Introduction
The concept of business is drastically different now from what it used to be when it first originated and even from what it was like a hundred years ago. The first forms of business appeared in prehistoric times in the form of small manufacturers and stores. Now large corporations have intercontinental chains, thousands of employees, and a very complex structure. Although the primary motivating factor for business remains the same: gaining profit, the responsibilities for entrepreneurs have grown according to the everyday concerns of humanity. Apart from taxes and legitimacy, companies now have an essential duty to society which is called ethical responsibility. Since businesses have become one of the main driving forces for humanity, it is in their power to partake and resolve significant social, political, cultural, and ecological challenges. For the past decades, large corporations have been modifying their policies corresponding to the needs of people and our planet. This paper will provide a comprehensive overview of typical ethical challenges businesses face, discuss ethical decision-making frameworks, and observe examples of various approaches to corporate responsibilities supported by philosophical theories.
Socioeconomic components
To begin with, it is essential to define the concept of business as a socioeconomic institution. This can be achieved through analyzing the contribution businesses make to each of the two sectors of society. For the economic part, businesses are one of the largest contributors to job creation and job placement. They also participate in international trade and influence the GDP of the country. Regarding the social side, businesses obtain a balanced list of rights and responsibilities. Their rights are somewhat apparent: conducting trade, making a profit, owning property, providing jobs, and others. However, when it comes to responsibilities, they are usually not well disclosed. Running a business involves multiple parties, and each of them requires appropriate collaboration, which forms the commitments of business owners. Indeed, there is a financial obligation to executives, stakeholders, and employees, but there is also the task to provide customers with decent goods and services and the duty to the government and community. This last factor determines the company’s «behavior» as citizens, including production legitimacy, urban planning, environmental protection, and working conditions standards. All of those challenges are important social factors that each company’s corporate policies should control, and those will be observed later in this paper.
Philosophical background
The beginning of ethical corporate policies lies in philosophical concepts of relativism and utilitarianism. Based on the definition, in the relativistic view, the concepts of right and wrong, moral and immoral, are defined by the conventional context of each situation and could differ in various cultures. Utilitarianism, in its turn, states that there is a standard evaluation system for every action regarding its usefulness and benefits to a majority. Although these theories are relatively broad, the basic business rules can be traced back to their aspects. This connection is illustrated in the paper by Chao, Li, and Chen (2016), which mentions that individuals or organizations with relativistic views focus their policies on local cultural norms and traditions. The same study remarks that such practices are often called «ethnocentric,» which is unsuitable for the age of globalization. (Chao et al., 2016, p. 266). With this in mind, the utilitarian strategy that focuses on the objective characteristics of every situation appears to be more practical for global businesses. Despite that, there are particular issues in ethical behavior that cannot be resolved with one technique only.
Ethical challenges for business
In general, any situation or practice that harms particular individuals or groups of individuals at their employment position for reasons that are out of their control can be considered an ethical issue. With the knowledge from previous paragraphs, this definition should also entail any violation of corporate responsibilities to those impacted or contradict the philosophical basis of the company’s strategies. The study by Smith, Rohr, and Panton (2018) emphasizes the role of strategic human resource management in conquering ethical issues. Before introducing strategic HRM, the paper states that there was no proper approach to workplace dilemmas or customers’ complaints (Smith et al., 2018). Indeed, those departments significantly impact resolving most of the conflicts related explicitly to workers, but it is essential to realize those social responsibilities spread beyond local complaints. The following section will explore four of the primary ethical concerns of a company in the twenty-first century and support them with possible causes and outcomes.
Equality in the workplace and employee relations
During the previous centuries, society has been extremely strict with gender-based limitations in job placement, salary, and career growth. Although legally, gender division has been removed, the tendency for inequality in offices exists today. According to Piasna and Drahokoupil (2017), there is a division between male and female-dominated jobs. The first category primarily exists in managerial positions or skill-intensive jobs. In contrast, the second category consists of low- and medium-skilled jobs in the fields of personal care and service (Piasna and Drahokoupil, 2017). In addition to not admitting female employees to administrative positions, there is a difference in payment, which often drives women to take up second jobs (Piasna and Drahokoupil, 2017). All of these factors promote discrimination in workers’ personal communication and might raise conflicts between colleagues. Stressful working conditions caused by bigotry significantly influence employees’, especially females’, mental state, which leads to reduced productivity. This is a direct violation of the company’s responsibilities to its employees and society in general. Also, when a business does not provide similar working conditions for all its employees, it impacts the public image and presents it as a controversial organization.
