Employees and Business Ethics

Dealing with employees is an area where we

are most likely to encounter ethical issues and
dilemmas.
Employee related ethical problems are
unavoidable for contemporary managers. Such
problems involve starting from the question of
fair wages and conditions to sexual harassment
in the workplace, or taking advantages of
company resources, for instances the phone or
internet for personal use.
• This issue was raised in the past by many thinkers
in different periods. In the nineteenth century,
Charles Dickens in his novel Hard Times, explored
the exploitation and poor working conditions.
• Karl Marks , Lenin , and even Mao developed
their ideas presumably with the improvement of
workers living conditions in mind.
• These days such issues are treated differently
than in the past( government used to deal with
this). Now there is a tendency to leave the
solution of theses issues to corporations
themselves. Thus employee issues have become
a matter of growing interest and concern.
• Employees as stakeholders:
Like shareholders, employees take on a role
among stakeholders as they are closely integrated
into the firm. Employees in many cases
constitute the corporation.
This contribution as well as fact that employees
benefit from the existence of their employers and
get affected by the success or otherwise of the
company qualify employees getting some kind of
definite stake in the organization.
• There are two sides of the relationship between
employees and employer: legal and economic .
• On the legal level, there is some sort of contract
between the two parties. The contract stipulates
the rights and duties of both the parties.
• The legal relationship is strongly embedded in a
dense network of legislation which provides
solutions to a large number of issues between
the two parties.
• The economic aspect of ‘firm’ and employees
relationship is characterized by some
externalities by both sides- by which we mean
that there are cost to each that are not included
in the employment contract.
• These hidden cost can lead to situations of ‘asset
specificity’ i.e., employees invest time and effort
in developing ‘assets’ specific to a particulate
employer, and vice versa. Such ‘cost specificity’
can cause a moral hazard for both parties,
opening up a range of moral issues.
• Examples from the perspective of an
employee include investing in a new job by
moving to a new town, including things like
shaking up the circle of friends, finding new
schools for kids, etc.
• The English synonym of “ Making a living’
involves the same theme, which means that
‘making a living’ for having a job.
• Employers, on the other hand, also face similar
elements of moral hazards from their employees. An
example is the France trader Jerome Kerviel ( discussed
in Ethics in Action, pp.162-3), who states that
companies do not have complete control of their
employees, and can sometimes find out only by hind-
sight whether they actually do their job properly.
• Especially in IT or other knowledge intensive industries,
employees have considerable power due to their
specialized knowledge, and employers face the risk
that some of their valuable assets might remain
underused or even be poached (stolen) by
competitors.
• The moral hazard is normally greater for
employees since they are the more dependent
and weaker party.
• The moral hazards are subject to legislation,
but legal loopholes and exploitation make
legislation ineffective.
• In this situation ethical consideration
becomes inevitable in addressing the said
hazards.
• Ethical issues in the firm-employee relation:
Employees are managed by the so called ‘human
resource’ department. The term ‘human resource
management’ and its implications have been a
subject of intense debate in business ethics (
Barrett 1999, Greenwood 2002).
• The second maxim of Immanuel Kant requires us
to treat humanity always as an end and never as
a means only.
The so called idea of ‘human resource’ treat
humans as ‘resource’, which means that it treats
humanity as means, not as an end.
Consequently employees are subject to a strict
managerial rational of minimizing costs and
maximizing the efficiency of the resource.
The difference between HRM policies and the
reality is apparent. For example, in the name of
‘new working patterns the HRM policy suggests
actually to offer part time jobs in stead of full
time jobs.
• For Kant, it is human dignity that forbids treating
employees as a means only, and it is exactly this
duty that posits the main ethical boundary for
the management of the employee.
• Human beings deserve respect and are entitled
to some basic rights. Thus the central ethical
issues in HRM can be framed around the issue of
rights and duties of the employees (Rowan 2000).
