How Unethical Corporation's Actions Can Affect the Whole Economy - Research Paper Example

Understating the Ethical Issues that Confront Corporations and Proposing Solutions to these Issues I. Introduction Corporate roles and responsibilities have been the subject of many debates and discussions for many generations. Many corporations around the world have been accused of unethical practices and some of these corporations have challenged the ethical standards that have society set (Boatright, 2009). Although corporations are private entities, their decisions and actions often affect the general public and lives of multiple stakeholders are often put in shambles because of unethical corporation actions and omissions. We have to understand that a single corporation, be it big or small affects multiple stakeholders including its stockholders, employees, public agencies, suppliers, customers, local communities, and many others. If a corporation fails to recognize its legal, moral and ethical responsibilities towards its stakeholders, the stakeholders can lose a lot of valuable resources (Boatright, 2009). Moreover, a corporation blunder of big magnitude can shake the economic structures of society and may cause other businesses to fail. The case of Enron and Lehman Brothers are good examples of how the failure of a corporation to act ethically can greatly affect the economy of the nation and the world (Huevel et al., 2009; Dembinski, et al., 2006). The direct stakeholders and the general public are not the only losers if a corporation negates its social and ethical obligations (Boatright, 2009). If the corporation does not perform its duties towards its stakeholders, it will lose the support of these individuals and entities, thus, in the end, the corporation also looses resources. Since there is a symbiotic relationship between the corporation and its stakeholders, the corporation must practice ethical decision-making processes and perform its social obligations faithfully. II. Defining the Ethical Roles of the Corporation Although corporations have varying duties and responsibilities towards their stakeholder, for the purpose of our discussion, let us discuss only the broad ethical issues concerning market fair play, product integrity, internal control and international involvement. To get a better picture of the ethical dilemmas and decision-making processes that the corporation must make in order to respond correctly to issues at hand, we shall limit the scope of our market fair play discussions shall be limited to the dealings of the company towards its employees while product integrity should be taken under the context of product research, development and quality control. Note that product integrity has become quite an issue in the past several years and many companies around the country have recalled their products due to defects, contaminations and other problems. When it comes to international dealings should be taken under the context of job outsourcing and materials acquisition. In order for us to get a clearer picture of the many ethical challenges faced by corporations in its dealings with its stakeholders, let us discuss these ethical issues one by one. a. Fair Play Fair play is other a subject of ethical debates when it comes to corporations and its employees. The role of the corporation as an employer is often put to the test in the workplace. As an employer, the corporation has the obligation to provide equal opportunities for growth to its employees as well as provide fair compensation for the time, skills and effort exerted by the employees in furtherance of the company’s goals and objectives (Collier & Esteban, 2007). Yet, despite the moral obligation of the corporation to provide just compensation to its employees, there are many companies out there that do not adhere to ethical and equitable standards of compensating their workers. A good example of this is the inequitable and often times unfair wages, benefits and bonuses between ordinary employees and corporate officers (Huevel et al., 2009). Big companies are known to give huge bonuses and salaries to its officers while paying minimum wage to their employees who are actually in the frontline of the business operations. Shop managers for instances do more work than the CEO but the CEO gets several times higher salary than the shop manager (Huevel et al., 2009). Yes, the CEOs may have bigger responsibilities towards the company but the fact still remains that it is the shop manager who does the dirty work so that the CEO can look good and can earn plenty of money. Yet, despite the fact that the shop managers and the ordinary employees are the ones that actually run the operations of the company they do not get as much compensation as the CEOs. Aside from the discrepancies in terms of salaries, the benefits and bonuses given to ordinary employees are often just a small fraction of what the CEOs receive (Huevel et al., 2009). Moreover, it is evident that in many organizations across the globe, women are often paid less than that of their male counterparts even if they are performing the same functions and are delivering the same results or even better results than their male counterparts (Guest, 2007). Given the huge in equity between the compensation of workers and top level managers, the moral and ethical thing to do for the corporation is to restructure its pay scale system and make it more equitable for everyone. Creating a more ethical and equitable pay scale can be quite tricky for companies. We have to understand that companies have their own interests to protect and in the course of protecting its interests, it tends to favor those people who can give more benefits to the company. To promote fairness and ethical distribution of compensation, since it is the frontline employees who directly run the ground operations of the company and not the managers that they serve under, a company that provides profit-linked bonuses to its managers based on their performance should also provide the same kind of incentive to the team of employees that work under the managers (Guest, 2007). The company needs to recognize the fact that all of the employees contribute to the success of the company and not just a few people who are in the top management level. Better yet, when making decisions regarding pay scale, the company should consider assessing the contribution of its employees to the company and give the employees compensation that is commensurate to their contribution to the company. Moreover, when it comes to decision making, companies should adopt a gender fair and gender sensitive approach to management (Machan, 2007). Providing equal opportunities for men and women across all races is the ethical and professional thing to do. b. Product Integrity A company is morally and ethically bound to provide its customers with good quality and safe products ( Boatright, 2009). However, the issue of product integrity has been one of the major ethical concerns that beset companies in many parts of the world. Products ranging from infant formula to cars have been the subject of recalls in the recent years because of contamination and factory defects. The recall of milk formulas made by companies in China is one of the most controversial issues when it comes to product integrity (Ma, 2008). Note that some milk products from this country had melamine content which is toxic and cause death among infants (Macartney, 2008). The companies involved in the melamine issue knew that melamine is harmful to health but many of them continue to produce the milk because it is cheap and profitable (Ma, 2008). What these companies failed to see is that they were earning profits at the expense of the lives of infants who could die or forever be impaired after taking the milk products with melamine. The worst part of it is that most of these companies did not voluntarily pull their products off the market. They waited until the authorities found out about the melamine content in the milk before they pull out their products from the market. This kind of attitude is not only unethical to the worst degree, it is also criminal. The fact that these companies knew that their products contained toxic ingredients yet they continue to manufacture the same only shows they care more about profits than the welfare of their customers. It is normal that companies want to make profits but they should also balance their interests with the interest of their customers. In deciding what kind of products it will produce, a company must consider safety and quality above profitability (Boatright, 2009). As it is, the most ethical thing to do here is to produce safe and good quality product and then sell it at affordable prices without compromising the profitability of the company. Moreover, proper disclosure of the materials and ingredients used in the products on the labels is in order especially for companies that are into food products (Boatright, 2009). Proper labeling is very important in order of the consumers to know what is in the food. When labeling products, companies should not withhold any vital information from the public. For instance, if the food products contain harmful trans fats, the amount of trans fats on the products should be stated in the label. This way, consumers will be guided accordingly as to whether or not they should buy these products. Aside from proper labeling, companies should make it a policy to subject their products through quality control procedures. If the products do not pass the quality control standards set by the government and the company, these products should never leave the company warehouse. In the even where these products find their way into the department store shelves, the company, upon learning of their defects, should pull out these products as soon as humanly possible and dispose the products so that nobody will be tempted to consume them. Pulling the goods off the shelves is not only an ethical thing to do; it is also a moral obligation of the company. The social and moral obligations of companies should never be set aside in favor of profits. c. International Dealings Outsourcing is one of the best ways for companies to earn more profit. Some countries around the world have lower taxes, lower labor cost and less stringent laws as compared to other countries (Sen, and Islam, 2005). Most developing countries are badly in need of capital infusion that they welfare investors with open arms that many transnational companies flock to their areas to do business. Although infusing badly needed capital in developing nations is a generally a good thing, what is not good is the fact many transnational companies take advantage of the resources and liberal regulatory laws of these countries (Sen, and Islam, 2005). Since most developing countries do not have strong laws that protect workers, many transnational companies set-up “sweat shops” in these places and exploit low cost of labor to boost profits (Krugman, 2006). Moreover, some companies resort to using cheap and locally available materials even if these materials are substandard. By getting low cost labor, cheap local materials and many tax incentives from the host country, the transnational corporation is able to produce goods are very low cost so it earns more profit. Although there is nothing wrong with using means and methods to reduce production cost what is unethical in this situation in the exploitation of cheap labor and the use of substandard materials. We have to understand that companies are morally bound to protect its employees so when a company set-up sweat shops, it violates its duty towards its employees. On the other hand, companies have the moral obligation to provide their customers with good quality products. In the same manner, when a company uses substandard materials for its products, it deprives its customers with the use of good quality products. We have to understand that when a company sells products that breakdown a few days after a few days use or sells products containing toxic ingredients, that company exposes a lot of people to hazards. Unethical practices of transnational companies have huge impact to the economy of the world and the culture of the place where their offices, factories and businesses are located (Krugman, 2006). As it is, these companies need to adopt policies and measures that protects the interests of the company at the same time, promote local growth protect and promote the rights and welfare of its stakeholders. III. Conclusion Corporations have the moral and ethical duties towards their stakeholders and despite the fact that fulfilling the ethical and moral roles and obligations of corporations is a tough job that is not an excuse for corporations to neglect their duties and obligations. The fact that there are many stakeholders involved in corporate transactions and these different stakeholders have different interests in the transaction. The presence of multiple stakeholders makes decision making processes even more difficult for corporations. For a corporation remain steadfast and true to its corporate values, it must come up with clear code of ethics, set corporate troubleshooting rules and train its employees to follow the code of ethics set by the company. The code of ethics shall serve as the guide for the company in its decision making process and courses of actions. References Boatright, J. R. (2009). Ethics and the Conduct of Business Sixth Edition. Upper Saddle River, NJ: Prentice-Hall, Inc. Collier, J., & Esteban, R. (2007). Corporate social responsibility and employee commitment. Business Ethics: A European Review, 16(1), 19–33. Dembinski, P. H., Lager, C., Cornford, A., & Bonvin, J.-M. (Eds.). (2006). Enron and World Finance: A Case Study in Ethics. New York: Palgrave. Guest, D. E. (2007). HRM and performance: can partnership address the ethical dilemmas? In A. H. Pinnington, R. Macklin & T. Campbell (Eds.), Human Resource Management: Ethics and Employment (pp. 52–65). Oxford: Oxford University Press. Huevel, K. et al., (2009). Meltdown: how greed and corruption shattered our financial system and how we can recover. New York: Nation Books Krugman, P. (2006). "Feeling No Pain." New York Times, March 6, 2006) Ma, Josephine (19 September 2008). "Adding chemicals to milk common: insiders, Page A3". South China Morning Post. Macartney, J. (22 September 2008). China baby milk scandal spreads as sick toll rises to 13,000. The Times (London) http://www.timesonline.co.uk/tol/news/world/asia/article4800458.ece Machan, T. R. (2007). The Morality of Business: A Profession for Human Wealthcare. Boston, Springer. Sen and Islam (2005). “Southeast Asia in the Global Wave of Outsourcing: Trends, Opportunities and Challenges”. In Regional Outlook: Southeast Asia 2005–2006, Institute of Southeast Asian Studies (ISEAS), Singapore. Read More