Ethical Theories and Business - Assignment Example

 Ethical Theories and Business Which ethical theory provides the most convincing guide to the ethical conduct of business? Introduction Business ethics are important aspects of running any organisation and the reasons for that are not limited to the requirements of the law or the orders of a regulatory body (Medawar, 1976). In fact, the reasons for running an ethical business can be shown to come from the theory of ethical egoism that suggests that individuals should do what they think is best for them. Of course the approach may be disguised in the ideals supported by utilitarianism or universalism but the basic reason for businesses acting in an ethical manner is that ethics are good for business in the long run. The fundamental reason for this is the emergence of the ethical consumer. This is a special breed of the common person which finds solace in the fact that his/her buying decisions are responsible decisions. This type of consumer will make purchase decisions influenced to some extent by knowing the operations of the company from which certain products are being bought. Understandably, being ethical is likely to have as many meanings as there are consumers but in a broad sense, the consumer could be very hesitant in buying goods or services from a company which does not ensure that its products or operations do not harm or exploit labour, animals or cause extensive pollution to the world around us (Ethical Consumer, 2006). Such decisions are very easy to make for the majority of people living in the UK where being an ethical consumer is relatively easy as compared to the situation a few years ago. The ethical consumer depends on information since it is the root of ethical buying decisions (Ethical Consumer, 2006). Information about companies, their actions, deeds and use of money is very easily accessed, shared and distributed on the internet (Adams, 2004). The use of the internet certainly makes the task easier as compared to getting information about companies in the developing world. Therefore, anyone with even a passing interest in a certain company can find out as much as they would like about the company and their various processes. Why Ethical Egoism? At the very root of business is the image of the company and the way in which it presents itself to consumers (Brown, 2005). The usefulness of ethical egoism is clear when the image that the company wants to present is that of an ethical organisation or even an ethical government (Yeatman, 2004). This is particularly important for organisations dealing in finance who must present an image of honesty and reliability to their consumers. Similarly, a company which produces outdoor camping gear would be greatly benefited if the image of the company was ‘green’ and environmentally friendly. Of course this would mean that the company might have to make some significant investment in obtaining that image. Helping recycling drives, creating and supporting nature preserves and helping the SPCA are just a few of the means in which a company can get the green image they want. While the ethics of the matter are satisfactory, a company must also look into the cost benefit analysis of the actions performed (Lockwood, 2005). It is possible to take the image too far and be labelled as a fake, for instance, if the company insists that they have gone completely paperless and do no harm to trees, the campaign might be defeated if the advertisements for this campaign are run on paper based media! Undeniably, the customers of today have become more aware of social issues and have understood that ethics can be forced upon sellers with boycotts or other campaigns directed against a company. That means that simply informing the consumers about the benefits of buying a certain product is not enough, a customer must also be informed about the ethical practices and operations of a company which confirm that the company is acting responsibly. Caveat Venditor is the opposite of Caveat Emptor which signifies that in the selling process, the seller also has to be careful and be concerned about the items being sold. The responsibility of the sale, use and resulting influences from the product might be with the seller of the goods as much as they are with the person who bought them in the first place. There may be situations where a company would not divulge its suppliers or explain their labour related management systems to outsiders but an educated guess is often good enough. Consider the sale of beauty products where Brand X pushes the fact that they do not test their products with animal testing and ensure a mandatory global minimum wage for workers in off shore locations along with employee benefits to everyone working for the company. On the other hand, Brand Y remains absolutely silent about their operations hoping that information will remain inside their walls (Chwastiak & Young, 2003). With this information and other things being equal, the consumer who value ethics would prefer to buy Brand X. If Brand X followed ethical egoism and would see that they are losing sales to Brand Y, they would also find alternative means to be more ethical than they are at the moment and then advertise the same fact. Buying something is no longer based on price alone since there is a moral dimension involved in the act of buying. In case where the consumer is well informed about the negative practices of a company, defence against the allegations can is impossible because the consumer is working with undeniable facts. However, it must be noted that the internet itself and the various pub houses of Britain are full of stories, exaggerations and complete fabrications about the dirty practices of giant companies and it is frequently very difficult to quell these stories. Since it is in the interest of a business to have a good image and to have buyers who feel good about making a buying decision from the company, ethical egoism is the best approach a company can take to business ethics. The Failure of Ethical Relativism The image of a company as connected to the ethics of the company are important for businesses because crimes committed more than half a century ago still haunt some European companies. Bertelsmann is one such organisation which shows this amply, the company claimed that it was shut down by Hitler’s government in 1944 and the management created a legend of defiant Nazi resistance which led to the company being granted a clean operational license in the years after the war. The truth of the matter, as reported by the BBC, was that the company was shut down due to the paper shortages created by the war and not their defiance to the Nazis (BBC, 2002). As a matter of fact, Bertelsmann cooperated with the Nazi government for generation of profits. The