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Q1 What reasons would you offer for encouraging leaders and or managers to use the stakeholder approach?

Would these reasons apply to teams? Stakeholder theory tells us that a decision made by a manager or leader in a company should take into consideration of its major stakeholders interest. For example, how such decision could impact them individually and at what magnitude. Failing to do that, would make managers make inconsiderable decisions that come with undesirable outcome. For example, traditional managers focus more on companys bottom line and individual performance rather than stakeholders interests like how their decisions made would impact employees, customers and suppliers in ethical perspective. However, due to globalisation effect, the way of doing business is much more complicated than before as it involves different parties in different countries. Hence, the first reason to adopt stakeholder approach is that it helps managers or leaders to response better to complexity of company environment by focusing not only on financial aspect (internal) but also non-financial forces that affect company and individuals (external). The second reason to adopt stakeholder approach is that it helps to improve working relationships and cooperativeness among the stakeholders. Stakeholder analysis is the key to stakeholder approach. It is a process that identifies the stakeholders that would be affected or would affect under a decision or action made by the company, and have them prioritize according to their priority. It requires analytical theory and system to recognize, mapping, and assessing business strategies together with stakeholders. Hence coupled with stakeholder approach, the objective is to work out a win-win combined result, meaning to make ethical decisions that would benefits all stakeholders in a fair and square manner. The benefits of such process are that it helps to identify stakeholders interest, the potential risk surrounding an action or decision, find out who are the affected stakeholders and the accompanied side effects and key people involved. The whole process draws stakeholders together and thinks constructively and gets to consensus effectively. This will foster good bonding, good working relationships and cooperativeness among stakeholders.

The third good reason to practice stakeholder approach is that it helps company to prevent unnecessary unethical activities in the company by protecting individual interest. After the Enron debacle, we learned that we should not only look after stockholders or financial interests but also diverse stakeholders as well. The massive scandal where top leaders uses investors funds and assets to perform unethical and illegal activities, wiped out all its employees hard earned retirement funds and take away their jobs and also caused investors to lose tonnes of money. Imagine yourself or your family members were the victims of the scandal. You would not want that to happen to you, isnt it? Stakeholder approach addresses these realities. The fourth reason to practice stakeholder approach is that it helps to build good reputation, image and brand of company and its employees. A highly ethical company would fetch more trust from its customers than an unethical one because customer has confident in the company, its product and its employees than unethical one. Such confidents and trust levels from customers other than making the company look more reputable and trustable to others customers or prospects (future sales), it also serve as a competitive advantage to keep its competitors at bay. For example, Toyota realised there were defective parts that compromised the braking system which are danger to his consumer. Irregardless of how high the liability cost and knowing the negative impact on its share price and sales, Toyota management insist to recall back all the cars in the market immediately. This shows that Toyota management value customers more than it bottom line. As such customer can trust them, investor has confident in them, and employers are proud of them and served as good role model to others players. Very true, after Toyota recalls, others automobile players start to recall. Months later the incident, both Toyota sales and share price rebounded. Thats the power of good reputation. .The fifth reason to practice stakeholder approach is that it helps company to maximise value. The outcome for stakeholder approach in decision making is that managers or leaders have to come out with a win-win strategy or solutions. For example, a strategy or decision is considered doubly valuable if it can meet both employees needs and stockholders requirements. This is so because the solution solves two rightful sets of stakeholders at the same time. Now, if we could keep on improvise the strategy to solve customer wishes as well on top of employees and stockholders interests, sales would increase and both employees and stockholders

would benefits from this also. See, the value can be maximised by joining and sharing the outcomes among the stakeholders. The dominant critique of stakeholder theory said that corporations should serve shareholders interest only because they own the company and not other. That is why company place little attention and emphasis on others stakeholders traditionally. I do not agree with this statement because on the other perspective I can only see a company would not be able to survive without the existence of the other stakeholders. Without customers, who are going to buy their products and services? Without employees who are going to serve the customers and run daily operations. Without suppliers, who are going to source and supply raw material to company. Together they support the company life span. Hence, it is critical for company to look after stakeholders interests and in return, they will protect yours. Hence, the sixth reason is that stakeholder approach ensures company survival. The above reasons do not only apply to manager or leader but to teams and every individual in a company. In my opinion, stakeholder approach should be incorporated in a company culture so to act as guiding value to all employees in addressing stakeholders dilemma or ethical situations and to guide employees day to day working behaviours. For it to be truly effective, the practice must be well supported and carried out from top to bottom. Senior management has the responsibility to ensure employees of the company are clear and understand the objective of stakeholder approach. For example, senior management can continuously communicate to employees the importance of stakeholder approach, serve as visibly role model through verbal message and daily conduct, and use reward system to encourage employees to practice it or to discipline those who failed to abide with the rule. In nutshell, senior management must lead by example in order for employee to respect and practice what preached.

