Abstract
Managers in the day-to-day running of affairs in business environment are normally faced with different challenges that vary in nature. It is of great importance that their action or decision be favorable to both the company and the society.
In this manner, the company improves its prospects in capturing new market segments, and the society will have confidence in the company. In essence, social and ethical practices may not be profitable or beneficial to the company in the short run, but will have lasting effects in the long run (Averch & Johnson, 1990).
Discussion
Managers pursue multiple objectives and multiple sets of priorities. They need to make choices from these goals after careful considerations.
Therefore, the choices they make affect the ability of employees, customers, suppliers, stockholders and anyone else with interests in the organization. So often managers have to decide who has the right to what and when. No matter what they do, the actions are either of benefit or of detriment to people.
Ethics as applied to management refers to the concept of interactive responsibility; it deals with what is good or bad, or what is right or wrong (Drucker, 1990). It can also be described as the study of how our decisions affect other people or as the study of people’s rights and duties and the rules that people apply in making decisions. In business, we cannot avoid ethical issues just like in other areas of our lives.
In business, most ethical issues will be categorized in these four levels: Social level, which deals with the basic institutions in society, like the role of the government in the market place.
Stakeholders’ level, which deals with employees, suppliers, customers in the way company’s decision affects them. Internal policy level, essentially deals with the nature of company’s relationship with its employees and managers. Personal level, that involves the ground rules of individuals, companies and social behavior.
The laws of the country prohibit any acts that are sufficiently hurtful to others and therefore laws offer guides to ethical behavior. Nevertheless, distinction must be made between what is illegal and what is unethical. Not everything that is unethical is illegal. For example, the law has limits regarding honesty. If one picks a lost item and keeps it, he probably has not done anything illegal but his act is unethical.
If a clerk steals from his company in order to feed the poor, he has done an illegal thing but for ethical reasons. Decisions of ethics are quite difficult but all managers need to know is that ethics goes beyond the minimum requirements by law and by market economy (Buckley & Casson, 1976). There are very many unethical things that can be done in business and yet there is no law against them!
Business ethics also called managerial ethics is the application of ethical principles to business relationships and activities. Managers who run business are human beings who despite the laws set cannot behave the same regardless of the circumstances. Managers face many ethical dilemmas (two or more situations) where both seem right but at the same time, conflicting.
Talking to the manager one of the major pharmaceutical company about managerial ethics, he said that managerial ethics normally apply in the following areas: relationship of the firm to the employees in terms of how they are to be treated and how they are paid.
Secondly is the relationship of the employee to the firm in terms of how employees should behave in the firm. Thirdly is the relationship of the firm to the environment, where ethical issues arise in how the firm relates to the various elements of the environment e.g. customers, competitors, stockholders dealers and the community.
Many industries and organizations companies have formal, written codes of ethics that provide specific guideline for managers and other employees. However, the question is whether when individuals violate the code of conduct, the organization enforces it (Demsetz, 1979)
Many companies in an attempt to manage ethics have developed specific codes of ethics. These establish guidelines for ethical decision making in business. Areas covered may be truthfulness in advertising, improper use of company assets political contributions, payments in connection with business transactions, conflict of interest, trade secrets etc.
There are advantages for organizations to form industry associations to develop and promote improved codes of ethics. It is difficult for a single firm to pioneer ethical practices if its competitors undercut them by taking advantage of unethical shortcuts. If ethics are to be improved, it is very important for top executives to support and emphasize ethical behavior by adhering to ethic themselves and train their staff in ethics.
The tools of ethics include ethical language, which normally refers to values, rights, duties and rules. I questioned one of the workers of an investment company concerning this tool as a way of improving work relationship and he responded by saying that values are permanent desires that seem to be good. He also added that rights entitled a person to do something.
On the other hand, since duty is an obligation that takes specific steps, in general, all the traits combined improve work relationships as well as productivity. Common morality as a tool is the body of rules covering ordinary ethical problems, which essentially are the rules that we live by most of the time.
During this century, there has been much change in what society expects of its institutions and in what managers’ regard as the proper roles in organization. This change has gradually developed into a new concept of corporate social responsibility.
Increasingly many managers are adopting the view that besides the obligations they have to their organizations, they have a personal responsibility to the society. Managers are increasingly being held accountable for the social effects of their actions. The questions however remain of where such social responsibility begins and where it ends (Trevino & Nelson, 2007).
The issue of corporate social responsibility has been debated for many years but it has never been clearly defined. However, from the various arguments raised, certain things can be said about social responsibility. One of them is that it deals with corporate conduct in respect to the broader societal values.
The other fact is that it questions the responsibilities of business to the entire society. Despite the lack of an accepted theory of corporate social responsibility, it is obvious that CSR draws on the fields of ethics and morals, which are basic to most cultures.
In other words corporate social responsibility may refer to the moral and ethical content of managerial and corporate decisions, that is to mean the values used in business decision making over and above the requirement of the law and market economy (Stephen, Dirk, & Daniel, 2007).
Closely related to social responsibility is the concept of social responsiveness, which simply means the ability of a corporation to relate its operations and policies to the social environment in ways that are mutually beneficial to the economy and the society. The difference between social responsibility and social responsiveness is that the latter implies actions and the ‘how’ of enterprise responses.
Business organizations do not operate in a vacuum but have to interact constantly with society. A business organization is a part of society. It interacts at a primary level with groups such as employees, distributors, consumers, stockholders, banks, suppliers and competitors.
