In any business organization, ethics is of the utmost importance.
Business ethics is what helps members of an organization – from c-suite and executive level players to entry-level employees – determine whether an action is positive or negative for the employer.
But unethical managerial behavior is an issue that can irreparably harm an organization, both internally and externally. Whether someone decides to manage unethically because of performance pressure or a lack of ethical training, it’s vital to remember that building long-term customer trust and increasing positive reviews provide a better roadmap to success than taking shortcuts.
Which are the drivers of unethical managerial behavior?
Everyone has a reason for doing what they do, and unethical business practices are often perpetrated for some type of personal gain.
Some of the drivers of unethical managerial behavior include:
Pressure to Meet Unrealistic Goals
When you’re working in a high-pressure environment, ethical compromises can become easier to stomach. However, once you give into this pressure, you put yourself and your company at risk. A prime example of this happened to Wells Fargo in 2020 when they agreed to pay a $3 billion settlement for setting up fake accounts.
Lack of Ethical Leadership
Ethical behavior comes from the top, as do unethical practices. Take, for instance, the Enron collapse in 2001. Rather than building their company the right way, members of leadership chose to inflate earnings via accounting tricks. Although it worked for a while, Enron was always going to get caught due to a lack of ethical leadership.
Weak Corporate Governance
Many people claim that ignorance is bliss, but the Theranos board proved this isn’t always true. By not challenging their CEO, the Theranos board failed to provide adequate oversight. Even worse, because the board was made up of the CEO’s close friends, there was also a complete lack of independent voices.
Competitive and Market Pressures
Remaining competitive is difficult, and some companies may give into unethical management techniques. This is highlighted by Volkswagen’s emissions scandal. Dubbed ‘Dieselgate’ by the media, this scandal temporarily covered up the fact that many Volkswagen vehicles were emitting significantly more carbon emissions than the public was led to believe.
Conflicts of Interest
What happens if your company gives a big contract to another company you have ties to? In almost every single case, this introduces a major conflict of interest. Consider, for example, how Martha Stewart’s insider trading case landed her in prison. Stewart was accused of using insider knowledge to save herself more than $45,000.
Lack of Clear Policies and Training
Misconduct is much less likely to occur at companies that place an emphasis on providing ethical training practices. After all, training makes it easier to identify ethical dilemmas, and it also helps set your business up to prioritize ethical behavior. Additionally, having clear policies in place is another deterrent to unethical behavior.
The Categories of Managerial Morality Include:
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- Moral Managers – These individuals prioritize good ethics and truly care about doing the right thing.
- Amoral Managers – Amoral managers indifferent to ethical concerns, which means they may undertake unethical behavior from time to time.
- Immoral Managers – These managers willfully engage in unethical behavior and are may even ask you to break the law for the company.
Why Do Some Businesses Behave Unethically?
When certain psychological and organizational reasons come together, they can explain why some companies tend to make unethical decisions. Psychologically speaking, people can be influenced by pressure to perform, a sense of entitlement, or their own self-interest.
From a company standpoint, you might be facing moral disengagement, a feeling of omnipotence, or conformity bias. Speaking of which, conformity bias is when someone wants to fit in, even in the face of doing something wrong. Cognitive dissonance is another major reason, which involves rationalizing unethical actions to make them seem not so bad.
How Businesses Can Prevent Unethical Behavior
One of your first lines of defense against unethical behavior should be implementing unimpeachable corporate ethics policies. In other words, don’t provide any wiggle room in your policies, and fewer people will behave unethically.
It’s also a wise idea to actually encourage whistleblower protection. Many companies tend to view whistleblowers as a bad thing, but they exist to ensure that each business will act in an ethical way. If that’s your intention anyway, then why not protect whistleblowers instead?
Finally, be prepared to provide leadership training on the topic of ethics, along with strong governance. By holding people accountable for their actions, you can drastically reduce your odds of having an ethics scandal.
Always Engage Others in an Ethical Manner
As you can see, there are many upsides to running an ethical business, not the least of which is avoiding potential prison time. Now that you’ve learned about the many factors that can contribute to unethical behavior, you should be in a better position to steer your company away from it.
Remember to steer clear of weak corporate governance and conflicts of interest. Utilize advanced interviewing techniques to help weed out immoral and amoral managers. It’s also vitally important that your organization has corporate responsibility and proper leadership training. Without this, one rogue employee could land your company in a lot of trouble.
Ethical business practices are the best way to maintain trust and integrity. One such practice is ensuring your team has comfortable office furniture. Here at Saraval we put forth tremendous effort to make sure we uphold a stellar reputation with both outstanding ethical practices and customer service. Turn to Saraval Industries for all your furniture needs!
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What to Do With Unethical Managerial Behavior
Perhaps the most important step to dealing with unethical managerial behavior is determining the damage done.
By understanding the impact of an instance of unethical managerial behavior, you can better understand the solution.
Financial Impact – Did the manager’s unethical actions cause financial impact to the business? If there was money stolen, then employers are often required to terminate the employee and report them to the authorities.
Moral Impact – Did the manager’s unethical actions cause a loss of moral in your employees? If valuable employees experienced punishment or a loss of bonuses and rewards for their hard work, they may decide to move to another organization.
The loss of valuable employees cannot be misunderstood. Managers are entrusted with not only maintaining productivity and profit goals – good managers are leaders, and good leaders improve on the investment your organization puts into the best employees.
Productivity Impact – Did the manager’s unethical actions cause a loss in productivity to your organization? This type of loss can impact profit directly, and employee moral indirectly.
Was Your Manager Breaking the Law?
Along with organizational impacts such as profit, moral, and productivity, the question of whether a manager broke the law while engaging in their unethical business practices is of utmost concern.
If a manager broke the law, it is a top responsibility of his superiors to use the necessary channels to report them. By not reporting a lawbreaking manager, the employer risks potentially being culpable in the eyes of the law.
How Valuable Is Your Manager?
In all business decisions, good leaders will add up all factors. Whether the law was broken and the level of organizational damage are both important considerations.
In some cases – like breaking the law – there is no way to retain a manager after unethical business practices. Those situations are out of the hands of their superiors.
But, unethical business practices can be a learning opportunity, especially if it will retain a specific benefit presented by the manager.
This is a last-ditch effort, and should only be considered in extreme cases. It should also be only considered in cases where a new or repaired relationship between the manager and other employees is possible – this is not always the case.
Regardless of whether or not you choose to retain a manager who engaged in unethical business practices, the choice you make is one that should be honest, thorough, and inclusive of as much evidence and insight as possible.
Some organizations hold focus groups with impacted employees to better understand what a work environment might look like.
For instance, in nearly all cases of sexual misconduct, a victimized employee might never feel comfortable working with a manager ever again. This is an important factor not only ethically, but legally. Failure to act on sexual misconduct charges on the part of employers is a common organizational legal battle in these types of cases.
Think Like A Good Leader
Above all, good leaders need to do what is right – for their organization, their employees, and the communities their organization serves.
Taking a hard look at what stakeholders are involved will guide any good leader in the right direction.
Common categories of stakeholders a good leader will consider in a situation of unethical managerial behavior include:
- Victims
- Communities (both local and international)
- Investors
- Vendors
- Media
- Customers
- Potential Customers
- Current and Future Markets