[Music] let's take a look at the concept and reality of workplace deviance ethics is a set of moral principles or values that defines right or wrong for a person or a group business ethics surveys across 13 countries found that 22 percent of employees were pressured to commit unethical acts 33 percent of employees observed unethical behavior 59 percent of employees observed unethical behavior reported it to company officials and 36 percent of those reporting on ethical behavior experienced retaliation for doing so workplace deviance is unethical behavior that violates organizational norms about right and wrong ethical behavior follows accepted principles of right and wrong depending on which study you look at one-third to three-quarters of all employees admit that they've stolen from their employers committed computer fraud embezzled funds vandalized company property sabotage company projects faked injuries to receive workers compensation benefits or been sick from work when they aren't really sick experts estimate that unethical behaviors like these which researchers call workplace deviance may cost companies as much as 3.7 trillion dollars a year or roughly 5% of their revenues this figure shows workplace deviance can be categorized by how deviant the behavior is from minor to serious and by the target of the deviant behavior either the organization or particular people in the workplace company related deviance can affect both tangible and intangible assets one kind of workplace deviance called production deviance hurts the quantity and quality of work produced examples include leaving early taking excessively long work breaks intentionally working slower or wasting resources property deviance is unethical behavior aimed company property or products examples include sabotage stealing damaging equipment or products and overcharging for services and then pocketing the difference organizational employees however do an amount of property deviants themselves employee shrinkage when employees steel company merchandise accounts for 43% of theft from US retailers and costs eighteen billion dollars a year in fact employee theft costs US retailers more than shoplifters do where is production and property deviants harm company's political deviance and personal aggression are unethical behaviors that hurt particular people within companies political deviance is using one's influence to harm others in the company examples include making decisions based on favoritism rather than performance spreading rumors about co-workers or blaming others for mistakes they didn't make personal aggression is hostile or aggressive behavior towards others examples include sexual harassment verbal abuse stealing from co-workers or personally threatening co-workers another kind of personal aggression is workplace violence management decisions differ in their ethical intensity or the degree of concern people have about an ethical issue when addressing an issue of high ethical intensity managers are more aware of the impact their decision will have on others they're more likely to view the decision as an ethical or moral decision than as an economic decision they're also more likely to worry about doing the right thing 6 factors must be taken into account when determining the ethical intensity of an action magnitude of consequences is the total harm or benefit derived from an ethical decision the more people are harmed or the greater the harm to those people the larger the consequences social consciousness is agreement on whether behavior is bad or good probability of effect is the chance that something will happen that results in harm to others if we combine these factors we can see the effect they have on ethical intensity temporal immediacy is the time between an act and consequences the act produces temporal immediacy is stronger if a manager has to lay off workers next week as opposed to three months from now proximity of effect is the social psychological cultural or physical distance of a decision-maker from those affected by his or her decisions thus proximity of effect is greater when a manager lays off employees he knows than when he lays off employees he doesn't know finally where as the magnitude of consequences is the total effect across all people concentration of effect is how much an act affects the average person for instance eliminating health care coverage for a hundred employees has a greater concentration of effect than reducing health care benefits for a thousand employees by ten percent which of these six factors has the most impact on ethical intensity studies indicate that managers are much more likely to view decisions as ethical issues when the magnitude of consequences the total harm is high and there is a social consciousness agreement about the behavior or action as being bad according to psychologist Lawrence Kohlberg your decision will be based on your level of moral development Kohlberg identified three phases of moral development with two stages in each phase as you see here at the preconventional level of moral development people decide based on selfish reasons for example if you're in stage one the punishment and obedience stage your primary concern will be to avoid trouble for yourself so you won't watch the pirated movie because you're afraid of being caught and punished yet in stage two the instrumental exchange stage you worry less about the punishment and more about doing things that directly advance your wants and needs people at the conventional level of moral development make decisions that conform to societal expectations in other words they look outside themselves to others for guidance on ethical issues in stage three the good boy nice girl stage you normally do what other good boys and nice girls are doing if everyone else is watching the pirated movie as an example you will - but if they aren't you won't either in the law and order stage 4 you'll again look for external guidance and do whatever the law permits so you won't watch the movie people at the post conventional level of moral development use internalized