loyola university new orleans

Corporate Bullying

BA-B415: BUSINESS ETHICS

Berk Guneri

12/6/2010

This paper addresses the definition, causes, effects, legal trends, and ethical issues of Corporate Bullying along with an example case study.

Executive Summary

According to surveys, majority of the employees in United States admit that they encountered

one form of bullying at work in their lifetime. The cost of corporate bullying is much more than

one can imagine. A Finnish study on the effects of bullying on municipal employees indicated

that 40 percent of bullied workers felt "much" or "very much" stress, 49 per cent felt unusually

tired on the job, and 30 per cent were nervous "often" or "constantly." “In the United States, the

total costs of workplace violence to employers amounted to more than $4 billion in 1992,

according to a survey conducted by the National Safe Workplace Institute.” Australian Human

Rights Commission estimates that workplace bullying costs Australian employers between $6 -

$36 billion dollars ($5.95 – $35.70 billion US dollars) every year when hidden and lost

opportunity costs are considered.

Although, this paper is written as an ethics paper, a large portion of the paper is devoted to the

definitions, reasons, and effects of corporate bullying in order to grasp the notion that corporate

bullying harms more than the bullied employees.

The ethical issues concerning corporate bullying are analyzed through Utilitarianism Theory,

Kantian Ethics, Freidman and Freeman’s views. The suggestions to avoid corporate bullying

when no law is clearly defined are also presented. The final portion of the paper presents a case

study on the subject to give a real world application to the reader.

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Table of Contents

Executive Summary..........................................................................................................................i

What is Bullying and Corporate Bullying?.....................................................................................1

Why do people bully?......................................................................................................................2

The Effects of Corporate Bullying..................................................................................................3

Current Legal Trends.......................................................................................................................4

Ethical Issues...................................................................................................................................6

Utilitarianism Theory...................................................................................................................7

Kantian Ethics..............................................................................................................................7

Friedman’s View.........................................................................................................................8

Freeman’s View...........................................................................................................................9

Indeed, Corporate Bullying is Unethical; but, how can it Be Avoided?.........................................9

A Case Study: Workplace Harassment..........................................................................................10

Summary....................................................................................................................................10

Situation.................................................................................................................................10

Actions...................................................................................................................................11

Results....................................................................................................................................11

Facts...........................................................................................................................................12

Issues..........................................................................................................................................12

Reasoning..................................................................................................................................12

Works Cited...................................................................................................................................14

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What is Bullying and Corporate Bullying?

Before going through the ethical issues on corporate bullying, the definition of bullying and

work place bullying, subsequently, has to be defined to get a clear understanding of what really

is corporate bullying. UK National Work Place Bullying Advice Line defines bullying as “…

persistent unwelcome behavior, mostly using unwarranted or invalid criticism, nit-picking, fault-

finding, also exclusion, isolation, being singled out and treated differently, being shouted at,

humiliated, excessive monitoring, having verbal and written warnings imposed, and much more.

In the workplace, bullying usually focuses on distorted or fabricated allegations of

underperformance.” (1). Amicus-MSF trade union defines workplace bullying as “Persistent,

offensive, abusive, intimidating or insulting behavior, abuse of power or unfair penal sanctions

which makes the recipient feel upset, threatened, humiliated or vulnerable, which undermines

their self-confidence and which may cause them to suffer stress.” (2)Tim Field defines the

phenomenon under the light of bullies’ character defects. He defines bullying as "… a

compulsive need to displace aggression and is achieved by the expression of inadequacy (social,

personal, interpersonal, behavioral, and professional) by projection of that inadequacy onto

others through control and subjugation (criticism, exclusion, isolation etc.). Bullying is sustained

by abdication of responsibility (denial, counter-accusation, pretense of victimhood) and

perpetuated by a climate of fear, ignorance, indifference, silence, denial, disbelief, deception,

evasion of accountability, tolerance and reward (e.g. promotion) for the bully." (2) Corporate

Bullying is where the employer abuses employees with impunity knowing that the law is weak

and jobs are scarce. (1) Corporate Bullying is when an employee or supervisor bullies another

colleague without mercy. Corporate bullies use tactics similar to stalking. This type of bully will

spy on employees. They will go through an employee's work files and use video surveillance on

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their victims. This type of bully will even fabricate complaints about their colleagues and

pressure others to fabricate complaints about their chosen victims. Corporate bullies usually are

well secured in their job positions, and filing complaints against corporate bullies usually can

backfire in an employee's face no matter what evidence they have to validate their claims of

workplace bullying in corporate environments. (3) Institutional bullying is similar to corporate

bullying and arises when bullying becomes entrenched and accepted as part of the culture.

