Organizational Ethics and Management


Organizational Ethics and Management

 Ethics refers to the principles, rules and standards of moral behaviour that are accepted by society as right or wrong. It tells the difference between the right and wrong. It guides the employees of the organization to decide on the best course of action in situations where it is difficult to make the right choice, or at least the best choice from among competing alternatives.

Organizational ethics is also known as corporate or business ethics. It is a form of applied ethics or professional ethics that examines ethical principles and morals or ethical problems that arise in an organizational environment. It applies to all aspects of organizational conduct and is relevant to the conduct of its management and employees as well as the organization as a whole. It can be both a normative and a descriptive discipline. The range and quantity of ethical issues reflects the degree to which organizational working is perceived to be at odds with non economic social values.

Organizational ethics lay emphasis on commitment of the organization in promoting non economic social values. They are tied to the ethics of the society as well as the ethics of the individuals who work for, and buy products from, the organization.

Ethics is not a recent phenomenon. Ethical codes have been prepared along with the development of human civilization. The word ethics is derived from the Greek word ‘Ethikos’ and Latin word ‘Ethicus’. The word means custom, norm, ideal, or character. In the words of Peter.F.Drucker, ‘Ethics deals with right actions of individuals’. The term ‘business ethics’ came into common use in the USA in the early 1970s. Organizations started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day.

According to Wallace, “A credo generally describes the highest values to which the company aspires to operate”. It contains the `thou shalts.’ A code of ethics specifies the ethical rules of operation. It’s the `thou shalt nots’, in the latter 1980s.

The concept has come to mean different things to different people, but generally it consists of knowing what is right or wrong in the workplace and doing what is right with regards to the effects of products/ services and in relationships with the stakeholders. Wallace and Pekel explain that attention to organizational ethics is critical during times of fundamental change which is the times much like those faced now by organizations. In times of fundamental change, values that were previously taken for granted are now strongly questioned. Many of these values are no longer followed.

Ethics can be defined as a set of principles of right conduct. It can also be defined as a theory or a system of moral values. Organizational ethics is the application of moral standards to the situations under which the organization is operating.

Organizational ethics are developed by the passage of time and custom. A custom differs from one organization to another. If a custom is adopted and accepted by the organization and public, then that custom becomes an ethic. Organizational ethics is applicable to every type of organization. The social responsibility of the organization also requires that the organization must observe ethics in its operations.

Ethical behaviour

Ethical behaviour is the behaviour that conforms to the ethics which is individual beliefs and social standards about what is right and good. Ethics are important for getting along with others, living with oneself, and having a good character.

Organizational ethics is concerned with the ethical behaviour of the organization while carrying out its operations. Unethical practices create problems within the organization. The life and growth of the organization depends upon the ethics practiced by its management and employees.

Organizational ethics means the behaviour of the organization while conducting its operations, by observing morality in its activities. It is nothing but the application of ethics in the organization. It is the application of general ethical ideas to organizational behaviour. Ethical behaviour facilitates and promotes good to society, improves profitability, fosters customer relations and employee productivity. The concept of ethics in the organization has come to mean various things to various people, but generally it is coming to know what it right or wrong in the workplace and doing what is right. Organizational behaviour has effects on products/ services and on the relationships with stakeholders.

The making of the ethical behaviour in an organization is shown in Fig 1

Ethical behaviour

 Fig 1 Making of the ethical behaviour

Core values of organizational ethics

Ethical behaviour is based on values such as trustworthiness, respect, responsibility, caring, fairness and justice, and good citizenship. It also depends on the adherence to moral rules Organizational valuestell what is important and this, in turn, helps in making decisions about right and wrong. Moralsare the rules for deciding what is good and what is bad. The following are the six core ethical values of the organizational ethics which influences the ethical behaviour.

  • Trustworthiness – It is the broadest and most complicated of the core ethical values. It is a broad value concerned with all the qualities and behaviour that makes a person worthy of trust especially integrity, honesty, promise keeping, and loyalty.
  • Respect Respect focuses on the moral obligation to honour the essential worth and dignity of the individual. It is expressed in terms of positive qualities such as civility, courtesy, dignity, autonomy, tolerance, and acceptance. It also involves prohibitions against such conduct as violence, humiliation, manipulation, and exploitation etc.
  • Responsibility – It speaks of the moral obligations to be accountable, perusal of excellence, and exercising of the self restraint.
  • Fairness and justice Fairness and justice embodies concern with equity, equality, impartiality, proportionality, openness, and due process.
  • Caring – It is the central value relating to sincere and abiding concern for the well being of others. Concepts of charity, kindness, compassion, empathy, and sharing are included under caring.
  • Citizenship The concept of citizenship includes civic virtues and duties that prescribe how the organization ought to behave as part of a community. The exercise of good citizenship requires doing one’s share to make society work and demonstrating a concern for future generations. A good citizen, for example, respects the law, reports crimes, serves on juries, votes, pays taxes and protects the environment.

