Ethics about employee individual loyal to employers & Organizations’ obligation to employees

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Content page

1.     Introduction……………………………………………………………………………………………… 2

2.     Literature review & related concepts applied in this study……………………………… 2

3.     Analysis and critical discussion…………………………………………………………………… 3

3.1      Ethics about employee individual loyalty to employers…………………………. 3

3.1.1     Employee individual loyalty to employers within business ethics….. 3

3.1.2     Employee loyalty to employers as in contradiction with business ethics      4

3.2      Ethics about organizations’ obligation to employees……………………………… 6

3.2.1     Respect for the human rights: individual dignity………………………… 6

3.2.2     Respect for the employees’ professionalism……………………………….. 7

3.2.3     Reward employees’ good performance………………………………………. 7

4.     Conclusions………………………………………………………………………………………………. 8

5.     Recommendations……………………………………………………………………………………… 9

5.1      Balance the psychological exchange between employees and employers…. 9

5.2      Build up comprehensive unethical business behaviors reporting system…… 9

Reference……………………………………………………………………………………………………… 11


Ethics about employee individual loyal to employers &

Organizations’ obligation to employees


1.        Introduction


As known to us, many companies would require or it is hinted in the corporate culture that employees need to have a high level of loyalty to the employers without asking too many questions, this has led to the fact that many employees understand the individual loyalty wrongly or even the employers are giving misleading information that employees should be loyal even in some ethical scenarios. Also on the other hand, it is believed organizations should also have its duties towards their employees as the most valuable resources. Below we will focus on these two topics with the research aim to try to provide clear answering to the question that to what extent employees in the companies should be loyal to their employers and what the duties and obligations the employers should have for their employees in term of care.


2.        Literature review & related concepts applied in this study


The abuse of official position refers to one’s using his or her official position for personal gain that is likely to violate one’s obligation to the organization (Shaw 2011, p. 390).


Employee loyalty refers to considerate employees who stay long in the company and have great knowledge of the customers and the processes and culture within the company (Furnham 2011).


Deontological business ethics theory which refers to a principle-oriented mode of ethical justification (Donaldson 1982, p. 71), these principle and rules to be followed sometimes take the form of duties and obligations.


The classical definition of the term conflicts of interest concentrates on the existence of a personal interest owned by an employee being in contradiction and conflict with the interests of the firm (Boyle 2001, p. 147).


Justice could be referred as an ethical approach is where all humans are treated equally through society ( 2011).


Insider trading is the buying or selling of a security by someone who has access to material, nonpublic information about the security ( 2011).


3.        Analysis and critical discussion


3.1    Ethics about employee individual loyalty to employers


Based on many researchers and studies and also my personal understanding, employee individual loyalty to the employers should be absolute and without conditions, in contrast, pre-conditions are so much important that their absence could make the employee loyalty become meaningless. Below we will discuss two distinct scenarios: Employee individual loyalty to employers within business ethics and Employee individual loyalty to employers in contradiction with business ethics.


3.1.1            Employee individual loyalty to employers within business ethics


In most cases, we would see the benefits of employee individual loyalty in the business practices based on the usual definition of employee loyalty that we have given above: employee motivation, employee involvement, improved employee productivity and so on. Firstly, when an employee is loyal to an employer, we can usually see some very positive phenomenon such as volunteering work overtime, and being highly responsible which are the features of high employee motivation. And also such motivation is internal motivation rather than external motivations that usually rely on costly monetary incentives; secondly, loyal employees tend to participate on the daily management and recommendations giving activities though these are not part of their job contents because they treat themselves as the owners of the company; thirdly, ultimately loyal employees are more welcome to the employers because they tend to create more value to the employers because of they are more motivated and experienced with the work task as long staying veterans. These are the usual positive advantages of having loyal employees, but these benefits could be made meaningless if employees are over loyal to their employees involving some unethical or even illegal transactions which will be talked above below.


