Ethical Code of Conduct - Essay Example

Business Ethics Business Ethics Part A CSR and Ethical Concerns Every organization contains an ethical code of conduct through which it communicates its core values and defines their rules for behaviour with respect to corporate governance and corporate social responsibility. Such code of conduct drives companies towards commitment of corporate goals and also helps in establishing relationship with its employees, society and the market (Tittle, 2000). As Corporate Social responsibility leads company to work for society’s interest, so employees have to comply with a code of conduct to work towards improvement or development of society. However, if there were no formal binding of legislation, it would be difficult to make employees comply with the rules and execute CSR practices effectively. In order to face this challenge, businesses need to align their framework based on certain principles that balances the financial and social performances of the company responding to stakeholders concerns at the same time (Schwartz, 2011). However, the framework and practices of Corporate Social Responsibilities varies with the culture and economy in which business operates. Mainly the communities in which the company operates are the major factors that drive ethical decisions of the corporation. The economic, cultural, environment and social issues are spontaneous. The pace of change in these factors is rapid and unpredictable. However, the core values of ethical conduct of the business are based on the effectiveness of the business to understand these changes and implement CSR policies that correspond with these issues. Hence, some of the CSR activities of the organization are based on legal contracts, and some are not based on formal binding. In the both cases, Corporate Social Responsibilities that are not based on formal binding legislation enforcement are less meaningful. Ethical Dimensions of Business Decisions Business ethics is code of conduct of the business it involves moral or ethical issues that may rise within a business with respect to its conduct with individuals or the entire organization. There are two dimensions of business ethics, normative and descriptive dimension. The Normative dimensions are the core corporate practice and specialization, and descriptive dimensions are experts and academics to understand the behaviour of business. In other words, Business ethics tells about the relation between the interactions of the organization with profit maximizing behaviour with non-economic concerns. However, there are several debates at international platform that citizen practices and framework of Corporate Social Responsibilities. It is because the some of the organization are committed toward non-economic values, as their ethical conducts and social responsibilities. On the contrary, the government and legislative bodies derive business behaviour that it perceives are beneficial. However, the ethic conduct of the organization shall be beyond the control of government but in the interest of society. In contemporary global environment, the emergence of multi-national organization has also persuaded organization to understand community’s core values. It is also said that the organizations that has limited relation and operate in sensitive community accelerate their business operation on the basis of formal ethical regimes. Ferell & Fraedrich (2014) states that the corporate entities are responsible for generating profit following the rules of society that are defined by the law and ethical custom (Ferell & Fraedrich, 2014). With respect to business decisions relating to CSR activities, it is essential to take care of certain ethical dimensions as there is no legal binding to control unfair work practices. These ethical dimensions relate to environmental justice, equality and rights of every individual. Thus, it can be said that every individual whether he is from management of the company or society is morally answerable for his deeds. In order to generate an understanding of the underlying issue individual, management and societal perspectives are being examined (Horrigan, 2010). Some of the researchers argue that the responsibilities do not imply on business, but it can only be implied on individuals. It is one of the reasons that in the United States the Corporate entities are considered as a person and other nations. Thus, the corporate persons are mainly entitled to have rights and responsibilities. Therefore, business ethics cannot be differentiated as a personal ethic covers all the standards (Campbell et al., 2012). In management’s perspective corporate social responsibility requires implementation of certain rules or principles to work for the well being of the society (Ferell & Fraedrich, 2014). In this regard, business ethics around the world should be global so that there is uniformity. However, there will be a high level of corruption if there is no established code of ethics. In it absence, management of a company can introduce accounting procedures that address, investigate and analyse ethical issues pertaining in an organization so that ethical CSR activities are practiced. In most of the cases, there is increased embezzlement of funds, bribery and insider trading that harm company’s practices. In order to reduce the risks, control measures need to be adopted by the company. For management, it is essential to raise ethical concerns as it is the responsibility of the company to safeguard the rights and the interests of its stakeholders. In a global world, company’s ethical and business standards are based on certain principles. These principles are established by examining the strengths of business ethics and comparing them with weaknesses to generate opportunities for better business practices (Jonker & Witte, 2006). However, business operates in the different parts of the world, and the economic conditions and culture of the country make a major contribution to shaping dimension of business decisions. If there is no legal binding, compliance from the