Choosing between Ethics and profit: A Concern of value choices

 

Stella Marie Andrea R. Llacuna

Divine Word College of Laoag

Abstract

Business has been an avenue for people in making and gaining money for their necessities or for their own desires as well as an instrument to contribute to the economy. In business industry, ethics, and business may not always be connected to each other, thus, creating a gap leading people to unfollow their moral standards because of profit maximization and economic and personal interests. However, there are circumstances wherein maximizing profit can still make people stick to their moral principles and standards i.e. business ethics in leadership wherein code of ethics is being exercised by the employees and to flourish personal moral principles in order for him or her to distinguish what is morally right and wrong in the business industry even when there is or there is nobody watching them. In addition, managers become the model and definition of good and as an outcome, employees follow the lead and example of their head. Employees are known for their hardworking and contribution to profit maximization to accompany, thus, when the company satisfies its employees, they will remain loyal and will always respect the company. The service profit chain explains how an employee and customer contribute to the revenue growth of a company. Because of the employees’ satisfaction, loyalty, productivity, service quality, and capability, they give service value to the customers which is one of the keys to customers’ satisfaction and loyalty.

Keywords: Ethics, business ethics, leadership, morale

I.                   Introduction

Conflict of interest continues to be the underlying challenge in the decision-making of the business. This dilemma has arisen between the two apparently inherently conflicting terms in business, ethics, and economic interests. By dissecting the two terms, business often deals with self-interest, while, on the other hand, ethics takes into account the views and ideas of others. Therefore, self-interest and interest for other people differ from one another, giving the conclusion that they will come up with a different outcome. Hence, ethics and business contradict one way or another.

In today’s modern era, people nowadays have excessive desire and needs and one of them is making money that can be a source out from whatever method that is possible or somewhat people called “by hook or by crook”.  Morality gives no importance in business because man is naturally greedy, rarely content in what they have achieved and they still eagerly want more power and more money (Hamilton & Mickletwait). As the pressure goes on in the business world, managers often ignore ethics.

Maximizing profit without a double is the main objective within the business world. A recent report from Ed Miliband stating that Britain’s bosses are prioritizing profits over principles. However, there are also studies that business is considered to be successful if it earns profits, but profit is just one objective that a business seeks to achieve; other pressing objectives that may emerge over time. These objectives may include growth, response to changes in the environment, or societal responsibilities (Leahy, 2010)

There are also important factors that contribute to maximizing profits in the business, such as specialized management teams, efficient and effective workforce, and consistent demand of consumers, valuable stockholders, and the overall users over the financial statements and its relation to business ethics.

Business Ethics in Leadership

The leadership and values of management hold the company’s framework. Management should set the tone from the top to establish a code of ethics to be followed and observed by the employees. According to Linda Trevino and her colleagues, a combination of being a moral person and a moral manager creates ethical leadership. Being a moral person innate trait such as integrity, honesty, and trustworthiness. To elaborate, integrity demonstrates sound moral and ethical principles and does the right thing, no matter who's watching or under any situational circumstances especially when the profit is at stake. Integrity is an ingredient in which co-workers build relationships and trust. In addition, in order to be able to make good decisions ethically, an individual needs to carefully develop his or her personal set of standards or values, a personal code of conduct, or integrity. Personal standards enable an individual to think through a decision with a clear rationale in mind.

All of the abovementioned traits will be melded to create a moral leader in a business. Being a moral leader leads employee by example and guide them in making decisions that are not only beneficial to them as individuals, but also to the organization as a whole. It also means providing rewards and discipline for the ethical and unethical choices made by others, so that a clear message is sent as to what behaviors are and are not acceptable in an organization or situation. In addition, moral management means the communication of ethics and values openly, explicitly, and frequently.

In conclusion, when all of this is well implemented and carried out with a resounding theme of business ethics from the top-down, each facet has a greater potential for a long-lasting positive effect in the company whether short or long term and further stability.

Business Ethics and Employee Morale

When the business ethics are encouraged by management and the managers lead by example, their employees will follow in their footsteps. Employees tend to make better and relevant decisions along with business ethics as their guiding principle, this increases their efficiency and effectiveness in the company also with focusing on their work exponentially.

According to Dalal, that if employees were satisfied with the fairness of the work environment, they would want to reward the company in the form of the Organizational Citizenship Behavior (OCB). OCBs are essentially "discretionary behaviors which are not part of the formal role requirements of the employee, but which nevertheless, promote the effective functioning of the organization" (Organ, 1988, p. 4).

