Hypocrisy in Behavior Regulation, Term Paper Example

Introduction

Within the last decade, there has been several scandals that have hit the media that have not only deterred the public from trusting corporations, but also forced the government to implement new regulations and policies to prevent scandals and unethical behavior from happening. The recent scandals in Enron, Arthur Anderson, WorldCom, and countless others, that have made us questions the ethical behavior of leaders within corporations. While the mention of these businesses drew the picture of success and global business savvy, it now conjures up discussion of ethics and greed. A major issue in the field of business ethics is the delegation of rules and the parties that are responsible for following these rules. While the SEC and other agencies have strived to implement ethical policies that employees need to follow, business leaders who promulgate rules regulating behavior typically do not follow them, such as in the case of Bernie Ebbers and Bernie Madoff. It is necessary to define the ethical responsibilities for top business leaders in their companies, because unethical or unchecked behavior can lead to consequences in which people choose profit over honesty. Although the responsibilities of CEOs, presidents, board members, and managers are unique due to hierarchical differences, it is essential to emphasize ethical obligations at all levels.

It would be useful to analyze leadership ethics as it pertains to concepts of corporate social responsibility and moral boundaries. Corporate responsibility is to increase profits for the organization. It also consist of having the interest of the shareholders, but also to engage in activities that contribute and protect the welfare of society. Violation of these basic expectations has contributed to controversies and negative attention towards the companies’ responsibility. Many leaders have forgone the efforts of corporate responsibility and instead focused on increasing their own personal gains. In order to understand the importance of these concepts of corporate social responsibility and moral boundary,  controversies that should be considered in regulating leaders’ behaviors include violation of employee’s rights, discrimination in the job, whistle blowing, and confidentiality. In doing so this paper will provide an overview of how a code of ethics that both leaders and employees should follow.

Business Leadership Ethics

Business leadership ethics are difficult to define because there is no clear way to define what is right for each individual. However, it is necessary that their actions should be ethical and legal. As such, business ethics can be broadly defined as practices that are legal and those that are done with good intent for employees and customers. More importantly it is the principles that are applied within the business setting in regards to ethical or moral problems that may arise. More or less, the SEC has implemented several standards and regulations that are requirements for all businesses to follow. These laws are placed to influence good ethical behavior and leadership, which guide leaders to make the right decisions. Right, however, is left to the individual which infuse different cultures, religions, and ways in certain situations. Within a business setting, there are certain rules and guidelines that need to be followed, however, they must be enforced from the top down. Leaders must follow a set of ethics in which helps them make the right decisions.  According to experts that follow business leadership, ethical behavior is a reflection of the value systems that are learned from a comprehensible perspective of the world, which is based on equity, a sense of obligation, the needs and rights of others, and the genuine needs and principles of the society. Ethics are based on social norms or logically coherent philosophical principles that direct or guide a person’s behavior and decision making

According to the philosophical concept of deontology developed by Immanuel Kant, ethical actions are those that are done with good intent, even if the actions result in negative consequences (Cavalier, 2002). Taking a Kantian perspective on business leadership ethics, Kant has set to define in his notion of duty, there are difference in “I ought” which is ethics, and “I want” which is for a person’s own self-interest. Business leaders’ ethics should follow the notion of duty where actions should be done from a sense of duty, instead of conformity (Cavalier, 2002). In doing their duty, ethics can be based on set of generally accepted factors that most rational people can agree. Those factors and principles include, impartiality, honesty, avoiding harm to others, fairness, taking responsibility for actions, and putting the greater good above self-interest. In regards to ethical behavior of leaders, their behaviors must reflect an environment where everyone is treated fairly. In the workplace, employees are entitled to certain rights, including overtime, protection against sexual harassment, and rights against age, religious, and racial discrimination. Unethical leaders are those that choose to mislead the public, encourage dishonesty in their practices, and facilitate a work environment in which people are afraid to question authority.

What many studies and research have concluded is that behaviors displayed by the leaders are influential in the conduct of the business’s employees. That means that unethical behavior by top management is reflected in the way that members within the organization treat others (Knights, O’Leary 2006). In a workplace that consists of many employees that come from different background, and have different values and moral systems, it could be problematic to the members and to the overall organization. In order to be successful in this competitive landscape, managers and leaders must implement a set of ethical standards and policies that does not override the rights of employees. The specific guidelines that dictate the outline rights of the employees according to the law differ by each state. Employee discrimination law is a collection of federal and state laws that protect employees from discrimination based on certain characteristics. These are essential in organizational hiring, recruiting, promotion, training, disciplinary actions, and compensation. Since the Constitution does not directly address the laws and problems of employee discrimination the states have legislation that protects the employees’ rights, and extend to other characteristics that include age and sexual orientation, there are instances in which employers can circumvent these laws.

