THE ORIGIN AND EMERGENCE OF THE CONCEPT OF ETHICS
ETHICS IN ORGANISATION
Meaning of the ‘Term Ethics’
The famous missionary physician and humanitarian Albert Schweitzer defined ethics as “our concern for good behavior. We feel an obligation to consider not only our own personal well-being, but also that of other human beings” this meaning is similar to the precept of the Golden Rule: Do unto others as you would have them do unto you.
The term’ ethics’ origins from the Greek word Ethos meaning human character and it refers to the philosophical science that deals with the rightness and wrongness of human actions. From the very beginning, clearly from the time of Plato and Aristotle, ethics- the most general term has concerned it self with the human ‘mechanism’ of moral being or morality: the faculties of the human soul and the needs, passions, and desires of the human mind and body. According to the International Encyclopedia of Ethics, ‘ Ethics is the name given to that most general study of the rightness and wrongness of human actions, including not only the determination of whether particular acts are morally permissible but also the derivation of those theories by which such a determination may be made, as well as an analysis of the meaning of the language that is peculiar to such determination and derivation’
THE ORIGIN AND EMERGENCE OF THE CONCEPT OF ETHICS
Consensus is that primitive tribes did not really need ethics, for a cohesive group tribal law was sufficient regulation to teach tribal members how to behave. Tribes had to survive in the harsh conditions of primitive life, where hasty, foolish or selfish behaviour of one person could lead to extinction of the tribe; this limited the options of behaviour of tribal members. However, as civilization developed and agriculture created abundance people began to live beyond the confines of tribal groups. Which meant that they required more universal methods of regulation than tribal law could provide. This is where so-called ‘ethics’ began to evolve. Ethics enabled people or tribal members to carry tribal codes ‘inside them’ when they left the tribe. Therefore, as tribal life diversified, people could adhere to original teachings even after they travelled outside their own group. Another view is that ethics did not really begin until the age of agriculture. Humans, like all higher animals, faced choices for millions of years. Initially, the choices were resolved by reflex, with the strongest reflex taking precedence. Later, humans sublimated choice by reflex to choice by learned behaviour, to give choice broader possibilities. Choice was then achieved through tribal codes, controlled by social regulation. Tribal codes were the behavioural codes regulating mechanism of all Stone Age peoples, and is so even today.
However, with the advent of agriculture, this ‘naturally evolved’ system was thrown into ‘chaos’. Agriculture could support such a large population that tribes broke up, and tribal custom became diversified and then subsumed into larger social structures which meant that tribal members started to travel outside the confines of their group . Most primitive people developed their own mode of social life and evolved their own carefully preserved customs and traditions, their own conceptions about what is good and bad, what is not to be done and what is proper in different situations. In short, they evolved their own morality, their own ethics. Morality must have been in existence from the time men began to live in groups. Even after people started to think philosophically, a great deal of relatively unreflective morality continued to exist and to guide human conduct, even in so-called advanced cultures, as it still does.
Every society throughout history has devised for its members something we might call ethical codes. These are a system of teachings, conveyed as reinforced learning, of how a society expects its members to behave. Teaching and reinforcement of ethics begins in childhood. Teaching is by example, discipline, religion or moral tale. The reinforcement is granting affection for good behaviour and reprimands for bad behaviour. For adults, teaching continues as religious or ethical doctrine, while reinforcement is in the form of punishments and rewards in the workplace, in sport and so on. Rewards refer to things like praise, honour, privilege and acclamation. Punishment involves reprimand, deprivation of freedom, wealth or in extreme cases, deprivation of life. Whether they exist as laws, rules, teachings or norms, the ethical codes of society instruct people how to behave . In today’s business world the impact of unethical behaviour is quite different than it was in primitive times. It might be said that only in very extreme cases could the foolish or selfish behaviour of a person lead to the extinction of a civilisation, as it could in primitive times. So-called ‘white collar crime’ is costing institutions millions of Rands a year.Any employee might be willing to steal from an employer under certain circumstances – that is, unless the company makes it clear that theft is unethical.
Under certain specific circumstances even employees who are believed to normally behave quite ethically and who are on normal levels of cognitive moral development for adults which implies that they would normally not easily be tempted to behave unethically – might be willing to steal from an employer under certain circumstances.
However, a research also found that there are certain factors that can minimize or stop this unethical behaviour from occurring, in this specific experiment, the fact that the organization in question had a code of conduct that prohibits stealing – made it stop or not occur at all. The functional problem of ethics is deciding how it suits society for people to behave without knowing how ethics arose or why it acts as it does. Civilization however recognizes that society requires ethics in order to function.
Without ethics society could not work. Modern theorists teach how family, government and commerce all require ethical norms to function. Whether they exist as laws, rules, teachings or norms, the ethical codes of society instruct people how to behave. It could be said that ethics has evolved from those tribal codes and so-called ‘customary conduct’ to the numerous theoretical views on ethics that exist today. Examples of simple ethical homily, that teach people how they ought to behave, even in the absence of specific laws or constraints regulating behaviour are “when in Rome, do as the Romans do” and “Do not do unto others as you would not have them do unto you.”
BUSINESS ETHICS AND CODE OF ETHICS
INTRODUCTION TO BUSINESS ETHICS
Business ethics refers to the application of ethical values in a business environment. Ethics refers to a philosophical branch that deals with human values in relation to their conduct regarding what is good or bad and what is right or wrong. Ethics are the foundation of respect towards others. In business, ethics make sure that profits are made only through the right channels.
Business ethics guides company officials to cater for the needs of the employees as well as the community from which they get their resources. Without ethics, most of the products in the market today would be half-baked of phony.
CODE OF ETHICS
A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization’s core values and the standards to which the professional is held. A code of ethics, also referred to as an “ethical code,” may encompass areas such as business ethics, a code of professional practice and an employee code of conduct.
Breaking Down ‘Code of Ethics’
Both businesses and trade organizations typically have some sort of code of ethics that its employees or members are supposed to follow. Breaking the code of ethics can result in termination or dismissal from the organization. A code of ethics is important because it clearly lays out the rules for behavior and provides the groundwork for a preemptive warning.
Regardless of size, businesses count on their management staff to set a standard of ethical conduct for other employees to follow. When administrators adhere to the code of ethics, it sends a message that universal compliance is expected of every employee.
Compliance-Based Code of Ethics
For all businesses, laws regulate issues such as hiring and safety standards. Compliance-based codes of ethics usually not only set out guidelines for conduct, but also lay out penalties for violations.
In some industries, including banking, specific laws govern business conduct. These industries tend to formulate compliance-based codes of ethics to ensure that laws and regulations are being followed. Employees usually undergo formal training to learn the rules of conduct. Because noncompliance can create legal issues for the company as a whole, individual workers within a firm may face penalties for failing to follow guidelines.
To ensure that the aims and principles of the code of ethics are followed, some companies appoint a compliance officer. This individual is tasked with keeping up to date on changes in regulation codes and monitoring employee conduct to encourage conformity.
This type of code of ethics is based on clear-cut rules and well-defined consequences rather than individual monitoring of personal behavior. Therefore, despite strict adherence to the law, some compliance-based codes of conduct do not promote a climate of moral responsibility within the company.
Value-Based Code of Ethics
A value-based code of ethics deals with a company’s core value system. It may discuss standards of responsible conduct as they relate to the larger public good and the environment. Value-based ethical codes may require a greater degree of self-regulation than compliance-based codes.
Some codes of conduct contain language that addresses both compliance and values. For example, a grocery store chain might create a code of conduct that discusses the company’s commitment to strict adherence to health and safety regulations above financial gain. The chain might also include a statement about refusing to contract with suppliers that feed hormones to livestock or raise animals in inhumane living conditions.
Code of Ethics Among Professionals
Financial advisers registered with the Securities and Exchange Commission or a state regulator are bound by a code of ethics known as the fiduciary duty. This is a legal requirement and also a code of loyalty that requires them to act in the best interest of their clients.
Certified Public Accountants, who are not typically considered to be a fiduciary to their clients, still are expected to follow similar ethical standards, such as integrity, objectivity, truthfulness and being free of conflicts of interest
IMPORTANCE OF EMPLOYEE CODE OF CONDUCT
Employee code of conduct guides individuals as to how they should behave at the workplace. Employees need to be aware as to what is expected out of them in the office. You just can’t behave the same way at office as you behave at home. Your Boss can be your best friend outside office but at work you have to respect him and also treat him like your superior. Employee ethics is essential for maintaining discipline at the workplace. Management needs to be liberal with the employees but there has to be some element of fear also in the minds of employees. If the superiors are too friendly with their subordinates, there are chances they might start taking undue advantage of the friendship. There has to be a balance always. Yes, organization’s policies ought to be employee friendly but that does not mean employees come to office at 11 AM just because they cannot get up early in the morning. There has to be a genuine reason for everything.