Q2 1. Do you agree with the writers decision to inform customers about the strike? Explain. I agree with the writers decision to inform customers about the strike. My reasons are as follows. First, I believe, being an ethical entity, both the writer and his company has the responsibility to inform not only customers but any parties about any situations which they believe would place negative impacts on their business doings. As the marketing manager for the firm, the writer has different duties, roles and responsibilities to play with for his firm, customers and colleagues. To the company, he has to obey and carry out companys command and decisions. To his fellow colleagues, it is unethical and hard for him not to inform them, especially the sales force who were panicking on customer delivery and need to answer to customers. To his customers, he has the responsibilities to look after their interests, that is, to inform them so that they could together work out something or if not at least customer would be prepared for any or look for alternatives to solve impacts created by the union strike, maybe not in whole but at least to the least impact. Given such ethical dilemma, the writer has to weigh the cost and benefits of such situation. This is called consequentiality theory, which is to identify the cost and benefits associated by telling and not telling the customers about the strike. By not telling, the writers satisfies his duty to his boss but failed to fulfil his roles and duties to colleague and customers and as a supervisors. It just a matter of timing issue of sooner or later customer and colleagues will find out about the strike and the fact he had hide the truth from them. As a result, the writer will lose its trust from his fellow colleagues and his customers. An early notice to customers and colleagues allows them to look for alternatives and face the impacts in proper and calm manner. Whereas, a late notice to them will make them panic and have little time to look for solutions. The writer will be blamed for failing to carry out his duty and responsibility from their perspectives. Consequently, he will lose his reputations for being lack of honesty and respect, and not handling such dilemma in an ethical manner. Such taint of reputations

and integrity not only affects his current status but also will affect his future career prospects. Very clearly, the writer himself is one of the stakeholders here. Colleagues like sales representatives and customer service personnel suffered the same fate as the writer because they were intentionally kept in the dark by the management and not aware of the strike. As such, salesperson failed to answer customer queries on delivery and customer service personnel lie to customers for delayed shipments. With prolong delay and different reasons of shipment delay, customers feel cheated, thus dissatisfied with firm customer services and move to competitors. To customers, they are not trustable, unable to help, eventually failed to fulfil their duty. They are other stakeholders risking their current reputations and future career prospect. The impact to customers could be huge as it involves customers customers, employees and suppliers, consumers, shareholders, and investors just to name a few. For example, delayed and unfulfilled shipments to customer impact its distribution channel and created costly stock out issues at consumer end. Customer failed to fulfil consumer demand. Consequently, customer suffered sales loss as fewer sales achieved thus affecting its bottom line. This affects shareholders, investor and employees. The impact goes down to suppliers sales. By telling the truth, not only reduce the state of panic among the stakeholders, but also helps them to work together to look for solutions. Besides, customer appreciates writers for being honest, thus bring goodwill, reputation and image to the company, because he represents the company. On the contrary, ignoring and keeping the actual situation will cause unnecessary panic and damages to customers and employees due to uncertainty and poor management handling. Furthermore, the intention behind management not telling the truth was not so much to avoid panic among customer but more of management ignorant and not doing the right thing to protect customers and employees interests. This is evident when management insists to keep quiet when it is obvious the strike will last longer than expected, ignore the writers advice to work out strategy to inform customers and command customer service department to create excuses to lie to customers about late delivery.

By telling the truth, the writer can save so many people. It is evident the benefits for telling are greater than just merely satisfying the boss. So, I agree with the writer decision.

2. Did management have the right to withhold this information from customers? Explain. In my opinion, I do not think management have the right to withhold the information from the customers due to a number of reasons. The first reason is, the management is a listed entity. As such I do believe listed company have good governance or transparency rules to follow according to that particular countrys stock exchange and commission. For example, in Malaysia, my company a listed entity, the factory was caught on fire, the management needs to inform Bursa Malaysia, the securities exchange of Malaysia about the incident. So, I believe the management in this case has to inform related authority about the strike they encountered. If so, management must be transparent and it should have informed their customers and other stakeholders as well. The second reason is, irregardless whether the management is a listed entity or not, the management have the responsibility and duty to take into consideration the account of its customers interests. That means if the action or decision made by the management has any chances to put customers interest at risk, intentionally or unintentionally, the management has the obligation to inform them. Hence, the management have no rights to withhold the information. The third reason is there are more stakeholders here other than the affected customers. The other stakeholders identified in this case are the shareholders, employees, and suppliers. These groups of people are affected by the management decision also. When company failed to deliver on time to customer, customer will face stock out issue which is a very costly situation to be at. Corporations lost billions of dollars in sales yearly due to out of stock dilemma. Stock out situation will create dissatisfied consumer because consumer are unable to find or buy what they wanted to. As a result, they will patron at others store and seldom come back due to the dissatisfaction. This will affect customer sales significantly. Lesser sales from customers means lesser orders to company. As such company sales will be affected also. And lesser sales in company mean lesser sales to its suppliers, thus affecting suppliers business as well. To certain extent, lost sales and declining market share will make management to reduce headcount to cut cost, risking employees jobs.

