Ethical issues in modern business management

Abstract: The ethical issues in business management have always been co-
existing, but their type and quantum have been changed in the present digital
world. The globalisation and digitisation of business have not only altered the
ethical issues but also their gravity, as evidenced by the widening of problems
and complaints. In the 21st century, business management is becoming more
complex while a multitude of ethical issues appears simultaneously. Thus, an in-
depth understanding of ethical problems and identification of mitigating options
is required, for which these review efforts have been undertaken. Highly relevant
research studies were selected from the literature and presented in a critique style,
elaborating both sides of the picture. Significant findings were documented
logically with consequent conclusions.

Keywords: harassment; discrimination; social networking; financial transparency;

managing ethical issues.

1 Introduction

Business management has been facilitated during recent years due to developments in
innovations, technologies, computer techniques, software support and the introduction of
the internet and digital media but simultaneously has been complicated as well.
Management is not of the same type now as it has been a couple of decades earlier. Business
management approaches, procedures, activities, sales promotions and marketing,
procurement, communication, accounting, and consultation have been modernised in total,
the most of which are now completed online with the help of internet and digitised devices
(Michael, 2014). Businesses, companies, corporate and small and medium enterprises have
been globalised and treating the whole world as one village. The website portals of
companies are serving as one-stop-shop which is open 24/7. Customer contact and service
centres have been automatised with instantly available question-answer websites. The
accounts, revenues, and profits of companies are updated within no time using the
appropriate software. Online payments, procurements, and sales are now dominating. The
periodic reports are currently generated automatically. All biodata of employees along with
their progress, performance, awards and warnings/punishments are available on computer
and can be viewed within a few seconds. Owners and managers can view the company
matters only with one click, no matter where they are sitting. However, accompanied with
all these facilities, conveniences and speedy work, there are also many issues, primarily
related to ethical aspects.
Besides all recent developments in business management, ethical issues have
strengthened and appeared in new forms and nature. Corporate responsibility and ethics
and accountability are one of the prominent and hot issues . Ethical climate in the
organisation cannot be claimed as exemplary . Many ethical issues like legal liability,
workplace safety, child labour, bribery, cybercrimes, overbilling, privacy threats and
disclosures due to social networking, frauds, misleading, fake reimbursements, etc. can be
observed in different businesses and management . Issues related to cyber ethics have
profoundly strengthened after the development and popularisation of social media.
Managers and management personnel are always under ethical pressure and stress from
different stakeholders like owners, government entities, employees, customers, suppliers,
competitors, and other managers. The trust, integrity, and honesty of management and
companies are under permanent stress.
The business managers may face ethical issues at different levels: personnel,
organisations, trade, society and the globe. Ethical issues may arise with managers,
customers, suppliers, employees, companies, and government entities. So, many layers of
ethical issues can sprout, but all revolve around integrity and trust. If integrity and honesty
of a management/company become doubtful or its trust is shaken, the ethical issues are
strengthened. This is especially true in deals with customers who are highly essential and
backbone of a business. Ethical issues may arise due to conflicts of interests, poor
management of employees and people, diversity and cross-culture composition of working
teams, ineffective communication, ethical conduct on social media, workplace safety issues
and ignoring legal liabilities.
Therefore, the ethical issues in modern management are emerging as a huge problem
pointed out that business ethical issues and their practices in the various organisation have
gained very high importance currently because these are now readily exposed on social
media while these were swept aside a few decades ago. It may affect the businesses
negatively losing reputation and popularity of companies resulting in a decrease in
customers’ number, loss of business, and reductions in revenues. There are some examples
of failure and closure of companies based on ethical issues like a big American energy
company ‘Enron’ . Hence, this problem needs elaboration and justification along with
identification of rectifying strategies for improving this situation. All the stakeholders can
be satisfied accordingly with better management. Consequently, ethical issues can be
managed effectively. With these objectives, this review article is being presented. The ways
and strategies to manage ethical issue have been discussed in this article.
Following this introduction, the methodology is presented followed by a systematic
review and then a critical review. In section six a discussion is presented followed by a
conclusion. The article ends with limitations and direction for future research.

2 Methodology

The article comprises of review of literature and selection of appropriate and relevant
research work and presenting in a critique style. An in-depth consultation of literature was
conducted, which were presented under various headings and sub-headings. The critical
review were documented and discussed. Finally, conclusions were drawn consequently.

