Ethics

Ethics Even though many executives in corporate America believe a corporation conducts business to maximize stockholder profits regardless of the social or ethical implications, ethics plays an important role in developing a business’s strategic plan relating to business behavior in addition to social responsibilities and stakeholder needs. A balanced approach to stakeholder needs and a business’s support of social responsibility requires an ethical approach to developing a strategic plan while providing the framework for business and employee behavior. Executives must incorporate an ethical code of conduct within the strategic plan to deter the temptation for employees to act in a manner contrary to the industry standard. I will describe the function of moral principles and community accountability in developing a strategic plan while considering stakeholder needs. Enron exemplifies a company violating ethical boundaries to ensure the company meets or exceeds stakeholder’s agenda’s. I will identify the steps necessary to prevent executives from companies such as Enron from violating ethical boundaries. The extent that a business has a social responsibility or obligation to the community or society in general will always receive scrutiny from those that believe a business has a social responsibility and those that believe that a business’s only concern should equate to profits. For example Milton Friedman does not believe a business has any social responsibility or obligation. “A business person who acts “responsibly” by cutting the price of the firm’s product to prevent inflation, or by making expenditures to reduce pollution, or by hiring the hard-core unemployed, according to Friedman, is spending the shareholder’s money for a general social interest” (Wheelen & Hunger, 2010, p. 72). On the other side of the argument, Archie Carroll, Archie believes business executives have a social responsibility. In fact, Archie Carroll believes organizations have four responsibilities. Economic, a business has an obligation to provide a product or service that will add value to the business. Legal, the business must adhere to the government regulations and laws. Ethical, a business must align the business behavior with the social norm. Discretionary, those responsibilities the business voluntarily agrees to support. Ethical and social responsibility have become more accepted in corporate board rooms as strategic planning consideration in today’s business environment because of cultural shifts and society’s beliefs of the most fortunate should protect the environment and give back to society to eliminate the injustice in the world. For example, the professional Golfers Association (PGA) contributes millions of dollars to communities’ where professional golfers compete in tournaments. The PGA does not want society to perceive professional golfers as elites. According to PGA Charities (2011), “The players, sponsors, volunteers and fans of the PGA Tour, Champions Tour and Nationwide Tour team up off the golf course to contribute millions of dollars to thousands of local charities each year. The majority of the funds raised are directed back into the local community where the tournament is held” (The Program). A company that not only overstepped ethical boundaries to ensure stakeholder profits is Enron. The traditional definition of stakeholder does not apply in this case. The stakeholders were not the stockholders or the employees, or even the suppliers. The stakeholders were the individuals who perpetuated the unethical and illegal behavior. Society can contribute many explanations for the cause of the Enron disgrace. To recommend preventive solutions to the problem one must understand the cause of the scandal. The legal or oversight system, in this case, the Securities, and Exchange Commission (SEC) is a systematic cause of the problem. The law allows companies to hire auditing firms to conduct audits and allows the auditing firm to report the results to the company. The law allows companies to pay the auditing firms to perform the audits, which provides an incentive for the auditing firm to issue positive findings. The law allows businesses to manage employees pension funds, not a good idea. Each of the examples a lawyer could argue is a conflict of interest. Enron did have a code of business ethics established to deter unethical behavior. However, businesses implement a code of business ethic voluntarily. Executive can dismiss the code of business ethic if the code does fit in with the business goals. The law leaves to much discretion to executives to operate in the best interest of the business. Velasquez (2010), “The law leaves considerable discretion to managers and executives to exercise their own business judgment about what is in the best interests of the company” (What Really Went Wrong With Enron' A Culture of Evil' ). Businesses must give ethical behavior and social responsibility top priority when developing strategic business plans. Surveys have shown business that operate unethically make less profits than those company’s operating within the legal framework. To compete in the global marketplace organizations must operate ethically to ensure customer confidence and demonstrate social responsibility to ensure success.