Intense competitiveness in the current business environment forces corporations to continuously improve their products and processes in order to develop and maintain a competitive edge. This is because the ultimate objective of every business organization is the maximization of shareholder wealth. In order to maximize shareholder wealth, businesses do everything in their power to maximize the level of profits that they generate. However strategies aimed at profit maximization are difficult to formulate efficiently and effectively because on their way to profit maximization, the managements in business organizations have to satisfy stakeholder needs which are diverse. This diversity also leads to conflicts. The diversity arises from the great number of parties both external as well as internal to the organization which are directly or indirectly impacted by the decisions arrived at in corporate circles. Thus every corporation has two categories of stakeholders: internal stakeholders and external stakeholders (cited in Shaw, 2007). Ethical dilemmas arise because of the tension that the management in a corporation experiences in trying to satisfy needs from different stakeholders that strive to take the corporation in their own directions.
Diverse stakeholder needs lie at the heart of ethical dilemmas that the management in a corporation has to tackle from time to time. Therefore understanding stakeholder needs is vital to developing an organizational culture where employees see the value of ethical conduct to the extent that they are prepared to actively engage in implementing the principles of ethical conduct. When it comes to navigating the diversity of stakeholder needs, it is useful to organize them into definite categories. One such categorization involves viewing them as external and internal stakeholders, as mentioned before. Another categorization is possible based on whether the stakeholder group involved is directly impacted by the corporation or not. According to these criteria, stakeholders may be categorized into primary and secondary stakeholders (cited in Shaw, 2007). The primary stakeholders, such as employees and customers are directly affected by the decisions that the management of a corporation makes. The secondary stakeholders are comprised of the government and the media which are only indirectly impacted by the operations of a corporation.
As mentioned before, every corporation strives to maximize its profits in its effort to maximize shareholder wealth. However that objective cannot be reached in the current business environment unless the corporation respects the rights of different stakeholder groups. When it comes to the rights of the primary stakeholders for example, the corporation cannot simply lay off its employees at will in times of trouble. In this respect, the corporation will have to have specific rules and regulations which will have to be communicated to the employees. An organization also has the responsibility of making its products safe for the consumers so that even if they misuse the product, they are not likely to be harmed by the product. This is an ethical responsibility on the part of the corporation related to product safety. Corporations also have the responsibility of paying taxes to the government as it has the responsibility within certain limits of keeping the media informed of its different activities. In spite of all this, the corporation cannot compromise on its basic premise of maximizing shareholder wealth. It would appear that inasmuch as maximizing shareholder wealth is the basic tenet of a corporation’s existence, its shareholders are its most important stakeholders. That is not true inasmuch as all the other stakeholders present an equally relevant threat to its existence if the corporation fails to address their needs. Examples of unhappy stakeholders may be employees going on strike or consumers boycotting the corporation’s products or the media circulating negative exposure. All these activities on the part of its stakeholders could threaten the corporation’s very existence. Therefore the need for developing an ethics program from a business point of view is very clear.
Developing an ethics program is directly related to the organizational culture of a corporation. The organizational culture of a corporation consists of a set of shared beliefs, values and attitudes. These values, beliefs and attitudes will have to promote the ethics program so that both the formal elements and the informal elements of an organizational culture are in alignment. However developing an ethics program is a difficult task not just because changing an organizational culture is equivalent to countering massive gravitational forces from employee resistance, but also because there is no single ethics programs that can effectively address the ethical needs of all organizations. Employee resistance to change is a well documented phenomenon. The management, when it comes to changing the organizational culture, has to take into consideration the element of employee resistance well ahead of others because employees are reluctant to abandon traditional processes in which they had gathered experience and developed an expertise. This is particularly true when it comes to developing an ethics program aimed at rooting out unethical practices in the organization. Unethical practices feed on themselves. For example, a manager who engages in unethical behavior will tend to hire only those people who show similar tendencies. In this way unethical practices in an organization are perpetuated and when it comes to developing an ethics program in the organizational culture of a corporation, the management pits itself against this perpetuation.
The process of managing change in corporations is often outsourced to change management consultants. This is because of the inertia that the management of a corporation finds itself pitted against when initiating change. Hiring a change management consultant pays off because consultants specialize in embedding new processes into existing organizational cultures seamlessly so that change does not seem disruptive. However change management consultants have to develop an intimate understanding of the organizational processes. This is particularly true when it comes to hiring consultants for developing an ethics program for a corporation. This is because the nature of ethical dilemmas varies from one organization to another. Every corporation has its own set of unique needs which the consultant has to address when it comes to designing the package of an ethics program for that corporation. Off-the-shelf reports in this case will do more harm than good because employees will be confused when they find themselves unable to align the scenarios they see in the reports with those that they see in real life. This happens because of the standardization that is the prime feature of off-the-shelf reports. These reports promote one-prescription-fits-all approach which does not differentiation between different industry needs. Customizing the ethics program to the unique organizational culture of a corporation is critical. As a result, consultants have to make an in-depth study of the formal and the informal systems of the organizational culture of a corporation in order to make sure that the ethics program being implemented addresses its unique needs specifically (cited in Shaw, 2007).
In order for the ethics program to be implemented successfully, the critical need is to make sure that the formal elements and the informal elements of the organizational culture are in alignment. Any misalignments in this context will render the ethics programs useless. For example, employees might see that according to the formal ethics code, honesty is highly valued in the organizational culture. Then they might see that their superiors always tell the customers the truth about the corporation’s ability to meet their needs. In this case, the formal and the informal elements are in alignment and therefore employees are given clear directions in how to conduct themselves ethically. On the other hand, the formal ethics code might promote honesty but when it comes to performance appraisal, a highly successful but an equally deceptive employee is rewarded. This is misalignment and the employees become confused about the ethics program. Therefore when it comes to developing an effective ethics program, the management of a corporation must make sure that all systems of the organizational culture support ethical behavior.
Shaw, William H. Business Ethics. McGraw Hill/Irwin. 2007.
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