The Business Ethics Course and Ethical Practice in Management - Essay Example

I. First Entry: Where I stand before taking the Even before taking the Business Ethics I already knew that ethics is important. It is important because it guides an individual or a professional to do the right thing in the dispensation of his or her job or profession. Ethics, I believe is part of professionalism. But I have to admit that my knowledge about ethics prior to the course was limited. I only knew it was important and my understanding was limited to generalize idea such as “we should always strive for the right thing to do” and it being ethical is always desirable. I came to the realization that ethics was important because I was aware that the recent financial crisis that rocked the world that made lives difficult for everybody was rooted in greed and lack of ethical practice in business. This explains why I was appreciative when I took the subject because I will have the opportunity to learn in details what really constitutes an ethical behaviour and to be able to discern the ethical behaviour from the unethical or undesirable one. I believed that this was important to learn especially when we are still in the academe and still in the process of equipping ourselves the necessary skills and knowledge so that it will be ingrained within us to become better professionals in the future. The lessons that we will learn would guide us when we make our choices in any ethical dilemma that we would confront, be it in business or in our daily activities. II. Second Entry – Evaluate The Theories Given the recent scandals that rocked the business and financial world, it now becomes an imperative that each individual entering into the corporate and financial industry must have a sound ethical foundation to avoid similar occurrences in the future. It should begin right in the academe where future professionals, employees or entrepreneurs are being trained and prepared. It is now important because the neglect and disregard for ethical practice in business has contributed to the recent financial and mortgage breakdown that stemmed from greed and lack of ethical practice that made life difficult for everybody. The high incidence of unethical practices in modern business has prompted a stream of organizational research about morality in business (Crane 1999). In fact, industry experts such as Ernst & Young has pointed out that unethical business practice is the main culprit that precipitated the recent economic crisis which caused a lot of jobs and homes to be lost that made life difficult for everybody which is why it is now an imperative not only to integrate but also to stress ethics beginning in the academe when future business professionals are being trained and prepared (Business Roudtable-Institute for Corporate Ethics 2009). The obvious disregard about business propriety is not surprising as Crane and Matten hypothesized that business in itself has been argued to be amoral that to put ethics in business is an oxymoron because they contradict each other (2010). Business in pursuit of its profit motive will invariably set aside ethics as it endeavour to make profit. Actions which may be considered unethical such as lying and deception may even become permissible in the business’ pursuit for profit (Carr 1998 qtd in Crane and Matten 2010). This is consistent with the consequential normative ethic theory that “holds that the moral rightness of acts, which holds that whether an act is morally right, depends only on the consequences of that act or of something related to that act, such as the motive behind the act or a general rule requiring acts of the same kind” (Stanford Encyclopaedia of Philosophy a 2011). In plain language, a business person may be prompted to choose a certain course of action or inaction based on the benefit or the avoidance of harm that may be derived from such action or inaction. In the case of business, it can chose to shun any propriety in conducting business with the idea that it is more expedient to make profit by disregarding scruples in conducting its operation. Business expediency for profit can also take form in utilitarian ethics. Utilitarianism is the view that “the morally right action is the action that produces the most good” (Stanford Encyclopaedia of Philosophy b 2011). While this can be good when viewed at the proper perspective, utilitarianism can also be thwarted to justify what is expedient such as the case of Worldcom, Enron, and Andersen among others who disregarded business propriety by justifying it with the benefit of profit. Deontological aspect of normative ethic may be the safest for business because it compels them to follow the law or rules of business as this ethical norm meant following a certain rule or code. Deontological aspect of normative ethics also meant “doing what is right”. “In contemporary moral philosophy, deontology is one of those kinds of normative theories regarding which choices are morally required, forbidden, or permitted” (Stanford Encyclopaedia of Philosophy c 2011). It is based on following rules and fulfilling one’s duty. It can be enforced by the government through legislation such as the Sarbanes-Oxley Act of 2002 to ensure objectivity and independence in financial audit (US Securities and Exchange Commission 2009). There is also an ethic which need not be legislated nor requires the following of rules but just doing good out if its sheer goodness. For me virtue ethics is the highest form of ethics. Virtue-ethics doctrine meant doing something good not out of expectation of anything or out of fulfilment of a duty or following a rule or code, but because an individual really intended to do good. It “emphasizes the virtues, or moral character, in contrast to the approach which emphasizes duties or rules (deontology) or that which emphasizes the consequences of actions. There is also an ethical principle that can be dangerous because the merit of its propriety depends on one’s culture which is ethical relativism. “For the ethical relativist, there are no universal moral standards -- standards that can be universally applied to all peoples at all times. The only moral standards against which a society's practices can be judged are its own” (Velasquez et. al, nd). III. Third Entry: Dissecting Enron, how it disregarded ethical practice in every stage of management If one is to study about how a company violated business ethics in every aspect of management (planning, organizing, leading and controlling), Enron would make a classic and an interesting case