Page 299 - Encyclopedia of Business and Finance

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Ethics in Management

ness ethics requires a special effort to ensure the health CREATING AN ETHICAL
and welfare of employees. Many corporations have estab- WORKPLACE
lished employee advisory programs (EAPs) to help Business managers in most organizations commonly strive
employees with family, work, financial, or legal problems, to encourage ethical practices not only to ensure moral
or with mental illness or chemical dependency. These pro- conduct but also to gain whatever business advantage
grams can be a source of enhanced productivity for a cor- there may be in having potential consumers and employ-
poration. ees regard the company as ethical. Creating, distributing,
A second area in which ethical management practices and continually improving a company’s code of ethics is
can enhance corporate health is by positively affecting one usual step managers can take to establish an ethical
outside stakeholders, such as suppliers and customers. A workplace.
positive public image can attract customers. For example, Another step managers can take is to create a special
a manufacturer of baby products carefully guards its pub- office or department with the responsibility of ensuring
lic image as a company that puts customer health and ethical practices within the organization. For example,
well-being ahead of corporate profits, as exemplified in its management at a major supplier of missile systems and
code of ethics. aircraft components has established a corporate ethics
The third area in which ethical management practices office. This ethics office is a tangible sign to all employees
can enhance corporate health is in minimizing regulation that management is serious about encouraging ethical
from government agencies. Where companies are believed practices within the company.
to be acting unethically, the public is more likely to put Another way to promote ethics in the workplace is to
pressure on legislators and other government officials to provide the work force with appropriate training. Several
regulate those businesses or to enforce existing regula- companies conduct training programs aimed at encourag-
tions. For example, in 1990 hearings were held on the rise ing ethical practices within their organizations. Such pro-
in gasoline and home heating oil prices following Iraq’s grams do not attempt to teach what is moral or ethical
invasion of Kuwait, in part due to the public perception but, rather, to give business managers criteria they can use
that oil companies were not behaving ethically. to help determine how ethical a certain action might be.
Managers then can feel confident that a potential action
A CODE OF ETHICS will be considered ethical by the general public if it is con-
sistent with one or more of the following standards:
A code of ethics is a formal statement that acts as a guide
for how people within a particular organization should act 1. The Golden Rule: Act in a way you would want oth-
and make decisions in an ethical fashion. Ninety percent ers to act toward you.
of the Fortune 500 firms, and almost 50 percent of all
2. The utilitarian principle: Act in a way that results in
other firms, have ethical codes. Codes of ethics commonly
address such issues as conflict of interest, behavior toward the greatest good for the greatest number.
competitors, privacy of information, gift giving, and mak- 3. Kant’s categorical imperative: Act in such a way that
ing political contributions. According to a recent survey, the action taken under the circumstances could be a
the development and distribution of a code of ethics universal law, or rule, of behavior.
within an organization is perceived as an effective and effi- 4. The professional ethic: Take actions that would be
cient means of encouraging ethical practices within organ- viewed as proper by a disinterested panel of profes-
izations (Ross, 1988). sional peers.
Business leaders cannot assume, however, that merely
5. The TV test: Always ask, “Would I feel comfortable
because they have developed and distributed a code of explaining to a national TV audience why I took
ethics an organization’s members have all the guidelines
this action?”
needed to determine what is ethical and will act accord-
ingly. There is no way that all situations that involve eth- 6. The legal test: Ask whether the proposed action or
decision is legal. Established laws are generally con-
ical decision making an organization can be addressed in
a code. Codes of ethics must be monitored continually to sidered minimum standards for ethics.
determine whether they are comprehensive and usable 7. The four-way test: Ask whether you can answer “yes”
guidelines for making ethical business decisions. Man- to the following questions as they relate to the deci-
agers should view codes of ethics as tools that must be sion: Is the decision truthful? Is it fair to all con-
evaluated and refined in order to more effectively encour- cerned? Will it build goodwill and better
age ethical practices. friendships? Will it be beneficial to all concerned?

276 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION