A Case of Corporate Ethical Failure, and Discuss Where Blame Might Be Assigned - Essay Example

Corporate Ethical Failure Introduction Most corporate ethical failures results from poor leadership by the top management of an organisation. The management in this sense often fails to provide leadership in terms of implementing sound practices in the organisation. As such, a culture is developed where employees engage in various malpractices due to an enabling environment created by the top leadership of an organisation. The junior employees in an organisation often look upon their senior managers to provide leadership, and as a result, the practices adopted by the junior staff emanates from what their seniors does in the organisation. In an environment where employee does what he or she wants, there tends to be ethical failure in the leadership. These failures often affect the productivity of an organisation because there is lack of clear direction on how things should be done in the organisation (Riivari & Lamsa, 2014). Organisations need to establish an ethical code that guides the behaviours of employees including the top management. However, where such the ethical code of conduct is ignored by the workers, then an organisation is exposed to different problems including ethical leadership failures. Ethical failures in any organisation result from what people do at the workplace. In addition, ethical failures are created as a result of the behaviours and thinking that is supported by the organisation in general. The individual behaviours that may cause ethical failures include ignoring boundaries, lack of self-control, the entitlement view, self-interest, lacking moral compass and crowd following. On the other hand, organisation culture that can lead to ethical failures include lack of clarity regarding ethical conduct in the organisation, lack of effective leaders to act as role models, lack of accountability, shifting blame and there is no performance integration and things are done incorrectly in the organisation (Riivari & Lamsa, 2014). This paper discusses corporate ethical failure that contributed to the bribery scandal at Siemens in 2006. Case Study: Bribery scandal at Siemens exposed A former manager of the Siemens testified regarding unethical practice in the company that involved slushing funds and bribery which amounted to corporate corruption. The manager testified on his role in the bribery scandal that was first exposed by German prosecutors in 2006. This corruption scandal has tarnished the name of the company resulting in two top executives losing their jobs. In addition, the remaining executives still faced fines and indictments that amounted to billions of euros because of the corporate corruption. The manager who testified in the scandal is facing charges of breach of trust admitted that the bribery scandal was an open secret within the division that he worked. Mr. Siekaczek, the manager charged in court for the scandal explained that managers in his division at Siemens engaged in a careful signing of post-it notes attached to incriminating documents in order to remove any evidence of their malpractices if necessary (Dougherty, 2008). The managers engaged in the malpractice as a way of removing their signs of involvement in the scandal in case there was to be an investigation. Mr. Siekaczek also implicated a number of supervisors in the division that he worked. Further, this trial also led to the investigation of another 300 people linked to the Siemens scandals. On another note, Mr Siekaczek also mentioned the involvement of senior management into the scandal, for example, Mr. Joe Kaeser, the company’s chief financial officer. Despite the revelation of the scandal, the company is still denying engaging in a corporate corruption (Dougherty, 2008). However, due to additional evidence into the scandal, the prosecutors also mentioned the need to charge the former chairman of the company for failing to provide effective supervision of the company. The investigations into the bribery scandal at Siemens also contributed to similar inquiries in a number of countries that the company operated such as the United States and Italy. In the scandal, Mr, Siekaczek narrated how employees in his division including himself engaged in malpractices such as paying for none existent consultancy services and the money derived was channelled into off-the- books slush funds. This money was then used to pay bribes in order to secure orders for the company’s major projects. As a result of the scandal, the company embarks on a housecleaning that was lauded by independent experts as a standing to eliminate corruption in the company (Dougherty, 2008). Discussion The corporate ethical failure at Siemens results from the lack of the senior management to provide leadership in regard to the appropriate functions of employees in the company. The malpractice that took place in the company is because the top leadership provided an enabling environment for other employees to engage in corrupt activities. In most organisations, leadership is hierarchical and other employees model the behaviours of their senior management and supervisors alike. In addition the violation of ethical conduct of employees in an organisation as evident in the Siemens Company is as a result of lack of appropriate governance at the workplace. In an organisation that focuses on a vertical structure rather than an horizontal structure, it is the mandate of the senior management and supervisors to see that sound practices are enforced in an organisation (Wray-Bliss, 2013). However, this lacked at Siemens where the senior management and supervisors condoned malpractices at Siemens that resulted in the bribery scandal and thus tarnishing the name of the company. The management is the core agents in terms of ensuring that an organisation is managed efficiently. Their purpose in an organisation is to ensure that the junior staffs conducts themselves in accordance with the ethical conducts of the organisation. Conversely, in an organisation where every person works to serve their self-interest without any regulation, then acts of corruption are unavoidable (Torlak & Tiffany, 2014). The work done by employees in such a case is geared at enriching themselves. Further, where corrupting is condoned in an organisation, employees disregard being genuine in their work and do not consider the public trust in their capacity to provide efficient services. In the case of Siemens, The Siemens case depict a situation where what is normal is what serves the divisions in the company. For instance, the finance division where Mr, Siekaczek worked new that they were involved in unethical practice, but because of