Strategic Management, A Competitive Advantage Approach: Concepts, 16th edition R
ID: 469493 • Letter: S
Question
Strategic Management, A Competitive Advantage Approach: Concepts, 16th edition
Read this Case Study, "Would Claims of Ethical Wrongoing by a Company Impact Your Buying the Firm's Products?"
Headquartered in New York City, avon products is the world’s largest direct-seller firm, and by far the largest direct seller of cosmetics and beauty-related items. Avon is the fifth-largest cosmetics and fragrancefirm in the world. the company receives sales from catalogs and online, but the vast majority of its sales come from about six million independent sales representatives in 110 countries. Since 1892, avon has empowered women to be their own boss and become leaders in communities and business. avon is struggling to recover from poor management and global bribery investigations. Specifically, law firm Zamansky LLc is investigating avon’s employee personal savings account plan (the “plan”) for potential violations of the federal employee retirement income Security act (“eriSa”). this federal act imposes fiduciary duties to prudently manage and invest plan assets. according to the claim, avon allegedly violated eriSa guidelines by its continued offering of company stock during a pending federal investigation for violations of the Foreign corrupt practices act (“Fcpa”). Between 2010 and 2015, avon’s stock price fell from over $40 per share to below $10 per year. the collapse in stock price relates to the Fcpa investigation by the U.S. Department of Justice and Securities and exchange commission that makes it illegal for U.S. companies operating in foreign countries to pay bribes or kickbacks. Separate shareholder lawsuits have alleged that avon engaged in Systemic Fcpa violations, and misrepresented its revenues from various foreign countries. one lawsuit alleges that avon made numerous misrepresentations about the extent, reach, and costs of the investigations against the company. according to Zamansky, avon employees who purchased and held company stock through the plan since 2010 suffered substantial losses to their retirement savings. Zamansky says Fcpa investigation and shareholder lawsuits raise serious issues over the prudent monitoring and oversight of the plan by avon under ERISA.
Evaluate if 'Claims of ethical wrongdoing by a company would impact your buying the firm's products'. Why or why not? Who in any company is most prone to engaging in unethical practices? How can a company best ensure highly ethical practices? Explain.
Explanation / Answer
1.
Ethical wrong doing has many aspects. If the quality of the product is intact and best in class, though the company is engaged in violation of other acts and regulations. Then, I will buy the product as regulatory body will work and take necessary actions against the company as in the case of AVON. But, if the quality is compromised as a part of unethical practice and it is disclosed. Then, I will not buy the product.
Besides, it is a human psychology that it brings solidarity with negatively affected people. Thus, it brings a careful vigilance before buying a product of the company that is being investigated by the federal agencies.
2.
As far as sales are concerned, it is the sales people engaging with the customer, are responsible for the unethical practices. Inside the company, it is the management who takes decision regarding the finances of the company, is most prone to adopt unethical practices in the company. Company management encourages the manipulation of data to reflect a rosy picture to the shareholders. Besides, they also encourage marketing team to put an offer of kickbacks to get business dealings.
3.
The company should adopt the best corporate governance policy with suitable ethical conduct. These policies should be implemented by the company and regular workshops should be conducted for employees to follow the best practices. Employees should also be rewarded on the basis of best ethical conduct while fulfilling his roles and responsibilities. Besides, posters and banners with best practices should be placed in common areas where employees can read it and follow it in their conduct.