Designing Ethical

Workplaces

Designing Ethical
Workplaces
The Moldable Model

Donald D. Dunn, PhD

Designing Ethical Workplaces: The Moldable Model

Copyright Business Expert Press, LLC, 2016
All rights reserved. No part of this publication may be reproduced,
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First published in 2016 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-236-4 (paperback)
ISBN-13: 978-1-63157-237-1 (e-book)
Business Expert Press Principles For Responsible Management Education
(PRME) Collection
Collection ISSN: 2331-0014 (print)
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Cover and interior design by S4Carlisle Publishing Services
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First edition: 2016
10987654321
Printed in the United States of America.

Dedication
To past, present, and future ethical leadersthose from whom I have
learned and those who I have taughtof which Janice, my wife, is the
ultimate role model of ethical leadership

Abstract
The unethical behavior of several prominent organizational leaders at the
start of this millennium and the subsequent fallout from the media, customers, and employees have brought business ethics to a more prominent
place within the vision of company executives. However, the day-to-day
tasks of leading an organization and the lack of any research-based knowledge of how to lead and manage company ethics often pre-empt the opportunity to give priority to ethics at the corporate level. Executive leaders
could benefit from a framework with which to evaluate current and to
create new corporate ethical management systems (CEMSs). This book
offers such a framework called the Moldable Model, a system of consistent components that give busy executives a framework and a guide to
build an organization-specific CEMS. This book teaches organizational
leaders how to design ethical workplaces utilizing the role modeling,
context, and accountability components. In a step-by-step process, the
author guides the reader through the research-based components with
definitions, ethical leadership theory, research findings, explanations,
and the practical application of those components through suggested organizational activities. Readers can expect to develop ethical tools such
as a code of ethics, an ethical decision-making ladder, a list of ethical
leader attributes, and a complete CEMS for implementation into their
specific organizations. Each chapter ends with application exercises, and
there are several case studies at the end of the book to aid the reader in the
use of these ethical tools. In just a few hours, a busy executive can have the
knowledge and tools to design an ethical workplace with the tremendous
results discussed in this book.

Keywords
accountability, business ethics, business morality, code of ethics, communication, company ethics, discipline, ethical audit, ethical hiring, ethical
leadership, ethical management, ethical workplaces, Moldable Model,
rewards, values

Contents
Preface...................................................................................................xi
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6

A System for Managing Company Ethics...........................1

Context: Why be Ethical?................................................15
Role Modeling.................................................................29
Role Modeling the Company Code of Ethics...................47
Accountability Through Making Ethical Decisions...........57
Accountability Through Communicating
CompanyEthics..............................................................79
Chapter 7 Implementation of the Moldable Model in your
Organization..................................................................105
Case Studies........................................................................................119
Works Cited........................................................................................125
Index131

Preface
Every author has a story that leads to the publication of his thoughts,
passion, and research. That story shapes and forms the text that is found
in this book. It is my hope that my story adds to the chapters that follow.
As a graduating senior from college 38 years ago, I sensed a burden
and passion to teach at the university level. That would not be earth shaking or life changing except that my collegiate training was in the area of
local church ministry. In confusion, I sought the advice of my academic
and spiritual advisor, Dr. Larry Fine. Dr. Fine simplified this new burden
for me with comforting words that helped me understand that I could be
involved in local church ministry for 10 to 15 years and then come back
to the university to teach. The combination of experience with academia
would be a valuable asset to my teaching. With that solid advice, I graduated from college, married Janice Moore, now my wife of 38 years, and
began pastoring a church in the Kansas City area. I also began the Master
of Divinity degree from my denominational seminary. Due to my immaturity, pastoring full time, and the 150-mile daily round trip to seminary,
I decided that the Master of Divinity degree was not for me; I quit the
master level of education.
During the next 33 years, I was involved in local church ministry,
leading three churches, remaining at the third congregation for 21 years.
In each of these assignments, I utilized the burden and passion to teach
by training leaders, often creating my own leadership curriculum. The
burden to teach at the university level seemed to be fulfilled with the
training I was doing in the local churches I served. However, during the
last 7 years of local church ministry, my academic side revived along with
the specific burden and passion to teach at the university level.
I knew that to teach at the university level, I needed graduate degrees.
So, at the age of 52 I went back to school to attain a Master of Liberal
Studies degree in Organizational Leadership. Over the next 2 years, I
completed my course work at Fort Hays State University (FHSU), all

