Business Ethics Activity 2 (Script)

Business is business, this is a famous phrase that means some

things are just the way they are. As simple as that. And it is true! Or
not at all… because on some cases, you’ve got to think twice.

In business, it is not all about profit or product but also, you must
consider that we are all people! And in this world, as the people, it is
our responsibility to be as good as we can be. That is why we cannot
just say “business is business” and do anything we want, but rather,
we must always think of the right path that we should take in order to
thrive.

Long story short, what I mean is that we should not forget about
business ethics.

What is Business Ethics?

Business ethics, also knowns as Corporate ethics, is a form of

professional ethics or applied ethics which deals with the problems
of moral nature in a business environment. It applies to the conduct
of an individual, the entire organization and all aspects of business
conduct. In simple terms, it is practicing morality while doing
business. This is shown on how we handle the business ethical issues
that arise as we go on with our business.

What is Ethical Issue?

Ethical Issues, in a business environment, may refer to a situation

where the evaluation of the morality of certain actions is deemed
necessary. Some ethical issues of concern in the modern business
markets include honesty, integrity, professional behavior,
harassment, and fraud.
 Certain ethical values are bound by laws. Often, businesses are
not bound by any ethical guidelines except those provided by the
law. In such cases, corporations try to make a profit by following to
the framework of the legal system and nothing more.

With this said, there are five biggest ethical issues facing
business:

1. Accounting

We all know that accounting is a crucial process for every

business. After all, this involves the processing of financial information.
On a negative side, “Cooking the books” and otherwise conducting
unethical accounting practices is a serious problem, especially in
publicly traded companies, that business faces inherently today.

2. Social Media

The 21st century is undeniably a world of Social Media, and

Social media is one of the best creations that helps the world to stay
connected and provide convenient ways of communication. More
importantly, social media has now become a means for business
wherein this has welcomed new ways of promotion of products up
to the interaction of the business and their respective components.
However, as much as it helps, there are also flaws that social media
brings upon business aspects. For an instance, the widespread
nature of social media has made it a factor in employee conduct
online and after hours. Is it ethical for companies to fire or otherwise
punish employees for what they post about? Are social media posts
counted as “free speech”? The line is complicated, but it is drawn
when an employee’s online activities are considered disloyal to the
employer, meaning that a Facebook post would go beyond
complaining about work and instead do something to reduce
business.

3. Harassment and Discrimination

This is on a much serious note of business ethical issues. Racial

discrimination, sexual harassment, wage inequality – are all costly
ethical issues that employers and employees encounter on a daily
basis across the world. According to a news release from the Equal
Employment Opportunity Commission (EEOC), there are several
types of discrimination including age, disability, equal pay, genetic
information, harassment, national origin, race, religion, retaliation,
pregnancy, sex and sexual harassment.

4. Health and Safety

Health and safety should be one of the top priorities in our

business ventures but some businesses tend to derive from it.
Unfortunately, the International Labour Organization (ILO) states that
7,397 people die every day from occupational accidents or work-
related diseases. This results in more than 2.7 million deaths per year.
Furthermore, physical harm isn’t the only safety issue to be aware of
because in 2019, an ILO report focused on rise of “psychosocial risks”
and work-related stress. These risks, which include factors like job
insecurity, high demands, effort-reward imbalance, and low
autonomy, have been associated with health-related behavioral
risks, including a sedentary lifestyle, heavy alcohol consumption,
increased cigarette smoking, and eating disorders. This a serious
ethical issue that is relevant in business industry as well.

5. Technology/Privacy
 Lastly, as our world continues to innovate every day, business
have also gain hand in terms of technology. Benefits aside, there are
also ethical issues at stake especially with privacy on a business
aspect. For example, with developments in technological security
capability, employers can now monitor their employees’ activity on
their computers and other company-provided electronic devices.
Electronic surveillance is supposed to ensure efficiency and
productivity, but when does it cross the line and become spying?
Companies can legally monitor your company email and internet
browser history. Although, employees should review the privacy
policy themselves from time to time, this still poses an ethical issue.

