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The less direct the impact, the more likely the stakeholder is to use consequentialist considerations to just the actions of managers. For example, government did not react to the need for improved governance and pass Sarbanes-Oxley until after multiple scandals had occurred. Millions of Americans lost money and faith in the financial system was eroded, threatening further harm. If the scandals had not resulted in outcomes so severe, it is unlikely that SOX would ever have been dreamed up.
Given the emphasis on consequentialist assessment, the onus on managers is therefore to fully assess society's reaction to the expected outcomes of their actions. This works mainly when managers properly assess the expected outcomes -- something the likes of Kenneth Lay and Bernard Ebbers did not do. These outcomes must consider the impacts on the gamut of stakeholders. Ethical problems occur when there is goal conflict between the stakeholder groups (Heath, 2006). For example, the decision to develop an environmentally sensitive piece of land weighs the mutually exclusive outcomes, one of which is negative to, for example, endangered species; the other negative to workers who otherwise would be unemployed and in poverty. In such situations, there is little a manager can do other than to rephrase the question such that another outcome is possible, something that is not always possible.
One of the most contentious issues in business ethics is that of ethics within the context of international business. Given that ethical standards are inconsistent within our own communities, expanding the scope of operations internationally inevitably increases the complexity of ethical decision making in business. There are several contentious issues. One is the application of home country ethics to foreign countries, or vice versa. Firms such as Nike have run into controversy in North America, for example, for working conditions in overseas facilities. The wages and conditions in question were superior to the average in the region of production, but inferior to those in North America. Cross-cultural ethical conflict is an area that emerges when a firm goes international with its operations.
The complexity of ethical conflicts would seem to encourage companies to take a more deontological approach to ethical decision-making. After all, in most countries the law reflects the ethical standards of the region. This, however, is only in the long-run, because of a couple of limitations. One is information -- the general public that sets the norms does not always know what the managers are doing. When they do, they compel government to act (e.g. Sarbanes-Oxley). Indeed, the ethical norms in the United States did not change after the scandals leading up to SOX, the public was simply unaware of the activity of the managers in question. In international business, the deontological approach again fails to provide foolproof guidance. This is especially the case where democracy is limited or non-existent. A government may control the laws regarding the conditions under which factory workers travail, but the those laws may not at all reflect the ethical norms of the country, especially under dictatorship. Once again, managers are left searching for a resolution to ethical conflict.
All of these dimensions lend complexity to the issue of business ethics. Theorists today cannot agree on any singular approach to the issue, arguing the above points of agency theory, stakeholder theory and adherence to the law as ethics (Ibid).
Improving Business Ethics
While the lack of a singular, defining approach to the issue of business ethics may seem to obfuscate the issue, it could be argued that having so many different ways of addressing the issue improves managers' abilities to enhance ethical decision-making within their organization by giving them a wider range of tools to use.
Most companies begin with an ethics program. Merely having an ethics program does not mean that the company or its managers will behave ethically, and indications are that incidences of ethical lapse have not waned since corporations began adopting ethics programs en masse in the late 1990s (Donaldson, 2000). However, having such a program is a signal of intent, and provides a modicum of guidance upon which the company will need to follow up. The ethics program should ideally define ethics in a manner beyond the basic legal framework. It is understood that companies expect their employees to act within the boundaries of law and the issue of corporate ethics should ultimately be focused on moving beyond that.
Training and communication are key to most corporate ethics programs. The firm's ethical standards are devised and communicated to the employees. This is crucial, because a substantial proportion of ethical lapses occur not at the executive level but at the middle and lower management levels. These managers are faced with ethical conflicts that stem from a lack of guidance from above. They feel that they must act as agents for the shareholders and make poor ethical decisions as a result of not knowing the consequences of their actions. Moreover, it is through these individuals that the corporation's ethical standards are disseminated and reinforced throughout the rank-and-file (Hanson, 2008).
The final component to a strong ethical program is to find a way to measure success without having a major ethical failure. It can be difficult to measure the success of ethics programs, simply because the lack of ethical lapse over a given time period is not an indicator of success implementation. Instances of ethical lapse may not occur often. Yet was with any strategy, the company needs to find a way to measure its effectiveness, before the disaster scenario occurs. It will require a complex and multidimensional scale to shed light on the attitudes towards ethics that employees and managers have (Reidenbach & Robin, 1990).
