Discuss about the Virtue ethics as a resource in business.
Ethics is the set of moral principles and standards that determine the everyday business decision. The ethical decision of a particular organization affects its business operation and the way it treats its employers, shareholders, customers and community in which it is situated (Ferrell &Fraedrich, 2015). The leaders of an organization need to start to behave ethically and morally and set the tone of an ethical business rule. Governance
The aim of this report is to discuss and analyze ethical theories in business and its relation to the characters of the leaders by literature reviews. The duties, responsibilities and roles of ethical leaders and the ethical dimension of their actions or decisions have been discussed in this paper. The report will explain the two characters of business leaders named Bernard Ebbers of WorldCom and Bernard Madoff of Bernard L. Madoff Investment Securities and their duties and ethical dimensions of their decisions or actions by applying appropriate ethical theories. The report will conclude with the responses to the discussions of ethical leadership and its application in the business operations.
Discussion of Ethical Theories
Ethical theories in business provide the base of the decision-making ability of the business leaders and when they act ethically, in any business operation, they become the moral agents and the other members of the organization follow them and respect their ethical decisions. The ethical theories provide the viewpoints from which an individual leader seeks guidance when he or she makes decisions (Wild, Wild& Han, 2014). The decision makers or leaders imply these ethical theories to reach in a set of common goals that the decision-makers pursue to achieve to become successful. Beneficence, respect for autonomy, least harm and justice are some of the goals that the leaders seek (Michaelson et al., 2014).
Cline (2014), has discussed one of the five broad categories of ethical theories in business operations, which include deontology. The business leaders employ the ethical theories as a guidance of decision-making. Using the ethical theories and different strategies of ethical application, the business leaders resolve the ethical dilemma (Bowie, 2017). The theories act as the guidelines for taking most ethical decisions in day-to-day business operation. The authors have broadly discussed the deontological ethical theory and its advantages and disadvantages in the business operations. This theory tells about judging an action based on the rules. In this theory, the rules act as the ethics as rules bind an individual to the duties. In business operations, the leaders need to follow the set of rules and ethics while applying the deontology (Cline, 2014). The leaders should take decisions in any business operation based on the rules or set of obligations where his or her actions or decisions are more important than the consequences. A leader who follows deontological theory could produce most unchanging decisions, as his or her decisions would be based on individual’s set duties.
Craft (2013), has discussed the positive and negative impact of the deontological theory in the workplace. There are many positive impacts of the deontological theory; however, this theory contains flaws. The author has successfully identified the flaws in this theory. There is no logical basis on which an individual leader’s duty can be identified. For instance, one businessperson decides that he will always arrive at the office in time; however, what is the logic for this obligation cannot be defined.
The major variation of this theory is that the duties or obligations are understood by using the reasons, which is proposed in the Kantian Deontology or common sense proposed by RossianIntuitionist Deontology (Bowie, 2017).
Hartman, DesJardins& MacDonald (2014), articulate another perspective of workplace ethics in the Utilitarianism theory. Each of the ethical theories is concerned with a particular perspective on right and wrong and good or bad. The famous proponents of the Utilitarianism theory are J.S Mill and Jeremy Bentham. In contrast to the deontology, it primarily focuses on consequences of a decision or an action. It is based on individual’s ability to comprehend these consequences. Utilitarianism is concerned with the maximum amount of benefits for a large number of people and that decide the ethically correct decisions (Shafer-Landau, 2012). The author has described the two divisions of Utilitarianism theory that affects directly for the workplace decision.
Utilitarianism focuses on the decision-makers’ acts, which would benefit the maximum number of people despite societal constraints or personal feelings (Ford & Richardson, 2013). On the other hand, the rule of utilitarianism focuses on the fairness of an act. It also works to benefit the maximum amount of people, following the fairest and justified means. Therefore, on the one hand, rule utilitarianism seeks justice and at the same time, it includes benefits to the maximum number of people (Albee 2014). However, leaders who follow utilitarianism theory could face challenges as this is based on the prediction of the choice of the leaders for the maximum number of people. Sometimes the choice might not be matched with the expected outcomes and thus, decision makers appear as unethical.
In contrast with the utilitarianism theory, egoism ethical theory focuses on the personal interest and self-gains. While utilitarianism emphasizes the benefits of the maximum number of people, egoism concerns with the self-interest of a person’s consideration. Utilitarianism focuses on maximize the overall pleasure and egoism focus on maximizing the individual pleasure (Broad, 2014).
