Ethics in the business world refer to the moral principles that regulate how business activities are conducted in the marketplace. Upholding ethical behaviours and practices within a business entity is very essential in promoting good relations between the business and its customers. Ethical practices can be practised within different sectors in a business unit. The success of a business generally relies on ethical principles upheld by its management. Many companies and business organizations in the United States and the entire world have incurred great loses resulting from unethical behaviours and practices. Companies and business organizations depend on customers to purchase their goods and services. The purchasing process is sensitive to any company or business organization because it determines customer retention. Ethics determine the type of relationship that a company will have with its surrounding community, as well as the profitability of its operations. This paper examines different purchasing ethical issues in the United States and in other global markets. The paper analyses different purchasing ethical issues, how they happened, and counter actions to the purchasing ethical issues.
Fraud
Fraud in the business world entails a planned deception act over a customer for personal or organization profit gain. Fraud in most cases happens when customers are purchasing goods or services and it is unethical practice which deprives a customer of his or her rightful gains from a business transaction. An instance of fraud occurred in New York where multiple oil companies were involved in unethical business with their unsuspecting customers. According to Ax (2015), the group of nine oil companies and 44 individuals would charge more money to their customers for fuel that was never delivered. The companies and the group of individuals used rigged trucks in a process known as ‘shorting’ where the unsuspecting customers would pay more than the amount of fuel they received from the companies (Ax, 2015). Through this process, the group of nine companies namely, 4th Avenue Transport, Enterprise Transportation, F&S Distribution, G&D Heating Oil, G&D Petroleum Transportation, Express Petroleum, Casanova Fuel Oil, All-Boro Transportation, and Century Star fuel managed to cheat unsuspecting customers over tens of millions of dollars over a period of more than a decade.
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The whole fraud business process involved company executives and owners, dispatchers and truck drivers (Ax, 2015). The truck drivers would in some instances deliver air instead of fuel by using a magnet to coax their customers. In a different indictment, drivers would install a bypass valve which would redirect some fuel back into the tank as they emptied the fuel to the destined customers (Ax, 2015). Following the incident, several facilities like schools, hospitals and offices suffered unexpected power shortages over the one decade that the fraud business occurred. Several facilities also recorded lose in their operations as much of their revenue was directed to purchasing more and more fuel. This procurement fraud process would have been controlled had the destined customers raised an alarm on overspending in fuel purchase earlier. The responsible bodies for controlling procurement fraud in the United States became aware of the fraud practice after a decade. A lot of money had already been lost and huge losses incurred in businesses. Had the affected customers raised an alarm earlier, then the responsible procurement fraud detection bodies in the United States would have unravelled the mystery and prevented losses on fuel purchasing.
A procurement fraud taking over a decade to be detected must have been well planned and executed skilfully. However, it was heartless and selfish for the nine companies and 44 individuals to partner in a fraud business which cost different facilities millions of dollars. As a C.E.O of any of the nine companies, I would have resigned from my position prior to hinting the procurement fraud practices to the investigative police departments. A C.E.O of a company is compelled by ethical principles to remain truthful and transparent of a company’s operations. A C.E.O is made to uphold ethical practices within a company or an organization and should shun any practices that might interfere with the company’s ethical practices and standards. Stepping down as a C.E.O and calling for investigation would have saved several stakeholders of unnecessary losses realized from unethical business transactions. I would have gone against the wishes of my fellow C.E.Os of the other companies to save multiple stakeholders and losses realized. Incorporating the investigative police departments would have unveiled the fraud procurement processes within the fuel industries.
Price Gouging
Price gouging refers to the act of spiking the prices of goods and services in the market and taking advantage of being sole services or goods provider in the market. The act of price gouging is unethical because customers are forced to purchase goods and services at higher prices than they are used to. Turing Pharmaceuticals in 2015 spiked prices of a drug relied upon to treat life-threatening parasitic infections (Pollack, 2015). Turing Pharmaceuticals acquired the drug, known as Daraprim, in august 2015. Immediately, Turing Pharmaceuticals hiked the price of the drug from $13.50 to $750, a move which caught many customers unawares. This move by Turing Pharmaceuticals rendered many patients unable to purchase the drug because of the spiked prices. Many infectious diseases analysts questioned the sudden price increase on Daraprim, wondering whether there were modifications made on the drug to qualify it for the high prices induced by Turing Pharmaceuticals.
