Managing Ethical Issues in an Organization: Apple - Term Paper Example

Abstract This venture endeavors to explore the part played by ethical behavior in decision making of leadership in an organization. Paper imperatively seeks to summarize the learning outcome from the course, application of seven step model of Hartman & DesJardins ethical decision making process to ethical issue faced by a quintessential global corporation Apple in order to seek a plausible conclusion. Introduction This paper tends to analyze the article ‘Apple finds human rights violations in Supply Chain’. With the suicides of 14 laborers at Foxxconn’s Shenzhen factory in China, information surfaced that Apple’s supply chain was fraught with human rights violations. Auditors did come out with numerous human right violations in the factories and audit report triggered leadership decision to spend huge sum of money to build the damaged reputation of the company. It is important to realize the significance of relationship between personal and business ethics and how it is to be embedded in a corporate culture. Charles Hills (2002, p132) explains that term “ethics refer to accepted principles of right or wrong that govern the conduct of members of a profession, or actions of an organization. Business ethics are not detached from personal ethics, which are commonly accepted principle of right and wrong. Charles Hills (2002, p132) explains “The term organization culture refers to the values and norms that are shared among employees of an organization. Values are abstract ideas about what a group believes good, right, and desirable while social norms are social rules and guidelines that prescribe appropriate behavior in particular situation. Together values and norms form the culture of organization.” Culture helps internal stakeholders to regulate their dealings in a business place not only individually but collectively as well in harmony with company goals and objectives. Questions, such as, what is the best way for leadership to make sure that ethical considerations figure into the business decisions?, how should the mangers decide upon an ethical course of action when confronted with decisions pertaining choice of profitability and human rights?, how should managers determine the moral obligations that flow from power hub of company?, what sort of moral courage should they exhibit?, is an ethical standpoint more important than revenue?, what ethical algorithm should be used for guidance through ethical dilemma to find an acceptable solution?, form the basics of this paper. Answer to these questions is sought through application of Hartman & DesJardins seven stage decision making model. 1. Determine the facts Chiltin Tippin (2011) reveals in his article that Apple found bribery, underage workers, chemical-related health problems, and falsifications of ID’s and payroll documents in its audit report. In three dozen facilities Apple’s audit revealed a system in which workers were made to pay recruitment fees that amounted to servitude. In these cases, workers passed through a network of hiring agencies to attain employment. Sub agencies would recruit workers from villages in places like Vietnam or Cambodia, and pass them from agency to agency until factories hired them in Taiwan, Malaysia, or Singapore. Auditors also found 10 factories that hired workers under the age of 16, which is the youngest age for employment in China. Underage hires totaled 91 across all factories. In many instances, managers at the factories were unaware that the laborers hired were underage. Recruitment is often funneled through agencies and vocational colleges which provide false identifications to those who need the work. Auditors also unearthed four instances in which factories falsified payroll documents to reflect higher wage payouts to workers. 2. Identify the ethical issues involved. It raised questions about ethics of Apples management’s policies towards labor and working conditions in their factories. It was unethical to use subcontractors who by western standards clearly exploited their work force. Decision to use subcontractors was motivated by the profit and revenue, "Where in the world can we find the cheapest labor - even if it's in the most repressed circumstances?" (V.Dobnik, 1997). Preferred approach should not only cater rights of individuals but also it gives paramount importance to consequences of a decision with respect to rights of all the stakeholders” (Charles Hills, 2002). Here management failed to foresee likely outcomes due to absence of a proper review system of their decisions and periodical calculation of impact of their decisions on stakeholders. Every stakeholder particularly internal stakeholder should know his moral obligations, duties and responsibilities. “Law clearly provided that all employees at least 18 years old and that exposure to potentially toxic materials does not exceed the permissible exposure limit established by occupational safety and health administration in USA” (Charles Hills 2002, p131). Management did not ensure that laws regarding their labor and working condition should be followed in their overseas factories and hence, Apple faced an ethical dilemma which impinged their reputation. 