Drawing on relevant theories of business ethics, examine managerial approaches used in dealing with ethical dilemmas

Drawing on relevant theories of business ethics, examine managerial approaches used in dealing with ethical dilemmas.

By Michael A. Braun – EEM/3 (ERASMUS)

A few years ago Shell, a British oil-company, had to close an old oil-rig in the North Sea. All relevant scientists and governments agreed, pulling it down onto the ground of the sea. This seemed to be the best solution in terms of environment and costs. But when the idea was launched by Shells managers there was a lot of protest all over Europe. People, heavily supported by Greenpeace, started to boycott Shells petrol stations and stopped buying in their shops. As an result the company decided to rebuild the oil-rig on land.

The reasons for peoples behaviour might have been diverse. Some probably could not believe that companies are allowed to waste environment that much. Others might be concerned how this could affect the food chain. But the majority of protestants argued that companies are responsible for their surroundings [Palazzo, G., 2002]. Namely managers should take care about their stakeholders. They have to respect others and to behave therefore. This essay is going to outline several aspects of ethical behaviour to be done by managers recently.

To become more familiar with the issue of business ethics it might be necessary to give details about its routes and meanings. For ethics there are two specific fields of interest: Firstly ‘moral’, which stand for answers that can be given by any human being as an individual person to judge between ‘good’ and ‘bad’. It was developed within many years in each culture independently. But as general ideas all over the world can be seen: the ‘idea of the good’ (Plato), the ‘idea of succeed life’ (Aristotle) and the ‘clear practically reason’ (Kant). Their observance is basic and necessary to live in a peaceful and worth living surrounding. It is essential that every member of this particular society keeps in these ‘guidelines’ - otherwise it would not work. On the other hand there is ‘ethics’ itself. This means the reasoning of all individual values and principles, which are causing human actions – or in other words the ‘what-has-to-be’. And business ethics, generally, are asking for good and moral actions to be implemented and transferred into business [Kreikebaum, 1996].

Nowadays, as Shell has seen as well, businesses are facing more and more to behave more socially responsible [N.A., 2001]. To be clear ‘social responsibility’ should be divided into three strands: intra (e.g. personnel–trainings, work-security, equal treatment), extra (e.g. competitors, society and cultural engagement like in supporting sports or arts) and mixed responsibility as a ill-defined field of company action. Questions of environment can be touched there or political engagement and further more. But in all ways of acting socially responsible it is possible to do this actively (for example: to help setting up better law) or passively (not working with unethical partners; e.g. step out of a specific joint venture). Unfortunately the last one does not change anything in general. It ‘only’ avoids own participation in unethical practises.

But what is the reason for implementing ethical action into business? And why is current management that keen to behave socially responsible? Two main fields could be seen. Firstly individual reasons: if a company does not relate to the society surroundings their employees might be not that motivated. It can be assumed that people prefer to work for companies that behave in good agreement with their surroundings. The workforce is then in turn probably higher motivated and in the end more satisfied. Otherwise they could move fast to competitors with requirements that are fitting better to them. Therefore a McKinsey-study [Chambers, 1998] says today’s high-potentials expect not money as the leading motivation for their work (23%). About 58% indicate they are more interested in an ethical and social responsible developed company culture. But 56% also want to have a high degree of personal independence. In times of an increase of individualisation and lower society-binding force ethical behaviour might be a huge competition advantage.

Secondly there are collective reasons: still ethical principles are a unique selling preposition in today’s business life. Good implemented it could be suggested that they can better the company’s image and acceptance in society. Through ethical behaviour customers might pay a significant higher price for products as well as for shares^[1]. The loyalty to this firm and its products could be also seen as more stable in the long term. However for this effect it is necessary to communicate openly following ‘Do good and talk about it!’. Moreover strong corporate values can be seen as prevention against crime and corruption of employees^[2]. Firms now tend more to keep to the four-eye-principle and separation of functions. Some are strengthening their intern and extern revision and are introducing further regulations and a code of conduct [Wieland, 1998]. Additionally applied business ethics also could change surroundings companies are acting in. Companies show through independent self-obligations that state-introduced regulation is not necessary. And this could be seen as a true entrepreneurial behaviour in terms of freedom of choice. As a further reason for ethical behaviour in business it should not be forgotten that in times of changing values people worldwide might need orientation in their lives as a guideline. Generally religions are no longer seen as the one and only truth. And education while childhood changed dramatically to a higher degree of freedom. Sense and value switching are meant to be mediated by school and state. Unfortunately they sometimes fail as we can often read in newspapers in the recent high numbers of juvenile delinquency. For this reason, employees spend in average about one third of the day at their workstation, firms might substitute to dedicate general an company-individual values, to gain both employer and employee.

But how could this occur by managers? How could ethical behaviour be introduced into daily business? First of all it should be looked at with healthy human understanding. Standards that are valid for conflict-free living since uncountable years, e.g. the Golden Rule,^[3] are also a good compass today. Behaviour, criticised as unethical, is often easy to understand as unintelligent and stupid. Of course there would be someone who is fighting for justice. But legal acting is mostly only the minimum. For a second example [Palazzo, G., 2002]. Percy Barnevik, the former CEO of ABB, a Swiss-Swedish company, gained about CHF 148m when he decided to leave the company. It was some kind of ‘Goodbye-present’. Unfortunately in this time because of a serious crises in both ABB’s market and the company, the firm had to save money wherever it was possible. Therefore their workforce was reduced dramatically and plants had to be closed. Legally there was nothing wrong with this transaction. Mr. Barnevik earned the money (including a 100% bonus from ABB) for his work. But the public might think that there is no economical reasoning for this payment. On one hand people are losing their jobs, the basis for the life of uncountable families, on the other hand one person gets money maybe without any realistic reason.

To become more practical, individually seen managers could follow the ten practical rules (appendix I) published by The Institute of Business Ethics (ibe) in London. This association is acting on behalf of lots of considerable British companies for integration of ethical behaviour within the regular business life. These rules could be seen as some kind of guideline [Spence, 2000]. Summarized can be said that managers should define and communicate core business values and follow these. Furthermore they are supposed to behave in a correct and fair manner to all customers, employees and competitors. And it should not be forgotten that managers’ behaviour is seen as a role model to staff. Employees’ welfare and motivation might be very important to the firms’ future success.

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^[1] Think for ‘The Body Shop’ as an supplier or for the Dow Jones Sustainability Index as an example for higher share prices.

^[2] About 88% of the asked companies said that they firstly try to better their intern control systems to prevent white-collar crime. Source: N.A., Ethik und Unternehmenskultur, in: KPMG – Integrity Service (business studies), n.p. 1999

^[3] Tobit 4.15: (In a very general manner) What you hate yourself do not do to others.