We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

The importance of ethics in an organization

The whole doc is available only for registered users

A limited time offer! Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

The term ‘ethics’ can commonly refer to the rules and principles that define right and wrong conduct of individuals (Robbins, Bergman, Stagg and Coulter, 2003, p.150). Ethical Behavior is accepted as “right” or “good” in the context of a governing moral code. Ethics can be viewed as a way of behaving that can be prescribed and imposed by the work environment (Garcia-Zamor, 2003).

Virtually all societies have developed rules and regulations about how business should be transacted and how business organizations should be managed. In other words, based on experience and the philosophical and religious values of the society, rules of acceptable and non-acceptable behaviors evolve and are encoded into society (Mendenhall, Punnett and Ricks, 1995, p.138).

Organization’s Role in Influencing The Ethical Behavior of Employees

Employees care and always question about the ethical conduct of employers and tend to believe the action rather than the word of the employer (Clark, 2000). Managers can discipline an employee by verbal warnings or punishments. However, if a manager himself does not conduct himself ethically, an employee will find not find good reason to follow the organization’s rules. An example is in the case of Exxon-Mobil’s management bribing foreign officials in Kazakhstan to obtain a contract deal (Levine, 2003). As the higher-management in Exxon-Mobil had set a bad example, employees working in Exxon-Mobil will not find good reason to follow the ethical guidelines that were implemented.

How an employee behaves in an organization is made up of attitudes towards pay, promotions, co-workers, supervision and the work itself (Cascio, 1991, p.130). These factors can play an important role in influencing how an employee in the organization behaves. A reasonable amount of wage should be paid in accordance to the kind of work an employee does. Extra bonuses and perks should also be handed out for hardworking employees. When an employee performs well and has shown potential in able to make important decisions, a promotion should be handed out in recognition of this ability. An organization should also work to ensure that there is harmony among the managers and workers and mediate to work out any conflicts.

An employee’s expectation on being treated fairly and ethically by an employer in return with a fair and reasonable amount of work is called the psychological contract (G√≥mez-Mej√≠a, Balkin and Cardy, 2001, p.460). Employers that uphold the psychological contract will have employees that are more satisfied with their jobs and will give fewer problems. Employers can seal the psychological contract by developing a code of ethics (G√≥mez-Mej√≠a, Balkin and Cardy, 2001, p.460). A code of ethics can offer guidelines against which unethical behavior can be judged (Finegan, 1994).

According to Weaver (2001), in order to foster ethical employee behavior in an organization, a low power distance suggests that a broad-based, cultural approach to managing ethics is needed. Specifically, managers and supervisors should take actions that develop trust, such as sharing useful information and making good on commitments (G√≥mez-Mej√≠a, Balkin and Cardy, 2001, p.461). They should also encourage open discussion of employees’ business concerns and demonstrate respect towards employees (Kaptein, 2004). This can show the organization recognizes the strengths and contributions of employees. Social factors such as the ethical climate of the organization and conformance to behavior of peers and superiors play an important part in mediating ethical reasoning of individuals (Bartlett and Preston, 2000).

Organizations can provide ethics training in order for employees to learn how to identify and deal with ethical issues (Kreitner and Kinichi, 2001, p.96). Managers and their staff can be sent to seminars, workshops and video training sessions to learn about ethical issues. Specific units or positions in an organization can also be created to observe and control a company’s employees as to uphold ethical standards (Kreitner and Kinichi, 2001, p.96). These units can help enforce ethical codes and ensure that a one-time announcement of a new ethical code does not get filed away and forgotten.

According to Kreitner and Kinicki (2001, p.92), there is a tendency among managers to act unethically in the face of perceived pressure for results. Terms of employment and compensation schemes can also create incentives for unethical conduct (Carson, 2003). This can cause managers to unwittingly set the stage for unethical shortcuts by employees who seek to please the organization. Adequate training, good communication channels and a cooperative working environment within the hierarchies can help reduce the unethical practices. The rewarding of ethical behavior can be a practice organizations can adopt. The rewards could come in the form of recognition or praise and not necessary money (Minkes, Small, Chatterjee, 1999). This can help promote and encourage ethical behavior within the organization.

Unethical behavior in organizations can be reduced by proper employee selection during interviews and job positions. Selection may bring greater benefits by helping managers decide which employees have attributes that will encourage ethical behavior in the organization (Wilk and Cappelli, 2003). An employee that has gone through interviews and tests and has been assessed by higher authority will be less likely to commit unethical acts in an organization.

