BA 325 - Part B

5 - Ethical Decision-Making

OVERVIEW

This chapter explores a variety of factors that influence whether a person decides to behave ethically or unethically, beginning with how ethical intentions are formed quickly, initially defended, and then may be revised through a rational ethical decision-making process.

The first part of this chapter helps managers understand factors that shape ethical intuitions, intentions, and behaviors.

The second part summarizes two common ethical decision-making frameworks and then offers a systemic seven-question rational ethical decision-making framework grounded in moral philosophy. The framework enables employees to independently derive a moral answer to ethical dilemmas. A process for persuading people who approach a decision from a different ethical perspective and warning signs that an unethical situation is arising are also provided.

After completing this chapter, students should be able to:

• Describe individual characteristics that impact ethical beliefs, sensitivities, intentions, and behaviors
• Analyze the processes by which general ethical beliefs and sensitivities lead to the formation of specific ethical intentions
• Apply a systematic rational ethical decision-making framework to arrive at a moral conclusion
• Facilitate a negotiation between competing ethical perspectives
• Recognize warning signs that an unethical decision is approaching

KEY WORDS

Belief: a mental state that guides behaviors.

Categorical imperative: a rule that applies to all situations.

Cultural Relativism: How does the action relate to the national culture, particularly its laws? If the action conforms to the law, then it is right. If it is contrary to the law, then it is wrong.

Deontology: Does the action treat every stakeholder with respect and dignity in all situations? Is the action something that everyone should do?  If yes, then it is right. If no, then it is wrong.

Egoism:  How does the action relate to me? If the action furthers my interests, then it is right. If it conflicts with my interests, then it is wrong.

Ethical intuition: a quick insight independent of any reasoning process about right and wrong.

Ethical intention: determining mentally to take some action that is morally appropriate.

Ethical sensitivity: an individual’s awareness that a particular situation raises ethical concerns.

Moral intensity: six issue-related factors that are likely to determine the magnitude of a person’s moral approval or disapproval.

Social Group Relativism: How does the action relate to my social group (peers, friends, etc.)? If the action conforms to the social group’s norms, then it is right. If it is contrary to the social group’s norms, then it is wrong.

Theory of Planned Behavior: A theory developed by Icek Ajzen where formulating an intention to act ethically is a function of a person’s attitudes toward the behavior, subjective norms, and perceived behavioral control.

Utilitarianism: How does the action relate to everyone who is affected by it? If the action is beneficial to the greatest number of people affected by it, then it is right. If it is detrimental to the greatest number, then it is wrong.

Virtue Ethics: How would a virtuous person act in this situation? If the act strengthens moral character, then it is right. If it is contrary to moral character building, then it is wrong.

DESCRIBE JAMES REST’S ETHICAL DECISION MAKING MODEL.

WHAT IS THE RELATIONSHIP BETWEEN ETHICAL BELIEFS AND ETHICAL ACTION?

BACKGROUND

As noted by business ethicist Marvin Brown, “Most people do what they think is right, considering the world they think they live in.”

Managers need to understand the complexity of decision-making influences and processes that an individual goes through when deciding whether to engage in an ethical or unethical behavior.

JAMES REST’S MODEL

James Rest, an educational psychologist, has developed a 4-component model sequentially showing that an individual is likely to behave morally if:

(1) he or she is aware that an ethical dilemma has arisen,

(2) forms a moral judgment,

(3) develops motivation to do something about it, and

(4) is a person of high moral character.

RELATIONSHIP BETWEEN ETHICAL BELIEFS AND ETHICAL ACTIONS

- In general, ethical beliefs generate ethical intentions and result in ethical behaviors. But there is typically a drop off going from one step to the next.

- Many people may agree on what ethical action “should” be done, but fewer people “would” actually do the right thing, and even fewer actually “did” what they think they should or would do.

- Many people believe that stealing is wrong. But then obstacles arise that prevent employees from taking action to stop this unethical behavior.

- Research has shown that a large percentage of managers who claim they would report a cheater did not follow up on the ethical intention.

WHAT INDIVIDUAL CHARACTERISTICS IMPACT ETHICAL BELIEFS, SENSITIVITIES, INTENTIONS, AND BEHAVIORS?

Review the research findings for individual characteristics that have a positive impact on ethical decision making

• Age (mixed results)
• Education level (higher education)
• Gender (similar, sometimes women)
• Locus of control (mixed)
• Machiavellianism (low Machs)
• Moral Development (higher stages)
• Nationality (mixed, sometimes U.S.)
• Idealism and deontology philosophy (high)
• Religious (high)
• Work experience (more)

HOW ARE ETHICAL INTUITIONS FORMED?

HOW DO THE VALUE SETS OF LIBERALS AND CONSERVATIVES DIFFER?

ETHICAL BELIEFS AND SENSTIVITIES

- A belief is a mental state that guides behaviors.

- Ethical sensitivity refers to an individual’s awareness that a particular situation raises ethical concerns.

- Ethical sensitivities are essential because they impact behavior and the lives of other people.

- Becoming more aware of how others interpret or experience our decisions and behaviors expands a person’s ethical sensitivities.

- Being sensitive to the ethical dynamics of a situation is an essential step in forming ethical intentions and ultimately ethical behaviors. People cannot intend to behave ethically if they do not think there is an ethical issue at stake.

ETHICAL INTUITIONS

- Ethical intuition is a quick insight independent of any reasoning process about right and wrong. Ambiguous situations, where there is high uncertainty regarding people’s motivations or the consequences of their actions, also tap into the decision-maker’s intuition.

- Professor Jonathan Haidt of the University of Virginia concludes that many ethical decisions are the result of intuitive reactions rather than deep reflection. These gut reactions flow out of a person’s deeply embedded value system.

- According to Haidt, our quick intuitive ethical judgments are the result of habituated patterns, emotions, and internalized teachings.

LIBERALS AND CONSERVATIVES ETHICAL INTUITIONS

- Haidt and his colleagues researched the apparent large difference in ethical intuitions liberals and conservatives have to public policy issues.

• They found that liberals interpret the ethics of a situation based primarily on two value sets: harm/care and fairness/reciprocity. Liberals respond when someone frames an issue in terms of harms or fairness, and favor outcomes that minimize harms or are determined to be the most fair.
• Conservatives, on the other hand, interpret the ethics of a situation based primarily on three different value sets: ingroup/loyalty, authority/respect, and purity/sanctity. Conservatives respond when someone frames an issue in terms of group loyalty, respect for authority, or moral purity/sanctity, and favor outcomes that reinforce loyalty, authority, or moral purity/sanctity.

- Review the ethical intuition value sets for liberals and conservatives.

- This does not mean liberals and conservatives ignore the other political group’s values. They just care more about their own political group’s values.

DESCRIBE ICEK AJZEN’S “THEORY OF PLANNED BEHAVIOR”

According to Icek Ajzen’s Theory of Planned Behavior, formulating an intention to act ethically is a function of a person’s:

1. attitudes toward the behavior,
2. subjective norms, and
3. perceived behavioral control

Each of the three factors has two dimensions. The factor dimensions are explained below in terms of whether a person should prevent a co-worker from stealing:

- Attitude toward the behavior dimensions:

• The strength of the belief – I strongly believe that stealing is wrong.
• The evaluation of the outcome – I strongly believe that my stopping the stealing would be a good thing to do.

- Subjective norms dimensions:

• The strength of the normative belief – Other individuals and groups I respect believe that stealing is wrong.
• The motivation to comply with the referent group – I really want to comply with the desires of individuals and groups I respect.

- Perceived behavioral control dimensions:

• The strength of the control belief – I strongly believe that I have the ability, resources, and opportunity to stop the stealing.
• The perceived power of the control belief – Given my ability, resources, and opportunity it would be relatively easy for me to stop the stealing.

The theory of planned behavior is very useful for understanding precursors to ethical behavior. Employees will behave ethically if the desired behavior fits their belief system, they personally have a strong desire to behave ethically, others at work desire the ethical behavior, and the employee has the ability and resources available to follow through on the ethical behavior. If any of these factors is weak, ethical intentions become weak and the desired ethical behavior does not happen.

WHAT IS MORAL INTENSITY AND HOW DOES IT IMPACT ETHICAL DECISION MAKING?

Moral intensity refers to issue-related factors, rather than individual or organizational factors, that are likely to determine the magnitude of a person’s moral approval or disapproval.

JUDICIAL ANALYSIS

Factors that influence the decision-making of judges and juries include the nature of the harm (physical, economic, or psychological), the nature of those harmed (person or nonperson), and the stage of the organization’s resource transformation at which the harm occurs (during the input stage, throughput state, or output stage).

The legal system holds managers most blameworthy for physical harms to people. Less blameworthy are psychological harms to people and physical harms to animals.

MORAL INTENSITY FACTORS

An issue’s moral intensity is likely to vary based on six factors:

1. Magnitude of Consequences refers to the total sum of harms and benefits generated by an act, such as the number of people who may be harmed (2 versus 100 people) or whether the harm is a minor injury or a death. Harmful acts with severe consequences have high moral intensity.
2. Social Consensus refers to the degree of social agreement that an act is good or bad. Consensus can occur at two levels, on the broad societal level or within a localized group of people. The strongest consensus occurs when both levels are in agreement. Situations that violate social consensus have high moral intensity.
3. Probability of Effect refers to the probability that an act’s effect will actually occur or cause the predicted harm. Acts with a high likelihood of causing harm have high moral intensity.
4. Temporal Immediacy refers to the length of time between an act and the onset of consequences. Acts that immediately cause harm have high moral intensity.
5. Proximity refers to the nearness of an act to its victims and beneficiaries. Harmful acts that are nearby have high moral intensity.
6. Concentration of Effect refers to the amount of harm an act will create in a concentrated area. Harmful acts concentrated in a particular area have high moral intensity.

Therefore, the most morally intense acts are those with a high likelihood of causing severe harm to many people in a short period of time within a close and concentrated area, and where there is strong social consensus that the act is wrong. If such an act occurs, the manager and organization face public outrage and strong legal condemnation.

WHAT ORGANIZATIONAL FACTORS IMPACT ETHICAL DECISION MAKING?

Ethical intentions and behaviors are also shaped by organizational factors. Researchers have found 4 organizational characteristics associated with ethical behaviors:

- Codes of Ethics: The existence of a code of ethics is positively related to ethical decision-making.

- Ethical Climate/Culture: Ethical climates and culture have a positive influence on ethical decision-making.

- Organization Size: Smaller organizations have a tendency to make better ethical decisions.

- Rewards and Sanctions: Organizations that reward ethical behaviors and punish unethical behaviors have a positive impact on ethical decision-making.

Therefore, employees of organizations with a code of ethics, an ethical climate, and whose managers reward ethical behavior and punish unethical behaviors, are more likely to make better ethical decisions.

WHAT OTHER OBSTACLES DIVERT PEOPLE FROM FOLLOWING THROUGH ON THEIR ETHICAL INTENTIONS?

An ethical intention is determining mentally to take some action that is morally appropriate. But even if an intention to act ethically is solidified, an individual still may not follow through on the ethical intention.

SECOND DOUBTS

Second doubts can arise and the decision-maker may reanalyze the importance or anticipated outcomes of some of the previous mediating factors between ethical beliefs and intentions.

WEAKNESS OF WILL OR LACK OF MORAL COURAGE

A weakness of will or lack of moral courage may also dilute the initial ethical intention. People are particularly prone to weakness of will when the moral duty to act is weak. Confronting a co-worker about stealing may require too much effort to for the individual stepping out of his or her comfort zone.

BREAKING OLD HABITS

Breaking old habits can be formidable. An employee who has never spoken out against unethical behaviors at work may initially intend to change that habit after observing the co-worker’s theft. But then the usual list of fears arise and it is easier for the employee to respond as he or she always has, which is to remain quiet and let someone else do something about it.

WHAT 7 QUESTIONS ARE THE BASES FOR A SYSTEMATIC RATIONAL ETHICAL DECISION MAKING FRAMEWORK?

WHAT 3 QUESTIONS POINT THE DECISION MAKER IN THE DIRECTION OF THE MOST MORAL DECISION?

Rational ethical decision-making frameworks help individuals analyze the ethical basis of their decisions and actions. The simplest question to ask is: How would my mother (or any person of high integrity you respect) feel if what I’m planning to do appeared on the front page of a newspaper?

ROTARY INTERNATIONAL’S FOUR-WAY TEST

The Rotary International’s “Four-Way Test” provides a simple framework for analyzing the ethical dimension of a decision.

Of the things we think, say, or do:

1.         Is it the TRUTH?

2.         Is it FAIR to all concerned?

3.         Will it build GOODWILL and BETTER FRIENDSHIPS?

4.         Will it be BENEFICIAL to all concerned?

RAYTHEON’S ETHICS QUICK TEST

Raytheon, a defense industry technology company, provides its 75,000 employees with an Ethics Quick Test consisting of the following questions to consider when facing an ethical dilemma:

• Is the action legal?
• Is it right?
• Who will be affected?
• Does it fit Raytheon’s values?
• How will I feel afterwards?
• How would it look in the newspaper?
• Will it reflect poorly on the company?

Review BEST PRACTICE IN USE, Raytheon’s ACTION decision-making model

• Act Responsibly
• Consider our Ethical Principles
• Trust your Judgment
• Identify Impact on Stakeholders
• Obey the Rules
• Notify Appropriate Persons

SYSTEMATIC RATIONAL ETHICAL DECISION-MAKING FRAMEWORK

- The Rotary’s Four-Way Test and Raytheon’s Ethics Quick Test and ACTION model are very helpful lists of questions. But they are not philosophically systematic.

- The moral philosophy literature provides a more systematic approach for deriving moral conclusions.

- Ethical reasoning is just like any other managerial problem-solving process. When confronting a problem, managers typically list the available options, prioritize them, and determine which alternative makes the most sense. The same decision-making process can be applied to ethical analysis.

- Strong consensus, though not absolute agreement, exists among philosophers that some ethical reasons are more morally acceptable than others. For example, it has been long established that the Golden Rule “do to others as you would want done to you” takes precedence over an individual’s self-interests when these two ethical theories are in conflict, although some hard-core libertarians might object.

