Just a Background
The stories from corporations around the globe indicate that business
bankruptcy is not really caused by tough competition but those stories tell us
that one of the causes of bankruptcy is related to moral issues. Moral values
are no longer applied to the workplace when people are carrying out their
duties and responsibilities but people are ruled by self-interest and greed.
Greediness causes people to look for shortcuts to achieve higher gains in the
short run. When companies commit unethical behaviour, it is not only the
company that suffers but the lives of the people.
Let us take the example of several stories of bankruptcies which are
considered corporate scandals. Sammy
Said (2013) in THE RICHEST journal listed several top ten corporate scandals
and they are Union Carbide (10), Compass Group (9), ImClone System, Inc. (8),
BP Oil (7), Xerox (6), Tyco International (5), HealthSouth Corporation (4),
WorldCom (3), Parmalat (2), and Enron (1).
Why are they called corporate scandals? Let us look into the reasons why
they are scandalous. Union Carbide is a chemical manufacturing company that was
founded in 1917 and was known as a pioneer of petrochemical industries. It
produced chemical products as raw materials for several industries. It went
into disaster when it exposed 5 million people in Bhopal India to methyl
isocyanate gas after a leak from the pesticide plant. The Indian government
charged them $ 480 million. Adding to the storyline is Compass Group. Compass
Group was founded in 1941 by Jack Bateman. The company started as a small
canteen to support British war support staff. The company then has grown to
become an authority in the contract catering industry. The scandal surfaced in
2005 when a UN procurement office together with Vladimir Kuznetsov was arrested
for corruption. The group later admitted to receiving $1 million as a bribe from
the Compass Group. ImClone Systems Inc. is an American
pharmaceutical company which was founded in 1984 and was engaged in the
production of cancer medicines. The scandal happened when the Food and Drug
Administration of America rejected one of the most anticipated medicines that was
developed by the company. How did the scandal happen? It
happened when the Founder and CEO, Samuel D. Waskal, sold his shares and
influenced his family, relatives and close associates to follow suit before he
even released the news of the FDA’s rejection of the medicine, for fear that the
share price of ImClone Systems Inc. would plummet. He was sentenced to seven
years of imprisonment for insider trading and fraud. Making it to the list is
BP Oil. BP Oil or British Petroleum Oil is the 3rd largest energy company in
the world operating in more than 75 countries and was founded in 1906. What
scandal did it do? There was a massive amount of oil leaked from one of the
wells into the Gulf of Mexico near the Mississippi River Delta. It was caused
by a wellhead blowout during the digging process, which killed 11 people and
eventually caused great harm to marine life affecting about 800 km of the American coastline. BP processed almost $1 million in damage claims and by far
has paid the claimants close to $5 million. Another scandal is committed by
XEROX. It was discovered in 2002 that there were incorrect
entries in the balance sheets of the company from 1997 to 2000. The U.S.
Security and Exchange Commission brought Xerox’s malpractice into the
limelight. The corporation rectified its accounts and was forced to pay $10
million as the penalty for securities fraud. Another malpractice story was committed by Tyco
International. In 2002 the company got involved
in a scandal when its CEO Dennis Kozlowski was accused of theft, and embezzling
more than $120 million worth of company funds. He received millions of dollars
that were never authorized by the company’s directors. Kozlowski was sentenced
8-25 years of imprisonment in 2005. Making it to the top 4 was
HealthSouth. HealthSouth provides health care for patients recovering from cardiac or neurological disorders. The company’s CEO
Richard Scrushy got into a scandal in 2002 when he sold $75 million of his
company stocks before the company reported huge losses. When the scandal was
investigated, it was found that the CEO got into a fraudulent deal which
amounted to $10 billion. Another rocking story is WorldCom. What did the CEO
do? The company’s CEO Bernard Ebbers aggressively acquired new companies as a
way to build the company. For this reason, the company was able to accrue more
than $40 billion worth of debt. Other officials of the company decided to use
illegal methods to conceal the real financial condition of the business. Upon,
proving that Ebbers got involved in the fraud, he was sentenced to 25 years of
imprisonment. The second place in the scandal list was Parmalat. The once famous and rich company collapsed in
2003 when Tanzi embezzled eight hundred million Euros from his own company and
left a hole in its accounts equivalent to the amount of $20 billion, making the
Parmalat affair the biggest bankruptcy ever to happen in Europe. Finally, the
top one that rocked the corporate world was ENRON. ENRON is an American company
doing business in the energy industry which was founded in 1985. It was one of
the well-known companies and was even considered as America’s Most Innovative
Company. However, that fame, changed when the Enron Scandal was brought into the
open in 2001, making it the largest bankruptcy of all time, amounting to a
whopping $63.4 billion. It led to a massive job loss in 2002. More importantly,
it pioneered several policy changes to ensure that every American corporation’s
books are properly audited.
