Employees and Business Ethics

Dealing with employees is an area where we are

most likely to encounter ethical issues and
dilemmas.
Employee related ethical problems are unavoidable
for contemporary managers. Such problems involve
starting from the question of fair wages and
conditions to sexual harassment in the workplace,
or taking advantages of company resources, for
instances the phone or internet for personal use.
• This issue was raised in the past by many thinkers in different
periods. In the nineteenth century, Charles Dickens in his novel
Hard Times, explored the exploitation and poor working
conditions.
• Karl Marx , Lenin , and even Mao developed their ideas
presumably with the improvement of workers living conditions
in mind.
• These days such issues are treated differently than in the
past( government used to deal with this). Now there is a
tendency to leave the solution of theses issues to corporations
themselves. Thus employee issues have become a matter of
growing interest and concern.
• Employees as stakeholders:
Like shareholders, employees take on a role among
stakeholders as they are closely integrated into the firm.
Employees in many cases constitute the corporation.
This contribution as well as fact that employees benefit
from the existence of their employers and get affected
by the success or otherwise of the company qualify
employees getting some kind of definite stake in the
organization.
• There are two sides of the relationship between
employees and employer: legal and economic .
• On the legal level, there is some sort of contract
between the two parties. The contract stipulates
the rights and duties of both the parties.
• The legal relationship is strongly embedded in a
dense network of legislation which provides
solutions to a large number of issues between
the two parties.
• The economic aspect of ‘firm’ and employees
relationship is characterized by some externalities by
both sides- by which we mean that there are cost to
each that are not included in the employment contract.
• These hidden cost can lead to situations of ‘asset
specificity’ i.e., employees invest time and effort in
developing ‘assets’ specific to a particulate employer,
and vice versa. Such ‘cost specificity’ can cause a moral
hazard for both parties, opening up a range of moral
issues.
• Examples from the perspective of an
employee include investing in a new job by
moving to a new town, including things like
shaking up the circle of friends, finding new
schools for kids, etc.
• The English synonym of “ Making a living’
involves the same theme, which means that
‘making a living’ for having a job.
• Employers, on the other hand, also face similar elements of
moral hazards from their employees. An example is the
France trader Jerome Kerviel ( discussed in Ethics in Action,
pp.162-3), who states that companies do not have complete
control of their employees, and can sometimes find out only
by hind-sight whether they actually do their job properly.
• Especially in IT or other knowledge intensive industries,
employees have considerable power due to their specialized
knowledge, and employers face the risk that some of their
valuable assets might remain underused or even be
poached (stolen) by competitors.
• The moral hazard is normally greater for
employees since they are the more dependent
and weaker party.
• The moral hazards are subject to legislation,
but legal loopholes and exploitation make
legislation ineffective.
• In this situation ethical consideration becomes
inevitable in addressing the said hazards.
• Ethical issues in the firm-employee relation:
Employees are managed by the so called
‘human resource’ department. The term ‘human
resource management’ and its implications have
been a subject of intense debate in business
ethics ( Barrett 1999, Greenwood 2002).
• The second maxim of Immanuel Kant requires
us to treat humanity always as an end and
never as a means only.
The so called idea of ‘human resource’ treat humans as
‘resource’, which means that it treats humanity as
means, not as an end.
Consequently employees are subject to a strict
managerial rational of minimizing costs and
maximizing the efficiency of the resource.
The difference between HRM policies and the reality is
apparent. For example, in the name ‘new working
patterns the HRM policy suggests actually to offer
part time jobs in stead of full time jobs.
• For Kant, it is human dignity that forbids treating
employees as a means only, and it is exactly this
duty that posits the main ethical boundary for
the management of the employee.
• Human beings deserve respect and are entitled
to some basic rights. Thus the central ethics
issues in HRM can be framed around the issue of
rights and duties of the employees (Rowan 2000).
Employee right Issues involved
Right to freedom from discrimination Equal opportunities, reverse
discrimination , sexual and racial
harassment
Right to privacy Health and drug testing, electronic privacy
and data protection
Right to due process Promotion, firing
Right to participation and association Councils and trade unions
Right to healthy and safe working Working conditions
conditions
Right to fair wages pay
Right to freedom of conscience and Whistle blowing
speech
Right to work Fair-treatment in the interview, Non-
discriminatory rules for recruitment
Employees duties
Duty to comply with labor contract
Duty to comply with the law
Duty to respect the employer’s property
issues involved
Acceptable level of performance , work
quality, loyalty to the firm
Bribery
Working time, unauthorized use of
company resources for private purpose,
fraud, theft, embezzlement
( misappropriation)

