Business Ethics Case Study - Essay Example

Business ethics case study Introduction: The term ‘business ethics’ is considered as one of the most significant aspects in corporate environments. It can be generally defined as the behavior adopted by a business to deal with its daily handlings. The term ’ethics’ is derived from the Greek word ’ethos’ signifying habitual conduct or character. In a wider context, an unethical conduct refers to immoral rule(s) of conduct to which the act of disapproval is more relevant. In terms of an organizational context, it can be argued that business ethics is particularly concerned with moral issues in business. Business ethics can be varied for different businesses. But it is important for a business to include good ethics. Further, the concerns of business ethics also encompass issues related to the ‘social responsibility’ of business. In this context, ethical theories and principles are relevant in terms of providing adequate insights to the managers on important matters of protecting the overall corporate environment. Ethical theories emphasize the primary objective of reaching ethically correct business decisions. In order to direct the organization to success and gain more competitive advantages, each ethical theory follows a common set of goals known as ethical principles. There are various ethical frameworks used in business that are discussed briefly in the following section. Ethical frameworks in business: The requirement of an ethical framework is considered relevant for organizations since they are now a significant part of the society and culture. With the ongoing globalization movement in the corporate world, the concept of a multi-cultural workplace is a familiar thing for most organizations. As people from various cultures, societies, communities and working backgrounds assemble under one roof, the cases of unethical conducts as well as other disapproved performances are being reported on a more frequent level. The requirement of ethical frameworks is highly demanded in order to make important decisions on determining what is right and what is wrong, what is ethically acceptable or unacceptable for the employees as well as the organization. In other words, an ethical framework should be constituted on the basis of certain ethical values such as justice, responsibility, reasonableness, respect and safety of workers. The ethical framework is effective in constructing a healthy and cooperative organizational culture. Thus, ethical frameworks provide the basic and moral principles needed to develop a multi-cultural organizational environment that take into account the common good and interests of employees. One of the most significant objectives of such frameworks is its emphasis on organizational justice and equality. Every individual should respect the dignity of his fellow members. Besides, every person should be considerate enough to respect the interest of others and work together towards the common good. In this context, corporate self-regulation is important, which is executed in the form of corporate social responsibility (CSR), a mechanism through which a business enterprise monitors and ensures its adherence to law, ethical standards as well as international norms. Corporate responsibility is important as it can have a great impact on securing the workplace environment, employee safety, consumers, communities, stakeholders, and others. As Chryssides and Kaler quote Friedman, corporate social responsibility makes two distinguishing claims: “that businesses must actively seek to do good, and that this good must not be done for profit.” (Chryssides and Kaler 1993, 231) The ultimate objective of a CSR policy is to include public interest into corporate decision making so that everyone can contribute to the economic growth of the corporate as well as the society of which it is a significant part. Ethical theory and practice: Coming to the corporate practices based on ethical temperament, there are several ethical theories practiced by different corporate enterprises. Starting with the normative theories of business ethics, the utilitarian ethical theory is developed on the basis of the ability to predict the consequences of an action. For a pro-utilitarian, a corporate decision can be accepted as ethically correct if it yields the greatest benefit to most people. Utilitarian theory provides a logical and rationalistic argument for each decision that can be compared to determine the most beneficial choice. Further, two types of utilitarianism are there: a) act utilitarianism where the performance of an individual is directed to the benefit of most people possible, and b) rule utilitarianism where the individual’s performance seeks to benefit the most people by means of societal constraints such as laws. Act utilitarianism is solely concerned with achieving the maximum good while it tends to ignore the aspects of justice, beneficence or autonomy of an individual if required for the benefit of a majority of people. Rule utilitarianism also includes certain flaws as there often comes the possibility of conflicting rules. The conflicts can be mentioned in terms of the HBR case study of the knowledge workers’ strike. The management’s decision of no revenue sharing with the employees includes conflicting ideas on what is ethically correct if the revenue is shared and if it is not. The management can be ethically correct as it considers the benefit of the entire corporate, but at the same time, it is ethically correct to consider the rights of the employees. Therefore, the conflicting ideas on ethical correctness rule the decision of the management. The deontological ethical theory states that people’s adherence to their obligations and duties is significant in terms