There has to be a proper dress code for employees. Individuals just can’t enter into the office wearing anything. Employee code of conduct decides what individuals ought to wear to office. Some organizations are very particular of what their employees wear to work.
Let us go through an example:
Organization A did not instruct employees about their dress code. There was really no strictness as far as dress code was concerned. One fine day; Paul came to office wearing T shirt and Capri. The same day, one of Organization A’s esteemed clients came for site visit. Trust me, the moment the client met Paul, he was rather surprised. Understand, coming in jeans and T shirt to work does not stop us from working but it just reflects the non serious and casual attitude of employees. It is always better if employees come to work in formals. Casual dressing is okay on Saturdays but that does not mean you can come to work wearing shorts. Dress sensibly even if it is a weekend and you have already gone in the holiday mood. Employee dress code also ensures uniformity among employees.
Employee code of conduct ensures career growth and also benefits the organization in the long run. If employees understand the difference between what to do and what not to do at the workplace, problems would never arise. We bunk offices because we do not realize that such a practice is wrong and unethical. Employee ethics ensures employees adhere to the rules and regulations and also work for the organization. Employee ethics motivates employees not to indulge in gossiping, nasty politics, criticizing fellow workers, bunking office and so on. They seldom think of sharing confidential information or data with competitors and all their energies are utilized in productive activities which would benefit the organization.
Employee ethics ensures employees attend office on time and genuinely respect their superiors. Most of the times it has been observed that employees have a hate relationship with their Bosses. Are bosses wrong always? Ask yourself. How would you feel if someone reporting to you is absconding from the office and you have a deadline to follow? Yes, sometimes it does become essential to show your powers and be a little authoritative. Understand that employee ethics is not meant to downgrade employees but make them aware of their duties and responsibilities in the organization.
SOURCES OF ETHICS IN ORGANIZATION
SOURCES OF BUSINESS ETHICS
In every society there are three sources of business ethics-Religion, Culture and Law. The HR manager in every organisation, thus, has to be well versed with the unique system of values developed by these three sources.
These sources are discussed as follows:
One of the oldest sources of ethical inspiration is religion. More than 100000 different religions exits across the globe. Despite doctrinal differences, the major religions converge on the belief that ethic s is an expression of divine will that reveals the nature of right and wrong in business and other walks of life. The world’s great religions are also in agreement on the fundamental principles, which are similar to the building blocks of a secular ethical doctrine. The principle of reciprocity towards one’s fellow human begins is found in all major religions such as Hinduism, Buddhism, Islam, Judaism, and Confucianism. The great religions peach the necessity for an orderly social responsibility with an objective to contribute to the general welfare. Built upon such vertices are many other rules of conduct.
Culture refers to a set of values , rules, and standards transmitted among generations and are aimed at modeling behaviors so that they fall within acceptable limits. These rules and standards always play an important part in determining values, because individuals anchor their conduct in the group in which they belong. Civilization itself is a cumulative cultural experiences in which people have passed through three distinct phases of moral codification. These phase correspond to the changes in economic and social arrangement. For hundreds of generations, during the hunting and gathering stage of human development, ethics was adapted to conditions in which our ancestors had to be ready to fight, face brutal foes, and suffer the hostile forces of nature. Under such circumstances, a premium was placed on pugnacity, appetite, greed, and sexual readiness. Since it was often the strongest who survived. Brute force and violence were thus accepted norms of trade ethics in this early phase of civilization.
Civilization passed into an agricultural stage approximately 10000 years ago, beginning at a time when industriousness was more important than ferocity, temperature pad greater dividends than violence, monogamy became the prevailing sexual custom and peace came to be valued over wars, which destroyed crops and animals. These new values were codified into ethical systems which guide the managers even today.
Two centuries ago, the society entered an industrial stage of cultural experience and ethical systems, which once again began evolving to reflect the changing physical, cultural, institutional and intellectual environment. Large factories and corporations, growth of population, capitalist and socialist economic doctrines, and technology have all replaced the ethical standards of the agrarian stage. Industrialism has not created any distinct ethics, but it has created tensions with old ethical systems based on the values of agricultural societies. It has done this done this by changing values related to ‘what is good and what is bad’. For example the copious production of material goods from factories has encouraged materialism and consumption at the expense of older virtues such as moderation. Managers run industrial entries on the cutting edge of cultural experience. The tensions that their actions create make business ethical more complex. For instance, the widespread use of computers for data storage and communication have raised security related issues.
THE LEGAL SYSTEM
Laws are rules of conduct, approved by legislatures, that guide behavior in any society. They codify ethical expectations and change as new evils emerge. But laws cannot cover all ethical expectations of the society. Law is reactive- new statue and enforcement always leaves behind the opportunity for corporate expediency.
Whatever ethics the law codifies, it is binding on businesses. The society expects businesses to abide by the law. Obeying the law is presumed to be ethical behavior.
Although the society expects business to be law abiding, seldom do the business adhere to the rules. Law breaking in business is common. Taxes are evaded, hundreds of employees die of occupational diseases, many perish because of industrial accidents, and millions others receive disabling injuries on the job. The blame for these death and injuries had to be shared by careless employees and employers who fail to adhere to occupational health and safety laws.
Consumers suffers because of poor-quality and high-priced supplied by businessman. Businesses that degrade the environment by disregarding environment protection laws cause misery to the society.
FACTORS INFLUENCING BUSINESS ETHICS
FACTORS INFLUENCING BUSINESS ETHICS
Business ethics is one of those curious things that hold a certain duality. On one side, it is something that everyone holds in high regard (more or less). On the other hand, everyone holds different ethical values. What one person may consider ethical, another may not. Or, what one individual may hold in the highest regard, may be much lower in priority for another. Ethics is up there with concepts like morals, values and beliefs in that they can at times differ drastically from one person to the next.
The business world is notorious for blurring the lines between what is ethical and what is not. Some say that ethics has no place in business at all, while other claim that holding true to a set of moral principles not only ensures growth for the business, but better standards throughout the industry and business world, in general. In order to discuss the factors surrounding ethical practices it may be worthwhile to quickly touch upon the definition of unethical issues. These practices deliberately impact the business or another business in a negative way. Acts can range from overt acts like bribery, theft and sabotage, to more subtler tactics like market espionage and making bad capital investments.
Boiled down, the application of one’s ethics amount to business decisions in the corporate world. But what exactly goes into those decisions? What factors will sway it from one outcome to the other? To make an ethically sound choice means running the matter through a series of filters. The first of these is to determine whether this business decision is equitable. The next filter deals with the morals of the decision. Is it right? Is it just? The general acceptability of the business factor is the next filter, and is followed by trying to discern the correct decision that will have the greatest positive impact to all those concerned. These factors, look deceptively simple from the outset. Most of them revolve around the ideas of fairness, justice, and doing things for the greater good. But, while these concepts seem easy to understand, they are abstract and can vary greatly depending on a person’s value system.
While different organizations, associations, governing bodies, and even religions have generated their own set of ethics. Unfortunately, there are no universal standards that is consistent throughout the various social and business environments that exist today. Enforcement of such standards is equally difficult unless the breach of ethics also breaks the law, in which case law enforcement agencies can act. In the end, the enforcement of ethical business practices must come from within a business or association of organizations. These self-governing bodies must define and create their own ethical standards which in and of itself, requires the company to delve into its own complex belief system.
A company’s belief system is not to be confused with the religious inclinations of its owners or partners. It does however mean that in order for a company to create ethical standards it must first develop moral standards, for its code of ethics greatly depends on its morals. In turn, these morals are derived from a company’s value system which is mainly culled from the years of experience that a company’s leadership structure brings to the table. This, of course, means that value systems, moral standards and ethics can differ greatly from one organization to the next.
While discussing semantics of ethical business practices is all well in good from a theoretical or philosophical standpoint, there are still real world applications to consider. The so-called “golden rule” must be considered. Several definitions of the rule exist, but it generally states that whosoever controls the gold (money, profits, revenue) dictates the rule. In plain speak, seeking profits is the overriding factor. This is not a universally accepted rule, but a company does have to generate income to remain solvent. But at what cost will the sole pursuit of profits have on a business, its company culture, the industry and the world? Ethics, in many cases, tends to stand in the way of actions that cater to the blind pursuit of money. Therefore, should a company, organization, association or industry decide to create and hold steadfast to a set of ethical standards then they must be willing pay for it, so to speak.
Business leaders today are well aware of the ethical issues and hence they want to improve the ethical standards of the business. Self-regulation is, of course, better and produce impressive results. Besides, there are also a number of factors, which significantly influence the managers to take ethical decisions.
