The study on correct company rules and procedures revolving around potentially contentious problems such as corporate governance, market manipulation, extortion, marginalization, corporate social responsibility, and fiduciary obligations are encompassed in business ethics. Ethics is generally a factor in an organization’s long-term success. Every organization must embody much for the smooth running of the company with fewer chances of facing predicaments. Establishing an organizational culture of ethical practices also contributes to bridging good relations with stakeholders and positively impacts the organization’s financial performance (Russell, 2021).
Ethical behavior in the workplace stimulates positive behavior of the individuals involved in the organization, just as unethical behavior damages an organization’s reputation. The headlines that frequently highlight allegations of unethical behavior in an organization could create crises involving public relations, distraction in the operation of the business, and even the collapse of organizations (Mahan, 2019). Given the consequences, organizations should make efforts to prevent, detect, and correct actions that threaten their existence. Carroll and Buchholtz (2015) stated that organizational reputation could be maintained by creating a management or governing body that upholds integrity and performs duties and responsibilities following ethical guidelines.
However, some organizations do have bad business ethics. One reason is that CEOs or management resort to actions that generate more significant gains faster despite going beyond the ethical standard without considering the long-term repercussions (Horton, 2022). Leaders possess the influence and authority to decide for the organization that could tremendously impact the shaping of the organizational culture. Leaders have the ability to reinforce values and the leadership style of the management, either effective or poor leadership, has a significant influence on the organization’s culture (Tanner, 2019). This implies that the decision of the leaders or the persons charged with governing the organization to act unethically, even in one instance, hurts the organizational culture.
Specifically, this case study examines how FIFA successfully reformed its deep-rooted corrupt culture. This paper further examines the root cause of FIFA’s unethical practices that resulted in charges of wire fraud, money laundering, and racketeering faced by primarily governing bodies or leaders of the organization. The investigation of the FIFA Scandal disclosed its culture of unethical behavior and corruption that began from the top and spread across the entire facet of the organization (Nadkarni, 2017).
Considering the circumstances mentioned above, the overall objective of this study is to conduct an analysis of the FIFA Scandal and recommend realistic solutions to help the organization’s reform.
Case background
Business ethics is arguably the most prevalent struggle in the corporate environment and business sector (Mahan, 2019). It is the responsibility of the organization’s officials and employees to abide by the ethical rules and regulations. However, articles were published in the media concerning the unethical culture and non-compliance to applicable rules and regulations of organizations. Several organizations, notably FIFA (Fe?de?ration Internationale de Football Association), are, nevertheless, facing unfathomable repercussions. Some personnel commit accounting fraud to safeguard the business (Amernic and Craig, 2010) or bribe officials to get an advantage over the competition (Effelsberg et al., 2014). Losing the reputation of the organizations could lose their credibility, general morale, and productivity, and actions could result in severe fines and financial losses (Bowes, 2017).
This case study would support theoretical structures of unethical practices, corruption, and bribes within organizations. The recent global economic meltdown has compelled many astute organizations, large and small, to engage in unethical methods to remain competitive (Amos, 2012). FIFA’s ‘business ethics’ crumbled owing to a lack of transparency inside the organization toward the public. They failed to provide the required and full financial documents, resulting in allegations and suspicions directed at their organization staff (Arora, 2021). However, accountability becomes much more critical when FIFA officials are accused of corruption. They have been in a bribery scandal involving the selection of World Cup host cities and, more recently, in the election for FIFA leadership (Pielke Jr., 2011).
Case facts:
The FIFA Scandal stemmed from unethical behaviors inside the organization. It started in May of 2015 when Swiss authorities arrested fourteen FIFA executives and were convicted of corruption charges. The investigation revealed that officials committed wire fraud, racketeering, and money laundering revealing a toxic culture of unethical behavior, non-compliance, and corruption that began at the top and spread across the organization (Ruiz and Mather, 2015).
When FIFA awarded Qatar the 2022 World Cup in 2010, there were accusations of vote-buying. The indictment primarily concerns suspected fraud and corruption throughout North and South America, a federal matter (McFarland, 2015). According to the indictment, the US and South American sports marketing executives paid ‘far over $150 million’ in bribes and other unlawful payments to secure lucrative television and marketing rights to international football tournaments. The World Cup provides practically all of Fifa’s earnings. Last year’s event cost Brazil an estimated $4 billion, while Fifa gained more than $2 billion through sponsorships, TV rights sales, and merchandise sales (BBC News, 2015). According to Gubler and Kalmoe’s (2015) research on FIFA governance structure concerns, it was discovered that more than 80% of football associations do not provide financial records, 20% do not have websites, and 85% publish something other than their actual performance.