Figure : Right and duties of employees as stakeholders of a firm

• Here rights are deduced from the concept of human
rights and theses are codified in various acts and
laws. Codification of workers rights is advanced in
Europe. Nevertheless the following four points are
overlooked by European codification of rights:
• (i) Codification of rights is an ongoing process. Law
relating to such codification is left open until certain
issues are brought into court proceeding.
Corporations usually take the advantage of such
loopholes.
• (ii) The legal framework regarding worker’s
rights still varies quite significantly in Europe.
For example, in UK the statutory minimum wage
was introduced during Blair government, while
it was started in other EU countries long before.
• (iii) Workers rights tend to be less accepted- let
alone codified - than at home. For example ,
MNC’s had their operation outside Europe, but
workers right was less accepted there.
• Discrimination:
• Discrimination in business occurs when
employees receive preferential (or less
preferential) treatment on grounds that are not
directly related to their qualifications and
performance in the job.
• The most common base for discrimination in
the work places are race, gender, marital status,
age, religion, disability, and nationality.
• Many organizations now claim that they avoid
discrimination and address the issue of diversity through
recruiting employees from a range of religious , racial,
national, and cultural groups.
Discrimination in essence is violation of the second
principle of John Rawls’s theory of justice that ‘Social and
economic inequalities are to be arranged so that they are
both (a) to the greatest benefit of the least advantaged,
and (b) attached to offices and positions open to all
under conditions of fair equality of opportunity.’
• There are inequalities between individuals ,
but the reason for choosing one person over
the other have to be based on qualifications
that in principle could be fulfilled by everyone.
• Making gender or race a criterion for a
particular position would exclude certain
peoples’ right from the start and would
certainly constitute an act of discrimination.
Say, for instance, the owner of an Indian super market in
Rotterdam was looking for a manager who speak Hindi or Urdu
fluently, who had a reasonable knowledge of Indian culture , and
had knowledge of current consumer preferences in the Dutch
Asian products market.
Although one might reasonably consider that this would mean that
it would be perfectly acceptable to advertise specifically for an
Indian manager, this would in fact be discriminatory.
Certainly, these criteria might be most likely met by a certain ethnic
group, but it is in principle possible for all potential applicants to
attain these qualifications, and so they should have an equal
opportunity to apply.
 Problems of (Hidden ) discrimination still persists:
Even though overt form of discriminations have reasonably
successfully been addressed, problems of this nature still
persists.
• In the summer in 2009, the cloth retailer Abercrombie &
Fitch lost a lawsuit filed by a women, who was removed from
working on shop floor. The reason for removing her was that
she wore an arm prosthesis which she covered by wearing a
cardigan.
• The cloth retailer lost the lawsuit not because it treated the
woman differently but that the company did not make an
exception from their policy to take account of her disability.
• Issues of diversity include concerns such as
age discriminations, the location of stares
impair the ability of physically disable
employee to do their jobs, the use of hard-to
read signs that can negatively impact those
with sight disability ( dyslexia) , facing
discrimination due to health problems e.g.,
AIDA/HIV.
• Age discrimination is another concern. In the
UK there are evidences that companies had
laid off staff between the age of 45 and 49.
Due to pension rights, it is more costly to lay
off workers beyond the age of 50.
• Some companies even run the risk of an
employment tribunal, given that the fine for
unfair dismissal is less costly than paying
redundancies for older worker.
• Another issue is gender discrimination. Despite success
in outperforming men educationally, women still, on
average, receive lower wages for the same job. They are
under represented in top management positions as well
as in the boardroom.
• Unequal career opportunity is another issue. In 2004,
the investment bank Morgan Stanley had to face a
lawsuit by a female employee. The acquisition was that
the female employees were barred from the key client
meetings. It is also called institutional discrimination.
Some other issues of Diversity considerations:
Sexual and racial harassment :
Physical, verbal and emotional harassments need to be taken into account, but
regulators still tend to be quite reluctant to take up these issues. Recently code
of practice and diversity programmes are introduced to tackle theses issues
( which includes office romance, joking, and mild from of harmless
harassments) .
Equal opportunities and affirmative action:
Is legislation enough to tackle unfair discrimination?
The answer is no. Thus many companies have sought to tackle discrimination
through the introduction of so called equal opportunity or affirmative action
programmes. For example, they do it through ensuring open advertisement,
and setting out specific criteria for jobs , and ensuring a structured assessment
of candidates , avoiding all sorts of discriminations.
• Affirmative actions( AA):
AA are the actions that target those who are
under represented, e. g, women, disable or
racial minorities. Four main areas of AA:
(i)Recruitment policies, (ii)fair job criteria,
(iii)training programme for discriminated
minorities, and (iv) promotion to senior
position.
• Reverse discrimination:
• At some point AA can itself be deemed discriminatory
because it disadvantages those thought to already be in
an advantaged position. For example ‘quota system’
select less qualified candidate. In cases like this, people
suffer reverse discrimination.
• Critics think that distributive justice is more defendable
here. For people promoted on the basis of gender or
color may well be discredited among their peers.
• Employee privacy :
• It involves issues such as physical privacy ( surveillance camera
in employees private rest areas), social privacy, informational
privacy, psychological privacy.
• Health and drug test ( see pp. 304-306)
• Electronic privacy and data protection ( pp. 306-307)
• Due process and lay offs (pp. 307-10)
• Employees participation and association:
• Employees are more than so called human resources.
Four Points/levels of participations (delegation, information,
consultation, and co-determination)
Some other issues :
• Working conditions
• Work-life balance ( excessive working hours
and presenteesim)
• Flexible working patterns, Fair wages
• Freedom of conscience and speech in work
place
• Absolutism and relativism :
If an ethical principle were to be considered
valid, it had to be applicable anywhere
(Absolutism ).
No one view of ethics can be said to be right . For it
must always be relative to the historical, social,
and cultural context ( Relativism)
The way out here is human rights view( ratified in
1948 through the UN).
• The corporate citizen and employee relations:
Relations are here framed in terms of
collection of rights.
Role of government and firms/ corporations:
The framework of ‘protect, respect, remedy’ is
useful for delineating responsibilities of
corporation and government.
• Towards sustainable employment:
• In terms of sustainability, there have to be some sacrifices or
trade offs protecting employees and promoting various
aspects of sustainability.
• One the other hand, it is also possible to determine some link
to protect individual rights and the notion of sustainability.
• Sustainability in the economic (got employed in a useful work
and feeling respected as human beings), social (stabilization
of social relationship) and environmental/ecological( making
no use of workforce, which is tantamount to a major waste of
material and energy) senses are to be considered.
• There are 3 ways in which these problems can
be addressed ( both theoretically and
practically):
(i)Re-humanized workforce
(ii) Wider employment
(iii) Green jobs.
 RE-humanized workforce:
• The alienation of the individual worker in the area of
industrialized mass production has been discussed by
Karl Marx.

