Description
The PPT explains about why good managers take bad ethical decisions.
Why do good managers make bad ethical decision?
What is Ethics?
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to act in the many situations.
The behavior that includes respecting human dignity and vulnerable people and keeping them in mind when making decision in organizations
It is helpful to identify what ethics isnot the same as feelings ?Ethics is NOT
?Ethics is not religion ?Ethics is not following the law ?Ethics is not following culturally accepted norms. ?Ethics is not science
Why Identifying Ethical Standards is ?There Hard? are two fundamental problems
On what do we base our ethical standards? How do those standards get applied to specific situations we face?
A Framework for Ethical Decision Mak
?Recognize an Ethical Issue ?Get the Facts ?Evaluate Alternative Actions From Various Ethical Perspectives ?Utilitarian Approach: The ethical action is the one that will produce the greatest balance of benefits over harms. ?Rights Approach: The ethical action is the one that most dutifully respects the rights of all affected.
?Common Good Approach: The ethical action is the one that contributes most to the achievement of a quality common life together.
?Fairness or Justice Approach: The ethical action is the one that treats people equally, or if unequally, that treats people proportionately and fairly.
?Virtue Approach: The ethical action is the one that embodies the habits and values of humans at their best. ?Make a Decision and Test It
?Act, Then Reflect on the Decision Later
•Honesty – Don’t mislead or deceive others. Integrity – Do what is right. •Trustworthiness – Supply correct information, and correct information that is not factual. •Loyalty to facility – Avoid conflicts of interest and don’t disclose confidential information. •Fairness – Treat individuals equally; always appreciate diversity. •Concern and respect – Be considerate of those affected by decision-making. •Commitment to excellence – Always do the best you can do. •Leadership – Lead by example. •Reputation and morale – Work to enhance the facility’s reputation and to improve the morale of employees.
Ethics Principles
FOUR COMMONLY HELD RATIONALIZATIONS THAT LEAD TO UNETHICAL DECISIONS
• A belief that the activity is within reasonable ethical and legal limits—that is, that it is not “really” illegal or immoral • Put enough people in an ambiguous, ill-defined situation and some will conclude that whatever hasn’t been labeled specifically wrong must be OK— especially if they are rewarded for certain acts.
• A belief that the activity is in the individual’s or the corporation’s best interests—that the individual would somehow be expected to undertake the activity.
• Ambitious managers look for ways to attract favorable attention, something to distinguish them from other people.
• A belief that the activity is “safe” because it will never be found out or publicized; the classic crime-and-punishment issue of discovery.
• A belief that because the activity helps the company the company will condone it and even protect the person who engages in it.
MENTAL GYMNASTICS BEHIND UNETHICAL BEHAVIOR
Mental gymnastics behind unethical behavior
Decision making can often result in managerial missteps, even those decisions that involve ethical considerations.
Most significantly, various cognitive processes that leaders often unwittingly employ and which may be called “mental gymnastics” or “mind games” may serve to support and sustain unethical behavior.
Mental gymnastics behind unethical behavior
Mind Game #1: Quickly Simplify - “Satisficing” When we are confronted with a complicated problem, most of us react by reducing the problem to understandable terms. We simplify. We tend to make quick decisions based on understandable and readily available elements related to the decision. We search for a solution that is both satisfactory and sufficient. Unfortunately, this process, called “satisficing,” can lead to solutions that are less than optimal or even ethically deficient. “Satisficing” leads the managerial leader to alternatives that tend to be easy to formulate, familiar, and close to the status quo.
Mental gymnastics behind unethical behavior
Ways to guard against oversimplifying and reaching less than optimal solutions to ethical challenges Discuss the situation with other trusted colleagues. Ask them to challenge your decision. The resulting dialogue can improve the quality of your ethical decision making. Before settling on a solution, ask yourself the following questions: · How would I describe the problem if I were on the opposite side of the fence? · Whom could my decision or action harm? · Could I disclose without reservation my decision or action to my boss, our CEO, the Board of Directors, my family, or society as a whole?
