By
Mark Daryll
T. Abuy
Introduction
Every individual or organization is
investing into a business driven by diverse goals and aspirations. Basically, the
capitalist’s primary, if not the sole objective in venturing into business, is
to maximize returns on his investment and be able to expand into more
profitable undertakings. Some have focused on gaining for their own advantage
alone but it is worth mentioning that today, there is an increasing awareness
for corporate social responsibility. This means that entrepreneurs are inclined
not only to achieving a high rate of income but also to take into account the
welfare of its stakeholders including, among others, its employees, suppliers,
buyers, and the community in general. It is in this context where business
ethics plays a great role not only in maximizing profits but also generating
goodwill to business players.
Ethics
that we mean in this paper is sets of moral principles or values that define
right and wrong for a person or group (Williams, 2009). Business ethics is the
application of ethics into business situations. It pertains to the moral
behavior or practices of investors/capitalists on how they conduct the affairs
of their ventures which would include, but not limited to, the choice on what
kind of business to operate, deciding on where the business will be located and
who are the target market, the process of hiring personnel, the means of
acquiring materials, equipment, inventories and supplies, securing business
licenses and permits and settlement of tax liabilities, and promotional
strategies employed and channels of advertising or enticing customers to buy-in
their products. According to an SHRM/CareerJournal.com survey, only 27% of
employees felt that their organization’s leadership was ethical. In another
study of 1,324 randomly selected workers, managers, and executives across
multiple industries, 48% of the respondents admitted to actually committing an
unethical or illegal act in the past year. These acts included cheating on an
expense account, discriminating against coworkers, forging signatures, paying
or accepting kickbacks, and “looking the other way” when environmental laws
were broken. Clearly, poor business ethics is a serious and widespread problem.
For
this part, I would like to delve on the areas of human resource management,
purchasing and production, advertising and promotion, and tax settlement, among
others.
Human Resource Management
A big
part on the success of every organization, at large, rests on the functional
business area of human resource management. Research found that effective human
resources management has a positive impact on strategic performance, including
higher employee productivity and stronger financial results (Daft &Marcic,
2011).
The
recruitment plays a very vital role in the employment of the rightly motivated,
competent, excellent and fitted personnel to the positions required in the
business. Giving due consideration to race, religion, gender, age, among
others, is not totally discriminative for as long as everyone is given equal
chances in the recruitment phase. I would say, the main consideration in
choosing manpower complement is their willingness and drive to uphold and work
for the attainment of the company’s vision and mission. According to Dart and
Marcic, when selecting an employee, make sure you have enough means of seeing
all sides of the person’s personality and qualifications. Don’t just look at
the superficial criteria. During the interview phase, to name a few, asking the
applicant’s ancestry or ethnicity, religious affiliation, if applicant has any
mental or physical defect, are deemed inappropriate or illegal to ask (Sources:
Bohlander, et. al., Managing Human
Resources, 2001; Mathis & Jackson, Guidelines
to Lawful and Unlawful Pre-employment Inquiries, 2002).
Effective
performance management is also a very essential system that must be given
attention. This ensures the retention of the best talents, motivating the less
effective workforce and objectively laying out the non-performing personnel.
The dilemma in the business system is the absence of a systematic performance
management tool to measure how people are contributing to the attainment of the
goals and objectives of the organization they belong to. Hence, the performance
of every employee, or each of the functioning units, is not appropriately
assessed and evaluated. With this, sometimes, inappropriate recognition and/or
remuneration are given to whom it is not due. As a result, it creates
demoralization among the people thus; causing the best talents to exit from the
organization, leaving behind the less effective ones because of the unethical
system of managing performance on a subjective manner. One approach to overcome
performance evaluation errors is to use a behavior-based rating technique such
as behaviorally anchored rating scale (Daft &Marcic, 2011). The BARS is
developed from critical incidents pertaining to job performance. Each job
performance is anchored with specific behavioral statements that describe
varying degrees of performance. By relating employee performance to specific
incidents, raters can more accurately evaluate an employee’s performance.
Another
aspect that must be given careful attention is the establishment of a
competitive and motivating compensation and benefits package to the workforce.
As part of the benefits package, the company must ensure the healthy well-being
of its people which may be incorporated through leave privileges, health and
medical insurance, social security benefits, among others. The company owner
must also ensure that the employees are receiving what is provided for by
statutes, meaning compensation package must be aligned with existing wage laws.