xii PREFACE

comprehensive exams, and an organizational internship. Just prior to my

graduation, my faculty advisor and department chair of the Leadership
Studies Department, Dr. Brent Goertzen, asked me to teach for the university and his department. Dr. Goertzen felt that the course in ethical
leadership would be a good fit for me. My immediate but private reaction
was that I was being stereotyped for ethics since my background was in
the spiritual leadership of people. Dr. Goertzen then led me to do research in ethical leadership for a project in my last semester. That research
into ethical leadership changed my life, doctoral, and teaching journeys
forever. I was hooked, as ethical leadership became my passion.
After graduation from FHSU, I began teaching for the university that
fall in a masters-level course in ethical leadership. In the following spring,
I began the doctoral journey at Capella University to pursue a PhD in
Organization and Management with a specialization in Leadership. During the doctoral coursework, I focused my research in the area of ethical
leadership, eventually narrowing the research to a gap in the literature: a
consistent component model to manage ethics at the corporate or organizational level. In the dissertation phase of the PhD, Dr. Janet Salmons
was my research mentor. Dr. Salmons expertise allowed me to effectively
move through the stages of the dissertation in 14 months, completing
the degree in 3 years. A PhD parishioner, Dr. Glen White, had challenged me that I would be somewhere at the age of 59; it might as well be
with a PhD. I defended my dissertation successfully at the age of 58 and
achieved a terminal degree in business ahead of schedule!
This book is based on the research for my dissertation. The research
design was a qualitative, multiple case study approach with three sources
of data in three organizations. The goal of the research was to discover a
consistent component model that organizations could use to either evaluate current or to create new systems to manage their company ethics. As
you will read in this book, the research did discover that model, which I
call the Moldable Model (MM). I trust that the MM will help you, the
reader, develop the ethical climate of your workplace.
I am deeply in debt and grateful to the people already mentioned
in this Preface. I thank Dr. Larry Fine for his wisdom in 1977 and for
his support all these years. Larry and I are now teaching colleagues in
the same department at one of our denominational universities. Dr.

 PREFACE
xiii

Fines advice came true 35 years later! I appreciate and thank Dr. Brent
Goertzen for his guidance through the MLS, for his vision for helping
me catch the passion for ethical leadership, and for allowing me to teach
at another of my alma maters. My indebtedness and gratitude continue
to extend to Dr. Janet Salmons for her guidance in the leadership theory
course at Capella, for her wisdom in navigating the foreboding waters of
the dissertation phase, and for her contact with Business Expert Press that
landed me this contract. The words of Dr. Glen White were inspirational
and gave me the perseverance goal I needed to complete the PhD. Thank
you, Dr. Glen! I am grateful also for the time you took to complete a peer
review of Chapter 3 of this book.
I am very grateful to Dr. Mike Gough for the time and energy expended to peer review this book. Mike is a friend, mentor, and colleague
in my transition to higher education. Thank you, Dr. Mike, for your
support and review.
I met Craig Eberly during an important part of this journey. Craig has
been an inspiration, friend, and an exemplary guide for my understanding of ethical leadership. I am grateful that our paths crossed and that he
gave time to also peer-review this book. Thank you, Craig!
My family has been a constant encouragement to me during my education in the later years of life. My wife, Janice, never once complained
about being a master or doctoral widow or the money expended for this
journey. She was my cheerleader and best advocate. Janice always had
pride in her eyes, voice, and mannerisms when she explained to others
what I was doing in my career shift in my 50s. She was my dissertation
and book editor, using her detail skills to correct items I missed. She gave
surprise parties to celebrate the MLS and PhD accomplishments. I love
you, Janice, and thank you for your partnership in life for 38 years. My
sons, David and Jared, always supported my education and the writing
of this book. David constantly prods me to offer my new skills to various
avenues, including the coauthoring of a book on customer service skills.
Jared asked me when I started the doctoral journey: Dad, what do you
want to be when you grow up? Thank you, Jared, for that challenging
question; I am now living the dream of what I want to be when I grow
up. I am grateful for Jareds wife, Stephanie, and her belief in reaching for
goals that seem unattainable to most. I always sensed she believed in my

xiv PREFACE

journey. I also had the companionship of my three grand dogs over the
doctoral and authorship journeysLewey who lives with us and sleeps
near my home office while I study and write; Lizzy and Chief (I call him
Larry for obvious reasons) who visit quite regularly.
I want to thank the faculty and staff of the five universities where I
teach 25 different courses throughout the academic year. You have given
me work and you have also provided encouragement for this journey.
The 500 to 600 students I contact annually also have been a boon to my
teaching and writing. I am constantly challenged by their questions and
ideas.
I could not have had the strength or stamina to do what has been
accomplished over the past 38 years without the clear calling, guidance,
love, and provisions of my God. God has given me joy on a difficult but
rewarding journey.
Finally, I want to thank you for purchasing and reading this book.
Ultimately you are the judge of the value of its contents. I would enjoy
hearing your thoughts and how you have applied this book to your work
and life. I would also covet any suggestions for future editions of the MM.
Don Dunn, PhD
[email protected]

