MM 5001 Business Law and Business Ethics INDIVIDUAL MIDTERM EXAM

Ethic Is Important for Every Company to Run The Business With The Focus in Hotel Industry

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Haidir Afesina

MBA Executive 46

MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2012

Executive Summary The aim of this essay is to emphasize ethics as critical aspects of running business. It focuses on business ethics and the social responsibility of business enterprises or company. The essay gives an example of ethics and social responsibilities in Hospitality Industry i.e. Hotel. It examines the role of ethics in business world (hotel industry) and ethical dilemmas encountered by company in hotel industry especially in Indonesia. Books and Internet along with the Author experiences are being used as references. In the end, a good business ethics practices increases the reputation and market competitiveness of the company. It creates a company grow with character. Therefore it has an important role to the sustainability to the company performance. 1. Introduction 1.1 Objectives The objectives of this essay are; 1. To define the relationship of ethics and business 2. To analyze the importance of ethics for company that impact to business performance 1.2 Challenges The challenges for the company to put ethics in practice in globalization era are; 1. The expectation and perception of the stakeholders 2. The influences of the company as a moral environment 3. The difficulties in arriving at ethical decision in business that is highly competitive 2. Background 2.1 Ethics and Business Public interests in ethics as critical aspects of business behavior come and go. Some argued that ethics is increasingly viewed to be important component of business education whilst others view as theory. Laura Nash stated in Weiss (2006) described the principle of ethics is the study of right or wrong in accordance to the norms. In other words is the general inquiry into what is good. It is linked to morality. On the other hand, business defines as a process that goods and services are exchanged to make profit. It is an economy system that growth and profit are the primary goals. According to Weiss (2006) business ethics is a basic framework, often guided by law that businesses may choose to follow in order to gain public acceptance. Thus business is part of the social system that cannot isolate the economic
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elements of major decisions from their social consequences. Therefore the relation of ethics in business is as guidelines to address the moral implications of business decisions. In other words, it is the moral and social responsibility of the company to the community. 2.2 Hotel Industry Hospitality industry (Hotel and Tourism) is one of the world`s developed industry. It has a great tendency to be the world`s greatest industry that create a social phenomenon, especially in Indonesia. It is highly competitive sector as the numbers of hotels are increasing. Hospitality itself implies warm welcome, friendliness and comfort. The aim of hospitality industry is to please people with service and utmost care whilst create business at the same time. Means it will bring group of people to come and buy the serviced experience and also invite people to work. This is what connects the industry and ethics. Thus, the managers at hotel are experiences the stress daily. The decision of any activities not only has to be profitable and efficient but also with respect to ethical principles. Sometimes good managers make bad ethical choices such as getting alcohol licenses and events, hiring people, shared corporate information and hotel wastes. In addition, there are some perceptions from society that glamorous life of hotel business is unethical i.e. leisure hotel facilities (spa and bar). Therefore, business is part of the social system that cannot isolate the economic elements of major decisions from their social consequences. Furthermore, there are some issues arise within the people inside the company, such as; 1. Why use ethical reasoning in business? 2. Can ethics and profit be compatible? 3. Analysis The perception of people to the company is important to run and expand the business. In order to categorize a company that is ethical on running business is when all the decisions made are accountable, not only towards its owners and employees but also towards the community within which it operates, and towards all people and the environment. In other words, the action for moral outcomes is important. Therefore the critical aspects are the executive (managers) as moral individual and the corporation as moral environment. The public judgments are coming to the company no matter if it is individual that act unethical. The policy formulation and implementation can affect the moral environment of company
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that influences the moral character of employee. The Author is using the examples from his past experiences to describe the awareness of company to the importance of the ethics. It is based on the four fundamental questions, there are; 1. Is the action consistent with the actors basic duties? 2. Does it respect the rights and other legitimate claims of the affected parties? 3. Does it reflect best practice? 4. Is it compatible with the actors own deeply held commitments? The first two questions bring out basic requirement that would be expected in any situation and the last two questions that are discretionary but important. 3.1 Ethics at Hotel Mulia Senayan As one of the prestigious independent five stars Hotel in Indonesia, there are some ethical issues that happened repetitively. Ethics has to be considered to both of internal and external. From the internal sides, such as; 1. HR policies including recruitment, equal opportunities, pay and working conditions The benefit packages are given according to their role, such as insurance and hotel`s service charge (monthly bonus). There is also a benefit packages for those part timers. The daily payment for them is higher than others five stars hotels in Jakarta. There is also an opportunity for disable person in some position. The company is also given 5kg`s rice to full timers who already married every week. The quality of the rice the same quality that is being use for hotel`s guests. Giving training and certification course for employee and have a religious event twice a month. 2. Health and safety to staff The company provides food for employees twice a day during their working day. Employees can also request for their special meal based on their dietary requirements. Rooms are provided for those who work at night shift. Standard of procedures is also tightly monitored in order to stress the safety, especially in kitchen area. It will not be allowed to any employees who come to work without safety attribute such as safety shoes. From the external sides, such as; 1. Government policies, regulation and legislation Company is using original software in each computer at every department. The license to play music in the restaurant or lobby, also tight control for foreigners data

