Analysis of Organizational Management

Introduction

Maurice Punch in his book, “Dirty Business” , states that in ‘a world of power struggles, ideological debate, intense political rivalry, manipulation of information, and short-term problem-solving….managers emerge as something of amoral chameleons, buffeted by moral ambiguity and organizational uncertainty’ (Punch, 1996, p.6). In their attempts to pursue organizational sustainability, contemporary managers are facing several ethical dilemmas, and numerous dimensions of social responsibility. That is, social responsibilities of those organizations and those of other social entities and forces within the business environment demand that managers change their attitudes towards overall management. In other words, corporate governance must change their attitudes and behaviors in order to sustain businesses.

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The ethical theory of business is in line with the increasing need to manage organizations in a sustainable manner within the societal setting. Ethics involve situations where managers apply behavioral norms in the process of management in line with the prevailing situation. According to Altes (1995, p.57), ethics is particularly about the “principles and process that are used in working out what ought to be”. Basically, it is normally regarded as a normative science since it concentrates on the normative behaviors of the human (Altes, 1997, p.57). In other dimensions, ethical behavior is based on professional standards in practical dimension, and that these standards normally affect the law of the land. This paper critically assesses the potential role of ethical theory when applied to the contemporary ethical dilemmas for management. It deals with ethical theory in the process of recognition and reflection of ethical dilemmas that may be encountered in the management process.

The principle of Ethics and Law

In the societal setting, law is made to go in line with the socially accepted and mutually agreed norms that define human conduct (Maclaren, 2001). In this perspective, one may argue that any organizational or individual behavior that is within the confines of the law is inevitably ethical. However, it is noted that not all behaviors can be legislated. This dilemma is compounded by the fact that behavioral norms set by the society do change overtime, i.e. what was considered acceptable some years or decades back may be unacceptable in the current or future world and vice versa (Maclaren, 2001). But this is not the case with the law which seems static especially if it is designed in economic terms. It is therefore right to state that morals or ethical conduct simply depends on an individual’s or group’s view of what is right or wrong according to their own standards. Murray, Poole & Jones (2005, p.197) observe that ethical decisions are rarely black and white since the process involves several moral dilemmas. When a decision is made about which ethical conduct should be in play, it is normally linked to what the majority thinks is right in the societal setting. For example, many would be in agreement that everyone should be in a position to tell the truth. However, in a situation where telling the truth will harm someone, what should one do? For instance, an employee observes a colleague committing fraud. Reporting the employee will cost him or her job, while ignoring may bring the organization down.

Ethical dilemmas are known to cause great problems to managers even more. The collective nature of businesses is in itself a socially constructed and shared culture. Balancing the collective demands of organizations and that of the society is what entails social corporate responsibility of the said organizations. It is the collective morality that determines the moral decisions taken by the managements of organizations (Monbiot, 2002). This is why ethics has become every manager’s part of life. Furthermore, media stories highlighting corporate unethical practices have become the norm of the society. it is no doubt many business managers around the world face ethical challenges as it has become top in the list of what society expect from corporations. Furthermore, as Monbiot (2002, p.11) argues, “being ethical can be profitable”. For example, unethical behaviors may lead to environmental degradation, cause injustice, cause job losses, spoil the reputation of the organization, reduce the value of the shareholders and provoke an increment of more external regulations from the governments and international regulatory bodies (Monbiot, 2002).

The Principle of Corporate Social Responsibility

The global business has become very competitive in the recent past. While some businesses have succeeded in meeting their business goals- profit making; others have found it difficult to cope with the increasingly tough choices of meeting the shareholders needs and at the same time satisfying the overall role of meeting the needs as well observing the welfare of the entire stakeholders. On many occasions, the success of the organization is linked to good management, supported by the shareholders. In the contrary, organizations that have not managed to satisfy the needs of the shareholders-those which have not inched closer to making any profit and instead incurring losses have been linked to poor management as well as failure by the people responsible to address some of the specific issues affecting the organization (Kennedy, 2003). In other words, measure of successful management lies in the degree with which an organization is able to achieve its set goals and objectives (Jensen, 1976, p.4).

