Categories
Business Ethics

Advantages & Disadvantages of Business Ethics

Introduction
Ethically upright or socially responsible businesses are those that aim at attaining their organizational goals while at the same time morally serving the interests of all their stakeholders. According to Shaw (2010), ethical business practices also involve fairly competing with business rivals in the industry. Even though all businesses are expected to act in an ethical and socially responsible manner, several cases have arisen where even large multinationals have been exposed for unethical business practices (Trevino & Nelson, 2010). This indicates that strict adherence to business moral codes may be challenging in the present-day business environment. This paper intends to highlight some of the benefits, drawbacks and challenges that are associated with socially responsible and ethical business practices. Business cases are also used to support arguments presented in the paper.
Strengths

One of the key benefits a business can get from acting ethically is that can keep its reputation intact or even improve it (Ferrell et al., 2011). This ultimately strengthens its brand position by attracting a higher number of customers and skilled employees that seek to be associated with the company. It also reduces cases of employee turnover and associated costs, and attracts more investors and shareholders (Trevino & Nelson, 2010). On the contrary, exposed unethical practices in a business can have detrimental impacts, which include losing employees and customers and in some cases, collapse of the business (Chua & Rahman, 2011). However, there are still many companies whose practices are not entirely ethical, but they have not faced any challenges in their operations. Such examples are rampant in developing countries. One of the companies that have benefited from sticking to the ethical codes of business is Johnson & Johnson, which lost close to $100 million as it recalled 31 million bottles of its best-selling product (Teynol) after it noticed that the product’s capsules had been accidentally laced by cyanide. The company later replaced the recalled bottles with safer ones at no charge to the affected stores. Not only did Johnson & Johnson take the burden for the losses that could have been incurred by the store, it also showed that it valued its customers’ lives more than the profits it could have made. This enabled the company to win back the trust of its customers and within a year, it had regained its original level of sales (Rehak, 2002). On the other hand, Enron, which was exposed for financial statement fraud attempts, lost its reputation and later collapsed (Shaw, 2010).
There are several business aspects that can be evaluated to establish how ethically or socially responsible a business is acting. For instance, companies should ensure that their goods and services are designed in adherence to the set regulatory standards (Ferrell et al., 2011). In addition to this, companies need to ensure that their impact on the environment is controlled to minimize the adverse effects it may have to the surrounding community. According to Trevino and Nelson (2010), companies are also supposed to diligently pay taxes they owe the government, ensure their employees’ working conditions are safe and compete fairly. This means that ethical business practices not only benefit corporations but also individual and communities that interact directly and indirectly with the company. Whilst this is the case, some business stakeholders stand to benefit more than others.
Limitations of ethical Business Practices
Even though ethical business practices have positive impacts on businesses, there are also limitations that it may have on them, especially in the current business environment. One of the limitations lies in the cost they incur in executing corporate social responsibility initiatives. According to Lindgreen and Swaen (2010), CSR policies are meant to make sure that the organizations recognize and deliver their responsibilities to all stakeholders, which include the community, suppliers and consumers. Whilst it is argued by proponents of CSR that it will have long-term benefits, the initial financial cost to the organization is usually quite high. In addition to this, Hopkins (2012) argues that implementing CSR initiatives may cause the company to lose its focus on its main objective, which is making a profit. However, given that companies depend on customers to make profits, they are obliged to ensure that they attract them by all means, one of them being creation of a good reputation through CSR initiatives.
