Example research essay topic: Ethical Decision Making Cost Benefit Analysis - 2,141 words

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Business Ethics In my paper, I will discuss a case that happened to one financial company. This is a large organization with more than one thousand of employees and fifty offices all over the country. This is not a multinational company, but it has a significant market share at the domestic market. As the company came into a new stage of its development, with a change of the top management, it became evident that the need improvement in operations. Regardless of the stable position of the company at the financial market, it encountered remarkable decrease in the profits. This is one of the reasons why the top management was replaced.

The former success of the company was connected with the quality of service that the corporation offered to its clients. The quality management standards were the result, mainly, of two management approaches the company practiced. The first one was the technology: constant intranet improvements, always renewed facilities etc. The second was the management. The compensation for the service was always high comparing to other companies.

It allowed the corporation to employ the best specialists. There was always a competition for an open position. With the expansion of the company, the expenditures increased dramatically. Sometimes, there was no profit at all.

Regardless of the optimistic expectations of the management that the investments would pay off within a year, the profits remained insignificant. That was the main concern of the shareholders who like to see higher return of their investment. The reason for the such a situation could be internet, the same as external. The market, at which the company worked, did not expand. There were a lot of competitors at the new places where the company settled new branches. The reputation of the company did not turn to be enough for the proper entrance into the local markets.

In this case, it looked like it required more funds for promotion. From the other hand, the technology demanded new investment. The new management faced these problems, and they had find a way out of this situation. Everything was up to them. Basically, there were two proposed actions. Cut of the salaries would allow the company to retain its expected profit position, or it would require for the company to take additional burden of debt.

Now we will explore the ethical principles within the frameworks and will see how the proposed actions of the new management would impact upon the stakeholders to the decision. According to John Stuart Mill and his concept of utilitarianism, an accepted approach is to evaluate the end results of the action. Traditionally, this evaluation was based on the decision's impact on the interests of the company's owners or shareholders. The impact was measured in terms of the profit or loss involved, as the profit is the thing that shareholders wanted to maximize. But at the present time, the interest of shareholder only in short-term profit is undergoing modification. We know that modern corporations find their who are interested in longer-term time horizons and in ethical aspects of business.

There a modern business belief that management of corporations requires a wider vision than short-term profit. Basically, corporations are looking for the people who would not be motivated only in making high profits by buying on lows and selling on highs. Modern corporations are looking for the investors who would be interested in the long-term development of the business. Such approach requires harmonious relationships with most stakeholder groups and their interests. It becomes an important issue since we consider our case. According to the old approach, which tended to maximize immediate profits, the decision of cutting salaries would be appropriate.

It would decrease costs and increase the profits. But it looks like this approach does consider possible consequences that can result in negative outcomes in the future. At the same time, it would be rather acceptable to take additional burden of debt for the company, according to the modern approach of business decision making. It would not increase the profits of the company within a shot-term period of time, but it would let the company develop in the future. We will not consider risk taking at this time. This decision may result in an overall net benefit, and be fair, but it may offend the rights of the stakeholder and therefore be considered not to be right.

There are three interests that must be satisfied for a decision to be considered ethical. The proposed decision should result in more benefits than costs. The distribution of benefits and burdens should be fair. The proposed decision should not offend the rights of the stakeholders and the decision maker. From this perspective, the first decision about the cut of salaries appears to be ethically right.

This decision would result in gaining more benefits and decreasing costs. The other aspect of distribution of benefits and burdens also plays in favor to the first decision making comparing to the second. It more appropriate to cut salaries and leave jobs for the employees than to take additional expenses of staying without income and take risk for the shareholders. And cutting salaries would not offend the rights of the shareholders and the decision maker. The measurement of profit is well developed at the present time.

We will look at its use in ethical decision making. It is true that profit is a short-term measure. But several important impacts are not counted in the determination of profit. In order to see a complete picture of the consequences of a decision, the profit or loss from the decision should be corrected focusing at the externalities it creates. Sometimes, corporations, that do not count the externalities of their decision implementation over time, find that they have underestimated the cost of the decision. Later, it leads to undesirable outcomes.

The problem here is that the benefit can not be measured directly. But it should be included in an overall assessment. The technique for bringing future impacts of a decision into an analysis is not difficult. This approach is a part of cost-benefit analysis (CBA). In our case, we saw that ethically the decision will be correct if the management takes decision to cut salaries of the employees. But such a decision making does not count possible consequences.

It will increase the profit almost immediately, but what can happen with the company in the future? Have we counted the externalities here? Within many years, one of the main feature of the company was the high quality of service expressed in satisfying the needs of the clients and reaching the goals and objectives of the corporation itself. The primary reason for that was high proficiency of the employees. What will happen if the management cuts the salaries?

