You are on page 1of 11

Case 1: The Gift 1. Ethical Issue in this case.

Initially, an ethical issue is a problem or situation which requires a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical). The ethical issue addressed in this case is the acceptance of gift (a gold bracelet with wifes initials and the date of the christening set in diamonds) from a party (Greek client) to another (me, account executive). The tricky question remains; accepting the gift and violate the companys policy or returning the gift and insulting the customer. The ethical theory which I think is more relevant to this case is Virtue Ethics. The virtue ethical theory judges a person by his character rather than by action that may deviate from his normal behavior. It takes the persons morals, reputation and motivation into account when rating an odd and unacceptable behavior that is considered unethical. To act from virtue is to act from some particular motivation; thus to say that certain virtues are necessary for correct moral decisions is to say that correct moral decisions require correct motives. The drawback of this ethical theory is that it does not take into account a persons change in moral character. For example, a scientist who may have made mistakes in the past may honestly have the same late night story as the scientist in good standing. Neither of these scientists deliberately copied, but the act was still committed. Alternatively, a researcher may have a sudden change from moral to immoral character may be ignored until a considerable amount of facts builds up against him or her.

2. Absolute and Relative Ethics compared and contrasted. Values are what anyone cares about and believes is meaningful. Generally, these values are what provides the passion in a persons life and gives them hope and a reason for being. Values can be divided into two subcategories: Absolute and Relative. Absolute values deal with conventional ethics. In absolutism, everything is certain. Conversely, relativism is more subjective and includes concepts such as utilitarianism and idealism. Relativism emphasizes the idea that nothing is certain. These two ideals are extremes when approaching reality and values. An ethical absolutist believes that there is a single or universal moral standard that is equally applicable to all people at all times and each society must stick to them. There is one moral law, one universal code and one eternal standard that govern all people. According to Immanuel Kant, a German philosopher, to possess moral worth is more important than to possess intelligence, humor, strength or any other talent of the mind or body. He feels that moral worth has absolute value. Kant supports absolutism whereas John Stuart Mill, a British philosopher, supports relativism.

Relativists feel that situations arise, can alter case and make exceptions to any rule. Everyday standards are satisfactory to live by but exceptions are always welcome since they are good and right. The judgment of good and bad is based upon the result of consequence of the act rather than the act itself. Contrary to ethical absolutism, ethical relativism claims that if two individuals disagree on a moral view, both can be right since moral views are not right or wrong. Many people, however, feels that the best solution lies as a happy medium that lies somewhere in the middle. I agree with this concept. Relativists see happiness and idealism which according to me is important but it is also essential to seek the greatest good for the greatest number of people. Absolutism, in contrast, has absolute certainty. I think that it is also vital to have certain realities that one can look forward to relying on.

3. Reason for not accepting the gift and why I agree with it. Receiving gifts might be considered as favoritism among employees and conflict of interest may arise. Company employees must avoid any situation that conflict with the law and their duty to act in the best interests of the company. I agree with this view. To prevent the appearance of a conflict of interest, the company prohibits anyone from personally accepting anything of value from our suppliers or customers. In other words, employees should not take gifts, gratuities or loans, or accept offers of entertainment, use of facilities or professional services. Staffs who work directly with the Company suppliers and contractors have a special responsibility to avoid actual or apparent conflicts of interest. Personally, I think that employees should not solicit or accept gifts from dealers in order to evade the emergence of favoritism which often raises serious questions of business ethics and potential violations of law. The following reasons should be reflected upon when assessing the morality of accepting a gift: o What is the value of the gift? That is, is it substantial enough to influence ones decision? o What is the purpose of the gift? Is the gift intended or accepted as a bribe? o What are the circumstances under which the gift was given? Was the gift given openly, was it given to celebrate a special event (Christmas, birthday or store opening)? o What is the position of the recipient of the gift? Is the recipient in a position to influence its own firms dealing with the giver of the gift? o What is the accepted business practice in the locality/country? Is the gift part of an open and well-known practice? o What is the companys policy? Does the company forbid acceptance of gifts? o What is the law? Is the gift forbidden by law? For example, a law prohibiting gifts in sports recruiting?

