HRM and Ethics

Right behavior from HRM functionaries will ensure that the

organization has the best people.
The HR man must be professional to ensure that there will
be no discrimination in any of his functional areas.
 HRM and Ethics

Discrimination is the disadvantage of people who are

equally able to perform a given function or to do the job as
well as another, whether in recruitment, in promotion or in
the formal or informal influence.
 Effects of Discrimination

1. Discrimination artificially reduces the pool of talent and

competence from which the business is staffed.
2. It underrates the valuable contributions employees make
to the company.
3. It gives the firm a poor public and industry image.
4. It affects staff morale as they increasingly see their
careers being adversely affected on account of it.
HR Dilemmas
 HR dilemmas arise from three sources:

1. Face to face Ethics

2. Corporate policy Ethics
3. Functional area Ethics
 Face to Face Ethics

These arise mainly because there is human element in

most business transactions.
For example, a purchasing agent of a company develops
personal relationship with the sales representative who
sells supplies to the company.
They may address one another on first name basis, have
lunch together, and talk often on the phone.
A company’s best customers may be well-known to people
in the production department as it helps to ensure that the
company’s products fit the customer needs.
Business is composed of these human transactions, it
should not be surprising that face to face ethical dilemmas
arise often.
 Corporate-policy Ethics

Companies are often faced with ethical dilemmas that effect

their operations across all departments and divisions.
Following conflicting situations are typical:
1. Your R&D department has modernized one of your
products. It is not really ‘new and improved’. But you
know printing these statements on the package and using
it in advertising will increase its sales.

What would you do?

2. You are interviewing a former product manager who just
left a competitor’s company. You are thinking of hiring him.
He would be more than happy to tell you the competitor’s
plans for the coming years.

What would you do?

3. You work for a cigarette company and till now you have
not been convinced that smoking cigarettes causes cancer. A
recent report has come across your desk that clearly
establishes the connection between smoking and cancer.

What would you do?

The ethical burden of deciding corporate policy matters
normally rests upon a company’s HR management.

The HR Managers and directors are responsible for making

policies and implementing them too.
The ethical content of their policies can have enormous
impact throughout the company.
 Functional-area Ethics

Ethical issues arise in all functional areas of business.

Accounting is a critical function of any business.
Accounting statements reveal to the manager and owners the
financial soundness of a company. Managers, investors,
regulating agencies, tax collectors, and trade unions rely on
accounting data to make decisions.
Financial statements are expected to present true and fair
picture about the business.
Ethical dilemmas crop up in purchasing departments where
strong pressures are felt to obtain the lowest possible prices
from suppliers and where suppliers too feel a similar need.

Marketing is another area of ethical issue. Pricing,

promotion, advertising, product information, relation
between the ad agencies and their clients, and marketing
research have potential areas of ethical dilemmas.
HR Ethical Issues
 Cash and Incentive Plans

These include:
Base salaries
Annual incentive plans
long-term incentive plans
 Base Salaries

The HR function is often presumed to justify a higher level of

base salaries, or a higher percentage increase than what
competitive practice calls for.
 Annual Incentive Plans

The HR function is often forced to design and administer top-

management incentive plans, at higher rates than what the
individuals deserve.
A common rationale presented to the HR executive for
bending the rules is the fear of losing the outstanding
executives, if higher incentives are not paid.
 Long-term Incentive Plans

Just as with annual incentive plan, many HR executives have

the responsibility of designing and administering the firm’s
long-term incentive plans, but in consultation with the CEO
and an external consultant.
Ethical issues arise when the HR executive is to pressure to
favor top management interests over those of other
employees and investors.
 Performance Appraisal

Performance appraisal lends itself to ethical issues.

