Management Ethics

Section A

1. Outline why a study of ‘business ethics’ is important.

In the light of the globalization process and the growing popularity of corporate social responsibility issue, more and more companies are striving to achieve recognition and positive image in order to attract more clients and sustain a competitive advantage in the international arena. However, few organizations realize the fact that business ethics should rely on philanthropic behaviour and transparent reporting to the international and non-governmental organizations that take care of the community and other important stakeholders (O’Sallivan, Smith & Esposito 2012). Therefore, business ethics is an integral part of carrying out organizational activities successfully that contributes to the company’s performance and productivity.

2. Discuss the business benefits of ensuring good ethical practice.

The concept of business ethics embraces many aspects of conducting organizational processes and activities. It specifically relates to such issues as employee behaviour, codes of ethics, moral conduct within an organization, organizational culture, learning and development (O’Sallivan, Smith & Esposito 2012). The moral aspects, therefore, create a specific organizational climate, in which employees are more motivated to work effectively and bring benefits to the organization’s mission and objectives.

3. Discuss the contribution of Utilitarianism to ethical decision-making.

Developed by Bentham and Mill, Utilitarianism focuses on the action that is considered either right or good in terms of consequences (Weiss 2014). Hence, if the outcome of an action is morally justified, the action itself is also justified. Utilitarian concepts are widely used by business professionals because these principles are beneficial for decision-making as they define each of the stakeholders’ influence in a specific environment. Sometimes, business ethics focuses on the consequences rather than initial actions in order to produce a greater good for all stakeholders.

4. Outline what you understand by the theory of Egoism.

The theory of Egoism focuses on the self-interest in performing a specific action, which implies that a morally justified action is the one that relies on the satisfactions of personal actions. According to Shaw (2013, p. 51), “Proponents of the ethical theory of egoism generally attempt to derive their basic moral principle from the alleged fact that human beings are by nature selfish creatures.” Therefore, psychological egoism assumes that all activities are motivated by self-interest, and all employees are dependent on the personal goals.

5. Outline what you understand by Kohlberg’s theory of Cognitive Moral Development.

The theory of Cognitive Moral Development by Kohlberg focuses on the stages of the human development in the context of moral dilemmas that a person encounters (Hill 2001). Kohlberg outlines six universal stages that focus on three major levels of morality, through which people progress: pre-conventional, conventional, and post-conventional ones.

6. Outline what you understand by the Ethics of rights.

The business managers should realize the importance of adhering to the ethics of human rights. While working at a company, all employees should feel that their rights and freedoms are respected and protected. The issue specifically concerns the cultural diversity, national affiliation, gender equality, and freedom of choice. All these issues should correlate with the company’s vision and mission.

7. Outline what you understand by the Justice approach.

In business, the importance of the Justice approach should be underscored. It implies that employees should be treated equally. Nevertheless, it has many contradicting undercurrents because the equality should refer to certain aspects but not to the responsibilities imposed on each worker. Therefore, the insurance of social policies and benefits is the key issue in this approach. The research should be treated in accordance with the achievements and performance level of each employee. Otherwise, there will be no motivation for the further improvement.

8. Briefly discuss the differences between relativism and absolutism.

From the viewpoint of relativism, the ethical behaviour is analyzed in the context of other people who either adhere to or ignore ethical standards. Basically, relativism assumes that people live in the world with many opinions, perspectives, and outlooks on life. In contrast, absolutism is more focused on the idea that moral standards should exist regardless of diverse opinions and outlooks.

Section B

Explain the term ‘corporate governance.’ Outline what good governance of UK companies should entail.

The concept of corporate governance originated in the ancient times when trade relations had been only developing among the countries. Since the emergence of companies with limited liabilities and partnerships, it became highly important to introduce appropriate principles and ethical codes that would provide favourable conditions for conducting the business. There have been many outlooks and definitions of the term with regard to the research-based analysis. In the United Kingdom, specific attention was paid to the Guinness case and the failure of Robert Maxwell’s companies. The board of directors imposed pressure on the executive directors who should report regarding the balances and checks; particularly, it concerned the chairmen of the board and the chief. Corporate governance became the core of attention because more and more cases required further examination. In general, the concept has gradually developed into new aspects, such as responsibility distribution, organizational learning and development, organizational and retention culture, and ethical codes. Additionally, the board of directors along with the executive directors should take responsibility for the welfare of their subordinates in order to keep them more motivated in their work and increase their performance. Hence, the corporate governance in the UK, as well as in other countries, focuses on the social responsibility and person-centred approach to an individual working for a specific company.