that deserves to be in the books. From the planning until the controlling stage of a business, Enron manifested how it blatantly disregarded any sense of ethical scruples as a business enterprise. a. Planning It is just but natural for every business enterprise to plan on how to increase its profitability. After all, for a business to remain a going concern, it has to make decent profit to fulfil its obligation to its various stakeholders that include its investors, its management and its employees. But when profitability becomes the sole motivation of business to the point of greed and disregard to ethical consideration in conducting itself as a business enterprise, is where the problem begins. As a business enterprise, it is not ethical to have it as among its objectives the increased valuation of its stock prices. After all, it is a responsibility of management to give returns to its shareholders for it to continue and to thrive as a business entity. Enron’s mistake begun when it solely focused its business objective on increasing the value of its stock prices and the enjoyment of benefits that can be derived from increased profitability. When it became engrossed with profits and the enjoyment of its perks, it lost its sense of business propriety. It resorted to financial acrobatics that is tantamount to lying and cheating about its true financial standing for the company to have a favourable outlook in the market. What could have it done instead is to plan how to deliver better products and services that provide customers real value and service. That way, Enron will be able to increase the value of its stock prices based on sound economic fundamentals. With regard to Arthur Andersen, it entered into a business relationship with Enron that is considered to have a conflict of interest. It served as its auditor while also taking up management consultancy projects for the company which conflicts with its mandate of objectivity. The relationship is already wrong at the beginning because Andersen lost its objectivity and independence as an auditing firm when it became an employee of Enron being a management consultant (BusinessWeek 2002). In this incident, it is very clear that Enron and Andersen resorted to utilitarian mode of ethics. That is, what is deemed to be right is the one that yields the most favourable benefit for both companies at least for the short term. The relationship of the two companies can also be considered utilitarian because Enron used Andersen to lend legitimacy to its fraudulent financial reporting with the stamp of “being audited” by Andersen as a reputable auditing company. Andersen in turn squeezed profitability out of Enron by charging it twice both as an auditor and as a management consultant. b. Organizing There is nothing wrong with hiring the best and the brightest employees. In fact, it is desirable to hire the best and the brightest among its applicants because of the promise of competency and talent they can bring in the organization. This competency and talent can translate to enhanced performance which could ultimately redound to an increased bottom line. What Enron did that was construed as unethical was when it trained to make these best and bright employees to be ruthless traders when it organized its staffing needs. By doing so, it perpetuated a culture of greed and fraud which was eventually uncovered. What Enron could have done is to follow Google’s creed which states “you don’t have to do evil to make money” (Google 2011). It could have organized and trained its human resources to perform excellently but is still mindful of ethics. They could have set high standards that cannot be achieved yet, but in trying to achieve those objectives, they are stretching themselves to perform better than what is expected (Google 2011). Google did it and if Enron chose to, they could have done the same because like Google, they also had the best and the brightest as employees. Again, this practice of Enron is reminiscent of utilitarianism with a shade of consequentialist ethics in motivating its employees. First, Enron hired the best and the brightest applicants which is fine ethically, but when it used them to serve a selfish end of becoming ruthless traders, that is where ethical issue begun because Enron begun to look at its employees through a utilitarian eyes that would serve a selfish end. c. Leading Leadership at Enron took a twisted turn when it became obsessed with increasing the value of its stock prices. Its sense of excellence also became crooked as reinforced and perpetuated by its leadership. It promoted a corporate culture of callousness when it arbitrarily ranked half of its employees as non-performer which it will eventually fire. The other half remaining may have remained in the company but adopted a corporate value system that is virulently greedy and fraudulent as promoted and reinforced by its leadership through its arbitrary performance appraisals (BusinessWeek 2002). What could Enron have done was, instead of forcing its employees to arbitrarily rank other employees to be low performer, Enron should have promoted a culture of excellence and integrity; to continuously look for ways to improve and to stretch their capabilities and not the ability to survive in a dog eat dog environment. Enron’s obsession to increase the value its stock prices made its leadership fail because it neglected to teach its new recruits the value of ethics and pervaded the culture of fraud and deceit which precipitated its collapse and downfall. Enron followed the negative pathway of a negative consequentialist ethics which suggests that bad leadership results to bad followership. Enron exercised a leadership which is the opposite of transformational leadership that brings out the best of its followers through an idealized leadership (Corona 2010). What Enron did was sow fear as the motivation among its employees to perform and made them ruthless as a result of a callous leadership that arbitrarily fired half of its employees that it perceived to be performing below par or not as ruthless as they should be. IV. Reflection Crane and Matten hit the head of the nail about the essence of ethics that ethics start where the law ends (2010). Indeed this is true because not all ethically desirable behaviour in business can be legislated. If a business enterprise is bent on committing fraud such as the case of Enron, no amount of legislation or law can enforced ideal behaviour in business. Legislating behaviour will only encourage a deontological ethics among business enterprise which in