While employees are required to be treated fairly in the workplace, employment-at-will is a federal law that indicates that employers have the right to fire their employees for any reason (Feinman, 1976). Many in the legal field see that practice as unjust. It can allow employers to deny the dismissal of certain rights that regular employees are protected from. There are many exceptions to which an employee can be fired, but in the case of unethical behavior by the employer, employers cannot force employees to commit the same acts. In that regard, employers cannot fire employees that choose not to act in the same manner. However, there have been several instances in which the employer, has made the workplace difficult by pressuring employees to following in the same process, and therefore, implementing an unethical code of behavior. Many individuals believe that this should not be done for controversial reasons, and this has led to adjustments to the law that cite specific exceptions. There are only seven states with exceptions to the at-will law, leaving the rest open to employers to interpret. These exceptions center on implied contract, a covenant of god faith, and public policy. The public policy helps to protect employees from actions that would violate the public interest, while implied contract can be argued by the employee in which they feel they have a long term contract with the employee. A covenant of good faith tries to protect employees from being fired out of not to pay benefits. This law has provided many loopholes for business leaders. Many employers can terminate employees’ jobs because they did not follow the “rules” established in the workplace. These rules can be contradictory to the law, and can be a tool for oppressiveness, which tips the balance of power in the workplace. At-will employment exploits the vulnerabilities of the employee, and enforces the prerogative boundless behavior of the employer. In the exquisite of the business environment which has given way to leaders employing unethical behaviors in the workplace, at-will employment has created an illegal dominion, in which leaders have limitless flexibility and autonomy to manage costs and labor without the legal standards of due process of just cause workplace employee firings. More critically, at-will employment has effectively absolved employers and leaders from responsibility of consequences of their behavior.

A recent publication in Forbes provides suggestions as to how business leaders can strive to achieve ethical behavior. This advice includes the need to establish what the individual company defines as ethical and to put a structure in place that ensures it is adhered to; a checks and balance system that would ensure that even top executives are adhering to company business ethics.  (Bailey, 2013) Leaders create a standard in the workplace for members to follow. It is necessary to establish a policy that incorporates guidelines on ethical behavior according to the law. Leaders have the responsibility to society at large to treat everyone with fairness and integrity. Bailey points out in his article, that businesses have suffered from an ethical drift which has gradually lowered their moral standards. (Bailey, 2013) Leaders have placed profit as a priority, and blurred the lines between what is right and what is wrong. This is added to the shift in the ethical framework that has placed the leader’s ego and power as a justification of their behavior.

While the government and other agencies have implemented legislation and policies that try to regulate the behaviors of these leaders, rules have often had loopholes that allow leaders to circumvent the system. Instead, as Bailey, insist there must be a restructuring of the ethical framework that allows leaders in the organization to go through a series of reasoning. These include, recognizing that in every action, there is a reaction. It is up to them that in a situation, they must make the right ethical decision. While many have an attitude that means to not get involve, for the sake of keeping their employment intact, there are others that take the risk and report it. (Somers, 2001)  In every situation, leaders should decide which ethical rules apply. These qualities in leaders are important in the decision making process. Managerial judgment is significant in situations where an ethical concrete solution is needed. In such ethical dilemmas, it is where some leaders falter, in deciding what the right decision to make. In employing a policy and credo, is only useful if implied in real life situations where everyone is in agreement (Stevens, 2007). When employees are faced with the dilemma of reporting their organization and conforming to what management is doing, they and organizations must prepare for the repercussions. Leaders must act as leaders, and lead the organization into a direction that reflects good judgment, fair practices, and ethical behavior. Organizations have a corporate responsibility follow the legal requirements, a consideration of ethical values, and a respect for the environmental and cultural factors within the business environment. Corporate responsibility not only influences society’s trust in the organization, but it also promotes an ethical corporate culture in which many corporations that have been in the headlines were lacking.

Situation Analysis

There is no shortage of examples of corporations that were not only practicing unethical conduct, but instill an environment in which employees reciprocated the actions of the leadership. A specific example of scandals that could have been avoided if ethical practices were followed include the Enron scandal. Enron, had a code of ethics that were implemented into the company, however, the lacked an ethical corporate environment. Throughout the 1990s, Enron, made several unethical and illegal accounting frauds procedures. Through several revelations, including Jeff Skilling’s convincing of federal regulators to allow Enron to use the accounting method “Mark to Market” that helped to mask Enron’s real numbers. Enron was able to inflate their revenue numbers, and manipulate projections for future revenues.  This was also aided by Arthur Anderson that covered up the crimes as well as for another major company. The corporate culture was so warped that the heads, convince the company’s accountant, and the general tax counsel that the Enron was able to make money without having to report it in their taxes. The lack of corporate governance and ethics helped pave the path for the leaders to make several acquisitions that were not in the interest of their shareholders. On top of their countless acquisitions, they were placing off sheet balance entities to move the debt off, and transfer their risks to other ventures. This helped to maintain their high credit rating, and keep their stocks profitable.

