Ethics in Organizations: The Case of Tata Steel

Abstract

The concern for ethical decision-making among the regulators, social groups, and managers has substantially increased in recent years following the failure of some of the prominent business organizations owing to strong social condemnation of some of their business practices. This paper reviews the literature to address this concern by examining and discussing significant issues of ethical decision-making in organizations. Literature shows that the research to examine the linkage of ethical decision-making with other organizational construct is inadequate. This paper tries to fill this gap by developing a comprehensive framework of organizational ethical decision-making and behaviour of individuals in organizations. The framework identifies three groups of variables: a) moral intensity, b) intrinsic factors, c) extrinsic factors. Further, it is used to analyse the implementation of code of conduct at Tata Steel. Ethical problems are problems of choice owing to the conflicting nature of values. They occur when the individual values and the social norms conflict with each other. Often, due to conflicting interests of different stakeholders, managers in organizations face the dilemma of identifying the righteous decision as perceived by these stakeholders. Hence, it is important to guide managers ? by articulating and communicating unambiguously � regarding what is right and what is not. Intense socialization will be required at different levels to imbibe organizational values and ethical practices. The socialization that leads to willing adoption of practices is likely to lead to better implementation of ethical practices. The scope of socialization could be extended to include the family members of employees to develop a sense of pride among them for being ethical. Organizations would need to undertake the following initiatives which would be useful for implementation of ethical practices: Enhance perceived self-efficacy among the employees. This study shows that people with high self-efficacy are more open to ethical choices in their decision-making. Initiate reward and incentive mechanisms, suitable monitoring system, and accountability mechanisms. Internal competition-driven performance management practices induce violation of ethical norms in organizations. Hence, organizations with such practices would need extra effort in socialization, training, and monitoring to ensure ethical decision-making. Develop different mechanisms for avoidance of violation of code of ethics. For adequate monitoring, ethic supervisors should ideally report to an independent unit in the organization, preferably at a higher level. Hence, the reporting relationships may need alteration for implementation of ethical practices. Enhance perceived self-efficacy among the employees. This study shows that people with high self-efficacy are more open to ethical choices in their decision-making. Initiate reward and incentive mechanisms, suitable monitoring system, and accountability mechanisms. Internal competition-driven performance management practices induce violation of ethical norms in organizations. Hence, organizations with such practices would need extra effort in socialization, training, and monitoring to ensure ethical decision-making. Develop different mechanisms for avoidance of violation of code of ethics. For adequate monitoring, ethic supervisors should ideally report to an independent unit in the organization, preferably at a higher level. Hence, the reporting relationships may need alteration for implementation of ethical practices. The study also suggests that leadership at different levels of the organization will have to display strong commitment to ethics through communication and adoption of role model stature. � 2006, SAGE Publications Ltd. All rights reserved.