Discuss about the Ethical Dilemma in Business Organizations.
In the present business scenario, it is a common perception that competition is good for consumers and society as it keeps a fair check on the business organizations. However, there is a dark side associated with the competition as it encourages unethical practices to achieve the organization goals. In spite the fact that business leaders or managers want to conduct their business ethically, many times; the business leaders have immense pressure to achieve the regular targets which leads to negligence of the ethics. Although the managers are aware of the unethical business practices, the high competition in the business changes their response to ethical transgression. The managers with high experience in the industry are more likely to neglect the moral aspects of their actions and are more driven by practical and financial benefits. Also, the managers in more competitive environment base their decisions on the financial profitability and overlook the immorality of actions. These business organizations overlook the unethical issues if it is profitable to the organization and disdain it, if it poses negative impact on the organization. The response of the managers in less competitive environment is driven by the unethicality of the actions and less by profitability (O’Sullivan, Smith & Esposito, 2012).
Several times the unethical behavior yields competitive advantages; however, in the long run it results in condemnation and impacts negatively on the organization (Fryer, 2014). It can be observed from the case of Volkswagen wherein the company lost 25% of its market share due to diesel dupe scandal. In September 2015, EPA (Environmental Protection Authority) found that the cars sold in in the United States of America are equipped with “defeat device” through which the diesel cars of the company can detect when they are checked for emission performance and improve results. It can be scrutinized that the company tried to fool the customers and the government from the low emission results. Previously, the company implemented huge marketing campaign regarding the low emission diesel cars and environment-friendly cars (Hotten, 2015).
Volkswagen was founded in Germany in 1937. Over the years, Volkswagen has become one of the largest auto makers in the country. However, due to the immense competition in the automotive industry, the market share of the company started declining from 2010 onwards. Despite being a prominent auto maker in European market, the company was struggling to capture market in the US. It launched new models such as Jetta Passat and Sedan to increase the market share; however, the response of consumers was not as per the expectations of the company (Boston and Boudette, 2014). Due to this, the company must be in pressure to increase its sales and implemented drastic measures.
The present ethical issue of the company can be examined from different ethical frameworks and business ethics theories. The ethical theories are developed to distinguish the right behavior from the wrong behavior. They are applied ethics which examine the ethical issues or dilemmas in the business environment. The business ethics refers to the standards or the values that govern the behavior of the business organizations. In order to act in the ethical manner, a business organization has to distinguish between right and wrong and adopt the right choice. The ethical principles for businesses are same to that of an individual. Although are no specific set of rules to determine the ethical practices, various theories have emerged to determine the morality of an action. Therefore, a company should judge all its actions on ethical grounds before implementing those actions (Brenkert & Beauchamp, 2010).
The utilitarianism is the best known ethics theory. In this theory, the fundamental is to judge the actions according to their consequences. The utilitarian theory states that the primary aim of morality is to enhance the living standard of the people and increase the happiness of maximum people. The utilitarian theory discards the moral codes and systems based on the customs and traditions. This theory was formulated by Jeremy Bentham in the eighteenth century and posits that while taking an action, a person should look beyond the self-interest and considers the impact on the entire population affected by the decision. It is also called rule-based theory and focuses on the consequences of an action rather than the action itself. In this theory, all the affected parties are considered as the stakeholders of the action. The utilitarian theorists acknowledge that there exists trade-off in several actions and states that if an action is having better outcomes for most of the people, it should be implemented. The theory states that the decision-maker should focus on maximizing the benefits and minimize the harm to the society (Weiss, 2008). When the utilitarianism consequential theory is used, the decisions of a business organization are dependent upon what actions will increase the benefits for the maximum people. It postulates that the end results of the action justify the means to achieve them.