Employee right Issues involved
Right to freedom from discrimination Equal opportunities, reverse
discrimination , sexual and racial
harassment
Right to privacy Health and drug testing, electronic privacy
and data protection
Right to due process Promotion, firing
Right to participation and association Councils and trade unions
Right to healthy and safe working Working conditions
conditions
Right to fair wages pay
Right to freedom of conscience and Whistle blowing
speech
Right to work Fair-treatment in the interview, Non-
discriminatory rules for recruitment
Employees duties
Duty to comply with labor contract
Duty to comply with the law
Duty to respect the employer’s property
issues involved
Acceptable level of performance , work
quality, loyalty to the firm
Bribery
Working time, unauthorized use of
company resources for private purpose,
fraud, theft, embezzlement
( misappropriation)

Figure : Right and duties of employees as stakeholders of a firm

• Here rights are deduced from the concept of
human rights and these are codified in various
acts and laws. Codification of workers rights is
advanced in Europe. Nevertheless the following
four points are overlooked by European
codification of rights:
• (i) Codification of rights is an ongoing process.
Law relating to such codification is left open until
certain issues are brought into court proceeding.
Corporations usually take the advantage of such
loopholes.
• (ii) The legal framework regarding worker’s rights
still varies quite significantly in Europe. For
example, in UK the statutory minimum wage was
introduced during Blair government, while it was
started in other EU countries long before.
• (iii) Workers rights tend to be less accepted- let
alone codified - than at home. For example ,
MNC’s had their operation outside Europe, but
workers right was less accepted there.
• Discrimination:
• Discrimination in business occurs when
employees receive preferential (or less
preferential) treatment on grounds that are
not directly related to their qualifications and
performance in the job.
• The most common base for discrimination in
the work places are race, gender, marital
status, age, religion, disability, and nationality.
• Many organizations now claim that they avoid
discrimination and address the issue of diversity
through recruiting employees from a range of
religious , racial, national, and cultural groups.
Discrimination in essence is violation of the second
principle of John Rawls’s theory of justice that
‘Social and economic inequalities are to be
arranged so that they are both (a) to the greatest
benefit of the least advantaged, and (b) attached
to offices and positions open to all under
conditions of fair equality of opportunity.’
• There are inequalities between individuals ,
but the reason for choosing one person over
the other have to be based on qualifications
that in principle could be fulfilled by everyone.
• Making gender or race a criterion for a
particular position would exclude certain
peoples’ right from the start and would
certainly constitute an act of discrimination.
Say, for instance, the owner of an Indian super market in
Rotterdam was looking for a manager who speak Hindi
or Urdu fluently, who had a reasonable knowledge of
Indian culture , and had knowledge of current
consumer preferences in the Dutch Asian products
market.
Although one might reasonably consider that this would
mean that it would be perfectly acceptable to advertise
specifically for an Indian manager, this would in fact be
discriminatory.
Certainly, these criteria might be most likely met by a
certain ethnic group, but it is in principle possible for
all potential applicants to attain these qualifications,
and so they should have an equal opportunity to apply.
 Problems of discrimination still persists:
Even though overt form of discriminations have
reasonably successfully been addressed, problems
of this nature still persists.
• In the summer in 2009, the cloth retailer
Abercrombie & Fitch lost a lawsuit filed by a
woman, who was removed from working on shop
floor. The reason for removing her was that she
wore an arm prosthesis which she covered by
wearing a cardigan.
• The cloth retailer lost the lawsuit not because it
treated the woman differently but that the
company did not make an exception from their
policy to take account of her disability.
• Issues of diversity include concerns such as
age discriminations, the location of stares
impair the ability of physically disable
employee to do their jobs, the use of hard-to
read signs that can negatively impact those
with sight disability ( dyslexia) , facing
discrimination due to health problems e.g.,
AIDA/HIV.
• Age discrimination is another concern. In the
UK there are evidences that companies had
laid off staff between the age of 45 and 49.
Due to pension rights, it is more costly to lay
off workers beyond the age of 50.
• Some companies even run the risk of an
employment tribunal, given that the fine for
unfair dismissal is less costly than paying
redundancies for older worker.
• Another issue is gender discrimination. Despite
success in outperforming men educationally,
women still, on average, receive lower wages for
the same job. They are under represented in top
management positions as well as in the
boardroom.
• Unequal career opportunity is another issue. In
2004, the investment bank Morgan Stanley had
to face a lawsuit by a female employee. The
acquisition was that the female employees were
barred from the key client meetings. It is also
called institutional discrimination.
Some other issues of Diversity considerations:
Sexual and racial harassment :
Physical, verbal and emotional harassments need to be taken
into account, but regulators still tend to be quite reluctant
to take up these issues. Recently code of practice and
diversity programmes are introduced to tackle theses
issues ( which includes office romance, joking, and mild
from of harmless harassments) .