3 Systematic review

As this article is a review paper, so various aspects of the subject are critically reviewed
and discussed by selecting highly relevant past research work and appropriate information
available online. The material is being presented under multiple sub-headings
subsequently.

What are the business ethics and their importance

According to Business-ethics Dictionary (2017), “Business Ethics is the set of moral rules
that govern how businesses operate, how business decisions are made and how people are
treated.” The Investopedia (2017) describes Business Ethics as “The study of proper
business policies and practices regarding potentially controversial issues, such as corporate
governance, insider trading, bribery, discrimination, corporate social responsibility, and
fiduciary responsibilities.” Law often guides business ethics, while business ethics provide
a basic framework that businesses may choose to follow to gain public acceptance. The
Charted Institute of Management Accountants (CIMA, 2008) very merely defined business
ethics as ‘the application of ethical values to business behaviour.’
Thus, business ethics comprise of observing rules and moral values while doing
business and protecting legal rights of people, society, humanity, and companies including
environment as well. The safety at the workplace is also part of it. The structure of business
ethics is built on integrity, honesty, trust, transparency, regulations, and protection of legal
rights of all the stakeholders. Most of the past studies on business ethics have been
restricted to observing law and regulations, but mostly these did not deal with the
behaviour, expectations, and demands of communities and customers. The study of
manners, honesty, and integrity has also been more often ignored. The companies need to
be aware that reward of obeying business ethics is received as increased stakeholders’
confidence, enhanced productivity, retaining a quality workforce, protecting customer trust,
improved efficiency and expanded compliance efforts. The business ethics have crossed
the national boundaries in the 21st century and have been globalised. Now, international
organisations like WTO have promogulated laws and regulations, and such breaches will
no more be possible. Businesses will be forced to observe ethics otherwise they cannot
survive.

Levels of ethical issues

The business managers and senior management may face ethical issues at various levels of
an individual, organisation/company, society/country, and the globe. The global level is a
recent addition due to development of the digital world, social media, and internet has
identified three levels, macro level (country and societal pressure), company level and
individual level (all people relevant to specified business in any capacity). The macro level
is also called systematic level and includes the operating environment of the business. This
may be a locality, a region or a country. The company or corporate ethical level may include
the policies and procedures of the organisation/business. Ethical issues at the individual
level may be concerned with employees, contractors, vendors, competitors and equivalent
and senior/junior managers. Ethical issues of different levels even may integrate and
complicate business management. On the other hand, identified four ethical levels as
Issuance of law, Framing internal policies by companies, obeying laws and policies by
individuals and Consequences of ignoring and breaking laws and policies. Whereas,
unethical business behaviours may damage productivity, and lose standards, affect society
moral values, cause environmental degradation and might result in a lack of trust.

Types of ethical issues

The types of ethical issues are specified to industry/business, community, locality, country
and company’s policies and its management. All the ethical issues may not be present
everywhere, but still there are a few of these that can be observed in most of the cases has
identified ethical issues like legal liabilities under prevailing law, establishing safety at the
workplace, avoiding child labour, controlling gender and cultural/racial/colour
discrimination bribery, cybercrimes, overbilling, privacy threats and disclosures at social
networking. Frauds, misleading, fake reimbursements, etc. can also be observed in different
businesses and management.
The above issues have been classified into various groups by different authors. For
example, four groups: fundamental issues (trust, integrity and treating customer fairly),
Diversity issues (recruitment and management of business teams which are diverse in
nationality, gender, culture and colour), decision-making issues and compliance and
governance issue. However, his grouping does not include ethical issues related to
accounting and finance and networking. categorised current ethical issues into five
categories: social networking, surveillance and privacy, transparency, child labour and
environmental protection. Thus, he ignored individual/personnel issues and ignored
accounting and finance matters as well, which are becoming so sensitive now. The
classification of Florida Tech (2017) seems more logical where ethical issues were
categorised into accounting, social media, harassment and discrimination, health and safety
and technology/privacy. This grouping is looked better and more reasonable in all aspects
which include almost all existing ethical issues. Therefore, ethical issues are going to be
elaborated further according to these five groups.

