Research Paper on Business Ethics

Ethical Decision-Making

Differences Between Descriptive and Normative Ethical Theories

Descriptive ethical theories give an account of how ethical decisions are made in business. It further explains the factors influencing the process employed and the consequences of the choices. Also, they indicate actions undertaken by business people and why they indulge in those acts as well. On the other hand, normative ethical theories ensure moral judgement has been followed when making ethical decisions. As such, the moral conclusions can be made by considering aspects like duty, rights, and consequences. Therefore, while the normative theory explains what business people should do, descriptive theory gives an account of what business people do and their reasons (Crane and Matten, 2015).

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Stages in Rest’s (1986) Ethical Decision-Making Process

The four stages in Rest's ethical decision-making process are centred on the moral aspect. The model may guide managers to comprehend why people engage in specific ethical and unethical behaviour. They will understand why people may know the right thing to do and either do it or ignore. Additionally, managers may detect that something was not undertaken correctly but still managed the company to, for instance, obtain high profits (Crane and Matten, 2015).

Prevalence of Unethical Behaviour

The prevalence of unethical behaviour in business is a case of good apples in bad barrels. People engage in unethical behaviour due to circumstances they live in or may find themselves in as well. A person's nature further explains why they engage in unethical behaviour and ranges from optimism to pessimism. It may thus include happiness, control or loneliness, and low self-esteem (Crane and Matten, 2015).

However, when looking at the government or civil society organizations, one may find themselves in a situation where they have to conform to already established rules or strategies. For instance, one may be required to know someone in authority before being employed in a government institution, which depicts corruption (Crane and Matten, 2015).

Kohlberg’s Theory of Cognitive Moral Development

The first stage of ethical decision making is pre-conventional where people behave according to socially acceptable norms as per the directions of someone in authority. In the second stage, moral thinking is perceived to be in the society and referred to as conventional. The third stage is moral thinking is one that has not been attained by most adults. Its initial stage entails comprehending social mutuality and genuine interest in people's welfare while the second one is based on respect for general standards and strains of distinct integrity (Crane and Matten, 2015).

Based on this theory, when people find themselves in certain situations, they should assess them before embarking on a particular moral direction. For business leaders, the argument is helpful in developing of human resource policies and incentive systems (Crane and Matten, 2015).

Issue-Related Factors in Ethical Decision-Making

Two main types of issue-related factors in ethical decision-making are individual and situational. Personal elements are exclusive features of a person that enables them to make relevant decisions such as gender and age. On the other hand, situational aspects are of the perspective that influences whether a person will make an ethical or unethical choice. These dynamics are linked with work perspective like job roles, organizational culture, and reward systems (Crane and Matten, 2015).

When managers want to prevent ethical violations in an organization, they may use these as a guide. Through individual factors, they will know how to deal with a person based on their gender or age. Also, through situational factors, managers will adjust the culture and reward system to ensure it aligns with an organization's ethical expectations (Crane and Matten, 2015).

Bureaucracy in Ethical Decision-Making

Bureaucracy has been observed to have specific effects on ethical decision-making. It suppresses moral autonomy. People are required to follow certain prescribed rules and procedures set by the organisation. Therefore, their capability to think freely is hindered. Additionally, bureaucracy leads to instrument morality. In this case, morality is only relevant when one conforms to established rules for achieving set goals. A highly bureaucratic organization could improve ethical decision-making of employees by ensuring they abide by already established regulations without raising questions (Crane and Matten, 2015).

Shareholders and Business Ethics

Ownership of Corporations

The ownership of corporation differs from that of other forms of 'property' since the management and ownership functions are separate. Besides, the difference is due to fragmented ownership. Due to various shareholders in a corporation, one individual cannot consider themselves the owner like in a sole proprietorship On the other hand, control of the property owned concerning a corporation is not under the owner but the board of directors (Crane and Matten, 2015).

Shareholders of a corporation have the right to sell their stock, vote in the general meeting, and obtain specific information about the company. They also have the right to sue the managers for any misconduct. However, these rights do not entail a certain amount of profit or dividend (Crane and Matten, 2015).

Corporate Governance

Corporate governance refers to numerous processes, rules, and structures that facilitate shareholders to use regulation and direction over managers. It thus includes how they can influence description of goals, control, supervision, and rewards (Crane and Matten, 2015).

