ETHICAL MANAGEMENT

Ethical management is the process of accounting for morals while overseeing an organization. This
practice allows managers to prioritize the well-being of employees, customers and the community
while considering the company's bottom line. By adhering to the company's core values and making
challenging decisions on a case-by-case basis, an ethical management team promotes principles like
honesty and fairness.

Like other moral deliberations, ethical management can have gray areas where the decision-making
process is more complicated than right versus wrong. For instance, consider a manager who
discovers a manufacturing plant taking shortcuts to make a product. The shortcuts resulted in
reduced labor costs, but the manager realizes that the company's increased profits are likely only
temporary. By reporting the manufacturing plant, the manager maintains product standards and
ensures overall customer satisfaction

ADVANTAGES - ETHICAL MANAGEMENT

Employers usually look at the past actions of an employee as an indicator of potential behavior's.
Someone who has a history of immoral behavior's will have difficulty securing employment in a
meaningful job, as that person may not be trusted. This also applies to the business world.
Businesses with questionable moral backgrounds are usually viewed with skepticism and are
unlikely to gain new customers by word of mouth, so it is unlikely that they will prosper. This is
especially the case where social media allows makes customer reviews readily accessible.

When management leads an organization, workers ethically follow in those footsteps.

With corporate ethics as a guiding principle, workers make better choices in less time; this improves
efficiency and overall workplace morale. When employees complete work in a way that is based on
honesty and integrity that benefits the entire organization.

Companies should have ethics codes to promote ethical behavior – not to enhance productivity,
profits, or public relations. Still, a sound, well-administered code can benefit a company and its
stakeholders in a variety of ways.

Benefits of business ethics

The importance of business ethics reaches far beyond employee loyalty and morale or the strength of
a management team bond. As with all business initiatives, the ethical operation of a company is
directly related to profitability in both the short and long term. The reputation of a business in the
surrounding community, other businesses, and individual investors is paramount in determining
whether a company is a worthwhile investment. If a company is perceived to not operate ethically,
investors are less inclined to buy stock or otherwise support its operations.

1. Draws more investors toward the business

If investors know that the company they work with prioritizes having high morals and will operate
ethically, they will be safe in the knowledge that their money is being used responsibly. Plus, it
means they can be comfortable knowing they’re not indirectly contributing to unethical practices.
Strong business ethics are also an attractive quality, which means other investors are more likely to
be interested in investing their money into the company, keeping its share price high and protecting
it from takeover.
2. Provide a competitive advantage in terms of customers
When a company behaves ethically, it can attract customers to its products and services and sway
them towards loyalty. This is indicated by a Unilever survey which found a third of consumers (33
percent) choose to buy from brands that are making a positive social or environmental impact.

3. Build Customer Loyalty

Consumers may let a company take advantage of them once, but if they believe they have been
treated unfairly, such as by being overcharged, they will not be repeat customers. Having a loyal
customer base is one of the keys to long-range business success, since serving an existing customer
does not involve marketing costs, whereas acquiring a new one does.

4. Enhance a Company's Reputation

A company’s reputation for ethical behavior can help it create a more positive image in the
marketplace, which can bring in new customers through word-of-mouth referrals. Conversely, a
reputation for unethical dealings hurts the company’s chances to obtain new customers, particularly
in this age of social networking when dissatisfied customers can quickly disseminate information
about the negative experience they had.

Avoid Legal Issues

Often the management of a business may be tempted to cut corners in search of profit, such as
refusing to fully comply with environmental legislation or labor laws, ignoring workers' health
hazards, or using inferior materials in its goods. The penalties for being caught can be severe,
including legal fees and fines or sanctions by governmental agencies. The resulting negative publicity
can cause long-range damage to the company’s reputation that is even more costly than legal fees or
fines. The advantages of business ethics become crystal clear in these situations since companies that
maintain the highest ethical standards are very unlikely to find themselves in such situations.

