What are the ethical responsibilities of a manager?

By Kimberlee Leonard Updated October 19, 2018

The principles by which a manager leads his company will dictate everything from employee ethics to company morale and productivity. Managerial ethics can also significantly affect the legal standing of a company that's owned by big-name moguls like Harvey Weinstein and Steve Wynn, who have experienced significant legal and PR problems from sexual misconduct scandals. Wynn was the Las Vegas real estate mogul who resigned from his multi-billion dollar company, when his stock plummeted during his sexual misconduct scandal. Every company needs to set an ethics policy that applies to everybody in the company, from the highest executive level to the mail clerk. Established policies and ramifications for violations enable a company to effectively manage issues.

Managerial ethics is a basic part of business ethics. It is the set of moral principles or beliefs that affect the behavior of employees. While most people automatically assume that ethics directly correlates to laws, this isn't always the case. Doing the right thing for employees and customers and demonstrating the willingness to go the extra mile also falls under managerial ethics.

When developing managerial ethics policies, everything is considered. Compensation and benefit packages, community involvement and corporate giving are all components of managerial ethics. The policies set the minimum standards that business leaders expect from the company down to its people and community.

Managerial ethics are broken down into two primary types: those that pertain to legal issues and those that pertain to moral issues. Company leaders have a choice, they can do the bare minimum when it comes to ethics, or they can set a higher standard in their industry and community.

Legal ethics consider the many rules and regulations for any company. There are human resource issues such as making sure that people are hired in a fair process, given a safe work environment and fair pay. Managers and employees are expected to not break laws by harming, harassing or otherwise infringing on another person's rights. Minimum safety standards must be met, as well as the work standards set forth by the Occupations and Safety Health Administration (OSHA).

Moral standards of ethics don't necessarily need to align with a company's legal standards. A company might not be required to offer paternity leave, but the company might believe that it is important to give fathers their own time with a newborn. -Moral ethics could also be how the company deals with customer complaints to ensure that people feel good about their experience with the company from the top down.

Managerial ethics is important for every company, because people will follow what leaders do. Even if a company has ethics policies in place, when top leaders ignore these standards, it resonates throughout the company. This negative permeation doesn't always look the same. It might mean that some employees might not act ethically, if they are following the actions of leaders. It could also reduce employee pride and morale.

When employees don't think that their leaders care about doing the right thing, they might feel that their efforts to do right are not valued. Morale drops, employee turnover increases, human resources costs go up, and customer loyalty and positive experiences suffer. Companies that follow the highest standards of leadership ethics generally have high morale and very high levels of productivity and low turnover.

There are many examples to look at when creating your ethics policies and standards. A company that gives entry-level workers a level of compensation and benefits that are well above the local minimum wage has morally ethical policies. Giving employees a generous profit-sharing plan based on the company's performance, demonstrates that leaders care not only about their personal profit but also about the growth and success of their people.

Policies on legal ethics start with the law, and then develop the protocol to deal with potential issues. A common example is how a company deals with a sexual harassment claim. It is against the law to sexually harass someone, but how the company deals with it also says a lot about that company's ethics. An ethical policy keeps accusations, witness testimony and mitigating factors as confidential as possible, and then comes to a conclusion based on evidence. Such a policy also calls in legal personnel and law enforcement when necessary.

Managers hold positions of authority that make them accountable for the ethical conduct of those who report to them. They fulfill this responsibility by making sure employees are aware of the organization's ethical code and have the opportunity to ask questions to clarify their understanding. Managers also monitor the behavior of employees in accordance with the organization's expectations of appropriate behavior. They have a duty to respond quickly and appropriately to minimize the impact of suspected ethical violations. Lastly, managers make themselves available as a resource to counsel and assist employees who face ethical dilemmas or who suspect an ethical breach.

Of course, managers are responsible for upholding ethical standards in their own actions and decisions. In addition to following the organization's ethical code, managers may be obligated to follow a separate professional code of ethics, depending on their role, responsibilities, and training. Fiduciary duty is an example that applies to some managerial roles. A fiduciary must put the interests of those to whom he is accountable ahead of any interests, and must not profit from his position as a fiduciary unless the principal consents.

Many managers have responsibility for interacting with external stakeholders such as customers, suppliers, government officials, or community representatives. In those encounters, managers may be called on to explain a decision or a planned action in terms of ethical considerations. The stakeholders will be interested to hear how the organization took ethics into account, and in those cases it is the manager's duty to speak on the company's behalf.

Additionally, managers may be responsible for creating and/or implementing changes to an organization's ethical codes or guidelines. These changes may be in response to an internal determination based on the experience of employees; for instance, additional clarification may be needed about what constitutes nepotism or unfair bias in hiring. Alternatively, new regulations, altered public perceptions and concerns, or other external factors may require the organization to make adjustments.

The manager has an important role in maintaining ethical conduct in a firm, but a firm's ethics cannot simply be based on a "manager to the rescue" approach.

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As part of comprehensive compliance and ethics programs, many companies formulate policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly generalized language, or they can be more detailed directives containing specific behavioral requirements. Ethical codes are adopted by organizations to assist members in understanding the difference between right and wrong and applying that understanding to their decisions and actions. They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business.

There are three types of ethical codes: codes of business ethics, codes of conduct for employees, and codes of professional practice.

Code of Business Ethics

A code of business ethics often focuses on social issues. It may set out general principles about an organization's beliefs on matters such as mission, quality, privacy, and the environment. It may delineate procedures that should be used to determine whether a violation of the code of ethics has occurred and, if so, what remedies should be pursued. The effectiveness of such codes of ethics depends on the extent to which management supports and enforces them.

Code of Conduct for Employees

A code of conduct for employees sets out the procedures to be used in specific ethical situations, such as conflicts of interest or the acceptance of gifts. It may include specific lists of dos and don'ts, or it may provide questions to ask to help determine the proper course of action. Codes of conduct typically delineate the proper procedures for determining whether a violation has occurred and for reporting suspected violations.

Code of Practice

A code of practice is adopted to regulate a particular profession. It may be styled as a code of professional responsibility that covers common scenarios and decisions and provides a guide to what behavior is considered ethical, correct, or right in certain circumstances.

Public signage often contains messages guiding conduct. Similarly, behavior in organizational settings may be guided by organizational codes of conduct.