Topic #1: HRM Ethical Issues Paul L. Schumann, Ph.D. Professor of Management MGMT 440: Human Resource Management © 2008 by Paul L. Schumann. All rights reserved.

Outline Role of Ethics in Business Law vs. Ethics Making Ethical Judgments Using Moral Principles Motivating Ethical Behavior by Employees

Role of Ethics in Business Friedman (1970): Managers should “… conduct the business … to make as much money as possible, while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.” Maximize profits, but actions should be both legal & ethical Why might ethical behavior be an important factor that contributes to the strategic success of the organization? Should managers consider ethics when making decisions?

Is there a conflict of law and ethics? Law vs. Ethics? Is there a conflict of law and ethics? Ethical? Yes No Legal? No conflict Legal but unethical Ethical but illegal

Conflicts of Law and Ethics Example: Legal but unethical? “Jim Crow” laws that required discrimination against Black Americans Laws in Nazi Germany that contributed to the holocaust Example: Ethical but illegal? Provide service in violation of “Jim Crow” laws to a Black American in a restaurant Help a holocaust victim escape from Nazi Germany

Is it illegal? Legal Judgment: Is the action legal or illegal? Judgment Based on Legal Factors Laws Regulations Court Decisions

Is it unethical? Moral Judgment: Is the action ethical or unethical? Judgment Based on 5 Moral Principles Utilitarian Rights Justice Care Virtue

Utilitarian Principle Who are the stakeholders? What are the alternative courses of action? For each alternative, what are the benefits and costs (good and harm) for each stakeholder now and in the future? Which alternative creates the most benefits and the least costs for all stakeholders considered together? What action will do the most good and the least harm for everyone who is affected?

Utilitarian Principle What would happen in a competitive market in which all stakeholders have complete and accurate information and are free to make their own choices in mutually beneficial negotiations with each other?

Rights Principle What action do you have the moral right to take … … that advances the moral rights of others? … that does not infringe on the moral rights of others, and … What action do you have the moral right to take …

Rights Principle Reversibility Universalizability Respect & free consent What action do you have the moral right to take in the situation under consideration?

What moral rights do other stakeholders have? Rights Principle Reversibility Universalizability Respect & free consent What moral rights do other stakeholders have?

Rights Principle What competing interest is being protected by each conflicting right? Which competing interest is more important? Give precedence to the right that protects the more important interest. Is there a conflict of moral rights? If so, decide whose rights take precedence

Distributive Justice Principle What action produces a fair distribution of benefits and costs for all of the stakeholders? What action provides all stakeholders with equal liberties and equal opportunities … … but allows for differences in results based on differences in contributions … … while helping those in need to the greatest extent possible?

Care Ethics Principle What action appropriately cares for your own needs … … and also appropriately cares for those people with whom you have special relationships (e.g., family, friends, coworkers, supervisors, employees, customers, suppliers, stockholders, etc.)? Care appropriately for those with whom you have a relationship, especially those who are vulnerable and dependent on you Nurture the ability of those with whom you have a relationship to make their own choices and live their own lives Do not base relationships on domination, oppression, hatred, violence, disrespect, injustice, exploitation, etc.

Virtue Ethics Principle Does the action display virtues such as benevolence, civility, compassion, conscientiousness, cooperativeness, courage, fairness, generosity, honesty, industriousness, loyalty, moderation, self-control, self-reliance, or tolerance? Or does the action display vices such as cowardice, deceit, dishonesty, laziness, neglect, or selfishness? Take the action that displays virtues, not vices. What action displays virtuous character traits?

Is it unethical? Moral Judgment: Is the action ethical or unethical? Judgment Based on 5 Moral Principles Utilitarian Rights Justice Care Virtue

Conflict Among the Principles? Do all five moral principles reach the same conclusion, or do they reach conflicting conclusions? If they all reach the came conclusion, then that’s the moral judgment If they reach what appear to be conflicting conclusions: Determine if the conflict can be resolved by developing (guided by the moral principles) a previously unconsidered course of action that satisfies all 5 moral principles If the conflict cannot be resolved with a different course of action, then examine your values to decide which principles should take precedence Example: “the ends can’t justify the means”  the Rights Principle takes precedence over the Utilitarian Principle

Motivating Ethical Behavior Stage 1: Self-interest: “The only crime is getting caught” Make it more likely to catch bad behaviors Anticipate possible bad behaviors Create rules & expectations: What’s unacceptable? Communicate rules & expectations Monitor & enforce the rules Increase the penalties for bad behaviors Have formal policies that describe the escalating sanctions

Motivating Ethical Behavior Stage 2: Self-interest: “What’s in it for me — I’ll scratch your back if you scratch mine” Create incentives for good behaviors and to avoid bad behaviors Punish bad behaviors Withhold benefits valued by the employee for bad behaviors Create positive incentives for good behaviors Tie rewards to good behaviors Watch for unintended incentives for bad behaviors

Motivating Ethical Behavior Stage 3: Group norms are important: “Do your duty to those whose opinions you value” Focus on co-workers & direct supervisors Monitor for workgroups with bad norms Screen applicants in hiring for the desired norms Use formal socialization, orientation, & training sessions to teach the desired norms Use self-managed teams & coach them to have the desired norms Direct supervisors should formally praise good behaviors

Motivating Ethical Behavior Stage 4: Social institutions are important : “Do your duty to society at large” Help employees become good citizens, including good corporate citizens Create organizational awards and recognitions for examples of good corporate citizenship Publicize examples of good corporate citizenship Company newsletter Company website Press releases to the media

Motivating Ethical Behavior Stage 5: Protect the social contract Use participative management techniques Create formal impartial due process procedures to resolve conflicts & disagreements Create opportunities for employees to participate in due process procedures

Motivating Ethical Behavior Stage 6: Universal ethical principles Create & use an ombudsoffice Create method for employees to report illegal or unethical behavior Ethics hotline Ethics webpage on company website Ombudsoffice investigates complaints, reports findings, & helps to resolve issues Guided by independence, confidentiality, objectivity, & ethics

Outline Role of Ethics in Business Law vs. Ethics Making Ethical Judgments Using Moral Principles Motivating Ethical Behavior by Employees