Mergers and Acquisitions
Individuals are influenced by a variety of factors- parents and family, friends, schools, media, the environment and society. Each has some bearing on how a person would view what is right and wrong, what is good and bad. The accumulation of these moral principles is known as ethics. Ethical ideas represent the totality of an individual’s learning experiences (Post, Lawrence, and Weber 98).
Since ethics or what a person deems is right and morally accepted is based on cumulative factors, ethical beliefs may vary depending on the societal and cultural perspective. In spite of these differences, there are some ethical ideals that are universality accepted such as honesty, protection of human and animal life and rights, and compliance with laws adopted by society.
In business context, ethics is not entirely different. Business ethics refers to the translation and application of ethical ideas into a business setting (Post, Lawrence and Weber 98). Business ethics is bound by the same ideals that individuals may regard as ethical and moral. For instance, stealing in general is unethical. In a business setting, stealing pertinent information is also viewed as unethical and immoral. Like in a society set-up, business ethics is shaped by several values that include
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Furthermore, ethical responsibility for corporate behavior is vested not only in the individual employees but the entire organization. An organization must have a Code of Ethics in place. This corporate ethic standard is what threads the individual employees and organization together. Business ethics is what keeps companies carry out its expectations for business. Business ethics enables corporations to demonstrate their social responsibility to the public. It binds the organization and the society and environment which it is nestled in. In the same vein, business ethics curtails companies from inflicting harm to the public.
For instance, improper disposal of toxic waste is unethical; companies caught doing so are bound to face culpability. It also protects employees from being harmed by the companies. Businesses cannot oblige their employees to work in conditions detrimental to their health and personal conditions. Business ethics also factors in the improvement of business relations and employee productivity (Post, Lawrence and Weber 99).
Studies have shown working in an ethical business environment cultivates a degree of trust and camaraderie which leads to increased productivity and better working relationship (99). In the U.S., companies that promote and adhere to business ethics are given favorable incentive by the U.S. Corporate Sentencing Guidelines (100). The guidelines weigh in when an employee is found guilty of a crime.
For example, if the corporation has a strong business ethics in place, the verdict for guilty corporate executive may be lighter than those whose business ethics are not that aggressive (100). Business ethics also promotes personal morality (99). Generally, individuals want to work in an environment that is in accordance to what they believe is right. It contributes to their sense of personal security. It gives them a boost, which in turn makes it easier for them to do their job, function better.
Business ethics, as aforementioned, prevents companies from doing harm to the public and to their employees while contributing to the overall corporate performance, raking in profits and good publicity. In essence, business ethics is a win-win situation for the company, the employees and the public.
Today’s business environment is volatile. With the economic plague surrounding most corporations in the world, it is no wonder that most have resorted to mergers and acquisitions, also known as M & A (Yeh-Yun and Yu-Chen 2006). Merger is when two companies unit, with the acquiring company taking in on the assets and liabilities of the target firm. On the other hand, acquisition is when an organization takes over a company through purchase of assets and common assets. M & A activities are change agents that companies use to increase their operations (2006). In addition, an M & A activity is deemed the “most efficient way” in achieve growth in human and financial aspects of a corporation (2006).
Despite the many occurrences of M & A activities, some of which are high-profiled, few have managed to make them successful. M & A activities usually take place during economic meltdown in hopes to turn it around. In theory, such activities are targeted towards growth- operationally and especially financially. However, in reality, most M & A activities have resulted in fiascoes- resignations, low productivity and employee morale, antipathy towards acquired employees, failure to meet expectations of shareholders and projected earnings, and financial losses (2006).
Aside from these, many M & A activities have led to inadequacy either by the acquirer or the merger company Conflicting corporate cultures may also contribute to M & A failure. Drawing on this premise, it seems that M & A activities have not focused on the internal aspects of the organizations involved, thus effective implementation falls short. Majority of M & A activities are centered on external business ethics, the value of the merging to the companies and the society rather than the internal ethical issues- dwelling on the changes brought to the shareholders, partners and customers.
