Ethics for Managers for the businesses - MyAssignmenthelp.com

Question: Discuss about the Ethics for Managers for the businesses. Answer: Introduction Ethics are such codes through which the decisions and the behaviour of the individual are governed and are based on the morals and values followed by them. In the daily life of any individual, they come across different sort of ethical issues and the same is true for the businesses, where the ethical decisions are faced more often (DesJardins and McCall, 2014). Ethical decisions are made on the basis of integrity and trust and cover complex issues like governance, compliance and diversity (Nill, 2015). IKEA is a leading brand and due to the magnitude of its operations, it constantly has to face ethical issues (Forbes, 2017). The purpose of undertaking this study is to analyse the ethical issues faced by the company; analysing the actions of the company on the basis of its code of practice, vision and mission; and applying certain theories to analyse if the company behaves in an ethical manner. Case Study Ethical Issues In international business, ethical issues are raised quite often as different business practices have to be adopted for conforming to the regulations of different nations. IKEA is a leading multinational company and it faces a number of ethical issues across the global market. IKEA France was accused of spying on its employees. In order to prove this claim, a private detective agency had been hired for spying on the existing and the prospective employees (Morrison, 2013). The former deputy director of communications and merchandising, Virginie Paulin, raised this issue and this issue caused a public uproar in the nation due to the breach of the right of privacy of an individual. As Paulin was terminated, she challenged the same in the court and had to be awarded 60,000 as the amount of compensation (Clark, 2013). This was due to France considering the right to liberty as the pillar of the values of French Republic. Even though the company did not comment on the scandal in public, an internal investigation was initiated and a number of executives were terminated for employee misconduct (Daniels Fund Ethics Initiative, 2014). Another ethical issue which was raised against the company was related to its meatballs, where the product quality was questioned. Back in 2013, the company had to withdraw all the meatballs in its stores across UK and around 20 other European nations (Meikle, 2013). This was due to the fact that when the meatballs were tested by the Czech State Veterinary Administration, there was evidence of horse DNA on the packaging of 1kg packs of pork and beef meatballs (The Associated Press, 2013). Even though horse meat is not dangerous, it was an ethical breach as the ingredients were different from the specifications and the recipes. Apart from stopping the supply, the company also filed police report against the supplier (Daniels Fund Ethics Initiative, 2014). IKEA drivers, in some nations, have such less salary that they have to sleep in trucks are they cannot afford to live in the nation where the work. This increases the chances of road accidents as the employees sleep, eat and wash in their truck, where at times, they are not as sharp as is required for a truck driver (Conway, 2017). The company has been blamed to exploit the loopholes of the law with regards to the EU guarantees to the host nations regarding the minimum rates of pay and particular conditions. By not giving the employees the proper work conditions and lawful wages, the company can be deemed as being engaged in unethical practices. Even though the company was not a direct employer of these drivers, it highlighted its compliance with applicable legislations related to wages and working conditions and the follow up done by the company by conducting regular audits (Chapman, 2017). The corporate structure of the company has also been raised as an ethical issue by the critics. The critics have stated that the corporate structure of the company is very complex and the management structure is highly hierarchical. The company however denied these accusations vehemently and stated that the structure of the company actually made it more competitive. The company has also faced issues related to corruption in Russia where the company has 12 stores. In this regard, two of the executives of the company were fired and the company pledged to be more careful about the same for the future and to ensure that the employees and managers adhere to the ethical standards (Daniels Fund Ethics Initiative, 2014). IKEAs vision, mission and code of practice The company was founded back in 1943 in Agunnaryd, Sweden by Ingvar Kamprand at the age of 17 and transformed it into the biggest retailing company in the world. Till date, he remains the key decision maker of the company (Milne, 2013). The ethics of the company are highlighted from its vision, mission and the core values, along with its strong code of ethics known as the IWAY (IKEA, 2017a). The mission and vision statement of the company is focused upon creation of a better daily life for the different people. And the idea of the business of the company is to support this very vision where a wide range of well designed and functional home furnishing products are made available to a number of people at the lowest possible prices where they can afford such products. The ten core values of the company are Leading by example The constant desire for renewal Enthusiasm and togetherness Cost consciousness Working towards meeting reality Willpower and humbleness Daring to be different Accepting and delegating the responsibility Simplicity Constantly being on the way (IKEA, 2017b). The company tries to create a better life for all of its stakeholders, which includes employees, suppliers, customers and communities. And this is attained through the mission and vision statement, its ten core values and the code of conduct. The code of conduct is drawn for the suppliers and is known as IKEA WAY or IWAY. The practices of the company are influenced by the mission, vision, and code of practices of the company. And this is evident from the profits of the company being raised constantly (Daniels Fund Ethics Initiative, 2014). In 2012, the profits of the company went up by 8% due to the high demand