A

Project report

on

“ETHICS AND ORGANISATIONS”

Submitted in the partial fulfilment for the

requirement of
the degree of

“MASTERS OF BUSINESS ADMINISTRATION

IN LEADERSHIP DEVELOPMENT”

G.S.S.D.G.S. KHALSA COLLEGE, PATIALA

SUBMITTED TO: SUBMITTED BY:

Dr. Komal Randhawa Ravinder Singh

ROLL NO:
9905

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 ACKNOWLEDGEMENT

It is a matter of great pleasure to present this report on the entitled “Ethics and
Organizations” undertaken by me as part of my MBA curriculum.

I am thankful to Punjabi university Patiala for offering me such a wonderful

challenging opportunity and I express my deepest thanks to faculties of the
college and Dr. Komal Randhawa, whose guidance and support was available
to me all the time. I find inadequate words to express my sincere gratitude towards
him.

It is my pleasure to pen down these lines to express sincere thanks to my parents

who had complete faith in my capabilities and also giving me the opportunity to
step in masters for flourishing my personality. I am also thankful to my guide for
training me on the subject of " Ethics and Organization".

I express my deep sense of gratitude to my dear friends for their support and
encouragement during my presentation.

Ravinder Singh

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 INDEX

Sr. No. Chapter Page

No.

1 Introduction to Ethics 4-7

2 What is Organization 8-11

3 Ethics and Organizations 12-13

4 Importance of ethics in organization 14-17

5 Factors in influencing organizational ethics 18-19

6 Factors affecting organization ethics 20

7 Ethical issues in organization 21-26

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 INTRODUCTION TO ETHICS

What is ethics?

Ethics (also known as moral philosophy) is a branch of philosophy

which seeks to address questions about morality; that is, about concepts
like good and bad, right and wrong, justice, virtue, etc. Ethics refers to
the moral values that govern the appropriate conduct of an individual
or group. “Ethics” speaks to how we ought to live, that is, how we ought
to treat others and how we ought to run or manage our own lives.

Simply stated, ethics refers to standards of behavior that tell us how

human beings ought to act in many situations in which they find
themselves-as friends, parents, children, citizens, businesspeople,
teachers, professionals, and so on ethics refers to a system of moral
principles a sense of right and wrong, and goodness
and badness of actions and the motives and consequences of these acti
ons.

As applied to business firms, ethics is the study of good and evils, right
andwrongof businessmen. Ethics is a body of principles or standards o
f human conduct that govern the behavior of individuals and groups.
Ethics arise not simply from man's creation but from human nature
itself making it a natural body of laws from man follows. Ethics is a
branch of philosophy and is considered a normative science because it
is concerned with norms of human conduct. Ethics is based on well-
founded standards of right and wrong that prescribe what humans ought

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to do, usually in terms of rights, obligations, benefits to society,
fairness, or specific virtues.

TYPES OF ETHICS:

Given below are the standard ethical practices that a business should
adopt:

1. Corporate Responsibility: The organization works as a separate

legal entity with certain moral and ethical obligations. Such ethics
safeguard the interest of all the internal and external parties
associated with the firm. This includes the employees, customers,
and shareholders.
2. Social Responsibility: Making profits should not be at the cost
of society. Therefore, corporate social responsibilities (CSR)
have been a common practice where businesses work towards
environmental protection, social causes, and spreading
awareness.
3. Personal Responsibility: Employees are expected to act
responsibly with honesty, diligence, punctuality, and willingness
to perform excepted duties. Individuals should settle dues in time
and avoid criminal acts.
4. Technology Ethics: In the 21st century, companies have adopted
e-commerce practices. Technology ethics includes customer-
privacy, personal information, and intellectual property fair
practices.

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 5. Fairness: Favoritism is highly unethical. Every individual
possesses certain personal bias. But at the workplace, personal
beliefs and biases should not affect decision-making. The firm
has to ensure fair chances of growth and promotion for all.
6. Trustworthiness and Transparency: Businesses should
maintain transparency in business practices and financial
reports.

NEED AND HISTORY OF ETHICS

People do business with other people and businesses they trust. A

business that is known for dealings that are fair and ethical fare better
over the long haul than those who operate using less ethical practices.
Although a business might be able to get away with fooling its
customers for a time, eventually the underhanded operations are
revealed and the company is as best vilified, at worst driven out of
business. Past mass disasters like the Bhopal Gas Tragedy in India in
1984 and the Shell Oil Spill in Nigeria in 2008 have clearly shown that
when companies are not accountable to governments, this can lead to
non-compliance with basic safety and operational standards, resulting
in widespread human rights abuse. In Bhopal and Nigeria alike, victims
of disasters still await compensation from the companies (Union
Carbide and Shell Oil). In the absence of proper ethical laws, the
existence of these tragedies would prevail. Ethical behavior gets

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beyond compliance: a culture of integrity reduces risk, attracts
shareholders and leads to better performance.

