Category: Business Ethics

INTRODUCTION

This essay will provide a detailed discussion on the emission scandal of Volkswagen which has involved legal as well as ethical issues. Suitable recommendations will be provided for the organisation based on theoretical models to avoid such issues in future.

UNETHICAL BEHAVIOUR OF VOLKSWAGEN

Volkswagen has been accused of violating the emission-related regulations in its cars. The company has installed emission software on its 10.5 million of its diesel cars. These are known as ‘defeat devices’ tends to detect if they were tested. It manipulates the performance and changes the results as per the limits set by the Environmental Protection Agency. However, under normal driving, the software gets switched to another mode which alters the exhaust gas recirculation, injection timing and fuel pressure. This model emits nitrogen oxide that is said to pollute the environment and cause lung cancer. The emission is higher by the federal limit by 40 times (Atiyeh, 2019). Earlier, Volkswagen has been performing marketing activities for its diesel cars at a huge level boasting the low level of emissions. EPA has found that Audi, Jetta, Beetle, Passat and golf are some of the models which have this emission software that includes 11 million cars in countries such as US, UK, Italy, France, Canada, Germany and other countries. Volkswagen has admitted that it has cheated the EPA regulation with the defeat devices. As a result, the company has lost the trust of the public and its customers. The scandal has made the environmental groups, regulators and politicians throughout the world to question its legitimacy. Volkswagen has to recall the affected vehicles in all the countries and the scandal has made the market shares to fall drastically (Hotten, 2015). Therefore, it could be understood that Volkswagen was involved in cheating the regulations. Emissions can affect the health of people and can affect the environment. The scandal has resulted in the loss of market share, trust and reputation of the organisation.

Ethical issues in business happen due to lack of awareness on the importance of ethics. The foundational values for identifying ethical issues are integrity, honesty and fairness. Fraud is one of the ethical issues in business which includes purposeful communication which manipulates or deceives and results in harm to others. It can also be a crime and usually includes accounting fraud, marketing fraud, fraud triangle, puffery and implied falsity (Said et al., 2017). Legal actions have been taken against Volkswagen and consumers have been seeking compensation for cheating on the emissions. More than 470,000 car owners of these diesel-powered vehicles are involved in the case. Already the company has spent over 30 bn for legal activities, compensation and fines after the scandal. Top management of the company has been accused to be involved in fraud for their approvals to fit the cheating devices in the vehicles (Jolly, 2019). Hence, it could be understood from the above scandal of Volkswagen that its leadership has failed to realise the importance of ethics where the values such as integrity, honesty and fairness have been lacking in the activities of the company. This has resulted in ethical issues as it has purposefully misled the consumers by fitting the cheating devices. Also, the regulatory standards have not been met and it has falsified information on emission values. Such activities have harmed the environment as well as society. Therefore, Volkswagen has to avoid involving in such unethical practices in future to ensure its survival in the industry.

RECOMMENDATIONS FOR FUTURE

Ethical decision making

Normative perspectives of ethics can be influential in aspiring followers with ideal goals. To ensure ethical decision making, it becomes important to recognise any ethical issues in a situation before making decisions. The facts are to be obtained, alternative actions have to be evaluated, and decisions could be made. It has to be then tested and the outcomes have to be reflected (Selart & Johansen, 2010). The management of Volkswagen has to incorporate normative perspectives of ethics in its decision making so that such issues could be avoided in future.

Incorporate Ethical values

Volkswagen has to enforce ethical values in its further practices. It can produce zero-emission cars that can reduce the emission levels by a considerable value. The company can emphasise on investing in electric cars with high power batteries. Several manufacturers established around the world for producing batteries could be influential in creating jobs. The EPA regulations have to be followed strictly without any cheating devices and have to be communicated with transparency (Mansouri, 2016). Volkswagen has to incorporate ethical values and strive to avoid any negative behaviour that can affect its reputation. It can involve creating electric cars that can serve the interest of society.

Ethical leadership

Ethical leadership makes the leaders demonstrate conduct by responsible and unselfish behaviour by the following integrity. The importance of ethics has to be realised and the leader has to spread the word to his followers. 4V model of ethical leadership emphasises on values, vision, voice and virtue to influence the actions of followers towards the common good by aligning the internal beliefs and external behaviours (Ahmad, Gao & Hali, 2017). Therefore, Volkswagen has to ensure that the leadership team is ethical with responsible conduct. Stringent measures have to be enforced for assuring the accountability of the leaders in senior management since the approvals for the cheating devices has involved their role as well. Thus, the 4V model could be useful for Volkswagen to ensure that the leaders serve as a guide for the practices in the organisation and prevent such issues in future.

CONCLUSION

From the above analysis, it could be concluded that the Volkswagen emission scandal is a major ethical issue which has compromised all the elements of ethics and acted in the interest of profit maximisation. The cheat devices installed have manipulated the values against the EPA standards and is legally accused as criminal behaviour. Such ethical issues could be avoided by Volkswagen in future through ethical decision making, ethical values and ethical leadership.

REFERENCES

1. Atiyeh, A. (2014). Everything You Need to Know about the VW Diesel-Emissions Scandal. Retrieved 08 Feb 2020 from, https://www.caranddriver.com/news a15339250/everything-you-need-to-know-about-the-vw-diesel-emissions-scandal/
2. Ahmad, I., Gao, Y., & Hali, S. (2017). A Review of Ethical Leadership and Other Ethics-Emission Test. International Journal of Science and Engineering Applications, 5(4), 211-216
3. Hotten, R. (2015). Volkswagen: The scandal explained. Retrieved 08 Feb 2020 from, https://www.bbc.com/news/business-34324772
4. Jolly, J. (2019). Volkswagen emissions scandal: mass lawsuit opens in Germany. Retrieved 08 Feb 2020 from, https://www.theguardian.com/business/2019/sep/30/volkswagen-emissions-scandal-mass-lawsuit-opens-in-germany.
5. Mansouri, N. (2016). A Case Study of Volkswagen Unethical Practice in Diesel Related Leadership Theories. European Scientific Journal, 13(29), 10-22.
6. Said, J., Alam, M.M., Ramli, M., & Rafidi, M. (2017). Integrating ethical values into fraud triangle theory in assessing employee fraud: Evidence from the Malaysian banking industry. Journal of International Studies, 10(2), 170-184.
7. Selart, M. & Johansen, S. (2010). Ethical Decision Making in Organizations: The Role of Leadership Stress. Journal of Business Ethics, 99, 129–143

Introduction

Wal-Mart, a giant company that keeps many clients, is widely known both at home and abroad for its huge variety of low-price goods and services. It was created by a very creative and innovative businessman, Sam Walton. Wal-Mart has done very well for itself because, in terms of its discounting retailing, it has defeated many other organizations.

It is thought to be the United States of America’s largest corporation. According to PBS, ‘Wal-Mart employs more people outside the federal government than any other corporation in the United States, and most of its employees with children live below the poverty line.'(pbs)

Walmart has been opposed by numerous groups and individuals, including labour unions, community groups, grassroots organizations, religious organizations, environmental groups, gun activists, and consumers and employees of the company. Some of the most critical unethical business practices initiated by them are as follows:-

Unethical Wal-Mart Business Practices

1. Labor Union Opposition.
2. Unfair Treatment to Employees.
3. Child Labor Violations.
4. Low Wages.

Thesis Statement – Successful Corporations are only those that protect themselves from unethical business practices because they are unavoidable.

Background

Walmart Inc. is an American multinational retail company with headquarters in Bentonville, Arkansas, running a network of hypermarkets, discount department stores, and grocery stores. Founded in 1962 by Sam Walton, the company was incorporated on October 31, 1969. It also owns and operates discount stores for Sam’s Club.3 As of 31 October 2019, Walmart had 11,438 shops and clubs in 27 countries, operating under 55 different names.4

According to the Fortune Global 500 list in 2019, Walmart is the world’s largest revenue company with US$ 514.405 billion. With 2.2 million workers, it is also the world’s largest private employer. It is a family-owned publicly traded business, as the Walton family controls the company. Sam Walton’s descendants own over 50 percent of Walmart through their holding company Walton Companies and their private holdings.5 Walmart was the biggest U.S. food store in 2019 and 65 percent of Walmart’s $510.329 billion sales came from U.S. operations.6

The New York Stock Exchange listed Walmart in 1972. By 1988, it was the most profitable retailer in the U.S.7 and by October 19898 it had become the largest in revenue.

Before we delve into Walmart’s unethical business practices, let’s define ethics first. Ethics is defined as ‘The general and abstract concepts of right and wrong behavior which are derived from philosophy, theology and professional societies.’9 Ethics is also defined as’ moral principles, irrespective of the situation or circumstances, through ethics, culture and religion.”.10

The definition of ethics in business decisions covers all aspects of a business organization’s activities. There is always a propensity for ethical issues to emerge in a global market, and multinational companies are no exception.11 Multinational corporations are facing a dynamic and complicated global market where right and wrong could be viewed as varying widely.12

Walmart is still performing some of the riskiest unethical business practices, being the biggest company in terms of sales and the number of people working. Below is the analysis done by me on the unethical practices carried out by Walmart. The unethical practices mentioned are analyzed on three basis, namely,

1. Why do these problems/unethical practices exist?
2. How do these problems/unethical practices affect Walmart Inc.?
3. Who is responsible for these problems/unethical practices?

Unethical business practices

Labor Union Opposition: – Walmart is a non-union company. Instead of relying on unions, they operate on an open-door policy. United Food and Commercial Workers Union filed a complaint against Wal-Mart with the National Labor Relations Board. ‘The complaint filed with the National Council on Labor Relations claims that Wal-Mart has breached Federal Labor Law by bribing employees to spy on those co-workers that demanded labor unions.”13

Why does Labour Union Opposition exist in Walmart?

1. Unemployment – The economist Milton Friedman, who supports laissez-faire capitalism, argues that unionization always creates higher pay at the cost of less workers, and that wages would decrease in non-unionized industries if some sectors are Unionized while others aren’t.14
2. Efficiency – Sherk argues this is more prevalent for businesses with a competitive advantage (the unions have trouble lowering profit in the competitive market), as this ensures that these firms have greater profits than average, so that redistribution is not in danger of alarming investors.15
3. Corruption – Several unions, like the Teamsters, have been blamed for being active in organized time.16
4. Cost-Push Inflation – With wage increases over the market rate, employers increase cost to businesses and cause prices to rise, leading to a general price increase.17

Note: – These were some of the reasons, which led Walmart Inc. to oppose labour unions in their company.

How did the Labour Union Opposition affect Walmart Inc.?

The labour union opposition affected Walmart Inc. negatively mostly. These impacts can be analyzed from the following affects that it had on the company.

1. In 2000, in Jacksonville, Texas, meat cutters voted to unionize. Subsequently, Walmart abolished in-house meat-cutting workers for pre-packaged products, arguing that the move will cut costs and avoid legal proceedings.18 Walmart argued that the national elimination of in-house meat processing was planned for many years and was not connected with unionization.
2. A successful unionization for a Walmart store in Jonquière, Quebec (Canada) in 2004 was completed, but Walmart closed the shop five months later, because the company did not approve the union’s new business plan.19 In September 2005, the Quebec Employment Board held that the closure of a Walmart store would be a reprisal against unionized workers..20
3. In August 2006, Walmart announced that it would allow employees of all Chinese trade unions to enter trade unions and would work for 28,000 workers with the state-sanctioned All-China Trade Union Federation (ACFTU).21 The All-China Federation of Trade unions was criticized because it is the only trade union in China and a method to use of the government. ACFTU was viewed as not acting in the best interest of its members (workers), bowing the pressure of public authorities on industrial growth and not upholding workers ‘ rights.
4. In November of 2012, the United Food and Commercial Workers and several Walmart workers initiated a campaign to go to strike on Black Friday in several stores across the country in protest of low pay, a rise in health insurance premiums, and not the option of taking a day off or Thanksgiving off.22

Who is responsible for the Labour Union Opposition?

The top management is primarily responsible for the opposition labor union, and the managers followed the lead afterward. This could be highlighted through the following incidents:-

1. In 1970, late Founder Sam Walton of Walmart resisted an anti-union campaign by pushing retailers International Union to push for unionization in two small towns in Missouri. Walmart retained an Alpha Associates firm to develop a Union prevention programme.23
2. Walmart CEO Tom Coughlin was pressured in March 2005 to resign its board of directors, under embezzlement charges.24 Coughlin alleged that the money was being used to carry out an anti-Union project involving cash bonuses paid to employees of the United Food and Trade Union, in exchange for a list of names of workers of Walmart who had signed the cards.25
3. A lawyer from the United States said that Coughlin’s initial claims were not supported by evidence and, while Coughlin himself reportedly reaffirmed those statements to journalists after his arrest, Walmart continues to deny that there was an anti-union campaign.

Unfair Treatment to Employees: –

Walmart, the largest private employer in America with 1.5 million staff, has been criticized for its strategy of putting profit first, and in particular above its employees. The company’s policy of sick leave was described in a new report on the ‘ absence control system ‘ by Walmart as ‘brutally unjust’ and ‘often against the Law.’ Further, Wal-Mart was strongly alleged to discriminate against women within the organization. Females were also apparently underpaid than men.

Why does Unfair Treatment to Employees exist in Walmart?

Employee inequality is a form of discrimination based on workers ‘ ethnicity, gender, religion, national origin, physical and mental incapacity, age, sexual orientation and sexual identity. Discrimination can be intended and involve inconsistent or unintended treatment of a group, yet create disparate effects for a group. The discrepancy is one type of illicit discrimination in US labor law. In the United States, it implies unfair behavior towards an individual because of a protected characteristic (e.g. race or gender).26

From the above definitions, we can conclude that Walmart is treating its employees unfairly due to one of two reasons or both, namely, it can unintended or it can be intended where they treat a particular group favorably or unfavorably due to the reasons mentioned above.

How did the Unfair Treatment to Employees affect Walmart Inc.?

Their unfair treatment towards different groups has been affected adversely by disparaging their own image and paying huge fines in courts settlements, as can be viewed from the following instances.

