Organizational Behavior Problem Analysis Essay

Good ethical behavior continues to be an issue that employees and leaders are faced with. Competition, cutbacks, and productivity are leading causes of why members of organizations feel pressured to take shortcuts, break the rules, and use other forms of questionable methods (Robbins & Judge, 2009). The ethical issues are prevalent in many organizations and range from a variety of unethical practices such as: officials padding their own bank accounts, engagement in bribes, inflation of profits to increase and cash in stock options, to name a few.

The excuses provided for these unethical behaviors are “everyone does it” or “you have to seize ever advantage nowadays” (p. 26). Unethical actions can lead to decrease in employee morale, lack of trust, employees mimicking the same unethical behaviors, loss of productivity and employee turn-over. With these types of attitudes, it has become increasingly more difficult for managers to create ethical climates for employees. For these reasons, this paper seeks examines how ethical leader behaviors manifest in employee behavior and affect the organization.

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Rational For Topic The increase of unethical behaviors has led to leaders’ implementation of creating ethically healthy climates with the use of ethical codes, guides to assist employees with faced with dilemmas, and training. Personal achievement, in many cases, seems to overpower ethical behavior leaving companies with a lack of stewardship over leaders. Ethical motivation is on the decline, leaving employees questioning what the benefits of doing the right thing are.

The role of leaders is more than just a role to promote ethical employee behavior, it is now a role of creating employee perceptions of leaders’ behavior to determine employee outcome or, in simpler terms, to create a link between leadership behaviors and individual trust and commitment to the organization. Elements of Thought The intent of this paper is to address the outcomes of employee behavior based on the behaviors of leaders from all levels. The questions raised are:1) How strong will employee commitment or engagement be? ) What is the likelihood of trust in the employee – manager relationship?

3) How willing will employees be to report suspected ethical issues? 4) Is there an acceptable level of unethical decision-making; that is, are some decisions ok to make if the benefit outweighs the cost? An alternate method of interpreting this information is that leaders are not aware of the results of their actions. It is possible that leaders believe their decisions are to benefit the company; however, studies thus far have proven this is not the case.

Although there has been some research conducted on the outcome of employee behavior, there is still more research that needs to be conducted. There is, however, much research available to support the claim that employee behavior will not be beneficial to the organization, nor will the organization survive if the ethical behavior of leaders is on the decline. The assumption made is that all employees are concerned with their leader’s behavior. There may be many employees who simply want to get paid.

The implication is that leaders should put what is best for the organization before their personal needs thereby creating a solid organization in which they are trusted, well respected, and have followers willing to be more productive. Arguments The only reasonable argument for unethical decision-making could be that sometimes it is necessary to do the wrong thing for the right reason. By that, it could be inferred that there are some issues that are in the best interest of the leader, employee, and organization.

For instance, it could be argued that it might be better to tell a small white lie to protect an employee from termination. Although the lie is harmless, it still sends a message that, in some instances, it is ok to be unethical. It could be refuted by arguing that although at that moment the lie was only for one employee and it will not have an effect on the organization; however, what would be the implications of that lie if it needed to be told for every employee?

Additionally, it could be argued that perhaps this employee was well liked; however, what would be the implications of not telling that same lie for an employee the organization wanted to terminate? The unfairness in the act would create a bias. Athanassoulis and Knight (2009) discussed Immanuel Kant’s philosophy which deals with the ethical duties of the individual morals with a system based on principles of universality. As previously discussed, according to Kant, ethics is a way of thinking about what is perceived to be morally right including one’s moral issues and conclusion.

Kant developed deontological ethics in which decisions, based on what is right or wrong, depend on the act and not its consequences. Kant suggested that moral rules are absolute and can never be broken. In Kant’s view, the sole feature that gives an action moral worth is not the outcome achieved by the action, but the motive behind the action. Examples of this would be killing someone is wrong because the act itself is wrong or lying to someone is an act of deceit; therefore, there is never a justification for telling a lie.

Kant’s view is also based on the religious concepts of morality. His belief is human beings are morally aware of right and wrong, have a conscience, and are capable of sharing moral ideals. He suggests we all have moral responsibilities, whether or not we act on them depends on the individual. Robbins and Judge (2009) state Kant asks individuals to consider the following: “If you want to know whether telling a lie on a particular occasion is justifiable, you must try to imagine what would happen if everyone where to lie” (p. 72). Impression management – telling a lie – goes against the notion that a world with no lies is better than a world with lies; otherwise, no one could be trusted. Being truthful should be first and foremost to the best of one’s ability. Defining Ethical Behavior Den Hartog and De Hoogh (2009), suggests that ethics at every level is important to sustain success in business and that a lapse in ethics, at every level, can be costly for the organization.

