Ethics, Leadership & Decision Making

Background of the Organization

Write an essay on “Ethics, Leadership & Decision Making “. 
 

This study is all about discussing ethical management practices and modern dilemmas which have been facing by many modern day organizations in Australia. “Businesses can be tempted to make short-term gains by turning a blind eye to ethics” (DesJardins & McCall, 2014). It has been found in the recent literature that many firms regularly ignore ethical considerations despite the presence of codes of practice, regulatory compliance and largely increasing pressure from public front. Some even claim that a activities of businesses simply requires to comply with the regulatory framework. However, organizations failed to regard ethical concerns into their daily practices, undermine the wider economy of the nation and so much responsible for severe damage.

There is a strong requirement of the ethical practice because an environmentally, socially ethical approach considers that the organization is protecting its reputation, its supply chain, its license to operate and having the best relationship with their partners. Furthermore, the best ethical practice also insights the firm’s ability to recruit talent. All this ethical considerations avoids “corporate collapse” as a result of fraud or litigation. However, the quality of leadership is an integral part of the ethical practice.

BHP Billiton Plc, a leading global energy resource company, is also maintaining business practice focusing code of practice and other ethical considerations. But the company recently criticized for engaging much unethical compliance which are going to be highlighted in this assignment.

BHP Billion Plc, a leading resource provider of Australia, has been responsible for establishing value through the finding, development and conversion of natural resources. The main objective of the company is to make provision an innovative market focused solutions for highest customer satisfaction and ensure great return of shareholders. The “Guide to Business Conduct” is strongly influenced by the Charter of BHP Billiton. The company is known for its high ethical value for maintaining the business goals which definitely attained through fairness, honesty and integrity in their business practice. By this study, users will get a clear idea regarding the implication of ethical management practices. In that case, a leader’s role is also significant in making ethical decision making.

The purpose of the research is to highlight the significant role of the ethical practice and considerations in the organizational perspective and evaluate the role of leader in making ethical decision. Moreover, ethical leadership will also be highlighted for operating ethical business environment in the study of literature.

Purpose of the Study

Incorporate ethics into strategy is one of the prime managerial concerns for modern day organizations. While many of corporations routinely fall short to think about ethical factors, others have given themselves a competitive edge by engaging as many as strong CSR activities and ensured a strong social responsiveness among others Randall & Gibson, 2013). Therefore, activities related to social responsibilities and ethics are interrelated with each other and management needs to know its implication in the practical field. However, there are many arguments regarding why such business ethics considered as valuable. According to Jones & Gautschi III, (2013), an ethical conduct has moved front and centre as firms are increasingly exposed to the glare of scrutiny of public. Specifically, there has been a conventional shift over the previous few years that require a complete rethinking of the functions of compliance, social accountability and governance, considering ethics into the routine business activities. For instance, BHP Billiton values safety and environment, integrity by their managing resource activities. However, limitations of compliance have been identified in the business practices which can be resolves if organization can effectively follow the ethical rules and regulations within their business practices.

Modern managers have followed many managerial theories relating to ethics.  Caroll’s  three domain approach has been highlighted the ongoing debate over the suitable relationship between business and society. The importance of CSR activities have been classified into the following four groups.

Responsibility regarding ethics: Those responsibilities of businesses include in this section which are essential but not covered by law, such as fair-trade

Responsibility regarding economics: The responsibility of entities’ offering privately and products to the market place which are aligned to the requirement of the society in exchange for making profit.

Responsibility regarding discretionary: The voluntary responsibilities, like “philanthropy initiatives” which are not necessarily projected by societies, but those are welcomed by the society because this has helped to build positive image for the business.

Responsibilities regarding legal activities: It is important that the company needs to function within the legislative boundaries in order to accomplish objectives and aims of the business.  