Assessment of an individual’s performance is based on
observation and judgment. HR managers are expected to
observe the performance in order to judge its effectiveness.
Yet, some HR managers assign performance rating based on
unrelated factors.
 Race, Gender, Age

The practice of treatment of employees according to their

race, ethnic origin or disability has largely been stopped.
No enterprise today would dare to publicly state that it denies
minorities, women, and the disabled opportunities for
employment, remuneration and growth prospects different
from those given to others.
 Job Discrimination

Job discrimination refers to making adverse decisions against

employees or job applicants.
 Job Discrimination

Discriminatory Practices

1. Individuals can intentionally discriminate out of personal

prejudice or on the basis of stereotypes.
For example, request from women to work in production
department may be rejected on the basis that they do not
understand machines.
 Job Discrimination

2. A company has a policy not to place women in supervisory

positions because “men in the company do not want to
receive orders from females”.

3. Discrimination on the ground of sex or race that violates

people’s basic moral rights.

4. Workplace harassment, particularly of women, is a

workplace discrimination.
 Privacy Issues

Privacy refers to protecting a person’s private life from

intrusive and unwarranted actions.
Exceptions are permitted only when job involvement is
clearly involved.
For example, it may not be inappropriate to intrude into an
employee’s private matters if it is suspected that he or she
discusses with a competitor, through e-mail messages, the
specifications of a newly developed product not yet
launched into the market.
Five areas pose ethical dilemmas to employers pertaining
to privacy of Employees or job applicants

Information Technology

AIDS Testing

Whistle blowing

Drug Testing
s e ussI l aci ht E

s’ eey ol p mE
 Information Technology

There are regulations prohibiting third-party interception of

e-mails without prior authorization, but interception by
insiders is not covered by any law, and no absolute privacy
exists in a computer-based system.
Employees are viewed on close-circuit TV, phones are tapped,
and computer files are read without his or her knowledge or
consent.
Such intrusions do breach the privacy of employees and
constitute an ethical dilemma for the HR practitioner.
 AIDS Testing

AIDS has become a major public health problem.

For the HR manager the disease raises two issues.
 Whether a new hire be subject to AIDS test?
 What treatment should be meted out to an employee who is
affected with the disease?
 Arguments against Aids Testing

Opponents of AIDS testing argue that new hires should not

be tested for the presence of HIV because it would be an
invasion of privacy.
It is generally understood that since AIDS cannot be
contracted by casual and normal workplace contacts,
employees with the illness should not be segregated from
others, nor should they be restricted in performing job for
which they are qualified.
 Whistle blowing

Whistle-blowing in a business setting refers to disclosure by

former or current organization members of any illegal,
immoral, or illegitimate practices involving their employers.
 How is whistle-blowing an ethical issue?

Generally, employees are not expected to speak against their

own employers because there is public interest in allowing
firms to operate without harassment from insiders.
Company information is generally considered to be
proprietary and private.
If employees, based on their personal points of view, are freely
allowed to expose issues to the public, the company may be
thrown into turmoil and be unable to operate efficiently.
 The following sequence of actions morally
justify whistle-blowing

 An unreported act that would be serious and would cause

considerable harm to the people.
 Once such an act has been identified, the employee has
reported the act to his or her immediate supervisor and
has made the moral concern known.
 If the immediate supervisor does nothing, the employee
tries other internal pathways for reporting the problem.

Only after each of these conditions has been met, should the
whistle-blower go public.
 Drug Testing

As a rule, employer has a right to drug test if drug usage

impacts employees job performance.
 Pros and Cons of Employee Drug Testing

Arguments favoring Employee Drug Testing

• Improves employee productivity

• Promotes safety in the workplace
• Decreases employee theft and absenteeism
• Reduces health and insurance costs
Arguments Opposing Employee Drug Testing
• Invades an employee’s privacy
• May be unrelated to job performance
• May be used as a method of employee discrimination
• Lowers employee morale
• May be yield undesirable test results
• Conflicts with company values of honesty and trust
 Safety and health

Over the past decade, new categories of accident and illness

have emerged, including the fast-growing job-safety problem
office injuries.
Stress from the rising productivity pressure and escalating job
demands can cause cumulative trauma and disorder, such as
the wrist pain which is sometimes experienced by super-
market checkers, meat cutters, or keyboard operators.
 Restructuring and Layoffs

