Unit 4: Ethics in Human Resource

Management

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Introduction to
Human Resource
Management:
Fresh Perspectives 3e
9781485714903
Section A
Chapter 3: Ethics In Human Resource
Management

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 Learning Outcomes

LEARNING OUTCOMES ASSESSMENT CRITERIA

Defend ethics in human resource
management.
1. Define the concept of ethics and discuss what ethics is
not.
2. Identify and discuss the most important ethical
decision-making frameworks.
3. Explain the concept of business ethics and indicate
why it is important.
4. Define corporate governance and explain why it is
important.
5. Differentiate between the five different theories of
corporate governance.
6. Describe how corporate governance is regulated in the
South African business environment.
7. Explain how an ethical working environment can be
created.
8. Discuss six different ethical issues found in the
workplace.
9. Identify measures to manage ethical issues in the
workplace.
10. Explain the importance of an effective ethics hotline as
a tool for reporting unethical workplace behaviour.
 What is ethics?
What ethics is not

• Ethics relate to how a moral person should behave. Our values, on the
other hand, are the inner judgments that determine how someone will
behave when a decision needs to be made.
• Ethics is not how a person feels.
• Ethics is not a person’s religion.
• Ethics is not simply following the law.
• Ethics is not merely conforming to what society approves of.

Important ethical decision-making frameworks

Deontology:

Deontology is the belief that rules should be used to

distinguish right from wrong.

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 Consequentialism

• The underpinning of this ethical framework is that ethical

decisions are made based on the consequences of the action
and, the most ethical course of action will be the one that
offers the greatest amount of good to the largest number of
people, or in difficult conditions, will produce the least amount
of harm.

What is Ethics? Virtue ethics

Virtue ethics entails that the decision maker should
Continued… understand what virtues are good, and that ethical
decisions and actions should be consistent with
certain ideal virtues that provide for the full
development of our humanity.

Theory of justice or fairness

All humans should be treated the same. The only
exception that would be permissible is if these
people differ in ways that are applicable to the
specific situation. If it is not possible to treat
everyone equally, then there must be a standard of
fairness that is applicable.

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 What is business ethics?
Business ethics can be defined as the moral
principles and values that act as guidelines
for the way a business conducts itself and
in its dealings.
Business ethics is important for the
following reasons:
Protects employees.
Supports fair and honest dealings with other companies.
Promote better service delivery to customers and clients.
The organisation’s reputation is safeguarded when business
is done ethically.
Investors and customers take cognisance and places value
on the way an organisation does business.
Investors and customers increasingly consider aspects such
as societal, environmental,
economic, and social issues related to organisations before
they support them.
Ethical business practices can be the differentiator between
your organisation and its competitors.
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 What is corporate governance?
Corporate governance can be seen as an internal framework that was designed to govern and protect
those stakeholders (employees, customers, investors, etc.) invested in the organisation.

The corporate governance of the organisation stems from the ethical values and practices of the
organisation.

The King IV Code on Corporate Governance (IODSA, 2016) (discussed in section 3.3.2) defines
corporate governance as the exercise of ethical and effective leadership by the governing body towards
the achievement of the following governance outcomes (IODSA, 2016):

• Ethical culture

• Good performance

• Effective control

• Legitimacy

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 Theories of Corporate Governance
Theory Differentiating principle

Shareholder theory Management’s objective is to maximise shareholder value and this takes
precedence over the interests of other corporate stakeholders, such as
employees, suppliers, customers, and broader society.

Stakeholder theory Integrates the accountability of management to a wider range of stakeholders

and advocates that every party that contributes to the organisation should
enjoy the advances of ethical governance since they are stakeholders.

Agency theory Agents (managers) act on behalf of principles (shareholders) in the daily
operational needs of the organisation. Principles employ these agents, and
delegate this decision-making function to the agents, to manage the
organisational assets on the behalf of their behalf.

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 Theories of Corporate Governance continued…
Theory Differentiating principle
Stewardship theory Managers are stewards who integrate their aims as part of the organisation’s
goals and emphasises the role of managers to work with more autonomy so
that the shareholders’ returns are maximised. Stewards protect and maximise
shareholder wealth through organisational performance.

Resource dependence Characterises a business as an open system, dependent on contingencies in

theory the external environment and emphasises that organisations need to obtain
resources and these needs result in exchange relationships between various
stakeholders and organisations.

