Unit-3 Ethics in Management
Unit 3
Ethics in Management
Ethics in management refers to the ethical treatment given to all its various stakeholders as well as the general public.ethics in management can be defined as a set of moral principles. Principles that govern the actions of a person or a group. It is a norm of behaviour that guides leaders and managers in their day-to-day actions.
Ethics in Management includes
i).Ethics in HRM
ii).Marketing Ethics/Ethics in Marketing
iii).Ethics aspects of Financial Management
iv).Ethics in Technology/Technology Ethics and Professional Ethics
i)Ethics in Human Resource Management (HRM)
HRM is the process of planning, organizing, directing and controlling human activities to achieve the organizational goal and individual goals.
Ethics in HRM indicates the treatment of employees with ordinary decency and distributive justice. The ethical business contributes to the business goals as the employees will feel motivated and they will work with efficiency and effectiveness. Ethics in HRM basically deals with the affirmative moral obligations of the employer towards employees to maintain equality and equity justice. It is that branch of management where ethics really matter, since it concerns human issues specially those of compensation, development, industrial relations and health and safety issues.
Role of HR in Promoting Ethics
1. Improve recruitment and selection tests, follow the recruitment policy that is identification of the recruitment needs, monetary aspects, criteria of selection and preference etc.
2. Conduct ethics training. It is a short term process of training given to the HR of the organization to do their work in adherence to the ethical code of conduct. The main advantages are increased productivity, higher employee morale, less supervision, less wastage, etc.
3. Ensure that there are no pitfalls in performance appraisal. Performance appraisal should be factual and there should not be any partiality or bias in the attitude towards the employees.
4. Rewards and disciplinary system
5. Improve and facilitate two way communication among all in the organization.
6. Avoid any kind of discrimination among the employees based on certain factors like caste, colour, culture, religion, appearances etc.
7. Equal opportunities must be given to every employee for his advancement and development.
8. Measures should be taken for employee safety while working in the organization.
Ethical Issues in Human Resource Management Labour Costs
HR must deal with conflicting needs to keep labour costs as low as possible and to offer fair wages. HR can create a public relations problem if consumers object to using underpaid workers to save money.
Opportunity for New Skills
If your HR department chooses who gets training, it can run into ethical issues. Because training is an opportunity for advancement and expanded opportunities, employees who are left out of training may argue that they are not being given equal opportunities in the workplace. HR must make certain to clarify the business reason behind its training decisions so employees understand why specific individuals receive training when others don't.
Working Conditions
HR must work to maintain safety standards and clean working conditions for employees based on Occupational Safety and Health Administration requirements. Employees also have the right to expect a workplace free of sexually suggestive signs or comments, and disabled employees must have access to the building. HR must make sure lighting and air quality are adequate.
Honouring Benefit Provisions
HR has an ethical responsibility to make sure that any benefits offered to employees actually pay as intended. This means monitoring company-managed benefits as well as insurance companies to make sure there are no financial problems that would shortchange employees.
Fair Hiring and Justified Termination
Hiring and termination decisions must be made without regard to ethnicity, race, gender, sexual preference or religious beliefs. HR must take precautions to eliminate any bias from the hiring and firing process by making sure such actions adhere to strict business criteria.
Employment Issues:
HR professionals are likely to face maximum ethical dilemmas in the areas of hiring of employees.
Challenges in Recruitment
a. Pressure to hire a friend or relative of a highly placed executive.
b. Faked credentials submitted by a job applicant.
c. Discovery that an employee who has been with the organisation for some time, is skilled and has established a successful record, had lied about his educational credentials.
Cash and Compensation Plans
These are ethical issues pertaining to the salaries, executive perquisites and the annual & Long Term incentive plans etc. Often employees believe that they are under-paid for their work and that employers do not appreciate and treat them fairly. Disparity in payment of salary scales, provident funds and other benefits exist in some organizations. While deciding upon the payout there is pressure on favouring the interests of the top management in comparison to that of other employees and stakeholders.
Race, gender and Disability
Employers should not discriminate on the basis of race, gender, origin and their disability, Discrimination on basis of caste-ism, religion and nationality with respect to employment, including job advertisements, recruitment, transfer, promotions, compensation, fringe benefits, retirement plans etc is unethical. Managers are trained for aligning behaviour and avoiding discriminatory practices.
