Question.3135 - Question 1 Historical trends have affected the social responsibilities of business. Explain how recent scandals have affected the business climate, including any changes in responsibilities and expectations? Question 2 Stakeholders are classified into primary and secondary. Why is it important for companies to make this distinction? Question 3 What is a code of conduct? How can a code be communicated effectively to employees? How can companies strive formsuccessful relationships with consumers, including meeting their economic, legal, ethical and philanthropic expectations? (10 marks) How can an organization be socially responsible and promote legal and ethical conduct? Case Study 1 Discuss who are the major stakeholders in this case and why? (ii) Explain in detail what is the main ethical issue involved in this case? Is it product quality, product safety, or deceptive practices? (10 marks) (iii) Explain what responsibilities the restaurant has to consumers in this situation. Case Study 2 Required: (i) Amgen’s Code of Ethics emphasizes “Doing the Right Thing.” The code suggests that employees should resolve ethical dilemmas by considering the legality of proposed actions, compliance with company policies, Amgen’s values, and an analysis of ethical issues including rights and respect. Identify the areas where the allegations by Lenny O’Shey and the alleged retaliation seem to contradict the principles and practices embodied in the code. (10 Marks) (ii) Explain what is meant by whistleblowing. (5 Marks) (iii) Given the facts of the above case, do you think O’Shey took the right steps to report his concerns about Amgen’s process for dealing with post-market complaints about drugs as a potential problem? Explain any other two steps he might have taken. (iv) Evaluate O’Shey’s actions from an ethical perspective, i.e., what motivated him to act as he did?
Answer Below:
Corporate Governance & Social Responsibility PART A Question 1 Historical trends have affected the social responsibilities of business. Explain how recent scandals have affected the business climate, including any changes in responsibilities and expectations? In the era of 1950’s & 1960’s corporate managers were working under restraints in their administrative practices. Most of the managers and companies took this few restraints to cultivate positive public relations and social endeavours. The corporate earnings were invested in charitable trusts, various communities and cultural activities. In 1970’s and 1980’s because of economic turmoil across the globe this trend shifted and companies started focusing on its core competencies and reduced product diversity. The late 1980’s and early 1990’s found companies focusing more on its profitability and establishing themselves in economies of scale. Productivity and efficiency became the most important attribute for all the companies. (Falconi 2004, pp. 92-94; Schoenberger-Orgad & McKie 2005, pp. 578- 583) However, latter the concept of corporate responsibility was again renewed due to various scandals in 1990’s. According to Mark Lilla in 1960’s we became highly concerned on social related issues although the economic turmoil gave negative influence on their social responsibility and they became primarily profit oriented but soon in the 90’s it was realised the importance of social responsibility. The trend continued in 2000 and in the coming year’s companies have created a solid focus to play a vital role in the society. Corporate crisis of 2001 & 2002 brought new legislation and social responsibility attributes into focus. The sept 11 attack brought crisis management, work place safety and other responsibility of the organisation towards society. Despite the economic turmoil of 2008 & 2009 social responsibility efforts remain enacted. Question 2 Stakeholders are classified into primary and secondary. Why is it important for companies to make this distinction? The stakeholders of a company are mainly classified into primary and secondary stakeholders. It is important to classify them as it helps to know who is a primary stakeholder or a secondary stakeholder of any activities. Also, it is necessary to know that all stakeholders are not important to achieve their objectives (Salam and Noguchi, 2006). In order to achieve their objectives all decisions are influenced by each stakeholder, their power, function, urgency and legitimacy. All these factors helps to differentiate between a primary, secondary and non stakeholders ( Vandekerckhove and Dentechev, 2005: P 221). According to (Bourne And Walker, 2005: P 651) stated that legitimate and valid stakeholders need to be identified by the companies as their influence and power could be mapped and has a strong impact on the projects and product needs can be better understood. Primary social stakeholders have direct stake in the company and its success. Thus they are very influential for the company whereas secondary social stakeholder may also be very influential in affecting the repute of the company but there stake is more as a representational then direct. Thus, any accountability of secondary stake holders is less compared to primary stake holders. Whetten et. al. (2002) recently defined corporate social responsibility as “societal expectations of corporate behaviour; a behaviour that is alleged by a stakeholder to be expected by society or morally required and is therefore justifiably demanded of a business” (p. 374). Those who benefit or are adversely affected are known as primary stake holders and those with some intermediary role the secondary stake holders (overseas development administration, 1995). 