Corporate Obligations Toward Society - Essay Example

? Business Ethics The Problem The biggest controversy in the field of businessethics is the extent of corporate obligations to society. Business scandals in the 1990's and the early part of this millennium have raised questions about business leadership, the ethical climate of business, and the ethics of business professionals. Public reaction to the scandals has been strong, and it has generated numerous suggestions to improve the ethical standards and behavior of business people (Richter and Burke, 15-21). Some of the specific problems identified through these scandals are corporate accounting irregularities evidenced by the need for earning restatements by several large corporations such as Enron, Waste Management, Tyco, WorldCom, Xerox, and HealthSouth; questions of auditor independence and faulty audits at the major accounting firms (Andersen, PWC, Deloitte, KPMG and Ernst & Young); the failure of boards of directors to challenge the financial information and their auditors (Hollinger, Enron); and brokerage firm scandals (Prudential, Credit Suisse) caused by security analysts issuing false reports as well as several mutual fund (Putnam Investments, Janus Capital Group) companies that were deemed to have engaged in improper trading practices. Additionally, in a report from Susan Markel, SEC chief accountant, she stated that the Securities and Exchange Commission's Division of Enforcement had identified 27% of the 598 actions filed in 2002 as being related to financial fraud and reporting irregularities (Prouty 1). The demise of the prestigious Arthur Andersen accounting firm sent shock waves throughout the accounting profession, spurring a strong determination to make the necessary changes to redeem the profession's reputation as the trusted advisors for the business community, and once again allow it to be recognized for its integrity and trustworthiness. These aforementioned recommendations to re-emphasize stronger business and professional ethical standards and behavior within the business community and the accounting profession should also be reflected in the curriculum of the colleges and universities that are preparing students to enter the business world. Relevance Wrongful and unethical behavior in the business environment is not a new phenomenon; wrongful acts can be traced back at least two centuries ago. Since the 1970s, public opinion polls have communicated a steady decline in the public's confidence in America's business community, which has shown an infinity for breaking the rules (Gautschi & Jones 205). It is apparent that both the accounting profession and the corporate business world need to regain the trust that stockholders and other constituent groups should have in their ability to manage corporate affairs and conduct business in an independent and moral manner, while still successfully running their businesses. The numerous calls for more and/or improved ethics education illustrates that business students are seen as part of the problem and perhaps eventually as part of the solution (Rich 11-17). Whether ethics can be taught and how it could be taught has been the subject of much research. Many different modules and approaches have been identified in the research and scholarly literature. For example, Armstrong (77-92) exemplifies the code of ethics approach; Langenderfer and Rockness (58-69) focus on ethical decision making through an eight step model to evaluate ethical dilemmas; Rest (1-10), Kohlberg (15-25) and Gilligan (10-21) are relied upon for research focusing on the psychological or moral development issues, an approach that Hiltebeitel and Jones (37-46) and Poneman (185-209) have continued to focus on. Mintz (247-267) claimed that all of these models are useful tools of ethical analysis; however, they ignore the ethical considerations of the actor, focusing only on the act. He noted that it is the actor who is faced with the ethical dilemma and, therefore, it is the actor as agent who will bring personal traits of character that will affect how and why a decision will be made. There is also significant research using Kohlberg's six levels of moral development correlated with the Defining Issues Test (DIT) developed by James Rest (25-30), whose authors indicate it is possible for students to transition from one stage of ethical reasoning to another after exposure to ethical reasoning at a level one stage higher than they had already attained. In examining the oft reported backsliding of this transition, Turiel (33-37) determined that the consistency and inconsistency of stage transition and achievement was evidence of a consolidation of reasoning at a particular stage (consistency) and a period of transition and subsequent stage shift (inconsistency). His conclusion was that most people reason at a single stage with smaller amounts of reasoning at adjacent stages. Additionally, much of the body of literature demonstrates that age and gender (Gilligan, 51-55) can be shown to affect the results of ethics learning, depending on the modality used. Business ethics has traditionally been taught by various approaches that include the analysis of cases and scenarios using either a philosophical framework or a stakeholder theory framework. A perceived problem with this approach is that in general the cases and scenarios that are presented are often not relevant. In an examination of business ethics textbook cases, Mathison (777-782) revealed that over two­ thirds of them are centered on concerns of top executives. Although, in a recent study (Bracken and Urbanic 279-284) researchers found increased coverage of ethics in the accounting textbooks, which was incorporated into the discussion of the topic and the assignments, the cases presented have not been studied for robustness or relevancy. Arguably, undergraduate