1.3 What is Business Ethics? – Leadership and Management in Learning Organizations

What is Business Ethics?

After learning about normative ethics and the ideas about how we should and ought to live, business ethics are how we should and ought to conduct business fairly. More succinctly, business ethics is an applied ethics that focuses on real-world situations in the environment where transactions occur. Without ethics in business, there would be no concept of organizational fairness. This leads to ethical leadership which is the enacting of ethical values central to organizational alignment[1]. Being an ethical leader and the meaning of leadership are closely intertwined, given the ability to influence others.  It usually depends on a level of morality and trustworthiness. Figure 1 shows the strategic organizational alignment of ethical leadership in relation to three main factors: vision, mission, and values[2].

Strategic Organizational Alignment
Figure 1: Strategic Organizational Alignment. (Source: Joseph W. Weiss, 2014. In OpenStax, Principles of Management). Long description.

This develops an interesting question relating to the nature of ethics within the business world. As Taft and White conclude that ethics are primarily influences by social relationships as people move from an individual mindset to an organizational mindset[3]. However, Fallding presents an empirical observation of ethics find inherent values that are found in evolutionary beings[4]. Using a global framework, are we able to clearly conceptualize a concise formula for ethics in the organizational world?

One of the main questions within the world of business ethics is how to spot unethical activities. Once spotted, how are they effectively ratified and prevented from happening again? Researchers at Brigham Young University developed eleven categories in which business practices fail[5]:

  1. Taking something that does not belong to you
  2. Saying things that are not true
  3. Giving or allowing false impressions
  4. Buying influence or engaging in a conflict of interest
  5. Hiding or divulging information
  6. Taking unfair advantage
  7. Committing improper personal behavior
  8. Abusing power, or mistreating individuals
  9. Permitting organizational abuse
  10. Violating rules
  11. Condoning unethical actions

Moving into a learning organization, these categories represent common ethical dilemmas.  Five of these include: discrimination (#8 abusing power, or mistreating individuals), sexual harassment (#8 abusing power, or mistreating individuals), conflicts of interest (#4 buying influence or engaging in conflict of interest), customer confidence (#5 Hiding or divulging information), and organizational resources (#1, #9, or #10 could fit in here). It is important to be vigilant when dealing with these unethical problems in the workplace. A checklist of the ethical decision-making process to ensure the best result should be created[6].

Checklist example
Long description.

With engaging in this checklist, it is important to be sure to understand the situation when making an ethical decision. It is important to be aware of the cultural, industry and ethical norms that are prevalent within the organization.

Understanding the ethical culture of an organization is key to ethical decision-making.  One area where this is relevant is the role of a whistle-blower, an individual who exposes the misdeeds of others in an organization in order to preserve ethical standards and protect against further wasteful, harmful or illegal acts[7]. Whistle-blowers are regarded as great actors of ethics, given the risks that they take for their personal and professional well-being. Once a whistle-blower comes out against a company, there is some legal protection, but the protection is limited, and usually leads to the whistle-blowers being fired from their jobs. In many ways, becoming a whistle-blower is a personal ethical dilemma in of itself.

Moving forwards, what are some actions that can be undertaken to ensure ethical actions take place? Here are the many ways organizations can influence ethical conduct and proper business ethics:[8]

  1. Leading by Example – Establishing proper patterns of behavior as a leader to pass onto your staff.
  2. Offer Ethics Training Programs – According to a recent survey of the Ethics Research Center, more than 80% of American companies provide some form of ethics’ training for employees.[9]
  3. Establish a Formal Code of Ethics – A piece of organizational legislature which provides employees with knowledge and of expectations, responsibilities, and behaviours toward fellow employees, customers, and suppliers. You can visit the code of ethics for the teaching profession by the Ontario College of Teachers.[10]
  1. Making the Right Decision – Refer back to the ethical checklist to ensure the proper procedures, follow up , and action is being taken.

 

Air Force Case Study:

The first culprits people think of when they hear of cheating on a test are students. When the Air Force cheating scandal was brought to light, it would not be unreasonable to assume that it occurred in the Air Force Academy. However, the cheating scandal shocked many because it did not involve students or a school. Instead, the cheating occurred among a group of Air Force officers at Malmstrom Air Force base in Montana.

This scandal is one of several that have rocked the Air Force in recent years. In 2008 the chief of staff of the Air Force and a secretary were fired after failing to properly oversee a nuclear mission. In another incident, a general of the Intercontinental Ballistic Missiles force was terminated after an incident involving drinking. The cheating scandal itself has come to light because of an investigation into illegal drug use among 11 officers across six bases. Two of the officers under the drug investigation were implicated in the cheating scandal.

The cheating scandal involved a monthly exam to test the officers’ proficiency in areas such as safety and launch protocol. It was estimated that the event took place in August or September in 2013 and involved a whopping 92 officers out of 190 crew members at the Montana air force base. This represents 20 percent of the work force, thought to be the largest scandal in Air Force history. An initial investigation revealed that one of the officers texted the answers to a proficiency exam to 16 others. Further investigation revealed that 17 other officers knew about the cheating but failed to report it. Altogether the scandal involved captains, lieutenants, and junior officers at the base.

