A balance decision making by ranking stakeholders

Assignment I

Question 1

(I) the stakeholders in this particular circumstance include:

Owners of the company: regarding the seriousness of the situation, we can logically deduct that without the consensus or acquiescence of the owners the last three CEOs would not just lay aside the toxic chemical materials there unresolved.

Current management team: i.e. I myself and other senior managers, when I decide to cleanup the dumping the challenge that is coming could not be overcome without the current management team members’ fully support.

The last three CEOs: although they have left the CEO position and seemingly have nothing to do with the company. But there’s efficient evident that they must had known the situation pretty well without doing anything factually to correct the mistake. And if the toxic chemicals did pollute the underwater system long before, the pollution may probably happen during their term in office. In the premise of their knowing the case and do nothing, we can easily conclude that it’s their obligation and responsibility to stop the escalation of the contamination or at least publicize the situation in order that the relative authority can intervene because of the possible huge damage to a lot of people’s lives.

The employees: as their employer-the company is going a life-and-death moment; it must affect all the employees and even their family.

Shareholders: increasing issue in stock market is a fast way to tackle the financial problem of the cleaning up program. But apparently it’s not easy to convince the shareholders to invest their money into such a project that will not directly earn money for them. Whether my plan will be successful or not, the attitude of the shareholders will absolutely influence heavily.

Creditors: if the creditors know the situation, for them it’s time to downgrade the credit rating of the company and make a judge whether the company can still pay the debt

Suppliers, customers: both up stream and down stream of the business of the company will be affected by the action that tries to rectify the fault because the priority will be shifted to the toxic chemical issue in stead of the normal refinery activities.

Local government: one of the most important effects of government is to do things that no body wants to do, removing toxic wastes is one of them.

The near farmers: if the water poisoning does occur, the near farm may provide early warning.

The design and construction team of the headquarter building: since the building is constructed atop the deserted tanks the design and construction team members should had know the truth situation.

and the whole citizens of the near cityeven babies who have not been born yet may get harmed: these are the most innocent people whose lives are under terrible risk without even knowing the what’s going on down there.

(ii) Strategy to Deal with the dumping

Erect fence around the building to reduce the possibility of poisoning by general contact.

Form a compound emergency team regarding the situation. On one hand the team should include the top departmental heads within the group; on the other hand it should especially contain the relative specialists such as crisis management specialists, chemical analyst and other professionals.

Set aside a portion of money; say one million, as special fund to cover the direct or indirect expenditure associated with the program.

Hold an urgent meeting within the emergency team. Counsel the members of the situation; brain storming will be of great effect here, but the bottom line should be insisted that the truth must be disclosed to the public. Sum up different ideas and make improvement to the plan.

After the meeting, set up an investigation group to collect data from the site immediately and form a report as soon as possible. The analysis report should contain the following elements: the composition of the waste (such as 10% class 1 out of the five hazard classes, 30% class 3, 70% none toxic chemicals), mapping of hazard site, under water sampling and toxicity experimental analysis report, scientific prediction of the damage of the whole dumping case, characterize the site and so on.

Keep a continuous monitoring of near water and air, report to the management regularly.

Resemble a following meeting to discuss the case, establish general program procedures, set up program priorities and define detail responsibilities of the cleanup process base on the facts collected in the investigation report. Prepare a preliminary cleanup and site restoring project plan.

Collect the office for rent information in case that the headquarter building will be closed.

Strategy of making disclosure

Inform the water supply factory and other governmental environment departments about the potential water contamination and provide with them the initiative investigation report and cleanup prospectus, request the relative professional group test the water quality immediately to ensure there’s not yet any water that has been poisoned.

Hold a company-wide meeting to publicize the case, highlight the importance of ethical business behavior, proclaim the main direction of company in this particular situation-accelerate the cleanup process which ensuring the normal running of the business (address the doubt about the going concern status of the company). Do an anonymous survey about the popularity of the strategy of the dealing and collected the suggestions from employees.

Soon after the internal meeting, invite the main medias in the local community like main newspapers, TVs, and radios to hold a news conference chaired by me and attended by the top managers to formally admit that the company have been hiding the fact of not removing the dumping of some toxic waste that abandoned 20 years ago. Make formal apologies to the public with sincerity to the damage that this waste may cause and promise that the company will be fully responsible of the relative lost. Announce the result of the initiative investigation and ongoing efforts and measures that had been taken by the company and the government together to stop the circumstances being further deteriorated.

(iii)I am obligated to disclose the situation by the timing of the disclosure is critical.

If I disclose the dump right away:

Good Bad
People get to know what happen immediately Rumors may arise, unnecessary unrest will spread through the community and the city
The situation could be contained as soon as possible and less people will be influence by the toxic waste if the underwater is being polluted. The company may be required to stop business to be investigated.
I may not get involved in the case for the prompt disclosure of truth. The employees, customers, suppliers will lose faith in the company.
The company’s stock will be dumped and the shareholders will suffer great lost.