Ethical issues related to accounting and finance

Ethical issues in accounting and finance increased a lot after putting all account matter
online. An old accounts ethical problem ‘Cooking the account books’ was referred
previously but now the same thing is done in online statements, reports, purchase, and
payments. The major motive is to save tax and paying the minimum to shareholder have
pointed out unethical account matters like dressing and misleading financial analysis,
manipulation of accounts, bribery, money frauds, overbilling of expenses and purchase,
fake reimbursements, compensation to executives, and an indication of lesser revenues, etc.
Florida Tech (2017) have quoted the most infamous scandal of 2001 of the American
energy company Enron, which was closed for inaccurate financial statements along with
its auditing firm Arthur Andersen due to endorsing incorrect statements. Both companies
went out of business, and the firm’s closure resulted in 85,000 jobs lost. Freedman (2018)
has also mentioned Fraudulent Financial Reporting, Misappropriation of Assets,
Disclosure, and Penalties as ethical issues of accounting and finance. The impact of these
types of ethical issues is very deeply affecting, companies, shareholders, states and
governments, shareholders and last customers through high priced products and services .

Social media ethical issues

The Institute of Business Ethics (IBE, 2011) has reported a survey of 250 online interviews
and concluded that social media is used for personal and work-related activities by 95% of
employees. So, it is very difficult to separate private and official use. As the use of
networking and social media websites like Facebook and Twitter is increasing and
popularising, ethical issues are also enhancing. Many ethical issues are arising when
business employees’ access and use social websites which may include disclosing
confidential secrets, conflicts, private information and potential use of child labour and
workplace discrimination. This may damage company reputation and credibility. Use of
social media during duty hours is a misuse of company time and resources. Companies
pose restrictions which are considered a ban on private rights by the employees. Thus, the
management has been put in a difficult position (Bernstein, 2016; Freedman, 2018). The
situation has created a serious problem for the employers, and most of them take it
employees’ misconduct online because they consider these activities as disloyalty and
breach of employment rules (Florida Tech, 2017). TTherefore, has recommended changing
the rules of business ethics regarding the use of social media by employees to pull out of
this situation.

Harassment and discrimination

Wage inequality, discrimination based on, age, gender race, colour, nationality, religion,
ethnic, disability and pregnancy, and sexual harassment, are the significant ethical issues
of today. The employers and employees encounter and face these on a daily basis and in
almost all businesses around the globe. Florida Tech (2017) has mentioned that according
to a report from the Equal Employment Opportunity Commission (EEOC), harassment and
discrimination cost US companies $372.1 million as penalties in 2013. Laws are made, and
regulations have been issued by governments of almost all countries whereas International
Labour Organization (ILO, 2017) is observing and monitoring at the global level to check
and control discriminations and harassment but still in actual practice, these have not wiped
out from business and companies. Despite policies of ‘Equal opportunity’ such behaviours
are observable extensively. The Australian Human Rights Commission (2017) mentioned
bullying in addition to discrimination and harassment. According to this commission
‘Bullying is a verbal or physical assault to subtle psychological abuse’. Amnesty
International (2017) mentioned that all have the right to be treated equally, regardless of
race, ethnicity, nationality, class, caste, religion, belief, sex, language, sexual orientation,
gender identity, age, health or another status. We hear heart-breaking stories of people who
suffer cruelty, simply for belonging to a ‘different’ group from those in power.

Health and safety at workplace

The health and safety problems in the workplace are rising despite all strict rules and
regulations by national governments and international agencies like ILO. According to an
ILO report (2017), each year, an estimated two million women and men die because of
occupational accidents and work-related diseases. Across the globe, there are some 270
million occupational accidents and 160 million work-related diseases each year. Thus, even
the lives of the workforce in the workplace are at stake. According to OSHA (Occupational
Safety and Health Administration, USA, 2017), the top nine most frequently cited
violations of 2016 are fall protection, hazard communication, scaffolding, respiratory
protection, lockout/tagout, powered industrial trucks, ladders, electrical, and machine
guarding.

