Module 3

Organizational
Ethics

LEARNING OUTCOMES
 Defining Organizational Ethics
 Ethical Challenges by
Organizational Function
 Ethics in Human Resources
 Ethics in Finance
 Ethical Challenges
 Conflicts of Interest

EXPECTED OUTPUTS
1. Organizational Ethics: Value Chain
2. Organizational Ethics: Follow-ups

MODULE 3 – Organizational Ethics 1|PAGE

 DEFINING ORGANIZATIONAL
ETHICS
are the principals and standards by which businesses operate, according to Reference
for Business. They are best demonstrated through acts of fairness, compassion,
integrity, honor and responsibility.
Organizational culture
The values, beliefs, and norms that all
the employees of that organization
share.
The culture represents the sum of all the
policies and procedures—both written and
informal—from each of the functional
departments in the organization in addition to
the policies and procedures that are established
for the organization as a whole. Source:https://www.shrm.org/resourcesandtools/pages/organi
zational-culture.aspx
Value Chain
the process or activities by which a company adds value to an article, including
production, marketing, and the provision of after-sales service.
The key functional inputs that an organization provides in the transformation of raw
materials into a delivered product or service.

Traditionally, these key functions are identified as:

 Research and development (R&D), which develops and creates new product designs
 Manufacturing, which sources the components and builds the product
 Marketing (and advertising)

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  Sales
 Customer service
Supporting each of these functional areas are the line functions:
 Human resource management
(HRM), which coordinates the
recruitment, training, and
development of personnel for all
aspects of the organization.
 Finance, which can include
internal accounting personnel,
external accounting personnel,
and external auditors who are
called upon to certify the Source:https://blog.walkme.com/human-resource-management/
accuracy of a company’s
financial statements.
 Information systems (IS or IT), which maintain the technology backbone of the
organization— data transfer and security, e-mail communications, internal and external
Web sites, as well as the individual hardware and software needs that are specific to the
organization and its line of business.
 Management, the supervisory role that oversees all operational functions.

ETHICAL CHALLENGES BY
ORGANIZATIONAL FUNCTION
THE ETHICS OF RESEARCH AND DEVELOPMENT
R&D professionals carry the responsibility for the
future growth of the organization. Without new
products to sell, organizations can lose their
customers to competitors who are offering better,
faster, and/ or cheaper products. R&D teams
incorporate customer feedback from market
research, competitive feedback from closely
monitoring their competition, and strategic input
from the organization’s senior management team
Source:https://www.vecteezy.com/vector-art/545112-r-d- to develop a product design that, hopefully, will
research-and-development-word-lettering allow the organization to capture and maintain a
leading position in its market.
However, alongside this responsibility comes an equally critical commitment to the consumer
in the provision of a product that is of the highest quality, safety, and reliability. Defective
products not only put consumers at risk but also generate negative press coverage (damaging

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the organization’s reputation) and very expensive lawsuits that can put the organization at risk
of bankruptcy.

Source:https://www.freepik.com/premium-
vector/smart-manufacture-factory-conveyor-modern-
industrial-manufacturing-computer-controlled-factory-
machines-line-illustration_6287621.htm
ETHICS IN MANUFACTURING
The pressures here are very similar to those in the
R&D function as manufacturers face the ethical
question, “Do you want it built fast, or do you want
it built right?” Obviously, from an organizational
perspective, you want both, especially if you know
that your biggest competitor also is racing to put a
new product on the market (and if it gets there before
you do, all your sales projections for your product
will be worthless).