Brown, Trevino, and Harrison (2005) (as cited by Den Hartog & De Hoogh, 2009) defined ethical leadership as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement and decision making” (p. 201). They suggest ethical leaders are honest, trustworthy, fair, caring, promote ethical behavior within the organization, and act as role models themselves.

Ethical behavior from an employee’s perspective, as stated by Den Hartog and De Hoogh (2009), suggest a positive impact on follower perceptions, attitudes, and performance. Employees seek trust, integrity, and fairness from their employers. If employees feel they have these qualities in their leaders and organization, they are more likely to be committed and stable to the organization reducing the turnover rate, have higher productivity, feel empowered, have positive attitudes, and be satisfied in their place of employment. Horvath (1995) argues that organizational culture has an impact on the moral belief of its employees.

Robbins and Judge (2009) also argue this belief by suggesting the “goal setting theory is culturally bound” (p. 186). Horvath (1995) suggests that if the culture of the organization is a culture where personal financial growth, lack of integrity, and cheating to get ahead are acceptable performance standards, it stands to reason that employees will exhibit either the same type of behavior or exhibit low performance objectives. Types of Ethical Behaviors Ethical conduct includes a multifaceted of dilemmas that involve personal, professional, and organizational considerations (Wooten, 2001).

Within the Human Resource (HR) field, Wooten (2001) notes the 10 most serious situations reported by HR managers as hiring/training, promotion based on favoritism, allowing differences in pay and promotions to be based on friendship with top management, sexual harassment, sex discrimination in promotion using discipline inconsistently, nonperformance factors used in appraisal, arrangements with vendors leading to personal gains, and sex discrimination in recruiting/hiring. Mathis and Jackson (1997)(as cited by Wooten, 2001) suggest that ethical issues create basic questions about fairness, justice, truthfulness, and social responsibility (p. 62). The questions created include withholding information from a potential employer of a problem employee, feeling of commitment to long-term ineffective employees as a result of job changes, investigating credit and criminal records of potential employees, consideration of personal lifestyles with regard to professional opportunities, enforcement of their personal beliefs promoting efforts to quit smoking, employment considerations for potential employees based on the possibility of costly health care where benefits are concerned, and privacy issues involving AIDS.

Wooten (2001) acknowledges rticles by Acher (1986), Edwards and Bennett (1987), and Wallace (1985) illustrate a core theme that HR practitioners engage in a multiplicity role – enactment of many different functions and responsibilities – that influence the opportunity of ethical dilemmas to occur. As an example, HR managers “set up and monitor policies, make decisions impinging upon employee rights, enforce employment law, educate organizational participants, and contract with external agencies for services, etc. ” (p. 163). Additionally, Edwards and Bennett (1987) suggest others often view managers as watchdogs for the organization over all other employees.

Implications and Outcomes of Ethical Behavior Robbins and Judge (2009) argue that effective leadership is what you are born with rather than what you have. Warren Buffet suggests “that characteristics or habits such as intelligence, trustworthiness, and integrity are most important to leadership” (as cited by Robbins & Judge, 2009, p. 404). Having said this, leaders have a responsibility to treat all employees in a fair, unbiased, and impartial manner (Zhu, May, & Avolia, 2004). According to Aronson (2001)(as cited by Zhu, May, & Avolia, 2004), leaders have an obligation to set the moral example for the organization.

They do this by exhibiting behaviors that are morally right, fair, and good, and by increasing moral awareness and self-actualization. Therefore, ethical leaders have a responsibility to create the right conditions and organizational cultural in an effort to promote the ethical behavior in employees. This type of ethical leadership will have an effect on employee attitudes, job satisfaction, and commitment to the organization which will lead to positive organization outcomes. Zhu, May, and Avilo (2004) argue that strong personal ethics encourage a higher level of trust and loyalty to an organization.

Leadership lacking ethical conduct can be “dangerous, destructive, and in some instances toxic” (Toor & Ofori, 2009, p. 533). Leaders are responsible for demonstrating the highest moral standards and ethical conduct in their talk, actions, decisions and behaviors so that they are role models, in their organization, to follow. According to Trevino and Brown (2004) unethical behavior has existed for many years; however, the impact of unethical behavior is more prominent in organizations today (as cited by Toor & Ofori, 2009). As the environment continues to change and become more complex, ethical challenges increase for leaders.

