Applying Ethical Theories to Business - Term Paper Example

Business Ethics Introduction While the relationship between business and ethics is a long standing relationship, the manner in which modern society has come to see business ethics and corporate social responsibility is quite different from the idealistic perspective taken by organizations and bodies such as Greenpeace. It has been famously suggested by Friedman (1970) that the one and only social responsibility of a business is to increase its profits as long as it stays within the rules of the game. However, when ethical theories are applied to the idea of making profits, it can be shown that the theory which works best for business is ethical egoism rather than any other perspective. This is not to say that other theories can not be applied at all, it simply means that a business which works with ethical egoism simply offers the best ethical position for a company to take. Applying Ethical Theories to Business As described by Medawar (1976) business ethics become important aspects of running a company and the basic reasons for that are not legal requirements or the orders of a body that regulates business. In fact, the reasons for running an business ethically come from the theory of ethical egoism which suggests that organisations as well as individuals should do what they think will be best for them in the long run. For many companies, this approach could be disguised in the ideals supported by ethical paradigms such as utilitarianism or universalism but the real reason for companies acting ethically seems to be that being ethical or at the very least, appearing to be ethical is good for business. This is because consumers themselves consider ethics to be important. Ethical consumers want to know if their choices in buying from one company or the other are ethical or not. For example, such consumers may be hesitant in buying goods from a company which exploits labour, uses animals tested or is the direct cause of creating extensive pollution (Ethical Consumer, 2008). Such consumers depend on the information they have about companies, the products they are selling, the actions taken by the company, their charitable works even how the company treats its employees can be easily accessed using tools such as the internet (Adams, 2004). Therefore, ethical consumers may find it easy to take decisions regarding which companies they want to support and which companies they want to oppose. Of course, the companies which are supported as being ‘green’ or socially responsible could proudly use their socially responsible position to sell more of their products. This is because the image of the company as well as the way in which it presents itself to various consumers is critically important for a business of any size (Brown, 2005). In fact, the same concept can be applied to individuals and even governments, as long as governments or individuals can give an image of being ethical, them actually being ethical or following an ethical theory seems to have little relevance to reality. The usefulness of ethical egoism is clear when the image that the company wants to present is that of an ethical organisation or even an ethical government (Yeatman, 2004). In real world business terms, a financial company may focus on giving the image of being honest and reliable while a company that manufactures or sells camping or other sporting gear could benefit if it gave the image of being friendly towards environmental causes. For such a company, the process of being ethical may mean that it has to make some investments towards obtaining the image. For instance, supporting recycling drives, assisting nature preserves or even giving cash support to the SPCA could give a company the ethical image they want. This is a delicate balance since the company can take the idea of ethics a little too fat for the taste of the consumer and could be labelled as being fake. Consumers as well as the media seem to be well aware of social issues and it has to be understood that ethics can forced upon a company by society. Ethical business operations demand that the company who is working to improve the sales may have to be careful with regard to the impact the product has on society. For example, Apple Inc. had to change the manner in which its world famous iPod MP3 player was packaged when Greenpeace pointed out that the packaging of the product used materials which were harmful for the environment. Responding to the situation, Apple changed the packaging to make it safer for the environment. Planque (2006) reports on this change which came almost overnight in Apple and shows that Steve Jobs (Apple’s CEO) pointed out this fact when it came to launching the new version of the product where he said that: Weve got some new packaging for the new Nano as well. And its 52% less volume. This turns out to be an environmentally great thing. Because it dramatically reduces the amount of fossil fuels we have to spend to move these things around the planet (Planque, 2006, Pg. 1). It is certainly possible that the packaging could have been environmentally friendly even before the product was launched but the design of the product and the look of the packaging was supposed to attract buyers. Environmental considerations only came into play once the fact was pointed out to Apple. Apple appears to have behaved with ethical egoism and only changed its behaviour since it recognised that not changing their packaging could alienate those buyers who are concerned about their buying decisions damaging the environment. The rules of the game seem to have come to appoint where buying something is no longer based on the price of the item alone. In fact, there appears to be a moral element involved in the process of making the choice for the consumers. If the consumer knows that certain practices of a company are unethical, the customer may go away and look for a company which is more ethical especially if all other things remain the same. Thus ethical egoism appears to be the best way for a company to go but other ethical viewpoints also deserve a look for a better understanding of why ethical egoism is the ideal. Amongst these other theories is ethical relativism. As per the basic definition of the ideas concerning ethical relativism, Velasquez et. al. (1992) say that: “Ethical relativism is the theory that holds that morality is relative to the norms of ones culture. That is, whether an action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another (Velasquez, 1992, Pg. 