Rationale and Motivation for Overt Ethical Policy - Coursework Example

Rationale and motivation for overt ethical policy Ethics in simplest terms means to be able to discriminate between the right and the wrong and have the courage to stick to the right no matter what temptations may arise. Managers justify that the definition of ethics changes with the situation. John C Maxwell says, "I believe the problem is that they had never made the decision to be an ethical person." He says successful people make decisions early in life, and manage those decisions the rest of their lives. "You cannot manage decisions you havent made" (Maxwell cited by Hillard, 2004). With the fall of corporations like Enron and WorldCom, business ethics has been a hot issue, be it at the B-schools or at forums. Corporate scandals and billion-dollar bankruptcies are the results of the lack of ethics in business today. According to Robinson (2002), ethics is a set of moral principles held by an individual or a group, encompassing individual behaviour, environmental policy, staff policy, and corporate social responsibility, which has gained importance recently. Demands of the shareholders, stakeholders and investors are forcing industries to maintain a high morality in how companies conduct business. Any deviation can adversely affect the brand image, customer retention, and overall business. A certain group of investors in Europe have decided to invest only in companies who are conscious of their social responsibility. Total, a Paris based oil company has instilled in its managers that it has a mission apart from making money (Peter, 2004). It is responsive in the way it deals with the environment, the employees, customers and vendors, with the governments and the people of the countries in which it operate. The rationale for ethics in business stems from the fact that when corporations collapse the society in general loses – the shareholders lose, the customers, the employees, the community, the creditors, the family – all lose. Hooker (2003) argues that ethics exist because ethical behaviour does not always pay. If ethical behavior were always rewarded, there would be no need for ethics. In the long run, however, morality pays. Unethical people do run into trouble even if they have reaped profits for some time. Ethical companies develop a brand image; investors come forward and support it in times of trouble. Above all, it brings financial rewards with it. There can be certain standard business practices laid down as far as child labour, integrity, respect for fellow employees, customers and business partners are concerned but code of ethics would differ from industry to industry. Any business functions within the ethical and the social codes of the society within which it operates. Then again the operations within an individual firm are conditioned by the morals and values held by the individual managers within that firm. When the two sets of values or codes of conduct differ then arises the conflict, which is detrimental to the long-term interests of the company. Managers tend to remain ethical when the going is good but they tend to go astray with the slightest temptation. Profits at the cost of ethics may pay rich dividends today but these are more often than not short-lived. Executives may be under pressure to achieve targets and find no discomfort in either engaging child labour to cut costs or conceal product information. They derive their bonus and move on to ‘better prospects’ for a better ‘pay packet’ leaving the company to ‘face the music’. This is at the individual level but there are instances even at the corporate level. Hooker (2003) cites the example of Nestle Corporation who wanted to capture the infant formula market in parts of Africa and employed nurses in local clinics to educate the mothers about the advantages of using their product. They even went to the extent of convincing the mothers that it was sophisticated and western to use the formula instead of breast feeding. Unfortunately, the water that was available to prepare the milk was unhygienic and the babies were falling ill. This did not deter the executives from withdrawing the product or even warning the mothers. It was only when there was a boycott by the consumers worldwide did the company relent. People argued that the directors of the company had no right to withdraw a product that was bringing in profits. Corporate giants like the CEO of Coca-Cola too make tall claims that by being more efficient and more profitable, it makes businesses better for the community (Ash, 2004) but findings reveal otherwise. Had the company been practicing what it preached, protestors would not have interrupted and demonstrated at the AGM of the company. The list of accusations against Coke are lengthy. They have committed as many as 179 major Human Rights violations (Cairns, 2005). The union leader was shot dead at the Columbia bottling plant. Turkish and Indonesian workers face mass firings for their union activity. Multination Monitor, an American non–profit organization, listed coke amongst the worst ten companies in US. In India they are diverting potable water from local residents for the production of soft drinks. During the processing of soda pop in India, Coke has contaminated soil and underground water with toxic cadmium, which was found in the sludge. They have also been charged and found guilty of bribing the Pollution Control Board in South India. They are accused of inflating profits, selling contaminated beverages and violating