All these above mentioned classification of CSR activities have been engaged differently by organizations. However, the common subject is that all are at an “engagement” to establish the “corporate citizenship” that implies a distinct representative role of the company in society. According to (), “CSR activities depends on a level of effectiveness with which chosen activities are implemented than the choice of CSR activities”. However, Tsalikis & Fritzsche, (2013) strongly opposed with the fact that it is more important to choose the right CSR activities for businesses through which firms can create a positive image. To establish both the arguments at the management practice, both the author have been failed related to the fact that their discussions were largely universal and failed to provide a particular example in both the cases. Following the Caroll’s theory of CSR into the business practice, ethical considerations are new phenomenon in the business world. During the industrial revolution there are many corporations who have thrived on a strong “philanthropic tradition”. According to Grosser et al. (2014), CSR has become an integral part of the firms’ strategies and this is embedded into the management culture at all level. BHP Billiton and its subsidiaries disclosed their payment of taxes and royalties on a project-by –project basis which are incorporated in the BHP Billiton Economic Contribution. Working with integrity is embedded in their corporate strategies with the help of BHP Billiton Charter. The code of business ethics up holds ethical business practices with company standards and guidelines. However, the company faced ethical dilemma related to Beijing Olympics. In the year of 2015, the Commission of US Securities and Exchange slapped BHP Billiton and fined $25 million for practices fixed for offering gifts to foreign government officials during 2008 Summer Olympic Games in Beijing. This is a perfect example if an unethical behavior of the management of the mining company. The company has been charged for violating books and records and failed to control provisions of the “Foreign Corrupt Practices Act”. The organization has faced negative ethical consequences due to provide luxury travel packages to foreign government officials and their spouses at the 2008 Beijing Olympics (Webley & Werner, 2008). The company was the official sponsor of the event. The intention of the company was to take advantage of its status as a sponsor with preferred access and thus BHP Billiton established a sponsorship program “to reinforce and develop relationships with key stakeholders” in China. According to the media report, this sponsorship program has seemed under the BHP Billiton’s anti-corruption compliance program on paper, however, no follow up was provided by the management of the company. According to Price, (2013) the business code of conduct should never been a tempted to make short term gains. But the company’s “Guide to Business Conduct” covered “financial inducements” and restricted payments “to influence individuals to award business opportunities to BHP Billiton or to make a business decision in the favor of the company”. The company has maintained less moral attitudes and anticipated “hypothetical scenarios” for instance such sponsorship program covered wife of minister who was considering the application of the company for a permit (it was not) (Adhariani et al. 2014). These all ethical dilemmas have been identified by the “Global Ethics Panel Subcommittee” and advised later regarding ethical and compliance concerns. However, the company has failed to make any decision regarding the issues and it was criticized by the company’s internal and external stakeholders (Hörisch et al. 2014). According to Shaw (2016), despite having a sufficient paper and structure, the compliance program failed to understand its priority and put the entire burden later on the shoulders of the business. Here the main ethical concerned was regarding not to recognize the anti-corruption risk in the company’s compliance program due to short-term gained revenue (Kaptein & Schwartz, 2012). Here in this situation, managers of BHP Billiton found in ethical dilemma due to have all alternative behaviors deemed undesirable because of potentially negative consequences.

Discussion

A conceptual framework of ethics of the business and management of the organization needs to be addresses moral and ethical values of the management (Reidenbach & Robin, 2013). Just like the Caroll’s CSR classification theory, the managers often maintained good rapport between firms and others in its external and internal environment. Shareholder theory, developed by R.Edward Freeman is all about considering the shareholder’s presence and recognizes the efforts of the management to satisfy the interest of stakeholder’s in a business. The modern day implication of this theory, in the context of the business is quite relevant because this has been observed that organizations that manage their stakeholder relationship effectively will survive longer and perform better than firms they don’t. To establishing a stable relationship, organizations ought to follow a integrated, transparent communication among stakeholders because they are the management base of the organization. Many stakeholders’ competencies are being suggested by Freeman:

• Make a commitment to monitor interest of stakeholders
• Strategies must be developed for dealing with stakeholder’s effectively and their concerns
• Ensuring that the functions of the firm address the needs of stakeholders

However the best part of this theory is the ethical implication in the context of the stakeholder’s value. The current race of business scandals has brought more and more attention to the concept of the management of stakeholder (Bridoux & Stoelhorst, 2014). According to Weiss, (2014), firms have many constituent groups and it is indeed important to maintain the support of these groups by considering and balancing their relevant interests. Stakeholder’s theory has been supported considering its organizational implications that both “instrumental predictions” and “normative prescriptions” has been fostered by this theory successfully and this is the reason it is still relevant in case of those interested in profits and those interested in ethics (Brower & Mahajan, 2013). However, this theory has been criticized by (Huxham & Vangen, 2013) because very little research has considered individual managerial decision making in this theoretical implications despite this theory considered manager as central part. When BHP Billiton owns Olympic Dam in South Australia, many of the researchers claimed that this would not an ethical investment made by the company. To become sustained their position as one of the largest uranium depositors and coal miners, the company has owned this dam. The company was found themselves in ethical dilemma while not holding the waste properly and the carbon blueprint of BHP. Further this has been evaluated that BHP Billiton’s have largest shareholders that any other companies in Australia. However, many controversial issues have risen in 2010 regarding the uranium investment funding because mostly smaller funds managers often avoid investing in companies with revenues from pharmaceuticals companies, old growth forest logging, tobacco, and uranium because test products on animals. This is a social consideration and ethical decision making not to involve in this kind of business practice, however, the company do not ready to avoid involve in uranium mining. Further the company faced a lot of criticism because a large section of shareholders of company were not ready to involve in this deal. It means that the company was not maintained a balancing ethical decision in the managerial practice for the overall benefits of the company.

