DQ AND ASSIGNMENT - Management
My topic is weighing business decision making and moral practices.
· You will also need at least ten (10) peer-reviewed sources.
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Business Ethics
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Business Ethics
Decision Making for Personal Integrity and Social
Responsibility
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BUSINESS ETHICS: DECISION MAKING FOR PERSONAL INTEGRITY AND
SOCIAL RESPONSIBILITY, FIFTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright ©
2021 by McGraw-Hill Education. All rights reserved. Printed in the United States of
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limited to, in any network or other electronic storage or transmission, or broadcast for
distance learning.
Some ancillaries, including electronic and print components, may not be available to
customers outside the United States.
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MHID 1-260-51293-2 (loose-leaf edition)
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page v
To Rachel and Emma.
—Laura Hartman
To Michael and Matthew.
—Joseph DesJardins
To Georgia.
—Chris MacDonald
page vi
About the Authors
Laura P. Hartman The School of Choice/L’Ecole de Choix (Haiti)
Laura Pincus Hartman is Executive Director of the School of Choice
Education Organization, a U.S.–based nonprofit that she cofounded, which
oversees the School of Choice/L’Ecole de Choix, a unique leadership
development education program in Haiti that serves children and families
living in extreme conditions of poverty.
Hartman also is professor emerita at DePaul University. She held a
number of roles during her almost three-decade career there, including
Associate Vice President for Academic Affairs, Vincent de Paul Professor of
Business Ethics at DePaul University’s Driehaus College of Business, and
Director of its Institute for Business and Professional Ethics. From 2015–
2017, Hartman also served as the inaugural Director of the Susilo Institute for
Ethics in the Global Economy at Boston University and Clinical Professor of
Business Ethics in BU’s Department of Organizational Behavior. She has
been privileged to serve as an Associated Professor at the Kedge Business
School (Marseille, France) and has taught as a visiting professor at INSEAD
page vii
(France), HEC (France), the Université Paul Cezanne Aix Marseille III, the
University of Toulouse, and the Grenoble Graduate School of Business, and
served as the Gourley Professor of Ethics at the Melbourne Business School.
Hartman is past president of the Society for Business Ethics and
established its Professional Mentorship Program. She is the coauthor of
Employment Law for Business (McGraw-Hill). Hartman graduated magna
cum laude from Tufts University and received her law degree from the
University of Chicago Law School. She divides her time between Haiti and
Sint Maarten, and has been a mother to two daughters.
Joseph DesJardins College of St. Benedict/St. John’s University
Joseph DesJardins holds the Ralph Gross Chair in Business and the Liberal
Arts and is professor of philosophy at the College of St. Benedict and St.
John’s University in Minnesota. His other books include An Introduction to
Business Ethics; Environmental Ethics: An Introduction to Environmental
Philosophy; Environmental Ethics: Concepts, Policy & Theory;
Contemporary Issues in Business Ethics (coeditor with John McCall); and
Business, Ethics, and the Environment: Imagining a Sustainable Future. He
has served as president and executive director of the Society for Business
Ethics and has published and lectured extensively in the areas of business
ethics, environmental ethics, and sustainability. He received his BA from
Southern Connecticut State University and his MA and PhD from the
University of Notre Dame.
Chris MacDonald Ryerson University
Chris MacDonald is an associate professor and director of the Ted Rogers
Leadership Centre at Ryerson University’s Ted Rogers School of
Management in Toronto, Canada, and a senior nonresident fellow at Duke
University’s Kenan Institute for Ethics. His peer-reviewed publications range
across business ethics, professional ethics, bioethics, the ethics of technology,
and moral philosophy, and he is coauthor of a best-selling textbook called
The Power of Critical Thinking (4th Canadian Edition, 2016). He is
cofounder and coeditor of both the Business Ethics Journal Review and the
news and commentary aggregator site Business Ethics Highlights. He is
perhaps best known for his highly respected blog, The Business Ethics Blog,
which is carried by Canadian Business magazine.
page viii
Preface
We began writing the first edition of this textbook in 2006, soon after a wave
of major corporate scandals had shaken the financial world. Headlines made
the companies involved in these ethical scandals household names: Enron,
WorldCom, Arthur Andersen, KPMG, J.P. Morgan, Merrill Lynch, Morgan
Stanley, Citigroup, Salomon Smith Barney. At that time, we suggested that,
in light of such significant cases of financial fraud, mismanagement,
criminality, and deceit, the relevance of business ethics could no longer be
questioned.
Sadly, as we enter the fifth edition of this book, these same issues are as
much alive today as they were a decade ago. While our second edition was
preceded by the unprecedented financial meltdown in 2008–2009 and the
ethical problems faced by such companies as AIG, Countrywide, Lehman
Brothers, Merrill Lynch, and Bear Stearns, this current edition continues to
witness financial and ethical malfeasance of historic proportions and the
inability of market mechanisms, internal governance structures, or
government regulation to prevent it.
But the story is not all bad news. While cases of corporate fraud continue
to make headlines (think of the recent Volkswagen, Wells Fargo, and
Facebook scandals), countless small and large firms provide examples of
highly ethical—and profitable—business enterprises. The emergence of
benefit corporations (see Chapter 5 for examples) is only one instance of
corporations dedicated to the common good. In this edition, we aim to tell the
stories of both the good and the bad in business.
As we reflect on both the ethical corruption and the ethical success stories
of the past decade, the importance of ethics is all too apparent. The questions
today are less about whether ethics should be a part of business strategy and,
by necessity, the business school curriculum, than about which values and
principles should guide business decisions and how ethics should be
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integrated within business and business education.
This textbook provides a comprehensive, yet accessible introduction to
the ethical issues arising in business. Students who are unfamiliar with ethics
will find that they are as unprepared for careers in business as students who
are unfamiliar with accounting and finance. It is fair to say that students will
not be fully prepared, even within traditional disciplines such as accounting,
finance, human resource management, marketing, and management, unless
they are sufficiently knowledgeable about the ethical issues that arise
specifically within and across those fields.
Whereas other solid introductory textbooks are available, several
significant features make this book distinctive. We emphasize a decision-
making approach to ethics, and we provide strong pedagogical support for
both teachers and students throughout the entire book. This decision-making
approach balances the goals of helping student reach conclusions without
imposing someone else’s answers on them. Our goal is to help students make
responsible decisions for themselves. But ethical decision
making is no small feat, especially in an area that is necessarily
multidisciplinary. Numerous small cases and examples aim to help teachers
and students integrate concepts and material from philosophy, law,
economics, management, finance, and marketing with the very practical goal
of making real-life decisions. We aim to bring students into these discussions
by regularly grounding our discussions in issues with which they are already
familiar, thus approaching them through subjects that have already generated
their interest.
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New to the Fifth Edition
While our goal for the fifth edition remains the same as for the first—to
provide “a comprehensive yet accessible introduction to the ethical issues
arising in business”—readers will notice a few changes. As always, the
primary incentive of a new edition is to update the text with new and timely
cases and topics. Readers will find new discussions of such companies as
Facebook and Wells Fargo, as well as such topics as the #MeToo movement
and digital privacy. Perhaps the most noticeable change, however, is the
elimination of end-of-chapter readings, and this deserves some explanation.
When the first edition was published, our goal was to be as current and
timely as possible, not only by including up-to-date examples throughout
each chapter, but also through the end-of-chapter readings. Our thinking was
that these readings would allow students and teachers to dive more deeply
into the subject matter and access perspectives to broaden the scope of the
conversation. They also could serve as convenient topics for written
assignments or in-class discussions. However, at this point, accessing these
perspectives has become so easy through the internet and other means that
including them is no longer necessary to achieve our original goals. In fact,
our choices instead can limit rather than broaden the range of ideas available.
Further, the increasing costs of textbooks are a serious concern for
everyone in education. Students should know that while they are most
directly affected by rising costs, teachers, authors, and, yes, even publishers
are also troubled by this and regularly look for ways to reduce the costs of
education. As we (the authors and our publisher, McGraw-Hill) looked for
ways to control costs, the end-of-chapter readings stood out. Permission fees
for reprinting readings have increased significantly in recent years, especially
in this era of electronic and custom publishing, and the additional length
added by the readings contributes to increasing production costs. We decided
that these added costs were no longer justified by the benefits, especially
page xi
considering that the readings are often readily available online, typically at no
costs to students under the “fair use” copyright guidelines. The readings were
always included only as a means to supplement the core text, and we have
now concluded that students would be better served by eliminating the
readings and focusing this edition more on the core text itself. In several
cases, we have been able to integrate the content of the reading within the
text as a Reality Check or Decision Point.
