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Discussion Activity 6 – Ethics and Corporate Social Responsibility
Propose a recent (within last 3 years) business ethics case that you are familiar with; alternatively search on the internet or among the following resources one business ethics case:
http://www.scu.edu/ethics/practicing/focusareas/cases.cfm?fam=BUSI
http://web.tepper.cmu.edu/ethics/aa/arthurandersen.htm
http://business-ethics.com/category/csr/page/2/
Discuss this case using the following Corporate Social Responsibility approaches: Stakeholder Theory, Corporate Citizenship, Corporate Social Performance; Legal, Economic, Moral and Social responsibilities.
Student Post 1
Wells Fargo first opened in 1852 as a pony express firm that offered services to a wide variety of entities. As the years progressed the organization has grown worldwide and ranked the 10th bank in the world (Wells Fargo, n.d.). The Wells Fargo’s 2015 debacle took many by surprise and still has many consumers wary of their organization and practices. Wells Fargo ended up paying $185 million in fines surrounding unethical practices and consumer fraud (Santa Clara University, n.d.). Stakeholder Theory states that organizations are to be responsible as well as accountable to all stakeholders, including employees. This could mean a loss to shareholders but the responsibility rests with accountability.
The stakeholders in the Wells Fargo case include the employees, customers and top management. The direct effect rested upon the customers. In this case Wells Fargo’s management did not uphold to the Stakeholder Theory and were not being good stewards of the organizations assets. Management was accused on ignoring fraud reports, creating fraudulent reports to promote cross selling and pressuring employees. Employees were pressured into selling and opening new accounts to both achieve a commission and to boost the organizations bottom line. The more open accounts the more equity given to the shareholders.
Proper utilization of the Stakeholder Theory would have helped management balance and intertwine existing strategic goals that would have covered all stakeholders. To thwart off future allegations and concerns, it is important for management to understand the daily transactions of the organization and ensure they match up to stakeholder well-being. As well as have a definitive way of handling conflicts of interests.
Corporate Citizenship is a mixture of Stakeholder Theory with the addition of legal, economic and ethical responsibilities that are to produce higher standards for not only stakeholders but the communities the organization serves. With the stigma still fresh, Wells Fargo set to invest $67 billion in 2016 (Wells Fargo, 2017), into their corporate social responsibility (CSR) goals. Wells Fargo is set to renew customer trust and advance their organization, by focusing on diversity, social inclusion, economic opportunities and a healthier planet (Wells Fargo, 2017).
Wells Fargo has the economic responsibility to make profits for shareholders. They also have a legal responsibility to adhere to set rules and regulations. Good faith efforts should be made to follow set rules and regulations or face the consequences of societal backlash and shareholder uncertainty. This leads to ethical responsibility; ingrained into Wells Fargo’s culture should be a respect and obligation to serve the society as a whole and the customers they serve. Wells Fargo created an unethical culture that promoted a reward system that was ineffective and infringed on customer well-being (privacy, trust) and basic code of conduct. The case listed that many employees had quit because of immense pressure. Some had reported the unethical behavior via their ethics hotline and were then terminated (CNN, 2016). This type of retaliation does not show Wells Fargo as a good corporate citizen lowers morale and can be seen as an infringement on employee welfare and confidentiality.
All companies are subject to legal responsibilities, which impact the organizations business processes and even competiveness. Wells Fargo’s site states that their legal team works closely with all of aspects of the business in order to provide consistent, good corporate practices and to insure they are in compliance with all legal requirements (Wells Fargo, n.d.). According to the 2015 case, this team failed. The legal responsibilities lying at Wells Fargo’s feet include establishing more effective controls to monitor account practices and deter fraudulent accounts being opened. The other responsibility is correcting their wrong. Acknowledgement of the problem earlier may have saved legal ramifications and backlash.
Reference
Erbschloe, M. (2015). Corporate social responsibility. Research Starters: Business (Online Edition).
History - Wells Fargo History. (n.d.). Retrieved from https://www.wellsfargohistory.com/history/
Wells Fargo Banking Scandal - Resources - Business Ethics - Focus Areas - Markkula Center for Applied Ethics - Santa Clara University. (n.d.). Retrieved from https://www.scu.edu/ethics/focus-areas/business-ethics/resources/wells-fargo-banking-scandal/
Wells Fargo Invested $67 Billion in 2016 to Advance CSR Goals. (2017, April). Retrieved fromhttps://www.wellsfargo.com/about/press/2017/csr-report_0421/
Wells Fargo workers: I called the ethics line and was fired. (2016, September). Retrieved from http://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html
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Student Post 2
Ethics and Corporate Social Responsibility
House of Representatives - Federal Government as Industry - The people of the United States as Stakeholders - Aaron Schock: (Former) Representative of 18th Congressional District of Illinois
The alleged crimes — theft of government funds, fraud, making false statements and filing false tax returns — began soon after Schock first entered the House of Representatives in 2008 and continued after he resigned March 2015
Stakeholder Theory: In the traditional view of a company, the shareholder view, only the owners or shareholders of the company are important, and the company has a binding fiduciary duty to put their needs first, to increase value for them. This Member misused money that would go to the good of the stakeholders. These funds would have gone to programs and projects that would benefit the American people.
Corporate Citizenship/ Corporate Social Performance: CSR policy functions as a self-regulatory mechanism whereby a business monitors(House of Representatives) and ensures its active compliance with the spirit of the law, ethical standards and national or international norms. In this case, Schock was sworn in and bound to particular ethical rules that all members of his company were bounded to. These rules were to properly use all funds allotted for is office use and campaign.
Legal, Economic, Moral & Social Responsibilities: Every Member of Congress and/or candidate are under the rules to only use campaign funds for items directly purposed for campaign situations. A 52-page indictment portrays Schock as treating government and campaign funds as a personal piggy bank — opulently decorating his office, buying a staffer a new car, handing out excessive bonuses, paying for travel to get a haircut and traveling on a private airplane to get to a Bears game. Schock broke the law, misuse funds, and broke the trust of his colleges and constituents.
I remember when this story first broke. I think that many Members of Congress might walk a tight rope when it comes to using funds properly. People outside or off the Hill think or assume that the rules are easy/black and white. However, there are many situations that may come up and fall in all or few red flag areas. Schock was just wrong in this case.
Resources:
https://www.usnews.com/news/articles/2015/03/17/rep-aaron-schock-resigns-over-campaign-spending-ethics-allegations
http://www.chicagotribune.com/news/local/breaking/ct-aaron-schock-indicted-20161110-story.html
