Executive Summary Of Business Ethics And Teleology Business Essay

In this report, an explanation of business ethics was done. Business ethics is described as the standards of conduct by which moral and acceptable decisions and actions are based. There exist various theoretical approaches to these standards of business moral behaviours. Relevant explanations were made on these theories ranging from consequentialism, utilitarianism, egoism, principilism and deontological approach.

Also, certain ethical issues greatly influence the operational activities of today’s business. Such issues include environmental issues, issues in product’s advertisement and marketing, consumerism and those attached to employment i.e. discrimination at work, labour utilisation and equal opportunities were explained. In the light of these issues mentioned, it is believed that when giving them consideration affect the realisation of business objectives. Areas of the business objectives that can be affected were also examined in this report.

There are various implications for a business and its stakeholders to operate ethically. This aspect was also looked into and finally, appropriate conclusion and recommendations made for today’s business.

INTRODUCTION

Government and other stakeholders of the business are emphasizing the relevance of ethical practices by business organizations. In recent years, we have seen many unethical behaviours taking place in the operations of certain businesses worldwide. This makes the society unsafe for upcoming businesses, healthy competition, and consumers.

Business ethical practice is an issue which is increasingly being given proper attention in the business world today. Businesses are recognising that more and more customers are becoming ethically conscious day-in-day-out. It is now being proved in recent studies that many investors use the ethical behaviour of a company in the society as a yardstick for choosing company to invest in. In order to remain sustainable and competitive in the global market, many businesses have recognised the need to adopt good ethical practice.

ETHICS AND BUSINESS ETHICS DEFINED

The concept of ethics and business ethics has been defined by various authors and accredited scholars. Ethics has been viewed as the conception of what is right and fair conduct or behavior (Carroll, 1991; Freeman and Gilbert, 1988). “Ethics is the concept of morals i.e. one’s ability to choose between right and wrong, good and bad, acceptable and unacceptable” (Desjardins, 2009; Valasquez, 2009). [1] 

The concept of ‘Business Ethics’ has come to mean various things to various people. According to Velasquez (2009), “business ethics is identified as a specialized study of moral right and wrong”. Garrett (1970) defines business ethics “as the studies of the impacts of individual acts, the firm, the business community, and society as a whole”. According to Weihrich and Koontz (1994), “business ethics is concerned with truth and justice and has a variety of aspects such as the expectations of society, fair competition, advertising, public relations, social responsibilities, consumer rights, and corporate behavior both within and outside the business walls”. “Business ethics is the standard of conduct and moral values which governs certain actions and decisions of an organization in its business environment. Such business actions and decisions are based on broad principles of integrity and fairness and stakeholders’ issues in the aspects of product quality, customer satisfaction, employee wages and benefits, local community and environmental responsibilities” (Boone and Kurtz, 2005).

For the purpose of this report, business ethics can be defined as the standards of conduct according to which business decisions and actions are made. Ethics can be described as a code of conduct or behaviour considered to be morally right. Business ethics entails the study of the extent of morality that exists in the activities and decisions of a particular business. Simply put, ethics in business is based on the facts or assertions of what is considered right or wrong, bad or good and moral or immoral. For example, an ethical decision of a business means doing what is viewed as morally right. Hence, business ethics provide a framework for the conduct of business affairs.

THE CONCEPT OF THEORETICAL APPROACHES TO BUSINESS ETHICS

Different philosophers and theorists have propounded various theories on what can be considered morally acceptable and unacceptable. Among these theories are: [2] 

Teleology (Consequentialist theories)

The consequentialists approach to ethical reasoning involves justifying an action by the outcomes or results achieved by such action. From this fact, it is evident that consequentialism is based on two principles:

What is morally right or wrong depends only on the outcomes or results of an act.

The more good consequences can be produced by an act, the better that act.

According the consequentialists, the results achieved by an action or a decision determines whether to categorize it as an ethical or unethical one. In assessing what the best consequences are, consequentialism is not very informative unless combined with other theory. Utilitarianism and egoism are the most influential forms of consequentialism.