We have retained the same logical structure and chapter organization of
previous editions because we have heard from many colleagues and
reviewers that this structure works well for a semester-long course in
business ethics. But every chapter has been revised to include new and
updated material, cases, topics, and readings. Importantly, we continue to
provide increased international perspectives, with particular references to
Canadian and UK legislation and institutions.
Among the changes to this edition are the following:
New or revised Opening Decision Points for every chapter, including new
cases or in-depth discussions on:
▸ Wells Fargo
▸ Job security and confidentiality
▸ Executive compensation
▸ Free expression in the workplace
▸ Facebook
▸ Digital marketing
▸ The business of food
New cases, Reality Checks, or Decision Points within the text on such
companies and topics as:
▸ Mylan Epi-Pen
▸ Greed
▸ #MeToo movement
▸ Tesla
▸ Uber
▸ Marijuana in the workplace
▸ Digital privacy
▸ Gender and sexual identity
As always, we reviewed and revised the entire text for accessibility,
consistency, and clarity.
page xii
Acknowledgments
A textbook should introduce students to the cutting edge of the scholarly
research that is occurring within a field. As in any text that is based in part on
the work of others, we are deeply indebted to the work of our colleagues who
are doing this research. Our book is a more effective tool for both students
and faculty because of their generosity.
In particular, thanks to Ryerson students Stefania Venneri, Tanya
Walia, and Daniel Marotta for their useful suggestions, and to Katrina
Myers at the University of Chicago and to Summer Brown at DePaul
University for their exceptional research and editing assistance. In addition,
we wish to express our deepest gratitude to the reviewers and others whose
efforts served to make this manuscript infinitely more effective:
Cheryl Adkins
Longwood University
Lynda Fuller
Wilmington University
Daniel F. Nehring
Morehead State University
Richard Stillman
The Graduate Center, CUNY
Jeffrey Yoder
Fairfield University
Our thanks also go out to the team at McGraw-Hill Education who helped
this book come into existence:
Michael Ablassmeir
Director
Laura Hurst Spell
Associate Portfolio Manager
Lisa Granger
Marketing Manager
Melissa M. Leick
Senior Content Project Manager
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1
2
3
4
5
6
7
8
9
10
Brief Contents
Preface viii
Ethics and Business 1
Ethical Decision Making: Personal and
Professional Contexts 31
Philosophical Ethics and Business 57
The Corporate Culture—Impact and Implications
91
Corporate Social Responsibility 139
Ethical Decision Making: Employer
Responsibilities and Employee Rights 171
Ethical Decision Making: Technology and Privacy
in the Workplace 227
Ethics and Marketing 285
Business and Environmental Sustainability 319
Ethical Decision Making: Corporate Governance,
Accounting, and Finance 351
Glossary 387
Index 394
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Table of Contents
About the Authors vi
Preface viii
Chapter 1
Ethics and Business 1
Opening Decision Point: Wells Fargo and Consumer
Fraud 2
Introduction: Getting Comfortable with the Topic 5
Making the Case for Business Ethics 8
Ethics and the Law 13
Business Ethics as Ethical Decision Making 18
Business Ethics as Personal Integrity and Social
Responsibility 20
Chapter 2
Ethical Decision Making: Personal and Professional
Contexts 31
Opening Decision Point: Am I About to Lose My Job?
What Would You Do? 32
Introduction 33
A Decision-Making Process for Ethics 34
When Ethical Decision Making Fails: Why Do “Good”
People Engage in “Bad” Acts? 45
Ethical Decision Making in Managerial Roles 50
Chapter 3
Philosophical Ethics and Business 57
Opening Decision Point: Are CEOs Paid Too Much,
Compared to Their Employees? 58
Introduction: Ethical Frameworks—Consequences,
Principles, Character 60
Utilitarianism: Making Decisions Based on Ethical
Consequences 64
Utilitarianism and Business 66
Challenges to Utilitarian Ethics 70
An Ethics of Principles and Rights 71
Human Rights and Duties 75
Human Rights and Social Justice 77
Human Rights and Legal Rights 79
Challenges to an Ethics of Rights and Duties 80
Virtue Ethics: Making Decisions Based on Integrity and
Character 81
A Decision-Making Model for Business Ethics Revisited
87
Chapter 4
The Corporate Culture—Impact and Implications 91
Opening Decision Point: Creating an Ethics Program
92
What Is Corporate Culture? 93
Culture and Ethics 101
Compliance and Values-Based Cultures 105
Ethical Leadership and Corporate Culture 107
Effective Leadership and Ethical, Effective Leadership
112
Building a Values-Based Corporate Culture 114
Mission Statements, Credos, Codes of Conduct, and Statements of Values 114
Developing the Mission and Code 116
Culture Integration: Ethics Hotlines, Ombudspersons, and Reporting 117
Assessing and Monitoring the Corporate Culture: Audits 123
Mandating and Enforcing Culture: The Federal Sentencing
Guidelines for Organizations 124
Chapter 5
Corporate Social Responsibility 139
Opening Decision Point: Facebook 140
Introduction 143
Ethics and Social Responsibility 144
Economic Model of CSR 150
page xv
Stakeholder Model of CSR 153
Integrative Model of CSR 157
The Implications of Sustainability in the Integrative Model of CSR 157
Exploring Enlightened Self-Interest: Does “Good Ethics”
Mean “Good Business”? 161
Chapter 6
Ethical Decision Making: Employer Responsibilities
and Employee Rights 171
Opening Decision Point: The Choice to Voice 172
Introduction 174
Ethical Issues in the Workplace: The Current Environment
175
Defining the Parameters of the Employment Relationship
177
Due Process and Just Cause 178
Downsizing 185
Health and Safety 188
Health and Safety as “Acceptable Risk” 189
Health and Safety as Market Controlled 191
Health and Safety as Government-Regulated Ethics 193
Global Applications: The Global Workforce and Global
Challenges 195
The Case of Child Labor 201
Rights and Responsibilities in Conflict: Discrimination,
Diversity, and Affirmative Action 203
Discrimination 203
Diversity 209
Affirmative Action 213
Chapter 7
Ethical Decision Making: Technology and Privacy in
the Workplace 227
Opening Decision Point Being Smart about
Smartphones 228
Introduction 229
The Right to Privacy 231
Defining Privacy 231
Ethical Sources of a Right to Privacy 232
Legal Sources of a Right to Privacy in the United States 235
Global Applications 238
Linking the Value of Privacy to the Ethical Implications of
Technology 242
Information and Privacy 243
Managing Employees through Monitoring 245
Why Do Firms Monitor Technology Usage? 251
Monitoring Employees through Drug Testing 252
Other Forms of Monitoring 256
Business Reasons to Limit Monitoring 258
Balancing Interests 259
Regulation of Off-Work Acts 261
Tobacco Use 261
Weight Differences 262
Marital and Relationship Status 262
Sexual Orientation and Gender Identity 263
Off-Work Use of Technology 265
Privacy Rights since September 11, 2001 267
Chapter 8
Ethics and Marketing 285
Opening Decision Point: Digital Marketing and Ethics
286
Introduction 288
Marketing: An Ethical Framework 290
Responsibility for Products: Safety and Liability 294
Contractual Standards for Product Safety 295
Tort Standards for Product Safety 296
Strict Product Liability 299
Ethical Debates on Product Liability 299
Responsibility for Products: Advertising and Sales 300
Ethical Issues in Advertising 301
Marketing Ethics and Consumer Autonomy 303
Marketing to Vulnerable Populations 308
Supply Chain Responsibility 312
Chapter 9
Business and Environmental Sustainability 319
Opening Decision Point: The Business of Food 320
page xvi
Introduction 322
Business Ethics and Environmental Values 324
Business’s Environmental Responsibility: The Market
Approach 328
Business’s Environmental Responsibility: The Regulatory
Approach 331
Business’s Environmental Responsibilities: The
Sustainability Approach 333
The “Business Case” for a Sustainable Economy 337
Principles for a Sustainable Business 339
Sustainable Marketing 341
Product 341
Price 342
Promotion 343
Placement 345
Chapter 10
Ethical Decision Making: Corporate Governance,
Accounting, and Finance 351
Opening Decision Point Volkswagen’s Diesel Fraud 352
Introduction 356
Professional Duties and Conflicts of Interest 357
The Sarbanes-Oxley Act of 2002 365
The Internal Control Environment 367
Going beyond the Law: Being an Ethical Board Member
368
Legal Duties of Board Members 368
Beyond the Law, There Is Ethics 369
Conflicts of Interest in Accounting and the Financial
Markets 372
Executive Compensation 374
Insider Trading 378
Glossary 387
Index 394
page 1
page 2
Chapter
1
Ethics and Business
It takes 20 years to build a reputation and five minutes to ruin
it. If you think about that you’ll do things differently.