students are at a very different decision-making level than top executives and would tend to find executive type dilemmas irrelevant and thereby less influential in raising their level of moral awareness and development. Another problem encountered is that authors of various business textbooks include ethics material in the form of cases with legalistic answers, that is, dilemmas which are often code or law related and therefore generally have but one correct answer. Business Ethics Education Despite the fact there is significant support for courses in business ethics, there has been considerable controversy over the years as to the efficacy of teaching such a course. The concept of business ethics has often been derisively labeled as an oxymoron (Fox Business Insider 1-10). Carlson and Burke (1179-1187) demonstrated a link between teaching ethics to college students and the evolution of student thinking about ethical dilemmas. An undergraduate population at a small private university in a northeast metropolitan area, with a pre-test population of 74 and a post-test population of 67, was used. The intervention was a semester of ethics instruction and a discussion of an ethics case based on a local real situation. To measure the effect, students were asked at the beginning and at the end of the semester to evaluate the behavior of the CEO and to give reasons for their conclusion about its appropriateness or inappropriateness. The final analysis produced a surprise since the researchers expected to find increased support for the resignation of the CEO but instead found a decrease of 10% in the support of that position. This finding supported the need for an in-depth analysis of student reasons. The analysis revealed that instead of reflecting classic ethical thinking as expected, the students used information from discussions by the faculty and other students to develop their own thinking about ethical dilemmas. They demonstrated flexibility, complexity, and a relatively high level of sophistication in their thinking about ethical concerns. Carlson and Blake concluded that education in ethics produces more "enlightened" consumers of ethics information who are able to make sound determinations about responsibility in ethical dilemmas. Glenn (217-223) completed a four year longitudinal study to measure the effect of a Business and Society course on the ethical judgment of students. In his review of prior research, he provides a summary of ten pre/post studies that measured course impact. Of these ten studies, the authors of seven found that an ethics course demonstrated some positive impact about one of the aspects of ethics: social awareness, ethical awareness, ethical or moral reasoning, values, or moral judgment. As with the Gautschi and Jones (205-216) study, he found that such a course can show an effect on judgment in a more ethical direction, but also like them questioned the state of research on whether ethics can actually be taught and in the same way referenced the absence of rigorous and sensitive instruments coupled with a tendency for most of the reported empirical research to not use techniques such as pre and post tests, matching groups, or controls. In a study in which the authors tend to substantiate some of these criticisms of the state of existent research, Wynd and Mager (487-491) distributed a questionnaire to 345 students in eight separate Business and Society courses on the first day of class, over a two and one half year period. This same instrument was distributed to 205 different students in seven separate classes on the last day of class. They reported that in agreement with other studies (e.g. Arlow and Ulrich's 295- 302), there was no significant impact on students' attitudes toward ethical decision situations as a result of the Business and Society class. In a study of undergraduate students in a large university, Peppas and Diskin (347-353) also found that there was no significant difference between students who had taken an ethics course and those who had not in terms of ethical values examined in their study. It is apparent from the foregoing that there is a need for more rigorous empirical research to investigate the effect of ethics interventions. The present study is designed so that multiple instruments are used to investigate any changes in the treatment group, pre and post the intervention, as well as any changes during the same time periods within the control and comparative groups that can be measured. Conclusion Integrity and ethical behavior are necessary attributes of business professionals for the capital markets to continue to function efficiently with the hallmarks of transparency and disclosure that enable that efficiency. Unfortunately, the media reports of ever more scandals are helping to insulate people from that perception. It begins to seem as if everyone is behaving badly and that is the way it is. In my opinion, due to recent multiple high profile ethical failures, it has become more urgent for education to try to address these issues. Therefore, it is incumbent on those of us to find creative and useful ways to give our students the tools that they will need. We need to help them develop their moral sensitivity, identify their moral compass and set of values, become aware of the ethical issues that inevitably they will encounter and have the moral courage to do the right thing. 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Combating Corruption, Encouraging Ethics: A Practical Guide to Management Ethics. Lanham, MD: Rowman and Littlefield, 2007. Turiel, Elliot. The Development of Social Knowledge: Morality and Convention Cambridge University Press, New York, 1983. Wynd, William R. and Mager, John. “The business and society course: Does it change student attitudes?” Journal of Business Ethics, 8, (1989), 487-491. Read More