Business ethics is one of the most dynamically developing areas of the national and international business communities. Although there is no unanimous scholarly opinion nowadays ( the opponents of the idea led by Milton Friedman fervently criticize the development of the business ethics institutions advocating the statement that it annihilates the very essence of corporation as a revenue source), the practice clearly manifests that business ethics is vitally important for the development of business in general and international commerce globalization in particular. Moreover, the gradual, coherent and consecutive congruence process is crucial for the effective functioning of the business units nationally and worldwide. The evolution of business is highly affected by numerous determinants, including the never-ending technological advancements, the re-orientation of the international economy and constant changes in the international business models. Another external factor which heavily contributes to the alterations of the existing canons of business ethics is the occasional interference of the state controlling authorities and escalated activism of the multiple social organizations.
However effective the regulatory and controlling mechanisms of the business ethics may seem to be, the objectives of business ethics evolution are rarely fully accomplished due to the various reasons. The most problematic areas of the United States business ethics are the following:
- The Ethics of the Managers in general.
- The Ethics of the Managers in the Employment Sector
- The Area of the Obligatory Public Control of the Internal and External Spheres of the Business Unit or Business Corporation
- The Issues of Social Responsibility
The aim of this proposal is to identify the existing problems of the abovementioned sections of the business ethics, to substantiate and justify the need to change the existing standards and regulations, to outline the nature of the available solutions, to consider possible legal and other limitations and to make accent on the advantages of the proposed changes.
Background of the Corporate Ethics in the United States of America
The development of the corporate ethics globally and domestically must be fully consistent with the pending legal regulations. The activity of the business units in the United States of America is governed by the statutory law, case law and internal legal regulations of the discussed business units.
One of the most legally significant legal instruments is the Model Business Corporation Act. Drafted by the American Bar Association, this document is ubiquitously regarded as one of the most influential legal mandatory prescriptions, which although indirectly channel the development and evolution of the Corporate Ethics of the United States of America. This act provides in particular that the institutional, business and social deportment of the business units incorporated under the provisions of this act must be “ethically consistent”. However, what business and social demeanor must be considered ethical is not defined by this act. Another important business ethics framework includes the so-called Delaware General Corporation Law. The system stipulated by this instrument is well-balanced, and since there is no obligation for the companies in the USA to operate in the place of their geographical registration, the overwhelming majority of the medium-scale and large-scale business units of the United States of America follow this business model. This model is more ethically sophisticated, since the act squarely prescribes the officials of the company responsible for the adoption of the ethical decisions and for the supervision that all the decisions adopted is completely ethically and legally concordant.
The acts that indirectly regulate the corporate ethics sphere include 1933 Securities Act, which is primarily focused on the deportment of the companies while partaking in the securities and other transactions. Securities Exchange Act 1934 in its turn governs the way the stakeholders of the process shall behave, although that is done indirectly and no sanctions are imposed for the violation of the ethical provisions. One of the most influential legal instruments indirectly imposing ethical prescriptions and limitations is the widely cited Sarbanes-Oxley Act, which mandates all business entities, regardless of their size and industrial affiliation to act completely ethically, both on the territories of the United States of America and internationally as well. The business units are obliged to act ethically in all business areas in general and in foodstuff and beverages production, environmental concerns, drugs and medication distribution and in other areas of production.
Apart from being regulated by the statutory legal provisions, the process of the business ethics development is heavily determined by the provisions of the case law. In Santa Clara County v. Southern Pacific Railroad, it was ruled that the companies incorporated under the laws of the United States of America are granted with the respective rights and immunities under the Fourteenth Amendment of the USA Constitution, but at the same time this court decision imposed an obligation over the companies to act ethically in accordance with the constitutional and other ethical provisions of the applicable company law of the USA.
Overall, the unanimous scholarly opinion of the United States academics is the following. While the entire system of the company and corporate law of the United States is very complex and sophisticated in its nature, not a single legal instrument encapsulates the obligation of the companies to fulfill specific business ethical obligations. In Cinerama, Inc. v. Technicolor, Inc. , the court established that it is up to the discretion of the companies to resolve what shall be considered as ethical prescriptions, to resolve whether they are to be followed and to interpret them as well.
The Formulation of the Existing Problems
The Driving Forces
Before the problems of the business ethics development and evolution are defined, it is necessary to outline the driving forces which contribute to the development of the business in general and business ethics standards in particular. The perception of these factors is crucially important, since when the factors are duly perceived, it possible to assume in which spheres the existing standards of the business ethics are in need of being updated and altered. The first factor is the development of the technology. The recently achieved technological advancements have greatly simplified the production cycle. This trend is of special concern to the industry-oriented and service-oriented business units. To be more exact, the automation of the production cycle squarely affects the evolutionary processes of business ethics. To exemplify, the installation of the automated machinery to the production cycle of the enterprises is among the roots of the massive layoffs of the United States of America, due to the fact that manual labor is no longer in demand. Employment ethical considerations are among the most heavily affected by the technological revolution and therefore the technological aspect is to highly be considered in this proposal.
