Organizations Losing Their Reputation - Term Paper Example

Management Based Research Problem Name: Course: Tutor: University: City and State: Date: Management Based Research Problem Introduction Recently, there is an increased focus on the conduct of businesses globally with the society more concerned about business practices than ever before. Many people, inclusive of the developing world, have realized the potential that big corporations and businesses have in many aspects of life. To this regard, many cases of unethical behavior have increased over the last few decades especially with accelerated globalization. In addition, conduct of business determines its corporate image, which subsequently affects the success of and firm. When engaged in unethical conduct, businesses lose the trust from stakeholders, which could lead to reduced performance. Background Ethics have become increasingly important in business for several reasons. One of them is attracting investors to the company, attracting customers for the firm’s products, attracting highly talented employees, retaining and establishing loyalty of existing staff. In addition, it ensures that organizations act within moral values that benefit people instead of hurting. Such reasons and the ability of people within the society to coordinate actions against unethical business practices using internet and other sources of information has made it possible for businesses to lose its reputations globally (Kibert 2012). Summary of Article The article gave examples of organizations losing their reputation such as ANZ Westpac, National Australia Bank and the Commonwealth Bank, which recently have had to defend themselves over allegations of unethical practices in overseas markets, such as Cambodia. Some of these practices as reported in the news article, Banks Accused with Unethical Overseas Practices by Abby Dinham, include land grabbing, exploitation of child labor and unapproved logging. In their practices to develop the area, the banks have hurt so many people who have been forced to vacate their land, while some of the children are risking educations. In addition, by logging the forests to clear land for agriculture, they are damaging the environment, which is a major global issue (Dinham 2014). These practices have seen activist groups engage in a battle to stop the four biggest Australian financial institutions from ruining people’s lives in other countries. Although the four banks have engaged in other corporate social responsibilities including funding development projects other countries, they have remained under tight scrutiny from activists and general population. Currently, the main problem is arising from funding the projects that have contributed to unethical practices in the developing areas in Asia. According to Dinham, “An Oxfam Australia report claims that ANZ, Westpac, National Australia Bank and the Commonwealth Bank are affiliated with organizations reportedly involved in illegal logging, forced evictions, inadequate compensation and child labor,” (Dinham 2014). This report will examine the four banks that are under scrutiny in the overseas market as reported in the news article using ethical theories and steps in solving the problem facing the management. The ethical theories involved are relative ethics theory, universal ethics, utilitarian and care ethics. In addition, it will address several steps that management of the four banks could use in solving the problem. The theories act as qualitative research methodology for examining the current situation. Literature Review This literature review will offer an overview of ethical theories that management can adopt to help them in making decisions. As aforementioned, ethics are very important in business. Today, they influence the ability of a firm to make profits, considering they contribute to a good reputation that people can trust. Ethical theories that will be used to analyze the situation are as mentioned above, which shall be discussed individually for clarity. Relative Ethics Theory Relative ethics theory argues that ethical of moral values are relative to different cultures and norms. For instance, in some countries, people accept child labor as customary while others practice female genital mutilation. These practices are considered unethical in modern world, while several decades ago it was not an issue. Relative ethics theory focuses on the source of right or wrong (Lee 2002). It seeks to find out what qualifies a certain value as moral or immoral. Mizzoni cites that, “Ethical standards seem to change, and there is so much disagreement between cultural practices that ethical relativism, the view that right and wrong are always relative, seems justified, (Mizzoni 2009, pp. 9). Proponents of this theory emphasize on different ways in which people make judgment, circumstances and cultural backgrounds, as well as traditions. This theory is very important in helping one to understand why some practices are conducted in different areas while government authorities do not intervene. In addition, this theory evokes people to consider whether there are any universally accepted ethics. The truth is that it is hard to find out (Velasquez, Andre, Shanks & Meyer N.d). Universal Ethics While relative ethics theory emphasizes that right or wrong is always relative, universalism believes that ethics are universal, meaning that right and wrong does not vary across different societies (Lee 2002). This theory purports that ethics apply to everybody in the same way irrespective of differences in societies. To this regard, it opposes relativism. This