Company's Ethical Code of Conduct for the Smooth Running of Its Business - Assignment Example

?Business Ethics Contents Ethical Theories 3 Corporate Social Responsibility 6 Ethical Issues in Advertising 6 Ethical Issues in Environment 7 Ethical Issues relating to Consumers 7 Ethical Issues regarding the Employees 8 Ethical Issues & Suppliers 8 Employing ethical approach for running a business 9 Report on an ethical issue 11 Reference 14 Meaning of Business Ethics Business Ethics describes the individual’s as well as the firm’s character which decides what is morally correct for the business & the society. In simple terms, it is nothing but a set of guidelines mentioning the acceptable & not acceptable part of the operations. These guidelines sets a boundary for the conduct of the staff which shows them what is right & what is wrong in terms of ethical values. At several instances, firms face acute dilemma regarding their functioning, which leaves them perplexed towards making further decision and then these rules help them to take the correct step which is morally acceptable. Now questions might arise concerning what should be the moral standards of a person or organization. Moral standards are different for different situations. It should be given more priority than any other standards related to an organization, which includes self interest even. The guidelines specified for setting moral standards are the basic conventional norms against killing, lying, stealing, cheating etc. which hurts human wellbeing & promotes negative behavior across the society. Providing the employees with safe working conditions is also considered as an integral ethical part of the Organization. There is no rulebook regarding the ethical & moral standards because it’s something which is very obviously expected from a person, as moral is a part of human nature & they are expected to apply it when doing business with other individuals. (Shaw, 2010, pp.8-9) Ethical Theories The purpose behind setting up a theory can belong to several contexts addressing various issues. Each theory has its own logic & each of those are applicable in situations based on which they have been formed. It must be kept in mind that a particular theory might prove to be perfect for a certain framework but it might not suit a completely different situation. Therefore we will discuss here the three main theories of business ethics which are more or less applicable in every situation- 1. Deontological theory- The term Deontology is derived from the Greek word “Deon” which means duty. This class of theory puts more emphasis on the deed instead of the consequence & states that even if the outcome of an activity is good, still some acts are considered to be wrong always. According to this theory, an action is judged to be ethical or unethical on the basis of the intentions of the doer & our actions should be based on the set of rules irrespective of the outcome. There are many theories under the Deontology approach but the most significant one is the moral theory suggested by Immanuel Kant in the year 1788. According to Kant, as human beings possess the unique sense of reasoning therefore they should be totally obliged to their duties without letting emotions, results & other factors to interfere. This indicates that the motivation for actions should be totally dependent on obligation & not on a particular person or situation. (GULCAN, n.d., pp.1-4) 2. Teleological theory- “Teleology” comes from the Greek expression “Tales” that refers to goal or end. The Teleological class of theory defines an action to be right or wrong depending on the consequence it bears. Unlike the Deontology approach, this approach puts significant amount of focus on the outcome of an action. Here whether an act is right or wrong is totally decided by the output it delivers & not by the action. This theory showcases the following features Outcomes are important, intentions are insignificant An act is considered to be good only if its results are good Standards & rules are insignificant. (Sunita, 2005,pp.113-119) 3. Natural Law Theory- This law defines every action that supports the natural law to be ethically correct. It is the further extension of the Deontological theory that describes the human reasoning to be obliged by the natural laws & then acting according to it. Natural Law theory can be categorized into two types namely- For the theist- A deity is there who has created the nature & it’s our duty to abide by the laws of the nature which is regarded as the ethically right thing to be done. For the atheist- Human beings are able to apply their logical sense in perceiving the laws of the nature. Therefore, the actions that take place maintaining the natural law is morally correct. Absolute & Relative Ethics The concept of Absolute ethics refers to the presence of a universal moral rule which applies equally to everyone irrespective of their age, gender, caste, color, creed etc. & the changing situations or thoughts doesn’t affect it anyway. For example, in this case a murder is considered as a crime without further investigation into the reasons that forced the murderer to commit this crime. Whereas Relative ethics states that moral standards depend totally on the varying circumstances. Thus, according to relative ethics, when a murder takes