Ethics in Functional Fields

7/28/2019 Ethics in Functional Fields

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ETHICS IN

BUSINESS DISCIPLINES/

FUNCTIONAL FIELDS


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ETHICS IN BUSINESS DISCIPLINES

Ethics in:

Human Resources Management

Finance & Accountancy Marketing

Purchase


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ETHICS IN HUMAN RESOURCES

MANAGEMENT

Here we explore the Ethical dilemmas that facethe worker, whether she or he is an employee onassembly line, the manager of a restaurant or theCEO of a large corporation.

Ethics at work and in HRM is about ourrelationship with others and our organizations.

Recent research supports a slew of earlierfindings that companies that place employees at

the core of their strategies produce higher longterm returns to shareholders than do industrypeers.


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ETHICS IN HUMAN RESOURCES

MANAGEMENT

When employees see that a firm values their

emotions, as well as exhibits values such as

honesty, respect and trust, they feel less

pressure, feel more valued as employees andare also more satisfied with their

organizations.


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ETHICS & HRM


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1. Cash & Compensation Plans

Salaries Raising the band of salaries of few

management employees against all others

Executive Perquisites & long term

compensation plans Pressure to decide on

plans favouring top managements interests

instead of organization at large.


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2. Discrimination

Though overt acts of discrimination might be decreasing, covertforms of discrimination are still at play.

For instance, in recent research, University of Chicago scholarsMarianne Bertrand and Sendhil Millainanthan found that thereremains discrimination simply on the basis of ones name.

These researchers answered help-wanted ads in Boston andChicago newspapers by sending their resumes. Though the resumeswere exactly the same in substance, they were different in thenames attached to them.

Names that were traditionally associated with Caucasians (Jill,Allison, Neil, Brad) drew 50% more callbacks than thosetraditionally associated with African Americans (Alisha, Ebony,Leroy).

Even when researchers increased the quality of resumes, higherquality resumes from African Americans- sounding candidatesreceived no more callbacks than the original resume.


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2. Discrimination

Additional studies reinforce these findings that bias on the job isalso common.

Rutgers Law school professors Alfred and Ruth Blumrosenconducted a study in 2002 that concluded that about 2 millionworkers were affected by intentional discrimination in 1999.

Within these, 22,000 employers were found to be hard-corediscriminators, employing below average numbers of women andminorities for 10 years.

Women often face challenges that are distinct from men. E.g.women and men are both subject to gender stereotyping, butsuffer from different expectations in that regard.

A woman who is aggressive in the workplace is often considered tobe a Bully. Whereas, Aggressive men may be viewed as going afterwhat they want, not letting anything get in their way and so on.

Womens wages per hour are on an average about 60% of menswages.


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2. Discrimination

Federal law prohibits public or private

employers to force their employees to retire

before the age of 70, with the exception of a

few job classifications as airline pilot.

The reason provided is that the use of age is

arbitary.


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3. Employment Issues Law and regulations dictate that we have to be ethical in hiring.

However, ethical hiring practice goes beyond them as well.

Applicants should be hired based purely on merits such as

knowledge, skills, and ability in accordance to the needs of the

organization.

There should be no discrimination to people from any other

group due to race, religion, gender, marital or pregnancy status.

Consistency and objectivity during the recruitment process are

very important.

Candidates should be informed about the true state of the

organization. E.g. Case of Phil McConey who was not informed of

the take over of the organization while he was recruited.

We have to be extra careful while recruiting from our Suppliers,

Customers and Competitors since they may feel we are poaching

their valued employees/ stealing of trade secrets etc.


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4. Privacy Issues

Any person working with any organisation is anindividual and has a personal side to his existencewhich he demands should be respected and notintruded.

This personal life may encompass things like hisreligious, political and social beliefs etc.

However certain situations may arise that mandatesnooping behaviours on the part of the employer.

For example, mail scanning is one of the activities usedto track the activities of an employee who is believedto be engaged in activities that are not in the largerbenefit of the organisation.


