CHAPTER 28

Ethical Issues in Human Resource Management

CHAPTER OBJECTIVES

After reading this chapter, you should be able to:

1. Understand the meaning of ethics and the need for ethical policies and codes
2. Enumerate the factors influencing ethical behaviour at work
3. Explain the role of human resource management in promoting ethical values
4. Present an overview of international business ethics

Enron was a popular energy company in the United States with diversified operations in different parts of the world. It had a presence in India through its subsidiary, the Dabhol Power Company (DPC), a joint-venture power- producing unit at Maharashtra. The Enron group had a strong workforce of 22,000 employees at the global level. Its employee-centred HR policies and procedures were well-known for their long-term beneficial schemes. Besides, the company had the rare distinction of winning the coveted “America’s Most Innovative Company” award presented by Fortune for six successive years. Despite all these impressive feats, the company incongruously filed a bankruptcy petition with an American court at the end of 2001. The Enron bankruptcy case eventually revealed a shocking institutionalized and premeditated accounting fraud and ethical code violations perpetuated by its authorities.

Strangely, the employees of Enron remained silent spectators when rules and ethical values were being violated and illogical proposals and moves being made by those occupying the highest ranks in the company. Tragically, this sordid event did not spare any one as it rendered the employees out of work, led to the imprisonment of the unethical officers, and, finally, forced others to learn the rele vance of practising ethical values in corporate and personal lives the hard way. In fact, this case highlights the consequences of the erosion of ethical values and the need to inculcate ethical values among members for the long-term health of an organization. We shall now discuss the different aspects of ethics in human resource management in detail.

Introduction

Value-based management, which means behaviour based on ethical principles and values, is a good formula for the long-term health and success of every organization. In fact, the practising of ethical values in management is an essential prerequisite for both individual success and organizational efficiency. However, when individuals practise ethical values within an organization, it does not mean that the entire organization is ethical. Only when the entire organization practises fairness and justice in a systematic way can it be called an ethical organization. The foundation of the ethical organizations is mutual trust and respect. Employees in any organization work hard not only for economic benefits but also for social and psychological well-being. A violation of ethical principles in decision making by an organization can have a deep impact on the employees’ life and character. For instance, the lack of fairness in HR issues like promotion and compensation can affect the career plans and choice of employees and thereby severely undermine their satisfaction, self-esteem and performance.

A written statement of the policies and principles that guides the behaviour of all the persons is called the code of ethics. But the fact is that no amount of written rules can achieve ethical behaviour among the employees unless the organizational leaders conduct themselves in a fair, moral and legal manner. Ethical leadership is essential for creating an ethical workforce. The employees of an organization view their leadership as role models to determine their own behaviour. Indeed, those organizations where employees reported fair treatment by management showed proportionately less unethical behaviour.¹ Today, the survival and success of organizations in a globalized market depends more on the ethical standards adopted by them. In ethical organizations, people can trust one other to back up their words with action. These organizations often have contented employees and are usually identified by their high productivity and effectiveness compared to that of their competitors. Box 28.1 depicts the relevance of value-based management as an element of corporate strategy.

The term ethics is an abstract concept and can be measured only through principles and practices adopted by an organization in dealing with its members. Understandably, the definitions of ethics predominantly cover these principles, beliefs and practices. Box 28.2 lists some of the important definitions.

We may, therefore, say that ethics refers to the ethical principles that determine the behaviour of an individual or a group.

Types of Ethics

Ethics can broadly be classified into three types, namely, descriptive ethics, normative ethics and interpersonal ethics. A brief explanation of these is provided as follows.

Descriptive Ethics

It is mostly concerned with the justice and fairness of the process. It involves an empirical inquiry into the actual rules or standards of a particular group. It can also mean the understanding of the ethical reasoning process.⁷ For instance, a study on the ethical standards of business executives in India can be an example of descriptive ethics.