The rapid pace of information flow adds pressure to increase performance and as a result ethical slipups in decisions, actions, and behaviors occur with leaders. Toor and Ofori (2009) conducted a study to determine the role ethical leadership has on employee outcomes and organizational culture. The study also sought to determine the relationship of ethical behavior with transformational leadership, transformational culture of organization, contingent reward dimension of transactional leadership, leader effectiveness, employee willingness to put in extra effort, and employee satisfaction with leader (p. 33). The two hypotheses most relevant to this behavioral issue are; 1) Ethical leadership is positively associated with employees’ outcomes (satisfaction with the leader, leader effectiveness, and willingness to give extra effort), and 2) Ethical leadership mediates the relationship between employee outcomes and organizational culture. The study, conducted in Singapore, included senior level managers perceived to be authentic and successful leaders. Each manager nominated one peer and two subordinates who served as raters.

Of those nominated 62 participated. Sample items relating to ethical behavior included: “Has the best interests of employees in mind”, “Sets an example of how to do things the right way in terms of ethics”, “I talk about my most important values and beliefs”, “We trust each other to do what’s right” and “We encourage a strong feeling of belonging”(p. 538). The results concluded that ethical leadership is positively associated with employee outcomes and that ethical leadership mediates the relationship between employee outcomes and organizational culture.

As a result of these findings, Thomas, Schermerhorn, and Dienhart (2004) (as cited by Toor & Ofori, 2009), suggest leaders recognize the importance of ethics and take the necessary steps to send out clear consistent messages about adhering to an ethical standards. Methodology of Ethical Behavior Using Appraisal System to Guide Ethical Behavior Dadhich and Bhal (2008) completed a study on leader behaviors and how their behavior affects subordinate behavior. The results support the following hypotheses H1a: Perception of leader’s honesty is predicated by ethical leadership behavior.

H1b: Willingness to report problems is predicted by ethical leadership. H1c: Affective and cognitive trust is predicted by ethical leadership. H1d: Ethical leaders will exercise idealized influence on the subordinates. The results indicate that leaders should be aware that their behavior is carefully viewed by subordinates and that subordinates behave in the same manner as their leaders. That being said, organizations should implement the identification, appraisal, and development of leaders as a method to reduce unethical practices and achieve the overall organizational goal (Dadhich & Bhal, 2008).

Informing leaders of their responsibility to behave ethically in all situations is a suggested course of action to implement. Using the appraisal system to hold leaders accountable is another course of action. Educating leaders that they are not only supervisors, but also role models is yet another course of action. Themes for Leaders to Guide Behavior According to Nekoranec (2009), ethical leadership has a connection to success. Through his research, three themes and 20 subthemes are recommended as guides for leaders when faced with ethical decision-making.

Theme I suggests leaders personify espoused values. In doing so, leaders should see themselves as ethical vanguards, act with integrity always doing what is right, incorporate reflective intuition, speak honestly and frankly, learn from past mistakes and move forward in a positive manner, lead others with “we” instead of “I”, live values that others will imitate, and display emotions. Theme II suggests leaders should build relationships for harmony and purpose.

Leaders can do this by supporting subordinates and encourage them to do their best, respect others, and openly display that respect, share information openly for all to hear, understand, and act on, instill a sense of trust to guide and lead, be approachable and always be visible. Theme III suggests leaders work for mutually beneficial solutions. Leaders support this theme by getting facts honestly and openly, seeking advice from others to clarify issues, knowing the law and legal operating procedures, thinking thoroughly through situations, listening to peers and subordinates eelings, negotiating the information gathering process, and challenging themselves and others to find more effective solutions (Nekoranec, 2009). Influencing Good Ethical Climate Duska (2010) suggests culture in an organization includes “the shared philosophies, ideologies, values assumptions, beliefs, expectations, attitudes, and norms that knit a community together” (p. 22). He adds that leadership has the responsibility to know: 1) what the values of the organization are, 2) the importance of employees understanding those values, and 3) to understand the obligation of being committed to that vision of the values.

The first step for leaders is to find out what the culture of the organization is. Creating a specific issue to discuss with no right or wrong answer will disclose employee opinions. Once an answer is provided, individuals are asked to defend their position. In an organization with a good ethical climate, the responses should identify individuals whose intentions are to create goodness, maintain integrity, show fairness to all, and be trustworthy.

