Organizational ethics is the

ethics Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and wrong behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, along with aesthetics, concer ...

of an

organization An organization or organisation (Commonwealth English; see spelling differences), is an entity—such as a company, an institution, or an association—comprising one or more people and having a particular purpose. The word is derived f ...

, and it is how an organization responds to an internal or external stimulus. Organizational ethics is interdependent with the

organizational culture Historically there have been differences among investigators regarding the definition of organizational culture. Edgar Schein, a leading researcher in this field, defined "organizational culture" as comprising a number of features, including a s ...

. Although it is to both

organizational behavior Organizational behavior (OB) or organisational behaviour is the: "study of human behavior in organizational settings, the interface between human behavior and the organization, and the organization itself".Moorhead, G., & Griffin, R. W. (1995 ...

and

industrial and organizational psychology Industrial and organizational psychology (I-O psychology), an applied discipline within psychology, is the science of human behavior in the workplace. Depending on the country or region of the world, I-O psychology is also known as occupationa ...

as well as business ethics on the micro and macro levels, organizational ethics is neither organizational behavior nor industrial and organizational psychology, nor is it solely business ethics (which includes corporate governance and

corporate ethics Business ethics (also known as Corporate Ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment. It applies to all aspects of business c ...

). Organizational ethics express the values of an organization to its employees and/or other entities irrespective of governmental and/or regulatory laws. Ethics are the principles and values used by an individual to govern their actions and decisions.Matthews, J. (n.d.). Eight Elements of an Ethical Organization. Retrieved November 30, 2014, from http://www.entrepreneurship.org/resource-center/eight-elements-of-an-ethical-organization.aspx An organization forms when individuals with varied interests and different backgrounds unite on a common platform and work together towards predefined goals and objectives. A code of ethics within an organization is a set of principles that is used to guide the organization in its decisions, programs, and policies.Kelchner, L. (n.d.). The Importance of Ethics in Organizations. Retrieved November 30, 2014, from http://smallbusiness.chron.com/importance-ethics-organizations-20925.html An ethical organizational culture consists of leaders and employees adhering to a code of ethics.

Overview

An organization's ethical philosophy can affect the organization in many ways including its reputation, productivity, and bottom line. Ethics within an organization can offer many benefits. A positive ethical corporate culture improves the morale among the workers in an organization, which could increase productivity, employee retention and loyalty. Higher productivity improves the efficiency of the organizations and increased employee retention reduces the cost of replacing employees. Other essential benefits of an ethical culture include better internal communication and wider community development through

corporate social responsibility Corporate social responsibility (CSR) is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethicall ...

. In the US, the Foreign Corrupt Practices Act restricts United States business firms from engaging in bribery and other illegal practices internationally. There are laws that have the same type of prohibition for European companies which creates a disadvantage competitively for both European and U.S. firms.Svensson, Jakob, “Who Must Pay Bribes and How Much? Evidence from a Cross-Section of Firms,” ''Quarterly Journal of Economics'', 118(2003), page 207 Such laws are not a restricting element to organizations that have highly elevated ethical behavior as part of their values. Organizations that lack ethical practices as a mandatory basis of their business structure and corporate culture, have commonly been found to fail due to the absence of business ethics. Corporate downfalls would include, but are not limited to, the recent

Enron Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional compani ...

and WorldCom scandals, two primary examples of unethical business practices concerning questionable accounting transactions. Organizations focusing on encouraging ethical practices are commonly viewed with respect by their employees, the community, and corresponding industries.Managing with Soul: Combining Corporate Integrity with the Bottom Line,” November 14, 2003, www.hreonline.com/HRE. Ethical business practices of organizations have resulted in a solid financial bottom-line. This has been seen through greater sales and increased revenue by companies retaining talented personnel and attracting new skilled employees. More importantly, an ethical organization will have the ability to retain employees that are experienced and knowledgeable (generally referred to as human capital). This human capital results in less employee turnover, less training time for new employees, and greater output regarding services (or production of

goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not ...