CHAPTER 1

A System for Managing

Company Ethics
We are people of plans, processes, and systems. We organize our lives
around specific systems to accomplish specific tasks. Talk to a dozen
people and there will be a dozen different methods to manage personal
finances, household chores, vehicle maintenance, work, leisure and family
time, grocery shopping, and calendar activities. There are different strokes
for different folks when it comes to processes and systems for the creation
and implementation of new programs in the workplace, at school and
church, and at home.
In the workplace, leaders, managers, and employees have systems
in place for nearly every function necessary to be productive, efficient,
profitable, and to survive in a competitive and ever-changing global
marketplace in order to deliver on customer needs (Burli, Kotturshettar, and Dalmia 2012; Dehghan, Shahin, and Zenouzi 2012; Ionut,
Marcel, and Monica 2011; Kaushik and Khanduja 2009).1 Companies use standardized efficiency tools such as Six Sigma, Total Quality
Management, and Continuous Quality Improvement to continually
improve those systems.
One glaring lack in organizational tools, plans, processes, and systems
is the ability to intentionally and effectively manage company ethics. The
ethical management of an organization results in the same outcomes that
companies desire from quality improvement processes: productivity, profitability, and competitive advantage (Dunn 2013; Trevio, Hartman, and
Brown 2000).2 In addition, companies attain higher levels of employee
satisfaction, commitment, comfort, and fun when managed ethically,
which in turn fuels improved levels of business performance. Why then

DESIGNING ETHICAL WORKPLACES

do companies lack in ethical management systems when the outcomes

are so desirable?
The lack of a system to manage ethics at the corporate level could
be because organizational decision makers believe that such a system is
too costly or time prohibitive compared to other company priorities.
Executive-level employees may not have the knowledge or the expertise to
craft such a system to keep the ethical environment as a focus in the organization. Most companies cannot afford the luxury of a full-time staff position for an ethics officer. It is possible that some may believe that proper
ethical behavior among employees should be intuitive, natural, and that
intentionality in this area is not needed. Some may just assume that every
employee knows proper ethical behavior and the difference between right
and wrong in business. It is probable that many organizations sense that
law-abiding behaviors are the equivalent of ethical behavior. Organizational leaders are trained in bachelor, master, and doctoral programs in
many important and critical leadership and management processes; however, the understanding of ethics and how to manage and lead company
ethics is usually a tangential thought represented by ethics courses that
are electives and not required or ethics courses that are fewer credit hours
than other business offerings. Many top-level executives have insisted that
their behavior was within the boundaries of the law, while lower-level
employees lost jobs and pensions from the actions of those executives.
Certainly many companies have a code of ethics (COE) or a code of conduct that seems sufficient to guide company values; however, beyond a
copy of the code in the policy handbook and a few posters on the walls,
many companies lack a system to maintain employee accountability for
and compliance to the code.
This book offers a system to effectively manage company ethics, called
The Moldable Model (MM). The MM consists of a research-based framework or model of consistent and necessary components to manage the
ethical climate of any organization. Organizational decision makers will
find that the MM is firm in its three-pronged framework, yet flexible in
its application to any company, industry, or for- and not-for-profit sectors. The ethical system recommended in the pages that follow guides
busy executives in the evaluation of current or the creation of new corporate ethical management systems (CEMSs). By using the MM, any

A System for Managing Company Ethics

organization can enhance executive and employee ethical behavior, employee work satisfaction, and company productivity with a distinct competitive advantage.

The Need for a CEMS

The surge into the 21st Century and the new millennium brought a sense
of optimism after we knew that the world did not collapse from a computer glitch. Executives and employees returned to work on January 2,
2000 after survival of Y2K. From corporate board rooms to office cubicles, organizational employees used the leadership and management
processes of direction setting, planning and budgeting, staffing and organizing, aligning staff to the new company direction through motivation,
problem solving for control, and inspiring appeals to guide the needed
change in direction (Kotter 1990).3 The hope and goal was for better productivity, financial performance, and competitive advantage in a global
marketplace.
Unfortunately, the push for these worthy goals blinded some leaders
to the ethical dimension of business. Because of success in the business
world, many top leaders fell prey to a hubris, sense of impunity, loss of
organizational and strategic focus, and to the push for personal gain over
organizational good (Ludwig and Longenecker 1993).4 Several top leaders in major, global companies succumbed to the allure of success that
is often the antecedent of unethical and destructive behavior. Unethical
and destructive behavior from top leaders alone could not bring down a
company without the aid of willing followers and organizational environments conducive to toxic leadership (Padilla, Hogan, and Kaiser 2007).5
A destructive leader with magnetism or charisma and a narcissistic personality could sway employees who chose to conform or collude with
the leaders personal goals (Padilla etal. 2007, 183).6 Without an organizational environment of checks and balances, leaders and employees could
find a way to emphasize personal gain over organizational good. When
these personal and organizational forces and limitations collide, the company environment is ripe for unethical behavior.
Through the actions of unethical organizational employees and the
ensuing glare of social media at the start of this millennium, leadership