- Review the systematic rational ethical decision-making framework that can help management and nonmanagement employees reveal the ethical dimension of any decision being made. A similar ranking of the ethical principles can be found in many cultures.

Answer Questions 1 through 7 to gather the information necessary for performing an ethical analysis. Based on this information, develop a decision that has the strongest ethical basis.

1. Who are all the people affected by the action? [Stakeholder Analysis]
2. Is the action beneficial to me? [Egoism]
3. Is the action supported by my social group? [Social Group Relativism]
4. Is the action supported by national laws? [Cultural Relativism]
5. Is the action for the greatest good of the greatest number of people affected by it? [Utilitarianism]
6. Does the action treat every stakeholder with respect and dignity, and is the act something that everyone should do? [Deontology]
7. Is this how a virtuous person would act? [Virtue Ethics]

- If answers to Questions 2 through 7 are all “yes,” then do it.

- If answers to Questions 2 through 7 are all “no,” then do not do it.

- If answers to Questions 2 through 7 are mixed, then modify your decision.

• If answers to Questions 5, 6, and 7 are “yes,” this action is the most ethical. You may need to modify this decision in consideration of any “no” answer to Questions 2 through 4.
• If answers to Questions 5, 6, and 7 are “no,” this action is the least ethical. Modify this decision in consideration of these objections.
• If answers to Questions 5, 6, and 7 are mixed, this action is moderately ethical. Modify this decision in consideration of objections raised by Questions 5, 6, or 7. You may need to further modify this decision in consideration of any “no” answer to Questions 2, 3, or 4.

The answers to questions 5, 6, and 7 point managers in the direction of the most moral decision. Doing something because the action is to the greatest good of the greatest number of people affected by it, treats all stakeholders with respect and integrity, and is something a virtuous person would do provides a tremendous amount of moral certitude. This is how we hope our leaders behave. But if that action might also result in the decision-maker being fired (Question 2), more reflection might be needed to determine how to do what is right without being fired.

Note how the “legal” answer is not the highest ethical theory (Question 4). Laws are not created out of thin air, they are justified by concerns about the greatest good for the greatest number, respect for everyone, and virtuous behavior. Laws that fail to meet these three fundamental ethical concerns are usually an issue of public and political concern, debated, and sometimes changed.

DESCRIBE THE 6 ETHICAL THEORIES

The six ethical theories are ordered beginning with the most basic ethical theory (egoism) and ending with the most important and demanding ones (deontology and virtue ethics).

View these six ethical theories as sequential steps on a moral ladder, and the first step is egoism.

EGOISM

How does the action relate to me? If the action furthers my interests, then it is right. If it conflicts with my interests, then it is wrong.

- Egoists tend to reason as follows: “I strongly believe that x is the best decision, because that is my personal preference.”

- People naturally make decisions based on self-interest (concern for self in relation to others).

- Ayn Rand’s novels The Fountainhead and Atlas Shrugged are among the most engaging articulations of the importance of egoism. In both novels, individual liberty and self-interest matter a great deal. According to Rand, the best thing for the common good is to become an individual of high integrity willing to pursue one’s self-interests at all costs.

SOCIAL GROUP RELATIVISM

How does the action relate to my social group (peers, friends, etc.)? If the action conforms to the social group’s norms, then it is right. If it is contrary to the social group’s norms, then it is wrong.

- Social group relativists tend to reason as follows: “I strongly believe that x is the best decision, because that is what my social group supports.”

- Social group relativists are very concerned about what their social group thinks about an issue because they share common interests.

- Social group relativism is a common ethical theory. Managers usually feel a strong affinity for the interests of other managers. When problems arise, a manager might ask other managers what they have done in the past when faced with a similar problem. The decision-maker wants to do what a good manager would do in the particular situation.

CULTURAL RELATIVISM

How does the action relate to the national culture, particularly its laws? If the action conforms to the law, then it is right. If it is contrary to the law, then it is wrong.

- Cultural relativists tend to reason as follows: “I strongly believe that x is the right thing to do, because the law says so.”

- The person perceives herself or himself as a member of a larger society that has some common interests. A common saying among cultural relativists is “When in Rome do as the Romans do.” This demonstrates tolerance and respect for the practices and policies of the host nation or community.

- Cultural relativism is also a rather common ethical theory. Many managers do not want to break the law, even when doing so might personally benefit them or their company.

UTILITARIANISM

How does the action relate to everyone who is affected by it? If the action is beneficial to the greatest number of people affected by it, then it is right. If it is detrimental to the greatest number, then it is wrong.

- Utilitarians tend to reason as follows: “I strongly believe that x is the best decision, because the consequences benefit the greatest number of people.”

- Utilitarianism serves as the foundational ethic for the political, economic, and business systems in the United States.

• Democracy is utilitarian in the sense that everyone can state his or her preference and the best public policy is that which the majority desires.
• The ethics of capitalism is based on utilitarian logic – the economic pursuit of self-interest improves national wealth more than other economic systems.
• Cost-benefit analysis is based on utilitarian logic – determine a project’s total benefits and total costs, and if the benefits outweigh the costs the project receives a favorable review.

DEONTOLOGY

Does the action treat every stakeholder with respect and dignity in all situations? Is the action something that everyone should do?  If yes, then it is right. If no, then it is wrong.

- Deontologists tend to reason as follows: “I strongly believe that x is the best decision, because everyone has a duty to treat everyone else with respect in all situations.”

- Deontologists emphasize the motives behind an action and individual rights, rather than the consequences. They have a duty to follow “moral rules” applicable to all people in all situations, such as the Ten Commandments.

- The philosopher Immanuel Kant prevents this faulty reasoning based on a categorical imperative, which is a rule that applies to all situations. Kant’s primary categorical imperative maintains that one must: “Act according to the maxim whereby you can at the same time will that it should become a universal law.” In other words, what would happen if everyone did what you were planning to do?

VIRTUE ETHICS

How would a virtuous person act in this situation? If the act strengthens moral character, then it is right. If it is contrary to moral character building, then it is wrong.

- Virtue ethicists tend to reason as follows: “I strongly believe that x is the best decision, because that is what a person of high moral character would do.”

- Virtue refers to achieving excellence in morals. The list of virtues is quite extensive. The most common grouping of virtues includes justice, empathy, passion, piety, reliability, respect, and incorruptibility.

- Virtue ethics is based on cultivating good habits. Humans are creatures of habit. Kindness and fairness must be practiced daily to become virtuous habits. A person becomes kind and fair by being kind and fair.

- Review the list of virtues and vices.

- Review the five values Rushworth Kidder and his colleagues have found strong global consensus: Responsibility, Fairness, Respect, Compassion, and Honesty

HOW DO THE ETHICAL THEORIES PARALLEL KOHLBERG’S THEORY OF MORAL DEVELOPMENT?

The six ethical theories parallel Lawrence Kohlberg’s six levels of moral reasoning discussed in Chapter 1 which show that:

• moral reasoning in Stages 1 and 2 reflects egoism
• Stage 3 moral reasoning reflects social group relativism
• Stage 4 moral reasoning reflects cultural relativism
• Stage 5 reflects utilitarianism and deontology
• Stage 6 reflects deontology and virtue ethics

HOW CAN THE ETHICAL THEORIES BE APPLIED TO PERSUADE PEOPLE?

BACKGROUND

- Most managers are primarily social group relativists (Question 3), wanting to do what a good manager would do, and cultural relativists (Question 4) who want to obey the law. But some managers are primarily egoists (Question 2), utilitarians (Question 5), deontologists (Question 6), or virtue ethicists (Question 7). Their ethical intuition is grounded in one of these six theories.

- Most people are very comfortable with the ethical theory they intuitively rely on, and may feel annoyed when others question their decisions.

- When ethical conflicts arise in organizations, the person with higher status tends to get his or her way. This conflict resolution approach assumes that the higher status person is applying the higher ethical theory, an assumption that has been proven false innumerable times.

- A manager’s failure to engage employees who apply different ethical theories can damage employee morale and result in unethical behaviors and lawsuits.

PERSUASION

- A healthier approach is for a manager to listen carefully to people who disagree, categorize the other person’s response in terms of one of the six ethical theories, and then reframe the analysis using the other person’s ethical theory to address the employee’s concern.

• This is hard work.
• It requires a great deal of patience and practice because we are more accustomed to reasoning based on our preferred ethical theory, which we consider to be the most appropriate ethical theory.

- Each ethical theory is similar to a different foreign language.

• Assume that egoism (self-interests) is equivalent to speaking English and utilitarianism (greatest good) is equivalent to speaking Spanish. If an English speaker wants to persuade a Spanish speaker, the English speaker must communicate in Spanish, otherwise no progress will be made. The same logic applies to using the ethical theories as a persuasion tool.
• For the egoist to persuasively reason with the utilitarian, the egoist must realize that the utilitarian does not care what is in his or her self-interest, so appealing to the utilitarian’s self-interest will fall on deaf ears. What utilitarians do care about is the greatest good for the greatest number of people. To be persuasive, the egoist must communicate using utilitarian reasoning and demonstrate how a greatest good analysis results in doing x rather than y.
• Similarly, egoists do not care about the greatest good for the greatest number of people, so appealing to the egoist’s sense of the greatest good will fall on deaf ears. What egoists do care about is their self-interests. To be persuasive, the utilitarian must communicate using egoistic reasoning and demonstrate how it is in the egoist’s self-interest to do y rather than x.

ACHIEVING ETHICAL CONSENSUS

Review TIPS AND TECHNIQUES.

Many ethical disagreements can be solved. Use the following steps to help people achieve ethical consensus and win-win ethical outcomes.

Step 1: Both parties state their position on the issue.

Step 2: Both parties reveal the values and ethical reasoning that underlie their position.

Step 3: Both parties paraphrase each other’s position.

Step 4: Both parties paraphrase each other’s underlying values and ethical reasoning.

Step 5: Both parties, working together, craft a resolution to the conflict over the issue.

Step 6: Both parties check that the resolution does not conflict with their own values or ethical reasoning, or those of the other party.

DISCUSS SOME OF THE WARNING SIGNS THAT AN UNETHICAL DECISION IS APPROACHING.

Review Michael Josephson’s 10 common rationalizations for unethical acts as “ethical hazard approaching” signs.

Beware when someone says:

1. It may seem unethical … but it is legal and permissible
2. It may seem unethical … but it is necessary
3. It may seem unethical … but it is just part of the job
4. It may seem unethical … but it is all for a good cause
5. It may seem unethical … but I am just doing it for you
6. It may seem unethical … but I am just fighting fire with fire
7. It may seem unethical … but it doesn’t hurt anyone
8. It may seem unethical … but everyone else is doing it
9. It may seem unethical … but I don’t gain personally
10. It may seem unethical … but I’ve got it coming

Train employees to recognize these rationalizations. When spoken pause for additional ethical reflection and develop an alternative strategy that meets ethical guidelines.

Ethical dilemmas reported in newspapers

Examples of Ethical Decision Making models

Josephson Institute

Ayn Rand Institute

Best Place to Work Video – Stew Leonard’s

Business Ethics Issue Video

“Black Money,” Frontline, about international bribery; April 7, 2009, 57 minutes

TEDTalks Videos

Moral Roots of Liberals and Conservatives: Psychologist Jonathan Haidt explains the five moral values that form the basis of our political choices, whether we're left, right or center, and pinpoints the moral values that liberals and conservatives tend to honor most; March 2008, 19 minutes

Justice and Ethical Decision-Making: Harvard professor Michael Sandel probes: Is torture ever justified? Would you steal a drug that your child needs to survive? Is it sometimes wrong to tell the truth? How much is one human life worth?; September 2005, 55 minutes

Conversations with Charlie Rose

A conversation with David Brooks, New York Times columnist and author, about the unconscious mind, emotions, decision-making, and social behaviors; September 16, 2010, 60 minutes

A conversation with Jeff Bezos, founder, president, chief executive officer and chairman of the board of Amazon.com; February 26, 2009, 60 minutes

6 - Ethics Training

OVERVIEW

Individuals are more likely to discuss work-related ethical issues with family and friends than co-workers or executives. A managerial challenge is to design workshops where employees can discuss ethical issues at work. Ethics training can initiate dialogue around contentious ethical issues. A well-facilitated ethics training workshop has greater impact on employee behaviors than the presence of an ethics code or memos from the boss. Researchers report that people employed in organizations with formalized ethics training have more positive perceptions about their organization’s ethics and greater job satisfaction.

This chapter emphasizes the importance of creating a culture of trust, reviews the extent of ethics training nationwide, recommends ethics training for everyone in the organization, highlights providing web-based and facilitator-guided ethics training programs, and examines choosing the workshop facilitator. Ten different types of ethics training workshops are presented.

After completing this chapter, students should be able to:

• Discuss the importance of organizational trust
• Describe the extent of ethics training nationwide
• Understand the shortcomings of web-based ethics training programs
• Develop ten types of ethics training workshops
• Create business ethics scenarios for workshop discussion
• Administer ethics personality surveys
• Assess the ethics training workshop

KEY WORDS

Assessment: a systemic collection, review and use of information to determine workshop effectiveness.

Embezzlement: a particular type of theft and fraud where an employee steals money from his or her employer.

Fraud: the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization's resources or asset.

Organizational trust: having a positive attitude that another member of the organization will be fair and not take advantage of one’s vulnerability or dependency in a risky situation.

Theft: taking someone’s property without their permission.

Web-based training: software program that provides standardized information about legal requirements and moral expectations.

WHY IS ORGANIZATIONAL TRUST SO IMPORTANT?

WHAT IS TRUST?

- Ethics training helps to create a culture of trust at work.

- Organizational trust refers to having a positive attitude that another member of the organization will be fair and not take advantage of one’s vulnerability or dependency in a risky situation.

- Trust has a cognitive dimension.

• Trust is developed based on careful reflection of past experiences with organizational members and practices.
• A trusting relationship forms through repeated social exchanges between two people, where each person makes decisions and acts in a way that takes into consideration the other person’s interests and well-being.