1. ‘In June of 2001 a group of six current and former female employees of Wal-Mart filed a lawsuit against the company against sex discrimination (who seeks to represent up to 500 000 Wal-Mart workers).’27
2. Wal-Mart struggled to provide women with equal opportunities in terms of employment, even though Walmart hires more than 70% of women, only a few of them are executives, which means that there are men at the top management of the business.
3. Walmart, the largest private employer in the country, regularly refuses to accept reports from physicians, penalizes staff who need to look after the sick family and punishes workers for legitimate absences.28
4. The above report is based on an inquiry by more than 1,000 employees, accusing Walmart, inter alia, of breaking the American Disability Act and the Family and Medical Leave Act. This month, in a lawsuit, the organization alleged that Walmart discriminated against pregnant workers in an earlier petition to the Equal Employment Opportunity Commission. Walmart said it did not review the report, but disputed the group’s findings.29

Who is responsible for the Unfair Treatment to Employees?

Mainly, the top management is responsible for the unfair treatment of its employees. These would comprise executives because they’re the ones who hire managers and we know that 65% of Walmart’s hourly paid workers are female workers, but only 33% of them are in Wal-Mart’s top management.30 Only 35% of its retail managers are women, compared with 57% in equivalent shops. On the other hand, keeping comparing Walmart with other retailers is unfair since it characterizes workers differently; if the total number of managers in departments were included, women would account for 60 percent of management levels.31

Child Labor Violations: –

The New York Times reported in January 2004 on its internal Wal-Mart audit carried out in July 2000, which examined the record for approximately 25 000 employees in a time clock of one week. The Times stated that ‘the audit identified large breaches of child labor laws and government regulations, including 1,371 cases of juveniles who work too late, leaving or not attending school and working too many hours a day. There were 60,767 missed breaks and 15,705 missing meals.

Why does child labor exist in Walmart?

1. Poverty is widely regarded as the primary reason why children work in insufficient jobs for their ages. Children work because their parents are poor; their family incomes must be supplemental or unpaid.
2. Note that children in England were considered acceptable to work in cotton mills at aged 5 years or older.
3. The relatively low salaries paid to children are often why employers like Walmart executives prefer them to adults for the jobs. Some children are unpaid, especially as domestic workers, if adults are involved in those conditions then it would be called ‘slavery.’ Employers find children more obedient and easier to control. With young workers, strikes or trade unions are unlikely to be launched.
4. The failure to attend school is a cause and effect of child labour. Education is not free in many countries, so parents often pay a fee for their children to attend primary school, buy books and provide school uniforms.

How did the child labor violations affect Walmart Inc.?

The child labor violations has affected Walmart negatively by disparaging their own image and paying huge fines in courts settlements, as can be viewed from the following examples:-

1. Wal-Mart Stores, the biggest company in retail, it has agreed to pay $135,540 in federal charges that in Connecticut, New Hampshire and Arkansas as it violated child labor laws. In the settlement, Wal-Mart promised to exclude any staff under 14 years of age from working on balers and agreed to ban workers under 18 years of age.
2. Wal-Mart promised to train new store managers to comply with child labor laws and to provide current managers with more education in the subject.
3. On January 6, the Labor Department and Wal-Mart signed the agreement but made no public announcement. The agreement states, ‘Compliance with child labor laws and regulations will be an important factor for the assessment of management’s performance.’
4. A clause of the settlement further agrees to notify Wal-Mart 15 days in advance before the agency investigates any other ‘salary and hour’ fees, such as a failure to pay minimum wages or overtime.

Who is responsible for the child labour violations in Walmart Inc.?

Walmart and primarily executives in the business are responsible for the infringements of child labour. There may be cases where top management i.e. executives, may not be aware about child labour in their company. Labour officials said that most of the 24 settlement violations involved employees under 18 years of age operating in hazardous equipment, such as cardboard balers and chain saw. Wal-Mart denied any wrongdoing in the Agreement, but at the same time promised to train new shop managers in compliance with child labour laws and to provide the existing managers with more education on this subject.

Low Wages:

Wal-Mart is accused of paying very low wages to its workers, with an average annual income of between $12,000 to $17,000 per annum. ‘The main justification of Wal-Mart is that it delivers lower prices for its and somehow excuses that sinfulness.’ In addition, Wal-Mart has an expensive insurance system and Wal-Mart workers can’t manage to pay for their health insurance again. Employees serving the company over time haven’t enjoyed the benefits of their labor since they haven’t been paid for overtime services rendered.35

Why does low wages to employees exist in Walmart?

1. Walmart Inc. provides its employees with low wages so they can make more profit by cutting costs as wages and pay which make a large part of their expenses.
2. Because of the current legislation, businesses such as Walmart must pay a mandatory minimum wage but are expected to save labor costs everywhere, they can.
3. A minimum wage increases the cost of items and thereby decreasing the demand for its products. In order to avoid this situation, the low wages are given by Walmart to its employees.
4. The reason for the existence of low wages could be due to unfair treatment of employees as discussed above.

How has the Low Wages affected Walmart Inc.?

Similarly, like other criticism mentioned above Walmart was affected unfavourably because of providing low wages to its employees and this harmed their public image as well as costing them hundreds of millions of dollars as settlements in court dispute cases. This could be highlighted below:-

1. By 2008, Walmart promised to pay at least $352 million for trying to pressure workers to work off a clock. “Several lawyers described the proceedings on wage violations as the largest settlement ever.’37
2. On September 4, 2008, the Mexican Supreme Court ruled that Walmart de Mexico, Walmart’s Mexican affiliate, would stop partly paying employees by redeemable coupons at Walmart outlets only.38
3. In July 2016 several employees in China went on informal strike against the new system of work hours at Walmart outlets in Nanchang, Jiangxi Province, the Chengdu Province of Sichuan and Harbin City in Heilongjiang Province.39 Since Walmart employs part-time and relatively low-paid workers, some workers may be partially eligible in the welfare program.40 This has led to criticism that Walmart has increased the burden on taxpayer-funded services
4. Berkeley claims that the low wages and benefits of Walmart are insufficient for a 2004 study at the University of California and that the social security burden is decreasing, although California taxpayers still pay $86 million a year to Walmart employees.42

Who is responsible for Low Wages in Walmart Inc.?

Previously, Walmart owner Sam Walton said ‘I pay low wages. I will benefit from this. We’re going to succeed, but the foundation is a very low-wage, low-earnings job template.’43 Walmart estimates that the employees were paid $10.11 an hour on average in 2006.

Human Rights Watch estimate that this is less than the mean of 10.24 dollars earned by discount department stores, 10.55 dollars for warehouse clubs and supercentres, and 11.12 dollars for grocery stores.44 Walmart managers are judged in part on the basis of their ability in controlling the cost of wages.45

Walmart insists its wages are generally in line with the current local market in retail labour.

From the above information we can conclude that the one responsible for the low wages in Walmart is entirely the top management, which can be seen from Sam Walton’s statement.

A macroeconomic factor that could contribute to Japan’s uncertainty avoidance stems from the fact that Japan is constantly at risk by natural disasters such as earthquakes, tsunamis, or typhoons. As a result, the Japanese have learned to prepare for this uncertainty. Natural disasters have an adverse affect on Japan’s economy. In the 1980s, “Japan was the world’s second largest economy” (Dutta & Lawson, 2018) and has been growing since World War II. However, challenges continued as the value of the Japanese yen (¥) was rising and price advantages were no longer competitive in foreign countries. This results in decreased exports and slowing down of the Japanese economy. The Japanese government also tried to stimulate the economy; and this led to a boost in asset prices. However, prices of assets dropped due to a subsequent bursting of the asset price ‘bubble’. The Great Recession of 2007 involving the U.S. banking crisis also caused an impact on the Japanese economy. In the next two years, Japan experienced the largest recession since World War II. Later in 2011, a large earthquake with a magnitude of 9.1 triggered a tsunami that devastated the country, leading to another recession in the middle of 2012. Environment uncertainty along with macroeconomic events has shaped Japanese culture and corporate culture into one that is comparable to a collectivist society. These events have major repercussions on the economy; which can force companies to take extreme measures including accounting fraud in order to meet shareholder expectations.

Fraud at Toshiba – The Unethical Company

Over a seven year period, Toshiba’s engagement in fraud inflated its cumulative net income by about 150 billion yen. In contrast with Olympus, this scheme was orchestrated by mid-level managers and senior management instead of top executives like the CEO and president. Toshiba was able to secure long-term contracts worth billions of dollars to build power plants around the world due to its expertise in that area. The revenue recognition method used for these contracts is the percentage-of-completion method. The amount of revenue recorded is dependent on a reasonable estimate the percentage of completion. Under this method, it requires the ability to reliably estimate future costs as well as disclosure of anticipated future losses. Companies like Toshiba that undertake long-term contracts need policies and procedures that enforce periodic assessments to make these estimates. Toshiba failed to report on these losses. “In some cases, the contract losses were evident at the inception of the contract” (Dutta & Lawson, 2018). The division delayed recognition of losses in order to keep revenue figures high. If these losses were recognized, the level of profitability would not be acceptable for the CEO because a “moral certainty of loss or firm loss figure” was needed before recognizing these losses. Price masking was another method of boosting revenue. Toshiba subcontracts its manufacturing to a production shop. When the products are transferred to Toshiba for sale, this is done using an artificial price, hence “masking” the actual transfer price. Toshiba exploited this method when the CEO demanded additional profits of 5 billion yen from its PC division. A similar demand of 12 billion yen was expected from the PC division in 2012 just three days before quarter end. As a result of these transactions, the cumulative profit boosted was estimated to be 65.4 billion yen.

The accounting malpractices that Toshiba exhibited were in violation of the Institute of Management Accountant’s (IMA) standards. Toshiba lacked competency and credibility by not carrying out professional duties in accordance to laws, standards, and regulations. In addition, information was not communicated in a fair and objective manner to investors and shareholders. Instead, the information was used for unethical/illegal purposes due to the lack of positive ethical culture in the workplace, which also violated the IMA standards. The culture of the company truly does start at top management which goes along with tone at the top. The amount of commitment that management and the board of directors have to creating an open, honest, and ethical corporate culture is key. This effect can be exemplified as Japanese corporate culture is hierarchical. Followers will always look towards their leaders or superiors for guidance and if these leaders create a climate such as the one in the Toshiba accounting scandal, followers will follow and adopt bad practices.

Fraud at Olympus – A Similar Case

Due to the rising value of the yen, there was a decline in exports; leading to a decline in income for Olympus. Olympus was also a victim of the asset bubble burst and this caused huge losses on its investment portfolio in these assets. Instead of selling off these investments and reporting the losses, it reported the investments at cost to avoid having to report the losses. Olympus continued to invest in investments disregarding the risk. This strategy failed and by 1995, the amount of unrealized losses had accumulated to tens of billions of yen. Throughout this time, there had been many turnovers of CEOs due to retirement and every single CEO resisted disclosing these investment losses even though these losses were incurred by their predecessors. Initially, failure to report these investment losses were not in violation of the Japanese Generally Accepted Accounting Principles (GAAP), which allowed investments to be valued at cost or fair market value at the company’s discretion. However, a new standard arose in 1997 that disallowed this reporting method of reporting historical costs of investments. Instead, Japanese accounting adopted US. GAAP. With a new challenge in its path, the company came up with an elaborate scheme of setting up shell companies that would buy its toxic investments. The funds required to buy these toxic investments were diverted through intermediary companies based in the Cayman Islands and British Virgin Islands and also through bank loans. Olympus got away with this because it was not required to consolidate its financial statements with the shell company that held its toxic investments. The CEO, president, chairman of the board, head of finance, and executive vice president were all aware of this scheme. This scheme was unraveled ten years later when the shell companies had to repay the bank loans. In addition, there was an overpayment for advisory services related to the acquisition of the British companies that alerted Olympus’ CEO, Michael Woodford, to potential fraud. He was later fired by the board of directors, but six months later, he got promoted to CEO and president of Olympus.

Using the ethical perspective of justice as fairness, the company including the board of directors were acting unethically even when the CEO brought the accounting fraud to light. Michael Woodford, who was the CEO at the time, was fired then rehired as the CEO and president of Olympus. Firing an individual for having professional skepticism and questioning the accounting practices violates the principle of fairness. Leaders need to make fairness the epicentre of their decision-making in terms of how to manage resources, whether it is financial resources or human resources. Practicing procedural justice, where processes and procedures are the same amongst everyone, as well as interactional justice, by treating everyone with dignity and respect, and lastly distributive justice: distributing rights, resources, and outcomes in a fair manner; all three types of justice is needed to foster an ethical corporate climate that may have prevented the accounting fraud to occur.

Olympus’ actions have violated the following: honesty, fairness, objectivity, and responsibility. The company engaged in business and accounting practices that had a sole purpose of deceiving the users of the financial statements. What happened fits the definition of dishonesty: behaving in an untrustworthy or fraudulent way. The corporation created a false impression by failing to disclose correct information. Doing so not only harms the shareholders as well as stakeholders of the company, but the company itself. Being dishonest hurt the company’s reputation and investor confidence. The underlying issue was the corporations loyalty and adherence to the hierarchical corporate climate of the company. Followers are expected to be faithful and loyal to their superiors no matter the situation. This can be related to the shadows that leadership can cast on their followers. The most relevant shadows of leadership cast in the case of Olympus include the shadow of mismanaged information, irresponsibility, and misplaced loyalties. Olympus failed to maintain their integrity by providing trustworthy and correct financial information to its shareholders. It can be said that the company was influenced by self-interest without considering the negative consequences. Top management failed to act responsibly by not accurately describing nor reflecting the true nature of the company’s financial performance. In turn, this has only led to short-term successes instead of the long-term vision that is usually adopted in Japanese corporate culture. In a study, even leaders that we do not classify to be dishonest leaders, are more likely to encourage dishonesty through what they say instead of exercising their coercive or reward power. Since Japanese corporate culture is so reliant upon hierarchical principles, it is easy for anyone in a managerial position to force followers to take a course of action. According to this study, employees are more likely to perform when they receive acknowledgement from their leaders, especially from top management of companies, than using leader incentives. In some cases, employees may prefer non-financial incentives such as recognition, relationships, and respect from superiors over financial compensation.

