The term ethics is used to refer to a set of acceptable principles of right or wrong that guides and regulates the conduct of an individual, the members of a professional body, or the general operations of an organization. In business, ethics refers to principles of right or wrong that have been accepted to govern the dealings of businesspeople.
Decisions may be regarded ethical if they are in accordance with the set of principles of right or wrong, while unethical decisions are those that contravene the generally accepted principles. However, ethical dilemmas are faced when there is no universal agreement over what is considered right or wrong. In order to minimize dilemmas in the society, the accepted principles of right or wrong have been written into laws.
Likewise, the business world is governed by several laws and they include tort laws controlling product liability, contract law governing contracts and breaches of contract, the intellectual property law which ensures the protection of intellectual property, antitrust law which regulates competitive behavior among businesses, and the securities law which governs the selling of securities. Any violation of these laws is considered unethical and punishable by law.
Hill and McShane note that not all legal actions are ethical and this causes dilemmas. Ethical behavior, by implication, is more than just being within the dictates of the law. This essay discusses the need to behave ethically by focusing on key areas that businesses and its managers can consider when making decisions.
Managers of any given business must ensure that ethical considerations are taken into account when making decisions. They should be guided by the basic principles of ethics. The authors of the book, Principles of Management, outline six important actions that a business and the managers who run it can and must do to ensure that business ethics are upheld (Hill and McShane 94-97). These actions are the pillars upon which ethical behavior rests.
Hiring and promotion
The first is the hiring and promotion of people who have a well-grounded sense of personal ethics. Any legitimate business would obviously want to hire individuals who demonstrate a strong sense of personal ethics.
These are people who would not imagine engaging themselves in unethical or illegal actions. In the same spirit, no one would expect a business to promote unethical instead of ethically responsible persons. Perhaps the business should instead consider firing the people who deliberately behave contrary to the accepted ethical standards.
Business managers find themselves in ethical dilemmas when it comes to taking such actions on their employees. It is not an easy task to judge someone as lacking a strong sense of personal ethics. There is a general tendency in the wider society for everyone to want to hide weaknesses in personal ethics. Problems start when people get to know the actual behavior which turns out to be unethical. Under such circumstances, people loose confidence in and no longer trust the person.
The pertinent question here is what the businesses can do to ensure that they get to hire and promote individuals with strong sense of personal ethics. Most businesses with expectations of high ethical standards do give their prospective employees standardized psychological tests so as to grasp their ethical orientations. The references cited by the potential employees are also used by businesses to discern their ethical predisposition.
Most importantly, employees in a business who have demonstrated unethical behavior should not be considered for promotion. This is normally the case in organizations which set very high ethical standards in all its operations. Therefore, businesses and its leaders should always make sure that they hire and promote people of unquestionable ethical character. Potential employees’ should do extensive research about the company they wish to join in order to determine its ethical climate.
Organizational culture and leadership
The second point that businesses must consider to enhance ethical behavior is the nature of organizational culture and leadership. There is need for businesses to develop an organizational culture that places a high value on ethical behavior. This implies that a business must embrace strategies that will help it achieve this objective. Explicitly articulated values that place a strong emphasis on the need to behave ethically will be needed.
Most companies ensure this by coming up with a code of ethics which is formally stated and prospective employees can get to know in advance. This is common especially among professional organizations. Other companies have used their statement of values and/or mission to capture their ethical priorities. For instance, the food and consumer products giant Unilever has a very clear code of ethics that includes:
“We will not use any form of forced, compulsory, or child labor” and “No employee may offer, give, or receive any gift or payment that is, or may be construed as being, a bribe. And demand for, or offer of, a bribe must be rejected immediately and reported to management,” (Hill and McShane 95).
It is not enough for a business to communicate its values in the code of ethics or in a document. There is need to emphasize the importance of adhering to them. The leaders should lead by example and use every opportunity to state the importance of ethics. Particularly, they should ensure that all business decisions are not just economically good but be ethically sound.
Most companies are opting to seek the services of independent firms to audit the company and ensure that employees are adhering to the provisions of their code of ethics.
The strategy here should be to give incentives and reward those who behave ethically, especially through promotions and sanctioning employees who contravene the provisions of the code of ethics or similar documents. Regardless of the economic returns of their expertise, business managers and employees should behave and act in accordance with the central ethical values of the company.
The third critical thing that business and its leaders must consider is the decision-making process. Before taking any action, businesspeople of high ethical value must digest the ethical implications of their decisions in a systematic manner.
In order to make appropriate decisions, they should be guided by rights theory and Rawls’s theory of justice. An additional approach that can be used to decide whether a decision is ethical has been developed. The businessperson should answer the following questions affirmatively: does the decision adhere to the code of ethics? Is the decision good enough to be communicated to all stakeholders? Would all my close relations approve of the decision?
The next action that can ensure businesses and its managers behave ethically is the appointment of ethical officers. They are responsible for instilling ethical values to all employees of the company. Decisions by the company are also audited by these offices and they act as internal ombudsperson by investigating deep-rooted secrets in the company.
Strong corporate governance
Strong corporate governance is the next critical action that promotes ethical behavior among the managers by ensuring that incidences of conflicts of interest do not arise. This can be developed by introducing an independent board of directors that is mandated to monitor all actions of senior persons in the company.
A strong board of directors should be constituted largely by external directors with no management duties in the company and of high integrity; the positions of the CEO and that of chairperson should be held by separate individuals and the chairperson should ordinarily be an external member; there should be a compensation committee hived from the board of directors constituting of entirely external members to regulate salaries of top managers; an audit committee of the board responsible for reviewing the financial statements of the company should be constituted; and lastly, external auditors reputed for their independence should also be invited. It is important to note that most companies have collapsed due to financial scandals.
The sixth important thing required of businesses and leaders is moral courage. This is one of the most critical aspects of promoting ethical behavior in any given company. It enables managers and members entitled to make decisions on behalf of the company to reject a decision that promises optimum profitability but obviously unethical. Moral courage empowers an employee to refuse to follow orders of a superior if the course of action is unethical, at least by the company’s ethical standards.
Employees with moral courage will not just remain calm when they are aware of unethical activities in the company; instead they ought to become the much dreaded whistleblowers. Developing a strong sense of moral courage is not easy given the associated risks. Whistleblowers that raise alarm on the behavior of top managers which they consider unethical have ended up being fired from their jobs. One has got to have the courage to anticipate a sack after going public with damning revelations about a company and its managers.
It is therefore the responsibility of a company that seeks to promote moral courage among the employees to commit to not taking reprisal against those who exercise moral courage, refuse to take unethical instructions from supervisors, or otherwise bring to light any actions considered unethical.
This commitment should be in writing and form part of company’s governing principles that may be quoted at any given time. Most companies which are serious about this commitment have put in place ethics hotlines and Compliment/Complaint boxes which allow their employees and other stakeholders to anonymously raise their issues with a corporate ethics officer.
The essay has defined ethics as used in business management and listed some of the laws that govern the business world. These include tort laws, contract law, the intellectual property law, antitrust law and the securities law. It has also broadly elaborated on the concept of ethical behavior in businesses.
Six major actions that need to be undertaken by businesses and its leaders have been discussed. The steps captured above can go a long way in ensuring that managers make decisions that adhere strictly to the code of ethics. Moral courage has come out as one of the most crucial element that not only managers and other senior persons in a company should have but also the lower-cadre employees themselves. It can therefore be concluded that ethical behavior should be one of the top most expectations of any legitimate business.
Hill, Charles W. L. and McShane, Steven L. Principles of management. McGraw-Hill Irwin, 2007: 94-97