Microsofts Display of Unethical Behavior - Term Paper Example

Abstract Antitrust laws were established to protect consumers and ensure equal opportunities in market competition among different companies. These laws were put in place to prevent a single corporation from manipulating and taking control over the whole industry. Several corporations have been accused of violating these laws and one such company is Microsoft Corporation. Microsoft has been indicted by various companies of displaying anticompetitive actions and conduct. Investigation regarding the antitrust has long been in the works since 1990. This paper discusses the primary stakeholders in the case, a legal analysis, as well as an ethical analysis of the different issues surrounding the antitrust case against Microsoft. It also includes a discussion of different factors that may have contributed to Microsoft’s display of unethical behavior as well as factors that need to be addressed to resolve the issues. The paper gives recommendations on what actions are needed to deal with the legal/ethical issues as well as policies that the company can adopt to prevent such incidents from recurring in the future. Background of Microsoft Corporation Although the partnership between William H. Gates (more commonly known as Bill Gates) and Paul G. Allen has been established in the year 1975, it was not until a year after that the trade name Microsoft Corporation was officially registered in New Mexico with the Office of the Secretary of the State (Microsoft, 2005). Since then, Microsoft has become renowned worldwide for their extensive range of original products and software as well as their laudable skills in marketing and advertising their products. As popular the reputation of Microsoft Corporations might be, they have been face with numerous cases regarding alleged violations of ethical and legal matters. These issues have cropped up in connection with Microsoft’s control of certain markets related to the selling of computer and software. The earliest inquiry was way back in the year 1990 regarding breach of the Clayton and Sherman antitrust laws. Since then, other complaints from several large corporations such as Apple Computer, Sun Microsystem, and Netscape Communications have been brought against Microsoft Corporation. The most recent antitrust complaint was from Opera Software ASA in the year 2007 with regard to Microsoft’s manipulation of web browser by combining the Windows operating system with Internet Explorer, thereby going against accepted web standards (Opera Software, 2007). These complaints have had an effect on Microsoft financially, when they were made to pay charges and when the price of their stocks started to go downhill. The corporation almost had to split itself into two separate and independent companies, one company was to be in-charge of Windows and the other company was to be for other non-Windows merchandise. For the aggrieved companies like Apple Computer and Netscape Communications, it is evident that they are concerned with the conduct and practices of Microsoft Corporation and how they treat competition. Microsoft tends to crush out and obliterate the competition, rather than allowing a fair fight for market share and popularity and letting customers choose what they want out of preference rather than convenience and accessibility. These companies have lost their chance at competing in the industry and have been driven out of the market due to barriers raised by Microsoft Corporation. Stakeholders, in the context of Microsoft’s antitrust issues, include the corporation itself, its employees, the nonprofit organizations that benefit from Microsoft’s donations, as well as the customers. With the tirade of complaints against Microsoft regarding ethical and legal violations, it is inevitable that its stakeholders will be affected as well. For the corporation, having a tainted reputation will certainly not help them in gaining future projects in other countries. The issues have certainly marred Microsoft’s reputation especially on its ethics and conduct. Its employees, in turn, will also carry the same stigma that Microsoft Corporation carries for its unethical behavior. In the past, Microsoft has been able to afford being generous to several organizations because of the large profit they are able to earn with their products. With the heavy monetary penalties they needed to pay for their violations, these organizations may not be able to expect the same generosity. Also, who would want to receive help when you know that the money came from doing harm to others? The customers will undoubtedly feel the effects of the issue also. Possible effects could be loss of customers, or on a more positive note, customers will be able to choose freely on a wider range of choices on browsers and operating systems. Legal Analysis Microsoft Corporation has been accused of monopolizing the software market on different occasions already. In the year 1990, they have been investigated by the Federal Trade Commission (FTC) with regards to suspected infringement of Sherman and Clayton antitrust acts. Sherman Act of 1890 states in Section 1 that contracts, combinations, or conspiracies to control trade or businesses with different states or foreign countries is forbidden while Section 2 explains that monopolizing or attempting to monopolize an industry is equivalent to felony and is punishable by law (APEC Competition Policy, n.d.). The Clayton Act of 1914 does not allow actions such as exclusive sales contract, predatory pricing, or rebates that will result in holding back the competition (The Columbia Encyclopedia, 2008). The inquiry’s focus was on the sales of Microsoft applications and operating systems that were construed by FTC as essentially anticompetitive. Microsoft offered