Business Ethics of the Proctor and Gambler Leading Company - Case Study Example

Running Head Ethics Audit Ethics Audit Introduction In the past few decades, transnational corporations have generated a significant number of economic, moral, and political questions. The conditions within which the moral behavior of transnational corporations would be promoted cannot be limited simply to a minimal state which seeks merely to limit force and fraud. Proctor and Gambler (P&G) is one of the leading international companies specialized in consumer goods. Global company like P&G pays a special attention to ethical issues and moral values as the core of business philosophy and successful performance. Ethical values are part of an intensely competitive global system of business in which they are constantly tested, among other things, on prices, costs, products, markets, research, and innovation (Husted et al 1996). Hence, they are under intense pressures to ensure their own wellbeing, if not survival. Ends and activities not directly tied to their own survival or well-being, and not protected by other supportive conditions, naturally come under pressures for reduction or elimination. Business Ethics "Ethics is a moving target. Social values shift over time, influenced by a complex web of factors. Employers must keep a close eye on those values and, when possible, proactively address ethical dilemmas emerging in their companies" (Vickers 2005, p. 26). Fo P&G, business ethics is much more than an expression of taste, however strongly felt. Properly understood, business ethics is in fact about moral principles; indeed, it is the application of ethics to, or in, specifically business situations and activities. For P&G, ethics refers to moral codes and the actions enjoined by them as well as to the study of either or both. Indeed, when dealing with received opinion, such common usages will be observed, both with respect to "ethics" and to "business ethics." When strictly used, however, the term "ethics" refers properly to a subsection of philosophy, that which seeks to identify and clarify the presuppositions of human conduct having to do with good and evil (International Business Ethics Institutive 2008). In a work on business ethics, the grounds of ethical activity, like the existence of business, must be taken as given. Certain implications of the philosophical nature of ethics are, however, crucial to the question of universality. "At Procter & Gamble, we have maintained strong Corporate Governance polices and practices for many years. These core values set a tone of integrity for the entire company-one that is reinforced consistently at all levels and in all countries" (P & G Home Page 2008). The most important, is that as a purely theoretical discipline, ethics has no necessary connection to any existing system of religious belief, or any specific legal framework, or any particular moral code. As a result, the commonly cited variations of actual practice are simply irrelevant to the question of whether there are universal truths of business ethics--cultural diversity, even cultural relativism, does not and cannot justify ethical relativism (Swanson, 2005). Nevertheless, although ethics is essentially theoretical, there is a metaphorical sense in which the techniques and principles of ethics proper can still be helpful in dealing with real life problems--the clarity of thought and awareness of key concepts developed in philosophical study may well inform action. It is in this extended sense that one may properly speak of "applied ethics," or the "application" of ethics to business, or of ethics "enjoining" specific courses of action. Business ethics is simply the application of general moral principles to specifically business situations and activities Husted et al 1996). The Function of Business Ethics P&G customizes its ethical culture to match unique needs and values of the company to global business demands. The function of business ethics is to resolve or at least to clarify the moral issues which typically arise in commerce. Starting from an analysis of the nature and presuppositions of business, business ethics applies general moral principles in an attempt to identify what is right. What the universality of business ethics depends on is the status of those ethical principles--if they are universal, then so is business ethics. But those principles are necessarily universal--they are so by definition (Swanson, 2005). That which is not universal may be a useful rule of thumb, or a practical guideline, or a summary of common practice, but cannot be a principle. That is because the point of principles, including moral principles, is precisely that they should identify the unvarying, essential features of diverse situations, and thus provide a unifying framework which can make sense of actual problems as they arise in all their unpredictable variety and complexity (International Business Ethics Institutive 2008). This is in accord with ordinary understanding of morality, in which ethical values are widely expected to transcend specific interests, be they national or cultural or economic, and in which business ethics is expected to provide a basis for assessing and guiding conduct. Just as money, by providing a common standard of financial value, permits making tradeoffs between items, so principles, by constituting constant points of reference, make discussion and decision making possible across widely different situations. Unlike assertions of mere preference, moral principles provide a criterion of acceptable business behavior which can be argued for, and applied consistently, over a wide range of actual people, places, and times (International Business Ethics Institutive 2008). So principles are essential--without them one might have statements of intent, or descriptions of preferred practice, but not business ethics (Swanson, 2005). There is a truism that multinational corporations should act like good corporate citizens in the host countries and cities in which they operate. The grounds for this truism and the extent of these obligations have been variously spelled out by a number of thinkers. These arguments include the idea that multinational corporations have a moral imperative to be socially responsible, which has sometimes been traced to a notion of a social contract. The claim is that multinationals have at least implicit contracts to act in a morally decent manner in the countries and cities that allow them to do business. In return for the opportunity to exist and do business, corporations, like ordinary citizens, have obligations to contribute to the well-being of the community (Robra, 2000; Vickers, 2005). As members of the universal community of human beings, and organizations created by human beings, multinationals have responsibilities to respect basic rights wherever they operate, including obligations not to cause harm, obligations to respect freedoms, and obligations to act in a fair manner in business dealings with all stakeholders. Such a position appears in at least two guises: (1) that a multinational has positive obligations to the community, or (2) that a multinational has merely negative obligations not to violate more rights nor to create more harm than the status