Chapter Eight:

Ethics and the

Employee

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Models of Organisation

-This chapter examines the ethical issues related to employees

working a business organization.

-Before that, we will describe three different models of the business

organization:

a.the traditional model of the business as a rational organization,

b.the model of business as a political structure, and

c.the model of the organization as a network of caring relationships.

 1. The Rational Model of a Business Organization
Rational organization theory is the idea that an organization, such as a business, is a tool for
achieving a definable goal or set of goals.
A rational organization uses a formal structure to define the role of each member of the
organization. In a business where roles and goals are clearly defined, the process of
management should be rational and predictable
Organizations seek to coordinate the activities of members so as to achieve their goals with
maximum efficiency.
Contracts obligate the employee to loyally pursue the organization’s goals and the employer
to provide a just wage and just working conditions.
In this model, the employee's main moral duty is to work toward the goals of the firm.
2. POLITICAL ORGANISATION
-A second model of firm that focuses less on its rational aspects and more on
its political features.

-A view of the organisation as a system of competing power coalitions (Team

A, Team B) and formal and informal lines of influence and communication that
radiate from these coalition.

-individuals group together to compete for resources, benefits etc.

-goals of organisation are established by most powerful coalition.

- the primary ethical problems in an organization are connected with acquiring

and exercising power.
Organisational politics- The process in which individuals or groups within an
organisation use non formally sanctioned power tactics to advance their own
aims.

Political Tactics
-Blaming or attacking others
-controlling information
-developing a base of support for one’s ideas
-Forming power coalition and developing strong allies/relationships
- Image building
-Associating with the influential.
-Creating obligations.
Ethics and Political Tactics
Assessing whether political tactics are ethical in any situation
• the utilitarian question (are the goals of the tactics socially
beneficial or socially harmful?)
• the rights question (do the tactics treat others consistently
with their moral rights?)
• the justice question (will the tactics lead to an equitable
distribution of benefits and burdens?
• the caring question (what impact will the tactics have on the
web of relationships within the organization?)
 3. Caring Model of Organization
A third different system where org is seen as a network of connected (“selves”)
relationships that are concerned with each other.
Caring is focused entirely on persons, not on “profit” or “quality.”
Caring is undertaken as an end in itself not as a means to productivity.. Caring for
favours.
Caring is essentially personal.
Looks at employees as human beings not machines

Problem with caring

-Caring too much for others which can lead to “burnout” when the needs of others are
given too much weight compared to the needs of the self.
-Not caring enough for others because fatigue, self-interest, or disinterest leads us to
ignore their needs.
-The organization systematically drives out caring with layoffs, bureaucracy, managerial
styles that see employees as disposable, or rewards that encourage competitiveness
and discourage caring.
 Similarity of Government and Company Argument

• Similarities between the power of management and government imply that

employees should have rights similar to citizens’ rights. Some of the similarities
are
– A company’s management is a centralized decision-making body that
exercises power, like a government.
– Managements wield power and authority over employees, like governments
wield over citizens.
– Management has the power to distribute income, status, and freedom
among the corporation’s constituencies, like government does with respect
to citizens.
– Since management’s power over employees is so similar to government’s
power over citizens, employees should have rights that protect them from
managers’ power, just as citizens’ rights protect them from government
power.
 Replies and Counter-Replies to Similarity Argument

• Power of government is based on consent and so is unlike the power of

managers which is based on ownership of the company, but supporters of
similarity argument respond that today power of managers does not come
from owners.
• Unlike government, the power of management is limited by unions, but
supporters of similarity argument respond that most workers today are
not unionized.
• While it is hard for citizens to escape the power of a government, it is easy
for employees to escape the power of managers by changing jobs, but
supporters of similarity argument respond that changing jobs is not always
so easy.
 Professional Duties and Conflicts of Interest
• The scandals of the early 2000s involved fundamental questions of corporate
governance and responsibility. IMDB, Enron
• There were a rash of problems associated with the financial meltdown in 2007 to
2008.
• Ethics in the governance and financial arenas is now the most visible issue in business
ethics.
The collapse of Enron Corporation brought the ethics of finance to prominence at the
start of the 21st century.
Several important categories of business professionals—for example, lawyers, auditors,
accountants, and financial analysts. Professionals within business have important roles to
play within political and economic institutions. Many of these roles, often described as
"gatekeeper functions," ensure the integrity and proper functioning of the economic,
legal, or financial system.
The gatekeeper function is necessary, but self-interest can make it difficult to fulfill
gatekeeper duties.
 Going Beyond the Law: Ethical Board
Members
The corporate failures of recent years would suggest:
• A failure on the part of corporate boards.
• A failure of government to impose high expectations of accountability on
boards of directors.