Now among those ethical issues, we are going to discuss two

particular issues to elaborate on how these ethical issues are faced
within the business world. I have prepared two stories as an example
of ethical issues there is about accounting and social media.

First Case: Accounting Fraud

Enron Scandal

One of the most infamous examples is the 2001 scandal that

enveloped American energy company Enron, which for years
inaccurately reported its financial statements, leading to one of the
biggest accounting fraud cases in the history.

Following a market research by Steffani Camero on 2019 as

reference, I will discuss to you the details regarding the Enron
Accounting Scandal.

Introduction to Enron Scandal

At its simplest, the Enron scandal is about fraud, the

complexities of deregulation and a system that rewards companies
for how they look on paper. Of course, it goes far deeper than that,
because it’s also a story about how millions of people lost their
savings by buying stock in a company that many deemed was too
big to fail. It’s also about how the watchers at the gate, including
accounting firms like Arthur Andersen, can be willfully complicit in
turning the other cheek to inflated numbers on balance books,
because greed is a mighty motivator.

At its height, Enron was America’s seventh-largest company.

Even now, people struggle to understand what Enron really did,
since they didn’t have a straight product to sell, like Apple. Enron
essentially created the way energy is traded on public markets.
There was no framework for this before Enron engineered one. What
happened next was their hubris got in the way, because if they
could trade something so intangible as energy, why not trade
everything?

Turns out that wasn’t such a great plan, because failures

began mounting.

What Caused the Enron Scandal?

In the 1980s, Wall Street rejoiced as deregulation (especially

surrounding energy) meant markets opened and became freer. This
allowed for all kinds of new, innovative trading for those who saw the
potential. By the 1990s, the "dot-com bubble" was growing wildly
with share values commonly being padded to wow and woo
investors.

If a company looked solid on paper, it performed well in the

market, which was where Enron got its juice. It was CEO Jeff Skilling
who decided to change Enron’s accounting approach from the
traditional historical cost accounting method to the mark-to-market
(MTM) method, and this changed everything, helping the company
to reach its heights.

MTM accounting is legitimately used by many companies on a

regular basis, but it’s easily misused by those looking for something to
hide, like Enron. As Investopedia explains, “The method can be
manipulated, since MTM is not based on 'actual' cost but on 'fair
value,' which is harder to pin down. Some believe MTM was the
beginning of the end for Enron as it essentially permitted the
organization to log estimated profits as actual profits.” Basically, this
method meant Enron could count projected long-term energy
contract earnings as current income, thus cooking their books, which
was one of the key Enron ethical issues.

Fallout from Enron

When all was done and dusted, the estimated losses from the
Enron scandal clocked in around $74 billion. Around 4,500 people
lost their jobs. Execs, however, scandalously cleaned out the coffers
in 2000, paying themselves bonuses as the company's collapse
loomed, leaving little to nothing for tens of thousands of investors
who lost billions.

Did Any Enron Executives Go to Jail?

Yes, several executives faced and were convicted of charges

of wire fraud and securities fraud in the Enron scandal. The biggest
names were Kenneth Lay, Jeffrey Skilling and Andrew Fastow who
held the highest position on the company at the time.

Enron Scandal as an Ethical Issue Insights

For me, some may look at the jail time served by some Enron
leaders as being the consequence of that scandal, but if you think
about it, others have already lost their retirement savings and saw
their entire lives transformed because they believed news headlines
about Enron being America’s “most innovative company” and
bought shares which was just a lie. Tens of billions of dollars were lost,
lives were altered, investor confidence shaken and laws changed,
all because a few executives let their greed get in the room when
doing the accounting process of a supposed legal business. The
question of whom is a company responsible? The public, the
investors, the employees, themselves?

It doesn’t matter because Enron failed them all.