Technology/privacy
With the innovative technology (video cameras and networking), it has become possible
now to observe, monitor and record employees’ movements, performance, presence at their
seats and working activities. Even their computers, communications, Emails, and visited
internet sites can be checked by managers and employers. Although employers can legally
check official Emails of employees, electronic surveillance should not become spies.
Monitoring employees through video cameras and recording their behaviour and
movement can keep work environment safe on one side, but it also hinders them mentally
because they are thinking all the time that their movements are being observed by others
has emphasised that it is the ethical duty of employers to create a balance in between
employee privacy concerns and preventing unethical behaviour of employees that could
hurt the business. The internal policies should be framed in this regard, and all employees
should be informed in advance about the extent to which the computer and internet devices
provided to employees will be monitored and checked.

SOLUTIONS:

Managing and rectifying ethical issues

After reviewing important ethical issues, it is highly important that management options
and strategies should be discussed which can be employed to rectify the prevailing situation
of ethical issues in business management that business managers should put in all efforts
to understand ethical issues of their workplace/company and integrate ethical wisdom and
managerial wisdom to solve these clarified that an ethical behaviour might not be profitable
for the company, but an unethical behaviour frequently generates substantial losses to the
business, especially on a long-term basis. The managers should create an ethical and moral
culture in the workplace. Different authors have recommended ways and strategies to
manage the emerging ethical issues in businesses and companies. These are assessment and
real evaluation of ethical issues in a company, identifying their quantum and main causes,
grouping the issues according to their types, planning code of conduct for all individuals,
framing policies for implementation of companies’ procedures and observing the ethical
and safety laws in letter and spirit. An ethical office can be established in each big company
and placing its representatives at all big workplaces to ensure no law and regulation
breaches. Training programmes should also be launched for managers, specifically for
managing ethical issues Continuous monitoring of ethical issues may be required to
complete and making programmes successful. The cooperation of government entities and
international organisations may prove highly useful in this regard.

4 Critical review

The preceding review of literature-based discussion has led to findings that despite all the
technological and digital developments in business management, various ethical issues
have not been disappeared from the scene, rather are strongly present, but in new forms
and nature. Companies and businesses understand that only fulfilling and observing laws
and regulations governing ethical issues is enough. However, these do not include the
behaviour, expectations, and demands of communities and customers as well as manners,
honesty, and integrity of employees and managers. Therefore, the concept of ethical issues
is more extensive and broader than it is usually understood. The features like increased
stakeholders’ confidence, enhanced productivity, retaining a quality workforce, protecting
customer trust, and improved efficiency are also encompassed in the real scope of ethical
issues (Institute for Global Ethics, 2017). The companies should remain aware of the fact
that obeying business ethics can increase stakeholders’ confidence, productivity, efficiency
and quality of business products and services, and may help in retaining the skilled and
experienced workforce. The protection of customer trust is also possible These rewards are
so significant which can make sound footings of implementing ethical requirements in the
premises of the various companies.
There could be various levels at which ethical issues are emerging or occurring, which
have been identified as an individual, company/business/organisation and the country .
However, the global level has also been added during recent decades due to the expansion
of multi-national companies to so many countries simultaneously, for which international
regulations are being issued by global organisations. Similarly, the nature of ethical issues
has also been changed a lot due to modifications in technologies, implementation of
management software and modern approaches as well as changes in lifestyles and nature
of duties of employees.
The ethical issues at an organisational level related to accounts and finance may be like
misleading financial analysis, manipulation of accounts, bribery, money frauds, overbilling
of expenses and purchase, fake reimbursements, compensation to executives, and an
indication of lesser revenues . Such issues were present previously but still can be seen in
different companies, if not in all. These issues shift a clear and direct loss to the government
(decreased revenue), investors (lesser profit on invested money) and customers (increased
prices of products and services). Thus, dishonesty is developed, and trust of stakeholders
is shaken. The companies may suffer and even can be closed because of severe third-party
audit if such ethical issues sustain for longer times.
Individual employees and workforce can suffer from ethical issues like privacy,
harassment, discrimination, wages inequality, health, and safety. Installation of monitoring
cameras and electronic surveillance of computers and emails is directly affecting the
privacy of employees on the one hand, but on the other hand, these are the needs of present
businesses as well. Therefore, a balance should be established between both ends . The
discrimination can prevail because of age, gender, race, colour, nationality, religion, ethnic,
disability, and pregnancy while harassment is mostly sex-based. Such issues are appearing
on a daily basis, and their gravity can be sensed from the report quoted by Florida Tech
(2017) that Equal Employment Opportunity Commission (EEOC) imposed penalties of
$372.1 million to US companies in 2013 due to harassment and discrimination. Many
employees may endanger and suffer from incidents and diseases related to work activities
and operations while a big number of them even sacrifice their lives (2 million only in the
USA, ILO, 2017) for their companies which cannot be rewarded at any cost.
 The social media websites like Facebook, LinkedIn, and Twitter, have developed into
popular networking which is attracting employees of companies and businesses as well. As
a result, so many ethical issues are appearing as disclosing of confidential secrets, internal
differences and conflicts, the potential use of child labour, workplace discrimination, and
using company’s time in using social media. Thus, significant damage may occur to the
reputation and credibility of the company along with misuse of a company’s time and
resources while restrictions imposed are considered as a ban on private rights by the
employees. Hence, severe problems like employees’ misconduct online, disloyalty and
breach of employment rules, as considered by the management, are arising and putting
companies in a difficult position (Bernstein, 2016; Freedman, 2017; Florida Tech, 2017).
Therefore, has suggested a modification of rules of business regarding the use of social
media.
The management options and strategies are compulsory to cope with various types of
ethical issues for which the basic need is clear understanding of major issues and their
potential losses and putting in all wisdom by business managers . The managers are
required to create an ethical and moral culture at the workplace of their companies. Some
important ways and strategies to manage the emerging ethical issues in businesses have
been recommended by various authors who include assessment and real evaluation of
ethical issues along with their quantum and main causes, categorisation of issues, framing
effective code, forming policies and subsequent implementation by the ethical business
office. The managers should ensure no law and regulation breaches. Training programmes
should also be launched for managers, specifically for learning and coping ethical issues.
Continuous monitoring with the cooperation of governments and international agencies
could also be highly useful.