In contrast to the corporate governance principles accepted abroad, for example, in the United States, the UK companies rely more on the general ethical and moral foundations rather than on the laws and regulations. The increased popularity of the corporate governance foundations was caused by the globalization process and emergence of multinational corporations, in which the principles of cultural diversity and corporate social responsibility have taken effect. Furthermore, the corporate governance also practiced the principles of fairness, sustainability, and commitment in terms of quality and employees’ engagement (Tricker 2015). The executive managers should develop favourable working relationships and become independent advisers if necessary. Each committee should also discuss the possibility of any managerial risks.

It should be stressed that the Corporate Governance has become a significant issue after the release of the Cadbury Report in 1992, which was a reaction to the Polly Peck and Maxwell scandals. The Report has a narrow focus made on the financial issues of the corporate governance. Greenbury Report of 1995, the Hampel Report of 1998, the Smith Report of 2003, and the Higgs Report of 2003 are the subsequent examples of the failure to adhere to the principle of the corporate governance. In contrast to the comprehensive analysis of the issue in the context of corporate law, Du Plessis Hargovan and Bagaric (p. 312) assumed, “UK reports deal only with specific aspects of corporate governance – including the disclosure of remuneration of directors and executive officers, audit committees and the role and effectiveness of non-executive directors.” Therefore, financial dimension goes along with awareness of the responsibility imposed on executives and their subordinates. Additionally, the corporate governance provides the basis for the development of the Codes, which contain a number of reporting controls. Specifically, it defines the responsibility of the Board to conduct and deliver an understandable and well-balanced evaluation of the company’s position, as well as to maintain professional and objective relationships with auditors. Furthermore, the establishment of an auditing committee that comprises three non-executive directors outlines the terms of references related to its duties and authority. The range of notes is followed by the Code of Best Practices, which explicitly introduces that these notes are not a part of the Code but rather additional recommendations. The committee should also be aware of the possibilities, resources, performance, and standards of behaviour within an organization.

As a consequence of the Cadbury Report failure, John C Shaw outlined four major principles. First of all, there should be a clear distribution of responsibility starting with the head of the organization in order to achieve a balance between the authority and power, so that there is not an individual, which would experience the unjust distribution of powers. Second, every Board should involve non-executive with various views and perspectives on carrying out specific decisions. Third, the institutional investors should be interested in creating the board of directors with the specific reliance on avoiding concentration of the decision-making sessions. Finally, the Board structure should acknowledge the prominence of the financial functions and performance.

The further developments of the corporate governance in the UK companies refer to the emergence of the Financial Reporting Council, an independent regulator. It is responsible for updating and maintaining the so-called ‘UK Combined Code,’ which will definitely be presented as the UK Corporate Governance Code. In June 2004, the Council carried out a regular overview of the Combined Code and established several bodies for achieving the set goals. In 2006, the Council developed a significant policy statement, the so-called ‘UK Approach to Corporate Governance,’ according to which, six objectives have been outlined: high-quality auditing, corporate reporting, high standards of the corporate governance, actuarial practice, integrity and transparency, and effectiveness of corporate government as an independent regulator. There are also specific functions that are exercised by the Council in the pursuit of these objectives, such as setting, enforcing, and monitoring auditing and accounting standards, promoting high level of corporate government, establishing actuarial standards, issuing regulation and oversight of auditors, and reviewing regulatory activities, as well as independent activities of professional responsibilities and accountability. The foundation, on which the Government made its decision about the role of the Council in establishing specific communities, has been also considered. Considerable attention should also be paid to the analysis of specific functions and responsibilities imposed on employees regarding their awareness and commitment to these codes and principles.

The emergence and development of social responsibility and transparency could be regarded as the leading pillars of the corporate governance movement. Under many circumstances, it requires the Board of directors to follow the implied practices in the legislation, under which their organizations can operate. However, its practice and principles are applicable to many companies and other entities listed in the PLCs. At this point, organizations should realize the tangible impact of their ethical decisions, which are a part of the corporate governance. All companies can follow the suggestions presented in the report mentioned above (Martin 2006). Furthermore, Martin (2006, p. 4) insists, “Corporate Social Responsibility entails organisations accepting the responsibility for the effects of their operations – and seeking to take best practice into account in their day to day actions.” Much emphasis has been made in terms of the challenges in following the policy, as well as the adoption of ideas, which introduce specific concepts and issues. Additionally, there are documents and legislature supporting the ideas.

