Paying to protect whom??

In 1997 Chiquita banana began paying ”protection money” to a group know as the United Self-defense Forces of Colombia (AUC) rather than pull out of the rejoin, an area the buisness had been working in going back several generations. Had they not paid employees villages would have been massacred as well as stockholder value would have dropped. In September of 2000 an internal audit showed the practice of payoffs to the board. On September 10, 2001 the AUC was declared a terrorist organization by the Untied States, making it illegal for the corporation to continue the practice.

On April 24 of 2003 Chiquita approached the U.S. Justice Department and voluntarily self-disclosed the practice. Michael Chertoff, then assistant attorney general (currently Secretary to Homeland Security) told the corporation what they were doing was illegal and said they would receive instructions on what to do. AUC remains an opposition group to FARC, another terrorist organization, and it was clear if Chiquita were to divest from the rejoin then U.S. security interest would be jeopardized. AUC was not networked to international terrorist groups such as FARC is.

No reply was received from the government despite repeated inquiries from Chiquita. During this time a new government in Colombia, which backed Bush’s anti-terrorism protocol, was established. It was clear to the U.S. government that speaking against this issue would up set the political foot hold the U.S. was losing in South America.

            By the summer of 2007 the U.S. government responded.  Chiquita had paid $1.7 million to the AUC up until that point. The government placed a $25 million dollar fine on the buisness due to the decade of funding terrorism despite Chiquita’s approaching them 5 years earlier and the reclassification of the AUC in 2001.

           

Should the date of the AUC’s terrorist classification effect how they were delt with?

Other than stockholders were there other stakeholders Chiquita was obligated to take into consideration?

Was the government’s reaction appropriate?

 Tim Stillman

FLS Ltd- Case Study

This case study is about a small management development consulting firm who issued this values statement:

           “We strive to ad value to businesses by developing their staff, whilst maintaining value for individuals, whether they be employees, clients, or other stakeholders in our business or in the businesses of our clients.  We deal fairly and honestly in all our actions. We seek to operate transparently, and to respect the dignity and contribution of all workers, whatever their individual demographic characteristics. We also respect the value of the environment and seek through our work to enhance the eco-sphere.  Our guiding principle is never to do anything that we could not publicly defend”.

The study highlights a few ethical dilemmas that the company is faced with during challenging business times.  The first scenario describes the complications with business growth and the correlation with the relationship between the founder of the consulting firm and the HR Director of the client.  Due to this personal relationship, the firm was getting many of the contracts and it finally came into question by the Deputy Director of HR.  There was a full scale review of the whole relationship with the FLS.  Some changes were made to their agreements, tightening certain spending components; however, their overall relationship remained strong and the Deputy Director of HR was dismissed a few months later.

Another example describes when a new manager is hired by the client and the FLS consultant is asked, by this new manager, to breach the confidence of his staff mentoring interviews to provide insight as to which employees are committed to the job and which ones aren’t.  The consultant does not provide this information to the new manager and reports the inappropriate conversation to the CEO of FLS.  The CEO of FLS then calls the CEO of the client and shares his outrage and concern for the behavior of this new manager.  When the new manager is questioned, he denies asking for this information and implies that it was actually the FLS consultant that was trying to offer him additional, inappropriate insight into their employees.  The two CEOs decided it was a mis-communication and it was never dealt with beyond that.

 

Questions: 

1.   Is it ethical to utilize personal relationships to help advance your business’s client-base?

2.   If you were the consultant in the second scenario, how would you proceed in working for the firm and potentially the same client?

Eastern Problems

Horizon Trading Company: John Smith’s dilemma

Ethic’s Case found on Babson College website

http://roger.babson.edu/ethics/horizonc.htm#Analyzing%20Values

Summary:

John Smith is a new Regional Supervisor for Horizon, an American based company, in their Russian operations sector. Early in his introduction to these on-going operations he is presented with the “fact” that the company alters its sales accounts to avoid what are said to be the exorbitant state and local taxes imposed by different Russian agencies. He is asked to comply with the ongoing obfuscation by everyone involved with Horizon company management that he meets during his orientation. One day, a week after his arrival, when he is visiting a profitable Horizon retail outlet in Moscow he discovers that sales registers are turned off and paper sales receipts are used to lower the traceable income generated. He does nothing to alter this practice, but he stays to observe the activities in the store. While the store manager is at lunch a Russian agent from the state tax authority enters the shop and asks why the registers are turned off.