theory is derived from John Locke who said that there is a law of nature that governs every person, which is reasoning that teaches all human beings are equal and none should harm the other. According to Mizzoni, “… universalists contend that there are at least some ethical values, standards, or principles that are not relative,” (Mizzoni 2009, pp. 10). Therefore, the theory claims that any wrongdoing cannot be justified by societal beliefs and traditions. In the example of female genital mutilation, it would be wrong anywhere. It would suggest that people should use logical thinking to realize that it is morally wrong to conduct such practices. It does not recognize the different ways people within various societies and circumstances make judgment. Universalism is focused on human nature and their ability to reason (Mizzoni 2009). Utilitarian Theory Utilitarian theory or utilitarianism purports that what matters in ethical issues it the amount of happiness and suffering that can result. Therefore, making decisions should be based on the best outcome for the majority, where happiness is maximized while suffering it minimized. It does not consider the traditional morals a society may have. Under this context, it can ignore beliefs and norms of a society if the decision made achieve more happiness than suffering for the majority. The main aim is to identify and analyze all the alternatives available to every situation. The one that maximizes on benefits and reduces the negatives should be the one taken (Mizzoni 2009). Under this theory, it could mean that no matter how morally wrong a decision might seem, as long as it provides the greatest benefit it should pass. It is no different from democracy, where majority win. Therefore, it is solely based on the consequences of choosing between more than one alternative. This allows utilitarianism to disregard individual interests while considering all the parties that are involved. Primarily, it helps in eliminating selfish decisions that benefit only a few while majority are left to suffer. Care Theory The final theory under this literature review is care ethics theory, which unlike others, focuses on the feelings of people. This theory recognizes that people have emotions and are relational (Zerbe, Härtel & Ashkanasy 2008). Therefore, it emphasizes on establishing, building, strengthening and maintaining relationships with other people. It purports that the way to act right and morally is by caring for other people. By establishing relationships, the parties to an ethical issue can be ready to come together for negotiations. It allows all parties to be considerate of each other. This can foster agreements between the parties just as contract ethics. However, unlike contract ethics, that considers agreements prior to anything else; care ethics consider relationships first, which subsequently bear agreements. Five Steps of Solving Ethical Issues While the theories of ethical decisions are used in deciding the criteria for action to take, this five-step model provides a detailed overview of the actions involved in analyzing the situation. For instance, for one to use utilitarian theory, it is necessary to understand the problem fully. The five steps model it the tool for helping a business in identifying an ethical issue. The five steps involved in this model include problem awareness, problem definition, decision-making, implementing action plan and following through. The first step involves establishing trust, stating objectives, assessment of the situation and identifying problems. This is followed by problem definition, which involves analyzing and agreeing which problems needs to be solved (Butterfield 2013). The third step, decision-making involves establishing a criterion for making decisions, developing and assessing alternatives and deciding on one plan. This is where theories do be used are decided. The fourth step is implementation of the action plan, which involves issuing tasks, establishing a schedule and activating the plan. The final step is follow through where a criterion for success is determined, indicators of performance defined and result monitored and corrections undertaken where necessary. Although not all the details may be relevant in every situation, majority of them are the basic rules of solving problems (Butterfield 2013). Methodology The issues and allegations against the four Australian banks in overseas countries were analyzed using the four theories to determine criteria for actions. Each issue, land grabbing, child labor and unapproved logging was analyzed under all the four theories. This would be necessary to find out the best course of action to take. However, before analyzing these issues using the four theories, the first two steps of the rational decision-making model must be considered, which start with problem awareness and definition. The third step will follow, where the theories come in to determine the criteria for action, which is then followed by the fourth and fifth steps. Analysis The first step of the rational decision-making model is problem awareness. In our case of the four banks, it is evident that by funding projects undertaken by unethical companies has put them under scrutiny. The banks may not have been aware that the problem existed considering they had no relationships with the people who were affected by the unethical practices. They are third persons in the issues considering they have only funded companies. The banks should establish trust with the affected people in order to solve the problem. This would also help in knowing the real