List the clear ethical violations in this case. Explain. List the gray ethical a

Question

List the clear ethical violations in this case. Explain.

List the gray ethical areas. Why are they gray?

What should Sherry do?

What should the parent company do?

Company Background Laxtec, Inc., is a subsidiary of a Texas-based company that function is to manufacture the motor and arm that rotates the cameras. Laxtec is located in Illinois. s surveillance cameras. Laxtec's main Laxtec, Inc, has no individual ethical regulations, nor does it have an ethics team within the organization. Laxtec's parent company however, has an ethics staff within corporate headquarters that deals with questions of ethics for its employees. The corporate headquarters does not take an active part in exercising ethics requirements in its subsidiaries due to staff limitations. Situation At the beginning of November 2017, Laxtec had been directed by its parent company to manufacture a new arm that will rotate 360 degrees instead of the present 180 degrees. Since Laxtec is operating near full capacity and cannot extend its resources to design and manufacture the special motor and control unit needed for the 360-degree specification, it has decided to subcontract this project. Knowing that only a few companies would be able to design and manufacture the arm, Peter Ferdenzi, president of Laxtec, instructed Sherry Morris, director of supply management, to inform the bidders that there were many companies bidding for the contract. This would insure that the bids received were competitive. One out-of-town bid and three local bids were received. Mr. Ferdenzi called Sherry into his office to discuss them. Sherry told Mr. Ferdenzi that the out-of-town bid from Aster Company appeared to be the most favorable. But Mr. Eerdenzi told Sherry to discard it because he wanted to subcontract the motor within the area to enhance business and social relationships with the community. Out-of-town contracting would only cause friction among the workers. The qut-of town bids, explained Mr. Eerdenzi, were simply to obtain pricing information Sherry looked over the remaining bids and explained that Prextel was the next best choice, then Gordon, Inc., and lastly Tom Corporation. Sherry was familiar with the Tom?Corporation and told Mr. Eerdenz? that it had been involved in questionable business activities and was being investigated by the local authorities. Mr. Ferdenzilooked sternly at Sherry when he heard the Prextel bid was the best and told Sherry to discard it. Mr Frdenzi's ex-wife was the director of the research and design team at Prextel and relations between the two were difficult, to say the least. Finally, Mr. Eerdenzi agreed to award the bid to Gordon, Inc. Mr. Eerdenzi told Sherry to negotiate the specifics with Gordon. Mr. Ferdenzi also told Sherry to delay notifying the other bidders of the award until two weeks after production had started with Gordon. In this way, it would not be necessary to listen to the other suppliers "beg" for more consideration. Negotiations between Gordon and Laxtec were finalized and production started. A problem arose within the second week, however, when Laxtec's quality representative noticed that the materials being used were not of the quality standard stated in the contract. Sherry immediately called a meeting with Gordon, Inc. During the meeting it became apparent that there was a lack of honesty in the development of Gordon's bid. Further, Gordon's attempt to use substandard materials was an attempt to increase profit. Sherry realized that Laxtec could not rely on Gordon, Inc. She stated that she would cancel the contract based on fraud. Gordon, wishing to avoid any litigation and bad publicity, agreed and passively backed out. Luckily, at Mr. Ferdenzi's direction, Sherry had not notified the other bidders of the award to Gordon. Sherry met with Mr. Eerdenzi again and recommended that Prestel be awarded the contract. Mr. Eerdenz? refused and ordered Sherry to meet with Tomos and negotiate a contract.

Explanation / Answer

1) There are two ethical violations in this case. One from the side of Gordon, and other from the side of Laxtec Inc. They are:

a) The first one is compromising of quality set in the contract with Gordon. This was done by Gordon to increase their profits. There was a lack of honesty in the development of their bid as well

b) The secons ethical violation is from the Laxtec Inc. side. Mr. Ferdenzi, unde desperate circumstances, agreed to pay Tomos donation, which was completely against the company's norms.

2) The two ethically gray areas are:

a) Mr. Ferdenzi not giving contract to Prextel just because of his personal grudges with Prextel's research and design team head. This was the case despite their bid being the best among all the bidders. On top of that, Laxtec didn't notify them about their contract non-rewardance on time. Such situations are ethically misleading and shouldn't be carried out.

b) Second, is Sherry's situation in case of providing Tomos donation. This was never done by Sherry earlier but she now has to take care of her 2 children making it a gray situation.

3) According to me Sherry should not indulge in donation related activities, on both ethical as well legal grounds. Such cases can tarnish her image for good. Also, with the experience she possesses, she can find a new job but getting back the reputaion would take some time.

4) If parent company gets to know about the situation, it should take the case into its hands because of conflict of interest between Mr. Ferdenzi and Prextel. This way there would be no bias in the decision making.   

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