Why is Business Ethics not an Oxymoron - Essay Example

Why is Business Ethics not an Oxymoron? BY YOU ACADEMIC ORGANISATION Why is Business Ethics not an Oxymoron? Introduction The Summer Institute of Linguistics, a renowned organisation promoting international literacy, defines the term oxymoron as a collocation of words that have contradictory or sharply incongruous meanings1 For instance, a statement which suggests a "deafening silence" illustrates the combination of contradictory terms2. For contemporary society, the term business and ethics are often categorised as maintaining two sharply different meanings. Business is defined as an activity that seeks to provide goods and services to others while operating at a profit.3 The key term in this definition is profit. With the assumption in place that ethics can be described as social perceptions of right versus wrong, there are individuals in todays society that often view profit to be a contradiction to ethical behaviour in business. However, business ethics is not an oxymoron, which can be substantiated by existing literature which highlights that true ethical values and behaviours can actually contribute positively to sustaining business objectives; including profitability. Contributions to Society Adam Smith, a renowned 18th Century economist, established his invisible hand theory, which was used to describe the process of turning self-directed gain into social and economic benefits for the whole of society.4 In essence, Smiths invisible hand theory offers that while businesses focus on gaining profit, the ultimate benefit is to building better societies through the production of desired goods and services; which fulfils obligations of corporate social responsibility (CSR). CSR involves the activities of a firm to provide additional benefit to communities in the form of sponsorships, environmentally-sound actions, or local/regional development in the form of charitable contributions. Essentially, as a company expands and finds monetary success, society expects additional contributory action to enhance the lives of the community members in proximity to the business. Why, then, are business activities considered, by some, to be in direct opposition to ethical responsibility? This is an interesting question, as wealth is virtually inseparable from business.5 Further, a business that cannot maintain focus on profitability will, in the long-term, be unable to provide elements of CSR to its local citizens and community members. However, there are those citizens who view profit-maximising business organisations as being greedy or maintaining far too much focus on satisfying profit objectives to be ethically-oriented. To satisfy community expectations for corporate social responsibility, businesses often provide charitable donations to any number of reputable social organisations, suggesting that such donations are philanthropic or benevolent, positive objectives to sustain communities.6 With this in mind, companies who actively contribute to charitable causes are extending a portion of their financial success to the stakeholder, a highly ethical objective. In this instance, the business is satisfying its profit expectations while exhibiting a system of ethical values and beliefs in sustaining local communities. The business is under no legal obligation to provide financial support to stakeholders, thus a company which actively pursues benevolent, charitable donations is performing to the highest ethical standard. However, one author proposes that charitable donations are sometimes perceived as being driven not by ethical value systems, but by the personal preferences of highly-placed executive leadership.7 In this instance, stakeholders perceive the business objectives being to enhance public relations or as a damage-control instrument when reputations are on the line. When charitable contributions are perceived in this manner, the argument is constructed which considers community donations on behalf of satisfying corporate social responsibility to be without a solid ethical purpose; thus an oxymoron. However, under the premise of the invisible hand theory, businesses are not firmly required to contribute, but they choose to do so. Whether the objective is truly to satisfy the business (i.e. tax write-offs, increase shareholder wealth), a company which actively contributes still maintains ethically-minded standards, ultimately benefiting the external stakeholders. In this scenario, there is no conflict of interest whatsoever, thus contributing to society, regardless of the true motive, somewhat shatters the notion of business ethics being an oxymoron. Social Perceptions of Executive Compensation as an Oxymoron Ethics is much more than just a sound organisational policy, it is recognised by many contemporary professionals as a cornerstone of the business culture.8 Profit-seeking organisations are often perceived as maintaining utilitarian cultures, or those cultures which value personal pleasure or satisfaction over any other value, including ethics.9 High executive compensation packages fall into this perceived unethical category. Under utilitarian cultures, the drive to maximise profit and personal gain is so monumental at the top of the organisational hierarchy that external stakeholders begin to view the business ethically-minded activities as having an ulterior motive. For instance, a leader who is heralded for their contribution to streamlining the business financial portfolio is often given a performance-based salary increase as reward for innovation and productivity, generally topping out above £1 million. Monetary bonuses are often tied to performance results in business, which makes sense to most people.10 However, there is the indication that society perceives executive leadership (including the board of directors) as being so profit-hungry and self-gratifying that outrageous financial incentive bonuses cannot possibly be