Ethics Case American Products Corporation participates in a highly competitive i

Question

Ethics Case American Products Corporation participates in a highly competitive industry. In order to meet this n and achieve profit goals, the company has chosen the decentralized form of organization. Each manager of a decentralized investment center is measured on the basis of profit contribution market penetration, and return on investment. Failure to meet the objectives established by corporate management for these measures has not been acceptable and usually has resulted in demotion or dismissal of an investment center manager. An anonymous survey of managers in the company revealed that the managers feel the pressure to compromise their personal ethical standards to achieve the corporate objectives. For example, at certain plant locations there was pressure to reduce quality control to a level which could not assure that all unsafe products would be rejected. Also, sales personnel were encouraged to use questionable sales tactics to obtain orders, including gifts and other incentives to purchasing agents The chief executive officer is disturbed by the survey findings. In his opinion, such behavior cannot be condoned by the company. He concludes that the company should do something about this problem. Instructions Who are the stakeholders (the affected parties) in this situation? Identify th e ethical implications, conflicts, or dilemmas in the above described situation. ht the company do to reduce the pressures on managers and decrease the ethical conflicts? What mig (CMA adapted)

Explanation / Answer

(a) Stakeholders in this situation are:

Stakeholders are the parties who are directly or indirectly affected by the performance of the organisation, and these parties are concerned for the good performance of the organisation. Stakeholders in this case are:

(b) The company could have taken a well planned and organised approach to tackle competition in the market. Rather it chose to increase pressure on the investment managers of profit centres, which is now decentralised. Hence not able to achieve the sales targets, leads to demotioni or firing of the investment manager. This created a feeling of insecurity among the employees. For the employees it is like do whatever, but achieve sales targets. Although management never asked its employees to compromise on the Ethical Practices, which were iin place, but it created a situation, where the investment manager was left with no option than to either perform by compromising ethical standards or get fired for non performance. This situation lead to lowering down the ethical standards, recommending the unsafe products to the customers, leading to wrong selling. This situation will ultimately lead to investors losses, and hamper company;s image in long run. The investors would soon lose trust in the organisation, and look for alternative option. Thus leading to ultimately closure of the company in the future.

(c) The company should not link performance to the sales target. It must focus on high ethical standards in its day to day operations. The company should rather work on innovative strategies to increase the sales and competitive edge over its competitors, rather than link performance of investment managers to their survival in the organisation.

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