Business Related Ethics - Essay Example

On 1st July 2008 Bill Gates resigned as CEO of the Microsoft Corporation to pursue his work with the Bill and Melinda Gates Foundation. He is currently Chairman of the Microsoft Corporation. Bill Gates is a well known philanthropist and whilst CEO of Microsoft his pledges of money to fight many of the world’s diseases were media headline grabbers. In 2005 he gave £145 million ($258 million) to fight malaria, and in 2006 he pledged £507 million ($900 million) to cut deaths by tuberculosis. Yet corporate and personal philanthropy did little to avert negative headlines about Microsoft’s questionable business practices. Since 1999 Microsoft has been at the centre of a number of legal disputes with both the US Government and the European Commission. At the heart of the disagreements have been accusations that Microsoft had been exploiting its monopoly power in order to reduce competition, and consequently choice, in the marketplace. Microsoft was accused of anti competitive behavior in the United States and had severe financial penalties inflicted on them in an anti trust law court action in Europe. Whilst the financial penalties were relatively easy for Microsoft to bear, the company continued to face accusations of poor ethics and unfair tactics) In your opinion, how important is it to stakeholders in a company that the ethics of the CEO match those of the organization? Explain your answer with reference to Bill Gates during his tenure as CEO at Microsoft. How well a business corporation performs in financial terms is significant for a broad group of people that includes potential/existing investors, creditors, employees or managers. With differing information needs and purposes, each category of stakeholders should be provided with data that is comprehensive, relevant and reliable, so as to allow an informed opinion to be reached on the corporations financial performance. However, all too often, the customer is left out of this equation. The situation is no different in the case of Microsoft Corporation, which has tremendous reach and market share, but whose customers have very little say in the affairs of the company. Bill Gates’ personal efforts as a philanthropist is widely appreciated,– both in terms of money and energy. Yet, the history of Microsoft since its inception shows that the organization is a purely economic enterprise, whose sole purpose is profits and whose foresight stops with the next quarter. This deviation in behavior between the Chief Executive Officer and his organization is the topic of discussion for this essay. The following passages will attempt to ascertain how important it is for the stakeholders that a consistent standard of ethic is adopted both in the realm of personal philanthropy and during business operations, in the context of Microsoft and its founder Bill Gates. Microsoft’s mission statement is ‘to enable people and businesses throughout the world to realize their full potential’, yet, the activities of the company had attracted criticism from both competitors and end-users. While Bill Gates’ personal philosophy is admired across the world, the business philosophy adopted by Microsoft has been unduly aggressive and opportunistic. Almost since the founding of Microsoft, the company and its founder have been constantly engaged in courtroom battles. The foremost among the charges against Microsoft is its tendency to monopolize the software market through acquisitions and ruthless business strategies to corner greater market share. Microsoft has had the ire of all its competitors, including Apple Computer, Opera, Sun Microsystems and Netscape (Crane & Matten, 2007). The existing regulations for corporate responsibility are full of loop-holes, which organizations such as Microsoft tend to exploit. For example, both in the United States and in the United Kingdom, the only document that a company is required to release in the public domain is its Annual Report. Corporations whose shares are traded publicly issue an Annual Report at the end of each financial year for the perusal of its shareholders and other stakeholders. The stakeholders could be potential investors, creditors, employees, regulating agencies and competitors. In other words, Annual Reports indicate the financial health of a corporation to all concerned. It contains such information as financial statements, the Chairmans statement, and the managements assessment of prospects in the following years. In the case of Microsoft’s annual reports charts, graphics and descriptions of financial performance is given, but they don’t mention the means through which the company achieved those results and whether the means were fair or unfair (Crane & Matten, 2007). This gives opportunity for companies such as Microsoft to show an impressive set of numbers, the reality of which can be deciphered only by reading the fine print. In this case, even the so called ‘stake-holders’ and capital contributors are at risk of being deceived, which makes a strong case for introducing stricter regulations for monitoring and reporting of the activities of a company. The resultant transparency would then empower the customers and competitors alike, to see to it that their genuine interests are not jeopardized by the company’s activities (Chandler, p.45). As of now, company law statutes across the world does not mandate the publishers of annual reports to explicate their company’s overall performance in relation to the welfare of general public and the company’s competitors – a loop hole which Microsoft had ruthlessly exploited in the past (Wheeler, p.22). This situation also calls for enforcement of a consistent standard of ethics in the personal and professional conduct of a Chief Executive Officer. Microsoft’s operations are spread across the world. In the context of its operations in developing countries, the issues of national sovereignty and commercial opportunity are intertwined. In other words, large Internet portals such as MSN, Yahoo and Google, by