In the managerial practice, a perfect leader values everyone’s contributions and regularly seeks out opinions. However, many organizations find difficulties to take decisions keeping in mind the best interest of team. Valuing on best of leadership skills, the manager can take decision aimed at achieving particular ends by applying the available resources and ensuring a coherent and cohesive firm in the process (Van Wart, 2014). According to Armstrong & Taylor (2014), leadership involves a type of responsive which helped to achieve the business objectives. Therefore, an ethical and transparent leadership is required for the overall growth of the organization. There are as many different views of leadership as there are characteristics that differentiate one leader to another. In this section, the concept of Servant Leadership theory is going to be figured out. Robert K. Greenleaf, first introduced this theory in 1970. Under this philosophy of leadership, every manager must be a good servant for the company. According to (Parris & Peachey, 2013), servant leadership is not a leadership style it considers the behavior that a manager adopts over the longer term. Servant leaders must have many attributes like good learning skill, emotional balance, self awareness, persuasion and a poer of conceptualization.  However the theory of Servant leadership would be problematic in case of applying this into managerial practice because leaders are expected to take all decisions under the culture of Autocratic. In that case, servant leaders may find difficulties to earn respects.

Servant theory of leadership has many attributes common relate to the transformational leadership. Corporations must thrive in an environment characterized by many unpredictability and uncertainty as a result of constant social, technological, economic and political changes. Firms thus should try to business in the dynamic contexts which demand routine adaptation (Avolio & Yammarino, 2013). In this context, transformational leadership guidance can provide transformed culture. There are several patterns of behavior under this leadership philosophy. According to Day et al. (2014), gaining trust and respect are the main concerns of transformational leaders. To more emphasizes the social dimension of the process, these leaders can be able to articulate the common purpose of the firm It means transformational leaders can be said to be a “a model of integrity and fairness, setting transparent goals, having high expectations, encouraging people and provide support and recognition, stirring the emotions and passions of the people and getting people to look beyond their own self-interests and reach for higher goals”.

Despite research has indicated that transformational leadership has many positive aspects for organizations, many scholars have found many disadvantages of this leadership. Beck & Wiersema, (2013), criticized that transformational leadership style is a perfect, flawless, and idealized form of leadership which has less practicability. This is often debated in the study of leadership literature that transformational leaders can exploit their emotional appeal in a negative way. However, a moral development is significant characteristics of transformational leadership through which one can distinguish ethical transformational leader and unethical transformational leader. On the contrary, Thiel et al. (2012), positively stated that the collective vision can be established by this theory rather than the only interest of leaders.

Both the above mentioned theory can be said that significant for making managerial decision. However, ethical decision making is challenging for any types of leadership. It has become impetrative to contemporary organizations to be able to recognize and deal with critical ethics of the business (Hoch & Kozlowski, 2014). Due to many scandals, events, controversies occurred in the recent past, the organization tends to be more involved in ethical business practice after ensuring ethical decision making by managers. Here ethical decisions are those which are legally and morally acceptable to the community at large (Fernández-Muñiz et al. 2014). On the other side, unethical decisions are not being acceptable but still that may be taken based on the situational crisis, thus large community may be affected by this as well. Empirical findings indicate that stress of leaders does influence ethical decision making. For instance, BHP Billiton faced ethical dilemma just because managers have not considered ethical values and consequences. An ethical guidance can prohibit illegal activities within the organization. More involvement in CSR of organizations can build up trust and integrity and more responsiveness among employees. In other way, manager’s ethical decision making directly influence several organizational and individual variables, such as job satisfaction, learning process, work experience and so on. Therefore, a sound ethical leadership can ensure the overall growth of the organization. 

Conclusion

Ethical business practice is always desirable for business sustainability. However, organizations often involve in unethical, corrupted events and practices consciously or unconsciously. By this unethical behavior or a lack of CSR involvement may damage the reputation of the organization. Therefore, the organization must be viable in economical, social activities. To increase social responsiveness the organization needs to more involvement on CSR activities. For example, sustainability can be achieved to emphasize health and safety concerns and provide support to large community as well. With a strong integrity, delivering superior good and services is another common CSR activity of the organization. The largest conglomerate, BHP Billiton confronted several times for less responsiveness and irregular activities, despite the company is holding a prominent position in the mining industry all over the world. Apart from sponsorship events in Beijing, considered unethical practice in 2008, the company’s top executives were faced criticism for BHP Billiton’s abysmal record in the area of indigenous rights, climate change and environmental sustainability. According to the environmental and Social justice campaigners, the company was largely responsible for huge pollution however, the company opposed the fact and firmly replied that the company is already incorporated these environmental and social concerns into their operational ethics. Therefore, ethical and moral values should be an integral part of corporate mission, objectives for every company. By practicing more CSR, organizations can reduce disparity between its preferred value and the values actually reflected by behaviors in the workplace. However, a value driven management practice must be included within the workplace. In that case, an effective leadership must be contributed in the managerial decision making. To enabling people to do the right thing, an ethical leadership shall be in practice and must adhere to a more universal standard of moral behavior. In this way, organization can establish ethical business environment where leaders value ethical decision making. 

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