Ethical Decision Making and Ethical Leadership Essay

To improve honorable ending reservation in wrinkle, single must first understand how individuals make good conclusions in an organizational environs. Too of ecstasy it is assumed that individuals in organizations make respectable closings in the same way that they make good decisions at home, in their family, or in their individualal lives. Within the context of an organizational organise group, however, a couple of(prenominal) individuals rescue the freedom to decide good tax returns independent of organizational pressures. respectable ISSUE INTENSITYThe first step in good decision reservation is to recognize that an honourable issue requires an individual or lap group to choose among several actions that various stakeholders inside or away the starchy will ultimately evaluate as in force(p) or wrong. respectable issue posture, so, apprise be defined as the relevancy or importance of an ethical issue in the eyes of the individual, work group, and/or o rganization. it is personal and temporal in character to accommodate quantifys, beliefs, needs, perceptions, the peculiar(a) characteristics of the situation, and the personal pressure prevailing at a particular situation and time. good issue intensity reflects the ethical sensitivity of the individual or work group that faces the ethical decision making treat. Research kindle that individuals atomic number 18 subject to six spheres of find out when confronted with ethical choices the workplace, family, religion, legal system, community, and trading and that the level of importance of each of these influences wiil vary depending on how important the decision maker perceives the issue to be. Addition solelyy, the individuals sense of the situations moral intensity increase the individuals perceptiveness regarding ethical problems, which in turn reduces his or her intention to unethically.Moral intensity relates to a persons perception of social pressure and the injure th e decision will have on others. The perception of ethical issue intensity can be influenced by actments use of reward and punishments, in incarnate policies, and merged values to sensitize employees. In the words, managers can affect the stop to which employeesperceive the importance of an ethical issue by means of positive and/or negative incentives.INDIVIDUAL FACTORSWhen spate need to go under ethical issues in their daily lives, they often base their decisions on their own values and principles of right or wrong. The generally learn these values and principles through the socialization process with family members, social groups, and religion and in their formal cave inment. Research regarding individual factors that affect ethical aw beness, judgment, intent, and deportment hold gender, education, work experience, nationality, age, and locus of control.Education, the weigh of age spent in pursuit of academic knowledge, is also a important factor in the ethical deci sion-making process. The important thing to remember roughly education is that it does not reflect experience. Work experiences is defined as the number of years within a specific crease, occupation, and/or industry. Generally, the more than than education or work experiences that one has, the better he/she is at ethical decision making.Nationality is the legal relationship amongst a person and the terra unfluctuatinga in which he/she is born. Age is another individuals factors that has been researched within rail line ethics. In other words, the older you atomic number 18, the more ethical you argon. However, recent research hint that there is probably a more Byzantine relationship between ethics and age.Locus of control relates to individual differences in relation to a generalized beliefs near how one is affected by internal versus immaterial evets or reinforcements. In other word, the concept relates to where people view themselves in relation to power. Those who remember in external control see themselves as going with the flow because thats all they can do. They hoped that the events in their lives are do to uncontrollable forces. They consider what they want to achieve depends on luck, chance, and healthy people in their family. Conversely, those who believe in internal control believe that they control the events in their lives by their owneffort and skill, viewing themselves as masters of their destinies and trusting in their capacity to influence their environment.ORGANIZATIONAL FACTORSAlthough people can and do make individual ethical choices in business situations, no one operates in a vacuum. Indeed, research has established that in the workplace the organizations values often have greater influence on decisions than a persons own values. Ethical choices in business are almost often make jointly, in work groups and committees, or in conversations and discussions with coworkers. The moment of this learning process depend on the strength of each person personal values, the opportunities he or she has to behave unethically, and the exposure he or she has to others two behave ethically or unethically.A corporate refining can be defined as a exercise set of values, beliefs, goals, norms and ship canal of solving problems that members of an organization share. An important component of corporate, or organizational, culture is the companys ethical culture. Whereas corporate culture involves values and rules that prescribe a wide range of behavior for organizational members, the ethical culture reflects whether the firm also has an ethical conscience.Ethical is a function of many factors, including corporate policies on ethics, top managements loss leadhip on ethical issues, the influence of coworkers, and the luck for unethical behavior.Obedience to authority is another aspect of the influence that significant others can exercise. Obedience to authority helps to explain why many employees resolve business ethics issues by simply adjacent the directives as superior. hazardOpportunity describes the conditions in an organization that limit or permit ethical or unethical