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Ethics in Business

It could be said that determination of ethical values in businesses is the work of both the society and the business community including the entities that operate within it. The determination of right and wrong cannot be judged by one individual. This is because the value of right or wrong depends on how one view the situation, those affected by it and the consequences of the same. Since individuals exist in groups the judgment of what is right and what is wrong must also be collective. The principles upon which groups decide actions, wrong or right is called ethics. Ethical values therefore are applicable to all members of the society as it has been agreed by all. The basic premise in setting up ethical values and moral conducts to individuals so as to assign responsibility for preserving the interest of the society is inherent in the individuals and the community alike. In doing so the society supposedly becomes free from social malaise. However, one often hears of breach of ethical conduct by some individuals or the other due to the fact that these individuals do not comply with the agreed upon moral codes. Consequently, they are subject to punishments. The issue arises who is to judge what conduct is ethically correct and what is not. Individuals who breach moral code may consider they are justified in taking particular actions while the society may consider it a breach of conduct. The individual may consider that his/her conduct as justified due to particular situations but others are more keen in the interest of the society. As a result some individuals are incarcerated for the crime of acting against the interest of the society. Business ethics in this context although to some extent is similar to the social ethics but at times differ due to the nature of the environment in which it exists. It has its own norms, principles, codes and moral values, and it is usually applicable to individuals within the business community. However, it does not mean that the business individuals are excluded from the society. In fact the business is accountable to the society as it operates within the society and it depends on the society to support it. It is only ethically correct to conform with the social norms as well as within the business community. Ethics within the business community is a complex issue as it deals with not only right and wrong but also with how to determine the fine line life and death, profit over public interest, employees or employer interests etc. While for some businesses, ethics may be inherent in their way of operations such as the banking industry where the financial products and services is based on the trust of the consumers, on the other hand, in industries such as the casinos retaining ethical values is difficult. Yet it cannot be said that they are without ethical values and do not follow any moral principles. In essence determination of ethical values and code of conduct depend on the organization's business and its operations along with the way the management perceive inherent culture for that particular organization. This is the reason why one often observes companies promoting their organizational culture, corporate governance and code of conduct etc. By outlining the set of ethical values within the organization not only clarifies any doubt among employees as to how to conduct their business but also to make them aware of the fact that breach of such codes would result in punishment in the form of demotion, expulsion or

even jail. Business and ethics therefore go hand and hand, and not a different concept that can be implemented through mutual understanding. Milton Friedman, in his essay, "The Social Responsibility of Business is to Maximize its Profits" writes: "A corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in the ethical custom." Hence, ethics is inherent in both the community as well as within the business environment. Yet one observes that the business community is strived with scandals like Enron, WorldCom and Anderson where corporate governance have been breached not to mention earning public despise. How then can one justify for the conducts of such executives and head of organizations that breach ethical code of conduct themselves? One of the reasons why such ethical values are not respected at the executive level by organizations like Enron, WorldCom and Anderson is that there are no checks and balances. Just like a society that closely monitor the conduct of individuals for the preservation of the community, the business community too must have an authority that monitors the business entities. Such an authority should also monitor the organizations for any breach of conduct. This not only keeps a check on proliferation of unethical conducts but also retains the trust of the customers and business entities. Why the presence of such authority is needed is because it would follow standard procedures for monitoring the business entities. Organizations tend to depend on the authority to keep the balance of correct business practices. Yet this very fact tends to act against the interests of the community because at times the authority tends to lag in their procedures thereby neglecting to keep a check on truant companies. The result is the proliferation of misconduct like financial misstatements, projection of inflated revenues and involvement in hedging activities etc. The ramifications for such conducts however are long term due to several reasons. The internal infrastructure becomes distraught by the breach of conduct. Employees especially are sensitive to their peers and leaders' actions. Distrust would lead to resignation and disappointment in corporate values. Fostering conducive and satisfying working environment for the employees is imperative but even more important is the company's ability to sustain a reputation within the organization as well as outside. Employee trust therefore is important for the organization to sustain and survive within the industry. Authors like Jennifer J. Salopek is of the belief that implementing ethical programs within the organization not only spur relations with the staffs but it also help in the motivating the staffs to envision and achieve company's mission and vision. A breach of institutional code of ethics tends to deescalate the motivation and trust level and enhance pressure on accountability. Issues such as legal risks, reputation, response to change and loss of stakeholder trusts all comes to the front. The reason why such ethical values are necessary for improving the reputation, health and safety of organization is that it earns the trust of the community at large as well as ensure that the organization comply with the external environment. The logic is simple: as long as the organization respect the ethical codes and values of the community and members of the community (employees and other stakeholders) it is ethically correct. It would earn the trust of

