Business_Ethics_and_Deontology

Introduction In all of today’s businesses and organizations ethics play a critical role in effectively accomplishing day-to-day operations and ensuring the organizations future. If ethics could be packaged as a tangible commodity, it would be a major resource for many businesses and organizations. While specifics of defining ethics can vary from one organization to another, it can be summarized into the accepted set of moral values and corporate standards of conduct in a business organization. Whether intended or not, these ethics/standards can have a major impact on an organization bottom-line – it can add value to an organization by showing that it can be trustworthy across all spectrums of business dealing. Adversely, cracks exposed in an organization’s ethical veneer can send investors and consumers fleeing and drive the company to bankruptcy. The objective of this paper is to review the role ethics, or lack there of, played in the downfall of Adelphia Communications. From utilizing company funds for personal expenses to misrepresenting accounting and inflating the company’s value, the lack of ethical regard to industry and company standards caused the downfall of the communications giant and sent top company officials to prison. This paper, briefly, discusses the ethical decision-making and deontological ethics for business executives and explores the concept of moral duty. Principles of deontology should guide executive decision-making particularly when executives are tempted to operate outside of codified legislation or are bound to act under judicial-free conditions. Understanding Deontological Ethics Business ethics manifests both as written and unwritten codes of moral standards that are critical to the current activities and future aspirations of a business organization. They can differ from one company to another because of differences in cultural perspectives, operational structures and strategic orientations. The guiding framework of business ethics permeates all levels of the organization. It is about having the wisdom and a duty to determine the difference between right actions and wrong decisions. Immanuel Kant (1724-1804) is one many philosophers that had a theory of deontological or duty-based ethics. (Williams, 2008) Kant is responsible for the most prominent and well-known form of deontological ethics. Kant’s moral theory is based on his view of the human being as having the unique capacity for rationality. No other animal possesses such a propensity for reasoned thought and action, and it is exactly this ability, which obliges us to act according to the moral law/duty. (Williams, 2008) Kant’s moral theory emphasizes acting in accordance with and for the sake of duty. Kant believed that inclinations, emotions and consequences should play no role in moral action. This means that the motivation for action must be based on obligation. Morality should provide us with a framework of rational principles (rules) that guide and restrict action - independent of personal intentions and desires. Kant believed that duty-based ethics should judge morality by examining the nature of actions and the will of agents rather than goals or outcomes achieved. One reason that duties are at the forefront of decision-making is that, in spite of our best efforts, we cannot control the future. (Williams, 2008) We are praised or blamed for actions within our control, and that includes our willing, not our achieving. This is not to say that Kant did not care about the outcomes of our actions - we all wish for good things. Rather Kant insisted that as far as the moral evaluation of our actions was concerned, consequences did not matter. Adelphia Timothy Rigas joined Adelphia Communications Corporation, his family business, after graduating from the University of Pennsylvania’s Wharton School of Business. Timothy Rigas became Adelphia’s executive vice president, chief financial officer, chief accounting officer, and treasurer. Timothy Rigas and father John Rigas were responsible for the collapse of the fifth largest cable provider in the United States (Hemingway, 2007). In 2002, the Securities and Exchange Commission filed charges against Adelphia in one of the most extensive financial frauds ever to take place at a public company (Cutler, 2002). According to the Securities and Exchange Commission, Director of Enforcement, “This case presents a deeply troubling picture of greed and deception at a large, publicly - held company" (Cutler, 2002). The Securities and Exchange Commission charged that Adelphia fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them; falsified operations statistics and inflated earnings to meet Wall Street’s expectations; and concealed self -dealing of corporate funds to pay for corporate executives’ lavish lifestyles. In addition, the United States Attorney’s Office for the Southern