Social implications of business ethics
Throughout this report I will cover the social implications of ethics on a business. I will use examples from a range of different businesses showing my understanding and considering which of these issues affect society as a whole and those which only affect a small group or organisation.
The main areas I will be highlighting are Ethics in Finance (bribery, executive pay, insider trading, lobbying), Ethics in human resource management, Ethics in production, Ethics in sales and marketing, Ethics in intellectual property, Environmental implications and finally a conclusion assessing all of the implications the above have on a business giving reasons and evidence for my answers. Ethics in financial dealing and payments, there are several kinds of unethical behaviour.
All regulations and codes try to make sure that ethical practices are observed and followed through. Businesses in the financial sector, which offers loans which are expensive to repay, are increasingly subject to the scrutiny of the general public and authorities. The credit crisis was a result of too many business lending large amounts of money and letting customers and consumers have a much larger time scale to pay it back, which led to the business not having the money to pay back
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Free enterprise is to generate profit mainly and anything which prevents this goal from happening can be a realistic target for financial malpractice. Malpractice is improper, illegal, or negligent professional activity. Bribery is another form of corruption. This is the straightforward use of financial muscle to gain unfair advantage over others. ‘IBM has received a slap on the wrist from the U. S. regulators at the Securities and Exchange Commission in the form of a $10 million fine.
The fine addresses the SEC’s belief that IBM used bribes in its business dealings in South Korea and China. According to a report from the Wall Street Journal, IBM employees in South Korea paid 16 government officials a total of $207,000 in cash bribes from 1998 to 2003 to secure the sale of mainframes and personal computers. The cash was supposedly stuffed into shopping bags and IBM envelopes and then handed over in secret meetings in parking lots. ‘ (Source: http://www. tomshardware. com/news/bribery-ibm-south-korea-china,12426.
html) This is just one of the examples I found about bribery within a business or organisation and how being found guilty for such dealings can lead to a terrible deficit in business revenue for the company and an overall bad reputation for future dealings and their expansion of customer base. In this case IBM was hit with a large fine for their wrongdoings, they paid the fine and took the consequences as they wanted to prevent the media getting hold of the information. Executive pay is something that has been at the front of all the top newspapers in the past twelve months.
This is a problem that will not go away the astonishing pay to the top executives within a business. An improvement in the United State is that they now have to include in their annual reports a single figure for the total pay of their executives. This reaction was a response to public concern over pay raises which were not based on their work done or effort given towards the business. This option at least gives shareholders within a company the ability to know exactly what their money is going towards and how much the top executives are earning.
‘For the average C. E. O. , however, the good times have returned. The median pay for top executives at 200 major companies was $9. 6 million last year. That was a 12 percent increase over 2009, according to a study conducted for The New York Times by Equilar, a compensation consulting firm based in Redwood City, Calif. ‘ (Source: http://www. nytimes. com/2011/04/10/business/10comp. html? pagewanted=all) This is a paragraph which I took from the New York Times on a special report about executive pay.
This article just highlights the extent of the bonuses and payments top businessman and woman are receiving compared to previous years. The quote above also mentions that the information is taken from 200 major companies so it is not just one or two within the sector whom are paying out these extortionate bonuses. Insider trading links directly to illegal use of important confidential information whilst dealing on a stock exchange. It isn’t that insiders trade stock, but that they have access to information which most people don’t have, and that the information gives them an unfair advantage.
After all, insider trading has been illegal since the Great Depression, and nobody seems to be too enthusiastic about giving corporate executives an unfair advantage when trading their own stock. The problem is that insider trading continues, despite vigorous enforcement of the existing laws, because the temptation to use inside information to make a quick profit is so great. ‘Raj Rajaratnam, a one-time billionaire hedge fund founder who was convicted on insider trading charges earlier this year. Prosecutors say he made more than $50 million through illegal trades and are seeking a prison term of more than 24 years.
‘ (Source: http://news. yahoo. com/2-ny-insider-trading-cases-pack-stern-punishment-002354977. html) This shows how serious the courts are taking insider trading and putting a stamp down on the consequences of using it to a business’s advantage. Lobbying is The act of attempting to influence business and government leaders to create legislation or conduct an activity that will help a particular organization. People who do lobbying are called lobbyists. This is an example of how lobbying can be carried out within the business world.
