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Corporate Governance and Unethical Issues

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    She also gave us the motivation and gentle reminders to help us finish the assignment on time. Our accomplishment is not possible without the elf and support from our friends and family as well. They have helped us in many ways which might be trivial but essential. Lastly, we owe our gratitude to all the staff and also to our seniors in Tune Abdul Raman College that had gave their helping hand to us. We also want to thank them for providing us with and maintaining all the facilities available in the college. 1. Differentiate Between Ethical and Unethical Issues Chris MacDonald (2007) states that “business ethics can be defined as the critical, structured examination of how people and institutions should behave in the world of commerce. In particular, it involves examining appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the actions of individuals or firms affects others”. Besides that, business ethics also examined variety problems that can arise from the business environment, and how employees, management, and the corporation can deal with them ethically.

    Controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities are examined in business ethics. However, greed has led the present business scenario towards unethical business practices, legal complications and general mistrust. Unethical business practices are common in the world we living today. Some of the company does not always play fair for the purpose making larger profits. According to Alex (2012) “there have some examples of unethical business practice.

    One of the examples for unethical business practices is discriminating employees on the basis of sex, race, or religion. Next, omitting to provide side effect information although this is sanctioned by law, but if a product can somehow get around testing by the authorities, it can be sold, thou the mentioning of these side-effects. Incomplete or inaccurate testing of products is unethical which is the domain of the public authorities who have the obligation to ensure that every product that goes out in the market is tested beforehand”.

    Ethical business practices should be followed to build an honest reputation and ensure smooth running of the organization. For investors, they must ensure safety of their money and timely payment of interest. Provision of fair opportunities in promotions and training, good working conditions, and timely payment of salaries should be given to employees. Complete information of the service and product should be made available to customer and personal information of the customers should not be used for personal gain. 2. 0 Three Unethical Issues There are several unethical issue found in Apple Inc.

    First of all, Apple’s unethical business practices include the working condition of employees. Dick Mister (2012) stated that “the working condition of the company’s employees is truly horrendous and brutal” “In year 2007, it was reported that Apple had conducted over three dozen audits and most of the employees regularly worked more than 60 hours a week. In addition, Apple Inc was involved in hiring underage workers as well as falsifying records. Some workers even received less than minimum wages or had paid withheld as punishment.

    Most notoriously, there were bunch of problems related to workers and suicide cases in recent years at Apple’s biggest supplier, Foxtrot. ” (Jesse Curtis, 2012) To be ethical, Apple Inc should terminate their relationship with such companies but in fact, they did not do so. Apple Inc should compromise the problem with the workers in China. Moreover, another unethical issues related to Apple’s company is tax evasion. In response to the latest expose on Apple the long New York Times article detailing the company’s tax evasion, Apple doesn’t behave any differently than other company that exploits tax loopholes.

    As the world’s most valuable and profitable company, the action of Apple’s on tax evasion have greater impact and more harmful to the country economy. The Times, quoting a former Treasury official, estimated that if Apple had more honestly in tax payments on its profit quote by U. S. Operation, it would have owed $2. 4 billion more in federal taxes last year. Instead, the rest of the sprayers had to make up that different. ” (David Callahan, 201 2) If Apple Inc still carried on with this unethical issue, the government and other taxpayers will be affected.

    Thirdly, Apple was involved in option backdating scandal of the past decade. “In the year 2001 , the board of directors and some executives of Apple had backdated options without properly reporting to the SEC. Although most of the executives and directors were aware that backdating option was illegal and unethical, they still succumbed to various pressures such as group conformity and authority conformity. (Blake Taylor, 2009) For the option backdating issue, the stockholders’ benefit will be affected. 3. 0 Possible reasons which caused the unethical issues.

    Dick Mister (2012) states that the “working condition of the company’s employees is truly horrendous and brutal”. In China, most of the companies provide poor working condition for employees besides multi-national company like Apple Inc. This happens because of the China government policy, and the population of China is too large compare to other country. If Apple Company provides too comfortable working condition to the employees, then it is not fair or other companies because they are not able to provide such same condition.

    Therefore, the people in China will reluctant to work for other companies because of the working condition. Even though, Apple Inc is one of the large companies in China, it should be consider other small companies that may not provide such beneficial condition like Apple Inc. In this case, the small companies may not have the ability to fulfill the employee’s requirements because it is not affordable for their company. Therefore, Apple Inc provides a balance employee benefits among other company to make the China current economic balance.

