{"id":3046,"date":"2015-12-28T02:06:04","date_gmt":"2015-12-28T02:06:04","guid":{"rendered":"https:\/\/courses.candelalearning.com\/waymakerintromarketing1xmaster\/?post_type=chapter&#038;p=3046"},"modified":"2017-07-21T21:14:10","modified_gmt":"2017-07-21T21:14:10","slug":"reading-executive-role-in-ethics","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-marketing-spring2016\/chapter\/reading-executive-role-in-ethics\/","title":{"raw":"Executive Role in Ethics","rendered":"Executive Role in Ethics"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Identify the unique ethical considerations and roles for company executives<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Introduction<\/h2>\r\nConsider the following observation by the\u00a0ECI on the results of the\u00a0National Business Ethics survey:\r\n<blockquote>Managers\u2013those expected to act as role models or enforce discipline\u2013are responsible for a large share of workplace misconduct (60 percent) and senior managers are more likely than lower-level managers to break rules. Surveyed employees said that members of management are responsible for six of every ten instances of misconduct and they pointed the finger at senior managers in 24 percent of observed rule breaking. Middle managers were identified as the culprit 19 percent of the time and first-line supervisors were identified as bad actors 17 percent of the time.[footnote]http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/nbes-2013[\/footnote]<\/blockquote>\r\nIf you're thinking about ways of boosting or ensuring ethical behavior in an organization, this is an interesting and alarming finding. In a supplemental report on Ethical Leadership, ECI reports that employees at all sizes of companies draw conclusions about their leaders\u2019 character primarily on the basis of the following:\r\n<ul class=\"greenbullet\">\r\n \t<li>The overall character of their leaders as experienced through personal interactions;<\/li>\r\n \t<li>How senior managers handle crises; and<\/li>\r\n \t<li>The policies and procedures adopted by senior leaders to manage the company.<\/li>\r\n<\/ul>\r\nEmployees want to know, for example, whether leaders treat lower level employees with dignity and respect, share credit when good things happen, and uphold standards even when\u00a0it reduces revenues and profits. They watch to see whether leaders are steady in crisis, hold themselves accountable or, alternatively, shift blame to others. Workers also look at day-to-day management decisions to gauge whether ethical behavior is recognized and rewarded, or whether praise and promotions go to workers who bend the rules.[footnote]http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/ethical-leadership[\/footnote]\r\n\r\nThese findings suggest the important role that\u00a0executives play in building ethical organizations\u2014ethics and integrity tend to start (or fail) at the top and trickle down.\r\n<h2>Executives Set Company Objectives<\/h2>\r\nWhen executives establish\u00a0specific, measurable objectives for the company, those objectives determine where people will focus their time and effort. When the objectives cannot be met\u00a0and there\u00a0are dire personal consequences for failure, such\u00a0conditions can lead to the compromise of ethics and standards.\u00a0In the National Business Ethics Survey, 70 percent of employees identified pressure to meet unrealistic business objectives as most likely to cause them to compromise their ethical standards, and 75 percent identified either their senior or middle management as the primary source of pressure they feel to compromise the standards of their organizations.\r\n\r\n[caption id=\"attachment_3729\" align=\"alignleft\" width=\"300\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1505\/2016\/01\/04105026\/1200px-Martin_Winterkorn_2013-09-09_001.jpg\"><img class=\" wp-image-3729\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1505\/2016\/01\/04105026\/1200px-Martin_Winterkorn_2013-09-09_001-1024x683.jpg\" alt=\"Photo of former VW CEO, Martin Winterkorn\" width=\"300\" height=\"200\" \/><\/a> Former Volkswagon CEO, Martin Winterkorn[\/caption]\r\n\r\nIn the Volkswagen case, internal investigations have questioned how both the company culture and the behavior of former CEO Martin Winterkorn contributed to a systemic ethical breach.\u00a0Like many chief executives, Martin Winterkorn was a demanding boss who didn't like failure, but critics say the pressure on managers at Volkswagen was unusual, which may go some way toward explaining the carmaker's crisis. When he became CEO in 2007, Winterkorn set an objective to make VW the world's biggest carmaker, which would require tremendous growth in the highly competitive U.S. car market.