• The suggestion is that the impact of technology, work

process, and the division of labour have meant that
many employees just repeat the same monotonous
and astonishing actions over and over again , resulting
in there being little real meaning, satisfaction, or
involvement in their work.
• Whether in factories, fast food restaurants, or
call centers, much employment has been
reduced to a series of meaningless ‘McJobs’
subject to intense management control, and
with little chance of real engagement or job
satisfaction.
• Thus , although our rational way of organizing work
can , and have, brought us tremendous efficiencies
and material wealth, they have also created the
prospect of a de-humanized and de-skilled workforce.
• Re-humanizing workforce: By empowering the
employees the work places are tried to re-humanize.
This includes ‘job enlargement’ ( giving employees a
wider range of task to do) and ‘job enrichment’
( giving employees a larger scope for dealing how to
organize the work).
• Rather than mass production, the worker can
be engaged with more creative and meaningful
work , utilizing human centered technology.
• However, the success of such scheme has been
contested, suggesting that the ‘humanized
approach’ might be more appropriate and
effective in some cultures than others.
• Wider employment: by reducing working time for all
workers we can off. For more read page 330. avoid
laying
• Green jobs: Greener workplace includes incentivizing
car pooling, by introducing paperless office, substituting
business travel by videoconferencing , increasing
recycling, moving into low energy use office space .
• The other option includes home based teleworking. It
addresses economic, social and ecological concerns.