Making business decisions and ethics - Essay Example

Ethics involves making decisions between right and wrong. Following all the rules and regulations is a good thing for a business enterprise, but it does not mean that a person is being ethical. Ethics are subjective and its application depends on the circumstance. For example a company in order to maximize shareholders wealth decides to fire 1000 employees. The move might be a wise business move, but some people might consider it unethical because the firm put out of work people that needed those jobs.

Ethical standards vary depending on the culture. In many Asian countries paying off bribes to governmental officials is viewed by many as a standard business practice. In the United States paying off a bribe is considered an unethical act. 2 In the normal course of making business decisions, there are many instances where determining the exact opportunity cost for a project or opportunity is not possible. The best sometimes one can hope for is being able to calculate a reasonable estimate for specific opportunity based on known parameters and assuming certain outcomes.

For example one might decide six months ago that a specific process improvement project for a product line is better than investing in the development of a new improved product line, but after finishing the process improvements unexpected changes in technology significantly lower the demand for the product making it obsolete. There is a high level of uncertainty in business and factors such as changes in the economic, social or business environment can have a detrimental effect on previous assumptions .3. Rising interest rates can have a detrimental effect in the ability of a firm to obtain new financing since overall financing costs will increase.

If the businesses current and long term liabilities are under a variable interest the firm is fully exposed to interest rate risks, unless interest rate hedging is incorporated in the company's financial structure. If the firm has a fixed rate for their liabilities, an increase in the interest rates will raise the market value since it would trade at a discount but would not affect the book value of the liability unless financing terms are modified or the liability is refinanced. 4. A few years ago I worked at an organization in which there was absolutely a complete lack of ethics by the administration.

The firm did not believe in treating the employees with respect. Every pay cycle the company would steal hours worked from different employees in order to pay them less. The payment of payroll was always late. Sometimes the payroll would be late as much as two to three weeks. The company promised paying production incentives and then it decided not to pay them. This place was a breeding ground for unethical behavior. 5. To me one of the biggest ethical scandals in the last few decades is the Nike Corporation fiasco.

Nike Corporation is a firm that generates billions of dollars in sales annually. At the end of the 1990’s Nike was involved in the utilization of sweetshops to manufacture its products. Imagine a company that charges on many of its shoe models between $100 and $150 paying its workers a few cents per hour. It is abusive and inhumane. The workers in these sweetshops were exposed to horrible working conditions. 6. Possibly the biggest accounting scandal in the history of business is the Enron case.

This case involved a company that violated all ethical standards you can think of. The managerial staff of the company was composed of a bunch of gangsters. Prior to the price of the stock losing all its value the executives sold off their shares using insider information. The pension fund was horribly administered since the company invested the majority of the pension fund on Enron stocks. 7. To truly know whether a business decision is the best alternative available one must consider opportunity costs.

Take for example a person that decides to give up his job in order to open a hot dog stand. The entrepreneur is generating $2000 a month from the hot dog business. The person is making a