MANAGEMENT AND 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”.
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.
Types of management ethics or standards of conduct in
Management
1. 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.
2. 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?”
3. 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.
There are 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.
(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 Behaviour of managers:
• 1. Obey the law:
Obeying legal practices of the country is conforming to ethical values.
• 2. Tell the truth:
Disclosing fair accounting results to concerned parties and telling the truth is
ethical behaviour of managers.
• 3. Respect for people:
Ethics requires managers to respect people who contact them.
• 4. The golden rule:
The golden business principle is ‘Treat others as you would want to be
treated’. This will always result in ethical behaviour.
• 5. Above all, do no harm:
Even if law does not prohibit use of chemicals in producing certain products,
managers should avoid them if they are environment pollutants.
• 6. Practice participation – not paternalism:
Managers should not decide on their own what is good or
bad for the stakeholders. They should assess their needs,
analyse them in the light of business needs and integrate
the two by allowing the stakeholders to participate in the
decision-making processes.
• 7. 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
organisation and the stakeholders.
Approaches to Management Ethics:
• There are three approaches to management ethics:
• 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.
• 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.
• 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.
Barriers to Management Ethics:
• James A. Waters describe three “organisational blocks” of management ethics:
1. Chain of command:
• If employees know that superiors are not following ethical behaviour, they hesitate in
reporting the matter up the hierarchy for the fear of being misunderstood and
penalized. The chain of command is, thus, a barrier to reporting unethical activities
of superiors.
2. Group membership:
• Informal groups lead to group code of ethics. Group members are strongly bonded
by their loyalty and respect for each other and unethical behaviour of any member of
the group is generally ignored by the rest.
3. Ambiguous priorities:
• When policies are unclear and ambiguous, employees’ behaviour cannot be guided
in a unified direction. It is difficult to understand what is ethical and what is
unethical.
Solutions to Barriers:
• The following measures can improve the climate for ethical behaviour:
1. Organisational objectives and policies should be clear so that every
member works towards these goals ethically.
2. The behaviour of top managers is followed by others in the organisation.
Ethical actions of top managers promote ethical behaviour throughout
the organisation.
3. Imposing penalties and threats for not conforming to ethical behaviour
can reduce unethical activities in the organisation. Formal procedures of
lodging complaints help subordinates report unethical behaviour of
superiors to the concerned committees.
4. Educational institutions also offer courses and training in business ethics
to develop conscientious managers who observe ethical behaviour.
The management gurus like Lord Krishna, Swami Vivekananda
and Peter F. Drucker assert that managers should develop the
following values:
• 1. Move from the state of inertia to the state of righteous action.
• 2. Move from the state of faithlessness to the state of faith and self-
confidence.
• 3. Their actions should benefit not only them but the society at
large.
• 4. Move from unethical actions to ethical actions.
• 5. Move from untruth to truth.
• 6. To believe Good actions always produce good results and evil
actions produce evil results.
• 7. Take the best from the western models of efficiency, dynamism
and excellence and tune them to Indian conditions.
Thank you