According to Pollack (2015), the HIV Medicine Association and the Infectious Diseases Society of America both condemned the price hike on Daraprim claiming that most patients will be unable to purchase the drug and that the price hike act was unjustifiable within the American patient population (Pollack, 2015). The perception of upholding ethics in business according to Sroka and Lőrinczy (2015), organizations should abide to ethical practices and not taking advantage over unsuspecting customers (Sroka & Lőrinczy, 2015). The act by Turing Pharmaceuticals was unethical in that the company took advantage of being sole suppliers of the drug and increasing the price of the drug. Ethical practices in business should ensure that all parties’ needs involved in the business transactions are fulfilled. Patients who were used to buying a drug at a price of $13.50 then overnight they are required to buy at $750 was definitely overwhelming to many. Turing Pharmaceuticals did not exercise ethics in their business. Turing Pharmaceuticals violated purchasing ethics and subjected their customers to suffering and financial constraints.
Martin Shkreli, who is the founder of Turing Pharmaceuticals and the chief executive officer, initiated the price hike on Daraprim despite of being aware of the adverse effects this would have on patients who lived on the drug (Pollack, 2015). Had I been the C.E.O of Turing Pharmaceuticals, I would have first considered the effects that spiking the price of Daraprim would have on patients who live on the drug. First, I would have widely broadcasted on the intended price spike of Draprim to make it known to as many citizens as possible. Martin Shkreli did not first consider broadcasting the planned price spike of Daraprim but simply did it overnight (Pollack, 2015). Secondly, I would have considered a reasonable price hike which would not become a burden to the patients and customers of Daraprim. Raising the price of Daraprim to an attainable price by normal patients would have promoted ethics with regard to purchasing the drug and not violating it as Martin Shkreli did.
Coercion
Coercion is a broad term which refers to dishonest and fraudulent actions mostly perpetuated by those in power get a business contract or tender. In this context coercion will be used in the aspect of companies or organizations purchasing contracts to transact business operations in a certain business environment. Coercion with regard to purchasing is unethical and does not promote ethical business practices within a business environment. In 2008, Siemens AG which is a leading engineering company in the whole of Europe pleaded guilty to have participated in bribing different government officials globally to win contracts in their countries (Meagher & Fader, 2008). The coercion actions by Siemens AG were against the U.S. Foreign Corrupt Practices Act which prohibits any acts of bribery and corruption in the business world. The U.S. Foreign Corrupt Practices Act is founded on ethical business practices and does not give room for business companies to promote unethical practices in their operations.
Another company that tolerated coercion in winning contracts in other business markets is the Alcatel Lucent SA which is based in France. Alcatel Lucent SA also admitted to have bribed different government officials in Latin America and Asia to win contracts and business tenders in the markets (Pelofsky, 2010). The telecommunications company has been accused of spending millions of dollars to win business contracts in Honduras, Malaysia, Costa Rica, and Taiwan. The company allegedly paid government officials in these countries and coaxed them to awarding business contracts to them despite of them being contested for by multiple telecommunication companies globally. In the cases of Siemens AG and Alcatel Lucent SA, the two companies acted as customers to the highly contested business contracts. The business contracts issuers, who had several choices to select on for the business contracts, opted to accept bribery from the two companies which violated ethics in purchasing.
Government officials in the affected countries ought to have relied on merit in awarding the business countries. The government officials did not promote purchasing ethics as Siemens AG and Alcatel Lucent SA took advantage of lesser companies by digging deep into their pockets win interest from the government officials. Giving money prior to purchasing a contract is one form of corruption and is against purchasing ethics in the business world. Had I been a C.E.O in any of these companies and fully trained and acquainted on purchasing ethics in business, I would have let transparency in business take its course. As a C.E.O I ought to give in to full practice of ethics in business. I would not have relied on coercion to win business tenders and contracts from the government officials. Promoting corruption within the business environment has negative impacts in business operations. Businesses and organizations are unable to thrive in environments where purchasing ethics in terms of tenders and contracts are not upheld. The negative impacts are more than the benefits that can be realized from such practices, and as a C.E.O I would completely shun coercion practices in contracts and tender purchasing.
Backdoor Selling
Backdoor selling in this context refers to the action of a wholesaler selling goods or services to the end user, ignoring the role of the retailers. The action of wholesalers selling goods and services directly to end users is a form of purchasing ethics violations towards the retailers. In the real business world according to Wittmaekers (2017), supplier representatives will evade the procurement process to sell goods and services directly to customers then go ahead to request the customer to formulate a purchase order to cater for the inevitable invoice stage (Wittmaekers, 2017). As Wittmaekers further notes, this act by suppliers is unethical because it violates the purchasing ethics applied in the business world. Backdoor selling has negative impacts on retailers who act as the intermediaries between suppliers and final consumers. The retailers suffer negatively as they are unable to realize the profits that they should otherwise have realized had the suppliers not breached protocol. It is unethical practice which creates unfair competition in the marketplace and poses danger to the existence of the retailers in the marketplace.
