Study of unethical business practices - Research Paper Example

? Inserts His/her Inserts Inserts Grade Inserts Here (Day, Month, Year) STUDY OF UNETHICAL BUSINESS PRACTICES Peter Cooper, American creator, maker and Philanthropist explained his perspective of business and ethics in the following words: "I have always recognized that the object of business is to make money in an honorable manner. I have endeavored to keep in mind that the purpose of life is to do good." WHAT IS MEANT BY ETHICS? Ethics is a code of moral principles that people follow with respect to what is right or wrong. Ethical principles are not necessarily enforces by law, although the law incorporates moral judgments (murder is wrong ethically, and is also punishable legally) (Business Management; Ethics and Social Responsibility; ICAP Guidelines) WHAT IS MEANT BY UNETHICAL? Unethical means not following permitted standards of social or professional behavior. It is opposed to law or integrity or scruples. (The Free Dictionary by Farlex) WHAT IS MEANT BY "UNETHICAL BUSINESS PRACTICES" Unethical business practices are acts that are contrary to business ethics In today’s world, there is a need do business with an open eye, incessantly measuring & analyzing the consequences & impact of actions and decisions taken .This responsibility is seen to extend ahead of the legal obligation to comply with legislation and seeing organizations taking further initiatives to improve the quality and standard of life for employees and their families as well as for the society at large of their own accord. The companies that carry on are the ones that identify ethical issues and correct them before they become tribulations. Our behavior in the business world is determined by moral values and beliefs. These are the integral part of all the activities that are a part of our business; they are part of our dealings either with other business organizations or with a solitary customer and are embedded in the creation of an idea to its sale. While the goal of all business is to earn profits, it should contribute to the society by ensuring that ethical and just practices are followed. It is important to note that all unethical practices are not illegal, therefore the deciding factor for going for an act is the person’s own conscience. Unveiling of unethical behavior among co-workers actually examines one’s own values and ethical behaviors. After all, unethical behavior that is permissible by law comes in the grey area between what is right and what’s not. Therefore, it is always difficult to make a decision in such situations. Furthermore, perception of ethical and unethical varies from person to person. What is unethical for one person may not be so for someone else. For example, some people don’t consider the act of making long distance call on the company's expense as unethical. WHY ARE UNETHICAL BUSINESS PRACTICES COMMITTED? 1 Stress by the higher management: Pressure from managers is one of the prime reasons why people get involved in unethical practices. The managers in an attempt to achieve better profits for the organization often set targets that are unrealistic and unachievable for the employees. Target and goal setting is a tool that is used for motivating employees but in this case it is just a stress causing factor. Their targets and goals send the following message to their employees: "I want it done, no matter what". Subordinates due to such targets come under intense pressure to meet their targets because their better career prospects rely to a large extent on the achievement of their performance goals. If the goals are not met, then the chances of their career growth are reduced. 2. Personal greed and a desire Personal greed to promote one's career is the other reason that forces people to commit unethical business practices. It has led the current business state of affairs towards unethical business practices, legal consequences and mistrust. Often, top executives are promised huge benefits if they achieve their goals and the temptation of money force them to resort to wrong means. The lure of money overshadows their sense of ethics. 3. Unawareness of company’s policies: Another rationale that can result in an unethical behavior in the office is an ignorance of the company's policies and procedures. We as human beings have a well defined definition of what is permissible by law and what is prohibited, but to define it for an organization and to produce a manual that covers almost everything is very difficult. Although all organizations possess their own 'Code of Conduct' and all the hired employees are made to go through it at the time of recruitment., there is a lot of room for issues which can be manipulated to one's advantage. It is concluded by researches that organizations must have strict policies to control unethical practices but they should pay more attention towards cultivating ethical values in its employees. SOME COMMON UNETHICAL BUSINESS PRACTICES: 1 Denial to pay wages and salaries There are certain organizations that don’t pay the wages to their employees when they become due. 2 Gender prejudice This is a very common practice that is followed in the world especially under-developed countries. There are certain entrepreneurs who don’t offer jobs to the females. Due to this discrimination, there are places in the world where the women are restricted to certain jobs. 3 Under payment This is also a very common practice. The organizations take advantage of the employees by taking services for a minimal amount. The employees who don’t have any other opportunity have to work on such a low pay. 4 Resorting to dishonesty, trickery or deception. This practice is not only followed by the management but also by the employees. In order to gain their means they use dishonest ways or deception. They resort to tricks in order to get “what they want”. 