Friday, January 19, 2007

Why good managers make bad ethical decisions?

There are internal as well as external factors which induce good managers to make bad ethical decisions. Internal factors could be – The boss wants you to reach your targets by hook or crook, Peer pressure, Others don’t catch me on the wrong foot & till such time I am not caught, I will do it AND external factors could be – Strict govt. regulations, Tax policies, Maximum benefits to maximum number of people.

Managers at various levels very frequently cite the following examples of having to quash their ethical sentiments in order to keep the organization/business running:-

(a) I have to satisfy an inspector from the electricity board to maintain adequate power supplies in times of recurrent shortage
(b) I am obliged to entertain and enrich an important customer to keep him from switching over to our competitor
(c) I have to fiddle around with year-end inventories to show a higher profit figure to the board of directors
(d) I have to produce fake securities and bills receivable to procure ready cash
(e) I have to over-invoice import bills and under-invoice export bills to oblige overseas owners
(f) I have to oblige a monopoly supplier, at an individual level, to ensure supplies of a critical component.
(g) I have to sign the transfer order of an officer to satisfy the prejudice of a higher-level boss.
(h) I have to arrange for cash payments to retired high court / supreme judges who are on the informal rolls of our company – at the instance of owners.
(i) I have to manipulate data to understate the profit figures for the purpose of trade negotiations
(j) I have to manipulate data when preparing the project report to meet the hurdle rate of financial institution.

These are invoked to circumvent the conflict between the instant, relative values and enduring universal values (honesty, responsibility etc). This side-stepping is also an excuse at times to subvert personal ethics in favor of company goals, under the argument that personal values are inappropriate as standards for corporate decisions.

D G Jones states that ‘managerial ethics’ is a subset of ‘business ethics’ and those aspects of managerial relationships which involve employees and other market agents like suppliers, vendors, customers, creditors and competitors. Managerial ethics deals with practical management problems that have an ethical strand interwoven with internal & external factors.