A Critical Discussion and Comparison of Ethics and Managerial Activities - Essay Example

Ethic and Managerial Activities: A Critical Discussion and Comparison BY YOU YOUR ACADEMIC ORGANISATION HERE 7 January 2008 Ethics and Managerial Activities: A Critical Discussion and Comparison Introduction A statement has been offered suggesting that ethics has no part to play in managerial activities, which tends to suggest that as a manager considers issues of strategy and the fulfilment of corporate objectives he or she is not required to exhibit or promote ethical behaviours or policies. Such a statement implies that businesses, by design, should be focused around sustaining the profitability needs of the company and can therefore dismiss any ethical actions which might impede or otherwise slow business progress and growth. This paper will discuss ethics from a managerial and company perspective, identifying various professional arguments which both support and refute this notion. Defining Ethics Longenecker, Moore, Petty & Palich (2006) define ethics as a moral code of right versus wrong from the perspective of the social environment and internal stakeholder perceptions. Ethics, then, can be interpreted to imply that all policies, behaviours and managerial actions should be constructed so as to serve the needs of internal and external forces, avoiding various decision-making processes which may be perceived as unfair or unjust. This definition of ethics is supported by other professional researchers who compare ethics to the Hippocratic oath in medicine which states “first do no harm” (Landy & Conte, 2006: 59). Hence, ethics can be interpreted as a series of business behaviours which consider the impact of various corporate decisions on the well-being of the social and organisational environment, respecting the perceptions of morally-correct behaviours stemming from employees and citizens alike. However, can a business actually sustain its profit objectives without considering the importance of ethical behaviours? Exploring Contemporary Business Ethics Adam Smith, an renowned 18th Century economist, proposed a theory of wealth creation known as the Invisible Hand theory, which essentially suggests that businesspeople do not have to actively set out in the pursuit of helping others, rather a company’s profit objectives and subsequent growth tends to increase the quality of living for regional citizens in the area where the company thrives (Nickels, McHugh & McHugh, 2005). In essence, self-serving goals and aspirations for monetary gain is the foundation for creating new jobs, better products and increased revenue streams for local governments; this in turn creates a better system of opportunities for job-seekers and provides consumers with the goods needed to live better lives. Smith’s theory tends to support that notion that ethics has no play in managerial activities, as Smith proposes that businesses should remain focused on growth and profit initiatives as a primary aspect to sustaining the company as a primary objective. He suggests that the gains received by the general public will occur as a natural evolution of corporate self-determination. From Smith’s view, shifting focus toward the creation of ethical policies would likely remove such focus from business sustainment and profit, decreasing the effectiveness of managerial decision-making. A more modern 20th Century economist, Milton Friedman, supports Smith’s Invisible Hand theory when he cited, "There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits” (Seligman, 1996: A1). Ethics are closely related to the notion of corporate social responsibility (CSR) which is defined by a series of activities prompted by ethical actions which provide sustenance to the stakeholder in the form of charity donations or regional improvement initiatives. Hence, Friedman suggests that businesses do not even need to consider ethics or CSR as part of their strategic decision-making, but simply need to remain focused on building wealth for the company. Friedman appears to share many of the same values as Adam Smith, believing that corporate profitability will have a trickle-down effect on the local communities thus managers must remain continuously focused on business, not the stakeholder and their needs. Most contemporary business professionals would argue strongly against Smith and Friedman, offering that in order to sustain a modern company managers must actively reinvent policies to focus on ethical behaviour and the promotion of ethical awareness as part of an entirely new method of conducting business (Henderson, 2005). In order to satisfy both the stakeholder and the shareholder, businesses must adapt their activities to ensure that employees, local citizens and the entire international community are supported. Perhaps this may illustrate the recent shift of business focus which provides ample literature on how best to fulfil the psychological and sociological needs of the employee population from a human resources perspective. Theories such as implementing policies which reward employees for performance and how best to create a