However, this is not to say that is it better to accentuate internal business ethics rather than the internal ones. M & A involves a lot of change, thus it is important to thresh out ethical problems within and outside the involved corporations. M & A activities must be a win-win situation for all constituencies- shareholders, customers, partners and employees. Producing long term wins for all concerned parties is the best chance for a successful M &A. This brings in the role of business ethics and managerial accountability in M & A.
Several studies have pinpoint business ethics as a factor in organizational commitment (Yeh-Yun and Yu-Chen 2006). The point is valid, after all organizational commitment affects job performance; a positive organizational commitment leads to better job performance whereas negligence on the job hints at a poor corporate dedication. Organizational commitment is something that does not grow overnight; it takes time. During an M & A activity, change is the operative word so whatever organizational commitment the employees had prior to the M & A is not easily absorbed. It is crucial to work on the organizational commitment of the merging and acquired companies.
As previously stated, one of the reasons why businesses must be ethical is that ethics encourage productivity and relations. In an M & A process, business ethics dictates that employees must be aware of any change that is bound to happen. Some mergers do not always equate to equality between the companies and acquisitions, especially since they are technically viewed as takeovers, thus the level of communication and respect between the employees must be handled with caution. It is important to assuage the fears that employees may have, especially if there are talks of layoffs and reduction.
The task of business ethics makes it easier for merging and acquiring companies to communicate to their employees-answer their questions and all. Meetings addressing the changes that will follow the M &A will be beneficial to both the employees and the companies involved. It is the new management’s responsibility to find a winning chemistry of the two companies- to lead the company as it tests new water. The new management is accountable for process improvement; map out new workflows that will go with the new corporate structure.
If the new management is able to integrate project plans as well as project teams, be able to educate and communicate the new strategy to the employees, control resistance issues, and make sure that practice are consistent, M & A will be successful. Managerial accountability is a critical factor in the success of any M & A. A study on the role of business ethics in M & A suggest that there are three critical variable interest in the process- employment security, justice and caring practices will lead to organizational commitment, which in turn, results to a positive job performance (Yeh-Yun and Yu-Chen 2006).
All three variables hint at business ethics so it follows that if these are met during the M & A, the M & A will work. On the side of the employees, an open line of communication between employers and employers as well as among employers will make them aware of the transformation that will ensue. After M & A, the companies will be united and often times, this will cause culture conflict. Corporate culture is critical in the success of an organization. It is the glue that unites and defines not only the If business ethics are in place and continuously monitored, there is a higher probability of having the individual corporate culture coalesce and result in a united front that will be beneficial to everyone concerned.
As stressed earlier, business ethics makes it possible for employees to be protected from companies and during M & A, this comes in handy. Business ethics and managerial accountability protect employers form employees while boosting employee morale and productivity, which is beneficial to the company in the long run. While there are managerial implications that occur in an M & A process, if the merging and acquiring companies are able to stick their Code of Ethics, then the merging process will not be as frightening as it looks.
While business ethics and managerial accountability matter for the employees and the concerning companies, they also are of importance to the stakeholders and the public. During M & A, it is important for the companies to ensure that they fulfill their obligation to the stakeholders, customers and the public. Business ethics ensure that the involved companies state to their public any developmental changes that will occur. Communicating to their customers and stakeholders of modifications demonstrates their transparency and accountability. Furthermore, it shows that the companies involved are controlling the situation the legal way, abiding with the laws that are roped in during an M & A.
In all areas of business, having an ethical reasoning will make a better understanding of possible issues that will arise. Business ethics operate across organizational functions. During M & A wherein corporate restructure is bound to happen, business ethics play a pivotal role in resolution.
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Yeh-Yun Lin, Carol and Yu-Chen Wei. “The Role of Business Ethics in Merger and
Acquisition Success: An Empirical Study.” Journal of Business Ethics 2006.