Business Ethics and Deontology - Essay Example

Introduction With the increasing pace of globalization, the transformational changes within the business operations are often observed in order to meet the ultimate expectations of the consumers. Consequently, business ethical concerns have emerged as an increasingly significant threat for business organizations. In order to maintain business ethics and professional working environment, it is necessary to incorporate feasible principles and moral values to maintain an effective balance in between the expectations and the interests of the stakeholders. (Authenticity Consulting, LLC, n.d.). Moreover, the field of ethics in the business module observes ethical controversies with regard to various social responsibilities within the business process and also includes the ethical conditions of the professional entities, the fundamental rights of the employees, employment discrimination and positive actions among other concerns (Scribd Inc., 2012). The objective of this paper is to identify three major ethical issues that were raised in the WorldCom case in its various business processes and to evaluate those issues using the deontological ethics guidelines. Moreover, the ethical issues faced by WorldCom will also be critically assessed through implementing Kant’s Categorical Imperative model of business ethics. Three Major Ethical Issues of WorldCom An ethical controversy significantly affected WorldCom during its business operations and most importantly upon its sustainability in the business market. The organization had faced financial distress during the scenario of US bankruptcy in the year 2001. However, WorldCom emerged from bankruptcy fortification after reporting its accounting irregularities of USD 11 billion. The accounting irregularities in WorldCom had resulted in its being prosecuted against security charges of many of the organization’s senior executives (Scharff, 2005). There were certain major ethical concerns related to the crisis faced by WorldCom. Among these ethical concerns, the three major ethical aspects comprise the corporate acquisition strategy in order to accumulate significant growth, roles and responsibilities of the leaders and the managers and ineffective organizational structure that coincided with chumminess behavior as well as arm’s-length practice in the business operations (Scharff, 2005). Corporate Acquisition Strategy of WorldCom The core business strategy of WorldCom was highly focused to develop the organizational growth through an effective acquisition strategy which was quite complex and a lengthy process of operation. Mergers and acquisitions process in an organization is a delicate process to efficiently execute and can cause various problems in order to effectively overcome the concerns (Cernusca, n.d.). WorldCom had performed 65 acquisitions worldwide through its effective business strategies and was regarded as one of the major business organizations in the telecommunication industry. WorldCom had spent almost USD 60 billion between the years 1991 to 1997 in its acquisition processes and accumulated a debt amount of more than USD 40 billion (Moberg & Romar, 2012). The acquisition strategy of the organization significantly focused on acquiring larger firms across the different regions of the world. The acquired organizations facilitated WorldCom to achieve larger market share along with strengthening their core competencies, however, it was observed that WorldCom failed to generate desired profit from its acquired organizations. The major ethical issues were raised due to various types of accounting scandals as well as certain unethical practices in the accounting department of the organization (Davis, Miksiewicz, Nitta, Rothenberger, & Scalera, 2011). Leadership and Management of WorldCom In relation to the drastic accounting scandal and financial failure of WorldCom, various studies have confirmed that the organization was following the ideology in which the managers and the leaders of the organization were not to be doubted or questioned by the other stakeholders of the organization. In the context of identifying the major ethical issues in WorldCom which were the creation of inefficient leadership and management, it can be revealed that fraudulent behavior with regard to illegal movement of line costs of the organization’s decreased expenses, inappropriate release of accumulation of accounting practice in order to reduce organizations current expenses as well as doubtful entries of the revenues regarding increased growth of earnings were crucial (Trevino & Brown, 2004). While these three unethical practices occurred in the WorldCom’s accounting department, there were certain other issues related to the organization’s various other business practices that also took place. A strong focus was put on the team performance and group-thinking attitude in order to reduce disloyal opinions and other related issues within the working environment. The groupthink approach enables to justify constructive evidence that the organization’s inefficient management and leadership was one of the major factors for WorldCom’s failure. The organizational atmosphere and culture discouraged disputed opinions and forced the followers to maintain the same policies of work as had been enacted. With due consideration to the organizational policies of WorldCom, it can be stated that majority of its employees left the job due to the organization’s fraudulent and suspicious business operations (Scharff, 2005). Organizational Structure The organizational structure of WorldCom can be considered as a contributory aspect to WorldCom’s failure and crisis. In the initial phase of operation of the organization, it adopted an effective growth strategy. However, continuous changes in the managerial position and ineffective decision making process in relation to organizational policies can also be taken into consideration as the causes behind WorldCom’s failure. In the context of the organization’s acquisition strategy, it significantly created various challenges for the managers due to its time consuming and expensive nature (Myers, 2004). Moreover, the organizational structure of WorldCom was also facilitated to earn benefits for the senior management of the organization which further influenced and encouraged them to continue fraudulent activities