THR Critical Failure of Workplace Ethics
THR Critical Failure of Workplace Ethics
THR Critical Failure of Workplace Ethics
EDITED BY
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ii
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CONTENTS
PREFACE AND OVERVIEW ...................................................................... v
John W. Budd and James G. Scoville
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v
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tions topics. Readers will be reassured to know that Delaney does not
address the oft-beaten horse: is it ethical to bluff in bargaining? Instead,
he addresses a number of more ethically serious issues related to
employee voice, freedom of association, employer opposition to unions,
the rights of strikers and nonstrikers, exclusive representation, and
minority dissenters in majority-rule environments. Delaney’s chapter
explicitly reinforces an important theme that underlies the entire volume—
different ethical theories frequently lead to different evaluations of
HRIR practices, but it is better to confront these ethical debates directly
than to suppress them. In other words, ethical analysis is not a magic
bullet that solves longstanding conflicts, but such analyses can help us
better understand the complex world of HRIR.
Section III of the volume focuses on ethics in practice. Chapter 9 by
Jonathan Booth, Ronald Heinz, and Michael Howe presents a firsthand
examination of key ethical issues in Allina Health System, a $2-billion
health care system with more than 22,000 employees. In parallel fashion,
chapter 10 by Linda Ewing presents a firsthand examination of key ethi-
cal issues in the United Auto Workers. While the authors recognize
some challenges and limitations, these corporate and union case studies
ultimately conclude that explicit ethical expectations—such as Allina’s
published values and the UAW’s published Ethical Practices Codes—can
positively shape individual action within organizations.
The final chapter by Gordon Lafer provocatively argues from a much
more critical perspective that “business ethics” (and its subcomponent,
“HRIR ethics”) is necessarily an oxymoron in a capitalist world. If ethical
behavior is costless, then it is meaningless; when a conflict arises
between ethics and profits, then profits win. Ewing’s chapter on the
United Auto Workers is not a clear refutation of Lafer’s stance, since
unions do not subscribe to the profit orientation of a corporation. Booth,
Heinz, and Howe’s study of Allina Health System possibly comes closer
to being the answer. Allina is a nonprofit organization, but the need to
compete in the market for health care means that controlling costs is a
constant consideration. In Allina’s case, we see some cases where
improved ethical approaches and standards—for example, moving from
a punitive system to a more positive approach to dealing with medical
mistakes—may yield returns to all. But the broad concern advanced by
Lafer with squaring ethical considerations with the profit motive still
lurks in the shadows. Lafer’s closing chapter therefore serves as a sharp
reminder that ethical issues in the employment relationship are complex
and rich with competing perspectives.
In our view, issues of ethics in HRIR have been overlooked for far
too long. These 11 chapters demonstrate that wide-ranging HRIR
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Acknowledgments
For their help and sacrifices in this endeavor, we are greatly
indebted to the authors—without whom this volume would obviously
not exist, and all of whom produced excellent chapters while meeting
our deadlines in the face of their many other commitments—and to our
families. We want to extend a particular note of thanks to Linda Ewing,
Ron Heinz, and Mike Howe (the labor and management professionals
who authored chapters 9 and 10), who took time from the demands of
their professional lives to candidly share their real-world experiences. If
dialogue on the ethics of human resources and industrial relations
results, we trust all of the contributors will agree that it has been well
worth it.
John W. Budd and James G. Scoville
Minneapolis, Minnesota
February 2005
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CHAPTER 1
JAMES G. SCOVILLE
University of Minnesota
(chapter 2), employee participation (chapter 3), gender issues (chapter 4),
international labor standards (chapter 5), employee monitoring (chapter 6),
compensation (chapter 7), strikes (chapter 8), values-based HR decision
making (chapter 9), union representation on corporate boards of direc-
tors (chapter 10), and the profit motive (chapter 11), to name just one
example from each.
Such issues are sometimes explicitly analyzed in ethical terms. Budd
(2004) and Muirhead (2004) root their standards of the employment
relationship in Aristotelian, Kantian, and Rawlsian ethical theories.
Legge (1998, forthcoming) and Schumann (2001) also analyze a selec-
tion of human resource management problems using these and other
ethical theories, while Bowie (1999) focuses on the Kantian implications
for contemporary employment practices. Provis (2000) explores the ethi-
cal implications of deceptive labor negotiations, and a number of human
resource management issues are analyzed in Winstanley and Woodall
(2000). But echoing the findings of some of these authors (e.g., Winstan-
ley and Woodall 2000; Schumann 2001; Budd 2004), we note that schol-
arship on ethics in HRIR is rare. This is unfortunate.
The lack of attention paid to ethics in HRIR scholarship stems par-
tially from the liberal market ethos of free choice; recall the quote from
Ryan (1912:5) at the start of the preface that an employment outcome is
typically perceived as fair if “it is free and made under rule of competi-
tion.” This deeply ingrained belief that “impersonal market forces . . .
produce efficient and equitable results” undermines the importance of
ethical analysis and has created a “moral vacuum” with respect to
employment issues (Osterman et al. 2001:12). The problem is that this
emphasis on free choice is not ethics-free; rather, it reflects a specific
ethical theory.
One might also be tempted to argue that work is required for survival—
“a necessary response to nature’s stinginess” (Muirhead 2004:4). If work
is natural or in some sense preordained, then there is little basis for dis-
cussing the ethical aspects of work. But this is overly simplistic. “Work of
some sort is necessary for survival, but modern employment—working
for someone else in a limited-liability corporation—was created by soci-
ety to serve human and social ends” (Budd 2004:33). “Work may be nec-
essary, but our organization of it is not; as such it invites evaluation and
justification” (Muirhead 2004:6). The modern employment relationship
should clearly be open to ethical analysis and debate.
In academia, the moral vacuum surrounding employment issues is
reinforced by the allure of value-free scientific analysis. But employ-
ment research is implicitly shaped by our underlying values. Research
that focuses exclusively on whether outcomes are efficient, or whether
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TABLE 1
The Society for Human Resource Management (SHRM) Code of Ethics
The Six Core Principles of the SHRM Code of Ethical and Professional Standards in
Human Resource Management
• Professional responsibility: As HR professionals, we are responsible for adding
value to the organizations we serve and contributing to the ethical success of those
organizations. We accept professional responsibility for our individual decisions and
actions. We are also advocates for the profession by engaging in activities that
enhance its credibility and value.
• Professional development: As professionals we must strive to meet the highest stan-
dards of competence and commit to strengthen our competencies on a continuous
basis.
• Ethical leadership: HR professionals are expected to exhibit individual leadership
as a role model for maintaining the highest standards of ethical conduct.
• Fairness and justice: As human resource professionals, we are ethically responsible
for promoting and fostering fairness and justice for all employees and their organi-
zations.
• Conflicts of interest: As HR professionals, we must maintain a high level of trust
with our stakeholders. We must protect the interests of our stakeholders as well as
our professional integrity and should not engage in activities that create actual,
apparent, or potential conflicts of interest.
• Use of information: HR professionals consider and protect the rights of individuals,
especially in the acquisition and dissemination of information, while ensuring truth-
ful communications and facilitating informed decision making.
Kantian Duty
The most important contrast to utilitarianism is the ethics of duty, in
which normative judgments are based on the character of the action, not
on its consequences. Most literally, people have a duty to act in certain
ways, for example, not to lie, even if it does not produce the best out-
come. The ethics of duty is rooted in Immanuel Kant’s categorical
imperative “Act only on that maxim by which you can at the same time
will that it should become a universal law,” which in turn is rooted in the
belief that humans are rational beings capable of self-determination and
self-governance (Bowie 1999). Every responsible person is therefore
entitled to dignity and respect.
A common example in business ethics is employment discrimination—
discriminatory treatment for arbitrary reasons violates the equal sanctity of
all human life. Treating someone only as a means—for example, to
increase your own or even aggregate wealth or utility—violates the intrin-
sic value and sanctity of human life. To fire a union supporter because you
are afraid a union will increase wages and lower profits treats a worker as a
means and is unethical. We therefore have a duty not to act in such ways.
Kantian moral philosophy has other far-ranging and rich applications to
HRIR ethics and is the focus of chapter 3 in this volume.
Kantian moral philosophy is not without its critics. Common, if over-
simplified and inaccurate (Korsgaard 1996), criticisms of Kantian ethics
attack the emphasis on universal, unwavering, rational rules for ignoring
virtues and the meaning of a good person in everyday life (Solomon
1992). Scenarios like protecting an innocent person by lying are also used
10
TABLE 2
LERA05.chap01.qxd
Six Western Ethical Frameworks for Human Resources and Industrial Relations
Ethical framework
(founders) Central element Unethical actions HRIR applications
8/1/05
Utility Welfare or utility maximization through Inefficient or welfare-reducing Using HR policies solely to enhance
(Jeremy Bentham, cost-benefit analysis behavior efficiency; “union-free” strategies based on
John Stuart Mill) a cost-benefit analysis
Liberty Negative right of freedom and liberty Forcing individuals to use themselves or Employer participation in the union
10:20 AM
(John Locke) from noninterference through their property against their will organizing process because of an
strong property rights (including taxation for redistribution) employer’s rights of private property and
free speech
Duty Respect for human dignity through Treating others in ways you would not HR policies and labor standards based on
(Immanuel Kant) the Kantian categorical imperative want to be treated; treating people only employees as human beings and not
Page 10
Virtue Moral character to achieve flourishing Actions contrary to virtues (vices), HR policies based on excellence, integrity,
(Aristotle) through virtues and community which prevent flourishing and personal growth
Care Nurturing personal relationships through Failing to develop special relationships; Union initiatives to organize workers by
(Carol Gilligan) caring for people relationships based on exploitation, developing special relationships with the
disrespect, or injustice workers, especially in female-dominated
occupations
Source: Adapted from Table 4.1 in Budd (2004:68) and Box 3.4 in Budd (2005a:77).
THE ETHICS OF HUMAN RESOURCES AND INDUSTRIAL RELATIONS
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Rawlsian Fairness
John Rawls (1971) famously augmented the Kantian standard of
inherent human equality with concern for the distribution of outcomes
and thereby developed an ethical theory of distributive justice or fair-
ness. Rawlsian justice is based on a veil of ignorance: individuals must
determine the principles of justice behind a veil of ignorance in which
they do not know their own characteristics (such as race, gender, social
status, and abilities). Rawls (1971:83, 250) asserts that under such condi-
tions, rational, self-interested, and equal individuals will agree to the fol-
lowing (ignoring intergenerational concerns):
1. Each person is to have an equal right to the most extensive total
system of equal basic liberties compatible with a similar system of
liberty for all.
2. Social and economic inequalities are to be arranged so that they are
both:
a. to the greatest benefit of the least advantaged, and
b. attached to offices and positions open to all under conditions of
fair equality of opportunity.
Principle 1 is the highest priority. This liberty principle includes private
property rights, the right to vote, freedom of speech, and freedom from
oppression and arbitrary seizure. Principle 2a is the difference principle,
which allows inequalities in outcomes if these inequalities benefit the least-
well-off members of society. Principle 2b requires equal opportunity—
differential outcomes are acceptable only if they reflect legitimate differences
in ability and effort, not arbitrary or discriminatory factors.
The ethical theory of Rawlsian fairness is very significant for HRIR
ethics because it raises the importance of social justice and the nature of
work (Budd 2004; Muirhead 2004). The veil of ignorance means that
“what counts for the justice of work is not the actual consent we give
when we take a job, but the consent we would give under ideal circum-
stances” (Muirhead 2004:31, emphasis in original). Individuals are
unlikely to agree from behind the veil of ignorance to hierarchical,
authoritarian workplaces, sweatshop working conditions, work that is not
meaningful, and other elements of the modern employment relationship
(unless the alternatives are even worse); hence such practices are difficult
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Aristotelian Virtue
Utilitarianism, libertarianism, Kantian ethics, and Rawlsian ethics
rely on outcomes, rights, and duties; missing is a concern with virtue and
character (Solomon 1992). Tracing all the way back to Aristotle, the
ethics of virtue emphasizes the type of person each individual ought to
be—virtues are the characteristics that make a person a good human
being and are necessary to live a good life as part of, and in service to, a
social community (in Aristotle’s lexicon, to flourish). Important virtues
highlighted by Aristotle include courage, temperance, generosity, friend-
liness, truthfulness, and proportionality. This is not an ethical framework
of atomistic individuals, and contemporary definitions of virtues echo
this importance of community and interaction.
In the context of business ethics, virtue ethics sees corporations as
human communities with a vital sense of purpose that both contribute to
and have responsibilities in the larger social community. A corporation
should be a collection of mutually dependent individuals in which indi-
vidual excellence and virtues play a role in community success. Con-
tributing to the community via the provision of quality goods and
services will result in profits if done well, but a blind focus on profits
should not be the sole driving force: profit is “a means of encouraging
and rewarding hard work and investment, building a better business,
and serving society better,” not “an end in itself” (Solomon 1992:47).
Industrial relations scholars might recall that John R. Commons
emphasized forbearance and the interdependence of individuals’ utility
functions (Kaufman 2003). Forbearance is essentially an amalgamation
of Aristotelian virtues, so it should not be surprising that the Aristotelian
emphasis on social purpose and interdependence is consistent with
Commons’s critique of neoclassical economics and its emphasis on prof-
its and individual self-interest. Aristotelian justice also includes a central
industrial relations belief: might does not make right (Solomon 1992).
More generally, virtue ethics implies that employment should be charac-
terized by cooperation, integrity, honesty, fairness, and tolerance. Work
should fit with individuals so as to promote flourishing and self-develop-
ment (Muirhead 2004).
Feminist Caring
Carol Gilligan (1982:79) asserts that the feminine voice consists of
“defining the self and proclaiming its worth on the ability to care for and
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one may with impunity outrage the dignity of man, which God Himself
treats with great reverence, nor impede his course to that level of per-
fection which accords with eternal life in heaven” (§57).
Rerum Novarum therefore explicitly calls for a living wage, a limit on
work hours, health standards, and restrictions on child labor. In Laborem
Exercens (“On Human Work,” 1981), Pope John Paul II also explicitly
affirms the right of workers to a living wage, social insurance, safe work,
and formation of labor unions. In Judaism, “a social justice imperative
appears repeatedly in Talmudic decisions concerning worker rights”
(Perry 1993:1). This yields important standards regarding the payment
of wages, hours of work, and sick and disability pay (Weisfeld 1974;
Perry 1993). Jewish doctrine is also very supportive of labor unions
(Schnall 2001).
Human rights scholarship in employment research (e.g., Gross
1999, 2003; Santoro 2000; Adams 2001; Budd 2004) has also raised the
profile of human rights in the HRIR context. The Judeo-Christian
teachings on work parallel those found in the United Nations’ Univer-
sal Declaration of Human Rights (1948) and the International Labour
Organization’s (ILO) Declaration on Fundamental Principles and
Rights at Work (1998).3 In particular, in the Universal Declaration,
human rights include just and favorable conditions of work, including
pay sufficient for an existence worthy of human dignity, equal pay for
equal work, reasonable working hours, periodic paid holidays, unem-
ployment and disability insurance, and the right to form labor unions.
The eight fundamental ILO conventions specify that freedom of asso-
ciation and collective bargaining, the abolition of forced labor, equal
opportunity and pay, and the elimination of child labor are “fundamen-
tal to the rights of human beings at work.”
Judeo-Christian traditions, the human rights movement, and ethical
theories beyond utilitarianism and libertarianism all “share a universal
interest in addressing the integrity, worth, and dignity of all persons,
and, consequently, the duty toward other people” (Lauren 1998:5). The
common concerns are clearly articulated by principle 4 of the ILO’s
1944 Declaration of Philadelphia: “[A]ll human beings, irrespective of
race, creed or sex, have the right to pursue both their material well-
being and their spiritual development in conditions of freedom and dig-
nity, of economic security and equal opportunity” (International Labour
Organization 1944).
Underlying this inherent dignity are the common beliefs of the
major religions that humans are created in the image of God and the
common beliefs of the intrinsic value and equality of human beings in
diverse writings on natural law, moral philosophy, and political theory.
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does not imply equal validity. Taken to their logical conclusions, subjec-
tivism and relativism prevent condemnation of Nazi Germany’s uncon-
scionable atrocities in the Holocaust, or allow slavery. Moreover,
tolerance is itself an ethical standard—to assert that everyone should be
tolerant of all views, as in the extreme versions of subjectivism and rela-
tivism, is a universalistic view and therefore contradicts the basis of sub-
jectivism and relativism.
Lastly, some alleged cultural differences in ethical standards are
actually differences in implementation (Beauchamp and Bowie 1997).
Consider, as an example, autocratic and high-performance human
resource management systems. At first glance, these two systems appear
to reflect different ethical standards—the autocratic system pays little
attention to how workers are treated while the high-performance one
pays close attention to distributive and procedural justice, employee
voice mechanisms, and other issues. And yet, if both systems are simply
seeking to maximize organizational performance (in particular, if the
high-performance system treats workers with respect only to increase
their performance), then the two in fact share a common ethical frame-
work.5 The differences are not in ethical standards, but in implementa-
tion.
Thus, it is widely accepted that at least some universal ethical stan-
dards exist. There is, of course, significant debate over the content of
these universal standards, but we cannot dismiss these debates out of
hand by falling back on arguments of ethical subjectivism or cultural rel-
ativism. Labor and management may have different ethical systems, but
this does not mean that each is right or that it is futile to try to establish a
societal standard. At the same time, there is value in respecting cultural
diversity because implementation of ethical standards can vary, because
not all issues involve ethical standards, and because there is value in con-
sidering new standards. As in other areas of HRIR, one must strike a
balance, in this case between strict universalism and extreme relativism.
uative responses presented there reflect the six theories in this chapter.
Under utilitarianism, a mandatory-overtime policy is ethically acceptable
if it improves economic efficiency and aggregate welfare. Under libertar-
ianism, it is acceptable because business owners have a right to establish
working conditions as they choose. In a Kantian ethical framework, such
a policy is troubling because it treats workers simply as factors of pro-
duction (as means, not ends). In a Rawlsian framework, the policy is
troubling because some (shareholders) benefit at the expense of others
(workers). In Aristotelian ethics, a mandatory-overtime policy might be
unethical because it doesn’t seem virtuous or consistent with human
flourishing. And in the ethics of care, the policy is troubling because it
doesn’t respect the community and the relationships that have been
established.
Ethical theories describe what should be of fundamental importance
in society and provide a rigorous avenue for evaluating specific HRIR
practices and outcomes. It almost goes without saying that there are dif-
fering views of which ethical standards are best, but the underlying theo-
ries provide the basis for debating these standards. Applying moral
philosophy and business ethics to the employment relationship will not
provide easy answers to the difficult debates in HRIR, but it will help us
more fully identify and evaluate the consequences of alternative policies
and practices.
In addition to being applied for such normative, or prescriptive, eval-
uations, ethical analysis in HRIR should also be used for positive, or ana-
lytical, applications. Natural, social, and behavioral research indicates
that humans “will be inclined, conditionally, toward cooperation with
others, toward concern with how we are viewed by others, toward hostil-
ity to those who fail to reciprocate our cooperation, and toward receptiv-
ity to moral reasoning that is consistent with these and other
propensities.” (Ben-Ner and Putterman 1998:5; also see Frank 2004).
Research has shown that ethics are an important determinant of
behavior (Rest and Narváez 1994). The ethical dimensions of an organi-
zation’s work climate moderate the relationship between ethical judg-
ment and intended behavior (Barnett and Vaicys 2000). Ethical climate
is related to forms of organizational governance and control (Wimbush,
Shepard, and Markham 1997).
Since the human resource management wing of the HRIR field is
rooted to a certain extent in industrial and organizational psychology, it often
emphasizes behavioral determinants of decision making. Since the industrial
relations wing is rooted to a certain extent in economics, it often emphasizes
environmental determinants. An integrated model of decision making
should then pair behavioral with environmental determinants (Kaufman
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Notes
1
In the context of the employment relationship, the terms unitarist and pluralist
are typically attributed to Fox (1974). The unitarist theory of the employment rela-
tionship emphasizes shared interests between employers and employees (as in the
human resources management tradition), the pluralist theory rests on combination of
shared interests and conflicts of interests limited to the employment relationship (as
in mainstream U.S. industrial relations), and critical theories are rooted in broader
assumptions of societal conflicts between labor and capital (or other competing
groups) (as in mainstream British industrial relations) (Budd 2004).
2 This
section draws heavily on Budd (2004, 2005a). Similar, though not identical,
taxonomies of ethical theories for human resource management are developed in
Legge (1998) and Schumann (2001).
3 For more on the ILO Declaration on Fundamental Principles and Rights at
References
Adams, Roy J. 2001. “Choice or Voice? Rethinking American Labor Policy in Light of
the International Human Rights Consensus.” Employee Rights and Employment
Policy Journal, Vol. 5, no. 2, pp. 521–48.
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CHAPTER 2
23
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Slichter, and Richard Ely, and compare their position with that of their
main adversaries—the economists and allies of the classical and neoclas-
sical schools. In places, writers from the personnel management wing of
industrial relations, such as Rockefeller and his industrial relations advi-
sor, William Lyon Mackenzie King, are also introduced to promote an
inclusive and balanced viewpoint.
Institutional economics emerged and grew in America in the first
three decades of the 20th century, although its roots go back to the “new
economics” introduced in America by Ely and others in the mid-1880s.
Many of these men did graduate work in Germany, where opposition to
orthodox economics was intense and dedication to constructing a new
“ethical” type of political economy strong (Koslowski 1995). In addition
to the German historical–social school of economics, the early institu-
tional economists drew inspiration from the British historical/heterodox
school (particularly the work of Sidney and Beatrice Webb), the newly
formed social science disciplines of psychology and sociology, the field of
law and the “legal realist” movement, and the Social Gospel movement
among American Protestants (Fine 1956; Koot 1987; Gonce 1996; Fried
1998). The writings of the early institutionalists spanned a wide variety
of subjects, but none was more important than labor.
The quest for a “new economics” was driven in part by dissatisfaction
with the dominant orthodox school of classical and neoclassical econom-
ics. Consideration of the position of the classical/neoclassical economists
on ethics and the social welfare objectives of economics thus helps to
place the position of the institutionalists in better context. Further
adding value to this discussion is the fact that many of these points of
debate continue to separate modern industrial relations and neoclassical
labor economics.
Perspective on Labor
The discussion now brings us to the subject of labor. In their effort to
establish economics as a science and to develop a general theory of value
and exchange, the classical and early neoclassical writers tended to treat
labor in their writings as no different from other goods and services.
Thus, late-19th-century economist Aaron Chapin states, “If labor and
capital are free, the flow of each under the law of competition towards
an equilibrium is as natural as that of the waters of the ocean under the
action of gravitation” (quoted in Fine 1956:58). Marshall provides a simi-
lar statement: “The normal value of everything, whether it be a particu-
lar kind of labour or capital or anything else, rests, like the keystone of
an arch, balanced in equilibrium between the contending pressures of its
two opposing sides: the forces of demand press on one side, and those of
supply on the other” (1961:526).