and information that has to be reported to Police in every single visit. Then getting alcohol licenses selling that has to be renewed annually. 2. Relation with local community and impact to environment Hiring local people surrounding in some percentages at some position such as security and housekeeping. Donate and monthly charity events to support the community nearby. Also having quarterly community services from every department that is being rotated. 3. Purchasing policies and relations with supplier Dealing with reliable food supplier that has been carefully analyzes and selected. 3.2. Ethical Standard HMS viewed ethics as managing integrity. There are the standard that being use as guidelines to all employees. Thus every business decision and activities will show a strong character of HMS`s ethical identity, there are; 1. Trustworthiness 2. Respect 3. Responsibilities 4. Fairness 5. Caring 6. Citizenship Those six ethical identities are becoming the core values and belief to do business. Increasingly the business environment is tending toward a global economy. With this trend comes excitement, opportunity, and unfortunately potential for problems associated with differing attitudes and practices commonly encountered when interacting with cultures different from our own. As morality, in business or elsewhere, always involves a personal choice. Those who practice gamesmanship do whatever they can getaway with to win whilst those who practice sportsmanship pursue a victory with passion and honor. Causing no harm whenever possible but when things go wrong try to minimize the harm to avoid altogether. Thus it is a long-range decision. Therefore the HMS tries to build conducive moral environment. 3.2 Good ethics is good business At HMS, there are some critical points to be found by applying good ethics in business;

1. HMS is able to attract people to as a place to work because of the perceptions as ethically and social responsible companies whilst those who have a reputation of being unethical have difficult tome recruiting 2. The way HMS set the rules, shared values, develop moral and respect the norms to the employees influence the individual moral of employees 3. Business ethics largely affects the development of society surround the area i.e. Patal Senayan area 4. Embracing positive ethical values makes an important contribution to ongoing supplier/buyer relationships i.e. able to attract both of prestigious international and national supplier with a long term contract However, there are also some views that being found from the archive of HMS employees who had disciplinary action of being unethical, such as; 1. A view that the activity is safe because it will never be found out 2. A view that being unethical in business is sometimes needed as a game strategy 3. A view that being ethic is irrational whilst business is rational aspects 4. The pressure from the management to the executives to create profit at any cost Ethical things to do may not always be in the best interest of the company, as profit is the most important interest. However, It is the job of the executives at the company to make ethical business decision based on the social perception. The ability to recognize ethical issues and to think through the consequences of alternative solutions is becoming an important skill. Having a status of ethical company will help generate business. However, the most important reason being ethics is not because good ethics is good business but we are morally required to adopt the moral point of view in all our dealings with other, and business is no exception. 3.3 Ethics as a character We are living in the era of transparency. The era that there is no place to keep our secret today because of the impact of technology. Word of mouth goes world of mouth. Thus, the community perception is very powerful to the company performance. The meaning of transparency itself is that people like to make business with us and accept by the surrounding as they know, they like and they trust us. To restore trust in business, ethical leadership is more necessary than ever before. It is becoming the character. Ethics is a component of
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quality to be attained only within the long-term perspective. The short-term goal of profit at any cost carries the risk of low quality, which can result in company failure and unemployment. Therefore, a company has responsibility not only towards its owners and employees but also towards the community within which it operates, and towards all people and the environment in the widest sense of the word. However, the company activity to develop the community has to get the support from the community itself. 4. Conclusion It is the job of the executives at the company to make ethical business decision based on the social perception. Business has always had the ability to bring out the worst in people. To operate effectively in this dynamic environment, business leaders today need to think and react with more over awareness of the moral issues surrounding everyday business decisions. Ethics should be a component part of all activities in all hotel departments, with the ethical elements defined according to the specific work and responsibilities of each department. In addition, ethical issues must be addressed by individuals, groups, corporations, and even nations in very different ways, and the consequences differ with each person or group involved. Therefore the HMS system and policy stated those who behave unethically would be discharged straightforward with no compensation. However, the investigation will always take place. References Andrews, Kenneth R (1989) Ethics in Practice: Managing the Moral Corporation Boston: Harvard Business School Press Weiss, Joseph W, (2006) Business Ethics: A Stakeholder and Issues Management Approach, Thompson Southwestern Wood, Roy C, (2003) Strategic Questions in Food and Beverage Management, Oxford: Butterworth Heinemann