1. Affect decision-making. The firm has to ensure fair chances of

growth and promotion for all.
2. Trustworthiness and Transparency: Businesses should maintain
transparency in business practices and financial reports.

The Society for Business Ethics was started in 1980. The first meeting
of the Society for Business Ethics was held in conjunction with the
meeting of the American Philosophical Association (APA) in
December in Boston. Other business-related association including the
Social Issues in Management Division of the Academy. The above-
mentioned association emerged as the International Association for
Business and Society. With the American development, Europeans
organized the European Business Ethics Network (EBEN), which held
its first meeting in 1987. By 1990 business ethics was well established
as an academic field.

The Ethical movement, also referred to as the Ethical Culture

movement, Ethical Humanism or simply Ethical Culture, is an ethical,
educational, and religious movement that is usually traced back to Felix
Adler (1851–1933).

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 WHAT IS ORGANIZATION?

Organization refers to a collection of people, who are involved in

pursuing defined objectives. It can be understood as a social system
which comprises all formal human relationships. The organization
encompasses division of work among employees and alignment of
tasks towards the ultimate goal of the company.

Process of Organization

• Step 1: Determination and classification of firm’s activities.

• Step 2: Grouping of the activities into workable departments.

• Step 3: Assignment of authority and responsibility on the

departmental executives for undertaking the delegated tasks.

• Step 4: Developing relationship amidst superior and subordinate,

within the unit or department.

• Step 5: Framing policies for proper coordination between the

superior and subordinate and creating specific lines of
supervision.

Organization is a goal-oriented process, which aims at achieving them,

through proper planning and coordination between activities. It relies
on the principle of division of work and set up authority-responsibility
relationship among the members of the organization.

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Types of Organization Structure

1. Formal Organization Structure: The organization structure of

jobs and positions, with specified activities and relationships, is
known as formal organization structure. It is created by
management, to attain the objectives of the company.

o Line Organization: Line organization is the oldest and

simplest pattern of organizations wherein the supervisor has
outright supervision over the subordinate. The flow of
authority is from the top- level executive to the person at the
lowest level of the organization’s echelon.

o Functional Organization: As the name suggests,

functional organization structure is one in which the
thorough task of managing and directing the employees, is
grouped as per the functions or type of work involved.

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o Line and Staff Organization: This type of organization
structure is an improvement over the traditional line
organization. In line and staff organization primary and
supportive activities are related to the line of supervision by
appointing supervisor and specialist, who are linked to line
authority.

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 o Project Management Organization: Project Organization
is not an independent organization, like the organization
structure discussed above. Instead, it is a set up within an
organization, so as to accomplish a project or firm’s
objectives. It is led by project manager, who is responsible
for project objectives.

o Matrix Organization: Matrix organization is the emerging

structure of the organization, which is a combination of
functional organization and project organization. In such an
organization, the functional departments such as
production, accounting, marketing, human resource, etc.
constitute a vertical chain of command, while project
division constitute horizontal line of authority.

2. Informal Organization Structure: The relationship between the

employees, that relies on personal attitudes, prejudices and
interests rather than procedures. It is system of personal and social
connection, whose creation is not needed by formal organization.

The organization structure is a basic idea, which depends on the activity

authority relationship in the company. It is designed in such a way to
realize business objectives.

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 ETHICS AND ORGANIZATIONS

Organizational ethics is the ethics of an organization, and it is how an

organization responds to an internal or external stimulus.
Organizational ethics is interdependent with the organizational culture.
Although it is to both organizational behavior and industrial and
organizational psychology as well as business ethics on the micro and
macro levels, organizational ethics is neither organizational behavior
nor industrial and organizational psychology, nor is it solely business
ethics (which includes corporate governance and corporate ethics).
Organizational ethics express the values of an organization to its
employees and/or other entities irrespective of governmental and/or
regulatory laws.

Ethics are the principles and values used by an individual to govern his
or her actions and decisions. An organization forms when individuals
with varied interests and different backgrounds unite on a common
platform and work together towards predefined goals and objectives. A
code of ethics within an organization is a set of principles that is used
to guide the organization in its decisions, programs, and policies. An
ethical organizational culture consists of leaders and employees
adhering to a code of ethics.