Viewing labor as similar to other commodities, and holding that
social welfare is maximized by allowing the laws of supply and demand
free and unfettered play, it was but a short step for the classical and early
neoclassical economists to conclude that the labor market and relations
between capital and labor were also best governed by the doctrine of
laissez-faire. In this vein Perry states,
suit of maximum efficiency, the dominant view held that labor markets
should be free and largely unregulated, workers’ wages and working con-
ditions would automatically rise with economic growth, and devices such
as trade unions and government protective legislation were disruptive to
efficiency and counterproductive to workers’ own economic interests.
While justice and other ethical precepts were formally ruled out of eco-
nomics as unscientific, Clark nonetheless claimed to show that as a
happy by-product of competition and free markets, social justice is
indeed served under capitalism because workers as a group receive the
full value of their contribution to production of wealth. Efficiency could
thus be the principal argument in the classical/neoclassical social welfare
function, but with the assuredness that social justice—or at least one
measure of justice, called by McClelland (1990) “marginal productivity
justice”—was simultaneously served.
The Ethical Principles of Early Institutional Economics
The economic viewpoint just described dominated American eco-
nomics and policy toward labor in the last part of the 19th century. As
can be appreciated, it was largely conservative with respect to existing
institutional arrangements and government involvement in economic
and social life. Arrayed against the orthodox position were various move-
ments and schools of thought that sought to change the status quo,
through either reform or revolution. Their chief complaint and object of
attention of the reformers and revolutionaries was the condition of labor
under capitalism, which they regarded as oppressive and unjust and the
source of much conflict and bitterness in society. They typically referred
to this condition as the Labor Problem (Kaufman 2004a). The Labor
Problem emerged in the 1880s and peaked in intensity in the years dur-
ing and immediately after World War I—the peak being marked in the
popular consciousness by the Bolshevik revolution in Russia in late 1917
and the subsequent Red Scare in the United States in 1918 through
1920. Emblematic of the threatening nature of the Labor Problem is the
statement of Commons that “[i]f there is one issue that will destroy our
civilization, it is this issue of labor and capital” (1919b:1).
General Orientation
The early field of industrial relations was essentially the labor branch
of institutional economics, and both could trace their American roots to
Richard Ely and his book The Labor Movement in America (1886). The
object of Ely and other early institutionalists was to vent the pent-up
steam created by the Labor Problem through progressive reform—a
problem-solving program and ideology that crystallized as the new field
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Ely then ends with this further observation. In it he ties the quest for
human self-development to the attainment of a just and equitable society
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Similar thoughts were voiced by other people from both the institu-
tional economics and business management sides of what became the
field of industrial relations. Representing business management, for
example, William Lyon Mackenzie King (1918) observed that “the path
of Industry is beset with human tragedy, for it is there that too often the
workers are mistaken as means to an end, instead of being regarded as
ends in themselves” (p. 62). Commons (quoted in Gonce 1996) claimed
that the end goal of economic activity should be “[to] gradually develop
all that is highest in every son of man.” Elsewhere Commons stated that
in the neoclassical view, workers are treated “as commodities to be
bought and sold according to demand and supply,” while in the institu-
tional perspective “they are treated as citizens with rights against others
on account of their value to the nation as a whole” (1919a:33). In a simi-
lar vein, Slichter remarked that “it is vitally important that the methods
of production shall be planned not only to turn out goods at low costs
but to provide the kind of jobs which develop the desirable capacities of
the workers” (1931:651–2).
that the social welfare goal of higher efficiency must be balanced by con-
cerns for equity/social justice and opportunities for individual human
self-actualization and self-development. I start with the former.
The central fact about labor, as seen by the institutionalists, is that
unlike other factor inputs (capital, land), it is embodied in human beings
and thus brings to the workplace and labor market a much higher moral
significance. The social interest may well be promoted by having inani-
mate objects such as steel, coal, and computers traded in competitive
markets and their price and conditions of use determined by the imper-
sonal forces of demand, supply, and maximum profit. But from an insti-
tutional point of view, social welfare is likely to be seriously harmed if
labor is utilized and traded in such a manner.
Because coal and computers are inanimate objects, no compelling
social interest exists concerning whether the price they command is high
or low, the working conditions are good or bad, or the treatment by the
owners is sensitive or harsh. Rather, they are used in production as an
instrumental means to an end and have value only to the degree that
they efficiently satisfy the wants of consumers. Labor is different, how-
ever, because a low wage may put workers and their families in dire
poverty—a condition society cannot be indifferent to if it puts value on
human life. Likewise, even if 16-hour workdays and child labor in mills
and factories are efficient outcomes of demand and supply, from an ethi-
cal perspective the hardships these conditions impose on flesh-and-
blood people are an affront to a civilized, progressive society. And,
finally, while it may be efficient to have business owners make unilateral
and unchecked decisions about the treatment of their coal and comput-
ers and how long and under what conditions they are used, to allow the
same with respect to their employees violates widely shared ethical prin-
ciples of justice and democracy. Thus, labor is not only a means to an
end (production of goods and services) but also an end in itself, since the
process and outcomes of work so directly and intimately affect the life
and well-being of the people providing the labor. By similar reasoning,
since people’s well-being in life comes not only from the satisfaction of
consuming more goods and services but also from the experience and
outcomes of work, a public interest rationale exists for a certain degree
of protection and regulation of labor conditions in order to achieve a bal-
ance between the interests of people as consumers and their interests as
workers.
A major impetus for the founding of the “new economics” by Ely and
other early institutionalists was to challenge what they saw as the amoral
and harmful doctrine of “labor as a commodity.” At an intellectual level,
this led them to try to construct a new body of theory to supplant the
LERA05.chap02.qxd 8/1/05 10:21 AM Page 38
then, can be taken as the first and antecedent argument in the institu-
tional social welfare function.
But Commons also stresses that efficiency does not arise automati-
cally from a God-given, Invisible Hand type of competitive market sys-
tem but must be socially constructed by getting people to cooperate in a
world where conflicts of interest are endemic and people, markets, laws,
and property rights are all highly imperfect. In other words, cooperation
is encouraged by “goal alignment” (creating a “harmony of interests”),
and both must be socially engineered. Fundamental to engendering and
maintaining cooperation and social order, in turn, is that the economy’s
“rules of the game” (e.g., laws, distribution of endowments, access to
markets) and “outcomes of the game” (e.g., wages, incomes, job opportu-
nities) be judged by participants as falling within the bounds of “reason-
ableness,” or what Commons (1934a) calls reasonable value. Reasonable
value thus imposes an ethical constraint on the market system—that it
generate not only efficient outcomes but also reasonable outcomes if
participants are to be induced to continue their cooperation and not
rebel against the existing system. Other closely allied terms for “reason-
able” are “just” and “fair.” In modern language (Shepphard, Lewicki, and
Minton 1992), for example, the concept of reasonable rules of the game
goes under the term procedural justice, reasonable outcomes are called
distributive justice, and “reasonable value” may be translated into the
concept of social justice. The second variable in the institutional social
welfare function may thus be specified as equity (justice, reasonable-
ness), introduced in a quasi-lexicographic ordering such that it serves as
both a constraint on the range of socially acceptable efficient outcomes
(efficiency being the antecedent social welfare objective) and as a
higher-order social goal valued for its own sake.
Thus, institutional economics holds as normative propositions that
both the procedural rules and the realized outcomes of the economy
must pass the dual test of efficiency and equity and that efficiency out-
comes that fail the equity test are against the social interest (Budd,
Gomez, and Meltz 2004). In part this is judged to be true because injus-
tice is an affront to basic human rights and universally accepted moral
principles. But inequitable outcomes are also against the social interest
because they produce dysfunctional forms of behavior that undermine
not only efficiency but also the very legitimacy of the economic and
social order. Although neoclassical economic theory, by the nature of its
assumptions, holds that economic efficiency can be separated from eco-
nomic justice (Stiglitz 2001), institutional economics and industrial rela-
tions claim the two are indissolubly connected. The Versailles Peace
Treaty clearly illustrates this principle in its first section: “Whereas the
LERA05.chap02.qxd 8/1/05 10:21 AM Page 42
thus have no bargaining power and, hence, ability to exploit the other.
The institutionalists argued, however, that in reality workers in this time
period often faced a marked inequality of bargaining power and, for this
reason, suffered from exploitative and unjust wages. The law, for exam-
ple, allows investors to combine together and form a corporation and
then treats this amalgamation of capital as a fictitious “legal person” who
then as the “employer” bargains the labor contract with the worker.
While in legal and neoclassical eyes it is a case of an individual employer
competitively bargaining with an individual worker, from an institutional
perspective the bargaining is often quite unequal since in actuality the
employer is a huge corporation that because of its size and resources
needs the worker much less than the individual worker needs the job.
Also, employers used their political power to obtain legislation that per-
mitted unrestricted immigration into the United States. Such a law
greatly expands the supply of labor in the market, shifting the labor–supply
curve to the right and leading to a low wage for workers. Neoclassical
theory, by taking the law as a “given” and focusing only on workers as
individuals, sees an equality of bargaining power and a socially desirable
competitive wage; institutional theory on the other hand looks at the
effect of the law on labor as a group (or class) and sees that unrestricted
immigration greatly undercuts labor’s bargaining power and thus forces
down the wage to a socially undesirable “cutthroat” or “distress sale”
level. With these results in mind, Commons and Andrews ([1916]
1936:532) declare, “Thus it may be affirmed that the equality of bargain-
ing power toward which the law of employer and employee is directed is
a principle so important for the public benefit that it becomes in itself a
public purpose.” To achieve a greater equality of bargaining power, in
turn, Commons and the other institutionalists recommended reforms
such as greater trade unionism, child labor and minimum wage laws, and
expanded social insurance programs.
A second example concerns work hours and conditions. Neoclassical
theory assumes that the length of the workday and the speed and pace of
work are bargained in a competitive labor market and thus are voluntar-
ily chosen, efficient outcomes that therefore merit no government or
union regulation. From an institutional perspective, however, a feature
of the property rights regime in labor markets is likely to cause both the
length of the workday and the speed and pace of work to be excessive
and injurious. This feature is that the firm cannot own labor (because
slavery is illegal) but can only rent it (by the hour, day, week, year, etc.),
and as is well known, a buyer who rents an asset (relative to owning) has
a much greater incentive to “overwork” it (or neglect its maintenance
and repair). The result in early-20th-century labor markets was that
LERA05.chap02.qxd 8/1/05 10:21 AM Page 47
many workers were “used up” and “put on the scrap heap” by the age of
40. Working conditions, such as workplace safety conditions and acci-
dents, provide another example. Neoclassical theory presumes competi-
tive markets will provide, via Adam Smith’s theory of compensating wage
differentials, the socially efficient amount of safety and injuries. The
problem, from an institutional perspective, is that many such workplace
“bads” have a public goods aspect and thus will be overproduced relative
to the social optimum (because workplace “bads” have ill-defined prop-
erty rights, individual workers will free-ride and not fully reveal their
preferences to the employer). For this reason, the institutionalists advo-
cated abandoning laissez-faire in the realm of industrial work conditions
and instead promoted a variety of protective labor laws (e.g., a maximum
hour law), an accident insurance program, and institutionalized forms of
collective voice.
A final example concerns democracy and voice in the workplace. A
firm will only provide democracy and voice in the workplace to the
extent it adds to profit, say in the form of an employee involvement
program or dispute resolution program. If workers want still more
democracy and voice, then the free market gives them a way to get it—
by “buying” it from the employer in the form of a lower wage offer.
From an institutional perspective, however, this mechanism is inher-
ently defective. Democracy and voice in the workplace, at least at
some minimum level, are basic human rights that all firms should pro-
vide and respect. Viewed this way, it is illegitimate to ask workers to
“buy” them in the market or allow firms to offer only the amount that
“pays,” suggesting that a non-market method is needed to guarantee a
sufficient supply of these social goods. One method is collective bar-
gaining. Thus, Commons (1919a:108) states of the union contract,
“Like the Constitution of the United States, the agreement has become
a ‘government of law and not men.’ A man is not deprived of his job
without ‘due process of law.’ This is the difference between democracy
and autocracy.”
America in the late 19th and early 20th centuries was thus presented
with three alternative legal policy regimes to solve the Labor Problem.
At the right end of the spectrum was the legal regime of free market
capitalism espoused by the classical/neoclassical economists and their
conservative colleagues; on the left end was the legal regime of social-
ism, state ownership, and/or worker cooperatives espoused by the social-
ists and anarcho-syndicalists; and in the middle was the legal regime of
humanized and regulated capitalism espoused by the institutional econo-
mists. The latter program sought to balance the social “good” of effi-
ciency and wealth creation with the equally valuable social “good” of
LERA05.chap02.qxd 8/1/05 10:21 AM Page 48
subjects are not part of the industrial relations field and should not be.
Regarding the unitarist model, for example, Godard and Delaney argue
that industrial relations scholars (p. 493) “must adopt a critical and ana-
lytical posture toward the new [HRM/high performance] paradigm”
(2000:493) and “at minimum adhere to a perspective and research
agenda that distinguishes their work from the management-centered
perspective associated with the human relations tradition” (2000:497).
The existence of this type of critical attitude is also spoken of by Strauss
et al. (1974) when they noted in the preface to the IRRA research vol-
ume Organizational Behavior: Research and Issues that “the question of
whether to publish a book devoted to Organizational Behavior (OB)
caused strenuous debate within the Executive Board. There was one
group which felt that OB did not really belong within Industrial Rela-
tions. Another group was willing to provide an opportunity to test OB’s
relevance.” Although Kochan (1998) does not explicitly state it, one also
infers that he does not believe HRM/OB is a part of industrial relations,
given his statement that normative assumptions about conflict in the
employment relationship divide the field into two different schools of
thought: the pluralists and the radical/neo-Marxists, with HRM omitted
by implication. That HRM is outside (modern) industrial relations is also
maintained by Budd (2004), who divides the employment field into HR
and IR (unitarist versus pluralist/radical).
Regarding the field’s less favorable attitude toward nonunion
employers, Cappelli observes that
labor markets. The decline of unionism and the New Deal model has
also negatively impacted the field of industrial relations, given its close
intellectual and normative ties to labor–management relations in recent
decades. Thus, a field that gives normative pride of place to pluralist
employment relations and collective bargaining finds itself in an increas-
ingly tenuous and somewhat marginalized position, evident in the sub-
stantial decline in LERA (IRRA) membership, the closing of numerous
university industrial relations programs, and shrinking student and aca-
demic interest in traditional labor–management relations. No doubt with
these events in mind, former IRRA president Thomas Kochan described
the field as being in “a state of profound crisis” (1998:31).
Inevitably, when caught in crisis, institutions and the people who
comprise them are forced to reexamine and perhaps readjust long-held,
often deeply felt values and normative commitments—a process now
under way in industrial relations but rarely explicitly discussed because
of the uncomfortable and potentially divisive nature of the subject.
Should the position of the field continue to decline, however, the subject
of “values” may require more explicit attention and, perhaps, further
adjustment.
A range of responses is possible. One option is to hold tight to the field’s
normative value statement. This option, however, could spell the further
decline of industrial relations and possibly even its demise as a going con-
cern, at least absent a rebound in the labor movement. My impression is
that a portion of the field—often coming from the ranks of political leftists,
trade unionists, and their intellectual allies—favors this option. A second
option is an intermediate position—to maintain fidelity to the basic princi-
ples of the pluralist model but broaden the field’s normative value state-
ment so it includes not only traditional collective bargaining but also new
forms of work organization and labor market intermediaries and a broader
array of methods for providing workers with protection, due process, and
participation. This seems to me to be the position broadly espoused by
Kochan (2000) in his recent IRRA presidential address and expounded on
in more detail in the book Working in America (Osterman et al. 2001). A
third and more far-reaching option is to further open up the field’s norma-
tive domain so it makes a balanced increase in efficiency, equity, and
human self-actualization and self-development the principal objective of
practice and policy and gives preference in a fairly pragmatic way to any
and all methods and institutions that singly or in combination promote this
goal. Thus, in some situations and time periods this objective may be best
accomplished by trade unions and collective bargaining, in others by a uni-
tarist HRM strategy, and yet in others by government legislation, macro-
economic policy, or greater reliance on market forces.
LERA05.chap02.qxd 8/1/05 10:21 AM Page 56
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CHAPTER 3
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well as efficient. The strategy will be very familiar to the pluralists. A Kant-
ian business enterprise organized as a moral community would require a
balance among the competing interests of different stakeholders—the
central tenet of pluralist theory. Although a Kantian theory of ethical
industrial relations is compatible with efficiency, or so I argue, it justifies
the pluralist contention that employees should not be treated as mere
commodities and that the workplace should be more democratic. (Budd,
Gomez, and Meltz 2004).
Though much has been written about profit sharing, few have recog-
nized that profit sharing throughout the business could be a means for
reducing coercion and deception. Profit-sharing plans that extend to the
entire workforce could allow everyone to share in the gains that result
from increasing productivity. Since everyone would have an interest in
the success of the firm, there would be demands for access to informa-
tion to make sure that the profit-sharing plan is handled fairly (Ben-Ner
and Jones 1995).
In theory, companywide profit-sharing plans also allow everyone to
share the risks of an economic downturn—specifically, by avoiding lay-
offs. Many critics of capitalism argue that layoffs are coercive. Defenders
of layoffs argue that they are often an economic necessity, one that every
employee understands when agreeing to employment, and that an
employee who freely accepts an employment contract cannot complain
of coercion when a layoff occurs. That response raises an interesting
philosophical issue about the nature of coercion.
The overwhelming number of people need to work to survive, at
least for a large portion of their lives. There is a sense in which people
are forced to work. When an assailant says, “Your wallet or your life,”
you technically have a choice. However, for many this situation is the
paradigm of coercion. How close is the analogy between the assailant
and the requirements of the employer? Admittedly, in good times the
balance of power shifts somewhat, but in hard times the balance of
power is with the employer. Most people have to take the terms of
employment as they get them (Manning 2003). Someone wanting
employment does not negotiate about whether or not to be tested for
drugs, for example. If drug testing is the company policy, you either
submit to the test or forfeit the job. If you want a job, you agree to
employment at will and to layoffs if management believes they are nec-
essary. Survival for yourself and any dependents requires it. As with
the assailant, you technically have a choice, but most employees argue
they have little choice about multiple important terms of employment.
A Kantian, in common with the pluralist school of industrial relations,
maintains that the imbalance between employer and employee ought
to be addressed. Otherwise, industrial relations rests on an unethical
foundation.
Layoffs are psychologically devastating to most employees. You can
lose many of the goods you purchase with your salary without feeling a
loss of respect. However, in Kantian terms, a layoff damages self-respect.
The person who loses a job feels herself diminished and someone who is
not fully worthy. I suspect that some of this results because the person
who loses a job also loses some of her freedom or autonomy, and auton-
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Naturally the bagels and cream cheese had long disappeared as well.
They were a cost that could be eliminated. Presumably the cost-
obsessed management could not justify what they could not quantify—
namely, the benefits of people getting together periodically over free
food to discuss and resolve issues. Needless to say, employee morale at
Apple was terrible. It continued to lose ground to Microsoft, and many
predicted Apple’s demise.
In desperation, Apple convinced Steve Jobs to return as CEO. He
reversed course, focusing on improved quality and new products and
competing on quality rather than reduced costs. Recently the company’s
iPod and iTunes have been great commercial successes. So have the
Apple stores opened in major urban centers, including Manhattan and
the Mall of America near Minneapolis–St. Paul. In February 2004 Steve
Jobs was once again on the cover of BusinessWeek. The story of the
decline and resurrection of Apple has much to tell us about corporate
strategy, the importance of job stability, and the ethics of respecting peo-
ple. Indeed, it casts light on a philosophical debate that is raging about
the very purpose of the firm.
argue that everyone affected by the firm has a moral claim to be treated
with respect, though they realize that not all those affected by firm
behavior stand in the same relationship to the firm. As William Evan and
R. Edward Freeman have pointed out, some stakeholder groups are
essential to the very survival of the firm (Evan and Freeman 1988). In
addition to stockholders, those stakeholder groups traditionally include
customers, employees, managers, suppliers, and the local community.
Given the centrality of these groups to the success of the corporation,
management has special obligations to them. Kantian moral philosophy
requires that all those affected by the firm be treated with respect. Kant-
ian business ethicists have spelled out in more detail what treating the
humanity in a person requires when managers interact with these six
essential stakeholder groups. This paper, of course, is outlining what is
required when managers treat the humanity in employees with respect.
A full-blown Kantian theory of business ethics would outline those obli-
gations for all the stakeholder groups.
required for both our rational and ethical decision making. As the Kant-
ian scholar Onora O’Neill points out:
Kantian Leadership
One might wonder about the implications of this emphasis on
employee autonomy for leadership. Doesn’t effective leadership require
someone who makes decisions and then successfully gets everyone on
board to achieve the organization’s goals? And if that is leadership, then
doesn’t an emphasis on autonomy undermine the stature of the leader?
I think not. What would Kantian leadership look like? Since Kant is
committed to a view where respecting the humanity in a person is tied to
LERA05.chap03.qxd 8/1/05 10:22 AM Page 78
with challenging the dominant idea of the group. In the Kantian model,
critical evaluators occur naturally because people in the organization are
encouraged to speak up and provide reasons for decisions—reasons that
in principle could appeal to all. Simply put, in a firm where the task of
the leader is to encourage others to be leaders, it is hard to imagine
group-think getting a hold.
It seems easier to find examples of successful Kantian leaders in
Europe than in the United States. One example is Jan Carlzon, former
head of SAS Airlines. When Carlzon took over as CEO, the company
had lost its way and was floundering. He undertook a number of steps
that brought popularity and profitability to the airline. A characteristic of
his leadership style was to empower others in the organization to make
decisions. For example, persons checking in passengers could make
decisions about upgrades, canceling penalties, and the like.
One anecdote in particular reflects Carlzon’s leadership style. Carlzon
realized he had not provided successful leadership the first time he went
on vacation and got constant phone calls asking him to make decisions.
Carlzon realized that he would only succeed when he went on vacation
and no one called to seek his advice. He believed that his job as a leader
was to encourage subordinates to make decisions on their own, and in
that way he increased their autonomy on the job. Carlzon knew he had
succeeded when eventually he went on vacation and nobody called.
Carlzon’s experience illustrates the central thesis of a Kantian theory
of leadership. Contrary to the popular stereotype of leadership, a Kant-
ian leader is not the one to whom you look for a decision. Rather, the
Kantian leader empowers others in the organization to take responsibil-
ity for making decisions. A central task of the leader is to respect and
enhance the autonomy of followers. I have argued that one respects
employee freedom by not coercing or deceiving them. Neither does one
simply use authority or power to get employees to do the leader’s bid-
ding. That is what is wrong with hierarchical management from the
Kantian perspective. Leadership that respects negative freedom (free-
dom from causal necessity) is leadership that increases an employee’s
autonomy in the organization. Kantian leadership empowers employees
to make decisions rather than wait for orders. Indeed, its purpose is to
turn followers into leaders. In addition to being required by the second
and third formulations of the categorical imperative, that style of leader-
ship simply makes good business sense.
