Can Professional Code of Ethics Be the Backbone of Management - Research Paper Example

Can Professional of Ethics Be the Backbone of Management and Leaderships Decision Making in Business? and Section # of course> INTRODUCTION The concept of ethics till date remains a rather elusive one, for who would define what is right or wrong, and thus acting in accordance with the business ethics, i.e. doing the right thing, is not nearly as simple and straightforward as put forth in many volumes of literature pertaining to business ethics. Most of the dilemmas regarding ethics at workplace are not merely crystal clear or simply a matter of ‘whether A should lie to B’ or ‘C should steal from D’. There exist diametrically opposite opinions with regards to the question at hand, with one side of ethicists arguing that the right thing to do is always determined by the verdict of moral principles, while the opposite side remains adamant on their stance that an ethical decision is subject to the intricacy of the situation, and therefore is dependant upon the individual’s subjective opinion rather than s certain set of principles. Philosophers refer to ethics as being the ‘science of conduct’, and that ethics comprise of all those basic foundational values and ground rules according to which we live our lives. This paper will open with a general discussion of ethics in the business world and move on to explain how this management discipline came into existence. Furthermore, the expedient tool of ‘professional codes of ethics’ is analyzed with regards to the decision making process, and finally the paper culminates with an in-depth analysis of the pros and cons of the codes of ethics in the decision making process (Ferrel et al., 2009, 4). WHAT IS BUSINESS ETHICS? Different people can relate to the concept in different ways, and therefore it has come down to having various different subjective meanings, but generally it is referred to as the knowledge of what is right or wrong in the workplace environment and then doing what is right. Wallace and Pekel claim that it critical to pay considerate attention to business ethics at times occurrence of fundamental changes- times which are faced by most of the businesses today, whether profit or non-profit. In these certain precarious situations, the values in a business which were taken for granted previously are questioned, leading to the dismissal of many of the values, and therefore there remains no clear or definite set of values which would act as a compass in guiding the leaders to steer the business according to what is right or wrong. Thus attention to the concept of ethics in the workplace sensitizes the leaders as well as the workers to how they are expected to cope up with moments change. Most importantly, this knowledge and study ensures that the leaders and the staff remain focused on a strong moral compass in the phase of change which is certain to bring about confusion and crises (McNamara, 2010). It is important to note that many people believe that business ethics only refers to the acts of doing right which are obvious, such as being good, not lying etc., and thus such people do not give due serious attention to the concept of business ethics. We tend to forget that for many of us, these principles which seem to be very obvious are downright foregone at times of stress. Consequently, the knowledge of business ethics can act as a strong preventive medicine, however, there are also many other benefits of having a professional code of ethics in the workplace, especially with regards to the concept of the decision making process, these are explained in detail later in the document (McNamara, 2010). CATEGORIES OF BUSINESS ETHICS Business Ethics has been broadly categorized into two categories (McNamara, 2010): Managerial Mischief Madsen and Shafritz (1990) talk of this concept in detail in their work titled ‘Essentials of Business Ethics’. It refers to the illegal, unethical or the questionable practices undertaken by the individual managers or more largely the organizations, it sheds light on the causes of such behaviors and also proposes remedies for the eradication of such practices. Considerable literature has been devoted to the concept of managerial mischief, such that the researcher is lured to believe that business ethics is all about the fundamental basics of what is right and wrong. Whereas, more often, business ethics is rather a matter of handling problems which do not have a clear indication as to what is the right path and which one is wrong. Moral Mazes The second broad category of business ethics is referred to as the ‘moral mazes of management’, and this category comprises of the various ethical problems which the managers of contemporary times encounter in their daily operational routine, these can range from potential conflicts of opinions and interests, the misuse of organizational resources, mismanagement of the agreements and contracts etc. BUSINESS ETHICS AS A MANAGEMENT DISCIPLINE Since the advent of the social responsibility movement back in the 1960s, the concept of business ethics has began to be considered as a management discipline. Back in that time, the social awareness movements which were initiated expected the businesses to utilize their financial and social strength to address social issues and endeavor to solve the problems of poverty, increasing crime rates, deepening environmental degradation, the debate of equal rights, the public health and the expense for the improvement of education. With time, these movements gained massive support, as people began to adapt the view that because these businesses gained revenue and profits by the exploitation of the natural resources of a country, therefore they were inalienably tied to the duty of giving back to the country in the form of efforts to improve the society. Numerous researchers, business schools across the globe, and managers have recognized and accepted this broader constituency, and have therefore as a result scraped the old term ‘stockholder’ only to include the more diverse term ‘stakeholder’ in their planning and operations, which attempts to include the different parts of the community such as employees, customers, suppliers, and also the wider community in the stakes of the business directly or indirectly (McNamara, 2010). The emergence of business ethics can be compared other management disciplines, and they turn out to rather similar. Such as the discipline of public relations was born since the organization realized that they needed to manage their positive image to the public since it affected their final sales volumes and the goodwill in the market. Organizations began to realize that they needed to manage their human capita if they wanted to extract maximum benefit out of it; therefore the discipline of human resources was born. Hence, as organizations began to realize over time that commerce is becoming more complex and dynamic, they recognized the need for more guidance to assure that their operations supported the common good and were in no way harming others, this led to the emergence of the concept of business ethics (McNamara, 2010). It must be duly noted that in contemporary time, a large number of business schools provide some for of training in business ethics. Today, ethics in the workplace are being managed through the use of code of ethics, codes of conduct, it involves the role of ethicists and the general committees formed with the agenda of uplifting ethics at workplace, policies and procedures designed to resolve ethical issues, and the provision of ethical training to the staff etc. Out of the expedient tools of ethics mentioned above, this study focused on how ‘code of ethics’ plays an integral part in the decision making process in a business, and whether the professional code of ethics can play the part of being the backbone of the decision making taking place in a business (McNamara, 2010). ETHICS TOOLS: CODES OF ETHICS About Codes of Ethics According to Wallace, a credo generally is an attempt to describe and outline the greatest values to which the company desires to operate. It comprises of all the ‘thou shalts’. Similarly a ‘code of ethics’ is what specifies the ethical rules of the operations, it contains all the ‘thou shalt nots’. It was in the latter 1980s that the Conference Boards, which was one of the leading business membership organizations, found that about 76% of corporations which were surveyed had codes of ethics. Some business ethicists strongly disagree on the importance and value of having codes, usually on the grounds that the creation of codes requires too much focus which is put on the codes themselves, but they are not influential enough in management of the ethics in the workplace around them, many ethicists argue that it is rather the developing and continuing dialogue about and around the code’s values, which is of a greater importance and influence (McNamara, 2010). Occasionally, employees do react to codes with suspicion, and believe that codes exist merely as a window dressing and can thus be treated as ‘apple pies’. But it is rather necessary to have a code when the need arises to manage a complex issue and enact decisions at the time of crises. More important, it is having developed the codes which make the management realize how to organize themselves in times of crises and how to manage according to what is right by developing worst case scenarios in which decisions need to be taken (McNamara, 2010). In the mid 1970s, the company Johnson and Johnson had to update their credo in a series of challenge meetings. Bob Kniffin, the Vice-President of the External Affairs, explained that: “We pored over each phrase and word. We asked ourselves, ‘Do we still believe this?’ Our meetings resulted in some fine tuning, but basically we didn’t change the values. The meetings infused the values in the minds of all of us managers” (McNamara, 2010) It must be understood that an organization needs a professional code of ethics, since without it the employees do not have any defined set of policies for the interpretation of unclear values. Therefore, it is in the best interest of any organization to develop a code of ethics to be obeyed rather than leaving ethical decision making on the discretion of the employees. As according to Trevino and Nelson (Trevino and Nelson, 2006, page 12): “Leaders identify appropriate and inappropriate conduct, and they communicate their expectations to employees through ethics codes, training programs, and other communication programs.” Business ethics are developed and created through company policies, many of which are a fruitful result of unethical situations and following conducts occurring at the workplace. Therefore, since it is such a crucial part of healthy decision making, the management must evaluate and then timely reevaluate the organization’s professional code of ethics in order to keep the code in line and accurate for the company needs. A company’s executive management team views an employee who follows the company’s code of ethics as a beneficial asset to the organization, since the following of these codes of ethics is a step towards achieving the overall goals of the business (Hunt, 2010). Incorporating Code of Ethics in the Decision Making Process Addressing the concept of ethics in the decision making process in a business or any other big organization or group, such as the government, points to the need to assure that the key focusing decisions (highlighted in green in the chart below), are made properly and are in place. Specifying these key decisions: the ‘core values’- these are values which defines what a company wants to be, must be in place in order to provide the goals and the requirements according to which are used to for the creation and constraining of the criteria which is used in the network of business decisions. This focusing decision has the capability to influence the criteria for decisions occurring throughout the organization’s business decisions (highlighted in blue in the graph below), and hence they directly influence the ethical decision making and the code of conduct at the workplace: (Decision-making-solutions.com, 2010) Furthermore, the additional business decisions comprise of choosing the business mission, and the code of conduct which shall add conformity of criteria to decisions throughout the network. A set of criteria could be