Warren Buffet
Ethics is the new competitive environment.
Peter Robinson, CEO, Mountain Equipment Co-op (2000–
2007)
No snowflake in an avalanche ever feels responsible.
Voltaire, 1694–1778
Opening Decision Point
Wells Fargo and Consumer Fraud1
In December 2013, the Los Angeles Times published the results of an ongoing
investigation into Wells Fargo. The Times report described high-pressure sales
practices that were aimed at marketing additional financial products to present
customers, a practice known as cross-selling. The report told of Wells Fargo
employees establishing new accounts in customers’ names without their
consent or knowledge. The Times story included interviews with numerous
branch managers from across the United States who described unreasonably
high sales targets and quotas that encouraged such unethical practices. In
response to this story, Wells Fargo claimed that it took all legal or ethical lapses
seriously but denied any systemic wrongdoing. A spokesperson cited a new
corporate Ethics Program Office that would oversee compliance with corporate
ethical standards.
Following this report, the City of Los Angeles, the State of California, and the
U.S. Consumer Financial Protection Bureau (CFPB) began a series of
investigations into Wells Fargo. Exactly how aggressive Wells Fargo had been
in cross-selling became clear in September 2016 when the CFPB announced
that Wells Fargo employees had fraudulently opened millions of unauthorized
credit card and deposit accounts in the name of present customers. Wells Fargo
admitted to the wrongdoing and agreed to pay fines of $185 million to state and
federal authorities.
The investigations uncovered a wide range of fraudulent practices that
included ordering credit cards, opening new accounts, establishing new lines of
credit, or purchasing insurance and overdraft protection. All of this was done
without the consent or knowledge of customers. In some cases, employees
forged customers’ signatures or used their own address so information about
these accounts would be sent to their homes rather than to the defrauded
customers. The process involved was reasonably easy. Employees, often in the
type of entry-level positions that recent college graduates might fill, had ready
access to the information needed to open new accounts: names, addresses,
social security numbers, credit reports, and so forth. Applying for and confirming
the sale of a new product for an existing customer could be done with a few
clicks of a mouse. Investigations revealed that thousands of employees had
taken part in the scheme.
Much of the activity described by the Los Angeles Times occurred at local
branch offices and included every level of employee from tellers to personal
bankers to the branch managers themselves. Of course, such widespread fraud
could not have gone unnoticed by managers who had oversight of these branch
offices. It soon became clear that mid-level management had actively
participated in these activities, including providing instructions on how to do it
and how to avoid detection by customers. Branch managers who failed to meet
sales targets were publicly berated and threatened by their superiors.
Employees who missed targets for cross-selling were required to work nights
and weekends and were denied promotions and salary increases. It also
appears that employees who were reluctant to participate, or who attempted to
blow the whistle, not only lost their jobs but also received negative evaluations
that effectively prevented them from finding future employment in the banking
page 3
industry. Less directly, but perhaps much more effectively, management
participated in the practice by creating and enforcing demanding sales quotas
and wage and salary structures that rewarded those who met these targets.
Wells Fargo had a reputation as a leader in the business strategy of cross-
selling, the practice of marketing additional products to existing customers.
Traditionally, banks and financial services companies had seen themselves as
professionals who provided advisory services to clients in much the same way
that an attorney or an accountant provides professional services to his or her
clients. In this model, success would be measured in terms of achieving the
clients’ interests in managing risks, return on investment, and so forth. This
fiduciary model of business aims to align the interests of the firm with the
interests of the client so that when the client succeeds, the firm succeeds. But
many banks and financial institutions have moved away from this fiduciary
model in recent decades to adopt a more transactional, consumerist model in
which clients are viewed simply as customers to whom the company sells
products. Here, the firm’s success is measured in terms of how many products
are sold and how much profit is earned from those sales. Of course, one trade-
off of this shift is that client and business interests may not always align in that
the business can profit whether or not the customer does. Wells Fargo was
among the first banks to move aggressively in this direction.
At the time of the 2016 announcement, Wells Fargo admitted that since 2011
employees had opened more than 1.5 million fraudulent accounts and more
than 500,000 unauthorized credit card applications in the names of present
customers. Further investigations of activities prior to 2011 discovered that more
than half a million additional fraudulent online bill-paying accounts also had
been opened and hundreds of thousands of fraudulent insurance policies were
sold to unsuspecting customers. By early 2018, Wells Fargo had admitted to
selling more than 3.5 million unauthorized financial products to customers.
In April 2018, the CFPB and the U.S. Comptroller of the Currency
announced additional fines to punish Wells Fargo for deceptively adding
unneeded insurance to consumer auto loans and manipulating interest rates on
mortgages. As many as 600,000 automobile loans might have been subjected
to such unneeded additional insurance.
Initially, senior Wells Fargo executives, including CEO and Board Chair John
Stumpf, claimed that the fault rested with “dishonest” individuals who had been
fired for this behavior. In total, 5,300 employees were fired as a result of these
frauds. Testifying to the U.S. Senate Banking Committee, Stumpf claimed: “I do
want to make it clear that there was no orchestrated effort, or scheme as some
page 4
have called it, by the company. We never directed or wanted our employees,
whom we refer to as team members, to provide products and services to
customers they did not want or need.”2 Stumpf explained the widespread nature
of the fraud as likely resulting from employees talking to each other.
But closer analysis showed a pattern of decisions, behavior, and tone at the
highest executive levels that contributed to a culture in which such widespread
fraud flourished. Stumpf himself was known for his mantra, “eight is great,” to
promote a target of eight products for each customer in an industry where the
average was less than half that. During every quarterly earnings call that took
place while the fraud was occurring, Stumpf had boasted to investors of the
ever-increasing levels of record cross-selling. Partially as a result, the value of
Stumpf’s own stock ownership increased by more than $200 million during the
five years that the fraud was prevalent.
There was also evidence that senior executives knew of the fraudulent sales
well before the practice became public. After all, the Los Angeles Times article
was published three years previously. Further, Wells Fargo’s own training
manual contained a reminder not to sell products without the explicit consent of
customers—a reminder that the manual highlighted and emphasized in such a
way to suggest that the practice was known to occur. Wells Fargo executives
also had internal reports showing that the steady increase in cross-selling was
directly correlated with a steady increase in accounts that were never used by
customers.
