Business Ethics: Concepts and Cases

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1. From a utilitarian point of view, how does ethical relativism play a potential role in issues facing multinational corporations? As a U.S. citizen, believing in “western” values, would you be obliged to attempt to change some of the discriminatory practices in Saudi Culture?

The definition of the term business ethics has been a subject of continuous debate with many business practitioners arguing from different perspective about its actual definition and scope. One of the argued definitions has been put forward by Jones, Parker and Bos (2005) who have defined the term ethics as what is good or bad. Therefore, the scope of business ethics has to do with what is good or bad in business (p. 2).

They however argue that this is a shallow definition of a term that has deeper implications, as “businesses ethics needs to take itself much more serious” (p 3). The argument here points to the fact that such a term as ethics which deals with the morality of vice versus virtue has a “transparent meaning” and cannot be left to such shallow definition (p 6).

This is because such terms as good and bad have relative meaning and their implication depends on the context and environment in question. Velasquez (2001) come up with a definition explaining that business ethics is “is a form of applied ethics in any undertaking that may be defined as business” (p 2). This paper will attempt to explain the implication of the term business ethics bearing in mind the relativity of the meaning of the term ethics in a business venture.

As earlier mentioned the term business ethics has been defined from different perspective. However, in this paper the highlight shall be to view it from the utilitarian perspective. Utilitarianism is a school of thought that argues that an action is weighed against the implications and the benefits of such an action. Raj (n. d) defines utilitarianism as “an intelligent way of thinking about the consequences of an action” before it is undertaken (p 32). Sen and Williams (1982) define it as a criterion of public action.

Utilitarianism assumes that it is possible to quantify the amount of good from an action and measure it against the amount of bad resorting from that action. Business action is only ethically correct if the amount of good produced by it, out weighs the amount of bad it produces.

The utilitarian perspective still brings as down to good versus bad (p 8). In dealing with good and bad, the concept of justice and rights comes to play. The problem with this approach is that utilitarianism cannot deal with moral aspects justice and peoples rights. For example, an action such enquiring people to follow a certain dress code at the work place may “be morally right but violate people’s rights” (p 9).

To avoid such violations by the American multinationals, an improved version of the rule of utilitarianism has been proposed. It is called the rule-utilitarianism. This rule states that instead of multi national companies measuring an action by the amount of good it produces, they value an action if it is morally correct only if it conforms to what is universally agreed as right (Harsanyi, 1985).

Rule-utilitarianism has been very effective in helping American multi nationals penetrate the Muslim markets, because of its emphasizing actions that are culturally and morally acceptable to people. However, it is important note that Muslim ethics varies in interpretation of good and bad. Beekun (1996) explains that in Muslim business morality is unlike the secular western business ethics. Islam emphasizes that morality connects one the creator and therefore the two (Morality and the creator) cannot be divorced.

Morality is therefore not constricted to the restrictions of time, space or environment (p 12). This means that the concept of good is cast in stone and therefore not subject to interpretation in countries like Saudi Arabia. Therefore, the Saudi business ethicist needs to debate this argument afresh as reality is relative. Not all occurrences can be restricted to a single rule without allowing a leeway for creative interpretation.

In conclusion, there is no clear definition of the term good and bad. These two terms are actually relative and can be subject of different interpretation in different societies. Ethical relativism assumes that society shapes morality. What the majority in the society claims to be good is correct (Velasquez, 2001, p 2). Therefore, business ethics must conform to what is largely acceptable as morally correct.

2. While corporations may be considered legally responsible for wrongdoing, can they be held morally responsible? Does a corporation’s guilt absolve its individual employees from either legal or ethical responsibility?

As earlier discussed business ethics is applied moral standards in any activities that are considered business (Velasquez, 2001, p 2). Business ethics incorporates ethical actions, done either by an individual, group of individuals within a company, or the organization itself. Arguments have been put forward as to who shoulders the blame should any business action go wrong. It is true what Velázquez (2001) explain that cooperate acts are acts of individuals either as a group or single.

The individual who runs organization “are morally conscious, and are aware when an act is right or wrong” (p 2). This not withstanding, it is very important to come to an agreement whether people can be separated from the roles they play in organization and if they are, is it ethical then to make them shoulder any blame arising from acts performed in their official capacities.

Velasquez (2001) explains that a person can only be morally responsible for those actions that are deliberately performed with the full knowledge that they are unethical and may cause harm. Any individual, who also fails to perform an action or fails to prevent a potentially harmful action, is liable to blame (p 6).

This explanation makes individuals take full responsibilities of the actions they take, or fail to take, the effect of which is exposing other individuals or the organization to potential danger. This means that individuals who are in positions of responsibility cannot seek to run away from any mishap that happens in an organization.

Several factors have been proposed in trying to evaluating a wrongful act and deciding whom shoulders blame and to what extent. Velasquez (2001) argues that there are two issues that absolve a person from total responsibility of blame on any act that goes wrong. They are inability to take action or ignorance about that action.