Meaningful Work
In addition to respecting negative freedom, employers have an obliga-
tion to respect positive freedom, or the autonomy to follow laws people
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have made themselves. Employees who are positively free are as free from
compulsions as they are from coercion. To honor positive freedom is to
enlarge the realm of obligations. Treating the humanity of a person as an
end in itself may require doing more than merely refraining from coercion
and deception. Sometimes it requires taking positive action to help.
One positive action that a business can take to honor positive free-
dom is to provide meaningful work. Using Kantian texts as a guide, I
have proposed that employers are obliged to meet the following condi-
tions with respect to employees and that honoring them all is what is
involved in providing meaningful work:
1. Meaningful work is work that is freely chosen and provides oppor-
tunities for the worker to exercise autonomy on the job.
2. The work relationship must support the autonomy and rationality of
human beings. Work that unnecessarily deadens autonomy or that
undermines rationality is immoral.
3. Meaningful work is work that provides a salary sufficient for the
worker to exercise her independence and provides for her physical
well-being and the satisfaction of some of her desires.
4. Meaningful work is work that enables a person to develop her
rational capacities.
5. Meaningful work is work that does not interfere with a person’s
moral development.
6. Meaningful work is work that is not paternalistic in the sense of
interfering with the worker’s conception of how she wishes to
obtain happiness (Bowie 1999:70–71).
Let us evaluate current human resource practices against these
requirements to provide meaningful work. Condition 1 is a straightfor-
ward requirement: that work be freely chosen and that employees be
given some autonomy on the job. Respect for negative freedom is suffi-
cient here.
Condition 2 has a lot more bite because it challenges the morality of
Taylorism, or the extreme division of labor. The classic case of division of
labor is Adam Smith’s pin factory, where the act of making a pin comprises
18 separate operations. Smith noted that without the division of labor, the
individual output of pins would be somewhere between one and 20 pins a
day. With the division of labor, hundreds of pins would be produced.
Fukuyama describes Taylorism as follows:
Reichheld, Frederick F. 1996. The Loyalty Effect. Boston: Harvard Business School
Press.
Schor, Juliet B. 1991. Overworked American: The Unexpected Decline of Leisure.
New York: Basic Books.
Smith, Adam. [1776] 1976. The Wealth of Nations. Edwin Cannan, ed. Chicago: Uni-
versity of Chicago Press.
Stack, Jack. 1992. The Great Game of Business. New York: Doubleday Currency.
Stewart, Thomas A. 1998. “Why Leadership Matters,” Fortune, March 2, p. 72.
United Nations. 1948. Universal Declaration of Human Rights. General Assembly
Resolution 217 A (III).
White, Joseph B. 1996. “Dodging Doom: How a Creaky Factory Got Off the Hit List,
Won Respect at Last.” The Wall Street Journal, December 26, p. A1–2.
Williamson, Oliver E. 1985. The Economic Institutions of Capitalism. New York: Free
Press.
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CHAPTER 4
JOHN J. LAWLER
University of Illinois
XIANG YI
Western Illinois University
89
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Islam
Islam is the third major religion to have sprung up in the Middle
East, and it does in fact share a number of ancient stories and characters
with Judaism and Christianity. Its holy book is the Qur’an (variously
spelled as Koran, Quran, etc.), which was dictated by God (through the
Angel Gabriel) to Mohammad in the seventh century CE. While recog-
nizing Abraham as the ancestor of all, and Moses, John the Baptist, and
Jesus (among others) as prophets, Islam teaches that Mohammad heard
and recorded the final and definitive voice of divine revelation. The core
of the faith is simple: “There is no god but Allah, and Mohammad is his
prophet.” There is also a set of hadith, or sayings of and stories about the
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Hinduism
The relentless monotheism of Islam finds its polar opposite in Hin-
duism, the ancient religion of India (but which today is home to some
200 million non-Hindus, mostly Muslims, but also Christians, Jews,
Parsees, and others). Hinduism has its oldest roots, several thousand
years BCE, in ancient stories (the Vedas) about the gods, the creation of
the world, and much in the way of mythical battles and other great
events. The Western viewer first looking at the Hindu religious scene is
struck by the plethora of gods—some quite curious in appearance (e.g.,
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TABLE 1
Beekun’s Sample Ethics Code—HRIR Aspects
Source: Beekun (1997:60–61). Ellipses indicate text omitted from the original.
Ganesh, who has the head of an elephant and the body of a man)—and
the fact is that almost anything can be revered as holy. You will see shiva
lingams, idols of all sorts, even pictures of Jesus. But the core ideas of
Hinduism lie behind this scene. These core religious ideas have perme-
ated and given long-term stability to the Hindu social structure. As such,
we expect them to be important in the ethics of business and HRIR.
We start with a list of key ideas: the cycle of rebirth and the ultimate
objective to escape it, the concept of a hierarchical set of castes into one
of which you are born and that have associated duties (the usual transla-
tion of dharma), and the concepts of pollution and impurity. All these
matters are interlinked and maintain the overall system. If you perform
the duties of the occupation(s) associated with your caste and can avoid
being polluted (which interferes with being clean enough to perform rit-
uals), you may over a sequence of lifetimes work your soul up the ladder
of hierarchical castes and eventually escape the cycle of rebirth, at which
point your soul will become one with Brahma, the soul of the universe.
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Whether being born into a Parsee priestly family helped make these
business principles so “sound and straightforward” to J. N. Tata is not
clear. For his part, Lala tends to stress Tata’s nationalist views and com-
mitment to India’s social and economic advancement. But for sure, Tata
was a well-educated and well-traveled man (in Europe, Britain, and
America), aware of the more brutal aspects of British and American
industrialization. When putting together a new and unfamiliar enter-
prise, such as Tata Steel, he made extensive use of foreign engineers and
other experts.5
Given Chakraborty’s support for J. N. Tata’s ideas, a look at some of
Tata Companies’ specific rules may provide a Hindu/Parsee parallel to
Beekun’s prescriptions and proscriptions for the Islamic workplace.
Although earlier formulations may have existed at the company level
(e.g., for Tata Steel in Jamshedpur), in 1999 a Tata Code of Conduct was
adopted covering all companies in the group. Some of the key provisions
of this code follow (Chopra 2003):
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Confucianism
Confucianism is a highly developed philosophy that has evolved over
2,500 years and is the product of the contributions of many thinkers,
although its fundamental notions are still to be found in Confucius’s
seminal work. Confucius (the romanized name of Kung Fu-tzu) lived
from roughly 551 to 479 BCE. Concerned by what he saw as an abandon-
ment of traditional Chinese values and social practices, he endeavored to
capture these in the Analects, his principal philosophical work. Confu-
cian values and social practices have remained pervasive and are widely
seen by the philosophy’s supporters as responsible for the ascendancy of
the East Asian economy in the past several decades (Chen 2001). Today,
despite well over a century of concerted challenges by Asian intellectu-
als, when we speak of Asian values, we are very often referring to the
values and ethical imperatives of the Confucian framework.
Confucianism is profoundly hierarchical and collectivist. A person’s
position in society is defined within dyadic, hierarchical relationships. A
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Guanxi relationships can form with those outside the family as well.
In general, one’s ethical obligations depend on the closeness of this
relationship.6
Hwang (2001) observes that the Confucian ethical system can be
summarized by two fundamental rules: honor the superior and favor the
intimate. That is, in Confucian society, one first must determine his or
her relationship to the other person involved in an interaction, particu-
larly who is the superior and who is the inferior. Although the wu lun
cover very specific relationships, by extension they can apply to others.
For example, business organizations are often equated to families so that
the employer–employee relationship would have similarities to the
father–child relationship, though other relationships might be relevant
as well. The relationship with the owner may be the same as with one’s
father, while the relationship with a manager or senior employee might
be more akin to that of an older sibling (indeed, a boss may be addressed
as “older brother” or “older sister”). The determination of hierarchy
establishes who will be dominant in the relationship and thus the princi-
pal actor and resource allocator. Specific obligations in a relationship
depend on the degree of intimacy or closeness, so the number and types
of connections to the other person are quite relevant. The closer the
relationship, the greater the obligation.
Five virtues (ren, yi, li, zhi, xin) guide social behaviors in Confucian
societies, which are all related to ethical expectations. First, regardless of
the relationship, there is the expectation of treating others with some
level of benevolence or kindheartedness (ren). It is benevolence that dis-
tinguishes the moral and ethical human from one driven only by self-
interest. However, the required degree and form of benevolence depend
on the closeness and nature of the relationship.
Second, there is the notion of righteousness (yi), which refers to the
rules that will be invoked in carrying out one’s ethical obligations. In
general, Hwang (2001) observes that the exchange rules governing a
relationship (and thus the foundations for ethical behavior) depend on
the degree to which the relationship involves expressive versus instru-
mental ties. In the expressive case, the relationship is very close, affect-
based, and personal, while the instrumental relationship is relatively
distant and based on the sort of cost–benefit calculus integral to Western
notions of social exchange. In Korea, the term yon-go, meaning “blood,
alumni, regional relations,” similarly captures the bases along which rela-
tionships evolve. Finally, in quite distant relationships where there is no
guanxi, behavior toward others might be governed primarily by expected
gains and losses. Here it is clear that ethical obligations depend on the
closeness of the relationship and are thus particularistic.
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rior appearing to the group to be in the wrong, which would cause loss
of face for the superior.
Organizational citizenship behaviors have long been advertised as a
face-gaining honor, and the pursuit of this honor sometimes goes beyond
the desire for monetary reward, which is also influenced by the Confu-
cian emphasis on social contribution and low regard for financial aspira-
tion. In addition, publicly losing face is an extremely severe punishment
that would normally not be a good option for leaders in the organization
if the purpose is to motivate employees to work hard. Thus it has been
noted that harsh criticisms tend to be avoided in performance evalua-
tions in Asian organizations and “central tendency” is often a convenient
means for the evaluator to try to avoid upsetting relationships.
Benevolence and Loyalty in the Workplace. The expectations associ-
ated with ren often mean that employers are obligated to take care of a
wide variety of things for employees, far beyond what would be expected
in the United States or Western Europe. The state-owned enterprises
(SOEs) in China, although largely a product of China’s post-1949 social-
ist system, operated through much of this period in such a manner. A
typical large-scale SOE was like a local community. Stores, hospitals, and
schools were run by the SOEs, housing was provided to employees, and
job security was permanent. Employees enjoyed lifelong benefits, and
their children could assume their positions after they retired. In return,
zhong and yi were expected from employees in that they worked for
minimal wages, showed reverence to superiors, and engaged in what the
Western organizational behavioral scientists might term “organization
citizenship behaviors” (Su, Zhang, and Hulpke 1998). Confucian beliefs
hold that ethical individuals will do more than simply follow job require-
ments (Su, Zhang, and Hulpke 1998). Thus, those selected to work over-
time would feel honored, as this was recognition of their contributions
and would bring “face” to them and their families. While certainly the
system was inspired in many ways by socialist thought and was modeled
after the Soviet system, and it would not at all have been linked to the
officially suppressed Confucian framework, it is clear that many aspects
of Confucian values, the foundation of Chinese culture for more than
2,500 years, persisted in what came to be known as the “iron rice bowl”
system.
There are many other variations of what would be considered ren in
the workplace. For example, consistent with the organization-as-family
metaphor, employers would not normally discharge employees, even if
economic conditions warranted (Wah 2001). “Lifetime employment” is a
well-known aspect of Japanese management, but it was until quite
recently commonplace throughout much of East Asia. A person’s job is
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not only a source of income but also integrally related to face. A job
might be seen as a means of bringing prestige to the family as a whole,
and the money earned by an individual might be shared with extended
family members as needed. Thus to lose one’s job can be a great source
of dishonor. Employers would traditionally seek to avoid causing
employees such loss of face and, indeed, discharging employees would
reflect badly on the employer as well. Moreover, traditional Asian com-
panies do little in the way of performance evaluation and, if they did,
they focused more on an employee’s loyalty and commitment to the
organization than on task performance (Hui and Graen 1997). Thus,
employees were generally not in danger of losing their jobs, at least for
economic reasons or poor task performance. And corresponding to this,
employees would be committed to their employers (often in a highly
personal matter), so voluntary turnover would be very low as well.
Age and Seniority. The need to be increasingly competitive in the
global economy has created organizational stresses throughout East Asia,
as resulting changes in management processes often contradict tradi-
tional values and certainly many Confucian notions of ethical or appro-
priate behavior. Reverence for age and seniority is a fundamental aspect
of Confucianism, and even slight differences in seniority can be impor-
tant in determining status in an organization. Thus it is not surprising
that seniority is a very important determinant of both pay and authority
in traditional organizations. Important leadership roles are reserved for
those who have reached a certain age. A retired owner or high-level
manager of a company may still exert considerable influence behind the
scenes because of his (or, very rarely, her) age and presumed wisdom.
Contemporary efforts in East Asia to introduce merit-based employ-
ment systems and assess organizations in terms of measurable financial
goals, such as stockholder equity (Bae et al. 2003), are at odds with
advancement and pay based on seniority. Many Asian-owned companies,
following the lead of Western multinationals, are endeavoring to become
more merit driven, which has immense implications for both HR and IR
(see, for example, Kim and Bae 2004, who describe these efforts in
Korea). Employees, and in some countries unions (e.g., Korea), have
often reacted negatively to the substitution of merit for age in pay and
promotion decisions, though not surprisingly this has generally been
more widely accepted by younger workers (who are often more West-
ernized and less wedded to traditional values, as well as beneficiaries of
these changes). Older workers who are passed over by younger workers,
or even more humiliatingly, who become subordinates of younger work-
ers, might well leave the company as a result. In Korea, for example, lan-
guage issues can make transformation to a merit-based system difficult.
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The honorifics that are used for organizational leaders and superiors
often implicitly convey the notion that such individuals are senior to all
of their subordinates. A manager of an Internet portal in Thailand
shared an example of how her company shed its “older” workers (i.e.,
over 40), who the owner felt were too old to understand the needs of an
Internet-based company. However, the owner felt uncomfortable firing
them, as this would be considered inappropriate. Most were simply
assigned to work groups with managers in their late 20s and early 30s.
Virtually all of the older workers experienced loss of face by this affront
and quit. Thus it can be problematic (though not apparently impossible)
to introduce employment systems that stress merit over age or seniority.
The Role of Guanxi. Confucian societies, with perhaps the exception
of Japan, operate through social networks in which family is the focal
point. It is not uncommon that hiring, promotion, and pay are influ-
enced by guanxi—that is, on the closeness of the employee and the deci-
sion maker (such as the supervisor) or someone who can influence the
decision maker (such as an important government official who has the
authority to create hardships for the business). This is also a process of
fulfilling responsibilities and/or exchanging favors (renching), which
could easily result in nepotism or favoritism. Although family-based con-
nections are the strongest basis of guanxi, we have noted that other con-
nections (such as having graduated from the same school, coming from
the same town or region, or just simple friendship) can also establish
relationships and impact significant employment-related decisions.
Given what Hwang (2001) observed as one of the defining characteris-
tics of Confucianism—“favor the intimate”—it is clear how employment
decisions are particularistic, as individuals have the ethical obligation to
act benevolently toward others in proportion to the strength of the rela-
tionship. Guanxi functions in many ways in lieu of the legal system as a
means of enforcing interpersonal obligations.
Gender Issues
The chapters of this volume focusing on the several Western ap-
proaches to HRIR ethics deal with critical interpersonal behaviors, in
particular those relating to sexual harassment and discrimination. Histor-
ically, however, neither Islam nor Hinduism has addressed these con-
cerns, since women are not really supposed to be in the workplace (at
least in mixed company): a family-centered purdah system is the Islamic
model, and a gender-based division of labor the Hindu one. (Neither of
these systems serves to spare women from arduous agricultural labor.)
Philosophically, the Islamic view is based in a demotion of women
beneath the qualities of men. Summarizing the views of the philosopher
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al-Tusi (who died in 1274 CE), Fakhry writes that the woman’s beauty
“should not be the chief incentive for marrying her, rather the contrary.
Due to her weak intelligence, the beauty of a woman is often a snare and
a cross” (1991:135). Wives’ attention should be kept focused on the fam-
ily. Islamic traditionalists can appeal to verse 34 of the sura (a chapter of
the Qur’an) on women: “Men have authority over women because Allah
has made the one superior to the other, and they spend their wealth to
maintain them.” As Shahidian (2002:2) notes, this verse has been given
legal status in the constitution of the Islamic Republic of Iran.
A much more recent and perhaps less negative view (although cer-
tainly equally paternalistic) has been expressed by Maulana Khan:
argues that the three basic dimensions are efficiency, equity, and voice.
Efficiency is for the most part assumed, although we should recall
Sialkoti’s strictures against loafing or, worse, featherbedding. In the Con-
fucian view, where wisdom and order are the ultimate goals, efficiency is
less clearly a principal objective. Efficiency would appear to be at least
partially offset by equity considerations in the interests of clean, safe
workplaces and the natural environment in the Hindu and Muslim tradi-
tions and in the Tata Code. Islam’s strong emphasis on justice (and its
close relative, dignity) yields a commitment to equitable and adequate
compensation. Equity is less strongly emphasized in Hindu traditions,
although clearly present in the Gandhian stewardship concept as regards
wealth. Equity has its own peculiar meaning in the Confucian frame-
work, deriving from neither meritorious work nor equality but from age
and other status variables. Voice is the topic least well developed. Only
Beekun’s sample code of ethics for Islamic business gives employees
explicit rights to some form of voice. In the Tata code, voice in gover-
nance is at most implicit. In Chakraborty’s Hindu vision, we are left
unclear about how, precisely, the members of the business ashram par-
ticipate in its governance. Voice is not an important element in the Con-
fucian view, centered as it is in authoritarian hierarchicalism.
As a second set of standards, the four core human rights in the work-
place according to the ILO Solemn Declaration of 1998 are the right to
organize and bargain collectively, abolition of forced labor, elimination of
all forms of discrimination, and abolition of the worst forms of child
labor. The three traditions examined in this chapter only partially fulfill
these four standards. Both the Tata code and the Islamic sample code
(with a somewhat mixed voice, however) are clear on avoiding discrimi-
nation, while Hindu traditionalism is built on it, however much change is
under way in present-day India. The Confucian view, at least classically,
embraces important elements of age and gender discrimination. The use
of forced labor and the worst forms of child labor are probably incom-
patible with all four patterns: the Tata and sample Islamic codes provide
for equitable or adequate compensation; Chakraborty’s business ashram
is presumably composed of consenting adults. The duties of benevolence
and paternalism in Confucian thought would likely preclude these prac-
tices. The right to organize and bargain collectively is explicitly recog-
nized nowhere, although we do note that Tata has had a long and
generally harmonious relationship with labor organizations representing
its employees (Lala 1992).
By these two sets of standards, therefore, the Muslim, Hindu, and
Confucian traditions have important shortcomings—for example, in the
areas of employee voice and nondiscrimination.9 We have noted earlier
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that the three traditions traditionally have had problems with full equality
for women. We know that some Islamic regimes (Saudi Arabia, for exam-
ple) have serious restrictions on women’s rights to work, to drive, and to
move about outside the home. We know that independent labor unions do
not exist in China and various Muslim states like Syria, Iran, and Turkey.
But are the standards of the ILO declaration and of efficiency,
equity, and voice applicable only to Western societies, or are they univer-
sal standards that can and should be applied to all? The ILO declaration
asserts that some workplace rights are human rights and are therefore
universal. Ignatieff, however, observes that “the cultural challenge to the
universality of human rights arises from three distinct sources—from
resurgent Islam, from within the West itself, and from East Asia. Each of
these challenges is independent of the others, but taken together, they
have raised substantial questions about the cross-cultural validity—and
hence the legitimacy—of human rights norms” (2001:102). In 1947 and
1948, Saudi Arabia did not accept the Universal Declaration of Human
Rights because of articles providing for freedom in marriage and of reli-
gion. “In Islamic eyes, universalizing rights discourse implies a sovereign
and discrete individual, which is blasphemous from the perspective of the
Koran” (Ignatieff 2001:103–4). It seems that we face—unsurprisingly—a
world where not all human rights are universally recognized.
Thus, recalling the story of General Boykin, we are generally correct
to stress the importance of culture and ethical values in shaping behav-
iors and attitudes in the workplace. This is particularly true with regard
to appropriate gender roles. The especially troublesome area of voice in
workplace governance reveals a gulf between universal best practice and
non-Western traditions that is wide and challenging. In the other key
areas of efficiency and equity (including “fairness” to the environment),
all non-Western traditions seem to see the trade-offs involved, although
in different ways and for differing reasons.
Acknowledgments
Scoville acknowledges the helpful assistance of David Faust (Ames
Library of South Asia), Ying Liu (graduate assistant), and Zuleqa Husain
(undergraduate assistant), all of the University of Minnesota. Lawler and
Yi acknowledge the research assistance of Bing Bai (graduate assistant,
University of Illinois) and the comments of Shyh-jer Chen (National Sun
Yat-Sen University, Taiwan).
Notes
1 The thumbnail sketches of Islam, Hinduism, and Confucianism that follow are
undertaken with some trepidation. There must surely be as many strains of Islam
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and Confucianism as there are of Christianity, and Hinduism is probably even more
variegated. Some will quarrel with the very idea of making the attempt. But, since
ethical teachings derive at least in part from the core religious or philosophical
teachings, it seems essential that we seek to identify some of them, much as other
authors in this volume have dealt with those stemming from other philosophical or
religious traditions.
2 Women are seen as pursuing traditional family roles throughout their lives.
3 Going beyond the Indian context, Perrett (1998) has even contended that some
of the concepts that may initially seem to render Hindu ethical thought useless for
Western thinkers—dharma, karma (rebirth in a status at least partially dependent on
how one’s previous life was lived), moksa (freedom in one’s life, contrasted with good-
ness)—may pose more apparent than real obstacles. Perrett concludes that principles
of Hindu ethical thought may be useful to modern-day Westerners, presumably to
deal with modern-day Western ethical issues.
4 There appear to be parallels between Chakraborty’s position and Aristotelian
virtue ethics. See Solomon (1992) for a virtue ethics exposition of the roles coopera-
tion and community ought to play in business.
5 It was in this tradition that one of J. N. Tata’s sons, Sir Dorab Tata, in 1917
Noddings (1984), in which moral principles rely on the deeper context of each partic-
ular situation—especially the implications for relationships.
7 In the market economy that modern China is trying to adopt, in which the use of
United States, for example, has been criticized for an excessive emphasis on effi-
ciency (Budd 2004) and a failure to conform to international standards on freedom of
association and collective bargaining (Human Rights Watch 2000).
