‫كلية العلوم والدراسات االنسانية بالغاط‬
Business Ethics
Chapter 8: The Individual in the Organization
The Rational Organisation
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“Rational" model of the business organization is a
structure of formal relationships designed to achieve a
goal efficiently.
A firm's organizational chart, identifying the formal
hierarchies of authority, exemplifies the fundamental
reality of the organization
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At the bottom of the organization is the operational layer of
workers who directly produce the goods or provide the
services.
Above this are levels of middle managers who direct those
below them and are, in turn, directed by those above.
At the top of the pyramid is the top management: the CEO, the
board of directors, and their staff.
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The Rational Organisation
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This model presupposes that information will be
gathered from the lower levels and rise to the top for
policy making
The glue that holds these layers together is contracts:
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each employee freely and knowingly agrees to accept the
organization's formal authority.
employees have a moral responsibility to obey the employer in
pursuing the organization's goals,
employer has a moral responsibility to provide the employee
with the pay and benefits they have promised (including fair
working conditions).
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The Employee’s Obligations to the Firm
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Employee's main moral duty is to work toward
the goals of the firm.
This view is called "the law of agency," which
specifies the legal duties of employees toward
their employer.
The employee, must pursue the firm's goals and
do nothing that conflicts with them while working
for the firm.
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The Employee’s Obligations to the Firm
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An employee might fail to live up to this duty
in several ways:
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might steal outright from the firm,
act on a conflict of interest,
use his position to leverage illicit benefits out of
others through extortion or bribery.
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Conflicts of Interest (1)
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Conflicts of interest arise when:
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employees have a private interest in the outcome of a task
antagonistic to the firm's interests
it might affect the employee's independent judgment on the firm's
behalf.
The result is that self-interest induces employees to act in ways
that may not be in the best interests of the firm.
employees hold another job or consultancy outside the firm.
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Commercial Bribes/Extortion and
Gifts
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Bribes and extortion are unethical and create clear
conflicts of interest.
Accepting gifts may or may not be ethical, depending on
a number of factors:
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What is the value of the gift?
What is the purpose of the gift?
What are the circumstances under which the gift was given?
What is the position of the recipient?
What is the accepted practice in the area?
What is the company's policy?
What is the law?
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Employee Theft and Computers
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Employees’ contractual agreement to accept only
specific benefits in return for services and to use the
firm's resources for the good of the firm.
Use of company resources and other appropriation of
benefits counts as theft.
Though theft is often petty (e.g. stealing of stationeries or
padding of expense accounts), it extends to white-collar
crimes such as embezzlement, larceny, fraud, and
forgery.
…
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Trade Secrets
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Propriety information or "trade secrets" is
information that the company owns
concerning its activities, which it explicitly
indicates that it does not want others to have.
Sharing such information is also unethical.
…
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Insider Trading
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Information can lead to other types of unethical behavior.
Insider trading, the act of buying or selling company stock on the
basis of confidential or proprietary information, is illegal and
unethical.
Some argue that insider trading is actually ethical and socially
beneficial; it does not harm anyone and helps the stock price
reflect its true value, they maintain.
These arguments ignore basic facts about insider trading: the
information being proprietary, does not belong to the trader (stolen
property).
Research shows that insider trading violates people's rights, based
on unjust advantage, harms overall utility of society.
…
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The Firm’s Duties to the Employee
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A firm's main moral duty to its employees is to
provide them with
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a fair wage
fair working conditions.
Both issues are aspects of the compensation
employees receive from their service and relate
to the question of whether the employee
contracted to take a job freely and knowingly
..
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Wages
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Setting a fair wage is both important and difficult,
so employers will need to consider these factors:
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What is the going wage in the industry and the area?
What are the firm's capabilities?
What is the nature of the job?
What are the minimum wage laws?
What are the other salaries in the firm?
Were wage negotiations fair?
What are the local costs of living?
…
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Working Conditions: Health & Safety
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Risks are sometimes unavoidable and acceptable, as
long as employees are fully compensated
If wages are not proportional to the risks, or the risk is
accepted unknowingly, contract between employer and
employee is unfair, and
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Fair working conditions require:
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Studying and eliminating job risks
Compensating for risk
Informing worker of known risk
Insuring workers against unknown risks
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The Political Organization (1)
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Rational model of organisation accounts for
much of the behavior of an organization
A great deal of organizational behavior is
neither goal directed, efficient, or rational.
A different model: the firm as a political
organization is needed to understand this
behavior
…
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The Political Organization (2)
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This model is newer than the rational model.
Unlike that model, it does not look only at the formal
lines of authority but emphasizes the informal lines of
influence
Sees the organization as a system of competing power
coalitions.
Focus on the competitive nature of different factions
within a firm.
The goals of the firm are the goals established by the
most powerful or dominant coalition
Fundamental reality of the organization is not formal
authority or contract, but power.
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The Political Organization (3)
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If power is the main organizational reality, then
the primary ethical problems in an organization
are connected with acquiring and exercising
power.
The two main questions become:
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What are the moral limits to the power managers
acquire and exercise over their subordinates?
What are the moral limits to the power employees
acquire and exercise on each other?
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Employee Rights (1)
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Corporate management is similar to a government:
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they are centralized decision-making bodies
they have power and authority to enforce their decisions on
subordinates concerning the distribution of resources, benefits,
and burdens.
Observers hold that this power is comparable that
moral limits placed on governmental officials must
extend to managers as well.
As government must respect the civil rights of citizens,
managers must respect the moral rights of employees:
the rights to privacy, consent, and freedom of speech,
among others.
..
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Employee Rights (3)
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Employees can leave firms more easily than citizens
can change countries.
Safeguards afforded to citizens not easily carried over
to employees.
Employee rights advocates counter that dispersed
ownership means that managers no longer function as
agents for the owner of a firm (there is no single
owner), so property rights are no longer relevant.
Unions do not protect many workers, and changing jobs
can be a very difficult and traumatic experience.
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The Right to Privacy
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Employees have some certain rights – the right to
privacy
Because of technical innovations, employees’ right to
privacy is under attack.
This must be balanced against employers' rights to
know certain information about their activities.
Three elements are relevant when considering this
balance:
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Relevance - the employer must limit his inquiry to areas that are
directly relevant to the issue at hand.
Consent - employees must be given the opportunity to give or
withhold consent before their private lives are investigated and
should be informed of any surveillance.
Methods - employers must use ordinary and reasonable
methods of inquiry unless circumstances are extraordinary.
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Freedom of Conscience
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Workers may think they have freedom of conscience,
If they found their firm doing something that harms
society, few legal options available if management does
nothing
Company has legal right to punish employee who
informs against the firm with firing or blacklisting.
May have a clear violation of an individual's right to
freedom of conscience, the law states that employee's
duty is to maintain loyalty and confidentiality towards
employer
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