Normative Ethics

It is primarily concerned with the fairness of the end result of any decision- making process. It is concerned largely with the possibility of justification. It shows whether something is good or bad, right or wrong. Normative ethics cares about what one really ought to do and it is determined by reasoning and moral argument.⁸

Interpersonal Ethics

It is mainly concerned with the fairness of the interpersonal relationship between the superior and the subordinates. It refers to the style of the managers in carrying out their day-to-day interactions with their subordinates. The manager may treat the employees either with honour and dignity or with disdain and disrespect.

Ethics and Human Resource Management

Though business ethics can be examined from the perspectives of the employees, the organization, and the society as a whole, it is, of late, seen more as an internal concern of the organizations. Human resource management plays an important role in building an ethical environment in an organization. In fact, nearly 37 per cent of all ethics inquiries in an organization involve HR issues and require interpretation of rules and regulations, and resolution of conflict by the HR people.⁹ If it is important for employees to adhere to ethics, it is equally important for HR managers to build the standards for ethics.

To create the appropriate atmosphere, every action taken by the HR people must comply with the ethical standards of the organization strictly. The alleged violations of the ethical norms by the HR people can vitiate the whole ethical environment of the organization. For instance, the decisions that result in the promotion of one and the refusal of another, selecting one and rejecting another in recruitment, and redressing the grievances of a few while spurning others’ can expose the organization to the charges of ethical improprieties unless understood properly by the employees. The specific role of the human resource management is to deal with those ethical issues that define the employer–employee relationship, namely, the rights and duties of employers and employees. In fact, the management of human resources often calls for decision-making where fairness occupies an important role. The issue of ethics normally arises in situations where there is a conflict between one or more of the parties on issues like fairness of the employment contract, balance of power between employer and employee, implementation of labour law, employee and employer privacy, among others.

The key role of ethics in an organization is the coordination and resolution of conflicting interests in a just and fair manner. It is the responsibility of the HR managers to ensure that every action taken by the organization conforms to the ethical standards. The function of the HR manager is to preserve the ethical standards of an organization and reversing the slip, if any, in ethical standards. Obviously, his role as the intermediary between management and employees puts him in a special position to steer the organization cleared of ethical slides.

Need for Ethical Policies and Codes

Business ethics is concerned mainly with the relationship between business goals and execution techniques. Its focus is on the manner of execution of these business goals towards an anticipated result. We shall now discuss the need for the presence of ethical policies and codes in an organization.

• A code of ethics in place will enable an organization to create an ethical workplace. Each employee will understand clearly the standard of behaviour and his or her role in carrying out the principles and values of the organization.
• The growing presence of knowledge workers in organizations has necessitated the introduction of strong ethical policies as they are more likely to violate laws and the code of ethics as compared to the earlier generation of workers.
• Organizations have fewer levels of management and are pushing decision making down to line managers. As a result, any decision by an immediate superior can be viewed as personal and subjective by the subordinates and this situation may call for strict adherence to a transparent code of ethics.
• Visible ethical policies and code can send a clear signal to the employees that the organization is serious about ethics and that it will make no compromise when it comes to dealing with ethical standards and violation.
• Ethical policies will enable employees to evaluate quickly their proposed actions with the company’s code of conduct to determine whether these fit the existing ethical standards.
• Generally, the public image for companies that practise ethical values will be high in the society. As a result, these companies can attract the best candidates in the labour market with ease. Similarly, consumers will keep their trust in those companies that ensure fairness in their dealing with the people and they may have a natural preference for their products.

Thus, it is imperative for each organization to have a strong code of ethics that focuses on business practices and specific issues such as conflict of interest, accuracy of information, prevention of harassment, safety, environmental compliance, and rules and regulations. But the code of ethics should not be allowed to remain only on paper; rather, the whole organization, especially the top management, must follow it with all seriousness. Further, to instil ethical values among its employees, an organization can attempt the following measures:

• Train the employees on ethical values through meetings, case studies, and role-playing on a sustained basis.
• Post or exhibit a code of ethics at prominent places of the organization like restrooms, dining room, and recreation room.
• Follow up the incidents involving ethical violations closely and deal appropriately with those who commit code violations.
• Leaders should be the model of ethical behaviour so that employees do not feel it is forced on them but rather emulate it voluntarily.