This rough framework for improving an organization's ethical decision making only begins to address, however, the complex nature of the issue. Even in situations when guidance is provided with respect to resolving some of the more common conflicts, the possibility still exists for managers to commit ethical lapses. Thus, the corporation must set up a safeguard. Ethical dilemmas are not only common, they are expected. It is unreasonable for managers to always know what the reason decision should be. Therefore, an ethics committee or office should be formed to help the organization provide guidance. This represents a middle road, distinct from stakeholder analysis and shareholder primacy, and equally distinct from strict adherence to laws (Goodpaster, 1991). After all, it is the conflict between these from which most ethical dilemmas arise. Thus, the organization should always understand that the inherent complexity of ethical dilemmas may demand that managers have guidance at their disposal.
That business ethics specifically arises from conflict illustrates the reasons why identifying and resolving ethical dilemmas is so difficult. Each society has its own ethical norms and there is sometimes little consistency between those norms and the norms of another given society. As a result, conflicts inevitably arise. The goal for managers is to control the number of conflicts and provide guidance for conflict resolution. The temptation is for the organization to devise a uniform system by which it can perform this function. The result of this, however, will be failure, as no ethical dilemma is the same . Even operating within the bounds of the law is not an adequate preventative for ethical scandal. What businesses can do, however, is take the time to understand the breadth and depth of the subject of business ethics. They can then set out a framework to help guide their managers to better ethical decision making. This cannot fully eliminate the possibility of ethical lapse, but it can reduce the possibility. Flexibility, knowledge and resources are all critical to this process. When applied well, such measures can not only reduce ethical issues, but improve shareholder value and improve outcomes for external stakeholders as well.
deGeorge, Richard T. (2005). A History of Business Ethics. Markkula Center for Applied Ethics. Retrieved May 11, 2009 from http://www.scu.edu/ethics/practicing/focusareas/business/conference/presentations/business-ethics-history.html
Fisse, Brent & Braithwaite, John. (1993). Corporations, Crime and Accountability. Retrieved May 11, 2009 from http://books.google.com/books?id=jJ0AUYA71nAC&pg=PA73&lpg=PA73&dq=corporation+rational+actor+ethics&source=bl&ots=0coi6X0tbv&sig=sictZG4yTQv2heEgV2OshTF_QQM&hl=en&ei=wI8ISoD9NKHhtgfJ_vGIBw&sa=X&oi=book_result&ct=result&resnum=1
Barrionuevo, Alexei & Eichenwald, Kurt. (2006). For Ken Lay, Enron's Riches Turning to Ruin. New York Times. Retrieved May 11, 2009 from http://www.nytimes.com/2006/02/26/business/26lay.html
Monks, Robert A.G. & Minow, Nell. (2003). Corporate Governance. Retrieved May 11, 2009 from http://books.google.com/books?id=RGmHAVPhmRwC&dq=business+ethics+corporate+governance&printsec=frontcover&source=bl&ots=h6AZpV875B&sig=PkSgJtkk6Lsy7hekkVrAPayRrjA&hl=en&ei=a5cISr6fOoqjtgfKm5GZBw&sa=X&oi=book_result&ct=result&resnum=7#PPA2,M1
Heath, Joseph. (2009). The Uses and Abuses of Agency Theory. University of Toronto. Retrieved May 11, 2009 from http://www.chass.utoronto.ca/~jheath/agency%20theory.pdf
Heath, Joseph. (2006). Business Ethics without Stakeholders. Business Ethics Quarterly. Vol. 16, Issue 3 pp.533-557.
Donaldson, Thomas. (2000). The Corporate Ethics Boom: Significant, or Just for Show? Knowledge @ Emory. Retrieved May 11, 2009 from http://knowledge.emory.edu/article.cfm?articleid=285
Reidenbach, R.E. & Robin, D.P. (1990). Toward the Development of a Multidimensional Scale for Improving Evaluations of Business Ethics. Journal of Business Ethics. Vol 9, Issue 8, pp. 639-653.
Hanson, Kirk O. (2008). Ethics and the Middle Manager: Creating "Tone in the Middle" Markkula Center for Applied Ethics. Retrieved May 11,…[continue]
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