Business Ethics Profit and Non Profit Organizations - Research Paper Example

? of paper and number submitted Business Ethics Profit and Non-Profit Organizations One important point one should understand before running a business is that, at the end of the day serving the community should be the primary goal. It does not matter whether the business is profit making or nonprofit. Customer satisfaction and better customer relations are likely to boost the profile of non-profit making organization while on the other hand boost the profits of a profit making organization. One thing each company or organization needs to be aware of is that as much as businesses evolve, so does ethical norms. It is therefore important for each company to have a constant update to its business ethics. Non Profit Company: The American Future Fund American Future Fund or AFF is an organization started back in 2008. Individuals working with Mitt Romney during the 2008 bid for the Republican US Presidency pioneered it as non-profit making organization. The fund “advocates conservative and free-market principles” (Jacobson, 2012). The organization was established under 501(c) (4) US tax code, it is therefore allowed by law to raise an unlimited amount of money, but restricted to use this money for campaigning as its primary purpose. Ethical Problems the organization is facing For non-profit making organizations, most of their ethical issues can be summarized into seven key problems. As outlined by Santicola, (2006) these issues include tainted money, compensation, privacy, stewardship, conflict of interest, impropriety, and honesty/full disclosure. Any organization that is directly involved in politics is likely to face many ethical problems in its line of operation. AFF is not an exception, and since its inception, it has faced a number of lawsuits relating to its ethics. The main problems include the use of tainted money, compensation, appearance of impropriety, and honesty and full disclosure. Background on these problems The organization also supports various positions in energy one of them being offshore drilling. In March 2008, The American Future Fund (AFF) ran “a series of radio and television ads blaming Gov. Chet Culver of snowballing spending by 20 percent between 2006 and 2007 resulting to an increase in fees and taxes and fees by $100 million”. The Iowa Democratic Party was convinced that AFF was using tainted money in running the ads and filed for a complaint with Iowa Ethics and Campaign Disclosure, to determine AFF’s donors. In February 2011, AFF faced another accusation by Citizens for Responsibility and Ethics in Washington (CREW), for tax violation. CREW seeks an investigation into AFF, where it has substantial evidence to question the organization’s honesty and disclosure. This suit also factors in other ethical issues that make the organization’s ethical standards questionable. Such issues include spending the organization's money to ask voters to vote against democrats, yet the mission of the organization is to support republicans to office. This is an appearance of impropriety since their methods may be arguable in court, but they are ethically inappropriate. AFF being a 501(c) (4) organization under US tax code, it is “allowed by law to raise an unlimited amount of money, but restricted to using this money for campaigning as its primary purpose”. In a bid to counter a decision made by Citizens United Supreme Court, AFF used more than $300 million to elect the 112th congress (CREW, 2011). This is a clear indication of compensation where the fundraisers of the organization are using donor funds for their own self-gain. With such claims directed towards the organization’s ethical standards, the organization is likely to face three major problems. First, the organization can end up being dissolved by the court if proven guilty of violating the tax code in its functions. Second, the organization ends u using many of its funds because of the various lawsuits that question its ethical standards. Thirdly, AFF is likely to run its functions comprehensively following the lawsuits that have been directed towards it requiring scrutiny into its functions. The organization also faces the risk of losing its donors if proven that they members are using most of the donations for personal gains. AFF’s Response to Company’s Ethical Dilemma The American future Fund has sort to settle most of its ethical issues through transparency and by abiding by the law. The organization has chosen to follow this path; however, there are still a lot of issues surrounding the organization with several questions still being an answered. One of the key problems being the anonymity of the groups sponsors. Although the law under the US tax code is protecting this group, the issue remains to be one of the key causes why the company is facing most of its ethical problems. The organization also decided to create transparency by notifying the public that the groups primary functions are to “educate and advocate for conservative and free-market ideas” (Beckel, 2013). The organization further “pledged to refrain from electoral politics, assuring the public that it would spend majority of its time, Up to 70 percent, doing work to “educate the public on policy issues” and the rest of its time engaging in efforts to “influence legislation through grassroots advocacy” (Beckel, 2013). Outcomes