{"id":227,"date":"2018-09-26T19:46:20","date_gmt":"2018-09-26T19:46:20","guid":{"rendered":"https:\/\/test-hcc-press-wp-multisite.pantheonsite.io\/businessethics\/chapter\/business-ethics-in-an-evolving-environment\/"},"modified":"2023-07-20T19:08:34","modified_gmt":"2023-07-20T19:08:34","slug":"business-ethics-in-an-evolving-environment","status":"publish","type":"chapter","link":"https:\/\/pressbooks.hccfl.edu\/businessethics\/chapter\/business-ethics-in-an-evolving-environment\/","title":{"raw":"Business Ethics in an Evolving Environment","rendered":"Business Ethics in an Evolving Environment"},"content":{"raw":"

Not only does the world seem to have shrunk, but the twenty-first century pace of change seems to have sped up time itself. As the world becomes smaller and faster and companies adapt their practices to fit new conditions, the core of business ethics<\/span> that guides corporate behavior remains the same, directed, as always, by shared values and morals as well as legal restraints. What happens when these are ignored? An example follows:<\/p>\r\n

Rajat Gupta grew up in India, earned an MBA from Harvard, and prospered for years as managing director of McKinsey & Company, a preeminent management consulting firm. A respected business leader and cofounder of the Indian School of Business and the American Indian Foundation, Gupta served on many corporate and philanthropic boards. \u201cGupta was commended by people who knew him as a person who helped others. He was very active in providing medical and humanitarian relief to the developing countries. Born to humble circumstances, he became a pillar of the consulting community and a trusted advisor to the world\u2019s leading companies and organizations.\u201d<\/p>\r\n\r\n

<\/div>\r\nAccording to the Securities Exchange Commission, however, in 2009, Gupta provided hedge-fund manager and longtime friend Raj Rajaratnam with insider information about investor Warren Buffet\u2019s agreement to purchase shares in Goldman Sachs, an investment bank for which Gupta served as a corporate director. Gupta was convicted of felony securities fraud relating to insider trading (three counts) and conspiracy (one count) and sentenced to two years in jail plus $5 million in fines.\r\n
<\/div>\r\nHe had chosen to violate both business ethics and the law, as well as breaching his fiduciary duty as a corporate director.\r\n

When corporate managers follow codes of conduct in a virtuous fashion, the outcome is positive but tends not to make the news. That is not a bad thing. We should value ethical behavior for its own sake, not because it will draw media attention. Unethical behavior, on the other hand, is often considered newsworthy, as were the crimes of Rajat Gupta. In discussing his case, the Seven Pillars Institute for Global Finance and Ethics (an independent, nonprofit think tank based in Kansas City, Missouri, that helps raise public awareness about financial ethics) said, \u201cAs a true professional, the good manager strives to achieve a moral excellence that includes honesty, fairness, prudence, and courage.\u201d<\/p>\r\n\r\n

<\/div>\r\nThese are some of the virtues ethical players in the corporate world display.\r\n

Respected businesses and managers adhere to a well-thought-out vision of what is ethical and fair. The primary purpose of business ethics is to guide organizations and their employees in this effort by outlining a mode of behavior that proactively identifies and implements the right actions to take, ones that avoid lapses in judgment and deed. For instance, as we saw in Defining and Prioritizing Stakeholders<\/a>, identifying the needs and rights of all stakeholders, not just of shareholders, is a useful first step in fair and ethical decision-making for any business organization. The box that follows describes what happened when General Motors forgot this.<\/p>\r\n\r\n

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General Motors\u2019 Failure to Consider Stakeholders<\/div>\r\n

General Motors (GM) has struggled with its brands and its image. Over the years, it has jettisoned some of its once-popular brands, including Oldsmobile and Pontiac, sold many others, and climbed back from a 2009 bankruptcy and reorganization. The automaker was hiding an even bigger problem, however: The ignition switch in many of its cars was prone to malfunction, causing injury and even death. The faulty switches caused 124 deaths and 273 injuries, and GM was finally brought to federal court. In 2014, the company reached a settlement for $900 million and recalled 2.6 million cars.<\/p>\r\n

The case exemplifies the tension between the concept that \u201cthe only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders\u201d on one hand, and the ethical obligations a company owes to its other stakeholders on the other.<\/p>\r\n\r\n

<\/div>\r\nGM\u2019s failure to consider its stakeholders and consumers when choosing not to report the potential for malfunction of the ignition switches led to an ethical breakdown in its operations and cost the company and its customers dearly. In addition, by treating customers as only a means toward an end, the company turned its back on a generation of loyal buyers.\r\n

Critical Thinking<\/strong><\/p>\r\n\r\n