Ethics today is very important for any organization to survive in the long run


Ethics today is very important for any organization to survive in the long run. The relevance is not due to its fashionability but its necessity because ethical choices are inevitable in business and so managers have to face the task of making the right choice that provides among other things the support of maximizing long term owner value (Sternberg, 2000). Ethical issues are inherent in daily activities of business as it relates to products been sold or new products that will soon be put in the market, hiring and firing, determining dividends, setting prices for products, awarding contracts and so on (ibid). Therefore a clear appreciation of business ethics is central. Organizations are constantly faced with pressures from other competitors for market share and so to survive in the extreme competition, they may be tempted to ignore one or two ethical principles which may result into a societal dilemma (Hosmer, 2008). Such organizations must recognize that being unethical though beneficial in the short term can cost dearly and result into legal, financial crises and even the life of the business (Sternberg, 2000). Thus the first step is to be fully aware that ethics is not an expendable alternative and further try to determine how such ethical issues can be addressed (ibid). Hence in this paper based on a case study, an ethical issue/dilemma will be laid out and explained using some basic theories to reach a probable course of action and the implementation of this decision in the organization.

Determination of Ethical Course of Action

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The case study refers to the decision that has been taken by an organization not to market a new product (chip) that will enable upgrading of computers without the need of a new computer. This helps to reduce electronic waste but also cuts down on the sales of computer and invariably a reduction in the revenue generated in the short run. The concern therefore is reduced revenue in the short run while the long run payoff is bleak. To expose the ethical dilemma further the moral impacts will be recognized, the moral problem would then be established and the economic outcomes and legal requirement will be taken into consideration.

Moral problems result in benefits for some and harm for others and also exercise the right of some and deny the rights of others (Hosmer, 2008). So the first step is to ensure that the constituents of the moral problem understand what is happening to each other (ibid). The decision not to market the new chip benefits the company because by doing that customers would have to buy new computers when their current one becomes outdated which in turn steadies the revenue in the short run. Also, by taking this decision the customers and the public is been harmed because the need to buy a new computer would not arise if the chip is bought and inserted to upgrade the current computers. The public also suffer due to the electronic waste that could harm the environment. With this decision, the company (manufacturer) has been able to exercise their rights by choosing not to market the products but to continue with just the selling of computers. The right to live in an environment with less waste and pollution has been denied by the action because the alternative would have resulted in reduced electronic wastes and also the customers' right as 'king', to better and innovative products and services have also been denied. With this conflict, a moral problem exists and is stated as thus;

Is it right that the computer manufacturer decide not to market a new product for its customers that will enable computers to be upgraded? This benefits the company by the continued revenue generated from the new computers sold. But it will also cause harm to the environment from the electronic waste which could have been reduced and also to the customers by making them spend money for the unnecessary item. The manufacturer has a right to decide when to and not to market a product but the customers also have a right to better products and services and the community also have a right to a better environment.

The lack of information available for customers makes it difficult for them to express themselves in an economically understandable way. Also the external cost borne by the economy as a result of electronic wastes should be taken into consideration. To consider the legal requirements, the decision not to market the chips could be legal based on the law but based on the veil of ignorance, what would the law be if the manufacturer did not take note of position in the society? This means making laws in the absence of self interest or self worth and position in the society (Hosmer, 2008). Following the analysis of the ethical dilemma, the next step is to determine the right course of action (moral solution) that should be implemented. To arrive at this some ethical theories will be argued.

