The Ethics of Business Management

Moral Problems in Business Management

Morals and ethics are very important in the organizational context. Organizations are made of people and their collective values make the basis for the moral and code of ethics of the organization. The organization as a whole needs to perform certain duties to society. This is called as social responsibility of the organization. Similarly the management and the workers also need to be ethical and follow the ethical codes of the organization. The code of ethics may be on the management worker relation or how the duty is performed or the dealing with outsiders etc. All actions and reactions have a moral side.

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The top management is showing their reluctance to be flexible since they are refusing to hear out the voices of their employees at the rank and file level. They are very much limited by the idea that managing the company is enough. They are not conscious that the company also needs to the voices of the common people since they know the situation better than them. Their ethics unfortunately does not constitute the ability to be sensitive to the issues that surround them.

Like all fields of practice the, business industry is governed by some regulations that have to be adhered to in the running of a number of its operations. Any violation of these laid down regulations is punishable by the law and can be of tremendous effects on the reputation of the implicated business. With regard to business ethics, a number of theories have been coined to justify some aspects common to many if not all business operations. Most of these theories revolve around the impact of the action and the truth inherent in the action. Most business theories are thus based on the con-consequentiality aspect where an action is justified based on the truth inherent and not related to the impact. With respect to this theory; an action is justified as ethical based on its truth that mainly explains the Kant perspective.

The consequentialist theory on the other hand has its justification for any action based on the impact , where an action is regarded as ethical or unethical based on its impact which can then be good hence ethical or bad hence unethical. About the consequentialist theory, a number of theories have been coined including; the egoism, libertarianism, utilitarianism alongside the rawlsianism theory. The consequentialist theory seems more realistic than the former especially with reference to the utilitarianism theory which justifies an action as unethical or ethical with respect to the extent to which the majority’s happiness is promoted. The utilitarianism theory thus identifies the proportion of those positively and negatively affected by action and further identifies the exact extent to which each of those affected is in any way affected.

With respect to the utilitarianism theory, exporting capital for overseas investment is an action that is bound to greatly benefit the owner of the business such that he or she will in turn reap more profits from the extended market and region of practice. With such an action, maybe the employees involved with getting international job positions and thus benefit from elevated pay but this is not a guarantee as the business may seek to obtain labor from the locals in the country that the operation is geared to; an aspect that will in turn benefit the local people as they will not only enjoy the prestige of an international operation with respect to the goods and services offered but also benefit from the job opportunity that will emerge. The country in which the operation is launched will in turn benefit from revenue collection in terms of the taxes to be paid by the investor. Exporting capital may at the same time drain the resources back at home if the move is not well estimated. This is an action that may benefit a large number of people both at home and abroad but on a shared proportion with only the investor getting a lion’s share but can still be regarded as ethical if done within the laid down protocols.

Moral Analysis and Economic Outcomes

In the event of severe economic difficulties as it is at the moment, a business needs to effectively identify strategies that may promote its own objective and at the same protect the interests of others. Some strategies may be of very negative implications especially if the business decides to lay aside a number of its employees and subsequently reduce its operation capacity which may imply that it cuts down some operations and only concentrates on others. It is a strategy that may benefit the owner of the business but at the same time affect a large number of people negatively hence not ethical with reference to the utilitarianism theory.This type of action is centered around an individual and can best fit in the egoism theory instead.

Like the former that may be of benefit to the business owner and not to a number of those whose lives are in a number of ways influenced by the business, terminating union contracts in the event of an economic meltdown may save the owner of the business the cost of meeting a number of salaries but at the same time reflect negatively on those whose jobs will be terminated as their own livelihoods may be altered such that it becomes relatively hard for them to sustain themselves and perhaps their families. This may also be of negative impact to the government as the level of joblessness will be elevated and thus the action may be regarded as unethical with respect to the utilitarianism theory. The utilitarianism theory acknowledges a practice as ethical only if it positively impacts a majority and goes further to measure the extent to which the positive impact is felt.

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This means that accountability to the society is important to various businesses globally. Businesses can increase their profit margins by showing a true account of their activities in various ways. To start with, the making public its activities will become part of its Cooperate Social Responsibility, CSR, is vital for the sustainability of a profitable business environment as it creates the needed social capital as it improves a company’s reputation with its stakeholders who include the company’s customers, supplier and investors. Societal sanctions can also result when companies whose carbon emission records are tainted go public with accounting their activities, clients enjoy giving back to society hence they involve majorly with businesses which through back whatever they have invested back to the public. In the event that a company does not do the above it losses its profitability as the members of the society tend to shy away and resort to competitors who have efficient green policy frameworks.

Highly profitable businesses should be socially regulated as every business is required to meet the legal requirements in the protection of the environment. It should be noted that environmental protection benefits the society in various ways. Firstly these businesses are usually large co-operations whose functions contribute huge amounts of environmental toxins or use a large amount of energy hence with regulation by the society that is directly affected by these environmental toxics is a very vital step in ensuring environmental sustainability.

