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Ethical Theory and Applications to Business and Professional Practice - Essay Example

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The paper "Ethical Theory and Applications to Business and Professional Practice" is an outstanding example of a Business essay. Enron was a very competitive company and was known for rewarding productive staff with high salaries and large bonuses. However, hidden from the public eye, top executives of Enron were using aggressive performance evaluation and firing policies…
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Ethical Theory and Applications to Business and Professional Practice 1. Introduction Enron was a very competitive company and was known for rewarding productive staff with high salaries and large bonuses. However, hidden from the public eye, top executives of Enron were using aggressive performance evaluation and firing policies. They also seem to espouse respect, integrity, honestly, and excellence but in fact doing the opposite. The contradicting moral image and the behaviour of Enron’s top executives demonstrate the limitations and weaknesses of organisations codes of ethics. The codes are actually helpless in the presence of executives that have no virtues and capability to make ethical decisions. The testimony of Sherron Watkins helps us understand that a lot of good people can go wrong particularly when under performance pressure and besieged by greed. The once good and morally right intentions were transformed into a culture of cheating and exploitation of people and opportunities. The following section discusses the various ethical theories and its applications to businesses like Enron. It will also discuss how Enron executives failed to comply with these ethical theories and moral obligations, and the implications of such corrupt practices to professional practice. 2. Ethical Theories and Enron In ethics, utilitarianism is generally known as a means to resolve a moral issue, where the righteousness or wickedness of an action is weight against the consequences of doing it (Belkaoui 2004, p.69). In other words, a person’s action is right when it brings favourable consequences or the greatest amount of utility. The utilitarian approach to ethics are related to the notion of good morality where doing the right action leading to the common satisfaction of human desires (Belkaoui 2004, p.69) or “the greatest good for the greatest number” (Bentham (1768) in Pugh (1978, p.393)) is very important. Moreover, assuming a man as a social animal who would be pleased by the joy of others, Hume, an English utilitarian philosopher, also wrote that the moral tendency of an act was its intention to produce happiness for the actor (Stone 1965, p.111). Today and in most organisations, the essence of utilitarian ethics is promoting the greatest balance of good over harm for everyone thus judgments are being made by cost-benefit analysis (Rost p.168). According to Singer (2005, p.245) judging an action whether performed by a public official or private individual affects different people beside themselves and utilitarianism may have some implications when applied privately as there is a tendency for a private person to do what he wants to do. For instance, utilitarianism may have a bad effect on the decision of a company manager since it’s consistent with the goal of profit maximisation and may ignore the rights of other stakeholders (Robbins & Coulter 2005, p.110). The manager may decide to lay-off a large number of his employees justifying that doing so would increase company profit and ensure employment for the few remaining others. In other words, the action would also make a lot of people happy thus maximising utility and ethical. The Enron case according to Sharp (2005, p.3) is “the most visible of frauds that seem to take place with alarming regularity”. In the article of Beenen & Pinto (2009, p.276), Sherron Watkins pointed out that top executives of Enron even during their trial rationalised that there involvement and actions was right. In fact, Jeff Skilling even to the last moment of his sentencing still believes that he is innocent of the fraud charges. The reason for this kind of behaviour probably is the fact that based on his ethical standard, he is ethically right to make decisions that could benefit the company and make many people “happy”- utilitarian ethics. According to Watkins, Enron was practically throwing money around, hefty bonuses, stock options, and things to satisfy the greed of many (Beenen & Pinto 2009, p.279) and it became both as CO and OCI mainly due to the high level of performance pressures and leadership style (Beenen & Pinto 2009, p.283). Skilling as mentioned earlier misinterpreted his ethical standard thus he was more oriented on satisfying the needs of the company and many others. His type of management seems lacking moral grounding, organisationally centred, and ignores the importance of individuals as the “appropriate unit of moral analysis” (Beenen & Pinto 2009, p.275). As the preceding ethical standard demonstrated how moral reasoning that centred entirely on maximising utility often sacrifices individuals in favour of the general welfare, the deontological theory alternatively perceived an individual with special status which we