Organization Ethics and Corporate Social Responsibility (CSR)

Organization Ethics and Corporate Social Responsibility (CSR)

Organizational ethics are essential in guiding the decision making of management and the behavior of the employees. The ethical standards should guide the behavior of both the management and employees. However, there is a tendency of an ethical breach for the executives. Employees usually follow the ethical standards as set by the management or society. A person violating ethical standards suffers adverse consequences. The executive compensation has increased to the detriment of shareholders. The paper seeks to discuss business ethics, executive compensation ethics and ethical breach. Besides, the paper addresses provide solutions to an ethical violation and a conclusion to organization ethics.

Ethics is a code of principles and values that guide the behavior of society or individuals in doing what is right or wrong (Zsolnai, n.d.). In business, ethics provide a standard in determining what is bad and good. The management will use business ethics in their decision-making processes on ethical issues. Ethics entails internal environment such as corporate culture and external environment regarding corporate social responsibility. Corporate culture is the behaviors or beliefs of employees that guide interaction with other staff and treatment of stakeholders. The behavior of moral employees will be guided ethics, while values will determine the action to be taken by an individual.

An ethical organization will apply principles of honesty and fairness in dealing with employees, customers and other stakeholders. The management should apply business ethics in dealing with the conflicts arising among the employees.  The customers who have treated fairly become satisfied and loyal to the organization’s brands. Managers should apply ethics guidelines to solve issues that are ethical-related. Business ethics should be applied to all matters of the business, including the behavior of the employees and decision making of the management.

Good organizational ethics may help the growth of the business; ethical code guides the actions of employees and management in business operations. Employees will be ethical in providing services and management will make proper decisions concerning business operations. The benefits of ethical behavior include; retention of employees, prevent legal problems, a conducive work environment and creates customer loyalty (Herring, 2017). Employees will be willing to work for the organization and there be minimal employee attrition. The management will make a sound judgment on ethical issues and they will avoid legal suit. Conducive work environment increases the performance of employees. Customers become loyal to the company’s product if their complaints are handled with fairness and honesty.

Ethical Issues in Executive Compensation

The executive compensation has been increasingly rising to the detriment of investors. Executive compensation is far much higher than the average employees. There has been a concern the executive compensation has created inequality of income distribution. The executive awards themselves high salaries and benefits without factoring the effects on employees, investors and the firm. Managers act as an agent of the shareholders. The executives should work to maximize the wealth of shareholders and meet other organizational goals. However, managers do increase their compensation, award themselves perquisites, focus on short-term objectives and ignores risks while making investment leading to adverse effects on stakeholders.

To address the challenges of high compensation to executives and low payment to employees, the organization should take several measures. There should be a code of ethics that guides how much an executive should be compensated; this will avoid excessive remuneration. The investors should be ready to fire the board of directors if they contradict the ethical code guidelines.  The compensation plan should be linked with performance. If the executives surpass their target and achieve the company’s objectives, then they deserve an increment of compensation. The ethical code of the company should provide the investors to check the excesses of executives, especially concerning the perquisites. The management should embrace corporate governance and balance the interest of stakeholders. Corporate governance will ensure that the board is transparent and accountable for their decisions. The executive will treat their employees honestly and fairly by paying them salary according to their performance, skills, qualification and experience. The management employing corporate governance will disclose the perquisites and inform the investors about ethical issues in its decision making.

The managers should act morally right following the fiducial duty; the duty entails trust relationship between the managers and shareholders. Executives, by working ethically they will do their actions for the best interest of the organization; therefore, the managers will award themselves salaries according to the expectation of shareholders.

Ethical Breach

An ethical breach happens when an individual or body makes an ethical standard and others are expected to follow suit (Luetge, 2016). The firm ethics may change and will lead to ethical breach; in such a case, the organization reviews the violation and determines whether it was unethical or set ethical standards that need to be revised. An employee will be punished for breaching ethical standards.

Lockheed’s ethics program, there are chances there will be an ethical breach at a higher level of management. In the case of an ethical breach, the management does not respond appropriately for executives by employees; they may be punished. Employees do follow ethical standards by questioning management. The ethical standards put the management in the position of abusing their powers and decision making are not for the best interest of the stakeholders. Several measures should be set to address the weaknesses of Lockheed’s ethics program.

In case there is an ethical breach, the management should need to review the ethical standards. The management should consider what led to the breach of ethical standards. If the ethical standards have some errors, it needs to be reviewed to reflect the current business ethics. The management should determine whether ethical standards reflect current business activities (Burnham, 2017).

The management should be trained on ethical issues. Lockheed’s management should be in a position of setting ethical standards that fit the organization’s goals. Executives should be in a position of reviewing the ethical standards from time to time. The management should be trained in dealing an ethical dilemma issues; in such cases, it requires a proper choice to solve the ethical dilemma. Also, the management should know to differentiate between ethical and unethical issues. It will be quicker for management to update the ethical standards if they have been trained.  Besides, the employees should be trained for them to understand the ethical standards; this will help the employees not to follow the decision of management or groups blindly.

The organization should consider the corporate values where the ethical breach occurs. Organizational values are important in deciding many situations when conflict arises. The management should incorporate corporate values in all its business activities. The decision of the management in case of violation of ethical standards will influence the behavior of employees. If the management applied corporate values and made the right decision in ethical issues, employee conduct of behavior will improve.

The organization should create an influential corporate culture. Corporate culture influences the behavior of employees and the entire organization. The management should establish a culture that will impact the employees in the moral decision on right and wrong. Studies indicate employees will be committed to doing the right thing if there is an influential culture (Yamashita, 2018). The management should provide the leading in embracing the corporate culture.

The management should encourage the employees to comply with the ethical standards; any unethical behavior should be punished. In Lockheed, these should apply to both the management and employees. The adverse consequences of ethical breach will force the employees to comply with ethical standards.

The management of Lockheed should address both the individual and group ethical standards. Currently, the management is only concerned with the individual ethical issues, not the group. The groups shall guide the behavior of a member of the group. Members will follow the ethical standards as set by the group and for the interest of the organization.

Conclusion

Business ethics are important in guiding the management in decision making; ethics should be enforced to employees and management. The benefits of business ethics include customer loyalty and retention of employees. The executive receives excessive compensation to the detriment of shareholders. Measures should be put in place to limit executive compensation. The organizational should set ethical standards and be reviewed from time to time.

References

Burnham, K. (2017). Ethical Standards. University of Illinois Press. doi: 10.5406/illinois/9780252038419.003.0003

Herring, J. (2017). 12. Business ethics. Legal Ethics. doi: 10.1093/he/9780198788928.003.0012

Luetge, C. (2016). Executive Compensation. Order Ethics: An Ethical Framework for the Social Market Economy, 349–361. doi: 10.1007/978-3-319-33151-5_20

Yamashita, H. (2018). Competitiveness and corporate culture. Competitiveness and Corporate Culture, 118–134. doi: 10.4324/9780429462351-12

Zsolnai, L. (n.d.). Economic Ethics and World Religions. Ethics, Meaning, and Market Society, 62–76. doi: 10.9774/gleaf.9781315207155_10