Individual report

7 July 2016

1. Ethical principles and the decision-making process Nowadays it is believed that ethical principles are the foundation of ethical analysis. Each theory can be used for predicting the outcome and following one’s duties to others in order to reach an ethically correct decision. The problems that are discussed in any cases like the AWB LTD scenario can bring significant changes to the decision –making process for others. Also the best approach is to use ethical theories such as Utilitarism, Deontology, Libertarianism etc. , in combination in order to obtain the most ethically correct answer and solution possible for each case. 2.

Case study of the AWB LTD wheat board scandal The Australian Wheat Board case is a clear example of corporate culture and other systemic failures influencing and defining an organisation’s decision making and its ethical posture. This report addresses the underlying organisational causes of the AWB scandal, whereby AWB paid kickbacks to Iraq in defiance of the rules of the Oil-for-Food programme, instituted by the United Nations. In so doing, it consider the evidence and conclusions presented in the Cole inquiry, a Royal Commission established to investigate the conduct of several Australian companies in relation to the program.

Individual report Essay Example

At the height of the investigation, the single-desk arrangement from which AWB benefits came under criticism. In 2006, the Australian Grain Exporters Association asked the Government to remove AWB’s monopoly export powers. The Oil-for-Food scandal cast doubt among some grain exporters over the trust placed in the company, especially as they lost the ability to export to Iraq during the length of the Cole Inquiry, losing one of their biggest markets. Consequently the scandal resulted in international condemnation and litigation.

On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets. The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East. The lawsuit was dismissed in March 2007. In August 2009, the Australian Federal Police dropped their investigation into any criminal actions undertaken by AWB and others in this matter.

The Australian Securities and Investments Commission then proceeded with several civil cases against six former directors and officers of AWB. Two have been against Andrew Lindberg, AWB’s former head. Another civil case was bought by shareholders of AWB, and was settled out of court for $39. 5 million in February 2010. These facts can characterize the problem associated with an ethics breach from costs side such as social (legitimacy breach), economical (fees) and human (war victims). 2. 1.

Ethical issues of the AWB LTD dilemma This particular case can be discussed from different points of ethical theories. At the beginning of our discussion we have to understand the way and reason why the management of this big public socially important company made such as problematic and criminal decision. The main approach that can be used to understand and explain the behaviour of people is Positive Accounting Theory. PAT explains AWB management behaviour as a self-interested, wealth maximizing and greedy organism.

However the most important question is how this company has received such a wild possibilities to act on international market on behalf of the Australian government on the middle of military regime?! How this became possible despite of ASIC and other government bodies control. Libertarianism approach suggests that everyone is free of coercion and act until he breached the freedom of someone else. Thus as longer management of AWB LTD were acting against the international law as longer we can highlight there breach of libertarians approach.

The questionable Utilitarian approach of ‘seeking the greatest good for the greatest number of people’ assumed by AWB itself and its Board, is analysed in this report. It draws attention to the underlying shortcomings in both corporate governance and culture, which play a significant role in allowing or precluding the occurrence of unethical activities. Further, the inaction from DFAT and Australian government in investigating claims against AWB highlights the systemic failures that permitted AWB’s unethical behaviour.

Another important moment of this case from Utilitarian point is cost/ benefits analyses. Such as to prevent similar problem in the future we can simply do comparing between achieved benefits of this way and paid for it cost. Yes, company management received huge benefits and was profitable performed for several times. However, the cost of this approach was incredibly higher rather than any benefits. Thus, international scandal, investigation and criminal actions, several civil cases against six former directors and officers of AWB, huge fees paid.

As we know, the utilitarian ethical theory is founded on ability to predict the consequences of an action. Thus the choice that yields the greatest benefit to the most people is the choice that is ethically correct. According with utilitarianism AWB Ltd had breached fairness and loyalty principles when decided to accept criminal way for goals achievements. Consequently that wrong organizational decision had caused all that strict measures, fees and reprehension from law bodies such as ASIC or National union.