the senior management ignorance regarding what was going on, corruption became part of Siemens culture. Sometimes, corporate ethical failures are caused by the top management’s pressure for various departments of an organisation to deliver on their mandate (Baden, 2014). As such, the employees in various departments will come up with ways of pleasing the top management regardless of the techniques they use. This is the case with Siemens where the division that Mr. Siekaczek worked involved themselves in using the company’s funds to pay bribes in order to secure major. On the same note, Siemens is not only the company in Europe that deals with technology engineering. There are other firms such as Nokia that provides stiff competition for Siemens products and services. Stiff competition means that organisation have to establish differentiation strategy that provides competitive edge over the completion. However, what is unnoticeable among companies is the underground dealings where bribery is used to win contracts because of the stiff competition in the marketplace (Yallop, 2012). This is the case of Siemens where as a result of stiff completion, the company condoned malpractices due to the desire to make more profits. Profits generated by a company play a significant role in determining the direction of a particular firm whether it is headed for a downfall or success. As a result, the senior management of an organisation often neglects accountability in terms of how various divisions in an organisation derive success with implemented projects (Lloyd & Mey, 2010). On the other hand, organisational culture plays a critical role in the type of behaviours adopted by employees in an organisation. On this note, the attitude that employees normally embrace in an organisation depends what the senior management demand. For instance, where the senior management demands results regardless of the means used by employees, the workers are left with no means but to use the entire arsenal in their disposal to achieve success including bribery so long as the management do not take account of how the success is derived (Lloyd & Mey, 2010). In most circumstances, supervisors in a division of an organisation often collaborate with the junior employees to adopt unethical practices in achieving their goals. This is because, where the demand for success is stiffened and there are consequences for failures, employees are often pushed to malpractices that the top management of an organisation may not be aware. In most organisations, the top management work under closed doors and as a result, may not be aware of unethical practices committed by their junior staff in the various divisions of an organisation. Essentially, corporate ethical failure emanates from poor governance of an organisation. In a company such as Siemens, it appears that the top management failed to provide direction regarding how the company needs to solicit for major projects that brings more proceeds to the company. In addition, it seems that attention of the senior management for the various divisions in the company prior to the revelation of the scandal were recognized and rewarded depending on the increments they bring to the company (Pakes & Davis, 2013). In a number of occasions, the top management often places other employees in a precarious situation where they have to deliver or they lose their jobs. These results in a situation where employees other than being innovative and creative engage in illicit practices so long as they achieve their objective of pleasing the top management and prevent them from losing their jobs. In multinational companies such as Siemens, the foremost interest is to make sure that the stakeholders are happy. This means that productivity and sales at Siemens has to be at the top compared to the competitors. However, challenges in achieving success with an organisation often arise because of the stiff competition in a constantly changing global business environment (Moore, 2005). In addition, as a result of liberalisation of markets around the globe, monopolizing a business is not an easy task and firms have to compete for the same market. As such, where the authorities responsible for rooting out corruption are ignorant, these create an environment for organisations to engage in unethical practices to generate more profits and remain relevant in a competitive market. On another note, in most organisations where corruption thrives, personal conviction regarding malpractices in an organisation often lacks because employees have an attitude that if the top management condones such practices then they have no option but to facilitate an enabling environment for corruption as long as their rewards for bring customers in an organisation is not affected (.McDonald, 2002). Leadership in any organisation by the top management is important in abating corporate ethical failure. This is because those in leadership position are seen as role model by the junior staff and what they do has a great influence on the behaviours of other employees. For example, where the top management condones corruption, other employees embrace such behaviour because their senior management sees nothing wrong the malpractices taking place in the organisation. On the other hand, the responsible authorities in tackling malpractices in organisations are also reluctant in ensuring that organisations embrace accountability and transparency. For instance, the malpractices at Siemens regarding bribery to win major contracts begun in 1998, but the German prosecutors discovered these illicit practices in 2006. As such, in ensuring that organisations do not deviate from the ethical codes of conduct require the responsible authorities to be vigilant regarding how organisation make their profits and subsequent expansions (Mele, 2013). In the case of the Siemens Company, the corporate ethical failure can be attributed to lack of proper leadership by the top management. The top management neglected what was going on in various divisions of the company and was only interested on their productivity in general. Further, the management knew that Mr Siekaczek was engaging in illegal dealings but failed to take action because they were interested in the profit that the company can generate rather than the company’s integrity to provide quality goods and services in a competitive business environment. Effective leadership requires accountability and transparency, but Siemens ignored such responsibilities at the expense of generating more profits. In this regard, it is evident that the case of scandal at Siemen that led to corporate ethical failure is as a result of lack of effective leadership from the top management