BUS102 Introduction to Management

When Volkswagen revealed in September that it had installed software on millions of cars in order to trick the Environmental Protection Agency’s emissions testers into thinking that the cars were more environmentally friendly than they were, investors understandably deserted the company. Volkswagen lost roughly $20 billion in market capitalization, as investors worried about the cost of compensating customers for selling them cars that weren't compliant with environmental regulations. The company not only has to deal with compensating their customers, but it will also need to contend with potential fines from regulators as well as a reputational hit that could severely affect its market share.

FIFA Corruption Scandal

The only surprising fact about the FBI’s indictment of FIFA officials for racketeering, fraud, and other offenses was that the charges came from the United States, where soccer’s popularity lags the rest of the world.The corruption part was the least remarkable aspect of the news, as FIFA officials had long been suspected of taking bribes in exchange for granting broadcasting rights for games and hosting rights for events like the World Cup. 

 

The FBI also indicted five sports marketing executives at the same time. And the scandal spooked some of America’s largest corporations, including Coca-Cola and McDonald’s-top FIFA sponsors. These firms called on the governing body to fire its leadership and enact tough reforms.

Toshiba Accounting Scandal
No list of corporate screw-ups would be complete without a good old-fashioned accounting scandal. In September, electronics conglomerate Toshiba admitted that it had overstated its earnings by nearly $2 billion over seven years, more than four times its initial estimate in April. CEO and President Hisao Tanaka resigned from the firm, and an independent investigators found that “Toshiba had a corporate culture in which management decisions could not be challenged” and “Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years.”

Valeant's Secret Division
In October, short seller Andrew Left accused drug company Valeant of using a specialty pharmacy company Philidor to artificially inflate its sales. Valeant denied the charges. But the fact that Valeant had never discussed its close ties to Philidor raised questions about Valeant's, and Philidor's, sales practices. It also shook investors' confidence in the acquisitive drug company, which had racked up debt as it did deals. Valeant (VRX, +1.28%) could still be on the hook if Philidor broke any laws. Valeant employees appear to have worked at Philidor under aliases to hide their identities. And Valeant had paid $100 million for an undisclosed option to acquire Philidor for no additional dollars whenever it wanted, essentially giving Valeant ownership of the company.

Valeant has appointed a special committee of its board, and an outside investigator, to look into the company's ties to Philidor, but it has yet to report its findings. Valeant said that Philidor sales never amounted to more than 7% of its total sales. Valeant's shares fell 75% in the wake of these revelations, to just over $70 from a high of $260.Also contributing to the stock fall was the fact that Valeant had been accused over the summer of price gouging, buying up drugs and then rapidly raising their prices. A number of members of Congress, including presidential hopeful Bernie Sanders, have called for an investigation into the company's drug pricing practices. And in early October, the company confirmed that it had received a federal subpoena. Many well known hedge funders, including Bill Ackman, who has defended the company, suffered big losses on Valeant stock in the wake of the scandal.

Turing Pharmaceuticals and Martin Shkreli
Martin Shkreli became known as the bad boy of the drug industry after his drug company, Turing, increased the price of a 62-year-old drug that treated HIV patients by 5,000% to $750 a pill. But it's what he did before that could land him in jail. In mid-December, the government arrested Shkreli on charges of stock fraud related to his activities while at
Retrophin, the drug company he ran before Turing. The former hedge fund manager is accused of using shares of Retrophin to pay off investors who had lost money with a hedge fund he ran in the past. The government described Shkreli's alleged behaviour as similar to a ponzi scheme. Shkreli, who maintains he is innocent, says there is little evidence of fraud because his investors didn't lose money. Shkreli, who has been defiant on Twitter about the allegations against him, bought the sole copy of a Wu-Tang Clan album for $2 million. He has had called himself the most successful Albanian. Mother Teresa, also an Albanian, presumably would not be proud. 

