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Solutions to Unethical Business Practices in America




Executive summary

The problem of unethical business practices in the US persists in spite of the efforts of the business community of the US to tackle this problem. In actually, cases of frauds and unethical behavior in largest American corporations, such as Enron, undermine the trust of international investors as well as American ones in the reliability of business and responsibility of business in the US. In this respect, the problem of unethical business practices cannot be viewed as a mere business problem. In stark contrast, the problem of unethical business practices derives from the ineffective socioeconomic and political system which exists in the US today. The close interdependent of business on politics and vice versa creates favorable conditions for corruption and unethical behavior of top executives of the largest corporations, who feel the support of politicians and believe in their untouchable social standing.

However, unethical business practices are punishable but it is important to prevent such practices. To meet this goal, it is necessary to change the existing socioeconomic and political system. To put it more precisely, it is necessary to separate political and business elite and introduce code of ethics and principles of proper ethical conduct in all companies operating in the US. The introduction of such codes of ethics should be the manifestation of the reliability of the company and its devotedness to principles of fair and ethically correct business.

Introduction

Today, the problem of unethical business practices is one of the major challenges to the development of business in the US because the public as well as business environment are growing more and more concerned with ethical responsibility of businesses and proper, ethical conduct of companies and their executives. However, the current situations and notorious cases of unethical behavior of largest American corporations, such as Enron, prove the fact that unethical behavior is a persistent problem that affects consistently the development of business in the US and the US economy at large. In this respect, it is important to lay emphasis on the fact that the problem of unethical business practices is closely intertwined with and, to a significant extent, determined by close interdependence between business and politics. This alliance makes unethical business conduct a norm and encourages large corporations and top executives to ignore business ethics. The modern politics tends to distance from business and commercial activities because the engagement of politicians in business activities can threaten to their political future and, therefore, to their political career. The modern society is very concerned with the separation of business and politics because the intersection of business and politics creates favorable conditions for the emergence of corruption and progress of illegal relationships between politicians and businessmen. In this respect, it is important to underline the fact that such cooperation between politicians and business is absolutely unethical and, what is more important, it can be extremely harmful not only to the national economy but also to the existing social order because it violates fundamental principles of democracy and free market economy, such as the principle of equality, fair competition, separation of powers, etc.

At the same time, it should be said that the involvement of politicians into business activities and the support of business by politicians used to be almost a norm in the past and lobbyism of economic interests of certain groups was a part of the political reality. At the present moment, the situation has started to change because the role of public opinion has increased consistently in both politics and business that made such cooperation between politics and business unprofitable in case if the link between business and politics is revealed. In this respect, it is possible to refer to the downfall of Enron which was accompanied by the scandal related to the enrollment of politicians into the business activities of the company. In fact, the company has managed to gain the support of politicians which allowed Enron to maintain a relatively stable position and avoid collapsing. Basically, this case revealed the extent to which relationships between business and politics are unethical. Consequently, the problem of unethical business practices can be solved only on the condition of the elimination of the close, unethical relationships between business and politics, which creates favorable conditions for corruption and ruins the moral and ethical foundation of business in the US.

The interdependence of business and politics as the ground for unethical business practices

The relationship of large corporations and politicians were traditionally a subject of numerous discussions and arguments because the involvement of large corporations in political campaigns and their sponsorship of certain politicians or political forces raises a number of serious problems which may refer not only to ethical sphere but also to the legal domain. In this respect, the practices of Enron are quite arguable from ethical point of view but the court rule indicates to the fact that the corporation’s policy was legal and acceptable from legal point of view. At the same time, it is obvious that the support of politicians and political forces by such a large corporation as Enron contributes to the formation of specific relationships between the corporation and politicians it supported because the latter felt obliged to the company, while the company is willing to get revenues on its investments regardless the field where the investments were made, even if it is politics (Bolt, 284).

In fact, the support of politicians and political forces by Enron and acceptance of such a support by the court as a protected speech raises a dilemma. On the one hand, such a support is formally correct and it does not violate existing laws and legal norms. On the other hand, it is necessary to understand the fact that such a support naturally creates certain responsibilities of politicians in face of the company (Hesselbein, et al., 162). In such a situation, politicians accepting the support of such a large corporation as Enron should be conscious of the fact that they will be responsible to the company and they can hardly cope with the pressure from the part of the company.

Such a pressure does not necessarily mean some legal actions targeting at politicians but the refusal of the corporation to support a politician can be disastrous for his or her electoral campaign. At this point, corporations like Enron have large advantages over the politicians because the latter need funds. Today, it is practically impossible to raise funds sufficient to defeat opponents without the involvement of large corporations like Enron (Brown, 129). Consequently, politicians do need Enron and the like, even though they will have to implement certain decision in return for the support of large corporations.

However, such a practice is unacceptable in a truly democratic state. In such a situation, it is necessary to introduce changes on the legislative level in order to avoid such dilemmas. It is necessary to limit the support of politicians and cut their expenses on their electoral campaign that will naturally make them less dependent on large corporations which can supply them with substantial funds. In addition, the financial support of politicians should not involve any actions in return (Benfari, 154). What is meant here is the fact that the support of a politician is a benevolent act and it should not be rewarded or compensated in one way or another.