In many cases, boards and executives operated within the law.

• Some actions may not have been ethical or in the best interests of
stakeholders, but they were legal.

The law offers some guidance on minimum standards for board

member behavior, but is the law enough?
 Legal Duties of Board Members
U.S. law imposes three clear duties on board members.
• The duty of care is the exercise of reasonable care by ensuring that
executives carry out responsibilities and comply with the law.
• The duty of good faith is one of obedience, requiring faithfulness to the
organization’s mission.
• The duty of loyalty requires faithfulness from board members by giving
undivided allegiance when making decisions affecting the organization.
• Conflicts of interest are always to be resolved in favor of the organization.

The Federal Sentencing Guidelines suggest the board exercise

"reasonable oversight" with respect to the implementation and
effectiveness of the ethics/compliance program.
• The program should have adequate resources, levels of authority, and
direct access to the board.
 Ethical Issues in Organisations
A. Conflict of interest
-The most basic ethical business issue facing gatekeepers involves a conflict of
interest.
-Conflict of interest exists when a person holds a position of trust that
requires that he or she exercise judgment on behalf of others, but where his
or her personal interest and/or obligations conflict with the proper exercise of
that judgment.
-Conflicts can arise when a person’s ethical obligations in their professional
duties clash with personal interests.
-Such professionals are said to have fiduciary duties—a legal duty, grounded
in trust, to act on behalf of or in the interests of another—to their clients.
 Avoiding or Eliminating a Conflict of Interest
• Removing oneself from the task in which the conflict of interest arises.
• Eliminating the interest that creates the conflict of interest. Sell interest.
• Eliminating or changing the obligation of serving the employer’s interests
and remaining free of any incentive to serve another interest while serving
the employer. Resign

-Society has a responsibility to create institutions and structures that will minimize these
conflicts.

-Critics say government regulatory rules alone will not avert financial crises.
B. Ethics of accepting gifts
• The ethics of accepting gifts depends on:
– The value of the gift. Cheap vs expensive
– The purpose of the gift. sample
– The circumstances of the gift. secretly
– The job of the recipient
– Accepted local practices.
– Company policies on gifts. No gift policy
– Legal prohibitions on gifts.
C. Theft
• Includes the theft of digitized programs, music, movies, e-
books, etc., as well as trade secrets, company plans, and
proprietary formulas or other data.
– Is theft even if the original is not taken nor changed but
only copied, examined, or used without the consent of the
owner
– Violates the owner’s right to have his or her property used
as he or she chooses, even if the theft does not injure the
owner
• The skills one acquires from a company are not information
and so it is not theft to take them when leaving the company.
D.Insider trading
Insider trading is said to be unethical because it is theft of information that
gives the insider an unfair advantage.
• Trading of securities by those who hold private inside information that
would materially impact the value of the stock and that allows them to
benefit from buying or selling stock.
• Illegal insider trading occurs then corporate insiders provide "tips" to
family members, friends, or others to buy or sell the company's stock
based on that information.
• "Private Information" includes privileged information that has not yet
been released to the public.
• The Securities and Exchange Commission has treated the detection and
prosecution of insider trading violations as one of its enforcement
priorities.
• Violates right to equal access of information of other stock traders
E. Fair Wages
• Fair wages depend on:
– Wages in the industry and local area. Changlun vs kl
– The firm’s ability to pay.sme vs mnc
– The risks, skills, and demands of the job
– Minimum wage laws.
– Fairness in comparison to other salaries in the firm. Clerk
vs manager’s pay
– Fairness of wage negotiations. Union.
– Local living costs. Changlun vs kl
Argument that Wages in Developing Nations are Too Low
Some criticized that the wages paid by companies from developed
countries(US MNC) in developing countries (Malaysia) are low:
– In relative to wages of workers in developed nations (US), even taking
productivity differences into account.
– In relative to what companies in developed nations can afford to pay
given their overall profits, or relative to the profits they make from
products assembled in developing nations. GAP profit high but pay low
salary(el salvador)
– In relative to what workers in developing nations need to live on.
Bangladesh. Cannot afford comfortable life.
Argument that Wages in Developing Nations are Adequate
Among some of the replies made against the above criticisms:
– It is wrong to use one country such as US to compare to other
developing countries. Here,local developing labor market should be
better factor to determine wage in developing countries.
– Local developing nation wages should not be determined by the price
of product being sold by MNC. Local factors such as cost of living, local
industry wage level are more important when setting wages than a
company’s profits.
– Costs of living are important, but wages should also consider the local
average number of workers per household. Traditionally, developing
nation household has more than 2 working people, therefore they can
afford comfortable life.
F.Employee Right to Privacy

