Ethics and Human Resource Management/By Amanda Rose

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CHAPTER 2
Ethics and
Human Resource
Management
By Amanda Rose
Chapter outline
Standards, values, morals and ethics have become increasingly complex in a postmodern
society where absolutes have given way to tolerance and ambiguity. This particularly
affects managers in HR, where decisions will affect people’s jobs and their future employment.
This chapter explores some of the ethical dilemmas encountered in the workplace,
discussing ethical behaviour and values that relate to HR. It looks at relevant ethical tools,
such as utilitarianism and relativism in order to examine current practices in the workplace
and their links to corporate social responsibility.
Learning outcomes
By the end of this chapter, you should be able to:
u Critically explore and evaluate the ethical nature of human resource management;
u Identify and define current ethical and moral issues confronting HR managers;
u Compare, contrast and critically appraise a range of approaches to ethical analysis;
u Critically appraise the relevance and usefulness of philosophical analysis to HR practice.
Introduction
Human Resource Management is a business function that is concerned with managing relations
between groups of people in their capacity as employees, employers and managers.
Inevitably, this process may raise questions about what the respective responsibilities and
rights of each party are in this relationship, and about what constitutes fair treatment. These
questions are ethical in nature, and this chapter will focus on debates about the ethical basis
of human resource management.
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The ethical nature of HRM
‘All HR practices have an ethical foundation. HR deals with the practical consequences
of human behaviour’.
(Johnson, 2003)
‘The entire concept of HRM is devoid of morality.’
(Hart, 1993: 29)
Despite these moral appreciations of human resource management (HRM), there is
a strong tradition in business that insists that business should not be concerned
with ethics. As Milton Friedman, a vociferous proponent of this position, has put
it:‘The social responsibility of business is to its shareholders. . . . The business of business
is business’ (1970).
The core concern of business – proponents of the market economy argue – is in
attempting to secure the best possible return on any investment. Any dilution of this
focus will lead to the corruption of what is a finely balanced system. Businesses that
seek to be ‘ethical’ as well as profitable will probably fail economically, following
which the whole community may suffer. Rather, let the invisible hand guide the market
and all will prosper. Like some evolutionary force, the best will always survive.
Wealth will trickle down from successful enterprises, and humanity will be best
served. Any constraint on the freedoms of the market – be they motivated by ethical
angst or vote-seeking government policy – will just mess everything up.
Notwithstanding the appeal of this position, a critique of business practice has
continued to accumulate and assert itself, and to challenge the notion that business
and morality have no meeting point. Concern has surfaced from a variety of sources:
from consumer groups, political groups, religious and charitable organisations.
Entrepreneurs (for example, Anita Roddick of The Body Shop (2000), academics and
researchers (Winstanley and Woodall, 2000; Greenwood, 2002) and management
professionals (Brown, 2003) have all expressed the view that standards of behaviour
within business need to be evaluated, and improved.
A case can be made that negative consequences flow from poor ethical standards:
u While short-term goals may be achieved through the cut-throat tactics of free
market principles, in the long run business will survive better if good standards
of conduct are maintained;
u Ethical business creates a positive environment in which to buy and sell, as corruption,
poverty and lack of respect for the environment generate problems for
the business community in the long term;
u Finally, people neither hold moral values nor have religious beliefs to guide the
conduct of their lives. Why should the area of business be exempt?
CHAPTER 2 ETHICS AND HUMAN RESOURCE MANAGEMENT
Do you think that ethical behaviour is relevant in today’s business world?
Why did you reach this conclusion?
pause for
thought
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ETHICS IN THE BUSINESS ENVIRONMENT 29
Much of the recent focus on business ethics has been directed against financial corruption,
especially a concern with accounting standards. The scandals involving
Enron Corp. and WorldCom are two recent examples. But concern has been raised
over a very broad range of issues, for example:
u Abuse of the world’s physical resources, and the global ecological balance (Esso);
u Abuse of human rights (Shell/Nigeria);
u Animal rights (KFC, McDonald’s);
u Aggressive treatment of competitors (Wal-Mart);
u Exploitative and unscrupulous marketing (Philip Morris) (Klein, 2000).