Restructuring and consequent lay-offs have become relevant

because of poor management, but incompetence does not
become unethical.
There are ethical implications in the process by which
termination decisions are made and actions taken.
For example, if restructuring requires closing of a plant, the
process by which that plant is chosen, how the news will be
communicated, and the time-frame for completing the lay-offs
are ethically important.
If conducted in an atmosphere of fairness and equity and
with the dignity of the affected individuals in mind, the
action is ethical.
 To start with, alternatives to lay-offs may be tried before
terminating services of employees. Following are the most
straightforward choices:

1. Reducing wages for all employees to reduce the wage bill.

2. Taking work previously outsourced back into the
organization.
3. Freezing hiring to avoid making overstaffing worse.
4. Encouraging people to develop new products, services, or
markets so that their skills can still be used by the firm.
5. Building inventory when demand is Slack.
6. Putting production or staff people into sales to build
demand.
 Employee Responsibilities

Employee responsibilities are responsibilities which employees

owe to their employers.
Employee owe responsibilities to themselves and their own
moral integrity, to their families, to their profession, to the
law and to society at large.
Conflict also arises when the responsibility to self or family
clashes with the responsibility towards employer.
 Managing Ethics

Top Management

It is the CEO who should take the initiative in ensuring

ethical standards in his or her organization.
The top management must avoid adopting business
strategies, schedules and reward systems that place
unreasonable pressure on employees.
 Managing Ethics

Code of Ethics

A Code of Ethics is a set of standards, rules, guidelines, and

values that govern and guide ethical business .
 Code of Conduct in TATA

For the Company

 To supply goods and services of the highest quality
standards to ensure total satisfaction of customers.
To engage only in activities beneficial to the national
interest of the country they operate in.
 To be fully transparent in accounting and financial
reporting standards.
To neither give nor take any illegal payment,
remuneration, gift, donation to obtain business or favours.
 Code of Conduct in TATA

For the Employees

 Conduct themselves professionally with honesty, integrity,
as well as high moral and ethical standards.
 Not derive any benefit from any information about the
company or group which constitutes inside information.
 Report to the management any actual or possible violation
of the code or an event that the employee become aware of,
that could affect the business of the employee’s company
belonging of the Tata group.
 Managing Ethics

Ethics Committees

Many companies have ethics committees to advise on ethical

issues.
Such a committee can be high-level one comprising the
board of directors, chaired by the CEO of the company.
 Managing Ethics

Ethics Training Programs

Nearly all companies, which take ethics seriously, provide

training in ethics to their managers and other employees.
In such training programs, company personnel are made
familiar with the official company policy on ethical issues.
Types of Right v. Right
Dilemmas
 Truth v. Loyalty

 Individual v. Community

 Short-Term v. Long-Term

 Justice v. Mercy
Examples of Right v. Right
Dilemmas
 It’s right to tell the truth, but it is also right to be
kind and considerate of peoples’ feelings and
emotions.
 It’s right to apply rules and procedures equally,
without favoritism, but it is also right to give
special treatment to hard-working, dependable,
and productive employees.
Examples of Right v. Right
Dilemmas (cont’d)
 It’s right to spend more time adding more quality
to your work but it is also right to meet deadlines
and avoid “diminishing returns” on your efforts.

 It’s right to be concerned about short-term

results, but it is also right to focus on long-term
growth and stability.
Examples of Right v. Right
Dilemmas (cont’d)
 It’s right not to share information
given to you in confidence, but it is
also right to report violations of
laws, rules, and ethical standards.
The Ethical Action Test
 Is it legal?
 Does it comply with our rules and
guidelines?
 Is it in sync with our organizational
values?
 Will I be comfortable and guilt-free if
I do it?
The Ethical Action Test
(cont’d)
 Does it match our stated commitments
and guarantees?
 Would I do it to my family and friends?
 Would I be perfectly okay with someone
doing it to me?
 Would the most ethical person I know do
it?