Some of them are:-
1. Personal Code of Ethics
A man’s personal code of ethics that is what one considers moral is the foremost responsible factor influencing his behavior.
It is already stated that the Government will intervene and enact laws only when the businessmen become too unethical and selfish and totally ignore their responsibility to the society. No society can tolerate such misbehavior continuously. It will certainly exert pressure on the Government and the Government consequently has no other alternative to prohibit such unhealthy behavior of the businessmen.
3. Government Rules and Regulations
Laws support Government regulations regarding the working conditions, product safety, statutory warning etc. These provide some guidelines to the business managers in determining what are acceptable or recognized standards and practices.
4. Ethical Code of the Company
When a company grows larger, its standard of ethical conduct tends to rise. Any unethical behavior or conduct on the part of the company shall endanger its established reputation, public image and goodwill. Hence, most companies are very cautious in this respect. They issue specific guidelines to their subordinates regarding the dealings of the company.
5. Social Pressures
Social forces and pressures have considerable influence on ethics in business. If a company supplies sub-standard products and get involved in unethical conducts, the consumers will become indifferent towards the company. Such refusals shall exert a pressure on the company to act honestly and adhere strictly to the business ethics. Sometimes, the society itself may turn against a company.
6.Ethical Climate of the Industry
Modern industry today is working in a more and more competitive atmosphere. Hence only those firms, which strictly adhere to the ethical code, can retain its position unaffected in its line of business. When other firms, in the same industry are strictly adhering to the ethical standards, the firm in question should also perform up to the level of others. If the company’s performance is below than other companies, in the same industry, it cannot survive in the field in the long run.
The business executive working as a professional manager has to decide what is ethical or unethical. Many factors influence this decision.
BASIC WORKPLACE ETHICS
EXAMPLES OF BASIC WORKPLACE ETHICS IN AN ORGANIZATION
Rules and regulations ought to be same for everyone.
Everyone needs to attend office on time irrespective of their designation, distance of their home from the workplace, salary or status. An individual cannot come to office late just because he is the team leader and his team is already present and working on his behalf. If a day’s salary of a clerk is deducted for coming late to work, it should be the same for the marketing manager as well.
Company’s policies need to be communicated clearly to each and every one.
There should be transparency at all levels of hierarchy. Employees are the backbone of any organization and thus they must have a say in company’s goals and objectives. Key responsibility areas need to be communicated to the employees on the very first day of their joining. Roles and responsibilities need to be assigned as per an individual’s expertise and experience. Do not expect an employee with one year experience to head the marketing team. Employees need to be trained well. Organizations need to give at least six months time to the new employees to adjust in the new environment.
.Rules and regulations should not be too rigid.
An organization ought to respect its employees to expect the same in return Don’t expect an employee to attend office two days before his marriage date. If an employee is not keeping well, please do not ask him/her to attend office unless and until there is an emergency.
Management must not forget that money is a strong motivator for employees. Everything is important, be it career, growth, job satisfaction but what is most important is employee’s salaries. Do not unnecessary hold their salaries for a long time unless and until there is really shortage of funds. In case of marketing and sales employees, conveyance and mobile bills must be cleared at the earliest. Do not ask for unnecessary bills and documents. It has been observed that most of the times employees crib when they are underpaid. Make sure employees get what they deserve. Salaries should be decided in the presence of the employee and also keeping in mind an individual’s role in the organization, his/her gross salary in the previous organization, responsibilities within the current system and of course his/her years of experience. One of the major reasons as to why employees quit their jobs after a year or so is poor appraisal system. Increments ought to be directly proportional to the amount of hard work an employee puts in through out the year and also his/her performance. Unnecessary favours are against the workplace ethics.
Granting genuine leaves
Organization should not expect employees to attend office 365 days a year. It is the responsibility of human resource professionals to prepare the holiday calendar at the beginning of the year and circulate the same among all employees. Let employees enjoy their respective festivals and come back to work with positive energy and smile.Infact allow them to go in the festive mood two days prior to the D day. Ask them to organize pre festival bashes at the workplace. Let them dress in colourful attires and have fun. Trust me, work never suffers this way. Rather, employees feel attached to the organization and strive hard to deliver their level best every time. Give employees the space they require.
Do not be too strict with your employees.
Do not block all social networking sites. Blocking face book and twitter is not the ideal way to ensure employees are working and not wasting their time. Even a 24 * 7 check would not prevent employees from wasting their time unless and until they realize it themselves. The moment, you are strict with something, people would tend to do the same more.
IMPORTANCE OF ETHICS IN ORGANIZATION
AND FACETS OF ORGANIZATION ETHICS
IMPORTANCE OF ETHICS IN ORGANIZATION
Workplace ethics ensures positive ambience at the workplace.
Workplace ethics leads to happy and satisfied employees who enjoy coming to work rather than treating it as a mere source of burden. Employees also develop a feeling of loyalty and attachment towards the organization. Organizations need to have fool-proof systems to measure the performances of individuals. Appraisal system needs to be designed keeping in mind employee’s performance throughout the year and his/her career growth. Periodic reviews are essential. It is mandatory for superiors to know what their subordinates are up to. You need to know who all are going on the right track and who all need that extra push. Workplace ethics ensures management guides and mentors their employees well.
It enables management to treat all employees as equal and think from their perspective as well.
Appraisal and salary hikes should not happen just for the name sake. Employees must have a say in their appraisal system. Transparency is essential. An employee is bound to move on after a year or so if he/she is not appreciated and rewarded suitably. It is indeed the organization’s loss when employees after being trained quit and move on. Do you think it is entirely the employee’s fault? Why would an employee move on if he/she is fully satisfied with his /her current assignment? Employees change primarily because of two reasons – Career growth and monetary benefits. Management needs to make employees feel secure about their job and career. Unnecessary favouritism is against workplace ethics. If you favor anyone just because he is your relative, the other team members are bound to feel demotivated and thus start looking for new opportunities. An individual’s output throughout the year should decide his/her increment.
Workplace ethics awares organizations about the need to retain and nurture talents
Organizations need to stand by their employees even at the times of crisis. You cannot ask your employees to go just because you don’t need them anymore or your work is over. Such a practice is unethical. How can you play with someone’s career? If an individual has performed well all through but fails to deliver once or twice, you just can’t kick him out of the system.. If you have hired someone, it becomes your responsibility to train the individual, make him/her aware of the key responsibility areas, policies, rules and regulations and code of conduct of the organization. Employees need to be inducted well into the system. They must be aware of the organization’s policies from the very first day itself.
Workplace ethics also go a long way in strengthening the bond among employees and most importantly their superiors.
Employees tend to lie if you do not allow them to take leaves. If you do not allow an employee to take leave on an important festival, what do you expect the employee to do? What is the alternative left with him? He would definitely lie. Do not exploit your employees and don’t treat them as machines. No employee can work at a stretch without taking a break. It is okay if they talk to their fellow workers once in a while or go out for a smoke break. Understand their problems as well. If you feel the problem is genuine, do not create an issue. It is but natural that once or twice they would definitely call their family members and enquire about their well-being. Superiors should not have a problem with that. It has been observed that organizations which are impartial to employees, lend a sympathetic ear to their grievances and are employee friendly seldom face the problems of unsatisfied employees and high attrition rate.
A strong ethical culture within your business is important in safeguarding your assets. Employees who abide by your workplace ethics would be able to protect and respect your business’s assets. For example, they would avoid making personal long distance calls using the business’s lines. Workers can only respect company property when you treat them with respect and dignity, which makes them feel proud to be working for your business. Ensure that your workers perform in an environment with integrity and strong ethics. It increases employee pride and discourages them from stealing supplies or equipment.
Productivity and Teamwork
Workplace ethics is integral in fostering increased productivity and teamwork among your employees. It helps in aligning the values of your business with those of your workers. Achieving this alignment requires that you encourage consistent dialogue regarding the values of your business, which enhances community, integrity and openness among employees. Ethics enable your workers to feel a strong alignment between their values and those of your business. They show such feelings through increased productivity and motivation.
You earn a lot of respect and cultivate a strong image in the public domain when you make ethical choices. For instance, you can fulfill your corporate social responsibility by reducing waste discharge from your business. The public would consider your business to be operating with honor and integrity while valuing people over profits. Building a strong public image through ethical conduct also earns you more clients. Customers would develop trust in you and do business with your organization.
Ethical conduct in the workplace encourages a culture of making decisions based on ethics. It also enhances accountability and transparency when undertaking any business decisions. During turbulent times, a strong ethical culture guides you in managing such conflicts by making the right moves. It can help you to introduce change successfully in your organization, which can be a challenge. Ethical conduct within the business sensitizes you and your staff on how to act consistently even in difficult times.
