Focusing on profit often becomes the must-have among many executives and business managers.
There are a wide range of business ethics issues. These problems, however, usually start with five main questions. In business school, students generally learn a set of concepts considered essential for corporate responsibility, although following these concepts creates ethical dilemmas. These ethical dilemmas create tension in the application of business ethics due to inherent contradictions. Various types of problems arise from these contradictions arising from essential corporate responsibilities to include issues with stakeholder equity, focus on profit, quantitative emphasis and accounting for externalities, as well as the very interpretation of corporate responsibility.
Stakeholder equity is a business ethics issue because managers and executives are often under pressure to put most of that equity with shareholders, often at the expense of other stakeholders in the organization. For example, a company may be pressured to pay millions in dividends to its shareholders in a given year, but to make that payment the company may need to downsize its workforce. Such a decision creates an ethical dilemma because one stakeholder takes precedence over another without justification. Arguably, the workforce and shareholders contribute equally to the corporation, while both have an equal stake in the organization.
The focus on profit, therefore, often becomes the must-have among many executives and business managers. Creating solid, sustainable profits rarely produces business ethics issues, but many companies emphasize profit to the point where stakeholders are adversely affected. Problems of this nature manifest themselves in the generation of profits through reduced quality, in the creation of profits through the reduction of operating expenses that result in not meeting the needs of consumers, and in the retention of more profit through the reduction of salaries and benefits of employees. employees or the cutting of some compensation measures in the aggregate. When some stakeholders profit at the expense of other stakeholders, a contradiction in business ethics arises in which profit maximization appears to encourage greed rather than prudence, questioning whether even the company’s interest is served in the long run.
Quantitative emphasis also tends to create many kinds of problems in business ethics, since while many kinds of decisions can be quantified, many cannot. Costs can usually be attributed and quantified, but benefits are much more subjective. Therefore, when business decisions require a focus on quantitative data to make decisions and avoid the arduous task of considering other benefits that cannot be measured directly, ethical questions tend to present themselves. Consider, for example, a company tasked with deciding whether to implement a security program. Managers and executives face the ethical dilemma of justifying an expense that can generate profits or implementing a program with potential benefits to the organization that they cannot quantify.
Externalities also present business ethics problems, simply because balance sheet numbers don’t always tell the whole story of a company. Defined as a liability that is not on the company’s financial records, externalities may not even be seen, or considered, as a liability, as they are not on the record. Still, liabilities can exist regardless of whether they are recorded or not. Many decisions involve externalities such as environmental damage caused by production, health problems caused by a lack of adequate scientific research before launching a product on the market, and social problems caused by business decisions that neglect social impact. Businesses that fail to account for their actions – other than the direct impact on the objective of maximizing profit for shareholders – create numerous ethical dilemmas for managers and executives.
Corporate responsibility often entails actions and decisions that are in the best interest of the business. Interpretation of that mandate is of vital importance, because if the focus is strictly on generating quantitative results designed to maximize profit in the present as the best interest of the business, then the business runs the risk of forfeiting not only its own future, but the future of many, if not all, of its stakeholders. Given the ethical issues faced with contradictory mandates and external realities, managers and executives face hard questions they must not only ask, but diligently seek for the right answers. Overcoming problems in business ethics means recognizing those contradictions and understanding why they exist and how to best apply ethical solutions to minimize harm to all stakeholders — not just a select few — as well as the social environment at large.