Ethical Theory and Application to Business and Professional Practice - Literature review Example

Name : xxxxxx Tutor : xxxxxxx Title : Ethical Theory and Application to Business and Professional practice Institution : xxxxxxx @2010 Introduction Introduction The story of Enron brings to the fore critical matters on corporate ethics in management. Enron’s case is a clear indicator that corruption trends are present and subtly entrenched even in the organizations we may perceive otherwise. Top level corruption or corruption organization as sometime known at Enron was so entrenched to a point that you had to get into the ‘club’ and tow the ‘line’ or get ‘fired’ This case clearly indicates a number of situations where violations on cooperate ethics and the defined financial structures therein were employed to benefit individuals and the organization that is Enron. According to Watkins Enron thrived on dodgy financial and accounting practices which accounted for corruption organization (CO) and widely adopted individual ethical failures which were defining the phenomenon organization of corrupt individuals (OCI)(Watkins 2003b). Watkins continues to assert that Enron was under enormous pressure from Wall Street to achieve earning goals (Beenen & Pinto 2009). In other words Enron had to be ‘valued’ favorably on Wall Street so that they could be able to strike substantial deals which would translate into better valued stocks and also benefit the individuals within the organization. Accounting malpractices also lace Enron’s record where reports would be twisted to imply a false impression. While all this brewed up at Enron the top echelon seemed to rationalize it which gave OCI phenomenon picture at Enron. One other main and necessary condition that spurred fraud at Enron was the management’s rationalization. While all malpractice happened they consider the nothing is wrong perception. This led to the ignoring of underlying accounting principles that were intended to fairly represent an organization’s financial condition to the investing public (Houndofzeus 2006). Utilitarianism views the morality in any action as deriving its basis on utility to provide service or pleasure. The common phrase normally used to define this is “the greatest good for the greatest number of people” (Beenen & Pinto 2009, p.275). We can perceive the utility coin with the two faces the head representing pleasure and happiness and the tail suffering and pain. We may not well understand how utilitarianism handles the problem of self interest which was an underlying factor in Enron’s case until we have gone a little further to look at the variants of utilitarianism. Variants of utilitarianism include the Act and Rule utilitarianism where Act utilitarianism indicates that faced with a choice, one needs to evaluate the potential actions based on the consequences or outcome. The ultimate in this case should be to derive pleasure. This we see can clearly encourage self interest because the act carried out is assessed on a personal opinion with a goal of deriving some form of happiness or pleasure. In this therefore we see that Act utilitarianism doesn’t effectively handle the problem of self interest, infact it promotes this problem. Rule utilitarianism on the other hand is based on rules of action, the more happiness the rules of action produces the more morally acceptable these rules of action become. This idea will tend to limit the perpetuation of self interest in the sense that the rules may be set out by a very different and independent party altogether from the applicant of the idea. In this case the applicant of rule utilitarianism will only carry out their actions based on preset rules which may not necessarily promote their personal or self interests. Act and Rule utilitarianism has birthed the two levels, negative and average and total utilitarianism. The two level utilitarianism brings out the fact that for the sake of happiness a person needs to morally and intuitively think which is basically rule utilitarianism. While looking at the Enron issue utilitarianism emerges when the top echelon including Jeff Skilling engage in unethical procedures just for the sake of bring happiness and pleasure. The malpractices were condoned because they would improve Enron’s earnings and standings at Wall Street which would eventually translate personal or individual benefits. A clear case from the reading and according to Watkins indicated that Enron had well crafted financial management policies even as Cassandra one of the employees in the department indicated. On raising this with the top management who had a fraud in the offing involving them, she was hastily transferred and pressured into resignation. Rule utilitarianism was transforming into act utilitarianism. Further still we understand that as much as there were clear policies especially in financial management at Enron pressure to perform normally had an upper hand in which case the ethics of the organization would be compromised for the sake of performance which had its rewards in happiness and pleasure for the people involved through promotions, bonuses, hefty salaries and the like. Therefore while you worked for Enron performance became a more important factor of consideration, work ethics weren’t necessarily important and so one was obliged to do whatever would keep Enron’s standings high and they would in turn receive incentives which to them meant happiness and pleasure. Hence what was going on at Enron was morally acceptable as long as it was benefiting the organization and the individual. Further still we can look at Kant’s theory which is considered deontological and speaks about duty or rule based on ethics in the perspective of the matter at Enron Deontology also has do with a duty or an obligation that may be based on some rule. Kant argues that duty can propel people to act morally and that their motives bear the most weight in determining the consequence of the actions. Therefore acting morally based on duty must be for the highest good. Highest good here refers to good both intrinsically and without qualification which he calls goodwill. That nothing in the world indeed nothing even beyond the world can possibly be conceived which could be called good without qualification except a good will Kant continues to argue that a person has a good will when he or she 'acts out of respect for the moral law (Houndofzeus 2006). According to Watkins Enron had financial standards that if followed would not have resulted in the fraud that resulted. The indication here is that forces within and without Enron began to dictate where the company should and should not be. And therefore Enron’s system ‘evolved’ to try and maintain what they perceived as the goodwill of Enron. In this very situation the top echelon were motivated by what was not necessarily the norm at Enron and worked out bypass systems which to them were for the organization’s highest good. Enron’s reputation was always at stake here and had to be maintained. With this in mind therefore, it became the duty of Jeff Skilling and his top level team to maintain the reputation which went hand in hand with Enron’s goodwill. They therefore saw nothing morally wrong in trying to fix the accounting processes at Enron