Profit Maximization and Business Ethics - Essay Example

University: Profit Maximization & Business Ethics. Name: Date: PROFIT MAXIMIZATION & BUSINESS ETHICS It is the primary role of businesses to among other things, ensure that they provide goods and services to consumers and do so with the utmost consideration of high quality standards and safety of the products. Undeniably, the business environment is highly competitive and for a company to sustainably remain relevant in the business environment, it has to respond to the changing market dynamics (Halbert & Ingulli, 2012, p.28). This continuous struggle to remain at the top of the competition while at the same time providing high quality and safe products develops the main issue presented in this paper. This paper seeks to address the delicate balance that corporations have to maintain in the highly competitive business world and maintaining ethical practices with regards to provision of safe, and satisfactory products for the consumers. Friedman’s argument draws bias on the fact that it limits the primary responsibilities of maximizing profit over other more critical role of business in the society. With the increase in globalization, the role of corporations have rapidly shifted from basically profit maximization and emerging trends such as corporate social responsibility have equally taken precedence (Boje, 2008, p.86). While Freedman’s argument holds true on the relationship between maximizing profits and surviving in a highly competitive environment, it omits the fundamental concepts that define corporate social responsibility (May et al., 2007, p.47). Over the years, corporations have consistently shifted their goals from profit maximization to wealth maximization. This has been majorly due to the evident shortcomings of solely depending on profit maximization as the key goal for organizations. One of the major disadvantage of focusing entirely on profit maximization is the eventual slow growth of the business in the long run as a result of continued increase in the prices leading to decreases sales volume (Heath, 2014. p. 29). Although this does not occur in all cases, achieving the profit maximization goal is a demanding venture since profitability of corporations is eminently dependent on the entry and exit of firms in the market. Essentially, the basic objective of every firm should be customer satisfaction. As such, profit maximization becomes the secondary goal of an organization. According to Freedman, the rule utilitarianism takes definitive pre-eminence over act utilitarianism (Suchanek, 2005, p.91). While the basis of his argument is that application of a rule that will lead to maximum profits will define an act that is morally right, the argument fails to acknowledge the relativism of comparing the act to other acts. In maintaining that corporations have no moral responsibility other than profit maximization, Freedman’s theory fails to appreciate the fact that corporations are tasked with the responsibility to not only look out for the rights of their workers but also that of the consumers. As companies compete to make more money and improve sales, the pertinent question remains to what extent should companies go in maximizing profits? In particular, the major concern among consumers is the moral standing and principles of organizations in the production process. Friedman denies the existence of social responsibility and only perceives it to be merely shared values and responsibility of individuals. Borrowing from the invisible hand theory, this point of view is further emphasized with the claim that the greatest social benefit occurs when the market is functioning most efficiently, a situation that the theory augments occurs when managers are seeking to make more profits (Trevino & Weaver, 2003, p.127). In a bid to make more profits, however, organizations will, among other things seek to reduce the cost of production and thus increase the profit margins. The criteria through which organizations reduce these costs of production begs serious scrutiny and ultimately lead to the worry on the safety of the final products delivered to the consumers. Product safety is dependent on the quality of the raw materials used, the standards used in the production process, and the mode of storage of the goods (Fraedrich et al., 2012, p.67). It is the chief responsibility of organizations to ensure that the goods they provide to consumers are at all times safe. Researches carried out in the business world have indicated that in highly competitive business environments, there is a high likelihood of prevalence of unsafe products in the short run, and these products can have very detrimental effects on the society, consumers and even the government. Moreover, the infiltration of unsafe goods ultimately leads to potential damage to the image of corporations that engage in safe production since consumers become unsure on which goods or commodities can be trusted in such a market (Gilpin & Gilpin, 2001, p.73). In addition to this, the is the lurking danger that in the pursuit of maximizing profits while compromising the safety of their products, corporations face the risk of penetrating to other markets and obtaining export orders due to reputation of producing and distributing unsafe goods. Ideally, there should be minimum safety standards that have been set for particular goods in each country. It is also important that corporations should engage in disclosure of the ingredients and the raw materials used in the production process so as to ensure that consumers’ wellbeing is not compromised as these companies try to out compete each other (Heath, 2014. p. 84). Ethical business practices require that corporations should keep in mind that the safety of their products to the end users is the primary role (Quatro & Sims, 2008, p. 95) While the above mentioned implications of profit maximization to the consumers and the businesses take the form of financial losses, there are serious ethical issues arising from the conduct of business as they engage in cut throat competition to make maximum profits. One of the ethical issue is that of social responsibility. Social