L-Ethical Behavior in Organizations

8/6/2019 L-Ethical Behavior in Organizations

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y

Its Fundamental Nature

Business ethics refers to the studyof peoples tendencies to behavein morally appropriate ways in

organizations.


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y Morals and Ethics: Whats the Difference?

In addressing a group about making key military decisions,U.S. General H. Norman Schwarzkopf once said, The truth ofthe matter is that you always know the right thing to do. The

hard part is doing it.

This notion is central to the distinction between two key

termsmoral values and ethicsthat are essential tounderstanding the nature of ethical behavior in organizations.


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Moral values (morals) are peoples fundamental beliefs

regarding what is right or wrong, good or bad.

One of the most important sources of moral values is

the religious background, beliefs, and trainingwe

receive. Although peoples moral values may differ,

several are widely accepted.For example, most people believe that being charitable to

someone in need is right whereas killing an innocent person is

wrong.

Ethics -Based on these beliefs, people are guided in ways that

influence the decisions they make and the actions in

which they engage. These standards are referred to as Ethics

Business ethics is the study of peoples tendencies to

behave in morally appropriate ways in organizations.


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Most organizational scientists acknowledge that

it is not a companys place to teach employees moral values.

After all, these come with people as they enter the workplace.

However, it is a companys responsibility to set clear

standards of behavior and to train employees in recognizingand following them. Just as organizations prescribe other

kinds of behavior that are expected in the workplace (e.g.,

when to arrive and leave), so too should they prescribe

appropriate ethical behavior (e.g., what precisely is

considered a bribe).


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Some UnEthical Organisations.

Arthur Andersen. This accounting firm was found

guilty of obstructing justice by destroying documents

related to the investigation of Enron, its client over

which it had auditing responsibility.

Enron. The bankruptcy of this former giant energy

company has been a catalyst for many of todays ethics

probes. Company officials were charged with creating

bogus partnerships that allowed managers to shift

debt off the books. This enabled officials to becomeenormously wealthy as Enrons stock soared.


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According to a survey conducted between 1994 and

2005, workers report that :

-the top managers have become more inclined to keeptheir promises,

-less inclined to engage in misconduct,

-less likely to feel pressure to be unethical, and

-perceive greater attention paid to practicing honesty

and respect for others.

At the same time, 55 percent of employees who

observe ethical misdeeds report them to organizational

authorities.


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Why Do

es Ethical Behavio

rM

atter inOrganizations?Under some circumstances, even seemingly ethical peoplebehave unethically. Pressure tomeet sales quotas, for example,have led some stockbrokers to boost their commissions by

convincing unknowing clients to make bad investments. Clearly,this is wrongon moral grounds. Although managers may beuncomfortable changing their morals, they must be concernedabout promoting ethical behavior for two sound businessreasons. First, over the long run, being ethical is profitable.

Second, being ethical satisfies many of todays legal regulations.


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Ethics and Profitability: You Can Have ThemBoth!

Too many people believe that being profitable

requires being unethical, at least sometimes. Thisproves to be untrue in the long run.

In fact, the evidence is clear that good ethics is good

business and that bad ethics is bad business.


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In recent years, companies have gone out of their way to

comply with the ethical requirements. Some of the most

prominent ones can be illustrated by examining the

response of one particular companythe large

pharmaceutical firm, GlaxoS

mithKline (GS

K).Specifically, policies were introduced that did the

following:

_Limited acceptance of entertainment and gifts by

employees_Raised standards for accurate documentation of

company performance.


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Ethics in the International Arena

Figuring out how to behave ethically isnt always easy.People in different cultures often have different ethical

standards. Consider the examples:

_In China, using pirated software is consideredacceptable.

_In Indonesia, bribing an official is considered anacceptable cost of doing business.

_ In Japan, you cannot conduct business unless you givethe other party a small gift.

_In North America, all such acts would be frownedupon and considered illegal and/or unethical.

Clearly, the implications for conducting business globally

are confusing.


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y Three Guiding Principles of Global Ethics

Show Respect for Core Human Values.

To be ethical, company officials must use their moralcompasses to guide people toward acceptable practices

and away from intolerable ones.

For example, taking steps to promote a healthy workplace,one that is free from physical danger and psychologicalabuse, is ethically appropriate. At the same time,

companies should refuse to do business with suppliers,such as those in the garment industry, who usesweatshops.


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Demo

nstrateS

ensitivity to

Lo

cal Traditio

ns.

Being ethical requires following local traditions, so longas these dont violate core human values, of course. As a

case in point, co

nsider the practiceo

f gift-giving amo

ngbusiness partners in Japan.

Such acts are not meant to be bribes. Rather, the act ofgiving small gifts is a customary ritual that connotespoliteness and trust between the parties. To not accept a

gift from a business partner would be consideredhighly impolite and insulting. These days, becauseAmerican companies conduct so much business in Japan,officials are coming to accept this practice as acceptable.


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Recognize that Context Matters when

Distinguishing Between Right and Wrong.

Sometimes whats right in one context may be considered

wrong in another. In the UnitedS

tates, fo

r example, itwould be considered unethical (and potentially illegal)to hire ones own relatives instead of a more qualifiednonfamily member. By contrast, conditions in India aresuch that such a practice makes sense. Indians believe

that keeping the family together is more important thanpursuing economic opportunities.


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yComponents of Corporate EthicsProgramsTypically, corporate ethics programs consist of some

combination of the following components:

Code of Ethics A code of ethics is a documentdescribing what an organization stands for and thegeneral rules of conduct expected of employees (e.g.,to avoid conflicts of interest, to be honest, and so on).

Some codes are highly specific, stating, for example,the maximum size of gifts that can be accepted,whereas others are far more general.


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Ethics TrainingCodes of ethics are especiallyeffective when they are used in conjunction withtraining programs that reinforce the companysethical values. About 68% of companies that havecodes of ethics provide training on the requirementsand responsibilities they specify. Citicorp, forexample, has trained more than 40,000 employees inover 60 countries using an elaborate corporate ethicsgame, The Work Ethic, that simulates ethical

dilemmas that employees are likely to confront.


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y Bodies Formally Responsible for Ethics

These are groups of senior-level managers from various areasof the organization who assist an organizations CEO in makingethical decisions. Members of the committee develop andevaluate company-wide ethics policies.Ethics officer:

A high-ranking organizational official who is expected toprovide strategies for ensuring ethical conduct throughout anorganization.

y AMechanism for Communicating Ethical Standards. To

be effective, ethics programs must clearly articulateandreinforcea companys ethical expectations to employees.ethics hotlines (or helplines), special phone lines that

employees can call to ask questions about ethical behavior andto report any ethical misdeeds they may have observed.


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y Ethics AuditsJust as companies regularly audittheir books, they regularly should assess themorality of their employees behavior so as toidentify irregularities. Such assessments are

known as ethics audits.These require actively investigating anddocumenting incidents of dubious ethical value,discussing them in an open and honest fashion,

and developing a concrete plan to avoid suchactions in the future.

Documents

L-Ethical Behavior in Organizations