Chapter 03 – Managing Ethics and Diversity
3-1
Chapter 03
Managing Ethics and Diversity
Learning Objectives 3-2
Key Definitions/Terms 3-2
Chapter Overview 3-3
Lecture Outline 3-3
Lecture Enhancers 3-15
Management in Action 3-18
Building Management Skills 3-20
Managing Ethically 3-22
Small Group Breakout Exercise 3-22
Be the Manager 3-23
Case in the News 3-23
Supplemental Features 3-24
Manager’s Hot Seat 3-24
Instructor’s PowerPoint Slides 3-25
CHAPTER CONTENTS
Chapter 03 – Managing Ethics and Diversity
3-2
LO 3-1. Illustrate how ethics help managers determine the right way to
behave when dealing with different stakeholder groups.
LO 3-2. Explain why managers should behave ethically and strive to create
ethical organizational cultures.
LO 3-4. Grasp the central role that managers play in the effective
management of diversity.
LO 3-6. Understand the two major forms of sexual harassment and how
they can be eliminated.
diversity: Differences among people due to age,
gender, race, ethnicity, religion, sexual orientation,
ethics ombudsman: An ethics officer who monitors
an organization’s practices and procedures to be sure
LEARNING OBJECTIVES
KEY DEFINITIONS/TERMS
Chapter 03 – Managing Ethics and Diversity
3-3
justice rule: An ethical decision that distributes
benefits and harms among people and groups in a
fair, equitable, or impartial way.
members of a profession are to make decisions when
the way they should behave is not clear cut.
quid pro quo sexual harassment: Asking for or
forcing an employee to perform sexual favors in
exchange for receiving some reward or avoiding
negative consequences.
reputation: The esteem or high repute that
individuals or organizations gain when they behave
ethically.
even though this puts them at risk.
utilitarian rule: An ethical decision is a decision that
produces the greatest good for the greatest number of
people.
The chapter opens with a discussion of ethics and how managers can apply ethical standards to assist in
deciding upon the proper way to behave toward organizational stakeholders. The importance of
establishing a code of ethics and an ethical organizational culture within the organization is also
discussed. Multiple components of diversity within the workforce are identified, followed by a discussion
of how managers can either promote or derail the effective management of diversity. It discusses how
effective management of diversity can improve organizational effectiveness. The chapter closes with a
discussion on sexual harassment and how it can be eliminated.
NOTE ABOUT INSTRUCTOR’S POWERPOINT
SLIDES
The Instructor PowerPoint Slides include most Student
PowerPoint slides, along with additional material that
can be used to expand the lecture. Images of the
Instructor PowerPoint slides can be found at the end of
this chapter on page 3-26.
BASIC POWERPOINT SLIDE 1
(INSTRUCTOR’S POWERPOINT SLIDE 1)
Chapter Title
CHAPTER OVERVIEW
LECTURE OUTLINE
Chapter 03 – Managing Ethics and Diversity
Management Snapshot (pp. 79-80 of text)
Ethics and Social Responsibility at Whole Foods Market
How can managers ethically satisfy the needs of multiple stakeholders?
Today the Whole Foods Market supermarket chain is the world’s leading retailer of natural and organic
foods. Why has Whole Foods been so successful? It is because founder and CEO John Mackey
established certain principles for the organization that required ethical behavior. Mackey says he started
his business for three reasons—to have fun, to make money, and to contribute to the well-being of other
people. The company’s mission is based on its members’ collective responsibility to the well-being of its
stakeholders. These include customers, team members, investors, suppliers, the community, and the
natural environment. Mackey measures his company’s success by how well it satisfies the needs of these
stakeholders. His ethical stance toward customers is that they are guaranteed that Whole Foods products
are 100% organic, hormone-free, or as represented.
Mackey’s approach toward team members is also based on a well-defined ethical position. Team
members are constantly experimenting to serve customers in new and improved ways. As they learn,
they become “self–actualized” or self-fulfilled, and this increase in their well-being translates into a
desire to improve the well-being of other stakeholders. Mackey believes that companies that behave
ethically and strive to satisfy the needs of customers and employees simultaneously satisfy the needs of
investors because high profits are the result of loyal customers and committed employees.
PLACE SLIDES 2 & 3 HERE
I. The Nature of Ethics
A. Ethical Dilemmas
1. An ethical dilemma is the quandary people find
themselves in when they have to decide if they should
act in a way that might help another person or group
and is the right thing to do, even though it might go
against their own self- interest.
