Ethical Decision Making In Business: A Case Study Of WorldCom
- December 28, 2023/ Uncategorized
Theories of Ethical Decision Making
As the illegal means in business is rapidly increasing, the need of integrating ethics in decision making process is also accelerating. Ethics can be considered as a set of moral principles which guides the people towards proper direction. Ethical decision making can be defined as the process of integrating the moral values into commercial course of action. According to Crane & Matten, (2016) business ethics is one of the most significant tools, behind used in recent times for integrating moral principles in business which is the key of running business with utmost efficiency. As per the case study, WorldCom, the major telecommunication company is encountering with financial threat due to increased cost of telephone rentals.
David Myers, the Financial Controller of the company is highly vulnerable towards leading such mischievous means that is ultimately leading the company to face immense financial loss. On the other hand. David, an extremely loyal employee of WorldCom is making multiple plans in order to get the company out from the issue. Present paper will highlight the ethical decision making in the context of WorldCom. Theories of ethical decision making will be discussed in the paper. AAA Model of ethical decision making will also be highlighted. Finally, this paper will put forth the discussion of APES 110 in order to provide David with requirements of this framework. Part: A
Ethics is considered as one of the most significant branches of moral principles that deal with the standard of right and wrong along with code of conduct of human behavior. As discussed by Ferrell & Fraedrich, (2015) having strong ethics in business is highly required for safeguarding the business assets and thereby create a fair working system without amidst any kind of illegal means. Utilitarianism theory is one of the most significant aspects of business ethics which deals with the application of moral values that can bring greater happiness towards the organization. This is one of the most significant forms of consequentialism, which is highly focused on determining the right from that of wrong. According to this theory, it is important to act in such a manner which can support in producing greater happiness among mass range of people. This is the most common approach, being highly used in business for attaining greater benefit (Trevino & Nelson, 2016).
Bowie (2017) highlighted that according to Utilitarianism theory, business must be operated in an ethical manner in order to get immense benefit. Being the most loyal employee of WorldCom, David must take significant initiatives in order to diminish the unethical practices from the workplace. It is important for David play the role of whistle blower in order to keep his boss about the illegal means at the workplace and the person, who is responsible for executing the illegal way. At the same time, he should also offer the boss with multiple plans to cut the cost of telephone rental and thereby improve the financial condition of the company. In the context of utilitarianism approach, the act of whistle blowing is highly significant as it supports in providing immense pleasure to the business.
Utilitarianism Theory in the WorldCom Case Study
According to the cases study, utilitarianism approach is needed to be applied in terms of lowering the threat, being faced by WorldCom in contemporary times. As highlighted by Pearson Pearson (2017) application of this approach, can serve the employer of the organization with the ability to align the issue with that of strategy, which is the key of running business in a cost effective manner. In addition to that, utilitarianism approach has been chosen at it can provide WorldCom with a fundamental purpose of decision making. This is the way, through which highly ethical decision can be taken by considering several aspects such as broader picture of decision along with its impact on internal functionality of WorldCom. Moreover, Shaw (2016) shaded this theory of business ethics can provide multiple tough choices for WorldCom, from which they can be able to mitigate the issue in a timely and cost effective manner. Additionally, with the assistance of this approach, both positive and negative aspect of decision can be measured.
Weiss (2014) showed that ethical decision making is a complicated process which requires multiple steps. American Accounting Association (AAA) is one of the most important models, which support in taking ethical decision in a comprehensive manner. There are multiple steps of AAA Model of ethical decision making which are as follows:
Initially, it is imperative to understand the main factor which is the most important factor in terms of taking effective decision. Determining the key factor is the major way of evaluating te issue, faced by a company. Identification of key issue is highly imperative factor for exploring the main basis that is leading to conflict of interest (Hoffman, Frederick, & Schwartz, 2014). By taking the case study into consideration, it can be said that, exploring the key issue faced by WorldCom is the initial step of promoting ethical decision making. The company is encountering with the issue related to higher rental of the telephone. As an extremely loyal employee, David should explore the base of such unethical practices at workplace, the factors causing such higher cost of rental and the responsible person behind such illegal means.
Assessing the ethical issue in the prevailing case is the second important step of ethical decision making model. It is imperative to define the ethical basis of the issue which is very much needed to understand every aspect of an issue (Medeiros et al., 2017). Based on the case study, increased cost of line rental is the prevailing issue of WorldCom- the giant in telecommunication industry. The ethical issue in this case is that, there is an illegal practice which is causing the issue and is affecting the annual revenue of the company. The highline cost of rental is creating strong barrier for WorldCom to raise their capital in future.
