Business Ethics at the Millennium - Case Study Example

Business Ethics Author’s Name Institutional Affiliation Tutor Date Introduction Business ethics refers to a type of ethics whose concern is the problems of morality or principles of ethics which are bound to occur in any given business environment. Business ethics refers to the conduct of the individual players in a business organization and also the conduct of entire organizations. Closely linked to the issue of business ethics is the Corporate Social Responsibility. Corporate Social Responsibility refers to a type of internal mechanisms through which corporations regulate their operations. Corporate Social Responsibility is put in place by organizations so that they such organizations are able to meet the requirements of ethics, international norms and the spirit of the law (Freeman, 2000, p.169). A Corporate Social Responsibility policy is geared towards ensuring that corporations take responsibility for the results of what their actions result to. A company should be in a position to ensure that the activities it carries out is made with the environment in mind, the community in which such a company operates, its employees and every other person who can rightly be considered as being affected by the activities of such a company(Freeman, 2000, p.172). A business which is concerned about the impact that its activities has on the environment and the key players can be said to be run in a manner which is ethical. It is therefore critical that managers should not just concentrate on the idea of maximizing profits but they should show some responsibility to the environment and the people who contribute to the overall success of the business. The paper seeks to address the issue of business ethics. The paper is informed by the raging debate on whether firms are supposed to be responsible for a host of other things and not just ensuring that their shareholders gain the maximum returns from the business. Discussion The issue of business ethics is a relatively new concept having come into use during the 1980s and 1990s. There was need for companies to show that they conducted their businesses in a manner which took cognizance of the people who were affected by the operations of such a business. It could be described as having resulted partly as the era of globalization took root and many such corporations gained foothold in many countries and held a lot of influence. Major corporations make it a point to show the fact that they consider other factors as important and not merely maximizing profits (Freeman, 2000, p.171). Such corporations therefore adopt social responsibility charters and also codes of conduct. The field of academia has been interested in the issues of ethics just as much as the large corporations have. This is reflected in the fact that courses have been developed with the title business ethics which are supplemented by text books covering the same subject in addition to journals (William, 1994). Major scandals which resulted in rip off of clients can be seen as having motivated large corporations to make it clear that they adopted practices which would not lead to crisis in loans and savings and hence end up causing much pain and suffering to people who might have spent the better part of their lives trying to take care of their lives following retirement. The term Corporate Social Responsibility was a term which gained prominence towards the end of the end of 1960s and the advent of the 1970s. Many multinational corporations came up with the term stakeholder. A stakeholder in this case had the meaning of people who were affected in one way or the other by the activities that an organization engaged in. The term stakeholder described people who could be said to have a stake in a corporation though they were not shareholders (Freeman, 2000, p.173). The term gained popularity after R. Edward Freeman wrote a famous book which addressed the subject of stakeholders and strategic management within organizations. There are people who support the central idea of corporate social responsibility while some do not agree with it entirely. The proponents of there being corporate social responsibility advance the argument that the long term profitability of a corporations is guaranteed by ensuring that its operations are alive to the idea of the stakeholders. There are also the people who do not really see the need to have Corporate Social Responsibility in place in the first place. These people who feel that corporate social responsibility is a burden to the organization advance some arguments to back their claims. Corporate Social is seen by these critics as an unnecessary distraction of a corporation from the role that businesses should play in an economy. There also critics of the corporate social responsibility who see it as merely a pretension of corporation in doing what in essence should be the preserve of governments. This mode of operation is therefore adopted by large multinationals so as to prevent government oversight over multinational corporations which appear to be an authority in themselves. The title of the Corporate Social Responsibility for any given organization should be in such a way that it clearly shows the position of a corporation on a given issue. A company also dedicates itself to serve the interests of the consumers. Development business ethics refers to a type of applied ethics whose concern is principles on ethics and morality which are bound to occur in a given business environment. The international standard