3.1.2            Employee loyalty to employers as in contradiction with business ethics      Fraud in accounting


Fraud in account is common in the business practices even though today the accounting practices are well standardized and restricted under ethical standards and rules and some commonly accepted ways of accounting have even been recognized and promoted in a world wide scale especially among the multinational corporations (MNCs). Fraud behaviors in accounting include overbilling clients or delaying vendor payments and so on, fraud cases usually involve hiding cash for internal purposes. While many accountants are not conducting the fraud accounting to benefit the individuals only, they are usually made believe that the fraud accounting is needed by the company to improve its financial performance or attracting more investments. And many employers would use the disguise of employee loyalty to try to rationalize the fraud behaviors. But such frauds in accounting are not ethical because they break the deontological ethics for the following reasons: firstly, it is the duty of the accountants to avoid making such fraudulent behaviors which is accepted widely in the accounting industry; secondly, it is every civilian’s legal obligation to avoid contributing to these fraudulent cases because they are usually illegal.      Conflicts of interest


The conflicts of interest could usually happen in the business practices, and even among the daily routine jobs. There are many famous examples and some of them are even happen to the large MNCs. For example, Goldman Sachs is one of the largest investment banks in the world, the employees working under the group are to provide investment information and professional advices to the institutional or individual customers or clients as said in the industry. But it had been reported that there had been the holding of trading huddles in which the investment advisors exchanged investment and market and demand information among the investment advisors but only investment advisors who were in charge of the large institutional investment funds are encouraged to make changes based on the trading hurdles. This has caused the conflicts of interest because the there had been conflicts between the employees’ different roles. On one hand, according to the deontological business ethics it is wrong for the holding of such meetings and an investment consultant has his or her duty to the clients, at least two of them are involved in this given example: loyal duty to the client and loyalty duty to the organization. Because some investment consultants knowingly neglected the provision of the best investment advices to the medium and small investors their loyalty to the customers and clients are reduced significantly though such advises could be the same if the investment consultants did not know the information obtained via the trading hurdle. On the other hand, the employees or investment consultants also are loyal to the employers and it is obvious that the employer encouraged and permitted the existence of the conflict of interests. What the company cares about its revenue and profit generation and the company has entrusted the investment consultants to not only work for the individual and corporate clients but ultimately making profits to the group is a must. Here the existence of the conflict of interest has been considered as unethical not only according to the duties that the employees hold but also based on the theory of justice in the business ethics. When within the business ethics theory of justice, all employees and clients should be treated in an equal manner and status, the existence of the trading hurdles in Goldman Sachs had showed that clients were classified into different groups and some of the group of users could enjoy better investment consulting services via the obtaining of the market and other clients’ investment information and demand information. When inequality exists, we can understand that people would believe that the company’s trading hurdles behaviors and other similar transactions could be remarked as unethical.      Abuse of official position: Insider trading


The insider trading could also be very unethical for two major reasons: firstly, it also could create conflicts of interests if someone has utilized the position power to do some insider trading to obtain individual earning and conflicts of interest in organizations is not ethical to this extent if not handled well; secondly, in many case even the employers would encourage the insider trading to be done by the individual employees and again the loyalty to the employers is demonstrated to the employees to try to rationalize the unethical transactions in the heart of the employees who would also doubt the ethics of such behavior.


3.2    Ethics about organizations’ obligation to employees


3.2.1            Respect for the human rights: individual dignity


First of all, employees are equal individuals that should have received the basic human rights that are enjoyed by the majority of the people in the world and thus each employee should receive these fundamental human rights as well irrespective of what positions they are in and what jobs they are doing. One of the rights is individual dignity, when employers requesting the employees to engage on some unethical behaviors that even the employees do not like, it is actually breaking the individual dignity right in some case that had been mentioned above. And once such individual dignity is damaged, it would be very difficult to restore in a short period of time. For example, when an accountant has been asked to do fraud accounting but has been offered extra money, once the fraud is made known to the public, there is high possibility that these employees who have directly been linked to such frauds would be hated by the society and the other industrial players.