When the employees work with integrity and fairness to their responsibilities and duties, the whole organization benefits. With a great environment, the employee’s productivity increases when fewer distractions are present and morale is high, and this leads to greater profit levels for the company. In addition, employee happiness has a great impact on turnover and retention having a greater chance that employees will respect their organization that they are affiliated with and stay loyal with the organization.

Successful companies stay on top because they manage their service profit chain well. Based on the concept of the service-profit chain, a company should establish a link between employees and customer experience on the one hand and create profit and growth on the other. Chain links are as follows: profits and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of the satisfaction of the customer. Satisfaction is largely affected by the value of the services provided to customers. Value is created by employees who are satisfied, loyal and productive. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.

II.                Conclusion

Most company uses the formula of maximizing profit by reducing costs and increasing sales. It is somewhat true but only for short term. When a company only focuses on maximizing profits without taking any considerations on how they earned them even if it is done unethically, it will result to a ripple effect to its stakeholders as well as the productivity level of employees will decline for having minimum benefits. However, when a company focuses on its corporate social responsibility, they focused on long term goals rather than short term goals. Rather than concentrating on how to maximize profits in any possible way they are more likely focused on the welfare and happiness of their employees, customers, and stakeholders and have a positive impact and good reputation for the company.

Therefore, there is no trade-off between ethics and profits. When ethics is being well maintained in a company, the profits and benefits will follow. Balancing ethics and profits give a company a strong foundation and sustainable growth.

III.             References

Dalal, R. S. (2005). A meta-analysis of the relationship between organizational citizenship behavior and counterproductive work behavior. Journal of Applied Psychology, 90(6), 1241-1255.

Groom, B. (2011, October 4). Bosses put profit before ethics, says survey. Financial Times.

Hamilton, S., & Micklethawait A. (2006). Greed and Corporate Failure: The lessons from recent disasters. Houndmills, Basingstoke: Palgrave Macmillan.

Heskett, J. L., Sasser, E.  Jr., & Schlesinger, L.A. (1997). The Service Profit Chain. New York, NY: The Free Press.

Leahy, C. (2010). Corporate Responsibility. World Congress of Accountants.

Organ, D. W., (1988). Organizational citizenship behavior: The good soldier syndrome. Lexington, MA: Lexington.

Treviño, L. K., Hartman, L. P., & Brown, M. (200) Moral person and moral managers: How executives develop a reputation for ethical leadership. California Management Review, 42 (4),128–142.

 

 

 

 

Leader and Ethical Role Modeling for Employees

 

Julliene Kay B. Saclayan

Divine Word College Of Laoag

ABSTRACT

 The paper addresses the ethical relationship between employees and management. The objective of this research is to show how to enhance the relationship between manager and employee. This research will describe the roles of managers and employees as they achieve the strategic goals of organizations. Despite growing professional and academic interest in business ethics, moral lapses continue in the business sector, which suggests a need to rethink the efficiency of existing ethical strategies. That is, top management's efforts to promote ethical behavior among employees tend to focus on the implementation of explicit formal mechanisms, whereas in practice, more informal elements that communicate the true attitude toward ethics may be more useful and necessary. Thus top managers must work actively to make their ethics evident to influence the ethical behaviors of employees. Without a perception of ethics at the top, formal mechanisms likely fail to result in a more ethical workforce.

Management is "The art of getting the things done through people"; this is the phase of Mary Parker Follett (1868-1933). Just only several words, Mary Parker has depicted the relationship between management and people. If we want to get the thing done, you have two choices. One is you do it yourself. The other way is to organize someone to accomplish it. People are somewhat complicated. However, you should understand if you work with them.

An organization is a collection of people working together to achieve a common purpose (John R. Schermerhorn, Jr., 2005). With this explanation as a whole, Organizational Management can be interpreted as "The art of getting the things done through a collection of people working together to achieve a common purpose".These findings have critical practical implications, as well as the promise for further research.

Keywords: Ethical Role of the Manager; Ethical Leadership; Top Management; Role Modelling; Responsible Management.

