Uploaded by Hina Hafeez

Management Control Related Ethical Issues (Final Project)

Strategic Management Control
Final Project
Management Control
Related Ethical Issues
15th May 2020
Submitted to:
Dr. Basharat Naeem
Associate Professor
Management Sciences Department
Submitted by:
Rabbiya (CIIT/FA16-BAF-020/LHR)
Hina Hafeez (CIIT/FA16-BAF-027/LHR)
COMSATS University Islamabad, 1.5 K.M. Defence Road off Raiwind Road,
Lahore, 54000
Table of Contents
Abstract ................................................................................................................................................... 3
A Glimpse of Ethics ................................................................................................................................. 4
Organizational and Business Ethics......................................................................................................... 4
A Snapshot of Ethics and Management Control ..................................................................................... 7
Common Ethical Issues in Business Organizations ............................................................................... 10
Harassment and Discrimination in the Workplace ........................................................................... 11
Health & Safety in the Workplace..................................................................................................... 11
Whistleblowing or Social Media Rants ............................................................................................. 11
Nondisclosure and Corporate Espionage .......................................................................................... 12
Technology and Privacy Practices ..................................................................................................... 12
Islamic Notion on Ethics ........................................................................................................................ 13
Islamic Context on Managerial Ethics ................................................................................................... 14
Measures to Improve Ethical Performance in Organizations ............................................................... 16
Final Words on Organization's Ethics Quotient .................................................................................... 17
References ............................................................................................................................................ 19
The essence of ethics is doing the right thing, especially under difficult circumstances.
Organizational ethics is widely known as business ethics as well. It is a form of applied ethics
or professional ethics that examines ethical principles, morals or ethical problems that arise in
an organizational environment. This research provides a glimpse of ethical considerations in
managing businesses as well as harnessing ethics to improve business performance. The
reflection of Islamic perspective in terms of ethical practices is also included in this study with
a narration of verses from Holy Quran. The study reveals that organizational ethics are tied to
the ethics of the society as well as the ethics of the individuals who work for, and buy products
from, the organization including all stakeholders. The research emphasized that an organization
needs to have thoughtfully developed its set of standards or values in terms of a code of
conduct. This study embraces highlights on managing ethical issues ranging from ethical
decision making and ethics training of the employees as well as the management control
phenomena to adhere the ethical code of conduct. For a business organization, it is crucial for
the decision makers or leaders to play a key role in devising the ethical code of conduct and
practicing it in true spirit. The research concludes adhering to the notion that ethics can be
taught and ethical practices can always be improved in any organization.
Keywords: ethics, management control, decision making, code of conduct
A Glimpse of Ethics
Ethic is defined as the rules or standards governing the conduct of individuals or organizations.
Ethics are the rules of moral values that guide decision making by groups and individuals.
These are a person’s fundamental orientation towards life, what he or she sees as right and
wrong. Ethics is the set of principles a person uses to determine whether an action is good or
bad. As Denis (2009) stated, ethics permeates every stakeholder interaction involving owners,
customers, employees, lenders, suppliers, and government official. The ethical decision
ideology is concerned with how different individuals apply their ethical philosophies in
decision-making when faced with ethical dilemmas. To know right from wrong and to know
when you are practicing one instead of the other determines a manager’s ethical intelligence.
An ethical issue is present in a situation when the actions of a person or organization may harm
or benefit others. Ethics can be more clearly understood when compared with behaviors
governed by laws and by free choice.
Organizational and Business Ethics
Organizational ethics is a form of the art of applied ethics that examines ethical rules and
principles within a commercial context, the various moral or ethical problems that can arise.