Pride et al. (2009) argue that ethical business practices minimize the opportunities for business to increase their profits. With reference to developing countries that are still characterized by corruption, multinational companies that are ethical may decline to offer bribes for favours. Therefore, they might fail to set up operations in such countries or if they start operations, an unfair competition orchestrated by political forces may limit them from attaining their operational capacity. There are also several companies where employees may be paid low wages or raw materials are bought are sub-standard prices to increase their profitability. Such “opportunities” may be missed out by companies that dedicated to acting ethically. However, it can be argued that restriction of company freedoms by ethical practices is beneficial to the wider society.
Challenges of implementing ethical and socially responsible business practices
One of the main challenges faced by businesses in implementing ethical and socially responsible business practices is the large number of stakeholders involved (Ferrell et al., 2011). While it is often at the interest of the business to cater for the needs of all its stakeholders, it is often difficult to achieve. This causes some business to unwillingly act unethically, either directly or indirectly. An example of such a situation is when a company gets its supplies from one supplier with which it has created a relationship over time. If the company later realizes that the supplier uses child labour to prepare the supplied raw materials, it might be challenging for it to immediately cut off such a supplier. This is because the welfares of other stakeholders in the organization depend on the constant supply of raw materials.
A case of a company that is in such a dilemma is Wal-Mart. In an effort to dissociate itself with factories with labour violations and safety problems, the company produced a list of 200 factories, barring them from supplying merchandise to them in 2011. However, two years later, the US customs records indicated that at least two among the two hundred barred companies were still sending merchandise to Wal-Mart. A similar case was established to be happening with Wal-Mart Canada. In Wal-Mart’s defence, it was stated that the companies were still supplying to Wal-Mart because of a confusion that existed as to whether its standards applied. This was because the supplier in question was producing garments under the label of another company (Grabell, 2013). This is a typical example of the challenges that companies face in implementation of ethical and socially responsible practices. To overcome such challenges, companies should formulate ethical policies that dictate the steps that have to be undertaken in case such situations arise. This will enable companies like Wal-Mart to avoid scandals of this type.
Conclusion
Ethical business practices are supposed to be carried out in all business aspects, which include product design, procurement, preparation of financial statements and recruitment of staff, among others. As it has been presented in this paper, adherence to principles of business ethics may be beneficial to the organization, customers, employee and other stakeholders that are affected directly or indirectly by the organization. It has also been pointed out that adherence to ethical and socially responsible business principles may be disadvantageous to the company. However, the organizational disadvantages that may be caused by this are argued to be advantages to the wider society. The key challenge to implementation of ethical and socially responsible business practices is posed by the large number of stakeholders involved. Therefore, whilst companies are encouraged to act ethically, they have to be aware of the limitations and challenges involved.
References
Chua, F. & Rahman, A., 2011. Institutional Pressures and Ethical Reckoning by Business Corporations. Journal of Business Ethics, 98(2), pp.307-29.
Ferrell, O.C., Fraedrich, ?J. & Ferrell, L?., 2011. Business Ethics: Ethical Decision Making and Cases. Mason: Cengage Learning.
Grabell, M., 2013. Walmart Accepted Clothing from Banned Bangladesh Factories. [Online] Available at: http://business-ethics.com/2013/06/17/1606-walmart-accepted-clothing-from-banned-bangladesh-factories/ [Accessed 11 november 2013].
Hopkins, M., 2012. Corporate Social Responsibility and International Development. New Jersey: Routledge.
Lindgreen, A. & Swaen, V., 2010. Corporate Social Responsibility. International Journal of Management Reviews, 12(1), pp.1-7.
Pride, W.M., Hughes, R?.J. & Kapoor, ?J.R., 2009. Foundations of Business. Mason: Cengage Learning.
Rehak, J., 2002. Tylenol made a hero of Johnson & Johnson: The recall that started them all. The New York Times, 22 March.
Shaw, W.H., 2010. Business Ethics: A Textbook With Cases: A Textbook with Cases. Mason: Cengage Learning.
Trevino, L.K. & Nelson, K.A., 2010. Managing Business Ethics. New Jersey: John Wiley & Sons.

