The principles of ethics and sustainability are base of numerous corporate concepts and business enterprises that widens the individual and corporate priorities beyond conventional objectives of profitability and shareholders growth. In today’s scenario ethical components are important for firms that goes along with conventional business objectives of delivering service quality and cost management and hence several firms largely participate in ethical considerations that influences trade and corporate environment (Hodges & Sulmasy 2013). In this report a business case is identified and alternative solution are discussed followed by recommending best choice to address ethical issues.
One such case of ethics and sustainability is being discussed for Timberland which is a company widely acclaimed for men shirts and climbing boots and has a strong financial stability in terms of revenues and profitability. Philanthropy started its root in Timberland during 90’s when employees started donating free boots and uniforms to community non-profit projects and later Jeffrey Swartz (CEO) started shutting down 1 day operations/annually at Timberland so that their employees would volunteer and company started paying their employees 16 hours of paid leave each year but it did not come cheap as on average these annual volunteer events costed around 2 mn USD for Timberland in loss of sales, project expenses. Many of the shareholders raised concern over Timberland’s focus on community causes and found them hurting profits at large and advocated cut off for these ethical and civil considerations to regain business losses. The company faced questions of ethics and sustainability and identified may be the managers were failing business and stakeholders by turning up too many resources into ethical considerations. Other questions of ethics was whether cutting out charity and focusing on returning to profits was an ethical decision for Timberland and was Timberland being ethical by spending money on community projects and at same time laying off employees.
Stakeholder Theory was proposed by Edward Freeman which emphasizes that the aim of a business is to develop value for its stakeholders and not just shareholders, as such a firm needs to meet needs and expectations of their customers, suppliers, employees, community and shareholders. In todays business context it is largely accepted that a firm requires to consider more than their shareholders and more than gaining profits so as to add valuable sense to stakeholders within the stakeholder ecosystem that includes getting each of them involved and invested with a firm to attain real success. The stakeholder theory states that a firm’s stakeholders consist of just anyone who is being impacted by the firm and their operations and it holds in opposition to shareholder theory that was given by Milton Freidman where it was stressed that the only stakeholder a firm needs to care about are their shareholders and should be driven towards profits to satisfy shareholders to ensure positive development. But this was later redefined by Freeman’s Stakeholder theory with the opinion that firms firm’s need to support all group of their stakeholders including customers, media, employees, community, government etc to build a healthy corporate environment and maintain sustainability in long term (Harrison, Freeman, de Abreu & Cavalcanti 2015). The stakeholder theory states that in order to maintain a healthy and growing firm it is required that it never loses focus of everyone who is engaged with firm to drive its success. For example the theory depicts that if a firm treats its shareholders say employees badly then in long run the firm will fail to grow. Similarly if a firm enforces its projects on community to lead to damaging effects then the same detrimental impact would return and occur likely to firm, as such the theory clearly states that a firm should not neglect any of its stakeholders so as to succeed truly as in long run a firm cannot grow and survive if it dis-satisfies its stakeholders and make them feel neglected.
Sine past few years there has been a wide counter action over the belief that firms have no liablity other than their shareholders value creation and this has been redefined by the idea that there are other groups along with shareholders to whom an enterprise has liablity which is widely accepted as stakeholder theory. However there are philosophical complexities in giving credible support of principles for managers of firms while dealing with ethical consideration like impact of enterprise on environment and nature that has no direct involvement of humans with business or engagement with transactions of firms. But these ethical consideration have impact over corporate decision that consist of appreciating these ethical values along with increasing awareness to social responsibility of enterprises (Van Buren, Harry & Greenwood 2013). This observation of rising value given to ethical decision and choices has been possible due to rise in awareness of consumers towards quality of life other than narrow economic benefits that have evolved and extended ethical consideration in the economy and in business behaviour of corporates. According to Bautz (2016) these days consumers largely consider social and environmental well being during their purchase decisions and intentions and also several institutional investors while making investment decisions base their screening on social and ethical activties of business before agreeing to invest in firms. Moroever government across the world also make and execute robust environmental and social policies to drive more emphasis on enterprises for ethical and sustaianble considerations of community and all these are directly and indirectly impacting the behaviour and performance of firms.
According to Giddy (2014) the relationship between a firm’s social and ethical responsibility and its financial performance are based on different contexts and arguments both positive and negative. Where some studies suggest a negative correlation between social and ethical responsibility and financial performance of firms thus arguing that high level of focus on social and ethical consideration often results into additional costs for firms thus leading them to economic disadvantage in contrast to other firms that are less ethically and socially responsible. These additional costs can tend to extend a drop in cash flow of firms. While in contrast to these arguments some studies present that there is positive correlation between social and ethical responsibility and performance level of firms due to improved outcomes and impact where it is argued that there exist a positive relation of ethical and social consideration over better employee and customer goodwill which are outcomes of social and ethical responsibility that has high level of impact on employee morale and productivity.
Also framework such as stakeholder theory specifically underpins that corporates have large responsibility to provide value to all stakeholders equally depending on the cost and hence ethical and social consideration have large impact on the work and operations of business not only in explicit claim but also in implicit claims which means that if an enterprise does not act in a socially and ethically resposive way then stakeholder such as employees, government, partners, customers etc who tend to get intrinsically associated with a firm based on perspective of social and ethical responsibility of firm may tend to tranform their radical agreement or behaviour into explicit acceptance that can become more costly eventually for a firm in long run (Miles 2017). Further socially and ethically responsive actions can spread over to other implicit stakeholders who may doubt whether an enterprise would satisfy their claims and needs. As such enterprise who have image of high ethical and social responsibility tend to have more low cost implicit representation than other corporates which hence drives large financial performances.