    Hence, the Apple Inc cannot be completely blamed for this issue. Although some of the condition cannot be changed to the best, it can also reduce to most harmless condition. The working condition in Apple Inc sometimes had stressed its employees and caused them to commit suicide. The working hours may be the main reason why the employees are stressed and find the shortcut to commit suicide. “In response to the latest expose on Apple the long New York Times article detailing the company’s tax evasion Apple doesn’t behave any differently than other company that exploits tax loopholes. (David Callahan, 2012) The Seibel reason that Apple Inc trend to tax evasion because of company profits. In the current economic situation, the tax rate is high and perhaps the Apple Company thinks that it is more profitable to use the money for other investment than paying up the tax. If the Apple Inc exploits the tax loopholes, the profit of its company will be greater and therefore the statement of financial position for its company at year end will look more profitable hence it can attract more investor to invest in its company’s shares.

    Besides, there are lots of companies in the country that practice on tax evasion and Apple Inc just follows the trend. Moreover, because of multiplicity of tax, it needs a lot of money to pay the tax and it is unfair for a company as big as Apple’s company. Thirdly, Apple was involved in option backdating scandal of the past decade. The reason of option backdating is executives personal agreed. Blake Taylor (2009) stated that “Although most of the executives and directors were aware that backdating option was illegal and unethical, they still succumbed to various pressures such as group conformity and authority conformity’.

    This is an example of corruption excises among the executives in Apple Inc. The executives of the Apple Inc fictitious grant date to their stakeholders and make them received inaccurate information to calculate the actual value of the share price. In this case, stakeholders will make a high strike price in the option at the fictitious grant date. When the actual share price is lower than the strike price the stakeholders will make loss and the option will become unworthy. Moreover, the executives will make ill-gotten gains from backdated options when the stakeholders make a high strike price.

    It is unfair for the Apple Inc stakeholders and it make the stakeholders lose faith on Apple Inc. 4. 0 Ways to overcome Working Conditions There are a few ways to overcome the working condition of employee problem. They are; having a regulation system, reporting grievance to the authority, set up counseling office, and citizen consciousness. The problem of employing under age worker, long hour of working, low wages can be overcome by having a statutory regulation that is passed by the parliament of the country. Once the regulation is gazettes, the employer has to follow it.

    Next, employees are encouraged to report his/her grievance to the Labor Office. If the employees find that the employers do not comply with the regulation of working condition such as long working hour, minimum wage etc, they can always report their grievance to the Labor Office so that the authority can take action against the employers. Government and non-government agencies can set up counseling office to help the workers to solve their personal issues. Moreover, counseling session can also help employees to reduce their stress and tension cause by work and reduce suicide case happened in the company.

    Citizens should have consciousness that there is a regulation governing the age of employment, minimum of wage, and duration of working for a day. If working condition, the oration of working, and wage offer to them are not comply with the regulation they should not accept the job at the meantime if the citizens know if they are under age, they should not take up the employment. Tax Evasion Tax evasion is not avoidable in today business. However, they are ways that can be implemented to minimize and overcome this problem.

    Listed here are five of the many ways. They are; changing policy, having frequent audit, investor or employee of company report tax evasion of the company to the anti-corruption agency, “sharing of learning and best practices of company” (Anon. , n. D. ), and overcome non-complier operating across international border” (Anon. , n. D. ). Government can change the law and regulation from time to time that can help to control and reduce tax evasion. Hence, it will improve government income from corporate/company tax.

    Furthermore, having a change of regulation will have tightened and stringent control over the frequency of tax evasion of a company. The change of regulation can also reduce and eliminate loophole so that there is no opportunity for the company to evade tax. The regulation can also impose heavy penalty to the defaulter or fraudulent. The policy can also set p a commission to allow employee of the company to report malpractices of tax evasion by the company. The regulation also should allow incentive for the people who report the case.

    Government should change the Company Act to allow frequent audit of the company account. By doing frequent audit, any tax evasion can be detected and penalty can always be imposing to the company concern. Moreover, the employee or public can always report the companies which have practice tax evasion to the anti-corruption agency so that the case can be investigated and charge the company’s owner or director to the court of rule. Sharing and learning the best practice of the reputable company can overcome tax evasion. Sometimes being a new company, practicing the taxation system may not be easy.

    At time unintentionally tax evasion can be happened. In order to avoid this unnecessary and unintentional problem, sharing knowledge of other company’s best practice and experience can be adopted as the best practices of own company. Between countries, they can always have common law to curb the tax evasion between borders. This can prevent the company from transferring the sales from a higher taxation country to a lower taxation country. Take for example transferring the sale from Singapore that has high sale tax to country like Brunet where there is no sale tax.

