Profits vs Ethics Including Strategic Decisions - Essay Example

Ethics vs. profits

Introduction

For a company to start and survive in today’s economy, it should keep the interest of the people in the forefront other than pursuing profits alone. A company needs to infuse its purpose in all it does and also ensure that it acts ethically to all its stakeholders such as employees, customers, the society among others who directly or indirectly rely on them. Companies that keeps the interest of its stakeholders in the forefront always have a long life in the marketplace since the major secret for survival in the market is acting ethically to gain acceptance and benefits from investors, stakeholders and the society at large. When a company is faced with a business decision that pits profits vs. ethics, should profits be the driving force?

Profits as the driver

Over the past decades, the obsession of majority of the big companies was about their value to the public. Unfortunately, the current situation today shows that nearly all the companies are now focusing on profit maximization, and they have reduced their value to the public constituencies which include the customers, employees and the society at large. The concept of driving force for every company is very simple whether profit-based or non-profit companies. What the company is after is the primary determiner of the scope of the future of the company. The driving force of every company is shaped by its strength or its competitive advantage in the marketplace (Wilcox, 2012). Every organization has only one driving force, either profit maximization or its value in the eyes of the public. It is usually a very difficult task for the senior executives to specify what to take. According to the companies Act, every company should try to balance the two but majority of the companies in the capitalist countries focuses mostly on profit maximization (Troutman, 2015). The driving force for companies should not only be greed for maximizing profits but also the genuine desire to provide benefits to other people who rely on them for the provision of goods and services. In fact, if a company would want to stay in business for a long time, it should make sure it places the value of its constituents in the forefront other than the profits it wants to raise. By doing this, the consumers would be willing to pay more cost on products and services they provide to them.

Pleasing the shareholders

The reasons as to why many businesses would like to focus more on profit making other that balancing profit making and value could be many. For instance, some organizations underlying driving force is their fear of what will happen to the stakeholders if they don’t make profits. Therefore, to please the stakeholders, the many organizations tend to focus more on making profits other than providing value to all other people that rely on them apart from the stakeholders. Another reason as to why many companies chose to maximize their efforts in profit making is the motivation to attract the investors.

Motivation

If the motivation of the company is to attract new investors to invest in their company or perhaps provide them with capital to finance their company’s growth, then it is evident that such companies will have little concern in providing value to the public. The driving force of a company if the one that determines whether the company will be able to survive in the competitive market.

For short term companies, their driving force is centralized in profit making alone but for long term companies, they base their driving force in the following nine strategic areas: market needs, technology, and production capability, method of sale, method of distribution, natural resources, size/growth as well as return/profit.

Shareholders

Shareholders are either people or organizations that own a certain percentage share of the company’s stock, and thus, they have the potential to earn profits if the company thrives. Owners are individuals or entities who own the entire business (Smith & Nystad, 2006). Such people have the right to make the decisions the entails the whole company and they have the control of all the company activities (Surbhi, 2015). On the other hand, investors are organizations or individuals offers companies’ financial support to finance the business or to start a business and in exchange, they gain some control over those companies and formulates agreements for them.

Management Styles

The management style of profit-driven companies tends to disregard the human element. Management of such companies is usually authoritative to the company team especially the employees. They set objectives for the company and compel the teams to achieve those objectives. The management of profit making companies treats employees as though they are cogs in a machine that merely need to be fine-tuned for maximum output (Emanuel, Lemmens, & Elliot, 2006).. Leaders in profit-driven organizations are usually misguided by the belief that profit comes through efficient processes and policies. They, therefore, keep on changing the policies and processes of the company’s process so as to maximize their profit margins. A good example of a profit-driven company is Satyam Scam Company in India which has been indulging in unethical practices for quite a long time. Satyam Company has been producing IT-services for the World Bank for several years using corrupt and unfair means.

Ethics as the driver

Ethics are the practices and policies that regard the possible issues that are controversial such as bribery, corporate governance, and social responsibility, inside trading, discrimination among others (Investopedia, 2009). They are implemented so as to maintain the required trust levels in business between the business, its employees, and the customers. Corporate governance is a system of rules, process, and practices that in the control and governance of a company (Investopedia. (2003).

Motivation

Companies that are ethics- driven are motivated differently from companies that are profit- driven. What motivates ethics-driven companies to include durable product, long term view and good treatment of the employees.1. Durable product

Ethical-driven companies are focused on producing durable products. Since they do not focus on short-term profits, his emphasis on quality is also ethically driven; the concept being that creating a long-lasting and durable product reduces repeat production. They emphasize on the production of durable but quality product. This reduces repeats in production.