When the present action is scrutinized by the utilitarian theory, it cannot be justified. The company tried to deceive the consumers and the stakeholders by suggesting that the manufactured cars have low emission rate. Although the action has a positive impact on the shareholders and the investors of the company, the impact on the mass public was negative. The marketing of the environmental-friendly cars boosted up the sales and image of the organization. While taking a social perspective, introducing cars with higher emission rates will play with the health of the public and increase the chances of respiratory diseases among the people. This decision not only has negative impact but a huge negative impact on the community. Therefore, the decision backfired on the company and it received condemnation from the environmental organizations from all across the globe. Moreover, since the cars were emitting carbon dioxide more than the permissible rate in the United States, they were negatively impacting on the health of the citizens and the friends or the families of the car owners. It can be deduced that the present action of Volkswagen has overall negative consequences on the citizens of the US. Therefore, this action is morally unjustified according to the utilitarian theory. As the utilitarian theory posits that the primary aim of morality is to increase the happiness and contentment of the life for most of the people (Machan & Chesher, 2002). The present action of Volkswagen has no positive implication on the living of the people; albeit, it increases pollution and the chances of several medical issues.
Another moral theory that can be used to judge the actions of the automobile company is deontological ethical theory. This ethical theory is based on the normative ethical position and judges the morality of an action based on the pre-determined rules. The deontology theory is the ethical theory based on the obligation and the moral duty of a person. It states that the moral judgment of an action should be based upon complying with these laws or the moral codes. The deontology theory states that in order to act in a morally justified manner a person must abide by the rules. This theory denotes the relationship between duty and morality. According to this theory, the ethics of an action is determined by the characteristics of the action rather than the consequences of the action itself. The deontological ethics state that some actions must be performed as a moral duty and regardless of their impact on the human welfare. The deontological ethics are considered as a formal ethical system. According to this system, the conformity of an action should be dependent upon some rule of law. The deontological philosophy was given by Immanuel Kant, a German philosopher in the eighteenth century (Trevino & Nelson, 2010). The theory postulates that no action is good, if it does not have a good will and the good will arises from the respect towards the law and regulations. The deontological ethical system states that every human being is valuable. Therefore, every human should be respected equally and provide basic human rights. This theory thrusts respect and interest of every person in spite of the fact that the interest of that person is in odd with the interest with the entire group. However, there are several negative aspects of this theory such as it is hard to settle conflicting interest between different parties and it is absolutist (Trevino & Nelson, 2010).
According to this theory, the action taken by Volkswagen was morally wrong. According to the government policies, the automobile companies cannot manufacture cars and other vehicles above a specific permissible level. In the present context, the company did not abide by the environmental laws of the country. Moreover, the government also makes policies to create transparency and; therefore, business organizations must disclose all the parts and the products used in the manufacturing. However, the company did not abide by these terms and tried to deceive its customers. Therefore, the present action can be categorized as morally wrong from the deontological theory (McDonald, 2014).
It can be discussed that the morally unjustifiable decisions backfire on the organization and they have to deal with the later consequences. In the case of Volkswagen, the company lost substantial market share all across the globe and several international organizations came together to criticize it. The company also lost the trust of the consumers which was attained over the years. Therefore, it is important to develop ethical leadership within the organization. The ethical leadership is defined as representing ethically appropriate conduct in the business environment and promoting such conduct among the business organizations through reinforcement and demonstration. The ethical leadership promotes ethically sound practices in the business organization and increase the effectiveness of the organization. The personal trait such as integrity is also associated with the ethical leadership and ethical characteristics such as such as honesty and trustworthiness are also associated with the effectiveness of the leadership. The ethical leadership is important for the business organization due to its implication in productivity and image building. The ethical leaders are attractive and provide a normative model to inculcate ethical principles in the organization. The ethical leaders create an organization culture wherein the employees are made accountable for their actions. Therefore, they foster an ethical system within the organization. The ethical leaders influence the ethical conduct of the employees. Even when the leader is not physically present, he can influence ethical qualities in the decisions of the follower and provide ethical guidance to the employees. The ethical leaders set ethical standards within the organization and communicate them to the followers. The ethical leaders taken into consideration the needs and the requirements of the stakeholders and base their decision on them. Through social learning, the ethical leaders enhance the social behavior of the employees. The ethical leaders develop relationships with their employees through social exchange rather than economic exchange. The employees take their ethical leader as a model and behave ethically (Mihelic, Lipicnik and Tekavcic, 2010).
