Module 6 Syllabus: Meaning of ethics, importance of ethics in hrm, ethical practices followed in organisations.

Learning objectives: What is ethics in organisations perspective? Why is ethics important in organisations when it comes to dealing with the human resource? Various unethical practices in the organisations and what are the ethical practices that companies are employing to combat these unethical practices. Definition Ethics as defined by the Webster Dictionary is a branch of philosophy dealing with values relating to human conduct with respect to the rightness or wrongness of certain action. A useful definition advanced by the writer is that ethics is a standard of right and wrong driven to an extent by what humans ought to do, usually in terms of rights, benefits to society, fairness or specific virtues. Meaning The set of moral principles or values that defines right and wrong for a person or group. Ethics refers to well-founded standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Arguments for and against business ethics Arguments Against Business Ethics 1. In a free market economy, the pursuit of profit will ensure maximum social benefit. 2. A managers most important obligation is to the company. 3. Business Ethics is limited to obeying the law. Arguments For Business Ethics 1. Ethics applies to all human activities. 2. Business cannot survive without ethics. 3. Ethics is consistent with profit seeking. 4. Prisoners dilemma argument. 5. Customers and employees care about ethics.

Arguments Against Business Ethics 1. In a free market economy, the pursuit of profit will ensure maximum social benefit. The free market is one in which economic resources are utilized in a way in which it is controlled by itself. The market is controlled and directed by the forces of demand and

supply. Adam Smith calls it as invisible hands. In a free market economy, every product is homogeneous and therefore a uniform price exists. There is no external control by the government or any other agency. It is said, such markets are called perfectly competitive market and such markets will function for the social utility maximization. But in actual case, perfect competition is only an idealistic market and the markets are not free, it is either oligopoly or monopolistic. Example: MRTP and fraud, bribery, tax evasion, price fixing etc. 2. A managers most important obligation is to the company. The manager has a duty to serve the employer as the way the employer wants to be served. This is called the law of agency. Law of Agency A law that specifies the duties of persons who agree to act on behalf of another party and who are authorized by an agreement so to act. 3. Business Ethics is limited to obeying the law. Obeying the law by not doing Murder, theft, rape, fraud and so on is not enough. There are many areas in organizational actions, decisions and behavior, where law abiding does not necessarily mean the organization is ethical. The laws about parking law, dress code, etc. are not mentioned in any law. Arguments For Business Ethics 1. Ethics applies to all human activities. To the question of why business ethics, is to be answered like if there is business there should be ethics. Doing business means following rules and regulations and standard, accepted human behavior. As the business is also termed as a human activity, it is necessary to follow those behavioral principles in business. Dhirubhai Ambani says there is no ethics in business. However, will Reliance industries keep an employee, who is not loyal to the organization? Who makes a wrong report? Unethical practices in any of the business practices? Who tells lies? 2. Business cannot survive without ethics. Hobbes wrote, Distrust and unrestrained self-interest would create, a war of every man against every man, and in such a situation life would become nasty, brutish, and short. If all employees steel business property, tell lies, do what they like to do? What will happen to the business?

3. Ethics is consistent with profit seeking. Good business with ethical considerations is consistent with profit. Ex: Merck and Co., Tata, H P, Cisco, Intel, Southwest airlines, Procter and Gamble etc. A business organization must look for long term profit. All genuine customers will always care for ethical companies. The more ethical and socially oriented the organization, the more will be the consumer/customer base of that organization. The more the customer base, the more will be product acceptance and more will be the profit of the business organization. 4. Prisoners dilemma argument. A situation where two parties must choose to cooperate or not, and where both gain when both cooperate, but if only one cooperates the other one gains even more, while if both do not cooperate both lose. Prisoner B Cooperate with A Prisoner A Cooperates with B Prisoner A Does not cooperate with B A gets 1 year B gets 1 year A goes free B gets 3 years Prisoner B does not cooperate with A A gets 3 years B goes free A gets 2 years B gets 2 years

If all members of a society everyone cooperates, everyone will be better off, a person can gain an advantage by breaking the rules of ethics. It is better to be ethical than unethical.