from the world of the products of the company, where the values of the company played a key role (Neville, 2013). An ethical company attracts more customers and IKEA had been named as the Worlds Most Ethical Company by Ethisphere Magazine in the past (Farfan, 2016). Hence, one of the reasons for the company profiting is it being an ethical one. The actions of the company also depict its adherence to the promises made by the company in its ten core values and its mission statement. While the war was still waging in Damascus in Syria, the family of Rana and her children did not have the required money for a safe home. Due to the shortage of money, they only could rent a cinder block walled house where they had no plumbing or mattresses. Red Cross in Norway took an initiative to help such families and so, it partnered with IKEA for creating a copy of Ranas home in their Stockholm flagship store. This was meant to gain sympathy from the shoppers for Ranas story and to raise money for her. The campaign was a success and raised $23.8 million. IKEA worked towards the stakeholder, i.e., communities in this effort where the attempt was made for raising money for the victims of war and also to make people aware about the condition prevalent there (Garfield, 2016). Carrolls Four Part Model of Corporate Social Responsibility The CSR Pyramid given by Carroll is a simple framework which helps in arguing the how and why behind the purpose of meeting the social responsibilities of the company. The main features of the Carrolls CSR Pyramid are that the corporate social responsibility is based on the foundation of profit and the same has to be always given the priority. After this, comes the business need where the compliances based on legislations and regulations have to be complied with. And before the business attains its philanthropic options, it is required to fulfil the ethical obligations (Schwartz, 2011). The four responsibilities which are depicted through the pyramid include: Economic Under this head, it is deemed that the only manner in which the business can survive and benefit the society is by being profitable. For 2016, the profits of IKEA jumped 20% due to its strong sales growth in China (Murphy, 2016). Even though the core strategies of the company are responsible for this growth, the CSR activities undertaken by the company, particularly the 2020 goals and its new sustainability strategy play a key role in the profitability of the company (Singh, 2013). Legal It is the responsibility of the companies to follow the different legislations applicable on it and these include the health and safety laws, the competition laws and the employment laws. All the CSR activities undertaken by the company are thus complaint with the laws. IKEA continues to comply with all the applicable laws and the best practices in different nations when it conducts its business (Daniels Fund Ethics Initiative, 2014). Ethical The companies are required to work in a manner which shows responsibility in ethical and moral manner. In this regard, the businesses are required to go beyond the narrow requirements of the law and take ethical steps while dealing with its stakeholders, which include employees and suppliers. In this regard, IWAY, which is the code of ethics for the suppliers of IKEA, is a great example, where the suppliers who violate IWAY are dropped as the company suppliers (Daniels Fund Ethics Initiative, 2014). This sets out clear expectations of the company from its suppliers to deal with the ethical risks. Philanthropic This denotes the responsibility of the businesses to give back to the society. In this regard, the company has formed IKEA foundation which words for philanthropic and humanitarian reasons. (Source: Guliyev, 2014) Three Key Relationship Attributes As per Mitchell et al (1997), there are three key relationship attributes, i.e., power, legitimacy and urgency. The stakeholders can be identified on the basis of these three attributes. Power denotes the power which the stakeholders have whereby they can influence the firm. So, such group of people or such stakeholders which have the power of influencing the firm are identified and categorized under this head. The second head is legitimacy, which denotes the relationship of the stakeholders with the firm. And the third head is urgency which denotes the claim of the stakeholder on the firm. A stakeholder can fall in one or more groups based on the identified attributes which the stakeholder possesses. By properly identifying the stakeholders on the basis of these three attributes, not only their needs can be addressed, but in time of crisis, the appropriate communication response can be elected. (Source: Cenek and ?stek, 2015) Power The stakeholder group which has the power of influencing IKEA are the shareholders, consumers, the government, creditors, employees, suppliers, unions and community. The shareholders hold the most power of influencing the course of business on which the company operates. The creditors can even lead the company to winding up. The government draws the legislations which have to be followed by the company; the consumers and community give direction to the business of the company; the suppliers, employees and unions have the power of influencing the decisions of the company. More or less, IKEA has treated these stakeholders in an ethical manner and an example of this can be seen in its efforts which it employs to work for the community. Legitimacy All the stakeholders have a legitimate relationship with the company and so the consumers, government, suppliers, shareholders, unions, communities, owners, directors, agents, creditors and employees. Each of these shareholders has a relationship with the company which is properly respected by the company. Urgency The stakeholders which have an urgent claim on the organization include the creditors whose debts remain unpaid; the government for the outstanding tax liabilities or the penalties arising out of insider trading, tax evasion or the like; the shareholders in case of the affairs of the company being mismanaged or in cases of oppression; the consumers in case of the product of the company being not up to the mark as was the case with the meatballs of IKEA; and the employees, in case where they are not being given the requisite pay or