 

You are to research and answer all of the following:
1. The case study has identified several ethical issues that have arisen with five different companies.Give a summary of the different ethical issues that have occurred with these companies. 
2. Ethical dilemmas can occur within an organisation which can challenge individual and management decision making. Explain where the responsibilities lie when it comes to managing ethical behaviour. Is it the responsibility of the individual or of management.
3. Using one of the examples profiled in the case study identify what caused the breaches of ethical conduct. In your answer consider elements such as the management style of those in charge and the culture of the organisation. 
4. Some organisations promote their corporate culture as one that supports ethical behaviour. Using any organisation of your choice as an example, explain the strategies they have in place to prevent inappropriate and unethical decision making from occurring. 

With reference to the case study the five companies named were either in one or another engaged in actions that are considered to be unethical regarding organizational codes of conduct. In the case of Volkswagen manufacturers it was completely unethical to trick their customer on environmental consciousness of the vehicle which was actually a lie. Their motive was to make more sale yet they were endangering lives of many on the roads. The company believed that it was cheaper to pay law suits than to repair the mistake in their manufacturing process. Regarding FIFA scandal corruption is entirely an ethical and illegal act in all nations across the world.

The unethical behavior lied in the hands of management as the officials were the ones engaged in corruption whereas they are supposed to lead by example (Zadek, S, 2004). In the case of Toshiba accountant who do not adhere to the international accounting standards are deemed to behave unethically hence not competent enough to work as professional accountants. Inflating the price of a commodity for personal gain is unethical. This applies to Valeant’s Secret Division. Shkreli is dishonest and has a record of fraud. He defrauded the company known as Retrophin after which he was also caught with fraud cases in Turing Pharmaceuticals. This an illegal act as well as unethical although it is still common with many organizational officials.

Some of the managers believe that ethics is a sole responsibility of an individual and every breach of ethics and values of organization is considered as the wrong doing of a rogue employee (Walther C. Zimmerli, 2007). While, this is not the case. The responsibility of ethics management is mutual and organizational management plays a major that involves setting values and enforcing them to ensure that the staff adheres to them. The assume that ethics has nothing to do with the management.

Actually management has a lot to do to ensure ethics in an organization. A simple misconduct by one individual cannot fully define misconduct of the whole corporate (Walther C. Zimmerli, 2007). It is so practical to say that unethical actions of a business includes the implicit if not the precise beliefs, attitudes, teamwork  and mirrors the values, language, and behavior trends which explains operating culture of the firm. Therefore, ethics is both a personal issue as well as the organizational issue.

The management team is responsible of setting the system of the way an entire organization is supposed to run its daily activities. When the present management policies are fundamentally based on ethical practices, organizational leaders can guide worker through their own example to make decisions that do not only benefit personal interests, but the entire organization in general. Investing on an ethical behavior foundation assist a company to establish a long term positive impacts, including the attraction ability and retention of highly talented employees and  maintaining a good status around the society (Zadek, S, 2004). Running the activities of a business ethically from top downwards establishes a stronger connection between the people in the management team and more creating stability in the organization.

If the management is ethically guiding and leading the company, most worker enticed by the management character to follow suit. Similar to every business initiative, organizational ethical operation is related directly to productivity both in the long term and short term (Windsor, D, 2006).  The way the community around views the a company’s reputation is very important as its determines if the firm is worthwhile investing in. If a company has got a negative reputation on the perception that its operations are not ethical, most probably it will push away investors because they will not be interested in either supporting its operation or buying stock. Business ethics benefits goes beyond the morale and royalty of employees or strengthening the management.

As in the case of Turing Pharmaceuticals and Martin Shkreli ,some organizations are only concerned about profitability without minding the ethical behavior or reputation of the company (Walther C. Zimmerli, 2007). Turing raised the price to get more profits since it was in high demand without minding he ethicality behind it.

If the world was perfect employee and their employers would always be on the right. But it is unfortunate there is no such world in existence. ethical dilemmas most commonly occur in almost every workplace (Zadek, S, 2004). An ethical dilemma refers to a situation when a person is at cross roads of choosing either a moral or an immoral action.

