Ethical dilemmas in consulting for a tobacco company

Social and Ethical Issues

Short Case

Consulting for a Tobacco Company

It would be difficult for me to consult for a tobacco company. I would have to seriously weigh the pros and cons of the assignment. One positive aspect is that it is only a short-term assignment. Thus if I did accept the assignment, it would only be for a short duration with a defined end point. Another advantage is that I would have some control over the decisions that the company made and I could recommend that ethics be applied in each situation. Although the sale of tobacco products is harmful to health in general, there are situations in which it can be relatively less harmful than it would otherwise be.

For example, there can be decisions made to use additives that are safer than others. There are also decisions to be made about marketing and distribution that could help keep the products away from young and underage products. For example, many tobacco products have been criticized over the years for producing marketing materials that have said to appeal to younger customers. If I were consulting for a company I would strongly recommend that any marketing material be ethically produced and try to focus only on the specified target market.

If I did not accept the position I would have no opportunity to try to influence the company to make its operations a little "less bad." Any changes to the company internally to make it operate a little more ethically would be missed by me because I refused to take the assignment. It might be good to have a consultant on the project who does not approve of smoking for that very reason -- so they can ensure that the company is operating in the most ethical manner as possible given their industry and their products.

However, at the same time, the organization is undoubtedly focused on profitability and not the well-being of a broader set of stakeholders given the nature of their products and the industry. Therefore, given my opposition to smoking it could also be the case that I am definitely unqualified for the position. I would not be able to make recommendations to the company to grow their market size or market share with my predisposition to smoking and as a result I could be a failure in this consulting position in terms of the end goals. It would be difficult for me to maintain a sense of professionalism in such a situation.

The case gives a limited amount of information about the consulting project and I think before I could make a decision either way I would need to find out more. I think the first step would be to schedule a meeting with the CEO to talk openly about my dilemma. It might be the case that the CEO is understanding and assigns someone else to the project. Or possibly they can provide more information about it that can clear up some of the issues that rest within my internal dilemma. For example, if I would only assist with some of the details of the merger and not anyway be contributing to the promotion of smoking then maybe it wouldn't be as challenging of an ethical position. Whatever the case maybe, I think that talking openly about some of my perceived challenges would be best not only for myself, but for the organization in general.

Conflict of Interest

Conflict Overview

The conflict described by the short case is one that is becoming increasingly common in the business world. A large manufacture of healthcare products acquires a smaller company that operates in a different space within the same industry. The smaller company has built a competitive advantage and a reputation for offering objective advice to its customers. However, many of the customers worry that after the acquisition that it could have a new mission that would sway its previously held levels of objectivity in its recommendations. The two companies' combined will have to reevaluate their positions in the marketplaces after the acquisition and make several decisions about how the new combined organization will be organized. This analysis will point out some of the possible strategies that could be followed as well as some of the pros and cons that might be apparent in each strategy.

The Little Company Operates Independently

Another option would be to let the little company operate completely independently of the Big Company. This would mean that the Big Company would retain ownership but have any say in the decision making of the products that the Little Company would offer to its wholesale clients. The Little Company would be allowed to operate as it always has and its new financial stakeholders would profit from these operations without any say in the specifics of the operations.

However, even if the Little Company was allowed to operate as a completely independent agency it would still face many problems. One would be that its employees would feel an obligation to promote the Big Company's products even if were allowed to operate completely independently. For example, if the employees new that they were owned by the Big Company they may automatically feel the need to try to promote the company's products because it would be indirectly in their best financial interest as well.

Another issue is that even if the Little Company was allowed to be completely independent that there would still be a level of skepticism from its clients that could cost some of their business. If the Little Company wholesaled some of the Big Companies products in this situation then there clients would wonder if the products were actually good or if they were doing it for other reasons. Therefore, even with a fully independent company there would still be many challenges present.

A Hybrid Structure

The best strategy would likely be to create some kind of hybrid structure in which the Little Company was given some autonomy but still collaborated with the Big Company. To do this ethically and responsibly, the companies would have to develop a well-defined ethical system and make this system fully transparent to all the stakeholders in both companies. Such an ethical system, if it were transparent and closely followed, could alleviate many of the concerns of different sets of stakeholders as well as guide the operations of both organizations under the new combined organization.

