Reality of Business Ethical Responsibility - Essay Example

BUSINESS ETHICS I. INTRODUCTION Globalisation has driven many corporations to undertake changes that will enable them in creating their niche and becoming globally competitive in the global market economy. In the context of change, one transformation that has altered the contemporary face of corporations is the concept and reality of business ethical responsibility. The coming together of business and ethics is relatively new. Although as early as 1932 there is already a proposition regarding the “idea of service [in business] as expressing man’s altruism” ( Follet, 1925 as cited in Hemingway, 2002), but still it does not try to clarify and negotiate how business can become an expression of man’s altruism. Nevertheless, the idea of ethics in business has gained momentum and until now much effort is being invested in turning business ethical (eg. Maclagan, 2008; Zolsnia, 2006). In lieu with this, the paper intends to address the question, to what extent is there a responsibility on the part of business people to act ethically? In order to answer this question, the electronic databases Academic Research Premier and Business Search Premier were searched using a combination of the following key terms: business ethics, social responsibility, and organization. Articles written only in English and published from the period of 1990 till 2008 were selected. Articles that provided an analysis of ethics and social responsibility in connection with business were included in the selection. Correspondingly, excluded in the selection were editorials, case studies, commentaries, mimeographs, and pamphlets. The reference list of the articles was searched to identify additional relevant publications. Moreover, it should be noted that the question that will be answered in this paper already has certain assumptions embedded within in the question itself. These assumptions are: first, business people are already expected to act ethically and as such, the necessity of clarifying the ‘extent’ of their responsibility becomes a little urgent. Second, the question also assumes that acting ethically falls within the concept of responsibility attributed to business people. This particular assumption has been criticised on the premise that as scholars in business and organizations continue to assume that acting ethically is a responsibility of business people and business, they fail to provide a clear conceptual analysis of the concept of responsibility (Comite, 2008). Thus, a vague appreciation of the connection between responsibility and acting ethically in business is often attained (Comite,2008). Third, the assumption that accepting the responsibility of being ethical among business people is a dilemma. And fourth, the line that distinguishes the business per se from its people is vague and blurred.Recognising the weight of these assumptions prod for a clearer understanding of the connection, relation and scope of responsibility and of undertaking ethical actions within the framework of business. The paper is divided into three parts. The first part is the introduction where the question, assumptions, searched method and hope of the paper is provided. The second part is the exposition of the answer to the question. And the third part is the conclusion. As such, this paper hopes that in the end a better perspective of the extent of the interrelation between responsibility and ethical action in the field of business is attained. II. ACTING ETHICALLY IN BUSINESS: A DEEP AND BROAD RESPONSIBILITY Milton Friedman (1971) in his economic theory claims that the business of business is business. And in order to fulfil this nature of business, the interest of shareholders should always be protected and guarded. This traditional perception of corporations hold true to the market economy which stipulates that the only way to measure success is dependent on the returns of profit that the corporation has acquired (Mälovics et al, 2008). As such, it can be impugned that the nature of corporation following Friedman’s elucidation is that businesses are and ought to be profit oriented and managers should work attaining the shareholders’ goal (Friedman, 1971). However, to suppose that the sole responsibility of business people is to satisfy the interest of the shareholders which is profit and more profit is to clearly fail in appreciating the broad field and environment with which contemporary businesses are operating. Being such, a wider and more accommodating paradigm should be provided in order to respond to the contemporary demands on businesses. In lieu with this, it is claimed that the extent of the responsibility of business people to act ethically covers a wide range of scope which includes individual-organization relationship, interpersonal relations within the organization, relations with third parties and social relations (Comite, 2008). And in the broadening of the scope of the demand of ethics in business, there is a need for the re-conceptualisation of the nature of business that will enable it in becoming more responsive to contemporary demands (Mälovics et al 2008; Hemingway,2002). Likewise, the broadening and deepening of ethical responsibility of business and its people is a paradigm that will allow businesses to authentically integrate in their vision and goal ethical responsibility which is manifested in both of their internal and external relations (Comite, 2008). And finally, the expansion and deepening of the ethical responsibility of businesses and its people is a win-win situation for everybody (Hemingway,2002; Zolsnia, 2006). How does this work? The broadening and deepen responsibility of businesses and its people to act ethically is buttressed on the following arguments. First, the changed nature of business. The contemporary nature of business is such that it is not just explained via shareholders theory (Friedman, 1971) which stipulates that the interest of the shareholders should be the main business of business. But that together with the shareholders theory, is the stakeholders’ theory which claims that businesses play an integral role in the society and as such, their responsibility is not just to gain profit but that of equal weight is the recognition that businesses are also equally responsible to all the persons, things and environment that are affected by the corporate action (Bastin,2003). Being such, the re-conceptualise nature of business entails that: 1. A corporation is integrated in the society. (Zolsnai, 2006) 2. A corporation is an actor in the public arena (Roper & Cheney, 2005). 