References
Bae, Johngseok, Shyh-jer Chen, David Wan, John J. Lawler, and Fred Ochieng
Walumbwa. 2003. “Human Resource Management and Firm Performance in
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Wah, Sheh Seow. 2001. “Chinese Cultural Values and Their Implication to Chi-
nese Management.” Singapore Management Review, Vol. 23, no. 2 (2nd half),
pp. 75–83.
Webb, Sidney, and Beatrice Webb. 1987. Indian Diary. Delhi and New York: Oxford
University Press.
Wu, Cindy, Xiang Yi, and John J. Lawler. 2000. “Age and Gender Discrimination in
Hiring in Asia: Cultural Effects in Taiwan and Thailand.” Paper presented at the
Seventh Bargaining Group Conference, East Lansing, Michigan.
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CHAPTER 5
Globalization
Stated most simply, globalization represents a “world without
walls” (Friedman 2000:133) in which information, capital, and goods
move easily across national boundaries. More formally, it has been
defined as “the inexorable integration of markets, nation-states and
technologies to a degree never witnessed before” (Friedman 2000:9).
The Organization for Economic Cooperation and Development
(OECD) has defined the phenomenon in economic terms as “an
evolving pattern of cross-border activities of firms involving interna-
tional investment, trade and collaboration for purposes of product
115
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Effects of Globalization
Many observers believe that globalization is a totally new and over-
whelmingly powerful force. It is said to be “the dominant international
system” and a “worldwide shaping force” (Friedman 2000:9, xxi).
There is, however, a minority view that globalization is really nothing
new and that the global nature of corporations has been wildly exag-
gerated (Hirst and Thompson 1999). The weight of the evidence
appears to favor the view that globalization is a very powerful new phe-
nomenon. It has created a situation in which we are all influenced in
our day-to-day lives by events elsewhere in the world (Leisink 1999).
The cost of labor in China may affect the price of the shirt that we buy
at Wal-Mart or our very job security. A protest in Seattle may improve
working conditions in India.
One feature of globalization is an extraordinary increase in the
mobility of production facilities. When a company locates a plant in a
place where labor costs are low and regulations are lax, a firm with
higher costs for labor and regulatory compliance can be placed at a com-
petitive disadvantage. With the liberalizing of the international trading
system, there are fewer and fewer barriers to firms’ moving their pro-
duction facilities around the world on this basis. The danger of this
movement is, of course, a race to the bottom—what the Europeans call
“social dumping.” A recent report by the World Bank recognizes that the
need to “find solutions that cut poverty through both growth and better
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A more nuanced argument for the benefits of free trade, and in par-
ticular foreign direct investment in developing countries, holds that
whether these lead to benefits, such as increasing democratization of a
society, depends on the strategic orientation of the firm operating in the
country. Economic prosperity, which the operations of a multinational
enterprise often bring about, is strongly associated with democracy.
Western multinational enterprises’ notions of rewarding individual
merit, giving importance to information sharing and teamwork, encour-
aging workers to take initiative and assume leadership roles, and recog-
nizing the need for continuous change are all useful in bringing a
developing country into the modern world. These practices have the
effect of producing a “human rights spin-off” (Santoro 2000:43). How-
ever, this can occur only where the strategic orientation of the multina-
tional enterprise is toward the building of markets in the developing
country, and not simply minimizing costs.
So it is in a highly disturbed and complex environment, about which
there is much disagreement, that ethical questions are arising. But what
do we mean when we speak of the ethics with which this paper deals—
business ethics?
Business Ethics?
One might argue that the term business ethics is an oxymoron, in
that it makes no sense to talk about business and ethics as being related.
Most business, particularly international business, is done by corpora-
tions. The traditional view of a corporation is that it is a legal fiction
(Paine 2003), having only those characteristics that are given to it by the
human beings who form it. It is argued that, since the character of the
modern corporation is that it is put together, and chartered by govern-
ment, for the purpose of earning money for its owners, the shareholders,
this is all that can be expected of it. It has no “soul to damn” (Paine
2003:83). It is a golem—an artificial being that has no moral compass.
Within this view, therefore, any attempt to assign moral responsibilities
to it is fundamentally misguided.
This “realist” view of corporations (Donaldson 1989:11) is deeply
embedded in the American law of corporations (Paine 2003). It is sup-
ported by the thinking of neoclassical economists, such as Milton Fried-
man. According to Friedman (1962), the only social responsibility of a
corporation is to make a profit. The very idea that it has moral responsi-
bilities to employees, customers, or the society at large is anathema. A
corporation is simply not “a proper subject for moral assessment,” since
“moral responsibilities attach only to human beings” (Paine 2003:87).
The role of the corporation in society is seen as being “to maximize
LERA05.chap05.qxd 8/1/05 11:54 AM Page 120
profits and financial value for the primary benefit of its shareholders”
(Clarkson 1998:1).
The realist view has been under attack for a number of years, and
it is not shared by most modern scholars in business ethics. An espe-
cially popular alternative is “stakeholder theory” (Clarkson 1998),
built upon the idea that the traditional view states an undesirable
“economics of irresponsibility” (Clark 1916:216). Stakeholder theory
in its place asserts a positive economics of responsibility where the
corporation is seen as obligated to serve interests in addition to those
of its stockholders. However, the theory does not tell us how to weight
the interests of the various stakeholders (Donaldson 1989). More
importantly, it does not speak to the idea that when economic inter-
ests are weighed against fundamental human rights, rights should
always trump interests (Werhane 1985). So the shareholder interest in
maximizing returns, for example, must necessarily yield to the funda-
mental human right to free expression or to freedom of association (as
in a labor union).
Ethics has to do with “rules without laws” (Donaldson 1989:149). If
we are willing to accept the proposition that corporations, as well as their
managers, are “moral actors—responsible agents that carry out their
business within a moral framework” (Paine 2003:x), then our inquiry
turns to the question of what their moral obligations are. The obverse of
this is the question of what the rights are of others to whom these duties
are owed (Donaldson 1989).
It is argued that the problems of corporate ethics can be solved by
hiring ethical individuals. After all, it is the individuals who do the act-
ing. The problem with this is that in a private corporation there are
duties owed to the corporation, which is itself lacking in any inherent
moral compass. A moral individual can be placed in a situation where
the pressures to do immoral things are irresistible.
What are the moral duties of a corporation? A useful description is
provided by Paine (2003), who distinguishes between basic and full com-
mitments to the values of justice and humanity. Under the heading of
obligations relating to justice, those reflecting only a basic commitment
include avoiding wrong, fulfilling contracts, avoiding theft, avoiding
fraud, and obeying the letter of the law. A full commitment to justice
includes doing right, keeping promises, being fair, being honest, and
obeying the spirit of the law.
Paine (2003) places under the heading of obligations relating to
humanity, at the basic level, maintaining oneself, not harming others,
respecting human rights, avoiding damage to the community, and being
considerate. A full commitment to humanity involves developing one-
LERA05.chap05.qxd 8/1/05 11:54 AM Page 121
appear to have CSR high on their agendas as they respond to the chal-
lenges to labor posed by multinational corporations. Dwight Justice of the
ICFTU Multinational Companies Department has cogently described
the confederation’s approach to CSR in the context of globalization.
According to Justice, it is necessary to keep clearly in mind the difference
between, on the one hand, “CSR as a form of business ethics or fad and
[on the other hand] how society defines, sets and enforces socially
responsible behavior by business” (Justice 2003a:1). CSR, which is gener-
ally seen as being voluntary for corporations, cannot replace the corpo-
rate accountability enforced by government regulation. Businesses should
not be allowed to use CSR to redefine standards downward by seeking to
have voluntary standards take the place of regulation.
As Justice notes, a stakeholder approach is not an unmitigated bless-
ing for unions. Not all stakeholders should have the same status. Trade
unionists argue that the worker interest is more akin to that of a share-
holder, given that workers, unlike non-governmental organizations
(NGOs), suppliers, and customers, have invested their lives and labor in
the corporation. In addition, workers have a claim that is rooted in soci-
ety’s general interest in the dignity of its citizens and the general level of
welfare. According to Justice, NGOs are, at best, surrogates for interests
and are not truly representative organizations, whereas unions are. In
Europe, management has utilized stakeholder analysis to escape treating
unions as social partners, instead viewing unions as only one among
many stakeholders rather than as an equal partner (Justice 2003a).
According to John Evans of TUAC (2002), unions have seen that
consumer pressure and brand-damage concerns can be important in
influencing corporate behavior. Issues involving supply chains of multi-
nationals have risen to a new level of importance. The moral accounta-
bility of global corporations for their own actions and those of their
suppliers has become a major theme of union actions.
U.S. and British unions have supported most of the attempts to build
international labor standards through codes of conduct written by
NGOs. Also, the European Trade Union Institute (ETUI) has declared
itself in favor of social benchmarking within the European Community.
It has produced a document (Benchmarking Working Europe) that pro-
vides extensive analysis of information relevant to benchmarking (Euro-
pean Trade Union Institute 2003).
Socially responsible investing is an area of considerable trade union
interest and activity (Fung et al. 2001). Dwight Justice (2003b:6) of the
ICFTU describes socially responsible investing as “part of the CSR phe-
nomenon.” As Justice argues (2003b), workers can pressure companies
to behave in a socially responsible manner even where there is not a
LERA05.chap05.qxd 8/1/05 11:54 AM Page 124
business case for it. This can be in the interests of workers because they
may have a stronger interest in the sustainability of the society than do
managers and some other investors. Sustainability is of greater concern
to rank-and-file workers because they generally have stronger ties to the
communities in which they live. Managers tend to be more geographi-
cally mobile. Particularly in the global economy, capital seems to fixate
solely on profits without regard for where they are made.
The Trade Union Committee on Workers’ Capital was formed by
various national and international union groups to encourage socially
responsible investing (Evans 2002). This group is supported by the
AFL-CIO, the British Trades Union Congress (TUC), TUAC, and
ICFTU, among others. It is headquartered in the TUC offices in Lon-
don. The AFL-CIO has taken the lead in this collaboration, perhaps
because in the United States there is more employee share ownership,
particularly through pension funds, than in other countries. However, as
private pension funds have come into existence in some countries (Ger-
many and Italy) or become more important in others (France), Euro-
pean trade union movements have become more interested in using the
power of these funds to influence corporate policy. In France, four of
the five major trade union groups (all but the Force Ouvrière) have
formed a consortium to review financial products (e.g., mutual funds
and the like) for social responsibility, with the hope that company pen-
sion funds will more likely be invested in products that meet with union
approval.
American labor has been active in using the power of pension funds
to influence corporate policies (Wheeler 2002). Through its corporate
affairs office, directed by Ron Blackwell, the AFL-CIO has adopted a
strategy of educating pension fund trustees in socially responsible invest-
ing. The International Brotherhood of Carpenters and Joiners and other
craft unions have moved beyond involvement during corporate share-
holder meetings to even picket companies in which they own shares.
This is in addition to efforts by the AFL-CIO Office of Investments to
make labor the leading voice in the United States for reforms in corpo-
rate governance (BusinessWeek 2003).
companies learn about best practices. It does have a “base code” that is
agreed to by participating companies, unions, and NGOs (Ethical Trad-
ing Initiative 2003). The Clean Clothes Campaign (CCC), headquar-
tered in the Netherlands, aims at improving labor conditions in the
global apparel industry. Its code is very similar to that of ETI, although it
goes beyond with respect to the right to collective bargaining (Clean
Clothes Campaign 2004).
An important source of standards and pressure for compliance with
them is the Global Reporting Initiative (GRI), whose “sustainability
reporting guidelines” are standards similar to many of those described
above. GRI, an official collaborating center with the UN, works in coop-
eration with the UN Global Compact and seeks to “harmonize and inte-
grate” efforts to set standards and ensure compliance (Global Reporting
Initiative 2004).
Benchmarking. A diverse coalition of religious and advocacy groups
has come up with yet another method of influencing corporations to
behave in an ethical, socially responsible manner. In 2003, “Principles
for Corporate Responsibility: Bench Marks for Measuring Business
Performance” were released by groups including the Interfaith Center
on Corporate Responsibility in the United States and similar organiza-
tions in the United Kingdom, South Africa, Canada, and other coun-
tries. Delegates from 22 countries were involved in the process of
benchmarking over a period of about 10 years. The Bench Marks doc-
ument calls for, among other things, “corporate governance policies
that balance the sometimes competing interests of managers, employ-
ees, shareholders and communities; and that are based on ethical val-
ues, including inclusivity, integrity, honesty, justice and transparency”
(Bench-Marks 2003:1).
What is unique about Bench-Marks is its explicit basis in religious
beliefs. It declares that, on the basis of religious faith, it views the global
economy in terms of “its impact on the environment, how it touches
human life, and whether it protects the dignity of the human person”
(Bench-Marks 2003:2).
Corporate Codes of Conduct. Since at least the early 1990s, it has
become increasingly common for large corporations, both domestic and
multinational, to adopt their own codes of conduct. It has been esti-
mated that some 60% to 70% of major American companies have these
codes (Sethi 1999). Several hundred were identified by studies per-
formed in the 1990s (Elliott and Freeman 2003). These are generally
seen as being voluntary, but it has been argued that all of the companies
with these codes have been “dragged kicking and screaming” into having
them (Maquila Solidarity Network 2004:1).
LERA05.chap05.qxd 8/1/05 11:54 AM Page 130
ration to criticism for not living up to them. Those whom Elliott and
Freeman call “human rights vigilantes” (2003:59) have been able to pres-
sure firms to hold common standards and accept independent monitor-
ing. While some firms have utilized international accounting firms as
monitors, others have accepted monitoring by FLA, WRAP, SAI, WRC,
and other NGOs that exist for this purpose. A number of groups, includ-
ing women’s organizations in Asia and Central America, have been able
to use corporate codes in their efforts to improve labor standards
(Maquila Solidarity Network 2004). A number of the more recent codes
have included provisions for independent verification of compliance
(Maquila Solidarity Network 2004).
country in the pact to enforce its own labor laws. The free trade agree-
ments of the United States with Jordan, Chile, and Singapore all have
labor standards in the main text of the agreement (Elliott and Freeman
2003). Most recently (May 28, 2004), the U.S. trade representative
signed the United States–Central American Free Trade Agreement
(CAFTA) and announced plans to sign a similar agreement with the
Dominican Republic. This agreement contains an obligation for the
countries to enforce their own laws but no other labor protections. U.S.
Senator John Kerry, during his Democratic candidacy for president,
opposed the pact because of its inadequate labor and environmental
protections (Bureau of National Affairs 2004b). Whether obtaining the
agreement of a country to enforce its own laws meets the moral obliga-
tion of the United States to enforce human rights depends on the con-
tent of that country’s laws. In the case of NAFTA, it appears that, in
principle, this would be sufficient. However, there is the further ques-
tion of whether this obligation is enforceable as a practical matter. It is
here that such agreements pose real difficulty.
A number of protests at World Trade Organization (WTO) and
World Bank meetings have aimed at the various effects of globalization.
A great deal of the impetus behind these protests comes from concerns
over the effects of globalization on labor conditions and rights. The
United States has unsuccessfully attempted to place labor and environ-
mental standards on the agenda of the WTO (Irwin 2002).
Critics of the idea of enforcing labor standards through trade sanc-
tions argue that (1) low labor standards do not give countries an unfair
advantage in international trade (it is low productivity that determines
wage levels, so their low productivity compensates for their wage advan-
tage); (2) standards such as limitations on child labor will only harm
workers in developing countries, and the problems of child labor are
best solved by eradicating poverty and improving educational opportuni-
ties; and (3) forcing a raising of standards by WTO action would cost
workers in developing countries their jobs or would, at best, create an
elite of workers in the export sectors of their national economies (Irwin
2002). It is argued that linking trade and labor standards is impractical
because of a lack of international consensus on the meaning of the stan-
dards and on how to decide whether the standards have been violated
(Bureau of National Affairs 2004a). However, as suggested by labor
unionists, the need for rules exists in the global society, just as in national
societies (Bureau of National Affairs 2004b). Indeed, the logic of the
international antilabor standards argument could be applied at the
national level as well. Yet, except for some extreme neoclassical econo-
mists, few students of employment relations issues would seriously argue
LERA05.chap05.qxd 8/1/05 11:54 AM Page 133
Conclusions
What has been the result of the great deal of recent activity regard-
ing ethical norms in employment relations for corporations operating
globally? There does appear to be consensus among the UN, other inter-
national agencies, NGOs, and the many corporations that have adopted
codes that companies face moral obligations in their international opera-
tions. It is important to note that this consensus is not limited to govern-
ments. The ILO, for example, consists of representatives of employers
and trade unions as well as governments. Some NGOs have corporate
representatives on their governing bodies. Corporate codes have been
set out by companies themselves.
The obligations included in this consensus exceed those imposed by
the laws of any particular country. Indeed, one of the ideas underlying
corporate social responsibility is that a common body of ethical princi-
ples exists transcending national cultures. It is this idea, however, that is
called into question by the LDCs, who argue that the standards are not
LERA05.chap05.qxd 8/1/05 11:54 AM Page 134
only Western ones but that they are being applied to LDCs only after no
longer affecting the countries now insisting on them. This is a funda-
mental philosophical question, long familiar to scholars of jurisprudence
debating the existence of universal natural law.
Assuming that it makes sense to have universal standards, it is rea-
sonably clear what they should be, at least in the most general terms.
The ILO core labor standards state minimum worker rights; there would
appear to be little argument that the worst forms of child labor, forced
labor, and discrimination on grounds of race, sex, and other characteris-
tics should be prohibited. I believe it equally clear that freedom of asso-
ciation in unions and collective bargaining is also a fundamental and
unalienable human right (Ogle and Wheeler 2001; Wheeler 2001).
Other statements go further than the ILO standards. As to collective
bargaining rights, the OECD guidelines include the obligation of
employers to engage in “constructive negotiations” with worker repre-
sentatives, make company facilities available to them, provide them with
information, “promote consultation and co-operation” with them, and
“provide information to employees and their representatives.” SAI
requires employers to find “parallel means of association and bargaining”
where national law interferes with the employees’ right to have a union.
The WRC model code requires a company not to cooperate with gov-
ernment prohibitions of collective bargaining, to give union organizers
free access to employees, and to recognize a union selected by employ-
ees. The CCC requires employers to “adopt a positive approach” and
have an “open attitude” toward trade unions. In my view the right to
freedom of association is so fundamental to the guarantee of a free and
democratic society, and to other rights in the workplace, that the
expanded version of collective bargaining rights contained in these docu-
ments is the one that should be adopted. In Paine’s (2003) terminology,
it is deserving of employers’ full, rather than merely basic, commitment.
There are at least two other areas in which the ILO standards appear
to be lacking. The first is pay. The UN norms require pay at a level that
ensures an “adequate standard of living” (United Nations Sub-Commis-
sion on the Promotion and Protection of Human Rights 2003:5). A num-
ber of other sets of standards address pay, with references to a living
wage (Bench-Marks 2003; Ethical Trading Initiative 2003); “just and
favorable remuneration ensuring for [the worker] and [his or her] family
an existence worthy of human dignity” (United Nations 2003a:5); pay
“sufficient to meet the basic needs of workers and their families” (Social
Accountability International 2004:4); pay that “provides for essential
needs and establish[es] a dignified living wage for workers and their
families (Worker Rights Consortium 2004:2); and wages that “meet basic
LERA05.chap05.qxd 8/1/05 11:54 AM Page 135
There is some hope for both government and trade union action to
deal with this problem. The norms that are becoming more widely
accepted are beginning to resemble a body of international law. The
more that this is true, the more corporations are susceptible to being
influenced by world public opinion. The authority of the UN, the ILO,
and the various NGOs can serve as a basis for public pressure. If their
standards are flaunted too shamelessly, the demand for international
regulation will likely grow. Also, it should not be forgotten that human
beings control corporations. They, unlike the corporation itself, have
“souls to damn.” Perhaps they can be made more sensitive to avoiding
actions that are condemned by the international community—to avoid
doing wrong.
As for trade union action, it appears that international labor organi-
zations have taken on new life. In recent years, five of the Global
Union Federations have entered into some 26 framework agreements
with multinational firms (International Confederation of Free Trade
Unions 2004). So for the first time we have a significant amount of
something very similar to international collective bargaining going on.
There had already been a start on this on a regional basis in Europe
(Wheeler 2002). The work of the ICFTU and TUAC on corporate
social responsibility has given them new visibility in global policy mak-
ing. The international union action on socially responsible investing
taps a source of real power within corporations—shareholder voting
rights. To the extent that workers can add the power of their capital to
the power of their labor, they may be able to change the basic nature
of the corporation.
Change in international institutions comes slowly. They do appear to
be moving in the direction of dealing with the phenomenon of globaliza-
tion. As they do so, ethical concepts have assumed increasing importance
in the discourse on globalization. This surely is a positive development.
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CHAPTER 6
141
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Appeal upheld the original decision of the trial court in favor of the
defendant, Nissan Motor Corporation in USA, against the charge of the
plaintiffs, “alleging wrongful termination, invasion of privacy and viola-
tion of their constitutional right to privacy in connection with Nissan’s
retrieval, printing and reading of E-mail messages authored by plaintiffs”
(no page).
This case is important because it occurred early in the use of e-mail
for office business practices. Apparently, in a training session, one of the
plaintiffs’ co-workers used as an example of e-mail an unfortunately
highly personal message sent by Bourke. The message was reported to
management, and many other messages containing personal content
involving Bourke and her colleague Hall were discovered. After receiv-
ing rather low performance ratings on periodic evaluations, Bourke and
Hall filed grievances against Nissan’s human resources department. Sub-
sequently, they sued Nissan for “common law invasion of privacy, viola-
tion of their constitutional right to privacy, and violation of the criminal
wiretapping and eavesdropping statutes” (no page). The trial court found
in favor of Nissan on two grounds, of which one is substantive: “Based
on the undisputed facts, plaintiffs had no reasonable expectation of pri-
vacy in their e-mail messages” (no page). Nissan presented additional
arguments that have by now become familiar in the workplace, namely
that only company business should be carried out on company comput-
ers and that if warnings of lack of privacy are made generally available,
workers have little to complain about.
Smyth v. Pillsbury
One case has become exemplary in illustrating the power of manage-
ment, even when an employee appears to be following company policy
with respect to monitoring. The following discussion is taken from
Rosenberg (1999: 6–7). Michael A. Smyth sued the Pillsbury Company
for being wrongfully discharged, based on information obtained from
Smyth’s supposedly protected e-mail in spite of the fact that the com-
pany “repeatedly assured its employees, including plaintiff, that all
e-mail communications would remain confidential and privileged. . . .
Defendant further assured its employees, including plaintiff, that e-mail
communications could not be intercepted and used by defendant against
its employees as grounds for termination or reprimand” (Michael A.
Smyth v. The Pillsbury Company 1996:no page).
The judge found for the plaintiff, and his reasons are revealing, par-
ticularly in the context of the accepted wisdom that well-defined and
publicized e-mail policies are an absolute necessity for management to
create an equitable and predictable environment. Consider the final
paragraph of his decision:
erroneous” (Dixon 1997:no page). In the end, the safest use of e-mail is
to treat it as the equivalent of a postcard; anyone who has any interest in
the contents can read them with no difficulty and no moral equivocation.