Part of the advantage of an acquisition of companies is that it can be done strategically to create synergies that create value for different sets of stakeholders. For example, given the current pressures in the market that the Big Company is facing, acquiring the Little Company will allow them to diversify their product mix to reduce some of the risks that it is currently facing. The Little Company will also benefit from the Big Company's resources and assets which can create new quantities of scale which can reduce the prices to their customers and create value. However, to achieve these potential synergies, the companies will have to redefine their relationships with all the stakeholders in an ethical and transparent manner.

The Gift

The short case, The Gift, deals with a gift given as a thank you for a successful business deal that involves an international finance of a new shipping fleet for a company in Greece. The company pays for a trip to christen the new ships as well as mails a diamond bracelet to your wife after the trip.

Case Questions

1. What kind of ethical issue is this?

The Gift represents somewhat of a complex ethical issue because it is not necessarily bribery or corruption. The gift was given after the deal was completed and did not influence the decision making process for the deal. Therefore, gifts such as this are not really a form of corruption and in the Greek culture is undoubtedly an innocent way to show appreciation for the business deal. It could be argued that it is against the fiduciary principle; especially for the Greek company. If the gift was not reported it could also violate transparency codes. Furthermore it could also be argued that the gift might violate the fairness principle since it is something of an unequal distribution of resources. The case does not really hit anyone ethical principle head on however and is something of a grey area that would have to be weighed against internal procedures and policies. For example, if the corporate policy did not allow gifts then it could be a violation of the internal policy.

2. Why would it be against corporate policy to accept such a gift? Do you agree with the policy? Why or why not?

Many corporate policies do not allow gifts to be given or received. This policy would reduce the likelihood of bribery and/or corruption because many might use the gift or the expectation of receiving a gift to influence behaviors. For example, employees could ask for a gift in exchange for some preferential treatment in a business transaction. In this case if the MNC employee said that he would give the Greek company certain terms if they would give his wife a diamond necklace then that would represent a form of bribery and corruption. Even though that was probably not the case, if gifts are being given then it increases the likelihood that some unethical deals could be made.

3. Put yourself in the "shoes" of each of the parties. How might they think about the issue?

The Greek individuals probably feel like the giving of gifts is a customary behavior that they are expected to do. The Greek individuals are grateful that they were able to obtain financing for their project and in their culture it is probably customary to show appreciation by giving gifts. The gift was not directly given to the MNC's employee but to his wife instead. This was probably an effort to show appreciation but to also uphold their moral perceptions of bribery and corruption. By giving the gift to the wife, they can show their appreciation without it being construed as a bribe or a form of corruption by others (from their perspective).

However, in most Western cultures, giving large gifts to business acquaintances is generally frowned upon. This behavior most likely stems from a strong dedication in these cultures to maintaining a perceived ethical position that cannot be construed as being corrupt or unfair. When gifts are given then some could question the motives for this behavior and create skepticism for one's ethical character. To avoid this skepticism, it is best just not to give gifts at all and maintain a professional appearance at all times.

4. Imagine that you are in the corporate vice president in charge of business ethics and conduct for your firm. Would you be willing to change this policy? Why or why not?

If I were the corporate vice president of business ethics for a corporation I think I would consider changing the gift policy but placing some restrictions upon it. Gifts are one way to build stronger relationships which can help businesses grow and create strong partnerships. For example, if someone that you have a professional relationship with that has grown over many years has a sick spouse, then it would be nice to send flowers or some small gift as a show of kindness. I do not believe that this would constitute an unethical action and would represent a kind gesture.

There is obviously the potential for the use of gifts to be taken advantage of and be used for unethical purposes and corruption. However, limitations on gift giving could be instituted to prevent such occurrences. For example, all gifts would have to be reported and documented so that they can have a level of transparency and accountability associated with them. There should also be limitations placed on the value of gifts. For example, gifts should not exceed one hundred dollars in value. If they exceeded this amount then there could be a special approval procedure needed for a gift to be given.

In the case the diamond necklace was likely an expensive gift. I think smaller gifts are more appropriate. Small gifts can allow for appreciation to be shown without any of the risks of appearing unethical or wasting stakeholder resources by giving expensive gifts. Thus I think gift giving should be allowed by company leaders and representatives with some regulations to guide their usage and a procedure to ensure accountability. However, I think valuable gift giving should be prohibited even in different cultures where it is customary. Even in these cases, small gifts can be given instead as well as an explanation of the company's policy and regulations. This would allow appreciation to be shown but in a responsible manner.