What is ethics, and what does it mean to “put business and ethics together”? What would it mean for a company to do this well? Ethics is a foundation of principles of moral conduct that is based on the philosophies of those involved in a life situation. Therefore, the melding of business and ethics is following these moral guidelines in a business life situation. This can be a slippery slope, as there needs to be an agreement between the moral behavior and the mission of the business, which at times seem to be at odds. It is important to recognize that ethics has a mission it is attempting to accomplish. That mission is not to create the perfect business world but to limit the harm on all stakeholders in their business life situations. “What the discipline of business ethics can and must do is to provide an approach for improving the lives of the stakeholders who, with business, live in an imperfect, and sometimes harmful, world.” (D. Robin, 2010). So the answer to doing business ethics well requires understanding the possibilities of the harms that could occur for the stakeholders. In order to do that it is vital to understand the stakeholders and their needs through a stakeholder analysis. This is a helpful way for managers to identify the relevant purposes and consequences in a given case (Freeman, Martin, Werhane & Wicks, 2010). In determining what ethical or moral code of conduct will be employed to eliminate or minimize a harm it is a waste of time to establish a code that does not resolve an issue that for any of the stakeholders. If this arbitrary moral code that has no positive or negative effect on any stakeholders is employed it is meaningless. However, if an issue is identified that applies to one or more stakeholders a meaningful moral code can be establish that is useful to all. So an organization that starts first by understanding their stakeholders through a stakeholder analysis and what their needs are will be able to employ meaningful and useful ethics that will allow them limit the harm and do business ethics well.
What are the three traditions of ethics, and how do they provide guidance to help inform your managerial decision-making?
The three traditions of ethics according to Business Ethics: A Managerial Approach (Freeman, Martin, Werhane & Wicks, 2010) are; Actions or means people use to achieve their goals; Agent or persons who are acting in the situation; and Ends or goals that are outcomes of actions. At first glance some comparisons between the traditions would seem to suggest that they are opposites. However, they are really a view of situations from different angles or approaches. They each provide a value in their own right. An actions based approach focuses on the standards that we are using in the decision making process. Is the decision maker following the rules of decency in coming to his moral decision? In an actions based approach it is believed that the means is paramount in the ethical decision that is being made. An actions based approach may be the most useful when stakeholders are going to see the entire process and expect things to be done in a certain way. An Agents based approach does not deal with how it’s done nor does it deal with what the the outcome is. Instead it centers on what the decision says about the person making the decision. Does this decision prop up his or her character or does it undermine it? This approach would likely be used when the decision creates a lasting impression that will cause a long term affect of the decision maker or the organization. Finally, an Ends based approach does not look back. It does not concern itself with how it was done or what the decision says about the individual or organization. Instead it looks to the end and assesses the result. Did it yield the positive result that was desired? Focusing on the Ends would be desired when there is little to no harm in how things are done or what the process means but instead what the bottom line becomes. Each of these traditions has its place and its value in providing the guidance to conclude what ethical decision is needed.
Before this class discussion in module 1, what was your sense of why organizational ethics like Enron, Arthur Anderson, and Worldcom, happen?
I don’t like to cast full judgment on people or an organization without completely understanding the entire story. However, I did have a very dim view based on the details of which I was aware. My perspective was that a very large company was taking advantage of the federal government. To mount more trouble on top of it, in the case of Enron, Arthur Anderson who should have held them to a higher standard as an auditor allowed the corruption to continue. The irony of all of this is of course the largest more corrupt offender of all, the federal government, was holding both of these organizations to a standard that they themselves cannot follow in terms of accountability, which is evidenced based on their balance sheet. I certainly did not have an understanding that the 3 traditions of ethics could be applied in this situation. It would seem at some very cloudy level they were applying the Ends tradition. I say this is cloudy in that it brought with it the baggage of corruption to get to the ends that should have almost obscured the view of it. I would suggest that it would have been more prudent for them to employ the Action, Agent or a combination of these traditions of ethics as it would have likely caused a different outcome. The long term result of this is much more than the harm these organizations caused themselves and their stakeholders. The constraints that often come from harmful situations such as saddling all companies with Sarbanes-Oxley will unnecessarily felt by the business community for years to come.
Which factors seem to be most important in diagnosing why bad things happen? What role does the individual, and individual conscience, play in making sure good things happen organizations?
