Introduction

Unethical practice is an action that falls outside of what is considered morally right or proper for
a person, a profession or an industry. Individuals can behave unethically, as can businesses,
professionals and politicians.

Factors that lead to unethical practices in organisations

Unethical organizational climate/culture

As mentioned, a bad barrel can make/foster bad apples. Organizations which foster unethical
behavior often exhibit one or more of the following characteristics: have weak and/or unethical
leaders, bottom-line mentality (ends justify means), unrealistic goals, reward or ignore/weakly
sanction unethical behavior, treat employees unfairly and demand unquestioning obedience to
authority. Like individuals, organizations may morally disengage by rationalization tactics to
maintain a positive image and infuse such tactics into their way of doing business. In a corrupt
unit, socialization tactics often accompany rationalization tactics to progressively assimilate
newcomers into accepting and committing unethical behavior. Over time, these actions can make
unethical behavior part of the organizational culture and routine way of doing business.

Weak and/or unethical leadership/supervision (do not demonstrate/enforce ethical

values/behavior).

Through social learning, employees look to significant others (especially leaders and
supervisors) for what is acceptable and unacceptable behavior. If leaders/supervisors commit
unethical behavior and/or allow others to do so, they can influence employees to think and act
unethically too by legitimizing such behavior. Through power of rewards/punishment and
unquestioned authority, unethical leaders/supervisors can also influence/pressure employees to
accept/commit unethical behavior. Under reciprocal deviance, a leader/supervisor that allows or
treats employees unfairly/disrespectfully can foster a toxic work environment, which can breed
contempt and retaliatory unethical behavior to right perceived wrongs. Research has found a
significant relationship between job dissatisfaction (especially from toxic leaders/supervisors)
and deviant/unethical work behavior.
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Certain job characteristics

Some jobs have inherent characteristics which can increase one’s opportunity and propensity to
behave unethically, especially if predisposed to do so based on individual causal factors. These
job characteristics include (in no particular order): stressful/demanding (unrealistic objectives,
limited time/resources), lack control over environment, lack of support network, more external
contacts and where/when employees perceive an expectation of unquestioning obedience to
authority. Note many military jobs contain such job characteristics. Organizations may also
create job/work demands (e.g., increased stress/work hours or rotating shift schedules) that foster
inadequate rest/sleep, which can increase one’s propensity for unethical behavior by diminishing
one’s self-control resources. This draws on Ego Depletion Model, which argues people have a
limited capacity for cognitive self-control (like fuel tank) at any moment that is depleted by
using it until rest/sleep restores it.

Situational factors.

Situationism posits “variance in human behavior is typically a function of the situation a person
inhabits, or takes herself to inhabit, rather than any traits of character she putatively
possesses.”So to understand one’s behavior, we must take into account situational variables.
Several studies show how minor situational variables affect helping behavior (e.g., hurried
passersby step over passed out victim while unhurried stop to help or those who just found some
change help a person whose papers have fallen vice those who did not just find change do not).

Gifts and Kickbacks

Some organizations do not allow their employees to receive gifts from clients during normal
course of business. Those who do, generally provide guide lines on limitations as to the amount
an employee can receive as gift. Sometimes a buyer may request for kickbacks or entertainment
which, if not provided, may lead to the loss of the customer. An employee frequently receives
pressure from the management to behave unethically or to obtain profitable business at any cost,
which may include the use of any possible dirty tricks. The employees who desire to be retained
or promoted have no choice but to dance to the tune of the management. This is because there
were cases of those who refused to behave unethically the way management instructed and were
fired or nearly fired.

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Conflict of Interest

Conflict of interest occurs when ones private interest interferes or appears to interfere in any
way with the interest of the organization. According to Sliglitz, it can be argued that there is no
conflict of interest because, based on Adam Smith‘s view, the individuals, when pursuing their
own self- interest are actually pursuing the general interest of society.

Collusion

Collusion, especially with competitors, to fix prices, is an unfair business practice today. This
could be considered stealing from customers. However, there are differences of opinion on
whether or not price fixing is stealing from customers.

Insider Trading

Insider trading is an unethical behavior which occurs when a person who has access to
confidential information uses or shares the information for securities trading purposes or any
other purpose except the conduct of regular company business. The confidential information of
the company are not to be used for achieving personal gain neither are they to be disseminated
directly or indirectly, to friends, family members and other outsiders who may in turn trade on or
misuse the information.

Slippery Slope

Misconduct starts small, such as the exaggeration of a mileage report. But the longer it goes
unchecked, the worse the offenses become. The few extra dollars that came from the mileage
report may eventually be dwarfed by larger falsified expenses or perhaps even outright
embezzlement. People who are faced with growing opportunities to behave unethically are more
likely to rationalize their misconduct because unethical practices becomes habit.

Setting a Bad Example

Ethical practices starts at the top. Employees emulate their leaders, and the most significant
factor in ethical leadership is personal character. Corporate leaders who employees view as
demonstrating personal character are more likely to be perceived as setting a strong tone,
researchers say. If employees see the boss knocking off early every day, they may do likewise.

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Ignoring the small stuff will not necessarily lead to the type of scandals that make the news. But
ethical misconduct could prove costly if it is not stopped. Identifying these causes of unethical
practices in the workplace could prevent problems and minimize damages.

2. Guidelines for developing a code of conduct

A code of conduct is an important management tool which can positively shape the culture of an
organization. Many organizations have found that adopting a clearly defined approach to ethical
issues improves the organizations’ reputation, helps to develop pride among staff and is good for
business.

