Unethical business practices and their

effects Term Paper

(votes: 2)

Introduction
In the contemporary world, businesses that comply with the rightful ethical conducts are
decreasing drastically. In most businesses, at least one business practice is done in an
unethical manner. The unethical practices in businesses are adversely affecting
governments through the loss of taxes (George & Jones, 2010). Consequently, the
world economy is facing a crisis as businesses evade from paying taxes.

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With globalization, companies are trying their best to reap maximum profits and
outweigh their competitors’ profits at the expense of the global economy. Transparency
and accountability is outdated as companies are aiming at one thing; to reap maximum
profits at all cost. Cases have occurred where companies that had been involved in
unethical practices clear their names in courts through bribery.

The executives of such companies protect their brand names, and they fight to maintain
the company’s reputation through corruption. At the end of the day, the government,
employees, investors, competitors, and the customers suffer while the crooks enjoy the
fruits of their unethical business practices.

This paper will give a stringent analysis of the various unethical business practices and
the effect that they have on the organization. The paper will bring in ideas, information,
and examples of unethical business practices in major organizations.
Unethical business practices and their effects on the
organization
Manipulation and exploitation of employees

Employees are very essential stakeholders in any company because they determine the
level of productivity of the company. However, some managers take advantage of
defenseless employees to exploit them in one way or another. The vulnerable
employees have no choice but to be submissive.

Some unethical practices that harm the employers include low wages and unsafe
working environment. Some employers have made it a routine to have their private
cloakrooms while the other employees use unsanitary cloakrooms. Essentially, any
practices that make the employees uncomfortable in the work place are unethical, as
they do not comply with the federal working standards.

We take an example of G4S Company, which is one of the largest private companies in
the world. The company has a motto of delivering excellent services and maintaining
the highest level of ethical standards. However, in the recent past, reports indicated that
G4S did not adhere to its motto, and its ability to control its worldwide operations failed
considerably.

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The executives of the company have turned up to be violent towards their junior
employees. The executives confront the employees; they pay then low wages, and
increase pressures in the work environment (Hill & Plimmer, 2013).

Unethical business practices are likely to have adverse consequences to the

organization. G4S is at the risk of destroying its reputation; therefore, the future of the
company is at risk. The G4S Company has existed for decades and it has expanded
globally, however, the company can collapse within a short period if its reputation is
disputed.
Currently, G4S’s has slipped in its ability to manage its global empire. It was so
embarrassing that G4S was unable to supply enough security guards in a contract that
would earn it massive profits during the 2012 Olympics. It is noteworthy that G4S
operates in third world nations that have rampant corruption and fraud cases.

There is a very high possibility of the G4S executives in such nations to be drawn into
unethical practices that may further portray the company’s incompetency. Essentially,
there are numerous fraud cases in the management of the company, and those
practices are driving G4S into the grave.

Unfair competitive practices

All business people aim at gaining a competitive advantage over their competitors to
win the trust of many customers. Companies would spend millions of dollars to employ
strategies that would enable them to enhance their sales. However, there are those
business people who opt to employ unfair and unethical business practices that result
into unfair competitive practices.

Wal-Mart was a victim of unfair business practices in the recent past. The multinational
company invested heavily to investigate and determine the extent to which its
competitors adhere to the anti-bribery law. Wal-Mart did the investigation in Mexico,
Brazil, China, and India, which are its major international markets.

In its investigations, Wal-Mart discovered that its competitors were indeed violating the
corruption act that guides foreign investors. One of the Mexican subsidiaries that
happen to be Wal-Mart’s major competitors had indeed paid bribes to be allowed to
open new stores in Mexico (Clifford & Barstow, 2012).

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To make the matters worse, the subsidiary’s parent company suppressed the
investigations through bribery. With regard to the mentioned allegations, there is a high
possibility that the competitor company evades many other compliance payments to the
government though bribery.

The unfair competitive practices would only earn a company massive profits in the short
run. However, upon investigation and publicity of the matters, the company will have its
reputation destroyed. Unethical business practices as those practiced with Wal-Mart’s
competitors will result into bad publicity, and the company may never win the publicity
trust in the future even though it struggles to employ ethical conducts.