Privacy Issues
The four main types of employee privacy violations are Intrusion (locker and rest room surveillance), publication of private matter, disclosure of medical records, appropriation of an employee's name. Any person working with any organisation is an individual and has a personal side to his existence which he demands should be respected and not intruded. The employee wants the organisation to protect his/her personal life. This personal life may encompass things like his religious, political and social beliefs etc. However certain situations may arise that mandate snooping behaviours on the part of the employer. For example, mail scanning is one of the activities used to track the activities of an employee who is believed to be engaged in activities that are not in the larger benefit of the organisation.
Safety and Health:
Industrial work is often hazardous to the safety and health of the employees. Legislations have been created making it mandatory on the organisations and managers to compensate the victims of occupational hazards. Ethical dilemmas of HR managers arise when the justice is denied to the victims by the organisation.
Restructuring and layoffs:
Restructuring of the organisations often result in layoffs and retrenchments. This is not unethical, if it is conducted in an atmosphere of fairness and equity and with the interests of the affected employees in mind. If the restructuring company requires closing of the plant, the process by which the plant is chosen, how the news is to be communicated and the time frame for completing the layoffs is ethically important. During restructuring and layoffs employers have to refer to values like empathy, patience and integrity.
Wage empowerment
The need for wage empowerment to ensure that members of the society meet their basic needs, to enhance and protect people's capabilities to be adequately nourished, extension of formal social security and to avoid preventable mortality.
Employee discipline
The purpose of discipline to encourage employees adhere to rules and regulations. A fair and just discipline process based on clear rules and regulations, a system of progressive penalties and an appeals process helps to ensure that supervisors take disciplinary actions fairly and equitably.
Performance appraisal
Performance appraisal means evaluating the performance of employees based on performance standards. It aims at performance improvement. The technical problems likely to occur are unclear standards, halo effect, leniency and personal bias.
Whistle blowing
Whistle blowing occurs when an employee informs the public of inappropriate activities going on inside the organizations. Whistle blowing must be done based on an appropriate moral motive, to avoid or expose moral violations etc.Responsibility of the Whistle Blower.
ii)Marketing Ethics/Ethics in Marketing
Ethics is Is the art and science of determining good and bad or right or wrong moral behavior.
Marketing Is the process of communicating the value of a product or service to customers, for the purpose of selling the product or service. Marketing ethics Refers to the application of marketing ethics into the marketing process. It is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. In short it means a standard by which a marketing action may be judged right or wrong .
Each facet of marketing has ethical danger points as discussed below. We discuss Marketing issues by using 4P'S OF MARKETING
Product
• Consumer safety • Product liability and reliability • Designing for special needs Packaging
Label information, Packaging graphics, Packaging safety, Environmental implication of packaging
Price
• Bid rigging • Price fixing • Price skimming • Predatory pricing • Price war • Dumping (pricing policy) • Variable pricing
PLACING:
DISTRIBUTION
Product distribution (or place) is one of the four elements of the Marketing Mix. Distribution of product or service is transporting them from manufacture to stockiest, wholesalers, retailer and then to consumers.
Ethical Issues In Distribution
• Ethical questions may also arise in the distribution process. • Because sales performance is the most common way in which marketing representatives and sales personnel are evaluated. • performance pressures exist that may lead to ethical dilemmas. For example: pressuring vendors to buy more than they need and pushing items that will result in higher commissions are temptations,
ADVERTISING &BRANDING · Promotion is one of the four elements of marketing mix (product, price, promotion, place). It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision. To present information to consumers as well as others • To increase demand • To differentiate a product
Major Ethical Issues in Marketing
1. Market Research
Market research is the collection and analysis of information about consumers, competitors and the effectiveness of marketing programs. Some ethical problems in market research are Invasion of privacy. As companies conduct research they also come into contact with confidential and personal information, which comes with a level of risk for both the business as well as the individual.
2. Stereotyping
Portraying an ideal body, weight or physical appearance can have potential harmful effects on the individual such as low self-esteem issues.