Characteristics of organizational ethics

The important characteristics of the organizational ethics are given below.

  • Organizational ethics are the principles, which govern and guide the management to perform organizational functions in a discipline manner.
  • Organizational ethics continuously test the rules and moral standards and is dynamic in nature
  • Organizational ethics is based on theological principles such as sincerity, human welfare, service, and good behaviour etc.
  • Organizational ethics is based on reality and social customs prevailing in business environment. Many of the ethical principles develop the personal dignity
  • Organizational ethics studies the activities, decisions and behaviour which are related to human beings and has universal application.
  • Organizational ethics keeps harmony between different roles of management and employees, with customer, suppliers, investors, and society.

 Principles of organizational ethics

The principles of organizational ethics are as follows.

  • Sacredness of means and endsThis principle of organizational ethics emphasizes that the means and techniques adopted to serve the organization ends must be sacred and pure. It means that a good end cannot be attained with wrong means, even if it is beneficial to the society.
  • Not to do any evil – It is unethical to do a major evil to another or to oneself, whether this evil is a means or an end.
  • Principle of proportionality – This principle suggests that one should make proper judgment before doing anything so that others do not suffer from any loss or risk of evils by the conducts of the organization.
  • Non cooperation in evils – This principle clearly points out that the organization should not cooperate with any one for doing any evil acts.
  • Cooperation with others -This principle states that the organization should help others only under condition when others deserve for help.
  • Publicity – Anything that is being done or to be done, should be brought to the knowledge of everyone. If everyone knows, none gets opportunity to do an unethical act.
  • Equivalent price – Everyone is entitled to get goods equivalent to the value of the money that he pays.
  • Universal value – According to this principle the conduct of the organization should be done on the basis of universal values.
  • Human dignity – As per this principle, employee should not be treated as a factor in production and human dignity must be maintained.
  • Non violence – If the organization hurts the interests and rights of the society and exploits the consumer by overlooking their interests this is equivalent to violence and unethical act.

Importance of business ethics

There are many reasons for organizational ethics to be regarded as an important area since it helps the organization in evaluating its activities and helps the management in improving the decision making process. Good organizational ethics promotes the operation of the organization in the following way.

  • The power and influence of an organization in society is greater than ever before. Organizational ethics help the management to understand why this is happening, what its implications might be, and how to address the situation.
  • The organization has the potential to provide a major contribution to the society, in terms of producing the products and services that it needs, providing employment, paying taxes, and acting as an engine for economic development and thereby increases the goodwill.
  • Malpractices have the potential to inflict enormous harm on individuals, on communities and on the environment. Through helping the organization to understand more about the causes and consequences of these malpractices, organizational ethics helps to create mutual trust and confidence in relationship.
  • The demands being placed on the organization to be ethical by its various stakeholders are constantly becoming more complex and more challenging. Organizational ethics provides the means to appreciate and understand these challenges more clearly, in order that the organization can meet these ethical expectations more effectively.
  • Organizational ethics can help to improve ethical decision making by providing management with the appropriate knowledge and tools that allow it to correctly identify, diagnose, analyze, and provide solutions to the ethical problems and dilemmas it is confronted with.
  • Organization can prosper on the basis of good ethical standards. Organizational ethics helps to retain the operations for longer period.
  • Organizational ethics provides the management the ability to assess the benefits and problems associated with the different ways of managing different issues in the organization.
  • In the age of complexity in the markets, competition is increasing day by day. Good ethical standard helps the organization to face the challenges.

Ethical management

Implementation of organizational ethics in the organization needs certain steps. Ethical or unethical behaviour of individual employees is influenced in the workplace both by their own moral development and the influence that the organization culture exerts on them. They are influenced by a group of forces that surround them such as their peers, their supervisors, and superiors, the reward system, group norms, organizational values and policies and the manner of their implementation. Ethical behaviour can be developed and managed in a number of ways. Human resource management (HRM) plays the pivotal role in the management and development of the ethical behaviour amongst the employees. HRM department can execute this through training, communication and discipline. In some of the organizations, there may be ethics officers who are entrusted with the responsibility to implement ethics in the organization. Further HRM department must prepare a sound ethical programme which should include the following components.

  • Formal code of conduct
  • Ethics committee
  • Ethical communication
  • Ethics officer
  • Ethics training programme
  • Disciplinary system in the organization
  • Establishing an ombudsperson.
  • Monitoring

Necessity for organizational ethics

The following are the ten necessities for an organization to implement organizational ethics.

  • To satisfy shareholder expectations
  • To protect the reputation of the organization
  • To build trust with those groups with which the organization works
  • To guard against unethical employees and competitors
  • To establish a working environment that matches the core values
  • To ensure that the organization is an equal opportunity employer
  • To maintain a safe working environment for employees
  • To engage actively with local communities as a partner
  • To maintain high standards of integrity
  • To adhere to the practice of full disclosure on the quality of goods and services