Those top ten most scandalous corporations are not the end of the story
of the scandals. Scandals continue to make the story of corporations in the
world today. Let us see some corporations that are also considered the Most
Outrageous Business Scandals of 2015. Yakowic (2015) presented several lists of
the most outrageous business scandals and they are first, Toshiba. To make aggressive profits, and convince the investors to invest, Toshiba’s
managers decided to fudge its financial results. The electronics company
admitted to inflating its earnings over seven years by close
to a whopping $2 billion, it sounded the same as Enron. Second is
FIFA. What happened? What did they do? The U.S. investigators accused the FIFA
officials of taking millions of dollars in bribes to influence clothing
sponsorship contracts, the FIFA presidential election, and the selection
process for the World Cup. Third is Goldman
Shacks. What did the company do? The
company officials did not supervise an employee who allegedly used
confidential regulatory information for the benefit of a client.
The employee had worked for the Federal Reserve Bank of New York
before Goldman and used his connections to get confidential
information. The company was fined $ 50 million. Fourth is the EXXON Mobil. What did EXXON do? The team of scientists of
EXXON conducted a study and concluded that global warming is real and that it
poses potential dangers for the company and higher sea levels could damage
Exxon's drilling platforms, processing plants, pump stations, and pipelines.
That is their findings; however, the solution was not to answer the problem.
Instead of helping to combat the environmental risk, Exxon decided to
launch a multimillion-dollar campaign questioning climate change in order to
bolster company profits. Another crook that came into the scene is Volkswagen. The Environmental
Protection Agency caught Volkswagen in a huge scandal that
reportedly could cost the company as much as $ 87 billion. The EPA uncovered that diesel-engine VW models sold in the United
States had software installed allowing the cars to falsely pass
emissions tests. Later, VW admitted that it had been cheating the tests
deliberately and revealed that 11 million cars worldwide were fitted with
the so-called "defeat device." There are still many to mention about
corporate scandals but the bottom line is that all those corporations mentioned
are involving ethical behavior in exercising their duties and responsibilities.
Are these caused by the confusion of morality and values? Or is it a lack of reinforcement?
The Confusion of Morality and Values
Different
people have different definitions of ethics. Often time people are confused with
ethics and values. The two are not necessarily the same because values are not
necessarily moral. One can value hard work but hard work is not necessarily
moral. Some people who do not know the exact difference between ‘values’ and
‘ethics’ often use the two words interchangeably. Though these two are
different, these two together form the basis for making decisions. Values are
basic beliefs one thinks to be of importance. Every individual has a set of
values through which he looks at all things and also at the world. It can be
said that most of the people will never deviate from their values. These values
can be said to be the guiding principles in one’s life or in decision-making.
‘Value’ can be defined as a bridge by which an individual makes a decision
regarding good and bad, right or wrong, and most important or least important
(Amico, 2016). Often time people say that the values of the person can be seen
in his way of living his life and in his work. Ethics is a set of moral
standards used for moral conduct or behaviour (Abun, 2016). In this case, moral
standards are guiding principles in one’s behaviour. Those moral values are
always in his /her mind whenever he/she carries out his/her duties and
responsibilities. Examples of moral
standards are honesty, fairness or justice, truth, generosity, kindness,
respect for human dignity and love.
