Ethical Theories and Their Application Business

It is vital for businesses to understand the importance of ethics in this dynamic environment. An organisation’s corporate culture is supposed to be characterised by ethical behaviours for it to make decisions that are more likely to be socially responsible rather than motivated solely by making profits. Organisations that are committed to long term success recognise and realise that creating a culture where ethical behaviours are rewarded and encouraged is the ultimate key to survival and growth. This paper aims at outlining three ethical theories and to evaluate how business ethics have been violated in the Zimbabwean banking sector.

Definition of terms Business ethics- According to Joseph 2003, business ethics refers to clear standards and norms that help employees to distinguish right from wrong behaviour at work. Ethical theories- these are theories that involves learning what is right and wrong and doing the right thing but the fact that the right thing is not straight forward brings in the subject of ethical dilemmas Utilitarianism theory The philosophy of utilitarianism is one of the most commonly used and accepted ethical theories and is linked to Jeremy Bentham and John S Mills.

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According to Crane and Matten (2010) utilitarianism is defined as an action which is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action. This principle focuses solely on the consequences of an action and it weighs the good results against the bad results. It also encourages the action that results in the greatest amount of good for all people involved. Utilitarianism is very powerful in business since it puts at the centre of the moral decision a variable which measures the value of an action.

In a business situation one can analyse the two possible actions in a single business decision for example the dualisation of the Masvingo – Beitbridge highway saw business premises being destroyed for the benefit of many Zimbabweans. A few people lost their properties but the consequence was justifiable on the utilitarian grounds that the pain of a few business people would benefit the public. The consequence with a higher aggregate utility can be determined to be morally correct. Utilitarianism is widely applied in the health and safety sector where priority is given to the majority.

Firstly organisations must analyse the course of actions that are available. Then they analyse who will be affected by the decision and what benefits or harms will be derived. Lastly they must choose the action that will produce the greatest benefits and the least harm. The ethical action is the one that provides the greatest good for the greatest number. Recently the government waived the maternity fees and this gesture will benefit most women and their babies in Zimbabwe. Zimbabwe Revenue authority ZIMRA uses the utilitarian approach to tax the high net worth for the benefit of the poor.

Utilitarianism is used as a determinant of economic decisions and actions. However, the utilitarian philosophy has complications in terms of being subjectivity, problems of quantification and the distribution of utility. It is difficult to assess such consequences as pleasure and pain hence it heavily depends on subjective perspective of the person carrying out the analysis. It is rather difficult to quantify the pain that those owners of buildings that were demolished endured and to assign costs and benefits to every situation. Deontology theory

Deontology is a normative ethical position usually attributed the philosophical tradition of I Kant that judges the morality of an action based on the action’s adherence to a rule or rules. Deontology can be described as a duty or an obligation based ethical theory. When individuals perform their duties at work they are behaving morally. Deontologists argue that there are transcendent ethical norms and truths that are universally applicable to all people. The deontological theory is quiet optimistic and views man as a rational actor who acts according to duty. People came to moral conclusions about right or wrong based on rational thought.

In business it is wrong to overcharge or to provide a product or service which is harmful. Everyone must ensure that they do their duties diligently . A good example is when a chemical company delivered a wrong water purifier at the Harare water works. Care and responsibility was not exercised and the results could have been fatal. Businesses take advantages of scarcity to overcharge consumers and that is unethical. Taking bribes or kickbacks is wrong and unethical. Workers must not abuse company properties for their personal interests. Deontological ethics is strongest in many areas where utilitarianism is weakest.

Unlike utilitarianism this moral principle is separated from any consequences which may follow. Justice theory Justice as an ethical approach is where all humans are treated equally through society regardless of rank, position, class, creed or race it is also known as the fairness approach in business. Organisations are supposed to treat employees fairly in terms of remuneration. If one employee receives a higher compensation than the other there must be a justifiable reason to support that decision. In Zimbabwe organisations use such things as experience or academic achievements to justify the salary discrepancies.

The justice approach is widely used because of its simplicity and most companies recognise the United Nations declaration of human rights. Human beings ought to be respected because they have dignity and they are capable of autonomy and self governance. In Zimbabwe there are two major religions namely Christians and Moslems. Christians would uphold the golden rule that states that “In everything do to others as you would have them do unto you” and for Islamists it reads “Not one of you truly believes until you wish for others what you wish for yourself”.

Crane and Motten 2010 page 106 Banks have not been spared by the changes in the social, political, technological and economic environment. One aspect of this is the globalisation of business activities which is bringing the whole world into a single market place. As banks reach out beyond their home market they are exposed to unfamiliar business environments. Defined business ethics as a guide to moral behaviour based on culturally embedded definitions of right and wrong. Business ethics is primarily concerned with those issues not covered by the law or where there is no definite consensus on whether something is right or wrong.