It also comes down to the premise that just because something

is legal doesn’t mean it’s ethical. Sure, the MTM accounting method
is used in responsible, pragmatic ways daily, by all kinds of ethical
companies, but it was also used by the likes of Enron to dupe millions
of investors out of their life savings. That is why I think the complexities
of what was legal versus ethical is why Enron will remain a lesson in
business classes. And in my personal view, even marking this case as
an ethical issue is an understatement because the extent of
misconduct by the business owners have led to serious and negative
life-changing consequences to the victims. This case of accounting
fraud could never be changed and the damage has already been
inflicted to those who lost their hard-earned investments.

Questions (that I would like to be discussed further by teacher):

1. What advice may you give to an individual to avoid getting

involved or being a victim of accounting fraud like what happened
on the Enron scandal?
2. Do you think it is reasonable for the victims to demand double or
greater than the investments that have been illegally swindled from
them from the convicted company?

3. Speaking of ethics, do you think cases of accounting fraud are just

as heavy than those of health & safety and discrimination ethical
issues?

Second Case: Social Media Unethical Usage, Dishonesty, Fraud

Presentation

Yelp Scrubbing

Following a case study by Arthur W. Page in their Public

Relations Ethics page as reference, I will discuss the details regarding
the case of ethical issue of ‘Yelp scrubbing away bad reviews’.

Background

Throughout the early 2000s, customers began posting product,

company and media reviews to online websites for other users to
base purchase or interaction decisions. These online spaces, called
Third Party Review Sites (TPRS) allow users to (sometimes
anonymously) post reviews of their recent purchases, retail/service
experiences and interactions. Previous literature suggests that the
public is more likely to trust reviews on TPRS than traditional
advertising or public relations tactics because they are perceived as
honest, unbiased and truthful depictions of personal experiences.
This makes TPRS a powerful representation of an online brand,
company, or organization. This is also why in 2014, organizations that
attempted to manipulate, change, and edit their online reviews
were heavily criticized.
 The term “scrubbing” relates to an organization attempting to
“scrub” or remove negative reviews from its profile and replace
them with fake positive ones. This artificially raises an organization's
average rating and hides bad reviews from the public. Although
legal, the act of scrubbing is now seen as highly unethical and
questionable by public relations practitioners. Despite the bad
reputation of scrubbing, the world’s largest TPRS, Yelp, was accused
in 2014 of that exact practice by a group of San Francisco small
businesses.

The Problem

The small businesses claimed that Yelp unfairly approached

them demanding payment for electronic advertisements in
exchange for scrubbing its profile clean of bad reviews. They argued
in the San Francisco Federal Appeals Court that Yelp demanded the
small businesses buy expensive online advertisements to artificially
inflate the reviews on their online profiles. The group of small
businesses claimed that this tactic produced an environment of
unfair competition because larger businesses would be able to pay
for the service, and small businesses would lack the funds to do so.
Therefore, the larger business would have better control over its
online presence and reputation, creating an unfair advantage.

Courses of Actions and Consequences

Yelp flatly denied scrubbing was occurring on its site, calling the
small businesses a part of “fringe commenters” who accuse the
company of accepting money to remove bad reviews. In its public
statement, Yelp accused this “fringe” group of “having an axe to
grind” and implying these were unfounded and unethical
accusations.
 The lawsuit by the San Francisco small businesses was quickly
denied in court, and the ruling in favor of Yelp called the tactic
“legitimate advertising services.” Although the lawsuit approved of
scrubbing as a practice, the public’s reaction when they found out
Yelp was scrubbing reviews suggested an ethical boundary was
violated with this “legitimate” advertising service.

The San Francisco small businesses created a new platform,

Yelp-Sucks.com. In response, the public took notice and began to
complain and contribute their own stories of reviews being removed
from the site. Users added testimonials and shared the website with a
larger audience, accelerating the spread of information about
Yelp’s scrubbing. Again, although Yelp denied scrubbing was taking
place, the user data on Yelp-Sucks.com provided evidence to the
contrary and challenged Yelp’s own reputation.