People are moved, long-existing contracts are replaced with new short-term contracts on less

favorable terms with the accompanying threat of "agree to this or else", workloads are

increased, work schedules are changed, roles are changed, career progression paths are blocked

or terminated, etc. (1) As can be clearly interpreted from the various definitions, The effects of

bullying on employees are easy to grasp even by someone who has never experienced bullying;

however, what is not easy to grasp with common sense is why people bully others in first place.

Why do people bully?

The main reason for bullying is feeling inadequate and a sense of urgency in hiding this from

others. Generally, the greater someone’s bullying efforts, the greater he feels inadequate. Bullies

project their inadequacy on to others to avoid facing up to their inadequacy and doing

something about it, to avoid accepting responsibility for their behavior and the effect it has on

others, to reduce their fear of being seen for what they are, namely a weak, inadequate and often

incompetent individuals, and, to divert attention away from their inadequacy - in an insecure or

badly-managed workplace, this is how inadequate, incompetent and aggressive employees keep

their jobs. (1) Another important reason for corporate bullying on management level is to push

employees on performing actions they are not confortable in performing (perhaps the actions are

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illegal or unethical). "Agree to this or else" is a common term in corporate bullying which

translates as a threat, coercion, against one’s job security or promotional opportunities. In some

cases, corporate bullying takes place to force employees into performing illegal activities as was

the case for Enron. Some managers simply see bullying practices as a cost effective alternative of

downsizing or getting rid of unyielding/unwanted employees where if the employee resigns, the

corporation saves on compensation, severance packages, and continuing benefits costs for the

terminated employees. In some rare cases, some managers condemn bullying in order to avoid

the stressful termination, a.k.a. firing, process. In these cases, incompetent managers are afraid to

carry out the employee termination process and they see bullying as a way to force employees

into voluntary resignation, therefore, avoiding the confrontation all together. Under no condition

bullying should be confused with the part of managing process as universal managing principles

never constitute harassment of others publicly or privately. Management is about managing, not

about harassing.

The Effects of Corporate Bullying

Employees, who are on the receiving end, suffer from great lengths of psychological distress

and, sometimes, from stress related physical illnesses. “A Finnish study on the effects of bullying

on municipal employees indicated that 40 percent of bullied workers felt "much" or "very much"

stress, 49 per cent felt unusually tired on the job, and 30 per cent were nervous "often" or

"constantly." (3) Bullying creates unpleasant and hostile work place environment not only for the

receiving parties, but also for the observing parties within the organization. Corporations which

employ bullying as a systematic practice show excessive rates of sick leaves, staff turnovers,

stress breakdowns, early retirements, suspensions, dismissals, illnesses caused by chronic stress,

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litigation or legal action against employees, and increases in premiums of employer sponsored

health insurance. (1) In long term, corporations get harmed from bullying by acquiring increase

in expenses(such as settlements, legal costs, increased health insurance costs, hiring/training

costs), by losing necessary employees who can generate positive value to the company, by

having difficulty organizing the work force efficiently, and by experiencing decreased

performance and productivity due to low morale. “In the United States, the total costs of

workplace violence to employers amounted to more than $4 billion in 1992, according to a

survey conducted by the National Safe Workplace Institute.” (3) The survey figure clearly

demonstrates the long term financial toll of bullying to U.S. economy.

Current Legal Trends

The United States is the only western country that does not have comprehensive laws against

corporate bullying. As of April 2009, 16 states1 have proposed legislations against corporate

bullying. Despite increasing amount of proposals, no comprehensive laws against corporate

bullying have passed by federal or state governments in the U.S. However, in recent years, bills

against corporate bullying have been gaining momentum. The most comprehensive of these bills

is “Healthy Workplace Bill.” The bill aims to address the issues of corporate bullying that is not

covered by current laws. According to the Healthy Workplace Bill (HWB) website, only 20% of

corporate bullying cases are covered under anti-discrimination laws. Under the current law, “In

order to claim sexual harassment, racial discrimination, or hostile work environment, the

recipient of the mistreatment must be a member of a protected status group (based on gender,

race, disability, ethnicity, religion, etc.). For example, if you are a white female being bullied by 1 Nevada (2009), Illinois (2009), Utah (2009), New Jersey (2007), Washington (2007, 2005), New York (2006), Vermont (2007), Oregon (2007, 2005), Montana (2007), Connecticut (2007), Hawaii (2007, 2006, 2005, 2004), Oklahoma (2007, 2004), Kansas (2006), Missouri (2006), Massachusetts (2005), California (2003)

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a white female or a man of color being bullied by another man of color you are not protected.”