6. What is a code of conduct? How can a code be communicated effectively to employees? For management and other employees, a code of conduct describes behavior expectations in written form or another form of communication that may be informal. Ethical codes do not always prevent unethical behavior but they do provide the employees as well as management legal and ethical standards which will help to influence their commitment and job performance to the entity’s system of internal control. A code of conduct is intended to be a central guide and reference for users in support of day-to-day decision making. It is meant to clarify an organization's mission, values and principles, linking them with standards of professional conduct. As a reference, it can be used to locate relevant documents, services and other resources related to ethics within the organization. A code is also a tool to encourage discussions of ethics and to improve how employees/members deal with the ethical dilemmas, prejudices and gray areas that are encountered in everyday work. A code is meant to complement relevant standards, policies and rules, not to substitute for them. (Ethics Resource Center, 2011). The most effective communication of the code of conduct is multi- faceted. (Kathryn N., 2011) How can companies strive formsuccessful relationships with consumers, including meeting their economic, legal, ethical and philanthropic expectations? (10 marks) Successful organizations can strive for marketing citizenship by adopting a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities that their stakeholders expect from them. The economic, legal, ethical, and philanthropic dimensions of social responsibility can be viewed as a pyramid. Firstly all the organisation have economic responsibility of becoming profitable in order to provide return. Stakeholders consist of the people who have a stake or claim in some aspect of the organisation’s product, markets, operations, industry and results. In general it includes customers, employees, investors, shareholders, government, communities, suppliers and many others. (Pride WM, 2009). There are various examples of companies which fall who ignore stakeholder’s demands of responsible marketing towards its customers trust. They also need to be abide by government. Some of the basic principles have been codified as laws and regulations to encourage marketers to conform to society’s expectations of conduct. Ethical marketing decisions foster trust, which helps to build long-term marketing relationships. Philanthropic responsibilities are not required by a company but in order to promote human welfare or goodwill a company has to do economic, ethical and legal dimension of social responsibility. Most of the companies link their product to a particular social cause for a short term or ongoing basis. This practice is known as cause related marketing. How can an organization be socially responsible and promote legal and ethical conduct? Businesses today are expected to look beyond self-interest and recognize that they belong to a larger group that expects responsible participation. Any organisation must conduct its business in an ethical manner and should promote social responsibility towards the society. The business ethics should go beyond the legal issues and should track the changes and trends in the society. We have often observed that the companies draw a boundary between legal and ethical issues but there decision should be beyond these factors, as it will help the company to gain societal benefit. The legal system provides a formal venue to marketers to resolve ethical and legal disputes. Social responsibility adds to an ethical imperative to do things which make society better and not to the one which makes worse. Social responsiveness consists of the capacity of the company to adapt to the changing societal conditions. Social responsibility requires business to determine what is right or wrong and thus fundamental of truths. Social responsiveness is guided by social norms that can provide managers with a meaningful guide for decision making. (N.d. Citeman) Case Study 1 Discuss who are the major stakeholders in this case and why? Stakeholders consist of the people who have a stake or claim in some aspect of the organisation’s product, markets, operations, industry and results. In general it includes customers, employees, investors, shareholders, government, communities, suppliers and many others. (Pride WM, 2009). There are various examples of companies which fall who ignore stakeholder’s demands of responsible marketing towards its customers trust. They also need to be abide by government regulations. The major stakeholders in the case “To Check or Not to Check the Chicken” are the employees of the firm battering the chicken at the time, Assistant manager of the firm, Store manager and consumers. The due-care theory provides that the customer is the more vulnerable party; consequently, the firm has a greater ethical responsibility to the customer. As per this theory the stake holders have ethical responsibility to the consumers of their sandwiches. It is firm’s and employees responsibility to ensure the consumers interests are taken care of and any health hazard after consuming their product. The doctrine of strict liability holds that anyone in the value chain is liable for harm caused to users if the product as sold was defective and unreasonably dangerous. (ii) Explain in detail what is the main ethical issue involved in this case? Is it product quality, product safety, or deceptive practices? (10 marks) The main ethical issue involved in the case, “To check or not to check the Chicken” is quality of chicken served to the consumers. The restaurant was suppose to measure the temperature of the chicken every hour to make it was below 40 degree. The responsibility was assigned to the person whoever was battering the chicken at the time. There have been several incidents of people falling ill, few people died as a result of bacteria formed in warm meat. According to the ethical theory of due care provides that the customer is the more vulnerable party; consequently, the firm has a greater ethical responsibility to the customer. The contractual and due-care theories do little to inform us about quality because they take the product as a given. The provider knows more about the product than does the buyer, so these theories focus on fulfilling the seller’s duties and protecting the customer. The social costs view can help a business person to focus on quality issues because of the threat of additional costs. This theory says that if a product harms a customer then the provider should bear the cost of that harm. With this sword hanging over their heads, providers may be more inclined to provide high quality, safe products to their customers. (iii) Explain what responsibilities the restaurant has to consumers in this situation. The doctrine of strict liability holds that anyone in the value chain is liable for harm caused to users if the product as sold was defective and unreasonably dangerous. In the above case we have seen that the restaurant was selling infected chicken which can be dangerous to the consumers of the sandwich. . If a product harms a customer then the provider should bear the cost of that harm. With this sword hanging over their heads, providers may