Sony Corporation – The Ethical Company

In contrast with Toshiba, Sony acknowledges that by being committed to an ethical business conduct, it provides a competitive advantage. Top management in this company is committed in promoting ethical culture throughout the organization and “leads by example” (Ethics and Compliance, 2019). The Group’s Code of Conduct is the foundation for its ethics and compliance program. It sets the standards for ethical and responsible business conduct, ethical values, and policies. In February 2019, Sony was recognized as one of the world’s most ethical companies by Ethisphere Institute. This institute researches and sets standards of ethical business practices worldwide. This award is only given to those who “achieve outstanding results in the areas of transparency, integrity, ethics, and compliance” (Ethics and Compliance, 2019). Sony’s culture stems from the following core ethical values: Fairness, Honesty, Integrity, Respect, and Responsibility. These values have been mentioned earlier in the analysis of Toshiba as well as Olympus. These values were the ones that were violated in the IMA standards, which led to both companies engaging in unethical accounting practices. The Code was created by the Board of Directors and other seniors of Sony and all employees are required to complete the Code of Conduct training within 90 days after hiring. The Group also enforces in-depth training on at least one part of the Code every year to keep employees up-to-date.

In addition to Code, Sony believe in a ‘speak-up/listen-up’ culture; which happens to be part of the Code of Conduct. This means that no matter the position within the organization, employees of the company are encouraged to raise their concerns. A culture and environment is created to make the employees feel confident that they can do so without the fear of being retaliated against. By promoting a healthy ethical corporate culture, many negative consequences of whistleblowing can be eliminated. Sony has many channels and reporting programs for employees to raise their concerns. The most popular method for this is a ‘Hotline’. The Hotline offered is available in 27 languages, available both online and by phone, available 24 hours a day, and 7 days a week. These hotlines are set-up by third-party organizations and are specially trained.

Sony has an Ethics and Compliance Program that also promotes an ethical corporate culture. The program provides mandatory training on ethics and compliance. Some key compliance training in the program includes: anti-bribery, customer due diligence, antitrust and fair competition, import / export trade compliance, and information security and privacy. By having an actual program set up really shows how much effort Sony is putting in to educate its employees on the importance of ethics in the workplace and puts Sony ahead of its competitors in the industry.

Discussion/Analysis/Recommendation

The fraud that perpetuated in Toshiba were a result of ethical failures due to its employees. These failures can be evaluated from the viewpoint of the IMA Statement of Ethical Professional Practice. The IMA Statement requires its members to “contribute to a positive ethical culture in their organizations and to place integrity of the profession above personal and corporate interests, thereby fostering a strong, open, and positive ethical culture in their organizations” (Dutta & Lawson, 2018). The IMA Statement is similar to the Code of Conduct, which organizations usually have in order to set rules that outline norms, responsibilities, and/or proper practices of every individual employee. The IMA Statement has four major ethical principles: honesty, fairness, objectivity, and responsibility as well as four standards: competence, confidentiality, integrity, and credibility. The standards are more relevant in an accounting sense. However, the principles are what drives the ethical culture of an organization. After analyzing Sony, three out of the four principles are presented in its core ethical values. Sony is one of the leaders in the consumer electronics industry that demonstrates undeniable ethical leadership and has been awarded for its commitment to creating a company that has high ethical standards. The single thing that Toshiba can focus on to prevent accounting fraud from reoccurring in the future is the ethical corporate culture of the company. Having a strong ethical corporate culture is essential for any organization’s long-term success. As mentioned earlier, Japanese culture is long-term oriented. People often view their own lives as a short moment in time that contributes to society or a corporates long-term success. It is as if Toshiba had lost its long-term orientation when it focused on short-term, quarterly revenue figures instead of looking at the long-run. Toshiba needs to reinvest in its corporate culture and retrain its employees to focus on long-term goals.

So how can Toshiba improve its ethical corporate climate? Honesty and integrity are the basis of forming human relationships. Without trust, relationships often do not last long if they form at all. From a corporation view point, those who earn the trust of their employees, suppliers, communities, and shareholders are more likely to achieve long-term success. Doing the right thing and being transparent will always create value. What steps can Toshiba take going forward to implement create a corporate culture that is ethical? First, comparable what Sony has implemented, Toshiba should restructure its Code of Conduct that encourages ethical behaviour by making employees feel safe when raising their concerns. For example, a third-party hotline for reporting concerns should be implemented as humans always feel safe by being anonymous. In addition, annual training should be reinforced upon all employees in order to keep them up-to-date with the Code. The training should be in the form of scenarios that present real-life situations and dilemmas and not just a regurgitation of the Code. Story-telling is a powerful tool as it can allow people to exercise their moral imagination. To be able to pretend to be in a situation and think about courses of actions can take can build one’s character and moral identity. By providing these training sessions yearly, it can have an improvement on top management as well as employee’s moral character. Lastly, Toshiba should investigate its internal audit division. The internal audit team should be robust and have the right monitoring tools and procedures in place to ensure compliance with company policies and government regulations. Management needs to ensure that internal audit practices are done fairly and openly.

The main takeaway is that management is the governing body that guides the direction of the company. If a bad example is set at the top of the organization, its effects can trickle down throughout the organization. Corporations should focus on long-term successes instead of short-term/quarterly results to meet shareholder expectations. By focusing on the long-term, it can help avoid unrealistic short-term goals, which can contribute to self-serving, fraudulent acts. And by promoting an ethical corporate culture, employees can keep each other in check as well as management without the fear of retaliation.

Question: 1

The introduction:

Ethical issues:

Ethical issues in business are a situation where a moral conflict arises and must be addressed. In other words, it is an occasion where a moral standard is questioned. Ethical issues occur when a given dec you obtain or create in connection with your activities for ICICI Group, in accordance with the applicable law. Your obligation to protect ICICI Group’s proprietary and confidential information continues even after you leave the Group, and you must return all proprietary information in your possession upon leaving ICICI Group.

• Proprietary and confidential information include any system, information or process (sensitive in nature) that gives ICICI Group an opportunity to obtain an advantage over competitors; nonpublic information about ICICI Group businesses, its customers and its employees, any other nonpublic information received.
• Proprietary and confidential information about ICICI Group, a customer, supplier or distributor, should not be disclosed (even with best of intentions) to anyone (including other employees) not authorized to receive it or has no need to know the information, unless such disclosure is authorized by the customer or is required by law, appropriate legal process or appropriate internal authorities.
• Intellectual property of ICICI Group such as trade secrets, patents, trademarks and copyrights, as well as business, research and new product plans, objectives and strategies, records, databases, salary and benefits data, employee medical information, customer, employee and suppliers lists and any unpublished financial or pricing information are some examples of proprietary and confidential information that need to be protected.
• Unauthorized use or distribution of proprietary information violates the internal policies and could be illegal. Such use or distribution could result in negative consequences for both ICICI Group and the individuals involved, including potential legal and disciplinary actions.
• Acts of ignorance that could lead to leakage of such proprietary information, especially through electronic means – like e-mails, web uploads, removable media (e.g. CD/DVD/pen drive) etc., may lead to investigation and probe against the employees.

The conclusion:

ICICI Group is committed to adoption of fair employment practices. It ensures diversity of workplace through efforts to recruit, develop and retain the most talented people from a diverse candidate pool. It upholds the principle that advancement is based on talent and performance and there is a commitment to equal opportunity. ICICI Group is committed to prohibition of harassment and intimidation of employees in the workplace. ICICI Group discourages conduct that implies granting or withholding favours or opportunities as a basis for decisions affecting an individual, in return for that individual’s compliance. Such action is an easier form of harassment to identify because it takes the form of either a threat or a promise, whether explicit or implied.

ICICI Group has a Sexual Harassment Policy that prohibits unwelcome advances, requests for sexual favours, or other verbal or physical conduct where such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment.

ICICI Group considers safety of employees as the primary concern. ICICI Group is committed to safety of employees and expects its businesses and employees to comply fully with appropriate laws and internal regulations

Question: 2

The introduction:

Common business objective:

Business objectives are the specific and measurable results companies hope to maintain as their organization grows. Entrepreneurs and business leaders must track performance in every part of their business to make sure they’re moving in the right direction.

Business objectives act as a compass for the modern company, dictating how the organization should allocate strengths, weaknesses and opportunities that may be available. Most of the time, objectives remain the same until the company’s circumstances change.

Examples of popular business objectives include:

• Revenue objectives: Maintaining consistent profitability is essential for any business. Companies cannot be profitable without consistent profit. Measuring revenue is a great way to track the sustainability of a firm.
• Operational objectives: Operational objectives include making sure that the logistical elements of your business are up to scratch. For instance, it might mean ensuring your supplies will arrive from a manufacturer at the same time each month. These objectives keep the company running smoothly.
• Productivity and performance: Employees are the lifeblood of a business. Making sure that employees remain productive drives revenue and improves customer satisfaction. Measuring employee satisfaction and setting goals for each team ensures efficiency and productivity.
• Customer satisfaction: The customer is always a top priority in any business. Some organizations regularly survey their clients to ensure that they’re making the right impression and driving loyalty.

Concepts and application:

All internal departments worked together to overcome the allegation and re- launch the same product in a way that it would earn the trust of its key consumers and stakeholders:

In the last three decades Maggi has grown drastically because it did not have any serious competition. Maggi has grown exponentially to become a generic brand, and has single-handedly taken the instant noodles category from being almost non-existent to a Rs. 1,200 crore one, of which it currently has, as per industry estimates, a 70% share, approximately. Initially Maggi only had to face competition from the Japan based Nissin

Group’s ‘Top Ramen’, and the Nepal based CG Foods ‘Wai-Wai’ Noodles. Wai-Wai, till recently, was restricted to the eastern market of West Bengal and Sikkim, where it controlled 70% of the market. Its strategy was to first build-up the distribution network, which it successfully did, the brand was available on the shelves of super stores, as much as in the local Kirana stores.

1. Innovative Promotion Techniques Creative methods of promotion should be employed in order to attract the attention of the public. Promotion should be done at public places, games should be organised, prizes should be given out, road shows should be done, mascots should be used, etc. Doing this will help Maggi to create a new image in the mind of the public.
2. New Packaging As Maggi is coming back into the market, it should come back with a change. It should change the packing design, so that the people also think that it is something different. New design will also lead to creation of brand and will have a positive psychological impact on the public. Public would always want something new or some variation in the product which it is using.
3. Campaign Maggi should use this issue as an opportunity and start a campaign with the title ‘Maggi is Back, Back with a Bang’. This would help them gain the popularity and would help in regaining the lost image among the customers. A campaign for positive publicity is required to counter the negative publicity campaign which has happened in the past. However, the campaign will not be able to show immediate results but would take time.
4. File a Case against the FSSAI Nestle should file a case against Food Safety and Standards Authority of India (FSSAI) as they have wrongly frame and were pulled to the court. They should also claim for damage of their brand name in the market. It is also said that Baba Ramdev is behind the Maggi ban. As he has close links with BJP, he has played the role of a catalyst, so that Maggi could be banned, for some reason or the other, and during this course of action he could introduce his noodles, which is called ‘Atta Noodles’. After it launch, it is also in news for the wrong reasons.
5. Corporate Social Responsibility Brand image is built when the customers and public have a good and positive opinion about the brand and company. Nestle should initiate certain activities relating to social responsibility under the banner of Maggi. This would ultimately help the company to come in contact with the general public and would help in developing a positive image about the brand. The CSR campaign would not should immediate results, but would gradually add value to the brand and company as a whole. However the objective of Corporate Social Responsibility is not to build brand it would be part and parcel of the activity.

The conclusion:

Maggi has become the most relevant, trusted and valuable food brand in India. It has understood the changing lifestyles of generations, provided products that the family enjoys and constantly innovated products that add value. Maggi the hot favourite among all the children in the country, noodles have come a long way since their introduction in 1983. It was considered as snacks in many households and a basic diet in many other homes. As people became busier and busier day by day, packaged and readyto-eat foods also began to gain quite a formidable share in the Indian food industry. It is because of Maggi that instant noodles have become a part of the food habit of Indian homes. Maggi has moved from being a 5 pm snack, to being a part of breakfast, lunch, and dinner, of the average Indian household. But in the recent past, the ban on Maggi has created a negative impact of Nestle and has created waves in the fast food industry. The case study is an effort to explore the various issues, possibilities and opportunities for Maggi.

Question: 3(a)

The introduction:

Whistleblower:

Whistle blowing refers to the act of organisation members, either former or current, disclosing information on illegal and unethical practices within the organisation to parties internal or external to the organisation, who can take action. It is becoming increasingly common as more and more employees speak out about their ethical concerns. It cannot be denied that whistleblowing is accompanied by a range of problems, for both the whistle-blower and the organisation. However, it can be argued that whistleblowing is an important and valid method of endeavouring to control possible unethical behaviour by organisations, as well as helping to establish a level of social responsibility. For these reasons, it is important for society to maintain a level of support and encouragement towards whistle-blowers, so that their often valuable contribution towards eliminating corporate wrongdoings can continue.

Concepts and application:

The ethical reason/s for becoming a whistle blower:

A whistle blower once testified in a California court about how his boss had regularly ordered him to discard some of the company’s toxic waste into a local storm drain rather than dispose of it properly. Why, the judge wanted to know, had the man finally decided to step forward after having participated in this illegal dumping for years. “Well,” the man explained, “I was fishing with my grandson, and it suddenly occurred to me that the waste I was dumping was going to pollute the water so that he might never be able to go fishing with his grandson.”

Whistle blowing has to do with ethics because it represents a person’s understanding, at a deep level, that an action his or her organization is taking is harmful—that it

interferes with people’s rights or is unfair or detracts from the common good. Whistle blowing also calls upon the virtues, especially courage, as standing up for principles can be a punishing experience. Even though laws are supposed to protect whistle blowers from retaliation, people who feel threatened by the revelations can ostracize the whistle blower, marginalizing or even forcing him or her out of public office. On the other hand, there have been occasions when the role of whistle blower has actually catapulted people into higher office and has earned the respect of constituents.

The conclusion:

NO, as an employee if I become a whistle blower, Then I am not being disloyal towards my employer because any potential whistle blower must realise that a well thought-out approach is both essential and practical. Firstly, be positive the situation is one that warrants whistle blowing. Secondly, carefully examine the motives behind the whistleblowing in order to ensure that they are genuine and can serve the public interest. Next, verify and document all information, as this will help to add further credence and strength to disclosures (CJC 1999, p. 13). Fourth, determine to whom the wrongdoing should be reported, and if the internal or external route is best. The allegations should then be stated in a clear, concise and objective manner. Lastly, ensure that all appropriate guidelines have been followed in reporting the wrongdoing.