justified, regardless of executive performance. Take, for instance, a situation where a senior manager brought forth a tremendous positive change in total profitability, but found this success through the layoffs of 30% of the workforce. In this scenario, the executive receives a £5 million bonus. The board of directors at this firm would likely argue that executives are being paid for making very difficult decisions to benefit companies.11 In this hypothetical situation, the board would be correct. Taking dramatic steps to improve profitability, though at the expense of many internal stakeholders, still maintains the objective to boost profitability. High levels of compensation for not only fulfilling profit objectives, but for making difficult business decisions is justified, for without the executives activities, this hypothetical firm would be in terrible financial condition, unable in the long-term to provide ethically-minded benefit to local communities. The aforementioned executive compensation debate strongly emphasises that in order for a company to instil the perception of ethical behaviour, it must remain operational and profitable. This must be the primary objective of a business leader: To ensure that the business need for revenue is sustained. It is a likely assumption that this executive did not experience personal gratification through the termination of subordinate staff members, however it was a necessary evil to keep the business afloat financially. Despite this reality of business, in this situation, it is likely the internal stakeholder (the employee) which compares executive-level compensation as being a conflict of ethical interests or an oxymoron. However, no ethical boundaries would have been crossed in this hypothetical scenario, only that the business must be sustained for longevity, sometimes as the expense of subordinates. This is a reality of contemporary business. Contradicting Mission Statements and Business Activities One professional compares perceptions of business ethics being an oxymoron with the equation A+B = D, where the core mission of the organisation is contradicted by its current actions.12 A company mission statement entails an outline of the fundamental objectives and purposes of a business entity.13 Mission statements highlight aspects such as diversity, honesty and business integrity as a system of values in the everyday activities of the company, promoting its relationship to internal and external stakeholders. Take, for instance, a firm which has established a publicised mission statement declaring an ethically-minded value system as it relates to expectations of providing environmental contributions to wildlife organisations; a tactic to satisfy corporate social responsibility. However, the company experiences a year of poor revenues or investment losses, creating a short-term inability to provide community contributions without sacrificing the firms financial future. In this instance, external stakeholders may view this as an oxymoron, suggesting that the firm has failed to meet its mission to provide ethical contributions. The reality in this situation is that the firm cannot satisfy social ethical expectations without negatively impacting the business. Rather, executive leadership has likely performed substantial strategic planning, realising that contributions to the community might jeopardise profitability, thus this senior executive has removed community contributions from the operating budget. Strategic planning is defined as the process of establishing company objectives and the policies for obtaining and using those resources to attain those goals.14 In a period where the firm is experiencing less-than-desired financial return, denying financially-related corporate social contributions is a stout reality to emerging profitable the following year. In this instance, touting business ethics as an oxymoron is somewhat ludicrous, as the ultimate goal of leadership is to ensure that the business operating future is not hindered by an attempt to satisfy negative social perceptions about ethical behaviour. A temporary denial of charitable contributions, in the face of financial losses, is a sound business decision, with zero conflict of interest from an ethical viewpoint. Internal Cultural Perspectives on Business Ethics Some companies take a justice approach to ethics, which is defined as an approach to decision-making based on treating all people fairly and consistently when making business decisions.15 In many countries, positive legislation has been created which protects workers from discriminatory practises in the workplace. However, outside of the law are the ethical ramifications for equal employee treatment. For example, a company which disciplines an employee for breaking a policy rule must provide similar procedural justice techniques to ensure that all other employees who break this rule are penalized as well. Managerial bias is often attributed to perceptions of contradiction to procedural justice policies, suggesting that failure to discipline a secondary violator of policy reflects an oxymoron. However, in organisational environments, the justice approach is more flexible than other approaches, because it recognises that standards of fairness vary depending on which individuals were involved in a decision.16 Having said this, when internal beliefs about unethical managerial behaviour occur, subordinate workers must recognise that there may be mitigating circumstances behind the managerial decision not to discipline an employee for a policy infraction. If two employees break the same procedural rule, with only one receiving a penalty, the issue may be much more far-reaching than perceived by the worker who made the complaint. Perhaps the other employee is currently being investigated for another infraction or is of a protected class requiring a more delicate managerial response. When employee-generated insinuations of