Business Ethics Group Assign FINAL

8/19/2019 Business Ethics Group Assign FINAL

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NAME REGISTRATION NUMBER

DANISTER JORI M157230

ANDY CHIYANGWA M122251ANDREW JORI M157232

DADIRAYI GONYORA M101937

PERTUNIA DHLIWAYO M101742

LEORNARD JERE M101686

ARTWELL BATIRAI M159862

GURAI PEPUKAI

LECTURER: RTD COL. NHEMACHENA

MAAC 507 APPLIED CORPORATE GOVERNANCE

GROUP 4


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BUSINESS ETHICS

Question: You are the directors of Doing Good Consultants andyou have been asked to present a paper on Business Ethics at abusiness forum. With reference to a case of your own choice,

prepare and deliver a presentation that demonstrates thenegative impact of unethical behaviour and suggest themeasures that companies in Zimbabwe can take to avoid similar pitfalls.


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INTRODUCTION

Business Ethics definition-

• The application of a moral code ofconduct to the strategic andoperational management of a business

Levels of business ethics

• Macro level

• Micro level

• Individual level


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INTRODUCTION (CONT.)

We shall present on the negative impact of unethicalbehaviour at three levels, namely:

• Company

• Society

• Economy

And on measures that can be taken to avoid the samepitfalls


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CASE: SIEMENS PLC

A regulatory investigation unearthed a raft offraudulent payments in order to win contracts.

Senior executives initially denied knowledge and

involvement although there was overwhelmingevidence of tacit approval of the practice.

The corporate culture seemingly toleratedpayment of bribes.

Four international investigations were institutedwhile the company also ordered an internal inquiry

by a New York lawfirm, Debevoise & Plimpton. Overall, the scandal cost Siemens €2.5bn, including

€2bn of fines

Siemens voluntarily suspended its applications forfunding from the World Bank for two years


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CASE: SIEMENS PLC (CONT.)

Siemens announced it would avoid competing incertain known hotspots for corruption or unethicalpractice, such as Sudan

It also agreed to a 15-year programme to pay $100m

to non-profit organisations fighting corruption The firm was also barred from dealings with certain

clients

The firm’s employees also suffered two years of shameunder intense public scrutiny

The firm took over 900 internal disciplinary actions,including dismissals.

Siemens rolled out strict new rules and anti-corruption/compliance processes and hired over 500full-time compliance officers (up from just 86 in 2006).


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IMPACT OF UNETHICAL

PRACTICE TO COMPANY Public Danger and Loss of Goodwill-

• Siemens lost the trust of the market and had to suspendits applications for funding to the World Bank

Legal scandals/ litigation risk -

• In addition to the initial regulatory investigation and itsown internal inquiry, four international investigations werecarried out on Siemens. The company paid €2.5 billion infines and other costs.


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IMPACT OF UNETHICAL PRACTICE

TO COMPANY (CONT.)

Recklessness-

• Unethical practices promote recklessness by employees andthe company at large. It was revealed at Siemens thathundreds of workers siphoned off millions of Euros into"phoney consultants' contracts, false bills and shell firms" to pay massive bribes to win contracts.

Loss of stakeholder trust and difficult to win backthe lost trust-

• Siemens lost the trust of many of its stakeholders among themthe regulators, shareholders and investors and financiers

upon revelation of the scandals. A huge price had to bepaid to win back stakeholder trust. One leading group ofshareholders questioned the Board's basic competence forits handling of the affair.

http://www.theguardian.com/business/2008/may/27/technology.europehttp://www.theguardian.com/business/2008/may/27/technology.europehttp://www.theguardian.com/business/2008/may/27/technology.europehttp://www.theguardian.com/business/2008/may/27/technology.europehttp://www.theguardian.com/business/2007/jan/25/germany.internationalnewshttp://www.theguardian.com/business/2007/jan/25/germany.internationalnewshttp://www.theguardian.com/business/2008/may/27/technology.europe


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TO COMPANY (CONT.)

Being unethical undermines competitiveness-

• Siemens had to voluntarily suspend it’s operations in somemarkets and were barred from dealing with certain clients.

