978-1259278211 Chapter 11 Solution Manual Part 3

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B.Integrity-Based versus Compliance-Based Organizational Ethics

There is an important link between organizational integrity and the personal integrity of

an organization’s members. While there can’t be high-integrity organizations without high-

Organizational integrity goes beyond personal integrity. It is based on the concept of

purpose, responsibility, and ideals for the entire organization. A key responsibility or leadership

Lynn Paine, a scholar at Harvard, has identified two approaches that organizations

Compliance-based programs are generally designed by corporate counsel with the goal of

preventing, detecting, or punishing legal violations. On the other hand, an integrity-based

To sum up, compliance-based approaches are externally motivated, that is, based on fear

Four key elements—role models; corporate credos and codes of conduct; reward and

Teaching Tip: Ask students which of these four elements—role models, corporate

credos/codes of conduct, reward and evaluation systems, policies and procedures—are

C. Role Models

Leaders are role models in their organizations. (The example of General Dynamics’ CEO

Leaders must be consistent in their words and deeds because their values and beliefs

become transparent to organizational members through their behaviors. Dennis Bakke, CEO of

D. Corporate Credos and Codes of Conduct

Corporate credos and codes of conduct are statements that describe a firm’s commitment

to certain standards or values. They provide guidelines for norms, beliefs, and decision making.

E. Reward and Evaluation Systems

Inappropriate reward systems may cause individuals at all levels of an organization to

commit unethical acts that they might not otherwise do. The penalties for such acts in terms of

The SUPPLEMENT below provides some insights on unethical behavior and some of the

possible underlying causes.

 Extra Example: Unethical Behavior and Some of the Underlying Causes

Ernst & Young conducted its 12th annual Global Fraud Survey of more than 1,700 senior executives in 43 countries,

including chief financial officers and heads of legal and compliance audits. It found that 15 percent were willing to

make cash payments to win or retain business. The corruption perception index of Transparency International, a

multinational organization dedicated to curbing corruption in business, ranked countries according to its level of

corruption. The United States ranked 24. New Zealand was first and Canada was tenth, in terms of the absence of

corruption.

Malcolm Slater, in a Harvard Business Review article, argues that the short-term focus of businesses invites

corruption. He cites examples such as Wall Street’s mortgage banking fiasco, defining it as “institutionally supported

behavior that while not necessarily unlawful, undermines a company’s legitimate processes and core values. In the

private sector, institutional corruption typically entails gaming society’s laws and regulations, tolerating conflicts of

interest, persistently violating accepted norms of fairness and pursuing various forms of cronyism.” Salter contends

that the excessive focus of executive on short-term results discourage long-term investments and weakens the

economy.

Source: Williams, R. 2012. How competition can encourage unethical business practices. business.financial.post.

July 31: np.

Discussion Question 31: What can be done to promote ethical behavior in

organizations/reduce unethical behavior? (Address some of the issues in this section of

the chapter and others, of course—such as reduced focus on short-term results and a

broader stakeholder, long-term perspective.)

F. Policies and Procedures

Policies and procedures are used to guide employees in handling routine occurrences or

IVI. Issue for Debate

Here, we consider the ethics of decisions made by JPMorgan Chase and other major

QUESTIONS:

1. Was JPMorgan ethical in hiring the friend of the Chinese government official?

A key issue that may revolve around this discussion is what JPMorgan’s motives are. Students

may see this in one of three ways.

A. Some students may see it as completely benign. JPMorgan may not have hired the

woman if she hadn’t been introduced to Dimon and other executives at the bank.

B. In the middle ground, JPMorgan may have hired this woman and a number of

others to curry favor with Chinese officials. As long as there is no direct quid pro

C. Some may see a more direct quid pro quo here. JPMorgan did win several

contracts with insurance companies overseen by Xiang after JPMorgan hired the

interpreter. Xiang may have made the job offer for the interpreter a pre-condition

The discussion could produce two insights. First, ethical decisions aren’t really black and

white situations. Second, the choices firms (and individuals) make need to tie back to the core

values of the firm.

2. What should the hiring policies of banks be to meet the needs of being ethical while also

building business in China? Should the banks strive to follow their legal requirements, or

should their standards be higher?

First, you may want to take a survey of the class: “How many of you think the banks should just

meet their legal requirements? How many of you think the banks standards should be higher?”

Students’ views can be tied back to the compliance vs. integrity-based approaches discussed in

The instructor can also discuss the issue from various philosophical perspectives. You could ask

how a utilitarian theorist (e.g. Mill, Bentham, and Sidgwick) might respond—“the greatest good

From another perspective, a deontologist, especially Kant, would claim that hiring employees to

win contracts is not justifiable—“the end does not justifies the means.” Similarly, if taken as a

3. How responsible are senior managers of banks for ensuring the hiring done in regional

operations is ethical and in line with legal requirements?

In a general sense, senior managers are responsible for setting the culture and ethical norms in

the firm that guide hiring and other decisions. Senior managers could choose to formalize

VII. Reflecting on Career Implications

Below, we provide some suggestions on how you can lead the discussion on the career

implications for the material in Chapter 11.