3. Identify stakeholders Subcontractors and workers are the important stakeholders in this case. Apple could have argued that it was the sub contractor’s problem to ensure health, recruiting and safety requirements but argument would have lacked moral strength. Apple is a global organization and its subcontractors are responsible for hazardous working conditions and less daily wages compromising prevalent laws. Business in society focuses on how actions by business leaders affect multiple stakeholders, including (a) shareholders, (b) employees, (c) customers, (d) suppliers, (e) the community, and (f) the environment. Stakeholder Theory, a prominent theory in business ethics, argues that business leaders must focus on more than just profits for their shareholders but must also balance the interests of multiple stakeholders (Evan & Freeman, 1988). Reputation is important as it affects the shares. If employees are fairly treated and paid they would be highly motivated. Customers would show loyalty to the brand. Community would know that company performed it CSR. Freeman (2009) argued that a firm has an ethical responsibility to manage a firm for all stakeholders. Shareholders are but one of the many stakeholders of a firm, and shareholder interests must be balanced among other stakeholder interests. Freeman (2009) identified primary stakeholders as groups who are essential to a firm’s existence. These include (a) employees, (b) suppliers, (c) financiers, (d) communities, and (e) customers. Secondary stakeholders are a broader group and include any individual or group that can influence a firm. Secondary stakeholders include (a) advocacy groups, (b) special interest groups, (c) the media, (d) government, and (e) competitors (Freeman, 2009). The stakeholder perspective is an appropriate framework for all areas of business ethics education including ethical decision making (Ferrell & Ferrell, 2008). 4. Consider the available alternatives. Apple failed to create alternative options. Their decision making calculus never recognized the importance of code of conduct and system of review of decisions by management. Apple management took number of steps. They ultimately established code of conduct for apple’s sub contractors and instituting annual monitoring by independent auditors for all sub contractors. Ethical theories traditionally taught in business ethics courses include(a) utilitarianism, (b) deontological, and (c) virtue ethics. Ethical theories help people reason through ethical dilemmas. Beauchamp, Bowie, and Arnold (2009) observed “ethical theory and moral philosophy point to reflection on the nature and justification of right actions” (p. 2). Utilitarianism deals with making decisions for the greatest good for the greatest number of people and focuses on the consequences of decisions (AACSB, 2004; Gibson, 2006; Hartman & Desjardins, 2008; Jennings, 2009). Mill (1863) proposed a principle of utility as “the greatest happiness principle.” According to Mill, “actions are right, in proportion to their tendency to promote happiness or absence of pain insofar as they tend to produce pain or displeasure” (as cited in Beauchamp et al., 2009, p. 19). Utilitarianism determines the ethical significance of an action by looking at the consequences of the action (Desjardins, 2006). There are several criticisms of utilitarianism, including the difficulty of measuring happiness and an assertion that the ends do justify the means (Desjardins, 2006). Utilitarianism is also criticized because it ignores certain duties and principles that people should consider and obey, including the principles of justice and respect (Beauchamp et al., 2009; Desjardins, 2006). In contrast to utilitarianism, deontology rejects the utilitarianism belief that the ends do justify the means. Deontology proposes, regardless of the consequences, there are some things people should, or should not, do (DesJardins, 2006). Deontology is derived from the Greek word for duty. Deontological frameworks involve using moral standards or principles as a guide to make decisions (AACSB, 2004; Hartman & Desjardins, 2008). Deontological ethics emphasizes duties, obligations, and responsibilities. Deontological ethics focus on the rights of individuals and on the intentions of an act rather than on the consequences of an act. Equal respect for all persons is central to deontological ethics (Ferrell et al., 2008). Kant greatly influenced deontology with the concept of the categorical imperative, which asserted one’s primary duty is to act only in those ways in which the maxim (intentions behind our acts) of our acts could be made a universal law. Kant asserted that ethics requires people to treat each other as ends and never as means (DesJardins, 2006). Deontology also emphasizes the importance of respecting individual rights, including the ability to choose freely, and the right to have these choices respected by others. A partial list of other rights include (a)the right to the truth, (b) the right to privacy, (c) the right not to be injured (Velasquez et al., 1996). Virtue ethics deals with attitudes and character traits that constitute a good and full life (Gibson, 2006; Hartman & Desjardins, 2008). Aristotle believed virtue allowed a person to make reasonable choices. Aristotle’s most important or Cardinal virtues were prudence, courage, temperance, and justice (Brooks & Dunn, 2010). Fostering virtues enables people to develop to their highest potential. Virtue ethics are prescriptive and can offer advice as to how people should live (DesJardins, 2006). Virtue ethics often rely on professional communities to identify ethical issues and help guide ethical action. 