positive, motivated organisational culture might suggest that ethical behaviours are slowly becoming a mandate of business and not an individual perspective. For instance, Mathis & Jackson (2005) describe the performance appraisal process, highlighting various problems with providing employees with fair and balanced reviews. They suggest that managerial biases can create impartial appraisals which do not serve to adequately reward employees for their performance levels at the business. However, the authors further highlight a series of managerial activities required to create a more balanced employee review such as creating a 360 degree feedback loop with the manager required to take feedback from customers, coworkers or even suppliers in order to fully gauge the level by which an employee performs. In theory, this would appear to be a quality programme for ensuring partiality when determining rewards. However, when a manager remains focused on aiding the company and boosting profit, can the leader devote so much time to gathering feedback about a singular employee from multiple sources? Can they possibly coordinate such information for an entire group of employees and still remain focused on creating strategy and business expansion? It would seem, from a rather subjective viewpoint, that the manager would be required to abandon their managerial activities in favour of satisfying stakeholder needs for partiality and fairness. The end result of providing employees with a better system of reward would seem to represent a significant investment on behalf of the manager who would be required to devote a substantial research effort to consult with a variety of internal and external entities simply to determine whether a £1.00 per hour increase was appropriate or a £1.25 was more balanced and fair. Does that hypothetical difference in reward justify such managerial devotion to satisfying employees’ perspectives on ethical behaviour or did the manager potentially jeopardise the future longevity of the company by sacrificing managerial functions pertaining to profit to suit the stakeholder? Smith and Friedman would likely argue that such efforts to satisfy ethical beliefs would constitute a waste of managerial efforts. Many companies today create a series of ethical statements in a formalised Code of Ethics which usually identifies issues of diversity or providing a more rewarding internal culture based on teamwork and the satisfaction of employee motivational drives; such as providing a sense of belonging for staff members (Weiten & Lloyd, 2005). In addition, objectives for sustaining the long-run needs of general society are often listed in such statements as part of corporate focus for CSR (Branco & Rodrigues, 2007). Many professionals might argue that these new efforts at satisfying psychological needs of staff members and the well-being of society actually create positive outcomes for the business in the form of positive public relations or diminished turnover due to satisfied employees. Conclusion It would seem that the argument which suggests that managers should engage in activities which promote social well-being can actually create positive benefits for the firm as a matter of outcome. However, the majority of evidence seems to indicate that acting ethically in the pursuit of satisfying social perspectives on what constitutes appropriate behaviour is a very time-consuming aspect of managing business. Hence, a competent conclusion is that managers should remain focused primarily on satisfying the needs of the business, acting socially responsible when feasible in light of time constraints or busy schedules, but not as a primary element of managerial activities. Ethics does, indeed, have a part to play in managerial activities, but it should never be the only focus of decision-making. Bibliography Branco, M.C. & Rodriques, L.L. (2007). ‘Positioning Stakeholder Theory within the Debate on Corporate Social Responsibility’. Electronic Journal of Business Ethics and Organizational Studies 12(1). Retrieved 4 Dec 2008 http://ejbo.jyu.fi/pdf/ejbo_vol12_no1_pages_5-15.pdf Henderson, David. (2005). ‘David Henderson on the Role of Business Today: Does it Include Corporate Social Responsibility?’. Journal of Financial Planning. Retrieved 4 Dec 2008 http://www.fpanet.org/journal/articles/2005_Issues/upload/38396_1.pdf Landy, F. & Conte, J. (2006). Work in the 21st Century: An Introduction to Industrial and Organisational Psychology. 2nd ed. Blackwell Publishing: 59. Longenecker, J.G., Moore, C., Petty, J.W. & Palich, L. (2006). Small Business Management: An Entrepreneurial Emphasis. 13th ed. Thomson South-Western, United Kingdom. Mathis, R. & Jackson, J.H. (2005). Human Resource Management. 10th ed. Thomson South- Western, United Kingdom. Nickels, W., McHugh, J. & McHugh, S. (2005). Understanding Business. 7th ed. McGraw- Hill Irwin, London. Seligman, Daniel. (21 Jun 1996). ‘Helping the Shareholder Helps the Society’. Wall Street Journal: A1. Weiten, W. & Lloyd, M. (2005). Psychology Applied to Modern Life: Adjustment in the 21st Century. 7th ed. 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