Strategic Leadership: The chapter identifies three interdependent activities that are

central to strategic leadership, namely, setting direction, designing the organization, and

This discussion is largely visionary. One approach is to ask students to think about a leader in

their lives. Then ask students how this leader effectively does each of the three leadership

Power: Identify the sources of power used by your superior at work. How do his or her

primary source of power and the way he/she uses it affect your own creativity, morale,

This discussion is mostly about students’ relationships with their supervisors. Ask students about

their perceived quality of this relationship, and there are likely to be a range of responses. Ask

students about the importance of a good relationship with their supervisors. Is there an effect on

creativity, morale, and willingness to stay with the organization? Are there other consequences?

Emotional Intelligence: The chapter identifies the five components of Emotional

Intelligence (self-awareness, self-regulation, motivation, empathy, and social skills). How

do you rate yourself on each of these components? What steps can you take to improve

your Emotional Intelligence and achieve greater career success?

Emotional intelligence (EI) is an effective topic to complement that of power (above). Students

can rate themselves on EI, and they may also rate their superiors. There may be a very close

association between students’ ratings of their relationships with superiors and the students’

However, most students will understand that all components of EI are useful, and it would be

nice to improve on them. Studies show that EI can be changed, but it is not easy. It takes time

and effort, but students should understand that it is possible. Changing your EI score may be as

Creating an Ethical Organization: Identify an ethical dilemma that you personally

faced in the course of your work. How did you respond to it? Was your response

compliance-based, integrity-based, or even unethical? If your behavior was compliance-

based, speculate on how it would have been different if it were integrity-based. What

have you learned from your experience that would make you a more ethical leader in the

future?

With all the unethical behavior reported in the business press, casual readers may assume that

business executives are ethically challenged. That perception may not be true, but it certainly

Ask students to identify an ethical dilemma such as conflict of interest, misrepresenting facts to a

potential customer, and the like. Regardless of how students claim they responded to the

It is also worth discussing the consequences to individuals of each response. What effects on

managers result from frequent unethical behavior? Ask students if they want to be a manager

who frequently engages in unethical behaviors. Would they want to work for an organization that

VIII. Summary

Strategic leadership is vital in ensuring that strategies are formulated and implemented in

an effective manner. Leaders must play a central role in performing three critical and

interdependent activities: setting the direction, designing the organization, and nurturing a culture

The success of today’s organizations depends on how well their leaders meet challenges

and deliver on promises. The demands of the business environment require leaders to learn to

For leaders to effectively fulfill their activities, emotional intelligence (EI) is very

important. Five elements that contribute to EI are self-awareness, self-regulation, motivation,

Leaders must also play a central role in creating a learning organization. Gone are the

days when the top-level managers can “think” and everyone else in the organization “does.” With

the rapidly changing, unpredictable, and complex competitive environments that characterize

In the final section of the chapter, we addressed a leader’s central role in instilling ethical

behavior in the organization. We discussed the enormous costs that firms face when faced with

ethical crises in terms of financial and reputation loss, as well as the erosion of human capital

Chapter 11: Strategic Leadership: Creating a Learning Organization and

Ethical Organization

Identify a business leader whom you admire the most. Discuss his or her most valuable

traits, attributes, or skills. Also, what types of activities (e.g., creating a vision) does this leader

engage in that are particularly impressive?

Teaching Suggestions:

There are many ways in which you can take the discussion. You might first ask the students to

There have been countless articles on leader traits in the leadership literature, including traits

such as energy, integrity, judgment, and so on. One listing that may be particularly interesting to

Charan and Colvin’s list included the following:

* Integrity, maturity, and energy

* Business acumen (deep understanding of the business)

* People acumen (leading teams, growing and coaching people, etc.)

* Organizational acumen (engendering trust, sharing information, etc.)

In addition, the text addresses the two primary bases of power (pages 404–405; including the

example of William Bratton, Chief of the Los Angeles Police Department in STRATEGY

SPOTLIGHT 11.4 (page 406.):

Organizational (legitimate, reward, coercive, and information)

You may ask them whether or not this individual makes effective use of power in attaining

Similarly, the text discusses the five components of Emotional Intelligence (EI):

Self-Management Skills (self-awareness, self-regulation, motivation)

You may ask them whether or not this individual would “score high” on the various dimensions

of EI.

The text also addresses the three primary activities that leader engage in:

Determining a direction

Designing an organization

As suggested before, ask students if the leader has a good balance of each of these activities.

What often becomes an interesting general question to ask is: Can the leader traits and activities

be learned or are they inherent in the leader (i.e., the “nature vs. nurture” argument)?

Here, you typically get a wide range of answers. For example, some students may feel

that traits such as integrity, intelligence, energy, and referent power are rather inherent in the

leader; while other traits, such as business acumen, perhaps, some elements of emotional

intelligence (EI), and expert power can be learned. It becomes important to encourage students