Further, regardless of the status of employment of the personnel, whether
regular, temporary, contractual or casual, they must be ascertained of security
of the tenure of their work in accordance with their contracts for as long as
these people does not perform unethical affairs and activities which violate
the company’s vision, and existing policies, rules and regulations resulting in
detrimental consequences to the company.
As
employees have ethical obligations to his employer, the business owner also has
ethical obligations to his people. That is to ensure that their welfare is well
taken care of while being conscious in attaining its gainful target.
Purchasing and Production
Customers
are often regarded as the most critical stakeholders. If a company cannot
persuade them to buy its products, it cannot stay in business. Thus, business
sells customers quality products at a fair price and providing good after-sale
services (Jones, 2007). In order to maximize profits, there has to be an
accessible source of low-priced products without sacrificing quality as this
may affect the company’s integrity which eventually would boil down to losses
rather than gains. Reducing costs by selecting suppliers that offer high
quality raw materials and components at reasonable prices (Pride, Hughes and
Kapoor, 2010). This is in support to the hybrid competitive strategy called
“best cost” where an organization sells products at high quality for a considerably
lower price (St. John & Harrison, 2010). Due to cost considerations,
however, the sourcing out of low-priced materials of good quality may seem difficult.
Thus, businesses look into other possible channels or means. Some may resort to
buying items, good for resale, used to conceal contrabands and other illegal
commodities (e.g. drugs, firearms, etc.). Since they see this practice as a
lucrative means to profiting large amount of money, their ethical behaviors are
overshadowed by their want for high gain and lose sight on the possibility of
being identified to illegal activities. That when uncovered, it may bring the
business venture into nothingness.
Advertising and Promotion
Marketing
is an organizational function and a set of processes for creating,
communicating, and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders
(Jones, 2007). With the aim of attracting its target market, a business
organization would exhaust all means and anything available even if it means
high cost of advertising expenses. Most businesses nowadays are fond of using
prominent personalities like the actors and actresses of various television
stations just to catch the attention of the public towards their products.
However, at some points, the strategies employed by these advertising agencies,
I would say, are unethical because it brings deception among people
particularly the less educated portion of the populace. Advertising strategies
bring various products to the limelight exceeding their actual effectiveness
when consumed by the buying public. While business owners do not have direct
intervention on these promotional strategies, I believe that it is still their
call to impose on the advertising agency, the manner how their products be
introduced to the market.
One
classic example is a known brand of RTW marketing underwear, jeans, and shirts,
among others. As any company exists to get the largest network of buyers and be
able to build the highest income, so this business group does. However, it does
not advertise its products using naked men and/or women on television screens
and on high rise wide billboards just to capture everyone’s attention. This is
so because its owners are said to have high regard on the moral of people who
will be made to wear their products with their bodies exposed for the gain of
the company.
Another
example of unethical practice is blatant to food service businesses
particularly those selling pastries. So as not to incur much loss with their
expiring food products, they sell them on discounted prices. This practice
endangers the health of the buying public most especially those who are not wary
on the importance of looking into the expiry dates of the products.
One
more viral strategy of marketing nowadays is the multi-level marketing or
networking system. These business organizations act by luring customers and
would-be dealers or networks with a promise of high income. In return, these dealers/networks,
in order to be able to beat the quota and meet the expected return, they will
venture into strategies of promoting the company’s products to the extent of
promising idealistic benefits which they are not even primarily cognizant of.
These
foregoing practices of advertising and marketing on the foreground benefit
primarily the business owner to the detriment of the consumers.
Tax Settlement
A
business venture must be legally organized and instituted in accordance with
existing laws and rules which regulate the appropriate conduct of its affairs
including the discharge of its obligations to its stakeholders including, among
others, its manpower, market, the community and the government.
Ethics
comes in initially from the time of applying for business permits and licenses.
Business owners must comply with all regulatory requirements and must pay
necessary monetary obligations without succumbing themselves to some
facilitative strategies just to hasten the process and go away with the
standard long queue of waiting for the papers to be done.
Another
critical aspect which has already been a perennial issue in the tax system of
the country is in the area of tax settlement. Business owners crave for large
percentage of income that they do all means to cut costs of purchases and
expenditures in order to generate higher income. Higher income would also mean
higher amount of tax liabilities to the government. Ironically, sometimes businesses
are maintaining two books of accounts: one for financial statements purposes
and the other for income tax filing purposes. With the latter, business owners
tend to report much lower income generation as against the actual as reported
in their audited financial statements. This strategy is done to cut down tax
liabilities to the government.