John Smith is met with the immediate challenge of whether or not to lie to the tax agent, and if he avoids this immediate situation he must decide what to do about the unofficial company tax avoidance policy. He has been told that if the company pays all of the taxes required that they will not be profitable and people will lose their jobs, information he took at face value. He feels a new manager’s sense of responsibility and does not want to jeopardize company operations or American personnel, or the livelihood of the Russian employees. He did not do any independent research to verify the information he was given.

Questions:  What should John Smith tell the Tax Agent?  What could John Smith have done to prevent his getting into this situation?  If the tax situation in Russia is as corrupt as he has been told, is John doing anything wrong by following expressed company policy?

Submitted by John White

Is This My Place?

Ben is a recent college graduate with an accounting degree, who was hired by a respected non-profit organization, to manage their internal and external reporting. The organization collects donated medical supplies from US producers, and ships them to countries in need. The organization was thinly-staffed and under a lot of stress. Ben soon realized that there was no system in place for the organization to monitor the value of the donated supplies for tax purposes. He had to trust that the donaters were giving him the correct values. He knew that it would be beneficial for the donaters to inflate the values of their products for their own tax purposes, and wondered whether they could be cheating the IRS.  Ben wondered how much it mattered, people in need were still receiving the medical supplies. He worried that if he were to question the donaters, or make them provide proof of value, he would deter them from donating the much needed supplies. He also considered that his boss must have known about this issue and did not seem to think it was a priority. It seemed to be the organization’s belief that a company who donates items is probably altruistic and would provide an honest value. She had told him that it’s all about helping people in need, we don’t care about data. He was quite certain that some of the donaters were cheating the IRS and he did not want to enable their deceitfulness. However, he was happy to be hired right out of college for such a respected organization. Is it his place to say something?

 

Which is more important, getting people in need their medical supplies, or making sure companies are honest on their taxes?

 

What would happen to Ben’s career if he were known as a “whistle blower”? Does it matter for the sake of honesty?

Mandy

Home is Where the House is

John and Marcia were excited about the new developments in their life.  John recently accepted a job at a small consulting firm in a new location.  Marcia owned a home-based business, so she was flexible about where she lived.  After many discussions, John and Marcia packed up all of their belongings and moved into a small rented apartment.  The first year at the new job went very well.  The company was thriving, and John and Marcia were thinking about settling down and starting a family.  John decided that he needed to talk with the owner of the firm about his career.  John explained that he wanted to purchase a home and settle into the community, but he wanted to make sure that he fit into the firm’s long-term plans.  The owner of the company praised John for all of his good work, and assured him that he would remain an important asset of the firm. Relieved, John went home to tell Marcia and they immediately started looking for a home.  John later told one of his co-workers, Alexis, about his discussion with the firm owner and his plans to buy a house.  Alexis was very inquisitive about John’s discussion with the owner, and appeared to be caught off guard.  John wasn’t sure what to make of Alexis’ reaction, but he quickly wrote it off as being nothing to be concerned about.
Alexis, on the other hand, was shocked at what she had heard.  Alexis is close friends with the owner of the firm, and knew that there was a good chance the firm would be closing in the near future. The owner was always complaining about the daily stress the business was causing him, and voiced his desire to dissolve the company and spend a year traveling around the world.  Alexis herself had been looking for another job for several months, and was devastated to hear about John’s plans for buying a home.

•    What are the ethical issues?
•    Should Alexis confront the owner about misleading John?
•    Does Alexis have an obligation to tell John the reality of the situation?

Societal Impacts of Marketing

Len Quill has been a buyer for Artifacts, Ltd., an importer of ethnic art, for four years. He majored in marketing and cultural anthropology in college and is faced with an ethical decision concerning the demand for a basket made by the Puna Native American tribe. The tribe is a major source of artifacts for Len and his interest in the tribe has inspired him to learn their native language, making him the only person from Artifacts who directly works with the Puna.