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5. Downsizing/ Layoffs

Organizations in every segment of business,

industry, government and education are

downsizing.

The very act of forcing people to leave their

employment is rife with ethics-related

questions.


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Is downsizing ever ethical?

Jobs are the by-product of successful

organizational endeavors, not their intended

output.

Downsizing is not necessarily a desperate

move on the part of failing organizations.

It can be and probably should be a strategic

choice designed to serve the best interests of

an organization.


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How do we act more ethically in

downsizing?

John Challenger suggested that we shouldconsider Planning, Timing, Notice, Impact (onthose who will go and those who will stay) andStakeholder perceptions.

The decision regarding downsizing should bemade by a representative group so that allstakeholder interests can be considered and toearn the trust of those who will be impacted.

Since employees should be kept aware ofbusiness conditions, the need for downsizingeffort should not come as a great surprise.


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How do we act more ethically in

downsizing?

Notice: Some argue that a firm should give noticeof downsizing as soon as that list is devised.

On the other hand, the uncertainty and rumoursthat are sure to develop between theannouncement of downsizing effort and thedecision about who will be terminated mayoutweigh the benefits gained in early notification.

Above all, during a time when relationships might

be strained, it is most critical to be honest andforthright and to have sensitivity to theexperiences of those you impact.


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How do we act more ethically in downsizing?

Those who must leave:

Being forced to leave a job, irrespective of separation-allowances,pensionenhancements or any of the other tools used by organizations to soften theblow, feels wrong.

It violates some values (EPIC as suggested by Kenneth Johnson):

Empathy: the act of dismissal can be unempathetic, since it negativelyaffects those who are forced to give up their chosen path, no matter what

future success may await them. Since typically they feel as though they hadno voice in the decision.

Patience: if the decision to downsize is perceived to be a faddish responseto competitive pressures it will appear impatient or premature to those whomust leave.

Integrity: where there was either an implied or spoken promise of

continuing employment as the repayment for employee loyalty and/ orsuccessful completion of assigned work, the decision may be thought to lackintegrity.

Courage: downsizing can sometimes be seen about creating victims anddisplacing blame rather than accepting responsibility and choosing the moredifficult, moral high ground.


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How do we act more ethically in downsizing?

Those who remain:

Surviving employees will often share perceptions about the ethics of this

decision with those who are being forced to leave. They also experienceemotional reactions anger, guilt, fear, depression when asked to take upthe slack by doing more work, learning new tasks, for same or less money.

Empathy: asking people to do more with less pay can seem unfair.Downsizing organizations put tremendous pressure on their survivingemployees, and that often affects their families as well. This can seem to

show a lack of caring on the part of decision makers, an insensitivity to thereality that employees are people with full lives and responsibilities outsideof work.

Patience: organizations which downsize often have a sense of urgencyabout realizing the promised benefits of doing more with less. If this rush toa new order is seen to be without a strong basis.

Integrity: in organizations where downsizing is imposed at the same time

that executives/ shareholders are receiving bonuses, there can be aperception of double standard.

Courage: if executives blame their superiors for the necessity to downsize,and speak or act as tough they had no choice, the message can be that theylacked the courage to do what is right, to stand up for those who haveserved them loyally, no matter the personal risk. This is viewed as cowardice.


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Downsizing & some exceptions

Some firms have survived decade after decade without any layoffs.

One firm, Nucor, has not laid off a worker in 20 years. However, thefirm maintains a 3 day work-week with an average wage of $8 perhour. When large contracts come in, it expands to a seven-day workweek and $22 per hour wage.

Other firms have entered into agreements with their workers wherethe firm promises not to terminate workers for reasons of theeconomy as long as the workers agree to lower wages or decreasedhours during tough periods.

For e.g., in December 1998, Volkswagen in Brazil was suffering underthe collapse of that countrys economy and the resulting 25%

downturn in the Brazilian car market. However it avoidedterminations at its 20,000 worker plant by moving to a 4 day work-week.