Utilitarianism

In the utilitarian approach to ethical consideration, emphasis is laid on the amount of good and harm which might be derived from an action or a decision i.e. judge a particular action or decision by the total amount of happiness or unhappiness it creates. For example, when a company decide to move its manufacturing plant from one location to another, what would be the amount of good i.e. happiness caused and amount of harm i.e. unhappiness that the movement would create. The utilitarian approach to business ethics is also evident when analysing a particular action or decision on cost benefit basis. For example, when all the costs incurred from an action are added and compared with the resulting benefits. If the benefit is more than the cost, the action may be considered ethical.

According to a utilitarian, if the amount of good appears to outweigh the amount of harm in the course of movement, the decision is considered as being ethical. But if the reverse is the case, it is an unethical decision. A good reference for this is in the quote of John Stuart Mill in his Greatest Happiness Principles. He quotes that “Actions are right in proportion as they tend to promote happiness, wrong as they tend produce the reverse of happiness”. In a nutshell, utilitarianism says that an action that is ethically right in a given situation is the one that produces the most happiness and least unhappiness for the largest number of people. Relating the concept of utilitarianism to today’s business, an organization that weighs the amount of influences its decisions and actions has on the numbers of stakeholders and use it as a basis of moral standards is said to adopt a utilitarianism approach.

Egoism

Egoist theories define right and wrong in terms of the consequences to one’s self. In any ethical decision making situation, an egoist would weigh and choose among alternatives those that would contribute in the largest amount to his/her personal self interest. Before doing this, critical consideration would have been done in assessing the effects of such action or decision on his/her physical, mental or emotional welfare. An egoist theories is evident in today’s business where a particular organization base its ethical values on actions and decisions which it can to a very large extent, derive its primary purpose or objectives.

Deontological Theory

This theory is also referred to as “duty-based theory” of business ethics. This is because the word deontological was derived from the Greek word deon meaning duty. Rather than focusing and attaching what is morally right or wrong to the consequence that an action or a decision brings, deontologists based their decisions about moral right and wrong on broad and universally acceptable ethical values such as honesty, fairness, duty, respect for human beings etc. According to the deontological approach, some actions or decisions would be considered wrong even they created consequences that were good while others would be viewed as good even when bad results were achieved. For example, an auditor embracing deontological approach would likely insist on telling the truth about a company’s financial difficulties even if doing so might put the company out of business and his/her job on the line.

Summarily, deontologist denies that what ultimately matters is not the consequences of an action but the action itself. Deontology is mostly related to Immanuel Kant, a German philosopher. The deontological theory is evident in many businesses today where [3] organization critically put into consideration their business activities so as to be fair, accountable and transparent in their dealings with stakeholders. [4] 5

THE CONCEPT RELATIVE AND ABSOLUTE ETHICS

Relative ethics/relativism

This theory states that there are no absolute truths, validity or generally acceptable principles of ethics and that what is morally right and wrong largely depend on individual and the prevailing societal views and cultures. The fact is that the relativist believed that the criteria for measuring right and wrong change over time and vary across cultures. Simply put, relative ethics is the denial of ethical absolutism.

Relativism holds the view that morality is relative to the beliefs and norms of one’s culture i.e. categorizing an action as right or wrong depends on the moral values hold by the society in which such action is practice. An action may be classified as morally right in one society but morally wrong in another. In the light of this, the relativist argues that there are no broad and universally acceptable moral standards as these are dictated by what is being practice in the society. Summarily, what is right for one may not be right for another or as a saying goes “When in Rome, do as the Romans do” This is the idea behind the concept of relativism.

Arguments against and for relativism

One of the arguments against relative ethics is that some is the belief of some people that universal moral standards is possible to be adopted even if some moral norms and beliefs differ among cultures. Although, great attention can be given to cultural differences in moral practices and beliefs, some of these practices and beliefs that are morally wrong should be pointed out. For example, the practice of slavery before the civil war in various countries. Relative ethics fails to recognise the fact that the rationale behind certain societal practices may be governed by self interest.

Since the moral rightness and wrongness of action depends on what is prevailing in the society according to relative ethics, it follows that one must obey the norms of a society irrespective of whether such norms are generally wrong or right because to diverge from them is to act immorally. Does it mean that if one is part of a society that embraces racial discrimination, one should accept and promote it?

