Corporate Strategy in Business Ethics

free essayThe increasing ethical issues have continued to impact businesses in modern societies and contributed towards the global business practices development. Business ethics in an international or domestic context present an intricate range of moral awareness, human rights and comprehensive acceptance of responsibilities and duties for corporate organizations. Regardless of the best circumstances, even good companies have the capacity to become entangled with the issues of unethical practices or moral injustices. Companies, the mandate and objectives of which are defined on the basis of good practices and intentions, may find themselves dealing with ethical issues that entail human rights injustices and violations.

Business ethics may be defined as significant in the determination of the differences between rights and wrongs; therefore, ethics are moral guidance in business and professional operations. Ethics have posed difficult challenges on businesses where various interpretations have been presented on ethical business conduct. In the light of this, a business may be faced with situations where ethical conduct is paramount to prevent misuse of authority. It is vital to recognize business ethics as a regulatory measure that ascertains entities do not abuse their mandate in pursuit of profitability. This prevents abuse of power or authority and constricts business operations within moral boundaries.

The business ethics factor is essential in empowering corporate leaders with critical tools to identify, tailor, strategize and manage defined behaviors. It is also crucial that appropriate issues are promptly addressed both in a moral and legal context. As such, addressing the distinctions in corporate strategy, the identification of what constitutes moral or legal responsibility such paying penalties and breaching the law. Corporate social responsibility recognizes a business entity’s duty to the economy, environment and community. Meanwhile, a number of recent corporate managers are of the view that an organizations responsibility extends beyond the profit maximization concept (Trevino & Nelson, 2007).

It has been said that today’s economy is no longer about creating products to meet an existing demand, but designing new markets to create this demand. In an effort to develop new and unique markets, corporations continue to encounter significant value conflicts such as integrity of business operations and moral duties which are among the issues that impact business ethics. Accountability is a critical factor in ethical decision making processes. Business ethics integration in policy making entails accountability to various vested parties and stakeholders within the company and the public. The design, development and implementation of policies should incorporate the views and interests of all stakeholders. The company’s intention should not cause harm to individuals that are directly or indirectly impacted by the application of defined corporate policies.

In response to the moral responsibility that businesses are expected to uphold, is a revived effort of corporate social responsibility. In college educational programs corporate social responsibility has been identified as a pyramid made up of four components: ethical, humanity, economic and legal duty (Trevino & Nelson, 2007). Economic responsibility addresses the relationship between producing goods or services, and what the consumer needs or wants. The producers need to make an acceptable profit while doing what is right both in legal and moral aspects. Essentially, businesses must restrict their operations within the limits of law; meanwhile, an organization’s business ethics duty includes conducting business in conformity with societal expectations.

An ethical responsibility would be having a code of conduct to treat employees with dignity and respect. For instance, Abbott Laboratories provided AIDS medication at little to no cost in over 35 African countries because the victims could not afford this medication (Trevino & Nelson, 2007). Philanthropic responsibility is the philosophy that the wealthy should give back to the community. This is questioned by some; however, it is widely accepted in the form of donations to charities or programs for the disadvantaged. Businesses are expected to help the community and share their good fortune. For instance, Ted Turner donated 1 billion dollars to the United Nations to help refugees and those less fortunate. These types of initiatives can be found on corporate websites showing applications for nonprofit organizations.

Among the significant issues that impact an organization’s ability and willingness to comply with corporate social responsibility include the consumer’s desire to align themselves with services and products from manufacturers that are committed to social and economic guiding principles (Kiewit, 2009). The focus for corporations should also be on the environment and community while maintaining equitable levels of profit. This would be in contrast to the accepted view of corporate responsibility to maximize the profits. Corporate social responsibility is ever evolving with factors such as legal strategies, laws, regulations, international concerns, consumer expectations, industry environmental initiatives, and social compliance.

Most businesses evaluate these issues of concern with a cost/benefit analysis. Some of the cost can initially exceed the benefit in participation and in corporate social responsibility. It comes with a long-term financial commitment for corporations but can be rewarding both intrinsic and extrinsic while still maintaining a high level of profits. For instance, a general manager in a cosmetic company has a duty both to the customers to ensure the production of safe and healthy products as well as a duty to shareholders to ensure that the company’s products strengthen the position and a duty to the government to preserve health standards of the general population. Additionally, a general manager has a duty to disclose any information regarding a product that might cause harm to the public (Trevino & Nelson, 2007).

The general manager has a legal duty to disclose and communicate to all vested parties including customers, government, stockholders and health authorities that the company’s major brand can cause cancer. Though such an action may impact the company’s business and profitability, it will save the company from being subjected to litigation for allowing its customers to continue using the defective product. The general manager faces an ethical dilemma on whether not to disclose the information that may compromise the company’s business integrity or to disclose the information that will save its customers’ lives and from painful medical processes.

The general manager has a moral duty to ensure that the company does not sell defective products irrespective of the impacts on the company’s profitability. Furthermore, he has a legal and moral duty to ensure that the stockholders are protected against undue expenses in compensation and legal costs resulting from the sale of defective and harmful products (Trevino & Nelson, 2007). In light of this, as a general manager, the right thing to do is to stop selling the defective product and warn consumers to stop using the product until the time it is proven to be safe to use.

A corporation called Gilda expanded its corporate social responsibility initiative to include medical benefits for its employees, and schools in Honduras to promote the employee education of its textile business. This pays back to the corporation with engaged employees, and innovations in apparel and engineering fields. In order for the initiative, to work with Gilda they had to build communication with the suppliers, partners, and distributors in order to make sure that everyone in the supply chain clearly understood the corporate commitment to corporate social responsibility. In so doing, they are building a relationship with the customer that enhances the value of the brand.

