HRM 502

Lecture-10
Ethics, Justice, and Fair Treatment in Human Resource Management
Definition of Ethics
• Encyclopedia Britannica
The branch of philosophy that is concerned with what is morally good
and bad, right or wrong, a synonym for it is moral philosophy.
• Webster's Dictionary
The discipline dealing with what is good or bad or right or wrong or
with moral duty or obligation.

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Bertrand Russell on Ethics. Similar Dichotomy
Characterizes Ethics
We have in fact, two kinds of morality, side by side. One which we
preach but do not practice and one which we practice but seldom
preach.
Then why bother about ethics and law?

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Relevance of Ethics to Business
• 1. Both ethics and business are based on trust. Ethical conduct
creates virtuous cycle of trust. Unethical conduct unleashes vicious
cycle of distrust.
• 2. Ethics contributes to employee commitment. A 2000 Survey in USA
shows that 79% employees value importance of ethics in
contemporary world. It improves performance of employees.

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• 3. Ethics builds up reputation – it is a marketable commodity. It
attracts investors. Companies perceived by their employees as having
a high degree of honesty (three year total return to shareholder
101%) is much higher than those with low degree of honesty
(comparable return 69%).

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• 4. Ethics contributes to customer satisfaction. A poll of twenty five
thousand citizens in 23 countries found that almost 60 percent of
people focus on social responsibility ahead of brand reputation and
financial factors. Special interest groups force the companies comply
with ethical standard. Boycotting for oil spill, for not using dolphin
friendly nets selling tuna.

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• 5. Ethics contributes to profit. It is a two way relationship. Profits
make spending on ethics easier. On the other hand, ethics enhances
profit. CSR increases profit.
• Sears suffered when its automotive repair shops sold customers the
parts they do not need. Ethical misconduct creates bad publicity, Bad
publicity means bad business.

