Giving Considerable Weight to Ethical Concerns - Essay Example

? Firm Behaviour Which Seeks to Give Considerable Weight to Ethical Concerns Must Do So at the Expense of Profit BY YOU YOUR SCHOOL INFO HERE HERE Introduction It has been suggested that in order for a business to pay considerable attention to sustaining a very high ethical climate and set of ethical principles, the business must do so at the expense of profitability. However, what are ethics? Ethics are a form of moral philosophy which attempts to place explanation and recommendation for what constitutes right versus wrong in society (Fieser 2009). Ethics are about studying human relationships (Ciulla 2003) and the concept involves the study of how individuals in a societal or business context should behave according to established principles of what constitutes moral or immoral behaviours. Having established a definition of ethics, the question as to whether or not a business can sustain very prominent ethical principles without sacrificing profitability requires significant examination. According to Milton Friedman (2003), a respected business theorist and philosopher, the only genuine goal of a business is to ensure shareholder satisfaction and earn a profit; this over all other objectives. Friedman’s view is that attainment of profit, by which some individuals in society believe this objective to be akin to greed and materialism, supersedes the demand for sustaining the highest standards of moral and decent behaviours. For many in society, however, this is deemed unethical behaviour requiring further focus on social responsibility. There is, however, ample evidence that both profit achievement and production of ethical behaviours can be effectively balanced. Why ethics and profit can achieve equilibrium Within a business dynamic, it is recognised that leaders who publicly exhibit high standards of ethical behaviour are more apt to gain trust from employee followers, making it more motivational for employees to follow the established mission and vision of the leader (Watts 2008; Resick, Hanges, Dickson and Mitchellson 2006). According to the literature, transparency and trust are two key dimensions for establishing a cohesive organisational culture (Barrett 2011). Since ethics and trust go hand-in-hand, theoretically the ethical leader will be able to establish an organisational culture that remains unified and consistently working toward modelling ethical behaviours that have been openly demonstrated by the leadership. Business theory and marketing theory, further, indicate that once a very cohesive and cooperative organisational culture has been established, it is easier for the firm to sustain competitive advantages that are attributed to human capital development. For instance, Armstrong (2007) indicates that once trust and cohesion have been established, employee followers of the ethical leader are more committed to attaining organisational goals and more loyal to the business due to the fact that the ethical leader was able to speak to the hearts and minds of employees. Why is this important to understanding whether ethics and profit can be balanced? When an organisation is perceived by external investors to sustain a very cohesive organisational culture, they are considered to be world class organisations with much more incentive for investment potential (Very, Lubatkin, Calori and Viega 1997). The ethical leader described in the aforementioned example has managed, theoretically, to build more loyalty and commitment simply by exhibiting ethical behaviours. Concurrently, the external investor now witnesses the human capital advantages of establishing a cooperative team environment and subsequently provides investment that assists the organisation in its long-term strategic plans and objectives, such as new capital machinery for production or improving the marketing function. In this example, ethical behaviours served as the absolute catalyst for improving the financial situation of the business. Without having exhibited ethical behaviours, the leader would not be creating an organisation that is inviting and lucrative for external investment. In this hypothetical situation, ethics and profit have become properly balanced and neither must be sacrificed in order to achieve positive gains in improving the competitive position of the business. Furthermore, there is a theory in ethical studies referred to as moral relativism, the notion that there cannot be a singular and universal set of ethical (right versus wrong) standards due to disparities between different cultures, religions and ethnic backgrounds. Under moral relativism, the individual does not attempt to prescribe a firm set of principles about what constitutes right versus wrong, instead the relativist suggests that society should simply be tolerant of behaviours that might conflict with our own moral and ethical code (Blackford 2010). With relativism in mind, it should be recognised that many businesses, today, are taking advantage of opportunities to be a direct foreign investor in other countries to take advantage of short-term taxation breaks or even less expensive labourers in the production process. In many Western societies, it is considered unethical and immoral for businesses to seek out cheap, foreign labour due to many conflicting arguments such as the disagreement that it takes away domestic jobs or infringes on human rights. Many Western individuals in society ascribe to the ethical philosophy of social justice, which states that all members of society deserve equal economic and social rights (Flynn 1995). In the aforesaid example, the government of the foreign country that invited a foreign business to establish a direct investment in the new nation would be recognising that the business would be incentivised for this activity through cost savings and labour exploitation. The long run result of this type of investment is generally higher