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Ethical Behavior at Work and Employee Relations Case Study

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Updated: Jun 21st, 2020

Gerry Green working at Terrondei Ltd. was reported to the manager of the Service Department as having removed things from the company’s premises. In spite of the possibility for the manager to focus on the disciplinary action, the case is complicated by the fact that Mr. Green declined to accept the responsibility for the misconduct because the practice of removing items from the organisation’s scrap bin was discussed as normal by the company’s employees, as it was mentioned by Mr. Green.

Issues to Consider

It was reported that Mr. Green had transgressed the company’s rules regarding the removal of the items from the premises. However, the removal of the things from the scrap bin was regarded as a normal practice for the other employees because of the ineffective enforcement of the rules in the past. The question is in the appropriateness and type of disciplinary action for Mr. Green.

The Case from the Perspective of the Shop Steward

The concept of justice that needs to be emphasised while discussing the case is associated with the ideas of fairness and equality in treating employees. It is important to admit the fact that the company has explicit rules regarding the case of the items’ removal from the premises. However, the procedures associated with these rules were not followed strictly in the past, and the rule was breached by many employees several times. As a result, certain custom and practice arrangements were formed regarding the use of the manufacturing scrap by the employees (Lewis, Thornhill, & Saunders, 2003, p. 24).

These informal workplace rules can be discussed with references to the idea of the external attribution (Dundon & Rollinson, 2011, p. 84; Mathis, Jackson, & Valentine, 2013, p. 152). Thus, the behaviour of Mr. Green was influenced by the observed actions of the other employees that were not punished by the managers of the company. From this point, it is necessary to avoid the realisation of the disciplinary action in relation to Mr. Green because of breaching the principle of fairness (Mallin, 2006, p. 24). However, it is necessary to recommend further investigation of the issue in the company in order to influence the working environment in relation to the aspects of control and regulation.

At this stage, it is possible to state that a just solution, in this case, is the focus on the provision of the warning for Mr. Green that is helpful to predict the determined misconduct in the future (Wilkinson, Donaghey, Dundon, & Freeman, 2014, p. 134). Furthermore, the possible strict disciplinary action regarding Mr. Green should be proposed according to the rehabilitation approach (Dundon & Rollinson, 2011). In spite of the fact that Mr. Green breached the company’s rules, his misconduct should be discussed as minor and caused by the external attribution associated with the custom and practice arrangements characteristic for the company (Dundon & Rollinson, 2011, p. 84; Mathis, et al., 2013, p. 152).

Therefore, the disciplinary process should include the discussion of the issue with Mr. Green during the face-to-face session and the warning. These procedures are necessary to demonstrate that the man’s behaviour was unacceptable according to the code of conduct followed in the company (Wilkinson et al., 2014, p. 134). The reason to state that the proposed solution is just is supported by the idea that the disciplinary action should be fair and realised according to the principle of equality (Mallin, 2006, p. 82). At the current stage, it is impossible to punish the other employees for the misconduct that became the habitual practice, and it is necessary to revise the company’s rule and provide the additional training for the employees regarding the rules and regulations adopted in the organisation (Dundon & Rollinson, 2011; Wilkinson et al., 2014).

The Case from the Perspective of the Manager

In spite of focusing on the concept of justice with references to the idea of fairness in relation to the other employees, the position of the manager in discussing the case of Mr. Green differs from the position of the shop steward. It is important to state the effective management depends on the ideas of fairness, openness, and honesty (Lewis et al., 2003, p. 25). It is impossible to tolerate the behaviours of the employees that are discussed as unacceptable in a certain context (Mathis, et al., 2013, p. 549). From this point, the concept of managerial justice is grounded on the idea of non-supporting the misconduct. This approach is associated with procedural justice (Mathis, et al., 2013, p. 520). In this context, Mr. Green should be punished for transgressing such a rule of the company as the removal of the items from the premises (Dundon & Rollinson, 2011). The focus on the punishment approach can be discussed as effective because it serves to establish a new approach to treating the misconduct in the company (Mathis, et al., 2013; Wilkinson et al., 2014).

Therefore, a just solution associated with the case of Mr. Green is a fair but consistent disciplinary procedure that can be performed in a form that is described in the rules and the company’s code of conduct, or it can be presented in the form of a penalty (Mathis, et al., 2013, p. 520). It is important for the new manager to demonstrate that the misconduct cannot be tolerated in the company in spite of the previous imperfect managerial approaches. In this context, the punishment in the form of a penalty causes the strong emotional reaction in employees, and it is possible to establish the new approach to treating the unacceptable behaviours (Dundon & Rollinson, 2011; Wilkinson et al., 2014). However, although the choice of the punishment approach is effective to regulate the environment in the company, it can be considered as unfair by Mr. Green because of the discussed context. Thus, it is important to choose the punishment procedure that is non-abusive for the employee, but it needs to support the idea of non-tolerating the unacceptable behaviour in the company.

Top Management Rewards at Royal Bank of Scotland: Case Study

Stephen Hester, the chief executive at the Royal Bank of Scotland, was discussed as having the opportunity to receive $15 million as the remuneration package in three years. The package for Hester was decided by the leaders of the Royal Bank of Scotland, and he was finally guaranteed to receive about $15 million in shares and options when the share price becomes 70p. Hester will also receive the relevant part of the stated amount if the price reaches 40p or 55p, indicating the significant increases in the stock market value.

Issues to Consider

The remuneration package proposed for Stephen Hester is extremely large, as it is stated by the representatives of unions, shareholders of the organisation, and politicians. The question is complicated with references to the fact that the $20 billion bailouts was created for the bank and also with references to the fact that 4500 employees lost their jobs at the Royal Bank of Scotland during the discussed period.