be more inclined to provide high quality, safe products to their customers. These principles, taken together, point to a movement away from caveat emptor (buyer beware) to caveat vendor (let the seller take care). It is important to emphasize that the liability doctrine applicable to a specific case is largely dependent on state laws. Case Study 2 Required: (i) Amgen’s Code of Ethics emphasizes “Doing the Right Thing.” The code suggests that employees should resolve ethical dilemmas by considering the legality of proposed actions, compliance with company policies, Amgen’s values, and an analysis of ethical issues including rights and respect. Identify the areas where the allegations by Lenny O’Shey and the alleged retaliation seem to contradict the principles and practices embodied in the code. (10 Marks) According to the site, Amgen each employee will be held accountable for any unethical practices. The code of conduct clearly states that all its employees should resolve ethical dilemmas emphasizes on Doing the Right they should adhere to the laws, and act on good judgment. (n.d Amgen) Kickbacks are illegal and deemed unethical in the United States. Kickbacks, sometimes referred to as bribery, are payments given or received with the intention of influencing another to gain from a situation or transaction. In the medical industry, doctors are often given samples from pharmaceutical companies to give to patients. This practice is common and is not illegal. However, when the doctor agrees to prescribe a particular medication or refer a particular specialist doctor and in exchange for a return, this is where the illegal process begins. In the above case the allegations by Lenny O’Shey, had uncovered facts that Amgen was not adequately and consistently identifying phone calls or mails related to post-marketing adverse events of product complaints. Despite his complains to senior manager there was no importance given. It seems the manager was aware of the issue and did not want to resolve .Thus, it contradict the principles and practices embodied in the code. (n.d. Brainmass) (ii) Explain what is meant by whistleblowing. (5 Marks) Understood correctly whistle-blowing is defined as an informant who exposes wrongdoing within an organization. Whistle-blowing is not about informing in the negative but more so, raises concern about malpractice within an organization. More so, it can also be defined as the release of information by a member (or former member) of an organization where there is evidence of illegal or immoral conduct in the organization, or conduct in the organization that is not in the public interest.Norman Bowie defines whistleblowing as “the act by an employee of informing the public on the immoral or illegal behavior of an employer or supervisor.” the question of whether an employee should blow the whistle on his company or organization (iii) Given the facts of the above case, do you think O’Shey took the right steps to report his concerns about Amgen’s process for dealing with post-market complaints about drugs as a potential problem? Explain any other two steps he might have taken. As per the facts mentioned in the case O’Shey was in ethical dilemma as the company was not taking any steps to post-market complaints. He again raised his flag to his seniors so that the issue could be resolved but again he was disappointed. The other two steps he could have taken is by finding out the issue why there has been so much complain from the drug, can there be any remedy to address the issue. He could also have approached the companies’ highest authority and raise flag with them as the immediate senior may be involved in the case. (iv) Evaluate O’Shey’s actions from an ethical perspective, i.e., what motivated him to act as he did? O’Shey’s did the right thing as the company’s code of conduct directly says that all its employees should resolve ethical dilemmas emphasizes on Doing the Right they should adhere to the laws, and act on good judgment. (n.d Amgen). His job was to improve Amgen's compliance processes with high inherent risk to public safety, major criminal and civil liability, or both. (n.d Brainmass). According to Federal law requires drug companies to track and report to the Food and Drug Administration any problems with their drugs after they hit the market. Thus these ethical perspective what motivated him to act. References Argenti, P. and Forman, J. (2002). The Power of Corporate Communication, New York: Mc Grow Hill Publishers Baker, S. (2002). The theoretical ground for public relations practice and ethics: A Koehnian analysis. Journal of Business Ethics, 35(3): 191-205 Barney, R. & Black, J. (1994). Attorney adversary model of communication. In Moloney, K. (2006) Rethinking Public Relations: PR Propaganda and Democracy, p. 165 Browne & Haas (1974), In Blowfield, M. & Murray, A. (2008) Corporate responsibility: A critical introduction, p. 207 Cheney, G., & Christensen, L. G. (2001). Organizational identity: Linkages between internal and external communication. In L. Putnam & F. Jablin (Eds.), The new handbook of organizational communication: 231-269. Thousand Oaks, CA: Sage. Courville, S. (2003). Social accountability audits: Challenging or defending democratic governance? Law and Policy, 25 (3), 269-297 Etzioni, A. (1993). The Spirit of Community: The Reinvention of American Society. New York: Simon and Schuster. Falconi, T. (2004). Corporate social responsibility. Journal of Communication Management, 91 (1), 92-94 Fitzpatrick, K. & Gauthier, C. (2001). Toward a professional responsibility theory of public relations ethics. Journal of Mass Media Ethics, 16(2&3): 193-212. Carroll IM, Consumer Stakeholders: Product and Service Issues, CH14, 2003 Management, Organization, and Ethics in the Public Sector, P 199 Bishop, Carmel Connors, C. J. Charles J. G. Sampford, Ashgate Publishing, Ltd., 2003 Pride WM, What we do to bad companies - Cengagebrain.co.uk (Ch.1,P 3), 2009 Ethics Resource Center. (2011). Why have a code of conduct. Retrieved from http://www.ethics.org/resource/why-have-code-conduct http://www.citeman.com/7714-how-can-organizations-demonstrate-socially-responsible- actions.html#ixzz2SFPG2994 visted on 03 rd May 2013 http://brainmass.com/business/other/437235 visited on 6th May 2013 www.amgen.com/corporatecompliance.html. visited on 6th May 2013 www.Wikipedia.org/wiki/whistle-blowing.com visited on 6th May 2013More Articles From Business Management
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