Organizational Benefits From Developing Ethical Codes of Conduct for Employees

An organization that enforces ethical regulations and company values will result in employees being united and committed (Watson, Papamacros, Teague and Bean, 2004). Employees that have a sense of unity and direction can work in harmony. An organization may also have a code of ethics that is a formal statement of the company’s primary values and ethical rules it expects its employees to follow (Robbins et al, 2003, p.158). A code of ethics can help establish an orderly environment in which employees can feel safe working. According to Schermerhorn (2004), an individual that feels secure in a working environment can move on to being more focused on an organization’s goal.

Organizations that develop structures that foster ethical conduct and institutionalize ethical practices can go a long way towards reducing the temptation for employees to misbehave (Grant, 1993). An organization can enforce a code of ethics by punishing those who break it. This can discourage employees to behave unethically. A result will be a more consistent behavior in the organization that will give fewer problems.

According to Trevino, Weaver, Gibson and Toffler (1999), many ethics managers believe that part of their job is to assure an environment of candor and safety in an organization. Employees should be able to deliver “bad news” to management without fear of repercussions. If employees are afraid of management, they may be unwilling to inform them of potential risks and problems that may affect the organization negatively. Communication is crucial to the fulfillment of organization members’ responsibilities (Bean, 2001). A lack of communication will result in information not disseminated properly. In contrast to a lack of communication, an organization that has information flowing freely within the hierarchies can have an advantageous working environment that can result in higher efficiency.

Ethics can be a real business asset (Cazalot Jr, 2003). Assets can bring in future economic benefits for an organization (Peirson and Ramsay, 2003, p.46). Generally, ethical employees will follow the guidelines laid down by an organization. When these employees follow guidelines, they tend to ‘do things right’. When things are getting done effectively and efficiently, an organization can expect to see gains rather than losses. Ethics can be seen as a form of capital that can produce profit, like any other kind of capital such as tools and equipment (Mele, 2003).

Ethics encourage examination of issues from the personal perspective and ensure that new ideas and ethics that emerge through individual creative expression are integrated into broader discourse (Beckett, 2003). In today’s increasing competitive business environment, the creation of new ideas and concepts can give companies a competitive advantage that is crucial to an organization’s profits and survival.

Ethics encourages both managers and employees to consider their views based on personal integrity before making decisions (Beckett, 2003). In business, the virtues of integrity include honesty, fairness and trust (Hartman and Beck-Dudley, 1999). An example of personal integrity would be Anita Roddick¬†of Body Shop International. Anita Roddick has ethical practices by being honest with the public, being ‘fair’ to her franchises and respecting her employees (Hartman and Beck-Dudley, 1999). Body Shop International advocates the use of recyclable materials and this can contribute to an external benefit. These externalities include a good impact on the natural environment that can help raise public awareness on the benefits of recycling and saving earth’s resources.

The variety of benefits organizations can expect to accrue from taking a positive ethical stance includes higher sales and profits, improved public image and enhanced employee commitment to the organization’s goals.

Importance of Ethical Practices in An Organization

An organization depends on its managers to work with and through other people by coordinating the staff’s work activities as to accomplish organizational goals (Robbins et al, 2003, p.6). Therefore, for an organization to implement a code of ethics efficiently, good managers are needed. Good managers are self-confident, follow ethical guidelines, have a sense of integrity and are not self-centered (Wallington, 2003). A manager should have moral sensitivity on top of his instrumental roles (Whetstone, 2003). He should be able to judge the ethical behavior of his employees. These managers will be instrumental in ensuring that an organization’s code of ethics is carried out and obeyed by employees.

An individual’s increase or decrease in ethical rule breaking is significantly related to job satisfaction (Sims, 2002). Factors such as good pay, a healthy working relationship with managers and peers and adequate working conditions can contribute to a satisfied employee. A satisfied employee will be more sensitive to ethical decision and therefore will less likely indulge in unethical practices such as leaking organization’s secrets, accepting bribes and stealing company funds (Yetmar, 2000).

The unethical practices of a single organization can cause the public and government agencies to focus more attention on other big companies, their¬†corporate governance and their ethical integrity (Yip, 2002). An example would be ‘Enron’, where a handful of highly paid executives were able to pocket millions of dollars while carelessly eroding the life-savings of thousands of unwitting employees (Sims and Brinkmann, 2003). This can cause government agencies to probe into the ethical practices of other organizations. Organizations should therefore always ensure its employees’ ethical practices are kept in check.

