Ethical Implications of Greater Business Regulation
Recently, there have been initiatives by some sectors at introducing significant legal and constitutional reforms aimed at changing existing laws and regulations governing business activities and corporate practice. These proposals are based on three major objectives: first, to establish tighter government and public regulatory control over business activities and the prohibition of “limited liability” claims by corporations; second, to limit business participation and influence in political exercises; and third, to force businesses into strict compliance with state rules and regulations by exacting individual accountability from business owners and investors for violations committed.
Clearly, the reform proposals are meant to ensure that businesses operate according to ethical and socially acceptable standards. The proposals are also based on the implicit assumption that business interests centered on revenue and profit generation are ultimately detrimental or pose threats to society and its members. Another assumption is that business organizations are inherently lacking in desirable virtues and therefore warrant the implementation of strict laws to minimize the impacts of business on the majority and to foster the development of responsible and conscientious values in business organizations.
On the other hand, the proposals will have significant implications on the social, economic, and political life of the country. The
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Thus, it is necessary to critically analyze whether the proposed reforms themselves are morally and socially acceptable based on prevailing ethical perspectives and standards or theories of ethics. Ethics is generally defined as normative values or principles that serve as guide in determining whether a behavior or conduct is right or wrong. Creyer and Ross note that “what constitutes ethical and unethical behavior can differ depending on the set of moral principles used as the basis for judgment (422).”
Accordingly, consequentialist or utilitarian approaches judge an action or behavior by its effects on the overall welfare of society or the majority. Duty and Rights-based theories, on the other hand, emphasize the social and natural obligations of human beings as well as their inherent rights. In contrast to utilitarian theories, duty and rights-based theories judge an action based on the fulfillment of social contracts or obligations or the exercise and promotion of human rights irrespective of the consequences of such action or behavior. Lastly, virtue-based approaches judge behavior based on its reflection or promotion of good character traits in an individual as opposed to the promotion of traits considered as vices.
Arguably, the ethical grounds of the reform proposal components can be justified based on existing ethical theories. Consequentialist theories clearly support the reform proponents’ argument for greater business regulation and limited business participation in political activities since it will be beneficial to the majority by ensuring that business activities “directly serve the public interest.” In the same manner, the reform proposals conform to the duty and rights-based approach by stressing the social obligation of businesses through the prohibition of the “limited liability” declaration.
By highlighting full social responsibility for the impacts of their activities, the proposed reforms therefore guarantees that the rights of other stakeholders such as employees, workers, consumers, and communities are not violated by unfair corporate and industry practices and are duly protected. These reforms are also acceptable according to virtue-based approaches since it promotes the development of desirable characteristics and will encourage the development of moral values in businesses and corporations.
However, the same theories also give sufficient reasons for rejecting the proposed reforms based on ethical grounds. Given that businesses are responsible for wealth creation in society, imposing tighter regulatory mechanisms that impede businesses from freely conducting their activities could ultimately do more harm than good to society, which is enough reason to oppose the proposed reforms based on consequentialist theories. Likewise, duty and rights approaches would find fault with the proposal to limit the participation of business in political exercise since it will also effectively deny them from fulfilling their civic and social duties such as the implementation of corporate social responsibility and educational programs.
The proposals will also be rendered unethical using virtue-based approaches since it systematically denies the fact that “many people in business choose to behave within the generally accepted standards of ethical behavior because they want to, that is, the desire to behave ethically is a personal choice.” (Creyer and Ross 423) The proposal therefore systematically denies the presence of good values in some businesses and the individuals in it.
In the end, the most compelling reasons to consider in decision to approve or reject the proposals lie in the the ability of the proposed reforms to promote the welfare of the majority and to safeguard the rights of marginalized groups and communities in business activities. At the same time, it is also worthy to acknowledge the existence of businesses involved in the advancement of ethical business and corporate practices, including the fulfillment of their social and ethical responsibilities.
Creyer, Elizabeth H. and Ross Jr, William T. “The Influence of Firm Behavior on Purchase Intention: Do Consumers Really Care About Business Ethics?” Journal of Consumer Marketing 14.6(1997): 421-432.