5. Customers and employees care about ethics. If a business tries to take advantage of its employees and stake holders, they will retaliate. Ex: Nike shoe making factories, Johnson and Johnson, Merck and Company.

Approaches to ethics The ethical relativism believes that there are no universal or international rights and wrongs, it all depends on a particular cultures values and beliefs when in Rome, do as the Romans do. The ethical absolutism believes that when in Rome, one should do what one would do at home, regardless of what the Romans do. This view of ethics gives primacy to ones own cultural values.

 In contrast, the ethical universalism believes that there are fundamental principles of right and wrong which transcend cultural boundaries and multinationals must adhere to these fundamental principles or global values 1. Teleological and deontological theories. Teleological Theory The word teleological is derived from the Greek word telos which refers to an end. Actions are justified on teleological theory by virtue of the end they achieve, rather than some features of the action themselves. Thus the concept of goodness is fundamental in teleological theories and the concept of tightness and obligations, or duties are defined in terms of goodness.

Strengths Teleological theories have much strength; one is that they are in accord with much ordinary reasoning. Teleological theories provide a relatively precise and objective method for moral decision making and assuming that the goodness of consequences can easily be measured and compared. Weakness Although much of our ordinary reasoning is teleological some of it is decidedly nonteleological in character. Deontological theories Do unto others as you would have them do unto you Golden Rule. Deontology comes from the Greek word deon means duty. Deontological ethics is strongest in many of the areas where utilitarianism is weakest. In an ethics of duty, the ends can never justify the means. Deontological theories in contrast to teleological theories such as utilitarianism deny that consequences are relevant to determining what we ought to do. A deontological theory looks at inputs rather than outcomes Do What is Right Always act in such a way that you can also will that the maxim of your action should become a universal law Deontological theories in contrast to teleological theories such as utilitarianism deny that consequences are relevant to determining what we ought to do. Lying is always wrong--even the "polite lie. or white lie Strengths They make sense of cases in which consequences seem to be irrelevant; especially in justifying the obligations that arise from relations such as contract and rules. They generally hold that the

lightness of action depends wholly or in part on the motives from which they are performed and not on consequences. In spite of our best efforts, we cannot control the future. They generally hold that the lightness of action depends wholly or in part on the motives from which they are performed and not on consequences. Weakness Failure to provide a plausible account of how we can know our moral obligations and resolve problems of moral conflict.

Importance of ethics in HRM Over the last few years, there has been a growing interest in cooperate ethical performance. Some reasons for this trend include the increasing lack of confidence regarding corporate activities, the growing emphasis on quality of work life issues, a spate of recent cooperate scandals at prominent firms, globalization of organizations and the introduction of a strategic approach. In all of this, HR professionals and in some companies, ethics officers have and continue to play a pivotal role in ethics management. Research suggests that successful ethics management depends more on employees' perceptions of fairness, ethical leadership at all levels, and the alignment of multiple formal and informal cultural systems to support ethical conduct than it does on formal ethics programmes. HR professionals must play a key role in ethics management using HR systems to invoke fairness and ensure organizational harmony. Human resource management occupies the sphere of activity of recruitment selection, orientation, performance appraisal, training and development, industrial relations and health and safety issues. Business Ethicists differ in their orientation towards labour ethics. Some assess human resource policies according to whether they support an egalitarian workplace and the dignity of labor. Issues including employment itself, privacy, compensation in accord with comparable worth, collective bargaining (and/or its opposite) can be seen either as inalienable rights or as negotiable. Discrimination by age (preferring the young or the old), gender/sexual harassment, race, religion, disability, weight and attractiveness. A common approach to remedying discrimination is affirmative action. Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-blowing. Employers must consider workplace safety, which may involve modifying the workplace, or providing appropriate training or hazard disclosure. Larger economic issues such as immigration, trade policy, globalization and trade unionism affect workplaces and have an ethical dimension, but are often beyond the purview of individual companies. The Role of HR in Operationalizing Corporate Ethics Programs