An organization's ethical philosophy can affect the organization in

many ways including its reputation, productivity, and the bottom line
of the organization. Ethics within an organization can offer many
benefits. A positive ethical corporate culture improves the morale

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among the workers in an organization, which could increase
productivity, employee retention and loyalty. Higher productivity
improves the efficiency of the organizations and increased employee
retention reduces the cost of replacing employees. Other essential
benefits of an ethical culture include better internal communication and
wider community development through corporate social responsibility.

Organizations focusing on encouraging ethical practices are commonly

viewed with respect by their employees, the community, and
corresponding industries. Ethical business practices of organizations
have resulted in a solid financial bottom-line. This has been seen
through greater sales and increased revenue by companies retaining
talented personnel and attracting new skilled employees. More
importantly, an ethical organization will have the ability to retain
employees that are experienced and knowledgeable (generally referred
to as human capital). This human capital results in less employee
turnover, less training time for new employees, and greater output
regarding services (or production of goods).

Organizations are constantly striving for a better ethical atmosphere

within the business climate and culture. Businesses must create an
ethical business climate in order to develop an ethical organization.
Otherwise said, companies must focus on the ethics of employees in
order to create an ethical business. Employees must know the
difference between what is acceptable and unacceptable in the
workplace.

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IMPORTANCE OF ETHICS IN ORGANIZATION

There are various benefits to using ethics in the workplace. Leaders,

stakeholders and the general public alike can experience significant
improvements when organizations hold themselves to high ethical
standards. Here are a few of the primary benefits that result from
employing ethics in the workplace:

• Employee satisfaction

When organizations express their commitment to maintaining high

ethical standards, they usually treat employees better and encourage
staff to act laterally under the same premises. These ethical standards
help establish a certain expectation for how organizational operations
affect stakeholders' wellbeing and personal interests. When
organizations and stakeholders follow through in upholding ethical
standards, they can create a workplace environment where individuals
feel respected, heard and satisfied in their roles. With this higher rate
of satisfaction, organizations can often reduce staff turnover and more
easily attract new, talented candidates to work for them.

• Improved workplace culture

As stated above, when organizations act responsibly and ethically,

leaders and employers typically follow suit. This can help significantly
improve workplace culture overall. For instance, if an organization
expresses their ethical commitment to diversity, inclusion and equality,
stakeholders may feel responsible for upholding the same ethical

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standard. They may begin to hold organizational leaders accountable
for ethically discrepant actions or start to examine their own behaviors
more closely. This type of interaction can help organizations strengthen
their initiatives overall and create a robust ethical culture for their
workforce where stakeholders feel safe, protected and engaged.

• Maintaining legal compliance

Often, the ethical standards that organizations set out for themselves
correspond directly with legal guidelines. For example, a
manufacturing company that expresses a strong commitment to eco-
friendly practices sustainability may also be subject to complying with
legal guidelines for sustainable waste removal procedures to avoid
environmental pollution. Therefore, when organizations establish
strong ethical codes of conduct, they often fall in line with the legal
regulations set out for them by official governing bodies and receive
the dual benefit of complying with their legal obligations.

• Improved public reputation

When organizations set out clear ethical standards for their workplace,
they can typically enjoy an improved public image. In recent years,
consumers and society more generally have become increasingly
concerned with how organizations treat their employees and act
accountably toward the public.

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For instance, as consumers have become more interested in buying eco-
friendly products that guarantee less harm for the natural environment,
they have started to examine the ways companies manufacture and
market products. This movement has led to the creation of a new
consumer market for green products and services in which sustainable
companies are viewed more favorably. Therefore, acting ethically can
significantly improve an organization's public image and avoid
potential criticisms that would arise through unethical behavior.

• Customer engagement and loyalty

If an organization is client-facing, instilling specific ethical workplace

standards can help encourage increased customer engagement and
loyalty. Often, customers will be more willing to engage with explicitly
ethical companies than those with fewer ethical initiatives. As
mentioned above, when companies serve their employees and
stakeholders with accountability and responsibility, they can garner a
certain level of respect in their public reputation.

With this, customers may feel more comfortable promoting an

organization or spending their money with such companies. Over time,
as an organization maintains a robust system of workplace ethics, their
reputation may solidify. This can result in heightened customer
loyalty—when customers and clients trust an organization, they will
return to the organization repeatedly and engage on a deeper level.

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 • Streamlined decision-making processes

When organizations establish ethical codes of conduct in the

workplace, they foster a culture designed to uphold such standards.
These guidelines can help organizational leaders make streamlined
decisions and solve problems efficiently when challenges arise. When
leaders have specific ethical expectations set out for them, they can use
these expectations to direct their choices and manage conflicts with
simplicity. Such streamlined decision-making processes can lead to a
high level of organizational consistency in the long term.

