Ethics Discipline as an Important Part of Doing Business
Introduction
Ethics is an important part of doing business. In 2017, global retailer Steinhoff was caught up in a scandal which involved corruption and unethical behaviour. In January 2018, Director of Rhodes University Business School, Professor Owen Skae, provided comments for this scandal in his article for The Conversation (Skae, 2018). With reference to this article, the following assignment will assess Steinhoff and identify the “mode of morality (MMM)” of the enterprise.
It will also identify the ethical transgressions committed by Steinhoff from the perspectives of classical ethical theory, as well as modern ethical theory. It will further include a discussion of societal expectation of the ethical performance of a company such as Steinhoff, using either classical or modern ethical theoretical foundation. Steinhoff and their mode of managing ethicsEvery business enterprise has an ethical dimension surrounding it, it is therefore imperative for managers to choose on how to deal with ethics issues effectively.
On one side of business we have leaders believing that by being unethical and indulging in unethical practices the business shall succeed, however on the other hand we have some business leaders that believe by implementing codes of conduct and by having ethics implemented,success within business can be achieved. Thus there are different ways or modes that manage ethics in the workplace. “A mode can be described as the preferred manner of an organisation to manage its ethics” (Rossouw & Van Vuuren,2003).
There are six modes of ethics management, namely: the amoral mode, the survival mode, the reactive mode, the compliance mode, the integrity mode and the totally aligned mode.
The amoral mode. Organizations that implement the amoral mode believes that ethics does not belong in business, and it should be excluded when making business decisions. As a result of being amoral, scandals result and stakeholders are alienated.
The survival modestates that unethical behaviour and practices are required in order to survive. Unethical behaviour is implemented to ensure the survival of the business. Financial penalties occur as a result of being unethical. There is also dissonance between organisational and people values .
The reactive mode is where token gestures of ethics are taken. Protects itself against the risk of unethical behaviour. Has ethical standards without any enforcement. Organisations are susceptible to scandal and corporate ethical reputation is below par.
The compliance mode – there is commitment to preventing unethical behaviour. Unethical behaviour is detected and penalised within organisations.
The integrity mode – organisations that practice the compliance mode take a commitment to promote responsible ethical behaviour. They raise the level of corporate ethical performance and ethucal behaviour is detected and recognised.
The last mode of ethics management is the totally aligned mode – this is where ethics is ingrained in corporate purpose and identity. This involves including ethics in corporate culture.An example of an unethical business practice is when a recent scandal of a South African retailer Steinhoff incurred a $12 billion charges related to accounting irregularities. Their charges were related to overstated profits,asset values and transactions having to be reversed. Steinhoff has been an enterprise that in its code of ethics state’s that “Ethical behaviour is good business” . However when looking at the Steinhoff debacle it is ironic that amongst its code of ethics it states and underpins the importance of accurate record keeping. This means that Steinhoff had agreed that their books should have reflected all business transactions and activities in an accurate and timely manner .
They had clearly emphasized that the undisclosure or unrecorded revenues, expenses, assets or liabilities are not permissible. However they have not abided by their code of ethics and policies. This makes Steinhoff an enterprise that practices the reactive mode when it comes to managing their ethics. The reactive mode conducts business as merely just stating to be ethical but not practicing ethics in the workplace. Businesses make confessions to abide by their code of ethics to avoid rejection from stakeholders and customers,however this is not followed through and unethical behaviour still prevails. A blind eye is turned to unethical behaviour and if detected it goes unpunished.
Organisations that practice the reactive mode are constantly in need to protect themselves against unethical behaviour as they aren't able to face a public or corporate scandal. By these organisations stating that they are ethical they avoid threats such as litigation, strikes, boycotts and stakeholder alienation. In the case with Steinhoff they state that ethics is good business but they actually want to protect themselves against investigation and punitive actions. Steinhoff also displays a rejection of unethical behaviour however their code of ethics lacks application.S
teinhoff states that as an enterprise they must be trustworthy in its dealings with customers, suppliers and other stakeholders.By Steinhoff being reactive they may face challenges such as a serious credibility problems with stakeholders. The internal and external stakeholders may find that their expectations aren't met and they have difficulty in trusting an entity whose words and actions are not aligned.
