Exploring ethics in the modern world of business

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'Ethics', from the Greek word 'Ethikos' which in turn means ethos- the customary way of acting means the character or custom of a set of people. Kenneth Kernarghan defines that 'Ethics is concerned not only with distinguishing right from wrong and good from bad but also with commitment to do what is right or what is good. The concept of ethics is inextricably linked to that of value that is, enduring belief that influence the choices we make from available means and end. (Agalghatti, Krishna., 2007)

In today's business world, it had been witnessed that a plenty of successful businesses fail. The foremost motive behind these surprise failures was the lack of business ethics. Therefore it is pretty much imperative to know the importance of ethical business practices. The key purpose of this essay is to critically evaluate why it is necessary to focus on developing an ethical approach to managing organizations.

In the methodology section, the approaches, theories, models, paradigms that will be used to support the argument are Radical Humanist Paradigm and Critical Theory and other organisational ethical practices such as Whistle Blowing, Corporate Social Responsibilities will be extensively discussed in the essay. Additionally several real world examples for business failures due to lack of ethics, such as Enron, OneTel, Wal-Mart, Nike, Pramuka Bank will be applied for further understanding of the topic.


2.0 Critical Analysis

2.1 Why is Ethical Management Important?

The primary focus of a business entity is to earn profits or make best use of the resources that it has to enhance its financial state. This form of understanding the main role of businesses in the society creates several impediments. Most of the businesses are concerned about making money and catering to the legalities in business where they seldom pay attention to be ethical. Sometimes, a businessman's ethical duties could be more long-lasting than even the business laws. Ethics is a concept that goes beyond making money legally. Several reasons as to why it is important to operate ethically are discussed in the following sections.

2.1.1 To build a healthy organsational culture

It's important for an organisation to be wealthy but also it's more important to be healthy at the same time. A business cannot be anymore or less than the people who run it and who work for it. Therefore, it is an accepted fact that ethics manipulates the culture of the organisation and the organisation's culture has an effect on the ethical behaviour of its members. (Stone R.J, 2005, p.756). An ethically strong organizational culture has a marvelous outcome on both its human resources and business activities whereas when an unethical organization puts the image of the organization down in the society's perspective through many scandals such as Enron, OneTel,

Organizations that are unswerving to achieve long term success recognize and realize that creating a culture, where ethical behaviours are rewarded and encouraged is the decisive key to survive today and growth in the future.

2.1.2 To increase the workforce's productivity

When the workforce is disciplined and ethical, the managers find it easy to manage them. If the workforce makes decisions that are not ethical, it negatively affects the stakeholders of the business. Number of researches state that the workforce with a high uprightness and the firms who are socially responsible, are far less prone to stress, attrition, and dissatisfaction. Therefore, they are happier and more productive. Stressed unhappy staffs are less productive, take more time off, disinterested and need more managing.

2.1.3 To fulfill the best corporate practices

It is important to comply with best corporate practices that are insisted by trade and professional legal associations. It will make certain the ethical process of the organization through the principles of accountability, transparency, fairness and responsibility. The managers must ensure that these guidelines are followed by every individual of the organization in order to augment the company image, goodwill and customer loyalty, and ultimately more profits and bigger market share which are the organization's goals.

2.1.4 TO maintain customer relationship in long term

Customers are ever more supporting and patronizing the companies who demonstrate ethical responsibility and high ethical conduct. The substantiation of any unethical practice would grind down not only the esteem and reputation of the firm, but also its revenue, profits and the market share. Therefore, there is a need of an ethical operation is imperative to achieve competitive advantage.

2.1.5 Corporate Social Responsibility (CSR)

Corporate Social responsibility is widely regarded today as an ethical duty the companies owe the society. It is believed that profit-making should not be the sole objective of a company; that companies also owe something to their workers and communities in which they operate. They have to sometimes sacrifice some profit for the sake of making things better for their workers and communities. (Business week, 11.03.1996, p.65) Thus social responsibility notion in effect encourages the company managers to act with ethical responsibility.

2.1.6 For legal/legislative reasons

All the businesses in the industry are bound by government rules and regulations. Some of them are particularly aimed at ensuring moral, ethical conduct of business such as Fair trading laws, anti-discrimination laws, and compensation laws. Therefore, it is vital for managers to have a control about the obedience of these legal and legislative necessities.