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According to the personal theory postulated by Aristotle (384-322 BC) in Hosmer (2008), individuals should be honest, open and truthful to discourage distrust and also live equably not to stimulate resentment from others. Also a set of standards should be adhered to that demonstrates right, fair and just treatment of one another. Furthermore actions exhibited should be such that one can be proud of because it is difficult to be proud of actions that take others for granted. Hence, no action should be embarked on that when exposed to the media the perpetuators would not be proud of. Based on this, the company would not be proud if the decision taken not to market the product is reported in the newspaper or goes public stating how the reverse would be beneficial to the customers and the environment. Another theory is postulated by St. Augustine (354-403) and St. Thomas Acquinas (1225-1274) in Hosmer (2008), is based on religious injunctions which argue that honesty, truthfulness and self restraint as put forth by the virtues argument is not enough but should be extended to accommodate empathy and kindness shown to each other to establish a truly good society. Furthermore a symbiotic relationship is necessary to build a better sense of community. Thus, does the decision show love and kindness to their fellow neighbors who in this case are the customers and the inhabitants of the environment? It is obvious that the company is only concerned about its well being and not that of its customers. Bentham (1747-1832) and Mill (1806-1873) in Hosmer (2008) also argue on utilitarian benefits which identifies that compassion, empathy and a sense of community would be supreme if everyone demonstrate such attributes not for their self interest but the interest of the community. This is taking action that gives the greatest good to the greatest number that is a net social benefit than harm. Hence the decision taken does not show any greater good to the greatest number and so the interest of the community is not put into perspective but that of the company only. Also the universal rules by Kant (1724-1804) in Hosmer (2008) argue that the need for net social benefits does not take into account the procedures for measuring and explaining how such benefits or harms should be dispersed. Hence the theory stipulates that what is needed is for any one that takes any decisive action which would affect a society, self interest should be eradicated by universalizing the decision making process. This means one should not undertake actions that he would not like others to take if faced with the situation, free and persuaded to take. Therefore how would the management of the company react if they are denied some extra benefits from one or two essential products they use or live in an unsafe environment due to wastes that can be reduced? The distributive justice theory by Rawls (1971) who argues that the problem with the universal theory is such actions that promote social interest rather that self interest cannot be absolute because people differ in their social and economic circumstances. And so the rule should be such that the poor and uneducated that lack position are taken into consideration. Therefore no action should be taken where the common ones will be harmed in any way because if no one knew if they would be poor or uneducated they would be in support of such a rule. In the case, the customer and the inhabitants of the environment are on the receiving side and so they are the least, harmed by the decision of the manufacturing company. Nozick, in Hosmer (2008) talks about contributive liberty as another ethical theory in that liberty which is the freedom to pursue one's self interest within the corridors of the law and markets is more relevant than justice which is the right to be protected from the severity of that law and markets. So to arrive at a compromise based on the social contract principle would be to respect each others rights and not infringe on them just to achieve their legal and marketable abilities. Therefore no action should be taken that will interrupt other individual rights for self enhancement and development. Thus the action does not take note of the customers right to better products as 'king' and also the right to live in a safer environment. Based on these theories the most ethical course of action would be for the manufacturing company to market the product.

Implementation of Ethical Course of Action

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In respect to the analytical methods discussed above to arrive at the ethical course of action, is not enough to convince the parties who have been affected by the decision that it is actually the right, just and most fair step in striking the balance between the financial outputs and social impacts of the business (Hosmer, 2008). According to Sternberg (2000) being ethical is good for business once the long term implications are taken into considerations. This means an organization that is ethical should also satisfy the conditions of been in business which is to maximize long term owner value. He further asserts that maximizing long term owner value and acting ethically are directly proportional. Hosmer (2008) describes the reasons why an organization should act ethically; first is reciprocity which is taking actions that affect others the way one would like others to take actions that affects them. Second is the concern for the quality of life which is making decisions that affects the lives of people around you positively for example, how a manager's decisions affect the different stakeholders of the organization. Third is that of cooperative effort as organizations consist of individuals both external and internal who act either directly or indirectly for the success of such a company and who can influence or are influenced by the achievement of the organizations objectives (Freeman, 1984). So organizations should act ethically because this instigates a combined effort of all groups associated with the business and this can be achieved prior to the trust and commitment built by the management (Hosmer, 2008).