Understanding and practicing good organizational ethics is an important part of a manager’s
job. One of the many reasons ethics are important is that customers and suppliers prefer to deal
with ethical organizations. Ethical behavior in an organization promote efficiency and
effectiveness. Unethical behavior has a negative impact on the stock price for an appreciable
period of time. Unethical behavior, therefore, reduces a firm’s wealth. Being ethical helps to
avoid the costs of paying huge fines for being unethical. It is absolutely not an easy task to
determine what may be classified as ethical or unethical business practices across organizations
as a whole. An essential factor is that there are expectations and perceptions that vary between
organizations. These expectations and perceptions also vary in the marketplace and societies
that surround organizations, and that influence the predominant belief or conviction of what
may, or may not, be seen as ethical business practices. Organizations are also confronted with
societal expectations and perceptions beyond purely economic issues, such as environmental
and social change responsibilities.
Ethics, in terms of a business, reflects the application of ethical values, such as fairness,
openness, integrity, to all organizational behavior. Ethical responsibilities of a business
encompass how the organization’s decision and actions show concern for what its stakeholders
(employees, customers, stockholders and the community) consider fair and just. It is difficult
for employees to determine what conduct is acceptable within an organization if the firm does
not have ethics policies and standards. And without such policies and standards, employees
may base decisions on how their peers and superiors behave. Professional codes of ethics are
formalized rules and standards that describe what a company expects of its employees. A code
of ethics is a formal statement explicitly or implied of what the organization expects in the way
of ethical behavior. It can serve as a guide for employee conduct to help employees determine
what behaviors are acceptable. Because the purpose of a code of ethics is to let everyone know
what is expected and what is considered right, it should be included in an employee handbook.
Ethical behavior involves knowing what is right and wrong and behaving accordingly.
Behaving ethically can contribute to the success in the society as well as an organization.
Organizations aim to achieve prosperity, growth and survival. Ideally, success should benefit
all the stakeholders in the organization (owners, management, employees, customers and
suppliers) but the single-minded pursuit of organization objectives can act to the detriment of
employees’ wellbeing and security. There may be a challenge between accomplishing business
purposes and the social and ethical obligations of an organization to its employees. The chances
of attaining a good climate of employee relations are slight if no attempt is made to recognize
and act on an organization’s duties to its members.
Successful businesses start with a good plan as well as ethics and compliance programs. In
order to create a relevant and meaningful plan, few aspects are extremely important to explore:
What ethics challenges are common in the work we do? In our workplace?
Where are our greatest areas of risk? Which groups of employees, locations, business
units, etc. are potential “hot spots”?
What values are important to our company and its employees?
What values are necessary for our business, our work in particular?
What ethics and compliance resources will be most beneficial for employees? What
vehicles of support (a phone line, an email, an individual or committee, internal social
network, etc.) are likely to be most utilized and helpful?
In developing our code and values, which groups’ input is necessary? Who would be
helpful? (For more information on this, see our resources on writing a code.)
Ethics should be implemented ideally throughout all aspects and operations within
organization. With successful implementation of ethical management, organization can
enhance the efficiency in the long run. Unfortunately, many organizations cannot perform
ethical management due to human nature and other inappropriate management control systems.
Business organization with successful ethical management can achieve superior performance
because they can attract and retain those high-quality staff, customers, suppliers as well as
investors. However, establishing the ethical organization needs time and effort. It cannot be
achieved automatically, because the human beings are not morally perfect. Those unethical
staff, customers, suppliers, and investors are capable of preventing business organizations from
achieving high integrity and superior performance. Also, without the adequate ethical training,
the culture of trust between the staff within the business organization cannot be established
successfully. Without the appropriate communication system within the organization, those
illegal or unethical conducts cannot be reported instantly and then carefully managed. Without
the ethical hiring system, hiring one employee with an unethical value system can corrupt an
organization. On the other hand, discrimination on an individual’s race, color, religion, gender,
national origin, physical or mental disabilities during hiring the staff could be an offence
against the discrimination ordinance. Ethical leadership performed by the management staff
can generate high quality performance outcomes. It tends to attract, develop, and promote hardworking, conscientious, caring, and moral employees who generate high quality performance
outcomes. For treating fairly on each staff in the workplace, management should design and
implement the code of ethic so as to abstain from any unfair treatment of customers, supplier,
competitors, and employees, such as concealment, abuse of privileged information, and
misrepresentation of material facts. With considering the above issues and knowing why
managing ethics is essential and the nature and negative ramification of unethical activities
within business organization, ethic management of organization can be implemented in the
appropriate ways. In general, organization ethics means more than simply passing moral
judgment about what should and should not be done in a particular situation. It is part of the
conscious decisions you make about the directions you want your organization to take. It is a
like between morality, responsibility and decision making within the organization.