a 60% discount to original equipment manufacturers (OEM) for their operating system if the PC makers would agree to pay Microsoft for every computer they sold. In essence, Microsoft set up contracts with PC manufacturers that would basically result in their operating system being integrated in most, if not all, computers because of the discounted price offer that is indeed more convenient for OEM’s. The competition found this practice as monopoly of the operating system market resulting in other OS losing their share of the market. Apple Computer also had a problem with Microsoft when they came up with a program similar to Microsoft’s existing program. Apple claimed that Bill Gates, then CEO of Microsoft Corporation, pressured them to stop the development of the program with a warning that they would stop making Macintosh-compatible merchandise. Sun Microsystems charged Microsoft with contract violation with allegations that Microsoft interfered with their Java code and replaced it with Windows-specific code. In the end, after several complaints, the government itself charged Microsoft Corporation with monopolization of the market that resulted in hindering the competition in the OS and browsers industry. Microsoft failed to follow the law on several counts. They displayed anticompetitive conduct in the following situations. First, they packaged Windows 95 and Internet Explorer browser together and claimed that they were inseparable. Second, Microsoft Corporation tampered with the Java language by making it more specific to their program. Third, they supposedly had exclusionary contracts with internet service providers. Fourth, Microsoft made PC manufacturers sign a deal that they will not modify the Windows desktop screen. They have also been in contempt of the court regarding the removal of Internet Explorer from Windows. In 2006, they were fined by the European Commission for failing to abide by the ruling in 2004, where Microsoft was required to submit complete and accurate interface specifications to allow development of interoperable products by other companies (European Commission, 2006). Antitrust laws were established to ensure that a healthy and productive competition is available for all industries. Microsoft Corporations has evidently failed to comply with these laws even though they have not admitted to doing anything wrong. In other industries, antitrust issues also exist as in the case of Wal-Mart. Wal-Mart is well-known for their low price merchandise not only in the USA but in other countries as well. In the past, they have been indicted with predatory pricing and alleged intentions of wanting to gain monopoly and to drive other corporations in the same industry out of business. In 2006, they had trouble with the pharmacy industry when they started to sell generic drugs for as low as $4 for a month’s supply (Drum, 2007). They have defended themselves in saying that efficient and effective negotiation with suppliers and management of distribution process is the key to their low prices (UNI-Commerce, 2002). Several factors may have contributed to Microsoft’s failure to comply with the antitrust laws. These may include fear of losing market share, lack of ethical consideration, lack of understanding regarding antitrust laws, lack of communication within the corporation, ineffective policies regarding antitrust in the company, or just an inherent hardheadedness of major players within Microsoft Corporation. Many factors unmentioned may or may not have a part in Microsoft’s decision and conduct with regard to the running of their business. Ethical Analysis Microsoft not only crossed over the lines of the law, they also stepped over the line of what is ethical in business. Microsoft supposedly blackmailed Apple Computer in forcing them to stop the development of a new program similar to Microsoft’s by threatening them with the stalling of production of Macintosh-compatible merchandise. It placed Apple Computer in a dilemma just because Microsoft was intimidated with their new program and didn’t want to run the risk of losing market share. In another incident, Microsoft’s company witness lost integrity after being caught in his own lie with a tampered videotape. How else would you call a corporation that tampers with Java program and weaves in their own codes to prevent standardization of the rival program, but unethical? Even Bill Gates, when asked for a statement, refused to answer questions and fussed over terms stated while avoiding the primary issue. What kind of company has a CEO that refuses to accept accountability for the actions carried out by his company? There are several ways to view Microsoft Corporation as ethical or unethical. It all depends which ethical perspective is taken into consideration. Ethical egoism is an ethical point of view that argues that for an action to be morally right, it must contribute a great deal to self-interest. In the context of Microsoft Corporation, they are trying to monopolize the market because of self-serving intentions. The fact that they refuse to admit any fault makes ethical egoism applicable to them. They do not see anything wrong with their actions because they benefit from it financially. Their interests are fulfilled to high a level that is, having almost full control of the computer software and browser market. From the standpoint of Teleology ethics or consequentialism, the goodness of the act is defined by its consequences. Microsoft Corporation, through their monopolistic actions and conduct, denied fair market share to its competitors. This resulted in profit and market loss to its rival companies. The actions of Microsoft Corporation would then be considered unethical because they have taken advantage of their current position, implicating other companies and placing