as long as goodwill was maintained. According to Watkins Deals that benefited Enron also benefited individuals, and vice versa. The finance and accounting people reaped some large bonuses when they closed something like the Blockbuster structure (Beenen & Pinto 2009, p. 278). It therefore may appear that all who were involved in Enron were considering it their duty to ensure that Enron remained on the map even if it meant twisting a few known rules here and there, the motivation being there. The situation at Enron to a large extended had its driving force based what one could do for Enron and what benefit would result from such an action. The performance appraisal meetings were meant to indicate to the staff at Enron that performance was most valued under whatever cost. This in itself opened avenues of corruption because rules could easily be twisted or bend to accommodate performance. By overlooking the financial management policies of Enron the top echelon may have been assuming Rawl’s initial approach to the liberty and difference principles. With liberty as one of the theory’s proposition, we can infer that the top management at Enron perpetuated malpractices under the guise that it constituted their fundamental liberty. The kickbacks, bonuses and hefty salaries could easily have passed off as accomplishing the difference principle where Enron’s fraudulent deals didn’t only benefit the top cream but their subordinates as well. In this sense the welfare of all was taken into account even as according to Rawl’s theory. However from Nozick’s perspective we see that every action at Enron was motivate ultimately by the individual gain that would result. According to Watkins at Enron money was thrown around so that people would look the other way. It was just a great client to have, so their accountants and lawyers and bankers would do what they wanted (Beenen & Pinto 2009, p.279). Watkins asserts that Jeff Skilling’s management style which was basically hypnotic, individualistic, charismatic and intimidating was a contributory factor to Enron’s failed state. The bottom line was always about the preferences of Jeff Skilling. This largely promoted the individualistic view (self interest) at bigger proportions accounting for organization corrupt individual phenomenon. Therefore one was required to promote these practices even when they were not ethically sound for the sake of their own welfare and that of the organization or society, and while they were at it they would realize their individual benefits which is what Rawl’s and Nozick’ s theory stands for. The society in this case Enron may have thrived on relativism. Ethical relativism asserts that there are no intrinsically right or wrong actions and therefore what we perceive as right or wrong is dependant on our cultural and social inclinations. Descriptive relativism a variation of relativism indicates that there are as differing standards as there are moral standards. This implies that to one it may be morally acceptable to carry out a certain action based on a certain standard even if the group to which they belong has differing standards. This was typical of what was going on at Enron when the financial management standards were being flouted because an individual or a group of individual assumed that this was morally acceptable. This group at Enron were meta ethical relativists where for them terms like good, bad , right or wrong were not subject to universal truth but rather based on societal and personal preferences. Based on this therefore disagreements were bound to occur between people. No wonder therefore Watkins asserts that there was so much spin going on internally, it was difficult for most people at Enron to know exactly what was happening (Beenen & Pinto 2009). Looking at all that was taking place at Enron one cannot help but ask the place for justice. There were many wrongs within the system that were rewarded and many rights that were punished. Justice was flouted for justice is the concept of moral rightness based on ethics, rationality, law, natural law, religion, fairness, or equity (Konow 2003). According to justice people and things within a society must be properly ordered. Variations of justice include utilitarianism, retributive justice where crime is proven and punishment is imposed and distributive law concerning the fair allocation of things between different people. Rawl’s and Nozick are proponents of distributive justice. The applications of utilitarianism and distributive justice have there bearing on the Enron case known. Enron’s case is just one among the many examples of corruption within organizations. The secrecy however with such practices within these organizations is for the same reasons as were at Enron, reputation and external perception must be maintained and remain intact. In order to promote company and individual interests which may not at times be ethically acceptable the participants at top level and their subordinates will build mechanisms that justify and even reward these practices. This we see was the case at Enron. Financial incentives and arbitrary promotions seem to be some of the mechanism that are at the disposal of the top echelon to cover up corruption. Beenen and Pinto suggest a number of ways in which organizational corruption can be countered. The 4P approach that includes perceive, probe, protest and persist is vital for management level and practitioners to effectively fight organizational corruption. We understand that being perceptive about organizational corruption is fundamental. This is especially true at managerial positions. A consistent approach to corporate ethics revision and application will go a long way to establish perception on organizational corruption. Perceiving corruption is not enough; the need to go further and concretely establish that the vice exists is the next step in probing. It is important to probe corruption while considering its two phenomena OCI and CO. Employees on noticing fraud have a moral obligation to raise this issue wherever channels are available to do so fearing no victimization. The employee’s beliefs and standards must supersede any other issue. Some organizational corruption scandals have been exposed through whistle blowing. Once one is aware of the presence of corrupt practices through probes they can then team together and protest. Protest can be effectively carried out in groups as opposed to individual. The protests may need to be carried on in a persistent manner. Nevertheless personal beliefs and integrity can go a long way to expose or eliminate organizational corruption. Bibliography Beenen, G. & Pinto, J 2009, ‘Resisting Organizational-Level Corruption: An Interview with Sherron Watkins’, Academy of Management Learning & Education, Vol 8, No.2, pp 275-289 Waller, Bruce N 2005, Consider Ethics: Theory, Readings, and Contemporary Issues. Pearson Longman New York. Konow, J 2003, ‘Which Is the Fairest One of All? A Positive Analysis of Justice Theories.’, Journal of Economic Literature, Vol 41, No. 4, pp 1188 Houndofzeus 2006, Free Essay Rawls Vs Nozick: The Necessity of Liberty viewed on13/03/2010, Cohen, Mitchell and Nicole, F 1996, Princeton Readings in Political Thought. Princeton University Press Princeton. Read More