At a secondary level, it interacts with such institutions as governments, local communities, media social pressure groups, business support groups and the public.
With all these interactions, business cannot afford to go on with their businesses without responding to issues affecting these groups. Some people argue that there is no such thing as corporate social responsibility (Adams, 1965).
Others argue that CSR must and will eventually result in long run profits, while others feel that modern organizations must undertake social responsibility regardless of the profit. Whatever the argument are, the question of accountability arises!
Two areas of corporate accountability exist: Conventionally which shows that management is professionally responsible to the board of directors while the directors run the corporation for the shareholders who are the providers of capital to their corporation.
It is logical that the shareholders expect a fair financial return for their investment. Although through separation of ownership and control shareholders do not run the company, thus by implication therefore management has the responsibility to ensure that the shareholders receive an adequate return.
Broadly and more modern view, corporations should be accountable to employees, customers, suppliers and the state. In short, corporations should respond to forces external to it but should be those that are of value to it. It is from these external forces that the corporation draws its existence.
How then can it operate without of them? CSR involves decisions – the corporation world is decision oriented and corporations have an impact on society through these decisions.
CSR therefore raises the question of rightfulness of decisions and further of which decisions are more right. So social responsibility goes beyond short run profitability, merely meeting minimum legal and market directives do not constitute social responsibility.
CSR is very subjective in nature and is influenced by the economic and social system within which it operates (Arrow, 1951). From an interview with a branch manager in one of the banks, he said benefits from social responsibility do not directly accrue to the firm making the expenditure on social responsibility.
CSR is hence a system holding that the corporation should respond to the moral and ethical values of society within which it is licensed and which it serves. A given corporation will draw from and shape the values of the society from which it draws its existence. CSR tries to fuse social values with profit maximization goals.
Many organizations have thus been evaluating the benefits and problems that are associated with corporate social responsibility, some business organization argue for and others against.
Those supporting say that since businesses create some problem they should solve them as well as the fact that organizations owe society for supply of resources. Those arguing against say that social responsibility gives corporations too much power, and that it will decrease profits thus contradicting the real reason for firms’ existence.
According to the research, there are different areas of social responsibility that an organization can exercise. Such undertakings include non-business related activities such as giving donations, being involved in preservation of the environment (ecology) and ensuring environmental quality.
These included things like noise control and aesthetic improvement, consumerism like control of harmful products, community needs like improvement of health care and education, government relations like restriction on lobbying and internal relations, labor relations like expansion of employee rights, and stockholder relations like full financial disclosures.
Companies often are in a position to do most of this things but the challenge to most corporations is the absence of immediate benefit.
Study has also shown that there is a certain pattern of response to social demands, hence organizations can respond to social demands in three strategic approaches. The first one is adoptive strategy; this involves changing only when you are forced to do so by the society. This is, complying with the law. The law gives business a general guideline of what is expected by a society.
Legal compliance is the minimum that is expected by a society. Organizations that use this strategy adopt or react to the environment only when there is strong outside pressure. For example, producers of body perfumes have to be ozone friendly.
The second one is pro-active strategy; this involves an attempt at shaping the environment. The company using this strategy tries to manipulate the environment in ways that will be to their advantage. The steps they take may or may not be to the interest of the society in the long run, e.g. paying off politicians to avoid scrutiny.
The final one is interactive strategy, when a company is able to anticipate environmental changes and blend its own goals with those of the society, then it is said to have taken an interactive strategy. This involves reducing the gap between public expectations and business performance.
This calls for knowhow and skills on how to manage the company’s social relations with external forces, which may affect the company. The firm tries to interact with the surrounding social environment in ways that will be mutually beneficial.
Conclusion
In conclusion, an ethical principle is a modern concept that provides businesses and organizations with corporate priorities. They are of significant influence to the way the organizations operate and especially its survival in the near future.
Customers are increasingly showing interest in doing business with those organizations that demonstrate responsibility and ethical practices. Those organizations that fail to achieve this suffer the consequences in many different ways, either by lose of market share, which will reduce revenues and in the long run, may put organization out of business.
One of the senior managers of the bank I interviewed suggested that the modern business world needed to incorporate the four Ps in their ethical management and leadership. They include purpose, people, planet and principles. These represent the four things required for success in any modern business venture. In practice, this model represents the personality of a good ethical organization, manager or leader.
Therefore, ethics and ethical decisions are of utmost importance in running of any organization, business ethics is what separates the successful giants and losers in the modern corporate world and the decision a company takes in ethical matters can be binding for or against the company.
References
Adams, J. (1965). Inequality in Social Exchange. Advances in Experimental Social Psychology, 2(1), 267.
Arrow, K.J. (1951). Social Choice and Individual Values. New York, NY: John Wiley.
Averch, H., & Johnson, L.L. (1990). Behavior of the firm under regulatory constraint. American Economic Review, 52, 1052-1066.
Buckley, P.J., & Casson, M. (1976). The Future of Multinational Enterprise. London: Macmillan.
Demsetz, H. (1979). Ethics and Efficiency in Property Rights Systems. Lexington: Lexington Books.
Drucker, P.F. (1990). Ethics in Management. The Practice of Management, 124-125.
Stephen, G., Dirk, D.S., & Daniel, S. (2007). Managing social and ethical issues in organizations. New York, NY: IAP.
Trevino, L., & Nelson, K.W. (2007). Managing business ethics: Straight talk about how to do it right. New York, NY: Hoboken.