However, any business should keep its original purpose of functioning, which is making a profit. Balancing the traditional standards of profitability and burden of social responsibilities is not an easy task. A good example is our Week #3 Assignment - Ford Pinto Case. The conflicting nature in terms of the Ford Pinto case, highlighted how Ford had to weigh social costs and benefits. The design of the Ford Pinto was poor and they knew it even after they conducted several crash tests, but the decision managers made was to go ahead with production.
The Ford Pinto case shows how they ignored justice, and rights. Ford had a duty to design the products they sell, so that the risk of harm in operating that product was free from foreseeable danger. Ford failed on every level; evidence internally communicated exhibited the potential for danger early in the engineering process. They failed to modify the process even though alternatives were available. To make this even more insulting is the fact that Ford owned the patent for a safer fuel tank.
It was not right; to spend $137 million of society money to provide a benefit society valued at only $49.15 million. “An action is right from an ethical point of view if and only if the sum total of utilities is than the sum total of utilities produced by any other act the agent could have performed in it place.”[2] As noted in the case study, Ford managers reduced primarily economic cost and benefits (such as medical costs, loss of income, and damage to buildings) and these were measured on monetary terms. Ford did not take into consideration pain, sickness, death, dissatisfaction ignorance and unhappiness they brought into people lives.
In order to keep ethical standards, management must follow the law. However, there are some complications in enforcing it. The law affects and is affected by social forces and prevailing ethical standards. Although the law can codify societies ethical values, ethical decision making transcends the law in that:
- The law deals with actions not with thoughts, and therefore it does not (and cannot) codify all ethical requirements;
- An individual or a group may perceive a given law as immoral, not as a guide to ethical behavior
In today’s world it is all too prevalent to see more and more people hungry to gain success at an ever-increasing rate. Modern culture can and indeed is labeled ‘greedy’ and ‘thoughtless’. In my twenty plus years in the business world, I have encountered many of these types of people.
Ethical behavior is one of the most discussed topics in the business world today. Recent scandals’ involving some of the best known companies in the world (Enron, World Com) raises concerns about trust and corporate integrity. Corporate ethical challenges are not new and many would argue that the level of ethics practiced in the corporate world cycles up and down over time. The rewards of non-ethical behavior are often determined by the ability to not get caught. Would the companies in the news today be doing business as they have had their unethical business behavior not been caught?
For every company that has been involved in a public ethics scandal, I often wonder how many companies have not been caught and will the recent highly publicized scandals force change within these organizations. Operating in a non-ethical manner can be very profitable to a company. Unethical behavior can result in huge personal gains for the employees of today’s corporations. With the rewards so high and the odds of getting caught so low, I hate to think unethical behavior actually pays off in the long run for some companies.
The most publicized ethics scandal in recent history has to be Enron. This company began in 1985 with the merger of two Houston pipeline companies. Deregulation allowed Enron to become a matchmaker in the power industry- bringing buyers and sellers together. They generated revenue from the difference between the buying and selling prices. “The culture at Enron became one that rewarded cleverness.”[3] Enron’s former President and Chief Executive Officer Jeffry Skilling actively cultivated a culture that would push limits- Do it right, do it now and do it better was his motto. He encouraged employees to be independent, innovative and aggressive. As this internal culture grew, so did the revenue and profits at Enron. Very soon the financial community responded and rewarded Enron for their performance. In the long run, Enron’s executives could not continue to rob Peter to pay Paul, even if the culture at Enron permitted acts of insignificant rule bending. We now know the results.
WorldCom was not only bigger, but also more surprising. Internal bookkeepers simply accounted for everyday spending (that should have been deducted from income) as expenditures for "capital assets"--as if an appreciable number of pencils and paper clips bought today would still be in use a year from now. That simple adjustment greatly overstated income because expenditures for capital assets are spread over the life of the asset instead of being deducted 100% from income right away. Sure, future reported income would be substantially reduced in the long run, but WorldCom management figured that, in the long run, they would not be around and probably all dead. Unfortunately for stockholders, it was their investments that died.
Ethics plays a large part in the business world and the decision-making that we all do while at work. Knowing right from wrong and doing the best we can is where ethics starts. Usually what is right in our private lives will also be what is right in our working lives. Ethics can have a great impact on most everything we do unless we have no heart whatsoever. Whenever we make a decision, we have to think about the ethical impact of our decision. Is what we are doing right or wrong? How will our decision affect others? If we want to do right in this world, we have to think in an ethical way that is in conjuncture to our morals and beliefs.