• Lack of proper training right information might lead to such dilemmas among the workers. Organizations are therefore supposed to offer the appropriate training and provide correct information to assist employees in making the right decisions.
• Companies have different. Some of them emphasize on results and profits. In this kind of atmosphere, the firm may be less concerned with the ethical behaviors of their worker provided that they deliver results(Zadek, S, 2004). Workers can hence experience ethical dilemmas as they may feel under pressure to act immorally so as to please their employers.
• Discrimination and inappropriate ambition. Although it is important for businesses to embrace diversity, some bosses may tend to be uncomfortable with workers from diverse backgrounds and therefore they are coerced to give them unfair treatment. Discrimination is both unethical and illegal but it is still common in some organizations (Zadek, S, 2004). Some employees might have desire for recognition or can be experiencing financial pressure. So if they Are unable to achieve what they hunger for through the right channels, they might opt for unethical practices which like faking numbers or assuming credit for a colleagues work to move forward.
• Working with other companies can also pose an opportunity for breach of ethics. Some of the employees will lie or negotiate in bad faith to get the best deals. Others will be ask for or take bribes to get away with a fair deal (Windsor, D, 2006). This is an illegal act as while but still happening in many organizations across the world.

Google, although it might be criticized by some people it frequently honors its motto which is “do not be evil”. With its Google Green Program, the organization has made donations worth over one billion dollars for projects promoting renewable energy. It has also reduced its footprint by use of energy effective infrastructures and transport for the public. The organization is also a stern free speech advocate, that is learnt from its regular misunderstandings with the government of China (Windsor, D, 2006). Google is a self declared gay rights supporter as well. Yet all of this pales in contrast to its status as a shining example for benefits of the employees.

Employees of Google company enjoys the privileges to free health care and free treatment by onsite doctors. They are also entitled to free legal advice accompanied by subsidized legal services an onsite cafeteria and a well stock snack pantry (with world class chefs offering services) plus a free onsite nursery as well. With this kind of cosmological record of social consciousness and quality worker relations, the company can simply termed as most ethical conscious corporate in today’s world.

Google critics suggest that the search engine’s motto “don’t be evil” is defined by the CEO as to what he alone thinks is evil. The truth is Google goes to greater lengths to make sure that its employees healthy happy and satisfied (Walther C. Zimmerli, 2007). The enhances employee morale, integrity levels hence encouraging ethical behaviors within the company. The company also has never shied away to  voice its views on controversial social matters, including LGBT rights.  

References

Carroll, A.B., 1999. Corporate social responsibility: Evolution of a definitional construct. Business & society, 38(3), pp.268-295.

Carroll, A.B., 1991. The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business horizons, 34(4), pp.39-48.

Beauchamp, T.L., Bowie, N.E. and Arnold, D.G. eds., 2004. Ethical theory and business.

Schwartz, M.S. and Carroll, A.B., 2003. Corporate social responsibility: A three-domain approach. Business ethics quarterly, 13(04), pp.503-530.

Zadek, S., 2004. The path to corporate responsibility. Harvard business review, 82(12).

Wilson, M., 2003. Corporate sustainability: What is it and where does it come from. Ivey Business Journal, 67(6), pp.1-5.

Carroll, A.B., 2000. Ethical challenges for business in the new millennium: Corporate social responsibility and models of management morality. Business Ethics Quarterly, 10(01), pp.33-42.

Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: A review of concepts, research and practice. International journal of management reviews, 12(1), pp.85-105.

Windsor, D., 2006. Corporate social responsibility: Three key approaches. Journal of management studies, 43(1), pp.93-114.

Stevens, B., 1994. An analysis of corporate ethical code studies:“Where do we go from here?”. Journal of business ethics, 13(1), pp.63-69.

Walther C. Zimmerli, K.R.M.H. (2007) Corporate Ethics and Corporate Governance, illustrated edition, Berlin: Springer Science & Business Media.