Executive accountability and control are one of the major ethical problems that arise in corporate governance. It entails the systems and processes that can be applied by shareholders and other stakeholders to hold senior executives accountable for the performance of an organization. The board of directors demands for accountability. Executive remuneration is another corporate governance ethical problem. It entails a process of balancing between directing and controlling internal matters of business entities and demands of external stakeholders and shareholders (Crane and Matten, 2015).

"Executive Pay as a an Ethical Issue"

Executive pay is alleged to be financial reimbursement and other non-monetary grants given to executives by a corporation. Also, bad behaviour and paying for risk has been standardized in the current world. The market value of CEO's, for instance, is quite high as compared to other workers (Crane and Matten, 2015).

Currently, workers performing similar work do not receive comparable pay. Specific criterion is employed to determine compensation to advance to every employee. Individuals who work from morning to evening are paid less than executives who mostly partake only managerial roles (Crane and Matten, 2015).

Financial Crisis of Late 2000s

Ethically, the financial crisis of the late 2000s occurred due to irresponsibility of those in power to take necessary measures early. Despite there being a crisis, executives associated with failing and bankrupt organizations continued earning millions in salaries and received billions as bonuses (Crane and Matten, 2015).

Taking pay cuts would have been an ideal way of minimizing the problem. Also, the executives should have designed solutions instead of just enjoying their huge salaries and bonuses. In this way, the crisis may not have extended for a long period (Crane and Matten, 2015).

Insider Trading

Insider trading entails buying or selling securities based on evidence that is not openly accessible to all other market partakers. The insiders have adequate knowledge of the market on issues like share prices of the company. The information may be applied to make high revenues (Crane and Matten, 2015).

Specific ethical arguments have been brought forth concerning insider training. There is fairness. It has been depicted that there is inequality concerning access to important information about firms and few people benefit. There is also misappropriation of property whereby insider traders utilize valuable information, some of which they are not supposed to access (Crane and Matten, 2015).

Effectiveness of SRI and Shareholder Activism

Shareholder activism refers to the effort to utilize the rights of the shareholder to alter policies and practices of a corporation dynamically. On the other hand, socially responsible investment (SRI) is an investment decision that syndicates the search for financial returns with fulfilment of ethical, communal, and environmental objectives (Crane and Matten, 2015).

SRI is socially conscious unlike shareholder activism as it considers financial return and ecological effectiveness to create a positive change. Therefore, SRI can be perceived to be more alert than shareholder activism which is less aware concerning the environment. Also, from the definition, it is evident that SRI is focused on society welfare and investment (Crane and Matten, 2015).

Consumers and Business Ethics

Customer Treatment

(a) Mobile phone companies have restraining agreements. As such, it limits customers' of their utilization. Consumers are overcharged with costly call rates which are unethical. The call rates should be regulated and made affordable (Crane and Matten, 2015).

(b) Holiday companies indicate low traveling, tour and accommodation charges during advertisements but upon physical enquiry, it's observed that one needs to pay more to access all services and products (Crane and Matten, 2015).

(c) Chemical companies, especially the ones dealing with drugs, exploit the poor and sick through preserving high prices for lifesaving pharmaceuticals and hindering the sale of generic drugs that are cheaper (Crane and Matten, 2015).

As such, each company has an ethical issue and hinders consumers from enjoying excellent or effective and cheap services. Besides, their interests come first, and in most cases, it entails making high revenues despite being unfair to consumers.

Deception in Marketing

Deception in marketing communications refers to the generation or taking of advantage of a false belief to interfere with the rational decision-making of consumers. As such, through marketing, false information concerning a product or service is passed to consumers. It is done to boost sales and earn high profits (Crane and Matten, 2015).

Instances of deceptive marketing practices include lotions used for slimming in two weeks, but the result is not observed even after using it for up to six months. There have also been claims that a product was imported yet it was locally produced (Crane and Matten, 2015).

Ethical Problems in Pricing Practices

Excessive pricing occurs when an important activity that has control of the market power sets prices above the competitive pricing levels. It's based on the supposition that fair price for goods and services have already been exceeded. The act is unfair to consumers (Crane and Matten, 2015).

On the other hand, price fixing is where competitors agree to fix prices above the market level, making them higher. As such, firms obtain high profits without caring about the consumers who have to pay more for products and services (Crane and Matten, 2015).

Moreover, predatory pricing is where the prices of goods and services are set at a low level such that other organizations or competitors cannot compete and thus forced to leave the market. Deceptive pricing is where actual prices of products and services are deliberately hidden. Firms may advertise low prices but when purchases are made, they vary (Crane and Matten, 2015).

Consumer Vulnerability

Consumer vulnerability may be determined by analysing the ta...