Business Society and Ethics

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Table of ContentsIntroduction...........................................................................................................................................3

Answer 1................................................................................................................................................3

Answer 2................................................................................................................................................5

Answer 3................................................................................................................................................6

References.............................................................................................................................................8

IntroductionThis 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 1The 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 2Several 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 3In 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).

ReferencesAguilera, 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