Current Ethical Issues in Business - Research Paper Example

? Current Ethical Issues in Business Current Ethical Issues in Business Introduction Corruption has been highlighted as one of thebiggest challenges impacting on both public and private business in contemporary times and remains a significant obstacle to sustainable development. Incidences of corruption are reported on almost daily basis, and the media are awash with scandals highlighting the depth and pervasiveness of corruption. Corrupt corporate culture has had detrimental effects on businesses such as distorting markets and competition, undermining the rule of law, breeding cynicism among citizens, and corroding the integrity of the private sector. This has mainly emanated from the absence of transparency, consistency; accountability, coupled with institutional weaknesses within judicial and legislative systems have been a primary cause of corruption within companies. The paper explores ethical challenges associated with corruption and bribery in business. Business ethics has overtime attracted significant interest partly owing to the perception of crude capital tendencies, which elevate the making of profits relative to ethical making of such profits. The realization of corporate goals and objectives necessitates that business managers design relevant policies and strategies, which enable them to attain the set objectives and cope with the overriding business environment. Nevertheless, some of the corporate policies may offend ethical sensibilities (Trevino & Nelson, 2011). Background Corruption is a complex phenomenon covering a wide range of and its origin lies deep within political and bureaucratic institutions. Although, the costs of corruption may differ and systemic corruption may be accompanied by sound economic performance, studies on corruption demonstrates that corruption is bad for development. Bribery represents one of the core tools of corruption and can be employed by businesses as a mode of “buying” things availed by governments or other entities such as contracts, government incentives, lower taxes, legal outcomes, and licenses (Myint, 2000). Ordinary business practices when abused can be construed as corrupt payments. Bribery and corruption in companies limits competition, corrupts the society, and damages innovation. In most cases, “corrupt” and “illicit” can be employed interchangeably, which implies that corrupt behavior contravenes a principle of legality; nevertheless, not all illegal behavior is corrupt and not all corrupt behavior can be deemed as illegal (Kochan & Goodyear, 2011). Transparency International differentiates forms of corruption by motive, whereby corruption behaviors injurious to the firm can be labeled as dysfunctional corruption while that beneficial to the firm can be labeled as functional corruption (Myint, 2000). Such a distinction is relevant when discussing international business and corruption given that some acts such as bribes and kickbacks may enable the firm to operate profitably, especially in the short-term (Loughman & Sibery, 2012). Discussion The World Bank estimates that close to 0.5% of GDP is lost via corruption each year. Bribery is mode common form of corruption, which creates a leeway where organized crime can flourish, corroding of trust in institutions, and undermining the rule of and democratic practices. Corruption can be highlighted as endemic within emerging economies causing chaos in economic development. In recent years, there has been a surge in high-profile cases of corporate corruption and bribery, which have given rise to colossal fines for companies engaged in corruption surpassing $ 1 billion and increasing diplomatic tensions between countries. In response to increasing incidences on corruption, the U.S. Justice Department has increased prosecutions of alleged acts of foreign bribery by U.S. corporations. For instance, in 2009, over 120 companies were under investigation representing a stark contrast from what was happening in the previous years. Recent trends toward vibrant enforcement of such laws have demonstrated that a failure to address bribery can exact a high cost on companies. For instance, in 2008, Siemens was compelled to pay a record $1.6 billion legal settlement with European and American authorities following a string of high-profile bribery scandals. At that time, the culture of corruption had permeated Siemens to the extent of becoming its business model. In an attempt to discard the culture of corruption, Siemens instituted anti-corruption efforts that aided the company to grow its bottom line. Recently, Canada has been highlighted as having the largest number of firms on World Bank’s blacklist of corrupt companies (the World Bank bars over 600 companies from doing business with the institution). Largely, the dubious reputation can be attributed to SNC Lavalin, a construction and engineering giant, as well as its subsidiaries. Causes of corruption and bribery in the business world Bribes can be paid so as to gain advantage such as a contract, a permit or license, the exclusion of other entities from a service, a judgment, legislation, or regulation, information, favorable taxation or exemption from custom duties, and expediting a routine official action. The consequences of corruption include distortion of the allocation of resources, misallocation of resources, covering criminal activities, and running afoul of rule of law that necessitates fairness and equality. The causes of corruption are mainly contextual grounded in company’s policies, history, and bureaucratic traditions (Kochan & Goodyear, 2011). The motivation to tame corruption may be weakened where company officials utilize their position for private gain. The opportunity for corruption can be regarded as a function of the size of resources under control, the discretion that officials enjoy in allocating resources and accountability that company officials faces in making decisions. Corruption is also systemic where formal rules are superseded by informal rules. Managing the risk presented by bribery and corruption relates to adoption of trust and ethical corporate behavior. Bribery and corruption are mostly deceptive, and each taints the subjects involved, as well as the process. Putting up with bribery and corruption may yield to or illustrate a systematic breakdown of a firm’s ethical framework (Trevino & Nelson, 2011). The Role of Managers and Employees in Stopping corruption and Bribery Consequent to the spate of corporate failures that have rocked some parts of the world, the pursuit of ethical leadership has become a global concern. The values and attitudes held by senior executives are critical determinants of employee behavior. Business leaders ought to lead by example and act as role models in exhibiting appropriate ethical behavior. Businesses