\u00a0In the years since, VW has nearly\u00a0doubled it global annual sales to 10 million cars and its revenue to $225 billion. In early 2015, VW finally approached\u00a0its goal, selling marginally more vehicles than the world's number-one automaker, Toyota of Japan.\u00a0One former sales executive said that the pressure soared under the target.\"If you didn't like it, you moved of your own accord or you were performance-managed out of the business,\" he said.[footnote]http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010[\/footnote]\r\n\r\nIn describing a Winterkorn's leadership style, a\u00a0former VW executive confidentially told Reuters New Agency, \"There was always a distance, a fear and a respect . . . If he would come and visit or you had to go to him, your pulse would go up. If you presented bad news, those were the moments that it could become quite unpleasant and loud and quite demeaning.\"\r\n\r\nA week after U.S. regulators revealed the company's cheating, Bernd Osterloh, the employee representative\u00a0on VW's supervisory board,\u00a0sent a letter to VW staff suggesting the change that was needed: \"We need in the future a climate in which problems aren't hidden but can be openly communicated to superiors,\" said Osterloh. \"We need a culture in which it's possible and permissible to argue with your superior about the best way to go.\"[footnote]http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010[\/footnote]\r\n\r\nIn <em>Fortune<\/em> magazine, Dr. Paul Argenti suggested, \"Rather than playing the blame game, executives should ask if pressures to grow at all costs might have created dishonest employees.\"[footnote]http:\/\/fortune.com\/2015\/10\/13\/biggest-culprit-in-volkswagen-emissions-scandal\/[\/footnote]\r\n\r\nIt seems likely that aggressive corporate objectives (and more specifically marketing objectives related to market share) played a contributing role in the Volkswagen ethics scandal. Moreover, when executives set aggressive goals, it becomes more important to cultivate communication channels to openly address issues. This was obviously not the case at Volkswagon.\r\n<h2>Executives Create Company Policy<\/h2>\r\nIn the previous reading\u00a0we reviewed a number of company policies that address ethical conduct. Executives play an important role in creating those\u00a0policies\u2014and by visibly following and\u00a0upholding\u00a0them. As the survey data cited above suggest, employees look to executives to decide\u00a0whether standards-of-business-conduct policies should be observed and\u00a0respected. When executives bend the rules or turn a blind eye to bad behavior,\u00a0the policies lose value and executives lose the respect of employees. This opens the door to a range of unanticipated issues, as employees look to ethical norms outside stated policy and beyond the executives' control.\r\n<h2>Executives Hire and Promote Company Managers<\/h2>\r\nInternal promotions send very strong signals about what is important to a company. When the company hires an employee from a different company, she is likely not well known by most employees. If the company promotes an employee who is already working at the company, others know him and understand what he has done to deserve\u00a0the promotion. If the company promotes individuals to\u00a0management positions when they have displayed questionable ethics in the workplace, it creates two issues. First, it creates a level of managers who\u00a0are more likely to encourage their employees to achieve business results at any\u00a0cost, even when ethics are compromised. Second, it sends a message to all employees that business results are more important than ethics.","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Identify the unique ethical considerations and roles for company executives<\/li>\n<\/ul>\n<\/div>\n<h2>Introduction<\/h2>\n<p>Consider the following observation by the\u00a0ECI on the results of the\u00a0National Business Ethics survey:<\/p>\n<blockquote><p>Managers\u2013those expected to act as role models or enforce discipline\u2013are responsible for a large share of workplace misconduct (60 percent) and senior managers are more likely than lower-level managers to break rules. Surveyed employees said that members of management are responsible for six of every ten instances of misconduct and they pointed the finger at senior managers in 24 percent of observed rule breaking. Middle managers were identified as the culprit 19 percent of the time and first-line supervisors were identified as bad actors 17 percent of the time.