Ethics and Governance

University Degree Business and Administrative studies

Introduction

The purpose of this report is to examine the issues raised in the case where L'Oréal was found guilty of racial discrimination in its recruitment practices for its new product - Fructis Style.

The report will begin with the identification of the key ethical issues raised in the case, followed by a proposed ethics policy concerning the issues. The rationale and implementation of the policy will also be examined before concluding with a discussion of the expected effectiveness and possible limitations of the policy.

Ethical Issues raised

The key ethical issues raised in the case study are stated as follows :

L'Oréal committing racial discrimination against ethnic minorities
L'Oréal executives being forced to deny claims that they lightened Beyoncé Knowles’s skin
L'Oréal’s perceptions that white sales staff will generate better sales

Discussion on issues raised

This part of the report will discuss on the issues and determine whether it is ethical with regards to the five ethical theories - egoism, utilitarian, virtue, Kantianism, and justice.

Racial discrimination against ethnic minorities

L'Oréal believed that ethnic minorities like blacks, Arab and Asian women were unworthy of selling its shampoo. This led them to recruit only white women to work with them. As stated in the case, they must be ‘bleu, blanc, rouge’. They also believed French shoppers were more likely to purchase shampoo from white sales staff.

Egoism

The egoist contends that all choices should involve self-promotion as their sole objective (7th ed). They believe that conventional morality is irrational and consider the interests of others only when their own interests are at stake.

From an egoism stand point, L'Oréal’s discrimination against ethnic minorities would be considered ethical because it would improve their shampoo sales and increase revenue. Both the acceptance of the conventional rules of morality and interests of ethnic minorities will not be a concern unless L’Oréal’s well-being is compromised.

Utilitarianism

Utilitarianism deems an action to be morally right if and only if it maximises good consequences over bad consequences (Chryssides and Kaler 1993). In other words, an action is ethical if utility is maximised.

Applying this theory to the case, it is clear that the recruitment policy will be advantageous for L'Oréal as it will lead to more sales. It is also clear that the ethnic minorities will in turn suffer the dire consequences of being unemployed. However, what is unclear is how units of utility can be precisely measured in order to determine if discriminating against ethnic minorities is morally right. Thus, it would be difficult to say if discriminating against ethnic minorities is moral according to the utilitarian theory.

Virtue

According to virtue ethics, an action is morally right if the agent exhibits a morally virtuous character, and is morally wrong if the agent exhibits morally vicious character. In other words, the wrongfulness of an action can be determined by examining the kind of character the action tends to produce, or the kind of character that tends to produce the action.

According to the virtue ethics, it is difficult to judge if L'Oréal is being ethical in discriminating against the ethnic minorities because virtue ethics does not explicitly state which traits of character are virtuous.

Arnett (2003) and Vladimir (1980) state that in France, the ability to speak the French language is widely advocated by the French state as a good way to uphold and preserve French culture. This is due to the widely held perception of a steadily declining French identity (Hewitt 2003).

From this perspective, it can be argued that L'Oréal is ethical because they are exhibiting moral character. On the other hand, upholding French culture can be seen as merely a disposition that is applicable to France society and not one that is a moral virtue for human life in general. Thus, L'Oréal can be seen as morally upright to the native French but to the rest of the world, they appear to be unethical.

Kantianism

According to Kantianism, moral right and wrong is determined not by what a person accomplishes – as in utilitarianism - but by the reasons the person has for the action. It is also based on the golden rule “Do unto others as you would have them do unto you”.

From a Kantian view point, it is difficult to determine if L'Oréal is ethical because Kant’s theory is too vague and does not tell us what interests people have and what their relative importance is. In other words, it does not tell us how the conflicting rights of L'Oréal and ethnic minorities should be adjusted to each other.

However, according to Kant’s theory of universalizability and reversibility - L'Oréal would be acting morally if they were willing to accept discrimination if they themselves were black, Asian or Arab. This is wrong because discrimination is obviously immoral. Thus, Kantianism is inadequate in helping to make a moral decision here.