Organizations also have to be aware of shareholders’ concerns. There is a growing number of investors that are guided by a sense of moral duty and that the maximization of shareholder welfare is just as important of the maximization of shareholder wealth (Cummings, 2000). A potential shareholder is more likely to have the confidence to invest in an organization that has ethical business practices. If an organization attracts bad publicity, shareholders and investors lose confidence and stop investing. The result can be dwindling profits and a loss of market share.

Ethics are cultural specific. What it is considered ethical in one culture may be considered unethical in another (Chiu, 2003). Because of globalization, individuals from different parts of the world may come together to work in an organization. Values and culture help determine individual behavior. Thus, there are very different interpretations of what behavior is ethical or unethical in a given situation (Schermerhorn, 1999, p.117). Each individual have their own behavior characteristics and the perception of what is ‘right’ and ‘wrong’ may be different. Individuals in an organization need to be guided by rules and regulations set by a higher authority. This will ensure the efficient and effective running of the organization.

An organization with an ethics programme does not necessary guarantee the prevention of unethical behavior, as General Electric and the Barings Bank in London discovered. Despite an extensive ethics programme that had been in existence for many years, General Electric was found guilty of fraud after one of its employees teamed up with an Israeli general and overcharged the U.S. government more than U.S.$30 million for jet engine servicing¬†(McDonald, 2000). Nick Leeson also traded over the stock options market using the Bank’s own funds that led to the collapse of Barings Bank (Maclagan, 2003). This shows that a fully developed ethical programme may not necessarily prevent an organization from ethical failures but it can at least be the foundation from which a heightening of ethical awareness can spring (McDonald, 2000). An organization that has taken the necessary steps of planning and controlling a code of ethics is less likely to run into problems than an organization that has not.


In conclusion, this essay has demonstrated although Individuals have their own characteristics and behavior patterns, there is a need for organizations to be concerned about the ethical behavior of its staff. An organization can play an active role in influencing the behavior of individuals if it is enforced and consistent with the organizational culture.

There is an importance in managing ethics in the workplace as it holds tremendous benefits for organizations and its employees, both moral and practical. This is particularly true today when it is critical to understand and manage highly diverse values in the workplace.

List of References

Bartlett, A. and Preston D. (2000), “Can Ethical Behavior Really Exist in Business?”, Journal of Business Ethics, Vol.23, Iss.2, Part 2, pp.199-209.

Bean, D. (2001), “Equivocal Reporting: Ethical Communication Issues”, Journal of Business Ethics, Vol.29, Iss.1/2, pp.65-76.

Beckett, R. (2003), “Communication Ethics: Principle and Practice”, Journal of Communication Management, Vol.8, Iss.1, pp.41-53.

Carson, T.L. (2003), “Self-Interest and Business Ethics: Some Lessons of The Recent Corporate Scandals”, Journal of Business Ethics, Vol.43, Iss.4, p.389.

Cascio, W.F. (1991), Costing Human Resources – The Financial Impact of Behavior in Organizations, 3rd Edition, PWS-KENT, USA.

Cazalot Jr, C.P. (2003), “Creating Competitive Advantage Through Business Ethics”, Executive Speeches, Vol.18, Iss.1, p.23.

Chiu, R.K. (2003), “Ethical Judgment and Whistle-blowing Intention: Examining The Role of Locus of Control”, Journal of Business Ethics, Vol.43, Iss.1/2, p.65.

Clark, S. (2000), “National Business Ethics Study: Monkey See, Monkey Do”, Journal Record, p.1.

Cummings, L.S. (2000), “The Financial Performance of Ethical Investments Trusts: An Australian perspective”, Journal of Business Ethics, Vol.25, Iss.1, Part 1, pp.79-92.

Finegan, J. (1994), “The Impact of Personal Values on Judgments of Ethical Behavior in The Workplace”, Journal of Business Ethics, Vol.13, Iss.9, pp.747-756.

Garcia-Zamor, J.C. (2003), “Workplace Spirituality and Organizational performance”, Public Administration Review, Vol.63, Iss.3, pp.355-413.

Gómez-Mejía, L.R., Balkin, D.B. and Cardy, R.L. (2001), Managing Human Resources, 3rd Edition, Prentice Hall, USA.

Grant, F. (1993), “Ethical Examples Speak Louder Than Words”, CMA, Vol. 67, Iss.5, p.2.