5 Distortion of facts to mislead or confuse. The manipulation of accounts of Companies is also common. The case of Satyam in India was an eye opener for all. In order to mislead the shareholders the companies overstate their profits or in order to do some tax saving they understate their profit. They produce the facts in such a way that it shows a picture that is favorable for them. This is unethical but the companies in their greed choose to ignore it. 6 Manipulating people emotionally by exploiting their vulnerabilities. In business people become aware of other’s vulnerabilities. The unethical act is that they use such vulnerabilities to their advantage. 7 Greed to amass excessive profit. As we have already discussed that some acts are unethical but not illegal. This grey area is the determining factor for any company’s ethical values. Nowadays we find that the companies in their lust of money and to gain competitive advantage choose to ignore their values. 8 Creation of false documents to show increased profits. Audit companies on daily basis face the situations where the Companies produce fake documents to further their means of enhanced profits. Duplication of invoices or dealings with fake suppliers is common examples. 9 Avoiding penalty or compensation for unlawful act. The Government has levied certain penalties on acts that are harmful for the society. The Companies violate such laws and instead of paying their due penalties they resort to bribery or they mold the situation in a way that favors them. Social welfare is of no importance to them. 10 Lack of transparency and opposition to examination. The policies that the company has regarding such acts in not very lucid at times, therefore the “check and balance system” for such practice is ineffective. When the employees, management or any organization that has committed an unethical act, is brought into question, they exhibit resistance to such inquiries. Their un-cooperative behavior is one of the reasons that such acts are difficult to correct. (Loveleena Rajeev) Katherine A. Nelson and Linda K. Trevino in their book “Managing business ethics”, have considered the lack of ethics as one of the major reason for the financial crises of 2008. According to her, the activities that brought the US economy down were not illegal; rather they were unethical acts that were contrary to ethical principles like responsibility, transparency and fairness. 11 Harming the environment by going beyond the government agreed measures for pollution. Pollution is a threat to all mankind. Unfortunately, the industrialists are so engrossed in filling their pockets that they have ignored the fact that their acts are destroying the environment. Although, they are aware of the Government regulations for harming the environment but they don’t feel any “social responsibility” towards society. 12 Invasion of privacy used as leverage, for obtaining personal or professional gains. Every individual consider his/her privacy his/her right. Cases where the companies have invaded the privacy of people are fairly common. The Companies don’t stop there, they later on use the information that they posses for gaining influence over their employees. 13 Long distance calls on business lines This practice is so common that it is not even considered a violation of ethics anymore. Personal long distance calls are made on the Company’s expense without any sense of guilt. 14 Duplicating software for use at home Software from the Companies are copied and then installed at home for the personal use. Using the Company’s resources for personal use is unethical but this is carried out so commonly that now this in no more considered as unethical by some people. 15 Falsifying the number of hours worked The policy of overtime is an integral part of every Company. The time that is put in by the employees after business hours is used as a basis for computation of their benefits pertaining to their overtime. The employees in order to gain more from this policy depict more hours than they have actually worked. 16 Embezzling money from the business Business money is taken for one’s own personal use. This is an unethical as well as an unlawful act. 17 Use of child labor Several business organizations in order to save their money on labor use children to perform the tasks. In under developed countries especially, where the Majority of people live under the poverty line, the practice of child labor is fairly common. 18 Ignoring health, safety and environmental standards The lust for money is a powerful motive. When there is any indication of profit, the organizations forgo all regulations of health and safety of their employees as well as the society. 19 Dumping Policy Dumping is the process where the developed countries sell the surplus of any material produced at a lower price to the underdeveloped countries. Dumping in wrong because it not only affects the rights of domestic producers but also the material that is sold is not of good quality. Companies should have an anti-dumping policy. 