have to respect regardless of consequences (Furrow 2005, p.49). The Kantian deontology theory was conceived by Immanuel Kant who believed that morality offers a rational framework of common concepts and rules that restrict and guide every individual (Sugarman & Sulmasy 2001, p.38). According to Sugarman & Sulmasy (2001, p.38), an individual should always act in the same manner that everyone would act if in the same situation. For instance, not everyone cheats, lie, steal, or ignore someone in distress and therefore not a common practice. , as far As far as this ethical theory is concern, any act that violates valid moral imperatives is unethical and should be avoided. Christman (2002, p.15) make clear that the morality in Kantian deontology is based on voluntary imposition of bias-free moral obligation regardless of time, place, and outcomes. In order to be a responsible, a person must be able to use his self-control, choose his own goals, and act to meet those goals. Moreover, a person must also respect the autonomy of others and treat them as goals in themselves (Webb 2005, p.53). For instance, cheating or being dishonest to someone means using them for our own purpose because we are depriving that person the opportunity to make the right choice which he would certainly do if he knows the truth. In general, the deontological theory, promotes that the right ethical or moral action is autonomous of consequences because there are norms and measures which are fundamentally correct that we should not breach (Lewis 2001, p.41). The Enron management undoubtedly refused to allow deontological reasoning as they never act in the same manner that everyone would act. They instead pursue their objectives the other way while disregarding the autonomy of others. They actually “twisted accounting rules....applied them in ways that violated underlying principles” (Beenen & Pinto 2009, p.276) which is far beyond what others would normally do in the same position. Take for instance the deliberate cheating and very uncommon practice when they book $50 million of revenues from a deal that had no actual revenues (Beene & Pinto 2009, p.278). According to Duska (2003, p.112), it is unethical and immoral when someone gives a false picture to get somebody to act in a way other than they would if they are given the true information. For instance, a company who deliberately present a false profit in order to get a bank loan is immoral. However, the case of Enron is a little more complicated since the aim was to buoy up the price of the stock, which was then used as collateral to float loans to cover (Duska 2003, p.112). If these behaviours would be accepted and universalised and everyone would do the same then our world will be chaotic since there be no more trust. Similar to the principle of Kantian Deontology that a responsible person should respect the autonomy of others and act in the same manner that everyone would act, the first principle of justice according to John Rawls requires a person to have rights and liberty similar to others. The second principle requires the reasonable arrangement of social and economic differences so they are beneficial to everyone (Rawls 2005, p.60). Robert Nozick also believes that exploitation of another individual is to do him injustice (McGray 1999, p.33) but opposes the idea of Rawls’ distributive justice because he thinks that the bias in respecting the autonomy of persons prowl in the very notion of distribution (Paul & Miller 2005, p.163). Norzick maintains that whatever people earn fairly is theirs and no one can take it away from them even if the reason is to help the poor (Gensler & Swindal 2004, p.20). This is contrary to Rawls theory that justice can be achieved if there is “cooperative venture for mutual advantage” (Wolf p.119) where people support and comply with existing just institutions that is applicable to them (DeLue 1989, p.12). Rawls believed that an ideal social system is where men act as one to achieve the greatest benefits while they separately pursue their individual interest (Tremmel 2006, p.73). The natural duty of justice for Rawls is one that binds people together, more essential than an obligation, and no voluntary act required (DeLue 1989, p.13). In Enron, justice is cooperative venture for mutual advantage but for the few. For instance, everyone in Enron perceived that they are good moral person and they certainly will do the right thing (Beenen & Pinto 2009, p.280). However, if one would look at the case of Cassandra, which happens to be a morally upright person, following the accepted accounting principles did not do her good. In fact, her move cost her job and dignity as Enron was not the right place to be morally correct. This is because a corrupt company like Enron knows no honesty and integrity but all profits and gains (Beenen & Pinto 2009, p.279). Cassandra was actually exploited and in Norzick interpretation, exploitation of individual is an injustice. Enron officials made her believed that she was being promoted but actually was being prepared for humiliation (Beenen & Pinto 2009, p.280). Another injustice committed by Enron executives was pushing Vince Kaminski to the side when he questioned the some irregularities in accounting practices (Beenen & Pinto 2009, p.278). In Enron, people are intimidated to stop them from