The worker must recognize, and for most this is only a confirmation of
long-held beliefs, that in the workplace, many civil liberties must be
temporarily abandoned.
One final point also worth considering is taken from an analysis of
the decision by the National Workrights Institute (“Electronic Monitor-
ing in the Workplace: Common Law and Federal Statutory Protection”
n.d.:no page):
Fraser lost on almost all the issues, however. In analyzing the find-
ings related to privacy concerns, the lawyer Shannon P. Duffy reports
the following results:
An employer’s decision to dig through an employee’s e-mails in
computer storage does not violate any provisions of the Elec-
tronic Communications Privacy Act since the law bans an
“interception” only if it occurs at the time of transmission and
exempts the owner of an e-mail system from any claim alleging
an illegal “seizure” of stored e-mails, a federal appeals court
has ruled.
In Fraser v. Nationwide Mutual Insurance Co., the 3rd
U.S. Circuit Court of Appeals ruled that since Richard Fraser’s
e-mails were stored on Nationwide’s system, any search by the
company was authorized by an express exemption in the fed-
eral ECPA for e-mail service providers (Duffy 2003:no page).
The legal system currently does little to protect the privacy of work-
ers, and this situation is unlikely to change. Adherence to basic ethical
principles regarding the importance of individual privacy in human
affairs has been abandoned at the entrance to the workplace. The imple-
mentation of privacy policy guidelines with respect to what employees
can expect in regard to their personal communications and other infor-
mation rests solely on the good will of their employers, hardly a recipe
for an equitable working environment.
TABLE 1
Key Elements of a Computer-Use Policy
Polygraph Testing
Lie detecting machines, or polygraphs, have become commonplace
in television dramas, where they are typically used to “prove” someone’s
innocence or guilt. However, as we are often told, the results are not
admissible in court. How do they work? A polygraph machine records
the body’s involuntary responses to an examiner’s questions in order to
ascertain deceptive behavior. The test measures physiological data from
three or more systems of the human body—generally the respiratory,
cardiovascular, and sweat gland systems—but not the voice. There are
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other tests that test the voice for deception (Polygraph Testing: no date).
Of course, polygraphs are subject to a variety of false positives and nega-
tives as a result of artificially altering body responses through the use of
sedatives, antiperspirants, and self-inflicted injuries.
To protect against the misuse of polygraphs, the Employee Poly-
graph Protection Act of 1988 (EPPA) was passed. The American Civil
Liberties Union describes the benefits of EPPA as follows:
However, there are many situations in which lie detector testing is per-
mitted, primarily for government officials and for national security–related
activities (”Lie Detector Testing” 1996):
• The Act permits “lie detector” testing of federal, state, and local
government employees.
• The federal government may administer “lie detector” tests to certain
government contractors engaged in national security–related activities.
• Private security firms and companies that manufacture and distrib-
ute pharmaceuticals are permitted to test certain job applicants.
• Any employer may administer “lie detector” tests in connection
with an ongoing investigation of an economic loss or injury to
his/her business on these conditions: The employee under suspi-
cion must have had access to the property, and the employer must
state in writing the basis for a reasonable suspicion that the
employee was guilty.
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The reasons for employing drug tests are not surprising but are
worth listing:
• Deter employees from abusing drugs and alcohol
• Prevent hiring individuals who use illegal drugs
• Provide early identification and referral of employees who have
drug and/or alcohol problems
• Provide a safe workplace for other employees
• Ensure general public safety and instill consumer confidence that
employees are working safely
It is obvious that drug tests are intrusive, and the American Civil
Liberties Union has pointed out three examples (“Privacy in America:
Workplace Drug Testing” 1997:no page):
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Genetic Testing
DNA has become a valuable tool to identify potential criminals and
to free wrongfully accused or imprisoned individuals. What role might it
play in the workplace?
Whether or not this act will become law remains to be seen, but it is
clear that a consensus exists that constraints must be put in place to limit
the power of management to require genetic testing as well as to limit
how the results can be used. Several states have already responded with
their own laws limiting the use of genetic testing. For example, consider
the following brief descriptions of laws in Oregon and Texas:
them” (Sullivan 2004:no page). Not surprisingly, the sponsor of the bill,
Rep. Debra Bowen (D-Redondo Beach), disagreed: “The bill simply
required companies that want to monitor their employees’ e-mail or
internet use to give them a one-time notice saying, ‘Your computer use
may be monitored at any time.’ ” (Sullivan 2004:no page). It is currently
against California state law to monitor employees’ telephone calls with-
out giving them notice. It seems fair to ask why the newer technology,
with its greater power to monitor, should not be governed by a similar
law. Lawmakers, judges, companies, and employees all need to pay
greater attention to the ethical ramifications of new technologies in the
modern office. Passage of the California bill would have been a signifi-
cant first step.
Note
1 From the website “The Jonestown Massacre”: No date. Jonestown: Examining the
Peoples Temple. On November 18, 1978, over 900 members of a religious group led by
the Reverend Jim Jones were killed in an apparent mass suicide. The megalomaniac
Jones convinced most of his followers to drink a cyanide mixture. Some, including
Jones, were shot, either in suicide or murder. <http://www.boogieonline.com/revolution/
express/religion/jonestown.html>. [December 29, 2004].
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CHAPTER 7
In a time when most organizations claim that “our employees are our
most important [most valuable, greatest] asset,” the ethical challenge to
human resource (HR) managers is clear: How do we avoid treating
employees merely as means? The term “human resources” may be rela-
tively new, but viewing employees as something to be used is as old as
the Roman days, when the tools of production were classified as “dumb
tools” (used of plows, shovels), “semi-speaking tools” (used of animals),
and “speaking tools” (used of slaves). While many employees would pre-
fer to be referred to as an asset rather than as an expense or liability, the
phrase “human resources” still rankles among those who see it as evi-
dence that employers have not changed over the millennia. Assuming,
arguendo, that we are discussing HR managers who wish to be ethical,
one of their main challenges is to belie their titles. That is, they must
manage humans not as resources but as autonomous individuals with
legitimate rights and interests.
Ethical Theories
Elsewhere in this volume, others describe ethical theories in depth. I
will not repeat those theories, save to suggest that each has something to
say about how HR managers do their jobs. HR managers face the Kant-
ian ethical question of how to ensure that their treatment of employees,
applicants, and former employees respects the autonomy of those con-
stituents. Stakeholder ethics also requires that the HR manager consider
the interests of employees, applicants, and former employees, at least if
we are to accept Clarkson’s definition that “stakeholders are persons or
groups that have or claim ownership, rights, or interests in a corporation
and its activities, past, present, or future” (1995:106). HR managers who
judge ethics by fairness or justice must apply them to employees, appli-
cants, and former employees, and they may even be required by Rawls’s
173
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(1971) conception of justice to ensure that the least well off are not disad-
vantaged by the policies they implement and also have a voice in decision-
making processes.
Utilitarian HR managers must consider the outcomes of their decisions
on everyone, including employees, applicants, and former employees. And
virtue ethics would recommend developing habits that contribute to the
flourishing of humans, as individuals and in community. While there
might be special situations in which a particular ethical theory would
prescribe behavior different from that prescribed by other theories, my
interest is not in ferreting out those exceptions but in illustrating the
claims these theories make on HR managers desiring to be ethical in
performing their functions. Therefore, where I use such words as “fair-
ness,” “stakeholder,” and “duty,” I intend to invoke principles of ethics
derived from the theories discussed elsewhere.
Types of Ethical Issues Addressed
Three different types of ethical problems face HR managers. The
first type is the need for discernment—determining the right thing to do
in very complex situations. The HR manager has both authority and the
support of management to make and implement decisions, but he or she
still must weigh options and make decisions with incomplete informa-
tion. The second type of problem is a conflict between the HR man-
ager’s professional judgment of what is right and the responsibility as an
agent of the employer to do what the employer asks. The third type of
problem involves conflict of interest—or appearance of conflict of inter-
est—when the HR manager’s personal interest differs from the responsi-
bility as an agent of the employer. The first type of problem has the
potential to turn into the second or third type once the HR manager
determines the appropriate course of action.
The common challenge with all three problems is recognizing them
(Rest 1976). Often, in the day-to-day requirements of running a human
resources operation, the manager does not have time to reflect on the
ethical implications of an action (Moberg 2000). The more obviously
“ethical” situations involve virtue or moral courage—the HR manager
simply has to refuse to do that which is not right and choose to do what
is. For example, an HR manager who looks the other way or even helps
falsify the paperwork when a hiring manager uses slave labor is not fac-
ing an ethical issue but rather simply failing to do right. There are many
cases, though, where HR managers do not know all of the facts, do not
think about the implications of a decision, or do not see themselves as
moral agents in the decision and thus do not recognize it as a moral
issue.
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Functions of an HR Manager
HR managers are taught that they have four basic functions with
respect to employees: to recruit, to train, to motivate, and to retain. A
fifth function, terminating, is also performed by HR managers, albeit
usually after failing somehow at one of the other four functions. All of
these functions are aimed at achieving the goals of the organization, and
each has the potential for all three kinds of ethical issues. Some respon-
sibilities (e.g., compensation, benefits, labor relations, record-keeping)
cross several functions. For example, compensation is used to recruit
applicants and to motivate and retain employees. Labor relations
(addressed in another chapter) affect recruiting, training, motivating,
retaining, and terminating employees. Practices in organizations vary
widely, so not all of the descriptions of issues here will apply to every
organization.
Recruitment
HR managers know all too well that, despite organizational rhetoric,
they are not looking for the best qualified person for each job. They are
looking for someone who can do the job well and, in some cases, for
someone who shows promise for being promoted. To this end, HR man-
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jobs they have already been promised. Often the advertisement is placed
at the behest of the HR manager, who insists that the position be adver-
tised to provide equal employment opportunities. But since advertising
does not ensure that the hiring manager will be any more open to con-
sidering all applicants, the HR manager’s goal would be better served by
establishing a procedure under which hiring managers can request
exemption from any requirement to advertise vacancies by providing evi-
dence that forgoing advertisement is appropriate in the particular case.
With a decision to advertise outside the organization made, the HR
manager should consider the organization’s stated values and choose
methods that reflect them. Word-of-mouth advertising, for example, is
most likely to generate applicants similar to current employees. If the
organization claims to value diversity but is not already diverse, this form
of recruitment would call into question the truth of the organization’s
claim. Similarly, website advertising may create a bias in favor of wealth-
ier and younger applicants. If computer skills are not important to the
job, such advertising diminishes the integrity of the process. The HR
manager’s job is to consider cost-effective outlets where qualified candi-
dates are most likely to see or hear a vacancy announcement. In choos-
ing among those outlets, the HR manager’s ethical obligation is,
foremost, not to bias the pool unfairly and, second, not to bias it in ways
that conflict with the organization’s stated values. (If the values them-
selves are unfair, the HR manager has no obligation to ensure that they
are enacted in advertising positions.)
Adhering to the organization’s stated values is, in ethical terms,
promise keeping. If the organization promises in its stated values to pro-
mote from within, an initial advertisement beyond the bounds of the
organization would violate that promise. The more difficult problem for
the HR manager is determining when the inevitable bias caused by the
choice of advertisements is significant enough to render the process
unfair. One important consideration is the intentionality of the bias
(Kant’s notion of a “good will”). For example, it is impossible to ensure
that no employee is on leave when a vacancy is announced, but if a hir-
ing manager waits until a particular employee’s vacation week to adver-
tise a vacancy because the manager wants to avoid considering the
person, that bias is unfair. A second important consideration is the
potential effect of the choice of advertisement on society. Ethical theo-
ries put varying degrees of emphasis on the outcomes of an action, but
they would suggest considering whether the bias caused by the advertis-
ing benefited those least well off in society, whether there was more
good than harm done by the bias, and whether important stakeholders
were considered in the decision. The advertisement of any particular
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even when the employer knows that they are valid through extensive
studies linking test scores with job success. One threat to test validity
exists if applicants who take a test multiple times can do better on that
specific test, but not necessarily on the job, just because they have prac-
ticed the test (Huasknecht, Trevor, and Farr 2002). If there are practice
effects that are not related to on-the-job performance, to preserve fair-
ness HR managers should consider whether to implement rules limiting
the number of times an applicant can take the same test.
HR staff may conduct recruiting or screening interviews, and surely
every HR manager has experienced having a CEO or other senior staff
member send people to be interviewed “as a favor.” In these cases, HR’s
role is to represent the organization well and to become familiar enough
with the applicant’s qualifications to help locate vacancies in the organi-
zation that might prove fruitful. The ethical HR representative must be
careful not to overpromise to the applicant or to misread the degree of
assistance promised by the senior staff member.
After the applicant pool is narrowed through evaluating preferred
qualifications and testing, there is often a small set of applicants pre-
sented to the hiring manager for interviews and the selection decision.
The HR manager bears some responsibility for training the hiring man-
ager in interviewing technique and for reviewing the process to ensure
that interviews are conducted and evaluated fairly. Many organizations
are moving toward establishing work teams, with the team empowered
to select its members. There is some evidence that teams are more likely
to pick people like themselves, demographically, and thus engage in
unlawful discrimination as agents of the employer (Goins and Mannix
1999). The HR manager has an obligation to create mechanisms that
reduce this tendency.
An ethical issue associated with the interviewing process is the
amount of privacy protection due applicants. Depending on the appli-
cant’s power in the situation, various ethicists have recommended elimi-
nating all questions aimed at determining attitudes, motivations, and
beliefs, arguing that applicants have a right to keep this information to
themselves. Others see this position as paternalistic (Nye 2002). The HR
manager’s job is to discern the appropriate amount of privacy protection
due applicants and convey this to hiring managers.
As genetic screening tests become available, employers face the pos-
sibility of having information that could be relevant to long-term
employment decisions. Knowing that a particular employee has a greater
likelihood of developing a serious disease can tempt an employer to pass
over that person for promotions or for training requiring long-term
investment. HR managers have a responsibility to ensure that these
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records are not available to anyone but the employee and that such data
are not collected without the employee’s knowledge and consent.
Many HR managers in industries with very low-wage jobs find
themselves in the position of not knowing whether their employees
are legally allowed to work—for example, because they are aliens,
because they are below a minimum age, or because they have not
obtained required licenses. In some cases, line managers obtain
forged supporting documents (birth certificates, passports, etc.) prov-
ing eligibility to work. While lack of participating in the forgery may
exempt the HR manager from legal liability, he or she still has an ethi-
cal obligation to take reasonable steps to ensure that neither line man-
agers nor new employees violate laws that are themselves ethical.
Random checks of original documents may eliminate widespread vio-
lations, but there may be no way to thwart the determined violator.
Internal whistleblowing by the HR manager may be necessary to
bring violations to the attention of someone with the power to enact
sanctions. Clear and relatively harsh consequences for employees who
are complicit in hiring illegally may be the only way to convey the
organization’s lack of support for such behavior.
Violating hiring laws would generally fall in the area of unethical
behavior. However, HR managers sometimes must discern whether the
law, various regulations, or court decisions are ethical. For example,
organizations considering employing persons with disabilities whose con-
ditions pose a threat to their own health and safety on the job but not
the health and safety of others faced conflicting Equal Employment
Opportunity Commission (EEOC) regulations and court decisions. The
EEOC allowed employers to refuse employment on this basis, but the
9th Circuit Court of Appeals did not. While this controversy has been
resolved by the U.S. Supreme Court, in favor of the EEOC regulations,
it illustrates a case where the HR manager must balance concern for the
health and welfare of the prospective employee against employees’
rights to make decisions about their own health and welfare (Reed
2003). Similarly, HR managers of multinational corporations during
apartheid in South Africa made decisions to violate local laws requiring
separation of the races.
A common complaint from applicants is that they submitted applica-
tions and “never heard back” from the employer. This contributes to a
perception of unfairness, and it may actually inhibit the freedom of an
applicant who waits to hear about an employment application rather
than go on vacation or accept other employment. At the conclusion of
the selection process, the ethical HR manager will ensure that unsuc-
cessful applicants are notified promptly and kindly of rejection decisions.
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take unnecessary risks. Again, while the burden of legal liability may be on
someone else, an ethical HR manager will implement systems to monitor
the transfer of the training to the workplace and will build incentive systems
that encourage safety.
Values Training. Some employees resent being required to attend values
training because they see it as an attempt to indoctrinate them into a partic-
ular religion or to brainwash them. The HR manager, who presumably
shares the organization’s values, should ensure clear consistency both
between values addressed in training and those supported by the organiza-
tion and between these values and the organization’s reward and discipline
systems. The training should also recognize that new employees may intend
to be ethical but may be less sophisticated than experienced employees in
evaluating the implications of various behaviors (Stevens 2001).
There should also be some provision for employees to opt out of
training they consider morally objectionable. However, enough such
requests should give the HR manager pause. It could be simply the
method of training and not the core value that is in question, but it could
also be time to reexamine the underlying values or the employee selec-
tion methods. Ever since Weber (1930) described how religious beliefs
can fuel corporate profits, employers have sought to select employees
with some set of religious or quasireligious beliefs or to create it in them.
The Kantian idea of a categorical imperative can guide HR managers
trying to ensure that all employees accept certain values. Some values,
such as participative management, tolerance, and diversity, create inter-
nal inconsistencies when organizations attempt to require them as “rules
for all.” Requiring all managers to use participative management, for
example, does not allow managers to participate in the decision to use it.
Requiring tolerance of all employees is intolerant of those who are
themselves intolerant. Embracing diversity means embracing even those
who do not embrace diversity. Rules that the HR manager either does
not want applied universally or cannot imagine applying universally
should not be implemented. The HR manager should periodically
review values-training programs to ensure that they are consistent with
all of the organization’s values, not simply the one or ones being addressed
in that particular session.
Employers have occasionally been required by law or court order to
train employees in certain values, such as diversity. In these cases, the
HR manager is faced with following the law, advocating for a change in
the law, breaking the law, or resigning. Deciding among these options
requires considering one’s personal position and the organization’s posi-
tion. If they are not in concert, and neither party is convinced by the
other to change, an ethical HR manager will resign. This is because ethi-
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vacancies and does not provide such training to those deemed not pro-
motable. To ensure that such planning does not treat employees unfairly,
HR managers should develop procedures that, at a very minimum, allow
employees to indicate their interests in being promoted and notify those
deemed not promotable of the decision. Employees remain with organi-
zations with the belief that they will have a chance to compete for future
vacancies on a level playing field. If a determination is made to give the
inside track to certain employees, in terms of both training offered and
preference for assignments, then the employees deemed not promotable
should not be deceived into thinking that, if they are loyal employees,
their tenure will be rewarded with promotions. They should be provided
with clear feedback that enables them to consider whether they want to
remain with the current organization without being promoted or to try
their chances at another. If current trends continue, such that employees
have reduced expectations that they will remain with the same employer
for life, this may become less of an ethical issue (Cappelli 1999).
Motivation
In designing motivation systems, HR managers seek to align
employees’ goals with those of the organization. This can be done
coercively or by convincing employees of the worthiness of the orga-
nization’s goals and the value of employee contributions to them.
Designing effective motivation systems is difficult; ensuring that they
have no coercive element is almost impossible. The HR manager’s
ethical challenge is to consider the amount of coercion used and dis-
cern whether it is reasonably balanced against the employee’s power
in the situation and whether it serves the goals and values articulated
by the employee. Taking the car keys away from a drunk would-be
driver is coercive, but it properly considers other stakeholders as well
as the values the driver has when sober. Similarly, docking the salary
of an employee who fails to follow safety regulations is a coercive way
to change behavior, but it can also be an ethical way to motivate a
recalcitrant employee. On the other hand, offering huge sums of
money to employees to work in dangerous environments may be an
unethical form of coercion, especially if the technology exists to make
the environment less dangerous. The problem of discernment for an
HR manager wishing to behave ethically is determining the point at
which “hazardous duty pay” stops being a reasonable recognition of
risk freely undertaken by an employee and becomes an offer the
employee truly couldn’t refuse. Coercion removes the employee’s
freedom to choose, thus abridging the right to liberty (Greenwood
2002).
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establishes pay caps for jobs based on market analysis, the manager may
be tempted to recommend eliminating caps as he or she approaches the
limit, based on the desire to earn more money rather than professional
judgment about the caps. The ethical obligation is to ignore such tempta-
tion and instead continue to develop a system that is best for the
employer, administer it impartially, and build in checks and balances.
HR managers’ problem of discernment requires determining a com-
pensation system that is fair and just, and this may differ within and
between organizations. Issues include the appropriate difference
between pay for the CEO and for rank-and-file employees, systems for
paying line versus staff employees, comparable worth, merit-based pay,
team-based pay, power differences in salary negotiations, coercively high
pay, unpaid work, paid breaks, travel pay, overtime pay, vacation pay, hol-
iday pay, and sick pay, among many others. In some jurisdictions, local
and national laws govern the treatment of some of these issues, and the
problem becomes more complex in multistate and multinational organi-
zations (Graham and Trevor 2000; Donaldson 2001).
Much of the current controversy regarding compensation addresses
executive compensation, especially for CEOs in publicly held firms
(Hannafey 2003). Decisions on executive compensation are almost
always outside of the HR manager’s job, though the manager may be
able to use informal influence and earned authority to affect these deci-
sions. In cases where the HR manager cannot create a fair compensation
system because of decisions made by senior managers or the board of
directors, the only ethical recourse may be to resign.
Performance Appraisal Systems. Performance appraisals are almost
universally dreaded. Despite this, HR managers argue, at least publicly,
that appraisals are valuable because they know that feedback is impor-
tant to smooth organizational functioning and that informal feedback,
while essential, is not remembered the same by both parties. At their
best, performance appraisals motivate employees to continue the things
they are doing well, to improve at things they are doing poorly, and to
cease things they should not be doing at all. At their worst, they are
used to attack or protect employees based on managers’ likes and dis-
likes. Ethics dictate that the HR manager not create a system so com-
plex, cumbersome, or unmonitored that supervisors ignore it or use it
improperly.
Employee Monitoring. Many employers have systems of monitoring
employees—to measure productivity, to prevent theft, or to protect oth-
ers (Hoffman and Hartman 2003)—through videotaping, capturing key-
strokes, reviewing e-mail, tapping telephones, collecting specimens for
drug testing, or tracking locations (Mishra 1998). In all cases, the HR
LERA05.chap07.qxd 8/1/05 11:56 AM Page 191
manager must weigh the employee’s right to privacy against the reason
for the monitoring. Some ethicists argue that monitoring systems offend
against employees’ freedoms and that the legitimate ends of monitoring
can be achieved in less intrusive ways (Mishra 1998).
Climate and Culture. There is evidence that the organizational cli-
mate and subunit climate can motivate employees to engage in ethical or
unethical behavior (VanSandt 2003; Weber, Kurke, and Pentico 2003).
Insofar as the HR manager has control over climate, there is an ethical
obligation to ensure that it is ethical. However, even when the HR man-
ager cannot control climate, especially in subunits, he or she may set up
systems to monitor climate and provide training or advice to managers
on how to improve it.
