How the writer defines the organizational ethics. Comment.

 

Business Ethics

 

How the writer defines the organizational ethics. Comment.

 

Case Studies

CASE STUDY (20 Marks)

By way of introduction, let me state my (a freelance writer) most fundamental belief about organizational ethics: Ethics is not about answers. Instead, ethics is about asking questions. It’s about asking lots of questions and, maybe, if you’re lucky, even asking the right questions every now and then. In my experience, ethical organizations don’t shy away from asking potentially embarrassing questions, ones that might disturb the status quo. The need and value of doing so was brought home clearly in the Enron/Arthur Andersen scandals. Those were two organizations where, apparently, no one dared ask the tough questions that might actually have saved the companies. Now, thanks to those and related scandals, the good news is that corporations are routinely asking tough questions about financial reporting. Today, we’re all terribly conscious of the risks to the organization if we fail to question the numbers. Almost all of you are in the firing line in that regard, so there’s very little that I can tell you about the importance of assessing financial risk. I don’t have the level of knowledge that you have about financial accounting, but I do have some related experience that I’m going to draw on in my remarks today. As you know, I’m a professor of management, but today I am drawing on my experience as a member of the board of a NASDAQ company for some ten years. I served as a chairman for the Audit Committee until they actually required that you know something about auditing. Now I am on the Compensation and Governance Committee. I am proud of the record of our little company: We have been squeaky clean from day one. As a matter fact, when we went public 10 years ago, we had little buttons that we all wore that said, “We be clean.” This is because we had a member of the board named Robert Townsend, the man who created the Avis Corp., and he was not only one of the great management thinkers but also one of the most ethical business leaders this country has known. He insisted upon spotless ethics in everything we did, and it became part of the culture of the company. If there was a nickel on the books that was in question, we have always interpreted accounting rules in the most conservative way. We have never had anyone question our numbers and I hope to God we never will. But the story doesn’t stop there. Recently our board undertook a thorough audit of the human resources function of our organization. The recent negative exposure that companies like Nike and Levi Strauss have experienced concerning working conditions in their plants in Asia convinced us that consumer products companies run considerable risk in this arena. There was a bit of resistance to undertaking this audit. In fact, as at most companies, the eyes of our HR people glazed over whenever we used the word ethics. We are a small company, so we don’t have somebody who was an ethics officer per se, so it fell to the board to raise these questions. Questions for the Compensation and Governance Committee Once we started to do so we quickly came to realize that there was an entire raft of HR associated issues that we had to monitor if we were to assure our shareholders we had done adequate risk assessment in the organization. Our board members are not experts in this arena, but we realized that we had to be able to assess risks in all the corporation’s major human capital management systems: selection and recruitment processes, training policies and  programs, performance appraisal systems, executive compensation, sales and other forms of incentive compensation, base pay and benefit determination, talent management systems (including manpower and succession planning), labor relations, and so forth. Wehad to ask if there were appropriate methods and analytical programs in place that monitor for age, sex, and gender discrimination; employee attitudes and morale; talent procurement and retention? We wondered to what extent potential employees saw our company as a great place to work. We started having to pay attention to health and safety, termination and downsizing policies, demographics about who gets promoted, raises, bonuses, and turnover. As we went on, we increasingly sought to discover the extent to which the company was on top of liabilities in those areas from a measurement and analytical perspective. With regard to all major HR systems, our board began to ask the following kinds of questions: Is there a formal system or process in place? Has the system been validated? Is it clearly understood and communicated? Has the system had unintended effects? Has it been analyzed for adverse effects, for example, possible discriminatory impact on legally protected groups? Each time we asked questions, we had to go back to learn more, we had to ask more sophisticated questions. Some questions we asked with regard to leadership development and talent management were things we thought the board would never get involved in. We started asking if there was a formal assessment of the key capabilities/talents needed in the company. We asked if retention rates were monitored? Did the monitoring include an analysis of criticality? Did it include competitive practices, capabilities, and performance? To what degree was the expertise of key people captured by the organization? Were there non compete agreements with key technical people? Does our reward system lock key contributors into the organization? We didn’t have a clue what answers we were looking for. This was a matter of constantly asking every possible question that we could think of. For example, when we looked at the succession planning system, we asked if the system was formal, who was involved, and how it was related to business strategy. We asked what metrics were used and were they related to assessment of needed capabilities? How do we monitor for derailment? Is there a system of mentoring and coaching? Is it seeing as effective and fair? That led us into questions about training policy: Who participates? What are the purposes of the programs? How are they evaluated? How are they related to business strategy? How do these programs deal with ethical and legal issues? Are there unintended gender, race, or age biases in who attends? Then, we started looking at selection procedures: Did we use validated instruments for identifying the “right” people? How were these related to business strategy? What methods were used? To what extent is an effort made at branding our company as a great place to work? Finally, we looked at retention policies: the retention packages for key personnel, how we are monitoring satisfaction, whether the packages are tied to system performance appraisal, and what metrics are used to identify key personnel, and so on.

