Ethical Decision Making - Essay Example

Ethical considerations are crucial to organizations and their businesses, often responsible for long term success. The aim of this paper is to draw attention to ethical impasses confronting organizations that make it hard for legal decisions to be made. The paper will also list the eight phases involved in ethical decision making. Introduction Through providing goods and services to clients, business organizations make profit and raise capital; however, there are certain ethical matters and responsibilities that go along with legally running businesses, not only vis-à-vis the clients and the producers, but also between contractors, producers, shareholders, stakeholders and business managers. As per Asgary and Mitschow (2002), ethical decision making is a key job of business organizations and, therefore, vital to the success of business dealings (p. 45). With the advent of ever increasing globalization in the business market, the business fraternity not only faces an intense competition among itself, but the risks involved have also escalated. This has triggered multiple predicaments for business organizations, setting off various circumstances where the lines of ethics are blurred for the business management. In certain situations the decision making process becomes tricky for the management, because when the ethical lines are so blurred the decision making process becomes intricate and problem solving develops into a thorny issue (Ferrell, Fraedrich, & Ferrell, 2006, p. 78). Customer awareness has enabled consumers to rank business organizations based on their performance, including client service. This stratification is based on ethical considerations as well, ranking business organizations based on ethical considerations. Hence, the top-ranked organizations are those who have engaged in ethical business practices. In this regard, business organizations based in China are regarded as the top organizations in the market, ethics being their primary concern. At one point or another, if not always, duty is owed to both the stakeholders and the shareholders, not to mention the clients, by the organizations. This responsibility or commitment is considered to be vital to organizational business ethics. Values, including various principles, directives and morals, need to be put into practice by business organizations with regard to their ethical responsibilities making ethical behavior a necessity for them. Consumer awareness causes public anxiety and trepidation whenever unethical violations are uncovered in business organizations. This concern not only affects the reputation of the organization in question, but also of its members, especially the management. It is important to remember that as business organizations are varied, as are their practices, ethical infractions also vary. As of date there are many business organizations that are confronted with legal arraignment based on their lack of ethical transactions concerning their clients and shareholders – these include Enrom, Health South, ImClone and WorldCom. Not only did these organizations face legal arraignment as a result of their unethical behavior, but they also incurred heavy financial losses leading to bankruptcy, as well as a fall out with customers and shareholders – public disgrace also resulted (O’Gara, 2004, p. 67). Deontological Approach: WorldCom’s Unethical Business WorldCom telecommunications saw its heyday in the 1990s, where not only was the organization earning great profit and increasing revenue, but there was also an ever-increase in their clientele, both national (United States) and international. Annual basis records showed a profit greater than 20% for the company – at its peak company records showed the annual revenue to be 40%. The organization acquired many telecommunication companies during this time as well. Nasdaq stock prices of WorldCom were considered to be booming and blooming. The CEO of the company, Bernard Ebbers, became a rich man in the process, which is not saying much. During this time, not only did the company sell some of its telecom sectors to various units in the United States itself, but also to many international sectors. The new millennium brought with it a further augmentation for the company, a fact that was the result of the impressive observations made by Nasdaq. An economic recession resulted after the technological boom of the late twentieth and early twenty-first centuries. The recession caused the growth of WorldCom to slow down, causing the financial growth of WorldCom to also decelerate. This was augmented by the regulators in the United States and Europe who were preparing to block WorldCom’s deal that amounted at approximately $152 billion – the deal for the acquisition of FON (Brook, & Dunn, 2009, p. 67). Not only was WorldCom confronting a recession, but its financial woes were increased by the impossibility of further acquisitions, and as the stocks were floating, no revenue was foreseen. Attracting more investors and shareholders was the call of the day for WorldCom, another option being selling out more telecom