The unethical practice of HRM itself has also hit public attention:
u Off-shoring and exploiting ‘cheap’ labour markets;
u Using child labour;
u Reneging on company pension agreements;
u Longer working hours;
u Increasing work stress;
u The use of disputed and dubious practices in hiring and firing of personnel.
It has been shown that just as consumers’ perception of the ethics of a company
can affect sales, so the views of its investors will affect its share price. Similarly,
it has been suggested that poor standards of conduct emanating from the top
management affect employee motivation and commitment to organisational goals
(Schramm, 2004).
Ethics in the business environment
Concern with standards must be seen in the current context of business processes.
We live in a complex society, which is both morally and culturally diverse.
Key drivers and features of this complexity can be identified:
u Globalisation of markets and labour forces (‘McDonalidisation’);
u Intensification of both competition and monopolies (‘Coca Colonisation’);
u Paradigmatic changes in technology and the application of ICT, creating new
opportunities, but also new dilemmas over communication, surveillance and
privacy;
u Rapidly increasing rates of product innovation, obsolescence and demand;
u Aggressive marketing and the use of celebrities by the media;
u An escalation of materialist values and the commodification of everything, even
education;
exercises
What other examples of unethical business practice have you heard about?
What have you experienced in your own organisation?
What is the difference between being fair and acting appropriately?
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u Increased isolationism, individuality and world-weariness, often demonstrated by
cynicism, sarcasm and mockery, with a disregard for traditional values and any
form of authority;
u A rise in secular concerns – but also a concern with a loss of spirituality.
Against this background, management style and management ideology has undergone
great change. New organisational forms and new ways of managing, including
the emergence of more flexible working patterns, have come into force. During this
era, HRM has become more strategically focused and more concerned with facilitating
the achievement of organisational goals.
Winstanley and Woodall (1996) highlight a number of ethical concerns about
standards of HR practice, arising from this strategic focus. These include:
u Increased job insecurity – arising from ‘flexible’ work practices; short-term and
temporary conditions of employment; fear of job loss due to outsourcing and
off-shoring; increased stress; and a widening imbalance of power between
management and workforce;
u Increase in surveillance and control – this ranges from the use of psychometric
tests to electronic surveillance of work patterns through the application of ICT;
u Deregulation – freedom of the market place has been imposed by global regulators
such as the WTO, and has led to what Storey (1993) has termed: ‘impatience
with rule’ and ‘can-do outlook’ amongst line managers, which in practice may be
seen to push HR into compromising ‘good’ practice, for business needs. In professional
services organisations, for example, fee-earners may be challenged to
decide between ‘doing good’ and ‘doing well’;
u Aligned to this is a decline in management integrity, leading to accusations of
recourse to rhetoric and deceit among HR professionals. For example, the current
emphasis on managing organisational culture and commitment of employees
can be contrasted with a highly instrumental approach to the supervision of the
employment contract.
In this current context, it becomes most relevant to examine the ethical dimension
of HRM practice. In what ways can HRM be ethical and/or unethical? Are there guidelines
and principles that all HR professionals ought to follow and adhere to? How
can we judge what a good course of action might consist of in a specific situation?
However, it is simplistic to consider HRM as a coherent and unitary set of principles
and practices. It varies from organisation to organisation, from culture to
culture, and can be diverse both within and between industries and sectors. It has
evolved in complex historical, economic and social contexts.
The current global operation of business creates extraordinary interactions of
values and practice. HRM is a feature of both the public, private and voluntary sectors,
and management practice differs accordingly. It is argued (Winstanley and Woodall,
2000) that HRM holds the moral ‘stewardship’ of organisations. It is interesting
therefore to consider the special role of HRM in the generation of an ethical and
moral climate in organisations in general.
Ethics and values
Organisations are bound by law to treat the people they employ fairly and not to discriminate
against identified groups. Legislation is a codification of accepted moral
CHAPTER 2 ETHICS AND HUMAN RESOURCE MANAGEMENT
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principles, and acts to moderate standards within a community – ‘the greatest good
of the greatest number’.
But, conformity to all legal requirements does not necessarily ensure the best
treatment of employees. The law itself may not be fair; it may not cover all eventualities;
and it may not always offer a clear guide to action.
