Table of Contents
- Defining Ethics
- Challenges and Trends
- Ethics and the Law
- Codes of Conduct
- Barriers and Drivers of Ethical Behaviour
- Gender Diversity
- Leadership Roles
Ethics is a touchy subject and has been deftly handled by explaining the theories of Ethics in this article. The ideas, though moralistic in manner, cover humanity’s emotional state and are metaphysical in nature. In the business environment morality is what is in the best interest of the business, particularly its stockholders. However the use of employees by the management in carrying out this activity raises serious questions about the duality of private and business lives. This dilemma is conveniently ignored by those who either look for personal gain or have the fear of losing their jobs, but there are others, notably the few women in power, who abhor this practice. There is also the general awareness that corporations have to look after all stakeholders that eventually curbs unethical practices.
It has been concluded that leaders have a major role to play in creating conditions where the employees are not coerced into unethical practices that are in any case not acceptable by either the law or the society at large.
The Objective of Business is to earn profits for its owners, the shareholders. But does it mean an open license for managers to serve their employers without regards to those who help them to achieve the profit motive they work for? Do ends justify means? There aren’t any stakeholders; manufacturers, workers, customers and indeed the community that gives them the chance to work for profit? The managers need to conduct a balancing act with ever-present contradictions to please all stakeholders. However the role of the employees is crucial in performance of their obligations, hence a special relationship is required to be developed.
The business objectives can not be achieved without the confidence of the employees and their involvement. Leaders at all level have to be conscious of the fact that they have to set examples of behaviour that will be emulated by their sub-ordinates. These actions have to in consonance with the company’s objective and at the same time have to be balanced right. This balancing is based on principles or ethics.
It is becoming evident to business in America that ethical values need to be upheld and become institutionalized (Sims 1991) as this is the desired status by society in general. However the dilemma is squarely faced by the individual manager. He perceives his primary role to be looking after shareholder value (Vogel 1991) in preference to other stakeholders. Therefore they justify the moral result or implication of their unethical behaviour and decisions (Kram et al 1989) simply because they have the need to survive themselves in a amoral universe per se (Derry, 1989; Wood et al., 1988). Indeed there exists a moral contradiction under which managers uphold ethical values in their private lives while denying and ignoring their relevance in business context (Reilly and Kym, 1990). A majority of business executives of the Fortune 500 companies admit compromising on personal principles in order to attain organizational goals (Lincoln et al. 1982).
Ethical theories are all about morals. Among the many theories two ethical systems stand out. They are the Utilitarian theory and the Deontological theory. Utilitarianism was first propagated by Jeremy Bentham (1789) and John Stuart Mill (1806-1873) who believed in ethics of consequences meaning that an action is good if it produces the greatest good for the greatest number. This was called the consequential theory, too. (Boxilload).
In his book Utilitarianism, Mills states that that happiness is not only desirable, but the only thing desirable, as an end in itself. For all other desirable things, happiness is a means to that end. This is also called the “Greatest Law of Happiness.”
There are three main events under this theory. The consequences of the acts must be determined first of all. Second, the decision is about the quantity of happiness produced by those actions. Finally, the wellbeing of each individual is equally important, and behavior must be directed toward that end.
There are two sub theories of Utilitarianism. Van Wyck (1990) states that, according to the philosophy of Act Utilitarianism, the view is that a right action is also chosen by another individual and the common action the goal is at least to deliver the same good result. Under this principle an action for the greater good is taken even if it means abandoning or following a law or set of rules. In other words ends justify the means.
The proponents of the other theory called Rule Utilitarianism believe firmly in observing rule and not encroaching on others happiness even if the happiness of a larger group is likely to be affected. That means laws are meant to be followed in order to preserve meaning and balance in a society.
The other group, called Deontological Theory, maintains that commitments must be obeyed regardless of consequences. Deontologists argue that behavior is morally wrong not because of its consequences but because these acts are essentially a moral infringement (Boxill). Morally right mans accepted by God and morally wrong implies that God disapproved. God’s will is the arbiter of what is right or wrong. (Rachels 1986). This ethics is simple and straight forward and right and wrong depend on the Will of God.
In 1907 Henry Sidgwick extended the concept of Greatest Happiness to suggest that people’s welfare was more important than pure happiness. He felt that utilitarianism could be used to balance the morality of “common sense:” In effect Sidgwick attempted to bring utilitarianism into mainstream thinking of other less philosophical theories on ethics.