However, Enron was not alone in their fraud activities, and unethical behavior, as Tyco, WorldCom, and other companies cooked the books and pressured employees to follow along in the unethical behavior of the top management. WorldCom and CEO Bernie Ebbers had the freedom to make rapid mergers that masked the amount of money the company was losing. More specifically, WorldCom inflated revenues using corporate unallocated revenue accounts, and booking line costs as capital expenditures instead of expenses on their balance sheets.  It is reported that Ebbers inflated assets by over $11 billion, throughout their 90s to the 2000s. Tyco International’s CFO and Chief Executive were accused of stealing over $150 million from the company, and defrauded shareholders of billions of dollars, by cooking the books. Leaders such as this work to only fatten their profits by elevating prices to customers, while taking kickbacks from other companies, and defrauding shareholders.  In order to have avoided these misgivings, leaders should have implemented and followed ethical codes of conducts that would help helped save them from these consequences. Proper ethical management would have ensured that the company was able to detect the detrimental impact that the CEOs action would cause (Silverstein, 2013). Ethical management begins in the top up, and is seen in the company’s corporate governance that helps monitor activities, resolves conflicts of interest, and keeps the interest of the shareholders in perspective. As Silverstein points out in his article, when there is money to be made, there is no shortage of leaders trying to circumvent the laws, or develop schemes that will stop them from crossing ethical boundaries (Silverstein, 2013). While Enron and others will not be the last leaders acting unethically, there are certain ways in which their behavior can be regulated.

Conclusion

There are several ways in which leaders’ behavior can be regulated, at least in regards to the letter of the law. When businesses act unethically thousands of people lose, including employees, shareholders, and the public. It is essential for companies to develop whistleblower programs that will ensure its actions remain legal and beneficial to the company’s stakeholders (OSHA, n.d.). Whistleblowers help bring attention to potential wrongdoings in their organizations. Many are employees that are willing to place their character and professional occupation on the line to forgo participating in fraudulent, harmful, an unethical behaviors perpetuated by their leaders. Programs must be instilled to protect them, and by doing so place integrity on their business practices. Before ethical behavior can be implemented, a company must define a code of ethics. The code should be developed using input from employees across a variety of positions and levels. Code of ethics are not just a piece of paper but instead, they are practical approaches in which implement the correct line of action to be taken in real life situations. These are critical to ensure each situation be addressed and handled in a holistic approach, to ensure a strong ethical framework in the organization.

References

Baily S. (2013). Business Leaders Beware: Ethical Drift Makes Standards Slip. Forbes. Retrieved from http://www.forbes.com/sites/sebastianbailey/2013/05/15/business-Leaders-beware-ethical-drift-makes-standards-slip

Cavalier. (2002). Kant’s Ethics. Retrieved from http://caae.phil.cmu.edu/cavalier/80130/part1/sect4/Kant.html

Feinman JM. (1976). The Development of the Employment at Will Rule. The American Journal of Legal History. (20)2: 118-135.

Knights, David, O’Leary, Majella. (2006). Leadership, Ethics, and Responsibility to the Other. Journal of Business Ethics. 67: 125-137. Retrieved from https://brainmass.com/file/1368876/Leadership,+ethics+and+responsibility+to+the+other.pdf

OSHA. (n.d.). Whistleblower Protection Program. Retrieved from http://www.whistleblowers.gov

Silverstein K. (2013). Enron, Ethics and Today’s Corporate Values. Forbes. Retrieved from http://www.forbes.com/sites/kensilverstein/2013/05/14/enron-ethics-and-todays- corporate-values

Somers, Mark Jones. (2001). Ethical Codes of Conduct and Organizational Context: A Study of the Relationship between Codes of Conduct, Employee Behavior and Organizational Values. Journal of Business Ethics. 30. Pg. 185-195. Retrieved from http://www.agsm.edu.au/bobm/teaching/BE/papers-pdf/Effectiveness%20of%20codes.pdf

Steven, Betsy. (2007). Corporate Ethical Codes: Effective Instruments for Influencing Behavior. Journal of Business Ethics. (2008) 78:601-609.