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According to Farber (2003, p. 3), ethics refers to a code of moral principles which guides the behavior of an individual or a group. Ethics lay more emphasis on what is right or wrong. As a result, ethics plays a significant role in setting standards on how one is supposed to act when making decisions. In the course of executing their duties, managers are faced with numerous challenges.
They have to deal with various unethical issues that arise on a daily basis. According to Hancock (2005, p. 8), managers are required to adhere to pre-determined managerial ethics in their decision making process.
Parnell (2009, p.99) defines managerial ethics as acting in an honest, fair and legal manner in the course of executing various duties. Adherence to ethics in an organization contributes towards the development of a strong organizational culture.
In executing their duties, managers are required to ensure that their actions contribute towards the shareholders wealth maximization as they are agents of the shareholders. Additionally, the management team should not make decisions which are detrimental to the society.
In light of this, the author presents a possible situation related to managerial ethics. Solutions to deal with the situation presented in relation to a relevant ethical theory are illustrated.
As an investment manager working in a manufacturing plant in China, there is a high probability of being faced with numerous unethical issues which can hinder my decision making. According to Hancock (2005, p.34) firms are required to act ethically when undertaking their investments.
Considering the fact that it is the firms’ objective to maximize profit, the management team may decide to expand its operations through internationalization. One of the strategies worth considering is foreign direct investment in which case a new manufacturing plant would have to be established. The United States is one of the investment destinations that the firm may consider.
In its operation, the management team recognizes that the firm has to act in an environmentally sustainable manner while handling the existing challenge of climate change. As the firm’s investment manager, it will be my role to conduct an analysis on how the firm will establish the plant successfully.
From experience, firms investing in the US manufacturing industry are required to install standard pollution control equipment within their plant. This is in line with the country’s environmental provisions to minimize climate change. Implementation of the equipment would approximately cost the firm $5 million.
Upon presenting this requirement to the management team, there is a high probability of most of them arguing that the firm could be saved from incurring the $ 5 million by not investing in the equipment.
One of their reasons could be that establishing the firm in the US would benefit the local community through creation of employment considering that the region in which it intend to invest is characterized by a high level of unemployment.
Failure to install the equipment will result into high levels of carbon dioxide emission which has a potential of adversely affecting the region’s fishing industry. This is because the carbon emitted from the industry will result to acidic rain.
Most of the rain water may find its way into lakes and other water thus affecting marine life such as fish. For example, the acidic rain water may tamper with the normal PH levels in the water bodies thus killing the fish (Rampur, 2011, p.1).
What is likely to happen?
As the investment manager, the management team would inquire on the most appropriate way of dealing with the situation. In my opinion, I would argue that the firm has to act ethically by adhering to the stipulated environmental laws.
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Therefore the firm is under an obligation to install the pollution control equipment. On the other hand, some of the managers may argue that investing in the equipment would make building of the plant expensive. Additionally, some may argue that they have an obligation to maximize the firm’s profit and also the shareholders wealth. This has a potential of causing intense divisions within the firm’s management team.
From the situation presented above, the importance of being guided by ethics when making decisions in organizations is illustrated. This means that one should not let him or herself be negatively influenced by colleagues and superiors when making decisions. However, one should act independently by making decisions which are for the well being of the society and the organization.
The resultant effect is that it will be possible to entrench ethics within an organization hence thus increasing the effectiveness of dealing with ethical dilemmas which may damage the firm’s reputation and hence its performance.
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Daft, R. (2011). Understanding management. Mason, OH: South-Western Cengage Learning.
Farber, D. (2003). Restoring trust after fraud: does corporate governance matter? Michigan: Michigan University.
Hancock, J. (2005). An investor’s guide to ethical l and socially responsible investment funds. London: Kogan Page.
Parnell, J. (2009). Strategic Management. Mason, OH: Cengage Learning. Robbins, S. & Coulter, M. (2002). Management. New York: Prentice Hall.
Rosen, F. (2003). Classical utilitarianism from Hume to Mill. New York: Routledge.
Rumpar, S. (2011). Facts about acid rain. Web.