Unit II Case Study

DBA 7632, Business Ethics and Corporate Responsibility 1

Course Learning Outcomes for Unit II Upon completion of this unit, students should be able to:

1. Examine dimensions of ethical theory in business administration. 1.1 Analyze ethical theories and perspectives for implementation in a code of conduct.

5. Evaluate ethical issues in the workplace.

5.1 Examine an ethical organizational culture. 5.2 Assess the value of ethics enforcement implementation. 5.3 Develop a code of conduct for an organization.

Course/Unit Learning Outcomes

Learning Activity

1.1 Unit Lesson Chapter 9, pp. 257–287 Unit II Case Study

5.1 Unit Lesson Chapter 9, pp. 257–287 Unit II Case Study

5.2 Unit Lesson Chapter 9, pp. 257–287 Unit II Case Study

5.3 Unit Lesson Chapter 9, pp. 257–287 Unit II Case Study

Reading Assignment Chapter 9: Building an Ethical Organization, pp. 257–287

Unit Lesson In the first unit, we completed a general overview of the foundational ethical theories that make up business ethics. As we move forward, we will explore some of these key areas in more depth. In this unit, we will address ethics in the workplace. Ethics in the Workplace Johnson (2019) shares a wealth of information regarding differing aspects of ethical concerns in the workplace. A good place to start is to explore the organization itself. When we look at the structure of the organization, what are the foundations adherent to the core beliefs and vision of the organization? Ethics, code of conduct, and vision are based on beliefs of the company founders. How do the original beliefs carry forward as the organization grows? The consistency becomes a greater challenge. When a small, core group of individuals works together and forms a team, providing a product or service as a unified organization, instilling the values of the organization is a relatively easy position due to alignment with the core personnel. Decisions are made corporately among company founders or the owner. As an organization grows, the alignment can become skewed. More individuals join the organization, and different perspectives, backgrounds, and experiences influence the organizational culture.

UNIT II STUDY GUIDE

Building an Ethical Organization

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Culture and Ethics You may wonder what culture has to do with ethics. The truth is that ethics influences culture, and culture influences ethics. The organizational culture may be very different than that of individual cultures within the workplace. Nationality, religion, or regional orientation may instill the culture. It is possible that there is a perceived culture based on gender, orientation, and ethnic affiliation. Organizationally, there are standards that will need to be addressed in order to maintain alignment, standardization, continuity, and implementation of a clear ethical code of conduct within the organization. The organizational code of conduct is more of an umbrella over the entire organization. The umbrella covers multiple individualized or specialized codes of conduct and ethical standards. As an organization, the more generalized approach will envelop the specialized codes of conduct that are unique to the operations being addressed such as sales, marketing, manufacturing, logistics, and other aspects of the organization. Standards are influenced by culture if we are using locations in host countries, vendors, or suppliers from other nations. Learning to adapt to the cultural standards of doing business with these circumstances requires a unique approach. Organizations in the United States will have a different approach to conducting business than organizations in other nations such as China, Korea, Egypt, and Argentina. Practices will vary, and the organizational standard may be very different than what is accepted in other countries or even within certain parts of the organization. Ethics Enforcement How does the organization and its operations adapt to an ever-changing culture, both internally and externally? Continued study and investment by the organization will maintain a dialogue with employees, vendors, and clients to ensure a standard that is in compliance with the organization and its various components. Enforcement becomes a greater challenge when there are variations in the standards due to the unique circumstances. The organization and its leadership design policies and practices that are implemented and enforced throughout the organization. There will be supplementation in key areas to address any unique needs and to establish well-grounded relationships that will ensure that a strong ethical standard is in place and that it reflects the organization's vision and code of conduct. Enforcement must be consistent. Deviation of the implementation and enforcement of ethical standards within the organization creates a potential breakdown in communication, processes, common practices, and results. When an ethical issue is brought before a court of law, the court will review the ethical practices in comparison to the policies of the organization. If a consistent pattern is not clear as to the enforcement of these policies, the standard in which the policies were set will be diminished, potentially setting up the organization and individuals for litigation, ethical violations, and punitive actions. What is acceptable in one organization is not necessarily acceptable in another organization. The behaviors can shift between nations, organizations, and operations internal to a larger organization. Some business units will seek opportunities to advance their results at the risk of reputation, integrity, and ethical standards to generate a greater return through questionable actions. Reporting The past 20 years have provided a wealth of stories regarding ethical violations in large corporations. In the United States, regulation and litigation have been on the rise in regard to ethical violations of corporate behavior. What was acceptable behind closed doors eventually became known. Trust, integrity, and reputation were compromised by these corporations, and the beliefs associated with placing trust in large corporations are still shaken almost a generation later. Organizations have chosen to implement more stringent codes of ethics and increased enforcement through training and implementation practices. Ethics hotlines, advocacy groups, and external regulatory agencies are available for monitoring and reporting purposes to safeguard individuals who may have incriminating information regarding ethical violations within

