Ethics in Management - Coursework Example

Problem Based Learning: Case Study of HRM Name: Institution: Problem Based Learning; Case Study of HRM Introduction Ethics is an important issue in many areas of life. By setting certain ethical standards, people are able to make sure that their conduct and behavior is regulated, thus safeguarding their general wellbeing. One field in which ethics is important is business. Business ethics is an important issue for all organizations because it determines the kind of behavior that a company will tolerate from its members. Accordingly, the standards set in the field of business ethics play a key role in influencing the organizational culture of a firm. In the case study presented (Ethical dilemma: The padding that hurts), the subject company is engaged in a major ethical issue revolving around one of its senior members. An internal auditor has just discovered that the executive has been misappropriating funds and seeks to take the necessary action. He informs the Human Resources Director about the situation and they both report the executive to the CEO. At this point, the whole situation becomes complicated because the senior executives in the company do not seem to take issue with the actions of their colleague. This is partly because some of them are friends with him. Through the ensuing debacle, several issues regarding business ethic arise. Key among them is the impact that unethical behavior could have on the morale in a company. Unethical behavior within a company tends to have a negative effect on the firm’s morale. Scope of the Issue The problem in this case study revolves around the unethical behavior of the senior manager in the subject firm. An internal auditor has discovered that the manager regularly inflates his expenditure when he goes on business trips. Through his investigations, the auditor finds out that the manager may have stolen tens of thousands of dollars from the firm. The auditor finds this to be a serious issue because the manager is in charge of millions of the company’s money. Accordingly, he raises the issue with the Human Resources Director. Problems arise when the two report the matter to the company’s CEO who happens to be a friend of the manager. The CEO does not find the issue to be serious because the company pays the manager much more. Similarly, the organization’s auditing committee and the board of directors find the manager’s conduct to be a trivial issue. However, they still took measures to stop the activity, though they did not punish the manager himself. Though the auditor, raised an issue with the fact that the manager was not punished, the firm would not relent. In the end, the auditor accepted the firm’s position on the matter and relented. Various ethical issues are raised in this case. One concerns the seriousness of unethical behavior. The firm’s decision to take the issue lightly was questionable. The senior executives decided to take the problem lightly because the amount of money involved was relatively low. However, the auditor and Human Resources Director were adamant that the manager’s misuse of small funds made it possible that he was doing the same with larger amounts of money at his disposal. Another ethical issue that is evident in the case concerns a conflict of interests. In the case study, the CEO was unwilling to deal with the matter because the senior manager was close friend of his. Similarly, executives on the auditing committee and the board of directors may have considered the problem a trivial issue mainly because they were well acquainted with the accused. There is also a conflict of interest concerning the auditor who raised the issue. When he first raised the issue, the auditor may have been aware of the possibility that his employment was at stake. Resultantly, he relented on the issue after the firm’s decision had changed the scenario such that his position was no longer at stake and his responsibilities had been increased. Lastly, a key ethnic issue that the case study presents concerns the impact that unethical behavior could have on a firm’s morale. While the management in the case argued that morale would be unaffected because of the fact that few employees knew about the incident, there was still a slight possibility of the debacle having negative implications on the firm. The Value of Business Ethics The main issue in the case study presented revolves around business ethics. The behavior of the senior manager was unethical and the ensuing events showed the way that a company could handle a matter concerning the conduct of senior personnel. Shaw (2008) argues that ethics is a wide field that deals with the issue of the character of individuals and the moral standards that guide people. Accordingly, the field deals with questions that separate right from wrong and good from bad. By extension, business ethics deals with the same issues but within the context of the corporation. Similarly, Desjardins (2009) claims that business ethics pertains to the values and standards that govern the behavior of the members of an organization. The above definitions highlight several issues regarding business ethics. Firstly, ethical standards within business are determined by the organization that a person works for. Different companies set varying standards for their employees meaning that the kind of conduct that was permissible in one organization may not be acceptable in another one. Secondly, the firm that a person works for and not the employee’s own values and norms determine business ethics (Weiss, 2009). Companies tend to have varying ethical standards based on the industry in which they operate their location and their clientele. Members of an organization, especially senior ones, also have varying amounts of influence over the organizational cultures of their firms. This means that a person’s conduct will have to change depending on the firm for which he or she works. The issue of business ethics can affect people in different ways. Weiss (2009) argues that the issues concerning business ethics now involve all of the shareholders in a company. The size of modern business corporations, and the scale of their operations, means that these issues also affect normal civilians, uninvolved companies, governments and international organizations. The late 2000s global financial crisis exemplifies the fact that business ethics is a