The role of ethics in management depends on the level of responsibility the firm is ready to undertake. Business managers encounter several ethical issues while discharging their duties. A decision is rarely made without involving an ethical dimension or an aspect related to it. Apart from multiple moral standards essential for decision-making process, they often face ethical issues as they perform their leadership responsibilities.
Whether it is planning, organizing, communicating, motivating, or some other management function, they confront the fact that matters of wrong or right, justice or lack of justice, and unfairness or fairness penetrate into their actions, decisions, and behaviors. Moreover, if the level of management is top, middle, or lower– all managers responsible for various functions encounter situations where ethical considerations play a critical role. Thus, they should be aware of ethics in the management, because that will help them to achieve their goals and retain leadership qualities. The current study explores the role of ethics and social responsibility in decision-making and examines the significance of moral reservations in business. Besides, the paper investigates some significant issues of business ethics to help managers to recognize and solve them when they arise. Additionally, the paper considers steps to improve ethical behavior in organizations.
Business ethics is comprised of the standards and principles according to which the organizations define acceptable behavior. The acceptability of conduct is determined by competitors, customers, interest groups, government regulators, and the stakeholders as well as by each individual depending on his/her personal morals, values, and principles. For instance, on August 20th 2005, Akzo Nobel Chemicals Inc was found guilty by the Federal Court of Canada and was imposed to pay fines totaling $2.8 million for conspiring to fix market prices for an animal feed additive used in numerous consumer and commercial products (Belland, 2008).
Many social advocates and consumers believe that firms should not only consider how to make a profit but also think carefully about the social consequences of their activities. Social responsibility is the obligation of the organization to maximize its positive influence and minimize its negative effect on society. Although many managers use the ethical terms and social responsibility interchangeably, they have different meanings. Business ethics concerns decisions made by a group or an individual that society evaluates as wrong or right, whereas social responsibility describes the effect of the entire business activities on society. For instance, from an ethical perspective, people may be concerned about a health care organization overcharging the state government for medical interventions. From a social responsibility viewpoint, the society might be worried about the effect that this overcharging will improve the credibility the health care system and enable medical institutions to offer adequate treatment for all citizens.
The most basic social responsibility and ethical concerns have been coded as regulations and laws, which encourage firms to conform to the attitudes of society, its values and standards. At a minimum level, managers are expected to follow these regulations and laws. A great number of legal issues originate from the choices that society regards as irresponsible, unacceptable, or unethical. However, all actions viewed unethical by society may not necessarily be illegal, and both ethical and legal aspects change over time. The business law focuses on the laws and regulations that govern the business behavior. Many conflicts and problems can be avoided if employees, owners, and managers know more about a legal system and business laws. The social responsibility, business laws, and ethics together act as a compliance mechanism requiring that managers and firms act responsibly in society (Belland, 2008).
Many large organizations have started creating formal programs for managing ethics and legal compliance. Most American firms now include ethics policy and have established formal ethics office. Meanwhile, owing to the importance of ethics officer, this position has become widespread in a professional society, but some studies indicate that a human resource orientation is often not present in corporate ethics programs. Thus, the research aims to suggest how HR managers can implement corporate ethics initiatives so that those initiatives encourage ethical conduct in organizations.
The ethics programs in organization generally involve many initiatives and components, and research has underlined these elements. Expectations for ethical conduct usually are communicated to workers through policy and codes, messages from management, and formal training programs. Ethics programs also offer the workers means to communicate with senior managers, sometimes anonymously via telephone. These communication channels are used to report perceived or real ethical problems and to seek advice and counseling. There are also common methods for monitoring conduct to reward ethical behavior or to control unethical conduct.