- Trust also has an emotional dimension.

• Trust is linked to an individual’s feelings and intuition, and creates a positive emotional bond between two people.

BENEFITS OF TRUST

- According to the management theorist W. Edwards Deming, “Trust is mandatory for optimization of a system... Without trust, each component will protect its own immediate interests to its own long-term detriment, and to the detriment of the entire system.”

- Trust eliminates psychological barriers separating employers and employees. The other person’s goodwill and reliability are assumed in a trusting relationship, which allows for greater flexibility to respond as needed without burdensome oversight or approval process.

- Trust creates economic benefits through enhanced individual and organizational performance. Trusting and cooperative relationships play a critical role in effective communications and teamwork, which impacts employee commitment, employee loyalty, productivity, and profits.

- Ethical organizations, which have high levels of trust, attract and sustain high quality employees, customers, and suppliers. They also have low levels of office politics and employee cynicism. Ethical work cultures lead to greater accountability through clearly defined standards and shared expectations. The two-way communication reinforces policy compliance and reduces organizational risks.

- Hard-earned trust can quickly disappear when violated and hamper organizational performance.

WHO SHOULD ATTEND ETHICS TRAINING WORKSHOPS?

EXTENT OF ETHICS TRAINING

- A 2004 survey of publicly traded companies found that 68 percent provided ethics training.

- More than 80 percent of city governments provide ethics training for employees.

- Members of some professions are required to take ethics training as part of obtaining or renewing their professional license to protect the public from incompetent practitioners.

- Many states mandate that continuing education courses for licensed accountants and lawyers include an ethics component.

- Organizations may be tempted to eliminate ethics training as an extraneous expense when budgets are tight, but this is exactly when ethics training is needed most.

- Employees who tend toward the relativistic belief that cutting ethical corners may be necessary to “save the organization” might sound heroic in the short-term, but these actions can come back to haunt the organization in the long-term.

WHO TO TRAIN

- Conduct ethics training throughout the organization.

- All employees, ranging from the CEO and Board of Directors to the janitor, experience ethical dilemmas on a daily basis.

- Ethics training can help organizational leaders achieve consensus on how to address difficult situations they encounter and how they will hold other employees accountable for their behaviors.

- Middle managers and supervisors deserve special attention for ethics training. Direct supervisors have the most immediate impact on the ethics of subordinates.

- New employees need ethics training; making ethics training part of a new employee’s orientation process demonstrates from the outset the importance of ethics to the organization.

- Conduct a follow-up session six months later to reinforce the crucial role of ethics and explore ethical issues they have experienced at work up to that point.

- Long-term employees significantly shape the organization’s ethical tone. One long-term employee’s denigrating comments about the organization’s ethical efforts can undo all the managerial effort at aligning a new employee with the organization’s ethics.

- Train long-term employees to lead ethics training workshops and share stories about how the organization’s code of ethics was upheld in difficult situations.

WHAT ARE THE STRENGTHS AND WEAKNESSES OF WEB-BASED ETHICS TRAINING?

BACKGROUND

- According to one survey, companies conduct more than 90 percent of their ethics training through e-learning programs.

- All new hires at Coors Brewing Company must complete a web-based training module within 90 days of employment.

- In Illinois, all state employees are required to do web-based ethics training annually.

STRENGTHS

- Online ethics training programs are easy to implement at minimal cost.

- Web-based training offers a simple method for making employees aware of the most common ethical issues. Software programs provide standardized information about legal requirements and moral expectations.

- The information can be studied at a pace that matches the employee’s learning style.

- Question and answer test formats provide immediate feedback on the knowledge being learned.

- At EnPro, an industrial products company, employees retake the computerized ethics training program until achieving a perfect score.

WEAKNESSES

- Ethics training requires dialogue. The best response to even the most cut-and-dried ethical dilemma can be highly debatable.

- Web-based training by itself does not address all the nuances and contextual issues associated with ethical dilemmas.

- Employees are not pushed out of their ethics comfort zone.

- Complement web-based ethics training programs with facilitator-guided face-to-face interactions and group activities.

- Skilled facilitators can guide the discussion to other relevant issues worthy of exploration, point out contradictions, and call on quiet participants to express their views in a safe learning environment.

- Interactive training workshops can also enhance team building and collegiality.

HOW WOULD YOU DESIGN AN ETHICS TRAINING PROGRAM?

WHO SHOULD SERVE AS FACILITATOR?

BACKGROUND

- Some organizations do not provide ethics training workshops because they believe it suggests that their employees are unethical or that the organization has ethical problems. This obstacle can be avoided by recognizing that every person is morally imperfect and that every organization has ethical risks.

- Present the ethics training in the spirit of ongoing continuous improvement efforts and part of a systematic effort to reinforce the organization’s ethical culture.

- There is no “one-size-fits-all” ethics training program, yet there are general trends and best practices found among organizations.

- Offer at least one mandatory ethics training annually. Researchers report that the frequency of training has positive impacts on employee attitudes and behaviors.

- If attendance is voluntary, the employees who need the training the most may not attend.

ETHICS TRAINING PROGRAM DESIGN

- Some organizations only want to sponsor one ethics training workshop a year. If this is the case, first consider conducting the “Code of Ethics Employee Assessment”

- Some organizations might find the approach too challenging to undertake for its first ethics training workshop because of the many issues that may be raised.

- A more moderate initial ethics training workshop for addressing an important issue during a 90-minute session.

• CEO or supervisor expresses support for the activity
• Clarify workshop rationale, goals, and objectives
• Present competitive advantages of maintaining an ethical work culture (see Chapter 1)
• Foster awareness of industry, organizational, or work unit ethical issues
• Introduce the organization’s Code of Ethics and Conduct (see Chapter 4)
• Focus on a salient issue or behavior that challenges the Code of Ethics and Conduct
• Legitimize an ethical decision-making process (see Chapter 5)
• Individually apply the decision-making process to a specific relevant situation
• Discuss the issue in small groups
• Debrief
• Assess and evaluate the workshop for continuous improvement

- Workshop relevancy can be created at the beginning of the workshop with a short quiz about a complex issue – such as what the code of conduct says about conflicts-of-interest – and the results can serve as benchmark data to measure achieving workshop learning objectives.

- Make the ethics training program content as specific as possible. Target specific behaviors and provide specific examples, but present the material in general terms so as not to offend any specific employee.

- Use cases that are relevant to the greatest number of participants. Ask participants how they would respond to the situation, and have them discuss their answers in small groups.

- Praise divergent thinking and creative problem-solving, but make sure the suggestions are ethically sound.

- Train participants on how to respond when these particular situations arise in the future.

WORKSHOP FACILITATOR

- Facilitating an ethics discussion takes a particular skill.

- A good facilitator inspires self-learning among the participants by keeping everyone focused on the main issues while being flexible to new issues as they arise.

- The facilitator can encourage participants to form opinions, analyze and modify their own views, and engage in civil disagreements without offending people holding the opposing view or stifling discussion.

- An ideal workshop facilitator is someone the participants trust and has the requisite skills to create a safe learning environment.

- Initially consider a human resources department staff person. But some employees will not speak honestly in front of a human resources employee, particularly about ethical issues, because they fear that their comments might have a negative impact on performance evaluations and lead to termination.

- If this is the case, assign the facilitator role to someone both the direct supervisor and employees trust.

- Possibilities include an informal leader from within the work unit, someone everyone respects who works in another department, or an outside consultant.

- The best option may be to train an informal leader from within the work unit who has management potential. This person already has a sense of key ethical issues and can ensure that the discussion is realistic and relevant.

DESCRIBE 10 TYPES OF ETHICS TRAINING WORKSHOP OPTIONS.

WHICH OF THESE WORKSHOP OPTIONS WOULD YOU RECOMMEND?

WHY?

Review the summary of ten very useful ethics training workshop options.

1. Ethical Culture Assessment – Assess the extent to which ethics permeates organizational operations, including how well the organization is living up to its Code of Ethics. Praise areas of strength and develop strategies for improving the lowest scoring areas.
2. Code of Conduct Analysis – Create a Who Wants to be a Millionaire or Jeopardy quiz show, or dialogue sessions, to raise awareness of code of conduct content, code application, and code violation outcomes. Present actual cases of employees, or people in the industry, violating a code of conduct, and the punishments they received.
3. Typical Behaviors Experience – Introduce employees to common industry or work task ethical issues.
4. Apply the Systematic Rational Ethical Decision-Making Framework – Provide several real-life situations, along with the 7-question systematic rational ethical decision-making framework, and have participants apply the framework to arrive at a moral conclusion.
5. Create Business Ethics Scenarios for Discussion – Have employees create ethical scenarios based on their own experiences and discuss them.
6. Fraud and Theft Exploration – Educate employees on how to detect fraud and theft. Brainstorm how these crimes could be committed and recommend preventive control mechanisms.
7. Level of Moral Development Analysis – Measure employee level of moral development using an ethical dilemma and survey instrument. 
8. Ethics Personality Measures – Administer surveys that measure personality factors and moral attributes associated with ethical behaviors, such as idealism/relativism, ethical ideology, moral identity, Machiavellianism, and locus of control.
9. Benchmark to an Ideal Employee – Develop a profile of an “ideal employee” and put into a survey format. Then have employees assess themselves to this ideal, praise the good, analyze shortcomings, and develop strategies for capitalizing on the strengths and transforming weaknesses into strengths.
10. Meaningful Work Exploration – Reflect on making job tasks enjoyable and meaningful experiences.

WHAT ARE THE RECOMMENDED 6 STEPS FOR FACILITATING AN ETHICS DIALOGUE WORKSHOP?

SIX STEPS

Review the six-step facilitation process, which is aimed at maximizing interactive dialogue.

Step 1: Distribute the 7-Question Systematic Rational Ethical Decision-Making Framework and review it using a sample business problem.

Step 2: Distribute a real-life situation to workshop participants, read it out loud, and have participants apply the Systematic Rational Ethical Decision-Making Framework to derive a moral conclusion that supports one of the decision options.

Step 3: Count the votes for each recommendation.

Step 4: Develop position rationale in small groups.

Step 5: Empower the minority position.

Step 6: Reach a conclusion.

Review TIPS AND TECHNIQUES about requiring written responses to ethical dilemmas

- Commits the person to a particular decision option

- Prevents employees from changing their decision based on how others vote

- Provides the facilitator with a hook to involve a quiet participant (“Could you please read your written answer to the workshop?”)

- Establishes an initial data point that can be compared to an employee’s belief at the end of the workshop

VIGNETTES

- The business ethics literature and Internet websites have many vignettes participants can examine.

• Some vignettes are just one or two sentences long and open-ended, such as: What would you do if a manager promoted a loyal friend and questioningly competent person over a better-qualified person whom he had no close ties?
• Many vignettes, such as those available on the Institute for Global Ethics website, ask participants to choose between two or three likely responses.
• Some vignettes offer three potential responses and ranks them according to ethical preferences.
• Other vignettes recommend an appropriate ethical response.

WHICH PERSONALITY SURVEYS CAN EMPLOYEES TAKE TO GAIN A BETTER UNDERSTANDING OF ETHICS AT WORK?

PERSONALITY MEASURES AND ETHICS

Several personality measures are associated with ethics.

- Moral identity scores are related to prosocial behaviors at work

- Expedient ethical ideology scores are related to antisocial activities.

- People with a strong internal, compared to external, locus of control exhibit more ethical behavior and are better able to resist coercion, thus less susceptible to pressure from unethical bullies.

PERSONALITY MEASURE EXAMPLES

- Idealism/Relativism measures whether a person tends to be an “idealist” or “relativist” when responding to an ethical dilemma. The 20-item survey consists of two 10-item factors (idealism and relativism).

- Ethical Ideology measures whether a person tends to be “principled” (deontology) or “expedient” (relativism) when responding to an ethical dilemma. An 18-item survey.

- Moral Identity measures whether a person internalizes moral character traits (internationalization) and projects them to others (symbolization). Survey participants read a list of 9 moral character traits (e.g., caring, compassionate, fair) and then answer a 10-item survey consisting of two 5-item factors (internalization and symbolization).

- Moral Courage measures whether a person exercises moral principles. The 15-item survey consists of five 3-item factors (moral agency, multiple values, endurance of threats, going beyond compliance, and moral goals).

- Empathy measures a person’s emotional reaction to the experiences of another person. The 28-item survey consists of four 7-item factors (perspective-taking, emphatic concern, personal distress, fantasy).

- Altruism measures whether a person engages in altruistic behaviors. Survey participants evaluate the extent to which they have performed a list of 20 behaviors.

- Trust measures whether a person is willing to be vulnerable in supervisor interactions. A 7-item survey.

- Ethical Self-Efficacy measures whether a person believes he or she can successfully perform an ethical behavior. A 12-item survey consists of three factors (uses and keeps computer self-efficacy, distribution self-efficacy, and persuasion self-efficacy).

- Machiavellianism measures whether a person identifies with “the ends justify the means” moral thinking. A 20-item survey.

- Locus of Control measures whether a person believes she or he controls (internal), or is controled by (extenal), events in life. The 30-item survey consists of two 15-item factors (internal and external locus of control).

- Life Regard measures whether a person values living a meaningful life (framework) and whether this desire is being fulfilled (fulfillment). The 28-item survey consists of two 14-item factors (framework and fulfillment).

HOW WOULD YOU ASSESS THE SUCCESS OF AN ETHICS TRAINING WORKSHOP?

- Similar to all types of workplace training, managers need to assess the effectiveness of ethics training workshops.

- Assessment is a systemic collection, review and use of information to determine workshop effectiveness.

- There primary purposes of assessment are

(1) evaluating if the ethics training workshop material presented has been learned by the participants

(2) evaluating if the workshop participant’s objectives have been met, and based on this information

(3) providing more effective instruction in the future by building on what worked previously and modifying what didn’t work.

- In the spirit of continuous improvement, assess the training session at its conclusion to determine if workshop goals and objectives were accomplished.

- Keep the assessment tool simple and short for employees and the facilitator.