Basic ethical elements

There are at least four elements that aim to create an ethical culture and behavior of employees within an organization. These elements are: # a written code of ethics and standards ( ethical code) # ethics training for executives, managers, and employees # the availability of ethical situational advice (i.e. advice lines or offices) # confidential reporting systemsClark, Margaret M., JD., SPHR, "Corporate Ethics Programs Make a Difference, but not the only difference", ''HR Magazine'', July 1, 2003, page 36. Organizations are constantly striving for a better ethical atmosphere within the business climate and culture. Businesses must create an ethical business climate in order to develop an ethical organization. Otherwise said, companies must focus on the ethics of employees in order to create an ethical business. Employees must know the difference between what is acceptable and unacceptable in the workplace. These standards are found in the written code of ethics or may be referred to as the employee handbook. These standards are a written form of employee conduct and performance expectations. Employee handbooks also commonly include rules concerning expectations and consequences that follow misconduct. Handbooks normally will clearly state the rules, guidelines, and standards of an organization as well as possible rules, regulations, and laws that they are bound by. Many company handbooks will include laws regarding sexual harassment, alcohol abuse, and drug/substance abuse.
For more information regarding situational ethical principles, refer to " Situational Ethics."

Intrinsic and extrinsic organizational rewards

The intrinsic and extrinsic rewards of an ethical organization are bound to an organization's culture and ethics. Based on the reliability and support structure of each of the four areas needed for ethical behavior, the organizational ethics will be evident throughout the organization. The organization including the employees, managers, suppliers, customers, and other entities, will receive intrinsic and extrinsic rewards. Actions of employees can range from whistle blowing (intrinsic) to the extraordinary actions of hourly employee purchasing all the recently produced peanut butter (as produced by his

employer Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...

), that has no resale value due to mislabeled jars. This employee was aware that his employer (extrinsic) would reimburse him in full for purchasing the mislabeled peanut butter.Peters, T.J., and Austin, N. ,(1985), Passion for Excellence: The Leadership difference. New York: Ballantine.
For more information regarding intrinsic and extrinsic motivation, see " Intrinsic and Extrinsic Motivation."

Ethical theory and leadership empowerment

There are many theories and organizational studies that are related to “organizational ethics,” but "

s" and "ethics" are wide and varied in application and scope. These theories and studies can range from

individual An individual is that which exists as a distinct entity. Individuality (or self-hood) is the state or quality of being an individual; particularly (in the case of humans) of being a person unique from other people and possessing one's own need ...

(s),

team A team is a group of individuals (human or non-human) working together to achieve their goal. As defined by Professor Leigh Thompson of the Kellogg School of Management, " team is a group of people who are interdependent with respect to inf ...

(s), stakeholder,

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...

leadership Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets v ...

human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms includ ...

, group(s) interaction(s), as well as the

psychological Psychology is the scientific study of mind and behavior. Psychology includes the study of conscious and unconscious phenomena, including feelings and thoughts. It is an academic discipline of immense scope, crossing the boundaries bet ...

framework behind each area to include the distribution of job tasks within various types of organizations. Among these areas, the influence of leadership in any organization cannot go unexamined, because of a clear understanding of the organization's vision, goals (including immediate and long-term strategic plans), and values. Leadership sets the tone for organizational management (strategic actions taken by an organization to create a positive image for both the internal and external public). In turn, leadership directly influences organizational symbolism (which reflects the culture, the language of the members, any meaningful objects, representations, and/or how someone may act or think within an organization). The values and ideals within an organization generally center upon “values for business” as the theoretical approach most leaders use to present to their "co-members" (which in truth may be subordinates).
In fact, an examination of business reveals that most leaders approach the X(?) from the perspective of values for the business.Dricscoll, Dawn-Marie and Hoffman, W. Michael (2002). Ethics Matters: How to Implement Values-Driven ManagementMcDaniel, Charlotte, (2004), Organizational Ethics: Research and Ethical Environments, page 39 Alongside presenting the vision, values, and goals of the organization, the leader should infuse

empowerment Empowerment is the degree of autonomy and self-determination in people and in communities. This enables them to represent their interests in a responsible and self-determined way, acting on their own authority. It is the process of becoming strong ...

and

motivation Motivation is the reason for which humans and other animals initiate, continue, or terminate a behavior at a given time. Motivational states are commonly understood as forces acting within the agent that create a disposition to engage in goal-dire ...

to its members. Leaders using empowerment to motivate their subordinates, is based upon the view of: “Achieving organizational ownership of company values is a continuous process of communication, discussion, and debate throughout all areas of the organization”Dricscoll, Dawn-Marie and Hoffman, W. Michael, (2002), Ethics Matters: How to Implement Values-Driven Management, page 172 as.
For more information about organization theory, refer to "

Organizational Theory Organizational theory refers to the set of interrelated concepts that involve the sociological study of the structures and operations of formal social organizations. Organizational theory also attempts to explain how interrelated units of organiz ...