employees can only be anticipated if they are subjected to frequent examination, dialogue and the company maintains strict policies relating to suspension and termination of the contract. Human rights, labour unions and companies would need to work to get consent and maintain standards for CSR activities in collaboration with government agencies (Clarke & Branson, 2012, p.596). There is an on-going debate on business ethics across the globe as some countries. However, the corporate social responsibilities of the business are based on the personal ethics of an individual. While considering an organization, it shall be identified that in a corporation mainly company directors are responsible for making a decision not to harm or violate any of the defined law. In some of the countries, Corporations are treated as individuals in certain circumstances, for example, title to the property but in some cases they are treated as business. Considering China, it fails to incorporate ethics in business strategies especially with respect to CSR (Hanlon, 2014). It is because China treats business entity as an economic unit of the society, and it can contribute towards the society through improving its performance and profit maximization. For China, economic development is the major source of Corporate Social Responsibility. On the contrary, considering business entities in United States they are inclined towards CSR activities more than others. The difference in the treatment of CSR framework in both of the countries occurs on the basis of its perceptions. The under development countries argue that CSR activities can only be implied on progressive and developed countries because the underdeveloped countries are even deprived of the necessities of life. However, there are certain control mechanisms like whistle-blowing systems and ethics committees. These tools are law binding but privileges of these control mechanisms are essential to lead an organization towards success. Many companies to drive employees towards a legitimate path also exercise a reward system focused on work ethics. Management ethicist also prefers training and education in the field of ethical audit in order to ensure that company is ready to execute positivism and incorporate professional ethical sense in their works (Jonker & Witte, 2006). Many countries in the modern history have been successful implementing ethical standards through positivism and interference in place of legal binding (Mullerat, 2010). It helps the management reach their goals and contributes towards social and community development as well. Positivism is exercised when a company can recognize the institutional pressures, but they can inculcate work ethics through education and training (Mujih, 2012). The crux of the situation is that management’s perspective for effective CSR practice is an implementation of a certain code of conduct along with education of ethics and also making it a part of the compensation package. At the same time, revising reinforcements of employee conduct can promote ethical action as well (Jonker & Witte, 2006). The Corporate Social Responsibilities of the organization are mainly governed by the ethics of business. According to Mujih (2012) Corporations are not bound by any ethics. It has an obligation to generate profit within the legal system (Mujih, 2012). The organizations can make profit and money as much as they want by ensuring basic rules of the society and the ethical customs varies with the norms of society. Therefore, the decisions that the organization should take at managerial or individual level are not bound by any of formal binding legislation until and unless they are in favour of the society’s custom (Agalgatti & Krishna, 2010). Part B Introduction Corporate Social Responsibility (CSR) has emerged to be a significant consideration in contemporary business processes. Banerjee (2009) defines CSR as a set of actions of a company that changes business operations to improve, maintain and sustain impacts on society and environment (Banerjee, 2009). In other words, it is ethical conduct and governance of the organization to improve the quality of life, economic and environmental development for employees, community and global society. However, CSR’s idea among different organization varies with respect to cultural difference, business opportunities and development of employees. McDonalds Corporation is the worlds largest and the leading fast food chain in the QSR industry that has specialized in hamburger, french-fries and soft drink, with average revenue of $15.9 billion operating across 199 countries around the world. Researchers suggest larger organization should have a greater contribution towards the environment and ethical practices. The main objective of the research paper is critically to assess Corporate Social Responsibility Report of McDonalds with respect to ethical environment in which McDonalds operates and impact on its business behaviour and organization performance. Overview McDonald is an American fast food chain that operates in more than 199 countries all around the world. In 1940, Richard and Maurice McDonald established the first McDonald restaurant in Bernardino, California. The company is one of the leading fast food chains around the world that yields enormous profits. It sustains its competitive edge in the market on its principles of mass production that has provided opportunities to expand its franchise outside United States since 1967. McDonalds have been focused to improve it quality and services focusing on its social performance. Currently, the company has several aspects of CSR activities, such as, environmental, animal welfare, Ronald McDonalds Charity houses and healthy lifestyle. The company established Global Environmental Commitment in 1990 in which it effectively managed solid waste by reducing packaging and production materials. McDonalds operates in a dynamic culture due to which it is essential that the company should consider cultural differences in its governance. However, McDonalds had been facing