Mental gymnastics behind unethical behavior
Mind Game #2: The Need to be Liked Most people want to be liked. However, when this desire to be liked overpowers business objectivity, ethical lapses can occur. Because they want to be liked, they may have a difficult time saying, “No.” Such an overriding desire to be liked can ultimately adversely affect the ethics of people in an organization and thus can decrease the firm’s bottom line. One way is to solve this problem is to distance yourself from subordinates (e.g., reduce unnecessary socializing) Another successful approach would be to respond warmly and assertively toward employees while still going forward with appropriate but possibly less popular decisions.
Mental gymnastics behind unethical behavior
Mind Game #3: Dilute and Disguise In trying to strike a diplomatic chord, leaders can disguise the offensiveness of unethical acts by using euphemisms or softened characterizations. Words or phrases such as “helped him make a career choice” are used to describe firing someone, or “inappropriate allocation of resources” is used to describe what everyone knows is stealing. Regardless of whether people want to be seen as kinder and gentler, or just politically correct, this process merely helps wrongdoers and those associated with them to get away with unethical behavior. Such softened characterizations serve to dilute and disguise unethical behavior. The antidote is for leaders to talk straight and to avoid euphemistic labeling or recharacterizing unethical behavior.
Mental gymnastics behind unethical behavior
Mind Game #4: “Making Positive” The mental gymnastic of comparing one’s own unethical behavior to more negative behavior committed by others serves only to avoid self degradation. For example, the salesperson who occasionally cheats when reporting his expenses may say to himself, “I do this only a few times a year, while Mukesh does it all the time.”Unethical behavior appears more ethical by comparing it to worse behavior. To avoid this mind game, ask three questions about the comparison: · Am I comparing apples to oranges? · How self-serving is this comparison? · What would three objective observers say about me and my objectivity regarding this comparison? Relativity does not excuse ethical lapses.
Ethical business practices can enhance overall corporate health in three important areas: 1. Productivity of employees 2. Outside stakeholders 3. Minimizing regulation from government agencies
• CODE OF ETHICS - statement that acts as a guide for how people within a particular organization should act and make decisions in an ethical fashion -addresses issues like conflict of interest, behavior toward competitors, privacy of information, gift giving, and making political contributions • TECHNIQUES USED IN CREATING ETHICAL WORKPLACE - Creating, distributing, and continually improving a company’s code of ethics - create a special office or department - training
• CEO INVOLVEMENT in ethical decision making • DILEMMAS FOR MANAGEMENT ?Upholding ethical codes can be cumbersome ?business sometimes can be lost ?employees often fear retaliation for blowing the whistle on unethical conduct
CASE STUDY
BARINGS BANK & NICK LEESON ‘THE ROGUE TRADER’
CASE STUDY
• Barings bank, a 233 year old family run bank • Associated with the royal family of England • Forced into bankruptcy by a trader named Nick Leeson • Nick Leeson- a trader in the Singapore office of the bank
CASE STUDY
• After being posted to Singapore, Nick Leeson worked through a back office mess in Jakarta • Hired a team of dealers inexperienced in the stock exchange • Dual role of floor manager for Baring’s trading on SIMEX and head of settlement operations • Short circuiting of normal accounting and internal control/audit practices
CASE STUDY
• Leeson was able to make seemingly small gambles in the futures arbitrage market at Barings Futures Singapore • Covered for his shortfalls by reporting losses as gains to Barings in London • Leeson altered the branch's error account, subsequently known by its account number 88888
CASE STUDY
• Leeson began to aggressively trade in futures and options on the SIMEX • He falsified trading records in the bank's computer systems • The Kobe earthquake sent the Asian financial markets into a tailspin • Leeson left a note reading "I'm Sorry" and fled on 23 February.
CASE STUDY
• Losses eventually reached £827 million (US$1.4 billion), twice the bank's available trading capital • Status that prevented him from owning up to what was happening • He never received the right kind of training to take on such a task • He didn’t want to be a failure, and saw asking for help at Barings as a sign of weakness.
CASE STUDY
• Observers, including Leeson himself, placed much of the blame on the bank's own deficient internal auditing and risk management practices • Barings Bank, eager to catch up to the rest of the financial world • Barings's own management did not understand derivatives and did not have a clue as to what Nicholas Leeson was doing • Leeson’s previous history was never communicated to SIMEX • Baring’s bank ignored the warning signal given by the internal audit committee
doc_922215957.ppt
The PPT explains about why good managers take bad ethical decisions.