Thus, the practice of close interrelationship of large corporations like Enron and politicians should be controlled and limited in order to avoid growing impact of large corporations on politicians. In this respect, it is worth mentioning the fact that Enron has managed to gain the support of both leading political forces in the USA, the Republicans and the Democrats. In fact, the representatives of the Republican and Democratic Parties remained inactive, while the company attempted to manipulate in the market, maintaining their profits and spreading rumors concerning the stable position of the company even when the first signs of the crisis in the company has already become obvious.

In this respect, it should be said that the political support of such companies is absolutely unethical and violates not only legal but also ethical norms of the modern society, as well as basic principles of politics and economy (Madsen and Shafritz, 346). In actuality, the development of business has to be separated from the politics because the interaction between politicians and businessmen can contribute to the development of corruption.

On the other hand, it is necessary to underline the fact that leading political forces in the USA need more and more financial support and they need to raise funds for their political campaigns to remain in power (Dessler, 173). Obviously, in such a situation, the assistance of private companies and business at large can be very helpful. As a result, the dilemma arises: whether politicians should accept the financial support from such companies as Enron that actually creates certain moral and ethical obligations from the part of politicians to such companies or, probably, politicians should sacrifice their funds for the sake of maintenance of ethically just principles and refuse from the support of business. At the present epoch, many politicians tend to the former, regardless of the growing pressure from the part of the public.

Ethical decision making model

In order to better understand the negative effects of the unethical cooperation of politicians and business and support of business interests of such companies as Enron by politicians, it is necessary to dwell upon the decision making model which actually reveals the extent to which unethical behavior and decisions taken by top executives of Enron and representatives of both the Republican Party and the Democratic Party affected ordinary American citizens, including Enron’s shareholders, employees as well as all those people who voted for the politicians who supported Enron and allowed its top executives to maximize profits, even though the company did not have actual, fair opportunities for this (Benfari, 216).

First of all, it should be said that the cooperation of Enron and politicians was mutually beneficial. To put it more precisely, Enron supported the electoral campaigns of politicians and provided them with financial resources, which actually allowed politicians to take seats in the legislative power of the USA. However, it was not a sheer charity from the part of the company. In stark contrast, the company demanded the adequate actions in response from the part of politicians (Khor, 252). In fact, politicians who received the financial support of Enron were supposed to protect business interests of the company through implementation of political decisions which can influence the position of Enron in the market or, at least, which can maintain its position of the company stable.

At this point, it is extremely important to underline the fact that the financial support from the part of Enron a priori created the situation which is arguable from the ethical point of view. In actuality, it is possible to speak about several ethical issues raised by the financial support of politicians by Enron. First of all, the amount of the financial support of political forces or individual politicians by such a company as Enron is very important. In fact, it proves beyond a doubt that Enron has its own interests and it supports politicians in order to create an interest group which can protect commercial interests of the company at the political level. In this respect, another ethical issue arises – whether politicians should accept such a financial aid from the part of such a company as Enron because they are elected to protect national interests, i.e. interests of American people but not the interests of a company or interests of a small group of people (Russell, 81). Furthermore, the actual purposes of the financial support of politicians by companies such as Enron can remain unclear when the general strategy of involvement of the company into the political life remains unclear. To put it more precisely, Enron supported politicians representing rivaling parties that apparently indicates to the fact that the company was interested in the support of certain political force. In other words, the company did not have any political ground which could explain its financial support of certain political force by purely political motives, while the support of political rivals proves the dominance of economic but not political interests in decisions taken by the top executives of Enron when agreed to support politicians. In such a situation, the question arises: whether the public should be informed on such controversial support by politicians as well as the company itself or not and the answer to this question defines whether the policy of the company as well as behavior of politicians is ethical or not.

In fact, it is obvious that the case of Enron financial support involves at least there stake holders. The first stakeholder is the company itself since it agrees to finance political campaigns and, therefore, takes certain financial obligations. On the other hand there are representatives of two political parties, who receive the financial resources of Enron and, in such a way, imply that they accept certain obligations in regard to the protection of interests of the company at the political level (Mohrman, 213). However, it is obvious that representatives of two competing political parties could not stand on the same political ground and, therefore, their programs are different that means that they could not accept the financial support from the part of Enron if it imposed obligations which contradict to their political programs. The existence of such contradiction is obvious because Enron, as any other company or individual supporting a political force, is supposed to support the program of this political force, but the company should not expect to get some financial benefits in return, i.e. a kind of return on investments. But the support of both political forces clearly indicates to the fact that it is commercial benefits that Enron counted for when it supported both the Republicans and the Democrats.

However, it is necessary to remember about American citizens who are also stakeholders because it is American citizens who vote for politicians and whose life and well-being is highly dependent on decisions taken by politicians (Brown, 220). In such a situation, it is absolutely unacceptable from ethical point of view when politicians receive financial support from the company which has already supported their political opponents and, what is more, which expects for lobbyism of its interests by the politicians, while the interests of people, the main source of power in the USA, turns out to be secondary.