5. Retain Good Staff

Talented individuals at all levels of an organization want to be compensated fairly for their work and
dedication. They want career advancement within the organization to be based on the quality of the
work they do and not on favoritism. They want to be part of a company whose management team
tells them the truth about what is going on, such as when layoffs or reorganizations are being
contemplated.

DISADVANTAGES OF BUSINESS ETHICS

LIMITED ABILITY TO MAXIMISE PROFIT

The main drawback of business ethics is that they can reduce a company’s ability to maximise profit.

For example, having factories in developing countries can reduce costs. This is because companies
can have practices in place, such as child labour and low wages, which help to maximise profit. But
although these practices are legal in those countries, they’re also incredibly unethical and will
obviously never be tolerated by a company following ethical practices.

Improvements in working conditions, such as providing workers with living wage and having proper
health and safety standards in place, are ethical but raises the amount it costs to run these factories.
This, in turn, reduces profit which might not be an issue for large companies who can afford to
allocate costs. But it can be an issue for small businesses, especially if they’re evolving.
TIME CONSUMING TO IMPLEMENT THE PRACTICES

Developing, implementing and maintaining business ethics can be time consuming, particularly if a
company is looking to become more ethical when they’ve previously followed unethical practices.
Ethical practices also need to be continuously updated according to changes in laws and regulations,
especially as a company grows.

Companies can streamline the process by hiring an ethics officer but this adds to the costs needed for
business ethics.

WHAT IS MANAGERIAL ETHICS?

Managerial ethics is the standard of social norms and values, truth, and justice that is accepted by the
manager in the decision-making process. It is the moral principles and rules of conduct that are
applied in the business. Where ethics is the set of moral principles and rules guiding an individual’s
behavior.

Ethics is the foundation of deciding what is wrong or what is right in a given position. It is an
individual’s personal beliefs and perceptions while taking decisions. A moral standard or code of
conduct determined by society defines how ethical an individual is.

Managerial ethics is the set of standard behavior that guide the individual manager in their work to
make managerial decisions. Making ethical choices can often be difficult for managers. It is
compulsory to obey the law about ethics but acting ethically goes beyond mere compliance with the
law.

Ethics is derived from society and the norms, values, beliefs, culture, and standards of society
determine it. A manager or businessman is a part of society and he has to make business ethics
accepted by society. Business ethics is the moral behavior of a businessman. An ethical businessman
can promote goodwill and reputation in society, gain benefit in the long run, and promote uniform
growth of the business.

A simple difference between ethics and managerial ethics is that ethics determines wrong and right
in our daily social life, in informal nature and managerial ethics is based on the periphery of the
organization, follow the standard rules of making decisions. In other words, ethics is related to
individual personal life and managerial ethics is related to organizational life

Following are some major importance of management ethics;

 Promotes Goodwill and Image

 Helps to Maintain Good Relations with Stakeholders
 Less Interference from Government
 Promotes Fair Competition
 Promotes Social Responsibility
 Improves Working Environment
 Helps to increase Market Share
PROFESSIONAL ETHICS

Professional people and those working in acknowledged professions exercise specialist knowledge
and skill. How the use of this knowledge should be governed when providing a service to the public
can be considered a moral issue and is termed professional ethics.

Professionals are capable of making judgments, applying their skills and reaching informed decisions
in situations that the general public cannot, because they have not received the relevant training. One
of the earliest examples of professional ethics is probably the Hippocratic oath to which medical
doctors still adhere to this day.

Professional ethics is a set of standards adopted by a professional community. Professional ethics

are regulated by standards, which are often referred to as codes of ethics.

The code of ethics is very important because it gives us boundaries that we have to stay within in our
professional careers. The one problem with the code of ethics is that we can't always have the
answers black and white. Sometimes there are grey areas where the answers aren't so simple.
Professional ethics are also known as Ethical Business Practices.