Charitable Contribution Campaigns. Many employers seek to moti-
vate employees by projecting an image as a caring, socially responsible
organization. Some sponsor campaigns to encourage employees to con-
tribute to charitable organizations, including, in the cases of qualified
organizations, the employer itself. This practice, when carried out with-
out coercion, can contribute to employees’ sense that their employer
does good, especially when the employer matches employee contribu-
tions. However, some employers pressure employees for contributions,
eliminating the strategic purpose of motivation and reducing the overall
good done by the organization. HR managers are usually removed from
the solicitation activity, giving them freedom to lessen pressure on
employees by reminding both solicitors and those solicited that contri-
butions are truly voluntary. They should remind management, in partic-
ular, to discourage campaigns seeking 100% participation and to
recognize employee charitable activities not connected with the organi-
zation’s campaign.
Job Design. The HR literature argues that jobs need to be intrinsi-
cally rewarding to be motivating. Hackman and Oldham’s classic set of
factors is still used today (Hackman, Oldham, Janson, and Purdy 1975).
Jobs must have skill variety, task identity, task significance, autonomy,
and feedback to have the potential to be motivating. Some ethicists sug-
gest that employers have an obligation to ensure that jobs are intrinsi-
cally rewarding. Others suggest that it is an obligation to design jobs in
a way that makes them more accessible to people with disabilities. HR
managers should consider such arguments in writing job descriptions.
Similarly, there is considerable debate over the number of hours a week
a person is expected to work. Flexibility in hours worked makes jobs
more accessible to people with lower levels of stamina, with competing
home responsibilities, or with restrictions on the income they can earn.
Determining that a job is “part-time” has significant implications for
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Retention
The origin of many HR departments can be traced to Henry Ford’s
efforts to maintain a stable, trained workforce. He paid employees more
money and offered them long-term benefits, such as retirement, that
made it very difficult for them to quit. The first ethical challenge for HR
managers is to examine the measures used to retain employees and to
ensure that they do not make it so difficult to quit that employees will
not leave or confront the organization even when put in untenable ethi-
cal positions. Do the on-site child care, company-subsidized mortgage,
stock-option incentive pay, and family-friendly health plan tie employees
so closely to the company that they are afraid to quit or to report irregu-
larities? Even if the HR manager determines that the benefits offered
have enough portability not to bind employees too closely, there are eth-
ical issues surrounding the specific programs implemented and the
amount of choice given employees.
Benefits. The negotiating power that a large employer has in pro-
viding benefits for employees helps drive the costs lower than they
would be if they were purchased individually by the employees. How-
ever, HR managers must consider the ethical implications of reducing
costs for their own full-time employees while increasing them for their
part-time employees, the unemployed, and persons employed in the
secondary labor market. This is probably irrelevant for some of the
more trendy benefits, such as on-site dry cleaning and fitness centers,
but for retirement and health insurance, the reflective HR manager
whose ethical concern goes beyond the organization’s boundaries must
consider these implications. I do not mean to suggest that any individ-
ual HR manager has the power to reverse the dominant U.S. model for
providing health benefits to employees. In fact, were any organization
to cut its benefits significantly, it might be violating its duty to keep
promises to employees unless it made arrangements for the same ben-
efits to be provided through another source. HR managers in multina-
tional firms, however, would do well to consider whether adding
U.S.-style benefits might begin a trend to undermine functioning
national systems.
The most common method of providing benefits to employees of
large organizations is to offer them an array from which they can choose.
In some cases, employees are given a fixed sum of benefit dollars to
spend; in others, they are given the option to use part of their salary to
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purchase the benefit. Many benefits are available through salary reduc-
tion, which shields part of the employee’s salary from income taxes.
Even where there is a choice in benefits, the HR manager must
decide which benefits will be included and, usually, which carrier will
provide them. An ethical issue facing HR managers in this arena is the
potential for conflict of interest. It can take two forms. First, the HR
manager, as an employee, can be tempted to select programs for the
benefit smorgasbord that are personally appealing. Second, since large
revenues hinge upon these decisions, insurance carriers can be tempted
to offer kickbacks or other incentives for the HR manager to select
them. In both cases, the HR manager has a clear ethical obligation not
to allow personal considerations to affect professional choices.
HR managers also have to balance the welfare of employees against
the cost of benefit plans, and they have to make decisions about the
amount of choice employees can reasonably be given. Obviously, com-
panies could go bankrupt offering employee benefits. The strategy of
offering benefits thus must take into account the likelihood that offer-
ing a particular benefit will help the employer attract better employ-
ees, retain desirable employees at lower overall cost, and motivate
employees to devote more hours to productive work. The strategic
question is not easily answered by a formula. Some benefits have a
very short half-life on the employee-motivation scale, after which they
become minimum requirements. By offering “cafeteria” plans of bene-
fit choice, employers reduce the need to up the benefit ante every
year, but they also increase administrative costs and decrease their pur-
chasing power. So even within their obligation to be good stewards of
employer resources, HR managers have real choices to make that have
ethical implications.
Over the past half century, the costs of benefits have skyrocketed,
with health insurance costs accounting for a large portion of the
increase. The introduction of health maintenance organizations
(HMOs) and preferred provider organizations (PPOs) to the mix slowed
the rise for some time, but some of the limitations imposed by these
plans created very real problems for employees. HR managers were
faced with angry employees, who felt that their psychological contract
with the employer had been violated (Lucero and Allen 1994). As
demand for lifting the restrictions increased, so did costs. In response,
some companies are cutting benefits or increasing the portion of the
costs paid by employees. The ethical implications of cutting benefits or
increasing co-payments mean that even when employers offer benefits,
many lower-paid employees (Rawls’s “least advantaged”) are unable to
purchase them.
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that having decision makers who are not part of management increases
the number of grievances (Colvin 2003). However, even if the typical
system is used, it is important for managers to receive training that
enables them to see the employees’ side of issues (Moberg 2003). An
ethical HR manager will encourage legitimate grievances, will have them
heard in a just platform, and will seek meaningful resolutions.
Termination
Not mentioned in the core responsibilities of HR managers but still a
very real part of their jobs are employee dismissals, layoffs, resignations,
and retirements. Employees who violate the organization’s rules or fail to
meet the standards established for their employment are dismissed.
Those whose jobs are no longer needed, due to changes in organiza-
tional structure, goals, or finances, are laid off. The main difference
between the two is that dismissal is person specific while layoff is job
specific. In either case, the person affected is often devastated, and the
HR manager has the ability to make the process less distressing. While
the law in some places allows an employer to fire an employee for “a
good reason, a bad reason, or no reason at all,” Kant ([1785] 1981) would
suggest that only actions done for good reasons can be good.
Dismissal. Dismissals for rule violations are different from dismissals
for poor performance; the first is willful, while the second may not be. The
distinction has implications for how an HR manager addresses dismissals.
“Fault” and “blame” should not be ascribed to people who are unable to
achieve the standards of the organization, especially if they have been able
to achieve those standards for years or are new employees. In the first
case, it is likely declining capabilities that cause the inability to meet stan-
dards, and blaming a person for a natural process is cruel. In the second
case, the HR manager is perhaps more blameworthy, having assessed the
person’s qualifications and determined that he or she could perform the
job duties. However, in cases where the employee has chosen not to meet
standards or has intentionally violated a rule, the HR manager may take
pains to explain that the dismissal was within the employee’s control.
HR managers have an obligation to make sure that systems of dis-
missing employees for rule violations are fairly designed and adminis-
tered and clearly articulated. While employees whose productivity is
high may be given special dispensation to violate rules (for example, to
come to work late), it is important for HR managers to ascertain that all
similarly situated employees receive the same dispensation. It is easy to
look at an individual’s record and say, “Of course that person deserves to
be fired,” but fairness cannot be determined until the HR manager has
compared that record to the records of those who are not being consid-
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ered for firing. The manner in which the employee is informed of the
dismissal, as well as treatment after the notice has been provided, must
respect the dignity of the employee and the safety of co-workers. Cases
where disgruntled people take up arms and attack former supervisors or
co-workers are rare enough to make front-page news, but the HR man-
ager’s ethical responsibility is to take steps to make sure they stay rare.
Layoffs. When there are insufficient funds or orders to justify the
size of the workforce, workers are laid off, either temporarily (until busi-
ness picks up) or permanently. Layoffs are sometimes conducted under
very strict rules, requiring people to be dismissed in reverse order from
their hiring and providing “bumping rights” to people to return to previ-
ously held positions, forcing the incumbents to be laid off instead. The
first job of the ethical HR manager is to provide alternatives to layoffs,
outsourcing, or downsizing to the other managers considering the action.
This requires clearly understanding the anticipated outcomes in terms of
what might happen to all of the stakeholders: employees, potential
employees, local communities, external communities, and stockholders
(Arnold and Bowie 2003). The HR manager must also clearly under-
stand all of the contracts, both actual and psychological, surrounding the
relationships with current employees.
Assuming that a layoff does occur, the second job of the ethical HR
manager is to provide notice, placement assistance, and recommenda-
tions for those being laid off. The specifics for each of these depend on
the situation. The ethical HR manager should focus on looking out for
those least advantaged by the decision. The third job is to provide for the
emotional reactions of the “survivors,” both rank-and-file co-workers and
managers in the affected unit (Dewitt, Trevino, and Mollica 2003).
Resignation. Employees who quit their jobs sometimes leave because
they haven’t found an outlet where they can voice their complaints. One
way an HR manager can help these employees is to provide exit inter-
views, which, though not completely satisfying, may at least help the
employees to feel as if their departure could help those left behind.
Assuming the HR manager investigates and acts on complaints voiced in
these interviews, other employees can be helped by subsequent reforms.
One practice prevalent in some industries is to process all resignations
immediately, despite any employee attempts to give notice. Unless there
is a compelling reason to do otherwise, HR managers should encourage
practices that reward giving notice rather than punish it.
Death. Employees who die while employed leave family members in
vulnerable positions with respect to the employer. The ethical HR man-
ager can smooth the way for survivors by providing prompt and clear
information on final paychecks, life insurance, continuation of health
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Conclusion
Having been an HR practitioner for more than a decade, I have spe-
cial sympathy for the pressures HR managers live under. It is rare that
they can sit back and reflect on the many ethical issues involved in every
decision they make. It is even rarer that they find other managers in the
organization who are attuned to HR issues from an ethical perspective.
While it may be easy for those removed from the situation to point to all
of the ethical lapses of HR managers, I would hope that industrial rela-
tions and HR faculty would recognize their great potential to assist cur-
rent practitioners and influence the behavior of future practitioners.
Teaching faculty can stress strategic or ethical considerations in
their HR courses. Stressing ethical considerations would be one way to
help develop an ethical sense among future practitioners. Faculty can
make a course in ethics a prerequisite for their own HR courses and
then address ethics regularly in relation to the topics they cover. They
can invite ethicists to give guest lectures and local HR managers to talk
about ethical issues they face. A few of the available HR textbooks
address ethics in almost every chapter—choosing those over textbooks
that ignore ethics or relegate it to a paragraph or two would be one
way to underscore that students should consider ethics in all that they
do. In “HR for the non–HR manager” courses, faculty can give other
managers an appreciation for the multiplicity of ethical issues involved
in their interactions with employees and with the HR department.
Research faculty have the opportunity to do considerably more work
in the area of HR ethics. They have examined HR practices alone and in
“bundles” to determine whether there are any that characterize more
productive organizations. The consensus seems to be that there are “bun-
dles” of best practices, but they are industry- or organization-specific
(Macduffie 1995; Hunter 2000). That is, HR practices must work
together toward the achievement of the organizational goal. How the
ethics of human resources fits into this picture is not clearly understood.
Researchers have yet to add what they know about ethics to what they
know about bundles of practices. Similarly, researchers could examine the
human costs of various HR practices.
In the end, though, the burden is on each individual HR manager to
be reflective, always alert to the potential that what appears to be a rou-
tine decision may actually be a chance to do right.
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CHAPTER 8
In the United States, life revolves around work. Over the past 25
years, average annual hours worked in the United States have increased
about 2%, while declining 12% in other OECD (Organisation for Eco-
nomic Co-operation and Development) countries (Mishel, Bernstein,
and Boushey 2003:425). People work for many reasons—to secure
money, to achieve self-actualization, even to escape problems of family
life. As Alan Wolfe noted, however, “in a capitalist society, we value work
to the degree that we establish a value for work” (1997:566). And in the
establishment of work’s value, society creates an intersection where
ethics and workplace issues collide.
The field of labor relations, in particular, includes many issues with sig-
nificant ethical dimensions. Today, for a variety of reasons, the resulting
collision between ethics and labor relations is less audible, albeit more
noteworthy. The nation’s general devotion to capitalism has served both to
discourage reflection on the equity of market-generated outcomes and to
treat as heretical ethical questions raised about the economic system. At
the same time, globalization has increased competition for jobs, especially
for workers with limited education and skills. In combination with the
decline in union density and employers’ victories in labor–management
battles, arguments for efficiency generally dominate concerns for equity.
There exists no widely accepted way to measure ethics in labor rela-
tions. The persistent struggle between unions and employers allows the
ethical character of most labor relations outcomes to be challenged. At
the heart of such challenges is disagreement over the extent to which a
measure of efficiency or equity or voice or freedom or human rights or
something else adequately captures all aspects of the interaction between
employees and managers (see Budd 2004). Even if the parties agreed on
common benchmarks for evaluating ethics, they would likely dispute
their application.
In addition, in labor relations one side’s gain is often perceived as the
other’s loss. Either side may complain that a situation or outcome is
203
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unfair when it does not achieve its preferred position. Any projection of
ethical considerations into labor relations thus appears to be contextual,
as each side strongly adheres to its objectives as moral and right while
rejecting the other party’s position as partisan and self-interested. The
persistence of this “holy war” (see Delaney, Lewin, and Sockell 1985:46)
virtually ensures that one side or the other will dispute any conclusion
that some labor relations approach or outcome is ethical.
Wolfe’s point reinforces the reality that just as union and manage-
ment supporters take different perspectives, so do philosophers studying
ethics. Readers might interpret the numerous and divergent perspec-
tives as suggesting that morality is subjective. For example, philosophers
have advocated both deontological perspectives (focusing on duties) and
teleological ones (focusing on ends). Moreover, ethical discourse is often
abstract and difficult to understand, making it easy to ignore in favor of
arguments of a more primal nature.
Today, economic theory serves as a primal approach by providing an
accepted way to categorize actions. Its unchecked dominance provides
an imprimatur of ethics in a capitalist society. This view is best reflected
in the words of character Gordon Gekko in the movie Wall Street
(1987): “Greed is good.” Economists are somewhat more pious, arguing
the point with the word self-interest. In America and many other parts
of the world today, it’s widely accepted that free markets are good, that
they create efficiency and promote the self-interested behavior of indi-
viduals that generates optimal economic outcomes. It is seen as wrong to
advocate anything other than efficiency, such as equity or voice. In the
best case, advocates of voice or equity are called liberals; in the typical
case they are called much worse. As a result, there is little common
ground across the disputing camps and little reason to develop a com-
mon measure of ethics in labor relations.
Advocates have staked their claims squarely in each of the theoretical
camps (see Friedman 1982 and McGurn 2002, on the one hand, and
Adams 1992, 2001, on the other). Each camp embraces and promotes its
perspective and ignores or rejects the contrary view. Ultimately, this cre-
ates a battle of principles in which contradictory assertions are leveled as
gospel by the disputing sides. Such battles cannot be won. Accordingly,
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may infringe on the freedom of others to avoid the dispute (e.g., workers
idled in other firms, consumers who temporarily lose access to a product
or service, communities that lose tax revenues because of idle facilities),
this concern is not typically dominant. Statutes limit or prohibit strikes
deemed to be harmful to the public (e.g., strikes by police or firefighters
or that threaten national health or safety). Strikes in violation of such
statutes may or may not be ethical. A strike that truly endangered the
population would be ethically unacceptable. In other situations, strikes
are an unfortunate but necessary by-product of a free society.
The human dignity benchmark provides a similarly murky perspec-
tive on the morality of strikes. While free persons have the right to with-
hold their labor, they could choose to do so by quitting their jobs rather
than by imposing costs on their employer and others. If a strike harms
bystanders, observers are forced to analyze whether one group’s inherent
human rights are more important than another’s—a no-win situation. It
is clear, however, that incidents of violence cannot be justified in strike
situations. Even when violence is precipitated by employers’ actions, it is
morally wrong. Deliberate employer efforts to incite violence are simi-
larly wrong. A problem here is the need to hinge ethical conclusions on
an assessment of the motivations of a party engaging in a stoppage. For
example, if an employer precipitates a strike solely to hire replacement
workers and eliminate the union, the action is immoral. If a union initi-
ates a strike to force small nonunion employers in a local industry out of
business, the action is unethical. In reality, it is impossible to know moti-
vations with certainty, and there is an inevitable intertwining of legiti-
mate and illegitimate objectives (e.g., an employer forces a strike to gain
concessions but ends up replacing the workforce). Short of embracing a
teleological approach to ethics (ends justify the means), which obviates
the need to analyze motivations, strike actions will never lend them-
selves to an easy general assignment of ethical implications. It will be
necessary to examine specific circumstances to make moral judgments.
That some workers inevitably choose not to strike almost always
ensures that hard feelings develop among workers. Whether some work-
ers disagree with the union in the first place, have a need to maintain
their job and income, or have legitimate reasons for not striking, when
they cross a picket line they subject themselves to potential retaliation
and repudiation by their co-workers. The situation degenerates into one
in which the right of one group to strike is valued more than the right of
another group not to strike—or the reverse. And yet pragmatically, to
enforce solidarity, unions have imposed penalties on workers who cross
picket lines, and union members regularly impose social sanctions on
their strikebreaking neighbors. From the perspectives of freedom and
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Majority-Rule Unionism
Most nations permit workers to form and join unions to advance
members’ interests. Wide national differences exist in the rights
afforded unions and the protections offered to individuals. In the
United States, unions organizing a majority of workers in a specific
LERA05.chap08.qxd 8/1/05 11:57 AM Page 217
bargaining unit must represent all workers in the unit for purposes of
collective bargaining. This notion of “exclusive representation” and its
derivative duty of fair representation compel unions to gain the sup-
port of a majority of people in a bargaining unit defined by a govern-
mental unit, typically in an election, and to represent all bargaining
unit employees fairly and equally. Exclusive representation generally
ensures that employers potentially need not deal with many small
groups of workers seeking minority representation rights (for a con-
trasting view, see Morris 2005). Such groups could be fragmented
across social, religious, class, or other lines.
The approach has fundamental consequences for the nature of labor
relations in the United States. It restricts workers’ free association rights
by subjecting labor relations to majority rule. This helps ensure that
employees do not use free association rights to form whatever groups
they prefer (e.g., the Christian workers group, the machinists, the Irish
workers group) and to seek special privileges for that group from
employers. Even in small workplaces, employers would be disadvan-
taged if they needed to deal with each group formed by employees, both
because of time costs and the reality that the groups would not have uni-
form preferences regarding outcomes. The result could be an adminis-
trative nightmare, especially if the employer were required to deal with
the issues raised by each group. Whereas an approach advocating pure
free association is akin to a parliamentary system of government, U.S.
labor law mirrors our national political system, which elects officials
based on their receiving a majority of the votes in their district. The sys-
tem avoids the problems associated with multiple minority groups and
multiple conflicting interests by subjugating those interests to the will of
the majority. It assumes that responsiveness to a majority of the people is
important, not responsiveness to each interest and issue of every small
group (or person).
Significant ethical issues arise from the requirement of majority rule.
The system restricts free association rights, and in so doing it ensures
opposition within a group that achieves majority rule because it is
unlikely that every member desires the same thing in a group defined by
bargaining unit rather than by class, religion, or a narrow interest.
Although it has been argued that the NLRA preserves the right of
“members-only unions” (Morris 2005), such unions are rare. In reality,
majority rule creates difficulties for unions, forcing them to organize a
unit of workers rather than an interested group of employees. It creates
a situation in which disputes are inevitable between the majority and
minority groups. And labor organizations must represent all workers,
whether or not they join the union.
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Compulsory Unionism
The system of majority rule and exclusive representation often cre-
ates situations in which some key concerns of one group may not be
addressed, giving certain employees economic incentives to refuse to
join the union. Why pay dues for services that must be provided equally
to all members of a bargaining unit? This free-rider problem is one rea-
son unions have engaged, where legally permitted to do so, in negotiat-
ing contract provisions requiring all members of the bargaining unit to
pay dues or representation fees to the union. While unions see this as an
issue of fairness—people paying for the services they receive—many
individuals see it as being forced to support outcomes, views, and politi-
cal perspectives with which they disagree (Haggard 1990). This situation
has extended the debate about majority representation into another
about compulsory unionism.
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Conclusion
It follows from the examination of selected labor relations issues that
no single ethical standard or approach will be acceptable to union and
management proponents on all issues. Each observer’s perspective colors
significantly the evaluation of the ethics of various issues, strategies, and
actions. Moreover, when freedom is used as an ethical benchmark, an
overall unambiguous answer to ethical queries is often not possible. Since
the perspective of freedom, as preached by economic theory, dominates
the political landscape in the United States today, labor relations will con-
tinue to be controversial in the near future. The growth of global markets
will probably worsen this situation, given that the quest for efficiency often
requires more exertion (or attention) from workers with no guarantee of
extra rewards—establishing a classic zero-sum game. When efficiency is
favored, it is easy to adopt legal strategies (such as closing high-cost plants)
and illegal ones (such as firing union sympathizers) that follow an ethically
ambiguous path to a preferred organizational objective.
LERA05.chap08.qxd 8/1/05 11:57 AM Page 224
In recent years, across the globe, unions have been on the defensive.
Businesses and institutions of capital have been celebrated. As a result,
unions have lost protections in some nations, and employees’ support for
unions at the workplace level has not been sufficient to stem the decline
in union density. The main reason for the changed perspective is a con-
cern about improving the state of the economy and the reality of the
brutal nature of global markets and competition. Unions have been
viewed negatively in this light because of the assumptions that efficiency
is the primary objective in an economy and that labor organizations
reduce efficiency. More important, the perspective presents itself as
objective and nonpartisan, while allowing the real interests and concerns
of working people to be subjugated to the theorized interests of labor in
an economy. Because these real and theoretical interests do not neces-
sarily match, the interests of workers, especially those with low skill lev-
els, are given less consideration than the interests of institutions (and
wealthy individuals) holding capital (Stiglitz 2002). Devotion to eco-
nomic orthodoxy provides a mechanism and theory to reduce the rights
of some so that those of others can be protected. It allows those who
benefit from the current situation to argue that the concept of human
dignity is irrelevant, as promotion of a capitalist system will provide the
greatest benefit to the greatest number of people.
