Managing Ethical Issue In Work Places Commerce Essay

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Founded in 1869, Goldman Sachs Inc. is an American investment banking and securities firm that engages in global investment banking, securities, investment management and other financial services.

In the financial crisis, Goldman took advantage from the Troubled Asset Relief Program (TARP) which is set by the United States government in 2008 to purchase assets and equity from financial institutions to strengthen their financial sector. The program is government's guaranty to rescue the banks when they are on the edge of bankruptcy. However, this kind of rescue was conducted without serious conditions.

In 2008, Goldman received $10billion preferred stock investment from the U.S. Treasury as part of the TARP, but Goldman chose to spend the money on risky investment and hand out the winnings to its top traders. In other words, Goldman was gambling with taxpayers' money and getting rich in the process.

To make things worse, the CEO of Goldman, Lloyd Blankfein, had publicly said that Goldman has not changed its way and in fact has no intention of changing its way. That means Goldman was continuously taking big trading risk with taxpayers' money and there is nothing anyone can do about it.

Ethic issues and their causes in the case

Apparently Goldman's behavior was not ethical and the top traders of Goldman were even defined as "financial terrorists". The major ethical problem revealed in the case can be defined as follow:

Extort money from government by non-disclosure or misrepresentation of financial statement

Gambling with taxpayers' money

The top performer' getting high pays whilst the whole corporation was being bailed out.

Executives' moral problems

Those unethical behaviors destroyed the trust between government and the corporation whilst damaging the reputation of Goldman among the public, which was harmful to the sustainable development of the firm and enlarge the financial crisis simultaneously.

While see through the appearance and perceive the essence, there were mainly five cause of the ethical problem within the case.

Lack of tight restriction on TARP

Lack of transparency of business conduct

Lack of moral training and supervision

Lack of justice on remuneration & reward system

Believed in "Greed is good"

3. Ethical issues in workplace

About 30 years ago, most corporate executives believed their sole responsibility was to provide a maximum financial return to shareholders. With the establishing of new governmental bodies like Environmental Protection Agency (EPA), Equal Employment Opportunity Commission (EEOC), Occupational Safety and Health Administration (OSHA), and the Consumer Product Safety Commission (CPSC), organizations realized the pursuit of financial gain had to be conformed to the laws of the land (Carroll, Archie B, 1991).

Except for the ethical problems listed above, a growing number of other ethical issues as fraud, theft, lying, spreading malicious rumors, withholding effort, aggressive behavior, and sexual harassment in the workplace are drawing a wide attention (Griffin, O'Leary-Kelly, & Collins, 1998). Those unethical behaviors generate not only the financial impact, but also the social and psychological effects on the organization (Robinson &Greenberg, 1998). The management literature has acknowledged that ethical behavior has a significant impact on the culture of the corporate (Quinn, J, Mintzberg, H., & James, R. 1987). Besides, as an important corporate duty, a firm's ethical policies or actions is highly related to its financial performance (Schneeweis, Thomas, 1988). However, the key discussing point in the case study is how does this ethic issue affect the work of HR managers and what can they do about it.

Responsibility of HR

Given the importance of ethical issue in workplace, managers continually encounter demands to from multiple stakeholders to increase input in corporate social responsibility (Abagail MCwilliams, Donald Siegel, 2001). But the issue of who is the ethic champion is highly controversial. Based on the in-class debate and extracurricular subject study, it is both external stakeholders and HR's obligation to drive ethics mandate, of which the HR is taking the internal responsibility for the following reasons.

For one thing, HR is responsible to the recruitment and training process of the organization and is responsible for getting the right personnel to fit the culture of organization (Ledwidge, Jonathan, 2007). In other words, HR needs to form correct perception of the organization's core value among employees prior to the everyday business conduction.

For another, it is one of HR function to set up appropriate performance and reward system including executive remuneration determination to ensure distributive justice. HR has the tool and measurements to monitor employees' and managers' behavior and is responsible for conducting the punishment towards unlawful practice (Bart, Chris, 2006).

Generally speaking, HR is in charge of providing an ethical environment within workplace while create a mutual trust between organization and its stakeholder as well as maintain a satisfying reputation among public (Bonham, Jamie, 2004). That means ensuring business honesty and transparency also belongs to human resource management.