Components
A number of professional organisations define their ethical approach as a number of discrete
components. Typically these include:

Honesty
"Honesty is the best policy" is a famous statement. Honesty refers to a facet of moral character and
connotes positive and virtuous attributes such as integrity, truthfulness and straightforwardness
along with the absence of lying, cheating or theft. Honesty is revered in many cultures and religions.

Integrity
Integrity is a concept of consistency of actions, values, methods, measures, principles, expectations,
and outcomes. In ethics, integrity is regarded as the honesty and truthfulness or accuracy of one's
actions. Integrity can be regarded as the opposite of hypocrisy, in that integrity regards internal
consistency as a virtue, and suggests that parties holding apparently conflicting values should
account for the discrepancy or alter their beliefs.

Transparency
Transparency, as used in science, engineering, business, the humanities and in a social context more
generally, implies openness, communication, and accountability. Transparency is operating in such a
way that it is easy for others to see what actions are performed. For example, a cashier making
change at a point of sale by segregating a customer's large bills, counting up from the sale amount,
and placing the change on the counter in such a way as to invite the customer to verify the amount of
change demonstrates transparency

Accountability
In ethics and governance, accountability is answerability, blameworthiness, liability, and the
expectation of account-giving. As an aspect of governance, it has been central to discussions related
to problems in the public sector, nonprofit and private (corporate) worlds. In leadership roles,
accountability is the acknowledgment and assumption of responsibility for actions, products,
decisions, and policies including the administration, governance, and implementation within the
scope of the role or employment position and encompassing the obligation to report, explain and be
answerable for resulting consequences.

Confidentiality
Confidentiality is a set of rules or a promise that limits access or places restrictions on certain types
of information. Confidentiality is ensuring that information is accessible only to those authorized to
have access.

Objectivity
Law is a system of rules and guidelines which are enforced through social institutions to govern
behavior. Laws are made by governments, specifically by their legislatures. The formation of laws
themselves may be influenced by a constitution (written or unwritten) and the rights encoded
therein. The law shapes politics, economics and society in countless ways and serves as a social
mediator of relations between people.

Respectfulness
Respect gives a positive feeling of esteem or deference for a person or other entity (such as a nation
or a religion), and also specific actions and conduct representative of that esteem. Respect can be a
specific feeling of regard for the actual qualities of the one respected (e.g., "I have great respect for
her judgment"). It can also be conduct in accord with a specific ethic of respect. Rude conduct is
usually considered to indicate a lack of respect, disrespect, where as actions that honor somebody or
something indicate respect. Specific ethics of respect are of fundamental importance to various
cultures and therefore key to success in any organization is Respectfulness.

Obedience to the law

Law is a system of rules and guidelines which are enforced through social institutions to govern
behavior. Laws are made by governments, specifically by their legislatures and in organizations, by
the Top Management.. The formation of laws themselves may be influenced by a constitution
(written or unwritten) and the rights encoded therein. The law shapes politics, economics and
society in countless ways and serves as a social mediator of relations between people. And the
employees working in an organization are bound to obey the Laws & Regulations of that
organization.

Stakeholders and Ethics

The people and groups affected by how a company and its managers behave are called its
stakeholders/stockholders. Stakeholders supply a company with its productive resources; as a
result, they have a claim on and a stake in the company. Because stakeholders can directly benefit or
be harmed by its actions, the ethics of a company and its managers are important to them. Who are a
company’s major stakeholders? What do they contribute to a company, and what do they claim in
return? Here we examine the claims of these stakeholders—stockholders; managers; employees;
suppliers and distributors; customers; and community, society, and nationstate
Stakeholders
Stockholders have a claim on a company because when they buy its stock or shares they become its
owners. When the founder of a company decides to publicly incorporate the business to raise capital,
shares of the stock of that company are issued. This stock grants its buyers ownership of a certain
percentage of the company and the right to receive any future stock dividends. Stockholders are
interested in how a company operates because they want to maximize the return on their
investment. Thus they watch the company and its managers closely to ensure that management is
working diligently to increase the company’s profitability. Stockholders also want to ensure that
managers are behaving ethically and not risking investors’ capital by engaging in actions that could
hurt the company’s reputation.