Backdoor selling can be viewed as a form of greed where the supplier or wholesaler wants to earn more at the suffering of the retailers. Retailers primarily depend on the suppliers and wholesalers to get goods and products to trade on in the marketplace. The retailers understand their markets to fine details and when the suppliers and wholesalers venture into direct contact with final consumers then their business operations in the marketplace are threatened. The suppliers and wholesalers will definitely sell the goods and products at lower prices than the retailers would. Therefore, the chances of the suppliers and wholesalers winning the final customers to their side are high. Any direct business conduct between suppliers or wholesalers with final consumers is against purchasing ethics within the business market. It is therefore an act which should highly be discouraged within the market place for the benefit of promoting and maintaining a healthy business marketplace.
As a C.E.O in a company which acts as a supplier or wholesaler to various retailers in the marketplace, I would strive to maintain ethical business practices in the market place. The role of a supplier or a wholesaler should solely be dealing with retailers with regard to supplying goods and products. At no point in time shoulder a supply or a wholesaler contemplate on reaching final consumers directly. My role as a C.E.O would be to advocate for the upholding of ethical business practices where the roles of suppliers and retailers a well-defined and optimally adhered to. My daily operations would revolve around reaching out to the retailers who get supplies with goods and products by my company to identify whether there are any cases of protocol breach. Necessary actions would then be initiated in events where supplier representatives are found to breach protocol and reach directly to final consumers.
Corruption
Corruption is a purchasing ethical issue which widely experienced in companies and business organizations in the United States and in different marketplaces globally. Corruption with regard to purchasing ethics refers to using socially unaccepted ways to obtain certain goods and services from a supplier or a wholesaler (Sroka & Lőrinczy, 2015). Corruption has adverse effects on the existence of a stable market because only a few gain profits in a marketplace which is dominated by corrupt actions. Corruption weakens business links in a marketplace and can lead to extinction of a marketplace. Forms of corruption between suppliers or wholesalers and final consumers and retailers should be shunned at all costs because they pose great threats to socially acceptable business practices. Companies and business organizations should also strive to maintain a corruption-free procurement process throughout all their business operations. A friendlier marketplace would be realized if all stakeholders in the different business operations uphold practices which do not give space for corrupt actions.
My role as a C.E.O in a leading business company in an environment dominated by corrupt business operations would be to set standards of operations which do not allow for corruption. Corruption is a great threat to strong business foundations in any place since it does not promote equality and fair-trade in the marketplace. A chief executive should give priority to practices which bring equality and fairness to all marketplace stakeholders. Employees who participate in corruption and other unethical practices ought to be expelled from the companies to pave way for more ethical oriented employees who can ensure fairness is observed in the marketplace. My role as a C.E.O would then be inclined towards settings the necessary standards which will promote purchasing ethics throughout all operation sectors in the company.
Conclusion
Ethics in the business world has unparalleled importance and impacts on the existence of a fair to all and reliable marketplace. There are numerous business practices that violate ethical principles which are socially accepted to function in any marketplace globally. Among the frequently violated ethical principles is the purchasing ethics, which entails the norms to be followed when purchasing for goods or services from companies, suppliers, and wholesalers. Some of the purchasing ethical issues include fraud, price gouging, Coercion, back door selling, and corruption. These purchasing ethical issues have negative effects on the thriving of any business entity and pose a great threat to fair competition in the market. These purchasing ethical issues should be discouraged from any marketplace and instead adopt socially acceptable purchasing practices which positively impact business operations.
References
Ax, J. (2015). New York Charges 44 with Sweeping Fraud in Heating Oil Industry. Retrieved November 16, 2019; from https://www.reuters.com/article/us-new-york-crime-heatingoil/new-york-charges-44-with-sweeping-fraud-in-heating-oil-industry-idUSKCN0SZ2G320151110
Meagher, J., & Fader, M. (2008). Siemens Pays Record $800 Million to Settle Foreign Corrupt Practices Act Charges. Retrieved November 16, 2019; from http://www.klgates.com/siemens-pays-record-800-million-to-settle-foreign-corrupt-practices-act-charges-12-23-2008/
Pelofsky, J. (2010). Alcatel Agrees to Settle Bribery Case for $137 Million. Retrieved November 16, 2019; from https://www.reuters.com/article/us-alcatel-settlement/alcatel-agrees-to-settle-bribery-case-for-137-million-idUSTRE6BQ3HR20101228
Pollack, A. (2015). Drug Goes From $13.50 a Tablet to $750, Overnight. Retrieved November 16, 2019; from https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?auth=login-email&login=email
Sroka, W., & Lőrinczy, M. (2015). The Perception of Ethics in Business: Analysis of Research Results. 34: 156 – 163.
Wittmaekers, F. (2017). Back Door Selling, Who is at Fault? Retrieved November 16, 2019; from https://www.linkedin.com/pulse/back-door-selling-who-fault-fred-wittmaekers