The entire culture of Wells Fargo seemed designed to encourage cheating
and discourage honest sales practices. For example, the incentive system,
ranging from sales targets for hourly …
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
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Business Ethics
Case Studies and Selected Readings
9E
Marianne Moody Jennings
Arizona State University
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
72544_fm_ptg01_i-xx.indd 1 01/08/17 8:44 PM
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Business Ethics: Case Studies and
Selected Readings, Ninth Edition
Marianne Jennings
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iii
Preface xii
Acknowledgments xx
UNIT 1
Ethical Theory, Philosophical Foundations, Our Reasoning Flaws,
and Types of Ethical Dilemmas 1
SECTION A Defining Ethics 2
SECTION B Resolving Ethical Dilemmas and Personal Introspection 29
UNIT 2 Solving Ethical Dilemmas and Personal Introspection 49
SECTION A Business and Ethics: How Do They Work Together? 50
SECTION B What Gets in the Way of Ethical Decisions in Business? 61
SECTION C Resolving Ethical Dilemmas in Business 84
UNIT 3 Business, Stakeholders, Social Responsibility, and Sustainability 115
SECTION A Business and Society: The Tough Issues of Economics,
Social Responsibility, and Business 116
SECTION B Applying Social Responsibility and Stakeholder Theory 130
SECTION C Social Responsibility and Sustainability 179
SECTION D Government as a Stakeholder 184
UNIT 4 Ethics and Company Culture 191
SECTION A Temptation at Work for Individual Gain and That Credo 192
SECTION B The Organizational Behavior Factors 196
SECTION C The Psychological and Behavior Factors 217
SECTION D The Structural Factors: Governance, Example, and Leadership 243
SECTION E The Industry Practices and Legal Factors 273
SECTION F The Fear-and-Silence Factors 300
SECTION G The Culture of Goodness 335
UNIT 5 Ethics and Contracts 349
SECTION A Contract Negotiations: All Is Fair and Conflicting Interests 350
SECTION B Promises, Performance, and Reality 366
UNIT 6 Ethics in International Business 385
SECTION A Conflicts between the Corporation’s Ethics and Business Practices in Foreign Countries 386
SECTION B Bribes, Grease Payments, and “When in Rome …” 411
UNIT 7 Ethics, Business Operations, and Rights 425
SECTION A Workplace Safety 426
SECTION B Workplace Loyalty 429
SECTION C Workplace Diversity and Atmosphere 442
Brief Contents
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iv Brief Contents
SECTION D Workplace Diversity and Personal Lives 450
SECTION E Workplace Confrontation 460
UNIT 8 Ethics and Products 471
SECTION A Advertising Content 472
SECTION B Product Safety 477
SECTION C Product Sales 501
UNIT 9 Ethics and Competition 513
SECTION A Covenants Not to Compete 514
SECTION B All’s Fair, or Is It? 525
SECTION C Intellectual Property and Ethics 536
The Ethical Common Denominator (ECD) Index:
The Common Threads of Business Ethics 541
Alphabetical Index 553
Business Discipline Index 559
Product/Company/Individuals Index 569
Topic Index 607
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v
Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xx
Ethical Theory, Philosophical Foundations, Our Reasoning
Flaws, and Types of Ethical Dilemmas
SECTION A
Defining Ethics 2
Reading 1 .1 You, Your Values, and a Credo 2
Reading 1 .2 What Did You Do in the Past Year That Bothered You?
How That Question Can Change Lives and Cultures 4
Reading 1 .3 What Are Ethics? From Line-Cutting to Kant 6
Reading 1 .4 The Types of Ethical Dilemmas: From Truth to Honesty to Conflicts 14
Reading 1 .5 On Rationalizing and Labeling: The Things We Do That Make
Us Uncomfortable, but We Do Them Anyway 19
Case 1 .6 “They Made Me Do It”: Following Orders and Legalities:
Volkswagen and the Fake Emissions Test 24
Reading 1 .7 The Slippery Slope, the Blurred Lines, and How We Never
Do Just One Thing: The University of North Carolina and
How Do I Know When an Ethical Lapse Begins? 25
Case 1 .8 Blue Bell Ice Cream and Listeria: The Pressures of Success 27
SECTION B
Resolving Ethical Dilemmas and Personal Introspection 29
Reading 1 .9 Some Simple Tests for Resolving Ethical Dilemmas 29
Reading 1 .10 Some Steps for Analyzing Ethical Dilemmas 34
Reading 1 .11 On Plagiarism 34
Case 1 .12 The Little Teacher Who Could: Piper, Kansas,
and Term Papers 36
Case 1 .13 The Car Pool Lane: Defining Car Pool 38
Case 1 .14 Puffing Your Résumé: Truth or Dare 39
Case 1 .15 Dad, the Actuary, and the Stats Class 42
Case 1 .16 Wi-Fi Piggybacking and the Tragedy of the Commons 42
Case 1 .17 Cheating: Hows, Whys, and Whats and Do Cheaters Prosper?
Culture of Excellence 43
Case 1 .18 Speeding: Hows, Whys, and Whats 45
Case 1 .19 Moving from School to Life: Do Cheaters Prosper? 46
Case 1 .20 The Pack of Gum 46
Case 1 .21 Getting Out from under Student Loans:
Legal? Ethical? 46
U N I T
1
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vi Contents
Solving Ethical Dilemmas and Personal Introspection
SECTION A
Business and Ethics: How Do They Work Together? 50
Reading 2 .1 What’s Different about Business Ethics? 50
Reading 2 .2 The Ethics of Responsibility 51
Reading 2 .3 Is Business Bluffing Ethical? 52
SECTION B
What Gets in the Way of Ethical Decisions in Business? 61
Reading 2 .4 How Leaders Lose Their Way: The Bathsheba Syndrome
and What Price Hubris? 61
Reading 2 .5 Moral Relativism and the Either/or Conundrum 64
Reading 2 .6 P = f(x) The Probability of an Ethical Outcome Is a Function
of the Amount of Money Involved: Pressure 65
Case 2 .7 BP and the Deepwater Horizon Explosion: Safety First 66
Case 2 .8 Valeant: The Company with a New Pharmaceutical Model and Different
Accounting 78
SECTION C
Resolving Ethical Dilemmas in Business 84
Reading 2 .9 Framing Issues Carefully: A Structured Approach for
Solving Ethical Dilemmas and Trying Out Your Ethical
Skills on an Example 84
Case 2 .10 What Was Up with Wall Street?
The Goldman Standard and Shades of Gray 85
Case 2 .11 Penn State: Framing Ethical Issues 96
Case 2 .12 Deflategate and Spygate: The New England Patriots 108
Case 2 .13 Damaging Reviews on the Internet:
The Reality and the Harm 112
Business, Stakeholders, Social Responsibility, and Sustainability
SECTION A
Business and Society: The Tough Issues of Economics,
Social Responsibility, and Business 116
Reading 3 .1 The Social Responsibility of Business Is to Increase Its Profits 116
Reading 3 .2 A Look at Stakeholder Theory 121
Reading 3 .3 Business with a Soul: A Reexamination of What Counts in Business Ethics 124
Reading 3 .4 Appeasing Stakeholders with Public Relations 127
Reading 3 .5 Conscious Capitalism: Creating a New Paradigm for Business 128
Reading 3 .6 Marjorie Kelly and the Divine Right of Capital16 129
SECTION B
Applying Social Responsibility and Stakeholder Theory 130
Case 3 .7 Turing Pharmaceutical and the 4,834\% Price Increase on a Life-Saving Drug 130
Case 3 .8 Walmart: The $15 Minimum Wage 133
Case 3 .9 Chipotle: Buying Local and Health Risks 134
Case 3 .10 Guns, Stock Prices, Safety, Liability, and Social Responsibility 137
Case 3 .11 The Craigslist Connections: Facilitating Crime 145
U N I T
2
U N I T
3
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Contents vii
Case 3 .12 Planned Parenthood Backlash at Companies and Charities 146
Reading 3 .13 The Regulatory Cycle, Social Responsibility, Business Strategy,
and Equilibrium 147
Case 3 .14 Fannie, Freddie, Wall Street, Main Street,
and the Subprime Mortgage Market: Of Moral Hazards 151
Case 3 .15 Ice-T, the Body Count Album, and Shareholder Uprisings 162
Case 3 .16 Athletes and Doping: Costs, Consequences, and Profits 168
Case 3 .17 Back Treatments and Meningitis in an Under-the-Radar Industry 174
Case 3 .18 CVS Pulls Cigarettes from Its Stores 176
Case 3 .19 Ashley Madison: The Affair Website 177
SECTION C
Social Responsibility and Sustainability 179
Case 3 .20 Biofuels and Food Shortages in Guatemala 179
Case 3 .21 The Dictator’s Wife in Louboutin Shoes Featured in Vogue Magazine 180
Case 3 .22 Herman Miller and Its Rain Forest Chairs 181
SECTION D
