UNIT4

Ethical Practices
Ethics and Crisis Management

Contents
Ethics in Management ............................................................................................................................ 2
10 Ethical Behaviours ......................................................................................................................... 2
Benefits of Ethics in Management ..................................................................................................... 4
CSR (Corporate Social Responsibility) .................................................................................................... 5
Types of CSR........................................................................................................................................ 5
Benefits of CSR ................................................................................................................................... 6
Crisis Management ................................................................................................................................. 7
Types of Crises .................................................................................................................................... 7
Causes of Crises .................................................................................................................................. 8
Crisis Management Plan..................................................................................................................... 9
Ethics in Management
Ethics in management refers to a company’s social responsiveness. It is ‘the discipline that
deals with what is good and evil, or right and wrong, or moral responsibility and duty.’
In other words, ethics in management can be defined as a set of moral principles. Principles
that govern the actions of a person or a group. It is a norm of behaviour that guides leaders
and managers in their day-to-day actions. Company core values shape business ethics. And
the establishment of an ethical culture relies on leadership. It is particularly true of leaders
who display integrity, unity, and respect.

10 Ethical Behaviours

Here are 10 behaviors that outline ethics in management:

1. Honesty
In all their dealings, ethical executives are honest and truthful. They do not purposely
mislead or deceive others by partial truths, selective omissions, or any other means.
2. Integrity
Ethical executives show personal honesty and courage. They are principled, trustworthy and
upright. They fight for what is correct. Lastly, they will not betray morality or be duplicates.
3. Trustworthiness
Ethical executives are worthy of faith. They make every fair effort to fulfil the letter and spirit
of their promises and commitments.
4. Fairness
Ethical people show a commitment to fairness. They treat people equally with tolerance and
acceptance of diversity.
5. Kindness
Ethical executives are loving, compassionate, generous and kind. They help those in need
and aim to meet their business goals with the least damage.
6. Respect
They treat all people, regardless of sex, race or national origin, with equal respect and
dignity.
7. Lawful
Ethical managers follow rules and regulations in their company operations.
8. Excellence
In conducting their duties, ethical employees seek excellence. They are well-educated and
trained. They actively aspire to improve their competence in all areas.
9. Leadership
Ethical employees strive to be positive role models as leaders. They help to build an
atmosphere in which they are highly respected for principled thinking.
10. Responsible
They consider and accept responsibility for their choices and actions.
Benefits of Ethics in Management

There are a number of clear benefits to managing ethically. These include:

1. It’s a Part of Our Developing Society
Without ethics, kids would still work in factories. 16-hour workdays would remain to be the
norm. And sexism, harassment, and unfair labour practices would still be part of doing
business.
But, change is taking place in our society. New societal and working standards are now being
developed. For all of us, this is wonderful.
2. It Helps Maintain Morale During Tough Times
The code of ethics gives you a tool to make clear choices. It shows what is right and wrong.
When making decisions in times of crisis, this is incredibly helpful.
There is often no robust moral framework during periods of turmoil to direct leaders and
managers. Continuing commitment to workplace ethics constantly stimulates them as to
how they want to behave.

3. It Supports Employee Growth

A firm evaluated several managers and executives on a series of tests. It had one most
significant finding. The more mentally healthy employees, the more they score high on
ethics assessments. Bennett explained that in his article Unethical Conduct, Stress Appear
Linked.
Ethics allows workers in the company to face the facts, both good and bad. They feel like by
operating an ethical operation, they contribute to society in a meaningful way. This sense of
obligation brings meaning and context to what they do daily.
4. It Improves Productivity
When you enforce ethics regularly, your organisation will develop goals and collaboration.
Employees who feel aligned with the company’s ethics, respond with utmost dedication.
5. It Promotes Goodwill
Ethics help in cultivating a positive image for your company. The informed public of today is
doing more research and watching more closely. The customers check how corporations
treat them, and if they really ‘walk the talk.’
CSR (Corporate Social Responsibility)

Corporate social responsibility (CSR) is a self-regulating business model that helps a company
be socially accountable to itself, its stakeholders, and the public.
By practicing corporate social responsibility, also called corporate citizenship, companies are
aware of how they impact aspects of society, including economic, social, and environmental.
Engaging in CSR means a company operates in ways that enhance society and the
environment instead of contributing negatively to them.