‘Aeneas Enterprises, judging by its bank records, the small consulting company with no listed telephone number was an instant success. Within a month, its records show, Aeneas had taken in $2. 3 million from a single client. Its founder, Robert Abramoff, a lawyer is the brother of Jack Abramoff, the lobbyist at the center of a Washington influence-peddling scandal involving several members of Congress. The company’s records show that the $2. 3 million was received from another consulting firm, GrassRoots, which was established by Jack Abramoff and where he directed some of his huge lobbying fees.
‘ (Source: http://www. democraticunderground. com/discuss/duboard. php? az=view_all&address=102×2216093) This reiterates how money can be made in a business then directly lobbied across to another business through the links of directors or friendship bonds. It is morally wrong because it gives a company an unfair advantage within their market area to progress and develop. A company would put money aside towards employing a lobbyist, this is because if they could gain any advantage over other competitors it would mean they have the upper hand to develop and capture the customer base to increase sales and business.
Ethics in human resource management is used within a business to prevent any discrimination when jobs roles are advertised. Applicants are entitled to feel that the position is based on ability rather than on the basis of race, gender, nationality, religion or any other unfair grounds. This is why businesses have trained human resource professionals to avoid discrimination of all types. Laws are used to make sure all businesses abide by this such as the disability and equality act 2010.
Within a company worker surveillance can be a base for a lot of conflict and disagreement, it is down to what extent is it ok for a member of staff to be watched and monitored. In many businesses employees don’t feel comfortable or safe when the management are looking at all their calls, texts and emails. Whistleblowing is the act of informing directors or other authorities about any unethical activities going on within a business or organisation. ‘The public interest disclosures act 1998 made it an offence to discipline anyone who made a disclosure about something believed to be in the public interest.
‘ (Source: Business Book 2 Level 3) This is classified as whistleblowing, alerting a person of something that is wrong. ‘Employment tribunal statistics show that the total number of people using whistleblowing legislation, which aims to protect workers from victimisation if they have exposed wrongdoing, increased from 157 cases in 1999 to 1,791 10 years later. Whistleblowers are being deliberately undermined or removed from their workplace, despite repeated promises to protect them. ‘ (Source: http://www. guardian. co.uk/money/2010/mar/22/tenfold-rise-whistleblower-cases-tribunal)
This newspaper article just shows how within the workplace over the last few years it has become increasingly tense and confusing what can be said to each other and what information can be shared with other employees. When someone may be just mentioning something they think is suitable and appropriate for all ears they later find out they are being laid off by the business for as they know it ‘whistleblowing’. Ethics in production of goods can lead to ethical problems for a company and their overall reputation and outlook.
British law requires that any drug which is being introduced to the market has been tested on at least two different species of living mammal. One has to be a large non-rodent. The Animals Act 1986 insists that no animal experiments should be conducted if there is a realistic and viable alternative. The ethical question which revolves around animal testing is whether or not the general value of human life is more important in relation to animals. Another question raised is the extent of the pain which animals suffer throughout the procedures.
People’s opinions on animal testing differs, some are ok with it if it is for valid medical reasons and tests are done ethically, others refuse to accept animal testing altogether. In many cases when animal testing is done it is done when it is unnecessary, for example done when they know a certain ingredient will cause harm, when they know a certain ingredient will kill or harm the animal being tested upon, when the product is nowhere near being released, on large numbers of animals when it is not a necessary product, or when it is simply not required.
There are also cases when animals are unfairly or cruelly treated, Huntington Life Science is a good example of this, the animal testing was not only unethical but it was found those in the labs were badly treating the animals, such as beating and under feeding them. A lot of the products we use such as shampoo, make-up and shower gel contain chemicals that are bad for human health. In many cases chemicals are tested in greater amounts to what is put into a product.
Here is a quote from a website which is against all animal testing ‘They languish in pain, ache with loneliness, and long to roam free and use their minds. Instead, all they can do is sit and wait in fear of the next terrifying and painful procedure that will be performed on them. ‘ (Source: http://www. peta. org/issues/animals-used-for-experimentation/default. aspx) This highlights a strong viewpoint on how valuable the animal’s lives are and they should have the freedom to do what they want to do not what someone else is making them do, just for scientific gain and progression.
Ethics within sales and marketing of a business can be brought under a large amount of scrutiny this is because sometimes businesses will employ unethical stances to generate sales which will lead directly to profits. They can do this in a variety of different ways; Spamming is a major problem which can occur for a business this refers to email chains which can be directly sent to thousands of users or members. Email spamming and spoofing can be linked directly which makes it very hard to find out the source or sender of such emails.
