Before wading into this morass, let’s remember who benefits from a profitable corporation. The biggest investors are “institutional,” which means endowments from universities, foundations, insurance companies (which invest the client’s premium payments so that the funds have a chance to grow until paid out as claims), and pension funds. Individual investors also participate. Your educational system depends on profits from their endowment’s investments in corporations. Your insurance premiums would be higher if insurance companies simply took your premium payments and put them in a checking account until they paid claims. Charities depend to some extent on earnings from corporation dividends and interest payments to operate.
Importantly, retired people need dividends and interest to eat, pay the rent and buy health insurance. If they saved their own money through a retirement plan, U.S. tax law lets that investment return accumulate tax-free until it is finally taken out after they retire. If the retired person has a pension from their company, that pension has taken the money put aside by the company and invested in the stock and bond markets (and real estate too) so that when funds need to be paid out when the employee retires, there will be sufficient money to pay the recipient until he, or she, and in some cases, their spouse dies.
Without growth in the stocks, the dividends and the interest payments, the companies providing the pensions would have to put more money in the pension fund, thus reducing current dividends to stockholders or by not giving raises to employees. If you live long enough, you will likely someday depend in part on this system for your retirement. So, before you say it’s greedy people who benefit from corporate profits, remember, that’s YOU!
We also know that some executive pay is very high. Some executives are really good, smart, and work hard, and are worth a lot of money to a company. Hiring someone cheaper but who is not as good, generally gives the result you’d expect. Lower profits. Remember, if you need someone to jump an eight-foot hurdle, don’t make the mistake of hiring two people who can jump only a four foot hurdle.
Keep that in mind as we launch into a criticism of some unethical practices. Our goal is to understand where it’s possible to let things slip into unethical behavior because of the pressures to perform. It’s true that companies put pressure on employees to produce profits by performing at a high level. It’s that quest to meet that demand that causes people to do unethical things; small at first, but over time it becomes easier for them to do “bigger things” that are unethical.
With that in mind, take at least one of the following scenarios you read about in the textbook and comment in detail about what went wrong, who was wrong, and who were the “stakeholders,” and how did they get hurt. Cover all those in your answer. We’re not discussing breaking the law, but only doing unethical acts. It’s not against the law to tell your employees that you will compensate them based on how much they deliver to the corporation’s bottom line. That’s called a “commission” or a bonus, and many of you have worked for a commission. Doesn’t it make sense that the person who works harder, smarter, longer and delivers more results should get paid more? If not, then could you make the case that the company is about to go out of business?
Wherever there is a demand for a product or service, if one supplier isn’t performing, another supplier will meet the demand and get the business, and the profits. That’s what happened in some of the cases you read about in Units 5 and 6. Competitors beat an unethical company at their own game once the unethical company is exposed, and the competition then bought the bad company for a cheap price. It’s sad when a large 100 year old retailer like Sears, from which I and my parents regularly made purchases for decades, ends up being dismantled for almost nothing because of an ethical breach that started with an incentive program to make their auto repair business more profitable.
Select one of the following four issues and discuss in a paragraph or two:
- Sears auto service centers told clients who brought their cars in for a $49.95 “brake job” often ended up with much larger bills, sometimes for simple overcharges and other times because the service agent told the client that their “shocks, springs, tension or sway bars, bushings, etc. were wearing out and should be replaced.” Was it true? Did those items need to be replaced or was the Sears agent selling things the client didn’t need? While admitting some of the brake work did have overcharges, most of that was small. What was egregious was selling things the client didn’t need. That’s unethical. BUT WAIT, says Sears. Older cars may have parts that still work, but are aboutto wear out – and when they do so, the driver and passengers are at risk. It’s the service agent’s moral duty to point that out to the client so the car won’t soon be dangerous to drive. Is that true? But is that method of selling ethical? Discuss in depth including the issues described above in my general discussion.
- I know a person who has a small company on the side. It is a service that provides an app on the internet and helps people understand estate planning. He gets companies to offer his app to their employees for a fee paid by the employer. He is 1/8 Cherokee. Because he is part Native American, and he owns a part of his company and his wife is female and is, for purposes of the law, therefore qualifies as a minority/female business owner as well. The U.S. Government says that companies that do business with the government get preference in awarding contracts if they are owned by protected minorities or women. Also, the U.S. Government itself requires all its agencies and branches to give hiring preference and contract award preference to companies owned by a protected minority or a female. Discuss your thoughts on this “preference,” and on the business owner’s claim of 1/8 Native American to get the contract with government agencies like the armed forces, IBM and other companies, merely by giving his wife partial ownership and his claim to being part Cherokee. Is 1/8 enough to make a claim as a minority? Is 1/16? Is ¼? Is ½? Do you have a cutoff point where you think it’s a ruse? Should the government require that preference at all? Read case 5.3 carefully before answering. If you want to dive deep, consider and analyze what the U.S. Constitution says about treating one group of persons differently than another group.
- If your U.S. based company is doing business overseas where the custom is to pay “grease” money to get licenses, permits, etc. in order to build a plant or get employees, is paying that “grease” money ok when it would be illegal to do so in the U.S.? Is it ethical to pay people overseas a very low subsistence wage to a 12 year old worker so you as a consumer in the U.S. can buy cheaper Nike shoes? Just because that’s the best job a person could have in their village and the 12 year old is making enough to feed the whole family, is that the right thing to do – what some would call “exploiting” vulnerable people? Who are all the stakeholders here? Should the company be allowed to do that? What about the protesters who claim that the company is treating these workers unfairly? So, if it’s that bad, why aren’t the companies manufacturing your shoes in the U.S.? Also discuss the other argument, that this type of activity actually provides a path to eventual prosperity as happened in Hong Kong and other Asian regions. Should Nike move to a poor part of Africa or India and start a factory and hire kids to make shoes? What would the barriers likely be if they tried that? Some companies are trying it right now. Will they be successful?
- Discuss industrial espionage on an international and a local level. Is espionage necessary as a part of business now that technology is readily available to do it? There have been spies for thousands of years. Until the industrial revolution, there was not much concern about intellectual property as a target of theft, but now it’s all about IP theft, not just for national defense, but for getting ahead of the competitor’s product development. Imagine the cost savings if your company didn’t have to spend years and billions in research to come up with a product when you could steal that information from another company in a foreign country, and it would be almost impossible for that foreign company to enforce their IP protective laws on you in your country. Discuss and suggest a solution.
Please do not rewrite the question just include it in your discussion
