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Rising Ethical Concerns in Corporate America

by Daniyal
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Introduction

Corporate America bounces at the opportunity to establish its ethical posture in public, yet frequently has failed to construct ethical choices when such choices intervene with profits. A company must educate and train its employees on constructing ethical decisions, as avoiding them can show to be detrimental and costly to its brand image. Moreover, the Ethics Resource Center (ERC) has detected that workforce in corporate America working in an ethical situation are keen to go beyond the limits to serve their bosses (Ethics Resource Center, 2012).

Scandals within few of US’s largest corporations have produced some farsighted-overdue self-analysis among individuals in government and business. Congressional bills and Presidential speeches set forth helpful policies and ideas considering heavier sanctions for fraud and more clear-cut accounting standards for practitioners. However, it would be a misunderstanding to believe that some novel ordinances from Washington will build everything correct with the corporate world. The response to corporate trickery is not stronger or more regulation. Over 2,000 years of legislation and criminal offense have established that laws are crucial, but are not able to do the work by themselves.

Rising Ethical Concerns in Corporate America

As the aftermath of well-publicized, recent, ethical failures, leaders concerns and public attention in government and business have centered on the ethical atmosphere of corporate America. This concern and awareness is eliciting anticipations for ethical conduct, admitting those statute into law (for instance, Sarbanes Oxley legislation), and producing social pressures for regenerate. Business leaders must realize the scope and nature of the issue. The focus of media on corporate ethics has connected chiefly to publicly-traded large corporations. Nevertheless, the matter of ethical indiscretion and behavior is a worry for all organizations, irrespective of size.  Indeed, the developing significance of enterprising firms to economic process and development all over the world has motivated some to condemn the restrained notice small business experiences in the ethics related literature.

Research Objectives

The mention of “Enron”,“WorldCom”and “Arthur Andersen”, titles that at one time directed to conversations about global business understanding and success, now brings up images of unethical behavior and greed. The humiliations surrounding these companies, accompanied with an interpenetrating perception of a deficiency of ethics demonstrated by the acts of business leaders, have caused a direct impression on businesses’ ability to contend, create jobs, and assist in pulling the American economy out of its economical down turn. In spite of the current attention channelized toward the unethical behavior of the leadership of these companies, the matter of business ethics violation, a phrase referred usually as an oxymoron by a few, is not novel. The basic consideration of this research is to draw the sources of rising ethical concerns in the Corporate America and their aftermath.

Business Ethics and the Corporate America

The terminology of ‘business ethics’, as employed in and mentioned to, in the place of work, was for the first time coined approximately in the 1970s. Its beginning was first employed in academician writings, education, and then in society conferences and meetings originated to tap the field as a novel wave of education took hold. As the terminology inserted in the workplace during the period of late 1980s and early 1990s, there was an effort to construct ethics into the groundwork of organizations in the form of ethics officers, ethics codes, ethics training and ethics committee. This ethics acceptance evidently collapsed in the early twenty first century. Corporate executives were evaluated on either meeting or outperforming their goals, and were provided handsome rewards with huge remunerations, immense stock options, and perks. One of the main causes behind such misconduct was the pressure from Wall Street for meeting targets, increasing profits that companies pursued ignoring the concept of ethical decision making. An average American organization thus utilizes this concept of business ethics to develop the ends to justify the means to those ends in the corporate world.

Businesses have strength through their capability to expenditure immense sums of money. They possess the capability to increase or change positions that the ordinary individual does not. As establishments affect various people, they have responsibilities to their community, consumers, employees and the world as a whole. They have an obligation to carry on business in a manner that is not destructive and which positively welfares as many individuals as possible along with serving their own interest. Business organizations today are confronted with an intimidating task of formulating, implementing, and imposing a compliance mechanism. This is an unmanageable area since it differs from industry to industry. In order to accomplish such an objective companies need to seek benefit from investigating some prior businesses chronicle of formulating a compliance mechanism. Since the twentieth century, U.S. corporate regulation has consisted of periodical, dramatic regulative treatments by federal regulators following a major scandal, collectively more nuanced on-going laws and rule by the United States.

Interest in corporate ethics has initiated importantly over the previous some years. Majority organizations still concentrate on maximizing earnings for investors but a lot of them also stress conscientious and operational conduct and its influences on investors, employees, customers, and the integral business community. Nevertheless, as manifested by current events, not all corporations comply with ethical tenets. Moreover, in few cases, the information organization publicly espouses differs to a great extent from their actual practice.

Hence, corporate ethics can be considered as a misnomer in the 21st century. This deficiency of personal ethics is being utilized by societal members simply due to their actions happening in corporate world. So it may be assumed that organizations in corporate America is making it  difficult for the U.S public to have faith in them with all the current scandals going on. Corruptions are everyplace and particularly in businesses, but the question arises whether these problems are ethical or legal problems within the corporate America.

