Top Management Involvement and Utilitarianism - Essay Example

?Background The case of the CEO involves inappropriate behaviour of the top management with his subordinates, which is certainly not acceptable, according to Gautier (2007). Attending dubious parties with women escorts and behaving in an inappropriate manner with young women in social functions can be considered as personal affairs of the CEO. There are arguments that an organization has no right to interfere in personal affairs (Losey, 1993). This will be dealt with later in the arguments. However, the complaint from the female staff members on sexual harassment is a matter of concern for the organization which affects several stakeholders. An organization exists in the society, for the society and cannot have an existence independent of the society. Moreover, the organization has responsibility towards all the stakeholders that are directly or indirectly affected by the conduct of the organization or the employees (Joyce, 2005). Problem statement Top management involvement is essential to build a strong ethical culture within an organization (Clement, 2006). The issues before Veronica are to ascertain if the company policy permits action against such issues. Besides, as a director, she has responsibility towards the stakeholders. She is also morally bound by duty to act in the interest of the maximum number of people. If the demands of the shareholders, stakeholders, consumers and the investors are not met, it can adversely affect the brand image, customer retention, and overall business (Robinson, 2002). Ethical theories & Stakeholders The stakeholders The stakeholder theory holds that managers are obliged to serve all those who have a “stake” in the firm (Marcoux, 2000). Initially the stakeholders included the Big Five – the employees, the owner or the shareholders, the customers, suppliers and the community in which the firm operated. The other twin stakeholders include the government (who has the responsibility to ensure that the firm complies with all regulations) and the competitors (who keep the company conscious of the developments and help avoid unethical business practices. The purpose of the firm itself is to serve and coordinate the interests of all the stakeholders (Joyce, 2005). Great Builds is a multinational engineering company and has to ensure that the interest of all the stakeholders is taken care of. Employees are the greatest stakeholders as they constitute the firm and contribute to the firm. Employees have the fundamental right to liberty and safety within the workplace (Greenwood & Cleri, 2005). Customers are only interested in reliable supply of goods and services but more recently they have become conscious of dealing with ethical firms. The suppliers demand timely payments and long-term relationships and the community expects safety and security. In the case of Great Builds the most affected by unethical practices would be the employees, the customers and the shareholders. The competitors could be positively affected if the performance of Great Builds suffers as a result of the CEO’s behaviour. Categorical Imperative According to Immanuel Kant duties cannot be associated with self-interest or rewards and payoffs (Carrigan, Maronova & Szmigin, 2006). Moral requirements are based on a standard of rationality known as “Categorical Imperative”. However, chances are these standards are desire-based on instrumental principles of rationality (Stanford, 2004). The moral philosophy goes beyond that of a human slave to passions. Kant emphasizes that there is a self-governing reason in each individual which guides the person in a rationale decision-making process. There has to be motivation by duty or motivation by respect for law that governs actions. Thus, Kant states that the fundamental principle of our moral duties is a categorical imperative. The word imperative urges us to act in a particular way. The Categorical Imperative is derived from two maxims – objectivity and respect for all persons (Kitcher, 2004). The maxim of objectivity states that the act is right if it is right for any person in similar circumstances. Despite cultural differences, the misconduct of the CEO would be unacceptable in any circumstance and the colleagues would take the same action anywhere. Only when the moral rules are universal they can be called a moral rule. The second maxim of this ethical principle states that all human beings should be treated as free and equal members of a shared moral community (BBC, 2012). People should be treated with respect, treated as valuable and as end in themselves. The employees are the largest stakeholders impacted by this behaviour of the CEO. The principle of corporate rights also states that the corporation and its managers may not violate the legitimate rights of others to determine their own future (Greenwood & Cleri, 2005). Possibly, he is also using the goodwill he has made for himself just because he managed to bring turnaround in the organization when it was allegedly involved in bribery. Besides, in sexually harassing the women employees, their right to equal treatment by the organization is jeopardized. They have been receiving sub-standard treatment at the hands of the CEO. This also demonstrates that the CEO has no respect for law and nor is he motivated by duty to perform actions suitable to the image of the organization. His action is thus against the laws of morality and it is categorically imperative for Veronica to take action against the CEO. Utilitarianism The stakeholder theory is based on two principles – the principle of corporate effects (based on the Utilitarian theory) and the principle of corporate rights (based on the deontological theory). The principle of corporate effects states that the corporation and its managers are responsible for the effects of their actions on others (Greenwood & Cleri, 2005). This principle is drawn from the moral theory of Utilitarianism. Utilitarianism, according to Mill (1863) proposes that we must always do what has the best consequences. The Greatest Happiness Principle states that the end result should give least pain and the maximum happiness to the greatest number of people. Any object that provides happiness has instrumental value. It is right to promote happiness as this is a moral act since it produces positive results and makes the world a better place. However, the term happiness has been discussed and debated upon and it may result in pleasure or it could mean the absence of pain. Hence, a corporation is responsible for all its impact in all areas which includes the social impact. Stakeholders in an organization may have different interests and values. Interests are “the purposes of particular individuals” whereas values “conceptualise needs and desires as valid claims” (Greenwood & Cleri, 2005). The needs, interests and desires of the