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Essay Samples > Business > Business Ethical Theories
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Business Ethical Theories

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Business ethical theories and stakeholders involved play important roles in determining the nature of decisions made by management. This paper identifies ethical theories that can be used to evaluate a case study where a construction firm received more payment than expected, yet the firm paying did not recognize the error. In the case study, a constructor whose line of business was mainly availed from public tendering received more payments for a service than was expected. This was a huge anomaly as the construction firm was not allowed to charge clients higher than quoted prices, and therefore this incident had to be dealt with urgently.  Similarly, a personal opinion will be provided based on occurrences in the case study in relation to business ethics.

Ethical issues and stakeholders in the case study

In this case study, the constructor had conducted his calculations as accurately as possible, as they all catered for the entire cost of the tender. However, based on the payments received, it is apparent that the client overestimated their calculations, and therefore excess payment was made. However, James, the constructor, could have made it clear where the discrepancies were identified in the payment cheque. According to the descriptive ethical issues, etiquette plays a critical role towards identifying application of ethics in business. Business etiquette calls for business partners to carry out their transactions amicably without any party maliciously benefiting from the weaknesses of the other (Weiss, 2009).

Based on the concept of moral ethics, human beings are supposed to be guided by their own perception of right and wrong, so that at all times we should refrain from undertaking activities that are not morally upright. James failed in the psychological and moral aspect as he did not heed his instincts that were pushing him to report the anomaly to the constructor. Consequently, identifying the erroneous area would have made it easier for the client to clarify why the payment was in excess. The ethical issue is failure by the constructor to point out the exact discrepancy in the cheque which would solve the issue (Weiss, 2009).

Stakeholders in this case study include the client who is a recipient of the constructor’s services and is among the stakeholders portrayed herein. The client represents the public and the council who account for a huge percentage of James’ clients. Therefore, the nature of relations between this particular council and the constructor will affect the overall relationship between the constructor and other local councils.  The community living in the area where the construction was taking place is among the stakeholders, as the service or facility constructed will have an impact on their daily lives (Post, 2002).

On the other hand, employees are among the constructor’s stakeholders, as their efforts and output are behind the firm’s success. Employees are vital stakeholders in any given organization as they aid in the daily procedures which enable such organizations to achieve their objectives. Similarly, from the case study, the scenario with the ethical issue was taking place in their home area, therefore, increasing their vulnerability in the occurrence of unethical conduct (Pinnington and Lafferty, 2002).

Neighbors or the surrounding community are also part of the stakeholders, as their way of life is greatly affected by presence of the construction company in their midst.  Individuals supplying this construction firm with materials used in the course of delivering construction duties present a yet another stakeholder who could have been affected by the mishap in calculations, hence their relationship with the constructor could be adversely affected depending on the decision made. Similarly, the reputation of the construction firm will be tainted in such a way that stakeholders including neighbors at the premises would never wish to be associated with it. Consequently, each and every person who has interests in the firm will be negatively affected by the impact of James’ decision. (Woodd, 1997).

James’ construction company has been noted to acquire most of their business deals through public tenders, therefore, the local authority accounts for a large percentage of its entire customers. Therefore, losing credibility of the local government could amount to losing of business, as potential clients would shy away from a constructor who is less than honest in unidentified scenarios. Similarly, other individuals or organizations that are affiliated to James’ construction company fall under the category of stakeholders, as their activities are affected by presence of the company. Such companies include financial institutions that would be affected by closure of James’ company in the event of auditors identifying the incidents (Woodd, 1997).

Ethical theories applicable in the case study

The categorical imperative consistency theory portrays ethical conduct as activities that are guided by the moral aspect of making decisions that are consistent. Consistency in this case shows that James was obviously getting his earlier debts and erroneous calculations being paid back using the councils extra cash. Such was the reason behind his inability to insistently urge the council to redo all their calculations as a way of pointing out the source of the miscalculation. This theory exhibits business ethics as decisions that are made to cut down on the questions that would be raised if unexpected moves are made (Robotham, 2005).

In this case, James could have made frantic calls to the clients asking them to recheck the calculations not because he wanted them to prove otherwise but rather as a formality so that he would not be accused of receiving excess payments. Consequently, based on this theory, it is apparent that calculations made by the constructors were not always accurate, hence consistent gaps were always seen in the calculations and the only difference in this scenario is that the gaps are in the constructor’s favor, unlike previously. It was the responsibility of James to inform the client that an anomaly had been identified in the payments which exhibits the act as an obligation of duty rather than an activity aimed at successfully completing the business transaction (Moon, 2001).

Consistency is a concept that goes hand in hand with lies, especially where the cost of being caught is rather high. Therefore, individuals portraying the categorical imperative consistency elements always rely on their own wit towards ensuring that their words do not reveal any suspicious issue that would be a setback in the planned move. Consequently, this would have been the key reason as to why James never mentioned any additional finances on top of what they were expecting from the client. James was very categorical about revealing details of the error, as this would have raised more intense calculations that would have pointed out the origin, hence James would miss out on the cash which was currently in his own hands (Robotham, 2005).

The other ethical theory is the cardinal virtues theory which states that the need of business managers to conduct business ethically is based on the human desire to attain happiness. This theory points out being in control, integrity and hard work so that any business transaction should be conducted in order to sustain happiness on both sides and prevent the stakeholders from being hurt or sustaining losses from decisions made by management (Cetina & Preda, 2005).

The aspect of integrity in the cardinal virtues theory is evident in the case study where the intellectual capacity of the said individual supersedes the moral component of ethics. According to this theory, James could have seized the opportunity to acquire additional income to recap the already incurred losses when errors in calculations made the construction company lose substantial sums of money. Similarly, at the time, the most intelligent move which James could have sought was that of employing logic as well as controlling the movement to sustain his firm (Cetina, 2005).

According to the case study, James could have failed to point out the real problem in the calculations so that the client could have concentrated on the real issue, thus confirming the source of extra funds. However, revealing the same would have cost the client as well as the construction company plenty of resources, as they would have had to start fresh calculations of the entire project and in turn inconvenience their daily activities. Therefore, James used the additional finances on the payment as compensation for the hard work done by his firm in the past construction activities within the public circles. Hence, this deduces any guilt that would usually be associated with such a move as it was justified based on the quality of services rendered by the firm (Smith, 1997). Consequently, James thought it wise to let everything stay as it was in terms of the already concluded calculations on his side, and at the end of it all everyone was satisfied as the extra payment would be used to recover a similar loss incurred previously (Huevel, 2009).

According to the case study, if I were James I would have confirmed the cost of each activity or materials used in the entire construction. This way the source of excess funds would have been identified and at the close of business each party would have had no doubts as to why certain transactions did not add up. Similarly, I would have withheld the information from employees until the entire incidence was settled as James did, thus reducing instances of unnecessary worry and misinformation (Watson, 2003).

Ethical conduct is vital in any business undertaking mainly due to the fact that it exhibits the overall conduct of stakeholders affiliated to the organization, as well as the overall enterprise. It is, therefore, important to ensure that moral laws are applicable in any decision made by a business enterprise, as its public image may be tainted by such moves. In conclusion, James made decisions based on opportunities he had at that time as he had to ensure that all stakeholders closed business satisfied, although this was not attained as he was left with a lot of unanswered questions. Similarly, the decision can be justified on the basis of satisfaction levels of their clients so that the additional payment could have been a token of good work done which was probably included by the council as part of the payment, hence failure to identify the errors when it was pointed out. 

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