If I publicize the situation after preliminary investigation and preparation in order to know the dump well and cope with the following situations:

Good Bad
The company is prepared and may later announce an in-depth investigation report to the public about the whole situation. I may bear the charge of not making the disclosure as soon as I know the situation.
The public will not be in chaos because of the scientific investigation and actions actively taken to contain the waste. More people may get poisoned if the water is polluted.
The company can probably keep in business because the shareholders, suppliers and customers are more acceptable to the scandal given the sufficient access to the situation.

Considering the tanks have been deserted 20 years ago, a little time to make some preparation work is allowable in common sense. Totally speaking I’m morally obligated to disclose the dump but should be in the premise of the finishing of preliminary work to make a clear picture of the dump and establish a plan by doing scientific investigation and consulting with relative professionals and avoid panic in society. It’s absolutely right that time is very important in dealing with such crisis of high ethical intensity but some preliminary job should be done before the highly desired disclosure.

Reaction of Wall Street

The news released certainly brings no good to the investors and yields no positive effect of the company in Wall Street. Down fall of the share price is definite with a concern of how much the decreases will be.

Hopefully the after the releasing of the investigation report together with the disclosure of the dump there should not be too much turbulence especially when the pollution is a very mild one and the water is still free of toxic. It is not a big deal that a company tries to correct its fault that has not made heavy harm to the society. To say the least, it is always better late than never. In the long run, the investors should have more confidence in a company that can admit and make up its mistakes.

The worst result may be that all the scientific facts and data all point to the conclusion that the toxic waste has been polluting the under water and causing major problems. It’s out of question that the disclosure will bring catastrophic hit on the confidence of the shareholders and thus a panic dump of the company’s stoke is foreseeable.

(iv)

I will not keep it as a secret for another two years. When making this decision I applied the utilitarianism. According to the principle of utility, an ethical decision should maximize benefits to society and minimize harms. What matters is the net balance of good consequences over bad1. By analyzing the good and bad effect yielded by another two years’ hiding to the stakeholders we can make a decision that produces more good than bad to the most people.

To the people who are under threat, it’s their interest to clean up the waste as soon as possible to minimize the harm. They are innocent and will not get any direct interest from the existing of the company. Thus they will not want to bear another two years’ fear.

To the company, the toxic waste is spreading like cancer. It’s a matter of time to be found out. To its own good early amputation is the only chance to survive in the long run. But if the owners of company just want to earn as much money as possible and then let the company go through bankruptcy we may say it’s the owners’ interest to hide another two years in a economy perspective. This is probably the reason why the waste was dumped 20 years ago and unresolved for these years.

To me, as mentioned above I am morally obligated to disclose the dump after a very short time of preparation. Because whenever I thinks about the tap water running through tens of thousands of families may be contaminated the waste released by the company in which I am the CEO who may stop this, I just can’t fall sleep. My upbringing and education in China has always teach me that people’s interest is always should be the priority and thus worth sacrifice if necessary. In the time of war millions of lives contributed to the peaceful life that we have today to discuss equality, freedom and soap opera. But these doctrines are venerable like people’s life, it needs protection and sacrifice. If in the time of peace like today, I will hesitate to make a balance between people’s interest and money in my pocket, then I betray my virtue and gust.

To the government, it is sure that public safety is the priority unless this little chemical refinery company is the largest benefactor that has funded the Obama’s presidential election. But obviously it’s not.

In sum, uphold the principle of maximizing the most people’s happiness, concealing another two years will not outweigh my desire to correct the situation.

Question 2 Integrate ethics into and between the departments

Let’s say the company is a large pharmaceutical corporation in US.

Preliminary works

Classify and descript our organizational culture like strong formal culture, rigid standard, being conservative in risk taking, symbolize by a dress code as black suit and white shirt, and other visible and invisible characters that show the personality of our organization that put human welfare in the first place when doing for-profit business.

Conduct a comprehensive audit of the current ethical culture of the company including formal and informal culture systems to see whether these systems are consistent with ethical behaviors and decision making. In order to achieve this target, every section of the culture systems must join together to support its ethical culture in practice rather than just talking. The focus should be put in the formal culture systems which is the main functional part of our ethical culture. Selection systems should be check whether the new employees are in conformity with the corporate culture in term of personality and by ways such as integrity test to ensure a more likely ethical employee (especially when hiring senior managers) is recruited. Access the orientation and training programs to see whether ethical culture is communicated and enough ethics training is provided. The same assessments in respect of involvement of ethics element should be done to other parts of the formal and informal culture systems such as performance management systems, organizational structure, decision-making processes, etc.