Moreover, if the courts decide to be very strict with such companies, they may be fined
heavily. The executive may receive merciless jail terms and finally, the company may
end up becoming bankrupt because of the high costs associated with unethical
business practices.

Bending the company rules

In many companies, employees are obliged to submit to their supervisors and

managers. They have to obey the authority and perform all their commands. In fact,
junior employees have a tendency of alleging to their supervisors in every aspect.
Therefore, regardless of how wrong an instruction is, the junior employees are
sometimes obliged to abide by the rules of their supervisors and managers.

It is noteworthy that performing unethical practices in the work environment is wrong

regardless of where the orders came from. Some junior employees are obliged to
withhold information regarding the unethical practices of their bosses for the fear of
intimidation, which that is also unethical.

In July 2 2010, the New York Times revealed the case of GlaxoSmithKline Company.
The company’s director agreed to pay fines amounting to $3 billion because of
promoting a drug for unapproved uses, and improper marketing for other drugs
(Thomas & Schmidt, 2012). Further investigations indicated that the company lured the
doctors by enticing them with luxury trips and spa treatments.

The company would meet the full payments of hunting excursions and all sorts of
luxuries to win the doctors, and force them to promote some unapproved drugs.
Moreover, GlaxoSmithKline financed the publishing of a medical journal that had
manipulated clinical trial data to promote the use of the Paxil drug in children.
The highly sensitive information was very essential for the prosecutors to file charges
against the GlaxoSmithKline Company, and it was very controversial to find out who
disclosed those unethical practices. Sure enough, the whistle blowers were some of the
employees of the company.

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Companies have to be warned that there is a whistle blower policy that rewards
employees with substantial rewards. Essentially, whistle blowers earn a great share of
the amount that the federal government recovers from the unethical business practices
that they report.

In fact, a policy guiding taxpayers against fraud has set aside about $10 billion to
compensate the whistle blowers. Therefore, managers and supervisors should be
warned that employees would be submitting to their unethical orders to set them up.

Lack of transparency

Companies are always obliged to portray transparency in all their activities. However,
cases have occurred where company executives hide some controversial information
from the most important stakeholders of the company. Some companies will present
false statements to the investors to clarify why they cannot afford to pay the dividends.

Whenever the investors resolve to have the company investigated, the company
managers and other executives resist the investigations. The executives of some
companies have taken advantage of humble investors to mishandle their propriety.
Some executives are even sued for creating false financial statements to deceive the
investors.

Moreover, company executives evade form paying the taxes using the false statements.
Cases have occurred where auditors are bribed to certify false financial statements so
that powerful companies can evade from paying the rightful amounts of taxes to the
government.

Company executives ought to know that legal lawsuits have adverse consequences to
the company. Firstly, the court can impose heavy fines to the company, which can
declare it bankrupt.

The court can order the suspension of the company’s activities for a considerably long
period. In the case of molesting the investors, the company places itself at a high risk of
lacking investors in the future. Of course, new investors would never buy the shares for
such companies, and the company’s activities may come to a spontaneous halt
because of the lack of funds.

Unethical treatments to suppliers and customers

Every business must have suppliers of raw materials and customers who purchase their
finished products. Essentially, the relationship between the company, its suppliers, and
its customers ought to have mutual benefits. However, some businesses are too greedy
to allow the other parties to enjoy some good profits.

Some companies pay their suppliers so low, such that the suppliers lack the value of the
efforts that they input in their work. As if that is not enough, some companies go ahead
to produce low quality or unsafe products.

In case the company faces strict regulations in the country of production, the unsafe
products are shipped into third world nations. This very sad incidence affects innocent
individuals who purchase such products unknowingly. Some companies are used to
offering the intermediaries with kickbacks so that they can continue purchasing their
products.

Companies that practice unethical business conducts that harm the suppliers and the
consumers should know that their practices might have adverse consequences than
anticipated. Once the suppliers find other places where they can sell their products at
fair prices, they would stop supplying raw materials for such companies with immediate
effect.
Unethical business practices that involves the offering of kickbacks to win customers
could have costly legal repercussions. Finally, the consumers have all the rights to file
lawsuits in case they consume unsafe products.

