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BUS 401: Business Ethics

Essay -1: Bribery in Bangladesh

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Case Analysis:

Question 1) Analyze the case using ethical theories that

you have learned

Answer:

In philosophical, theological, or moral discussions, corruption is spiritual or moral impurity or

deviation from an ideal. In economy, corruption is payment for services or material which the

recipient is not due, under law. This may be called bribery, kickback, or, in the Middle East,

baksheesh. In government it is when an elected representative makes decisions that are

influenced by vested interest rather than their own personal or party ideological beliefs.

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Relating with the ethical theories:

Although business executives and managers have an obligation to the corporation, in SRB

Friedman clearly states that the pursuit of profit must be constrained by both legal and ethical

considerations. Business executives should maximize profits while conforming to the basic

rules of the society, both those embodied in law and those embodied in ethical custom (SRB p.

33).

Friedman would state that the manufacturer and exporters are free to take actions that minimize

losses or produce profits for the organization as long as the actions are legal. Do not involve

deception or fraud, and do not interfere with the competitive processes of the market.

1Barenboim, Peter (October 2009). Defining the rules. Issue 90. The European Lawyer.

Friedman's argument has two main

thursts:

Profit maximization for shareholders Incompetence to make decisions on

ethical issues
http://en.wikipedia.org/wiki/Philosophyhttp://en.wikipedia.org/wiki/Theologyhttp://en.wikipedia.org/wiki/Spirtualityhttp://en.wikipedia.org/wiki/Moralhttp://en.wikipedia.org/wiki/Impurityhttp://en.wikipedia.org/wiki/Ideal_%28ethics%29http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Briberyhttp://en.wikipedia.org/wiki/Kickback_%28bribery%29http://en.wikipedia.org/wiki/Baksheeshhttp://en.wikipedia.org/wiki/Baksheeshhttp://en.wikipedia.org/wiki/Kickback_%28bribery%29http://en.wikipedia.org/wiki/Briberyhttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Ideal_%28ethics%29http://en.wikipedia.org/wiki/Impurityhttp://en.wikipedia.org/wiki/Moralhttp://en.wikipedia.org/wiki/Spirtualityhttp://en.wikipedia.org/wiki/Theologyhttp://en.wikipedia.org/wiki/Philosophy


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Customer confidence

It is the ethical responsibility of every employee to ensure that customers are treated fairly and

that no harm comes to customers as a result of using the companys products orservices. From

time to time, the officers in the company will have inside information that may not be

known to the general public. This may be information about new products, plans or processes,

mergers, acquisitions, negotiations relevant to significant business deals, contracts, sales,

lawsuits, or special relationships with others. You cannot use undisclosed material information

(including material facts and material changes) concerning the company, its shareholders or

partners to your personal advantage, or the corresponding disadvantage of others in the securities

market. It is also prohibited for a person with such information to give it to others, or "tipping",

so that the other person may improperly make use of the information.2

The scenario in the given case:

In the case there were several informations provided:

The organization is state owned

It has the authority to operate independently

Involvement of bribe to take the contract

The organization is bureaucratic and decision-making authority lies with top

management.

Fraud and deception was clearly involved in the situation. The president had a good relation with

the procurement committee and also bribed him for getting the contract. The president also

exploits his power and moreover the bribe was shared with other members of the company.

In addition to these ethical considerations, Friedman places two other important restrictions on

the pursuit of profit: Business people must commit no deception or fraud, and they must

maintain open and free competition.3So if we apply these restrictions in this case, it means

that individual s are free to pursuit their interest (such as making profit) as long as they do not

interfere with the economic and political freedom of others. Such interference occurs when

2Miller, C. (2009). The Conditions of Moral Realism. The Journal of Philosophical Research, 34, 123-155.

3Miller, C. (2009). The Conditions of Moral Realism. The Journal of Philosophical Research, 34, 166-175.


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individual in business, for instance, breach contracts, cheat customers, misrepresent the efficacy

of their products, withhold important information on product safety, sabotage a competitors

operations, or monopolize markets by political means, such as lobbying the government for

protection against imports.4

In this case there was clearly breach contracts, cheat customers, misrepresent the efficacy of their

products, withhold important information on product safety, sabotage competitors operations, or

monopolize markets by political means, such as lobbying the government for protection against

imports.

According toMilton Freidmans theory managers are said to be agents of their employer and

their foremost duty is to maximize profit. Managers are hired to work for the company and play

the role as a representative of their employer. The guidelines are given to them to complete their

task and their job is to make sure that the business objectives are met. In a free-enterprise,

private-property system, a corporate executive is an employee of the owners of the business. He

has direct responsibility to his employers. That responsibility is to conduct the business in

accordance with their desires, which generally will be to make as much money as possible while

conforming to the basic rules of the society, both those embodied in law and those embodied in

ethical custom. Of course, in some cases his employers may have a different objective. A group

of persons might establish a corporation for an eleemosynary purposefor example, a hospital or

a school. The manager of such a corporation will not have money profit as his objective but the

rendering of certain services.

4Phillips, R., Robert; Edward Freeman (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler

Publishers.


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Question 2) why is this important to have code for this particular

situation? What factors should be considered while preparing a code

of ethics to encounter the particular situation?

Answer:

An ethical business has to be concerned with the behavior of all businesses that operate in the

supply chaini.e.

Suppliers

Contractors

Distributors

Sales agents

Pressure for businesses to act ethically

Businesses and industries increasingly find themselves facing external pressure to improve

their ethical track record. An interesting feature of the rise of consumer activism online has been

increased scrutiny of business activities. Pressure groups are a good example of this. Pressure

groups are external stakeholders they

Tend to focus on activities & ethical practice of multinationals or industries with ethical

issues

Combine direct and indirect action can damage the target business or industry

Is ethical behavior good or bad for business?