Types of CSR

• Environmental responsibility: Corporate social responsibility is rooted in preserving

the environment. A company can pursue environmental stewardship by reducing
pollution and emissions in manufacturing, recycling materials, replenishing natural
resources like trees, or creating product lines consistent with CSR.
• Ethical responsibility: Corporate social responsibility includes acting fairly and
ethically. Instances of ethical responsibility include fair treatment of
all customers regardless of age, race, culture, or sexual orientation, favorable pay and
benefits for employees, vendor use across demographics, full disclosures, and
transparency for investors.
• Philanthropic responsibility: CSR requires a company to contribute to society,
whether a company donates profit to charities, enters into transactions only with
suppliers or vendors that align with the company philanthropically, supports
employee philanthropic endeavors, or sponsors fundraising events.
• Financial responsibility: A company might make plans to be more environmentally,
ethically, and philanthropically focused, however, it must back these plans through
financial investments in programs, donations, or product research including research
and development for products that encourage sustainability, creating a diverse
workforce, or implementing DEI, social awareness, or environmental initiatives.
Benefits of CSR

According to a study published in the Journal of Consumer Psychology, consumers are more
likely to act favorably toward a company that has acted to benefit its customers.
1. As a company engages in CSR, it is more likely to receive favorable brand recognition.
Additionally, workers are more likely to stay with a company they believe in. This
reduces employee turnover, disgruntled workers, and the total cost of a new
employee.
For companies looking to outperform the market, enacting CSR strategies may improve how
investors view the company's value. The Boston Consulting Group found that companies
considered leaders in environmental, social, or governance matters had an
11% valuation premium over their competitors.

2. CSR practices help companies mitigate risk by avoiding troubling situations. This
includes preventing adverse activities such as discrimination against employee
groups, disregard for natural resources, unethical use of company funds, and activity
that leads to lawsuits, and litigation.
Crisis Management

Crisis management refers to the identification of a threat to an organization and its

stakeholders in order to mount an effective response to it.
Due to the unpredictability of global events, many modern organizations attempt to identify
potential crises before they occur in order to sketch out plans to deal with them. When and
if a crisis occurs, the organization must be able to drastically change course in order to
survive.
Crisis management involves dealing with crises in a manner that minimizes damage and
enables the affected organization to recover quickly. Dealing properly with a crisis can be
especially important for a company’s public relations. Crises come in several forms, and it is
recommended that a company be prepared ahead of time with a crisis management plan.

