AIG Case Study
The major facts in this case are on how the company had failed in running their own affairs. Strategies developed were not very favorable. Before the company came to the melt down point, there were other companies and stakeholders already complaining of the undertakings in the company. It is clear that individuals that were shaping the policies did not have sustenance aspect in the strategies that they provided. This aspect could have been attributed by the nature of the culture that the organization had adopted. It prompted employees and other key figures in the organization to adopt strategies that would only bring results in the short-run. This made life difficult for future operations.
Among the major issues in the case are the corporate culture of AIG and the government involvement in the bailout process. Culture adopted in the organization contributed significantly in the meltdown experienced by the organization. The corporate culture enhanced a reward system that was based on the performance. This resulted in the neglect of the responsibility that the organization had towards its stakeholders (Greenberg & Cunningham, 2013). There are also issues as to how the government got involved with the organization when it reached its meltdown point. People from different areas have analyzed the issue through contrasting ideologies.
Other sub-issues involved include the remuneration for the employees of the organization. The company seems to spend a lot in paying its employees. However, it is not all employees that are being paid at this rate. It is a select group based on the tasks being executed and the length of time spent in the organization. The bonuses seem to be exorbitant based on the conditions that the organization is engulfed in. However, the company has its way of finding justification in their decision making process. Other stakeholders like auditors and investors have also contributed to the occurrence of this situation. This is based on the steps that they have taken in light of the issues being experienced (Spencer, 2009).
The stakeholders in the case are the AIG management, government, investors and employees. AIG management has been involved in making all the decisions that have resulted in the current crisis. They developed a financial product unit without much inquiry on the extent that it would affect the organization. These products featured almost every aspect of the economy. There was an assurance that the organization would capture a large market share based on this strategy. However, the technique used in the extent of risk was blunt. The company ended up providing excessive credits to individuals that were reckless risk takers. There was an opportunity on the profits gained in the short-run, but there was no consideration for long-term effects. The corporate culture of the entity also provided both the management and employees an opportunity to benefit. This culture paved way for high-stakes when it came to risk taking. Using these strategies employees and management were able to produce high profits in the short-run. This meant their bonus would increase hence acted as a source of motivation (Gensler, Swindal & Spurgin, 2013). The company supported these payouts citing that they were a strategy of retaining the best employees in the organization. To some extent, this might create an ethical dilemma.
Another ethical dilemma is evident on the stakes that the government has in the case. Other financial institutions that had been involved in such scenarios before did not receive any bailout from the government. Providing bailout to AIG resulted in numerous questions. The government had a challenge in trying to convince other people that were interested in the case. However, based on the situation the government had been faced with an ethical dilemma before making its decision. This is because it had not done something like this to any other financial institution that was on the verge of bankruptcy. To make it even worse, AIG was solely responsible for the outcomes. Nevertheless, if the government did not come in the rescue, this would have resulted in other companies being bankrupt. This would mean that many employees would lose their jobs in the process. In the long-run the economy would go to depression. Such an occurrence justifies the government involvement in the bailing process.
An ethical theory that is in support of this action is consequentialism theory. It states that an action is favorable if it spearheads beneficial outcomes (Landau, 2007). The actions of the government ensured that the economy did not suffer a depression based on the situation at hand. This theory is more favorable in analyzing the case than other theories like virtue ethics. This believes in putting character above all other things. It has been contradicted in the case since the management has put greed and selfishness above their character. The occurrence is evidenced by the nature of bonuses they award themselves despite the condition that the organization is facing.
Among the recommendations for AIG is that it needs to be transparent in its dealings. The company has already lost the trust of stakeholders involved with its business. Being transparent in future operations would help in building the trust that has been lost. Initially, outside auditors had raised concerns regarding the evaluations of the derivatives. However, the company tried to mitigate their effect by locking them out of crucial company undertakings. Among the companies that faced this turmoil was the PricewaterhouseCoopers. All the relevant information that they needed was not disclosed o them. The company’s executive went ahead to reassure the auditors and investors that the company had identified all the areas of exposure hence aware of the undertakings. The organization should not have acted in this way since the investors trusted them with their money. Enhancing transparency would help in avoiding such occurrences in the future. The best way to implement this is by changing the organization’s culture (Flamholtz & Randle, 2011). It will be of importance if AIG adopted the culture of working in partnership. This means that all the stakeholders are involved in the decisions and actions of the organization. It would help in making the best decisions since individuals would set aside the aspect of conflict of interest. However, the strategy has a disadvantage in that other measures need to be enhanced before this can take effect. The company will incur extra cost in running management diversity programs. This is because for an organization to work in partnership aspects of diversity must be overcome.
