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Ethics are an integral part of any business. Earlier it was solely concerned with the issue of fraud related activities in business. However, with time, it has increasingly evolved into a more complex form of definition. With laws that have come into force in the past decades that have outlawed controversial practices in business such as child labour, ethics has progressed to become a guideline for businessmen and organizations to follow in order to understand how they must conduct business in the saturated and complex contemporary market (White, 2001).
Across academic history, there has been several theories which have debated on whether ethics is a factor of structure or of individual leadership. The debate primarily revolves around understanding if the structure needs to be revamped to implement ethics in an organization or whether the leadership needs to be trained. The following paper will examine these two viewpoints critically, in a bid to understand if any one perspective has a stronger bearing than the other.
Ethics and Leadership
A very well-studied concept, especially in the past decade, has been the issue of leadership and its responsibility to construct and implement ethical behaviour. The issue of ethics has long been connected to the ideal of corporate responsibility, often the lack of responsibility in the corporate sector leads to ethical compromise which may lead to drastic results. Kakabadse et al (2011) cites the example of the massive oil spillage that was caused by the Deepwater Horizon oil rig, which caused intense ecological damage to the Gulf of Mexico.
Generally speaking, the study of ethics from the viewpoint of a leader concentrates on the principle that ethics arise from deep-seated personal viewpoints. Academics like Cameron (2003) and Manz et al (2006) understand ethics as something which the leader develops when they have their own set of principles and a flourishing sense of right and wrong. Gardner et al (2005) understands ethics that develop on the inside of a person and the motivations for ethical behaviour should not be searched for in the external socio-cultural environment, according to them. However, this viewpoint opens up a host of objections and possible critiques. If that is indeed the case, then very little scope could be understood for the possible evolving and developing of a person’s ethical considerations outside their personal sphere. Decision making, an everyday phenomenon, especially for a leader, is dependent on ethical considerations which developed a long time before the individual has had the time to gather technical knowledge. Such a debate sounds familiar to the age-old debate in the discipline of sociology, which tries to understand if nature has more of an influence on the individual or nurture. However, not all literature is especially concerned with how ethics appear and how it manifests inside the leader. Ethics which is understood to be part of the individual more than the organization also forms the basis of academic debates which draw inspiration from the religious ideals which forms a basis of personal ethics. Pramanaik (1994) understood ethics in the organizational sense as prescribed in the religious texts of Islam. This forms an interesting analysis as religious ethics form a deeply personal motivation, but they are also a part of an organized, structural setup which has been sustaining since time immemorial.
Amir and Ariely (2007) postulate that regardless of personal values, responsibility of a leader is dependent on the actual practices that he/she undertakes in the organization. Their argument places more value on how the organizational practice makes the leader behave in an ethical manner and not the personal beliefs of the leader, and this organizational structure is uniform for the leader and for the employees as well. The following argument will be explored further in the next section.
Ethics and The Organization
The following perspective on ethics understands ethics more as a system of checks-and-balances rather than a deep personal drive. Boone and Kurtz (2019) understand ethics in this particular viewpoint, as a set of rules which govern the actions of the decision maker, undertaken in order to ensure that there are some uniform rules of business that individuals across nations can rely on. The basis for such rules can take inspiration from all aspects of life. Rizk (2008) understands the principles of ethics in terms of understanding the rules and regulations which are passed on as knowledge from generation to generation in an organization. From this perspective, the idea is that ethics is contained in an organizational structure and despite the beliefs and practices of the individual employees and leaders, it seeks to understand ethics within the boundaries of a particular organization.
Gibson (2007), similarly talks of a market morality, whereby the responsibility of maintaining ethics in conducting business comes from the consumer’s viewpoint. While such an approach can be attributed majorly to the attitudes that the general people or consumers have, while they are engaging with the market, the structural changes it makes to the company renders it an ethical consideration which is a structural concern of the company. For example, if the company decides to use recyclable packages instead non-recyclable and non-biodegradable packages with its products, then it could be contested that it is making an ethical choice with regards to the environmental sustainability of its products and its packages. However, this could also be a response to the changing customer perspectives across the decades, whereby people are becoming more and more conscious about environment sustainability.
A good example of this would be the usage of animal testing in the cosmetic industry. While several companies over the decades have declared themselves ‘cruelty-free’, that is, they do not test their products on animals, a large proportion of cosmetic companies continue to use animals for testing. This has caused an outrage among groups of customers and forced certain companies to rethink their approaches (Byars and Stanbarry, 2018). Hence, in cases like this, ethical considerations are implemented not from the initiative of the management, rather it comes from the external pressures of the consumer base. Measures which endeavour to sustainably produce goods and services from an environmental perspective can also come from these perspectives.
Another important factor which affects the ethical setup and ultimately forms a basis for decision-making in an organization is the economic environment it is operating in. Sako (2008) speaks of the concept of obligation-contractual relation and the dynamic it shares with mutual trust in the economic sphere where businesses operate. It postulates that the scenario in which two businesses, however competing operate, there must be mutual trust among these two organizations that they both trust in the rules which have been set up by the economic environment. As opposed to the arms-length contractual relation is when mutual trust is not loosely defined and it is not assumed that the other will automatically know what to expect from the other. It demands the laying down of specific rules and regulations before the organization starts operating in the partnership, so that there is no ambiguity about the moral guidelines under which the partnership will be proceeding. In a way, this approach of taking responsibility and agreeing to a set of rules mimics the reliability that a trustworthy person is supposed to exude. Wasserman (2006), postulates something similar, when he says that trust and responsibility is not something that is present externally, rather it is something that an individual has and that is what makes for an environment where they’ll be able to conduct responsible business with everyone.
The paper considered two facets of the origins and the enforcer of ethics; the individual and the structure of an organization. This was done in a bid to understand which of these two groups has a better impact on the ethical setup of an organization and what are the major hindrances to bad ethics, either individually or as a part of the organization.
The paper learnt that while it is not easy to completely draw boundaries on which of these two groups have a bigger impact on ethics, research easily showed that both these two aspects were interdependent on each other. The ethics of an individual was the base on which the other moral principles in his life would be laid, including the moral principles they make for any organization or the passage of any policy. In a formal setting, the ethics which are enshrined by the organization may be inspired by the ethics which individuals uphold, like honesty and responsibility. However, as we saw, in many cases, structural ethical responsibility may also be brought about by group pressure from the outside. Hence, individual and structural ethics are intertwined and interdependent.
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