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FACTORS INFLUENCING ORGANIZATIONAL
ETHICS

Business leaders today are well aware of the ethical issues and hence
they want to improve the ethical standards of the business. Self-
regulation is, of course, better and produce impressive results. Besides,
there are also a number of factors, which significantly influence the
managers to take ethical decisions.

Some of them are

1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral is the
foremost responsible factor influencing his behavior.

2. Legislation

It is already stated that the Government will intervene and enact laws
only when the businessmen become too unethical and selfish and
totally ignore their responsibility to the society. No society can tolerate
such misbehavior continuously. It will certainly exert pressure on the
Government and the Government consequently has no other alternative
to prohibit such unhealthy behavior of the businessmen.

3. Government Rules and Regulations

Laws support Government regulations regarding the working

conditions, product safety, statutory warning etc. These provide some

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guidelines to the business managers in determining what are acceptable
or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to

rise. Any unethical behavior or conduct on the part of the company
shall endanger its established reputation, public image and goodwill.
Hence, most companies are very cautious in this respect. They issue
specific guidelines to their subordinates regarding the dealings of the
company.

5. Social Pressures

Social forces and pressures have considerable influence on ethics in

business. If a company supplies sub-standard products and get involved
in unethical conducts, the consumers will become indifferent towards
the company. Such refusals shall exert a pressure on the company to
act honestly and adhere strictly to the business ethics. Sometimes, the
society itself may turn against a company.

6. Ethical Climate of the Industry

Modern industry today is working in a more and more competitive

atmosphere. Hence only those firms, which strictly adhere to the ethical
code, can retain its position unaffected in its line of business. When
other firms, in the same industry are strictly adhering to the ethical
standards, the firm in question should also perform up to the level of
others. If the company’s performance is below than other company.

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FACTORS AFFECTING ORGANIZATION ETHICS

The business executive working as a professional manager has to

decide what is ethical or unethical. Many factors influence this
decision. In part, what is ethical is based on:

1. The individual’s personal code of behavior: The personal Code of

Behavior is the result of the complex environment that influences one’s
life.

2. The ethical standards imposed on a manager by his superiors

also influence him in his decisions as to the morality of behavior. If the
superior condones unethical activities such as padding expenses
accounts, the subordinate is encouraged to look upon this activity as an
acceptable practice.

3. The policies of the company also influence the determination of

ethical conduct. Standards of behavior in an industry are often
influenced greatly by the dominant firms in that industry. The authors
of the company policy obviously have an effect that is decisive.

4. The ethical climate of a country: If, it is poor, then only giant

corporations and large undertakings can stand competition and be
viable; a small concern is apt to go bankrupt, since business is
concerned with employment of a large number of persons, it has the
obligation to see that it adheres to an ethical atmosphere. However,
considerable differences occur among managers as to what is ethical or
unethical; and business truly lacks a Code of Ethics.

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ETHICAL ISSUES IN ORGANIZATION:

1. Harassment and Discrimination in the Workplace

Harassment and discrimination are arguably the largest ethical issues

that impact business owners today. Should harassment or
discrimination take place in the workplace, the result could be
catastrophic for your organization both financially and reputationally.

Every business needs to be aware of the anti-discrimination laws and

regulations that exist to protect employees from unjust treatment. The
U.S. Equal Employment Opportunity Commission (EEOC) defines
many different types of discrimination and harassment statutes that can
have an effect on your organization, including but not limited to:

• Age: applies to those 40 and older, and to any ageist policies or

treatment that takes place.
• Disability: accommodations and equal treatment provided within
reason for employees with physical or mental disabilities.
• Equal Pay: compensation for equal work regardless of sex, race,
religion, etc.
• Pregnancy: accommodations and equal treatment provided within
reason for pregnant employees.
• Race: employee treatment consistent regardless of race or
ethnicity.

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 • Religion: accommodations and equal treatment provided within
reason regardless of employee religion.
• Sex and Gender: employee treatment consistent regardless of sex
or gender identity.