Corporations are often wrapped up in issues of ethical responsibility and violations of social expectations such as in legal strategies of lobbying, arbitration, document retention, breach and pay. A legal strategy is the effort of executives to anticipate legal claims and put measures in place to maximize the profits. Corporations maximize profitability in this respect; however, profitability attained in this manner raises ethical and moral duty concerns. The exploitation of the law through perceived or evident loopholes in legal definitions is the primary motivator of such practices. Legal loopholes address the factors involved in business that does not violate the letter of the law but violates the purpose or underlying principle (Ostas, 2009).

For instance, in a chemical company scenario, it is the manager’s duty to ensure that the company does not suffer any avoidable legal consequences in the present or in the future. Therefore, as the manager of a regional chemical company, it is essential to ensure that the large amount of chemicals and smoke are minimized as much as possible. Since the company has not violated EPA regulations, it may be safe in the short term (Trevino & Nelson, 2007); however, in the long run the impacts of prolonged exposure to particles and smoke emission may have significant health consequences, which will cost the company a large amount of money in litigation and compensation. Though the emissions are below the prevalent EPA standards, the company may suffer legal consequences in the event that such emissions cause health problems in the neighboring groups (Trevino & Nelson, 2007). Therefore, from a legal point of view the manager should authorize the installation of the filtration system that will ensure the reduction of the particle and smoke emissions.

The manager has a moral obligation not only to preserve the integrity and going concern of the company, but also to protect people and the environment. Furthermore, though the company has not violated any APA regulations as far as particle and smoke emissions are concerned, there is a moral duty to ensure that people in the neighborhood are not harmed. The implementation of the filtration system may incur significant one-time costs of installation; however, this initiative will save the company a significant amount of legal and compensation costs resulting from litigation against the company for poisoning the neighborhood groups. As a manager, the best thing to do is to implement and install the filtration system.

With breach and pay strategies, a corporation identifies laws that can be breached with little to no cost for the benefit to which it is weighed against. An example of this would be in undocumented illegal workers. A business can operate with illegal workers and when caught will pay a minimum fine for the maximized cost of low pay and wages offered to these employees. Noncompliance with failure to pay overtime and participating with the hiring of undocumented workers is widespread and well documented. Sometimes the legal strategy of the corporation is to redefine hourly wages, to salaries requiring long hours. Corporations are not required to pay large fines when caught. For example, in 2004 there were over 10.5 million unauthorized workers. 65 corporations were indicted and paid only a total of $45, 480 dollars among these corporations (Ostas, 2009). The Immigration Reform Act of 1986 prohibits undocumented workers from being hired; however, the law is not always enforced.

There are three elements addressed with the breach and pay strategy; those who condemn the strategy, those who are sympathetic, and those who seek a middle ground (Ostas, 2009). Societal norms would emphasize that it is a moral obligation for businesses to obey all laws and regulations. Meanwhile, others believe that there is an alternative view that allows businesses to pick or choose the laws they wish to follow and those they do not. Most corporate lawyers would advocate on the sympathetic approach stating that some legal matters are subject to choice except when a moral or criminal distinction is made. Some would even claim that maximizing profit does not support ethical reason unless a regulation is prohibited or violated. Lawyers hired by firms attempt to interpret the laws in question; for instance, if one does X one will have to pay Y. Therefore, legal obedience is a matter of choice (Ostas, 2009). The opposition in the form of societal norms in American culture would state that one may not do X even if one is willing to pay Y (Ostas, 2009).

Corporations also attempt to control the release of documents in court hearings by destroying those documents such as email, electronic records, and paper files. They do so under the legal umbrella of protecting trade secrets, consumer privacy, and prevention of other corporate espionage. However, this is done to minimize the chance of criminal detection by an otherwise under enforced legal system. In the Enron fraud cases, Stewart and Arthur Anderson were convicted of obstruction of justice with insider trading. Occasionally, when something like this is done a small level of moral reason is upheld; therefore, actions to destroy documents are expected and excused.

Litigation can also be very expensive, and corporations employ a host of procedural devices that raise the cost and may cause the opposite party to abandon claims or settle under negotiations. Some may claim that corporations are exercising legal rights other than negotiating in good faith and should not be allowed to delay legal actions. Corporations would defend by stating that delaying provides a substantial purpose in most, if not all cases (Ostas, 2009).

These strategies as mentioned above leave the public demanding terms of an otherwise ambiguous legal system to be re-written to take into account the matters of corporate social responsibility. In 2009 AIG was bailed out in the tune of 173 billion by the federal government. They then turned around and paid out a sum of 450 million dollars in bonuses. AIG attempted to make good on the backlash by asking executives to reimburse half of what they had been given; however few paid anything. The government grilled CEO Edward Liddy and proposed a $500,000 salary cap to executives bailed out by the government (Rollert, 2009).

Conclusion

Business ethics have continued to elicit increased concern as corporations continue to expand in the global market. International and domestic organizational ethics comprise an intricate range of issues including human rights violations and moral awareness. Social norm expects companies to extend their financial wealth and fortune through helping those less fortunate, and exercising good moral judgment. Corporations that do not exercise social corporate responsibility may at times implement policies or strategies to limit their financial responsibility.

Some of those strategies discussed included breach and pay, legal procedural delays, and rewriting policies to exclude legal dilemmas with issues such as hourly pay and wages. Corporations have also started to adapt corporate social responsibility in the increasing response of consumers that want to align their purchases with the companies that exercise good moral conduct within the economy and environment. Lawrence Kohlberg stated that people behave morally when they decide what course of action is morally right. To make a continued difference in the climate and culture of capitalist societies, the society needs to align purchases/investments with the actions of corporations that do what is right both legally and morally.

Steps banner