Ethics and HRM K. Michele Kacmar

Ethics, Morality and Values Ethics is the study of morality Ethics is the study of morality Morals are the standards used to judge right and wrong Morals are the standards used to judge right and wrong Values are the degree of conviction about the way to conduct life Values are the degree of conviction about the way to conduct life

Conviction The degree of conviction to your values can be described as primary, secondary, or peripheral The degree of conviction to your values can be described as primary, secondary, or peripheral Primary – core values, unchangingPrimary – core values, unchanging Secondary – Important, but changeable occasionallySecondary – Important, but changeable occasionally Peripheral – Values that are known but not lived byPeripheral – Values that are known but not lived by

How Do We Get Values? Parents, family and friends Parents, family and friends Experiences Experiences The environment (media, education) The environment (media, education)

Conflict of Values Dramatic outcomes can occur when individuals and groups hold conflicting core values: Dramatic outcomes can occur when individuals and groups hold conflicting core values: Religious warsReligious wars Business scandalsBusiness scandals CrimeCrime

Environmental Factors Over the last decade, ethical scandals in business have been on the rise: Over the last decade, ethical scandals in business have been on the rise: EnronEnron WorldComWorldCom TycoTyco Health SouthHealth South

How To Stop Unethical Behavior A combination of external regulations and compliance programs and voluntary corporate ethics programs is the most effective way to combat inappropriate corporate behavior (Trevino, Weaver, Gibson, & Toffler, 1999). A combination of external regulations and compliance programs and voluntary corporate ethics programs is the most effective way to combat inappropriate corporate behavior (Trevino, Weaver, Gibson, & Toffler, 1999).

External Regulations Sarbanes-Oxley Act (SOX) Sarbanes-Oxley Act (SOX) Requires CEOs and CFOs to sign statements making them personally responsible for the accuracy of the quarterly financial statementsRequires CEOs and CFOs to sign statements making them personally responsible for the accuracy of the quarterly financial statements Knowingly misrepresenting the financials opens them up to punishments including fines and jail timeKnowingly misrepresenting the financials opens them up to punishments including fines and jail time Protection for whistleblowersProtection for whistleblowers

Other External Regulations Other external regulations include regulations related to: Other external regulations include regulations related to: Minimum wageMinimum wage Overtime compensationOvertime compensation DiscriminationDiscrimination Health and SafetyHealth and Safety PrivacyPrivacy

Organizational Responses Codes of ethics including: Codes of ethics including: Explicit standards of rules to be followedExplicit standards of rules to be followed Corporate values statementsCorporate values statements

Explicit Standards Explicit standards define precisely acceptable and unacceptable conduct such as accepting gifts and the amount allowable Explicit standards define precisely acceptable and unacceptable conduct such as accepting gifts and the amount allowable

Corporate Values Statements Describes the core values the company wants its employees to exhibit including: Describes the core values the company wants its employees to exhibit including: How employees are to treat one anotherHow employees are to treat one another How employees are to treat customers and stockholdersHow employees are to treat customers and stockholders

Effective Values Statements Must come from the top with the CEO being directly involved in its development Must come from the top with the CEO being directly involved in its development Top management must actively disseminate the values statement and then live by it Top management must actively disseminate the values statement and then live by it The values statement must be focused The values statement must be focused

HR Responses Conduct surveys to determine: Conduct surveys to determine: What behaviors are routinely being rewarded and reinforcedWhat behaviors are routinely being rewarded and reinforced What values and attitudes are prevalentWhat values and attitudes are prevalent How strong the pressure to engage in misconduct isHow strong the pressure to engage in misconduct is

HR Responses Continued Take steps to eliminate and discourage reasons for misbehavior and introduce and encourage reasons to behave ethically Take steps to eliminate and discourage reasons for misbehavior and introduce and encourage reasons to behave ethically

HR Responses Continued Develop an appraisal system that rewards individuals for ethical behaviors and punishes those who act unethically Develop an appraisal system that rewards individuals for ethical behaviors and punishes those who act unethically

HR Responses Continued HR can use its expertise to communicate with the workforce to get out the ethical message HR can use its expertise to communicate with the workforce to get out the ethical message

Costs of Corporate Ethics Violations $7 trillion in stock market losses $7 trillion in stock market losses Loss of jobs and retirement savings by employees Loss of jobs and retirement savings by employees

Costs of Corporate Ethics Programs Costs of implementing and maintaining compliance to create an ethical business environment Costs of implementing and maintaining compliance to create an ethical business environment

Human Costs Unethical business environments can: Unethical business environments can: Demotivate individualsDemotivate individuals Make good employees leave the companyMake good employees leave the company Attract unethical employeesAttract unethical employees Lead to the lack of trust by the employees for the companyLead to the lack of trust by the employees for the company

Ethics Effectiveness Quick-Test Ethics Effectiveness Quick-Test asks eight questions about twelve different areas that can help to increase the ethical effectiveness in an organization Ethics Effectiveness Quick-Test asks eight questions about twelve different areas that can help to increase the ethical effectiveness in an organization

Guidelines for Fostering an Ethical Culture Have a well developed policy and procedures manual Have a well developed policy and procedures manual Enforce policies Enforce policies Reward compliance Reward compliance Recruit ethical employees Recruit ethical employees Create a division to oversee ethics Create a division to oversee ethics

Conclusion Whenever you are required to make a difficult decision, especially one that is ethically challenging, select an option that you would be comfortable describing to the nation on the evening news Whenever you are required to make a difficult decision, especially one that is ethically challenging, select an option that you would be comfortable describing to the nation on the evening news