Ethics and Governance
Ethics and Governance
With reference to the Oxford English Dictionary (2012), ethics is described as the science of morals. It is also the agency of study with regards to the values of moral obligations of what is right or wrong. It also covers human behaviour. A company makes many decisions in a course of one day. It may include, launching new products, doing Public Relations, making sales, rewriting company policies and the recruitment or retrenchment of people, just to name a few. All business aims to do so ethically. To conduct business ethically, a business must first commit to adhering to laws and regulation (Timms, 2009). These are clearly defined, as they are in black and white. However, once the definition of what is ethical becomes contested, ethical dilemmas will arise. An ethical dilemma occurs when there is a situation which all alternate choices and behaviours have been deemed undesirable, and that there may be potential ethical consequences when one is unable to identify the right from the wrong.
An example of an ethical dilemma is of follows, where one faces a conflict between his ethical code and his business aims. Cadbury, the chocolate producer, was offered a contract by Queen Victoria to send decorative tins of chocolates to every single one of her soldiers in the Anglo-Boer war in South Africa (Andrews, 1989). However, since he was against the war, which resulted in him deciding to resolve this conflict by completing the order without profit. According to Sir Adrian Cadbury (1987), his grandfather “made no profit out of what he saw as an unjust war. The additional work benefitted his employees, the royal presents consisting of tins of chocolates were sent to the soldiers, and it was a win-win situation. In a business, there are 3 levels of ethics: the ethics of the governing body, workplace ethics and individual ethics (Trevina & Nelson, 2011).
A governing body usually is made up of a board of directors, whose aim in the company is to make good corporate practices easier and more available for employees. They too must drive and motivate employees to strive for good performance, conformance and results. Workplace ethics are important, as it ensures a conducive and supportive environment to work in. There must be equal treatment among and within subgroups, open communication between levels, and information must be transparent and readily available. Individual ethics is affected by four complementary elements. Individuals must be able to identify ethical issues; recognise the values and priorities through their grasping of principles, rules, norms and theories; developing their individual sets of reasoning and perception; and improving the strength of one to act upon such decisions (Trevina & Nelson, 2011).
Before a difficult decision is made, the shareholder or the manager has to think a problem though. One way to do so is using Kidder’s Ethical Checkpoints (2006). He has 9 checkpoints which he feels will lead to an ethical decision being made. First, the manager needs to recognise that there is a moral issue. After determining the actor, he has to gather the relevant facts. Next, he tests for right-versus-wrong issues as well as paradigms. After applying resolution principles, he has to look for a third way before making the decision. After the decision is made, he has to revisit and reflect on the decision. After much research, I feel that Utilitarian approach is the most useful in guiding company decisions. I will explain why below. A decision is only ethical, according to the utilitarian principle, if it has the greatest net utility as compared to any other alternatives.
As a decision maker, he must evaluate and weigh every option present to him. He must determine if there any positive or negative utilities arising from the option, before selecting the option that has the greatest net utility (Fuitzsche, 2005). It is very similar to the cost-benefit analysis used by stakeholders to consider the costs and benefits of a potential business decision. According to someone applying the utilitarian principle, a decision is only ethical if it has the greatest net utility and benefits the most people. An example of the utilitarian approach is when, during office hours, a company monitors their employee’s habits like tobacco consumption, as one man’s actions can affect the entire workplace. A prominent example is in Singapore, where there is the Smoking (Prohibition in Certain Places) Act.
This act aims to protect the public from the hazardous effects of second-hand smoke. (Smoking Prohibitions, 2012) By making sure that employees do not smoke around the office, there would potentially be less health problems, so lesser sick employees which mean improved productivity and greater yields. There are two types of utilitarianism, act and rule. Act utilitarianism targets problems in the short run while rule utilitarianism targets problems in the long run. While act utilitarianism looks at the total aftermath of a single act, rule utilitarianism looks at the repercussion over a series of acts (Fuitzsche, 2005). For example, bribing is frowned upon. An example of bribing occurred in NES China in 1998. NES’s government affairs co-ordinator proposed giving gifts to government officials to establish a working relationship to help get its application approved.
The other members were horrified, as this was considered bribery and a criminal offence in their country (Joerg & Xin, 2009). Under act utilitarianism, if bribing means that the company will get the business contract, thus allowing the employees to keep their jobs, it is ethical. However, under rule utilitarianism, this is not the case. Bribing, thou it will work in the short run by generating business, however, in the long run, potential customers will question if you got the job through bribing or because of your superior products you are selling. Therefore bribing does not provide the greatest utility (Fuitzsche, 2005). However, the utilitarian approach does have several limitations. Therefore other ethical theories have to be used together with the utilitarian approach in making company decisions. Firstly, there will be some people who will be at a disadvantage. A decision, according to the utilitarian principle, is only ethical if it has the greatest net utility.
However, increasing net utility sometimes causes serious issues and affects people negatively. One notable historic example was the construction of the Great Wall of China (Construction of the Great Wall of China, 2006). Three hundred thousand prisoners and peasants were reportedly conscripted to help construct the great wall. It is said that ‘for every block laid down, one labourer lost his life.’ In terms of utilitarianism, a significant positive net utility was creates, as the great wall restricted the nomads and protected China. The Chinese citizens were safe for many years to come, at the expense of these three hundred thousand prisoners. Secondly, it is challenging estimating the results or effects of a business decision made. Also, a unit of currency gives more benefits to a poor person than to a rich person (Fuitzsche, 2005). In April 2012, all national servicemen in Singapore Armed Forces, Singapore Civil Defence Force and Singapore Police Force received a $60 pay raise (Chua, 2012).