5 Discussion

The set of moral rules governing businesses operations including how people are treated is
business ethics . This is the basic definition of Business Ethics. However, Investopedia
(2017) related it to business policies and practices of companies whereas CIMA (2008)
made the concept very simple declaring Business Ethics as the application of ethical values
to business behaviour. In a broad and practical sense, controversial issues such as corporate
governance, bribery, discrimination, corporate social responsibility, etc. are part of the
ethical concept. noticed in his review article that current businesses are overwhelmingly
concerned with earning a profit even if ethical standards in business are ignored. This
phenomenon is widespread in Muslim and non-Muslim countries. He emphasised that
merchants must implement rules and regulations in their business to establish a stable and
sustainable financial system. The ethical issues have become stronger with changing
nature, although a lot of recent developments and innovations in business management
have occurred. Ethical issues have been regarded as highly prominent by various authors.
Elaborating these issues in more detail, have highlighted ethical problems like legal
liability, workplace safety, child labour, bribery, cybercrimes, overbilling, privacy threats
and disclosures due to social networking, frauds, misleading, fake reimbursements, etc.
Huge penalties ($372.1 million in 2013) to US companies due to ethical rules breaches and
deviations (Florida Tech, 2017) by Equal Employment Opportunity Commission (EEOC)
are just one example from highly developed and civilised country. This instance is also
telling the story what status of ethical issues in developing countries can be expected where
these are not taken care at all. Earning profit is the sole motive in many countries of the
world .
Various authors have enumerated the ethical issue of the current digitised business era
(Enderle, 2015) by placing these into different groups like macro level (country), company
level and individual level,Fundamental issues (trust, and integrity), Diversity issues
(recruitment and management of business teams differing in nationality, gender, culture,
and colour), Decision-making issues and compliance and governance issue . categorised
current ethical issues into five categories: social networking, surveillance and privacy,
transparency, child labour, and environmental protection. However, these authors did not
consider individual/personnel sensitive issues and accounting and finance matters,
although these were the most important in actual practices. On the other hand, Florida Tech
(2017) made more logical categorisation of ethical issues: accounting, social media,
harassment and discrimination, health and safety and technology/privacy. Freedman (2017)
has pointed out fraudulent financial reporting, misappropriation of assets, disclosure, and
penalties as ethical issues related to accounting and finance. Some other non-ethical issues
relevant to finances and accounting can also be misleading financial analysis, manipulation
of accounts, bribery, money frauds, overbilling of expenses and purchase, fake
reimbursements, and declaration of lesser revenues . The driving motive behind such
business actions is saving of taxes and paying the minimum to investors of the company.
The social media is used by 95% of employees of different companies for personal and
work-related activities . Cain and Joseph (2010) explained that use of social media like
Facebook, YouTube, and Twitter had introduced new legal and ethical complexities. Social
communications mostly have been claimed as private, but it has a strong concern with
companies at present. Many ethical issues like disclosure of companies’ secrets related to
conflicts, use of child labour and workplace discrimination are faced by business. The
consequent result is damaging of company reputation and integrity. The employers consider
these actions and activities as online misconduct, disloyalty of employees, and breach of
employment rules (Florida Tech, 2017). The managers are also raising the issue of the
company’s time consumed on social media for private purposes. indicated that postings by
employees of organisations on social media had raised quantum of ethical issues in recent
years. It is becoming particularly difficult to differentiate between private/personal or
business-related postings and the anonymity right to do that on social media. He has pointed
