Introduction
Economic crises are believed to be recurrent phenomena that represent a natural item of the economy. Some economists argue that crisis reoccurs in cycles, signifying a renewed and transfer to a new stage of development (Markham, 2015). However, in most situations, economic crises are deemed as generally negative phenomena that lead to a drastic drop in performance among the majority of organizations in the target economic setting (Markham, 2015). Moreover, some theorists argue that economic crises are instrumental in building knowledge about the subject matter and the internal laws that guide the processes within the economic environment (Markham, 2015). Therefore, by considering the ethical factors that have contributed to the economic disaster of 2008, organizations worldwide will be able to avoid a similar disaster in the future. Although the development of the 2008 crisis has been defined by numerous factors, the presence of greed and the unwillingness to comply with basic ethical standards have become two of the cornerstone problems with the movement, causing the 20008 drama and the current convoluted situation.,
Analysis
Ethical Leadership in Modern Business
In the modern economic setting, the role of ethics and ethical reader ship is valued extraordinarily high. For example, most organizations prefer to have their mission or vision statement render the specified idea of ethics in some way. Typically, the vision and mission of a company tend to reflect its stance on ethical issues, specifically, the presence of a policy that informs the choice of a particular solution when facing an ethical dilemma (Markham, 2015). Traditionally, ethical decision-making is viewed not only as of the option that entails no repercussions and, therefore, is highly recommended to take, but also as the course of actions that will cause the company in question to win, which is the main reason for companies to consider the ethical options first when choosing the decision to make.
Therefore, the significance of ethical leadership in the workplace is central for the promotion of the attitudes that will allow avoiding massive economic crisis. Moreover, in retrospect, the absence of ethical leadership could be named as the main factor that facilitated the 2008 crisis. Specifically, the failure to instill foundational ethical standards into the organizational context as the norm and convincing staff members to follow them was one of the main causes of the 2008 crisis, leading to the discovery of the importance of introducing strong leadership that will bind the team of staff members together.
Need for Corporate Ethics
Additionally, corporate ethic and the introduction of ethical leadership into the workplace are needed for very practical and pragmatic reasons of avoiding major scandals. Furthermore, the introduction of ethical principles and compliance with the set ethical standards allows organizations to gain the trust and support of their key stakeholders. The latter include not only potential customers, who are vital for the company’ market performance and its economic growth, but also investors, suppliers, retailers, and other essential business partners that a company may need in the target economic setting (Markham, 2015). Indeed, as the examples of companies that have broken ethical standards have shown, the downfall of a firm starts with the disruption pf its relationships with its primary stakeholders, namely target buyers and business partners (Markham, 2015).
Ethics and Finances
At first glance, the idea of unwavering compliance with ethical principles, namely, those of integrity, honesty, and transparency across the organization, might appear to be naive to some. However, some of the most infamous corporate scandals associated with the breach of ethical standards will show that following corporate ethics and the associated principles allows a company to benefit in the long term since its further development will remain the focus of decision-making as opposed to the immediate gain of some of the company’s members.
To illustrate the specified phenomenon, one might need to look at the case of Enron, which to this day remains the most infamous instance of breath of corporate ethics. Due to the failure to perform an audit properly, Enron was entangled into a case of corporate fraud, which has caused severe implications for the organization (Markham, 2015).
The described situation exemplifies the problem of greed being the main driver behind decision-making in the corporate setting. As the titular quote suggests, the extent of greed is truly immeasurable, which suggest that mechanisms for containing and controlling it must be introduced into the corporate setting. In turn, the case of Enron shows what may happen if the setting for evoking participants’ instinctive need for personal gain is presented and left completely uncontrolled. Indeed, according to Markham (2015), the failure to establish ethical leadership became the foundation for the company’s demise and the development of the situation that finally led to its downfall (Markham, 2015). Specifically, the author mentions the following detail (Markham, 2015). The described note alludes to the importance of ethical leadership as the tool for guiding employees’ decision-making and ensuring that all participants recognize the implications of unethical decision-making.
