Decision Based on Profit Maximization Ethical Perspective - Case Study Example

Running header: Business ethics Student’s name: Instructor’s name: Subject code: Date of submission Advice to Marcus Jones Introduction It is clear that Lobsters which are the main products that Lobster Lovers Company offers to its customers are harvested in a manner that exposes the divers who are the harvesters to danger to an extent that most of them die while others are left paralyzed for life. In addition, it has been established that though the company does not buy directly from the divers, the ship owners who are the main suppliers of Lobsters to the company ignore the plight of the divers and they even don’t care whether they die during the course of harvesting or not. This means that the company is also indirectly involved in this most unethical action in the course of its business. As such, Marcus the company’s CEO is confused about whether to take action or let the status quo remain as long as the business continues to make profits. Using the three ethical perspectives of Utilitarianism , profit maximization and universalism , the following section will explain the cause of action that Marcus ought to take with regard to the perspectives before concluding on the best course of action for him as the CEO and hence the company. Decision based on profit maximization ethical perspective Taking action to ensure the safety of diverse is an aspect of social responsibility and if the company decides to take the action, it will be good for the community of divers as well as for the company in the long run though it does not maximize profit for the company in the short run since costs will be involved . Such costs will eat into the company’s profit and hence to don’t contribute to profit maximization in the short run. The profit maximization perspective is of the view that all corporate behaviors should be aimed at maximizing financial benefits to the existing stakeholders the scope of which does not include people related to the business including employees, community and suppliers. As such, improving the working conditions of the divers will be against profit maximization. Instead, since the diverse are paid, they should take initiative to improve their working conditions from the pay they get. Alternatively, the company’s shareholders should themselves take such an initiative from the dividends they get instead of trusting the executives to use their money in bettering the divers working conditions (John, 2010). As such, Marcus should not do anything but should leave things as they are according to the profit maximization perspective as using company’s money to better the divers working conditions will not help in maximization of profit but will indeed eat into the company’s profitability. Decision based on the Utilitarianism perspective According to the perspective, Marcus ought to make the decision that will ensure happiness for the greatest number of people in society (stakeholders). In other words, Marcus ought to consider common good in making the decision. As such, Marcus should first of all determine who the stakeholders likely to be affected by his decision are and identify the nature of effect this would be. In other words, will they be affected positively or negatively? After this, Marcus should then make the decision ensuring that the maximum numbers of people are affected in a positive way. The following table gives out the details of people who are likely to be affected by the decision as well as the effects of Marcus decision. Stakeholder Effect of decision 1 Effect of decision 2 Shareholders Costs will be involved and hence profitability might slightly reduce in the short run. As such, the dividends are likely to reduce. No effect. The status quo will remain Customers More quality Lobsters will be supplied while the company might consider increasing prices to cater for costs of improving divers working conditions No effect Employees The employees will most likely not be affected by the decision. However the company might decide to reduce some of their allowances as it looks for funds to better the divers working conditions No effect Suppliers/ship owners The suppliers might benefit from better relationship with divers as disputes regarding compensation will be minimized. In addition, the productivity of divers will increase to their benefit since they are the main suppliers of Lobsters to the companies. No effect apart from increasing disputes between them and divers for compensation Divers They will benefit from improved working conditions. A lot of lives will be saved and their productivity will also increase knowing that the threats facing them have been minimized. Their working conditions will continue deteriorating with most of them continuing to die due to the bad working conditions. Community The community supplies the company with customers as divers and suppliers of Lobsters. As such, deaths of family breadwinners when sourcing for Lobsters will be minimized thus improving their living standards. There will be increased suffering as families continue losing their bread winners as divers continue to die. From the analysis above, it is clear that most stakeholders are likely to be affected negatively by the decision to improve divers’ conditions. As such, though the divers continue to die, the utilitarian perspective would compel Marcus not to take any action. Decision based on universalism Universalism calls for Marcus to be aware of the fact that ends do not justify the means in making his decision. In other words, Marcus’ decision must involve doing the right thing even if doing the wrong thing would do most good for most people. Thus, despite the above analysis indicating that most people will be negatively affected by Marcus improving the divers working conditions, he should go ahead and implement activities that will improve their working conditions since it is the right thing to do. Conclusion, I would advise Marcus to go ahead and implement programs that will improve divers working conditions since it is the right thing to do. Furthermore, the company stands to gain in the long run from such a decision by improving its image and hence revenues. 