Saturday, May 8, 2010

Managerial Ethics

Managerial Ethics

Ethics can be defined as a set of inner-guiding principles, values, and beliefs that people use to analyze or interpret situations and then to decide the appropriate way to behave. I contend that companies should not leave these sorts of decisions up to individual interpretation but should attempt to set a moral ethos for the company in anticipation of any such dilemmas. These should include ways to behave to avoid harming others, including customers and coworkers, the company itself and the world at large. While not every situation can be anticipated, a set of basic principles which are endorsed by the company should be able to communicate what the company expects. For example, a manager might believe in “doing unto others what she would have them do unto her”. Letting someone know that lay offs are imminent would offer an employee some time to prepare for a life changing event. This appears to conform to that idea of ‘doing unto others’ because anyone would really want to have forewarning of such an event. However, when we consider the manager’s obligation to the firm, we realize that early warning to even one person might not be contained and could have consequences for the stock price, credit ratings and a whole host of other unanticipated outcomes that might affect even more lives. A decision like this cannot be left up to an individual’s conscience because they might not have all of the information, may not have considered the ramifications and it is too great a stress for one person to have to bear. When the company clearly states its position, the individual has guidelines and expectations within which to operate. After all there will be other, more subtle ethical problems for managers to bear.

Managers find themselves in ethical dilemmas when they are faced with temptations for enhancing their own self interest, when they are responsible for actions of others, when they are pressured by expectations or when they are pressured by people in positions that are above them. Some will adhere to the letter of the law. Some will go with their own interpretation of ethics. Everyone should, however, take a few breaths and think things through. First, they should get the facts- to whatever extent is possible. Many times ethical decisions must be made with very little information and on tight time schedules. Slow things down as much as possible and get as much light on the situation as possible. Find out if there are different agendas at play. Find out if it is an ethical issue at all. Find out if it is an ethical situation that is yours to solve. Then, if it is yours, try to find someone to consult with. It should be someone outside of the problem, someone who might have a neutrality and perspective. Perhaps that person would be an old professor, a former boss in another firm, or even a lawyer. Once you have discussed it and it appears that it is a true ethical dilemma, one must then decide what course of action to take. Some things are easier to decide about than others. If something is clearly illegal and unethical the decision should be morally easy even if the process and the outcomes might be very painful. The right course of action is to report the problem to the authorities and the reality is that the consequences for not doing so might be very harsh indeed. This includes situations in which company employees enrich themselves at the expense of stockholders such as Enron, WorldCom, Tyco and Arthur Anderson.

Stakeholders can also be affected by unethical actions. Actions that hurt the company’s reputation hurt the stock holders. This too is an ethical dilemma because exposing wrong doing can result in a media scandal that hurts the reputation of the company but that is short term thinking. Managers are often in the position of having to juggle the interests of various stakeholders and the decisions can be stressful. For example, withholding a raise for a deserving employee leaves a bit more money for your own raise or for the conference you wish to attend. Suppliers and distributors can be a source of ethical dilemmas. They may be more favourably disposed toward your company after that weekend in the Jamaica but is that ‘buying’ their business? Conversely, you might be able to improve your bottom line by delaying paying them. My overall point in this section is that many of these problems could disappear if the company had solid policies on how the company handles such questions.

Organizational culture should include a mandate from the very top of the organization and a reinforced set of communications that let everyone know what is expected. Social responsibility should be expressed as the norm. Everyone should have easy access to the written code of conduct. Managers should be role models in this process. There should be an ‘ethics’ officer or an ombudsman who is a safe placed to report problems or to get advice. This person must not be a token but be empowered to act and to protect those who come forward. This ombudsman should have organization wide authority. People who risk coming forward should be considered a great asset to the company and protected from repercussions which might result from the report.

Managers faced with moral dilemmas should analyze the issues according to four ethical guidelines. Consider first the utilitarian rule and ask what will produce the greatest good for the greatest number of people? Then ask ‘What course of action protects the fundamental rights and privileges of the people involved’. Then compare and contrast the possible outcomes for an alternative which promotes the fairest outcome for all. Finally, ask yourself ‘Would an impartial observer find this outcome acceptable?’

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