3. Confidential information or Trade secrets Confidential business information is a valuable corporate asset to the company that, if inappropriately disclosed could harm the company, its associates, its customers and its stockholders. Confidential information includes personnel data, technical information, research data, marketing strategies and techniques. Employees should hold in strict confidence and should not disclose to any person or entity any information deemed confidential by the company, except for the benefit of the company's business and in strict compliance with company rules.
4. Fair Competition The company should support competition based on quality, service and price. They should conduct their affairs honestly, directly and fairly. They should comply with the antitrust laws and follow policy of fair competition. The employees must never discuss with competitors any matter directly involved in competition between their company and the competitor. E.g. sales price, marketing strategies, market shares and sales policies. Must never engage in commercial bribery.
5. Fair dealing
Employees should deal fairly with the company's customers, suppliers, competitors and each other. No associate should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice. All employees are required to comply with trade laws. Violation of trade laws results in penalties for the company and for any associate or other person who participates in the violation.
6. Accepting gifts and bestowing benefits Employees shall not seek or accept personal gain, directly or indirectly from anyone soliciting business from or doing business with the company. Employees are not permitted to accept gifts or to have any travel, living or entertainment expenses paid for themselves or members of their families.
7. Unfair or Deceptive marketing practices Misrepresentation, Omission or misleading practice when dealing with any element of the marketing mix. Selling Hazardous or defective products without disclosing the dangers. Not honouring warranty obligations. False or greatly exaggerated product or service claims. Packages intentionally mislabelled as to contents, size, weight or use information that constitutes deceptive packaging.
8. Offensive materials and objectionable marketing practices
When people feel that products or appeals are offensive they may pressure vendors to stop carrying the product. Thus all promotional messages must be carefully screened and tested, and communication media, programming and editorial content selected to match the tastes and interests of targeted customers.
9. Product and distribution practices Among the most frequently voiced complaints are ones about products that are unsafe, that are of poor quality in content, that do not contain what is promoted or that go out of style or become obsolete before they actually need replacing. Pressuring vendors to buy more than they need ad pushing items that will result in higher commissions are temptations.
10. Special Ethical Issues in Marketing to Children Children are an important marketing target for certain products. Because their knowledge about products, the media, and selling strategies is usually not as well developed as that of adults, children are likely to be more vulnerable to psychological appeals and strong images. Thus, ethical questions sometimes arise when they are exposed to questionable marketing tactics and messages.
11. Pricing Ethics
Predatory pricing (also undercutting & destroyer pricing) is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. In many countries predatory pricing is considered anti-competitive and is illegal under competition laws.
Price skimming - Discriminating through time. When the price for a product is first sold at a very high price and then gradually lowered, a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. It allows the firm to recover its sunk costs quickly before competition steps in and lowers the market price.
Price discrimination :Anti-favoritism
Price discrimination is the strategy of selling the same product at different prices to different groups of consumers from the same provider, usually based on the maximum they are willing to pay. The practice also surfaces in hiding lower priced items from customers who have a higher willingness to pay.
Bid rigging: Favoritism- an agreement between two or more competitors. It is a form of collusion, which is illegal in most countries. It is a form of price fixing and market allocation, and it involves an agreement in which one party of a group of bidders will be designated to win the bid. It is often practised where contracts are determined by a call for bids, for example in the case of government construction contracts.
Price war - One competitor will lower its price, then others will lower their prices to match. In the short-term, price wars are good for consumers who are able to take advantage of lower prices. Typically they are not good for the companies involved. The lower prices reduce profit margins and can threaten survival. Etc.
Price fixing An agreement between business competitors to sell the same product or service at the same price. It fraudulently prevents other businesses from being able to compete in the open market. Price fixing violates competition law because it controls the market price or the supply and demand of a good or service. This prohibits other businesses from being able to compete against the businesses in the price fixing agreement, which prevents the public from being able to expect the benefits of free competition.
iii)Ethical aspects in Financial Management
Meaning of Finance
Finance means fund or other financial resources; it deals with matter related to money and the market. The field of finance refers to the concept of time, money and risk and how they are interrelated. Banks are the main facilitators of funding. Funding means asset in the form of money. Finance is the set of activities that deals with the management of funds. It helps in making the decision like how to use the collected fund. It is also art and science of determining if the funds of an organization are being used in a right manner or not.