them in an unfavorable condition in the process that resulted also in complaints filed against them. When viewed in the context of Virtue Ethics, what Microsoft did was also unethical. According to virtue ethics, an unethical action is based on a person’s morals, reputation, and values. In Microsoft Corporation’s case, there have already been numerous incidences in the past that they have done misdeeds to other companies such as blackmail, lying, and tampering. They have had a reputation of being monopolistic as viewed from their actions, conduct, and business strategies. Apple, Sun, Netscape and Microsoft are subject to the same rules, same guidelines, and same regulations. What Microsoft did was prevent a healthy competition among the different companies, resulting in less popular corporations suffering from their actions. The fact that Microsoft denied any competition, opting instead to eliminate it, did not do any good to the industry they belonged in. It limited the options of the consumers, resulted in increased prices in merchandise of other companies, and generally, low profit for these companies as well. The fact also that they have done similar things in the past can justify the unethical display of behavior from a virtue ethics perspective. Contributing Factors Microsoft prides itself in having a workforce that is diverse and inclusive. This is the strategy they utilize to ensure the company’s success. People who work at Microsoft come from different background with varied experiences and this contributes to their development as a company. This would mean that different ideas, opinions, and beliefs are present as well given the mix of people, not only the hired workers but also part of the board of directors at Microsoft. This diversity in the Board, who is in-charge of major decisions in the company, may have actually contributed to the unethical behavior. Different members have different individual opinions based on where they come from. Their standpoints vary depending on their background, where they have come from, and the experience they have had in the past. Diversity in the company can either pull it together or pull it apart. In the case of unethical behavior, I believe it to be a contributing factor rather than a preventing factor. Microsoft values include integrity, honesty, passion, openness, respect, dedication, willingness, self-criticism, commitment, and accountability. They have a standard on business conduct that ensures ethical and legal compliance. It is the responsibility of their employees to follow these standards and report possible violations to proper channels. Microsoft’s standards are thorough and provide an in-depth account of proper conduct in the company. If an employee wishes to disclose something regarding compliance with the standards, he can simply send an e-mail message to the Microsoft Office of Legal Compliance. It is that easy and simple. The Board of Directors of Microsoft also recognizes the need to address the needs and concerns of its employees. Why then has unethical behavior become an issue in Microsoft? The channels of communication are always open and available, easy to access, and simple to apply. The corporation’s rules and regulations may seem adequate to control unethical behavior but the problem may be with its enforcement, and whether its employees are even aware that of their roles, duties, and obligation in relation to these standards. It may also be attributable to fear of retaliation against them in case they report a violation, and fear for their safety or loss of their job. Ethical Decision Factors Three ethical perspectives were discussed earlier, namely ethical egoism, teleological ethics, and common good perspective. To be able to resolve the different issues in the case of Microsoft, several factors need to be addressed first. In ethical egoism, Microsoft’s focus was merely on gaining something out of their action without regard to its effect on others. This selfishness needs to be corrected and Microsoft needs to take into account that other companies exist also. It is not possible to have everything for yourself and let others suffer for it. The company needs to follow rules that are in place because no one is above the law regardless of who they are and what they do. It would seem that Microsoft has become consumed in the idea of having the greatest market share that they always want more. They have a set standard for business conduct which includes ethical and legal conformity yet they fail to follow it. From the teleological perspective, Microsoft Corporation has failed to be ethical in the instance where they failed to recognize the full consequences of their actions. They failed to take accountability for their actions and even tried to mislead the judge with lies. In order to address these issues, Microsoft needs to inculcate a stronger sense of responsibility and accountability in their employees. Evidently, some of their employees would rather lie blatantly than admit a mistake or a weakness as seen with Jim Allchin’s doctored videotape. In every action, there are always consequences. It may not always be good but it is essential that we always take responsibility for our own actions. It is also important to think before acting to avoid making mistakes that we often regret later on. In the context of the virtue ethics perspective, the complainants viewed Microsoft’s actions and conduct as unethical mainly because of Microsoft’s reputation of predatory and anticompetitive actions in the past, which have included lying and tampering. In order to address this issue, it is important that Microsoft determine their values and stick to it, rather than simply listing it down and putting it on display. Also, Microsoft again needs to divert their focus away from themselves