ETHICS IN HRM

GROUP MEMBERS MANU CHOURASIYA NIKHIL DESAI PREYAL DOSHI DIPA MEHRA URVI MOTANI

ROLL NO. 05 07 10 18 22

INDEX:
Sr. No CONTENTS Pg No

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Introduction History HRM evolution in India Business Ethics Role of business ethics in HRM Ethical issues in HRM Importance of HRM International issues Law & regulations Economic system Strategies Advantages Disadvantages Conclusion Bibliography

4 6 7 9 11 12 14 16 18 19 20 22 23 24 25

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. Human resource management occupies the sphere of activity of recruitment selection, orientation, performance appraisal, training and development, industrial relations and health and safety issues. Business Ethicists differ in their orientation towards labor ethics. Some assess human resource policies according to whether they support an egalitarian workplace and the dignity of labor. Issues including employment itself, privacy, compensation in accord with comparable worth, collective bargaining (and/or its opposite) can be seen either as inalienable rights or as negotiable. Discrimination by age (preferring the young or the old), gender/sexual harassment, race, religion, disability, weight and attractiveness. A common approach to remedying discrimination is affirmative action.

Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-blowing. Employers must consider workplace safety, which may involve modifying the workplace, or providing appropriate training or hazard disclosure. Larger economic issues such as immigration, trade policy, globalization and trade unionism affect workplaces and have an ethical dimension, but are often beyond the purview of individual companies.

History:

Business ethical norms reflect the norms of each historical period. As time passes norms evolve, causing accepted behaviors to become objectionable. Business ethics and the resulting behavior evolved as well. Business was involved in slavery, colonialism, and the cold war. The term 'business ethics' came into common use in the United States in the early 1970s. By the mid-1980s at least 500 courses in business ethics reached 40,000 students, using some twenty textbooks and at least ten casebooks along supported by professional societies, centers and journals of business ethics. The Society for Business Ethics was started in 1980. European business schools adopted business ethics after 1987 commencing with the European Business Ethics Network (EBEN). In 1982 the first single-authored books in the field appeared. Firms started highlighting their ethical stature in the late 1980s and early 1990s, possibly trying to distance themselves from the business scandals of the day, such as the savings and loan crisis. The idea of business ethics caught the attention of academics, media and business firms by the end of the Cold War. However, legitimate criticism of business practices was attacked for infringing the "freedom" of entrepreneurs and critics were accused of supporting communists. This scuttled the discourse of business ethics both in media and academia.

HRM evolution in India:

The Royal Commission on Labor set up from 1929 to 1931 to examine the situation recommended the appointment of labor officers and other changes. The suggested changes led to the bringing in of standardization and that was the first step toward introducing personnel management, Formation of trade unions, with close links with political leaders like Mahatma Gandhi (the Textile Labor Association in Ahmedabad was founded in 1920), also influenced the way industrial workers are managed. This focus made an adequate number of employees available to the industry, disciplined the rural and less educated workers and implemented various legislations and settled disputes. At the same time there were progressive employers who on their own cared about the well-being of the employees. Tata Steel in Jamshedpur, for instance, had introduced a series of welfare measures for workers much before it became mandatory by law. After India won independence in 1947, considerable changes happened in the personnel management approach of organizations. The post independence period encouraged a mixed economy as the growth model. Industrial organizations were broadly classified as the public sector (including the administrative arm of government) and the private sector. Public sector organizations were the largest employers and received huge investments. The Constitution of India had the objective of achieving a socialist society and various constitutional provisions supported protection to working class. Numerous legislations were introduced to protect workers. Along with industrialization, the trade union movement also grew in India. The rapid growth of trade unions also catalyzed the development of personnel systems. The workers became more aware about their rights and it was increasingly difficult to exploit them. In the 1970s and 1980s typical HRM functions in organization included: (1) Personnel and administration, (2) Industrial Relation, and (3) Labor welfare. The prescribed and assumed role was crisis driven or issue driven. This high level of union activism also led to the situation where the decision framework took a legal turn.
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The same period also saw the rise of managerial unionism, where non workers without formula union rights joined to form associations that acted as pressure groups. Managerial unions were able to exert an influence in the public sector and that called for attention to be given to managing the non-worker staff also. Though not widespread, the industry was also open to adopting tools and techniques that could help improving efficiency and productivity. For examples, 1961, with the full cooperation from the trade union, the Indian Aluminum Company Ltd. Conducted a plant wide work study at its Alupuram, Kerala plant. This lead to defining the work output, staffing pattern, and productivity linked inventive scheme. The establishment of management training institutes and business schools like XLRI and the IIMs helped the industry to imbibe modern management principles and thought. It could be very well summarized that up the mid 80s human resources management in Indian organizations grew through various phases under the influence of the following factors: (1) A Philanthropic viewpoint about doing good to workers, (2) A legislative framework, (3) government policies, (4) Trade unions, (5) emerging trends / concepts in management and (6) Changes in the economy. By then, most organizations, business as well as non-business had established separate departments to handle the personnel function, with senior level managers heading them.

