Corporate Ethics in Organisations - Essay Example

Running head: CORPORATE ETHICS IN ORGANIZATIONS Corporate Ethics The issue of corporate ethics has become of a significant importance in today’s business world. The problem’s angles not only shape a company’s internal and external policies and behaviors, but also tend to be of even a higher importance as the world of business grows along with globalization and internalization trends accompanying the economic development of the countries. The problem of defining right and wrong, good and bad, virtue and vice has always been much discussed and analyzed in the society. There are many theories that try to explain why we choose to act in this of that way, why we define something as bad or good, what we are based on in our everyday choices and decisions. Our conscience tells us what we believe to be right or wrong and the reasons behind it. It is beneficial because good and bad are self evident and, therefore, easy to distinguish. We can instantly see if something is right or wrong by logical thinking. It is also beneficial because it can be adapted to every situation, taking into consideration all the factors, which make something right or wrong, and everybodys point of view. However, there are some problems with this. For example, if everything goodness is self evident, then why do we often find ourselves in situations where we cannot decide? Life is a very complicated thing and many decisions are not easy, we have to ponder on them for quite some time before we make up our minds. Does this, therefore, rule out the theory of everything having a self-evident level of goodness? Denise Schoenbachler, Dean of the College of Business at NIU, believes that ethics, and corporate ethics in particular, is not just a set of rules and practices a company tries to implement, but a set of inner beliefs of the employees. Surely, such a system of beliefs can and should be formed by means of the company’s influence. Still, it is formed on the basis of people’s beliefs and moral values, and greatly depends on both the company’s and other employees’ attitudes and loyalty. In the interview for Smart Business Chicago (Duffy, 2008) Mrs. Schoenbachler states that corporate ethics can be based only on ‘corporate ethics culture’ first of all (Schoenbachler, 2008). She outlines that it is the responsibility and the duty of the leaders to show the employees of how an ethical business should be run. The leaders are, consequently, to educate their followers about the various aspects of ethical and unethical business culture. Therefore, as I understand Mrs. Schoenbachler’s idea, the leaders are the one to not only teach and educate their followers, but also show an example of highly ethical and moral behavior and attitudes. Therefore, successful leadership potentially involves a broader, though in some aspects identical, set of skills and approaches to be used, and calls for specific personal attributes of an individual. Dean of the College of Business suggests role-playing, recognition of achievements, outlining mistakes, and education like ‘training in ethical business practices’ (Schoenbachler, 2008) to be the tools for solving any ethical dilemmas within an organization. Nevertheless, I personally would question such an approach since any education should be based on a certain particular set of values and rules to be followed. Therefore, at this point it can be concluded that since such values are set by individuals within organizations, they are to some extend subjective because are based on a person’s individual perception and understanding of the issue. Consequently, such an education may also have some features of subjectivism since it reflects and teaches particular views of an individual, which cannot be considered absolutely right and objective because any moral or ethical principles are relative in their nature, I believe. After getting deeper into some research on the ethics topic Mrs. Schoenbachler’s position seems to have a common foundation with the point of view of W. D. Ross’ who argued that "I know what my duty is, but sometimes it conflicts with another and therefore a choice must be made" (Ross, 1930). He is saying that everything still has a self-evident goodness but we are simply put in the position where we have to choose the greater of two evils. We have to decide which option brings more good to the world and opt for that. Even so, there are still many situations where we do not know what is right and many cultures where there is no one ethical way of life, we do not have clear instincts on some moral dilemmas. It may be also suggested that all moral views are just as important as each other because you cannot say one is totally correct or wrong. This is because it is based on personal opinion and feelings, which can never be debated seeing as they are personal to you. Emotions and feelings play a big part in our life and, therefore, our expressions of preference are valuable. In his paper ‘The Psychology of Ethics in the Finance and Investment Industry’ Thomas Oberlechner (2007) outlines that ethical scandals are really very numerous nowadays, especially starting in 1999 when the first internet-based companies came to the market. The most extreme the situation grew in the financial industries, states Oberlechner, so that at some point banker’s profession was considered to be the least ethical. Unlike Schoenbachler (2008), who only stresses the importance of corporate ethics, Oberlechner (2007) also tends to explain the reason for their absence – specifically in the finance industry, - a desire to make a profit. Surely, considering a sophisticated nature of human mind, it is a very logical conclusion – while ethics is a very relative and indefinite set of moral regulations, material wealth is always a good motivation for action. Under such circumstances, I believe, it is the most logical conclusion to make, especially considering the fact that all the ethical and moral views and beliefs are very relative and greatly vary from individual to individual. Oberlechner also outlines that behavior greatly depends on the individual’s social environment. Together with Schoenbachler’s belief that