In the light of organizational issues, specific attention should also be paid to transparent reporting, which contributes to the respectability of an organisation at the international scale. As such, the Companies Act requires managers to practice greater transparency in terms of the interests of all parties that are involved in trading with their organization for the purpose of avoiding any conflicts of interest. At the same time, at its first reading, the bill caused significant disagreements among the parties concerned. In such a manner, the issues regarding sexual harassment at the workplace required specific attention. They were solved by the adoption of this legislation that banned the unacceptable behaviour of the employees. It should be stressed that the corporate governance foundation creates a corresponding environment, which recognizes a potential liability for little return. Therefore, it is surprising whether a number of food quality candidates is striving to put themselves from promotion (Martin 2006). The idea of developing the corporate governance initiatives is congruent with the implementation of the company’s mission and vision.

The corporate governance in the UK companies is closely associated with contractualism. According to the Companies Act, which was issued in 2006, “The UK corporation – and more specifically, its constitution – is to be treated as a conduct” (Bruner 2013, p. 36). In the light of the corporate governance evaluation in the UK companies, it is evident that their constitution can be presented as a contract in a modified sense. According to Section 33, it is the status that delivers this contract, but not the stakeholders or the company itself. In addition, the fact that company’s shareholders can change the constitution by a specific resolution of a 75% majority is beneficial. At this point, the constitution of the UK corporations focuses on specific private contracts.

Despite the facts presented above, a strong emphasis on contracts that pervade the UK nature of a corporation remains salient. The power of the Board of Directors in the UK corporations is efficiently negotiated by its shareholders through contractual delegation. The model articles, for instance, which are applied to the national public companies state that directors are authorized to control a company that relies on the contract, as well as the terms, which can be determined by shareholders. At this point, there is no such a phenomenon as the ‘board power’ in the United Kingdom. Broad power in the corporations derives entirely from a unique contract, by the means of which shareholders introduce supreme power. It means that they are a genuine source of governance power in the UK Corporation. At this point, Bruner (2013, p. 36) explains, “The directors’ authority is derived from the shareholders through a process of delegation via the articles and not from a separate and free-standing grant of authority from the State, as structure reflecting the shareholder-centered nature of British company law.” Therefore, there should be specific legal standards that would regulate the relationship between all the concerned shareholders. There is a certain ambivalence related to the shareholder interest in the UK corporate governance patterns as compared to those accepted in the U.S. corporate governance. Specifically, the conceptual role of parties in the corporate organization is rendered by the specific legislature, which suggests that integrating hostile takeover is always done in shareholders’ interest. At the same time, the next aspect of jurisprudents proves that enhancing their ability to develop premium bids could be approved by referencing to other corporate stakeholders.

Regardless of the national affiliation, the company’s objectives are based on the common theoretical frameworks. In this respect, the critical aspect in terms of what the purpose and mission of the company are consists in the benefits that the managers of the company get while running a company. Thus, the shareholder value suggests that the managers should pay attention to shareholders and their management; therefore, they should seek to increase the interests of the concerned parties ahead of any other interested parties; this approach might cause arguments against the company. In contrast, the stakeholder frameworks state that the managers should also regard the interests of all the stakeholders. The directors should not only run the company but also look for a balance among all the interests and concerns of all the stakeholders. In other words, there are specific values and pursues that guide shareholders’ activities and actions and influence the company’s philosophy. The task of the executive director is to pay attention to the interests dictated by employees, investors, and community in order to be able to achieve a balance between them.

In conclusion, the UK companies and corporations adhere to the moral, ethical, and legal norms and standards based on precedents and case studies in developing the company’s mission and objectives. They are more concerned with the definite contexts, in which these objectives are formed. There are many cases and reports, which make the UK corporations change their outlook on the corporate governance and introduce such aspects as corporate social responsibility, transparency, flexibility, and fairness. The transparency refers to the financial operations and activities carried out by the company. The corporate social responsibility relates to employees’ relations and defines the further directions of managing these relations. In general, the UK companies do not differ much in their outlook on laws, as well as ethical norms and theories, which guide the working environment. What is more important, the executives and directors should strive to balance the interests and objectives of all the shareholders involved in the process of a company formation.

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