Guidelines for developing a code of conduct

Development and Approval Process

While those in senior management are likely to have considerable input into the content of the
code of ethical conduct, there is a need to seek input from a range of stakeholders in the code.
Being part of the consultative process encourages potential users to engage with the code’s
implementation, rather than feel that the code has been merely imposed upon them. Such an
approach invokes a broader sense of ownership of the code. In addition, stakeholders who
contribute to the development of a code of conduct may bring to light ethical challenges of which
other parts of the organisation were not previously aware.

Introducing the Code to the Organisation

The organisation will require a strategy for introducing the code to those affected by it. Formal
training is considered later in section 5.3. However, thought should first be given to how initial
awareness of a code of ethical conduct should be brought about. In larger organisations, many of
those governed by the code would have been made aware of it at the start of the consultation
process. For others, their introduction to the code should highlight the benefits of having a code:
how it will enhance the reputation of the organisation, introduce clarity, and promote widely held
values such as equality and respect throughout the organisation. Staff, in particular, should be
made aware at an early stage of whom to contact, on a confidential basis, if they have any

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questions. In some organisations, this might be a personal mentor. If the process is conducted
diligently, the introduction of the final code should be welcomed by all those affected.

Internal Training
Training is an important step in introducing a new code of ethical conduct. It is important to
explain the rationale behind the implementation of a code – what it is intended to achieve, and
why a principles-based approach has been adopted. Furthermore, users of the code will benefit
from practical training on how to make ethical decisions. If employees (together withtheir
managers) and subcontractors have received appropriate training (including practical exercises)
and had the opportunity to raise any concerns, then the process of embedding the code into the
organisation has already begun.

Use of Case Studies

Proportionate guidance, training, advice and other support must be made available to users of the
code of ethical conduct. A proportionate and effective measure, in this respect, is the availability
of case studies. CCAB has taken a lead on this in respect of the code that applies to its members
– the Code of Ethics for Professional Accountants, issued by the International Ethics Standards
Board for Accountants (the IESBA Code).

In particular, training is likely to be more effective if it incorporates practical examples in the

form of case studies – illustrating situations that the organisation’s employees and subcontractors
may encounter. Those attending the training should be asked to voice their opinions before
alternative possible solutions to the dilemmas in the case studies are provided. Higher levels of
participation tend to arise from discussions in smaller groups, although ideas emerging from
those discussions may also be fed back to the larger group. In this way, the use of relevant case
studies enhances the ethical sensitivity and confidence of staff and other users of the code. In
introducing the case studies, it is important to point out that the ‘right’ course of action will not
always be clear, as there may be more than one right answer. Such is the nature of ethics. The
objective is to exercise people’s decision-making ability.

New Managers and Staff

An organisation’s code of ethical conduct must be introduced to new employees of the
organisation, at all levels. It represents a benchmark for acceptable behaviour, and should form

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an integral part of employees’ terms of employment. At the earliest possible stage, the
organisation should make clear that it aims to employ (or otherwise engage) only those who are
ethically fit. These measures demonstrate the importance that the organisation attaches to
meeting an acceptable standard of behaviour. In particular, time should be set aside to review the
code with new employees as part of their induction programme

Discipline
The purpose of a code of ethical conduct is to bring about consistently high standards of
behaviour and internalise ethical decision-making. To this end, an effective disciplinary process
is an important component in supporting the code. It indicates, both to those bound by the code
and to all external parties, the organisation’s commitment to the principles and policies therein.

Prompt, effective and fair action must be taken against those who are found to have breached the
code. Action must be proportionate and transparent. Any variation between the standard of
behaviour required by the code and that which is seen to be the practice may seriously erode trust
and be very damaging to relationships, both within the organisation and externally. In such cases,
the organisation must be seen to enforce its own code of ethical conduct

Performance Appraisals
On the other hand, high standards of ethical behaviour should be rewarded. The organisation’s
appraisal process provides an opportunity to review how an individual has lived up to the
organisation’s values, and demonstrated competence in ethical decision-making. It is also a
useful mechanism to achieve ongoing awareness of the code. In recognising what an individual
has achieved, managers should also consider how it was achieved, and staff should be rewarded
appropriately. If an organisation gets this right, then all employees and subcontractors will be
seen to be rewarded on merit. It will then be possible to look to the ethical standards of those
rewarded, understand the reasons for the rewards, and attempt to emulate them. Ideally, this
creates a virtuous circle – to the benefit of the organisation, its staff and its stakeholders.

Access to Advice
Quite apart from training sessions and regular performance appraisals, the code of ethical
conduct still needs ongoing support through the availability of information and advice from a
competent source. Organisations may consider incorporating into their codes how the reader can

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obtain clarity concerning any aspect of the code, or ethical advice in any given situation.
Otherwise, separate guidance must be provided.

Conclusion

Although ethics education seem to produce limited evidence of changing behaviors, the
commitment of management to monitor annual ethics education for all employees will produce
the desired favorable results. There should be clear communication to the employees of what are
honorable and expected behaviors in the organization.

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References:

Butterfield, K. D. (2012). The Influence of Unethical Peer Practices on Observers’ Unethical

Practices: A Social Cognitive Perspective. Journal of Business Ethics, 109: 117-131

Messick, D. M. (1999). Alternative logics for decision making in social settings. Journal of
Economic Practices and Organization, 38: 11-28

Pillutla, M., & Chen, X. P. (1999). Social Norms and cooperation in social dilemmas.
Organizational Practices and Human Decision Process, 78: 81-103.