Also, it is possible that members of the same society hold different views and beliefs on a similar practice. How do one judge what is morally right or wrong in such situation? The concept of relativism does not address this situation.

Despite the criticism above, the concept of relativism still has some acknowledgement for addressing societal issues which are important. Relative ethics points out the fact that different societies hold different beliefs and these beliefs are influenced by culture. It also encourages individuals to explore the rationale for differences in belief while also challenging them to examine reasons for beliefs and values they hold [6] .

Absolute ethics/absolutism

The concept of absolutism explains that certain actions or decisions are absolutely right or wrong regardless of their outcomes or consequences as well as the rationale behind them. For example, eavesdropping to private matter might be considered to be always morally wrong even if the reason for doing such thing is good, and even if it leads to good result.

Simply put, ethical absolutism states that there is universal or one single moral code or standard that is absolute and which is equally applicable to everyone in the society at all times. From this fact, it is evident that absolute ethic is not dependent on individual views, existing cultures of the society etc.

Arguments for and against absolutism

While moral relativism is seen as only leading to problems and conflict in one’s life and in society, it was argued that moral absolutism will lead to no or little confusion i.e. when moral standard is based on general principles. The other argument for absolutism is that it is true and to some extent, seen in our everyday lives. For example, we condemn or criticize wrong actions and praise good ones. This is an evidence that moral standard which is based on general views exist.

Judging what is right and wrong on a universal moral standard is seen as criticizing other people’s culture. According to the relativist, this is intolerant as moral criticism of others is inappropriate. Another fundamental criticism of absolutism was its lack of human concern. Critics argued that trying to maintain order by forcing or frightening people into conformity by agreeing to a universal moral standard can destroy an individual potential for moral judgment. Many philosophers also argued to oppose the idea of absolutism in a situation of life and death. For example, suppose it is decided that it is absolutely wrong to lie under any situations, what if one is faced with the choice in which he/she must lie as a result of no other alternative.

ETHICAL ISSUES THAT CAN AFFECT THE OPERATIONAL ACTIVITIES OF TODAY’S BUSINESS

An ethical issue can be described as a problem, situation or opportunity which requires individuals, group or an organisation to choose among several actions those which must be evaluated as right or wrong, ethical or unethical. Hence, an ethical issue from business of point of view is a subject matter which raises questions about the standards of conduct or behaviours which are being adhered to by the company separate from the financial motives. In some situations, certain ethical issues may require the company to undertake behaviour which is unprofitable if it adheres to one set of standards or profitable if adheres to another set of standards. For example in the UK, while employing women at lower rates of pay than men may have been considered acceptable according to the business ethics of the 1960s, it was not by the 1970s and indeed the Equal Pay Act which was passed in 1970. Examples of ethical issues faced by today’s businesses are: [7] 

Environmental Issues

Environmental issue is becoming an area of increasing concern for every business nowadays. Considering the growing concerns of global warming, many businesses now strive hard to reduce their emissions of carbon dioxide and encourage the production of more energy-efficient equipments and appliances. The objective is to stabilize greenhouse gas concentration in the atmosphere at a level considered less able to trigger dangerous climate change. Other environmental issues that can affect the operational activities of today’s business are in the aspects of water utilization and pollution, responsible sourcing and waste management i.e. recycling. For example, the Coca-Cola Company has environmental issue in India when it was reported by some communities that its operation has led to shortage of water, water pollution and illegal toxic dumping. This really affects the operation of the company. Other recent issue that raised ethical questions is that of BP Gulf oil spills. [8] 

Employment Issues

These are issues relating to working for, or taking up a role in an organization. Examples of issues arising from discharging one’s duties in the workplace are:

Discrimination: This occurs when individuals are not being treated accordingly in the workplace. Examples of areas where discrimination may occur are in pay, promotion and performance evaluation. Also, racial and sexual discriminations in an organization create ethical issues which can in turn affect the operations of such organization. In the UK, employers must not discriminate base on the aforementioned factors and if found guilty in any aspect by any employer, such employer will be liable.

