HC2121: Comparative Business Ethics- Better Business Bureau- Report Assignment Solution

Better Business Bureau- Business Ethics Report

Group Assignment Guidelines:

• Students are required to organize themselves into groups of 4-5 students. You are not allowed to submit on your own as an individual. Each group will complete a detailed case analysis and present their case assessment, analysis and research as part of a written report.
• To successfully assess a case, you must engage in additional research to gather more background information as well as current information on the company and situation.

IMPORTANT: You must submit a soft copy to the Blackboard ‘Final submission line’, wait an hour, then print the blackboard safe assign report and attach it to your hard copy. Sign and attach an assignment cover sheet to your hard copy, then submit the hard copy to the lecturer in class. Safe Assignment percentage matching should be less than or equal to 15%.

Topic: For the assignment your group must complete the following case study from PART 5 Text Book (Business Ethics - !0 th Edition by Ferrell/Fraedrich)

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• Case 17 – Better Business Bureau: protecting Consumers and Dealing with Ethical Challenges (Page 572)

• Format: Standard Report Format. Please address all questions in the case within your report.

• Executive Summary: ideally one page but no more than two.
• Sections 1: Introduction
• Section 2: Main body of the report consisting the questions at the end of case study
• Section 3: Conclusions
• Reference List (15-20 references)

• Additional Questions: In addition to the 3 questions in the Case Study – each group must also answer the following 2 standard questions at the end of their report.

• Discuss the concept of institutionalization and how it helps shape ethical conduct within and organization like Better Business Bureau
• Discuss the importance of Ethical Leadership and Corporate Governance. What impact do they have on ensuring ethical conduct within organizations?

Better Business Bureau: Protecting Consumers and Dealing with Ethical Challenges

Executive summary

It is essential for business establishments to comply with the ethical benchmarks so as to sustain and grow in a competitive global environment. Hence, for business establishments functioning in Canada and the United States of America, a not for profit institution needs to regulate and control activities that may subsequently modify the results of business functions and products in the form of advertisements. The below case study has appropriately maintained the instance of Better Business Bureau as an institution that functions as a regulatory body to protect consumer rights and interests across U.S.A. and Canada. Other than developing ties with other regulatory bodies like the Association for National Advertisers, Better Business Bureau is consistently working to prevent and take corrective actions against ethical malpractices in a business environment. The body has changed and revised its duties and accountabilities over time depending on several factors that warrant better practices to prevent the interests of customers. Despite this, the mission of Better Business Bureau has not changed. The objective to support and encourage the protection of consumer interests and at the same time ensure to improve regulations and take corrective action against violators is consistently being exercised by Better Business Bureau.

Introduction

The BBB acts as a third-party agency that mitigates complaints and is most often contacted by disgruntled consumers who are not able to get any remedy from organization. The Better Business Bureau (BBB) has faced severe criticism as it has failed to fulfill its mandate to provide impartial service. This case study will critically review the functions of this institution including the limitations it poses in providing excellent service to protect consumer interests. Several considerations of ethics and corporate governance will be explored and accordingly inferences will be made. The role of ethics and corporate governance in helping to curb ethical malpractices in business settings and the contribution of BBB and its affiliate bodies have been explored. The main emphasis is to ensure that business houses provide accurate information. Hence, Better Business Bureau ensures that it has set standards for ethics and trust that business houses have to follow.

1. Which is the National Advertising Division’s most important stakeholder, businesses or consumers?

Consumers are the significant stakeholders of NAD because the activities of this body are aimed to safeguard the customer’s interests. The most critical mandate of this body is to protect the rights of the clients. One of the most important responsibilities of National Advertising Division is to ensure that its consumers are satisfied and hence the contents of the advertisements are screened and expert guidance provided prior to airing them. Other important stakeholders of NAD are those running national advertising campaigns. They involve in reviewing the advertisements of these firms. NAD ensures that the advertisements are reviewed within two months, are cost effective if compared with litigation charges and are conducted by means of expert advice.

Moreover, the main aim of the National Advertising Division is to focus on the requirements of business establishments to embrace ethical systems and practices so as to improve the precision in disseminating information to potential customer (BBB, 2016). The mission of Better Business Bureau is to ensure a marketplace that adheres to ethical standards and the same holds true for National Advertising Division. While reviewing the activities of potential advertisers, the aim of National Advertising Division is to ensure that consumers are empowered and get appropriate value for their investments with respect to the purchase decisions taken. At the same time, the decision of National Advertising Division is also influenced by potential advertisers and hence one may infer that both consumers and business establishments form the relevant and critical stakeholders of National Advertising Division. Another significant stakeholder of National Advertising Division is the government. The government plays a central role in strengthening the functions of National Advertising Division as a large body having the effectiveness to review the business activities along with the government. Those violating these standards are warned and in case of repeated violations are expelled from being associated with the body (BBB, 2016). It is also the responsibility of National Advertising Division to ensure that laws are enforced and adhered to in order to

protect information. Despite this, National Advertising Division is subject to severe criticism. Hence, the National Advertising Division is working with relevant stakeholders and information technology experts for transmission of authentic data as well as maintaining the confidentiality of relevant data (Villafranco & Riley, 2013).

2. Do you believe the BBB can be truly impartial given its financial dependence on businesses?

The rating system used by BBB has been subject to several complaints mainly due to prejudices displayed in its ratings. The organization has also been accused of not paying attention to several failures in businesses that did not adhere to maintaining the designated benchmarks for protecting information. At the same time, BBB has not been able to conduct its duties as per legal conditions. Furthermore the revised rating systems of Better Business Bureau have been criticized on the grounds of being confusing and useless. This is mainly because ratings are provided to business establishments if they respond to customer complaints on good faith and take efforts to resolve them. This translates to the fact that business houses will have superlative ratings despite having a plethora of complaints (Tuttle, 2013).

