MANAGING BUSINESS ETHICS

Introduction
 Top management can do a number of things to
reducing unethical practices in their organizations.

 They can select individuals with high ethical

standards, establish codes of ethics and decision
rules, lead by example, delineate job goals, and
provide ethics training.
 Taken individually, these actions will probably not
have much impact. But when all or most of them
are implemented as part of a comprehensive
ethics program, they have the potential to
significantly improve an organisation’s ethical
 Business Ethics Management
 Business ethics management is the direct
attempt to formally or informally manage
ethical issues or problems through specific
policies, practices and programmes
 This ensures Professional Behaviour - an
obligation on members to comply with
relevant laws and regulations and avoid any
action that may bring discredit to the
profession.
Approaches to improve Ethical Conduct at Work
 Codes of ethics are voluntary statements that
commit organisations, industries, or professions
to specific beliefs, values, and actions that set
out appropriate ethical behavior for employees.
 A code of ethics is a formal document that states
an organisation’s primary values and the ethical
rules it expects its employees to follow.
 Codes should be specific enough to show
employees the spirit in which they are supposed
to do things yet loose enough to allow for
freedom of judgment.
 An organization’s code of conduct is one of the
most important communications vehicles that
management can use to communicate to
employees on key standards that define
acceptable business conduct.
 Types of Ethical Codes
 Organisational or Corporate Codes of Ethics.
- Specific to a single organization.
 Professional Codes of Ethics
– Guide appropriate conduct for members of
profession, such as medicine, law, accountancy,
Finance etc
 Industry Codes of Ethics
– Specific to particular industries, such as financial
services, electronics, chemical.
 Programme or Group Codes of Ethics.
– For certain programmes, coalitions, or other
 Contents of a Code of Ethics
 High-level endorsement from the organization’s
leadership.
 Simple, concise, and positive language that can
be readily understood by all employees.
 Topical guidance based on each of the
company’s major policies or compliance risk
areas.
 Practical guidance on risks based on
recognizable scenarios or hypothetical
example .
 A visually inviting format that encourages
 Ethical decision-making tools to assist
employees in making the right choices
 A designation of reporting channels and viable
mechanisms that employees can use to report
concerns or seek advice without fear of
retribution.
Principles of Ethical Codes
Purpose of Corporate and Professional Codes
 LEADERSHIP AND INTEGRITY
 In the workplace, we are faced daily with the
responsibility of making decisions.
 These leaders have a responsibility to the
people who work for them and the society, in
general, to provide employees with guidelines
for making ethical decisions
 What do good leaders do in order to achieve
ethical standards?
 Laws - These are laws that guide business
leaders. Breaking laws can lead to arrest and
imprisonment
 Individual Ethics. Laws are not enough to
assure ethical behaviours. Individual leaders
and their decision-making behaviours (ethical
or unethical) set examples for employees.
 Conflict of Interest – A leader achieves
personal gain from a decision he/she makes.
 Whistleblowing – Does the leader tell others
(media or government authorities) about
unethical behaviour of the company or
institution
• Relationships – There is need to build
cooperative long-term relationships with various
stakeholders. When an organization prioritizes
the preservation of these relationships, it is less
likely to engage in practices that will violate the
trust that has built up.
• Recruitment – The nature of one’s recruitment
has a strong influence on his/her level of
integrity in the workplace. For example,
practices such as “empowerment” and nepotism
tend to create cultures that result in the integrity
of the organization being compromised.
 Other Approaches to Improving Ethical
Behavior in Organisations.
Selection
 Given that individuals are at different stages of
moral development and possess different personal
value systems and personalities, an organisation’s
employee selection process – interviews, tests,
background checks, and the like – should be used
to eliminate ethically undesirable applicants.
 Thus, the selection process should be viewed as
an opportunity to learn about an individual’s level
of moral development, personal values, ego
strength, and locus of control
 Top Management leadership
 Codes of ethics require a commitment from top
managers. Because it’s the top managers who set the
cultural tone.
 They are role models in terms of both words and actions,
though what they do is probably far more important than
what they say.
 If top managers, for example, use company resources for
their personal use, inflate their expense accounts, or give
favoured treatment to friends, they imply that such
behaviour is acceptable for all employees.
 Top managers also set the cultural tone by their reward
and punishment practices the choice of whom and what
are rewarded with pay increases and promotions send a
 Job Goals
 Employees should have tangible and realistic
goals.
 Explicit goals can create ethical problems if
they make unrealistic demands on employees.
 Under the stress of unrealistic goals, otherwise
ethical employees will often take the attitude
the “anything goes”.
 When goals are clear and realistic, they
reduce ambiguity for employees and motivate
rather than punish.
 Ethics Training
 More organizations are setting up seminars,
workshops, and similar ethics training programs to try
to increase ethical behaviour.
 The primary debate is whether you can actually teach
ethics. Critics, for instance, stress that the effort is
pointless because people establish their individual value
systems when they are young.
 Proponents, however, note that several studies have
found that values can be learned after early childhood.
 Training has increased individuals’ level of moral
development, (Penn and Collier, 1985 pp 131-36), and
that, if it does nothing else, ethics training increases
awareness of ethical issues in business (Weber, 1990,
pp 182-90).
 Comprehensive Performance Appraisal
 When performance appraisals focus only on
outcomes, ends will begin to justify means.
 If an organization wants its managers to
uphold high ethical standards, it must include
this dimension in its appraisal process for
example; a manager’s annual review might
include a point-by-point evaluation of how
his/her decisions measured against the
company’s code of ethics as well as on the
more traditional economic criteria
 Independent Social Audits
 An important element of unethical behaviour is fear of
being caught.
 Independent audits, which evaluate decisions and
management practices in terms of the organization’s
code of ethics, increase the likelihood of detection.
 These audits can be routine evaluations, performed on a
regular basis just as financial audits are, or they can
occur randomly with no prior announcement.
 To maintain integrity, the auditors should be
responsible to the company’s board of directors and
present their findings directly to the board.
 This practice not only gives the auditors clout, but also
lessens the opportunity for retaliation from those being
audited.
 Formal Protective Mechanisms

