Student paper – case study – the stakeholder view

By | April 20, 2015

Question 1

A) List all of the stakeholders involved in this situation and justify your answers

Before listing all of the stakeholders, I must illustrate what a stakeholder is. Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions and policies. Key stakeholders in a business organization include customers, employees, government, owners (shareholders), suppliers, and the community. All stakeholders are not equal and different stakeholders are entitled to different considerations. For example, my friend Lily will get married with John that there are various stakeholders in the wedding, including the groom John and the bride Lily, siblings and their parents, friends, business associates and all those who helped to organize the wedding. Stakeholders will discuss how to make the wedding successfully, makeup, cars, the food, dresses, flowers, music, and especially how much will be spent and who will be invited.

There are five kinds of stakeholders involved in this situation.

Customer is an important component of business activity. The survival of enterprises relies on customer support. In this case, 120,000 bottles of water were contaminated during packaging which will be sold to customers. Excessive drinking may lead to poisoning. Although the possibility is very small, we can not provide products from being misused. Consumers have not been reminded of the consequences of excessive drinking. Before selling, the enterprise knows the water has been contaminated, so the possibility of recalling products is impossible. Customers may become innocent victims.

Employees are a key stakeholder group in all enterprises. I want to divide employees into two categories–workers and managers.

Workers create wealth for enterprises, but when companies are in trouble, they may be the first to be affected. In this case, the workers struck for better wages and benefits, which led to interruption of production and distribution. Strike caused the company to lose significant revenues and market share. Especially, one of them put a chemical into one of the bottling plants, which in turn contaminated 120,000 bottles of the spring water.

Managers are a group of people who grows up together with enterprises. Some of them may be shareholders who share the interests of enterprises. In this case, managers experienced strike and contamination incidents. Also, they had great expectations for new products.

Shareholders are the owners of an enterprise. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly. They have obligation to make the enterprise perform well, not only in the short term, but also over the long term.

Government is also a stakeholder. The relation between government and enterprises is very compact, such as taxation, employment, interest and so on. When the enterprise profits, the government share in the profits; when an enterprise is not profitable, the government can pass laws and regulate a firm’s activities.

The last shareholder group is other companies in the industry. Because the industry is highly competitive, it is one of the reasons why the spring water company lost significant revenues and market share.

B) In you view, do any stakeholder groups have more to gain or lose than other? Why?

In my view, there is no way to compare which stakeholder group has more to gain or lose than others. A business downturn will affect all of its stakeholders.

For customers, if the enterprise does not expose the contamination incident, they are the most innocent victims. They may be due to the guidance of campaigns and advertisements to buy those contaminated water. Even if the contaminated water would not cause harm to customers, when they know the truth, they will no longer buy. Therefore, the customers may gain cheat and lose money. If I must choose one who more to lose than others, I think it is the customer.

For employees, they struck for better wages and benefits. I do not want to evaluate it is right or wrong. However, due to strike, production and distribution were seriously disrupted; also, the company lost significant revenues and market share. Who will suffer most because of this result? I think that the answer is the employees. As is well known, if the lips are gone, the teeth will be cold. Worse, contamination may cause the company into a double dilemma on the development and economy. The company’s image also suffered incalculable effects. If the company handled the incident improperly, may become insolvent.

For shareholders, they are the masters of the enterprise. Their mismanagement is the reason for predicament. Shareholders gave the unfair treatment led employees to strike. Contamination occurred because the problem of strike has not been properly resolved. Shareholders would not only face gain and loss of interests, but also assume social responsibility. Whether or not to response for the contamination incidents, they will face the test of morality.

For government, the relationship between the government and enterprises, that like the relationship between fish and water, the government is the fish, the enterprises is the water. If the water is good, the fish will be good, if the water is contaminated, then fish will grow slower, or even die. Government maintains economic development but has no right to interfere with the legitimate business enterprises. Enterprises share the interests with government; also, government should fully support the development of enterprises and manage enterprises directly through various schemes. For the employees strike, the government may impose a number of regulations to the company. If contamination incident was revealed, the government may provide economic support to the company, after all, if the company goes bankrupt, the government will also undertake a lot of pressure, for example, the doubts on the government regulations, employment and economic interests.

For other companies in the industry, contamination incident will not bring much benefit to other companies in the industry; on the contrary, community will generate more doubts on the industry. This effect may last a long time, the bad is larger than temporary profits. It is a huge loss to the whole industry.

