Business Situation Presenting a Legal and Ethical Issue - Case Study Example

Business Ethics and number submitted Introduction The study of business ethics is a significant to business organizations. Dating back to the 1960s, business ethics have become an area of great concern within the business environment (Seaquist, 2012). Most organizations are often faced with multiple issues ascribed to ethics, ranging from scandals that lead to cynicism, to government regulations. In the business context, ethics and law are significant for the success of any successful business operation. The law encompasses the aspects of right, wrong and the dispensation of justice. On the other hand, the study of ethics often makes an inquiry into certain aspects, including the concepts of good and evil. Essentially, ethics in business entail the study of morality. Presidents, legislators, governors and the regular citizens play greater roles in determining the direction of law in the business environment (Seaquist, 2012). Through the utilization of the official capacity and universal suffrage, such individuals are capable of shaping the constitution of justice and promoting the common good. The promotion of law and ethics in business ensures that every individual acts according to laid down principles called values. In addition, the law plays a critical role in replicating the ethical views and values of society. In this regard, there are multiple principles that underpin any nation’s system of jurisprudence. For instance, ethical absolutism, religious fundamentalism, utilitarianism, deontology, ethical relativism and justice ethics are some of the core principles that dictate human values (Seaquist, 2012). In reality, upholding ethical standards ranging from respecting human rights to social responsibilities is critical in protecting the reputation of the firm, safeguard the social authorization to operate and in most cases promote the brand of a company. Multinational corporations have an outright obligation to support development within which they operate by paying their fair share of taxes and are obligated to abide by basic institutional standards. For instance, it is essential that they see to it that health and safety standards are observed as well as the rules and obligations governing labor conducts. The large corporations with subsidiaries in developing countries are expected to respect the local cultures and their operations must concur with cultural obligations of the host countries. In essence, the global organizations have are obligated to abide by established moral guidelines to behave ethically and responsibly. The paper explores the legal and ethical situations that relate to the workplace environment. A Business Situation Presenting a Legal and Ethical Issue Diverse ethical systems have significant legal implications on business environments. In reality, ethical values that are upheld by the individuals in authority often become part of the political system and as such, control business environments. In essence, such ethical values influence public policies pertaining to the monetary and fiscal policies of diverse nations. For example, in the United States, the influence of religious fundamentalism is imminent. Governments have continued to debate on the ethical conduct of enterprises over the years (Seaquist, 2012). The proponents of such ideologies argue that the business enterprises are obliged to contribute to the betterment of the society. In essence, the businesses should operate in a responsible manner and give back to the society through social corporate responsibility. On the contrary, opponents claim that the maintenance of law and order and turning profit for the investors are the fundamental obligations of business enterprises. Since the mid-20th century, the rate of government legislations enacted to regulate businesses has continued to register significant amplifications at the state and the federal levels. Through government administrative agencies, the federal and state governments have passed legislations, which ensure that businesses operate responsibly (Seaquist, 2012). Such regulations include the antitrust laws, securities laws, and regulations, labor laws, tax incentives and consumer protection. Specifically, the Sarbanes-Oxley Act of 2002 came into force due to the Enron scandal and other corporate misconduct. Through the act, the CEOs and CFOs of the United States’ public incorporations and the global firms that have listed their equity and debt securities with the Security and Exchange Commission are individually liable for the accuracy of their financial statements. In addition, the Sarbanes-Oxley Act necessitates the enterprises to utilize the services of an external auditor to audit the firms’ internal control systems (Seaquist, 2012). Encouraging a philosophy of carefulness, responsibility and transparent financial reporting as well as corporate governance are principles on which the Act is anchored. The passage of the Act has had major implications on business operations as the firms spend billions in complying with the act’s requirements. In the 1990s, the enormous proceeds accrued to Enron were emanated from the firm offering electricity and natural gas resources to state utility companies. Such an unscrupulous business philosophy led to the creation of a multifaceted web of ploys and shams. The investigations of the Securities and Exchange Commission revealed that Enron, Inc. hid millions of dollars in debt under the cover of shell companies. Further, the investigations affirmed that the firm routinely shattered, altered and faked its financial statements to hide their precise actions. The scandal also led to the dissolution of the Arthur Andersen auditing firm for disregarding its oversight in Enron’s finances. In general, the enactment of the Sarbanes-Oxley Act ensures transparency and circumvents financial frauds in firms (Seaquist, 2012). The other important legislation that was enacted to prevent unethical acts by the businesses was the Dodd–Frank Wall Street Reform and Consumer Protection