# Organizational Integrity

### Question How can an organization or corporation (a group), rather than merely individuals in that organization, have integrity?

### Thesis Although it may seem that _corporate_ integrity is the same as personal integrity (e.g., faithfulness to one's principles), an organization is ethical, or has integrity, when it has a "a certain sort of moral climate" -- that is, when it is _a cooperative social union of people with a shared moral purpose and shared norms of fairness._

## Summary of Arguments ### A "moral climate" is... - (a) the "shared perceptions of prevailing organizational norms" pertaining to moral issues - (b) a good method for dealing with moral wrongs and failings - Such norms and methods are "built in" to the structure of the organization and actually lived out by people - Which norms exactly?

### Norms and Values A good moral climate has at least four norms: 1. Concern for stakeholders connected to the organization 2. Cooperation within the organization 3. Fairness to all involved 4. And a proper attitude toward incentives

### Norm 1: Stakeholder management - Of course you must be committed to your organization's purpose in the face of adversity - But you must also have a good purpose - And (according to Bowie) be a "value-creating institution"

### Objection 1: Friedman - Isn't it enough to achieve the organization's purpose, be that what it may? - Isn't the moral manager the one who gets the job done and serves stockholders? - Bowie is setting this possibility aside and assuming stakeholder theory

### What is a business? (704) - A business is not just an economic community (of means) but a moral community (of ends) - The organization's cooperative social union is not just practically necessary; it is an intrinsic good

### Seven Norms 1. Consider all affected stakeholders 2. Participation of ruled in ruling 3. No single stakeholder's interest always trumps others 4. It should not always be that the majority interest trumps 5. Always treat people as ends in themselves 6. It's an (imperfect) duty to make profits to benefit society 7. Create procedures to implement justice

### Norm 2: Substantive Fairness - Equitably distribute "surplus" (as in negotiation of house price) - Proportionality versus equality -- contribute more, receive more - If there is no way to measure or quantify, then distribute equally - Everyone contributes work so everyone should benefit from success

### Coca-Cola example - Is a Coke vending machine that raises the price on a hot day "unfair"? 

### Rawls on Fairness - Rawl's fairness procedure: a veil of ignorance - Social planners create a society with equally distributed goods, not knowing which segment of society they will make up

### Rawls on Fairness - Two principles: - Equal basic liberty, compatible with liberties of others, and - Equal opportunity for everyone to climb the economic and/or social ladder and attain more Primary Goods - Social and economic inequalities exist to help the least advantaged to achieve Primary Goods

### Norm 2: Procedural Fairness - The more input the governed have, the more they accept difficult decisions - Yet receiving input does not eliminate potential biases - Decision makers should strive to be impartial and unbiased

### Norm 2: Procedural Fairness in Pay - Do CEOs receive unfair proportion of surplus? - Perhaps CEOs have a "market rate", so their salary is determined by the market - However, even this market rate is biased in favor of CEOs, who help set rates - How to overcome this bias?

### Agency theory - Agency theory is the observation that agents, even leaders committed to the good of the group, tend to seek their own good - One answer: align incentives of individual with the incentives of the group - That is, give pay with stock options so that the CEO benefits only when the company benefits - This lead to a conflict of interest: cheating on accounting - Conclusion: people are selfish, yes, but also immoral. Selfishness and immorality are two different things.

### Norm 4: Incentives - Morality is about the ideal (what ought to be) - But humans are real (what is) - So business ethics needs constant input from psychology, sociology, economics, and common sense

### Human Nature - X theory -- mankind is selfish. Dislike work but do it if necessary. - Y theory -- mankind is human. Like work but prefer it to be self-directed. - The more Y people, the easier to have integrity - X people can be managed, converted to Y people, or fired

### Incentive Structures - Sears Auto Center performed unnecessary repairs - They had production quotas of 60% higher - Their hourly pay was dropped 17%, to be compensated by commission - The CA attorney general said the structure "made it totally inevitable that the consumer would be oversold" - Suggestion: make sure there is a moral climate in place _before_ creating incentive structures that test integrity

### Code of Ethics - These are necessary, but not sufficient - It must be part of a broader moral climate - Codes can change -- this can be a pro or con

### Individual vs Structural - Not all moral failings have individual responsibility - Some moral failings are due to structure or system - The problem in the Sears case for instance is not just human weakness (eg: Abraham Lincoln) - Sometimes no one is entirely culpable (eg. Medical deaths)

### Jose Martinez - Doctor called for 0.09 Digoxin - Wrote out 0.9 milligrams (10 times higher) - The pharmacist was concerned that was too high, set prescription aside, and paged resident - Resident was not in - A pharmacy tech got a copy of the order, filled 0.9 milligrams - Pharmacist checked it, saw that the prescription matched, forgetting his original concern - Nurse concerned it was too high, approached the resident - Resident knew it was 0.09, but didn't realize the vial was missing a zero - Administered drug, and the kid died

### Jose Martinez - Who's at fault? The system? Everyone? Someone?

## Reflections - What is "surplus?" If I'm willing to pay $520,000 for your house, and you're willing to sell for $500,000, why should strength of will determine? - Accepting "proportionality" is denying "equality" - There are ways to measure qualitative degrees without quantifying them (more/less love, more/less red, more/less beauty)

## Discussion of Obstacles (716) - Groupthink - Telopathy - Conflict of interest - Other questions?