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Business Ethics

By ‘Business ethics’ we refer to the moral evaluation of the goals, policies,


practices, and decisions taken within business organizations as they
impact on human well-being, fairness, justice, humanity, and decency.
.
Often business ethics is presented in terms of the decisions facing
individuals as board members, managers, or employees and the dilemmas
(i.e. choices between competing moral considerations), or temptations (as
in conflicts of interest) facing them.

Business ethics has to consider the moral critique of business and


management practice as a whole and not just address the behaviour of
individual managers and others. It is individuals who must ultimately
make moral choices, either on their own or collectively, but identifying
what choices exist and decisions they ought to make requires analysis of
the morality of the existing and potential system and its constituent roles.

This broad approach to business ethics does not entail that ethics in
business is something that comes into business ready made from the
wider world as an external imposition of standards that have been
developed and refined elsewhere. Rather, business has its own ethics, a
specific ethics that draws on general moral principles but refines and
develops these in the light of its own particular goals, requirements,
institutions, and objectives. Consequently, business ethics is not a
compartmentalized add-on to business, but a dimension of business and
specifically one that is inescapably present in all management decisions.
In making this point we nevertheless recognize that in recent times some
writers have sought to critique the foundations of ethics.

All across the world , business decisions are based on the values and
ethics of a company The behaviour a business conducts daily towards its
employees and customers is known as business ethics. Some of the
struggle that management must deal with include but are not limited to
ethical issues pertaining to sexual harassment, discrimination, and
termination. Moral and ethical issues represent a difficult challenge by
managers then in the past. Many of the same issues managers are faced
with in today’s society were overlooked many years ago. There has been
an increased awareness of moral and ethical issues that has forced
companies to implement and enforce policies against immoral and
unethical behaviour. This paper will explain ethical issues pertaining to
termination of employment.

Termination of employment was considered an event that takes place


due to unusual circumstances. Presently, it happens more frequently due
to the decline of our nation’s economy. Organizations compensate by
downsizing, consolidating, or even outsourcing its products or services
overseas. One of the toughest challenges for a manager is to terminate an
employee that he or she has developed a relationship during the
employee’s tenure. This is made even more difficult when a manager has
knowledge of how it will impact the employee’s personal and financial
situation. Managers are put into an uncomfortable position when they
must tell a hard working family oriented employee, who just purchased a
vehicle or moved into a new home, that they are being terminated for one
reason or another. Someone who manages others must block out personal
feelings of guilt during this unyielding process.

Today, terminating employees is more difficult then in the past.


Employees enjoy more rights and are protected by various laws that were
non-existent in years past. Companies are fearful of lawsuits that are filed
by employees as a result of their termination. Terminated employees may
claim an unjust termination by management that show favoritism to other
employees with similar circumstances whore main employed. Managers
must follow certain rules to ensure each termination is legally carried out.
To prove the legality, protocol may suggest following specific steps that
will minimize the hazard of a lawsuit. Steps may include verbal and
written documentation or placing him or her on suspension. Businesses
labeling itself as an at-will-employer in the past would fire an employee
without any notice. Today, employees usually receive several warnings,
both verbally and written, prior to termination.

Ethical concerns for many businesses across the nation have been the
termination of an employer and employee relationship due to poor
performance, attendance, failure to comply with company policy and
procedure, and more. Ethical issues of employment termination causing
legal troubles for organizations are not the only problems companies
realize. Surprising outcome may surface because of how, why, and when
the employment termination occurred. Peers reactions to employee
termination differ and can cause a ripple effect that can cripple the
success of a business.

Utilitarian ethical principles are used to affect the greatest good for most
employees. Management must determine how swiftly to deal with an
employee who has demonstrated behaviour or performance problems.
Employees are aware when a peer is having these problems and
management must react quickly and responsibly to keep moral and
productivity high.

Employment termination is perceived to be an ethical dilemma that is


deemed a sensitive subject but also a moral and legal responsibility for
management to uphold. Presently, employment termination takes place
more often due to global economic recession and firms that are
downsizing, consolidating, or outsourcing its business overseas. A difficult
challenge for managers is terminating an employee he or she has built a
relationship with. Emotions must be erased by a manager during the
termination process. Terminating an employee and employer relationship
is a moral and ethical issue that represents a difficult challenge for
managers more now than ever before. It is one of the issues that business
decisions are constantly scrutinized and a company’s values and ethics
are measured. This ethical issue has also forced companies to implement
and enforce policies against immoral and unethical behaviour.

Ethical Issues facing a Manager

Every manager will have to deal with moral and ethical issues during his
or her career. As a manager, a person may have to re-evaluate what he or
she was taught to be moral and ethical. Furthermore, making moral and
ethical decisions is not for self, but for the company, the individuals who
work for the company, and customers and the community. A manager
must know what the policies are for the company are when deciding what
is ethical, before he or she can implement and enforce the company
policies on ethical behaviour. Managers must be consistent when dealing
with ethical issues. For instance, if a management punishes an individual
for doing something immoral and unethical, the manager much do the
same for any person who does anything unethical.

