Showing posts with label business ethics. Show all posts
Showing posts with label business ethics. Show all posts

Thursday, April 12, 2007

Employee rights & responsibilities...

The modern society assigns a number of roles to people. A very important one is the role of an employee. Work constitutes a significant part of the adult life of most humans. It is natural that certain rights and responsibilities come with it.

I would like to comment on a part of Prof. Joseph DesJardins’* book “An Introduction to Business Ethics”. Chapters 5 and 6 of this work analyze employee rights and responsibilities respectively. The focus is on the ethical, not the legal/contractual framework.

Employee rights

First the author discusses the concept of a right to work and its meaning and extent. Later on, the ideas of employment at will and due rights are being contrasted against each other. The chapter also asks about the extent of employee participation rights.
In my opinion an employee does not have the right to get job he or she would like to obtain, but only those that correspond their skills and abilities. Whereas the inequality of power and means makes a good case for justifying the concept of due rights, it does just the contrary for the idea of participation. Corporations are not democratic institutions and they need hierarchy to be economically viable. An employee cannot expect same decision-making rights as the agent appointed by the owner of the corporation.

I acknowledge that in an optimal situation an employee gets both extrinsic (salary, benefits etc.) and intrinsic (job satisfaction, sense of fulfillment etc.) compensation from his or hers employment. It is clear to me that in exchange for that, employees should adhere to certain employer rules, which might sacrifice some of the employee privacy. The corporations have a goal to achieve a profit and an implicit obligation to act for the good of their employees. If this means screening for people abusing illegal substances or alcohol it just serves the greater good of all employees and the business entity itself.

Employee responsibilities

DesJardins opens this chapter covering employee responsibilities with a case study about Enron, which discusses the behavior of various Enron agents’ right before and during the fall of the energy-trading giant.

The principles of the agent theory are discussed subsequently. Employees are defined as agent hired by the principal (employer) to fulfill certain of the principal goals. The author makes a crucial distinction between regular employees and managers. It is pointed out that the manager’s expertise and the resulting information asymmetry in favor of the agent may result in abusing of the trust of the employer and lead to the question what is the extent of employee responsibilities.

Furthermore, the role and responsibilities of certain established professions which are holding particular social importance, or even the gatekeeper function, are discussed. Joseph DesJardins also writes about managerial responsibility and the conflicts of interests between managers’ goals and organizational goals are presented next. The author does a very good job in contrasting the Enron executives selling of their shares versus the employees that they have deliberately misinformed. That leads to the section employee loyalty, which presents a view point that employees should not have the moral obligation to be loyal to the company. This made me ask myself the question – if the employees do not have such a responsibility, does this mean, the company does not need to be loyal towards its employees and how does it affect the agents’ rights’?

The chapter is concluded with questions about responsibilities of employees towards outside parties. Such issues as honesty, whistleblowing and insider trading are mentioned.

The conclusion I have reached after analyzing the mentioned above readings is that employees have certain moral obligations towards their employers, as well as certain rights. If the organization is hurting the employee’s autonomy or dignity by deceit or any other kind of abuse, the right of the employee to be treated ethically overrides the possible loyalty. Another aspect of these responsibilities is that agent may feel compelled to have responsibilities towards third parties, or the society as a whole and in certain cases they might be more important than the employee responsibilities towards their principals.

I do not agree with Prof. DesJardins at certain points in his book, but it provides an inresting material for analysis. Sometimes I feel that the ethical aspect of an issue such as employee rights/responsibilities is overlooked…
* - Joseph DesJardins An Introduction To Business Ethics, McGraw Hill, second edition, 2006

Monday, February 19, 2007

Follow up

Over a month passed since the time I have created this blog and life has written new lines to some of the stories present in my previous posts.

Business ethics

Last week's Wall Street Journal presented a couple of interesting stories, which add to the post about unethical behavior of business professionals (http://janbartczak.blogspot.com/2007/01/when-will-they-learn.html).

Siemens seems to be in a lot of trouble as bribery allegations might overlap with a German-Russian big-time telecommunications scandal, deepening the company's problems. The case is even more severe, as the issue is clearly not only unethical, but also unlawful behavior.

An example of handling a similar issue completely differently was given with KPMG and its CEO, who decided to admit to the organizations unlawful practices and tried to eliminate such behavior. These actions apparently saved the company, which faced a threat similar to the one that destroyed Arthur Andersen a couple of years ago.

Securities market

In the post “What does the market hold for the future?” (http://janbartczak.blogspot.com/2007/01/what-does-market-hold-for-future.html), I have discussed the possible effect of various factors on the stock market.

Some time followed since then and a couple of things are clearer now. The stock market is obviously affected by the fluctuations of oil prices, and moves in such industries as the Technology Sector (which particularly holds for NASDAQ).

Through this month the Dow Jones Industrial Average showed strength, as it climbed over 12,700 points, and set yet another record in the high 700’s. It is interesting to see now, how the major indices will react to such factors as lower automobile demand, changes in real estate prices and oil price fluctuations.

Tuesday, January 16, 2007

When will they learn?

Business people are not very well perceived by the general public when it comes to judging about their professional integrity. The common perception is that they take advantage of the information asymmetry and abuse the privileged position that they have over the external stakeholders. Events such as the Enron and WorldCom scandals seem to support this judgment.

In my opinion, the common view of the business people is biased by those few who break the rules and abuse the trust and harm the interests of their own clients/shareholders for personal financial gain. That does not change the fact that this minority gives a whole wide profession a bad name.

Countless courses in business ethics, which are by now offered at virtually every business school in the country and various publications address that issue. Government regulations are designed to eliminate the possibility of frauds and unethical behavior. Courts prosecute those suspected of unlawful behavior.

Does it mean that unethical behavior can be completely rooted out from the world of business professionals? Last weeks news reports conclude just the contrary.

Legal authorities in the U.S. investigate the back-dating case of Apple Inc options, as it seems that the computer industry giant may be in some trouble. The issue is that options were backdated, which changed their value, this was supposed to be approved on a special board meeting... that never took place. (More on that case: http://online.wsj.com/article/SB116856838800274709-search.html?KEYWORDS=apple+&COLLECTION=wsjie/6month ). The news about the investigation hurt the Apple stock price, offsetting part of the rise reported after the company announced the introduction of iPhone.

In a different case, Europe's largest engineering company, Siemens, ran in trouble as its the former CFO and No. 2 in the corporate hierarchy was named a suspect in the on-going German police investigation of a bribery case, amounting to at least half a billion dollar (more on that: http://online.wsj.com/article/SB116861598934275269-search.html?KEYWORDS=siemens&COLLECTION=wsjie/6month ).

Even though only a marginal proportion of business professional engages such unlawful practices as the ones named above, their actions influence the way the whole sector is perceived. The funniest thing about it is that usually people who commit such crimes are caught and prosecuted - it is just to hard to destroy all the data pointing to them as culprits. Still, it happens over and over again, hurting individuals, companies and whole professions. When will they finally learn it?