CHAPTER FOUR

MANAGING ETHICS
 MANAGING ETHICS
• Managers have a responsibility to behave
ethically and manage ethically.
• They set the example for all employees and
will determine how effective ethics
management can be.
 ETHICAL MANAGEMENT
• Applies to any and all aspects of business
conduct, from boardroom strategies and
how companies treat their suppliers to sales
techniques and accounting practices.
 Ethical management is sometimes seen as an exercise in integration
the four Ps:
 Purpose
 The ethical management approach may be considered particularly relevant in the
context of public and voluntary bodies and the commercial organizations whose
business it is to support them.

 people.
 Ethical Management recognizes the importance of people.

 This includes not only the staff of the ethically managed organization who would
expect good quality terms and conditions of employment; but also the organization’s
other stakeholders be they customers, shareholders, local communities or suppliers.
 Issues of ‘equality’ and ‘diversity’ are important to ethically managed organizations,
as is participation in the communities where ethical organizations work.
 planet
 Any organization’s activities have an impact on planet.
 ethical management seeks to minimize the negative impacts
and maximize the positive impacts.
 The ethical organization is ‘green’.
 This includes sustainability, environment, biodiversity,
natural resources, heritage and 'fair trade'.
 Probity
 includes basing all activities and relationships on
 integrity,
 compassion,
 honesty,
 trust,
 respect and
 truth.
 Cont…

Characteristics of ethical management

1. Integrity (reliability): The manager behaves
with truth and leads by example.
2. Transparency: The company and its managers
are transparent and do not hide their actions.
3. Utilitarianism: The organization and manager
considers the happiness of the people
involved in the organization.
Ethical Behavior:

 There are ways to promote ethical behavior

 Develop an ethics management program.

 Develop a code of ethics.

 Create policies and procedures that reflect the company ethics.

 It is not enough to simply create codes, programs, policies, and procedures.

 All rules must be enforced in order to be effective and curb unethical

behavior.
 Roles and Responsibilities

Who are responsibilities for effectively

implement workplace ethics?
 ETHICAL TREATMENT OF SUBORDINATES

• As a manager, one of your duties is to solve the ethical problems

brought to you by your subordinates.
• In such situations, you’ll need to consider blowing the whistle.
• During the whistle-blowing process, you should remember to
 remain calm,

 objective,

 specific, and

 focused on the dilemma,

 as well as avoid placing blame on others.

 Here is a process you can use to help solve ethical problems
brought to your attention by subordinates:
1. Listen actively.

2. Obtain further information.

3. Explore possible solutions.

4. Select the best solution.

5. Implement the solution.

6. Evaluate the decision’s effectiveness.

 Employer/Employee Rights
 An ethical organization is able to balance the rights of employees with the rights of the employer.
 Instituting clear privacy policies will prevent any confusion between employees and employers.
 When creating policies, employers need to remember that they are obligated to provide employees
with a safe work environment

 Privacy Policies
 Companies collect detailed personal information about their employees for background checks and
other reasons, and
 they need to clearly state the purpose of collecting this information and how it will be used in their
privacy policy.
 Personal information must be protected and kept confidential,
 Surveillance,
 drug testing, and
 searches are points of contention for many employees, and they need to be addressed in privacy policies.
 Surveillance:
 Organizations routinely monitor the phone and Internet usage of their employees while they are at
work.
 Security cameras are also used to ensure the safety of employees.
 Experts advise employers to include in their privacy policies, a warning to employees that they will
be monitored.
 There are limits to the use of cameras. For example, cameras are not allowed in locker rooms or
bathrooms.

 Drug Testing:
 Taking a drug test before beginning a new job is common, and employers also have the right to
demand drug tests in the event of an accident or suspicion of drug use.
 Random drug tests, however, can be contested if they violate employee privacy.
 The policy on random drug testing need to be reasonable and clearly spelled out.
 Companies are responsible for keeping drug test results private.
 Searches:
 Privacy policies need to remind employees that their workspace and tools are company property,
and that they are responsible for any lost or damaged personal property.
 This should prevent any invasion of privacy claims if an employer who suspects theft searches a
locker.
 Searches should be conducted carefully and with the instruction of senior management.

