Ethics & Corporate Social Responsibility

Often times, many business decisions are not always black and white and there are ethical dilemmas that leaders sometimes face. “Leadership must know how the myriad human behaviors and interactions fit together like puzzle pieces to create a whole picture” (Kehoe, pg. 201). Ethics is the study of honest behaviors and decisions, examining what should be done in relation with Corporate Social responsibility (CSR). Corporate social responsibility is a business’s commitment to contribute to economic development while improving the quality of life of the workforce and their families as well as the community and society at large. (Investopedia, 2014) This case discusses Ethics and Corporate Responsibility by observing Cinco, a pulp processing plant.

As a newly promoted plant manager for Cinco, Jim is required to prove his ability to effectively manage several employees who have been with the company much longer than he has, and as a result, are more experienced and insensitive to change. “Cinco’s policy is to give each manager a freehand in dealing with employees, the community and the plant itself. It’s main measure of performance is the bottom line and the employee’s are keenly aware of this fact” (Ferrell, pg. 1). With this in mind, we can assume that if Jim attempts to change the way the plant is managed, his efforts could very well be overlooked and ignored. The first time Jim understood an ethical dilemma was upon his discovery of the fraudulent water sample data reports being sent to the Environmental Protection Agency (EPA).

In order to avoid a shutdown, the plant’s waste disposal into the river needed to be in compliance with the EPA standards. After Jim was told that the mill’s waste disposal into the river exceeded the EPA’s guidelines, Jim ordered tests of the water for the last 6 months. After comparing the reports against EPA standards, he saw no violation. As a result, Jim checked the mill to test the water himself, only to learn the truth behind the plants operations. The mill had never been modernized to meet EPA standards, so they needed to divert the bad waste to one of the four large storage tanks, and twice a week, they dumped it into the river. However, according to past EPA reports, the mill had always been in compliance. Jim grew suspicious and wondered how there was discrepancy in the EPA reports. Jim learns of a miscellaneous expense of $100 a month, and realizes that this was essentially a bribe payment to Ralph in order to operate the plant under the radar, while they continued to violate the new EPA standards.

It was evident that this fraudulent activity was the cause of the discrepancy within the reports. Given the current circumstances, it is critical that Jim consider the potential ethical issues at risk as he examines each of his alternatives as a manager. We have identified four options for Jim: A. Meet with higher management and discuss the ramifications of the EPA to discuss to pay for new equipment and meet the EPA standards. B. Pay Ralph for 2 years until he can get new equipment. C. Quit or D. Find a trusted person in the media and explain the situation and have a community member find the issue with the water. Potential Ethical Issues (PEIs)

As the plant manager, Jim is faced with an ethical dilemma that requires him to make a decision that could jeopardize his position and/or potentially shut down the plant. Not only was a bribe payment to keep the plant open an ethical issue and risk, but also the fact that the company was essentially committing fraud. Further, by violating the EPA standards and lying about it to the public, the company was risking an exposure for a poor reputation by neglecting to be socially responsible. Jim’s ethical issue raises several questions, each possessing varying levels of risk: Does Jim quit his managerial job at Cinco to only allow for the corporation to continue surreptitiously polluting the towns river (inaction), does he stay at Cinco and do nothing in order to keep his job and satisfy his spouse’s wishes to continue his career advancement through the Cinco corporate ranks (personal gain at the expense of harming the community), or does he report Cinco’s environmental deception and bribes to only face immediate termination (action with personal consequence)?

Before analyzing each question and their threats, we must first recognize the underlining ethics and morality of his issue. Jim’s situation deals more with a higher legal responsibility to the “greater good” of his and his employee’s community who are deceptively being affected through the polluting waste. According to a research report written on the ethics of whistleblowing, the author examines the following: “An ethical behavior is related first of all to the idea of morality, above respecting the law. Ethics aims to the heart of the corporate’s reputation and in the end that is all you have if you hope to be successful and prosperous in the business world”