behavior. Opportunity results from conditions that either put forward rewards, whether internal or external, or fail to erectbarriers against unethical behavior. Example of internal rewards include feelings of goodness and personal worth generated by performing altruistic acts. impertinent reward refer to what an individual expects to receive from others in the social environment. Rewards are external to the individual to the degree that they bring social approval, status, and esteem.An example of a condition that fails to erect barriers against unethical behavior is a company constitution that does not punish employees who accept monumental gifts from clients. Opportunity relates to individuals immediate job context where they work, whom they work with, and the nature of the work.Opportunity also comes from knowl edge. Major botch up observed among employees in the workplace include lying to employees, customers, vendors, or the world or with holding needed instruction from them. The opportunity for unethical behavior cannot be eliminated without aggressive enforcement of codes and rules.BUSINESS ETHICS EVALUATIONS AND INTENSIONSEthical dilemmas involve problem-solving situations in which decision rules are often vague or in conflict. The results of an ethical decision are often uncertain, no one can continuously tell us whether we have made the right decision.An individuals intentions and the final decision regarding what action he or she will take are the at big last steps in the ethical decision-making process. When the individual intention and behavior are inconsistent with his or her ethical judgment, the person whitethorn feel crimey. offense or uneasiness is the first sign that an unethical decision has occurred. The succeeding(a) step is changing ones behavior to reduce such( prenominal)(prenominal) feelings. This change can reflect a persons values shifting to tally the decision or the person changing his or her decision theatrical role the next time a similar situations occurs. For those who begin the value shift, the future(a) are the usual onlyifications that will reduce and finally eliminate guilt 1.I need the paycheck and cant afford to quit right now.2.Those or so me are doing it so why shouldnt I? they believe its okay 3.If I hadnt have done this, I may not be able to get a good wing from my boss or company when I leave. 4.This is not such a big deal, given the potential benefits 5.Business is business with a different set of rules6.If not me, someone else would do it and get rewardThe road to exploit depends on how the business person defines success. The success concepts drives intentions and behavior in business either implicitly or explicitly. USING THE estimable DECISION-MAKING FRAMWORK TO IMPROVE honorable DECISIONS It bears repeat ing that it is infeasible to tell you what is right or wrong instead, we are attempting to prepare you make in framed ethical decisions. Although this chapter does not moralise by telling you what to do in a specific situation, it does fork over an overview of typical decision-making processes and factor that influence ethical decisions.The framework is not a guide for how to make decisions entirely is intended to provide you with insights and knowledge about typical ethical decision making processes in business organizations. Because it is impossible to agree on normative judgments about what is ethical, business ethics scholars develop descriptive models have instead tensenessed on regularities in decision making and the various phenomena that interact in a dynamic environment to produce predictable behavioural patterns.THE ROLE OF LEADERSHIP AN A integrated CULTERELeadership the ability on authority to guide and direct others toward achievement of a goal, has significant i mpact on ethical decision making because leader have the power to motive others and enforce the organizations rules policies as head as their own viewpoints.LEADRESHIP STYLE INFLUENCE ETHICAL DECISIONSLeadership courses influence many aspects of organizational behavior, including employees acceptance of and adherence to organizational norms and values. Styles that focus on building strong organizational values among employees abide to shared standards of conduct. The ethical leadership concept is not only for chief operating officers, boards of directors, and managers but can alsobe fellow employees. Ethical leadership by the CEO requires an understanding of the firms vision and values, as well as the challenges of responsibility and the assay in achieving organizational objectives. Six leadership styles that are based on emotional intelligencethe ability to manage ourselves and our relationships impellinglyhave been identified by Daniel Goleman.1.The coercive leader demands instant(prenominal) obedience and focuses on achievement, initiative, and self-control. Although this style can be genuinely telling during times of crisis or during a turnaround, it otherwise creates a negative temper for organizational performance. 2.The authoritative leaderconsidered to be one of the most effective stylesinspires employees to follow a vision, facilitates change, and creates a strongly positive performance humour. 3.The affiliative leader values people, their emotions, and their needs and relies on friendship and trust to promote flexibility, innovation, and risk taking.4.The democratic leader relies on participation and teamwork to reach collaborative decisions. This style focuses on communication and creates a positive climate for achieving results. 5.The pacesetting leader can create a negative climate because of the high standards that he or she sets. This style works best for attaining quick results from highly motivated individuals who value achievement and take the initiative. 