Ethics and profits
Ethics and profits go together. A company which is inspired by ethical conduct is also a profitable one. Value driven companies are sure to be successful in the long run though in the short run they may lose money. Decisions taken within an organization may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company. The decision to behave ethically is a moral one; employees must decide what they think is the right course of action. This may involve rejecting the route that would lead to the biggest short-term profit.
Law cannot protect society, ethics can.
Ethics is important because the government, law and lawyers cannot do everything to protect society. Technology develops faster than the government can regulate. People in an industry often know the dangers in a particular technology better than the regulatory agencies. Further, government cannot always regulate all activities which are harmful to society. Where law fails, ethics can succeed. An ethically-oriented management takes measures to prevent pollution and protection of workers’ health even before being mandated by law.
Ethical ehavior and corporate social responsibility can bring significant benefits to a business. For example, they may:
Attract customers to the firm’s products, which means boosting sales and profits
Make employees want to stay with the business, reduce labour turnover and therefore increase productivity
Attract more employees wanting to work for the business, reduce recruitment costs and enable the company to get the most talented employees
Attract investors and keep the company’s share price high, thereby protecting the business from takeover.
Knowing that the company they deal with has stated their morals and made a promise to work in an ethical and responsible manner allows investors’ peace of mind that their money is being used in a way that arranges with their own moral standing. When working for a company with strong business ethics, employees are comfortable in the knowledge that they are not by their own action allowing unethical practices to continue. Customers are at ease buying products or services from a company they know to source their materials and labour in an ethical and responsible way.
For example, a coffee company which states all their raw beans are picked from sustainable plants where no deforestation has occurred, by people paid a good living wage, in an area where investments have been made to ensure that producing the coffee for a foreign market has not damaged the local way of life, will find that all these elements of their buying strategy becomes a selling point for their final product.
A company which sets out to work within its own ethical guidelines is also less at risk of being fined for poor ehavior, and less likely to find themselves in breach of one of a large number of laws concerning required ehavior.
Reputation is one of a company’s most important assets, and one of the most difficult to rebuild should it be lost. Maintaining the promises it has made is crucial to maintaining that reputation.
Businesses not following any kind of ethical code or carrying out their social responsibility leads to wider consequences. Unethical ehavior may damage a firm’s reputation and make it less appealing to stakeholders. This means that profits could fall as a result. The natural world can be affected by a lack of business ethics.
For example, a business which does not show care for where it disposes its waste products, or fails to take a long-term view when buying up land for development, is damaging the world in which every human being lives, and damaging the future prospects of all companies.
FACETS OF BUSINESS ETHICS
Business ethics is not concerned merely with not bribing to get things done. In other words, a businessman does not become ethical simply by not accepting or offering bribes. That would be a too restrictive and narrow view of what essence is applicable to every human act. Business ethics covers the whole amount of activities, including quality, keeping to promises, transparency in reporting of financial performance, not avoiding taxes, and so on. We shall briefly look at six of these areas in detail.
Hawking poor quality products
This ought to be against any businessman’s ‘dharma’. It is the duty of every entrepreneur to ensure that he gives products of the highest quality to his customers. The pursuit of quality through TQM and TPM and with whatever the method is a lifetime engagement. There are no permanent benchmarks. One needs to surpass all benchmarks and break records set by one-self, as far as quality is concerned.
This is something that is essential for survival in any business. It could be promises made to customers, employees or contractors. It is in the enlightened self-interest of entrepreneurs to honor the promises they make, because business is built on trust and relationships which will get eroded the moment an entrepreneur is seen lacking in integrity and honesty. In today’s outsourcing environment, this acquires great importance.
Companies resorting to window dressing to attract investments and those fudging the balance sheet to cheat the workers of their rightful entitlements, whether bonus or exgratia payments are indulging in unethical practices as much as a person who sells adulterated foods and medicines. Present consumers need transparency in business concern’s financial statements.
Super Normal Profits
This is something dear to monopolies and mostly attempted by short run and fly by night operations. For the long haul, it is essential that we share the benefits with all those who are part of the business. If we squeeze the suppliers too much, we can be let down in a critical situation. The same is true with customers and also with employees. The objective of a business is not just to maximize the shareholder’s values, but rather to deliver balanced value in a manner that benefits all the stockholders and society. Milking the customers can give benefits in the short run. But will end up ruining the relationship built over a long period of time. Relationships are more precious than short term profits. Several studies report that it costs six times as much to develop a new customer as it does to sell to an existing one.
Compliance with laws and statutes
To be a good clean and corporate citizen in the country in which the business operates, is a moral duty for any business. Laws prohibit theft, enforce contracts, set limits to advertising and reinforce many other moral norms. Flouting or circumventing law is sometimes seen as a smart thing to do, but in the long run it is not the right policy. We must also remember that what is ethical need not always be covered by law. Often the law underscores only the non-negotiable minimum.
Concern for the local community
In the area, in which your factories and offices are located, it pays to develop a harmonious relationship with the local community apart from providing employment to local people and in addition, every company can contribute to some social cause. A few organizations have instilled such a sense of purpose into their employees, that it has become a reason why they exist. They have transformed noble and lofty sentiments into a heartfelt response from their employees, customers and stakeholders. Now organizations like Microsoft, Infosys, GE etc. are stepping with social service by providing funds.
Harm in changing the policies. Think from the employee’s perspective as well. Policies should not be too rigid.
Don’t be too strict with the employees. If someone is not present in the office, please do not call his family members to enquire about him. No one would like it. We all are mature professionals to understand that if there is work, we need to finish it first rather than waste our time in gossiping and surfing social networking sites. Management can’t force employees to respect the organization. Respect must be commanded and not demanded. Respect your employees if you expect the same in return.
ETHICS IN VARIOUS FUNCTIONAL DEPARTMENTS
ETHICS AND VARIOUS ORGANISATION FUNCTIONAL DEPARTMENTS
ETHICS AND HR
Human resource management deals with manpower planning and development related activities in an organization. Arguably it is that branch of management where ethics really matter, since it concerns human issues specially those of compensation, development, industrial relations and health and safety issues. There is however sufficient disagreement from various quarters.
There are different schools of thought that differ in their viewpoint on role of ethics or ethics in human resource development. One group of thought leaders believes that since in business, markets govern the organizational interests and these interests are met through people, the latter are therefore at the highest risk. They believe that markets claim profits in the name of stakeholders and unless we have protocols, standards and procedures the same will develop into a demon monopolizing markets and crushing human capital; HR ethics are become mandatory.
There is another group of ethicists inspired by neo-liberalism who believe that there are no business ethics apart from realization of higher profits through utilization of human resources. They argue that by utilizing human resources optimally, there is more value creation for the shareholders, organization and the society and since employees are part of the society or organization, they are indirectly benefited. Nevertheless ethics in human resource management has become a perennial debate of late!
Discussions in ethics in HRD stem from employee relationships and whether or not there can be a standard for the same. Employee rights and duties and freedom and discrimination at the workplace are issues discussed and covered by most texts on the topic. Some argue that there are certain things in employment relationship that are constant others disagree with the same. For example, right to privacy, right to be paid in accordance with the work (fair compensation) and right to privacy are some areas that cannot be compromised upon.
Ethics and Market System
The kind of market system affects business and HR ethics; the latter thus becomes negotiable. In occupations where the market conditions do not favor the employees it is necessary to have government and labor union interventions in order to control the possible exploitation. In free market system, employees and the employer are almost equally empowered, negotiation create win win situations for both the parties. Government or labor union interventions become harmful.
Globalization has brought about the concept of globalizing labor, trade unions have started to decline and the role of HR as such in issues like employee policies and practices has become a debatable topic. In fact many people are of the opinion that HR is nothing but an arm of the stakeholders through which major strategic and policy decisions are divulged geared towards profit making!
Thought there can be no single opinion on ethics in HR that is convincing. Market in itself is neither an ethical institution nor unethical and no policies and procedures alone cannot govern and align markets to human well being. However the requirement of such policies and procedures can also not be denied. In lieu of this HR ethics should take care of things like discrimination (sexual, religion, age etc), compensation, union and labor laws, whistle blowing, health and safety of the employees etc.
Ethical Issues in HR
Cash and Compensation Plans
There are ethical issues pertaining to the salaries, executive perquisites and the annual incentive plans etc. The HR manager is often under pressure to raise the band of base salaries. There is increased pressure upon the HR function to pay out more incentives to the top management and the justification for the same is put as the need to retain the latter. Further ethical issues crop in HR when long term compensation and incentive plans are designed in consultation with the CEO or an external consultant. While deciding upon the payout there is pressure on favouring the interests of the top management in comparison to that of other employees and stakeholders.