DESIGNING ETHICAL WORKPLACES

researchers became quite interested in the study of ethics in organizations,

including unethical or dark leadership. Society in general has replaced its
enchantment with organizational leaders with anger, frustration, and a
real sense of betrayal due to the unethical behavior of many executives
(Morris, Brotheridge, and Urbanski 2005).7 The media glare placed on
the unethical behavior of top leaders has had a positive effectthe public
today longs for leaders who act ethically (Ciulla 2003).8 Years ago, Frankl
(1959, 1984) believed that the Statue of Liberty on the East coast, which
represented freedom, should be offset with a statue of responsibility on
the West coast to remind us that all freedom is encompassed with huge
responsibility.9 Organizational leaders of the last several years needed
Frankls wisdom.
The study of leadership, including ethical leadership, has been in progress for over 100 years (Baumhart 1961; Donham 1929).10 As with any
research, the study of ethical leadership has moved from basic quantitative
analysis to a more sophisticated correlational analysis of action and outcome variables. Variables under study often included ethical processes such
as codes, rewards and discipline, training, communication, and executive
role modeling and the variables effect on organizational behaviors such as
employee satisfaction, productivity, and job commitment (Collins 2010;
Howell and Avolio 1992; Klein, Laczniak, and Murphy 2006; Trevino,
Butterfield, and McCabe 1998; Valentine and Fleischman 2008; Vitell and
Davis 1990).11 Qualitative research in ethical leadership has also surged in
the last 15 years. Researchers desire to understand the lived experiences
of organizational members in the areas of ethical and unethical leadership, resulting in the rise of increased qualitative studies to understand
the perceptions of employees. This recent and focused interest in ethical
leadership grew exponentially due in large part to the unethical activity
of several major companies during the early years of the 21st Century.
Enron, WorldCom, and Tyco remain household names in the study of
ethical or unethical leadership. Companies came under intense social and
ethical scrutiny at the turn of this century, and that intense scrutiny continues today.
The management of company ethics, however, must be motivated by
more than intense scrutiny and simply an attempt to avoid the dark leadership of past executives and that leaderships devastation to employees

A System for Managing Company Ethics

and organizations. A CEMS should do more than just help companies

comply with the SarbanesOxley Act and to just keep organizations from
legal issues, though good reasons. Research now demonstrates that some
type of ethical management system has critical, positive results as well.
Companies that manage internal ethics see better productivity, better
business results such as financial performance and competitive advantage,
and improved employee performance as employees are more satisfied
with and comfortable at work while having more comfort and fun (Dunn
2013; Trevio etal. 2000).12 Customers who receive ethical treatment are
return customers (Dunn 2013).13 Teleological reasoning allows companies to focus on outcomes and results as motivation to be ethical.14 From
a deontological ethics perspective, ethical behavior at the organizational
level is the right thing to do.15 Zenger and Folkman (2012) found that
integrity and honesty are 2 of the top 3 of 16 competencies needed by
executives.16
Therefore, the leadership and management of company ethics must
now take priority in direction setting and visioning of organizational goals.
Company ethics must be an intentional thrust of top leaders (Trevio
etal. 2000).17 No longer can ethics be a tangential thought or a sidelined
activity until money and time permit. Employees, customers, and communities where organizations operate should not only expect but demand
ethical corporate behavior. A CEMS is the answer for that demand.

A Research-Designed CEMS: The MM

According to research, a system to manage company ethics provided improved ethical climate, employee ethical behaviors, and company performance (Donker, Poff, and Zahir 2008).18 Trevio, Hartman, and
Brown (2000) found that ethical leadership in an organization resulted
in employee satisfaction, commitment, comfort, and fun, which in turn
brought improved productivity and financial performance.19
The research on ethical leadership has offered many helpful tools
to the management of ethics at the corporate level. To manage ethics
at the corporate level, several system components have been suggested
in the research literature: codes of ethics, value statements, communication of company ethics, ethical training, ethical audits, and rewards and

