Case Study of Business Ethics in Organization

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Table of Contents

Introduction
Case Study 2
Code of Conduct
References

Introduction

Corruption

Business ethics are designed to ensure a fair, legal, and honest approach to operating on the market and managing the workforce. However, in case the potential contractor is an official entity and aims to cooperate with a private business as a result of a remuneration, all the ethical frameworks become invalid. As presented in the case study, the company is requested to pay a “motivational fee” before the Minister of Energy agrees to go further with a deal. On the one hand, this is an excellent economic opportunity to work with a reliable entity, the government. Moreover, since the cause is ethical in itself due to the fact that the business builds solar panels, there is a possibility of contributing to a significant environmental change. However, it is essential to consider the ways in which these outcomes can be achieved.

Public Opinion

Corrupt government officials are not only unreliable for the public but also potentially risky to work with from a reputational standpoint. The issues change from ethical concerns to economic ones. Suppose a scandal occurs and the public finds out about how the business chooses to engage in bribing. In that case, there will be repercussions in terms of customers being dissatisfied and choosing to invest in more ethical brands. Thus, unethical business strategies are not only morally wrong but also result in physical difficulties for a company that chooses to contribute to an unfair and unjust system.

Avoiding the Payment: Reasons

The motivation fee should not be paid due to several critical reasons. It is vital to illustrate that calling a bribe a motivation fee does not change its premise. Corruption in itself is a major risk factor that correlates with multiple negative outcomes. One reason why the fee should not be paid is the contribution to the monopolization of a particular industry. This diminishes competition, which ultimately adversely affects innovation. In case a company chooses to engage in unethical corporate behavior and use corrupt politicians for financial gain, the other ones are limited in regards to clients. While other organizations can be more innovative, productive, ethical, and technologically advanced, the corrupt systems will only benefit those who are willing to choose dishonest ways of conducting business.

Another reason why the fee should not be paid is the risk of consumer distrust. The consumer has the potential to either support a company by purchasing products or services or opt for another organization within the same industry. Due to the fact that the market is not a monolith and multiple organizations compete and aim to win through consumer satisfaction, the person spending the money can decide which entity is worth investing in verses which one cannot be supported. It is certain that working with corrupt politicians who are supposed to think of the public is critically negative from the reputation. Another factor that plays a role in consumer demand is the politicization of private businesses. People who disagree with governmental premises, oppose certain political parties, or seek a systematic change will less likely invest in an entity that directly encourages the political system to be corrupt.

Last but not least, paying the fee is a direct illustration that corruption is tolerated or even encouraged. This can be perceived negatively by employees, who will have a distorted overview of what is allowed or what is not. In this case, certain individuals may be disappointed with the corporate decision and leave the organization. The lack of impartiality also motivates rivals in terms of applying the same techniques. This creates an even more dangerous business environment in which organizations do not strive to be innovative or consumer-centered but rather use the corrupt system to acquire financial gain.

Legal Aspects

There are also legal aspects that have to be referred to in terms of not agreeing with the motivational fee. Certain practices that are legal in some countries resemble corruption while being legal depending on circumstances. Researchers refer to lobbying as an attempt to influence or contribute to a specific governmental decision initiated by a private business or an individual (Ceva & Ferretti, 2017). However, in this case, the governmental official is not being manipulated into engaging in unethical behavior but rather has the initiative and clearly states that the contract will not be signed without a fee. This is a definite example of corruption, which is illegal and correlates with consequences from fines to jail time. Nevertheless, giving bribes is also a punishable offense, which is why both the organization and the political entity can suffer from legal consequences as a result. The business may face reprocessing such as fines, loss of license, and other critical disturbances that will majorly affect productivity, reputation, and competitiveness. Since most legal systems are created to not only punish but also prevent crimes, it is certain that applying regulations from both the recipient and the sponsor exemplifies how unethical behavior is not tolerated on a legal level. Thus, the legality of the issue and the consequences correlating with corruption as a crime also highlight that the motivational fee should be avoided at all costs. This will be not only the right ethical decision but also a minimization of risks related to legal problems for engaging in criminal activity.

Case Study 2

Contract Termination

The termination of the contract before the expiry is a negative outcome for both parties involved in the deal. On the one hand, the company scheduled the project in a way that both the workforce and the materials are ready to be utilized. Moreover, the organization loses the opportunity to receive the payment initially established unless the contract specifically mentioned compensation. Furthermore, the government expected the project to be finalized by a specific deadline, which cannot be achieved since a new contractor will require time for planning and managing resources. However, while the outcomes are overall disruptive, there are several solutions to approaching the contract termination.

Solutions

First, it is important to refer to the legality of the process. The contract itself is a legally binding agreement between two entities that cooperate (Van Truong & Ninh, 2017). The important factor is that the documentation gives the company a reason to seek compensation by going to court. Terminating a contract before the previously discussed deadline is not permittable due to the fact that there is a risk that one party will suffer financial losses. Depending on the contract itself, it may have an arbitrary clause included, which prevents the parties from resolving the conflict in the court. However, in order for the issue to be mitigated, the company has to seek compensation based on fiscal calculations of financial losses due to project termination. Moreover, operating based on the arbitrary clause minimizes the possible bias that will influence the decision of the judge since a private business challenges a state authority. In this case, it is possible to invite a third-party representative who will be objective in assessing the problem between the business and government in case the two entities cannot resolve the conflict without additional help.

