Business ethics concepts and applications

¶ … business ethics in the context of the Enron scandal. Business ethics are seen to be very important today, but yet there are still many businesses that do not engage in ethical behavior, either toward their employees or toward those that they work with in other companies, such as distributors and suppliers. While this is unfortunate, there are cases where the companies do not 'get caught' for a long time, and this makes them feel secure in what they are doing, even though they are aware that it is wrong. Their concern lies, therefore, not with doing what is right, but with not getting caught for doing what is wrong.

Where Enron is concerned, the company did 'get caught' at the dishonest dealings that it was involved in, and the whole company virtually collapsed. However, there were stronger and much more important repercussions than just what happened to the company. The employees lost their pension plans, they were out of work, and there were larger societal impacts that became obvious in the days and weeks after the scandal made the news. It is important throughout this paper to see that Enron is being discussed in the much larger context of a societal concern that could yet happen to other companies.

Business Ethics: The Issue of Enron

The concept of business ethics has been around for many years, but many companies and employees are still not clear on what is ethical and what is not in many cases. Some managers feel that it is important to treat their employees in an ethical manner, but ethics are not required when working with other companies in the cut-throat business world. There are other managers who do just the opposite -- treating their employees like slaves, but being fair in dealings with competitors and others. What is 'ethical' becomes a matter of opinion, which can make business dealings difficult for many (Garrett & Klonoski, 1986).

Business ethics do not require understanding from a managerial standpoint only. Employees should be aware of what business ethics really mean, and what the ethical rules of their company are. Most employees would agree that it is wrong to steal money from the company they work for. However, those same employees would think nothing of taking home a pen they stuck in their shirt pocket, or a notepad they took with them when they went out to talk to a client. While small items such as pens and notepads may seem very insignificant, even small items are part of the ethical dilemmas that face companies today.

Over and above the small items are the larger issues such as discrimination, sexual harassment, and overall treatment of employees. These larger items are more easily recognized and treated as ethical dilemmas than the smaller items mentioned in the above paragraph, but both large and small items are important to the ethical running of any business. Business ethics is currently a very hot topic, but not enough is being done to correct the wrongs that still go on every day in the business world. There is always more that companies can do to protect themselves and their employees from ethical dilemmas, and the evolution of the current field of business ethics still has a long way to go to reach the high level demanded of such an important societal topic.

Ethical considerations in business must not be just something that are listed on the company mission statement, or something signed by an employee when he or she is hired. It must be an ongoing process of re-examining the codes of ethical conduct and making sure that those codes are up-to-date and relevant. It is also necessary to make sure that the employees who agreed to uphold those codes are continuing to do that. All of the written codes in the world will not make a difference if the management fails to utilize the things mentioned in them. They must remain sensitive to other employees' racial and cultural differences, and assure employees that there are policies in place to prevent unethical behavior.

Recently, with the collapse of Enron, new calls are going out to revamp the business ethics movement. Most people believe there are still large deficits in the ethical codes of most businesses if a company like Enron can literally fall apart the way it did. The question for Enron executives is how people who were believed to be so intelligent could lack the moral courage to tell the truth. Further, why did they make no effort to seek out the truth, and make sure that everyone in the company was doing their jobs in an ethical and legal manner?

Greed is one of the suspected reasons why Enron executives failed to seek out and tell the truth. When the economy gets shaky, the morals of some companies get shaky as well. Most large companies are under tremendous pressure to perform, they are worried about profits, and they are worried about what will happen to their stock on Wall Street if they fail to meet the quotas expected of them. Even though these are all valid points to help understand why companies sometimes fail to exercise the proper moral judgment, it still does not make their decisions correct or ethically viable.

One of the problems with the business ethics movement today is that business ethics courses are not being taught to have much application in the real world. Most of these types of courses spend a lot of time on issues such as environmentalism and affirmative action, and do not spend enough time on integrity and truth-telling, which are actually more important (Bernstein, 2000). Currently, the business ethics movement is making strides, partially due to Enron and other large companies that have recently ran afoul of the law. In order for the movement to continue and remain sound, other companies must learn from the mistakes of companies like Enron and make certain that they do not subscribe to the same moral codes. Businesses must want to make ethical choices for the business ethics movement to actually grow strong. Anyone can hang a code of conduct on the wall, but following it is where the real work comes in, and businesses that do not follow it will sooner or later end up where Enron was when the collapse took place.

There were several ethical dilemmas that Enron faced when they had difficulties. The first dilemma that Enron faced in the workplace is the information dilemma. In the information dilemma employers and employees weigh whether they want to tell the whole truth, the partial truth, or an outright lie. 'Whole truth' and 'outright lie' are pretty straightforward, but 'partial truth' is a little more of a gray area. Partial truths fall under the category of 'misinformation'. They are not the complete story, but yet they are not totally dishonest, either. For example, if a potential employee is asked why he left his previous job and he states that he felt it was time to explore other opportunities, but he refrains from mentioning that the boss was about to fire him because he had lost an important account this is misinformation. Unfortunately, the information dilemma encompasses issues far greater than a 'white lie' during a job interview. There are much more serious problems such as misleading advertising, product safety, and bargaining styles during negotiations (Donaldson & Gini, 1984).

