1. Session 8 Employees and business ethics
Sungkyunkwan University (SKKU) International Summer Semester (ISS) 2017
“Global Synergy: Innovating through Collaboration”
Business Ethics
Session 8
Employees and business ethics
Prof. J. G. Frynas
6 July 2017

2. Classroom Task: Ethical dilemma of employee
You are a strategic analyst at a successful hotel chain that has generated substantial excess cash flow.
Your CEO asked you to analyse the competitive structure of closely related industries to find one the company could enter, using its cash reserve.
Your analysis suggests that the highest profit opportunities can be found in the gambling industry. You realise that it might be possible to add casinos to several of your existing hotels, lowering entry costs into this industry.
However, you personally have strong moral objections to gambling
Should your own personal ethical beliefs influence your business recommendations to the CEO?

3. Classroom Task: Ethical dilemma of employer
Betty is a junior member of staff who has just returned to work after taking special leave to care for her elderly mother. For financial reasons she needs to work full- time. She has difficulties with her mother’s home care arrangements, causing her to miss some team meetings (which usually take place at the beginning of each day) and to leave work early. She is very competent in her work but her absences are putting pressure on her and her overworked colleagues. You are Betty’s manager, and you are aware that the flow of work through the practice is coming under pressure. One of Betty’s male colleagues is beginning to make comments such as “a woman’s place is in the home”, and is undermining her at every opportunity, putting her under even greater stress. How should you proceed so as not to discredit yourself, your profession or the company for which you work?

4. Employees – selected duties
Duties of employees:
Issues involved:
Duty to comply with labour contract
Acceptable level of performance
Quality of work
Loyalty to employer
Duty to comply with the law
Bribery and corruption
Duty to respect the employer’s property
Working time
Unauthorised use of company resources for private purposes
Fraud, theft, embezzlement
Working conditions
• Right to healthy and safe working conditions
• Dense network of health, safety and environmental (HSE) regulation
• Enforcement and implementation
• HSE issues relating to changing patterns of work
• Ethical issues in the context of:
– Excessive working hours and “presenteeism”
– Flexible working patterns
MGT4226, Week 2, 2007

5. Employees – selected rights
Rights of employees:
Issues involved:
Right to freedom from discrimination
Equal opportunities
Sexual and racial harassment
Right to due process
Promotion
Firing
Disciplinary proceedings
Right to safe and healthy working conditions
Working time
Working conditions
Health and safety
Working conditions
• Right to healthy and safe working conditions
• Dense network of health, safety and environmental (HSE) regulation
• Enforcement and implementation
• HSE issues relating to changing patterns of work
• Ethical issues in the context of:
– Excessive working hours and “presenteeism”
– Flexible working patterns
MGT4226, Week 2, 2007

6. Employees as individuals or human resource?
Management of human ‘resources’: an ethical problem between rights and duties
The term ‘human resource management’ and its implications have been a subject of intense debate
Humans are an important and costly resource for a company
Consequently, employees are subject to a strict managerial rationale of minimising costs and maximising the efficiency of the ‘resource’ – is that an ethical problem by itself?

7. Possible consequences of HRM perspective
HRM rhetoric
What it could mean:
‘New working patterns’
Part-time instead of full-time jobs
‘Flexibility’
Management can do what it wants
‘Empowerment’
Making someone else take the
risk and responsibility
‘Training and development’
Manipulation
‘Recognizing the contribution of the individual’
Undermining the trade union and
collective bargaining
‘Teamworking’
Reducing the individual’s discretion

8. Selected ethical issues in employment
Some of the key ethical issues involve:
Discrimination
Privacy and data protection
Due process and lay-offs
Employee participation and association
Working conditions
Excessive working hours and presenteeism
Flexible working patterns
Fair wages

9. Discrimination
Discrimination in the business context occurs when employees receive preferential (or less preferential) treatment on grounds that are not directly related to their qualifications and performance in the job
Managing diversity prominent feature of contemporary business
Extensive legislation
Institutional discrimination: discrimination deeply embedded in business

10. Women in top management positions Female Directors in FTSE 100 Companies 2000-2008
2004
2008
Female held directorships
(in % of total directorships) 69
(5.8 %)
110
(9.7 %)
131
(11.7 %)
Female executive directors 11 17
Female non-executive directors 60 93
114
Companies with 2 women directors 14 19 39
Companies with no women director 42 31 22
Source: Singh, V. & S. Vinnicombe & 2008

11. Electronic privacy and data protection
Increasingly relevant as technology advances and electronic ‘life’ becomes more important
Computer as a work tool enables new forms of surveillance
Time and pace of work
Usage of employee time for private reasons
and internet
Issue of privacy in situations where data is saved and processed electronically
Data protection

12. Due process and lay-offs
Ethical considerations in the process of downsizing
Right to know well ahead of the actual point of the redundancy that their job is on the line
Compensation packages employees receive when laid off

13. Employee participation and association
Recognition that employees might be more than just human ‘resources’ but should also have a certain degree of influence on their tasks, job environments, and company goals – right to participation
Financial participation – allows employee share in the ownership or income of the corporation
Operational participation can include a number of dimensions:
Delegation
Information
Consultation
Codetermination

