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MGT 216 Week 1 Individual Assignment Ethics Issues

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Ethical Issues Paper
Business Ethics
Business ethics refers to practices in business which is fair, honest, and just. In an ethical
business, executives and shareholders would not profit financially by laying excessive costs of
burdens on others. Where personal ethics come down to moral questions such as “right and wrong”,
business ethics can have much wider and more far-reaching consequences. Business ethics include
such issues as treatment of employees, sustainable practices, honest labeling, product safety, fair
competitive practices, and management of financial risk.
One ethical issue for businesses right now has to do with financial reporting. After the
debacle of Enron and Arthur Andersen in the late 90’s, companies have been held to higher standards
of ethics in their accounting practices. The Sarbanes-Oxley Act of 2002 requires stricter internal
controls, defines required independent audits, and increases personal responsibility for failures in
accounting practices for senior executives. Even though companies are held to higher standards, they
can still be more or less ethical in their financial reporting and their management of risk. For
example, in t he current economic climate, we’ve seen many banks fail because they allowed
themselves to become overexposed to risky mortgages and other real estate investment. The lack of
foresight and self-monitoring on the part of these banks has led in large part to the current recession.
Another ethical issue is the treatment of employees. Labor unions in many industries have
taken employee rights a long way, and yet some large corporations are still strongly anti-union. Wal-
Mart is one of the main practitioners of union-busting; its poor treatment of employees is one of the
reasons that it can keep its prices so low. Some of its unethical practices include stocking its stores
with products made in US and overseas sweatshops; pricing corporate health insurance so high that
most employees can’t afford it; and keeping pay rates and promotions so low that employee turnover
remains high (which in its turn prevents union organization) (“Store wars”, n.d.). Wal-Mart
employees also complain of unpaid overtime, illegal appropriation of breaks, and being locked into
warehouses over night to prevent theft (Greenhouse, 2002). This becomes a major factor in
communities that have a Wal-Mart, as the number of people they employ and the low pay rates (and

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Ethical Issues Paper
lack of benefits) affects the overall standard of living in the area. Because the presence of a Wall-
Mart tends to lead to the extinction of small businesses, people in the community have fewer
options for work and become more likely to accept the low pay rates and terrible working
conditions.
A final issue in ethics has to do with environmentalism. Companies are known to
“externalize” costs, which means incurring long-term costs but making someone else pay for them.
An example of this is in disposition of waste products. Companies that dump toxic effluent into
rivers, use resources unsustainably, or pump huge amounts of carbon dioxide into our already over
warmed planet are behaving unethically. They are creating costs to society and profiting from them,
but they are not paying the costs themselves. Instead, they are pushing those costs onto other people.
When legislation gets in the way of these unethical practices, some companies simply pay the fines,
which cost less than giving up the revenues associated with them. In other cases, no legislation
exists, and yet the practices are clearly wrong. For example, consider strip mining, in which huge
swaths of earth are removed and highly toxic chemicals such as arsenic are used to leach minerals
from the soil. This practice is very destructive to the earth, but since the costs of cleanup are not
completely borne by the company that profits from it, it still continues.
Business ethics concern everyone. Companies, especially mega-corporations, have a lot of
power to shape the world we live in. With their financial power, they can even shape legislation or
determine who our leaders are. If they do not act ethically, then a lot of damage will be done. With
an ethical stance, however, in which they voluntarily repair their own environmental damage, treat
their employees fairly, and are honest about their financial transactions, our communities can be
enhanced by businesses.

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Ethical Issues Paper
References
Greenhouse, S. (2002). Suits say Wal-Mart forces workers to toil off the clock. Retrieved January 9,
2010, from
http://www.sullivan-county.com/id2/wal-mart/not_paid.htm
“Store Wars: When Wal-Mart comes to town.” (n.d.). Retrieved January 9, 2010, from
http://www.pbs.org/itvs/storewars/stores3.html
“What is Sarbanes-Oxley?” (n.d.). Retrieved January 9, 2010, from http://www.tech-
faq.com/sarbanes-oxley.shtml

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