20 Piracy Another evil plaguing our society is Piracy. Book piracy is very common nowadays. People justify it by saying that since the prices of the original books are so high so we resort to piracy. This approach is wrong; there are always other alternatives like Library memberships or purchase of second hand books. 21 Kick-backs Owing to the competitive environment, the practices of kick-backs and bribery are fairly common. This is usually seen when Companies want to win over some quotations. This is an ethical policy and must be avoided. UNETHICAL ACTIONS AND EMPLOYEES: When employees find out about the acts of other staff that they know is not according to the company's standards, their own sense of what is ethical and what is not immediately comes into issue. At that occasion, that employee has to judge how she/he feels about that particular action. They also have to decide whether to inform about that activity to the superior officials or turn a blind eye to it. Even by deciding to do something about it, the employee who has exposed the unethical deeds is presented with a number of intricate choices. Should the employee talk to the person directly, or should the employee talk directly to a company manager? To make this decision a bit easier, many companies have adopted quite a few techniques that permit for the management of unethical behavior. The first footstep is to create a company strategy, in writing, that is understood and signed by each member of staff. This erases most thoughts of ambiguity when it comes to deciding what to do after identifying an unethical behavior. The second is to give a clear outline of what is anticipated of the person who has bared the unethical behavior. It should consist of the person who should be called, and how to go about it. With clear directions, there will be less uncertainty in reporting unethical activities, and then they can be dealt with quickly and relatively easily, before they develop into overwhelming issues. Communication is a key in the proper administration of unethical activities in today’s workplace. (Anonymous Employee) WAYS TO EVADE UNETHICAL BUSINESS PRACTICES 1 Be sincere: Be sincere for doing all your business transactions with your suppliers, customers or employees. This also means that you must use honesty when reporting income and expenses, when paying employees and suppliers, and when disclosing of information to customers. 2 Listen to customer complains Customers are the major stake holders of any company. The organizations should listen to the customer complaints. They may have discovered some unethical behavior of the Company’s employees. The Companies should make a policy for complains so that they should be aware of all the activities that are going in the Company. 3 Call the produce back: This often arises in companies which sometimes involve a products or services to vend. If business is carried by ethical way, you notify the public of the affects of you product. If you later discover that the danger of the product is high, you may need to call back product even if it means losing money and lose some business in the future. Recalling products and eliminating the problem are suggested ways to evade the loss of credibility and lawsuits. The calling back of product is not considered a bad press, because you’ve taken the appropriate ethical action. 4 Best Hr policies The Companies should have appropriate HR policies formatters like recruitment, training, promotion etc. These policies are a means of motivating the employees, so that they don’t feel that the Company has done something unjust to them. The policies should be lucid. Proper training should be provided to them so that they may know what is ethical and what is not. 5 Prudence of social conscientiousness and responsibility Social responsibility plays imperative role to maintain highly ethical practices in business.. They should scrutinize every choice they make based on profitability, long term business value and social accountability. In the short term impacts of business ethics and social responsibility, there will be very few identifiable benefits in terms of productivity and financial gain but these actions will serve to develop the dealing trade name and increase profitability over the longer time. By accepting business ethics and social responsibility the business can gain from improved goodwill. Nowadays, as public awareness has increased, organizations and business globally must include social responsibility into their business practices at least to the same extent that they have integrated ethics in every conditions and in every country. 6 Pressure groups Businesses and industries are more and more finding themselves facing external strain to improve their ethical record.  An appealing feature of the rise of customer activism online has been increased analysis of business activities. Pressure groups are a fine example of this. Pressure groups are the outer stakeholders who are prone to focus on behavior & moral practice of multinationals or companies with ethical issues can with the mixture of their direct and indirect action can mess up the target business or industry 7 Management Strategy Management strategies that companies employ should have a "soft" approach that regards employees as a source of resourceful energy and give them the opportunities of participating in the workplace verdict making. The employees of the Companies who employ such strategies are less likely to get involved in unethical practices. On the contrary, a "hard" version strategy focuses on control and the employees re not given much importance. Here the chances of unethical acts are more. The companies should choose appropriate strategies to avoid unfavorable issues. Some studies assert that lasting success requires a compassionately treated and satisfied workforce. 