The fact that the gift was given to the accountant executives wife does not avoid the business policy on gifts; in fact, the gift-giving may make things worse because involving the account executives wife seems to be an obvious attempt to do just that. Many corporate policies will state that it is also improper for the immediate family of the employees to accept gifts from business partners that would be forbidden to the employee. Consequently, it is a good idea not to accept any unusual gift from a client without checking companys corporate policy first. If the gift must be declined, a simple explanation of company policy will usually do to prevent hurt feelings.

4. Need for serving of public interest and development of trusting relationships with a wide range of stakeholders. Stakeholders are individuals or groups that have interests, rights or ownership in an organization and its activities. The primary stakeholder has interest in how an organization performs or interacts with them. These stakeholder groups can benefit from a companys success and can be harmed by its mistakes. The secondary stakeholders are also significant as they can take action that can damage or assist the organization. In order to serve the stakeholders in an ethical and social manner, more and more organizations are adapting the model of corporate social responsibility (CSR). The latter is the idea that those who run corporations can and should act ethically and be accountable for their actions.

Secondary Stakeholders Media Governments (Regulatory Agencies)

Primary Stakeholders Political Action Groups/ Activities Unions

Supplier s

The Organization

Employee s


Nongovernmental Organizations

Stakeholders of Organization

An organization is said to have possessed a self-regulating mechanism that guides, monitor and ensure its adherence to law, ethics and norms in carrying out business activities that ensures the serving the interest of all external and internal stakeholders when it builds ethical and social elements in its operating philosophy and integrate them in its business model. Total corporate social responsibility can be subdivided into four criteria; i. Economic

The business institution is, primarily, the basic economic unit of society. Its responsibility is to produce goods and services that a society wants to maximize profits for its owners and shareholders. The purely profit-maximizing view is no longer considered an adequate criterion of performance in the world in general for treating economic gain as the sole social responsibility can lead companies into trouble. ii. Legal

Legal responsibility defines what society deems as important with respect to appropriate corporate behavior. Businesses are expected to execute their economic goals within the legal framework. Legal requirements are imposed by local councils, state and federal governments and their regulating agencies. Legal sanctions may include embarrassing public apologies or corporate confessions. iii. Ethical

To be ethical, organizations decision makers should act with equity, fairness and impartiality, respect the rights of individuals and provide different treatments of individual only when differences between them are relevant to the organizations goals and tasks. Unethical behavior occurs when decisions enable an individual or organization to gain expense of society.


Discretionary responsibilities

Discretionary responsibility is purely voluntary and guided by an organization's desire to make social contributions not mandated by economics, laws or ethics and is the highest of social responsibility because it goes beyond societal expectations to contribute to the communitys welfare. The activities include generous charitable contributions that offer no payback to the organization and are not expected.

5. Recommendations. Business owners wishing to avoid disputes over ethical violations must focus on creating a written ethical code that is clear and understandable (in plain English). The code should establish specific procedures that employees can follow if they have questions or complaints. It should assure employees that their jobs will be secure and that they will not face reprisals if they do file a complaint. Business owners should also explain to employees why these ethics policies are important to the company. A well-written code might include example to clarify what the company considers to be acceptable and unacceptable conduct.

The companys code of conduct: o Confidentiality The business is committed to preserving the highest degree of integrity in all our dealings with potential, current and past clients, customers, suppliers and associates both in terms of normal commercial confidentiality and the protection of all personal information received in the course of providing the business services concerned. o Conflict of interest Due to the sensitive nature of our particular consultancy services, well not provide a service to direct competitor of a client, and we generally avoid any dealings with competitor companies even after the cessation of services to a client. o Gifts & Entertainment

The company has a zero tolerance policy for receiving gifts and entertainment when there is any chance that the purpose is to: unacceptably influence the recipient; violate the companys policies; or violate the law. But there are some countries where refusal of a gift would cause professional embarrassment or be a cultural insult to the person offering it. In this case, the best practice is to discuss the companys policy with foreign officials prior to the meeting and in the event the associate feels compelled to accept the gift on behalf of the company, it should be reported to the manager and turned over to the company instantly. o Financial controls The companys books and records must accurately reflect all company funds, assets and transactions. Entries into company records must be made promptly without false or misleading information. The integrity of our accounting practices requires that supporting documents are accurate and complete.