Use sticks

Set up a corporate ethics office which directly report to the board of directors or CEO to manage and communicate ethics in various ways such as designing and carrying out ethics and legal compliance programs to ensure its own code of ethics is strictly followed by all employees within the company. The ethics office may hire a fulltime professional ethics officer to manage the office running and bring in new and advanced ethical theory and practice. The ethics office should include senior managers with different background from all departments who will be the individuals in charge of and accountable for the enforcing the compliance with the corporate ethics policy within their respective department. An important effect of this office is to act as a platform in which managers can communicate ethical problems and solutions faced in their working life. Core work of the office is to build up monitoring, auditing and reporting systems to detect and receive information about unethical behaviors and deal with it.

Laws and policies: Quote the relative articles of laws and regulations in the pharmaceutical field which are critical to the business of the company as an important part of the policy manuals such as Federal Food Drug and Cosmetic Act, National Drug Policy and Federal Sentencing Guidelines. Different employees from different departments and different levels may need particular laws and rules to follow. Staffs from accounting department may need IAS (International Accounting Standards) as a guideline while the R&D department takes Patent Act as reference. The importance of abiding law and regulations may be emphasized by posting typical cases involving law breaking happened in the company or in the pharmaceutical industry.

Company’s own regulations: As laws can be understood as basic requirement of a person by the society, the company needs to enact its own regulations as guidance for the employees when facing ethical issues that are not confined within the law’s context. Punishment plays a significant role in disciplining regulation-breaking practice and the punishment should be severe enough to scare off those who tend to follow.

Show up the carrot

Value statements (every word should be clearly defined): say teamwork, ethics, partnership, quality and innovation. Value statement should have existed long ago forming with the company history, what needs to be done is to revalue it whether this statement is aligned with the ethical culture and whether it is carried out in the daily work. Incorporate the corporate value into the recruitment, orientation, training programs and decision making process to make it important reference when employees encounter ethical problems. Encourage every employee to participate the value statement relative training programs, updating and reporting any behaviors that go against the value statement.

Ethics Programs take forms of orientation as mentioned above, educational seminars, outdoor ethics training etc to communicate corporate ethical culture and policies to employees. Ethics programs should focus on prevention, have clear goals and be design to tackle employees’ ethical issue and provide substantial resolutions rather than just act as window dressing.

100 Best practices can be enacted and regularly undated by the ethical office to contain the usually best resolutions to typical ethical dilemmas as a guidebook that employees can refer to when face with similar issues. Counseling and guidance service should be easily available to staffs that are in need when applying the best practice in making important decisions.

Philanthropy

Unethical decisions sometimes are made because people are separated from the victims, communities, and nature environment. By encouraging charitable activities in the community that the employees work or countries that the company’s products are consumed especially in the meaningful days like Children’s Day and Labor Day can give a broader perspective to employees to know their work better because their work are not just a matter of earning money but can significantly affect the people’s life positively or negatively.

Core of ethical culture

Value-base leadership is the core of the ethical culture system just as unethical leadership is the core of unethical culture because employees usually look upwards to get reference. If the senior have not ever talked about the waste dump issue then the employees will consider this as quiescence or encouragement to dump waste. According to the executive ethical leadership theory2 not only a manager should be an ethical manager but also should be an ethical person in order to earn reputation from employees. So it is important to select ethical persons as managers and reinforces ethical leadership by continuous ethics training programs.

Stakeholder management is another core in building corporate ethical culture. Ethics is about norms, rules and practices that are commonly accepted by the society. We can’t and need not to consult the whole society about making every decision but it’s better to indentify the affected parties that have a stake on this decision and think on their shoes and ask them directly if necessary particularly when that issue is of great ethical intense.

Question 3

Benefits of using a stakeholder approach in ethical decision making.

Increase the perceived ethical issue intensity

After serious consideration of all the stakeholders in a particular decision making situation, the decision maker would know the importance of his decision. The more one knows about the seriousness of the case the less possible will he focus on the problematic idea and behavior.

A long term view decision when considering more the stakeholders

Offer the employees with safest working environment and favorable salary will encourage them to keep outputting high quality work. Gradually built up employees’ commitment to the company is a sustainable motivational factor and this commitment may probably help avoid problems that come up with decreasing motivation of wage as appear in most corporations.

Return shareholders sound bonus is the basic responsibility of a company to its shareholders and high profit can retain cash injection from investors in the future.

Provide customers with healthy excellent products but reasonable prices will certainly maintain regular customers and attract more. Contributing to the welfare of the local communities such as using cleaner energy to reduce pollution, building up libraries for orphans and provide poor students with scholarships should lead to better relationship with the local people and thus stimulate more potential customers to buy the company’s product.