For organization to improving the ethical behavior, the management needs to understanding
how people make ethical choices and what prompts a person to act unethically may reverse the
current trend toward unethical behavior in an organization. Ethical decision in an organization
is influenced by three key factors: individual moral standards, the influence of managers and
coworkers, and the opportunity to engage in misconduct. In fact, the activities and examples
set by coworkers, along with rules and policies established by the organization, are critical in
gaining consistent ethical compliance in an organization. If the company fails to provide good
examples and directions for appropriate conduct, confusion and conflict will develop and result
in the opportunity for misconduct. If your boss or coworkers leave work early, you may be
tempted to do so as well. If you see coworkers making personal long-distance phone calls at
work and charging them to the organization, then you may be more likely to do so also. In
addition, having sound personal values contributes to an ethical workplace.
According to Denis (2009), organizations, performing and exercising ethical practices,
comparing with unethical organizations earn certain competitive advantages.
Attract and retain higher quality employees
Attract and retain higher quality customers
Attract and retain higher quality suppliers
Attract and retain higher quality investors
Earn goodwill with community members and government officials
Achieve greater efficiency and decision making, based on more reliable information
from stakeholders
Achieve higher product quality
Need less employee supervision
A Snapshot of Ethics and Management Control
When companies establish an ethical environment led by example and commitment from each
level of management, they perform better financially, have higher rates of employee retention
and satisfaction, and are more likely to make better decisions than organizations that do not
actively manage for high ethical performance. Employees need to believe their managers are
truly committed to doing things the right way as opposed to just giving superficial endorsement
to ethics in order to protect their own self-interests and legal obligations. The perception
employees have of their top management's commitment and adherence to the company's ethics
and compliance guidelines is a critical factor in the overall success of those efforts. In an
atmosphere of trust and sincerity, employees are encouraged to seek guidance from within the
organization when faced with ethical dilemmas, and they are rewarded for their ethical
behavior as much as for their job performance. Consistency between the ethics policies and
actual organizational practices exists at all levels of the organization. All business decisions
have an ethical or moral dimension because they have an effect on stakeholders. Ethical
decisions cannot be made solely through objective analysis or consideration of data and
information, but must rely on judgment and interpretation. To improve and adjust policies,
management relies on feedback from ongoing ethics and compliance training.
Management control systems are usually adopted by companies in order to guide the behavior
of the employees towards the accomplishment of organizational goals, ensure that workers’
interests do not diverge from firm’s interests, and monitor the level of achievement of targets,
analyzing possible deviations from preset goals. Throughout the organization, open
communication with top managers is established so workers can feel comfortable discussing
ethics and reporting bad news or questionable behavior. The company has clear rules on gift
giving and receiving as well as other areas most susceptible to ethical lapses. The ethical
consideration and relative decision making absolutely impacts the behavior of employees. Any
management control system is designed to ensure that employees act in the best interest of
organization. Serving the organization’s best interest means implementing the business
strategy as intended by the top management. That’s why both ethics and management control
system are often considered as interrelated. One recent trend in the convergence of ethics and
MCS is the inclusion of ethical criteria such as corporate social responsibility (CSR) into
corporate objectives, performance appraisals, and rewards (financial and nonfinancial). This
trend shows the influence of stakeholder and, hence, ethical thinking in the corporate strategy
formulation process (Weber & Wasieleski, 2013). Management is responsible for internal
control and can respond to this requirement legalistically or by creating a “control
environment.” That is, management can follow the “letter of the law” (its form), or it can
respond substantively to the need for control. The control environment reflects the
organization’s general awareness of and commitment to the importance of control throughout
the organization. In other words, by setting the example and by addressing the need for control
at the top of the organization, management can make an organization control conscious.
