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The team of Des Jardin and Mc Call gave a relatively narrow description of business ethics; so narrow that anyone who reads it might think that businesses are generally allowed limitless practices to ensure profitability because who can really define the rules of the games but the people who are actually playing which is tantamount to biased and self-motivated justifications. Davis, on the other hand, instructs businesses to exert conscious effort to protect the interests of their patrons. The answer to which is more favorable seems quite obvious at this point, but there are inherent areas to these statements that can pose concerns on business ethics principles which this study would like to delve on.
By the end of this study, the author would have an educated insight on which statements have more bearing in ethical practices in the business and would also attempt to enlighten readers on what constitutes rules of the game and social responsibilities. The study would also like to define the reasons for adhering to ethical practices and what non-adherence implies in the society today.
The study would also glimpse at some companies who have had a brush against business ethical standards and see what past actions have resulted to.
The author hopes that the study would clarify whether one or both of these statements are true today and evaluate the quotes' effects on the businesses that use them respectively. In a foresight, the author thinks that the latter quote has more implications of success as far as business ethical standards are concerned. The study believes that all businesses have a responsibility in the society it belongs to and any mishap could cause the inevitable domino effect to the larger part of the economy - the demise and crisis of the society.
In the past, business ethics was deemed to be a shared culture among people who run businesses. It wasn't considered a major aspect of business organizations, but today it is considered a separate branch altogether. Although there is still considerable questions involving the principles of business ethics - it is simply understandable as the relationship between businesses and the society and therefore, subjects the business to moral standards (Carmichael, 1995).
According to Parker (1998) the most common definition of ethics is the attempt to define what normal and socially acceptable human behavior. Philosophers and proponents of ethical principles use reasoning to create rules to guide our judgment of different circumstances. Consequently, tensions have arisen between the theories of people are expected to do and what they actually do. It is all about virtuosity to some philosophers and acting for the good of the general public for some others.
Since business organizations are governed by law, businesses have the law to answer to if they fail to adhere to regulations or if they do not meet their responsibilities - these are considered legal responsibilities of businesses. Humans however, are morally responsible for their actions, also what constitutes morality is still depended on many factors such as culture and environment, generally speaking, a person who defies what is morally accepted within this or her society, he or she will be subject to retribution fit within that society he or she belongs to. From a business standpoint, when it fails to fulfill its obligations to the law, it will answer to the law; if it fails to do its moral responsibilities, it can be subject to censure - although we cannot fully define what corporate social responsibility is, it is simple to say that as long as it does not have dire effects to the people around it or to its society, then its actions can be considered ethical (Malachowski, 2001).
It is important to re-visit what ethical decisions are to begin with. By saying that steps to evaluate whether the actions to be undertaken by a business constitutes right or wrong already imp-lies that this is a case of morality intrinsically. Businesses have to consider a number of factors to ensure that they are making sound decisions for their organization. They would need to examine the significant results of the plans to others, check whether there are alternatives to these plans, evaluates the relevance of this ethically concerning plan (Crane & Matten, 2007).
Carroll & Buchholtz (2008) explains some elements involved in making moral judgments in the business based on Powers and Vogel's understanding. Moral imagination is a person's ability to conceptualize based on the ethical values present in his society, where he looks for possible areas that could be affected by his decisions, as if simulating the idea first. From a managerial standpoint, it would involve identification of major ethical issues within an organization before considering any actions. Moral identification and ordering follows this, where relevant and irrelevant moral factors are introduced into the situation. Issues and ethical values will be ranked according to which would be prioritized or given more weight. For instance, a manager may choose to give weight to employee development rather than employee short term remunerations. Ethical issues have been identified and weighted based on what the managers truly prioritize, there has to be moral evaluation, where decisions are gauged by essence of consistency against already set principles in the organization.
Business ethics has always been narrowly defined, according to Carmichael (1995) thus, deviating from any of the theories can be very easy that is why most businesses can just as easily be judged as criminals. Business organizations have to operate in a more open environment - one that gets the dynamism and complexities of the changing world. In this regard, to traditionalize ethical principles in a business is never advisable. Since the values of the consumers and employees change over time, it is only obvious the values of the business would be affected.
Jackall (1989) gives an insightful gist of what constitutes business ethics - what is proper in domestic situations may not be the case for businesses and vice versa. Usually, what is considered right in a business organization is the moral values upheld by the people on top who manage the organization.
