Relationship Built to Support Ethical Decisions - Research Paper Example

The Legal & Ethical Environment of Business and E-Commerce at the International, National and Level, Bus3130 Word count 2486 Business Ethics and Law: A Relationship Built to Support Ethical Decisions Introduction Within the United States, over 90% of all larger corporations have a code of ethics in place. In Canada, 85% of the larger corporations have codes of ethics with only 57% of United Kingdom corporations, 51% of German corporations, and 30% of French corporations having formalized codes of ethics (Schwartz 27). The purpose of defining the ethics of a corporation is to allow for a corporation to make a statement about what they consider to be acceptable and not acceptable within the framework of public opinion. The code of ethics, however, is nothing if it is not applied to the activities of a business. One of the ways in which the activities of a business are framed for ethical conduct is through the application of law on how business is conducted. In this way, a sense of universality, at least within the context of a state, is managed in regard to ethical conduct. Laws are put into place to force corporations to behave in certain ways within the nation in order to conduct business in an ethically considered manner. The following essay will first discuss the various theories on ethics that provide a framework for the discussion of ethics. A discussion of law and ethics will allow for examples to be supplied of ways in which ethics and law work in concert to create a more morally responsible collaboration between business and society. A brief discussion about shareholder models of corporate governance in comparison to stakeholder models of corporate governance will provide a context for the concept of ethics as they are applied to business. The nature of business is not always in line with universally held views of ethics, however, in order to conduct business in a manner that is conducive to all parties impacted, ethics must be created to preserve social, cultural, and national states of morality. Business Ethics: Theories Ethical Fundamentalism Ethical fundamentalism is a theory in which the search for an ethical foundation is made through an outside source. According to Nagata “Fundamentalism is fast becoming the metaphor of choice in a quest to assign meaning to an ever widening range of ideas and behaviors, and it has recently migrated from its original narrow religious reference band to other domains” (481). In order to understand the parallel to religious considerations, one must assert the idea that in looking at a source or religious inspiration, one is looking to an outside source for how to frame behaviors or ideologies. In the search for foundations of how to frame a business ethic, one might use a figure who represents a certain framework or an ideology that provides context to how an set of ethics is determined. Organizations that can be considered for its fundamentalist approach and through the strength of its work culture can be Wal-Mart and McDonalds. Both organizations have a foundation of ethics that are centered on the philosophies of their founders. Utilitarianism Utilitarianism is based upon the concept of behavioral consequences. Bentham begins his discourse on utilitarianism by suggesting that there are two domains under which motivation is created: that of pleasure and pain. He calls these tow domains “sovereign masters”, having such power over actions that they are the contrasts that rule most all actions. He states “The principle of utility recognizes this subjugation, and assumes it for the foundation of that system, the object of which is to rear the fabric of felicity by the hands of reason and of law” (Bentham 5). Bentham states that “By the principle of utility is meant that principle that approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question” (6). This can mean individual or community, or any entity that is focused as a singular entity towards specific goals. John Stuart Mills suggests that morals are subject to the one who frames them. He states that “Our moral faculty…supplies us only with the general principles of moral judgment…it is a branch of our reason…and must be looked to for the abstract doctrines of morality, not for the perception of it in the concrete” (4). This, perhaps, may be the failing of utilitarianism. While the intent of the doctrine is to inform ethics based upon the greater good, the nature of determining the greater good is subject to the location of its focus. A corporation will see the greater good based upon its overall profit, while a town may see the greater good as extending far beyond the limits of the shareholder needs. In making decisions based upon the profits of the shareholders, a corporation sees its ethics served by maintaining the interests of the shareholders, hoping that trickles down to the stakeholders. Therefore, in using a moral compass for ethics, it is the possessor of the compass that determines the moral focus. This lack of universality has been the support of the case for suggesting that utilitarianism supports imperialism and its concerns. Therefore, a business that focuses on benefit as an informing capacity to ethics would be considered utilitarian, which is balanced by benefit as it is compared to legality. In this case, the legal system provides frameworks in which business ethics balance the pain of an action against the legality of not performing that action. An example of that is environmental laws which