Managers
Managers are a vital stakeholder group because they are responsible for using a company’s financial,
capital, and human resources to increase its performance and thus its stock price. Managers have a
claim on an organization because they bring to it their skills, expertise, and experience. They have
the right to expect a good return or reward by investing their human capital to improve a company’s
performance. Such rewards include good salaries and benefits, the prospect of promotion and a
career, and stock options and bonuses tied to company performance. Managers are the stakeholder
group that bears the responsibility to decide which goals an organization should pursue to most
benefit stakeholders and how to make the most efficient use of resources to achieve those goals. In
making such decisions, managers frequently must juggle the interests of different stakeholders,
including themselves. These sometimes difficult decisions challenge managers to uphold ethical
values because some decisions that benefit certain stakeholder groups (managers and stockholders)
harm other groups (individual workers and local communities).

Employees
A company’s employees are the hundreds of thousands of people who work in its various
departments and functions, such as research, sales, and manufacturing. Employees expect to receive
rewards consistent with their performance. One principal way that a company can act ethically
toward employees and meet their expectations is by creating an occupational structure that fairly
and equitably rewards employees for their contributions. Companies, for example, need to develop
recruitment, training, performance appraisal, and reward systems that do not discriminate against
employees and that employees believe are fair.

Suppliers and Distributors

No company operates alone. Every company is in a network of relationships with other companies
that supply it with the inputs (such as raw materials, components, contract labor, and clients) that it
needs to operate. It also depends on intermediaries such as wholesalers and retailers to distribute its
products to the final customers. Suppliers expect to be paid fairly and promptly for their inputs;
distributors expect to receive quality products at agreed-upon prices. Once again, many ethical
issues arise in how companies contract and interact with their suppliers and distributors. Important
issues concerning safety specifications are governed by the contracts a company signs with its
suppliers and distributors, for example; however, lax oversight can have tragic consequences.
Customers
Customers are often regarded as the most critical stakeholder group because if a company cannot
attract them to buy its products, it cannot stay in business. Thus managers and employees must work
to increase efficiency and effectiveness in order to create loyal customers and attract new ones. They
do so by selling customers quality products at a fair price and providing good aftersales service. They
can also strive to improve their products over time and provide guarantees to customers about the
integrity of their products like the Soap Dispensary.

Community, Society, and Nation

The effects of the decisions made by companies and their managers permeate all aspects of the
communities, societies, and nations in which they operate. Community refers to physical locations
like towns or cities or to social milieus like ethnic neighborhoods in which companies are located. A
community provides a company with the physical and social infrastructure that allows it to operate;
its utilities and labor force; the homes in which its managers and employees live; the schools,
colleges, and hospitals that serve their needs; and so on. Through the salaries, wages, and taxes it
pays, a company contributes to the economy of its town or region and often determines whether the
community prospers or declines. Similarly, a company affects the prosperity of a society and a nation
and, to the degree that a company is involved in global trade, all the countries it operates in and thus
the prosperity of the global economy.

Business ethics are also important because the failure of a company can have catastrophic
effects on a community; a general decline in business activity affects a whole nation. The decision of a
large company to pull out of a community, for example, can threaten the community’s future. Some
companies may attempt to improve their profits by engaging in actions that, although not illegal, can
hurt communities and nations. One of these actions is pollution. For example, many U.S. companies
reduce costs by trucking their waste to Mexico, where it is legal to dump waste in the Rio Grande.
The dumping pollutes the river from the Mexican side, but the U.S. side of the river is increasingly
experiencing pollution’s negative effects.
STAKEHOLDER
Stakeholder is a person who has something to gain or lose through the outcomes of a planning process,
programme or project (Dialogue by Design, 2008).

What are the internal stakeholders?

Internal stakeholders, also called primary stakeholders, are entities with a direct interest or influence in a
company, as all the processes and results of the company's operations also affect them. An example of
internal stakeholders are employees of a company and its owners or investors.

