Business Ethics: Corporate Responsibility and Governance Report

This report delves into the critical aspects of corporate responsibility and governance, emphasizing the significance of ethical frameworks in business practices. It begins by introducing the concept of ethics in business and highlights the impact of unethical decisions, using the Enron scandal as ...Read More

Running head: Business Law Assignment 0
Corporate Responsibility and Governance
8/26/2019
Student’s Name

CORPORATE RESPONSIBILTY AND GOVERNANCE
1
Contents
Introduction......................................................................................................................................2
Ethical Frameworks.........................................................................................................................2
Importance of clear ethical framework............................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

CORPORATE RESPONSIBILTY AND GOVERNANCE
2
Introduction
Ethics plays an important role in every sector of life and this becomes even crucial when it
comes to business and professional practices. Many of the cases and issues have been reported in
the past where managers and decision-makers of business failed to make ethical decisions. The
case of Enrol Corporation in the USA is the one, which would be discussed, in brief in the
presented report. The lead issue in the application of ethics is unawareness regarding the way in
which ethical decision can be made. Various ethical frameworks are there which helps in
decision-making. This report will identify a different ethical framework, which can be applied to
making a business decision. In addition to this, the report shall also an emphasis on the
Importance of having a clear ethical framework while conducting decision-making.
Ethical Frameworks
Different ethical theories are there which focuses on different aspects. Depending on these
theories, mainly three types of an ethical framework is there. These are The Duty Framework,
The Consequentialist Framework, and the Virtue Framework. Similar to theories, these
frameworks consider the importance of different factors. Nevertheless, to say that no framework
is perfect and they have their own advantages and disadvantages. The frameworks help business
leaders/top management of the company to reach up to ethical decisions based on different
beliefs. These frameworks are detailed as below:-
 The duty Framework: - As the name implies, the frameworks focus on the duty of a
person. The framework states that a person must be aware of his/her obligation and never
should do a thing that is contrary to the ethics and principles attached to his duty and

CORPORATE RESPONSIBILTY AND GOVERNANCE
3
obligation (Lorenzetti, 2010). In other words, this is to state that as per this framework
one should perform his/her duty and pursue correct actions setting aside everything rest.
This framework designs a system of rules and encourages the practice of treating
everyone with equal respect and dignity. Secondly, the framework demands people to act
considering ethics in practice rather than the results. In such a manner, it allows people to
pursue those acts, which are ethically correct but maybe lead bad results (Bbc.co.uk,
2019). For instance, this framework prevents the practice of grating of bribe, even when
such prevention leads to negative financial consequences to the company. This
framework is generally required in those cases where ethics in the performance of duty is
mandatory and far necessary. Nevertheless as mentioned above, this framework also has
certain limitations. Firstly, it seems to be very rigid with respect to the performance of
duties. It is not always possible to consider ethics in action and sometimes, the business
leader has to analyze the consequences of a particular action. Performing an action that is
ethical but does not generate any good is not possible to carry every time. In addition to
this, the framework also fails to inform that which duty a person must keep in
consideration in those situations where more than one duty is involved (. Nevertheless, it
does not mean that the framework has no benefit. By using the same, ethical decisions
can be made easily because limitations of the same are subject to exceptions.
 The Consequentialist Framework: - This framework is just opposite to the earlier
discussed one i.e. the duty framework. Consequentialist Framework emphasis on results
and argues that one must pursue those acts which lead goodness to a greater number of
people (O'Keefe and Brien, 2018). The framework considers the impact of a course of
action to people who will be affected by the same directly or indirectly. To discuss the

CORPORATE RESPONSIBILTY AND GOVERNANCE
4
manner in which this framework works this is to state that a decision-maker identifies a
different course of action under this model, assess consequences of the same, and then
pursue the one action, which finds able to deliver best advantages. One of the advantages
of this framework is that the same consider the ultimate result of an action and provide an
advance view of the future. However, similar to the duty framework Consequentialist
Framework also has some limitations. One of the most significant limitations is that the
consequences of the same are not always possible (Icheku, 2011). Even after this
limitation, the framework helps in general and gives an idea about results to decision-
makers.
 The virtue Framework: - This framework is related to characteristics. This framework
informs people what kind of person they should be (Veatch and Ross, 2015). Further, it
outlines the manner in which a virtuous person would have reacted in a particular
situation and motivates people to do the same. This framework identifies a wide range of
ethical behaviors. This would not be wrong to state that virtue framework does not
consider rightness of an action or consequences similar to two frameworks discussed
earlier. The most important feature of this framework is the inclusion of human
experiences and the identification of their role in ethical deliberation. The reason behind
the same is that the framework believes that a person’s thoughts, experiences, and
emotions can influence the development of that person’s character. Decision making by
the use of this framework seems to be difficult as disagreements about virtuous traits are
more likely to be there in comparison to disagreements about ethical issues (Brown.edu,
2019). However, in totality, it is a good framework that actually develops a personality
according to ethical norms.