DESIGNING ETHICAL WORKPLACES

discipline for compliance or noncompliance to company ethics (Cohen

1993).20 However, the extant literature lacked a consensus for a consistent component model or framework by which any organization could
encourage, monitor, and correct the ethical behavior of its employees
(Dunn 2013).21 The literature demonstrated no consistent components
for a CEMS across years of research. A consistent component model
would be of great value to any organization that wished to create a new
CEMS or evaluate a current CEMS. This type of tool would allow organizations to have a research-based and empirically based approach to
leading and managing company ethics. A consistent component model
or framework for a CEMS would also allow a foundational approach to
the management of ethics, yet a flexibility to adapt each component for
organizational fit. Indeed, there was a need for such a model.
In a qualitative, multiple case study approach, I researched three organizations in an attempt to find the effective CEMS with consistent
components (Dunn 2013).22 The three-organization sample included a
large, for-profit global organization, a large not-for-profit global organization, and a small, for-profit local organization to assure some diversity
in industry, size, and sector. Data were collected from interviews with
executives and employees, organizational documents, and visual tours of
each organization to determine how ethics was promoted. Data analysis
included single- and multiple-case comparisons of all data sources, including comparisons to the components and organizational benefits of
a CEMS already found in the extant literature. Rich data streamed from
this research including strong support for components and organizational
benefits in the extant literature, new emerging theories of ethical leadership, and most importantly the discovery and design of a consistent component model CEMS.
I designed a consistent, component model CEMS, called the MM,
from the research conducted in the three organizations (Dunn 2013).23
The research demonstrated that the most consistent components across
the sample organizations were communication, value statements, and discipline for unethical behavior. The benefits of a CEMS included employee
satisfaction and commitment, employee comfort and fun, and productivity. My research determined that an organizational CEMS was good
for business, it improved financial performance, and a CEMS brought

A System for Managing Company Ethics

distinct competitive advantage to the company. From an interview with

a top-level executive, the framework for a consistent component model
emerged, to which I synthesized the research to develop the MM.
The MM consists of a framework of three parts, which are the consistent components: (1) Role modeling of the company COE and value statements by both top-tier and peer-to-peer employees; (2) Context or giving
employees the reasons for ethical behavior in the organization, which include the research-based reasons stated above; and (3) Accountability for
company ethics, including hiring, training, communication, rewards and
discipline, and ethical audits. Every organization that desires to create a
new or to evaluate a current CEMS should look at the three components
of the MM to determine organizational needs, additions, and/or corrections in its ethical environment. The MM offers research-based foundational tools that can be adapted to fit the specific values and processes
of any organization, regardless of size, industry, or sector. The following
chapters discuss the MM in detail.

Definition of Terms
The journey into designing ethical workplaces first needs clarity of the
terms that are used on the road map for an effective CEMS. The following
discussion and definition of terms provide the reader an understanding of
the meaning and the use of specific concepts in this book. While this section offers a variety of accepted definitions for certain business and ethical
terms, stipulated definitions become the foundation to guide the journey.
The reader may use this section as a glossary or as a map legend to more
fully comprehend how to design an ethical workplace.
Business Morals and Business Ethics
Morals and ethics are terms that are often used interchangeably in the
study, teaching, and writing of ethical topics. The interchange of these
terms can cause confusion or cause a loss of understanding of the uniqueness of each. It is important to understand the distinct difference between
these two terms in order to effectively use these words in any arena, especially the business arena context of this book.

DESIGNING ETHICAL WORKPLACES

Morals are simply standards of right and wrong (Velasquez 2006).24

The question becomes whose standards of right and wrong? The answer
to that question can vary depending on the context. For some, standards
of behavior originate in a belief or faith system from a supreme being.25
For others, standards originate from parents or the culture into which one
is born and/or lives. For all, standards of right and wrong are certainly
dictated by governmental laws and by organization-specific requirements
for membership into clubs and businesses in which people live, serve and
work. Morals can be an integration of all of these origination sources. The
stipulated definition of morals is standards of right and wrong, and for this
books context, morals are standards of right and wrong as set by the business
in which a person works. Often business morals are stated through a company
COE and a policy handbook, which we might consider as the foundation
of workplace morality. Some might debate that business morals and personal morals should not be all that different to necessitate this stipulated
definition. Certainly, one could assume that there are universal standards
of right and wrong that should be intuitive for employees. But, to assume
that can cause confusion when employees each operate at their personal
level of beliefs of right and wrong. It should be remembered that todays
workforce is diverse on many levels, including beliefs about standards of
right and wrong. Therefore, it is critical that each company carefully state
its specific standards of right and wrong or business morals in order for
employees to know what is the expected behavior at work. A discussion
follows later in this book as to how to use a COE as business morals or the
right and wrong behavior expected of employees by an organization.
Ethics is (note the singular verb) a related, yet different term from
morals. Velasquez (2006) believed that ethics is the discipline that examines ones moral standards or the moral standards of a society (p. 10), and
that ethics is the evaluation of standards of right and wrong as to their reasonableness and application.26 Trevio and Nelson (2007) suggested that
ethics is the principles, norms, and standards of conduct governing an
Morals ~ standards of right and wrong
Business Morals ~ standards of right and wrong (workplace morality)
as set by the business in which a person works