cause for concern for members of a company as well as outsiders. The subprime mortgage crisis revolved around scandalous business conduct that employees in banks and mortgage companies engaged in. In the build-up to the crisis, banks and mortgage companies failed to inform customers about risks related to their loans, as they believed that they were dealing with “low-risk, high-return products” (Weiss, 2009, p. 3). In the ensuing fallout, thousands of people lost their homes, business and jobs. Had the involved parties acted ethically, the financial crisis could have been avoided. Dynamics of Business Ethics Whistle blowing The issue of business ethics is a wide field that encompasses different concepts and ideas. One of the issues that are included within business ethics is whistle-blowing. Whistle blowing is a controversial issue within many organizations in the world because of its divisive nature. Brenkert (2010) states that the term refers to actions in which a person divulges information regarding the actions that people within an organization take. Normally, the whistle-blower is a member of the organization and may or may not have been privy to the information that he or she disclosed. Whistle blowing also describes a form of action in which a person reports activity inside an organization that he or she considers illicit or unethical. In whistle blowing, the person spreading the information usually discloses it to the public or to people within the organization who are capable of influencing the situation and preventing further wrongdoing (Brenkert, 2010). Brenkert (2010) argues that there are certain conditions that surround the actions of whistle blowing. Firstly, the chief perpetrator of the act should be a member of the involved organization and have the authorization to access the information that he or she is disclosing. If the person gains access to information that they should not have and then divulges it, they may face civil suits or criminal charges. The second condition that is required for whistle blowing is for the action to be unethical or illegal in one way or another. Normally, the person releasing the information should feel that the activity is not ethical and that it goes against basic principles held by the organization or the public. A third condition for whistle blowing is that the person involved report the issue either internally or externally. The reporting must be made to a person or body that bears significant influence and has the ability to stop the ongoing activity through direct or indirect action. This could include the government, regulatory bodies or senior executives in the firm. Brenkert (2010) also explains that the activity the whistleblower reports should be of a serious nature, such that the situation could cause significant damage if left unchecked. Lastly, the wrongdoing should be an issue that involves public interest. This interest may not be immediate or specific, but the issue should be one that eventually affects the public in one way or another. Management and Ethical Conduct Another important dynamic within business ethics is the role that the management plays in reinforcing moral conduct. Private organizations in the contemporary world are normally regulated by different sets of laws and standards set by the government. These laws are reinforced by the values and codes that the firms themselves develop. The management of a company plays a crucial role in ensuring that employees and members of the firm abide by these regulations (Carroll, 2003). Accordingly, managers are some of the most important factors in the issue of business ethics, as they are entrusted with the protection of the public, employees and entire company from the debacles that normally follow unethical behavior. The role of managers in business ethics mainly revolves around their ability and duty to reinforce the regulations set by public authorities and the codes that the company uses to guide its conduct. According to Carroll (2003), the duties mean that managers should be personally responsible for responding to ethical issues in their firms. Apart from upholding the standards themselves, managers also play a significant role in formulating the code of conduct and updating it. As the business and workplace environments change, it is important for a company to review its code of conduct to make sure that the standards it has set for employees are not too low. This requires firms to regularly review their codes of conduct and update them if necessary, a process that the manager is involved in (Carroll, 2003). Lastly, managers play an important role in reinforcing ethics in their firms because employees adopt the morals and codes of the context in which they are working. Many experts have argued that ethics is an issue that mostly affects a few bad employees within a company. This argument assumes that unethical behavior within a firm is not the result of a weak code of conduct, but workers and company members who lack the right values. Trevino and Brown (2004) argue against this assumption, as they claim that most people are the products of the contexts on which they find themselves. This means that an ethical person working in a morally corrupt firm is likely to start engaging in questionable conduct. This issue particularly involves managers because many employees claim that they engage in unethical behavior because their seniors pressured them to do so. This implies that managers have a crucial role to play in reinforcing ethical behavior by leading by example (Trevino & Brown, 2004). Business Ethics and Workplace Morale Business ethics can help a company by increasing employee morale. This effect is achieved through different ways. Trevino and Nelson (2011) argue that good business ethics boost the morale of a company’s employees because most people find it rewarding to work for a firm with values that are well-developed and that are upheld. Consequently, employees with high morale work better and are more productive, and this pays off for the firm as it witnesses an increase in returns. Webley and More (2003) hold a similar view as they argue that companies with ethical business conduct are more likely to record higher profits and returns than competitors who lack similar moral codes. Response to the Case Study Analysis of the Case Study The case study presented involves the issues of whistle blowing, managerial