Unit-2
MANAGEMENT OF ETHICS
(30% Weightage)
Syllabus (Unit 2)
Ethics analysis [Hosmer model], Ethical dilemma, Ethics in practice, ethics for managers, Role and function
of ethical managers, the organizational size, profitability and ethics, Cost of ethics in Corporate ethics
evaluation. Business and ecological / environmental issues in the Indian context and case studies
MANAGEMENT OF ETHICS IN ORGANISATIONS
Organizational ethics express the ethical behaviour of an organization towards its employees and
other stakeholders. There are many advantages of practicing ethics in organisations. For example,
employees become loyal and there is less employee turnover problem to the company. Employees
require less training and have higher productivity. Companies have better relations with all other
stakeholders like suppliers, customers etc.
ETHICS ANALYSIS [HOSMER MODEL]
According to Hosmer model of ethical analysis, a manager in a company must always act
according to one of the seven principles.
The manager must believe in any one principle which is “right”, “proper” and “just”. This is
called Moral reasoning.
Moral reasoning is when a manager works on the basis of ‘what is right’ while making
decisions regarding his duties to others.
The decision-making will be called right when the selected option from many alternatives is
found right for all the parties, business firms, and country in an economy.
Following are the seven principles on which a manager must base his decisions regarding
his duties for others;
HOSMER’S PRINCIPLE OF ETHICAL DECISION MAKING
Principle of Long-term self-interest - Never take any action that is not in your
organization's long-term self-interest
Principle of Personal Virtue - Never do anything that is not honest, open, and truthful.
Never do anything that you would never be glad to see reported in the newspapers or on TV.
Principle of Religious injunction - Never take any action that is not kind and that does not
build a sense of community.
Principle of Government Requirements - Never take any action that violates the law
because the law represents the minimum standards of morals.
Principle of Utilitarian benefit - Never take any action that does not result in greater good
for society.
Principle of Individual rights - Never take any actions that infringes on others agreed-
upon rights.
1
Principle of Distributive Justice - Never take any action that harms people especially
Page
those that are poor, uneducated and unemployed.
Dr. Zakir Patel, Prof, Naran Lala College of Commerce and Management, Navsari
, Hosmer model discusses about the decisions made by a manager in an organisation.
1. What is duty?
The duty of the manager is to recognise the moral problems that exist while making any
decision. The decision of a manager might be for different parties – like employees,
suppliers, retailers etc.
The first thing is to identify if there are any moral problems that exist while making any
decision.
For example, when a manager decides to fire an employee from the organisation, he must
identify whether there are any moral issues associated with the decision.
2. What is right?
Now the manager is going to use his moral reasoning to know what is right and what is not
right.
The manager will have his reasons for thinking what is right and what is wrong.
In the above example, if a manager thinks that it is important to fire an employee for the
benefit of the company in the long run, then he has the reason for firing that employee.
The manager must believe in one of the seven principles on which his decisions are based.
3. What is integrity?
The manager must possess the moral courage while making ethical decisions.
Moral courage is the courage to take action for moral reasons even if there is a risk of
negative results or consequences.
A manager requires moral courage to take morally right decisions without any fear of the
negative consequences (results).
Trust generates Commitment. Commitment ensures efforts and Efforts will result into
great benefits for the company in the long run.
When a manager takes the ‘right’ decision, employees and other stakeholders will start
trusting the organisation. Trust will bring commitment of employees, customers and other
stakeholders for the company. This will ensure optimum efforts by all towards the benefits
of the company.
The Nature of Ethics in Management
"Right" and "proper" and "fair" are ethical terms. They express a judgment about our
behaviour towards other people.
We believe that there are right and wrong ways to behave towards others, proper and
improper actions, fair and unfair decisions. These are our moral standards of behaviour.
Moral problems are truly managerial dilemmas. They represent a conflict between an
organization's economic performance (measured by revenues, costs and profits) and its
2
social performance (stated in terms of obligations to persons both within and outside the
Page
organization).
