Ethical behaviour in managerial context

Nowadays ethical behaviour in business is becoming a very important subject. First of all the word ethics comes from the Greek word ‘ethos’ which means character. Ethics is a branch of philosophy that addresses questions about morality that is concepts of what is right and what is wrong. Therefore ethical behaviour in business is the effective leadership by the managers which connects the moral integrity of an organization with a constant value in service to the public.

So effort to enhance ethical behaviour must begin with top management because acts of lower-level employees and acts of the organisation as a whole when facing ethical dilemmas are influenced by what top managers do, and on the culture the managers establish and reinforce.

Factors of Ethical Behaviour

There are various factors that may be emphasized by the ethical culture of organisations. Some of them are; personal self-interest, company profit, operating efficiency, individual friendships, team interests, social responsibility, personal morality, laws and professional codes. So managers are required to outline the values, attitudes and behaviour of the company to be effective and increase competition but at the same time adopt also ethical business practises.

For example Johnson and Johnson, when the infamous Tylenol poisoning took place, the managers immediately pulled their product from the marketplace regardless of its cost since their ethical framework required that they act in good faith due to social responsibility. While other organizations may worry more for operating efficiency than social considerations when similarly difficult decisions are faced. So the actions taken by the managers depend on the ethical culture of the company.

More recent contemporary example is Hewlett-Packard Co (HP) faulty laptops. This year, in March, a lot of people were complaining about faulty laptops of which video cards were overheated and cause the laptop to malfunction. Later HP issued an apology and offered an extension of warranty periods for some laptop models, but it did not respond to consumers’ request for a recall of the faulty laptops. So in this case HP focused on the company’s profit because it was more aware on its costs than to satisfy its customers.

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Another example is Toyota’s announcement of a technical fix for its sticky gas pedals which could lead to sudden acceleration problems. Like Johnson and Johnson, Toyota acts towards social responsibility since reputation is very valuable for them. So they recalled more than nine million cars worldwide to fix the problem and ensured that something like this is not going to happen again.

Managerial Ethics

Managerial ethics are based on three-way relationships. The first relationship that managers have to look after is the relationship of the firm to its employees. Managers have to see that there are ethical standards by which the firm treats its employees. Such standards may include hiring and firing individuals, wages and working conditions.

The second is the relationship of employees to the firm. Managers also have to look after issues that surround employees like conflicts of interest, honesty, professional privacy, stealing and abuse of entitlements.

The third is the relationship of firm to other economic agents. Managers have to be ethical with customer relations, fair competition, public and investor relations, fairness and honesty towards suppliers and unions.

For example employees are very important internal stakeholder for The Co-operative Group, because they are the key to help the business retain its customers if they provide a good service. So The Co-operative for example gives training programme to help the employees improving their skills and product knowledge. Also customers for example are treated well because the firm ensures that the products are labelled with an honest label to help the people make informed decisions about the products that they buy.

In other words The Co-operative managers are being ethical both with the relationship of the firm with the employees and also with the relationship of the firm to its customers.

How Managers can improve the Ethical Behaviour in an Organisation?

Some organisations have formal management for ethical behaviour to offer a guideline on how to act in particular situation and dilemmas. This formal management includes; committees, codes of ethics and ethical training.

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The code of ethics is a formal statement of an organisation’s primary values and the ethical rules it expects its employees to follow. While ethical training is like what The Co-Operative gives to its employees i.e. the programme mentioned earlier.

A manager can also improve ethical behaviour by hiring individuals with high ethical standards, outline job goals and performance assessment mechanisms, conduct independent social audits and provide support for individuals facing ethical dilemmas.

Managers must also provide a good role model by being ethical and honest at all times, tell the truth, admitting failure and not trying to cover it up, communicating shared ethical values to employees through symbols and slogans, rewarding employees who behave ethically and punishing those who do not and protect employees who bring to light unethical behaviours or raise ethical issues.

All the above criteria must be met because it is important that the ethical culture of an organisation is clear and positive so that when ethical dilemmas arise there will be no unethical behaviour.

Back to the Co-operative example, managers creates a series of values that helps them to behave in an ethical manner. This involves understanding, meeting and balancing the needs of its internal and external stakeholders. Although balancing these needs is not always easy and sometimes a conflict of interest arise in the way a business behaves, running the business in an ethical way will help the company to be sustainable. Not like the recent cases of Enron and WorldCom as well as the accounting firm Arthur Anderson. These dramatically illustrate how unethical behaviour can lead to a firm’s rapid decline. These firms’ improper actions caused many investors to lose faith in American business and to turn away from the stock market, which made it difficult for the firms to raise the capital they needed to grow, create jobs and stimulate the economy.

Another example is; Lehman Brothers Holdings Inc. a global financial services firm, which declared bankruptcy in 2008, following drastic losses in its stock and devaluation of its assets by credit rating agencies. This was the largest bankruptcy in U.S history because it involved 10 major investment banks which they lost billions of dollars. So again, this case obviously shows us how negative effect unethical behaviour can have on innocent people.

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Factors Influencing Managerial Ethics

Figure ; Factors Influencing Managerial Ethics

There are also factors that affect managerial ethics, which these also make the manager’s job a more challenging one. These factors can be; family influences, religious values, personal standards and needs which influence the manager as a person. Policies, code of conduct, behaviour of supervisors and behaviours of peers are also influences which come from the employing organization. While government regulation, norms and values of society, and ethical climate of the industry, are influences coming from the external environment.

Stage of Moral Development


Therefore a decision can be either ethical or unethical because of these factors, so the manager has to think twice before taking any decision.


In a nutshell, ethical behaviour in a managerial context refers to the values, attitude and the behaviour of the managers while running the whole business.

One can also conclude that shared values are very important because they guide managers to take decisions and actions, they also shape employee behaviour, influence marketing efforts and finally they build team spirit.

Manager’s good attitude and behaviour are also important because they will motivate both the departments and the organization. Also motivation will increase production, work satisfaction, work and personal appreciation, personal commitment and personal respect. That is why ethical behaviour is very important for modern businesses because they want to be productively and profitability.

Since in the past years there were many commercial scandals and environmental disasters, it is important for the companies to regain and sustain the trust of their customers and the public in general and this can only be done by adopting ethical managerial behaviour. Therefore with little effort and responsibility, perhaps today’s managers can leave the world in better shape for our future generations.

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