All this means that ethical issues are inherent in labor relations across
the legal systems used by governments to regulate worker–management
relationships. No system is more or less ethical than another. Depending
on the specifics of the systems, either unions or employers are advan-
taged. Only in instances of strong adherence to social democratic institu-
tions, as is the case in Scandinavian countries, do managers and union
officials seem to have similar views. And even in those nations, pressure
from globalization is forcing consideration of the idea that efficiency is
more important than equity in society.
The issue of ethics in labor relations boils down to the question of
whether it is necessary to achieve morally correct actions and outcomes
at work. This question is unanswered in practice. Ironically, because so
much is at stake, competing groups (including unions and employers)
engage in political and other activities to secure self-interested out-
comes. This has reduced the amount of ethical reflection and increased
the use of self-interested justifications for preferred positions, outcomes,
and decisions. No labor relations legal system can remove the moral
issues that arise when competing interests exist at work and in society.
This means that nations increasingly seem to assume that economic effi-
ciency promotes social equality and that government laissez faire is the
precursor to efficiency in markets. Put differently, evidence of increasing
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Acknowledgment
I wish to thank John Budd, Jim Scoville, and Susan Schwochau for
the helpful comments, insights, and advice they provided as this chapter
was being written.
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CHAPTER 9
RONALD S. HEINZ
Allina Health System
MICHAEL W. HOWE
Allina Health System
229
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TABLE 1
Allina’s Mission, Vision, and Values
the implications of the values. At Allina, actions should not deviate from
what is promised (integrity); honor, dignity, and courtesy should occur in
every stakeholder interaction (respect); care is at the forefront of every
decision and action (compassion); and individuals should monitor, prop-
erly use, and distribute capital, human capital, and other intangible or
tangible resources (stewardship). These values provide an ethical check
to ensure that behaviors are appropriate and align with Allina’s goals.
The mission/vision/values process had just been completed when the
board of directors hired a new CEO. At that point, Allina turned its
attention to a comprehensive effort to share the mission, vision, and val-
ues with every one of its 22,000 employees. All leaders conducted dis-
cussions with their work teams and solicited input about the values that
were demonstrated when employees performed at their best. In addi-
tion, managers led meetings with their staffs to uncover situations and
conditions in which Allina and its employees were not embracing and
following the values. In many cases, these employee meetings served as
a significant catharsis for the organization as a whole. Many discussions
were intensely emotional, with employees expressing anger, sadness,
guilt, or embarrassment over the experiences of the past. The meetings
facilitated and developed a commitment by most to behave in an honest
and ethical way moving forward. In addition to facilitating employees’
reception of the new mission, vision, and values, Allina instituted new
tools specifically to ensure ethical practices.
site allows the CEO to share the direction of the organization and inter-
act with all of Allina’s stakeholders, to respond publicly to concerns and
questions submitted by employees and other stakeholders, to educate
everyone about key challenges, and to communicate what’s keeping him
up at night. The site has been used to solicit employee input into key
issues and to inform everyone of prospective changes in a way that
allows all to anticipate implications and react to issues if they so choose.
The CEO made an ultimate demonstration of transparency in post-
ing on his “On My Mind” website a summary of the performance review
he received from the board of directors. He essentially shared with all
employees what, in the estimation of the board, he was doing well and
not so well and what he needed to improve. This level of self-disclosure
did much to assure the entire organization that no secrets were being
withheld from stakeholders.
Allina recognized that it was necessary to ensure that the company’s
leadership broadly understood the new expectations and developed the
competencies required to lead a more transparent organization. As a result,
a set of leadership commitments and supporting competencies necessary to
fulfill the commitments was established and communicated to all manage-
ment. The Leadership Commitments and Competencies have been incor-
porated into a patterned interview selection methodology used for each
vice-president hire, have been incorporated into the CEO performance
review format and used for 360-degree feedback in the process, have
served as the core component in the leadership talent review and develop-
ment process for all management (i.e., used for the business directors up to
the CEO), and have been central in the recent Leadership Cornerstone
Program that brought all 1,400 managers together to better understand
expectations and learn essential skills to support the expectations.
Figure 1 illustrates Allina’s Leadership Commitments and Competen-
cies (Allina Health System 2003), which set high expectations for leaders to
demonstrate a responsive, transparent, and engaging organizational culture.
The wheel’s core identifies Allina’s expectation of all managers: performance
excellence. Arising from the company’s mission, the commitments, dis-
played in the inner circle, lead to performance excellence and articulate the
principal components that Allina’s leaders must pledge to uphold.
Leaders are expected to act courageously to inspire high performance,
build a collaborative culture, convey passion to the mission, foster joy and
optimism in the workplace, and enable a caring community to inspire
exceptional care. However, the decisive commitment that should guide a
manager ethically is “live the values.” The competencies, identified on the
wheel’s outer circle, align with a commitment and provide behavioral,
defining dimensions and a skill set for each commitment. Table 2 defines
LERA05.chap09.qxd 8/1/05 11:58 AM Page 236
FIGURE 1
Allina’s Leadership Commitments and Competencies Wheel
the competencies for “live the values” and specifies for leaders the behav-
ioral expectations to which they should hold themselves and their team
accountable (Allina Health System 2003). The value commitments and
competencies are the cornerstone for ethical action within Allina; they are
required for appropriate decision-making, use of Allina’s ethical tools, and
interaction with every stakeholder. Together, the commitments and com-
petencies set the stage for demonstrating a leadership style that encour-
ages an ethical culture and results in the discretionary employee effort
necessary to provide exceptional patient care and service.
Values-Based Decision-Making
Allina has created a tool to help leaders and teams make better ethi-
cal and business decisions. The Values-Based Decision-Making (VBDM)
LERA05.chap09.qxd 8/1/05 11:58 AM Page 237
TABLE 2
Allina’s “Live the Values” Competency Definitions
tool is intended to instill Allina’s mission, values, and vision within each
and every decision that is made throughout the organization. Allina
believes that by incorporating the mission, values, and vision into every-
day decision-making, they will create a more stable, secure, and honest
environment. Figure 2 outlines the steps that Allina takes in its VBDM
assessments (Allina Health System 2004a).
The first step of the VBDM tool is to determine if the decision has
value-based implications. The leader or team must deliberately question
the proposed decision to ensure that it does not affect patient care; does
not compromise Allina’s commitments to employees, physicians, and the
communities that the company serves; does not affect the reputation of
the organization; does not impede organizational goals and strategies;
does not require exorbitant funding; or does not conflict with one’s indi-
vidual conscience or the group’s collective conscience. If any one of
these questions is answered yes, the manager or team must approach
step two.
Step two utilizes one or more resource options that assure values-
based reflection: using the values checklist, seeking a values-based con-
sultation, or using the structured discussion format. With the values
checklist, the leader or the team simply assesses the potential decision to
see if it mirrors and achieves Allina’s mission, values, and vision.
Values-based consultation asks that the leader or team locate a confi-
dential in-house consultant who is trained and has experience with the
appropriate application of Allina’s values and healthcare ethical principles.
LERA05.chap09.qxd 8/1/05 11:58 AM Page 238
FIGURE 2
Allina’s Values-Based Decision-Making Tool
cation of the more applicable values can assist further with developing a
resolution or a consensus. The steps for the structured discussion format
are outlined in Table 3 (Allina Health System 2004a).
After the completion of step two in the VBDM tool, Allina requires
the decision-maker to seek feedback and/or approval on the preliminary
decision. If the decision-maker used the values checklist or the values-
based consultation, the leader or team must thoroughly examine the
decision privately with trusted, knowledgeable peers who may provide
thoughtful insight on how the decision may be perceived by or affect all
key stakeholders. If the structured discussion format is used for decision
assessment, the recommended decision must be presented and
approved by leadership.
Finally, step four involves finalizing the decision and communicating
and implementing it. Throughout the implementation, the decision-
maker or team should always educate and conduct discussions with the
stakeholders using values-based justifications.
Just Culture
Many healthcare providers function under a traditional punitive sys-
tem: a staff member who makes a mistake pays for it. The individual may
TABLE 3
Allina’s Values-Based Decision-Making Structured Discussion Format
ately train and educate staff to avoid further errors if errors are never
reported. Late notice of errors does not just place patients in potential
jeopardy; it also jeopardizes the facility and staff because the hospital is
unable to mitigate issues in a timely fashion to stop or avoid further
damage, such as lawsuits or investigations by governmental agencies.
These struggles and the nature of the healthcare culture prompted
Allina to look for alternatives to the punitive system. Realizing that the
system does not foster the reporting of errors and inherently hurts
patients, Allina wanted to find a program that enables individuals to act
ethically by reporting themselves or their colleagues while remaining
confident that their jobs will be protected. However, the new program
still needed to instill accountability and distinguish between the provider
who gives consistent health care but due to human error makes a rare
mistake and the repeat offender who has utter disregard for the oath to
protect patients’ interests (such as someone who consistently reports to
work under the influence of drugs or alcohol). Ultimately, Allina needed
a system that its employees and patients could trust and that would work
seamlessly and effectively.
After thoroughly investigating the situation and inquiring how other
hospital systems handle error reporting, Allina determined that a “just
culture” would foster its core values of creating a safe environment for
patients and employees. As well, just culture blends well with Allina’s
long-term organizational goal to implement a “blameless” culture. Just
culture facilitates an environment in which it is safe to report and learn
from mistakes; the organization as a whole is allowed further openness
and mandates that errors be reported while ensuring that reported
errors are dealt with in an environment of learning and continuous
improvement. In addition, Allina received support for the implementa-
tion of “just culture” from the nurses’ union. The union has concluded
that the change is in the best interest of its membership and has encour-
aged immediate implementation of “just culture” throughout Allina’s
hospital network. Additionally, the union has been instrumental in noti-
fying, educating, and supporting its membership throughout this cultural
change.
Though the public’s support of “just culture” is not fully known,
some idea of the likely receptivity can be inferred from a recent event
that occurred at a non-Allina hospital. Several weeks after surgery, a
patient “discovered what looked like a tiny piece of metal poking out of
her abdomen” (Lerner 2005). The patient visited her doctor to investi-
gate her concern, and the physician found a “5 1/4-inch metal clamp
inside [the patient’s] abdomen” (Lerner 2005). The physician immedi-
ately informed the patient and her spouse and profusely apologized for
LERA05.chap09.qxd 8/1/05 11:58 AM Page 242
and employees who are not covered (employees who are not covered by
a union contract often pay more for the same benefits).
Allina’s leadership believes that the process allowed these issues to
be identified and provided for sufficient consideration. In spite of the
many efforts to include all parties in the process and discourse, Allina
realizes that it may receive future grievances from the unions. However,
given the transparency and values-based tools, senior leaders are com-
fortable standing behind the benefit changes. In addition, these ethical
tools will continue to guide Allina in its future benefit considerations and
in discussions with all stakeholders, both union and nonunion.
Conclusion
As a result of the initial investigation by the Minnesota attorney gen-
eral’s office, Allina determined that it had to reevaluate its ethical presence
and the inclusion of all of its stakeholders. This reevaluation has provided
a rebirth and restructuring of the company’s mission, vision, values, and
culture and the tools that it applies to ensure its ethical soundness. From
the frontline employee to the CEO, Allina has created strategy and tools,
including a new mission, vision, and values; transparency; leadership com-
mitments and competencies; values-based decision-making; and just cul-
ture, with the goal of enabling each of its employees to act, behave, and
decide in a more ethical manner. Allina’s leadership continually is learning
and demonstrating the business value of becoming a more ethical enter-
prise by following and building policies and practices that reinforce its eth-
ical framework. By being more explicit and transparent about its internal
ethical practices, Allina also has become a better citizen to the external
community.
Given the nature of health care and care delivery, Allina’s employees,
management, and board undoubtedly will continue to face daily ethical
dilemmas. Breakthrough technologies and the pressures for increased
organizational efficiency and effectiveness of care delivery processes will
continue to challenge all healthcare organizations. The strategies and
tools this chapter has discussed, when hardwired into the organization,
will better equip Allina to address future ethical issues in a transparent
businesslike manner. Though growing pains are inevitable, Allina has
learned from its former unfortunate experiences that it has the capacity
to change and is positioned to adapt, take control, and proactively lead in
the face of future adversarial conditions.
Allina’s experiences could be encountered by any organization. Organi-
zations must realize that they are not immune to ethical dilemmas and
probably face ethical decisions daily. However, they should not become dis-
couraged when confronted with ethical issues, because change is feasible.
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References
Allina Health System. 2003. Allina Leadership Commitments and Competencies.
Minneapolis: Allina Health System.
————. 2004a. A Guide to Making Values-Based Decisions. Minneapolis: Allina
Health System.
————. 2004b. Allina’s Good to Great Journey: 2004 Strategy Overview. Min-
neapolis: Allina Health System.
Balik, Barbara, Lori Peterson, and Nancy Watson. 2004. Just Culture Principles. Min-
neapolis: Allina Health System, pp. i–5.
Lerner, Maura. 2005. “When Words Help to Heal a Medical Error.” The Star Tri-
bune, January 23. <http://www.startribune.com/stories/1556/5199521.html>.
[January 30, 2005].
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CHAPTER 10
problem” and the AFL’s failure to take on corruption within its ranks.
Reuther and other CIO leaders called for the united body not only to
declare its ethical principles but also to establish internal mechanisms to
enforce them—leading to the creation of a Committee on Ethical Prac-
tices for the new federation.
In light of this history, it’s not surprising that the need for unions to
uphold the highest ethical standards was a recurring topic over the six
days of the 1957 UAW convention. To provide a sense of the time, it’s
worth quoting from the proceedings at length. Reuther himself set the
tone in his keynote address:
American labor had better roll up its sleeves, it had better get
the stiffest broom and brush it can find and the strongest soap
and disinfectant, and it had better take on the job of cleaning
its own house from top to bottom and drive out every crook
and gangster and racketeer it finds, because if we don’t clean
our own house, then the reactionaries will clean it for us, but
they won’t use a broom, they’ll use an axe and they’ll try to
destroy the labor movement in the process (UAW 1957:13).
Other speakers elaborated on Reuther’s challenge. As Monsignor
George Higgins cautioned the assembled UAW delegates on the second
morning of the convention,
The labor movement at the present moment is confronted
with a very serious crisis—perhaps the most serious crisis in its
entire history. It is basically a moral and spiritual crisis and one
which has its roots within the labor movement itself. Generally
speaking, in the past the labor movement could, with a certain
amount of justification, blame its troubles on real or alleged
enemies outside its own ranks—unfriendly legislators, anti-
union employers, or a biased and prejudiced press. At the
present time, however, it must be said in all candor that labor’s
principal enemies are dues-paying members and elected offi-
cers of its own affiliated organizations (UAW 1957:77).
a way that raised the profile of ethical issues within the institution.
Accordingly, delegates to the union’s next constitutional convention
approved new Ethical Practices Codes to stand alongside (and with the
same weight as) the union’s governing constitution. Although the initial
action was presented as a technical matter of housekeeping following the
UAW’s disaffiliation from the AFL-CIO, the resulting document has
become an enduring point of institutional pride (UAW 1970:187).
The UAW’s Ethical Practices Codes are actually four codes, covering
democratic practices; internal financial practices; the special issues
posed by health, welfare and retirement funds; and the business and
financial activities of union officials. (The full text can be found in the
appendix to this chapter.) The code begins not with a list of prohibited
practices or a discussion of conflicts of interest but with what amounts to
a bill of rights for members. Freedom of speech, due process, freedom
from discrimination, and democratic procedures are spelled out first,
before the code addresses what are more commonly viewed as ethical
practices—maintaining integrity and transparency in the union’s finan-
cial dealings, avoiding real or apparent conflicts of interest by officers
and representatives, and, of course, not using union positions for per-
sonal gain. The codes apply to all levels of the union, from its interna-
tional executive board to headquarters and regional staff to individual
locals.
To a considerable extent, the UAW’s Ethical Practices Codes echo
the legal requirements of the Landrum-Griffin Act. That statute’s “bill of
rights of members of labor organizations” also guarantees free speech,
due process, and the right to participate in democratic decision-making,
in terms similar to those used in the UAW code on democratic practices.
While there are areas in which the UAW code goes further—the right to
due process, for example, includes not only adequate notice of charges
and the right to a fair hearing but also opportunities to appeal an initial
finding—its real significance is its role in the institution’s internal gover-
nance. Guaranteeing the democratic rights of UAW members in an
internal document has value both symbolic (including them in the
union’s constitution means that they are widely known and understood)
and practical (creating additional avenues of enforcement).
The same applies to the UAW codes’ treatment of conflicts of inter-
est and financial malfeasance. The UAW codes’ treatment of conflicts of
interest and outright financial malfeasance also overlaps with Landrum-
Griffin in many ways, while going beyond it in others—by, for example,
banning the outside use of union mailing lists. As with the codes’ guaran-
tees of democracy and due process, the existence of an institution-
specific code of conduct—even one that largely parallels statutory
LERA05.chap10.qxd 8/1/05 10:27 AM Page 257
formed to study the social costs of plant closings. On the plant closing
issue, more than any other, Fraser’s considerable persuasive powers had
an impact on other Chrysler directors; one result was a reprieve for the
company’s Detroit glass plant.
The thorniest ethical dilemma faced by the union during Fraser’s
tenure on the board came in 1982, when the UAW and Chrysler entered
into a new round of negotiations. Though the UAW settled with Chrysler
in the United States, UAW members in Canada struck the company’s
Canadian affiliate. Fraser thus found himself on the board of a corpora-
tion that was the target of a UAW strike. While insisting that there was
no real danger of a conflict of interest, Fraser acknowledged that his
board seat could lead to the appearance of one (BusinessWeek 1984). To
avoid any such appearance, he opted to suspend his board service for
two months, resuming it after the strike was settled.
Despite the radical departure from traditional arm’s length approaches
that Fraser’s service on Chrysler’s board represented, it did not result in
an alternative set of ethical guideposts. Instead, Fraser and the UAW
improvised—successfully, by general agreement—to apply traditional
ethical standards to nontraditional forms of engagement and struggle.
One possible gauge of that success: in the years since, other union repre-
sentatives have served on corporate boards in a variety of industries,
with little of the controversy that surrounded Fraser’s 1980 election at
Chrysler.
Now as then, labor representation on corporate boards arises out of
extreme circumstances, when a company on the ropes agrees to board
representation as part of a turnaround plan that also typically involves
contract concessions and an ownership stake for employees. In that
sense, Fraser’s board service at Chrysler did not usher in a new era of
co-management, or even mark a sea change in union tactics. Over the
past decade, however, the UAW and other unions have also become
more involved in corporate governance as a day-to-day concern. Histori-
cally, “labor’s capital”—the investments held by unions directly, or by
union-administered health and welfare funds—was passive. As unions
have joined forces with other institutional investors and shareholder
activists to press for reform measures (and, on occasion, to seek leverage
in contract and organizing campaigns), the old arm’s length approach has
evolved into a much more active engagement with the world of capital
markets.
This shift has generated very little ethical controversy. Within the
labor movement, discussions have revolved around the effectiveness of
the approach, not its propriety. Outside the labor movement, whatever
controversy has attended union-backed shareholder proposals and other
LERA05.chap10.qxd 8/1/05 10:27 AM Page 262
initiatives has been on their merits, not on the ethics of a union acting
within a shareholders’ forum. While the labor movement’s agenda may
well be at odds with a short-term stock market focus, unions have argued
forcefully—much as the UAW did at the time of Fraser’s service on the
Chrysler board—that opening corporations to the voices of other stake-
holders is entirely compatible with increased shareholder value over the
long term.
Appendix:
UAW Ethical Practices Codes
Democratic Practices
The UAW is proud of its democratic heritage. Its Constitution is carefully
designed to insure each member her/his full democratic right, both as an individ-
ual and through her/his elected representatives, to express her/himself freely and
to participate at all levels in the decisions governing the Union. Moreover, indi-
vidual rights as a UAW member are protected against infringement and abuse,
for a member may appeal complaints concerning the administration of the
Union, to the Local Union, the International Executive Board and the Constitu-
tional Convention; and has the right to submit her/his appeal to the UAW Public
LERA05.chap10.qxd 8/1/05 10:27 AM Page 267
Review Board, comprised of citizens with national reputations outside the labor
movement, whose decisions are final and binding.
The democratic principles which have always governed the International
Union, UAW, and its Local Unions are:
Financial Practices
Union funds are held in sacred trust for the benefit of the membership. The
membership is entitled to assurance that Union funds are not dissipated and are
spent for proper purposes. The membership is also entitled to be reasonably
informed as to how Union funds are invested or used.
1. The International Union and its Local Unions shall conduct their propri-
etary functions, including all contracts for purchase or sale or for rendering
housekeeping services in accordance with the practice of well-run institu-
tions, including the securing of competitive bids for major contracts.
2. The International Union and its Local Unions shall not permit any of their
funds to be invested in a manner which results in the personal profit or
advantage of any officer or representative of the Union.
LERA05.chap10.qxd 8/1/05 10:27 AM Page 268
Notes
1 Being “clean” does not immunize a union from corruption charges, of course.
The UAW under Walter Reuther had charges of racketeering hurled against it by the
Kohler Company during a long and bitter strike (Kohler 1957). Similar charges
remain a staple of union opponents, as any number of websites developed by anti-
union committees will attest.
2 References to “Caesar’s wife” abounded at the 1957 convention, and she is still
invoked by UAW leaders. The specific reference is to Julius Caesar’s second wife,
Pompeia, whom he divorced at the merest suspicion of scandal. Her actual guilt or
innocence was immaterial since, as he is traditionally held to have declared, “Caesar’s
wife must be above suspicion.”
3 For Fraser’s thoughts on his board service and those who criticized it, see Fraser
(1982). For the view of his critics, see the special report on Chrysler in Labor Notes
(1979).
4 For a sampling of typical reactions from business leaders and conservative com-
mentators, see Hayes (1979); Wall Street Journal (1979); BusinessWeek (1980); and
Raskin (1980). For a statement of General Motors’s views, as expressed by then-chair-
man Thomas Murphy, see Hadden (1979).
LERA05.chap10.qxd 8/1/05 10:27 AM Page 270
5 Chrysler always insisted that the board seat was Fraser’s, based on his personal
qualifications, and not the UAW’s as an institution. In 1982 negotiations, the company
rejected a union proposal to recast Fraser’s seat as a UAW seat, much less to increase
labor’s representation to four board seats. As Fraser’s retirement approached, he and
Chrysler’s Lee Iacocca wrangled over whether Fraser’s successor as UAW president,
Owen Bieber, would be nominated for Fraser’s board seat. In the end, Fraser stayed
on the board, on what was understood to be a transitional basis, for a year after his
retirement from UAW office. In 1984, Owen Bieber was nominated to succeed him
and served until 1991. After a lapse of seven years, the UAW’s governance role
resumed in a different context when Chrysler merged with Daimler-Benz and then-
UAW president Stephen P. Yokich assumed a seat on the supervisory board of the
new German-headquartered company.
6 There was one vacancy as of October 2004, following the death of Professor
Marilyn Yarbrough.
7 See, for example, the resolution on corporate responsibility passed by delegates
References
Bureau of National Affairs. 1981. “UAW President Says Indicted Union Officials
Should Step Down Until Cleared of Charges.” Daily Labor Report 103, May 29,
pp. A7–8.