way of exploiting global opportunities provided by the medium of the Internet have submitted to the imperatives of business. While their profits have shot up as a result of the new opportunities for advertisement, their tacit support of citizen censorship (as typified by the case of China) has attracted criticism. As a result of facilitating Chinese government censorship, these dotcom giants have done social injustice to the people of Tibet (Meyer, 2004). Similar instances of thwarting democratic participation can be found in countries such as East Timor, Cambodia and the Indian subcontinent. In essence, enterprises such as MSN, Yahoo and Google don’t seem to care an iota about freedom of speech and democracy in the countries in which they function, as long as their revenues remain impressive. Such profiteering attitude is ethically very shallow and does not project globalization and Multinational Enterprises in good light (Buckley & Ghauri, 2004). It is especially hypocritical that someone who claims for himself the title of ‘Philanthropist’ should show indifference to the suppression of fundamental rights such as freedom of speech, as is obviously the case in Tibet and the greater China (Machan & Chesher, 2002). Hence, it is obvious that to avoid double standards as those mentioned above, a comprehensive legal regulatory framework should be devised. These regulations should be made applicable to activities in the professional and personal lives of Chief Executive Officers such as Bill Gates. Already, certain initiatives are being made toward this end. The UK governments Corporate Social Responsibility (CSR) website is a good example. The opening page of the website proclaims, "We have an ambitious vision for UK businesses to consider the economic, social and environmental impacts of their activities, wherever they operate in the world" (www.csr.gov.uk). Consistent with its mission statement, the CSR engages in advocacy activities so that business corporations will adopt a sustainable model of growth and development. To help businesses with this transition, the CSR offers policies and institutional frameworks that encourage companies to adhere to the highest ethical standards. The CSR also provides substantial incentives for those companies that accept and adopt newer (and more just) regulations. The framework of CSR is very broad and it includes environmental protection, health and safety and workplace rights, alongside fair means of competition (Crane & Matten, 2007). Apart from legislative measures, Multinational Enterprises across the world, including Microsoft, are also voluntarily adopting a set Code of Ethics, which reflects its overall approach to business. These sets of self-imposed rules originate from the aforementioned corporate social responsibility initiatives of business corporations. It also defines the values and standards by which the company conducts its business. It provides all stakeholders with a clear understanding of the procedures and processes at various levels of the organization. In other words it acts as the road map or set of guidelines to help the firm in acting and conducting itself in a socially and commercially acceptable manner. A well designed code of ethics will help highlight the resources available to achieve various goals set at the personal and corporate levels. A good code of ethics document will inspire confidence in all business associates – like suppliers, clients, employees and competitors. More importantly, it will also win the trust of the general public. (Shiner, p.10) There is also a strong case for companies such as Microsoft to constructively liaise with regulators in the drafting of the Code of Ethics document. It is understood that a regulatory atmosphere conducive to fair and competitive business can help raise ethical standards of all businesses involved. For example, far too often, when some “potentially illegal or unethical business conduct” does not affect an individual directly, then it is likely to go unreported and unaddressed (Shiner, p.10). Keeping this in mind, the drafters of the code of ethics can include strict policies so that associates and employees can freely report their concerns about suspected breaches in the ethical code without fear of negative consequences. By making it a violation of employment agreement to not report such breaches and violations, the firm gives a clear message to its employees as to how important business standards are. Those who violate the company’s ethical standards, irrespective of designation or tenure, may be subject to legal disciplinary action that can lead to termination of employment (for employees) and contract annulment (for other associates) (Shearer, p.551). In conclusion, it is quite clear that it is not enough for companies such as Microsoft to cater to the needs of only those who have staked their capital. The company’s and its Chief Executive’s responsibilities have now been extended to include upkeep of ethical standards of operations. In light of these changing expectations, not only have newer legislations been enacted but some companies have also voluntarily adopted ethical standards for their operations. Yet, one should exercise caution in reading these apparently positive developments. These days "environmental stewardship" and "corporate social responsibility" have become catch phrases in the business world (Fisher, 2006). This is an acknowledgement of the fact that consumers (who are part of a larger public) nowadays expect high ethical standards from corporations. Partly to cater to this demand and partly to indulge in a Public Relations exercise, some multinational corporations in the UK have over the last few years issued reports covering these concepts. But these reports have to be read by keeping in mind the motivation behind all corporate action - "Boosting the Bottom-line". The statements emerging from the public relations officers for Microsoft should also be read in this backdrop. 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