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Figure: Ethical Relationship of a Firm
Ethics and Fair Treatment At Work
Role of the Employer
The Meaning of Ethics
Ethics refers to the principles of conduct governing an individual or
a group Ethical decisions always involve two things. First, they
involve normative judgments. A normative judgment implies that
something is good or bad, right or wrong, better or worse. “You
are wearing a skirt and blouse” is a nonnormative statement:
"That's a great outfit!" is a normative one.
Ethical decisions also involve morality. Morality is society's accepted
standards of behavior. Moral standards address behaviors of serious
consequence to society's well-being, such as murder, lying, and slander. They
cannot be established or changed by decisions of authoritative bodies like
legislatures. They should override self-interest. Many people believe that
moral judgments are never situational. They say something that is morally
right (or wrong) in one situation is right (or wrong) in another. Moral
judgments also tend to trigger strong emotions. Violating moral standards
may therefore make individuals feel ashamed or remorseful.
It would simplify things if it was always clear which decisions were ethical
and which were not. Unfortunately, it is not. If the decision makes person feel
ashamed or remorseful, or involves doing something with serious
consequence such as murder, then chances are it's line unethical. The
problem for managers is that many decisions seem to fall “on the line.”
Ethics and the Law
Asking, "Is it legal?" is not a perfect guide about what is ethical. You can
make a decision that involves ethics (such as firing an employee) using
what's legal as a guide. However, that doesn't mean the decision will be
ethical. Firing a 39-year-old employee with 20 years' tenure without
notice or cause may be legal, but many would view doing so as
unethical.
Ethics, Fair Treatment, and Justice
Managing human resources often requires making decisions in which fairness plays a role.
You hire one candidate and reject another, promote one and demote another, pay one more
and one less, and settle one's grievances while rejecting another's. How employees react to
these decisions depends, to some extent, on whether they think the decisions and the
processes that led up to them were fair.
Fairness is inseparable from what most people think of as “justice.” A company that is just is,
among other things, equitable, fair, impartial, and unbiased in how it does things. With
respect to employee relations experts generally define organizational justice in terms of its
three components- distributive justice, procedural justice, and interpersonal or interactive
justice.
• Distributive justice refers to the fairness and justice of the decision's result (for instance,
Did I get an equitable pay raise?)
• Procedural justice refers to the fairness of the process (for instance, Is the process my
company uses to allocate merit raises fair?)
• Interactional or interpersonal justice refers to "the manner in which managers conduct
their interpersonal dealings with employees," and, in particular, to the degree to which they
treat employees with dignity as opposed to abuse or disrespect.
Managing Dismissals
Dismissal is the most drastic disciplinary step the employer can take.
Because of this, it requires special care. There should be sufficient
cause for dismissal, and dismissal should preferably occur only after all
reasonable steps to rehabilitate or salvage the employee failed.
However, there will undoubtedly be times when dismissal is required,
perhaps at once.
The best way to "handle" a dismissal is to avoid it in the first place.
Many dismissals start with bad hiring decisions. Using effective
selection practices including assessment tests, reference and
background checks, drug testing, and clearly defined job descriptions
can reduce the need for many dismissals.
The Termination Interview
Dismissing an employee is one of the most difficult tasks a manager
faces at work. During one five-year period, physicians interviewed 791
working people who had just undergone heart attacks to find out what
might have triggered them. The researchers concluded that the stress
associated with firing someone doubled the usual risk of a heart attack
for the person doing the firing, during the week following the dismissal.
Furthermore, the dismissed employee, even if forewarned warned
many times, may still react with disbelief or even violence. Guidelines
for the termination interview itself are as follows.
1. Plan the interview carefully. According to experts at Hay
Associates, this includes:
• Make sure the employee keeps the appointment time.
• Allow 10 minutes as sufficient time for the interview.
• Use a neutral site, not your own office.
• Have employee agreements and release announcements prepared in
advance.
• Have phone numbers ready for medical or security emergencies.
2. Get to the point. Avoid small talk. As soon as the employee enters,
give the person a moment to get comfortable and then inform him
or her of your decision.
3. Describe the situation. Briefly explain why the person is being let
go. For instance. "Production in your area is down 6%. We have
talked about these problems several times in the past three
months, and the solutions are not being followed through. We have
to make a change." Stress the situation, rather than the employee
and his or her shortcomings. Emphasize that the decision is final
and irrevocable.
4. Listen. To the extent practical, continue the interview for several minutes
until the person seems to be talking freely and reasonably calmly about
the reasons for his or her termination and the support package (including
severance pay).
5. Review all elements of the severance package. Describe severance
payments, benefits, access to office support people, and how references
will be handled. However, under no conditions should any promises or
benefits beyond those already in the shortcomings. Emphasize that the
decision is final and irrevocable. support package be implied.
6. Identify the next step. The terminated employee may be disoriented and
unsure what to do next. Explain where the employee should go upon
leaving the interview. It's often best to have someone escort him or her
until the person is out the door.
Role of the Workers
What Shapes Ethical Behavior At Work?
Whether a person acts ethically at work is usually not a consequence of
any one thing. For example, it's not just the employee's ethical
tendencies, since even "ethical" employees can have their actions
influenced by organizational factors. So, the manager's first task is to
understand what shapes ethical behavior, and then to take concrete
steps to ensure that employees make ethical choices. Let's look at the
factors that shape ethical behavior.
Individual Factors
Because people bring to their jobs their own ideas of what is morally
right and wrong, the individual must shoulder much of the credit (or
blame) for the ethical choices he or she makes. For example, one
survey of CEOs explored their intention to engage (or to not engage) in
two questionable business practices: soliciting a competitor's
technological secrets and making payments to foreign government
officials to secure business. The researchers concluded that personal
predispositions more strongly affected decisions than did
environmental pressures or organizational characteristics. Employers'
experience with honesty testing shows that some people are more
inclined toward making the wrong ethical choice.
Self-Deception
Personal tendencies are also important because self-deception has a
bigger influence in ethical choice than most people realize. For
example, “corrupt individuals tend not to view themselves as corrupt.”
They rationalize their unethical acts as being somehow okay. As the
president of the Association of Certified Fraud Examiners puts it,