<a class=\"footnote\" title=\"http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/nbes-2013\" id=\"return-footnote-3046-1\" href=\"#footnote-3046-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p><\/blockquote>\n<p>If you&#8217;re thinking about ways of boosting or ensuring ethical behavior in an organization, this is an interesting and alarming finding. In a supplemental report on Ethical Leadership, ECI reports that employees at all sizes of companies draw conclusions about their leaders\u2019 character primarily on the basis of the following:<\/p>\n<ul class=\"greenbullet\">\n<li>The overall character of their leaders as experienced through personal interactions;<\/li>\n<li>How senior managers handle crises; and<\/li>\n<li>The policies and procedures adopted by senior leaders to manage the company.<\/li>\n<\/ul>\n<p>Employees want to know, for example, whether leaders treat lower level employees with dignity and respect, share credit when good things happen, and uphold standards even when\u00a0it reduces revenues and profits. They watch to see whether leaders are steady in crisis, hold themselves accountable or, alternatively, shift blame to others. Workers also look at day-to-day management decisions to gauge whether ethical behavior is recognized and rewarded, or whether praise and promotions go to workers who bend the rules.<a class=\"footnote\" title=\"http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/ethical-leadership\" id=\"return-footnote-3046-2\" href=\"#footnote-3046-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a><\/p>\n<p>These findings suggest the important role that\u00a0executives play in building ethical organizations\u2014ethics and integrity tend to start (or fail) at the top and trickle down.<\/p>\n<h2>Executives Set Company Objectives<\/h2>\n<p>When executives establish\u00a0specific, measurable objectives for the company, those objectives determine where people will focus their time and effort. When the objectives cannot be met\u00a0and there\u00a0are dire personal consequences for failure, such\u00a0conditions can lead to the compromise of ethics and standards.\u00a0In the National Business Ethics Survey, 70 percent of employees identified pressure to meet unrealistic business objectives as most likely to cause them to compromise their ethical standards, and 75 percent identified either their senior or middle management as the primary source of pressure they feel to compromise the standards of their organizations.<\/p>\n<div id=\"attachment_3729\" style=\"width: 310px\" class=\"wp-caption alignleft\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1505\/2016\/01\/04105026\/1200px-Martin_Winterkorn_2013-09-09_001.jpg\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-3729\" class=\"wp-image-3729\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images-archive-read-only\/wp-content\/uploads\/sites\/1505\/2016\/01\/04105026\/1200px-Martin_Winterkorn_2013-09-09_001-1024x683.jpg\" alt=\"Photo of former VW CEO, Martin Winterkorn\" width=\"300\" height=\"200\" \/><\/a><\/p>\n<p id=\"caption-attachment-3729\" class=\"wp-caption-text\">Former Volkswagon CEO, Martin Winterkorn<\/p>\n<\/div>\n<p>In the Volkswagen case, internal investigations have questioned how both the company culture and the behavior of former CEO Martin Winterkorn contributed to a systemic ethical breach.\u00a0Like many chief executives, Martin Winterkorn was a demanding boss who didn&#8217;t like failure, but critics say the pressure on managers at Volkswagen was unusual, which may go some way toward explaining the carmaker&#8217;s crisis. When he became CEO in 2007, Winterkorn set an objective to make VW the world&#8217;s biggest carmaker, which would require tremendous growth in the highly competitive U.S. car market.\u00a0In the years since, VW has nearly\u00a0doubled it global annual sales to 10 million cars and its revenue to $225 billion. In early 2015, VW finally approached\u00a0its goal, selling marginally more vehicles than the world&#8217;s number-one automaker, Toyota of Japan.\u00a0One former sales executive said that the pressure soared under the target.&#8221;If you didn&#8217;t like it, you moved of your own accord or you were performance-managed out of the business,&#8221; he said.<a class=\"footnote\" title=\"http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010\" id=\"return-footnote-3046-3\" href=\"#footnote-3046-3\" aria-label=\"Footnote 3\"><sup class=\"footnote\">[3]<\/sup><\/a><\/p>\n<p>In describing a Winterkorn&#8217;s leadership style, a\u00a0former VW executive confidentially told Reuters New Agency, &#8220;There was always a distance, a fear and a respect . . . If he would come and visit or you had to go to him, your pulse would go up. If you presented bad news, those were the moments that it could become quite unpleasant and loud and quite demeaning.