Government as a Stakeholder 184
Case 3 .23 Solyndra: Bankruptcy of Solar Resources 184
Case 3 .24 Prosecutorial Misconduct: Ends Justifying Means? 185
Ethics and Company Culture
SECTION A
Temptation at Work for Individual Gain and That Credo 192
Reading 4 .1 The Moving Line 192
Reading 4 .2 Not All Employees Are Equal When It Comes to Ethical Development 193
SECTION B
The Organizational Behavior Factors 196
Reading 4 .3 The Preparation for a Defining Ethical Moment 196
Case 4 .4 Swiping Oreos at Work: Is It a Big Deal? 199
Reading 4 .5 The Effects of Compensation Systems: Incentives, Bonuses, Pay, and Ethics 199
Reading 4 .6 A Primer on Accounting Issues and Ethics and Earnings Management 204
Case 4 .7 Law School Application Consultants 214
Case 4 .8 Political Culture: Daiquiris and Ferragamo Shoes and Officials 215
SECTION C
The Psychological and Behavior Factors 217
Reading 4 .9 The Layers of Ethical Issues: Individual, Organization, Industry, and Society 217
Case 4 .10 Rogues: Bad Apples or Bad Barrel: Jett and Kidder, Leeson and Barings Bank,
Kerviel and Société Générale, the London Whale and Chase, Kweku Adoboli and
UBS, and LIBOR Rates for Profit 226
Case 4 .11 FINOVA and the Loan Write-Off 237
Case 4 .12 Inflating SAT Scores for Rankings and Bonuses 241
Case 4 .13 Hiding the Slip-Up on Oil Lease Accounting: Interior Motives 242
U N I T
4
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SECTION D
The Structural Factors: Governance, Example, and Leadership 243
Reading 4 .14 Re: A Primer on Sarbanes-Oxley and Dodd-Frank 243
Case 4 .15 WorldCom: The Little Company That Couldn’t After All 247
Case 4 .16 The Upper West Branch Mining Disaster, the CEO,
and the Faxed Production Reports 264
Reading 4 .17 Getting Information from Employees Who Know to
Those Who Can and Will Respond 268
Case 4 .18 Westland/Hallmark Meat Packing Company and the Cattle Standers 271
SECTION E
The Industry Practices and Legal Factors 273
Reading 4 .19 The Subprime Saga: Bear Stearns, Lehman, Merrill, and CDOs 273
Case 4 .20 Enron: The CFO, Conflicts, and Cooking the Books
with Natural Gas and Electricity 280
Case 4 .21 Arthur Andersen: A Fallen Giant 293
Case 4 .22 The Ethics of Walking Away 299
SECTION F
The Fear-and-Silence Factors 300
Case 4 .23 HealthSouth: The Scrushy Way 300
Case 4 .24 Dennis Kozlowski: Tyco and the $6,000 Shower Curtain 307
Reading 4 .25 A Primer on Whistleblowing 318
Case 4 .26 Beech-Nut and the No-Apple-Juice Apple Juice 318
Case 4 .27 VA: The Patient Queues 324
Case 4 .28 NASA and the Space Shuttle Booster Rockets 327
Case 4 .29 Diamond Walnuts and Troubled Growers 330
Case 4 .30 New Era: If It Sounds Too Good to Be True, It Is Too Good to Be True 332
SECTION G
The Culture of Goodness 335
Case 4 .31 Bernie Madoff: Just Stay Away from the Seventeenth Floor 335
Case 4 .32 Adelphia: Good Works Via a Hand in the Till 337
Case 4 .33 The Atlanta Public School System:
Good Scores by Creative Teachers 341
Case 4 .34 The NBA Referee and Gambling for Tots 343
Case 4 .35 Giving and Spending the United Way 344
Case 4 .36 The Baptist Foundation: Funds of the Faithful 346
Ethics and Contracts
SECTION A
Contract Negotiations: All Is Fair and Conflicting Interests 350
Case 5 .1 Facebook and the Media Buys 350
Case 5 .2 Subprime Auto Loans: Contracts with the Desperate 350
Case 5 .3 The Governor and His Wife: Products Endorsement and a Rolex 352
Case 5 .4 Subway: Is 11 Inches the Same as 12 Inches? 359
Case 5 .5 Sears and High-Cost Auto Repairs 360
Case 5 .6 Kardashian Tweets: Regulated Ads or Fun? 364
U N I T
5
viii Contents
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SECTION B
Promises, Performance, and Reality 366
Case 5 .7 Pension Promises, Payments, and Bankruptcy:
Companies, Cities, Towns, and States 366
Case 5 .8 “I Only Used It Once”: Returning Goods 373
Case 5 .9 Government Contracts, Research, and Double-Dipping 374
Case 5 .10 When Corporations Pull Promises Made to Government 377
Case 5 .11 Intel and the Chips: When You Have Made a Mistake 379
Case 5 .12 Red Cross and the Use of Funds 382
Case 5 .13 The Nuns and Katy Perry: Is There a Property Sale? 383
Ethics in International Business
SECTION A
Conflicts between the Corporation’s Ethics and
Business Practices in Foreign Countries 386
Reading 6 .1 Why an International Code of Ethics Would Be Good for Business 386
Case 6 .2 Chiquita Banana and Mercenary Protection 390
Case 6 .3 Pirates! The Bane of Transnational Shipping 394
Case 6 .4 The Former Soviet Union: A Study of Three Companies
and Values in Conflict 395
Case 6 .5 Bangladesh, Sweatshops, Suicides, Nike, Apple, Foxconn,
Apple, and Campus Boycotts 397
Case 6 .6 Bhopal: When Safety Standards Differ 404
Case 6 .7 Product Dumping 406
Case 6 .8 Nestlé: Products That Don’t Fit Cultures 407
SECTION B
Bribes, Grease Payments, and “When in Rome …” 411
Reading 6 .9 A Primer on the FCPA 411
Case 6 .10 FIFA: The Kick of Bribery 415
Case 6 .11 Siemens and Bribery, Everywhere 418
Case 6 .12 Walmart in Mexico 420
Case 6 .13 GlaxoSmithKline in China 422
Ethics, Business Operations, and Rights
SECTION A
Workplace Safety 426
Reading 7 .1 Two Sets of Books on Safety 426
Case 7 .2 Trucker Logs, Sleep, and Safety 427
Case 7 .3 Cintas and the Production Line 428
SECTION B
Workplace Loyalty 429
Case 7 .4 Aaron Feuerstein and Malden Mills 429
Case 7 .5 JCPenney and Its Wealthy Buyer 431
Case 7 .6 The Trading Desk, Perks, and “Dwarf Tossing” 432
Case 7 .7 The Analyst Who Needed a Preschool 434
U N I T
6
U N I T
7
Contents ix
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Case 7 .8 Edward Snowden and Civil Disobedience 437
Case 7 .9 Boeing and the Recruiting of the Government Purchasing Agent 438
Case 7 .10 Kodak, the Appraiser, and the Assessor:
Lots of Backscratching on Valuation 440
SECTION C
Workplace Diversity and Atmosphere 442
Case 7 .11 English-Only Employer Policies 442
Case 7 .12 Employer Tattoo and Piercing Policies 443
Case 7 .13 Have You Been Convicted of a Felony? 444
Case 7 .14 Office Romances 445
Case 7 .15 On-the-Job Fetal Injuries 446
Case 7 .16 Political Views in the Workplace 448
SECTION D
Workplace Diversity and Personal Lives 450
Case 7 .17 Julie Roehm: The Walmart Ad Exec with Expensive Tastes 450
Case 7 .18 Facebook, YouTube, Instagram, LinkedIn,
and Employer Tracking 452
Case 7 .19 Tweeting, Blogging, Chatting, and E-Mailing:
Employer Control 454
Case 7 .20 Jack Welch and the Harvard Interview 457
SECTION E
Workplace Confrontation 460
Reading 7 .21 The Ethics of Confrontation 460
Reading 7 .22 The Ethics of Performance Evaluations 463
Case 7 .23 Ann Hopkins and Price Waterhouse 465
Case 7 .24 The Glowing Recommendation 469
Ethics and Products
SECTION A
Advertising Content 472
Case 8 .1 T-Mobile, Ads, and Contract Terms 472
Case 8 .2 Eminem vs . Audi 474
Case 8 .3 The Mayweather “Fight” and Ticket Holders 475
SECTION B
Product Safety 477
Reading 8 .4 A Primer on Product Liability 477
Case 8 .5 Peanut Corporation of America: Salmonella
and Indicted Leaders 480
Case 8 .6 Tylenol: The Swing in Product Safety 482
Case 8 .7 Samsung Fire Phones 486
Case 8 .8 Ford and GM: The Repeating Design and Sales Issues 486
Case 8 .9 E. Coli, Jack-in-the-Box, and Cooking Temperatures 496
Case 8 .10 The Tide Pods 497
Case 8 .11 Buckyballs and Safety 498
Case 8 .12 Energy Drinks and Workout Powders: Healthy or Risky? 499
x Contents
U N I T
8
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SECTION C
Product Sales 501
Case 8 .13 Chase: Selling Your Own Products for Higher Commissions 501
Case 8 .14 The Mess at Marsh McLennan 502
Case 8 .15 Silk Road and Financing Sales 504
Case 8 .16 Cardinal Health, CVS, and Oxycodone Sales 505
Case 8 .17 Frozen Coke and Burger King and the Richmond Rigging 506
Case 8 .18 Wells Fargo and Selling Accounts, or Making Them Up? 509
Ethics and Competition
SECTION A
Covenants Not to Compete 514
Reading 9 .1 A Primer on Covenants Not to Compete: Are They Valid? 514
Case 9 .2 Sabotaging Your Employer’s Information Lists before
You Leave to Work for a Competitor 516
Case 9 .3 Boeing, Lockheed, and the Documents 516