The bad news continued to increase. Later investigations revealed that as many as 92 officers were involved in the scandal—nearly half of the crew members at the base. The officers were suspended and decertified. The Malmstrom Air Force base operates about one-third of the 450 Minuteman III nuclear-tipped intercontinental ballistic missiles. The Air Force maintains that the cheating scandal did not compromise nuclear safety, but the scandal is disturbing nonetheless. As a result of the suspensions and de-certifications, the rest of the officers had to take on extra duties for the time being.

There are signs that all is not well at some of the Air Force bases. While the tests themselves normally have a 97 percent passing rate, the Associated Press revealed that officers had anonymously intimated that they were tempted to cut corners on these tests. It is also notable that in the spring of 2013, 17 officers were de-certified due to bad performance and bad attitudes. In August, the Malmstrom Air Force base failed a nuclear safety and security inspection but passed in October. Air force officers may have felt pressured to cheat so as to earn high marks.

Ethical conduct in businesses involves individual values, organizational factors, and opportunity. It is important for organizations to have controls in place to limit the opportunity for unethical conduct. It would appear the Air Force did not have the necessary controls to prevent such a widespread cheating scandal. Additional pressure to succeed at the tests and threats of punishment likely created an organizational climate that encouraged cutting corners (as several officers had related to the Associated Press). In another AP revelation, a memo was discovered from a missile operations officer who complained that his force was infested with “rot.” This does not reflect well on the organizational climate of the base. With both the opportunity and an organizational culture conducive to misconduct, it remained for the officers to individually determine whether to cut corners. Research has frequently indicated that organizational factors often overcome individual inhibitions when the stakes are high; thus, even if the 34 officers had strong values against cheating, they might have decided to engage in this behavior to avoid negative outcomes.

This leaves the major question of who should be held responsible. Did the Air Force base create a high-pressure culture? With something as serious as nuclear security involved, high standards must be enforced to ensure the officers are familiar with the issues they must know to do their jobs. However, the Air Force has admitted that its culture could be the problem, and that it might spend too much time looking at test scores rather than at the officer’s overall ability. In a statement by the Air Force secretary, she admitted that in her travels to three air force bases, officers had intimated that they felt the need to achieve perfection to be promoted. In other words, they felt pressured to score 100 percent on tests. The breadth of the scandal and officer feedback reveals that the Air Force not only lacked the necessary controls to prevent the misconduct, but also might have a cultural problem that indirectly encouraged officers to do what it took to excel.

Source: Classroom Exercise: Air Force Cheating Scandal Reflects Negatively on Organizational Culture.  Retrieved from https://danielsethics.mgt.unm.edu/pdf/air-force-classroom-exercise.docx

Note on Attribution

Chapter 1.3 What is Business Ethics? – Leadership and Management in Learning Organizations was adapted from “Chapter 5.2, What is Business Ethics? – Leadership and Management in Learning Organizations” by Clayton Smith, Carson Babich, and Mark Lubrick, licensed under CC BY-NC-SA 4.0.

  1. OpenStax, Principles of Management (2019, May 31). https://cnx.org/contents/w6yyq31c@8.84:JaKv7fV9@5/5-1-Ethics-and-Business-Ethics-Defined ↵
  2. Taft, S., & White, J. (2007). Ethics education: Using inductive reasoning to develop individual, group, organizational, and global perspectives. Journal of Management Education, 31(5), 614-646. https://journals.sagepub.com/doi/pdf/10.1177/1052562907307641 ↵
  3. Fallding, H. (1965). A proposal for the empirical study of values. American Sociological Review, 30(2), 223-233. https://www.jstor.org/stable/pdf/2091566.pdf ↵
  4. Weiss, J. W. (2014). Strategic organizational alignment. In OpenStax, Principles of Management, May 31, 2019. https://cnx.org/contents/w6yyq31c@8.84:zlehnBLW@5/5-4-Leadership-Ethics-at-the-Organizational-Level#ch05fig04 ↵
  5. OpenStax, Introduction to Business (2018, November 13). https://cnx.org/contents/Tgl3H6iq@8.5:R35ftDQ0@7/2-1-Understanding-Business-Ethics ↵
  6. OpenStax, Introduction to Business (2018, November 13). https://cnx.org/contents/Tgl3H6iq@8.5:R35ftDQ0@7/2-1-Understanding-Business-Ethics ↵
  7. Miceli, M. P., Near, J. P., & Dworkin, T. M. (2008). Whistle-blowing in organizations. Taylor & Francis Group. ↵
  8. OpenStax, Introduction to Business (2018, November 13). https://cnx.org/contents/Tgl3H6iq@8.5:Af3tSe28@8/2-2-How-Organizations-Influence-Ethical-Conduct ↵
  9. Meinert, D. (2017). Creating an ethical workplace, In OpenStax, Introduction to Business, November 13, 2018. https://cnx.org/contents/Tgl3H6iq@8.5:Af3tSe28@8/2-2-How-Organizations-Influence-Ethical-Conduct ↵
  10. Ontario College of Teachers. (n. d.). The ethical standards for the teaching profession. https://www.oct.ca/-/media/PDF/Standards%20Poster/standards_flyer_e.pdf ↵

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