Ethics concepts and applications

Ethics

The manager or managers of any specific firm are responsible for taking actions that maximize the value of that firm. When a firm's value is maximized the firm's shareholders are happy because their investment(s) are providing them with a return commiserate with their shared risk. The manner in which agency theory comes into play in this particular scenario is that the managers are acting as the agents for the principals (shareholders) by making decisions that will supposedly maximize the value of the firm. Since they are acting for the shareholders, these same managers will likely make some decisions regarding the policies and transactions for the firm that could be questioned under other circumstances. The managers are acting as the shareholder's agents and are therefore much more likely to consider those shareholders than they are the perceptions or ideals of other stakeholders of the firms. The goal of maximizing the firms' value therefore would take precedence over other considerations. Other considerations could include employee benefits or retention, the environment, adding new products, even expansion or contraction of the business. The agency theory supposes that the managers will make the decisions based on what is best for the shareholders and not what is best based on the other considerations.

2. It is important the ethics are offered in university courses. The reasoning behind this statement is that there is often very little instruction in ethics offered on the high school level and it is such an important part of business (and other industry) that to have no knowledge at all concerning ethics does not make much sense for a business community.

One recent article espoused the fact that "in the global business arena with 24-hour media scrutiny, unethical behavior can affect the key elements of business success -- profitability, productivity and brand equity" (Berenbeim, 2012, p. 408). If what Berenbeim states as truth, is true, then it is important to the business community as well as specific business' to have employees that understand the difference(s) between ethical and unethical behavior. The question then remains, where would these employees acquire that knowledge. Many students of business could be missing a key component to their future success by not having access to ethical studies and training. Therefore, teaching ethics at the university level becomes of paramount importance.