people who have engaged in corrupt acts “…. excuse their actions to
themselves, by viewing their crimes as non-criminal justified, or part of
a situation which they do not control.”
Organizational Factors
That happens all the time. Several years ago, WorldCom's former chief
financial officer (CFO) pleaded guilty to helping the firm's former
chairman mask WorldCom's deteriorating financial situation. Among
other things, the government accused the CFO of instructing underlings
to fraudulently book accounting entries, and of filing false statements
with the SEC. Why would the CFO do such a thing? "I took these
actions, knowing they were wrong, in a misguided attempt to preserve
the company to allow it to withstand what I believed were temporary
financial difficulties."
The Boss's Influence
The boss often has a determining effect on whether his or her
employees do the ethical thing. According to one report, for instance,
“the level of misconduct at work dropped dramatically when
employees said their supervisors exhibited ethical behavior.” Only 25%
of employees who agreed that their supervisors "set good example of
ethical business behavior" said they had observed misconduct in the
last year, compared with 72% of those who did not feel that their
supervisors set good ethical examples. A study by the American Society
of Chartered Life Underwriters found that 56% of all workers felt some
pressure to act unethically or illegally.
The Organization's Culture
One reason why ethics codes (and even what the boss says) does not
always determine how ethically employees act is that it is not what the
boss or employer says but what they do that’s important.
Organizational psychologists refer to this phenomenon as
organizational culture. Organizational culture is the characteristic
values, traditions, and behaviors a company's employees share. A value
is a basic belief about what is right or wrong, or about what you should
or shouldn't do. ("Honesty is the best policy" would be a value.) Values
are important because they guide and channel behavior therefore
depends on shaping the values they use as behavioral guides. The
firm's culture should therefore send clean signals about what is and
isn't acceptable behavior.
To an outside observer, a company's culture reveals itself in several ways. You
can see it in employees' patterns of behavior, such as ceremonial events and
written and spoken commands. For example, managers and employees may
engage in behaviors such as hiding information, politicking, or expressing
concern when a colleague is bending ethical rules. You can also see it in the
physical manifestations of a company's behavior, such as written rules, office
layout, organizational structure, and ethics codes. In turn, these cultural
symbols and behaviors tend to reflect the firm's shared values, such as “the
customer is always right” or "be honest." If management and employees
really believe "honesty is the best policy," the written rules they follow and
the things they do should reflect this value. JetBlue Airlines Founder, David
Neeleman, wants all employees get the message that, "we're all in this
together." You'll therefore sometimes still find him helping out at the gate, or
handing luggage up into the plane.
Why Treat Employees Fairly?
We've seen that a main way employers foster ethical behavior is by ensuring that
they treat employees fairly. For most people the answer to, "Why treat employees
fairly?" is obvious, since most learn, at an early age, some version of the golden rule.
But there are also concrete, reasons to treat employees fairly. Arbitrators and the
courts will consider the fairness of the employer's disciplinary procedures when
reviewing disciplinary and discharge decisions. Fairness also relates to a wide range
of positive employee outcomes. These include enhanced employee commitment,
enhanced satisfaction with the organization, job, and leader, and to “organizational
citizenship behaviors” (the steps employees take to support their employers'
interests). Job applicants who felt they were treated unfairly expressed more desire
to appeal the outcome. Those who view the firm's testing programs as fair react
more favorably to the selection procedure, and view the company and the job as
more attractive. Employees who view the firm's drug testing program as unfair are
less satisfied and committed.
Role of the Customer
• 1. Compliance of code of conduct: Customers expect that the code of conduct is
complied by the owners of the firms as well as the employees. If there is no code
of conduct, they would expect that the firm will have a code of conduct soon or
comply with the code of conduct of similar other firms.
• 2. Fair treatment: Customers expect fair treatment. Fair treatment can be ensured
through two way communication. Opportunities for two-way communication
effect our perceptions of how fairly we're being treated. One study concluded that
three actions contributed to perceived fairness in business settings: engagement
(involving individuals in the decisions that affect them by asking for their input and
allowing them to refute the merits of others' ideas and assumptions); explanation
(ensuring that everyone involved and affected understands why final decisions are
made and the thinking that underlies the decisions); and expectation clarity
(making sure everyone knows up front by what standards they will be judged and
the penalties for failure). For this reason, many employers take explicit steps to
facilitate communications.
Role of Others
• 1. Goodwill or reputation: Ethical, just, and fair treatment enhances
the goodwill of a corporation. This enhances the asset value of the
corporation. Thus the neglect of ethics, just, and fair play is injurious
in the long run for a company.
• 2. Interaction with other firms: Unless a firm is a monopoly, it has to
compete with other firms. In this competition, firms which have
ethical, just, and fair treatment are likely to be more successful than
others.
How to Enforce Ethics in a Corporation
Ethics office has to be established.
• 1. The first step is the appointment of an ethics officer who will report
directly either to the MD or to the Board of Directors.
• 2. The first work of an ethics officer is to prepare a code of ethics for
the company. If your company does not have any code of ethics, you
can borrow from the following sources. (a) code of ethics of similar
firms, (b) code of ethics of the chamber of the business, (c) code of
ethics of the national chambers, (d) code of ethics of international
chambers. Every company must have its own code.
Advantages of Code:
• Employees know of their duty and customers know about their rights.
• Courts use code of conduct in compensation cases. If a firm does not
have any code of ethics, court will have a low opinion about the firm.
Disadvantage of Code:
• No code is enough. New situations are continuously developing. The
code should be continuously updated. This is not always possible. This
is why the employees should be careful. They should not only follow
the codes scrupulously, but they should go beyond the rules to meet
the ethical concerns.
• 3. Training: Ethics office should train all employees on ethics.
• 4. Ethics office should supervise the enforcement of the code of
ethics. Delinquents should be punished, super achievers should be
rewarded.
• 5. Ethics Audit: Ethics office should organize periodical audit by
outside auditors of the ethical functions of the firms. The following
functions have to be performed by the ethics office.
 a. Preparation of TOR of ethics audit
b. Appointment of the auditor
c. Assisting the auditors in collecting information
d. Analysis of audit objections and recommending corrective actions to meet
audit objections to managing directors.
7. Explaining the rules of the code to the employees. In case rules are
inadequate, new rules have to be framed. There should be
continuous improvement of the code.