Answer the following question.

Q1. How the writer defines the organizational ethics. Comment.

Q2. What are the benefits of routinely asking tough questions about the related issues? Discuss.

CASE STUDY (20 Marks)

When lakhs of people of the quakehit region in a certain state in India were braving the biting cold under open skies, some 100odd resident doctors of a certain hospital went on a flash strike ignoring more than 70 critically injured quake victims for almost six hour. The hospital didn’t supply blankets or given medical treatment to the quake injured and other seriously ill patients as the angry doctors assembled in the hospital compound and chanted slogans, announcing a flash strike that lasted for about six hours. Apparently, a nurse, after locking the room where blankets for doctors were stored, had forgotten to deposit the keys with the hospital matron. On discovering that there might be no blankets for the night to ward off the chill in the special rooms where the doctors had been put up, the latter reportedly gheraoed the matron and the assistant matron and heaped on them the choicest of abuses for the mistake committed by the nurse. When the nurse protested against the abuses, the doctors reportedly demanded that the matron tender an unconditional apology, or else they would remain on strike. Nevertheless late in the night, on the day of thestrike, the dispute was amicably resolved and the doctors resumed duty. The issue was too minor for the doctors to lay aside all their responsibilities and go on a strike. Misbehavior of the doctors by striking just when they are most needed is indeed regrettable. A senior physician associated with the hospital has condemned the irresponsible behavior of the doctors.

Answer the following question.

Q1. Discuss the ethical issue in the above case

Q2. Give the remedies for the above problem.

Q3. Have the doctors violated the Hippocratic Oath? Explain.

Q4. Discuss the unethical issue in the above case.

CASE STUDY (20 Marks)

