Corporate Disasters

Cost Benefit Analysis of Stakeholders

Overview

Ethical issues prevail all over the world in many different ways, shapes, and forms. The three major ethical issues that have a profound effect on consumers/people/investors, government, and businesses are as follows:
1. Human Rights

2. Environment

3. Corporate Corruption

Human Rights - Ayaan

Background Info


Human rights are standards that recognize and protect the dignity of human beings. They govern people's lives, providing them with rights and responsibilities. All humans are born free and equal, with inherent, inalienable, and universal rights - regardless of age, sex, or race. The basic human rights that are protected in developed countries are: freedom of expression, association, speech, assembly, and movement. However, one major ethical issue is that these basic rights are not protected in many countries.

Initially, human rights were defined as rights to which all human beings are entitled to. This emerged when the United Nations General Assembly adopted a declaration called the Universal Declaration of Human Rights (UDHR) on December 10, 1948. The UDHR promotes human, civil, economic, and social rights. These rights are still violated in many countries by corporations and governments with great power. Governments fail to ensure access to justice for victims of human rights abuses due to poor regulations.

Overall, doing business ethically involves respecting and appreciating human rights to prevent violations. The task of protecting human rights also involves governments, in terms of globalization and multinational corporations, NGOs, and risk management.

In conclusion, human right violations occur all over the world every day. Efforts are being done by building awareness and protesting about how humans are treated poorly. For example, during the Holocaust of World War II, Hitler's Final Solution led to the death of 6 million (78%) European Jews, whereby all their major human rights were violated and they were not provided justice because they were powerless.


Cost/Benefit Analysis


Governments


Costs

- Governments fail to regulate rights or ensure justice for those who have been deprived of rights, due to poor laws and regulations

- Governments are still responsible for violating basic human rights of citizens in many countries (i.e. they are tortured, oppressed, and not given the right to life)

- Governments still violate human rights of many individuals in certain countries up to this date (e.g. China, Burma) because of poor economic development and it also jeopardizes their fundamental rights, such as having access to food, shelter, health, and education


Benefits

- Governments have a main obligation to secure universal enjoyment of human rights and to protect them from harmful action of others (including companies), which is mainly done in developed countries and can be only be authorized by them to do so and they also have ability to promote greater respect of human rights

- Human rights is top priority for governments of developed countries, as this is entrenched in their constitution whereby they have to follow and promote the rule of law in their society, which helps maintain a peaceful society


Businesses


Costs

- Many economic players (companies) have gained unprecedented power and influence the world economy, which results in having negative impacts on individual and society's human rights and are also left powerless without entitled protection or access to justice

- Companies directly abuse human rights, through colluding with others (e.g. businesses) to violate human rights or by failing to respect human rights through acts or omissions, which results in companies held accountable and making it hard to prevent human rights abuses at a national and international level


Benefits

- Promotes excellence and helps fight problems

- More employment opportunities, therefore creating enhanced reputation/image

- Better relations between employers and employees, therefore better cooperation and standards in the workplace

- Strengthen rule of law to make better standards

- More secure license to operate, which proves that it creates safe working conditions in companies to conduct business operations

- Greater potential for sustainable socio-economic development, which helps maintain peacemaking and peacebuilding in businesses

- More companies would want to conduct business if businesses follow human rights and maintain a peaceful environment because this would expand business; if human rights were to not exist, most companies would not feel safe of conducting business.


Consumers


Costs

- Not enough rights given for every citizen around the world, which proves that people are left powerless and they live miserably because of not having the basic fundamental rights to live by

- Consumers affected are not entitled to their rights and can’t get access to justice, and as a result, they file lawsuits for their rights being violated and being treated poorly by businesses and government


Benefits

- UDHR protects and promotes human rights, as it outlines that human rights belong equally to everyone, as people should be familiarized with those rights, and how they should help in order to promote and defend those rights (this is for all people and for all nations)

- NGOs like Amnesty International set out to protect human rights and provide justice to those who, therefore gaining attention nationally and internationally for campaigning about supporting human rights for consumers

- Creates more jobs, which results in more employees

Human Rights Violation

Environment - Runda

Background Info



Earth is a place full of scarce natural resources. By recognizing that all the goods being produced by the natural environment are limited, it’s the businesses duty to respect, take responsibility, support and sustain the natural resources that they are extracting from. Despite the knowledge of environmental scarcity, many companies are continuing to pollute and depleting natural resources in many ways. As a result, the world is faced with dramatic environmental changes such as global warming, contamination and impairment of natural habitats.

Traditionally, corporations pollute the environment simply for the sake of decreasing operating expenses in order to generate more profit or negligence. As a result, leftover wastes produced were being dumped irresponsibly into the ocean causing harm to natural habitats and life around it (ie. The Great Pacific Garbage Patch).

A more recent example would be the British Petroleum oil spill in April 2010. In this case, the business was liable for the damage of surrounding habitat and the cleanup of the oil (one of the world’s most scarce resources) spilled into the Gulf of Mexico. After the spill, surrounded communities were also impacted with limited access to drinkable water supply. As a business, BP was responsible to cover for all costs of damage inflicted by the oil spill.


Cost/Benefit Analysis


Business:

Cost: (negative image) Sales is the number one goal that a business strives for. And in a society where large number of businesses are competing against each other, a positive image/reputation of the brand name is needed. When a business is not acting environmentally responsible, negative brand image will be associated with the business by the public. As a result, the business will receive decreased sales and competing businesses’ market share will increase.

