Business Ethics and Deontology - Essay Example

? Introduction Ethics refers to behavior that characterizes an individual or an organization in its daily running of activities. Business ethics is diverse in nature in that apart from it dealing with the world, it interacts with consumers on a one on one basis. Over the years, we have seen business organizations gaining a bad reputation. (Barry, 2000) Deontology on the other hand, refers to moral obligation and undertaking of duties with the right motives (Darwall, 2003). A business problem refers to a gap that exists between desired results from the normal results. Most businesses deal with problems and constraints instead of prime movers of ethical business. In this study, we are going to give a critical analysis of a business problem using deontological ethics as discussed below. Step 1, The three major ethical problems raised in the WorldCom case include, corporate strategy of growth through acquisition, use of loans to senior executives, threat to corporate governance created by chumminess and lack of arms length dealing. Step 2, Evaluating WorldCom’s ethical problems using the deontological framework. This framework entails undertaking of duties with the right motives. It is a philosophy developed by Immanuel Kant. His theory is considered deontological for reasons such as acting in the morally right way suggest that people act from duty and lastly Kant says that it is the motives of the person and not the consequences. Corporate strategy of growth through acquisition We have many models different kinds of governance in the world. The difference comes due to the variety of capitalism in which they are formed. Liberal model tends to give priority to shareholders interest while the coordinated models recognizes other stakeholders interest such as workers, managers, customers, suppliers and community (Penrose, 2009.). Each model has an advantage. In view to WorldCom ethical, Bernie Ebbers who was considered to be colorful and likable had nothing to show after the collapse of WorldCom. Achieving position as a significant player in the telecommunication sector through the successful completion of 65 acquisitions was deontological. This is because only two of the acquired were significant. Total accumulated debt amounted to $41billion due to acquisitions. As Chief Executive Officer it was advisable to only make acquisitions of companies that were very significant at that particular time. This would have made the company free from the big debts the company has. As much as a business strategy was a success at that time with the continued rise in the stock market, the manager should not have used this as a driving tool for business to enable him purchase other companies. During this all process of mergers and acquisitions there was managerial challenges in two areas. That is management dealing with integrating new and old organizations. This evident when the British telecommunication corporation made a bid of $19 billion and there was a quick response of countering the offer by Ebber to $30. In addition to this, Ebber also agreed to assume $5billion in MCI debt making the deal $35. It is time consuming because of its involvement in planning and managerial attention. There is also a challenge in accounting for financial aspects in the acquisition e.g. accounting for assets, debts and goodwill. This process illustrates areas where management did not address well. For instance, Ebber was an indifferent executive who did not pay attention to operation details. A good example is the deterioration of customer service and it was evident when a customer contacted customer service was discontinued incorrectly. The company was not up to the task of merging the different companies acquired. The effect of poor integration of acquired companies include little effort by management to develop a cooperative mindset among various units, closure of three important MCI services that helped in maintenance of network and opening twelve inefficient and duplicate centers. Another problem was competitive local exchange carriers. This was a waste since WorldCom paid too much and yet they were underutilized. Use of loans to senior executives The problem in this scenario is financing of the new purchases using existing holding as collateral. Ebber was faced with a situation of putting more collateral for outstanding loans on some of the purchases. Ebber being in this position meant that he has an option of selling his common share or taking a loan from the company to recover the calls. Refusal of the board for him to sell his shares was a deontological idea. This is because; selling the shares would depress the stock price and hence sign of no confidence for the future of the company. Borrowing against the stock is only good if there is certainty that the stock will go up. Authorization of loans for senior executives is both ethical and unethical (Darwall, 2003). This is because there is goodwill by the board of directors to authorize while on the other hand if not taken seriously it will ruin the company. A large loan brings about concern on conflict of interest and breach of fiduciary duty. In modern businesses, we find that executives are being given loans in order to compensate them. These loans come with very low interest and thus constitute a poor return on company asset. As our scenario we are informed that it can go to as low as 2% which is far below average borrowers and company’s marginal rate of return. In my own opinion I think it is wrong for the company to do such. Threat to corporate governance created by chumminess This refers to issues that inhibit corporate governance in the organization. For our study we have auditors and analysts who participated in nods and winks for endorsement of irregular accounting policies that contributed to the company’s downfall. Senior managers in WorldCom were the greatest target in this chumminess behavior. For instance WorldCom chose Salomon smith Barney to be the lead underwriter of $5billion of its bond issue. In modern business such scenarios are seen and are impediments to corporate governance. Deontology in this case is the coming together of WorldCom company management and the city group brokerage unit to do business. This is because the two acted from duty and there was also goodwill. The motive behind all these was a successful business for both companies and so that’s why we take the act to be deontological. Step 3, assessing WorldCom’s ethics from Immanuel Kant point of view using Kant’s categorical imperative Categorical imperative according to Kant denotes unconditional requirement that asserts its authority in every area. In my own view, WorldCom ethics from Immanuel Kant’s view needs to be improved. This is because management was taking every opportunity with a view of enriching themselves (Penrose, 2009). This is true because right from corporate strategy of growth through acquisitions to use of loans to senior executives and also threats to corporate governance, we see moves that benefit the management. For example low interest rate charged on management on the loan given to them is an impediment to the growth of the company. Another one is coming together of WorldCom company management with City trust bank as their financiers. The ability of Worldcom Company to spread large expenses over decades instead of years is considered imperative. This is because as a company expense cannot be spread in such a long period since it will have an effect on financial statement. Another idea is the issue of accounts receivables, which is the amount of money customers owe the company. Normally different companies have got specific period for accepting receivables but for WorldCom case management decided to ignore credit department list of customer who had defaulted. Such a decision had an effect in the company, for instance it led to smaller reserve funds. Work citations Barry, Norman P. Business ethics. West Lafayette, Ind.: Purdue University Press, 2000. Print. Darwall, Stephen L. Deontology. Malden, MA: Blackwell Pub., 2003. Print. Penrose, Edith Tilton, and Christos N. Pitelis. The theory of the growth of the firm. 4th ed., rev. ed. Oxford: Oxford University Press, 2009. Read More