However, there is one important phenomenon in the management of business organizations: business success goes beyond shareholders profit satisfaction. This is the Corporate Social Responsibility (CSR). It is referred to as the need by the organization to accept the responsibility of taking care of the entire stakeholders in wider global or regional groups (Carroll, 1999). Sometimes referred to as corporate citizenship, CSR is believed to have great influence in many business dimensions ranging from expansion to profit or loss making. This belief is based on the fact that business organizations which make a lot of profit should be in a position to share with the entire community, normally referred to as “stakeholders” (Atkinson, Waterhouse & Wells, 1997, p.25; Bushman & Smith, 2003, p.66). In this perspective, CRS concept basically a state in which a business entity or organization decides where to participate in the social fabrics of the society, by addressing business ethics, environmental issues, and any other issue within this context. However, some people have questioned the role of CSR as an ethical initiative, with a unanimous acceptance among critics that “businesses destroy and cover up their unethical deeds through CSR” (Dawson, 1989, p.51). Moreover, others do criticize the role of business entities or organizations in satisfying the needs of the entire society instead of concentrating on the needs of shareholders as the business owners.

Business ownership and Management dilemma

Case against corporate Social Responsibility has been presented by many business leaders and analysts alike. According to some business leaders and analysts, the rightful business owners are the shareholders, and that the claim of wider stakeholder-ownership is a polite approach to claim what belongs to others (Bushman & Smith, 2003, p.14). Shareholders are entitled to the ownership of the organizations and that they are at liberty to act in any way they deem right without any barrier. In this perspective, it is logical to argue that the shareholders’ right to own property is being infringed, an express disregard of 1948 United Nations Universal Declaration of Human Rights.

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Laissez-Faire, one of the leading voices against corporate social responsibility argued that CRS as a practice is principally against human right- going against the right of owners to fully reap what they saw, which can sometimes be viewed as being denied a right to property ownership (Werther & Chandler, 2006). Another figure in agreement with Laissez-Faire is Elaine Sternberg, who argues that every objective of the contemporary view is not logical since the right to own property is earned fairly in a business environment and thus should be respected at all costs (Werther & Chandler, 2006, p.39). Grossman & Hart (1982) argue that corporate social responsibility undermines the very basis of free society, particularly when corporate leaders accept that they have social responsibility to satisfy the needs of those who have not contributed directly to the success of the corporation. This subsequently reduces shareholders’ dividends. However, Jensen (1996, p.112) points out that “ordinary decency, honesty and fairness” should be part and parcel of every business entity and should be regarded as important as profit making in itself (Jensen, 1996).

The Dilemma between Success and CSR

Corporate Social Responsibility initiatives have not been helped by constant issues that have emerged in the past as concerns successful corporations and their role in the CSR initiatives. A survey conducted in the early 90s revealed that the most successful corporations in the United States had concentrated less on the CSR activities (Freeman, 1994). The report stated that “The Most Respected Business Leaders” positions have historically gone to executives who do not play nice in the market, hence creating a belief among many contemporary leaders that being good to the stakeholders is not the best option to managing businesses (Freeman, 1994). Monks & Minow, (2007) highlights the most recent cases of unethical business leaders, pointing out the case of Microsoft founder and business leader Bill Gates. Gates has been accused of having played dirty in marshalling huge profits at the expense of other people. In fact, Microsoft is linked to some of the highest profile cases of dirty business as it has been accused of playing ‘big brother’ in this line of business, subsequently putting barriers to other firms (Monks & Minow, 2007, p.172). Ironically, Bill Gates has used his huge financial success to establish himself as the leader in corporate social responsibility by giving away big sums of money to fight poverty, diseases, and supporting many non-governmental organizations working towards social developments in the society.

Another frequently cited case of unethical conduct is that of Jack Welch of General Electric. It is argued that Welch played nasty in the business world when he presided over a memorable anti-social downsizing in his corporation. He was also accused of environmental pollution that went against the concept of sustainability. This led to a lot of criticism across the wider perspective of the society (Monks & Minow, 2007, p.173). However, some have stated that Welch played his part in the establishment of corporate social responsibility, especially through his restructuring of the employee status and empowering them. He is also in records to have said that business success should not only be viewed in the dimension of making profit and paying of taxes, as corporation leaders should go beyond the interests of shareholders and support wider society (Alchian & Desmetz, 2002).

Finding balance between CSR and Core Business Focus

It has been argued on several occasions that the success of any business initiative lies in the ability of its managers to balance core business focus with the CSR, particularly during this period of economic hardship. In other words, the argument points out to the fact that management should never lose focus of its core business focus even when spending on the CSR initiatives. According to Colley (2003, p.213), one should not spend huge sums of revenue on issues related to CSR while they are unable to retain their workforce- retrenching workers is itself unethical and can never be replaced by CSR initiatives. In other words, retrenching workers is destroying the reputation of the company as it goes against principle of CSR as a supporter of people’s welfare. It is therefore possible to state that the reputation of the company may not be easily redeemed when the very members of the society who are supposed to respond positively towards their activities are being retrenched.