of analyzing an ethical dilemma. In this context, Kantian approach is the most prominent of all, a definitive formulation provided by the German philosopher Immanuel Kant. Deontology is concerned with special duties and obligations to specific people. Kant’s theory claims that “one thing and one thing only is ‘good in itself’.” (Chryssides and Kaler 1993, 97) While emphasizing on the aspect of ‘good will’, Kant argues that an action is morally right only if the person performing it is motivated by good will. Thus, good will is derived from a sense of duty. There is a striking difference between Kantianism and Utilitarianism: unlike the latter, Kantianism does not permit individuals or minorities to sacrifice their own self-interest to collective self-interest. However, this argument proves to be the weak point of the theory as there is no rationalistic or logical basis for deciding the ethically correct duties of an individual. In case of a complex situation (such as the failure of contract efficiency in the HBR case study), conflicting obligations of individuals (management, in the context of the case study) can never lead to appropriate and ethically correct business decisions. In case of the ethical theory of rights, the rights recommended by a society are given the highest priority and thus, protected. Rights supported and practiced by a larger population are considered to be ethically correct and valid. This is complementary to Kantian deontologist in the sense that it advocates natural law which is about “protecting people from unjust or tyrannical actions by governments.” (Chryssides and Kaler 1993, 101) According to the theory, natural law is above all human laws and has immense control in limiting the power of rulers. The natural law permits governments to act accordingly while allowing the governed to obey them. In fact, this was the fundamental factor behind the development of democratic form of government. However, the rights theory has its own complications, the most important being the selection of the rights for a society. In order to determine the rights, a society must decide its goals and ethical priorities. In this context, conflicts are possible between different groups and communities. In case of a corporate environment, such clashes are quite evident. For instance, in the HBR case study, inadequate emphasis on organizational goals and objectives has led to a considerable rift between the employees and the management. The management’s inability to come to an appropriate negotiation policy with the employees is the main reason behind the gap. Ethical issues: Management ethics is one of the most debatable issues in organizational culture. Managers in organizations have to face ethical issues as they carry out their leadership responsibilities. Management ethics is considered as an integral part of corporate social responsibility where ethical considerations play a crucial role in the corporate functions at all levels. Ethical managers are needed because “society expects managers to be ethical…managers should be responsive to the expectations of society and stakeholders if they wish to maintain their legitimacy as agents in society.” (Frederick 2002, 142) Ethical issues are significant for managers as they believe in shared values that build trust among companies, consumers and shareholders. In this context, the stakeholder theory is relevant which “reflects and directs how managers operate rather than primarily addressing management theorists and economists.” (Freeman et al 2004) Frederick points out some of the most frequent ethical issues faced by managers, which he categorizes as follows (Frederick 2002, 144): Equality: Executive salaries, product pricing Rights: employee health and safety, privacy, affirmative action/equal employment opportunity Honesty: Employee conflicts of interest, security of employee records, advertising content Exercise of corporate power: Workplace/product safety, environmental issues, corporate contributions The HBR case study also shows some of the ethical issues faced by the managers of Detonation Media that can be included in the above categories. Some of the main ethical concerns are: a) revenue and profit sharing issues (management is not ready to share them with employees), b) contract efficiency issues, and c) poor negotiation skills by the management. This is evidently an indication of poor or weak management as it is not effective in reaching organizational goals, which according to Petrick and Quinn (1997), is the primary objective of a management. Conclusion: Business ethical theories and practices are essential for the progressive advancement of an organization. Management plays a special role in the modern corporation. While looking after the ethical considerations and issues within and around the corporation, the management “must look after the health of the corporation, and this involves balancing the multiple claims of conflicting stakeholders.” (Chryssides and Kaler 1993, 261) Moreover, as an efficient social structure, organizations must follow the common good and interests of people, and make it their main objective to achieve these factors. After all, the purpose of a business organization is to maximize the welfare of the corporation, its employees, consumers and stockholders, and above all the welfare of the society. References: 1. Carter, C., S. Clegg, M. Kornberger, S. Laske and M. Messner. Eds. Business Ethics as Practice. Cheltenham: Edward Elgar, 2007. 2. Chryssides, G. D. and J. H. Kaler. An Introduction to Business Ethics. London: Thomson, 1993. 3. Coady, C. A. J. and C. J. G. Sampford. Business, Ethics and the Law. Sydney: The Federation Press, 1993. 4. Frederick, R. E. ed. 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