profitability by opening new markets for exportation and sales and also controlling costs along the operational model, such as taking into consideration a much higher currency exchange rate for operating in the foreign country. In this example, the business might be angering Western civilization for this decision-making, however is satisfying the foreign government officials by providing valuable products and economic value to regional gross domestic product. Whilst the business executive is being applauded for entering the foreign country, others in global society may believe this was highly unethical behaviour. It is important to recognise the theory of moral relativism to explain whether or not profit can be achieved without having to sacrifice ethical behaviours. The business investing in the foreign country did not break any established international laws in this process of investment, provided jobs for foreign employees, enhanced the social and lifestyle welfare of foreign stakeholders, and was also able to recognise profitability through more efficient cost controls and less expensive product distribution. To the foreign culture, the business executive is hailed as a proverbial hero (thereby satisfying regional expectations on ethics) even though it served to potentially anger Western civilization. Under the relativist principle that argues a singular set of principles pertaining to right versus wrong, the business was clearly able to successfully balance ethical behaviours whilst also achieving considerable profit gain. Again, it would seem that it is dependent on the social contract, which differs region by region, about what actually constitutes right versus wrong behaviour in order to determine whether profit and ethics can both be attainable concurrently. Yet another example that supports profit and ethics can be balanced can be witnessed in the case study of Andrew Carnegie, a multi-millionaire American philanthropist that significantly advanced the profit opportunities of the international steel trade. Carnegie amassed enormous wealth during his time period, between the late 19th Century and early 20th Century, by being a shrewd and dominant businessperson. Simultaneously, Carnegie was an outspoken orator that consistently published written materials about the danger of corporate greed. Carnegie wrote in 1868, “there is no idol more debasing than worship of money” (Klein 2004, p.57). During his career as a businessperson, Carnegie donated millions of dollars to a variety of different charities and organisations, without having to sacrifice continued business growth and new export opportunities internationally for the steel industry. Internally, at the business level, Carnegie continued to exhibit an outward example of the utmost in ethical integrity whilst also servicing the profit needs of the business successfully. Carnegie is a prime example of how a business can act with the highest standards of ethics and also achieve profitability without any disruption to business operations. Though Carnegie’s viewpoint did not necessarily reflect the prevailing corporate and social attitude regarding ethics and serving the greater social welfare, he is a significant example of how profit achievement and ethical behaviours have positive relationships to business performance and revenue growth. He can serve as a benchmark for best practice in profit attainment and servicing high standards of ethical behaviour. Conclusion Having examined the different conceptions regarding ethics, internal business cultural development, direct foreign investment internationally, and the case study of Andrew Carnegie, it is abundantly clear that the business can achieve a proper balance between ethical behaviour and profit attainment. There cannot be a fundamental and universal set of ethical behaviours that are considered right in society as there is going to be culturally-driven disagreement to this foundation of correct moral behaviour. As such, ethics are highly relative in global society, making it easier for businesses to behave according to their own ethical standards whilst satisfying the stakeholder and profit need of the operating business. Ethics and profit can indeed be successfully balanced and neither needs to be sacrificed in order to satisfy the business’ needs and those of external, critiquing societal stakeholders. References Armstrong, M. (2007). Armstrong's Handbook of Strategic Human Resource Management, 5th edn. London: Kogan Page Barrett, R. (2011). States in the evolution of democracy, p.1. [online] Available at: http://www.valuescentre.com/uploads/2012-06-19/Stages%20in%20the%20evolution%20of%20democracy.pdf (accessed 5 November 2013). Blackford, R. (2010). Sam Harris’ the moral landscape, Journal of Evolution and Technology, 21(2), pp.53-62. Ciulla, J.B. (2002). The ethics of leadership. Cengage Learning Fieser, J. (2009). Ethics, Internet Encyclopedia of Philosophy. [online] Available at: http://www.iep.utm.edu/ethics/ (accessed 6 November 2013). Flynn, J.P. (1995). Social justice in social agencies, in R.L. Edwards (ed.) Encyclopedia of Social Work, 19(1), pp.95-100. Friedman, M. (2003). The social responsibility of business is to increase its profits. [online] Available at: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html (accessed 6 November 2013). Klein, M. (2004). The change makers: from Carnegie to Gates, how the great entrepreneurs transformed ideas into industries. Providence: Holt Paperbacks. Resick, C.J., Hanges, P.J., Dickson, M.W. and Mitchelson, J.K. (2006). A cross-cultural examination of the endorsement of ethical leadership, Journal of Business Ethics, 63, pp.345-358. Very, P., Lubatkin, M., Calori, R. and Veiga, J. (1997). Relative standing and the performance of recently acquired European firms, Strategic Management Journal, 18(8). Watts, T. (2008). Business leaders values and beliefs regarding decision making ethics. Los Angeles: LULU. Read More