The Aspects of Ethics in Management

Today, managers at all levels, top, middle or lower, in their daily activities face some sort of ethical issues in their leadership responsibility. These issues can be related to different activities managers are engaged in, from planning and organizing of work activities at the workplace to motivating and communicating with employees. Manager’s role is not easy, they countenance with matters of right and wrong, matters of fairness and unfairness or matters of justice and injustice while decision making and acting. Managers of all functions and at all levels, as mentioned above, face many different situations where making ethically acceptable decision and consideration play an enormous role. The topic of ethics is crucial from the aspect of management. Observance and professional ethics may lead to an increase in the capability of an organization’s performance; this is important since most of the companies are profit-oriented and look for profit maximization.

Ethics in management is very broad subject and it deals mainly with different situations managers encounter while making decisions important both for the company they work for as well as for the employees and the management of the company or organization. To better understand what managerial ethics is, we should be able to answer a few questions such are:

• Why should managers be ethical?
• What are the ethical issues managers face the most?
• What is ethical decision making?
• What is a manager’s role in making a working environment of organization ethical one?

The best form of ethical training that a company can provide to its employees is an example itself sets as a leader and the type of behavior that is acceptable within the organization and towards its subordinates. If the leader or high-level management behaves ethically other employees can follow their example. Managers many times face situations in which they must decide about what is correct or ethical at the moment of action or decision making. Since many of these decisions must be made in a matter of minutes, managers are exposed to high levels of stress. When we are speaking of what managers “should” be doing, it is classically referred to as normative ethics. That means what managers are typically doing to increase their own ethical behavior as well as an ethical environment in the organization.

Social responsibility is one way how organizations show their ethical awareness. Nowadays it is even more expected of organizations, especially companies to be not only profitable and obey the law but also to be ethically and socially responsible. While profitability and legal obedience are what the company in the first place does for own benefit, ethical component and social responsibility of the company is more of what the company is doing for society. The logical answer to the first question of why managers should be ethical is because it is anticipated form them by the society they are operating in. The society and the stockholders both expect managers to be ethical, and if managers want to maintain a good reputation and legitimacy they must act ethically. Next to these, there are many more reasons why managers need to be ethical. Here are some of the reasons:

• When the same good values are shared, trust and confidence are easily built within the organization.
• Confidence and trust build loyalty towards the organization and its collective.
• Both customers and shareholders care about values.
• Organizations and companies are as good as their employees are.
• Ethics is characterized as a form of insurance, good insurance leads towards good and effective partnership.

In general opinion, companies should sacrifice some profit for the sake of making things better for their workers and community. It is believed that ethical behavior is in the company’s and manager’s best interest and that it will keep them out of the trouble.

There are many ethical issues that managers face. Those might be a problem, situation or even opportunity that will at some point require from manager or company to make choice between different actions that must be evaluated as right or wrong, or to say ethical or unethical. To better understand the question of an ethical issue we might consider to what extent or how significant dimension of dishonesty, disloyalty unfairness or illegality is represented.

Ethical issues might be grouped to different levels at which they occur. In that sense, managers experience those issues on a personal or organizational level, but they also can be traded professional, social or global level. A specific ethical issue might arise from situations such are giving a gift, discrimination, and fairness, sexual harassment, unauthorized payments, fringes, and layoffs, etc.

Following are many times categorized as specific topics that might constitute ethical issues:

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• Equity (such are: executive salaries, product pricing, etc.),
• Rights (such are: privacy, health screening, equal employment opportunity, sexual harassment, etc.),
• Honesty (such are: inappropriate gifts, unauthorized payments, security of employee records, etc.)