The
sources of moral standards or moral values are reason, religion and culture for
those who adopt moral relativism. There is a saying that goes like, “avoiding the
negative clears the paths for our inherent goodness”. This saying is just
confirming the belief that all humans are necessarily good, not evil (Astor,
2016). This saying is in line with what Jean-Jacques Rousseau (1712-1778) was
arguing that humans are good by nature but corrupted by Society (Cameron,
2013). God has given humans the reason which has the capability to know good and
bad. Actions of humans are guided by reason and reason is naturally good.
Besides reason, the source of morality is religion. Each religion has the bible
and the bible contains moral values/teachings that everyone who belongs to that
religion has to follow. On top of reason and religion, a school of thought
is arguing that cultural practices are a source of moral conduct. Since it is
based on the culture, then each culture will have different moral values and in
such a case, there is no absolute morality to be followed by all (Abun, 2010).
The
source of values is the individual person based on what the person views as
important. Values are very much personal while ethics is very much societal. Ethics
regulate human behaviour in dealing with other human persons. Ethics remind the
person to follow the rules that are accepted socially. It is within such a view; that one can also argue that values and ethics sometimes can be in conflict. Even if
one has certain values, he will not be able to entertain certain decisions
based on the ethical codes. A person, who values profit as his /her important
value in running his /her business, may not be able to hold himself/herself
from cheating the customers, though she/he knows that cheating is immoral. What
is morally accepted by some may not be accepted by some who hold different
values. In short, values and ethics are two poles that influence a person in
his/her choice to act or not to act.
How about work ethics? For the purpose of this research paper, I
define work ethic as how one does his/her job based on the socially accepted
moral principle. In other words, it is a moral values-based work behaviour. The one who does the job has in mind
that his/her work should not harm himself/herself, others or the community as a
whole but it should promote the happiness of oneself and others. Along such
concepts, work ethics involve such characteristics as honesty, fairness,
integrity, justice, truth, love and accountability. Essentially, work ethics
break down to what one does or would do in a particular situation. Work ethics,
such as honesty such as not lying, cheating, and stealing, doing a job well,
and feeling/being a part of a greater vision or plan is vital. One should be
aware that what one does affects others and one should not harm the lives of
others in any form. In terms of justice, one should always be aware that
everyone should be treated equally as a human person, not as objects. In the case
of integrity, what one promises should be delivered. Lying is definitely
against telling the truth. Hiding the truth about the true nature of your
business is a form of unethical behaviour. Accountability is another work ethics
that motivate people to accept the blame if mistakes have been committed. When
a person does his/her job he/she should do it honestly, justly, truthfully,
with integrity and accountability.
A
work value is a different thing. It is a fundamental belief of a person or
organization and a source of guiding principles in carrying out their duties
and responsibilities. Values are the embodiment of what an
organization stands for and should be the basis for the behaviour of its
members in carrying out their duties and responsibilities (National Defense
University, 2016). However, those values may not necessarily be in consonance
with publicly accepted values because they are considered personal beliefs or
organizational beliefs. They are considered mirrors to evaluate one’s work if
she/he does it in line with his values or organizational values. An
organization has always values such as excellence, advancement, risk-taking,
altruism, creative expression, hard work, honesty, integrity, efficiency,
profitability, accountability, and many more. These values are their core
values and are used as their guiding principles in their work, however, these
values are not necessarily moral. The organization can have a long list of core
values as their work values and their core values may contradict the values
that the society holds. Those values can help people to know how to
evaluate their work; they can help companies to determine if they are on the
right path and fulfilling their business goals; and they create an unwavering
and unchanging guide. There are many different types of core values and many
different examples of core values depending upon the context.