Business ethics is the behaviour that an organization conducts on a daily


basis both towards organizational personnel and customers. Businesses
worldwide struggle to adhere to these business ethics on a daily basis, but
ethical issues still arise. Ethical issues such as layoffs, discrimination, and
harassment are just some of the issues companies are faced with
everyday.

Downsizing or layoffs is one ethical issue that companies are faced with
today in this struggling economy. Harassment in the workplace is another
ethical issue that should not be tolerated. One type of harassment is
called hostile environment. Harassment is unwelcome conduct that is
based on race, color, sex, religion, national origin, disability, and or age
(eeco.gov). Bullying is a form of harassment which turns the workplace
into a hostile environment and should not be tolerated. This type of
behavior can lead the company to being sued if this issue is not corrected.
No one should have to work in an environment where he or she is being
intimated into doing someone else work. When the issue is reported it
needs to be dealt with immediately. Once the issue has been bought to
the attention of higher personnel, it is now the responsible of the
company to make sure all employees are to work on time and doing his or
her own work.
An organization can maintain business ethics with a code of conduct. A
business code of conduct and ethics is a written document with standards
relating to an organization’s values. The code of conduct is used to
promote honesty, fairness, compliance, and accountability. Establishing
corporate values such as integrity, high standards, performance, and
responsibility are just some factors businesses need to maintain a healthy
business ethics environment. By a company living up to the image and
reputation of the company can lead to positive thinking and positive
results. Although some ethical issues such as layoffs may sometimes be
unavoidable, others such as discrimination and harassment can be
prevented.

A supervisor was told that he has to be return to his position as an agent


helping customers on the telephone and sometimes work as floor support
to help take supervisor calls and for agents that may questions that are
not in the troubleshooting guides. The reason that was gave; the company
was experiencing loss in revenue and was not hiring any new employees
at that time. This individual was one of the last persons to move into a
supervisors’ position. As a supervisor this individual was working on a
salary instead of hourly like the agents on the telephone but was told that
he would have to lose his salary and return to hourly pay. This supervisor
agreed with returning to being a telephone agent, but refused to take a
pay cut because he had signed a contract. The supervisor was terminated
in view of the fact that he would not take a pay cut. At the time when the
individual was offered a supervisory position he signed a contract that
stated that he could be asked to return to the telephones to help
customers, but pay shall remain the same. The legal ramifications are
that the supervisor that was let go may decide to take legal actions
against the management for breach of contract. A breach of contract is
failing to perform any term of a contract, written or oral, without a
legitimate legal excuse. By law that individual had the right to decline the
decrease of pay and go back to being a customer service representative
on the telephone. Since the company did not keep within the terms of the
contract that individual refused to agree with a pay cut and was released
from the company. Management should have honored the contract and
continued to pay the individual his salary.
Ethics in Human Resource Management

Adopting ethical human resources management practices can improve


the triple bottom line item of people for a company.

An engaged workforce can lead to increased production, innovation and


good word of mouth advertising for the company as an employer.
Corporate social responsibility practices in human resource management
include valuing human capital, providing safe and healthy workplaces and
a work/life balance; embracing diversity in human resources and continual
skills development for all employees. A company can chose to extend
ethical human resource management practices by ensuring that they only
work with suppliers who value the same human resource ideals.

The benefits of undertaking ethical human resource management include


greater engagement of employees which may lead to decreased staff
turnover, opportunities for greater innovation as employees feel valued
and potential to be considered an employer of choice. These benefits can
be reported to all stakeholders of the company through the annual
corporate social responsibility report.

A large area of human resource management is concerned with various


ethical issues, both on the part of upper–level management in its business
decisions and lower–level management in the treatment of individual
employees. In making decisions the human resource manager should
consider alternative solutions to the needs of the business as well as the
effects the decisions will have on the lives of the employees. Frequently a
human resource manager will be given instructions from higher level
management to take action which will be oppressive to the employees
and the manager must either present argument to higher management
for alternate solutions which will have less impact on the employee
morale or determine the best method for implementing the instructions
which have been given.

The Human Resource Professional’s Responsibilities.

I believe that HR practitioners can be a driver for building a strong ethical foundation,
although one person – or one department – cannot single-handedly change a culture
that has some of the indicators of a weak ethics system mentioned earlier in this
article.

An organization’s core values are manifested by its culture; that is, in the basic ways
that business is handled, such as how decisions are made and how rewards are
distributed. Employees learn these ways of doing business through observing
coworkers and leaders. If no expectations are established and effectively
communicated, employees will “make it up” as they go along when faced with ethical
dilemmas. Does your organization have a Code of Ethics or Statement of Core
Values?

Supervisors and managers in organizations are often afforded a level of respect from
employees because of their leadership position. I believe that HR professionals are
in leadership roles by virtue of their visibility and influence, if not always in terms of
title. Employees look to the leadership as role models to guide their own behavior.
This is especially true when organizations are weathering difficult times, such as
mergers or acquisitions. A written Code of Ethics cannot be institutionalized unless
organization leaders show their respect for individuals and the organization by
engaging in legal and moral behaviors. Employees will learn to trust and respect
each other and managers only if they observe characteristics that merit that trust and
respect.

