Good Ethics in Good Business Assignment Example | Topics and Well Written Essays - 3000 words

Good Ethics in Good Business - Assignment Example There are conflicting studies regarding the link between good ethics and profitability in the short term, however, it does appear that good ethics can help a company achieve a strong long-term business model. Conversely, in the cases of Enron, Parmalat, and Merrill Lynch for example, a business ethics-related scandal can cost billions of dollars and even the destroy a company. Empirically, ethics or the lack thereof, can be a wild-card factor that can either improve or cost a business. More or less, good ethics serve as an insurance policy against corporate implosion and can help establish long-term customer and employee loyalty. In today's business culture, however, profitability is still the trump card, even amongst a trend toward greater corporate social responsibility. To understand what good ethics are, a clear definition of ethics must be made. The reality is that among others, there are two major separate and at times, conflicting paradigms regarding a preferred business model. The prevailing model in modern business, an open-market model, relies philosophically on Adam Smith's lassiez faire approach, that unadulterated market competition will always yield the most effective results. In theory, a pure open market system abhors any form of market interference, as it will only work counter to the maximization of an economic system. On a practical level, this type of competition finds its way into the investment markets. Large corporations are constantly under pressure to showcase their value in the form of stock prices, earnings reports, and prognoses for increased profitability in the near future. It would be considered unethical in this model to interfere with the natural conduct of business. Advocates of this model are by nature, against regul ation. The other model, which focuses on corporate social responsibility, is a more holistic approach that includes the social consequence of a company beyond its shareholder obligations. Therefore, good ethics are measured by the benefit to all entities that come in contact with a company directly or indirectly, from shareholders, to customers, to employees, to subcontractors, and to the environment. This type of model, which has been recently adopted by the United Nations, is challenging the traditional bottom-line approach and redefining the meaning of good ethics in business. The open market model has been the prevailing model of big business since roughly 1980, following international economic turmoil, believed to have been caused by an over-regulating economic philosophy from both sides of the Atlantic Ocean. Deregulation, desperation, and temptation have invited many ethics scandals in recent memory, from European scandals in the 1980' and 1990's to the U.S. based global corporate scandals in the early 21st Century. Lloyds of London for example, one of the largest insurances providers in the world, narrowly avoided bankruptcy as a result of allegedly misrepresenting its profitability and the amount of liabilities in the early 1980's to its Names, or wealthy individuals who underwrite their policies. The scandal led to over $8 billion in losses as it rocked London's financial markets, and as Tony Blair claimed, "Lloyd's has committed the largest, most extensive and pervasive fraud in history (McClilntick, 2000)." Another large European company, Parmalat , has been accused