within the organization (Jackson, n.d.). Despite the continuous failure of the organization’s management, WorldCom did not take any initiative in order to restructure the management structure (Jackson, n.d.). Assessment of WorldCom Business Problem Based on Deontological Ethics Deontological approach to the ethical consideration involves effective and regular practices of morality or moral rules which are required to be followed by an individual in his/her activities. The approach concerns universal standards which involve the ethical guidelines that an individual needs to follow. Deontological ethics is an ideology of directing people regarding their works and behaviors as well as it provides effective ability to identify what is right or wrong. Moreover, deontology can be considered as an important feature of rationality that focuses on finding appropriate reasons that are considered to be the foundation of ethical guidelines (Staveren, 2007). In relation to a major implication of Kant’s deontological ethics, it has been observed that “human beings are considered to be equal and therefore should never be turned into means for other people’s ends; people should always be regarded as ends in themselves” (Waluchow, 2003). According to this statement, mutual respect and protecting human dignity are fundamental concerns for any human being to effectively maintain the moral norms (Waluchow, 2003). In the context of WorldCom, it has been observed that the organization had involved in various unethical practices in relation to accounting activities. The ethical violation of WorldCom was basically the mis-representation of funds during the presentation of its financial reports to the Securities and Exchange Commission (SEC). The organization appeared to be profitable while it was actually incurring considerable losses (The McGraw-Hill Companies, 2011). Moreover, the organization was also accused to be practicing various informal activities within the management level that resulted in substantial employee turnover. The leadership model of WorldCom was significantly focused on groupthink approach and the employees were forced to maintain the organizational policies as directed by the executive members (National University of Ireland, 2005). According to deontological ethical point of view, the organization was observed to not appropriately treat the lower management people and forced them to maintain organizational policies. The practice of providing unauthorized large amount of loans in an ineffective low rates as well as increasing personal expenses through using organizational funds were the major unethical practices that were carried-out by the senior management people of the organization (Jackson, n.d.). WorldCom’s Ethical Practices from Immanuel Kant’s Point of View From the perspective of ethical norms, the organizations must need to focus on key elements of ethical concerns with regard to various practices both in internal and external environment of the organization. With this concern, the leader of an organization plays a key role for the organization in terms of maintaining an effective balance between the organizational policies as well as ethical values regarding overall processes of the organization. According to Emmanuel Kant, “the ‘Categorical Imperative’ is the foundational principle of morality given that, of all the practical policies of which we can think, it is the only one that actually has that necessary feature for being a principle of morality: it has unconditional, universal reason-giving force” (Graziano, 2010). It can be considered; ‘categorical imperative’ is the fundamental policy which considers that every human being has effective practical reasons behind their practices and conducts their tasks effectively and independently (Graziano, 2010). In the context of WorldCom, the leadership and management model of the organization involved various unethical and fraudulent activities in its various divisions. In the initial phases of the organization’s unethical practices, the strategic management people or the top level executives got frequently involved in the fraudulent activities (Nikoi, 2008). For instance, the top level management of WorldCom had submitted inaccurate SEC reports and significantly created much pressure for other employees in order to achieve expected financial outcomes for the organization. Therefore, it can be identified that the top level management of the organization was primarily responsible in terms of influencing the executives to practice unethical activities which resulted in company’s failure (Scharff, 2005). Conclusion According to the above discussion, it can be apparently mentioned that WorldCom’s acquisition process, leadership role and management responsibilities as well as the organizational structure were a few of the major contributing factors regarding its failure. In addition, continuous practice of fraudulent activities along with improper conduct among the employees had raised various problems both with its internal and external auditors and stakeholders. Moreover, illegal practice of aligning line costs to the organization’s capital expenditures, improper methods to reduce current expenses and doubtful entries of the company’s revenues in order to prove higher earnings were also among the major unethical practices performed by WorldCom. WorldCom could have taken early prevention steps in its various business operations to avoid unethical practices in various departments of the organization. An efficient strategy to discourage fraudulent practices should have been taken as a serious issue for the organization to ensure its long-term relationship with the stakeholders along with ascertaining its sustainability in the competitive business environment. Therefore, an effective leadership is highly required to successfully prevent such fraudulent activities within an organization. Moreover, the organization could have also prevented its massive financial losses through an effective management decision making process in terms of preparing its organizational structure. An effective reformation of WorldCom could also have prevented the organization from facing such massive ethical and financial crises. References Authenticity Consulting, LLC. (n.d.). Business ethics and social responsibility. 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