Why do good managers make bad ethical decision?
What is Ethics?
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to act in the many situations.
The behavior that includes respecting human dignity and vulnerable people and keeping them in mind when making decision in organizations
It is helpful to identify what ethics isnot the same as feelings ?Ethics is NOT
?Ethics is not religion ?Ethics is not following the law ?Ethics is not following culturally accepted norms. ?Ethics is not science
Why Identifying Ethical Standards is ?There Hard? are two fundamental problems
On what do we base our ethical standards? How do those standards get applied to specific situations we face?
A Framework for Ethical Decision Mak
?Recognize an Ethical Issue ?Get the Facts ?Evaluate Alternative Actions From Various Ethical Perspectives ?Utilitarian Approach: The ethical action is the one that will produce the greatest balance of benefits over harms. ?Rights Approach: The ethical action is the one that most dutifully respects the rights of all affected.
?Common Good Approach: The ethical action is the one that contributes most to the achievement of a quality common life together.
?Fairness or Justice Approach: The ethical action is the one that treats people equally, or if unequally, that treats people proportionately and fairly.
?Virtue Approach: The ethical action is the one that embodies the habits and values of humans at their best. ?Make a Decision and Test It
?Act, Then Reflect on the Decision Later
•Honesty – Don’t mislead or deceive others. Integrity – Do what is right. •Trustworthiness – Supply correct information, and correct information that is not factual. •Loyalty to facility – Avoid conflicts of interest and don’t disclose confidential information. •Fairness – Treat individuals equally; always appreciate diversity. •Concern and respect – Be considerate of those affected by decision-making. •Commitment to excellence – Always do the best you can do. •Leadership – Lead by example. •Reputation and morale – Work to enhance the facility’s reputation and to improve the morale of employees.
Ethics Principles
FOUR COMMONLY HELD RATIONALIZATIONS THAT LEAD TO UNETHICAL DECISIONS
• A belief that the activity is within reasonable ethical and legal limits—that is, that it is not “really” illegal or immoral • Put enough people in an ambiguous, ill-defined situation and some will conclude that whatever hasn’t been labeled specifically wrong must be OK— especially if they are rewarded for certain acts.
• A belief that the activity is in the individual’s or the corporation’s best interests—that the individual would somehow be expected to undertake the activity.
• Ambitious managers look for ways to attract favorable attention, something to distinguish them from other people.
• A belief that the activity is “safe” because it will never be found out or publicized; the classic crime-and-punishment issue of discovery.
• A belief that because the activity helps the company the company will condone it and even protect the person who engages in it.
MENTAL GYMNASTICS BEHIND UNETHICAL BEHAVIOR
Mental gymnastics behind unethical behavior
Decision making can often result in managerial missteps, even those decisions that involve ethical considerations.
Most significantly, various cognitive processes that leaders often unwittingly employ and which may be called “mental gymnastics” or “mind games” may serve to support and sustain unethical behavior.
Mental gymnastics behind unethical behavior
Mind Game #1: Quickly Simplify - “Satisficing” When we are confronted with a complicated problem, most of us react by reducing the problem to understandable terms. We simplify. We tend to make quick decisions based on understandable and readily available elements related to the decision. We search for a solution that is both satisfactory and sufficient. Unfortunately, this process, called “satisficing,” can lead to solutions that are less than optimal or even ethically deficient. “Satisficing” leads the managerial leader to alternatives that tend to be easy to formulate, familiar, and close to the status quo.
Mental gymnastics behind unethical behavior
Ways to guard against oversimplifying and reaching less than optimal solutions to ethical challenges Discuss the situation with other trusted colleagues. Ask them to challenge your decision. The resulting dialogue can improve the quality of your ethical decision making. Before settling on a solution, ask yourself the following questions: · How would I describe the problem if I were on the opposite side of the fence? · Whom could my decision or action harm? · Could I disclose without reservation my decision or action to my boss, our CEO, the Board of Directors, my family, or society as a whole?