In the business world, our decisions can affect the company we work for and also our very own future. Thought must be put into our decisions based on the ethical impact that they may have. An interesting issue in corporate management is social responsibilities. “Responsibilities can be defined as a set of obligations an organization has to protect and enhance in the society in which it functions.”[4] There are a few main components of social responsibilities. All businesses have responsibilities to its customers. The paramount duty in this respect is to provide customers with quality and safe products. Unfortunately, not all businesses follow this rule.
An example of such deception is the tobacco industry, which I feel deliberately manipulates the level of nicotine in cigarettes. Despite its declaration of managers, scrutinized research has made it clear that the industry tried to maintain the addictive level of nicotine. The purpose of it was far from humanistic addicted smokers kept buying cigarettes, making the industry prosperous and profitable.
In addition to social responsibilities, organizations also have a duty of care to protect the environment. A good example was our Week 6 case study-Ashland Oil. Ashland’s actions breached that duty and had a duty of care to the community. The company did act in accordance with this duty when it promptly authorized expenditures for the cleanup, paid for a temporary pipe to be laid across the spill to get water from the Allegheny River, and flew in Coast Guard on the company planes.
Ashland Oil promoted a great deal of negligent in regards to the oil spill. Their negligence began with the construction of the tank and grew as the oil spill continued. They attempted to show no responsibility or blame for what had happened with the construction of the tank. Nor where they ready for an incident of this magnitude. The company showed malfeasance in dealing with the issues at hand and most of the issues could have been alleviated had they taken proper care in the construction of the failed tank.
Another issue is equal employment opportunities for everyone. Although a lot has been done to destroy the system that kept women and minorities away from the top management positions, many corporations still rely on white men’s stereotypes and prejudice. Women are considered just as accessories for men and are not treated equally. In fact, some firm’s attitude toward employees often determines the way employees feel about the company. As a rule, the corporate code of ethics contains the pattern of behavior, an employer expects from employee.
Another example is from our Week 2 Case - Ann Hopkins. Based on the facts in this case, Ann Hopkins was indeed a victim of sexual discrimination. Her style and business demeanor was not accepted among the male partners and they felt threatened by her assertiveness and desire to always win. When her interpersonal skills were addressed, Ann did everything within her power to try and change and accommodate the company and truly make the effort needed to show her sincere and willing attitude to do what it took to get the job done.
Price Waterhouse did discriminate against Ann Hopkins by permitting gender stereotypes to play a significant role in its decision to deny her promotion. Her aggressive style irritated some partners who did not work closely with her. She didn't seem to fit the mold they had for women and they tried to change her looks and behaviors. They acknowledged using the forms and written comments in the evaluation phase when determining her appointment to partner. Included in these comments were remarks made about her masculine characteristics, which are against the stereotypical ideal they held for a woman. They discriminated against Ann because she was female, and didn't fit the company mold.
Another example is our Week 1 Case - Paul Cronan. This case was an example of legal and ethical reactions associated with minorities in general and disabled persons in particular. It illustrates the interplay between law and ethics, and that mechanical application of the law does not automatically produce a correct result. The case was settled out of court and we will never know how a jury would have seen the facts of this case. However, even if it had been found that New England Telephone Company followed the letter of the law, it failed to live up to the higher standard of ethical treatment of its employee, Paul Cronan. He alluded to the fact that there was a great deal of prejudice against homosexuals in the working class neighborhood of South Boston where he worked.
Regardless of a person’s sexual orientation, it was unethical behavior on the part of NET that contributed to Mr. Cronan’s inability to work and support himself. NET made a public statement at a news conference announcing the settlement, which it did not treat its employees with insensitivity but their actions seem to contradict this. They even drafted a corporate AIDS policy stating that AIDS is treated like any other illness contracted by an employee. I wonder under the circumstances if an employee with lung cancer would have suffered the same invasion of privacy, humiliation and harassment that Paul Cronan did.
There is no particular solution for any of these issues. There is only hope that ethical standards and social responsibilities will guide every manager throughout his or her career. Professional conduct should be governed by a code of ethics that reflects positively on the practitioner and managerial profession. Simply stated, nothing should prevent a manager from maintaining high ethical standards and social responsibility in the quest for high performance and quality.
Many cases in America show us examples of the delicate balance between ethical and unethical decisions that can affect the entire complexion of business. There are many cases and situations in which unethical practices are revealed. Not always are these practices necessarily illegal, but they often are. Employees and former employees of the business often bring up the issues in civil cases involving their termination and company malpractice.