In the chapter Looking Up and Looking Around, Jackall (1989) shrewdly describes the significance of senior management perception to decision-making activities in a business organization. Managers, directors and top executives have been considered as engineers and cooks of business rationalization. Higher levels of business administration seem to rely much on highly specific procedures and step by step programs of decision making techniques rather than critical thinking. Middle managers often get caught in following orders and fear making huge decisions involving a lot of stakeholders for fear of being pin-pointed later in case the project backfires. Here begins 'gut based decision making' where managers have to look up and around the company and see which side of the deal is more favorable and has a potential to gain support from majority. Senior managers are generally good at making huge decisions affecting more aspects of the business primarily due to the expanse of their power and influence. They have the ability to nudge the rules to their advantage and justify the evaluative standards alongside their plans.
So, imagine if the managers within a business organization have no moral or ethical values to begin with, they can basically turn the whole business upside down only because they have the bandwidth to do so and not because they have thought about it. This is where business ethics come into play. The individual characters involved in the business should be responsible individually to mold a sound and morally stable organization.
Sternberg (2000) dares to explore why some businessmen find it absurd that what is successful for a business may be considered ethical. Logically, does that imply that only unethical means produce success in a company? This is so distorted. If it is profitable for the business, it is ethical - and vice versa.
Businesses make decisions all the time, and as long as their decisions are created based on acceptable justice and decency, it is ethical. At this point it is important to understand the differences between Act versus Motive. Anyone could jump into the sea to save a drowning child, but not everyone may have the same motive. One hero might just want to gain publicity, one may have just jumped out of surprise, while another may be acting on his own moral volition. (Sternberg, 2000)
During the first few pages of his book, Andersen (2004) discussed the reasons for his fascination of business ethics. Over the years that he has studied business and devoted much of this time in understanding the complexities of a business organization; performance development, orientation to different business processes, strategy development, balanced scorecard, time-based management, professional burn-out and many others - he realized that the competitiveness of one organization relies in the interrelation of all management principles and not just focusing on one. If so, focusing on one sole aspect of the business could deem detrimental to the business organization as a whole. Although managers have to manage the business by piece, there is a need for business runners to understand the larger picture. Ethics seem to be a balancing factor on each of these principles and it ultimately keeps the business afloat. Andersen reiterated that it is no longer suffices to look at the productivity of a business activity when it implicates the business negatively in the future.
Anderson (2004) enumerated a few reasons to involving ethics in the business organization; (1) ensures the development of the employees and the morale of the whole organization; (2) it promotes customer loyalty, which results to more prospects attracted; (3) it enhances financial gains; (4) it alleviates any negative exposure or repercussions; (5) it draws more stakeholders; (6) it makes the world more peaceful.
Sternberg (2000) stresses the value of business ethics stating that it maximizes long term value for a business. Because businesses are mainly composed of individuals with different sets of character and values, and it interacts with different people in its quest for profitability, it is imperative that businesses satisfy the 'human needs' without undermining the intrinsic humanity of a person.
In July 2002, former US President George W. Bush gave a speech amidst the clamor on the accounting scandals in the American Corporate world following multiple accounting frauds that shook the country in the last few years, one of the most controversial is Emron. A few years later, another company audited by Arthur Andersen took a dive, WorldCom, one of the largest and most feared telecommunications company in North America. (Jeter, 2004)
Most companies involved in accounting scandals over the last decade used simple techniques such as marking down their expenses and more - all of which aims to project a different image of the company than its original state. In the case of WorldCom, it overstated its cash flows (Wikipedia, 2009).
In 2002, the Securities and Exchange Commission filed a case against WorldCom on the grounds of improper disclosure of income and unlawful transfer of costs to capital account which was prohibited under the generally accepted accounting principles or GAAP. The disclosure was not done in a timely fashion thus; the shareholders were misled on the company's real earnings. These and among many other accusations brought one of the largest telecom empires in the world to its knees (Duska, 2003).
Fast forward to the present year, the current global financial crisis brought on by the sudden bursting of the housing bubble in the United States of America brought several business industries to their demise - real estate, banking, automotive and retail. Sub-prime lending, characterized by vast approvals of loans of financing to less qualified candidates left the financial institutions lending more money to people who cannot pay and subsequently amassing real estate repossessions after the sub-prime sales backfired and foreclosed. In the quest for major profits, loan officers and managers have become lax on their standards and news of fraud also circulated - which now resulted to the biggest crisis the world has ever known (Shiller, 2008).