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6. Performance Appraisals Performance Appraisals are conducted to evaluate an

employees performance over a set period of time.

When evaluating subordinates, one has to remain consistentand objective.

Consistency requires that you treat every employee's

misbehaviour the same way. For e.g. it would be wrong to

punish one employee's sluggishness while leavinganother employee's tardiness unchecked.

In order to maintain Objectivity & Uniform criteria, the

companys standardized evaluation forms should be

used. It is unethical to base salary adjustments upon performance

problems that have not been brought to the employees

attention. Constant feedback and communication between you

and your subordinates is necessary to facilitate a positive andproductive working relationship.


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7. Disciplinary Issues

Disciplining employees is one of the most difficultparts of a managers job. Nevertheless, itis vital to the growth and overall success of the

organization. Disciplining employees both ensures productivity

and sets standards for the future.

Discipline should occur immediately after a

problem has occurred. It is imperative that thedisciplinary actions remain consistent for allemployees.


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7. Disciplinary Issues Sexual

Harassment A serious disciplinary issue is sexual harassment where

employees are subjected to an unwanted sexual behaviorthat creates an intimidating or hostile work environment.

Treating someone differently because of his or her genderis unlawful under Title VII.

There are 2 types of sexual harassment that fit within thisbroad prohibition: Quid Proquo exists where a supervisor offers an employment

in exchange of sexual activity or where a supervisor refuses togive an employee deserved benefits unless she/ he engages in

sexual activity. Hostile environment exists where a work environment is

severely or pervasively altered such that a reasonable personwould find it offensive or abusive.


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ETHICS IN FINANCE ANDACCOUNTANCY


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Ethics & Finance/ Accountancy

Ethics in Financial services area is the most visible area inbusiness ethics in the first years of the new millenium.

Accounting and investment firms that were looked upon as

guardians of integrity in financial dealings are exposed as

violating the fiduciary responsibilities entrusted to them. Enron, Worldcom, Tyco, Adelphia, Anderson, Ernst & Young,

KPMG, Deloitte & Touche, Pricewaterhouse Coopers, J.P.

Morgan, Merill Lynch, Morgan Stanley, are names of companies,

accounting firms and investment firms that have all been

implicated in some ethically questionable activity in the past few

years, activities that have resulted in fines or criminal

convictions.

Ethi & A t


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Ethics & Accountancy

Accounting is a profession in the financial world wherein the

Accountant is responsible for giving the financial pictures that are

necessary for companies to stay in existence, and Auditors areresponsible for verifying that the pictures are accurate and truthful.

Bogle calls for the need of Accountants to be independent, and

then contrasts the difference between being a mere business

marketing a product and being a profession. When companies move from being professions to mere business

marketers, a conflict of interest between the good of the client and

the profit needs of the company arises.

Ten of the top investment firms in USA had to pay fines for actionsthat involved conflicts of interest between research and investment

banking. i.e. Companies that engaged in investment banking would

pressure their research analysts to give high ratings to companies

whose stocks they were issuing, whether those ratings were

deserved or not.


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Abusive Tax Shelters

Taxes are not part of the financial servicesmarket, but the avoidance of taxes is an impetusbehind all sorts of financial instruments createdand sold by financial players, tax lawyers, tax

accountants and financial services firms. It is imperative for the general welfare that all

constituents pay their fair share of taxes. Yet alarge portion of the financial markets is intent on

finding loopholes or dodges to help clients payless than their fair share and thus free ride on thebacks of the ordinary taxpayer.


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Abusive Tax Shelters

For a system to be healthy, entities with powerand privilege need to participate in what is alwaysa necessary inconvenience, paying taxes, for the

good of the whole. In April 2001, IRS named 25 companies who

evaded $4 billion in taxes in improper shelters.

The large accounting firms form teams dedicated

to gaming the tax codes for the benefits of theirclients, as long as the clients promise not todivulge the schemes.