Consumerism and ecological concerns
One of the legal responsibilities each business has to the country is preserving the ecology. Implementing this commitment is usually limited to having wasteless production, using safe technologies and materials, and restoring natural resources equivalently to those destroyed in the production process. However, with climate emergencies and the global trend of overconsumption, there is a need to introduce better production cycles. Usually, corporations only count the waste they produce while manufacturing goods, but there is also a significant amount of litter from unsold items. Most products are made of non-recyclable and non-degradable materials that are either burned, evolving toxic fumes, or kept at giant dumping sites that take up natural areas. Evidently, the population is not going to give up their consumerist view, so it is business owners who should become concerned about sustainable technologies and recycling. Innovative eco-friendly practices are usually more expensive, and time-consuming which makes them undesirable for corporations. That is why eco-friendliness is plainly an ethical choice for companies to invest in better practice or keeps things more profitable yet harmful.
Media relations
With the global spread of press, social media, and the internet in general, many complications arose in the relations between businesses and the public. Most of those problems are connected to marketing and promotion. Apart from traditional advertisements, companies now have the ability to create hidden or «native» promotions through magazine articles, blogs, or social media influencers. This type of promotion is based on the public’s trust in a particular source and the presentation of the product as an «honest recommendation». Companies resort to this marketing strategy due to it being relatively cheap and effective. However, there is a high risk of falling below customers’ expectations when the story behind the advertisement is about a «life-changing experience». Another method of extreme promotion is creating «publicity stunts» when the company is widely accused of some infringement. Sometimes, those conflicts are paid by companies, and further investigations prove the business is not guilty. The ethical problem here is the lack of transparency with the audience and the implementation of somewhat dishonest promotion methods. Such behavior makes the audience rather doubtful and biased towards businesses and brands.
Government interface and community responsibilities
Cooperation with the government and mutual responsibilities is the part of a business that is usually not disclosed to the public. Nevertheless, some aspects of that relationship affect the community and social environment in the country, which is especially dangerous if the effects are adverse. The primary role of any government is to reinforce laws and control their execution. Businesses within each country must comply with those laws, and they usually do, but multinational corporations that spread through the whole world often face contradicting restrictions. If a company wants to expand to a new country, but that country puts legal limitations, the business owners must decide whether to compromise or retreat. Such cases sometimes bring a lot of media attention and cause people to protest against their government or the brand. Any involvement in political activity impacts a company’s reputation. Additionally, if the business owners are even remotely illegitimate, it might even lead to public boycotts. Ultimately, there is a hard ethical choice behind every business decision connected to politics, especially for international corporations, and the dilemma for the executives is whether to stand for their customers or the country’s authorities.
Frameworks of ethical decision making
Despite the fact that all of those issues seem incredibly complicated, there are well-established strategies for coping with them through following carefully planned policies and protocols. Some of the methods are based on such ethical theories as deontology. According to Chen (2019), this theory states that people should make their decisions according to to set ethical principles and rules rather than consider consequences or weigh possible implications. Such an approach is exceptionally rationalistic, however, it is suitable for businesses, which are often forced to act urgently and simply do not have time for considering every single case of conflict. As an example of a deontological evaluation of business practice, Chen (2019) provides the case of Takata, a Japanese automobile parts supplier. Firstly, he describes the basics of deontology and explains that «ethics are based on not desires, but rational will» (Chen, 2019, 785). Secondly, he provides evidence of how Takata acted unfaithfully: it produced low-quality airbags, concealed the information about the harm, and also lied about its technological improvements (Chen, 2019). Finally, the conclusion was that Takata’s actions were not ethical since they only complied with its desire for profit (Chen, 2019). Although this case illustrates a bad practice, there is a lot to be taken from it to resolve other conflicts.
Promoting ethics
The principles of deontology can be applied to every ethical issue that has been discussed before, and they are actually widely used by companies who value their ethicality. Today, developing ethical action plans for each situation usually occurs at the first stages of business planning and operates with hypothetical scenarios. However, for those companies established earlier and only now began to modify their practice, there is a need to announce their changes. Consequently, companies often create promotion events or presentations about their new social responsibility programs, ecological practice, and other improvements. It became common for businesses to design special sections on their websites or release journals dedicated to their progress with community responsibilities. In fact, this kind of self-promotion works in two ways: it encourages companies to proceed with their upgrades and supports another ethical trend of transparency. Disclosure and honesty raise people’s trust in the brand and everyone to evaluate their policies. When business principles are publicly known, everyone, including media resources, the government, or competing brands, can make decisions about possible cooperation. Creating transparency might actually be the most important step on the path to ethicality.
Evaluating cases of corporate responsibilities
As mentioned above, many companies value their principles and announce them publicly on their websites. Unfortunately, it most often applies only to those brands whose practices are positive and highly ethical. For the other businesses, the information about their controversial decisions or violations comes from investigations, research, or large scandals. The next part of this paper will evaluate two companies regarding their corporate policies and social responsibilities. The companies were explicitly chosen to represent good and bad examples of corporate social responsibilities to provide an opportunity for comparison. The information for this section was taken from recent case studies of Volkswagen and Microsoft Corporation, and the evaluation will focus on particular positive and negative events which indicate the level of social responsibility for each company.