contracts. All these are against the basic ethics of business. It also demonstrates lack of social responsibility on the part of coke. Ethical standards are important and necessary in the hospitality industry. In the hospitality environment, ethical issues surround guest rights, empowerment, sexual harassment, equal opportunity, departmental relations, vendor relationships, yield management, community and public relations, and the balance of personal and organizational values (cited by Upchurch, 1998). In a service-based setting like the hospitality sector, it is the management’s role to resolve ethical issues. It has been found that management in this sector base their ethical decisions on self-interest, care and concern for others and on the importance of adherence of internal and external rules and regulations. Individual values, values of the society are also taken into consideration. It is a difficult task for the management as Stevens and Fleckenstein (1999) argue that customers and staff converge at a point from different backgrounds. They have diverse expectations and their opinions on morality and ethical standards differ (cited by Yeung et al.,). Globalization has brought significant impacts on the global economy, culture and society. This has led to multinational hotel companies opening units worldwide and employing local people. A survey of Chinese restaurant managers working in Hong Kong revealed the difficulties they had to encounter. Expatriates held the top management positions in these restaurants (Wong & Chung, 2003). It has been observed that such assignment lead to clash of culture and values, thereby making their task difficult. They become confused and frustrated as they enter a foreign work culture. They are either ineffective or fail in their assignments. The ability to understand foreign culture and manage effectively determines their managerial capabilities. Values differ as culture differs from region to region, which makes the situation difficult to handle. It has also been proved that culturally homogenous workers performed better than culturally heterogeneous workers do (Thomas, 1999, cited by Wong & Chung). Job satisfaction and commitment increase in a homogenous environment. In the hotel industry, managerial ethical standard (MES) is the process in which the management is responsible to mould the hotels’ ethical environment. Hotel employees face ethical challenges and temptations at their workplace every moment. A guest may offer tips for room upgradation, or seek assistance in theft of hotel property or ask for some services, which are not part of the routine services. In the absence of code of conduct, the employee has to take instant decisions. Conflict between ethics and industry: custom and practice, conflict with notions of ethics and social responsibility and special connection with marketing context of sales promotions. The hospitality industry comprises of hotels, motels, contract catering, restaurants, pubs, clubs and bars apart from hospitality services. Each of these sectors requires licensing and the licensed retail sector of pubs, clubs, and bars alone is worth 20 billion pounds (AGCAS, 2005). There are about 64000 licensed units operating in UK and includes city nightclubs. The question that arises is even though it is a licensed sector and efficiently managed, how ethical is it to conduct business of this type? Are the pubs aware of their social responsibilities towards the staff and the customers? The pubs mostly employ students due to which many staff works part-time. The pubs have led to the development of late evening culture, which is frequented by the youth in the age group of 18-30. Consumption of alcohol is the major attraction. Pratten & Greig (2005) cite a recent study which showed that on a weekend Norwich will have about 15,000 people; Newcastle upon Tynes city centre is registered to allow 30,000. Croydon expects to attract 25,000 visitors on Saturday evening, and Cheltenham welcomes 20,000. With these figures, the advantages in economic terms are clear both for the nightclubs and for the region concerned. What is being ignored is the environmental and noise pollution that nightclubs bring. Alcohol encourages violence, rowdy behavior and criminal acts. Cleaning the debris and arresting the criminals has a cost, which the administration has to bear. Insurance companies too are burdened. Boffey (2003) reported that the Daily Telegraph announced that alcohol abuse was “costing Britain £55m a day” (cited by Pratten & Greig). Girls drink and make themselves vulnerable to attack. Surveys have revealed that alcohol misuse is directly related to crime. There were around 1.2m incidents of alcohol-related violence in 1999 and half of such incidents took place around the pubs and nightclubs. It becomes imperative that the drink manufacturers and the club management jointly devise and take of the customers after they are drunk. Their responsibility does not end by providing entertainment and reaping economic benefits. The government too should take responsibility while granting license to such outfits. The local administrative authorities, the police, the licensee and the charitable organizations should jointly shoulder this responsibility to advice, warn and protect the consumers. There is no question of preventing the consumption of alcohol but education and awareness has to increase. It is the prime responsibility of the hospitality sector to educate the masses along with their sales promotion efforts. Merely adding a few words of caution