resolving ethical business challenges case study daniel

Resolving Business Ethical Challenges

This essay will discuss how to effectively resolve ethical challenges in business. It will cover approaches to identifying ethical dilemmas, decision-making processes, and implementing ethical practices. The piece will emphasize the importance of corporate responsibility, transparency, and maintaining trust in business relationships. PapersOwl offers a variety of free essay examples on the topic of Business Ethics.

How it works

Companies ensure the wellbeing of their employees through following and applying established ethical regulations. For instance, the ethical code in a given firm may determine the working hours, sick leave, compensation, and the provision of protective equipment in working conditions that put the workers at risk. From the case study “Resolving Ethical Business Challenges,” Preet notes that the Amex Corporation’s outsourced factory in China has developed issues that include late deliveries and increased accidents. After taking a trip to the factory, she discovers many ethical issues such as poor working conditions, low pay, and overworked employees.

Once she presents her report and offers recommendations for changes to the supervisors at Amex Corporation, nothing is done. The study presents solutions to the case study by discussing the choices that Amex has and the advantages and disadvantages of each, how Jim takes cultural relativism approach to the issue, and whether Amex is responsible for the working conditions of its suppliers.

• 1 Discuss some of the choices of the firm and the advantages and disadvantages of each
• 2 Describe how Jim takes a cultural relativism approach to the problem
• 3 Since Amex does not own the Chinese factory, are they still accountable for the working conditions of its suppliers? Why or why not?

Discuss some of the choices of the firm and the advantages and disadvantages of each

Amex Corporation has applied a business strategy of outsourcing its manufacturing processes to reduce costs and increase profits. From the case, the reduction in overall expenses allows the firm to provide quality products at an affordable price, which is appealing to the targeted consumers. Therefore, some of the significant advantages of the choice to outsource are saving money, offering quality products at an affordable price, increased consumers, and high profits. Despite the benefits, the process of outsourcing also has disadvantages. For example, Amex does not have the authority to control the culture or impose working regulations to their outsourcing factories. The company focuses on the increased productivity that a factory facilitates, which reduces their concerns about the working conditions of the employees at this factories. A second disadvantage associated with the decision to outsource is the fact that Amex cannot monitor the outsourcing factories, which prevents the establishment of employees’ welfare that leave the issues unsolved.

Amex also has a choice to influence the working conditions in the factories they outsource to, which can be done by entering into contracts that establish ethical rules on how workers should be treated. A benefit for this will include increased output, timely deliveries, satisfied workers, reduced accidents, and increased revenue. Amex has decided to do nothing despite the presentation of Preet’s report and recommendations. The disadvantage for this choice is the possibility for detrimental consequences for the company once the public discovers the poor working conditions of the workers in its outsourced factories.

Describe how Jim takes a cultural relativism approach to the problem

?Cultural relativism is the notion that actions, customs, beliefs, and ethics in a culture or an individual are relative to or based on the culture itself or within the person’s social context. In the case study, Jim believes that Amex will not do anything to rectify the issues in the China factory because that is the business culture in that part of the world. For example, he claims that people in such factories are willing to work for more extended hours and in less than ideal conditions to get better pay. Therefore, it is within their social context or culture to work long hours and in poor conditions to get higher salaries compared to other workers in different factories. Further, he claims that Amex must outsource to cheap factories to keep their costs low and provide low-priced products that consumers want. Here, Jim uses cultural relativism approach to show that there is a culture where consumers need low-cost products without caring how they are manufactured.

Since Amex does not own the Chinese factory, are they still accountable for the working conditions of its suppliers? Why or why not?

?Amex Cooperation is not legally accountable for the working conditions of its suppliers because they do not own these factories. Nevertheless, it is the company’s responsibility to ensure that it outsources its work to suppliers that show responsibility in providing the best working conditions for their employees. They should select the suppliers that are aligned with their ethics and represent their business in the best way possible. Apart from this, Amex can provide contracts to the Chinese factories making demands for the implementation of better working conditions and other ethical regulations associated with the wellbeing of the employees. In case the factories decline, the company should offer their business to other willing factories. In this case, once the poor working conditions and welfare of the employees are known to the public, Amex will experience adverse business outcomes forcing it to implement new strategies at the factories, working with a different source, or losing its consumers. Therefore, although it is not responsible for its suppliers, it has an ethical responsibility to facilitate the welfare of workers to ensure the success of the business in the short and long-term.