ETHICS IN MARKETING
Once the manufacturing department
delivers a finished product, it must be
sold. The marketing process (which
includes advertising, public
relations, and sales) is responsible for
ensuring that the product reaches the
hands of a satisfied customer. If the
marketers did their research correctly
and communicated the data to the Source:https://blog.mailrelay.com/en/2018/10/23/10-common-
R&D team accurately, and assuming marketing-challenges-or-problems-that-most-businesses-will-face
the finished product meets the original
design specifications and the competition hasn’t beaten you to market with their new product,
this should be a slam dunk, but with all these assumptions, a great deal can go wrong.
Marketers emphasize customer service and argue that since their customers are satisfied, the
good outcome justifies the methods used to achieve that outcome no matter how misleading
the message or how unnecessary the product sold. This represents a view of ethics called
utilitarianism. Critics argue that the process itself is wrong irrespective of the outcome
achieved—that is, how can you be proud of an outcome when the customer never needed that
product to begin with and was manipulated, or at the very least influenced, by a slick ad
campaign into feelings of envy, inadequacy, or inequality if he or she didn’t rush out and buy
it? On this side of the debate we are considering universal ethics.
Utilitarianism
Ethical choices that offer the greatest good for the greatest number of people.
Is an ethical theory that determines right from wrong by focusing on outcomes. It is a
form of consequentialism.
Holds that the most ethical choice is the one that will produce the greatest good for the
greatest number.

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Universal Ethics
Universal Ethics Actions that are taken out of duty and obligation to a purely moral
ideal, rather than based on the needs of the situation, since the universal principles are
seen to apply to everyone, everywhere, all the time.
are accepted principles. These principles require that what we do should be what is
acceptable to all people regardless of religion, gender, race, and other social differences.

ETHICS IN HUMAN RESOURCES

The human resources function within an organization should ideally be directly involved in the
relationship between the company and the employee throughout that employee’s contract with
the company:
The creation of the job description for the
position.
The recruitment and selection of the right
candidate for the position.
The orientation of the newly hired employee.
The efficient management of payroll and benefits
for the (hopefully) happy and productive
employee.
The documentation of periodic performance
reviews.
The documentation of disciplinary behavior and Source:https://habergroup.com/blog/getting-a-
remedial training, if needed. better-understanding-of-human-resources

The creation of a career development program for the employee.

In each of these scenarios, accountability for the transgression would ultimately end with the
HR department as the corporate function that is legally responsible for ensuring that such things
don’t happen.
For this reason, many advocates of ethical business conduct argue that HR should be at the
center of any corporate code of ethics—not as the sole creator of the code, since it is a document
that should represent the entire organization, but certainly as the voice of reason in ensuring
that all the critical areas are addressed:
HR professionals must help ensure that ethics is a top organizational priority.
HR must ensure that the leadership selection and development processes include an
ethics component.
HR is responsible for ensuring that the right programs and policies are in place.
HR must stay abreast of ethics issues (and in particular the changing legislation and
sentencing guidelines for unethical conduct).

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 ETHICS IN FINANCE
The finance function of an organization can be divided into three distinct areas: financial
transactions, accounting, and auditing:
1. The financial transactions—the
process by which the flow of money
through an organization is handled—
involve receiving money from
customers and using that money to pay
employees, suppliers, and all other
creditors (taxes and the like), with
hopefully enough left over to create a
profit that can be either reinvested back
into the business or paid out to
owners/shareholders.
Source:https://www.lynda.com/Business-Accounting-
2. The accounting function keeps
tutorials/Finance-Non-Financial-Managers/368915-2.html
track of all those financial transactions
by documenting the money coming in (credits) and money going out (debits) and
balancing the accounts at the end of the period (daily, weekly, monthly, quarterly,
annually).
3. When an organization’s financial statements, or books, have been balanced, they must
then be reported to numerous interested parties. For small businesses, the most
important customers are government agencies—state income and sales taxes and
federal taxes the IRS (Internal Revenue Service) collects on the profits generated by the
business. In addition, lenders and creditors will want to see financial statements that
have been certified as accurate by an impartial third-party professional. That
certification is offered by the auditing function—typically handled by certified
professional accountants and/or auditing specialists.
Auditing Function
The certification of an organization’s financial statements, or “books,” as being
accurate by an impartial third-party professional. An organization can be large enough
to have internal auditors on staff as well as using external professionals— typically
certified professional accountants and/or auditing specialists.

ETHICAL CHALLENGES
For internal employees in the finance, accounting, and auditing departments, the ethical
obligations are no different from those of any other employee of the organization. As such,
they are expected to maintain the reputation of the organization and abide by the code of ethics.

GAAP
The generally accepted accounting principles that govern the accounting profession—
not a set of laws and established legal precedents but a set of standard operating
procedures within the profession.