asking questions. In fact, Skilling’s leadership was founded on intimidation and exploitation as he do not like people asking questions, and when they do, he would intimidate and make his employees feel that they are foolish (Breenen & Pinto 2009, p.279). In general, Enron do not have any sense of justice as if one would consider the fact that justice whether from Rawls or Norzick is respecting a person’s right and dignity. Similar to Rawls first principle of justice that people should have equal rights and the Nozick notion that an individual should not be sacrificed for achieving another person’s ends, the second moral perception in the traditional discourse of rights is the notion that all persons have equal value and are both worthy of respect and fair treatment (Morris 2006, p.21). For a person to have right means to have something that overrides other considerations in both moral and legal discourse (Campbell 2006, p.3). In other words, the right of people should be given priority over the promotion of general utility or the common good. According to Jones (1994, p.50), the way rights function in a person’s moral thinking is in contrast to utilitarian reasoning. As discussed earlier, utilitarianism consider some act as the best act that would obtain the ultimate utility. Utilitarianism seems to conflict with the ideas of right since it only recognise that something is good if it promotes utility. In contrast, the theory of rights considers different goods or preferences (Jones 1994, p.52). For instance, a person may have a right to ‘x’ but not right on ‘y’. In other words, the theory of rights has a more objective moral position where satisfaction is not geared entirely on a person’s utility gains. The right of a person must be respected not because of some further end but because morality provide it with its own grounding (Smith 1995, p.87). A right protects a person’s integrity on the job and one of them is to participate in job-related decisions (Ezorsky & Nickel 1987, p.26). However, this right may not practice at all times since it may conflict with rights of business owners to choose what they think is best for the business. However, according to Ezorsky & Nickel (1985, p.25), the right to equal opportunity also shields individuals from subjective and humiliating rejections. In Sherron Watkins interview, one would find Enron as a company with utilitarian thinking. Enron executives always act in the best way possible to obtain the maximum utility. For this reason, they see promotion of utility as more important than the right of people or the common good. For instance, Enron executives were always under pressure because of their earning goals and consequently, thinking that their earnings is more important the right of people, they resulted to manipulating accounting rules for their advantage (Beenen & Pinto 2009, p.276). Moreover, Enron’s top executives were aware of the violations committed but seem to be more interested in justifying their wrong doings than correcting them (Beenen & Pinto 2009, p.277). This behaviour is indicative that their moral position, which was based entirely on utility, gave them the right to pursue whatever is good for them. When Jeff Skilling told the judge that he was innocent of the charges, he was actually telling that he is not corrupt and what he had done is correct. For him, misrepresenting the actual financial condition to the investing public and hiding their large long-term debt (Beenen & Pinto 2009, p.276), is morally acceptable and do not violate the rights of others to know. In addition, the transfer of Cassandra was actually a humiliation and violation of her rights in the workplace as she was deprived of the right to know and dignity. These practices are never acceptable but Enron’s executives were so used to it that it never bothers them. In fact, the “rank and yank” (Beenen & Pinto 2009, p.278) performance review process is an aggressive policy towards their employee but the made look like a legitimate policy. Contrary to all of the above ethical or moral theories, ethical relativism knows no universal moral codes or standards. According to Johnson (2004, p.298), ethical relativism promotes that each group and society is distinctive and therefore members of one culture cannot pass moral judgement on members of another culture. This is because relativist believed that “what is morally right for one person may be wrong for another” (Banks 2004, p.7). In other words, they do believe that there is right or wrong but there are the differences in the way they are perceived from one culture to another. There are three forms of ethical relativism- ethical, cultural, and extreme relativism. According to Banks (2004, p.9), cultural relativism promote that each society varies in moral code and therefore no one can has the right to judge one moral code as correct and applicable to all. For instance, a country’s moral code is only one of the many moral codes and if the moral code of one country sees that a certain action is right then the act is right. On the other hand, extreme relativist takes the position that is more specific. They believed that a moral belief individual varies with one another. They deny the concept that there are absolute values and believed in the notion that what is morally right or wrong is always relative