and see the market as a whole and as it really is, full of competition and full of potential consumers. Monopoly had no place in the past, has no place in today’s consumer market, and will not be allowed in the future because of economical problems it causes. Lying is also unacceptable behavior and they should learn to admit their mistakes and faults. What companies need to work on is create strategies that will benefit all of them, even the competitors, while abiding with the ethical and legal aspects involved. Recommendations In the past, fines and monetary penalties mean little to corporations as it can be replaced easily with just a few months of profit. It would result in more leniencies in making sure that company policies and guidelines are strictly observed and followed. In order to effectively address the legal issues mentioned above, there needs to be parallel enforcement of appropriate competition laws not just in one country, but in other countries as well. Having a common law with regard to competition would most likely lessen breach and violations and also prevent companies from creating loopholes into antitrust laws. Another action that can remedy the antitrust situation is to apply criminal sanctions on violations of such laws. Although the U.S. is already using imprisonment as a sanction, other countries are yet to follow suit. Enforcing criminal sanctions would make anyone who wishes to go against these antitrust laws think twice before engaging in monopolizing actions and conduct (The Asia-Pacific Antitrust Review, 2009). To be able to prevent similar incidences from happening to Microsoft, there are different policies and strategies that they can adopt. Microsoft should ensure adequate training of all its employees regarding antitrust breach and violations. It should not only be a one-time seminar but a continuous process through updates, posts, and even follow-up discussions. The company should also make sure that all employees are aware of the standard operating procedures regarding reporting of violations and where to get more information regarding antitrust laws. It is important to keep an open line of communication between all levels in the corporation (Lieber, 2008). In AIHA-LAP LLC, they have a list of guidelines that can minimize antitrust violations within the company. There is also a list of topics that are not allowed to be discussed at industry meetings such as cash discounts, credit terms, and price adjustments, among others (AIHA-LAP LLC, 2009). NAMM International Music Products Association also has protocols regarding report of violations of antitrust policies. Anyone who reports a potential or actual violation of the antitrust laws will not retaliate and will not tolerate retaliation against that person (NAMM, n.d.). Microsoft should pay more attention to each and every one of its employees and make sure that they are aware and can recognize instances of possible and definite breaches in the antitrust policies. They should provide an open channel of communication and maintain an assurance that reports of violations will be kept private and go through appropriate channels of communication and that the one who reported it need not fear for their safety or their job. The bottom line, in essence, is to educate and train employees about antitrust policies, and instill in them the courage to report violations whichever level the breach occurs, whether from employees or from the Board of Directors. Everyone should be given the freedom to speak without fear of its consequences. References AIHA-LAP, LLC. (2009). Antitrust Guidelines. Retrieved on December 08, 2009, from http://www.aihaaccreditedlabs.org/Pages/AntitrustGuidelines.aspx APEC Competition Policy. (n.d.). The Sherman Antitrust Act (1890). Retrieved on December 07, 2009, from http://www.apeccp.org.tw/doc/USA/Policy/sherman.html Clayton Antitrust Act. (2008). In The Columbia Encyclopedia 6th Ed. Retrieved on December 07, 2009, from http://www.encyclopedia.com/topic/Clayton_Antitrust_Act.aspx Consequentialism. (2006). In Stanford Encyclopedia of Philosophy. Retrieved on December 08, 2009, from http://plato.stanford.edu/entries/consequentialism/ Drum, K. (2007). Wal-Mart: The Good, the Bad, and the Ugly. Retrieved on December 08, 2009, from http://www.washingtonmonthly.com/archives/individual/2006_09/009545.php Egoism. (2002). In Stanford Encyclopedia of Philosophy. Retrieved on December 08, 2009, from http://plato.stanford.edu/entries/egoism/#2 European Commission. (2006). Press Conference on imposing penalty payments on Microsoft – introductory remarks. Retrieved on December 08, 2009, from http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/06/452&format=HTML&aged=0&language=EN&guiLanguage=en Lieber, L. (2008). Employment Relations Today: Questions and Answer Column. Employment Relations Today, 34(3). Retrieved on December 08, 2009, from http://www.workplaceanswers.com/News/Human-Resource%E2%80%99s-Proactive-Role-in-Workplace-Ethic302.aspx Microsoft. (n.d.). Microsoft Diversity and Inclusion. Retrieved on December 08, 2009, from http://www.microsoft.com/about/diversity/default.mspx Microsoft. (2005). The History of Microsoft Timeline 1976. Retrieved on December 07, 2009, from http://www.microsoft.com/about/companyinformation/timeline/index.html Microsoft. (2009). Microsoft Corporation Corporate Governance Guidelines. Retrieved on December 08, 2009, from http://www.microsoft.com/about/companyinformation/corporategovernance/guidelines.mspx NAMM, the International Music Products Association. (n.d.). Antitrust Policy and Guidelines. Retrieved on December 08, 2009, from http://www.namm.org/policies/antitrust-policy-and-guidelines Opera Software. (2007). Opera files antitrust complaint with the EU. 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