Starbucks Company. Audit Report - Essay Example

? Business Ethics: Ethical Audit Report about Starbucks Company of 0 Introduction The proper use of business ethics in the management of a company makes it run all the business operations in a manner that respects the company’s stakeholders. Business Ethics according to Crane and Matten (2010:5) is “the study of business situations, activities and decisions where the issues of rights and wrongs are addressed”. In this report, the focus is on ethical dilemmas in Starbucks Company. As at October 2011, Starbucks has 149, 000 employees, operating over 17, 000 Coffee Shops globally, spread in approximately 40 countries (Hoovers, 2011, p.1). Out of the outlets, The United States accounts for most of the outlets, meaning that the country forms the base of the company’s operations (Hoovers, 2011, p.1). The relative importance of the ethical dilemmas and the ways, in which the company deals with the dilemmas, shows its strength. Mostly, ethical organisations achieve success in their business undertaking and corporate citizenship. The combined factors have led to the success in Starbucks Company. Despite the improvements, which the company has made on its corporate ethics, there are various ethical dilemmas that it faces. 2.0 Ethical Dilemmas in the Company In essence, the ethical dilemmas of the company could be understood well using the stakeholder’s analysis to unveil the truth. Literally, stakeholder’s analysis is the detailed consideration of the people within, or outside the company whose influence in the business operation is significant. According to Crane and Matten (2010:62) “a stakeholder is a individual or a group which is either is harmed by or benefits from, the corporation; or whose rights can be violated or have to be respected by the corporation” It is also important to identify whether the stakeholders operate as a group or individual person. Since the business ethics in Starbucks depends on the use of fairness and integrity, the main focus of the company about the internal stakeholders is their ability to deliver quality output and customer satisfaction. This stakeholder model below (Winter/sunspace 2011) as well as Crane and Matten (2010: 63) demonstrate all the different stakeholders. The stakeholders, both internal and external are regarded as important since they contribute to the development of the company. In fact, the company has full influence on the stakeholders to maintain their public image. The chairman refers to the stakeholders of the company as skilled work-force in coffee industry. As an International company, the stakeholders embrace diversity of intellect, race, colour, taste, and religion without any form of discrimination, or prejudice. As any other company, Starbucks face a lot of ethical challenges during their operations. Those challenges either impact negatively or positively on the stakeholders and the communities of operation. Some of the ethical dilemmas facing the company include protection of private information, intellectual property, diversity and conflict of interest. The issues have been ranked according to their impact on the stakeholders. Rank Issue Stakeholder Why this issue has been ranked in this position 1 Data from customers Customers They are the most important Stakeholders. 2 Intellectual property Employees They make the organistion operate daily. 3 Diversity Employees They make the organistion operate daily. 4 Conflict of Interest Suppliers They supply necessities to the organisation. 2.1 Customers - Private Information being Held on Customers One of the ethical dilemmas that the company faced was the need to protect the information received from the clients concerning the business ethics and adherence to compliance requirements. Since data were collected from, the customers could threaten personal security, there was need to protect the identity and security of the person disclosing the data. Indeed, the information might threaten a person’s safety if confidentiality of the data is not assured. 2.2 Employees - Intellectual Property The problem of intellectual property in the company is another ethical dilemma that it has to consider. Mostly, a person’s expertise, skills and knowledge are the intellectual property that the company has to respect and preserve for its stability, growth and development. Notably, such valuable information acquired from the company belongs to it, while the stakeholder transacts businesses with the company. 2.3 Local Community - Diversity The other ethical dilemma was the diversity. As a company, there is interaction among the people from different backgrounds, sexes, religion, colour, social status among other attributes. Indeed, the diversity posed a great challenge to management, who had to assure the stakeholders and potential customers of unilateralism. In fact, it was only through impartiality that the company could achieve sustained growth. Therefore, the management had to find a way of dealing with the dilemmas before they worsen the company operations. 2.4 Suppliers - Conflict of Interest The other ethical dilemma that the company has to deal with is conflict of interest. In most companies, conflict of interest occurs when, one’s interests affects his/her duties and the level of performance. Additionally, conflict of interest lowers a person’s integrity and might cause anxiety in the organisation. Notably, organisational ethics require that the workers, stakeholders and customers should not be overwhelmed with personal interests at the expense of their duties. This might compromise on the quality of their produce and integrity, because self-interest and nature of the duty may not have any relationship. Some of the situations, in which conflict of interest would occur, include doing a business that directly competes with the company. This is not utilitarianism as it is not for the greater good for any organisation. In reality, engaging in such business might lower the person’s concentration in doing the company tasks (Starbucks, 2009, p. 14). For example, working in a coffee shop that competes with the company, personally or a family member investing in such business could actually draw ones attention from the company operations and the tasks assigned (Starbucks, 2009, p. 14). In addition, making transactions or sharing data which has not been approved by the customer or individual is not for the greater good and does not link to utilitarianism theory. Dealing on someone’s behalf with Starbucks, such as assisting someone or another company to sell their services or goods to Starbucks might interfere with the ethical compliance of the person (Starbucks, 2009, p. 14). Furthermore, making own transaction in a business deal that Starbucks intends to do for self gain would compromise the person’s ability to work for the company (Starbucks, 2009, p. 14). In such cases, the person the personal interests might override the company interest, thus lowering the quality and quantity of production. 