A System for Managing Company Ethics

individual or group (p. 13).27 Ghillyer (2014) understood ethics as the

manner in which we try to live our lives according to a standard of right
or wrong behaviorin reciprocal thinking and behaving between persons (p. 4).28 The stipulated definition of ethics is the appropriate application of standards of right and wrong to daily living. Trevio and Nelson
defined business ethics as behavior that is consistent with the principles,
norms, and standards of business practice that have been agreed upon by
society (p. 16).29 Ghillyer simply stated that business ethics is the application of ethical standards to business behavior (p. 24).30 In the context
of business, the stipulated definition of business ethics is the appropriate
application of standards of conduct (workplace morality), influenced by law
and personal and societal norms, agreed upon and practiced in the workplace.
The debate considered with morals could once again engage the differences between ethics and business ethics with the same result and understanding as with morals and business morals. The stipulated definition
of business ethics requires that workplaces integrate and apply sources of
morals (law, personal, societal) through a collaborative effort among all
employees of that organization.
In this book, company morals and ethics are synonymous with business
morals and ethics. Most often, I refer to company as the descriptor versus
business.
Ethical Leadership and Ethical Management
In the use of the terms, leadership and management, it is important here
to note that these are processes, not positions or specific persons in an
organization. Quite often, organizational members use leadership and
management to denote hierarchical positions or particular roles or persons within that hierarchy. While we may call one person our leader and
Ethics ~ the appropriate application of standards of right and wrong
to daily living
Business Ethics ~ the appropriate application of workplace morality,
influenced by law and personal and societal norms, agreed upon and
practiced in the workplace

10

DESIGNING ETHICAL WORKPLACES

another person our manager, the denotation of name and role does not
necessarily mean the person in that role understands leadership and management processes or how they differ.
Kotter (1990) and Rost (1993) helped separate the processes of leadership and management for a better understanding of what is needed in
an organization.31 Leadership is an influence relationship that involves setting direction and aligning people to that direction through motivation
and inspiration so that needed change can occur for the collective good.
Management is an authority relationship that involves planning, budgeting, staffing, and organizing to meet company objectives through control
and problem solving to maintain the status quo when the company course
is good. Leadership is a group-centric and collaborative process in which
influence is multidirectional. Management is a manager-centric process
in which authority is top-down. Both leadership and management processes are needed in an organization; persons who are called leaders and
managers may not be adept at both processes. It is important for those
in supervisory positions or top-tier leadership to understand these differences and to understand personal strengths and limitations in the ability
to enact these processes. When limitations exist, the individual training
and the hiring of complementary personnel to mitigate those limitations
are important considerations.
Understanding that leadership is an influence relationship that involves
alignment and change, it is possible to entertain a stipulated definition of
ethical leadership as the consistent role modeling of the appropriate application of company standards of right and wrong (workplace morality) in the
daily influence of the organization. Brown, Trevio, and Harrison (2005)
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. 120).32 As management
is an authority relationship that seeks to maintain status quo, it is possible to entertain a stipulated definition of ethical management as holding
employees accountable for appropriate workplace morality through a system of
consistent components that represent the organizations values.
Ethical leadership is about the influence, motivation, and influence of
employees toward appropriate behavior through the visible demonstration

A System for Managing Company Ethics

11

Ethical Leadership ~ the consistent role modeling of the appropriate application of workplace morality in the daily influence of the
organization
Ethical Management ~ holding employees accountable for appropriate workplace morality through a system of consistent components
that represent the organizations values
of company values, which we can consider as workplace morality. Ethical
management, on the other hand, is about holding employees accountable
for the status quo of those company values (workplace morality) through
various authority-based components called a CEMS.
Organizational leaders and managers often succumb to the day-to-day
operation of the company by focusing on management processes. Planning, budgeting, staffing, organizing, and problem solving engage toptier employees in maintaining organizational status quo for the bulk of
their time and day. The immediate usually supplants the expedient. Little
time remains to dedicate to the leadership processes of direction setting
and the alignment of personnel through motivation and inspiration to
organizational vision and goals. The same can happen in the ethical leadership and management of a company. The attempt to hold employees
accountable for company values through hiring, training, communication, ethical audits, rewards, and most often discipline can utilize most
of a busy executives day. Though ethical management is a critical piece
of an ethical environment, ethical leadership or influence through role
modeling should never be a shelved concept. Without ethical leadership
or the example set by top-tier leaders, any effort to hold employees accountable could be perceived by employees as hypocritical actions on
the part of top leaders. As leadership and management are both needed
organizational processes, the same is true of ethical leadership and ethical
management.
The focus of this book now turns to the framework of a CEMS, called
the MM: role modeling, context, and accountability. Putting the MM
into organizational practice brings a balance to ethical leadership and
ethical management. First, it is important to understand the context for a
CEMS or the reasons why an organization should be ethical.

