Business Ethics and Legal Environment - Case Study Example

Please review and kindly just send me a message if you need to change anything. Thanks FLY EMIRATES Business Ethics and Legal Environment I. Introduction “Fly Emirates” is a slogan of Emirates airline, a subsidiary of the Emirates Group which is a travel and tourism company in Dubai wholly owned by Dubai government. Emirates group is considered one of the most admired companies in the region with more than 50 travel and tourism related specialist businesses. It is also one the biggest employers in the Gulf region with about 62, 000 workers of different nationalities (The Emirates Group, 2013). Emirates Airline made its first flight from Dubai to Karachi in 1985 and since then, with the acquisition of more traffic rights, its network grew and now flies to Amman, Colombo, Cairo, Dhaka, Tokyo, Rio de Janeiro, Dallas, and other major cities in the world. Along with is growing Airbus fleet, Emirates Airline continue to acquire new routes and in 2010 purchased 32 additional A380s to carry passengers for newly open routes in different parts of the world (Emirates Group, 2013). The Emirates Group consider their business ethics as pillar of their success for nearly 30 years and these include caring for their employees and stakeholders well-being, the environment and communities affected by their businesses, and taking an active role in shaping a sustainable future. Its “culture of respect” enables the Emirates Group to see the value of corporate citizenship, social responsibility, and continued adherence to business ethics. These include business development using fewer resources and minimal production of waste and pollution, operating an eco-efficient fleets, preservation of natural and cultural heritage of areas affected by expanding business, different green projects, reward and competitive benefits to employees, profit sharing scheme, and career development programs (Emirates Group, 2013). In the community, the Emirates Group strives to improve the lives of people suffering from severe poverty and deliver humanitarian relief during natural disasters and wars. Some of these initiatives include the Emirates Airline Foundation, a charitable organization providing health services to poor children around the world. The Emirates Friendship Hospital Ship is a humanitarian initiative delivering medical care to people affected by annual flooding in Bangladesh’s most deprived areas. The Emirates-CHES Home is an orphanage built for HIV positive children in Chennai while the Emirates –AIM for Seva Student Home for Girls is a hostel located in remote tribal villages in Tamil Nadu, India providing opportunities for learning and development (Emirates Group, 2013). The following sections described the theoretical framework of this research and the methodology used to gather relevant and useful data regarding Emirate Airlines’ real-life business ethics application and practices to comply with relevant legal requirements. The results and findings of this research are presented in Section IV while conclusion and recommendation is provided in Section V. II. Theoretical Framework As businesses are increasingly becoming powerful institutions the more it needs to take responsibility for their behaviors (Halbert & Ingulli, 2011). In relation to this behaviors, the law According to Halbert & Ingulli, 2011) provides a set of rules for behaviors while business ethics offers a set of options businesses can use to comply with moral norms (p.2). Moreover, while the law provides stability, predictability, and continuity, citizen must be knowledgeable of what is legally right and legally wrong and in order for any society to survive (Cross, 2007). For instance, if a person suffers harm as a result of others wrongful doings, he or she can seek redress from the law which in essence provide an essential framework for all civilized activities including the ways and means a business is carried out. However, although both affect the morality of individual, law and ethics are not the same as legal activities is not necessarily morally right. For instance, there is no legal obligation to stop a blind man walking off a cliff but it is seriously immoral to keep silent and watch him fall. Similarly, a U.S. company exporting banned products to countries where they are not prohibited is legal but it can be challenged on moral grounds due to the effect of such product on people’s health (Mann & Roberts, 2012). By analysis, some ethical theories assert that drawing conclusions from cause to effect while others rely on a certain repository of wisdom to make moral reasoning and ethical decisions. In ethical fundamentalism for instance, individuals tend to look to a central authority such as writings of Karl Marx or guiding rules to help them make ethical decisions such as those in the Bible, Koran, and other writings perceived to be morally compliant. In contrast, ethical relativism holds that the morality of individual’s action is dependent on their perception of morality. For instance, actions of individuals from different cultures may be both correct because morality is relative to what each individual feel is right or wrong (Mann & Roberts, 2012). Normative theories of business ethics include stockholder theory, stakeholder theory, and social contract theory. The stockholder theory according to Fernando (2009), gives more emphasis on business relationship between the owner and their agents who carry out business activities regardless of any societal benefits. In other words, this theory focuses on stockholders’ interest and does not recognize social responsibility as an important aspect of business. In contrast, stakeholder theory considers businesses as an input-output model where all interest groups (employees, customers, dealers, government, and communities) are involved in business activities. The main principle of this theory is to achieve success in the market place by maintaining the optimal balance among stakeholders interest (p.39). However, maintaining this balance according to critics negates and weakens the influence of stakeholder groups as equal treatment and protecting stockholders fiduciary interest can result to severe consequences such as eliminating labor union, profit lost, and harming others just to protect some stakeholders interest (Weiss, 2008). Similarly, the social