established by an organization to help ensure that the decision making is being done in accordance with the ethical considerations (Decision-making-solutions.com, 2010): Compliance- this involves ensuring that whether the decision being made conforms to the company’s values and it’s already developed code of ethics, and whether it is necessary for the decision to meet or exceed the legal requirements? Promoting well-being and reducing harm- to determine that which solution will be plausible by considering its good worth to the maximum number of people while reducing the harm to minimum. Responsibility- this criterion enables a company to consider alternative responsibility options, and forces the management to question whether its decisions are in line with the duties of a good corporate citizen. Respects and Preserves Rights- this criteria makes the decision makers to question whether the decision in any way negatively affect any individual’s or organization’s rights? Promotes Trust- this criteria questions the capability of the decision being made to promote honest and open communication within and outside the organization? And whether full disclosure is being made or not? Builds reputation- it is necessary to consider whether the headline of the decision being taken would instill pride or shame? And what is the effect of the solution; such that does it add or reduce the identity which the management aimed to achieve for the organization in the first place? In addition to the above set of criterions, a contribution to this field has also been made by Doug Wallace and Jon Pekel, who have developed the ‘Ten-Step Method of Decision Making’ which acts as a useful guide in developing code of ethics which would help in decision making process in a business in today’s rapidly changing and fast-paced global business environment (Managementhelp.org, 2010), below is the ethical checklist which is a part of this guideline: There has been a drastic increase in the reliance on study of business ethics and the usage of code of ethics in business decision making, and many organizations have become increasingly interested in ethical issues. This is evident through many acts of the companies such as appointment of ethics officers, which were almost none about 7 years ago but has dramatically increased to about 33 percent of the large corporations in contemporary times. Similarly, the increase is visible through the increase in provision of ethics resources for employees, such that today over 70 percent of corporation provide advices on ethics related questions via telephone, e-mails, web or even through face-to-face meetings. Many companies have also developed code of ethics as a means to improve their decision making processes, and as a guideline to assist the managers and other employees of the organization to make better decisions which are in line with what is right, and are in compliance with the company objectives and goals. A national study of USA revealed that 60 percent companies which were surveyed had a code of ethics; about 33 percent offered some sort of ethics training and nearly 33 percent employed and ethics officer. The companies which are most highly praised for their code of ethics comprise of Hewlett-Packard, Boeing, Johnson & Johnson and Costco. Furthermore, according to Charles Lamb, Joseph Hair and Carl McDaniel, there is a checklist of ethical guidelines which must be followed during the decision making process in order to improve the chances that the decision made is ethical, if not ‘right’. The table below shows the checklist (Lamb et al., 2008, 72): The points in the above checklist depict how important it is for a business to undertake the development of a proper code of ethics to ensure that the decisions being made are right, or at least ethical. Over the last few years, the definition of the term business code of ethics has expanded, and it has become a prismatic ideational structure, which now incorporates a range of guidelines and areas of a business. Business ethics aims to address all the major legal responsibilities and the relationships that an organization has with the key actors such as employees, shareholders, stakeholders, and customers etc., therefore every company in today’s world must develop a code of ethics with regards to each of these key players and the industry, and the code of ethics must be tailored according to its specific needs and requirements. Since it is the business code of ethics which depicts an organization’s core values, therefore in contemporary times, considerable effort must be put into devising it, and it essentially serves as the backbone of the decision making process since every step of the solution is passed through ethical screening for compliance in order to make it feasible and ensure conformity with company principles. In a nutshell, the business code of ethics must contain the following points (Conductcode.com, 2010): Responsibilities the organization has towards the environment it operates in, this is necessary since in order to make the right decision the company must also incorporate the externalities to the environment, and therefore must operate at a socially optimal level. The righteousness of its employment practices and activities since it is incumbent upon firms to be true and fair to its employees and uphold all the values of employment rights such as equal rights and opportunities, removal of gender bias and discriminatory decisions. The adaptation of safety measures for employees. The protection of the human capital of an organization is their responsibility as long as they operate within its premises, therefore the provision of healthy and safe working conditions is a right of the employees and any decisions which could impact the working conditions must be made while considering for this criterion. Provision of gratuity with bonuses, since it is the right of the employees to attain gratuity, it is a positive gesture on part of the firms to make decisions with this criteria in mind. The accuracy of payroll of workers- the organization must ensure that the employees receive the due amount of pay which is their share, it must not be over or underrated, therefore decisions regarding