Rachels (2012), has elaborated the egoism ethical theory in business in his book. Following the egoism theory, the leader should choose an action that conduces to his or her self-interest. The famous proponents of the egoism theory are Adam Smith and Ayn Rand. Ethical egoism is a self-centred theory, in which the doer of an action will own the benefits of the consequences of that action. Egoism, which contrasts to that of utilitarianism is agent-focused, that is it provides the subjective point of view of the ethical agent (Broad, 2014). However, on the other hand, utilitarianism is agent-neutral, as it does not treat the self’s or moral agent’s self-interest, however, it focuses on the well-being and interest of the others.
Shafer-Landau (2012), has discussed the effect of ethical egoism in the workplace. When a moral agent or leader chose ethical egoism as the basis of his decision-making, he or she does not make any harm to the well-being and interest of the others, rather he or she focuses greatly on the interest and benefits of himself or herself. The moral agent or ethical leader is not necessarily thinking about the interest and benefits of others. In that sense, he or she is selfish. The effect of the self-interest of an individual could be beneficial, neutral or detrimental to the others based on the actions he or she is doing (Broad, 2014). He or she cannot blame others for making any decision or doing any act. It is the sole responsibility of the moral agent or doer for any action or decision he makes based on the ethical egoism.
The care ethics sometimes has been seen as the supplement to the other ethical theories. Waller (2013), have discussed the care ethics broadly and its application in the workplace in his book Consider Ethics: Pearson New International Edition: Theory, Readings, and Contemporary Issues. The famous proponents of care ethics are Virginia Held, Carol Gilligan and Michael Slote. It talks about the ethical base of decision-making based on providing care for others. The vulnerable or needy group are in necessity of the care, thus, care ethics concerns for these groups mainly or the groups that need the support. The utilitarianism and care ethics are similar on the ground of valuing the emotions of the other groups (Broad 2014). Following the care ethics theory, the leaders could chose the action or make a decision that supports the other people and nurtures the other person’s emotions. Showing care towards the needy people or the people who need care is the basis of care ethics. The centre of the moral action is creating an interpersonal relationship with the others and showing benevolence or care. The vulnerable groups in consideration are workers, children and women (Hartman, DesJardins& MacDonald, 2014).
Aristotle proposes virtue ethics and it is one of the classical ethical theories, which is based on the socio-cultural construct of ethics. Russell (2013), has shown how the societal and cultural construct affects the individuals to chose what is right or wrong. It focuses on the individual’s character as the foundation of the ethical thinking, rather than the laws and rules of the acts, which is the basis of Deontology or the consequences of an action, which is the basis of Utilitarianism (Audi, 2012). The virtue ethics theory analyzes deeply about the individual’s character as the social and cultural construction. Ethics of an individual is constructed by the society and an individual decides good or bad based on the societal norms of the ethics. This is the basis of virtue ethics, which is different from other broad categories of the ethical theories such as, Deontology, Utilitarianism, Egoism and Ethics Care.
Application of Ethical Theories
WorldCom, which is the telecommunication giant, was accused in accounting fraud and for this case, the CEO, Bernie Ebbers was convicted and sentenced to jail for twenty-five years in 2005 (Yallapragada, Roe &Toma, 2012). He was accused of violating the ethics in the business operation and charged with eleven billion US dollars (Cronje, 2014).
The main reason behind this fraud case was the business strategies taken by the CEO of the company, Bernie Ebbers. Around the 1990s, he took strategies for achieving magnificent growth by acquisitions. In 1988, he adopted merger and acquisition strategy. By this process, the company merged with sixty other small and large companies (Searcey, 2018). On June 25 in 2002, WorldCom admitted inflating incomes by 3.8 billion US Dollars by applying improper accounting of expenses. On June 26, the American government lodged civil charges of fraud against the organization. On June 21, the company declared the bankruptcy (Moepya et al., 2015).
The ethical issues include violation of ethical, economic and legal responsibilities and destruction of ethical norms and values. The CEO of the company did not tell the truth, he violated the ethical norms of the business such as truthfulness and honesty (Tran, 2018). He was doing illegal actions. His decision regarding the merger led the company to the greatest bankruptcy in the US. The company had to face challenges due to unethical decision-making policy of the CEO (Yallapragada, Roe &Toma, 2012).
The unethical action could be described by the violation of the ethical theory such as deontology. In this theory, the ethics of the decision-maker is created by the rules he follows. The set of rules act as the ethical base of the decision-maker. In this case, of WorldCom, the CEO has violated the ethical rules proposed in the corporate ethics (Forbes.com, 2018). He did not follow honesty and legal means of the corporate rule.
In his character, the dimension of selfishness or personal benefits of the CEO led to the corruption of the agency could be described by the egoism theory (Searcey, 2018). In this theory, the decision-maker would only concentrate on the self-interest or profits of himself. In case of Ebbers, he has concentrated on his personal gains and profits. He did not think about the long-term benefits of the company or the growth on a long-term basis.