responsibility encompasses engagement in practices that promote the performance of the organization while at the same time serving the interest of the society (Boje, 2008, p.39). In this regards, corporations need to integrate reliability and thoroughness whereby there should be carrying out of precision tests and determination of the accuracy of equipment used in the laboratories. All these practices help to prevent situations whereby the final products are highly compromised. The implications of a corporation that fails to engage in these social responsibilities is the risk of losing a major market segment should their products be wrongly tested and thus harmful to the consumers. There have been cases of product recalls and though this is a possible way to deal with unsafe products, prevention is the most appropriate. Further, governments intervene in situations where corporations release and distribute unsafe products by either banning the goods totally from the market or demanding that thorough quality assessment procedures be put in place to reinforce quality production (Fraedrich et al., 2012, p.104). Secondly, the issue of honesty in business has been a major ethical concern. In the pursuit of profit maximization, it has possible that corporations engage in practices that are permissible in safety standards and in the law but are in essence detrimental to the final consumers. Outmost honesty in the highly competitive business environment is a highly ambitious goal to attain but can be achieved through concerted efforts by the relevant bodies that check on company standards by carrying out surveillance of the market, testing the products and carrying out flow ups to ascertain that the products in the market are safe for the final consumers (Donaldson, 2002, p.48). In as much as corporations operate in highly competitive business environments, they are not justified to act in manner that amounts to dishonesty and thus compromising the moral and ethical standards. While Friedman’s idea of the competition in business was accurate, there was a major flaw on his perception of maximizing profit with disregard to the moral responsibilities in the contemporary business (Shaw, 2011, p.78). Since consumers are more aware of their rights, it has become increasingly difficult for corporations to engage in underhand methods in pursuit of higher profits. Similarly, dire legal consequences have been put in place to prevent and serve justice to corporations that prove dishonest to the consumers. Equally contributing to the ethical issues has been the concern about conflict of interest in the modern businesses. In addressing the moral responsibilities of businesses, it is important to note that businesses are under obligation to do good, even at the cost of some reduction in the profits (Carroll et al., 2005, p.57). On the contrary, Friedman’s view was that the obligation of businesses was to be limited within the compliance to existing laws and should embark on increasing in its profits if this obligation is fulfilled. While a corporation make wish to adopt Friedman’s perspective, it should be noted that this compliance with the laws only is not enough. Businesses should endeavor to avoid hurting an interfering with the interests of other parties in business. In this regard, corporations should at all times seek to strike the delicate balance between profit maximization and serving the interest of their employees, their supplies, creditors, and most importantly ensuring that the products they release to the consumers are safe and of high quality (Parkinson, 2003, p.105). In conclusion, it can be seen that in as much as Friedman maintained that the main goal of every business was profit maximization as long as there was compliance with the existing laws, his argument had some major flaws. Even with compliance with the law, this compliance should have been limited only to applicable laws (Sims, 2003, p.114). This is due to the reality in modern society that there is in existence some unjust laws. Moreover, the influence of lobbying cannot be ignored in today’s society and this has had a major influence on existing legislations. Finally, as business penetrate in uncharted areas where there are no existing laws on how to conduct business, it is the primary responsibilities of these corporations to set standards for moral responsibilities in these regions and ensure that even without legislations in place, they can still produce high quality and safe products for the consumers. REFERENCES. BOJE, D. M. (2008). Critical theory ethics for business and public administration. Charlotte, NC, Information Age Pub. CARROLL, A. B., & BUCHHOLTZ, A. K. (2006). Business & society: ethics and stakeholder management. Mason, Ohio [u.a.], Thomson/South-Western. DONALDSON, T. (2002). Corporations and morality. Englewood Cliffs, N.J., Prentice-Hall. FRAEDRICH, J., FERRELL, O. C., & FERRELL, L. (2012). Ethical decision making for business. Mason, Ohio, South-Western. GILPIN, R., & GILPIN, J. M. (2001). Global political economy understanding the international economic order. Princeton, N.J., Princeton University Press.  HALBERT, T., & INGULLI, E. (2012). Law & ethics in the business environment. Mason, OH, South-Western Cengage Learning. HEATH, J. (2014). Morality, competition, and the firm: the market failures approach to business ethics. MAY, S., CHENEY, G., & ROPER, J. (2007). The debate over corporate social responsibility. Oxford, Oxford University Press. PARKINSON, J. E. (2003). Corporate power and responsibility: issues in the theory of company law. Oxford, Clarendon Press. QUATRO, S. A., & SIMS, R. R. (2008). Executive ethics: ethical dilemmas and challenges for the C-suite. Charlotte, NC, Information Age Pub. SHAW, W. H. (2011). Business ethics. Belmont, Calif, Wadsworth. SIMS, R. R. (2003). Ethics and corporate social responsibility: why giants fall. Westport, Conn. [u.a.], Praeger. SUCHANEK, A. (2005). Is profit maximization the social responsibility of business? Milton Friedman and business ethics. Leipzig, HHL.  TREVINO, L. K., & WEAVER, G. R. (2003). Managing ethics in business organizations: social scientific perspectives Read More