MODULE 3 – Organizational Ethics 6|PAGE

The accounting profession is governed not by a set of laws and established legal precedents but
by a set of generally accepted accounting principles, typically referred to as GAAP
(pronounced gap). These principles are accepted as standard operating procedures within the
industry, but, like any operating standard, they are open to interpretation and abuse.

CREATIVE BOOKKEEPING TECHNIQUES

It is legal to defer receipts from one quarter to
the next to manage your tax liability. However,
accountants face ethical challenges when
requests are made for far more illegal practices,
such as falsifying accounts, underreporting
income, overvaluing assets, and taking
questionable deductions. These pressures are
further compounded by competitive tension as
accounting firms compete for client business in
a cutthroat market. Unrealistic delivery
deadlines, reduced fees, and fees that are
contingent on providing numbers that are
satisfactory to the client are just some examples Source:https://www.dummies.com/business/accountin
of the ethical challenges modern accounting g/bookkeeping-all-in-one-for-dummies-cheat-sheet/
firms face.

CONFLICTS OF INTEREST
A situation in which one relationship or obligation places you in direct conflict with an
existing relationship or obligation.
 Selling a product that has the potential to
be harmful to your customers represents an
equally significant conflict of interest. The
convenience of fast food carries with it the
negative consequences of far more calories
than you need to consume in an average day.
McDonald’s, for example, has responded
with increased menu choices to include
salads and alternatives to french-fries and
soda— but the Big Mac continues to be one
of its bestselling items.
 Selling a product that has the potential to
Source:https://www.bamboohr.com/blog/conflict- be harmful to the environment also carries a
resolution-in-workplace/ conflict of interest. Computer manufacturers
such as Dell and Hewlett-Packard now offer
plans to recycle your old computer equipment rather than throwing it into a landfill.
Fast-food companies like McDonald’s have changed their packaging to move away
from clamshell boxes for their burgers. Beverage companies such as Nestlé are
producing bottles for their bottled water that use less plastic to minimize the impact on
landfills.

MODULE 3 – Organizational Ethics 7|PAGE

 Republic of the Philippines
CAPIZ STATE UNIVERSITY
PONTEVEDRA CAMPUS
Bailan, Pontevedra, Capiz

College of Management
Module 3: Worksheet 1 in BA 314
Organizational Ethics: Value Chain
1st Semester, A.Y. 2020-2021

Exercise

Name: Course/Yr./Sec.:

Directions: These questions are for student evaluation to determine if you have understood the
lessons discussed in the module. Answer the following questions below and put your answers
on the space provided.
Label the corresponding boxes according to Company Value Chain.

Primary
Activities
and Costs

Support
Activities
and Costs

If you have any comments, suggestions, or recommendations on how will the subject
teacher improve the discussion please write them on the space below. Thank you! ☺
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MODULE 3 – Organizational Ethics 8|PAGE

 Republic of the Philippines
CAPIZ STATE UNIVERSITY
PONTEVEDRA CAMPUS
Bailan, Pontevedra, Capiz

College of Management
Module 3: Worksheet 2 in BA 314
Organizational Ethics: Follow-ups
1st Semester, A.Y. 2020-2021

Exercise

Name: Course/Yr./Sec.:

Directions: These questions are for student evaluation to determine if you have understood the
lessons discussed in the module. Answer the following questions below and put your answers
on the space provided.

1. Explain the term organizational culture.

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2. Identify the three functional components of the marketing process.
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3. Explain why marketers feel that their involvement in the production and delivery of
goods and services is an ethical one.
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MODULE 3 – Organizational Ethics 9|PAGE

 Republic of the Philippines
CAPIZ STATE UNIVERSITY
PONTEVEDRA CAMPUS
Bailan, Pontevedra, Capiz

College of Management
Module 2: Worksheet 3 in BA 314
Organizational Ethics: Case Study
1st Semester, A.Y. 2020-2021

Evaluation

Name: Course/Yr./Sec.:

Directions: Read the case study and analyze the situation carefully then answer the questions
related to the case study that was read. Write your answers on the space provided after the
questions.

