Egoism Vs. Utility Research Paper

Length: 7 pages Sources: 7 Subject: Business Type: Research Paper Paper: #61918002 Related Topics: Warren Buffett, Oprah Winfrey, Wrongful Conviction, Bill Gates
Excerpt from Research Paper :

Olympus Scandal

The Olympus corporate governance and accounting scandal is and should be considered one of the largest business scandals in the history of business and the modern world. It is right up there with Enron (and in some ways worse) than the exploits and travails of Enron and Bernie Madoff. This report will look at the Olympus scandal through the prisms of utility, egoism and what precisely could or should be done (if anything) to finally put an end to the malfeasance perpetrated by Olympus and others. While some corporate-related laws are moderately to very effective in stopping wrong-doers, it is impossible to stop them all without clamping too hard down on the people that are not doing wrong.

SOX & AICPA

There are some legal, sociological, mental and corporate concepts that can be brought up here. Two of those would be Sarbanes-Oxley (SOX) and AICPA Code of Professional Conduct. SOX was in reaction to the Enron scandal. It has multiple facets that are quite aggressive regarding things like accountability, procedure and conflicts of interest. For example, the executives of companies must personally vouch for what is being attested to on the balance sheets and income statements being submitted. This may make people think twice before committing a wrong-doing, this does not mean that people will not try. The tenets of the AICPA, those being public, trust and principle, work much the same way in their own way but are apparently not effective all the time either. Further, the Olympus case proves that neither independent board members nor a changing of the guard will stop a company or its leaders from engaging in improper fiscal behavior. The problem with Sarbanes-Oxley is that it might stop some people from engaging in improper corporate governance or accounting behavior, it does not stop everyone and the increased amount of compliance spending from firms subject to the law could be stifling if not crippling (SEC, 2015; AICPA, 2015).

Utilitarianism & Egoism

To look at more high-level principles, one clear concept that comes up quite easily is egoism. When a person leads a publicly traded company, it is assumed and demanded that they capitulate to the will of the board, the stakeholders and the public before they line their own pockets. When executives and such are taking out high-dollar loans for themselves, are lying about the losses or income that exist and so forth, it is clear that the person is engaging in egoism rather than utilitarianism or a focus on stakeholders in general. This last sentence brings up the fact that there are three different entities involved. Those three are the stakeholders, the leaders and the public. It is generally stated that egoism is not a good thing but there will always be some modicum of that when it comes to promotion-seeking executives and who wish to maximize their income and raise their prestige. A person who is driving to succeed but would never seek or try to break the corporate governance or accounting rules is not doing anything wrong, at least not intentionally (Shaver, 2002).

Even when egoism is not firmly in the picture, there can still be problems. Just deciding between the interests of the stakeholders and those of the public can be difficult to balance correctly. There are quite a lot of people that decry the profit motive...

...

As such, there are indeed ethical questions as to how Olympus and other could and should conduct their business and what laws should be put in place to stop someone from doing what is not preferable or wise. However, clamping down too hard on behavior that is usually sin-free is hard to do across the board without inconveniencing the people who are not trying to do the wrong thing (Shaver, 2002).

All of this begs the question of what to do when running a business, at least in the general sense. Utilitarianism says that everything should be utilized and employed in a way so as to bring the most benefit to the most people. Some might think that giving benefits or pay that is above industry standard should be the answer. Others would say that prices should be lowered so that more people can afford their products. Of course, the main goal of a business in the eyes of many is to make a profit. Also, many economists would say that setting the price too low is just as bad as setting the price too high. For example, if an average mid-range camera would go for $200, it might make sense to have a sale where it sells for $180 during the holiday season or to get rid of a glut of inventory. Similarly, if the average price goes up to $225, then Olympus would want to echo that as pushing too hard on the equilibrium price. Ferraris might only cost $100,000 to make but they sell for a lot more than that and other elite car makers would be wise to operate within the market price range for the given echelon of car (Tamuc, 2015; Utilitarianism, 2015).