District of New York filed criminal charges against several Adelphia corporate executives, including Timothy Rigas (Cutler, 2002). In 2004, a federal jury found Adelphia Communications Corporation’s founder John Rigas and son Timothy Rigas guilty of conspiring to loot the cable television company of millions of dollars (Masters & White, 2004). Timothy Rigas, 47, was found guilty of two bank fraud counts and 15 counts of securities fraud and sentenced to 20 years to prison (Masters & White, 2004). According to Masters and White (2004), “Prosecutors have said the Adelphia case was also one of the worst recent examples of corporate titans milking a public company for private financial gain” Dereliction of Duty Duty-based approaches are heavy on obligation, in the sense that a person who follows this ethical paradigm believes that the highest virtue comes from doing what you are supposed to do -- either because you have to, e.g., following the law, or because you agreed to, e.g., following an employer's policies. It matters little whether the act leads to good consequences; what matters is "doing your duty." (Josephson Institute, 2010) The Rigas family had a duty and responsibility to utilize investors’ funds to better Adelphia. They were also obligated to keep and accurately report accounting practices. Regardless of the reasoning, the failure to report earnings and deficits demonstrate the company’s ability to neglect its most basic responsibilities to their stakeholders. As leaders in the Adelphia organization, it was incumbent upon them to be good stewards of every dollar invested into the company. Another looming issue is the liberty the Rigas family took with financing their lavish lifestyle with company funds. While the bulk of the issues stemmed with the Rigas family, it is not a far reach for one to conclude that they fostered an internal culture of corruption. Every company has the right and power to impose standards of behavior, which supplement and extend laws and generally accepted professional practices. There has been a lot written in recent years about “corporate cultures” and how top management, especially the Chief Executive Officer, determines that culture and the general level of ethical sensitivity and commitment down the ranks. (Josephson Institute, 2010) There is little doubt that senior managers who are fully and genuinely committed to uplifting and upholding the ethical quality of corporate behavior can have an enormous impact. Even if they do not change attitudes, and they often do, they can affect conduct by the reward systems they establish and the sanctions they impose and threaten to impose. There has been a major movement in the boardrooms of America’s top corporations to find ways of inculcating and reinforcing positive ethical values. (Josephson Institute, 2010) As part of this process, company executives have often had to develop and implement explicit, coherent and specific standards of conduct. In many cases, the activity has resulted in written codes of conduct, in others it has resulted in more general credos or statements of principle. In addition to written codes, many companies have instituted company-wide ethics “training” of one form or another. Conclusion Over the last decade many organizations have fallen victim the unethical behavior of unscrupulous top-executives. Where laws and legislation do not govern the leaderships’ behavior, the obligation to the shareholders, investors and consumers should prevail. From utilizing company funds for personal expenses to misrepresenting accounting and inflating the company’s value, the lack of ethical regard to industry and company standards caused the downfall of Adelphia Communications and sent members of the Rigas family to prison. Principles of deontology should guide executive decision-making particularly when executives are tempted to operate outside of codified legislation or are bound to act under judicial-free conditions. References: Cutler, S.M. (2002). SEC charges Adelphia and Rigas family with massive financial fraud. Retrieved April 7, 2013 from http://www.sec.gov/news/press/2002-110.htm Hemingway, J. (2007). John & Timothy Rigas ordered to jail. Retrieved April 7, 2013 from http://www.broadcastingcable.com/article/CA6456059.html Josephson Institute (2010). Why Should Business Executives Be Concerned with Ethics. Retrieved April 7, 2013 from http://josephsoninstitute.org/business/blog/2010 /12/business-executives-concerned-ethics/ Masters, B. A., & White, B. (2004). Adelphia founder, son convicted of fraud: Another son acquitted of conspiracy in partial verdict. Retrieved April 7, 2013 from http://www.washingtonpost.com/wp-dyn/articles/A37665-2004Jul8.html Williams, W. (2008). Kantian ethics: What Immanuel Kant was talking about. Retrieved April 7, 2013 from http://www.helium.com/items/1018797-kantian-ethics-what-immanuel-kant-was-talking-about