ETHICS IN THE BUSINESS ENVIRONMENT
Ethics is a key branch of philosophy, concerned with analysing what is right or wrong
in people’s behaviour or conduct. Ethics and morality are terms that are often used
interchangeably in discussions of good and evil. The term ‘ethics’ is usually applied
to persons (ethics comes from the Greek ethos, meaning character) – and ‘morality’
to acts and behaviour (moral comes from the Latin moralis, meaning customs or
manners).
Philosophy presents us with suggestions about the nature of morality and ethics.
It also offers us a set of tools for analysing and exploring morality. Some main
issues and approaches will now be discussed:
u Relativism and absolutism;
u Consequentialist approaches (e.g. utilitarianism);
u Non-consequentialist approaches (deontological or ‘duty’ ethics);
u The ethics of human rights;
u Virtue ethics;
u The stakeholder approach.
Cultural relativism
One core distinction when analysing morality is the issue of relativism – the idea that
morality varies with culture, time and circumstances. The opposite position is that
of absolutism, the notion that there are universal truths in morality that apply at
all times and in all circumstances. In a global business world, this aspect becomes
significant. When businesses operate globally, how far should they adapt company
rules to local circumstances? Situational ethics can become problematical for
organisations wishing to expand into new international markets.
exercises
How far do you agree with the following list of HR objectives?
u In recruitment and selection: ensure that all assessment measures are fair and just.
u In reward management: ensure fairness in allocation of pay and benefits.
u In promotion and development: ensure equal opportunities and equal access.
u Ensure a safe working environment in both for all employees.
u Ensure that procedures are not unduly stressful, and that the needs of employees’
work–life balance are not compromised.
u When redundancies occur, to be fair and just in handling job losses.
u Deal effectively with all forms of bullying and harassment.
u In outsourcing and offshoring: ensure that contractors, consultants and franchisees
are fair and honest in their dealings with employees, clients and customers.
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Consequentialist approaches (utilitarianism)
This approach was developed by Jeremy Bentham (1748–1832) and John Stuart Mill
(1806–1873). Its main premise suggests that the morality of an act is determined by
its consequences: people should do that which will bring the greatest utility (which
is generally understood to mean whatever the group sees as good) to the greatest
number affected by a given situation.
CHAPTER 2 ETHICS AND HUMAN RESOURCE MANAGEMENT
The ethical concerns of personnel managers
A survey of over 1,000 US personnel managers (Danley et al., 1991) found that the most
common areas causing ethical concern were: favouritism in hiring, training and promotion;
sexual harassment; inconsistent disciplinary measures; not maintaining confidentiality;
sex discrimination in promotion, and pay; and non-performance factors used in
appraisals.
u How far do you feel these are culturally specific?
u Why did you reach this conclusion?
u Would personnel managers in different cultures agree with this list? Give reasons for
your answer.
exercises
A company needs to make savings to survive a recession. They have a number of plants
in the Yorkshire area, some of them in areas of above-average unemployment. All plants
are equally profitable.
u Which plant should they close?
u Should they make their decision on purely economic grounds? Why?
u What if financial analysis doesn’t produce an obvious choice?
u What should they then decide to do?
exercises
For example, military contractors may be faced with ransom demands for kidnapped
employees. The UK government was embroiled in such a situation in 2004 in the
case of a UK citizen who was taken hostage in Iraq. His captors demanded economic
and political concessions to win his release. His family pleaded with the prime minister
to meet these demands. The government argued that to do so would jeopardise
the lives of many more UK subjects in Iraq and globally. In doing so, the government
was appealing to utilitarian arguments.
Critics suggest that in practice it is very difficult to accurately determine what
the maximal utility would be for all affected by a situation. People may not have the
necessary information. The notion of utility is very vague. Are we thinking of the short
or long term? These perspectives may lead to different conclusions. People may vary
in their perceptions and requirements. What is the ‘majority’? Can we accept a situation
where the benefits of the majority might mean the exploitation, and suffering,
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of the minority? In this system, vast income disparity, or even slavery, might be
condoned on the grounds that it maximised the benefits of the majority. Some very
morally repugnant acts might be condoned on the grounds of utilitarianism.
