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Business Society and Ethics
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Table of Contents
Introduction
This
assessment is centred on a case study involving AWB scandal where the
organization indulged in paying huge amounts of kickbacks to secure its wheat
export contracts with Iran. In context of this case study, the assessment seeks
to critically discuss and provide answers to questions which have been posed by
the case study.
Answer 1
The
case study indicates several actions undertaken by AWB and the Australian
government which stringently violated the principles of ethics and morality. The
greatest unethical and immoral action was undertaken by AWB by paying large
amounts of kickbacks to government representatives in Iraq in order to ensure
that they remained primary wheat suppliers to Iraq and majorly benefited from
the Oil for Food program as established by the United Nations. This caused them
to pay approximately US$ 300 million in kickbacks. AWB in Australia acts as a
single desk wheat export authority in Australia which was established in order
to help Australian farmers sell their produce in global markets. In order to be
able to do this, Australian farmers are required to pay a fixed amount to AWB. In
this context, AWB’s action could be deduced as robbing farmers in their own
country and transferring wealth to Iran in order to secure their own profits. This
action could also be considered unethical and immoral as this might have helped
Iran acquire military power to disrupt the world. The Oil for Food program was
established by the United Nations in the year 1995 in order to allow Iran to
sell its oil produce in global markets in exchange for medicines, food and
other humanitarian substances without being able to boost its military
capacity. However kickbacks payed in order to secure profits might have allowed
Iran to fuel its military developments. Thus, this action undertaken by AWB
might have made a direct contribution in harming hundreds of innocent people (Aguilera & Jackson 2010).
Another
unethical and immoral action undertaken by AWB can be cited in the form of
missing internal audit procedures. Scope of internal audits in any organization
is broad and includes managing control over operational effectiveness,
maintaining reliability in financial reporting, ensuring that the organization
complies with rules, regulations and laws of the state and the nation. Most
importantly, internal audits are responsible for identifying and preventing the
organizations involvement in any potential fraudulent activity. In this case,
AWB completely skipped internal audit procedures (which are mandatory) thus
allowing it to openly indulge in fraud and transfer’s their nation’s wealth to
Iran for their own profits (Harjoto
& Jo 2011).
Even
when the Cole Inquiry was established to investigate AWB’s actions, the
organization instead of admitting their fraudulent activities and compensating
farmers who lost money owing to the fraud, tried its best to cover up the
fraud. When asked about the hefty kickbacks, representatives of the
organization merely replied by saying that they were unaware of the payments
made. This action can be recognised both as unethical as well as immoral as the
organization can be seen shying away from its responsibilities towards the community.
According to the theory of corporate citizenship, an organization is a part of
the community and is responsible for maximizing returns of its stakeholders and
giving back to the community. In this case, AWB only cared about its own
interests and did not even acknowledge the fact that it had done anything
wrong. This action is also unethical in nature as it severely affected
Australia’s reputation globally. Australia’s ranking on the transparency index
fell from 9 to 11 and AWB made no attempts on its own to make up for this
damage (Van Ees et al 2009).
Falling
in line with AWB, the Australian government also made no attempts to stop the
fraudulent activity. Cole Inquiry report suggested that there were several
warnings of unethical practice carried out by AWB. The government however chose
to keep quiet and not take actions against AWB. This could be equated to
supporting AWB in robbing Australian farmers to ensure that wheat export
contracts stayed with Australia (Brammer
et al 2012).
It
has also been pointed out that since kickbacks demanded by bureaucrats in Iran
were quite high, it is not possible that government officials in Australia were
unaware of the ongoing transactions. Thus, it is also possible that a few
government officials had their own share in these ongoing transactions. This
move can also be considered as both unethical and immoral in nature and can
directly be equated to cheating. These government officials could be filling
their own pockets in the name of doing well for their country by maintaining
wheat exports. Lastly, it might also be argued that they were completely aware
of the fact that their actions might serve to damage the reputation of their
country and this did not stop them from indulging in fraud (Brammer et al 2012).
Answer 2
Several
things could have been done in a different manner both by AWB and by the
Australian government in order to avoid these allegations of corruption. First,
AWB should not have participated in paying kickbacks when demanded in order to
secure contracts. Since Iraq was a huge market with great potential for AWB
exports, AWB was desperate to keep contracts with it and not lose them to U.S
or Canadian competitors. Under these circumstances, AWB might have reported the
issue to United Nations and should have ensured appropriate actions were taken.
Once AWB indulged in making a kickback payment, it became a vicious circle and
they had to do this every time. If they had reported the issue to United
Nations the very first time, they would have indulged in fair competition
enabling them to be praised for their actions rather than being criticised (Aguilera & Jackson 2010).
Additionally,
AWB should have established an internal audit commission which would have been
able to advise the management on ethical decision making and compliance with
rules and laws. The internal audit would have been able to guide the company
officials that indulging in kickback payments is unethical in nature and this
should not be done (Aguilera &
Jackson 2010).
AWB
should also have established training procedures in order to educate employees
on corporate ethics and generate responsibility towards framers and their own
country. By looking at the case study, it is evident that managers and decision
makers in the organization had not been trained in corporate social
responsibility. Under these circumstances, it would have helped if training
procedures had been in place. The training procedures would also have helped
the organization justify that they care for the community they carry out their
business activities in (Spitzeck
& Hansen 2010).
