An ethical dilemma for the new CEO of Cheryl Tobin - Essay Example

Summary Moral ethics and dilemmas surrounding the use of ethical practices have been a subject of major research in various circles. The present case also shows an ethical dilemma for the new CEO of Hammond named Cheryl Tobin who took over the reins of the company preceding the flamboyant CEO James Rawlings. The case briefly describes the first day in office of the CEO where she was faced with an ethical dilemma. The day began with the CEO having a disgruntled feeling over the design of the magnanimous chamber of her office. However the main issue arose from the CEO’s suspicions nature of the manner in which overseas business clients were sourced by the company for contracts worth billions of dollars. The new CEO was suspicious of slush funds and other monetary aspects including paying kickbacks to government officials for sourcing contracts. The CEO wanted to conduct an impartial enquiry into the matter in order detect any unethical practices and to ensure that compliance norms are strictly followed in the organization. However her efforts to instigate an enquiry into the matter evoked sharp yet passive response from two of the senior executives of the company including the legal counsel of the company. They advised that an external agency enquiring into the matter would complicate the issues and would lead to negative sentiments in the market that would adversely affect the performance of the organization. The CEO was thus in an ethical dilemma as to whether go ahead with an external enquiry or let the matter go unnoticed. Solutions The approach of the CEO as described in the case reflects the importance of business ethics and regulations in the manner of working of the CEO. The CEO also displays a democratic style of leadership as she consults various other team members before making a final decision. This shows the true democratic traits of the new CEO as she prefers to ensure participation from all the quarters before making any crucial decision (Daft & Lane, p.44). The CEO was very correct in initiating a probe into the financial irregularities as it is mandatory for business organizations to ensure fair practices. The Sarbanes Oxley Act also makes directors personally liable for any corporate frauds that occurred in the company and the directors did not take any action on it. Since all the financial documents are to be signed by the directors any frauds reported within the company makes them personally liable to criminal prosecution (Ashcroft & Ashcroft, p.412). Moreover, with the CEO being appointed by the board of directors makes the CEO answerable to them. It also questions the ethical dimensions of the CEO as it is the duty of the same to report matters to the board. The powers vested to the CEO are largely for the purpose of acting on the behalf of the board and to make the CEO answerable for the day to day affairs of the organization. Hence the CEO was very correct in initiating a probe into the matter. Examples from real life also suggest unfair and corrupt practices should not be encouraged in any organization. These malpractices may give short term gains but it is clear from the history of companies like Enron that unethical practice if not checked can lead to a complete downfall of the organization (BBC News, “Enron Scandal at a Glance”). Issues like negative sentiments coming in the wake of an enquiry into the scandals should not pose as a hindrance or an obstacle to the enquiry process as it ignorance in the long term can have very serious implications. This can also be inferred from the manner in which Boeing had to pay huge amounts as a fine towards fraudulent transactions and activities of the company. However rather than suddenly taking a decision to hire an external agency for the investigation, first the CEO can carry out an internal monitoring and supervision of the books of accounts of the company. The CEO should lead this team that would be handpicked by her in order to ensure that the internal employees cannot hamper the investigations. This is because it should be remembered that the CEO has no concrete evidence of a fraud in the company and the basis of the CEO’s thoughts are largely based on reports reported from external sources that can be largely dubbed as rumors. Acting on rumors and engaging an external agency would not only harm the company’s reputation but would also take the CEO on a collision course with the other senior management members. Only if the initial enquiry reflects frauds, then an external agency can be hired so as to ensure minimal damage to the reputation of the organization. It would also ensure that the employees and the senior management would not be vary of the fact that the CEO who has been hired from an external organization is not hell bent on finding flaws and imposing her individual style of working in the organization. Moreover the findings of the internal audit committee can be very well concealed within the organization so that remedial measures can be initiated and that there is no harm in the reputation of the organization. A hasty decision of conducting an external enquiry can only aggravate matters and can have disastrous implication on the business prospects of the organization. It would also reflect an autocratic leadership style of the CEO that would eventually not help in improving the situation and would make matters worse in the long run. However the CEO in any case should not ignore the aspect of fraudulent practices in the organization as it would not be beneficial in the long run. Although in the short run allegations such as slush funds as well as kickbacks can hamper the positioning of the company but in the long run it would be beneficial if an enquiry is conducted and the organization resolves the issues. This would not only help in ethics and good governance but would also generate sustainable competitive advantage in the long run. References Ashcroft, J.D. & Ashcroft, J.E. Law for Business. Cengage Learning, 2007. BBC News. Enron Scandal at a Glance. 2002. Business. December 21, 2011 from < http://news.bbc.co.uk/2/hi/business/1780075.stm>. Daft, R.L. & Lane, P.G. The leadership experience. Cengage Learning, 2007. Read More