Types of Crises
There are several types of crises that need critical attention, with crisis management in
mind:
1. Accidental Disasters
Accidental disasters are those that happen unintentionally by human cause. Fire is one
example of accidental disasters that can affect the workforce and leave a lot of damage to
the entire organization. Especially in fields such as mining and construction, that involve
physical labor and operation of large machinery, drastic accidents that can happen to the
workforce in the performance of their duties can lead to serious consequences.
2. Natural Disasters
Natural disasters are generally environmental crises that are beyond human ability to
prevent. Earthquakes, tornadoes, and floods are examples of natural disasters.
3. Technology Disasters
A majority of undertakings in an organization involve technology in one way or another. In
some cases, a slight disruption in a company’s technology structure can cause all operations
to come to a standstill. Some technology crises can happen accidentally, while others can be
maliciously caused. Under technology disasters, you will find examples such as:
• Malevolence crisis – Criminal technology attack by opponents; hostile employees
with malicious intentions of destabilizing the organization
• Cybercrime crisis – Intentional theft crime by technology
• Critical virus attacks – Accidental or maliciously infected
4. Conflict of Interest Crisis
A crisis involving a conflict of interest can be very tricky to manage, as it involves political
factors. It does not provide a particular step-by-step guide, as such crises tend to be unique
in nature each time they occur. However, that does not mean that there are no best
practices and strategies that can be implemented. Some events that would fall under a
conflict of interest crisis are:
• Rumors – False news regarding an organization and its products. An example is
spreading rumors that a certain organization’s products are contaminated or
defective. Bad news travels fast and once such a rumor is started, intensive public
relations strategies may need to be implemented to calm the fire. Such a rumor can
destroy an organization completely. So, in these cases, companies can spend
considerable sums to keep their image clean.
• Product tampering – Opponents can buy products of a rival company in volume,
tamper with them and then release them into the market. This kind of strategy
happens between business rivals who are malicious. One example of product
tampering happened to Pepsi Corporation in 1993 when there were claims of
syringes found in Diet Pepsi cans. After a thorough investigation and arrests of
culprits, Pepsi Corporation had to undertake an intense campaign to restore the
public’s confidence in the company.
• Headhunting – Poaching of top executives or senior management staff can happen
between companies that are neck-to-neck in competition. Business rivalry is the
major reason for this kind of crisis.

Causes of Crises

The process used in tackling the crisis can depend on how a particular emergency
arises. There are two primary ways a disaster can arise – a sudden crisis or a
smoldering crisis.
1. Sudden Crisis
Sudden crises are uncontrollable. They happen and catch the
organization’s stakeholders off guard. The best examples of sudden crises are natural
disasters that occur unexpectedly and without warning.
2. Smoldering Crisis
Just like a smoldering fire, smoldering crises start slowly and quietly with a few to no
signals at all. They move in phases, and each stage must be contained and tackled in
time before it develops into a greater crisis and eventually evolves into a major
disaster. An illustration of such crises is that of toxic work behavior that eventually
leads to turning the whole company culture sour.
Crisis Management Plan

To counter any looming crisis, a proper process and plan must be used for effective crisis
management. A crisis management plan is a documented outline of a process to follow for
an organization to respond effectively to a crisis.
Crisis management planning will focus mainly on building infrastructures that help the
company nullify possible risks and how to respond to crises. It also involves the
organization’s workforce and the crisis management team in testing the methods and having
regular internal training on the processes.
The following guidelines are recommended for establishing good crisis management plans:
• Identify an individual from your workforce to take over the crisis management role as
a manager. Or, you can employ a professional crisis manager who can help you in
planning crisis management processes.
• Initiate frequent training and refresher courses on handling crises. Drills and practice
operations must frequently take place to keep refreshing stakeholders on emergency
responses to crises.
• Form a crisis team to work under the leadership of a crisis manager. When a crisis
occurs, this is the team that should be able to respond quickly. A veteran of several
training sessions and drills for such occurrences, it is expected to be on the frontline
in directing other stakeholders on what to do and where to assemble to avoid further
damage.
• Initiate systems that can effectively monitor or detect foreseeable crises signals early
enough in order to tackle the situation before it gets out of hand. Examples of such
systems are smoke detectors that can detect potential fire long before it gets out of
hand.
• Provide a list of key persons in case of a crisis and their contact information. The
contact information must be displayed where anyone can see it and easily access
them.
• Identify the ground person to be notified immediately when a crisis occurs. Apart
from a crisis manager, there must be a coordinating person among employees who
possesses first-hand news on a looming crisis. This should be a person who can be
trusted by his colleagues with vital information during any suspected crisis.
• Identify a central point where employees can assemble and the exit points to use in
case of a crisis. Emergency exit doors with ease of opening them must be labeled
well and an emergency central gathering place identified and properly labeled as
well.
• Regular testing of the crisis management process and emergency equipment and
updating them frequently or as needed.