out a positive use of social media which is tracking peoples’ concerns and opinions about
the company indicated concerns over preserving privacy and confidentiality of online users
as well as data protection, which is a major issue when employees of organisations use
social media network.
Two major categories of ethical issues relevant directly to employees are Harassment
and discrimination, and safety at the workplace. Despite best efforts of ILO, National
Commissions working in different countries, and Amnesty International; ethical issues of
harassment, discrimination and differential opportunities have not been wiped out from the
working places for the employees varying in race, ethnicity, nationality, class, caste,
religion, belief, sex, language, sexual orientation, gender identity, age, health or any other
status (Amnesty International, 2017; The Australian Human Rights Commission, 2017).
The study of Naif et al. (2014), consisting of 59 reviews, demonstrated a very high
prevalence of harassment and discrimination among medical trainees which did not decline
over time and digital development in companies. They reported at least one form of
harassment or discrimination during training of 59.4% of medical trainees. White (2018),
a law officer, concluded from his study that gender-related harassment issues continue to
dominate in the USA in the form of online or workplace harassment. His findings indicated
that 30% women and 7% of men faced sexual harassment at workplace, 70% of women
complained of online harassment, while 42 percent of women suffered from gender
discrimination at the workplace. The quite higher values reveal the state of these issues in
the USA, a highly civilised country, meaning that ethical issues are still alive significantly
even in the year 2018 analyzed the reasons of sexual harassment and concluded that these
are: the power of the boss, the risk of career damage for women, employment contracts and
conditions of employment (not going for complaint outside the organisation),
nondisclosure agreements, and the silence of people at key positions. The prevalent
situation demands a strongly managing strategy.
It has been reported that ethical issues are impacting performance of companies which
has become strategically important while corporate scandals and instances of ethical
misconduct are defaming the business and losing public trust . Therefore, the drafting of
policies and promoting cultural changes within organisations to prevent future abuse are
urgently require. Researchers have emphasised that ethical and managerial wisdom should
be utilised to understand and solve ethical issues of workplace and within company’s
operations to avoid substantial losses to the business . Managers must sustain an ethical
and moral culture in the premises of their business. The high management should frame
policies and plan code of conduct for all employees. Observing the ethical and safety laws
and ensuring no law and regulation breaches should be the top most priority of every
business. Launching of training programmes, specifically for coping ethical issues, can
prove highly useful . Regular monitoring and evaluation of ethical issues could be included
in the routine operations of companies and help of governments may be sought.

• Conclusions

The managers and the company management may face a lot of ethical issues at workplaces,
on-net and with different stakeholders, the important is:

• Working force diversity and cross-cultural issues in multidisciplinary teams, big

constraints in shaping ethical climate in the organisation.

• Legal liability, adhering to regulations, workforce health, safety, and environmental

protection.

• Social Network/Media disclosure of the company’s secrets and cybercrimes by

corporate employees and the managers.

• Misleading accounts’ and financial analysis, frauds, overbilling, bribery, fake

reimbursements and overpricing, etc.

• Misuse and misappropriation and careless utilisation of company assets.

• Health and safety at the workplace, more extended working hours, child labour,
cultural and gender discrimination, and sexual harassment.

• Misleading performance appraisal and evaluation of employees and project work.

These issues are highly significant and remain as hurdles in modern management to destine
the projects and entrepreneurs to ultimate success and full revenue generation.
The ways and measures to manage and overcome these issues have been presented in
the text of the paper.