MBA - 3

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Business Ethics as Practice

• In recent years, a succession of corporate scandals has rocked the international business community.

• As a result, many companies have invested considerable time, money, and effort on the development of ethics management programs.

• In many cases, such programs are nothing more than insurance policies against corporate liability, designed merely to limit the fallout of scandals should they occur.

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Introduction: the dissociation ofethics from practice• Ethics talk has never been more prevalent than in the

first few years of the twenty-first century. • Corporate scandals have shaken the international

business community over the last few years and seem to have reanimated many people’s interest in ethics.

• As a result, codes of conduct, ethics management programs and ethics offices are being created with breathless haste.

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Introduction: the dissociation ofethics from practice• Many corporate ethics programs have become no

more than “insurance policies” against corporate liability and are implemented and managed with an indiscriminate “checkbox” mentality.

• The approach to business ethics that is currently being extolled in many business and academic forums may implicitly be contributing to the dissociation of ethics with business practice.

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Introduction: the dissociation ofethics from practice• Ethics is portrayed as a set of principles that must be

applied to business decisions. In this conception, ethics functions as a final hurdle in a deliberate decision-making process.

• Most of the time ethics becomes something that people consider after they have interpreted events and determined what they want to do.

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Introduction: the dissociation ofethics from practice• To think of ethics as part of everyday practice, they

argue, is to associate it too closely with the “messiness” of individual perception and contextual biases.

• It simply allows individuals too much discretion to ensure the orderly conduct of business.

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Introduction: the dissociation ofethics from practice• In contemporary business and society, it is only the

law that can ensure responsible behavior.• Those who subscribe to this line of reasoning

therefore invariably turn to stricter legislation, more exacting compliance measures and the threat of imprisonment to keep business practitioners in line.

• Despite its widespread implementation, this legislative approach does not seem to be working.

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Introduction: the dissociation ofethics from practice• News of fresh business scandals continues to arrive

at our doorsteps almost every morning.• Judged on the basis of their performance, then, rules

and legislation alone appear to be poor substitutes for the kind of practical wisdom.

• Both legality and morality are concerned with establishing criteria for acceptable behavior.

• Both make these judgments on the basis of existing social norms and values.

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Introduction: the dissociation ofethics from practice• Ethics in business is about the capacity to respond

appropriately to the many competing pressures and expectations that push and pull individuals in the course of their daily participation in complex organizational and business networks.

• It requires an intuitive and continuous balancing act, in which an individual’s character, values, and relationships all register in significant ways.

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Introduction: the dissociation ofethics from practice• This is precisely why the law cannot adequately serve

ethics as practice. Practical wisdom is not simply the ability to identify and apply relevant rules.

• It is the capacity to make decisions in situations where there are no regulatory parameters to defer to.

• Business ethics is supposed to be as much about business as it is about ethics.

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Introduction: the dissociation ofethics from practice• This is precisely why the law cannot adequately serve

ethics as practice. Practical wisdom is not simply the ability to identify and apply relevant rules.

• It is the capacity to make decisions in situations where there are no regulatory parameters to defer to.

• Business ethics is supposed to be as much about business as it is about ethics.

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Introduction: the dissociation ofethics from practice• Pre-packaged business ethics strategies often rely on

the institutionalization of standardized codes and compliance procedures.

• These codes and procedures are not tailored to reflect the unique sensibilities that may have developed within a particular organization or the expectations and dynamics that exist within specific industries.

• This limits their relevance and ability to effect change.

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Introduction: the dissociation ofethics from practice• There are many who believe that ethics officers and

ethics offices play an important role in making ethics a central concern amongst an organization’s workforce, but often little consideration is given to how a small minority of individuals are supposed to shape and transform the cultural dynamics of a complex organizational system.

• In ethics training initiatives employees are taught to use ethics “quick tests.” Case study analyses are employed to hone the moral reasoning skills of workers who are unlikely to be given sufficient discretionary freedom to use them.

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Introduction: the dissociation ofethics from practice• In all of this, individuals are never asked to

reconsider fundamentally who they are, what they really care about, and how they can leverage these beliefs to make their workplace a better environment.

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Introduction: the dissociation ofethics from practiceThe typical ethics management process and its limitationsThe elements of ethics meaningfully divided into three basic phases: motivation, formulation and integration.• Motivation: Motivation has to do with the process

of establishing a rationale for an ethics program within an organization. Ethical risk assessments are often employed to this end.