An additonal element that comes with high level of ethical and social responsbility image is positive repuatation of corporate due to their corporate social responsibility intiatives and support for sustainable development of people, profit and planet. These positive identity helps to attract talented resources towards firms as well as help to meet the needs of employees in fulfiling their philanthrophic or community obligations to remain ethically and socially satisfied along with their association with firms who have good CSR image. This is because of the fact that high ethical and social consideration levels signals stakeholders high maangerial skill levels and a high corporate social resaponsiblity image and goodwill level results into high corporate value that increases because the employees of a firm earn a minimisation in their explicit cost in return for a low implicit charge so as to improve and extend reputations (Enyinna 2013). Because of these positive impacts the financial performance as well as individual or corporate performance along with corporate image becomes strong to drive interest and confidence of all stakeholders towards the firm because of strong ethical and sustainablity corporate practices and approaches.
The decision on solution to address the ethical and sustainability concerns or issues at both individual and organizational levels can be based on the following three alternative approaches.
Utilitarian: the solution and decision to address the ethical issues using utilitarian approach is based on moral behaviour that creates greatest good for largest numbers. Under this decision is made by considering the effect of each alternative solution on all parties involved and then best one is chosen that optimizes the fulfilment (May, Luth & Schwoerer 2014).
Individualism: the solution and decision to address the ethical issues can also be based on individualism that contends that actions are moral if they facilitate individual’s best long term undertaking and states that individual self-direction is foremost and external forces that obstructs self-direction should be restricted while making decision for ethical solution. It states that individual calculates long term benefits to themselves as tool to evaluate decision’s goodness or fairness. As such solution that intends to provide larger ratio of good to bad for individual or organization as compared to other alternative choices is right one to perform and in practice organization with their self-direction can pursue larger goodness that can ultimately serve more number of people as they learn to accommodate each other’s interest (Remisová, Lasáková & Búciová 2014). So ethical solution that are based on individualism directs behaviour or decision that fits standards of behaviour people or firms look for towards themselves thus ensuring to value ones understanding.
Moral Rights Approach: in this solution or decision to address ethical issues are based on fundamental right and freedom of people and states that an ethically right decision or solution is that which best maintains the right of people who are affected by ethical issues. Under this solution should be identified based on six moral consideration while making decisions which are right of consent, right to privacy, right to freedom of conscience, right to speech, right to due process and right to life and safety (Bliss 2014). Hence under this firms avert interference to fundamental right of others while making solution and decision for ethical issues.
It is recommended that issues of ethics should be dealt with solution or decision that are focused on justice where decision must be founded on standard of fairness, equity and impartiality. Hence it is recommended that Timberland in event of decline in their profits should have looked to provide compensatory justice while laying off their employees so as to cut cost that was additionally incurred due to more focus on philanthropic activities to remain fair to employees ethically where employees should have been compensated for the cost of their losses (in this case job) by their employer Timberland as employees should not be held responsible for matters over which they had no control.
Conclusion:
Thus it can be concluded from analysis that enterprises that undertake strong perspective and consideration for maintaining social and ethical responsibility gain in three different aspects i.e. related to strong financial performance where high profits can be ensured due to high demand and consideration for firms and their services in market and among customers. The second aspect is good image that builds reputation in market and third is high impact over employees moral thinking which helps to attract and retain competent resources who share growth and long term sustainability of firm.
References:
Bautz, B. (2016). What is the common morality, really? Kennedy Institute of Ethics Journal, 26(1), 29-VI. Retrieved from https://search.proquest.com/docview/1790490109?accountid=30552
Bliss, E. V. (2014). Solution focused formulations. InterAction, 6(2), 8-22. Retrieved from https://search.proquest.com/docview/1645019025?accountid=30552
Enyinna, O. (2013). Is stakeholder theory really ethical? Journal of Business Ethics, 7(2), 79-86. doi:https://dx.doi.org/10.4103/1817-7417.123083
Giddy, P. (2014). Porportionalist reasoning in business ethics. Journal of Business Ethics, 8(2) doi:https://dx.doi.org/10.15249/8-2-88
Harrison, J. S., Freeman, R. E., & de Abreu, M.,Cavalcanti S. (2015). Stakeholder theory as an ethical approach to effective management: Applying the theory to multiple contexts. Revista Brasileira De Gestão De Negócios, 17(55), 858-869. Retrieved from https://search.proquest.com/docview/1721707649?accountid=30552
Hodges, K. E., & Sulmasy, D. P. (2013). Moral status, justice, and the common morality: Challenges for the principlist account of moral change. Kennedy Institute of Ethics Journal, 23(3), 275-96. Retrieved from https://search.proquest.com/docview/1442723961?accountid=30552
May, D. R., Luth, M. T., & Schwoerer, C. E. (2014). The influence of business ethics education on moral efficacy, moral meaningfulness, and moral courage: A quasi-experimental study. Journal of Business Ethics, 124(1), 67-80. doi:https://dx.doi.org/10.1007/s10551-013-1860-6
Miles, S. (2017). Stakeholder theory classification: A theoretical and empirical evaluation of definitions. Journal of Business Ethics, 142(3), 437-459. doi:https://dx.doi.org/10.1007/s10551-015-2741-y
Remisová, A., Lasáková, A., & Búciová, Z. (2014). Ethical-economic dilemmas in business education. Business, Management and Education, 12(2), 303-317. doi:https://dx.doi.org/10.3846/bme.2014.238
Van Buren, Harry J, III, & Greenwood, M. (2013). The genesis of employment ethics. Journal of Business Ethics, 117(4), 707-719. doi:https://dx.doi.org/10.1007/s10551-013-1722-2
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