The second determinant of the ethical revolution is the globalization processes. The economy of the United States of America is becoming more and more integrated to the international business community and the ethical trends of the major contracting countries are to be focused (Allen, 2000). In particular, cultural and economic characteristics of the European and Asian countries are to be necessarily taken into consideration. The way of deportment of the commercial institutions which may be fully admissible for the domestic business entities in the United States may be ethically totally inadmissible for their contractors in Europe, Asia and other regions of cooperation.
The third factor affecting the evolutional process of the contemporary business ethics is the issue of intangible assets. The way the immaterial values of the company which are to be treated respectively require specific ethical approach, and the way their framework is changed definitely affects the development of the ethical system.
The latest issue which is to be highly accentuated is the so-called war for talents. Whilst the nature of the companies have been fundamentally changed, the human resources of the companies still remain and important aspect of the internal and external effective functioning of the business unit. Within this section, the companies, corporations and other legal entities must treat each other ethically, in order to ensure that the existing provisions of the United States competition and antitrust law are fully observed.
The Most Conspicuous Ethical Considerations and Problems
With regard to the above stipulated driving forces of the business ethics development, the following sections of the existing corporate ethics are to be highly reconsidered by the authorized public authorities.
a) Managerial Ethics
The managers of the business unit are those, who on the daily basis encounter complex situations which are to be resolved and special scrutiny shall be laid over the ethical consideration of the managerial decisions. The most important aspect of this section, according to the leading academics of the United States labor law is the dismissal process. Legally, the selectivity process is fully regulated by the pending laws, bylaws and statutory regulations of the United States of America. Legal practice explicitly manifests that the selectivity process when the layoff is to be made is strictly subjected to the existing state and federal labor law of the United States of America and internal legal prescriptions of the companies.
In the context of managerial ethics section the key problem is that the selection process is not ethically regulated at all. In other words, the companies are not legally mandated to act ethically when the need to dismiss a person arises and normatively it is not stipulated what professional is to be dismissed.
b) Obligatory Government Control over Specific Areas of the Business
Specific areas of the business are subjected to the obligatory state control. To be more exact, tax collection procedures, the observance of the existing environmental concerns are supervised by the authorized government agencies. Failure to comply with these regulations ultimately leads to the imposition of the sanctions on such entities.
The problem of this section of the ethical paradigm is the fact that the process of effective controlling and motivational strategies is becoming more and heavier financially for the controlling authorities. The federal and the state budgets are lacking sufficient resources to finance the controlling programs effectively. Numerous ethical violations take place when the companies employ legal and financial strategies with the intent to perpetrate tax evasions and to maximize the profits accrued by the enterprise. To summarize, the problem of this paradigm is the fact that it is not officially established that maximizing the profits generated by the company at the expense of the tax collections is nothing but an flagrant ethical transgression.
c) Social Responsibility Issues
A great many of the business entities incorporated domestically in the United States of America proclaimed to have social responsibility policies. The companies declared that they will contribute to the development and thrive of the communal institutions, educational, environmental and healthcare sectors in particular. Unfortunately, for the majority of the companies the social responsibility declarations are merely the means to obtain the tax privileges and immunities and nothing is done practically to ensure that these declarations are indeed implemented by the companies.
The problem lies in the non-obligatory character of the social responsibility declarations. To be more exact, the business entity is free to declare whatever positive social responsibility program it considers necessary, but no one can effectively control the implementation of such programs. More importantly, no one can efficaciously enforce such provisions, except for the authorities of the company itself.
The problem of with the managerial ethics
Considering the rising importance of the employment disputes and the adoption of the several landmark cases by the United States court instances, it has become evident that the ethical issues for the managers and their daily employment practice shall be systematized and encapsulated into a single document.
The most acceptable option here seems to be to contact the American Bar Association and to solicit them to elaborate the single code of ethics for the managers of the US business entities. Before the manager is appointed to occupy a specific managerial position he or she must be obligatorily requested to pass an examination signifying that the manager is fully informed about the existing standards of the ethical conduct.
With regard to the enforceability of the ethical standards, it is highly advisable Untied States congress to create a specific supervisory state authority. Moreover, it is highly advised for the companies to include the violation of this Code of Managerial Ethics to the admissible grounds of instant dismissal of the employees.
The Problem with Effective Public Control
As stated in the problem formulation section, the government spends billions of dollars annually to ensure that the existing mandatory tax and environmental provisions are fully observed. It seems to be reasonable to shift these issues to the corporate ethics paradigm so the employment of the sophisticated tax collection schemes becomes the preoccupation of the managers, but not the tax inspectors. Or in other words, it is advised to make it legally binding to encapsulate the discussed provisions into the Codes of Ethics.
The Problem with Social Responsibility
With regard to this aspect, it is highly advisable for the government authorities of the United States of America to shift this aspect from the ethical paradigm to the legal one. Considering the increased profitability of corporations in the USA, the increased unemployment rates and re-orientation of the business entities from the utilization of the manual labor to the intellectual one, the declaration of the social responsibility policy shall no longer be an option, but an obligation of the business entities.
Provided that this policy is legally supported and enforced by the authorized government agencies, it can be justly assumed that the business will become more contributive to the development of the community and common welfare of the United States community will be considerably enhanced.