company went ahead and published several volumes of anti-Semitic documents contracted by the German government during the Nazi era. Additionally, those profits were made using Jewish slave labour in camps within Lithuania and Latvia. Before the war, the company was a small school and religious books and after the war (with the aid of illegal profits) it became one of the giants of the print media. Additionally, the BBC (2002) reports that in collaboration with the Nazi government, the company targeted children for recruitment with its sponsored publication of The Christmas Book of the Hitler Youth and that book along increased the publisher’s sales twenty times over. This example shows the failure of ethical relativism as per the basic definition of the idea of ethical relativism which is fully explained by Velasquez et. al. (1992) and they say that: “Ethical relativism is the theory that holds that morality is relative to the norms of one's culture. That is, whether an action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another (Velasquez, 1992, Pg. 1)”. Clearly, the ethical relativism approach used by Bertelsmann was wrong since they simply followed what the social order of the time wanted them to follow (LaFave, 2006). However, it does not take much perception to see that their actions were unethical and based solely on the need for profit which they even tried to hide from the public. The cost of their actions is steep indeed since they have joined other German companies who have setup a fund for billions of pounds to help the holocaust survivors (BBC, 2002). The Failure of Utilitarianism and Universalism The approach for business ethics can not be based on utilitarianism since this particular ethical theory asks a business to do what will bring the most benefit for all concerned parties (Lachapelle, 2005). The fundamental fact of business is competition and competition will result in winners and losers. A company will therefore have to look out for the benefits of its stakeholders which means it will have to see the interests of its shareholder, its clients, its suppliers and its employees if it wishes to win over the competition. However, as soon as the interests of the stakeholders are made paramount, the interests of the vast majority of the people who are not stakeholders in the company become secondary and thus can be ignored. This is the problem with taking the utilitarian approach because by doing this a company would have to work for the benefit of the public and not of its shareholders or owners. Business in a sense would be done as a state owned company and not as a private company that thrives on competition. In fact, as soon as we enter into business under a capitalist and liberal economy which we find in the UK, the concepts outlined by the utilitarian approach become difficult to follow (Drydyk, 1991). The same can be said for the theory of ethics under universalism even though it is possibly one of the more optimistic views taken by different thinkers concerning how we can come to an arrangement between differing parties. A universalistic viewpoint would mean that both parties who are in a state of competition should try to seek common ground and then go from there to see what compromises can be made by them to come to a solution. In real life and in business itself, such an approach would again put the company at odds with the stakeholders who may not wish to see compromises being made by the company. In fact, the shareholders might prefer to see the company’s stock rise while that of the competition could be immaterial to them. In fact, it is very difficult to apply any moral compass to a business since the connection of ethics and the organisation of how business is conducted is invariably connected to the idea of profit. I feel that the words of Friedman are still true for the approach taken to business ethics when he said that, “There is one and only one social responsibility of business: to use its resources and energy in activities designed to increase its profits as long as it stays within the rules of the game, engaging in open and free competition, without deception and fraud (Friedman, 1970, Pg. 1)”. The rules of the game have changed and with the emergence of the age of information, ethical consumers and the demands made by governments around the world, ethics are good for business. Conclusion In the final analysis it seems that ethical egoism is an excellent theory which can be applied to business ethics since there are business reasons for why ethics are good for the company. Essentially, being ethical can bring profits and being unethical can cause losses. Losses not in moral terms or in terms of how the company ‘feels’ at the end of the day but actual losses which come from lawsuits against the company, fines against the company or even the loss of the market. To avoid these situations from coming up a business has to do what is best for itself and if being ethical is good for business then a company has to be ethical. Works Cited Ethical Consumer. 2006, ‘Why Buy Ethically?’ EthicalConsumer.org, [Online] Available at: http://www.ethicalconsumer.org/aboutec/whybuyethically.htm BBC. 2002, ‘Bertelsmann admits Nazi past’, BBC.co.uk, [Online] Available at: http://news.bbc.co.uk/2/hi/business/2308415.stm Lachapelle, E. 2005, ‘Morality, Ethics, and Globalization: Lessons from Kant, Hegel, Rawls, and Habermas’, Perspectives on Global Development & Technology, vol. 4, no. 4, p. 603-644. Drydyk, J. 1991, ‘Capitalism, socialism, and civil society’, Monist, vol. 74, no. 3, p. 457-478. Velasquez, M. et. al. 1992, ‘Ethical Relativism’, Issues in Ethics, [Online] Available at: http://www.scu.edu/ethics/practicing/decision/ethicalrelativism.html Adams, C. 2004, ‘The ethical, social and environmental reporting-portrayal gap’, Accounting, Auditing and Accountability Journal, vol. 17, no. 5, pp.731-757 Medawar, C. 1976, ‘The Social Audit: A Political View’, Accounting Organizations and Society, vol. 1, no 4. pp. 389-394. Chwastiak M. & Young J. 2003, ‘Silences in Annual Reports’, Critical Perspectives on Accounting, vol. 14, no. 1, pp. 533-552. LaFave, S. 2006, ‘Relativism’, West Valley College, [Online] Available at: http://instruct.westvalley.edu/lafave/relativ.htm Yeatman, A. 2004, ‘Right, the State and the Conception of the Person’, Citizenship Studies, vol. 8, no. 4, p. 403-417. Friedman, M. 1970, ‘The Social Responsibility of Business is to Increase its Profits’, The New York Times Magazine [Online] Available at: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html Brown, R. 2005, ‘The ROI of Diversity’, Mortgage Banking, vol. 65, no. 12. pp. 111-113 Lockwood, N. 2005, ‘Workplace Diversity: Leveraging the Power of Difference for Competitive Advantage’, HR Magazine, vol. 50, no. 6, pp. 1-14. Read More