place, the prime focus is put on the situations that led to this crime. If it’s found that the murderer committed the crime to defend him or herself then the act is not considered as morally wrong. Therefore it can the conclusion can be drawn that Absolute ethics are objective in nature while Relative ethics are subjective in nature. (Lillie, 1964, pp.98-99) Corporate Social Responsibility Every business has got some obligation towards the welfare of the society. It should run its operations in accordance with the interest of the customer, shareholder, employees & most importantly the ecological interests. It should not perform in such way that might harm the social integrity. For example, the cigarette companies clearly mention in their ads that “Smoking is injurious to health” which might prove to be a promotion against their product but still they mention it in their advertisements because it is an awareness message for the society & the company is obliged to spread it. This commitment of the various organizations towards being socially responsible gives rise to Corporate Social Responsibility. In other words, the continuous effort of the organizations towards social & economic development through their ethical behavior is termed as Corporate Social Responsibility. Ethical Issues in Advertising Advertising is the bare necessity for modern business houses. It is the means to reflect an organization’s offerings in front of the world. No doubt it creates lots of opportunity for an economy’s growth & development; it also provides necessary information to the customers & encourages creativity & innovation. But it has some negative effects which are ethically unacceptable to the society. Our society is greatly influenced by advertisements & many marketers use this opportunity to create misleading ads that highly attracts individuals. In this way the marketers make money by exploiting the emotions & weaknesses of the general people. It makes people purchase things which they don’t need at all & causes them to feel dissatisfied with their present belongings, paving the way for more greed & more desire. Also young people & uneducated ones get impressed by some ads & try to imitate those causing injury to themselves or others. Marketers should deal with these issues with care to prevent any unethical practice to get encouraged. Ethical Issues in Environment It is the moral responsibility of every organization to act considering the environmental issues. The operations of the business must not cause any harm to the natural environment & business houses are obliged to maintain their operations on this basis. The protection & preservation of the natural environment is considered as a priority than any other function. For example, the places which suffer from scarcity of water must not encourage wastage of water by factories that require huge amount of water supply. The ultimate aim is to protect the society & in turn, to protect the environment. Ethical Issues relating to Consumers The consumers of the new era have become more & more brand conscious. They can no more be persuaded by the sugar coated words of the marketers. They have become highly aware about the various issues taking place in the society. Therefore it is of considerable importance on the part of the organizations to offer healthy & hygienic products to the market to remain in the competition. Also any unethical or controversial behavior spotted by the consumers regarding the manufacturing & marketing of the products might lead to loss of market. This mindset of the consumers is also exploited by various competitors to implement strategies against their rival firms. We can take the example of the Pesticide Controversy that took place in India in the year 2003. Then The Centre for Science & Environment contented that MNCs like Coca-Cola & PepsiCo contains pesticides in their aerated drinks. The instant reaction of the customers was to eliminate the consumption of these drinks which is the evidence of the fact that customers will never compromise with their health & safety. Ethical Issues regarding the Employees The employees of an organization are expected to perform ethically within a business & outside the business premises whenever they are representing their organizations. There is no rulebook for guiding the moral performance of the employees. The National Business Ethics Survey found that the employees are mostly inclined towards the following ethical misconducts- Putting more emphasis on personal interests than the company’s interest. Abusing or ill-treating other employees Lying Taking bribe for performing their duty Cheating the company by providing important information to their rivals These unethical approaches can lead to severe consequences for the employees including sacking from the job because these practices indirectly harms the reputation of the organization. Thus honesty is considered an important criterion while selecting employees for a particular designation. (Weiss, 2008, p. 10) Ethical Issues & Suppliers Suppliers are treated as partners by various organizations because suppliers are the various sources of information for the firms. A loyal supplier helps the firm to deal with several issues & to fight competition. Therefore organizations make continuous efforts on building long term relationship