Dr. Zakir Patel, Prof, Naran Lala College of Commerce and Management, Navsari
MANAGEMENT OF ETHICS
(30% Weightage)
Syllabus (Unit 2)
Ethics analysis [Hosmer model], Ethical dilemma, Ethics in practice, ethics for managers, Role and function
of ethical managers, the organizational size, profitability and ethics, Cost of ethics in Corporate ethics
evaluation. Business and ecological / environmental issues in the Indian context and case studies
MANAGEMENT OF ETHICS IN ORGANISATIONS
Organizational ethics express the ethical behaviour of an organization towards its employees and
other stakeholders. There are many advantages of practicing ethics in organisations. For example,
employees become loyal and there is less employee turnover problem to the company. Employees
require less training and have higher productivity. Companies have better relations with all other
stakeholders like suppliers, customers etc.
ETHICS ANALYSIS [HOSMER MODEL]
According to Hosmer model of ethical analysis, a manager in a company must always act
according to one of the seven principles.
The manager must believe in any one principle which is “right”, “proper” and “just”. This is
called Moral reasoning.
Moral reasoning is when a manager works on the basis of ‘what is right’ while making
decisions regarding his duties to others.
The decision-making will be called right when the selected option from many alternatives is
found right for all the parties, business firms, and country in an economy.
Following are the seven principles on which a manager must base his decisions regarding
his duties for others;
HOSMER’S PRINCIPLE OF ETHICAL DECISION MAKING
Principle of Long-term self-interest - Never take any action that is not in your
organization's long-term self-interest
Principle of Personal Virtue - Never do anything that is not honest, open, and truthful.
Never do anything that you would never be glad to see reported in the newspapers or on TV.
Principle of Religious injunction - Never take any action that is not kind and that does not
build a sense of community.
Principle of Government Requirements - Never take any action that violates the law
because the law represents the minimum standards of morals.
Principle of Utilitarian benefit - Never take any action that does not result in greater good
for society.
Principle of Individual rights - Never take any actions that infringes on others agreed-
upon rights.
1
Principle of Distributive Justice - Never take any action that harms people especially
Page
those that are poor, uneducated and unemployed.
Dr. Zakir Patel, Prof, Naran Lala College of Commerce and Management, Navsari
, Hosmer model discusses about the decisions made by a manager in an organisation.
1. What is duty?
The duty of the manager is to recognise the moral problems that exist while making any
decision. The decision of a manager might be for different parties – like employees,
suppliers, retailers etc.
The first thing is to identify if there are any moral problems that exist while making any
decision.
For example, when a manager decides to fire an employee from the organisation, he must
identify whether there are any moral issues associated with the decision.
2. What is right?
Now the manager is going to use his moral reasoning to know what is right and what is not
right.
The manager will have his reasons for thinking what is right and what is wrong.
In the above example, if a manager thinks that it is important to fire an employee for the
benefit of the company in the long run, then he has the reason for firing that employee.
The manager must believe in one of the seven principles on which his decisions are based.
3. What is integrity?
The manager must possess the moral courage while making ethical decisions.
Moral courage is the courage to take action for moral reasons even if there is a risk of
negative results or consequences.
A manager requires moral courage to take morally right decisions without any fear of the
negative consequences (results).
Trust generates Commitment. Commitment ensures efforts and Efforts will result into
great benefits for the company in the long run.
When a manager takes the ‘right’ decision, employees and other stakeholders will start
trusting the organisation. Trust will bring commitment of employees, customers and other
stakeholders for the company. This will ensure optimum efforts by all towards the benefits
of the company.
The Nature of Ethics in Management
"Right" and "proper" and "fair" are ethical terms. They express a judgment about our
behaviour towards other people.
We believe that there are right and wrong ways to behave towards others, proper and
improper actions, fair and unfair decisions. These are our moral standards of behaviour.
Moral problems are truly managerial dilemmas. They represent a conflict between an
organization's economic performance (measured by revenues, costs and profits) and its
2
social performance (stated in terms of obligations to persons both within and outside the
Page
organization).
Dr. Zakir Patel, Prof, Naran Lala College of Commerce and Management, Navsari