BOOSTING YOUR RESUME: Short Case Study

“Everybody has stretched the truth a little on their résumés at one time or another,
right?” That’s the question that people who are about to give their own résumés a little boost
ask themselves as a way of dealing with the twinge of guilt they are probably feeling as they
adjust their job title or make that six months of unemployment magically disappear by claiming
a consulting project. In the harsh light of day, résumé inflation is not only unethical, but if you
transfer those untruths onto a job application form, which is a legal document, then the act
becomes illegal.
So, if the risks are so high, why do people continue to embellish the details on a
document that is supposed to accurately reflect their skills and work experience? Pressure!
Getting hired by a company is a competitive process, and you need to make the best sales pitch
you can to attract the attention of the HR person assigned to screen the applications for a
particular position (or, at least, the applications that make it through the software program that
screens résumés for keywords related to the open position). In such a pressured environment,
justifying an action on the basis of an assumption that everyone else is probably doing it starts
to make sense. So, changing dates, job titles, responsibilities, certifications, and/or academic
degrees can now be classified as “little white lies”; but as you can see from our three examples
in this case, those little white lies can come back to haunt you.

1. Does the competitive pressure to get hired justify the decision to boost your résumé?
Why?
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MODULE 3 – Organizational Ethics 10 | P A G E

___________________________________________________________________________
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2. What steps should companies take during the hiring process to ensure that such bad
hires do not happen?
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3. Can you polish your résumé without resorting to little white lies? Provide some
examples of how you might do that.
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4. Your friend has been unemployed for two years. She decides to boost her résumé by
claiming to have been a consultant for those two years in order to compete in a very
tough job market. She explains that a colleague of hers did the same thing to cover a
six-month period of unemployment. Does the longer period of unemployment make
the decision any less unethical? Why or why not?
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5. If you discovered that a colleague at work had lied on her résumé, what would you
do?
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MODULE 3 – Organizational Ethics 11 | P A G E

Additional Readings and References

Additional Reading:
 https://smallbusiness.chron.com/example-organizational-ethics-36755.html
 https://llbcpa.com/gaap-generally-accepted-accounting-principles/
 https://www.shrm.org/about-shrm/pages/code-of-
ethics.aspx#:~:text=As%20human%20resource%20professionals%2C%20we,all%20e
mployees%20and%20their%20organizations.&text=To%20create%20and%20sustain
%20an,a%20positive%20and%20productive%20manner.
 https://www.managementstudyguide.com/ethics-in-human-resource-management.htm

References:
 P. Kotler, “Is Marketing Ethics an Oxymoron?” Marketing Management, November–
December 2004, pp. 30–35.
 Adapted from A. Pomery, “The Ethics Squeeze,” HR Magazine, March 2006.
 M. R. Vickers, “Business Ethics and the HR Role: Past, Present, and Future,” Human
Resource Planning 28, no. 1 (2005).
 The Institute of Internal Auditors, www.theiia.org.
 Curtis C. Verschoor, “Ethical Culture: Most Important Barrier to Ethical
Misconduct,” Strategic Finance 87, no. 6 (December 2005), p. 19.

Image Sources:
https://www.scrum.org/resources/blog/why-does-scrum-team-need-self-organization
https://www.shrm.org/resourcesandtools/pages/organizational-culture.aspx
https://blog.walkme.com/human-resource-management/
https://www.vecteezy.com/vector-art/545112-r-d-research-and-development-word-lettering
https://www.freepik.com/premium-vector/smart-manufacture-factory-conveyor-modern-industrial-
manufacturing-computer-controlled-factory-machines-line-illustration_6287621.htm
https://blog.mailrelay.com/en/2018/10/23/10-common-marketing-challenges-or-problems-that-most-
businesses-will-face
https://habergroup.com/blog/getting-a-better-understanding-of-human-resources
https://www.dummies.com/business/accounting/bookkeeping-all-in-one-for-dummies-cheat-sheet/
https://www.bamboohr.com/blog/conflict-resolution-in-workplace/
https://www.lynda.com/Business-Accounting-tutorials/Finance-Non-Financial-Managers/368915-
2.html

MODULE 3 – Organizational Ethics 12 | P A G E