Stakeholder theory

Whether it is a team, small group, or a large international entity, the ability of any organization to reason, act rationally, and respond ethically is paramount. Leaders must have the ability to recognize the needs and desires of members (or called “stakeholders” in some theories or models), and how they correspond to the organization. It is the

stakeholder theory The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. It addresses morals ...

that implies that all stakeholders (or individuals) must be treated equally, regardless of the fact that some individuals will contribute more than others to the organization.D.A. Gioia, (1999), "Practicability, Paradigms, and Problems in Stakeholder Theorizing," Academy of Management Review, 24(2), pp. 228–232.
Leaders who motivate others must present the goals of an organization to the stakeholders with respect to particular benefits of the stakeholders. Leaders must set aside individual (or personal) ambitions (along with any prejudice) in order to present these goals properly. Furthermore, it is leadership that influences stakeholders towards ethical behavior for the organization. They must step behind a veil of ignorance and treat every stakeholder as a means with equal weight. Importantly, the leader (or stakeholder management) must possess the necessary skills and rank to ensure that each stakeholders voice is respected and heard within the organization to ensure that other voices are not expressing views (or needs as with respect to Maslow's Hierarchy of Needs). Therefore, stakeholder management must ensure an ethical system for their own management styles, personalities, systems, performances, plans, policies, strategies, productivity, openness, and even risk(s) within their cultures or industries.

Ethical system implementation

The function of developing and implementing business ethics in an organization is difficult. Due to each organization's culture and atmosphere being different, there is no clear or specific way to implement a code of ethics in an existing business. Business ethics implementation can be categorized into two groups; formal and informal measures. Formal measures include training and courses pertaining to ethics. Informal measures are led by example from either the manager or the social norm of the company. There are several steps to follow when trying to implement an ethical system. Some of these steps include obtaining a commitment from the board of directors and senior managers, developing resources for ethics initiatives, and determining ethical risks and developing contingency plans. Other steps include developing an ethics program that addresses risks while still maintaining compliance with the ethical standards, providing insight for implementation and audits of the ethical programs, and communicating with stakeholders to create shared commitment and values for ethical conduct. The implementation should be performed to the entirety of the business including all areas of operations. If it is not implemented pragmatically and with caution for the needs, desires, and personalities (consider the Big Five personality traits) of the stakeholders, the culture, and the employees, then problems may arise. Although a great deal of time may be required, stakeholder management should consider the

Rational Decision-Making Model The rational planning model is a model of the planning process involving a number of rational actions or steps. Taylor (1998) outlines five steps, as follows: * Definition of the problems and/or goals; * Identification of alternative plans/policies ...

for the implementation of various aspects, details, and standards of an ethical system to the stakeholders. If an implementation has been performed successfully, then all stakeholders have accepted the newly designed ethics system for the organization. With the implementation of an ethical system comes the implementation of new tasks and responsibilities. The responsibilities include leadership in ethics, delegating, and communicating as well as motivating the company's ethical position to its employees. Some corporations have tried to burnish their ethical image by creating whistle-blower protections, such as anonymity. In the case of Citi, they call this the Ethics Hotline. Though it is unclear whether firms such as Citi take offences reported to these hotlines seriously or not.

Theories and models

Refer to the following theories and models for more information: *

Stakeholder Theory The stakeholder theory is a theory of organizational management and business ethics that accounts for multiple constituencies impacted by business entities like employees, suppliers, local communities, creditors, and others. It addresses morals ...

* Maslow's Hierarchy of Needs *

* Big Five Personality Traits

References

External links

Organizational Ethics and IntegrityOrganizational Ethics Articlesethicsweb.ca

Notes

* Halbert, Terry, and Ingulli, Elaine, Law & Ethics in the Business Environment, 5th edition (2006). Mason, OH: Thomson Learning. * Driscoll, Dawn-Marie and Hoffman, W. Michael, Ethics Matters: How to Implement Values-Driven Management (2000). Waltham, MA: Bently College Center for Business Ethics. {{Social accountability ethical theory Ethics Leadership Human resource management Business ethics