Organizational Justice, Ethics, and Corporate Social Responsibility

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CHAPTER 2 • ORGANIZATIONAL JUSTICE, ETHICS, AND CORPORATE SOCIAL RESPONSIBILITY 61 FIGURE 2.12 One Individual’s Ethical Misdeeds Leads Many to Suffer: An Example In the 1990s, the president of one local chapter of a United Way agency was accused of misusing agency funds. Although only one person was involved, other chapters were adversely affected as donations slowed to a trickle and 20 percent of previous donors stopped giving altogether. It took 5 full years before donations to this venerable charity recovered fully. The real losers, of course, were the millions of people who would have been helped by the agency’s efforts. TABLE 2.4 U.S. Laws Bearing on Ethical Behavior in Organizations Several federal laws have been enacted that reflect people’s disdain for unethical behavior in government and business organizations. Summarized here are some of the most important U.S. laws bearing on ethical behavior in organizations from the last quarter century. Law Year Enacted or Revised Description False Claims Act 1986 Provides mechanisms for reporting fraudulent behavior against U.S. government agencies and protects individuals who do so. Foreign Corrupt 1988 Prohibits company officers from soliciting business by paying bribes to foreign Practices Act officials Federal Sentencing 1991 Specifies guidelines for federal judges to follow when imposing fines on Guidelines for organizations whose employees engage in criminal acts. Its underlying rationale Organizations is that the more steps companies take to discourage criminal behavior by its employees, the less they will be penalized should such acts occur. This law specifies several actions which, if taken, will be recognized as efforts to discourage illegal behavior. As a result, companies are actively engaged in following these courses of action Sarbanes-Oxley Act 2002 Enacted to guard against future accounting scandals, such as occurred at Enron, this law raises the standards that public companies must use to report accounting data. Specifically, this law has kept companies actively involved in monitoring the ethical behavior of their officers. Federal Prosecution 2003 A revision to the Federal Sentencing Guidelines for Organizations that is designed of Business to protect investors against unscrupulous acts by top executives (also in response Organizations to the Enron scandal). The focus on boards of directors is intended to discourage unethical behavior, given that such individuals often are the only parties with sufficient clout to prevent wrongdoing by top company officials. Sources: See Note 50.
62 PART 1 • INTRODUCTION TO ORGANIZATIONAL BEHAVIOR Closely monitor and audit behavior to be able to detect unethical acts. Follow a clear policy for disciplining rule violators. In recent years, companies have gone out of their way to comply with the ethical requirements specified by the Sarbanes-Oxley Act. Although there are many specific requirements, some of the most prominent ones can be illustrated by examining the response of one particular company—the large pharmaceutical firm, GlaxoSmithKline (GSK). Although this company is considered well run and has not been accused of any questionable accounting practices, its officials—like those of other publicly held companies (i.e., those in which people can purchase stock)—had to revise various policies to ensure compliance. Specifically, policies were introduced that did the following. Limited acceptance of entertainment and gifts by employees. Because accepting gifts and entertainment from suppliers may unduly influence an employee’s business judgment, all 100,000 GSK employees worldwide are limited to accepting offers only if they are customary in nature and occur infrequently. Although the written policy provides no specific numbers as guidelines, it asks employees to consider how it would look to others if they accepted an offer. If they feel they would be embarrassed if others found out about a gift they took, then they are asked to refrain from doing so. Raised standards for accurate documentation of company performance. The policy specifies that “no false, artificial, intentionally misleading or incomplete entry shall be made or data established for any reason, and no employee shall engage in any arrangement that results in the creation of such entry or data.” Further clarifying expectations to avoid financial misrepresentations, that policy also stipulates that “The books and records of GSK . . . are accurate and sufficiently, clear, detailed, and timely, to record the true nature of GSK’s business, its transactions and liabilities.” 52 We shared GSK’s responses because they are typical of those enacted in many companies. The company’s policy changes fell more into the category of small adjustments than major overhauls. In most cases they merely formalized several practices that already were in effect informally. Ethics in the International Arena Our discussion thus far suggests that figuring out how to behave ethically isn’t always easy. If that’s the case when conducting business at home, then imagine how much more complex things become when conducting business in other countries. After all, people in different cultures often have different ethical standards. Consider the examples: In China, using pirated software is considered acceptable. In Indonesia, bribing an official is considered an acceptable cost of doing business. In Japan, you cannot conduct business unless you give the other party a small gift. In North America, of course, all such acts would be frowned upon and considered illegal and/or unethical. Clearly, the implications for conducting business globally are confusing. Given that most business conducted today is international in nature, it’s important to consider the special ethical challenges this creates. Specifically, how does one behave ethically when conducting business abroad? The answer, as we now discuss, is complex and highly nuanced, but can be mastered by adhering to several guiding principles that we will identify. Ethical Relativism and Ethical Imperialism: Two Extreme Positions Over the years, philosophers have approached the matter of international business ethics by distinguishing between two extreme approaches—ethical relativism and ethical imperialism (see Figure 2.13). As you will see, each of these viewpoints is problematic. However, understanding them is important because it helps you understand the most effective approach, which lies in between these two extremes.
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