1. a) Profit maximization In the profit maximization model, shareholders/owners are benefited (and possibly others), but some stakeholders may be harmed. In other words, the company ought to concentrate on profit maximization without regard of whether these actions are harming other stakeholders provided the shareholders will enjoy maximized profits. This is well illustrated in the article by Smith who has decided to quit working in Goldman Sachs having worked there for almost 12 years. He cites the reason of his quitting being the fact that the company has prioritized the profit motif to the extent that it does not care whether or not the clients are harmed (Smith, 2012). The company in addition no longer considers leadership and ideas as a basis for promoting its officers. Provided one is able to bring maximum amounts of profits to the company regardless whether it has resulted in the customer being misadvised as to what investments they should make, that person is highly likely to be promoted. In addition, Smith notes that even in company’s meetings, the issues of maximizing profits take precedence and clients’ interests are no longer important. It shows that the company sees profit maximization as its priority and employees will only be motivated to earn profits for the company regardless of whether they are misadvising customers as to what are the best investment options for them. As such, Goldman Sachs is a good example of a company that is following the profitmaximization model which of course results into negative externalities when investors are advised to make bad investment decisions provided it profits the company according to Smith. b) Utilitarianism/Universalism model In this case, there is an attempt to find a balance where all stakeholders gain though it does not imply profit maximization. This is seen for instance when companies become environmentally responsible or even involving themselves in corporate social activities. Though such actions do not necessarily result in improved profitability, the actions ensure that all stakeholders gain substantially. This can best be illustrated by the article by Susan on rebuilding America. The B lab initiative discussed is aimed at marrying the power of markets with the purpose and mission of nonprofit sector. The initiative aims at encouraging companies engage in activities that benefit workers, the community and the earth possibly at the extent of shareholders (Susan, 2010). Though a company might invest in such initiatives thus implying increased costs and hence this does not maximize profits, the company also benefits from increased good reputation which might also result in increased profitability in future. Hence, everyone is a winner though profits might not be maximized. C) The win-win model In this case, although key stakeholders including employees and customers also enjoy positive externalities, the shareholders also have their profits maximized. The article by Meredith clearly describes this. Through their expansion, multinationals seek to maximize profits which is not only advantageous for their employees and shareholders in terms of better pays and increased dividends due to maximized profits, but also due to the fact that they create a lot of jobs in the foreign countries where they venture (Meredith and Suzanne, 2007). In this regard, they benefit from exploiting foreign resources to create profits while the locals benefit from job creation and hence improved living standards. As such, this is a win-win situation where the communities and other stakeholders benefit while the company’s shareholders also benefit from maximized profits. 2 a) Unconscious bias refers to a situation where corporates or people make unethical decisions according to the ethical perspectives of profit maximization. This issue has been well described in Reich’s article on how capitalism is killing democracy. In their attempt to become capitalists and hence attract foreign investments which are supposed to create jobs for the locals, government are putting in reforms that end allow companies to retrench and give people bad working environments (Reich, 2007). Although these decisions are made in good faith and with the intention of maximizing corporate profits, they end up hurting people who have to lose jobs or workers who have to be poorly paid. This is an example of unconscious bias. b) Money can be addicting just like drugs. Addiction to money could in turn lead to unethical behavior. This is well portrayed in the article by Ray in his article on whether CEO salaries are out of control. In the article, CEOs are described as engaging in unethical behaviors in their bid to see their salaries rise as much as they can. As such, this has resulted to continual rise in wage gaps between the CEOs and other employees (Ray, 2010). Ray describes the huge CEOs pays to have resulted from their being given too much power, the inattention to boards of directors and conflicts of interest by compensation consultants all of which can be said to be unethical behaviors in their desire to earn more and more by abusing their positions. 3. Wal-Mart being the largest retailer in the world has achieved this through demanding the lowest costs from suppliers and is hence able to deliver the lowest prices to customers. However, this demand sees the suppliers provide workers with unsafe working conditions. This has been evidenced by the constant fires in their factories. There have been protests against the act of Wal-Mart continuing to buy from suppliers who do not observe safety standards. Though Wal-Mart promises to act, it does not seem to support the safety standards (Steven and Jim, 2012). Furthermore, most of the suppliers are located in Bangladesh where they are paid some of the lowest wages worldwide. It is clear that Wal-Mart uses the profit maximization perspective in pushing the suppliers to offer lowest prices so that it can attract customers with the lowest prices. However, as it succeeds in making profits while offering lowest prices to its customers, the workers in these supplier factories continue to suffer bad working conditions as well as low pay. This is an example of a company’s actions that affect a stakeholder group (supplier- workers) negatively through encouraging unethical practices in pursuit of profits. References: John, C2010, What good is Wall Street?The New Yorker, November 29th 2010. Smith, G2012, Why am leaving Goldman Sachs, The New York Times, March 14, 2012. Schmitt, T2006, Meet the losers of globalization, Der Spiegel Reich, B2007, How capitalism is killing democracy, New York, Alfred A. Knoof. Steven, G& Jim, Y2012, As Walmart makes safety vows, it is seen as obstacle to change, The New York Times. Meredith, R& Suzanne, H2007, Why globalization is good, Susan, A2010, Rebuilding America: Capitalist monkey wrench, Forbes.com, 4th December 2010. Ray, W2010, Are CEO salaries out of control? Psychology today, August 2nd 2010 Read More