Justice

With regards to this case, the justice theory is more concerned with fairness and legal compliance. It also advocates equality of opportunity for all, regardless of differences like race, and political beliefs which is a requirement of justice (Buchanan 1985). Procedural justice is based on the processes and activities that produce the outcome.

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Justice

According to John Rawls, giving some individuals less of an opportunity to compete for jobs from others is unjust, and furthermore, discrimination in employment is wrong because it violates the fundamental principal of justice by differentiating between people on the basis of characteristics that are not relevant to the task they must perform (Velasquez 2006). It also goes against the principal of equality where individuals are equal in all aspects relevant to the kind of treatment in question should be treated equally even if they are dissimilar in other aspects which are irrelevant (Trevino and Nelson 2007).

In this case, discrimination is unethical since the action of recruiting only whites is considered as illegal under the French employment law.

L'Oréal’s executives forced to deny lightening of Beyoncé Knowles’s skin

Egoism

According to egoism theory, L'Oréal’s actions are ethical because they are acting only for their own interests. In this case, L'Oréal’s sole concern was the reputation of the company. Both the interests of the consumers and general public were secondary to L'Oréal.

Utilitarianism

From a utilitarian perspective, it is obvious that denying the claims will have good consequences for L'Oréal’s branding as public confidence in the company will be less badly affected. The stability will benefit shareholders, employees and suppliers. It is also apparent that the general public will suffer the ill consequences of misplaced trust. Nevertheless, it would be difficult to conclude that denying the claims is strictly moral or immoral since the measurement of utility remains vague and arbitrary. Indeed, utilitarian theory does not help in making a ethical decision here.

Virtue

According to virtue ethics, honesty and justice is accepted in all cultures and concealing the truth is considered unethical (Dunfee 1991).By forcing the executives to deny the act, L'Oréal went against the virtue of truth which is also the backbone of business transactions (Maitland 1997). Thus, according to virtue ethics, L'Oréal’s denying of the truth is considered unethical.

Kantianism

By forcing the executives to deny the claims, L'Oréal is using them to achieve their own ends and not respecting the executives’ liberty to determine whether it is a moral act. Furthermore, under universalisability the reasons for asking the executives to deny such a claim, is definitely inconsistent and cannot be applied universally (Beauchamp and Bowie 2004). Thus, at first hand, it may seem unethical. However, one may also argue that L'Oréal is also respecting their capacity to freely choose for themselves because they are willing to let them work elsewhere if they choose. Thus, Kantianism is not useful in helping us make ethical decisions here.

Justice

According to the theory of justice, an ethical decision is one that protects the interests of stakeholders who may be under-represented or lack power. Thus, L'Oréal’s act of forcing their executives to deny the lightening of Beyoncé’s skin would be considered unethical here.

L'Oréal’s perceptions that white sales staff are more likely to generate more sales in French shops

Egoism

According to egoism theory, L'Oréal’s perception that only white sales staff will generate sales would be considered ethical because L'Oréal sought to maximise only their own welfare and interest (Tannsjo 2009), without regard for the concerns of others.

Utilitarianism

Based on utilitarianism, it is debatable if the sum total of welfare is maximised when L'Oréal hires only BBRs. This is because it is impossible to accurately and objectively define the total utilities that each decision brings about. Thus, utilitarianism is not effective as an ethical decision making tool here.

Virtue

From the virtue ethics perspective, it is not clear if L'Oréal is being ethical in perceiving that whites will be able to generate more sales in French shops. This is because strongly upholding French identity is a virtue that applies exclusively to the French and is not a general virtue for the rest of the world. Thus, virtue ethics theory is not applicable in helping to decide on the morality here.

Kantianism

According to Kantianism, the motive of any moral obligation counts substantially towards distinguishing if an action is ethical. Here, L'Oréal’s motive was to increase profits. It did not act out of a sense of duty to provide fairness for all job seekers. Thus, L'Oréal’s actions are considered unethical here.

Justice

Here, L'Oréal’s actions are considered morally wrong because the theory of justice states that there should be fair, equal treatment of all human beings, instead of favouritism for certain races.