ethical principles to solve ethical dilemmas in stage 5 the social contract stage you'll refuse to watch the pirated movie because as a whole society is better off when the rights of others in this case the rights of actors producers directors writers are not violated in stage 6 the universal principle stage you might or might not watch the pirated movie depending on your principles of right and wrong moreover you'll stick to your principles even if your decision conflicts with the law Stage four or what others believe is best for society Stage five for example those with socialist or communist beliefs would probably choose to watch the pirated movie because they believe that goods and services should be owned by society rather than by individuals or corporations Kohlberg believed that most people would progress sequentially from earlier stages to later stages as they become more educated and mature but only 20% of adults ever reached the post conventional stage of moral development where internal principles guide their decisions most adults are in the conventional stage of moral development in which they look outside themselves to others for guidance on ethical issues this means that most people in the workplace look to and need leadership when it comes to ethical decision-making a number of different ethical principles can be used to make business decisions long-term self-interest religious injunctions government requirements individual rights personal virtue distributive justice and utilitarian benefits all of these ethical principles encourage managers and employees to take others interests into account when making ethical decisions according to the principle of long-term self-interest you should never take any act that is not in your or your organization's long-term self-interest according to the principle of religious injunctions you should never take an action that is unkind or that harms a sense of community such as the positive feelings that come from working together to accomplish a commonly accepted goal according to the principle of government requirements the law represents the minimum moral standards of society so you should never take any action that violates the law the principle of individual rights holds that you should never take an action that infringes on others agreed-upon rights the principle of personal virtue holds that you should never do anything that's not honest open and truthful and that you would be glad to see reported in the newspapers or on TV under the principle of distributive justice you should never take any action that harms the least fortunate among us in any way this principle is designed to protect the poor the uneducated and the unemployed finally the principle of utilitarian benefits states that you should never take an action that does not result in a greater good for society in short you should do whatever creates the greatest good for the greatest number companies are putting more emphasis on ethical decision making organizations are putting considerable emphasis on ethical decision making as an employer how can you increase your chances of hiring honest employees overt integrity tests estimate job applicants honesty by asking them directly what they think or feel about theft or about punishment of unethical behaviors personality based integrity test indirectly estimate job applicants honesty by measuring psychological traits such as dependability and conscientiousness today most all large organizations have an ethics code in place in fact to be listed on the New York Stock Exchange a company must adopt and disclose a code of business conduct and ethics for directors officers and employees if a company has a code of ethics two things must still happen if those codes are to encourage ethical decision-making and behavior first a company must communicate its code to others both inside and outside the company second in addition to having an ethics code with general guidelines such as do unto others as you'd have on others do unto you management must also develop practical ethical standards and procedures specific to the company's line of business in addition to establishing ethical standards for the company managers must sponsor and be involved in ethics and compliance training in order to create an ethical company culture the first objective of ethics training is to develop an employee's awareness of ethics employees recognize which issues are ethical issues and then avoid rationalizing unethical behavior by thinking this isn't really illegal or immoral issue or no one will ever find out several companies have created board games produced videos or invited special speakers to improve awareness of ethical issues the second objective for ethics training programs is to achieve credibility with employees not surprisingly employees can be highly suspicious of management's reasons for authoring ethics training some companies have hurt the credibility of their ethics programs by having outside instructors and consultants conduct these classes a third objective of ethics training is to teach employees a practical model of ethical decision making a basic model should help them think about the consequences their choices will have on others and consider how they will choose between different solutions the first step in establishing an ethical climate is for managers especially top managers to act ethically themselves let's take a look at a basic model of ethical decision making first identify the problem what makes it an ethical problem thinks in terms of rights obligation fairness relationships and integrity how would you define the problem if you stood on the other side of the fence next identify the constituents who's been hurt who could be hurt who could be helped are they willing players or our victims next diagnose the situation how did it happen in the first place what could have prevented it is it going to get worse or better can the damage now be undone next analyze your options imagine the range of possibilities limit yourself to the two or three most manageable what are likely outcomes