PROFESIONAL ETHIC OUMM 3203

Faculty of Business and Management

SEM 05 / MAY 2011

OUMM 3203

PROFESSIONAL ETHICS

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801018015615001

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801018-01-5615

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012-9418590

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kurtz_2599@yahoo.com

LEARNING CENTRE

OUM MELAKA

PROFESIONAL ETHIC OUMM 3203

TABLE OF CONTENTS

NO

DESCRIPTIONS

1.0

2.0

3.0

PAGES

INTRODUCTION

1.1.

Ethics and Social Responsibility

LITERATURE REVIEW

2.1

The Challenge of Corporate Responsibility

ARGUMENT ON THE IMPORTANT OF

ETHIC AND SOCIAL RESPOSIBILITY

3.1

Debate Around Friedmans Arguments

3.2

Mutual, Aligned Interests and Moral Argument

8
4.0

APPROACHES TO SUSTAIN HIGH LEVELOF

ORGANIZATION ETHIC AND SOCIAL
RESPONSIBILITY

5.0

CONCLUTION

11

6.0

REFERENCES

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PROFESIONAL ETHIC OUMM 3203

1.0 INTRODUCTION
1.1

Ethics and Social Responsibility

Ethics are generally defined as the principles of morally acceptable conduct of

individuals. We define ethics as an individuals personal beliefs about right and wrong
behaviours. Ethics are talked about frequently and addressed in the news when unethical
decisions are found. Sadly, people do not hear about ethics when others are engaging in ethical
behavior on a daily basis. Keep in mind that things that are not illegal may be unethical. Ethics
are an individual belief system that consists of knowing what is right and wrong. Ethics can vary
person to person. Ethics is in part analyzing decisions, beliefs, and actions.
It is vital to note that ethical or unethical actions by particular managers do not occur in a
vacuum. Indeed, they most often occur in an organisational context that is conducive to them.
The actions of peers and top managers, as well as the organisations culture, all contribute to the
ethical context of the organisation.
The starting point in understanding the ethical context of management is the individuals own
personal ethical standards. Some people are willing to risk personal embarrassment or lose their
job rather than do anything unethical. Other people are easily swayed by unethical behaviour
around them and by other situational factors, and they may be willing to commit significant
crimes to further their own careers or for financial gain. Organisational practices may strongly
influence the ethical standards of employees. Some organisations openly permit, and may even
encourage, unethical business practices that are in the best interest of the firm.
Organisations are also going to greater lengths to formalise their standards for ethical behaviour.
Some organisations, including Johnson & Johnson and Hewlett-Packard, have prepared
guidelines that detail how employees are to treat suppliers, customers, competitors and other
constituents. Some organisations have developed and publicised formal codes of ethics, written
statements of the values and ethical standards that guide the firms actions.

PROFESIONAL ETHIC OUMM 3203

Only individuals have ethics. Organisations themselves do not have ethics, but their relationships
to their various environments often pose ethical dilemmas and call for ethical decisions. Social
responsibility is the set of obligations that an organisation has to protect and extend to the society
in which it functions.
Social responsibility can be an example of ethical behavior. It is enhancing society in general.
However, a business cant afford to go around doing good deeds if there is no potential pay off.
If the business were to loose too much money, then it would cease to exist, hurt customers, and
leave employees jobless. There are some that argue that social responsibility is shown only when
companies go beyond what is optional, and really intend to create a benefit for others besides the
company. Additionally, some companies may not benefit from some forms of social
responsibility. These businesses should focus on what they do best as a business and give back
what they can. Examples of socially responsible behavior range from projects that raise money
for research on diseases, raising money for the needy, requiring workers to volunteer within the
community, recalling products that may be dangerous, promoting recycling, and offering free
services to the disadvantaged.

2.0 LITERATURE REVIEW

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Ethics and social responsibility in organisation context means moral values and obligations.
Ethics influences the value system of every organisation and employee by serving as a moral
guide or base (Sweet 2001). Furthermore, business ethics is a potential vehicle for employee
pride and motivation as well as a focus for customer satisfaction (Hall 1991). Ethics is a part of
the managers responsibility as the ethical environment reflects managerial value system
including personal and organisational perceptions and preferences of morality and known to be
fundamental on a persons attitude towards ends and means (McCarty and Bagby 1990, p. 21
cited in Fox 2000, p. 70). Fox (2000) believes that ethics are values that traditionally sprouted
from religious or organisational influences and may evolve from personal experiences. There is
importance in combination of value systems that leads to generalised principles, which are used
as guidelines in making and evaluating decisions and specific cases that require acceptable
conduct among people. General theories of business ethics are considered generic and are not
directed to specific applications (Walle 1995). In almost all organisational setting, Frederick and
colleagues (1994) state that ethical guidelines are expressed in the forms of code of conduct,
outlining the organisations foremost expectations to every contributing factors such as the
employees and other stakeholders. Business ethics further support management strategies,
accountability structures, organisational policies, incentive systems, training programs, and
decision-making processes. It ensures their unity of work as the common denominator of
strengthening the organisations essential ethical code of conduct.
Abreu, David and Crowther (2005) argue that an organisation can affect its external
environment and change it through its activities. Corporations or organisations in general are
expected to have economic, ethical and legal responsibilities to the public at large (Lantos,
2001). This is covered by the idea of corporate social responsibility (CSR). For Lom (2005),
CSR is the recognition of accountability aside from financial productivity of companies. This is
the operating word for the concept of CSR accountability. Accountability is believed to be the
most important factor to be considered for companies to know their role in the society and its
people.
These definitions are chosen due to its simple yet inclusive features. It does not require
further explanations but rather simple words that are easily understood and executed.
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2.1