Bob is an art gallery owner who is interested in placing a large order for the Puna baskets. However, he wants them within a short time frame and only if he can redesign the baskets with his customers in mind. Each basket’s shape, pattern and color represent important historical events and symbols of the tribe and are only made by the women. Len would have to market this design change to the Punas, as well as the idea of men making the baskets too, in order to meet the short deadline. The Punas will receive a good price for their baskets, which could improve their standard of living. Len’s boss, Mary, is very enthusiastic about this opportunity, for Artifacts, Ltd. will prosper from the large order.

Coming from an anthropological viewpoint, Len isn’t sure he wants to persuade the Punas to alter their artwork or encourage the men to make the baskets. He has learned that these kinds of changes have weakened other cultures and is concerned the Punas are not aware of the negative effects such changes could have on their society. Len needs an agreement from the Puna tribal council before a contract can be signed with Bob, but is conflicted over how to handle the deal.

Questions:

1. What are the ethical issues Len is faced with?

2. Do you think Len has a moral duty to protect the Puna tribe? If so, why?

Author: Judy Cohen, Assistant Professor of Marketing, Rider College

posted by Wende

“Business Cycles and employment practices”

“Business Cycles and employment practices”

Byrne, Keely and Detert, Jim.  “Business Cycles and employment practices in the Garment Industry.”  Business Roundtable Institute for Corporate Ethics.  BRI-1002A (2005).  8 Sept 2008. http://www.corporate-ethics.org.

 

The case involves a small, niche company in the garment industry.  The company has USA-based manufacturing operations and is recognized in the industry for responsiveness and a stylish product offering .  The skill level and high engagement of the production workforce is a significant contributor to the company’s competitive advantage.  The company has historically treated the associates well and has developed an unwritten set of values that includes ‘valuing all associates as partners’.   The company is growing and will need to add production capacity.

 

Prior year company sales were $80M and the forecast for the coming year is $150M (187%).  The increased output is enabled by adding 1,000 workers to a second shift.  Total production employment will thereby increase to 3,000; up 50%.  The initial ramp up of operations is effective and the company is over-producing to the market requirements.   The management team has determined that a 33% reduction in output is required over the winter months to avoid an excess inventory situation.  It is expected , however, that the volume in the spring season will rebound and that the ramped up capacity will once again be required. 

 

The management team needs to develop a revised production plan that will support the company’s financial objectives and comply with their espoused ‘human resource’ values.

 

Questions:

1. How would you describe the ethical dilemma? 

 

1. What solutions would you offer the management team that would allow them to be true to their ‘core values’?

DWF

It’s About Right or Wrong!

Cynthia Fitzgerald had found her dream job after 20 years in sales; a managerial position at one of the nations largest discount pharmaceutical sales company’s, Novation.  As a new employee she attended training classes that included ethical purchasing procedures. Once work began, she found that her new workplace did not square with what had been taught in her training.

A meeting had been scheduled for Cynthia and her boss to meet with a group of sales people who had bid on a contract for 30 million dollars worth of IV equipment.  The meeting had been arranged during a “silent period”, when she was not supposed to meet privately with any of the bidding companies. This type of interaction was prohibited. The meeting included discussions behind closed doors, tipping off on how to structure a winning bid and “naming her price” (bid rigging), among other potential felonious behavior. Cynthia even recalls one sales person asking how much it would take to get the contract. When she did not respond the sales person assured her that “others before you have done it”.

Cynthia confronted her boss.” Shouldn’t they report the incident to the legal department?” Her boss offered no satisfaction, being  more concerned about the integrity of a bidding process that they were responsible for. Cynthia began pursuing the matter herself. She took her concerns to Novation’s legal department, human resources and even the company’s president, she was only rebuffed and scrutinized for her findings.

Cynthia moved on to the next contract and the same thing started to happen. Feeling uncomfortable, she asked her supervisor if she could be taken off the contract. Her supervisor agreed, but then gave her a negative performance review stating that she was rude, unable to meet deadlines, among many other false accusations.  Fifteen days after she had asked to be taken off the contract, Cynthia was fired from Novation for “nonperformance of duties that were clearly identified as part of her job description”. Cynthia believes she was shown the door because she had stumbled onto illegal behavior that involved sales manipulation, resulting in millions of dollars of Medicare reimbursements and she had refused to look the other way.  Her firing left her unable to get another job in her field; word of her demise at Novation seemed to precede her wherever she went.