ETHICS IN FINANCE:
1. Act with honesty and integrity, avoiding real or clear conflicts of interest in personal and professional relationships.
2. To provide information which is full, fair, accurate, complete, objective, relevant, timely and understandable, including in and for reports and documents that the Company files with, or submits to, the other public communications made by the Company.
3. Act in accordance with all applicable laws, rules and regulations of governments and other appropriate private and public regulatory agencies.
4. Act in good faith, responsibly, with due care, competence and carefulness, without misrepresenting material facts.
5. Respect the confidentiality of information acquired in the course of business except when authorized or otherwise legally obligated to disclose the information. 6. To promote ethical behavior among associates.
7. Assist in the production of full, fair, accurate, timely and understandable disclosure in reports and documents that the firm and its subsidiaries file with, or submit to, the Securities and Exchange Commission and other regulators and in other public communications made by the firm.
8. Take all reasonable measures to protect the confidentiality of non-public information relating to firm and its clients.
9. Carry out their responsibilities honestly, in good faith and with integrity, due care and diligence, exercising at all times their best independent judgement.
10. Never take, directly or indirectly, any action to coerce, manipulate, mislead or fraudulently influence the firm's independent auditors in the performance of their audit or review of the firm's financial statements.
iv)Ethical Issues in Information Technology
1 Ethical dilemmas
There are various ethical dilemmas in relation to I.T. that need to be addressed. What are and are not ethical issues in I.T.? In regard to hackers, for example, are they testing the system or performing an immoral action? Will genetic engineering improve the quality of peoples' lives or start to destroy it? How do we recognise when an ethical dilemma exists? There are, indeed, many grey ethical areas.
2 Plagiarism
Plagiarism is where the work of others is copied, but the author presents it as his or her own work. This is a highly unethical practice, but happens quite frequently, and with all the information that is now available on the Internet it is much easier to do and is happening more often. Copying media (especially images) from other websites to paste them into your own papers or websites. Making a video using footage from others videos or using copyrighted music as part of the soundtrack. Performing another person's copyrighted music (i.e., playing a cover). Composing a piece of music that borrows heavily from another composition.
3 Piracy Piracy, the illegal copying of software, is a very serious problem, and it is estimated that approximately 50% of all programs on PCs are pirated copies. Programmers spend hours and hours designing programs, using elaborate code, and surely need to be protected. Although some might argue that some pirating at least should be permitted as it can help to lead to a more computer literate population. But, for corporations, in particular, this is a very serious issue, and can significantly damage profit margins.
4 Hacking Hackers break into, or _hack into a system. In computer jargon, "hacker" has a variety of meanings, including being synonymous with programmers and advanced computer users. In these cases, it refers to someone who hacks away at a keyboard for long periods of time, performing any number of computer-related tasks. In recent years, hacking has come to mean the same as another term "cracker," which is a person who cracks the security of a system or computer application. Hacking (and cracking) now refers to the act of gaining unauthorized access to a computer, network, Web site, or areas of a system.A person may hack their way into a system for a variety of reasons; curiosity, the challenge of breaking through security measures, or to perform malicious actions and destroy or steal data. All too often, it involves performing mischief and damaging a Web site or corporate network in some manner.
5 Computer crime
Many different computer crimes are committed, which clearly poses ethical questions for society. Various illegal acts are performed on computers, such as fraud and embezzlement. This includes, for example, using imaging and desktop publishing to create, copy or alter official documents and graphic images. There are also various ethical dilemmas, such as whether copying such files is as bad as stealing something.
6 Viruses Clearly writing and spreading virus programs are unethical acts; they have very serious consequences, and cause systems to crash and organisations to cease operating for certain periods. One of the most concerning consequences of such actions is when viruses interrupt the smooth functioning of an organisation such as a hospital, which could in extreme cases even cause people to die. Logic bombs are also sometimes planted. There is obviously a lot of anti virus software on the market now though that helps to deal with this ever-growing problem.
