Business ethics Essay
In one of two dilemmas Mr. Owen is facing, he decided not to inform the guests about the construction. In narrow view, he is responsible for profit maximization for his shareholders. Even though he was not honest to his guests, his action is considered as morally right since different situation makes different choice according to Ross. In egoism view of consequentialist theory, Mr. Owen promoted long-term interest to himself and stakeholders. Giving a note of apology and offering $100 dining credit are considered as the duties of reparation from Ross’ seven Prima Facie obligations.
The action the writer took of ‘inform the guests’ in broad view of corporate responsibility respects the stakeholders. It shows honesty which is considered as ethical in virtue theory, and theories of Kant and Ross. From Ross’ theory, the loyalty is also mentioned in duties of fidelity from 7 prima facie obligations. In long-term view, the shareholders will be satisfied with increasing profit. In utilitarianism of consequentialist view, more people are considered to be happy.
The proactive action of providing accurate information on advertisement lets the hotel be an ethically good business based on Solomon’s 3’C’s of business ethics. 1. The first dilemma Mr. Owen is facing is about ‘to inform’, ‘not to inform’ the guests in advance about the roof construction or ‘cancel the summer season’. If Mr. Owen decides to inform the construction to the guests or cancel the summer season, the guests will be happy about his honesty to them and loyalty about the hotel advertisements which stated ‘a peaceful and quiet location on the beach’.
On the other hand, shareholders will not be happy about his action, since their profit might not be maximized. Many guests probably will cancel their reservations and decide not to come to the hotel, and the revenue of the hotel in the summer season will be dropped. Not only the shareholders, employees, retailers and local community will also not happy with his action since they might lose the opportunities to earn money in the summer season. In that case, Mr. Owen will not take any social responsibility about his stakeholders.
However, if he decides not to inform the guests about the construction, by contrast, shareholders will be happy about his action since he took the responsibility of profit maximization, while customers will be unhappy with his morally wrong action which lack of honesty and loyalty. The second dilemma is between ‘to listen to the Housekeeping Director’ and ‘postpone the construction’. The Housekeeping Director (Mrs. Smithson) would be happy with Mr. Owen’s action if he respected her opinion and showed any proper reaction about it immediately. However, guests and shareholders will be happy with his action if Mr.
Owen considered postponing the construction until after the busy summer season since he did not want to disturb the guests and give their right to be respected, and take responsibility of profit maximization for his shareholders. 2. Mr. Owen’s action is considered as an ethical manner based on narrow view of corporate responsibility, consequentialist and non-consequentialist theories. Since managers are employed by shareholders as a result of the separation of ownership and manage, therefore the duty of the manager is set by shareholders, and this will be maximizing profit for shareholders within legal limits.
, which is called ‘Narrow View’ of corporate responsibility, provided by Milton Friedman. In ‘Narrow View’, Mr. Owen has the responsibility for its shareholder. By deciding not to inform the guests in advance about the construction, he can to avoid the negative result that the revenue of the hotel would be decreased from cancellations of reservations after the guests know about the construction. (Friedman 1970) (Friedman 1962) The shareholder value maximization is sometimes in conflict with prima facie duties.
Even though his action can be considered as dishonesty because he did not let the guests know about the construction, according to perspective of W. D. Ross who provided seven prima facie obligations, his dishonesty can be broken in different situation, for different reason. For Mr. Owen, it is the purpose and responsible to consider his shareholders and their interest in ethical decision making. To satisfy his shareholders, he had to be dishonest to his guests. (Alpaslan 2009) (Ross 1988) (Shaw, Barry, & Sansbury 2009, p.79)
In egoism view from consequentialist view, Mr. Owen’s action is morally right since he promotes long-term interests. From deciding not to inform the guests about the construction, he can bring more long-term benefits. Nowadays, there are many CEOs who have been successful businesses for a long time, consistently applied the principle of self-interest and the principles of egoism. The hotel will be still operated as usual, and not only his shareholders but his employees, retailers and other businesses in its local community will also get benefit from his action.
Organizations have ethical obligations to their employees, which includes the right not to be fired without just cause, the right to due process and fair treatment etc. Even though there would be many reasons for downsizings or layoffs. In Mr. Owen’s case, he has to downsize number of employees depends on the business forecasting in the summer season. If the forecasted occupancy is very low, the hotel will need fewer employees to work. In egoism view, it can be a reason for him not to inform the guests about the construction because he wants those experienced employees to stay with him, and does not want to fire them.
(Woiceshyn 2011) (Shaw, Barry, & Sansbury 2009, p. 59) (Carroll & Buchholtzl 2008) As the business of hotel will also influence on it retailers since the hotel will order the amenities and ingredients depends on its occupancy. The guests will still spend money in other business around the hotel and economic situation of its local community will be increased. For Mr. Owen, in egoism view, it was one of his long-term benefits to let his hotel still be operated to generate revenue, and in consequentialist view, his employees, retailers and local community of the hotel will be able to keep earning money.