The FIFA corruption issue is exceptional in that there is no alternative governing organization for world soccer since FIFA maintains a monopoly on its administration. Because FIFA’s ethics problems will not prevent the majority of soccer fans from watching key competitions, FIFA is in a position to enact reforms at their own pace and in the manner that they see suitable (Nadkarni, 2017). The problem is that the leading leaders at the top management started the unethical behavior by representing the whole organization. FIFA is a multinational, non-governmental organization. Like many other international sports organizations, including the Olympics, FIFA operates in a gray area of governance. FIFA’s corruption stems from the fact that it has grown so large without adhering to the same regulations. The absence of general organization and responsibility has been a significant problem (Stomberg, 2015).
Case analysis
Suspicions of bribery and kickbacks against the organization dated back to 1991, which has been going on for years, not until the public became aware of FIFA’s corruption allegations in May 2015, when Swiss authorities arrested several top FIFA officials on corruption accusations at a luxury hotel in Zurich.
One fundamental problem, in this case, is that FIFA’s financial statements contain several financial irregularities. The organization’s accounting records carry many potential fraudulent adjustments that raise concerns regarding its legitimacy because of such sparse records. Moreover, the reports have traces of possible abuse of power and scant documentation regarding the payments made by the organization resulting in questionable financial reports and increasing the prospect of committing fraud and other unethical activities.
Another key problem is that FIFA markets its rights to advertise and hold the event through a bidding process, which several countries and entities are eyeing. Although a considerable amount of money is required to prepare for the World Cup event, many countries wish to acquire the right because the benefits, such as economic development, outweigh the expenses. Such a situation would encourage entities and countries to bribe FIFA officials.
These identified key problems are caused because FIFA operates in negligible corporate governance where the officials do not strictly enforce the Code of Ethics. The top officials themselves started the unethical culture in the organization. They showed no intention of resolving, punishing, and avoiding allegations against the ethics regulations of FIFA, as stated in the resignation of a former FIFA Ethics Committee, Gunter Hirsch. It was evident that the long-time FIFA President Joseph ‘Sepp’ Blatter was passive in dealing with this matter, wherein Blatter continuously denied his participation in the corruption allegations. In his statements from their press conference, he used words that appealed to the public’s emotion for him not to be held accountable, and he never mentioned methods that FIFA would use to deal with the case.
FIFA’s lack of strategy and overconfidence is another key problem in the FIFA scandal case. Their crisis communication plan was nonexistent (shown by their passive action and no response to the allegation). Since FIFA’s unique selling proposition is organizing the world’s largest sporting event, the Football World Cup, they have gained that overconfidence. Further, top brand companies such as Adidas, Coca-Cola, and Emirates, among others, are their sponsors. They believe that despite the ethical controversies, football soccer fans worldwide will still watch the games and cheer on their favorite teams and players, enabling them to sell tickets and broadcasting rights.
To sum it up, those top officials charged with governing the Federation Internationale de Football Association (FIFA) are to be held accountable for the deep-rooted toxic unethical culture of the organization. This practice then affected the organization and became widely recognized as unethical.
Decision analysis
To eradicate a corrupt governing body that lacks professional and ethical behavior in FIFA, amending its overall structure would be most fitting. It is evident that despite the previous failures of fixing FIFA’s immoral management by changing the governing body, the corrupt system continued to push through and influenced the appointed head. Thus, a shift of attention must be given with the intent of looking deeper into the problem beyond the management and pulling through the roots of such a predicament. The organization at hand, FIFA itself, and its structure are the problems with the abundant opportunities encountered by the executive leading to misconduct. Abolishing such possibilities requires strict transparency and accountability with the eyes of the public and the law and authority on them.
The casual organization should shift to a government organization to strengthen the need for accountability and disclosure of financial documents and reports. This ensures that higher authorities would be able to push their compliance since the government would be questioned. With this system, the audience would be able to pinpoint which side is prone to abuse and bribery with which the perpetrators hold more significant influence. Strengthening the Swiss laws and punishments enforced by the US prosecutors would further enhance its abolishment.
