BUSM3199: moral Agents in Organisations? The Significance of Ethical Organisation Culture for Middle Managers’ Exercise of Moral Agency in Ethical Problems: Ethics and Governance Literature Review, RMIT

moral Agents in Organisations? The Significance of Ethical Organisation Culture for Middle Managers’ Exercise of Moral Agency in Ethical Problems

Abstract

This paper investigates qualitatively the significance of different dimensions of ethical organisation culture for the exercise of middle managers’ moral agency in ethical problems. The research draws on the social cognitive theory of morality and on the corporate ethical virtues model.

This study broadens understanding of the factors which enable or constrain managers’ potential for moral agency in organisations, and shows that an insufficient ethical organisational culture may contribute to indifference towards ethical issues, the experiencing of moral conflicts, lack of self-efficacy and morally disengaged reasoning. In contrast, a healthy ethical culture can contribute to motivation to tackle ethical problems, an increased capacity for self-regulation and ultimately ethical behaviour.

Keywords

Corporate ethical virtues Ethical culture of organisations Ethical problem Middle manager Moral agency Qualitative research Virtue ethics

Ethics and Ethical Dilemmas – A Practical Approach

Introduction

At present, bankers are faced with a highly challenging environment. They are presently subject to greater scrutiny and high demands from all stakeholders – the government, the customers, the employees, the society, and the regulator. Bankers are required to assume new functions and responsibilities as a result of new norms, laws, and roles.

The challenge of today’s economic scenario and the various ethical lapses that occur in financial institutions call for a more sophisticated approach in managing day to day work in the banks. Managers make decisions on a daily basis and that has an effect on the future of their organisation.

Not only does their decision impact their own jobs and livelihood, it also has consequence (positive or negative) for business as a whole. Similarly, officials engaged in public service need to follow a strict code of ethics. In fact, it is a prerequisite for engendering public trust and fostering good governance. Citizens expect public servants to serve with fairness and to manage public resources ethically.

Management of ethics forms a critical component of safeguarding individual and groups from the potential negative consequences of poor management decision making.

Some decisions, however, involve choices that could impact people inside or outside the organisation in potentially negative way. In these instances, businesses must have a leaders who can make ethical choices that put people ahead

of bottom line. Management ethics is concerned with the role of leaders in protecting their suppliers, employees, customers and society as a whole from negative consequences that could arise from actions taken during the course of business.

Ethics needs to be practiced in business and it is the responsibility of every manager to ensure adherence to ethical principles. Managerial ethics provides the framework that guides managers on how to act in business activities.

Corporate governance provide systems and methods for performing such actions, while managerial ethics gives ‘modus vivandi’ (Latin phrase meaning “mode of living” for achieving excellence) and corporate governance provides modus operandi for doing so.

Ethics is a matter of values that guides how to behave. Ethics is the basis on which governance can succeed. These are standards that can be applied to personal behaviour. Ethics distinguishes between the ‘right’ and the ‘wrong’ ways for providing the direction to our behaviour in personal and professional life.

The story of the Mahabharata has often been cited as a failure of ethical norms in the face of power-hungry, egoistic people fighting against each other. The dignity of an innocent lady could not be prevented by the senior people in the family.

In the end, it was the metaphysical power possessed by Lord Krishna that ensured that the lady’s dignity was protected. In a similar vein, bankers are often seeking answers from the Almighty for getting solutions to their ethical issues. A senior banker remarked: “Time has come for managers of corporate world to look for support from one’s inner conscience while undertaking the business of banking.” Ethics is one of vital components that allows democracy to thrive in any country.

Ethics in government is critical to realising the promise of democracy. In democracy, Government has an obligation to treat everyone equally and to provide the greatest good to the citizens.

For effective operation of a democratically elected government, public officials and employees belonging to the institutions run by the Government must be independent, impartial and act in a responsible manner towards the people and public offices shall not be used for personal gains.

This is not easy since public servants are functioning in a challenging environment, wherein they are presently being subjected to greater scrutiny and increased demands from citizens.

They are also facing a severe crunch on the resource availability and having to do more with less. While profits have become important in today’s world, the scrutiny that bankers need to withstand while discharging their duties has increased manifold. The balance between ethics and profits is always a very delicate one.

Ethics in Banking

Ethics in banking must be firmly anchored on four pillars

First, banks must comply with all laws, rules and regulations that are usually framed in any country to ensure soundness of operation and to enhance confidence of the society.

Second, banks must ensure fair and equitable treatment to all stakeholders, such as investors, depositors, borrowers and employees.

Third, banks must ensure full, truthful and transparent disclosures of their financial health.

Fourth, banks must behave as socially responsible corporate citizen. Social responsibilities must be viewed from wider prospective, taking into account the impact of banks activity on growth, employment and poverty alleviation as well. Some of the following do’s and don’ts can serve as guidelines for bankers faced with ethics-related challenges in present times:

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