12

DESIGNING ETHICAL WORKPLACES

Chapter 1: Workplace Application Exercises

1. On a scale of 1 to 10 (1=irrelevant; 10=extreme focus), where does
your company rate in its prioritization of ethics? What ethical activities are in place or are lacking that leads you to that rating?
2. If your ethical rating was 6 or below, what do you see is lacking in the
ethical areas described by the MM?
3. If your ethical rating was 7 or above, what specific ethical activities are
you doing well as described by the MM? What could your organization do better?
4. In 25 words or less describe the difference between ethical leadership
and ethical management.

Notes
1. Burli, Multiple Performance Measures, 69.
Dehghan, Service Quality Gaps & Six Sigma, 1.
Ionut, The Six Sigma System, 236.
Kaushik, Application of Six Sigma DMAIC Methodology, 197.
2. Dunn, The Moldable Model, 1.
Trevio, Moral Person and Moral Manager, 128.
3. Kotter, A Force for Change, 35.
4. Ludwig, The Bathsheba Syndrome, 265.
5. Padilla, The Toxic Triangle, 176.
6. Ibid, 183.
7. Morris, Bringing Humility to Leadership, 1323.
8. Ciulla, The Ethics of Leadership, 1.
9. Frankl, Mans Search for Meaning, 1.
10. Baumhart, How Ethical are Businessmen, 6.
Donham, Business Ethics, 385.
11. Collins, Designing Ethical Organizations, 95.
Howell, The Ethics of Charismatic Leadership, 43.
Klein, Ethical Marketing, 228.
Trevio, The Ethical Context in Organizations, 447.
Valentine, Ethics Programs, 159.
Vitell, The Relationship Between Ethics and Job Satisfaction, 489.

A System for Managing Company Ethics

13

12. Dunn, The Moldable Model, 1.

Trevio, Moral Person and Moral Manager, 128.
13. Dunn, The Moldable Model, 1.
14. Teleological reasoning has to do with consideration of outcomes or
goals.
15. Deontological has to do with duty and principled reasoning.
16. Zenger, Are Women Better Leaders Than Men?
17. Trevio, Moral Person and Moral Manager, 128.
18. Donker, Corporate Values, 527.
19. Trevio, Moral Person and Moral Manager, 128.
20. Cohen, Creating and Maintaining, 343.
21. Dunn, The Moldable Model, 1.
22. Ibid.
23. Ibid.
24. Velasquez, Business Ethics, 1.
25. The belief that a supreme being gives standards of behavior in the
form of verbal or written commands is called Divine Command
ethical theory.
26. Velasquez, Business Ethics, 10.
27. Trevio, Managing Business Ethics, 13.
28. Ghillyer, Business Ethics Now, 4.
29. Trevio, Managing Business Ethics, 16.
30. Ghillyer, Business Ethics Now, 24.
31. Kotter, A Force for Change, 6.
Rost, Leadership for the Twenty-First Century, 102, 145.
32. Brown, Ethical Leadership: A Social Learning Perspective, 120.

Index
Accountability
communicating company ethics
and,79102
discipline, 9598
ethical auditing, 98101
rewards, 9395
training processes, 8390
visual marketing, 9092
ethical decisions, through, 5776
decision making ladder, creating.
See under ethical decisions
using COE, 5860
framework of, 108110
Acronyms, 5154. See also
Mnemonic device
Business ethics, 9, 49
Business morality, 79
Capitalist or contributive justice
theory, 71
CEMS. See Corporate ethical
management systems
(CEMS)
Code of conduct. See Code of ethics
(COE)
Code of ethics (COE)
role modeling and, 4754
values and behaviors, 4854
company behaviors, 5051
company values, 4950
mnemonic device, 5154
COE. See Code of ethics (COE)
Communication, in CEMS, 79102
Company COE. See Code of ethics
(COE)
Company ethics, management system,
114
Context
framework of, 108110
organizational, ethics and, 1526

Continuous Quality Improvement, 1

Corporate ethical management system
(CEMS)
critical foundations, 17
failure of, 59
Frodo, 1617
and MM, 57, 108110
need for, 35
Plato and, 1617
quality improvement
processes, 1
research and, 57
results of, 1
and role modeling, 4748
terms used in, 711
Corporate social responsibility (CSR),
19, 2122
Cultural relativism, 68
Customer service, 2021
Decision-making ladder (DML),
58, 6165, 6772, 7475,
79, 109, 120, 123. See also
Ethical decisions
Deontological ethics, 1718
Destructive behavior, 3
Discipline, 9598
Distributive justice theory, 71
Divine command (DC) ethical
theory, 6465
DML. See Decision-making ladder
(DML)
Dunns DML. See Decision-making
ladder (DML)
Egalitarianism, 71
EL. See Ethical leadership (EL)
Engrained ethical theory,
115116
Ethical auditing, 98101
Ethical behavior, 2, 15, 19