several CSR consequences in the past that the company has addressed in its current practices. CSR report of McDonald (2010) highlights that company’s core are based on key five areas, nutrition and well-being, sustainable supply chain, environmental responsibility, employee experience and community. The quality of the products remains to be the dominant aspect of McDonald’s mission. Analysis Model of CSR - Carroll’s Four-part Pyramid Fig 1: Carroll’s four-part model of CSR Carroll’s Four Part model of CSR is implied to analyse CSR report of McDonalds. The Carroll’s CSR Model focuses on the entire range of business responsibilities (Carroll, 1991). It states that the social responsibilities of the organization are constituted on the foundations of four parts, economic, legal, ethical and philanthropic. According to Carroll (1983) “Corporate social responsibility involves the conduct of the business of that it is economically profitable, law-abiding, ethical and socially supportive.” He states that organization’s foremost considerations should be its profitability and obedience to the law when we talk about firm’s ethics and to what extent it supports the society in terms of money, time and talent. Economic Responsibilities Economic responsibilities of the pyramid highlights that the business is responsible for the production of goods and services that are required by the consumer society. It also involves selling of products to customers in order to generate profit for economic development, such as, returns of stakeholders, fair wages and safety of employees and meeting demands of customers (Schwarz & Carroll, 2003). Thus, it is the first responsibility of the business to be a functioning unit of the business. Legal Responsibilities The corporation’s decisions and actions should be according to law. Thus, the organizations are legally responsible to take initiatives within defined legal framework. If the organization ignores or neglects its legal responsibilities, the organization may face several losses and damage to its brand image. Ethical Responsibilities Carroll explains Ethical responsibilities of the corporation, are not imposed by the law but it is the general expectation of society that is more than economic and legal expectations. Philanthropic Responsibilities Philanthropic responsibilities of the organization are the top most of Carroll’s pyramid. It is focused on luxurious aspects of the society that is improving the quality of employees, communities and society. In other words, it states that the organization makes money from the society; it should also spend on the well-being and betterment of the society. McDonald’s CSR report (2010) highlight that the organization anticipates demands of its customers. McDonald is committed to providing high-quality food and enhancing experiences at restaurants. Therefore, it has expanded its offering to its customer with salads, grilled chicken wraps, etc. In addition, it is increasing its conservation to animal welfare for its sustainable sources. Cattle farming and potato plantation are one of the major welfare programs that the organization follows to sustain its resources, as well making contribution to the development. McDonalds has been dedicated to improving its performance through incorporating demands of its customers, and it is focused to listen to its customers with accelerating the choices of fruits and vegetables in it menus. Therefore, McDonalds has increased its participation in corporate volunteer programs to improve local and global resources. Hygienic concerns play a crucial role in the QSR industry. McDonalds had been facing severe criticism because of its unhygienic food. It has been criticized for its poor food storage condition and use of fatty food material in its food products. It has adversely affected the brand image of the company due to which it now more focused to incorporate fruit and vegetables in its menu. However, the CSR report of McDonald does not tell about any of the efforts of the company to reduce the use of fatty material it used it food, or increasing the use of non-organic food. However, the McDonalds is increasing its fruit and vegetable product line in its menu, it should also focus to improve its previously existing menu and their recipes. McDonalds is more focused to participate in animal welfare and plantation. According to the information of CSR report it can be identified that the company is more inclined towards cattle farming and potato and lettuce plantation. However, McDonald has also a large chicken menu and other vegetables but it is not making any efforts for chicken welfare or other vegetables. It shows that the organization’s contribution toward animal welfare is not fair. In addition, it can be identified that the McDonald’s CSR goals are focused to improve nutrition and well-being but the focusing only on beef and potatoes plantation is a contradiction to healthy menu that McDonald claims. McDonald is focused to provide high-quality food to its customers. People are inclined towards healthy and nutritional attitudes and behaviours for their healthy figures and health. As being a part of the fast food restaurants, McDonald have been linked with the growing number of obesity (Anon., 2010). It has been observed that the material used in the food and oil contains ten fatty acids and monosodium glutamate. The substances increase the risk of heart diseases and obesity. In addition, saturated fat in the products increases blood cholesterol. Most of the saturated fats have not been mentioned on the food label due to which they have casted negative impact on the people. Thus, it is important that the McDonalds should also take initiatives to improve its existing menu by reducing the use organic and fatty material in its products. The organization can contribute to society by participating in fitness plans that can improve ethical conduct of the company. Moreover, McDonald should improve its participation in global community development programs. The CSR report (2010) reveals that McDonalds is aims to be environmental