Personal and Organizational Ethics - Essay Example

?Personal &Organizational Ethics Table of Contents Table of Contents 2 Introduction 3 Situational Analysis 4 The Enron Scandal 4 Outcome & Result 4 Practical Application of Ethical Theories & Morals 5 Conclusion 6 Introduction Ethics has been derived from the Greek word “Ethos” which signifies habits, customs, disposition and significance. Ethics has been related to honesty, morality and fairness in personal and professional lives of the individual (Dimitriou et al, 2011). A widely accepted definition of business ethics does not exist but author Lewis defined business ethics as rules, standards, codes, or principles which provide guidelines for morally right behavior and truthfulness in specific situations (Dimitriou et al, 2011). It is observed that an organization with a diverse workforce witnesses various ethical dilemmas and issues arising out of ethical values. This happens because the interest of the organizational and personal ethics is different from each other giving rise to potential conflict among employees and managers. Ethics can be termed as a moral principles or set of standard followed by an individual. Business ethics can be termed as a set of moral values and principles that help the business managers to arrive at unified conclusion. The impact of business ethics on managerial decision making is huge and has the potentiality of changing the course of decision making. It is observed that the influence of legal laws on the managerial decision making is huge and can have considerable amount of influence on the personal lives of an individual as well. Since, business activity is also regarded as a human activity the evaluation of business ethics would be done in a similar fashion. The importance of business ethics, personal ethics and legal influences on ethics would be covered in this study by the author. Situational Analysis The Enron Scandal In the year 2001 Enron Scandal had filed for bankruptcy and the collapse of the company was regarded as the biggest audit failure of all times. This occurred when the shareholders of the company had filed a suit against the company after the company’ share dropped from a double digit number to less than $1. The root cause of the sudden drop in the share price of the company confused the shareholders compelling them to file a suit against the company. It was observed that lack of systematic and clear organizational structure was the root cause behind the collapse of the company. The company failed to comply with business and legal ethical standards and there was a lack of moral standard among the employees of the organization. Outcome & Result The failure to provide a valid reason for the collapse of the Enron Corporation aroused curiosity among investors and sparked controversy among competitors and investment banking analyst. The company management tried to solace the investors by claiming that it would hold an IPO separately for its internet department but ultimately the company filed for bankruptcy (Lashinsky, 2001). It was noted that various employees and managers were involved behind the collapse of the company. Lack of implementation of an ethical and moral standard by the human resource department can pave the path for downfall of the company. Lack of financial, sustainability accounting disclosure and lack of proper organizational climate within the company were solely responsible for the scandalous act. The US government had immediately enacted the Sarbanes-Oxley Act in response to this particular incident in the year 2002 which aimed at primarily promoting transparent and accurate auditing among public accounting companies (Peavler, 2013).This federal law has set new accounting standards for USA public accounting companies, corporate directors and corporate management to enhance the corporate practices. Practical Application of Ethical Theories & Morals The above mentioned incident is a conglomeration of the egoism theory; psychological and enlightened egoism. Enlightened egoism focuses on the fact that individuals should treat each other in similar manner the way he/ she wants to be treated. Psychological egoism lays emphasis that individuals are naturally egoistic and it would be unnatural for them not to be egoistic. Although, most of the companies are required to comply with business ethical standards and the corporate responsibility charter it is observed that is the ethical standard followed by the company that compels it for financial and sustainability accounting disclosure. Morality arises out of the respect and awareness for the individuals and the societal needs. Ethics are categorized into two types; normative and descriptive ethics. Normative ethics focuses on the values and beliefs that an individual possess and descriptive ethics focus on “What If” behavior of the individual and the employees (Dimitriou et al, 2011). Descriptive theory usually revolves around various subjects like anthropology, sociology and psychology. It helps in studying and identifying the different moral systems and ethical code practices by the company. The theory lays emphasis on the fact that most of the moral values and ethical standards practiced by the society are justifiable. The unethical conduct practices in the organization are due to the failure of implementation of the moral values and standards. Metaethics on the other hand includes composite elements of normative and descriptive theories. The only minuscule difference is that it indentifies the difference between the rationale behind the ethical principles and standards. However, this theory has various loopholes and lacks to serve the purpose of a guide. It is possible that an individual can face this kind of situation in any kind of organization and thus the employees can monitor the ethical system themselves. If the management of Enron Corporation would have followed the Utilitarianism concept then it would have given the employee a clear idea about the distinction between right and wrong. The utilitarianism concept lays emphasis on the fact that an activity can be either right or wrong and develop a technique that defines the moral value of a particular action. It also helps us in understanding whether the action conducted in the past have an effect on the futuristic actions or not. The theory developed by John Stuart Miller lays emphasis on the fact that an action should be performed for the betterment of an entire society. This theory should have been followed by the management of the Enron scandal for promotion of a congenial and well defined work environment. There are various legislation theories and act which could have also served the purpose of a guide for Enron Corporation. For example the Sale of Good Act protects the interest and rights of the consumers with respect of the coarse aspects of the Contract law (Macfarlane, 1995). The contract theory is almost similar to the game theory and is often preferable by the shareholders of the company. The theory developed by Charles Ess “Global Information Ethics” lays emphasis on the implementation of a universally applicable ethical system which can reconcile the differences between the cultural and ethical values of the individuals (Capurro, 2008). Conclusion Although, the government of varied nations have developed several legislation laws which discourages unethical and immoral conduct among the corporate there has been evidence of several scandalous corporate events. The legal and personal ethics has considerable influence on the business ethics of an organization and has the influential power of changing the course of managerial decision making (Dench, 2008).The theories proposed by the various theorists can be a remedial solution in multiple situations and can also lead to the establishment of the moral concepts and standards within a company. Normative, descriptive, Hybrid theories can prevent misconduct within a company and can permit the employees of the organization to channelize their desires and energy in a positive way. These theories will also serve the purpose of a strategic direction and help in coordination of activities within the departments of the company (Holme, 2008).Thus; the management of the companies can refer to various theories and treat them as a continuous process which can improve the ethical climate of the company (Mauro, Natale & Libertella, 1999). References Capurro, R. (2008). Intercultural information ethics: Foundations and applications. Journal of Information,Communication & Ethics in Society, 6(2), 116-126. Dench, S. (2008). How personal can ethics get? Journal of Management Development, 25(1), 1013-1017. Dimitriou, C.K., Blum, S.C., Adams, C., & Kim, S. (2011). The impact of a hotel's business ethics. Retrieved from http://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1625&context=refereed . Holme, C. (2008). Business ethics: Too little, too late. Industrial and Commercial Training, 40(5), 248-252. Lashinsky, A. (2001, November 30). Bankrupt analysis. The New York Times. Retrieved from http://www.nytimes.com/2001/11/30/opinion/30LASH.html?todaysheadlines=&pagewanted=print Macfarlane, B. (1995). Business ethics: Too little, too late. MCB University Press, 37(5), 32-36. Mauro, N., Natale, S.M., & Libertella, A.F. (1999). Personal values, business ethics and strategic development. Cross Cultural Management, 6(2), 201-206. Peavler, R., (2013). The Sarbanes-Oxley Act and the Enron Scandal - Why are they important? Retrieved from http://bizfinance.about.com/od/smallbusinessfinancefaqs/a/sarbanes-oxley-act-and-enron-scandal.htm Smith, M., & Hansen, F. (2006). Ethics of business strategy. Handbook of Business Strategy, 40(5), 201-206. Read More