Management ethics

Need and importance of

management ethics
 Meaning of management ethics
• ‘Management Ethics’ is related to social responsiveness of
a firm. It is “the discipline dealing with what is good and
bad, or right and wrong, or with moral duty and obligation.
It is a standard of behaviour that guides individual
managers in their works”.
• “It is the set of moral principles that governs the actions of
an individual or a group.”
• Business ethics is application of ethical principles to
business relationships and activities. When managers
assume social responsibility, it is believed they will do it
ethically, that is, they know what is right and wrong.
 Ethical Activities

Amongst a host of ethical activities that

managers can perform, a study conducted by
Barry Posner and Warren Schmidt highlights
the following ethical activities observed by
managers
 Ethical Activities
1. The foremost goal of managers is to make their organizations
effective.
2. Profit maximization and stakeholders’ interests were not the central
goals of the managers studied.
3. Attending to customers was seen as important.
4. Integrity was the characteristic most highly rated by managers at all
levels.
5. Pressure to conform to organisational standards was seen as high.
6. Spouses are important in helping their mates grapple with ethical
dilemmas.
7. Most managers seek the advice of others in handling ethical
dilemmas
 Types of management ethics

• Immoral management
• Moral management
• Amoral management
 Immoral Management
• It implies lack of ethical practices followed by
managers. Managers want to maximize profits
even if it is at the cost of legal standards or
concern for employees.
 Moral Management
• According to moral management ethics,
managers aim to maximize profits within the
confines of ethical values and principles. They
conform to professional and legal standards of
conduct. The guiding principle in moral
management ethics is “Is this action, decision,
or behaviour fair to us and all parties
involved?”
 Amoral Management
• This type of management ethics lies between
moral and immoral management ethics.
Managers respond to personal and legal ethics
only if they are required to do so; otherwise
there is lack of ethical perception and
awareness
Two types of amoral management

• (a) Intentional:
• Managers deliberately avoid ethical practices
in business decisions because they think ethics
should be followed in non-business activities.
Two types of amoral management

• (b) Unintentional:
• Managers do not deliberately avoid ethical
practices but unintentionally they make
decisions whose moral implications are not
taken into consideration.
 Guidelines for ethical behavior
1. Obey the law
2. Tell the truth
3. Respect for people
4. The golden rule
5. Above all do not harm
6. Practice participation- not paternalism
7. Act when you have responsibility
 Obey the law

Obeying legal practices of the country is

conforming to ethical values.
 Tell the truth

Disclosing fair accounting results to concerned

parties and telling the truth is ethical behaviour
of managers.
 Respect for people

Ethics requires managers to respect people who

contact them.
 The golden rule

The golden business principle is ‘Treat others as

you would want to be treated’. This will always
result in ethical behaviour.
 Above all do not harm

Even if law does not prohibit use of chemicals in

producing certain products, managers should
avoid them if they are environment pollutants.
Practice participation- not paternalism

Managers should not decide on their own what

is good or bad for the stakeholders. They should
assess their needs, analyze them in the light of
business needs and integrate the two by
allowing the stakeholders to participate in the
decision­-making processes.
 Act when you have responsibility

Actions which cannot be delegated and have to

be taken by managers only (given their
competence and skill) must be responsibly taken
by them for the benefit of the organization and
the stakeholders.
 Approaches to Management Ethics:

There are three approaches to management

ethics:
1. Utilitarian approach:
2. Moral rights approach:
3. Social justice approach
 1. Utilitarian approach
• In this approach, managers analyse the effects of
decisions on people affected by these decisions.
The action rather than the motive behind the
action is the focus of this approach. Positive and
negative results are weighed and managerial
actions are justified if positive effects outweigh the
negative effects. Pollution standards and analysing
the impact of pollution on society is management
ethics code under utilitarian approach.
 2. Moral rights approach:
• In this approach, managers follow ethical code
which takes care of fundamental and moral rights
of human beings; the right to speech, right to life
and safety, right to express feelings etc. In the
context of business organisations, managers
disclose information in the annual reports
necessary for welfare of the people concerned. The
nature, timing and validity of information is taken
into account while reporting information in the
annual reports.
 3. Social justice approach:
• According to this approach, managers’ actions
are fair, impartial and equitable to all
individuals and groups. Employees are not
distinguished on the basis of caste, religion,
race or gender though distinction on the basis
of abilities or production is justified. For
example, all employees, males or females with
same skills should be treated at par but it is
justified to treat employees who produce more
differently from those who produce less
 What is Business Ethics?
Acting in an ethical way involves distinguishing
between “right” and “wrong” and then making
the “right” choice. It is relatively easy to identify
unethical business practices. For example,
companies should not use child labour. They
should not unlawfully use copyrighted materials
and processes. They should not engage in bribery.
 Why should business or companies should
act ethically?
Businesses have great potential to transform
people's lives and to alleviate poverty through
generating economic growth. They produce goods
and services that customers want and they create
jobs. Through paying taxes, they contribute to
government revenue that can finance schools,
hospitals and other public services
The 8 elements of a ethical organization

• Respect
• Honor
• Integrity
• Costumer Focus
• Result-oriented
• Risk taking
• Passion
• Persistence
 Respect
As an entrepreneur building a business, you
need to respect yourself and surround yourself
with people you can respect. Remember, strong
respect doesn't mean you can fly on auto-pilot.
While you can assume your people will do their
job as well as they can, they do need coaching,
training and direction, but respect and trust.
 Integrity
When it comes to integrity, it is impossible to avoid
sounding preachy or parental. Do not lie, steal, or
cheat. Make your word your bond and always stand by
your word. When you are wrong, own up to it and
make good on the deal. Treat others as you'd want to
be treated.
Do not hire or retain people who do not have integrity.
Other employees, customers and vendors will not
trust them. That lack of trust is like a virus; eventually
they will not trust you either.
 Costumer Focus
A company is nothing if it does not have customers. More
to the point, if a company does not produce what people
want and will pay for, there is no point to that company. A
focus on your customers reinforces the responsibility you
have to the market. Your decisions affect your people,
your investors, your partners and ultimately, your
customers. Serving all of these people is part of your
ethical responsibility. Selling your customers short not
only risks compromising your ethics, it also risks the long-
term health of your company
 Results Oriented
Reaching goals in an ethical way without
stepping on anyone’s privilege or rights of any
person you encounter or reaching out the
results by any means necessary, without the
concern of the employees or possible entity that
could be affected by the means of taking up the
process or reaching the outcome of the target
results or goals of a business.
 Passion
Great organizations are comprised of people who have
a passion for what they are doing. These are people
who are working for you for the thrill and challenge,
not merely putting in time to collect a pay-check. They
are excited, driven, and believe that their work and
efforts can make a difference.
Without the passion burning within them, people put
in a minimal effort, getting paid and going home. These
people are role models to others: why work so hard
when you can come in late and leave early?
 Risk taking
So far, you might be feeling that ethical companies are
timid and mousy, scared of doing the wrong thing.
That is simply not true. Organizations that thrive,
prosper and grow do so by taking risks. They do not
stick to the safe path. Great companies innovate, they
think "out of the box", and they try new things. They
re-invent themselves and they reward the risk-takers.
As long as you stick to your philosophical guns, risk-
taking poses no threat to your ethics
 Persistence
People in awesome organizations have the will to persist.
They will keep working even when results are not what
they hoped, or when customers refuse to buy. Their
persistence is tied to their passion for what they are doing
and a belief that this group of people, this company, has
the best chance of "making it" of any company they could
join. And so, they work harder, They continue to take risks.
They behave with honor and integrity. They keep their
focus on the customer's needs and wants. And, they are
not satisfied until they achieve the goals and results that
are expected.
 Honor
Good people are a fundamental part of good ethics. They
are also great ambassadors for doing things right. Give
special attention to strong performers and people who
exemplify the spirit of your organization. Most companies
recognize top achievers and producers. Go beyond quotas
and sales figures. Point out, and show your gratitude to the
people who exhibit exemplary behavior, and who have
made sacrifices on your behalf. These are people who have
helped you be successful, and you need to acknowledge
and honor their contributions publicly, as well as privately.