On one hand, others have argued that the process of managing CSR depends on the willingness and perspective of the managers (Fombrun, 1996). One particular manager can approach it with good initiatives while another may ignore everything and concentrate on what pleases shareholders. In other words, one may argue that many a time corporations just do things to comply with the law and please pressure groups such as environmentalists (Fombrun, 1996). In economic and business terms, many observe that CSR withdraws attention of the management towards quality improvement, and instead redirect it towards rebuilding lost image (Freeman 1994). In this case, the corporations would be spending millions of dollars to build an image that they could have maintained in the good books of government and society by improving product quality.

Role and Responsibility Conflict

The case of tobacco is one which has been used to highlight the dilemma and controversy of CSR. Historically, businesses have been noted to involve themselves in activities that are more than obeying public policy; creating a friendly environment for everybody as a way of maintaining or moving towards sustainable profit and growth (Millstein, 1998). Through such initiatives, governments are able to draw benefits through revenue collections, hence their efforts to create favorable framework for just business initiatives. According to Millstein (1998), it is not practical to continue insisting that smoking remain legal while the authorities continue imposing huge tax on its production and usage at the expense of consumers, who are supposed to be protected. In this case, tobacco companies continue to splash huge sums of money to support their CSR programs; a somewhat controversial behavior. This is why many people in the civil society have argued that such actions are never in the interest of the stakeholders or society in general and should be regarded as shareholders’ own personal interests (Alchian & Desmetz, 2002).

Environmental Management and Corporations’ Profitability

Traditional view of natural resource exploitation is based on the notion that such resources as water and air are supposed to be free and unlimited for access by anyone (Mallin, 2007). It is in this perspective that some people have argued that businesses have no obligation to protect unlimited resources. They view these resources as lacking ownership and therefore any initiative to protect them is negligible in the wider perspective of societal development. However, the combined activities of many companies in releasing toxic wastes into the environment are potentially dangerous in cumulative nature.

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The environmental ethics is defined in the dimension of building better attitudes towards environmental protection (White, 2002). According to androcentrism theory of environmental management, organizations polluting the environment are human rights violators as well as destroying the very basic resources in animals and plants that human depends on. Studies have also suggested that almost every business has the ability to “shift 1% of its overall turnover straight into its bottom line” if they strive to manage the environment by minimizing wastes (Bushman & Smith, 2003). However, many business executives have conceived the idea of environmental conservation, ostensibly because such initiatives involve spending money that they believe should be used in the mainstream investment initiatives (Bushman & Smith, 2003). In other words, this may mean that business leaders only prefer acting after a problem has occurred instead of preventing it. In summary, the need to solve the problems only come after they have realized that they have an already existing problem rather than acting to prevent the calamities.

Conclusion

To some extent, Punch’s idea of dirty business has some logical ground from which to base any argument against CSR. The case of tobacco carries with it a big issue of morality of businesses and the absurd nature of CSR. This is because managing business that is known to affect the health of the very society whose welfare is within the hands of the government is making nonsense of the efforts of tobacco companies. Moreover, the increasingly high taxation is indirectly passed to the consumer. The past cases of business leaders such as Welch of General Electrics ‘playing it dirty’ with downsizing and concentrating on protective business initiatives have been regarded as unethical in the overall role of businesses in the process to build just society sustainable society. Bill Gates’ Microsoft fortune is one greatest dilemma of business that made huge profits at the expense of other organizations in the same line of trade, and subsequently plunging the money back to CSR.

While Corporate management of organizations comprises the internal relationships amongst shareholders, boards of directors, and managers, it must be observed that CSR is a basic component of businesses and that any effort to build public relations will rely on the goodwill of the society as a whole. This is why governments involve themselves in constructing legal guidelines to control moral or ethical behaviors. The private sectors also involve themselves in voluntary initiatives to build their initiatives. It is possible to argue that CSR is basically an image building initiative, which may not be necessary if all ethical behaviors are observed without only concentrating on the limits of the law. Moreover, organizations belong to the shareholders, who are expected to get their rightful shares or any other benefits as long as good business practices are maintained.

Reference List

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Atkinson, A., & Waterhouse J., & Wells R. (1997), A stakeholder approach to strategic performance measurement. Sloan Management Review, Spring [38(3)]: 25-36.

Bushman, R., & Smith, J. (2003), Trasparency, Financial Accounting Information and the Corporate Governance. FRBNY, Economic Policy Review.

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Carroll, A. B. (1999), Corporate social responsibility: Evolution of a definitional construct. Business and Society 38(3), 268-295.

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Monbiot, G. (2002), ‘What do we really want?’ The Guardian.

Monks, R. G. & Minow, N. (2007), Corporate Governance, 4th Edition. New York. Wiley Blackwell.

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