The Importance of Business Ethics - Essay Example

Business Ethics The importance of ethics lies directly in understanding the positive and negative consequences associated with decisions and actions. In accounting, there have been multiple cases of scandals that have evolved over the last decade to draw attention to the failure of accountants to effectively utilize ethical behaviors in their professional activities. Just a few of these financial scandals directly involved such large corporations as Enron, HealthSouth, Adelphia Communications, WorldCom, Rite Aid, Tyco International and Global Crossing. Due to the extent of these scandals, many accounting professionals, public and private organizations and government authorities have raised serious concerns about the actual use and implementation of ethics in accounting and business practices. The managers and companies involved in these scandals have suffered mightily – from huge fines to jail terms and financial collapse (Garrison, Noreen & Brewer, 2009), and the public outcry and recognition that ethical accounting behaviors are absolutely essential to improve the functionality of the economy and business environment have led to several different regulatory changes, which will be discussed further in this paper. It is critical to discern the ultimate importance of ethics in the business and accounting environments. Ethical behavior is critical to the success of the economy and to ensure that it operates more efficiently while maintaining consumer confidence and quality assurance. If ethical behaviors are not performed, less products, supplies and resources would be available to consumers; quality would be lower; and prices would be much higher than they are today. Expert Consulting Group has unfortunately been presented with two highly unethical situations that should be considered for this negative impact that can greatly diminish the quality of business functions within the organization. The first scenario presents the administration with an executive that seeks to financially benefit from a merger through a business relationship with the merging institution. This is both unethical and illegal as it directly showcases a conflict of interest within the entire business and acquisition process. Under no circumstances should an executive be allowed to conduct business that provides financial benefit for themselves while placing the company in an illegal and unethical situation. Conflict of interest is often an illegal activity that is presented as an illegal activity and it can cause great problems for the corporation due to criminal activity that can result in large fines and jail time as previously describe in many of the corporate scandals (Garrison, Noreen & Brewer, 2009). Government Allies, Inc. would not be worth the potential negative consequences of having an executive on staff that receives financial benefits due to a merger. Many unethical actions and behaviors are usually conducted because the individual believes that the ends justify the means. However, this is not always the case because of the great amount of negative consequences and immense risk that can be attributed to the executive and both corporations in this scenario. When this is a serious consideration, many ethicists and behavioral managers will suggest that utilitarian theory is administered to justify a potentially unethical decision. Utilitarian theory argues that actions should only be taken if it is in the best interest of the entire group. This suggests that the best option is the greatest good for the greatest number. One of the most important concepts for understanding environmental ethics theory is a commonly referred to as utilitarianism. “As the utilitarian focus is the balance of pleasure and pain as such, the question of to whom a pleasure or pain belongs is irrelevant to the calculation and assessment of the rightness or wrongness of … actions” (Palmer et al., 2008, par. 10). In other words, utilitarianism has become known as choosing a behavior that provides the greatest good for the greatest number. However, utilitarianism does not necessary imply that it is the greatest good for the greatest number of resources or assets. Furthermore, an unethical decision may have short-term benefits for the entire organization, but many unethical acts fail to take into consideration the utilitarian thought behind the long-term ramifications of unethical behaviors. The second ethical scenario presents ECG with another opportunity to invest business resources and processes in determining ethical decisions. Business controls are often utilized to protect a company against unethical and illegal activity that can negatively impact the organization. There are many different types of controls that are available at the disposal of any manager, director or executive to help monitor the operations and staff within a company. This is also true for Expert Consulting Group. Within this industry, there are several types of controls that are utilized on a daily basis to ensure that the desired end results are ultimately achieved and to protect the company from the unethical activities of internal and external groups or individuals that may negatively impact the company. Many organizations effectively utilize approvals, security of assets, reviews of performance and segregation of duties as control efforts to distinguish the desires results and ensure that they are achieved. Each of these control tactics has a particular purpose and controls a different aspect of the organization. Furthermore, the role of a manager within the company provides an individual with the ability to utilize these tactics in the best ways possible to ensure production and efficiency within the store for the staff as well as to provide a quality service to the customers. Given the second scenario, ECG would best be suited to place the team hearing the proposal to maintain a position of power within ECG to execute the control method of approval. Approvals are essential elements to ensure that management maintains control over the staff activities. Approvals exist when management authorizes employees or groups within a company to execute certain actions within previously approved parameters. In addition, management specifies those activities or transactions that need supervisory approval before they are performed or executed” (“Understanding Internal Controls”, 2009). In this scenario, the supervisory team is meant to hear the proposal for the acquisition and to examine the pros and cons of the entire decision-making process. The goal should always be to exhibit decisions that are in the complete best interest of the company. However, the employee that currently has friends on the other side of the bidding process should be removed from the entire decision-making process and proposal hearing. While this information definitely places ECG in a great position to acquire enough quality information to make strong bids for the acquisition, this is completely unethical and does not satisfy the purpose of ethical approvals. ECG must take great steps to reduce the potentially negative impact that this situation can have upon the organization. While the first scenario has an immediately negative outcome, the second scenario may not provide such an outcome directly. However, the acquisition of information and the fact that such information is going to be used for the benefit of the company greatly changes the situation and is completely unethical. These two situations with ECG are very difficult to analyze and can each have alternative outcomes that may allow some individuals to justify their actions. In the first scenario, the executive will directly receive positive financial benefits while the company will not benefit nearly as much. This does not satisfy the utilitarian theory nor does it pass the legal test as it is an immediate illegal conflict of interest case. The second scenario may not have an immediately negative consequence; however, it does present ECG with an unethical situation whereby information is acquired in a manner that is not equally available to all companied looking to place bids in the merger. To avoid this unethical action, the team must utilize control activities such as approvals to analyze the entire situation and even to approve whether the conflicted employee should even be present in the proposal hearings at all. Ethics are critical to business functions and they can present many negative issues for organizations that do not wish to act accordingly. References Garrison, R., Noreen, E., & Brewer, P. (2009). Managerial accounting. Boston, MA: McGraw-Hill College. Palmer, C. (2008, January 03). Environmental Ethics. Retrieved on September 20, 2010, from Web site: http://plato.stanford.edu/entries/ethics-environmental/ Understanding internal controls. (2009). Retrieved from http://www.ucop.edu/ctlacct/under-ic.pdf Read More