Business Ethics and the HR Role: Past, Present, and Future

Article excerpt

Inherent in the term "business ethics" is an unavoidable tension: Managers must continuously balance the needs of the organization and its stockholders with the needs of other stakeholders. Despite this tension between competing interests, today's business leaders can model behaviors and create a corporate culture that support ethical business practices even while making their firms more competitive in the marketplace.

The first step in any recovery process is admitting you have a problem, and businesses have a problem with ethics. It is not just a matter of some arrogant, immoral executives at a few companies getting greedy and cooking the books. The problem is more basic than that. The hard truth is that natural, unavoidable tension is inherent in the term "business ethics"--a tension that stems from conflicts between the interests of companies and their employees, customers, and the greater society (Columbia, 2001).

Although society wants companies to create many well-paying jobs, those same organizations want to limit compensation costs and raise productivity levels. Customers want to purchase goods and services at low prices, but businesses want to maximize profits. Society wants to reduce pollution levels, but businesses want to minimize the cost that environmental regulations add to their operations.

Because these conflicts are fundamental to the nature of business, managers must continuously and consciously balance the needs of the organization and its stockholders with the needs of other stakeholders, including workers, customers, and the larger community. Managers must also balance their personal needs and desires against those of their organizations.

Balancing such factors in a stable economic environment is tough enough. What makes it even trickier these days is factors such as globalization, technological innovation, and the quickening pace of business change. There are just too many new developments for traditional ethical standards to keep up. At what point, for example, does using cloning technology in medical research become unethical? Are executive stock options a principled way of linking performance to pay, or do options actually encourage unethical decision making? When does offshore outsourcing become a form of labor exploitation and a repudiation of community responsibility?

There are no easy answers, but this does not mean managers should throw up their hands and turn over the problem of ethics to corporate lawyers, saying, "Just keep us out of court." Business and HR leaders can model behaviors and create corporate practices that reduce unethical business practices even while making their firms more competitive in the marketplace. Despite the impression that U.S. companies are less ethical than ever, they have actually enjoyed progress in this area over the last couple of years, a trend that will continue if employers remember the lessons of the recent past.

Ethics is a moving target. Social values shift over time, influenced by a complex web of factors. Employers must keep a close eye on those values and, when possible, proactively address ethical dilemmas emerging in their companies. This will always be more of an art than a science, but it is an art well worth pursuing in a world where ethical missteps can result in disaster.

Conflicts of Interest Play a Key Role

To address ethics problems, managers first have to recognize that conflicts of interest exist. In 2000, the Ethics Officer Association conducted a survey of 213 members representing 150 firms and found that the most widely mentioned reason (by a large margin) for contacting the ethics office was conflicts of interest, cited by 74 percent of respondents (Ethics Officer Association, 2000).

Although such conflicts stem from many sources, the most important of these is management itself, suggests an April 2003 study conducted jointly by the Society for Human Resource Management (SHRM) and the Ethics Resource Center (ERC). …