Business ethics - Dissertation Example

?Introduction Business Ethics examines the ethical problems and moral issues faced by the businesses and apply to individuals as well organizations. It is a form of applied ethics more relevant to ethical conduct of organizations and individuals working in organizations. Business ethics have both the normative as descriptive dimensions however, from the perspective of the practice, business ethics are mostly considered as normative in nature. The overall emphasis is balancing the act between the commercial and profit maximizing motives of the organizations with that of the non-commercial and non-economic concerns which may directly affect other stakeholders of the organization. It has been argued that the business ethnics have evolved over the period of time however, the concept as a whole started to take roots during 1970s. Over the period of time, not only on the academic level but at the practice level, business ethics evolved and organizations started to give due consideration to business ethics. Organizations actually attempted to adapt business ethics in order to distance themselves from the dubious business scandals. As a result of this drive, overall reporting on ethical issues improved to allow all the stakeholders a better view of information regarding ethical conduct of the organizations. This literature review will provide an extensive analysis and exploration of the seminal and most recent work on the topic of business ethics. By reviewing the existing and past literature, this review will offer an insight into how the discipline has evolved and what future course of action can be taken by the researchers in this discipline. Ethics and Business Ethics Conceptually, business ethics deal with moral features of the commercial activity performed by the business entities. In practice, however there is a wide array of disciplines and subjects which are pursued under the heading of business ethics. Business ethics therefore are constructed as a discipline for moral reflection the commerce activity and are considered as as old as the trade itself is. From academic point of view, the field of business ethics however, is relatively new as major work in this field took place in the last 4 decades which witnessed growth of literature on the topic of business ethics and organization efforts to incorporate business ethics into their strategy. The roots of ethics and business ethics largely are founded in the religion as it is from here the overall need to do good emerge. Religion stressed upon the use of justice and fairness in terms of trade and commerce and thus binds its followers to observe justice, equality and fairness when dealing with others in trade and commerce related activities. The oldest evidence regarding setting up some sort of ethical bindings on the commercial activities can be found in the Code of Hammurabi which not described the rules for setting up prices but also deliberated upon setting up tariffs and other rules for the commercial activity. (Moriarty, 2005) However, the definite and more formal theory on business ethics starts with the work of Aristotle and Plato as contained in both the Republic as well as Politics. Republic, a book by Plato clearly speaks about the idea of Justice and outline that Justice is speaking the truth and giving back what one receives. This idea of justice seem to be aligned with the responsibility of the business to actually provide accurate and true reporting of its affair besides participating into the activities which are beneficial for the society as a whole. Plato’s concept of justice therefore is considered as something where Justice flows naturally from the type of activities pursued by the organizations. This relationship of justice also outlines the basic structure of the exchange taking place between two parties engaging into any trade related transactions and forming the contractual arrangements. Business activities therefore need to be oriented towards the achievement of a balance between the rights of two parties engaged into sort of trade or exchange with each other. Another important work in this regard is that of the Kant from which much of the philosophical underpinnings of the business ethics have been outlined. Kantian Ethics are based upon the issue of moral duty suggesting that an action will only be good if it is done out of moral duty rather than out of the practical need or desire. As such, Kantian ethics also form one of the basic and fundamental philosophical underpinnings for the field of business ethics. It is however, important to note that more formal work on the issue of business ethics started more recently specially during 1970s. Early work on the business ethics during the modern era which set into motion most of the latest work on the business ethics seem to emerge from two important works of Tom Donaldson and Patricia Werhane as both the works focused upon developing a central thesis behind the role of corporations with that of the social order. Tom Donaldson’s book “Corporations and Morality” published in 1982 outlined and debated on the central question of the moral position of corporations within the organizations. There have been two important questions which were debated vis a vis role of the organization and their connection with the social order. The first questions focused upon the question of whether corporations of moral agents different from people who actually formed them and secondly, how or in whom interest organizations should be managed.( Donaldson, 1982),  Donaldson’s work seeks to explore the question of moral problems of the organizations and whether organizations have any moral duty towards the society in which they operate. He argues that people perceive corporations as moral entities therefore if they are artificial persons than they can have same rights and obligations as enjoyed by the real persons and that the organizations can also be subject to ethical obligations. His work is based upon the ideas of Kant however, his overall approach seem to be subjectivist in nature as he attempted to outline the behaviors of the people towards the organizations and how modern organizations are actually perceived by the people in the modern ear. Patricia Werhane’s book Persons, Rights, and Corporations is also based upon the arguments of the moral position of an organization and what moral authority is possessed by the organizations. The arguments of both the Donaldson as well as that of Werhane are based upon discussing the moral position of the corporations specially by suggesting that if corporations can be subject to civil liability as that of the real persons therefore it is also a moral agent responsible for its actions to larger group of