As Yelp-Sucks.com gained popularity and news of scrubbing

spread, Yelp continued to deny the accusations, referencing the site
as “fringe” and implying the small businesses were on a mission to
get even with Yelp after they lost the lawsuit. The public, who
continued to voice outrage on Yelp-Sucks.com gained momentum
and lead a mass exodus from the site by hundreds of users who
deleted their accounts.

Although Yelp continued to deny scrubbing was taking place,

in early 2015, Yelp deleted thousands of reviews very publicly from
Dr. Walter J. Palmer (a Minnesota dentist) who was accused of
hunting and killing a famous lion in a protected Zimbabwe park.
Anti-hunting advocates posted angry reviews of Palmer to Yelp,
however the platform quickly removed them all stating they were
against the “terms and service agreement” of the site. As the issue
gained salience and news coverage, more attention was paid to
Yelp’s removal of the protest reviews and history with scrubbing.

In an effort to address the scrubbing crisis, Yelp introduced a

“pop-up” notification for profiles that were suspected of scrubbing or
paying for fake reviews. Using an algorithm based on the analysis of
thousands of fake reviews, Yelp announced it was now launching
this new initiative so that users would be more aware when looking
at honest versus scrubbed profiles. The pop-up notifications were
framed as a service to the public and a way for the platform to
protect the integrity of its information.

Although Yelp still denies scrubbing and has introduced

initiatives to prevent unethical behavior on its platform, many users
and companies still claim that unethical practices are ongoing. In
2014, a class action lawsuit was filed against Yelp that identified
2,000 companies who filed complaints with the Federal Trade
Commission. These complaints ranged from unfair competition
violations to accusations of false advertising. Rather than deny or
directly address these accusations, Yelp adopted a policy of silence,
and instead promoted its “pop-up” notification initiative.

Yelp as an Ethical Issue Insights

In my opinion, the fact the Yelp, despite its many lawsuits and
alleged deeds of dishonesty in their business practice, is still rampant
in the industry today is unfortunate and worrying. Although the case
presents a clear unethical issue, Yelp was able to cover it up and
those struggling individuals who wanted this to be corrected are
disregarded even with legal pursuits. Yelp is an excellent business,
after all, it provides a convenient access to reviews and promotion
of products for the people. But the problem is still there, no matter
where you look. It is unethical to change the reviews according to
subjective intentions because it is nothing but dishonesty or can be
considered fraud. Technically, they are fooling people and
committing fraud by manipulating what is presented with the viewers
or customers. Reviews are subjective, may it be good or bad, it is
equally supposed to be posted because that is the main purpose of
Yelp as business which is to provide a platform for personal reviews. It
is unjust to delete, change, or gaslight the information or even the
identities on the site just because it deems a ‘bad’ review for certain
products. I understand that businesses must maintain good image as
much as possible but it is unfair for customers and even small
businesses to take away their freedom of speech and cheat product
reviews for their own good. But on the other hand, giving the benefit
of the doubt to Yelp, with all these issues going around even to this
day, I think it is reasonable to make a clear and better solution to
assure the people that they are not really committing unethical ways
of ‘scrubbing bad reviews’ or anything. The pop-up solution is clearly
not working and is just raising more suspicion so I think they must
really account for the issue now or it will just get worse.

Questions (that I would like to be discussed further by teacher):

1. What are the possible ethical ways to deal with ‘bad reviews’ in
general?

2. Speaking in ethics, bad reviews are technically bad in a way,

considering how it is ethical to be considerate and good as much as
possible. But do you think it is still reasonable to profess it claiming as
your genuine personal opinion or more like a critic on the product?

3. Are social media users to be blamed if ethical issues arise upon

their discreet of usage just like the bad reviews in Yelp?
4. What actions, legal or not, must be done to once and for all clear
this ethical issue of Yelp scrubbing?