(4) Since not all corporate bullying cases are covered by anti-discrimination laws, one may easily

think that the rest is covered by Workplace Violence Protections. Unfortunately, this assumption

is not correct. On this issue HWB web site states that “…violence policies and laws always focus

on the acts and threats of physical violence -- striking someone (battery), or threatening

someone so that they fear being physically hurt (assault). The one exception is the inclusion of

verbal abuse in violence policies. So bullying that is verbal, but not physical, is completely

legal.” (4) Clearly, majority of corporate bullying cases goes unpunished under the current laws.

The HWB strives to bring protection to employees against corporate bullying by,

Providing an avenue for legal redress for health harming cruelty at work.

Allowing employees to sue the bully as an individual.

Holding the employer accountable.

Seeking restoration of lost wages and benefits.

Compelling employers to prevent and correct future instances. (4)

On the employers’ side, the HWB brings the following rights/responsibilities to the table,

Precisely defines an "abusive work environment"- it is a high standard for misconduct.

Requires proof of health harm by licensed health or mental health professionals in

bullying cases.

Protects conscientious employers from vicarious liability risk when internal correction

and prevention mechanisms are in effect.

Gives employers the reason to terminate or sanction offenders.

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Requires plaintiffs to use private attorneys.

Plugs the gaps in current state and federal civil rights protections. (4)

The HWB does not do the following,

Involve state agencies to enforce any provisions of the law.

Incur costs for adopting states.

Require plaintiffs to be members of protected status groups (it is "status-blind").

Use the term "workplace bullying". (4)

(For more information about the proposed Healthy Workplace Bill, visit the HWB2 web site.)

Ethical Issues

Since there is no specific law which covers the whole perspective of corporate bullying, one can

think that conflict resolution techniques and ethics rules can be employed to deal internally with

bullying at work. However, corporate ethical principles are ineffective in dealing with workplace

bullying. They are usually not enforced since bullies usually target one person at a time and

managers may see bullies actions as effective management techniques. If ethics rules had been

enforced, the dehumanization of workers would not have happened in the first place. (4) The

frequent occurrence of corporate bullying shows that managers and organizational leaders do not

take corporate ethical principles seriously; and, they are unwilling to enforce those ethical

principles when issues arise. Perhaps, they are unable to understand why corporate bullying is

unethical and is not a valid part of management technique. Let’s analyze corporate bullying

under major ethical theories in order to prove why it is unethical.

2 http://www.healthyworkplacebill.org

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Utilitarianism Theory

According to Utilitarianism theory, “An action is morally right if and only if it produces at least

as great a balance of value over disvalue as any available alternative action.” (5) In other

words, an action is morally right only if it serves to a greater good. The financial harm caused by

corporate bullying was $4 billion in 1992 in the U.S. A 2005 study by Australian Human Rights

Commission estimates that workplace bullying costs Australian employers between $6 - $36

billion dollars ($5.95 – $35.70 billion US dollars) every year when hidden and lost opportunity

costs are considered. Economically speaking, corporate bullying causes more harm than good.

Socially speaking, it does not provide any benefit to anyone involved except the bully himself

who is trying to cover his inadequacy. Therefore, according to Utilitarian theory, corporate

bullying is morally wrong, hence unethical since it does not produce a greater balance of value

over disvalue.

Kantian Ethics

Kantians, on the other hand, argues for principles that specify obligations rather than a balance of

value. (5) One of Kant’s best-known principles of obligation is “Never treat another person

merely as a means to your own goals,” even if doing so creates a net balance of positive value.”