&#8221;<\/p>\n<p>A week after U.S. regulators revealed the company&#8217;s cheating, Bernd Osterloh, the employee representative\u00a0on VW&#8217;s supervisory board,\u00a0sent a letter to VW staff suggesting the change that was needed: &#8220;We need in the future a climate in which problems aren&#8217;t hidden but can be openly communicated to superiors,&#8221; said Osterloh. &#8220;We need a culture in which it&#8217;s possible and permissible to argue with your superior about the best way to go.&#8221;<a class=\"footnote\" title=\"http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010\" id=\"return-footnote-3046-4\" href=\"#footnote-3046-4\" aria-label=\"Footnote 4\"><sup class=\"footnote\">[4]<\/sup><\/a><\/p>\n<p>In <em>Fortune<\/em> magazine, Dr. Paul Argenti suggested, &#8220;Rather than playing the blame game, executives should ask if pressures to grow at all costs might have created dishonest employees.&#8221;<a class=\"footnote\" title=\"http:\/\/fortune.com\/2015\/10\/13\/biggest-culprit-in-volkswagen-emissions-scandal\/\" id=\"return-footnote-3046-5\" href=\"#footnote-3046-5\" aria-label=\"Footnote 5\"><sup class=\"footnote\">[5]<\/sup><\/a><\/p>\n<p>It seems likely that aggressive corporate objectives (and more specifically marketing objectives related to market share) played a contributing role in the Volkswagen ethics scandal. Moreover, when executives set aggressive goals, it becomes more important to cultivate communication channels to openly address issues. This was obviously not the case at Volkswagon.<\/p>\n<h2>Executives Create Company Policy<\/h2>\n<p>In the previous reading\u00a0we reviewed a number of company policies that address ethical conduct. Executives play an important role in creating those\u00a0policies\u2014and by visibly following and\u00a0upholding\u00a0them. As the survey data cited above suggest, employees look to executives to decide\u00a0whether standards-of-business-conduct policies should be observed and\u00a0respected. When executives bend the rules or turn a blind eye to bad behavior,\u00a0the policies lose value and executives lose the respect of employees. This opens the door to a range of unanticipated issues, as employees look to ethical norms outside stated policy and beyond the executives&#8217; control.<\/p>\n<h2>Executives Hire and Promote Company Managers<\/h2>\n<p>Internal promotions send very strong signals about what is important to a company. When the company hires an employee from a different company, she is likely not well known by most employees. If the company promotes an employee who is already working at the company, others know him and understand what he has done to deserve\u00a0the promotion. If the company promotes individuals to\u00a0management positions when they have displayed questionable ethics in the workplace, it creates two issues. First, it creates a level of managers who\u00a0are more likely to encourage their employees to achieve business results at any\u00a0cost, even when ethics are compromised. Second, it sends a message to all employees that business results are more important than ethics.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3046\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Executive Role in Ethics. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Martin Winterkorn. <strong>Authored by<\/strong>: Volkswagon AG. <strong>Provided by<\/strong>: Wikimedia. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/commons.wikimedia.org\/wiki\/File:Martin_Winterkorn_2013-09-09_001.jpg\">https:\/\/commons.wikimedia.org\/wiki\/File:Martin_Winterkorn_2013-09-09_001.jpg<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-3046-1\">http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/nbes-2013 <a href=\"#return-footnote-3046-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-3046-2\">http:\/\/www.ethics.org\/newsite\/research\/eci-research\/nbes\/nbes-reports\/ethical-leadership <a href=\"#return-footnote-3046-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><li id=\"footnote-3046-3\">http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010 <a href=\"#return-footnote-3046-3\" class=\"return-footnote\" aria-label=\"Return to footnote 3\">&crarr;<\/a><\/li><li id=\"footnote-3046-4\">http:\/\/www.reuters.com\/article\/us-volkswagen-emissions-culture-idUSKCN0S40MT20151010 <a href=\"#return-footnote-3046-4\" class=\"return-footnote\" aria-label=\"Return to footnote 4\">&crarr;<\/a><\/li><li id=\"footnote-3046-5\">http:\/\/fortune.com\/2015\/10\/13\/biggest-culprit-in-volkswagen-emissions-scandal\/ <a href=\"#return-footnote-3046-5\" class=\"return-footnote\" aria-label=\"Return to footnote 5\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":7,"menu_order":16,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Executive Role in Ethics\",\"author\":\"\",\"organization\":\"Lumen 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