To sum it all up, having the perception that white sales staff are more likely to generate more sales in French shops is an unethical thing to do.

Proposed Ethics Policies

An ethics policy will be proposed relating to the issues discussed above:

Racial discrimination against ethnic minorities & L'Oréal’s perceptions that only white sales staff will generate sales

With regards to this issue, L'Oréal already has an existing ethics to address racial discrimination against ethnic minorities. As stated in the ethics policy, L'Oréal believes in the value of difference and supports and promotes L'Oréal’s commitment to a diverse workforce, and see it as a great asset in their work. This applies not only to recruitment, but also to all decisions relating to training, promotion continued employment and working conditions in general (L'Oréal 2007).

Since there is already such an ethics policy for L'Oréal’s code of ethics, a new policy will not be introduced. However, measures will be implemented to ensure the code will be adhered by the employees.

L'Oréal’s executives were forced to deny claims that they lightened Beyoncé Knowles’s skin

L'Oréal at the moment does not possess a code of ethics on the issue related above. It will be prudent for L'Oréal to include an ethics policy on the importance of honesty and integrity. The ethics policy should be as follows:

L'Oréal’s staff should have a reputation for integrity and honesty in every dealing with customers, staff and the public.

Rationale for Ethic Policies

The above suggested ethic policies will be beneficial to the organisation, individuals and society. This is so as having a code of ethics will provide the necessary guidelines for staff when they have to deal with issues like racial discrimination and denial of claims (Trevino et.al 1999). This ensures that their actions will be in line with the codified policies hence, avoiding any wrongful and unethical actions committed by staff (Schwartz 2002). They will also be aware of the necessary and desired actions to be made when meeting with such circumstances.

Having the ethics policies will also be beneficial for L'Oréal as a whole. This is so as the image will be improved as society will recognise their commitment to ensure fair and equal opportunity for all (Weaver 1995). This might lead to consumers being more willing to purchase L'Oréal’s products which will lead to more sales and profits.

Furthermore, by ensuring that employee’s actions are ethical in relation to the issues concern, it will avoid any undesirable activists and governmental interventions taken against L'Oréal (Patty and Miles 2002). As stated in the case, L'Oréal was attacked by an activist group for their discrimination practices against ethnic minorities. This will lead to a negative impact on L'Oréal’s reputation.

Development of Code of Ethics

The section will indicate the measures taken to develop the code before fully implementing it.

Code Objectives

The objectives of having the code should be made known to the employees. In this case, L'Oréal should inform the employees on the importance of diversity, honesty and integrity. Only then will they understand the rationale and contribute to the development of the codes (Byrne 2002).

Encourage Employee Participation

The most feasible approach will be to have all employees be involved in the designing of the code (Patty and Miles 2002). In the case of the code that already exists, all employees can be involved in evaluating whether any modifications need to be done (Messmer 2003). This will encourage commitment and hence, compliance to the code (Molander 1987).

Designing the Code

The new code to address the issue of integrity should include the importance of having this trait. L'Oréal should look at other organisational code of ethics to find out the best practices which pertains to the issues concerned such as integrity and discrimination; hence the most applicable ones can be applied to L'Oréal. This will assist in constructing the new code of ethics and assess the feasibility of the existing code of ethics. In doing so, it will make the codes more relevant and making it effective as they tend to be remembered by employees.

Having a Trial Run

Before L'Oréal fully implements the new code across the organisation, L'Oréal should have a trial run on the effectiveness of the code. This can run through a course of six months. This is to ensure whether there will be any need for modification, to ensure a more effective code (Patty and Miles 2002).

Proposed Implementation

Several measures will have to be implemented to ensure the existing and the new policies are properly adopted and adhered by the employees of L'Oréal.

Communicate to employees on the codes

The code of ethics will need be to be communicated to all employees to ensure there are aware of the existence of such code of ethics and the introduction of the new one. There can be a sign of provision for employees to acknowledge that they had read and understood the code hence ensuring they know the importance of adhering to it (Pitt and Groskaufmanis 1990). Furthermore, the reasons of the existence of the codes can also be communicated as a lack of justification will lead to non compliance (Schwartz 2002).

