Business Ethics and Sustainability
Report on Sustainability Issues Affecting Institutional
Investors, Within the Australian and global Markets
Executive Summary 3
Stakeholder’s Approach Theory 4-5
Major Stakeholders 5
Impact of the Incident to the Organization 6-7
Further Discussion 7-9
Ethical Theories behind the Incident 9
SBS Strengths: Ethics in Leadership and Organizational Culture 10-12
Recommendation/Conclusion 12 -14
This case study pertains to the organization called SBS, short for Special Broadcasting Service. It provides multi-cultural programs on radio and television. The person who was interviewed for this case report was from SBS Radio. His name is Abu. He is the Executive Producer for Bangla Audio and Language Content at SBS of the Special Broadcasting Service. He is responsible for selecting, producing and editing audio & language content for the Bangla Program which airs twice a week on the SBS radio channel.
The major source of information for this discussion is Abu’s interview and the SBS’ Code of Conduct, particularly its provisions under Section 2.11 (Fraud) and Section 3.1 & 3.2 (Penalties and Sanctions for breaching the Code). The main issue in this case is the ethical behavior of one SBS contractors with regards to the advertisers.
The SBS Codes of Practice stipulates the principles and policies the media organization uses to guide its programming (University of Missouri, 2013, p. 1). The Codes embrace the principal Charter function of SBS as:
“ providing multilingual and multicultural radio and television services which inform, educate and entertain all Australians, and, in doing so, reflect Australia’s multicultural society.”
The SBS’s role as a multilingual and multicultural national broadcaster ensures that its services will be distinctive in Australian broadcasting. Across its media services, audiences can expect a reflection of the diversity of Australia and programming which is parallel with SBS’s Vision of “uniting and enriching its society by creatively communicating the values, the voices and the vision of multicultural Australia and the contemporary world” (2013, p. 1). As said, the SBS intends to represent the various experiences, lifestyles, perspectives, cultures and languages within Australia (2013, p. 1).
Stakeholder’s Approach Theory
According to Clifton & Amran (2010, p. 123), in the more conceptual level and in the corporate setting, the stakeholder Approach (SHA) is based on a view that a corporation such as SBS exists for the benefit of a number of parties (beneficiaries), not just shareholders, in order to ensure its survival. Hence, it should proceed in ways which maximize the overall value the corporation creates based on what the beneficiaries consider to be of value relevant to their interests and to equally distribute this value to all of the beneficiaries (2013, p. 124).
In this sense, beneficiaries are considered as ends in themselves and not merely as tools to increase the returns to shareholders (2013, p. 124). Hence, the real stakeholders are the SBS managers, its employees and the general public, along with the advertisers who support the company’s vision and operations. A corporation’s beneficiaries are stakeholders in the corporation but, since it is a media company, the stakeholders extend to the general public by which all the actions and behaviors of the other stakeholders contribute to its development and strong existence.
The major stakeholders involved in this issue are the employees and management of the company as well as its external audience and stakeholders. Other stakeholders include the SBS corporate members and the external advertising company.
Basically, the case is about a certain SBS contractor of the Sales and Marketing Department. He was involved in a fraud issue and he breached the company’s Code of Ethics. It was found out that this contractor received some money and gifts from the advertiser to persuade key members in the SBS Sales and Marketing Department to approve new advertisers.
This contractor, as narrated by Abu, assisted in the selection and acquisition of a new advertiser to air during one of the other language content shows. This contractor developed a solid relationship with this newly acquired advertiser. As SBS is funded 80% by the government, the remainder of the funds must be generated from sponsors such as advertisers. Anyways, so after the contract was signed with this advertiser/company, it sent this contractor a few of their electronic goods.
Impact of the Incident to the Organization
Stakeholders are directly affected by this issue because they are expected to adhere to a higher sense of integrity and ethical conduct. In general, Australian media company has a reputation and it strictly adheres by its Code of Conduct. While this code of conduct is not uniform among the media organizations in the industry, they are all set with the highest integrity in this line of profession (Murdoch University, 2013, p. 1). Hence, it is in their best interest to veer away from breaches in their code of conduct as it could negatively affect their reputation in the community. Obviously, the SBS is scared of losing its government trust and funding with any scandals or ethical issues attached to its organization.