ethical behavior can be taught and developed with time, this leads to the conclusion that ethical behavior does depend on the person’s surrounding, education, and social background. Therefore, since it depends on the environment, the company’s management, as a leading force, does have the power to influence and shape corporate culture and, consequently, ethics. At the same time the above mentioned force is the one to create an environment that would allow an individual to develop new ethical and moral principles, values, and beliefs. However, in nowadays’ complex organizational structures it is rather difficult to be able to assess each employee’s individual morale, and, consequently, evaluate how effective any education or training is. Hence, while much time and effort should be put into the development and implementation of such educational programs, the results’ measuring tools can not be absolutely objective. At the same time both authors agree on the fact that in many organization the so called ‘codes of ethics’ or any other ethical standards set for the employees are a result of the profit maximization policies. That is, if an employee acts ethically, the company maintains its positive reputation, gains more profit, avoids losses related to unethical behavior of the employees. When, on the contrary, an employee does something unethical, the company is greatly affected, and can have great losses, in both profit and reputation, that diminish organization’s role in the business world. Code of Ethics and Standards of Professional Conduct for members of the CFA Institute outlines the rules and principles for members and candidates to follow. In my opinion, this document does not correspond to Schoenbachler’s philosophy. Schoenbachler believes ethics should be based on culture and positive example, while the Code only sets the rules. However, a code of ethics is an important and essential feature of any organization because the code provides its employees with clear guidelines of how to maintain ethical behavior and decision-making within the organization. It, of course doesn’t provide solutions to each particular situation, but gives basic principles that are to be followed in any situation. All the elements of the Code of Ethics are based on ethical and legislative norms that are generally accepted by the society, social values and needs, basic moral and ethic principles of the society and on guidance drawn from personal values, culture, and experience. I believe the Code is a good guide to follow. However, each individual may have own beliefs and values which may mot correspond to the generally accepted principles. As the example with Minerals Management division (Times Argus, 2008), generally accepted principles may not correspond to individual perception of how they should be implemented. Though the Code covers all the important ethical issues involved in corporate governance, additional clarification and values’ reinforcement is needed for the employees in my opinion. Such an approach would help shaping people’s moral and ethical principles, and strengthen their beliefs and moral culture. At the same these guidelines are given in order for an employee to act ethically right and take a correct decision in each particular situation. The Code also provides an employee with main and basic behavioral principles to maintain within his/her working environment. A code of ethics is, I believe, a subject to constant revision and updating in order for it to correspond with the contemporary situation within the society, its moral and ethical values, principles and beliefs. It has to reflect the state of outside world and the society’s current vision of what is right and wrong, good and bad. When due to some social processes these parameters of general perception and social vision of the values to be followed changes, the organizational code of ethics is to be changed as well and should reflect the basic values of the organization and of the society. We base our ethics on the norms around us and how others and we ourselves act. Therefore we, as individuals, are in fact the ones who decide what actions and behaviors are ethical, morally determining our own providence. Any action can be justified and this is exactly what people do in case they act unethically. Basically, the analysis of this issue should be actually started from the analysis of individual perception of the world, individual values, norms and morals. What seems bad to one person may seem good to another – first of all it depends on an individual. In case a person all the same behaves or acts unethically and clearly realizes it, then this may be justified by good personal intensions and good personal thoughts as for that particular action. Though not always the action may be justified for the society in general, it’s appears difficult to define whether the individual’s behavior was ethical or not because it depends on the society’s system of values, beliefs and moral principles. Hence, one of the most important reasons of person’s acting in this or that way is a set of personal values, beliefs, individual understanding of rightness or wrongfulness of these or those phenomenon. The second factor influencing personal decisions is the community an individual lives in, the way people around live. People are used to observe and take outside events as an example for behaving: if my neighbor does it, why can’t I? – A standard way of thinking we often use. That’s why not only personal values, but social ones are defining the way a person is likely to behave in some particular situation. According to Oberlechner’s study, in their nature people are initially ethical and moral. Therefore, both authors, Oberlechner and Schoenbachler, define ethics as not only rules regulation what to do or what not to do, but a set of values to be followed in order to achieve personal and corporate excellence. At the same time Oberlechner mentions very different approaches to ethics. As an example, consequentialist approach considers ethics any action that gives positive results – profit. Deontological approach, on the contrary cares more about the fairness and truthfulness of the actions. Virtue ethics, at