7. Ergonomics/health issues.
There are many ergonomic/health issues related to I.T. Responsible/ethically-minded employers will, hopefully, give due consideration to this, as indeed should all employers. This includes issues such as the importance of taking adequate breaks from using the computer and ensuring that the screens comply with the regulations. Also, ensuring that the positioning of the chair and the computer is appropriate for the user and providing foot rests, when required. Some organisations will give special advice to their employees on these matters. When I worked at Clifford Chance, an international law company, for example, they had specialised staff who would come round to each employee individually, and discuss their ergonomic needs, if the employee requested this. Having enough light and having plants in the room can also be important factors. Without such ethical/moral awareness and taking the necessary action, many workers will suffer health problems directly from I.T., such as back problems, eyestrain and eye infections and repetitive strain injury (RSI).
8 Job displacement/work pressures imposed on computer professionals
Computers are changing the face of the work scene. For some people, their jobs are becoming redundant or they have to play quite different roles, and others are suffering increasing levels of stress from work pressures. Others are, obviously, reaping the benefits of having more rewarding jobs, and there is certainly more emphasis on knowledge, information and I.T. skills than ever before. However, this all clearly poses various ethical issues. Should those that lose their jobs be compensated? How can the pressure be eased on those that are suffering stress? Is it acceptable for computer programmers to be made redundant on the spot“ etc? There are many ethical issues that need to be addressed here.
9 Digital divide The digital divide poses a serious problem today. A new breed of haves' and have nots' are being created, between those that have access and can use a computer and the Internet, and those that do not have such access. Digital divide describes a gap in terms of access to and usage of information and communication technology. There are clearly serious ethical implications here. Those that do not have such access may well be discriminated against, feel socially excluded and miss out on many life opportunities.
10 Gender
There are also ethical issues in regard to gender and computers, given the fact that females are often discriminated against in various ways in this new I.T. age. The number of females in computing academia is low. Furthermore, when females do work closely with computers, it is often in the lower level of work. Also, computer screens and layouts are frequently designed and programmed by men, and they might not be ideally suited to women, which could affect the quality of the work that women produce. Men tend to obtain the better quality I.T. jobs, earn more money, and make far more of the important decisions in relation to I.T. Basically, men are driving the I.T. age forward, whereas females are playing more passive roles, confined to working with the systems that men have already created, but which might not be ideally suited to them. These are all ethical issues that people should be made more aware of, and efforts need to be made to try to remedy the situation.
11 Nanotechnology
Nanotechnology presents a new set of ethical dilemmas. Nanotechnology could help humankind and help to provide adequate food and shelter. On the other hand, it could be very dangerous. There are also various environmental issues to consider, such as the effect that nanomaterials have on living systems. There is a relatively low investment in environmental nanotechnology, which must surely give us cause for concern. These are all very serious ethical issues that need to be confronted sooner rather than later. If it appears to be the case that advanced aspects of I.T. are seriously threatening our way of life, then something surely needs to be done about it as soon as possible.
12 Expert systems
Expert systems are a body of information in a specific field that is held in an electronic format, such as a _doctor expert system', that houses detailed medical information on a database. Various questions can be posed in regard to expert systems, such as what is the basis of ownership? Is it the different elements that comprise the total system or the total package? These issues are related to intellectual property rights and the moral aspects in regard to this. There are also wider ethical issues in regard to expert systems that need to be explored. In regard to a 'doctor expert system', for example, such a system can provide accurate information, but the face-to-face contact is missing. Such face-to-face contact might prove to be essential in order to ensure that the right diagnosis is made, and it is possible that some individuals could even die as a result of a wrong diagnosis given through this lack of face-to-face contact. In other ways expert systems could help to save lives. The patient might, for example, be given a speedier response. All these ethical issues need to be considered further.
13 Genetic engineering and the patenting of life- forms Many ethical issues are raised in regard to genetic engineering and the patenting of life forms. Is such behaviour morally acceptable? Such debates can sit alongside debates on subjects such as euthanasia and abortion.
14 Netiquette. There are also ethical/moral codes that should be adhered to, in the use of networks and email correspondence. As already indicated, the setting up of such codes has become necessary as people have not always addressed each other in an appropriate manner through this means of communication, and in this way they have behaved unethically. For example, not wasting peoples' time and not taking up network storage with large files. Furthermore, not looking at other peoples' files or using other systems without permission and not using capital letters, as this denotes shouting (unless one does actually want to shout at someone through email!). Also, people that become too obnoxious can be banned or ignored. A kill file can be set-up, which will automatically, erases messages from that person.