Challenges & Trends
Values and traditions are shifting and changing all the time, especially in contemporary times due to influences from all over the world brought about by easier communications and acceptability of previously unknown customs and rituals. Ethics have taken different meaning too and new ethical dilemmas face the managers and workers alike. Both managers and employees attempt to overcome and evade these issues in face of stiff competition and the conflict of interest comes into play.
The conflicts have many sources but the majority are from within the organisations themselves. In a study conducted by Society for Human Resource Management (SHRM 2003) along with Ethics Resource Centre, it was discovered that 49% employees were compelled to compromise their ethical standards to please their superiors; According to Joseph & Essen (2003) 48% were trying to meet business objectives; and 40% did so to help the survival of the company. There is a continuous pull between performing within ethical standards and serving the organizations. The biggest pressure on the employees, even managers and leaders, is to safeguard their own interest or means of livelihood. Lovell (2002) found in various interviews that mostly it was the fear of endangering the current or future employment prospects and the consequences of this for the family was the main reasons for unethical practices. This study also established that this fear and the loyalty to the organization were main factors in ignoring questionable ethical practices.
The culture of the organization plays a major role in this conflict of interest. Setting of standards, declaration of mission statements and preaching practices are all meaningless unless there are underlying principles are enforced with conviction.
Ethics and the Law
Normally, ethics is understood to be the underlying values attached to an activity. There may be laws and rules enforceable by a regulatory authority that defines ethics but in some cases it is defined by morally acceptable unwritten customs. The concept is drawn from the basic ideals of what is right or wrong within the meaning of the activity under question. It is commonly understood that laws shape the role of business, but in broader perspective it is the contribution of the business, by virtue of its varying role-play, to shape future laws and forms of regulatory activities. They also help in the evolution of business ethics when they cross the boundaries to set new rules for themselves. It would not be far-fetched to state the contributions by business towards law-making are enormous. It has a tremendous impact on the society in general. In counteraction the society too plays a vital role by accepting, modifying or rejecting these activities and re-defining the role of business ethics.
If we work on the premise that business ethics begins where the law ends then under the force of globalization the country of origin’s laws and financial regulations are not applicable and the demand of business ethics increases as the companies are beyond the control of the national governments. (Scholte 2000). Indeed in the absence of International laws and Global Regulations, businesses themselves form regulatory business ethics through self-regulation, global codes of conduct, ethical sourcing etc (Ronit 2001; Cashore 2002).
Codes of Conduct
Companies formulate their code of conduct to define processes and establish practices, all within compliance of laws and regulations. They have an additional need to be able to face market competition. In most cases the law is followed in letter but not in spirit. Therefore corners are cut in interpretation and profit becomes the motive of survival. This leads to unethical practices by the employees in the interest of the company. This is not only prescribed by the company and its leaders, it is also actively encouraged.
The American business culture is dominated by the bottom line. This extreme focus and emphasis on profitability leads to dubious in ethical practices. This has even breached the research activities. They too have become largely questionable and often animal rights activists are at loggerheads with business on this account. Similarly in case of Tobacco Industry a blind eye is turned despite the knowledge of its harmful effects.
An empirical research conducted and published by the Academy of management revealed that, from 1958 to 2000, there was more interest and consciousness of economic performance and less in human welfare.
It has been reported by the University of Michigan Business School that this shifting of emphasis on profitability, performance and productivity has effected the social responsibilities of business which has been relegated to sidelines. Leaders and managers are now considering employees as expendable and treat the society in general as the tool for obtaining competitive advantage in the cut throat corporate environment. This single mindedness on productivity and performance that is prevalent today brings about a spate of scandalous practices and as a result fraudulent practices by individuals come to light in much greater numbers today. This brings to fore the question of whether the managers and employees are being put to pressure to outperform one another? This strain leads to unethical behaviour.
White collar crime is on the increase and a reason for this is higher education that enables the employee and manager to use the power of technology to their advantage. (Labaton 2002). It has been said that introduction of stringent laws like the Sarbanes-Oxley Act and other regulations are deterrents to unethical practices. The fact is that they are merely legislations and rules that corporations and employees use for their personal benefits and bend their activities to go around them. Doubts, pessimism, sarcasm and cynicism abound and business revolves around getting things done by any means.