contract theory is also concern in stakeholder’s interest but gives more emphasis on the ethical duty of businesses to generate wealth by producing goods and services, generate income by creating jobs, and enhancing social welfare by providing increased economic efficiency (Fernando, 2009). However, social contract is fictional and hypothetical contract taking advantage of positive psychological attitude toward consent with no actual legal obligation to deliver. According to Allhoff & Vaidya (2008) this theory is merely revealing the moral foundations of productive organizations and the moral force behind the social contract is not derived from the consent of the parties but from assumptions that businesses and people are psychologically willing to accept obligations when they believe they have consented to them (p.90). In other words, this theory is merely a declaration of social responsibilities that may or may not be fulfilled in the future. Shareholder and Social Contract theory seems to share similar perspective but the former according to Boylan (2013) cannot satisfactorily claim moral legitimacy because of the fact that it cannot explain how businesses moral obligations can be fulfilled in the face of conflicting stakeholders’ interest (p.130). Similarly, the latter theory is “assumed contract” (Fernando, 2009, p.40) between businesses and members of society where “implied corporate social responsibility” (Frederickson & Ghere, 2013, p.247) may or may not be realized. For instance, since a business in reality is someone’s property and not meant to distribute social justice, it is very likely that it will have difficulty in complying with conflicting moral standards and yield to a more favorable one (Saxena, 2009). Clearly, acknowledging the importance of business ethics and implying social responsibility does not guarantee fulfillment of moral obligations as businesses, in the face of conflicting stakeholders’ interest will likely priorities its own interest over social responsibility. According to Ahner (2007) there is a tendency for businesses to equate ethics with law thus business activities complying with law are ethical. For instance, a company can claim that its operation is ethical because it complies with the law despite pollution and other harmful effects. This is because the very meaning of ethics is lost when it is reduced to legal compliance (p.84). Businesses focusing on compliance by obeying the letter of the law rather than following ethical principles tend to protect themselves rather than helping others (Trevino & Nelson, 2010). The “moral minimum” or the acceptable standard for ethical business behavior suggests that mere compliance with the law is ethical thus many businesses simply followed the law. However, this is not the case as legality of business activities does not necessarily make them ethical. For instance, corporations can pay their officers excessive amount of salaries because no law prohibits such practices but the fact that they are inequitable to other employees, such practices may be challenged as unethical (Miller & Jentz, 2010). Considering these theories and criticism, research on Emirates Airline’s business ethics and compliance with its legal environment require deep understanding of their actual practices and evidence of compliance measured using both law and moral principles. III. Methodology As research is an intensive and purposeful search for facts about a certain social and physical phenomena (Kumar, 2008), selecting the most appropriate research method is vital. For instance, it requires a method that can ensure that enough data will be collected and relevant to the problem under study (Connaway & Powell, 2010). According to Rabaiah (2010), the emphasis should be in “best practice” cases when searching for qualitative data and from these successful cases choose which one yields critical learning (p.21). Review of research methodologies suggests that Case Study research strategy is valid for both quantitative and qualitative research as investigates phenomenon within its real-life context. According to Cohen et al. (2011), Case Studies are methodologically eclectic and use a range of methods of data collection such as interviews, observation, survey, document analysis, and others (p.296). Since this study is investigating a single case which is Emirates Airlines’ business ethics and legal environment, the research employed the Case Study research strategy and follows its recommended data collection and analysis technique. The initial step taken by this study is to collect data from the Emirate Airline’s website that eventually led this study to the Emirates Group’s website, the owner and operator of Emirates Airline. As discussed in Section I, the Emirates Group online corporate portal contains valuable information about the company, its vision and values, brands and other subsidiaries, facts and statistics, history, leadership, and achievement. However, although this study is interested in knowing the company the runs Emirate Airlines completely, greater interest is more focus how this company actually conduct its business in terms of ethics and compliance with relevant legal requirements. First, the study examines the company history and noted the key moments that shaped the organization over the years. Second, the study examines the company’s moral principle and “implied” social responsibility and self-reported community initiatives. Third, the study downloaded and evaluated the corporation’s annual report from 2010 to 2013. Since Case Study research strategy allows qualitative analysis of data, the study employs the “within case analyses”, a data analysis technique in qualitative research intended for a single case. This technique allows this study to generate insights on case descriptions and use them to develop or elaborate theories (Klenke, 2008). Consequently, the study analysed each business activities and associated corporate initiatives, compare it to theoretical assumptions regarding business ethics and law, and generalized whenever strong relationship exist. IV. Results and Findings Using the recommended qualitative data analysis technique for a single case, the study found several interesting business practices carried out by the Emirates Group over the years. Analysis of Emirates Group history suggests that it all started with the