2. Health and Safety in the Workplace

As outlined in the regulations stipulated by the Occupational Safety and

Health Administration (OSHA), employees have a right to safe
working conditions. According to their 2018 study, 5,250 workers in
the United States died from occupational accidents or work-related
diseases. On average, that is more than 100 a week, or more than 14
deaths every day. The top 10 most frequently cited violations of 2018
were:

• Fall Protection, e.g. unprotected sides and edges and leading

edges
• Hazard Communication, e.g. classifying harmful chemicals
• Scaffolding, e.g. required resistance and maximum weight
numbers
• Respiratory Protection, e.g. emergency procedures and
respiratory/filter equipment standards
• Lockout/Tagout, e.g. controlling hazardous energy such as oil
and gas
• Powered Industrial Trucks, e.g. safety requirements for fire trucks
• Ladders, e.g. standards for how much weight a ladder can sustain

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 • Electrical, Wiring Methods, e.g. procedures for how to circuit to
reduce electromagnetic interference
• Machine Guarding, e.g. clarifying that guillotine cutters, shears,
power presses, and other machines require point of operation
guarding
• Electrical, General Requirements, e.g. not placing conductors or
equipment in damp or wet locations

However, health and safety concerns should not be limited to physical

harm. In a 2019 report conducted by the International Labour
Organization (ILO), an emphasis was placed on the rise of
“psychosocial risks” and work-related stress and mental health
concerns. Factors such as job insecurity, high demands, effort-reward
imbalance, and low autonomy, were all found to contribute to health-
related behavioural risks, including sedentary lifestyles, heavy alcohol
consumption, increased cigarette smoking, and eating disorders.

3. Whistleblowing or Social Media Rants

The widespread nature of social media has made employees conduct

online a factor in their employment status. The question of the ethics of
firing or punishing employees for their online posts is complicated.
However, the line is usually drawn when an employee’s online
behavior is considered to be disloyal to their employer. This means that
a Facebook post complaining about work is not punishable on its own
but can be punishable if it does something to reduce business.

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In the same vein, business owners must be able to respect and not
penalize employees who are deemed whistleblowers to either
regulatory authorities or on social media. This means that employees
should be encouraged, and cannot be penalized, for raising awareness
of workplace violations online. For example, a Yelp employee
published an article on the blogging website Medium, outlining what
she claimed as the awful working conditions she was experiencing at
the online review company. She was then fired for violating Yelp’s
terms of conduct. The ambiguity of her case, and whether her post was
justifiable, or malicious and disloyal conduct, shows the importance of
implementing clear social media policies within an organization. In
order to avoid this risk of ambiguity, a company should stipulate which
online behaviors constitute an infringement.

4. Ethics in Accounting Practices

Any organization must maintain accurate bookkeeping practices.

“Cooking the books”, and otherwise conducting unethical accounting
practices, is a serious concern for organizations, especially in publicly
traded companies.

An infamous example of this was the 2001 scandal with American oil
giant Enron, which was exposed for inaccurately reporting its financial
statements for years, with its accounting firm Arthur Andersen signing
off on statements despite them being incorrect. The deception affected
stockholder prices, and public shareholders lost over $25 billion
because of this ethics violation. Both companies eventually went out of

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business, and although the accounting firm only had a small portion of
its employees working with Enron, the firm’s closure resulted in 85,000
jobs lost.

In response to this case, as well as other major corporate scandals, the

U.S. Federal Government established the Sarbanes-Oxley Act in 2002,
which mandates new financial reporting requirements meant to protect
consumers and shareholders. Even small privately held companies
must keep accurate financial records to pay appropriate taxes and
employee profit-sharing, or to attract business partners and
investments.

5. Nondisclosure and Corporate Espionage

Many employers are at risk of current and former employees stealing

information, including client data used by organizations in direct
competition with the company. When intellectual property is stolen, or
private client information is illegally distributed, this constitutes
corporate espionage. Companies may put in place mandatory
nondisclosure agreements, stipulating strict financial penalties in case
of violation, in order to discourage these types of ethics violations.

6. Technology and Privacy Practices

Under the same umbrella as nondisclosure agreements, the

developments in technological security capability pose privacy
concerns for clients and employees alike. Employers now have the
ability to monitor employee activity on their computers and other

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company-provided devices, and while electronic surveillance is meant
to ensure efficiency and productivity, it often comes dangerously close
to privacy violation.

According to a 2019 survey conducted by the American Management

Association, 66% of organizations were found to monitor internet
connections, with 45% tracking content, keystrokes, and time spent on
the keyboard, and 43% storing and reviewing computer files as well as
monitoring employee emails. The key to using technological
surveillance in an ethical manner is transparency. According to the
same survey, 84% of those companies tell their employees that they are
reviewing computer activity. In order to ensure employee surveillance
does not turn into an ethical issue for your business, both employees
and employers should remain conscious of the actual benefits of being
monitored, and whether it is a useful way of developing a record of
their job performance.

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