Box 28.3 describes the code of conduct of Ashok Leyland.

Approaches to Ethical Issues in Organizations

Though many supervisors are interested in acting in an ethical manner, they often face a dilemma in determining what constitutes ethical actions. For instance, organizational politics is viewed as an unethical act by many organizations, yet it is widespread in our country. Indeed, the difficulty surrounding ethics makes it hard to distinguish right from the wrong.¹⁰ However, the management of an organization can ensure that its policy satisfies as many persons as possible in the organization. Similarly, it should provide for the recognition of the rights of an individual while determining the ethical proportion of its HR polices. Velasquez et al.¹¹ have provided a proposition for determining whether a particular policy or action is ethical or not.

Utilitarian Approach

In this approach, the HR policy is based on the philosophy of the utmost good for the greatest number of people. It evaluates the ethical quality of policies and practices in term of their effects on the general well-being. For instance, decisions like lay-offs in a difficult situation for the organization are justified on the grounds that they benefit the majority of the employees.

Approach Based on Rights

This approach is based on the principle that an organization should respect an individual’s dignity and rights. Each employee is entitled to be treated with due respect and to be provided with safe working conditions, a reasonable and equitable pay system, and relevant and unbiased performance evaluation. An individual’s privacy and integrity should also be respected by the organization.

Approach Based on Justice

The focus of this approach is on equal treatment, adoption of due procedure, and consistency in application of policies and rules. The focal point of this approach is on the fairness in ensuring a balance between the benefits and the burdens of the job, like compensation and performance, compensation and job attendance. Similarly, HR policies should lay down a proper procedure for dealing with the employees’ discipline problems such as rule violation, absenteeism, and employee insubordination.

To make the HR policy strong in ethical content, an organization should consider these approaches while framing the policies as well as in their implementation. However, in practice, the HR policies hardly provide clear-cut guidelines on matters involving people and their job that can produce ethical dilemmas. In such cases, HR managers should apply their knowledge and experience in handling ethical dimensions in the decision-making process.

Box 28.4 outlines the significance of whistle-blower policies in the early detection of unethical behaviour.

Factors Influencing Ethical Behaviour at Work

Ethics represent values cherished by the members of an organization. The law alone cannot determine what is ethical or unethical since a legal act need not be an ethical act. Thus, the employees’ perception of ethical behaviour is influenced by a variety of factors (see Figure 28.1). It is essential for the HR managers to first understand the factors that shape the ethical behaviour of the employees in an organization.

Individual Factors

The personal character and outlook of individuals can have a greater influence in determining their ethical choice. Independent of organizational environment, each employee has some notion about the dos and don’ts of life. This ethical attitude is shaped by one’s own personal experience, education and awareness. Obviously, the ethical propriety of a decision in business is determined more by personal disposition than by the environment, peer pressure, or organizational characteristics.¹²

Organizational Factors

Sometimes, the employees’ ethical or unethical acts are determined by the organizational consideration. For instance, an employee may indulge in a window-dressing of financial results or filing of false statements with the government agencies, in the hope of protecting the interests of the company. In such cases, ethical lapses occur in the organization just because the employees feel pressured to do what they think is best to help their companies.¹³

The Supervisor’s Behaviour

The notion of “boss is always right” may become a clinching factor in determining the ethical or unethical acts of the employees of an organization. By his words or deeds, the supervisor may transmit the signal to his staff about what is morally right or wrong in the organization. More than the written rules, it is the conduct of the supervisors that often influences the employees’ own behaviour. For instance, when the supervisor intentionally ignores a clear misconduct, takes undue credit for somebody else’s effort, or permits subordinates to adopt any means to achieve results, there is a fair chance that the employees’ behaviour may go wrong.¹⁴

Organizational Culture

The organizational culture reflects the total characteristics, values, traditions and behaviours of the employees of an organization. It is capable of guiding the ethical behaviour of the employees closely. This is because the values of people often mirror their belief about good or bad, right or wrong, dos or don’ts in a situation. In managing the employees and fine-tuning their activities, the values promoted by an organization can play a key role as a behavioural guide. Thus, an organization’s culture, where values are a major component, can send a clear signal about whether the proposed act of an employee is right or wrong.

