CHAPTER 2: LITERATURE REVIEW
Literature is replete with the sources of ethics. In considering ethics in general, it can be argued that ethics is but a branch of the study of human conduct. Other branches of this study exist, such as psychology, history, anthropology, sociology and religion, which examine various aspects of human conduct. This study, however, is concerned only with the study of one aspect of ethics, namely business ethics. Generally seen, ethics is an aspect of human conduct that concerns morality, and ethics is as much a study of morality as biology is a study of life.
As the literature shows, sources of ethics are varied: conscience, revelation, reason, moral values and even science. There is vast literature dealing with one or more of these sources, e.g. Baier (1958) examines morality and rationality as the moral rationality or rational morality basic to ethical conduct; Mortimer (1950) regards Christian ethics as a fundamental source, while Taylor (1970) simply examines ideas of good and evil as a basic source of ethics. Russel (1935), on the other hand, sees religion and science as the well of ethical conduct.
Aristotle’s Nicomachean Ethics is one of the oldest works in Western literature on ethics (arguably as old as the Old Testament). And so too are the studies by Plato in scripts as Gorgias, Philebus and Protagoras. It will not, however, be necessary for this study to plumb those depths since it is confined largely to examining not ethics in general, nor even its history, but rather, the literature on business ethics – which is itself largely a latter-day phenomenon (“latter-day” as covering late 20th century to the current epoch).
This chapter reviews material that is relevant to the theme of this research study, namely ethics in organisations and business ethics in particular. It begins with a review of business ethics literature in general and concludes with the same theme but for South African business schools.
The first recorded “rules for trade” in Western literature (which today would be regarded as a code of ethics) were developed by Johannes Nider in 1468 (Dahlin, 2007). In early times business ethics was not regarded as a science, rightly or wrongly so. In attempting to find reasons for this state of affairs, Clegg et al. (2007: 107) state:
‘The theoretical disdain may occur because ethics have been viewed as an extraneous incursion from a moral realm outside ordinary practice and orderly theory…’
A gradual graduation from the ‘rule of man’ to the ‘rule of law’ saw a corresponding growth of the consciousness of the need for ethical integrity in organisations. This need for ethical integrity in organisations was reinforced by, among other things, the research findings of Conry and Nelson (1989) that business students come to university with the lowest level of moral reasoning skills of any undergraduate students.
Dahlin (2007) provides a fairly detailed historical overview of business ethics. He traces the roots of business ethics to the Renaissance (14th– 17th centuries). At this early stage it was established that products should be lawful and useful, that the price of goods to be traded should be ‘fair’ and that the trader must treat his customers with honesty. From the 1920s to the 1960s the focus of ethics shifted from being on the relationship between the employer and the employees with a call for employees to be paid a ‘living wage’ to an emphasis on the relationship between the organisation and the broader stakeholder community. Dahlin (2007) indicates that business ethics became particularly powerful in the US in the 1960s with the adoption of the Civil Rights Act, various environmental protection policies and the birth of the consumer movement in the USA.
Dahlin indicates that the 1970s and the 1980s saw the emergence of business ethics as a field of study with the term ‘business ethics’ becoming commonly used, the establishment of business ethics as a field of study and the publication of business ethics journals. This, he argues, was a direct result of all of the business and political scandals of the time and the perception that businesses were resorting to unethical behaviour in order to survive. This led to the legislating of principles to act as guidelines for business dealings by the US government in the 1990s and the institution of incentives for US companies with programmes that prevent and detect corporate violations of the law. The success of these measures is questionable and the author’s overarching conclusion (a view which is shared by Ludescher and Mahsud (2010)) was that corporate US was fuelled by greed and selfishness, the result of which affected people at all levels with downsizing and the increasing casualisation of labour. It also resulted in a watering-down of business ethics as CSR (corporate social responsibility) became the buzzword. This has not improved, as indicated by Furlonger (2012), since an ethical orientation remains low on the list of skills associated with South African MBA graduates (see Table 1.1).
In terms of ethical behaviour in South African organisations, Van Zyl and Lazenby (1999) found that these are particularly at risk given the country’s changing economic environment with the opening up of markets and an end to sanctions following the 1994 elections. Over and above the importance of individual conduct and the development and institutionalisation of codes of conduct and ethics, Van Zyl and Lazenby (1999: 19) strongly emphasise that an organisation’s ‘performance assessment, appraisal and reward systems must be modified to account for ethical behaviour’.
This view is supported by the conclusion reached by Ermongkonchai (2010) linking the reasons for the unethical behaviour of employees to a lack of control systems, psychological contract theory and agency theory. These authors caution that performance pressures can actually increase unethical behaviour if employees’ perceptions are that that is what is required to meet performance targets.