Equal Opportunities and Diversity: On the ground of being operating ethically, many organization give proper attention to equal opportunity during the process of recruitment, selection, staff training etc. They also promote diversity in every aspects of their business operation by employing and dealing with different people of different nationalities, backgrounds, cultures, people with disabilities etc. All these go a long way in influencing business operations. For example, failure to give equal opportunities may leads to high rate of staff turnover, reduce employee morale and the rate of absenteeism in an organization.

Advertisement and Marketing

The process of creating awareness for products and services, the means of distribution, the ways in which product/service are priced and the promotional strategies adopted are business area that generates potential ethical issues. For example, false or misleading marketing communications i.e. the use of deceptive sales tactics can jeopardize customer’s trust in a company. Also, charging unnecessary and unjustifiable high price or engaging in price fixing for a product or service may be considered unethical by buyers or users. These can affect business operations. Many businesses try to adopt ethical standards for advertising and marketing and this goes a long in influencing how they operate. [9] Labour Utilization

The manners in which labour is being used and paid for in the production of goods and provision of services constitute a major issue to business ethics. For example, utilising labor at below minimum wage, not complying with health and safety standards, poor working conditions etc are current ethical issues in today’s business. Also, it was revealed recently that the amounts of money paid as wages to workers by companies in some part of Asian and African countries are by far too low compared to the amount of labor utilized for production.

Consumerism

In the UK and other parts of the world e.g. US, consumers have rights to quality products and services. That is the reason why businesses, during their process of production give proper attention to methods adopted in the process of production and standards laid down by regulations. On the ground of being ethical in operation, businesses now engage in proper product labelling, packaging, honest advertisement, safe and quality products etc all for protecting consumer’s interest.

HOW BUSINESS OBJECTIVES ARE AFFECTED BY ETHICAL CONSIDERATION

Business objectives are the desirable end results which an organisation seeks to achieve. Generally, every business wants to maximize profit, assures adequate return on investments increase market share, achieve business expansion, reduce environmental impacts and meet or if possible, exceed stakeholders’ expectations. Ethical consideration affects business organizations of all sizes. Aspects of the business that generate concerns when considering ethical operation are discussed below: [10] 

With the rising demand for products and services as the world economy grows, businesses have a higher tendency of increasing sales and maximising profits as long as they meet the needs of customers. Modern businesses are increasing seeking ways of carrying out their operational activities in a manner that assures less impact on the environment. In the UK for example, it is known that the objectives of the construction companies are influenced by considering issues such as minimising waste, energy use, water utilisation, and managing emissions to minimise harm.

Also, maintaining an ethical workplace involves short-term costs against business objectives. Engaging employees and other stakeholder i.e. suppliers in ethical operation take time and money. Also in line with, people with disabilities cannot perform organisational tasks and take up more challenging roles as those without any disability. An organisation who on the ground of acting ethically employs more disabled employees can experience less job performance although might be viewed as doing the right thing. But the fact remains that realisation of objectives may be hindered by such organisation.

Every business wants to assure its shareholders adequate return on investment. Where a particular business consists of many unethically aware investors, considering ethical operation by such business might be seen as not relevant by the shareholders who have the voting right of seling their shares or even quit the business.

Another important way in which business objectives are affected by ethical consideration is that it influences business direction. At times, considering carrying out business operation in an ethical way creates confusion for new and young businesses on how to integrate this with the objectives which have already been set. As pointed out earlier in this report, consumers are increasingly becoming ethically conscious. In the light of this, many businesses end up setting priorities in the order in which they should not during the course of establishing their objectives.