Ethics and Global Markets
When applying the idea of business interactions and trade-based relationships to the global market setting, the absolute necessity of ethic and ethical decision-making becomes obvious. Specifically, the global economic environment with its necessity for transparency and trust as the main tools for furthering the progress of global supply chains and the management of organizational processes, as well as interactions between companies and their stakeholders, proves that trade in its current form can only exist in the setting that is devoid of fraud (Markham, 2015). Indeed, when considering the multitude of fraudulent concepts that have flooded the global market since 2008, one will realize that Ponzi schemes, accounting frauds, and other tools for market manipulations affect the relationships between the parties significantly, undermining the core based on trust and, thus, lading to their gradual deterioration (Markham, 2015). Namely, with the drop in the levels of corporate ethics, business leaders will fail in forwarding the development of their organizations since self-interest will prevail and take over the idea of economic growth (Markham, 2015). Thus, the multiple instances of corporate fraud that have resulted in massive scandals have problem that the very idea of refuting corporate ethics is self-defeating in the end since it will lead to the ultimate demise of entrepreneurship (Markham, 2015). For this reason, pursuing ethical decision-making and adhering to the foundational principles of ethical decision-making must be treated as the priority.
Ethical Dilemmas
The statement above does not negate the presence of an array of ethical dilemmas in the contemporary business setting, especially in the context of the multicultural economic environment. With the rise in the number and range of stakeholders, a company experiences an increasingly strong challenge when seeking the business strategy that satisfies the need of all those involved, which entails the necessity to prioritize certain choices over others (Markham, 2015). The described scenario requires a company to wander into an ethically grey area, where the choice of a solution becomes much more complicated.
One might make an argument that the specified complex and nuanced environment does not require the presence of an ethically strong philosophy and the existence of a rigid ethical code. However, the specified assumption is quite far from the truth. Instead, in the setting where the line between moral and immoral is especially blurred, corporate leaders must adhere to ethical standards especially strongly. Thus, the threat of losing integrity and developing the propensity toward bending corporate ethics to the needs of individuals, primarily, organizational leaders, will be avoided, which, in turn, will reduce the probability and possibility of corporate fraud (Markham, 2015).
In turn, the importance of complying with ethical codes in the modern business setting is vital for investment bankers and other parties responsible for financial transaction and the management of finances, in general. By providing an honest and accurate account of the financial state of an organization, financial bankers will be able to present an effective moral infrastructure that will allow them to sustain the performance of an organization in the long term (Markham, 2015).
Overall, when failing to present ethical decision-making in the corporate setting, company leaders primarily set the basis for their personal failure. Since the performance of an organization is predicated not only on its current financial well-being but also on the relationships of its leaders and members with other entrepreneurs and participants of the target market interactions, the failure to comply with principal ethical standards will lead to a company being generally ostracized by the rest of the target community. Therefore, while the idea of choosing the most lucrative option leading to an immediate gain might appear to be very tempting for corporate leaders and mangers, it is important to keep in mind that it will inevitably lad t the eventual reveal and the resulting economic dive that cannot possibly be recovered.
Moreover, the choice of ethical decision-making allows a company to keep a high profile in the target economic setting even at the times that might see as especially challenging for a company. As a result, the support system that a firm will have built by the time when it faces a financial risk will allow it to face the threat with due resilience and with an adequate amount of resources to counteract the risks. In turn, when demonstrably avoiding the foundational principles of ethics, a firm is highly unlikely to develop the support framework that will allow it to minimize market risks and collaborate in the target setting successfully.
Ethics for Individuals and Organizations
The necessity for one of the parties to comply with principal ethical standards does not absolve the specified necessity for the other. In other words, both individuals and corporation must follow ethical standards in order to prevent a crisis from happening. The role of individuals in the development of a global crisis might seem insignificant; however, examining the details of the 2008 crisis, one will notice the increased impact of individuals and their decisions on the development of tensions within the global market. Namely, with the drop in the levels of trust toward an organization among employees, the extent of other engagement with the company and their loyalty toward it will inevitably drop (Markham, 2015). In turn, studies show that eh extent of employee engagement and corporate loyalty are directly linked to their motivation and, therefore, their performance levels not only through correlation but also through causation (Markham, 2015). Namely, the presence of positive performance is necessitated by the increase in motivation and engagement rates, which is why embracing the ethical concerns of key stakeholders an meeting their expectations in regard to corporate honesty integrity, and ethics will allow a company to stay relevant and popular in the target market (Markham, 2015). As a result, investments, an increased number of potential buyers, and alluring and lucrative business opportunities will open to a company that will shape its corporate ethics toward a stakeholder-oriented approach and prioritize the needs of its target audiences.