The impact on employees includes loss of customer account for now and future, loss of trust from customers and bad reputation for being not honest with customers, and also employees future career prospects. Last but not least, the management. The impact on management includes loss of both affected and non-affected customers accounts, company reputation and image together with trust will be tarnished. Given these consequences on stakeholders, management do not have the rights to withhold the information from customer. The fourth reason is, by withholding the information from customers, the management is indirectly misleading the customer on the delivery of their orders made to the company. Under such situation, the management are under an obligation to tell the truth to affected customers about the delayed in shipments after the strike. Why? This is because it is basic consumer right to be told the truth about the products or services they purchased. If management failed to tell customer the truth about their product, the company will be devastated and it also can bring big problems to the company employees who are involved in spreading the false information. For example, from the case given, the management commanded customer service department not to inform customer about the strike and should create excuses to lie to customer about delayed shipments when customers call in to enquire. Such unethical actions will bring legal problems to the customer service personnel for unintentionally providing false information and lie to customers. In conclusion, management did not have the right to withhold information from the customers. The reasons are one, being a listed entity; management must abide transparency and good governance rules set by securities exchange. Second, management has the responsibility to inform all stakeholders affected or would be affecting by their decision. Third, withholding information is indirectly misleading customers and that violated the basic consumer rights and would bring big problems to management and its employee for providing false information. Customers have the rights to be told the truth.

3. Explain what you would have done, and why, if had you been in the writers situation. If I had been in the writers situation, I will do the same. I will not withhold the information of the strike from customers and colleagues. But before the disclosure, I will identify the affected parties (stakeholders) followed by identifying the potential consequences for each of these stakeholders and work out contingency plans for each of these parties based on priority. I will then share my cost benefits analysis with the vice president of sales and marketing so that we could work out a win-win strategy to handle the situation with the least impact. If the vice president insists not to disclose the information, I will bring the case to higher level of authority to seek for help. If they too insist to keep it secret, I will inform the customers without waiting for them to call. To me, timing the disclosure or to keep customer in the dark is wrong and unethical for simple reason like what if the timing estimation is wrong like what happened in this case. We are putting stakeholders interests at risks for internal problems inflicted by company unfair treatment on its workers. So, I will inform sales teams and customers about the strike and will try to work out solutions together with customers. If after the work out, customers are still not satisfied with the solutions and looking for competitors to supply is the best option, then by all means help customers to look for one. At least Ive tried my best to serve my customer and they understand my situation and they do not condemn me for the consequences because we tried our best already. On the contrary, if customers find out I lied to them, and help them at later part, they will blame me for not telling them earlier and caused them the troubles. My reputation will be gone forever in this modern world today where news spread so fast. The reasons are simple. First, I believe the customer and others have the rights to know about the real situation. Secondly, it is my duty and my company responsibilities to look after all stakeholders interests. Thirdly, the impact for not telling truth is so much bigger and destructive to all stakeholders in this case than not telling. Besides, customers and employees have their rights to know the truth because the situation will impact them the most. Furthermore, the consequences for not

telling are costly to all stakeholders as illustrated very clearly in Question 1. Customer face stock out issues as a result the company failed to deliver. As a result, customers sales declines, thus affecting its suppliers (in terns of sales) and offended consumers (dissatisfaction caused by stock-out). Customer move to competitors and company loses customers, followed by decline in sales and market shares, company retrench, employee lose their jobs, those remain are low morale and company reputation tainted, shareholders suffered. See how a simple decision to withhold information made by management can have such a great impact on stakeholders. In retrospect, there are no valid reasons for not telling customer about the strike. Another reason I choose to disclose the information because I have personally been through similar situation in my working life which just happened few months back. I am a sales manager with the company. As such I know the negative consequences resulted of such inconsiderate decision made and action taken by top management. My company factory was caught on fire and production has to stop because some machines were damaged while putting out the fire. It takes time to repair the machines. So production capacity was down and delivery schedules were affected. All salesperson were asked not to inform customers about this for short period until further notice from top management worrying that customer will get panic and look for competitors. Unfortunately such short period extended from days to weeks where customers keep calling for delivery schedules and we failed to answer as we still pending confirmation from senior management. The worst was top management urge sales forces to reduce customer damage but their actions show otherwise. It seems to me they put more attention on insurance claims for lost sales rather than helping customers to overcome supply issues. What they failed to see was such ignorant were causing them future sales more than they could claim from insurance covers. The worst was other departments like planner and factory sensed top management non-urgent behaviour and follow suit. The impact was huge to customers, sales force and sales administration personnel. Eventually customers got fed up waiting for our and pressured by our inconsistency on delivery schedules. Those who cant wait cancel all their orders