6. Role of company as moral agent. More and more corporations are seen not only as profit-making entities but also as moral agents that are accountable for their conduct to their employees, investors, suppliers and customers. Companies are required to obey the laws and regulations that define acceptable business conduct and although individuals may attempt to abide by their own values and moral philosophy as employees that are supposed to act in the companys best interests. Thus, the individual as a moral agent has a moral obligation beyond that of the corporation because it is the individual, not the company, who can think responsibly through complex ethical issues. French (1984) regards the corporate entity itself as a moral agent that is logically distinct from its members. French writes corporations can be full-fledged moral persons and have whatever privileges, rights and duties as are, in the normal cause of affairs, accorded to moral persons. Though clearly not a person, a corporation can be considered a societal moral agent that is created to perform specific functions in society and is therefore responsible to society for its own actions. Because corporations have the characteristics of agents, responsibility for ethical behavior is assigned to them as legal entities as well as to individuals or work groups they employ. A corporate culture without values and appropriate communication about ethics can facilitate individual misconduct. The roles of corporations as suppliers of goods and services, as employers and the impact of corporate products and activities, make it reasonable to talk about their moral responsibility. Corporations exercise social and economic power and can cause harm to individuals and social institutions.

7. Critical ethical assumptions/values shown by business to current business issue. Business gifts are meant to create goodwill and positive working relationships and not to gain improper advantage with customers or facilitate favorable treatment from governmental officials. o Showing honesty, integrity and openness in consumer relationships, addressing warranty and guarantee claims in an open transparent manner and involving the company in some kind of social welfare causes is an ethical business practice that many are yet to follow. o Whether to accept moral responsibility of onsite accidents, spills, leaks and disasters and whether to make product recalls if certain harmful information about them comes to light are ethical issues that all businesses must be prepared for. o Unethical business practices like dumping good at loss making prices just to earn market shares or to oust a new competitor from business, colluding with competitors to fix higher prices, using high pressure selling tactics, using deceptive advertising, etc. are also to be looked at. o Some stronger ethical issues are related to practices that are not easily detected, like releasing products that have built in obsolescence (to generate further demand for future products) and indulging in accounting manipulations to generate secret reserves or to show higher or lower profits as per convenience.

Case 2: Bonus Case 1. Ethical issues in this case. Business ethics theories include the moral principles or codes a company applies to ensure that all individuals working in the company act with acceptable behavior. Business owners and managers can use an ethics theory they deem most appropriate for use in their operations. A few different business ethics theories exist such as utilitarian, justice, common good and virtue approach. These theories can be used on their own or in combination with each other; each theory includes specific traits or characteristics that focus on specific ethical principles that can help companies correct business issues. The ethical issue in this case is that Bill-the sales director of the third region and one of the firms biggest money makers-is trying to bribe the marketing manager into doing things his way and in return Bill will propose him and his people for every award the company has to offer. Besides, he says that hell personally give the manager monetary bonus based on his teams performance yearly. In my opinion, utilitarianism best applies to this case. The utilitarian approach focuses on using ethical actions that will promote the most good or values among a society while limiting the amount of harm to as few people as possible. This theory is typically seen as the oldest one as it was circulated by many philosophers, for instance, Jeremy Bentham, James Mill and Mills son John Stuart Mill. This theory can be used in business to ensure the outcomes of various situations help the maximum amount of stakeholders.

2. Deontological and Teleological theories. A teleological approach to ethic focuses on the outcomes of actions. A teleological (or consequentialist) ethical framework judges behavior according to its outcomes or consequences. A person might violate the law (behave unethically) because it will result in a positive outcome. This can lead to the view that ends justify the means. A utilitarian teleological perspective suggests that outcomes or consequences of an action should be evaluated in terms of its effects. The desired action should be one that creates positive outcomes for the greatest number of people. From a teleological standpoint, stealing for example could not be judged to be inherently right or wrong independent of the context and the predictable consequences. In contrast, the basis for the deontological ethical framework is a system of rights, obligations and duties. This approach is dependent upon certain obligations between actors (e.g. contractual commitments) or between organizations and actors (e.g. the Equal Employment Opportunity Commission and workers). Laws, regulations, moral rules and codes can be used as the standards