- Below are questions that could be asked following a variety of ethics training sessions.

• Were specific real-life situations addressed?
• Were questions raised by participants?
• Did the trainer serve as a coach and facilitator, rather than a lecturer?
• Were participants shown how to address, report, or correct ethical problems?
• Were the situations raised linked back to the Code of Ethics, Code of Conduct, or organizational strategy?

- If important content has been supplied, have participants complete a follow-up test several weeks after the workshop to determine information retention.

- Follow-up interviews with the participants and their supervisors can also verify that new skills are being applied.

- Some workshop topics lend themselves to return-on-investment calculations.

Ethical Dilemmas for Training

- Institute for Global Ethics, Ethical Dilemmas

- Thomsett International, “Crossing the Line” vignettes

SAIP Institute, eInsight Ethics Quiz

Government Ethics Training

- Institute for Local Self Government, Ethics Training Materials

- United States House of Representatives, Code of Conduct training

- U.S. Department of Defense, “Encyclopedia of Ethical Failure” 

Moral Development - Center for the Student of Ethical Development

Best Place to Work Video – Dreamworks

Business Ethics Issue Video

“A Dangerous Business,” Frontline, about worker safety and environmental violations at McWane, Inc.; January 9, 2003, 54 minutes

TEDTalks Videos

- Difficult Negotiations: William Ury, author of Getting to Yes, offers a way to create agreement in even the most difficult situations -- from family conflict to, perhaps, the Middle East; October 2010, 19 minutes

- Democracy and Public Policy Debates: Democracy thrives on civil debate, Michael Sandel says, and leads a debate over a Supreme Court case (PGA Tour, Inc. v. Martin) whose outcome reveals the critical ingredient in justice; February 2010, 20 minutes

Conversations with Charlie Rose

- A conversation with James Wolfensohn about the World Bank, the future of the world economy and what it means to lead a global life; December 22, 2010, 20 minutes

- A conversation with John Wood author of 'Leaving Microsoft to Change the World'; December 9, 2010, 15 minutes

7 - Respecting Employee Diversity

OVERVIEW

This chapter provides a brief history of population diversity in the United States. Harmful discriminatory employment practices and behaviors led to the need for Title VII of the Civil Rights Act of 1964 and the Equal Employment Opportunity Commission (EEOC). Title VII defines, and the EEOC monitors, illegal types of workplace discrimination.

There are many competitive advantages of appropriately managing diversity. The chapter examines the most common types of workplace discrimination and the best operational practices for enhancing and managing diversity, including a 10-step process for implementing a diversity initiative. Diversity training problems and solutions are examined, and instructions offered for conducting a series of diversity training workshops that increase social group self-awareness, explore specific issues, and help employees manage different communication styles.

After completing this chapter, students should be able to:

• Describe competitive advantages of diversity

• Explain the most common types of workplace discrimination
• Adopt best operational practices for managing diversity
• Successfully implement a diversity initiative
• Facilitate a variety of diversity workshops

KEY WORDS

Age Discrimination in Employment Act: prohibits dismissing, or not promoting, anyone age 40 or older because the individual is considered “too old” for the job.

Americans with Disabilities Act: prohibits discrimination against a qualified workers with a physical or mental disability who can perform the job task with or without reasonable accommodation.

Dominant group: refers to the diverse characteristic that is held in common by a large number of employees, typically Caucasian males.

Employment at-will doctrine: allows employers and employees to end an employment relationship for any reason, or “at will,” so long as it does not violate contractual agreements or federal, state, and municipal laws.

Employment Non-Discrimination Act: federal legislation under consideration to protect lesbian, gay, bisexual and transgender people from job discrimination.

Equal Pay Act: prohibits pay discrimination based solely on gender considerations; men and women receive equal pay for equal work.

Fairness: refers to making decisions according to rules not based on personal biases.

Family and Medical Leave Act: ensures a total of 12 workweeks of unpaid leave during any 12-month period, and the continuation of health care and other fringe benefits during this period, for: (1) the care of a newborn baby, a newly adopted child, or a new foster child, (2) the care of an immediate family member with a serious health condition, or (3) an employee’s serious health condition.

Glass ceiling: refers to situations in which the hierarchical advancement of a qualified woman or minority group member is prematurely stopped at a lower level because of gender, racial, or ethnic discrimination.

Harassment: unwelcome conduct that is based on protected class status from a supervisor, coworker, or nonemployee, such as a customer or supplier.

Pregnancy Discrimination Act: protects the civil rights of pregnant women and ensures that women experiencing pregnancy, childbirth, or related medical conditions would be treated the same as an employee with an illness or temporary disability.

Respect for others: refers to treating everyone with dignity.

Reverse discrimination: refers to discriminating against a dominant or majority group member, such as Caucasian males, in favor of a historically disadvantaged or minority group member.

Self-categorization theory: individuals define themselves in relation to others based on a “self-identity” or “social identity” factor and form binding relationships with people who categorize themselves similarly.

Sexual harassment: occurs when (1) an unwelcomed sexual favor is quid-pro-quo condition of employment, promotion, pay increase, continued employment, or desired assignment, or (2) when offensive comments about a person’s gender or physical harassment of a sexual nature results in a hostile work environment.

Subordinate group: refers to the diversity characteristic held by a small minority of organizational members.

Undue hardship: refers to excessive costs and difficulties that would exempt an organization from a legal obligation, such as the Pregnancy Discrimination Act.

WHAT ARE THE 4 DIVERSITY DIMENSIONS?

Diversity is a complex concept. Respecting the diverse aspects of people goes beyond the factors that fall under the purview of the EEOC.

- Every person is diverse in multiple ways. Each aspect of diversity can contribute to improving organizational performance or be the source of detrimental prejudices and stereotypes.

- Our prejudgments about people we meet and interact with are usually a reaction to a diversity factor.

- Diversity can be conceptualized in terms of four unique dimensions: permanent, evolving, personality, and organizational (see “Diversity Dimensions”).

- Each diversity dimension adds complexity to who we are, how others perceive us, and how we perceive others.

PERMANENT DIMENSION

- The permanent dimension refers to physical attributes or inclinations people are born with and do not change over time.

- Human characteristics that are permanent and beyond a person’s control include race, ethnicity, gender, sexual orientation, and birth generation.

- Any of these factors can significantly influence a person’s identity and life experiences.

EVOLVING DIMENSION

- Evolving dimensions include age, height, weight, religion, education, physical ability, marital status, income level, and geographic location.

- At one point in life an employee is a young person, and this characteristic may influence how others treat the individual. Later in life the same person is an older person, and the individual may be treated very differently by others because of the change in age.

PERSONALITY DIMENSION

- As discussed in Chapter 3, personality theorists and researchers have reached a general consensus on a “Big Five Personality Model” consisting of five different personality aspects: extraversion, agreeableness, conscientiousness, emotional stability, and openness to experience.

- The Myers-Briggs Type Indicator (MBTI) is probably the most popular personality assessment tool used by employers is based on four paired items.

- Where you get your energy: Introvert (internally) or Extrovert (relationship with others)

- How you learn: Sensor (by understanding procedures) or Intuitive (by understanding the big picture)

- How you make decisions: Thinking (by following logic) or Feeling (by ensuring harmony)

- How you organize your time: Judger (rigidly organized) or Perceiver (flexible)

ORGANIZATIONAL DIMENSION

- Organizational characteristics—which can be either unchanging or evolving—include hierarchical status, work content, department, and seniority.

- We may prejudge others based on their being a senior manager or a recently hired nonmanagement employee. Others may prejudge us based on our being an accountant, financial analyst, or salesperson.

RACE AND ETHNICITY DISCRIMINATION ISSUES

• In 2008, approximately 73 percent of the civilian labor force was Caucasian, compared to 13 percent Hispanic and 10 percent African-American.
• Racial and ethnic discrimination refers to treating an employee differently because of his or her race or ethnicity.
• It is illegal to discriminate in job assignments and promotions based on an individual’s race or ethnicity, even if customers or other employees express a preference for Caucasians.
• National origin prohibitions include discrimination based on a person’s birthplace, ancestry, culture, and native language.
• The formation of racial and ethnic stereotypes is usually the result of segregation.
• Racial and ethnic minorities are much more likely to perceive discrimination as a problem than the Caucasians wielding managerial power.
  • African-Americans, compared to Caucasians, are four times more likely to report that racial discrimination is a serious problem and three times more likely to attribute racial discrimination as a cause for difference in jobs and income.

RELIGIOUS DISCIMINATION ISSUES

• In 2008, approximately 76 percent of the population 18 years and older were Christians – 51 percent Protestant and 25 percent Catholic – down from 86 percent in 1990.
• The remainder included 1.2 percent Jewish, 0.9 percent Eastern Religions, 0.6 percent Muslim, 0.5 percent Buddhist, and 15 percent no religion.
• Religious discrimination refers to treating an employee differently because of his or her religious beliefs.
• Job assignments, promotions, and terminations cannot be determined based on religious reasons.
• Employees can practice a religious belief at work if the employee is sincere and the practice is non-harmful to others.
• Employers must provide religious accommodations that are reasonable and do not cause an under burden to the employer.
• Claiming that another employee or customer would be upset or uncomfortable because of an employee’s religion or religious practice is not an undue hardship.
• Employers are also expected to provide flexible scheduling for religious holidays and respect religious clothing and grooming policies.
• An employer cannot forbid an employee from wearing a Jewish yarmulke, Sikh turban, or a Muslim headscarf, or a religious hairstyle, unless the clothing or hairstyle negatively impacts job performance.
• If one employee is allowed to decorate office space for a religious holiday, all employees must be allowed to do likewise regardless of their specific religion. An employer cannot force an employee to participate in a particular religious activity.

AGE DISCRIMINATION ISSUES

• Age discrimination refers to treating an employee differently because of his or her age.
• The Age Discrimination in Employment Act (ADEA) of 1967 prohibits dismissing, or not promoting, anyone forty or older because the individual is considered “too old” for the job.
• Job assignments, promotions, and terminations must be based on productivity, skills, abilities, or any factor other than protected class status, including age.
•  Exemptions to the law require a bona fide occupational qualification, such as not rehiring an aging actor for a young role, or matters of public safety, such as for airplane pilots or bus drivers.
• Common age-related stereotypes include older employees being less productive, less physically and technologically capable, and less motivated to work hard. Research has discredited these age stereotypes.
• The researchers, however, have found three age-related differences: older employees were more likely to demonstrate organizational citizenship behavior and comply with safety rules, and less likely to engage in counterproductive work behaviors.
• Due to longevity and accomplishments, older employees in some organizations have higher salaries. If an organization seeks to reduce labor costs, salaries can be a deciding criterion, but not age.
• Employers can provide employees incentives to voluntarily take early retirement, but not require early retirement.

DISABILITY DISCRIMINATION ISSUES

• Approximately 50 million Americans have a physical or mental disability, of which 55 percent are employed.
• Historically, citizens with physical and mental disabilities had been discriminated against in areas such as employment, housing, and education.
• Congress passed the Americans with Disabilities Act of 1990 (ADA) to prohibit discrimination against a qualified worker with a disability who can perform the job task with, or without, reasonable accommodation.
• The legislation defines a disability as “a physical or mental impairment that substantially limits one or more major life activities of such individual.” Examples include impairments associated with seeing, hearing, walking, standing, speaking, learning, and breathing.
• The ADA requires employers to provide reasonable accommodations for the disability, such as modifying a job assignment, work schedule, facilities, and equipment.
•  According to the ADA, factors that an employer can take into account to determine the reasonableness of an accommodation are:
  • The nature and cost of the accommodation
  • The overall size and financial resources of the facility or business
  • The impact of the accommodation on business operations
• Alcoholism is a disability under the ADA.
  • An employer cannot discipline or fire an individual because he or she is an alcoholic.
  • The employer, however, can prohibit alcohol consumption during work hours for all employees, including alcoholics, and discipline or fire an employee for productivity or performance-related factors.

SEXUAL ORIENTATION DISCRIMINATION ISSUES

• Homosexuality exists in all cultures and throughout history.
• As of 2010, there were an estimated 40,000 legal same-sex marriages in the United States.
• Gays and lesbians are estimated to be between 1.5 and 4.1 percent of the U.S. adult population, which translates to 3.2 million to 8.8 million people.
• The percentages of men who are gay, and women who are lesbian, are very similar.
• Researchers maintain that the overall percentages are low estimates due to how narrowly homosexuality is defined and confidentiality concerns of survey respondents.
• Although there has been a long history of workplace discrimination against lesbians, gays, bisexual, and transgender (LGBT) people, sexual orientation discrimination is not covered by Title VII of the Civil Rights Act.
• Nonetheless, more than 15 states and 150 municipalities have passed laws prohibiting sexual orientation discrimination in areas such as employment, housing, public education, credit, and public accommodations.
• The Employment Non-Discrimination Act (ENDA), federal legislation under consideration to protect LGBT people from job discrimination, is modeled after the Civil Rights Act.
  • The legislation is spearheaded by the National Gay and Lesbian Task Force, whose first major victory was getting the American Psychiatric Association to declassify homosexuality as a mental illness in 1973.
• In 1994, the U.S. military implemented a contentious “Don’t Ask, Don’t Tell” policy, a compromise developed by the Clinton Administration, to address the military’s ban on homosexuals.
• Military leaders opposed to gay and lesbian soldiers maintained that homosexuality threatened troop cohesiveness in combat units.
• Between 1994 and 2010, however, more than 10,000 military personnel were discharged for declaring their sexual orientation.
• In 2010, Congress passed legislation prohibiting the military from discriminating against gay and bisexual people.
• Some companies provide “domestic partnership” benefits to same-sex or different-sex couples, although not required to do so by federal or state law.
• By 2009, 57 percent of the Fortune 500 companies provided domestic partner health insurance benefits, including nine of the top ten largest corporations, and 85 percent prohibited sexual orientation discrimination.
• In 2010, the federal government developed policies that granted hospital visiting rights to same-sex partners and extended the Family Medical Leave Act to care for sick or newborn children of same-sex partners.