Long-term view

Companies that are ethics driven are long-term focused. They protect the long-term value of the company disciplined marketing and the ability and willingness to sacrifice the short-term profits (Wilcox, 2012). When the short term profits are obvious, it is difficult to focus on the long-term gains, however, being led by ethics makes a company be disciplined. Treatment of employees

When a company is ethics- driven, the interest of the employees is put at the forefront. The managers do not apply management styles that will affect the employees negatively (Hilton, Choi & Chen, 2004). Participative and directive leadership are the, most applied in companies that put the interest of, the, employees at the company.Stakeholders

The interest of a company which is driven by ethics is the stakeholder. A stakeholder of business is any person who is directly or indirectly affect the decision made by a company (Surbhi, 2015). It is important to identify the stakeholders of the company since the company cannot serve everyone. Trying to meet everyone’s need will mean doing nothing at all (Kenny, 2014). Examples of stakeholders include shareholders, customers, employees, suppliers, creditors, governments and debenture holders among others. What is affected is the interest this particular individual, patterns or company. Stakeholders focus on the performance of the company. The interests of the internal and external stakeholders can sometimes conflict. Internal stakeholders

The internal stakeholders of a company include the employees, the owners, managers, directors, and investors. The company’s responsibility towards them is, primary. They identify the internal matters of the company. They either work for or own then company. External stakeholders

The external stakeholders of a company include the customers, suppliers, creditors, government, intermediaries, competitor’s society, client, among others. The company’s responsibility towards them is secondary. The decisions and actions of the company affect them in one way or another.

Social consciousness

A company that is focused on following the ethics of business has a social consciousness. They do everything with the society in considerations. They do not want to harm the society. For instance, they cannot produce drugs which are harmful to the society despite the level of profit drugs can fetch. Every decision made in such a company but be socially accepted. Management styles

In every organization, there are different management styles that are used. The management style to be used depends on the people, task or situation to be, managed. Managers who use flexible managing styles achieve the best results compared to those who use good but rigid management styles. The directive style (Coercive) management style focuses on immediate compliance from the employees. The employees in a company which is ethics- driven do it the way they think is right. They have the power to advise their managers with the best alternatives. The managers control the employees closely. The employees in such a company are motivated by punishments and disciplines. Employees are rewarded for their excellence (Hill, (n.d.). This management style is effective in times of crisis management (Rosalind, 2015). They are also applicable when it is risky to deviate. However, Directive style is ineffective if the employees in the company are not developed since there is not much learning done. It is also ineffective when the employees are highly qualified and highly skilled (Youseffnia, 2012). Such employees become resentful and discouraged at the micromanaging. Another management style that is used in ethics- directed company is participative or democratic style. The employees are given an opportunity to vote their options. The progress is slow since decision takes a long process to be agreed. The employees feel incorporated into the organization. Pacesetting is another leadership style that is used in such ethics- motivated company. The manager sets the pace in doing the tasks and then takes the task away from them if they do not rise up to the tasks.

Company example

MacDonald’s is an example of a company that is ethics base, despite its popularity for its fast foods, the company is ethical in its activities. Since it deals with goods that can easily be manipulated, it is very keen on its ethics; Employees are the main image of the company. They are therefore employed in terms of their ethics.Finding balance

A balanced ethics/profit company is one that makes profits ethically. The main aim is to make a profit, but only profits that are obtained ethically. Any activity that leads to profit but is unethical according to the business ethics is not carried out in such a company. Most companies find it difficult to balance between ethics and profits. The modern consumers are increasing in the knowledge of corporate malpractice (BBC, n.d.).

Company examples

Etsy

This is an advertising company that is peer-to-peer based. It focuses on the sale of handmade and vintage items and supplies. The culture of Etsy Company is admired by many. It is a place where buyers and sellers connect either online or offline. The employees at Etsy nurture and maintain the culture of the company. It was started in 2005 in New York. (Etsy, 2016). The company is based on ethics and profit making. Since the company affects billions of people through online marketing, it is largely dependent on the creation of a positive image.

Zara

This is a Spanish company that is based Arteizo Spain. It is a foreign owned company that specializes in the retail sale of clothing. The company is both profit and ethics based. It focuses on selling clothing and accessories to people in an ethical manner. This is a good example of a company that is balanced in terms of ethics and profits. Conclusion

In a world with ever-growing businesses, companies are under great pressure to maintain their profits levels and still operate under the business ethics. Ethics apply in every area of the business and especially in production and marketing. Business exists with the main purpose of making profits (Wilcox, 2012). Profits and ethics are two important ingredients of a company. A company that does not uphold ethical standards is likely not to last long in the market. It, therefore, takes the company to have principles on operating according to the business ethics. This paper has clearly described what it means for a company to be ethical driven or profit driven. The management styles used in these two kinds of businesses have been outlined. Despite the increase competition, companies can still be ethics driven and make high profits some companies will make profits out of their ethics. It is, therefore, clear that ethics, as well as profits, are important to the business, and there is none that can be forgone. It can, therefore, be concluded that profit is the engine, ethics is the steering wheel.