Who are the internal stakeholders, and what are their roles?

In business, the internal stakeholders are investors, owners, directors, managers, and employees. Obviously,
different internal stakeholders have different roles in a company. This depends on their interest, degree of
influence in decisions, and responsibility. So, to answer the question, it is necessary to divide them into several
types.
nvestors or shareholders

Investors or shareholders are internal stakeholders who are only responsible for the funds they invest in the
company. Their influence on decisions is indirect, but their interests require a high priority because they must
trust the company to invest their money. However, their interest is often solely financial, as the company
regularly generates profit, and its capitalization steadily grows.
Owners

The owners are responsible for the company's foundation and existence, and their influence on the decision-
making can vary greatly. If they are only interested in ensuring that the company is consistently profitable,
then the influence and responsibility for decisions are transferred to the board of directors. However, the
company owners may also directly influence decisions if they are interested in ensuring that its core ideas are
consistent with all internal and external processes, products, and services.
Board of directors

The board of directors is responsible for making strategic decisions and directly influences all operational
aspects of the company.They are also responsible for the company's market capitalization, which their
decisions affect. Their main interest is to ensure that investors are happy with their investments and that the
owners are satisfied with their choice of persons who have taken over the company's management and the
extension of its products and services.

Managers

Managers are responsible for the quality of the employees and good performance, and they can also
influence tactical decisions and the setting of goals. Their interest is in the no risk of downsizing, good
working conditions, decent wages, and bonuses for good work in their departments.

Employees

Employees are responsible for the quality of their jobs and can sometimes be influential in setting tasks.
However, employees need to have confidence in their employer rather than check for open positions at
other companies. Therefore the interest of employees is in the absence of risks of downsizing, good
working conditions, stable pay, and bonuses.

Who are the external stakeholders?

External stakeholders, also called secondary stakeholders, have an interest in the company but have no
direct influence on its decisions and are not directly affected by its performance. Customers and local
communities, suppliers, and various government or financial institutions are examples of external
stakeholders.
What is the role of external stakeholders?

Here, too, everything depends on the nature of their interest and the extent of their influence in
supporting the stable production and distribution of the company's services and products. Of course, they
do not directly influence the decisions, but they must be accounted for.

How to build transparent work processes, so stakeholders have no questions about where the money was
spent? Read Oleg Puzanov's new article, where he reasoned about the future of outstaffing and
outsourcing and described the new approach to cooperation models - Transparent Remote Staffing.

Customers

Of course, individual customers often have no direct influence on a company's decisions, although some
good exceptions exist. However, the customers collectively show how successful the company's decisions
have been by giving their money and attention, allowing the company to develop and distribute its
products and services. Therefore, it is necessary to look at the interests of the customer, which are the
high quality, availability, and relevance of the company's products and services.

Local community

Although local communities do not directly influence the company's decisions, they may still influence the
company by organizing various actions and demonstrations. Their interest is that the company doesn't
negatively impact their lives in the form of environmental damage, an increase in traffic, etc. At the same
time, their interest may be that the company's activities raise the status of the location, attracting more
people, which allows them to make higher rents, open profitable businesses, etc.

Creditors

Creditors do not influence the company's decisions but are interested in its stable income. That way, they
can give the company a bigger loan on better terms.

Suppliers

Today's world is global, and no company is in a completely closed loop. Each company's profits depend on
other businesses, and they all provide goods or services to each other. Therefore, suppliers are vested in
the company's growth, giving them more orders, profits, and cheaper production.

Government

There is a question: Is the government an internal or external stakeholder? Here is the answer, the
government is the external stakeholder interested in companies' growth because the higher the profits,
the higher the taxes. Also, the more a company expands, the more jobs it creates, increasing citizens' well-
being and purchasing power, which positively affects the demand for goods and services from other
companies. If a government provides conditions for the active growth of companies, it makes it attractive
 for others to start their own companies. In this way, it creates mutual enrichment and positive economic
trends.