Another recommendation is that the organization concentrates on paying back the tax payers money invested by the government. This will help in fighting the critics that are using this ideology to corrupt the minds of the general public. There is an indication that company has sunk in funds that would be used for their enhancement. Several ways of funding this agenda should be devised. Some parts of the business that do not seem to yield the desired results should be sold in the process.
Joe Camel Advertisement
The facts of the case are that RJR have been involved in controversial advertisement. Some people view the advertisement as cool while others are very skeptical of its intentions. The advertisement uses a cartoon character “Joe Camel” in its quest. This aspect has created an ethical dilemma since cartoon characters are usually associated with kids. Several stakeholders are convinced that the company came up with this advertisement prospect so as to target the young generation. It is like a way of them that smoking is cool since they associate it with things that they like to see. From the surveys conducted, it is clear that of people had seen this advertisement. This entails children under the age of 18. Most of them had found it intriguing. However, the company is adamant that it does not target this group of consumers.
The major overriding issue is that the sale of cigarettes has increased since this advertisement was initiated. As a result of the advertisement, the Camel shipments grew by 11.3%. The market share on the other hand, grew from 2.7% to 3.1%. Initially, this market was experiencing some form of decline due to the awareness that was being created. The Joe Camel advert came around to change things. Based on these aspects, it was clear that a new consumer base had been created. The new numbers in the company’s share entailed teenagers that had been thrilled by the advertisement. This brings the question on the suitability of this advertisement. The motive seemed to be different from what the company was trying to portray (Batra, 2009). Other stakeholders got involved in the process.
The stakeholders in this case include RJR, health care associations, Antonio Novello and the government. RJR Company came up with an advertisement that paid off. To them, it was an opportunity that they went ahead to exploit. There was an ethical dilemma since the advert was clear on its target market. It is only children that are thrilled with cartoon personalities hence likely to fall or such adverts. Several individuals came along to object the advert, but the company was not ready to drop it. The profitability aspect that was entailed became very tempting to the company. It was only after everyone was against the advertisement that the company thought of dumping it. This is a true indication on how company’s value profits than being ethical to the society (Jaffé, 2002). The government on its part had the challenge of dealing with individuals that suffered as a result of tobacco usage. Funds being increased in the healthcare to deal with this problem would have been used in other developmental institutions. To this effect, the government was in support of the institutions that came along to suppress the consumption of tobacco. However, this was not very easy since it had an ethical dilemma in it. Reduction of this consumption would mean a reduction in government revenue collected through taxes.
Healthcare associations posed threats to RJR based on its advert. They pressured the company to drop the advertisement due to the effect it had on children. Several litigations were levied. When RJR’s CEO appeared on these panels, he stood with his word that the advert was not targeting children. Novello on his part formed associations with other medical practitioners to protest against the general tobacco industry. He was of the support that all advertisement campaigns regarding the tobacco product should be banned. This was a threat to RJR since it would affect its ability of reaching the market. Not only adverts that targeted the children would be banned, but all advertisements in general. It would be a great blow since advertisement is the life in of any business in increasing its market share (Kim, 2007).
Ethical theories applicable to this case include the care ethics. This theory puts the relationships that exist between individuals at the fore-front. RJR had the responsibility of establishing favorable relationships with the society. This is vital for any business to undertake in order to make substantial profits in the long-run. However, the company seems to have done away with this ethical theory. Involving adverts that target children has come a long with critics from different sectors of the society. Based on this, many people will not trust the company in the future and might as well change preferences for their products. Contract theory is also relevant in this case study. The theory entails an agreement between people being served under similar systems (Lozano, 2001). Once a company initiates its operations, there is an implied contract between them and the society. A company is expected to uphold social responsibility towards the people at all times. The Joe Campbell advert was an indication of a breach of this implied contract. As a result, RJR is the source of any misfortune that might befall it.
The company would have withdrawn the advertisement once the society came against it. Coming in tussle with the society rubbished the company’s name in light of upholding favorable ethical standards.
Recommendations available for RJR are that it should not involve advertisement that have an essence of targeting children in the future. The Joe Campbell advert is very clear on its target market based on the cartoon personality used. Most children get intrigued by cartoons and might opt to try out what they are seeing. RJR should abandon this strategy since it would tarnish the company’s image. On aspects of morality, it is also clear that children of this age are mature enough to make their own decisions (Heyes, 1999). They try out anything that seems fascinating to them irrespective of the consequences.
There is also some bad blood that has developed between the company and the society in general. It is RJR’s responsibility of mending the relationship since it created it in the first place. Among the ways to do this is by developing social responsibility aspects towards the people. A favorable way would be getting involved with developmental projects that aim at helping the society. Participation in charitable activities would also help in this quest. The major advantage of this strategy is that if it works, trust is created (Kreske, 2008). RJR will be able to return to its normal business activities and maybe benefit even further. However, there might exist a disadvantage based on the damage that the company has already made. If it is severe, the strategy might take a long time before it brings the desired results.