for Corporate Social Responsibility is the ISO 26000. The principles of Corporate Social Responsibility should be similar to legislations though they have not been formalized. In the modern times, globalization has become a reality and this is an avenue that corporations have tried to exploit in order to ensure that they reach higher levels of growth (Werther & Chandler, 2011, p.33). However, while the organizations are pursuing growth through globalization, there are challenges which have resulted in curtailing how much they can grow and also the level of profits that they are able to make from their operations. The hindrances to the growth of the multinationals include tariffs imposed by the governments, restrictions based on the environment and standards which bar any form of exploitation of workers by their employers. Some people do not view the regulations are being meaningful and they are viewed as unjustly preventing the companies from achieving the required levels of profitability. Those corporations that have embraced the idea that corporate social responsibility is necessary use a number of strategies which enable them to have support from the public in the markets where they have a presence. Such corporations are able to have an edge over their competitors since the social issues they address also serve as a form of advertising which is very potent. Vitell (2009, p.159) assert that in the recent times, the issues of environment have taken centre stage in the issue of corporate social responsibility. Environmental sustainability has become a serious issue in the modern times owing to the amount of degradation that has taken place. The impact of environmental degradation has resulted in unpleasant consequences ranging from changes in weather patterns to rises in the sea levels. As such there are some island countries which might be buried beneath the oceans if the current rises in the sea levels are not addressed. The issues of environment have rose to a prominent position in matters concerning corporate social responsibility. Sustainable environment is the only sure way that human beings are not going to make the world uninhabitable and in the end result in the human race being wiped through what would be described as self destruction. Environmental sustainability means that the biological systems are able to retain their diversity and productivity. If these characteristics are maintained, then the well being of human and other forms of life is assured of survival. There are processes in the environment which are referred to as ecosystem services. In managing the impact of human activities on the ecosystem there are two approaches which could be adopted. The first approach is what is referred to as environmental management. Environmental management relies information emanating from professionals who have vast knowledge on the issue of conservation, the environment and about the earth science. Economists provide another kind of approach which deals with consumption of the resources which are available on the planet earth. Sustainability is influenced by economics by the fact that it is to some extent a result of the economic activities that humans engage in. It is therefore needful that corporations should put in more prominence to the idea of sustainable development. There are companies which are talking of going green. Some of these include global giants such as the car maker, Toyota. This auto maker is one of the companies that have come up with structures which meet high standards with regard to the environment. A computer firm, Dell has a provision for whereby, while its customers are purchasing computers, they are given the option of buying carbon offset. Companies such as British Petroleum, General Electric and Alcoa are part of an organization known as the US Climate Action Partnership. There are also a number of lobbies which advocate for the government to come up with regulation as to the amount of green house gas emitted. Some are not convinced that the companies purporting to go green do actually have the matters of environment at heart and hence the reference to their actions as ‘greenwash’. These efforts by such corporations have been widely accepted by consumers, the employees, the authorities and also the members of the public. (Werther & Chandler, 2011, p.39) The questions that beggars an answer is whether the voluntary actions which are being adopted by the corporations can substitute the role of the government which should primarily be the regulators in matters to do with the environment(Werther & Chandler, 2006, p.41). Another important question that arises is whether managers should use money which could otherwise have benefitted their shareholders and use it in projects which are geared towards ensuring that environment sustainability is achieved. Different people have different perceptions as to what entails corporate social responsibility. Different people therefore think of different activities when they think of corporate social responsibility. There is environmental corporate social responsibility. This entails actions which though not required to be done by law, corporations nevertheless engage in them. Some people have advanced the argument that for an issue to be considered as forming part of corporate social responsibility then such an action should not be geared towards profiting the organization conducting it. If a corporation engaged in an action which is stated to be corporate social responsibility and the corporation gained through profits, then that