with the suppliers. Fair negotiations & removal of unethical approaches towards the formation of policies related to the suppliers would help the organizations as well as every party related to it, to run an honest & just business. Employing ethical approach for running a business Pros An ethically correct organization is appreciated & trusted by the people associated with it, that is, the employees, the customers, the shareholders, the distributors & the suppliers. Organizations having ethically correct background gets least involved in legal matters. Ethical code of conduct of an organization establishes a goodwill for the company Businesses that follows ethical code of conduct goes through minimum complexities during mergers & acquisitions Cons For emphasizing on the ethical part of the business, firms has to sacrifice a lot of profit & revenue which is equally important for the running of a business In a competitive environment, firms struggle to overcome the position of their rivals & in this tough situation following ethical code of conduct would only lead the firm towards losses However for selecting an ethical or unethical approach the organization must firstly consider its objectives, because if the objective of the firm is to earn revenue without even caring for the ethical codes then it would be wastage of time & energy to implement ethical code of conduct in its functioning. The objectives of Newcoffee Ltd – 1. To become the market leader in the coffee industry 2. To ensure complete customer satisfaction & encourage brand loyalty among the customers 3. To develop overseas markets 4. To build an image that would be regarded as the ideal ethical model for every organization 5. To earn huge profits from the business 6. To conquer the territory of the largest coffee seller across the world Keeping these objectives in mind we decide to execute the ethical course of action in our business. This will affect all our stakeholders as well as the environment in several ways- 1. Environment- Production of coffee can cause negative effects on the natural environment like conversion of natural forest, degradation of soil, usage of excessive pesticide & degradation of the water quality. In order to go for an ethical approach towards the environment we should opt for sustainable coffee growth. (Santos & Lima, 2009, pp.271-272) 2. Fair Trade- Coffee farms are located on small acres of lands where the farmers & their family practice farming. It is like their family business & therefore their livelihood is limited to it. If these farmers do not get fair payment for their hard work then they would have to abandon these lands & have to search for other means of earnings. The presence of middlemen reduces the farmer’s earning. Therefore for applying an ethical approach it’s necessary to keep control on the middlemen. (Arena, 2011,p.103) 3. Workplace- The concept of workplace ethics involves every individual related to an organization. Maintaining healthy & long term relationship with these individuals is very important for running a business. Encouraging them into ethically correct activities & influencing their thoughts in a morally correct manner is the sole responsibility of the management. They should be given proper space & reasonable salary for their hard work so that they do not get forced in taking ethically wrong steps. Report on an ethical issue The onset of rapid globalization has introduced various changes in the operations of business with an increased focus on profit generation & high turnover. The increasing challenges of the economy & ever growing competition forces the firms to take part in the rat race or else they would be thrown out of the frame. Moreover the customers today are getting more concerned about their value for money. They have easy access to foreign markets & therefore their taste & preference has changed depending on the offerings by various markets. The quality of products & services are improving according to the changing pattern of demand in the society. Hence the firms are continuously channelizing their efforts towards customer service by paying little attention towards the moral & ethical values of the business. Here we will consider the case of ethical crisis faced by Coca Cola. It is one of the largest beverage companies of the world & produces leading soft drinks like Coke, Fanta, Sprite etc. It has the largest distributor system in the world & serves its customers efficiently. It has been tremendously successful since its inception. The most detrimental crisis faced by the company was in June 1999 when around thirty Belgian kids got ill after having Coca-Cola produces. The company soon recalled all its products. Investigation proved that the illness was caused due to unhealthy means of processing a batch of carbon dioxide. The company took many days to formally comment on the situation. Coca Cola considered the incidence to be of minor importance but by that time rumors spread throughout the world about the company’s irresponsibility. Media played a vital role in the process. Countries like France & Poland banned all the products of the company from entering their market. This crisis had a huge damaging impact on the markets in Europe. The Belgium government restricted Coca-Cola’s restore campaigning which was meant to regain the trust