to some framework or context (Nathanson 1993, p.99). For instance, according to Nathanson (1993, p.100), if one would follow the relativist attitude that the validity of laws is relative to countries and morality is similarly relative, a driver from the United Kingdom would find driving on the left side of the road in the United States is morally wrong. Similarly, an American driver would be accused of immoral act if he drives his car on the right side of the road in the United Kingdom. The implication of this theory is that it never considers entirely the applicability of such idea. Driving in the wrong side of the road in the United States is prohibited and acceptable because it is unsafe and people, regardless of nationality, are morally obliged to avoid hazardous practices. Drivers in the U.S. or the U.K are bound by the moral principle demanding safe practices to avoid accidents and lost of life. If one would look deep into the Enron case, the executives of this company are relativist of some type. For instance, these people do not believed they had done wrong up to the last moment of their trial. They seem confident that their business practice harm no one and therefore does not violate any moral codes or rights. Ethical relativism as discussed earlier promotes that there are no absolute moral code thus what may be wrong for one person is acceptable to another. Enron executives seem to perceive that their deeds were up to standard as far as their own moral code is concern. Corruption in Enron perhaps “spread like a sexually-transmitted disease” (Beenen & Pinto 2009, p.276) because of this widely accepted internal moral codes which is relative to their agenda and circumstances. 3. Conclusion/Implications for Professional Practice Enron’s corrupt practices were mainly due from high level performance pressures and flawed leadership style. Its executives were too organisationally centred and lack strong moral grounding. The organisational-level corruption in Enron has a powerful moral implication on the role of a CPA. The fraudulent practices of Enron and Arthur Andersen through misleading accounting would surely affect people’s trust on accountants. Many would find it necessary to raise ethical questions in accounting and audits and probably revise accounting laws to constrain creative accounting and monitor the accounting profession. However, what had happen to Enron may be beneficial to accountants in the sense that they would now consider or think about the significance of ethical practice and learn from the experience of Sherron Watkins. Although doubts in the reliability and integrity of the accounting profession would perhaps stay for a while, an accountant who recognises the importance of moral values and rules will be confident enough to pursue his or her profession unaffected by people’s negative perception. 4. Bibliography Banks C. 2004, Criminal justice ethics: theory and practice, SAGE, US Beenen, G. & Pinto, J. 2009. Resisting Organizational-Level Corruption: An Interview with Sherron Watkins, Academy of Management Learning & Education, Vol 8, No. 2, 275-289 Belkaoui A., 2004, Accounting theory, Cengage Learning EMEA, Singapore Campbell T. 2006. Rights: a critical introduction to contemporary political philosophy. Routledge, UK Christman J. P. 2002. Social and political philosophy: a contemporary introduction. Routledge, UK DeLeu S. 1989. Political obligation in a liberal state, SUNY Press, US Duska B. S. 2003. Accounting ethics, Wiley-Blackwell, Australia Ezorsky G. & Nickel J.W. 1987. Moral rights in the workplace. SUNY Press, US Furrow D. 2005, Ethics Key concepts in philosophy, Continuum International Publishing Group, UK Gensler H. J. et al. 2004, Ethics: contemporary readings in philosophy. Routledge, UK Johnson C. 2004. Meeting the Ethical Challenges of Leadership: Casting Light Or Shadow, SAGE, US Lewis D. 2001.Whistleblowing at work. Continuum International Publishing Group, US McGray H. 1999. Race and social justice. Wiley-Blackwell, UK Morris L. 2006. Rights: sociological perspectives. Routledge, UK Nathanson S. 1993. Patriotism, morality, and peace Studies in social & political philosophy, Rowman & Littlefield, US Rawls J. 2005. A theory of justice. Harvard University Press, US Rost J. C. 1993. Leadership for the twenty-first century, Greenwood Publishing Group, US Robbins S. P. & Coulter M.K. 2005, Management, Tsinghua University Press, China Paul J. & Miller F. 2005. Natural rights liberalism from Locke to Nozick, Part 1 Volume 22 of Social Philosophy and Policy, Cambridge University Press, US Pugh G. E., 1978, The biological origin of human values, Routledge, UK Sharp D. 2005, Cases in business ethics: The Ivey casebook series, SAGE, US Singer P. 1993. A companion to ethics. Wiley-Blackwell, UK Smith T. 1995, Moral rights and political freedom Studies in social & political philosophy. Rowman & Littlefield, US Sugarman J. & Sulmasy D. 2001. Methods in medical ethics, Georgetown University Press, US Tremmel J. 2006. Handbook of intergenerational justice. Edward Elgar Publishing, UK Webb P. 2005. Ethical issues in palliative care, Radcliffe Publishing, UK Wolf J. 1991. Robert Nozick: property, justice, and the minimal state Key contemporary thinkers, Stanford University Press, US Read More
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