the company prior to the revelation of the bribery scandal (Garegnani & Melotti, 2015). The common good approach as a way if tackling corporate ethical failure at Siemens Mr. Siekaczek and other members of his division at Siemens engaged in paying non-existent consultancy services and the money they obtained was channelled into off-the –books slush funds. Such malpractices when revealed to the public domain impacts negatively on a company. In addition, a negative reputation for a company can affect sales and to an extent, lead to the collapse of an organisation due to lack of trust from customers and other prospective investors. It is essential for organisation to enhance the trust of the public on their products because business organisations thrive as a result the confidence that consumers and the prospective investors have in a company (Brunson, 2015). However, the bribery scandal at Siemens is a classic example of corporate ethical failure because the problems for the company can be attributed by the lack of the management to ensure that sound practices are adopted by the company. In this sense, the common good approach related to ethical practices posits that ethical principles are necessary in the society to guide the conscience of organisation in appropriate decision making process. However, the essence of promoting common values or ethical principles varies from one organisation to another (Brunson, 2015). Organisations need to establish ethical principles as a way of ensuring that the company’s overall mission resonates with the society. In a competitive business environment, customers or clients are particulate regarding how organisations perform their daily functions in the production of goods and services. However, where organisations engage in malpractices, the key stakeholders with an interest in a particular company tend to be reluctant in terms of increasing their investment portfolio. This is because, malpractices in an organisation tend to lead in failures and this results in a significant loss of profits. For instance, the exposure of bribery scandal at Siemens in the public domain presents a picture whereby Siemens is not genuine and engages in shoddy dealings to achieve their overall goal. Because of the ethical failures regarding accountability and transparency, organisations often loss their customers to the competition who embrace sound practices (McDonald, 2000). On another note Siemens as an international brand needs to provide leadership in terms of embracing sound practices to avoid corporate ethical failures. Good corporate governance is important in avoiding corporate ethical failures such as the one created by the corruption, for instance, in division of Siemens that is responsible for undertaking projects and consultancy services. In addition, reputation is important in ensuring that an organisation meets its overall objectives. However, embroilment in scandal means that a company’s reputation is bound to diminish. As such the management of an organisation needs to be at the forefront of promoting sound ethics to avoid corporate ethical failure such the one created by the corruption allegations at the Siemens Company that also implicates the former financial chief (McDonald, 2000). The business environment has demands for ethics to bring sanity in a competitive market. As such, fair competition in the marketplace require organisation to embrace the acceptable ethical codes in conducting business rather than engaging in illegal deals to maintain a competitive edge or please the senior management in expectation of a reward. As such, personal interests influenced by the need to earn more incentives in a company should not comprise the need to embrace sound practices in business that is acceptable to the society as recognized by the common good approach in establishing sound ethics in an organisation (Brunson, 2015). Post script From a personal point of view, sound ethics in an organisation requires the top management to provide leadership. The leaders are the ones who act as role model for the junior staff that follows their direction. As a result, when the managers in an organisation engage in an inappropriate practice, others are bound to follow because such behaviour is condoned by the people who are supposed to provide direction (Wallace & Sheldon, 2015). For instance, the management knew about what was going on in Mr. Siekaczek’s department in the company. However, they decided to enable an environment of ethical malpractice by not stopping the bribery to secure major projects for the company. Depending on the organisational structure, the top management or leaders in a group holds the ultimate decision regarding activities taking place in an organisation. As such, most of the activities carried out by the junior staff are endorsed by the management or leaders in a team at the workplace (Wallace & Sheldon, 2015). The stakeholders of a company often demand for positive results regardless of the volatile situation in the business environment. However, as a result of the competitive nature of most businesses, some organisations tend to take a short cut by engaging in unlawful practices in order to gain advantage over other companies in the same business environment. This is a practice common in today’s business environment and often goes unnoticed by the responsible authorities. In this sense accountability and transparency is imperative in eradicating corporate ethical failure in organisation. The top management need to take responsibility in terms of ensuring that the practices adopt in an organisation resonates with the acceptable behaviours in a competitive business environment such as, fair competition and avoiding bribery to win contracts. Corporate ethical failure in this sense results from the inability of an organisation to establish sound practices to ensure a company’s reputation in the marketplace remains intact because customers prefer firms where sound practices in conducting business are emphasised (Wallace & Sheldon, 2015). Conclusion Corporate ethical failure can be created by a number of factors that include the lack of leadership in providing direction on how an organisation’s operations are conducted. As such, the reluctance of the top management result in the junior staff engages in practices not approved by the organisation as long as those practices produce positive results. Conversely, the public is often concerned about genuineness of companies of the delivery of goods and services. Consequently, where organisations engage in an illegal practice than can tarnish their name, the consumer confidence in such an organisation also diminishes. 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