According to Duska (2010), in order to explore having goodness in an organization, leadership should be concerned about the providing services that are good for their clients and employees. Personal interest should not be a factor. Organizations should be about creating value for someone else – not themselves. This is the type of goodness that leaders should emulate for their employees to follow and clients to value and respect. Duska (2010) adds that leaders should consider exploring integrity.

Integrity is preserved if people are true to their goals and values. He argues that having integrity means being one unit, where goals align, to promote the good individuals view as their life’s work and to be true to those goals and values. By not practicing integrity, customers are likely to take their business elsewhere and employees are likely to seek other employment. Third, Duska (2010) suggests to explore fairness. Considering what is owed to clients and/or employees is an act of being fair. He defines fairness as providing everyone what they are due.

Leaders should reflect on what is in the best interest of the clients and employees, and less on themselves, prior to making decisions. This is otherwise known as selfless-service. This type of behavior promotes leaders who are in tune with the organizations goals and who are truly concerned with leading others. Finally, leaders should explore trustworthiness as a concern. Professionals must be true to their own word and place the needs of the others above their own. Leaders should live up to the commitments in the roles they chose.

Creating an Ethical Code of Conduct. Many organizations have ethical codes or policies on ethics (Wooten, 2001). These codes or policies reflect the unique culture of their organization in the conduct of their specific roles, functions, and duties. As an example, Wooten discusses Human Resource Management’s code of ethics that is broad and reflects a diverse population of professionals, which addresses many functional areas; however, in comparison, as noted by Jamal and Bowie (1995) (as cited by Wooten, 2001), the codes of conduct for accounting, law and engineering are much more comprehensive.

Based on these findings, it is important to create codes and ethics that will not be underdeveloped. Honesty, candor, diligence, and public service are areas Loevinger (1996)(as cited by Wooten, 2001), suggests should be define and refine when establishing standards of conduct and codes of ethics. Strengths, Weaknesses, and Application of Organizational Behavior Theories While there are many reasons for ethical, or unethical, behavior of leaders, there are a few theories, in particular, that predict such behaviors. Athanassoulis and Knight (2009) define ethical theories as the following:

Ethical theories are theories of right action in the area of morality, which have implications for how we behave when faced with practical problems. Morality is about how we out to behave, what kind of people we should be, and what the ethically right thing to do is. Ethical theories attempt to answer these questions. While empirical disciplines seek to describe what the world is like, ethics seeks to reason what the world out to be like. (p. 1) Theory of Reasoned Action The first theory introduced in this paper is a theory to predict unethical behavior.

Ajzen and Fishbein (1980) (as cited by Chang, 2008) introduced the theory of reasoned action (TRA). Fishbein and Ajzen (1975) propose the theory of reasoned action, suggesting “that an individual’s behavior is determined by the individual’s behavior intention (BI) to perform that behavior, which provides the most accurate prediction of behavior” (as cited by Chang, 2008, p. 1826). Behavioral intention consists of two causes: 1) attitude toward behavior – general feeling of likes or dislikes of that behavior, and 2) subjective norm – the perception that people of importance believe the behavior should or should not be performed.

While this theory has proven to be successful for predicting organizational behaviors such as turnovers and education it also has its faults. One fault being that there are other factors, other than intention, which conclude whether or not the behavior in question is performed. Another fault being there is no condition in the model to consider whether or not the likelihood of failing to perform the behavior or the consequences of failing in determining what the intentions are.

In dealing with these issues, Ajzen (1985) (as cited by Chang, 2008) extended his theory of reasoned action to include perceived behavior control (PBC) in an effort to predict behavioral intentions and behavior. The extended model formed the theory of planned behavior (TPB). The TPB model has been successful at predicting the performance behavior and intentions “such as predicting user intentions to use a new software (Mathieson, 1991), to perform breast self-examination (Young et al. , 1991), and to avoid caffeine (Madden et al. 1992)” (as cited by Chang, 2008, p. 1827). Chang (2008) discussion on the application of the theory of reasoned action and theory of planned behavior to moral behavior, notes a recent study conducted by Randall and Gibson (1991) (as cited by Chang, 2008). Using the theory of planned behavior to ethical decision making of medical professions to report misconduct of colleagues, Randall and Gibson (1991) showed that attitude explained the large discrepancy of intention while subjective norm explained the fair amount of discrepancy. Espoused Theory and Theory-in-Use

