Business Ethics & Social Responsibility in the Context of Human Resource Management

The fundamental aim of any business can be expressed as “maximizing profit for the shareholders.” There are several ways of achieving that. However, those goals and targets should be reached through widely accepted moral norms within the society including adherence to Laws governing business conduct, and employ fair trading to achieve the goals of the business through legitimate and just means. It is also about doing what is right and refrain from doing what is wrong in carrying business activities. Although some aspects of business ethics differ from society to society due to different laws governing different societies, the broader aspects of Business Ethics are still the same across all the societies in general.

Some examples of Business ethics are conflicts of interest issues, corrupted and fraudulent procurement practices, abuse of confidential and critical business intelligence information, deliberate ignorance of applicable laws, ignoring responsibilities towards the employer and ignoring the rights of the employees and adjusting financial information (accounting fraud) to deliberately gain financial benefits.

An HR Manager has an organizational responsibility to formulate to corporate policies dictating the different aspects of Business Ethics and communicate them to the employees. These guidelines need to be available and need to be signed by employees where applicable so that penalties and applicable repercussions are carried out properly in cases where non-compliance warrants such actions. In addition, the HR Manager should also ensure that new employees are made aware of those policies governing business ethics and conduct orientation and induction in such a way that corporate philosophy on Business Ethics are highlighted in the early stages of an employee’s career. The commitment of the management to adherence to those guidelines should be communicated in tangible terms reinforce the behavior required by those policies.

An American Company, Enron Corporation based in Houston, Texas has become a popular symbol of unethical business practices. The company was declared bankrupt and many senior executives were investigated and indicted for deliberate and substantial alteration of financial accounts to grow stock prices, keeping critical investment grade credit ratings. Although Enron Corporation was named by Forbes Magazine in “100 Best Companies to Work For” in 2000, their fraudulent activities were exposed the following year which eventually led to bankruptcy. At the end, shareholders lost almost $11 Billion when the share prices dropped to as low as $1. Many Enron Executives are still serving prison sentences for their role in the scandal.

Although the goal of any business is to maximize profit for the shareholders, a business cannot be treated as an individual entity. Organizations carry business activities with the society and get its revenue from members of the society. For any business to thrive, the society (company’s customer base) needs to thrive. For that reason, business organizations have a social responsibility to invest back in the society through carefully formulated initiatives that will benefit both parties in the long run. To do this, corporate social responsibility (CSR) values need to be instilled throughout the organizational hierarchy of the business. An HR Manager plays an important role in embedding CSR Values in the corporate culture, presenting itself as an excellent employer, caring for the employees, in turn, producing a work force that takes the CSR seriously. This is a win-win situation for all parties involved.

Different HR Functions and Policies form a framework for instilling CSR values in carrying out business management and achieving business goals incorporating socially responsible culture and attitudes in the work force. In this context, HR Manager plays the role of coordinating CSR activities in getting employee relationships right and establish effective relationships with external stakeholders.

Through these policies and Functions, HR department also keeps the workforce engaged in sustainable development practices involving employees. Many organizations encourage their workforce (including the top management) to volunteer for social events and even actively participate in the fundraising programs. Such programs are not only provide critically important socially responsible investment in the society and support the local communities, but also proved to be strong motivational exercises to build positive teams spirit, improving staff retention levels and satisfactions.

All organizational practices should focus on sustainable practices. Gross negligence may cause irrecoverable damage to the organization’s image and the society with which the organization engage with for their survival. One such case is the “Deepwater Horizon Oil Spill” involving British Petroleum (BP) in the Gulf of Mexico, devastating the ecosystem and destroying marine and wildlife habitats. This is widely regarded as the largest accidental marine oil spill in the history. The level of environmentally conscious safety standards is surprisingly low within the ranks of BP which led to the disaster. BP admitted their mistake later on, after the US investigation and had to spend a hefty sum on cleaning up the mess it created, but overall impact on the ecology and the industries in the area remains devastated.