Question: 3(b)

The introduction:

Business ethics:

Business ethics is the study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities. The law often guides business ethics, but at other times business ethics provide a basic guideline that businesses can choose to follow to gain public approval.

• Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects.
• Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.

Concepts and application:

Reasons to showcase that study and understanding of ethics makes for a better manager, good business and happy society:

A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive employees, consistent consumer demand, and a careful watch over the bottom line. In addition to these well-known business practices, companies that implement a management philosophy that relies heavily on business ethics are proven to be more successful than those that operate in an unethical manner. Although it may not be the first variable considered in analysing the profits of a company, business ethics is an equally important catalyst to the success of a company.

The leadership of an organization holds the key to its long-term success, and remaining consistent with a management philosophy built on a foundation of ethics creates a positive example for all workers. Ethical accounting practices, treatment of employees, interactions with the public, and information disseminated to shareholders are all responsibilities of the leadership team and can have a direct impact on the overall profitability of the company. When these integral aspects of a business are not performed with a resounding theme of business ethics from the top-down, each facet of the business beneath the management team has a greater potential to falter in the short or long-term.

Companies would be nothing without shareholders and investors, and as such, operating with business ethics in mind is most important when interacting with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When confidence is lost, it can be a struggle for a company to regain the trust of the public, its investors, and its shareholders; profitability may take years to build up again.

The conclusion:

Employee happiness can also have an impact on turnover and retention, as unsatisfied workers are more prone to seek out other opportunities, regardless of higher pay or benefits offered by their current employer. Continuous recruitment and training of new employees can reduce the capital a company can otherwise spend on revenue- producing activities, ultimately shrinking its long-term profits. Implementing a sound ethical policy at a company ensures a positive impact on all stakeholders, from investors to employees to consumers. Companies that lay the framework for business ethics in all facets of operations are more likely to become and remain profitable than those that conduct business in an unethical manner.

Question: 1

The introduction:

Ethical issues:

The specific ethical issues that charathe Code.

• You should not offer or give any funds or property as donation to any government agency or its representatives, in order to obtain any favourable performance of official duties.
• While you are expected to put in best of your efforts in every transaction, you will not be penalised by ICICI Group for delayed performance of a transaction solely on the grounds of refusal to pay bribes.
• You should familiarise yourself and comply with the Bank’s Anti-Bribery and Anti- Corruption Policy which is available on the Intranet. You should contact the Compliance Group with any questions on the matter.

Personal Investments:

• To protect the integrity of ICICI Group and its subsidiaries and affiliates, it is essential that you conduct your personal trading as per the framework prescribed for prohibition of insider trading under SEBI (Prohibition of Insider Trading) Regulations, 2015, in an appropriate manner that withstands public scrutiny and does not create even the appearance of impropriety.
• ICICI Group policy and the laws of many countries prohibit trading in securities of any company (listed / proposed to be listed) while in possession of material, non-public information (also known as inside information or UPSI*) of any company. Employees of certain ICICI Group businesses are subject to additional personal trading policy restrictions.
• You should note that using non-public information to trade in securities, or providing a family member, friend or any other person with a “tip”, is illegal. All non public information should be considered inside information and should never be used for personal gain.
• You are required to familiarise yourself and comply with the Code of Conduct laid by the Bank in line with SEBI (Prohibition of Insider Trading) Regulations, 2015 (or such other Code applicable to your Company), as amended from time to time copies of which are available on the Intranet or from the Company Secretary.
• You are required to ensure compliance and conduct your trading in accordance with Code on Insider Trading and the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (UPSI) of the respective company.

The conclusion:

ICICI Group encourages responsible behaviour of its employees and colleagues that result in the best possible accident prevention measures. This applies both to the technical planning of workplaces, equipment, and processes and to safety management and personal behaviour in everyday workplace. The quality of our relationships with our suppliers and other external counterparties often has a direct bearing on the quality of our products, services and ultimately our customer relationships. We therefore expect our suppliers to operate to the same standards as we expect of ourselves. All such relationships with external counter-parties should be conducted in professional and impartial manner. Vendor selection and hiring decisions must be made objectively and in best interest of ICICI Group, based on evaluation of integrity, suitability, price, delivery of goods/ service, quality and other pertinent factors. You should commit to fair contract and payment terms with them in return of good service at a good price supplied in a responsible manner. Employees, officers and Directors are prohibited from taking for themselves business opportunities that arise through the use of corporate property, information or position. No employee, officer or Director may use corporate property, information or position for personal gain, and no employee, officer or Director may compete with ICICI Group. Social media allows users to interact with each other by sharing information, opinions, knowledge and interests. Some examples of social media are sites such as Facebook, YouTube, LinkedIn, Orkut, Twitter etc.

Question: 2

The introduction:

Common business objective:

Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims.

When someone first sets up in business, he/she may have some unstated aims or objectives – for example to survive for the first year. Other businesses may wish to state exactly what they are aiming to do, such as Amazon, the Internet CD and bookseller, who wants to ‘make history and have fun’.

An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe.

Business objectives are the stated, measurable targets of how to achieve business aims. A mission statement sets out the business vision and values that enables employees, managers, customers and even suppliers to understand the underlying basis for the actions of the business.

A business may find that some of their objectives conflict with one and other:

• Growth versus profit: for example, achieving higher sales in the short term (e.g. by cutting prices) will reduce short-term profit.
• Short-term versus long-term: for example, a business may decide to accept lower cash flows in the short-term whilst it invests heavily in new products or plant and equipment.
• Large investors in the Stock Exchange are often accused of looking too much at short-term objectives and company performance rather than investing in a business for the long-term.

Concepts and application:

All internal departments worked together to overcome the allegation and re- launch the same product in a way that it would earn the trust of its key consumers and stakeholders:

After the ban of Maggi, India today television team conducted a sting operation in which they approached FSSAI officials pretending to have a food product with high lead levels in October 2015. One of them agreed to pass the samples without conducting any tests. He told the team that they need a pay an amount of Rs. 20,000 on a yearly basis. He revealed that milk samples from one of India’s best known companies had been dismissed by deliberately adulterating it, because company did not agree to bribe the inspectors. He further revealed that they sometimes have pressure to declare food samples of some established brands as unsafe. He also stated that Maggi is an international brand, there may be a possibility that someone asked for donation and the company denied. He also stated that the laboratories and samples lie under the government, it can do anything. Food and Consumer Affairs Minister Ram Vilas Paswan reacting to the operation said that, “Standard products are being labelled as sub- standard and faulty products are being passed by such corrupt officials. This is a big crime and I demand strongest possible action against all those found guilty and promised to take serious action, although FSSAI is not administer by his ministry.

Commenting on the reports, Union Health Ministry stated that FSSAI has clarified that the officials who have figured in the sting operation are not working in FSSAI but are employees of the UP State Government.

1. Target Online Sales A large percentage of people who use Maggi as a meal are people who are pretty busy and who do not have time to cook. These categories of people are generally found in cities and urban areas. The people who live in cities and urban areas prefer online shopping to a very larger extent. Thus, Maggi should initially focus on publicity of the product online.
2. Increasing the Product Line Maggi should relaunch itself by adding new products to its product line. Adding now products would stimulate the customers to try new products which would also help the company to generate sales. Maggi should basically introduce new flavours into the market under the veg and non-veg category. For example, it can introduce Maggi with Potato flavour under the veg category and Mutton flavour under the non-veg category.
3. Indulging in Positive Publicity For six months, Maggi has been a victim of negative publicity, thus it should do something new would help them grab the attention of the media and then the public. For example, the company can launch an advertisement campaign with some creativity or should come up with an innovative product which should have the capacity to grab the attention of the media. iv. Target Children and Women Children’s should be targeted as would be soft targets. Advertisements should be created mainly focusing and targeting the children. After children, the women would play a significant role in deciding what their family members should eat and what they shouldn’t. Thus, focus should be given on women, showing that it is the women who are making a wise decision by opting for Maggi.

The conclusion:

Today, organizations are operating not only by fulfilling the government regulations, but arc partnering for the sustainability and responding to the increased concerns from the consumers and society about human health impact of the products, operations and resources depletion. The company that moves beyond the self-interest and operate selflessly for the betterment of all sectors it affects can actually secure self-interested achievements in the end. Food products industries have to be even more responsive as intake of bad quality product can cause irremediable harm to the health of the consumer and sometimes become the cause of death too. The Nestle India controversy these days have become an eye opener for many on one hand it shows that we Indians easily believe on what is said and not on what the reality is, it is very easy to be fool innocent consumers and make millions and billions of money. Many literate consumers also do not bother to read the ingredients except the expiry date or price on the pack which is their prime concern and it results because of the blind-folded faith in the brand.

Question: 3(a)

The introduction:

Whistleblower:

Employees who discover apparent wrongdoing within an organisation are faced with several options, each of which comprise of both negative and positive aspects.

Generally, a whistle blower may hesitate to report wrongdoings either internally or externally due to a fear of losing their job or being transferred to an undesirable location, being subjected to harassment and victimisation (Lewis, 1997), having their lifestyle, competence and mental health questioned, and becoming a focus of public attention, resulting in a loss of privacy (Criminal Justice Commission [CJC] 1999, p. 2). As well, they may struggle with a sense of disloyalty, where they inadvertently feel as if they are betraying their fellow colleagues or organisation if they report what they know. Larmer (1992 cited Jones 1996) states that a loyal employee will discern that any unethical behaviour can never be in the best interests of an organisation, and to ignore it with silence is in itself disloyal.

Concepts and application:

The ethical reason/s for becoming a whistle blower:

When a person encounters wrongdoing in the public sphere, his or her first step should probably be to use the organization’s internal whistle blowing mechanisms. William Black, professor of law and economics at University of Missouri-Kansas City, was himself a whistle blower when he worked as a Savings and Loan regulator in the 1980s. During a term as visiting scholar at the Ethics Center, he wrote about his experience:

Whistle blowers in the public sector often face the unique problem that their disclosure may constitute a crime. This can create an ethical dilemma when the ongoing misconduct is severe and there is no reasonable prospect that the abuse will end absent blowing the whistle….I would still recommend trying to get the responsible organs (e.g., your agency’s/department’s congressional oversight committees and/or inspector general) to take action first unless the threat to public safety was imminent.

All government bodies should have fairly straightforward lines of authority. For example, if a councilperson has a problem with city staff, he or she would go to the city manager. If an employee of the water district sees wrongdoing, he or she would start with a supervisor and move up the chain of command, and so forth. It’s always best to start with the mechanisms the organization has set up to deal with problems because these represent the best chance at an amicable solution.

If this process does not produce results, however, it’s not enough to say, “Well, I did my best.” If wrongdoing is not being addressed within the organization, it may be time to move outside—to the district attorney, the grand jury, or to the press.

The conclusion:

No, as an employee if I become a whistle blower, then I am not being disloyal towards my employer because a leaker must determine if the conduct he or she is exposing represents actual wrongdoing or if it is simply represents a policy disagreement.

Question: 3(b)

The introduction:

Business ethics:

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors. These kinds of practices ensure the public receives fair treatment. Business ethics are meant to ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally versus maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Concepts and application:

Reasons to showcase that study and understanding of ethics makes for a better manager, good business and happy society:

Business Ethics and Employee Morale:

It has been proven time and again that employees who are satisfied with the environment in which they work are more productive than workers who are unhappy. Unethical practices in the workplace can cause widespread unrest with employees, leading to a greater sense of dissatisfaction with the work that they are doing and with their employers. However, when business ethics are encouraged by management and company executives lead by example, the ability of employees to focus on the work they need to complete increases exponentially. Productivity increases when fewer distractions are present and morale is high, and this leads to greater profit levels for the company.

Employee happiness can also have an impact on turnover and retention, as unsatisfied workers are more prone to seek out other opportunities, regardless of higher pay or benefits offered by their current employer. Continuous recruitment and training of new employees can reduce the capital a company can otherwise spend on revenue- producing activities, ultimately shrinking its long-term profits.

Business Ethics and Public Image:

Companies would be nothing without shareholders and investors, and as such, operating with business ethics in mind is most important when interacting with these crucial players. It is common for the profitability of publicly traded companies to decline rapidly when they encounter situations where information regarding unethical behaviour is discovered. When confidence is lost, it can be a struggle for a company to regain the trust of the public, its investors, and its shareholders; profitability may take years to build up again.

The conclusion:

All companies rely on consumers for profits and consumers prefer doing business with ethical companies. According to a study conducted by Nielsen, 55% of online shoppers in 60 countries would accept paying more for goods or services from companies that are focused on having a positive impact on society and the environment. Studies also show that more than 50% of consumers cease spending their money with companies that are unethical. This is particularly easy given the number of substitute products available in the global economy. Implementing a sound ethical policy at a company ensures a positive impact on all stakeholders, from investors to employees to consumers.

Business ethics means applying or implementing set of appropriate business policies even if difficult obstacle comes in between for example obstacles like without bridging government laws, refraining from corrupt practices and other illegal practices. Ethics plays an important role in individual judgment and decision which lead to downfall or profit in businesses. When thinking about ethics, it consists of all the ingredient like integrity, honor, fairness, honesty, principles, moral, value, conscience, right and responsibility which made up the principles of ethics. We become moral individuals by practicing good at being truthful by habitually telling the truth and becoming honest by trying always not to be dishonest. It is similar with the business ethics where individual play at organisational level. It is simply another level where business man or woman takes decision on bigger picture. For example, if managers conduct his business with his ego of profit maximisation and sheer believe on dominance then they will take all the decisions accordingly with his temperamental and ego. If, on the other hand, they are aware of moral values and social policies that affect their own societies and the wider world, then they will be likely to make a judgment purely weighing based on cause and effect to their society.