When the ethical principles are embedded in the organization, they change the traditional outlook of the organization. The ethical organization encompasses several factors such as CSR, triple bottom line, ethical management, fair trade, globalization, sustainability and cooperatives. Furthermore, there are also several long-term negative impacts of unethical leadership on a business organization. The primary issue with the unethical practices is untrustworthiness of the organization. It can be observed from the case of Enron, which was the most innovative and seventh largest business organization in the United States. However, by adopting unethical practices it lost the trust of the consumers and eventually collapsed. In the social context, the unethical leadership is increasing white collar crime and business malpractices in the business organization (Brown, Trevino, & Harrison, 2005).
The ethical leadership encompasses morality, character, vision and judgment of the leader. It is the ability of the leaders to perceive what is considered by the community as wrong or right action. It is the responsibility of the leader to take actions which are not offensive towards the law, religion or the culture of the local community. The ethical leaders should be capable of identifying the vision or the mission of the company, ethical or cultural sensitivity of the situation, should have intrinsic motivation for ethical decisions and review the decisions made (Brown & Trevino, 2006).
The ethical leadership is a characteristic of the leaders. Leadership can be defined as a relation between the leader and the followers wherein the leader convinces the followers to perform certain actions or achieve certain goals. The leaders exert their positional power and charisma to engage employees and lead them. In the ethical leadership the leaders directs how the employees must behave in the organization. The ethical leaders direct the employees and the organization to fulfill the mission and the goals of the organization. The ethical leadership is a construct that encourages the employees to take the right decisions rather than preventing them to take unethical decisions. With the ethical leadership, the leader embeds ethical practices in the organization which are adopted by the followers through social exchange theory. By being ethical, the leader considers the justification, fairness and welfare of all the stakeholders and the community as a whole. The ethical judgment or decision-making is influenced by the upbringing and the surroundings. Even if a person has grown with a strong sense of ethics, the surroundings or the bad behavior of the people can reduce the ethical sense of the person. Moreover, the leaders practicing the business ethics considers the long-term consequences, drawback and the profitability of their own decisions (Fitch, 2009).
The ethical leaders work as a role model for the followers and determine the ethical boundaries and regulations which are needed to be followed in the business organization. The new employees in the organization learn about the values and culture of the organization from other employees. Moreover, when the leader start realizing the ethical values into actions he gathers more trust and respect from the followers. When the leaders demonstrate that they can sacrifice the profitability of the organization to act according to their values, the followers demonstrate the same behavior. If managers and the business leaders follow ethical behavior, they become more considerate of the follower’s needs and reducing conflicts. Moreover, they become morally obligated to the followers and the stakeholders of the company and make efforts for the welfare and fulfillment (Fitch, 2009).
The ethical leaders creates an organization culture which increases he perceived effectiveness of the leader, increases the productivity and he efficiency of the employees and increases the respect and the trust of the followers toward the leader. The ethical leadership is a process rather than one time act and requires a timeline to acknowledge the followers and wider community the culture of the organization. The leaders must be able to communicate the ethical standards to the followers and demonstrate the behavior by practicing them in the organization (Brown & Trevino, 2006).
There are a number of personal traits such as integrity, trustworthiness and honesty which are associated with the ethical leadership. Along with it, the ethical leaders are considered as just and fair decision-makers who care about the community and the employees. Another important dimension of the ethical management is morality management. The ethical leaders’ makes ethics and morality an explicit agenda of their leadership style and send messages of moral behavior by either demonstrating it themselves or enforcing it by creating a reward system. In this system, the followers are held accountable for their actions and the organization is recognized as an ethical organization.
