Analysis of Business Ethics at Tom of Maine - Case Study Example

Analysis of Business Ethics at Tom of Maine Introduction Toms of Maine is a pioneering national health care company. The company commenced operations in 1970 after it was incorporated by Tom and Kate Chappell. Toms of Maine manufactured products that were not in the normal health channel. The core principle of Toms if Maine was to grow fiercely in a competitive environment. This is because most other entities were using cheaper and less healthy or ethical products. Ethics are “the principles, norms and standards of conduct governing an individual or group” (Trevino and Nelson, 2010: p17). Thus, it can be said that there are some ethics of conducts for different classes and groups of people. Business has its own ethics. Ferrell et al state that “business ethics comprises the principles and standards that guide behaviour in the world of business” (2009). This paper will examine the ethical matters that differentiated Toms of Maine from other businesses. It would examine the dominant theories that affected the way Toms of Maine and also identify the different dilemmas that Toms of Maine went through. The paper will examine the important activities that influenced the companys ethical affairs. The report concludes by making findings and recommendations on this subject. Theorisation of Ethical System of Tom Chappell The story of Toms of Maine is such that the company started with a modest belief that was based on the views and strong beliefs of the founder and his wife that people must be more responsible for their actions and how they use natural resources. Toms of Maine was steeped in two things: humanitarianism and environmental consciousness. In terms of humanitarianism, they believed strongly that the members of the public needed to be given the proper products that would boost their health and ease their conscience. People who purchased their products felt that they were helping to promote a kind of business that is responsible. In terms of environmental consciousness, the company used operational systems that were very responsible. They were sensitive to animals and also conscious of the systems and production they had. Also, the company used popular methods like recycling and other things. Applicable Ethical Frameworks There are several ethical frameworks that can be used to help in decision making and thinking before any action is taken. There are several approaches which are always applied and they can give a view of how to decide on a matter. Deontological Ethics are based “on duties and obligations that apply, for the most part, regardless of consequences” (Thompson, 2011: 54). Deontological ethics suggest that what is right and what is wrong is universal and absolute. This means that a person must strive to do those absolutes without thinking of the consequences. In other words, the consequences are not important. One has to do what he has to do. The basis for deontological ethics is the inherent rightness of an action as opposed to the wrongness of all other options (Cheek, 1992). In other words, a person is required to do something that is right because it is steeped in higher principles that govern things (Cheek, 1992). Deontology indicates that a person has a moral duty to adhere to what is right because it is absolute and there is no other option but to adhere to these absolute duties and facts. Deontology can be contrasted with Teleology. Teleological ethics are steeped in the fact that the end of a given moral option would justify its rightness or wrongness (Finnis, 2009). Teleological ethics implies that a person must make a choice if a given choice would bring better results than another choice. This means that teleology is based on the outcome rather than the inherent features of a given option. Teleological ethics are consequential ethics. This means that the consequences of a given choice will either justify or refute it. The main challenge is that teleological ethics cannot be justified until it the results are known. On the other hand, deontology does not concern itself with results. It concerns itself with choosing the real ruling that binds the act at hand. Another view closely related to teleology is Utilitarianism. Utilitarianism is about the maximisation of goodness to the society (Pojman and Feisser, 2011: 101). In other words, if a given choice is going to provide the highest level of good for the society, then it is seen to be right. This line of ethical thinking is often used to complement teleological choices. In other words, if a person is making a teleological choice, s/he can use the theory of utilitarianism to justify his choices. The main limitation of utilitarianism is that it could cause the highest level of good for the highest numbers of people in society and cause severe, serious and untold hardships for a small section of the society. In terms of examining practical cases, we can view the case of a student who falls pregnant. Under the principles of deontology, that student should carry the pregnancy and give birth because it is wrong to terminate a pregnancy. Under the principle of teleology, a different decision is likely to be taken. Teleology which argues that the end justifies the means. These ethics can be applied to the c ase at hand to explain some trends and actions that were undertaken by Tom Chapell