itself is not really bad. Deontological ethics presuppose obedience to certain rules or following a duty as an ethical practice. This is the kind of ethics that the government can enforce such as the legislation of Sarbanes-Oxley Act of 2002 in response to the Enron and Andersen debacle in its effort to avoid the repetition of such fraudulent and conniving acts. But as Crane and Matten pointed out, laws have its limits and it is not the best way to elicit an ethical behaviour (2010). It can also be difficult to suggest virtue ethics among business enterprise to do things that are good for no other reason than by doing good things. As Carr pointed out, business in itself is primarily motivated by profit that when left on its own will even find less desirable action such as fraud and lying to be acceptable to realize its economic objective (qtd in Crane and Matten 2010). In fact, in the same book, Crane and Matten did not mince with words when they mentioned that “business ethics” can even be an oxymoron because they contradict in terms as business by nature in its pursuit to make money does not coincide with ethics. Applying the consequential ethics may be easily understood by business because it is the language it speaks that in every action, there is a consequence or reaction. This is evident when a business employs its strategy and marketing implements to elicit a particular behaviour from its potential customer. But this kind of ethic can also be thwarted by business especially if it has insidious mind such as Enron. The good intent of consequentialist ethics which is to be responsible of our action because it produces a reaction may be circumvented to serve its selfish end. It may justify less desirable acts to realize the consequence of profit thus adhering to the sinister maxim that “the end justifies the means” (Machiavelli 1532). Getting the right mix that would enable business to act ethically can indeed be a challenge. Getting it right so that business will act right is important because business is not just a money making enterprise but an entity which can affect not only our economic, but also social and psychological well being as well. This was evident with the recent financial crisis. I felt the crisis even if I am just a student and have nothing to do with the financial scandals of Enron, Worldcom and others. The scandals happened thousands of miles away from me and yet it affected my daily life. In a globalized economy, the act of a certain group of businesses can affect others because economies are now linked together which underscores the importance of ethics not just for the sake of being ethical but also for its economic implications when it is not practiced. It has a ripple effect which has unintended effect of causing people to lose their jobs and homes and many more economic dislocations in ways that we cannot think of. So it redounds to the final question, what is the right mix of ethics that is applicable and realistic to business? I believe that for any ethical guidelines to be effective, it has to be communicated in a language that can be understood by the receiving party which in this case is the business. Business understands very well the concept of “consequence” of an action because business strategy is founded on this concept and being such, ethical prescription for business should begin with consequential ethics. Business has to understand the importance of Corporate Social Responsibility as enunciated in most companies Corporate Responsibility Management that if the consuming or patronizing public will have a negative perception about a company because of business malpractice, it will affect their bottom line (Ellet 2009). Such, being good or ethical as a company has also an economic consequence or benefit and being such, must be desired as a mode of behaviour among business. This ethical behaviour can be translated to positive brand image which again has an economic value because customers tend to patronize products and services which they trust (Fischer et al 2010). As mentioned earlier, consequentialism has its limits because it can be circumvented to serve a particular end. Consequential ethics must also be reinforced by deontological ethics in the form of following certain rules either from the government or from a company’s own policy. This safeguards the company’s behaviour to be within a minimum desirable behaviour in case that it will be tempted to become overzealous in realizing its economic objective. Penalties imposed by legislation for violating certain rules will have preventive effect among businesses leaving them to only act ethically. Finally, when these two ethics (consequentialist and deontological) are already ingrained in the company’s value system, it would be high time to introduce the highest form of ethics which is virtue ethics or doing good for the sake of being good. I believe that when companies mature and become reasonably profitable, they will be receptive to this kind of ethic. It is because the pressure of survival is already taken off their shoulders that as a business entity, they can already transcend beyond the motive of profits and can now include social responsibility and making a difference in society and community among its priority as a business. When virtue ethics is incorporated in the company, it will be practiced in every aspect of its operation that will redound to the positive image of the company and its brand. This will ensure the long term profitability of the company because it has the trust and confidence of the consuming and patronizing public. This will reflect in the increased value of its stock price reflecting the confidence of the market not to mention the steady stream of revenue from the continuous patronage of the general public of its products and services. When these mixes of ethics are applied to the company, it will in fact be more profitable to become ethical in conducting the operation of a business than to be unethical. Bibliography Anon (2002, March 25). DON'T KILL ANDERSEN. REFORM IT. BusinessWeek, 3775, 124. Business Roudtable-Institute for Corporate Ethics. (2009). The dynamics of public trust in business—Emerging opportunities for leaders. Retrieved from www.corporate-ethics.org [accessed February 24, 2012]. Corona, Miguel Angel (2010). The Relationship Between Emotional Intelligence and Transformational Leadership: A Hispanic American Examination. The Business Journal of Hispanic Research, 4(1): 22-34 Crane, Andrew (1999). Are You Ethical? 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