The advantages of ethical behavior include:

Higher revenuesdemand from positive consumer support

Improved brand and business awareness and recognition

Better employee motivation and recruitment

New sources of financee.g. from ethical investors


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The disadvantages claimed for ethical business include:

Higher costse.g. sourcing from Fair-trade suppliers rather than lowest price

Higher overheadse.g. training & communication of ethical policy

A danger of building up false expectations

Supplier/Customer Relations

In addition employees and business owners must consider the ethical issues involved with their

relationships between suppliers and customers. Business owners in particular must consider

whether it is ethical to do business with suppliers who have unethical practices. When dealing

with customers or clients, business people must ensure that they use their information correctly,

do not falsely advertise a product or service, and do not intentionally do sub-standard work.

Business people are now held accountable for their own actions, as more and more people are

now demanding that they meet their social duty not just for their country but most especially to

their customers, which are considered as their life and blood. An unsatisfied customer can

definitely hurt any company, something that no one would want to happen.

So how does one business determine what is ethically unacceptable and acceptable behavior?

Where do business owner, chief executives and employees get their standards or guidelines for

ethics? Is there a definition for business ethics that can really set an honest and fair business

practices?5

This is the dilemma that many employees and business owners are facing every day. Everyone

will somehow and someday is faced with a decision that involves ethical behavior.

5Cory, Jacques (2004-09-29).Activist Business Ethics. Boston: Springer.


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Since, there is no clear definition of Ethical Issues in Business then it would be really hard if

all you have are guidelines that the company gave you.

Fairness and honesty are big issues, a very complex dilemma especially if this will somehow

hurt the business. Since ethics are moral issues, thus making a decision that will have negative

effect on the company is going to be tough for the person who will be making the decision. An

individual can make either a right or wrong decision, depending on how it will affect his life and

work status. In view of the fact that ethics are moral issues your beliefs and values will definitely

be tested.

A business will react accordingly to its moral guidelines and principles if the owners and

executives do not lose sight on the essential value of fairness. However, if they choose to use

legality and profitability as their measurement in determining what is right from wrong then

business ethics will surely becomes irrelevant.

A discussion of ethics is actually a subjective issue. Everyone will always have their own

concept of righteousness; therefore a one definition of business ethics can be difficult. Moral

standards are created by home environment, religious

beliefs and traditions and thus making ethics hard to

define, but not impossible to make.

We have already seen that there is a lot of room for

corruption when government tenders for goods or

services. To address this, the Act requires the Minister

of Finance to create a Register of Tender Defaulters.6

This Register should be kept by the National Treasury.

Whenever a person or business is convicted by a court of

law of crimes involving contracts or tenders, their names and details, including the names of

Directors, are recorded in this Register (together with details of the crime). This creates an

additional 'penalty' for these people or businesses:

6Cory, Jacques (2004-09-29).Activist Business Ethics. Boston: Springer.


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Existing government contracts or tenders that they have can be cancelled immediately

and they might have to pay any costs that result from this.

Their names remain on the Register for between 5 and 10 years. While their names are on

the Register, they are not entitled to any new contracts or tenders.

It won't help anyone convicted of these crimes to simply change the name of their business or to

start a new business to try and get around this. Instead, the details of any new businesses that

these people start must also be entered on the Register.7

Lastly, the Act requires a person or business convicted of these crimes to say this in any future

applications for contracts or tenders. If they don't, they will be guilty of another crime and can be

fined or imprisoned.8

While preparing this code of ethics to particular situation the following factors should be

considered:

Disclosure of information: The employees should not disclose the company information to

third parties and other outside organizations. However the employers should reveal the

various policies of the organization to their employees and make them aware about the code

of conduct and other policies.

Conflict of interest: An employee should not indulge into other professions or services or

other interests which might conflict with the interest of the company. This means personal

interests should not overshadow organizational interests.

Confidentiality: Employees should protect companys confidential information. The

financial records and unpublished data should be kept within the organizations and should

not be spread outside the organization.

7Kelly, Eugene. 2006. The Basics of Western Philosophy. Greenwood Press: 160.

8Ellis, C. (2007). Telling secrets, revealing lives: Relational ethics in research with intimate others. Qualitative

Inquiry, 13, 3-29.


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Equal opportunity employer: This factor expects the employer to be an equal opportunity,

that is, no discrimination should be done on the basis of caste, color, race, gender, religion or

physical disabilities.

Misusing company resources: Employees should not misuse company resources,

intellectual property, time and other facilities. They are provided to them for business

purposes and thus, should be used in a cost effective way.

Payment and gifts: The employees should neither accept nor offer any kind of illegal

payments, donations, remuneration and gifts from outsiders.

Illegal payments

It is expected that suppliers do business in an ethical and transparent manner. Suppliers must not

offer bribes, kickbacks or improper payments of any kind to government officials or other third

parties for the purpose of obtaining or retaining business or gaining an improper advantage. 9

Commitment to the suppliers

Relationships with its suppliers must be characterized by honesty and fairness. We are guided by

the following standards of behavior:

We will not make payments to any employees of suppliers to attain lower prices.

We will not reveal a suppliers pricing, technology or other confidential information

without prior written permission.

We will not make false or misleading remarks to others about suppliers or their products

or services

9Phillips, R., Robert; Edward Freeman (2003). Stakeholder Theory and Organizational Ethics. Berrett-Koehler

Publishers.


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After saying all these, we must conclude that, as long as they are being legal,Managers are to

exercise reasonable care in the performance of duties to put the employers interest ahead. This

is their duty of service, obedience and loyalty to their stockholders.

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