Benefit: (decrease cost of operations) Generating profit is primarily based on one idea: decrease costs and increase sales. By eliminating the costs of cleaning up wastes produced by the operations, the business will benefited with lower costs of operations. This will result the business to decrease the price within their products in order to generate more sales from consumers.

Government:

Cost: (extra tax dollar spending) As the leaders of society, it’s the governments’ duty to preserve the environment for the public in order to satisfy everyone within the community. However, that satisfaction comes with a price, funds are needed for governments to take action and preserve the environment.

Benefit: (attract foreign businesses investment) When a country is more tolerant with environmental issues and loose in policies, foreign businesses are more likely to invest in that country because of more freedom from restrictions to operate and less expenses to be incurred.

Consumer:

Cost: (bad environment to live in) Pollution created by factories could turn the environment around us less habitable due to CO2 emissions, polluted water supplies, garbage landfills and etc.

Benefit: (access to cheaper goods in demand) Since corporations are able to fully utilize their budget in producing goods and disregard any expenses related to responsibly disposing operating wastes within the business, which translates to cheaper goods that are in demand within the market.

Investors:

Cost: (less options to invest) When businesses are being socially irresponsible, negative press from the media are going to follow. This will discourage the consumers to purchase goods from certain brands. These brands will be the brands that the investors will start to avoid and in the end, investors will have less options to invest in companies that they wish to invest in,

Benefit: (more returns on investments) Even though some businesses will receive negative press, they’ll continue to thrive on top because of their competitive advantage of being able to produce more than others to generate more sales. Because of this, investors will be able to gain more returns on their investments as an added benefit.


Corporate Corruption - Harsh

Overview: Corruption is an epidemic disease that is spread amongst most humans in the world due their greedy nature. Corruption has spread throughout the globe in every aspect of the new economy. Corporate corruption exists both in the public and private sector; in the last decade or so these crimes have been revealed extremely often. Fraud and bribery are the two most evident forms of corporate corruption, as shown in the text below.


"For example, 68 per cent of citizens interviewed in 2012 considered it acceptable for a civil servant to top up a low salary by accepting small bribes from service users (as opposed to 42 per cent in 2009)."


Corporate Corruption
: crimes committed by the corporation or the people representing the corporation.


Cost/Benefit Analysis


1) BRIBERY: most common form of corporate corruption

Public Sector: giving public officers money to get licenses, permit, loans, state grants, etc.
Private Sector: small business giving bigger companies money to gain contracts, services like electricity, phone lines, hydro, etc.


Government


Costs

· Misuse of permits/contracts could lead to an outspread of diseases putting a strain on the health care system

· A sub-satisfactory job is done on a construction and an accident occurs, results in loss of infrastructure, manpower.


Benefits

· Employed people putting money back into the economy

· Government gets more taxes from the people and the company


Business


Costs

· Business goes bankrupt or there are multiple law suits filed against them

· Compensation has to be paid

· Besides monetary loss there is loss of reputation, resulting in the loss of potential investors


Benefits

· Gets more contracts and can expand business

· Company can attract investors after being listed on the stock exchange


Consumers/Citizens/People


Costs

· If health care is not free, people must pay for treatments

· If a death has occurred funeral costs must be paid

· If the company is bankrupt, invested savings are also lost


Benefits

· Creates jobs as the company grows more employees

· People get dividends, monetary gain


2) FRAUD

Public Sector: individuals converting public dollars for private gain, vacations etc.
Private Sector: schemes, scams, etc. created by individuals with high rank and reputation


Government


Costs

· Tax dollars are wasted and now put a strain on the government, which takes loans for other countries resulting in high national debt (tax dollars used for social welfare, employment insurance, healthcare, education, etc.)

· Questions are raised about the laws for governing the business world

· As people lose their money economy goes through the floor and people are left rattled

· The US economy went into recession after scandals such as Enron, Worldcom, Lehman brothers, Bernie Madoff, etc


Benefits

· Can create a false boom stage, where people think their money is safe and spend a lot

· If a government learns from its mistakes it can create a better corporate environment and stricter laws to safeguard people’s money

· Strategize to pay off national debts

· Laws/Actions taken to prevent corporate scandals: Sarbanes-Oxley Act 2002, OECD Anti-Bribery Convention, Foreign Corrupt Practices Act



Business


Costs

· Gains for high ranking individuals, board of directors, etc. are mostly monetary, but take more paid time off than lower-ranking employees

· Exploitation of lower ranking employees, using their salaries for personal benefits

· Bribery occurs to keep fraud a secret

· Might result in jail time for few responsible individuals

· Jeff Skilling, CEO of Enron during its scandal, got 24 years in prison


Benefits

· Individuals in the corporate world can live life king size, as they can make a huge sum of money

· If the business is prosperous new markets can be accessed and more people can be lured into the investing money into the schemes

· Bernie Madoff made up to 50 billion dollars through his scandal


Consumers/Citizens/People


Costs

· Government may charge extra tax to recover the lost money

· If people invest money in a scheme they lose it

· May even result in loss of homes

· see video below, which shows Bernie Madoff's victims and how they lost most of their savings


Benefits

· Individuals who pull out of the scheme at the right time may have monetary gain (in the video, if the couple withdrew one million dollars of their savings, some money could have been saved)


Madoff fraud exerts grim toll on investors - 29 June 09