According to the above, no stakeholder is the winner of this event.

C) Develop a strategy for dealing with the contamination

It is difficult to make a decision whether to disclose the news or keep the secret. The primacy is how to solve the current situation effectively based on the minimum risk. At the mention of minimizing risk, I have to put the stakeholders in (a) mentioned first: customers, employees of the company, shareholders, government and other companies in the industry. Balancing all these interests of the stakeholders, of course, customers’ health is the most important. Because evidence shows no customer could possibly suffer harm unless people drink excessively over a long period of time. That means possibility of poisoning is very small but the possibility still exists. Therefore, I think that reducing the risk of poisoning is the most important, at the same time save the company from the predicament. I would rather recall the contaminated water secretly and destroy it as soon as possible than disclose the news. For the following reasons:

(1) The disclosure will cause the social fear. Many customers may produce some unnecessary worry.

(2) The reputation of the industry will be damaged. Customers distrust will soon spread to the water industry, which will be disaster for the entire industry.

(3) To disclose the fact that not only impact the company’s development, even worse, may cause the company go bankrupt. If it happened that would harm both to the customers and the company. The water that has been sold to retailers will not be recalled. Customers will assume a greater risk of contamination. Further more, hundreds of people will lose jobs. That equals to passing the buck to the government.

There are some details of the strategy:

The first thing is to build up an Emergency Response Team contained some efficiency managers and workers, who come from each department. This group could lead by CEO directly. We could divide these people into five groups.

1st part: they are in charge of recalling the contaminated water. The more they get back; possibility of poisoning will be less. They must be quick and secret, then, destroy all the contaminated water. This work is the key to recover the company.

2nd part: their tasks are to stabilize the mood of workers and enable companies to resume normal operation. They could re-draw up a contract concluding an increase in wages and benefits to stabilize workers in order to prevent the disclosure of news.

3rd part: this group of people is responsible for emergency. They should get in touch with hospital in advance. If customs got sick because of drinking contaminated water, they should react quickly in order to minimize the harm.

4th part: they come from advertising department. They should launch campaigns continually and devote greater efforts on propaganda offensive. Also, they could interview with the satisfied customers, which as a part of advertisements. It will be a powerful propaganda because a customer satisfaction is the best advertisement.

5th part: the following thing is raising money because we have to depend on the raising money to develop the company and pay the workers better. The most quick and effective way is to get loans from banks. I think it is not very difficult. Although banks awarded that the company has just experienced a strike , they knew nothing about the contamination incident. Now the company is launching a series of campaigns actively. Especially, initial consumer responses are positive. The company also can ask government to give assistance.

The second thing is to investigate the worker who introduced a chemical into one of the machines. If he is a hard worker and is not intentional, just because did not satisfy the low salary and benefit. I think the company is best not to lay off the worker soon in order to let other workers know, the company can understand their strike. But the worker must be criticized and fined for contamination event. When all the dust has settled, I insist on firing the worker, because the state own national laws, house have rules.

D) How much does a company’s financial situation determine how ethical dilemmas are handled?

I have my own view on this topic, how ethical dilemmas are handled not only depends on a company’s financial situation but also determined by any other factors, such as management philosophy, social responsibility and entrepreneurs’ own moral quality. These factors forgathering with the financial situation determine how ethical dilemmas are handled. Therefore, when we discus degree of a company’s financial situation determine how ethical dilemmas are handled, we should consider the combination of factors at the same time.

For example, my friend John owns a small manufacturing company. The company produces a product that can cause water pollution during the production process. If the company does not control that pollution, it’s much cheaper for producing the product and the company can promise the shareholders larger returns in the short-term. But the residents who drink the pollution water near the company will get silk. However, if the company does control the pollution and promise cleaner water, it might cost more in the short-term and short-term returns may suffer. At the beginning, the company was lack of money, so the company could only focus on reducing the pollution to the maximum extent. Following the development of the company, the company not only strongly controlled the pollution but also paid more attention on cleaning the water. Now John’ company is more respected, his company attracts more business and investors, and the stockholders will profit for a long period of time.

