Section B Case Study

Top 10 Business Ethics Stories of 2015

It has been a busy year in business ethics and corporate social responsibility. From the cheating
carmaker to the price-gouging pharma-bro, to the coffee company that wanted us to have a
casual chat about race with the barista, the year has been a cornucopia of case studies in the
ethics of commerce. Just about any media outlets year in review could serve as fodder for a
year-long course in business ethics. But weve gone ahead and drawn you a roadmap.

Below, the editors of Business Ethics Highlights present their entirely unscientific Top 10
Business Ethics Stories of 2015. This is our list of the top 10 items we reported on during 2015.*
To create this list, we looked both for individual stories that had made a big splash, and for
companies or individuals who had made the news multiple times for different reasons. In no
particular order, here they are.

Volkswagen was perhaps the biggest business ethics story of the year. The attention it got springs
from two main sources: first, VW is a big, big, well-regarded company, not some fly-by-night
operation. Second, the company didnt just engage in some sort of minor rule-bending, fiddling
along the margins: it outright lied to regulators and to customers regarding a key aspect of its
cars performance. No wonder people were so interested in the lies the company told, in how it
tried to scapegoat its engineers, and in the possibility that there just might not be very much
thats special about Volkswagen, in terms of the companys likelihood to engage in wrongdoing.

In September, the CEO of Turing Pharmaceuticals, Martin Shkreli, quickly went from utter
obscurity to being the worlds most hated chief executive by buying a company that makes a life-
saving pharmaceutical and promptly raising the price from $13.50 to $750 per tablet. Most recent
update: Shkreli has been arrested, for fraudulent activity unrelated to his price-gouging. Few
tears are being shed, even among those who would defend his price-gouging as an unremarkable
side-effect of an otherwise-beneficial free market.

Another issue that has seen a lot of attention this year is the sale of homeopathy, and other
alternative medicines. Toward the end of 2015, we featured a piece by BEH co-editor Chris
MacDonald, which generated a huge amount of discussion on social media and which, within 24
hours of publication, became Canadian Business magazines most commented-upon story of the
entire year. Check out Homeopathy: the Ponzi Scheme of Healthcare. The key idea: relevant
experts know that Ponzi schemes cant make you rich, so theyre illegal. So, by analogy, why
hasnt homeopathy been outlawed yet?

BEHs own most popular item of the year was a story about BBQ restaurants being banned in
Austin, Texas. The bylaw the city passed was not a ban, per se, though it was sometimes referred
to that way. But it was a proposed limitation on restaurants right to emit smoke, which raised
interesting philosophical questions about just what counts as pollution, and what counts as
nuisance. Frankly, were not quite sure why this tempest in a teapot topped our stats; are
visitors finding our site by mistake while googling BBQ recipes?

Various elements of the so-called sharing economy were big in the news this year, and
continued to generate controversy. Fans and foes have been vocal. For example, back in
September the New York Post published an op-ed on why Airbnb helps make New York more
affordable, contradicting those who claim that the accommodations service is driving up the
price of lodgings. And ride-sharing service Uber continued to please users while angering
traditional taxi companies and frustrating municipal lawmakers.

Another of the big stories of the year involved an organization that most wouldnt think of as a
business in the traditional sense, namely FIFA (the Fdration Internationale de Football
Association)the governing body for soccer worldwide. In May, several of the organizations
leaders were arrested for corruptionbut not its bombastic president, Sepp Blatter. The
following month, Blatter resigned, and was more recently banned, for 8 years, from participation
in any soccer-related activities, by FIFAs ethics committee.

Fast-food company Chipotle created a tempest in a taco by announcing that it would stop using
genetically modified ingredients. Critics called the move anti-scientific, citing the lack of
evidence to support anti-GMO sentiment. More recently, suspicions arose that Chipotles anti-
GMO stance was a smokescreen to distract from the companys dodgy sanitation practices. Why
keep the kitchen clean when you can impress people with your holier-than-thou sourcing
practices?

Not surprisingly, wage inequality continued to be an important theme. August saw the release of
a list of CEOs who make at least 800 times more than their employees. One of the richest men
in the world, Warren Buffett, chimed in and agreed that inequality is a problem, but added that
one standard prescription raising minimum wage is not a solution.

