Ethics and HRMEthics and HRM

K. Michele Kacmar K. Michele Kacmar

Ethics, Morality and ValuesEthics, Morality and Values

Ethics is the study of moralityEthics is the study of morality Morals are the standards used to Morals are the standards used to

judge right and wrongjudge right and wrong Values are the degree of conviction Values are the degree of conviction

about the way to conduct life about the way to conduct life

ConvictionConviction

The degree of conviction to your The degree of conviction to your values can be described as primary, values can be described as primary, secondary, or peripheral secondary, or peripheral • Primary – core values, unchangingPrimary – core values, unchanging• Secondary – Important, but changeable Secondary – Important, but changeable

occasionallyoccasionally• Peripheral – Values that are known but Peripheral – Values that are known but

not lived bynot lived by

How Do We Get Values?How Do We Get Values?

Parents, family and friendsParents, family and friends Experiences Experiences The environment (media, education)The environment (media, education)

Conflict of ValuesConflict of Values

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

Environmental FactorsEnvironmental Factors

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

How To Stop Unethical BehaviorHow To Stop Unethical Behavior

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

External RegulationsExternal Regulations

Sarbanes-Oxley Act (SOX)Sarbanes-Oxley Act (SOX)• Requires CEOs and CFOs to sign Requires CEOs and CFOs to sign

statements making them personally statements making them personally responsible for the accuracy of the responsible for the accuracy of the quarterly financial statements quarterly financial statements

• Knowingly misrepresenting the Knowingly misrepresenting the financials opens them up to financials opens them up to punishments including fines and jail punishments including fines and jail time time

• Protection for whistleblowers Protection for whistleblowers

Other External RegulationsOther External Regulations

Other external regulations include Other external regulations include regulations related to:regulations related to:• Minimum wageMinimum wage• Overtime compensation Overtime compensation • Discrimination Discrimination • Health and SafetyHealth and Safety• PrivacyPrivacy

Organizational ResponsesOrganizational 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 StandardsExplicit Standards

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

Corporate Values StatementsCorporate Values Statements

Describes the core values the Describes the core values the company wants its employees to company wants its employees to exhibit including:exhibit including:• How employees are to treat one another How employees are to treat one another • How employees are to treat customers How employees are to treat customers

and stockholdersand stockholders

Effective Values StatementsEffective Values Statements

Must come from the top with the CEO Must come from the top with the CEO being directly involved in its being directly involved in its development development

Top management must actively Top management must actively disseminate the values statement disseminate the values statement and then live by it and then live by it

The values statement must be The values statement must be focusedfocused

HR ResponsesHR Responses

Conduct surveys to determine:Conduct surveys to determine:• What behaviors are routinely being What behaviors are routinely being

rewarded and reinforced rewarded and reinforced • What values and attitudes are prevalentWhat values and attitudes are prevalent• How strong the pressure to engage in How strong the pressure to engage in

misconduct is misconduct is

HR Responses ContinuedHR Responses Continued

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

HR Responses ContinuedHR Responses Continued

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

HR Responses ContinuedHR Responses Continued

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

Costs of Corporate Ethics Costs of Corporate Ethics ViolationsViolations

$7 trillion in stock market losses $7 trillion in stock market losses Loss of jobs and retirement savings Loss of jobs and retirement savings

by employeesby employees

Costs of Corporate Ethics Costs of Corporate Ethics ProgramsPrograms

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

Human CostsHuman Costs

Unethical business environments Unethical business environments can:can:• Demotivate individualsDemotivate individuals• Make good employees leave the Make good employees leave the

companycompany• Attract unethical employeesAttract unethical employees• Lead to the lack of trust by the Lead to the lack of trust by the

employees for the companyemployees for the company

Ethics Effectiveness Quick-TestEthics Effectiveness Quick-Test

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

Guidelines for Fostering an Ethical Guidelines for Fostering an Ethical CultureCulture

Have a well developed policy and Have a well developed policy and procedures manual procedures manual

Enforce policiesEnforce policies Reward complianceReward compliance Recruit ethical employeesRecruit ethical employees Create a division to oversee ethicsCreate a division to oversee ethics

ConclusionConclusion

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