In this case, John, as an entrepreneur, has a high moral quality and a strong sense of social responsibility. He takes into account the impact of polluted water on nearby residents. He did not discharge sewage for short-term interest. When the ethics conflicts with the interest, John chooses to take the moral side. In this context, the company’s financial situation determines how ethical dilemmas are handled. At the beginning, financial situation limits the capacity of polluted water treatment. So the company could only focus on reducing the pollution to the maximum extent. With the company’s development, the company has the ability to spend more money to clean the water, not just only control the pollution.

There is also a negative example.

Defective fresh milk from unlawful dairy farmers is to blame for the contamination of milk powder from Sanlu Group. Investigations have shown that an industrial contaminant, melamine, was added, directly resulting in kidney stones found among babies. Sanlu Group, the state-owned company was one of the oldest and most popular brands of infant formula infant in China and China’s largest producer of powdered milk. In two years, the group opened a dairy plant in TangShan with annual capacity of 200,000 tons of formula milk powder and acquired a liquid milk production base in Weifang, capable of producing 300,000 tons of liquid milk every year. Because of developing at a fast speed, raw milk is in short supply. So Sanlu’s eyes half shut to bad quality milk. The most milk powder is provided to baby. In a statement, Sanlu admitted that some of the products were contaminated by melamine.

In this case, Sanlu was a flagship enterprise in milk powder manufacturing. It was in good financial situation at that time. It raised money just for expansion. From the perspective of business ethics, Sanlu’s behavior goes against business ethics and it fails to take its basic social responsibilities for consumers, therefore, any excuse for that is nonsense.

This incident is attributed to some social environmental factors, such as implicit rules, entrepreneurs’ poor moral quality and their fluke mind. Their poisonous products have damaged the whole society’s interests as well as theirs. When they face the choice between money and morality, they chose the money. We can say that because the food industry’s own problems, they ruin themselves.

In this context, the company’s financial situation can not determine how ethical dilemmas are handled. Although Sanlu has recalled 700 tons of baby milk powder, Sanlu Milk incident has effected on dairy enterprises and food industry. For example, products of relevant enterprises fall into poor market, stock prices are on the decline, corporate image is damaged seriously and the whole society falls into a state of psychological panic.

Question 2

Introduction

Utilitarianism is a consequentialist theory, which is based on utility, or doing that which produces the greatest happiness. Therefore, a utilitarian would require that each action must be weighed against the consequences of conducts before making a decision. Kant proposed a deontological moral theory. Kantian moral theory and Utilitarianism are similar in the respect that they both attempt to explain how one can go about acting ethically, however, they differ in areas of measuring morality and their usage of rules. Kantianism says that an act is considered moral for two reasons: if it done for the sake of duty and if its maxim can be willed as a universal law.

We have all read some reports about people who act heroic deeds. We absolutely believe that those people should be given moral praise. But if we discover that they did the heroic deed just for praise, or for a reward, or by accident, or were forced to do it in some degree, our sense of respect will lower. Some acts that look like moral conduct may intend to be self-interested or even wicked aims. We do not want to give people moral praise when their deeds fill with immoral purpose. We prefer to praise when they act from correct purpose.

Kant’s theory has a conception of a good will. Good will which can be conceived to be good without qualification is good in itself. Kant pointed out other good features of human nature, as ingenuity, intelligence, courage etc. have value only under appropriate conditions because they may be used either for good or for evil. But a good will is good intrinsically; its value is utterly independent. The value of a good will not depend on the consequences of human action.

From the questions about a good will, Kant quickly rises to principles. These principles describe moral obligation. Kant held that only when we act from duty does our action have moral worth. Motives of conducts are moral, which must derive more from duty than from inclination. Kant begins to consider whether a person should be given moral praise for a given action. This depends on the person’s aims. If the person aims for any other purpose, for example, out of embarrassment, personal gain, under force, and so on, the person should not be given moral praise, even the action seems moral. When a person’s conduct is for his own profit, that person should not be given any moral praise because his conduct is a self-interested conduct, not a moral conduct. It was not done to do the morally proper thing. Instead, it was done for some form of profit. Kant’ moral theory insists that no conducts done for private interests should be given moral praise.

For example, if a person get a job to earn money, which is not a morally conduct. But what if the person does the job for caring his family? As the purpose of the conduct, is not a moral purpose either. In this case, conducts based on care is the right thing to do. It does not come from the moral purpose. The person why does because he cares, because he has involved with another person. When our starting point is not a moral purpose we act because we care. Then this conduct is not a moral conduct. All of these purposes are in a way like the desire for money. They are external to a moral concern.