The key characteristics of each theory can be found in Table 3.1 (pages 57-58)

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 Corporate Governance in the South African business
environment
In South Africa, the following legislation regulates and speaks to
corporate governance:
Companies The Companies Act is the primary source of company law and applies to all
Act (71 of South African organisations. The Act promotes transparency and
accountability in the South African corporate sector.
2008)

King Code The King Code, is a booklet of guidelines for the governance structures and
operation of organisations in South Africa. It is issued by the King
on Committee on Corporate Governance
Corporate Key amendments to the King Code can be found in Table 3.2 on page 60
Governance

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 Protected Disclosures Act (PDA) 26 of 2000

• The preamble of the Protected Disclosures Act (sometimes referred to as the

Whistleblowing Act) recognises the presence of unethical or other irregular
conduct in public and private organisations, which is detrimental to good,
Corporate effective, accountable, and transparent governance in these entities.
Governance in the Broad-Based Black Economic Empowerment Act (BBBEE) (53 of
South African 2003)
Business • The BBBEE Act speaks to the need that organisations should take the
interests of the broader community into account in its operations. The focus
Environment of the BBBEE Act, is twofold. It focuses on the correction of racial inequities
and encourages social investment and the empowerment of communities.

Protection of Personal Information Act (POPI) (4 of 2013).

• Every organisation, regardless of their nature, has in their possession

specific information that must be protected. This information typically includes
trade secrets of the organisation and personal information of employees,
clients, and customers.

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 Creating an ethical working environment
Fostering a culture of ethics in
the organisation
• A culture of ethics can be
defined as the set of
assumptions, expectations, and
practices of both the managers
and employees which guides
and encourages them to
conduct themselves in an
ethical manner and prevents
them from behaving unethically.
Business ethics policy and the Code
of conduct
• A business ethics policy can be
understood as the universal principles
which helps guide the behaviour of all
members of the organisation to
conduct business with honestly and
integrity.
• The Code of Conduct on the other
hand enforces the ethics policy of the
organisation. It is an accompanying
document to the ethics policy that
expresses the practices and
behaviour of individuals, expected or
restricted as a condition for becoming
or remaining a member of the
organisation.
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Ethical issues and challenges in the workplace

Discrimination
Discrimination is prohibited on the grounds of race, gender, sex,
pregnancy, marital status, ethnic or social origin, colour, sexual
orientation, age, disability, religion, conscience, belief, culture,
language, and birth. In addition, the Employment Equity Act (55 of
1998) also prohibits discrimination on the grounds of family
responsibilities and HIV status.

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Ethical issues and challenges in the workplace

Harassment
• Teasing and bullying
• Cyberbullying
• Unacceptable sexual behaviour

Descriptions and examples are

outlined in Table 3.3 on page 67

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 Ethical issues and challenges in the workplace
• The unauthorised disclosure of any confidential
Unauthorised disclosure of information of the organisation is a breach of the trust
confidential information between the employer and employee. Furthermore,
and data privacy breaches disclosing such information is an illegal practice.

• Generally, when employers provide organisational

Use of organisational resources to employees, it should be for work related
resources for personal purposes and for the furtherance of their duties in the
purposes workplace.

Health and safety • A health and safety violation refers to the violation of a
violations in the particular workplace safety standard, regulation,
workplace policy, or rule.

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 Employee theft
• Stealing money
• Stealing inventory
Ethical issues • Stealing office supplies
• Stealing of services
and challenges • Burglary of organisation premises
in the workplace • Using an organisation credit card for
private use
• Fabricating overtime

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 Managing ethical issues in the workplace

When managing the human resources of Although employers cannot prevent all
an organisation, it is critical to clearly employees from acting unethically, there
communicate to employees what is are measures that can be set in place to
acceptable and unacceptable behaviour. deter this kind of unethical behaviour.

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 Reporting ethical issues in the workplace
• In order for employees to have
the confidence and certainty to
report ethical breaches (make
protected disclosures) within
the organisation, HR
managers need to ensure that
an ethical culture manifests
within the organisation

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 Guidelines for a successful ethics hotlines
It is important for organisations
to have an ethics hotline since it
supports a culture of ethics
Where honesty and
accountability of all employees
are underscored.
The following aspects should be
taken into consideration.
Immediate attention
Make provision for multiple
reporting formats
Constant availability of the service
Anonymity and confidentiality
Detailed reports
The ethics hotline should
continuously be promoted
No retaliation against whistle
blowers
Independent third-party service
providers
Multilingual reporting options
Evaluate, test and audit the
effectiveness of the ethics hotline
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