?In conclusion, despite the existence of different business cultures in the countries that it outsources to, Amex Corporation has a moral responsibility to ensure the implementation of ethical standards that maintain the wellbeing of workers. It should solve the issues with the Chinese factory to avoid losing its customers in the future. It is essential for the supervisors at the firm to recognize the effectiveness of ethics in business. Amex should strive to build a strong brand in its market to overcome competition, observe legal and moral obligations, and present a confident appeal to its consumers through maintaining an ethical code in all its business endeavors.

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How Best to Respond to Ethical Challenges in Business

Most accountants in business and the public sector, whether working in a small organization or serving as the chief financial officer (CFO) of an international corporation, face ethical dilemmas during their professional careers. Ethical dilemmas come in many forms and accountants sometimes need support to address complex and challenging conflicts. Accountants may also treat ethical dilemmas as “business decisions” and not utilize their professional code to assess potential courses of action.

The CGMA survey report  Managing Responsible Business, A Global Survey on Business Ethics  shows the trends, pressure points, and ethical gaps within some organizations. The key findings of the CGMA survey include:

• Business challenge 1—Ethical Culture

The survey showed a 10%-15% increase since 2008 in organizations providing both statements of ethical values and a code of ethics, as well as related training, provision of hotlines, and incentives, such as performance-based rewards.

Corporate leadership appears to be less actively engaged in reviewing and taking responsibility for ethical performance compared to 2008 as shown by a significant decline in the number of corporate leaders who held formal responsibility for ethics. This provides more evidence of a gap between the rhetoric from corporate leadership on ethical issues and actual practice. A weakened “tone from the top” has potentially serious implications for the overall ethical operating culture of an organization.

• Business challenge 2—Accounting for Ethics

The survey showed an almost 20% increase in organizations both collecting and reporting ethical information. The majority of management accountants feel it is important to collect and analyze ethical information, but one in five do not believe their organization will do so in the near future.

• Business challenge 3—Ethical Dilemmas and Pressures

Despite an increase in ethical codes and training, there is greater pressure within organizations to act unethically. Pressures are most apparent in emerging economies.

• Business challenge 4—Business Issues

Security of information remains the biggest issue of concern across all markets. Bribery has risen from sixth to third in the rankings of issues of concern, reflected by the increase in anti-bribery and corruption legislation.

Fewer now believe that business has a moral imperative to help address global issues, with a decline from 84% to 77% since 2008.

Examples of the most common ethical dilemmas in the business environment are varied and include:

• Dealing with pressure to act unethically, particularly from dominant superiors;
• Balancing confidentiality with blowing the whistle on illegal or improper actions of others;
• Disclosing information in the public interest; and
• Wrongful trading in a distressed situation where insolvency might be imminent.

Such ethical dilemmas cover various ethical issues, such as overstating performance and valuation, participating in fraudulent activity, non-disclosure and withholding of information from auditors and other stakeholders, and making a decision without adequate information.

Many IFAC member organizations provide guidance, ethical resolution frameworks, and pathways to help accountants deal with ethical dilemmas. A key question for a professional accountant is whether you would be able to justify your decision to deal with a problem or conflict.

A common aspect to guidance on resolving ethical dilemmas is to help accountants define and apply the fundamental principles in their professional code of ethics. A distinguishing mark of the accountancy profession is the responsibility to act in the public interest and professional ethics places an expectation on accountants to self-regulate their behavior in accordance with the  Code of Ethics for Professional Accountants   (the Code) developed by the  International Ethics Standards Board for Accountants  (IESBA). IFAC member organizations are required to abide by ethical standards  at least as stringent  as those stated in the Code.

