Business Ethics and Ethical Issues in Organization


Business ethics involves the application of ethical principles to the business world (Garsten & Hernes, 2008). Business ethics applies to all business organization and even to individuals in the organization. Business ethics determines how individuals and organization behave to the external environment and even within the internal environment. Business managers are faced with ethical dilemmas whereby they are needed to make decisions that are to the best interest of the organization and that these decisions are supposed to be ethical.

Introduction to the organization

Stern Stewart Company, which is based in the New York, was formed in the 1982 by Joel M. Stern and G. Bennett Stewart. The Stern Stewart Company has over 50 employees with high qualifications. This company is concerned with helping other companies advance their performance and appraisal through advisory services. The success of Company is derived from their understandability of the market and the factors that affects the share prices, bond yield and enterprise value. The company helps the clients in designing good strategies; policies and transactions that enable their organization generate reliable results.

Ethical issues / dilemma

Ethical dilemma is whereby one is forced to make a clashing decision between two morals. Harman (2001) argues that business ethics involves the company avoiding breaking the criminal laws, avoiding activities that may lead the company to civil law suits against the company and avoiding dealings that may ruin the image of the company.

Maximizing of the shareholder’s wealth

The main aim of the Stern Stewatt Company is maximizing the shareholder’s wealth at the expense of the other stakeholders. This is a dilemma for company because one of the objectives of the company is to maximize the wealth of the shareholders. On the other hand it is unethical since the company is doing all this at the expense of the customers, government and other stakeholders of the company. The company does not consider how maximizing the shareholder’s wealth would impact the clients and other stakeholders of the company.

The utilitarian approach requires that the company make a decision that has the greatest utility to the greatest number of stakeholders in the company. The main aim of this company is the maximization of the profit and this is not the best decision for the entire stakeholder. Profit maximization only benefits the owners of the company. The utilitarian approach is in the view of making a decision that results to the benefit of the greatest number of people (Garsten & Hernes 2008). This company does not consider on how the other stakeholders will be impacted by maximizing the shareholders’ profits.

Under the shareholder’s perspective, its right to maximize shareholder’s wealth beside other stakeholders interest since they are the owners of the company and have invested their capital in it. This approach encourages the management of the company to make decisions that are in line with interest of the shareholders.

On the other hand, Kantian theory supports, the maximization of the shareholders wealth because it argues that making or implementation of ethical decision should be encouraged no matter the impact of decision on the organization.

Offering advice on a value perspective

The Stern Company only provides advice to its clients at a values perspective without considering faithful presentation. The company does not look at other factors that may be required by their clients, which may assist them in making decision to improve their performance. Faithful presentation requires that the company provide all the relevant information required by their clients and information that can be relied on by the clients for them to make feasible decisions.

Rawls argues that justice is the basic value for the society. It therefore requires that while providing information to the clients the organization need to perform this in a justly manner and provide all the necessary information to the clients.

The Kantian theory requires that the company provide information to the client that is faithfully presented no matter how much that information will harm the organization. Providing advice from a value perspective only does not therefore provide full information to the client and according to the utilitarian this decision does not benefit majority. This therefore means that the organization is not providing the right information to the clients since it does not provide full information to the clients. It only provides information based on values only.

Employees’ rights

The Stern Stewart Company hires very qualified employees who are remunerated highly. According to the utilitarian theory it is in the best interest of the employees of the company, who are part of the stakeholders to be remunerated well. This conflict the objective of the company to maximize the profits of the company. If the company does not remunerate the employees well then it will be breaking the law and this will lead to lawsuits for the company.

The Rawls’ theory requires that the company act with justice to the society. This means that the company should give the employees their basic rights and duties. The company should also be able to distribute the remuneration to the employees well. Rawls identifies the key social goods, which include income, wealth, human rights and opportunities.

The company is not acting justly because it requires the employees of the company to act as if they were the owners of the company. This is violating the rights of the employees as they are overworked and not given extra pay for the effort they put into the company’s success.

Kantian also argues that the company is required to make decisions that are right and therefore the company needs to remunerate their employees well since it the right decision.

Ecological ethics

The Stern Stewatt Company is not involved in any social responsibility activity. It does not participate in any activity that helps to prevent pollution of the environment. It only aims at reducing its expenses and that is why is not involved in any activity that may lead to extra cost. Companies are required to have ethics to the environment and the ecological environment.

According to Rawls theory, it is the right of the society to benefit from the social responsibility of the company. The company should act justly to the society by ensuring respect to the society.

According to the utilitarian approach the company should not keep off from assisting the community only with self-interest of improving its profits. Improving only the profits of the company will not benefit the majority and therefore the company is violating the interest of the community. In good faith the company should aim at benefiting the majority of the people with all good intensions

The Kant’s approach requires that the company do what is right no matter what impact it will have on the company. It is morally good for the company to take part in community activities such as cleaning of the environment, planting of trees, assisting the poor to get education and even improving religion in the community even if the company will have to commit its resource.


It is recommended that the company make decisions that will benefit all the stakeholders of the company. The company should not only aim at maximizing the profits of company but look at other ways, which can help the company improve its performance and on the other hand benefit the stakeholder of the company.

The decision made should have the best result for the greatest number of people (Garsten & Hernes 2008). The decision of the company should be ethical. Decisions should be able to be determined whether it is right or wrong. The company will not be guided by the motive of profits only but consider other issues of satisfying the company and its stakeholder. The company will be advised to use the utilitarian approach to determine which decision benefits the majority of the stakeholders and this will help the company solve the conflict of maximizing profit and the interest of the stakeholder. For instance since the company hires high qualified employees, the company should ensure that the employees are well remunerated according to their qualifications.

It is recommended that the employees of the company be trained on how to use skills such as honest, ability to work cooperatively, having respect for other employees, having the willingness to learn from others and being responsible for any action done. This will enable the company provide information that is faithfully presented by its employees and reduce the instance of providing information that may be misleading to the clients. It will also help the employees provide advice to the client on a wide perspective without concentrating on value only.

It as also recommended that the employees be thought on vital thinking skills and conflict resolving skills so as to be able to solve any dilemmas in the company. For instance in deciding which decision should dominate another in the company. They should be educated on ways and steps to be followed when solving a problem. By training the employees they will be able to be familiar with the issues they come across in the business environment and be able to deal with them in an ethical approach. When the employees are handling different situations they will be able to determine whether what they are doing is right or wrong and ensure that they don’t violate any laws. They will also be able to ensure that the decision made is fair to all people who are concerned.

It is also recommended that the employees be trained to be assertive. In that way they will be able to defend their rights without any fear. The employees will be required to listen to the ideas of other people before they can make any important decisions.

Recommendation is made to train employees on how to evaluate risk and be able to deal with possible risks in the environment. They are also required to be principled when making business negotiations. This will enable the employees to make fair decisions to benefit all the people concerned.


Christi Garsten & Tor Hernes, 2008 Ethical Dilemmas in Management: Taylor & Francis, P.118.

Jon R. Katzenbach, 1998 the work of teams: Harvard Business Press P.8.

Noel M. Tichy & Andrew R. McGill, 2003 the ethical challenge: P.225.

Robert T. Golembiewski. 2000 Handbook of organizational consultation: CRC Press P.746.

Laurinda B. Harman, 2001Ethical challenges in the management of health information: Jones & Bartlett Publishers P.163.

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