Legal and Ethical compliance

The aim of this essay is to focus on whether legal and ethical compliance is necessary for competitive advantage. It will also discuss the factors affecting the HR functions of Selection and recruitment and how they interrelate with legal and ethical compliance and competitive advantage. Patrick Stevedores will be used as the main example, however other examples have been used where necessary.

The research has been based on both written and oral sources found readily available in the public. The report found that Legal and ethical compliance is necessary for competitive advantage. Furthermore it found that Patrick Stevedores did not increase its competitive advantage due to its poor implementation of change in its HR factions.

"Legal and Ethical compliance in managing HR functions is necessary for competitive advantage."  The most sustainable competitive advantage between companies today is the quality of its people. Most organizations are in search of the able people to work for them and it is often a never-ending search. Human Resource Management today focuses on the enhancing better performance in the work force and sustaining peak performance. It is the quality of its people that is the competitive advantage of an organization (McBride et al. 2002, 290 – 304).

However, as clear and easy as this sounds, it is the way in which firms handle their legal and ethical compliance in managing HR functions that determines their level of competitive advantage. This essay will use the wharf company of Patrick Stevedores as an example in describing how legal and ethical compliance affects the HR functions of Recruitment and Selection.

Firstly let us define the terms used in this essay. Competitive advantage is defined as a special edge that allows organizations to better deal with business challenges (Stone et. al., 2002, p.838). Ethical behaviour deals with what is good and bad, right or wrong, or with moral duty and obligation. Ethical behaviour may require higher standards than that established by the law. For example although it is not illegal to use cyanide in some countries for mining, an Australian firm may choose not to use it because of the ethical issues involved.

Although many large corporations now have formal programs for managing ethical behaviour and legal compliance, human resources departments often play only a minor role in companies' ethics management efforts. It is a wide belief that the human resources departments should play a more prominent role in ethics or compliance management (Linda K. Trevino, 2001).

She notes that fairness issues are important to employees, and the involvement of HR staff and departments in ethics and compliance programs could be important to the real and perceived fairness of those programs. Therefore, HR staff and departments need to play a more central role in ethics management initiatives if those initiatives are to provide real benefits for both organizations and their members.

HR offices are likely to be viewed as representing employee's concerns. In addition, HR offices can play a key role in developing ethics programs with a proper balance of values and compliance orientations, and in integrating ethics programs into important organizational activities, such as the design of performance appraisal systems, management training, and disciplinary processes (Gary R. Weaver et. al, 2002).

HR departments should not attempt to manage ethics initiatives on their own. Multiple functions and departments-including legal, audit, the top management team, and board of directors-need to work together in a coordinated effort aimed at fostering ethical behaviour in the organization. 

Research has shown that a values orientation in company ethics programs is more likely if the highest levels of management are committed to the intrinsic value of ethics. So even though HR's involvement in ethics programs is important to their success, HR should not expect to accomplish the task alone (Linda K. Trevino, 2001). 

If HR departments adopt a higher profile role in ethics management, employees may perceive more fairness in the ethics program. Employees who see an organization's ethics program as unfair may reject the program. On the other hand, Trevino claims that when employees perceive that the organization treats the employees fairly, commitment to the organization and to the ethics program is higher. 

Research on this topic also has shown that employees are more aware of ethical issues, more likely to ask for ethical advice within the organization, more likely to think that it was all right to deliver 'bad news' to management, more likely to report an ethical violation, and more likely to believe that decision making was better in the organization as a result of the ethics program if they perceive that the organization treats employees fairly. Employees' belief in a just organization may be necessary for ethics/compliance management effectiveness. 

Although issues of ethics in organization encompass much more than questions of fairness or justice, failure to foster justice in the organization can undermine organizational efforts to encourage ethical behaviour generally. Ethics management, in short, though not the same as fairness management, depends on careful handling of fairness issues within an organization. Consequently, the HR function should play a crucial role in organizations' efforts to deal with ethical issues, because HR's role is central to the management of fairness in contemporary organizations.

Let us now introduce Patrick Stevedores. Patrick is a Stevedoring company that is based in Australia. It has built an integrated network of freight logistics operations that deliver transport solutions across all modes – rail, road, sea and air. Patrick is Australia's largest operator of container terminals, with state-of-the-art facilities in all major ports. Patrick is also Australia's largest stevedore, with origins dating back to 1919 (Patrick Stevedores website, 2003). However Patrick s was faced with numerous problems.

Cargo rates in Australia were almost one third higher than for foreign ships, and the Maritime union was accused of holding the Australian economy to ransom (N. Bita et. al.1997). It was claimed that there is no purpose in trying to develop manufacturing export systems that require sea transport due to the inefficiency of the Australian waterfront (R Gottliebsen, 1996, page 6). On Tue 7th April 1998, with the support of the Federal Government, Patrick Stevedores sacked its workforce, and planned to replace current waterside workers with new, non-union affiliated contractors. The Government at the time supported the perceived right of the company to restructure its business.

Workplace Relations Minister, Peter Reith, called on the Maritime Union and ACTU not to over-react, and to consider the generous redundancy packages that will be made available to the redundant workers. The Maritime Union of Australia (MUA) however urged its members to remain united and claimed that Patrick stevedores would attempt to divide its workforce by offering individual contracts.