Case 9 .4 Starwood, Hilton, and the Suspiciously Similar New Hotel Designs 521
SECTION B
All’s Fair, or Is It? 525
Reading 9 .5 Adam Smith: An Excerpt from the Theory of Moral Sentiments 525
Case 9 .6 The Battle of the Guardrail Manufacturers 526
Case 9 .7 Bad-Mouthing the Competition: Where’s the Line? 528
Case 9 .8 Online Pricing Differentials and Customer Questions 528
Case 9 .9 Brighton Collectibles: Terminating Distributors for Discounting Prices 529
Case 9 .10 Park City Mountain: When a Competitor Forgets 530
Case 9 .11 Electronic Books and the Apple versus Amazon War 531
Case 9 .12 Martha vs . Macy’s and JCPenney 532
Case 9 .13 Mattel and the Bratz Doll 533
SECTION C
Intellectual Property and Ethics 536
Case 9 .14 The NCAA and College Athletes’ Images 536
Case 9 .15 Louis Vuitton and the Hangover 537
Case 9 .16 Tiffany vs . Costco 538
Case 9 .17 Copyright, Songs, and Charities 538
The Ethical Common Denominator (ECD) Index:
The Common Threads of Business Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
Alphabetical Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553
Business Discipline Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559
Product/Company/Individuals Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569
Topic Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
Contents xi
U N I T
9
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Copyright …
Leadership in
Organizations
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Leadership in
Organizations
Gary Yukl
State University of New York
at Albany
William L. Gardner, III
Rawls College of Business
Texas Tech University
N i n t h E d i t i o n
ISBN 10: 0-13-489513-4
ISBN 13: 978-0-13-489513-0
Copyright © 2020, 2013, 2010 by Pearson Education, Inc. or its affiliates. All Rights Reserved.
Manufactured in the United States of America. This publication is protected by copyright, and permission should
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Library of Congress Cataloging-in-Publication Data
Names: Yukl, Gary A., author. | Gardner, William L., III, author.
Title: Leadership in organizations / Gary Yukl and William Gardner,
University of Albany, State University of New York.
Description: Ninth edition. | Boston : Pearson Education, Inc., [2020] |
Includes bibliographical references and index.
Identifiers: LCCN 2018041734 | ISBN 9780134895130 | ISBN 0134895134
Subjects: LCSH: Leadership. | Decision making. | Organization.
Classification: LCC HD57.7 .Y85 2020 | DDC 658.4/092—dc23
LC record available at https://lccn.loc.gov/2018041734
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BRIEF CONTENTS
About the Authors xv
Preface xvii
Chapter 1 The Nature of Leadership 1
Chapter 2 Leadership Behavior 22
Chapter 3 The Leadership Situation and Adaptive Leadership 46
Chapter 4 Decision Making and Empowerment by Leaders 72
Chapter 5 Leading Change and Innovation 106
Chapter 6 Power and Influence Tactics 138
Chapter 7 Leader Traits and Skills 172
Chapter 8 Charismatic and Transformational Leadership 203
Chapter 9 Values-Based and Ethical Leadership 230
Chapter 10 Dyadic Relations and Followers 255
Chapter 11 Leadership in Teams and Decision Groups 284
Chapter 12 Strategic Leadership in Organizations 315
Chapter 13 Cross-Cultural Leadership and Diversity 349
Chapter 14 Developing Leadership Skills 375
Chapter 15 Overview and Integration 402
References 421
Author Index 505
Subject Index 526
vii
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TABLE OF CONTENTS
About the Authors xv
Preface xvii
CHAPTER 1 THE NATURE OF LEADERSHIP
Introduction 1
Definitions of Leadership 2
Indicators of Leadership Effectiveness 8
Research Methods for Studying Leadership Effectiveness 10
Major Perspectives in Leadership Theory and Research 11
Level of Conceptualization for Leadership Theories 14
Other Bases for Comparing Leadership Theories 18
Organization of the Book 19
Summary 20
Review and Discussion Questions 21
CHAPTER 2 LEADERSHIP BEHAVIOR
Introduction 22
Reasons for Diverse Taxonomies of Leadership Behavior 22
Some Important Types of Leadership Behavior 23
Specific Task-Oriented Leader Behaviors 26
Specific Relations-Oriented Leader Behaviors 34
Summary 42
Review and Discussion Questions 43
CASE: Consolidated Products 43
CASE: Superior Staffing 45
CHAPTER 3 THE LEADERSHIP SITUATION AND ADAPTIVE
LEADERSHIP
Introduction 46
Different Ways Situations Affect Leaders 46
Stewart Model of Situational Determinants 47
Other Situational Determinants of Leader Behavior 50
Guidelines for Coping with Demands and Constraints 56
Early Contingency Theories of Effective Leader Behavior 59
ix
Multiple-Linkage Model 61
Evaluation of Research on the Contingency Theories 65
Guidelines for Flexible, Adaptive Leadership 66
Summary 67
Review and Discussion Questions 68
CASE: Acme Manufacturing Company 69
CASE: Foreign Auto Shop 70
CHAPTER 4 DECISION MAKING AND EMPOWERMENT
BY LEADERS
Introduction 72
Decision Making by Managers 73
Participative Leadership 75
Normative Decision Model 81
Guidelines for Participative Leadership 85
Delegation 89
Guidelines for Delegating 93
Psychological Empowerment 97
Empowerment Programs 98
Benefits of Empowering Leadership and Programs 100
Summary 101
Review and Discussion Questions 102
CASE: Echo Electronics 103
CASE: Alvis Corporation 104
CHAPTER 5 LEADING CHANGE AND INNOVATION
Introduction 106
Types of Change in Teams and Organizations 107
Change Processes 108
Reasons for Accepting or Rejecting Change 110
Implementing Change 112
Guidelines for Implementing Change 116
How Visions Influence Change 121
Collective Learning and Innovation 126
Guidelines for Enhancing Learning and Innovation 130
Summary 133
Review and Discussion Questions 134
CASE: Ultimate Office Products 135
CASE: Ready Foods Company 136
x Table of Contents
CHAPTER 6 POWER AND INFLUENCE TACTICS
Introduction 138
Sources of Power 138
How Power Is Gained or Lost 143
Consequences of Power 145
Guidelines for Using Power 147
Influence Tactics and Outcomes 151
Types of Proactive Influence Tactics 153
Power and Influence Behavior 158
Effectiveness of Proactive Tactics 159
Guidelines for Using Proactive Influence Tactics 162
Summary 167
Review and Discussion Questions 168
CASE: Sporting Goods Store 168
CASE: The New Dean 170
CHAPTER 7 LEADER TRAITS AND SKILLS
Introduction 172
Personality Traits and Effective Leadership 174
Skills and Effective Leadership 185
Managerial Competencies 189
Situational Relevance of Traits and Skills 191
Evaluation of the Trait Approach 195
Guidelines for Leaders 196
Summary 198
Review and Discussion Questions 198
CASE: National Products 199
CASE: Prestige Marketing 201
CHAPTER 8 CHARISMATIC AND TRANSFORMATIONAL LEADERSHIP
Introduction 203
Charismatic Leadership 204
Effects of Charismatic Leaders 210
Transformational Leadership 215
Comparison of Charismatic and Transformational Leadership 217
Evaluation of the Theories 219
Guidelines for Inspirational Leadership 221
Table of Contents xi
Summary 224
Review and Discussion Questions 225
CASE: Metro Bank 225
CASE: Astro Airlines Part 1 226
CASE: Astro Airlines Part 2 227
CHAPTER 9 VALUES-BASED AND ETHICAL LEADERSHIP
Introduction 230
Conceptions of Ethical Leadership 231
Determinants and Consequences of Ethical Leadership 234
Theories of Values-Based Leadership 239
Comparison and Evaluation of Theories 245
Guidelines for Ethical Leadership 248
Summary 250
Review and Discussion Questions 251
CASE: Unethical Leadership at Enron 252
CASE: Restview Hospital 253
CHAPTER 10 DYADIC RELATIONS AND FOLLOWERS
Introduction 255
Leader–Member Exchange Theory 256
Leader Attributions About Subordinates 261
Guidelines for Correcting Performance Deficiencies 263
Follower Attributions and Implicit Theories 267
Impression Management by Leaders and Followers 270
Followership 272
Self-Management 274
Guidelines for Followers 276
Summary 279
Review and Discussion Questions 280
CASE: Cromwell Electronics 281
CASE: American Financial Corporation 282
CHAPTER 11 LEADERSHIP IN TEAMS AND DECISION GROUPS
Introduction 284
Determinants of Team Performance 285
Functional and Cross-Functional Work Teams 292
Self-Managed Work Teams 297