Furthermore, individuals also have a tremendous effect on the levels of ethics within an organization. Creating an environment in which the principles of ethics are imbued with meaning and used to improve workplace performance, encourage innovation, and promote teamwork, the significance of a workplace setting where the individual value of each staff member is appreciated and recognized is vital to promoting accountability and ensuring that staff members follow the established ethical standards. Indeed, when considering the 2008 situation, one will realize that the individual role of each staff member was largely ignored (Markham, 2015). The specified issue becomes apparent when considering the case of Enron mentioned above (Markham, 2015). However, other instances, such as the WorldCom case, also exemplify the absence of cohesion and cooperation within a tem as one of the major problems in advancing the notion of organizational responsibility (Markham, 2015). The described issue echoes the quote in the title of this essay particularly visibly since, when divided, staff members develop the propensity toward focusing solely on their personal interests and the opportunities for personal gain (Markham, 2015). As a result, as seen in the case of Enron, employees and managers become inclined toward bending the set ethical standards and abandon the social acceptable moral principles for the sake of quick personal gain (Markham, 2015). Thus, building the stetting where the drastic outcomes of egotism and the inability to focus on team interests are recognized and sought to be avoided will help organizations to eliminate the possibility of any instance of fraud, be it financial, legal, or managerial.
One could argue that the extent of freedom and agency in decision-making that individuals can enjoy in the corporate setting defines the levels of significance of individual compliance with ethics in a company. Indeed, on the surface, with low decision-making power, individuals have a barely noticeable effect on how a company is perceived form an ethical perspective in the target market. However, on further study of the issue, it will become obvious that the amalgamation of individual attitudes within an organizational environment creates the atmosphere in which the premise for issues such as problems with quality control, management of workplace tasks, understanding of customers’ needs, and willingness to collaborate are created (Markham, 2015). Therefore, with a drop in the individual levels of engagement with corporate ethical standards, the general propensity toward complying with ethical principle within a company is likely to be reduced significantly (Markham, 2015). As a result, the perception of a company in the setting of the target market is shaped toward a more negative one, affecting it opportunities for expansion, collaboration, and the overall performance of a company. Consequently, the company gradually loss credibility without the application of the ethical principles and the corresponding model according to which decisions will be made in its setting.
Conclusion
Although the concept of ethics in business might seem as a naive and near obsolete concept, particularly, as information about global companies breaking ethical standards surfaces regularly, organizations must rely on a strong ethical code in their financial decision-making and integrate ethics-based leadership into their context. Thus, the threat of corporate fraud and the resulting demise will be avoided successfully. Since the breach of ethics entails not only legal repercussions but also long-term disruption of relationships with key stakeholders, companies succumbing to corporate fraud inevitably lose in the long term. Thus, pursuing ethical leadership and ensuring that all parties, including not only entrepreneurs, but also investment bankers, managers, and staff members, comply with the predetermined ethical cod, it vital for the proper functioning of an organization.
In order to convince all stakeholders to uphold ethical standards high, one must consider introducing the leadership based on a combination of the Transformational, Innovational, and, most importantly, Ethical Leadership frameworks is vital. Predicated on the principles of Social Learning and Social Exchange Theories, the proposed frameworks will guide participants of business interactions to the idea that ethically questionable choices will have a detrimental effect on them in the long term. Thus, organizations will lean to invest in the development of the principles and standards of Corporate Social Responsibility, employee loyalty and engagement, proper communication with consumers, and, most importantly, the management of financial transactions. As soon as the specified principles are integrated and internalized by the company and its members, the incentives for ethical decision-making ad behavior will emerge.
Reference
Markham, J. W. (2015). A financial history of modern US corporate scandals: From Enron to reform. Routledge.