3.0 Evaluation of the Main Ethical Issues The ethical dilemmas or issues will be analysed using Utilitarianism ethical theory. Utilitarianism according to Crane and Matten (2010:101) is “when an action is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action”. 3.1 Customers - Private Information being held on customers The organisation’s Chairman confirmed the secrecy act when he said that “Starbucks and Customers’ information should be used only for company purposes and should not be disclosed to any one outside Starbucks” (Starbucks, 2009, p. 18). This was an assurance that the company valued private information and confidentiality was a means of dealing with the dilemma. Truly, the employees who were to use the information for doing business in the company or help the company in development strategies could access the information. The practice according to Crane and Matten (2010:101) could results in the greatest amount of good for the greatest amount of people affected by the action, according to the utilitarianism ethical theory. 3.2 Employees - Intellectual Property Concerning the issue of intellectual property, Starbucks (2009:18) explained that the organisation stored the data outside the reach of unauthorised people, clearly marking them as confidential. In addition, no one was allowed to discuss the information regarded as the company secrets (Starbucks, 2009, p. 18). Absolutely, this would make sure that the information does not leak to the unintended people, thus results in the greatest amount of good for the greatest amount of people affected by the action, as the utilitarianism ethical theory suggests. 3.3 Employees – Diversity Indeed, the organisation promoted diversity as a sure way of making it competes with the rivals since the different people have unique skills that would enhance development. Therefore, the organisation has successfully used the various mechanisms discussed, to offer solution on problems, which might arise due to diversity. Precisely, incorporative all divergent groups and opinion was for the good of the greatest amount of people affected by the action, which is in conformity to the utilitarianism ethical theory. 3.4 Suppliers - Conflict of Interest The organisation implements a systematic procedure that ensures that the conflict is resolved within the shortest time possible without causing more problems to the company of the shareholder. In this regard, conflict of interest evidenced in one of the stakeholders should be directed to the partner’s manager, and in his absence reported to the departmental Vice president (Starbucks, 2009, p. 14). Conspicuously, this is a way of finding an amicable solution to the conflicting idea or an individual’s interest would reduce chances of its occurrence in the future, and possibly eliminate the impacts of such conflicting ideas. Apparently, the initiative is generally geared to achieve the greatest amount of good for the greatest amount of people affected by the action, in compliance with the utilitarianism ethical theory. 4.0 The Relative Importance of Ethical Dilemmas The ethical dilemmas that company face during their operation makes enhance their ability to solve problems in their production, marketing and customer relations and this is in the greater good or utilitarianism to solve issues or dilemmas quickly. Often, solving the dilemmas relies on the application of ethical theories, which were developed to ensure social justice for the people. In this report, some of the ethical theories that are used to explain the organisational behavior include the social contract and non-consequentialist theories. The social contract theory postulates that all the people are important and should be treated with dignity (Howell, 2010, p.4). Therefore, it implies that, there is need for social justice for the stakeholders working with the company. In addition, the theory indicates that natural rights of the people should be upheld always, thereby making one to understand the relative importance of the ethical dilemma relating to social equality and the need for finding an early solution to such dilemmas (Howell, 2010, p.4). The application of the theory ensures that there is mutual relationship between the company and the stakeholders, consequently, there emanates mutual co-existence (Howell, 2010, p.7). Through adequately solving the ethical dilemmas, the company becomes in a position of competing favorably with the other coffee producers. In addition, the ethical dilemmas help the company to evaluate its strengths, weakness, opportunities and threats. Indeed, the evaluation guarantees stability and sustainability of the production system. In this regard, the company applies the non-consequentialist theory that uses the provisions of Kantian ethics, which are categorically imperative (Howell, 2010, p.6). Under the theory, the system of production and the products do not have adverse consequences on the consumers, thereby promoting ethical consumption of the company products (Howell, 2010, p.6). The solutions that the company has for the ethical dilemmas facing them increase their recognition among the customers, workers and other business partners. As a result of positive reputation, the consumer behaviour towards the company products alters as they generally accepts them. In fact, they consider the products as ethical and most people would like to associate with them for presumed quality. Truly, this would increase the company sales and outlook to the public. Through ethical practices, the company engages in fair-trade that appeals to most clients. Consequently, the clients would be willing to spend money on the products, which they classify as the product of fair-trade. Notably, such products are not expensive and meet the high quality