Page 233 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 12: Behavioural Implementation

12.4.1 Importance of Ethics Notes

There has been a growing interest in corporate ethics over the past several years. This is perhaps
because of a spate of recent corporate scandals at such firms as Enron, Tyco, Texaco etc. Without
a strong ethical culture, the chances of ethical crises occurring in companies cannot be ruled out.
Due to this, companies face enormous costs in terms of financial and reputational loss as well as
erosion of human capital and relationships with suppliers, customers, society at large and
governmental agencies.
An ethical organisation is driven by ethical values and integrity. Such values shape the search
for opportunities, the design of systems and the decision-making processes of the organisation.
They provide a common frame of reference that serves as a unifying force across different
functions and employee groups. Organisational ethics define what a company is and what it
stands for.

The potential benefits of an ethical organisation are many. A strong ethical orientation can have
a positive effect on employee commitment and motivation to excel. This is particularly important
in today’s knowledge-intensive organisations, where human capital is critical in creating value
and competitive advantage. An ethically sound organisation can also strengthen its bonds among
its suppliers, customers and governmental agencies.
The ethical orientation of a leader is generally considered to be a key factor in promoting ethical
behaviour among employees. Leaders who exhibit high ethical standards become role models
for others in the organisation and raise its overall ethical behaviour. In essence, ethical behaviour
must start with the leader, who plays a central role in instilling ethical behaviour in the
organisation.

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Caution Some may think that ethics is a question of personal scruples. But ethics is as much
an organisational issue as a personal issue. Leaders who fail to provide leadership in
establishing proper systems and controls cannot create an ethical organisation. Unethical
business practices reflect the values, attitudes and behavioural patterns that define an
organisation’s operating culture. Thus ethics plays a critical role in organisations.

12.4.2 Approaches to Ethics

When an ethical dilemma arises, there are four approaches to guide our action. These four
approaches are:
1. Utilitarian approach
2. Individualism approach
3. Moral – rights approach

4. Justice approach

Utilitarian Approach

According to this approach, moral behaviour is one that produces the greatest good for the
greatest number.

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