Merchant and Van der Stede (2017) stated three causes of management control system related
1. Lack of direction: Some people don’t know what organization wants from them.
2. Lack of motivation: Some people are not interested in doing what the organization
wants for various reasons like personal beliefs, greed and laziness.
3. Personal limitations: Some people are not able to perform well in the role assigned to
Top management ethical leadership contributes to organizational outcomes by promoting firmlevel ethical and procedural justice climates (Shin, Y et al, 2015). According to Langevin and
Mendoza (2012), the perception of distributive justice also increases when managers are heard,
because participation gives managers the opportunity to influence their objectives, as well as
the amount of resources that will be allocated to them. In addition, participation gives them the
opportunity to influence the objectives, which will then be used as a reference for their
assessment. Thus, participation can increase the chances that managers will receive fair
rewards, as they will depend on the targets they helped to set.
In the context of management control, ethical issues can arise in any department or function of
an organization. On the financial front, the ethical issues may arise due to the creation of
budgetary slack and managing earnings. Budgetary slack is a deliberate understatement of
revenues and/or overstatement of expenses in the budget. It is caused by managerial intention
rather than by an unforeseen error in the estimation process. Whether the manager feels that
creating slack is ethical or unethical depends on his/her personality traits (related to honesty
and fairness). It also depends on the extent of open communications possible between the
manager and his/her superiors regarding the ability and the support necessary to achieve the
desired objectives. Earnings management is used by organizations to show the financial
performance to be better than they actually are. This may misguide stakeholders who use the
financial statements to assess the organization's financial strength. The core is to seek feedback
from the employees, several researched prove that feedback of subordinates on ethical policies,
practices and implications make them feel valued and respected.
In the operations function, ethical issues may arise in terms of productivity and quality or on
the safety front. Better quality leads to more efficient utilization of resources, thus boosting
productivity. Bad quality can lead to managers budgeting for slack in their operations, either
in terms of consuming more resources, providing for greater lead times, or accepting relatively
poor quality. If the managers and employees in an organization are highly ethical and if the
business environment and organization/job-related factors encourage ethical behavior, it can
have a positive influence on the development and maintenance of a quality culture. Managers
may compromise on quality to increase productivity and cut costs. To increase their
profitability, organizations may ask the employees to work in unhealthy or dangerous working
conditions. Some issues that are important in terms of their ethical implications on the practice
of human resource management include lack of job security and increased risk of
unemployment, excessive scrutiny and control over employees, and discrimination. The
management control systems of any organization can be divided into three parts. These are:
indicating and communicating the objectives of the organization to all the levels in the
organization; measuring performance through a set performance measurement system; and
integrating the reward systems of the organization with the accomplishment of objectives and
in turn encouraging the employees to perform. Organizations use different mechanisms to
control and monitor the ethical behavior of employees.
An organization’s Code of Ethics is a document which gives details about the expected
behaviors from each level of management. The ethical code gives the policies that are in place
related to ethics and also the methods of implementing them.
Leading multinational companies strive to ensure fair and equitable working conditions for
employees at all of their locations and within their joint venture, subcontracting and supply
chain relationships. They set high standards for integrity and values that transcend boundaries,
but at the same time they are sensitive to local customs and adjust for them where appropriate.
