Moral Issues In Business - Research Paper Example

Running Head: AN ESSAY ON MORAL ISSUES IN BUSINESS An Essay On Moral Issues In Business Michael Hormawan BUS2/PHIL 186 Fall Professional and Business Ethics Research Paper Assignment AN ESSAY ON MORAL ISSUES IN BUSINESS ABSTRACT This essay is based on actual events in the USA in relation to the topics found in the book entitled “Moral Issues in Business” by William H. Shaw & Vincent Barry. Having read topics of the book, I chose the topics Justice defined as a moral right, Utilitarian Principle, Entitlement Theory, Adam Smith’s Invisible Hand concept, Criticism of Capitalism by Karl Marx insofar as it it ends up with exploiting the less privileged laborers, and Corporation as a separate juridical personality. The related realities of recent years which came to my attention included the widening gap between the rich and the poor, the causes of Economic Meltdown, the effects of taxes and government intervention, and the management freedom to outsource business processes. The questions I attempted to answer were as follows: (1) How should justice be defined in understanding the growing gap between the rich and the poor ? (2) Is there anything obviously wrong with the Utilitarian Principle ? What is it in the first place ? (3) What has government done to address the moral issues in the present day Professional Business Ethics ? (4) Was the economic meltdown a product of the capitalistic system ? (5) Was it right for corporations to allow Americans to have less job opportunities by outsourcing ? (6) What should be the extent of moral obligations of corporations ? (7) Have controversies in orofessional business ethics been resolved ? To build up on this essay, research was done with very recent issues that can be related to moral issues in business. Reading and analysis took place. A few recommendations and insights can be discovered to be the product of that analysis. Due to the broad scope of those selected topics, elaborations and definitions were not extensively done, to provide for space to cover corresponding critical analysis and a few possible recommendations. AN ESSAY ON MORAL ISSUES IN BUSINESS “Justice implies something that is not only right to do, and wrong not to do, but something that an individual can claim from us as a moral right.” (Shaw & Berry, Chapter 3) A striking news report involving the growing gap between the rich and the poor in the USA will make us wonder whether businesses have been providing employees with benefits out of their work which should maintain or uplift the dignity of a human being in the same way that the owners’ quality of lives are maintained by adequate profits of their businesses. Individual employees responsible for the success of an enterprise have the right to share in the organizational accomplishments. People are not supposed to be used as sacrificial lambs for the benefit of a few who are rich. To allow that is to condone exploitation. I am referring to a recently released news entitled “Income Gap Widens: Census Finds Record Gap Between Rich And Poor “ (Hope Yen) and published this November 19, 2010. Although members of a business entity did receive a compensation according to personal effort, social contribution, and merits, it appears obvious that those who are supposed to have been a part of the organization are experiencing financial difficulties which lead to loss of homes, broken marriages, and even insufficient food supply, whereas the owners as well as the big income earners within the same organization have continued to live in luxury even in times of economic crisis. Here is a situation where the Utilitarian Principle which “does not tell which economic system will produce the most happiness” ( Shaw & Berry,Chapter 3) is exacting a toll on people because the material incentives along with the social security and welfare provisions were inadequate in contrast to the income gained by the business owners and highly paid officers who are able to live happily even during times of crisis. AN ESSAY ON MORAL ISSUES IN BUSINESS However, the current business ethics are not the only parts of the system. I believe the government should perform a role in providing a social security and welfare since it can create and enforce regulations to correct the resulting disparity between the rich and the poor. Aside from taxation, government takes some amount out of the employee compensation to provide for social security benefits. Perhaps the rich earners should be also required to contribute to a government investment fund that will be utilized for the employees who get laid off, not necessarily as welfare fund while they are jobless, but as source of capital to launch businesses or projects that will re-employ the people who got unemployed. Or the funds can be converted into equity with very profitable enterprises. And the returns on investments can be distributed among the people who lost their jobs and whose company had contributed for the employees. How can that reduce the inequality ? For one thing, the people who earn much more should be similarly contributing to the fund a bigger amount because they earn more. Let me call it Government Investment Funds for Social Justice. Their funds will also be of help for government to correct the inequality if such investments will lead to re-employment of the unemployed. If invested in more stable and profitable ventures, the income should benefit those who lost their jobs. Those who remain employed should not yet be entitled to a similar benefit while gainfully employed. In a way, this looks like an extraordinary benefit in times of economic crisis or any unforeseen event that results in a crisis situation. Given such a recommended solution, the moral right of an individual to claim what is rightfully his (fallback income in times of difficulties) for having served an organization beneficial to the country, can be exercised with great hope and certainty of realizing benefits that