 Organisations should provide formal mechanisms so that

employees who face ethical dilemmas can do something
without fear of reprimand.
 An organization might, for instance, designate ethical
counselors / advisors.
 An ethical advocate can also be used to improve ethical
conduct in the workplace. An ethical advocate is normally a
top-level executive who, in many ways serves as the
organisation’s full time ethical conscience.
 His/her job is to evaluate the organization’s actions from
an ethical point of view, and openly questioning the ethical
implications of the organization’s proposed plans of action.
 The organization might also create a special appeals
process that employees could use without risk to
themselves to raise ethical issues or blow the whistle on
 WHISTLEBLOWING
 When an employee discovers unethical, immoral
or illegal actions at work, the employee makes a
decision about what to do with this information.
 Whistleblowing is the term used to define an
employee’s decision to disclose this information to
an authority figure (boss, media or government
official).
 A whistleblower is an employee or former
employee, or member of an organization,
especially a business or government agency, who
reports misconduct to people or entities that have
the power and presumed willingness to take
corrective action.
 Generally the misconduct is a violation of law,
rule, regulation and/or a direct threat to public
interest, such as fraud, health/safety violations,
and corruption.
 Blowing the whistle may include:
 Reporting wrongdoing or a violation of the law to
the proper authorities such as a supervisor, a
hotline or an inspector general.
 Refusing to participate in workplace wrongdoing.
 Testifying in a legal proceeding.
 Leaking evidence of wrongdoing to the media.
 The most common type of whistleblowers are
internal whistleblowers, who report
misconduct to another employee or superior
within their company or agency.
 In contrast, external whistleblowers report
misconduct to outside persons or entities. In
these cases, depending on its severity and
nature, whistleblowers may report the
misconduct to lawyers, the media, law
enforcement or watchdog agencies, or to
other local, or state agencies
 Guidelines for Whistleblowing
The following list is a guideline that will help an
employee to determine if a situation merits
whistleblowing.
 Magnitude of Consequences. An employee
considering whistleblowing must ask himself or
herself these questions: How much harm has been
done or might be done to victims? Will the victims
really be “beneficiaries”? If one person is or will
be harmed, it is unlikely to be a situation that
warrants whistleblowing.
 Probability of Effect. The probability that the
action will actually take place and will cause harm
 Temporal Immediacy. An employee must consider the
length of time between the present and the possibly
harmful event. An employee must also consider the
urgency of the problem in question. The more
immediate the consequences of the potentially
unethical practice, the stronger the case for
whistleblowing.
 Proximity. The physical closeness of the potential
victims must be considered.
 Concentration of Effort. A person must determine
the intensity of the unethical practice or behaviour.
The question is how much intensity does the specific
infraction carry. For example, according to this
principle, stealing US$10 000 from one person is more
unethical than stealing US$1 from 10 000 people
 Common Reactions to Whistleblowing
 Some see whistleblowers as selfless martyrs for public
interest and organizational accountability.
 Others view them as pursing personal glory and fame.
 Persecution of whistleblowers has become a serious issue
in many parts of the world.
 Although whistleblowers are often protected under law
from employer retaliation, there have been many cases
where punishment for whistleblowing has occurred, such
as termination, suspension, demotion, wage garnishment,
and/or harsh mistreatment by other employees.
 Depending on the circumstances, it is not uncommon for
whistleblowers to be ostracized by their co-workers,
discriminated against by future potential employers, or
even fired from their organization.
BUSINESS EDUCATION – ETHICS AND NEW
PROFESSIONALS
 Employees and future employees should know
about business ethics in order to perform
ethically on the job.
 Standards of ethical conduct are a part of good
business education and training in all geographical
and business settings.
The following questions need to be addressed:
 What can academic institutions do to educate
students about ethics?
 What do companies do to educate employees
about ethics?
 How do employees learn to do a better job and
do it ethically?
 How do governments support training for
ethical business practices?
 Where do employees get information when
they face a conflict between keeping a
competitive edge and maintaining ethical
standards?