INTRODUCTION

The employer-employee relationship should not be looked at simply in economic terms. It is a significant human relationship of mutual dependency that has a great impact on the people involved. A person's job, like a person's business, is highly valued possessions that pervasively affect the lives of the employees and their families. With stakeholders everywhere, the relationship is laden with moral responsibilities. Though the pressures of self-interest are very powerful and compelling, both workers and bosses should guide their choices by basic ethical principles including honest, candor, respect, and caring.

  Every day, managers and employees need to make decisions that have moral implications. And those decisions impact their companies, company shareholders, and all the other stakeholders in interest. Ethically conducting business is incumbent upon everyone in an organization for legal and business reasons. And as a manager, it's important to understand your ethical obligations so that you can meet your company's expectations as well as model appropriate behavior for others.

Despite great attention to and efforts by academics, professionals, and society to avoid immorality in the business sector, moral scandals have not ceased. Ethical failures in the business sector (e.g. bribery, falsifying reports, stealing, deceptive advertising) appear in media reports, many of which point to the involvement of high levels of management in the immoral acts. The study and understanding of ethical behaviors in organizations thus must advance if we are to minimize further ethical failures in business.

Considerable efforts have aimed at implementing ethical standards in international business spheres (Weaver, Treviño & Cochran, 1999; IBE, 2008), yet most of the companies that gained reputations as "rotten apples" had in place organizational procedures, mechanisms, or systems to promote ethics (Sims & Brinkman, 2003).

Ethical Role of the Manager

In a broad construction of the ethical role of the manager, managing and leading can be said to be inherently ethics-laden tasks because every managerial decision affects either people or the natural environment in some way—and those effects or impacts need to be taken into consideration as decisions are made. A narrower construction of the ethical role of the manager is that managers should serve only the interests of the shareholder; that is, their sole ethical task is to meet the fiduciary obligation to maximize shareholder wealth that is embedded in the law, predominantly that of the United States, although this point of view is increasingly accepted in other parts of the world. Even in this narrow view, however, although not always recognized explicitly, ethics are at the core of management practice. The ethical role of managers is broadened beyond fiduciary responsibility when consideration is given to the multiple stakeholders who constitute the organization being managed and to nature, on which human civilization depends for its survival. Business decisions affect both stakeholders and nature; therefore, a logical conclusion is that those decisions have ethical content inherently and that managerial decisions, behaviors, and actions are therefore inherently ethical. Whenever there are impacts due to a decision, behavior, or action that a leader or manager makes, there are ethical aspects to that decision or situation. While some skeptics claim that business ethics is an oxymoron, the reality is that decisions and actions have consequences and that reality implies some degree of ethics, high or low. Thus, ethics and the managerial role cannot realistically be teased apart.

 Ethical leadership

In the development of the ethical leadership framework, Brown and Treviño (Brown et al.,2005; Brown and Treviño, 2006; Trevion et al., 2003) proposed that ethical leadership is comprised of four components. First, by engaging in behaviors that are normatively appropriate in the eyes of subordinates such as exercising responsibility and showing respect to others, ethical leaders are viewed by subordinates as legitimate and credible role models (Brown and Treviño, 2014). Second, ethical leaders engage in two-way communication with their subordinates about ethical issues. They not only talk to subordinates about ethics and stress the importance to them of acting ethically, PR but also encourage subordinates to voice their concerns and provide feedback (Avey et al., 2012; Brown and Treviño, 2006), thus helping develop the employee's ethical mindset for future moral-laden interactions and decisions (Zhu et al., 2016). Third, ethical leaders establish ethical standards and ensure their subordinates abide by those standards through rewarding or disciplining subordinates based on their ethical conduct or misconduct (Trevion et al., 2003). Finally, ethical leaders take into account ethical principles when making decisions and ensure that the decision-making process is observable by subordinates (Brown and Treviño, 2006). Taken together, this presents a narrative akin to the social learning process (Bandura, 1977) whereby employees are observing, internalizing, emulating, and then being rewarded for engaging in ethical behaviors such as CCBs, which has been shown to influence employees' ethical mindsets ( Jennings et al., 2015; Miao et al., 2019; Zhu et al., 2016). As highlighted in recent meta-analytical work (see Bedi et al., 2016; Hoch et al., 2018), growing research over the last decade has examined the relationship between ethical leadership and employees' work outcomes including job satisfaction, organizational commitment, job engagement, job performance, and counterproductive work behaviors. Also, ethical leadership has been found to enhance employees' organizational citizenship behaviors (OCBs) (e.g. DeConinck, 2015; Mayer et al., 2009). OCBs are discretionary behaviors on the part of employees that enable the team to achieve its mission and goals (Graham, 1991). CCBs are similar to OCBs as they are both prosocial behaviors that seek to benefit others, however, the recipients of these behaviors differ. For CCBs they are focused on that outside of the organization (i.e. charities) (Rodell et al., 2016), whereas OCBs are directed at members of the team or organization (i.e. co-workers) (DeConinck, 2015; Lau et al., 2016).