132 INDEX

Ethical decisions, accountability and

decision making ladder, creating,
6076
cultural relativism, 68
DC theory, 6465
Dunns, 6264
ethical egoism theory, 6566
justice theory, 7071
Kantian ethics, 6667
narrative ethics, 7273
natural law theory,65
situational ethics, 6869
social media, 7375
utilitarianism, 6768
virtue ethics, 6970
using COE, 5860
Ethical egoism theory, 6566
Ethical hiring, 8081
Ethical leadership (EL)
definition, 1011, 31
research on, 56
and role modeling, 3031, 43
Ethical management, 1011
Ethical theory, 7576
Ethics
business, 9, 49
of care, 20
communication and, 79102
definition of, 9
importance of, 1526
teleological, 2223
Ethic-specific tool. See Decisionmaking ladder (DML)
Executives Ethical Guide (EEG), 61
Explicit CSR, 2122

Law-abiding behavior, 2
Leadership. See Ethical leadership

Frodo, 1617

peer-to-peer role modeling, 25,

3940
mentor systems, 4243
Plato, 1617
Procedural justice, 72

Hiring. See Ethical hiring

implicit CSR, 21
Informational or interactional justice
theory, 72
Instrumental stakeholder view, 19
justice theory, 7071
Kantian ethics, 6667
Kohlbergs model, 110112

Management ethics, lack of, 2

MM. See Moldable Model (MM)
Mnemonic device, 5154
Moldable Model(MM), 2
and CEMS, 108115
creation of, 109110, 112115
evaluation of, 108109
engrained ethical theory, 115116
ethics, role in, 15
framework of, 108110
implementation of, 105116
and Kohlbergs model, 110112
Moore-Dunn ethical theory,
22, 63
Morals. See Business morality
narrative ethics, 7273
Natural law (NL) theory, 65
ongoing ethics training, 8890
Organizational context, ethics and,
1526
Organizational duty
to community, 2122
to employee and customer care,
2021
to financial performance, 1820
Organizational outcomes, 2226
employee outcomes, 2426
financial performance, 2224
Organizational tools, 1
Orientation ethics training, 8588

Rewards, 9395
Role modeling, 2943
and code of ethics, 4754
framework of, 108110
peer-to-peer. See Peer-to-peer role
modeling
theoretical basis, 3033

 INDEX
133

social exchange theory, 3233

social learning theory, 3132
TT. See Top-tier (TT) role
modeling
shareholder theory (ShaT), 1819
Situational ethics, 6869
Six Sigma, 1
Social exchange theory (SXT),
3233
Social learning theory (SLT), 3132
Social media, 7375
Stakeholder theory (StaT), 19
StaT. See Stakeholder theory (StaT)
SWOTT, 61
SXT. See Social exchange theory
(SXT)
teleological ethics, 2223
Top-tier (TT) role modeling

company COE, 3435

leader attributes, ethical, 3539
mentor systems, 41
personal morality, 34
Total Quality Management, 1
Training processes, 8390
ongoing ethics training, 8890
orientation ethics training, 8588
utilitarianism, 6768
Unethical behaviour,
34, 6, 59
values and behaviors, COE
company behaviors, 5051
company values, 4950
mnemonic device, 5154
Virtue ethics, 6970
concepts in DML, 70
Visual marketing, 9092

This book is a publication in support of the United Nations Principles for Responsible Management
Education (PRME), housed in the UN Global Compact Office. The mission of the PRME initiative is
to inspire and champion responsible management education, research, and thought leadership
globally. Please visit www.unprme.org for more information.
The Principles for Responsible Management Education Book Collection is edited through
the Center for Responsible Management Education (CRME), a global facilitator for responsible
management education and for the individuals and organizations educating responsible
managers. Please visit www.responsiblemanagement.net for more information.
Oliver Laasch, University of Manchester, Collection Editor

Other Titles Available in This Collection

Corporate Social Responsibility: A Strategic Perspective by David Chandler
Responsible Management Accounting and Controlling: A Practical Handbook for
Sustainability, Responsibility, and Ethics by DanielA.Ette
Teaching Ethics Across the Management Curriculum: A Handbook forInternational
Faculty by Kemi Ogunyemi
Responsible Governance: International Perspectives for the New Era by Tom Cockburn,
Khosro S. Jahdi, and Edgar Wilson
Environmental Policy for Business: A Managers Guide to Smart Regulation
by Martin Perry
The Human Side of Virtual Work: Managing Trust, Isolation, and Presence
by Laurence M. Rose
Sales Ethics: How To Sell Effectively While Doing the Right Thing by Alberto Aleo
and Alice Alessandri
Personal and Organizational Transformation Towards Sustainability: Walking a
Twin-Path by Dorothea Ernst

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