Code of Ethics

A code of ethics is a written statement of the ethical principles and policies adopted by an organization governing the ethical behaviour of its members. It can act as a standard for the employees to compare their behaviour with the available code to check whether their acts are right or wrong from an ethical point of view. It can also guide them when they face an ethical dilemma in the decision-making process.

However, the mere presence of an effective code of ethics in an organization is not sufficient to call it an ethical organization. It is to be understood clearly that ethical or unethical behaviour need not be a direct outcome of the presence or absence of one or two isolated factors in the organization. Actually, the interaction of several factors creates an environment, which, in turn, breeds ethical or unethical conduct among the employees.

Role of HRM in the Development of Ethical Behaviour

An organization cannot be expected to have a ready-made or instantaneous solution to overcome the ethical challenges emerging at its workplace. It should work in a systematic manner to initiate the necessary steps to create an ethical environment in general and inculcate good values among the employees in particular. In its endeavour to promote ethical behaviour among its members, the organization will have to utilize the HR professional’s knowledge and expertise effectively to achieve the desired results. That is where human resource ethics, which is the application of ethical principles to human resource relationships and activities, comes in action. The HR managers can perform the process of building an ethical environment through the management, the workers and the system. They should create a kind of environment where employees work to reduce ethical lapses throughout the organization.¹⁵

HR managers play a unique role in introducing ethical practices in an organization since they are an intermediary between the management and workers. Though it is not possible for them to suggest an appropriate ethical behaviour applicable for all situations, they can rightly balance between organizational interest and individual freedom. An ethically appropriate behaviour may lie between the legitimate business needs of an organization and the workers’ feeling of dignity and worth.¹⁶ HR managers can work through various HR functions to promote ethical behaviour among its members.

It is imperative for HR managers to ensure that ethics and values fit into the design of key HR functions such as hiring, performance management, and reward systems. While designing performance management, training and development, and grievance-handling systems, the HR managers should ensure that the systems make leaders accountable for the ethical dimension of their leadership, fit the ethical dimension of leadership into all leadership training and development programmes, and, finally, discover ethical leaders and count on them for role modelling and mentoring others.¹⁷ Let us see those HR functions that provide a scope for promotion of ethical behaviour.

Recruitment and Selection

The organization can adopt a two-pronged approach in recruitment and selection to promote ethical behaviour in the organization. The first one is to recruit more ethical people for the organization.¹⁸ The next one is to discourage unethical people from applying for the job in the organization. In this regard, the HR managers can make specific references to the ethical practices of the company in their advertising material concerning recruitment.

The selection process can also be used effectively to inform applicants about the ethical practices of a company. The selection tool itself can speak about the fairness of the organi- zation in hiring employees. For instance, if the hiring process does not treat people fairly, they may assume that ethical behaviour is not important in the company.¹⁹ In that case, any amount of assertion about fair treatment and ethical practices by the organization will hardly carry any conviction. To overcome this problem, organizations can seek to identify and employ those selection tools that are normally viewed by the employees or others as unbiased. For instance, job-related assessment tests and interactive interviews can serve this purpose. Similarly, the practice of providing feedback to the candidates about their performance can vastly enhance the fairness of the selection techniques and the ethical practices of the organization. However, the amendment of selection tools to ensure equal opportunities for the deprived persons of the society cannot be construed as an unfair practice.