However, government officials may be tainted or influenced by FIFA’s unethical practices leading to a broader scope of connection and creating a bigger dilemma now fully immersing the government. A more significant conflict may arise from the involvement of politics, possibly affecting the participating nations.
Another route to take would be turning it into a for-profit business; otherwise, a large corporation since the organization would be subjected to compliance with legislation and company monitoring and providing the appropriate disclosure to the public for security. The Swiss government, which is its headquarters, would also keep its eyes on FIFA in that occurrence and become a subject of greater scrutiny and surveillance. This will aid in keeping the organization in check. With the need for investors and public support, the organization would need up-to-date financial records accessible to potential audiences. Corporate governance would be enhanced since compliance with the corporate code would be strictly adhered to. Hence, regardless of rank, each member of the Congress would be protected along with their notion and assessment. This creates a proper delegation of authority, especially with FIFA’s ‘one member, one vote’ policy in their congress.
Despite the change, corruption and unethical conduct may still occur if internal controls are not adequately maintained and adhered to. Having any loose ends, big or small, would grant an employee or administrator a side or fraction of the fraud triangle. Unethical behavior would go unnoticed if left alone, becoming rampant throughout the organization, so proper countermeasures must be implemented.
Most importantly, it is crucial to strictly comply with the Code of Ethics and Conduct being led by the governing body and disseminated throughout the organization. As both the congress and administrators adhere to the Code of Ethics and Conduct, the succeeding personnel would follow. Since it was emphasized that the previous leadership management started the actions of the unethical practice, it is also possible to eradicate underhanded customs revolving around the organization through this.
Recommendation
Focusing on the unethical culture of the FIFA organization, it is more appropriate to be registered as a for-profit organization or as a multinational corporation. By this, FIFA and its executive committees would be subjected to transparency, media coverage, accountability, and civil society’s disciplining effect. Although changing from a non-profit organization to a for-profit organization would require much administrative work, it is still doable. It would be best to resolve the unethical practices that have been continuing in FIFA.
As mentioned, turning FIFA into a for-profit organization requires a prolonged process. However, such would be the best and most probable solution to reform and eradicate the corruption and unethical culture of the organization. The conversion from non-profit to for-profit would need an agreement of all shareholders and notifying the Internal Revenue Service (IRS) of such a decision by writing a statement of non-profit conversion. Upon conversion, FIFA executives shall consider the following:
Propose new governing statutes to demonstrate their commitment to fight corruption in the organization and embrace real reform. FIFA also needs independent reform delegates that review and develop new governance agreements.
The statutes of FIFA should be amended to guarantee that FIFA membership is contingent on maintaining high standards of conduct in every facet of the organization. Thus, every confederation of FIFA shall conduct independent integrity checks on its leaders and delegates for more transparency and accountability to the players, viewers, and other stakeholders.
As to FIFA’s executive committee, members should have term limits for better governance. Also, there should be a balance of independent directors to be appointed to the Executive Committee. An organization that is run by sound governance principles and expert committed board members fosters long-term success and benefits for the organization and its stakeholders.
To address the organization’s lack of transparency in their financial reporting, FIFA shall disclose amounts spent for development, as their statutory objective mentioned constant improvements and promoting the game globally. Additionally, there should also be public disclosure of the income and benefits of the senior executives and committee members.
After much consideration, this proposed solution was selected due to the clear outcome in addressing the previously discussed issues revolving around FIFA. Becoming a for-profit organization would ensure that their accountability towards transparency will be strictly complied with given the responsibilities that they would now face as a for-profit organization. Aside from reassuring stockholders with their financial statements, they would also need to appeal to the public as their consumers. Considering FIFA’s revenue as of 2021 is $766.5 million, it is questionable to retain its state as a non-profit organization. Thus, it makes this changeover the most suitable course of action they could take with the least disruption to their organization while still demonstrating their sincerity and determination to change and improve.
Bibliography
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- Effelsberg, D., Solga, M., and Gurt, J. (2014). Transformational leadership and unethical behavior for the benefit of the company: a two-study investigation. J. Bus.Ethics 120, 81–93.