Ethics
Introduction
Lately ethical issues had become more popular in business environment. Interestingly, more often companies from different business fields encounter ethical issues. Lately, more newspapers describe ethical dilemmas people and organizations face. Ethical misconduct has become a serious concern in business nowadays. It is necessary to know how to abide ethical principles in order to save positive image of the company.
The ethical problem is not new since long ago Milton Friedman said: “make as much money as possible while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical custom”. He emphasized the necessity to achieve a balance between personal motives and public interests.
This paper is devoted to consideration of how two different companies managed ethical crisis they encountered. Also, advantages and disadvantages of ethical and unethical policies are described.
1. An Example of Unethical Company
Analysis of the ethical cases shows that there is no corporation or a firm which is insured against ethical dilemmas. Chevron Corporation is the second integrated energetic company after ExxonMobil in the USA and one of the largest companies in the world. The company took the fifth place in the Fortune Global 500 in 2009.
At the same time Chevron is famous for its Ecuador lawsuit. Ecuador case is also called “Amazon Chernobyl” and occupies the third place between the most unethical companies of the world.
Chevron Corporation was accused of being unethical because Texaco (Chevron’s acquisition), which operates in South America, caused harm to Amazon waters and rainforest. However, Chevron denied the fact of poisoning Amazon’s waters and had lodged an appeal.
Chevron was incriminated making harmful environmental influence when Texaco dumped 18.5 billion gallons of toxic water into the rainforest during the period from 1964 to 1992. Meanwhile, the Company concealed the fact of poisoning environment claiming that there was no harm caused instead of making attempts to improve the situation. Texaco declared remediation of the damage caused by “waste water”, but, in fact, the remediation covered less than one per cent of the damage. Soil samples showed significant contamination after remediation was carried out.
It was also proved by the scientists that toxic “waste water” posed health risk while Texaco stated the opposite. Scientific studies have found that there was a high cancer rate in the region where Texaco was operating.
In addition, Texaco violated Ecuador laws dated back to the 1920’s during its operational practices. The company placed false information about the real situation that occurred stating that all the accusations were fabricated and Ecuador Trial Court was biased against Chevron.
Besides, Chevron tried to undermine plaintiffs’ rights and attacked judges and journalists who consider that Court-appointed experts were qualified and neutral. It is obvious that Chevron’s respect of human rights in Ecuador is questionable not taking into account violation of its own ethical code.
2. An Example of Ethical Company
As ecological issues are becoming more topical nowadays, public and organizations’ attention is drawn to the problem of environment pollution and ecological consumption. Public interest shifted from financial aspects of ethics to environmental sustainability of the companies. In this respect Adidas worth to be mentioned as the company which is in the list of the most ethical companies of the world.
Adidas is considered to be the most ethical company because it struggles with poverty demonstrating active sponsorship position. Thus, Adidas launched a pilot production of the €1 trainers in Bangladesh. German sport giant is going to provide millions of people in Bangladesh who cannot afford buying expensive sports wear with its trendy trainers. This path will help to strengthen brand name of the company and to declare social responsibility of the company all over the world.
Another ethical approach used by Adidas is that the company wants to make sure that the cotton it uses for production of sportswear is sustainable and the farm where the cotton grows does not make any harm to the local people who harvest the cotton and the environment. For this purpose the company made a plan under which Adidas will entirely switch to sustainable source of cotton by 2018.
One more reason why Adidas can be considered the ethical company is that it makes attempts to implement ethical approach in every field of its activity. Adidas plans to source cotton through the Better Cotton Initiative (BCI). BCI is an organization which controls procurement of cotton from sustainable sources. Besides, the organization also controls purchasing cotton from ethical farms which do not use low-paid or child labor. The company is going to implement the same approach with its leather procurement. In addition, Adidas plans to significantly reduce water and power consumption by 2015.
3. Advantages of Ethical Behavior and Disadvantages of Unethical Behavior for the Companies
Needless to say that abiding ethical code is an absolute priority for the company which is running fair business. Maintaining proper relationship between stakeholders and the companies is very important for prosperity and good reputation in a highly competitive environment.
Compliance with ethical code includes the following steps:
- ethical attitude to employees (fair wages, social guarantees, healthcare, appropriate pension plan, avoidance of using child labor in the production process);
- sponsorship activity (struggling with poverty, helping non-profit organizations such as hospitals, orphanages and seniors’ centers, participation in various social events);
- producing sustainable products and utilization of ecological materials in production process (avoidance of environment pollution, utilization of sustainable resources for production);
- using fair accounting practices (avoidance of financial fraud, double-entry bookkeeping, provision of shareholders with transparent reports).
The affect of the ethical policy of the organization is not as obvious as potential benefits resulted from unethical activity. Meanwhile, an existing business practice showed that violation of the ethical code may lead to a world scandal and even ceasing operational activity of an organization.
Abiding ethical norms results in following advantages for the organization:
- higher revenues (ethical behavior helps attract a circle of devoted, returning and loyal customers);
strengthening brand name (improving brand awareness and recognition of the trade mark); - better employee motivation and recruitment (human resources are the main source of value added);
- better company reputation in financial circles (new sources of finance from ethical investors).
The disadvantages of unethical policy of the company include:
- higher costs (sourcing from suppliers which use fair trade in their operational activity rather than orientation at lowest price);
- higher overheads (training and communication of ethical policy in the organization);
a threat of creating false expectations.
Conclusion
Ethical crisis in business drew attention of many social scientists and is the popular topic in scientific discussions. Abiding ethical principles must be the main priority for the individuals and organizations in order to create fair business environment. Personal and social responsibility together with training and improving ethical awareness in the organization is the best way to provide ethical relationship between participants of any business process. It is important for the organization not only to have ethical code but to provide its implementation within the organization.