Training and Development

In today’s business environment, employees, in general, and managers, in particular, are often faced with a situation that requires decision-making intertwined with ethical dilemmas. Ethics training in organizations plays a significant role in helping the employees understand and resolve such ethical dilemmas successfully. The primary goal of these training programmes is to enable employees to recognize the situations posing ethical dilemmas and make a judicious use of the code of ethics to solve such problems. In this regard, organizations normally adopt a what-if analysis training to help employees identify the nature of the situation, understand the intricacies of the problems, and recognize conflicts of interest, which cause ethical predicaments, and, then, settle the issues amicably.

While establishing an ethics training programme, it is necessary to first set standards for ethical behaviour in the organization and then the training goals to be accomplished in the programme. An ethics training programme can focus on matters like the code of ethics of an organization or an ethical decision-making model. Decision-making models will force employees to answer a few pertinent questions. The nature of response will show how far the employees are just and ethical in their decisions. For instance, decision-making models may involve asking questions like whether the proposed action is legal, whether it complies with the values of the company, and how one would feel after doing it. Many companies have now introduced ethics training after realizing its impact on employee morale, recruitment, and retention. Obviously, people would want to work for organizations they trust and respect for its values. This is applicable for institutions too as they would like to do business only with a trustworthy organization.

Performance Appraisal

Performance appraisal is one of the sensitive HR functions prone to ethical slippages. Employees often view performance appraisals with distrust and suspicion. To gain the confidence and the cooperation of the employees, the management should, as far as possible, ensure transparency in the development and administration of the evaluation tool and in the assessment of the performance against standards. This is important since it proves that the firm adopts high ethical standards not only in assessing its employees but also in rewarding them objectively. Moreover, an organization can actually use performance appraisal as one more opportunity to prove its seriousness about upholding its ethical standards by ensuring objectivity and fairness in the performance evaluation process. D. Winstanley and K. Stuart-Smith²⁰ have advocated the following ethical principles for a performance evaluation process:

Respect for the individual: An employee should not be viewed as a mere tool or means to achieve ends. Rather, he must be looked at as an ends in himself.

Mutual respect: It is imperative for all those involved in the performance evaluation function to have regard for each other’s wants and preoccupations.

Procedural fairness: The procedures included in performance management must be followed justly and fairly to limit its adverse effect on individuals.

Transparency: Each employee who feels wronged by the assessment of the performance management process should be given opportunities to examine the basis upon which decisions were arrived.

Compensation

Compensation management is another area where organizations often find ethical dilemmas due to the complexity involved in the pay-fixation process. In this regard, organizations can depend more on scientific tools like job analysis, job specification, and work measurement to base their wage administration policies on and to avoid ethical conflicts. Besides, while framing HR policies pertaining to compensation packages, the HR managers must make adequate provisions for recognizing and rewarding those employees who exhibit high ethical values like honesty and integrity. Similarly, the policies should discriminate and discourage those employees who display unethical behaviour like work evasion and slowdown, frequent absenteeism, insubordination, misconduct, dishonesty, pilfering, disloyalty, negligence, drug and alcohol abuses and other rule violations.

Discipline and Disciplinary Procedure

The HR managers should ensure that the disciplinary procedure of the organization provides for equal protection and fair treatment to all its erring members while dealing with matters involving indiscipline. This can make employees feel confident about the fairness of the system and the rights of the employees. A strong code of ethics will enable employees to evaluate the ethical dimensions of their own behaviour without any externally imposed procedure.

The different dimensions of ethical issues involved in a managerial decision-making process concerning employees were identified as:²¹

• Extended consequences: Ethical decisions can have consequences far beyond the decisions. For instance, relocating a plant from the existing place to a new place to reduce the strength of a regionally concentrated but militant union can have an impact on the employees, their families, and the ancillary units also.
• Multiple alternatives: Since several alternatives usually exist in nearly all decision-making situations, an organization has to decide how far it will bend rules to accommodate the chosen decision. An example of this would be accommodating the request of employees with family problems for exemption from night shifts, even while denying the same request of other employees, which may require considering a variety of alternatives.