Such cases may have adverse consequences to the business, which may end up
paying heavy fines, or even being ordered to close down because of their unethical
practices. The destroyed reputation of such companies may cause their sales to reduce
drastically, and the company may end up being bankrupt.

Deceptive sales practices

Companies’ sales managers are obligated to try all possible ways of making massive
sales. However, that does not mean that the companies should involve themselves in
deceptive sales practices. In the GlaxoSmithKline case, the company promoted its
unapproved antidepressants for human consumption (Thomas & Schmidt, 2012).

The unethical business practice clearly indicated that the executives of the company
were extremely selfish. No amount of fine can compensate for the unethical practice of
selling unapproved drugs to humans. Further, the company distorted the data of a
diabetic drug that recorded very high sales, and it marketed other drugs improperly.

Genuinely, drugs are meant to enhance human life, and the named unethical practices
concerning drugs are so inhumane. Even after paying the fine amounting to $3 billion,
GlaxoSmithKline does not tremble because their sales exceeded that amount by far.

While GlaxoSmithKline may not feel the pain of paying such a huge fine, the company
executives should know that its publicity reputation was destroyed. The company may
never gain the huge profits that it made in the past. Regardless of how effective their
drugs would be, informed customers will tend to shy away from purchasing their drugs.

Once consumers know that a company employs unethical business practice in their
operations, the effects are inerasable. A company like GlaxoSmithKline that has had
some good reputation for many years can have its brand name torn down because of a
single unethical incident. Therefore, companies that are practicing deceptive and
unethical sales practices should know that their practices would tore the company down
in a matter of seconds.
Harming the environment

All companies ought to adhere to the pollution norms set by the government. Moreover,
the companies should adhere to the corporate social responsibility policy that obliges
companies to honor the surrounding environment and the people in it. However, cases
have occurred where companies are involved in unethical behaviors that harm the
environment.

Some companies release chemical pollutants into the air or into water bodies. Such
companies do not care about the repercussions of their ill deeds. The companies
release toxics that harm the lives of the living things around their locality.

They evade the expenses that are associated with the treatment of toxics before they
are released into the environment. This sad incidence clearly indicates that the greedy
executives of such companies care less about those individuals and other living things
that are affected in one way or another.

One thing that companies harming the environment without caring ought to know is that
some individuals who lived in the past cared about the people in the current generation.
They should make it their obligation to think about their descendants who will need a
safe environment. Moreover, the affected individuals would be junior employees of the
company who may suffer from lifestyle diseases.

Of course, the company will have to cater for their Medicare bills, and pay fines if
employees decide to sue the company. It is noteworthy that the worst repercussion of
unethical behaviors regarding the destruction of the environment is the lowered
organizational credibility.

The company’s partners, customers, and all other stakeholders will feel intimidated to
be associated with a company that does not value the environment. Further, the courts
can even order the company to be closed down.

Conclusion
Indeed, unethical business practices harm a series of people, whereas; only a few
greedy incumbents enjoy the fruits of their ill deeds. Essentially, if the global economy is
to be on the safe side, companies must adopt ethical business practices. Business
executives must ensure that their businesses spend their investors’ monies in
worthwhile projects.

They should ensure that the investors obtain their dividends in time. As discussed,
some vulnerable employees suffer in silence, and it is upon the business managers to
ensure that they treat all their employees equally. The managers have a responsibility of
offering a favorable working environment for all their employees.

They have to ensure that the employees’ salaries are disbursed at the right time. In the
case of customers, the involved stakeholders of the company must ensure that the
customers obtain quality products and services. Business managers should never take
advantage of their might to disadvantage their competitors. Moreover, company
managers should understand that the government depends on taxes to develop the
nations.

Therefore, company executives are obliged to ensure that the company pays taxes
exclusively. Finally, companies are requested to have a corporate social responsibility.
Polluting the environment should be outdated, as companies ought to employ practices
that are environmental friendly.

Companies should comply with the government’s rules of conserving the air, water, and
the general environment. Certainly, if all companies adopt the above named ethical
practices, every individual in the world would be very comfortable, whereas, companies
will be making honorable profits.