The banking industry has been under scrutiny for ethical conduct by governmental regulatory authorities, shareholders, clients, and the general public. Financial institutions have a responsibility to act in a manner that inspires public trust and confidence. Over the past years business ethics have been violated in Zimbabwe’s banking industry. Many banks have gone under curatorship like Royal, Barbican, Trust and some banks closed down as a result of violating business ethics. Business ethics has been affected by the forces of globalisation, international diversity and practices in business.

These forces have a direct impact on the violation of business ethics in Zimbabwe. People have been exposed to different cultures and practices. According to Crane and Matten (2010) globalisation has provided a greater potential for greater profitability but has brought in greater risk as well. Lack of regulation of global financial markets has impacted on the banking sector leading to additional financial risks. Employees have not been spared by globalisation. They have been exploited through poor working conditions and poor remuneration.

Employees were given money that could not buy anything. In crisis situations businesses have an ethical duty to minimise whatever hardships that can be employed on the employees in the form of workforce reductions, banks closing, job transfers and loss of income. Employees expect remuneration for the worth and dignity they devote their time and energies to save the company. Business ethics provides a clear and carefully defended decision procedure for reaching ethical judgements in business practice. Many banks went under curatorship because they forgot their core business which is banking.

Owners of the indigenous banks were abusing depositors’ funds buying luxury cars, houses and living luxurious lives. NMB bosses left the country through undesignated points trying to evade the authorities because they had violated simple business ethics. Business ethics reminds businesses and professionals the consequences of their actions. They destroyed their business reputation they had taken years to build as a result of not adhering to ethical standards. Renaissance bank violated its ethical duties when the directors were borrowing money for their private companies and lending money to their relatives.

Ethical dilemmas can arise when banks try to innovate particularly when they stray outside their core business. Unethical behaviour will force the bank to finance other wings. Auditors played a role in violating business ethics in the banking sector. Auditors have an obligation of informing the public a true and fair value of the banks position. As a result of greediness and unethical motives auditors are being paid money and cover up the anomalies. In the case of NMB Bank the auditors should have picked the fraud that was perpetrated by a treasury officer.

The officer transferred millions of dollars to a Swiss bank over a period of time from the bank’s suspense account. If those anomalies had been highlighted the bank would have averted the losses. Full, fair, accurate, timely and understandable disclosure in reports and documents that the company submits to regulatory authorities or to the public is an ethical obligation of a company. Organisations have a code of conduct which is supposed to encourage employees to be honest and steer clear of potentially illegal behaviour.

Most banks have a code of conduct but in most cases people do not follow the rules and they end up violating standing instructions. Employees were involved in illegal money transactions. In 2008 bankers were exchanging foreign cash outside their mandates. By so doing they are pursuing their interests against the organisation. Bankers were involved in third party transactions when they are supposed to place the interests of the company and clients first. Bank employees were selling stationery and fuel to their organisations.

Business ethics stipulates that employees have a duty and obligation to make full disclosure of any situation in which their private interests conflict with those of the organisation or its clients. Paying bribes is regarded as economically unsustainable because these activities undermine the long term functioning of the bank. Megane and Robinson 2002 stated that using business resources for non business purposes is a kind of theft. Often when an employee puts his or her own interests ahead of those of the organisation it is a conflict of interest. Employees knew about the multi practices by their superiors but they kept quiet.

It became very normal to see a manager abusing company resources like time, premises, equipment, vehicles or other assets for their personal benefits. Managers would carry their farm implements using company vehicles with company logos or even use the drivers to do the chores. These practices are unethical and can tarnish the name of the company. Workers were no longer fulfilling their duties and responsibilities. Employees were doing unethical practices on the basis that everyone else is doing it. A good example is the case of an RBZ official who was abusing farm mechanisation funds and is still at large.

Business ethics do remind professionals of the consequences of their actions and to encourage them to pursue their success responsibly. Bank directors were earning excessive salaries and business ethicists have been criticising hefty executive salaries While it is generally true to say that good ethics is good business it is important to highlight the limitations of business ethics. If a lucrative but illegal transaction has to be refused or honesty costs the business an important deal then acting ethically can lead to business losses. Doing the right thing can sometimes cost the reputation of an rganisation. In 2008 financial institutions were trading on the parallel market to keep their banks afloat. All sectors were faced with economic challenges and the banking sector was not spared. Ethically what they were doing was wrong but they kept their employees at work. Unethical behaviour is beneficial in the short run but has adverse consequences in the long run. Many banks lost their trading licences and they seized operations. A firm’s reputation can take years to build but can be destroyed in an instant through unethical behaviour.

Companies must ensure and maintain a corporate culture of morality, integrity, honest and good ethical standards to maintain their reputation. Ethical shortcuts may yield results in the short run but they can prove tragic in the long run. Businesses are faced with ethical dilemmas hence there is need for them to take proactive measures to establish and maintain a corporate culture that emphasises strong moral behaviour and practices. Businesses need to adopt and maintain a code of conduct, correct unethical behaviour and empower the guardians of integrity.

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Ethical Theories and Their Application Business. (2016, Nov 18). Retrieved from