establishment of “dnata” (the largest air travel service provider in the Middle East today) in 1959. Emirates Airline was launched in 1985 but the actual initiative related to social responsibility for generating employment and income started ten years later in 1995 through the Emirates Flight Training Centre. In 2005, the Emirate Group workforce reached 25,000 people sourced from 124 countries around the world. In 2009, along with rapid development and business expansions, the Emirates Group launched its Community Health Education Society or CHES, an initiative to care for HIV-positive children in Chennai, India (Emirates Group, 2013). Its historical presentation never mention any other social initiatives but examination of their “Our Vision and Values” webpage suggest that the corporation have been involved with a number of ethical activities include stakeholders reward and benefits, efficient use resources, and curbing waste and pollution. Moreover, the corporation claims commitment to the environment by being involved in the development of Dubai Desert Conservation Reserve, an initiative intending to preserve that natural and cultural heritage of Dubai. Another was their involvement in sustainable development and conservation through the National Park, a protected area for 30 species of indigenous birds, plants, and animals. Lastly, the corporation stress their green project and eco-friendly resort in Australia as evidence of their endless support on corporate citizenship and social responsibility (Emirates Group, 2013). In terms of community initiatives, the Emirates Group is proud of helping people suffering severe poverty, establishing good relationship with communities around the world, and delivering humanitarian aid during major natural disasters. Starting from the Emirates Airline Foundation, the corporation has been involved with charitable work in both UAE and around the world. Generally, this foundation is helping disadvantaged children by providing food, medicine, housing, and education. Note that most of these projects are within Emirate Airlines destination and funded by the Emirates Group. Along with those mentioned in the introduction, the corporation built care facility in Addis Ababa to house orphan children and established the Big Pen School in Kenya in order to provide basic education to over 500 poor children (Emirates Group, 2013). Analysis of Emirates Group’s 2010-2011 Annual Report suggest that Emirate Airline has been very concern with their environmental performance with 100% compliance in emission standards and 101.83 CO2/PK CO2 efficiency. Emirate Airlines complies with ICAO (International Civil Aviation Organization) safety, operations, and environmental standards and followed the provisions of UAE Environmental Law. Considering its take-off and landing noise footprints around the airport, the airline is also making sure of minimal aircraft noise through improved aircraft design and management and strict compliance to ICAO’s standard. In terms of waste, the airline has an “On Board Waste Recycling Program” and recovered 1,274 tonnes of recyclable materials that were intended for landfill in 2010. Moreover, the airline also taking into account their impact on the ground and invested on renewable energy to save electricity, water, and reduce waste (Emirates Group, 2011). In the 2012-2013 Annual Report, the Emirates Group along with existing initiatives introduced new line thinking such as the “One Safety” mindset to reinforce employees’ attitude and approach to safety. However, this annual report does not contain updated information of reported social corporate responsibility related initiatives in 2011 (Emirates Group Annual Report, 2013). Critical analysis of Emirates Group social performance suggest that with Emirate Airline, the corporation’s business ethics and compliance with relevant laws is not merely implied but delivered in real-life. According to Mietusch (2010), compliance to business ethics greatly depends on economic factors, political changes, and awareness of value-conflicts and ethical and environmental demands (p.12). From this perspective, the Emirates Group ethical performance may be evaluated against the above factors and economically, the corporation demonstrated its ability to comply with ethical principles when it finally reached its business and economic goals in 1995. Starting with a training centre so that many people can be employed by the company, the Emirates Group continuously made efforts to fulfil its social responsibility. As the company becomes one of the largest in the world, the Emirates Airline Foundation went further and actually built care facilities for poor children in developing countries. Presumed to be aware of value-conflicts and ethical and environmental demands, it complied with every relevant standards and regulations and turn its vision and values into reality. Note that the corporation is responsible for 37 humanitarian projects in 17 countries and concern with virtually every aspect of its business environmental impact from CO2 emissions to noise and waste. It should be noted that Emirate Airline through Emirates Groups support is extending social responsibility regardless of applicable law. For instance, its operation impact in Bangladesh, Kenya, Ethiopia, and India is certainly not governed by UAE law but similarly, it had gone establishing care facilities, school, hospital, and continually extending humanitarian relief to people affected by natural disasters and wars. Result of analysis shows that the only reason why the corporation is doing these is the fact that the above countries are within Emirate Airline routes. For this reason, it can be safely assume that Emirate Airline is taking their moral responsibility seriously enough to ignore the principle of “moral minimum” which as discussed earlier is business ethics reduced to law. For instance, the corporation can simply ignore the well-being of poor children because Emirate Airline is operating within provisions of the law but it never did and in fact, take full responsibility regardless of cost. It is somewhat surprising that despite uncertainties of three normative theories of business ethics discussed earlier, there is actually a large global corporation taking social contract seriously similar to a tangible document agreed and signed by the corporation and members