3. Contemporary corporations endeavours for collaborative work with the stakeholders.(Tencati & Zolsnai, 2009) 4. Contemporary corporations are establishing relations and partnerships with stakeholders. (Morsello, 2006) 5. It upholds transparency and accountability. This is necessary as it is the only way with which trust from the stakeholders can be gained (Livesey, & Kearins, 2002). 6. Corporations trying to balance profit with environmental concerns, social values and political beliefs. (Tencati & Zolsnai, 2009) 7. It is responding beyond the demands of the law to a more comprehensive and integrated responsibility to all stakeholders.(Zolsnai, 2006) 8. It is responding to the interest of the shareholders as well. The combination of the shareholders’ theory and the stakeholders’ theory although seen as an unholy alliance due to the divergence in their interest, is necessary for corporations and organizations if they intend to survive in the globalised market economy. Why? Globalisation. The second argument that broadens and deepens ethical responsibility of businesses and its people is globalisation. Globalisation has created market dynamics that are unique only within the contemporary period. Globalisation has created a borderless and boundaryless market (Peet,2003), a market that requires fast-phased changes (Soros, 2002) and a market that will account, respond and satisfy the consumer demands and preferences first and foremost if it is to survive the globalised market (Hastings & McDermott, 2006) This has become the case since consumer satisfaction has become the barometer and the heart of business undertakings (Hastings & McDermott, 2006). Thus, there is the perpetual need for businesses to find their niche in a very competitive global market and one sure way to attain this is for business to be ethically responsible for its action. The third argument that supports the paper’s position is ethical consumerism. Ethical consumerism is entailed in the improvement of the quality of life and the recognition that each and every individual has the social obligation and duty to promote the welfare of the State. As such, several different categories of consumers have come up. The consumer that is concerned with the impact of the economic activity to the environment is called the environmentally conscious or concerned or green or ecologically concerned consumer. On the other hand, the consumer that is concern not only with the environment but also with community activism is called the socially conscious, concerned consumer. The consumer which is concerned with the deep seated problems of the world like poverty, injustice, oppression, are called the ethically and socially concerned consumer, while consumers who are concerned with socio-demographics variables are the socially conscious consumers (Memery et al, 2005). What is important in the recognition of the presence of the ethical consumers regardless of the categories is the fact that ethical are numerous and that they are willing to pay extra costs for their cause (Todd, 2004). Fourth, the presence of non-governmental organizations that very often supports the cause of the stakeholders opens the venue for social awareness and information drive that keeps consumers, and all the stakeholders aware of the progress, issues and developments regarding the market - the products and the producers and its movements. But more than that, non-governmental organizations keep the people abreast with issues regarding the environment, the socio-political conditions which are almost played up in the public arena. This contemporary scenario is prodded by the media, and technological advancements like easy access in the internet and this reality makes businesses and its people more conscious and cautious in their actions. Fifth, is the creation and maintenance of the company image. The do good doing good image of corporations who are ethically responsible, becomes the image or symbol that usually sticks in the mind of the consumers and influence their buying decisions (Hemingway, 2002). After, the creation of the company image, the next step is to maintain and sustain the image (that is if they have not come up with one).This is important since, as stated above, this is how the consumers perceived the corporation. So if, the consumers have a negative perception of the company it will not be patronised. Whereas, a company that is true, consistent and honest with its corporate image is patronised. (Hemingway, 2002; Van de Ven, 2008). Sixth, the cultural and environmental movement during the 50’s to the 70’s which have changed consumers’ perception. During the 50’s up to the 70’s people have been reintroduced to the ancient wisdom of that speaks of the interconnectivity of all beings in the Earth regardless whether material or immaterial, human, animal or plant life. Moreover, the connectedness of the web of life is not only perceptible among animate or inanimate beings but that the environment, Earth herself, has been appreciated as the necessary and only condition with which life as we know it thrives (Mirvis, 1994). Furthermore, people have been made aware of the presence of toxins and carcinogens in air, water and even in the land brought about by people’s abuse of the environment (Mirvis, 1994) and finally, everybody has been jolted by the reality that as advancement in technology definitely improves the quality of life, it too can be used for destruction as attested by numerous genocides and wars in the contemporary period (Marvis, 1994). These experiences have opened the eyes of many that people just cannot pursue their own self-interest and that each and everyone, even in the littlest possible way, is responsible for the Others, towards each other (Ortega – Villaseňor, 2004). This new insight has changed the way with which responsibility and ethics have been perceived and