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Introduction: the dissociation ofethics from practiceThe typical ethics management process and its limitations• Formulation: The formulation phase of an ethics

program typically includes the establishment of some source of normative orientation. This is mostly done by means of an organizational code of conduct.

• Integration: The integration phase of an ethics program is a multifaceted process that includes the appointment of an ethics officer, the roll-out of a training and communication program, the establishment of reporting channels,

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Introduction: the dissociation ofethics from practicethe enforcement of rules and regulations through the implementation of disciplinary procedures against offenders, and doing regular audits.• Ethics programs typically also include a fourth

element, namely, “evaluation”. However, various forms of evaluation are typically included as part of the motivation, formulation and integration of such programs in organizations.

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Introduction: the dissociation ofethics from practice

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Introduction: the dissociation ofethics from practiceMotivation: fear of penalty and ethical risk• One of the main challenges for practitioners in the

ethics and compliance field is to motivate the leadership of organizations to invest money, time and effort in ethics.

• Ethics consultants and ethics officers often use ethical risk analyses to substantiate their proposals and requests for ethics interventions and programs.

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Introduction: the dissociation ofethics from practice• There is nothing that motivates a board of directors

like a statistical analysis that clearly demonstrates employees’ and other stakeholders’ negative perceptions of an organization.

• Such an analysis typically includes some form of interaction with an organization’s internal and external stakeholders, as well as an assessment of its compliance environment and a survey to gain insight into its employees’ beliefs and expectations.

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Introduction: the dissociation ofethics from practice• In many cases, general quantitative surveys are

employed to this end. These surveys are called by many different names, such as “Climate studies,” “Organizational culture surveys” and “People’s surveys.”

• They typically serve multiple purposes. Some include questions that are specifically formulated to gauge the ethical orientation of an organization’s employees.

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Introduction: the dissociation ofethics from practice• The concept of organizational “culture,” on the other

hand, is associated with the rules, rewards, codes, leadership, rituals and stories within an organizational system.

• It is difficult to establish a conclusive relationship between different types of organizational climate and the ethical or unethical behavior of those who are exposed to it.

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Introduction: the dissociation ofethics from practice• The problem with many of the instruments that have

been developed to study organizational culture, is that there are aspects of people’s experience of working in an organization that challenge clear conceptualization and articulation.

• Martin Parker points out that, the words “culture” and “organization” are both associated with processes, rather than with objects

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Introduction: the dissociation ofethics from practice• According to Parker, the word “culture” refers to a

process of cultivation and of tending natural growth. “Organization” literally refers to the process of making tools.

• For Parker, organizational culture is a process which is locally produced by people. As a process, it is something that has certain effects on people.

• In conducting surveys on organizational culture, researchers all too often assume that there are homogeneous cultures, or subcultures, within organizations, whereas the reality is infinitely more complex.

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Introduction: the dissociation ofethics from practiceFormulation• The dissociation of ethics from business practice is

also evident in the way that the value priorities that inform the normative sensibilities of those who participate in an organizational system are expressed in ethics programs.

• Those things that represent moral truths or ideals within an organization are often referred to as “core values.” These values are usually organized and discussed in “values statements,” “codes of ethics,” or “codes of conduct.”

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Introduction: the dissociation ofethics from practice• Typically, a “values statement” consists of a brief

aspirational enumeration of the normative commitments that an organization makes to its stakeholders.

• A code of ethics is normally slightly longer, but still aspirational rather than directive in tone.

• Codes of conduct, however, are directive in form and intent. Their purpose is to provide employees with behavioral guidelines

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Introduction: the dissociation ofethics from practice• The crucial question, as far as ethics management is

concerned, is whether codes of conduct really have any effect on people’s beliefs and behavior, or whether they have become no more than a mindless paper-exercise in compliance.

• Codes are often regarded with skepticism by both internal and external stakeholders.

• Several researches worldwide suggest there seems to be no definitive evidence that codes have a significant effect on ethical behavior in organizations.

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Introduction: the dissociation ofethics from practice• Kjonstad and Willmott make a distinction between

restrictive ethics and empowering ethics.• The former is concerned with formulating and

operationalizing codes of conduct, the latter with moral learning and development.

• The fact that code content is often commonsensical may indeed insult employees’ intelligence.