1)”. Applying these to business ethics would make all the companies which cooperated with the Nazi regime as upstanding ethical companies. Bertelsmann is one such company which appears to have used the idea of ethical relativism to do business. After the war was over, the company said that it was closed down by Hitler since the management of the company was defiant towards the Nazi government. The company was given license to operate but decades later, the truth about the company was revealed when it was found out that Bertelsmann was only closed since the ware created a paper shortage (BBC, 2002). In reality, Bertelsmann actively cooperated with the Hitler and made massive profits. The company was responsible for publishing several anti-Semitic books commissioned by the Nazi party and even used the Jews put into labor camps. While it was a small company before the war, after the war it emerged as one of the media giants in Germany mainly through the illegal profits it had made during the war era (BBC, 2002). Undoubtedly, the company behaved in an ethical manner if we measure their actions with ethical relativism but their acts were quite unethical to say the least. Had they focused on ethical egoism, they might have considered the long term impact of their use of slave labor, printing anti-Semitic books and could possibly have refrained from doing those things. Further, business ethics may be difficult if not impossible to be governed with the ideas presented by utilitarianism since this particular ethical theory suggests that individuals and organizations should do what is likely to bring about the most benefit for society (Lachapelle, 2005). The collective society in which the business operates includes the competition of the business. However, the fundamental fact of doing business remains that competition will create winners as well as losers. At the same time, all companies which work for profit will have to keep in mind the advantage of their stakeholders which include shareholders, clients, suppliers and the employees. As soon as the interests of the stakeholders are made the primary concern of the company, the interests the remaining society become secondary and it will be difficult for any company to behave ethically if they are not balanced. This seems to be the fundamental issue with the utilitarian approach since doing so makes a company as focused on the public benefit as it is for its stakeholders. Perhaps the idea could be applicable when a company is owned by the government but in private industry, especially in a capitalist system which Friedman is working with, utilitarianism is difficult to apply. Further, a capitalist agenda with a liberal economy may not even permit the application of utilitarianism (Drydyk, 1991). A similar issue can come up when we deal with the ethics and take them in consideration under universalism. While the ideas concerning universalism are quite enlightening, it is difficult to bring two opposing and competing parties to a common agreement in business terms. A universalistic viewpoint on ethics would suggest that individuals that are in competition with each other should to seek out common grounds and then create compromises between themselves to get to a real solution for their problems. In the business world, such an approach might put a company at odds with its stakeholders who may not wish to have or create any compromises with their competing organization. As a matter of fact, the shareholders might actually prefer to see the company gain profits and the competition be blown out of the water. Of course, as described by Friedman (1970) it can be difficult to use a moral or ethical guide for business since the idea of doing business is directly connected to making profits. It seems that the words of Friedman remain true for business ethics when he said that: There is one and only one social responsibility of business: to use its resources and energy in activities designed to increase its profits as long as it stays within the rules of the game, engaging in open and free competition, without deception and fraud (Friedman, 1970, Pg. 1). After nearly forty years, the rules of the game have changed to a point where ethical consumers and the responsibility of the sale of the product have bought business to a point where ethics are good for business and ethical egoism helps a company make money and gain clients. Conclusion Being ethical and using the idea of ethical egoism can certainly bring profits as exhibited by the case of Apple Inc. and not being ethical or focusing on short term relativism can actually damage the reputation of a company. In fact, unethical behavior can actually mean damage in terms of the company’s bottom line if the unethical behavior is discovered and there are people who are willing to take the matter to court. This can result in not only the reputation of the company going down but also the profits since a costly lawsuit or fines from regulatory authorities have to be paid. The best solution for all these problems is for a company to simply be ethical since it makes good business sense. Works Cited Adams, C. 2004, ‘The ethical, social and environmental reporting-portrayal gap’, Accounting, Auditing and Accountability Journal, vol. 17, no. 5, pp.731-757 BBC. 2002, ‘Bertelsmann admits Nazi past’, BBC.co.uk, [Online] Available at: http://news.bbc.co.uk/2/hi/business/2308415.stm Brown, R. 2005, ‘The ROI of Diversity’, Mortgage Banking, vol. 65, no. 12. pp. 111-113 Drydyk, J. 1991, ‘Capitalism, socialism, and civil society’, Monist, vol. 74, no. 3, p. 457-478. Ethical Consumer. 2008, ‘Why Buy Ethically?’ EthicalConsumer.org, [Online] Available at: http://www.ethicalconsumer.org/aboutec/whybuyethically.htm Friedman, M. 1970, ‘The Social Responsibility of Business is to Increase its Profits’, The New York Times Magazine [Online] Available at: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html Lachapelle, E. 2005, ‘Morality, Ethics, and Globalization: Lessons from Kant, Hegel, Rawls, and Habermas’, Perspectives on Global Development & Technology, vol. 4, no. 4, p. 603-644. Medawar, C. 1976, ‘The Social Audit: A Political View’, Accounting Organizations and Society, vol. 1, no 4. pp. 389-394. Velasquez, M. et. al. 1992, ‘Ethical Relativism’, Issues in Ethics, [Online] Available at: http://www.scu.edu/ethics/practicing/decision/ethicalrelativism.html Yeatman, A. 2004, ‘Right, the State and the Conception of the Person’, Citizenship Studies, vol. 8, no. 4, p. 403-417. Word Count: 2,167 Read More