Ethical Decision Making in Organizations

Dr. O.C. Ferrell

Bill Daniels Distinguished Professor of Business Ethics University of Wyoming oferrell@uwyo.edu

Organizational Ethics

ethics in an organization refers to rules (standards, principles & values) governing the conduct of organizational members and the consequences of organizational decisions

What is organizational ethics?

(a managerial perspective)

defining appropriate behavior establishing organizational values nurturing individual responsibility providing leadership & oversight relating decisions to stakeholder interests developing accountability relating consequences auditing & improvement

Principle of Employee Conduct

10%
Follow their own beliefs

40%
Try to follow company policies & rules

40%
Go along with the work group

10%
Take advantage if the risk is low

Myths about organizational ethics

Its easy to be ethical Unethical behavior is part of any organization There are no rewards for being ethical Ethical behavior will prevent me from being successful Work is like a sport, push the rules & try not to get caught

Framework for Understanding Org. Ethical Decision Making Individual Individualmoral moral philosophies philosophiesand and values values Evaluation Evaluationof of ethical ethical outcomes outcomes

External External stakeholder stakeholder interestsand and interests concerns concerns

Ethical Ethical issue issue intensity intensity

Ethical Ethical decision decision

Organizational Organizational culture, culture,values, values,and and norms norms

Source: O.C. Ferrell, 2005

Who are the primary stakeholders that shape organizational ethics?

employees customers suppliers community government shareholders other

Interactions Between an Organization and Stakeholders

Special Interest Group Mass Media

Customer Group Government Regulatory Body

Employee Group

Organization

Shareholder Group Supplier

Community

Trade Association
Primary Stakeholders Secondary Stakeholders

Competitor
Society at Large

Adapted from Isabelle Maignan, OC Ferrell, and Linda Ferrell, A Stakeholder Model for Implementing Social Responsibility, European Journal of Marketing, forthcoming.

How to support ethical decision making in the organization?

culture, values & programs compliance & leadership recognition of the role of co-workers & managers balancing stakeholder interests management of situational pressures rewards beyond short-term performance

The Ethics Mirror & Reality

people judge themselves based on their intentions others are judged based on their behavior individual accountability in an organizational setting is necessary

Warren Buffet, Chairman Berkshire Hathaway

Right now we know there are misdeeds going on somewhere in our company. We just hope it is small and we find it.
Business Nightly interview, May 2005.