 HR has a special role to play in the formulation, communication, monitoring, and enforcing an enterprises ethics program. The US-based business ethics literature generally presents the view that the HR function along with finance and law is the appropriate locus of responsibility for an enterprises ethics program. The 2003 SHRM/ERC survey found that 71% of HR professionals are involved in formulating ethics policies for their enterprises 69% are a primary resource for their enterprises ethics initiative. However, the SHRM respondents did not regard ethics as the sole responsibility of HR. The findings suggest that responsibility for ethical leadership should cut across all functions and managerial levels, including line and senior managers. At the same time, HR is well positioned to make an important contribution to creating, implementing and sustaining ethical organizational behavior within a strategic HR paradigm. HR professionals have specialized expertise in the areas of organizational culture, communication, training, performance management, leadership, motivation, group dynamics, organizational structure and change management all of which are key factors for integrating responsibility for ethics into all aspects of organizational life. People involved in international business activities face many of the same ethical issues as those in domestic business, The issues are more complex for IHRM because of the different social, economic, political, cultural and legal environments in which multinationals operate. Consequently, multinationals will need to develop self-regulatory practices via codes of ethics and behavioral guidelines for expatriate, TCN and local HCN staff. Firms which opt consciously or by default to leave ethical considerations up to the individual not only contribute to the pressures of operating in a foreign environment (e.g., poor performance or early recall of the expatriate), but also allow internal inconsistencies that affect total global performance. When recruiting and selecting expatriates, ability to manage with integrity could be a job-relevant criterion. The pre-departure training of expatriates and the orientation program should include an ethics component. This might include formal studies in ethical theory and decision making as well as interactive discussion and role playing around dilemmas which expatriates are likely to encounter. In an effort to sensitize managers to cultural diversity and to accept the point that home practices are not necessarily the best or only practices, there has been an emphasis in international business training on adapting to the way in which other cultures do business. In designing training programs to meet the challenges of multinational business, HR professionals must raise not only the issue of cultural relativities but also the extent to which moral imperatives transcend national and cultural boundaries. Insufficient attention may result in unacceptable ethical compromises. It is also important for the HR department to monitor the social, ethical performance of the expatriate managers to ensure that as managers become familiar with the customs and practices of competition in the host country, they do not backslide into the rationalization that everybody else does it. There is not yet agreement about what should constitute a global ethic to resolve the conflicts which arise in such a community. However, there is an emerging consensus about core human values which underlie cultural and national differences and the content of

guidelines and codes which help to operationalize the ethical responsibilities of multinationals

Ethical practices followed in organisations

1. Fair wages and salary
Minimum wages, fair wages, and subsistent wages, conditions given in India with respect to minimum wages act 1948 Fair Wages Fair wage depends on local wages, firms ability to pay, burdens of the job, minimum wage laws, fair relations to other wages in the firm, fair wage negotiations, local living costs. Fair wage consists of Economic needs of the employee and the employees family needs. A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say that it increases the standard of living of workers and reduces poverty. The Minimum Wages Act 1948 The Act aims to prevent sweating or exploitation of labour1( According to the NSSO (200405) 61st round, around 395 million workers (86%) out of the total workforce of around 457 million workers constitute the unorganized/informal sector. In fact 7% of those employed in organized sector has been identified as informal workers raising the toll of informal sector to 422 million (92%)) through payment of low wages by ensuring a minimum subsistence wage for workers. The Act also requires the appropriate government (both at Centre and States) to fix minimum rates of wages in respect of employments specified in the schedule and also review and revise the same at intervals not exceeding five years. Living Wage Living wage means after meeting the employees economic needs, income sufficient for meeting the expenses of the family of four members (Father, Mother, and two children). In