Equal opportunities and affirmative action:
Is legislation enough to tackle unfair discrimination?
The answer is no. Thus many companies have sought to tackle
discrimination through the introduction of so called equal
opportunity or affirmative action programmes. For
example, they do it through ensuring open advertisement,
and setting out specific criteria for jobs , and ensuring a
structured assessment of candidates , avoiding all sorts of
discriminations.
• Affirmative actions( AA):
AA are the actions that target those who are
under represented, e. g, women, disable or
racial minorities. Four main areas of AA:
(i)Recruitment policies,
(ii)fair job criteria,
(iii)training programme for discriminated minorities,
and
(iv) promotion to senior position.
• Reverse discrimination:
• At some point AA can itself be deemed
discriminatory because it disadvantages those
thought to already be in an advantaged position.
For example ‘quota system’ select less qualified
candidate. In cases like this, people suffer reverse
discrimination.
• Critics think that distributive justice is more
defendable here. For people promoted on the
basis of gender or color may well be discredited
among their peers.
• Employee privacy :
• It involves issues such as physical privacy ( surveillance
camera in employees private rest areas), social privacy,
informational privacy, psychological privacy.
• Health and drug test ( see pp. 304-306)
• Electronic privacy and data protection ( pp. 306-307)
• Due process and lay offs (pp. 307-10)
• Employees participation and association:
• Employees are more than so called human resources.
• 4 points/levels of participations ( delegation,
information, consultation, and co-determination)
Some other issues :
• Working conditions
• Work-life balance ( excessive working hours
and presenteesim)
• Flexible working patterns, Fair wages
• Freedom of conscience and speech in work
place
• Absolutism and relativism :
If an ethical principle were to be considered
valid, it had to be applicable anywhere
(Absolutism ).
No one view of ethics can be said to be right .
For it must always be relative to the historical,
social, and cultural context ( Relativism)
The way out here is human rights view( ratified
in 1948 through the UN).
• The corporate citizen and employee relations:
Relations are here framed in terms of
collection of rights.
Role of government and firms/ corporations:
The framework of ‘protect, respect, remedy’ is
useful for delineating responsibilities of
corporation and government.
• Towards sustainable employment:
• In terms of sustainability, there have to be some sacrifices
or trade offs protecting employees and promoting various
aspects of sustainability.
• One the other hand, it is also possible to determine some
link to protect individual rights and the notion of
sustainability.
• Sustainability in the economic (got employed in a useful
work and feeling respected as human beings), social
(stabilization of social relationship) and
environmental/ecological( making no use of workforce,
which is tantamount to a major waste of material and
energy) senses are to be considered.
• There are 3 ways in which these problems can
be addressed ( both theoretically and
practically):
(i)Re-humanized workforce
(ii) Wider employment
(iii) Green jobs.
 RE-humanized workforce:
• The alienation of the individual worker in the area of
industrialized mass production has been discussed by Karl Marx.
• The suggestion is that the impact of technology, work process,
and the division of labour have meant that many employees
just repeat the same monotonous and astonishing actions over
and over again , resulting in there being little real meaning,
satisfaction, or involvement in their work.
• Whether in factories, fast food restaurants, or call centers,
much employment has been reduced to a series of meaningless
‘McJobs’ subject to intense management control, and with little
chance of real engagement or job satisfaction.
• Thus , although our rational way of organizing
work can , and have, brought us tremendous
efficiencies and material wealth, they have also
created the prospect of a de-humanized and de-
skilled workforce.
• Re-humanizing workforce: By empowering the
employees the work places are tried to re-
humanize. This includes ‘job enlargement’ ( giving
employees a wider range of task to do) and ‘job
enrichment’ ( giving employees a larger scope for
dealing how to organize the work).
• Rather than mass production, the worker can
be engaged with more creative and
meaningful work , utilizing human centered
technology.
• However, the success of such scheme has
been contested, suggesting that the
‘humanized approach’ might be more
appropriate and effective in some cultures
than others.
• Wider employment: by reducing working time
for all workers we can avoid laying off. For more
read page 330.
• Green jobs: Greener workplace includes
incentivizing car pooling, by introducing paperless
office, substituting business travel by
videoconferencing , increasing recycling, moving
into low energy use office space .
• The other option includes home based
teleworking. It addresses economic, social and
ecological concerns.