the same time, emphasizes the type of a person an individual should be in order to be ethical. One of the recent articles of Times Argus (2008) speaks that the employees of the Interior Departmen’ Minerals Management division took gifts from the companies they should oversee, had personal relations with those companies’ employees, etc. Though the Department’s inspector stated it was an ethical failure, the convicted employees just stated that they were developing business relations in such a way. That is, here we see an example of how different understandings of ethical and unethical result in specific conclusions and judgments: while one person sees such a behavior as an ethical failure, another person understands it as just developing business relations. The same article describes a case when a retired employee helped her friends to get a large procurement contract. These and other events are claimed to be ‘mismanagement’ that cost billions to the taxpayers. Here we see another ethical dilemma: on one hand it is not difficult for a person to help an old friend, on the other hand – the society considers such an action to be totally unethically since violates the principles of fair and open competition. At the same time, is it bad to help people? – No, everyone would say. And, probably, the retired employee did not mean to act badly, he just followed his (!) moral principles – that it is good to help people. Terence Corcoran (2008) writes about Jerome Kerviel who left the French bank with seven billion stock trading losses. The author further states that this event was considered to be a result of poor market culture and poor corporate ethics, and that the banking industry lacks ethics in general. The author himself, however, does not support this idea, and believes that corporate culture cannot be analyzed by the actions of one individual. To some extend I agree with Corcoran, but, on the other hand, what is corporate culture? – Isn’t it a set of personal ethics of individual employees? And if so, the corporate culture should be analyzed by the action of each individual because, all together, they create that corporate culture. It is exactly what Schoenbachler writes about – a corporate culture is a set of individual ethics, values, beliefs, etc. In the article “The fastest cars have the best brakes” Carole Stern Switzer (2008) describes how their company leverages value from corporate ethics. Ethics management is considered to be of the tools for growing and developing business. The author states that measuring and reinforcing ethics within the organization help to increase performance and improve company’s culture. And indeed, this point of view corresponds to Oberlechner’s idea that high ethical standards within the company do help an organization to succeed, increase profit, and reinforce one’s image. Leanne Hoagland-Smith (2007) provides in her article the facts that prove how poor corporate ethics can turn down both individual and organizational performance. At the same time the author believes external education and trainings will not help. Instead, she states, the leaders should take care of the moral state of the employees. An article by Mallen Baker (2008) discusses some results of the case study conducted by the UK Institute of Business Ethics. They found out that most of the ethical complaints come from influenced customers. Consequently, they defined that customers don’t trust companies as much as it was before Enron, for example. No matter what positive programs a company may run, the customer’s trust is not that easy to earn nowadays. Human Resources departments across the U.S. are coming up with innovative ways to teach ethics to employees. Rouda and Kusy (1995) outline that organizational excellence is based mainly on human resources and only on people themselves depends the productivity of all the other resources such as physical, financial, and informational ones. They continue their thought with the idea that organized by the organization learning and training should be aimed at each person’s development, improvement of personal performance, and, as a result, improvement of organizational performance. A need for personal development is also caused by constantly changing environment in both personal and organizational spheres. Times change, new technologies appear, people’s demands change, while organizations’ purpose is to bring people the very best products and services. Therefore, each person’s abilities and skills should correspond to those needed for efficient work in certain area. Consequently, successful performance in each particular area is impossible without constant development, learning and improvement as the external environment changes, modifies, and moves to another levels. In order to improve the organizational culture we must also motivate the topside to listen, take our advice seriously and motivate our employees to take the initiative to communicate with one another, and generate a feeling of one organization. The following steps can be made in order to achieve this goal: we must outline visions that encompass the values and beliefs’ of the individuals and the organization, and we must define several goals that represent a lifestyle desired by most. Both visions and goals should be outlined. Once established, mechanism to promote the common visions and goals must be devised and put into place by human resources. Mechanisms such as an annual company outing that represent a lifestyle desired by most and an employee of the month compensation for goal promotion or achievement can be a part of the solution. Individual compensation should also promote the organization’s visions. A common vision is the standard constant for success across all social classes and lifestyles. Human resources must present all the innovations to our employees as their vision, thereby motivating them to develop a more exciting organization. Human resources must recognize the barriers and work at removing them. An organizational vision that motivates is the secret to achieving an organization desired by their employees (Webb, 2001). Employee participation in creating a new organizational culture can be done using the above