Employees have some rights, in any case. Because of technical innovations, the
right to privacy is under attack more than ever before. Employees' rights to
privacy must be balanced against employers' rights to know certain information
about their activities.

Three elements are relevant when considering this balance:

a.Relevance - the employer must limit his inquiry to areas that are
directly relevant to the issue at hand. Size of pants

b.Consent - employees must be given the opportunity to give or

withhold consent before their private lives are investigated and should
be informed of any surveillance. Ask people permission to fill in
questionnaire

c. Methods - employers must use ordinary and reasonable methods of

inquiry unless circumstances are extraordinary. Id/password to use
computer vs Bug the phone.
 1

Privacy Rights Since September 11, 2001

-9/11 had a major impact on privacy within the U.S. and on the employment
environment, in particular.
-The most publicized modification was the adoption and implementation of
the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001.
• Expands states' rights with regard to Internet surveillance, including
workplace surveillance technology , and amended the Electronic
Communication Privacy Act.
• Grants access to sensitive data with only a court order rather than a
warrant and imposes criminal penalties for aiding terrorists.
• New disclosure regime allows increased sharing of information between
government agencies to increase protection.
G.Whistle blowing

-WB is the attempt by an employee to disclose wrongdoing in an organization,

can take two forms:
a.It is internal if it is reported only to management within the organization.
b.If it is reported to others (such as governmental agencies or the media),
then it is external.

-External Whistleblowing is morally justified if:

a.the wrong is clear
b. other methods have failed
(c) it will prevent the wrong
(d) the harm is serious enough to justify the injuries it will bring upon the
whistleblower. Massive corruption case.
H. The Right to Work
• It is justified because of the interest we have in the
instrumental and intrinsic value of work.
• Work has a critical instrumental value because it is a means to
our survival.
• Work has an intrinsic value because
– it is our basic economic contribution to society and helps
us feel worthwhile and useful
– it lets us develop our potential and identity as a particular
human being
– it lets us develop our character and virtues
– it is a source of self-esteem and self-respect.
Threats: Right to wok
• The right to work is threatened by unemployment which in the United
States has many causes including:
– recessions
– use of new technologies,
– outsourcing of jobs to low-wage countries
– free trade agreements
– our shift from a manufacturing to a service economy
• Company layoffs also threaten the right to work and have many causes
including:
– decline in demand
– changes in consumer demand
– product obsolescence
– the pursuit of cheaper workers
– the need to consolidate operations
I. The Right to Organize
• This derives from the same right owners have to join
together to form a company (the right to freely
associate with others).
• Unions have a right to strike that derives from every
worker’s right to quit working so long as doing so
does not violate other’s rights.
 REFERENCES
Hartman, L. P., DesJardins, J., & MacDonald, C. (2021). Business
ethics. McGraw-Hill

Velasquez, M. G. (2018). Business ethics: Concepts and cases

(8th ed.). New York: Pearson.