Poor Discipline-

• Siemens had to contend with 900 disciplinary cases includingdismissals whilst amnesty was extended to others.

Negative shareholder wealth as a result increasingmonitoring costs-

• Siemens increased its compliance staff from 26 to 500including hiring a former Interpol officer. A lot of money wasalso spent on massive anti-corruption training in theorganisation.


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TO COMPANY (CONT.) Poor credit rating-

• The suspension of Siemens’ applications for funding to theWorld Bank together with negative publicity could

significantly affect its credit rating on the capital markets. Lead to a drop in stock price-

• A fall in Siemens’ profits due to increased costs as well aslost business would inadvertently result in a fall in thestock price

Employee Performance / Morale.

• The scandal brought shame and humiliation to theemployees and this could have affected employeeperformance and morale.


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TO THE SOCIETY

Insufficient Community Development

• Siemens could have used the money it was using for bribingto improve the communities it was operating in.

Environmental degradation• Using bribes to secure contracts could result in bribing of

environmental authorities again so as to avoid remedialactions for the degradation

Harm the people who used to depend on the company incases where it fails and closes

• Individuals and companies who took Siemens as a rolemodel suffered and also the potential beneficiaries in themarkets it considered hotspot for corruption were deniedservice


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TO THE ECONOMY

Reduces economic growth

• Siemens increased its compliance staff from 26 to 500including hiring a former Interpol officer. A lot of money

was also spent on massive anti-corruption training in theorganisation and withdrawal of funds application.

Creates unemployment when the company fails andcloses

• To the dismissed employees and potential employees

from hindered growth Hinders potential growth

• Accessing of funds from the World Bank could haveenhanced company growth beneficial to the economy


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MEASURES TO BE TAKEN TO

AVOID SIMILAR PITFALLS Develop, communicate and implement a code of ethics

Siemens’ had no one and their system seemed to supportunethical behavior

Quantify reputational and other ethical risks. Siemens’ did not quantify the risks and only realized the

resultant loss after the scandal

Embed business in business models, organisationalstrategy and decision making processes.

Siemens’ aggressive growth strategy has arguably,

compelled managers to see bribes as a tempting short-cutto hitting tough performance targets; a complex, matrix-likestructure that allowed divisions to effectively run themselves,and poor accounting processes.


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AVOID SIMILAR PITFALLS (CONT.)

There should be a process of reporting unethical activitiessuch as the whistle blower policy

When Peter Löscher took over he put in place the amnestyand whistle blower policies which resulted in more evidencebe supplied

Carrot and stick method.

There should be a reward for good ethical behavior andpenalty for bad ethical behavior.

Dismissals Siemens

Senior managers and business leaders must beexemplary in ethical approach.

Loscher led by example in Siemens to the extend that theybelieved they have won the war against corruption


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AVOID SIMILAR PITFALLS (CONT.) Allow independent individuals and organisations

review the company’s operations.

Siemens appointed Michael Hershman, co-founder

of Transparency International, to serve as its adviser amove to affiliate itself with a leading anti-corruptionexpert

Governance structures should include people withappropriate skills to scrutinise performance andstrategy across social, ethical and environmental

issues.

Siemens’ had no one conscious of the ethical issues until

the scandal was unearthed

http://www.theguardian.com/sustainable-business/transparencyhttp://www.theguardian.com/sustainable-business/transparency


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AVOID SIMILAR PITFALLS (CONT.) Managers must not be short sighted to look short run

cost cutting measures at the expense of the long run.

Chasing short run growth targets might have contributed

to the scandals in Siemens’

Taking social, environmental and ethical factors intoaccount when allocating capital, so that sustainableinnovation is encouraged.


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CONCLUSION

Unethical behaviour is very costly in the long term andcan lead to business failure

Structural, procedural and cultural interventions should

be adopted to instill ethical behavior in organisations.

Voluntary penance is often necessary for effectivelyrestoring trust.


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THANK YOU

Documents

Business Ethics Group Assign FINAL