6.The coaching leader builds a positive climate by evolution skills to foster long-term success, delegating responsibility, and skillfully emergence challenging assignments.Transactional leaders attempt to create employee satisfaction through negotiating, or bartering, for desired behaviors or levels of performance. Transformational leaders strive to raise employees level of load and to foster trust and motivation.HABITS OF STRONG ETHICAL LEADERSIn particular, we believe that ethical leadership is based on holistic thinking that embraces the complex and challenging issues that companies face on a daily basis. Ethical leaders need both knowledge and experience to make the right decision. strengthened ethical leaders have both the courage and the most realised information to make decisions that will be the best in the long run. unwavering ethical leaders must stick to their principles and, ifnecessary, be realise to leave the organization if its corpora te governance system is so damage that it is impossible to make the right choice.Ethical Leaders Have Strong Personal CharacterThere is general agreement that ethical leadership is highly unlikely without a strong personal character. The question is how to school or develop a moral person in a corporate environment. White, a leading authority on character development, believes the focus should be on ethical reasoning rather than on be a moral person.Ethical Leaders Have a displeasure to Do RightThe passion to do right is the glue that holds ethical concepts together. Some leaders develop this trait early in life, whereas others develop it over time through experience, reason, or spiritual growth. They often note familiar arguments for doing rightto keep. society from disintegrating, to alleviate gentle suffering, to advance man prosperity, toresolve conflicts of interest fairly and logically, to praise the good and punish the guilty, or just because something is the right thi ng to do.Ethical Leaders atomic number 18 ProactiveEthical leaders do not hang around waiting for ethical problems to arise. They anticipate, plan, and act proactively to avoid potential ethical crises.44 One way to be proactive is to take a leadership role in developing effective programs that provide employees with guidance and support for making more ethical choices even in the face of considerable pressure to do otherwise.Ethical Leaders Consider Stakeholders InterestsEthical leaders consider the interests of and implications for all stakeholders, not just those that have an economic impact on the firm. This requires acknowledging and monitoring the concerns of all legitimate stakeholders, actively communicating and cooperating with them, employing processes that are respectful of them, recognizing interdependencies among them, avoiding activities that would harm their human rights, and recognizing the potential conflicts between leaders own role as corporatestakeholders and th eir legal and moral responsibilities for the interests of other stakeholders.Ethical Leaders Are power Models for the Organizations Values If leaders do not actively serve as role models for the organizations core values, then those values become nothing more than lip service. According to behavioral scientist Brent Smith, as role models, leaders are the primary influence on individual ethical behavior. Leaders whose decisions and actions are contrary to the firms values send a signal that the firms values are trivial or irrelevant. Firms such as countrywide Financial articulated core values that were only used as window dressing. On the other hand, when leaders model the firms core values at every turn, the results can be indexyEthical Leaders Are Transparent and Actively Involved in Organizational Decision Making Being transparent fosters openness, freedom to articulate ideas, and the ability to question conduct, and it encourages stakeholders to learn about and comment on wha t a firm is doing. Transparent leaders will not be effective unless they are personally involved in the key decisions that have ethical ramifications. Transformational leaders are collaborative, which opens the door for transparency through interpersonal exchange. preferably we said that transformational leaders instill commitment and respect for values that provide guidance on how to deal with ethical issues.Ethical Leaders Are Competent Managers Who Take a Holistic View of the Firms Ethical Culture Ethical leaders can see a holistic view of their organization and therefore view ethics as a strategic component of decision making, much like marketing, information systems, production, and so on. Although his company is called Waste Management, CEO David P. Steiner is as committed to renewable energy as just about anyone working for a multibillion one dollar bill business. Steiner was selected as one of the 100 Most Influential People in Business Ethics by the Ethisphere Institute i n 2007, and his company, Waste Management, was chosen as one of the Worlds Most Ethical Companies in 2008.Case study Tyco International Leadership CrisisINTRODUCTIONOn family 12, 2002, national television showcased Tyco Internationals power chief decision maker officer (CEO) L. Dennis Kozlowski and precedent chief financial officer (CFO) distinguish H. Swartz in handcuffs after being arrested and charged with misappropriating more than $170 one thousand gazillion from the company. They were also accused of stealing more than $430 million through dishonest sales of Tyco stock and concealing the information from shareholders. The two exe vitiatedives were charged with more than thirty counts of misconduct, including grand larceny, enterprise corruption, and falsifying business records. Another executive, former general counsel Mark A. Belnick, was charged with concealing $14 million in personal loans. Months after the initial arrests, charges and lawsuits were still being f iledmaking the Tyco scandal one of the most notorious of the early 2000s.TYCOS write upFounded in 1960 by Arthur J. Rosenberg, Tyco began as an investment and holding company rivet on solid- resign science and energy conversion. It developed the first optical maser with a sustained beam for use in medical procedures. Rosenberg afterwards shifted his focus to the commercial sector. In 1964, Tyco became a publically traded company. It also began a series of rapid acquisitionssixteen companies by 1968. The expansion