Nature of stakeholders

 A stakeholder is any group or individual who can affect or is affected by the achievement of the
organization’s purpose and objectives.
 Stake = Interest, share in undertaking, legal claim of ownership
 Content of stakes vary between diverse stakeholders
 NGOs – Corporate social responsibility
 Investors – maximize short term profits

Edward Freeman – 3 major stakes – Equity stakes, economic/marketstakes, influence stakes.

 Equity stakes – held by those who have direct ownership of the company e.g. shareholders, directors,
minority interest owners.
 Economic / market stakes – held by those who have an economic interest e.g. employees, customers,
suppliers, competitors.
 Influencer stakes – held by those with interests as consumer advocates, environmental groups, trade
unions, and government agencies.
 Freeman also classified interests into either economic or moral and whether bound by a contract or moral
obligation.
 Clerkson
 Clerkson furthers this categorization into primary and secondary group of stakeholders.
 Primary groups – important for financial transactions and necessary for company’s survival.
 Secondary groups – influence, affected, are influenced by the company, not engaged in financial
transactions, not essential for economic survival. E.g. media, special interest groups, . They have a moral
and normative interest. They can mobilize public opinion and influence company performance.
 Charkham
 Charkham categorized stakes into community and contractual stakeholders.
 Contractual – have some form of legal relationship with company for exchange of goods and services e.g.
customers, employees, suppliers.
 Community – non contractual, diffuse but relationship real in terms of impact e.g. government, regulatory
agencies, trade unions, media.
What is a Stakeholder?

In business, a stakeholder is any individual, group, or party that has an interest in an organization and the
outcomes of its actions. Common examples of stakeholders include employees, customers, shareholders,
suppliers, communities, and governments. Different stakeholders have different interests,
and companies often face trade-offs in trying to please all of them.

Types of Stakeholders

Types of Stakeholders

This guide will analyze the most common types of stakeholders and look at the unique needs that
each of them typically has. The goal is to put yourself in the shoes of each type of stakeholder and see
things from their point of view.

#1 Customers

Stake: Product/service quality and value

Many would argue that businesses exist to serve their customers. Customers are actually
stakeholders of a business, in that they are impacted by the quality of service/products and their
value. For example, passengers traveling on an airplane literally have their lives in the company’s
hands when flying with the airline.

#2 Employees

Stake: Employment income and safety

Employees have a direct stake in the company in that they earn an income to support
themselves, along with other benefits (both monetary and non-monetary). Depending on the
nature of the business, employees may also have a health and safety interest (for example, in the
industries of transportation, mining, oil and gas, construction, etc.).

#3 Investors

Stake: Financial returns

Investors include both shareholders and debtholders. Shareholders invest capital in the business
and expect to earn a certain rate of return on that invested capital. Investors are commonly
concerned with the concept of shareholder value. Lumped in with this group are all other
providers of capital, such as lenders and potential acquirers. All shareholders are inherently
stakeholders, but stakeholders are not inherently shareholders.

#4 Suppliers and Vendors

Stake: Revenues and safety

Suppliers and vendors sell goods and/or services to a business and rely on it for revenue
generation and on-going income. In many industries, suppliers also have their health and safety
on the line, as they may be directly involved in the company’s operations.

#5 Communities

Stake: Health, safety, economic development

Communities are major stakeholders in large businesses located in them. They are impacted by a
wide range of things, including job creation, economic development, health, and safety. When a
big company enters or exits a small community, there is an immediate and significant impact on
employment, incomes, and spending in the area. With some industries, there is a potential health
impact, too, as companies may alter the environment.