Business Ethics:
Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons. Economist Milton Friedman writes that corporate executives' "responsibility... generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom". Friedman also said, "the only entities who can have responsibilities are individuals. A business cannot have responsibilities. So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not." A multicountry 2011 survey found support for this view among the "informed public" ranging from 30-80%. Duska views Friedman's argument as consequentialist rather than pragmatic, implying that unrestrained corporate freedom would benefit the most in long term. Similarly author business consultant Peter Drucker observed, "There is neither a separate ethics of business nor is one needed", implying that standards of personal ethics cover all business situations. However, Peter Drucker in another instance observed that the ultimate responsibility of company directors is not to harm primum non nocere. Another view of business is that it must exhibit corporate social responsibility (CSR): an umbrella term indicating that an ethical business must act as a responsible citizen of the communities in which it operates even at the cost of profits or other goals. In the US and most other nations corporate entities are legally treated as persons in some respects. For example, they can hold title to property, sue and be sued and are subject to taxation, although their free speech rights are limited. This can be interpreted to imply that they have independent ethical responsibilities. Duska argues that stakeholders have the right to expect a business to be ethical; if business has no ethical obligations, other institutions could make the same claim which would be counterproductive to the corporation.

Ethical issues include the rights and duties between a company and its employees, suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues concerning relations between different companies include hostile takeovers and industrial espionage. Related issues include governance; corporate; political contributions; legal issues such as the ethical debate over introducing a crime of corporate manslaughter; and the marketing of corporations' ethics policies.

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Role of Business ethics in Human resource management:

The role of business in the society is one of the highly contested fields as it attracts divergent views. There are arguments that it is difficult for business to practice ethics since business is amoral or moral neutral. This means that business should be taken as a private entity that need not adhere to any rules and regulations. Arguing on this approach, ethics in business should therefore be seen quite different from ethics related to human activity (Mirza, 2003). This implies that business ethics would be immoral if applied in any other area. However, business is closely tied to private life of the owners and therefore it is a part of moral community. To understand this argument well, it is important to look at how business operates. The aim of setting up any business is to make profit. However, making profit should be viewed as just one of the obligations that businesses fulfill in society. A business will provide the needed goods and services and therefore sustain life in the society (Barrett, 1999). A business will also provide employment to individual in the society therefore raising the standard of living of the society members. This implies that a business is a part and parcel of the society.

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Ethical Issues in HR
Of all the organisational issues or problems, ethical issues are the most difficult ones to handle or deal with. Issues arise in employment, remuneration and benefits, industrial relations and health and safety.