responsible by increasing adoption of energy efficient equipment and technology in restaurants. McDonald aims to increase awareness in business operation by reducing the costs and increasing benefits for the environment. However, the workplace safety, employee opportunities and training and diversity in McDonalds have been effectively managed. The leadership at McDonalds is strong as the best graduates of Hamburger University are employed in McDonalds (Anon., 2010). It continuously strives to improve employee’s experience at McDonalds by providing them incentives, safety measures, bonuses and friendly work environment. In addition, it supply chain system has increased communication with its suppliers about sustainability. McDonalds has developed global forestry policy in order to ensure overall sustainability with land management commitment (Anon., 2010). It is working with the supplier to make use of wood fibre to ensure environmental sustainability. The Fast Food Industry is quality and price sensitive. The ethical consideration in terms of food quality, customer experience and employee satisfaction plays a crucial role in the industry. However, food quality and taste is the dominant aspect that the McDonald should consider. Thus, the organization should be very careful of the quality of material it uses in its products, reduce the packing costs but ensure health and hygienic concerns. In this industry, the organization may lose its potential client and quality of food. Part 3 Code of Conduct for Wal-Mart As a manager of multi-national retail company like Wal-Mart I would require a code of conduct that would focus on building relationship with our stakeholders, which are the customers, suppliers, competitors and employees. In this regard, I would set the rules that would allow managers and employees to carry out their behaviours according to the guideline existing in the code of conduct. It shall be applied to all the associates, directors as well as third parties like suppliers, business consultants and other service providers (Brown, 2012, p.170). Significance of ethical considerations Ethical concerns or considerations refer to a person’s moral judgment to know the difference between right and wrong. In a retail company like Wal-Mart, we need to undertake decisions that are ethical because employees tend to follow the behaviour and rules of the senior management. However, the attitudes and behaviours of the employees are also influenced by the organizational culture, so ethical code of conduct and corporate governance plays a vital role in ensuring that there are fair and equal work practices. Ethical concerns has a wider role than to bring improvement in business areas, they also address environmental and community development plans through investments of times and funds and may also include lobbying within the organization for any social or political change (Carroll & Buchholtz, 2008). Wal-Mart’s Ethical Values Wal-Mart is a retail company that exercises an ethical code of conduct based on three main principles. First, to maintain respect for individuals, secondly have focus on product and service to the customers and thirdly, executing business excellence (Wal-Mart, 2014). Thus, I would establish a code of conduct for the company would exhibit rules that back the three principles. The code of conduct would abide by the corporate law and should relate to fair and equal work practices at the personal as well at the community level targeting to all the stakeholders at the global level. Before joining the organization, every employee must sign an agreement with the company to abide by the company’s code of conduct. Ethical Issues There are many different kinds of ethical issues that can be faced by the company. Thus, with respect to varying circumstances, the following ethical issues are faced by most organizations today. 1. Dishonesty/ distortion of facts Being dishonest and manipulative is one of the common unethical behaviours carried out by most of the associates in any workplace. It leads to participation in any fraud in order to get monetary gain, praise or promotion. Dishonesty and deception also lead to theft, meaning stealing of any material or monetary object for personal gain or interest. Deception is a form of dishonesty that violates company’s policies. Moreover, with-holding any accurate information, misleading and confusing others also come under dishonesty which ultimately threatens company’s profit-making capacity. 2. Irresponsible behaviour Irresponsible behaviour raises ethical concerns as it means that the associate intentionally does not commit to his assigned duties or responsibilities. Irresponsible attitudes and behaviours affect the performances of the scheduled tasks as work gets disrupted due to neglect, avoidance or procrastination on the part of the associate. In this regard, the norms of the company can be made strict, and the assigned tasks can be allotted specified time frame so that associates abide by the rule, maintain a responsible attitude at the company. However, in case of prolonged irresponsible behaviour, the company shall place a fine on the associate and in serious circumstances the company can issue warning and suspend the employee for the unethical work practice. 3. Coercion Supervisor exercises coercion or the senior associates in order to exercise control over junior staff. The common forms of coercions carried out in the workplace are late night sittings, giving tough unachievable targets and getting the work done through power and authority. Coercion is carried out if there are personal grudges amongst the peers. In corporate environment, coercion leads to unhealthy work environment, which can damage relationships. It is an illegal practice and is discouraged in order to maintain a good work environment. However, it is important to state sometimes management needs to coerce its employees to follow an ethical code of conduct in order to maintain discipline. Managers may use the threats of termination in order to get punctual attendance and increased performances. Coercive management schemes may backfire as employees may become resentful and show resistant attitudes. If any employee faces workplace coercion he may file discriminatory charges using EEO as the basis so that they can exercise their equal rights at the place. 