BBA Study Material Organisational Ethics

BBA Study Material Organisational Ethics

BBA Study Material Organisational Ethics

BBA Study Material Organisational Ethics


The nature of an organization typically brings together m little in common with each other except the impersonal frame organization typically brings together men and women who initially have in each other except the impersonal framework of their organizations organization causes us to behave differently at our workplace and outside it. The nature of the organization shapes our consciousness in decisive ways. It regularizes our experience of time and indeed influenced our lives. It brings us daily into proximity of and subordination to authority. It places a premium on a functionally rational, pragmatic mind that seeks specific goals, and t creates subtle measures of prestige and an elaborate status hierarchy.

An enduring genius of organizational form is that it allows individuals to retain their private motives and meanings for action as long as they adhere publicly to agreed upon rules. Even the personal relationship that men and women share in organizations is, mostly, governed by explicit or implicit organizational rules, procedures, protocols and the extent of economic and ethical concerns

There is another fundamental problem that surfaces between those employed by an organization and the organization itself. What is the best way to characterize the relationship between a corporation and those who choose to join it? Do top executives, managers, and workers merely represent the corporation, or are they, in actually, the corporation itself? Put in another way, are individuals only agents employed, solely, to further the interests of the corporation in an agent principal relationship, or are workers more than just agents, having a vested interest themselves in the life of the organisation?

The answer to these fundamental questions is important, since one’s liability for unethical andut may increase or decrease depending upon the type of relationship one holds with the organization.

Within organizations it is individuals who are responsible for creating goals, criticizing and evaluating the corporate culture and instigating and implementing  change. A moral organization healthy reciprocity between its culture and the autonomy of its individuals.


Oranizations engage us on a daily basis in rational, socially approved, purposive Such action in addition to fostering intense competition for status, also makes the procedures, social contexts, and protocol of paramount psychological and behavioural pa The nature of organization influences employees in a decisive way, creating in the prore. upward looking stances that decide social and psychological consequences

The collective actions of organizational entities come in a variety of forms. They may take place within internal policies and directives that give the organization its particular structure and culture they define the way things are done within the organization. As such, these policies and directives can be evaluated from an ethical perspective.

Following are typical questions that are posed from this perspective :

  • Are these policies and directives fair and just?
  • could they create circumstances that might lead to unethical action on the part of the organization’s members?
  • Do they espouse desirable values and belief systems worthy of an excellent corporate culture?

Organizational culture enforces an unspoken ethos that requires mangers to balance social and personal morality, if they are to survive and succeed. Within a given situation people behave differently according to their beliefs about the situation and their values. Social values grow out of social interaction and become part of the group culture. Values are the bedrock of any corporate culture. People working together form a group and these values produce a sense of direction for employees and guide their day-to-day behaviour.

Organization culture has three main elements: Basic values, attitudes and beliefs of the organization,

Organizational goals, policies, structures and strategies which are shaped by these basic values, attitude and beliefs, and

Organizational way of doing things, i.e, everyday accepted, unchallenged processes and procedures

Organization culture affects employee behaviour powerfully. So, one must not have reward systems that encourage misreporting of revenue and expenses or that promote cheating on government contracts.

But in practice, all this talk about how employees are creatures of their culture ends up by accepting the notion tacitly that the individual employee really cannot be held responsible for his actions. Questionable conduct within business organizations is an accepted fact of life and organizational ethos appears to condone and promote it. The result is that every one is talking about ethics without obligating any person to be ethical.


Organizational values are found in mission statements, code of ethics or credos. They state what organization stands for and describe the ethical perspective of the organization’s leaders. But these value are sometimes different from values in practice. There would be a general expectation that written corporate values are followed in practice.

What matters on day-to-day basis in an organization is the moral rules-in-use fashioned within the personal and structural constraints of one’s business. These rules vary sharply responsibilities, or one position in the hierarchy. Actual organizational moralities are, thus, contextual, situational, highly specific and, most often, un-articulated.

Different organizations have different values that based on the policies of that particula organization, but there are some intrinsic values that form the basis of all organizations. Thes values of the company are what every employee must be aware of. This helps him to get hi priorities right and know the company goals. Other intrinsic values are honesty, righteousness and work, diligence and sincerity. Punctuality and judicious use of time allows one to do a jol more thoroughly, painstakingly and effectively. Shortage of time results in haphazard an sharply work. Here is a list of ten desired values of a business organization:

  • National service through industry
  • Fairness
  • Harmony Cooperation
  • Continuous Improvement
  • Courtesy
  • Humility
  • Adjustment
  • Assimilation
  • Gratitude

Organizational Values and formal standards of conduct should be treated as absolute Whatever ethical standards an organization chooses, it cannot waver on its principle.