(5) Referring to “Why do people bully?” section, it is easy to deduct that bullies carry out their

actions either to hide their inadequacy and/or to force people into performing activities by the

use of coercion. When someone bullies another person to cover his inadequacy, the bullied

person becomes a barrier between bully’s inadequacy and the outside. In this sense, the bullied

person is used as a shield by the bully. The bullied person, as a shield, becomes a means to

bully’s own goal which is to appear more capable than he actually is. The same goes for when

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someone uses coercion to force people into carrying out tasks (in most cases, illegal and/or

unethical) that they do not want to perform. In this case, again, the bullied person is used by the

bully to reach a certain goal. In either way, bullying is against Kant’s principles as it involves

treating others as means to an end. Thus, corporate bullying violates Kant’s principles and,

therefore, unethical.

Friedman’s View

According to Milton Friedman, “In a free-enterprise, private-property system, a corporate

executive is an employee of the owners of the business. He has direct responsibility to his

employers. That responsibility is to conduct the business in accordance with their desires, which

generally will be to make as much money as possible while conforming to the basic rules of

society, both those embodied in law and those embodied in ethical custom.” (5) Friedman’s

principle has two parts, “to make as much money as possible” and “while conforming to the

basic rules of society.” Referring to the first paragraph, corporate bullying creates huge

economic losses, $4 billion in 1992, for companies in the form of loss of talented employees,

excess sick days, high employee turnover, law suits, health care premiums etc. This does not

fulfill the first part of Friedman’s principle as companies not only incur high costs, but also lose

opportunities in making more money by high employee turnovers. A personal example, I worked

as an engineer at a construction company which had more jobs than the current employees, at

that time, can handle. As a result of acting supervisor’s use of bullying as a management

principle, our company suffered high employee turnovers resulting in dismissal of some projects

due to lack of available work-force. High employee turnover increased the hiring and training

costs as more frequent hiring/training took place. Subsequently, some of the projects needed to

be dropped or delayed due to inadequate work-force. Clearly, the supervisor was not acting for

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the best interest of the principals as his actions created more costs and less revenue. The

supervisor, in this case, was violating the principle of Friedman. Second part of Friedman’s

principle “while conforming to the basic rules of society” is also violated by corporate bullying.

Even though, there is no specific law against it, corporate bullying violates “the basic rules of

society” as it cannot be formulated as a universal rule. Therefore, both parts of Friedman’s

principle are violated by corporate bullying. Thus corporate bullying is unethical under

Friedman’s principle.

Freeman’s View

According to Edward Freeman, “… businesses, and the executives who manage them, actually

do and should create value for customers, suppliers, employees, communities, and financiers (or

stakeholders).” (5) Freeman replaces the Friedman’s idea that managers have a fiduciary duty to

stockholders with stakeholders. Corporate bullying is easier to prove as “unethical” under

Freeman’s view. Clearly, corporate bullying does not create value for employees, actually it

creates disvalue. As explained in “Friedman’s View” section, stockholders get harmed

economically in the long term by corporate bullying. Customers get negatively affected as costs

associated with corporate bullying are passed onto customers as increased fees for products,

services etc… Under Freeman’s view, corporate bullying creates negative value to stakeholders,

and, therefore, unethical.

Indeed, Corporate Bullying is Unethical; but, how can it Be Avoided?

There are alternative courses of actions to avoid corporate bullying and other unethical actions at

the workplace in the absence of legal rights. Many countries have adopted moderator approach

where employees can submit their cases regarding corporate bullying for external investigation.

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After investigation, the moderating body suggests a course of action to the abused employee.

However, the most efficient way of avoiding corporate bullying is the one done in corporate

level. Corporation can assign ethics officer who are responsible of overseeing the ethical conduct

between employees and the management. In this case, the ethics officer acts as a moderator. In

this case, the participation from the top management is necessary. Ethics officer can investigate

the claims and suggests a course of action to the top management. Ultimately, it is top

management responsibility to take action. In a more general sense, companies should enforce

ethics training to employees and make sure that employees know their rights and responsibilities

within the organization. If bullies realize that their actions would not go unpunished, they would

not be willing to condemn unethical behavior in the first place. Finally, it is top management’s

responsibility that the company code of ethics is enforced.

A Case Study: Workplace Harassment

Summary

SituationA mid-size private manufacturing firm in the United States produces parts for the airline

industry. In the Purchasing Department, the supervisor had been bullying his staff for years. In

the past month, two key staff in the department resigned without notice. One of the remaining

employees had noticed great stress in his co-workers and was also getting fed up with the lack of

respect from his manager.

