Business ethics principles and applications

Business Ethics

MG Rover Case Study

The most important stakeholders that were affected by MG Rover's situation are represented by both internal and external parties. The company's internal stakeholders include: employees, senior managers, owners and shareholders. External stakeholders include: the government, customers, the trade union, the local community in case.

The employees are the most affected stakeholder category. They are interested in the rates of pay and in their jobs' security. In return, they contribute as supporters to building a successful company, to maintain the quality standards of the company's products, and to work towards achieving the goals and objectives established by the company's managers and owners.

Senior managers are another internal stakeholder category that is directly and significantly affected by the company's situation. Their main interests refer to reaching performance standards, meeting the financial targets imposed by the company's owners or shareholders, and leading the company on a developing trajectory.

The company's owners and shareholders are the company's stakeholders with the highest financial stake. They can be positively affected when the company is experiencing growth and development times, but they also carry the greatest financial responsibility when the company is suffering financial losses. Their main interest consists in obtaining the highest profit, in increasing the company's performance, and in establishing the direction that must be followed by the company.

The most important external stakeholder in this case is represented by the government. The UK government's main interests refer to the taxes that be collected. The main responsibilities of the government refer to ensuring a legislative framework that contributes to the company's well-functioning, providing benefits for the state at the same time, and to maintaining a low unemployment rate in the region in case, which was not achieved for MG Rover's employees.

Customers also have important stakes in the well-functioning of a company like MG Rover. They are mostly interested in the quality of the products they purchase, in paying a price as low as possible for that quality, in receiving customer care, and in being treated ethically.

The trade union of the workers at MG Rover is mainly interested in ensuring that workers benefit from proper working conditions, and that the legal dimension of their activity is respected by the company.

The local community has an indirect, but important stake in the activity of MG Rover. Its interests refer to the situation of jobs in the region, to the environmental matters that affect the community, and to the company's involvement in all kinds of actions with social and economic effects.

2. According to Carroll, the basis of the corporate social responsibility pyramid is represented by economic responsibilities (Carroll, 1991). In other words, the main responsibility of the company is to generate and to maximize profit. This situation was portrayed by MG Rover, but in an unsuccessful manner. Such an attitude follows the direction described by the shareholder theory, which states that the main purpose of the organization consists in orienting the company's efforts only towards achieving the highest profit possible (Pichet, 2008). Even so, MG Rover collapsed, all the parties involved not being able to help the company survive.

Given the high number of employees at MG Rover at the impact the company has on the local community, an approach based on the stakeholder theory would have been more suitable (Smith, 2003). Both the government and the company failed to ensure that employees suffer as least as possible for the company's difficulties. This means that ethical responsibilities towards employees were not put into practice. Although Carroll rates ethical responsibilities on the third line of the CSR pyramid, it is not appropriate to rate economic, legal, ethical, and philanthropic responsibilities with different importance. Each of them should be treated with the same importance, developing a strategy that manages to address each type of responsibility. Carroll's view on CSR, mainly referring to the pyramid he developed, is considered by some as a limited approach (Visser, 2005).

3. In the MG Rover case, it is obvious that the government was surpassed by the situation and by the private players involved in this business. The government was unable to help the company maintain its activity and most of its employees, and this was admitted by the government's officials. It seems that Asian manufacturers had more to say in the MG Rover matter than the UK government. This is a proof of the government's decreased power or competency, and of the growing power of multinational and transnational companies, their financial size and ability to influence sectors of a country's economy accounting for their international power.

4. It is difficult to point fingers at one direction only when it comes to the job losses at MG Rover. It was a combination of factors that led to a complicated situation that the parties involved failed to resolve. For example, the market for the company's products was in a period of decline for too long, making it more difficult to recover. This situation automatically leads to reducing costs, which is most of the times achieved by job cuts.

Furthermore, the company's top managers failed to implement a successful strategy that should have managed to reduce costs and to increase production efficiency. With all the company's efforts, production did not become more efficient and costs were not reduced. At the same time, competitors managed to achieve such objectives, which means the strategy in the case of MG Rover was not a suitable one for the company.