How did Delaware become the most common state for incorporation, and why is its position important? At a recent meeting of the Business and Organizational Ethics Partnership at Santa Clara University’s Markkula Center for Applied Ethics, The Honorable Jack Markell, governor of Delaware, held a dialogue called “Business Ethics: The Delaware Perspective” on this subject with David Yosifon, associate professor at the Santa Clara University School of Law. In his introduction, Yosifon explained why the location of a corporation’s incorporation matters: Corporations exist only when the law says they do, when a government entity grants a corporate charter. U.S. legal tradition says that in the case of a dispute – between shareholders in one state and a board member in another, for example – these internal affairs of the corporation will be governed by the laws of the state of incorporation. Corporations in the United States can charter in any state, even if they don’t do business there. “In the United States there is a clear winner in the competition for the sale of corporate charters, and that is Delaware,” Yosifon said. As a result, “Delaware’s corporate law dominates the legal landscape.” The work is advantageous for the state due to the fees it generates and the jobs it generates for corporate lawyers and those who support them. The governor said he and other leaders meet with lawyers, accountants, private equity investors and others around the world, encouraging them to consider Delaware when they expand to the U.S. market. The governor discussed how Delaware achieved this premier position in corporate law, and how it works to maintain that position. Until about 100 years ago, Markell said, New Jersey was actually the premier place for corporate law. Then Gov. Woodrow Wilson, to improve his presidential prospects, pushed through some changes to that corporate law that broke the trust corporations had had in the stability of the state’s law. As corporations looked for a new place to do business, Delaware stepped in. Delaware maintained its leadership positions through the Depression, when the state adapted to the creation of federal securities regulation; in the 1960s,  when the law was rewritten to allow cash mergers and acquisitions; and in the 1970s, when the state fought off proposals to federalize corporate law. These concerns appeared again after the 2008 financial crisis, with proposals to regulate executive pay and corporate directors. “There’s nothing wrong with any of those proposals in the abstract, but there is something wrong with the top down, onesizefitsall approach,” Markell said. Shortly after he was elected in 2008, Markell met with the corporate law section of the state bar to talk about how to “address all of these ideas and angst,” he said. They decided on a three part strategy: Offer a serious state based alternative to one size fits all; get organized in Washington, D.C.; and find allies outside of Washington. Markell cited three main reasons for Delaware’s strong position:

  • Delaware’s corporate law is widely regarded as modern and flexible.

  • Delaware’s judiciary is well respected. Markell described “a very apolitical system” in which judges are appointed by the governor but are chosen from a pool of candidates that have been vetted by a judicial nominating commission. The state bar association has a section on corporate law that recommends changes when necessary to state law.

  • The state workers in the Division of Corporations are well regarded as well. “I’ve gotten comments from the best law firms in the country that in the middle of a nasty snowstorm, the clerks in the Division of Corporations figured out how to make a merger go through,” Markell said. “We work really hard to understand trends and strive to keep a very open door,” he said. “The corporate legal community is looking for stability and predictability.” Markell said Delaware’s system relies on “timeless principles,” such as balancing the interests of shareholders, directors and managers; not second guessing business decisions that don’t work out; and holding directors accountable if they fail to act carefully, loyally and in good faith. In answer to questions from the audience, Markell said he was hopeful that Congress and the White House would reach an agreement on corporate tax rates. He said he has had “quite a few conversations” in which business leaders say “there are great workforces all over the world,” so they have to decide whether to do business in the United States. He also defended the system of creating corporations, saying the United States has “the most vibrant economy in the world, in large part because of our great system for capital formation.”

Answer the following question.

Q1. Give an overview of the case.

CASE STUDY (20 Marks)

What is the biggest bane of the Indian system? Corruption. Statistics and action plan released to PT by the Excise Department (Pune Zone) testifies to this. Tax evasion for excise duties for the year 20022003 has almost doubled from the previous year, this year it is Rs. 174 crore. R.K Tewari, Chief Commissioner, Customs and Central Excise, Pune zone says, “We have launched a two year program. In our first year, we have made an attempt to get the actual evasion figures. Figures till last year were highly understand. This year we are going to crack the whip on defaulters and we have a toughened action plan for the same.” Another striking feature is that the collection of arrears is remarkably low. For the year 20012002, it stood at Rs. 22 crore. However, now with tax evasion for this year pegged at Rs. 174 crore, the department has fixed a target of Rs. 42 crore for arrears collection. “Our action plan is especially designed for the same”, says Tewari. Why is collection so lukewarm? “This is basically because of our legal system. Any defaulter fights us till the apex court and that takes years to sort out,” he explains. As for the corruption in the department, Tewari says “Some people in the department could be working handing love with the defaulters.” Tewari claims that the biggest defaulters are not the big corporates, but the small and medium scale industries.

Answer the following question.

Q1. What are your view points on the above case?

Q2. What may be the reasons for the lower collection of the arrears of excise tax? Elaborate.

 

How the writer defines the organizational ethics. Comment.

 

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