Because many ethical dilemmas encountered in foreign countries are not easy to resolve, best
practices companies have the courage to stand by their beliefs and the imagination to create
solutions that satisfy all conditions. In order to regulate ethical conduct, one of the best practices
followed by organizations is to constitute an Ethics Committee. The Ethics Committee has to
strike a balance between the ethical issues cropping up due to the strategic decisions taken at
top management level, and the ethical problems that the employees face at all levels of
functioning. Ethics training for employees is the basic process by which the ethical conduct
and decision-making power of employees can be improved. Ethics training should help
employees decide the ethical implications of their decisions and actions. The ethics training
program should be such that it strengthens the organization's stand on ethics, gives the
employees guidelines regarding bringing to light wrong behavior, and also makes the
employees aware of the likely penalties for wrongdoing.
Common Ethical Issues in Business Organizations
Ethical issues in business encompass a wide array of areas within an organization’s ethical
standards. Fundamental ethical issues in business include promoting conduct based on integrity
and trust, but more complex issues include accommodating diversity, empathetic decisionmaking, and compliance and governance that is consistent with the organization’s core values.
Individuals also play a key role in promoting ethical decisions in the workplace. However,
more companies are establishing programs to encourage employees to report illegal or
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unethical practices internally so that they can take steps to remedy problems before they result
in legal action or generate negative publicity. Enlightened companies extend their ethics
policies and training to address email and internet usage, employee monitoring technology, and
customer information management. At the same time, they use technology to improve ethics
training and related communication. Whatever form their policies take, leading companies are
open about their processes and explain their rationale. They do not secretly observe employee
behavior simply because they have the tools to do so. According to the Global Business Ethics
Survey of 2019, 25% of employees still feel that their senior managers do not have a good
understanding of key ethical and compliance business risks across the organization. In
SpriggHR’s blog post on February 19, 2019, the author shared following key ethical issues in
business organizations.
Harassment and Discrimination in the Workplace
Harassment and discrimination are arguably the largest ethical issues that impact business
owners today. If harassment or discrimination take place in the workplace, the result could
be catastrophic for the organization both financial and reputational. Every business needs to
be aware of the anti-discrimination laws and regulations of the country that exist to protect
employees from unjust treatment.
Health & Safety in the Workplace
Employees, in any organization, have a right to safe working conditions. However, health
and safety concerns should not be limited to physical harm. In a 2019 report conducted by
the International Labor Organization (ILO), an emphasis was placed on the rise of
psychosocial risks, 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 behavioral risks, including sedentary lifestyles, heavy alcohol
consumption, increased cigarette smoking, and eating disorders.
Whistleblowing or Social Media Rants
The widespread nature of social media has made employees conduct online a factor in their
employment status. Whistle blowing occurs when an employee exposes an employer’s wrong
doing to outsiders, such as the media or government regulatory agencies. 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
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employer. 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.
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.
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 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 survey conducted by the
American Management Association in 2019, 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.
In order to manage the ethical issues in business that arise in an organization, first need to
develop a thorough understanding of what those issues can look like. Understanding how to
detect and, most importantly, deter these issues before they become a problem can ensure your
focus stays on business growth and success instead of remediation. Avoiding ethical issues in
business always starts with top management. Providing clearly written policies and processes
that ensure those policies are both acknowledged and adhered to, can ensure transparency and
ethical business practices are applied. In order to effectively detect and, most importantly, deter
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ethical issues in business from surfacing in your organization, there are several everyday efforts
that can be taken. Every organization should ensure to communicate and enforce a robust code
of ethics when making decisions and ask the same of your employees. Remain aware of the
discrimination laws that exist in your region. Stay informed on the rules that impact your
industry, and ensure your organization is acting in compliance with those regulations.
Collaborate with accountants, maintaining transparency and honesty in your financial reports.
Be present in your company, making sure your organization and employees alike are always
doing the right and ethical thing.