Al-Kazemi and Zajac (1999) suggest organizations often create statements of moral principles to use as guides to organizational behavior. According to Agyris and Schon (1996) (as cited by Al-Kazemi & Zajac, 1999), these codes of ethics work to establish the moral tone in the organization and represent the espoused moral theory of the organization. The behavior carried out within the organization is defined as the moral theory-in-use. They further add “espoused theory represents the moral idea established by the organization and the theory-in-use represents the moral reality of the organization” (p. 53); that is, what is right and what is wrong. The units that make up the moral theory-in-use with an organization are individual, organizational and universal forces. At the individual level moral behavior is produced by what individuals accept to be right and wrong, key life experiences and the position they hold in the organization. At the organizational level the moral theory-in-use is produced by politics within the organization, disagreements with policy and mission, and the overall organizational culture. At the universal level environmental forces are introduced to create tension with the organizations espoused moral theory.

Agyris and Schon (1996) (as cited by Al-Kazemi & Zajac, 1999), state the moral theory-in-use is not only the direct result of the organizations espoused theory; however, the similarities do serve as one sign of the health and integrity of the organization. In addition to integrity referring to beliefs about what is right and wrong, it also refers to the effectiveness and efficiency of the organization. Al-Kazemi and Zajac (1999) imply that insight of an organizations dysfunction can be gained by exploring the closeness of an organization’s ideas with employee perception and commitment to those ideas.

Al-Kazemi and Zajac (1999) explore the application of espouse moral theory – attitudes about right and wrong behavior – in Kuwaiti organizations, employee perceptions of moral theory-in-use – awareness about the ethical climate, and the connection between the two. The Islamic tradition in Kuwait influences ethics. This tradition implies that everyone practices dignity and rights of others, they are dedicated to their work, they reject unethical behavior, and they are committed to the common good. This behavior represents the espoused theory working within Kuwait organizations.

However, adjacent to the espoused theory is an organizational theory-in-use with desires to be wealthy and to follow Western material culture. This has resulted in decline in work performance due to the lack of commitment to excellence. Because of Arabic tribal traditions, loyalty towards family and clan are placed above public interest. This pursuit of personal interest behavior has coined the term “pulling” which is derived from acts such preferential treatment, favor seeking and giving, and influence peddling.

Goal-Setting Theory Robbins and Judge (2009) discuss Edwin Locke’s proposed theory that employees with intentions to work towards a goal would show an increase in performance if the goals were specific, would result in higher performance if the goal was accepted, and that feedback from attempts at performing the goal would result in higher performance – the goal-setting theory. The specificity of the goal itself acts as an internal stimulus (p. 185); that is, the more difficult the goal the more focused one becomes.

Feedback, as suggested by Robbins and Judge (2009), provides a direct response to how individuals are progressing in their goals. The feedback guides individual behavior however; it has been noted that self-generated feedback – monitored by the individual – is a stronger motivator than externally generated feedback. Goal setting theory, as argued by Schweiter, Ordonez, and Douma (2002), has been linked to motivating unethical decisions. In particular, it is noted that when individuals have barely fallen short of reaching goals, unethical behavior is demonstrated.

The study conducted considered three hypothesis: 1) Decision makers who are short of reaching a goal will be more likely to engage in unethical behavior than decision makers who do not have a set goal 2) Decision makers who are short of reaching a goal will be more likely to engage in unethical behavior than decision makers who do not have a set goal 3) Decision makers who are close to reaching the goal will be more likely to engage in unethical behavior than similar individuals who are far from reaching the goal (para 6).

The first hypothesis predicted that individuals with defined unmet goals were more likely to cheat than individuals with goals who performed to the best of their ability. Hypothesis two predicted that individuals with defined unmet goals were more likely to cheat than individuals with defined met goals. Hypothesis three predicted that individuals close to meeting their goals are more likely to cheat or lie than individuals are far from achieving their goals. These results suggest that unethical behavior is more likely to occur in individuals who use the goal setting for performance measures.

Robbins and Judge (2009) contradict the finds of goal setting theory argued by Schweiter, Ordonez, and Douma (2002), and suggest goal setting assumes that individuals will be committed to the goal, and will be determined to achieve the goal without lowering or abandoning the goal. Through findings, according to Robbins and Judge (2009) managers can improve employee performance by setting specific, challenging goals. This is reinforced through the use of setting management by objectives (MBO). Managers should set goals that are “tangible, verifiable, and measurable” (p. 187).