units to shareholders and various financial centers. Otherwise, WorldCom had to face the problem of continuing to make little revenue, if any, while waiting for the recession to end and the growth to increase (Frederick, 2002, p. 89). The CEO of WorldCom, Bernard Ebbers, was now confronted with devising plans to cause a revival of the company in a bid to increase the profits and revenue of the company. As per the deontological ethical approach, WorldCom hid its mergers and acquisitions not only from its new investors but also from the Securities and Exchange Commission. Moreover, in a bid to attract more investment, data was fabricated that showed the company to be thriving in the telecommunications sector worldwide, whereas the reality was just the opposite. These unethical practices caused WorldCom to commit a fraud that amounted to US$ 11 billion. Upon discovery of these facts, Ebbers as well as five executives of the company, who were considered to be responsible for the infractions, were legally arraigned. Upon testimony, the executives revealed that as a consequence of the financial slump capital from the operational budget was transferred, illegally, to the capital budget. Just like Frank Quattrone of the Credit Suisse, Sam Waksal of the ImClone, cable television bigwig John Rigas, and business magnate and television host Martha Stewart, Bernard Ebbers was convicted for criminal financial activity. As all other executives of WorldCom testified to the unethical practices of the organization, the only thing left for Ebbers was to face disgrace and infamy, both in front of his family and the public at large, not to mention the chances of facing time in a federal penitentiary (Fraedrich, & Ferrell, 2010, p. 89). In an effort to increase revenue and profit in recession time, Ebbers lied to his shareholders. During the critical period of recession, choices had to be made by the CEO. Ebbers took the route of unethical practices in a bid to increase his organization’s revenue and profit. Had Ebbers taken the ethical route, refraining from making up false records, his company, or him, would not have owed any duty to its shareholders. As a consequence of his fraud, the company was held liable and all the money had to be returned to the shareholders (Swanson, & Fisher, 2008, p. 34). Not only Ebbers get involved with unethical practices himself, but he also implicated his company’s executives by directing them to present fraudulent date to the investors with regard to WorldCom. Ebbers and his company both lost their integrity in the process. An organizational CEO is characterized by taking ethical and legal choices, even at dire times, ensuring the protection of all stakeholders, including the investors. His unethical choice caused Ebbers to lose his character as a good CEO, causing him shame, not to mention a criminal arraignment. During the dire straits, Ebbers, along with the senior management of WorldCom, took the decision to unethically rob their investors and transfer money into the company’s accounts. These executives also did not question Ebbers, and did not propose any ethical alternatives to him. Of course, the ethical decisions would have been harder to follow, especially keeping in mind the times of recession, however, the unethical decision was followed, however wrong, because it gave them an easy alternative. It would have been harder, but the ethical decision of mapping out strategies that could keep the company afloat during recession times, and then increase revenues and profits slowly and surely after it was over (Zerbe, Härtel, & Ashkanasy, 2008, p. 89). In times of financial crises, it is required by organizations and their management, to practice courage and patience while devising plans to revive their company, and ensuring minimum losses of shareholders and clients. Unanticipated events, especially require strength and morality by the managerial brass in keeping their practices ethical. It is, as WorldCom executives showed, an easy way out to adopt unethical practices in times of crises, however, the price that is paid is monumental. WorldCom executives showed a wanton disregard for the duty owed towards their investors, and made conscious unethical decisions (Carroll, & Buccholtz, 2008, p. 60). Whenever a business emergency arises, it is up to the executives of business organizations to ensure that their obligations to their investors are met, and that all stakeholders have their rights protected. This is done by making ethical decisions, even in times of crises. The example above shows that WorldCom executives made unethical decisions showing a wanton disregard for the duty they owed to their investors. All in all the unethical decisions of the WorldCom executives caused them to defraud their stakeholders out of approximately US$ 11 billons. References Asgary, N., & Mitschow, C. M. (2002). Toward a Model for International Business Ethics. Journal of Business Ethics 36, 239–246. Brooks, J. L., & Dunn, P. (2009). Business & Professional Ethics for Directors, Executives & Accountants. (5th ed.). 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