Ethical Analysis of Company Q
Business ethics is defined as the choices and actions businesses make that reflect their values. Not only are businesses expected to perform in a manner that benefits their stakeholders and shareholders, there is now an expectation that businesses will support the communities in which they operate. Company Q is a small grocery store chain operating in a major metropolitan area. A recent analysis of its ethical culture shows there are areas that could use improvement.
Recently, the company decided to close several stores. These stores were located in areas of the city considered to be high crime and the stores consistently lost money. While this can be considered an ethical decision because it protects the profits of the company, many may not see it that way. Many may view this as an unethical decision because closing the stores affects the community in which they operated. The decision to close the two stores affects not just the company but supplies, contractors, and increases unemployment. The decision also affects the community because of lost taxes, which pay for community programs and improvements. Business must take into consideration all of these factors.
In addition to closing these stores, Company Q is also taking steps to retain consumers while increasing profits. The company has decided after many requests to begin carrying high margin organic items. This decision is beneficial to Company Q in two ways. First, the new organic items that are being stocked are considered high margin, which equals increase profits. Second, this keeps Company Q’s current customer base happy and shopping in its stores. Consumer retention is important to smaller companies. Consumers that are unsatisfied with the store’s selection are always in danger taking their business elsewhere.
While it appears that Company Q is fulfilling its responsibilities to share- and stakeholders, it is falling short in its social responsibilities to the communities in which it operates. A local food bank recently approached the company with a request for it to donate day old food items. Company Q decided not to donate to the food bank. Let’s examine the decision not to donate to the local charity. By refusing, the company may not be fulfilling its obligation to serve the community in which it operates. The expectation to support the local community is proportionate to the size of the business. Larger companies think globally, leaving smaller companies to support on a local level. Company Q is not currently fulfilling this obligation.
In order to determine whether Company Q’s decision was ethical and if not, how the company might fulfil its ethical obligation to the community, we must understand why it refused to donate to the food bank. The company said it declined because it feared employee theft. The way the company treats its employees affects future job applicants. Job seekers will not want to work for a company that believes employee theft is the norm. The company has a responsibility to its employees to teach them how to act in an ethical way. Improving the employee experience will improve the reputation of the company in the community and improve the applicant pool.
In examining Company Q’s situation, several suggestions come to mind. The first suggestion for the company would be to develop and implement a strong corporate governance program. Implementation of this program will current and future employees and strengthen management in stores. It will reduce the opportunity for employees to make unethical decisions and provide a common understanding of what is and isn’t permissible in the workplace. This program should include oversight, accountability and a system of control.
The second suggestion for Company Q is to develop a strong idea of corporate citizenship. While the company appears to be listening to its share- and stakeholders, it needs to develop a stronger philanthropic responsibilities to the communities in which it serves. The company is not obligated to donate food items to local food banks. Instead it can create a volunteer program for current employees to donate time at the local food bank or simply make cash donations to the food bank.
The final recommendation for Company Q would be to implement a system of internal audits. While the decision to close the two stores can be viewed as ethical, they were closed for reportedly due to the stores consistently losing money. Why were the stores losing money? Shoplifting? Employee theft? Supplier misconduct? The company would benefit from implementing an internal audit structure to help identify potential threats to profitability and heath. It would also help identify risky behaviors by employees and outside parties. The company can then analyze the results and come up with a solution that benefits both the community and the company.
The issues that Company Q faces are not unique in the business world. By implementing the suggestions above, the company can approve its reputation in the communities it operates, attract a new set of applicants, and benefit the communities it operates in. Hence, by implementing these suggestions, Company Q will be acting in a more ethical manner. That in turn should help its profitability. Thus, acting in a more ethical manner can increase the shareholders’ returns.