The conflict would initially be mitigated with a contract that would refer to all possible implications, challenges, and disruptions in the working process. According to researchers, contract termination can only be beneficial and fair if the party that decides to cancel the deal is ready to compensate expenses (Liu et al., 2017). Thus, resolving the dispute may correlate with negotiating a compensation fee that covers the resources spent as a result of cancelation. The party that has already legally agreed to purchase and pay for the installation of the solar panels has to follow up with the payment for the materials and work. The company providing the service has prioritized this deal, perhaps lost other potential customers, allocated skilled workers, and bought the equipment and materials. An ethical solution would be calculating the sum (perhaps excluding the interest rate) and asking for compensation.

Due to the sensitive subject related to the allocation of the project in the first place, a cause that ultimately caused its termination may be the fact that it was signed as a result of corruption. This means that the bribe became public the government officials chose to stop working with a company that engages in such unethical and illegal behavior. This is a valid reason for termination, yet it can be argued that the party that initially gave an ultimatum is the one that has to be punished. The Minister of Energy would only sign the contract if a fee was paid, which can be classified as a threat. If there is evidence for this being truthful, it can be easy to argue that the victim is the business in both cases. First, a governmental official seeks financial remuneration, which will prevent them from not signing the contract. Another framework in which financial losses are experienced is the cancellation of the cooperation between the two entities. Illustrating the situation in this way can be another method of mitigating the ethical problems while addressing the challenges.

Due to the concept of confidentiality that applies to both the minister and the company, the termination can be discussed openly with the opposing party. The purpose is to either decide the legal way in which the conflict will be resolved, determine the compensation depending on the financial losses, or pursue the agenda correlating with the Minister’s initiative. The methods of resolving a dispute are not only ethical and based on legislative norms but also contribute to fair contract closure. Thus, the minimization of the resources already spent on the project through compensation can be applied towards payments for workers who were to be involved in the construction. The majority of the funds will be applied to cover the already purchased goods and equipment.

Code of Conduct

Implementing a Compliance and Ethics Program is essential in building corporate culture, installing ethical value in the organization, and minimizing issues both in the internal and external environment of the organization. According to researchers, some problems that can be addressed by applying this project include money laundering, tax evasion, theft, corruption, and others (Gaughan & Javalgi, 2018). The proposed program mostly covers human resources, which is why the policies refer to regulations that apply to employees. The first policy is securing the work environment by providing employees with a way for sharing information in regards to unethical behavior. A phone line or web platform can be a safe and secure way to do it. Moreover, the company will be responsible for the security of the person sharing the information, which will encourage honesty and risk minimization. Openness may be rewarded in case the employee reported on a violation that detrimentally opposes the values of the business.

The second implementation within the Compliance and Ethics Program is operating based on corporate values rather than personal ones. This is why having corporate culture is a vital step in establishing compliance. Researchers refer to corporate values as, sometimes, more critical than law when it comes to mitigating the risk for unethical behavior (Dolan et al., 2021). Employees who see themselves as a part of a big team rather than singular entities are less likely to engage in unethical behavior since the corporate regulations clearly state the rules that have to be followed. In case a violation has occurred, the next point in the Compliance and Ethics Program can be applied.

Violating rules, especially frequently, cannot be ignored by the board of directors. In case an individual knowingly goes against the regulations pointed out in the program, or the offenses of other employees have been purposefully not reported, repercussions will be applied. Each case will be discussed individually, but the violations can be punished with fines, firing employees, or even applying severe measures such as pursuing legal justice. The level of the response directly depends on the violation and its severity in terms of impact on the company as a brand.

Corporate Governance

The new corporate governance structure will be based on the stakeholder theory. The proposed model may help mitigate the risk for bias or unethical behavior by high-ranking employees. Based on the theory itself, shareholders elect the board, which consists of both executive and non-executive directors. Thus, these entities will ensure each person, company, or institution affected by the business have to be considered. In the case of this corporation, certain organizational values and ethical frameworks have to be implemented. Thus, a board of directors representing the interests of all stakeholders can apply the necessary techniques to build the ethics program and minimize risks related to unfavorable contrasts that do not put the organization in a favorable position.

The reasons for applying these measures are mainly related to the lack of current guidelines in regard to corporate behavior. This creates a negative outcome for the organization that does not have the ability to minimize susceptibility to corruption, avoid signing contracts that do not ensure financial safety, and create a just and fair environment in and outside the organization. Moreover, the presence of a program signed by the board of directors validates the legal appliance of the implementation in case a violation leads to a court case. By applying the new model, the legal, social, and ethical aspects of the business will benefit, and the overall outcomes will highlight a more ethically-centered environment.

References

Ceva, E., & Ferretti, M. P. (2017). Political corruption.Philosophy Compass, 12(12). Web.

Dolan, S., Hawkins, S., & Richley, B. (2021). Raising the ethical bar: Ethical audits and positive culture transformation.The European Financial Review. Web.

Gaughan, P. H., & Javalgi, R. R. (2018). A framework for analyzing international business and legal ethical standards.Business Horizons, 61(6), 813–822. Web.

Liu, J., Gao, R., & Cheah, C. Y. (2017). Pricing mechanism of early termination of PPP projects based on real option theory.Journal of Management in Engineering, 33(6), 04017035. Web.

Van Truong, D., & Ninh, D. T. (2017). Several legal issues on construction contract termination. Journal of Science and Technology in Civil Engineering, 11(6), 210–216. Web.

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