Literature Review
Discuss about the importance of ethics plays an important role in maintaining sustainable profits in a business.
The importance of business ethics cannot be undermined in today`s world. Business ethics plays equal important role as sustainable profits do for an organisation. Competition in corporate world made ethics a major factor in calculating the success of any organisation.
The individual, employee, or society depends on organisation to get benefit from ethics. Ethics tries to make distinct approaches to classify wrong and right. The importance of ethics plays an important role in maintaining sustainable profits in a business. Organisation regulated by morals and ethics are profitable in long run and attains sustainable success.
It becomes important to resolve ethical dilemma occurring due to dynamic environment in both inside and outside the organisation. Therefore, organisations can focus on smooth working. Ethical behaviour is a self-regulating behaviour that affects both personal as well as organisational behaviour. Ethical leadership affects the organisational culture as leader leaves imprint marks for employees. This organisational culture affects the working of employees (Morrison, Wilmshurst, and Shimeld, 2018).
There is no golden rule to solve the identified ethical issue. A manager has to evaluate number of alternatives to solve the problem. Finally, the manager evaluates the alternatives in the light of dynamic external environment and resolves the ethical problem with most appropriate alternative.
According to Trevino, and Nelson, (2016), ethics is a set of moral rules based on what is morally good or bad. Business ethics are the moral principles that guide the behaviour of the organisation that how a business should act. Business actions in an ethical manner mean differentiating the action as either wrong or right. Ethics provides a set of moral principle and code of conduct as guidelines to operate a business properly.
According to Spencer, (2017), competition among the organisations no more focuses on earning more and risky profits. Business ethics has changed the criteria of competition. An organisation who follows ethics and accomplishes its corporate social activities wins support from government as well society. Operating every activity of business in an ethical manner has become a moral obligation. There are situations in which the government forces the company to achieve higher ethical standards because the company or the industry is among the top profit earners (Carey 2018).
According to Williams, Agle, and Gates, (2018), some business practises are legal but not ethical. For example- charging $5000 for a medicine, which costs only $500, is legal but not ethical. Especially when high prices of medicine prevents the people to buy. It is important for a business to make fair dealing and win long-term credibility through trust. Unethical practises may question that how business treats its customers and employees. For example- A business that underpays the customers and accumulate huge profits may force the public to make a wrong perception about the company. In the above example, the customers are not treated very well. Most relevant theory is right ethical theory in this regard. Today`s customers demand to be fairly treated because as per Right Approach, the customer has its respect and dignity.
Impact of Business Ethics on Credibility and Image
According to Hill, (2017), company`s image is built by customer trust and loyalty because the customer believes that company can rely on the behaviour so that long term interest of the customers is satisfied. To achieve credibility, which can give economic value to both product as well as company`s image. The degree of credibility depends on how far the activities of the business are profitable to the public. By following ethical standards and code of conduct, business can focus on creating long-term value in the eyes of employees, investors, and customers. Long-term growth focuses on long-term ethical vision to benefit various stakeholders. Long-term profitability with low returns is more acceptable than short-term profitability with risky returns. For example- Goldman sacks, an investment banker wants maximum returns without focusing on current performance. Long-term ethical decisions have positive impact on the society and government. It assists the organisation to maintain low regulation cost, high sales, high goodwill, and satisfied work force (Bell, and Hindmoor, 2018).
The prevailing necessity to fulfil ethical responsibility has awakened the customers. Consumers have become more active about quality of goods that company offer. Social media is an instrument through which unethical scandals of the organisation spreads like a wildfire and reaches customers quickly spoiling the reputation of the organisation. An organisation incurs huge cost to resolve unethical cases in the court. It becomes very difficult for the organisation to retain its reputation and image.
However, high standards of ethical practises need efficient decision-making skills. The company may starts using expert insights and training methods to involve the ideas of employees, so that employees feel empowered and motivated benefiting the organisation by achieving goals. However, it is not at all necessary that applying ethical standards in an organisation will always lead to happiness among the employees. The common good approach theory focuses on achieving overall benefit rather than considering happiness and respecting the employee choices (Schwartz, 2016). Whereas utilitarian theory focuses on decisions which virtually guarantees happiness among all.