quo. So, while a multinational's responsibility is to operate within the law and customs of the host country, it has no further commitments to social responsibility. Indeed, it would be a violation of fiduciary duties to extend such responsibilities (Husted et al 1996). P&G is one of the best examples of strong ethical principles and moral values followed by the company in all countries. Accordingly, government and community "intervention" on structures within a transnational are justified because such organizations affect the quality of life and the moral potential of that corporation within the community (Robra, 2000). If an alien stranger with great powers and dispositions which could significantly affect the moral, political, economic, and social well-being of a community sought residence in a particular community, that community would be justified in demanding that circumstances be created to hedge in or modify those powers and dispositions, since they would be a social, not simply a private, matter. Likewise, transnationals must no longer be seen simply as "private" but as social organizations (International Business Ethics Institutive 2008). Improvements Globalization has made international competence crucial to the survival of American business. To improve internationally-focused business strategies, American firms must develop new skills in multicultural collaboration and raise their level of cross-cultural awareness. At the same time, public demand for ethical accountability from leading social institutions requires businesses to take a more active role in creating and maintaining ethical work climate (Vickers, 2005). For P&G, the change program will consist of several steps: (1) analysis of business and cultural environment in Asian countries, (2) development and (3) introduction of culturally sensitive ethical principles and moral values. Comprehensively integrating responses to these two concerns poses a particularly difficult challenge for U.S. multinational corporations. To foster this step, several options are available: (1) the public and the state might encourage efforts to transform the workplace so as to include various forms of worker participation and democratization; (2) forms of management which move managers about and promote their rootlessness may promote conditions in which they are at odds with the communities in which they work. and (3) industry-wide ethics councils, occupied by individuals from inside and outside the particular industry as well as by relevant citizen groups, might be charged with soliciting information regarding transnational activities, holding hearings, making public transnational moral actions and policies, and engaging in education campaigns (Robra, 2000). Such councils could also function as socialization mechanisms for those within particular industries. Those that do would receive preference in tax credits and other favorable incentives. It is a mistake to think that all promotion of morality must require a pound of flesh or the stamina of a saint. Morality can also be promoted through positive conditions as well (Husted et al 1996). The second share will aim to improve relations with local communities. P&G should improve its relations with local communities and meet their unique needs and objectives in African countries. Many local companies and local communities claim that P&G obtains a monopolistic position of the market and deprives local firms a chance to grow and prosper. The distinctively business objective is maximizing long-term owner value by selling goods and/or services (International Business Ethics Institutive 2008). Accordingly, a business will not, except incidentally, be pursuing social welfare, spiritual development, of psychic gratification. That these highly variable ends are irrelevant to business is another reason why cultural diversity has no bearing on the universal validity of business ethics principles (Husted et al 1996). Given the strictly limited objective of business and its narrow role, the key principles of business ethics can actually be identified quite simply--the principles are those enjoining the basic values without which maximizing long-term owner value would be impossible. Although the more general virtues of fairness, honesty, and responsibility necessarily extend far beyond the limited business realm, one key principle incorporates the purpose of business into its very definition, and can thus be regarded as central--the classical principle of distributive justice (Vickers, 2005).. In seeking to maximize long-term owner value, the business cannot ignore the interests of any of its stakeholders, because whether they are employees, customers, suppliers, lenders, or shareholders, they all affect the operations of the business (Robra, 2000). Their tastes and preferences, including their moral preferences, will influence their willingness to deal with the business and must be taken into account in calculations of long-term owner value. Given the very different views of the various stakeholders worldwide, it is not surprising that businesses vary as much as they do. Nevertheless, operating within a market framework and a presumption in favor of legal compliance, the teleological approach offers a system of business ethics which can be seen to be applicable everywhere and always--which is valid across all geographical, cultural, and temporal boundaries (Vickers, 2005). Conclusion The case of P&G vividly portrays that universally applicable principles of business ethics are thus perfectly possible. Understanding the nature of principles and the limited purpose of business does not, of course, eliminate the existence of genuine moral dilemmas or the need to make difficult decisions. The described approach does serve to identify which problems are legitimately the province of businesses, and to offer a fundamental principle of business ethics, that of distributive justice, which goes far to resolving those problems, regardless of participants' race, creed, or national origin.. Institutionalizing ethical practices in the firm is an arduous task for management under any circumstances, and it becomes especially problematic as corporations move into the international arena. Besides the usual barriers of custom and language, operating in foreign locations also poses another problem--different countries have value systems which vary widely, often leading to ethical norms and beliefs which are at odds with those of the American corporation. References 1. Husted, B. et al (1996). The Impact of Cross-National Carriers of Business Ethics on Attitudes about Questionable Practices and Form of Moral Reasoning. Journal of International Business Studies, 27 (2), 391. 2. International Business Ethics Institutive. (2008). Retrieved 25 May 2008 from http://www.business-ethics.org/ 3. P&G Home Page (2008). Retrieved 25 May 2008 from www.pg.com, 4. Robra, M. (2000). Affirming the Role of Global Movements for Global Ethics. The Ecumenical Review, 52 (4), 471. 5. Swanson, D. L. (2005) Business Ethics Education at Bay: Addressing a Crisis of Legitimacy. Issues in Accounting Education, 20 (1), 247. 6. Vickers, M. R. (2005). Business Ethics and the HR Role: Past, Present, and Future. Human Resource Planning, 28 (1), 26. Read More