CUSTOMER STAKEOLDER...

Keeping Customers on Top

Employees, customers, shareholders, and suppliers of a firm are the key organizational stakeholders. There are obligations to these subjects that are often considered to be affected by organizational self-interest.

Customers help in holistically establishing the organizational reputation and identification. For example, Procter and Gamble is an ideal market-driven global powerhouse that has billion-dollar brands such as Olay, Tide, Crest, and Folgers etc.

It is important to realize that understanding the needs and offering high-quality products are the major attributes for a company's success.

Customer Loyalty and Business Ethics

Today, the contribution of customers in developing ethical programs and social responsibility standards is not quite clear. In a study, the ethical environment of a firm was found to be positively associated with customer loyalty. However, there are many variants of customer loyalty.

In competitive markets, market orientation and customer focus are the key drivers of organizational performance. Still, intense competition may also create unethical behaviors. For example, it is well documented how Pizza Hut and Papa John's attacked each other in advertising campaigns, declaring that each provided the 'freshest' ingredients. The matter was in the court of law and was resolved by civil litigation.

Ethical Customer Stakeholder Relationships

There is an implied reasoning about good faith and fair dealing. Performance cannot just be a matter of the firm's own discretion. This is not an ethical requirement but it has also been legally enforced in many states. Good faith and fair dealing may enforce a contract or a transaction according to the parties' expectations.

Therefore, ethically questionable practices can be treated with civil litigation. Ethically inappropriate judgments have a base for legal resolution. As an instance, Wal-Mart had roughly twelve lawsuits per day or one every couple of hours. Wal-Mart is the most sued public organization. The lawsuits stem from Wal-Mart’s customer interactions and their perceptions about the organization.

Consumer Protection and Legal Aspects

Ethical responsibilities have a strong base of legal protection. At the federal level, the Federal Trade Commission (FTC) makes sure that consumer protection laws are enforced. Within FTC, the Bureau of Consumer Protection protects consumers from unfair, deceptive, and fraudulent business practices.

At the state level, there are consumer protection statutes and deceptive trade practices laws. Consumer protection issues include product liability that refers to a business' legal responsibility for the product performance.

False or misleading communication can destroy stakeholders' trust in an organization and may be considered fraudulent. Ethical advertising is increasingly becoming a key issue in organizational communications. Exaggerated claims and concealed facts may be a part of advertising communications. These abuses range from the unethical to the illegal.

The Sarbanes–Oxley Act

The 2002 Sarbanes-Oxley Act and the United States sentencing commission guidelines provide strong directives to encourage ethical leadership. If ethical leadership fails, especially in corporate governance, there are significant penal ties.

Under the Sarbanes-Oxley Act, boards of directors need to provide oversight for all types of auditing. They are responsible for developing ethical behaviors. Moreover, court decisions of the Federal Sentencing Guidelines for Organizations make the board members responsible for the ethical and legal compliance programs of the firms they control.

Misidentification

It has been found by research that consumers may identify with organizations and may see the overlap between firms’ attributes and their own individual attributes. The concept is important because consumers may seek organizational images that are in harmony with their self-identity.

Organizational misidentification may take place if individuals perceive a conflict between their own attributes and the attributes of the organization. For example, Enron, WorldCom, Parmalat, and HealthSouth were involved in unethical practices and assumed misidentification from customers.

Ethical Considerations

Wal-Mart has experienced ethical and legal allegations concerning employment issues. Wal-Mart workers usually get a lower pay and fewer benefits than other retail stores workers. Wal-Mart work force is over 1.4 million; hence its policies are blamed for low retail wages across America. However, the company’s philosophy helps save customers possibly more than $100 billion per year.

What a company can do for success and what the company should do for success are two different aspects. In Wal-Mart’s case, the customers seem to have more power, or they are the preferred stakeholders. Wal-Mart's suppliers are not 'preferred,' many communities boycott Wal-Mart, and employee treatment is scrutinized.

Establishing a Balanced Stakeholder Orientation

There are potential conflicts between customer stakeholders and other stakeholders, including the communities for natural environment or economic development. Some customers engage in self-centered approach while some other customer groups prefer organized communication and actions.

For example, Nike has been boycotted by consumer groups concerning child labor practices. In general, however, these groups are not organized or have a uniform voice. Therefore, a danger that some more powerful stakeholders may influence ethical decisions in a manner not in the overall best interests of consumers is imminent.

The Business Stakeholder Relationships

Organizational ethics programs have become popular for ethical relationships with all stakeholders. Organizations often create an ethical or an unethical corporate culture depending on their leadership and the commitment to the values of stakeholder relationships.

Strategic approach to improve organizational ethics depends on establishing, communicating, and monitoring ethical values and legal requirements of organizational history, culture, and environment.

Key customer issues today include privacy, identity theft, disclosure of product information, etc. Forming an ethical climate that looks for the needs of customers must be based on a foundation of ethical values that make concrete connections between the standards and the actions of organizations.

