Ethical scandal on the part of businesses

Category: Metaphysics
Last Updated: 18 Jun 2020
Pages: 5 Views: 164

The past two to three years may be characterised as the most serious period of ethical scandal on the part of businesses. In most respects, the current environment of fraud and corruption is far worse than the insider trading scandals as the current situation has caused such significant financial harm for tens-of-thousands of employees and millions of investors. Greed and dishonesty has caused the top management, accountants and auditors to falter in the ethical context for these are the people who control the decisions of the company and have the knowledge of what is going on.

Basically, there is a rise in the number of people who have failed to adhere to ethical codes of conduct and behaviour. With this in mind, this paper is indeed timely and relevant for it discusses an accounting scandal, highlights the stakeholders who would be affected by the decision taken, the chain of reaction that would follow, the ethical issues involved, as well as the proposed resolution towards overcoming the problem. It is difficult to define ethics in a precise manner.

In a general sense, ethics is the code of moral principles and values that govern the behaviours of a person or group with respect to what is right or wrong (Daft, 2003). Ethics set standards as to what is good or bad in conduct and decision making. Business ethics deal with internal values that are a part of corporate culture and shape decisions concerning social responsibility with respect to the external environment. Ethical behaviour means doing the right thing. A difficulty arises, however, in attempting to define doing the right thing.

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The problem is that each person has his or her own set of values which forms the basis for personal judgements about what is the right thing to do. However, every society adopts a set of rules or laws that prescribes what it believes to be doing the right thing. The notion of ethical decision making relies on one's sense of right and wrong which, in turn, influences how a person makes judgements. There are basically three main frameworks for ethical analysis, namely teleology, contracturalism and deontology. The teleological framework discusses the doctrine of design and purpose in a materialistic world.

There are three versions in this framework. The first version is the ideal person theory which is basically the virtue ethics theory and it evolved from natural law theory. This theory advocates that a person imagines what an ideal person would be like, and then try to live up to all those virtues. The ultimate goal of this theory is for all to lead a happy, beautiful and fulfilled life by practising all the virtues. The second version is the divine law theory whereby the ideal person is defined by religion. This contrasts with the ideal person theory which goes on the basis of law.

The ultimate motivation of this theory is to do good in this life, not to harm others, and be ethical, in order to be rewarded by eternal happiness and bliss in the after life. The third version is utilitarianism which advocates that an individual chooses the action that produces the greatest good or benefit to the greatest number of people. The contracturalism framework emerged as society evolved, and there was a need for rules and regulations to govern society. It ensures that equality prevails in all aspects of society. There are two versions within this framework.

The first version, Hobbesian theory advocates that an individual keeps the laws as he has implicitly agreed to be part of the society. The person is to obey the laws of the society in exchange for protection from the rulers. The second version, Rawls theory operates on the principle of maximising the minimum by adhering to equality and fairness. This theory imaginatively reflects on what it would be like to choose a set of moral and social arrangements prior to an individual's reincarnation into that society if that individual had no knowledge of his future degree of intelligence, strength, or position in that society.

The deontological framework discusses the doctrine of duty and obligation whereby it highlights what a person ought to do in an ethical dilemma. There are two versions in this framework. The first version, Kant theory advocates that all decisions must fulfil two conditions. The first condition is that the act must be universal, whereby if a person acts in a certain manner, he must ensure that he would be able to accept it if another person were to act in the same manner.

The second condition is that the other person has to be treated as an end in himself whereby he must be considered as equal or better than the person who is making the decision. The second version, Ross theory introduces the concept of prima facie or at the first look. With this, a person has to be guided by one's own conscience when making decisions. As this paper would proceed to discuss a financial dilemma, it would also be relevant to look into two other fundamental sources of value systems advocated by Scott, Martin, Petty and Keown (1999).

These value systems, namely the Smithian and Humanitarian value systems can be considered in the analysis of ethical decisions. The first is the basic notion, the Smithian value system advocates that by working hard to fulfil his or her own personal ambitions, a person contributes not only to his or her own personal welfare but also to society as a whole. This is the idea of the 'invisible hand' put forth by Adam Smith. Briefly, this system holds that when individuals pursue their own self-interest at the work place, they contribute to the good of society.

The second fundamental value system, the Humanitarian value system is based on a person's desire to be humane. Humanitarian values rest on the notion that all are equal as human beings and should be protected from the harsh realities of a purely economic allocation system. This system does not suggest that all be equally wealthy or have equal earnings, rather it provides the basis for social welfare programmes and other forms of economic safety nets for individuals in the society. A person's personal value system may be a combination of these theories and ideas, but they are not the only factors that would influence his or her behaviour.

With this, an ethical dilemma arises in a situation when each alternative choice or behaviour is undesirable because of potentially harmful consequences. In this case, right or wrong cannot be clearly identified. Beyond the question of ethics is the question of social responsibility. In general, corporate social responsibility means that a corporation has responsibilities to society beyond the maximisation of shareholders' wealth. It asserts that a corporation answers to a broader constituency than shareholders alone. As with most debates that centre on ethical and moral questions, there are no definite answers.

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Ethical scandal on the part of businesses. (2018, Jul 28). Retrieved from

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