Non-consequentialist or deontological approaches
This approach, associated with Immanuel Kant (1724–1804), is sometimes referred
to as ‘duty ethics’. Kant’s aim was to establish a set of absolute moral rules, developed
through the application of reason. He also put forward an acid test for evaluating
the quality of moral rules and this is termed: the categorical imperative. This
states that: ‘I ought never to act except in such a way that I can also will that my
maxim should become a universal law.’ In other words, moral rules should follow
the principle of reciprocity: do as you would be done by. This premise can be found
in the moral principles of many religious systems, including Islam, Christianity,
Judaism and Buddhism. See, for example, the Ten Commandments.
Kant further stated: ‘Act in such a way that you always treat humanity . . . never
simply as a means, but always at the same time as an end.’ The defining characteristics
of this approach are the universal applicability of principles to all humanity, and
basic respect for humans.
A key notion for Kant was that of intentionality. It might well be that the outcome
of an act leads to very bad consequences for people – for example, the closure of a
site and subsequent job losses – but if one’s aims and intentions are good, then the
act is a moral one. It’s all about motivation and meaning.
Goodpaster (1984) has attempted to develop a set of rules along Kantian lines for
business practice:
1. Avoid and prevent harming others.
2. Help those in need.
3. Do not lie or cheat.
4. Respect the rights of others.
5. Keep promises or contracts.
6. Obey the law.
7. Be fair.
8. Encourage others to follow these principles.
ETHICS IN THE BUSINESS ENVIRONMENT
exercises
Examine the rules of business practice developed by Goodpaster and the CIPD code
of professional conduct, which can be found at the following site: www.cipd.co.uk/
about/profco.htm.
u Which of these rules would you find:
– easiest to do?
– hardest to do?
Outline the reasons for your answer.
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The development of codes of good or ethical practice within organisations and professional
associations stems from the deontological approach. However, the approach
has been seen to present problems in its implementation, as follows:
u How do you judge that a rule is a good one?
u What, in the final analysis, is fair?
u Can we all agree?
u How should we proceed in cases where principles compete?
u And what about situations when avoiding harm to one person means harming
another or where keeping a contract with one person or group leads to breaking
it with another?
Hart (1993) has suggested that current HR practice falls short of Kant’s categorical
imperative. In tough business contexts, policies seem to support the premise that:
‘We should behave towards our fellow human beings with the over riding objective
of extracting added value’ (p. 29).
Human rights
Another very influential view stems from seeing people as having basic human
rights. In this view, there is recognition of a core set of human rights. Where a human
CHAPTER 2 ETHICS AND HUMAN RESOURCE MANAGEMENT
The shrm code of ethical and professional standards in human
resource management
Core principles
As HR professionals we are responsible for adding value to the organisations we serve
and contributing to the ethical success of those organisations. We accept professional
responsibility for our individual decisions and actions. We are also advocates for the profession
by engaging in activities that enhance its credibility and value.
u As professionals we must strive to meet the highest standards of competence and
commit to strengthen our competencies on a continuous basis.
u HR professionals are expected to exhibit individual leadership as a role model for
maintaining the highest standards of ethical conduct.
u As human resource professionals we are ethically responsible for promoting and fostering
fairness and justice for all employees and their organisations.
u As HR professionals we must maintain a high level of trust with our stakeholders. We
must protect the interests of our stakeholders as well as our professional integrity
and should not engage in activities that create actual, apparent or potential conflicts
of interests.
u HR professionals consider and protect the rights of individuals, especially in the
acquisition and dissemination of information while ensuring truthful communications
and facilitating informed decision making.
window into
practice
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right exists, there must also be a duty or responsibility to recognise, support and
acknowledge that right.
John Locke (1632–1704) was one philosopher who emphasised and elaborated an
ethics based upon human rights. He argued that it is not so much the application of
reason to acts that is important to morality, but an appreciation of the fair and equal
treatment of all people, enshrined in the recognition of basic human rights. For
Locke, the key rights included freedom, and rights to property.
There have been many attempts to codify and elaborate human rights, including
the declaration of the Rights of Man (1789), the Universal Declaration of Human Rights
(1948) and the European Convention on Human Rights (1950). Recently, the UK has
passed the Human Rights Act (1998) in an attempt to codify rights within British law.
The full implications of this act for the business and employment arenas are currently
being explored through case law and, undoubtedly, this will have major implications
for HR practice.