The Challenge of Corporate Responsibility

To augment the Essential Knowledge Project, this essay discusses the perplexities and challenges
of corporate social responsibility (CSR). The essay features the what, why, and how of
CSR. As they help formulate CSR standards and give voice to organizations, public relations
practitioners can use experts carefully considered thoughts as well as research findings to
determine the best plan of action. Internally and externally, practitioners can help build a
foundation for image/reputation management, brand equity, relationship management, issues
management, and crisis management.
Are you a good corporate citizen? That rhetorical question was asked by Ben W. Heineman Jr.,
senior vice president for law and public affairs at General Electric Corporation, writing in the
Wall Street Journal (6/28/2005). His question helps set the tone for the topic of corporate social
responsibility as a vital part of the Essential Knowledge Project. The column explained how GE
sets a challenging goalhigh performance with high integrityfor successful companies and,
indeed, for 21st-century capitalism (p. B2). High performance and high integrity are good for
the bottom line. Citizenship requires a rigorous, unwavering compliance with the law. It blends
strict adherence to capital performance with integrity to never allow that commitment to corrode
those principles. Quality judgments support, rather than defeat, a commitment to financial
standards and to the globe where the organization works, including commitment to reduce
greenhouse gases and increase energy conservation (p. B2).

3. 0 ARGUMENT ON THE IMPORTANT

OF ETHIC AND SOCIAL RESPOSIBILITY
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Business ethical practices and principles are important elements in building an ethical
working environment with strong corporate guidelines. These guidelines govern the overall
condition of the organisation in terms of allowing members of the workforce be familiar with the
upper management authorities deliberation of ethical behaviours as significant ingredients of
business operations. One key issue on ethics is the issue on forgetting social responsibility for the
sake of profits. Thus, there is a need for stakeholders to know what the organisation needs to
sustain its immediate environment and its people.
3.1

Debate Around Friedmans Arguments

In one way or another, all discussions of CSR recall the famous, or infamous, claim of economist
Milton Friedman (1970) that CSR is bunk. He sparked decades of controversy by arguing that
the only responsibility of publicly held companies is to increase profitsthe efficiency paradigm
of organizational excellence. Companies should pay only as much wage/salary as necessary to
operate efficiently and pay taxes reluctantly. Some today laud his sentiments, and indeed many
empirical tests have not found a positive relationship between CSR activities and major
corporate financial performance indicators such as profit (e.g., Agle, Mitchell, & Sonnenfeld,
1999; Auppede, Carroll, & Hatfield, 1985). Agle et al. (1999) stressed the methodological
challenge: Corporate social performance is notoriously difficult to quantify (p. 515).
Others argue that Friedmans view of the role of companies too narrowly addresses the key issue.
Stovali, Neill, and Perkins (2004) fought the traditional interpretation of the Invisible Hand of
Adam Smith, which serves to legitimize the maximization of shareholder wealth, and as a result,
shareholder-dominant corporate governance. A broader view of the Invisible Hand considers a
sympathy principle, or the ability and propensity of human beings to consider the interests of
others. This view may be more aligned with the dominant concept of CSR and promote a
broader, multiple stakeholder approach to corporate governance. If sympathy suggests only
philanthropy, we add that CSR demands empathy, an outside-in way of thinking and planning to
help management reflect on its role in and impact on the society where it operates. Critics
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believe that Friedman failed to understand the positive advantages to be gained from CSR:
Reduce business costs and bolster profits (See the section on Profits and CSR).
3.2

Mutual, Aligned Interests and Moral Argument

CSR is the foundation for achieving mutually aligned interests and winning the moral argument
about the social relevance of the organization. The modern approach to organizational
management was to communicate in ways that shaped markets to the advantage of businesses
an inside-out approach to relationships. A post modern approach suggests that an outside-in
approach is more capable of creating and sustaining relationships by achieving truly mutual and
aligned interests.
This attention to mutual and aligned interests forms a moral argument for CSR. This argument,
similar to the business citizenship perspective, also known as normative stakeholder management
(Donaldson & Preston, 1995; Jones & Wicks, 1999), states that organizations consider
themselves to be duty bound and deeply embedded in the strength and wholesomeness of
community. A large part of corporations success comes from the values, expectations, and
principles of the wider society within which they operate and which franchises them to operate.
In a sense, a social contract exists and conforms corporations to societys objectives (Wartick &
Cochran, 1985). Within the corporate social performance (CSP) framework, Carroll (1979) stated
that corporate social responsiveness is measured by the degree to which management responds to
the social sphere by enacting each of the firms social responsibilities.