#6 Governments

Stake: Taxes and GDP

Governments can also be considered a major stakeholder in a business, as they collect taxes from
the company (corporate income taxes), as well as from all the people it employs (payroll taxes)
and from other spending the company incurs (sales taxes). Governments benefit from the overall
Gross Domestic Product (GDP) that companies contribute to
Individual variables and organizational variables
This study examines five individual variables (age, gender, work experience, educational level
and personal moral philosophy), four organizational variables (type of industry, organizational
size, code of ethics and ethical climate) and three dimensions of moral intensity (magnitude of
consequences, social consensus and temporal immediacy). The theoretical framework is shown
in Fig. 1.
Fig. 1

Individual Variables
A number of individual variables including demographic characteristics, traits of personality and
beliefs have been proposed to have a significant relationship with ethical decision-making stages
(e.g. Haines and Leonard 2007; Marta et al. 2008; Shafer 2008; Vitell and Patwardhan 2008). For
some of the variables, the empirical results look mixed, but on closer examination it is found that
any significant results are all, or mostly, in a particular direction. One of the possible reasons for
other studies finding no significant relationship is limited sample size, but this cannot be
determined conclusively in the case of any particular study.
Gender
The possible influence of gender on ethical decision making has been studied more than any
other variable in business ethics research (O’Fallon and Butterfield 2005). Differences associated
with gender have been theoretically explained in various ways. Socialization theory
(Gilligan 1982) hypothesizes that men and women bring different sets of values to the workplace
because of early socialization. Women, accordingly, tend to evaluate ethical issues in terms of
their caring view of others, understanding relationships and responsibility to the entire
community; whereas men tend to recognize ethical issues from a perspective of rules, fairness,
rights and justice. In their meta-analysis, Jaffee and Hyde (2000) find support for this theory. On
the other hand, structural theory suggests that the occupational environment and the rewards
and costs structure within the workplace will overcome the impact of gender differences caused
by early socialization (Betz et al. 1989). Thus, women and men will respond equally to ethical
issues in the workplace (Reidenbach et al. 1991). In their reviews, Ford and Richardson (1994),
Loe et al. (2000), O’Fallon and Butterfield (2005) and Craft (2013)Footnote1 report more than one
hundred results and conclude that gender often tends to produce no significant results, but when
differences are found, women are more sensitive to ethical issues than men (e.g. Fang and
Foucart 2013; Ferrell and Skinner 1988; Fleischman and Valentine 2003; Galbraith and
Stephenson 1993; Oumlil and Balloun 2009). More recent research (e.g. Kuntz et al. 2013;
Walker et al. 2012) has shown similar varied results. Given that the results tend to show either
no difference or that females are more ethical than males, this study hypothesizes:
H1a
Females have significantly higher ethical recognition, judgment and intention.

Age
Kohlberg’s theory of moral development suggests a positive impact of age on moral development
as individuals generally move from lower to higher stages of moral reasoning as they grow older
(Borkowski and Ugras 1998). However, research shows inconsistent and mixed results
(Craft 2013; O’Fallon and Butterfield 2005). Some studies (e.g. Bateman and Valentine 2010;
Brady and Wheeler 1996; McMahon and Harvey 2007; Walker et al. 2012) indicate that age is
positively and significantly correlated with ethical decision making, while others find no
significant relationship (e.g. Kuntz et al. 2013; Marta et al. 2004; Pierce and Sweeney 2010).
However, it is not generally suggested that ethical decision making is negatively correlated with
age. Thus, this study hypothesizes:
H1b
Age is positively related to ethical recognition, judgment and intention.