Discussion of Reward Packages

Extremely high rewards or bonuses for top managers are known as ‘massive’, and they are discussed as an actively followed tendency in the financial industry (Mathis, et al., 2013). However, there is a debate regarding the rationality of proposing extremely high rewards for executives. The proponents of the idea that top managers should receive significant bonuses and stock options as shareholders state that such high bonuses are the effective motivational tool (Lewis et al., 2003, p. 89). The opportunity to receive the high bonus depending on the performance motivates executives to implement successful strategies and increase the overall profitability of the organisation because of the risk of the failure without financial returns (Mallin, 2006, p. 156).

On the other hand, experts state that there is little relationship between the provision of the extremely high bonuses in forms of shares and options and the actual performance of top managers (Mathis, et al., 2013, p. 433). The problem is in the fact that executives are expected to receive bonuses even if the goals are completed partially, and there is still no guarantee that significant revenues will be received (Dundon & Rollinson, 2011; Wilkinson et al., 2014). Thus, the focus on the ‘massive’ bonus as a tool to stimulate the activities of Hester cannot be discussed as obviously efficient.

The fact of receiving the bonus by Hester is also an issue for discussion because of the absence of the relevant balance between the basic reward package or salary for Hester and the expected bonus. The decision for providing the bonus in $15 million for the executive should be carefully explained and supported (Mathis, et al., 2013). On the one hand, it is possible to state that the Royal Bank of Scotland experiences difficulties because of focusing on the $20 billion bailouts. As a result, the proposed bonus seems to be too high for the bank. On the other hand, Hester’s efforts in ramping up the share price can be discussed as leading to the bank’s progress.

From this point, Hester’s activities will lead to success, and the reasonable bonus is necessary (Wilkinson et al., 2014). In this context, the expected bonus should be calculated with the focus on Hester’s current salary, existing awards, and prognoses for changes in the financial sphere for the next three years. Furthermore, the proportion of the award should be revised after the three-year period according to the evaluation of the success of Hester’s activities (Dundon & Rollinson, 2011; Mathis, et al., 2013). In this case, Hester would receive the bonus depending on his actual performance and contributions to the organisation’s progress.

Corporate Governance Style

Having focused on the case of Hester’s remuneration package, it is possible to state that the specific corporate governance style that explains the situation in the Royal Bank of Scotland is the focus of the authorities on shareholders’ interests. This model is typical for the organisations in the United Kingdom, the United States, and Australia because of its connection with the focus on the organisation’s profitability (Dundon & Rollinson, 2011; Mathis, et al., 2013). From this point, if Hester is expected to receive the bonus in $15 million in the form of shares and options, his activities are oriented to completing the organisation’s goal and to increase the stock market value. As a result, shareholders will benefit from Hester’s activities significantly (Wilkinson et al., 2014, p. 156). In addition, Hester’s interests as a shareholder will also be met.

It is possible to state that in this context, the managers performed their agency function fully while being oriented to responding to and protecting the interests of shareholders of the Royal Bank of Scotland. The followed corporate governance style can be discussed as efficient for the large financial institutions like the Royal Bank of Scotland because of the necessity to implement strategies that work to increase profits and improve the share value. In this context, the position chosen by the bank’s top managers can be explained with their focus on the shareholders’ interests in the short-term and long-term perspectives (Mathis, et al., 2013; Wilkinson et al., 2014).

The Behaviour of Management in Position of Power

While focusing on the redundancy of 4500 people previously working at the Royal Bank of Scotland, it is possible to state that the management of the bank acted according to the idea of the power of position (Mathis, et al., 2013; Wilkinson et al., 2014). Thus, having the freedom of action, the management chose to dismiss people in order to improve the financial situation in the organisation. The hierarchical position of authority allows the unequal distribution of resources (Wilkinson et al., 2014, p. 30). That is why the necessary corrections were not made to the policy regarding the level of the remuneration at the Royal Bank of Scotland. As a result, the approach followed by the management of the bank can be discussed as indicative of the specific behaviour of the managers who have the authority in the bank (Dundon & Rollinson, 2011; Wilkinson et al., 2014).

Handling the employee relations with the focus on the interests of shareholders and choosing the path of redundancy, the managers in the bank demonstrate their concentration on their authority over the other employees as subordinates (Dundon & Rollinson, 2011; Wilkinson et al., 2014). According to Wilkinson and the group of researchers, “issues of vital concern to workers, such as wages, hours, and job security, inevitably create a conflict of interest between the employer and employee and thus have a significant element of win-lose” (Wilkinson et al., 2014, p. 31). Furthermore, “employers are typically in the superior power position since they control who gets the jobs” (Wilkinson et al., 2014, p. 31). That is why the managers chose to fire employees instead of focusing on the strategy that is non-beneficial for them.

The results of the authoritative management style are the discussion of the interests of employees in terms of shareholders’ interests. In this case, the power position allows the top managers to decide on controversial issues while orienting to long-term perspectives and possible profits for the shareholders. From this point, the redundancy of 4500 people is discussed as the business necessity when the provision of the high bonus for the executive is discussed in terms of the potential and completion of long-term goals.

References

Dundon, T., & Rollinson, D. (2011). Understanding employment relations. New York, NY: McGraw-Hill Higher Education.

Lewis, P., Thornhill, A., & Saunders, M. (2003). Employee relations: Understanding the employment relationship. New York, NY: Pearson Education.

Mallin, C. (2006). International corporate governance: A case study approach. London, UK: Edward Elgar Publishing.

Mathis, R., Jackson, J., & Valentine, S. (2013). Human resource management. New York, NY: Cengage Learning.

Wilkinson, A., Donaghey, J., Dundon, T., & Freeman, R. (2014). Handbook of research on employee voice. London, UK: Edward Elgar Publishing.

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