HARASSMENT

• Harassment is defined as an “unwelcome conduct that is based on race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information” from a supervisor, co-worker, or non-employee, such as a customer or supplier.
• Examples of offensive conduct include offensive jokes, slurs, name calling, physical assaults or threats, intimidation, ridicule, insults, offensive objects, pictures, and interference with work performance.
• Harassment becomes unlawful when the conduct is severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile, or abusive.
• A one-time minor isolated incident does not qualify as harassment. Nonetheless, minor incidents should be brought to an employer’s attention for further investigation to determine if a pattern is being established.

DATING, SEXUAL HARASSMENT, AND HOSTILE WORK ENVIRONMENT

• Office romances and dating co-workers are increasingly common with more women in the workforce and the considerable amount of time employees spend at work.
• Discourage employees who are dating each other from exhibiting public signs of affection at work because it damages morale and suggests signs of favoritism.
•  Dating is based on mutual consent, sexual harassment is not.
• Researchers report that 26 percent of the respondents had been sexually harassed at work.
• Sexual harassment occurs when:

(1) an unwelcomed sexual favor is a quid-pro-quo condition of employment, promotion, pay increase, continued employment, or desired assignment, or

(2) offensive comments about a person’s gender or physical harassment of a sexual nature results in a hostile work environment.

• Sexual harassment includes unwelcomed sexual comments, jokes, leering, pictures, or physical touching.
• When quid-pro-quo sexual harassment or a hostile environment occurs, the employer must immediately notify the accused person to stop the offensive behavior.
• The most common target of sexual harassment is a woman employee in a male-dominated occupation.
  • Provocatively dressed women are particularly prone to being sexually harassed
• Males are also subjected to sexual harassment, which accounts for 16 percent of the EEOC filings in 2009.
• Most of these cases reflect two types of scenarios.
  • One situation involves males harassed by females in female-dominated occupations, such as nursing.
  • The other situation involves males harassed as being too feminine by males in male-dominated occupations, such as construction.

RETALIATION FOR DISCRIMINATION CLAIM

• All EEO laws carry a stipulation that it is illegal to take retaliatory adverse action against someone who complains to an employer, manager, or law official about a discrimination issue.
• Typical forms of retaliation include termination, demotion, promotional denial, increased surveillance, unjustified negative performance evaluations, and harassment.
• Employees who speak up for, or testify on behalf of, the alleged victim, or cooperate with an investigation, are also protected against adverse retaliatory action.
• Even if an employer is found innocent of the original discrimination charge, an employer can be found guilty if retaliatory action was taken against an employee associated with the initial claim or subsequent investigation.   

DISCUSS 5 COMPETITIVE ADVANTAGES OF DIVERSITY MANAGEMENT

The United States population continues to diversify, as does the employee and customer base of organizations. For more than two centuries, Caucasian males dominated the American workforce. This is no longer the case. In 2008, Caucasian males made up only 39 percent of the entire civilian labor force. Caucasian females composed 34 percent of the workforce, followed by all Hispanics (13 percent), African-Americans (10 percent), and Asians (4 percent).

• The avoidance of lawsuits and increased government regulation are fear-based incentives for managing diversity.
• Five positive bottom-line reasons why respecting diversity creates a competitive advantage for organizations are:

1.   To attract and retain diverse customers. Customers tend to feel more comfortable doing business with people who respect them. Customers from diverse social groups who feel unwelcomed by insensitive salespeople from a different social group will take their business elsewhere.

2.   To attract and retain diverse employees. As an organization’s reputation for appropriately managing diversity issues increases, so does the diversity of the organization’s job applicant pool.

3.   To achieve cost reductions. Cost reductions associated with diversity management include fewer employee grievances, absences, turnover, and litigation. Responding to claims that an employee is being discriminated against requires time and resources to resolve.

4.   To enhance decision-making, problem solving and creativity. Due to different life experiences, different cultural groups perceive the world in different ways, enhancing organizational decision-making, problem solving, and creativity. A multicultural workforce is likely to make more informed decisions regarding their own cultural groups, and examine an issue from multiple perspectives.

5.   To increase stakeholder goodwill. Organizations that are diversity leaders earn goodwill from the media, government, socially conscious consumers, and job candidates wanting to contribute to a broad social mission. This translates into free advertising from the media and consumers, and high-profile government and industry task forces.

• Review BEST PRACTICE IN USE about the Well Fargo Diversity Imperative. Wells Fargo is one of the nation’s largest financial services corporations.  In 2010, its 278,000 employees included 60 percent women and 34 percent minorities. Among officers and managers, 49 percent were women and 23 percent minorities.

WHAT ARE SOME OF THE BEST OPERATIONAL PRACTICES FOR MANAGING DIVERSITY?

In 1998, the EEOC Task Force published examples of the “best” diversity policies, programs, and practices in the private sector. Integrating these best practices in diversity management throughout organizational operations can ensure long-term continuous success.

- Diversity officer/committee/office. Assign organizational responsibility for diversity to a diversity officer, committee, or office. This establishes a particular person as being accountable for diversity issues.

- Recruiting and hiring. Develop a list of highly qualified diverse job candidates that employees know, and personally invite them to apply. Sources include previous business dealings, professional associations, civic organizations, minority job fairs, and internship programs for colleges and high schools with high minority populations.

- Personnel policies. Provide flexible personnel policies reflecting the needs of diverse populations. Areas for flexibility include the use of personal days, cafeteria-style benefits plans, and work schedules.

- Dispute resolution mechanisms. Be receptive to diversity-related grievances and investigate every claim. Presume everyone innocent until proven otherwise. The most efficient dispute resolution system is a direct dialogue between both parties. If unsuccessful, have a supervisor or Diversity Officer serve as mediator. If unsuccessful, have a Peer Review Panel arbitrate a binding resolution.

- Retention and promotions. Diversity retention techniques that lead to promotions include job training and rotation, challenging assignments, holistic performance appraisals, career counseling, mentoring, focus group feedback, and promotion from within.

- Performance appraisals. Link bonuses to achieving diversity goals. Include a performance appraisal scale measuring behaviors that demonstrate respect for diverse co-workers and customers.

- Termination and downsizing. The two best criteria for determining layoffs are job requirements and past performance. When organizations use seniority as a layoff criterion, newly hired diverse employees are the first to be terminated, undoing years of concerted effort to diversify the workforce. Conduct an adverse impact analysis to determine if the list of employees to be laid off adversely affects the percentage of women, racial, and ethnic minorities employed by the organization. If it does, then consider modifying the layoff criteria to avoid the undesired result.

WHAT ARE THE RECOMMENDED 10 STEPS FOR IMPLEMENTING A DIVERSITY INITIATIVE?

Creating an organizational culture that respects diversity requires planning and effort. The following 10-step process describes how to successfully implement diversity initiatives based on a traditional organizational change model.

1.   Present a business case for the diversity initiative. Determine which of the five competitive advantages of diversity discussed earlier is most important for achieving superior organizational performance. Use this reason as the key motivator for undertaking the diversity initiative. Support the rationale with demographic trends, competitive analysis, and adoption of best practices in the industry.

2.   Create a shared vision statement. Employees implementing the diversity initiative must be committed to achieving the desired results. Achieve commitment by involving them in the crafting of a vision statement emphasizing fair treatment of all stakeholders. Clearly link the diversity vision to the competitive advantage.

3.   Respectfully build from the past. A diversity initiative is one step along the continuous improvement path. Praise previous diversity successes and use past success as the foundation for new initiatives.

4.   Create a sense of urgency. Emphasize the importance of undertaking the change right now, ahead of the competition, not later, after the competition has already staked its claim in the diverse markets and talent pools.

5.   Empower a change agent. All organizational changes require a point person ultimately accountable for achieving the desired results. Give a particular “go-to” person authority to manage the change process.

6.   Gather political support. Success depends on all work units supporting the diversity initiative. Educate all formal and informal leaders about the importance of the change initiative. Establish a diversity committee composed of key supporting people to oversee the initiative.

7.   Craft an implementation plan. Gather input from those directly affected by the changes. Anticipate, and overcome, obstacles by inviting representatives from the affected organizational units and diversity groups to comment on the implementation plan. Link action plan strategies to reasonable long-term and short-term goals.

8.   Develop enabling processes. Train key participants to manage the change process. Establish multiple communication channels for input and feedback on the quality and quantity of changes being made. Share feedback and results with key constituents, and revise the plan as needed.

9.   Evaluate the progress. Gather relevant historical data to benchmark and measure progress toward achieving the stated goals and objectives. Recognize all positive changes. In the spirit of continuous improvement, explore unmet goals with key constituents.

10.      Reinforce the change. Link the accomplishment of diversity objectives to performance evaluations and compensation. Spotlight diversity champions and share their best practices. Rewards and visibility reinforce credibility.

WHAT IS THE DIFFERENCE BETWEEN BEING A MEMBER OF A DOMINANT GROUP AND A SUBORDINATE GROUP?

DOMINANT GROUP AND SUBORDINATE GROUP

Helping employees overcome their biases against diverse people requires training. Review “Diversity Training Problems and Solutions,” which highlights 7 common diversity training problems that can arise from within, or between, dominant and subordinate workplace groups, along with recommended solutions.

• The dominant group refers to the diverse characteristic that is held in common by a large number of employees, typically Caucasian males.
• The subordinate group refers to the diversity characteristic held by a small minority of organizational members.

WHAT IS THE EVOLUTION OF ETHNIC AND RELIGIOUS DIVERSITY IN THE UNITED STATES BEGINNING WITH CHRISTOPHER COLUMBUS?

When Christopher Columbus arrived on the shores of the Dominican Republic in 1492 the landmass eventually named the United States served as home to an estimated 10 million indigenous people.

- Population demographics changed dramatically over the next 500 years.

- In 2008, 307 million people lived in the United States, of which 65.6 percent were Caucasian, 15.4 percent Hispanic, 12.8 percent African-American, 4.5 percent Asian, and 1.5 percent two or more races.

- Only 1.0 percent were indigenous Native-Americans.

COLUMBUS TO 1790

- The transformation from an indigenous to a non-indigenous population occurred through waves of new immigrants seeking to improve their living conditions, except for African-Americans who arrived prior to the Civil War through captivity and enslavement.

- Each new arriving immigrant group was met with prejudice and fear from many among the existing population, a new “other” or group of strangers often speaking a different language, for inhabitants to interact.

- Columbus’ arrival led to a confrontation between social groups. Indigenous people did not welcome Christopher Columbus with open arms, or vice versa. Differences in race, ethnicity, religion, and language contributed to mistrust. Trading goods between the two groups was soon followed by European conquest and enslavement of the indigenous inhabitants with the aid of more powerful military technology.

- The success of Italian and Spanish explorers in the “New World” attracted explorers from England, Netherlands, and France.

- Each European nationality ruthlessly competed against one another for the best trading posts and settlements, which were hospitable only to their own countrymen.

- African slaves arrived to work plantations, accounting for 20 percent of the new nation’s 3.9 million inhabitants when President George Washington gave the first State of the Union address in 1790.

1800s TO 2010

- Beginning 1830, the federal government welcomed more British, Germans, and French immigrants to help settle the expanding nation.

- They were joined by three-quarters of a million poor Irish fleeing the potato famine (1845-1849) and looking for employment and better land. Irish immigrants were discriminated against not only because of their nationality, language, and economic status, but also their religion: Roman Catholic.

- Chinese began arriving in the mid-1800s, drawn by the allure of getting rich from the California Gold Rush and jobs building the transcontinental railroad.

- They were followed by poverty-stricken Swedes, Norwegians, and Italians. Each ethnic group lived in separate ghettos, clinging to their different languages, religious beliefs, and cultural traditions.

- The religious mix became more salient with the arrival of more than two million Jews fleeing religious persecution in Russia and Europe, followed by Muslim Lebanese and Syrians.

- The annexation of Texas, New Mexico, and Arizona added many Mexicans to the American ethnic mosaic.

- Over the next 100 years, Latin Americans, Asians, and Middle-Easterners seeking work and political freedom arrived. 

- With the continued increase in Hispanic immigration, and low birth rates among Caucasians, the U.S. Census Bureau projects that Caucasians will dip below 50 percent of the population by 2042.

DISCRIMINATORY EMPLOYMENT PRACTICES

- For nearly two centuries, from 1776 until 1964, Caucasian males primarily employed and serviced people from their own national heritage and religious group, a pattern followed by other racial and ethnic groups.

- Job openings were filled by family members, relatives, and friends, people who shared a common language. German Protestants, for instance, trusted hiring only German Protestants, and Irish Catholics trusted only Irish Catholics. African-Americans and Asian-Americans did likewise.

- Organizations began to diversify as they grew in size and expanded their markets.

- Nonetheless, managers tended to hire and promote those employees who shared a common gender, race, ethnicity, or religious heritage.

EMPLOYMENT-AT-WILL DOCTRINE

- Businesses operated under the “employment-at-will doctrine” which allowed employers and employees to end an employment relationship for any reason, or “at will,” so long as it did not violate contractual agreements or federal, state, and municipal laws.

• This doctrine was widely accepted during the industrial revolution and legally codified in an 1884 Tennessee Supreme Court ruling clarifying that an employer can “discharge or retain employees at will for good cause, for no cause, or even for cause morally wrong, without being thereby guilty of legal wrong.”
• As a result, during layoffs, employee dismissals were also often predicated on an employee’s gender, race, ethnicity, or religious heritage.

- Title VII of the Civil Rights Act of 1964 made many of these discriminatory hiring, promotion, and firing practices illegal.

UNITED STATES RACE/GENDER PRESIDENTIAL LEADERSHIP 2008

- The United States has evolved to the point where Barack Obama, an African-American born to a Caucasian mother and Kenyan father, won the presidency in 2008, a diversity accomplishment many believed impossible to achieve just a few decades earlier during the late 1960s race riots.

- Obama’s most notable contender for the Democratic Party nomination was a woman, Hilary Clinton, as was the Republican Party’s Vice President nominee, Sarah Palin, then the governor of Alaska.

ILLEGAL (UNDOCUMENTED) IMMIGRANTS

- A contentious aspect of local, state, and national law is the treatment of undocumented, or illegal, immigrants.