Ethical Discernment in Corporate America

Every decade demonstrates its own prominent-profile outrages.  In 1970s, the Watergate scandal rose along with its succeeding hearings, accompanied by insider trading and a blizzard of corporate pillaging in the 1980s; in the 1990s, the Lewinski matter and arraignment proceedings; and the render down of corporate behemoths such as Arthur Anderson, Enron, Tyco, WorldCom and Adelphia soon after the commencement of the twenty first century.  It has been described that the most recent round of corporate devastation as being so penetrating and vast that they deeply shock the most inherently held beliefs our most deeply held faiths about the integrity and honesty of American corporate culture. The preceding events have engendered common perceptual experiences of ethical conduct within the U.S. that are markedly negative and are supported by numerous empirical research studies. Nevertheless majority of the corporate executives considers themselves to be more ethical than their counters. It has also been evidenced that the corporate ethical standards are declining day by day (Frohnen & Clarke, 2002).

Lamentably, corporate America has become an accumulation of transinternational business concern entities concentrated solely on short-run profits against the concerns of the national values. Component of this course away from a creditworthy bearing entity framework is an outcome of economical principles that cannot ascertain long-term achievement. Unfortunately, moral philosophy is a long-term contemplation that affects the short and long-run accomplishment of a company, its community in which it operates and the industry it is part of. The contemporary business culture nurtures detrimental competition with a declining necessity for considering ethical dimensions while conducting business.

Ethics render guidance to incorporated firms by determining standards and limits on the ways and procedures of treating other businesses, own employees and the end consumers of their products or services. But the modern Corporate America is neglecting ethical considerations since it provides a way of underselling competition and minimizing costs, thus heightening profits. Counteracting a product’s quality or entrapping a consumer into an inequitable contract may be and most probably has been utilized effectively to augment profitability. In the meantime, unethical activities in opposition to a competitor can be categorized into anything ranging from pilfering intellectual property to simulated advertising to mistreat of the legislative system and so on. Moreover, everything from merchandising bad debt to entrapping creditors into an interminable debt cycle or merchandising tools and cars planned to fail are also manners of eradicating ethical competitions in the short-run, although it damages consumers as well. undoubtedly, these unethical patterns are consequences of business organizations concentrating on short-term profits at the cost of their long-term feasibility. If the objective of business managers is to level value of stock and their remunerations as ensured by these unethical and immoral business practices. But before making such a short run objective, the corporate leaders should realize the fact that such practices can provide gains in the short run only and with the passage of time that organization or business entity will be pressured to a painful restructuring or an ultimate collapse.

Being a society, the detrimental consequences of unethical corporate activities endure for generations and destabilize healthy competition for all commercial enterprises in a contributed industry. United States necessitates strapping industries to furnish for the concerns of their nationals and other critical national involvements beyond commerce. The difficulty is that unethical exercises do not merely demolish the firms employing them; these organizations eliminate ethical competitions and countermine ethical practices throughout the entire industries.

Moreover, individuals and the states necessitate industries to furnish their needs and wants for as long as they are anticipated to exist as a society. Considering America, in order to continue to exist as an inviolable world leader, it necessitates such corporations that take into thoughtfulness the long-term consequences of their business activities instead of merely concentrating on short-term earnings. Unhealthy contention is shaped when organizations move beyond ethics only considering their profits and ignoring other long-term interests (Geiger, 2010).

Causes

The causes of any unethical conduct can be personal short term gain and similar is the case in the rising unethical practices within the corporate America. The main reasons behind renowned scandals range from the personal motives of all level employees as well as the pressure and forceful application of unethical practices within lower levels workforce for the accomplishment of upper level personal gains (Callahan, 2004).

According to Ethics Resource Center’s recent National Business Ethics Survey, developing an ethical culture commences at the top, and employees reported that the senior executives appear to be less apprehensive about maintaining high measures of integrity. The assurance in senior leadership within the organization was found to be 62 percent in the year 2011, representing the historically least laid down since 2000 and declined up to 6 percentage points since 2009. Far smaller number of employees conceives that their supervisors function as ethical leaders as one third or approximately 34 percent of workers reported that their managers do not demonstrate ethical behavior. This percentage has increased from 24 percent as reported in 2009 and the most eminent percentage ever. In a further sign of undermining cultures, human resources are found to be less convinced in their personal capability to deal out ethics situations as the percentage of workforce reporting that they are well prepared to deal the prospective invitations of misconduct declined from eighty six percent as reported in 2009 to seventy seven percent in the year 2011 (Larmore, 2012).

Prevention

Ethical troubles are unavoidable at all stages of a business and thus it is necessary and crucial for organizations to formulate and institutionalize a formal business ethics coding mechanism to restrict unethical behavior. Accordingly, a significant section of corporate America has commenced depending upon such apparatus as: corporate values statement, ethics workshop, codes of conduct, hotlines, even board of governance level ethics committees as well as incorporated ethics offices. Concisely, organizations are establishing corporate ethics plans. Formal ethics mechanisms are comparatively novel to the American corporate world. Even though a handful of organizations have experienced and implemented them for a period of 20 to 30 years, the preponderance of ethics programs are not more than a couple of years old and few have been there for only a couple of months. Ethical conduct is being recommended through organizations embracing training programs, creating awareness among their employees and formulating ethical policies. Large as well as mid-sized companies are also employing ethics and compliance officers to guarantee that the decisions and activities being carried out within the corporations should follow the organization’s ethical standards as well as the legal regulations.

