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Economic Rationality and Ethical Behaviour
According to Le (2002), Milton Friedman reduced ethical characters to economic rationality through the development of the idea that the social responsibility of any corporate institution is to make profits (p. 157). Such a statement is a development of the idea that businesses promote the common good through the pursuit of their economic interests. According to Friedman, profits are ethical according to the perspectives of corporate institutions (Le, 2002).
It is to means that businesses undertake prominent roles in a global society with the intention of exploring their interests. Such is the reason for the accusations made against tobacco firms and the attitudes and behaviors of oil corporations concerning human rights issues, the environmental aspects, and the social roles of businesses. The accusations represent the political pressure and its implications on business activities and its power to balance the social and economic spheres of life. There is, therefore, a question concerning the social role of institutions. Behind the concern of the relationship between the community and the firm, there is the deduction that profit is unethical. Resultantly, in this context, it is needful to examine how economic rationality correlates with moral behavior.
If there exist economically rational acts, which are unethical, then there are ethical characters that are uneconomically logical. Because such situations encompass the tension existing between the ethical considerations and economic perspectives, they are a reflection of ethical dilemmas. Therefore, an ethical dilemma results from the situation in which institutions have to make a choice of behavior present a conflict between moral and economic interests. Therefore, there are two forms of behavior that concern ethical dilemmas (Le, 2002). Such a case occurs when there is a sacrifice of the economic interest for the considerations of moral values, and the other is the maximization of the economic benefits at the expense of ethics.
Most economic methodologies are of the idea that there is only one rationality concerning the dilemma posted, which is economic rationality. In such a context, therefore, sacrificing economic benefits because of ethical considerations is irrational. An example of such a scenario is the case in which the environmental issues in the stance that Velasquez took in his work of 1992 (Carroll & Buchholtz, 2014). He explained that it would sound irrational for a multinational company to decide to refrain from environmental pollution.
In this case, there was the political pressure that the company faced pushing it to stop operations because of the concern for the environment. The case, therefore, highlighted the fact that political interferences act as a blend to the acceleration of the dilemmas between ethics and economic gains. However, such an approach is pragmatic from the fact that it denies rationalities to immaterial concerns (Carroll & Buchholtz, 2014).
However, it is necessary that businesses consider both the ethical and the economic aspects discussed in this work as being separate, but complements of each other. It implies that the two issues are often conflicting, which means that the same institutions should always find a balance between them. Ignoring ethical frameworks would mean that the corporate world will stop having rules governing because they have their foundations on balance among stakeholders.
Therefore, the best approach to the balance should entail embracing the ideologies of consequential reasoning and its relationship with the utilitarian theory. The latter theory proposes that if there are conflicting situations, the best approach is striving to find the solution with the best outcomes for all or a majority of the stakeholders. As such, the best alternative for the firms is to ensure that they meet their economic obligations in manners that best please their stakeholders. It is irrational for the institutions, in this case, to ignore their economic benefits because it is the reason for their existence. At the same time, it is irrational for the organizations to forego their ethical obligations because of economic benefits. Therefore, the utilitarian approach is the best alternative, and the political background measures the levels of interaction between the two aspects of the conflict.
References
Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. Cengage Learning. Boston. Web.
Le Menestrel, M. (2002). Economic rationality and ethical behaviour: Ethical business between venality and sacrifice. Business Ethics: A European Review, 11(2), 157-166. Web.
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