Guidelines for Leading Teams 300
xii Table of Contents
Leading Decision Groups 303
Guidelines for Leading Meetings 306
Summary 310
Review and Discussion Questions 311
CASE: Southwest Engineering Services 311
CASE: Columbia Corporation 313
CHAPTER 12 STRATEGIC LEADERSHIP IN ORGANIZATIONS
Introduction 315
Determinants of Organizational Performance 316
How Leaders Influence Organizational Performance 320
Situations Affecting Strategic Leadership 324
Organizational Culture 326
Research on Effects of Strategic Leadership 329
Executive Teams 332
Other Conceptions of Organizational Leadership 335
External Monitoring and Strategy Formulation 338
Guidelines for Strategic Leadership 340
Summary 343
Review and Discussion Questions 344
CASE: Costco 345
CASE: Turnaround at Nissan 347
CHAPTER 13 CROSS-CULTURAL LEADERSHIP AND DIVERSITY
Introduction 349
Cross-Cultural and Global Leadership 349
Cultural Values and Leadership 354
Guidelines for Global Leadership 360
Gender and Leadership 362
Summary 371
Review and Discussion Questions 372
CASE: Madison, Jones, and Conklin 373
CASE: A Day in the Life of a Global Leader 374
CHAPTER 14 DEVELOPING LEADERSHIP SKILLS
Introduction 375
Leadership Training Programs 376
Learning from Experience 378
Developmental Activities 380
Table of Contents xiii
Facilitating Leadership Development 391
Systems Perspective on Leadership Development 394
Summary 397
Review and Discussion Questions 398
CASE: Federated Industries 399
CASE: River Bank 400
CHAPTER 15 OVERVIEW AND INTEGRATION
Introduction 402
Major Findings About Effective Leadership 403
Multi-Level Explanatory Processes 407
Ways to Improve Leadership Research 414
General Guidelines for Effective Leadership 419
The State of the Field 420
Review and Discussion Questions 420
References 421
Author Index 505
Subject Index 526
xiv Table of Contents
xv
ABOUT THE AUTHORS
Gary Yukl
After more than 45 years of studying leadership, Dr. Gary Yukl is highly qualified to write about
the subject. His highest academic degree is a Ph.D. in Industrial-Organizational Psychology
from the University of California, Berkeley. He is an emeritus professor at UAlbany, State
University of New York, where before retiring he taught courses in leadership at the under-
graduate, MBA, and doctoral level. He is a member of the editorial boards for several important
journals that publish articles on leadership theory and research. His own publications include
many articles on leadership, and he has received a number of awards for best research article,
most-cited article, and best convention paper. He has also received two lifetime achievement
awards for his research and publications: the 2007 Walter Ulmer Applied Research Award from
the Center for Creative Leadership, and the 2011 Eminent Leadership Scholar Award from the
Academy of Management Network of Leadership Scholars. He has consulted with several
business and public-sector organizations to help improve the effectiveness of their managers,
and the leadership development programs he designed for a consulting company were used by
managers and administrators in many organizations. Some of the practical guidelines presented
in this book are from management development programs found to improve the effectiveness of
the participants. For his exceptional research and scholarship he was elected a Fellow of the
American Psychological Association, the American Psychological Society, the Society for
Industrial-Organizational Psychology, and the Academy of Management.
William L. Gardner, III
Drawing on his 40-plus years of teaching and researching leadership, Dr. William (Bill) Gardner
is well positioned to share his insights on leaders and effective leadership. His highest academic
degree is a Doctor of Business Administration (DBA) from Florida State University. He holds
the Jerry S. Rawls Chair in Leadership and serves as the Director of the Institute for Leadership
Research in the Rawls College of Business at Texas Tech University. He previously held fac-
ulty positions at Southern Illinois University, the University of Mississippi, and the University
of Nebraska–Lincoln. During his career, he has taught leadership and management courses at
the undergraduate, masters, professional MBA, and doctoral levels. Currently, he serves as the
Editor-in-Chief for Group & Organization Management and as an Associate Editor for The
Leadership Quarterly. He has published numerous high-impact articles focused on leadership
in top-tier journals and received several best-paper and most-cited-article awards. In 2011, he
received the Distinguished Doctoral Alumni Award from the College of Business at Florida
State University. In 2015, Texas Tech recognized him as an “Integrated Scholar,” an honor be-
stowed to “a faculty member who not only demonstrates outstanding teaching, research, and
service, but is able to generate synergy among the three functions.” In recognition of his exten-
sive contributors to the Southern Management Association (SMA), including his service as
President and an SMA Fellow, he received the “James G. (Jerry) Hunt Sustained Outstanding
Service Award” in 2017.
This page is intentionally left blank
xvii
PREFACE
This book is about leadership in organizations. Its primary focus is on managerial leadership
as opposed to parliamentary leadership, leadership in social movements, or emergent leadership in
informal groups. The book presents a broad survey of theory and research on leadership in formal
organizations. Topics of special interest are the determinants of leadership effectiveness and how
leadership can be improved. William Gardner was added as a second author for this edition to
incorporate his knowledge and perspective on effective leadership.
The book is appropriate for use as the primary text in an undergraduate or graduate course in
leadership. Such courses are found in many different schools or departments, including business,
psychology, sociology, educational administration, public administration, and health-care administra-
tion. The book is on the list of required or recommended readings for students in many doctoral
programs in leadership, management, and industrial-organizational psychology. With its focus on
effective leadership in organizations, the book is especially relevant for students who expect to be-
come a manager or administrator in the near future, for people who will be responsible for training or
coaching leaders, and for people who will be teaching courses or workshops that include leadership
as one of the key topics. The book is also useful for practicing managers and consultants who are
looking for something more than vague theories and superficial answers to difficult questions about
leadership. The book is widely used in many different countries, and some editions were translated
into other languages, including Chinese, Korean, Indonesian, Spanish, Greek, Croatian, and Swedish.
The content of the book still reflects a dual concern for theory and practice. We have
attempted to satisfy two different audiences with somewhat different perspectives. Most aca-
demics prefer a book that explains and evaluates major theories and relevant empirical re-
search. They are most interested in how well the research was done, what was found, how well
the research supports the theoretical basis for it, and what additional research is needed. Academics
tend to be skeptical about the value of prescriptions and guidelines for practitioners and may
consider them premature in the absence of further research. In contrast, most practitioners want
some immediate answers about what to do and how to do it in order to be more effective as lead-
ers. They need to deal with the current challenges of their job and cannot wait for decades until
the academics resolve their theoretical disputes and obtain definitive answers. Practitioners are
more interested in finding helpful remedies and prescriptions than in finding out how this
knowledge was discovered. Readers who desire to improve their leadership effectiveness will
find this edition of the book is even more useful than previous editions.