mentioned Goal-Setting Theory. This will reduce any possible conflicts. There will be a new organizational culture with employee input, thereby making all employees stakeholders in the new organizational excellence. Diversity among motivational factors is inevitable within any organization; however, it is the commonality of certain beliefs which produce the solidity of the group. There are clear differences between the motivational factors of men and women. The men identified competitive factors higher on the list of motivators, while women listed group cohesiveness as their top motivational elements. This fact should be also considered by management when developing motivation strategies for the employees. Bandura (1997) outlines that a great role in the efficiency of both personal development and achieving mentioned above goals play one’s beliefs or expectations as for the abilities and results of potential achieving some self-improvement. Such expectations will them determine whether the goals will or will not be achieved, whether a person will or will not accept certain new value or line of behavior. Besides, such beliefs about one’s abilities are claimed to be am important factor in determining how much effort and time a person will put into the process of the desired development of certain personal traits (Bandura, 1997). Related to careers, these expectations define one’s career-related behavior, making choices in education, person’s being devoted to those choices and scope of effort put into their realization (Betz & Hackett, 1997). They actually become a reflection of one’s understanding of his abilities to accomplish certain tasks, to perform certain behavioral patterns (Hackett & Betz, 1981), and, therefore, before deciding to improve some aspects of one’s being a person should first of all raise one’s self-esteem and confidence in one’s abilities. So, self-efficacy greatly depends on person’s internal feelings about oneself: the more positive they are, the greater is the possibility of successful achievement of all the goals set. Peoples opinions often take into account definite sets of values that they agree with. Listening to different emotive opinions will give us a broader outlook onto moral issues, because there are many different points of view to be heard. It does not prove anything because opinions are neither right nor wrong. Logical and rational thinking plays a very important part too. Therefore, we must include this in the way we think to receive a balanced and fair point of view on everything. Reducing it to mere emotions is not considered an acceptable way of looking at things. To make a fair and all rounded balanced and acceptable decision, we must include both emotion and reason together. This is because rational thinking is brought into consideration, prescribing a course of action to be taken rather than solely relying upon our feelings. That is why I think that whether we believe right or wrong to be mere personal preference or to have some deeper meaning, which follows absolute values all, depends on personal opinion. Many would say there is no such thing as an absolute set of values because everything depends on different circumstances as to whether it is right or wrong. Others would say there are some sets of values or morals that are always right, such as striving for peace or happiness. It all depends on which side you base the majority of your decision making; your emotions and feelings or your logic and reasoning. . References: Bake, M. (2008). Can you have social responsibility without ethics? An Article from Business Respect, Issue Number 132, dated 20 Jul 2008. Retrieved September 20, 2008 from http://www.mallenbaker.net/csr/CSRfiles/page.php?Story_ID=2157 Bandura, A. (1997). "Self-Efficacy: Toward a Unifying Theory of Behavioral Change." Psychological Review 84: 191-215. Bandura, A. (1997). Self-Efficacy: The Exercise of Control. New York: Freeman. Betz, N. E., and Hackett, G. (1997). "Applications of Self-Efficacy Theory to the Career Assessment of Women." Journal of Career Assessment 5, no. 4: 383-402. Corcoran, T. (2008). Ethical failure? No. Société Générale is a sign of amazing market system success: Corcoran. Nationalpost. Retrieved September 20, 2008 from http://network.nationalpost.com/np/blogs/fpcomment/archive/2008/01/24/ethical-failure-no-societe-generale-is-a-sign-of-amazing-market-system-success-corcoran.aspx Duffy, M. P. (2008). Ethics, Front and Center. The importance of a culture of ethics. Insights Executive Education. Smart Business Network Inc. Reprinted from the September issue of Smart Business Chicago. Retrieved September 20, 2008, from http://www.cob.niu.edu/highlights/niu_chi.pdf Hackett, G., and Betz, N. (1981). "A Self-Efficacy Approach to the Career Development of Women." Journal of Vocational Behavior 18, no. 3: 326-39. Hoagland-Smith, L. (2007). The Real Cause of Business Management Failure is More About Ethics Than Skills. EzineArticles. Retrieved September 20, 2008 from http://ezinearticles.com/?The-Real-Cause-of-Business-Management-Failure-is-More-About-Ethics-Than-Skills&id=407117 Kusy, M. E., and R.H Rouda. (1995). “Development of human resources - Part 2” Technical Association of the Pulp and Paper Industry. Retrieved September 29, 2008 from http://www.work911.com/cgi-bin/links/jump.cgi?ID=5044 Oberlechner, T. (2007). The Psychology of Ethics in the Finance and Investment Industry. The Research Foundation of CFA Institute. Webster University Vienna. Retrieved September 20, 2008, from http://www.cfapubs.org/doi/pdf/10.2470/rf.v2007.n2.4697 Ross, W.D. (1930). The Right and The Good, Oxford. Reprinted with an introduction by Philip Stratton-Lake. 2002. Oxford: Oxford University Press Switzer, C. S. (2008). The fastest cars have the best brakes. Business Management. Retrieved September 20, 2008 from http://www.busmanagement.com/currentissue/article.asp?art=26106&issue=156 Times Argus. (2008). Ethical failure. Editorials. Retrieved September 20, 2008 from http://www.timesargus.com/apps/pbcs.dll/article?AID=/20080912/OPINION01/809120309/1021/OPINION01 Webb, C. B. (2001). Elements of Motivation. Retrieved September 29, 2008 from http://motivation-tools.com/ Read More