There are some problems with Kantian morality. When it is used in real life Kant’s moral theory is really strict. Suppose 30% profits of my company come from the cooperation with the AB Company. Now I’m faced with an unreasonable request for information which refers to trade secret. I might have to respond, so I lie, sure that the person asking the question has exceeded his rights. Although I know it is wrong to lie under normal circumstances, I also believe that some circumstances are exceptional. And I think everyone has the right to lie when they face the situation which is out of control. It will become a universal rule. From Kant theory, such a rule may fail because if people all follow the rule, it will reduce to be possible to lie under external force. Kant could state that I can not lie. No matter how serious the situation because lying is absolutely wrong, no exceptions can be made. I think it is too strict morality to allow no exceptions.

To solve this problem we can discuss more widely and more precisely. For instance, your leader wants your private information that is intrusive. You want to lie because you do not want to refuse the categorical imperative at the same time. Should a young girl works for a company who is asked by a male leader for intrusive information is allowed to lie? It may be not inconsistent to require such lies, but it does seem as if our universality is a fake. We have not really generalized but instead offer a rule tailored to fit people in exactly our own situation. Kant believes, instead, that we must generalize at a wide level.

Suppose government supports social agency on policy, and generalizes that all those social welfare organization should be support by government. This seems perfectly acceptable. If a Kantian rejects such a widespread phenomenon, we may argue that he or she is wrong. This seems to be a permissible normal while the lie to leader seems not to be. How do we determine an acceptable generalization from an unacceptable one? How do we respond the questions like those without too subjective? If we generalize in the wildest way without including special circumstances, Kant’s morality seems an inhuman judge. If we allow special circumstances included in the generalization, how can we judge what is permitted in an acceptable generalization without guidance.

There is an example that reflects the conflict between Kant’s theory and actual situation. A worker of a nature spring water company introduced a kind of chemical into one of bottling plants, which in turn 1000 bottles of the spring water were contaminated. Because the amount of the chemical was very minute, according to investigation, no customers could possibly suffer harm. Since the machine has been sterilized, any risk of long-term exposure has been virtually eliminated. How to handle this emergency? Whether need to recall that contaminated water? Basic on no customers would be suffered. If the company recalls the water openly, there are several problems to face.

1) The recall will cause the social fear.

2) The recall will not only impact the company’s development but also may cause bankruptcy. It is harm both to the company and employees who would lose jobs.

3) Government would undertake a lot of pressures.

4) The reputation of the industry will be hurt.

Kant’s moral theory requires people to be truthful to others and themselves because truthfulness is their duty. However, in reality, when it comes to whether one should lie to protect the stakeholders, his theory faces a conflict between the duty to be truthful and the duty to protect the stakeholders. One of the biggest difficulties with Kantian ethics is that it discounts outcome as a valid factor in evaluating the moral worth of an action. While it is not necessarily wise to rely solely on outcome (as in utilitarianism), it is problematic to discount the outcome altogether – as we saw in the dilemma of lying.

Sometimes Kantian moral duty seems to conflict with our natural inclinations or common sense. If we obey the moral law rather than our intuitions we are acting morally. Kant’s theory does not tell us what to live for or what to value.

Kant’s morality is not a panacea. There are too many issues that can not be guided by Kant’s moral theory. We need what kind of social institutions? How can we avoid inequality and discrimination? What ethical standard is humane can be acceptable? How do measure when to give moral praise?How to discriminate the moral saint from the person who complies with the moral rules?

Utilitarianism narrows the moral range, which requires that we first count both the good and bad consequences of an action; we then determine whether the total good consequences outweigh the total bad consequences. If the good consequences are greater, then the action is morally proper. If the bad consequences are greater, then the action is morally improper. The Kantian narrows both the range and domain. For Kant all actions should come from moral duty or moral permission. This gives a larger range than does the utilitarian. Kantianism can be universally applied but it does neither determine which acts are morally good, nor provide guidance to various acts of moral values. Kant also restricts the moral domain. We can not simply use Kant’s theory to determine who moral people are, and it is difficult to use Kant’s theory to support virtues.

Conclusion

Kantianism focuses on the motivation of actions, has clear and distinct set of universal rules, and is morally logical. However, Kantianism is overly strict in not permitting exceptions. Kant’s theory is lack of universality, which used in the business, also has some limitations.

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