Social Implications of Business Ethics Essay
Social Implications of Business Ethics
In this task I will be looking at various business practices in any area of activity and explain how those actions have an effect on society as a whole, the areas of activity I will be discussing in this report are:
– Ethics in finance, e.g. bribery
– Ethics in human resource management e.g. discrimination
– Ethics in production, e.g. animal testing
– Ethics in sales and marketing, e.g. spamming
– Ethics in intellectual property, e.g. software privacy
I will also be investigating how my chosen business Timberland considers these issues and addresses them.
The Timberland company was set up in 1955 by the Swartz family. Originally a shoe store based in Abington, Massachusetts the small family business has grown into one of the most easily recognisable brands of modern times. Since its inception in 1955, be it either under the Abington shoe company brand name or under the Timberland company brand name, one thing has remained the same, its business Code of Ethics Charter.
Timberland Code of Ethics Charter
Timberland has a site dedicated to their beliefs of ethics and explains what is expected of their employees and what consumers should expect from Timberland as a business regarding ethics. Their mission statement reads, ‘We believe the honest and ethical conduct of our employees is an essential prerequisite to our success as a company. There is a direct relationship between the code of conduct of the company and the employees, and the attainment of our corporate missions and goals. Maintaining the highest standard of ethical behaviour is consistent with our core values of Humanity, Humility, Integrity and Excellence. ‘
Area of Activity: Ethics in Finance
In regards to ethics, when most people think of ethics they think of various scandals and illegal trading which appears to be ever present in the news such as insider trading, bribery, lobbying and executive pay. Some of the more recent unethical actions which have happened are the MP’s expenses scandal which occurred in mid 2009 and the banking crisis which started in late 2008. This is a concern for ethics as individuals want to know who they are doing business with and if they can trust them, for example If a business is accused of being unethical because they bribed a member of parliament in order to gain an unfair advantage over competitors so they could evade paying a certain amount of tax or VAT then not only are they giving themselves a bad name but they are also ruining the reputation of their business associates and partners who may decide they no longer wish to provide their service to that business in order to save their own credibility.
NEED TO WRITE AN INTRODUCTION EXPLAINING WHY THIS AREA IS A CONCERN FOR ETHICS…….CHECK YOUR NOTES!
There are several key areas where ethics can be questioned in terms of finance and these include:
* Insider trading is the illegal trading, buying or selling of corporate stock based on information received which has not been made public and is supposed to remain confidential; insider trading is a common law broken by employees. The Timberland Company set up its Code of Ethics Charter to provide assurance to its customers but also to provide guidelines to employees so that they can clearly understand what is expected of them from the business. The Timberland Code of Ethics Charter clearly states that the securities laws set up within the business strictly prohibits insider trading and tells employees what to do if they are in doubt as to what information can be shared and what to do if they are in any doubt as to what information can be shared and what information must remain private. Employees and directors may not trade in or even recommend company stock whilst in possession of any information. Timberlands insider trading policy applies to all employees and directors.
* Bribery is a form of corruption in which an individual or business may offer a payment or gift to a person in a position of trust in order to gain an unfair advantage over other competitors. On the 20th of July 2010 the UK ministry of Justice announced that a new, modern and comprehensive bribery act will be brought into force in April 2011. The new act replaces the existing legislation known as the Prevention of Corruptions Act of 1889 – 1916. The Timberland Company’s general principles, Code of Ethics Charter and compliance guidelines state their policy on bribery is that they are not permitted in any circumstances and that they believe a bribe can be anything from a simple gift or an undercover payment. Their general principles also state that any individuals suspected of accepting or being involved in bribery in anyway will be held accountable in a court of law and will be dealt with by the Federal Bureau of Investigation.
BRIBERY – NEED TO DISCUSS
* Executive pay is the financial compensation paid to an executive official within an organisation, most executives would receive their basic salary along with added incentives such as share options, annual bonuses, salary rises and pension schemes. Many employees in a business may feel disheartened by the gulf in salary between them and their chief executive, especially in the middle of a recession as the public are being made more and more aware of the bonuses many executives are receiving whilst other employees are being made redundant.
Many people regard this to be unethical as it is taking money away from a bunch of employees and putting it into the pocket of one executive who may not even work as hard as the individuals who may be regarded as below them in the hierarchal structure of the business. Recent news reports suggest that the new chief executive of the bank Barclays Bob Diamond is in line to receive a bonus of ï¿½8million despite only being in the job for just 9 days, the story so far has caused outrage amongst Barclays employees who feel the money should be given to existing employees or pumped back into the economy. The Timberland Company don’t currently have any publicly viewable policies or corporate guidelines regarding executive pay.