The principles may potentially be threatened by a broad range of circumstances including self-interest, self-review, advocacy, familiarity, and intimidation. An awareness and understanding of these circumstances will help to establish which fundamental principles are affected by a situation and why.

Stathis Gould

Director, Member Engagement and PAIB

Stathis Gould is responsible for IFAC member engagement and leads IFAC’s advocacy for professional accountants working in business (PAIB) and the public sector. A key element of his work is developing thought leadership and guidance in support of enhancing the recognition of and confidence in professional accountants as CFOs, business leaders, and value partners in the context of sustainability/ESG, data and digital transformation, and other emerging business trends and issues.

Before joining IFAC, Stathis worked at the Chartered Institute of Management Accountants (CIMA), where he was responsible for planning and overseeing a program of policy and research that promoted and developed management accountancy. Prior to serving the accountancy profession, he worked in various roles in the private and public sectors in the UK. There, Stathis delivered financial and performance management in the National Health Service and worked for a technology company responsible for delivering the localization of software and content across the globe.

Stathis holds a BA in European Business Studies, an MBA (with distinction), and a postgraduate certificate in Environmental Management, Economics, and Policy. He is a member of the Institute of Management Accountants.

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Business case studies

These case studies are aimed at members and students working in business.

ICAEW case studies

The case studies are illustrative and should be read in conjunction with the guidance contained in Part 1 and Part 2 of ICAEW's Code of Ethics .

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CCAB case studies

The case studies were developed by the UK and Ireland’s Consultative Committee of Accountancy Bodies (CCAB). They illustrate how the ethical codes of the CCAB bodies can be applied by professional accountants working for commercial organisations. These scenarios are not intended to cover every possible circumstance, but instead to outline key principles and processes that could be considered when attempting to identify, assess and resolve ethical problems in line with the ethical codes. These case studies were published in February 2022. The CCAB welcomes comments on these cases. Please email [email protected] . 

• Ethical Dilemmas Case Studies - Professional Accountants in Business

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Please note you do not have access to teaching notes, flight or fight: a case study in resolving ethical issues.

Publication date: 20 June 2019

Issue publication date: 10 September 2019

Teaching notes

Theoretical basis.

Students apply the new Institute of Management Accounting (IMA) ethics standard to “contribute to a positive ethical culture” and advice to “actively seek to resolve an ethical issue.” By learning and practicing how to voice concerns students gain confidence in this approach to resolve ethical issues. In addition, most students are inspired by the moral courage of the chief financial officer (CFO) and report an increased resolve to have moral courage.

Research methodology

The case was based on the CFO’s published account of his experience and supplemented with an interview. It has been gradually refined in an ethics course for accounting students over several years and evaluated from a sample of students who completed the course.

Case overview/synopsis

The CFO of a mining company was pressured to pledge collateral that was already pledged on another loan. The CFO courageously refused his supervisor’s request and resigned his position immediately (flight). In its ethics guidelines, the IMA requires its members to actively seek to resolve ethical issues internally before disassociating from the organization (fight). In addition, ethics writers Gentile (2010) and Badaracco (2001) suggest ways to communicate ethical concerns. In this case, accounting students learn how to resolve ethical issues using the ethics guidelines and suggestions by analyzing and writing about the experience of the CFO.

Complexity academic level

The case is used in a graduate ethics course. It may also be used in undergraduate accounting courses.

• Giving voice to values
• Communicating ethical issues
• Fight-or-flight
• Accounting ethics

Acknowledgements

Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision making. The authors may have disguised names; financial, and other recognizable information to protect confidentiality.

Christensen, D.S. , Schneider, P. and Orton, J. (2019), "Flight or fight: a case study in resolving ethical issues", , Vol. 15 No. 4, pp. 295-305. https://doi.org/10.1108/TCJ-11-2018-0121

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Copyright © 2019, Emerald Publishing Limited

You do not currently have access to these teaching notes. Teaching notes are available for teaching faculty at subscribing institutions. Teaching notes accompany case studies with suggested learning objectives, classroom methods and potential assignment questions. They support dynamic classroom discussion to help develop student's analytical skills.

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