MMM343 Business Ethics

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MMM 343: Business Ethics

T3 2021 EXAMINATION

Case study 1: Fast Food Restaurant (30 marks)

Read the case study and answer each question drawing on facts from the case and unit content from the Business Ethics unit.                                                                              

Steven, a junior at Northeast State, just started working part-time at a local fast-food restaurant chain. Although not his dream job, it paid for tuition and books, and the restaurant gave him the flexible schedule he needed for school. After a few months, Steven found he got along well with all his coworkers, but it was apparent they did not respect the company or the management. The employees made fun of their bosses and treated the work area like a playground. In some respects, Steven thought it was a fun environment to work in, especially after hours when management was gone for the day. They played their music loudly, laughed, and talked with one another during the down times instead of cleaning up their work areas like they were supposed to. Despite the fact there were ethical policies telling employees how they were expected to act in the workplace, these policies never seemed to be enforced.

One day, while working with his coworker Julie on the food assembly table, Steven saw Julie accidently drop a meat patty on the floor. Without so much as a finch, she bent down, picked up the patty, stuck it back on the bun, and wrapped it up. It happened so fast that Steven wasn’t even sure he had seen right – especially since Julie had done it so causally. Steven watched in dismay as another worker took the hamburger to the customer. Over the next few weeks, Steven saw others, including the shift supervisor, do the same thing with burgers and other products. Once, an entire cheeseburger hit the greasy floor, was picked up, and was taken back to the customer. This time the customer complained the burger tasted funny and sent it back. Steven noticed other unsanitary practices such as employees not washing their hands between handling meat and vegetables and not washing utensils between uses. Obviously, such practices were against company policies and, if reported, the supervisors in change could get in trouble and the restaurant would face investigations from the health department. However, there was ample opportunity for things like this to occur. There was no one watching them, and the shift supervisor also engaged in these activities. Steven felt it was the company’s responsibility to hire good people, so they were to blame if these things happened.

One day, Steven approached Julie and asked, “Why do so many people here serve food that has fallen on the floor to customers”? Julie thought about it briefly as though she had never considered it before and replied, “I guess it’s because it would take too much time to get another beef patty out of the freezer, cook it, and serve it to the customer. This is a fast-food restaurant, after all, and I’m not interested in hearing customers complain about the time it takes for them to get their food. Besides, the restaurant with the fastest service gets a bonus from corporate headquarters. Last year the supervisors rewarded us with some extra money for doing our jobs so quickly”.

Steven was somewhat taken aback by the honest reply and asked, “Wouldn’t you be disgusted if you were served dirty food at a restaurant”? This time Julie’s response was quick. She said, “What I don’t know won’t hurt me”. She walked off. Several weeks went by and the same practices continued. Steven became more and more concerned about the consequences that could happen in an environment so laid back and unconcerned about safety and health. It seemed like the more time that passed, the worse everyone’s attitude became.

Once day at the beginning of his shift, Steven noticed the walk-in freezer had been left open. As he went to shut the door, he discovered a smell of rotten meat. It almost made him vomit, “How could this happen”? he wondered. He threw away the rotten meat without asking anyone because he was afraid of what the answer might be. After Steven threw out the spoiled meat, he began to wonder how the culture of the restaurant got to the point of supporting such practices. He realized the seemingly minor unsanitary practices allowed major issues to arise that could possibly hurt someone. Steven felt he should say or do something but to whom? He sat down to ponder what he should do.

Case questions (all questions carry equal marks of 10 each)

1. Identify at least five (5) stakeholders being impacted by the fast-food restaurant chain’s employees' actions, and briefly discuss the ethical issues that impact on each of these stakeholders.
2. From your perspective, how have the organizational factors and culture contributed to the current actions of the fast-food restaurant employees?
3. Assume you are part of the fast-food restaurant chain’s decision-making committee and you  have just found out about this franchisee’s operating methods. What strategies would you put in place to remediate these operating issues? Critically present the pros and cons of at least four of your strategies. 

Case Study 2: Branscombe Co (20 marks)

Read the case study and answer each question related to the case drawing on facts from the case and unit content from the Business Ethics unit.                                                                              

Branscombe Co has been supplying and fitting premium bathrooms and kitchen in hotel chains throughout Effland for the past 20 years. The company started as a small family business, but because of the rapid growth it experienced and an associated need for additional capital, it was recently listed on the national stock exchange via an initial public offering.

To remain fully compliant with the Effland corporate governance code, the board established audit, remuneration and nomination committees which were solely populated by independent non-executive directors. However, it did not consider it necessary to create a separate risk committee because the board believed that the remit of the audit committee include all aspects of risk management policy. This explanation was formally submitted to the shareholders at Branscombe Co’s first general meeting, and the shareholders agreed with the board’s proposal.

As part of its expansion strategy, the board of Branscombe Co decided it needed to enter overseas markets, and in particular the developing country of Geeland. The reason that Geeland was selected as a suitable market was because it had experienced rapid economic growth and domestic prosperity following the discovery of rich, offshore mineral deposits. Unfortunately, this small island nation has never enjoyed stable democratic environment and is notorious for corrupt business practices, with customs officials regularly demanding bribes from both importers and exporters. As a result, Geeland has a poor international credit rating. In order to attract both domestic and foreign inward investment, the government of Geeland operates with very low levels of indirect tax, which has stimulated the island’s tourist industry and led in turn to a significant increase in hotel buildings.

Following a successful tendering exercise, Branscombe Co was awarded the contract to supply all of the bathroom equipment for a 200-room hotel, currently under construction in a remote area of the island. The total value of the supply contract amounted to 1,800,000 Geeland dollars and it was to be paid in three equal instalments as the bathrooms were delivered to the hotel. The contract assigns responsibility of shipping the goods the 3,000Kms from Effland to the island solely with Branscombe Co, and no payment will be made until an agreed volume of goods clears Geeland customs. A further problem is that the Geeland dollar is quite volatile, but recently it has been weakening against the Effland dollar. As all contract payments are to be made in Geeland currency, Branscombe Co is exposed to foreign exchange risks.

The many contract-related issues amount to significant risks to Branscombe Co, requiring effective management if the supply contract is to be a success and contribute to the company’s ambitious growth targets.

Case questions (all questions carry equal marks of 10 each)

1. As a board member of Branscombe Co, what would you identify as the key challenges for the company to fulfil 200-bathrooms hotel contracts on time? What strategies would you recommend to mitigate the risks arising from each of the above-mentioned contractual agreement?
2. From your perspective, are the current audit committee types and structures sufficient to mitigate any current and/or future risks for the company? Please explain your response justification. How might Branscombe Co improve their audit committee structure and scope? Justify your recommendation using your learning from the unit to support your arguments.

END OF EXAMINATION