References
Clifford, S. & Barstow, D. (2012). Wal-Mart inquiry reflects alarm on corruption. The
New York Times. Web.

George, J.M. & Jones, G.R. (2010). Understanding and managing organizational

behavior (6th ed.). Upper Saddle River, NJ: Prentice Hall.

Hill, A. & Plimmer, G. (2013). G4S: The inside story. Financial Times. Web.

Thomas, K. & Schmidt M.S. (2012). Glaxo agrees to pay $3 billion in fraud

settlement. The New York Times. Web.
 5 EXTREMELY COMMON BUT
VERY DISTASTEFUL
UNETHICAL BUSINESS
PRACTICES
Posted by Manish Khanna | Updated on Nov 18, 2020 | Legal | 3  |     

Deception, collusions, swindling… sounds like the plot of a best-selling novel. However, these terms
are quite common in the commercial circles where unethical business practices can be seen by the
dozen. Whether it is a big conglomerate or a small business, the stakes of outperforming the
competition are always high. This cut-throat struggle for survival and emerging as a winner attracts a
lot of unscrupulous tendencies; this has unfortunately become a part of the system. The urge to rule
the market has made businesses selfish and all-consuming. However, the obligation to operate
responsibly has been put on the back-burner. The lines between acceptable and unacceptable have
blurred; the focus has shifted from the consumers to gaining higher profits and margins.
For example, a Facebook data scandal from not that long ago engulfed its CEO Mark Zuckerberg in a
global controversy. A quiz app on the social networking website gathered data from 50
million Facebook profiles and delivered it to Cambridge Analytica. Using consumer’s personal data
without their consent is a major digital theft that has come to light in the past few years.
In another example, Australian finance company, AMP, faced scrutiny for misconduct in banking.
Apparently, they charged clients for advice which they never received. Consequently, the Chairman
had to step down as evidence against the company started surfacing.
Certainly, scandals are shaking up the business world. Some offenders get caught and face public
disgrace; others continue to bask in the glory of their unprofessionally accomplished success. Here
are some common unethical business practices that many companies around the world are guilty of
adopting for success.
1. Misleading Product Information
Many companies promote injurious products with misleading information, purely for the sake of
improving the bottom line. There is no dearth of examples of this corrupt practice. From breakfast
cereals to automobiles, all types of companies have blatantly tricked consumers by providing
misleading information.

For instance, maker of Nutella, Ferrero USA, Inc. had to pay $3.05 million as settlement for a lawsuit
filed in New York for pitching the chocolate spread as a nutritious breakfast for children.
Then, in 2015, the biggest German carmaker, Volkswagen, publicly accepted that it had installed
software in several of its cars to fool the Environmental Protection Agency’s emissions testers into
believing that the cars were environmentally friendly. The popular brand lost a staggering $20 billion
in market capitalization and was badly hit by the negative publicity.
For ages, businesses have exaggerated on the qualities of their products and downplayed the inferior
features. All to make them more salable. However, these unethical business practices continue until
consumers take notice and start questioning the authenticity of the information.

2. Unfair Competition
Defamation of a competitor, misappropriation of their trade secrets, and trade mark infringement –
all these fall under unfair competition which gives a wrong impression to the consumers about the
competitor and its products. It is not wrong to use a competitor’s name in the marketing material, but
it should not deplore the company or its products.

For example, in 2009, PepsiCo sued Coca-Cola promoted its sports drink, Powerade, as being more
refreshing than PepsiCo’s Gatorade because it contained more electrolytes. However, PepsiCo
argued that there was no scientific evidence behind the claim.
Meanwhile in the digital age, businesses have taken the route of cyber-defamation where they spread
false information about a brand as an anonymous user on a social networking site or a blog with a
fake screen name. This is why laws exist governing this kind of libel and slander; the offender faces a
fine to the tune of millions if caught red-handed.

3. Mistreating Employees
Mistreating employees has become a familiar scenario in small and big companies who make
employees work for long hours and underpay them. Similarly, many employees face stressful
conditions, mental and even sexual harassment.