Training of employees

All employees will have to be trained to ensure they are aware and understand the application and the intention of the codes (Ethics Resource Centre 1994). The training programme can be a packaged one as a one size fits all approach will not be effective. In the case of new employees, training is also necessary and this can be done during induction. Scenarios that relates to the issues concern can be given as example for employees as it facilitates understanding, resulting in effectiveness of the codes (Murphy 1995).

Having an ethics officer

It is good for L'Oréal to have an ethics officer to ensure proper adherence of the codes and measures are implemented to inform employees of the repercussion of not adhering the codes, like warnings and punishments. This is so as proper enforcement will contribute to compliance of the codes (Schwartz and Cragg 2000).

Proper reporting mechanism

A proper reporting mechanism will have to be implemented for reporting of violators of the code. Employees will have to be informed of the proper channel, like immediate supervisors to address this so to ensure the problem can be detected earlier, hence an employee should report a case if he knew of another employee who violates the code (Trevino and Nelson 1995). Employees can also be provided with incentives to report as an encouragement (Nitsch, Baetz and Hughes 2005).

Establish Grievance Procedures

Employees must be made aware of the avenues available if they have any issues that they are unhappy about with regards to the codes (Ethics Resource Centre 2003). This indirectly will lead to effective feedback from employees and further measures can be taken to improve on the codes, if there is any.

Leaders to set example

Leaders in L'Oréal will have to set a good example to inculcate the desired ethical behaviours in the employees. Actions of founders and leaders are definitely an effective mechanism to ensure employees will adhere to the codes. When employees are aware that their leaders are supportive of the codes, there will be more adherence, making it effective (Montoya and Richard 1994).

Evaluating the Code

After implementation, the code should be reviewed regularly to ensure it meets L'Oréal’s needs. It should be aligned with local legislation to ensure that it conforms to any legal requirements.

Effectiveness of policy

It can be expected that the introduction of the policies will be effective as the proper mechanisms to develop the codes are adhered and the proper measures are taken to implement the codes (Nitsch, Baetz and Hughes 2005). This ensures that it will be effective and there will be no resistance among L'Oréal’s staff.

Furthermore, as the staffs are informed of the repercussions of not adhering to the policies like the punishments, they will definitely abide by it to avoid the undesirable outcome (Ferrel and Gresham 1995).

Another determinant of effectiveness of the codes is the degree to which code violations can be reported (Nitsch, Baetz and Hughes 2005). This is so as if violators are not reported, it will render the policy useless. As the employees of L'Oréal are informed and encouraged to report cases of violators, it will definitely result in an effective policy.

Limitations of policy

After implementing the policies, there will be some limitations that may arise and will be detrimental for L'Oréal.

Decrease in sales

When L'Oréal has ethnic minorities as their sales staff, there will be a possibility that their sales in France will decline as customers prefer to purchase from white sales staff there. This will affect L'Oréal’s profits negatively.

Organisational dynamics will be affected

When new ethnic minorities are introduced to L'Oréal, the organisational dynamics of L'Oréal will be affected. This is so as the status quo, which includes the culture and employee dynamics of L'Oréal will change as there will be more diversity in the workforce. This might cause problems arising from resistance to change to occur, like workplace disharmony and drop in service standards, resulting to damage to L'Oréal’s image.

Conclusion

This report has discussed the key ethical issues which have been identified in L'Oréal’s case. The new ethic policy is proposed to address the issue on honesty and integrity, and the existing policy on diversity is reiterated so that it is conformed by all employees. Measures were also recommended to ensure proper development and implementation of the code of ethics. Furthermore, the effectiveness and limitations were also discussed. This report has also indicated the importance of businesses to conduct ethically with integrity and honesty, as they are liable to all stakeholders, and to prevent any undesirable consequences, as displayed in L'Oréal’s case.

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Student Contribution Statement

Mohamed Hidir Bin Mohd Jamal (3178853)

Mohamed Hairul Bin Mohd Jamal (3179363)

Shereen Bte Mustafar (3178965)

Terence Tan (3178904)