As companies compete to make more money and improve sales, the pertinent question remains to what extent should companies go in maximizing profits? In particular, the major concern among consumers is the moral standing and principles of organizations in the production process. Friedman denies the existence of social responsibility and only perceives it to be merely shared values and responsibility of individuals. Borrowing from the invisible hand theory, this point of view is further emphasized with the claim that the greatest social benefit occurs when the market is functioning most efficiently, a situation that the theory augments occurs when managers are seeking to make more profits (Trevino & Weaver, 2003, p.127). In a bid to make more profits, however, organizations will, among other things seek to reduce the cost of production and thus increase the profit margins.

The criteria through which organizations reduce these costs of production begs serious scrutiny and ultimately lead to the worry on the safety of the final products delivered to the consumers. Product safety is dependent on the quality of the raw materials used, the standards used in the production process, and the mode of storage of the goods (Fraedrich et al., 2012, p.67). It is the chief responsibility of organizations to ensure that the goods they provide to consumers are at all times safe.

Researches carried out in the business world have indicated that in highly competitive business environments, there is a high likelihood of prevalence of unsafe products in the short run, and these products can have very detrimental effects on the society, consumers and even the government. Moreover, the infiltration of unsafe goods ultimately leads to potential damage to the image of corporations that engage in safe production since consumers become unsure on which goods or commodities can be trusted in such a market (Gilpin & Gilpin, 2001, p.73). In addition to this, the is the lurking danger that in the pursuit of maximizing profits while compromising the safety of their products, corporations face the risk of penetrating to other markets and obtaining export orders due to reputation of producing and distributing unsafe goods.

Ideally, there should be minimum safety standards that have been set for particular goods in each country. It is also important that corporations should engage in disclosure of the ingredients and the raw materials used in the production process so as to ensure that consumers’ wellbeing is not compromised as these companies try to out compete each other (Heath, 2014. p. 84). Ethical business practices require that corporations should keep in mind that the safety of their products to the end users is the primary role (Quatro & Sims, 2008, p. 95) While the above mentioned implications of profit maximization to the consumers and the businesses take the form of financial losses, there are serious ethical issues arising from the conduct of business as they engage in cut throat competition to make maximum profits.

One of the ethical issue is that of social responsibility. Social responsibility encompasses engagement in practices that promote the performance of the organization while at the same time serving the interest of the society (Boje, 2008, p.39). In this regards, corporations need to integrate reliability and thoroughness whereby there should be carrying out of precision tests and determination of the accuracy of equipment used in the laboratories. All these practices help to prevent situations whereby the final products are highly compromised.

The implications of a corporation that fails to engage in these social responsibilities is the risk of losing a major market segment should their products be wrongly tested and thus harmful to the consumers. There have been cases of product recalls and though this is a possible way to deal with unsafe products, prevention is the most appropriate. Further, governments intervene in situations where corporations release and distribute unsafe products by either banning the goods totally from the market or demanding that thorough quality assessment procedures be put in place to reinforce quality production (Fraedrich et al., 2012, p.104).

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