problem. Additionally, they should set objectives for funding projects. Finally, it should assess the situation to identify the problems. The second step of the model is problem definition. The most important factor in solving a problem is identifying it. This is not always obvious. However, in the case of the banks the problem is easy to identify. The main problem may not be the land grabbing or child labor alone. Considering the banks have not been involved directly, their main problem does not know the business partners. They lend funds to companies that engaged in unethical practices. However, considering the problem has already alleviated, the banks will e involved. This step will also involve analyzing the problems identified (Tricker & Tricker 2014). One of the main issues is lack of open communication between the companies lend the money and the banks. This resulted in bigger problems, which include child labor, land grabbing and unapproved logging as aforementioned. In addition, many families have been evicted from their homes, with nowhere to go while the unapproved logging is damaging the environment. The third step involves establishing decision criteria, which is done by analyzing the problems using the ethical theories. Utilitarian theory seeks to maximize the benefit while minimizing the negative effects (Melden 2008). In the problems identified above, the main benefit is developing the overseas countries. This has the potential to improve the economy of the countries involved. In addition, they are creating jobs for the locals who mostly relied on farming. However, this is at the expense of evicting families from their homes. Many are let with little means of livelihood. Furthermore, children are being exploited for labor, which is risking their education. The logging projects have the benefit of generating revenues, but to damage the environment. Under this theory, the action would be to stop the projects because they are likely to cause more negative effects than benefits to the locals. Under relative ethics theory, the only relevant problem is child labor. In these overseas countries such as Cambodia, child labor is traditionally considered customary. This allows children to undertake full employment in companies, which in other societies is considered unethical. Going by the relative ethics theory, there is nothing wrong with child labor where t is accepted (Melden 2008). Conversely, the universal ethics theory holds that moral issues are the same irrespective of society norms. Under this theory, child labor is unethical everywhere including countries where it is customary. Therefore, the action would be putting it to an end. The final theory is care ethics, which seeks to establish relationships. Under this theory, the banks should establish and build strong relationships with the affected people. It should be concerned about their welfare, meaning they should not engage in practices that affect the local people. It should sit together with them to come up with solutions to the issue. The solution can be agreeing to purchase the land and relocate the farmers to other areas, where their lives are not affected. This theory analysis should be followed by assessing the alternatives and activating the decision plan. The fourth step is implementing the action plan, which should start with assigning tasks to the involved parties. It should also involve setting a schedule for achieving the objectives. The fifth step is following through, where the banks should keenly ensure the action is implemented. This involves establishing a criterion for success. In the issue f land grabbing, the banks should set a goal of the number of people to relocate or compensate within a given time, reduction in logging and reduction in the number of children working. This should be followed by close monitoring to ensure everything goes according to plan. Incas there are issues arising; they should be ready to respond (Tricker & Tricker 2014). Conclusion The four Australian banks allegedly involved in unethical practices through funding other companies should be ready to help in eliminating the problem in order to avoid ruining their reputation. The issue as discussed can be analyzed using the four ethical theories, relative, universal, utilitarian and care ethics. In addition, the rational decision-making model should be used for details on taking action. The problems associated with the issues should be stopped as indicated in the analysis. Bibliography Butterfield, J 2013, Problem solving and decision-making, Mason, Ohio: South-Western. Dinham, A 2014, Banks Accused of Links with Unethical Overseas Practices, viewed May 13, 2014, at http://www.sbs.com.au/news/article/2014/04/28/banks-accused-links-unethical-overseas-practices Kibert, C. J 2012, Working toward sustainability: Ethical decision making in a technological world, Hoboken, NJ: Wiley. Lee, D. E 2002, Navigating right and wrong: Ethical decision making in a pluralistic age, Lanham, Md: Rowman & Littlefield. Melden, A. I 2008, Ethical Theories, Englewood Cliffs, N.J: Prentice-Hall. Mizzoni, J 2009, Ethics: The basics, Chichester, West Sussex, U.K: Wiley-Blackwell. Tricker, R & Tricker, G 2014, Business Ethics: Uniting corporate governance and risk management: A stakeholder, governance and risk approach, Hoboken, N J: Taylor and Francis. Velasquez, M, Andre, C, Shanks, T & Meyer, M J n.d, Ethical Relativism, viewed May 13, 2014 at http://www.scu.edu/ethics/practicing/decision/ethicalrelativism.html Zerbe, W J, Härtel, C E J, & Ashkanasy, N. M 2008, Emotions, ethics and decision-making, London: Emerald. Read More