Social responsibility means the obligation a business assumes to have for society. They have to be socially responsible for maximising positive effects and minimising negative effects on society. The economic responsibilities of a business are to produce goods and services that meet the needs and wants of society at a price that can perpetuate the business while also satisfy the needs of the investors. Ethics plays vital role in shaping society we live now, for instance if the country is led by the leaders who are all corrupt then eventually all the employees will follow the lead and imagine how the society will suffer with this consequences of these corrupt individuals. Connecting with the Volkswagen scandal, one of the notorious examples of how corporations can shape the ethical and political issues of the environment. Their deceitful action was not discovered for so long year and just imagine how much it would have done harm to environment, small growing business, competitors and loyal customers who had full trust in the brand. The Volkswagen Group which is headquartered in Wolfsburg, Germany owns many range auto company brand like Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, and Skoda. Volkswagen is one of the gigantic auto manufacturing companies which were widely appreciated and trusted brand up until this scandal was unfolded. When this scandal was unfolded it made headlines not because of the legal and financial repercussions or profit they made different countries, but because of the lasting damage caused on society and the environment which cannot be claimed back by their money or any product.

When conducted a test, they rigged eleven million car carbon emission tests which is estimated to have emitted at least one million tons of carbon each year leading to permanent damage to our environment. Each year different government comes together to talk about the climate change and one of the ways to reduce carbon emission is to go green or electric car by the auto manufacturing industries. Exemplifying particular country, Bhutanese government have promised to maintain sixty percent of their landmass with forest cover and every year they introduce to electric cars and taxis. In 2016 country announced that they are not only carbon neutral but also carbon negative which means they emit lowest carbon compare to any country. While some other country like China and India which are the highest polluted country are promising to reduce fossil fuel consumption and substituting it to renewable power sources, Volkswagen the one of the prominent auto manufacturing company just set aside their principles, laws of ethics and compromising the environmental and climate change challenges in order to maximise profit and become one of the top companies in the world.

Volkswagen previously had a goal of becoming the world’s largest automaker by 2018, but the scandal caused the company to lose one third of the company’s market capital. In an attempt to compensate for the emissions violations, Volkswagen ordered a voluntary recall, issued a public apology, and the CEO along with other directors of the firm resigned. The company is also facing lawsuits and criminal charges and the future of the company looks grim. In order to analyze how such a global company could commit fraud for so long on such a big scale, it is beneficial to view this case as a problem of regulatory capture involving information asymmetry, issues with oversight, and private governance. This analysis attempts to examine the problems of social concern presented by the behavior of Volkswagen in the international economy and provide some recommendations to increase the system of accountability within the global auto industry. The International Council on Clean Transportation suspected that Volkswagen had installed a defeat device because many testing were done but each time result of carbon nitro oxide came different. In the initial test none of the researcher doubt that one of the biggest auto manufacturing company would have taken this step but eventually after carefully examining the default they found programmer writes the code that tells the computer it is on the official test cycle and allows for changes in how the emissions control system. In this case they can manipulate the how much carbon emission the car emits by just installing the devices. They have broken the ethical principle of the any Organisation by doing it, in short they have cheated the whole world, and they have cheated the customers, dealers, and other competing auto manufacturer and so on.

Volkswagen was soon investigated by any other countries suing them. Prosecutors from the United States, South Korea, France, Italy, Canada, Germany, and the UK tried to find out how many people knew of the deceit that occurred within the corporation. One German newspaper even labeled this scandal as the “most expensive act of stupidity in the history of the car industry”. As news of the scandal began to leak, Volkswagen’s stock price immediately began to fall. Volkswagen admitted that 11 million cars worldwide had been fitted with the defeat device. Then on November 2, 2015, it was also found that the same device were used on additional Volkswagen, Audi, and even Porsche models. However, the biggest tragedy of this entire scandal is the release of enormous amounts of nitrogen oxide into the atmosphere. This gases cause smog, acid rain, and the formation of the ground level ozone which are associated with adverse health effects such as inflammation of the airways and respiratory problems including asthma, bronchitis, emphysema, etc. High levels of these harmful gases also cause damage to vegetation including reduced growth. The European Union also published an inventory report in 2011 that stated the majority of nitrogen oxide emissions come from the road transport sector at 40%. It is important to realize that the environmental damage of this scandal will have a far more lasting and immeasurable impact on the ecosystem. Their ambition to become top auto manufacturing companies might have caused huge damage to our ecosystem which may take thousand years to recover.

Aside from public apologies, Volkswagen announced a voluntary recall of all the vehicles, The CEO had to immediately resigned and Volkswagen’s top US executive also stepped down. Head of other brand like Audi, Porsche were also suspended which were also leveled as way of rectifying their mistakes. The Volkswagen head office in Wolfsburg and other offices were raided for investigation purposes. It is impossible to fathom that only a handful of people were involved in the master plan of the manipulation software. Perhaps the company made the wrong decisions and followed a wrong strategy, but this scandal was way too big to be an accident. It was one of the auto industry’s biggest scandals proving dishonesty in conducting a business. Firms have an obligation to be open and honest to owners and managers should be held accountable to stakeholders. However, this was more than just a problem of simple deceit. This case involved more complex theories that deal with the theory of regulatory capture. The main issue here is how manipulation software went undetected for so many years other than Volkswagen should be held as per their actions. If it were not for the existence of non-governmental Organisation, this scandal may have never been uncovered and Volkswagen would have proceeded to emit harmful gases above permitted levels. Environmental groups had previously warned national car approval authorities and the European Commission that diesel cars emitted much less Nitrogen Oxides in official laboratory tests than on the roads. Many also knew that this was due to tricks used by manufacturers, but regulators did not take urgent measures.

These cases have questioned the trust worthiness and importance of ethics of any Organisation. It also proves how easily people are being deceived by the big Organisation in order to maximise their profit and increase their market value setting aside the basic ethical values.

1. Introduction

What are we aware of the ethics of business? Have we ever experienced a difficult ethical issue in which we have to determine what is correct or what is totally off base may be? In modern society and corporate world, business ethics is now a central issue. If we search for the word ethics, we will constantly find five related words: ethics, virtues, morals, values and principles. These words seem interchangeable to the casual observer; indeed, to develop good ethics, each term builds on another. Any business ‘ core goal is to maximize its profit and value. The more revenue a company makes the longer the life of the business would be, and when a business makes earnings in an unethical manner, the life of the business can be shortened. In order to achieve strong ethical morals, both business organizations and individuals should adhere to solid morals. Business needs to balance the ambitions of increasing profits with needs of society. Many corporations have ended in failure because of their terrible business ethics ‘ financial and legal ramifications. Maintaining a healthy balance that often requires compromising profits for society’s needs and demand is essential for businesses.

2. Understanding the Importance of Ethics

Good ethical quality and moral rectitude are essential attributes to show for citizens as does for anybody without any yearning for the government and law enforcement. Naturally we realize that being good and acting upright is a nice thing to do, but then again through considering the objectives behind ethical and moral quality, we must support and encourage such activity. One of the motivations to be good and necessary is to pay little attention to work. Among the reasons to be moral and integral, regardless of occupation are to:

• BUSINESS SUCCESS, if we are hired in a profession where we would have to depend on others, our ethical behavior will determine the level of loyalty we accrue from everyone else. Organizations with a verified bad history are usually seen with alert and are not likely to attract new customers by listening to the conversations of others and will probably not flourish in this way. This is particularly the situation in which internet-based life promptly makes audits available to clients
• REDUCING STRESS, once we settle on cynical actions we might feel insecure and worried about our basic leadership. Significantly stepping on the right choice or taking a principled view of an issue lessens the pressure.
• SECURING A SUBSTENTIAL BUSINESS, businesses sometimes take a gander in the past actions of an individual as an indicator of future actions. In a significant activity someone who has a background marked by unethical behavior will experience problems verifying work as that individual may not be trusted.
• ABSOLUTE EQUALITY, equality is the foundation for most governments of the modern democracy where equivalent privileges are managed by all individuals. This would be absolutely nonsensical without all of the moral efficiency of most people.
• MAKING SOCIETY A BETTER PLACE, by helping to improve society we are remunerated by improving our own lives as well as the lives of our families and our businesses. Society would be a hopeless spot without good leadership and ethics.

We strengthen our live as well as the lives of people surrounding by being ethical. it is notably absolutely essential to pursue an ethical life even if we are pretty young as it is useful to practice and exercise these ideas before gradually dealing with serious issues and problems.

3. Literature Review

Even more than before the demand for a worldwide ethic is increasing. We live in a society that is largely connected leading to more possibilities for communication and confrontation. Investment-centered disparities are the main reason of many nation-to-nation disputes and answers to environmental and economic difficulties almost always involve international cooperation.

3.1 Definition and Theories

Ethics is an aspect of justification that manages the requirements of deep reliability and the well characterized gauges of right and wrong that endorse human character and direct as far as commitments rights rules social advantage decency etc. Ethics involves a discipline that examines good or bad practices within the context of a moral duty. Business ethics include practices and behaviors that are good or bad

3.2 Discussion and Analysis Ethical Challenges Faced by Organizations

It is important to make a distinction between greed and self-interest. The two terms are not synonyms and there is a world of difference between them. Greed may work in the short run, but is very destructive in the long run as the following indicates, bold

Business ethics history is an ongoing story of the employee-employer relationship from the labor conditions of the factory to 20th century’s diversity training focused workplace. As shown in the 2013 National Business Ethics Survey, supervisors are to blame for the work environment offending the dominant part of the time , which is almost 60 percent ,ranking senior managers are almost certain of defying the guidelines than those at a lower level.

BAD LEADERSHIP, It is not the staffs that show immoral behavior in some situations, but the organization’s proprietor or leader. Establishing principles for staffs while not tailing them is a case of a moral issue in the workplace. In order to keep employees motivated and happy with their working environment, a true employer should try to do what he says others should do and maintain their own moral behavior.

Technology and Privacy Concern, The current security technologies for advancement can imply that businesses can use innovation, such as texts, emails and site history, without too much of a stretch monitor for their specialists. In any case, an entrepreneur might well continue to run into the moral issue of how much security an organization staff can anticipate on an organization gadget, regardless of the source of whether it is a PC, tablet or telephone. Similarly Internet-based usage, employees should have a distinctive understanding of how much they have, assuming any, and security when using a claimed gadget organization. If the organization initiative intends to peruse email or if its web use will be followed, they should be cautioned.

Perils of Employee Favoritism, while it is not preposterous for an organization’s owner to have representatives that they appreciate working with more than others, moral issues will arise if the individual in an organization place shows a worker with no moral legitimacy behind it to be generally opposed. Giving employees up to playing personal favorites can cause major problems and organizations might end up losing important employees.

Cooking the books (Accounting), conducting unethical accounting practices is a serious problem, especially in publicly traded companies. One of the worst infamous brands was the embarrassment of 2001 that wrapped American vitality organization Enron, which for a long time mistakenly announced its fiscal reports and its inspector, bookkeeping firm Arthur Andersen, approved the announcements despite being inaccurate. When reality devised, the two organizations left business, Enron’s investors lost $25 billion, and despite the fact that the previous ‘Enormous Five’ bookkeeping firm had a bit of its staffs working with Enron, the company’s conclusion resulted in a loss of some 85,000 positions.

Health and Safety, ILO (The International Labor Organization) claims that more than 2 3 million people die worldwide each year from employment-related accidents or sicknesses. That makes 6300 deaths every day. The top 10 most frequently cited violations of 2015 are, according to the Occupational Safety & Health Administration,

1. Communication of hazards, for example, categorization of harmful chemicals
2. Lockout / Tag out, for example, trying to manage unsafe energy like oil and natural gas.
3. Powered industrial vehicles, such as fire truck safety regulations.
4. Ladders, e.g. standards for how much weight a ladder can sustain.
5. Electrical, cabling techniques, i.e. electromagnetic interference reduction methods.
6. Machine guarding; for example, to clarify those chainsaw blades, saws, power presses and other equipment require monitoring point of procedure.
7. Fall Protection, for example, unsecured sides and edges and leading corners.
8. Respiratory safety, such as safety procedures and standards for respiratory / filter facilities.
9. Electrical, particular requirements; i.e. do not place drivers or equipment in humid as well as humid places.
10. Scaffolding e.g. required strength and the maximum amount of weights.

Though, physical hardship is not the main security problem to be considered about. An ILO report specialized on the negative impact of ‘psychological health consequences’ on the well-being of workers in 2016. These potential risks, these include components such as occupational weakness, popularity levels, gender imbalance in compensation and poor self-sufficiency, are influenced by social safety risks connected to well-being, including an inactive one.

3.3 Improving Personal and Organizational Effectiveness (Contribution of ethical measures)

If we want to run a sustainable business, then it is absolutely necessary to have a set of high ethics. Even though each man and his puppy seem to own a few Nike these days, the Nike image was interchangeable with sweatshops and misleading manufacturing in the relatively recent past. But does this brand value the care of individuals, society and animals today? In 1991, a famous activist named Jeff Ballinger distributed a report listing small pay rates and unsafe working conditions at Indonesian manufacturing facilities of Nike. The brand became the subject of a strong and backed up battle between United Students and Factories. Nike was at first moderate to react – yet under expanding weight it in the end rolled out certain improvements by improving its checking endeavors, rising the base period of laborers, and expanding industrial facility reviews. Since then, the brand has earned far and wide acclaim for its efforts. Just last year, Business of Fashion reported that Nike has extensively turned its damaged reputation into a ‘recognized leader in sustainability,’ with Morgan Stanley ranking Nike ‘the most environmentally and socially sustainable apparel and Footwear Company in North America, including its labor record.’

Good ethics might be critical to establish, but if bad ethical decisions are taken, severe consequences will arise. Whether we honestly think that good business ethics leads to profits or not, poor ethics will have a significant effect on in our own ultimate outcome. Misinformation, misguide and bad decisions without standards that can lead to economic loss or accident to other individuals or business. Several criminal cases are brought up since people require reimbursement for their casualties as a result of unethical decisions being made by business people.

3.4 Ethical Business Practice

Business ethics are the standards of behavior for making business determinations identifying what’s good or bad and drawing up frameworks that a business must engage in. Since acquiring faith and confidence from its customers is very essential for an organization, business ethics plays a significant role in establishing values for its clients. Here are some examples of business ethics:

Examples of Business Ethics:

Enforcing Policies: Ethical values may not always be enhanced and laws and regulations will naturally be compromised. It is essential that inappropriate actions is not accepted and there are has to be legal ramifications for it. Pushing liable employees should prevent any unwelcome practices from being reinforced and tuck them before they get out of grasp.

