Core Aspects of Corporate Ethics and Corporate Social Responsibility - Assignment Example

BLE 215 of Supervisor October 28, Introduction Corporate social responsibility, corporate governance and ethics are important elements of businesses in the world today. It is an important element of business and aids their performance and success. In order to remain a going concern, a business will need to ensure it meets all the elements and aspects of successful businesses. This paper will involve a critical analysis of four core scenarios that are presented for analysis. The research will involve a critical analysis and evaluation of core aspects of corporate ethics and corporate social responsibility. Question 1 Joseph Johnson puts forward a case which states that the stakeholder theory is just a social theory and does not work in practice. a) Joseph Johnston argues that the failures in corporate governance and top level scandals indicates that the fiduciary principle does not really help to ensure that managers seek the best interest of their stakeholders (25). Johnston argues on the basis of the conflict of interest that is so rife in organizations. This is because most managers and directors seek to meet their profit motives and since they are often assessed on the basis of their ability to attain profitability, most directors are prone to find ways and means of cutting corners and cheating some stakeholders. A stakeholder is a person who affects and/or affected by an organizations activities (Freeman 29). This include a wide variety of people including employees, consumers, suppliers, financial institutions, government agencies amongst others. These people have various demands and expectations from the organization and its directors. And due to the reality that directors are expected in practice, to generate profits, directors are wont to do illegal things that will lead to higher profitability. They are also likely to ignore other peoples claims and legitimate needs in order to attain high profitability. From another angle, managers and directors want to remain in the good books of shareholders and guarantee shareholders expectations of higher dividends. They are therefore likely to present misleading reports that will allow them to remain in office as directors. Thus, the fiduciary duty of operating in good faith is often missed and directors use ways and means to attain results. b) To a large extent, I agree with this assertion. This is because in reality, a director works under so many constraints. And if that is the case, a director will be forced to do things that might not be in the best interest of everyone. From another perspective, it is practically impossible for a manager or director to meet all the expectations and demands of stakeholders. So a director will have to forgo some aspects and some elements of stakeholder demands in order to attain the profitability motive. However, the limit of this argument is that corporate governance rules have evolved. And in nations like the UK where the corporate governance rules are not very rigid nor legally binding, directors continue to attain high results. So in that sense, there is hope that if an organization adheres to the right levels of corporate governance principles and there are proper controls, directors and managers will be forced to respect their fiduciary obligations and attain the best results. c) Friedman supported the school of thought that corporate entities in a Capitalist economy must do everything possible to attain results and profitability. And by this school of thought, as long as an activity is not illegal, the directors will be right to pursue it. Going strictly by Friedmans position, it appears that Joseph Johnston is right because if directors are allowed to pursue profitability as long as it is not illegal, then it means Johnstons request is necessary. This is because in a capitalist system, directors will have to be compelled by law to find limits to their actions. Thus, I think that Friedman is in agreement with the proposition of Joseph Johnston. And the concept of multi-fiduciary proposed by Friedman is in sync with Joseph Johnstons request for the law to compel directors to become sensitive to their fiduciary demands and expectations. Edward Freeman is somewhat in agreement with this demand and expectation. This is because Freeman makes it imperative for directors to be sensitive to stakeholder interests and expectations. Thus, if the law compels directors to do so, that should be appropriate. d) In the short-run, the stakeholder theory and corporate social responsibility conflict with the profit orientation of businesses. This is because shareholders pool their resources with the view of earning dividends. Higher dividends are linked to higher profitability. The challenge however is that if a director is implementing his fiduciary duties to shareholders, the need to satisfy stakeholders and other parties who are merely related to the entity clashes. This is because it cuts down on the earning capability of the entity and since all ethics concerning stakeholders must be observed in a framework of corporate social responsibility, there is a reduction in profitability. However, in the long-run, corporate social responsibility and shareholder expectations are one and the same. This is because for a firm to thrive into the future, there is the need for the director to satisfy its partners to attain their goodwill. This enables the business to remain profitable into the long-run. And to this end, corporate governance and stakeholder theory helps to guarantee the survival of the organization and this means the shareholder are assured of dividends over a sustained period of time. Question 2 Steve Kelman provides a critique of the cost-benefit analysis and whether it leads to a “flawed ethical result.” a) Kelman identifies that ethical sensitivity does not always lead to the right and efficient results. People might want to move