and other stakeholders. This will provide the basis for the analysis of the dilemmas and ethical systems that were applied by Chapell. There is evidence that many large organisations like Renault are trying to use absolute standards in their operations. They are now spending more money and resources on the improvement of their technology. Some new companies are also springing up. These companies use the most organic tools and technologies. Toms Responsible Operations Versus Shareholders Views Shareholders are individuals who pool resources to provide capital to a business (Mankiv, 2009). Shareholders expect dividends for investing capital in a given business. Dividends also come when a business increases its returns on investments. From the profits a business acquires, it would declare a percentage of dividends for shareholders. The best interest of shareholders is to acquire more dividends and returns on what they put in a company. They always vote for the best managers and directors who will supervise operations to ensure that the highest possible profits are made so they get higher dividends. The shareholders of Toms of Maine is no different from other shareholders. They would expect higher returns on investments and better dividends. However, it appears that there are some important and significant things that happened to Toms of Maine which were adversarial to the expectations of their shareholders in the first twenty years. The company was started in 1970 with a small loan. At that point, consumers were simply not interested in green and healthy products. Most consumers were interested in getting cheaper products. This means that Toms of Maine was operating in a small market and this meant that returns on investment were likely to be limited. There were major product failures like the detergent, toothpaste and soap which was simply because the company was using methods that were not conventional. The toothpaste was not approved and there was the time where there were $400,000 worth of product recall. The company is positioned as a company with a corporate conscience and they made a lot of donations including the $100,000 donation made to the Rainforest Alliance. Clearly, these things were made at the expense of the shareholder. This was clearly against the profitability of the company and most shareholders are not likely to be interested in investing in such a company because it was seen as a loss-oriented entity. On the other hand, conventional businesses were using cheaper products and disregarding ethics like animal rights and other recycling systems which was making their operations less expensive. On the other hand, Toms of Maine was using the most sophisticated methods and they were increasing their cost of production by using the most expensive methods which they believed were worth it on the grounds of ethics. Clearly, ethics is not something that the shareholders of Toms of Maine appreciated so well between 1970 and 1992. The company was simply seen as one that was not making profits. The only turnaround came when the world began to appreciate the worth of ethics and social responsibility. This made the market grow towards the end of the 1990s and this allowed Toms of Maine to become more attractive to shareholders. Most corporate entities are now spending more money on their corporate social responsibilities than ever. Tesco announced in 2011 that they are giving 1% of their earnings to charity and corporate social responsibility drives. Clearly, this was not in favour of shareholders. However, the need to remain responsible as an end in itself inspired the managements choice of this brave decision. Analysis of Potential Dilemma of Tom Chapell in the 1980s From the position of shareholders, it was apparent Tom Chapell had a major dilemma in the 1980s when things were not going to well. At that time, Toms of Maine had to balance the interests of the various stakeholders involved in their operations. Freeman defines a stakeholder as a party who affects the activities of a given business (2009). Each class or group of stakeholders had their own demands and expectations. This led to obvious dilemmas that Tom Chappell had to deal with. The dilemma of Tom Chapell was to draw a balance between ethical operations and profitability. This dilemma rose from the fact that there was the need for him to maintain the original vision of promoting ethical operations and activities. This was to integrate ethical and responsible methods of doing business and providing ethical and healthy products to help the company to meet its vision of becoming ethical. The vision of ethical operations was in conflict of shareholders and financiers of the company who were against the idea of being too ethical. Also, government agencies like the Food and Drugs Board of the United States did not find the methods and systems of Tom Chapell to be appropriate. The ethical system was not conventional and clearly, it led to an ethical dilemma. This dilemma was whether to reduce its ethical stand or to keep it going. Role of Tom Chapells Personal Views in making Maines Successful Basically, Tom Chapell had chosen a deontological approach to dealing with his business. To him, it was universally and absolutely right for the business to operate in an ethical, environmentally responsible and safe and healthy manner. This deontological view was