CORPORATE RESPONSIBILTY AND GOVERNANCE
5
After the discussion over three of the ethical frameworks, it is far clear that these frameworks
provide different approaches that can be used by decision-makers and helps them to attain ethical
decisions. It is clear now what functions this framework has and other issue is to check the
importance of these frameworks in business practices. In the following section, such importance
will be address with appropriate examples.
Importance of clear ethical framework
In today’s world, managers and board of directors are aware of the fact that they need to work
ethically but they do not find a suitable course of actions in order to attain those goals. They need
assistance in such a situation. The ethical framework plays an important role in such a situation.
In general, such frameworks are important for the whole organization but the board of directors
needs the same most urgently, as they are the decision-makers of their business. In the absence of
a clear ethical framework, board members, and other decision-makers fail to understand the level
of expectations, stakeholders of business have from them.
In the case of Enrol scandal, Jeff Skilling, CEO of the company played an important role.
Without considering any ethics or standard of conduct, he switched the accounting policy of the
company from traditional historical cost accounting method to the mark-to-market (MTM)
method (Markham, 2015). Generally, a company that looks sound on paper works well in the
market. Therefore, the CEO of the company presented the accounts in a positive manner before
the public. It result hike in share prices and in August 2000, the share of the company were
traded at the rate of $90 per share (Cameron, 2019). Afterward when the truth has been revealed,
the company faced a huge loss. The lead reason behind this scandal was the absence of a clear

CORPORATE RESPONSIBILTY AND GOVERNANCE
6
ethical framework. CEO of the company neither considers ethics in action, not in consequences.
Further ethics also seems to be absent in his character.
An ethical framework decides the expected manner of behavior. It means it let the directors
know that whether they are required to pursue ethics in the performance of their duty or whether
they need to check the results. When no such framework is there, members of the board act
according to their personal choices and stakeholders of the company has no reference to argue. If
an appropriate ethical framework would have been there in the case of Enrol, the decision-maker
might have knowledge that what he is expected to do or what he is doing. It is not wrong to state
that ethical framework acts as guidance for board members and provide a realization to them
with respect to their workings.
Conclusion
Conclusively, this is to state that ethics are much important in business as in the absence of the
same stakeholders may face negative impacts. Board of directors and officers appointed at the
higher position are the people who are responsible to make decisions on behalf of the business.
Mostly three ethical frameworks are there which helps board members in ethical decision-
making. These frameworks include the Consequentialist Framework, the duty Framework, and
virtue ethics, where the first framework focuses on results, the second one focuses on actions and
the third one focuses on characters.
In the second part of the report, the importance of an ethical framework has been identified. In
the case of Enrol Corporation, CEO made an unethical decision that seems to be a result of the
absence of an appropriate ethical framework. Conclusively every organization must have an
ethical framework to provide guidance board members.

CORPORATE RESPONSIBILTY AND GOVERNANCE
7

CORPORATE RESPONSIBILTY AND GOVERNANCE
8
References
Bbc.co.uk. (2019) Duty-based ethics. [online] Available from:
http://www.bbc.co.uk/ethics/introduction/duty_1.shtml [Accessed on 26/08/2019]
Brown.edu. (2019) Making Choices: A Framework For Making Ethical Decisions. [online]
Available from: https://www.brown.edu/academics/science-and-technology-studies/framework-
making-ethical-decisions [Accessed on 26/08/2019]
Cameron, S. (2019) The Enron Scandal & Ethics. [online] Available from:
https://bizfluent.com/info-7747847-enron-scandal-ethics.html [Accessed on 26/08/2019]
Icheku, V. (2011) Understanding Ethics and Ethical Decision-Making. USA: Xlibris
Corporation
Lorenzetti. (2010) Ethical Frameworks for Academic Decision-Making. [online] Available from:
https://www.facultyfocus.com/articles/faculty-development/ethical-frameworks-for-academic-
decision-making/ [Accessed on 26/08/2019]
Markham, J., W. (2015). A Financial History of Modern U.S. Corporate Scandals: From Enron
to Reform. Oxon: Routledge.
O'Keefe, K. and Brien, D. (2018) Ethical Data and Information Management: Concepts, Tools
and Methods. Great Britain: Kogan Page Publishers.
Veatch, R., M. and Ross, L., F. (2015) Transplantation Ethics: , Second Edition. USA:
Georgetown University Press