discussion required
Post 1
When considering the story of Tom's Shoes, research an organization of interest on the Internet. Describe how this organization promotes or contributes to social responsibility and awareness. How has this helped or hindered both the organization and those the organization is helping?
I chose State Employees Credit Union (SECU) as my organization of interest. I have been employed with this organization for years and have firsthand knowledge of social responsibility and social awareness efforts. First, we are not-for-profit and owned by our accountholders also known as members. Most financial institutions are owned by a limited group of stakeholders or shareholders. However, our members are our stakeholders and there is no limit to the number of members who can join. As such, our business revenue is given back to our accountholders in the form of dividend deposits, lower interest rates to borrow and little to no fees on deposit accounts. This is the most significant way SECU shows social responsibility, by extending a stake in its union to anyone in the state and offering financial advantages not offered in banks. Second, SECU employees have a shared value of education. We take ownership of the responsibility to educate our members and those in the community to support better financial decisions and enable financial stability. We regularly visit high schools and colleges to educate the youth. Third, SECU partners with United Way every year in October to raise as much as we can to help the communities we serve. Employees participate in various fundraising events resulting in a $40k donation this past October. Lastly, SECU gives employees 8 hours of volunteer leave each quarter to ensure social responsibility efforts.
These efforts have helped in my opinion to build a large membership base that trusts SECU and its employees.
Consider corporate scandals over the past several years. Research the Internet and consider a corporate scandal of Interest. Explain and describe the moral and ethical implications from this scandal. What could have been done differently? Where is the organization today- still thriving or not? Where are the executives today who were involved?
I chose Wells Fargo for its recent scandal, opening deposit accounts and credit card accounts in consumer’s names, unbeknownst to the consumer, all in efforts to meet sales goals. There were many moral and ethical implications from this scandal. First, opening new credit card accounts causes inaccuracies on consumer’s credit reports. This could possibly affect a consumer’s ability to finance a car or a home. Also opening unused deposit accounts can cause service fees on those accounts that are not being used. Unpaid service fees on accounts that should have never been opened, turn into a charged off accounts for Wells Fargo and the inability for the consumer to open accounts elsewhere until it’s paid. Morally and ethically bankers should always sell things that have true value to consumers. Product pushing, is when a salesperson forces a product on a consumer based off of their desire to sell and not on the desire to bring the consumer true value. This is a highly unethical practice in sales. Elderly or inexperienced consumers may be subject to these types of sales. This opens up the practice of elder abuse which is also highly unethical.
Wells Fargo is a very large, very old financial institution. During the 2008 rescission, Wells Fargo was the only large financial institution that did not require bail out money due to its conservative lending practices. They would have done well to hold on to this history of security and stability by ensuring to be more socially responsible and reviewing sales goals. Since this scandal, the company has a new CEO and they run regular ads basically begging for consumers to forgive them and trust them again. I’m almost certain they are not the thriving bank they once were.
Explain how a specific decision bias mentioned in this chapter led to poor decision making by a firm.
Anchoring and adjustment bias takes place when an organization makes substantial decisions on insignificant data (Chapter 10 Leading Ethical Organization, p.333). Availability bias takes place when more recent data incorrectly overshadows the significance of less recent data (Chapter 10 Leading Ethical Organization, p.334).
Chapter 10 Leading Ethical Organization. (2014). The University of Minnesota. Retrieved December 5, 2018 from: https://learn.umuc.edu/d2l/le/content/331272/viewContent/13247367/View
Post 2
Toms Shoe runs one of the most successful social responsibilities in modern business strategies. The company has managed to use social responsibility as a competitive strategy that runs dry its competitors. Its decision to donate a pair of shoes to the needy for each pair bought is such a unique strategic social responsibility. Led by Blake Mycoskie, the company witnessed a great impact in social contribution to the developing markets. This however turned into a profitable strategy for the company as it gave purpose and sense to buy from Toms Shoes (Mastering Strategic Management, 2016). In the same manner, there are other companies that have heavily invested in promoting the social welfare of their communities and markets. Russel Metals have an undeniable impact on society. The company has invested in social responsibility as a way of giving back to society through corporate citizens, environmental conservations, and Russel community projects. The company undertakes donations and funding of community-based initiatives throughout North America (Mooser, 2015). Such include employee volunteerism where it facilitates its employees to undertake voluntary construction services with its beneficiaries paying no penny. The company has also taken the responsibility of reclaiming amicable environment by averting pollution and degradation it causes. Through its Carbon Disclosure Project, the company works with local communities to set environmentally friendly projects to reduce any form of pollution, internal and external (Lindgreen, & Swaen, 2010).
The year 2015 saw accounts of corporate scandals that rocked the market. An example of such corporate scandal is the Toshiba Scandal valued at $2 billion. This was associated with an old-fashion accounting that had the electronic giant overrate its revenues above its actual earnings for a series of years proceeding. This gave a wrong impression of the company’s earnings thereby misleading investors and shareholders for the ill benefit of the corporate managers (Russell, 2015). The company’s CEO Hisao Tanaka among other managers were found culpable hence leading to his resignation. The culprits took advantage of the company’s ill internal culture that had its management’s decision final and unchangeable. They hence acted in their self-interest to give a wrong impression of the company above its actual earnings. The company reports postponed losses incurred to avoid recording negative statements. Even though Toshiba suffered greatly from ill-advised decisions by its managers, the company has in recent time depicted positive progress. It is now under new management after sacking its former management. Instead of lying about its earnings, the company should have given the real results about its earnings. It would have saved itself from potential investors leaving. The decision had immense ethical and moral implication of the company. It faced legal compulsory tussle between investors and other shareholders. This led to the board’s decision to sack its top management involved and compensate affected investors (Melé, Rosanas, & Fontrodona, 2017).
Decision biases limit the logical rationality of a decision. Toshiba company scandal was affected by anchoring and availability biases in their decision to overrate their earnings (Mastering Strategic Management, 2016). Anchoring bias applied when the company objectively cooked figures and provided incorrect annual statements that were irrelevant and not supportive of their real earnings. This means data on company earnings were not in any way related to their actual earnings. To blindfold investors further, the management faulted availability bias whereby carrying forward its larger revenues, capital expenditures, and deleted losses from its statements. The result was an unrealistic financial statement that overrated the company’s earnings with over $2 billion. This cost the company its reputation, investment upon discovery.
References
Lindgreen, A., & Swaen, V. (2010). Corporate social responsibility. International Journal of Management Reviews, 12(1), 1-7.
Mastering Strategic Management. (2016). Mastering strategy. Washington, D.C.: The Saylor Foundation.
Melé, D., Rosanas, J. M., & Fontrodona, J. (2017). Ethics in finance and accounting: Editorial introduction. Journal of Business Ethics, 140(4), 609-613.
Mooser, Sherri (April 6, 2015). Russel Metals Supports Higher Education. News Wire, Online Source. Retrieved from > https://www.newswire.ca/news-releases/russel-metals-supports-higher-education-517424411.html > and < https://www.russelmetals.com/en/AboutRusselMetals/Pages/Corporate-and-Social-Responsibility.aspx >
Russell, G. W. (2015). Will Toshiba's Scandal Bring About the Change Needed in Corporate Governance?. GAA Accounting, May, 10.