Based on the research that used open-ended interview questions, to the question “What ethical questions came up or have come up in the course of your work life?”, Waters, Bird, and Chant in their study from 1986, found that following ethical or moral issues were identified as most frequent:

1. Regarding employees, the feedback about their performance, employment security, and appropriate working conditions came as the most frequent ones.
2. Regarding peers and superiors, the truth-telling then loyalty and at the end support were identified as most frequent.
3. Regarding customers, the most frequent issues were about fair treatment, truth-telling, and collusion.
4. In regards towards suppliers, impartial treatment, balanced relationship and unfair pressure tactics came up as most frequent issues.
5. Toward other stakeholders, they identified respecting legal constraints, truth-telling in public relations and stockholder interests as the most frequent ethical issue.

As mentioned above, managers face ethical issues and, most of the time they are characterized as a conflict of interest. Those conflicts are mainly between manager’s personal values or ethical views and those of his superiors or subordinates, or with some of the stockholders.

We can say that decision making is the essence of every process in management. Therefore, every manager needs to constantly improve its ethical decision-making process and there are many reasons to do so. For example, cost of unethical conduct, erosion of integrity and corruption pressure that threatens manager’s and company’s reputation, etc. Majority of the top business managers would most probably advocate anyone to use ethical principles while running an organization and bringing the decision. These principles, the principles of business ethics, are guidelines or a rule that will help when faced with an ethical dilemma to bring the right decision. Laura Nash in her study “Ethics without the sermon” from 1981 suggested a very practical approach to a decision-making process. In order to make an ethical decision, she recommends that managers ask the following questions before making any decision:

• Have you defined the problem accurately?
• How would you define the problem, if you stood on the other side of the fence?
• How did this situation occur in the first place?
• To whom and what do you give your loyalties as a person, and as a member of the corporation?
• What is your intention in making this decision?
• How does this intention compare with the likely results?
• Whom could your decision or action injure?
• Could you engage the affected parties in a discussion of the problem, before you make your decision?
• Are you confident that your position will be as valid over a long period of time as it seems now?
• Could you disclose without qualms your decision or action to your boss, your CEO, the board of directors, your family, or society as a whole?
• What is the symbolic potential of your action if understood? If misunderstood?
• Under what conditions would you allow exceptions to your stand?

Blanchard K. and Peale N. V. in their study “The Power of Ethical Management” published in New York in 1988 proposed another set of question that is helpful while deciding what would be ethical or unethical. “Ethical check” is called the set of three questions that these authors recommend managers ask before making any kind of decision:

1. Is it legal? Will I be violating either civil law or company policy?
2. Is it balanced? Is it fair to all concerned in the short term as well as the long term? Does it promote a win-win situation?
3. How will it make feel about myself? Will it make me proud? Would I feel good if my decision was published in the newspaper? Would I feel good if my family knew about it?

These two authors think that any “wrong” answer to the above-mentioned questions should trigger manager’s conscience to make the right choice or reconsider the decision they made.

Another major responsibility that managers have is to shape an ethical climate in the working environment. When managing a company’s ethical climate, managers need to take into consideration the overall corporate culture. Recently, the company’s moral climate and working environment of organizations both become a very complex social phenomenon. They both can be greatly affected by the decisions, actions, and different examples that managers set. Carroll A. B. in his book “Business and Society: Ethics and Stakeholder Management” published in 1996 states that some of the important components in company’s ethical environment or culture also include, but it is not limited to:

• Top management leadership,
• Codes of conduct,
• Ethics programs,
• Realistic objectives,
• Processes for ethical decision making,
• Effective communication,
• Disciplining of ethics violators,
• Ethics training,
• Ethics audit, and
• Whistleblowing mechanisms.

Many of the studies showed that the manager’s behavior is the most important factor that can and will give a contribution to a positive ethical climate in the organization.

We see that in the last several decades, ethics in management has become of very important concern to all companies and organizations. To have moral management within a company, there must be an individual who will have to avoid making unethical decisions and keep away from immoral management. All level managers must integrate ethical wisdom in their decision-making processes and work in favor of a positive ethical climate in the organization if they want to have high moral management and achieve the best possible model of leadership. When done this way, any of the desirable goals set by management, moral or ethical are surely attainable.