stakeholders. (Werhane, 1985),  Work of Peter French is also of an important nature as he critically discusses various components of moral agency. The overall corporate decision making as well as the actions taken by the organizations correspond to different components of moral agency. This argument therefor concludes that organizations are moral agents and their decisions are always subject to moral evaluation. French specifically argues that corporations have corporate internal decision structures which provide sufficient evidence that organizations are moral agents. French’s article “The Corporations as Moral a Person” appeared in 1979, few years before the books of Donaldson and Werhane. French’s work is also mostly seems to be influenced by the work of Kant as he sees reason behind the actions of human beings occupying different positions within the organization. He uses reason and rationality as two important components of his overall analysis of the role of a modern corporation within a society and how it can operate as a moral agent. His approach is subjectivist in nature too as he attempt to discuss the behavior of people under different circumstances. He argues that organizations are run by the people therefore people have their reasons while making decisions thus making organizations as moral agents too. The overall approach taken by French in this research paper is that of the qualitative study and arguments regarding the existing literature. He seems to have shaped his ideas from the existing inventory of literature discussing about the moral role of organizations in society. (French,1995). Most of his arguments are based upon logic and rationality and are not supported by valid empirical results. His work has however, attracted criticism as it has been argued that the corporate internal decisions are the product of human agency and design actually. These are the internal rules for the organizations and therefore organizations may not be responsible for the actions to which no natural person can be considered as responsible for.( French, 1979), Second most important primary debate in business ethics surround around the debate of the stakeholder vs shareholder analysis. This debate basically emerges from the basic question of how and in whose interest organizations should be governed. Stakeholders theory fundamentally emerges from the work of Edward Freeman and is also considered as the most authentic and fundamental work in the field of business ethics. This theory is normative in nature and deals with the normative challenges faced by the business ethics as a discipline. Freeman argues that the very purpose of a firm is to service its stakeholders. (Werhane,& Freeman,.1997) Stakeholders in business ethics occupy important position because this theory outlines that management decisions shall not only take into consideration the shareholders but other stakeholders also. The overall concept of Stakeholders analysis and business ethics started to mature during 1990s when much of theoretical emphasis was placed on this discipline. It is critical however to note that theoretical research on this started to develop during 1980s. Stakeholder theory is based upon two important and fundamental principles of corporate legitimacy and The Stakeholder Fiduciary Principle. Both these principles are based upon the assumptions that corporations shall only act as a vehicle for coordinating the interests of the stakeholders of the organization. Goodpaster (1991) presents arguments in work “Business ethics and stakeholder analysis” on the stakeholder synthesis rather than on the stakeholder analysis for the purpose of business ethics. Goodpaster (1991) is especially more critical of the stakeholders analysis because stakeholders are not always affected in the same manner as in which shareholders are. He is particularly of the view that stakeholders are not affected under all circumstances as sometimes they are affected minorily and in other instances they may have been affected in major way. This paper has fundamentally challenged the view of stakeholder analysis and how the stakeholders may not be true representatives for the organizations despite the fact that earlier research work has categorically described the very purpose of organizations as serving as a conduit or vehicle for coordinating the various interests of the stakeholders. This paper however, seems to differ from this established view and suggests an alternative view that stakeholders may not be directly affected by the decisions taken by the organizations. (Cooper, 1991) Work of Goodpaster is of theoretical nature too as he attempt to present an analysis of the existing literature and work out theory out of this. His approach is also subjectivist in nature as he attempt to outline the behavior of the people and their relationship with organizations in order to carve out moral identity of the corporation. It is also critical to note that more recent research on the topic has been focused on understanding the practical aspects of business ethics and how organizations actually implement the same. Holmes (2008) studies how the organizations are actually aligning business strategy with that of the business ethics. Holmes (2008) studies specifically the role of non-executive directors in implementing and ensuring the ethical conduct of the business. This study is quantitative in nature and is also based upon evaluating ethical value system of various organizations. This paper intends to cover the overall phenomenon of how business ethics can be viewed from the perspective of international business. Other theoretical points raised in this paper include a discussion on the role of non-executive directors. What is also important to understand that this article has provided practical implications for the managers to implement real business value through ethics? This paper, by studying organizations and managers, therefore presented a balanced analysis of how managers can actually implement business ethics and drive value from them for the business. Another recent research examines the relationship between the ethics and the business strategy by examining two business models of business as war and business as value creation. This is a literature review mostly based upon the sociological perspectives on ethics. This literature review suggests that organizations working with the mindset of business as war continue to see themselves as sovereign states at war with other sovereign states. On the other hand, organizations looking for value creation engage into journey of realizing their full potential of capability and service.