Race, gender and Disability
In many organisations till recently the employees were differentiated on the basis of their race, gender, origin and their disability. Not anymore ever since the evolution of laws and a regulatory framework that has standardised employee behaviours towards each other. In good organisations the only differentiating factor is performance! In addition the power of filing litigation has made put organisations on the back foot. Managers are trained for aligning behaviour and avoiding discriminatory practices.
Human resource practitioners face bigger dilemmas in employee hiring. One dilemma stems from the pressure of hiring someone who has been recommended by a friend, someone from your family or a top executive.
Yet another dilemma arises when you have already hired someone and he/she is later found to have presented fake documents. Two cases may arise and both are critical. In the first case the person has been trained and the position is critical. In the second case the person has been highly appreciated for his work during his short stint or he/she has a unique blend of skills with the right kind of attitude. Both the situations are sufficiently dilemmatic to leave even a seasoned HR campaigner in a fix.
Any person working with any organisation is an individual and has a personal side to his existence which he demands should be respected and not intruded. The employee wants the organisation to protect his/her personal life. This personal life may encompass things like his religious, political and social beliefs etc. However certain situations may arise that mandate snooping behaviours on the part of the employer. For example, mail scanning is one of the activities used to track the activities of an employee who is believed to be engaged in activities that are not in the larger benefit of the organisation.
Similarly there are ethical issues in HR that pertain to health and safety, restructuring and layoffs and employee responsibilities. There is still a debate going on whether such activities are ethically permitted or not. Layoffs, for example, are no more considered as unethical as they were thought of in the past.
Ethical Practices in Sales & Marketing
Your sales and marketing activities have to follow ethical standards if you hope to avoid sanctions from regulatory agencies and loss of reputation with customers. You can get guidance on ethical practices from industry and marketing associations and develop your own internal policies. Ethical companies know how to respect the rights of all stakeholders in the business while making decisions that are in the interests of the company.
Ethical conduct in sales and marketing means using a professional approach to customers, competitors, members of regulatory bodies and company colleagues. Characteristics of such conduct include respectful interactions, consideration for cultural diversity and nondiscriminatory behavior toward people who are different than you. You have to behave honestly, portray situations and products accurately and make constructive contributions to discussions about problems and solutions, and you must observe the applicable laws and regulations at all times and adhere to company ethics policies.
Healthy competition delivers value to customers while allowing companies that compete to earn an appropriate return on their investment. Ethical behavior in a competitive environment includes supporting fair competition, competing on the basis of accurately representing your products and services in the marketplace and fulfilling your obligations in good faith.
Following ethical guidelines in pricing means prices have to be clear without hidden charges. The consumer has to know how much he is going to pay when he makes the purchase. Your prices have to reflect both the cost you incur in delivering the product or service and the value the customer expects to receive.
Ethical sales and marketing offer only safe products that are suitable for their intended use. Supply of the product includes supplying instructions that the customer can follow to make the product work as intended, providing customer service to resolve problems and dealing with problems objectively by applying appropriate solutions. Following these ethical guidelines is good business practice because it increases customer satisfaction.
Businesses obtain personal information about their customers during sales activity and marketing research. Ethical practice means you respect the privacy of customers and safeguard their data. You have to follow privacy legislation and inform customers that you are collecting their data, let them know its intended use, use the data only for that purpose and destroy it securely when you no longer need it.
Sales and marketing include promoting your products and services to potential customers. Ethical promotion portrays your offers honestly and accurately, without links to attractive lifestyles that are not relevant. You have to promote your products and services on their own merits and highlight those features that members of a target market might find valuable when promoting to that market segment.
Ethics and Production
Ethics in production is a subset of business ethic that is meant to ensure that the production function or activities are not damaging to the consumer or the society. Like other ethics there is a certain code of conduct or standards to be followed, however ensuring that the ethics are complied with is often difficult.
One of the most important characteristic of the business today is that there is a great degree of interdependence between various business functions. Production cannot happen without marketing and sales and vice versa. In order to survive in the competitive sphere organizations try to reduce the costs involved in production processes. This cost efficiency is sometimes achieved at the cost of quality. Poor processes and technology is used to keep the cost down, this is especially true for small players who cannot afford economies of scale. Having said this there are also examples of industry giants that compromised on certain production processes, cola companies make up for a good example.
All the production functions are governed by production ethics but there are certain that are severely harmful or deleterious which need to be monitored continuously. The following are worth mentioning:
There are ethical problems arising out of use of new technologies that are deleterious to health, safety and environment. Technological advancements like genetically modified food, radiations from mobile phones, medical equipment etc are less problems are more of dilemmas.
Defective services and products or products those are innately deleterious like alcohol, tobacco, fast motor vehicles, warfare, chemical manufacturing etc.
Animal testing and their rights or use of economically or socially deprived people for testing or experimentation is another area of production ethics.
Ethics of transactions between the organization and the environment that lead to pollution, global warming, increase in water toxicity and diminishing natural resources.
Dilemma of Ethics in Production
There are certain processes involved in the production of goods and a slight error in the same can degrade the quality severely. In certain products the danger is greater i.e. a slight error can reduce the quality and increase the danger associated with consumption or usage of the same exponentially. The dilemma therefore lies in defining the degree of permissibility, which in turn depends on a number of factors. Bhopal gas tragedy is one example where the poisonous gas got leaked out due to negligence on the part of the management.
Usually many manufactures are involved in the production of same good. They may use similar or dissimilar technologies for the same. Setting a standard in case of dissimilar technologies is often very difficult. There are many other factors that contribute to the dilemma, for example, the involvement of the manpower, the working conditions, the raw material used etc.
Social perceptions also create an impasse sometimes. For example the use of some fertilizer by cola companies in India recently created a national debate. The same cold drinks which were consumed till yesterday became noxious today because of a change in the social perception that the drinks are not fit for consumption.
Ethics in Accounting & Financial Decision Making
Accounting is the process of describing business processes in numbers. For a company’s accounting to truly represent what is going on in its financial arena, its bookkeeping numbers must be honest and accurate. Honesty and accuracy in accounting are ethical as well as financial issues. Bookkeepers and accountants have a responsibility to represent information in ways that genuinely represent what is going on in the business. Failure to do so can have consequences for business owners, stakeholders and tax reporting agencies.
Businesses are accountable to a range of shareholders, from partners, to investors, to customers. Shareholders, partners and investors deserve to know the truth about your company’s finances because this information is critical to sound investment decisions. Customers, as well, may be entitled to know whether your company is financially healthy if they enter into transactions that depend on its longevity. For example, a customer taking out a mortgage has a stake in working with a bank that is financially stable and a customer renting a storage unit has a stake in the storage company’s ongoing solvency.
Accountants and bookkeepers have a responsibility to provide the business owners who employ them with accurate information that facilitates sound planning. This obligation involves providing accurate information, and providing it in a time frame that is prompt enough to be relevant. If your bookkeeper takes his time compiling profit and loss statements that could tell you that your business is spending too much on payroll, you may miss an opportunity to improve the situation before it puts your business in jeopardy.
Your company has a legal obligation to report financial information fairly and accurately on tax forms. Providing inaccurate information to tax agencies may lower your tax burden, but you will be subject to fines and perjury charges if you are caught. Ethical accounting practices ensure that your tax forms will be completed in a way that keeps your conscience clear and keeps you out of trouble.
Honest and ethical accounting helps to create a positive image for your business. When a company makes news for dishonest accounting, it loses the trust of current and potential customers. This is especially important with industries that depend on strong working relationships with their customers.
INTERNATIONAL BUSINESS ETHICS
HOW DO BUSINESS ETHICS DIFFER AMONG COUNTRIESBusiness ethics are an important subject when a business decides to expand internationally. Business ethics can differ in many ways between countries and industries. Some companies strive to be the gold standard for business ethics in their industry, while others do the bare minimum that is legally required. With the globalization of business, it is important for companies to establish policies and practices both domestically and internationally with respect to business ethics.
In many foreign countries, business practices that would be frowned upon and illegal domestically are often a normal part of doing business. In many Latin American countries, bribery and kickbacks are a regular part of doing business. A business needs to decide whether to engage in this questionable behavior or stick to its business ethics established at home.
There are two approaches that can be taken when doing business in foreign countries. A business can operate internationally with the policies and procedures it has developed at home, or it can adopt its own practices in each foreign country where it operates. Establishing the same standards in offices worldwide can be advantageous to ensure compliance throughout the entire organization. Management and workers are less likely to engage in risky and illegal behavior if it is explicitly forbidden in a company’s written policies and procedures. Companies can ensure compliance by mandating that its workers read and sign its policies and procedures and successfully complete an annual quiz.
