The Elasticity of Business Ethics

Running head: The Elasticity of Business Ethics The Elasticity of Business Ethics Abstract Given the competitiveness in the world market, many are tempted to go outside of the rules and regulations of society in order to get ahead. Although many would like to think that qualities such as honesty and credibility are first and foremost in the minds of people, temptations have lured some to act irresponsibly to get more of the almighty dollar. Recent scandals have proven that good ethical and moral values are becoming more the exception rather than the rule. This paper will address the following ethical and moral questions: What is ethics and morality in business. How far have we come as a country in relation to business ethics? Why society is becoming more aware of corporate behavior? What measures are taken by businesses to become a better corporate citizen? Business practices came under fire when America's seventh largest firm, Enron, collapsed due to unethical accounting strategies. I feel this created a domino effect and was the beginning of our current crisis. Now there are companies folding one after the other, large organizations in the US collapsed or filed for bankruptcy cover and one case even implicated the famous home economist, Martha Stewart for insider trading. The various deceitful activities of some larger companies resulted in widespread public mistrust of business practices and principles. This paper will concentrate on some of the ethical and moral issues that must be addressed when trying to understand the state business ethics. 1. What is ethics and morality and how do they relate? 2. What happened in business ethics before the 1960s to the present time? . What are factors that could change ones views of a business’ ethical behavior? 4. What are interactions between business and society that alter societal expectations? What is ethics and morality and how they relate? When considering the difference between ethics and morals, consider what a criminal defense lawyer does for a client. Though the lawyer’s perso nal moral code likely finds murder immoral and reprehensible, ethics demand the accused be defended to the best of his ability even when the lawyer knows the party is guilty and that a freed defendant would potentially lead to more crime. Legal ethics must override personal morals for the greater good of upholding our justice system in which the accused are given a fair trial and the prosecution must prove the accused guilt. Ethics is the branch of philosophy that deals with morality. Ethics is concerned with distinguishing between the good and evil in the world, between right and wrong human actions, and between virtuous and nonvirtuous characteristics of people. Ethics means thinking critically about your actions and about their motives and their consequences (Dictionary. com, 2009). Do I want to be an honest, honorable, spiritual, respectful, or loving person? You might hold an ethical position that it's wrong to lie. A time may arise where it may be necessary to bend the truth or sometimes tell a â€Å"white lie†. For example, if you have plans to deploy to Iraq on a sensitive mission and you want to keep your trip a secret for obvious reasons. If someone asks you about those plans, you may need to lie to protect the integrity of the mission. When it comes to making ethical decisions, I take into account my very personal feeling that there is a principle greater than myself. With that said, morality is the subset of ethics dealing in the philosophical study of interpersonal relations and their ethical implications. It has to do with the critical analysis of our roles in society, our â€Å"duties† and â€Å"rights†. Morals are not personal decisions, except in whether you agree with them or not. Morals are rules that a group has decided are best for that group. (Borade, G, 2009). Americans have several versions of what is moral and immoral, Catholics have lists of sins, Christians have the Ten Commandments, Buddhists has a set and so forth. You may strongly agree with them, or trongly oppose them, but they still exist, and people will judge your conduct against them whether you agreed with them or not. Building on these definitions, we can begin to develop a concept of business ethics. Business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions within a company (Simpson, C, 2004). Business ethics boils down to knowing the difference between right and wrong and choosing to do what is right. The phrase ‘business ethics' can be used to describe the actions of individuals within an organization, as well as the organization as a whole (Lovetoknow. om, 2009). What happened in business ethics before the 1960s to the present time? Now that we have defined terms, we can now discuss the progression of business ethics in the United States over the years. The study of ethics in North America has evolved through five distinct stages: (1) Before 1960, (2) the 1960s, (3) the 1970s, (4) the 1980’s and 1990s to present (Ferrell, 2008). Business Ethics Prior to 1960 Prior to 1960, the United States questioned the concept of capitalism. The 1920s brought about the ‘living wage’ through the progressive movement. In the 1930s came the New Deal, which blamed business for the country’s economic woes and businesses where asked to work more closely with government to raise family income. By the 1950s, the New Deal evolved into the Fair Deal by President Truman which addressed civil rights and environmental responsibility as ethical issues that businesses had to address. Until 1960, ethical related issues were addressed in religious institutions of all faiths. Religious leaders raised questions about fair wages, labor practices, and the morality of capitalism. Religion applied its moral concepts to business as well as government, politics, the family, personal life, and all other aspects of life (Ferrell, 2008). Business Ethics in the 1960s During the 1960s, the antibusiness attitude emerged as critics attacked the vested interests that controlled the economic and political side of society, the so called military-industrial complex. The 1960 saw the crumbling of the inner cities and the growth of environmental problems such as toxic and nuclear pollution and waste disposal. A rise in consumerism by individuals, groups, and organizations began to protect their rights as consumers. In 1962, President John F. Kennedy delivered a â€Å"Special Message on Protecting the Consumer Interest† where he outlined the four basic consumer rights: the right to safety, the right to be informed, the right to choose, and the right to be heard. These four rights later came to be known as the Consumers’ Bill of Rights. After Kennedy came Lyndon Johnson and the Great Society, which extended national capitalism and let the business community know that the government would be responsible for providing the citizens with a degree of economic stability, equality, and social justice. Any business practice that could destabilize the economy or discriminate any class of citizen began to be viewed as unethical and unlawful (Ferrell, 2008). Business Ethics in the 1970s In the 1970, business ethics developed as a field of study. Business professors began to teach and write about corporate social responsibility. Companies became more concerned with their public images and realized that they had to address