Another challenge that may pose would be that Steinhoff is very likely to be subjected to further scandals because of their failure to be ethical. Dissatisfied employees, instead of whistleblowing may turn to creating scandals for the organisation.3. Ethical transgressions committed by Steinhoff.
According to The Free Dictionary a transgression is “a violation of a law, principle, or duty (The Free Dictionary, 2018). In December 2017, Steinhoff admitted to its ethical transgressions in the form of accounting irregularities (Debtfree, 2017). Ethical theories help in the decision-making process to determine what is ethical and unethical. There are classical ethical theories and modern ethical theories (Lopez, 2012). These theories will help identify the ethical transgressions committed by Steinhoff.
Classical Ethical Theories
There are three classical ethical theories which have survived through centuries and still remain relevant today. These theories consist of the virtue theory of Aristotle, the utilitarian theory of Mill, and the deontological theory of Kant (Roussouw & van Vuuren, 2013).
The Virtue Theory of Aristotle
The virtue theory can be most closely associated with Greek philosopher Aristotle. He “declared that a virtuous person is someone who has ideal character traits” (Athanassoulis, 2018). There are three key directions that virtue ethics has developed in: Eudaimonism, agent-based theories, and the ethics of care.
According to Pennock, “in moral philosophy, eudaimonia is used to refer to the right actions as those that result in the well-being of an individual” (Pennock, 2014). Aristotle believed that “virtue is necessary but not sufficient—what is also needed are external goods which are a matter of luck” (Hursthouse & Pettigrove, 2016).Agent-based theories can be summarised by the following statement: “An action is right if and only if it exhibits or expresses a virtuous motive, or at least does not exhibit or express a vicious motive” (van Zyl, 2005).
The ethics of care “involves maintaining the world of, and meeting the needs of, ourself and others” (Sander-Staudt, 2018). From the virtue theory and its subsections, it can be summarised that a virtuous person can behaves ethically and these actions can benefit that person and the people around them. In the case of the Steinhoff scandal, this theory can be used to elect new board members for the company. If there were virtuous board members, there would be less unethical behaviour.
Deontological Ethics
“Deontology is an ethical theory that uses rules to distinguish right from wrong” (Ethics Unwrapped, 2018). It can be associated with German philosopher Immanuel Kant. Kant believes that moral direction can only be found through rational thinking (Roussouw & van Vuuren). He also believes that moral guidance can only be found in our rationality rather than our nature.Good will is a concept which is an important part of Kant’s theory (BBC, 2014). He believes that steady moral behaviour is only achieved through the good will. Hence good will can be defined “as the will that obeys the universal moral law from a sense of duty” (Roussouw & van Vuuren, 2013).
The universal moral law, according to Kant, can be used to make common moral judgements. After researching the concept of deontology, it is understood that one way Steinhoff could practice ethical behaviour is by setting basic rules for individuals within the corporation and regulations for the company as a whole to follow.
Utilitarian Ethics
Utilitarianism is a “normative ethical system that is primarily concerned with the consequences of ethical decisions” (McCartney & Parent, 2018). John Stuart Mill is the classical representative of this theory. Mill believes that the point of morality is to raise the amount of good things, such as pleasure and happiness, and reduce the amount of bad things, such as pain and unhappiness, and hence making life better (Nathanson, 2018). According to Mill, if each person strives towards their own individual happiness it could contribute to the general happiness of the society (Duignan & West, 2018).From this understanding of utilitarianism, it can be assumed that the people responsible for the unethical behaviour in Steinhoff should suffer certain consequences. According to Skae, people following the Steinhoff scandal are “calling for harsh punishment, including jail, for the culprits” (Skae, 2018).