can lessen the gap between the rich and the poor. AN ESSAY ON MORAL ISSUES IN BUSINESS “People are entitled to their holdings (that is, goods, money, and property) as long as they have acquired them fairly ( Nozick’s Entitlement Theory).” Do entrepreneurs, stockholders, top executives who earn substantial income simply because of the value of their talents or capabilities, deserve what they earn? Competition within industries oftentimes define how much they are worth. Salaries have industry standards. Historical good performance attributed to those who are in demand is also a valid basis for defining how much a person is worth. They therefore acquired so much holdings “fairly”. In Adam Smith’s Invisible Hands concept discussed in his book entitled Wealth of Nations, “people are free to pursue their own economic interests” and “they will, without intending it, produce the greatest good for all.” ( Shaw & Berry, Chapter 4) This was referred to as the moral justification of capitalism. Those two remind me of a current issue that has been hurting USA since 2007. It is the Economic Meltdown. According to the Good News Magazine, the American Economic Meltdown meant “Unemployment, debt and trade imbalances are soaring while the dollar’s value is plummeting .” (Becky Sweat) The report pointed to chaos. Mortgages were foreclosed. People had to sell their homes. Banks failed. The auto industry needed bailouts. Although not highlighted in the report, cost of gasoline kept going up which was also why the auto industry demand went down. By 2010, the Congressional Research Service estimated another major reason for the chaos – “the war in Iraq cost the USA $746 billion and for the war in Afghanistan $300 billion more.” (Becky Sweat) National budget deficit then hit $ 1.42 Trillion while national debt amounted to $ 12.03 Trillion by November 2009. It was estimated that every American citizen (children included) is indebted AN ESSAY ON MORAL ISSUES IN BUSINESS by $38,974.34 . How can this be consistent with Adam Smith’s Invisible Hands concept ? For this is obviously not producing the greatest good for all. As of September 2010, due to the very tight credit situation in the USA, “the inventory of homes available for sales stood at 4.04 million units. (Larry D. Spears).There were 7 million homes facing foreclosures at the start of 2009. And one of the major reasons for this crisis was unemployment. Many were laid off during the recession years that started in 2007. With an average household size or family size between 2.5 to 3, that means about 17.5 million to 21 million Americans are in danger of becoming homeless as a result of the Capitalistic System. All these validate the criticisms that challenge capitalism as a viable and fair economic system. What I can see is that Adam Smith’s Invisible Hand Theory does not produce the greatest good for all. Laws of supply and demand victimized people. Can the government be blamed for interfering in the market ? As a matter of fact, it is the government that took steps to try and bail out losing companies, then took steps to help homeowners avoid home mortgage foreclosures. On the other hand, it is possible to blame government for spending almost a $ 1trillion dollars for the wars in Iraq and Afghanistan. But that too is highly debatable because it may have been necessary for the maintenance of World Peace and Order and to avert the spreading wars abroad as well as terroristic acts in the USA. Karl Marx’s criticism of capitalism can be observed in the present time problems of the American masses. It appears that as a consequence of economic crisis wherein corporations had to retrench its employees in order to stay afloat in a market with less demand, while the highly paid executives maintain their jobs, people get to be exploited with lower pay jobs. And the value of their services are actually devalued. “Karl Marx argued that as the means of production become concentrated in the hands of a few, the balance of power between capitalists AN ESSAY ON MORAL ISSUES IN BUSINESS (bourgeoisie) and laborers (proletariat) tips further in favor of the bourgeoisie.” (Shaw & Berry, Chapter 4) What I have read in real life for the Americans is that as a result of wealth accumulation under control by a few, the interest of laborers in the USA gets less attention and importance to the business entities. Since the interest of capitalism is profits and it relies on supply and demand, the management of an enterprise seeks out ways and means to lower labor costs in order to make its products and/or services more competitive. Business managers were then able to find outsourcing as a way to get manpower to work for a lower compensation. News reports alarmed the government saying, “It has to be agreed that outsourcing does lead to loss of jobs in the US, especially those that have minimal qualifications. On the other hand, the loss of jobs is not only limited to people with minimal skills, but also jobs of skilled labor that are being outsourced to other countries.” “Americans who are in poverty and willing to do minimally skilled jobs find it harder to find jobs, and poverty does nothing for the US economy, other than reduce consumer spending and tax revenues.” “There is also data that provides evidence that jobs are lost and lost forever, especially for those who belong to the low end of the food chain. A suitable example would be the manufacturing job losses examined by the University of California-Santa Cruz. In their study, they found that in a period of 20 years, in the labor intensive industries such as leather, textiles, footwear and clothing, about one-third displaced workers could not find re-employment within a three-year period, and even those people AN ESSAY ON MORAL ISSUES IN BUSINESS who did, about half of them experienced a substantial cutting in their wages by at least 15 percent. The middle class American is not far behind as even his job is being outsourced. This level of outsourcing involves