Social, Cultural and Ethical Dimensions - Essay Example

of the of the Assignment no: 2 Why do some companies believe that being more ethical means reduced profits whereas some other companies believe that being more ethical means increased profits? Wherever possible support your arguments with case study and other empirical evidence. Lack of business in ethics is at an all-time high. In any business unless personal, professional or company norms are laid out people would not be able to resist crossing the lines of acceptable behaviour. What is this acceptable behaviour? What is ethics? More specifically what is business ethics? Do ethics really have a place in business? Do all businesses have the same ethics? Who formulates the codes of ethics? Who is responsible for its implementation? What happens when the rules are not adhered to? Is profit more important than the strict rules to maintain the codes laid out? Ethics in simplest terms means to be able to discriminate between the right and the wrong and have the courage to stick to the right no matter what temptations may arise. Managers justify that the definition of ethics changes with the situation. But John C Maxwell1 says, "I believe the problem is that they had never made the decision to be an ethical person." He says successful people make decisions early in life, and manage those decisions the rest of their lives. "You cannot manage decisions you havent made." With the fall of corporations like Enron and WorldCom, business ethics has been a hot issue, be it at the B-schools or at forums. Corporate scandals and billion-dollar bankruptcies are the results of the lack of ethics in business today. There can be certain standard business practices laid down as far as child labour, integrity, respect for fellow employees, customers and business partners are concerned but code of ethics would differ from industry to industry. Any business functions within the ethical and the social codes of the society within which it operates. Then again the operations within an individual firm are conditioned by the morals and values held by the individual managers within that firm. When the two sets of values or codes of conduct differ then arises the conflict, which is detrimental to the long-term interests of the company. Profits at the cost of ethics may pay rich dividends today but these are more often than not short-lived. Executives may be under pressure to achieve targets and find no discomfort in either engaging child labour to cut costs or conceal product information. They derive their bonus and move on to ‘better prospects’ for a better ‘pay packet’ leaving the company to ‘face the music’. This is at the individual level but there are instances even at the corporate level. John Hooker2 cites the example of Nestle Corporation who wanted to capture the infant formula market in parts of Africa and employed nurses in local clinics to educate the mothers about the advantages of using their product. They even went to the extent of convincing the mothers that it was sophisticated and western to use the formula instead of breast feeding. Unfortunately the water that was available to prepare the milk was unhygienic and the babies were falling ill. This did not deter the executives from withdrawing the product or even warning the mothers. It was only when there was a boycott by the consumers worldwide did the company relent. People argued that the directors of the company had no right to withdraw a product that was bringing in profits. In this case capturing the market and selling their product was the only motive and they could do so as they did not adhere to the business ethics. Had they been ethical they would certainly not have made the huge profits. Firstly, they even urged the nurses to adopt unethical means to convince the mothers. When the world is switching from powder milk to breast milk, highlighting that mothers in western countries were using this product was a false statement. Thirdly, even when the children started falling ill, they did not withdraw the product. This clearly shows that they were interested in short term profits, which normally flow out as penalties in due course. The net profits to the companies in such cases is, if at all, negligible. It is when people or companies start attaining success that greed steps in. To make more profits they are willing to compromise on principles. It is very difficult to resist temptations at this stage. It would be rare to find people like Henry “Hal” Thomas3, co-founder of Dallas-based Corban  Communications, who is what he is today because of ‘his unwillingness to compromise his beliefs’. When something went wrong with their accounts Hal was asked by his bosses to terminate the services of five of his employees. Rather than do what he was asked to he preferred to quit. Moral courage is the need of the day; to stand up to your principles requires courage. Greed and moral erosion are the only reasons behind the numerous corporate scandals. It has often been seen that the violators are those corrupt executives who are busy in amassing and protecting their own wealth while the company is driven towards bankruptcy and forcing the employees to leave their jobs. The executives forget that they have an equal responsibility towards the consumers, the general public and more specifically the shareholders. To adhere to the ethics laid down would and does mean at some stage to compromise with profits. When an executive is pressured to meet targets, be it in achieving sales or meeting the financial commitments, it is very difficult to hold on to the “so-called ethics”. Some people even attribute it to emotions saying that in business there is no place for emotions. A practical approach is desired and they have no hesitation in crossing all barriers of the humanistic approach. People are quick to point out that most often what appears as ‘unethical means or greed’ is really the outcome in the face of competition. They reiterate that they were compelled to resort to certain unwanted means. John Hooker in his article Why Business Ethics reasons that case studies show that one can do well by doing good but one can fail also. He feels ‘if ethical behaviour were always rewarded there would be no need for ethics’. As mentioned above in connection with the case of Nestle Corporation, unethical businesses end up in trouble and this itself is enough motivation to be ethical. But Hooker thinks differently. According to him ‘virtue is neither necessary nor sufficient for tangible reward’. He further argues that even if ethical attitude does not ensure material success, the company does build up a good reputation which brings in rich dividends in the long run. Andrei Shleifer4 emphasizes that in the face of competition the managers have no way but to compromise on ethics. When one company hires child labour, the costs are reduced. It poses a threat for a competitor who too has to hire children instead of adults. The efficiency of child labour is not taken into consideration and the only criterion is reduced costs and thereby increased profits. On the other hand child labour helps a family to survive and hence compromise on ethics is beneficial both to the company and the family. Shleifer also mentions about Harvard’s former president Derek Bok (2003) who expressed concern about commercialization of the universities. Universities today have a commercial approach in the face of competition. To attract the best faculty and students they need profits which they try to increase through highly commercial athletic programs or on-line educational efforts. It is competition that leads to pursuing of commercial activities by the universities at the cost of academic standards. Companies and individuals take advantage of the situation and change the codes of conduct of business just to rake in immediate profits. It happened during Hurricane Andrew in 1992 and again can be seen in Hurricane Katrina5 when gasoline is being sold for over $6 per US gallon. Jack Forney6 believes that faith based approach to business does not come without challenges. During the course of business Forney learnt that one of their main competitors was misrepresenting the power of its battery chargers. He was faced with the dilemma to go along with this deception or disclose the truth. Forney took the high road. “We just could not bring ourselves to do what the competition was doing in those ratings, so we didn’t, and we lost sales because of it.” Forney was convinced that it helped his company in the long run. “It built a sense of integrity with a lot of our field people and certain in our home office, and the Lord honours those things.” Healthy competition is good for the economy and the industry but social obligations and moral values cannot be ignored. Till recently business ethics meant merely adhering to administrative policies and legal standards but today the situation is different. Executives realize that it is essential to build repute in order to sustain in the market. It is no more the seller’s market and the confidence of the market is essential to its growth. To be unethical is effortless; to be ethical requires courage. References: , Read More