Virtue ethics
Virtue ethics is an approach that is seen to originate with Aristotle (384–322 BC). It
has recently regained prominence through the work of the philosopher Alasdair
Macintyre (1981). Aristotle was not concerned to identify the qualities of good acts,
or principles, but of good people. Acting as a ‘good person,’ Macintyre suggests,
‘is the state of being well and doing well . . . a complete human life lived at its best’
(pp. 148–149). For Aristotle, the virtuous man has to know that what he does is
virtuous; a good man has to ‘judge to do the right thing in the right place at the right
time in the right way’ (p. 150). This is not just the simple application of rules. The
virtues include both intellectual and character virtues. Macintyre includes the need
to feel that what one is doing is good and right; to have an emotional as well as a cognitive
appreciation of morality is an essential component of virtue.
A key distinction between this approach and others is that it focuses on the issue
of agency in ethical conduct. It suggests that neither good intentions nor outcomes,
codes and the recognition of basic rights will necessarily ensure ‘goodness’. In the
final analysis, the effectiveness of an ethical system depends on the nature of the
people who employ it. And are people essentially good or bad?
Stakeholder analysis
This approach has emerged from the area of applied business ethics, and proponents
include Freeman (1998) and Weiss (1994). As discussed earlier, free market economics
accords rights only to shareholders in the business enterprise. Stakeholder
analysis offers an alternative view.
Stakeholder analysis sees morality as evolving within a community of equals,
where rights and needs are recognised as residing within all individuals and groups
that partake in business life. Organisations consist of many interwoven webs
of relationships, rights and responsibilities. Many individuals and groups have
a ‘stake’ in how an organisation performs, apart from just the shareholders and
members of the board. Employees, customers, suppliers and the wider community
should all be considered when decisions are made, and they should be consulted
accordingly.
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Winstanley and Woodall (2000) argue that this is a very useful approach for
analysing ethical issues in HRM. Jones (1995) has presented evidence to suggest
that companies that follow a stakeholder approach are actually more profitable.
Greenwood (2002) finds this an underused approach in analysing the ethical aspects
of HRM. She feels that it provides a framework which brings into relief both the
macro (ideology) and micro (specific policy) aspects of HRM.
However, there are a number of practical problems with this approach. Firstly,
companies must identify relevant stakeholders – and this is not always an obvious
matter. Secondly, when stakeholders are identified, an organisation has a moral
obligation to discover their views. This is not always easy. For example, ‘the community’
is a very vague term – who is included here? Will everyone in the ‘community’
have the same views? Can they all realistically be consulted? A company may,
with the best of intentions, obtain a partial view of the wishes of its stakeholders that
does not acknowledge the voices of several relevant diverse groups.
Corporate social responsibility (CSR) and HRM
Crowe (2002) defines CSR as, ‘all the ways in which a company relates to society
from purchasing to product disposal, from human resources to human rights’. The
concept is generally used in management literature to refer to the responsibilities
and relations between an organisation and the community within which it operates.
This focuses attention away from individual practices and procedures, to the strategic
direction and mission of the corporation as a whole.
One approach that companies can take to CSR is to include a ‘social audit’ in their
annual reports. This was first recommended by Medawar (1978), and shows not just
the financial performance of a company, but also details of its impact on both the
environment and the community. It was reported in 2003, that 132 of the FTSE 250
companies now report their environmental performance, and 100 also report on
social and ethical issues.
CSR can affect a company through the message it signals to potential recruits.
Research conducted by Duncan Brown of the CIPD (2003) suggests that companies
that adopt a policy of social responsibility tend to fare better in attracting new
recruits – a key concern for UK companies in the current labour market. Eightyeight
per cent of participants surveyed said concordance of individual and organisational
values was a key component in job choice.
Current CSR policies include an attempt to involve employees in voluntary community
work. One-third of companies based in the City of London have community
and volunteering programmes, covering an estimated 27,000 staff and providing
charitable support worth an estimated £337 million (Heart of the City, 2002).
Examples of companies that have implemented such schemes through the Business
CHAPTER 2 ETHICS AND HUMAN RESOURCE MANAGEMENT
Have a look at the Warbings case study.
Who are the various stakeholders in the organisation?
What rights and duties do you think they have concerning the activities of the company?
How could their concerns be raised and dealt with?
exercises
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in the Community initiative include Walkers Snack Foods and IBM. Potentially, CSR
can usefully form part of an employee development programme, and may benefit
the community, employees and the organisation itself.