the stakeholders who consequently would boost the business. In the event of breach, the reverse cycle comes into existence. The organization, as a member of the society must comply with ethically correct practices. As ERC (Ethical Resource Center) notes: "The code needs to address the organizational realities of today in dynamic fashion. The code doesn't need to re-articulate every possible situation that could arise, nor does it need to cover every rule and regulation. But it should address the areas of uncertainty, confusion, and significant risk that the organization faces today and in the near future." As long as values are determined, organizations cannot differ from the beliefs and principles which the community and its member follow. The responsibility of standardizing correct behaviors and setting obligations upon executives and employees alike thus fall on the shoulders of organizations, the community, the employees as well as the authority that monitors it. One cannot train employees to change their behaviors but to value certain norms and principles. For this reason corporate values are important for training individuals to believe in them as well as to promote them so that everyone follows one set of code of conduct and principle. Albert Carr's comments in "Is Business Bluffing Ethical?" "[A]s long as a company does not transgress the rules of the game set by law, it has the legal right to shape its strategy without reference to anything but its profits. If it takes a long-term view of its profits, it will preserve amicable relations, so far as possible, with those with whom it deals. A wise businessman will not seek advantage to the point where he generates dangerous hostility among employees, competitors, customers, government, or the public at large." On the other hand there are businesses that consider such man-made rules are meant to be breached and can be discarded in the interest of profits. For this reason these businessmen tend to ignore the values accepted by all and eventually lose out in the race of competitors. The dollars involved in making reputation is none comparable to the dollars lost due to a bad business reputation, especially when customers find out of the nature of reputation involve breach of ethics. The gravity of the nature of corporate ethics among consumers, the stakeholders and the public can be determined by the degree of concern that they are demonstrating. According to authors Laczniak et al ethical values should be put ahead of the bottom line profitability to ensure of future progress and growth. They write that: "A goal of zero ethical transgressions is also something organizations must increasingly strive for. .... Since then, public expectations have evolved to suggest that environmental concern is a strategy that companies must internalize as part of their basic operation fabric. In short, higher public standards have emerged and businesses have adjusted accordingly." Thus, the aim of organizations should be zero tolerance towards misconduct, breach of ethical conduct and conduct that is against good business practices. The determination of good business practice largely depends on the entities within the organization as well as those outside the organization who govern the community. According to the utilitarian theory of ethics by Mill Gray moral codes and principles should be for the benefit of the whole community but it should also be in the interest of the individuals. In this context, the individuals must make sure that all codes of conduct conform with agreed upon terms and practices so that there is little room left for doubts which would result in breach of ethics.

Red Lion Broadcasting vs. FCC provides an important case study that demonstrates some of the issues that IIC may encounter if it decides to support these Congressional changes. "The FCC's fairness doctrine requires radio and television broadcasters to present a balanced and fair discussion of public issues on the airwaves. The document is made up of two principal guidelines regarding personal attacks in the framework of public issue debates and political editorializing." (, 2010) Red Lion Broadcasting aired a "radio broadcast which was a personal attack on journalist Fred J. Cook. Cook was verbally attacked on the air by evangelist Billy James Hargis." (, 2010) In order for IIC to avoid such legal and ethical violations, it will have to ensure all parties are given the right to debate public issues, with each side being given equal exposure and coverage. It will also have to ensure that it complies with all regulatory and enforcement agencies such as the FCC and the FTC. IIC should also engage in periodic "corporate social audits or ethics audits" (Pearson Custom Business Resources, 2010, p.255) to avoid any unethical or illegal actions by its employees. In order for IIC to make an informed decision it should consider some of the theories involved with social responsibility. In the past it has been common for organizations to strive to "maximize profits for its shareholders." (Pearson Custom Business Resources, 2010, p.248) Unfortunately, this theory does not take into account the needs and wants of any other stakeholders in the company. A more realistic theory to follow would be the "corporate citizenship theory. Advocates of this theory contend that organizations owe a debt to society to make it a better place due to the social power granted to them." (Pearson Custom Business Resources, 2010, p.253) In closing, it is recommended that IIC support these new FCC regulations. If IIC supports the changes that are being suggested it will most assuredly gain more influence and control in the media and telecommunications business. While this will provide more profits for IIC, it will also mean a greater social responsibility.