payrolls must be ethical. Proper record maintenance in order to avoid conflicts and inconvenience. Any conflict resolution must be achieved after consultation with proper records; hence an organization must ensure the proper and accurate maintenance of these records. It can be rightly stated that it is essentially the business code of ethics which provides direction to the employees and guides their behavior, and serves as the foundation for correct decision making. Ethical decision making has numerous benefits that it has to offer to the company and the environment at large; however, it has its negative aspects as well which can not be ignored. These pros and cons of professional code of ethics in management decision making are discussed are discussed in the following sections. CODE OF ETHICS: PROS AND CONS It has become increasingly known and common today that the management discipline of making use of business ethics in the decision making process is very beneficial for a company and the environment on the whole. The moral benefits are common and have been highlighted above as to how ethical consideration helps in decision making. These are: The usage of code of ethics in the organizations policies and procedures, and the decision making process greatly enhances and increases the ethical judgment of the organization, and also all the employees who work for the organization and are subject to following the code. It also enables an organization to follow a certain checklist of not-to-do activities; therefore it helps in corrective decision making which is in line with the ethical requirements of the company and also at the global level, since many of the clauses are universally accepted principles. When the company ensures that it is following the professional code of ethics, it is also indirectly ensuring the adherence to legal responsibilities. Therefore, as decisions are made with keeping the code of ethics in consideration, it is also assured that the company is highly likely to stay away from legal suits. When a company is operating in accordance with their ethical code of conduct, their decisions are enacted after considering for the maximum number of stakeholders, and not only the shareholders who receive profits, hence environment and the society also become part of the decision making process, and when their needs are met, the company is said to be have adapted the principle of social optimality, and thus it leads to a positive image for the organization, and it is perceived to be an ethical organization which has indirect benefits for the company, such as a premium image and goodwill in the market. Apart from these generic and well known moral benefits of the usage of the code of ethics in the decision making process of an organization, there are some other not so obvious advantages of following the code of ethics as well: 1. Attention to business ethics has greatly improved the society- only about a decade ago, child labor was rampant, and children were made to work a disturbing 16 hours a day. Worker’s body parts were torn off and they were subjugated to poverty and often starvation. A few trusts and bigger organizations managed to artificially control the markets and as a result the smaller firms were wiped out since they were forced out of competition. Price fixing was a common practice and it crippled the natural effect of the interaction of the market forces. Employment was not fair, discriminatory practices were common, and it was a usual happening that employees were terminated on the basis of personalities. Influence was asserted by intimidating and harassing the employees who has no legal rights and hence they were incapable of taking any legal actions. This is when the society woke up, and awareness spread in a manner that people began demanding that businesses should place a greater value on fairness and equality. Furthermore, anti-trust laws were enacted, Government agencies were establishes for fluctuation and smooth running of the market forces and to supervise any unethical practices, unions were organized, and laws, rules and regulations were instituted, thus consideration of ethics in the decision making of the businesses led to a change in the society. 2. Ethics programs assist in maintenance of a moral course in dilemmatic situations- as explained earlier, attention to business ethics at times of fundamental changes is necessary, since in such situations the employees and managers are likely to lose track of what is right, and the definitions of right and wrong become blurred. Therefore, when attention is devoted to training staff to operate in line with the code of ethics with regards to decision making in turbulent times, it would ensure that no wrong decision, or at least an unethical decision, is passed. 3. Ethics programs induce feelings of strong teamwork and cultivate productivity- such programs align the behavior of the employees in accordance with the top ethical requirements of the leaders. Usually, organizations are amazed at the disparity between its desired behavior or employees and the actual conduct. Hence ongoing reference to the codes of ethics in the decision making process at all three levels- strategic, tactical and operational, essentially leads to the development of an open atmosphere, integrity among employees and cohesiveness, which are all essential for team building. Thus when employees feel the bond of alignment between their values and that of the organization, it acts as a motivational factor, and improves the overall performance of the workforce. 4. The Ethics programs assist in employee growth and meaning- considerable attention to ethics in the workplace enables employees to encounter reality, whether good or bad, in the organization and also at an individual level. They develop self confidence and tend to deal with the problems that come their way as they are trained by the usage of the code of ethics in the daily decision making process. 