From large company to small-scale organisations, there is a less possibility of non-occurring of ethical issues among the employees. There is huge number of employees working in an organisation. Every person has different perception, which sometimes creates clashes among the employees.
Various ethical dilemmas which occurs due to management issues are-
Employees Behaviour and legal issues- When the supervisor discriminates the employees based on gender, complexion, and religion. Moreover, conflicts occurs when people with different perception meets. These rivalries create jealousy among the employees. There is a legal state of affairs for the unethical behaviour of supervisor (Agnihotri et al., 2012). Organisation needs to be aware of anti-discrimination rules. A business must not receive any compliant from customer or employee for breaking disabilities act. Harassing behaviour of co-workers is another diplomatic situation faced by manager.
Ethical Dilemmas in Business Management
Employee working conditions- Employees have the right to remain safe and secure even during the working hours. Chemical exposures in industries create respiration problems.
Taking credit for other`s work- Employees work in a team when there is huge project. The project is divided into various tasks and the task is allotted to a team. The task may need innovation ideas. Not every employee in a team contributes equally to the idea formulation. Nevertheless, whole team is rewarded when the idea is successful.
To solve the above unethical acts, manager has to undertake various steps-
These management ethical dilemmas test manager`s ability that how efficiently manager deal with challenges.
Identifying the ethical problem- Initially, a manager has to focus on identifying the prevailing ethical issue. One wrong deed by an employee affects both internal as well as external stakeholders. The manager should be competent enough to understand the urgency of the situation and make decision accordingly. Therefore, the decision does not harm any employee.
Identify an alternative course of action and discuss the situation with the subordinates- The solution to every problem can be in more than one way. However, ethics clearly defines the difference between good and bad. Every alternative course of action focuses on the situation and the outcome. Accepting any solution depends on what is the nature of situation and how relevant is the solution to the problem given.
Selecting the best alternative-, Theory of utilitarian focuses on the effect of decision made by the manager. The decisions related to problem should not harm any employee directly or indirectly. The manager can use different approaches such as debate moral choices, integrating ethical decision with strategic management balance sheet approach. In Balance sheet approach, the manager evaluates the pros and cons of the decision (Muda et al., 2018b).
Manager should establish ethical committee- Manager should appoint a retire employee to guide the new comers and freshers. This committee will assist the fresh employees to cope up with the ethical standards followed in the organisation. Providing appropriate ethical training to the employees reduces the occurrence of ethical issues. Experimental learning is an effective way to delegate training to employees. Example- role-play training may involve scenarios related to misappropriation of company funds, improper organisation`s compliance.
Set expectations- Develop a policy based on the company`s philosophy, mission statement and code of conduct. The rules in the code of conduct must be incorporated in performance management programs (Webley, 2011). It will help employees to hold the responsibility to maximise the efforts so that, they can achieve rewards. Employees remain motivated when rewards recognition emphasis on ethical performance.
Resolution of Ethical Dilemmas in Business Management
Ethical violations such as discrimination, poor working conditions, and corruption are not at all acceptable on the workplace. Here are some examples of corporate that suffered due to non-fulfilment of ethical requirements. Corporate scandals are-
Corruption allocates opportunities in such a way that is unfair. Corruption is a broad range of Government Issue. Corruption has been increasing since last three years (George, 2010). For example- FIFA corruption scandal, where leaders received bribes to give broadcasting rights to country who have not applied initially. Reportedly, FIFA president Sepp Blatter was involved in the scandal. The marketing executives paid more than $150 million as a bribe to favour broadcasting rights. Various federal association took investigation steps for the FIFA scandal to find out the culprits (BBC, 2015).
Corruption ruins the company`s image. Corruption leads to diminishing business growth when the public trust is at risk. Corruption can take many forms such as bribery, extortion, graft, and embezzlement. If corruption exists in business, professional misuse the resources for personal gain that spoils business credibility and profit. For example- Teva Pharmaceutical Industries that is owned by Russian subsidiary, Teva agreed to pay more than $519 million as fine and penalty to settle civil and criminal charges because it bribed foreign government officers in Mexico, Ukraine, and Russia (Gassmann et al., 2018). Finally, Teva has completely modified its governance program on each level. Teva also terminated complex business relationships with third party. It dismissed some employees that were the part of bribery (Gassmann et al., 2018).