    Backdating Backdating has been a practice by many companies for many years. The purpose of practicing this activity can be for personal gain and to present a good image to stockholder. This practice cannot be eradicated totally. However, there are some common ways that can help to minimize this occurrence. They are; “investor in Information and System of Technology which increase the likelihood that fraudulent activities will be detected and punished” (OH Feasted, 1996), “access o non-public, potentially market-moving information” (Charles Gem, et al. , n. ), “enforcement of existing reposting regulations” (Charles Gem, et al. , n. D) and “the timeshare and frequency of stock option grants” (Charles Gem, et al. , n. D). Tax Department of country can always make it as a requirement for a company to invest an information and system of technology that has build-in fool prove system to disallow and detect backdating. Even though the system is a fool prove system, the top management can still backdate the sales by changing the date of the system intentionally. Thus, it requires a top management consciousness not to backdate.

    Another way to overcome backdate is to prevent access to non- public, potentially market-moving information. Once the information is not access by public and the insider, the manager and the employees will not have the greed to backdate or date forward the sales or stocks. Law should always be enforced so that there is no chance for the company doing backdating activity. Law has clause to provide incentive for the employee to report backdating activity to the authority. Informer can get incentive for reporting the case, heavy anally can be imposed on the fraudulent company.

    Another way to prevent backdating is to grant stock option to the employee at any time of the year instead of fix intended date during the year, this can “prevent executives to research stock prices and backdated their option to the desirable date” (Charles Gem, et al. , n. D). 5. 0 Method to prevent any other Potential Unethical Issues in the future A very potential unethical issue occurring is from the members of the organization, it can seriously affect the whole organization. There are some methods to prevent the potential ethical dilemmas within the organization which s following: 1.

    Formulate a code of corporate ethics Organizations must design a code of corporate ethics for the organization so that employees are aware of the organization’s expectations regarding ethical norms and conduct. This code should be distributed to all the members within the organization and must be taken seriously by all levels of the organization no from top to down. The head or top ladder of the organization must play a very important role to be a good example for all the members of the organization.

    The leader cannot leave the ethical tone of the organization. A code of corporate ethics must be a very good reference for everyone in identifying what is right and what is not right as an ethical behavior. 2. Communication and awareness The company must also care and attach importance to the members’ welfare and cannot ignore any problems which rise up by the members. The management needs to more alert with the staffs’ behavior and make more communication in the right time to know more well about the condition of the group.

    A proper meeting like a round-table discussion need to be conducted within the leaders and staffs to build up a good communication between top and bottom as immunization is a bridge to connect everyone. Top level must share their vision regarding ethical behavior to employees often so that the employees also get a good understanding regarding the company goal. 3. Seminar and campaign Ethical responsibility must be taught to all the members of the organization. It can be done in various methods including ongoing workshops, seminars and campaigns.

    The content of those education activities should include some case studies which are more close to the realistic situation so individuals can be aware of the current problems and have the proper way to handle real life issues. Through some effective campaigns and seminars, members can clearly understand the importance of individual’s responsibility and how ethical responsibilities affect to an organization. The members must all time remember to maintain the organization reputation as it is the principal responsibility. 4.

    Establish an appeal policy An appeal policy need to be established and the process must be in place so that any unethical practice in the organization can be brought into light. The policy established must be reinforced in the organization about how to report ethical abuses. Employees must know how to report the actual problems and understand that they can do so without fright of retribution. The policy must usable to protect the people who reporting the truth of the ethical dilemmas occurring. In advance, compliance officers can be appointed to keep an eye on corruption, fraud and mistreatment within the organization. . Whistle-blowing policy The ethical corporate culture education within the company might ineffective when the unethical acts are occurred at the top of the corporate hierarchy. A way a corporate could have caught the fraud in its immaturity would have been to prize whistle-blowing. It may have temp a subordinate or the executives or erectors themselves to disclose the fraudulent activities if there is an attractive reward to give to whistle-blowers. By increasing consequences and rewarding the ethical behavior of whistle-blowers, a company can avoid future unethical issue within the top level group. . Reward and punishment To promote ethical behavior, ethical behavior must be rewarded and it should also be included as one of the parameter for appraisal in the performance management system. To discourage unethical behavior, an organization should develop a more austere punishment to anyone who caught up in serious unethical activities, such as immediate sack from the company or dismissal from board. A significant punishment needed to be received by an offender to act as warn for the others. Unethical behavior should be punished and prohibited to carry on.

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