In addition to that these businesses should be socially regulated to prevent them from engaging in misrepresentations and fraudulent activities as they will be constantly under public scrutiny through the checks and balances instituted by the social processes in the society. For example a casino operating in Las Vegas can not indulge in child match-fixing so as to increase their profit margins.

People are the core of any business hence the business should pursue to benefit the internal as well as the external livelihood of its employees and the involved stakeholders. Companies should form workplace cultures that are affirming, offer some assistance to the communities who supply them with the raw materials, creation of outreach programs for the locals. These businesses should be more involved with the above-named areas so as to bring the best out of the people and also to help in the development of the environment.

In addition to that businesses can involve more in environmental consciousness so as to create foundations that have a course in their creation, such as donate to non-profit organizations, conservation of the natural environment and wildlife. By channeling more of their profits towards these endeavors they will help in the development of the community and the replenishment of the environment.

This chapter focuses on discussing the various legal principles that are relevant for businesses. Different countries have devised different methods of regulation taking into account their respective requirements and state of the economy. There are various approaches to legal regulations of businesses;

The Paternalistic Approach:- The first model is the paternalistic approach. Under this approach the’ supervisory body exerts authority over the business falling within its jurisdiction, compelling disclosure of all the facts to the authority in order to instill and maintain the public confidence. Some external disclosure is however required, and the business reports are kept confidential under the custody of the authority. The supervisory authority assumes itself as the guardian of the public’s interest, but ensures the interest of the business in revealing little about their operations to an ignorant public. Under such an approach regulators may implicitly or explicitly promise to assist businesses that face trouble, thereby ensuring the safety of general public.

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Market-Assisted Models:- In this model prudential standards are imposed upon the businesses, and appropriate regulatory action is taken along with adequate public disclosure. Although, business shareholders still have an incentive to maintain minimal leverage, the countervailing pressure is built by market participants, provide assistance to business regulators, while at the same time prompting businesses to act more prudently than they might otherwise do.

While the businesses are is similar all over the world, there are differences in the regulatory structures. While the subjects of regulation are broadly comparable, the specific rules governing banking practices and their implementation vary in many respects.

The world is facing many new challenges and threats like terrorism, cyber crimes and corporate crimes like stock market fraudulences etc. The challenges that are faced to avoid these crimes from happening are even bigger. Countries need to look at internal security as they perceive border security. There is an urgent need for all the countries to work on issues related to internal security to avoid the above consequences to happen. Existing laws need to be reviewed and made even better and stronger.

Countries should also look at globally accepted ethics when they are amending the existing laws. By taking into consideration the ethics, countries prevent humanitarian crises and make citizens believe in the makers of law and the ones who protect them. The fundamental responsibility of any law is protecting the lives and assets of general public against frauds and subjugation. Law should also provide liberty, equality and justice in terms of constitutional rights to every citizen of the country.

In the ordinary and usual course of business, for example when a baker grants financial facility to its customer under a valid contract, the terms and conditions of the financial assistance are enumerated. Further, the terms, as well as the consequences in the event of breach of conditions, are also enumerated. In the event of breach, the banker will have the same remedy, which is available to any other contracting person. Such a remedy is none other than the enforcement through a competent court of jurisdiction, the rights arising out of the contract.

Prevention is better than cure, this is a pro-formula for making the systems work and be active. Despite the structured model of developing the systems and law enforcement agencies, the key factor for any system is the implementation of the same. However the execution of the system relies on the structure of the agencies and also on the people who are executing the service.

Moral Analysis and Ethical Duties

One of the most important aspects of businesses is ethics. Business managers are faced with numerous challenges which may require the use of emotions, intellectuality, and critical judgment skills. Ethical duties are based on the principle of deontology. Deontology is the principle that guides us to act according to our duties or responsibilities. Moreover, these duties are perceived as what are ought to be done, rather than what should be done or what is commonly done. Deontology does not give regard to the results but instead emphasizes the intention of the conduct. Once the intention of the conduct is determined, it is then that one can deem if the conduct was ethical or not. A person may be confronted with the question if his or her duties and obligations are moral or not regardless of the result for it is the intent that is analyzed. The results of the duty do not matter as long as a person is able to do the duty which is perceived as the right one. In summary, deontology focuses on the ethicality of conduct and not on the ensuing consequences.

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Utilitarianism is mainly based on the belief that the consequences of an action/s are the ones that matter regardless of the actions used to come to the results. Moreover, utilitarianism adheres to the belief that pleasure is the only intrinsic good and pain is the intrinsic bad. And most importantly, utilitarianism believes that an act is morally right if it provides the greatest comfort for the greatest number. Utilitarianism does not give regard to the morality of an act but instead to its results. This is commonly associated with the belief that the end justifies the means.

Another fourth ethical perspective is equity. This perspective holds the belief that all individuals are equal in all aspects. Races, genders, cultures, and traditions are disregarded in perceiving rights and thus, everyone has the same political, civil, economic, and social rights. Moreover, equity holds the belief that since people are equals, then the power to govern should be given to them, thus outlying the foundation of political beliefs in a society ruled by the people for the people. However, there are many instances that equality is violated such as slavery and sexism.