AAA Model of Ethical Decision Making
This is the third step of ethical decision making which focuses on the affected parties of the issue. It is imperative to identify both the direct and indirect stakeholders, who are associated with the issue. This is the way, by which the impact of issues on the affected parties can also be understood (Davies, 2016). According to the case study, WorldCom is facing major financial problem due to higher cost of rental. This is affecting the financial stability of the company. In this case, the owner of telephony infrastructure is the direct stakeholder of WorldCom, who is being affected by the higher cost. In order to mitigate the issue, WorldCom might leave the company which can also affect the rate of profitability of the owner of telephony infrastructure. The employees are one of the key internal stakeholders of a company, who holds a significant role of gaining success from business (Shapiro & Stefkovich, 2016). It is quite evident from the case scenario, that the accountants of WorldCom are responsible for executing this illegal means which is resulting in major financial loss for the company.
In this step, it is required to make a list of multiple options before taking final decision. This is the mode of choosing the best judgment and thereby diminish the issue in a timely and cost effective action. The durability of each of the solutions must be analyzed before applying one of them in the final decision making process (Dane & Sonenshein 2015). Being the financial controller and highly loyal staff of WorldCom, it is imperative for David to make a list of multiple options to the employers in terms of mitigating the prevailing issue. David can execute a strong code of conduct for the entire organization, generate the consequences of the issue, and create the organizational culture in such a manner, which can support in showing welcoming attitude to the employees who show ethical behavior and creating a system of check and balance to avoid any kind of mischievous behavior in the workplace (Lehnert, Park & Singh, 2015).
Out of all the solutions, it is imperative to choose the best course of action, which is highly beneficial for the company. This is the way, through which best possible option can be integrated. Cooper, (2010) observed that there are multiple ways, through which all the probable solutions can be measured. Harm test is the best option in this context, which deals with the analyzing the extent to which an option is less harmful than that of the others. Defensibility test is another major way of measuring all the options. This is the mode of defending the best option and placing them towards the authority. Virtue test is considered as one of the best ways of measuring the best possible option. Through this way, the benefits of each solutions is being measured (Schwartz, 2004).
Requirements of APES 110
This is the 6th step of AAA model of ethical decision making. In this way, the probable outcome of all the course of action can be assessed before applying the best technique. In-depth assessment of the result can serve the higher authority of WorldCom with the ability to initiate the process of ethical decision making in a timely and cost effective manner. Thus, it is imperative for David to measure the result of all the possible courses of action.
Based on all the alternative options of ethical decision making along with its benefit, it is imperative to choose the best option that can give the company with a highest benefit. This is the final steps of ethical decision making which deals with in-depth review of all the other steps. This step also requires taking strong cautions based on the problem and changing the organizational structure and policy which is the key of mitigating the issue.
Based on all the steps of AAA model of ethical decision making, it is imperative for David to put ample stress on 4th step that is suggesting alternative course of action. This is the mode of unfolding multiple ways of solving. Out of all the possible options, David should execute a strong code of conduct throughout the organization. Code of conduct can be referred as a strong organizational culture which deals with how the employees can behave in an appropriate manner. Being the accountant of WorldCom, it is the prime responsibility of David to take care towards the financial aspects. Determining code of conduct can serve David with the ability to generate a positive behavior among all the accountants in order to undertake immediate ethical course of action. In addition, strong code of action can also support in reinforcing the culture and value of WorldCom.
APES 110 is one of the major code of professional ethics, which has been designed especially for the professional accountants. It is the prime responsibility of the members of Australia to follow such code of conduct while dealing with any kind of ethical issues of business. Honesty and integrity are two of the most significant code of conduct which are needed to be followed by the members of CPA Australia. This is the fundamental principle of this code of conduct which deals with straightforwardness in the business relationship (APES 110., 2018). As an illegal practice is being executed in WorldCom which is resulting in increased cost of rental and leading the company to face major financial loss, it is imperative for David to play the role of whistle blower and inform the higher authority of WorldCom regarding the treacherous mean, which has been executed in the company.
Objectivity is another vital principle of APES 110 code of ethics for professional accountants. As per this principle, it is imperative to avoid any kind of biases while making judgment as it can hamper the consistency of ethical decision making. David must make a healthy interaction with Buddy in order to get the things, without making any kind of pressure on him. Professional competence and due care, too is a vital principle of APES 110 code of ethics for professional accountants which focuses on intense skill and knowledge among the members of CPA Australia. According to this principle, it is the prime responsibility of the professional accountants like David to strengthen his skill in order to modify the organizational structure and thereby generate positive behavior among the all the employees to avoid any kind of mischievous practices at workplace (Schwartz, 2016). This principle can also lead the staffs like David to keep the organizational structure and culture up to the mark which can support in establishing a strong standard throughout the workplace. Professional behavior is the key principle of APES 110 code of ethics for professional accountants which is concerned with amenableness with all the prescribed rules and legislative framework. Undertaking any mischievous means is highly unethical in business, it is imperative for David to consider the issue of increased cost of rental from a legal perspective and take legal action against the person, who has executed the illegal means in order to create harm for the company (May et al., 2014).