It can be deduced that the ethics is the heart of leadership. A leader has the power which can be used for the welfare of the society or otherwise. An ethical leader is focused on the development and the welfare of the society. The decision-making of the leaders is focused on achieving goals with all the rational measures. In essence, all the available information is collected and processed for the sound judgment. In the ethical decision-making, judgment is the essential component. The judgment of a person is dependent upon discretion, choice, intelligence and values. If the ethics are embedded in the central values and the mission of an organization, the employees give ethics high priority before taking any decision. The adoption of the ethical behavior initiates with the analysis of ethics and the ethical decision making. The leaders must be aware of the values, morals, integrity and the ethical decision making. The primary characteristics of the ethical leadership are trustworthiness, respect, responsibility and the fairness. The ethical dilemma occurs when the values of the leader or the organization are in conflict with the practical interest of the organization and the leader ha to choose between them (Mihelic, Lipicnik and Tekavcic, 2010).
Conclusion
It can be concluded that the ethical leadership is a significant aspect in the present business world. In the recent years, unethical conduct by several business organizations has impacted them in a drastic manner. In the present essay, the unethical conduct of Volkswagen has been discussed wherein the company deceived its major stakeholders and the customers by implementing a deceiving device in its automobile cars. The company was in ethical dilemma due to increased pressure of diminishing market share in the US markets. This action of the company invited criticism from the environmental organizations, reduced the market share and resulted in the loss of trust of the customers. Therefore, practice of ethical leadership is critical in the business organization. A business firm can establish ethical leadership by appointing leaders who have a strong ethical background and are intrinsically motivated for ethical behavior. Moreover, the ethical leaders should foster ethical behavior in the organization by establishing norms and regulations in the organization. The employees should be held responsible for their unethical actions. Moreover, reinforcement can be in the form of rewards and punishments so that the employees realize the importance of practicing ethical behavior. The leader can also encourage ethical behavior by modeling it by practicing himself. The demonstration of the ethical behavior will result in the ethical organization culture.
References
Boston, W. and Boudette, N.E. (2014). VW Labor Rep Blasts Car Maker’s U.S. Strategy. Wall Street Journal. Retrieved from https://www.wsj.com/articles/SB10001424052702303947904579336443225906138
Brenkert, G.G., & Beauchamp, T.L. (2010). The Oxford Handbook of Business Ethics Oxford Handbooks in Philosophy. OUP USA.
Brown, M.E., & Trevino, L.K. (2006). Ethical leadership: A review and future directions. The Leadership Quarterly, 17, 695-616.
Brown, M.E., Trevino, L.K., & Harrison, D.A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97, 117-134.
Fitch, W. (2009). A Study of Relationships Between Ethical Decision Making, Leadership Styles, and Demographics in Pennsylvania Superintendents. Theses and Dissertations. Paper 868.
Fryer, M. (2014). Ethics Theory and Business Practice. London: SAGE.
Hotten, R. (2015). Volkswagen: The scandal explained. BBC News. Retrieved from https://www.bbc.com/news/business-34324772
Machan, T.R., & Chesher, J. (2002). A Primer on Business Ethics. London: Rowman & Littlefield.
McDonald, G. (2014). Business Ethics. Cambridge: Cambridge University Press.
Mihelic, K.K., Lipicnik, B., Tekavcic, M. (2010). Ethical Leadership. International Journal of Management & Information Systems, 14(5), 31-43.
Nikoi, A.A.A. (2008). Ethical Leadership and Business Decision Making in Contemporary Times. International Journal of Business and Management, 3(10), 183-194.
O’Sullivan, P., Smith, M., & Esposito, M. (2012). Business Ethics: A Critical Approach: Integrating Ethics Across the Business World. London: Routledge.
Trevino, L.K., & Nelson, K.A. (2010). Managing Business Ethics. London: John Wiley & Sons.
Trevino, L.K., & Nelson, K.A. (2010). Managing Business Ethics. London: John Wiley & Sons.
Weiss, J. (2008). Business Ethics: A Stakeholder and Issues Management Approach. Boston: Cengage Learning.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download