Unit 4 - Ethical Issues

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Ethical issues at work often relate to trust, integrity and conflict of interest:

1. Trust. Maybe you or someone you know has access to confidential information that others would be interested in. Deciding not to betray confidence is an example of an ethical decision.
2. Integrity. Sometimes at work we are asked to do things that conflict with our beliefs. Asking ‘Can I live with myself if I do that?’ might be an ethical question.
3. Conflict of interest. If a client asked you to do something that appeared to be against the interests of another client or your own firm and you were not prepared to do so, your response would be an ethical one.

A number of other accounts challenge the simple economic determinist view of managerial choice. Institutional theorists reject the assumptions of rational actors seeking to optimise financial outcomes that lie at the heart of many economic theories of the firm. They suggest that structures, rules and processes in organisations arise not out of the rationally calculated actions of self-interested individuals, but because certain practices come to be taken for granted. They suggest that individuals in organisations, when faced with choices, seek guidance from the experience of others in comparable situations and refer to socially relevant standards of legitimacy.

Within this perspective, organisations are understood to exist in socially constructed communities of similar and related organisations. Such communities include related groups such as suppliers, customers, regulatory agencies and unions as well as organisations producing a similar product or service. Within this framework, the constraints on managerial decision making and action are less economic (although this is not disregarded) than social.

First, managers are seen to make decisions in an environment of uncertainty about outcomes. It is not always possible to tell which activities will be economically advantageous. This acts as powerful encouragement to mimic the decisions of other organisations in the same social community.

Second, organisations come under both formal and informal pressure from other organisations on which they are dependent as well as from social expectations in society at large.

Third, professional networks that span organisations (for example, the accounting profession or management associations) act as mechanisms for the diffusion of organisational norms.

The very complex and sometimes contradictory nature of the different economic, social and institutional forces faced by organisations may, paradoxically, provide increased scope for managerial choice. Also, importantly, the need for social legitimacy may be seen as a pressure on organisations to behave in ethically defensible ways that go beyond a minimal conformity to the law.