2. Ethics are the inner-guiding moral principles,
values, and beliefs that people use to analyze or
a. Ethics indicate inappropriate behavior and how
a person should behave to avoid harming another
person.
POWERPOINT SLIDES 3-4 TO 3-5
Chapter 03 – Managing Ethics and Diversity
rules or principles can be developed to decide if
an action is ethical or unethical.
B. Ethics and the Law
1. Laws and ethics are not fixed principles. Ethical
beliefs change over time, and as they do, laws also
change to reflect the changing ethical beliefs of a
society.
2. “Do unto others as you would have them do unto
you” is a commonly used ethical or moral rule that
continues to be useful.
C. Changes in Ethics over Time
There are many behaviors, such as murder, theft, and rape,
that are unacceptable and unethical to most people and
therefore should be illegal. However, there are other
actions and behaviors whose ethical nature is open to
dispute. Examples include gun possession or the use of
tobacco.
unvarying standard to determine how we should
behave.
2. In the 2010s, scandals involving J.P Morgan Chase,
HSBC, and Capital One broke the law and used illegal
and unethical means to defraud investors.
3. Being legal does not make behavior ethical. The
Occupy Wall Street movement was prompted by the
unethical influence of the financial services sector on
II. Stakeholders And Ethics
A. Stakeholders are people and groups that supply a
1. Stockholders
right way to behave when
dealing with different
Chapter 03 – Managing Ethics and Diversity
become its owners. Stockholders are interested in
the way a company operates because they want to
maximize their return on investment.
b. Stockholders also want to ensure that managers
are behaving ethically by not engaging in actions
that could hurt the company’s reputation.
2. Managers: Managers are responsible for using a
company’s financial, capital, and human resources to
increase its performance and stock price.
a. They bring skills, expertise, and experience to
an organization.
b. They bear the responsibility of making
decisions about the goals a company should
pursue to most benefit stakeholders and how to
efficiently use resources to meet these goals.
4. Suppliers and Distributors: Most companies
products over time, and providing product guarantees
b. Through the salaries, wages, and taxes it pays, a
TEXT REFERENCE
ETHICS IN ACTION: Safety in the
Garment Industry
In 2013, more than 150 international brands
and retailers signed the Accord on Fire and
Building Safety in Bangladesh. The accord
is a five-year agreement stating that the
signing companies and organizations
commit to meet the minimum safety
standards for the textile industry in
Bangladesh.
Several industrial accidents in 2013
catalyzed social accountability in global
supply chain management, including the
shocking collapse of the Rana Plaza, which
killed 1,132 workers. Young consumers in
been organized through the accord issued
inspection reports on 10 Bangladesh
factories. The reports indicated many
aggressive action to stop unsafe working
conditions because it can be difficult to keep
Chapter 03 – Managing Ethics and Diversity
company contributes to the economy of the town
or region in which it resides and often determines
whether the community prospers or declines.
c. Companies affect the prosperity of a society
and a nation, and to the extent that a company is
involved in global trade, it affects the prosperity
of the global economy.
B. Rules for Ethical Decision Making
1. To help managers and employees make ethical
decisions, four ethical rules or principles can be used
to analyze the effects of their business decisions on
stakeholders:
a. The utilitarian rule defines an ethical decision
as one that produces the greatest good for the
greatest number of people. Therefore, managers
should consider how different courses of action
can benefit or harm stakeholders, and implement
the one with the most benefits.
b. The moral rights rule defines an ethical
decision as one that best maintains and protects
based on how the action will affect stakeholders’
rights.
c. The justice rule defines an ethical decision as
to which the action will promote a fair distribution
of outcome to stakeholders.
d. The practical rule defines an ethical decision
as one that a manager has no hesitation
ethical if he or she can answer ‘yes’ to the
following three questions:
i. Does my decision fall within the accepted
values or standards that typically apply in
business activity today?
Chapter 03 – Managing Ethics and Diversity
ii. Am I willing to see the decision
communicated to all stakeholders affected by
it, for example, by having it reported in
newspapers or on television?
iii. Would the people with whom I have a
significant personal relationship, such as
family members, friends, or even managers in
other organizations, approve of the decision?
C. Why Should Managers Behave Ethically?
1. The relentless pursuit of self-interest can lead to a
collective disaster. When one or more people start to
profit from unethical conduct, this encourages others
to act in the same way.