8 Corporate Policies and Procedures As part of more complete compliance and ethics process, many companies have formed internal policies relevant to the ethical behavior of employees. These policies can be simple generalized language usually called a corporate ethics statement, or they can be more comprehensive policies, containing specific behavioral requirements called as business ethics codes. They are normally meant to spot the company's expectations of workers and to offer guidance on management some of the more frequent ethical problems that might come up in the path of conducting business. It is hoped that having such a policy will lead to greater ethical consciousness, stability in purpose, and the prevention of ethical disasters. A growing number of companies also necessitate employees to attend seminars regarding business conduct, which often involve discussion of the company's policies, particular case studies, and official requirements. Some companies even require their employees to sign agreements stating that they will follow the company's regulations of conduct. 9 Appointment of ethics official Ethics officers also called "compliance officers" have been appointed officially by organizations for many years. One of the reasons for the creation of this new position is a chain of fraud, corruption, and exploitation scandals that afflicting the Companies. He looks after various issues and brings them to the High management’s attention so that appropriate actions may be taken. But, the mere establishment of a position to manage ethics will most likely be inadequate to inculcate ethical behavior: a more systemic program with steady support from general management will be essential. 10 Religious views The historical and global importance of religious views on business ethics is sometimes not given the due importance in standard introductions to company ethics according Dr. Todd Albertson, writer of The Gods of Business. According to him, religious views are important in incorporating Company’s ethics but this reality is ignored by the majority. Especially, in Asia and the Middle East, religious and cultural perspectives have a strong pressure on the conduct of business and the construction of business values. The religious views should be use to educate employees about the ethical values. 11 Learn from history and previous situations Examining how previous situations were handled reduce the risks of making insensible mistakes. Many things are basically innovative in this world, regardless of how unique you believe your situation to be, you can find some related situations in the past.. Also history is a splendid amasses of already invented wheels, which can frequently save you the time and agonies of trying ineffectively to conceive a new one. 12 Strengthen system of controls Cautious business policies don’t only permit the business to be conducted properly and orderly but it also help to detect irregularities that may in the long run influence the Company. So, in order to prevent disasters, the Companies should have the following: clear corporation policies unambiguous work measures clear job tasks separation of duties efficient supervision incessant monitoring and review 13 Ethical culture A construction of ethical culture should be a main concern of every business, large or small. The difficulty for many organizations is trying to comprehend what it takes to construct one. From an enforceable code of conduct, to continuing training and communications, to an unknown coverage hotline, companies can quickly implement ethics and observance programs and solutions that cultivate an ethical culture across the venture. The six steps for ethical culture are as follows: 1 Establish an enforceable code of conduct 2 Initial and ongoing training 3 Regular communications 4 Secret reporting hotline 5 Enforcement/Action 6 Satisfying employees that live the culture CONSEQUENCES OF UNETHICAL BUSINESS PRACTICES 1 Legal actions and law suit 2 Loss of credibility and reputation 3 Loss of customers 4 Increased employees turnover CONCLUSION: From the above arguments, it is to be concluded that there should not be any compromise on beliefs and socially responsible behavior, as it is giving back to the the public, other wise its survival will be in risk. This is high time that the Companies should realize the significance of ethics. It is not to be taken lightly. As discussed above the consequences of resorting to unethical ways to gain profit have grave consequences. The short term effects might not be apparent but in long term, these might badly affect the reputation of a Company. So, we should try to pursue ethical acts to carry out our business. References ICAP Guidelines, Business Management; Ethics and Social Responsibility, 2011. Nelson, K.A, Trevino, L.K. Managing Business Ethics, 2010. Dr. Albertson, T. The Gods of Business, 2007 “Unethical”, The Free Dictionary by Farlex, The Free Dictionary by Farlex Online, Web, 2011. http://www.thefreedictionary.com/unethical Rajeev, L. Ethical and Unethical Business Practices, Web, 2011. http://www.buzzle.com/articles/ethical-and-unethical-business-practices.html “Unethical Behavior”, Anonymous Employee, Anonymous Employee Online, Web, 2011. http://www.anonymousemployee.com/csssite/sidelinks/unethical_behavior.php Read More