Gender equity was also a big topic in 2015. Women fighting for equality got a boost from high-
profile women, including Jennifer Lawrence (lamenting gender-based pay disparities in
Hollywood) and tennis superstar Venus Williams (trying to correct the gender-based pay
differential in pro sports).

In March, Starbucks announced an ambitious some would say quixotic plan to get Americans
talking about race. The idea was to encourage customers to chat with baristas about what is
without a doubt one of the most pressing social issues of the day, namely race. Skeptics scoffed,
mocked, and rolled their eyes. The foam had barely settled on the latte before Starbucks declared
that the Race Together campaign was over.

There you have it, our year in review. Each of the stories above involved winners and losers. But
then interesting times are always a mixed blessing.

Sources: Journal Review Foundation, 2015.

1) Explain about importance of ethical conduct in a business. (10 Marks)

2) List and explain the way to promote ethical conduct in the organization. (10 Marks)

Answer

1) Explain about importance of ethical conduct in a business. (10 Marks)

Social Norms

Ethics involve people from different walks of life, different countries and different cultures all
agreeing on some basic principles of how to conduct themselves. Since business transactions in
our increasingly global economy involve businesses with employees and owners who come from
different backgrounds interacting with each other on a regular basis, business ethics provide a
common ground everyone can agree upon. For example, accountants from different backgrounds
may all prescribe to the same system of accounting standards such as GAAP, or General
Accepted Accounting Principles. By everyone adhering to the same standards, investors and
other groups can assess the financial performance of one company using the same methods it
uses to evaluate another company.

Employee Conduct

If employees feel they are expected to act ethically and are treated ethically by their employer,
they are less likely to engage in unethical behavior that would hurt their employer. Employees
are less likely to take company property, including office supplies, or make larger claims on
expenses for travel or other business-related activities, including the cost of conducting some
non-business activities. Employees who act ethically also do not take excessive breaks or spend
company time and resources engaging in personal activities, lowering their productivity and the
profitability of the business.

Legal Problems

Depending on the country, state or even city where you are conducting business, engaging in
some unethical activities may lead to trouble with the law. You may have to work to defend your
business from legal action as a result, which takes away from any profit the business earns.
Problems arising from unethical behavior may seriously affect the companys ability to operate
in certain markets.

Public Relations

When your company, or the employees within your company, engages in behavior that is either
ethical or unethical, the members of the public who interact with your company take notice. If
your company acts in ways the public considers ethical, your company enjoys an increase in
public trust. Building a positive image in the public sphere helps your company unlock future
opportunities and avoid intense public scrutiny during periods when your firm may struggle.

*Accept relevant answer.

 2) List and explain the way to promote ethical conduct in the organization. (10 Marks)

Train Employees

You can't expect your staff to act ethically in accordance with your company's code of ethics if
they don't know what that code is or why it's important. Hold regular sessions on ethics and how
to approach ethical dilemmas among staff. The more training and resources you provide, and the
greater emphasis you place on being ethical and acting accordingly, the more your staff
understands exactly what you expect in the office.

Reward Ethical Behavior

Far too often, companies simply expect ethical behavior; however, if you want to promote this as
a prominent behavior among staff, then you need to show and prove, so to speak. Provide
rewards for solid ethical behavior; for example, if you have an employee that goes above and
beyond to put her personal interests aside to always do what is best for her clients, that is
considered ethical behavior and she should be rewarded and held up as an example for others to
strive to do the same. The more you reward employees for sound ethical decisions, the more
likely the masses will follow suit.

Lead by Example

Expect more of your management team; employees generally follow company examples set forth
for them by management employees. Hold your managers to a higher ethical standard so that
they are credible when they communicate expectations to their staffers to do the same. Challenge
management staff to hold regular discussions with employees to work through potential ethical
issues that may come up and find ways to brainstorm through them as a team. If everyone is on
the same page, it is more likely that the team as a whole will adopt the same types of ethical
behaviors.

Consider Work-Life Balance

According to the Accounting Web website, a 2007 Ethics and Workplace survey by Deloitte &
Touch states that 91 percent of employees surveyed said they are most likely to make good
ethical decisions at work when they have a better sense of work-life balance. Pay attention to
signs of burnout or discontent among staff, and take steps to address these types of issues when
they present themselves.

*Accept relevant answer.