Islamic Notion on Ethics
Islamic concept of Ethics is based upon a very simple but concrete philosophy; Islam clearly
mentions that ALLAH is the sole creator of Universe and everything in it. HE is one {unity of
command}; HE is omnipotent, omniscient and omnipresent. HE is clean from all defects and
free from any weaknesses, HE is holy in all due respects, HE himself narrated in Holy Quran
about HIS greatness as: Say (O Muhammad PBUH to mankind): "If the sea were ink for
(writing) the Words of my Lord, surely, the sea would be exhausted before the Words of my
Lord would be finished, even if We brought (another sea) like it for its aid." (Kahf:109). When
we become aware of the Supremacy of Allah, it naturally follows that we put our lives in HIS
Protective Hands; follow HIS Commands without questioning; have the best hope, and then
prepare ourselves to meet HIM, the Most Beneficent, the All Forgiving. Islam very clearly
presents a mono-thematic concept of ethics which envelops whole of a human’s life from all
corners and it is vitally to be understood that Morality is the core of all Islamic principles. The
Qur'an summaries and sketches the principles of social and moral values for all Muslims.
1. Worship only God: Take not with Allah another object of worship; or thou (O man!)
wilt sit in disgrace and destitution. (Bani Isra'il:22)
2. Be kind, honorable and humble to one's parents: Thy Lord hath decreed that ye worship
none but Him, and that ye be kind to parents. Whether one or both of them attain old
age in thy life, say not to them a word of contempt, nor repel them, but address them in
terms of honor. (Bani Isra’il:23) And, out of kindness, lower to them the wing of
humility, and say: "My Lord! Bestow on them thy Mercy even as they cherished me in
childhood." (Bani Isra'il:24)
3. Be neither miserly nor wasteful in one's expenditure: And render to the kindred their
due rights, as (also) to those in want, and to the wayfarer: But squander not (your
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wealth) in the manner of a spendthrift. (Bani Isra'il:26) Verily spendthrifts are brothers
of the Evil Ones; and the Evil One is to his Lord (himself) ungrateful. (Bani Isra'il:27)
And even if thou hast to turn away from them in pursuit of the Mercy from thy Lord
which thou dost expect, yet speak to them a word of easy kindness. (Quran Bani
Isra'il:28) Make not thy hand tied (like a niggard's) to thy neck, nor stretch it forth to its
utmost reach, so that thou become blameworthy and destitute. (Bani Isra'il:29).
4. Do not commit adultery: Nor come nigh to adultery: for it is a shameful (deed) and an
evil, opening the road (to other evils). (Bani Isra'il:32)
5. Care for orphaned children: Come not nigh to the orphan's property except to improve
it, until he attains the age of full strength... (Bani Isra'il :34)
6. Keep one's promises: ...fulfill (every) engagement [i.e. promise/covenant], for (every)
engagement will be enquired into (on the Day of Reckoning). (Bani Isra'il :34)
7. Be honest and fair in one's interactions: Give full measure when ye measure, and weigh
with a balance that is straight: that is the most fitting and the most advantageous in the
final determination. (Bani Isra'il:35)
8. Do not be arrogant in one's claims or beliefs: And pursue not that of which thou hast no
knowledge; for every act of hearing, or of seeing or of (feeling in) the heart will be
enquired into (on the Day of Reckoning). (Bani Isra'il:36) Nor walk on the earth with
insolence: for thou canst not rend the earth asunder, nor reach the mountains in height.
(Bani Isra'il:37)
Islamic Context on Managerial Ethics
Research examining Islamic business ethics show how different tenets can help ethical
organizational practices. The essence of the Islamic ethical system therefore places an
obligation on Muslims to continually enjoin what the Quran recognizes to be right and forbid
what it considers to be wrong, as well as striving for the good of humanity. For example,
research suggests that Islamic ethical guidance on caring for the environment can help to
advance corporate governance and social responsibility practice (Abdelzaher et al. 2017;
Helfaya et al. 2018).
