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CHAPTER 6
Ethics and Organization Politics
LEARNING OBJECTIVES
1. Define ethics and discuss what behaviors are considered unethical in the workplace.
2. Explain what a code of ethics is and describe what a code of ethics typically covers.
3. Discuss the role that supervisors play in setting the example of ethical conduct.
4. Identify the three areas that require ethical conduct by supervisors.
5. Summarize the requirements of SOX.
6. Define whistle-blowing.
7. Outline the steps the supervisor should follow when dealing with a dishonest subordinate.
8. Define the term corporate culture and explain how it can affect an organization’s ethical
standards.
9. Explain the concept of social responsibility.
10. Describe how a supervisor can positively increase his or her power base.
11. Define organization politics.
12. Discuss several guidelines that supervisors should follow when socializing with other
members of the organization.
SUGGESTIONS FOR PRESENTATION
Involve your students
Ask students who are employees to share with the class the formal code of ethics followed by
their organizations. What’s included? How do they compare among companies?
Discuss current events
Recent years have seen a great increase in prosecution of white-collar crime. What may have led
to this change? Has there been an increase in these incidents, or are we just catching more people
now?
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LECTURE OUTLINE
Supervision Dilemma
Jane hears other supervisors discussing personal business on company time and padding expense
accounts.
I. Content of Codes of Ethics
• A code of ethics is a written statement of principles that should be followed in the conduct
of business.
• Codes of ethics serve three basic purposes:
o To demonstrate a concern for ethics
o To transmit ethical values and standards to employees
o To affect employee behavior by establishing behavioral expectations
• Some of the areas usually covered by a code of ethics include:
o Honesty
o Adherence to the law
o Product/service safety and quality
o Acquiring and using information about competitors
o Security
o Payments to obtain business
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o Political activities
o Protection of the environment
• The code must be communicated to all employees.
• The code must be actively supported by all levels of management.
• Figure 6.2 outlines unethical Internet practices.
II. Setting the Example
• Supervisors need to use their judgment in situations that are not covered by a code of
ethics.
• Employees’ notions of what is acceptable and not acceptable are based on the supervisor’s
actions.
• It is important that companies discipline employees who violate their code of ethics.
III. Making Ethical Decisions
• Unethical behavior can hurt an individual’s career as well as the organization’s business.
A. Behaving Honestly
• Employee theft
• Lying about hours worked
• Falsifying records
IV. Ethics Training
• Figure 6.3 summarizes the major benefits of ethical training
V. Areas Requiring Ethical Conduct by Supervisors
A. Loyalty
• Supervisors who are viewed as being interested only in themselves and their futures
will have difficulty in getting the full cooperation of employees.
B. Human Relations
• This category centers on a supervisor’s concept of fairness, particularly in the
treatment of subordinates.
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C. Overt Personal Actions
• This category includes the supervisor’s behavior within the company and how they
handle themselves in the community. Figure 6.4 gives several examples of the ethical
conduct required of supervisors.
VI. Laws Relating to Ethics in Business
• Enforcement of laws related to business ethics is handled by the Antitrust Division of the
Justice Department and by the Federal Trade Commission.
• Several laws protect consumers in the United States against unethical and unsafe business
practices such as the Truth in Lending Act of 1968 and The Equal Credit Opportunity Act
of 1975.
• The Public Company Accounting Reform and Investor Protection Act (Sarbanes- Oxley
Act), also known as SOX, includes requirements for:
o Auditor independence.
o Restriction on firms engaging accounting firms for both auditing and consulting
o Employees can file complaints with the Occupational Safety and Health
Administration (OSHA) if they face retaliation by their employer for whistle-
blowing. Figure 6.5 summarizes the major points of the Sarbanes-Oxley Act of 2002.
A. Whistle-Blowing
• Whistle-blowing is an attempt by an employee of an organization to disclose what
he or she believes to be wrongdoings in or by the organization.
VII. Dealing with Dishonest Employees
• Dealing with dishonest subordinates
o Recognize the problem, get the facts, and document the case.
o Confront the employee.
o Follow the established disciplinary system.
• Dealing with dishonest peers or other managers
o You may not be able to deal directly with the problem.
o In most cases, report your suspicions and findings to your boss and let them confront
those involved.
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VIII. Corporate Culture and Ethics
• Corporate culture, in simple terms, means “the way we do things around here.”
• Corporate culture communicates how employees should behave by establishing a value
system conveyed through rites, rituals, myths, legends, and actions.
IX. Social Responsibility and Ethics
• Social responsibility is the obligation that individuals or businesses have to help solve
social problems.
• Businesses have obligations to stakeholders.
X. Building a Supervisory Power Base
• Power is the ability to get others to respond favorably to instructions and orders.
Supervisors can gain power base in a positive manner.
• Gain the respect of subordinates.
• Help employees be successful.
• Be “in good” with your boss.
• Seek responsibility—accountability for reaching objectives, using resources properly, and
adhering to organizational policy.