3.2.2            Respect for the employees’ professionalism


Another obligation in my opinion that an organization should has for each of its employees in term of care is to respect for their working professionalism and provide enough of room for flexible handlings. For example, as mentioned above in term of insider trading, in many case even the employers would encourage the insider trading to be done by the individual employees and again the loyalty to the employers is demonstrated to the employees to try to rationalize the unethical transactions in the heart of the employees, this actually damage the relative employees’ working professionalism because each job have its specification and employees are trained to do such jobs in a professional way without too much interference from the management. But when employees are directed to do these behaviors, they are actually losing the decision making regarding how their job should be done in a more professional way. Obviously, employees should be provided by the employers this right: the right to be professional


3.2.3            Reward employees’ good performance


There have been a number of ways describing the exchange relationship between the employees and the employers, a legal relationship, a psychological relationship or a social relationship. Here we focus on a psychological exchange relationship between the employees and the employers. In term of a psychological exchange, we can usually think of psychological contracts which are implicit rather than being written down in black and white and they are subjectively understood and dynamic (Rousseau 1989). For example, as mentioned above, employers tend to expect their employees to show some extent of employee loyalty to them in term of being obedient and long staying in the same company, but this is only the expectation from the employers and its existence alone is not enough to make up a psychological exchange relationship. Therefore, employees also tend to expect some things from their employers in exchange for their good employee performance in term of keeping high loyalty or being highly productive in their work. Such expectations could be take the form the organizations’ obligation to provide promotion opportunities, bonus and other incentive schemes to reward the good employee performance.


4.        Conclusions


Firstly, when employee individual loyalty to employers is well managed and restricted within business ethics boundary, we can see that employee individual loyalty have great benefits such as the above mentioned employee motivation, employee involvement, improved employee productivity and so on. But when some unethical or even illegal transactions such as fraud in accounting, conflicts of interest and insider trading which persistent loyalty and obedience would become meaningless or even become harmful to the employees in term of breaking the legal obligations or just moral obligations. Secondly, based on the analysis on some unethical behaviors, I do believe that employers also their obligations to the employees rather than simply paying to buy the work from the employees. Employees should be authorized to obtain these rights and service without too much influence from the management. Two of them are mentioned above, Respect for the human rights: individual dignity, Reward employees’ good performance and Respect for the employees’ professionalism. Employees should receive and have these rights is because of the basic principle of ethics in business that is accepted around the world that “everyone is born equal” and there is no possibility that they should not receive the basic rights as a human while at the same time under contract with their employers.


5.        Recommendations


5.1    Balance the psychological exchange between employees and employers


As analyzed above, employees are to some degree subject to the duty to be loyal to their employers though over loyalty is also not permissible according to the relative business ethics theories. Such employee loyalty could be expected from the employers, but at the same time in order to keep the psychological exchange between the employers and employees balance, employers must time by time review the reward system to make sure that when employers are performing continually in a well manner, there are sufficient rewards in term of promotion or bonus offering to make sure that they would not feel the imbalance psychologically. For example, the monitoring of the employees turnover rate would be helpful for employers to identify such problems when they happen.


5.2    Build up comprehensive unethical business behaviors reporting system


As mentioned in the study, employee loyalty would create value for the employers but the over loyalty which involves the behaviors that are in contradiction with the business ethics theories would make the employee loyalty become meaningless, hence it is recommended that employers closely monitor the unethical business practices among the employees as well as among the management since many unethical business behaviors do exist in the deep of the organizational structure or organizational culture rather than just some employees’ individual behaviors. One of the recommendations would be to build up comprehensive unethical business behaviors reporting system to perform the monitoring function. For example, within the employee guideline or employee orientation, employers could in detail explain how fraud and other unethical business behaviors could be reported to the relative department and how the whistle blowers are encouraged to report these unethical problems. Also different unethical behaviors should be described to the employees clearly, for instance, fraud accounting should be stated as serious unethical behaviors that would attract the most severe penalty from both the company management and also the legal departments.





Boyle, P. 2001, Organizational ethics in health care: principles, cases, and practical solutions. San Francisco, CA: Jossey Bass. p. 147


Donaldson, T. 1982, Corporations and morality. New Jersey: Prentice-Hall. p. 71


Furnham, A. 2011. Managing People in a Downturn. New York: Macmillan Publishers Limited.


Rousseau, D. M. 1989. Psychological and implied contracts in organizations. Employee responsibilities and rights journal, 2, 121 – 139 2011. Insider trading. 5 Jan 2012 [online]


Shaw, W. H. 2011, Business Ethics: A Textbook with Cases. Boston, MA: Wadsworth. p. 390 2011. What Are Basic Business Ethics Theories?. 5 Jan 2012 [online]

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