Ethics and Governance

On September 2nd, 2011, Posted by author

Last modified: October 26, 2015

Corporate governance has changed and altered very much from the days of Aristotle and Kant. Ethical behavior of an organization depends on its belief of ethicality not only within the organization but also in its relationship with the society. It behooves on the organization to inculcate its members on what is considered desired behavior, who would otherwise

become free to choose their actions to suit what they believe as ethical values. Therefore, to maintain sustainable growth and enhance the value of the organization, instead of merely concentrating on profit-making, the standards of social improvement must also be carried out, giving prominence to aspects such as protection of the fundamental rights of the people, protection of the environment and the integration of the safety and benefits of the different stakeholders.

Hurd (1996), avers that, “to do an act negligently is to do an act that imposes costs greater than the benefits it produces, implying that right action consists in acting on the balance of consequences, all consequences considered” (p.249). This can be illustrated by the example of the explosion and 15 deaths in the BP oil processing facility in Texas City on March 23, 2005, which was the explicit consequence of the cost-cutting strategies of the company with little concern to the safety of its employees. The reasons given by the company for its oversight are the drop in the oil price and the amount of investment required for training the staff and providing the safety infrastructure. These reasons to continue functioning at such low standards of safety levels seem lame excuses and unjustifiable for a company of the multinational standard that actually prides itself on its governance standards and social responsibilities. To prove Hurd’s observation, the disaster also incurred a lot of expenditure for the company which was much more than they had saved by the cost-cutting.

After investigation, the CSB in report stated that the company seemed to be cognizant of the serious safety problems in its plants, with regard to the maintenance of the outdated plant components as also in the lack of training in safety measures of its personnel. The awareness of the company of these issues could be proved from the internal audits and studies that were accessible to the officials as well as the board director in charge of refining. But these issues were ignored and put by without any appropriate action. The CSB further observed that instead of blaming operational and administrative errors, that are local and subjective, the organization should have placed more stress on “the significant cultural and organizational causes” that are objective and widespread in the company.

This should be an awakening call to companies with a short-term focus on profitability and cost-cutting strategies, and a decentralized management and entrepreneurial culture. The managers in such companies have more flexible powers and are not made aware of the expectations and accountabilities of their positions. This encourages them actually to cut costs wherever possible and ignore maintenance and safety measures, like the manager of BP who preferred to save the cost of the safety flare that would have prevented the exact explosion that occurred. This lack of safety consciousness also filters down to the other officials in the cadre who simply tick the safety procedural forms without following the actual procedures.

Ethics and Governance is a subject that is crucial to management students who plan to become executives in large organizations and could impact the society and environment with their actions. Essay writing service on topics such as this are available with us. Our academic writing help will gladly assist you in your search for custom papers on similar subjects.

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