Lastly,
AWB should not have made attempts to cover up their actions by saying that they
were unaware of the payments made. Rather, they should have taken
responsibility for their actions and should have initiated strategies to undo
the damage caused. This might have told the community that they care and might
have helped in controlling anger of the community thereby reducing allegations
of outright corruption (Spitzeck
& Hansen 2010).
The
Australian government on the other hand should have increased liability of the
organization towards the community by making the contract procedure more
transparent to the community. AWB should have been urged by the Australian
government to indicate methodology adopted by it to secure contracts with Iran.
AWB should also have been urged to share the contract procedure with United
Nations thereby further promoting transparency. Alternately, the Australian
government could also have requested representative from United Nations to
oversee the contract signing procedure. This would have served a great deal in
avoiding allegations of corruption (Spitzeck
& Hansen 2010).
Further,
the Australian government should have exercised a tighter control on its own
officials so that they do not indulge in personal profit making. Also, government
officials should have reacted to complaints and suspicion against AWB when they
first arose. This would have enabled the government to curb corruption at the
very beginning and such a scandal would not have arisen (Siddiqui 2010).
Finally,
the Australian government should have approached United Nations and notified
the same about demands made by Iran. With the help of these measures, corrupt
practices would have been eliminated at the very beginning. This would not only
have avoided allegations of corruption but would also have served to protect
the government’s reputation in the community as well as globally (Siddiqui 2010).
Answer 3
In
order to minimise the risk of future unethical practices and enhance its
reputation, AWB needs to put several measures in place. First internal meetings
need to be held involving all individuals who might have a say in the manner in
which AWB functions. Managers of the organization need to be consulted as they
would be aware of exact procedures and loopholes. Areas of improvement need to
be specifically highlighted and improvement proposals need to be created and
implemented (Christopher 2010).
Decision
makers need to ensure if a manual governing company relation with the community
is available, is up to date and is followed. If not, a manual for governing
company relations needs to be created and this manual needs to clearly lay out
expectations of the organization from all its employees including members of
the senior management. Responsibilities of owners, decision makers and managers
need to be clearly indicated so that other employees can keep a check on
fulfilment of these responsibilities. Employees should be allowed to make their
contributions towards creation of this manual by allowing them to provide
improvement suggestions. Alternately, if such a manual is available, it needs
to be thoroughly discussed within the company and its implementation needs to
be ensured (Christopher 2010).
AWB
needs to enhance transparency of its procedures in order to win back public
trust. For this purpose, corporate rules need to be disclosed to all
stakeholders of the firm. These rules and regulations can also be placed on the
organization’s website in order to ensure that the organization complies with
them (Jensen 2010).
An
internal audit commission needs to be established in order to regularly monitor
the behaviour of the organization and decision makers within the organization.
This would help in ensuring that the company does not engage in fraudulent
activities henceforth (Jensen
2010).
In
order to improve the organization’s reputation in public and globally, a public
apology might be issued stating that the organization seeks to bear complete
responsibility of its actions and ensuring the community that such a scandal
would be discouraged in the future. AWB might also set up an internal inquiry
in order to pin point the names of all officials who might have been involved
in the scandal. These officials might be suspended and penalised. The
organization might also initiate to end corruption by writing a letter to the
United Nations and disclosing the names of all Iranian officials who have been
demanding money in order to secure contracts. AWB might also look forward to
publish these actions in the local media and in international publications (Jo & Harjoto 2011).
Damage
done to the reputation of the organization as well as to the nation as a whole
is huge and this would take time to recover. However if the organization vows
to refrain from fraudulent practices in the future and genuinely make an
attempt to enhance its reputation, the damage would be recovered over a course
of time. Additionally, the organization would have to take care of the fact
that any further negative publicity might cause an irreparable damage (Jo & Harjoto 2011).
References
Aguilera, R. V., & Jackson, G, 2010,
Comparative and international corporate governance, The Academy of Management Annals, vol 4, no 1, pp 485-556
Brammer, S., Jackson, G., & Matten, D,
2012, Corporate social responsibility and institutional theory: New
perspectives on private governance, Socio-Economic
Review, vol 10, no 1,
pp 3-28
Christopher, J, 2010, Corporate governance—A
multi-theoretical approach to recognizing the wider influencing forces impacting
on organizations, Critical
perspectives on accounting, vol 21,
no 8, pp 683-695
Harjoto, M. A., & Jo, H, 2011, Corporate
governance and CSR nexus, Journal
of Business Ethics, vol 100,
no 1, pp 45-67
Jensen, M. C, 2010, Value maximization,
stakeholder theory, and the corporate objective function, Journal of applied corporate
finance, vol 22, no 1,pp
32-42
Jo, H., & Harjoto, M. A, 2011, Corporate
governance and firm value: The impact of corporate social responsibility, Journal of Business Ethics, vol 103, no 3, pp 351-383
Siddiqui, J, 2010, Development of corporate
governance regulations: The case of an emerging economy, Journal of Business Ethics, Vol 91, no 2, pp 253-274
Spitzeck, H., & Hansen, E. G, 2010,
Stakeholder governance: how stakeholders influence corporate decision making, Corporate governance, Vol 10, no 4, pp 378-391
Van Ees, H., Gabrielsson, J., & Huse, M,
2009, Toward a behavioral theory of boards and corporate governance, Corporate Governance: An
International Review, vol 17,
no 3, pp 307-319
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