2.1.7 REcruitment and retention of the best human resource

Human resource is the best resource that a firm has. They can even be the competitive advantage. Recruiting the best and retaining them is the winning solution to win the goal. Therefore, it is recommended for managers to establish an orgnisational culture in an ethical atmosphere for the best competent people to feel comfortable to work.

2.2 Managing ethics through functionalist paradigm

The ethics has long needed a highly practical resource that is designed particularly for leaders and managers - those people charged to ensure ethical practices in their organizations. Unfortunately, far too many resources about business ethics end up being designed primarily for philosophers, academics and social critics. As a result, leaders and managers struggle to really be able to make use of the resources at all.

Also, far too many resources about ethics contain sensationalistic stories about businesses "gone bad" or prolonged preaching to businesses to "do the right thing".

This guide is a straightforward and highly practical tool designed to help leaders and managers implement comprehensive ethics management systems in their workplaces -- systems to deal with the complex, ethical issues that can occur in the day-to-day realities of leading and managing an organization.

Ethics is usually divided into normative (perspective) and empirical (explanatory, descriptive, or predictive) approaches. The distinctive features of normative business ethics and empirical business ethics that we believe contribute to current misunderstanding. The normative approach-in interdisciplinary fashion-draws from philosophy, theology, political and social theory and other self- consciously critical inquires. The entire normative task involves not only prescriptions but also description and analysis and the application of moral judgment in question and its applicability to the subject at hand. Nevertheless, the dominant feature of the normative approach is its emphasis on formulating prescriptive moral judgments (Kahn 1990)

Recent debates in organizational science have left the field ideologically divided into multiple schools (Burrell and Morgan 1979) supported by a multiple of possible research methods. The so-called functionalist paradigm, however, has dominated organizational science (Gioia and Pitre 1990) and the empirical approach to the study of business ethics. It is guided by a presumed natural science model focused on explanation and prediction, rooted in as objective epistemology and metaphysics, and is characterized by a managerial orientation toward stability rather than change (Burrell and Morgan 1979). Thus, the functionalist approach can be for the empirical approach and the emphasis on formulating prescriptive moral judgments for the normative approach.

2.3 Managing ethic through radical humanist paradigm

The radical humanist approach grounded in a normative theory of human self-realization. Formally the concept of solidarity has been relatively neglected by social scientists and the discipline of politics has been guilty of overlooking this 'subjective' element of community life. But recent world have reflected a growing awareness of the theoretical significance of the concept. Traditional forms of solidarity have been dissipated by the social changes accompanying globalization, but they were often locked into the defense of particular interests.

2.4 Comparison of functionalist and radical humanist approach in managing ethics

Functionalist Organizational theory provides its clientele with a 'mirror' through which it can see and assess itself. First and foremost, business ethics is about values. There must be commonly recognized standards, so that businesses aren't dependent on individuals' ethics when decisions are made that affect the entire organization and others on the outside. Establishing values for a business creates a common language for all the members of that business community. Moreover, the values chosen by a business become the basis for how business decisions are made and how all employee behaviors should be aligned. In other words, the business's values tell everyone in that business community what is right and wrong.

The radical humanist approach grounded in a normative theory of human self-realization. Formally the concept of solidarity has been relatively neglected by social scientists and the discipline of politics has been guilty of overlooking this 'subjective' element of community life. But recent world have reflected a growing awareness of the theoretical significance of the concept. Traditional forms of solidarity have been dissipated by the social changes accompanying globalization, but they were often locked into the defense of particular interests.

Therefore, as well as the main two approaches that are been compared the other four (sociological) paradigms (radical humanist, radical structuralist, interpretative, functionalist) are founded upon mutually exclusive views of the social world. Each stands in its own right and generates its own distinctive analyses of social life. The four paradigms taken together provide a map for negotiating the subject area, which offers a convenient means of identifying the basic similarities and differences between the work of various theorists and, in particular, the underlying frame of reference which they adopt. The map provides a convenient way of locating one's own personal frame of reference with regard to social theory and those of the theorists who have contributed to the subject area.