Organizational actions take the form of business strategies where the future directions the firms are enunciated. Strategic plans about markets, products, cost reduction, and the used existing facilities are examples of the kind of organizational action where ethical evaluation and considerations are important. Indeed it is in this realm of strategic business decision making where many of the essential issues of business ethics have made their appearance,

organizations can be classified on the basis of extent of economic and ethical concern  Following figure presents such a classification. Onanisations can be categorized into four types exploitative, manipulative, holistic and balanced.


Organizations with low economic and ethical concern are exploitative in nature. There are many such organizations in India who exploit child labour, use rivers for dumping wastes, and moulge in corrupt practices to maximize their profits. Manipulative organizations have high concern for economic performance but low ethical concerns. These organizations manipulate tax laws, labour laws, and union leaders for gain.

There are organizations that have high ethical concerns and low economic concerns. These organizations are involved in charity work and are willing to spend money to fulfill their social and environmental obligations

Balanced organizations have high ethical and economic concern. Such organizations are able to create wealth as well as fulfill their moral obligations towards the society. Individuals who operate from a thoughtful sense of personal values provide the foundation for such organizations. These organizations nurture traditions that encourage freedom of enquiry, support personal values and reinforce them. Behaving ethically is based, partly, on the strength of commitment to a value system, fortitude in diversity and skill in analyzing ethical issues.

Organizational culture is based on various factors like feelings, experience, concern, nature of drive, employee attitude and work environment. Employees react differently in different organizational settings.


Organizational ethics deals with the issue of morality and rationality in organizations, while management ethics focuses on the ethical quality of decision making and the resulting action of managers. Corporate ethics examines the propriety of decision making and actions made by corporate entities. Therefore, management ethics deals with individuals, while organizational ethics is collective in scope.

All large organizations are perceived to be impersonal and opposed to individual values and needs. The notion of shared values and agreed-upon process for dealing with adversity and change the corporate culture-seem to be the heart of the ethical issues. Because corporation and its members are interdependent, for the former to be strong, the members need to share a preconceived notion of what is correct behaviour, common business ethics and think of it as a positive force and not a constraint. Corporate ethics deals with the ethics of the organization, where the company is deemed as a body corporate, which, like an individual which, like an individual, can sue or can be sued.

The subject of corporate ethics can be dealt with at three levels!

  • The corporate mission
  • Constituency relations
  • Policies and practices

A company’s primary ethical responsibilities are defined by the nature of its objectives. This is the most easily recognized and universally applicable category of mission’

Many employees feel that the enterprise in which they are engaged, and the products and services that they market, ought to serve an ethical purpose. Therefore, the corporate i n should reflect the aspirations and expectation of the employees, Employees need to have a high degree of self-respect and integrity.

Constituency Relation’ Relates to statements of corporate responsibility to any or of the following employees, local self-government bodies, customers, suppliers, shareholders, home country, foreign governments and, in some cases, the general public. If these responsibilities are met, the ethical conduct of business for specific situations is taken care of

There is a significant role played by ethics in evaluating policies and practices of any organization. Ethical considerations may be inappropriate for many management decisions and policies, because under certain circumstances, public commitment to ethical principles can give way to business and administrative practices, or the potential connection between ethical commitments and board social policies can make the company a target of pressure groups


One barometer of an organization’s practice of ethics can be the strategic responses it makes in times of organizational crises. Crises management and the way a firm handles imminent threats to its operations says much about the culture of that company.

Value systems of individuals and organizations are revealed under stress. Organizations that do not have a heritage of mutually accepted shared values tend to become unhinged during Stress, with each individual bailing out himself. Those who cannot serve the corporate vision under stress are not authentic business people, and therefore, not ethical in the business sense.

The problem in organizations is that as a group there are no processes for developing a consensus. The cross-cultural nature of the group adds a further layer of complexity. No sense of purpose or plan exists in complex situations and no single person can handle it. Since such Situation does not have a set of preconditions that can guide an action to an acceptable solution the people in the group react instinctively as individuals. People who are in touch with their own core beliefs and the beliefs of others, and are sustained by them, can be more comfortable living on the sword’s edge


An ethical code is adopted by an organization in an attempt to assist those in the organization called upon to make a decision (usually most, if not all) understand the difference between ‘right’ and ‘wrong’ and to apply this understanding to their decision. The ethical code therefore generally implies documents at three levels: codes of business ethics codes of conduct for employees and codes of professional practice.

Code of Ethics (Corporate or Business Ethics) : A code of often focuses on social issues. It may set out general principles about an organization’s beliefs on matters such as mission quality, privacy or the environment. It may delineate proper procedures to determine whether a violation of the code of ethics has occurred and, if so, what remedies should be imposed. The effectiveness of such codes of ethics depends on the extent to which management supports them with sanctions and rewards. Violations of a private organization’s code of ethics usually can subject the violator to the organization’s remedies (such as restraint of trade based on moral principles). The code of ethics links to and gives rise to a code of conduct for employees.