14. Evolution of trade union membership
1970
2003
Absolute change in %
Australia
50.2
22.9
-27.3
Canada
31.6
28.4
-6.5
Germany
32.0
22.6
-9.5
Italy
37.0
33.7
-3.3
Japan
35.1
19.7
-15.4
Sweden
67.7
78.0
+10.3
United Kingdom
44.8
29.3
-15.5
United States
23.5
12.4
-11.1
Based on Visser, 2006: 45

15. Working conditions
Right to healthy and safe working conditions one of the very first ethical concerns for employees
Dense network of health, safety and environmental (HSE) regulation
Main issue is enforcement and implementation
Newly emergent HSE issues relate to changing patterns of work
Ethical issues in the context of:
Excessive working hours and presenteeism
Flexible working patterns

16. Excessive working hours and presenteeism
Excessive work hours
Thought to impact the employee’s overall state of physical and mental health
‘Presenteeism’
phenomenon of being at work when you should be at home due to illness or even just for rest and recreation (Cooper 1996)

17. Flexible working patterns
Another way of saying that management can do what it wants? (Legge, 1998)
‘Non-standard’ work relationships
Part-time work, temporary work, self-employment and teleworking (Stanworth 2000)
Less secure legal status for periphery workers
Potential for:
Poorer working conditions
Increased insecurity
Lower pay
Exclusion from training and other employment benefits

18. Fair wages
The basis for determining fair wages is commonly the expectations placed on the employee and their performance towards goals
Note discussion about excessive compensation for executives after the stock market collapse of 2008
Problems of performance-related pay (PRP)
Risk
salaries and benefits become less secure
Representation
individualized bargaining

19. Classroom Task: Business ethics quiz
Please watch this video quiz on employment ethics:
Which answers would you choose?

20. Classroom Task: Ethical dilemma in aviation sector
Please read Ethical Dilemma – A case from the aviation industry
Discuss the major ethical problem Emma encountered in her new workplace. What could be done in order to prevent such a dilemma from occurring in the first place?
What main premises might have contributed to the development of unethical decision making at EastJet?
If you were Emma, what steps would you take in the situation described? Why?

21. Employees and globalization
Different cultures view employee rights and responsibilities differently.
Different levels of economic development may require different approaches.
This means that managers dealing with employees overseas need to first understand the cultural basis of morality and context in that country
Raises the question of whether it is fair to treat people differently on the basis of where they live.
Relativism vs. absolutism in employee concerns:
Absolutism: ethical principle must be applicable everywhere
Relativism: view of work ethics must always be context-related

22. Responsibility in global supply chains

23. Global value chains as driver of ethical standards
International buyers often ask foreign manufacturers in Asia to comply with certain ethical or social standards through e.g.:
Codes of Conduct
Monitoring, Social and Environmental Audits
Corrective Action Plans

24. …but buyers often have double standards
”The West has huge double standards. All these programmes for children, it is all one big tamasha (performance). But when I ask my buyers to make concessions over the rates they will pay, they refuse.”
Ali Shabbir, Ali Trading, Sialkot Soccer Ball Exporter

25. Are contents of codes of conduct appropriate?
Under pressure from Western activists, multinational firms in clothing and footwear sectors have often implemented ethical codes of conduct for suppliers. But do these codes address key concerns?
Employees rights in codes:
Freedom from discrimination
Healthy and safe working conditions
Child labour
Working hours
Key concerns of local workers :
Job security
Trade union membership and collective bargaining rights
Salary levels

26. Job offshoring is not covered in codes
Splendid - a German leather manufacturer - became involved in a labour dispute in a Thai manufacturing subsidiary producing leather jackets, which centred around the workers’ demand for a wage increase and the firm’s subsequent attempt to ban the factory’s union. Under pressure from its workers, the local trade unions and non- governmental organizations, the manufacturing subsidiary was forced to pay compensation to 130 unjustly dismissed workers. However, Splendid subsequently decided to close down the Thai subsidiary and re-locate production abroad.

27. The ethical role of whistleblowing
British Petroleum and Prudhoe Bay oil spill
Whistleblower: Chuck Hamel
Enron fraud
Whistleblower: Sherron Watkins
Peanut Corporation of America
and salmonella outbreak
Whistleblower: Kenneth Kendrick

28. Example of whistleblowing: Enron
Please watch this video on Enron:
and on Enron’s whistleblower:

29. What is whistleblowing?
“Release of information by a member or former member of an organisation that is evidence of illegal and/or immoral conduct in the organisation or conduct in the organisation that is not in the public interest.”
there must be information, evidence of misconduct
information must be released outside normal channels of communication (external/internal whistleblowing)
aim of release of information: rectify malpractice, bring about change
must be done voluntarily
must be undertaken as a moral protest (motive is important)
(source: Boatright 2003)

30. Why is whistleblowing controversial?
FUNDAMENTAL TENSION BETWEEN
the need for employees to feel able to exercise moral agency (i.e. follow their conscience and/or their professional ethos)
public interest in information that affects societal welfare
AND
loyalty of employees to their employers / do the best for the organisation
need for organisations to protect commercially sensitive information
protection from malicious and ill-founded accusations from disgruntled employees
consequences for employees