of each what are likely costs look at the company mission statement and code of ethics for guidance make your choice what is your intention in making the decision how does it compare with the probable results can you discuss the problem with the affected parties before you act could you disclose without qualms your decision to your boss the CEO the Board of Directors your family or society as a whole next act do what you have to do don't be afraid to admit errors and be is bold and confronting a problem as you were in causing it a second step in establishing an ethical climate is for top management to be active in and committed to the company's ethics program top managers who consistently talk about the importance of ethics and back up the talk by participating in their company's ethics programs send clear messages that ethics matter a third step is to put in place a reporting system that encourages managers and employees to report potential ethics violations whistleblowing that is reporting others ethics violations is a difficult step for most people to take to encourage employees to report ethics violations that is to act as whistleblowers many organizations have installed confidential ethics hotlines the factor that does the most to discourage whistleblowers from reporting problems is a lack of company action to their complaints thus the final step in developing an ethical climate is for management to fairly and consistently punish those who violate the company's code of ethics social responsibility is a business's obligation to pursue policies make decisions and take actions that benefit society because there are strong disagreements over whom and for what in society organizations are responsible it can be difficult for managers to know what is or what will be perceived as socially responsible corporate behavior there are two perspectives regarding to whom organizations are socially responsible the shareholder model and the stakeholder model according to the late Nobel prize-winning economist Milton Friedman the only social responsibility that organizations have is to satisfy their owners that is company shareholders this view called the shareholder model holds that only social responsibility that businesses have is to maximize profits by maximizing profit the firm maximizes shareholder wealth and satisfaction more specifically as profits rise the company stock owned by shareholders generally increases in value by contrast under the stakeholder model management's most important responsibility is to the firm's long-term survival not just maximizing profits which is achieved by satisfying the interest of multiple corporate stakeholders not just shareholders stakeholders are persons or groups with a legitimate interest in a company because stakeholders are interested in and affected by the organization's actions they have a stake in what those actions are some stakeholders are more important to the firm's survival than others primary stakeholders are groups on which the organization depends for its long term survival they include shareholders employees customers suppliers governments and local communities when managers are struggling to balance the needs of different stakeholders the stakeholder model suggests that the needs of the primary stakeholders take precedent over the needs of secondary stakeholders but among primary stakeholders are some more important than others according to the life cycle theory of organizations the answer is yes secondary stakeholders such as the media and special-interest group can influence or be influenced by the company unlike primary stakeholders however they do not engage in regular transactions with the company and are not critical to its long-term survival meeting the needs of primary stakeholders is therefore usually more important than meeting the needs of secondary stakeholders nevertheless secondary stakeholders are still important because they can affect public perceptions and opinions about socially responsible behavior historically economic responsibility or making a profit by producing a product or service valued by society has been a business's most basic social responsibility organizations that don't meet their financial and economic expectations come under tremendous pressure for example company boards are quick these days to fire CEOs legal responsibility is a company's social responsibility to obey society's laws and regulations as it tries to meet its economic responsibilities discretionary responsibilities pertain to the social roles that businesses play in society beyond their economic legal and ethical responsibilities carrying out discretionary responsibilities such as these dis voluntary companies are not considered unethical if they don't perform them today however corporate stakeholders expect companies to do much more than in the past to meet their discretionary responsibilities social responsiveness refers to a company's strategy to respond to stakeholders economic legal ethical or discretionary expectations concerning social responsibility a social responsibility problem exist whenever company's actions do not meet stakeholders expectations one model of social responsiveness identifies four strategies for responding to social responsibility problems reactive defensive accommodative and proactive these strategies differ in the extent to which the company is willing to act to meet or exceed society's expectations a company using a reactive strategy will do less than society expects by contrast a company using a defensive strategy would admit responsibility for a problem but would do the least required to meet societal expectations a company using an accommodative strategy will accept responsibility for a problem and take progressive approaches by doing all that could be expected to solve the problem finally a company using a proactive strategy will anticipate responsibility for a problem before it occurs do more than expected to address the problem and lead the industry in its approach one question that managers often ask is does it pay to be socially responsible [Music]