Code of Conduct

While prices were not the issue with Olympus, there were some obvious ethics flaws. When a company's business is going south, it is true that there will be negative reactions when it hits the press. To be sure, it will not be easy to just come out with it and say what is going on and how they plan to fix it. However, that is absolutely what needs to happen. Not only did this not happen with Olympus, it continued in perpetuity through the reigns of more than one person. It took a British man by the name of Michael Woodford to come onto the job and realize quite quickly that there was something very wrong. Woodford was clearly operating from utilitarianism and ethical standpoints rather than an egoistic one. Sure, a lot of why he spoke up may have been to prevent people from thinking that he was personally involved but it was still the right thing (Armitage, 2013).

The Olympus scandal is still having some fallout because it was indeed fairly recent in terms of when it was revealed. What makes the Olympus case an outlier is that was going on since the 1980's. This fact alone should floor just about anyone. Also flooring is that Woodford was just promoted to CEO and he started to push the fact that there were bad things going on. When he would not relent, the board unanimously removed him from his job even though he was acting ethically. The above would indicate that there was a groupthink and/or mob mentality going on. The board members either did not know what was going on or they knew full well and then bounced Woodford afterward. It was almost certainly the latter because Woodford described the board as toxic and the board reinstated the prior CEO to the job. That didn't last long as the person in question (Kikukawa) was gone in short order thereafter (Seiffert, 2015).

The aftermath, which is still going on, includes a removal of 2700 people from their jobs and a closure of nearly half of their manufacturing plants. The latter was set to continue through the end of 2015. Woodford sued for defamation and wrongful dismissal and he won nearly $15 million USD for that case. The stock price, predictably, took quite a dive as it dropped from 2500 yen to 500 yen in the span of two to three months. The price recovered in the form of doubling to about 1000 yen but it's still only 40% of its original level. The company has since updated its code of conduct. This was done in 2012, the same year as the scandal's reveal. There are numerous sections in this new code that were either not present or not followed. One example would be the whistleblower system. It would seem to cover the problems realized when the Woodford tried to sound the alarm, as follows:

If the company's executives or employees discover any conduct to be in violation of the Code of "Conduct, if such a violation is suspected, or if any assistance is needed to resolve a matter not within the current scope of the Code of Conduct, they must report to and/or consult with their superiors or the relevant department. However, if the employee has difficulty in reporting to his or her superiors or the relevant Compliance Department, the employee may use an appropriate external reporting system (i.e., Compliance Integrity Hotline or Compliance Help Line).

The consultation and the act of reporting as well as the content of any such dialogue will be held in the strictest confidentiality; honestly raising legal and/or ethical concerns shall not disadvantage the reporter in any way. All reports…

Sources Used in Documents:

References

AICPA,. (2015). AICPA - AICPA Code of Professional Conduct. Aicpa.org. Retrieved 22

April 2015, from http://www.aicpa.org/research/standards/codeofconduct/

Pages/default.aspx

Armitage, J. (2013). Michael Woodford ... The Olympus whistleblower's back in focus.
The Evening Standard. Retrieved 22 April 2015, from http://www.standard.co.uk/business/markets/michael-woodford -- the-olympus-whistleblowers-back-in-focus-8652256.html
Aronson, B. (2015). Retrieved 22 April 2015, from http://sydney.edu.au/law/anjel / documents/2013/ZJapanR35_05-Aronson.pdf
from http://www.olympus-global.com/en/csr/olycsr/socialin/principle/policy.jsp
from http://www.sec.gov/about/laws.shtml
Business Journal. Boston Business Journal. Retrieved 22 April 2015, from http://www.bizjournals.com/boston/blog/bioflash/2014/06/olympus-biotech-indicates-more-layoffs-from.html
Shaver, R. (2002). Egoism. Plato.stanford.edu. Retrieved 22 April 2015, from http://plato.stanford.edu/entries/egoism/
TAMUC,. (2015). Equilibrium Price. Faculty.tamuc.edu. Retrieved 22 April 2015, from http://faculty.tamuc.edu/dfunderburk/231/notes/EquilibriumPrice.htm
Utilitarianism,. (2015). Utilitarianism. Utilitarianism.com. Retrieved 22 April 2015, from http://www.utilitarianism.com/utilitarianism.html


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