There Are Those That Take The Position In Business That If Something I
There are those that take the position in business that if something is legal, it is also ethical. However, many of the issues we deal with in business ethics involve practices that are officially legal but are considered unethical by some. For this activity, you are asked to identify a current legal business practice that you find to be unethical and explain why. Your personal opinion is acceptable, but your rationale should be well-articulated. Additionally, based on your understanding of the stakeholder approach to corporate governance, identify a company or company policy that truly reflects this approach.
Paper For Above instruction
Business ethics frequently present a complex landscape where legality does not always equate to morality. The differentiation between what is legally permissible and what is ethically right is crucial for understanding corporate responsibility and societal expectations. In this essay, I will explore a current legal business practice that I believe is unethical, specifically focusing on the issue of aggressive tax avoidance by multinational corporations, and analyze why this practice undermines ethical standards despite its legality. Subsequently, I will examine a company that exemplifies the stakeholder approach to corporate governance, illustrating how businesses can align operations with broader ethical and societal responsibilities.
Unethical but
Legal
Business Practice: Aggressive Tax Avoidance
One prevalent and contentious business practice that is legally permissible yet ethically questionable is aggressive tax avoidance. Multinational corporations often exploit loopholes within tax regulations to minimize their tax liabilities significantly. They employ complex strategies such as transfer pricing, profit shifting, and the use of offshore tax havens to reduce their taxable income in jurisdictions where they operate. For instance, tech giants like Amazon, Apple, and Google have faced scrutiny and public criticism for their tax planning strategies, which enable them to pay relatively minimal taxes despite generating substantial revenue (Zucman, 2018).
Legally, these corporations operate within the scope of the tax laws of the countries in which they are registered or have subsidiaries. The legality of such tax arrangements is often upheld by sophisticated legal and financial structuring, which underscores the importance of understanding tax laws' complexity. However, from an ethical perspective, these practices raise questions about corporate responsibility and fairness. By minimizing their tax contributions, these corporations shift the tax burden onto ordinary
citizens and smaller businesses, which are less capable of engaging in such elaborate tax planning. This behavior erodes public trust in large corporations and governments, as it creates inequality and reduces public resources available for social services and infrastructural development (Gabriel Zucman, 2018).
Many argue that avoiding taxes within the legal framework is not inherently unethical; however, the ethical issue arises when such practices contravene the spirit of tax laws and societal expectations. Ethical standards in business call for corporations to contribute their fair share to the societal system that allows their success. When companies prioritize shareholder profits over societal good engaging in aggressive tax avoidance they breach the social contract and undermine the moral foundations of corporate responsibility.
Corporation Exemplifying Stakeholder Approach: Patagonia
In contrast to the practices described above, Patagonia exemplifies a company that strives to adhere to the stakeholder approach to corporate governance. This approach emphasizes balancing the interests of all stakeholders, including employees, customers, suppliers, communities, and the environment, rather than focusing solely on maximizing shareholder value (Freeman, 1984). Patagonia’s mission statement explicitly reflects this philosophy: “We’re in business to save our home planet.”
Patagonia demonstrates this commitment through numerous sustainable and socially responsible initiatives. For example, the company sources environmentally friendly materials, invests in fair labor practices, and actively engages in conservation efforts. Patagonia allocates a portion of its profits to environmental causes and advocates for responsible business practices across the industry. Their Worn Wear program encourages customers to repair and reuse clothing, reducing waste and environmental impact (Patagonia, 2021).
The company’s transparent supply chain and commitment to environmental sustainability reflect a holistic stakeholder perspective. By integrating social and ecological concerns into their business model, Patagonia prioritizes long-term social good alongside economic success. This approach has garnered customer loyalty and enhanced their reputation, illustrating that stakeholder-oriented practices can be both morally commendable and economically viable (Friedman & Miles, 2001).
Conclusion
In conclusion, the ethical considerations surrounding business practices extend beyond legality.
Aggressive tax avoidance exemplifies a legal but ethically questionable practice that shifts societal burdens and promotes inequality. Conversely, Patagonia showcases how companies can adopt a stakeholder approach, balancing economic interests with societal and environmental responsibilities. Recognizing the distinction between legality and ethics is crucial for fostering responsible corporate behavior that benefits all stakeholders and upholds social trust.
References
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pitman.
Friedman, M., & Miles, S. (2001). Stakeholders: Theory and Practice. Oxford University Press. Patagonia. (2021). Our Environmental & Social Responsibility. Retrieved from https://www.patagonia.com/activism/
Zucman, G. (2018). The Hidden Wealth of Nations: The Scourge of Tax Havens. University of Chicago Press.
Simon, H. A. (1997). Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations. Free Press.
Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the Value of 'Creating Shared Value'. California Management Review, 56(2), 130-146.
Martínez, G., & de las Heras, F. (2020). Ethical Implications of Corporate Tax Avoidance. Journal of Business Ethics, 161, 731–744.
Schneider, F. (2012). The Shadow Economy and Tax Evasion in Europe. Berlin: Springer.
Kolstad, I., & Wiig, A. (2017). Tax Havens, Tax Evasion, and Development. Journal of Economic Perspectives, 31(2), 131–151.
Ismail, K., & Ahmad, N. (2015). Corporate Social Responsibility and Stakeholder Engagement. International Journal of Business and Society, 16(2), 215-230.