public policy, a living wage is the minimum hourly income necessary for a worker to meet basic needs (for an extended period of time or for a lifetime). These needs include shelter (housing) and other incidentals such as clothing and nutrition. In some nations such as the United Kingdom and Switzerland, this standard generally means that a person working forty hours a week, with no additional income, should be able to afford a specified quality or quantity of housing, food, utilities, transport, health care, and recreation. In addition to this definition, living wage activists further define "living wage" as the wage equivalent to the poverty line for a family of four. The ILO uses various criteria to establish minimum wage levels: the needs of workers and their families, the general level of wages in a county, the cost of living, social security benefits, the relative living standards of social groups and economic factors such as economic development and employment maintenance. The living wage focuses more on the needs of worker units, social security benefits and cost of living. International Business organizations consider the following in deciding the living wages. 1. The local wages that is the going rate of wages. 2. The nature of the job. 3. The firms capabilities. 4. The minimum wage laws of the host country. 5. Wage in relation to other salaries/wages. 6. The fairness of wage negotiations. 7. The local cost of living

2. Ensuring diversity (to counter discrimination and glass ceiling)

A program designed to ensure the proportion of minorities within an organization matches their proportion in the available workforce. To rectify the effects of past discrimination, many employers have instituted programs designed to achieve more representation of women and minorities. Ex: Titan Destitute women employees

3. Product recall:
A product recall is a request to return to the manufacturer a batch or an entire production run of a product, usually due to the discovery of safety issues. The

recall is an effort to limit liability for corporate negligence (which can cause costly legal penalties) and to mitigate (minimize) damage to the customers. Eg:Toyota, Honda, j&j, etc.

4. Safe working environment

Companies are today striving hard to make the work environment healthy and safe as they are treated today as asset and not a commodity. This act of providing safe working environment is an act of being reasonable and ethical towards the human resource. The United States Occupational Safety and Health Administration (OSHA) is an agency of the United States Department of Labour. It was created by Congress of the United States under the Occupational Safety and Health Act, signed by President Richard M. Nixon, on December 29, 1970. Its mission is to prevent work-related injuries, illnesses, and occupational fatality by issuing and enforcing standards for workplace safety and health. It was also established to create a better workplace for all workers and to ensure the safety of everyone by making and enforcing certain standards that are needed to protect the people. The Problems 1. Wages are not fully compensating. 2. Monopolies of employers make less bargaining power of the employees. 3. Workers accept risk unknowingly. 4. Workers accept risk knowingly for more compensation or lack of mobility.

The measures a) Inform the workers about the known risk b) Fully compensate and insures the risk on the job. c) Workers willingly accept the risk. d) Study and eliminate the risk on the job. e) Insuring the workers against the unknown risk.

5. Prohibiting child labor:

Child labor in India is a human right issue for the whole world. It is a serious and extensive problem, with many children under the age of fourteen working in carpet making factories, glass blowing units and making fireworks with bare little hands. According to the statistics given by Indian government there are 20 million child

laborers in the country, while other agencies claim that it is 50 million. Companies now refrain from such practices as an ethical obligation towards the society. E.g.: Nike, wal-mart, etc.

6. Grievance handling cell:

Most of the companies are now taking care of the employees like never before. Grievance handling is one such practice. Companies today do not leave their employees unattended especially when they feel that they are not treated fairly or are not happy with the working condition or have been dismissed unlawfully and so on. Companies create a grievance handling cell for this purpose.

7. WHISTLE BLOWING It is when person takes a concern (such as suspected

abuse or fraud) outside of the organization in which it is occurring. Internal whistle -blowers report misconduct to another employee or a superior within their organization. External whistle-blowers report misconduct to outside persons or entities.

8. CSR
Business does not operate in a vacuum. Decisions made by business have far-reaching effects on society. In the past, many business decisions were made solely on a cost-benefit analysis. The Bottom line impact of the organization to society and society to organizations. Such decisions may cause negative externalities for others. Corporations are considered to owe some degree of social responsibility for their actions.

9. Best practices
Best practices refers to processes, practices, and systems that are identified in topperforming public and private organizations and are widely recognized as improving the organizations performance and efficiency in specific areas. Successfully identifying and applying best practices can reduce business expenses and can improve organizational efficiency.