Recently, the company had hired a new vice president of human resources. This HR executive

had made a point of being accessible to the workforce and greeting each individual—on all three

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shifts—over the course of her first six months at the company. Over time, employees began to

feel that she truly cared about the workforce. After enduring months of bullying, the employee

from Purchasing decided to take a chance and speak with HR.

ActionsThe vice president of HR listened carefully to the employee and took copious notes. It was

evident that the employee was unsure of his reception in HR, and so she assured him that the

situation would be thoroughly investigated. The descriptions of bullying clearly pointed to a

serious problem. Over the next two weeks, the vice president of HR conducted interviews with

the remaining three employees in Purchasing. She also contacted the two people who had

resigned and met with them away from the company premises. The investigation revealed that

the employees had been threatened with the loss of their jobs if they went to management to

reveal that the supervisor had approved many contracts for one particular vendor, disregarding

the company’s standard procedures for a request for proposal (RFP). As a result of the

investigation, the Purchasing supervisor, with six years’ tenure, was fired.

The two employees who had resigned were given the opportunity to return to the company; one

accepted and one declined. The investigation also revealed that although the company had an

ethics policy, not all senior management was known for ‘walking the talk’ in terms of ethical

behavior. Complicated by insufficient resources allocated to ethics compliance, the policy was

not uniformly administered. Rather, the general viewpoint was to get the job done, whatever it

took.

ResultsThe vice president of HR made the following changes:

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1) The organization conducted a thorough review of the ethics policy, ensuring protection

from retaliation for employees who reported ethics violations.

2) With support from the CEO, ethics training was made mandatory for every employee,

including top management and the board of directors, with the goal to improve the ethical

environment.

3) Ethics training was added to HR orientation for all new hires.

4) The vice president of HR requested and received a direct line of report to the board of

directors for ethics and compliance, so that the board would receive input regarding

ethical leadership, workplace culture and decision-making.

5) In a letter to all employees, the CEO communicated the updated ethics policy and

mandatory training for all employees and announced the vice president of HR as the

company ethics officer, reporting to the board of directors.

6) The vice president of HR plans to administer an employee survey in three months to gauge

employee morale and overall resulting transparency in the organization. (7)

Facts

The purchasing supervisor had been bullying employees in order to cover his actions on

disregarding the company’s standard procedures for a request for proposal (RFP).

Issues

Unethical treatment of employees via corporate bullying.

Reasoning

This case study is clearly a form of corporate bullying as employees are threatened by losing

their jobs. The purchasing supervisor clearly violates the company policies by approving

contracts for one specific vendor and, subsequently, by bullying the employees to avoid whistle-

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blowing. HR manager’s actions not only save the company money on future purchases by

enabling competitive bidding, but also reduce the employee turnover costs. The ethical situation,

in this case, could not be resolved without the full support from the top management. This case

demonstrates the importance of conflict resolution mediums, in this case HR department, in

avoiding/resolving ethical dilemmas.

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Works Cited

1. UK National Workplace Bullying Advice Line. Home Page. Bully Online. [Online] [Cited: December 1, 2010.] http://www.bullyonline.org/workbully/bully.htm.

2. —. Workplace bullying definitions. Bully Online. [Online] [Cited: December 01, 2010.] http://www.bullyonline.org/workbully/defns.htm.

3. Wilson, Latricia. OvercomeBullying.org. Analysis of Workplace Bullying. [Online] 2010. [Cited: December 06, 2010.] http://www.overcomebullying.org/workplace-bullying-article.html.

4. International Labour Organization. When working becomes hazardous. [Online] October 1998. [Cited: December 1, 2010.] http://www.ilo.org/public/english/bureau/inf/magazine/26/violence.htm.

5. The Healthy Workplace Campaign. The Healthy Workplace Campaign & State Coordinators Site. [Online] 2010. [Cited: December 06, 2010.] http://www.healthyworkplacebill.org.

6. Tom L. Beauchamp, Norman E. Bowie, Denis G. Arnold. Ethical Theory and Business, 8th Edition. New Jersey : Pearson Education, Inc., 2009. 978-0-13-612602-7.

7. Societ for Human Resource Management. The Ethics Landscape in American Business. A Survey Report by the Society for Human Resource Management and the Ethics Resource Center. [Online] 2008. [Cited: December 06, 2010.] http://www.shrm.org/Research/SurveyFindings/Documents/08-0449_Ethics_Landscape_HR_Perspective.pdf.

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