EXECUTIVE PAY – NEED TO DISCUSS
* Lobbying is a form of corruption when a business will use personal contacts, peer pressure, public pressure or political action in order to persuade a politician to make a decision which will benefit the business. Currently lobbying is not illegal which means it is easy for big multi national organisations to get away with changing legislation to benefit them but affected their competitors if they have the right connections to the right people in power. The Timberland Company’s policy on lobbying is that no director, executive, officer or manager has the authority to breach or violate any government law in any country that Timberland operates in, nor may they engage in any activity that involves benefiting one individual party whilst others don’t have the opportunity to.
LOBBYING – NEED TO DISCUSS
Area of Activity: Ethics in Human Resource Management
Human resource management is the management of the workforce of a business to ensure sufficient staff levels with the right skills that are properly motivated and equally rewarded. The human resource department is one of the key elements in Timberlands organisational structure, without it the business would be an inefficient, unproductive business which manufactured sub standard products. The human resource department in the Timberland Company is responsible for overseeing a variety of issues such as contract of employment violations and employee problems and queries.
The human resource department of Timberland recently put into place the Fair and Equal Treatment Policy. The policy was designed to promote fairness in the workplace. The code clearly states that no factory employee be disciplined through corporal punishment, harassed, abused or run the risk of employee retribution on the basis of expressing grievances predicted on the violations of basic human rights. To promote equality, Timberland’s code prohibits status discrimination based upon race, colour, sex, religion, political opinion or for any other reason.
When a candidate is applying for a job and is invited for an interview it is important that Timberland act ethically and treat every individual candidate fairly and equally, they must not discriminate against any candidate in any way, shape or form regarding their age, race, colour, ethnicity, sex, religion or political views. In order to remain as ethical as possible Timberland should look to tweak their recruitment process so that they can ensure no individual candidates will feel targeted throughout the recruitment process and that all the personal information gathered from the candidates remains as confidential as possible. Many employers give applicants various tick boxes to fill in on their application forms, the only answer which appears on every question that candidates can tick is the answer would rather not to say.
This cuts down on discrimination as employers can not make pre judgements on any candidates based on the information received in their application which may help the candidate to be successful at their attempt to get the job. To date Timberland has yet to be accused of discrimination, this is due to the high levels of transparency within the business an Timberland’s attempts to broaden consumers awareness of what Timberland is trying to achieve as a business and what it is planning corporately.
One of the most growing concerns amongst employees is workplace surveillance through CCTV footage, internet activity and email monitoring. Many businesses now offer their own dedicated email service which allows employees to communicate with one another through email rather than passing memos to one another. Although this may seem like the business is offering something positive to the employees, many believe there is a hidden agenda behind it.
The administrators who monitor the email service can also go through the individual emails of every employee registered to the service and can view every email without the employee even knowing. Many people argue that this is an invasion of privacy and that employers shouldn’t be allowed to pay attention to every aspect of the employees working life however employers argue that it is up to the employee if they wish to work in that environment and it is not a requirement for the employee to sign up for the email service and should not use the email service for personal use.
Some businesses tend to overstep the boundaries and may do things which may not seem ethically correct such as firing employees for matters that did not happen during working hours or do not affect the business. An example of this is when 16 year old Kimberly Swann was dismissed from her post at Ivell Marketing & Logistics after three weeks of employment for describing her office job as boring on the social networking site Facebook. Steve Ivell of Ivell Marketing & Logistics said the decision was made to dismiss Kimberly because she had shown disrespect to her employer and her dissatisfaction undermined her relationship with the business which made it untenable.
Many people agreed with Kimberly Swann’s response to the statement made by her former employer that she shouldn’t be persecuted for a throw away comment made after a tiring day at the office for a 16 year old. Ms. Swann believes that what her former employer did was unethical and she shouldn’t have been dismissed for something which happened out of work hours and was written on her personal page whilst in her own time on her personal computer.
You also need to discuss the ethical concerns that some have in regards to recruitment. What must Timberland ensure they do to ensure fairness in recruitment (use you unit 13 notes, e.g. same interviews questions, balanced interview panel, etc.) Has Timberland been accused of discrimination in recruitment? If not, include a business which has!
You also need to discuss the concerns some have about the increasing level of workplace surveillance – why are people concerned? Use the Facebook example we discussed in class!
