Competition and Ethical Behaviour
It is usually said that whenever competition gets fierce, market pressures can drive you to become unethical. On the other side of the same argument, in a tough business environment, competitors are cautiously determining each other to report unethical behaviour to bring the competitor down.
One topic of growing concern in business ethics is the relation of business to the natural environment and the ethical issues inherent in that
relationship. The natural environment is becoming increasingly important as environmental problems impinge themselves on business and
society. Yet when it comes to ethical issues with respect to the
environment, business ethics is confronted with another area of ethics, environmental ethics, that has separate body of literature, different
professional organizations, and disparate scholars and educators. Attempts
are being made to overcome the chasm between business ethics and
environmental ethics through the establishment of new overlapping
groups, through joint sessions at various organizational meetings,
through special conferences, and through books and papers, all
concerned with environmental issues both from managerial and ethical
perspectives.
One of the most basic fundamentals of the theories in economics is those of personal preferences, which is assumed to regulate our everyday behaviour. As is well known, if a person’s preferences satisfy certain rationality requirements then they can be represented by an ordinal utility function. Economists sometimes assume that people’s preferences are completely
selfish. But we all know that this is an oversimplification. First, many people
and perhaps most people display considerable altruism, at least in dealing
with members of their family and with their close friends. Indeed, they are
often quite willing to provide some help and do some favors for many
other people, including complete strangers, as long as this costs them only
a little in time, effort, and money. But even if most people’s preferences are
not completely selfish, they are particularistic in the sense of giving more
weight to their own interests and to those of their family members and
friends than to those of other people. (1996)
What is illegal and what is unethical can often be quite clear. But there is a vast grey area in-between and that is where the fierce competitor can often land if he is not careful. There is no doubt that competition is fierce when it comes to getting doctors to prescribe a particular brand of medicine for an ailment when there are alternatives. For example, if a patient suffers from high cholesterol that needs to be brought down through medication, Pfizer, Merck and Bristol-Myers-Squibb are keen that the doctor prescribes their particular brand.
Economics and ethics naturally come into rather intimate relations
with each other since both deal with the problem of
value. Two of these lines of relation are especially interesting in their
bearing upon the vexed problem of scope and method in economics.
Children:
In many business scenes nowadays, the pressures of contention between business organizations force them to take in children into their labor force. In hiring children of which is way cheaper than hiring adults individuals and also taking into account variations in terms of productivity, and if one firm hires children, it can reduce prices. Given this setting, its competitors are also obliged to hire children or face the reality of going out of business. On the other side of the situation, if the parents of the family can require their children to work and thereby place themselves at a vantage point for themselves in competition with other families, then competition among families also force children to join the work force. Either of these forces of competition on the demand or on the supply side – would ultimately lead the children into the workforce.
Whether or not child labor is considered effective depends on a list of elements, such as whether the children are educated and whether capital markets are sufficient as developed that their respective families can borrow rather than send their own children to work, how the family acts as a family, and etc. Presumptively, the more effective these market structures are, the less chance are for children to work as laborers.
Corruption:
In the first kind of corruption, a fitting example would be for an official of a government who takes in payment in exchange for reduction of the payments in revenues, taxes or tariffs of which a briber owes to the government. In the second type of corruption, government official contracts extra wealth in substitution for rendering the briber with goods or services, such as business permits, to the official is titled even without the bribe itself. Relative to an organization with no corruption, corruption in existence without larceny brings up related costs, but corruption with larceny brings down overall prices.
As an effect, the latter type of corruptness permeates more where markets are more competitive with each other. Whenever a firm’s rival can cut back on its taxes by way of corruption, or is able to import more by compensating with lower bribes rather paying higher tariffs, it can pass on his savings to consumers. In a competitive market, then, every firm must pay bribes or go out of business. The fiercer the competition is between competitors, the bigger is the pressure to reduce costs, and the more likely is the chances for corruption to be present.
Corruption coupled with larceny has one extra competitive vantage point. This is because both the official and the briber benefit, and neither one of them have any lawful right to report the account to the police. In contrast to corruption without theft, this raises costs and the briber has a right to report the account to the authorities. Another pressure comes from the competition for available government jobs.
In some other countries some of these government positions are being auctioned off by their senior officials. This leaves the interested applicants paying to acquire the job. This kind of competition for jobs causes’ pressure on corruption occur and spread and the honest government officials simply can’t afford appointments. In the end, open positions are taken by those who paid the most for the jobs. This source of competitive pressure applies to corruption both with and without theft, which might explain why corruption without theft is also pervasive, even though it raises costs.
What to do:
What are some steps which can be taken to prevent such social ills? As earlier said, discouraging unethical behaviour is easier said than done. Corruption enables businesses to get around through undue business ordinances and some of these businesses in reality promote economic development and this actually improves the economic circumstances of both the children and their families wherein there isn’t much choice for alternatives. High levels of executive pay may allocate the most talented managers to growing young firms. Some technology entrepreneurs argued that conventional accounting harmed their companies as investors failed to understand the temporary nature of their losses, and that therefore some freedom of accounting choice was essential for accuracy. And commercialization of universities might enable them to better discharge their core duties.
How the firm is embedded in its business environment can best be
understood in terms of the dynamics of adjustment whereby a culture
and its institutions mutually affect each other. Business institutions affect culture of the business environment and this culture adjusts, this adjustment in turn bears upon the direction of the ongoing development of corporate activity.
As this kinetics has been present since business started out, the alterations
taking place within it can possibly be looked upon in terms of consecutive
shifts among the three major moral frames of which market activity is located. Through this processes, the while market organization can be gradually gain
its autonomous state and dominating force.
When rationality and morality clash, one of them has got to yield. There are those who would have us change our moral intuitions: ‘Greed is good!’,
declared the flamboyant Wall Street arbitrageur, just a few months before
going to prison. Others would allow that perhaps it is rationality–Nash
rationality, to be precise–that ought to give way. Is bounded Nash
rationality likely to give us what we need? In this chapter, I have argued
that it is not. What is needed, rather, is a more radical departure from Nash.
argued for a notion of rationality based on convention, an idea
that has since been explored by many, most recently by (1969).
The notion of rationality to which I have chosen to refer is one based on
survival. There are, and will be, other approaches, and only time will tell which,
if any, is apt (1996)
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