Apart from the Deontology and Egoism, he has violated other ethical theories such as Care Ethics or Utilitarianism theory. Ebbers saw the employees of the company as the means of production. He did not consider the employees as the part of the decision-making team. In course of personal gain, the CEO did not think about the well-being and profit of the employees, thus, violating the ethical rules of Utilitarianism and Care Ethics. Eve, the CEO has taken personal loans from the company’s finance (Cronje, 2014). Thus, he focused only on the personal interest by unethical means.
Madoff investment Scandal
Madoff was charged for money laundering case of his company, along with false statements, securities fraud, perjury, trust fraud, wire fraud and theft from the employees’ benefit plans 9 (Stolowy, 2014). The penalty imposed on him was one fifty years in the federal prison and one seventy billion US Dollars in restitution. He accused in March 2009 (Ragothaman, 2013).
His case was one of the biggest fraud cases in US history. Madoff induced thousand of investor to submit their savings and he falsely promised to them that he would provide them with a consistent profit in return. When he was caught, he was accused of eleven fraud cases and several money laundering cases, theft and perjury (Sander, 2013).
The ethical issues of the decision-maker, in this case, are related to the violation of Deontology. The chief manager, Madoff of this company violated the basic ethical rules in business. He profited from the benefit plans of the employees of the company (Reuters.com, 2018). The act of gaining benefits from the employees’ plan has made him as an unethical leader in the company (Theguardian.com, 2018). He has not only violated the ethics of Deontology, rather he has violated Utilitarianism, Care Ethics, Virtue Ethics and even the egoism. Critics could find similarities of his action with the egoism ethical theory, however, in the egoism theory; there is no mention of gaining personal profits by the unethical means.
Apart from Deontology, he also violated ethical issues such as Utilitarianism, Egoism, care ethics and virtue ethics. He did not think about his employees in his firm. He used his employees as only the means of production. He even benefitted from his employee's schemes without knowing them. He violated Utilitarianism ethics. He did not think about the benefits or well-being of his employees. He only focused on his own benefits using the unethical means (Economist.com, 2018). He even violated the egoism ethical theory, as he was too self-centred; however, he gained his profit for creating harms to the other people. He used many unethical means.
He violated care ethics and virtue ethics too. In care ethics, it is said that the decision-maker should be caring for the vulnerable groups like workers. On the other hand, the decision maker, Madoff was not at all caring towards the workers of his company. He exploited his workers (Wsj.com, 2018). He never thinks about benefits of his workers. Even the investors, from whom Madoff took the money, was being exploited by the decision-maker, Madoff. Madoff said one type of schemes to his investors, on the other hand, he was pocketing a large amount of money for himself from these investor’s money by falsifying those investors.
Madoff has violated even Virtue Ethics. In the Virtue Ethics, it is said that individual is the construct of the society. Applying the theory, Madoff is the construct of the society and societal values. However, it is most unimportant to say and analyze the social context of the Madoff. His guilt cannot be justified by his societal construction. Whatever, his society may be, he has done unethical deeds and for this, has to face some legislative actions. He was not transparent and unethical. Madoff’s case has become one of the invaluable lessons to the students, entrepreneurs, investors and businesspersons regarding the corporate ethics, governance, social responsibility and organizational behaviour (Nytimes.com, 2018). His action was never driven by honesty, courage, justice or temperance. However, at times he showed honesty before his family members when he was already caught by the police for his fraudulent activities. In the light of virtue ethics, Madoff was the failure. At the end, in the conflict of common or greater good, crude individualism sustained in Madoff’s case.
It can be concluded by stating that details of ethical theories had been discussed in the paper. The report also analyzed the ethical theories and its application in decision-making in the workplace. The five broad theories of ethics are discussed in details. The decision-makers sometimes follow only one particular theory and reject the others. On the other hand, sometimes, they follow two or three theories at the same time, depending on the situation of the workplace and the necessity of an ethical action. The ethical theories that have been discussed in the paper include Deontology, Utilitarianism, Egoism, care Ethics and Virtue Ethics. Any leader follows these ethical theories would be affected by his decisions and actions. On the other hand, the decisions of an ethical leader would directly influence the business operation of the firm. The success of the business operation of any firm would be determined by the ethical actions of the moral agent. When a leader follows the ethical action, he becomes the moral agent of that particular organization. The moral agent needs to be strictly ethical and the ethical action would be initiated by him.
The leaders who had already violated the governance ethics and corporate laws have been described in the essay by a detailed description. They did unethical acts and for this, they are caught by the legislation. They could be the examples of unethical actions and future generation could learn from their actions. They could be an example to the future generation in negative ways for not following the ethical rules of the corporate governance and the theories of the ethics.
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