CSR: Corporate Social Responsibility focuses through the very concept as industry uses the society’s capital; it requires restoring some benefit to society. Businesses can do that by investing in education, developing transportation infrastructure, contributing money to civilized charitable organizations, and so on. Thus an organization creates a better relationship outside the business with the society.

Developing ethical standards: An essential task is to simplify standards and clarify what behaviors in the organization are and isn’t appropriate. Build a code of ethics that describes good business behavior and must make all employees conscious of everything.

Appreciating Positive Attitude: the search for great practices is extremely valuable to laud officials. Compensation for the staff portion could be straightforward affirmation. This should be a positive motivating force that can be a long term business advantage.

Set examples: it is significant that pioneers demonstration ethically and fill in as models for the remainder of the representatives. Whenever pioneers and directors try to do they say others should do and maintain an exclusive expectation of morals it will normally acclimatize into the way of life of the association.

3.5 Ethical Business example

It is quite simple to paint the corporate world in a negative light between the relentless challenge and the flawed movements made to expand net income. Nevertheless there are many organizations out there that hold on to a higher standard and show consideration for their general environment. This rundown praises organizations with excellent good practices from having the best representative advantages to advocating instruction and earth.

Cadbury: Cadbury’s ethical standard is not something new. John Cadbury founded the company in 1824. He was a Good Samaritan who decided to sell cocoa and tea to extricate people from alcohol the organization moved to Bonneville in 1879 a country site next to Birmingham to be in a more advantageous cleaner area. The organization paid high wages set up great working conditions spearheaded annuity plans and a well-being administration for it employees. the organization stays at the bleeding edge of corporate and social responsibility even after two centuries later.

TATA: Tata is one of the largest Indian corporations established in Mumbai. In 1868 the company was founded by Jamsetji Tata, in the wake of obtaining a few worldwide organizations, the organization increased global acknowledgment. Tata Steel has been perceived as a standout among the most ethical organizations in the world. It’s often recognized because of its commercial action transparency. It offers its workers with so many welfare benefits. The company’s CSR practices are quite well acknowledged.

H&M: H&M one of the biggest apparel manufacturers in the world is extremely devoted to its clarity in the manufacturing process. Once every three months they distribute and update a rundown of 98.5% of the names and addresses of their providers on their website. This guarantees they can be considered freely responsible for their providers ‘ conduct, and that anybody can confirm that their providers satisfy the organization’s guidelines. Other than sharing data on the inventory network, H&M additionally has a dependable sourcing target of utilizing just 100% recycled or supportable materials by 2030. This will allow H&M to become true a pioneer, an innovator in apparel retail ethics.

4. Conclusion

After quite a brief discussion on the need and difficulties of ethics in businesses, the vast majority are familiar with hearing or seeing the moral benefits of profound corporate quality. Since we comprehend the business morals thought solid moral ethical quality is essential to work out. To show others how it’s done to instruct by guide to be a good example these are on the whole conceivable results in the event that we practice moral conduct and act dependably and take moral choices for our business. Ethics begins at the highest level that implies that anyone in charge should work and live ethically to give more people who work for them a prime example. It is important to develop ethical behavior throughout the corporate world to build confidence and to provide a sincere products or services.

5. Recommendations

People neglect business ethics and corporate social responsibility in order to make money, and ultimately lead to the serious consequences. Thus, connecting utmost importance to ethical social responsibility is of great significance for the business, but since when paying attention to making money in any way. While dissecting moral arrangements it is important to consider the expenses and advantages related with working together morally however it is vital to take a gander at long term impacts versus short term costs.

Abstract

As of not long ago, in business practice, there was a conviction that organizations were working exclusively for the profit of their proprietors. Hardly any organizations have perceived the need to join their exercises with ethics, and specifically with their commitments toward society or the earth. Be that as it may, the view of ethical issues has changed fundamentally in business throughout the most recent 20 years. If an organization needs to be seen as a solid business accomplice and a regarded individual from the business area, it ought to show a significant level of regulation of business ethics standards and practices, and it must work on outstanding ethical conduct. This is particularly valid in some dubious businesses.

Introduction

Up to this point, in business practice, there was a conviction that organizations were working exclusively for the profit of their proprietors. Barely any organizations have perceived the need to consolidate their exercises with ethics, specifically with their commitments toward society or the earth (Majerova, Krizanova, and Nadanyiova, 2015). It is additionally a motivation behind why the embodiment of social obligation and the contention among genuine and reproduced charitableness has been fiercely talked about.

After some time, be that as it may, the perspectives on the job of organizations in financial reality, got from traditional financial aspects, have become progressively less important to the current financial reality. Moreover, there have been various changes in the circle of current business tasks. Globalization, joined by quick mechanical changes, has offered to ascend to a new business condition. Under these new conditions, the improvement of a cutting-edge organization is resolved not just by the successful utilization of assets and applying suitable systems but also by considering the idea of Corporate Social Responsibility and business ethics in the executives’ forms. For instance, Bhattacharya, Sen, and Korschub (2011) demonstrate a quick changing methodology of organizations to Corporate Social Responsibility:

• the idea of Corporate Social Responsibility is progressively seen as a business opportunity, not as a commitment,
• organizations are starting to see the job of other partners, for example, financial specialists, controllers, representatives, non-profits,
• the idea of Corporate Social Responsibility is being treated as a vital, long-haul approach, not as a solitary shot, as an erratic activity for the time being.

Literature Review

Business ethics (otherwise called corporate ethics) is a type of applied ethics or professional ethics that looks at the ethical standards and good or ethical issues that emerge in a business domain. It applies to all parts of business lead and is significant to the direction of people and whole organizations. Ethical conduct and Corporate Social Responsibility can carry noteworthy advantages to a business. For instance, they may (Lorinczy and Sroka, 2015):

• pull in clients to the organization’s items, thereby boosting deals and profits;
• guarantee that representatives need to remain with the business, lessening work turnover and therefore expanding efficiency;
• pull in more representatives needing to work for the business, therefore empowering the organization to contract the most gifted representatives;
• draw in speculators and stay with the offer value high, thereby shielding the business from takeover.

Conversely, unethical conduct or an absence of corporate social obligation may harm an organization’s notoriety and make it less speaking to investors, prompting a fall in profits. The term ‘ethic’ originates from Greek (ethics – standard; ethics – custom). It tends to be characterized as a theory of profound quality, which endeavors to systematize moral decisions (Paswan, 2015), or moral standards utilized in dynamic (Salehi, Saeidina, and Aghaei, 2012). In the presence of the mind of the word, ethics implies the principles that decide if conduct is correct or wrong. Ethics in business has a long history (Fischer and Lovell, 2009).

A progression of defilement scandals related to organizations, for example, Enron or WorldCom has changed the open view of numerous elements. Because of the scandals and misuses uncovered, certain desires identifying with incorporating this theory emerged. Therefore, in the twenty-first century, the business has changed: from the absence of responsibility toward the start to significant levels of ethical obligation these days. It would thus be able to be expressed that business ethics is a logical order in managing the ethical setting of the board and administration.

Discussion

Ethics—the qualities an organization exhibits in its objectives, arrangements, and practices—are the core of any work environment culture. The nature of involvement with an organization relies upon the nature of its way of life. Whether we are workers, clients, or customers, a positive culture animates and improves our experience of a firm—and a negative culture lessens it. We ought not to be astonished by the connection between ethical working environment culture and profit. Specialists have discovered that an organization’s way of life is the most grounded indicator of how much market esteem a firm will make for each dollar contributed by investors. Somewhere in the range of 1993 and 1998, securities exchange returns of the traded on open market firms with the most grounded societies beat the financial exchange by a normal of 20 percent (Fischer and Lovell, 2009). The proof shows that a positive working environment culture predicts investor esteem by empowering predominant worth creation. The ethics of a firm’s way of life assumes a critical job in making and continuing worth.

Ethics starts with the objectives we look to satisfy. We get our objectives from our qualities. In a working environment, our qualities can be separated into organizational, professional, and individual. The more perplexing our objectives, the more mind-boggling our qualities. A decent part of working environment ethics concerns articulating and imparting our qualities, then refining them to assess activities, arrangements, individuals, and occasions. Discussion and conversation cultivate ethical learning. Practically all ethical learning happens when individuals talk about and banter about their qualities. We learn ethics by tuning in to others as they respond to our thoughts. On the off chance that we don’t well-spoken our qualities, then nobody can react to us, and no ethical learning will happen (Salehi, Saeidina, and Aghaei, 2012). In other words, the ‘ethical muteness’ of numerous supervisors and representatives forestalls ethical learning. Ethics help us make ‘right versus right’ decisions. At the point when commendable objectives strife and we can’t pick between two objectives, our ethics direct dynamic. For instance, we may feel conflicted between applying rules fair-mindedly and demonstrating benevolence to an individual or gathering. In examining such a ‘right versus right’ decision, we might be enticed to legitimize our own decisions as ethical and judge other decisions as unethical. An ‘I’m ethical, and you’re not’ way to deal with a difficulty isn’t just pretentious; it additionally chillingly affects discussion and squares ethical learning. We are ideally serviced by encircling answers as ‘increasingly satisfactory’ and ‘less sufficient,’ rather than as ‘ethical’ and ‘unethical.’ A progressively sufficient ethical decision will (Hatcher, & Aragon, 2000):

• Consider what is in question or hazard for a greater amount of the gatherings influenced by the choice.
• Prioritize moral interests over interests in laws, jobs, contracts, or existing social practices. Albeit such things can be a piece of our decisions, advances to moral criteria fall more by ethics.
• Appeal to standards that are shared by others, paying little mind to age, culture, or individual inclination, not thin partisan standards or quirky convictions.
• Be unprejudiced, declining to support some to the detriment of others.

All working environment societies are not made equivalent. Some are more ethical than others. The initial step to improving society is to evaluate its present state. Ethical societies are estimated by seeing three elements: ethical substance, how well ethics are incorporated into the organization’s ordinary activities, and how well every individual sticks to ethical practices. Ethical substance Ethical working environment societies organize self-amazing quality qualities, for example, care, sympathy, genuineness, and the obligation to maintain the privileges of all things considered and nature. These others concerning esteems trump self-improving qualities, for example, riches, influence, delight, and acclaim. Truth be told, as opposed to mainstream thinking, individuals the world over organize self-rising above, ethical qualities over self-upgrading values. In business, magnanimity converts into organizing worry for representatives’ privileges, reasonable methodology, and equity in pay and advancement, just as showings of resilience, sympathy, unwaveringness, and genuineness in the treatment of clients, customers, and workers (Carroll, 1978). These qualities, whenever developed and energized, are the bedrock on which to manufacture ethical organizational activities. Ethical activities When we state that one organizational culture is ‘increasingly ethical’ than another, we allude to how satisfactorily the organization’s qualities, frameworks, and approaches address the intricate real factors of its regular tasks. Ethically satisfactory working environment culture will use such basic devices as onboarding, execution and advancement strategies, job displaying, interchanges, and worker input to incorporate ethics with its activities.

Consistency alludes to the standards, values, and ethical desires set by the organization and its administration rehearses. Consistency is the establishment on which each ethical working environment culture stands. The organization’s standards, qualities, and desires must be imparted in solid terms that all representatives can understand and that relate straightforwardly to their everyday work exercises. On the off chance that representatives can’t perceive how the firm’s qualities shield its strategic upgrade their commitment to that crucial, will see consistency as a bothersome extra, rather than as a feature of each workday.

Conclusion

In recent years, the view of ethical issues in Europe has changed considerably. At first, they were dealt with additional in philosophical terms, and to a limited degree alluded to the business. At present, ethical research is fundamentally centered around business issues, and thousands of individuals are engaged with research and preparing on business ethics. Our exploration directed at three disputable parts of the economy, i.e., pharmaceutical, tobacco, and liquor, confirmed the developing significance of Corporate Social Responsibility and business ethics in contemporary business. The inventiveness of the paper is the consequence of the introduction of interesting subjective research identified with business ethics in delicate segments of the economy in two Central European nations. The nations have been picked because of huge contrasts between them as Poland’s economy is right around multiple times bigger, while Hungary has a significantly more open economy. Areas, for example, pharma, tobacco, and liquor are often blamed for manufacturing faulty items or applying industrywide acts of neglect; therefore, watching their ethical standards and practices unquestionably gives huge new bits of knowledge right now. Such research is generally uncommon (because of the delicate idea of the segments investigated) in these two nations as well as on a global scale.

References

1. Bhattacharya, C.B., Sen, S., & Korschun, D. (2011). Leveraging corporate responsibility. The stakeholder route to maximizing business and social value. Cambridge: Cambridge University Press.
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Corporations institute compliance and ethics programs (C&E) with the purpose of following the law and promoting ethical conduct on a daily basis. Traditionally, public law and order officials were authorized to keep a watch and prosecute civil and criminal infractions by business entities and their owners. Over time, businesses found it more beneficial to comply with public pressure for self-policing. “Outrage over ethical and financial misconduct by the senior management of public companies led to the passage of historic legislation redefining the roles and responsibilities of corporations and those who serve them.” (FindLaw, 2019).

A large number of corporate cases of bribing foreign officials for business and contracts, particularly government contracts, led to the coming of the Foreign Corrupt Practices Act (FCPA) in 1977. The investigations of offenders were carried out by the Securities and Exchange Commission (SEC). Enforcement is the joint responsibility of SEC and the Department of Justice (DOJ). (SEC, 2017). Enforcement agencies were formed to give teeth to the law. Such agencies were Environmental Protection Agency (EPA) and the Drug Enforcement Agency (DEA).

With the corruption and illegalities exposed in defense procurement in 1980s companies were in the negative radar of public resentment. Karpoff et. al. (1999) reported, “… from 1983 through 1989, 17 top defense contractors were convicted of fraud, whereas none was from 1946 through 1982 … From 1983 to 1995, these 98 companies were incriminated in press announcements for 249 separate cases of (alleged) procurement fraud … The most announcements in a single year occurred in 1988… Intentional frauds include mischarging, bribing, falsifying test results, and submitting false claims or invoices.” Managers were aware of the fraudulent activities. The contractors were penalized about the same, proportionally irrespective of size.