would be considered as being hypocritical and not genuine. It is apparent that most of the corporations who purport to engage in corporate social responsibility activities are motivated by the returns that they are bound to gain from their initiatives. Therefore, adopting a narrow definition as meaning corporate social responsibility should only be taken to exist where a company ends up sacrificing its profits then very few corporations would fit in the list of those who would be considered as participating in corporate social responsibility. It follows therefore that very few companies engage in issues of corporate social responsibility for the sole purpose of benefiting a certain cause but self interest plays a key role in the decisions arrived at by the organization. According to Hosmer (2000, p.236) the huge amount of interest which is seen in the issue of corporate social responsibility concerning the environment is a clear indicator that there must be forces which are making it necessary for corporation to engage in such kind of activities. These forces can be seen everywhere ranging from the labour to the markets of the products. Therefore the forces of demand and supply play a role in the amount of corporate social responsibility activities that a corporation is likely to engage in. On the side of demand, there are forces which ensure that corporations struggle to have products which are friendly to the environments. Hybrid cars, ethanol fuel and organic food have largely been driven by the huge demand for such products. Where the consumers prefer products which are environmentally friendly, any firm which is involved in production of the goods would be motivated to ensure that such products are of high quality and are produced in an economic way so that in the end the price of such products gets lower as compared to the prices set by the competitors. The products considered as green have also been seen to attract higher prices than the others. This premium which results from such products serves as a motivator to producers to produce them since the amount of profits derived from such an exercise is much higher. Investors have also been playing a role in driving corporations to go green. There are investors who would choose some of their wealth invested in companies which employ practices which are considered as socially responsible (Crane, 2008, p.44). Where investor prefer to have their investments in socially responsible companies which could result in less taxes then engaging in corporate social responsibility serves as an advantage for the given company. Therefore a company would be motivated to adopt practices which would be considered as corporate social responsibility but such activities are calculated to ensure that the company attracts the necessary capital to runs its operations and it is able to have the value of its shares rising. The labour market also plays a role in corporations engaging in corporate social responsibility. Many employees are concerned about the reputation of the company for which they work (William, 1994). Employees are proud when they work for companies which can be considered as being concerned about the betterment of the world. Therefore, companies are able not only to attract but retain gifted employees through commitment to the environment which meets their employees' expectations. Some employees would comfortably accept a smaller amount of pay as long as the organization they are working for is engaged in practices which are in alignment with their ideals. For developing countries, the motivation to engage in corporate social responsibility activities geared towards the environment can be attained through the international market. Developing countries tend to have weak system to regulate the processes of producing their goods. Consumers in the developed world at times demand certain minimum standards to be met by their suppliers before they can accept certain goods (Werther & Chandler, 2006, p.44). Some companies would give guidelines as to the type of pesticides used. In this regard, the players in the relevant market would have to comply with such requirements otherwise they would be driven out of the market. Therefore, even where the regulation mechanisms at the country level are weak as to the use of pesticides which could be harmful to the environment, the insistence on standards being met by consumers is a sure way of ensuring that compliance is being achieved. At times the standards which are required become difficult to establish. Consumers mostly check on the labels of products to determine whether such products do actually the standards to ensure environment sustainability (Crane, 2008, p.61). Reputation of a firm therefore plays a critical role as to whether consumers do continue to have confidence in their products or not. This may lead to consumers abandoning the companies which purport to meet the standards while in fact this might be just a ploy to confuse the consumers. Velasquez (2006) notes that there are forces on the side of supply which encourage organizations to adopt greener modes of productions. There are firms which have had the outcome of having its operations being efficient, reducing cost and also reducing levels of pollution. Even in situations where there are no opportunities which are available to reduce costs, firms which products which are not perfect can make higher profits by reducing their production of imperfect goods. If it were possible to have markets gain information concerning reduction of waste and there