- For the working poor and politically oppressed born in other nations, the United States has always represented a land of opportunity and freedom.

- But when the number of laborers exceeded job availability, anti-immigration sentiments rose due to the decline in wages.

- In 1921, the Emergency Quota Act placed limits on the number of immigrants admitted into the United States, which often fluctuates due to labor needs.

- Ever since then, immigrants have entered the nation illegally to seek employment or unite with their legally immigrated family members.

- In 2008, an estimated 12 million illegal, sometimes referred to as undocumented, immigrants lived in the United States. Approximately 76 percent of illegal immigrants are Hispanic, mostly from Mexico and Central America.

- Illegal immigrants account for 5.4 percent of the national labor force. They typically perform low-skilled and low-paid jobs. California, Arizona, and Nevada have the highest percent of undocumented laborers, whose children and families have overwhelmed some schools and state and local social services.

- Federal law requires aliens who are 14 years old or older and in the United States for more than 30 days to register with the federal government and maintain registration documents in their possession at all times.

- In 2010, the Arizona legislature passed a more restrictive state law requiring police who stop aliens for a traffic violation or some other crime to ask for a driver’s license or some other state ID. Those without proof of legal status on them may be detained and eventually deported if no legal proof exists.

DESCRIBE SEVERAL WORKPLACE DISCRIMINATION ISSUES.

WHAT LAWS GOVERN THESE?

Every employee should feel comfortable at work, and every customer and supplier should feel comfortable doing business with any organization. But that is not always the case. Despite the diversity progress made, discrimination remains a problem requiring managerial attention.

SELF-CATEGORIZATION THEORY

- According to self-categorization theory, individuals define themselves in relation to others based on a “self-identity” or “social identity” factor and form binding relationships with people who categorize themselves similarly.

- Individuals typically self-identify in terms of race, ethnicity, or gender, though a wide range of other categories could take precedence, such as being left-handed or rooting for a particular sports team.

- Within groups, members may further self-identify based on some factor that differentiates group members.

- People usually form group coalitions based on race and ethnicity – characteristics that reflect their family and neighborhood demographics – and then by gender within the race/ethnicity grouping.

• Caucasians, for instance, tend to associate with Caucasians. Among Caucasians, males tend to associate with males while females tend to associate with females.
• The same is true for African-Americans, Hispanics, or Koreans.

- Problems arise, however, when dissimilar people are treated as inferior or excluded.

- Customers and employees who differ from others according to some prominent characteristic—race, gender, ethnicity, age, or religion—often report not being respected by the dominant social group.

- Workplace segregation can reinforce prejudices toward members of other groups, which contributes to communication breakdowns, high conflict, low morale, reduced productivity, and potential lawsuits.

- As shown in Chapter 1 “EEOC Charges and Resolutions 1997 and 2009” there were more than 100,000 discrimination cases filed with the EEOC in 2009, and settlements exceeded $440 million.

WORKPLACE DISCRIMINATION

- Individuals discriminate all the time. To discriminate means to make a distinction among possible options.

- Two prominent ethical principles must guide decision making when making distinctions among people at the workplace: fairness and respect for others.

• Fairness refers to making decisions according to rules not based on personal biases
• Respect for others refers to treating everyone with dignity

- Managers, for instance, must discriminate among hundreds of job applicants when deciding which person to hire.

- The decision-making rule used to discriminate among the applicants could be ethical, unethical, legal, or illegal.

- When differentiating among job candidates, or choosing which employee to assign a job task or promote, make sure that the decision-making rule being applied is fair and respectful.

• When hiring, it is ethical and legal to discriminate based on previous job experience, potential productivity, and educational level.
• It is unethical and illegal, however, to discriminate based on “protected class” status, defined as a person’s race, color, religion, gender, national origin, age, pregnancy, and physical or mental disabilities.
• Some state and municipal laws also include sexual orientation – lesbian, gay, bisexual, and transgender people (LGBT) – as a protected class.

GENDER DISCRIMINATION

- Gender discrimination refers to treating an employee differently because of his or her gender.

- NOTE: The chapter mentions the sex discrimination class action lawsuit initiated by six female Wal-Mart employees that grew to represent more than 1 million women. The case was dismissed by the U.S. Supreme Court in June 2011 on a technicality dealing with what counts as a “class action” lawsuit.

- Women are discriminated against in job assignments based on physical and personality characteristics.

• Stereotypes of women include being too physically weak, too sensitive, or too polite to perform certain job tasks.
• Men are stereotyped as being aggressive, less emotionally vulnerable, and task-focused rather than relationship-focused, qualities assumed to be needed for executive leadership.
• The stereotype that men should be leaders and women support staff is attributed to people growing up in a family and neighborhood where women were subservient to male authorities.
• Compounding the problem, researchers report that women who behave contrary to stereotype are evaluated negatively. Thus, women are denied jobs requiring assertive behaviors, and woman who exhibit assertive behaviors are penalized for doing so.

PAY INEQUALITY

- The Equal Pay Act of 1963 prohibits pay discrimination based solely on gender considerations.

- Men and women must receive equal pay for equal work.

- Previously, different wages for the same job tasks were justified on the grounds that men were the head of household whereas women were earning supplemental family income.

- The work being performed is considered equal if the two jobs entail equal skill, effort, responsibility, and working conditions.

- Different wages for performing the same type of work are justified only if related to an employer’s seniority system, merit system, quantity or quality of productivity, or a factor other than gender.

- On average, females earn approximately 69 percent of male salaries.

• In 2008, the mean salary for all males 25 years and older working full-time was $64,283.
• Females 25 years and older working full-time earned $44,595.
• The Bureau of Labor Statistics, which includes wages for 16 year olds, reports a higher comparable wage rate of 80 percent.
• The pay gap increases, rather than decreases, when education is taken into consideration.
  • Males with at least a college degree working full-time earned an average of $95,326, while their female counterparts earned $61,319, or 64 percent of male salaries.

- A variety of explanations other than gender discrimination may explain these earning differentials:

• Career pattern choices: Women, in general, choose less-prestigious careers that have lower market wage rates, such as nursing, secretarial work, sales associates, and childcare services, whereas men choose higher wage professions, such as doctors, engineers, information technology, and production operators.
• Even within the same field, such as physicians, women tend to choose lower wage occupations (family practice) compared to men (surgeons).
• Seniority factor: Large numbers of women have only recently entered some highly-paid occupations, so they are not yet earning the highest wage scale.
• Job demand choices: Women choose less demanding jobs that allow for more workplace flexibility to care for family and household needs, and pay less.
• Organization size choices: Women prefer working for small firms, which pay less than larger firms.
• Salary negotiation issues: Women are less likely to negotiate for higher wages.
• Customer preferences: Customers perceive male employees as more competent and providing better service than female employees, thus justifying a higher wage based on customer satisfaction evaluations.

PREGNANCY

            Pregnancy Discrimination Act

• In 1978, Congress passed the Pregnancy Discrimination Act (PDA) to protect the civil rights of pregnant women. The PDA classified discrimination based on pregnancy, childbirth, or related medical condition as a form of sex discrimination.
• Prior to the federal legislation, employers used a woman’s pregnancy as a reason for promotion denials and job terminations.
• Employers also denied pregnant women health insurance and other fringe benefits when on maternity leave.
• The PDA ensured that women experiencing pregnancy, childbirth, or related medical conditions would be treated the same as an employee with an illness or temporary disability.
• The PDA requires that employers provide appropriate job accommodations for pregnant women, such as temporarily modifying tasks and assignments, which do not cause undue hardship to the employer.
  • An undue hardship refers to the cost and difficulty associated with making the accommodation.
• Employee health insurance policies must include coverage for pregnancy-related conditions, and sick or unpaid leave policies must include morning sickness and childbirth recovery.
• Upon returning to work, women are entitled to the same or equivalent job, much like any employee returning after sick or disability leave

Family and Medical Leave Act

• The PDA did not require that any specific amount of leave be extended to childbearing women beyond existing company policies.
• Congress passed the Family and Medical Leave Act (FMLA) of 1993 in part to address this issue, and expanded provisions to include any employee needing time off to address health-related problems.
• The FMLA ensures a total of 12 work weeks of unpaid leave during any 12-month period, and the continuation of healthcare and other fringe benefits during this period, for:

• the care of a newborn baby, a newly adopted child, or a new foster child
• the care for an immediate family member (spouse, child, or parent) with a serious health condition
• an employee’s serious health condition

• The FMLA applies to all state, local, and federal employers, as well as private sector firms which employ 50 or more workers.
• An employee must have worked at least 1,250 hours during the previous 12 months to be eligible for coverage.
• With the employer’s approval, an employee can substitute paid medical leave for unpaid time off
• The FMLA exempts highly compensated employees, defined as being managers in the top 10 percent of the company’s pay scale, whose absence could not be replaced and would cause an undue hardship on the employer.

GLASS CEILING

• Glass ceiling refers to situations where the hierarchical advancement of a qualified woman or minority is prematurely stopped at a lower level because of gender, racial, or ethnic discrimination.
•  In 2008, women represented 46.5 percent of the entire civilian labor force.
  • Assuming women and men are generally equally competent, a similar percentage of women should hold managerial jobs.
  • But, according to 2009 Bureau of Labor Statistics, women accounted for only 25 percent of all CEOs, and 30 percent of all general and operations managers.
  • There seems to be an invisible barrier preventing women from climbing to the top of organizational hierarchies, which is why the phenomenon is called a “glass” ceiling.

REVERSE DISCRIMINATION

• Reverse Discrimination refers to discriminating against a dominant or majority group member, such as Caucasian males, in favor of a historically disadvantaged or minority group member.
• Organizations that put in place an affirmative action plan to promote more women to management positions discriminate against equally qualified men based solely on gender.
• If it is unfair for women to have been historically discriminated against based on gender, isn’t it also unfair to deny men a job, promotion, or assignment based on gender?
• Vision Quest National, located in a high-crime neighborhood, operated a day and night shift. When several women night shift employees threatened to quit, the company implemented a policy for women to be given a preference for day shift work. A male night shift employee making the same request was fired. He sued for sexual discrimination and won the lawsuit.

DIVERSITY DISCUSSION GUIDELINES

• Many employees are not comfortable discussing diversity issues. Diversity topics can feel threatening and an invasion of privacy.
• Some people may unintentionally offend others or not be aware that their attitudes are racist or sexist. Others fear having their views misinterpreted or misjudged as being naïve or bigoted.
• Initial employee tension and resistance can be defused by a warm-up activity where participants agree on discussion guidelines.
• Begin by reviewing the organization’s Code of Ethics and highlight the importance of applying relevant aspects of the code, such as respect for others, during workshop discussions. If discussion guidelines already exist, have attendees review them and make modifications as needed.
• If the organization lacks discussion guidelines, have participants independently develop a set of rules governing how participants should treat each other during the discussion.
• Discussion guidelines typically include:
  • one person speaking at a time without interruption
  • being open and honest
  • participating fully at one’s own comfort level
  • listening respectfully
  • asking questions (why do you believe that?) rather than making accusatory statements (that’s a sexist comment!)
  • supporting the expression of dissent in a harassment-free environment
  • focusing on issues rather than the person making the statement
  • maintaining confidentiality.
• Maintaining discussion confidentiality is particularly important.

DESCRIBE SEVERAL DIVERSITY TRAINNG WORKSHOPS.

HOW WOULD YOU ADDRESS THE TYPICAL PROBLEMS ASSOCIATED WITH DIVERSITY TRAINING?

WORKSHOP OPTIONS

• This book section contains several diversity training exercises.
• The first four diversity exercises foster self-awareness: Who Are You, Dominant Group and Subordinate Group Awareness, The Dominant Group, and Implicit Attitude Test.
• The next two diversity exercises explore what it was like being prejudged, and how everyone is unique, yet shares things in common with others.
• The seventh diversity exercise focuses on generating discussion about sexual harassment.
• The last exercise highlights a diversity factor that is easily overlooked, yet at the core of daily work interactions—differences in communication styles.

• The following diversity training activities have been presented earlier in the teaching manual as “Discussion Activity” suggestions:
• Who Are You? – Chapter Question 1
• Dominant Group and Subordinate Group Awareness – Additional Question 1
• White Privilege – Additional Question 1
• Implicit Attitude Test (IAT) – Chapter Question 3
• Experiences Being Prejudiced – Chapter Question 3
• Sexual Harassment – Chapter Question 3

COMMUNICATION STYLE

• Communication style is an often overlooked aspect of employee diversity.
• People tend to express themselves in a way that feels normal to them and assume that others like to communicate in the same manner. But this disrespects the uniqueness of the person receiving the information, can result in misunderstandings, and negatively impact employee performance.
• Some people tend to get right to the point and typically assume that the people they communicate with want to get right to the point. If the other person does not, then that other person is judged to be distracted or wasting time.
• Some people, however, tend to first ask about the other person’s family situation. They also prefer that others communicating with them first make a personal connection. If the other person does not, then the other person is considered rude or uncaring.
• Treating others with respect means understanding how other people prefer to communicate.
• In Success Signals, Rhonda Hilyer, President and CEO of Agreement Dynamics, has developed a very useful tool of four communication styles, each symbolized by a different color. Individuals can exhibit all four styles to some extent, but most likely one or two styles dominate.
• Review “Communication Styles” and the four communication styles.
  • Brown: Direct, decisive, assertive, stays on point
  • Green: Logical, sequential, desires historical data, literal
  • Blue: Supportive, concerned about other people’s feelings
  • Red: Dramatic, fast-paced, spontaneous, creative

INDIVIDUAL UNIQUENESS AND COMMONALITIES

• People want to be treated as individuals, rather than as representatives of a social group. End this chapter by not only showing how every person is different, but also how everyone shares some commonalities.
• Review “Individual Uniqueness and Commonalities” to help students understand how each of them is unique, and also how each of them shares some common traits with members of other diverse groups.