of the consumers. The rival firms used this opportunity & started spreading more false rumors against the company in order to lower their image. The firm applied aggressive marketing strategies to regain the French market & decided to purchase a French beverage company named Orangina. But this effort was refused by the French government. On the other hand, Italy defeated the company in a legal case concerning anti-competitive pricing strategies. Moreover PepsiCo & Virgin blamed the company for using discounts & rebates for gaining increased market share. The company’s strong-arm strategies were proved to be violating the European Laws. Further the company was found to be accused of Racial Discrimination among the employees & differentiating their payments & perks. This resulted in around two thousand employees suing the company for these allegations. During the period of 1997 to 1999 the company was again brought in limelight. This time it was accused of “channel stuffing”. Channel Stuffing is a typical approach of shipping excess inventory to the distributors before the end of a financial year. The main objective of this purpose is to highlight in the company’s statements that demand is increasing throughout the market even if actual sales have not taken place & the goods have been kept in storage. This would eventually mislead the investors regarding the health of the company. The Securities Exchange Commission investigated the matter & found that the allegations were true. After discussing the major crisis that occurred within the company, now we would like to point out the faults that caused such mishaps- Coca-Cola was unaware about the foreign laws It was harmful for the company to go for malpractices in the areas of pricing & channel stuffing. A huge company would have huge competitors; therefore whenever the firm faced some charges, the rival firms took advantage of it & started negative promotion for the company. The firm did not put proper supervision on its operations in various countries. Lack of proper monitoring led to irrecoverable losses for the company. Each time the company faced allegations, their response was slow which was considered as their weakness & as their acceptance of the faults. It is necessary for a business concern to maintain good relations with the media & using them in for their own good. Coca Cola failed to do so & as a result the media played a vital role in damaging its image Aggressive marketing strategies don’t always reap good results. Sometimes the strategies should be designed in accordance with the situations. Regular feedbacks from employees is necessary to know their grievances & needs In order to avoid such errors, the company - Should study the law & order of a country thoroughly before entering its markets Should try to avoid unethical practices for gaining market share Should always track the competitor’s movement Should put proper focus on the operations in each & every market Should quick response should be provided in cases of allegations Should a long-term relationship should be maintained with the media Should treat the employees of the concern with care & due respect Should form strategies according to the market situations Hence the company could form an ethical code of conduct for the smooth running of its business. The design of the code of conduct should be matching the firm’s objectives. Coca-Cola is an MNC with large market share & with an ever expanding market. Therefore to stick to its objective, which is exploring new markets & earning good revenues, the company can create the following rules for its staffs & every individual related to its operations- 1. All the employees should get fair treatment irrespective of their gender, caste, creed, color, religion, language etc. 2. The production process should be monitored at every stage by expert managers 3. The working conditions should be safe & protected 4. The water used in the plant should be treated every week & a proper hygiene standard should be maintained in the manufacturing process 5. The bottles used for marketing the soft drinks should be made of high quality fiber 6. Any kind of malpractice or violation of law would not be tolerated in the production process & the management would take strict actions against such anyone found guilty (academic.udayton.edu, n.d, pp.311-313) Reference Shaw,W.H. 2010. Business Ethic. 7 ed. USA: Cengage Learning academic.udayton.edu. n.d. The Coca-Cola company struggles with ethical crisis[pdf]. Available at:http://academic.udayton.edu/LawrenceUlrich/LeaderArticles/The%20Coca-%20Cola%20Company%20Struggles%20with%20Ethical%20Crises.pdf [Accessed 24May 2013] Arena, C. 2011. Cause for Success: 14 Companies That Put Profit Second and Came in First. Novato:New World Library Santos, M. R & Lima,D.R. 2009. An Unashamed Defense of Coffee: 101 Reasons to Drink Coffee Without Guilt. USA: Xlibris Corporation Weiss, J.W. 2008. Business Ethics: A Stakeholders and Issues Management Approach with Cases. USA: Cengage Learning GULCAN, N.Y, n.d. SOME ETHICAL APPROACHES IN BUSINESS. Turkey: Kastamonu University Faculty of Arts And Sciences Department of Philosophy Sunita, 2005. Politics, Ethics and Social Responsibility of Business. India: Paragon Books Lillie,W. 1964. An Introduction to ethic. Great Britain: University Paperbacks Read More