4.0 APPROACHES TO SUSTAIN HIGH LEVEL

OF ORGANIZATION ETHIC AND SOCIAL RESPONSIBILITY
It is considered that the stakeholders are any group that is affected by, or can influence,
conducts of this organisation. In order to serve the needs and interests of stakeholders or other
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PROFESIONAL ETHIC OUMM 3203

groups, managers are expected to employ their managerial expertise toward highest standards of
effective management and customer satisfaction. Organisational relationships are associated by
stakeholders interests and managers ability to be guided in terms of strategies employed in
maximising organisational performance. The influencing ability of stakeholders is high that most
managers are required to give in to it. This influential power guides managers to decision making
in relation to strategic issues affecting the whole business operations. Managers are often
dependent on stakeholders interests and act on the applicability of generic strategies. Such
interests reflect desires that are subjected to moral evaluation by the manager by looking on
ethics on business management. To serve stakeholders interests, the following ethical behaviours
should be observed:

Stakeholders desires are crucial consideration in decision making of managers.

While the organisation requires maximum satisfaction on the employees as well as

the customers, the managers in response to the desires of the stakeholders must
encourage responsible planning, management, and development.

Strict compliance to individual policies on bribery, extortion, facilitation payments,

environmental problems, and human rights are addressed in details.

Sexual and racial discrimination, price discrimination, and destructive products are
also firmly avoided.

Integrity and competence are significant managerial factors particularly in

performance of their identified duties.

Participation is an important aspect of determining the acceptability of stakeholders

desires and interests.

Responding to ethical dilemmas is a managers or leaders concern.

Stakeholders interests are mainly covered by managerial responsibilities.

Perhaps, established code of conducts help in ensuring managers ability to respond on times
when they are struggling on moral crises and confusion. They keep hold of a strong moral
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compass. In hospitality and tourism industries, holding on to the moral compass of managers is a
challenge when they try to serve the desires of stakeholders. Communication is very relevant.
The duties of managers are always bounded on standard management principles and practices.
Research and development efforts are encouraged so as to determine weak areas and loopholes
of the said code of conduct. Responding to the its weaknesses will lead to more effective
organisational governance provided that the desires of stakeholders are classified based on merits
of desires on whether or not valid or invalid, etc. lastly, feedback systems must also be available.

5.0 CONCLUTION
In conclusion, even though ethical problems in organizations continue to greatly concern society,
organizations, and individuals, the potential impact that organizational culture can have on
ethical behavior has not really been explored (Hellreigel et al., 1989). The challenge of ethical
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PROFESIONAL ETHIC OUMM 3203

behavior must be met by organizations if they are truly concerned about survival and
competitiveness. What is needed in today's complicated times is for more organizations to step
forward and operate with strong, positive, and ethical cultures. Organizations have to ensure that
their employees know how to deal with ethical issues in their everyday work lives. As a result,
when the ethical climate is clear and positive, everyone will know what is expected of them
when inevitable ethical dilemmas occur. This can give employees the confidence to be on the
lookout for unethical behavior and act with the understanding that what they are doing is
considered correct and will be supported by top management and the entire organization.

6.0 REFERENCES
Griffin, Ricky W. (1993). Management 4th Edition. Geneva: Houghton Mifflin.
Frederick, RE, Hoffman, WM, Kamm, JB, and Petry Jr., ES (eds) (1994) Emerging Global
Business Ethics, Quorum Books, Westport, CT
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PROFESIONAL ETHIC OUMM 3203

Hall, SSJ (1992) Ethics in Hospitality Management: A Book of Readings, Educational Institute of
the American Hotel and Motel Association, East Lansing, MI

Sweet, W (ed.) (2001) The Bases of Ethics, Marquette University Press, Milwaukee
Brenner, S. and Molander, E.: 1977, 'Is the Ethics of Business Changing?', Harvard Business
Review 55(1), pp. 55-71. Bucholz, R. A.: 1989, Fundamental Concepts and Problems in Business
Ethics (Prentice-Hall, Englewood Cliffs, NJ).
Gray, M. and Rosen, I.: 1982, The Warning (Norton, New York).
Hellreigel, D., Slocum, J. W., Jr., and Woodman, R. W.: 1989, Organizational Behavior (West
Publishing, St. Paul, MN).

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