Ethics in a business setup refers to a set of moral guidelines, principals, and policies that guide the conduct of day to day activities and examine the ethical problems that can emerge in a typical business environment. Business ethics covers various subjects and issues relating to the business, including corporate social responsibly, insider trading, bribery, discrimination, fiduciary responsibilities, and corporate governance. It is paramount for every organization to adopt business ethics because it fosters employee morale and cultivates good working relationships among employees and management. Moreover, ethics are fundamental to better decision making in a business. They eliminate conflicts with the law, attract new investors, and create a business's right image. Additionally, ethics maintains a loyal customer base and improves profits in the business. Using a case from Timmco, this paper will analyze the different ethical theories, including the rights theory, justice theory, profit maximization theory, and utilitarianism. An exploration of the ethical issues presented will also be highlighted by shedding light on legal concepts such as product liability, breach of contract, corrupt foreign practices, deceptive advertising, and negligent torts ( Langvardt et al., 2019).
According to Langvardt et al. (2019), breach of contract refers to a situation whereby one of the parties in a contract fails to fulfill the obligations expected of them. The forms of breach of contract include unsatisfactory performance, where obligations are not fulfilled as per the standards set. Another form is the delayed performance, whereby one party does not deliver within the stipulated time. Additionally, complete non- performance is another form of breach of contract where ignores their obligations. Examples of breaches of contract are; when one party shows the intention of not performing the contract altogether, it starts to show the intention of not being bound anymore by the contract or when one party deprives the other fundamental benefits entitled to the contract. Breach of contract is unethical and has severe consequences. Various remedies can be taken to correct a breach of contract. It includes monetary compensation, termination of the contract, specific performance, or an injunction (Taylor & Taylor, 2017). Timmco's consideration to source its valves from another company in a foreign country indicates a breach of contract. Although outsourcing seems to be a better option, it will be unethical because Timmco has an existing contract with Blagg. Terminating the contract is likely to put Blagg out of business and lead to massive layoffs. Blagg could sue Timmco, and the remedies for breach of contract could lead to enormous losses for Timmco. For instance, Blagg could sue Timmco for showing the intention of not being bound to the contract and demand for specific performance and monetary compensation as the remedies.
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A negligence tort refers to a legal wrong that a party may suffer due to another party's carelessness ( Langvardt et al., 2019). There are four negligence elements that a plaintiff must demonstrate to prove that the other party acted in negligence. First, the defendant had an obligation to the plaintiff which they breached, and by doing so caused harm that led to business loss to the former. Not every accident producing injury gives rise to liability for negligence. Some accidents cannot be avoided even with the exercise of reasonable care (Gardner, 2019). Upon proving negligence, the plaintiff may receive compensation for all damages incurred. However, the negligence tort issue happens to be more of an ethical issue than a legal one. The duty to care for the other cannot be fully enforced in a court of law and left in humans' idea to act ethically. By outsourcing their valves, Timmco will violate its duty of care to Blagg; this will pose potential harm because there will be no market for their products, and this will lead to damages for which Timmco will have to compensate. Being the primary client for Blagg, Timmco should consider the harm that might occur in their actions. Ethically, Timmco's engagement with Sanco renders several employees jobless and thus increased suffering.
Product liability refers to holding a manufacturer or seller accountable for doing business with a defective product that a client may end up consuming. The originator of the product and all parties participating in the distribution chain are to blame for any products that may have defects that cause injuries to the end-user. Product liability is subject to significant court cases relating to how certain defects of a product made it unreasonably dangerous. Such situations are characterized by several varying forms of defects that may cause supplier or manufacturer liability (Ostendorf, 2014).
A design defect appears in a product even before it is manufactured, making it unsafe for use. The manufacturing defect represents the errors that may occur during the assembly of a product subject to its liability. Finally, a marketing defect is simply an error that appears in the course of advertising the product. It could range from inadequate instructions, lack of safety warnings, among others. All these defects have legal and ethical implications that are bound to affect a company's general operation. Blagg being the current supplier of valves to Timmco, must care for the product end user's safety. In cases of defective valves, the product could be defective, thus risking users' lives. Ethically, any business needs to place the lives of others in considerations. Failure to which legal actions are subjected to either Timmco or Blagg builds to the chances for loss.
Langvardt et al. (2019) note that the Foreign Corrupt Practices Act (FCPA) was implemented as a measure to prohibit foreign officials from engaging in corrupt acts as a means of safeguarding business transactions. The statute is enforceable by both the Justice Department and the securities and exchange commissions. The main aim of the development of this statute was to bar foreign businesses from posing competitive threats to local companies on an unfair basis ("Bribery, Corruption, and the Foreign Corrupt Practices Act," 2011). Those who are found to violate this act face strict action from the law including civil action, penalties and sanctions. Punishments include fines, that may be charged twice the fraudulent amount obtained through bribery. A firm that is guilty of this practice is forced to accept the services of an independent auditor who will examine its operations to determine it they comply with the law. Those who break the law may face jail time for a term that does not exceed five years. The Act of Sanco proposing to Timmco to issue a 20,000-dollar bribe to the Slawrovia Minister of Commerce is meant to gain them a better competitive base to the Blagg company. The idea itself is unethical. Ethical business practices exist in a fair, competitive base. Legally, if Timmco offers this bribe, the company may be subject to legal action under the FCPA while the Sanco company is deemed a complicit to the Act.