adopted in the lives of people especially in business. Seventh, people in business are individuals who are defined by their responsibilities and roles within the corporation (Solomon, 1992). However, their particular roles and duties in the organization redound in the end with their social and cultural responsibilities as corporations are social actors itself (Zolsnia, 2006; Roper & Cheney, 2005). And this becomes richer and more powerful drive to do good (Maclagan, 1992) as “the need to resolve complex ethical dilemmas in the real world, rather than rely on adherence to statements of principle, or codes of conduct” (Maclagan, 1992: 372) is a reality that organizations are confronted with as they acknowledge their impact on social and physical environments (Zolsnia, 2006). Eight, the corporate ethical scheme (Comite, 2008). The corporate ethical scheme deals with the four aspects of ethical interaction that transpire in an organization. The first aspect is the work ethic between the individual and the organization which is perceived under individual ethic. This aspect deals with the just and humane contract that is given to the individual employee on one side; and, on the other side, the employee fulfilling his duties and responsibilities towards the achievement of the goals and visions of the organization (Comite, 2008). The second aspect is the interpersonal ethical relations that happen in the organization. This pertains to the internal relations and behavior of the employees with one another and with the relations of employees and the managers. In this aspect, ethic behavior, “is characterized by the respect of other peoples’ personalities and rights in all corporation activities” (Comite, 2008: 106). Also, in this aspect, the kind of leadership that is at play in the business has an integral role. Since, the kind of leadership that recognizes the important role idealized influence which motivates the employees, inspirational motivation that drives the employees to go beyond the required performance standard in the fulfillment of their roles, duties and functions (Masood et al, 2006). Intellectual stimulation which acknowledges that employees are creative, innovative and intelligent and that they are not afraid of any negative repercussions in case they share or air out their opinions or ideas. And finally, individual consideration, this is the managerial level recognizing and respecting the personhood and individuality of each employee (Masood et al, 2006). The third aspect is the ethical relation of the organization with third parties. When dealing with third parties, these are the groups whose interests in the organization are easily seen for example the suppliers, clients, financial backers and the likes. The ethical behavior which is contractual ethic necessitates transparency, accountability, fairness and openness in contractual relations. This is essential in establishing a long term relation with third parties built on trust and an atmosphere of reciprocity (Comite, 2008). And the last aspect of the ethical scheme is the humanitarian relations which falls under social ethics. Under this aspect, the social responsibilities of the corporation to the society, to the community, environment and all the other stakeholders of the company (Comite, 2008) are integrated in policies and even visions and goals of the organization. This scheme points to the reality that the responsibility for ethical action permeates in all existing relations within and external to the organization. And that to claim that ethical behavior and relations are limited only to some aspects of the organization is to misappropriate the interconnectedness of all relations in the organization. Finally, the ninth argument, broadening and deepening the ethical responsibility of business and its people is a win-win situation. The dilemma between shareholders’ interests and stakeholders’ interests can be resolved if both interests are satisfied. How? by becoming ethical. A company that has a created a corporate ethical image encourages consumers’ trust and builds consumers’ loyalty. As such, the company is assured of continued patronage. And this is good in itself. While, on the other hand, if there is continued patronage for the company, then the interests of the shareholders are also satisfied. Take for example The Body. despite the fact that the prices of their commodities are a little bit higher compare with other brands, but since there are known for their active involvement in environmental concerns and the holistic approach to business there is a continued patronage to their products which is really a win-win situation for everybody – the shareholders, the stakeholders, the consumers and the society in general. In the end, embracing ethical responsibility by broadening and widening its range and scope is a definitive path with which businesses and its people can create their niche in the globalised market economy. III. CONCLUSION The extent of the responsibility of businesses and its people to act ethically is broad, wide and deep in range and scope. This is claimed based on the following arguments: 1. Changed nature of contemporary business 2. Globalisation 3. Ethical consumerism 4. Presence of non-governmental organizations 5. Creating and maintaining corporate image 6. Cultural and environmental movements during the 50’s to the 70’s 7. People in businesses are individuals 8. Corporate ethical scheme and 9 Being ethical is a win – win situation. Although there may be other compounding factors that may influence ethics in business, in the end to be ethical, is to be global. REFERENCES: Bastin, R. (2003). Surrender to the market: Thoughts on anthropology, The Body Shop, and intellectuals, The Australian Journal of Anthropology, Vol. 14: 1, pp 19 – 38. Comite,U. (2009). The evolution of modern business from its assets and liabilities Statement to its ethical environmental account, Journal of Management Research, Vol. 9, No 2, pp. 100 – 120. Friedman, M. (1971). A Theoretical Framework for Monetary Analysis. UK: Proquest Info & Learning. Hemingway, C.A. (2002). An exploratory analysis of corporate social responsibility: definitions, motives and values. 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