for determining if behaviors are ethical. The codes of ethics for many professionals associations can be viewed as reflecting this ethical sensibility. Duties in the deontological tradition are most often associated with obeying absolute moral rules. Hence, human beings are morally required to do (or not to do) certain acts in order to uphold a rule or law. The rightness or wrongness of a moral rule is determined independent of its consequences or how happiness or pleasure is distributed as a result of abiding by that rule or abiding by it. 3. a) Reasons to go along: Ethics is an everyday occurrence in the corporate world as well as ones personal life. In this particular case, Bill-the sales director of the third region is offering the decision maker including his team a monetary bonus based on his their performance yearly out of his own pocket. This can be a good motivating factor as it will influence them to work harder and more efficiently on one side. Moreover, Bill will be recommending the decision maker and his team for every award the company has to offer. b) Reasons not to go along: To be ethical involves handling others both employees and customers correctly and equitably. In this particular case, it is Bill who lays down the law. The fact that Bill has proposed to give the decision maker monetary bonus out of his own pocket is unethical and considered as bribing. The act clearly shows that it is intended to alter the behavior of the recipient. Bribery is a crime and can result in severe penalties. Besides, there is no worker participation; that is, no employee involvement and empowerment. Improvement of the employer-employee relationship is essential to both parties for several reasons. First, employee productivity increases when employees are treated with respect by employers. Second, employees may find that increased ethical behavior on their part actually results in higher compensation. For example, many companies are involved in relationship marketing; which is the process of creating and maintaining long-term relationships with customers. Relationship marketing, which can help a company increase its profits, requires the cooperation of employees. Employees who perform their jobs carefully and thoroughly are frequently rewarded with higher wages.

4. Range of competing business objectives and limitations of short-termism. Business objectives are the strategic goals of organizations. Conversion to measurable targets occurs through a cascading process that flows from corporate objectives, to division or strategic business unit objectives, to operating plans for execution. In their forms, business objectives therefore run the executive suite to the front lines, concurrently affecting all management layers and operations. A general manager may plan for short-term gains and search for ways to

synchronize processes with cost and profit goals. A director of operations deals with division and plant-level issues for improving profits for the strategic business unit. Short-termism is the nuisance of long-term economic prosperity. It has put innumerable corporations in danger by derailing growth strategies, hindering long-term gains and sowing the seeds of the high-risk tactics. A definition of short-termism must therefore be viewed not just in terms of the prioritization of short-term, but as actions taken in the short-term which damage the long-term effectiveness of the firm and hence its value. This short-sighted philosophy is detrimental to long-term market health because: a) It hampers long-term gains by incurring too costly, too frequent trades fees; b) It distracts policies that could lead to the creation of a responsible corporate culture and practice and; c) It harms the interests of long-term oriented investors.

5. Personal opinion. In this case, I would have explained to Bill that what he is suggesting can only work for some time and there should be more joint consultation. This involves seeking acceptable solutions to problems through a genuine exchange of views and information. Consultation does not remove the right of management to manage-management must still make the final decisions but it does impose an obligation that the views of employees will be sought and considered before the final decision is taken. An arrangement can be reached where both parties will gain. Effectively involving employees in the market performance of the firm requires a culture that encourages employee involvement and empowerment, communication from the top down about the importance of employees involvement, a willingness to share market-related information throughout the organization and informal or formal cross-functional teams.

6. Development of mechanisms for achieving employee involvement and empowerment. No organization can taste the fruit of success until and unless its employees are with it in full spirits. An organization needs to understand that its employees are its biggest strength and bigger weakness too. Involvement and Empowerment inspire a sense of belongings among the employee. It is a long term promise done both by the organization and employee to each other that they will leave no stone unturned to take the organization to new heights. Share ownership also leads to increased employee commitment. Job security is ensured through employee involvement. Reduced absenteeism and increased quality of products and services can be assured. A two way

communication process i.e. the flow of information should be to and fro. There should be monthly meetings within the organizations where in everyone has the right to put forward his or her views, give suggestions. Employees are the biggest asset for any organization and if well taken care of, this asset will prove useful in the longer run. It is a long time investment which would bear sweet fruits for sure. Employee involvement increases efficiency by maximizing the contribution of individual employees to the company whereas employee empowerment is seen as a way of improving job security and increasing the skill set of the employees.

Conclusion Business ethics comprises the principles and standards that guide behavior in the world of business. Investors, employees, customers, interest groups, the legal systems and the community often determine whether a specific action is right or wrong, ethical or unethical. Although these groups are not necessarily right, their judgments influence societys acceptance or rejection of a business and its activities.