With specific reference to capitalism as the dominant economic system globally, Robin (2009) posits that ‘the mission of ethics is to ameliorate the abusive use of power’. He cites this abuse of power, made possible by the inherent imbalance of power of the capitalist system, as one of the imperfections of the capitalist economic system that makes it potentially harmful to the stakeholders of organisations. Fairness and respect for people are the cornerstones of business ethics within a paradigm that takes cognisance of the level of commitment required from businesses, synergies with the mission of business and the interface between societies, business and government. These conclusions of Robin do not take cognisance of comparative capitalisms, including alliance capitalism, dirigisme capitalism and family capitalism or market-oriented, Rhineland, statist or social-democratic capitalism.
The impact of “fair” treatment on employee performance was investigated by Sharma et al. (2009). These authors found that whilst there is a positive relationship between corporate ethical values and job performance and commitment, this relationship is moderated by perceptions of fair treatment. As much as this finding supports the importance of treating employees as a significant stakeholder “fairly”, it also implies that the same fairness may make employees overlook ethical lapses in the organisation. It therefore stands to reason that the ‘ethical audit’ of even the most ethical of organisations needs to be undertaken by independent and objective external partieS
Business ethics and the workplace
Concerns around ethical business practise are not new. Well-meaning and driven business executives often take decisions that have intended or unintended unethical consequences. Bazerman and Tenbrunsel (2011) discuss five barriers to an ethical organisation that executives should be acutely aware of: Table 2.1 Five barriers to an ethical organization (Adapted from Bazerman and Tenbrunsel (2011: 63))
In organisations the rise of corporate social responsibility (CSR) as an implicit principle including business ethics as but one area of social responsibility is a typical example of how mainstreaming a concept or principle can lead to its demise. Van Liedekerke and Dubbink (2008) postulate that in order to survive and grow in the 21st century, business ethics will have to explain why it is important in a liberal free market, given the macro-sociological nature of the market. These authors are of the opinion that the survival of business ethics in Europe lies in the field positioning itself at the meso-sociological level of the organisation where the institutional constraints of market actors can be mapped whilst retaining the ability to describe and explain the perspective of these actors in a way that is ‘morally appealing’. Ludescher and Mahsud (2010) complicate the matter further by indicating that even tobacco and defence companies generally have CRS programmes, although their products are ‘of dubious ethical value’. Similarly, Alford and Bebensee (2010) raise the question whether an organisation’s products compromise its ethicality and whether the nature of the products is fundamental to business ethics. Somewhat controversially, these authors state that the general public often regard the term ‘business ethics’ as an oxymoron and that there is a ‘general air of mistrust of business by the public (Alford & Bebensee, 2010).
In contributing to the conceptual framework for business ethics, the principal components of the model of business ethics developed by Svensson and Wood (2008) are expectations (relating to the relationship between businesses and the societies within which they operate), perceptions (about the way in which the organisation interacts or fails to interact with the expectations of society relating to ethical behaviour) and evaluations (the criteria used by members of society to judge the performance of the organisation). These authors interconnect these three principal components with five subcomponents, indicating that business ethics is a continuous and iterative interactive process between the organisation and society, combining past, present and future expectations of all the stakeholders of the organisation.
Ardichvili et al. (2009) identified the absence of comprehensive models outlining the characteristics of ethical business cultures. Through their research they set about formulating such a model. They found that the ethical standards of role models in the organisation and the alignment of formal structures, policies and procedures with ethical behaviour form the basis of an ethical business culture. This research was confirmed by Casali and Day (2010) in their investigation of the manner in which an ‘unhealthy organisational culture’ results in an enabling environment for unethical decision-making. Callanan, Rotenberry, Perri and Oehlers (2010), on the other hand, studied the impact of environmental factors on ethical decision-making and identified a link between ethical relativism and ethical choices, indicating that people that have a greater relativistic orientation are ‘more likely to make unethical choices’ (Callanan et al., 2010), while more idealistic people are more likely ‘to choose more ethical options’
CHAPTER 1: INTRODUCTION
1.2 The problem statement
1.3 Research objective
1.4 Research proposition and sub propositions
1.5 Research approach
1.6 Outline of chapters
CHAPTER 2: LITERATURE REVIEW
2.2 Business ethics and the workplace
2.3 The curriculum of business ethics
2.4 Business ethics within the South African higher education legislative framework
2.5 Business ethics in South African universities and business schools
CHAPTER 3: RESEARCH METHODOLOGY
3.2 Research objectives
3.3 Research proposition
3.4 Research methodologies considered for this research
3.5 Research design and methods applied in this study
3.6 Data collection methods
3.7 Data analysis
3.8 Validity, reliability and triangulation
3.9 Research ethics
3.10 Limitations of the study
CHAPTER 4: ANALYSIS OF RESEARCH RESULTS
4.2 Results of the questionnaires
4.3 In summary
CHAPTER 5: ANALYSIS OF RESEARCH FINDINGS
5.2 Analysis of research findings
5.3 In summary
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS
6.2 Conclusions drawn from the research
6.4 Possibilities for further research
6.5 In conclusion
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