RUNNING HEAD: Current Ethical Issue Current Ethical Issue 1. Introduction This paper seeks to analyse a current ethical issue that deals with a change in midstream of expectation or ground rules using as particular example the case of a CEO who is beinng asked to forgo some of his previously contracted compensation or other benefits, as the dismal results of operations of company reveal towards the end of the fiscal year. This would discuss the possible legal and legal issues in the context of ensuring the long-term health of the corporation because of the sudden change in the competitive environment. 2.
1 The previous situation This paper assumes that before a CEO of a corporation is asked to head the company towards the latter attainment of objectives, a contracts was a signed formally pay the CEO including the latter’s salary and other perks of the position such as cash incentives, stock options and other benefits. Given the responsibility assumed by the CEO, he is the highest paid official in the company.
2.2 The changes that are taking place It is assumed that company which the CEO heads is showing difficulty towards the end to the year because of the some problems in the economy due to sudden changes that may put the company in a more dangerous situation if not properly addressed. To give to the CEO every agreed benefits and perks would be legal but it may mean that that CEO may be enjoying a high compensation when employees of the company would be retrenched because as evidenced by declining sales brought about by stronger competition and a slow economy. 2.3 Why the changes are taking place The changes are taking place because they are influenced by the external environment and as consequence of some decision made and in the past.
These negative events were of course part of the planning in the past but the sudden opening up of the market due to deregulation during the year many companies were encouraged to enter the industry and thus created more players in competition to compete for prices, thereby lower profitability for industry players.
The problem is exacerbated by the weak recovery of economy from the crisis as evidenced by high unemployment which would mean lower purchasing power of consumers. 2.4 Desired outcome/future situation The desired situation of the company is to be able to able to increase sales and reduce costs as ways to increase profits for the company and to be able to recover its capital investments made in the past which are financed by loans.
Maintaining an acceptable profitability could help the company to survive completion. This would entail cost reduction by company including possible retrenchment and removing or saving on unnecessary expenses. Sustainability of the business is desire to be able to continue the business and survive the competition and the slow economic growth. 2.5 What are the legal and ethical issues involved The legal issues would include the right the CEO to be paid with what was agreed in contract to which he or she is entitled.
To deprive him now for what was due him may show some kind of disrespect for legal processes that should be respected no matter how the circumstance might have changed. This is with the premise that before any agreement could be entered into it has something to be anticipating the future. When the CEO agreed to have that compensation it could be presumed that the board of directors which manages the corporation, approved the level of compensation and should be presumed to have anticipated the risks that the corporation is facing and the basis when CEO would have accepted the challenge of the decisions that have to be made.
Thus the CEO may demand as a matter of right for the legal enforcement of his claim from the corporation. As to whether the CEO would end up happy afterwards is another question. The latter would be better called an ethical issue.
What then are the ethical issues involved in the case? The ethical issues involve include the possibility of the of the CEO not taking some of his perks or some of his promise compensation as way to show some sense of responsibility to the events taking place in the company and as way to help to promoting sustainability of the business. The other circumstances of the company to understand the ethics of pursuing the decision would have to be considered.
A CEO is the top executive in a company for which he is perceived as the first to show ethics to employees. Thus to see his some of his people having to lose jobs in order to reduce cost while enjoying the high benefits and very luxurious standard of living would leave some bad taste in the mouth. Assuming that that company has its global operations and its happens that since the company’s business most come from the United States, the resulting consolidated financial information would still show dismal results.
May it not be argued that his case should be treated differently? With companies becoming by expansion bigger because of the globalization, top level manager including CEO are offered abnormally high incentives that would be high sounding enough to match their big responsibilities in handling others money and resources of stockholder. Would it be proper to put a limit to what these CEO can get or just allow the sky to be the limit for all these perks and incentive?
Would finding the best CEO for each of the companies when the shareholders happen to be looking for the best returns of their investments be justified by the big salaries? How if external events as expected would turn out differently. If indeed the shareholders would not be tamed for controlled by their desire to get more wealth in capitalistic society by all means the greed cannot be attributed solely to CEO but stockholders likewise.
But if the CEO has become too optimistic with any sense of risk management, prudence could dictate that there should be limit to things. It can be assumed that CEO has taken their basic finance theory in school where he learned that the higher the return, the higher would be the risk (Brigham and Houston, 2002) for the purpose of this case. Sobriety therefore would call for ethical concern and decision to address the present situation of the company at hand it desires to attain its long-term health.
2.7 The importance of business owner/manager to act ethically The important of ethical leadership in business cannot be underestimated and could be best demonstrated with the company which is trying to survive this in paper. Talking about ethical business decision making is empty if management does have any standards set (Cross & Miller, 2011). As a global company, it can be expected to have its code of ethics to which it may demand some ethical behaviour.
As managers must apply these standards set to themselves as they must be willing to do the same for their employees. If the CEO would forgo some of this benefits and compensation, he would be showing deep commitment to the company’s code of ethics. By so doing he would be saving a number of jobs. The US government has been very serious in solving the unemployment problem in the US and the company’s doing the same would be fulfilling its corporate social responsibility. This decision would create and maintain a workplace that can be called ethical.
The same would a demonstration its commitment to ethical decision making. A CEO who is not cannot show commitment to ethical workplace hardly will find success in creating one that would bring back the company to sustainability. 3. Conclusion This paper has found that there different ethical and legal issues that may be involved in case of a sudden change in the ground rule. To ask what is legal is to ask what is fair and just that is compellable through formal processes.
What is legal is however not necessarily ethical and what is ethical is necessarily ethical. Different outcomes or goals require different approaches and legal and ethical approaches can be applied was in this case in attaining the most compelling goal or objective. Viewed from a wider perspective, the situation is actually looking at that is most beneficial to company in relation to its long-term health. In making a decision to forego some of the expected compensation due to change in the economic environment, the CEO is encountering a chance to show commitment.
Such action would be building goodwill for employees whose jobs may be saved. The decision the same show love for country and fulfilment of social responsibility. References: Brigham, E. and Houston, J. 2002, Fundamentals of Financial Management, London: Thomson South-Western Cross, F. & R. Miller (2011), The Legal Environment of Business: Text and Cases: Ethical, Regulatory, Global, and Corporate Issues, Cengage Learning, 2011)