Also with Teleopathy we can determine here unhealthy pursuit of goals, some of the management members were forgotten about the main ethical principles due to financial goals achievement. Thus an organisation’s strong profit driven demand to meet financial or business objectives, promoting tolerance for illegal acts; a culture of ‘getting the job done’, where corrupt acts are justified under the proviso that the greatest good will be achieved for the company.

Another significant breach in this case is violation of deontological approach – deontological suggestion of the ‘’duty’’ to be fair to all employees and to be loyal to society; an action is right if it is in accordance with moral rule or principles. The key causes of and an influence on unethical behaviour ascertained from deontological point of view is lack of control mechanisms and moral agents in both corporate and public sector governance; breach of fairness and loyalty duties.

The virtue ethical theory judges a company by his character rather than by an action that my deviate from his normal behaviour. It takes the company’s management moral and reputation into account when raying an unusual and irregular behaviour that is considered unethical. So virtue mostly concerned with improvements rather than punishments. According with virtue and Normative Accounting Theory we can find some weak elements in this case and suggest other solutions. 3. Consequences and solutions. First of all, the common criticism of any monopoly scheme worked in this case as well.

By law Australian government gave too much power and independency in one hand. AWB had veto power over any other prospective exporters of wheat, which effectively eliminated competition on the export market for Australian wheat, thereby capturing freight differentials. Secondly, lack of the government control of this company during its international performance obviously allows AWB to act out of frame. Thirdly, obviously weak internal ethical system allowed the company board to use the criminal unconscious way for business.

As a result, there are loss of company legitimacy and market niche, big fees, investigation and damage to the country’s prestige. As we know, regaining legitimacy is a very complicated and expensive process, assumes several methods, such as changing itself (board removal), changing norms and boundaries of social contract and competitors distraction. Thus, in the years immediately following the Cole Inquiry, AWB continued to be dogged by bad performance. The company remains liable in several civil cases being completed, and has not always been successful in its attempts to find new markets.

Also a new management team was installed under the leadership of Gordon Davis who was recruited from Orica in August 2006. This fact may characterize how the company tried to rebuild social contract with community. However this new management team has not been entirely without controversy, in 2009, the company faced difficulties in another new market, when it was forced to recapitalize the balance sheet after the company produced significant losses from the expansion of trading activities into Brazil under Mr Davis.

In 2010 AWB accepted a takover bid from Agrium at A$1. 50 a share, or $1. 2 billion in total, which was later approved by Australia’s Foreign Investment Review Board. 4. AWB LTD case importance It is said that to avoid similar problem in the future, it is better to fix all these violation possibilities, through improvements in government control for international companies especially during military conflicts, introduction of the compulsory centralised ethical board or system for the big international companies such as AWB Ltd.

The casuist ethical theory is one that compares a current ethical dilemma with examples of similar ethical dilemmas and their outcomes. This may help to determine the severity of the situation and to create the best possible solution according to others’ experiences. The AWB Ltd case is not the only evidence of internal ethical problems of the big international companies. Unfortunately AWB management did not gain paradigm that represent the extremes of the situation from the previous examples.

Some historical samples may prove that fact that as bigger the company as bigger it can damage community and environment. For example, similar problem in relation to the cooperation of social responsibilities we can find in ‘’deepwater disaster British Petroleum ‘’. Where similar teleopathic approach lead to ‘’tunnel vision’’ for the company board and brought BP to the social, economic and legitimate problem with society.

Another similarity can be found in Lames Hardy case, where powerful majority of the company was not care about people lives, due to CEO bonus plan and other profitable goals. To sum up this case, it is obvious that government control system failure due to ASIC allowed this corruption. As a preventive measure of similar future mistake, I personally believe, better to create kind of national ethical body with auditing right and obligation. Any companies that have even half power that AWB on international market with socially important resources must been under government ethical control.

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