The second approach is for a company to establish different policies and procedures for business ethics in foreign countries. Different countries have different country risks. In some countries, child labor is acceptable and normal, but is frowned upon in the United States. If a multinational company is discovered to have used child labor, it could end up being a public relations nightmare and lead to a decline in domestic sales.
It is important for a company to establish its management philosophy. Although many people often use management style and philosophy interchangeably, they are both different terms. Your management style is how you manage your workforce, while your philosophy is why you manage your workforce that way. For example, your management style may be authoritative, while your philosophy may be intended to ensure that each individual follows the rules in a highly regulated industry, such as financial services.
Some of the most common ethical issues in international business include outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery and corruption. Businesses trading internationally are expected to fully comply with federal and state safety regulations, environmental laws, fiscal and monetary reporting statutes and civil rights laws.
Cultural considerations can also make or break a company conducting business globally. Every culture and nation has its own history, customs, traditions and code of ethics. Cultural barriers include language, which often means a company must rely on translators when speaking to business contacts and customers. Gender can be an issue in countries where women do not have the same rights as men. Religious holidays and other cultural events can prohibit trade at certain times. Acting in accordance with ethical and cultural values is crucial for a multinational company to win clients’ support and business and to achieve a competitive advantage in a particular market.
Employment Practices and Ethics
Ethical issues may be related to employment practices in many nations. The conditions in a host country may be much inferior to those in a multinational’s home nation. Many may suggest that pay and work conditions need to be similar across nations, but no one actually cares about the quantum of this divergence.12-hour workdays, minimal pay, and indifference in protecting workers from toxic chemicals are common in some developing nations. Is it fine for a multinational to fall prey to the same practice when they chose such developing nations as their host countries? The answers to these questions may seem to be easy, but in practice, they really create huge dilemmas.
Basic human rights are still denied in many nations. Freedom of speech, association, assembly, movement, freedom from political repression, etc. are not universally accepted. South Africa during the days of white rule and apartheid is an example. It lasted till 1994. The system practiced denial of basic political rights to the majority non-white population of South Africa, segregation between whites and nonwhites was prevalent, some occupations were exclusively reserved for whites, etc. Despite the odious nature of this system, Western businesses operated in South Africa. This unequal consideration depending on ethnicity was questioned right from 1980s. It is still a major ethical issue in international business.
When environmental regulation in the host nation is much inferior to those in the home nation, ethical issues may arise. Many nations have firm regulations regarding the emission of pollutants, the dumping and use of toxic materials, and so on. Developing nations may not be so strict, and according to critics, it results in much increased levels of pollution from the operations of multinationals in host nations.Is it fine for multinational firms to pollute the developing host nations? It does not seem to be ethical. What is the appropriate and morally correct thing to do in such circumstances? Should MNCs be allowed to pollute the host countries for their economic advantage, or the MNCs should make sure that foreign subsidiaries follow the same standards as set in their home countries? These issues are not old; they are still very much contemporary.
Corruption is an issue in every society in history, and it continues to be so even today. Corrupt government officials are everywhere. International businesses often seem to gain and have gained financial and business advantages by bribing those officials, which is clearly unethical.
Corruption in Japan-In the 1970s, Carl Kotchian, an American business executive who served as the president of Lockheed Corporation, paid $12.5 million to Japanese agents and government officials to sell Lockheed’s TriStar jet to All Nippon Airways. After the case was discovered, U.S. officials charged Lockheed with falsification of its records and tax violations.The revelations created a scandal in Japan as well. The ministers who took the bribe were charged, and one committed suicide. It even led to the jailing of Japan’s prime minister. The Japanese government fell in disgrace, and the Japanese citizens were outraged. Kotchian had, without doubt, engaged in unethical behavior.
Some of the modern philosophers argue that the power of MNCs brings with it the social responsibility to give resources back to the societies. The idea of Social Responsibility arises due to the philosophy that business people should consider the social consequences of their actions. They should also care that decisions should have both meaningful and ethical economic and social consequences. Social responsibility can be supported because it is the correct and appropriate way for a business to behave. Businesses, particularly the large and very successful ones, need to recognize their social and moral obligations and give resources and donations back to the societies.
IMPORTANCE OF ETHICAL LEADERSHIP
IMPORTANCE OF ETHICAL LEADERSHIP
Ethical leadership typically involves leading employees to build good relationships based on respect and trust. Effective leaders fundamentally believe that acting with integrity, honesty, fairness, equity, justice and compassion result in sustainable success. When people recognize the value of adhering to standards for business conduct, they treat each other with sincerity.
When an organization’s leader is reliable, willing to admit mistakes and trustworthy, subordinates tend to have confidence in leadership. Employees believe that leaders will keep promises and therefore are willing to commit to the organization’s goals as well. Ethical leaders recognize that by leading by example, creating an environment that fosters productivity, without the distractions of scandals and corruption. When people trust each other, they can focus on getting work done, asking for help when they need it and solving business problems.
An effective leader honors commitments and expects subordinates and business partners to do so as well. She maintains loyalty, apologizes when necessary and takes responsibility. Doing so also inspires the same behavior in all transactions. She makes the right choices for long-term benefit. For example, an ethical leader chooses not to use information against a competitor if it was obtained through a third-party who didn’t have the authority to provide it. Long-term, improved ethical leadership tends to positively impact the financial aspects of the organization. It also improves employee morale, job satisfaction and loyalty.
Ethical leadership creates and maintains a safe work environment for the workforce. All employees get treated with dignity and respect, regardless of their level in the organization. This type of leadership enables fair and equal opportunity for promotion, following local, state and federal regulations prohibiting discrimination for ethnicity, gender or age. Ethical leadership also provides physical and mental health support and helps employees maintain a healthy life and work balance. It provides work that has meaning and encourages employees to pursue training and development opportunities to advance in their careers.
An ethical leader realizes subordinates watch her closely to decide how to act themselves. She makes decisions carefully and communicates in a timely manner. When appropriate, she accepts input from subordinates and considers how her actions, such as strategic goal modifications, leadership changes, policy adjustments and other transformational activities, may distract employees from concentrating on job tasks. Ethical leaders act responsibly on a local and global level. For example, they do not conduct business in locations where employees work in unsafe conditions or receive incommensurate pay. They don’t make business deals in an unethical manner or knowingly act to harm the environment.
CREATION OF ETHICAL CULTURE IN AN ORGANIZATION
Ways to Create a Culture of Ethics in Any Organization
There are many ways that organizations can create a culture that supports and nurtures ethics. And good ethics is good business in the end. Closely attending to just a few important and easy to remember strategies to help create and sustain a culture of ethics could be endorsed and shared with perhaps all organizations. These include the following:
Clear Expectations for What is Okay and Not Okay
All organizations have both spoken and unspoken rules and guidelines about how to act within their environments. This includes everything from attire, attitudes expressed, and behavior towards colleagues, customers, and the public. For anyone who has worked at several organizations, even within the same sector such as corporations or universities, they can likely describe how the culture of these organizations differ and sometimes differ radically.
Many of the cultural norms and expectations of an organization are never expressed in writing but are inferred once you closely observe the environment of the organization for some duration. Some organizations highlight ethical values and decision making more than others. Many may pay lip service to following ethical guidelines but then don’t practice what they preach. Some are more utilitarian than others. Others are more hospitable and gracious than others. Clear expectations for behavior among all members of an organization is the first step towards a more ethical organizational culture.
2. Modeling Desired Behavior (especially from organizational leaders)
Research conducted by well-known Stanford psychologist, Al Bandura, among others have made clear that people tend to model the behavior of others (especially well thought of and desirable others) and that leaders within any organization act as models for those below them in the organizational chart. Thus, any organizational leaders must be mindful that they are being watched very closely and that others in the organization will likely follow their lead when it comes to ethical behavior and attitudes.
Bandura defines the specific stages of observational learning to include attention, retention, reproduction, and motivation. Thus, for observational modeling to occur, one need to observe or attend to the model, remember the model’s behavior, reproduce the model’s behavior, and be motivated to do it again and again.
Thus, organizational leaders must practice what they preach and be sure that they model for others the desired behaviors that they wish to nurture within their organizations. If the highest standards of ethics are desired within an organization then high profiles leaders in that organization much demonstrate these standards and be beyond reproach in this regard. Their actions often will speak louder than their words when it comes to helping to create a more ethical environment within their organizations.
3. Reinforce the Behavior You Want, and Don’t Reinforce the Behavior that You Don’t Want
This is a very simple truth from basic operant conditioning that any college freshmen would learn about in their introductory psychology course. Also, it is a truth that has been known for generations. If you want behavior to continue, then reinforce it. If you want behavior to discontinue, don’t reinforce it. This is a pretty simple truth yet it is often hard to do and hard to remember for many organizations and individuals alike. And it is certainly easier said than done. Organizations must be mindful and intentional about what behaviors they want to reinforce and what behaviors they do not want reinforced. Ethical behavior must be clearly reinforced so that it will continue to occur. Problematic unethical behavior should not be reinforced if the organization wishes to extinguish these undesirable behaviors.