In response, companies started to create managerial positions for in-house policing. They are known as compliance and ethics officers. The purpose was to preempt further federal regulation by voluntary corporate responsibility. In 1991, the US Sentencing Commission released the first guidelines for organizations. It defined the specific requirements for an effective compliance and ethics program. Currently, there are stiffer federal sentencing guidelines for frauds committed with managers’ intent (Karpoff et. al., 1999). Leniency was proposed for successfully compliant companies.

Successfully compliant companies are considered favorably by prosecutors for pretrial agreements and deferred prosecution agreements in corporate criminal investigations. Executives of unsuccessful or noncompliant organizations can be imprisoned. Companies are increasingly integrating C&E programs into risk management and general counsel oversight.

The revelation of Enron’s unethical practices from 2001 was another major historical point for reforms. (FBI, n.d.). The directors of Enron had precisely waived the provisions of the code of ethics before their horrendous collapse. The chief financial officer was allowed to benefit from transactions involving Enron. Such blatant unethical behavior led to reforms incorporated in

Section 406 of the Sarbarnes-Oxley Act. The Act addressed the unethical practices at Enron, WorldCom, and Arthur Anderson. FindLaw (2019) reported, “Section 406 requires public companies to disclose whether they have codes of ethics and also to disclose any waivers of those codes for certain members of senior management. The Commission adopted specific rules implementing these requirements in January 2003.” FindLaw (2019) further reported that in 2003, “the Commission approved significant reforms by the NYSE and Nasdaq that, among other things, specifically require companies listed on these markets to have codes of ethics applicable to all employees, senior management, and directors.”

The US Sentencing Guidelines provides direction for an effective C&E program. It includes due diligence, organizational culture and effective program for preventing and detecting criminal activities, and knowledge of, leadership by, and responsibility for the program on the part of organizational leadership. Barring suspected and proven former offenders, periodic evaluation, reporting systems, appropriate response to criminal conduct, and program modifications for prevention of further repetition of such conduct are part of the guidelines. All employees and agents require training. There are also industry specific guidelines and requirements. One such industry is banking.

Congress and the Securities Exchange Commission (SEC) “asked public companies to disclose the fundamental values by which they operate, and by which the conduct of executives may be measured. Senior management and directors are challenged to examine the ‘tone at the top’ of their organizations, and to emphasize ethics and integrity in business decisions.” (FindLaw, 2019).

While progress has been made, much remains to be done. The 2013 National Business Ethics Survey reported that misconduct was significantly down as a result of organizational C&E programs. At the same time the nature of misdeeds, especially among management, is shocking. Reporting has gone down, and at the same time, retaliation is high. (Ethisphere, 2014).

C&E programs have mushroomed in organizations. The motivation appears to be the avoidance of stiffer punishment, including fines and penalties. Simultaneously, corporate scandals have mushroomed too. It is not surprising to deduce that corporations are too busy to stay within the law to avoid repercussions than to fine-tune corporate ethical culture.

The purpose of C&E programs is both law abidance and ethical conduct. For effectiveness, procedures, communications, and culture are essential. (Ethical Systems.org, 2018). A researcher at the University of Michigan, David Hess proposed two additions to the federal corporate sentencing guidelines: “Monitor the organization’s informal system of communication, surveillance and sanctions, and promote an informal system that supports the goals of the compliance and ethics program. Periodically assess organizational members’ perception of the organization’s ethical climate.” Hess emphasized that focusing on what can be measured is the easy part. Measuring culture on the other hand is not easy. Therefore, with time, compliance and ethics drifted apart, whereas they should have worked together. The end goal should be to do the right thing. (Vice President for Communications, 2016).

Edwords (2015) added, “Law, however, is not necessarily the same as morality; there are many moral rules that are not regulated by human legal authorities … Laws and rules are generally designed to regulate activities that can be publicly observed. This makes enforcement easy. But breaches … often involve acts that are not illegal but simply unethical and can include acts that are private and difficult to observe without invading that privacy. Enforcement, therefore, is almost totally left to the perpetrator. Others may work on the perpetrator’s emotions to encourage guilt or shame, but they have no actual control over the perpetrator’s conduct.”

Corporations are smart enough to know the difference between compliance and ethics. Compliance basically means to follow the law, rules, and policies so you do not get into trouble. Compliance is easier to achieve and easier to deliver. It can be very objective. As long as you have mechanically and accurately fulfilled the checklist, you have complied with the standard requirements. Ethics on the other hand, demands more.

While ethics at its minimum is compliance with the law, that is not by itself sufficient. Ethics demands that you have complied and complied in the right way. Fulfilling the requirements for the right way is where the challenge lies. Therefore, it is more convenient to have multiple and repeated measures for compliance than it is to have measures of ethics. It is not surprising therefore, that efforts at compliance “crowd out” corporate ethics in several C&E programs.

“Deterrence theory in its classical form holds that crime is deterred by the threat of punishment,” wrote Andersen et.al. (1983). They added that people make criminal choices rationally, based on the payoff probability. A moral hazard is doing something risky and leaving the damages on others that follow. The person or group that committed the action do not face the consequences of their actions. This leads to willful questionable behavior since there are no consequences on the wrongdoer, added Pritchard (2019). Deterrence theory and model provides the vital stimulus for C&E programs.

A good example from the world of business is the subprime crisis that came to light in 2007. Banking lenders gave housing loans to people who could not afford to make the payments. They were done with the principle that they, the banking lenders, would not be responsible for the aftereffects. Several banking lenders skipped due diligence with documentation, fabricated income figures, and approved loans on those bases. Once they sold/originated the loans, the banking lenders sold the loans to investment banks. When the borrowers failed to pay back, the investment banks, not the original banking lenders, paid the price, recounted Fiorillo (2018).

There was a public uproar, and the lawmakers swung into action. Some of them were themselves parties to the act. Fearing bank failures and the collapse of the US economy, and since the US government considered these banks to be “too big to fail,” the US government bailed them out. The bailout of course was with taxpayers’ money. “Lenders and investment banks took risks that had consequences for taxpayers and others,” said Pritchard (2019). Therefore, the banking lenders took unethical and even criminal action and taxpayers were the ones punished. That is blatant involvement in moral hazard.

Collins (2015) stated, “The operating principles of the big banks is a cesspool of greed, ethics and criminal intent and they give a very bad name to free market capitalism. The industry is not afraid to do it again because they know no one goes to jail and the government will bail them out.” About the global repercussions that followed, Noonan et. al. (2018) added, “The US, ground zero for the financial crisis, has jailed just one banker for issues relating to the crisis. Former Credit Suisse trader Kareem Serageldin was sentenced to thirty months in prison for artificially inflating the price of subprime mortgages, a financial product at the very heart of Wall Street’s unravelling.”

In conclusion, I strongly believe that the deterrence model by itself is inadequate to handle all ethical challenges. It is a good and strong start but not the end-of-all solution to ethical depravity. While it does provide for punishing somebody to establish accountability, in cases of moral hazard there is high likelihood that the original offenders go free and some poor unfortunate soul, who is left holding the bag, is punished. Ethically, that is fundamentally wrong. While the intent of Deterrent Theory was for establishing C&E Programs in corporations, it needs a lot more work. It needs to expand to control for moral hazard. The Theory is invaluable but it is still flawed. It is a work in progress.

A review of various cases of US C&E programs and related cases showed that both high-ranking and “the little people” are mostly equally treated. There is evidence to support that. The trend seemed to have been in place since the 1980s. There are exceptions too, but prosecution efforts are on. As Karpoff et. al., (1999) had pointed out, there are stiffer federal sentencing guidelines for frauds committed with managers’ intent. Intentional frauds include compliance and ethics. They found defense contractors who were found to have committed fraud in the 1980s were penalized irrespective of size.

In the Enron case revealed from 2001, several top executives and others were fined and sentenced to prison terms. This included high-ranking corporate officials and “the little people”. Section 406 of the Sarbarnes-Oxley Act addressed the unethical practices of top-management. “Section 406 requires public companies to disclose whether they have codes of ethics and also to disclose any waivers of those codes for certain members of senior management. The SEC adopted specific rules implementing these requirements in January 2003.” (FindLaw, 2019). FindLaw (2019) further reported that in 2003, “the Commission approved significant reforms by the NYSE and Nasdaq that, among other things, specifically require companies listed on these markets to have codes of ethics applicable to all employees, senior management, and directors.” This addressed all “high-ranking corporate officials” and “the little people”.

There are arguments or outcries that justice is not served equally. Collins (2015) complained that nobody is affected by the C&E program requirements among the high-ranking corporate officials because “they know no one goes to jail and the government will bail them out.” Noonan et. al. (2018) suggested that only “the little people” get punished. He said, ““The US, ground zero for the financial crisis, has jailed just one banker for issues relating to the crisis. Former Credit Suisse trader Kareem Serageldin was sentenced to thirty months in prison for artificially inflating the price of subprime mortgages, a financial product at the very heart of Wall Street’s unravelling.”

Pursuant to the Subprime crisis and the Troubled Assets Relief Program (TARP) Bailout. “There have been 35 bankers sentenced to prison, according to Christy Goldsmith Romero, the special inspector general for the Troubled Assets Relief Program (SIGTARP), in a report to Congress …” reported Isidore (2016). She reported further that Romero said, ‘I certainly understand the frustration of the people who want to see accountability for those who brought on the financial crisis. Some of these institutions where we are finding criminal conduct, the level of accountability stops at a lower level and doesn’t rise up.’ Romero’s “office is continuing to investigate hundreds of cases at institution of all sizes.” Isidore (2016) added, 59 bankers were convicted, 19 more bankers have been charged with crimes, and several are awaiting trials.

On April 23, 2019, the first ever felony charges were filed against Rochester Drug Co-Operative (RDC), Laurence F. Doud III, the company’s former chief executive officer, and William Pietruszewski, the company’s former chief compliance officer, for violating federal narcotics laws. The Manhattan U.S. Attorney and N.Y. Division of the Drug Enforcement filed the charges. “RDC entered into a Stipulation and Settlement Agreement (the “Agreement”) and consent decree under which RDC provided an extensive Statement of Facts admitting to its conduct, agreed to a $20 million penalty, reform and enhance its Controlled Substances Act compliance program, and submit to supervision by an independent monitor,” reported Sullivan (2019).

Pietruszewski “pled guilty to numerous charges, one of which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years. A criminal case will proceed against Doud, who also faces two charges, one of which also carries a maximum life sentence in prison and a mandatory minimum sentence of 10 years. The government also brought a civil lawsuit against RDC for its knowing failure to comply with its legal obligation to report thousands of suspicious orders of controlled substances to the Drug Enforcement Agency (“DEA”).” (Sullivan, 2019).

Looking at both sides of the issue, the progress made, and the concerns about both the high-ranking corporate officials and “the little people”, I believe that C&E programs can be more intimidating for the latter. The 2013 National Business Ethics Survey reported that the nature of misdeeds, especially among management, is shocking. Reporting of violations has gone down, and at the same time, retaliation against “the little people” is high. (Ethisphere, 2014).

The attributes of an effective C&E program include all nine of the following. They are found in the U.S. Department of Justice’s 2017 document titled “Evaluation of Corporate Compliance Programs.”. The attributes are, 1. Oversight by Senior and Middle Management, 2. Autonomy and Resources Available for Compliance, 3. Assessment of Policies and Procedures, 4. Risk Assessment, 5. Training and Two-Way Communications, 6.Confidentiality and Reporting Hierarchy, 6. Fair and Consistent Disciplinary Actions and Incentives, 7. Continuous Improvement, Periodic Testing, and Review of Data and Reporting to Management and Board, and, 8. Third-Party Management – Monitoring and Incentives for Compliant and Ethical Behavior. (Chen and Soltes, 2018).

Paine (1994) proposed an integrity-based approach to ethics management. The integrity-based approach combines both the compliance requirements of law and the managerial responsibility for upholding ethics. The intent of the integrity approach is to “strive to define companies’ guiding values, aspirations, and patterns of thought and conduct. When integrated into the day-to-day operations of an organization, such strategies can help prevent damaging ethical lapses while tapping into powerful human impulses for moral thought and action. Then an ethical framework becomes no longer a burdensome constraint within which companies must operate, but the governing ethos of an organization,” Paine (1994) wrote.

Legal compliance is inadequate for addressing all everyday ethical issues. Just being legal is not necessarily ethical. For example, in the Salomon Brothers case from 1991, company lawyers found no law that dictated that the four top-level executives had to disclose the wrongdoings. Their ethical shortcomings adversely affected stakeholders. The loss to Salomon Brothers was nearly $1 billion. (Paine, 1994).

The attributes of the integrity-based approach are similar to a compliance-based initiative in several ways. It has the code of conduct, training, mechanisms for reporting and investigation, and, audits and controls. Paine (1994) argued, “A strategy based on integrity holds organizations to a more robust standard. While compliance is rooted in avoiding legal sanctions, organizational integrity is based on the concept of self-governance in accordance with a set of guiding principles. From the perspective of integrity, the task of ethics management is to define and give life to an organization’s guiding values, to create an environment that supports ethically sound behavior, and to instill a sense of shared accountability among employees. The need to obey the law is viewed as a positive aspect of organizational life, rather than an unwelcome constraint imposed by external authorities.”

There are fundamental differences too between integrity strategy and compliance strategy. Compliance aims at conformity with laws and preventing crime. Integrity aims at self-governance, responsibility, abiding with laws, company values, and social obligations. The activities in compliance and integrity differ in that integrity includes development of company values and standards from the top, integration into company systems, guidance and consultation, assessment of values performance, and, identification and resolution of problems. (Paine, 1994).

Navran (1997) recommended 12 best-practices attributes for an ethics program. They are: Vision Statement, Values Statement, Organizational Code of Ethics, Ethics Officer, Ethics Committee, Ethics Communication Strategy, Ethics Training, Ethics Help Line, Measurements and Rewards, Monitoring and Tracking systems, Periodic Evaluation, and Ethical Leadership.