DIVERSITY TRAINING PROBLEMS

• Common problems include:
  • Trainer credibility: use co-leaders, one from dominant and subordinate groups
  • Problems portrayed too negatively: Praise previous diversity efforts
  • Dominant group members portrayed too negatively: Recognize good examples
  • Training limited to dominant group: Include everyone
  • Training exercises not relevant: Address real-world situations
  • Training over-emphasizes differences: Highlight commonalities among people
  • Training emphasizes knowledge, not behaviors: Address behavioral issues

• Begin the diversity training workshop by discussing the five competitive advantages of diversity presented earlier. The purpose of diversity training is to improve organizational performance and profitability.
• Provide some national and industry examples of diversity problems and their associated costs.
• Educate employees about the best operational practices, presented earlier in this chapter, so they can see what leading-edge organizations are doing to manage diversity.
• Praise previous diversity efforts the organization and particular managers have undertaken, and acknowledge the need for continuous improvement.
• Design workshops that foster greater personal awareness of diversity issues, and develop action plans to improve diversity management.

• Government Statistics for Diversity
  • U.S. Census Bureau, Quick Facts
  • U.S. Census Bureau, National Population Projections
  • Bureau of Labor Statistics, “Household Data Annual Averages”
• Diversity Laws and Topics
  • U.S. Equal Employment Opportunity Commission, “Laws and Guidance”
  • United States Department of Labor, Compliance Topics
• Pew Hispanic Center
• Sexual Orientation Issues:
• “Best Places to Work for LGBT Equality” 
  • Williams Institute, sexual orientation law
  • Lambda Legal, list of states and municipalities prohibiting sexual orientation discrimination
  • National Gay and Lesbian Taskforce
• White Privilege Questionnaire
• The Implicit Attitude Test

Best Place to Work Video

• Best Place to Work – Google

Business Ethics Issue Video

• “Digital Nation,” Frontline, about people immersed in a “wired” life; February 2, 2010, 90 minutes

TEDTalks Videos

Diversity Empowerment of Women: Hanna Rosin reviews new data that shows women actually surpassing men in several important measures, such as college graduation rates; December 2010, 17 minutes

Gender Diversity: Tony Porter shares stories from his own life about how the "act like a man" mentality, drummed into so many men and boys, can lead men to disrespect, mistreat and abuse women and each other; December 2010, 12 minutes

Conversations with Charlie Rose

- A conversation about the repeal of 'Don't Ask Don't Tell' with Al Hunt of Bloomberg News and David Ignatius of 'The Washington Post'; December 22, 2010, 20 minutes

- A conversation with Paul Volcker, former chairman of the Federal Reserve, about the 2008-2009 global economic crisis; September 29, 2009, 60 minutes

8 - Ethics Reposting Systems

OVERVIEW

High performance organizations depend on employees speaking honestly with their colleagues, managers, and company owners when ethical problems arise. This chapter examines why employees maintain silence when they observe ethical misconduct and what management behaviors and internal mechanisms can elicit such essential information. Excellent managers are the type of person colleagues and subordinates can trust and confide with such personally sensitive information. But some employees remain comfortable sharing ethical issues with their direct supervisors.

The chapter also explores three alternative internal communication mechanisms for obtaining information about unethical behavior: an Ethics & Compliance Officer, an ombudsman, and an assist line. A failure in these internal communication systems can result in external whistle-blowing, which is damaging for both the organization and the whistle-blower.

After completing this chapter, students should be able to:

·      Understand why some employees do not report ethical misconduct

·      Describe how to engage employees in discussing ethical misconducts

·      Administer an internal reporting system for ethical issues

·      Create an Ethics & Compliance Officer and Ombudsman positions

·      Manage an assist line to receive employee complaints by telephone or Internet

·      Describe the negative outcomes whistle-blowing has on both the whistle-blower and the organization

KEY TERMS

Assist lines: previously referred to as “ethics hotlines,” provide a channel of communication where employees can anonymously and confidentially report ethical wrongdoings or receive clarification on an organization’s ethics policies.

Authoritarian leaders: people who expect absolute loyalty from subordinates and consider taking suggestions or advice from subordinates, no matter how essential, as a leadership weakness.

Chaplains: members of a religious clergy trained in providing spiritual advice.

Employee empowerment: refers to employees possessing the authority to make decisions affecting themselves and their work.

Employee silence: refers to an employee who observes ethical misconduct at work but does not discuss the matter with the person engaged in the ethical misconduct or someone else in the organization with authority.

Ethics & Compliance Officer: a high-level employee responsible for managing ethical performance.

False Claims Act: initially passed in 1863 during the Civil War, allows an employee to independently sue his or her employer for fraud against the government and receive between 15–30 percent of the total recovery amount plus attorney fees and related costs and expenses for successful lawsuits.

Ombudsperson: an organizational person who receives complaints about unethical behaviors, guarantees employee anonymity, and investigates and attempts to resolve the complaints.

Qui tam: provision where citizens can sue the fraudulent supplier on behalf of the government and be rewarded a percentage of the financial recovery.

Whistle-blower Reward Program: IRS program that pays whistle-blowers 15% to 30% of the unpaid taxes recovered for reporting an individual or corporate tax fraud.

Whistle-blowing: refers to contacting someone outside the organization about potential or actual nontrivial misconduct inside the organization.

WHY DO SOME EMPLOYEES REFUSE TO REPORT ETHICAL MISCONDUCT?

TYPES OF UNETHICAL ISSUES NOT REPORTED

Managers also rely on employees to take immediate corrective action when ethical misconduct occurs or inform them so the manager can address the problem before the situation worsens. But sometimes employees are hesitant to share personally sensitive issues with their manager.

- Employee silence refers to an employee who observes ethical misconduct at work but does not discuss the matter with the person engaged in the ethical misconduct or someone else in the organization with authority.

- According to the 2009 Ethics Resource Center (ERC) biannual survey, 37 percent of the respondents who observed ethical misconduct did not report it.

- Review “Unreported Observed Ethical Misconducts,” which highlights the frequency of six types of unreported observed ethical misconducts that benefitted the organization or an employee.

Frequency of ethical misconducts undertaken to benefit the company that go unreported:

• Bribes (Unreported 64% of the time)
• Using Inside Information about a Competitor (46%)
• Environmental Violations (45%)
• Alteration of Documents (45%)
• Alteration of Financial Records (43%)
• Safety Violations (37%)

Frequency of ethical misconducts undertaken to benefit an individual that go unreported

• Improper Hiring Practices (Unreported 67% of the time)
• Discrimination (65%)
• Internet Abuse (62%)
• Lying to Stakeholders (59%)
• Lying to Employees (58%)
• Sexual Harassment (51%)

- The ERC study also differentiates “red-flag” financial reporting misconduct – falsifying or manipulating financial information, overriding routine procedures, or creating fictitious vendors or invoices – from other types of ethical misconducts.

• During the previous twelve months, approximately 14 percent of the ERC respondents observed one or more “red-flag” financial reporting misconducts.
• Among these, 30 percent of the observers did not report the financial misconduct, which put their organizations at significant legal risk.

REASONS FOR EMPLOYEE SILENCE

- Review “Reasons for Employee Silence,” which highlights a wide range of organizational factors, observer factors, and anticipated negative outcomes reasons for maintaining silence about an observed ethical misconduct.

- Organizational Factors

• Work culture discourages conveying negative information or dissent

Authoritarian leaders rule according to the saying: “My way or the highway.”

• Loyalty to employees, manager, organization, and profession are not aligned with ethics
• No established reporting system beyond chain-of-command
• Lack of anonymity for reporting misconduct

- Observer Factors

• Habituation not to share sensitive information
• Low moral intensity
• Lack of evidence
• Lack of empowerment

Employee empowerment refers to employees possessing the authority to make decisions affecting themselves and their work.

• Unsupportive supervisor
• Lack of seniority
• Low hierarchical position
• Lack of personal relationship with the person or person’s supervisor
• Lack of moral courage

- Anticipated Negative Outcomes

• Being labeled or viewed negatively (e.g., troublemaker, complainer, tattletale)
• Damaging a relationship (e.g., loss of trust, respect, acceptance)
• Retaliation or punishment (e.g., loss or job or promotion)
• Negatively impacting others (e.g., don’t want to upset or embarrass someone, or get someone in trouble)
• Being blamed for the problem
• No corrective action will be taken

WHAT SKILLS MUST A MANAGER DEVELOP FOR EMPLOYEES TO FEEL COMFORTABLE TO DISCUSS POTENTIAL UNETHICAL BEHAVIORS?

The best ethics reporting system is a manager who welcomes ethical discussions with employees and input on ethical misconduct. A diverse set of managerial techniques and attributes can help employees become comfortable sharing sensitive ethical information.

• Managers who are honest and responsible, and provide opportunities for sharing information as part of normal operations, are easier for employees to approach.
• Ethical discussions need to be an on-going dialogue. Employees are more likely to discuss an ethical concern with a manager if these types of discussions occur on a regular basis rather than only during dire circumstances.
• Managers can demonstrate familiarity with the types of ethical issues the organization experiences by staying abreast of the ethics and diversity training workshop topics and discussions, and ensuring the implementation of action plans supporting existing strengths and addressing ethical weaknesses.
• Refer to the organization’s code of ethics and ethical decision-making framework as often as possible and relate them directly to specific decisions and actions.
• Emphasize how good decisions and actions were rooted in ethics. Describe how managers took into consideration the impact a decision had on effected stakeholders, and that the good consequences were generated by good motives.
• Approachability begins with managerial honesty and transparency.
• A manager must be willing to discuss his or her own ethical mistakes in a manner that humanizes the manager without losing authority.
•  Approachability also means having frequent interactions with subordinates. Highly visible managers who circulate among their subordinates foster trust and authenticity because less is hidden from view.
• Schedule short check-in meetings with employees on a regular basis to address continuous improvement issues. This establishes a meeting time when other issues, including ethical dilemmas, can be addressed.
• Sharing concerns about a colleague or manager can be emotionally draining. The information deserves to be kept private and confidential.
• Near the conclusion of any one-on-one meeting, ask the subordinate if there have been any situations lately when living up to the Code of Ethics has been challenging. Share examples that may be of concern to deepen managerial understanding of workplace dynamics.
• Observers of ethical misconduct must believe the manager not only understands and cares, but also will act on the knowledge and make appropriate changes. Provide the observer with progress feedback to keep the communication channel open for other relevant information.
• In general, ethically approachable managers embody virtuous behaviors. An approachable manager, like a virtuous one, exhibits empathy, sympathy, compassion, justice, integrity, and kindness in a nonjudgmental manner.

DISCUSS THE TYPICAL DUTIES AND SKILLS OF AN ETHICS AND COMPLIANCE OFFICER.

HOW CAN THESE ACTIVITIES BE MANAGED IN SMALL ORGANIZATIONS?

BACKGROUND

The Federal Sentencing Guidelines (see Chapter 2) provide a judicial incentive for assigning a high-level employee the responsibility of managing ethical performance. A growing number of organizations assign this responsibility to an Ethics & Compliance Officer (ECO).

• The position enables sensitive information to be shared without being diluted or stymied by the chain-of-command.
• The Ethics & Compliance Officer Association (ECOA) is a nonprofit organization where ECOs can share common problems and best practices exemplified by its four values: integrity, confidentiality, collegiality, and cooperation.
• Some organizations create a separate ECO position focused solely on enhancing ethical performance.
• Many organizations, however, add the title and job responsibilities to an existing position, such as legal counsel, ombudsmen, regulatory compliance manager, internal auditor, or human resources manager.
• In small organizations, some of the duties discussed below can be assigned to a high level manager or taken on by the owner.
• Organizations also differ according to the nature and scope of ECO activities.
  • Some organizations are highly centralized and one person or office determines ethics activities and standards for the entire organization.
  • Other organizations are highly decentralized where the ECO provides oversight and the different locations or markets create their own ethics activities and standards, allowing for greater flexibility.

ECO DUTIES

• ECO duties include:
  • Manage internal reporting systems
  • Assess areas for ethical risks
  • Offer guidance
  • Monitor the organization’s adherence to its Code of Ethics and Code of Conduct
  • Oversee the ethics communication strategy
  • Develop and interpret ethics policies
  • Oversee the ethics training program
  • Receive information about potential wrongdoings
  • Collect and analyze relevant data
  • Ensure that decisions are made and enforced
  • Inform employees about outcomes

ECO SKILLS

• Review TIPS AND TECHNIQUES for best attributes of an ECO
  • Insider status and is well-networked with business unit managers
  • A high position that exemplifies authority
  • The trust and respect of organizational executives
  • Independence from senior staff and freedom from internal political pressure
  • Operational experience
  • Knowledge of organizational issues and activities
  • Access to internal information as needed
  • Knowledge of ethical theories
  • Counseling and communication skills
  • Problem-solving skills

DESCRIBE THE 14 STEPS FOR DEVELOPING AND MANAGING AN INTERNAL REPORTING SYSTEM PROCESS

The ECO’s primary duty is to manage the organization’s internal reporting system. Review the process model “Internal Reporting System Process,” which provides guidance on how to accomplish this.

• STEP ONE: Develop the ethics reporting policy in partnership with upper management to establish their buy-in.
• STEP TWO: Communicate the ethics reporting policy to all employees through multiple media, such as the employee handbook, e-mail, the company intranet site, department meetings, and training sessions.
• STEP THREE: Emphasize the importance of reporting concerns about unethical and illegal conduct. Management cannot act on what it does not know.
• STEP FOUR: Assure people that any form of retaliation against an employee who raises an ethical concern is prohibited.
• STEP FIVE: If appropriate, the employee should first attempt to resolve the issue by directly approaching the individual engaged in the questionable activity.
• STEP SIX: If direct discussion or resolution is not possible, then the employee should confidentially meet with the ECO to discuss the issue.
• STEP SEVEN: If the employee prefers not to reveal his or her identity, then the employee should anonymously submit the concern to the ECO through the organization’s intranet reporting system or in a sealed box. Establish a means of communication if the issue becomes a high-priority item needing additional information from the employee.
• STEP EIGHT: Assure the employee that his or her identity will not be revealed without consent.
• STEP NINE: Interview the employee and discuss clarifying questions.
• STEP TEN: Develop a plan for investigating the case in a manner that honors the employee’s confidentiality or anonymity.
• STEP ELEVEN: Conduct the investigation in a fair and confidential manner.
• STEP TWELVE: If the investigation reveals that the employee’s allegations are accurate, take prompt action to correct the wrongdoing.
• STEP THIRTEEN: Inform the employee about the outcome of the investigation.
• STEP FOURTEEN: Establish an appeals process for employees dissatisfied with the outcome of the initial investigation. Provide an advocate, probably from the human resources department, to assist an employee who wishes to appeal an outcome.