( Hansen, & Smith, 2006). This paper has taken a subjectivist approach too as it outlines the behavior of the organization in terms of their ability to compete with each other. Philosophically, this paper has taken a very broader approach of underlying two different moral systems experienced by organizations having two different mindsets. By presenting an analysis of the recent business scandals and other related data, this paper has concluded that the modern American organizations are following business ethics but they are implementing wrong moral systems and values and thus fail to achieve the results. The overall audience in this literature review is based upon the organizations working in US and managers working in such organizations. The major strength of this work is that it offers an insight into how practically managers can actually attempt to develop a strategic mindset which is more aligned with the ethics and can deliver required results if managers are actually ready to change the game they are playing. Another and probably one of the most important dimensions of business ethics which emerged during recent times is sustainability and environment. Globalization of operations, supply chain management practices as well as need to explore new markets have created a new ethical issue of corporations’ role in damaging the ecological environment and whether organizations actually act ethically in order to sustain the environment. Zsolnai, (2011) questioned as to how corporations effect the environment and the earth as a whole and whether ethics in environmental sustainability can be applied to organization in order to better achieve compliance with the business ethics. This article broadens the scope of business ethics and extends it to animals and earth as a whole to outline as to how the overall conduct of organizations can affect not only earth but animals too. This work therefore has a relatively larger scope and sample out not only the organizations and humans but earth and animals too. This research outlines that organizations has a reciprocal responsibility to protect earth and other species too and therefore it becomes the ethical responsibility of the organizations to actually protect earth and other living things too. Though this research study aims to broaden the scope of the business ethics but it focuses on just one aspect of business ethics and do not give much consideration to the social interaction between the organizations and social systems in which they operate. This research therefore lacks the objective view about how organizations work in social settings as a whole. Comparison & future research implications Seminal work has set the overall tone for the future research by first setting up theoretical background of seeing organizations as a part of the society as a whole. Earlier works started with the idea of justice and deliberated upon making justice as an important part of the commerce activity. Earliest work of Aristotle and Plato seem to suggest that justice is speaking truth and giving back what is received. Based on this fundamental assumption, corporation’s role within the society is discussed. Work of Kant is also considered as important for understanding moral duty of the organizations. Earlier work therefore set the foundations upon which basic principles of business ethics were laid down. Work during 1980s focused mostly upon viewing the role of organizations as moral agents besides discussing their role in the larger society. Following work was therefore focused upon integrating business ethics with that of the business strategy of the organization. More recent work is more extensively focused upon defining link between the organization’s strategy and the business ethics and how ethics can actually create value for the organization. More recent work has also focused upon the role of managers and how they can actually use business ethics within the organizational settings to achieve more value for the organization. Recent work has also seem to take Kantian approach of moral duty and suggest the link between organization’s decision making process as a whole and the business ethics followed by the organizations. Future research may focus more upon the role of organization in business ethics at international level. With organizations becoming global and rapid rise of technology allowing organizations to transcend borders, future work may focus upon the role of business ethics within international context. Especially supply chain management practices have been questioned and it has been outlined that organizations are not following ethical principles when procuring their raw materials from developing countries. This could be one of the areas for the future research where researchers can put more emphasis on. Conclusion The above literature review presented a historical review of the business ethics and how they have shaped from the religious beliefs to more concrete theory on business ethics. Ethics were mainly the topic of religion as it outlined different codes and principles as to how to deal with when doing commerce. Aristotle as well as Plato also outlined the principles of Justice and how to apply them into everyday settings. However, the real philosophical impetus came from the work of Kant which formalized the discussion on ethics and it is also his theory that most of the recent work is grounded. Modern theory on business ethics starts with the work of French and Donaldson who deliberated upon the role of organizations as moral agents. Subsequent work discussed about the role of organizations within social settings. More recent work however, is focused more on understanding the practical issues of business ethics and how organizations can integrate them with their strategy. References 1. Holme, C (2008) . Business ethics – Part One: Does it matter?, Industrial and Commercial Training, 40(5), 248 – 252 2. Hansen, F & Smith, M (2006). The ethics of business strategy, Handbook of Business Strategy, 7(1), 201 – 206 3. Zsolnai, L (2011) . Environmental ethics for business sustainability, International Journal of Social Economics, 38(11), 892 – 899 4. Donaldson, T. (1982), Corporations and Morality, Englewood Cliffs, N. J.: Prentice Hall. 5. Werhane, P. (1985), Persons, Rights, and Corporations, Englewood Cliffs, N.J.: Prentice Hall. 6. Werhane, P. and R.E. Freeman, eds. (1997_, Blackwell Encyclopedic Dictionary of Business Ethics, Malden, MA: Blackwell 7. French, P. (1979), “The Corporation as a Moral Person,” American Philosophical Quarterly 16: 207-215. 8. French, A. (1995), Corporate Ethics, Fort Worth: Harcourt Brace 9. Goodpaster, K. (1991), Business Ethics and Stakeholder Analysis,” Business Ethics Quarterly 1(1): 53-73 10. Moriarty, J (2005), On the Relevance of Political Philosophy to Business Ethics, Business Ethics Quarterly 15(3): 453-471 Read More