XI. Organization Politics
• Organization politics refer to the practice of using means other than merit or good
performance for bettering your position or gaining favor in the organization. Supervisors
should understand organization politics and know how to use them in a positive and ethical
manner.
A. How to Keep Your Boss Happy
• Know your boss.
• Be loyal.
• Show respect for your boss.
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B. How to Build Your Supervisory Credibility
• Be candid.
• Be accessible.
• Accept responsibility.
• Be patient and attentive to others.
XII. Socializing with Other Members of the Organization
• There are no hard-and-fast rules; however, these general guidelines should be followed:
o Don’t be overly anxious to socialize with subordinates or superiors.
o Use common sense when socializing.
o Be yourself.
o Don’t try to use your rank when socializing with subordinates.
o Don’t make any work-related promises to subordinates while socializing.
o Don’t date or become romantically involved with subordinates.
Solution to the Supervision Dilemma
Jane’s company could benefit from establishing a code of ethics.
Supervision Illustrations
6-1: Unethical Practices in Recruiting College Athletes
6-2: Code of Ethics of the American Society of Travel Agents
6-3: Jeffrey Wigand: Outspoken Critic and Whistle-Blower
6-4: Whole Foods Market: One of the Best Corporate Citizens
REVIEW QUESTIONS
1. What are ethics?
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2. Give several examples of behaviors that most people would consider unethical.
Examples of behaviors that most people would consider highly unethical are:
• Using e-mails to harass co-workers
3. What are codes of ethics, and why are they desirable?
4. What are three major areas that require ethical conduct by supervisors?
The three major areas that require ethical conduct by supervisors are
5. Define the term corporate culture.
6. Define social responsibility.
7. Define whistle-blowing.
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8. Define organization politics.
9. List several things that you can do to help keep your boss happy.
Following are some of the things that people can do to keep their boss happy:
• Know your boss
10. What are some tactics that are often used to gain a competitive edge on peers?
11. Outline the basic guidelines that the supervisor should follow when socializing with
superiors and subordinates.
Following are the basic guidelines that the supervisor should follow when socializing with
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SKILL-BUILDING QUESTIONS
1. Do you think that most people consider their personal ethical standards to be higher than
those of their peers? Explain.
2. At a recent retirement party, a supervisor with 30 years of service boasted, “I’ve never
played politics in my job.” Do you think this is possible, and even if it is, do you think it is
desirable?
3. Suppose your boss asked you to do something that you considered unethical. Would you
do it? If not, how would you handle the situation?
Students’ answers may vary. The issues that students will face in such a situation would
include the following:
• How unethical or illegal is it?
4. What are your personal views regarding socializing with superiors? With subordinates?
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ADDITIONAL READINGS
SKILL-BUILDING APPLICATIONS
Incident 6-1: Additional Expenses?
This case illustrates how many decisions are made based on the consequences involved rather
than the ethics.
1. If you were Steve, would you say anything to Chet about Susan’s request? Why or why
not?
2. How would you handle the situation with Susan if you were Steve?
Incident 6-2: The Date: Jim’s Perceptions
This case illustrates how supervisors should socialize with other members and with subordinates
in an organization.
1. What do you think Louise should say to Jim?
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2. Do you think that it is unethical for Jim to date a teller? Why or why not?
Exercise 6-1: Where Do You Stand?
This exercise describes some actual ethical dilemmas in business. The data below gives the
Situation 1: Family versus Ethics
Situation 2: The Roundabout Raise
Situation 3: The Faked Degree
Situation 4: Sneaking Phone Calls
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Situation 5: Cover-Up Temptation
Situation 6: E-Mail Messages
Exercise 6-2: Evaluate Your Ethics
Exercise 6-3: Rating Your Boss on Ethics
Exercise 6-4: Whistle-Blowers
Exercise 6-5: Ethical Dilemmas
SUPERVISORY ANECDOTES
Although more companies now have written codes of ethics, fewer employees are reading them.
According to a recent Industry Week survey on ethics, the number of employees who claim to
have read their company’s codes has dropped from 95.5% in 1987 to 91.5% in 1991. Perceived
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Currently, many companies are jumping the ethics bandwagon with programs that contain few
innovative ideas on how the ethical standards of business can be improved. These programs
often concentrate on the “micro” individual behavior rather than looking at the “macro,” the
context and environment in which organizations interact. Integrity and bottom line performance
are not at opposite ends of a continuum. Good ethics is good business. Maintaining high ethical
standards helps firms to: 1. create a psychologically healthy working environment; 2. avoid
losses to employee theft, expense account padding, and employee sabotage; 3. avoid litigation in
the areas of product safety, safety of the work environment, sexual harassment, and
discrimination; 4. develop trustful relationships with clients and establish stable, profitable
relationships; 5. minimize the catastrophic risk of scandals or disasters that destroy companies or
careers.
RELATED VIDEOS
1. Whistleblowers, FHS, 24 minutes. This video tells the story of four American whistle-
blowers who paid a high price for their integrity.