15 Intellectual property rights: the moral rights There are moral rights embedded within much intellectual property rights legislation, agreements and directives, for the benefit of creators of works and copyright holders. Furthermore, there are penalties for those that violate such legislation, (such as violating copyright legislation), although this can sometimes be difficult to enforce in practice. The legislation, though, is often complex and difficult to understand, which means that some creators of works do not obtain the moral rights that they are entitled to. However, sometimes, moral rights are actually excluded from agreements.
16 Issues of data collection, storage and access. There are many moral issues that need to be considered in regard to the collection, storage and access of data in electronic form. Under what circumstances, for example, should one seek permission from or inform those whose records are on file? Furthermore, how accurate is the data and who has access to it?
17 Speed of computers. The pure speed at which computers operate can cause ethical problems in themselves. It can allow people to perform unethical issues quickly, or perform operations that it was difficult or impossible to perform before, such as browsing through files that one is not authorised to. It can also mean that people do not give enough consideration before performing various actions.
18 Vendor-client issues. Ethical issues also arise in regard to vendor-client relationships, the vendor being the computer supplier and the client being the person that is buying the computer system, whether this be the hardware or software or both. If the user continually changes the system specification, for example, to what extent should the vendor be prepared to adjust the system specification accordingly? Other unethical acts include, for example, consultants selling the program to the second client, after being paid to develop the program for the first client only.
Also, the vendor might provide hardware maintenance according to a written contract and for hardware to be repaired in a _timely manner', but the client might not believe that the repairs have been timely. Drawing up more precise contracts might help here, but in some instances the outcome can probably only depend on peoples' individual moral consciences.
19. Logic Bombs A logic bomb is a program that runs at a specific date and/or time to cause unwanted and/or unauthorized functions. It can effect software or data, and can cause serious damage to a system.
Professional Ethics
A profession is a job that requires specific training and is regulated by certain standards Professional ethics the ethical norms, values, and principles that guide a profession and the ethics of decisions made within the profession.
• Lecturer
• Doctor
• Accountant
Professional ethics encompass the personal, organizational, and corporate standards of behaviour expected of professionals. Professional ethics are often established by professional organizations to help guide members in performing their job functions according to sound and consistent ethical principles.
Characteristics of a Profession
- Common body of knowledge
- Formal educational process
- Standards of entry
- Recognition of public responsibility
- The Public Interest
- Integrity
- Objectivity and independence
- Due Care
- Scope and Nature of Services
Elements of Professional Ethics.
- Group Identity
- Shared Training
- Common knowledge
- Penalties for substandard performance
The professional responsibility of a manager
- Personal responsibility
- Responsibility to the Organisation
- Responsibility to the Community
Importance of Employee Code of Conduct
Employee code of conduct guides individuals as to how they should behave at the workplace. Employees need to be aware as to what is expected out of them in the office. You just can't behave the same way at office as you behave at home. Your Boss can be your best friend outside office but at work you have to respect him and also treat him like your superior, Employee ethics is essential for maintaining discipline at the workplace.
There has to be a proper dress code for employees.
Individuals just can't enter into the office wearing anything. Employee code of conduct decides what individuals ought to wear to office. Some organizations are very particular of what their employees wear to work. Employee dress code ensures uniformity among employees.
Employee code of conduct This ensures career growth and also benefits the organization in the long run. If employees understand the difference between what to do and what not to do at the workplace, problems would never arise. We bunk offices because we do not realize that such a practice is wrong and unethical.
Employee ethics ensures employees adhere to the rules and regulations and also work for the organization. Employee ethics motivates employees not to indulge in gossiping, nasty politics, criticising fellow workers, bunking office and so on. Employee ethics ensures employees attend office on time and genuinely respect their superiors. Most of the times it has been observed that employees have a hate relationship with their Bosses. Understand that employee ethics is not meant to downgrade employees but make them aware of their duties and responsibilities in the organization.
Employee ethics Most essentially, employee ethics is important as it goes a long way in making the value system of employees strong. This way, employees on their own develop a feeling of attachment and loyalty towards the organization. Remember, employee ethics is not meant to bind you but make you an indispensable employee.
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