ACCG399 case study

5CASE STUDY

Business Morality: Case Study

Is Current Business Immoral?

This paper discusses whether current businesses in the case study are illegal. Morality and accountability are central aspects of business. According to Barsky (2008, p. 65), immoral business practices directly and indirectly harm a business and its stakeholders such as customers, regulators and employees. This can be in the form of tax evasion, unfair wages, using child labor, and dumping of hazardous wastes into the environment. Some immoral business practices cause greater consequences such as loss of lives due to negligence. Other actions that can constitute business immorality include creating a monopoly in the market. Monopoly eliminates competition, which make companies unwilling to set fair prices.

Although some people feel that unethical business practices do not happen in the modern world, many companies continue to engage in immoral practices. Tax evasion is perhaps the most documented immoral business practice. This refers to the nonpayment or underpayment of tax contrary to legal requirements. Many successful companies have been found to pay little or no tax at all. Usually, companies are required to pay tax on profits (corporation tax). Therefore, if no profits are made, then to tax should be paid. The important issue here is whether the taxes are calculated correctly. It has been established that some companies manipulate their accounting systems to reflect nil or little profit to avoid paying taxes. For example, they can keep two sets of the books of accounts or make falsified entries in the financial records (Barsky 2008, p. 66).

In the article, “Tale of two taxpayers”, all the companies mentioned paid little tax despite their huge sales revenue. The most plausible explanation for this scenario is that the companies corrupted their accounting procedures to avoid paying taxes. Indeed, manipulation of the accounting system is a common tax evasion tactic employed by many companies. To ensure that companies operate morally by observing applicable tax regulations, it is necessary to pay attention to how financial information is captured and analyzed. As Weber and Getz (2004, p. 698) note, if companies are able to beat the tax system, it is possible that they are manipulating other records to avoid liabilities to shareholders and owners, which is equally immoral.

As part of good corporate governance and accountability practices, some companies will try to minimize tax liability by making use of the mechanisms and tools provided by the government. These tools include tax rebates, allowances, deductions and exemptions among others. When used properly, these tools can help companies reduce their tax obligations. However, when used aggressively and in a manner that was not intended or anticipated by the government, the practice constitutes business immorality. Avoiding tax or attempting to dodge the provisions of the tax system can be immoral and even illegal. Paying a fair tax promptly should be an important aspect of corporate social responsibility. Tax can be an important source of funding for public services such as education, healthcare and infrastructure development. These are important public utilities which also benefit the companies paying taxes (Barsky 2008, p. 64).

Opponents of business morality may argue that the sole purpose of a business is to maximize profit and that focusing on any other concern is a gross violation of this fiduciary responsibility. However, the fact that companies operate in competitive business environments does not mean that they have to be amoral. A company can still make profits and compete effectively while adhering to the ethical code of business operations, legal requirements and other principles. In today’s world of technology where social media plays an important role in shaping business reputations, companies that operate morally can enhance their reputations, build loyal customer bases and earn high sales revenues. Sticking to applicable business ethics also reduces chances of employee turnover, which in turn cuts down on recruitment costs. According to Weber and Getz (2004, p. 696), no employee may want to be associated with a company that operates immorally, for example by not paying taxes. Operating morally fosters the allure of a company to prospective talented employees and enhances productivity because employees are motivated to take pride in their employer.

In conclusion, not all modern businesses are immoral. However, the issue of immorality is rampant in corporate organizations. Tax evasion is the most common immoral practice in the world of business. Deliberately underreporting business income or claiming false deductions are immoral strategies used by companies to evade tax. In some cases, companies engage in sham transactions to avoid or reduce tax liability. All these practices are immoral and can lead to negative reputation, which can ruin a company.

References

Barsky, A 2008, ‘Understanding the Ethical Cost of Organizational Goal-Setting: A Review and Theory Development’, Journal of Business Ethics, vol. 81, no. 1, pp. 63-81.

Weber J & Getz K 2004, ‘Bribes or bye-bye bribes: The future status of bribery in international commerce’, Business Ethics Quarterly, vol.14, no. 4, pp. 695-711.