EthicsCulture

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organizations. Reporting, in theory, has improved the organizational culture as a whole and has contributed to establishment of codes of conduct. According to Johnson (2019), fewer ethical violations are being reported due to increased awareness and modified ethics programs. There are, however, still cases of questionable business practices, which is evident in the scenario below. The Overnight Dealership An entrepreneur opens a used car business. The dealership only sells high-end, luxury performance vehicles. The dealership develops a strong marketing plan for the demographic that is being targeted. The dealership quickly becomes cash positive, creating significant profit for the entrepreneur. The entrepreneur sells cars and works with high-risk, high-fee, and high-interest-rate finance organizations. The dealership sells the dream of the car on emotion and entitlement—not eligibility. It is learned that the cars are not in excellent condition, and customers begin to complain. The repair department starts to get overwhelmed with repairs on cars that were bought at the dealership. The owner authorizes limited repairs. He encourages the service managers to find inexpensive solutions to fixing the cars. Less than 2 years later, the dealership closes suddenly. All of the vehicles, all of the documentation, and the owner disappear. All of the loans are sold to a finance company. The owner is untraceable, and the business is shut down. Bankruptcy is filed for the corporation, and debts go unpaid. Upon investigation, it is learned that the entrepreneur has a circuit of five states and 20 different businesses that she works in across different industries, often rotating through the businesses on a 2-year cycle. The businesses are constantly shifting; businesses are started and then closed with no notice. Over a 10-year cycle, the entrepreneur made tens of millions of dollars by running questionable businesses. Medical Driver Medical transportation companies have a very important position in society that involves transporting those in need of emergency services as well as transporting those who need non-emergency medical services on a regular basis. Government assistance programs offer to help fund many of the private medical transportation companies on a per-trip basis. There are examples of corporations that run private medical transportation companies, often using specially equipped vans and ambulances and including emergency medical technicians and paramedics based on the needs of the clients. Depending on the needs, managers will decide on the necessary staffing and cost to provide transportation. Government regulations are very clear as to what must occur on these designated trips. There are business owners who will work multiple trips concurrently with the same personnel; however, according to the regulations, the personnel should be standing by and ready should there be an incident. In effect, these companies are double- and triple-billing the government assistance programs. The government assistance programs periodically will audit organizations. The owner will start the process of closing the business and moving assets out of the business when the audit begins, and audits can take several months to complete. The owner will file bankruptcy of the medical transportation company and sell the equipment at pennies on the dollar, often to a different medical transportation company that is run by a different corporation. There is also a market from other entrepreneurs who are selling or needing to purchase used medical transportation equipment. Another tactic is to shift the ownership for a period of time or until the equipment gets purchased by the same owner under a different corporation. The company can then open under a new name as a new corporation, which protects the owner from any potential litigation associated with the old corporation. This also provides the new company with lower startup costs. While the examples used here talk of used automobile dealerships and medical transportation companies, the business model is not isolated to these two industries. This model is played out across industries and enterprises globally. This is where the rubber of the ethical standards of the individual and the ethical standards of the corporation meets the road. It is important at all levels that the ethics are consistent throughout the organization and everyone is held accountable from the top leadership to the bottom-level associates. The ethics that we practice will be the reputation we are known by. Ethics in Diversity Hiring Practices Organizations and operations are impacted by hiring unique individuals with specialized knowledge, skills, and abilities (KSAs). There can be a culture within particular departments of an organization (e.g., accounting, manufacturing, technology) where certain behaviors might be more tolerated in comparison to the culture of the organization as a whole. Hiring practices may be tailored to meet the needs of the organization, though special handling of these circumstances is risky. The individual who decides if behaviors, practices, and

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policies, whether written or unwritten, are a violation of the code of conduct or common ethical standards places this entity within the organization at risk. The organization must continue to monitor at different levels to ensure quality, safety, and enforcement of ethical practices. A hiring manager can choose to hire individuals who meet a certain criterion, but there is still the challenge of hiring the most qualified individual for the position (i.e., who the best fit is for the workplace environment) and aligning the individual who has the greatest KSAs with the culture of the organization. When attempting to establish a diverse workforce, hiring individuals from a similar demographic and cultural background or experience is diminishing. Adaptation and inclusion are necessary in order to continually improve performance and potential within the organization. Ethical standards, codes of conduct, and implementation of safe workplace practices are foundational for the improved performance of organizations to create a greater environment, thereby increasing potential and results by all individuals working toward the same vision, using the same mission, and being held to the same standard.

Reference Johnson, C. E. (2019). Organizational ethics: A practical approach (4th ed.). Thousand Oaks, CA: Sage.