the computer and technology industry.” “Outsourcing in these areas does not leave enough jobs for the Americans. A jobless person cannot purchase homes and cannot spend money. When people do not buy, people that produce things do not make money too.” (Hassan) By June 19, 2009, President Barack Obama had to step into the effects of business process outsourcing by announcing that there will be no tax breaks for companies creating jobs outside of the USA. And so, the companies would have to decide where they can enjoy a better competitive advantage. This is where the principles of capitalism has been leading corporations. With mllions of jobs that could have been for Americans but were lost due to outsourcing for over 18 years, USA citizens realized a greater gap between the rich and poor. Corporations, under the law, have legal personalities with rights to speech, due process of law, and many other legal rights (Shaw & Berry, Chapter 5). Along with such rights and freedom, there should be corresponding responsibilities towards other entities and specially the people who make it possible for a corporation to survive. It is not only obliged to pay its debts. The entity is supposed to ensure the well being of its employees as well as the people of its immediate surroundings. Let us take the BP Oil Spill that was said to have destroyed the livelihood of those engaged in Fishing, Shrimping, and Tourism. It is public knowledge by now that millions have to be compensated by BP Oil company. A corporation need not wait until a disaster damages the environment and human standards of living. It has to exercise its responsibility not just to protect itself from losing profits but also because of its moral responsibilities to the employees who work to keep a company profitable. As a unique entity without a human body of its own, the owners and managers of corporations should be held liable for the failure to be responsible for its employees. AN ESSAY ON MORAL ISSUES IN BUSINESS In Milton Friedman’s book entitled “Capitalism and Freedom”, it was argued that obliging a corporation to divert from the pursuit of profits makes it less efficient. Therefore he suggests that the only work of the corporation is to make money. Public responsibilities belong to the government. ( Shaw & Berry, Chapter 5 ) Applying these ideas to moral issues involved in the BP Oil Spill, such an argument would make it impossible for millions to be compensated, since no particular person within the organization can afford the means to pay them. Only the corporation can pay large amounts for the damages. BP Oil was obliged to shoulder the burden of a moral issue. Although the business aims for profits, government sanctions for damages required the corporation to be responsible for the spillage. If this can be done by one corporation, then other corporations who laid off its personnel in order to remain profitable should similarly be held responsible for such unwanted situations specially if the employees laid off have nothing to do with the performance of the economy which forced the corporation to retrench. Perhaps the question is how else can corporations be held responsible after laying off employees ? Should there be additional government regulations ? And so goes the debate about the competence of a corporation to decide on moral standards as against the competence of the government to take care of it for all corporations. Professional Business Ethics should then be standardized such that the Adam Smith idea of Invisible Hand can lead to a set of “moral” separate entities that we call businesses or companies or corporations. This is being taught in schools. Some issues are being discussed by government officials. In fact, there are laws on business ethics. Wikipedia says there are so many of them and describes them as follows: “There are laws governing treatment of labor and generally relations with employees, safety and protection issues (Health and Safety), anti-discrimination laws (age, gender, disabilities, race, and in some jurisdictions, sexual orientation), minimum wage laws, union laws, workers compensation laws, and annual vacation or working hours time.” (Wikipedia ) AN ESSAY ON MORAL ISSUES IN BUSINESS Works Cited Hasan (16 Sept. 2008). “How Outsourcing Affects The US Economy !” Business Journal. General Web Directory Journal. Retrieved from http://www.dirjournal.com/business-journal/how-outsourcing-affects-the-us-economy/. 22 Nov. 2010. Hasan (19 June 2009). “Obama Says No Tax Breaks For Companies Creating Jobs Outside US !” Business Journal. General Web Directory Journal. Retrieved from http://www.dirjournal.com/business-journal/obama-says-no-tax-breaks/. 22 Nov. 2010. Hunt, Albert R. (18 Feb. 2007). “Letter From Washington: As U.S. rich-poor gap grows, so does public out cry.” Herald Tribune. Print. Mattern, Jennifer (24 July 2009). “Who’s To Blame For The Recession ?” Business Journal. General Web Directory Journal. Retrieved from http://www.dirjournal.com/business-journal/whos-to-blame-for-the-recession/. 22 Nov. 2010. Spears, Larry (19 Nov. 2010). “Why The Real Estate Market Weakness Will Continue In 2011.” NuWire Investor. Retrieved from http://www.nuwireinvestor.com/articles/why-the-real-estate-market-weakness-will-continue-in-2011-56468.aspx . 21 Nov. 2010. Sweat, Becky (2010). “America’s Economic Meltdown: What Does It Mean ?” The Good News, January- February 2010. United Church of God (1995-2010). Retrieved from http://www.gnmagazine.org/issues/gn86/america-economic-meltdown.htm. 21 Nov. 2010. Wikipedia (2010). “Business.” Wikipedia foundation Inc. http://en.wikipedia.org/wiki/Business. Retrieved 22 Nov. 2010. Yen, Hope (28 Sept. 2010). “Income Gap Widens: Census Finds Record Gap Between Rich and Poor.” How Business Has Contributed To The Widening Gap Between The Rich & Poor in USA. The Huffington Post (19 Nov. 2010). Retrieved from http://www.huffingtonpost.com/2010/09/28/income-gap-widens-census-_n_741386.html 20 Nov. 2010. Read More