BAE Systems - Essay Example

Enterprise and Social Responsibility: BAE Systems case Study Year of Study/Semester: submitted: Section A Q1 One of the harms associated with the BAE act of bribing officials in the African and Eastern Europe region so as to get preferential treatment in terms of getting lucrative government defense contracts is that it increases its overall operating costs. This can be attributed to the fact that the UK-based company incurs an extra cost by opting to bribe the said officials. Hence, it is justifiable to note that its overall profit margins are bound to be reduced significantly. The second harm is in the form of increased cost of their tenders to their clients. This is most likely to be the scenario as one way of this organization to be able to recover its already spent money in the form bribes to these governments. Consequently, this increases the economic vulnerability of its clients. Furthermore, this locks out other qualified and competent market players in this industry due to the outright violation of ethics of business by this firm. In this regard, this shall then set a precedence of violation of ethics of doing business by other players as well with the main objective of achieving their financial. At the same time the rapid increase in the arms to several countries brings to the fore the challenge of security. This is further aggravated by the fact that this type of trade is usually centered towards the need for a country to protect and assert itself in its respective region. On the other hand, developments in this trade carry the obvious benefit of improving the economic growth of the UK from the associated benefits of wining defense contracts a broad. The S.F.O’s investigation into the conduct of BAE has the benefit of bringing sanity into this industry. By exposing this type of business mannerisms by a leading firm in the UK, other firms shall be bound to appreciate the importance of upholding ethics of business irrespective of the conditions in the international market. Q2 According to Velasguez (2005, p. 48), ethics play a very important role in the overall well-being of mankind. It is therefore imperative to note that the ability by individuals and organizations to abide by them determines the extent to which their actions affect our well-being. Faced with the challenge of emerging markets in the form of Russia and China, business players in this sector are greatly predisposed to the risk of violating the conventional ethics of business. As noted by Jennings (2008, p. 261), an increase in the number of market players in one industry has the effect of increasing competition. In this regard, companies such as BAE risk loosing their market leadership positions which in turn results to the violation of the business code of conduct. Hunt (2002, p. 187), says that in the utilitarian perspective of ethics, there is no justification for BAE to bribe officials to win tenders overseas. This perspective holds the view that among any two actions, the greatest balance of benefits comparative to the harms shall be achieved through the use of an ethical course of action or policy. This is attributed to the fact that such actions or policies have the impact of affecting the overall well-being of people both directly and indirectly. Hence, the current developments in this arms trade industry characterized by bribery do not yield a favorable balance of benefits over harms. Thought these companies shall be able to secure tenders and improve their financial turnovers in the international markets, this usually carries a range of harms over the required benefits. In particular, the use of bribery in business exposes one to the risk of getting substandard goods or services as argued by Pool-Robb and Alan (2003, p. 137). This implies that the clients to such firms shall have to incur additional costs to improve their security standards. It is noteworthy that these costs are usually passed on to the people. Also, other upcoming and competent firms in this sector shall not be able to secure such tenders in the event that they do not have the financial muscle to bribe within the international markets. Ultimately, it is the people who are left to bear the brunt of such acts in terms of lost jobs and wage-pay reductions. Q3 From this case study it is evident that all the main players have violated the required code of ethics expected of them. From the onset, it is clear that BAE as an investor does not have consistency of positive character. Based on the recommendations from the Woolf’s commission, it is apparent to note that the firm’s managers have been having the habit of violating business code of ethics with the main focus being on the ability of this firm to win tenders in the overseas markets. It is ironical for the directors to argue that they would be breaching their fiduciary responsibilities when asked to make an out-of court settlement yet they have been involved in bribery allegations according to the SFO. It is the lack of their consistency in behavior that makes them not to be able to fulfill their responsibilities. This is best captured in their various acts of bribery involving the South African as well as Saudi Arabia Princes. The government through the SFO on the other hand does not have consistency owing to the fact that it opted to drop the case against BAE. Instead, it is requiring an out-of court settlement as a means of punishing the firm. Although this might be effective, it is not universal since it shows some form of preferential treatment to the company. To this end, there is no universality in terms of punishment to the violators of the stipulated business code of ethics applicable to all the market players in this industry. This makes SFO culpable to failure to perform its duties of ensuring sanity in the business fraternity. In overall, these acts of violating ethical duties by all the main actors in this case study point towards the apparent lack for the protection of human dignity. In this case, economic benefits have taken the center-stage without considerations being made to the ultimate consequences of such acts; Ganeri (2007, p. 88). Section B Q1 According to Shaw (2005, p. 73), ethics make the difference between failure and success of any organization in its respective industry or sector. In principle, business ethics are positively correlated to the competitive ability of the organization. On a positive rejoinder Malachowski (2001, p. 128), notes that ethics help to establish the organizational culture for the benefit of employees, clients and wider community alongside the firm itself. To the clients, ethics ensure that they are treated with dignity which in turn allows them to get value for their money. In the modern business environment, the cost of being unethical may imply market failure due to the loss of image and investor confidence. Q2 The present market environment is witnessing dynamism. In this regard, one can not afford to overlook the role that is played by the business being able to be sustainable. The concept of sustainable development entails the business being able to come up with strategies to meet its present needs; while at the same time ensuring for the protection of its human resource base as well as natural resources for its future needs; Mercedo, Richard and Kate, (2001, p. 502). Sustainable development of business has the importance of enabling the business to respond to emerging challenges. To add to that, it also allows the business to allocate, prioritize and utilize its resources efficiently. References Ganeri, J 2007, The concealed art of the soul: theories of self and practices of truth in India ethics and epistemology, Oxford University Press. Hunt, EK 2002, History of economic thought: a critical perspective, 2nd Ed. M.E. Sharpe, New York. Jennings, MM 2008, Business Ethics: Case Studies and Selected Readings, Cengage Learning, New York. Mercedo, S, Richard, W and Kate, P 2001, European business, 4th Ed. Times/Prentice Hall, New York. Malachowski, A 2001, Business ethics: critical perspectives on business and management. Taylor & Francis, Washington, D.C. Pool-Robb, S and Alan, B 2003, Risky business: corruption, fraud, terrorism and other threats to global business, Kogan Page Publishers, New York. Shaw, W 2005, Business ethics, 5th Ed. London, Thomson/Wadsworth. Velasguez, MG 2005, Business ethics: concepts & cases, Pearson Prentice Hall, New York. Read More