To determine within an organization what is the cause of bad ethical decisions it is important to understand the morality and conscience of individuals within the organization and what is driving the decisions that they are making. This includes not only the leadership of an organization but all members from the top down. It can be valuable to look at not only the moral development of the individual but what forces that affect decision making are in play (Freeman, Martin, Werhane & Wicks, 2010). First moral development, which is postulated by Kohlberg to be progressive, should be looked at and considered. While not all theorists agree with this approach it can be used as a good model for understanding causation of ethical problems. What is the tendency of individuals in terms of moral development? Is there a tendency to make ethical decisions based on the earlier stages of fear or are they at a point of maturity in this process? Knowing where individuals are in this spectrum can help us understand if it is part of the problem (Forsyth, Donelson R, 1992). Also, if the leadership of the organization is at the early point of the moral spectrum they are going to feed this type of decision making down through the rest of the organization. Understanding not only the individual’s moral development but also the leadership’s moral development all the way through the organization will help in the diagnosis of the problems.
Second, we need to look at the forces in play for decision making. In considering each of the forces discussed in the text it can be assumed that it can be applied at the individual level if we want to understand the problems and want to see good decisions within the organization. Attempting to apply these forces at an organizational level becomes abstract and makes it very difficult to see or directly affect individuals. For example, to see how authority is properly communicated in an organization it is necessary to look at specific examples of this. That is, how a particular individual in authority communicates to other individuals in the organization is important in the making of good ethical decisions. Likewise, how an individual responds to that authority will play into it as well. This can be done with each of the other forces, Distance from Responsibility, Tunnel Vision, Rationalization, External Pressure and Communication Breakdowns. Applying individual notions to each of these will help in both the diagnosis and resolving to better decision making. Therefore the consideration of the individual conscience both in the diagnosis and the resolution of good decisions is a key element.
Read the case, “Marge Norman and Miniscribe Corporation”, pages 58 – 67 of your textbook. Provide a summary of this case including the ethical dilemmas and how they were handled in this case. Draw on what you learned in chapters 1 & 2 as part of your response.
The case of Marge Norman and Miniscribe Corporation is a good example of some of the central forces that affect the decision making process, chief of which is the authority force (Freeman, Martin, Werhane & Wicks, 2010). In addition, the findings and results suggest the rationalization played a major role in the decisions that were made within the company that caused the downfall of the corporation. Chronologically, the case begins with a company in a difficult position financially. Initially it appeared as if things were moving in a good direction with new leadership, Q. T. Wiles, being very decisive and with a solid influx of investors. One of the dilemmas that initially showed it head was in the area of communication breakdown, as all information was required to be communicated from the very top. In doing this it can be completely controlled as to what is being communicated. This created a fertile ground to allow the story to become whatever the leader wanted it to be. This also ties into the central force of authority, which played a major role. With Q.T. Wiles being a strong personality with his 13 disciplines it would appear that the company was being lead in the right direction with strong accountability. From the outside this might give the appearance of a solid ethical foundation ensuring those doing the work are being held accountable. As the case continues and we see in the end that cooking of the books had occurred, this suggests that the authority force did indeed play a major role. In addition, the case states that there were many employees involved in the cover up. To have a large number involved it would require an authority figure guiding them and providing rationalizations in the process. There was also the external pressure force placed on the leadership by the accountability structure to come up with the correct numbers, which has the possibility of causing bad decision making. For the scandal to be this successful it had to cause dilemmas for all areas of the company. The accountants had to decide if the numbers forced to them should be used. The sales department always watches the numbers closely and would have had to wonder about the inflated numbers. Even the shipping department, who day to day knew what would be going into the boxes, must have faced a moral dilemma. As lies or deceptions occur within a company there is a need for consistency in the store and an escalation tends to occur (Kidwell & Martin, 2005). As deceptive dilemmas began to mount with each bad decision more bad decisions were made until it was impossible to conceal as indicated by MiniScribe’s 13 successful quarters.
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Looking back had any of the employees overcome the central forces and employed even one of the rationalization tests earlier in the process, the scandal could have been less severe. Far too late, Marge Norman applied the publicity test in a small way by communicating her findings to her supervisor. Had this been done earlier the story would have been different. Had the leadership put themselves in the place of the stockholders, using the reversibility test, it would have brought to the surface the lack of ethics in the decisions. And certainly, using the generalizability test and comparing the situation even to one’s personal finances it would be clear that this situation would eventually be found out.
The mounting power of the authority force and rationalization along with a failure to apply any of the rationalization tests to the situation proved to be the down fall of MiniScribe. Sadly, this affected not only the company itself but many others in the process.
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