employers and the employee differ and hence no single act can satisfy all the people. The employers and employees have differing goals and this can result in conflict between the parties. In a democratic society the employees have a voice and need to be heard if the organization has to fulfil its responsibility towards all the stakeholders. If Veronica acts morally and takes action against the CEO based on this principle, this act would bring happiness to the greatest number of people – the employees, one of the important stakeholder groups. In this instance, the moral act by Veronica may not provide any additional happiness to the employees but it certainly will result in reduction of pain inflicted by the CEO. It may be argued that employees do not come to work seeking pleasure but they would certainly leave the organization if they experienced pain. Thus, it can be concluded that action by Veronica would be a moral act because the needs and values of the employees have to be taken care of. The absence of pain that the employees would experience once the CEO is made to control his gestures has more value than the CEO derives in immoral act such as sexual harassment. Veronica is bound by duty to act as a moral agent as the interests of all the stakeholders are at stake. This is also the principle on which all other people should also act upon. Hence this is Universalizing the maxim, according to Kant (Kitcher, 2004). Apart from happiness, Utilitarianism also proposes that cost and benefit must be measured economically. It is not clear what the outcome of Veronica’s moral act would be and it is not possible to determine who will be affected by it. This necessitates quantification of cost/benefit analysis. Veronica’s stand – cost/benefit analysis Veronica’s action of reporting the matter to the board can positively impact one group of stakeholders while adversely impacting another. Therefore, a table of the costs and benefits would help her decide on the most appropriate action. Since the employees and the customers are the largest stakeholders only these two groups are being attended to here. Costs to stakeholders: If Veronica acts morally Violates the individual rights to privacy of the CEO (Jenner, 1993) If Veronica does not act morally If she does not act morally she would be depriving the employees of a congenial and peaceful work environment. In the process, the organizational performance is also likely to suffer The CEOs personal socializing can impact the reputation of the organization which impacts several stakeholders such as the consumers, the vendors as well as the employees. Consumers are one of the large stakeholder groups that stand to lose if the corporation collapses, if Veronica does not act morally Benefits: If Veronica acts morally Veronica’s action would imply that she treats humanity as an end because her intention is to maintain decorum, decency and peace at the workplace in the best interest of all the stakeholders. Moreover, this would also ensure that performance is not affected as relationships do not sour, as consumers do not turn away due to the bad reputation of the organization. If Veronica does not act morally The only beneficiary and that too in the short-term, would be the CEO, if Veronica decided not to act morally. It has been specified that the CEO would benefit only in the short term because in the long-term morality pays (Hooker, 2003). When corporations collapse the society in general loses, which justifies the need for ethics in business (Hooker, 2003). In acting morally, Veronica would be protecting all the stakeholders from harm. Since the benefits far outweigh the costs if Veronica were to act morally, Veronica should act morally and take suitable action against the CEO. Arguments based on both the ethical theories discussed here support this stand. Personal recommendation It is imperative to take action against the CEO so that inappropriate behaviour does not become the norm over a period of time by others in the organization. There can be no justification for immoral act and hence I would first warn the CEO and urge him to change his behaviour. However, I would do this without the knowledge of the other employees making him conscious of how his conduct impacts all the stakeholders. I would remind him of all the goodness he has in him and just this act of his is demeaning all the sincere and honest efforts in bringing a turnaround for the organization. I would not try to justify why he should act morally and ethically in the interest of others. I would make him aware how it impacts his self, his reputation and his career. If despite this, he continues to behave as he has been, then I would apprise the board members of the events and the complaints. Being a non-executive director, it is not possible to take direct action against the CEO and hence I would raise the issue at the next board meeting. What the CEO does outside of the organization is of no concern to the company and may amount to intruding into his private affairs. Hence the action against the CEO should be restricted to the complaints by the women employees of the organization. I would not involve the HR department unless the code of conduct prohibits employees from such acts. Word count: 1975 words References BBC. 2012. About duty-based ethics. Retrieved online January 12, 2012 from http://www.bbc.co.uk/ethics/introduction/duty_1.shtml Carrigan, M., Marinova, S. & Szmigin, I. 2006. Ethics and international marketing. International Marketing Review, 22 (5), pp.481-493 Clement, R.W. 2006. Just how unethical is American business? Business Horizons, 49, pp.313—327 Greenwood, M & Cleri, H. 2005. Stakeholder Theory and the Ethics of Human Resource Management. 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Retrieved online January 22, 2012 from http://www.cato.org/pub_display.php?pub_id=4641 Kitcher, P. 2004. Kant’s Argument for the Categorical Imperative. Nous; Dec2004, 38 (4), p555-584, 30p Mill J.S. 1863. UTILITARIANISM, What Utilitarianism Is. Roberts, R.C. 2011. Utilitarianism and the Morality of Indefinite Detention. Criminal Justice Ethics. 30 (1), 69-73 Robinson, K. 2002. The importance of being good: the Enron scandal has put the spotlight back on ethics. Banks can no longer ignore the issue of social responsibility and those which do may not survive.(Brief Article)." The Banker 152.914 (April 2002): 16(5). British Council Journals Database. SparkNotes, 2011. Chapter 2: What Utilitarianism Is (Part 1). Retrieved online January 6, 2012 from http://www.sparknotes.com/philosophy/utilitarianism/section2.rhtml Stanford. 2004. Kant's Moral Philosophy. Retrieved online January 13, 2012 from Stanford Encyclopedia of Philosophy. http://plato.stanford.edu/entries/kant-moral/ Stanford. 2008. Kant's Moral Philosophy. Retrieved online January 6, 2012 from http://plato.stanford.edu/entries/kant-moral/ Read More