Hartman, C.L. and Beck-Dudley, C.L. (1999), “Marketing Strategies and The Search For Virtue: A Case Analysis of The Body Shop, International”, Journal of Business Ethics, Vol.30, Iss.3, Part 1, pp.249-263.

Kaptein, M. (2004), “Business Code of Multinational Firms: What Do They Say?”, Journal of Business Ethics, Vol.50, Iss.1, p.13.

Kreitner, R. and Kinichi, A. (2001), Organizational Behavior, 5th Edition, Irwin McGraw-Hill, USA.

Levine, S. (2003), “U.S. Bribery Probe Looks at Mobil: Firm’s Role in Payment To High Kazakhstan Officials Is Under Investigation”, Wall Street Journal, p.A.2.

Maclagan, P. (2003), “Varieties of Moral Issue and Dilemma: A Framework For The Analysis of Case Material in Business Ethics Education”, Journal of Business Ethics, Vol.48, Iss.1, p.21.

McDonald, G. (2000), “Business Ethics: Practical Proposals for Organizations”, Journal of Business Ethics, Vol.25, Iss.2, pp.169-184.

Mele, D. (2003), “Organizational Humanizing Cultures: Do They Generate Social Capital?”, Journal of Business Ethics, Vol.45, Iss.1, p.3.

Mendenhall, M., Punnett, B. and Ricks, D. (1995), Global Management, Blackwell Publishers, USA.

Minkes, A.L., Small, M.W. and Chatterjee, S.R. (1999), “Leadership and Business Ethics: Does It Matter? Implications For Management”, Journal of Business Ethics, Vol.20, Iss.4, Part 2, pp.327-333.

Peirson, G. and Ramsay, A. (2003), Accounting: An Introduction, Pearson Education Australia, Australia.

Robbins, S.P., Bergman, R., Stagg, I. and Coulter, M. (2003), Management, 3rd Edition, Pearson Education Australia, China.

Sims, R.L. (2002), “Ethical Rule Breaking By Employees: A Test of Social Bonding Theory”, Journal of Business Ethics, Vol.40, Iss.2, Part 1,

Sims, R.R. and Brinkmann, J., “Enron Ethics (or: Culture Matters More Than Codes)”, Journal of Business Ethics, Vol.45, Iss.3, p.243.

Schermerhorn, J.R. (1999), Management, 6th Edition, John Wiley & Sons, Inc., USA.

Schermerhorn, J.R., Campling, J., Poole, D. and Weisner, R. (2004), Management: An Asian-Pacific Perspective, John Wiley and Sons Australia Ltd, Singapore.

Trevino, L.K., Weaver, G.R., Gibson, D.G. and Toffler, B.L. (1999), “Managing Ethics and Legal Compliance: What Works and What Hurts”, California Management Review, Vol.41, Iss.2. pp.131-152.

Wallington, P. (2003), “Honestly?! ; Ethical Behavior isn’t Easy, Just Essential. Here’s How To Run an Honest Organization and be an Ethical Leader”, CIO, Vol.16, Iss.11, p.1.

Watson, G.W., Papamacros, S.D., Teague, B.T. and Bean, C. (2004), “Exploring The Dynamics of Business Values: A Self-affirmation Perspective”, Journal of Business Ethics, Vol.49, Iss.4, p.337.

Weaver, G.R. (2001), “Ethics Program in Global Businesses: Culture’s Role in Managing Ethics”, Journal of Business Ethics, Vol.30, Iss.1, Part 1, pp.3-15.

Whetstone, J.T. (2003), “The Language of Managerial Excellence: Virtues As Understood and Applied”, Journal of Business Ethics, Vol.44, Iss.4; Part 1, p.343.

Wilk, S.L. and Cappelli, P. (2003), “Understanding the Determinants of Employer Use of Selection Methods”, Personnel Psychology, Vol.56, Iss.1, pp.103-124.

Yetmar, S.A. (2000), “Tax Practitioners’ Ethical Sensitivity: A Model and Empirical Examination”, Journal of Business Ethics, Vol.26, Iss.4, Part 2, pp.271-288.

Yip, P. (2002), “The Dallas Morning News Personal Finance Column”, Knight Ridder Tribune Business News, p.1.

Related Topics

We can write a custom essay

According to Your Specific Requirements

Order an essay
Materials Daily
100,000+ Subjects
2000+ Topics
Free Plagiarism
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access

Your Answer Is Very Helpful For Us
Thank You A Lot!


Emma Taylor


Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59