Policy Proposal to Institute Ethics in Business - Essay Example

To Barack Obama, President,United s of America From Re Policy Proposal to Institute Ethics in Business August 27, 2012 Dear Mr. President I am sure that by now, you already realized the devastating effect of unethical business practice to the US economy and the world. Unethical business practice is not only bad for business in terms of the economic losses attendant to it but it also has a ripple effect of eroding confidence in the business community business that business themselves would hesitate to expand due to its perceived uncertainty of the general economic environment of the US. I am sure that you have been briefed by your staff about the capital surplus that was just parked last year that amounted to a couple of trilion dollars that instead of reinvesting to expand the operation of business and create jobs (that would have helped us recover from the recession) businessmen and investors alike just waited and see. That is more devastating than what Enron and company did to the US economy for it is already a crisis of confidence of which we will not know when it will be over. I cannot stress enough how important it is for businesses to act ethically and responsibly. It is not just about being proper as a corporate entity but to avoid the economic consequences if business will misbehave. I am well aware that government cannot alter how people thinks and behaves but it has the power and resources to restructure the corporate and legal environs that would rehabilitate corporate behaviour and align its actions to a desirable corporate citizenship that is wanted by all through its various legal and policy instrumentalities that would make it act ethical. To achieve this, there are two policy proposals that I would like to suggest. This two pronged proposal is based on two principles. First, instilling business ethics at a preparatory level to make it as part of discipline that business professionals has to learn and imbue. Second is to make corporate malfeasance less advantageous by imposing heavy penalties to the level of economic sabotage to those corporations and individuals who will transgress the ethical law therefore serving it as a deterrence towards corporate malfeasance. At present, the punishment and aggravation against white collar crimes particularly corporate malfeasance is lesser than the benefits that the benefits that corporations and benefits will reap from it. For example, an executive and a business entity who is found guilty of corporate malfeasance amassed hundreds of millions if not billions of dollars only to be sentenced to few years of prison and/or few million dollars fine which in effect incentivize them to commit crimes. The recent laws enacted to prevent corporate malfeasance while needed were reactive to the present realities of business. For example, the Sabarnes Oxley Act is just a reaction to whistleblowing at Worldcom and intends to protect other whistleblowers in the future. While the law is good, it is limited and does not cover the entire gamut of corporate malfeasance nor encourages business to act ethically. My suggested proposals are as follows; first, require universities through the mandate of the law to include in their syllabi business ethics. Each student must be required to have an Ethics subject at least once per school year. The rational for this is not just to react for every corporate transgression that catches our attention but preventing it right from the source, when professionals are still learning the ropes of business. Second, disincentivize corporate crimes. Elevate corporate malfesance to the level of economic sabotage applying the principles of general deterrence of which I will explain at length later. But for now, let me elaborate my first suggested proposal. Incorporate Business Ethics In School Curricula Intensively I believe that given the recent scandals that rocked the business and financial world, it now becomes an imperative that each individual entering into the corporate and financial industry must have a strong sense of corporate social responsibility to avoid similar occurrences in the future. It should begin right in the academe where future professionals, employees or entrepreneurs are being trained and prepared. It is now important because the neglect and disregard for ethical practice in business has contributed to the recent financial and mortgage breakdown that stemmed from greed and lack of ethical practice that made life difficult for everybody. One of the reasons why our business professionals act the way they are is because ethics holds very little sway in their professional fiber. This can be traced to their lack of appreciation of the importance of ethics. This utter lack of appreciation of the importance of ethics among business professionals cannot be entirely faulted to them but also to the academe who put more importance on the rigor of technical skill sets and totally disregarding ethics. The academe too cannot be blamed entirely because the benefit of having ethical business professionals cannot be immediately felt thus they tend to relegate the importance of business ethics. But as we now know, the effect of the lack of ethics among business professionals can be economically devastating. The recent financial crisis that made everybody’s life difficult where millions lost their jobs and thousands more lost their homes can be attributed directly for business people lack of ethics or willful disregard for any concept of ethics. The financial scandals that rocked America from Enron, Worldcom to mortgage crisis all redound to greed which is a byproduct of lack of any sense of any ethical consideration. Worst, the crisis that was wrought by lack of ethics was not solely a financial crisis but also a crisis of trust. Investors and the general public suddenly became wary of the ethical practice of American business that they stopped investing their money that made America’s economic recovery more difficult. This was evident with businesses having extra cash but are not investing to expand the operation of their business that would create jobs because they do not trust America’s economic environment. This created a vicious spiral where the anticipated crisis becomes a reality because the economy will naturally contract if businesses are not investing or expanding. And all of this can be traced back to lack of ethics. Having said this, I believed that this is very important that ethics should be learned especially when business professionals are still in the academe and still in the process of equipping themselves the necessary skills