I think we still need to change our business culture to make truth both cultural and economic imperative. We must start in primary schools with real values education, but we can also de-program our current corporations of executives, lawyers, and accountants. While the President and Congress would have us scare them into telling the truth, we think the problem will be resolved more quickly and completely with a simple two-step approach. First, those in business need to be assured that telling the truth is not only okay, it is what the people they are working for want. We are already seeing that message being conveyed in the market by investors who are punishing those firms that have been identified as having engaged in so-called "aggressive accounting."
Merely reinforcing the fact that virtue is its own reward is not enough, though. We must overcome two generations of moral relativism and teach executives, accountants, and attorneys how to recognize the truth. For instance, most professional licensing organizations require licensees to participate in continuing education, and a small portion of that requirement is generally satisfied at the end of a long day of "substantive" learning. However, investors and clients are beginning to realize that ethics is a part of substantive business. Lawyers and accountants have so long viewed themselves as being mouthpieces for a particular spin on a client's business that they need to be taught the skills necessary for ferreting out the truth and evaluating the dynamics of business that might, and often do, lead to fraud.
Business and professional schools across the country are making noises about "getting serious" about ethics, but what will this mean in practice? Unless we reconnect with the source of our ethical precepts, grounding moral rules like "don't lie" in deep moral habits and our religious tradition, once the latest crisis of confidence passes, it will be business as usual.
As we work to reestablish an ethical structure to business behavior, we had best remember our need for religious moorings. Otherwise, we will continue to see more Enron’s and WorldCom’s, whether new laws are put on the books or not.
To conclude, businesses everywhere walk a very fine line when it comes to the topic of law and justice as well as ethics. Companies can do all they please to try to insure themselves from the many controversies arising from unethical decisions by their employees and associates. Codes of ethics or bylaws will take some of the risk and liability away, but not 100% of it. The best that one can do as a leader of a corporation is put his/her foot down and stand up for what is correct and right. It needs to be demonstrated from the top down in a business that unethical practices will not be tolerated. A strong emphasis on ethics should be practiced at the corporate level. Not just as a PowerPoint slide in the a conference room but as a training program for employees at all levels: Executives, management and employees.
Lastly, the law versus justice question is very vague and ambiguous. The simple answer: When the government is enforcing the law, it must do so unarbitrarily. When citizens are concerned, they needn't be concerned with the law, they just need to be concerned with justice. Justice has always had a flexible definition - everyone's definition is different. Upholding the law is always important. Law should not be influenced by the thousands of different moral codes out there, each with a different meaning for justice.
Business is not a machine. We can't simply "fix" it with a new law here or there. The U.S.'s free market economy is made up of real people; acting on the basis of real motivations that include, but are not limited to, the desire to obey the law. People's actions, in business as in all areas of life, are deeply affected by those they deal with every day. Nowhere is this truer than with securities laws. America's complex legal system requires people in business to rely on (and persuade) attorneys and accountants. The securities laws are clearly meant to check individual and corporate greed, limiting it and channeling it to socially useful ends. However, they do so through the persons of professional advisors and experts, and those experts are not doing their job. Why? Because they don't know what their job really is or should be.
As a nation, we increasingly are losing our understanding of just what it means to act fairly and honestly. To be sure, we have a multitude of laws on the books that say, in essence, "Thou shalt not lie." However, the very number and complexity of these laws, applied in different ways to almost every aspect of economic life, have blurred the basic point: Lies are evil. The very complexity of our laws has encouraged many professionals and businesspeople to find ways of conducting business that arguably fit within the letter of the law while avoiding its true intent. The game is not whether a statement is true, but whether it can be defended as not knowingly false. Moreover, those accountants and lawyers who choose to game the system are seldom caught and punished because their professional associations--those who are supposed to police their conduct--no longer understand what it really means to lie or tell the troth. We have become so tolerant of half-truths, hair-splitting definitions, and the notion that truth is "subjective" that we have lost our ability to enforce basic, commonsense honesty, even where it is crucial to our economic well being.
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Bibliography and Works Cited:
[1] Chua, Dennis “The Search for a Businessman with Ethics” The New Straits Times Press, 1/29/02
[2] Velasquez, Manual “Business Ethics – Concepts and Cases, 6th Edition
[3] Special Collection: "Enron & Ethics", From , http://www.businessethics.ca/enron/
[4] Velasquez, Manual “Business Ethics – Concepts and Cases, 6th Edition