The vision statement would define the parameters of acceptable decisions. If unethicality is involved in the decision or in the execution in the decision, it is an unacceptable decision and should be rejected. The company’s values statement would influence and retain appropriate behavior. The organizational code of ethics would provide organization-specific requirements of expected C-suite behavior in carrying out duties. The ethics officer provides the coordination and implementation. The ethics officer reports to the ethics committee that oversees the organizational efforts. The ethics officer should deliver an effective ethics communication strategy that is timely and usable and fosters two-way dialogue.

Ethics training helps to handle difficult situations and utilize safe avenues for communicating concerns and fair dissent. Ethics helplines facilitate communication. Measurements and rewards provide validation of acceptable practices. Monitoring and tracking systems provide feedback on internalization of the organization’s values and ethics code. Periodic evaluations show progress or need for intervention. Above all and most importantly, ethical leadership provides credibility and facilitates acceptance.

Here is the outline of the C&E program that I would recommend for my corporation. It will incorporate the integrity-based approach and fulfil the attributes provided by the Department of Justice. It would be in line with the US Sentencing guidelines for effective C&E programs. As mentioned earlier, the integrity-based approach combines both compliance and ethics.

Conclusion

With the plethora of outrageous corporate scams and frauds that came to light in the last 40-plus years, public outrage on corporate behavior reached revolutionary levels. Congress responded with Acts to reduce the blatant infractions. In order to avoid some of the impositions of the law, businesses started self-policing of compliance and ethics. Results have been achieved but the efforts cannot stop on the part of the government and businesses. A corporate C&E program has been recommended for my company.

In my remarks on the C&E program, I would like to emphasize that in the above-recommended C&E program for my company, both compliance and ethics are addressed. Complying with the law is the minimum starting point of ethics. It is impossible to enact laws for all ethical violations. However, if certain ethical violations become rampant, society would be forced to enact laws. Voluntary compliance and ethical propriety would serve all society well. The recommended C&E program fulfils the requirements of attributes of an effective C&E program, the expectations highlighted by the Department of Justice, the US Sentencing guidelines for effective C&E programs, best practices, and over and above all, integrity.

References

1. Andersen et.al. (1983). Models of Deterrence Theory. Social Science Research 12, p. 236-262. Retrieved from https://www.sciencedirect.com/science/article/pii/0049089X83900145?via%3Dihub
2. Chen, H. and Soltes, E. (2018). Why Compliance Programs Fail—and How to Fix Them. HBR. Retrieved from https://hbr.org/2018/03/why-compliance-programs-fail
3. Collins, M. (2015). The Big Bank Bailout. Retrieved from https://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/#7fcc13ec2d83
4. Edwords, F. (2019). The Human Basis of Laws and Ethics. Retrieved from https://americanhumanist.org/what-is-humanism/human-basis-laws-ethics/
5. Ethical Systems.org. (2018). Compliance & Ethics Programs. Retrieved from https://www.ethicalsystems.org/content/compliance-ethics-programs
6. Ethisphere. (2014). 2013 National Business Ethics Survey of the U.S. Workforce: Executive Summary. Retrieved from https://insights.ethisphere.com/2013-national-business-ethics-survey-of-the-u-s-workforce/
7. FBI. (n.d.). Enron. Retrieved from https://www.fbi.gov/history/famous-cases/enron
8. FindLaw. (2019). Corporate Ethics and Sarbanes-Oxley. Retrieved from https://corporate.findlaw.com/law-library/corporate-ethics-and-sarbanes-oxley.html
9. Fiorillo, S. (2018). What Was the Subprime Mortgage Crisis and How Did it Happen? Retrieved from https://www.thestreet.com/personal-finance/mortgages/subprime-mortgage-crisis-14704400
10. Isidore, C. (2016). 35 Bankers Were Sent to Prison for Financial Crisis Crimes. Retrieved from https://money.cnn.com/2016/04/28/news/companies/bankers-prison/index.html
11. Karpoff, J. et. al. (1999). Defense Procurement Fraud, Penalties, and Contractor Influence. Journal of Political Economy, 107(4), p. 809-842, Retrieved from https://www.jstor.org/stable/10.1086/250080
12. Navran, F. (1997). 12 Steps to Building a Best-practices Ethics Program. Workforce, 76 (9) p.117-122. Retrieved from https://www.workforce.com/1997/09/01/12-steps-to-building-a-best-practices-ethics-program/
13. Noonan et. Al. (2018). Who Went to Jail for Their Role in the Financial Crisis? Retrieved from https://ig.ft.com/jailed-bankers/
14. Page 10 of 11
15. Paine, L. (1994). Managing for Organizational Integrity. HBR. Retrieved from https://hbr.org/1994/03/managing-for-organizational-integrity
16. Pritchard, J. (2019). Moral Hazard: Definition and Examples. Retrieved from https://www.thebalance.com/moral-hazard-what-it-is-and-how-it-works-315515
17. SEC. (2017). Spotlight on Foreign Corrupt Practices Act. Retrieved from https://www.sec.gov/spotlight/foreign-corrupt-practices-act.shtml
18. Sullivan, T. (2019). First Ever Felony Criminal Charges’ Against a Distributor and its Former CEO & Chief Compliance Officer for Violating Federal Narcotics Laws. Retrieved from https://www.policymed.com/2019/05/first-ever-felony-criminal-charges-against-a-distributor-and-its-former-ceo-chief-compliance-officer-for-violating-federal-narcotics-laws.html
19. Vice President for Communications. (2016). Compliance Cannot Compel Ethical Behavior. Retrieved from https://news.umich.edu/compliance-cannot-compel-ethical-behavior/

Abstract

Assessment Four of MBA-FP6028, will focus on the analysis of the Assessment Four Scenario. The focus of the analysis would be drawn to the safety and ethical issues regarding the scenario. This assessment looks at business considered that are presented by the situation, various approaches that could be made for the situation and favored choice of action to handle it. A professional correspondence will be created as well.

Introduction

Business ethics are considered to be the study of appropriate business policies and practices in regard to potential controversial subjects (Twin, 2019). To begin, the company needs to determine the ethical dilemma present and assure that the individual within the organization progresses for the better based off the current scenario. Airline’s industry is very fragile, and requires in-depth evaluation and planes need to be inspected thoroughly before departing from the airport, and after arriving to the airport to assure that everything operates in a coordinated manner. United airlines have gone the extra mile to assure safety and following the regulations and policies. This includes the pencil maintenance regular activities on all planes and that the engineering department are following procedure and within regulations and policies. The following scenario goes into the ethical actions and decisions surrounding the United Airlines’ organization.

Business situation presented by considerations

In any business condition, including the issues of the management of the airlines, there are ethical issues and safety pacts that are involved in a substantial role with the actions that address the affair the surround a company. The real predicament here is directed to the competitor within the airline industry whom is conducting their pencil maintenance procedure. The event goes to demonstrate that the problem has to do with irregular ticking of logs as well as poor repairs and standard representation of parts create a substantial influence on the event at hand. As the United Airlines crew, the employee of the competition has provided a crucial sum of data. The chief maintenance officer needs to determine what line of action to follow with this data. Employees hired that come from the competition often produce higher sales and more productivity (Vozza, 16). This is good for the company that hired this individual but business considerations are needed to be decided before following through with action based off the new employee.

To begin, the airline industry honors the FAA. The FAA is the Federal Aviation Administration, and they are the authority whom inspects regional flights and commercial flights with the only purpose of finding difficulties. Many airlines with the FAA have a cozy relationship as FAA work closely with the airlines and manufacturers (Lewis, 2019). Many airlines, including United Airlines has entrusted the safety role to the Federal Aviation Authority. Airlines have a fear that taking responsibility for what may happen to their airline following the guidelines and policies, and as a result the fault goes to the authority. It would be unethical for both competitors and the case study airline to completely transfer safety roles to the FAA. The purpose of brining this to light is because the FAA possesses less employees and they cannot handle the safety issues of so many airlines under investigation.

Next off, the safety of the passengers and the employees of the airline provide fascinating features that are worth noting. The biggest disaster that can destroy your customer experience is a lack of safety for the customers you serve (Martins, 2013). It is unfortunate that the competitor fails to properly maintain their airlines, endangering the employees and the passengers, which is a serious consideration when airlines are trying to execute a retention policy. Upon learning that the competitors possess a weak check system, probing more accidents to occur, the United Airlines chief maintenance officer must assure that the maintenance policies follow the AA guidelines and procedures at any given time. Physical security can be internal or external, man-made or acts of nature (Simpson, 2017). Physical security is crucial, and therefore the organization must guarantee that the employees and the passengers are safeguarded from bodily harm and other harm. The main point here looks into the issue that the concern for safety is disregarded or unnoticed, and this may ruin the company’s reputation or image, therefore it is essential for engineering tests and checks to take place before a flight departs or arrives. Considering the magnitude with which the informant has stirred up the data, the airlines has no other option but to always review their actions regarding the situation of doubt and insecurity.

Compare actions on two facets of activities under the dilemma

Reporting ethics under any circumstance can be viewed as profoundly. Although in the above case, there is the involvement of the competition, and therefore careful procedures have to be analyzed to fully understand the ethical circumstances of the situation. There exists the choice of conveying the unethical information to the authority, in this case being AA or FAA. On the flip side, the data collected on the safety lapses may get passed to the CEO of the competing organization, strictly providing them accurate data without making them think one is getting back on them for the firing meted against them. Nonetheless, the subject may get provided to them as an advice within the local newspapers or magazines, and look on the way forward for the topic at hand. It doesn’t make sense to provide an urgent problem in the advice section (Scutts, 2018). The advice should be given in a different section that would grasp their attention. Observing the issue above, a comparison is conducted on the report done to the FAA or the reality that we observe the report to the CEO.

Both actions taken by the prior Chief maintenance office provide consequences if executed incorrectly. For example, the report that is created to the FAA, the group that is affected is the competition and even United Airlines when the competitors discover which they shall, that it’s us whom distributed their names to the authorities. Furthermore, the reality is that the reports are generated on a daily basis and this is damaging to the organization, in which the image of the organization will be affected, not just regionally but nationwide as well as around the world. Even the American market will see it is problematic to trust the carrier conducts maintenance on its spare parts since we have chosen to hire somebody who oversaw the rot in the prior organization and wouldn’t say anything about it. Safety is not the absence of harm but it’s the presence and development of capability, awareness, active communication and caring (Godd, 2015). So it’s crucial to note that an organization’s fright of expenditure should be part when it involves safety. It is for the same motive that the organization’s employees should be brave enough to report any undoing to recover the expenses and other repercussions that may provide the organization with a lot of losses. Therefore, this is the differences of identified pointed to the very existence of the safety management approaches by the organization.

Best course of actions and the ups and downs

The best course of action when observing the airline management indicates the fact that the workers must report the unethical fetes to the competitor organization’s CEO. Amid all the choices available, this seems as the appropriate course of action, and therefore, the organization attains the benefits by utilizing it. The airline industry is interconnected and no one should be on bad terms with their competition. So when going about this course of action, this is to bring to the attention of their management. The advantage that United Airlines possesses with this action is that the market choices and the market share maybe depreciate with the information that United would spill out against their competitor. The disadvantage to this action is the robbed worker. The worker will function in the bad blood of the competitor since he is the one that attained this data and it was confidential but shared amongst competition. People believe the ends justify the means are more likely to offset a good dead with bad ones or vice versa (Ghose, 2013). Every action has to have its balance. There is good that can come out of it or there is bad that can come out of it.

Communicating ethical decisions and which ones

The last stage in this entire commotion represents the delivering the unethical services to any concerned player. A couple of the matters that worth communicating involve the financial and legal repercussions of the entire fiasco. Stakeholders should be aware of how to take care of the effects of the moral corruption on the entire situation if everything were to come to a standstill and assure that the matter such as the profits that are affected due to poor ethics must be known by everyone. If any legal actions were to surface from the situation, then they must recognize and get ready to face the consequences that are coming. The organization being affected include the employees, shareholders, management, and the board. Everyone in the organization should be aware of the control of safety in the organization and therefore never be kept in the dark. When an employee doesn’t get the wide view, not only does the point of their work escape them but it can be frustrating (Fried, 2015). So no one within the organization should be kept in the dark and should be aware of everything that is going on.

The individuals whom are disturbed by the management of ethics in the maintenance section should plan actions to do with the same at any particular time. Successful businesses are built on relationships (Towers, 2017). Ethics play a crucial role in generating trust between employees, customers, and United Airlines shareholders. instant that the trust is destroyed, there are things like corporate social responsibility that break down significantly. This is why it is important for an organization to do everything possible to diminish the effect of the adverse policy effects expanding out by for instance, establishing confidentiality clauses.

Reference

1. Fried, J. (2015). The danger of keeping your team in the dark. Inc. Retrieved from https://www.inc.com/magazine/201506/jason-fried/lighting-the-way.html
2. Ghose. T. (2013). Why good deeds can cause moral backsliding. Live Science. Retrieved from https://www.livescience.com/27729-morality-changes-ethical-behavior.html
3. Godd, M. (2015). Cost vs. Safety: This is the time for safety leadership. JMJ Retrieved from https://www.jmj.com/blog/cost-vs-safety-this-is-the-time-for-safety-leadership/#
4. Martins, F. (2013). Is safety a part of customer service? Business 2 Community. Retrieved from https://www.business2community.com/customer-experience/safety-part-customer-service-0722603
5. Lewis, R. (2019). The FAA’s relationship with airlines and manufacturers is under scrutiny, again. National Public Radio. Retrieved from https://www.npr.org/2019/03/14/703535271/the-faas-relationship-with-airlines-and-manufacturers-is-under-scrutiny-again
6. Simpson, D. (2017). The importance of physical security. AGIO. Retrieved from https://agio.com/newsroom/importance-physical-security/
7. Scutts, J. (2018). The evolution of the advice column. Medium. Retrieved from https://medium.com/s/story/the-evolution-of-the-advice-column-4676167c4317
8. Towers, P. (2017). Workplace trust: Why trust is important in the workplace. Task Pigeon. Retrieved from https://blog.taskpigeon.co/workplace-trust-trust-important-workplace/
9. Twin, A. (2019). Business ethics. Investopedia. Retrieved from https://www.investopedia.com/terms/b/business-ethics.asp
10. Vozza, S. (2016). Why your competition’s staff will be your best employees. Fast Company. Retrieved from https://www.fastcompany.com/3059542/why-your-competitions-staff-will-be-your-best-employees