BusinessWeek. 1980. “The Risk in Putting a Union Chief on the Board.” May 19,
pp. 149–50.
______. 1984. “Labor’s Voice on Corporate Boards: Good or Bad.” May 7, pp. 151–3.
Fraser, Douglas. 1980a. Keynote address to 1980 UAW National Community Action
Program Conference. Text provided in UAW press release, January 13.
______. 1980b. President’s Report to 26th Constitutional Convention, Part One: UAW
in Action. Detroit: UAW.
______. 1982. “Worker Participation in Corporate Government: The UAW-Chrysler
Experience.” Kenneth M. Piper Lecture, Illinois Institute of Technology.
Reprinted in Chicago Kent Law Review, Vol. 58, No. 4.
Hadden, Jeffrey. 1979. “Murphy Sees Problems with Fraser-Chrysler Ties.” Detroit
News, November 8, p. 14d.
Hayes, Thomas. 1979. “Fraser Board Role Riles Critics, Raises Questions.” New York
Times, November 26, p. D1.
Kohler, Herbert. 1957. “Can a Free Economy Tolerate Union Violence? The Menace of
UAW-CIO Coercion.” Address to Detroit Economic Club, delivered February 25.
Reprinted in Kohler Company pamphlet.
Labor Notes. 1979. “Labor Notes Special Report: Substandard Chrysler Contract
Ratified,” November 20, pp. 6–7.
Moley, Raymond. 1957. “The Ultimate Wrong,” Newsweek, April 8, p. 120.
Raskin, A.H. 1980. “The Labor Leader as Company Director,” New York Times, April
27, p. F1.
Reuther, Walter. 1957. President’s Report to 16th Constitutional Convention, United
Automobile, Aircraft and Agricultural Implement Workers of America. Detroit:
UAW.
UAW, International Union. 1955. Proceedings, 15th Constitutional Convention,
United Automobile, Aircraft and Agricultural Implement Workers of America,
Cleveland, OH, March 27–April 1.
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CHAPTER 11
273
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What Is Ethics?
To say anything clear about HR ethics, it’s critical to start with an
understanding of what ethics is and is not in this context. Much of the
literature focuses on compliance with legal regulation; thus, a review of
business ethics textbooks found that the single most commonly dis-
cussed HR issue was employment discrimination (Ciulla 1999:271). But
obeying the law is not the same thing as acting ethically: both ethical and
unethical firms presumably obey the law not out of conscience but out of
fear of the consequences of disobedience.
So, too, perhaps the single most common argument about HR
ethics—heard from both the left and the right—is that treating employ-
ees ethically actually serves the long-term interests of shareholders. I
will address later the accuracy of this claim. But for now, what’s critical
to point out is that, to the extent that this view is true, it makes ethics
irrelevant. If acting “ethically”—whatever that may mean—is acting in
the long-term interests of shareholders, then the category of “ethics” is
useless, because it adds nothing to our understanding of the business
world. We already know that smart businesses act in order to maximize
long-term shareholder return; noting that those exact same actions may
also be deemed ethical gives us no new insight into business manage-
ment. Things that are in the selfish interest of shareholders will be pur-
sued by smart managers no matter what their ethical leanings. If it’s true
that paying employees well, for instance, leads to improved customer
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Anachronistic Ethics
In part, ethicists legitimize business mores by drawing on moral cate-
gories that predate industrial capitalism. In many cases, scholars pro-
mote biblical, Greek, or other ancient sources for lessons about how
people should treat each other in personal relationships, then seek to
apply these lessons to 21st-century workplaces. While there are many
realms of life in which ancient wisdom has much to teach us, it is simply
anachronistic to apply economic ideas from that time to ours. As Polanyi
(1947, 1968) has shown, while trade, employment, and exploitation have
existed for thousands of years, the specific form of capitalist firms—with
monopoly control of the means of production and a ceaseless quest for
ever-growing profits—is qualitatively different from what came before it.
In this sense, it is ironic that MacIntyre’s work (1984) is so often invoked
as the foundation for a form of HR ethics (“virtue ethics”). MacIntyre’s
own argument was not that Aristotelian ethics should be applied to con-
temporary life but the contrary: that virtues are meaningful only in the
context of the social order that created them. To pick an assortment of
virtues from other times and cultures and apply them in our own is to
create an incoherent and unsustainable code of conduct.
This, ultimately, is one of the reasons why the field of “HR ethics” is
so marginal and lifeless: it offers an imagined terrain that is systemati-
cally disconnected from the reality of workplace relations. Thus, Lewis,
for example, invokes “the common law implied duty of fidelity”
LERA05.chap11.qxd 8/1/05 11:59 AM Page 284
Every group of human beings sets rules for how its members
ought to behave. . . . Individuals are expected to learn what is
required of them . . . and to bring their own conduct into line
with these minimum expectations. The setting of conduct rules
by groups occurs in families, communities, civic organizations,
social clubs, schools, and, of course, business organizations
(1999:386).
happen to people who don’t follow the rules?” While this may be appro-
priate for children or for freely chosen social clubs, the same question
becomes divorced from reality when applied to a workplace where rules
are not chosen but imposed, and where the central dynamic holding the
organization together is not love or affiliation but coercion and threat of
impoverishment. On this distorted basis, Dubinsky goes on to articulate
an obnoxious psychologization of worker resistance, explaining that “just
as groups feel a need to set rules . . . so do some individuals feel a need
to rebel against those rules. . . . There will always be rule followers, rule
breakers, and those who delight in testing the limits” (1999:386). By tak-
ing ethics that may be appropriate for voluntary organizations and mis-
applying them to a fundamentally different setting, the author renders
them nonsensical.
Burkett (1998:135–6) likewise stresses the importance of workers’
honoring authority, obeying orders, and maintaining loyalty to the firm;
he recommends that employees be financially rewarded for loyalty (a
form of favoritism that others might view as ethically suspect) and fired
for disobedience. Indeed, he goes so far as to call for discipline or termi-
nation as a response to “subtle disobedience” such as that illustrated by a
troublemaking secretary described by one employer:
the wicked live, reach old age, and grow mighty in power. . . .
Their houses are safe from fear. . . . Their bull breeds without
fail; their cow calves. . . . [The wicked man] dies in full pros-
perity, being wholly at ease and secure, his body full of fat and
the marrow of his bones moist (Job 21:7–24).
Is it really possible that learned scholars believe that someplace in
the world exists a mechanism that naturally aligns greed with good? For
that matter, to take Sternberg’s conclusion, do serious students of indus-
trial capitalism really believe that the natural function of a laissez-faire
market is to drive out unethical businesses? Should we expect that the
maquiladoras employing 16-year-old girls kept on a regimen of barbitu-
rates and birth-control pills will be driven out of business by those who
employ higher-wage adults and observe stricter environmental stan-
dards? Should we consider it a temporary market irregularity that Wal-
Mart—a company whose employees have filed class-action suits in more
than 30 states charging sex discrimination and theft of overtime wages—
tops the Fortune 500? Or that garment and toy manufacturers who rely
on sweated and child labor around the world are turning handsome prof-
its? One wonders how to explain why, after 150 years of a market econ-
omy, exploitation still appears so common.
In reality, the area of overlap between the profit motive and the ethi-
cal treatment of employees seems extremely limited. To begin with,
much of the literature really applies only to professional and managerial
employees. Tracts such as Harvard Business School’s The War for Talent
(Michaels, Handfield-Jones, and Axelrod 2001), warning of the competi-
tive imperative to retain valued employees, are not much concerned with
the two thirds of Americans in jobs that do not require a college degree.
Indeed, there is great evidence that even white-collar professionals,
rather than being wooed with perks and participation, are seeing their
benefits cut and hours increased, on the assumption that they have no
choice but to run faster to stay in place (see, for example, Fraser 2002).
But to whatever extent the logic of profit maximization leads to careful
treatment of professional employees, this logic is largely absent for those
further down the food chain. It is not hard to imagine, for instance, that
Nike could be a great place to work for Portland-area marketing profes-
sionals and a hellish place to work for Malaysian production staff.
It is doubtless true that, even for nonprofessional employees, there
are certain occupations in which owners’ interests are served by treating
employees well. But the dominant trend in the country is in the opposite
direction—toward lower real wages, continuing cuts in benefits, and a
weaker voice for workers on the job. And when hard work can be
extracted through fear, discipline, Taylorization, or surveillance, there is
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no economic need for ethics. Thus the theory put forth by so many busi-
ness ethicists is not utterly false, but it describes only a small slice of the
business world.
with a tiny slice of the work world for our subject of analysis. Yet this is
exactly how many scholars identify their task: as advocates to managers,
pitching the notion that the scope of profitable ethics is slightly broader
than management may perceive.
The limitations to this project are evident in surveys of corporate
managers themselves. Both scholars and practitioners of HR generally
start from the acknowledgment that HR is of marginal concern to most
senior managers. Recently, a number of scholars have attempted to con-
cretize the contribution of HR practices to the bottom line, in hope of
transforming HR from an administrative to a strategic function. If ethics
truly adds to profitability, this is where we would expect its impact to be
revealed. Yet it is striking that, when scholars have calculated the mone-
tary value of HR practices, they have not identified ethical practices as a
significant source of untapped profit. One of the most ambitious of such
projects is The HR Scorecard (Becker, Huselid, Ulrich 2001), which is
dedicated to making HR more relevant by identifying measurable “HR
deliverables” that impact the return to shareholders. The study is based
on a 10-year survey now covering the 3,000 largest publicly traded cor-
porations. Though the authors developed an extensive list of relevant
HR strategies, ethics per se is notably absent. Instead, the key practices
identified are items such as the number of hours of training for new
employees or the share of workers whose pay is tied to performance
(2001:16–17). Nowhere in the list is there a single item that explicitly
concerns ethical treatment of workers. On the contrary, the share of
workers who represent themselves in collective bargaining—from Kant’s
viewpoint an ethical good—is identified as a negative factor to be
avoided by firms bent on establishing “high performance work systems”
(2001:18). Upon reflection, one of the striking things about the Becker
book is how obvious and commonsense it is. Of course it is practices
such as recruitment and retention of professionals that matter rather
than anything overtly ethical. Of course profit-maximizing companies
want to deny their employees the leverage that comes from unionization.
None of this is surprising. But it points once again to the pervasive mar-
ginality of ethical concerns, even among those who champion the impor-
tance of HR to overall corporate strategy.
but pull back from either endorsing or condemning any particular path
of practice. Winstanley and Woodall thus conclude their comprehensive
review of the field by noting that “there is no consensus either about
what constitutes an appropriate ethical framework or about the possibil-
ity for ethical intervention” (2000:278). But if a set of leading scholars in
the field can’t even agree as to whether ethical intervention is possible,
this suggests the field has little relevance to the lived reality of the work
world.
For the most part, then, the field of HR ethics seems useless but
harmless. In some ways, however, the field may actually prove damaging
to the very interests of workers that it purports to safeguard. As I have
discussed, the general structure of capitalist employment and the actual
practice of most firms are built on a fundamentally coercive relationship.
Management’s goal is to operate this coercive system without triggering
a rebellion from the employees, who vastly outnumber their higher-ups.
But from the workers’ point of view, some sort of rebellion is exactly
what’s needed. Even focusing solely on incremental reforms such as
more equal sharing of profits and increased worker control over the
labor process, these changes are unlikely to come about without collec-
tive pressure from angry workers. To the extent that the discourse of
“ethics” helps forestall such pressure by defusing workers’ anger or
organization, it serves to undermine the long-term well-being of the
workforce. Claydon (2000) raises the question of why the field of
“ethics” has taken on increased prominence in the past decade and con-
cludes that it is in direct proportion to the increase in work intensifica-
tion and aggressive management. In other words, the world of “ethics”
serves as a sort of political cover for more exploitative management.
Indeed, many employee participation schemes represent nothing so
much as the co-opting strategies of anti-union consultants described by
Levitt (1993) and Slaughter and Parker (1994). For instance, Taylor and
Jones trumpet the creation of “employee charters,” defined in part by “a
notion of partnership and mutuality” that “highlights the shared respon-
sibility the individual and the employer have to the achievement of the
organization’s aims,” along with “a series of rights and responsibilities”
that apply to each individual employee (2000:252–4). All of this is
worked out in a process of “consultation” that gives everyone the right to
speak up but leaves senior management with a free hand to make what-
ever decisions it chooses. The outcome of such ventures is unsurprising.
The authors celebrate one hospital’s charter that includes the principles
that “staff have the responsibility to adopt an attitude of positive cooper-
ation” as well as “the responsibility to work flexibly” (2000:256). It is
telling, of course, that what management seeks is a unilaterally authored
LERA05.chap11.qxd 8/1/05 11:59 AM Page 293
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and ethical issues in the private and public sectors. He was co-editor
(with Paul Clark and Ann Frost) of the 2002 IRRA research volume,
Collective Bargaining in the Private Sector.
Linda Ewing is the research director of the UAW. She and the
research staff provide technical support for collective bargaining as well
as industry and policy analysis intended to help build the union and
improve the lives of working people.
Ronald S. Heinz is vice president, compensation and benefits, at
Allina Hospitals and Clinics, a healthcare system of 22,000 employees
operating in Minnesota and western Wisconsin, and is responsible for all
compensation and benefit program design. He holds a B.A. in psychol-
ogy from the University of Minnesota-Duluth and an M.A. in industrial
relations from the University of Minnesota. Prior to joining Allina in
2000, he worked for Honeywell for 25 years in a wide variety of busi-
nesses and human resources leadership positions.
Michael W. Howe is executive vice president of human resources
and chief talent officer at Allina Hospitals and Clinics, a healthcare sys-
tem of 22,000 employees operating in Minnesota and western Wiscon-
sin. Since 1981, he has served as an officer at Allina and its predecessor
organizations. His human resources career began in employee assistance
at Xcel Energy, and prior to that he was an assistant professor at the Uni-
versity of Minnesota. He earned a bachelor’s degree in psychology from
Mankato State College and an A.M. and Ph.D. from the University of
Chicago.
Bruce E. Kaufman is professor of economics in the Andrew Young
School of Policy Studies and senior associate of the W. T. Beebe Institute
of Personnel and Employment Relations at Georgia State University.
He is editor or co-editor of three previous LERA (IRRA) research
volumes—Employee Representation: Alternatives and Future Directions
(1993); Government Regulation of the Employment Relationship (1997);
and Theoretical Perspectives on Work and the Employment Relationship
(2004). His most recent book is The Global Evolution of Industrial Rela-
tions: Events, Ideas and the IIRA (2004).
Gordon Lafer is an associate professor at the University of Oregon’s
Labor Education and Research Center and is author of The Job Training
Charade (Cornell University Press, 2002). He has served as an employ-
ment policy advisor in the New York City mayor’s office and as a strate-
gic consultant to a wide range of labor unions.
John J. Lawler is a professor of labor and industrial relations at the
University of Illinois at Urbana-Champaign. His research interests in
LERA05.Contrib.qxd 8/1/05 10:26 AM Page 301
INDEX
INDEX 305
Enron, v, 3, 69, 275, 281. See also Cor- Gandhi, Mahatma, 96, 109
porate scandals Gender issues, 105–108, 110. See also
Environmental ethics, 94, 97–98 Discrimination
Epson America, Alana Shoars v., 144 General Electric, 68
Equity, 7, 24–25, 37, 39–42, 44, 50, 55, General Motors, 211, 259–260
90, 109–110, 203, 205. See also Genetic testing, 143, 160, 164–167
Fairness; Voice Germany, 124
Ethical: relativism, 15–16; subjec- Global union federations, 117, 125, 137
tivism, 15–16; tools, 244; work cli- Globalization: and ethical standards,
mate, 3 121–137; defined, 115–116; East-
Ethical Trading Initiative (ETI), 128–129 ern response, 96; effects of,
Ethics: codes of, 4–6, 93–94, 97–98, 116–121, 203, 213, 223–224
106–109, 124–129, 130–133, 136, Golden rule, 61–62, 278–279
176, 231–232, 252–269; compli- Grievances, 264–265. See also Duty of
ance training, 273–275; critique of, fair representation
273–293; discernment, 174, 188, Griggs v. Duke Power, 177
190; Eastern versus Western, 90, Guanxi, 99–100, 105
99; teaching, 5–6, 48, 198, 273. See
also Aristotelian ethics; Business Harassment, 94, 97–98, 105–107, 145,
ethics; Care, ethics of; Kantian 149, 158, 167, 192
ethics; Libertarianism; Rawlsian Harmony, 101–103
ethics; Utilitarianism Health insurance, 82, 84, 164,
Exclusive representation, 217 193–194, 197–198, 273, 275, 279,
290
Face, 101–103 Hewlett-Packard, 147
Fair Labor Association (FLA), 128, 131 Hierarchy of needs, 40
Fair trade. See Free trade High performance work practices, 4,
Fairness, 5, 10–12, 40–41, 61, 16, 52–53, 77, 281, 291
173–175, 184, 190, 192, 196, 207, Higgins, George, 254
218, 229, 263, 275. See also Dis- Hinduism, 89–90, 93–98, 105–109
tributive justice; Equity; Justice; Human dignity: and freedom of associ-
Marginal productivity justice; Pro- ation, 133, 208; and human rights,
cedural justice; Rawlsian ethics 14, 121, 125, 208; as a metric for
Featherbedding, 109 labor relations, 212–213, 215–216,
Federal Mediation and Conciliation 218, 220–221; in ethical theory, 9,
Service, 4 13–15, 65, 67, 207; in religious
Ford Motor Company, 147, 259–260 teachings, 13–15, 93, 207, 210; in
France, 74, 124 the employment relationship, 18,
Fraser, Doug, 252, 258–262, 270n5 98, 107, 127, 166, 197, 232, 237; in
Free markets. See Competitive mar- the global economy, 129, 224
kets; Free trade; Libertarianism Human resource management, 2, 4–5,
Free trade, 118–119; and labor stan- 7, 17, 24, 42, 49, 52–53, 55, 68–69,
dards, 54, 131–133. See also Glob- 80, 85, 173–198, 274–294. See also
alization Compensation systems; Diversity;
Freedom, 6–8, 28, 44, 64–67, 73–74, High performance work practices;
79–80, 125, 188, 203, 206, 208, Job design; Motivation, employee;
212–216, 218, 220–221, 223; of asso- Performance evaluation; Recruit-
ciation, 14, 39, 54, 120, 125–128, 130, ment; Training
132, 134–135, 207–209, 213–217, 222 Human resources and industrial rela-
Friedman, Milton, 3, 68, 204, 206 tions (HRIR): defined, 1
LERA05.index.qxd 8/1/05 12:00 PM Page 306
Human rights: and labor rights, 14, 23, Japan, 74, 81, 103, 105, 107–108, 118
47, 54, 109, 133–134, 206–208; and Job design, 191–192
multinationals, 119, 121, 134; and Jobs, Steve, 71–72
natural rights, 6, 14; fulfillment of, Jordan, 132
120, 130, 132, 206; international Judaism, 13–14, 90, 279. See also
instruments, 14–15, 54, 109–110, Christianity
207–208; measuring, 203, 208; Just culture, 233, 239–246. See also
scholarship on, 14–15; universality Progressive discipline
of, 110, 215 Justice, 5, 11–13, 18, 27, 31, 33, 35,
Humanism, 90 37, 39–42, 44, 91, 93, 129,
173–174, 251, 257. See also Dis-
Iacocca, Lee, 258, 270n5 tributive justice; Equity; Fairness;
IBM, 147, 281 Marginal productivity justice; Pro-
India, 89, 92–93, 97–98, 107, 116–118. cedural justice; Rawlsian ethics
See also Hinduism
Indonesia, 108, 130 Kant, Immanuel, 9–10, 62–67, 82,
Industrial relations, 1, 8, 12, 17, 23–26, 107, 173, 206, 278
34, 36, 39, 48–55, 61, 70, 85, 295 Kantian ethics, 2, 9–12, 17, 61–85, 93,
Inequality, 11, 27, 35, 45–46, 70, 225, 95, 173, 179, 196, 206–207, 274,
275, 279, 284; income, 82–83, 96, 278, 291
109, 117. See also Discrimination King, William Lyon Mackenzie, 26, 36
Information technology, 141–142, 146, Koran. See Islam
148, 166. See also E-mail; Privacy, Korea, 100, 104, 107–108
employee; Monitoring
Institutional labor economics. See Labor: as commodity, 29, 36–39, 48,
Commons, John R.; Economics; 204; problem 24–25, 33–39, 44–45,
Industrial relations 47, 51
Integrative bargaining, 78 Labor relations, 176, 203–204,
Integrity, 4, 12, 64, 98, 129, 231–232, 208–225. See also Collective bar-
236–237, 248, 256 gaining; Industrial relations; Labor
International Confederation of Free unions
Trade Unions (ICFTU), 122–125, Labor rights. See Human rights
135, 137 Labor unions, 13, 109, 184, 294–295;
International Labour Organization and corporate boards of directors,
(ILO), 108, 133, 137, 210; and 252, 258–262, 270n5; and global-
employee privacy, 142, 159–160, ization, 118, 122–131, 135–137,
163–164; and globalization, 117, 224; and human rights, 14, 39, 54,
121, 126; and labor standards, 54, 125–128, 133; and Islam, 93; and
126–128, 131, 134–135, 207, 213; modern industrial relations, 49–55;
Decent work initiative, 127; Decla- and utilitarianism, 7; and work-
ration of Philadelphia, 14; found- place democracy, 38, 43, 74–75; as
ing, 38; mission, 39. See also Allina Health System stakeholder,
Declaration on Fundamental Prin- 231, 233, 241, 248–249; compul-
ciples and Rights at Work sory unionism, 218–220; corrup-
International trade. See Free trade; tion, 253–255, 263; democratic
Globalization structure, 221–222, 252; dues,
Iran, 89, 106, 110 218–220, 251; early institutionalist
Iron rice bowl, 103 support for, 35, 38, 43, 46–47;
Islam, 89–94, 97, 105–106, 108–110 employer opposition to, 9, 85, 127,
Italy, 74, 124 134, 209–213, 218, 223, 253, 279,
LERA05.index.qxd 8/1/05 12:00 PM Page 307
INDEX 307
Safety, 14, 31, 46–47, 126–128, 135, Taft-Hartley Act. See National Labor
162, 183, 188, 197, 214, 216, 221, Relations Act
294; training, 185–186 Taiwan, 101, 108
Safeway, 278–279 Tata, J. N., 96–98, 108–109
Sarbanes-Oxley Act, 4, 266 Taylorism. See Scientific management
SAS Airlines, 79 TEAM Act, 211
Saturn Corporation, 211 Teams, work, 75, 77, 81, 182, 189, 190,
Saudi Arabia, 110 192, 232, 280
Scientific management, 42, 80–81, Teamsters, International Brotherhood
281, 287, 289 of, 222
LERA05.index.qxd 8/1/05 12:00 PM Page 309
INDEX 309
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