standards that the consumer’s desire and they develop the idea that such products are the best in the market. In addition, it is through ethical dilemmas, that triggers the company’s actions. The implications are that, the ethical considerations would lead to ethical behaviour towards the products and subsequently translating to ethical buying. Notably, the ethical buying and consumption of the products helps the company increase sales and public image. Alternatively, the people and environment might benefit from ethical consumption, thereby indicating that the ethical considerations in the company play an important role in the development of the company. Due to the increasing ethical concerns, most consumers prefer to buy products, which have positive attributes such as environmental friendly, legally accepted, adhering to the ideals of fair-trade, and healthy for human consumption. Conversely, they might boycott the products having negative attributes such as those prepared by the children, substandard or companies, which are not legally recognised and the ones made by companies with bad public reputation. Making the products, which match the ethical requirements of the consumers shows that the company upholds the ethical and legal provisions during production and keen to offer solution to the client’s concerns. Therefore, without paying close attention to the ethical concerns, making some commendable success in the production system is hardly achieved. It is thus imperative for the company to consider the ethical dilemmas surrounding its entire production and find amicable solutions to the problems. 5.0 Ways the Organisation is Dealing with the Ethical Dilemmas 5.1 Customers - Private Information being held on customers Dealing with ethical dilemmas in the company is a critical issue that the management has to address urgently. For example, the company started a conduct helpline that one could use to call the customer representative, to raise concerns or ask questions patent to the company products and services (Starbucks, 2009, p.22). Notably, the communication channel operated on 24 hours daily. For those who could not communicate effectively via the phone due to language barrier, they were allowed to request for an interpreter to enable them express their views and concerns. In reality, the initiative was in line with business ethical requirements, in attracting and retaining the potential customers. Moreover, business compliance requires, close cooperation with the clients so that the company could increase their morale and confidence. The other initiative was that the company created a web line for the customers who could not use the voice services effectively (Starbucks, 2009, p. 22). Using the web line, the potential customers would communicate with the company representative through the internet to make any inquiry on the business conduct and activities. In this online service, the person submitting the data or raising the concerns was to do it anonymously. The system ensured that the client’s information and concerns were treated as confidential, and protected from unauthorised use. In fact, it was only the company representative who had the authority to use the information and advise the company on the implication of the customer concerns. In reality, disclosing the facts to an unauthorised user jeopardise the image of the company, implying that safety of the information was a priority. 5.2 Employees - Intellectual Property Under the intervention mechanism, the company applies the social contact theory in making sure that the stakeholders upheld morality and confidentiality in dealing with private information. Notably, there were specific policy guidelines, which the company formulated to deal with cases of information leakages. For example, storing the data outside the reach of unauthorised people, clearly marking them as confidential, finally, no one was allowed to discuss the information regarded as the company secrets (Starbucks, 2009, p. 18). In addition, the company spelt the explicit rules that the workforce, business partners and customers should apply on one another. Indeed, the rules were rationally accepted, because they aimed at making sure that each party engaged in any transaction with the company gets mutual benefit from the interaction. In Starbucks, for example, each stakeholder is treated equally and with dignity, as the ethical baseline of their operation (Howell, 2010, p.16). 5.3 Employees – Diversity In dealing with the dilemma of diversity, the company made sure that every stakeholder was treated with dignity and respect. In addition, the company did not tolerate any form of discrimination, harassment and bullying for all stakeholders. For example, unwelcome gestures, physical contact and remarks were prohibited. Moreover, within the company precinct or the website, no one was allowed to circulate or show offensive materials including, sexual pictures and defamation messages using the Internet or other forms. Furthermore, the company did not allow physical and verbal threat or/and abuse to the stakeholders and other customers. Literally, those were measures to make the stakeholders comfortable in working with the company. Through such practices, the stakeholders found the company as a fulfilling and pleasant environment, free from all forms of discrimination, harassment and inflammatory remarks (Starbucks, 2009, p. 5). This was a way of making sure that the customer service matches the ethical standards and corporate compliance. To illustrate that the company was really interested in solving diversity, the Chief Executive Officer of the company clarified that “We respect diversity in each other, our customers and suppliers and all others with whom, we interact” (Starbucks, 2009, p. 6). This means that in the working environment, every person with unique ideas, abilities and strength is included to make it gain a competitive edge over other companies. 5.4 Suppliers - Conflict of Interest In dealing with conflict of interest in the organisation, all cases of discontent and noted conflict of interest in one of the stakeholders should be directed to the partner’s manager (Starbucks, 2009, p. 14). In the absence of the manager, such cases are reported to the departmental Vice president (Starbucks, 2009, p. 14). Once the responsible person has received the information, he/she would direct complain to the Chief Compliance Officer for necessary actions (Starbucks, 2009, p. 14). Sometimes, the CCO could receive the information from the stakeholder directly. 