Educational Level
Based on the argument that the length of formal education is an important influence on an
individual’s moral development (Kohlberg 1981), many researchers suggest that educational
level has a positive impact on the ethical decision-making process (e.g. Browning and
Zabriskie 1983; Kracher et al. 2002; Pierce and Sweeney 2010). However, some researchers (e.g.
Dubinsky and Ingram 1984; Marques and Azevedo-Pereira 2009) have not found a significant
relationship between the two. Again, though, it is not generally suggested that increased
educational level is negatively associated with ethical decision making. Thus, this study
hypothesizes:
H1c
Level of education is positively related to ethical recognition, judgment and intention.
Work Experience
When considering the effect of work experience on the ethical decision-making process,
Kohlberg’s (1969) theory provides a framework which could suggest a relationship between
work experience and moral development (Treviño 1986). Glover et al. (2002) argue that greater
experience may be associated with greater awareness of what is ethically acceptable. Dawson
(1997) also proposes that ethical standards change with years of experience. Ford and
Richardson (1994) and Loe et al. (2000) conclude that empirical research continues to present
mixed results. Nevertheless, recent studies (e.g. Fang and Foucart 2013; O’Leary and
Stewart 2007; Pierce and Sweeney 2010; Valentine and Bateman 2011) generally indicate a
positive relationship between work experience and ethical decision making, consistent with
Kohlberg’s (1969) theory and Treviño’s (1986) argument. Thus, this study hypothesizes:
H1d
Work experience is positively related to ethical recognition, judgment and intention.

Moral Philosophy
Personal moral philosophy is another individual variable that has been extensively studied.
Business ethics researchers agree that individuals within organizations will respond based on
their own moral philosophies when encountering situations having an ethical content (Shultz
and Brender-Ilan 2004; Singhapakdi et al. 2000). For example, Hunt and Vitell (1986) stress the
importance of moral philosophies—deontology and teleology—in their model of ethical decision
making.
The most common model of personal moral philosophy that has been examined in the business
ethics literature (e.g. Marta et al. 2008) is Schlenker and Forsyth’s (1977) two-dimensional
model consisting of idealism and relativism. Forsyth (1980, p. 175) posits that these dimensions
are distinct; while moral idealism refers to “the degree to which an individual focuses upon the
inherent rightness or wrongness of actions regardless of the results of those actions”, moral
relativism refers to “the extent to which individuals reject universal moral rules or standards”. In
making ethical decisions, moral idealists use idealistic rather than practical criteria; those who
have high idealism believe that desirable results can be attained, and harming others is
universally and always bad and should be avoided (Swaidan et al. 2004). Relativists, on the other
hand, assume that moral rules are relative to the society and culture in which they occur
(Schlenker and Forsyth 1977). Thus, moral relativists do not accept universal moral rules and
codes in making ethical decisions.
Forsyth (1980, 1992 developed an instrument, the Ethics Position Questionnaire (EPQ), to
measure these two dimensions of personal moral philosophy. Using the EPQ, empirical research,
in general, has produced consistent results suggesting that moral idealism has a significant
positive relationship with ethical decision making, and moral relativism has a significant
negative relationship with ethical decision making (Craft 2013; O’Fallon and Butterfield 2005).
Based on the above, this study hypothesizes:
H1e
Idealism is positively related to ethical recognition, judgment and intention.
H1f
Relativism is negatively related to ethical recognition, judgment and intention

Concepts in ethical psychology

The four ethical principles in psychological research are BENEFICENCE,
NONMALEFICENCE, AUTONOMY, AND JUSTICE. Beneficence means that the researcher
is working for the benefit of the person or the field of psychology. Nonmaleficence refers
to "do no harm" and making sure to minimize the risks to the participant.

Ethical awareness

Ethical awareness is the eagerness and ability to designate moral situations and
dilemmas; critically analyze, evaluate, and additionally change one’s own moral esteems;
and look up the effects of one’s own attitude for the lives of others. All sizes of enterprises
must be conscious of the ethical implications of their way of acting. Ethical awareness
begins with watchful thinking to guarantee an enterprise’s activities are morally right.

A person is ethically aware if he/she realizes that a problem he/she experiences

incorporates an ethical problem [1]. A person can make right and moral decisions only if
that person is aware of an ethical problem. Additionally, that person can identify the
potential effects of a problem on the benefits, desires, and welfare of all related parties
[8].

Most of the people think acting ethically is its personal reward, however, an enterprise
likely consumes monetary motivations too. Unethical behaviors may spoil the position,
reputation, and relations of an employee. Moreover, it may damage an enterprise’s image,
which will end up with losing current and potential customers. Indorsing ethical
awareness among employees stops issues from developing in any way.