• Mixed outcomes: Decisions with ethical proportions frequently involve weighing positive results against negative ones. For example, laying off a few employees to keep the business on track and thereby preserving the jobs of other workers would result in both positive and negative outcomes for the organization.
• Unclear consequences: The effects of decisions with ethical dimensions are usually unpredictable. For instance, the influence of the employees’ personal variables like lifestyles and family conditions on promotions and transfers are often not known.

Box 28.5 shows the Society for Human Resource Management’s (SHRM) Code of Ethics.

International Business Ethics

As a result of globalization, there has been a tremendous increase in the number of companies conducting business across national boundaries. Indeed, intense competition forces companies of different natures and sizes to enter global markets, in some cases with absolutely no knowledge about the diversity of business standards and practices in the host country (country of operation). Organizations now have to learn how to adapt to diverse national cultures and socio-economic conditions, and new and diverse ways of communicating and of managing people.²² This trend is posing new challenges for the companies on the ethical front. For instance, organizations tend to exploit the divergent situation by adopting double standards in wage fixations and environmental compliance, mostly to the disadvantage of the less developed countries. This raises questions on ethical validity of the actions of the global business enterprises. Box 28.6 outlines the relevance of ethical values in a global scenario.

Although knowledge of business ethics is important for every manager, those with responsibility for foreign operations are confronted with many ethical issues that do not usually arise in domestic business. The typical ethical problems of global businesses arise from factors like diverse ethical traditions and political and legal systems; the different forms of economic organizations; the different stages of economic progress; insufficient or incompetent rules and regulations; the conflicts between national and regional economic and political interests; the absence of guidelines for international business; the ability of multinational corporations to evade tax obligations and other regulations; and the large-scale corruption in some countries. We shall now see some of the guidelines that can help the managers handle ethical issues that normally arise in global concerns.

Guidelines for International Business Organizations on Ethical Issues

When the existing ethical standards of the multinational companies are inadequate, these companies can adopt any one of the following guidelines to develop ethical standards for evaluating the decisions of their employees operating at global levels.

Human Rights Obligation

This guideline is based on the fundamental human rights. The proponent of this guideline, Thomas Donaldson,²³ advocates that organizations have an obligation to recognize and respect certain rights as fundamental international rights. These rights are

The right to freedom of physical movement; the right to ownership of property; the right to freedom from torture; the right to a fair trial; the right to non-discriminatory treatment; the right to physical security; the right to freedom of speech and association; the right to minimal participation; the right to political participation; and the right to subsistence.

Donaldson declares that each company is morally bound to discharge these fundamental rights, and any persistent failure to observe them would deprive the company of its moral right to exist.

Welfare Obligation

Based on moral considerations, Richard T. De George²⁴ proposes a few guidelines for i nternational organizations with the twin aims of preventing damage and providing benefits to the host countries. These guidelines are:

• Multinational companies should desist from committing any intentional direct harm to the host countries.
• They should ensure that they create more good than harm for the host country as a result of their operations.
• They are morally bound to contribute to the growth and progress of the host country by their activities.
• They must see to it that their activities are, as far as possible, in compliance with the local practices and culture. They should also strive hard to respect the human rights of their employees in the host countries.
• They have a moral and legal responsibility to pay a fair share of taxes to the governments of these nations.
• They should work together with the local government in developing and maintaining institutions with a just and fair background.

Justice Obligation

It deals with the fairness of the activities of a multinational company in the host country. Multinationals have an obligation to help in the development of the host country, in addition to their business activity. They should be not only efficient but also responsible business houses. Foreign companies often attempt to avoid the payment of proper taxes by resorting to transfer pricing, which refers to the values assigned to raw materials and unfinished products that one subsidiary of the multinational company sells to another subsidiary in another country. Since pricing is done as an internal mechanism independent of market forces, companies tend to manipulate it to show profits in counties where taxes are low.