Area of Activity: Ethics in Production
The production process involves transferring a range of inputs into the outputs desired by the target market. The production process requires two main resources; the transforming resources and the transformed resources. Transforming resources include the building where the product is manufactured, machinery, computers and employees. The transformed resources are the raw materials which compose the end product. To make sure that their production process is ethical a business must look at a range of issues such as:
* Genetically modified food – Many food producing companies in the US have come under heavy criticism for modifying their products without informing customers. One of the more recent cases was Monsanto – An agricultural company which helps farmers develop new technology and produce better quality crop was charged by the California Northern District Court with for producing low quality crop which was to be distributed to countries which forbid the growing of genetically modified crops. Although no charges were ever made against the company, it was a wake up call to other businesses that their practices are being closely monitored and scrutinised.
However they argue that in order to protect the food from insects, parasites, weed and unfriendly bacteria it must be genetically modified so that they aren’t attracted to it in anyway. By keeping the insects away there will be more crop which means more money for the farmers however many people believe this is an unethical tactic used by farmers to get as much money as possible and that the GM food could contain harmful viruses or diseases. you need to tell me what it is and why some believe it is unethical
* Product testing on animals – Many people believes this to be the biggest argument regarding ethics believing that it is wrong for businesses to use defenceless animals who do not share the same genes and DNA as humans to test their products on. A counter argument to this statement is that in order for scientists to find cures to medical diseases there must be some way for them to be able to test the products without using illegal methods such as trialling them on humans.
One of the strongest and most controversial arguments raised from this topic is that why do people believe it to be wrong to test cosmetic products on animals but not medical products which could potentially hurt or even kill them. Timberland have issued numerous press releases stating that they in no way support animal testing nor do they practice it themselves and that 80% of raw materials they use for their products is recycled with plans to use recycled materials 100% on all of their products by 2014. – you need to explain what it means, why some are against it and why some people do not mind.
* Planned Obsolescence – Planned Obsolescence is when a business deliberately design a product which can be sold to the public with a few flaws and can be improved in an upgraded model which will be sold again to the public at a later stage. An example of this is Apple’s iphone. The first iphone was released on the 29th of June 2007. The original model could ring, send and receive text messages, send and receive email messages, browse the internet with a wifi connection and users could download custom applications. One of the flaws of the original model was the camera didn’t have a flash and the internet wasn’t fast enough when users didn’t have access to a wifi connection.
The iphone 3g was then released a year later to succeed the original iphone, the difference between the two models was that now users could access the internet almost anywhere thanks to the 3g connectivity but the camera still lacked flash, optical zoom, auto focus and didn’t support video recording. Apple have released a new and improved model of the iphone annually since the launch of their first iphone and released the iphone 4 on the 24th of June 2010. The fourth instalment of the apple iphone was now fully equipped to do everything users could ask for ranging from the internet issues to a new and improved 5 mega pixel camera which supported HD video recording, had digital zoom and had an LED flash. you need to explain what it means with an example, why some are against it and why some people do not mind.
* Environmental ethics – some questions are raised about how ethical products are produced in terms of the environment. The Timberland Company take this seriously and have introduced the “Green index” in 2007, a unique calculating tool which can measure the impact manufacturing their boots has on the environment and allows customers to see the carbon footprint Timberland creates. In 2008 Timberland expanded the Green Index programme to include the carbon footprint created from the entire range of Timberland products.
Area of Activity: Ethics in Sales and Marketing
Businesses such as Timberland manufacture a variety of products and are constantly updating them in order to keep the attention of their audience and maintain its market share. Sometimes a business may decide to use unethical methods to help boost sales and raise the company profile. Some of the unethical techniques a business may use include slandering other businesses or even providing false information when promoting and selling products. In 2001 the supermarket Tesco was charged by the Advertising Standards Agency (ASA) for misleading its customers. Tesco mislead its customers on price comparisons, comparing the prices of rival business Sainsbury’s with its own prices however the prices shown for Tesco products were all on a discounted promotion at the time but were not at Sainsbury’s. However, the main types of unethical activities in terms of sales and marketing are:
* Product Placement – Sometimes a business may decide to place their product in a television programme or in a movie, this is known as ‘subliminal advertising ‘ . It is the easiest way for businesses to expose their products to customers without their knowledge. However it can be expensive, some producers may charge the business more than ï¿½1million for their product to be in front of the camera for just a few seconds or even mentioned as part of the dialogue in a script for just one sentence in the entire film. Some consumers believe this to be unethical as people who pay money to go to the cinema do not wish to view a hidden advertisement during their film and have no choice but to sit and watch throughout the entire film. People who watch television at home may not like watching adverts and would rather flick through different channels whilst waiting for their original programme to come back on than sit and watch four minutes of advertising.