Mental gymnastics behind unethical behavior
Mind Game #2: The Need to be Liked Most people want to be liked. However, when this desire to be liked overpowers business objectivity, ethical lapses can occur. Because they want to be liked, they may have a difficult time saying, “No.” Such an overriding desire to be liked can ultimately adversely affect the ethics of people in an organization and thus can decrease the firm’s bottom line. One way is to solve this problem is to distance yourself from subordinates (e.g., reduce unnecessary socializing) Another successful approach would be to respond warmly and assertively toward employees while still going forward with appropriate but possibly less popular decisions.
Mental gymnastics behind unethical behavior
Mind Game #3: Dilute and Disguise In trying to strike a diplomatic chord, leaders can disguise the offensiveness of unethical acts by using euphemisms or softened characterizations. Words or phrases such as “helped him make a career choice” are used to describe firing someone, or “inappropriate allocation of resources” is used to describe what everyone knows is stealing. Regardless of whether people want to be seen as kinder and gentler, or just politically correct, this process merely helps wrongdoers and those associated with them to get away with unethical behavior. Such softened characterizations serve to dilute and disguise unethical behavior. The antidote is for leaders to talk straight and to avoid euphemistic labeling or recharacterizing unethical behavior.
Mental gymnastics behind unethical behavior
Mind Game #4: “Making Positive” The mental gymnastic of comparing one’s own unethical behavior to more negative behavior committed by others serves only to avoid self degradation. For example, the salesperson who occasionally cheats when reporting his expenses may say to himself, “I do this only a few times a year, while Mukesh does it all the time.”Unethical behavior appears more ethical by comparing it to worse behavior. To avoid this mind game, ask three questions about the comparison: · Am I comparing apples to oranges? · How self-serving is this comparison? · What would three objective observers say about me and my objectivity regarding this comparison? Relativity does not excuse ethical lapses.
Ethical business practices can enhance overall corporate health in three important areas: 1. Productivity of employees 2. Outside stakeholders 3. Minimizing regulation from government agencies
• CODE OF ETHICS - statement that acts as a guide for how people within a particular organization should act and make decisions in an ethical fashion -addresses issues like conflict of interest, behavior toward competitors, privacy of information, gift giving, and making political contributions • TECHNIQUES USED IN CREATING ETHICAL WORKPLACE - Creating, distributing, and continually improving a company’s code of ethics - create a special office or department - training
• CEO INVOLVEMENT in ethical decision making • DILEMMAS FOR MANAGEMENT ?Upholding ethical codes can be cumbersome ?business sometimes can be lost ?employees often fear retaliation for blowing the whistle on unethical conduct
CASE STUDY
BARINGS BANK & NICK LEESON ‘THE ROGUE TRADER’
CASE STUDY
• Barings bank, a 233 year old family run bank • Associated with the royal family of England • Forced into bankruptcy by a trader named Nick Leeson • Nick Leeson- a trader in the Singapore office of the bank
CASE STUDY
• After being posted to Singapore, Nick Leeson worked through a back office mess in Jakarta • Hired a team of dealers inexperienced in the stock exchange • Dual role of floor manager for Baring’s trading on SIMEX and head of settlement operations • Short circuiting of normal accounting and internal control/audit practices
CASE STUDY
• Leeson was able to make seemingly small gambles in the futures arbitrage market at Barings Futures Singapore • Covered for his shortfalls by reporting losses as gains to Barings in London • Leeson altered the branch's error account, subsequently known by its account number 88888
CASE STUDY
• Leeson began to aggressively trade in futures and options on the SIMEX • He falsified trading records in the bank's computer systems • The Kobe earthquake sent the Asian financial markets into a tailspin • Leeson left a note reading "I'm Sorry" and fled on 23 February.
CASE STUDY
• Losses eventually reached £827 million (US$1.4 billion), twice the bank's available trading capital • Status that prevented him from owning up to what was happening • He never received the right kind of training to take on such a task • He didn’t want to be a failure, and saw asking for help at Barings as a sign of weakness.
CASE STUDY
• Observers, including Leeson himself, placed much of the blame on the bank's own deficient internal auditing and risk management practices • Barings Bank, eager to catch up to the rest of the financial world • Barings's own management did not understand derivatives and did not have a clue as to what Nicholas Leeson was doing • Leeson’s previous history was never communicated to SIMEX • Baring’s bank ignored the warning signal given by the internal audit committee
doc_922215957.ppt