In Urs E. Gattiker’s, Attitudes and Differences in Moral Judgments, he explores the topic of morality as a “behavior of individuals who choose, implement, and bear the consequences of their actions. Morality is traditionally understood to exert an impartial constraint on the pursuit of individual interests in the face of societal objectives” Thus, morality is a principle that should guide Jim and our decision to take his ethical questions at risk, and select a balanced ethical approach that is grounded in morality, yet may allow for Jim to be the positive change within the company culture. It is Jim’s moral obligation to choose to improve the situation for himself and community by creating an opportunity for moral change, rather than bearing the inactions at Cinco. Application of the Business Ethics Formula/Matrix (Exhibit 1) As mentioned, there are four options3 available to Jim. We begin by assuming the previous manager failed at solving this same dilemma, due to the pressure from upper management, as their only concern was about the bottom line.

The issue has now ultimately landed in Jim’s hands, challenging him to make an ethical decision that not only promotes an ethical standard, but also one that doesn’t harm his career, family, employees, community and the company’s image. According to John Boatright, “the best defense is a good offense. And the best defense against involvement in wrong doing is being prepared for organizational challenges that will inevitably test your personal values, moral beliefs, and commitment to doing the right thing.” The first three options do not allow the immediate reaction needed from upper management and do not allow Jim to prepare for unforeseen circumstance. Also, option B can lead to worse, and while quitting (C) is smart, Jim could be wrongfully targeted by the company. We have developed an option for Jim that proves to be tactful and yields the best outcome. We agree that Option D, finding a trusted person in the media and explain the situation and have a community member find the issue with the water (option D) will yield the best outcome.

Based on the 5 sources for ethical decision-making, we agree that Jim’s solution revolves around a concern for the common good of the community. By keeping in mind the social responsibility of the company and the legal risks at hand, Jim will attempt to anonymously expose the company’s violations against the EPA to the media. We believe that by doing this, it will force the company to address the environmental concerns, and fix the problem in order to avoid a shutdown or a poor reputation. This decision, in turn, protects Jim’s position in the company and to society, giving him the freedom to quit, while also ensuring the plant remains socially responsible. Assessment of what we learned

In hindsight, we agree that this case has guided us in thoroughly understanding ethical decision-making. We learned that at some point in our career, we may be confronted with a situation that presents an ethical dilemma. In efforts to uphold a professional standing, we believe that any ethical decisions should promote a compliance with a company’s core Code of Ethics. We realize that ethical dilemmas will not always have an obvious solution, but when it involves breaking the law or violating regulations, the solution is clear-cut. In Jim’s case, we learn that conflicts of interest and issues regarding confidentiality are issues that pose an ethical risk involving a fraudulent act being committed by the company. As a professional, Jim has the responsibility and a duty to practice good judgment. Our role is to understand the wider implications and the impact of the issue on the business, and society.

Exhibit 1

Prism
Do Nothing
Do Something
Option A
Option B
Option C
Option D
Utilitarian

Rights

Fairness + Justice

Common Good

Bibliography

A Framework for Thinking Ethically. (2009, May 1). A Framework for Thinking Ethically. Retrieved from http://www.scu.edu/ethics/practicing/decision/framework.html Boatright, J.R. (2013) Confronting Ethical Dilemmas in the Workplace. Financial Analysts Journal. Pp. 6-9.

Bunget, O.-C., Bunget, Ovidiu-Constantin, & David-Sobolevschi, Maria-Iulia. (2009). Ethics and internal audit: whistleblowing issues. (Bunget, Ovidiu-Constantin and David-Sobolevschi, Maria-Iulia (2009): Ethics and internal audit: whistleblowing issues. Published in: Revista Audit Financiar , Vol. 7, No. 9 (September 2009): pp. 43-51.) Corporate Social Responsibility Definition | Investopedia. (n.d.). Investopedia. (2014, September 27).

Retrieved from http://www.investopedia.com/terms/c/corp-social-responsibility.asp Ferrell, Fraedrich, Ferrell Business Ethics Decision Making and Cases 6th Ed.
Ethics and Corporate Social Responsibility- Cinco Corporation Kehoe, William J. Business Ethics 13/14 McGraw-Hill 2013