Corporations are unelected and unmonitored, and their involvement in charitable
enterprises could be seen to compromise people’s right to self-determination.
Social critics, such as Klein (2000), have argued that corporations that involve themselves
in community projects may be accused of promoting their own self-interest.
Tesco has spearheaded a ‘Computers for Schools’ campaign that gives shoppers
in their stores tokens which can be exchanged for much needed IT equipment for
schools. Many schools publicise this to parents – effectively asking them to shop at
Tesco. This moral pressure is in Tesco’s interests, and while the outcome may
be positive and therefore applauded from a utilitarian point of view, it cannot be
viewed as ethical from a non-consequentialist perspective. A similar discussion
took place in the book and film The Constant Gardener, which explored the practice
of a pharmaceutical company that killed healthy African adults in its clinical
trials.
From a stakeholder perspective, CSR initiatives might seem to be the right
approach, where companies acknowledge their responsibilities to their surrounding
environment and community. But the critics of the approach would caution
that a clearer analysis of the needs and interests of respective stakeholders needs
to be undertaken in order to establish whether these are always beneficial, and
ethically laudable. Employees and community members alike may be exploited
through such initiatives. Both parties might benefit more from greater corporate
governance in collaboration with national and international agencies or charities
in the provision of social services. It might be better for companies to simply pay
higher taxes.
SUMMARY
Summary
Ethical conduct in business practice and HR procedures is no longer a matter of choice for
UK companies. In 2000, the European Union included a requirement for social and environmental
reporting in its fourth company law directive. The EU also voted in May 2000 to
develop a label to endorse products made by companies that can demonstrate commitment
and respect for human and trade union rights.
The current government strategy in the UK supports voluntary action, rather than legal
requirement. The Department for Trade and Industry strategy is to encourage companies to
sign up to best practice in CSR. The Confederation for British Industry has lobbied for this
approach.
The DTI would seem to promote an approach of stakeholder analysis in recommending that
company directors should consider the interests of multiple stakeholders in their strategy
and action, including employees, customers, suppliers, the wider society and the physical
environment.
There are a number of codes of practice to choose from:
u The Global Compact, launched by the United Nations in July 2000, encourages companies
to incorporate nine human rights into their strategies and business dealings, and to consider
a broad range of stakeholders in setting strategy;
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u The International Labour Organisation (ILO) has prepared a Declaration of Fundamental
Principles and Rights at Work (1998). This focuses on eliminating forced labour, child
labour, freedom of association and the right to work free from discrimination;
u The Organisation for Economic Co-operation and Development (OECD) Guidelines for
Multinational Corporations cover standards of behaviour in employment and industrial
relations; environmental impact; combating bribery; consumer interests; science and
technology; competition and taxation.
Website addresses for these organisations can be found at the end of this chapter.
A deontological position would caution that if people are just mechanically following a
guide, if they have no intention to act well, then their behaviour isn’t strictly ethical. This is
as true of the employee following company guidelines as of the management who devise
them. For example, consider the role of both employees and directors in recent railway
disasters.
A virtue analysis would suggest that the effectiveness of these codes depends on the
goodness of the people who try to apply them.
HRM has a key interest in codes of behaviour, as they will most likely be the department
called upon to implement and monitor them. A basic problem resides in the wider context.
No matter how far HRM may work to improve the behaviour of professionals and aid in the
implementation of codes of conduct that affect all employees, if businesses show little
respect for any ethical or even legal considerations over and above the generation of profit,
then the pursuit of an ethical HRM is essentially futile.
Review Questions
You may wish to attempt the following as practice examination style questions, allowing
5 minutes per question.
2.1 What is ‘ethics’? How does it differ from ‘morality’?
2.2 What is ‘moral relativism’? Give an example from a business context.
2.3 ‘Corporate social responsibility without HR is just PR.’ Do you agree? Why? Why not?
2.4 What is ‘utilitarianism’? Give an example of a utilitarian argument in human resource
management.
2.5 List some human rights that are relevant to the work context.
2.6 What is the ‘stakeholder’ approach? List the key stakeholders in a typical work
organisation.
2.7 Give an example of an ethical code of conduct? What are the key characteristics of a
good code? How can they improve standards of behaviour?
2.8 What mechanism does HR have to ensure stakeholder participation in organisational
decision making?
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