AWB Case Study
The case study revolves around the sanctions that had been placed to Iraq during the First Gulf War. These sanctions were aimed at mitigating the power of the government so as to reduce its unlawful operations. The country had invaded Kuwait and succeeded in their quest. This resulted in outcries from several parts of the world and UN had to take an action. The case study attempts to show how the sanction towards the country failed to take effect. Based on the systems of governance used by UN, Iraq took advantage of the loopholes that presented themselves. Aspects of ethical behavior also restricted the UN from attaining its objectives. When the country received sanctions from operating with other countries, it meant that the economy would be affected to a great extent. Among the issues that arouse was reduction in living standards. Sadam Hussein took advantage of this occurrence. He used the aspect as a bargaining tool with the UN. To some extent, the government tried to portray a worse situation than it was in actual sense. The UN is responsible for the well being of all citizens regardless of their geographical location. For this reason, they have to do anything in their power so as to empower these people and enhance wellness. This was an ethical issue that prompted UN to negotiate with Iraq so that they adjust the terms of the sanctions. Inclusion of these terms made provided loopholes for the Iraq government to take advantage of the sanctions that were instituted towards the country.
Another issue that has surfaced is lack of corporation among the international entities involved. As UN tried to make its policies function, other stakeholders worked to derail them. Their involvement came in other ways that were not viable and ethical. Among them was involvement with bribery activities in an attempt to benefit from the current situation. The entities gave their short-term goals a priority without minding the effects it would bring to long-term reputation. Actions taken by the government of the respective entities after the occurrence of the scandals also warrant some consideration. This is because they critical is identifying the ethical dilemma that exists in the case.
The key stakeholders in the case study include the Iraq government, AWB, UN and Australian government. Iraq government is involved with going against the policies set forward between them and the UN. Initially, the country had been restricted to trade with any other country around the globe. The aspect brought a lot of misery to the well being of the society since it polarized the living conditions of the country. UN was faced with an ethical dilemma and had to restructure its policies in the process. It allowed the country to involve itself in international trade, but they would control all the funds. They were to take the initiative of distributing these funds so as to bring a favorable lifestyle to the people. Sadam Hussein took a stint approach during the negotiations hence clinching more control than it was intended. This created a challenge to UN in the control of their policies. The government was able to operate with more than 2000 entities around the globe in light of these policies. To some extent, UN is to blame for these occurrences since they were responsible in coining the policies. They should have devised other strategies to help protect their policies.
AWB on its part was faced with an ethical dilemma. They had the initiative of honoring the national treaty on the sanctions placed towards Iraq. At the same time, the company had an operational objective of making profits for sustenance. AWB was exporting 10% of its wheat to Iraq. As a result, emergence of these sanction acted as a threat to the company. There was a challenge as to which array to follow. The Iraq government would have terminated their contract if they did not comply with their offerings. Whatever was being provided to them was very lucrative. It meant that they would reduce their costs hence increasing the profit prospects. In the process they would have engaged in an illegal business since there was some form of bribery involved (Andrew, 2007). To them it came as an opportunity and they took. This was followed with consequences from the country’s government.
The actions taken by the stakeholders are supported by several ethical theories. Among them is the consequentialism theory used by the utilitarianism like Mills. It states that any action is appropriate if it brings about best outcomes (Charlesworth & Coicaud, 2010). For AWB, they went against the sanctions levied towards Iraq and initiated their own transactions. This resulted in gains in terms of profits in the short-term. Virtue theory also emanates from the actions of Iraq government. It states that an action is appropriate if that is what any other individual in the same capacity would have done (Katzman, Prados & McHugh, 2003). Sadam Hussein identified a weakness in the policies that were devised and took advantage of the situation. If any individual is being oppressed, and an opportunity of redemption arises, the most appropriate thing to do is taking advantage.
A recommendation for this case would be that UN needs to understand the nature of people that it is dealing with in any operation. This is because they help in realization of the objectives of the policies being implemented. In this case, it should have been more strict. Based on the nature of the policies that were being drafted, UN needed to be the one bearing more power and control. Failure of enhancing this prospect resulted in the manipulation of the system by the Iraq government (Botterill, 2012). For fulfillment purposes, the entity should have put its own spies in the government. They would have helped in leaking information on the hidden agendas within the government ranks. In a way, this appears as unethical based on the independence that such an institution requires. However, the situation at hand warranted such a practice. An action might not be ethical, but might be a favorable action given the scenario at hand. UN also needed to coin the consequences that would have engulfed other third parties in case of breaching the sanctions. This would have restricted companies like AWB from taking advantage of the situation. When the consequence is mild, businesses tend to fear since they want to remain in operation for a long period of time (Christoff, 2006). The aspect prompts them to corporate no matter how tempting the situation at hand might be.
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