Environment Business Ethics- Environmental ethics focuses on the responsibility to prevent and protect the environment especially in which it works. The existing awareness of exploitation of environment of the society forces the organisation to conduct its activities environment friendly (Traer, 2018). Companies operating all over the world can make strategies to protect the environment and natural resources that they use to generate profit. For example- Volkswagen designed and installed software “defeat devices” in about 600000 vehicles all over the world by which vehicles started causing emissions, violating EPA policies (Environment protection agency). The VW discussed its reorganizational plan in which CEO stated that deficiencies in processes have supported misconduct by the individuals and employees (Muda et al., 2018a). As a result, CEO Martin Winterkorn resigned and several managers were terminated. The fine and penalty of $20 billion was imposed for breaking Clean Air Act (CAA) (Cruden et al., 2018).
Misconduct in the work place can take place through various actions. Some of the common actions may be sexual harassment, discriminatory practises based on age, gender, and race. Unethical actions range from corporate theft to sexual harassment (Karandikar et al., 2018). For example- Although Uber has achieved great success but now CEO of Uber, Travis Kalanick revolted that to remain on this position has become difficult. Uber ignored corporate governance blindly to achieve growth and valuation and insulted ethical norms by hiding in the name of innovation. After the CEO`s resignation, various practises reviewed as sexual harassment, disobedience of government regulations, corporate theft lawsuit, and a toxic corporate led some executives to leave the organisation (Bell, and Hindmoor, 2018).
Organisation should strive to maintain discrimination free environment where employees can feel safe and secure while working. Any trusted employee can file a complaint about sexual harassment. The ethical implication of sexual harassment questions whether it is acceptable or unacceptable in the workplace (Wisse et al., 2018).
Ethical theory that is acceptable for cross-cultural environment is the foundation of decision-making. Each theory emphasizes different points. The following two theories are-
Deontology- This theory emphasize on people`s obligation to fulfil duties of decision making. This theory states that a person will follow his obligation towards another individual or society because fulfilling and upholding the ethical correct act is the duty of the individual. Every theory has its own pros and cons. Deontology has many positive attributes, but it also has some negative side (Yu, 2015). Negative side of the theory states that there are some illogical bases for deciding duties of an individual. For example- if a person is running late for the meeting, he has to drive car fast. How far is speeding car favourable to uphold the traffic rules (Muda et al., 2018)?
Utilitarianism- This ethical theory applies to every cross-cultural environment. The theory states that every decision maker should focus on moral benefit to everyone. Any decision should not harm anyone in and around the organisation. The selected decision should give greatest benefit to the maximum people. Under utilitarian, a person has to perform the act, which benefits most people, regardless of self-interest and personal gain. Both act and rule can have disadvantages (Wisse et al., 2018). Meanwhile, experts can use their experience to predict the outcome. However, business has to face various uncertainties. No one can certain his/her prediction that the decisions made are accurate. Uncertainty can lead to unexpected outcomes. The decision made for accomplishing great good for all may appear to be unethical as time passes. Utilitarian decision-making concentrates on achieving maximum good. However, measuring gain in terms of money, material gain, intangible gain such as goodwill and happiness is very difficult (Breslin, 2018).
Some of the ethical issues occur due to difference in cultural environment. The reason of occurrence may be caused due to difference in culture, difference in laws and rules of conduct.
One problem in dealing with differences in culture represents values and pattern of feeling and acting in a known group. While other nations have modern infrastructure, developed infrastructure. This modern culture represents how people interact with each other. The objective of identifying nation`s value can be achieved by studying the every dimension of culture. For example- some cultures totally prohibit giving gift. However, in societies like china greeting elder people with small present or gift is a symbol of respect. The gift may remain with the giver if the receiver does not feel comfortable. It is a situation where basic etiquettes differ.
