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Business Ethics - Masters Business Administration Essay - Drawing relevant literature, critically evaluate a position debates firms responsibility maximising shareholder returns. Discuss implications chosen position a manager concerned impact company environment.
Throughout the past recent decades, the means in which the economic agents conduct their business operations have suffered some notable changes, in the meaning that less apparent emphasis comes to be placed on profits, and more on generating socio-economic benefits. The companies as such seek to create pleasant and stimulating working environments for their staff members, to create high quality and innovative products and services for their customers and to support the development of the communities in which they operate.
In other words, while the ultimate purpose of the firms remains that of registering profits, they seek to attain this objective by maintaining positive relationships with their various stakeholder categories, and also creating benefits for the employees, customers, the public and the general society.
In light of this new context, the current project presents theoretical support as to why the economic agents should develop activities that expand beyond their profitability desires. A practical situation is then presented and a solution is proposed.
2. Business ethics
The concept of business ethics is a relatively novel one, having emerged throughout the past recent decades. The practice of business ethics has nevertheless existed throughout the entire history of mankind, yet academic interest has only been placed on it starting with the past five decades.
During the 1960s and 1970s, the United States of America underwent a series of social changes, generated by social factors such as the civil rights movements of the minorities, the pursuit of gender equality by women, the protection of the physical environment or the insurance of health and safety within the workplace (Prakashan). All these social forces took their tool on the business sector, which was impacted by the movements and was forced to integrate the new trends and respond to them. In other words, the managerial function within economic agents expanded to also include issues of business ethics and social responsibility.
For the first time, the decade saw a transformation in the perception of the public towards the economic agents, who were viewed as entities that simply pursued their profitability objectives. The public nevertheless began to demand that these institutions also attend to other social issues. More specifically, it was believed that the sustained pursuit of profitability objectives had a severe detrimental impact upon the society, at levels such as the environment or the well-being of people. In this setting, firms were pressured to also address some of the social problems of the communities, at least to mitigate some of the negative impacts they themselves created.
"A new view came into being that the single minded pursuit of economic growth produced many detrimental side effects that levied considerable costs on the very segments of society that could not bear it. Deteriorating environment, unsafe workplaces, undesirable exposure to poisonous substances and wastes which affected both the workers and consumers and society in general, discrimination against certain groups in society, urban decay, unhealthy labour practices and a host of other social ills could be traced to business corporations. It was thus business was asked to assume greater responsibilities to society than ever before. It was asked to serve a wider range of human values. Business enterprises were expected to contribute more to the quality of human life than just supplying quantities of goods and services" (Prakashan).
Ultimately then, the members of the society linked a series of social problems with the negative impacts of corporate affairs, and demanded the economic agents to reshape their approach of business and become more socially responsible. For the business agents then, it became a stringent need to better respond to the needs of the society, or, otherwise, risk damages to their reputation, and the perils that come with it.
Within the business context then, social responsibility has been defined in a multitude of manners, most of them using different terminologies, yet sending the same message. One such notable attempt belongs to Nirali Prakashan and it sees that socially responsible firms have to simultaneously meet several demands, as follows:
The firm has to accommodate to the changes within the society, if it wishes to survive
The firm has to understand that social benefits are in its long-term interest and has to create these social benefits for itself as well as others
The firm has to accept the moral obligation to help solve the social problem that it had created or perpetuated
The firm has to go beyond the imposed regulations by engaging in socially responsible activities before these become regulations; additionally, it should support and stimulate governmental initiatives towards social responsibility
The firm has to utilize its resources -- otherwise generated by the society -- to help solve social issues
The firm has to view and approach the social problems as business opportunities to improve the company's image and position, and last
The firm has to be socially responsible in order to create a better public image for itself (Prakashan).
Given the numerous changes within the society, the development and implementation of corporate social responsibility and business ethics endeavours is a necessity. In other words, it is firmly concluded that firms should engage in more ethical and responsible behaviour, due to the social changes emerged, as well as the need to adapt to these changes in order to survive within the competitive business environment (Ferrell, Fraedrich and Ferrell, 2010).
Today, competition within the economic sector is stimulated at multiple levels, such as hiring and retaining the best staffs, as well as attracting and retaining the most profitable customers. And the competition is further strengthened by the processes of globalization and market liberalization, which intensify economic activity within the domestic and foreign markets (Ocampo and Stiglitz, 2008). Business ethics and corporate social responsibility initiatives then can be used to create further competitive advantages and support the companies' efforts within the fiercer business climate.
Ultimately, the effects of engaging in social responsibility initiatives can only be quantified once the company has engaged in these efforts and has compared the gains and the losses of the initiative (Cramer and Bergmans, 2003). Still, in a generic setting, it is assumed that corporate social responsibility generates the following advantages for the firm:
Improvements in operational efficiency, as the managers are better able to identify and solve inefficiencies. "Educating employees on CSR can improve profitability by supporting greater efficiency through less waste, water and energy usage" (Garrett, 2012).
Better support for innovation, due to the creation of new products and services, as well as the ongoing pursuit of new technologies and solutions to better manage waste, energy and water.
Increased supply chain management as the operations are better supervised and communications are enhanced throughout the supply chain. "Educating employees on sustainability practices throughout the supply chain can lead to greater efficiencies and help build collaboration to meet sustainability, quality and other goals. It can also strengthen relationships between a company and its suppliers by aligning values and objectives" (Garrett, 2012).
Last, investments in corporate social responsibility also support the financial stability of the firm, managing ultimately to safeguard the profitability objectives of the economic agent. One practical application in this sense is represented by the situations in which governments offer subsidies for social responsibility initiatives, financially supporting the firm (Garrett, 2012).
3. Practical application
3.1. The problem
The Australian mining company has been operating within the domestic industry for over two decades, and has managed to consolidate a stable position. From a financial standpoint, the company is highly profitable, as a result of natural resources exploitation. The financial results retrieved by the firm then generate high levels of satisfaction among the organization's shareholders.
Still, from within the Australian society, the firm has been faced with criticism as a result of the negative impacts it creates upon the environment. The criticism has, as such, been centred on the means in which the company manages its waste, with the pointed blame being represented by inadequate dumping, which subsequently leads to higher levels of environmental pollution, all land, water and air.
In response to these concerns, a brief and superficial internal investigation was conducted, and it found that the company was borderline following the legally imposed regulations. The executives declared that the firm was acting in accordance with the legislations and that it did not intend to take any additional measures. This approach would allow them to continue to respond to their responsibility of generating additional value for their shareholders' investments.
As Quality and Environment Manager however, one's perception of the situation is different. Specifically, it is understood that the criticism received from the society is damaging the firm and its public image, and it could, eventually cost it contracts with potential partners, or even decrease its competitive position.
In order to eliminate this indirect threat upon the company, it is necessary for the firm to address the concerns raised by…[continue]
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