Offering opportunities for recognition, awards, and social reinforcements for desirable ethical behaviors can go a long way to promote the types of ethical culture desired in any organization. Certainly, these rewards or reinforcements must be thoughtfully considered and delivered with careful attention to both intended and unintended consequences of using them.
Focus on Skill Building and Problem Solving
Organizations can do a great deal to focus their attention on developing ethical skills and problem solving techniques. Rather than only stating what kinds of behaviors are expected or not, institutions must help with the step by step strategies for developing effective ethical decision making and behavior skills and strategies for resolving ethical dilemmas or troubles. Workshops, easy to use reference materials, ongoing and readily available consultation from peers or mentors are just some of the many ways institutions can assist in training students and staff to best use the tools that are available to them to participate in better and more thoughtful ethical decision making.
Provide the Tools People Need to Act Ethically
If an organization wants to create a culture of ethics they must be sure that members have the tools that they need to do so. These include adequate and appropriate training, consultation, modeling, and supervision. These tools also include being able to bring internal and external to the organization experts in to engage staff at all levels of training and problem solving as well.
Having an ethics ombudsman or point person for an organization can be especially valuable. They or their staff can provide a focal point for getting tools and resources to better help with ethical consultation.
Provide Corrective Feedback
Another basic and important principles borrowed from introductory psychology is the notion of immediate corrective feedback. Unless organizations offer timely and thoughtful corrective feedback regarding behavior they will unlikely create a culture of ethics. Reinforcement for behavior that is desired and corrective feedback for behavior that is not desired is critical to help create and sustain a culture of ethical behavior and consideration.
This corrective feedback needs to be conducted in the spirit of collaboration and education rather than in terms of punishment or chastisement. Collaboration and education allow for more openness and less defensiveness when feedback is provided. Immediate feedback is critical to maximize a fuller understating of the problem behavior as well.
TATA STEEL CASE STUDY-
IMPLEMENTATION OF TATA CODE OF CONDUCT
BASIC ETHICAL PRINCIPLES
IMPLEMENTATION OF THE TATA CODE OF CONDUCT AT TATA STEEL
Nearly a century old, Tata Iron and Steel Company Ltd. (TISCO), more popularly known as Tata Steel, is one of India’s oldest companies. Established in 1907 by Mr. Jamsetji Tata — a visionary — it is Asia’s first and India’s largest integrated private sector steel company. Since its inception, the company has focused on the customer, operational excellence, employee welfare, organizational leadership, and social responsibilities and citizenship. Consistent with its thrust on these dimensions, the company is one of the most respected companies in the country for its value-based practices, ethical and dynamic practices, and competitive performance. The name ‘Tata’ has always been synonymous with trust. The statement of purpose of the Tata group (Tata Steel belongs to this group) explicitly seeks to improve the quality of life in the communities it serves. It says, “Our heritage of returning to society what we earn evokes trust among consumers, employees, shareholders, and the community. This heritage will be continuously enriched by formalizing the high standards of behaviour expected from employees and companies.”
The values and principles that had governed the company (and Tata group) were articulated for the first time in 1998. It was in this year that the company formally published its ‘code of conduct.’ Among other things, the implementation of the Tata code of conduct was mandatory for the relatively autonomous group companies to leverage on ‘Tata’ as a brand. The successful implementation of this code of conduct was not a matter of choice for Tata Steel. One of the senior managers of the company stated: Deciding to implement the Tata code of conduct was easy for us. We had always believed in ethical practices. However, we had to ensure that every one of more than 50,000 employees practised the code.
To implement the code of conduct, the company created a new position of ‘ethics counsellor’ at the senior management level. He was internally identified and made to report to the Managing Director of the company for the day-to-day functioning. However, he directly reported to the group headquarters. In his own words: The company management encourages me to interact directly with the group headquarters. On my part, I discuss most of the issues with the MD to facilitate better voluntary implementation of the code of conduct by the employees.
In every department, one person was identified by the head of the department to additionally look after the implementation of the code of conduct in the department. These ethics coordinators reported to the ethics counsellor directly on matters related to ethics. However, for other purposes, they continued to report to the heads of their respective departments. The ethics coordinators in consultation with the ethics counsellor organized a large number of awareness programmes every year. Such programmes were extended to the other stakeholders like suppliers and dealers of the company.
Having succeeded in creating awareness among the employees, the ethics counsellor organized nearly 15 awareness programmes for the families of the executives. The family members were made to feel proud that one of them was part of a ‘value-based’ organization. The ethics counsellor stated: We realized that it was not adequate to create awareness among the employees alone. Frequently, executives succumb to the temptation of accepting favours owing to the unreasonable expectations of the family members. Further, we also realized that if the families of the employees could take pride in the honesty of Tata Steel employees, they would encourage the employees to follow the code of conduct in letter and spirit. Formal control systems to uphold the code of conduct do not work owing to a lack of direct monitoring mechanisms. The workshops for the families were primarily restricted to the senior management levels.
The ethics counsellor stated that implementation of the code was more critical for this group of employees. “Owing to larger responsibilities, they experience more temptations for violation of the code,” he explained. Having organized the workshops, the company looked into the possibility of integrating ethics in the performance management system. Every month, one ethics coordinator was rewarded on the basis of quality of work. The employees and other stakeholders were rewarded whenever they demonstrated unique behaviour of high moral value. However, the company decided not to make it a part of performance appraisal system as the management felt that following the code was not a matter of discretion. Any proven violation of the code was viewed seriously. In fact, one of the employees was dismissed from the company for violation of the code of conduct. The news was widely publicized though the name of the employee was not revealed. The outcome of these efforts was found to be encouraging. One of the executives stated, “I received an honorarium of Rs. 2,000 for delivering a lecture in one of the prestigious management institutes. I proactively asked the ethics counsellor whether I could accept such payment. I did not want to violate the code of conduct even by mistake. I strongly believe in the ethics of the company.” The executives were extremely happy when they realized the advantage of the code of conduct in maintaining their relationships with external stakeholders.
The managers found it difficult to interact with government officials without arranging for any favours in the early days after implementing the code of conduct. However, the executives continued to insist on the directives of the top management and the principles of the code of conduct. Slowly, the officials realized that the company would continue to follow the code honestly. They stopped seeking gratifications from the company.
One of the managers summarized the issue in the following words:
We are willing to provide any information required to the officials. We are also willing to wait for clearances and certificates from the government officials. However, we cannot grant any favours to them. Now, these officials respect us for our values and ethics. They treat us differently. I now feel better and more comfortable while interacting with external agencies.
TATA’S BUSINESS ETHICS PRINCIPLES
• Committed to benefit the economic development of the countries in which it operates.
Financial reporting and records
• Prepare and maintain its accounts fairly and accurately and in accordance with the accounting and financial of the country
• Fully support the development and operation of competitive open markets
Equal opportunities employer
• Provide equal opportunities to all its employees and all qualified applicants for employment
Gifts and donations
• Its employees shall neither receive nor offer or make, directly or indirectly, any illegal payments, remuneration, gifts, donations or comparable benefits
• A Tata company and its employees shall not, unless mandatedunder applicable laws, offer or give any company funds or property as donation to any government agency or its representative
• Be committed to and support the constitution and governance systems of the country in which it operates.
Health, safety and environment
• A Tata company shall strive to provide a safe, healthy, clean and ergonomic working environment for its people
Quality of products and services
• Be committed to supply goods and services of world class quality standards, backed by after-sales services consistent with the requirements of its customers
• Committed to good corporate citizenship, not only in the compliance of all relevant laws and regulations but also by actively assisting in the improvement of quality of life of the people in the communities in which it operates
Cooperation of Tata companies
• Cooperate with other Tata companies including applicable joint ventures, by sharing knowledge and physical, human and management resources
Public representation of the company and the group
• Honour the information requirements of the public and its stakeholders Third party representation
• Parties which have business dealings with the Tata group but are not members of the group, such as consultants, agents, sales representatives, distributors, channel partners, contractors and suppliers, shall not be authorised to represent a Tata company without the written permission
Use of the Tata brand
• The use of the Tata name and trademark shall be governed by manuals, codes and agreements to be issued by Tata Sons
• A Tata company shall be committed to enhancing shareholder value and complying with all regulations and laws that govern shareholder rights.
• Every employee of a Tata company shall preserve the human rights of every individual and the community, and shall strive to honour commitments.