in a certain direction that might not really bring the highest net benefit. This means the ethical sensitivity and human rights are not always in our best interest. I agree with Kelman because the cost-benefit analysis creates a framework and a formula for managers to use to take decisions. Sometimes, the stereotyping and adherence to strict models of decision making leads to results that are far from what the organization expected or sought. This means the organization will be led astray if it applies cost-benefit analysis strictly without making allowances and exceptions where there is a need for that. b) Cost-benefit analysis is not very sustainable. It helps to provide a credible and acceptable method of democratically authorizing decisions and actions on the basis of efficiency and effectiveness. However, there is no guarantee that cost-benefit alone will always bring the best results. Sometimes, there is the need for some degree of deviation to attain results. In the long-run there is the need for a decision to have some considerations for some important factors that are based on the firms long-term interest. This means there is the need for an organization to integrate some important elements and aspects of other stakeholders in order to attain long-term confidence and remain operations. c) Cost-benefit analysis ought to be done alongside other methods and other systems like stakeholder mapping – the Mendelow Matrix. This is because in order to identify which stakeholders are most important and find ways of meeting their needs at a level appropriate to them. The stakeholder matrix enables a business to identify the best and most appropriate ways of allocating their results with the hope of ensuring they meet their long-term expectations and demands (Norton 36). This helps the organization to remain operational and rake in revenues as and when and how there is the need for that. d) The most important of the two: cost-benefit analysis and stakeholder mapping is the cost-benefit analysis. This is because cost-benefit analysis enables an organization to remain productive and solvent. As long as a business is making profits and attaining efficient results, there is no need for the business to make the most rational decisions that will bring the best and the most optimum forms of revenue. Cost-benefit analysis enables the business to thrive and bloom. However, for long-run purposes, there is the need for an organization to undertake various stakeholder analysis in order to ensure that the business remains operational into the future. Question 3 The Hosmer Model of moral analysis involves the identification of moral standards from three different angles: 1. Cultural Experiences 2. Ethical Belief Systems and 3. Economic and Social Situation (Zimmerli et al 246) These three pointers will form the basis and the structures of the moral standards that will become the basis for measuring ethics and ethical conducts. With that, the content of the moral standards will be examined and the appropriate management decision will be taken. In the Ford Pinto Fires case, it was clear that the case involved a major issue relating to Fords Pinto car range was that the cars were poorly built and it was responsible for several accidents. However, there were 40 more cases at hand and when they were charged for murder, there was a major ethical concern because if Ford lost the first case, there was going to be a domino effect that would lead to major set of lawsuits that would cost millions of dollars. Aside that, the management of the company would face lawsuits and there could be criminal proceedings against them which could be far-reaching. The initial analysis of the brand of the car came with major issues. And this led to serious issues. However, the management of the company sought to meet targets and do things quickly. Thus, applying the Hosmer Model of Moral Analysis, the following will be recommended: 1. The cultural experience: The company should have created a culture which integrated the safety of their customers. This is because such an experience would have ensured that Ford always worked to attain the best results and put their safety activities in order. 2. Safety Ethics: Safety should have been a central part of their activities. And they should have had these standards clearly spelt out and used as a guideline for their administration and their activities. Without safety ethics, there was bound to be various profit oriented activities that would cut down on their sacrifices and enable management to meet targets. 3. Economic and Social Situation: Ford needed a system of undertaking longer-term analysis of their activities. They should have considered all stakeholders and the economic implications of leaving any stakeholder out. This would have allowed Ford to get a better and a more appropriate method of evaluating activities and their managerial plans and processes. With a system for careful evaluation and analysis, Ford should have found a way of getting all of the management to comply with this system and this model in making management and managerial decisions. To ensure enforcement of these ethical standards and ethical cultures, there is the need for a company like ford to have a supervisory authority like a board of directors that would have supervised their activities. The board could have had an audit committee that would audit all activities including the safety standards. This would have allowed Ford to get a thorough review and examination of their activities before taking any decisions on when and how to undertake their activities and provide results. Clearly, such a system was lacking. The management of Ford could override the system and there was poor supervision. This allowed the management to take decisions without the approval of other entities and also without standards to guide and direct them as to how to carry out their safety activities to attain optimal results. Clearly, there is the