Act. The Act was invaluable in augmenting the scrutiny of the financial industry and thwarted the deceptive practices, including the subprime mortgage lending. Due to the increase in unethical practices in corporations, including WorldCom, Enron and Arthur Andersen, firms began implementing codes of ethics and ethical training of leaders and employees to avert such occurrences. An Analysis of the Ethical Concerns Raised by the Legal/Ethical Issue One of the major questions that most business organizations and corporations tend to ask is whether multinational corporations have moral duties to uphold ethical values and global corporate responsibility in their conduct, activities and daily decision-making processes. The dissolution of Enron, where several workers were jailed, is an example of the consequences of ignoring ethical values and principles as well as corporate responsibilities that guide the actions of corporations operating not only in developing countries but also all over the world (Seaquist, 2012). The shocking conditions under which Enron operated led to the enactment of several labor laws and the basis for determining the observance of ethical values and responsible acts by corporations. Multiple enterprises continue to operate with blatant disregard for the core values governing the operations of enterprises. Studies affirm that numerous firms often flood the countries with relaxed labor laws to manufacture products at reduced costs in order to appeal to consumers in such countries and reap huge gains. Researches assert that the effect of such actions is the abuse of the core values and the exploitation of resources at the expense of the majorities living in these countries. Under such circumstances, the roles of businesses in terms of ethical values and human rights as well as constructs that guide these firms’ decision-making processes are questioned (Seaquist, 2012). The question that normally arises is whether multinational corporations should consider some of the societal problems out of their ethical obligation or such efforts are just instances of corporate benevolence. Ethical Theories Actions Based on the Principles of Deontology The presentation argues that multinational corporations have a moral obligation to ensure that their actions, conducts as well as decisions benefit and bring good intentions to the whole society (Seaquist, 2012). In addition, governments, international organizations as well as corporations have a moral duty to build a just and fair global society. Based on the universal core ethical values, businesses are obligated to avoid causing or contributing to immoral deeds through their actions. In addition, businesses are obligated to mitigate adverse impacts that are directly related to their operations, services and products through corporate social responsibility. The fundamental rationalization of this restriction is for the benefit of businesses as well as the society. In other words, behaving unethically will have undesirable economic consequences for the organization. Deontology’s core ethical principles, including honesty, justice, accountability, consideration, reverence and citizenship should form the framework through which businesses operate (Seaquist, 2012). Indeed, organizations manufacturing goods and services possess indirect convention with society. Similarly, firms have the moral duty to be socially responsible, which encompasses honoring the fundamental human rights, caring for the environment and producing standard goods and services for the benefit of all human consumption. Actions and decision-making processes based on the universal core principles will often foster the growth and development of firms. Deontological ethics is a global moral framework for not only multinational corporations but also large organization operating within the international arena (Seaquist, 2012). Though global organizations are required to behave ethically, no company has attained the desired ethical standards, particularly where dissimilar stages of development and diverse cultures are involved. The case of companies making huge profits at the expense of ethical values is a question most corporations, particularly with subsidiaries in the least developing countries have grappled with. In reality, the cases where multinational corporations continue making huge profits at the expense of ethical principles in developing countries are not new and are understood clearly by the stakeholders in the international arena (Seaquist, 2012). Whereas gains in the form of profits are the ultimate goal of most of business organizations, they should be attained in a manner that upholds ethical standards and social responsibilities. Actions Based on Utilitarianism Ethical conduct is concerned with distinct values that uphold the rights of individuals and the masses as well as the notion of distributive justice (Seaquist, 2012). The principles tend to emphasize the benefits that individuals as well as the society attain from certain actions. In principle, firms should be engaged in actions that benefit the whole society. In reality, most multinational corporations often apply the principle of utilitarianism in their actions. Brenkert & Beauchamp (2012) assert that ethical standards under the utilitarianism principles hold that the rights of certain individuals have to be sacrificed in order to benefit others. Drawing from the case, the rights of workers from poor nations are sacrificed in expense of consumers from rich nations. Essentially, the question of whether consumers in developed countries should continue to benefit or buy products manufactured under deplorable conditions in the developing countries could best be explained using the utilitarian principles. Over the years, multinational corporations constantly violated the rights of workers in developing economies to manufacture products that benefit consumers in the rich economies through reduced prices. Through the application of principles of consumerism, capitalism and utilitarianism, multinational organizations have consistently