Therefore, in long-term, Mr. Owen can take the responsibility of profit maximization for his shareholder, he is also mindful of obligations to other corporate stakeholders such as employees, retailers, and local community. (Audi 2009) From his decision to give the guests a note upon their arrivals to inform them about the construction, and to offer $100 dining credit in the hotel’s restaurant to apologize for inconvenience, his action can be considered as morally right in non-consequentialist view. Mr.
Owen was afraid of guests’ complaints from construction. Since compensation is required when the opportunity to complain or a simple apology is not enough, he decided to use a note and dining voucher. However these are not only for the way to prevent possible guests’ complaints but also the way for reparation for the previous wrongful action. According to seven prima facie obligations of Ross, his action to give the note for apology and $100 dining voucher is considered as duties of reparation for his previous wrongful actions.
He was trying to compensate guests’ inconvenience to the guests. Even though his other actions were considered as ethically right only in consequentialist view only, by giving note for apology and offering dining voucher, he tried to take an obligation on the process not only on the outcome or the result, and responsible for his previous wrongful actions. (Cranage & Mattila 2005) (Ross 1988) 3. Even though the action of Mr. Owen was also in an ethical manner as mentioned above, the writer will inform the guests about the construct in advance.
And this action is also in an ethical manner based on broad view of corporate responsibility, consequentialist and non-consequentialist theories, and Solomon’s hybrid theory. Corporate social responsibility which refers to actions taken by firms with respect to their stakeholders including employees, local communities, and shareholders is now one of the most significant corporate trends. In broad view of corporate responsibility, it is said that as a part of society, responsible corporate has a duty to care about justice and stakeholder rights.
Based on these considerations, the writer will give the guests the rights to know about the truth and fact about the construction, and from doing that customers will be happy to see the loyalty to them and to the advertisement said ‘a peaceful and quiet location on the beach’. This action is considered as moral manner according to Immanuel Kant who provided a non-consequentialist approach to ethics, telling the truth is an absolute obligation to people. Honesty was also mentioned in ‘virtue ethics’ which defined those aspects of human beings that are generally considered morally right or wrong.
The Duties of fidelity which is one of seven prima facie obligations of principles in morality of W. D. Ross is also supports this action as an ethical manner, since it prevents the duties of fidelity to be broken. (McWilliams, Siegel & Wright 2006) (Trevino & Nelson 2007, p. 33) (Kant 1996) (Shaw, Barry, & Sansbury 2009, p. 88) Nowadays, it is pretty obvious that corporate reputation is doing a significant role of one of contributions to long-term competitive advantages of organization. From the customers’ point of view, corporate social responsibility has positive influences on customer satisfaction and loyalty.
And now customers care much about organizations operated ethically. In the Beach View Hotel’s case, customers will be more interested in the Hotel and more likely to spend their money in it after they are informed about the construction in advance which is in moral manner. And the reputation of the hotel will be naturally increased by those guests and their positive impression on the Beach View Hotel. From the shareholders’ point of view, reputation can stand for a valuable asset it is often defined as a valuable, unestimatable and intangible resource which may provide the organization competitive advantage.
Shareholders generally recognize the positive influence of reputation on possibility to gain profitable return. In consequentialist view, in long-tem, the shareholders of the hotel will be also happy with the action since this action can satisfy them by increasing profit of the hotel. More people will be satisfied with the action of ‘inform’, than the action of ‘not inform’. Based on the utilitarianism of consequentialist theory, which says that the greater amount of happiness can be the standard to determine whether an action is right or wrong, the action of ‘inform’ can be considered as morally right.
(Helm 2007) (Sarstedt & Ringle 2010) (Barney 1991) (Hall 1993) (An introduction to business ethics 2007) (Flatt & Kowalczyk 2011) (Vitezic, 2011) Since advertising can betray its role as a source of information by misrepresentation and by withholding relevant facts, the writer will take proactive action by adding an explanation about the construction till the construction is finished so that not only the guests with reservations, but possible guests can also be informed about the construction when they are considering the hotel as their summer vacation destinations.
By doing this, the guest are respected by the hotel, and given the guests the right to know about the facts. There are many lawsuit cases of big brand organizations such as Listerine and Philadelphia Cream Cheese for misleading advertising by giving wrong information on their advertisements. In Australia, ACCC is in charge of ensuring consumers are given accurate information about the products. By making correction on the advertisement, the hotel will avoid the lawsuit. According to the Solomon’s 3‘C’s of business ethics which are values of business ethics, the hotel can be considered as a morally good business.
Making correction on the advertisement lets the hotel not to break the advertisement law and regulations which can be applied with Compliance of Solomon’s 3’C’s. The second C, Contributions can also be applied. The hotel will be an example to other organizations and let them learn about ethically proactive action from the hotel, and it will make contribution to its society. Bing an example of morally right hotel in the industry, the employees will be proud of the hotel and customer reputation will get higher, and it is considered as the Consequences of 3’C’s.
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University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 7 November 2016
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