Principle of Management Case Chapter 6

Chap 6
LO5: responsibility and ethics issues in today’s world

There are 3 issues that today’s manager have to face with: managing ethical
lapses and social irresponsibility, social entrepreneurship, and promoting positive
change.
Let begin with managing ethical lapses and social irresponsibility. It’s not too far –
fetched to say that organizations may have difficulty upholding high ethical
standards when their future employees so readily and accept unethical behavior.
What can managers do? Two actions seem particularly important: ethical
leadership and protecting those who report wrongdoing.
Next, social entrepreneurship is an individual or organization who seeks out
opportunities to improve society by using practical, innovative, and sustainable
approaches.
Finally, business promoting positive social change, businesses can create
activities that promote positive social change in couple way: through corporate
philanthropy and through employee volunteering efforts.
Let move to case 1: a novel wellness culture.
Question 6 – 14: how can Technogym balance being social responsible and focus
on profits?
- Technogym can balance being social responsible and being focused on profits
by getting individual investors to support its causes and maintain a good
business model. Being social responsible cuts costs and makes processes less
dangerous or harmful to the environment or people in the company. They
have to allocate a portion of their profits to donate shows and eyewear and
they have promoted their social responsibility to attract more customers.
Question 6 – 15: would you describe Nerio Alessandri’ s approach as social
obligation, social responsiveness, or social responsibility?
- Nerio Alessandri is following a social responsibility approach. His main
intentions is to convince people and organizations of the benefits associated
with regular physical activities for personal health and well – being as well as
for organizational absenteeism and productivity.
Question 6 – 16: how can a manager emphasize genuineness of corporate social
responsibility and activities in society?
- Students should reflect on effective managerial interventions that can range
from developing appropriate communication to the use of political skills to
convince consumers of the genuineness of a company’s intentions. Students
should look at modern social networks such as Twitter and Facebook where
interactions with customers allow the company to make clear the motivations
behind its corporate social responsibility initiatives.
Question 6 -17: do you think the Wellness Foundation can boost Teachnogym’s
turnover? Why or why not?
- Students might have different opinions on this issue. The differences would
depend on whether they trust or distrust the company's intentions. However,
the idea that social responsibility and ethical behavior are beneficial for a
company’s turnover is at the core of the entire social responsibility discourse.
Hence, students should search for other similar examples. For example, the
initiatives by Microsoft Corporation’s founder Bill Gates and his wife Melinda
Gates.
The final part of chapter 6 is case 2: lessons from Lehman brothers: will we ever
learn?
Question 6 – 18: describe the situation at Lehman brothers from an ethics
perspective.
- Lehman Brothers had a culture problem, as they incentivized there employees
to take excessive risks. Their culture fostered significant risk taking. They use
to reward employees with lots of money for taking risks. Individuals who
made questionable deals were treated as heroes; on the other hand anyone
who questioned decisions was often ignored or overruled. They use to ignore
risk just hoping for outlandish profits, meaning it felt more like a casino then
an investment bank. They ignored basic regulatory rules which created
financial danger. Basic rules are the way companies grow and expand. Their
desire to make money at all cost was more important than following basic
ethical values.
Question 6 – 19: what was the culture at Lehman brother like? How did this
culture contribute to the company’s downfall?
- The culture at Lehman Brothers was to take risks at all costs. When
Transactions were presented to them they ignored the warning signals costing
them. This eventually led to shady deals which eventually lead to the
company’s downfall. Repo 105 is a good example of how Lehman misused this
device to get some $50 billion of undesirable assets of its balance sheet at the
end of the first and second quarter of 2008, instead of selling those assets at a
loss. They continued to take lots of risks which caused them to lose a lot of
money, there by bringing down there previously good name. They did tax
deals like Repo 105 and didn’t care if it was legal or not.
Question 6 – 20: What role did Lehman’s executives play in the company’s
collapse? Were they being responsible and ethical? Discuss.
- They were very stubborn, and displayed very bad conduct and poor judgment.
Valuka’s report was highly critical of Lehman’s executives who should have
done more, done better. He pointed out that the executives made the
company’s problem worse by their conduct, which ranged from “serious but
nonculpable errors of business judgment to actionable balance sheet
manipulation.
Question 6 – 21: could anything have been done differently at Lehman Brothers
to prevent what happened? Explain.
- There are many things that could have done to prevent it. If there were top
managers that actually cared about the company beside than themselves.
Building a better,proper culture and reward structure.
Question 6 – 22: after all the public uproar over Enron and then the passage of
the Sarbanes Oxley Act to protect shareholders, why do you think we still
continue to see these types of situations? Is it unreasonable to expect that
business can and should act ethically?
- No. Many companies promote positive working environments. The company’s
responsibility is to promote and act ethically enabling employees to follow
suit. Managers need to create and encourage a culture where bad news are
heard and acted on before it’s too late. If the company focuses on ethical
leadership, the company will be ethical and profitable.

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Chap 6

LO5: responsibility and ethics issues in today’s world

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