Cash and Compensation Plans There are ethical issues pertaining to the salaries, executive perquisites and the annual incentive plans etc. The HR manager is often under pressure to raise the band of base salaries. There is increased pressure upon the HR function to pay out more incentives to the top management and the justification for the same is put as the need to retain the latter. Further ethical issues crop in HR when long term compensation and incentive plans are designed in consultation with the CEO or an external consultant. While deciding upon the payout there is pressure on favouring the interests of the top management in comparison to that of other employees and stakeholders. Race, gender and Disability In many organisations till recently the employees were differentiated on the basis of their race, gender, origin and their disability. Not anymore ever since the
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evolution of laws and a regulatory framework that has standardised employee behaviours towards each other. In good organisations the only differentiating factor is performance! In addition the power of filing litigation has made put organisations on the back foot. Managers are trained for aligning behaviour and avoiding discriminatory practices. Employment Issues Human resource practitioners face bigger dilemmas in employee hiring. One dilemma stems from the pressure of hiring someone who has been recommended by a friend, someone from your family or a top executive. Yet another dilemma arises when you have already hired someone and he/she is later found to have presented fake documents. Two cases may arise and both are critical. In the first case the person has been trained and the position is critical. In the second case the person has been highly appreciated for his work during his short stint or he/she has a unique blend of skills with the right kind of attitude. Both the situations are sufficiently dilemmatic to leave even a seasoned HR campaigner in a fix. Privacy Issues Any person working with any organisation is an individual and has a personal side to his existence which he demands should be respected and not intruded. The employee wants the organisation to protect his/her personal life. This personal life may encompass things like his religious, political and social beliefs etc. However certain situations may arise that mandate snooping behaviours on the part of the employer. For example, mail scanning is one of the activities used to track the activities of an employee who is believed to be engaged in activities that are not in the larger benefit of the organisation. Similarly there are ethical issues in HR that pertain to health and safety, restructuring and layoffs and employee responsibilities. There is still a debate going on whether such activities are ethically permitted or not. Layoffs, for example, are no more considered as unethical as they were thought of in the past.

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Importance of Ethics:

Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and redrafted in books may not serve the purpose. Of course all of us want businesses to be fair, clean and beneficial to the society. For that to happen, organizations need to abide by ethics or rule of law, engage themselves in fair practices and competition; all of which will benefit the consumer, the society and organization. Primarily it is the individual, the consumer, the employee or the human social unit of the society who benefits from ethics. In addition ethics is important because of the following: 1. Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human needs. Every employee desires to be such himself and to work for an organization that is fair and ethical in its practices.

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2. Creating Credibility: An organization that is believed to be driven by moral values is respected in the society even by those who may have no information about the working and the businesses or an organization. Infosys, for example is perceived as an organization for good corporate governance and social responsibility initiatives. This perception is held far and wide even by those who do not even know what business the organization is into. 3. Uniting People and Leadership: An organization driven by values is revered by its employees also. They are the common thread that brings the employees and the decision makers on a common platform. This goes a long way in aligning behaviors within the organization towards achievement of one common goal or mission. 4. Improving Decision Making: A mans destiny is the sum total of all the decisions that he/she takes in course of his life. The same holds true for organizations. Decisions are driven by values. For example an organization that does not value competition will be fierce in its operations aiming to wipe out its competitors and establish a monopoly in the market. 1.5. Long Term Gains: Organizations guided by ethics and values are profitable in the long run, though in the short run they may seem to lose money. Tata group, one of the largest business conglomerates in India was seen on the verge of decline at the beginning of 1990s, which soon turned out to be otherwise. The same companys Tata NANO car was predicted as a failure, and failed to do well but 6. the same is picking up fast now.

7. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery is often found acting as a mute spectator, unable to save the society and the environment. Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one. Lawyers and public interest litigations may not help a great deal but ethics can.

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International issues:
Ethics tries to create a sense of right and wrong in the organizations and often when the law fails, it is the ethics that may stop organizations from harming the society or environment. While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decades.

Many new practical issues arose out of the international context of business. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include:

The search for universal values as a basis for international commercial behavior. Comparison of business ethical traditions in different countries. Also on the basis of their respective GDP and [Corruption rankings]. Comparison of business ethical traditions from various religious perspectives. Ethical issues arising out of international business transactions; e.g., bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.
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Issues such as globalization and cultural imperialism. Varying global standardse.g., the use of child labor. The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries. The permissibility of international commerce with pariah states.

The success of any business depends on its financial performance. Financial accounting helps the management to report and also control the business performance. The information regarding the financial performance of the company plays an important role in enabling people to take right decision about the company. Therefore, it becomes necessary to understand how to record based on accounting conventions and concepts ensure unambling and accurate records. Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

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Law and regulation:

Very often it is held that business is not bound by any ethics other than abiding by the law. Milton Friedman is the pioneer of the view. He held that corporations have the obligation to make a profit within the framework of the legal system, nothing more. Friedman made it explicit that the duty of the business leaders is, "to make as much money as possible while conforming to the basic rules of the society, both those embodied in the law and those embodied in ethical custom". Ethics for Friedman is nothing more than abiding by 'customs' and 'laws'. The reduction of ethics to abidance to laws and customs however have drawn serious criticisms. Counter to Friedman's logic it is observed that legal procedures are technocratic, bureaucratic, rigid and obligatory where as ethical act is conscientious, voluntary choice beyond normativity. Law is retroactive. Crime precedes law. Law against a crime, to be passed, the crime must have happened. Laws are blind to the crimes undefined in it. Further, as per law, "conduct is not criminal unless forbidden by law which gives advance warning that such conduct is criminal. Also, law presumes the accused is innocent until proven guilty and that the state must establish the guilt of the accused beyond reasonable doubt. As per liberal laws followed in most of the democracies, until the government prosecutor proves the firm guilty with the limited resources available to her, the accused is considered to be innocent. Though the liberal premises of law is necessary to protect individuals from being persecuted by Government, it is not a sufficient mechanism to make firms morally accountable.

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Economic systems:
Political economy and political philosophy have ethical implications, particularly regarding the distribution of economic benefits. John Rawls and Robert Nozick are both notable contributors. For example, Rawls has been interpreted as offering a critique of offshore outsourcing on social contract grounds, whereas Nozick's libertarian philosophy rejects the notion of any positive corporate social obligation.

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Strategies:

Ethics and Sustainability involves strategic planning for many different areas including business practices, governance, sustainability, and quality of life. Though Ethics and Sustainability are two different areas, it is important for them to be grouped together because they deal with some of the same types of issues. Ethics is covered in the Company Code of Ethics, and Sustainability makes sure the company is liked in the place where it does business. Ethics can be considered as the level of transparency and honesty in business practices. There is no middle ground when it comes to ethical business practices. Either the way your organization does business is ethical, or it is not. The upside to having ethical business practices is there is less of a chance of being sued. Some unethical business practices are outright illegal and can land you in jail. Companies who are doing business involving legal actions can be a whistleblower to the Securities Exchange Commission of the United States of America, or the SEC. On the Sustainability side of this discipline is the company Corporate Social Responsibility programs. Corporate Social Responsibility is the companys way of giving back to the community, and it is good practice when the company is doing business ethically. Corporate Social Responsibility programs can be things like organizing a food drive, opening a community center, or even offering scholarships to students. Of course there are many other ways for an organization to do good deeds in the community, but those were only provided as
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simple examples. Some car manufacturers are making all-electric vehicles which helps make money for the company as well as promoting a healthy work ethic and good face with Corporate Social Responsibility. The final thing to remember is that as a manager, you should be aware of the strategic human resources discipline of ethics and sustainability because this is what makes the company look good or bad in the eyes of the public. The object of this series is to explain Strategic Human Resource Management as well as Strategic Human Resource Planning in an easy to follow way. You can become familiar with reading Strategic Human Resources Management Disciplines Overview. If you are a manager or want to be a good manager, then you should be familiar with each of these disciplines: Benefits; Business Leadership; Compensation; Consulting; Diversity; Employee; Ethics & Sustainability; Global HR; Relations; Organizational; Safety & Security; Staffing Management; and Technology. Then everything is put together in the final conclusion, where you are shown how to use Strategic Management Skills in order to put it all together and become a successful manager for any business.

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Advantages:
Business ethics offer companies a competitive advantage. Consumers learn to trust ethical brands and remain loyal to them, even during difficult periods. In 1982, Johnson & Johnson spent over $100 million dollars recalling Tylenol, its bestselling product, after someone tampered with bottles of the painkiller

The company followed its credo, a set of ethical organizational values, and the result was a boost in consumer confidence, despite the contamination scare. Society benefits from business ethics because ethical companies recognize their social responsibilities.

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Disadvantages:
Business ethics reduce a company's freedom to maximize its profit. For example, a multinational company may move its manufacturing facility to a developing country to reduce costs. Practices acceptable in that country, such as child labor, poor health and safety, poverty-level wages and coerced employment, will not be tolerated by an ethical company. Improvements in working conditions, such as a living wage and minimum health and safety standards reduce the level of cost-savings that the company generates. However, it could be argued that the restrictions on company freedom benefit wider society.

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Conclusion:
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: 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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Bibliography:
http://www.hr.uwa.edu.au/publications/code_of_ethics http://people.brandeis.edu/~molinsky/documents/Human%20Resource%20Manage ment%20Ethics%20and%20Employment.pdf http://highered.mcgraw-hill.com/sites/dl/free/0077111028/536508/EHR_C02.pdf

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