Base on the analysis above, HR is taking huge responsibility to balance their commitment to the owners of the cooperation and the ethical rights of an ever-broadening group of stakeholder. Under modern HRM theory, today's business leaders are able to model ethical behaviors and create an organizational culture that supports ethical business practice while obtain the competitive advantage in the marketplace through the process (Vickers, Mark R., 2005). This section exposits several approaches to manage ethical issues in workplace.

Firstly, conducting an all-around orientation to the staff including employees and managers to shift their focus of working and management philosophy from shareholder interest to stakeholder interest is essential. In the case, CEO of Goldman denied their misconduct in the crisis showed lack of morality of the top traders in the organization. The purpose of the training is to wake the staff that organizations have moral responsibilities towards all their stakeholders, which mean the obligation is a broad one, extending beyond the traditional duty to shareholders to other societal groups such as customers, employees, managers, suppliers, government and neighboring communities (Jones, 1980, pp. 59-60). HR managers must play a key role in embedding those beliefs throughout the organization.

Secondly, HR professionals should concern how their organizations determine the ethical and limits of core values and beliefs and ensure that ethics is a top organizational priority (Jonathan Ledwidge, 2007). To focus on the core values and beliefs of the organization and make sure the firm has integrated ethical sensitivity to the policy and action of financial goal is of great importance (Carroll, Archie B, 1991). To be specific, it is one of HR functions to set guidelines and restrictions for appropriate behavior under different circumstances and ensure the corporation is fulfilling its legal obligation. Even though Michael Douglas said in the movie Wall Street "Greed is good." HR has the obligation to set code of business conduct under local regulations when pursuing profit.

Third, HR is suggested to take ethical and legal concern into its compensation system. Properly designed performance reward system is generally advantageous and desirable to both employees and owners (Levine, Mark, 2001). To be specific, the payment of remuneration should align to the performance of individual and the legal restriction of corporation policy; rewards given to wrong reason (e.g. greedy) have to be punished. Supervision and monitoring are required in the process. HR executives should either being the ethics champion or ensure there are some other capable people in the organization can taking the job of monitoring (Vickers, Mark R., 2005).

Fourthly, an ethics component must be included in the leadership selection and development processes. Since most unethical action taken by employees were requirement by their boss (Brown, David, 2003), strict criteria of morality need to be set up in employee-development programs and succession plan thus ensured the organization respect the ethical climate and corporation social responsibility from the executive to the bottom line. To be specific, leadership development should include both ethical theory and real life examples. For instant, managers need to represent how did they handled ethical dilemmas in the workplace. Furthermore, HR processes the tough task to convince the top board members to taking ethic training (Grossman, Robert J., 2007).

Fifth, transparency of the business activity and financial statement of the corporation is required. In 2001, a study by the Society of Financial Service Professional and Walker Information found that deceptive promises to workers and customers were listed as one of the most egregious ethic violations ("Importance," 2001). HR is taking the responsibility to help disclosure the performance of the organization and accept the inspection of the public. Non-disclosure and misrepresentation should be reported and call to account. Through this process, intellectual property will be closely guarded, business honesty and transparency can be achieved and artificial "economics of scale" is avoided.

Finally, conduct constantly evaluation of ethical HRM policies by assessing the ethical climate of organizations, and the feedbacks from external stakeholders (Peterson, Dane K, 2002). Ethics is a moving target and social values shifts time after time. Organizations will ¬nd themselves consistently challenged to adapt to new requirements and demands from the ever-changing environment (Jonathan Ledwidge, 2007). HR professors are suggested to collect timely feedbacks by taking interviews and survey with both internal and external stakeholders and updating the HRM policies according to the strength and weakness reflected. In a word, human resource management of ethical issue needs to keep constant innovation in order to respond to social and human requirements and achieve the competitive advantage of the organization.


It is wildly believed that HR has a signi¬cant responsibility of promoting and restoring an ethical work environment, while developing the core values and belief culture within and throughout organizations. Base on the analysis above, managing challenge and opportunity of ethic issue could occupy an important position in the HRM system. HR functions in managing ethical problems can be briefly concluded into six points. Providing comprehensive employee training of ethic perception, cultivating core value of ethic priority in organization culture, ensure distributive justice by restricting compensation system, including ethics component in leadership selection, helping to achieve business honesty and transparency, and constantly evaluating ethical HRM policies. Through these processes, HR functions can be maximized in managing ethic in workplace as well as stakeholder interest.

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