associated with AFF’s actions Despite this claims the organization’s ethical profile is still in question. There are a lot of question unanswered into the origin of its funds yet the law governs against such inquest. Some solutions have been offered to the company to clear the surrounding, such as the organization to change its registration to a political committee (Rutenberg, Natta, & McIntire, 2010). However, noting that this would affect a great part of its funding the organization has chosen to ignore the proposal. Instead of settling the ethical issues and integrity matters at AFF, its actions have further called for IRS and CREW investigations. Most recently, in 2013, CREW has shown a lot of concern over the organization spending, citing that “raises some serious questions” and “evades any form of meaningful disclosure” (Beckel, 2013). Profit Making Organization: Bank of America (BOA) Bank of America Corporation or simply known as BOA is both a financial holding and bank holding company. Its market includes small and middle market businesses, individual consumers, government, and corporations. The bank incorporates banking, asset management, investing, and other financial as well as risk management products and services (Moynihan, 2011). The bank provides both its banking and nonbanking products and financial services through its various nonbanking and banking subsidiaries on international markets and the United States under five major business segments. These segments include Global Banking, Consumer and Business Banking, Global Markets and Global Wealth & Investment Management (GWIM), Consumer Real Estate Services (CRES), and the rest of the operations being recorded as ‘other businesses’. The organizations performance has recently been boosted following its sale of “International Wealth Management Business situated outside the United States to a group known as Julius Baer Group” (Stapleton, 2013). Ethical problems facing Bank of America Being the second largest Asset holding bank in America, BOA has had its fair of accusations concerning its ethical practices. Until recently, the bank was operating smoothly without any major complaints from its customers, however, the situation has changed, and the bank is facing several claims of unethical practices. These problems include unethical accounting practices, reckless lending practices, falsifying information, and poor customer relations. Background on these problems Recently, February 2013, the bank was accused of unethical actions on mortgages. It was established that the bank lowers principals on first mortgages and avoids adjusting the principle for the second mortgages (Campbell, 2013). The result is to ensure that its investors take the hit while lenders receive their full portion contrary to ethical practices in banking. In 2012, the Bank faced a lawsuit challenging its lending process. The Bank in association with Countrywide Financial was accused of allowing its employees to churn out loans while accepting fudged applications and hid the ballooning defaults (Rexrode, 2012). These among other lawsuits accuse Bank of America in engaging in unethical issues that protect the bank from loss while shifting the loss to investors (Campbell, 2013). Customer complaints have also been directed towards the bank for unethical handling of clients starting with management to the junior workers. BOA is a profit making organization; therefore, customer satisfaction is key to running their business. With such complaints and unsatisfied customers, the biggest challenge the bank will face is losing its customers. Since the bank is also the second largest asset-holding bank in America, continued unethical practices and lawsuits may hinder its expansion plans and investor relations. Bank of America’s Response to Company’s Ethical Dilemma In its defense, the Bank of America did not do much to clear its name, in fact it has been trying so hard to shift the blame to another Countrywide Financials; a company it acquired to finance the mortgage loans. The company also assured the public, “We are working aggressively to progress our process through improved communication, formal training, and enhanced checklists” (The Financial Brand, 2012). The company has also been updating its code of ethics on a yearly basis and assuring its customers that they are dealing with the issues that they are currently facing. Although the Bank has taken these steps towards improving its image, a lot is still unanswered and more doubts than reaffirmation are arising, thus risking the banks future business. Political, social, legal, and economical outcomes of these solutions Just as I had mentioned, the solution to Bank of America’s problems has led to more lawsuits and doubts in the eyes of the public. The main problem being all this solutions have never been put into action for example no substantial course has been taken towards “formal training, improved communication, and enhanced checklists” (The Financial Brand, 2012). The Bank is still facing legal issues such as “$11.8 billion – Robosigning Foreclosures, $335 million – Latino Discrimination Lawsuit, $4.1 million – Unpaid Overtime, and several others” (Para. 10). Socially the bank customers especially those with mortgage loans are portraying the bank with a negative image which might become a serious problem to the bank’s clientele in the end. Personal Reflections