Therefore, corporations have had to change their viewpoints and start looking at the long-term consequences of their behavior, as well as looking at the bottom line.
Businesses also have to be concerned because consumers have also become aware of environmental concerns, and many consumers are demanding earth-friendly products and have shown a willingness to pay more money to competitors who observe environmentally-friendly practices. Interestingly enough, this demand has given rise to its own ethical dilemma; because there is no real regulation regarding what a product must do to be regarded as earth-friendly, companies determine which of their own products are environmentally friendly. The result is that some products are labeled “green” or “organic” even though they have been produced in a normal manner, which means that consumers are likely to pick them over competing products, and may even pay a premium price for those items. Therefore, it is clear that corporate response to environmental concerns can actually serve to create additional ethical difficulties.
As a result of these growing concerns and in light of the recent spate of ethical scandals, most business people are concerned about ethical awareness and education in their businesses, even if that concern is driven by a desire to remain profitable in an increasingly competitive environment. Most scholars and commentators discuss ethics in the context of corporations and big business, but it is erroneous to think of ethics as solely the concern of big business. On the contrary, small business people may need to be even more concerned about ethics than big businessmen. After all, if a large corporation deals unethically with a single customer, partner, or provider, that transaction is unlikely to have a meaningful adverse impact on its business. In fact, it takes several hundreds of unethical transactions to tarnish the reputation of a company that is known for good customer service or ethical dealings. Therefore, many big businesses are somewhat insulated from minor ethical scandals.
However, small businesses do not have the same protection as big businesses. On the contrary, if a small business engages in even a single unethical business transaction that single transaction could literally lead to the demise of the entire business. In addition, small business owners frequently live in the same communities as their businesses, which mean that unethical behavior can have a very real impact on a persons standing in the community, personal relationships, and personal reputation. Therefore, this paper will examine current literature regarding ethics and management, and compare the concerns mentioned in the literature with the ethical concerns of a small business owner, to help determine whether small business owners share the same ethical concerns as people engaged in big-business.
When people first began the formal study of business, few of them bothered to mention ethical concerns. This has led some modern commentators to believe that ethics are not an essential part of the study of business. Other commentators disagree with that point-of-view. For example, Schwartz is aware of the relative newness of the study of business ethics and the skepticism that many management educators have about the relevance of the field. However, he has studied some of the pioneers in management theory and believes that three essential questions can help explain the importance of ethics in management. He asks what are “the ethical implications of Frederick Taylors theories?…What did Chester Barnard say about the moral status and responsibility of executives? Why is Peter Drucker so concerned with the social responsibilities of business?” (Schwartz 2007, p.44). According to Schwartz, the answers to those questions quickly reveal the primary role that ethics has played in the study business, since the inception of that study.
Frederick Taylor may not have addressed business ethics, but he was one of the forerunners in the study of business and management. In fact, “Frederick Taylor is recognized as the leading advocate of scientific management. He is considered one of the first major management theorists…Taylor proposed a scientific system for breaking down each activity into its component parts and determining the most efficient means by which to perform each task.” (Schwartz 2007, p.45).
This scientific system would have allowed for greater production with the use of fewer resources, thus maximizing profit, but at what expense? “Taylors theory… despite not specifically addressing business ethics, generates significant business ethics implications. For example, discussion of any employee related business ethics issue such as employee job satisfaction, well-being, participation, or rights, might be related to Taylor-based management practices.
” (Schwartz 2007, p.45). For example, by focusing on output, Taylors theory has been characterized as cold because it might encourage managers to replace those people who could not perform to expectations, and reduce camaraderie among co-workers by turning them into competitors. Taylor was aware of these criticisms, and his responses demonstrated that, from the beginning the theorists studying business were aware of ethical concerns: he cautioned that optimum performance should be based on a sustainable rate of performance and that workers should be encouraged to suggest improvements to the production process.
Chester Barnard was another of the first theorists to engage in the formal study of business, though his approach to management differed from Taylors scientific approach. Barnard “focused on formal organizations as cooperative systems. His main contribution to management theory was his attempt to bridge the requirements of the formal organization with the needs of the socio-human system.” (Schwartz 2007, p.46). In that way, Barnard may have been one of the first management theorists to focus on employees as individuals. For example, he “recognized that individuals in an organization have their own motives (i.e. purposes, desires, and impulses) which can be modified through the executive function to match the goals of the organization (i.e. By offering incentives or changing attitudes). If the individual and organizational goals match and cooperation is achieved, the system is considered effective.” (Schwartz 2007, p.46).
As a management theorist, Barnard advocated that companies strive to attain the matching of those goals, which opens up the possibility that companies will try to manipulate employee goals. This manipulation would give rise to ethical concerns on its own, because it appears unethical to manipulate anyones goals.
However, it is important for critics to realize that those ethical issues are not the product of Barnards theory, but, instead, the possible product of management without ethical guidance. In response to those concerns, Barnard also recognized the ethical responsibilities of managers: (1) they must hold some moral code; (2) they must demonstrate a high capacity for responsibility; and (3) leaders must be able to create a moral code for others. (Schwartz 2007, p.47). As a result, Barnard may have been the first management theorist to discuss how to improve ethics in a business situation.
Finally, Schwartz looked at the theories of Peter Drucker, who may be considered the founder of American management theory. Schwartz believed that Drucker, “arguably provided two major contributions to management theory: (1) advocacy of the federally decentralized organization; and (2) the concept of management by objectives (MBO).” (Schwartz 2007, p.48). Druckers work is actually quite troubling, as one can see from the ethical implications implicit in Druckers theories:
His support of decentralization raises several ethical concerns such as increased reliance on the moral judgment of autonomous managers. The creation of autonomous profit/loss centres in a decentralized organization may generate inter-organizational competition for resources which is detrimental to the organization as a whole. MBO also leads to an emphasis on the maximization of financial performance and results, often short-term, which may in turn create pressures for short cuts and ethical abuses by managers and employees. (Schwartz 2007, p.48).
However, it would be unfair to suggest that Drucker himself was unethical, because he realized the dangers inherent in his business theories. In fact, he warned people against the pitfalls of a profit-based business model.
In addition to discussing how to maximize profits and short-term gains, Drucker also specifically addressed three ethical arguments: “(1) profits, though important, are not the purpose of business; (2) corporations are social institutions and therefore have social responsibilities; and (3) business has special responsibilities towards its employees.” (Schwartz 2007, p.49).
While Schwartz indicated that he found Barnards theories relevant to the modern study of business ethics, not all modern commentators are fans of Barnards approach, even though Barnard acknowledged the possible ethical dilemmas arising from the theory he described. On the contrary, some have indicated that his approach represents a personal rejection of his formerly Christian heritage, with its built-in moral code, and that without that religious background, Barnards theory is simply not sufficient to truly develop management ethics. Feldman examined Barnards the Functions of the Executive to try to understand Barnards approach to the development of management ethics. (1996). Feldman looked at four moral justifications that were developed by prior authors to help explain Barnards theory of management ethics, and highlighted the central themes in Barnards attempts to.