However, three considerations can lessen an individual’s level of responsibility. Velasquez (2001) explains that, a person can be uncertain of how to act. This is especially applicable where a something interferes with a person’s knowledge. A person may also be in an impossible position to act especially when a person is unduly influenced to act in a certain manner that leads to a wrongful act.

Thirdly, a person may not be wholly involved in a wrongful act. This means that a person contributed partially to the occurrence of the wrongful act. If a wrongful act occurred under such conditions then a person will be partially absolved from shouldering all blame, depending on the seriousness the wrongful act committed (p 6). This however does not absolve a cooperate group of any responsibility for wrongful act done by individuals in their cooperate capacities.

Krongkajonsook (2006) argues that cooperate groups are morally responsible for any wrongdoing “in a secondary sense,” and that organizations are “only morally responsible of any wrong doing of its members are morally responsible for what happened” (p. 21). Velasquez (2006) adds that cooperate groups are responsible for wrong doing and that business managers should face the consequences of their actions in their official capacity.

In conclusion, corporations should strive to be as moral as possible. Both the individual and the corporation should bear the responsibility of any wrongful conduct. However, the magnitude of involvement especially by the individual is considered before determining the level of responsibility the individual takes.

3. Explain the competing claims of whether or not ethics has a place in business in view of the issues presented by the Enron case. Would the Enron situation have turned out differently if Enron managers had considered the ethical implications of their business practices? Cite three elements of the case study and how the ethical principles you present would or would have not made a difference.

The Enron case has been one of the most sensational business ethics scandals in history because of its magnitude. Enron Corp was an American investment company with business interest in “natural gas, pulp paper and communications”. Its revenue by the time the scandal was going public was estimated to be $111 billions.

The Enron Corp. scandal emerged after it was found out that its accountants were engaging fictitious accounting practices that hide a lot of truth about its financial state. It provides a classic study of how business ethics can affect business and make even a mammoth business to fold under the weight of business impropriety.

The Enron scandal vividly explains the fact that an organization can only claim to adhere to prescribed ethic if they establish a deep-rooted culture of doing what is morally right rather than having a nonsensical code of ethics that no one is interested in following. Business ethics is a culture that business executives establish over a long period of time (Sims & Brinkmann, 2003).

The Enron case would therefore had been different had Enron business executives acted in the right manner and release factual rather than fictitious accounting information.

Firstly, the most wrongful act by Enron Corp. was its decision to hide the truth about its financial status. It failed the integrity test of what Velasquez 2001 defines as “moral norms of revealing the truth about something” (p. 1). Enron managers committed a serious act of deceiving the stakeholders by inflating the company’s accounts leading to a rise in Enron at Wall Street. It s is worth to note that these managers were the principal stockholders and therefore benefited a lot for such deception (p. 3).

Individuals and institutional investors lost millions because they ere misinformed about the reality of Enron Corp.’s financial statement. Such revelation would have protected the interest of the individual and cooperate stockholders as they would not have lost their invested millions, had they known the truth. Probably they would have diversified their investment to cushion themselves against the loss (Sims & Brinkmann, 2003)

Enron Corp. case would have been different had top managers adhered to an established moral norms (Velasquez, 2001). Their top management was blind to the ‘moral hypocrisy’ of their actions.

They were insensitive to the moral implications of their improprieties to the stockholders and the general American public (Sims & Brinkmann, 2003). Had the managers established and adhered to a culture of strict observance to what is right, then every business action they undertook would have sought to protect the interests of the stockholders they worked for.

Velasquez (2001) continues to explain that individuals should not serve their own interest but that of the organization they are working for, another ethic that Enron Corp. managers violated. They were characterized by “greed, selfishness, dishonesty arrogance and culpable motives” (Sims & Brinkmann, 2003).

The sole reason for hiding the truth about the financial status was purely for their benefit as the price of Enron Corp.’s stock inflated, so did the managers benefit. Without a doubt, if they had the interest of Enron Corp at heart then the Enron scandal would not have existed.

In concluding this part, the most valuable lesson learned is that existence of a code of conduct in a company is not enough. It is a deliberate effort by top management to establish a deep-rooted culture of doing what those involved morally agrees. It is still possible to have an ethical code but unless the top management is morally, conscious businesses will still fold because of violation of business ethics.

Reference List

Beekun , R. (1996). Islamic business ethics, International Institute of Islamic Studies. Web.

Harsanyi, J. (1985). Social Philosophy and Policy: Utilitarianism and the Concept of Social Utility, 2 (02).

Jones, C., Parker, M., & Bos, R. (2005). For business ethics. Routledge: New York.

Krongkajonsook, N. (2009). Business ethics: Business and social responsibilities: Ethics and business. Web.

RAJ. (n.d.). Centre for excellence. Web.

Sen, A., Williams, B. (1982). Utilitarianism and beyond. Cambridge: Cambridge University Press.

Sims, R., & Brinkmann, J. (2003). Enron ethics (or: culture matters more than codes), Journal of Ethics, 45, 243-256.

Velasquez, G., & Manuel, V. (2001). Business Ethics: Concepts and Cases, (6^th Ed). New York: Prentice Hall.

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Business Ethics: Concepts and Cases

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