4. Inappropriate behaviour/ abuse, harassment Harassment is a serious offence and has become common at most of the organizations today. Abuse can be in many forms and illegal under two circumstances. Firstly, when harassment occurs due to a person’s colour, creed or ethnic origin and secondly it can be related to protected characteristics of individual, taking place through backbiting, making of fun of the peers, belittling, verbal and sexual abuse. Workplace harassment takes place when the management of the company engages in explicit and implicit conducts, exercises favouritism, and there is an intimidating environment. Wal-Mart would respond to the harassment concerns by implementing a strong company policy with disciplinary action against the violator. Moreover, investigation shall be carried with a corrective action under accounting principles and practices. 5. Unnecessary waste and consumption Wasting and unnecessary consumption of company resources is unethical. People responsible for such behaviours shall be penalized and fined. The company would establish a policy of safeguarding its assets with respect so that the company can utilize them for the right purpose. An effective code of conduct ensures that the employees conserve its resources, conserves water and energy in order to promote ethical sense in the society. Wal-Mart uses a company policy to reduce waste, sell sustainable and recyclable products to avoid wastage and extravagance of material resources. It also helps in reducing costs for the company. 6. Breaking Company’s confidentiality Every organization contains factual information regarding their proprietary and working criteria through which it operates and competes with its rival firms. The company relies heavily on its employees to keep the information privately and confidential. Breaking the established rule is a serious crime and can lead to termination of the employee. In order to handle privacy, the company may carry out strenuous background checks of the employees if they are caught disclosing private information of the company. It shall not only have an effect on reducing the trust with the employee but also have an impact on the profile, career of the employee. 7. Acting as a bystander, failing to report unethical behaviour of anyone Acting as a bystander means that an employee is an eyewitness of any unethical practice. It makes the person equally responsible for the crime because he is covering the offense and do not report the practice to the Ethics Office. However, many innocent bystanders suffer from the consequences of irresponsible subordinates due to their non-interference. Wal-Mart advises employees to support the victims of the perpetrators and immediately report any inequalities witnessed in the workplace. Failing to report any incident could lead to suspension depending on the severity of the case. 8. Favouritism/ Nepotism Favouritism and Nepotism is a common ethical problem existing in many companies today. Exploitation of power is carried out especially in bureaucratic set-ups where there the senior executives exercise strict rules and are involved in certain wrongdoings like favouring few employees (who may their relatives) and discriminating others on the basis of their personal disliking or grudge. The code of Conduct entitles the company to carry out hiring, promoting, rewarding individuals based on their performances using equal employment opportunity as a base. Implementing Code of Conduct for Wal-Mart According to our code of conduct an employee may report to the supervisor using the concept of “Open Door” which can be exercised by raising the concern to the supervisor and if the supervisor is involved then contacting the Ethics Office. The Ethics Office of United States is always answers to the complaints maintaining confidentiality of the complainer. Complaints can be made through phone, Email or via Post mail (Wal-Mart, 2014). The matter in the Ethics Office comes under the Internal Audit Department, which will have an access to all the factual information, will review and assess the report. They would carry out further investigation of the subject. If a person would be guilty then, he would be given a warning letter or fined according to the severity of the situation. The Internal Audit Department along with the Legal Department and Ethics Office shall make plans to resolve the issue in hand. The ethical matter shall be kept under supervision, and the concerned authority shall keep the summary of the receipts as well as the progress of the case till it is solved (Wal-Mart, 2014). Action against Violators In the case if there is any unethical code of conduct then we can take any disciplinary action, which could lead to criminal charges, fine, temporary suspension or termination. We encourage self-reporting if any involuntary or unintentional violation takes place in order to avoid strict and severe disciplinary action to be taken against the violator (Aswathappa, 2010, p.711). Waivers We will have the authority to waive any disciplinary action upon the request of the associate and the Ethics Committee provided that the facts of the situation are written down on the paper with supporting evidences along with an undertaking to remain honest and answerable for further scrutiny on the subject. With respect to waivers, we would require approval from the board of directors and support from the Ethics and Audit Committee (Aswathappa, 2010, p.712). List of References Agalgatti, B. & Krishna, S., 2010. Business Ethics. New Delhi: Prakashan Publisher. Anon., 2010. CSR Report: McDonalds. New York: McDonalds. Aswathappa, 2010. International Business 4E. New Delhi: Tata McGraw-Hill Education. Banerjee, S., 2009. Corporate Social Responsibility. 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