based on the universally responsible method or means through which he believed the business should operate. To Tom Chapell, it was a duty to operate in an ethical manner. Tom Chapell held this view and kept it strongly enshrined in his affairs. Thus, when things were going bad, Toms of Maine continued to focus on their vision which was steeped in ethical matters. Other competitors of Toms of Maine in the 1970s and 80s were using a teleological and utilitarian approach in operating and designing their products. They seek to use cheaper methods that would keep their cost of operations lower. With this, they can get higher profit margins which could help them to assist other stakeholders well. Consumers were all likely to get cheaper goods to buy. Shareholders got more dividends and this helped them to invest more and this led to the expansion of their respective companies. However, the absolutism in ethics that Tom Chapell adhered to provided the grounds for focus on ethical behaviour. Tom Chapells vision influenced the strategy of the company and it was used to guide and direct the company through the tough times of the 1980s and 90s. This led the company through the various stages of their operation. Chapells Approach to Ethical Management Management ethics involve the the application of ethics in the different units and components of a business (Waldt, 2009). Ethics provide the code of conduct and the framework for different units of the organisation to operate (Fereirra, 2011). The way Toms of Maine did this was to come up with a mission statement that blended business strategy with the social responsibility. This shaped the way their top level management decided and did things. Decisions were based on the vision of promoting the common good. This was used for setting the blueprint for product development and production. The mission and vision of promoting social responsibility was imparted onto the employees. The employees benefits were connected to the concept of common good which was part of the companys top level vision. Thus, the ethical codes and the remuneration package of employees were skewed towards the main vision. Application in Larger Businesses Most large organisations around the world have integrated the views of social responsibility into their vision and mission. The corporate governance rules of the world today ensures that businesses are ran by directors who are chosen and have balances. Directors are encouraged to use various tools and approaches to promote corporate social responsibility. This forms the background of their corporate philosophy. Employees and stakeholders are required to operate according to the standards of the vision of the entity and this include the corporate social responsibility vision. Just as Toms of Maine was focused on using ethical matters of operating, they ensure all stakeholders like employees and suppliers. Recommendations It appears that Toms of Maine has done significantly well to attain its current level. However, the following recommendation seem to be relevant to the companys future: 1. Horizontal integration of other entities or organisations in the supply chain to control suppliers and other selling outlets. This way, the company can become more steeped and stronger in the industry and pursue its end. 2. The support of other industrial action to promote the demand for organic products and ethical operaitons. Conclusion and Findings From the case analysis, it is identified that the Toms of Maine has maintained a deontological approach where they built an absolute focus on promoting the common good of all their stakeholders. This is a position that might not have been attractive to a shareholder. However in the long term, Toms of Maine built a larger market and it began to grow. Many corporate entities like car manufacturing entities like Renault are seeking to improve technology and provide more responsible cars. Tesco gives more to charity and the society than shareholders. However, they all learn from Toms of Maines needs to do what is right and responsible as an absolute rule and not as a subjective principle. The concept of ethical management that was used by Toms of Maine is applicable to larger businesses whereby they can integrate social responsibility into their corporate governance systems. It is recommended that Toms of Maine expands its influence in the industry through horizontal integration and also support the promotion of organic products and ethical operations. References Cheek, D. W. (1992) Thinking Constructively New York: SUNY Press. Fereirra, J. T. (2011) Administrative Management Cape Town: JUTA Publishing Ferrell, O. C., Fraedrich, J. and Ferrell, L. (2009) Business Ethics, 2009: Ethical Decision Making and Cases Mason, OH: Cengage Finnis, J. (2009) Fundamentals of Ethics Washington: Georgetown University Freeman, E. (2009) Stakeholder Management Boston: Yale University Press. Mankiv, A. (2009) Fundamentals of Economics Mason, OH: Cengage Publishing Pojman, L. & Feisser, J. (2011) Ethics: Discovering Right and Wrong Mason, OH: Cengage Thompson, R. R. (2011) Agro-Technology: A Philosophical Introduction Cambridge: Cambridge University Press. Trevino, L. K and Nelson, K. A. (2010) Managing Business Ethics Hoboken, NJ: John Wiley and Sons. Waldt, G. V (2009) Managing for Excellence in the Pubic Sector Cape Town: JUTA Publishing. Read More