• Employees of a Tata company, in their business conduct, shall comply with all applicable laws and regulations, in letter and spirit
• Consistent with applicable laws, an employee of a Tata company shall not, without the requisite, officially written approval of the company, accept employment or a position of responsibility with any other company
Conflict of interest
• Employees act in the interest of the company, and ensure that any business or personal association which he / she may have does not involve a conflict of interest with the operations of the company
Securities transactions and confidential information
• An employee of a Tata company and his / her immediate family shall not derive any benefit or counsel, or assist others to derive any benefit, from access to and possession of information about the company
Protecting company assets
• The assets of a Tata company shall not be misused
• The involvement of a Tata employee in civic or public affairs shall be with express approval from the chief executive of his / her company
Integrity of data furnished
• Every employee of a Tata company shall ensure, at all times, the integrity of data or information furnished by him/her to the company.
CSR INITIATIVES OF TATA
Tata Steel Rural Development Society
Tata Steel Rural Development Society (TSRDS), established in 1979, has faithfully executed its mandate of enriching the quality of life of the communities in which Tata Steel operates. Over the years, it has worked in areas such as food, water and health and ensured empowerment to people whose lot has been otherwise abject and pitiable. Today those people aspire and have access to things they scarcely dreamed of some decades ago.
The society has a special focus on income generation, health and hygiene and empowerment. It has established a network of health stations and trained staff who act as providers of basic healthcare. TSRDS has offices in West Bokaro, Noamundi, Jamadoba, Gopalpur and Sukinda, besides Jamshedpur.
TSRDS’s efforts have led to the economic development of an area once classified as backward. Starting with 32 villages, it now covers over 700 villages in its programmes, including those surrounding Sukinda, Bamnipal and Gopalpur.
Its projects have included the developing of water sources, training farmers on improved agricultural practices, promoting rural enterprise, infrastructure development to boost the village economy, encouraging animal husbandry, promoting art, culture, sports and games. Some projects have also been in the area of sanitation, water conservation, tube well installation and the enhancement of livelihood.
The infrastructure it has developed includes schools and hostels, community sheds, rehabilitation hutments, link roads, culverts, etc, the absence of which pose a serious hindrance to rural development.
The society also conducts health awareness programmes and health camps to promote awareness on health issues, especially on the preventive and curative aspects. TSRDS has also made arrangements for the Lifeline Express to visit villages under its care. This is a unique ‘hospital on wheels’, equipped with a modern operating theatre that provides diagnostic, medical and surgical intervention to people living in remote areas.
TSRDS’s commitment and dedication have inspired and directed numerous people to play a more proactive role in their spheres of existence. The thrust has always been on participative leadership as a successful model of rural development. Groups such as Salahakar Samiti, Pani Panchayat, Community Health Guide, Save the Forest Group and Mahila Samiti have helped the organisation to garner support in all its endeavours.
The idea was to encourage the ultimate beneficiaries to play a more active role in the projects so as to make it more self-sustaining. To ensure this, TSRDS conducts periodic leadership camps, where youngsters are encouraged to develop their talents in the service of their own people.
The Tribal Culture Society
The Tribal Culture Society (TCS) of Tata Steel has done outstanding work for the tribals of Jamshedpur and the surrounding areas in Jharkhand. The society evolved from a pure company department for Adivasi affairs in 1974, to a Tribal and Harijan Welfare Cell in 1984. In 1993, it assumed its present form as a non-profit organisation, equipped with the expertise and financial resources to make a difference in the lives of marginalised tribal communities. The intention was extremely laudable since developmental concerns often have a way of neglecting indigenous people. TCS was set up to ensure that the voice of the tribal community did not go unheeded. Empowerment of the marginalised community was TCS’s primary aim. The society focuses on three important issues: education, improvement of livelihood opportunities and the preservation of the ethnic identity of the tribal community.
At its basic level, education requires the creation of functional literacy within the community. Shakshar Samaj uses the software developed by Tata Consultancy Services to teach people to read and write. RK Singh, honorary joint secretary, TCS, says, “We have shifted from using only computers to using flip charts and alphabet charts.” Currently learners are taught how to write in the Devanagari script. Plans are on to teach them the local language, Santhali.
Programmes like the Jyoti fellowship and other coaching programmes have served to create a positive impact on the lives of youngsters. SC/ST candidates appearing for the Trade Apprentice entrance exams are made to undergo a six-month residential training programme to increase their capabilities. Similar coaching classes are held for those wanting to appear for the civil services exam. Aspirants are also given training to become motor drivers, fitters and mechanics, pathologists and community health providers, etc.
Project Sahyog helped youth to gain a better understanding of themselves, develop leadership skills, and inculcate a feeling of fellowship. Beyond this, TCS decided to work on building the capacities of adolescents. This gave rise to DISHA — Development Initiative on Supporting Healthy Adolescents, a programme seeking to delay the age of marriage, and provide access to information and better health services.
TCS takes its goal of livelihood generation very seriously. The idea, says Singh, is not so much to guarantee livelihood as to improve their employability. Self-help groups enable TCS to fulfill dreams of running microenterprises. The society arranges for bead and jute handicraft making, paper making, candle making, stone carving classes, etc. TCS also supports numerous local clubs and promotes tribal customs and traditions in an attempt to help tribal children understand their heritage. This programme includes a tribal appreciation programme to promote indigenous value systems. A heritage hall has been created in Jamshedpur to showcase the rapidly dying culture and lifestyle of the four major and six minor tribes in Jharkhand. TCS has a library of books, which are available to students conducting research on tribal issues.
TCS has also made arrangements for a number of mobile clinics to treat diseases like tuberculosis, diarrhoea, leprosy, cleft lip and other general ailments. It also looks into immunization of babies and creates awareness on subjects like contraception, breast feeding, etc.Through these and other measures, TCS has demonstrated that it has the will and the desire to give a helping hand to the less privileged sections of society.
Family Initiatives Foundation
Tata Steel’s Family Welfare Programme began in the 1950s. Since March 2000, the activities are being carried out under the Tata Steel Family Initiatives Foundation. It provides maternal and child health and family planning services. It also works on adolescent reproductive and sexual health issues and has a care and support programme for HIV/AIDS.
“TSFIF believes that investing in a health system is the key to improve the quality of life of people and is continuously striving for it,” explains TSFIF head Shakti Sharma. The foundation operates in Jharkhand, Orissa and Chhatisgarh.
TSFIF has six main focus areas:
Maternal and Child Health
Adolescent Reproductive and Sexual Health.Strategies to Improve Adolescent Reproductive Health and Rights through Advocacy and Services (SAHAS)
Apni Baatein(a school-based teen health programme that emphasises value-based education.)
RISHTA ( an adolescent health project, in collaboration with the Tata Steel Rural Development Society and the David and Lucile Packard Foundation.)
Drinking water and sanitation.Lifeline Express(This hospital on wheels has helped over 50,000 patients in Jharkhand, Orissa and Chhatisgarh).
TSFIF also looks at livelihood concerns of the community through:
Watershed management: It trains villagers on water use, crop diversification, multicropping, hybrid farming, maintenance of assets, etc.
Land and water management: It teaches villagers to adopt improved agricultural techniques.
Enterprise promotion: It trains villagers on financial management, entrepreneurship, etc through activities such as goat rearing, poultry, banana cultivation, etc. The organisation has worked hard to enhance the quality of life of the people in and around Jamshedpur.
It truly believes in what JRD Tata once said: “The wealth gathered by Jamsetji Tata and his sons in half a century of industrial pioneering formed but a minute fraction of the amount by which they enriched the nation. The whole of that wealth is held in trust for the people and used exclusively for their benefit. The cycle is thus complete; what came from the people has gone back to the people many times over.”
What makes the ethics and values in business special relevant and topical in the present day context in the world, the fact that we are on the threshold of environmental changes of far-reaching consequences. Owing to the happenings on the political scene, the winds of change being brought about by the force of globalization, liberalization, privatization and new digitalization, challenges being faced by managers today is to somehow reconcile the pragmatic demands of works to the call of the inner voice which somehow prevents them from using unethical means for achieving organizational goals. The sense of deceit always breeds a sense of distrust and skepticism that kills the business image. Trust breeds trust and a natural goodwill in heart, good business ethics are necessary for, such mutual trust and goodwill. Therefore business ethics must be charted out very carefully; commercially they should be sound to be values that should be valuable to the society. The single most important factor in improving the climate for ethical behavior in organizations is the actions taken by top managers, in addition to setting examples by their own behaviour. Top managements should establish clear policies that encourage ethical behaviour. All employees who observe or become aware of criminal practices or unethical behaviour should be encouraged to report the incident to their superiors.Management training seminars and orientation meetings that include discussion of actual situations can alert employees to potential ethical conflicts and serve to communicate the organizations code of ethics.