and knowledge so that it will be ingrained within them to become better professionals in the future. This is more viable because students are still “malleable” whereas teaching ethics to professionals who are already exposed to the reality of corporate dog-eat-dog environment would be more difficult. As the cliché goes, it would be hard to teach new tricks to old dogs. Such, we will focus teaching ethics among the “young” and we will have a separate treatment among the “adults” in the corporate world. The lessons that will be learned about ethics in the academe would guide students when they make their choices in any ethical dilemma that they would confront in the future and having taught ethics early, they would have a better chance to decide ethically and responsibly. We can compel the universities to incorporate into their syllabi this if we make this into law. Punitive laws as a general deterrence: Applying one strike policy and zero tolerance against corporate malfeasance One of the reasons why white collar crimes are rampant, particularly corporate malfeasance is because the perceived benefit of committing the crime far outweighs the perceived risk. For example, the benefits of doing inside trading or the accountant doing financial acrobatics that defrauds seemingly outweighs the risk. Assuming one is caught, the penalty only amounts to several thousands or several millions and/or short jail terms and this is after raking in millions if not billions of dollars. Clearly, the penalty of committing corporate malfeasance does not impose a deterrence to the offender. If there is a deterrence to committing corporate malfeasance, frauds, scams that brought the economy to its knees would be prevented. General deterrence as a mechanism to reduce corporate malfeasance is grounded on the basic premise of intimidating and threatening people to refrain them from committing the act. It is thought that by imposing punishment through a clearly written law, people will be deterred from committing crimes and their acts will be shaped according to a desired behavior that will produce an efficient society (Paternoster, 2010). It is grounded on a premise that business professionals being educated are rational being, and being rational people, they will elect a course of action based on what will benefit them the most. Following this line of argument, if the pain of punishment far outweighs the benefit or pleasure of breaking a law, and that apprehension and punishment is certain, then corporate people would avoid committing corporate malfeasance and deterrence takes effect. For general deterrence to take effect, it is suggested that the one strike policy should be implemented to communicate to the business professionals that we have no tolerance against corporate malfeasance. It meant for the first offense, sanction will already be imposed without the usual written or oral warning. This can range from suspension of the operation of business to closing down business. This policy could be made into law through Congress whereby your office could support it as a priority bill. When this has passed congress and made into law, this policy can be incorporated in company manuals and “enforce” ethics or honesty to be a part of organizational culture. This would send the message to the would-be offender that the government is dead serious against corporate malfeasance and this will make anyone who intends to commit the crime think a lot of times. Knowing the certainty of punishment and the gravity of penalty, would-be offenders would be discouraged to commit the crime. Conclusion The present disregard about proper corporate conduct is not surprising as Crane and Matten hypothesized that business in itself has been argued to be amoral that to put ethics in business is an oxymoron because they contradict each other (2006). Business in pursuit of its profit motive when left on its own will invariably set aside ethics as it endeavour to make profit. Actions which may be considered unethical such as fraud, financial acrobatics, and inside trading may even become permissible in the business’ pursuit for profit. This is consistent with the consequential normative ethic theory that “holds that the moral rightness of acts, which holds that whether an act is morally right, depends only on the consequences of that act or of something related to that act, such as the motive behind the act or a general rule requiring acts of the same kind” (Stanford Encyclopedia of Philosophy, 2011).. In plain language, a business person may be prompted to choose a certain course of action or inaction based on the benefit or the avoidance of harm that may be derived from such action or inaction. In the case of business, it can chose to shun any propriety in conducting business with the idea that it is more expedient to make profit by disregarding scruples in conducting its operation. To address this tendency, we will make it less beneficial to commit fraud by imposing heavier penalties that would far outweigh the perceived benefit in committing corporate malfeasance. This would leave business a better alternative to practice corporate responsibility which is the ideal norm among business. Promoting corporate responsibility among business would not only make everybody “safe” from the dangers of corporate malfeasance but would also be good for business. Having corporate responsibility does not mean that a business organisation is already shunning the importance of profit. Profit is equally important for without it, business cannot survive. Only that profit would come from a good source of enhanced business through consumers and investors confidence towards a business and not through fraud and scams. This is more sustainable, durable and a legal means of earning money. When corporate responsibility’s is already ingrained in corporate culture that businesses already acts responsibly even without the watchful eye of the government nor need be threatened by its punitive laws, the economy will surely be vibrant again. It is because there would be a confidence among consumers to patronize products and investors will again put in their money in business. And these policies proposed would facilitate such favourable condition that would make the economy vibrate again. References Crane, Andrew; Dirk Matten (2006). Business Ethics, 2nd edition, Oxford: Oxford University Press. Paternoster, R. (2010). How much do we really know about criminal deterrence? Journal of Criminal Law & Criminology, 100(3):765-823. Stanford Encyclopedia of Philosophy (2011). Consequentialism. Online. Retrieved at http://plato.stanford.edu/entries/consequentialism/ Read More