continued through 1982, as the company anticipate to fill gaps in its development and dissemination networks. Between 1973 and 1982, the firm grew from $34 million to $500 million in consolidated sales.THE RISE OF DENNIS KOZLOWSKIIn 1975, armed with a degree in accounting, Dennis Kozlowski went to work for Tyco, following brief stints at SCM Corporation and Nashua Corporation. He presently found a friend and mentor in then CEO Joseph Gaziano. Kozlowski was impress ed by Gazianos lavish lifestylecompany jets, unrestrained vacations, company cars, and country club memberships. However, Gazianos reign ended of a sudden in 1982 when he died of cancer. Gaziano was replaced by John F. spike III, who differed sharply in management style. Where Gaziano had been extravagant, Fort was analytical and thrifty. His goal was to increase profits for shareholders and cut the extravagant spending characterizing Gazianos tenure, and Wall Street responded positively to Tycos new direction. Kozlowski, who had thrived under Gaziano, was forced to adapt to the abrupt change in leadership.Adept at crunching numbers, Kozlowski focused on helping to achieve Forts vision of putting shareholders first. Kozlowskis largest acquisition was Wormald International, a $360 million global fire-protection concern. Integrating Wormald proved problematic, and Fort was reportedly unhappy with such a large purchase. Fort and Kozlowski also disagreed over rapid changes made to G rinnell. Kozlowski responded by lobbying to convince Tycos board of directors that problems with Wormald were a bump in the road and that the firm should continue its strategy of acquiring profitable companies that met guidelines.KOZLOWSKIS TYCO EMPIREAfter Forts departure, Dennis Kozlowski, then 46, found himself helming Tyco International. With a new lifestyleparties and multiple homes in Boca Raton, Nantucket, Beaver Creek, and New York cityand an aggressive management style, he appeared to be following in the footsteps of his mentor, former CEO Joseph Gaziano. Kozlowski knew Tyco from the bottom up, and stated that he was determined to make it the great company of the next century. Among other things, he recognized that one of Tycos major shortcomings was its reliance on cyclical industries, which tend to be very sensitive to economic ups and downs. In 1997, Kozlowski acquired ADT Security Services, a British-owned company find in Bermuda. By structuring the deal as a reverse takeover, wherein a public company is acquired by a private company so as to avoid the lengthy process of going public, Tyco acquired a global presence as well as ADTs Bermuda registration.The majority of members had served for ten years or more, and they were familiar with Kozlowskis management style. As directors, they were amenable for protecting Tycos shareholders through disclosure of questionable situations or issues that might seem unethical or inappropriate. Despite this, after the arrests of Kozlowski and Swartz, investigations uncovered the following troubling relationships among theboards members 1.Richard Bodman invested $5 million for Kozlowski in a private stock fund managed by Bodman. 2.Frank E. Walsh, Jr. received $20 million for helping to arrange the acquisition of CIT Group without the other board members knowledge. 3.Walsh also held controlling interest in two firms that received more than $3.5 million for leasing an aircraft and providing pilot services to Tyc o between 1996 and 2002.4.Stephen Foss received $751,101 for supplying a Cessna Citation aircraft and pilot services. 5.Lord Michael Ashcroft used $2.5 million in Tyco funds to purchase a home. Meanwhile, Jeanne Terrile, an analyst from Merrill Lynch who worked for Tyco, was not impressed with Kozlowskis activities and Tycos performance. Her job at Merrill Lynch was to make recommendations to investors on whether to buy, hold, or fail specific stocks. After Terrile wrote a negative review of Tycos rapid acquisitions and mergers and refused to upgrade Merrills position on Tycos stock, Kozlowski met with David Komansky, the CEO of Merrill Lynch.THE happen OF DENNIS KOZLOWSKI AND OTHERSIn early 2002, Kozlowski announced Tycos split of its four divisions into independent, publicly traded companies Security and Electronics, Healthcare, Fire Protection and Flow Control, and Financial Services. Kozlowski stated, I am extremely proud of Tycos performance. We have built a 5 great portfolio of businesses and over the five years ended September 30, 2001, we have delivered earnings per share growth at a compounded yearly rate of over 40 percent and industry-leading operating profit margins in each of our businesses. During this same period, we have increased annual free change flow from $240 million in 1996 to $4.8 billion in fiscal 2001.Nonetheless, even with this performance, Tyco is trading at a 2002 P/E multiple of 12.0x, a discount of almost 50 percent to the S&P 500. in any case in 2002, the New York State Bank Department observed large sums of money moving in and out of Tycos accounts. What made this foreign was that the funds were being transferred into Kozlowskis personal accounts.Authorities discovered that Kozlowski had sought to avoid around $1 million in New York state import taxes. In September of that year, Dennis Kozlowski and Mark Swartz, who also had resigned, were indicted on 38 felony counts for allegedly stealing $170 million from Tyco and fraud ulently selling an additional $430 million in stock options. Among other allegations, Kozlowski was accused of taking $242 million from a program intended to help Tyco employees buy company stock. make AN EMPIREAfter Kozlowskis resignation, Edward Breen replaced him as CEO. The company filed suit against Dennis Kozlowski and Mark Swartz for more than $100 million. The SEC allows companies to sue insiders who profited by buying and selling company stock within a six-month period. Tyco stated, To hold him accountable for his misconduct, we seek not only full payment for the funds he embezzled but also punitive damages for the serious harm he did to Tyco and its shareholders.