Deceptive advertising, also referred to as false advertising, is any sort of publicizing that is bogus, misdirecting, or has the impact of misleading buyers ( Langvardt et al., 2019). Such kinds of deceptions may appear in different aspects. They include product pricing, Quantity, Quality, warranty information, confusion over essential matters, and even the availability of the product. Regarding the Federal Statutes, any content posted b a marketer could be deceptive even without the intention of the originator. Deceptive advertising is subject to legal consequences under varying capacities. Some of the consequences affiliated with such practices include Compensation for damages caused to the consumer, refunds or exchanging of the product, civil fines, among any others. As a rule, these kinds of cases are dealt with and researched by the Federal Trade Commission (FTC). Exceptional laws exist contingent upon the kind of item or administration being delivered. For example, there are specific laws that oversee publicizing for experts, such as specialists and legal counsellors. Timmco risks legal action by using the tagline suggesting its affiliation to the sale of America-made products, yet it plans to source its valves from Slawrovia. On a general view, the deed is unethical to make a sale on information mounted on wrong information.
Several ethical theories define the business and human interactions world under varying capacities. The Rights Theory suggests that specific human rights are essential, and no other persons should interfere with them ( Langvardt et al., 2019). The theory focuses on every person within a society and the rights of each one of them. It suggests how unethical it is to manipulate others to achieve their happiness. The theory applies in deciding on fundamental human interactions. It suggests that it's ethically wrong to gain personal satisfaction from the loss of others. Generally, the theory could be applied in the drafting of business contracts to ensure no party wins while the other loses. In the Modern Rights Theories challenges the beliefs of the rights theory. The theory implies that even though it is not wrong to behave in a particular manner, it is not outright that it is correct. The aspect of murder best explains the theory. Even though murder is acceptable in the case of self-defense, it is not outright to commit murder.
The theory helps develop a line between justifiable human behavior and what is ethically correct ( Langvardt et al., 2019). The strength of rights theory justifies what cause of action takes precedence over the other. This implies that an individual right is essential unless a more excellent right is identified. The theory can be used to decide the cause of action on two or more ethical practices that may conflict with each other. For example, any government will suppress the right of access to information to citizens if, in other ways, it helps save lives elsewhere.
It is difficult to achieve agreement about which rights are protected. John Rawls developed the Justice theory in 1971 with a view of equitable distribution of resources by the government to help the poor within the society ( Langvardt et al., 2019 ). In this theory, each posses’ equal rights and thus fostering the sense of ethical practices in the overall society. In its application, the justice theory is fundamental in the development of business decisions. It allows decision-makers to be impartial and to practice fairness as the right thing to do. The strength of the theory is based on protecting the disadvantaged groups within society from exploitation by wealthy individuals. However, the theory has been criticized based on treating resources at fair value but not addressing the cost of gaining equitable distribution of resources ( Langvardt et al., 2019). Under an ethical basis, all humans are equal, regardless of their social status. The theory can devise policies for resource allocation on the aspect of equal share for everyone.
The Utilitarianism theory requires the decisions made to allow the community to maximize utility as a whole and ensure the topmost level of satisfaction of the society ( Langvardt et al., 2019 ). The utilitarian theory can only be applied if the benefits of a specific action surpass the cost that the society may have to bear. The strength of the theory is that the decision made will always suggest what is best for the community a whole and not an individual. This way, the community takes precedence over individuals, thus ensuring ethical control. One of the main criticisms of this theory is that it cannot measure the level of satisfaction, preference or frustration for individuals or a community ( Langvardt et al., 2019 ). The theory is, therefore, applicable in situations where there is a community aspect to ensure there is a clear definition of right and wrong.
According to Langvardt et al. (2019), one of the main ethical theories relevant to this case is the profit maximization theory. Here, decision makers are required to exploit the profits earned in the long run without violating the law. Consideration is, therefore, given to the long-run profitability of the business as opposed to any other business aspects. The strength of the theory is derived by the fact that it is goal-oriented and, at the same time, transactional. It assures the business of future existence. However, profit maximization has been questioned on the grounds of failure to concentrate on people and the process. Regarding many organizations, human resources should take precedence.
In conclusion, both businesses and individuals cannot operate in isolation. Both legal and ethical factors define the day to day interactions with others. A company needs to perform under ethical considerations to sustain the right image for their goods and services. In general, ethical practices contribute to customer retention, who feel that their feelings and beliefs are held to account. Legally, ethical practices help reduce penalties associated with non-compliance. A business has a lot to gain by ensuring that it holds a duty to care, truthful advertising, abides by contracts, and corrupt foreign acts, ensuring zero tolerance to the sale of defective goods.
References
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Gardner, J. (2019). Torts and Other Wrongs. Torts and Other Wrongs , 1-26. doi:10.1093/oso/9780198852940.003.0001
Ostendorf, P. (2014). V. Product Defects. International Sales Terms , 105-115. doi:10.5771/9783845259000-105
Taylor, R., & Taylor, D. (2017). 12. Specific remedies. Contract Law Directions . doi:10.1093/he/9780198797739.003.0012
Langvardt, A. W., Barnes, A. J., Prenkert, J. D., McCrory, M. A., & Perry, J. E. (2019). Business law: The ethical, global, and e-commerce environment . New York: McGraw Hill Education.