exploited workers from poor nations despite calls for ethical standards to be upheld (Arnold, Beauchamp & Bowie, 2013). Whether the actions of the multinational corporations are right based on this perspective depends on individual points of view. Nonetheless, ethical standards are critical for the well-being of organizations. In other words, organizations’ behavior should be acceptable to all. The firms must operate within suitable parameters that uphold both individual and societal moral values. In a broader perspective, firms should be seen as socially responsible through actions that result in universally acceptable outcomes (Hayes & Walker, 2005). Nonetheless, some international firms operating overseas end up manufacturing cheap products and benefit the home consumers. They gain huge profits but their actions do not benefit the whole society. Such multinational organizations should observe labor regulations as well as improve working conditions in order to be socially responsible. With the new trends in consumerism where awareness has changed the manner in which products are consumed or bought from the shelves, firms should understand that social responsibility is critical for their success. The moral duties of organizations must be guided by their willingness and desires to do good in society. Even though their main objective is to make more profit for their shareholders, the actions towards attaining their objective must also be guided by their capacity to manage their resources in a way that benefits the whole society (Donaldson, 1989). Individual preferences should not drive ethical responsibilities; rather, reason should guide the actions undertaken by the firms. Studies postulate that social justice should be the ultimate goal in case there is need to build a just global society. In essence, multinational corporations should base their actions on universal principles and the ultimate goal is the benefit that all people derive from such actions. Ethical Outlook that will Result in the Best Legal Outcome for the Business Business operations and decisions should be grounded on a code of business conduct based on universal values. Moreover, the minimum requirements of corporate responsibility should provide the way forward for doing international business with integrity (Rendtorff, 2009). The past decade has seen an increase in ideas concerning the roles and responsibilities of multinational corporations towards the societies in which they operate. Questions have arisen on how global corporations deal with environmental hazards, unfair treatment of workers and the production of faulty goods and services that pose great danger to consumers. The populace’s increased concerns over these issues have raised issues concerned with ethics among individuals and corporations from different countries. However, increased competition and pressure for increased revenues from shareholders prevent organizations from taking necessary actions that uphold ethical values (Fisher & Lovell, 2009). Essentially, the benefits gained from increased income tend to determine whether such actions benefit the society. The explanation provides reasons why the businesses should adopt codes of conduct ascribed to universal values and affirmative moral minimum of corporate responsibility to continue doing international business with integrity. Authorized legal systems are also essential in the undertakings of the corporations. The major focus of international justice revolves on the rights or goods that human beings are supposed to enjoy (Carroll, 2000). Nonetheless, international justice often ignores the obligations capable of protecting and realizing the rights and goods and the agents and agencies for whose actions are to be regulated. Essentially, multinational corporations have the moral obligation of abiding by the varying social contracts laid down. The Relevant Areas of Law Addressed Anti-trust Laws The federal government has continued to create several anti-trust acts that regulate the mergers between business organizations (Seaquist, 2012). The anti-trust regulatory framework has been put in place to prevent the creation anticompetitive mergers. The anti-trust laws have achieved major milestones in regulating the operations and conduct of firms in order to ensure fairness in competition as well as to avert the creation of a monopoly. The creation of such statutes has been critical in restricting cartels and collusive practices limiting trade. In addition, the anti-trust laws are capable of putting ceilings on mergers between organizations with the motive of minimizing competition (Carey, 2013). Further, the statutes have been significant in proscribing the conception of domination as well as the misuse of monopoly power. In the United States, the courts often apply strong rules and remedies concerning anti-trust laws to prevent the creation of monopolies from mergers. Contracts Contracts are defined as a compulsory agreement defined under the legal obligations between two or more parties. In business terms, contracts are binding legal agreements between two or more business entities (Lundi, 2011). All commercial entities enter into contracts in their everyday activities. By simple definition terms, uncomplicated activities such as the sale of products, hiring of employees and purchasing of supplies are all contracts. Parties are obligated by the terms of a contract as soon as they are made. The parties involved in the formation of the contract are legally bound by the terms agreed upon in the contract (Seaquist, 2012). However, an entity can only be liable to the contract if it was a party to it. In other words, only parties that entered or got involved with the formation of the agreement are held liable in case there is a breach of contract. According to article 2 of the Uniform Commercial Code (UCC), selling of goods is a contractual agreement between the parties involved in the transaction (Seaquist, 2012). Further, the article defines the goods as tangible products that can be moved. The goods also include personal property but not real