There is nothing wrong about making profits or focusing on it since in fact socially favorable outcomes are derived from it like more employment and better environment (Gallagher, 2005). Also managers don't see decisions as ethical or unethical but they see them based on success and failure (Preston, 2000). Therefore Gallagher (2005:57) sees the need to view ethical decisions as 'long term visions and as a strategic shock absorber or social insurance for a firm.' He asserts that organizations operate within environments that exhibit socio cultural norms, so acting ethically reduces the effect of change from the socio cultural environment of the firm and also cushion them from instability as a result of this external force. Therefore firms are better able to gain competitive advantage because their behavior and actions are in line with the social environmental force. Behaving ethically in business activities is very vital because the reverse when they occur often does not go unnoticed by the public (customers) which may cause lack of respect and affect the reputation of such a company (Creyer and Ross, 1997). According to Van Raaij (1991) customers form beliefs about organization in three different ways by direct experience, by inferring and based on information from a wide range of sources. In terms of the latter, this information could create a positive or negative impression of a company and if a company is seen to have behaved unethically based on the information, could have some serious impact on the success of that company (Creyer and Ross, 1997). They argue that the ethicality of a company's behavior is an essential matter during customer purchase decision, ethical behavior by the company is imperative, customers reward ethical behavior by choosing to pay higher prices for the company's products and also punish unethical acts by paying low prices. Therefore ethical corporate behavior benefits both society and the company involved when customers are informed of it. The primary purpose of business is decision making and taking and in these decisions there are ethical components inherent (Movita, 1986). Organizations must be aware of this and not isolate the decision making from ethical consideration because this could have serious financial impacts on an organization (Wells and McCoy, 1989).

Despite the fact that acting or taking ethical decision is very important for an organization and the right thing to do, executing such decisions may be difficult due to some challenges faced by the organization either internally or externally. Wolfe (1988) in his work explains that managers have come up with some ways of thinking that causes barriers to ethical behavior. This can be referred to as the financial mentality that only considers financial success and promote shortemism. He also asserts that competition could also pose a challenge to acting ethically or implementing ethical decisions because they may result into loss of market share and reduced revenue. According to Sims and Ronald (1992:510) 'pressure, opportunity and predisposition can all lead to unethical activities; however, organizations must still take proactive stance to promote ethical climate.' This ethical climate can help reduce and overcome such challenges via the organizational culture. Managers should create a good perception towards ethical practices which must be adhered to for it to have a ripple effect on subordinates (Stead, Worrell and Stead, 1990 Nielson, 1989).

An example of how a company place public interest at the center of its plans or activities, can be seen by Heinz corporation, a food manufacturing company that joined forces with the food and drug administration (FDA) in the USA to draft a new regulation that would eradicate botulism (preserved foods infected by poisonous bacteria) and as a result Heinz gained major competitive advantage and the complete eradication of botulism (Key and Popkin, 1998). Therefore putting the interest of the public into perspective not only provided the company with key competitive advantage but also fulfilled an ethical duty that Heinz had to its customers to provide them with safe food products (ibid).


In respect to the case study, the subject matter of this paper, based on the various theoretical stands on ethics and the examples, it would be in the best interest of the manufacturing company to market the chip for its customers as it would bring about an upgrade in computer systems which increases efficiency. Also this would result in a reduction in the electronic waste. Firstly, the company should create awareness and promote the product showing the efficiency and potency. Computers today are necessities for the majority so the feedback should be positive. Customers should be willing to buy such product and this would result in good revenue as long as the marketing strategy is effective. By satisfying the needs of the customers, apart from acting ethically the company is protecting its place in business in the long run. Another reason to take this decision is because of competition. Although this could count as a reason not to make such decision it could also be a reason to because the company cannot be so sure if its competitors have produced or is about to produce similar products which could take them off the top market share position. Again reputation is important in business and so by doing this which reduces electronic waste, reputation is built and also customer loyalty is acquired. In taking this decision, the challenge will be the reduced revenue and fear of uncertainty. The company can set up a promotion plan stating that customers that buy the new chip can have a new computer at a discounted price and as such revenue is also generated from the computer sale which is better than alternative decision not to market. Finally customers would still have to buy a new computer system later on due to age and hard ware damage.