6.0 The Organisation’s Ethical Best Practices and Values 6.1Diversity In Starbucks Company, the ethical best practice is the respect to diversity, including clients, business partners and the workforce. This relates to the ethical theory of virtue theory and treating all people the way you would like to be treated. Through promoting an all inclusive environment, this goes beyond utilitarianism theory which is for the greater good. The company makes sure that all people they interact with are treated in a non-discriminatory manner. The uniqueness every person is appreciated, their strengths are utilised for the mutual benefit of the company and stakeholders. This is a sure way of guaranteeing the company of the title of being competitive in the market. 6.2 Values Some of the values, which the company embraces, include integrity, hard work, impartiality, morality, equality, justice, confidentiality and respect of intellectual property. Apparently, it is those core values, which keep the company in operation and make them competitive in the market, and this is for the greater good which links to utilitarianism theory. The ethical theory that the organisation applies in making sure that they uphold their values and the ethical principles is utilitarianism as well as the social contract theory (Howell, 2010, p.4). Considering that the organisation practices integrity, impartiality, morality, equality, justice, confidentiality and respect of intellectual property, they truly uphold the provision of the theory that rests on the universality of treating all the stakeholders (Howell, 2010, p.5). 7.0 Recommendations There are two strong recommendations, which the company should practice to answer their critics, improve their public image and increase their sales. Notably, the recommendations are attributed to ethical behaviour particularly to the company. 7.1 Improve Their Public Image First, Starbucks Company should have a strong, reliable and responsible public relations office, to receive ethical concerns arising from the customers, workers and the business partners. This body would coordinate all the ethical issues, raised inside or outside the company, which are important for their sustainability. 7.2 Maintain its Ethical Position Second, since the company is considered as the ethical company in the world and would like to maintain this position, their policies should promote ethical behaviors, including honesty, integrity and impartiality. In addition, the work environment should be non-discriminative in terms of policy application, meaning that the stakeholders should be given the same treatment with dignity and respect. 8.0 Conclusion Ethical practices are noted as a precondition for the company success. Starbucks achieved the status of being considered as most ethical, therefore had to make sure that they maintain the status. Usually the company experiences ethical dilemmas concerning private information, intellectual property, diversity and conflict of interest. Despite those challenges, the company has made efforts in terms of policies, behavior change that ensures respect and dignified treatment to all the stakeholders. In addition, the ethical best practice in the company is respect to diversity, including clients, business partners and the workforce. Finally, the company has values, on which their operations are based, including integrity, hard work, impartiality, morality, equality, justice, confidentiality and respect of intellectual property. Bibliography Crane, A. and Matten, D. (2010), Business Ethics Oxford University Press, Oxford Hoovers. (2011), Starbucks Corporation. Available at: [Accessed on 13 Dec, 2011]. Howel, R. (2010), “Choosing Ethical Theories and Principles.” International Journal of Transdisciplinary Research.5 (1):1-28. Starbucks. (2009), Standards of Business conduct. Available at: http://assets.starbucks.com/assets/sobc-fy09-eng.pdf > [Accesses on 25 Nov, 2011] Appendices Ethical Dilemmas of Starbucks Company Some of the ethical dilemmas facing the company include protection of private information, intellectual property, diversity and conflict of interest. Private Information One of the ethical dilemmas that the company faced was the need to protect the information received from the clients concerning the business ethics and adherence to compliance requirements. Since data were collected from, the customers could threaten personal security, there was need to protect the identity and security of the person disclosing the data. Indeed, the information might threaten a person’s safety if confidentiality of the data is not assured. Intellectual Property The problem of intellectual property in the company is another ethical dilemma that it has to consider. Mostly, a person’s expertise, skills and knowledge are the intellectual property that the company has to respect and preserve for its stability, growth and development. Notably, such valuable information acquired from the company belongs to it, while the stakeholder transacts businesses with the company. Diversity The other ethical dilemma was the diversity. As a company, there is interaction among the people from different backgrounds, sexes, religion, colour, social status among other attributes. Indeed, the diversity posed a great challenge to management, who had to assure the stakeholders and potential customers of unilateralism. In fact, it was only through impartiality that the company could achieve sustained growth. Therefore, the management had to find a way of dealing with the dilemmas before they worsen the company operations. Conflict of Interest The other ethical dilemma that the company has to deal with is conflict of interest. In most companies, conflict of interest occurs when, one’s interests affects his/her duties and the level of performance. Additionally, conflict of interest lowers a person’s integrity and might cause anxiety in the organisation. Notably, organisational ethics require that the workers, stakeholders and customers should not be overwhelmed with personal interests at the expense of their duties. This might compromise on the quality of their produce and integrity, because self-interest and nature of the duty may not have any relationship. Read More