Ethics Paper Business Ethics and Corporate Strategy

Ethical Issue Paper Travis G. Stoufer Business Ethics-BUS 323 Janet Evelyn-Dorsey January 29, 2010

Ethics Paper

Abstract A paper presented on the growing issues of business ethics and the decisions consumers and producers make when moral and ethical responsibilities are in question. Paper presents tools for consideration for tomorrows leaders and gives a general overview of strategies corporations take to limit legal responsibility in ethical matters that include; hiring of undocumented workers, strategies such as breach and pay, document retention, and rewriting policy on employees instead of treating them with dignity and respect. The paper discusses the viewpoint of ethical responsibilities with primary stakeholders in mind. The primary stakeholders for consideration in this paper would be employees, consumers, managers, and CEOs. This paper argues corporate strategies such as breach and pay, document retention, and hiring of undocumented workers is unethical. Corporate strategies of this sort are unethical and consumers should align the purchases of goods and services with companies that participate in corporate social responsibility.

Ethics Paper

BUSINESS ETHICS AND CORPORATE STRATEGY TABLE OF CONTENTS Abstractii Table of Contentsiii Introduction......1 Background.......1-2 Analysis........2-5 Conclusion...6 References7

Ethics Paper Business ethics is a growing issue of concern as businesses continue to grow and our capitalist society expands into a global context. Business ethics both domestic and international is a complex continuum of human rights, moral awareness, and a universal acceptance of duties and responsibilities for corporations. Even under the best conditions, an otherwise good company can become entangled in a web of moral injustice (Hoffman & McNulty, 2009). Companies with the best of intentions can find themselves dealing with ethical dilemmas in human rights violations; employment of undocumented workers, corporate strategies, and host nation laws. The primary stakeholders for consideration in this paper would be employees, consumers, managers, and CEOs. This paper argues corporate strategies such as breach and pay, document retention, and hiring of undocumented workers is unethical. Corporate strategies of this sort are unethical and consumers should align the purchases of goods and services with companies that participate in corporate social responsibility.

Addressing business ethics is important to empower leaders with the tools to manage, strategize, identify, and tailor certain behaviors (Trevino & Nelson, 2007). It is also important in addressing what is right; both legally and more importantly morally. I will address the differences in corporate strategy; identifying what is a legal responsibility versus a moral responsibility such as, the decision to breach law and pay penalties. Social responsibility identifies a businesss responsibility to the community, environment, and economy in which it co-exist. Some recent capitalists are considered to be enlightened capitalists who feel that they have a responsibility that extends beyond maximizing profit. It has been said that todays economy is no longer about creating products to meet an existing demand but designing new markets to create this demand (Huberman & Sweezy, 1959). In the attempt of capitalist to create new markets; values such as moral responsibility and

Ethics Paper integrity are fatal liabilities (Trevino & Nelson, 2007). The profitability alone in a capitalist society can promote moral irresponsibility. In response to the moral responsibility that businesses are expected to uphold; is a revived effort of corporate social responsibility (CSR). In college educational programs CSR has been identified as a pyramid made up of four components. The four components to corporate social responsibility are; economic, legal, ethical, and philanthropic responsibilities (Trevino & Nelson, 2007). Economic responsibility addresses the relationship between producing goods or services, and what the consumer needs or wants. The producers need to make an acceptable profit while doing what is right both legally and morally. Legal responsibility is the responsibility of businesses; to adhere to government regulations and laws. Ethical responsibility addresses the function of performing under societal expectations on what is right. An ethical responsibility would be having a code of conduct to treat employees with dignity and respect. Abbott Laboratories for example provided AIDS medication at little to no cost in over 35 African countries due to the fact that the victims of the disease could not afford this medication (Trevino & Nelson). Philanthropic responsibility is the philosophy that the wealthy should give back to the community. This responsibility is questioned by some but generally accepted in the form of donations to charities or programs for the disadvantaged. Businesses are expected to help the community and to share their good fortune such as Ted Turner donating 1 billion to the United Nations to help refugees and those less fortunate. These types of initiatives can be found on corporate web sites showing applications for nonprofit organizations or scholarships for continued education. Some of the emphasis that effects businesses compliance with corporate social responsibility is the fact; that consumers have a desire to align themselves with products from

Ethics Paper producers that are committed to social and economic guiding principles (Kiewwi, 2009). The focus then for corporations should also be a focus on the environment, and community; while maintaining equitable levels of profit. This would be in contrast to the accepted view of corporate responsibility being to maximize profits. CSR is ever evolving with factors such as legal strategies, laws, regulations, international concerns, consumer expectations, industry environmental initiatives, and social compliance. Most businesses evaluate these issues of concern with a cost/benefit analysis. Some of the cost can initially exceed the benefit in participation in CSR. It comes with a long term commitment financially for corporations but can be rewarding both intrinsic and extrinsic while still maintaining high level of profits. A corporation called Gildan expanded its CSR initiative to include medical benefits for its employees, and schools in Honduras to promote the employee education of its textile business. This pays back to the corporation with engaged employees, and innovations in apparel and engineering fields. In order for the initiative to work with Gildan they had to build communication with the suppliers, partners, and distributors in order to make sure that everyone in the supply chain clearly understood the corporate commitment to CSR. In doing so they are building a relationship with the customer that enhances the value of the brand. Corporations are often wrapped up in issues of ethical responsibility and violations of social expectations such as in; legal strategies of breach and pay, lobbying, document retention, and arbitration. A legal strategy is the effort of executives to anticipate legal claims and to put measures in place to maximize profits. Corporations maximize profitability with this behavior but the private gain brings up issues of moral and ethical responsibility. Corporations that exhibit this behavior do so through the use of legal loopholes. Legal loopholes addresses the