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Insider Trading Insider trading refers to buying or selling a security, in breach of a fiduciary duty or

other relationship of trust and confidence, while in possession of material,nonpublic information about the security. Insider trading violations may also

include tipping such information, securities trading by the person tipped and

securities trading by those who misappropriate such information.

Ivan Boesky, Ken Lay and his colleagues at Enron have been accused of Insider

trading.

They allegedly dumped their stock, knowing of the inevitable downturn in the

stocks worth, while encouraging others to hold on to it.

The main argument against insider trading is that it is unfair to those who do not

have the privileged information. So, if some executive gets rid of a stock he knows

is going to be greatly decreased in worth because of bad news that no one except a

few insiders knows, he takes advantage of those who bought the stock from himwithout full disclosure.

There is also the argument that it is the unethical misappropriation of proprietary

knowledge (i.e. knowledge that only those in the firm should have, knowledge

owned by the firm and not to be used by abusing ones fiduciary responsibilities to

the firm. Such behaviour undermines the trust necessary to the proper functioning

of a firm. It is also unfairness to those who buy the stock under ignorance.


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BUSINESS ETHICS AND MARKETING


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CASE STUDY


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Ethics in Marketing

Critics understand that Marketing is at best aNecessary evil

Marketing is typically perceived as something

that is done to customers; something thatcustomers have to watch out for.

Marketing, generally equated with selling andadvertising, is viewed as a set of tactics used by

firms to induce unsuspecting customers to buyproducts and services that they do not need, atprices that are much too high.


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Marketing Critics

Most criticisms of marketing ethics pertain to tacticsused by marketers:

Create demand for unnecessary products,

Fail too provide complete information

Create misleading advertising,

Mark up prices when demand is high,

Charge different prices for different customers and so on

Critics hence believe that criticisms of marketing aredeontological i.e. concerned with the means employedby marketers, irrespective of the outcome.


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Ethics & Marketing

Marketers respond to the above criticisms by

pointing to a more expansive definition of

marketing as the process of planning and

executing the conception, pricing, promotionand distribution of ideas, goods, services to

create exchanges that satisfy individual and

organizational goals.


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Deontological (Code of Ethics)

response for critics Marketers have created and adopted a code of ethics that is mainly

deontological i.e. it deals with how marketers must conduct theiractivities, irrespective of outcomes (Appendix A).

In a survey of 1076 marketing professionals asking for the mostdifficult ethical issues they face in their work, respondents cited the

following: Bribery (gifts, questionable payments)

Fairness (conflicts of interest, manipulation)

Price issues (differential or predatory pricing)

Products (safety, infringement)

Personnel confidentiality,

Advertising (puffing v/s misrepresentation),

Manipulation of data and purchasing (reciprocity in supplier selection)

Creating a code of ethics and subscribing to it in practice can beentirely two different matters.


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Recurring lapses in ethics on part of

marketers1. Its legal, isnt it? : There is a perceptible trend to determine the wrongness

and rightness of a decision by refering to the legality of an issue ratherthan using an internal or external ethical reference point.

2. Do customers really care about ethics?: When purchasing products andservices, customers seem to care about other aspects of purchase beforethey consider whether a firm is ethical or not. Customers consider ethics

in purchase decision when the ethical issue affects them directly. Ifcustomers place ethics lower in the hierarchy of needs when actuallypurchasing, marketers lose incentive to pursue ethical behaviour.

3. Where are the ethics police?: Ethical lapses by firms are made public byconsumer advocacy groups, concerned citizens and members of media.

4. Following the money: Short term mentality for profits (arising from

shareholders expectations) is not conducive for encouraging ethicalbehaviour. Results from ethical behaviour are typically long term, oftenvague and sometimes unclear. Given the pressures from short-termoriented shareholders with very sharp teeth and comparing those tolonger term, sometimes weak pressures from ethical interest groups withunclear dental records, the choice of behaviour is startingly clear- Ethicstakes a back seat.

Documents

Ethics in Functional Fields