on the Company’s Actions: AFF Did the company respond in a morally responsible way? AFF’s actions to deal with ethical dilemmas they were facing did not go well with the public. I would therefore disagree that they took the right and responsible action in settling the matter. Their responses were morally irresponsible mainly because, even though they assured the public of not engaging in politics directly, the opposite was being followed. The organization refuses to be directly linked to the Iowan republicans yet majority of its leaders starting with its president, Sandy Greiner, secretary Kathy Pearson, and many other officials directly linked to the Iowan republicans (Hancock, 2011). When it comes to who created the ethical dilemma, I would say that, being entangled to the political field is a tricky situation. However, when setting up the organization under the US tax code, they must have understood their boundaries before registering the organization. Therefore, the organization created the dilemma from the time it registered under the US Tax Code. The company also brought these issues to themselves by electing its leaders from politically affiliated backgrounds. Best Solutions for AFF current Ethical problems Honesty and disclosure: The best solution to solve this problem is for the company to provide a full disclosure of its operations and use of its funds to the IRS. This will ensure clarification to the public and try to solve a future misunderstanding. Tainted Money: The organization needs to analyze its objectives and mission. Since law prohibits the organization to sponsor primarily or participate in a political campaign, it would also be advisable not to receive donations with the donor’s interest being to sponsor a campaign. Appearance of Impropriety: In this case, the organization needs to restrict its functions to “advocating conservative and free-market principles" as its primary function. The organization also needs to ensure that before taking any drastic actions, they should be in accordance with the company’s ethics and abide to the law. Compensation: the situation refers to an area where insider-trading laws apply to avoid misuse of private information for self-gain (Fieser & Moseley, 2012). The company needs practice being non-partisan, as this would limit its involvement with direct politics, in a move to rid the constant suspicions. A few people in at the top ranks and some donors to the organization are the key players in the problems the organization is facing. The organization’s president, Sandra Greiner, stands to affect the organization’s ethics following his role in Iowa republican politics (CREW, 2011). One of AFF’s first board members, Nicole Schlinger, also affects the organization due to his links with Republican Party of Iowa (Para. 4). Further, one of its donors, Bruce Rastetter, has also been closely linked with Iowa politics (Para. 5). These key figures in the organization among other board members are primary to the problems AFF is facing currently. Personal Reflections on the Company’s Actions: BOA Considering the company’s response to the ethical dilemmas it is facing, I would disagree that it responded in a morally responsible way. First, the company gave out baseless assurances that it has never followed. Second, the company has taken the liberty to throw the blame to Countrywide Financials; a company they acquired to deal with their mortgage loans. The company has also not done any substantial move to deal with the poor communication between the bank staff and complainants. From my point of view, the company created its own ethical dilemmas. For a start before acquiring Countrywide Financials a company they blame for most its problems, they had already investigated its credibility, yet went ahead with the plan to purchase. Second, some of the mortgage complaints from its clients are directly linked to the bank’s management siting that they intentionally lured the public to acquire them with fraudulent intentions. Further, no possible explanation has been given for their poor customer relations yet they keep updating the company’s code of ethics disclosure. Suitable solutions for Bank of America’s ethical problems Unethical accounting practices: Stringent measures such as revoking a license of those involved in unethical accounting practices. These will ensure honesty and full disclosure the banks investors and customers. A good example of such as measure taking effect is the case of John Rigas of Adelphia Communications who was sentenced to 15 years imprisonment (Fieser & Moseley, 2012). Reckless Lending Practices and falsifying information: Full Public disclosure of the banks terms and conditions involved in lending should be enforced to help unsuspecting customers from being exploited. Appropriate disclosure of information will ensure buyer beware principles are adhered to enabling clients to make an informed decision while taking loans. Poor customer relation: This problem whose solution starts at the managerial level, it would be advisable if the banks policies include tough measures to those found guilty of unethical handling of its customers. Although the bank has continuously blamed Countrywide Financial, recent developments have established that the bank is part to blame for most of these problems (Campbell, 2013). The management has played a key role in each practice starting with