Ethics Paper factors involved in business that does not violate the letter of the law but violates the purpose or underlying principle (Ostas, 2009). With breach and pay strategies, a corporation identifies laws that can be breached with little to no cost for the benefit to which it is weighed against. An example of this would be in undocumented illegal workers. A business can operate with illegal workers and when caught will pay a minimum fine for the maximized cost of low pay and wages offered to these employees. Noncompliance with failure to pay overtime and participating with the hiring of undocumented workers is widespread and well documented. Sometimes the legal strategy of the corporation is to redefine hourly wages, to salaries requiring long hours. Corporations are not required to pay large fines when caught. An example would be in 2004 there were over 10.5 million unauthorized workers. 65 corporations were indicted and only paid a total between these 65 corporations; of $45, 480 dollars (Ostas, 2009). The Immigration Reform Act of 1986 prohibits undocumented workers from being hired however the law is under enforced. There are three elements addressed with the breach and pay strategy which are; those who condemn the strategy, those who are sympathetic, and those who seek a middle ground (Ostas, 2009). Societal norms would emphasize that it is a moral obligation for businesses to obey all laws and regulations. Others however believe that there is an alternative view that allows businesses to pick and choose which laws they will abide by and those they dont want to abide by. Most corporate lawyers would advocate on the sympathetic approach stating that some legal matters are subject to choice except when a moral or criminal distinction is made. Some would even argue that maximizing profit doesnt support ethical reason unless a regulation is prohibited or violated. Lawyers hired by firms attempt to interpret the laws in question for instance; if one does X one will have to pay Y. Legal obedience therefore is a matter of choice

Ethics Paper (Ostas, 2009). The opposition in the form of societal norms in American culture would state that one may not do X even if one is willing to pay Y (Ostas, 2009). Corporations also attempt to control the release of documents in court hearings by destroying those documents such as email, electronic records, and paper files. They do so under the legal umbrella of protecting trade secrets, consumer privacy, and prevention of other corporate espionage. They do this however to lessen the chance of criminal detection by an otherwise under enforced legal system. In the Enron fraud cases Stewart and Arthur Anderson were convicted of obstruction of justice with insider trading. Often times when something like this is done a small level of moral reason is upheld; and therefore actions to destroy documents is expected and possibly excused. Litigation can also be very expensive and corporations oftentimes employ a host of procedural devices that bring up the rising cost and may cause the opposite party to abandon claims or settle under negotiations. Some may argue that the corporations are exercising legal rigths other than negotiating in good faith and should not be allowed to delay legal actions. Corporations would defend by stating that delaying provides a substantial purpose in most, if not all cases (Ostas, 2009). These strategies as mentioned above often times leave the public demanding terms of an otherwise ambiguous legal system be rewritten to take into account matters of corporate social responsibility. Take into account in 2009 AIG was bailed out in the tune of 173 billion by the federal government. They then turned around and paid out a sum of 450 million dollars in bonuses. AIG attempted to make good on the backlash by asking for executives to pay back half of what they had been given; however few paid anything. The government grilled CEO Edward

Ethics Paper Liddy and proposed a $500,000 salary cap to executives bailed out by the government (Rollert, 2009). In conclusion, business ethics is a growing issue of concern as businesses continue to grow and our capitalist society expand into a global environment. Business ethics both domestic and international is a complex continuum of human rights, moral awareness, and a universal acceptance of duties and responsibilities of corporations. Even under the best conditions, an otherwise good company can become entangled in a web of moral injustice (Hoffman & McNulty, 2009). Companies are expected by social norms to extend their financial wealth and good fortune by helping those less fortunate, and exercising good moral judgment. Corporations that do not exercise CSR; could sometimes, have policies or strategies in place to limit financial responsibility. Some of those strategies discussed included breach and pay, legal procedural delays, and rewriting policies to exclude legal dilemmas with issues such as hourly pay and wages. Corporations have also started to adapt CSR in the increasing response of consumers that want to align their purchases with companies that exercise good moral conduct within the economy, and environment. Lawrence Kohlberg stated that people behave morally when they decide what course of action is morally right (Trevino & Nelson, 2009). To make a continued difference in the climate and culture of capitalist societies, we as a society need to align our purchases/investments with the actions of corporations that do what is right both legally and morally.

Ethics Paper References Hoffman, M, & McNulty, R. (2009). International business, human rights, and moral complicity: a call for a declaration on the universal rights and duties of business.. Business & Society Review , 114(4), Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh& AN=45513670&site=ehost Ostas, D. (2009). Legal loopholes and underenforced laws: examining the ethical dimensions of corporate legal strategy. American Business Law Journal, 46(4), Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh& AN=45198532&site=ehost-live Kirwei, L. (2010). Why Corporate social responsibility matters now. Wearables, 14(1), Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh& AN=47143275&site=ehost-live Rollert, J. (2009). Goldman sachs bonuses: more than just bad pr. Christian Science Monitor, Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph& AN=47011065&site=ehost-live McClearn, M. (2009). Shooting down the honesty policy. Canadian Business, 82(21), Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph& AN=45552146&site=ehost-live

Ethics Paper Huberman, L, & Sweezy, P. (1959). Fifty years ago. Monthly Review: An Independent Socialist Magazine, 61(7), Retrieved from http://vlib.excelsior.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph& AN=45308210&site=ehost-live Trevino, L, & Nelson, K. (2007). Managing Business Ethics: Straight Talk About How To Do It Right Hoboken, NJ: John Wiley & Sons Inc.