Given that all resources are being held in trust from Allah, individuals as well as organizations
must act in a way that utilizes the resources fairly, honestly and in keeping with the moral
objectives. Consistent with this idea of being ethically and morally good in Islam, the debate
on core Islamic ethical values suggests that trustees and senior management need to display a
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certain level of individual ethics for the effective discharge of governance. These key personal
characteristics would enable them to act as ethical agents within the governance framework
and strive towards maintaining an equitable and just organization and set of activities. These
characteristics, also virtues of having a good moral character, include being honest (siddique)
and trustworthy individuals, who should be consistent and steadfast (istiqamah) in their ability
to deliver (tabligh) organizational goals. These latter values suggest that trustees and senior
management should be adequately skilled and experienced to be able to undertake their role
effectively. Individuals must always act in a professional manner, taking responsibility
(masuliyah) for their actions and keeping kindness-par-excellence (Ihsan) at the heart of their
individual conduct. These personal values and attributes would then aid the ethical governance
within the organization as a whole.
Quran clarifies this standing as: We raise some of them above others in ranks, so that some
may command work from others. (Al-Zakahraf:32). This verse from Al-Zakahraf embodies in
a compilation as to why God elevated some people over others in statuses that being, that they
can get work done from them. This verse undertakes the fundamental concepts and working
ideology of modern management encompassing all the relevant schools of thought. It
emphasizes, in essence, the creation of appropriate hierarchies and the division of
responsibilities subject to individual capabilities. It basically implies the creation of
organizational charts from the top management to the lower management. Islam is the only
religion which provides an infrastructural framework for effective and efficient managerial
practices and it is a fact that all the major and minor issues from decision making till time
management are thoroughly addressed and not only addressed but even briefed in such a
manner that they provide further courses of actions to the entrepreneurs and front line
managers. Corporate ethics and ethical issues are so dynamic, vibrant and diversified in nature
that it seems next to impossible to cover all of these under single code of conduct and Islam is
the only religion which enfolds them with reference to the relationship aspect of socio-religious
teachings as Islam treats an organization as an inorganic totality and all the people inside it as
integral element to complete this totality.
The Islamic concept of ethics revolves around this famous verse from Holy Quran and it has
three basic angles, or you may call it tri-dimensional ethical system given by Islam as: You are
the best of peoples, evolved for mankind, enjoining what is right, forbidding what is wrong,
and believing in Allah. The logical conclusion to the evolution of religious history is a nonsectarian, non-racial, non-doctrinal, universal religion, which Islam claims to be. For Islam is
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just submission to the will of God. This implies (1) Faith, (2) doing right, being an example to
others to do right, and having the power to see the right prevails, (3) eschewing wrong, being
an example to others to eschew wrong and having the power to see that the wrong and injustice
is defeated.
Islamic Ethics marks the steps of a manager in a corresponding manner and provide complete
guidelines in order to how to make the moves to avoid wrong doings in an organization.
Developing a Code of Ethics to guide the organization's ethical principles in all its
Ensuring compliance by appointing key organization actors to an ethics review panel;
Appointment of an ethics advocate to probe management's decisions regularly;
Selection and training incorporating an employee's ethical responsibilities to help set
common expectations and understanding within the organization; and,
Adjusting the award system to reward ethical behavior and encourage repetition.
The above ethical code of conduct drives a Manager and guides him towards the way with the
help of which he can keep the balance in the organization and avoid conflict and unhealthy
conditions by keeping a plausible balance (equilibrium) and by exercising just (adl) by being
strongly connected with Piousness (taqwa).
Measures to Improve Ethical Performance in Organizations
There are several measures that can be opted by business organizations to improve the overall
ethical performance. Some of these are described below based on commonalities.
Develop a code, and make ethical performance a strategic priority. A relevant code of
ethics, conduct or similar policy that sets clear objectives, standards and expectations
is a key requirement for ethical performance. A code needs to be supported by a focus
on ethical performance in wider decision making.
Set the tone from the top. Senior management teams must show leadership and be seen
to live the organization’s ethical values. Only once that happens can employees get in
step and ensure the whole organization lives those values.