Cynthia was contractually forbidden from disclosing any information about Novation or filing lawsuits against it for three years. Once that period lapsed, she gradually became aware of the False Claims Act, a federal law that allows private individuals to sue on behalf of the United States if they believe that they have inside knowledge of a fraud. It can be seen as protection for people who are willing to risk their lives and livelihoods, their careers and reputations.   Cynthia did finally go to court, but the case is still under investigation.

Questions

If you can’t trust Human Resources, where do you go ?

Should Cynthia have confronted her boss about the illegal behavior instead of asking to be taken off the Contract?

Brianna Bain

Under the Table

 

Maryann is a divisional manager for a major restaurant chain.  She has been hearing rumors about Paul, her best manager, that make her uncomfortable.  Paul’s store has the best sales and highest rate of growth, does well on inspections, and has the most positive customer feedback.  As a result of this great performance, Paul is being considered for a promotion. 

The rumor that Maryann has heard is that Paul was not ringing cash sales into the register at the restaurant.  To get to the bottom of the story she sent several friends to the restaurant at different times to see what Paul was doing.  Some of them reported that the rumor was true: Paul took the money and didn’t enter the payment into the register. 

On her own Maryann discovered that Paul did not seem to be pocketing the money, he was using it as under the table payments to his crew in order to motivate them to perform better.  He was clearly violating company procedure, but he wasn’t using the money for direct personal gain, he was using it to achieve the high performance standards that had become his trademark.  The money was never recorded as income, and no payroll taxes were taken out.  The result is that although his store was performing at the highest level, Paul was exposing the company to tax liability action by the IRS. 

 

1. What action if any should Maryann take in this situation? 
2. Do the merits of Paul’s unorthodox methods outweigh the risks?

 

Author:  G. Scott Erickson, Lehigh University

The Pizza Puzzle

George Hansen is General Manager for the Marigold Inn in Augusta, Georgia. Sharon 

Coombs is Restaurant and Food Services Manager for the Inn. She reports to George. Two 

years ago, Sharon noticed a decline in room service business, the highest margin portion of 

her operation. This decline coincided with an increase in the national sales of pizza delivery 

and carryout firms as well as an increase in the number of empty pizza boxes from these 

firms being left in guest rooms in the Inn. Her immediate response was to install a pizza 

oven in the kitchen and offer room service pizza to guests. The effort met with modest 

success, though it was well below her expectations. Questionnaires completed by departing 

guests revealed a problem of product quality. 

 

Focusing on this problem, Sharon improved the Inn’s pizza until blind taste tests judged it at 

least equal in quality to the products of the two major pizza delivery competitors in Augusta. 

Sales did not improve, convincing Sharon that the problem was a perceived mismatch 

between the hotel’s image and guests’ expectations of pizza makers. Guests simply did not 

seem to believe that the traditional steak and seafood restaurant at the Inn could make a 

high-quality, authentic pizza.  Based on this conclusion, Sharon presented the following 

proposal to George: 

“Sales of room service pizza are stagnant due to guests’ misperception that our product is 

lower in quality than that of competitors. This misperception is based on the belief that until 

we disassociate our pizza from the Marigold Inn name. Therefore, to capture more room 

service pizza business, we should create a ‘Napoli Pizza’ image for our guest room delivery 

service by: 

• Preparing ‘Napoli Pizza’ brochures for each guest room, complete with a phone number 

with a prefix different from that of Marigold Inn. The number will reach a special phone 

in room service, which will be answered, Napoli Pizza, authentic Italian pizza from old, 

family recipes.’ 

• Using special ‘Napoli Pizza’ boxes for delivering room service pizza to guests. 

• Issuing ‘Napoli Pizza’ hats and jackets to room service personnel for use in pizza 

delivery. Room service waiters and waitresses will wear these garments to deliver pizza. 

They will change to their regular uniforms for other deliveries.” 

How should George respond to this proposal? 

Author: Fred L. Miller, Associate Professor of Marketing, Murray State University

Posted by Daisy Wilson