A Recruit, who once earned $420, now earns $480, while a Lieutenant, who once earned $1120, now earns $1180. This increment would mean more to a recruit, who had a 12% pay increment, as compared to the Lieutenant, who had a 5% pay increment. It shows that it provides more utility to the poorer recruit. Therefore calculating if a decision maximises utility is difficult. Thirdly, not only are the consequences of a decision made hard to foresee, some decisions have consequences which are not easily or unable to be measured. In August, Apple manufacturer Foxconn improved on the working condition of its factory in China, such as introducing more breaks, lowering overtime, doubling wages and having better maintenance of safety equipment. (Rushe, 2012) Louis Woo, special assistant to the chief executive of Foxconn also released a statement, lamenting that reduction of overtime meant that they ‘needed to hire more people and implement more automation, more investment on robotic engineering’ (Yip, 2012).
These costs to the company are easy to determine. However, the gains in utility from these implementations are difficult to tell. Would productivity increase? Will employees be more loyal? Will turnover rate be significantly lesser? Consequences like these are hard to measure. Lastly, utility gained from these business transactions mean different things to different people (Fuitzsche, 2005). Some managers gain utility from maximising their employee’s happiness. Some managers calculate utility as one which will increase their material wealth. Below I will compare utilitarian ethical theory with egoism and moral rights approach, to show that while utilitarianism has it flaws, it is still the more useful ethical theory. The utilitarian and egoism ethical theories are rather similar. Decisions made using egoism ethical theory will often provide the most favourable outcome to oneself, no matter how others around are affected (Fuitzsche, 2005).
The other parties may not be harmed or disadvantages, but to the decision maker, it is of no concern. The decision maker using egoism thinks about how the proposition would involve him (Collins, 2009). If the proposition adds onto his interest, it is right. If it does not, it is wrong. However, the decision maker using utilitarianism thinks about how the preposition involves everyone affected by it. If the preposition done is advantageous to the most number of people, it is right. If it is harmful to the most number, it is wrong. Egoism is very similar to the philosophy of Adam Smith (1790). Egoism according to Smith is an excellent market allocating tool, which benefits society if one cares for their interests in the long run. Egoism usually views things in the short run, which is similar to act utilitarianism, which evaluates what happens in that one incident. However, while utilitarian considerers the total positive net utility, egoism only considers the decision maker’s self-interest.
Thus decisions made using egoism would be deemed as unethical. The rights a principle gives you assured moral or human rights because you are a human being. The moral rights approach stresses that human beings have essential rights and power of choice that cannot be taken away by an individual’s action. Gerald Cavanagh (1990) explains six rights that he affirms are basic to business work. They include life & safety, honesty, privacy, freedom of conscience, freedom of speech and lastly private property. One example is regarding Firestone and their tires. In America, 1978, the National Highway and Transportation Safety Administration (NHTSA) began investigating the relation between Firestone’s Wilderness AT tires on Ford’s explore sport utility vehicle.
The problem of Firestone’s tire separation was known internally at Firestone and by the automobile manufacturers; however, instead of recalling the tires, they kept it in the market, resulting in 150 preventable deaths and 500 injuries (Henn, 2009). As facts leaked out that were damaging to both companies, they became more aggressive in its defence. Firestone appeared to have violated several human rights. The firm knew that the tyres would create a hazard to humans. And by refusing to recall its products, it violated the right to truthfulness when the truth was extremely important. Even after the whole incident was resolved, public trust in Ford wavered. According to Henn (2009), a position of trust with the public that took many years and millions of dollars to build was severely damaged. According to the utilitarianism theory, an ethical decision is one that produces the most amounts of advantages to the majority of people (Trevina & Nelson, 2011).
However, according to the moral rights approach, an ethical decision is one that does not breach on the rights of another. The utilitarian approach is best for countries with high collectivism while moral rights approach is best for countries with high individualism. According to Hofstede (2007), most Asian countries scored below average on Individualism. Singapore is no different, so the utilitarian approach is more applicable in companies here. According to Johnson (2007), there is the five ‘I’ format with regards to making decisions. A problem must first be ‘identified’, before it can be ‘investigated’. Next, one has to be ‘innovative’ in coming out with many solutions. After this, a solution has to be ‘isolated’ and then ‘implemented’. Making an ethical decision is easier when one applies an ethical theory.
A decision made using the utilitarian theory is ethical if it provides the greatest net utility, and produces the greatest benefit for the largest amount of people. Rules developed under utilitarianism can become a moral code to be used throughout the company. Thou it has its limitations, as it is difficult to measure utility, or figure out the consequences of a decision, and that it might not benefit everyone, but it is still better as compared to egoism or moral rights approach. Utilitarian is the most useful theory in guiding company decisions, and when used together with moral rights and egoism, it shows what it means to be ethical.
Subject: Decision making,
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 29 December 2016
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