Volkswagen case study
Volkswagen is a vehicle company that was founded in Germany at the beginning of the twentieth century. In 2018 the corporation became involved in the «Dieselgate» scandal around Volkswagen’s deceit about their cars’ harmful emissions. The study by Mačaitytė and Virbašiūtė (2018) mentions that although the company admitted cheating on emission testing and artificially reducing test results, the reputation and financial profits of the brand were severely damaged. Within this incident alone, one can notice two substantial violations of ethical behavior and social responsibilities. Firstly, the company was dishonest with the customers, who thought their cars were more environmentally friendly than they appeared to be. Secondly, the company betrayed its commitment to ecology and its responsibilities for supporting fuel efficiency, breaking the expectations of stakeholders and investors. In addition to Volkswagen losing trustworthiness among customers and becoming the center of negative media attention, the scandal resulted in a dramatic fall in stock sales and financial performances, which indicates how social responsibility influences business (Mačaitytė and Virbašiūtė, 2018). Ultimately, the company has demonstrated highly unethical behavior: it was not transparent about its production, simulated its commitment to the environment, and concealed its actions. In order to regain credibility and restore the brand name, Volkswagen needs to be extremely careful with their further development, emphasize transparency and follow the statements they make.
Microsoft corporation case study
Microsoft is one of the largest software companies in the world that also sells computers, and video game systems publish books, and provides e-mail services. Overall, this corporation is extremely powerful and influential in the business field, so it is expected that it would commit to social responsibility programs to improve its corporate image and reputation. Microsoft has developed a number of sustainability strategies, which involve policy renovation, production plan modification, and donation to multiple human resources and environmental organizations. According to the case study by Sehgal et al. (2020), during the last few years, Microsoft was supporting charitable organizations that help refugees, low-income people in developing countries, and other minorities. The company has also invested in AI to address global challenges and help with decision-making during a crisis. All of those actions are aimed at increasing environmental sustainability and the distribution of resources. Overall, it is noticeable that this company values its social responsibilities and ethical policy. Additionally, Microsoft understands its position as a role model both for customers and competing brands. Evidently, the company’s reputation and financial performance are steadily high, and a lot of it comes from its transparency and dedication to sustainable development. Microsoft’s practice can be used as a guideline for good, ethical and responsible business management.
The importance of ethical corporate practice
As mentioned in the previous section, ethicality tends to affect the reputation and public image of brands seriously. Primarily, the irresponsible behavior regarding the company’s own commitments and policies undermines customers’ trust and, thus, they do not strive to support this business by purchasing its goods or services. Also, when involved in large scandals, the media spread judgemental information about the company, damaging its credibility even more. Eventually, if the company cannot restore public trust, they begin to lose profit which leads to low financial performance. Consequently, stakeholders’ interest in unprofitable companies drops, as well as stock prices, and the business falls into a risky position close to bankruptcy. On the other side, focusing on ethical practice often serves as an effective additional marketing tool for small businesses. If the customer is aware that the brand is eco-friendly, sustainable, and supports equal working conditions, they will be willing to purchase from it. Additionally, by creating a healthy and stable working environment, the company is likely to be more successful in its employment rates, with more long-term workers and a lower dismissal rate. As it can be seen, there are many advantages to emphasizing social responsibilities in a business, both in terms of reputation and financial profit.
The impact of corporate culture on ethics and the law
It is undeniable that the spread of corporate costal responsibilities has influenced other related areas. For example, the ethical theories, deontology in particular, which has shaped corporate culture in many ways, sometimes operate as a major point in legal proceedings (Chen, 2019). The emphasis on ethical business practice goes as far as it manages to modify state laws. The paper by Baigutlin and Sukhanova (2020) provides an instance of a law modification in Russia that now obligates employers to not only create a formal set of corporate requirements but also familiarize every employee with it. This correction was made to ensure that employees will not be able to accuse employees of violating requirements when the workers have not been acquainted with those in the first place. The moral code states that companies must take full credit for violations when involved in court cases since it will only demonstrate their responsibility and commitment.
Conclusion
Based on the research for this paper, it is possible to conclude that in the complicated world of business has occurred a major change which brings ethicality and morality to be one of the major priorities. Companies obtain a number of obligations to their customers, employees, stakeholders, the government, and society in general. Those obligations often create challenges related to employee equality, preserving ecology, marketing strategies, publicity, and legitimacy. Philosophical theories or relativism, utilitarianism, and deontology have shaped the new requirements for ethical behavior named corporate social responsibilities. Instances of various multinational corporations have shown that following ethical standards can have strong positive effects on a company’s image and financial performance. At the same time, irresponsible behavior leads to a damaged reputation and significant loss in profits. Some state laws have also contributed to spreading social responsibility as a mandatory step in forming corporate culture. Overall, maintaining ethical, inclusive, ecologically friendly policies is highly valued in modern society, and it is recommended for businesses to follow this strategy for further development.
References
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