Top Management Sanctioning Behaviour

Traditionally, the tactics used by top management to reduce immorality in their companies have involved the implementation of organizational and formal mechanisms (Ford & Richardson, 1994; O'Fallon & Butterfield, 2005), such as codes of conduct, training initiatives, ethical officers, ethical auditing, and reporting or ethics ties to the performance system. According to previous research, these tactics also are some of the most commonly used instruments in European companies, especially in the Spanish business context (Guillen, Melé & Murphy, 2002). A system of rewards and punishments based on ethical actions has been cited as a necessary element for achieving a reputation for ethical leadership (Treviño, Hartman & Brown, 2000; Treviño & Nelson, 2004). Such a system plays an important role in social influence processes; as Bandura (1977) argues, a person behaves by the negative or positive consequences that attach to his or her behaviors, such as avoiding behaviors linked to negative consequences and acting in ways that lead to positive consequences. Therefore, sanctioning unethical behaviors should encourage ethics among employees. Furthermore, this mechanism fulfills an informative, motivating, and reinforcing function in the business organization (Bandura, 1977). Top management efforts to discipline unethical behavior should offer an effective strategy to encourage ethical behavior.

 Top Management Role Modelling

 Even if formal mechanisms are valid and effective in improving the ethical quality of a business organization (Ford & Richardson, 1994; O'Fallon & Butterfield, 2005), if ethics are absent at the top management level, an ethical organizational climate might not be easily achievable (cf. Schroeder, 2002; Weaver, Treviño & Agle, 2005). Top management's behavior thus affects the level of ethics among employees. In the role set theory (Merton, 1957), a referent's level of formal authority determines his or her influence on an employee's behavior and attitudes. Because top managers have great formal authority, their behavior, values, and decisions should exert strong influences over employees' ethical behaviors. It may be difficult for employees to perceive the personal behaviors of top managers directly, but the top management level likely develops (even if unconsciously) a reputation for ethical or unethical, hypocritical, or ethically neutral leadership (Treviño & Nelson, 2004). For example, rumors about decisions, strategies, and behaviors (both in private and corporate settings) by top managers likely circulate throughout the organization and contribute to their ethical image. Therefore, top management needs to develop a reputation for ethical leadership if ethical behavior among employees is desired to be encouraged. Ethics must start at the top; even if the firm implements various formal, ethics-related mechanisms, they cannot truly influence employees' ethics if those mechanisms do not match the ethical image at the top (cf. Schroeder, 2002), in which case top management instead could be perceived as hypocritical (Treviño et al., 2000; Treviño & Nelson, 2004). Thus top management ethicality is one of the most important determinants of company ethics (Zabid & Alsagoff, 1993; Vitell, Dickerson & Festervand, 2000), and making such ethics evident to all organizational members should strongly affect the ethical behavior of employees.

 Responsible Management

 Responsible management is defined as managerial practices that integrate and assume responsibility for the triple bottom line (sustainability), stakeholder value (responsibility), and moral dilemmas (ethics)‖ (Laasch and Connaway, 2015: 25). Within this quickly emerging field of research, there is a move towards a more holistic approach to disparate aspects of organizational activity, which used to be researched separately. A new research topic called the transdisciplinary of Sustainability, Responsibility, and Ethics (SRE) (Laasch and Moosmayer, 2015; Laasch, 2016), is gaining increasing attention from scholars, with the view to establishing a more accurate approach to responsible business practices and management. As business organizations function with the approbation of society (Donaldson and Dunfee, 1994), they need to adapt to the changing societal conditions, for instance, by adopting a new conception of market success where traditional financial bottom-line indicators are being complemented with social and environmental factors‖ (Hilliard, 2013: 365). Responsible management provides a good answer to such challenges by promoting practices that lead to prime management‖. Prime management refers to superior management practice leading to performance that, at the same time, is socially, environmentally, and economically sustainable; optimizes stakeholder value, and leads to moral excellence‖ (Laasch and Conaway, 2015: 27).