should also institute measure to deal with conflict of interest (real or perceived) given that conflict of interest can yield to split loyalty, which is favorable to corruption and is likely to undermine a company’s interests (Osuagwu, 2012). Senior management in a compliance regime has the role of getting big ideas right (that compliance with anti-corruption and bribery laws is rewarding), communicating the ideas, and overseeing the implementation of the ideas. A compliance program can be categorized into (1) prevent, (2) detect, and (3) respond. Leadership constitutes a critical part in stopping cases of corruption in firms. In working towards this goal, top level and middle level should play a critical role in molding a corporate environment that promotes a high standard of ethical conduct (Loughman & Sibery, 2012). Corporate executives should leave no room for mediocrity, but rather should demand the highest level of conduct that demands the highest level of conduct. A Plan for Resolving Corruption and Bribery in a Company Effective management of corruption and bribery rests on three critical steps: (1) organizational assessment (highlighting internal risks); (2) prevention (highlighting systems controls, processes in place, training and awareness; and, (3) detection and response (detecting, reporting, and responding). A plan for resolving corruption and bribery in companies should align with the corporate responsibility function of the business. It is essential that businesses adopt a zero tolerance policy towards corruption and bribery and appreciate that corruption bear an adverse impact on communities (Hoogh & Hartog, 2008). In cases where corruption is endemic, such a culture can threaten laws, impoverish countries, threaten democratic processes and fundamental human freedoms, and distort free trade and competition. The guiding principles for the anti-corruption plan entail conducting business fairly, transparently, and honestly; desisting from making or offering bribes (whether directly or indirectly with the aim of gaining business advantage; and, not accepting bribes (whether directly or indirectly). A company’s anti-corruption program highlights and mitigates the risk of corruption. Effective anti-corruption programs aid to mitigate risk and improve corporate reputation while at the same time establishing credibility (Zimmerli, Richter, & Holzinger, 2007). The core step in the designing of an effective anti-corruption policy must respond to all aspects of business’ including form of business and country of operation. A well-established code of conduct can aid a company to mitigate incidences of corruption and bribery. The management has a responsibility to institute concise policies on the scope and circumstances where the directors and employees are likely to engage in corrupt dealings. The code of conduct should be enforceable, anchored in fair competition principle, and up-to-date. The code of conduct should also be accompanied by prudent system controls that guarantee that business activities can be conducted in a controlled and orderly manner, as well as aid deter and detect irregularities (Hoogh & Hartog, 2008). The ever-changing nature of corruption necessitates continuous monitoring to ensure that the instituted processes work. Risk assessment centers on highlighting risk factors, schemes and scenarios, and appraising the likelihood and impact of corruption. The response and remediation part touches on investigation, analysis of the cause, and enhancing controls. The monitoring of the plan centers on monitoring of indicators and risk factors, examination of “red flags”, and appraisal on the efficacy of internal controls (Zimmerli, Richter, & Holzinger, 2007). The business community should raise the level of information and quality of corporate governance enterprises by focusing on the development and management functions within the business. The overall aim, in this case, rests on continuing fostering a culture of integrity within the entity itself, as well as across the board in business with competitors and the society at large. There is a need to adopt positive moral perspective, and ethical conduct to better leadership in the business world. The management should demonstrate normatively appropriate conduct via personal actions, as well as interpersonal relationship, and fostering of such conduct through two-way communication, decision making, and reinforcement (Clinard, 1990). Ethical leaders are transparent and engage in open communication and encourage ethical conduct among the staff. Conclusion Bribery and corruption represent giving, offering or receiving undue rewards propelled by the intention of influencing behavior of someone within government or business so as to gain or retain a commercial advantage. Corruption remains one of the most widespread and least punished crimes across the business world. Business organizations operating within developing economies may be affected by the numerous environmental factors such as deficient infrastructure, policy inconsistency, political instability, and competition that generate unfavorable impacts on the operations of business organizations. As a result, business decision-makers come up with managerial practices that appear unethical so as to cope and survive in their operations. Corporations should be alive to the threat and risk of bribery and corruption. Companies should demand compliance with the highest ethical standards, as well as all the anti-bribery and corruption that apply in conducting business. Companies should institute proactive measures to safeguard against corruption and detect corrupt practices. Greater accountability and transparency can be considered as the building blocks that link up all the expectations that any business may have. References Clinard, M. B. (1990). Corporate corruption: The abuse of power. New York: Praeger. Hoogh, A. H. & Hartog, D. N. (2008). Ethical and despotic leadership, relationships with leader’s social responsibility, top management team effectiveness and subordinates’ optimism: A multi-method study. The Leadership Quartely, 19 (1): 297-311. Kochan, N. & Goodyear, R. (2011). Corruption: The new corporate challenge. New York, NY: Palgrave. Loughman, B. P., & Sibery, R. A. (2012). Bribery and corruption: Navigating the global risks. Hoboken, N.J: Wiley. Myint, U. (2000). Corruption: Causes, consequences and curses. Asia-Pacific Development Journal, 7 (2): 33-58. Osuagwu, L. (2012). Conceptualization of corruption in business organizations. American International Journal of Contemporary Research, 2 (5): 18-25. Trevino, L. K., & Nelson, K. A. (2011). Managing business ethics: Straight talk about how to do it right. Hoboken, NJ: Wiley. Zimmerli, W. C., Richter, K., & Holzinger, M. (2007). Corporate ethics and corporate governance. Berlin: Springer. Read More