2. The pursuit of individual self-interest with no
consideration of societal interests leads to disaster for
3. Unethical behavior ruins business commerce, and
society has a lower standard of living because fewer
with others who are basically moral and honest, trust
exists. Trust is the willingness of one person or group
5. Over time, trust between stakeholders allows them
to work together more efficiently and effectively, thus
6. If other individuals or groups copy the behavior of
the unethical stakeholder, the rate at which collective
7. Reputation is the esteem or high repute that
individuals or organizations gain when they behave
POWERPOINT SLIDES 3-15 TO 3-16
Chapter 03 – Managing Ethics and Diversity
acceptable standards, the manager’s reputation will
suffer.
D. Sources of an Organization’s Code of Ethics
1. Codes of ethics are formal standards and rules,
based upon beliefs about right or wrong, that
managers can use to help themselves make
appropriate decisions concerning the interests of their
stakeholders.
2. An organization’s code of ethics is derived from
three principal sources in the organizational
environment. They are societal ethics, professional
ethics, and individual ethics.
a. Societal ethics are standards that govern how
members of a society deal with each other in
matters involving issues such as fairness, justice,
poverty, and the rights of the individual. Societal
ethics emanate from a society’s laws, customs,
and practices, and from unwritten attitudes,
values, and norms that influence how people
interact with each other.
b. Professional ethics are standards that govern
how members of a profession, including managers
or workers, make decisions when the way in
c. Individual ethics are personal values (both
terminal and instrumental) and attitudes that
govern how individuals interact with other people.
Sources of one’s individual ethics include the
influence of family, peers, personality, and
experience.
E. Ethical Organizational Cultures
models of ethical conduct, knowing that subordinates
scrutinize their behavior.
creating the role of ethics officer, or ethics
ombudsman. The ethics ombudsman is responsible
LO 3-2: Explain why managers should
behave ethically and strive to
create ethical organizational
cultures
POWERPOINT SLIDES 3-17 TO 3-20
Chapter 03 – Managing Ethics and Diversity
for communicating ethical standards to all employees,
designing systems to monitor employees’ conformity
to those standards, and teaching all employees how to
respond to ethical dilemmas appropriately.
III. The Increasing Diversity of the Workforce
and the Environment
A. Diversity: Differences among people due to age,
gender, race, ethnicity, religion, sexual orientation,
socioeconomic background, education, experience,
physical appearance, capabilities/disabilities, and other
characteristics used to distinguish people.
1. Diversity is a critical issue in organizations for the
following reasons:
a. There is a strong ethical imperative in many
societies that diverse people must receive equal
opportunities and be treated fairly and justly.
Unfair treatment is illegal.
b. Effective management of organizational
diversity can improve organizational
effectiveness.
a. The federal Glass Ceiling Commission Report
indicated that African Americans have the hardest
time climbing the corporate ladder, Asians are
often stereotyped into technical jobs, and
Hispanics are assumed to be less educated than
other minority groups.
a. Effectively managing diversity means
employees of diverse ages are able to learn from
each other.
POWERPOINT SLIDES 3-21 TO 3-23
4. Gender: Although women and men are almost
equally represented in the U.S., the median weekly
earnings of women are estimated to be lesser than the
earnings of men. Thus the gender pay gap appears to
be as alive and well as the glass ceiling.
a. Research suggests that female executives
outperform their male colleagues in skills such as
motivating others, promoting good
communication, turning out high quality work,
and being a good listener.
5. Race and Ethnicity; U.S. Census Bureau treats
ethnicity in terms of whether a person is Hispanic,
a. The racial and ethnic diversity of the U.S.
population is increasing quickly, as is the
composition of the workforce.
6. Religion: Title VII of the Civil Rights Act prohibits
discrimination based on religion, as well as based on
race/ethnicity, country of origin, sex, and color.
a. Employers must make reasonable
accommodations for religious practices, such as
observances of holidays.
7. Capabilities/Disabilities
reasonable accommodations to allow the disabled
to effectively perform their jobs, while making
sure that those accommodations are perceived to
be fair by those not disabled.
b. Some employees are hesitant to reveal their
LO 3-3: Appreciate the increasing
diversity of the workforce
and of the organization
environment
POWERPOINT SLIDES 3-24 TO 3-35
2. Seeing managers express confidence in the abilities
and talents of diverse employees causes other
organizational members to adopt similar attitudes and
helps reduce misconceptions rooted in ignorance or
stereotypes.
3. Research suggests that slight differences in
treatment of diverse organizational members based
upon race, gender, ethnicity or other factors can
accumulate to result in major disparities over time.
Therefore, managers must ensure that such disparities
do not occur and are not tolerated.
B. Effectively Managing Diversity Makes Good
Business Sense
1. The diversity of organizational members can be a
source of competitive advantage. The variety of points
of view that diverse employees provide can improve
managerial decision making.