31. What employees should consider when faced with situation in which they might blow the whistle
Stay calm.
Remember that you are a witness, and not a complainant.
Think about the risks and outcomes before you act.
Let the facts speak for themselves - don't make ill-considered allegations.
Remember that you may be mistaken or that there may be an innocent or good explanation.
Do not become a private detective.
Recognise that you may not be thanked.
(source: Public Concern at Work)

32. Protection of Whistleblowers
Recognition that whistleblowers perform an important function in society (prevention of harm)
Takes the form of
National Legislation
Corporate Whistleblowing Policies

33. Example of whistleblowing regulation: The Public Interest Disclosure Act 1998 (PIDA) in the UK
The act was designed to provide protection to those who raise awareness of an act or practice that poses problems for public safety or threatens other specific areas of public interest
Premise: confidentiality of corporate information is the primary principle, from which there are few exceptions (qualifying disclosure):
A criminal offence
A failure to comply with any legal obligation
A miscarriage of justice
Danger to health and safety of any individual
Damage to the environment
Deliberate concealment of any of the above
Conditions for ‘protected disclosure’:
Burden of proof upon employee to show that a malpractice has occurred (‘reasonable belief’ for internal disclosure, ‘substantially true’ for external disclosure)
Employee must first use to the full the organisation’s internal procedures for handling such concern or, if not possible, a ‘prescribed body’ (regulators etc) before blowing the whistle externally
Disclosure must be made in ‘good faith’ and not for personal gain
PIDA PROVIDES ONLY LIMITED PROTECTION TO WHISTLEBLOWERS (Fisher and Lovell 2003, Lewis 2008)

34. Corporate Whistleblowing Policies
Companies increasingly develop internal whistleblowing policies
There are two key drivers for companies to develop such policies:
compliance
Sarbanes-Oxley Act 2002 (US)
Combined Code on Corporate Governance (UK)
business case
SARBANES-OXLEY ACT
Each audit committee shall establish procedures for the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.
This part effectively requires institutionalized whistleblowing, and companies are free to apply these procedures to other kinds of violations covered by codes of conduct or ethics policies. Section 806 of the Act protects whistleblowers from retaliation by giving them the opportunity of civil action after reporting a violation of securities laws to a law enforcement agency, Congress or an internal person
with supervisory authority. Finally, Section 1107 makes retaliation against employees disclosing a Federal offence (possibly) committed by the company to a law enforcement officer, a criminal act to be punished with a fine or a maximum of 10 years of imprisonment.
compliance: following corporate scandals involving whistleblowing – accounting fraud (Enron, Worldcom)
Combined Code:
The audit committee should review arrangements by which staff of the company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The audit committee’s objective should be to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.
THE BUSINESS CASE
A positive whistleblowing culture has numerous advantages. It:
detects and deters wrongdoing;
gets to managers the information they need to make decisions and control risk;
demonstrates to stakeholders and regulators that you are serious about good governance;
reduces the chance of anonymous or malicious leaks (including to the media); and
reduces the chance of legal claims against your organisation.
EXTERNAL WHISTLEBLOWING MORE DETRIMENTAL
How can companies benefit from having an internal whistleblowing policy?

35. Business case for whistleblowing policies
An organisational whistleblowing policy can do one of the following:
detects and deters wrongdoing;
gets to managers the information they need to make decisions and control risk;
demonstrates to stakeholders and regulators that the organisation is serious about good governance [reputational effect];
reduces the chance of anonymous or malicious leaks (including to the media);
reduces the chance of legal claims against the organisation.

36. Good practice for whistleblowing policies
Good practice for whistleblowing policies includes:
An effectively communicated statement of responsibility
Makes clear that organisation does not wish to see illegal or unethical conduct in the organisation and therefore takes whistleblowing seriously
Makes speaking up a responsibility for all employees
A clearly defined procedure for reporting
Gives employees the option to raise a whistleblowing concern outside of line management (internal/external contacts)
Offers employees a right to confidentiality when raising their concern

37. Good practice for whistleblowing policies (cont.)
A commitment to take appropriate action
Organisation provides well-trained personnel to investigate reports
Provides feedback to employees about outcome of investigation
A guarantee against retaliation and victimisation of the bona fide whistleblower and a provision of disciplinary action against those who maliciously make a false allegation
The involvement of employees in drawing up the policy

38. Possible consequences for whistleblowers
Career disruption
more stringent criticism of work, less desirable work assignments, pressure to drop charges, heavier workloads, exclusion from meetings
loss of employment
opportunities to gain alternative employment often limited
Financial hardship
loss of income, legal expenses
Emotional hardship
break up of marriages; alienation from co-workers and friends
Suffering ill-health
depression, panic attacks, insomnia

39. Classroom Task: Consequences for whistleblowers
Please watch this video on consequences for whistleblowers:
In your view, how serious does the corporate offence have to be for someone to consider becoming a whistleblower?
Do you think whistleblowers are sufficiently protected in your own country?