5. Ethics programs act as an insurance policy, they make sure that the policies implemented are legal. As discussed earlier, when the decisions reached are in accordance with the code of ethics, then it can be ensured the legal requirements are met, therefore the company is indirectly insuring for legal responsibilities. There are an ever-increasing number of lawsuits pertaining to the personal matters and also matters with regards to an organization’s products and services, thus being following the code of ethics ensures that no moral contracts are breached. Adherence to the code of ethics ensures highly ethical policies and procedures in the working environment, and it is evident that it is better to suffer the costs of implementation of ethical principle at current level than paying for litigation costs later on. 6. Ethics programs help avoid criminal acts of violation and can help lower fines- ethical programs when initiated in an organization can help detect any sort of unethical activities, or violations of contracts, and can thus help avoid the fines which result from such acts, by reporting or addressing such acts. In many cases, if the organization does not report the violation to the specific authorities, it is taken to be a criminal act, therefore they remain vigilant at each level, and thus extra precaution acts as insurance. 7. Ethics programs help upkeep the values attributed to total quality management, strategic planning in decision making and diversity management- ethics programs help to recognize the values and morals, and assure that organizational behaviors are aligned with those values. This step includes the recording of these values, development of policies and processes to match the behaviors with the preferred values, and then training all the employees in accordance with these policies. This overall process is very important and useful in other sectors of the organization which require the alignment of behavior which require the alignment of behaviors with values. When decisions need to be made with regards to behavior alignment, then the concept of business ethics can not be ignored, since it is essential to determine which sort of behavior falls in which category according to the recognition of values and morals of the level. 8. Ethics programs translate into a strong public image for the organization- public relations is connected to professional code of ethics at this point, however, management of ethics must not be done with the primary intention of public relations But nevertheless, regular attention to the maintenance of business ethics by an organization gives out a positive image of the organization to the public, which helps in public relations development. The general public views such organizations as more humane, and that they value people, their sentiments and emotions more than the profits they generate out of exploiting the people, and rather they endeavor to operate the organizations with utmost sincerity, integrity and honor. Aligning behaviors with the preferred values is crucial to the effective marketing and public relations efforts of an organization. It can be rightly stated that ethical values are the cornerstones which help to build up a commercially successful, prosperous and a socially responsible venture (McNamara, 2010). Thus the benefits of involving business ethics approach in decision making can prove to be very beneficial for the organization, society, and world at large, it helps upgrade the working standards, treatment of others, following of legal regulations and above all, working cohesively for a better community. However, organizations must be very careful as to not make their professional code of ethics very vague or elusive, and also very detailed, as both could become a problem to follow. Codes that are too vague are almost as good as nothing, they do not provide any sort of guidance to the employees, or any indication as to what is the right direction to proceed in with regards to day to day activities. On the other side, codes that are too detailed provide the leverage to employees to substitute rules for judgments, and it halts their own decision making abilities. For instance, if an employee is involved in a questionable act, the kind of which is not outlined in the code of ethics, then the employee would take the benefit of doubt and continue to behave in that way, despite their conscience saying that their actions are wrong. This was portrayed by the ethics checklist presented by Lamb et al., which gives a very simple but extremely useful guideline for following ethical rules (Lamb et al., 2008, 72). However, when the disadvantages and advantages are compared one against the other, it is obvious that the benefits far greatly outweigh the drawbacks; this is precisely why many organizations spend considerable time and effort in drafting the professional code of ethics. In light of the entire discussion in this study, it can be substantiated that business ethics do play an important role in the success or failure of any organization. When involved in the decision making process, they have the power to influence virtually all the networks of the organization, influence the way people behave, impact the outcome of the decisions, change the way people perceive that organization and over and above all, define the process through which an organization progresses to achieve its set goals and objectives. The company which accords considerable effort and time to the development of its professional code of ethics would reap the benefits of the deliberate efforts, since it is the management which must lay the foundation of the core values which the employees must follow, hence the management must carefully devise the code of ethics. A company will be forever known with regards to its practice of handling the business and industry it operates in, good or bad reputation can make or break a company, hence any organization must be careful in defining the choices which would speak volumes about their values. Businesses in the contemporary world are aware of the importance of this management discipline, and it is their firm belief that following a code of ethics in the business decision making process can spell success for a business. Therefore, it can be rightly regarded as the backbone of the management and leadership decision making process of businesses of contemporary times. 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