In the wake of finding cheap labor, many companies in developed nations hire sweatshops in third-
world countries for bulk manufacturing. The conditions in these workplaces are worse than one can
even imagine. The tech giant Apple has been using the services of Foxconn, Taiwanese
manufacturing company that has been manufacturing the coveted iPhone. As an
example, Foxconn has been accused of employing child slaves working in hazardous conditions for
10 hours a day all through the week.

4. Manipulating Accounts
Want more unethical business practices? Some companies cook their books to hoodwink investors,
lenders and end-consumers. As a result, they tweak their financial reports to show inflated profits and
lowered depreciation. This makes investors think that the company is faring well; they end up buying
more stocks from the share market.

For instance, in 2015, Toshiba, the Japanese multinational, faced mismanagement of its accounts.
They exaggerated their profits by $1.2 billion for more than seven years.

5. Bribery
Inducement to influence a business decision is not uncommon in the corporate world. In other words,
offering something of value, or money in return of a favorable dealing.

For example, in 2011, Diageo, the UK-based beverage company, had to pay $16 million to settle
charges of bribing government officials in India, Thailand and South Korea to assist them in the
product approval process.
In conclusion, the pressure of surpassing the competition and wooing consumers year-after-year with
the same products takes a toll on organizations. As a result, they resort to dishonest and devious
activities. Even the biggest names in the industry are not untouched by this phenomenon. From
buying email addresses to spamming consumers without their consent, to ignoring quality and safety
guidelines for generating higher revenue, many businesses are indulging in some kind of unethical
behavior. Let’s just say it is a big bad world and the consumers should not blindly trust any business.
Ethical Company practices and Unethical
Business moves
In 2014, India made it compulsory for companies that have a net profit of Rs 5 crores or greater to
give away a portion of its profit for the well being of the society. That was indeed a great move. No
other countries in the world had such mandatory laws. Top Indian companies like Infosys, Mahindra
and Mahindra, ITC, Tata Motors, Hindustan Zinc, Bharat Petroleum, Ultra Tech and many more began
incorporating CSR initiatives in their business strategies successfully. Such initiatives show the
human face of an ambitious business. Besides helping the society, this is also very beneficial for the
growth of the business. It builds goodwill and this goes a long way in building trust among the
consumers. 
An initiative to contribute to the well being of the society indeed benefits the company in the
process. The companies gain customer’s trust, which in turn results in building a global reputation.
To stand true to its reputation, the company builds the best of products. This leads to the expansion
of its market. As the network expands, more investment begins to flow in. As the money flows into
the company, the business flourishes. CSR initiatives are a big reason for business success. 
Let’s take an example of Infosys. The CSR statement of the company says that “ Eradicating extreme
hunger, poverty, and malnutrition, promoting preventive healthcare and sanitation and making available
safe drinking water”. This is such a noble deed and plays an important role in the development of the
nation. Mahindra & Mahindra aims to ‘Transform the lives of people in India through education, by
providing financial assistance and recognition to them, across age groups and across income strata’
Dominos decided to serve only vegetarian pizza in Gujrat, valuing the sentiments of the large section
of the community members. Both Apple and Paytm have switched to 100 percent renewable
sources of energy. 

But there’s a business side of it. One of the biggest pharma companies in the world, a British drug
company, GlaxoSmithKline (GSK), has been selling drugs and saving lives across the globe for
decades. However, the company also got into sleazy practices and continued selling an
unauthorized drug for curing depression among children.
Deloitte, a major computer manufacturer has been in talks for its suspected huge accounting
malpractices.  H&M has been a global manufacturer of clothing and that too in an eco-friendly way.
But there are questions on their treatment of workers at their factory outlets. Talking about organic
food, as they become more popular, India has begun to export a lot of such products. As the market
grows, so are the malpractices. Recently the exported food from Nainital and Tamil Nadu were
caught in the United States for false labeling of organic food material on the package. It was caught
because the US had advanced technology to catch these frauds. Just imagine the level at which it is
out there in the Indian market, jeopardizing the health of so many trusted consumers. 
So, is the law of corporate social responsibility building a voluntary approach to help out the society
or is it a forced action due to stricter laws. If the former approach is true, it is indeed a move that can
make the nation a much better place. However, if the latter approach is followed, companies will
continue to find a loophole to make more money out of such practices. This, in turn, will do more
harm than good.