constrict businesses from damaging the environment through actions that would otherwise be in the focused interests of the companies. According to Ferrey “The rationale for environmental law is to restore, preserve and protect natural systems”, thereby protecting the environment against the actions of corporations who would take the most cost effective path regardless of environmental impact (1). Deontology Deontology is based upon the writings of Immanuel Kant. Sometimes called Kantian ethics, the concept is defined by the belief that entities are ruled by a set of universal rules that define how morals are applied. Essentially, Kantian belief is centered on the agent, the actions of the person having the importance, not the consequences. In some other theories on ethics, the consequence is the informing concept, as in that bad thing that happens is the immorality, rather than the action of doing something (Darwall 2). In Kantian ethics, doing the act is the foundation of the immorality, not the consequence that follows. In other words, doing murder is the center of its immorality, not the consequence of the death. Rawls Social Justice Theory Theories based upon social justice are defined by their attention to fairness within justice. Ethics are based upon what would be considered fair to opposing parties when justice must be met. Capsulated, Rawls argues that “justice denies that the loss of freedom for some is made right by a greater good shared by others. It does not allow that the sacrifices imposed on a few are outweighed by the larger sum of advantages enjoyed by many” (3). In other words, justice is defined by the way in which it is equally measured to each. Consequently, it is the opposite of any justification that is made for colonialism and suggestive of how corporations must hold globally equal standards for moral and ethical behavior. An example of how this is violated can be seen through the chocolate industry. It is known that the chocolate bean farms of West Africa are maintained by the use of slave labor in the form of young boys. It is estimated that as many as 15,000 child slave laborers work on the farms on the Ivory Coast. Americans spend 8.5 billion dollars per year on chocolate with approximately 60% of the world’s cocoa bean production occurring in West Africa (Satre 220). While slavery is illegal in West Africa, the importance of the cocoa bean market and the difficulty in enforcing laws for a virtually voiceless population of children makes it difficult to manage the problem. Additionally, there are no laws in the United States governing the purchase of products from nations who do not follow globally recognized violations of law, such as child slave labor, or even child labor. Therefore, the only recourse is through social pressures brought about by consumers. Boycotts and public opinion provides the social contract terms under which a company is forced to end relationships with those who violate universally accepted moral and ethical considerations. Ethical Relativism Ethical relativism is centered on the beliefs of the individual and framed in regard to the way in which the personal morality informs action and intentions. According to Pojman, there are two kinds of ethical relativism: subjective ethical relativism and conventional ethical relativism. In subjective ethical relativism, “all moral principles are justified by virtue of their acceptance by an individual agent” (16). In conventional ethical relativism, “all moral principles are justified by virtue of their cultural acceptance” (Pojman 16). An example of this can be seen through the concept of slavery. In the 18th century, the concept of slavery was a socially acceptable convention in some areas of the nation, while in the 20th and 21st centuries the concept is abhorred. Law and Ethics According to Pride, Hughes, and Kapoor, “Business ethics is the application of moral standards to business situations” (39). Honesty in business practices is an example that one might think would be a standard in ethics. However, an example of how law affects the ethical standards of how a business practices are applied can be seen through Copley Pharmaceutical, Inc. Copley was convicted of “falsifying drug manufacturers’ reports to the Food and Drug administration” (39). The fine for pleading guilty to these charges was 10.5 million dollars, however, while Teva Pharmaceutical Inc. acquired Copley in 1999, the third quarter of 1998 alone showed a profit of 7.5 million dollars for the corporation, suggesting that such a fine might work still to the overall advantage of Copley when balanced against the sales of the products in question. Therefore, in asserting law as a deterrent against unethical behavior, the law must have enough of an impact on the activities and profits of a business in order to change behavior to be within the expectations of societal ethics. Because of the shareholder model of corporate governance that is prevalent in the United States, a philosophical system of governance that directs all actions within the corporation to have the best interests of the owners at the center of every decision, law must step in to balance those interests with the interests of the public. An example of how the law may be seen to work against an expectation of ethical practices can be seen in the event of the lawsuit that Ypsilanti brought against General Motors. In this lawsuit, the plaintiff alleged that General Motors had sought abatements from the town of Ypsilanit for improvements on their Willow Run plant in