On the other hand, their numeral is mounting as their convenience becomes apparent. Upon focusing at organizations depicting and ensuring strong commitment to moral philosophy and ethical principles, it becomes evident that this wave of ethical standards reflects the ethical considerations and discernment of the organization leaders depicting them as a symbol of integrity and honesty. Chairmen and Chief Executive Officers of these organizations are vocal and clear, convincingly charging everybody in the company to consider not only the level of profitability of their actions but also the ethical considerations involved. To the doubters who conceive that business and ethics go together similar to water and oil, such ethical organizations provide a message of a short of heresy.

In spite of the fact that majority individuals probably consider that doing business in an ethical manner does not yields financial benefits, some senior level managers debate that there exists a straight association between ethics and the financial profitability. The leaders of corporations are also prompt to signalize the financial costs that may occur in the long run in case of operating business processes without considering the ethical dimensions. They generally comprise of an array of elements proposed at: passing along the organization’s values, distinguishing what establishes acceptable deportment in problem domains, rendering resources for human resources with accusations or questions about wrongdoing, and demonstrating a mechanism for enforcement and oversight. The most all-encompassing ethics programs, broadly speaking encountered in the defense industry entails: ‘codes of conduct’, ‘statements of corporate values’, ethics workshops, ethics offices as well as the board of governance level ethics committees.

Enforcement

To enforce ethical standards, ethical leadership within corporate America must implement a zero-tolerance policy in opposition to unethical behavior. Organizations implement the policy by laying down a strict penalization procedure, which entails dismissing the employee in violation. Reporting is however a matter within corporate America since a few number of employees convey their awareness of an unethical activity to the reporting authority. Besides the corporation’s level enforcement within the organization, the state laws should also ensure that the proper penalizing procedures are developed to deal with case like Enron, Arthur Anderson and others (Larmore, 2012).

Current Trend of Ethical Practices In Corporate America

As reported by the Ethics Resource Center’s survey report for 2011, within the last two years around forty five percent of American employees witnessed unethical as well as illegal practices within their organization and almost 65% of the employees reported such an act. Moreover it was reported by the employees that retaliation against such a reporting was increased. The strength of ethical culture manifested within the organization was found to be at its lowest point in the last decade (Ethics Resource Center, 2012).

Conclusion

Integrating ethics within the lifespan of an organization is a necessitated process. The rising corporate scandals and ethical malpractices demonstrated by the big corporate giants of the America, the public faith in the corporate America declines day by day. While the nation state struggles to include and eliminate dishonesty within the American workplace, business executives along with their accountants are full of activity developing and planning to formulate new methods and ways to ‘cook the books’ to engrain Wall Street and in the end their own self-gain, profit and enrichment.

As evident from recent surveys that yielded that with the growing rise in the business world, growing beyond boundaries, the ethical practices are declining in the corporate world. However, the organizations that are found to be practicing ethical philosophies are headed by or driven by people who belief in ethical values. These leaders being the driver thus formulate proper ethical guidelines, ethical committee, and other mechanism to curb the personal ethical mishaps and punishments associated with unethical practices within the organization by all level employees. Although the implementation process necessitates resources, commitment and patience from the business leaders but the most important aspect is patience because demonstrating a substantial ethical environment within a corporation merely is a time consuming activity. These ethics should be framed as a constituent of the corporate culture so that they become institutionalized with time as a consequence of hundreds and thousands of people discretions on daily basis. Thus due to cumulative impact of these decisions, the corporate ethical philosophy is reflected in the organization’s ethical principles and standards.

References
  • Callahan, D. (2004). The Cheating Culture: Why more Americans are doing wrong to get ahead. Orlando, Florida: Harcourt Books.
  • Ethics Resource Center. (2012). Latest National Business Ethics Survey Reveals Looming Ethics Downturn in Corporate America. Corporate Compliance Insight.  Retrieved from http://www.corporatecomplianceinsights.com/news/latest-national-business-ethics-survey-reveals-loomingethics-downturn-in-corporate-america
  • Frohnen, B. & Clarke, L. (2002, November). Scandal in Corporate America: An Ethical, Not a Legal Problem. USA Today. 131, 24-26.
  • Geiger, M. J. (2010). Corporate America: Competition Beyond Ethics. Yahoo Voices. Retrieved from http://voices.yahoo.com/corporate-america-competition-beyond-ethics-6035384.html?cat=3
  • Larmore, C. (2012). Ethics in Corporate America. eHow. Retrieved from http://www.ehow.com/facts_6866932_ethics-corporate-america.html#ixzz2DsYLaE8Q

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