IMPLICATIONS FOR A BUSINESS AND ITS STAKEHOLDERS TO OPERATE ETHICALLY

Build sales: For an organization conducting its business operation in an ethical way, there is higher tendency for it being the most preferred choice for customers especially as most people now base their purchasing decisions not only financial factor but on other relevant issues where being ethical is part of. [11] 

Increase revenue: Obviously when ethically concerned customers are aware that a particular business conducts its business affairs in an acceptable manner, they tend to patronize such business and as sales increase, business revenue increases and more profits generated. According to the KPMG report titled “Ethical Business and Sustainable Communities” (May 2002), it was revealed that 91% of consumers are more likely to purchase goods or services from businesses that the consumer sees as acting ethically. [12] 

Attract investment: It has been proved in the UK that long-term investors such as pension funds who run large investments for millions of ordinary people believed in company who does not carry out its business operation only on financial motive, but also on social and ethical issues. Apart from this, the numbers of ethically aware investors have grown in recent years. According to The Independent on Sunday 17 January 2009, it was revealed that 85 per cent of equity ISA investors were considering investing in ethical funds and 67 the previous year. This figure shows how relevant it is for business to consider operating ethically.

Competitive advantage: An organization operating ethically has a higher probability of gaining competitive advantages over its rivals who doesn’t. In today’s global market, it is necessary for businesses to implement good ethical practice to remain sustainable and competitive. Many businesses use sound ethical practice as a strategy to combat competitors.

Promote employee loyalty and motivation: By treating staff accordingly and providing equal opportunities in various business areas such as pay, promotion and job appraisal. The rate of staff turnover will be reduced to zero or a minimum, staff will be loyal to the organization and motivated to discharge their contractual duties towards the realisation of set objectives.

Improve the image/reputation of a business: In the world of today’s business, ethical operation is one of the criteria of choosing responsible business. For example, responsible sourcing of raw materials which Tarmac Construction Company has always embraced enabled it to possess unique image in the eyes of its stakeholders.

Operating ethically also helps to protect brand value, improve corporate citizenship and consumer confidence in a business. [13] 

Promote trust in a company: Clear ethical practices create trust in the company, both internally and externally. An organization that demonstrates good ethical values has a high probability of achieving customer loyalty and trust.

According to Holme (2008), “it has been also been found that suppliers are confident in, and always looking to supply organizations with good ethical practice that they can trust”.

A “STAKEHOLDER” is anyone who influences or can be influenced by the activities of a business. Stakeholders are classified as internal i.e. the people within and who carry out day to day work of the business e.g employees. And external stakeholders i.e . those that purchase, use and influence the sale of products or services of a company e.g. customers.

EMPLOYEES: It is not only on the organization that operating ethically has effects. Employees are key internal stakeholder of any organization. Organizational ethics such as promoting equal opportunities, giving proper attention to employee health and safety, not engaging in any act of discrimination, provision of quality working conditions etc make the workplace an interesting place to be and also enhance job performance. As pointed out earlier, employees will be motivated and remain loyal to the organization.

SHAREHOLDERS: For the shareholders, their dividends may be reduced in the short-run due to both financial and non-financial costs incurred from ethical operation, but in the long-run as people become aware of the business operations, revenue will increase and more dividends will be distributed to shareholders. Also, from a shareholder’s point of view, a business that is operating ethically provides higher assurance on prosperity. That is the kind of organization which customers, employees, suppliers etc want to deal with. Demonstration of good business value is achieved by shareholders.

CUSTOMERS: Customers will have confidence in the business. Without any benefit of doubt, they will patronize the company’s product or service thereby contributing to the business success. As pointed out earlier, customer retention will be achieved and more potential customers will be attracted to the business. [14] 

CONCLUSION AND RECOMMENDATIONS

This report has revealed that good ethical practices by businesses are very significant to the realisation of organizational success. A business organization that embraces ethical ways of conducting its business affairs is more likely to achieve employees’ commitment, loyalty and satisfaction which in turn lead to quality of works and increased performance than unethical one. Such business will also portray good organizational value in the eyes of the stakeholders. It is also concluded that adopting good ethical behaviour will increase being competitive, business sales, profit, customers retention and loyalty and investments to mention a few.

Since the relevance of business ethics cannot be downgraded in today’s business world, it is highly recommended that business organization embrace ethical practices. Businesses should handle ethical issues such as discrimination and equal opportunities in the workplace in the best possible manners. Obviously business do operates in vacuum, environmental issues such as energy utilisation, minimising waste and recycling should be properly addressed so that business operations will not be negatively influenced by stakeholders.