Barriers and Drivers in Ethical Behaviour
Human Resource Development theories have us believe that the cause of employee behaviour is the management led by its leaders at different levels. A look at the various theories of Human Resources will reveal this in depth.
An organization’s primary image is analogous to family, clan, or tribe where relationships, desires, emotions, and abilities are its members ‘ characteristics. The objectives are empowerment, liberation, fulfilment and self actualization of both the individual and the group and the challenge is how to develop attitude to achieve this goal.
There are three assumptions to all HR theories. Organizations serve human needs. Individuals and organization, for this service, need each other. To fulfill this purpose, it is critical that people and the organisation are in complete harmony.
Abraham Maslow (1954) explained this in a hierarchical way, beginning with human psychology, protection, belonging, self-esteem, and finally self-actualization. According to Maslow, workers have a basic human need and a right to aspire for self-realization, just as corporate managers and owners do and so do fulfilment the organization becomes stronger, competitive and profitable.
Chris Argyris (1957) argued that confrontation was an intrinsic part of the problem, and that the product of talent was job monotony. This dehumanizes a person and leads to conflict.
Frederick Herzberg (1959) suggests that in general there are only two factors that drive a person to work and that they are hygiene and motivators such as self-actualisation. Hygiene is not motivational but its absence will reduce motivation and a good hygienic atmosphere will increase motivating factors such as success, responsibility and progress. He also notes that wage increases without better sanitation would result in catastrophe, and the motivators.
Douglas McGregor (1960) discusses the management’s negative or positive disposition in his theory X and theory Y. According to him, a management negative attitude, theory X, presupposes workers are lazy, passive, unambitious, reluctant to be guided and resist change. Therefore management is by means of control, intimidation, threats and punishment. Low productivity, antagonism, unionism and covert sabotage lead. Positive management, theory Y, on the other hand, assumes people are motivated, involved and interested, optimistic, want to lead and are interested in changing. Management therefore takes place through open systems, communications, self-managing teams, and peer-controlled pay systems. The consequence is high organisation’s efficiency, bonhomie and treatment.
Most industries operate on the X theory and therefore there is the usual mistrust and struggle between the management and the workers. Unions are stronger and teamwork is only on paper. Self actualization is narrowed to self empowerment at the cost of others. This gives rise lack of loyalty on the part of employee. The only thing that motivates them is the fear of loosing their job. For increasing productivity they will adopt unethical means till such time as they get another and better opportunity. The organization therefore does not get the best out of them. The barrier is the attitude of the leadership and the driver is there is their personal need and greed.
It has been observed that gender diversity within the top leadership has a positive impact on ethical practices. It is reported by The Conference Board of Canada that 94 percent of boards which have three or more women members make certain that their organizations stick to conflict-of-interest guidelines. As against this only 68 percent of all-male boards follow this practice. The same survey suggested that boards with larger numbers of women also are more likely than are all-male boards to ensure that codes of conduct are followed in their organizations (2002). This goes to show that compared to males, the females value ethics greatly and are not willing to play a compromising role in their public and private lives.
Leaders play a vital role in business. They can transform an ordinary company into a vibrant organisation. These transformational leaders are capable of using their most important asset, the human resources, in a most productive manner. In doing so, they do not compromise on values but in fact emphasize them.
According to Armstrong (2001) the four main characteristics are ethical behavior, sharing a vision and goals, improving performance through charismatic leadership, and leading by example.
In yet another description the four characteristics have been referred to as the four “I’s” by Avolio, et al 1991 with which transformational leaders stimulate and engage their followers.
- Individualized Consideration: The leader gives personal attention to others, which makes every person feel highly appreciated.
- Intellectual Stimulation: Encouraging a new look to old methods, inspiring creativity, encouraging others to look at problems and issues from a different angle.
- Inspirational Motivation: By increases optimism and enthusiasm the leader communicates higher expectations and points out new possibilities.
- Idealized Influence: The leader provides a vision and a meaningful role thereby gets respect, trust, and confidence from followers.
The biggest ideal these leaders hold is integrity and honesty, and this is what brings about healthy ethical values in the whole organization.
Ethics or morals have always been an issue in business but it will be wrong to say that business and employees are more unethical today. In fact there is much higher consciousness of ethical values since it is recognised that a successful business needs to cater to all its stakeholders in equal proportion. This automatically results in upholding ethical values. It is true that there are instances of unethical practice both at the organizational and individual level, but by an large the general conception is to value ethical practices.
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