The fraud also affected the SBS employees, in an indirect manner, since most of the employees who knew about the incidents of gift giving by a new advertiser. According to Abu, they felt a bit jealous as they learned that this contractor was getting all these benefits and they did not receive any. (He said he did not feel affected at all). However, the said sentiment was only insignificant compared to the gravity of the offense and the negative feelings it left for the honest SBS employees.
Lastly, Abu thought that the advertising company was also negatively affected by this as they were deemed “unethical” for offering this contractor money and gifts. While the action of one employee does not necessarily reflect on the entire company, it made a tinge of distrust for other industry players as well as colleagues within the companies.
Abu does not consider this incident as organization-specific, however, he generalized it as part of competitive strategy for some employees in the highly competitive world of advertising and media. As mentioned, he has not heard any of such incidents happening in their company before. Hence, he generalized that it is leaning a bit more to the overall industry side of the matter. He attributed this to the general competition as people in the industry try to climb up the corporate ladder, to network with external companies and build relationships with them.
The interviewer considered the competition as the main trigger to the incident. As he explained, the Australian media industry is quite competitive. The trigger would most likely be greed and wanting to secure a better position or earn some extra money. Quite frankly, he thinks that the issue was mostly external as they were the ones who initiated the gifts and money. However, this could also be considered an internal issue since it takes some employees to know such incident before it was found out. Hence, it can be overall considered as both an internal and external issue.
Abu does not also particularly know how such fraud is common in the Australian media industry. However, he said, in his previous experience as a journalist in a third world country, Bangladesh, such incident is extremely common. Extortion, bribery, unethical and sometimes illegal acts used to occur a lot during his journalism stint in the said country. He, however, distinguishes such practice from the more ethical media in Australia.
It has to be noted that SBS is a large media outfit and the Australian media network is a big industry as well. SBS is a very large corporate unit and this is very confidential since the company is mainly funded by the government. Hence, its managers have the ethical responsibility and they must to do various kinds of investigations to ensure there is no fishy business in their operations.
As it is, the SBS has a Code of Conduct, under which all gifts accepted must be done so on behalf of SBS and with the knowledge of the immediate manager. This rule applies to all SBS employees and contractors.
The fraud incident was found out when this particular contractor boasted to his co employees or colleagues about how he received all these gifts from the new advertise during one of the daily lunches. He also mentioned that he did not want to tell his manager because he really liked his new gadgets. Later on, one of the colleagues told the manager or the manager somehow found out about this.
Ethical Theories behind the Incident
The results suggest that the extent of whistle-blowing disclosures is positively linked with the permissibility of anonymous reporting and organizational support for whistle-blowing, the number of external managers on the investigating committee, and the existence of concentrated shareholdings (Lee & Fargher, 2013, p. 285). The mere existence of whistle-blowing disclosures can be taken as symbolic. Well, it might also be indicative of the greater ethical force and a strong corporate culture of trust and integrity among the employees and its managers. It also reflects the greater likelihood of the existence of “hotlines” as SBS is also a large company and has a higher level of current inventory, among others (2013, p. 285).
The incident negates the conviction of O’Fallon & Butterfield (2005, p. 411) who explained the perceived prevalence of illegal and unethical corporate behavior as pushing skepticism and uncertainty about the place of ethics in modern business practice. This case gives encouragement, especially in a very fraud-prone industry where ethics compete with material rewards and instant gratification. It signifies attention that ethical decision making, as demonstrated by this case, still holds and is being practiced by many large companies and organizations.
SBS Strengths: Ethics in Leadership and Organizational Culture
The manifested strengths in this case are the strong organizational culture and a general ethical environment where work ethics and codes of conduct are strictly followed. It is noteworthy that the alleged contractor revealed his secrets to some of his friends in the company. Yet, even when they have personal ties, it did not hinder the reporting of such negative acts.
Another strength shown is the standardized procedural means by which the manager had an informal discussion with the contractor. This is usually the first step in the process where there is a potential breach in code of conduct. It generally ended there in most cases as a mutual understanding is usually achieved. When the manager turned suspicious, perhaps a further investigation was initiated. This leads to a short decision, which manifests that this is how things should be done.
The instant firing of the contractor shows that ethical standard run supreme. His contract was terminated on the basis that he committed a form of “fraud” under the company’s Code of Conduct which does not allow any sort of illegal or unethical acts. It shows the sacredness of the code and the power of their organizational culture. The code was used quite effectively.