estate, stocks and bonds. A contract is said to be valid when it meets all the binding legal requirements. Valid contracts are formed through an offer and consequent acceptance. The method adopted in the resolution of disputes arising from the negotiation and performance of the terms of the contract is critical in addressing such issues. According to the Uniform Commercial Code (UCC) and the common laws of contracts, parties in the contractual agreement will be given a period of one month from the date of the dispute to discuss the concerns (Seaquist, 2012). The intent to a contract means that the offering party must indicate the willingness to enter into the contract upon acceptance by the offeree. In other words, the offerer must objectively indicate their willingness to meet the needs and obligations of the contract upon acceptance by the offeree (Seaquist, 2012). Definiteness of terms means that the party making the contractual offer must be specific on the actions to be undertaken and the benefits that accrue from the offer. In other words, all the essential terms and conditions must be indicated in the offer (Seaquist, 2012). The communication of an offer means that the offeree or the other party to the contract must understand the terms and conditions of the contract. The offering party must provide clear information on the offer as well as the terms and conditions of the offer. The offeree must understand the terms and conditions of the offer. On other hand, the offer’s term in the contract must be accepted for an engagement to form a contractual agreement (Brousseau, 2009). Acceptance of an offer means that the other party has agreed to the terms and conditions of the offer. Accepting the terms and conditions of the offer requires that the offeree indicate the intent of acceptance to the proposed offer, terms and conditions are understood and accepted and the approval must be communicated to the offering party. Environmental Laws Environmental laws and regulations affect the operations of every business organization. In the US, the businesses are obliged to inform and educate the employees on the perilous materials available at the workplace (Prasad, 2008). According to the requirements of the Occupational Safety and Health Administration (OSHA), the firms must notify their personnel and society on the materials found on the premises of such organizations. From the requirements of the federal Environmental Protection Agency (EPA), the firms that produce hazardous products are obliged to compensate for the cleanup of the environmental emanating from their acts. The environmental law mandates the firms to protect the health and safety of personnel at the workplaces. Guarding the consumers against noxious chemicals is also another environmental contract that firms have to uphold. Conclusion and Recommendations Conclusion In summary, it is evident that the success of any organization depends on the set of moral aspects of governance and conduct that influence the operations of the firms. In this regard, business organizations should embrace the application of well-founded principles of right and wrong that stipulates the employees’ obligations and benefits to the community in the execution of duties and tasks. Further, ethics forms a foundation from which the organizational laws as well as societal norms emanate. The workplace ethics are critical for the success of the organization. The benefits of work ethics range from asset protection to the decision-making process. In between the spectrum is the increased productivity, enhanced teamwork, increased reputation or public image. The businesses are currently integrating the needs of all their stakeholders into their corporate strategies. Incorporating the interest of employees, customers and shareholders into the corporate strategies is beneficial to the firm not only in the general growth and expansion, but also in the profit generated. The success of any organization depends on how the firm influences potential investors, personnel, suppliers and the society through the creation of worth. In this regard, the businesses achieve value by attaining equilibrium between the environmental and societal obligations and proceeds. Additionally, through the utilization of the ethical client relationship management, companies are capable of attaining efficient promotional activities through interactions with the targeted customers. In reality, the business also gives back to the society through corporate programs thereby attracting the interests of various stakeholders Recommendations Firms have no choice but to conduct their businesses responsibly and ethically in order to enhance their performances and productivity. As such, the organizations have to implement appropriate work ethics in order to enhance their performance, be financially stable and meet their objectives. To remain relevant in the market place, firms must uphold corporate standards and responsibilities that enhance the value of their products and services to satisfy the needs of the customers. In addition, the firms should adopt work practices that enhance ethical behaviors and responsible performances that increase their efficiency in the use of resources. The reason is that adopting the concepts of work ethics that enhances the responsible use of resources increases both financial and procedural performances. References Arnold, D. G., Beauchamp, R. T., & Bowie, N. E. (2013). Ethical theory and business. Upper Saddle River, NJ: Pearson. Brenkert, G. G. & Beauchamp, T. L. (2012). The Oxford handbook of business ethics. Oxford, UK: Oxford University Publishing. Carey, L. E. (2013). Business ethics managing values and corporate responsibility. Frenchs Forrest, Sydney: Pearson. Carroll, A. B. (2000). A commentary and an overview of key questions on corporate social performance measurement. Business and Society, 39(4), 466-479 Donaldson, T. (1989). Moral minimums for multinationals. Ethics and International Affairs, 3(1), 163-182. Fisher, C. & Lovell, A. (2009). 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