Human resources managers (and, in fact, anyone managing people day to day) must be proficient in applying employment law to employment decisions. For example, in the United States equal employment laws set guidelines regarding how the company writes its recruiting ads, what questions its job interviewers ask, and how it selects candidates for training programs or evaluates its managers. Occupational safety and health laws mandate strict guidelines regarding safety practices at work. Labor laws lay out, among other things, what the supervisor can and cannot say and do when the union come calling to organize the company’s employees. As one employment lawyer sums up, the use of such terms as probationary period, permanent employee, merit increases, white collar [or] annual salary in a job offer, now causes serious exposure to a lawsuit.
Because legal issues are so central to all managers’ employees related activities, we will discuss Indian labor laws and US equal employment laws.
Ethics refers to the standards someone uses to decide what his or her conduct should be.
There is one proficiency that is so important that it was best to cover it after the above, because if the manager fails to apply this proficiency, then everything else he or she does will have been for nought. Several years ago, MCI WolrdCom’s CFO pleaded guilty to helping hide the company’s true financial condition. The government accused him of having subordinates make fraudulent accounting entries, and of filing false statements with the SEC. Why would a start CFO do this? Because, he said he thought he was helping MCI. Managers can learn some lessons from MCI – Worldcom. Even gifted managers fail if they make the wrong ethical choices. And even honest managers find it easy to convince themselves that what they are doing is not really wrong. Managing ethically is our last, but in some respects most crucial, HR manager proficiency.
Ethics refers to the standards someone uses to decide what his or her conduct should be. Ethical decisions always involve morality, matters of serious consequence to society’s wellbeing, such as murder, lying, and stealing. Newspaper headlines regarding ethical lapses at Enron and MCI and questionably timed stock option grants at Apple Computer seem to never end. Given that some of these firms, such as the accounting firm Arthur Andersen, were literally put out of business by ethical lapses, one has to wonder what the managers were thinking.
The US Congress passed the Sarbanes- Oxley Act in 2003. To help ensure that managers take their ethics responsibilities seriously, Sarbanes Oxley (SOX) is intended to curb erroneous corporate financial reporting. Among other things, Sarbanes- Oxley requires CEOs and CFOs to certify their companies’ periodic financial reports, prohibits personal loans to executive officers and directors, and requires CEOs and CFOs to reimburse their firms for bonuses and stock option profits if corporate financial statements subsequently require restating.
SOX does not just involve the firm’s CEO and CRFO. For example, every publicly listed company now needs a code of ethics, more often than not promulgated by human resources.
In India, the Securities Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA) have set the relevant framework for corporate conduct. Under these, the promoters and key managers bound to Indian business houses like the Tata group and Infosys have codified their code of ethics to ensure that the same is followed with zero tolerance. The codes are promulgated from the top office, indicating the significance attached to tem. While MNCs operating in India subscribe to their parent companies’ code of ethics, many Indian organizations are moving fast to adopt a formal ethics policy and view corporate governance seriously.
The human resources manager’s responsibilities for implementing Sarbanes- Oxley are just the tip of the ice berg when it comes to human resource – related ethical practices. One survey found that six of the ten most serious ethical issues – workplace safety, security of employee records, employee theft, affirmative action, comparable work, and employees privacy rights – were human resource management related.