Some email accounts have the ability to block specific addresses. However, with spamming emails they quite often change the email address being used meaning they will get through your blocking system and reach your inbox. Spoofing is another major problem this is where an email appears to come from a single source when it is actually sent from another. People sending these spam emails want the email to appear as if it is from a real address. This way the email cannot be traced back to the originator.
I believe this is against regulations of the internet and it is being used inappropriately because when someone is receiving information to their private address they have the right to know who sent the information and how to respond if need be. ‘A district court in Atlanta has awarded EarthLink $16 million in damages against a New York state man that it alleged used illegal means to send out more than 825 million unsolicited e-mail messages, commonly referred to as spam. ‘ (Source: http://www. pcworld. com/article/110627/earthlink_wins_16_million_in_spam_case.
html) This is just one of many cases where someone has been caught for sending on spam linked emails to in this case millions of innocent people. The business that were the victim of these emails were paid a huge amount of money in damages because of what the spam had caused to their sales, reputation and overall standing in the business market. Companies are always finding ways of raising their own status within the business sector. This can happen when businesses place false comments, recommendations or blogs onto a website.
These can come from paid individuals whom are paid by marketing companies or are employees from the business or organisation pretending to be satisfied customers. People who are engaged in this profession are called ‘shills’. Online consumers are frequently being made to believe that the comments are from a trustworthy source recommending the product or service given. ‘But now the Advertising Standards Agency (ASA) has launched an investigation into the popular review website, following growing criticism of its apparent failure to monitor fake comments posted online.
The formal inquiry was opened after a complaint that ‘abuse, flaws and distortion’ on the Trip Advisor website had reached ‘epidemic levels’. ‘ (Source: http://www. dailymail. co. uk/travel/article-2032997/TripAdvisor-investigated-ASA-fake-reviews. html#ixzz1eiflRv00) This article from the Daily Mail emphasis’s how often such sites are being used to create positive reputations for a business and also work against another business giving those negative reviews. The ASA have now realised what is going on and are putting together an in depth review on the procedure and trying to find the culprits and punish them.
Marketing is scoped around a huge amount of public relations via the media and many other sources this is a way of getting the attention of future clients. However, with the climate being as difficult and tight as it is in today’s world many businesses approach this in the wrong way by lying and trying to con consumers. Intellectual property law allows people to own their creative ideas on work in the same way which they can own physical property. The owner of intellectual property can be rewarded for the use of it.
This encourages more creativity and innovation to the benefit of everyone. There are four main types of Intellectual property; Patents for inventions, Designs for product appearance, Trade marks for brand identity and Copyright for material. -Patents are a grant made by the government that lets the creator of an invention the sole right to make, use, and sell that invention for a set period of time. -Trademarks are a symbol, word, or words legally registered or established for representing a company or product.
-Designs for product appearance is designed by someone with special skills, this is something which can then be covered by copyright. -Copyright of material is used for artistic, music, sounds, film, software, multimedia and broadcasts All of the above types of intellectual property means that the people or businesses that have invested money and time into creating an idea, have the right to protect is from being stolen or reproduced by others. ‘A court in Sweden has jailed four men behind The Pirate Bay (TPB), the world’s most high-profile file-sharing website, in a landmark case.
Found guilty of breaking copyright law and were sentenced to a year in jail. They were also ordered to pay $4. 5m (i?? 3m) in damages. ‘ (Source: http://news. bbc. co. uk/1/hi/8003799. stm) This is a sign of how serious the consequences of copyright can be and the severity of doing such acts. These men who were jailed for the creation of pirate bay distributed millions of film and music files to users worldwide without paying for any of them. Environmental implications have a huge influence on a business these days.
The most serious threat facing us comes from climate changes caused by human activity. One of the most major problems today is that economic activity is growing quickly in different areas spreads across the world. When a business is putting together new ideas and ways of developing already existing products they have to make sure that they are following all of the future aims for sustainability and reducing the use of greenhouse gases used in today’s climate.
The factory creating the product to the final sale stage to the consumer has to be viable and correct for future environmental expansion. This can also be directly linked to the suppliers and employees used such as how they are getting to work and transferring the products around the country or world. Many consumers and businesses will only work with people who have these aims and objectives set out clearly with a good positive direction for the overall reputation on the world and affect it can have.
‘The software drinks giant has come up with a technology to use plant material in plastic bottles. But it is not an easy task. ‘ (Source: http://www. guardian. co. uk/sustainable-business/coca-cola-green-plant-bottles) This shows how major companies are trying to create new initiative for being more green and helping towards using less harmful products for the environment. This type of movement means that many pressure groups that are out to harm businesses get on their side which is always good for consumer base and media attention.