To be able to advance such a holistic perspective, the proper use of the basic components of responsible management is crucial. To this end, we address in this chapter the ethics component of responsible management, both in terms of what ethics is and how to manage it. Based on our examination of the literature, we focus on two issues. First, we present an overview of the various ethical criteria for the organizational and managerial levels. Second, we map the mechanisms, strategies, and interventions that managers may use to embed ethics within organizations. Ethical and unethical behavior in organizations is influenced both by individual behavior and organizational activity (Treviño and Youngblood, 1990). Notably, ethical problems negatively impact ―the trust and reputation of both leaders and organizations‖ (Kalshoven, Hartog, and Hoogh, 2011: 51). We thus argue that developing responsible management research as a holistic approach necessitates taking a step further and addressing not only ethical management at the individual level and ethics management at the organizational level, but also, their interconnections, how they complement each other, and how they may enable the responsible business practice.

 CONCLUSION

 In the wake of corporate scandals over the past several years, most organizations have written or updated their Codes of Conduct and Ethics Rules. The first thing the manager should do is read and understand those documents. That means understanding the actual words used in the documents along with the spirit and the intent behind the words. The second thing to do is to be sure that your staff also reads and understands the documents and can come to you with any questions.

If you act consistently with Codes of Conduct and Ethics Rules, you provide a foundation of trust in your relationships with others. Part of your goal is to show others what it means to make ethical decisions. The other part of your goal is to encourage others to come forward if they suspect that someone is not acting ethically. As a result, your organization will be in a position to look at that behavior and stop it before it is out of control or worse, crosses the line into illegal conduct.

Society is changing and so are the institutions that are part of our social reality. If they are to remain competitive in the long run, business organizations need to respond to the growing demands of society (Hilliard, 2013) through wise managerial practices. As ethical, social, and environmental performances are currently, under the spotlight of public opinion, financial performance is no longer enough to ensure business success. To be able to achieve long-term, sustainable performance, business organizations need to operate ethically and be socially and environmentally sound while they aim for financial gains (Constantinescu and Kaptein, 2019). This calls for a new managerial perspective for business organizations, one that is robust and visionary enough to lead towards such performance. The umbrella concept of responsible management (Buckingham and Venkataraman, 2016; Ennals, 2014; Haski-Leventhal, 2018; Hibbert and Cunliffe, 2013; Laasch, 2016; Laasch and Conaway, 2015; Ogunyemi, 2012) encompasses these dimensions of an emerging type of management practice. The growing body of research supporting managerial integration of ―triple bottom line (sustainability), stakeholder value (responsibility), and moral dilemmas (ethics)‖ (Laasch and Connaway, 2015: 25) puts forward the new transdisciplinary of Sustainability, Responsibility, and Ethics (Laasch and Moosmayer, 2016; Laasch, 2016). One aspect emphasized by current research on responsible management is the need to ensure that ethical decision-making processes are adequately responsive to moral dilemmas and that they strive for moral excellence in managerial practice (Laasch and Conaway, 2015).

 REFERENCES

Ajzen, I. & Fishbein, M. (1980). Understanding Attitudes and Predicting Social Behaviour. Englewood Cliffs, NJ: Prentice-Hall.

Arnold, D. G. (2010). Transnational Corporations and the Duty to Respect Basic Human Rights. Business Ethics Quarterly, 20: 371-399.

Aronson, E. (2001). Integrating Leadership Styles and Ethical Perspectives. Canadian Journal of Administrative Sciences, 18: 244-256.

Beams, J.D., Brown, R.M. & Killough, L.N. (2003). An Experiment Testing the Determinants of Non-Compliance with Insider Trading Laws. Journal of Business Ethics, 45 (4), 309-323.

Cavanagh, G. F. (2005). American business values with international perspectives (5th ed.). New York: Prentice-Hall.

Cavanagh, G. F., Moberg, D. J., and Velasquez, M. The ethics of organizational politics. Academy of Management Review vol. 6 no. (3)(1981). pp. 363–374.

Ennals, R. (2014). Responsible Management: Corporate Social Responsibility and Working Life. New York: Springer.

Cherrington, D. J. (1980). The work ethic: Working values and values that work. New York: AMACOM.