work conditions, as was seen in the case of the truck drivers hired by the contractors for IKEA. Even though in other matters, the company did behave ethical, in the view of the writer, the manner in which the company reacted towards the plight of the truck driver was not ethical. Opinion In the opinion of the writer, IKEA treats all of its stakeholders in ethical manner as it attempts to create a better life for all of its stakeholders, which includes all the stakeholders groups, instead of being concentrated upon a single group. This is strongly stemmed from its core values, code of conduct, strong vision statement and the direct actions undertaken by the company. IKEA stays transparent with its stakeholders and continues to provide regular disclosures so as to help in this regard. Even though there had been some issues faced with the employee as stakeholders but they were not direct stakeholders of the company, and instead these truck drivers had been hired by independent contractors. And yet, the company felt the pain of these stakeholders when an incident surrounding them occurred. This is particularly important when it comes to the employees of the company as the company understands the pain and view of their employees and also teaches them humility, simplicity, responsibility and thrift so that when they interact with others, ethics are upheld (Daniels Fund Ethics Initiative, 2014). The work of the company towards sustainability is another great initiative of the company, where it has invested in plastic recycling plant as a step towards sustainability (Gould, 2017). For the community, the company has decided to sell the textile and rugs made by the Syrian refugees from 2019 for providing job opportunities to the ones who had been displaced by civil war (Rodionova, 2017). When the company treats its stakeholders in the right manner, the stakeholders contribute towards its success, which translates into the revenues of the company. The evidence of this can be seen in the reason why the company earns $1 billion in profits as being mostly tax-free (Chenoweth, 2014). All this points towards IKEA being ethical in its conduct towards the stakeholders and this is prominent from the various steps taken by the company towards different stakeholder groups. Just because a company faces hardships or certain issues, it does not mean that the company is unethical. Instead, th e manner in which these issues are handled depicts the ethical behaviour of the company. Recommendations The discussion conducted above has opened up different recommendations which can be adopted by the company for being more ethical in the future. In this regard there are some specific and some general recommendations which have to be followed by the company and both of these have been stated below. General There is a need for the companies to formulate ethical policies in a practical manner. The company has to work in a manner where the interests of the stakeholders are not breached; and instead, are honoured. Making ethical practices a part of the hiring process of the company, so that every individual is aware of the significance given to ethics in the company. Ensuring that the staff members are aware about what has to be done in case they face an ethical dilemma and conducting regular trainings where the employees are educated about the same. There is a strict need for enforcing the ethical standards in an even and stringent manner (Cummings, 2013). The company has to be ethical in a consistent manner. Most importantly, the company has to lead with morals and set examples for being ethically correct. It is also important that the company gives back to the community (Turchetti, 2017). Specific The company needs to check and also double check the different laws which are applicable on the company and be clear that spying is a violation of the privacy of an individual which has to be avoided at all costs. There is also a need to respect the human rights, particularly with regards to the privacy rights and also the almost inhumane treatment of the truck drivers, where they are paid way too less and even do not have a place to sleep properly. The company has to take proactive steps in ensuring that it is responsible. There is a need for the supply chain management of the company to be more proactive and be more effective. This is important so that the company can check the supplies being made to it and by it, and ensure that the product being offered to the consumers is authentic. In this regard, the country where the product originated and the details regarding the slaughter need to be clearly included in the labels, so that the freshness and quality of the product can be ensured. This is all the more important where frozen products are being extended to new categories of food and the processed food is gaining popularity. In this regard, it is important to ensure that the product is safe and fresh for human consumption. The company also needs to think about the sourcing of its products and even take steps towards forestry so as to be more ecologically friendly. In the time of CSR being a popular concept, the company has to take steps towards protection of the environment, while at the same time, bringing out such products which are fresh and are not contaminated. In this regard, the company should not use such suppliers who use the woods originating from natural reserves, national parks or any area which has been declared as having high conservative value by the government. By opting for own forestry, this can be ensured. Conclusion To effectively summarize the discussion which has taken place in the preceding parts, it becomes very clear that ethics is a substantial part of the business of the company. IKEA is a very ethical company and is constantly engaged in efforts for conducting its business in an ethical manner. Though, despite these efforts, the company has had to face certain ethical issues in the past, which were majorly dealt in an effective manner by the company. However, where the company lacked, certain recommendations have been drawn, by adopting which, IKEA can restrict, if not eliminate, the ethical issues being faced by it. References Cenek, M., and ?stek, A. (2015) A Survey of Stakeholder Visualization Approaches. 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