Discuss the relevance of management ethics in a modern business context

Ethics can be defined as moral principles or beliefs about what is right or wrong. These beliefs guide individuals in their dealings with other individuals and groups and provide a basis for deciding whether behaviour is right and proper (Beauchamp et al. , 1979). From a managerial perspective ethics are able to guide managers to making moral decisions in a variety of situations. An ethical decision is a “decision that reasonable or typical stakeholders would find acceptable because it aids stakeholders, the organisation, or society.

By contrast, an unethical decision is a decision a manager would prefer to disguise or hide from other people because it enables a company or a particular individual to gain at the expense of society or other stakeholders (Jones et al. , 1998). Therefore it seems that in order for organisations to function fairly and in an appropriate manner ethical behaviour must be adopted. However it is often difficult for managers to determine whether decisions that are made are ethical or unethical. So it is common practice for a code of ethics to be enforced within a firm.

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This consists of a formal document that states an organisation’s primary values and ethical rules it expects managers and operatives to follow (Decenzo, 2002). The code of ethics is only likely to work as long as they are precise enough to follow, yet allow for some personal interpretation. They must be implemented into the work environment in order to be effective, so employees can be reminded regularly of what is expected from them. Without this motivation towards ethical behaviour whole groups of people can be harmed.

For example in 1982, seven people died from taking Tylenol made by the company Johnson and Johnson (www. jnj. com). The FBI advised them to take no action yet they decided to withdraw the contaminated drugs from the market, at a huge expense, in order to protect the public. Johnson and Johnson took the decision to be socially responsible because their firm has a conscience. Firms do not always have a sense of right and wrong as seen in the next example concerning the managers at Dow Corning. They were responsible for the development of silicon breast implants.

They received many reports indicating that “women who had received Dow Corning silicon breast implants were experiencing health problems ranging from fatigue to cancer and arthritis due to ruptured implants” (Galen et al. , 1992). They decided to postpone any action in order to protect profits, and deny any responsibility for the safety of the product they produced. Pressure can often influence managers decisions. Managers are often under constant pressure to increase output and efficiency, as well as maintaining profits. Therefore they engage in unethical behaviour to reduce losses, as they did at Dow Corning.

This can also happen if a supplier reduces the quality of its goods to firms, in order to keep its costs down. This is obviously unethical behaviour as it is deceptive and dishonest. However if they reduce the quality of their goods it is likely that firms will stop using them as their supplier. Eventually the unethical suppliers will lose all their customers, so receive no long term gain. That concerns whole firms and their decisions. If we look at individual managers in organisations we can see how unethical behaviour can spiral out of control and cause much damage.

Certain managers may use the resources under their control for their own personal gain. If other individuals decide to copy the unethical behaviour of the manager the rate at which combined resources are misused increases. Ultimately there will be little left to use to produce goods and services. If this unethical behaviour goes unpunished it provides incentives for more people to engage in these activities, putting their own self-interest above what is right. When these break down in communications happen and nobody intervenes, a downward spiral is created that can eventually lead to more harm being created.

An important safeguard against unethical behaviour is the potential for loss of reputation (Dobson, 1989). Reputation, which can be defined as “the esteem or high repute that individuals or organisations gain when they behave ethically” (Jones et al. , 1998) is a vital asset. Firms must protect their reputation in order to gain loyal customers and increase their customer base. By creating a certain amount of trust firms are able to prosper, and by acting ethically they are seen as socially responsible and therefore can be trusted. The same principles apply to manager’s, and their reputations.

By upholding their reputation within a firm they are likely to receive more long-term gains. If they misuse resources the manager’s reputation is likely to suffer, making it more difficult to find employment elsewhere. Management ethics are therefore of great importance within organisations. Without ethics whole firms can be thrown into chaos with each member only performing tasks that will benefit their own self interests. If that were to happen the whole communication network would break down, reputations would be undermined and organisations would not be able to function in an efficient manner.

The most important step to encouraging ethical behaviour is through a code of ethics that are published regularly in news-letters and are given to every employee. Johnson and Johnson’s credo is widely circulated, and all its employees know how they are expected to behave (Murphy, 1989). Through these ethical control systems employees are able to learn an organisation’s ethical values. As long as those controls are in place and are taken seriously, organisations will do the right thing and behave ethically.