   "It's sad to know I'm done. But looking back, I've got a lot of great memories".

                                                     ----- Bonnie Blair

BUSINESS ETHICS - HRM

BUSINESS ETHICS - HRM

Human Resource Management (HRM) deals with work force management, manpower planning and other employee related activities in an organization. Therefore, we can say that it is a special branch of management where ethics play a crucial role. HRM concerns human issues, especially those related with compensation, development, industrial relations, health and safety issues. However, there are sufficient disagreements in managing HRM issues that stem from various quarters.

Ethics and Market System

Various types of market systems affect business and HR ethics differently and hence, business ethics becomes negotiable. Occupations in which the market conditions do not favor the employees, it becomes necessary to have government and labor union interventions for controlling the possible exploitation of employees.

Free market systems empower employees and the employers equally; negotiations are used to create win-win situations for both of these parties. Government or labor union interventions are often harmful in free market systems because they stall the operations and create unnecessary hindrances.

With the growth of globalization, the concept of globalizing labor has gained importance. Trade unions have ceased to exist and the role of HR as such in issues like employee management, desirable policies and practices has become debatable topics.

Many people now have the opinion that HR is nothing but a part of the stakeholders, which initiates major strategic and policy decisions to divulge the organization and gear it towards profit making.

There cannot be a single opinion about ethics in HR that is completely convincing. Market is neither an ethical institution nor an unethical one; no policies and procedures can govern and align the markets for human well-being. However, the need of these policies and procedures cannot be denied or ignored because human development is the ultimate aim of all human initiatives.

HRM Ethics

Out of all organizational issues or policies, ethical considerations are the most difficult to deal with. Issues arise in employment, remuneration and benefits, industrial relations and health and safety.

Important Clusters of HRM related with Ethics

Some HRM issues are more important than the rest because we, as human beings, are more responsible for the development and empowerment of the human resources involved in the operation and management of organizations. Some of these issues are discussed below.

CASH AND COMPENSATION PLANS

There are some general ethical issues pertaining to the employee salaries, executive perquisites and compensations and the annual incentive plans, etc. The HR department is often under pressure to increase the band of base salaries. There is always an increased pressure upon the HR function to pay out more incentives to the top management and provide justification for the same to retain them.

Further, ethical issues arise when HR deals with long-term compensation and incentive plans by consulting with the CEO or an external consultant. There is a pressure on the HR managers on favouring the interests of the top management in comparison to that of the other employees and stakeholders.

RACE, GENDER, AND DISABILITY

There are several examples of organizations where, until recently, the employees were treated differently based on the race, gender, origin, and their disability. This is not the case anymore since the evolution of laws and a regulatory framework standardized for the employee behavior. In ethical organisations, the only factor of appraisal is performance.

EMPLOYMENT ISSUES

Human resource managers face many dilemmas in hiring employees. One particular dilemma stems from the pressure of hiring one, who has been recommended by a friend or someone from the family of a top executive.

Another major dilemma arises due to employees who are later found to have fake documents. Both of the issues are critical. In the first case, the person may have been trained and filling the position is critical. In the second case, the person may be efficient in his work and have the right kind of attitude. Both the situations are tough and HR managers face such cases day in and day out.

PRIVACY ISSUES

All human beings working with any organization have their personal life. An employee needs the organization to directly or indirectly protect his/her personal life. This personal life includes things like the religious, political and social beliefs etc.

There are many ethical issues in HR that are related to health and safety, restructuring and layoffs and employee responsibilities. A debate is still going on whether some activities are ethically permitted and why some are not. Layoffs, for example, are not considered unethical as they were thought of in the past.

"I'd rather attempt to do something great and fail than to attempt to do nothing and succeed."

                                            ---- Robert H. Schuller

BUSINESS ETHICS - MORAL REASONING...

What is Morality?

In a broad sense, morality is a set of rules that shapes our behavior in various social situations. It is more sensitive doing the good instead of the bad, and therefore, it establishes a level of standard for virtuous conduct.

The Corporate Governance Code of Coca Cola

Coca Cola makes it clear that the company is inclined towards a good business morality. Its corporate governance code starts with these starting announcements.

“At the Coca-Cola Company, we aim to lead by example and to learn from experience. We set high standards for our people at all levels and strive to consistently meet them. We are guided by our established standards of corporate governance and ethics. We review our systems to ensure that, we achieve international best practices in terms of transparency and accountability. The foundation of our approach to corporate governance is laid out in our Corporate Governance Guidelines and in the charters of our Board of Directors’ committees.”

Where Does Morality Come From?

The principles of moral ethics can be injected into any business. Ethical businesses recognize the power of conducting businesses in socially responsible ways and they realize that doing so leads to increase in profits, customer satisfaction and decrease in employee turnover.