allowing its accountants to adjust mortgage loans to allowing its staff handles its clients unethically. Philosophical theories American Future Fund’s decision was emotivism, where they did what they felt was right without considering other people’s thoughts. This was not the best choice as it did not solve any of the organization’s ethical problems instead it heightened them causing more investigations and doubts form the public. The best choice for the company should have been through a relativist perspective. This would mean that the organization derive definitions of ethical behavior subjectively from their experience and come up with succinct solutions. This would be best considering the long history of investigations into the organization they have experienced. For BOA, their decision can be termed as ethical egoism, as they made their decision purely in relation to economic terms. Their decision implied that do what is the best for the company in terms of economic benefits. The appropriate decision would have been utilitarianism. This would be the best because it would imply doing what is best for the benefit of the community and the company’s reputation. The ideal relationship between bad and profit in an ethical manner should be; the company ought not to make decisions that will create suffering to the community or its clients. This relationship should be based on the Utilitarianism philosophy where the community comes first before economic considerations (Watson, 2003). An ethical business refers to a business where professional or applied ethics that observe ethical morals and principles or problems that may arise within the business environment in the course of its operations. The range and perspective of business ethical issues portray the relationship of profit maximization with non-economic concerns (Smith, 1952). The best way for accompany to maintain and competitive edge and contribute to overall good in relation to its workers and customers is to practice virtue ethics (Ferrell, 2011). These can summarized as: 1. Having good corporate ethics programs that encourage its members virtue and integrity 2. Association of these virtues with appropriate conduct from reliable people 3. Serving the public to remain the primary goal 4. And finally, the well-being of the community to go hand in hand with individual excellence (Ferrell, 2011) Conclusion After analyzing the profiles and business relation of the two company’s AFF and Bank of America, it is clear that business ethics plays a major role to a company’s presence in the society. Poor business ethics have led to the two company’s ending up in numerous lawsuits and threatening their existence. This is in irrespective of whether they are profit making or non-profit making. The overall analysis shows that in making decisions, the company needs to have a perspective of engaging with the community rather than carrying out decisions that protect or benefits a few individuals while alienating the community. The other conclusion from the study shows that ethical and moral values are very important and there is no way of hiding the facts because in the end the public or community always ends up knowing the truth, which puts the company at a risk. This is contrary to having the appropriate ethical disclosures and suffering the blow in the short term but gaining a lot in the end. References Beckel, M. (2013, January 31). Nonprofit Spends Big on Politics Despite IRS Limitation: American Future Fund Has Conservative Roots . Retrieved from The Center for public integrity: http://www.truth-out.org/news/item/14261-nonprofit-spends-big-on-politics-despite-irs-limitation-american-future-fund-has-conservative-roots?tmpl=component Campbell, S. (2013, February 8). Bank of America’s Unethical Practices. Retrieved from Bank forclosure sale: http://www.bankforeclosuressale.com/wp/article-02084220.html CREW. (2011, February 1). CREW asks IRS to investigate American Future Fund. Retrieved from Citizens for Ethics and Responsibilities in Washington: http://www.citizensforethics.org/legal-filings/entry/irs-investigate-american-future-fund Ferrell, F. (2011). Business Ethics: Ethical Decision Making and Cases. New York: Cengage Learning. Fieser, J., & Moseley, A. (2012). Introduction to Business Ethics . San Diego: Bridgepoint Education, Inc. Hancock, J. (2011, February 1). Group calls for IRS probe of American Future Fund. Retrieved from The Washington Independent: http://washingtonindependent.com/105267/group-calls-for-irs-probe-of-american-future-fund Jacobson, L. (2012, August 14). Did a New Mexico Rep. spend $1 trillion in tax dollars on a stimulus for "failed companies here and jobs overseas"? Retrieved from Tampa Bimes: http://www.politifact.com/truth-o-meter/statements/2012/aug/14/american-future-fund/did-new-mexico-rep-spend-1-trillion-tax-dollars-st/ Moynihan, B. T. (2011). Bank of America 2010 Annual Report. Charlotte, NC: Bank of America. Rexrode, C. (2012, Oct 25). Bank of America Lawsuit: Countrywide's Unethical Lending 'Brazen in Scope,' U.S. Prosecutor Says. 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Retrieved from The Finanancial Brand: http://thefinancialbrand.com/22274/ethical-issues-lawsuits-plague-bank-of-america/ Watson, T. J. (2003). Ethical Choice in Managerial Work: The Scope for Managerial Choices in an Ethically Irrational World. Human Relations, 167–185. Read More