Assignment

Ethics in management

Assignment submitted to – Dr. Romila Aggarwal

Paper : 511 Management Concepts and Organization Behaviour

PRADEEP KUMAR

ROLL NO – 43

MIB

BATCH 2010-2012
 Ethics in Management

All persons, whether in business, government, a university, or any other enterprise, are
concerned with ethics. In Webster’s Ninth New Collegiate Dictionary, ethics is defined as “the discipline
dealing with what is good and bad and with moral duty and obligation.” Thus, personal ethics has been
referred to as “the rules by which an individual lives professional conduct of accountants.” Business
ethics is concerned with truth and justice and has variety of aspects such as the expectations of society,
fair competition, advertising, public relations, social responsibilities, consumer autonomy, and corporate
behavior in the home country as well as abroad.

Ethical theories and a model for political behavior decisions

In organizations, managers compete for information, influence, and resources. The potential for
conflicts in selecting the ends as well as the means to the ends in easy to understand, and the question
of what criteria should guide ethical behavior becomes acute.

Three basic types of moral theories in the field of normative ethics have been developed. First,
the utilitarian theory suggests that plans and actions should be evaluated by their consequences. The
underlying idea is that plans or actions should base on rights holds that all people have basic rights.
Examples are the rights to freedom of conscience, free speech, and due process. Third, the theory of
justice demands that decision makers be guided by fairness and equity, as well as impartiality.

Institutionalizing Ethics
Business ethics are increasingly addressed in seminars and at conferences. Managers especially top-level
managers, do have a responsibility to create an organizational environment that fosters ethical decision
making by institutionalizing ethics. This means applying and integrating ethical concepts with daily
actions. Theodore Purcell and James Weber suggest that this can be accomplished in three ways

1). By establishing an appropriate company policy or a code of ethics,

2). By using formally appointed ethics committee,

3). By teaching ethics in management development programs.

 The most common is the use of ethics board committees. Management development programs
dealing with ethical issues are very seldom used, although companies such as Allied Chemical,
International Business Machines, and General Electric have instituted such programs.

The publication of code of ethics is not enough. Some companies require employees to sign the
code and include ethics criteria in the performance appraisal. Moreover, certain firms connect
compensation and rewards to ethical behavior. Managers should also take any opportunity to
encourage ethical behavior and publicize it. On the other hand, employees should be encouraged to
report unethical practices (commonly known as ‘whistleblowing’). Most important, managers must set a
good example through ethical behavior and practices.

Code of Ethics and Its Implementation through a Formal Committee

A code is a statement of policies, principles, or rules that guide behavior. Certainly, codes of
ethics do not apply only to business enterprises; they should guide the behavior of persons in all
organizations and in all organizations and in everyday life.

Simply stating a code of ethics is not enough, and the appointment of an ethics committee,
consisting of internal and external directors, is considered essential for institutionalizing ethical
behavior. The functions of such a committee may include –

1). Holding regular meetings to discuss ethical issues,

2). Dealing with “gray areas,”

3). Communicating the code to all members of the organization,

4). Checking for possible violations of the code

5). Enforcing the code,

6). Rewarding compliance and punishing violations,

7). Reviewing and updating the code, and

8). Reporting activities of the committee to the board of directors.

Factors that raise ethical standards

The two factors that raise ethical standards the most, according to the respondents in one study, are

(1) Public disclosure and publicity and

(2) The increased concern of a well-informed public.
These factors are followed by government regulations and by education to increase the
professionalism of business managers.
For ethical codes to be effective, provisions must be made for their enforcement. Unethical managers
should be held responsible for their actions. This means that privileges and benefits should be
withdrawn and sanctions should be applied. Although the enforcement of ethical codes may not be
easy, the mere existence of such codes can increase ethical behavior by clarifying expectations. On the
other hand, one should not expect ethical codes to solve all problems. In fact, they can create a false
sense of security. Effective code enforcement requires consistent ethical behavior and support from top
management.
Another factor that could raise ethical standards is the teaching of ethics and values in business
and other schools and universities. The Harvard Business School has come under severe criticism by its
own president, Derek Bok, for the lack of teaching of human values. With the help of business
executives, the school hired Dean John McArthur and faculty members trained to teach ethics to give a
new direction to the school. While financial aspects received less attention in the revised curriculum,
more emphasis was placed on people skills and ethical behavior. Since Harvard has one of the largest
numbers of B-school graduates who often hold top managerial positions, a somewhat greater
awareness of the ethical dimension in managing may be expected.

Differing ethical Standards of Various Societies

Any person in business, government, a university, or some other organization is aware that
ethical, as well as legal, standards do differ, particularly among nations and societies. For example,
certain nations with privately owned companies permit corporations to make contributions to political
parties, campaigns, and candidates. In some countries, payments to government officials and other
persons with political influence to ensure the favorable handling of a business transaction are regarded
not as unethical bribes but as proper payments for services rendered. In many cases, payments made to
ensure the landing of a contract are even looked upon as a normal and acceptable way of doing
business. Consider the Quaker Oats Company, which was faced with a situation in which foreign officials
threatened to close the operation if the demand for “payouts” were not meet. Or what should a
company do when the plant manager’s safety will be in question if payoffs are not made?
The question facing responsible American Business managers is: What ethical standards should they
follow? In China and East Asia, for example, “guanxi” which pertains to the informal relationships and
exchanging of favors, influences the business activities in those countries. There is no question of what
to do in the United States, and American executives have had to refuse the suggestion of putting money
in a “paper bag.” In a country where such practices are expected and common American executives are
faced with a difficult problem. With the passage of laws by the U.S. Congress and the adoption of
regulations by the Securities and Exchange Commission, not only must American firms report anything
that could be called a payoff, but also anything else the can be construed as a bribe is now unlawful.
Thus, the United States has attempted to export its standards for doing business to other countries,
which can improve ethical standards abroad.