Sunday, May 4, 2008



Modern Business Ethics and Dilemmas

Modern entities are acquiring large significance due to their size and the influence exerted by them. These business corporations have become a method of property tenure and means of organizing society’s economic life. The growth of business houses has evolved a corporate system. These corporate systems have gained prominence and have with it the attributes of power and can deal with itself as a major social institution. While making a decision, a manager has many questions which need to be answered- What is right, for whom the decision will help, for whom it will harm, what will be the gains and losses and what would be the optimal decision which would make everybody happy.

The most important people that are connected with the company are the stakeholders. These stakeholders include all individuals or groups who can effect or is affected by the actions, decisions, policies, practices or goals of the organization.

These stakeholders are divided into 3 categories:

1. Focal Stakeholders- Business house or the top management

2. Primary Stakeholders- Owners, customers, suppliers and employees.

3. Secondary Stakeholders- All sets of people other than those in 1 & 2. Includes consumers, government, general public, society, media etc.

Actions/ Demands of the entire all the above stakeholders exerts certain ethical dilemmas on the company which could be divided into two types:

· Open: Where the problem is open to the public and could be seen. For eg: theft, bribery, sabotage, espionage etc

· Concealed: Hidden. Complex and covered by rules and laws. Difficult to locate and becomes a potential danger to the corporate. For eg: Inside trading, bad HRM policies, corporate acquisitions and mergers.
Right in Theory, do ethics work in business?

Questions that are generally asked is whether all the theories really work in real life? Can these theories guide ethical decision making/ Do they work where the market is a battle field and where every product is fighting for a place in the market?

The surprising thing is that every manager thinks that the competition is breaking the rules of ethics except him and he has to take protective measures.
The question generally asked is that when the market is full of unethical companies following unethical routes how could a competing company remain ethical? The managers feel that the company would be put to disadvantage, if they follow ethical means. The stock markets and even the local auto repair shop is full of examples of the unethical practices followed by them.

However it has been proven time and again that if every organization commits itself to the path of honesty and culture, it can certainly overcome all the difficulties of enforcing ethical values and principles.

Is Business Bluffing Ethical?

Without truth as a guiding principle, any discussions become valueless. More often than not we lie, tell half truths or keep quite to some questions. We regularly distort, alter, and manipulate the true information in order to tailor it to the discussions. What words we say and how we say conveys a lot of meaning to the listeners. Truth is not always a wise policy. We need to keep certain things away from public eyes to avert greater disaster.

What is Legal is Ethical?

A decision that a manager makes has broadly three components:

· The company requirements like physical targets, financial requirements, profits etc.

· The moral standards of the company based on the social structure of the society, corporate social responsibilities and ethos of the company.

· Legal requirements of the company and particular situation.

Of these the most important is the Legal route. The legal route is essentially a compliance based approach where the decisions follow existing laws. Moreover the legal compliance route goes against the philosophy of empowerment. Empowerment gives the managers resources, discretion and the authority and then a trust to make good and ethical decisions in the interest of the company. Compliance to legal requirements simply kills the initiative and to follow on the dotted line of the law.

Law should be taken only as a guideline so that the decision maker is well within the laid down laws. The law gives only a level of acceptable behavior whereas it does not inspire human excellence that is required in business. A manager should be aware of the rights as well as the power he has in his hands for making ethical choices in decision making.

There are four types of justice based on larger principles of justice:

· Compensatory justice: Compensating someone for past losses or harm or injustice.

· Retributive Justice: Serving punishment to a guilty who has done harm to a person. The criterion is that the punishment should be in accordance to the crime.

· Distributive justice: Fair is equitable distribution of benefits and burden. Some should not get undue gain.

· Procedural justice: Good rules, fair decisions making processes, procedures and agreements among the parties. This is applicable in all cases especially in contracts.

Corporate Social Responsibility and Ethics

Social responsibility is defined as the intelligent objective concern for the welfare of the society. Social responsibility should lead to position contribution towards human betterment. The social responsibility restrains individual or corporate behavior from destructive activities even if it means losing immediate profits. There are 2 important elements of Corporate Social Responsibility (CSR)
· Business should take account of its responsibilities.
· Society to accept responsibility of setting ethical standards in the society
Adam Smith considered that making pure profit is a social responsibility of any business as long as some part of the profits is ploughed back to the benefit of the society. By ding this, the company earns a good RQ, which gives the company a better and lasting brand image and helps in its financial performances.

Is Maximizing Profits unethical?

In the high level of competitive markets and free economy it is seen that the function of business is economic and not social. The policies of the business should be guided by economic criteria and actions be dictated by the profit maximization within the social and legal framework. Considering any other factor other than profit maximization will be deliberately sacrificing profits. From the point of view of society the profit maximization may not be the best outcome from the business entity.

· Profit is necessary for the survival of the business. The growth of the business is dependent on the level of the profit earnings of the organizations. The company has to survive by making adequate profits for itself and for growth.

· Equally important is the fact the pricing policies of the firm have to be in line with the competitive advantage of the business entity.

· The next principle is the business has to take into account, is the fairness that is combining social activities with the established economic activities of the business.

· The final argument is the legitimacy that is the social issues are the concern of the government.

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