BMO5501 | Business | The Convergence Of Ethics And Profit Making

Introduction

Brief background of the case:

The case is related to setting up an ethical bank and the issues that are faced by the directors and the board members in setting the guidelines and also financing the bank. There is a value and ethics issue in the financing of the bank and bank is faced with two issues: request from a bank which is involved in fracking and the other is a request from a gun maker (Marquis and Almandoz 2014). Jay had a knowledge of banking and was also concerned about the environment and therefore set up Rocky Mountain Green Bank with an aim to promote environmental awareness and protection.

xt-align: justify;">Primary stakeholders:

The stakeholders are the directors of the bank, who are four in number and are successful entrepreneurs, lawyer, an ex-mayor and a former executive.

Challenges:

The main challenges that will be face din the particular case is regarding ethical decision making. The board of directors is divided on the question of ethics and the primary question is should economic success be put ahead of ethics? The primary issue is regarding the main mission of the bank and how that will get deluded if the loan is accepted from a gun manufacturer. In analysing that, it is important to consider the views of the directors as they are stakeholders and have a substantial interest in the functioning of the bank. The mission of the bank was to promote environmental issues and then look at the profit making aspect of the bank. The element of business needs to be aligned with the main prospect of the bank (Van der Byl and Slawinski 2015). Therefore, if the bank accepts loan from a fun manufacturer, the reputation will be at stake because being a green bank it cannot get attached to a gun manufacturer which is perceived as a negative activity. The community will be giving a bad verdict and the media coverage that was supposed to promote green bank with the cause of environmental sustainability will be lost. 

Alternatives:

The issue can be solved by the following measures:

1.  By implementing a decision making framework: This will help in saving time and the conflict as well as difference opinion can be challenged in a time saving manner. The decision making framework will ensure that no new rules are made every time a loan application comes and the board is divided in their opinion about the ethics of the issue.

2. The bank should be promoted a B Corporation where both environment as well as a profit will be emphasised on. A B-Corporation entity will focus moth on social and environmental factors and will also advance their economic goals (Horisch, Freeman and Schaltegger 2014). Therefore, this will help in clearing the heads of the directors as they are fixed on the ethical issues and are not looking beyond that.

Solution(s): 

The best solution would be to reconstruct the board and search for a professional recruiter who will help Jay find the perfect board who are aligned with the goals and the objects of the bank. The board has to be robust and concise and they need to agree with the majority. The first move with respect to the strategic management would be define the goals and purposes of the bank and determine and prioritize the objectives of the bank (Beauchamp and Bowie 2014). Till the time the goals are not made clear to the board and the media, the bank will not be able to maximize profit as well as reach its potential.

Evaluation:

If there is a lack in the way the objectives of the bank are communicated, it will be very difficult for Rocky Mountain to survive and carve a niche. The customers need clarity and transparency and therefore, the principles and the goals of the bank will help in estimating the target audience and also will help in gaining the trust of the customers. If the bank is not clear on its stance of ethics and it faces an ethical dilemma regarding its business strategy, the customers will lose their faith (Schwartz 2017). The intentions of the bank is very important and therefore to make sure that the trust is restored, the bank has to be very clear about its goals and objectives. If the company has a clear and unambiguous set of goals, it will stay out of trouble as well as will have a better future (Tai and Chuang 2014). Therefore, if the ultimate goal is to promote sustainability and environment protection, it is necessary to make the customers believe in that agenda and furthermore gain the trust of the investors.

Conclusion:

The Sustainable theory ensures that there is a symbiotic relationship between humans and non- humans and therefore, to ensure that it is important to focus on the long term implications of the human activities. The aim is to create a system so that there is an agreed relationship that will look at the long term economic, social as well as environmental needs of the humans. The case is a primary example of how sustainability is an essential factor for human existence and therefore it is the need of the hour to understand that humans have a big role to play in ensuring a safe and healthy environment. The board was divided on ethics regarding the frackling as well as gun manufacturing because both were against the agenda of the bank that they had internally agreed to protect.  It is therefore very important to unanimously agree upon a decision and that has been promoted by the principles of corporate governance and corporate social responsibility. Corporate Social Responsibility mandates that self-regulation of a company with regards to protecting society and promoting philanthropic activities keeping in mind the interests of the community. It is important to give due regard to ethics and sustainability as they are the north star of an organizational set up that will ultimately will keep the interests of the society ahead of the economic prospects of the company.

Bibliography

Beauchamp, T.L. and Bowie, N.E. eds., 2014. Ethical theory and business. Pearson.

Chase, J.M., Christopher Marquis. Management and Organization Review, 11, pp.427-440.

Eaton, D., MGT 444 Business Ethics, Section 4.

Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.

Marquis, C. and Almandoz, J., 2014. Can an" ethical" bank support guns and fracking?. Harvard business review, 92(4), pp.123-127.

Schwartz, M.S., 2017. Corporate social responsibility. Routledge.

Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.

Van der Byl, C.A. and Slawinski, N., 2015. Embracing tensions in corporate sustainability: A review of research from win-wins and trade-offs to paradoxes and beyond. Organization & Environment, 28(1), pp.54-79.