Management ethics

Need and importance of

management ethics
 Meaning of management ethics
• ‘Management Ethics’ is related to social responsiveness
of a firm. It is “the discipline dealing with what is good
and bad, or right and wrong, or with moral duty and
obligation. It is a standard of behaviour that guides
individual managers in their works”.
• “It is the set of moral principles that governs the
actions of an individual or a group.”
• Business ethics is application of ethical principles to
business relationships and activities. When managers
assume social responsibility, it is believed they will do it
ethically, that is, they know what is right and wrong.
 Ethical Activities

Amongst a host of ethical activities that

managers can perform, a study conducted by
Barry Posner and Warren Schmidt highlights
the following ethical activities observed by
managers
 Ethical Activities
1. The foremost goal of managers is to make their
organizations effective.
2. Profit maximization and stakeholders’ interests were not
the central goals of the managers studied.
3. Attending to customers was seen as important.
4. Integrity was the characteristic most highly rated by
managers at all levels.
5. Pressure to conform to organisational standards was seen
as high.
6. Spouses are important in helping their mates grapple with
ethical dilemmas.
7. Most managers seek the advice of others in handling ethical
dilemmas
 Types of management ethics

• Immoral management
• Moral management
• Amoral management
 Immoral Management
• It implies lack of ethical practices followed by
managers. Managers want to maximize profits
even if it is at the cost of legal standards or
concern for employees.
 Moral Management
• According to moral management ethics,
managers aim to maximize profits within the
confines of ethical values and principles. They
conform to professional and legal standards of
conduct. The guiding principle in moral
management ethics is “Is this action, decision,
or behaviour fair to us and all parties
involved?”
 Amoral Management
• This type of management ethics lies between
moral and immoral management ethics.
Managers respond to personal and legal ethics
only if they are required to do so; otherwise
there is lack of ethical perception and
awareness
Two types of amoral management

• (a) Intentional:
• Managers deliberately avoid ethical practices
in business decisions because they think ethics
should be followed in non-business activities.
Two types of amoral management

• (b) Unintentional:
• Managers do not deliberately avoid ethical
practices but unintentionally they make
decisions whose moral implications are not
taken into consideration.
 Guidelines for ethical behavior
1. Obey the law
2. Tell the truth
3. Respect for people
4. The golden rule
5. Above all do not harm
6. Practice participation- not paternalism
7. Act when you have responsibility
 Obey the law

Obeying legal practices of the country is

conforming to ethical values.
 Tell the truth

Disclosing fair accounting results to concerned

parties and telling the truth is ethical behaviour
of managers.
 Respect for people

Ethics requires managers to respect people who

contact them.
 The golden rule

The golden business principle is ‘Treat others as

you would want to be treated’. This will always
result in ethical behaviour.
 Above all do not harm

Even if law does not prohibit use of chemicals in

producing certain products, managers should
avoid them if they are environment pollutants.
Practice participation- not paternalism

Managers should not decide on their own what

is good or bad for the stakeholders. They should
assess their needs, analyze them in the light of
business needs and integrate the two by
allowing the stakeholders to participate in the
decision-making processes.
 Act when you have responsibility

Actions which cannot be delegated and have to

be taken by managers only (given their
competence and skill) must be responsibly taken
by them for the benefit of the organisation and
the stakeholders.
 What is Business Ethics?
Acting in an ethical way involves distinguishing
between “right” and “wrong” and then making
the “right” choice. It is relatively easy to identify
unethical business practices. For example,
companies should not use child labour. They
should not unlawfully use copyrighted materials
and processes. They should not engage in
bribery.
 Why should business or companies
should act ethically?
Businesses have great potential to transform
people's lives and to alleviate poverty through
generating economic growth. They produce
goods and services that customers want and
they create jobs. Through paying taxes, they
contribute to government revenue that can
finance schools, hospitals and other public
services
 The 8 elements of a ethical
organization
• Respect
• Honor
• Integrity
• Costumer Focus
• Result-oriented
• Risk taking
• Passion
• Persistence
 Respect
As an entrepreneur building a business, you
need to respect yourself and surround yourself
with people you can respect. Remember, strong
respect doesn't mean you can fly on auto-pilot.
While you can assume your people will do their
job as well as they can, they do need coaching,
training and direction, but respect and trust.
 Integrity
When it comes to integrity, it is impossible to avoid
sounding preachy or parental. Do not lie, steal, or
cheat. Make your word your bond and always stand
by your word. When you are wrong, own up to it
and make good on the deal. Treat others as you'd
want to be treated.
Do not hire or retain people who do not have
integrity. Other employees, customers and vendors
will not trust them. That lack of trust is like a virus;
eventually they will not trust you either.
 Costumer Focus
A company is nothing if it does not have customers.
More to the point, if a company does not produce
what people want and will pay for, there is no point
to that company. A focus on your customers
reinforces the responsibility you have to the
market. Your decisions affect your people, your
investors, your partners and ultimately, your
customers. Serving all of these people is part of
your ethical responsibility. Selling your customers
short not only risks compromising your ethics, it
also risks the long-term health of your company
 Results Oriented
Reaching goals in an ethical way without
stepping on anyone’s privilege or rights of any
person you encounter or reaching out the
results by any means necessary, without the
concern of the employees or possible entity that
could be affected by the means of taking up the
process or reaching the outcome of the target
results or goals of a business.
 Passion
Great organizations are comprised of people who
have a passion for what they are doing. These are
people who are working for you for the thrill and
challenge, not merely putting in time to collect a
pay-check. They are excited, driven, and believe
that their work and efforts can make a difference.
Without the passion burning within them, people
put in a minimal effort, getting paid and going
home. These people are role models to others: why
work so hard when you can come in late and leave
early?
 Risk taking
So far, you might be feeling that ethical
companies are timid and mousy, scared of doing
the wrong thing. That is simply not true.
Organizations that thrive, prosper and grow do
so by taking risks. They do not stick to the safe
path. Great companies innovate, they think "out
of the box", and they try new things. They re-
invent themselves and they reward the risk-
takers. As long as you stick to your philosophical
guns, risk-taking poses no threat to your ethics
 Persistence
People in awesome organizations have the will to
persist. They will keep working even when results
are not what they hoped, or when customers refuse
to buy. Their persistence is tied to their passion for
what they are doing and a belief that this group of
people, this company, has the best chance of
"making it" of any company they could join. And so,
they work harder, They continue to take risks. They
behave with honor and integrity. They keep their
focus on the customer's needs and wants. And,
they are not satisfied until they achieve the goals
and results that are expected.
 Honor
Good people are a fundamental part of good ethics.
They are also great ambassadors for doing things
right. Give special attention to strong performers
and people who exemplify the spirit of your
organization. Most companies recognize top
achievers and producers. Go beyond quotas and
sales figures. Point out, and show your gratitude to
the people who exhibit exemplary behavior, and
who have made sacrifices on your behalf. These are
people who have helped you be successful, and you
need to acknowledge and honor their contributions
publicly, as well as privately.