Managerial ethics

By definition ethics is the system or code of morals of a particular person, religion, group, profession, etc. In other words ethics sets standards for a person or group as to what is good or bad or right or wrong in one’s behaviour.

Ethics are one of the most important factors of a manager’s behaviour. Managerial ethics are standards and principles that guide the actions and decisions of managers and determine if the actions and decisions are “good or bad” or “right or wrong” in a moral sense.

Management activities occur within an ethical context. Every time a manager is faced with two or more conflicting ethical issues he faces what is called an ethical dilemma that requires an ethical decision. The most common ethical contexts are: 1) relationship of the firm to the employee; 2) relationship of the employee to the firm; 3) relationship of the firm to the environment.

The relationship of the firm to the employee involves the ways in which the organization chooses to treat its employees in different situations (organizational ethical context). In such areas as hiring and firing, wages and working conditions, and private lives of employees, managers must take careful ethical decisions.

In the relationship of the employee to the firm the critical point is how the individual behaves vis-à-vis the organization (personal ethics). Examples of ethical dilemmas include conflicts of interests, secrecy and espionage, stealing or any other form of misconduct.

Ethical dilemmas often arise in the relationship of the firm to the environment (environmental context). Ethical issues are involved in relations of the organization with customers, competitors, stockholders, suppliers, labour unions, the community and surrounding environment.

Ethical managerial behaviour is the standard for behavior at the individual level in a company. When we consider the organizational level, we speak of social responsibility. Companies want to be seen as good corporate citizens, with activities that are beneficial for the community and society as a whole. Social responsibility refers to the obligations of the organization to protect and/or enhance the society in which it functions. Areas of social responsibility include ecology and environmental quality, consumerism, community needs, government relations, minorities and disadvantaged people, labour relations, stockholder relations, and economic activities.

Ethical corporate behaviour includes accountability – the idea that organizations are completely responsible for what they do and that people should be able to expect them to explain their actions. Transparency is explaining this behaviour in a way that can be understood by outsiders, and not trying to hide anything.

Companies have long had codes of ethics and codes of conduct saying how their managers and employees should behave. Now many organizations are employing executives to oversee the whole area of corporate social responsibility.