of the community. The Emirate Group 2010-2011 annual report clearly indicate the social contract where the corporation entered into an agreement to embrace the principle of business ethics in almost every aspect of business operation in communities affected by its operation (Emirates Group, 2011). With the support of Emirate Group, Emirate Airline is a true socially responsible company complying with the principle of social contract. It generate wealth by establishing businesses that produce goods and services, it creates employment opportunities for people in amazingly 124 countries and enhancing social welfare by not only increasing economic efficiency but providing real-life humanitarian aid. Although social contract in theory is a fictional and hypothetical contract and mere declaration of intent, Emirate Airline made it real and took it as a legal obligation that must be delivered. It is no longer an “implied” social responsibility but actual moral obligation that must be realised regardless of conflicting moral standards and available alternatives. V. Summary, Conclusion, and Recommendations In summary, there are three theories involved in business ethics but only social contract truly supports corporate social responsibility. Business ethics in general is difficult to control as businesses, aside from inherently being a profit organization; ethics in these organizations is either voluntary or a marketing strategy. Although entirely different, the law and business ethics complement each other in making businesses comply with moral norms. However, since the law provides a set of rules for behaviours that must be strictly complied with, it is often used as a measure of ethical compliance which in some circumstances is wrong because the legality of a certain business activity is not necessarily ethical. With the support of the Emirates Group, Emirates Airline managed to turn its vision and values to reality with real-life application of socially responsible initiatives from stakeholders’ rewards and benefits to humanitarian projects in developing countries. This study concludes that although theories of business ethics differ in both perspective and scope they are similar in advocating the role and responsibility businesses to their respective community. Compliance to business ethics in this study’s view is dependent on the prevailing moral values of business owners, the economic situation of the business, awareness of value-conflict, and consideration of ethical and environmental demands. Some businesses neglect the principle of business ethics because it is much easier to comply with the rules of law particularly when balancing different stakeholders’ interest. Application of the moral minimum endangers the noble intention of business ethics as business owners with generally economic interest will likely justify their actions through law rather than moral obligation to communities affected by their business activities. This study found Emirate Airline a socially responsible company as it satisfactorily complies with the expected characteristics of a truly ethical company. The Emirate Group track record from 1959 to present demonstrates how a small company transform itself to a socially responsible giant in travel and tourism industry. The success of Emirate Airline may be attributed to its owner’s positive moral values and the willingness to face the ethical and environmental demands associated with their business activities. Although complying with standards and regulations and following best practices in aviation, Emirate Airline did not ignore the importance of business ethics and in fact, separate their social responsibility from the law. The tangible evidence of Emirate Airline’s social consciousness in Dhaka, Kenya, India and others despite the absence of law setting the rules for corporate behaviour in this particular part of the world demonstrates their high ethical standard and willingness to reduce their operational impact whatever the cost. Similarly, as reported in the annual report, the mindset behind the preservation of natural and cultural heritage, development of eco-friendly facilities, and establishment of socially and environmentally responsible businesses is remarkable in the sense that businesses by experience do not usually devote so much time and resources in areas outside the market place. Although such efforts may be taken as a marketing strategy, image building, and other economic related endeavours, it cannot be denied that the corporation actually used the same mindset in building facilities for the poor. This study’s analysis of Emirate Group’s business strategy found no contradictory principles that can establish the presence of agenda other than fulfilment of corporation’s social responsibility to communities within Emirate Airline’s business operation. It is important to note that by simple analysis, helping people suffering from extreme poverty and lack of education will not significantly increase ticket sales or bring additional monetary benefit to the corporation. In fact, instead of contributing to business expansion and rapid growth such efforts consume a large portion of company resources and reduced stockholders financial gain. Although this study used all possible means to make this report comprehensive and reliable, it is limited by the research method used in collecting and analysing data. Moreover, the scope of inquiry is limited to published materials available and to the ethical performance of Emirates Group in relation to Emirates Airline alone. For this reason, this study recommends further study of the Emirates Group as a company with many subsidiaries with different social impacts. If possible, conduct a qualitative survey of the corporation’s social performance directly from Dubai and interview stakeholders affected by their operations and experiencing the effects of Emirate Group’s social initiatives. It may be more beneficial for future studies to conduct a comparative study of different airlines in order to determine best practices in the industry in terms of business ethics and law compliance. VI. 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Appendix Figure 1- Emirate Airline Environmental Performance from 2010-2011 Figure 2- Emirate Airline Take-off and Landing Noise Footprints Figure 4- Students of Big Pen School in Kenya Read More