Path-Goal Theory Dadhich and Bhal (2008), argue that the path-goal theory of leadership plays an important role in how leaders influence subordinate behavior. Judge et. al, 2002 (as cited by Dadhich & Bhal, 2008), suggests leadership effectiveness is defined as the influence leader’s performance has on the influence and guiding of subordinates toward the achievement of subordinate goals. Effective leaders, as suggested by House (1971)(as cited by Dadhich & Bhal, 2008), motivate employees by clarifying the path for attaining goals and when goals are achieved personal outcomes are increased.

When employees receive extensive guidance they are more likely to have a high quality of interactions with leaders. The results of the study validate the prediction that ethical behavior of leaders influences subordinate outcomes and behaviors. Subordinates use the same ethical means that leaders use to accomplish their goals. Implementing Theories to Influence Ethical Behavior Of the theories discussed in this paper, the most appropriate for avoiding and/or solving ethical behavior is the path-goal theory. As previously discussed, Dadhich and Bhal (2008) suggests leader’s behavior influences subordinate outcomes and behaviors.

With that said, it stands to reason that leaders are role models as previously stated by Brown, Trevino, and Harrison (2005) (as cited by Den Hartog & De Hoogh, 2009). Once organization recognize the importance of holding leaders accountable for their role model positions, they will likely be in a better position to control the tone of the organization. By setting the tone of integrity and trust within the organization, leaders know exactly what is expected of them and are able to expect that same behavior from their subordinates.

Subordinates will be more likely to achieve the goals set for them and will have greater respect for their leaders. While the path-goal theory may be the most appropriate theory for avoiding ethical behavior, the goal-setting theory should not be discounted. As previously discussed, Robbins and Judge (2009) indicate that employee performance can be improved by setting specific and challenging goals. If managers themselves follow the same path for achieving goals, employees will be likely to receive the challenge and complete the goal.

Although Schweiter, Ordonez, and Douma (2002) disagree with the results of implementing the path-goal theory suggesting that unethical behavior is more likely to occur, all authors agree that managers are in a role-model position that can positively or negatively affect the outcome of subordinate behaviors. Conclusion In conclusion, this paper has examined how ethical leader behaviors manifest in employee behavior and affect the organization and determined that ethical and unethical leadership has an impact on subordinate outcomes.

Additionally, the findings suggest that ethical leader behaviors have a positive effect on employee attitudes, trust, job satisfaction, and organizational commitment. Leader behavior influences peers and subordinates and impacts the perception of the organization. If an organization lacks trust from within, one thing is for certain – survival will be difficult in its future. As leaders personal gain should take a backseat to employee and organizational outcomes.

As Dadhick and Bhal (2008) discuss the function of leader behaviors influence subordinates and if this knowledge were somehow incorporated in the identification, appraisal, and development of leaders organizations would do well. The development of leaders, using techniques such as role modeling would help the organization achieve its overall goals. Although organizations should be concerned about the likelihood that the leaders they employ are that creating an ethical and healthy climate, they should be more concerned with creating that climate to begin with.

As Agyris and Schon (1996) (as cited by Al-Kazemi & Zajac, 1999) suggest, establishing a code of ethics at the organizations conception, is a sure way to set the tone of the organization in the direction of selfless-service, integrity, fairness, and lastly trustworthiness. In doing so, leaders will be the role models that subordinates wish to emulate. An organization’s social responsibility should be the concern for the businesses welfare as a whole, which includes concerns beyond legal and contractual obligations.

Organizations have a responsibility to be a good corporate citizen, do what is fair, obey the law, and be economically responsible. Within any organization, there should be an active concern for ethical outcomes. Doing what is right is something everyone wants to accomplish; therefore, values should be shared across the organization. It is also an organization’s responsibility to establish a code of ethics in the form of a document that contains statements reflecting the core values. These code of ethics need to be accepted as a starting point.

The bottom line is that it is an organization’s responsibility to do the right thing, for the right reason, in the right way, and at the right time. Organizations also have a responsibility to its stakeholders – employees, customers, the general public, and investors alike. Organizations can influence ethical conduct by recognizing unethical business actions, resolving ethical problems in the business, provide ethics training, and establish a formal code of ethics. There is a three-question test to resolving ethical problems. These questions are; 1) is it legal, 2) is it balance, and 3) how does it make me feel.

The concept of social responsibility has been frequently discussed as a counterpart to ethics. An organization that exercises social responsibility attempts to balance its commitments – not only to its investors, but also to its employees, its customers, other businesses, and the community in which it operates.


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