need for the institution of an ethical system and this should be complemented by a supervisory body. I will recommended an ethical system and a stakeholder analysis system. There should be a functioning board of directors that will sit on each and every matter and provide information about how to do things and how to authorize various safety and other social concerns and matters. Question 4 This section discusses the scenarios involving me as an employee of MLTI a cutting edge designer and seller of artificial limbs. a) There are various types and forms of pressure and conflicts of interest. First of all, there is a lack of authority to enforce the correction of the defects that have plagued the brand. The request for defect modifications have been left unattended to. Secondly, the management of MLTI seem to be a self-regulatory entity. Due to this, there is no direct control of the products and the brands by the government. Due to this, the company will have to rely on itself to set standards and try to meet the quality and consumer standards. This is a recipe for self regulation which could prove to be disastrous in the long run. Thirdly, it seems MLTI is in a good relationship with medical supply entities. And this means they are able to exert an undue influence over them. The gifts and other inducements given to the medical group means that they have a monopoly and nobody can challenge or question what MLTI does. These three issues are mainly issues of conflict of interest. And since the entity is shielded and comfortable in the industry, minor issues and minor which could give way for improvement are likely to go unnoticed and this could prove to be problematic. b) I have questions relating to the kind of reason why the MLTI products are not regulated or controlled by the government. Why will the management do that since it opens up the firm to a risk of a higher standard of evaluation if anything goes wrong one day. Secondly, I have a question about the fact that customer complaints are brushed aside. In future, if a major case comes up, it might be difficult to brush that aside. Thirdly, I wonder how appropriate it is for an entity like MLTI to donate money to the local medical board. Is it the same as an inducement or a bribe? What is the ethical impact of those donations? c) There are various stakeholder interests which include first and foremost, the safety of customers who use our artificial limbs. This is because they have an inherent and inalienable right to protection from injuries if they acquire any product and our product is no exception. So we have a duty of ensuring that our product is safe and all complaints from consumers are dealt with. Secondly, the medical board is an entity that seeks to regulate, recommend and ensure that the services of MLTI are good and really appropriate. To this end, they need to be independent and operate in an independent way and manner for all entities in the industry. The government of the nation is a sovereign authority and has the ultimate right of ensuring that all its citizens, including patients who use the limbs are safe. So it is up to the state to find ways of regulating the activities of MLTI. In cases where MLTI fails to live up to expectation, the state could enforce the broader implications of the law either directly in criminal proceedings or indirectly through a civil proceeding by third parties. d) What is legal here include the fact that the company is not regulated. However, there is an ethical concern about the fact that there are no activities aimed at providing extra care and extra results to the customers who get injured by the company. This is ethical in nature and could have legal implications. The fact that they give donations is legally wrong since it is a conflict of interest and could turn out to be ethically problematic. e) The company will need to ensure that they get the right structures and the right systems in place that will ensure that they first and foremost, meet every single clients best needs. This way, they will be able to ensure that they have an ethical code and an ethical oversight system that will keep them in check at all times. The next thing is that they will need to implement the system and monitor it. Although they have to do cost-benefit analysis, they will also have to ensure that they integrate the expectations and the desires of customers and also try to remain ethically conscious of their actions and do their best to support customers and provide the best services. f) Ethical norms vary across cultures in the macrocosmic and microcosmic level. In the broader sense, human beings grow up and pick the cultures of the wider society they live in. This way, the culture influences the norms and what is acceptable and what is not acceptable. Through this, organizations also adopt cultures and norms that reflect the realities. Additionally, ethical norms vary from organization to organization. This is because ethical standards are chosen by the organizations managers and directors. This is integrated into the structure. Thus, the ethical appetite of entities vary and through this, there is a general variation of organizations and their ethical standards and expectations around the globe. Works Cited Freeman Edward. Strategic Management: A Stakeholder Approach New Haven, CT: Yale University Press. 2010. Print. Johnston Joseph. “Natural Law and the Fiduciary Business Duties of Business Managers” Journal of Markets and Morality 8(1) p25 – 51. 2005. Journal . Kelman, Steven. “Cost-Benefit Analysis: An Ethical Critique,” Regulation, January/February. 1981. Journal. Norton Anne. CIMA Official Learning System: Integrated Management London: Elsevier Publishing. 2008. Print. Trevino Linda and Nelson Katherine. Managing Business Ethics. Hoboken, NJ: John Wiley and Sons. 2010. Print. Zimmerli Walther, Richter Klaus and Holzinger Markus. Corporate Ethics and Corporate Governance New York: Springer. 2011. Print. Read More