Categories
Business Ethics

Business Ethics Critical Analysis

Student Assignment for HC2121 in Trimester 1, 2010 2. How effective has Mattel been at encouraging ethical and legal conduct by its manufacturers? What changes and additions would you make to the company’s Global Manufacturing Principles? ____________________________________________________________ __ ‘Good ethics is good business and bad ethics is bad business are connected’ (Burton & Goldsby 2010). Mattel has been quite effective at encouraging ethical and legal conduct. It has developed its Global Manufacturing Principles for sub contractors and global manufacturers.These ‘including employee health and safety, environmental management and ensuring that employees are treated fairly and with respect, to the cultural, ethnic and philosophical differences of the countries where Mattel operates’ (Mattel Inc. 2010).
Mattel also assists its manufacturers to meet its Global Manufacturing Principles or code of conduct. However, ‘if a business partner is either unable or unwilling to work with Mattel in order to meet and maintain its standards, Mattel is prepared to end the working relationship’ (Mattel Inc. 010). Although Mattel has a good Global Manufacturing Principles, it also needs to update its principles in timely manner. The nature of business is rapidly changing nowadays. As Mattel is operating more than one hundred countries across the world, sometimes it is hard to control all the production facilities or code of conduct of sub contractors. To resolve this problem, Mattel can tighten its principles by specifying different principles in different regions based on ethics, local culture and law and work force.
Another change Mattel could take into consideration is it should monitor the implementation of its Global Manufacturing Principles frequently, rather than to set the principles and do nothing. Finally, Mattel must tell its customers and stakeholders if any possible hazards or dangers occur using a product. Some ‘companies do not tell consumers about accidents even after they have withdrawn products from sale’ (Pearlman & Ryle 2009). It is moral duty of a company to notify the users. ____________________________________________________________ ______________________ Page 2 of 7 HD Student Assignment for HC2121 in Trimester 1, 2010 3. To what extent is Mattel responsible for issues related to its production of toys in China? How might Mattel have avoided these issues? ____________________________________________________________ __ In 2006-2007, according to U. S.

Consumer Product Safety Commission, Mattel recalled 13,970,000 units of toys from China due to problem with products. Most of the problems emerged due to lead paint and small loose magnets (Gilbert & Wisner, 2010).In a servery it was revealed that the most frequently manifested emotion associated with the Mattel product recall across time was 49% anger in people’s mind (Choi & Lin 2009). There are many ways Mattel is responsible for this collapse. First, the chinse company had been sub contracting another company, which is not approved by Mattel, ultimately supplied the lead paint in the product. Second, in their monthly audit they did not check the quality of each product, which they should have checked. The chinse manufacturer did the quality control and they did not do it properly.
Third, Mattel simply failed to make good design for toys, which caused the loose magnet hazards (Gilbert & Wisner, 2010). Mattel might have avoided the above issues if they made several design changes in their products which caused the loose magnet problem. This problem is not because of production is China. If it was produced in the U. S. A. it also caused the same problem as did in China.
On the other hand, the lead paint problem were occurs due to sufficient supervision in the supply chain management of Mattel’s.There should be more monitoring and controlling needed in the manufacturing chain. Although it was a complex process to manage such a huge process, they could have minimized this if the regulations and code of conduct were tightened and ‘additional industry guidelines were established to require manufacturers to install additional safety features—and require retailers to educate customers about the dangers’ (Abbas, Bamberger & Gebhart 2004). ____________________________________________________________ _______________________ Page 3 of 7 HD Student Assignment for HC2121 in Trimester 1, 2010 4.Do you feel that Mattel should receive control of MGA’s Brats Dolls? If so, what actions should Mattel take regarding Brats? ____________________________________________________________ __ Mattel should receive control of MGA’s Brats Dolls. The intellectual property was belonging to Mattel, which is design by an employee Carter Bryant. An employee cannot take the intellectual property to another company because the right is belonging to Mattel.
So there is substantial reason to take control of Brats Dolls. Mattel should keep the intellectual property right for Brats Dolls.They should seek fair justice in court in order to gain control over Brats Dolls. In 2008 the federal court revealed that, ‘Carter Bryant, the creator of the multi-ethnic, bigheaded dolls, had created their characters and the name while he was under contract as a Barbie designer at Mattel’ (The New York Times 2008). He was using Mattel materials and workers to create a Brats prototype (Keating 2008). Based on this, Mattel should keep seeking for the intellectual right of Brats Dolls. The Brats Dolls is not a court case-battling toy; it is toy for little children.
Mattel should also consider about all those little girls out there who use the dolls and like the dolls? (Keating 2008) There is also ethical and moral issues to consider regarding to children. If the court case going on and on, and if some stages the court decides to ban the product from selling what would happen to the poor kids everybody should consider. In these circumstances, Mattel should look for a common ground between MGA without affecting the image of Brats Dolls to children’s mind.