exchange for the continuation of production of cars within the district. While the initial ruling was in favor of the plaintiff on the grounds of promissory estoppel, the appeals court ruled in favor of GM citing that hopes and expectations were not the same as a promise. The statement made by GM was that “upon completion of this project and favorable market demand, it will allow Willow Run to continue production and maintain continuous employment for our employees (Lawnix). In this case, the economic environment did not allow for GM to continue at this plant, therefore that need conflicted with the needs of Ypsilanti. In this case, the needs of the corporation did not take into consideration the needs of the stakeholders, which is a different way of creating a model of corporate governance. In a stake holder model of corporate governance, the needs of all those who have a stake in the success of a business are taken into consideration (Aras and Crowther 173). This includes the needs of the community, the environment, the lending institutions, as well as all the members of the corporate culture. The needs of the employees of Willow Run would have been part of the decision making process, but because of the overriding needs of the shareholders, the needs of Ypsilanti and the people of that community were not of primary concern. From an ethical point of view, this is utilitarianism once again as it supports the notion of imperialistic concerns as management and labor have a distinctly different set of needs that sometimes come into conflict. Shareholder Model of Corporate Governance In discussing the topic of business ethics in the United States, one cannot divorce this prospect from the most common model of corporate governance that frames the decision making process within the corporation. According to Aras and Crowther, “shareholder oriented model, which focuses solely on maximizing the value of the company, has also been insufficient to address the current urgent issues of the world, such as environmental degradation, unacceptable distribution of income and poverty” (173). With a world that is more globalized, the shareholder oriented model is no longer an efficient model in which to expand the foundation of a corporation. Because the laws of one state do not necessarily cross into the law structures of another state, a company, through this philosophy, will maximize its profits at the cost of ethics that may be lawfully enforced in one nation, but not within another creating a disparity in human rights, environmental impact, and social degradation (Aras and Crowther 173). The way in which this can be assessed is through utilitarianism. The pain of the costs of illegal activity is eliminated when business activities are moved to a nation in which the laws do not dictate the same code of ethical considerations. One of the costs of this can be seen through the example of Nike who has its production allocated to sub-contractors who are in nations with lowered wage and human rights laws. This was made public, however, and through the bad publicity a higher level of expectations on plants making Nike shoes was put into place. Even though Nike was aware of the conditions in plants making their shoes, it wasn’t until it was made painful through boycotts and bad image problems that Nike changed its point of view on the standards and practices of production outside of the United States (Jennings 238). Conclusion The nature of business is to focus on the goal of creating profit in order to perpetuate the activity of business. Ethics create a framework in order to monitor and control the nature of those activities as they work towards the consideration of profit. The many theories about ethics allow for the nature of business to be constructed under a philosophy on how to approach business. However, laws are put into place in order to provide excuses for business to behave in moral and ethical ways, creating a reason behind actions that otherwise are outside of the direct benefit of the company. In having adopted a shareholders point of view on how to approach decision making, law provides a balance on which to create an ethical decision through forced application. Works Cited Aras, G., & Crowther, D. (2009). Global perspectives on corporate governance and CSR. Farnham: Gower. Bentham, J. Utilitarianism. London: Progressive Pub. Co., 1890. Print. Darwall, Stephen L. Deontology. Malden, Mass. [u.a.: Blackwell, 2003. Print. Ferrey, S. Environmental law: Examples & explanations. New York, NY: Aspen Publishers, 2010. Print. Jennings, Marriane M. Business ethics: Case studies and selected readings. Mason, OH: South-Western Cengage Learning, 2009. Print. Lawnix. Ypsilanti v. General Motors Corp. Lawnix. 2011. Web 10 June 2011. Mills, John Stuart. Utilitarianism. S.l.: Assistedreadingbooks Com, 2006. Print. Nagata, J. Beyond Theology: Toward an anthropology of ‘fundamentalism’ American Anthropologist. 103.2 (June 2001): 481-498. Print. Pojman, Louis P. Ethics: Discovering Right and Wrong. Boston, MA: Wadsworth, 2011. Print. Pride, William M., Robert J. Hughes, & Jack R. Kapoor, Business. South-Western Pub., 2011. Print. Rawls, John. A Theory of Justice. Cambridge, Mass: Belknap Press of Harvard University Press, 1999. Print. Satre, Lowell J. Chocolate on Trial: Slavery, Politics, and the Ethics of Business. Athens OH: Ohio University Press, 2005. Print. Schwartz, Mark. S. A code of ethics for corporate code of ethics. Journal of Business Ethics. 41.? (November-December 2002): 27-43. Print. Read More