(a) Identify some common barriers to the successful adoption of ethical standards in business practice.
(b) Explain the practical steps that organisations can take towards creating an ethical framework for corporate governance.
Answer
(a) Problems with ethical framework
Over the past few years the topic of business ethics has been examined and debated by many writers and academics. Although many organisation world-wide have adopted or redefined their business with ethics in mind, there are many people both in business and who study the area who see many barriers to businesses implementing an ethical framework.
What constitutes ethics
Defining 'what we mean by ethics' is for the most part easy to understand (inappropriate gifts, accepting money, environmental protection are all ethical issues). More contentious issues are
topics such as workplace safety, product safety standards, advertising content and whistle-blowing which are areas where some businesses have been considered less ethical.
Necessity for action
Actions speak louder than words. Ethics are guidelines or rules of conduct by which we aim to live
by. It is the actual conduct of the people in the organisation that, collectively, determines the organisation's standards – in other words it is not what the organisations 'says', but rather what it 'does' which is the real issue. It is no good having a code of ethics that is communicated to the outside world, but is ignored and treated with disdain by those inside the organisation.
Varying cultures
Globalisation and the resultant need to operate within different ethical frameworks has undermined the idea that ethical guidance can be defined in simple absolute terms. It may be culturally
acceptable to promote by merit in one country, or by seniority in another. Paying customs officials may be acceptable in some cultures, but taboo in others.
Ethical versus commercial interests
Ethical and commercial interests have, it is argued, always diverged to some extent. Some organisations have seen for example the issues of 'being seen to be ethical' as a good business
move. However this viewpoint is pragmatic rather than idealistic; being ethical is seen as a means towards the end of gaining a better reputation and hence increasing sales.
Policies of others
Modern commercialism places great demands on everyone in organisations to succeed and
provide the necessary revenues for the future growth and survival of the business. Acting with social responsibility can be hard, as not everyone plays by the same rules.
(b) Need for practical steps
If organisations are to achieve a more ethical stance they need to put into place a range of practical steps that will achieve this. Developing an ethical culture within the business will require
the organisation to communicate to its workforce the 'rules' on what is considered to be ethical and is not. Two approaches have been identified to the management of ethics in organisations. Rules-based approach
This is primarily designed to ensure that the organisation acts within the letter of the law, and that violations are prevented, detected and punished. This is very much the case in the US, where
legal compliance is very much part of the business environment. The problem here is that legislation alone will not have the desired effect, particularly for those businesses who operate internationally and therefore may not be subject to equivalent legislation in other jurisdictions.
Integrity-based programmes
Here the concern is not for any legal control, but with developing an organisational culture. The
task of ethics management is to define and give life to an organisation's defining values and to
create an environment that supports ethical behaviour and to instil a sense of shared accountability among all employees. Integrity-based programmes require not just words or
statements, but on seeing and doing and action. The purpose with this approach is not to exact revenge through legal compliance but the develop within the workforce a culture of ethics that has value and meaning for those in it.
The integrity-based approach encompasses all aspects of the business – behavioural assumptions
of what is right or is wrong; staffing, education and training, audits and activities that promote a social responsibility across the workforce.
Organisations can also take further steps to reinforce their values by adopting ethical committees
who are appointed to rule on misconduct and to develop ethical standards for the business.
Kohlberg's framework
Kohlberg's ethical framework demonstrates how individuals advance through different levels of moral development, their advance relating to how their moral reasoning develops. Kohlberg's
framework goes from individuals who see ethical decisions solely in terms of the good or bad consequences for themselves through to individuals who choose to follow universal ethical principles, even if these conflict with the values of the organisation for which they are working. The importance of different components of an organisation's ethical framework can indicate the
level of moral reasoning that staff are in effect expected to employ.
Pre-conventional reasoning
A rules-based framework that sets out expected behaviour in detail and has strong provisions for
punishing breaches implies that staff are at the lowest stage of development – they define right or wrong solely in terms of expected rewards or punishments. An emphasis on bureaucratic controls, including the reporting of all problems that occur with staff, would be designed to prevent 'You scratch my back, I scratch yours' behaviour that is also part of moral reasoning at this level. Conventional reasoning
An emphasis on a strong ethical culture would indicate staff are expected to adopt the
intermediate stage of Kohlberg's framework. Peer pressure, also the concepts that managers
should set an example, are features of this sort of ethical approach; if also the organisation
appears to be responding to pressures from outside to behave ethically, this suggests higher level
reasoning within this stage
Post-conventional reasoning
An ethical approach based on staff using post-conventional reasoning would be likely to emphasise adherence to an ethical code. A detailed code based on rights and values of society would imply ethical reasoning based on the idea of the organisation enforcing a social contract. Higher-level
reasoning would be expected if the code was framed in terms of more abstract principles such as justice or equality.