no transaction costs involved, then the market would result in a situation the reduction in pollution would benefit everyone even without requiring the government to intervene and ensure that levels of pollution are reduced. It becomes extremely difficult, in practice, to have the perfect conditions being present and in case, emission driven reductions are not likely to ensure the attainment of an optimum situation. This being the case, regulations by the governments and politics should never be rules out as important driving forces which play a vital role in ensuring that the environment is constantly improved (Shaw, Barry & Sansbury, 2008, p.64). Oftentimes what is needed so as to solve problems of the environment. Politics in a country provide an opportunity or an avenue whereby key decisions on the protection of the environment are taken. The industry at times makes an investment into corporate social responsibility due to some form of compulsion. Players in an industry are likely to undertake corporate social responsibility activities to prevent this from being done by advocacy group which would press for regulations to be passed on a given issue of the environment. Lobby groups have to incur a lot of money in their activities (Velasquez, 2006, p.29). Therefore, industry players find an escape route by investing in activities amounting to corporate social responsibility so that a political process does not ensue which would result in far stricter forms of control of the players in a given industry. In situations where it is cheap to lobby, firm engaging in this kind of action to preempt regulation might not achieve much since after players in a given have taken up measures to ensure a reduction in their emissions, such lobbyists might still press for regulation. Therefore, where the costs of lobbying are high, then firms are able to take preemptive actions at a cost which is far much less than where they are unduly exposed to the actions of the lobbyists whose outcome would be having the profits of such an organization being significantly reduced. According to Schaefer (2008, p.301), industry and advocacy groups at times decide that the best way out is to operate outside the regulatory system. There are times therefore where regulators could negotiate with industry players and the outcome would be what are referred to as voluntary agreements. This could be considered as engaging in corporate social responsibility as industry players get into such agreements out of their own volition and not through a compulsion by the law (Blackman et. al., 2006, p.684). In signing a voluntary agreement the government and the industry players reduce their costs. Voluntary agreements present another problem in that it becomes difficult to determine who should bear certain burdens in an agreement already entered into. It is impossible to preempt each and every environmental regulation. Corporate Social responsibility on the environment can have positive outcome since this helps in determining the kind of regulations that would be implemented in the end. Corporate social responsibility plays an important role where the regulator does not have sufficient information on the costs of coming up with alternative policies. In a situation where an industry player decides to start making use of clean technology, the regulator would come to the realization that the cost of such an activity is not so high after all. Conclusion Corporate social responsibility appears to be indispensable in light of the economic of the modern day. The reasoning behind this kind of an undertaking is very impressive. However, questions linger as to why companies engage in issues of corporate responsibility. It is evident that a great majority of corporations engage in corporate social responsibility so that they can some mileage in terms of perception by their clientele and also ensure that they gain an edge in terms of the profits that they make. No matter what motivates companies to engage in corporate social responsibility, the end result is that all are bound to benefit. When companies engage in practices which ensure environmental sustainability through economical use of resources and clean energy then consumers are bound to benefit. The producers gain through increased sales since many consumers do favour products which are considered 'green'. Issues of the environment are very critical and hence the need of as many players as possible to dedicate more resources towards ensuring an environment which is hospitable is achieved. Many people disagree as to the relevance or otherwise of corporate social responsibility but it is worth realizing a company owes a duty to more than its shareholders. A company does not just exist and prosper as a result of the input by the shareholders but as a result of every stakeholder. References Blackman, A., Thomas P. L., & Nicholas S. (2006). Voluntary environmental agreements when regulatory capacity is weak. Comparative Economic Studies 48: 682–702. Crane, A. (2008). The Oxford handbook of corporate social responsibility. Oxford: Oxford University Press Inc. Freeman, E. (2000). Business Ethics at the Millennium. Business Ethics Quarterly, 10(1): 169-180. Hosmer, L.T. (2000). It’s Time for Empirical Research in Business Ethics. Business Ethics Quarterly, 10(1): 233-242. Schaefer, B. P. (2008). Shareholders and social responsibility. Journal of Business Ethics, 81(2), 297-312. Shaw, W., Barry, V., &Sansbury, M. (Eds) (2008). Moral issues in business. 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