5. Consider how a decision affects stakeholders Apple’s sub contracting policies were perceived as unethical. Apple made its decisions regarding sub contracting to drive down its costs and therefore maximize its profitability. Originally ethical issues probably did not enter into the manager’s decision making process. The right and proper thing for Apple to do when it decided to sub contract work to firms was to establish an ethical code that articulated basic guidelines with regard to the working conditions. Apple ultimately had to do this. This damaged Apple’s reputation which is one of the corporation’s most important intangible assets. Management adopted consequentialist approach where the morality of decision is determined by its consequences. Thomas Donaldson (1989) believes that moral worth of actions is primarily assessed by their consequences. Management was so much consumed with revenue generation that they failed to analyze the harms and benefits of their actions on the stakeholders. 6. Guidance. It is commendable that it published the findings. The audit noted that Apple ceased business relations with several plants that would not comply. In addition, the company shelled out $3.4 million to help educate workers who had been injured or exploited on the job. It is a good step because it reflects that company has the management that reviews constantly what is important for all the stakeholders. 7. Assessment Deontological ethics approach should be followed because “it not only cater rights of individuals but also it gives paramount importance to consequences of a decision with respect to rights of all the stakeholders” (Charles Hills, 2002). Management needed to take decisions ensuring not only to good will of the company but also the well being of clientage. Bad decisions hamper not only the reputation of company but also hamper the revenue of the company. A good manger should have the guts to say no to a decision which is unethical. This step needs to encompass the obligations of both management of the company and the subcontractors. Obligation arises from the mere fact that it is the user money that eventually shapes company’s review. Hence, management was morally obligated not to take decisions which hamper the quality of life and safety of workers but it failed to fulfill its obligations. It required the establishment and enforcement of rules that adhere to accepted principles of right and wrong. Apple should have catered for better working condition and labor policies for workers in its factories and fulfill its noblis oblige towards its main workforce. In this particular case leadership did not exhibit integrity requisite for sound decision making initially. Management should be convinced of his decision and should have the integrity to question an unethical practice which was ultimately practiced in this case. Management lacked the character to voice its concerns on an unethical move motivated solely for profit in this case. In short Apple concluded that behaving ethically required going beyond the requirements of law. It required the establishment and enforcement of rules that adhere to accepted principles of right and wrong. Apple did make amends eventually. Those protests damaged Apple’s reputation which is one of the company’s most important intangible assets. Therefore it was in the enlightened self interest of Apple to proactively insert ethical considerations into its decision making calculus which it did and won approval of the community. In nutshell, it is important for other companies as well to give regard to ethical behavior in their decision making calculus. References Beauchamp, T., Bowie, N., & Arnold, D. 2009. Ethical theory and business. 8th ed. Upper Saddle River, NJ: Pearson Prentice Hall. Brooks, L., & Dunn, P. 2010. Business & professional ethics for directors, executives & accountants. Mason, OH: South-Western Cengage Learning. Charles Hills, 2002. International Business: Ethics in business. Washington, DC: McGraw-Hill. Chilton Tippin, 2011. Apple Finds Human Rights Violations In Supply Chain. Signal news, 17 February. 1. DesJardins, J. 2006. An introduction to business ethics .2nd ed. New York, NY: McGraw-Hill. Dobnik,V. 1997. Chinese workers abused making Nikes, Reeboks. Seatle Times, 4 Sep.p A4. Evan, W., & Freeman, R. E. (1988). A stakeholder theory of the modern corporation: Kantian capitalism. In T. Beauchamp & N. Bowie (Eds.), Ethical theory and business (pp. 97-106). Englewood Cliffs, NJ: Prentice Hal Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston, MA:Pitman Ferrell, O. C., Fraedrich, J., & Ferrell, L. 2008. 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