ethics and the impact of moral behavior on morale. Whistle blowing in this case comes through the way that Davenport (the internal auditor) discovered the misappropriation and attempted to take action against it. Several key issues stand out concerning Davenport’s involvement in the incident. Firstly, he discovered actions that were unethical and went against the law and the company’s code of conduct. He had evidence indicating who the culprit was and was himself a direct witness to the unethical acts. Secondly, he attempted to resolve the matter internally by first approaching the Human Resources Director and then forwarding the issue to the firm’s CEO. Thirdly, Davenport felt that the matter was a serious issue that the company needed to handle with urgency. This is because the senior manager who was misappropriating funds had access to the company’s accounts and could have caused further damage. The case also revolved around the issue of managers and their role in business ethics. Firstly, the person responsible for the misappropriation of funds was a senior manager. This was a potential problem for the firm because his position gave him influence over other workers, making it likely that he would influence them negatively and promote a culture of unethical behavior. Another issue regarding management in the case study revolves around the reactions of the CEO and other senior executives at the firm. As a friend of the senior manager, the CEO, the auditing committee and the board of directors were reluctant to discipline the senior manager, choosing instead to change the company’s structure as a way of preventing further abuses. This nonchalant attitude is unlikely to have stopped the senior manager from misusing funds in the future. Additionally, it sent a negative message to the internal auditor and the Human Resources Director regarding the firm’s position on unethical conduct. Accordingly, there is an increased possibility that Davenport will ignore the next issue that arises involving the misuse of funds by a CEO. Lastly, the incident in the firm is likely to have had an effect on the morale in the workplace. While making their decision, the senior executives argued that morale would not be a problem because only a few of the members of the firm knew about the issue. While there may have been some accuracy to this argument, the executives ignored some key issues. Firstly, their decision disregarded and undermined two key players in the incident. The internal auditor and Human Resources Director performed their work dutifully by taking the issue concerning the senior manager forward. However, the executives’ decision seemed to consider only the manager. This is likely to have affected their morale negatively and there is a strong possibility that the two workers will not want to be involved in any other incident concerning senior members of the firm. Furthermore, the executives’ attitude sent a negative message to the two employees and they likely consider the firm to be an unethical place to work. The slight possibility that other employees my soon find out about the incident increases the chances of the firm’s overall morale being dented. Solutions to the Issue in the Case Study The decision not to punish the manager involved in the scandal is bound to have negative effects on the subject corporation. Accordingly, the management should take certain steps to protect the firm from possible fallout. Firstly, the organization needs to come to terms with the existing ethical culture. Two key issues emerge in this case. Firstly, a senior manager was embroiled in a scandal after he misappropriated funds. Secondly, the other executives in the company took the issue lightly and protected him from any punishment. These two issues make it obvious that the firm’s current moral stature is weak. Accordingly, junior employees are unlikely to make the right decisions when faced with ethical dilemmas. By appreciating the circumstances as they are, the executives at the firm can enforce changes starting with their own perceptions towards unethical conduct and the firm’s code of conduct (Trevino & Brown, 2004). Having appreciated the ethical situation in the firm, the company needs to clearly highlight the importance of having morals in business. The senior executives play a major role in determining the ethical orientation of the firm. By ignoring a key ethical issue, they sent a subliminal message that outlined the firm’s uncaring attitude towards such conduct. Since they bear influence as the leaders of the firm, it is important for the executives to take charge and participate in the process of training junior employees on ethics in business. Lastly, the senior executives in the subject corporation could salvage the situation by promoting ethical leadership in the firm. The leadership system in the company failed to fulfill its duties by not punishing one of their own who was engaging in unethical behavior. This created the impression that the other executives are unethical as well. By promoting this ethical leadership, the executives would be effectively rebranding their image. One step in this process could involve the reprimanding the senior manager embroiled in the scandal. By promoting ethical leadership, the firm would also be creating a new culture that would be firmly grounded in ethical values (Trevino & Brown, 2004). References Brenkert, G. G. (2010). Whistle-blowing, moral integrity and organizational ethics. In G. G. Brenkert & T. L. Beauchamp (Eds.), The Oxford handbook of business ethics (pp. 563-601). Oxford: Oxford University Press. Carroll, A. B. (2003). Ethics in management. In R. Frederick (Ed.), A companion to business ethics (pp. 141-152). Malden: Blackwell Publishers. DesJardins, J. R. (2009). An introduction to business ethics. New York, NY: McGraw-Hill Higher Education. Shaw, W. H. (2008). Business ethics. Belmont: Wadsworth. Trevino, L. K. & Brown M. E. (2004). Managing to be ethical: debunking five business ethics myths. Academy of Management Executive 18(2): 69-81. Treviño, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. New York: John Wiley. Webley, S. & More, E. (2003). Does business ethics pay?: Ethics and financial performance London: Institute of Business Ethics Weiss, J. W. (2009). Business ethics: A stakeholders and issues management approach. Australia: South-Western Cengage Learning. Read More