Business Ethics Cases - Essay Example

Business Ethics Cases of the of the Number Business Ethics Cases Answer a. According to Joseph Johnson, fiduciary relationship binds different parties involved in the act together by trust. The fiduciary controls certain property or life aspects of the beneficiary and as a result, it is duty of the fiduciary to be loyal, faithful and trustworthy to the beneficiary (Van der Weide 27). The moral obligation of fiduciary is to treat stakeholders such as, employees, respectfully and take care of their safety or health, as they will receive benefit or profit for services provided (Johnston 30-40). b. Fiduciary relationships between organization and customers or stakeholders in the current business economy would mean creation of new jobs, new products and services for customers, shareholder profit and growth of the economy (Van der Weide 27). Hence, I agree with Johnson’s view. c. Milton Friedman’s approach towards fiduciary duties was more practical and believed that profit maximization is a correct method to be socially responsible as a high-revenue earning company would provides higher benefits to the society through utilitarian work, thereby enhancing social welfare. Edward Freeman, on the other hand, would disagree with Johnson’s approach towards stakeholders. According to Freeman, it is the duty of fiduciary or organization to fulfill all stakeholder benefits, while Johnson has argued that stakeholder theory will not be applicable in practical situation (Johnston 30-40). d. The morals of CSR and stakeholder theory argue that stakeholder’s benefits such as, those of customers, workers and employees, should not be compromised. However, major objective of an organization’s board of director is that of profit maximization, which might compromise stakeholder’s benefits or CSR of the organization; for instance, closing a non-profit company results in unemployed workers at the expense of shareholder’s profit (Freeman and Liedtka 95-98). Answer 2 a. Based on Kelman’s analysis and further critics by known analysts, I disagree with most of the analysis. Nonetheless, Kelman’s analysis of cost and benefit method is right to certain extent. While it is flawed in terms of its applicability, it can still be useful and beneficial in certain areas such as, health and safety (D’Entrèves 33). b. The sustainability of cost-benefit analysis depends on accurately estimating individual benefits and costs. Inaccurate usage of models, over-reliance on past project’s data and information and subjective impression generates flawed results. Sustainability of the cost benefit analysis can be secured through minimizing these flaws and making sure those benefits outweigh costs (Kelman 35-40). c. The article has suggested that ethics, where the outcome of moral conduct is right, should be an alternative for cost-benefit analysis (Kelman 35-40). d. In the article, it has been suggested that cost benefit analysis is suitable in modest business assessments. Even so, in analysis involving non-market elements and regulations, cost-benefit analysis can produce irregular results. As such, it is more appropriate to use alternatives such as, cost-effectiveness analysis while measuring businesses. Answer 3 a. Hosmer Model of Moral Analysis states that ethical principles will be meaningless unless applied. He also stated that business rules should be morally created so as to benefit the society under all circumstances. According to the model, individuals possess different moral standards due to difference in norms, goals, values and beliefs, culture, religious traditions, social and economic situations. Economic outcomes are a sum of total benefits over potential threats for entire society within a free and open market framework. According to the model, benefits can be identified and raw materials, time and money should be subsequently used for effective optimization of social wealth. In a free market economy, firms should obey all laws and include all costs while calculating economic benefits (D’Entrèves 33). On the basis of the above model, Ford Pinto should have repaired its gas tank and made it safer for the public. The company failed to calculate the expenses regarding damage and repair as well as other physical and psychological costs occurring from the sub-standard fuel tank (“The Ford Pinto”). Legal requirements determine fair path for any business activity. A balance can be achieved only when the business considers abiding by the laws to be a moral duty and ignore any vested interest. In the case involving Ford Pinto, it can be seen that all such moral duties were clearly ignored for personal interest of the company. The company even went on to lobbying and paying huge sums so as to avoid law suits and keep their current model unchanged. While