Organizational ethics are the standards that address human behavior, promoted and adhered to by organizations and businesses. The standards attempt to quantify and regulate human relationships in an effort to avoid harmful behavior or damage to the organization. Defining and managing the values of a collective group of people within an organization composes the practical application of organizational ethics.
There are various processes an organization may use for creating these standards. If regulatory laws address ethical concerns, then these requirements are often spelled out in detail in the ethical standards. Ethical areas and concerns that may affect the organization’s stakeholders will likely be considered. Stakeholders may include stockholders, customers, neighbors, and those in the company’s procurement chain.
Ethical standards for an organization attempt to quantify and define behaviors that produce beneficial effects in the organization and in the organization’s sphere of influence, and to avert detrimental behaviors. An organization's approach to ethics may range from laissez-faire to a highly proactive methodology that spells out specific behavioral expectations in detail. In a proactive approach, the organization attempts to eliminate gray areas that may cause ethical lapses.
When an organization adopts a laissez-faire approach to ethics, it essentially allows employees and management to make ethical decisions for themselves based on their own judgments and standards of morality. Since the organization’s members may not collectively agree on what ethical behavior is, the entire burden for ethical compliance is placed upon the individual. There may be little or no ethical training for employees or management. People are expected to do the right thing, but the “right thing” is not specifically defined. The problem with this approach is that each person may have a different way of defining what is ethical and what is not.
At the other extreme, organizational ethics may be defined in an extremely detailed manner, specifying the exact ethical behavior expected in relationships. For example, an employee handbook might have a list defining such ethical actions as keeping client confidentiality, not spreading rumors about other employees, and never using company property for personal use. This is a compliance approach to organizational ethics, and it typically employs specific penalties for non-compliance. A problem with this approach is that those gray zones in ethical behavior are not spelled out.
In between these two extremes are organizational ethics approaches that employ general exhortations to do the right thing, or to be honest, or to be fair. There are risks to this approach, too. Although ethical training may be offered, people from different backgrounds may define honesty and morality in different ways.