The different preferences are one of the reasons for the much-lamented gulf between
scientists and practitioners in management and industrial-organizational psychology. We be-
lieve it is important for managers and administrators to understand the complexity of effective
leadership, the source of our knowledge about leadership in organizations, and the limitations
of this knowledge. Likewise, we believe it is important for academics to think more about how
their theories and research can be used to improve the practice of management. Too much of
our leadership research is designed to examine narrow, esoteric questions that only interest a
few other scholars who publish in the same journals.
Academics will be pleased to find that major theories are explained and evaluated, find-
ings in empirical research on leadership are summarized, and many references are provided to
help readers find sources of additional information about topics of special interest. The field of
leadership is still in a state of ferment, with many continuing controversies about conceptual
and methodological issues. The book addresses these issues, but the literature review was not
intended to be comprehensive. Rather than detailing an endless series of weak theories and in-
conclusive studies like most handbooks of leadership, this book describes major findings about
effective leadership and how they can be applied by readers.
For practitioners and students who desire to become effective managers, we attempted to
convey a better appreciation of the complexity of managerial leadership, the importance of hav-
ing theoretical knowledge about leadership, and the need to be flexible and pragmatic in apply-
ing this knowledge. The current edition provides many guidelines and recommendations for
improving managerial effectiveness, but it is not a “practitioner’s manual” of simple techniques
and secret recipes that guarantee instant success. The purpose of the guidelines is to help the
reader understand the practical implications of the leadership theory and research, not to pre-
scribe exactly how things must be done by a leader. Most of the guidelines are based on a limited
amount of research and they are not infallible or relevant for all situations. Being a flexible, adap-
tive leader includes determining which guidelines are relevant for each unique situation.
Most chapters end with two short cases designed to help the reader gain a better understand-
ing of the theories, concepts, and guidelines presented in the chapter. Most of the cases describe
events that occurred in real organizations, but some cases were modified to make them more useful
for learning basic concepts and effective practices. For many of the cases, the names of organiza-
tions and individuals were changed to keep the analysis focused on the events that occurred in a
defined time period, rather than on recent events that may involve different leaders and a different
situation. The cases ask a reader to analyze behavioral processes, identify examples of effective
and ineffective behavior, and suggest effective ways to handle the situation that is depicted.
In this ninth edition, the basic structure of most chapters remains the same, but the order
of some chapters was changed, a few topics were moved to a different chapter, some new top-
ics were added, and the discussion of some other topics was expanded. Since the book is not
intended to be a history of leadership, it seemed appropriate to reduce the amount of detail
about early research programs and old theories that are no longer popular, and focus more
closely on what we now know about effective leadership.
New to This Edition
Following is a list of changes we made to make the book easier to understand and more useful
to most readers:
• The number of chapters was reduced from 16 to 15 to improve the organization of content.
• The order of chapters was modified to improve the explanation of related topics.
• Every chapter has been updated and revised for clarity and understanding.
• New examples of effective and ineffective leadership were added to most chapters.
• Personal Reflection exercises were added to most chapters to help students think critically
and apply the leadership concepts.
• Several new cases were added, and there are now two cases for all but the introduction
and overview chapters.
• Over 500 citations to recent research were added throughout.
• The design of the book was updated, and two colors are used for this edition.
Chapter by Chapter Changes
• In Chapter 1 (The Nature of Leadership) we added a discussion of the research methods
used to study leadership, including new methods such as social networks, biosensor
xviii Preface
methods, and behavioral genetics. The description of different theoretical approaches
for studying leadership was expanded.
• In Chapter 2 (Leadership Behavior) the description of distinct types of leadership behav-
ior was revised to include new knowledge and theories about these subjects. A new case
on leadership behavior was added to the chapter.
• In Chapter 3 (The Leadership Situation and Adaptive Leadership) the ways in which
leaders are influenced by the leadership situation was expanded to include the discus-
sion of leadership in extreme situations such as hospital emergency rooms, SWAT teams,
and police work. This chapter also includes some theories of situational determinants
and adaptive leadership that were included in a separate chapter on managerial work in
the previous edition.
• In Chapter 4 (Decision Making and Empowerment by Leaders) we added a discussion of
the threshold effect of participative leadership, which explains how there is a minimum
level of participative leadership that must be reached before the positive effects on
employee performance are realized. In addition, we expanded the discussion of psycho-
logical empowerment and empowering leadership.
• In Chapter 5 (Leading Change and Innovation) we added a discussion of the differences
among developmental, transitional, and transformational change, and organizational
cynicism about change was added as another reason for rejecting change. A discussion
of the strategic fitness process is included, and it involves a nine-step process of organi-
zational change that combats the “silent killers” of organizational effectiveness. This
chapter also includes a new case about leading change.
• In Chapter 6 (Power and Influence Tactics) the description of how leaders can effec-
tively use their power and several different influence tactics was expanded. A new case
about power and influence was added to the chapter.
• In Chapter 7 (Leader Traits and Skills) we added a discussion of core self-evaluations about a
leader’s worthiness, effectiveness, and capacity as a person. In addition, the concept of political
skill is discussed in more detail, along with the associated research and practical implications of
this skill.
• In Chapter 8 (Charismatic and Transformational Leadership) we added a discussion of
specific charismatic leadership tactics that leaders use to manage impressions. We also
describe how leaders can learn to effectively use these tactics. The discussion of contex-
tual factors that contribute to the emergence and impact of charismatic leadership was
expanded to include attributional ambiguity.
• In Chapter 9 (Value-Based and Ethical Leadership) we added an explanation of the fac-
tors that increase the moral intensity of an ethical issue and the effects of moral intensity
on ethical leadership. The constructs of ethical culture and ethical climate, and the dif-
ferences between them, are discussed, along with their effects on leader and follower
behaviors in organizations. We also refined the discussion of authentic leadership by
describing the four components: self-awareness, balanced processing, relational trans-
parency, and an internalized moral perspective.
• In Chapter 10 (Dyadic Relations and Followership) we added a discussion of how a
leader’s affective expressions serve as cues about the leader’s enthusiasm for the rela-
tionship, which in turn evoke emotional reactions from followers. We also describe how
leaders and followers sometimes attribute performance problems to their relationship
rather than to internal or external causes, and how leaders and followers may engage in
relational work for the purpose of improving the relationship and future performance.
Preface xix
• In Chapter 11 (Leadership in Teams and Decision Groups) we added a discussion of
how a team’s composition affects the emergence of identity-based, resource-based,
and knowledge-based subgroups, and the implications of these subgroups are ex-
plained. A new case was also added to this chapter.
• In Chapter 12 (Strategic Leadership in Organizations) we added a detailed discussion of
strategic human resource management, which calls for an alignment and coordination of
the firm’s human resource practices across organizational levels to ensure that human
capital is deployed strategically to foster enhanced competitiveness.
• In Chapter 13 (Cross-Cultural Leadership and Diversity) we introduced the concept of
global leadership and added a set of guidelines for effective global leadership and the
practical challenges that confront leaders of multinational organizations. We also added
a discussion of the “glass cliff” phenomenon, which refers to the tendency of women to
be more likely to be appointed to leadership positions that are risky and precarious.
We included a discussion of findings from research that investigates the relationships
between gender composition on corporate boards and key organizational outcomes.
A new case was also added to this chapter.
• In Chapter 14 (Developing Leadership Skills) we added a discussion of how return on
development investment (RODI) can be used as a metric for assessing the impact of
leadership development programs and activities. In addition, we expanded the descrip-
tion of factors that facilitate leader development to include the concept of developmental
readiness, which is a function of the leader’s ability and motivation to develop. We also
added a new case to this chapter.
• In Chapter 15 (Overview and Integration) we updated the summary of major findings
about effective leadership to include new findings since the eighth edition was written.
Ways to improve leadership research in the future are suggested, and we briefly sum-
marize some general guidelines for effective leadership.
Gary Yukl
The Villages, Florida
William L. Gardner
Lubbock, Texas
August, 2018
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Losinski forwarded the article on a priority basis to Mary Scott
Losinksi wanted details on use of the ED at CGH. He asked the administrative resident