moral and legal issues are usually intertwined, Ford used loopholes in the industry standards and regulations and managed to come out of the allegations (“The Ford Pinto”). While assessment of ethical duties, it is important to consider the impact of activities performed by a member on other members within the same society. The personal gains should be compared with impacts created on the society. A set of regulations is framed, encompassing ethical duties that benefit the society. In context of the case, ethical duties of the carmaker was safeguarding the life of customers and therefore, changing the fuel tank when flaw was detected during initial tests (“The Ford Pinto”). The moral problem in this case was that design of the product was harmful and sub-standard, which could seriously harm customer’s life. Then again, according to the company, benefits outweigh the costs of human life and also it was hugely unprofitable to undergo any change in the present design, unless significant profits are generated (“The Ford Pinto”). Answer 4 a. From the case study, various conflicts and pressures were identified. For instance, conflicts of interest were found among customers and organizations. The organization sacrificed quality of its products in order to avoid loss. Similarly, conflicts of interests can be recognized with the medical board, which had endorsed the flawed product for monetary benefits and compromised on that of customers. It can also be said that activities of the organization stems from pressure of generating revenues and profits and fear of extreme loss if the design flaws are made public. Conflict of interest was also seen between the new employee and the higher management, which pressurized the former (Belliotti 126; Hosmer 10-40). b. I will ask questions regarding ethical and moral principles of the company, its long-term objective and understanding of the negative impact of their current unethical activities in the future. These questions will also revolve around negative health effects of using flawed prosthetic legs and related complications. c. The major stakeholders in this situation are customers who are buying the prosthetic legs. Other stakeholders include employees, suppliers such as, the local medical board, distributors as well as owners of the company. The suppliers, distributors and company owners are interested in their individual profits, thereby compromising on product quality. The interests of customers are to live a better life through prosthetic legs (Hosmer 10-40). d. While some countries consider gifts in business transactions as bribe, in other countries, it is acceptable and common. However, distributing gifts to promote a flawed or harmful product is unethical, as it will compromise on health and lifestyle of customers. This may also cause serious complications (Belliotti 126). e. Given the situation, it is difficult to maintain a synergy between ethics as well as earnings by the organization. Even so, the organization compromises on a proportion of its profits for future growth and development. Rectifying the product design might lead company to incur huge costs, but the company will be able to induce faith and trust among customers. This in turn will result in positive word-of-mouth advertising as well as greater sales and profit (Hosmer 10-40). f. Different ethical norms are followed in separate cultures. As cultural attributes and features vary from one region to another, the same trend is noticed among ethical norms. For instance, giving or receiving gifts during business transactions is considered ethical and acceptable in Asian countries such as, China and India, while same practices are regarded as bribe in western countries such as, USA and UK (Belliotti 126). Works Cited Belliotti, Raymond, A. Justifying Law: The Debate over Foundations, Goals, and Methods. Philadelphia: Temple University Press. 1992. Print. D’Entrèves, Passerin, Alessandro. Natural Law: An Introduction to Legal Philosophy. New Brunswick: Transaction Publishers, 1994. Print. Freeman, E. and Liedtka, J. “Corporate Social Responsibility: A Critical Approach,” Business Horizons, Vol. 34.4 (1991): 92-98. Print. Hosmer, La Rue. E-Study Guide for: The Ethics of Management. Atlanta: Cram101 Textbook Reviews. Print. Johnston, Joseph, F. Jr. “Natural Law and the Fiduciary Duties of Business Managers.” Journal of Markets & Morality, Vol. 8.1 (2005): 27-51. Print. Kelman, Steven. “Cost-Benefit Analysis: An Ethical Critique (with replies).” AEI Journal on Government and Society Regulation, (1981):33-40. Print. “The Ford Pinto.” Hoffman, Michael. Cunny Education. n.d. Web. 06. June. 2013. Van der Weide, Mark. “Against Fiduciary Duties to Corporate Stakeholders,” Journal of Corporate Legislation, Vol. 21 (1996): 27. Print. Read More