business ethics during a merger

It has been a pleasure working with Tom Tramlin, the CEO of UWEAR and our new colleagues at PALEDENIM. During the merger process, we have had the opportunity to get to know each other better. This has allowed us to create a new Code of Conduct for all employees after the merger.

A Code of Conduct is designed to create and maintain an ethical organizational culture. Standardizing organizational behavior in a Code of Conduct helps to create social norms that govern business operations, which will tremendously help smooth out the kinks of the merger process. The merger is occurring between one larger and one smaller company, and a Code of Conduct will help to establish some ground rules for the new company culture. The following situations are covered in the Code of Conduct, based on my observations.

Situation 1: Conducting Business on Neutral Ground

Joe Smith achieved the tremendously lucrative contract with the Peninsula Hotel chain. This contract was earned legitimately and without concern related to conflict of interest. Joe admits that he organized and facilitated the contract by underbidding competitors by about $5 per uniform. There is no problem with Joe's methods of conducting business.

While it is understandable that Joe Smith would have lunched with Bill Bateman, the CEO of the Peninsula Hotel, on the Peninsula premises at first, conducting all future meetings there will raise questions and create at least the impression of conflict of interest. Meeting on neutral ground is preferable for several reasons. First, meeting on neutral ground ensures that there will be no undue influence on any parties in the business meeting. Second, meeting on neutral ground means that the salesperson is not receiving perks in the form of free drinks and food, which could unduly influence the business transactions.

Reporting and investigative measures include alerting the parties involved, and bringing the matter to the attention of the Ethics Committee. Punitive measures begin with one warning. After the warning, the individual(s) who violate the policy will be subject to discipline at the discretion of human resources. Further violations will result in termination.

Situation 2: Receiving Gifts

It is understandable that gifts are a natural part of human interactions. We want to encourage long-term and healthy business relationships. Gifts are not necessarily problematic. However, there do need to be measures in place for investigating and reporting situations in which gifts are no longer gifts but bribes. Employees should not be basing their business decisions on receiving gifts. When gifts are less than $150, then they may be considered natural gifts and not problematic. After this amount -- as with the case of wine that Bill gave to Joe -- an ethical violation has occurred.

Investigation into potential bribes can be difficult but requires the use of an anonymous tip system in which employees are encouraged to report any witnessed bribe or conflict of interest. The first time a violation has been committed, the person will receive a warning. After the second incidence, the person will not receive their annual bonus. However, the third incident will result in termination.

Situation 3: Organizational Structure

The merger will be successful if there is greater uniformity in the organizational culture and structure. Therefore, the PELEDENIM model will be adopted, in which each employee works more as part of a team. A flattened organizational culture will help increase ethical accountability. Each employee will feel more empowered to speak up, and can do so in the spirit of helping the whole company grow. Instead of being intimidated by an organizational hierarchy, the employees will feel like they are part of a democratic decision-making process and an ethical team.

References

"Code of Ethics and Business Conduct," (2014). Retrieved online: https://www.shrm.org/resourcesandtools/tools-and-samples/policies/pages/cms_014093.aspx

Problem A: Ethical Dilemma.

Problem B: Regulatory Compliance