There are two basic schools of thought in the business world about lying. The first is that business is sort of like a poker game, and while there has to be a minimum level of honesty, a certain amount of falsity and bluffing is also acceptable. These types of bluffs include things like slogans that state the customer 'has a friend' at a particular company. No one seriously believes that. It is understood that the slogan is an attempt at making a statement about the friendliness of the employees and how customers are treated. It is also deemed acceptable by this school of thought for an older person who feels that they may face age discrimination to lie about their age on their job application (Donaldson & Gini, 1984).

The other school of thought is the one that holds views like those of Immanuel Kant. According to Kant, lying for any reason at any time was completely unacceptable. Kant does, however, distinguish lies from false statements, and give the impression that false statements are acceptable in games, when the statement is part of the game (Donaldson & Gini, 1984). Those who see the business world as a game might then feel that false statements are absolutely acceptable. Kant feels that false statements are also acceptable in one other circumstance -- when someone is being tortured by their enemies. It is highly unlikely that that excuse would work in today's business world.

Companies today are trying to achieve a balance between lying outright and the views of Immanuel Kant. Employees and employers alike are encouraged to tell the truth, no matter what the cost, and many companies have 'open door' policies where employees can come to management and air their grievances without fear of losing their job. Employees are being rewarded for their honesty, and managers continue to encourage communication between supervisors and subordinates. Management is also looking for ways to encourage employees to tell the truth about other employees who may be involved in something dishonest or illegal (Jones, 1982). Not all employees will take advantage of this, of course, because some still believe that they will face punishment for being a 'whistle-blower', but there are laws in place now to protect the rights of employees who blow the whistle on other employees or their employers.

Employee rights have become increasing important over the last 20 years, and this is another area in which Enron had difficulties. Those people who advocate employee rights make two different arguments. The first argument is that tougher laws and regulations are needed to ensure that employees get the rights that they deserve. It cannot be left up to the companies to take care of the employees, because they will not 'police themselves'. The other argument is that it should be up to companies. The thinking behind this is that companies will take care of their own employees through open-door policies and grievance procedures, as well as other means. This will mean less red tape and hassle for companies, since they will not have to deal with regulatory agencies all the time.

Both arguments have merit, and both have good ideas. It seems as though a good mix of both government regulation and company willingness is needed to truly give employees all of the rights that they deserve. Companies today are addressing the challenges of employee rights by creating some of the procedures mentioned above (i.e. open-door policies and grievance procedures). Some of the more progressive companies are coming up with concepts such as an 'employee bill-of-rights' and 'quality circles', which are group meetings where problems and concerns can be discussed freely with others and with management. This was something that Enron lacked in what they were doing with their company.

Another dilemma in the workplace that Enron also experienced difficulty with was how to deal with the obligations a business has to its stakeholders (i.e. employees, the community, customers, and stockholders). Businesses have more obligations now than ever before. As the business climate continues to change, new demands are placed on businesses all of the time. One demand that has not changed in some time is that companies should be held financially responsible for problems caused by their products. A company can be found to be financially liable without being morally or legally liable (Donaldson & Gini, 1984).

The most important factor in the ethical equation for Enron and other businesses, however, is leadership. Employees usually follow company example, and without sound leadership and ethical actions, the example will be a poor one. The consensus today seems to be that a crisis is occurring in the field of business ethics. While this may or may not be the case, there are problems that need to be addressed. Consensus also shows that profits are the driving force of all business, and today's companies are interested in profits above everything else, including ethical behavior.

Today's businesses must understand the role of their leaders, and the ethics or morality of leadership. The argument made by Kanungo & Mendonca (1996) in their book Ethical Dimensions of Leadership is that those people who desire to be leaders cannot be two different people -- one for home and one for office. Leaders who do not believe in unethical behavior will see it as a matter of virtue because that is the way they act in their everyday lives, instead of seeing it as a matter of policy because it is something to be done only at the office.

Clear, any company has a need for leadership. Companies have to have structure, and leaders help to make that structure sound by working toward common goals and aspirations. Leaders guide employees in their day-to-day work, as well as keep them focused on the visions that the company has for the future. Without leaders chaos would result. It is because employees look up to their leaders that leadership ethics are of such vital importance. Some would argue that worrying about ethics and morality turns leaders away from the real business of a company, which is making profits for owners and stockholders. These same people would also argue that ethics are something that should be left up to religious and educational institutions.