As David is holding a senior position in the company, it is his responsibility to influence the attitude among the employees along with the practice which can be beneficial for the company. However, there are certain threats, which David might face while executing his course of acting. As he is playing the role of whistle blower and uncovering the illegal practices, happening in the company, he might face threat of replacement. He might also face self-review threat while determining appropriate accounting system (Valentine et al., 2014). Therefore, it is imperative for David to safeguard himself by employing the organizational structure. Ethics and conduct program must also be executed at workplace for the sake of having strong internal control.
Conclusion:
Based on the discussion, it can be concluded by saying that determining professional code of conduct in business is highly significant in order to run business with utmost proficiency. Ethical decision plays a key role in lowering any impending issue of business and take action accordingly to mitigate the issue in a timely and cost effective manner. According to the scenario, WorldCom, the giant in telecommunication is facing major threats due to increasing cost of rental. This is encumbering the financial context of the firm. Therefore, it is vital to take strong and proactive action in order to lessen the impact of the issue. Utilitarianism approach is highly required in this case to provide benefit of the entire organization. AAA model of ethical decision making must also be implemented in WorldCom for getting multiple solution to the problem. A strong code of conduct is needed to be established in the organization for reinforcing positive behavior among the employees in terms of avoiding the issue. Honesty and integrity must be possessed by the employees who is playing the role of whistle blower in terms of keeping the higher authority of WorldCom informed regarding the ongoing issue that is affecting the future capital of the firm.
Reference:
APES 110. (2018). Retrieved from https://www.cpaaustralia.com.au/professional-resources/accounting-professional-and-ethical-standards/apes-110-code-of-ethics-for-professional-accountants
Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.
Cooper, C., (2010), Extraordinary Circumstances Kindle edition, John Wiley & Sons,
Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Dane, E., & Sonenshein, S. (2015). On the role of experience in ethical decision making at work: An ethical expertise perspective. Organizational Psychology Review, 5(1), 74-96.
Davies, P.W., (2016). Current issues in business ethics. Routledge.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Hoffman, W.M., Frederick, R.E. & Schwartz, M.S. eds., (2014). Business ethics: Readings and cases in corporate morality. John Wiley & Sons.
Lehnert, K., Park, Y.H. & Singh, N., (2015). Research note and review of the empirical ethical decision-making literature: Boundary conditions and extensions. Journal of Business Ethics, 129(1), pp.195-219.
May, D.R., Li, C., Mencl, J. & Huang, C.C., (2014). The ethics of meaningful work: Types and magnitude of job-related harm and the ethical decision-making process. Journal of Business Ethics, 121(4), pp.651-669.
Medeiros, K.E., Watts, L.L., Mulhearn, T.J., Steele, L.M., Mumford, M.D. & Connelly, S., (2017). What is working, what is not, and what we need to know: A meta-analytic review of business ethics instruction? Journal of Academic Ethics, 15(3), pp.245-275.
Pearson, R. (2017). Business ethics as communication ethics: Public relations practice and the idea of dialogue. Routledge.
Schwartz, M.S., (2016). Ethical decision-making theory: An integrated approach. Journal of Business Ethics, 139(4), pp.755-776.
Schwartz, MS., (2004), ‘Effective Corporate Codes of Ethics: Perceptions of Code Users’, Journal of Business Ethics, 55 (4), pp. 321–341.
Shapiro, J. P., & Stefkovich, J. A. (2016). Ethical leadership and decision making in education: Applying theoretical perspectives to complex dilemmas. Routledge.
Shaw, W. H. (2016). Business ethics: A textbook with cases. Nelson Education.
Trevino, L. K., & Nelson, K. A. (2016). Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.
Valentine, S., Nam, S.H., Hollingworth, D. & Hall, C., (2014). Ethical context and ethical decision making: Examination of an alternative statistical approach for identifying variable relationships. Journal of Business Ethics, 124(3), pp.509-526.
Vitell, S.J., Singhapakdi, A. & Nishihara, C.M., (2015). The influence of ethics institutionalization on ethical decision-making in marketing. Handbook on ethics and marketing, 3(2), pp.61-88.
Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.