improper managerial ethics are constructed, the manager may only be attempting to satisfy legalities or is waiting to discuss the infraction in a less-public environment. This scenario supports the notion that business ethics are not always concrete by definition, meaning that a certain level of flexibility exists under the appropriate circumstances. An individual, under the justice approach, who perceives a conflict of interest, is likely only viewing his or her own side of the situation. It is a reality in business today that certain company-related situations require different approaches to distributing internal justice. From the perspective of disgruntled employees who feel that managers cross an ethical boundary in terms of fair procedural justice, such accusations should be reinforced as having no validity, as the distribution of justice is not always an issue of black or white. In essence, internal perceptions, such as these, of unethical treatment have no merit, thus no oxymoron exists, only a managerial awareness of their personal obligations to satisfy delicate managerial situations and handle each situation according to its unique characteristics. Social Viewpoints as Catalyst for Conflicting Opinion Reverting back to Corporate Social Responsibility, which is a major theme of todays business ethics, it is important to note that different social viewpoints are often the catalyst behind why the term business ethics is deemed, by some, to be an oxymoron. Though society exerts pressure on companies to provide sustenance to the local communities in which the business thrives, scholars have struggled to achieve a clear paradigm, let alone a common language to guide the conversation.17 What this suggests is that ethics, or right versus wrong, mean different things to different individuals, making it virtually impossible for a best practise template on ethical behaviour to be constructed as a universal guideline for businesses. Differing values and belief systems tend to paint a unique picture of reality, while also forming a view of what individuals believe life ought to be.18 With this in mind, a domestic firm operating on foreign soil might be pressured to conform to the local civilians viewpoint on business ethics, even if it is wholly different than European beliefs. Perhaps these different values, potentially leading from differing geographical locales, is the main reason as to why individuals perceive business ethics as being an oxymoron; as what is good for one culture is bad for another. As more and more businesses are moving into global marketplaces and expanding their activities internationally, predicting sound ethical behaviour that will be acceptable to everyone is virtually impossible. If a global company determines that ethical policies must be wholly different for its activities on foreign soil in order to maintain a positive international image, businesses cannot succumb to domestic pressures to explain or defend the firms overseas activities. Once again, environmental factors play a significant role in determining ethical policies unique to each region, which is a stern reality of todays business environment. Likely, there are not behaviours occurring by leadership that cross ethical boundaries, only that certain groups have foreign viewpoints about what constitutes sound business ethics. Conclusion It is important to highlight several different ethical issues in contemporary business in order to justify the notion that the term business ethics is not an oxymoron, from any perspective. This paper has clearly illustrated that the first priority of business leadership is to ensure a quality and competent operational future for the firm. Lying to customers or other blatant disregard for human dignity would, of course, be crossing ethical boundaries. However, the nature of complex business environments dictates that managerial leadership must be adaptable to both the internal and external environment, and create ethical policies based on the companys actual capabilities. If resources are high and the company is experiencing tremendous monetary successes, most firms contribute appropriately to ensure a more stable community. It has been established, however, that such efforts toward appeasing corporate social responsibility expectations is not a legal requirement of todays firms. Perhaps the argument that business ethics is an oxymoron is formulated by those individuals who do not truly understand the complex nature of modern business. Or, perhaps the argument is formulated by individuals that have become so accustomed to receiving charitable contributions that they fail to realise that organisations are not mandated to provide this support, thus they always expect more contributions year after year. Whatever the situation, business ethics is not an oxymoron, as a business can ensure profitability and still maintain a culture that is ethically-minded. A business can continue to capture its interests in maximising profit, ensure fair treatment of its employee population and extend a helping hand to communities in need. Blatant disregard for somewhat universal values such as honesty and criminal behaviour might justify the argument that business ethics is an oxymoron, however it does appear that todays organisations genuinely value building relationships with its stakeholders, refuting the notion that business ethics can be categorised as a contradictory terminology. Bibliography Coate, C. & Mitschow, M. (2002). Business Ethics, Business Practices, and the Power of the Parable. Teaching Business Ethics. 6(1): 127. Godfrey, P. & Hatch, N. (2007). Researching Corporate Social Responsibility: An Agenda for the 21st Century. Journal of Business Ethics. Vol. 70, p.87. Gomez-Mejia, L., Balkin, D. & Cardy, R. (2005). Management: People, Performance, Change. 2nd ed. McGraw Hill Irwin: London: 105. Henslin, James M. (2003). 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