Putting a Code of Ethics in place and encouraging leaders to model desired


behaviors are important steps toward creating an ethical organization. Each
employee must understand his or her role in carrying out the organization’s values,
as well. Expectations around standards of behavior in everyday situations must be
established and enforced. By the way, the 2000 National Business Ethics Survey
finds that employees have high expectations for their organizations. Ninety percent
say they expect their organizations to do “what is right, not just what is profitable.”

After expectations are initially established, ongoing and open communication


systems must be in place to ensure a forum for discussion exists regarding ethical
issues. Informal meetings and accessibility are two ways that supervisors and HR
practitioners can keep the channels of communication flowing.

Human Resources can influence organizational culture. The stories you tell and the
events that you comment about illustrate what matters to you and what you consider
acceptable behavior.

Ethical Behaviour at Work


What Shapes Ethical Behaviour at Work?
• Individual factors
• Organizational factors
• The boss’s influence
• Ethics policies and codes
• The organization’s culture
• Unethical business environments can:
• De-motivate individuals
• Make good employees leave the company
• Attract unethical employees
• Lead to the lack of trust by the employees for the company

Staffing and selection


• Fostering the perception of fairness in the processes of recruitment
and hiring of people.
• Formal procedures
• Interpersonal treatment
• Providing explanation
• Training
• How to recognize ethical dilemmas.
• How to use ethical frameworks (such as codes of conduct) to resolve
problems.
• How to use HR functions (such as interviews and disciplinary
practices) in ethical ways.

Performance appraisal
• Appraisals that make it clear the company adheres to high ethical
standards by measuring and rewarding employees who follow those
standards.
• Reward and disciplinary systems

HR Ethics Activities
• The organization swiftly and harshly punishes unethical conduct.
• Workplace aggression and violence
• Taking care that HR actions do not foster perceptions of inequities
that translate into dysfunctional behaviours by employees.

Qualities of a Personnel Manager


• Training and Learning Opportunities
• Employee Welfare
• Accountability along with power of decision making.
• Nurturing innovation and allowing participation

Valuing Human Capital and Employee Engagement

Traditionally, many companies have viewed employees as a cost centre in


relation to the business and may attempt to minimise costs through tight
labour contracts and provision of the bare minimum of health and safety
standards. Ethical human resource management takes the view that
employees are far from a cost but are in fact a unique value adding
component of business operations.
CASE STUDY

• The case is about the retrenchment drama that unfolded in one of


India’s leading aviation companies, Jet Airways (India) Limited in
Oct 2008.
• More than thousand employees were laid off.
• It was a part of major Cost-cutting exercise to tackle Global
slowdown and price hike of Aviation fuel.

JET AIRWAYS AS ON OCT 2008

• Largest Indian Aviation Industry ($6 billion).


• A fleet of 107 Domestic aircraft serving 1,009 daily flights.
• 82 International routings.
• Total strength of 19000 employees.

The retrenchment drama unfolds.

• Oct 16, 2008, Jet announced that it would lay off nearly 1,100 of its
staffs to streamline operation.
• A day after it had already laid off around 800 of its cabin crew
members.
• Simultaneously announced second phase of lay-off of 1100
employees, mainly from departments like flight attendant, cockpit
crew etc.
• Amidst great furor and opposition by various organizations and
political parties, Naresh Goyal , chairman of Jet, reinstated the
employees a day later the great emotional drama.
• November 2008, Jet decided on a 20% cut in the salaries of its
pilots, engineers, and some other staffs.

Some salient issues.

• Employees were FIRED with no PRIOR NOTICE


• The entire force of unconfirmed staff was being laid off on a 30-day
compensation package
• Company took action only against lower staffs.

Ethical issues.

Some most crucial questions unanswered….

• Where would those 1900 employees go?


• Why took action only against lower grade staffs?
• Senior management was very less affected.
• What would be the future of those students currently taking
courses in cabin crew, captain etc?
• Why did the Jet CEO enter the competitive market, instead of
playing down after foreseeing risks?

Some quotes made by higher officials…..

"A total of 1,900 people are being served separation notice.


800 have already been served notice. In the next few days the
others will also be served notice. It is an attempt to save the jobs
of remaining 11,100 employees,“

Sar
oj Datta (Exe Director)

“It is a difficult decision but we had to take it,”

Wol
fgang Schaeur (CEO)

It throws a serious question towards the accountability of an


organization to its employees……….
Some observations

• The very existence of any company is because of its employees.


• Company keeps on focusing on customer satisfaction when its
own people are so highly dissatisfied.
• Employees are more than just-a-resource.

Points to ponder

• No company would know of a risk over night, its built over a


period and there should not be any drastic decision which may
endanger its employees.
• More accountability from top management.
• The role of HR executive is important to ascertain that people’s
interests are not left aside in the race for profits
• The HR executive to ensure no discrimination in pay cut and lay
off.
• Before reaching to decision, make environment conducive to
acceptance of decision.