The
Cause of Bankruptcy
Now
after we have seen the difference between ethics and values, we can make a
judgment because the big corporations went bankrupt. The question is: is
bankruptcy caused by moral values/ethics or values? The nature of ethics a
code of moral conduct that is socially accepted, while work values are not really
socially accepted because it is individual beliefs or organizational beliefs, not
necessarily socially accepted. Though some core values may be in
line with moral values, however, it is not a rule that a person or a
company’s work values should always be aligned with moral values. Based on the
above arguments, therefore, I really believe that work values have something to
do with bankruptcy but not work ethics. A company that is driven by
profitability as one of its core values can pursue profit by all means. A
company that is driven by excellence as its core values can do everything by
all means to achieve such status. A company that is driven by competitiveness
as one of its core values can do everything to stay competitive. Often time
the core values that are posted together with the vision and mission statement
are for pleasing the eyes of the investors, just like what Enron did. At
Enron.com, the company's Web site, one learns that as a ''global corporate
citizen'' Enron intends to conduct itself in accord with four capital-V Values:
Respect, Integrity, Communication and Excellence (Kunen, 2002). This is fairly
standard stuff but what happened after the values statement is crucial. The values
were just decoration on their wall but it was not used as guiding principles in
their business dealings. CEO Jeffrey Skilling had a way
of hiding the financial losses of the trading business and other operations of
the company; it was called mark-to-market accounting. This is a technique used
when trading securities where you measure the value of a security based on its
current market value, instead of its book value. This can work well for
securities, but it can be disastrous for other businesses (Investopedia, 2016).
Reinforce
Ethical Behavior in the Workplace
An excellent organization is
not just described by its quality product but also by the quality of
its human resources. Quality product is a product of quality human resources.
However, quality human resources is not just defined by their skills but also
defined by their moral values. When they are working on a product, they are
guided by their moral values. By their moral values, they are told that a
product should not be hazardous to human health, it must be safe. By their moral
values, they are told that they should not make a fake financial statement just
to please the eyes of the investors. By their moral values, they are told that the environment should be protected because the quality of life is dependent on
clear air. By their moral values, they are advised not to lie to their
customers, or investors and should be honest in dealing with their customers or
investors. By their moral values, they are reminded not to treat employees as
objects but as subjects with dignity, not as means to achieve ends.
Now, where do we start to
establish a clean or ethical organization? In order to
create an ethical organization, an organization screen employees based on their
past moral conduct/behavior. It is here an HRM should investigate the candidate
very well to include all moral records of the applicant. Dennis Collins (2009)
suggested that behavioural information can be obtained from resumes, reference
checks, background checks, and integrity tests. Behavior is also a function of
attitudes. The most reliable attitudinal survey scales for predicting ethical
behaviour measure conscientiousness, organizational citizenship behaviour, social
dominance, and bullying. Job candidates also should be interviewed about how
they managed ethical dilemmas at their previous workplace and allowed to comment on any issues revealed from the behavioural information
or attitudinal surveys.
Though strict screening
may be employed at the beginning, however, there is always a possibility that
the organization may have not gathered all the information about a person. There
are possibilities that some bad eggs have joined the workforce. To
prevent further the development of unethical behavior within the organization, the organization must formulate an ethical code of conduct as
Mack (2016) suggested that the organization must pose clear guidelines that
delineate the type of behavior that the organization expects. An
organization's codes serve as its conscience and provide employees with a
common ethical reference point. Reviewing a list of ethical questions helps to
unveil the ethics of any work situation that arises
Conclusion.
Corporate scandals are
majority caused by unethical behavior. Proper training and development on moral
values and values should be done in all organizations. Creating an ethical
organization may not be easy after all. It is not a matter of writing those
ethical standards and placing them on the wall and letting everybody read them and that’s
all. Actions that reflect those values are not monitored. This is actually what
happens when the organization writes their core values. They have core values
and place them on a piece of paper and place them on the wall. That’s it. There
are no clear guidelines on how to implement those core values, monitor their
implementation and what sanctions for violating those core values are.
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