Ethics and HRM
K. Michele Kacmar
Ethics, Morality and Values
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Ethics is the study of morality
Morals are the standards used to
judge right and wrong
Values are the degree of conviction
about the way to conduct life
Conviction
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The degree of conviction to your
values can be described as primary,
secondary, or peripheral
• Primary – core values, unchanging
• Secondary – Important, but changeable
occasionally
• Peripheral – Values that are known but
not lived by
How Do We Get Values?
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Parents, family and friends
Experiences
The environment (media, education)
Conflict of Values
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Dramatic outcomes can occur when
individuals and groups hold
conflicting core values:
• Religious wars
• Business scandals
• Crime
Environmental Factors

Over the last decade, ethical
scandals in business have been on
the rise:
• Enron
• WorldCom
• Tyco
• Health South
How To Stop Unethical Behavior

A combination of external regulations
and compliance programs and
voluntary corporate ethics programs
is the most effective way to combat
inappropriate corporate behavior
(Trevino, Weaver, Gibson, & Toffler,
1999).
External Regulations

Sarbanes-Oxley Act (SOX)
• Requires CEOs and CFOs to sign
statements making them personally
responsible for the accuracy of the
quarterly financial statements
• Knowingly misrepresenting the
financials opens them up to
punishments including fines and jail
time
• Protection for whistleblowers
Other External Regulations

Other external regulations include
regulations related to:
• Minimum wage
• Overtime compensation
• Discrimination
• Health and Safety
• Privacy
Organizational Responses

Codes of ethics including:
• Explicit standards of rules to be followed
• Corporate values statements
Explicit Standards

Explicit standards define precisely
acceptable and unacceptable conduct
such as accepting gifts and the
amount allowable
Corporate Values Statements

Describes the core values the
company wants its employees to
exhibit including:
• How employees are to treat one another
• How employees are to treat customers
and stockholders
Effective Values Statements
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Must come from the top with the
CEO being directly involved in its
development
Top management must actively
disseminate the values statement
and then live by it
The values statement must be
focused
HR Responses
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Conduct surveys to determine:
• What behaviors are routinely being
rewarded and reinforced
• What values and attitudes are prevalent
• How strong the pressure to engage in
misconduct is
HR Responses Continued
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Take steps to eliminate and
discourage reasons for misbehavior
and introduce and encourage
reasons to behave ethically
HR Responses Continued

Develop an appraisal system that
rewards individuals for ethical
behaviors and punishes those who
act unethically
HR Responses Continued

HR can use its expertise to
communicate with the workforce to
get out the ethical message
Costs of Corporate Ethics
Violations
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$7 trillion in stock market losses
Loss of jobs and retirement savings
by employees
Costs of Corporate Ethics
Programs

Costs of implementing and
maintaining compliance to create an
ethical business environment
Human Costs
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Unethical business environments
can:
• Demotivate individuals
• Make good employees leave the
company
• Attract unethical employees
• Lead to the lack of trust by the
employees for the company
Ethics Effectiveness Quick-Test
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Ethics Effectiveness Quick-Test asks
eight questions about twelve
different areas that can help to
increase the ethical effectiveness in
an organization
Guidelines for Fostering an Ethical
Culture
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Have a well developed policy and
procedures manual
Enforce policies
Reward compliance
Recruit ethical employees
Create a division to oversee ethics
Conclusion
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Whenever you are required to make
a difficult decision, especially one
that is ethically challenging, select an
option that you would be comfortable
describing to the nation on the
evening news