Empirical research highlights that HR department is merely involved in managing ethics programs. The study of ethics programs in Fortune 500 companies found that an HR manager was responsible for compliance with ethics management in 30 percent of responding firms. Many companies, nearly 28 percent, placed responsibility for ethics on legal matters, while 20 percent placed it on compliance departments or distinct ethical programs, and 12 percent – on control and audit processes. The remaining companies chose such positions as public affairs, corporate communications, and corporate secretary (Avey, Polanski, and Walumbwa 2011). This research also emphasizes that legal and HR department was involved actively in ethics training, while audit, control, and legal functions dominated investigations of legal or ethical violations. The introduction of ethics programs at many firms also reflects that legal issues are frequently dominant.
At many organizations, this effort means the ethics and compliance program or compliance program. Similarly, the telephone queries sometimes are labeled in terms of values and ethics and in terms of control and compliance from time to time. Trevino, Weaver, and Reynolds (2006) explain that the majority of telephone queries have a suggestive legal compliance approach. The important role of audit and legal staff and a focus on control and compliance are not surprising given that much of the motivation for corporate ethics programs arrives from outside of companies (Trevino, Weaver, and Reynolds, 2006).
Developing policies and rules as well as training staff on those policies would be an efficient and effective way to satisfy not only stakeholders’ expectations but also to demonstrate to other external observers and critics responsible intentions. Some organizations, in fact, simply prefer to buy off-the-shelf packages of regulations, policies, and monitoring functions from external consultancies firms. In some firms, for instance, codes of ethics are designed by outsiders, ethics training is offered by consultants, and ethics telephone calls are answered by the staff from consultant companies that provide this service.
An important question as to whether human resource functions perform a more consistent role in the ethics programs of the firms arises. In essence, HR functions are critically important, because they perform a pivotal role in issues of fairness which, if neglected, can cause unsatisfactory results from expensive corporate ethics initiatives. Precisely, HR’s role focuses on two key dimensions of ethics programs such as the control orientation integrated with ethics programs and the level to which the goals and policies of this program are embodied in other organizational processes. Hence, HR role fosters a sense that compliance and ethics programs offer an unbiased representation of worker’s interests, and treat workforce with appropriate respect (Verschoor, 2007).
Empirical research on the effectiveness of ethics program has found that workers’ evaluations of fairness are a key impact on ethics-related outcomes (Mihailovic and Cvijanovic, 2013). The respondents in a survey of five leading firms conducted by these authors believed that if employees were treated fairly, a number of outcomes relating to efficiency and productivity would be more positive. These employees reported less unethical conduct in their companies and explained that workers in their firms were more concerned about ethical issues, more likely to seek ethical advice from managers, tended more to report an ethical violation, and believed that management decision-making was in the interests of workers because of the compliance/ethics program. These findings reflect that workers’ belief in an organization is necessary for ethics/compliance management effectiveness (Mihailovic and Cvijanovic, 2013).
There is a strong connection between reactions to ethics programs and perceived fairness. When employees hear that their organization centers its attention on ethics, they will be more attentive to all those ethical issues that are crucial for the workers, such as fairness in promotion, hiring, performance appraisal, pay hike, and restructuring. Therefore, any effort to integrate organizational ethics is likely to raise awareness of fair treatment of employees in general (Gentile, 2010).
The involvement of business ethics in the corporate sector has gained significance in the last decade. The paper concludes that the HR department should perform a more leading role in ethics and compliance management. This is because evaluations of employees’ fairness have a strong influence on their reactions to compliance and ethics initiatives. HR staff should represent workers’ concerns and treat them fairly. In addition, HR functions can be crucially important in designing ethics programs by maintaining a proper balance between values and orientations, and also in embedding ethics programs in organizational activities, such as management training, performance appraisal systems, and disciplinary processes. Moreover, organizations should remember that ethics and compliance management is linked to the overall activities of the employees; their HR staff should not attempt to manage these issues alone. All departments including legal, audit, and the management should work together to foster ethical behavior in employees and the organization. There are many good business reasons for adhering to ethical values, since ethical firms have produced more profitable results. Furthermore, ethical choices reduce stress for managers and ethical behavior of employees increases leadership. It is also necessary to understand that ethics in business is more serious than legal issues. Ethical behavior builds trust among managers and employees, which validates and develop confidence in business relationships.