Business Ethics and Leadership
Business ethics plays a significant role in influencing the system that governs moral and ethical theories that guide values, decision making and behavior of an organization. This is achieved through developing an organization culture that is centered on ethical business practices. (Schwartz 2007). These ethical practices in business are stated in the constitution or regulations of an organization. In relation to ethics in leadership, the organization is responsible in structuring the culture which is to be followed on a daily basis (Sale 2013).
Ethical business practices allow leaders to direct the employees through decision making as well as empowering them in their duties. Besides, setting up an organization considering ethical behavior assist a company realize sustainability initiatives as well as attracting new talent, building and maintaining rapport in a community. Managing a business in an ethical manner strengthens the relationships between the management team thereby enhancing stability. Business ethics is significant not only in creating loyal employees and boosting morale but also tied to profitability in both short-term and long-term. Moreover, business ethics contributes to corporate social responsibility initiatives and increasing positive public image of an organization (O’Brien and Dixon 2012).
The UK’s Serious Fraud department conducted an investigation into Rolls Royce engine maker for over three decades. In the case, it was determined that the company had engaged in corruption, bribery and false accounting. Instead of the company facing prosecution, it entered into an out of court settlement where it was liable to 671 million Euros to authorities in UK among other countries such as Brazil and the United States. The company admitted to uncouth behavior regarding ethical business practices that govern an organizations operations. The behavior influenced the company’s reputation with respect to customers, investors among other stakeholders (McConnell 2014).
The second ethical business scandal in the UK is widely known as JPMorgan and the London whale. JPMorgan admitted that the company lost $ 2bn in a period less than six weeks. As a result of the scandal, the Banks’s stock tumbled significantly resulting to losses on the side of shareholders. The CEO of the company admitted to the mistake on his part for failure to keenly follow the trading losses. The scandal arose because a single trader in London who placed bets large enough that prices moved $10 trillion credit securities market. The company sued the trader and his supervisor. As a result of the scandal, the two employees left the bank (Crane and Matten 2016).
Potential risk in Procurement Agency relates to the challenges that are likely to influence the procurement process in terms of purchase services, products and resources. Among the common types of procurement risk include fraud, cost, quality and delivery risk. These risks affect a company’s operations, profitability, customers and investors. With respect to accountability, the London whale could not be charged without any involvement of the Company’s authorities. Therefore, the CEO had to take accountability by admitting the mistake made by one of their traders. Further, the employee and his supervisor were dismissed and charges filed against them as a move by the organization to be accountable (Logsdon and Wood 2005).
Recent Ethics Scandals
Based on transparency, both scandals attest to the fact that business practices should be transparent in a manner that stakeholders can have control for purposes of decision making. The London whale trader failed to make his trading knows and as a result led to huge losses for the company. It implies that transparency is a significant part of ethical business practice which businesses should emulate to operate favorably. In regards to employee ethical conduct, it is justified that the JPMorgan trader lacked ethical conduct which would have influenced his decision making process and report the losses immediately before it became a scandal (Post, Lawrence, Weber and SJ 2002).
There are several policies and practices that guide ethical practices at procurement agency. All procurement officers must be guided by a written code of ethics that forms the culture of an organization (Walker and Lloyd-Walker 2014). The goal of these policies to offer an alternative ways to realize accountability, transparency and employee conduct. The success of a policy is dependent on the work that is put to it which can be measured through project management approach (Rolstadås et al 2014).
In order to ensure procurement ethics are upheld, various factors come into play. For instance, Orion Analytics should have a well-written policy statement that outlines what the management considers ethical and unethical. A written policy statement will remove the element of difference of opinion that may lead to disputes. Consequently, ethical training is significant in ensuring that the employees are made aware of the benefits of ethical practices. Orion Analytics should innovate their training program increase employee’s knowledge about ethics to deal with their day-to-day routine (Carroll 2000).
Ethics policies are said to be tangible and indisputable when they are clearly written. Besides, the firm should adopt a process with checks and balances for purposes of reviewing and confirming that regulations are followed. Orion Analytics should ensure that it carries out periodic audits as means of verifying procurement activities. Periodic audits are often implemented as deterrent measure to unethical practices in the future. In order to enhance employee conduct the business should maintain business professionalism in their communication channel. The business should work towards identifying circumstances which may affect the performance of the business negatively. The procurement agency should discuss both actual and potential impropriety with the authorities. The business should promote actions that remove any suspicion of impropriety.
Public Relation Company should be hired by the business in order to manage its public reputation. Accountability and transparency has a huge impact on ethical practices of a business. As a result, competency is demanded from professionals (Grayson and Hodges 2017). Commitment in an organization is evidenced by development of business skills and knowledge which contributes positively to the employer, employees and suppliers. The business should encourage employees to conduct self-assessment with regards to ethical practices required. OA should develop a program that is designed to modifying old policies based in the existing demands of the business. Leaders in an organization are also tasked with the responsibility of mentoring other junior employees.
Potential Risks to Procurement Agency
The leadership of the organization should become actively involved in various business practices such as procurement. If this were the case for the CEO of JPMorgan, then the trader would have been identified early and minimize the losses that were incurred. The leaders are advised to empower, support and participate in ongoing ethical training (Goetsch, and Davis 2014). In addition, the business should undertake professional development goals for ongoing ethical training as well as adopting and promoting ethical standards of management.
The ethical basis of leadership and change is pegged on the three forms of ethical consequentialism. Altruistic consequentialism is often associated with Auguste Comte, a philosopher who suggested that altruism concerns the welfare of as a means to an end. It further implies that an action is considered to be ethically correct is it maximizes the important aspect for other people other than an instigator. In this case, the Rolls-Royce scandal in the UK failed to consider the beneficial consequences of other people than their own.
Their example negates the Theory proposed by Comte. Therefore, Rolls-Royce is recommended to ensure that it focuses on the interest of the customers, employees and shareholders before it engages in fraud, corruption and bribery. This is because all these unethical practices influence the reputation of the organization with respect to customers, employees, shareholders and public image. Altruistic consequentialism therefore justifies that the leadership at Rolls-Royce should act in the best interest of all other stakeholders (Rothaermel 2015).
When it comes to JPMorgan scandal, the traders should have considered the interest of the shareholders and customers before engaging in unethical practices that jeopardized the reputation of the firm to the public. Another theory in this category is Utilitarian consequentialism which suggests that an action is considered right if it maximizes the beneficial consequences of everyone. This implies that the Rolls-Royce should have considered the interest of everyone at the time they were engaging in unethical business practices.
By doing so, the company would have avoided the mistakes that it was found culpable of committing. Also, the JPMorgan scandal would have been completely avoided if the trader had considered the repercussion of his actions when he was caught (Robertson and Athanassiou 2009). Had he clearly evaluated the options before him, he probably would have chosen a different alternative that would not affect the company negatively.
The company should hire a public relation company as a recommendation to build its damaged reputation among stakeholders and public (Babalola, Stouten and Euwema 2016). The last aspect relates to individual consequentialism which indicates that an action should benefit the instigator and not everyone else. For this reason, leadership in both companies that experienced the scandal should have acted in their own interest rather than other stakeholders. Lack of a clear action taken on the culprits points to failure of business ethics.
This approach should not be recommended to the company since it supports the fact that the people responsible in the scandals were acting for their own interest. It implies that the scandals are justified and they are ethically correct which is not the case that should be followed based on accepted ethical business practices applied across the Globe.
Reference List
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