ethical issues more directly. The Nixon Administration’s Watergate scandal brought attention to the importance of an ethical government. The Foreign Corrupt Act was passed during the Carter administration, making it illegal to for U. S. businesses to bribe government officials of other countries. Numerous ethical issues emerged during the late 1970s such as bribery, deceptive advertising, product safety, and the environment issues. Business ethics became a common expression and researchers sought to identify ethical issues and describe how businesspeople might act in a situation (Ferrell, 2008). Business Ethics in the 1980s In the 1980s, business ethics is acknowledged as a field of study. Five hundred courses in business ethics were offered at colleges across the country. Leading companies such as General Electric, Chase Manhattan, General Motors, Atlantic Richfield, Caterpillar, and S. C. Johnson and Son, Inc viewed business ethics as a major concern. The Defense Industry Initiative on Business Ethics and Conduct (DII) was developed to guide corporate support for ethical conduct. The DII established a method for discussing best practices and tactics to link organizational practices and policy to successful ethical compliance. In the 1980s, the Reagan-Bush eras brought about the policy of self-regulation rather than regulation by government. Tariffs and trade barriers were lifted and businesses merged. Corporations that were once nationally bases began operating internationally. The rules of business were changing at an alarming rate due to fewer government regulation imposed during the Reagan-Bush era (Ferrell, 2008). Business Ethics in the 1990s In the 1990s, President Clinton continued to support self-regulation and free trade. However, it also took unprecedented government action to deal with health issues. These issues included restricting cigarette advertising, banning vending machine sales and banning the use cigarette logos during sporting events. The Federal Sentencing Guidelines for Organization (FSGO) was established by Congress and set the tone for organizational ethnical compliance programs in the 1990s. FSGO broke new ground by rewarding and penalizing companies for their ethical compliance programs. Even though the FSGO has made enormous strides it will not be enough to prevent serious penalties. Companies must develop cooperate values, enforce its own code of ethics, and strive to prevent ethical misconduct (Ferrell, 2008). Business Ethics in the 21st century Although business ethics in the 1990s appeared to be an institutionalized concept, evidence emerged in the 2000s that business executives and managers had not fully embraced the public desire for high ethical standards. One such executive, Dennis Kozlowski, former CEO of Tyco, was indicted on thirty-eight counts of embezzling $170 million of Tyco funds and netting $430 million from improper sales of stock. Author Anderson, a â€Å"Big Five† accounting firm, was convicted of obstruction-of-justice conviction for shredding documents related to its role as Enron’s auditor. The reputation of the firm was destroyed and lost all their clients and eventually went out of business. Author Anderson was also questioned for their involvement in audits involving Halliburton, WorldCom, Global Crossing, Dynegy, Qwest, and Sunbeam for their questionable accounting practices. These examples of misconduct increased public demand for improved standards in business. In 2002, Congress passed the Sarbanes-Oxley Act, which made securities fraud a criminal offense and strengthened penalties for corporate fraud. It created an accounting oversight board for greater transparency in financial reports to investors and other interested parties. Top executives are required to sign off on their firms’ financial reports. Company executives must now disclose stock sales immediately and prohibits companies from giving loans to top managers. The Sarbanes-Oxley Act and the FSGO have institutionalized the need for top manager to discover and address ethical and legal risk. Business leaders should view that ethical misconduct as the greatest danger to their companies. Ethical disasters can be damaging to company’s reputation and will significantly have an effect on their bottom line (Ferrell, 2008). What are factors that could change ones views of a business’ ethical behavior? In today’s uncertain business environment, traumatized by countless corporate scandals has brought a lot of attention to the social and ethical practices of business. The highly televised, Enron scandal was exposed when the company filed for bankruptcy. The degree of fraud impacting investors, employees, and others became known to the public. Business criticism is more prevalent than ever because people are more affluent, educated, and better inform because of the access to information. Twenty-four hour news coverage, investigative news programs, the internet, the revolution of rising entitlement mentality, the rights movement, and a philosophy of victimization. Businesses now, more than ever, must realize that there is a more informed society and businesses are being watched (Buchholtz, 2009). What interactions between business and society alter societal expectations? Business is increasingly held to greater standards of social performance, reflecting an imbalance between its traditional conduct and the expectations of society. A corporation commitment to its social responsibilities will go a long way to shape societal approval. There are four levels commitment in social responsibilities. First and foremost, economically, businesses strive to make a profit, maximize stakeholder wealth and value, create jobs for the community, and create goods and services to the economy. Legally abide by all laws and government regulations. Ethically, follow standards of ethical of acceptable behavior as judged by stakeholders or any one other interested party. Finally, philanthropic responsibilities refer to activities not required of business but promote human welfare or goodwill. In my opinion, this level of commitment has the greatest impact on society’s view of a company (Ferrell, 2008). The uses of these levels of responsibilities are attempts by businesses to meet societal expectations and become a better corporate citizen. In conclusion, understanding the meaning of ethics and morality and how they relate is important when trying to understand why people act or react in a given situation. Knowing how business ethics has evolved over the years and how far we still must go to create a happy median between business and society.. As technology becomes more available, society is more aware of corporate social responsibility. With this information, consumers are better able to make informed discussions on which companies to do businesses with. Finally, economic, legal, ethical, and philanthropic interactions between business and society will alter societal expectations of a business good or bad. References Buchholtz, C. (2009). Business and Society: Ethics and Stakeholder Management. (7th Edittion ed. , pp. 3-7). International: South-Western. Ferrell, F. F. (2008). Business Ethics: Ethical Decision Making and Cases. (7th Edition ed. , pp. 11-14). Boston, New York: Houghton Mifflin Company. Simpson, C. (2004, October). Should I or Shouldn’t I? An Ethical Conundrum. 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