The company is going to loss the best people. The company will not make difference among competitors. It is not going to make positive impact on the name of the corporation, and probably will loss its high reputation within time. Sometimes, executives who have learned the way to focus on short-term profit, reject the idea of including externalities in their analyses.

But they have to consider impacts that externalities input into affecting the company's bottom line in the future. In our situation, the decision makers have to consider the affects of cutting salaries. Even the most optimistic expectation of negative outcomes do not indicate on the wisdom of this decision, without counting the ethical aspects of the case referring to the employees. Graham Tucker offers or 5 -question approach to the ethical decision making.

It involves the examination or challenge of a proposed decision using the five questions. The proposed decision is considered by asking all of the questions. If a negative answer comes out within the five questions, the decision maker have to revise the proposed action to remove the negative. If the revision process is successful, the proposal will be ethical.

We will consider salary cut decision as to being ethical according to the five question approach. First, this decision will lead to gaining profitability in short-term. But undertaking this decision involves undesirable changes in the future. But, according to the stakeholder interest examination, this decision can be considered profitable. Second, it is absolutely legal, as the cut of salaries will not decrease the level of salaries under those limits settled by the government. It will rather cut surplus that the employees used to have.

Third, this decision is fair for the shareholders, but not absolutely for the employees. But the negative impacts of this decision is going to be shared by the employees as well as stakeholders. Employees will suffer and, probably, will leave the company. As the result, the corporation, the profits, and, therefore, stakeholders are also going to suffer losses in the future.

If the stakeholders realize that, I can infer that this decision is fair. Fourth, it can be said that the employees rights are not violated. It is rather to be said that their expectations did not meet the reality. And the company is going to suffer the consequences.

Fifth, this decision is unfortunately not leading to sustainable development of the corporation. According to the five question approach, this decision cannot be counted ethically right. The proposed action has to be reviewed. As it stands, the 5 -question framework is a very useful approach to the orderly consideration of problems.

The only minus of this approach is that it does not always count externalities such as health care or air pollution. But in our case, it perfectly fits. Now we will come to the consideration of the moral standards approach. It is somewhat more general in focus than the 5 -question approach, and leads the decision maker to a more broadly-based analysis of net benefit rather than just profitability as a first challenge of proposed decisions. As a result, it offers a framework that is more suited to the consideration of decisions which have significant impacts outside the corporation than the 5 -question framework. Our proposed action remains cutting salaries.

We will consider this question using moral standards approach. Does this action maximize social benefits and minimize social injuries? The answer to this question is rather no then yes. In framework, I think, it is appropriate to consider shareholders beneficiary part, while the employees will represent the society. From the utilitarian point it is ethically wrong to put the whole burden on the people, while the company tries to solve its problems. Such a situation is a mistake of the top management, not the employees.

Why should they carry the whole burden? Is the action consistent with each person's rights? According to the rights of the shareholders, the decision about the salaries cut is ethically right. The corporation is their property, and they have right to do anything they want with their property. They can cut salaries, sell the company, or fire all the workers and employ new specialists. From this point, the shareholders make the right ethical decision.

From the position of the employees, they have right to receive the salary they were promised. But at the same time, they should have realized that the salary policy of the company could have changed any time, and this is the right of the owners of the company to that. Will the action lead to a just distribution of benefits and burdens? From the point of justice, this decision is not absolutely right.

The distribution of benefits is not equal. The shareholder will receive their desirable benefits but the employees will gain nothing. A to the burdens, they are also not distributed equally, though there is a great probability that the company will suffer from this decision later. But, it is not the fact yet. The fact is that the employees will carry the whole burden of this decision, and it is not just. One of the advantages of using a framework such as the 5 -question approach, the moral standards, or commons approaches is that the unethical aspects of a decision can be identified.

Then it can be modified in order to make the overall impact of the decision acceptable. From time to time, an ethical problem arise which doesn't fit perfectly into one of the approaches described. But using these approaches help to identify the whole picture, and finally leads to the ethical decision making. Words: 2, 050 Bibliography: Brooks, L. J. , "Cost-Benefit Analysis", CA magazine, Oct. 1979, 53 - 57. Mitchell, R...

K. , Are, B. R. , & Wood, D. J. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts.

Academy of Management Review, Vol. 22, # 4, 1997, 853 - 886. Past, M. , The Hard Problems of Management: Gaining the Ethics Edge, Jossey-Bass Inc. , Publishers, San Francisco, 1986. (based on the material that was provided)

Research essay sample on Ethical Decision Making Cost Benefit Analysis