• Providing more detail in codes of conduct may also be counterproductive, as it leaves no room for individual discretion.

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Introduction: the dissociation ofethics from practice• In fact, a heavy reliance on rules and policies may

bring individuals to the conclusion that if something is not strictly forbidden, it is permissible.

• A further problem regarding codes relates to the way in which they are used. Research has shown that though a very large percentage of organizations have codes, a much smaller percentage of employees are aware of their existence and an even smaller number are versed in their content.

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Introduction: the dissociation ofethics from practice• Many authors argue that codes are only effective

insofar as they are enforced and communicated via effective ethics training programs.

• These authors believe that the relevance of codes may be demonstrated through the practical case study discussions that are part of many ethics training programs.

• Whether this strategy really succeeds in bridging the gap between theory and practice remains questionable

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Introduction: the dissociation ofethics from practice• Nevertheless, training programs remain central to

most companies’ ethics and compliance efforts

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Introduction: the dissociation ofethics from practiceIntegrationEthics training and communication• Ethics training programs have become a standard

feature of most organizations’ ethics and compliance functions. Service providers have developed multiple training modules and products that can meet the needs of any size company, in any industry and of every nationality.

• It seems then that ethics training, in the form that it is currently being offered, may have some serious limitations.

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Introduction: the dissociation ofethics from practice• To gain an understanding of the nature of these

limitations, it is necessary to consider what has become the conventional model for ethics training, in terms of its content, its mode of delivery and the frequency with which people are exposed to it.

• The first and most basic question to be asked about ethics training is, of course, whether “ethics” can be taught.

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Introduction: the dissociation ofethics from practice• Michael Hoffman, one of the fathers of the business

ethics movement in the US, has argued that ethics training enhances people’s ethical awareness by making them aware of their organization’s values and the moral dilemmas that they may be confronted with as result of their commitment to these values.

• Hoffman also believes that case study discussions assist people in the practical application of philosophical reasoning skills.

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Introduction: the dissociation ofethics from practice• Kohlberg’s research led him to conclude that an

individual’s moral sensibilities develop progressively, through stages, as he/she learns to think about moral issues, first in a “pre-conventional,” then in a “conventional” and finally in a “post-conventional” way.

• In the pre-conventional phase, the individual (at this stage he/she is likely to still be a child) is concerned with self-interest. An individual in this phase of moral development is primarily concerned with eliciting praise or avoiding punishment.

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Introduction: the dissociation ofethics from practice• In the conventional phase, the individual develops a

concern for enduring personal relationships. Because of this, the individual begins to balance his/her self-interest with the interests of those by whom he/she is surrounded and develops a concern for law abidingness.

• In the post-conventional phase, the individual finally masters principled thinking.

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Introduction: the dissociation ofethics from practice• Petrick and Quinn’s integrity capacity construct

includes a combination of four ethics theories (deontological, teleological, rights and systems development) with four legal theories (natural law, positive law, civic responsibility and social reform).

• They argue that individuals with high integrity capacity are capable of cognitively balancing the guiding principles of these theories when faced with a moral dilemma.

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Introduction: the dissociation ofethics from practice• In large companies, information technology is

increasingly being used in ethics training. This makes it possible to record the number of staff members who have completed an ethics training program.

• In online ethics training, ethics is treated as though it comprises a fixed body of knowledge, which can be digitized and “downloaded” for easy consumption. As such, it is unlikely to have any meaningful effect on people’s everyday behavior.

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Introduction: the dissociation ofethics from practice• One of the challenges that ethics training programs

face, is the fact that they compete with other job-related skills programs for time, attention and funding. Time consuming and costly face-to-face ethics training is therefore likely to be limited to annual events.

• As such, ethics training remains low on the priority-list of both supervisors and staff.

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Introduction: the dissociation ofethics from practice• Many business ethicists and practitioners uncritically

assume that individuals are deliberating agents, who have the ability to consider objectively all the various contingencies that pertain to a particular situation before making a decision or taking action.

• A second, related assumption is that ethical learning takes place in a deliberate fashion.

• Many ethics programs encourage people to consider their ethical responsibilities “objectively,” and not to allow their judgment to be “contaminated” by personal or contextual biases.

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Introduction: the dissociation ofethics from practice• Ethics thus becomes a matter of principle, rather

than practice. • This contributes to the impression that ethical

considerations are checks on business practice, rather than a normal part of everyday business practice.