Business Ethics : Fraud of the century - Essay Example

? Business Ethics Introduction Ethics and values are the very foundations on which businesses survive. Organisations that follow ethical business practices have more chances of getting benefitted in the long run. History is abounded by the cases of unethical businesses failing like pack-of-cards. Many call business ethics a subjective issue leaving a space for varying conduct and interpretation by business managers. Business owner or employer needs to identify those ethical conflicts in the particular business setting and resolve them for the benefit of business and company itself and should be aimed at reinforcing those values across the company workforce to create healthy work environment. Businesses face many ethical challenges in the 21st century. In the following paragraphs, an attempt is made to outline key Ethical challenges facing businesses and the steps that are necessary to stem the root. Misguiding Product Information and Unethical Advertising Profit is an aim of all organisations but when means become unethical to achieve the objective than it becomes a concern for all. Product and quality ethics are important in business. Consumer buys particular product reading details written on its package regarding weight, ingredients, manufacturing, expiry date and many other details and trust them fully. Manufacturers often write on packaging ‘no artificial ingredients’ and this has become a common cliche to convey buyers that the company cares for consumer health. ‘No artificial ingredients’ means that the product contain all natural ingredients; however, on scrutiny it has been found that product is prepared using hydrogenated vegetable oil. Hydrogenation is an artificial process done at high temperature using nickel, a metal catalyst, altering the nature of vegetable oil. The altered product is known as trans fats that is a major contributory factor behind spread of cardiovascular disease. Consumers buy the product in good faith. Such practice is surely an unethical behaviour on part of companies. Similarly, deceptive advertising along with misinformation is also a part of unethical behavior (Hogg, 2011). Violation of State Laws Asking employees to do unethical acts in the violation of state or moral laws is certain an unethical activity. For example, child labour is unethical and many companies use them to save on their costs. This is also an example of immoral act (BBC, 2010). Accounting Manipulation and Fraud Financial fudging and accounting manipulations are quite infamous to over or under report operating income causing huge losses to shareholders. The WorldCom case is well known in this respect. The company reported its line cost by capitalizing it over many years and thus reported profits misguiding its investors and creditors. Finally, the company became bankrupt causing huge loss to the investors and creditors (Romar and Calkins 2006). A famous case of Enron is worth mentioning here that began with many unethical practices including account fudging to misguide the gullible investors. Eventually, the company failed registering bankruptcy under chapter 11 (Ackman, 2001). Unequal Remuneration and Lack of Transparency Unequal remuneration based on gender or racial consideration is another area where companies behave unethically. Lack of transparency in company policies and discriminating behaviour may cause conflict across all levels and stunts the growth of organization. Creating Ethical Culture Creating ethical behaviour is a need of the 21st century for the healthy growth and progress of the company. That is the only way company can sustain its operations and survive in the long run. The unethical behaviour is noticed by all including investors, customers, creditors and employees themselves and it creates a detrimental effect on the functioning and operations of the company. Code of Ethics In order to enforce ethical behaviour, companies must have a code of ethics to create an ethical culture within organisation. ‘The Code of Ethics’ will spell out the standards of behaviour that are expected from the employees. These standards will guide about acting within the law, protecting the environment and competing fairly in the pursuit of business. It also works as a guiding tool to deal in conflict situations within and outside the organization. The company must have core values that guide its decisions on day-to-day operations. Employees, all potential partners or collaborators must honour these core values so as to avoid any conflict in the operations. Delivering as per Promise In a free market scenario, successful companies are those that earn respect and trust of their customers, employees and suppliers alike. These groups of people are in direct interaction with the company and their perceptions about the company are very important. Employees must get necessary training on the company products and the measures that are being undertaken to ensure consistency in quality so that customers get what is being promised to them. Employee Safety – an Ethical Necessity As a part of strategy to follow ethical standards, all necessary safety measures should be at place to safeguard the employees from any injury. The point is that profit goals are secondary to the workers’ safety. This also ensures work discipline among workers raising their standards of the working. Incentives and Disincentives to Promote Ethical Behaviour Providing incentives to the employees in the form of bonuses, promotion, tour tickets or credit incentives for a good ethical behaviour may do wonders in changing the culture of the organization. Similarly, the bad ethical behaviour should attract disincentives in the form of fines, demotion, or the dismissal from the job depending upon the gravity of the issue. All these actions will create an ethical culture in the organisation raising moral standards of the employees. Auditors and Regulatory Bodies – Behave as an Epitome of Highest Ethical Standards The recent case of Bernard Madoff running a Ponzi scheme is a glaring example of big financial scam or fraud. The amazing aspect is that the regulatory body such as SEC failed to identify the malpractices done by Madoff and his colleagues. Collecting money from the investors for the purpose of investing to get higher returns and then diverting it somewhere else is certainly a most unethical behaviour on their part. On the top of it, external auditors behaved most unethically by not highlighting any discrepancy in the company accounts. Had the external auditor and the government regulatory body such as SEC exercised their high standards of ethics in discharging their duties the persons like Madoff would have been caught much earlier saving billions of dollars of investors. It is extremely important that all regulatory bodies and auditors of the companies must have very high standards of ethics because they act as the watch-dog of the entire financial world (Champagne, 2009). Conclusion Ethical standards are often found to be failing because of their vagueness and undefined nature. It is important that all necessary ethical behaviours are documented and provided to all employees in writing. Conducting a formal oath ceremony for all employees will help nurture the ethical culture within the company that will be reflected in the dealings with customers, creditors and suppliers at all levels. References Ackman, D. (2001). Enron Files Chap. 11. Forbes. Retrieved May 29, 2012 from http://www.forbes.com/2001/12/03/1203topnews_print.html BBC (2010), Tracing the bitter truth of chocolate and child labour, Retrieved May 29, 2012 from http://news.bbc.co.uk/panorama/hi/front_page/newsid_8583000/8583499.stm Champagne, P. (2009). ‘Preventing Madoff-type Ponzi schemes and corporate scandals’. Le Panoptique. Retrieved May 29, 2012 from http://www.lepanoptique.com/sections/politique-economie/preventing-madoff-type-ponzi-schemes-and-corporate-scandals/ Hogg, C.D. (2011). Retrieved May 29, 2012 from http://www.independent.co.uk/life-style/food-and-drink/features/dying-for-a-burger- why-are-trans-fats-still-legal-in-the-uk-2351306.html Romar, E., Calkins, M. (2006), WorldCom Case Study Update, Retrieved May 29, 2012 from http://www.scu.edu/ethics/dialogue/candc/cases/worldcom-update.html Read More