In ethics, when one believes that each and everyone is equal, an individual comes to the conclusion that all must be regarded with equality. Therefore, it is fundamentally ethical to treat a lowly person with the same amount of respect as one respects an honored or important person. Same goes with opportunity; it is ethical to provide opportunity to all people regardless of their gender or social standing. In summary, equity suggests that all are equal and therefore, all must treat each other as equal.

Each and every one of us have different beliefs regarding what is inherently right and what is inherently wrong. Furthermore, these differences often lead us to choose different perspectives in achieving an ethical stance regarding life and this may pose problems with regard to dealing with numerous situations. However, for all these differences, we must always remember to stand up for what we believe in and in critical moments of decision making must prioritize the welfare of those around us and never infuse our own personal desires for gain.

Why Should a Business Manager Be Moral?

Some managers view that the organizations should only focus only on profit-making. They are very passive on social responsibility of business. But the situation is slowly changing. Now a majority believe that only socially responsible organizations are going to stay for a longer period of time. Social responsibility is the responsibility based on ethics in the dealings with the stakeholders, the environment and the society as whole. While a business grows it accepts some resources from the nature free of cost. This includes sunlight, water etc. In the case of industries, pollution is also a problem. This all makes a strong argument for the business to be socially responsible.

Organizations that keep ethics in their dealing with the employees will have good relations with their employees. Similarly the employees are to deliver their duty, keeping the organizational interest in their mind. However it is also observed that employees do not care to come in time and pack up at time fixed for their duties. They also use the property and the facilities of the organization for their personal use. They also avail more intervals in between their working hours. This is not ethical. Mangers on the other hand try to keep their subordinates under stress. They ask people to work more than they are supposed to. Mangers are to develop their subordinates. They have to train them. However this usually never happens. Over-stressed employees lose their enthusiasm for work and the productivity decreases. The interest to work should come from their mind and they are likely to be more ethical. Most of the employees complain about lack of management support and over-stressing the work environment. Managers complain about the lack of interest of the employees. The need of the hour is to make the people moral conscious and make them aware of the benefit of being ethical. The employees will be happy to work; it will increase productivity and also improve the attitude of the employees.

How Can a Business Organization be Made Moral?

There has been general perception that, the business sectors would only be fulfilling their economic responsibilities, i.e. generating employment and profit and completing the economic cycle. But with time the complexity in the way of running business has changed and side by side competition has increased. With the change in these dimensions, now more is expected out of a business unit or in other words a corporation. Now the responsibilities include, the ethical practices that the firm must follow, how environmentally conscious is the firm and over and above how they are responding to the stakeholders of the firm. Change in views now demands a firm to be looked upon as a corporate citizen rather than just a business unit. So like a citizen the firm is now equally responsible for the welfare of the society as well as the organization itself. This means when the firm starts operating from the first day onwards they are making a contract with the society to follow the above mention obligations. Now the degree or extent to which a firm will indulge it in these activities depends upon various aspects like, how critical or important is the role of the stakeholders, what is their financial strength, how had been their past economic performances and also most importantly what is the true intent of the firm towards the social issues.

Every corporate has an underlying objective of cost reduction or profit maximization in the way they implement corporate social responsibility. But to look in the economic viewpoint the sole responsibility of a business is to generate profit and thus by doing this it becomes socially responsible because its profit will be plowed back to the household sector in ways of income. But this economic profit and social welfare merge only in the long term.So when a company totally ignores its social responsibilities and commitments it is usually being unnoticed by the consumers and investors in the short run.

The principle of sustainability involves the firm’s ability to perform in the long run. Porter and Kramer have mentioned the triple bottom line concept of economic, social and environmental performance. By ensuring the stable working of these three elements the firm ensures its stability. License to operate is more concrete and practical approach. This approach helps a business to identify the issues that are important for the stakeholders. So in this approach companies have to rely on the Government’s consent, neighbors etc.

Though there would be changes and differences in outlook and constant modification of ideas and theories, no one can ignore the fact that corporate social responsibility as a practice is gaining its importance. A company’s role is becoming more important and prominent in the society. One may say a company is using its corporate social responsibility practices as an effective direct marketing tool or to create brand awareness, but the fact is there is an effort on the part of these firms to indulge itself in social and philanthropic activities. The companies have realized that their performance cannot be judged by a single yardstick. Corporate performance, especially for the global companies is measured in different dimensions. Their contribution to the society, the environmental issues and their participation in global development and welfare are also strictly scrutinized now. As we have observed from the various theories that in the short run though consumers and investors look at the economic performance of a company but in the long run, the other performance comes into the picture. So with the increase in competition and expectation from a company, it’s about time they should start acting. It is not necessary that the companies have to invest a huge amount in these activities or do something which does not match their present business scenario, but what is expected is very simple. They should be environmentally and socially responsible in whatever way it suits their business.

Work Cited

Hosmer, La Rue T. and Hosmer, Larue T. The Ethics of Management. New York : McGraw-Hill/Irwin, 2002

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