Ethical Dilemma in Global Wage Payment

As regards the payment of wages and salary by multinationals, there are many questions that require to be answered. For instance, they often face ethical dilemma in deciding between the host country and the parent country (country of origin) wage standards to pay the wages of the employees of the host country. Applying parent-country standards in the host country may not be ethically necessary. At the same time, adopting host-country standards on matters like wages and working conditions, especially in the less developed countries, may be ethically unacceptable. Sometimes, the wage standards of both countries may prove to be inadequate in dealing with the situation. In such a situation, the organization may warrant special standards for the conduct of international business.

Organizations need to decide the extent to which market forces should be allowed to operate in the determination of wages and the extent to which principles of human rights have to be allowed in wages determination.²⁵ On the one hand, higher wages for workers can become counter-productive for a nation as the competitive advantage of lower costs may be lost and the further economic development of the country may be hindered, On the other hand, paying less than living wages would amount to exploiting the labour force unethically. Thus, organizations have to find appropriate means to balance between the market rate for labour and the minimum or living wages. The solution lies in developing international agreements and a code of ethics to deal with the ethical issues arising in the international operations of the organization.

Apparently, the principal task of international organizations is to adopt a code of conduct pertaining to the HR aspects for their own operations and for their agents operating in a host country. While deciding the code of conduct, the organizations should consider the local conditions adequately. The International Labour Organization (ILO) has provided a set of international standard for ethical practices concerning multinational corporations. Similarly, the Organization for Economic Cooperation and Development (OECD) has advocated OECD guidelines for multinational companies.

Summary

1. Ethics refers to the ethical principles that determine the behaviour of an individual or group.
2. Ethics is classified into descriptive ethics, normative ethics and interpersonal ethics.
3. The different types of approaches to ethical issues in organizations are the utilitarian approach, the approach based on rights, and the approach based on justice.
4. The factors influencing ethical behaviour at work are individual factors, organizational factors, the supervisor’s behaviour, organizational culture, and code of ethics.
5. Ethical behaviour can be developed through recruitment and selection, training and dev- elopment, performance appraisal, copensation, and discipline and disciplinary pro cedure.
6. The guidelines for global organizations on ethical issues are human rights obligation, welfare obligation and justice obligation.

Review Questions

Essay-type questions

1. Evaluate the factors influencing ethical behaviour at work critically.
2. Discuss the various HR functions that provide scope for the promotion of ethical behaviour.
3. Enumerate the guidelines followed by international business organizations for ethical issues.
4. “Value-based management is an essential prerequisite for the long-term health and success of every organization.” Discuss.
5. Examine the various approaches to the study of ethics in human resource management using relevant examples critically.
6. Explain the various ways and means by which an organization can inculcate ethical values among its workforce.

Skill-development Exercise

Objective – The objective of this exercise is to provide you with an experience in developing a strong code of ethics to help employees evaluate the ethical component of their proposed action.

Procedure Note – The class is divided into groups. Each group has: (1) an HR manager, (2) a union representative, (3) two line managers, (4) two members of the HR team, and (5) an observer. The last role is important for the analysis and feedback aspects of the role-playing session.

Situation

Atul Vikas Limited is a medium-sized cement- producing company with an annual turnover of Rs 4 billion. The company has a workforce of 2,100 employees. Of late, it has been facing a moderate financial crunch due to stiff competition in the industry and stagnant sales performance. Recently, the company has bagged a huge and prestigious order from a business conglomerate after agreeing to supply cement worth several millions within a short period. This is to be used for the construction of a state-of-the-art airport. To achieve the target, the managers made a proposal for the introduction of a compulsory overtime policy in which workers can be fired when they refuse a supervisor’s order to work overtime. But, the union opposed this on the ground that workers can not be treated like tools of production and there is a limit to their physical endurance and energy.

