Ethics and Employees - Essay Example

ETHICS AND EMPLOYEES A CRITIQUE TABLE OF CONTENTS Page 3 2 Introduction 4 3 Defining Ethics 5 4 Challenges and Trends 6 5 Ethics and the Law 7 6 Codes of Conduct 8 7 Barriers and Drivers of Ethical Behaviour 10 8 Gender Diversity 11 9 Leadership Roles 12 10 Conclusions 13 11 Bibliography 14 1 Abstract Ethics is a touchy subject and has been deftly handled in this essay by describing the theories of Ethics. While moralistic in attitude, the theories encompass the emotional state of humanity and are philosophical 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. 2 Introduction 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? Are there not other stakeholders; suppliers, employees, consumers and indeed the society which offers them the opportunity to work for profit? With ever present conflicts the managers need to perform a balancing act to satisfy all stakeholders. However the role of the employees is crucial in performance of their obligations, hence a special relationship is required to be developed. Without the trust of the employees and their involvement the business objectives cannot be achieved. 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 world that is amoral by itself (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). 3 Defining Ethics 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 has also been called as the consequential theory. (Boxill). 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 referred to as the "Greatest Happiness Principle." There are three main events under this theory. First all actions must be judged from the consequence of the actions. Secondly, the judgment is about the quantum of happiness these actions have generated. Lastly, each person’s welfare is equally important and actions must be directed to this objective. There are two sub theories of Utilitarianism. Van Wyck (1990) explains that under Act Utilitarianism theory the view taken is that a right action is one that is also chosen by another individual, and the common intention is to produce at least the same good result. Under this theory an action is taken for the larger good even if it means abandoning or ignoring a rule 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. This means that rules are meant to be followed to preserve sense and balance in a society. The other group called Deontological theory hold that obligations must be followed irrespective of consequences. Deontologists insist that actions are morally in the wrong not because of their consequences, but because fundamentally these actions are a moral violation (Boxill). Morally right mans approved by God and morally wrong means disapproved by God. The will of God is the arbiter of 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 expanded the Greatest Happiness principle to conclude that welfare of the people was more paramount than mere 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. 4 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. 5 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). 6 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. 7 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. The primary image of an organization is akin to family, clan or tribe where relationships, needs, feelings and skills are the characteristics of its members. 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. People and organization need each other for this service. It is critical that people and the organization are in complete harmony to fulfil this purpose. Abraham Maslow (1954) described this in a hierarchical manner starting with human psychology, safety and security, belongingness, self esteem and finally self actualization. According to Maslow employees have a basic human need and a right to strive for self-actualisation, just as much as the corporate directors and owners do and by this fulfilment the organization becomes stronger, competitive and profitable. Chris Argyris (1957) argued that conflict was an inherent part of the issue and the result of skill was monotony of work. This dehumanizes a person and leads to conflict. Frederick Herzberg (1959) propounds that there are indeed only two factors that motivate a person to work and they are hygiene and motivators like self actualization. Hygiene does not motivate but its absence will reduce motivation and a good hygienic environment enhances motivating factors like achievements, responsibility and advancement. He further states that increase in salary without better hygiene and the motivators will result in disaster. Negative or Positive attitude of the management is explained by Douglas McGregor (1960) in his theory X and theory Y. According to him a negative attitude of the management, theory X, presupposes that workers are lazy, passive, without ambition, willing to be led and resist change. Hence management is through control, coercion, threats and punishment. This results in low productivity, antagonism, unionism and subtle sabotage. In contrast positive management, theory Y, believes that people are motivated, active and interested, ambitious, prefer to lead and are interested in change. Hence management is through open systems, communications, self-managing teams and peer controlled pay systems. The result is high productivity, bonhomie and care for the organization. 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. 8 Gender Diversity 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. 9 Leadership Role 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 "Is" by Avolio, et al 1991 with which transformational leaders stimulate and engage their followers. Individualized Consideration: The leader gives personal attention to others, making each person feel outstandingly valued. 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. 10 Conclusions 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. 11 Bibliography Argyris, C., (1960). Individual actualization in complex organizations. Mental Hygiene, 44(2), 226‑37. Armstrong, S. (2001). Are you a "transformational" coach? Journal of Physical Education, Recreation and Dance, 72(3), 44-47. Avolio, B. J., Waldman, D. A., & Yammarino, F. J. 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