In such a situation, it is obvious that Enron as well as politicians should develop alternative ways of interaction. To put it more precisely, the company should support one political force only. This would be a clear, comprehensible and fair policy of the company, which does not raise ethical issues concerning the possible economic implications of such a support (Khor, 274). At the same time, political forces should reject the financial support of the company which has already supported their opponents because it is absolutely unethical and undermines the public image of political forces.

Consequently, the support of rivaling political forces by Enron is unethical as well as the acceptance of such support by politicians because it creates implications for the lobbyism of interests of the company by politicians instead of their work for the well being of American people at large.

At the same time, the aforementioned practices encourage unethical conduct of American companies and their executives. In actuality, the lack of transparency in business-politics relations and the problem of unethical business conduct lead to the violation of the principle of fair competition (Brown, 238). As a result, unethical business practices become an effective tool with the help of which companies can take a competitive advantage in their business, whereas politicians using financial support of business cover unethical practices of their supporters.

In such a situation, the elimination of the close interaction between business and politics will help to minimize the risk of unethical business practices. In fact, without political support, business will act responsibly because, in the open market economy where the fair competition rules, unethical conduct of companies can undermine their position in the market as soon as their unethical conduct becomes a subject to public debates (Stewart, 183). The reputation is an extremely important concept all modern companies have to take into consideration.

However, the elimination of close relationships between business and politics is only a part of the solution of the problem of unethical business practices. To tackle this problem effectively, it is necessary to introduce the new philosophy of business, which should be ethically responsible business (Brown, 281). For this purpose, it is necessary to introduce codes of ethics and principles of proper, ethical business conduct en masse. In fact, codes of ethics should become an essential element of the organizational culture of modern corporations because they will define the ethical behavior within corporations and their business practices in the market.

At this point, it is worth mentioning the fact that codes of ethics should involve all professionals working within organizations. In other words, all professionals should participate in the development of codes of ethics and observe their norms and rules, from an average employee to a top executive. The equality of all professionals and their ethical responsibility should be closely intertwined with their professional responsibility (Khor, 306). What is meant here is the fact that the violation of norms and rules of codes of ethics should lead to the punishment of those who violate them. Therefore, codes of ethics should be not just abstract codes which do not involve any responsibility but, instead, they should involve the system of punishment, including such measures as fines, transfer to a different or lower position, and dismissal. The list of measures to punish the violation of codes of ethics can be longer but the main point is to increase the responsibility of business and professionals working in all organizations through making them liable to certain punishment for the violation of ethical norms and the punishment should be defined by the scope and effects of the violation of codes of ethics.

Conclusion

Thus, taking into account all above mentioned, it is possible to conclude that the prevention of unethical business practices starts from the elimination of causes of such practices. In this respect, the increasing cooperation and close relations between politics and business are among major causes of unethical business practices in the US. In actuality, both businessmen and politicians should take ethically justified decisions. Otherwise, the dominance of their private interests over the interests of the public undermines basic democratic principles and existing social order. In fact, the support of rivaling political forces by business is absolutely unacceptable because it clearly indicates to the presence of economic interests of the company and the domination of these interests over political interests as well as it creates implications for ignorance of interests of the public.

In such a situation, the elimination of close relationships between business and politics will undermine the basis of the unethical business practices because business will be defenseless in face of fair competition and public opinion. In addition, it is necessary to introduce codes of ethics which should define principles of business conduct, establish basic ethical norms and rules. Moreover, codes of ethics should incorporate the system of control and punishment in case of the violation of their norms and rules. Finally, it is important to make ethical norms and principle truly equal to all professionals working in business, from an average employee to a top executive. Thus, business will become free of unethical business practices or, at least, unethical business practices will decline.

Works Cited:

Benfari, R. C. Understanding and changing your management style. San Francisco: Jossey-Bass, 1999.
Bolt, R. A Man for All Seasons. New York: Vintage Books, 1960.
Brown, D. C. Leading complex change. New York: Touchstone, 2003.
Dessler, G.  Management: principles and practices for tomorrows’ leaders (3rd ed.). New Jersey: Upper Saddle River, 2004.
Hesselbein, F., Goldsmith, M., & Beckhard, R. (Eds.). The Leader of the Future: new visions, strategies, and practices for the next era. San Francisco: Jossey-Bass, 1996.
Khor, M. Global Economy and the Third World. New York: New Publishers, 2001.
Mohrman, S. A. Tomorrow’s organization: Crafting winning capabilities in a dynamic world. San Francisco: Jossey-Bass, 1998.
Madsen, P., Ph. D., and Shafritz, J. M., Ph. D. (Eds.). Essentials of Business Ethics. New York: Penguin Books, 1990.
Russell, G. Introduction to Philosophy. New York: Random House, 2003.
Stewart, G. Ethics. New York: Routledge, 2002.



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