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Executive Summary on Ethical Issues
Ethical issues of contemporary domestic and international business are so sophistically developed, that comprising them in a single document will definitely result in a composition of a voluminous paper. Therefore, in this paper, only the major points of the issues connected with corporate ethics, transparency, and their causation with the fundamental principles of corporate governance are analyzed.
This paper outlines the stakeholder groups and speculates over the relevance and the scope engagement of each group providing a detailed analysis between the groups and the ethical issues which are connected with the activity (both professional and non-professional) of this group. Another section of this report discourses over the most topical issues of ethics such as agency misrepresentation, abuse of powers, and various kinds of harassment.
Apart from other issues, the report accentuates the most important aspects of corporate governance and corporate transparency which is normatively regulated by the respective government authorities. Specifically, those issues which are determined by the applicable laws and bylaws of the government authorities in the field of corporate governance are meticulously analyzed in this section
Leading business and academic scholars have a convergent opinion that the contemporary transnational business structures have been radically changed during the latest decade. In particular, the importance of corporate governance is being ubiquitously cultivated among scholars and business practitioners. In the recent past, the business structures, both international and those incorporated domestically, were ruled automatically and no one thought that specific issues should be considered before the managers start functioning. A manager or other executive employee was merely hired and no one took seriously ethical issues he could encounter and the effect those issues could have hypothetically on the development and composition of the business structures.
However, in reality, the significance of ethical issues shall never be underestimated because the repercussions which ensue from them are so significant, that the company may completely collapse if the proper actions are not taken by the managerial department to cure them. To illustrate, one of the most widespread issues is sexual harassment claims, which are often submitted to the court of law. Whilst the misdeed is always committed by an individual, the damages are always paid off by the corporation and therefore the regulation of the sexual harassment situations is vitally important for the business climate of the company. International practice clearly states that several companies have been completely devastated financially as a result of similar claims submitted to the court of law by former employees.
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Another aspect of corporate governance and ethical issues can be found among the most fundamental principles of the agency costs theory. Under the postulates of this theory, the managers are hired workers who are prone to disregard the interests of the shareholders when a conflict of interests arises. In other words, it is undisputed that the violation of the fiduciary duty is nothing else, but an ethical misdeed routinely perpetrated by the managerial departments and other executive officers of the corporation. But this ethical violation often leads to the huge financial penalties applied by the tribunals or by the supervisory boards of the shareholders.
Overall, the fact that the elements of effective corporate governance and the ethical issues are integrally connected and cannot be considered separately is undisputed. Moreover, with the development of the transnational business structures, the importance of ethical principles and especially ethical transgressions are becoming more and more fundamental for the effective business environment (Fogarty 2004).
Whilst the importance of the ethical issues is undisputed, the engagement of the specific groups of the business structures is often challenged by international business scholars as well as by their theoretical colleagues. This section of the present paper aims to outline the major stakeholder groups, i.e. those business and non-business groups who either directly or indirectly take part in the process of ethical issues consideration and disputable situations resolution. The determination of whether a specific person or a specific entity is an ethically eligible participant of the business privity is vital because prospectively this party will be entitled or vice versa disentitled to submit a claim in the court of law or the arbitral institution claiming indemnification for a specific violation (Johnson & Johnson 2002). Hereby, if this entity is not ethically involved it can be neither claimant nor responded in the specific privity.
Group # 1 the Shareholders
The first group which is directly implicated in this process is the shareholders of a specific company. By the overwhelming majority of the shareholder's agreements and articles of incorporation of the international companies, the shareholders are the entity that determines the subsequent development of the company. In other words, the financial strategy and the tactics that will be prospectively employed by the managerial department of the corporation are defined by the shareholders. All managerial decisions of the company are always confined to the activity of the shareholders and the mandatory prescriptions issued at the annual general meetings of them.
The main ethical consideration relating to this group is the fact that the shareholders are not professional in finance, economics, or management. To be more exact, the professionally hired managers of the company always owe them fiduciary duty, i.e. they are requested to act in the better interest of the shareholders even in situations when the shareholders are not familiar with the pending business processes of the company. In the event of a conflict of interests between the personal financial interest of the shareholders and the needs of a company strategic development arises, the managers are obliged to give their preference to the issues which are connected with the development of the company (Bajaj 1996). The deviation of this principle is nothing but an ethical violation. Shall this dispute arise the shareholders represented by the council can be a plaintiff in the court of law?
Group # 2 The Managers and other Executives of the Company
Another group of those who are directly implicated in the resolution of ethically related situations are the managers of the company. The managers are those who by the surveys of the leading international business research agencies are the most frequent violators of the ethical principles and mandatory ethical provisions. Moreover, they are the group against which the majority of the sexual harassment claims are submitted. Another peculiarity of this group is that the managers and other executives are those who routinely violate a corporate fiduciary duty.
Overall, it can be assumed that the managers are the risk group of those implicated in the ethical dispute resolution process because they are frequently sued by the shareholders and by the administrative personnel of the company. However, the managers of the company in their turn do not have sufficient grounds to file claims against the shareholders or the administrative staff of the corporations.
Group # 3 The Administrative staff of the Company and other Employees
Apart from the shareholders and the managerial executives of the company, the employees of the company are integrally implicated in the process of ethical dispute consideration and resolution. As far as the practical implementation of their function is concerned, it shall be outlined that they are the biggest group who submit sexual harassment claims and claims connected with the labor law issues which in their turn can be classified as ethical violations.
Overall, it can be recapitulated that the activity of the business fully corresponds to the existing and emerging international standards.