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and move to another competitor. Due to this, I have lost good accounts worth millions. Other salesperson shared the same fate with me. Sales tumbled significantly and employees morale declined and the production has not solved the capacity issue till today because of excessive backlog to clear. The worst was the current delivery lead time is 2 months compared to 3 weeks originally. To me, top management do not put customer as first priority but themselves. I say this because the problems for late delivery and capacity constraints can be solved by outsourcing some orders to competitors while waiting for machine to get fixed. This is the best solutions as customer gets their goods and we clear the backlog faster. The management rejected the idea because it was too costly. In my case, I did not follow management decision. I make my own decision based on my understanding on my customers portfolio and the context of my company. I knew I was right and I act on it with no regret. But I know I will not be with the company for long because after my MBA course especially after the ethics class, I do not belong to this company and its culture.

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4. What should management have done in this case? When? Why? The whole ethical dilemma happened after the strike started. But what causes the strike? The strike happened because the union workers at Belgium plant were not treated fairly by the company as compared to the United States (US). The inequality here refers to the final sale agreements conditions between the company and union workers which are different of that practiced in US. As stated in the case, the agreement involves radical change in conditions such as those who got laid off will not be compensated fully. It seems to me that the company intention was to retrench with minimum losses to certain extent attempt to change conditions stipulated in the final sale agreement. Secondly, the reason to lay off half the workforce is due to high overhead with the plant and product obsolescence. The overhead could be due to high debt leverage, high top management compensations packages, or inadequate sales. After clarifying the root cause, what the management would have done is to look for ways to solve the problems. There are few ways to this. For example, top management can opt for a cut in salary or compensation package to reduce the high overhead, or may use the plant to produce components required by other plants since the current component is obsolete, or suggest all employees and management to have a pay cut as temporary measures and reverse when company financial condition is fit to. See, the management objective here should be to look for and try every possible solutions on hand first and last resort is to retrench workers, thus to avoid protest. Given the current gloomy economy outlook in European countries, the job is very important to every worker. Hence, as an employer, I think the management are obliged to look after employees welfare like what employees had contributed to the company success during good times. Now, if all possible alternatives do not work, and lay off is a must, management should try to get help from recruitment agencies or relevant party to look for jobs for these retrenched worker. This could help workers to relieve from worrying to get a job in future. As for compensation scheme and entitlement, management got to be fair and square to retrenched workers and should not have any intention or radical changes to cut them off. Doing so would put the management into

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lawsuit of discrimination if the retrenched workers decided to sue the management. Discrimination happens whenever something other than qualifications affect how an employee is treated. Unequal treatment normally unfavourable, can take many forms and it can be subtle and non-subtle factor not only in working relationships but also in hiring, promotions, and layoff decision. The workers deserve their compensation. Besides, by treating the lay offs fairly and with empathy, the management shows those who were not laid off that the management are ethical employer and do not simply fires people as and when they like. If management practice this, they will help to gain trust, loyalty and motivation from those who remains. This is very critical because during and after layoff period, employees morale is very low because those remain may think they would be the next on the list. As a result, a prudent management practice and handling on such matter can reduce the chances of protests by workers. The other thing the management would have done is to have a contingency plan for every unforeseen situation, like workers strike, factory on fire, flood just to name a few. A good contingency plan is a saviour that helps management to stay calm and focus when the incident happened because the management has a contingency list stating what should be done and by who should do it and how to do it. It is all documented in the plan. One just needs to execute it. Like in my case where my company factory was caught on fire, the management have no contingency plan and have no experience in handling such situation. The consequences were disastrous. For management who has a contingency plan, besides staying calm and focus, it also shows that the management has good corporate governance for business continuity, which is an important aspect to all stakeholders.

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References

1. Jensen MC (2000) Value Maximization and Stakeholder Theory July 24,


Harvard Business School http://hbswk.hbs.edu/item/1609.html

2. Weiss JW (2009) Business Ethics: A stakeholder and issues management


approach 5th edn South Western Mason.

3. Trevino LK & Nelson KA (2007) Managing Business Ethics: Straight Talk About
How To Do It Right 4th edn John Wiley & Sons, Inc Danvers

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