Cory (2005) states that the one thing people have to overcome are indifference. People have a tendency to overlook things or circumstances that do not affect them directly, and would often choose not to react against something they think is unethical is either out of fear of retribution or simply because they could care less. Immorality when taken lightly has a strong chance of penetrating other aspects of the society and eventually, even those who opted not to care will fall victim to this.
Such is not uncommon to businesses. Imagine a company whose upper managers knowingly overlook the lax of their production, or perhaps a manager who sees an employee being harassed by another and dares not to meddle. One way or another, somebody might know that a misdeed is being committed but no one dared to come between, so the fraud continues until it backfires to the amazement of the public.
Ciulla (p26) supports ethical leadership in her book, stating that leaders set the over-all ambiance of the company. Business politics do exists and if those people in position use their influence to the detriment of others then business organizations are set to doom. Ciulla reiterates that although it is sensitive to discuss morality and business together; and that moral leadership and ethics in business are intrinsically dissimilar - these factors should be components of an organization.
In his book, Lippke (1995) used anonymous alcohol manufacturers in the United States as an example - a large part of these businesses produce fortified wines which has about twice the alcohol content of regular table wines. Patrons of these products are usually people who are looking for cheap and fast get-away from consciousness - highly profitable but clearly involved in sending more alcoholics into frenzy. A fictional manager from one of these companies expressed her concern about their company, who has recently voiced their intent to increase the alcohol levels on their products. When she attempted to raise her concerns to the company's decisions makers, she was rebuffed countless times until she decided to air her ideas to the local newspaper. Many employees who give in to their conscience over their professional responsibilities often find themselves a target for company sanctions.
Lozano (2004) attempts to define the overall success of a company in his article where much of the focus was given to corporate accountability. Since corporations are composed of individuals capable of feeling and understanding it is expected that members of business organizations have respect for accountability or ownership. Everything that company does say something about itself - it projects its image and its general contribution to the society it belongs to. In this regard Lozano deems it inappropriate to look at dysfunctional companies brought down by scandals as an example - if not only for what businesses today should avoid. It must be remembered that these companies were once heralded as successful companies and most have even made names through corporate involvement in environmental and social responsibilities. If the ultimate goal of a business entity is to become successful, what then is success to begin with and how come people resort to devious lengths to achieve success? The thing is, success is highly relative, just like morality. What could be a measure for success on a particular individual or company may not apply to another. But as a generalization, success does not simply imply economical or financial stability of a company - it must impact the society in a positive way.
The problem with ethics is that the people who propose what is ethical are that: people - who are capable of making mistakes. People could easily twist and tweak and justify ethics to their advantage and since businesses are run by people, so can businesses be tweaked into different directions depending on the people who run them.
What constitutes rules of the game is very vague. All we know is the only thing constant in the world is change - a cliché, but a truth nonetheless.
The first attempt to define what constitutes ethical social responsibility of a business is good, but if the people who would adhere to this quote has very weak values to begin with, it is obvious that they'd easily fall prey to doing what they please without much concern on the long term implications of their actions.
Businesses such as WorldCom has taken its quest for financial success so far that the rules of the game were tweaked if not completely obliterated. Such is also the reason for the current global financial crisis which also began in wanton loan approvals in lieu of monetary gains.
The second quote on the other hand, expresses that the business managers have the obligation to society in lieu of its quest for financial success. The quote while represents values of public consideration, could be misconstrued as a scapegoat for companies who conduct massive corporate sustainability programs but engage in unlawful and unethical practices in the business. The interest of the society should not be used as a mask for a company's wrong doings. Enron, for instance, was popular for its programs promoting environmental preservation, but the business took a dive in 2002 following a colossal damage to its accounting credibility.
Businesses cannot be guided with just one ethical principle to achieve the real essence of success. While the business exists to become financially and economically successful, it needs to consider the effects of its actions to its stakeholders - patrons, consumers, customers, believers, etc. The company needs to hire people who believe in integrity and credibility and would not compromise any of these over money and temporary success.
The global financial crisis that we are surviving today is a mere wakeup call that ethical practices should be the number one priority in all businesses. Small gaps in values could result to the demise of a society and the effects are drastic and often involve not only money but lives of people who have gambled their trusts to the wrong organizations. Over the course of business history, questions on ethical principles have erupted alongside crisis. Sadly, business practitioners do not seem to learn from history.