Categories
Business Ethics

Business Ethics and Reading Response

The process of making decisions in a management sometimes is cumbersome. Choosing to do the right thing in business matters cannot be very easy as the name ‘right’ may depict and therefore, ethical decisions are not simple. It can be asserted that a right thing can be based on principles of moral or depending with the situation. Ethics can be based on values such as respect, transparency, accountability and many more. Therefore business ethics can be termed as knowing what is right or wrong and making the right decision (Carter McNamara, Complete guide to ethics Management). In most circumstances, it is not enough to think of good or bad but making proper and focused decisions when dealing with situations in the workplace. For example, the managers and the supervisors should be in a position to cope with difficulties in management and the best way to address the recommendations to the employees.
Business ethics focuses on the dilemmas where one can judge as either right or wrong. For example, mischief in management and managerial moral misconducts such as failing to honor contracts, misuse of resources, mismanagement and many more. Business ethics has a sense of social influence and therefore must address social problems and interest. The social part in it is that it involves business suppliers, community, employees, and customers and so on. Apart from management business must foster good relationship with the public in order to make a reputable organization.
It is noted that 90% of business institutions have considered business ethics in their curriculum (Carter McNamara, Complete guide to ethics Management). In the workplaces today, ethics are managed by the code of conducts, training and seminars among many more. In a workplace business ethics are achieved through prioritizing workplace conducts and ensuring good behavior according to these values. The management should strictly get involved in sensitizing on the moral values through the means of discussions and making follow up. Therefore a continuous process is usually involved in instilling business ethics. Even if the business is in operation within the law, it is not an indication that it observes the ethics and therefore there is a need to check on the internal affairs before making such kind of a judgment.

There are considerably a good number of benefits associated with business ethics. To start with, the society improves. It is true that without the business ethics, employees can be overworked or fired without reasonable arguments, small business can be outraged due to price fixing, and consumer protection can be violated and so on. At least policies have been instituted to take care of the welfare of the society. Paying attention to ethics in workplace has enabled employees and the leaders to act consistently in cumbersome situations. It cultivates productivity and a sense of teamwork. Discussing issues pertaining to ethics creates openness between the managers and the employees as well as good relationship in the place of work.
Since the employee is trained to face reality, he or she gets development and life attains its meaning. Cases of criminal have been curbed since mistakes are addressed as early as possible and rectified. Managements have been made better since there are no much cases of misappropriation of organization funds. The image of the organization in public improves since effective and fair markets as well as opportunities are properly observed. Relationship between members in the public as well as individuals is improved as there is a balance in the culture of organization. Businesses with strict observation of ethics can be characterized of being organized. There is free and open interaction, fairness, individual responsibility, purpose focused intentions and so on. The management decisions are clear and well focused and therefore the output is highly increased (Carter McNamara, Complete guide to ethics Management).
In conclusion business ethics needs to be implemented in a more reasonable manner. Its benefits are quite enormous not only at the workplace but also to the wider community. It can be recommended that the existing institutions and businesses involve the ethic culture in order to improve their welfare and that of the community.
Cited Work
Carter McNamara. Complete guide to ethics Management: An ethics toolkit for Managers (Accessed 11April 2009) <http://www.managementhelp.org/ethics/ethxgde.htm#anchor26548>