Whilst agreeing the terms and conditions for TV licensing one of the key points the BBC agreed to was to no advertising and no product placement so rather than advertising products at the end of a programme, the BBC will just advertise its own upcoming programmes and its programmes rather than referring to or showing the brand name of a product such as mobile phone, they will just show the phone itself with the brand name hidden. Timberland have used product placement in various television programmes and films such as in the heist film “TAKERS.”
All of the actors involved in robbing from the bank never mentioned any brands of the clothes they were wearing but were constantly referring to their Timberland boots and how they were the best for the job. The Timberland Company have confirmed that they did agree to the actors mentioning their product but did not ask them to continually mention them to get the viewers attention. People may still view this as unethical as although it was the film producers who approached Timberland, they still had the option of rejecting the offer. GOOD CRITIQUE!
* Greenwashing – Green washing can be defined as “the act of misleading consumers or being untruthful about the environmental practices of a company, or the environmental benefits of a product or service.” A business may choose to use this technique in order to attract more customers and appeal to a wider market. The Timberland Company have a full website dedicated to explaining its views on ethics and have set out four pillars which are updated annually and analysed regularly to ensure all targets are met. If any of these were found to be incorrect, this would be an example of green-washing.
* Spamming – in business this is where a company may often send various newsletters and promotional emails to somebody who has never signed up to the newsletters and often do not wish to receive the newsletters and updates because of the volume of emails being received. Businesses that do use this method often use a false email address which can not be replied to or blocked. Many businesses say they only use this method to gain the attention of potential customers and promote their products and services.
Many people believe this is unethical as the recipient of the spam email has not agreed to receive the junk email and have no alternative but to ignore and delete all emails which they suspect to be junk or spam that clog up their email account. Spam emails are regarded as a breach of the Data Protection Act 1998 as the only way a business can obtain the email addresses of customers is through purchasing them from other businesses with the consumers consent.
Area of Activity: Ethics in intellectual property
Intellectual property law gives people the rights to their own creations such as ideas, concepts, videos or music sounds. The most common way people protect their intellectual property is through copyrights, patents and trademarks. Ethical issues which arise from intellectual property are:
* Counterfeiting – A counterfeit is a forged copy of a product or brand name with the intent to deceiving people. The counterfeiter copies the original idea of a product or service and alters it slightly to either pass it off as their own or to deceive people into believing it is genuine. Tesco have been accused on numerous occasions of selling counterfeit versions of products from top designers such as ‘ Tommy Hilfiger ‘ and have faced numerous court cases and legal action.
* Piracy – Piracy is the unauthorised copying and distributing of a product. Reproducing a product without the consent of its original creator is illegal and can lead to a large fine and a jail sentence. An example of piracy sharing is online peer to peer programs such as Limewire. For years Limewire was used by millions of people to share illegal products with one another rather than obtaining them legally which caused many people to lose money such as musicians, film producers, computer programmers. Eventually enough evidence was put together to charge the creators of Limewire who were subsequently fined, jailed and had their peer to peer sharing software shut down permanently. Piracy is a growing concern and is becoming a losing battle for prosecutors as many websites which stream illegally sourced movies and songs are being shut down and are back live again under a similar name on a new server within an hour.
If a business chooses to ignore the ethical concerns of its customers then they are giving themselves a negative image and gain negative publicity and bad press which will cause them to lose money and drive away customers. Every business must make sure it listens to and takes into consideration the different corporate and environmental implications in order to ensure their popularity is maintained and attract more customers.
Corporate implications are to do with the day to day running of a business looking at the corporate social responsibility policies, employee hiring and firing, consumer protection and managing suppliers. The Timberland Company have a clear Code of Ethics Charter which is available to all employees, investors, potential customers, potential investors and general members of the public. Their charter was set up to show employees and partners and future partners what Timberland is trying to achieve ethically as a business.
Environmental implications are ethical issues which affect the environment such as pollution, recycling, using renewable sources and water conservation. Timberland have become very environmentally ethical since 2006 and have created a whole new line of products created solely from recycled products using renewable energy. Timberland also has a website detailing their four pillars which they have built their organisational structure around, the four pillars are :
– Energy : Becoming carbon neutral
– Products : Design products for recyclability
– Workplaces : Fair, safe and non-discriminatory workplaces
– Service : Community greening
In conclusion I believe that in order for a business to be truly ethical it must take into consideration all environmental and corporate implications and analyse their business practices before truly declaring themselves as an ethical business.