in fine print does not relieve them of their responsibility. Today, the sales promotion only encourages more consumption because cheaper rates are offered during lean hours. This means people spend more time as they arrive early to avail of the cheaper rates and continue until late hours. This shows a lack of commitment on the part of the management. Making the pub safer would not only make the unit socially responsible, it would also reduce the cost spent on crimes arising out of alcohol misuse. Code of Practice Business ethics should not be merely a corporate code but should be implemented as a corporate philosophy (Yamaji, cited by Svensson & Wood, 2004). Virtue does not guarantee success but it is essential for success otherwise the fate will be like Nestle – short-lived benefits. Tung & Miller (1990) emphasize that in international business relations, managers face uncertain situations and tend to fall back on their own values to make decisions (cited by Wong & Chung). Ethics is very important in attracting customers to the hotel. In this industry, the ethical behaviour and standards of the direct service providers (staff) are critical components (Wong, 1998). Kim & Olsen emphasize that no industry can exist free of its external environment (Ingram, 1995). With these principles in mind, Hospitality Ventures, a multi-national Hospitality Company, comprising of resorts, luxury hotels and budget accommodation, conference centers, fast food chains, concept cafes, contract catering, is advised to adhere to the following code of Practices: Front office staff has to maintain ethical and decent behavior with the customers, as they (staff) are the representatives of the company. It has been observed that the younger age group are more tolerant of ethical behavior. Hence, under 25 should be employed in the core sectors and hands-on training provided. Orientation program should include ethical education. Humanitarian aspect the social responsibility should be insisted upon. When they are faced with a challenge to choose between the unwritten company policy and satisfying the guest, they should be motivated to take the right independent decision based on the request of the guest. Under no circumstances should ethics be compromised with. Hospitality Ventures is advised to devise different training and orientation programs to suit the different age group of the employees. Environmental and noise pollution standards have to be adhered to. Compliance with norms laid by the local governments and regions is essential. Since this is a multi-national chain, they are advised to recruit local people as far as possible who understand the local culture and values. This can help minimize conflicts within the organization and lead to better performance. Sales promotions of the various services should not compromise on the basic principles. Local sentiments, holidays, and festivals should be observed to muster greater local support, thereby discharging social responsibility. This would promote international understanding and communication. In conclusion, it is important to note that ethical dissonance can be a source of stress. Mental discord in managers arises out of a conflict in ‘what they believe’ and in ‘what they practice’ (Ingram). The hospitality sector requires holistic treatment because profits remain the primary reason of business. At the same time, no industry can operate independent of ethics and its social responsibility. A socially and ethically conscious organization would, in the end, do well in business. Even if the law has loopholes and permits anti-social behavior as in the case of granting license to pubs, it is the social responsibility of the business house to curb such acts. The good and bad will always remain in the society. It is upto the businesses to restrain the bad and encourage the good to the maximum extent possible. References: AGCAS (2005), Hospitality: As it is, 30 March 2006 Ash J (2004), Coca-Cola CEO talks ethics, 30 March 2006 Cairn S (2005), Economics or Ethics? 30 March 2006 Hilliard J C (2004), Inspired by the Golden Rule, 29 March 2006 Hooker J, 2003, Why business ethics? 29 March 2006 Ingram H (1995), Hospitality and tourism: international industries experiencing common problems, International Journal of Contemporary Hospitality Management Volume 7 Number 7 1995 pp. 44-5 Peter G (2004), "Total Clean Up: The $125 billion European oil giant is embracing ethics and environmentalism as it does profit. But its not easy being green.(TIME Bonus Section February 2004: Global Business/Big Oil)." Time 163.4 (Jan 26, 2004): A10. British Council Journals Database. Thomson Gale. British Council - India. 28 March 2006 Robinson K (2002), "The importance of being good: the Enron scandal has put the spotlight back on ethics. Banks can no longer ignore the issue of social responsibility and those which do may not survive.(Brief Article)." The Banker 152.914 (April 2002): 16(5). British Council Journals Database. Thomson Gale. British Council - India. 28 March 2006 Upchurch R S (1998), Ethics in the hospitality industry: an applied model, International Journal of Contemporary Hospitality Management Volume 10 Number 6 1998 pp. 227-233 Wong S C K (1998), Staff job-related ethics of hotel employees in Hong Kong, International Journal of Contemporary Hospitality Management Volume 10 Number 3 1998 pp. 107-115 Wong C S & Chung K H (2003), Work values of Chinese food service managers, International Journal of Contemporary Hospitality Management Volume 15 Number 2 2003 pp. 66-75 Read More