Engage, communicate and train your staff. Employees may hesitate to reveal those
ethical problems to their supervisor or senior management or they may think that
nothing will be improved even though Engage staff and other stakeholders such as
suppliers, investors, regulators and consumer communities, through effective and
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informative communication. Good, regular and consistent communication through
effective communication channels and training will help to embed an ethical culture.
Provide support routes for staff. Organizations need to develop clear routes for
reporting suspected fraud and violation of company policies on ethical behavior. Too
many organizations are weak in this regard and must adopt a zero-tolerance approach.
Measure effectiveness of your ethics program. To ensure best practice, organizations
need both to measure their ethical performance and to foster open discussion.
Final Words on Organization's Ethics Quotient
Ethics and compliance management is a human process and so is improved through reflection,
evaluation, and ongoing dialogue with employees and other stakeholders. Companies that
create innovative ways to promulgate, assess, and refine their ethics and compliance programs
enhance their reputation and maximize all the resources directed at these programs. They also
avoid the complacency and hubris that take hold when companies believe that nothing bad can
happen to them simply because they install ethics and compliance policies in the first place.
Globalization, technology and expanding economic development have propelled business to a
leading role in shaping the course of human events. With that influence comes a greater sense
of responsibility for work that balances achievement with environmental sustainability,
provides better than harm, spreads wealth, and focuses on long-term outcomes over short-term
gains. Increasingly, people are attracted to companies they perceive as sincerely striving to
operate at a high level of integrity and with concern for the impact of their work. The notion of
responsible business practices like ethics, corporate citizenship and community involvement
has emerged as a legitimate factor in helping people make decisions about the products they
buy and the companies they elect to do business with. Ethics and compliance management
drives these efforts. Ethical dilemmas can be magnified by differences in language, culture and
organizational practices. Organization should manage ethically for the following reasons; to
maintain a good reputation, to keep existing customers, to attract new customers, to avoid
lawsuits, to reduce employee turnover to avoid government intervention, to please customers,
employees and society, simply to do the right thing etc. Business ethics and legal compliance
now encompass a worldwide community and carry great responsibility. An increasing number
of companies are finding it necessary to compete at some level on an international scale in
order to thrive. Mass media coverage across an ever more connected global society and
increased complexity and risks of business determine that how multinational companies
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conduct themselves will come under more scrutiny and observation than ever before. Ethical
concerns are an important area in business practices and research endeavors in the field of
management. The need of the hour is to establish ethical codes, processes and performance
measures in today’s corporate houses. Establishing ethical goals allows organization to take
corrective action by punishing employees who do not comply with company standards and by
rewarding those who do. If the organizational ethics is supported and strictly enforced by
employees’ management team, it will become part of the company’s culture and will improve
ethical behavior.
Ethical management of an organization can be improved by creating the appropriate Code of
Ethic. The Code of Ethic should be implemented throughout all members including those
senior staff and junior staff. With the executing of ethical training continuously within the
operation life of the organization and with the involvement of the ethic facilitator, more
information about the ethic and unethical issue will be gathered so as to improve the ethic
management of an organization. Another main point is that is that the senior management must
clearly signal on a daily basis that ethical behavior is expected, and unethical behavior is
unacceptable. Employees learn more about what types of behavior are acceptable by observing
the actions of their direct supervisors, rather than just from listening to inspirational words
coming from the senior management. Formally appraise and appreciate the employee’s ethical
performance on an annual basis and link these results to merit raises and promotion will have
the positive effect on the whole ethical management of an organization. Organization of
superior performance places a high value on trust and responsibility. Trust increase when
employees are treated fair like all managers and the senior management staff and so the barrier
between management and non-management employees will to be minimized. Therefore, the
organization will have a better achievement both in the business development and the ethic
management development. Organization of high ethic will continuously attract and retain more
and higher quality employees, customers, suppliers, and investors and make more profit in the
long run.
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