The management was inclined towards the overtime idea as a successful completion of this order could improve the image of the company in the industry besides fetching it good returns. However, it was not sure about the ethical issues involved in the managers’ proposal. As the company does not have a code of ethics, it could not evaluate the ethical components of the decisions and the actions of its members of the organization. It acutely felt the need for a code of business conduct and ethics for the organization. At this stage, the top management asked the HR manager to evolve a code of ethics after due consultations with the stakeholders and send the code to them for approval.

Steps in the exercise

There are four steps in the exercise:

Step 1: The HR manager meets the line managers to get to know about their views on a uniform code of ethics.

Step 2: He meets the union representative to gather his opinions and ideas on the code of ethics.

Step 3: He calls a meeting of his team members to finalize the code.

Step 4: The observer analyses the performance of the members in the role-playing session and gives his feedback.

Case Study

Future Tense is a medium-sized electronic company located in a metropolis. It markets popular brands of home appliances like air conditioners, refrigerators, washing machines and microwave ovens, and undertakes post-sales maintenance. The policy of the company is to attend to the faults within 24 hours if the customer is within the city limits and within 36 hours if the customer is located outside the city limits. Obviously, the maintenance department is completely stretched and always works against stiff targets. Mr Anil Kumar is working as one of the executives in the post-sale maintenance department. He has twelve mechanics in his team. It is his responsibility to depute mechanics to attend to the complaints of the customers after they report for duty in the morning.

The other day, Rahul, one of his most trusted and efficient employees, was assigned the duty to attend the complaint of one of the long-standing customers, Mr Suresh, whose air conditioner had developed a fault. At the end of the day, as part of his duty, Anil Kumar made a surprise visit to some of the select complainants, including Suresh, to know how satisfied they were with the performance of the mechanics. To his shock and surprise, he found that Rahul had not visited Suresh. When contacted on phone, Rahul informed Anil that the sudden illness and the subsequent hospitalization of his daughter was the reason for his inability to call on the customer. He also pleaded with Anil Kumar to help him out in this matter. However, the company has uncompromising rules that view dereliction of duty by employees for any reason as a major offence warranting immediate suspension.

Adhering to the rules, Anil Kumar reported the matter to the higher authorities, who promptly suspended Rahul pending a full-fledged enquiry. The news of Rahul’s suspension created widespread resentment among other employees, who sympathized with Rahul. But Anil Kumar justified his action by saying that any compromise on that rule would have undermined not only the ability of his team to meet the stiff targets set by the company but also the rule itself. He also felt that this kind of behaviour would set a bad precedent, eventually bringing disrepute to the company.

Questions for discussion

1. How do you view the whole incident that resulted in the suspension of Rahul?
2. If you were Anil Kumar, how would you deal with Rahul’s lapse?
3. Do you see any lacuna in the ethical component of the rule that imposes suspension for dereliction of duty, irrespective of the cause?
4. What are the policy measures required for the company to deal with such situations in the future?

Notes

1. Gary Weaver and Linda Trevino, “The Role of Human Resource in Ethics/Compliance Management: A Fairness Perspective,” Human Resource Management Review, 11 (2001): 115.
2. Manuel Velasquez, Business Ethics Concepts and Cases (Upper Saddle River, NJ: Prentice Hall, 1992), p. 9.
3. R. C. Appleby, Modern Business Administration, 6th ed. (London: Pitman Publishing, 1994).
4. R. Wayne Mondy, Human Resource Management (Upper Saddle River, NJ: Pearson Education, 2007), p. 30.
5. P. S. Bajaj and Raj Agarwal, Business Ethics: An Indian Perspective (New Delhi: Biztantra, 2004), p. 11.
6. George A. Steiner and John F. Steiner, Business, Government and Society: A Managerial Perspective (New York: McGraw-Hill, 1997), p. 180.
7. John R. Boatright, Ethics and the Conduct of Business, 4th ed. (Delhi: Pearson Education, 2005), p. 35.
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