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Ethical problem - Essay Example

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Businesses exist so they can produce goods and services that are needed by the consumers, while making value to the shareholders. Therefore, the relationship between the shareholders and the management of the company is based on the assumption that the managers will act in the best interest of the shareholders…
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Ethical problem
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Ethical problem

Download file to see previous pages... The action of the managers to hide some information to the shareholders is unethical. This is because, ethical behavior requires that any decision reached by the management should be a truthful one, and thus any action that is mean to hide the truth from the shareholders is unethical (Frederic, 17). This type of conflict falls under the category of conflict referred to as Normative ethics, in a subset referred to as professional ethics, which requires that the professional conduct of individuals within an certain professions should act in accordance with set standards of right and wrong, and the deviation from such conduct eventually creates an ethical conflict (Weiss, 41). The classification of this ethical conflict under the Normative ethics category is informed by the fact that Normative ethics apply a practical approach towards arriving at an ethical decision, which has to do with the duties that individuals should follow and the implication of behaviors of an individual on others (Frederic, 31). Explaining the conflict can happen in the corporation Normative ethics conflict can happen in organizations due to conflicts of interests, where the interests of the professionals tend to compete with the obligations and responsibilities of the professional (Weiss, 72). The managers can hide information from the shareholders, so that they can favor their interests at the expense of the interests of the shareholders, considering that he interest of the shareholders and those of the management are always conflicting (Frederic, 22). Therefore, the managers can hide a potential investment venture to the stakeholders, which would have long-term benefits for the shareholders through enhancing organizational growth, and prefer to pursue short-term investments that will result to short term benefits for the shareholders, to avoid taking risks, while also trying to make a name amongst their peers and other corporate commentators, who evaluates organizations on the basis of their short term revenues and performances (Weiss, 49). Further, the managers might hide the long-term benefits of an investment from the shareholders, and instead pursue short-term investments, so that they can increase the revenues in the short-term and benefit from salary increments and promotions, at the expense of pursuing investments that may have no revenue benefits in the present, but will yield more benefits and revenues for the shareholders in the future, such as investment in Research & Development (Frederic, 44). The effect of this conflict on the stakeholders This conflict has an adverse effect on the shareholders, since it works towards making the shareholders lose their future value of investment, while the managers are the ones who benefit from the conflict, through financial gains and promotions. Another effect of the conflict on the stakeholders is that; it erodes the trust that the stakeholders had on the managers, since the existence of such a conflict shows that the managers are not favoring the ...Download file to see next pagesRead More
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