Conclusion
In today’s era, fulfilling ethical requirements has become obligation for the business. Ethical practises help the organisation to create long-term credit standing in the corporate world. Manager should create confidence in its stakeholders. The trending competition in the corporate world focuses on long-term ethical actions. Some organisations have their establishments all over the world and they hold a huge team for accomplishing different projects. It is obvious that there can be a difference in perception of different people. A conflict in interest is a story of every other organisation. Various ethical theories define the way to operate successfully in cross-cultural environment. Utilitarian decision maker focuses on good for all. Every organisation should follow this theory.
Some of the problem associated with ethical violation are corruption, bribes, theft, and sexual harassment. These problems ruin the image and reputation of the company. Moreover, ethical issues is a dilemma or conflict between two different possible perceptions. Fundamental issues such as conducting the business affairs with dishonesty and spreading distrust among customer`s through false serving of products. Diversity issues such as employing and preferring a particular gender in a workforce. Many organisation faces compliance and governance issues related to environmental laws, civil rights laws, and monetary reporting statues. For example- To accomplish American compliance, an Aluminium Company should ensure that no company would neither ask employee to break any law nor go against company Morales.
To solve the problems, an organisation should implement strict rules and regulation to accomplish its ethics. However, focusing only on ethics will not allow the organisation to meet its daily goals and then sustainable profits. An organisation can establish a particular ethics committee, which regulates the training of new employees. A retired employee can be appointed, so ethical manager will reflect reports of ethical requirements, which the organisation needs to fulfil. For resolving employee related problems, organisation should give equal opportunity to participate in operational missions without discriminating on the bases of race, gender, and nationalism.
References
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BBC. (2015) Fifa corruption crisis: Key questions answered. [online] Available at: https://www.bbc.com/news/world-europe-32897066 [Accessed 14/07/18]
Bell, S. and Hindmoor, A. (2018) Are the major global banks now safer? Structural continuities and change in banking and finance since the 2008 crisis. Review of International Political Economy, 25(1), pp.1-27
Breslin, C. (2018) The Advantages of Being Ethical. [online] Available at: https://yourbusiness.azcentral.com/advantages-being-ethical-17579.html [Accessed 01/07/18]
Capell, B., Tzafrir, S. S., Enosh, G. and Dolan, S. L. (2018) Explaining sexual minorities’ disclosure: The role of trust embedded in organizational practices. Organization Studies, 39(7), pp. 947-973
Carey, J. (2018) Moral Obligation in Business Law. [online] Available at: https://smallbusiness.chron.com/moral-obligation-business-law-78910.html [Accessed 01/07/18]
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Morrison, L., Wilmshurst, T., and Shimeld, S. (2018) Environmental Reporting Through an Ethical Looking Glass. Journal of Business Ethics, 150(4), pp. 903-918
Muda, R., Niszczota, P., Bia?ek, M., and Conway, P. (2018a) Dieselgate: How the Investigation, Prosecution, and Settlement of Volkswagen’s Emissions Cheating Scandal Illustrates the Need for Robust Environmental Enforcement. 36, p. 118
Muda, R., Niszczota, P., Bia?ek, M., and Conway, P. (2018b) Reading dilemmas in a foreign language reduces both deontological and utilitarian response tendencies. Journal of Experimental Psychology: Learning, Memory, and Cognition, 44(2), p. 321.
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Trevino, L. K. and Nelson, K. A., (2016) Managing business ethics: Straight talk about how to do it right. UK: John Wiley & Sons
Webley, S. (2011) Corporate ethics policies and programmes: UK and Continental Europe survey 2010. London: Institute of Business Ethics
Williams, R. N., Agle, B. R., and Gates, D. (2018) Teaching business ethics: current practice and future directions. UK: Routledge
Wisse, B., van Eijbergen, R., Rietzschel, E. F. and Scheibe, S. (2018) Catering to the needs of an aging workforce: The role of employee age in the relationship between corporate social responsibility and employee satisfaction. Journal of Business Ethics, pp. 1-14
Yu, Y. M. (2015) Comparative analysis of Jones and Kelley’s ethical decision-making models. Journal of Business Ethics, 130(1), pp. 573–583
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