2. Diverse members of an organization are likely to be
attuned to what goods and services diverse segments
of the market do and do not want.
3. The recruiting of diverse employees must be
followed up with ongoing effective management of
diversity to retain those employees. It helps the
company avoid the costs related to the hiring of
replacements of members of diverse groups who, once
hired, think that they are being unfairly treated.
4. Many organizations also insist that their suppliers
support diversity.
effective management of
diversity
V. Sexual Harassment
diversity is both an
the reputation of the organization in which it occurs.
While victims can be either men or women, women are
the most frequent. There are two forms of sexual
LO 3-4: Grasp the central role
that managers play in the
LO 3-5: Understand why the
effective management of
ethical and a business
imperative
POWERPOINT SLIDE 3-36 TO 3-37
Chapter 03 – Managing Ethics and Diversity
favors in exchange for receiving some reward or
avoiding negative consequences.
2. Hostile work environment sexual harassment
occurs when organizational members are faced with
an intimidating, hostile, or offensive work
environment because of their sex. A hostile work
environment interferes with members’ ability to
perform their jobs effectively and has been deemed
illegal by the courts.
B. Steps Managers Can Take to Eradicate Sexual
Harassment
1. Develop and clearly communicate a sexual
harassment policy endorsed by top management.
2. Use a fair complaint procedure to investigate
charges of sexual harassment.
3. When it has been determined that sexual
harassment has taken place, take corrective actions as
soon as possible.
4. Provide sexual harassment education and training to
organizational members, including managers.
topic, suggest a number of additional factors that all
organizational members, including managers, need to
keep in mind about sexual harassment.
TEXT REFERENCE
Focus on Diversity: Effectively
Managing Diversity at Sodexo and
Principal Financial Group
Managers at Sodexo, Inc., a major food and
facilities management company take many
steps to ensure that diversity is effectively
managed. Sodexo provides employees and
managers with extensive diversity training,
encourages managers to mentor and coach
employees who are different from
themselves, and bases 25 percent of top
managers’ bonuses on their performance on
diversity initiatives, including hiring and
training diverse employees.
Principal Financial Group, headquartered in
Des Moines, Iowa, operates in a vastly
different industry: financial products,
services, and insurance. To ensure that
opportunities are open for diverse
employees, Principal has offered its
employees flexible work schedules since
1974—decades before many other com–
career progress hampered as is sometimes
the case at other companies.
Sodexo and Principal Financial Group are
among the growing numbers of companies
that are reaping the benefits of an
LO 3-6: Understand the two major
and how they can be
eliminated.
Chapter 03 – Managing Ethics and Diversity
3-15
Lecture Enhancer 3.1
MODELING ETHICAL CONDUCT: THE BALANCING ACT AND LEVEL FIVE LEADERSHIP
LECTURE ENHANCERS
Chapter 03 – Managing Ethics and Diversity
3-16
In the May 2000 issue of Executive Excellence, Dr. William Cottringer, the author of Managing Fairness,
asserts that, “the first and most important rule of good management is fundamental fairness.” According
to Cottringer, leaders should follow the golden rule, treating all stakeholders as they would like to be
treated. This requires “an attitude of openness, a desire to achieve a workable balance between valid
opposing behaviors, and a keen sensitivity to know when you cross over the line of fundamental fairness.”
One way a CEO can attempt to achieve and maintain the balance described by Cottringer is to aspire to
what author Jim Collins has labeled Level 5 leadership. In his book, Good to Great, Collins describes a
Level 5 leader as one that “embodies a paradoxical mix of personal humility and professional will. They
are ambitious, to be sure, but ambitious for the company, not themselves…….. Level 5 leaders display a
compelling modesty, are self-effacing, and understated.” He contrasts Level 5 leaders with others who
had “gargantuan personal egos that contributed to the demise or continued mediocrity of the company.”
93% of 40,000 Americans surveyed admitted to lying regularly at work, according to a Fast Company
magazine report. 60% of employees who say or know about an ethical violation in their have not report it,
Lecture Enhancer 3.2
ETHICS, THE BOTTOM LINE, AND COMPETITIVE ADVANTAGE
Do ethics impact the bottom line? Yes, according to DePaul University and the Management Review. A
1999 study of 300 large firms conducted by researchers at DePaul University found that companies that
make an explicit commitment to follow an ethics code provided more than twice the value to shareholders
Does ethics impact competitive advantage? Yes, it does, if a business either partially or fully attributes its