Another
issue in the tax system is the payment of facilitative charges to tax
examiners. This holds true primarily to large taxpayers who are assessed by the
Bureau of Internal Revenue (BIR) for not paying a considerable huge amount of
taxes to the government. To illustrate, Company A is assessed of not correctly
declaring its income and paying the correct taxes of P5, 000,000.00 for the
last five years. After being assessed, they will be directed for audit by the BIR
examiners. These examiners may be bribed with an amount of money to facilitate
the tax audit. If these examiners would agree to the amount, the audit process
will be shortened and the tax liability is considerably reduced. Thus the
business owner gains, the BIR examiner profits, and the government loses.
Company
B, however, illustrates an ethical behavior in business. The BIR assessed the
company for not paying P5, 000,000.00 in taxes for the last five years. It is
good to note that the company is ready with its books of accounts, including
all needed supporting documents, and presented them to the BIR examiners in
good faith. An offer from the BIR team of examiners was made to shorten the
audit engagement, and reduce the tax obligation by 50% in exchange of an amount
(payable to the examiners) as facilitative charges. Considering the costs
involved during the period of audit, the company may have agreed. However, the
company owner insisted on proceeding with the audit engagement regardless of
the cost accruing to them. In the end, the company was assessed only with P150,
000.00 tax liability. They may have incurred additional costs during the audit
engagement, but the prize of letting the BIR team of examiners know that they
are doing business in good faith, is another thing. After that, there were no
more BIR examiners wanting to be assigned to audit that company. These
unethical practices in the tax system of the government need an immediate cure.
Conclusion
Business
organizations play a very important role in promoting progress, growth and
development in the community. In fact, there had been a growing participation
in corporate social responsibilities through donations in calamity-stricken
communities, instituting foundations for the poor, etc. But the question plays
on whether this value has already been instituted in their system or does this
remain only a show off.
Ethics
in business must be well valued and guarded not only to gain goodwill and
maintain integrity for the organization but most importantly to ensure equal
protection and promote the general welfare of its stakeholders and the
community as a whole.
Managers
can encourage more ethical decision making in their organization by 1) carefully
selecting and hiring employees, 2) establishing specific code of ethics, 3)
training employees to make ethical decisions and 4) creating ethical climate.
The
code of ethics urges employees to conduct themselves as responsible and
responsive corporate citizens, respect the environment, maintain high level of
legal and ethical conduct, and deal honestly and fairly with customers (Daft
&Marcic, 2011). Creating ethical climate starts from top management. First,
they need to be a visible role model. Second, communicate ethical expectations
in the organization and provide ethical training. Third, visibly reward ethical
acts and punish unethical ones (Robbins & Judge, 2010).
Several
advantages result when companies behave in an ethical way. First, companies
known for ethical behavior enjoy a good reputation. Reputation is the trust,
goodwill, and confidence others have in a company such that they want to do
business with. A second reason for companies to behave ethically is because
when they don’t, the government (and taxpayers) has to bear the costs of
protecting their stakeholders. If all companies in a society act socially
responsible, the quality of life for people as a whole increases. Business
activity affects all aspects of people’s lives, so the way how the business
behaves toward stakeholders affect how stakeholders will behave toward
businesses. You “reap what you sow” as the adage says.
REFERENCES
Daft, Richard L. and
Marcic, Dorothy, 2011.Management: The New
Workplace, 7th Edition. South-Western Cengage Learning.
Jones, Gareth R.,2007.Introduction to Business: How Company Create
Value for People. McGraw-Hill International Edition.
Pride William M.,
Hughes, Robert J., and Kapoor, Jack R., 2010. Introduction to Business, 10th Edition.South-Western
Cengage Learning.
Robbins Stephen P. and
Judge Timothy A., 2010.Essentials of
Organizational Behavior, 10th Edition. Pearson Education, Inc.
St. John, Caron H. and
Harrison Jeffrey S.,2010. Strategic
Management Fundamentals, 5th Edition.South-Western Cengage
Learning.
Williams, Chuck R.,
2009. Principles of Management, 5th
Edition.South-Western Cengage Learning.
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