 Harassment Issues:
 Employees can sue their employers for not protecting them from harassment.
 The EEOC protects the rights of individuals from discrimination and harassment, regardless of
ethnicity, sex, religion, sexual orientation, disability, age, etc.
 An employee who feels threatened or uncomfortable by any statement, gesture, or action may be
experiencing harassment.
 An anti-harassment policy and training in harassment will help prevent harassment and protect the
organization.
 Any harassment in the workplace needs to be confronted immediately and the rights of the
harassed employee protected.
 Technology: how technology affect employee privacy?
 As technology changes, so does the clarity about employer and employee rights.
 Advances in technology provide employers with more ways to monitor employees.
 Social networking further complicates this issue.

 Employees often post things online for their friends to see, but employers may be
monitoring these posts well.
 It is becoming more common for people to lose their jobs because of posts on their
social networking sites.
 A recent survey revealed that about half of employees feel that their social networks
are not any business of their employers, but 60 percent of executives think that they
have the right to monitor their representatives’ social network behavior.
 This use of social networks should be included in privacy policies to protect both
employee and employer, but many companies cite personal conduct policies to
validate their actions.
4.3. ORGANIZATIONAL ETHICAL
• All functional areas within an organization
should establish ethical standard.
Human resources
Accounting
Finance
Marketing
Other
 Human resources:
– Human resources issues result from employees working together, and are by
far the largest category of ethical dilemmas.
– The categories of human resource issues include discrimination, performance
appraisals, and sexual harassment.
 Accounting:
– Accounting is vital to any company’s success.
– A company’s financial statements also inform investors, the government, and
tax collectors about the state of the organization.
– Examples of unethical behavior in accounting include
• falsified financial statements,
• bribery, and
• embezzlement.
– To help guide the accounting process, professional accounting firms have
developed principles that all organizations should follow. These principles
emphasize honesty, integrity, consistency, and accuracy.
Other functional areas
– information systems, production, maintenance, and purchasing.
– Employees in all of these areas must act ethically to ensure overall
organization ethicality.
• For example,
• information systems departments must maintain
confidentiality among all stakeholders.
• Maintenance departments must dispose of toxic waste in a
manner that does not harm the environment.
• Production departments must take quality control
measures to ensure that products are safe and of the
highest quality.
 Cont..

• Whistle-blowing: The disclosure by an

employee of illegal, immoral, or illegitimate
practices by the organization.
• Whistle-blowers often report wrongdoing to
outsiders, such as regulatory agencies,
senators, or newspaper reporters.
 Key reasons why managers act ethically

– Personal moral values prevent doing it;

– The action would hurt the organization or
someone in it;
– Not doing it enhances personal satisfactions;
– The organization is fair, so why take advantage
of it;
– The punishment if caught is severe;
– There is a high risk of getting caught.
 Key reasons why managers act unethically

– Belief that the act would not hurt the organization

or its members;
– Belief that act would advance personal economic
well-being;
– Absence of moral constraints not to do it;
– Top management acts this way or overlooks such
acts;
– Other workers do it, accept it, or put pressure on
others to do it;
– There is little risk of getting caught or punished.
 Developing Code of Ethics
• A code of ethics is a formal statement of the company’s values
concerning ethics and social issues; it communicates to employees
what the company stands for.

• A Code of Ethics is the foundation of an ethics program. The Code

of Ethics needs to address certain issues.
– Laws and regulations:

– Organizational needs:

– Ethical values:

– Wording:

– Update the code each year, and

 Cont…

• Key Things to Consider in Developing a Code

of Ethics Create a team to assist with the
process of developing the code (include
management and non management employees
from across departments and functions).
Performing an Internal Ethics Audit.
• An internal ethics audit utilizes several different sources. An
auditor (or a committee, if there is no auditor) usually goes
over the information to determine if any adjustments need
to be made.
• Sources:
Surveys
 Interviews
 Documents
Focus Groups
Direct Observation
• The audit is used to evaluate the design, execution, and
effectiveness of the organization's ethical objectives,
programs, and activities.
 Improving Ethical Behavior
1) The selection process for bringing new employees into organizations should be viewed as

an opportunity

2) A code of ethics is a formal statement of an organization’s primary values and the ethical

rules it expects employees to follow.

3) Top management’s leadership and commitment to ethical behavior is extremely important

since the cultural tone for an organization is established by its top managers

4) Employees’ job goals should be tangible and realistic,

5) If an organization wants employees to uphold high ethical standards, this dimension must

be included in the appraisal process.

6) Ethics training should be used to help teach ethical problem solving

7) Independent social audits evaluate decisions and management practices

8) Organizations can provide formal protective mechanisms so that employees with ethical

dilemmas can do what is right without fear of reprisal.