Business ethics is concerned with applying a moral framework to the way organizations do business. From dealing with human resources issues to sales and marketing policies, ethical viewpoints can shape and change the way businesses operate.

Business ethics has both normative and descriptive elements −

The normative part of business ethics has to do with understanding, how the behavior you and your employees exhibit in relation to cultural issues or social upbringing. The key to normative ethics for business owners is to understand how personal beliefs affect the choices made as a business owner.

The descriptive part of business ethics, on the other hand, is related to how you incorporate "best practices" into your organization's policies and procedures.

Henry Ford on Business Morality

“There is one rule for the industrialist and that is: make the best quality goods possible at the lowest cost possible, paying the highest wages possible.”

The Meaning of Moral "Justification"

"Justification" in terms of business ethics can be portrayed in two different ways. In business ethics, do the means justify the ends, or do the ends justify the means?

Is it better to have a set of rules telling you what you ought to do in a particular situation, or should one worry more about how things are going to end up and do anything to reach that goal?

Let’s take an example. John ran a medicine business in California, USA. His herbal product used to stop nausea and vomiting for chemo patients. California regulators had allowed his business entity, but federal agencies had not approved it. Therefore, selling it on national level was breaking the law. On the other hand, not selling could consign his clients to suffering. So, when federal agents came knocking on his door, he had to make a decision.

If the means justify the ends − If he follows the rules no matter what the consequences are, then the agents ask John directly whether he is selling the medicine and the ethical action would be to admit it.

If the ends justify the means − If your ethical interest focuses on the consequences of an act instead of what you actually do, then the ethics change. Therefore, when agents ask him whether he is selling, he has a reason to lie.

The Importance of Context

When we ask questions, such as "Which is more important, telling the truth or preventing harm?” often the context is more important. Context can be determined from factors such as time and place, the nature of the situation, other people's expectations, and the relevant history.

To understand the context, let’s assume you are a resident of Nazi Germany, in 1940. A family of Jews is hiding in your attic. The German police come searching that particular family of Jews. In such a case, preventing harm is clearly more important than telling the truth.

The Importance of Relationships

Business morality largely depends on business relationships. Our rights and obligations spring largely from relationships. These include our relationships with shareholders, customers, and general stakeholders.

These relationships can offer moral reasons for particular actions. For example, relationship with your shareholder means moral duties to them (such as to offer profits and be transparent) which you do not have for non-stakeholders.

Moral Questions are not Distinct

Moral problems are not a separate, special or particular domain to that is followed only on special occasions. Moral issues are present all the time. Most decisions that people make usually have a degree of moral importance. The challenge is in recognizing that fact. Morality is often finding the best choice overall, taking into consideration the result, economics, and technical (e.g., finances) appropriateness, and balancing them against other sorts of business values, which the organization follows.

Moral Decision Making

There is no crafted-out formula or algorithm for moral decision-making. Good moral decision-making includes knowledge of the facts, and careful consideration of the moral values (principles) relevant to a given situation. Importantly, sensitivity and awareness of the range of interests are also highly sought in moral decision-making process.

GETTING THE FACTS STRAIGHT

To make a good decision, we have to get the facts of the situation straight. In some difficult cases, additional facts may make the correct course of action apparent. These facts are available through science, or from the experiences of people who have studied the situation for a long time.

THE IMPORTANCE OF MORAL SENSITIVITY

Sensitivity to the moral issues involved in everyday activities is important for moral decision-making. Sometimes, we may take the help of instincts for taking trivial decisions. For example, most of us do not require an impetus to avoid lying in most cases.

For a problem with moral importance, the first and perhaps the most important step in resolving the problem lies in finding out the range of considerations. This includes an awareness of the parties going to be affected, sensitivity to the set of values or principles probably to be applied, and a sensitivity to the factors that influence the decision.

The Role of Discussion in Morality

If morality in business ethics is primarily about shared values, then business discussion, which can take many modes of communication with various parties, takes a central place in moral business-decision making. In many cases, more than one party may often be involved, and we should include others in our decision-making processes.

DISCUSSION AS A MEANS OF CONSENSUS-BUILDING

Discussion is important in moral business-decision making, as it is often important that others around us agree with or understand our decisions. For example, the consumer products industry often collects feedback through surveys and marketing gigs to take the business discussion forward.

DISCUSSION AS A WAY OF LEARNING FROM OTHERS

We can learn from discussing moral questions with others. Others can provide valuable insight or experience. For example, the software makers can have valuable feedback from users. That is why they beta test their products before launching a product.

GUIDE TO MORAL DECISION MAKING

There is no formula for making good medical diagnoses, or for giving good legal advice. All of these involve significant elements of experience and sensitivity.

Experience and sensitivity will not guarantee that a good decision is made, but they help assure that decisions are not hasty, or lacking in sufficient consideration of ranges of problems.

" I am blessed to have so many great things in my life - family, friends and God. All will be in my thoughts daily."

                                                         ----Lil' Kim