If anything, the case demonstrated a moral strength in how the SBS management responded. The manager obviously had some important leadership skills which helped him determine that foul play was happening. The breach process was also followed to the letter. There was due process but at the same time, the penalty was applied as straightforward as it was clearly written in the company’s manual. Fairness was promoted and this gives extra power and moral ascendancy to the management. They gathered information from other sources and gave the contractor ample chances to come clean. Basically, it was found that the interrogated contractor also received some money from the advertiser to persuade key members in the sales and marketing department who approve new advertisers. In a short while, the “fraud” issue was resolved and the penalty was imposed. The message was clear and simply – follow the rules and be ethical.
Leadership and organizational culture was significant in this incident because if the management also shows unfair treatment or if there is no moral authority (as others also see them as corrupt), then, the decision will not stand. There was a smoke and it was investigated. The offender was given due process. An internal review was initiated. Others were also interrogated so as to give both sides of the story. Some of the other employees were asked by the manager if the contractor’s story has been heard and if there was truth to it.
Obviously, there is legitimacy to the company’s leadership and there is an essence of positive organizational culture. Otherwise, this case would not have been resolved so quickly. The manager showed leadership skills by choosing do undertake the review himself, rather than refer it to the internal committee. In terms of organizational culture, there was a strong indignity on the said fraud and everyone in the workplace was shocked when they heard about the issue. The SBS employees were obviously against it as it was and is a wrong thing to do. This definitely signifies the strong ethical culture pervading in the company.
The company has displayed a very strong ethical standard and an organizational culture which is very admirable. It has followed up its Code of Ethics to the dot and this is very inspiring. The conflict of interest was resolved quickly and it determined that the wrongdoing, such as getting money from stakeholders, is indeed unacceptable as a rule of conduct.
Recommendations and Conclusion
In order to further promote this behavior in an organizational setting, it is important that the company create an ethical environment which motivates and rewards ethical behavior (Dunkelberg & Jessup, 2001, p. 62). This can be accomplished in many ways. In order to prevent fraud and other unethical behavior, SBS should constantly support and develop the culture. The culture must clarify that colleagues will find unethical behavior unacceptable and will report it, thus, the perceived probability of getting caught levels up. When ethical misdeeds are detected, the company should punish the individual fairly but openly (2001, p. 62).
According to Murphy & Dacin (2011, p. 602), there are three sure pathways to fraud: (1) lack of awareness, (2) intuition combined with rationalization, and (3) reasoning. The first pathway is due to overpowering situations or contexts in which the individual makes a decision. This path depends on several literatures such as organizational theory and social psychology, where there are some overwhelming situational factors which can instigate deviant behavior. The second path transpires when the individual is conscious that the behavior in question is fraudulent. The person goes through an affect-driven rational process which ends in a gut level, urgent decision. The individual either decides to stop from committing fraud due to the experience of negative affect (feelings) or decides to commit fraud due to his/her ability to instantly think of a rationalization to justify the act and, in so doing, veer away from the negative feelings. This shall reinforce the ethical decision making and emotions. The third path to fraud transpires only when the person is conscious that the act is fraudulent and the intuition is conflicting or unclear.
In this situation, the individual uses logic, most likely utilizing some form of a cost benefit analysis (2011, p. 603). If the person perceives that the benefits of committing fraud weighs more than the costs, then the person will commit fraud. When the person commits fraud, he/she will experience negative affect and the encouragement to reduce it (2011, p. 604).
Ethics is very important in a more socially responsible corporate governance times. This author proposes that reinforcements must be emphasized to strengthen the behavior of those employees reporting anomalies. As studies conducted by Honeycutt, et. al. (2001, p. 69), ethical perception is the most significant determinant of ethical behavior. Likewise, the method of compensation is a major determinant in four of five ethical scenarios and legal perception is identified in two out of five ethical scenarios. However, the authors contend that age and education are not vitally linked with ethical behavior.
Hence, it is imperative that companies implement policies and procedures which make it very obvious that unethical conduct will be known and the employee is penalized. The penalty must be direct, publicized and enduring. The company should send a message that unethical conduct will not be tolerated (Dunkelberg & Jessup, 2001, p. 60).
This is crucial as “employees enter the workplace looking for guidelines for acceptable behavior” (2001, p. 61). New employees look up to role models and mentors to set the standard for ethical behavior. The “ethical tone” of the commercial enterprise should be formed by top management and it must set down to the rank and file employees. If the moral standard of the top management is beyond reproach, this directly tells the whole organization that ethical conduct and success often go together.
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