DESCRIBE OTHER ETHICS REPORTING SYSTEM MECHANISMS: OMBUDSPERSON, CHAPLAINS, AND ASSIST LINES

OMBUDSPERSON

o   Another internal channel for communicating information about potential ethical and legal violations is an organizational ombudsperson.

o   The ombudsman concept originated in government, and has spread to other types of organizations, including corporations, hospitals, newspapers, universities, and nonprofits.

o   An ombudsman guarantees the employee anonymity, asks permission to contact key people, develops a plan for gathering information without revealing the identity of the complainant, investigates the claim outside the regular chain-of-command, reaches a conclusion, and, if so concluded, advocates for implementing the appropriate change.

o   By providing employees with an institutional voice, the ombudsman serves as a deterrent against managerial abuse of power and other unethical activities. The ombudsman is granted access to all employees, including board members, when investigating a complaint.

o   An ombudsman, similar to an accountant or lawyer, is held legally accountable to a professional Code of Ethics. The International Ombudsman Association’s Code of Ethics highlights four ethical principles and corresponding policies:

1.    Independence. The ombudsman is independent in structure, function, and appearance to the highest degree possible within the organization.

2.    Neutrality and impartiality. The ombudsman remains unaligned and impartial, and does not engage in any situation which could create a conflict of interest.

3.   Confidentiality. The ombudsman holds all communications in strict confidence, and does not disclose confidential communications unless given permission to do so. The only exception to this privilege of confidentiality is when there is an imminent risk of serious harm.

4.   Informality. The ombudsman does not participate in any formal adjudicative or administrative procedure related to concerns brought to his/her attention.

- Review BEST PRACTICES IN USE, which provides a list of issues reported to an ombudsperson:

o   A code of ethics violation

o   Trading issues or violations

o   Legal or compliance issues

o   A situation that threatens employee safety

o   Unfair treatment by a manager or co-worker

o   Unfair pay as defined in the Fair Labor Standards Act

o   Unfair treatment on the basis of sex, race, color, ethnic group, age, sexual orientation, or other affiliation

CHAPLAINS

o   Some businesses have contracted out with chaplain consulting organizations as a mechanism for employees to confidentially share their personal and ethical concerns.

o   Chaplains are members of a religious clergy trained in providing spiritual advice.

o   Dating back to the 1940s, corporate chaplains originally provided, upon request, pastoral care for employees and their families dealing with illnesses, death, addictions, encouragement needs, or other personal issues, and were part of a company’s employee benefits package.

o   Over time, their list of services expanded to include helping employees manage ethical dilemmas and interactions with other employees. Most corporate chaplains have seminary degrees and are trained counselors.

o   The two most prominent providers of chaplains are Marketplace Chaplains and Corporate Chaplains of America.

o   The chaplains are on-call twenty-four hours a day, seven days a week.

o   Workplace interactions between a chaplain and an employee are kept to a minimum.

o   Most meetings are arranged for nonworking hours, unless in time of crisis.

o   Conversations with chaplains are confidential, although an employee can request the chaplain to discuss a matter with corporate managers.

ASSIST LINES

• Assist lines, previously referred to as “ethics hotlines,” have long been popular with organizations as a method of obtaining information about situations that may be unethical or illegal.
• Nearly all Fortune 500 companies provide toll-free assist lines for employees from all over the world to share their concerns.
• Small organizations can contract out to an assist-line managed by a third-party.
• Scripted questions are delivered live by calling a particular phone number or through a computerized system to gather the appropriate information.
• Employees reporting to the assist line are ensured anonymity and privacy, and the information provided is directed to the appropriate person within the employee’s organization.
• At Sears, whose assist line receives 16,000 to 18,000 calls a year from its 300,000 employees, only a very small percentage of the calls are about potential law violations.
  • The largest group of assist line callers consists of employees asking for assistance to solve a human resources issue, such as how to respond to an unfavorable performance evaluation or lack of work breaks.
  • The second largest group of assist line callers consists of employees asking for ethics policy clarifications.
• Confidentiality and false accusations are two central issues addressed by effective assist lines.
• Review “AICPA Audit Committee Assist Line Checklist,” which provides a list of items the AICPA recommends for assessing the effectiveness of an audit committee assist line.
• For colleges and universities, the EthicsPoint system highlights four categories of wrongdoing. An “other” category is available for issues that do not fit any of these four options.

1.   Unethical financial abuse, such as fraud.

2.   Unethical personal conduct, such as discrimination.

3.   Unethical treatment of college property, such as theft.

4.   Unethical use of information technology, such as data privacy abuse.

WHAT IS WHISTLE-BLOWING AND WHAT PROTECTIONS DO WHISTLE-BLOWERS HAVE?

BACKGROUND

Sometimes an individual concerned about ethics works for an organization that refuses to take action against unethical or illegal activities. When this happens, an employee is faced with a major conflict of values — should the employee remain loyal to the organization or inform someone outside the organization who can take appropriate action.

• Contacting someone outside the organization about potential or actual nontrivial misconduct inside the organization is referred to as whistle-blowing.
• If nobody within the organization is willing to take appropriate action, then the employee can inform a regulator, lawyer, reporter, law enforcement official, or a watchdog group.
• The federal government encourages its employees to blow the whistle. The U.S. Office of Special Counsel (OSC), an independent federal investigative and prosecutorial agency with jurisdiction over current and former federal employees, investigates and prosecutes cases supplied by whistle-blowers that violate personnel policies.
  • The OSC guarantees whistle-blower confidentiality and submits investigative reports to Congressional oversight committees that include the whistle-blower’s comments.
  • The OSC also obtains remedies for whistle-blower retaliation as appropriate, such as back pay and job reinstatement.

WHEN TO BLOW THE WHISTLE

• Blowing the whistle on an employer can be detrimental to the whistle-blower as well as the organization.
• After failing to pursue change within the organization, potential whistle-blowers must cautiously explore the ramifications of blowing the whistle prior to formally informing the public about ethical misconduct.
• Begin by consulting with an attorney.
• Legal advisors recommend that the following four conditions be met before an employee informs an external authority.

     1.    Serious harm is involved.

2.   The whistle-blower has already expressed his or her concerns to an immediate superior.

3.   The whistle-blower has exhausted other communication channels within the organization.

      4.   The whistle-blower has convincing, documented evidence.

FALSE CLAIMS ACT

• Researchers estimate that 10 percent of federal government spending is lost to fraud.
• The U.S. Department of Justice encourages whistle-blowing on fraud issues by offering financial rewards for information that leads to successful recovery of funds.
• As of 2010, the federal government has paid whistle-blowers approximately $3 billion, with an average award of $1.5 million.
• The False Claims Act was initially passed in 1863 during the Civil War to prevent defense contractors from fraudulently selling the Union Army rifles, ammunition, and horses.
• The False Claims Act includes a “qui tam” provision where citizens can sue the fraudulent supplier on behalf of the government and be rewarded a percentage of the financial recovery.
• President Ronald Reagan’s Administration strengthened the False Claims Act in 1986 following a series of defense industry frauds against the federal government.
  • An employee who independently sues his or her employer for fraud can now receive between 15–30 percent of the total recovery amount plus attorney fees and related costs and expenses for successful lawsuits.
  • If the government joins the lawsuit, the employee can receive up to 25 percent of the total recovery. The lawsuit must be filed within six years of the fraud being committed.
• Review “Top Seven False Claims Acts Cases (as of September 2009),” which lists the seven highest settlements, all in the healthcare industry, as of September 2009.
• According to the False Claims Act Legal Center, a potential whistle-blower should consider the following prior to filing under the False Claims Act:

• The whistle-blower must have actual knowledge of the fraud, not just a suspicion, and the evidence cannot come from a publicly disclosed source, such as a newspaper or court record.
• The fraud cannot be a tax fraud; tax fraud is specifically exempt from prosecution under the False Claims Act.
• Federal money must be involved, or, in a state with a state False Claims Act, state money must be involved.
• Most lawyers work on a contingency fee basis, and will only pursue a case if the financial amount of the fraud is sizable, and the entity to be sued is able to pay back the stolen money and associated fined.

REPORTING TAX FRAUD

• In 2006, with estimates of U.S tax evasion as high as $350 billion, the IRS created a Whistle-blower Office to receive information about possible individual or corporate tax frauds.
• The IRS Whistle-blower Office modeled a Whistle-blower Reward Program after the False Claims Act, paying whistle-blowers 15-30 percent of the unpaid taxes recovered.
• To be eligible for a reward, the tax fraud and assessed penalties must exceed $2 million.
• If the tax cheat is an individual, rather than a corporation, the fraudulent person must have gross income above $200,000 for a reward to be disbursed.
•  The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, developed in response to the 2008-2010 financial crisis, offers the same reward program for information about securities violations successfully enforced by the Securities and Exchange Commission.

WHISTLE-BLOWER PROTECTION LAWS

• Fear of retaliation is one of the primary reasons why employees do not blow the whistle on illegal activities.
• Retaliation protection clauses are common for new federal laws.
• Review “Whistle-blower Protection Laws,” which summarizes key federal laws that protect all, or major groups of, employees from retaliation for whistle-blowing.
  • 1935 National Labor Relations Act: Forbids employers from retaliating against any employee who files a charge with the National Labor Relations Board.
  • 1964 Civil Rights Act: Protects employees who file a discrimination charge and participate in an investigation.
  • 1970 Occupational Safety and Health Act: Prohibits retaliation against any employee who files an OSHA complaint or testifies.
  • 2002 Sarbanes-Oxley Act: Prohibits retaliation against any employee of a publicly-traded company who provides a law enforcement officer with truthful information relating to the commission or possible commission of any federal offense.
  • 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act: Establishes a “whistle-blower bounty program” which rewards people who provide information that leads to a successful SEC enforcement between 10 to 30% of the monetary sanctions over $1 million.

SARBANES-OXLEY ACT OF 2002 (SOX)

• Congress quickly passed the Sarbanes-Oxley Act of 2002 (SOX) to ensure additional confidence in the stock market and the financial statement of publicly-held companies following a series of high profile accounting scandals in early 2000s, including Enron.
• According to SOX, no publicly traded company, or subcontractor of that company, can discharge, demote, suspend, threaten, harass, or in any other manner discriminate against a whistle-blower.
• Other major features of SOX include

• Creation of a Public Company Accounting Oversight Board, a private, not-for-profit entity that reports to the Securities and Exchange Commission that registers and inspects public accounting firms and sets quality and ethical standards for the issuers of audit reports.
• Disclosure of whether a Code of Ethics has been established for executives and making it available to the public.
• Personal loans to executive offices and directors are prohibited
• Establishment of an “anonymous reporting mechanism” for employees to report fraud.
• Managerial assessment of the effectiveness of their company’s internal control structure for financial reporting and auditor comments about management’s assessment.
• Outside, independent directors chosen for the board of directors, and a “financial expert” on the board’s audit committees
• Auditors cannot engage in consulting work for the companies they are auditing without approval of the client’s audit committee
• The same senior auditors cannot work on the same account for more than five years, and other auditors for more than seven years

WHAT ARE SOME OF THE NEGATIVE OUTCOMES THAT MANY WHISTLE-BLOWERS HAVE EXPERIENCED?

The decision to blow the whistle on an employer requires careful consideration. Whistle-blowing can have many negative impacts on an employee’s life. Researchers report that soon after blowing the whistle, many whistle-blowers experience:

1.   Negative performance evaluations

2.   Undesired job transfers

3.   Demotions

4.   Criticism or avoidance by co-workers

5.   Physical, psychological, and family problems

6.   Loss of job or forced retirement

7.   Blacklisting impeding employment

8.   Protracted legal battles waged at personal expense

• All of the retaliatory actions listed above are prohibited by law.
• Nonetheless the legal process can take years to settle the issue, during which time the whistle-blower might be unemployed and without any guarantees the outcome will be favorable.
• Judges and juries can attempt to financially remedy whistle-blowers for psychological stress and family problems, but the negative impacts on the lives of whistle-blowers and family members are difficult to reverse. Being ostracized, a recipient of insults and mistreatment creates memories and feelings that cannot be simply forgotten.

• Ethics & Compliance Association
• International Ombudsman Association
• Marketplace Chaplains USA
• EthicsPoint
• Whistle-blowing
  • U.S. Office of Special Counsel (OSC)
  • National Whistle-blowers Center
  • The False Claims Act Legal Center
  • Project on Government Oversight
  • IRS Tax Fraud Whistle-blower

Best Place to Work Video

• Best Place to Work – NetApp

Business Ethics Issue Video

• “Flying Cheap,” Frontline, about the impact of airlines outsourcing flights to regional carriers; February 9, 2010, 57 minutes

TEDTalks Videos

- Happiness: Dan Gilbert, author of Stumbling on Happiness, challenges the idea that we’ll be miserable if we don’t get what we want and how our "psychological immune system" lets us feel truly happy even when things don’t go as planned;  February 2004, 22 minutes

- Lessons Learned from Presidents: Historian Doris Kearns Goodwin talks about what we can learn from American presidents, including Abraham Lincoln and Lyndon Johnson;  February 2008, 19 minutes

Conversations with Charlie Rose

- A conversation with journalist Rick Stengel on WikiLeaks; November 3, 2010, 25 minutes

- A conversation with Brian Ross about his book "Madoff Chronicles, The: Inside the Secret World of Bernie and Ruth;" October 27, 2009, 60 minutes

Sarah Nilsson, J.D., Ph.D., MAS

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sarah@sarahnilsson.org

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