Code of Conduct (Employee Ethics) : A code of conduct for employees sets out the procedures to be used in specific ethical situations, such as conflicts of interest or the acceptance of gifts and delineate the procedures to determine whether a violation of the code of ethics occurred and, if so, what remedies should be imposed. The effectiveness of such codes of ethics depends on the extent to which management supports them with sanctions and rewards. Violations of a code of conduct may subject the violator to the organization’s remedies which can under particular circumstances result in the termination of employment.

Code of Practice (Professional Ethics) : A code of practice is adopted by a profession or by a governmental or non-governmental organization to regulate that profession. A code of practice may be styled as a code of which will discuss difficult issues, difficult decisions that will often need to be made, and provide a clear account of what behavior is considered “ethical” or “correct or right in the circumstances in a membership context failure to comply with a code of practice can result in expulsion from the professional organization, in its 2007 International Good Practice Guidance, Defining and Developing an Effective Code of Conduct for Organizations, the International Federation of Accountants provided the following working definition: “Principles, values, standards, or rules of behavior that guide the decisions, procedures and systems of an organization in a way that (a) contributes to the welfare of its key Stakeholders,  and (b) respects the rights of all constituents affected by its operations.”


There are many professional associations who have formulated codes of ethics for their members. Even some business organizations have written statements of code of ethics. Most of these codes are

  • Very different;
  • Often similar;
  • Not simply connected with ethics;
  • Perceived as an important tool for fostering ethical conduct.
  • Not very effective in a broad ethical sense;

Items in a code of ethics are difficult to classify and have to be, therefore, analyzed individually. This difference in the content of every of every item reduces the ability to offer any general clues of improvement.

If the codes are not used by the organizations and associations as an important tool for fostering ethical conduct, then their formulation is meaningless. Some of the codes of ethics are given below as illustrations:

Ethical Codes for organization Man

  • Demonstrate courtesy, respect, honesty and fairness in relationships with customers, suppliers, competitors, and other employees.
  • Comply with safety, health, and security regulations.
  • Do not use abusive language or actions.
  • Follow proper code of dressing.
  • Follow directive from superiors.
  • Be reliable in attendance and punctuality

 Legalistic Ethical Codes

  • Maintain confidentiality of customer, employee, and corporate records and information.
  • Avoid outside activities, which conflict with or impair the performance of duties at information.
  • There is no place for friendship or personal gain in decision-making.
  • Do not accept bribe.
  • Any payment to business, person, political organization, or public official for unlawful or unauthorized purpose is unacceptable.
  • Comply with all relevant laws, regulations, and policies in the conduct of business, or dealings.
  • Do not provide false or misleading information to the corporation, its auditors, or a government agency.


Manley’s (1992) comprehensive analysis of company codes identifies eighteen benefits of written codes. They are :

  1. Providing guidance to and inculcating the company’s values and cultural substance and style in managers and employees.
  2. Crystallizing and defining the company’s policies and unifying the work force.
  3. Providing overall strategic direction.
  4. Helping in dealing with outside pressure groups.
  5. Signaling expectations of proper conduct to suppliers and customers.
  6. Delineating the rights and duties of the company and its employees.
  7. Effectively responding to government pressures and rules.
  8. Enhancing the company’s public image and confidence.
  9. Pre-empting legal proceedings.
  10. Improving bottom-line results.
  11. Enhancing employee self-image and improving the quality of new recruits.
  12. Promoting excellence.
  13. Realizing company objectives.
  14. Responding to stakeholders’ concerns.
  15. Strengthening the enterprise system.
  16. Encouraging open communication.
  17. Integrating the cultures of acquired or merged companies.
  18. Determining improper requests from employee.


Changes in management, economic slowdown in the country, and several other factors can tempt most companies to forget about ethics in business. Since unethical behaviour is a systematic matter, building a commitment to ethics requires systematic methods. Programmes can be developed to introduce systematic changes into the organizations and to institutionalize the organization’s commitment to ethics.

Ferrel and Fraedrich (1994) suggest that the implementation of strategies to encourage employees to take more ethical decisions is not very different from implementing other types of business strategies. This approach seeks to incorporate ethical issues in to traditional management functions.

Manley (1992) provides the following factors, as crucial to the implementation of a code o conduct:

  • Management involvement and supervision.
  • Constant consciousness of these codes.
  • Stressing code values during training.
  • Recognition for conduct exemplifying desired values and standards.
  • Ombudsmen or other designated persons assigned for this purpose. Thorough concentration on high-risk jobs and areas in terms of violation of code values and standards.
  • periodic auditing to assure compliance.
  • Well-defined and fair enforcement procedures

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