What’s more by doing charitable activities for larger communities or regions make the local people feel proud to have such responsible company in their community is a cost beneficial way of advertisement.

In a larger sense, the most ethical decisions mangers make are for most people’s good in the global societies. This is how an internationally famous company based and survives in a long run. Just as an old Chinese says, Water can carry a boat, also can overturn it, this was used to warn the emperor to show respect to his people under his ruling since it was their power that likes water keep his boat buoyant and they can sink his boat too. An unethical company is like a brutal emperor in war time, it can be very successful at a time as it makes its own special contributions like providing internal peace and eliminating criminals, but as time goes when a better leader appear, the people will help overthrow the unethical dynasty without hesitation. The society and the natural environment is the ultimate and most distant stakeholder that a company may serve if there is no human in the Mars.

A balance decisionrank stakeholders

Usually there is no such a way to satisfy all the stakeholders without damaging some parties’ interest. Within a particular decision making case the stakeholders can be classified by several ranks, for example, we define shareholder, employees, suppliers, and customers as primary stakeholders and local community, government, trade union and society as secondary stakeholders. Priority should be given to the primary stakeholders’ and take into consideration the secondary stakeholders’ sake. If conflict of interest exists compromises and modification of the solution should be considered. When it comes to a decision that will bring severe harm to one of the stakeholders it is recommended to consult the stakeholder directly rather before actual decision is determined. There are a lot of ways determine stakeholders ranking or mapping, In a word, try to consider more stakeholders and balance their interests to achieve common good is what stakeholders approach means in an ethical decision making process.

Use a stakeholder approach to help solve an ethical issue in my working life.

Even: In June 2007, I worked in a large company and was then no.1 in the service outsourcing industry in TEDA (Tianjin Economical Development Area), Tianjin city, North China. I together with another colleague in the marketing department were offered a job to collect outsourcing industry information of Tianjin city and form a report at the request of our strategic partner IDC (one wholly owned subsidiary of the famous data company IDG ) regarding a possible big investment project. But no special fund was offered to our company to do this job; we did this market research for them to show our sincerity toward cooperation. When we worked into it according to the information request form provided by IDG we found that most data could be collected from the national statistical annual report except some core digits were still no where to be found. After we had stated our position to our manager, he told us to go to the TEDA local government to get the data and promised us that it had been ‘communicated’. When we finally received the papers from the secretary we were told that the digits had been exaggerated as a request of our manager and such information would not be publicized or given to another company and in a near future the digits will be realized because the central government had promised to pump 1 trillion to boom this area especially our industry. There was no surprise that later the manager required us to use the confidential digits to make the report look as good as better and said that if we did not use some tricks IDC probably would choose Bombay of India instead of our city to star the project which meant 100 millions dollar direct lost to us and more for our city.

The dilemma was whether or not we should use false digits to make a beautiful report in order to earn an important project bid. On one hand we were reporting to our manager who require us to do so; on the other hand we were risking our personal honest and credibility of our company and may lose our strategic partner which we had a lot of relationship with. The stakeholders in this situation includes: I and my colleague, our company, our strategic partner IDG, local community, our local government, our competitor in Bombay, community in which the competitor was located.

Use power-interest mapping method to classify the stakeholders3

A our local government B our company, our strategic partner IDG
C D I and my colleague, local community, our competitor in Bombay, community in which the competitor was located

A=High Power & Low Interest B=High Power & High Interest

C=Low Power & Low Interest D=Low Power & High Interest

According to the grid, it’s sure that stakeholders in zone B should be the priority when making decisions. But the situation was that our company wanted to use false data when supposedly IDG will not want to see this happen anyway. Then it came to zone A, the stakeholder in zone A should be kept satisfied. Stakeholders in zone C and D who had low power to affect the decision making process can be consider when there’s no clear conclusions after analyzing stakeholders zone A and B. But stakeholder in zone A our local government probably support the false data using because the secretary even helped forge the data to attract investment in the service outsourcing industry. So this simple two dimensional grid using stakeholders approach help me make up my mind to use the false data which seemingly was not ethical but reasonable.

Reference

1 Linda Klebe Trevino, Katherine A. Nelson.2007.Managing Business Ethics: 96

2 Linda Klebe Trevino, Katherine A. Nelson.2007.Managing Business Ethics: 265

3 Power-interest grid. Moor house Consulting 2007

4 Fletcher, Guthrie et al. 2003) defined a process for mapping stakeholder expectations based on value hierarchies and Key Performance Areas (KPA),

5 Radest, Howard. Toward Common Ground: The Story of the Ethical Societies in the United States. Ungar, 1969

6 Mitchell, R.K.,B.R.Agle, and D.J. Wood. (1997). Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and what really Counts: 867

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