Moreover, Better Business Bureau completely ignored the business failures especially with respect to infringement of data protection. Another pertinent issue faced by BBB is its inability to resolve consumer complaints. Theoretically, the BBB is supposed to aid consumers, especially those hailing from disadvantaged societal communities and areas. This is mainly because such consumers have to take greater effort in order to redress their grievances with business establishments. However, prior research conducted in investigating the consumer employment of third party grievance agencies have inferred that these bodies are fundamentally not employed by disadvantaged community or consumers in the society. Instead, studies have observed that consumers hailing from non-priority communities and the youths having significant income and educational qualifications are those who have greater possibility to use the services of BBB (Gareett & Toumanoff, 2010). The assumption that the body was emphasizing on resolving the customer grievances impacted by business having non-affiliates was baseless. This is mainly because prior studies have highlighted a failure to contact the BBB by clients hailing from the disadvantages section of the society. This is a failure that needs to be immediately addressed by the government in liaison with relevant stakeholders including the BBB and NBC and significant associates working to protect the society from unethical occurrences. Another complaint levied against BBB is that it has taken a lot of time to protect consumers. Despite this, there are several situations in which the body has displayed impartial judgments and impartial discharge of its responsibilities. This is especially true as the body has cancelled the membership of a fitness firm engaged in fraudulent activities. At the same time, BBB has also provided several tips to consumers that they should take prior to investing their finances in pursuing fitness or health activities in

fitness organizations (BBB, 2015).

Despite criticism, there are several reasons as to why BBB does not carry out its responsibilities in a partial and unethical manner. An example is that BBB thoroughly investigates loopholes displayed in regulating several tasks conducted by a plethora of advertisers and hence require more stringent rules and regulations with reference to advertising. Another activity that portrays that the body has impartially and ethically conducted its activities is the acceleration of instances of prejudices in advertising. However, the organization takes a lot of time to seek funding from government as this can be attributed to several bureaucratic tasks that slow down the functioning of work, systems and activities. The body is heavily dependent on business establishments to support them and this has increased chances to compromise the trust and integrity of BBB. Furthermore, the expulsion of BBB in Southland with respect to the selection and subsequent employment of personnel have heavily impacted the company’s reputation. At the same time, the body has taken the extreme step to expel one of its associate bodies working in Southland towards protecting consumer rights and ensuring consumers are treated ethically (Lopez, 2013). This is mainly due to the failure to inculcate ethical values and support an ethical organizational culture. It is essential to restructure the Better Business Bureau to ensure that the underlying aims of building an ethical marketplace by imbibing the values of integrity and trust is fulfilled. It is essential for the management to first streamline its processes so as to restrict the area of jurisdiction of BBB (Limbu, Wolf & Lunsford 2012).

Another area that warrants modification is the process for investigating consumer complaints. In case of complying to the regulations imposed by the state, it is essential for BBB to act as a bridge with legislator so as to lobby for ratifying legislations that develops confusing situations in business activities. It is essential that the state governments ensure that efficient rules and regulations are levied so that the chances of providing a prejudiced judgment are mitigated. Other than the fulfillment of the above, it is also required that individuals provide their consent whenever it is required so as to enhance the operations of BBB by means of engaging in ethical duties (Garrett & Toumanoff 2010).

Lastly, it is essential for a change in the attitudes and culture of the people and business houses to work towards authenticity, integrity and ethical conduct in business functions. It is challenging for BBB to remain completely impartial with its duties mainly because of its progress being reliant on business establishment support. Without coordinating with relevant bodies, it may be highly challenging for BBB to refrain from conducting unethical activities. Hence, it is essential for business houses to strictly refrain fraudulent advertisers to be a

potential financer.

3. What actions would you take to ensure an ethical misconduct disaster such as the pay- for-play scheme does not happen again?

It is essential for a non-profit body like BBB to undertake a series of strategies in order to prevent malpractices that challenge the credibility and reputation of the body. This is especially true while redressing the malpractices like the pay-for-play scheme that took place in the Southland branch of Better Business Bureau. It is essential for BBB to first recognize factors that motivate employees to conduct activities that lead to ethical malpractices. Accordingly, it is essential to eliminate these activities by developing a certain amount of dependency in the overall institution. Other than this, the institution needs to restructure its systems and processes so that they align with consumer feedbacks and suggestions. It is also necessary to heed to consumer grievances and accordingly enhance systems that are better equipped to handle these issues. Hence, the point system provided in ratings should be changed so as to ensure authenticity in its accreditation strategies. Another possibility of an ethical mishap is due to misconduct ensuing due to lack of integrity and trust among the business establishments and hence it is essential to clarify and communicate certain problems with respect to advertising products and services. Furthermore, the institution needs to exercise increased caution in enacting legislations pertaining to managing governmental relations in business establishments.

At the same time, it is essential for BBB to delegate responsibilities to several of its units that are functional in diverse locations of USA and Canada. Effective delegating of authority helps in preventing difficulties that develop potential chances for firms to be a part of plans that aim to fleece and provide fraudulent services to consumers. At the same time, it is equally essential to surcharge independent bodies with the responsibility to monitor the functioning of Better Business Bureau. After perusing through the case study, it can be observed that implementing such extreme and stringent steps may discourage members to engage in several activities that support ethical malpractices. At the same time, the BBB should establish set benchmarks for advertisers so as to make certain that accurate information is disseminated to consumers. This in turn will evade fraudulent schemes and curb measures that lead to ethical scams and malpractices. There are several instances in

which advertisers disseminate confusing data to consumers and it is only aimed to gain optimum level of returns from product advertising. While dealing with these kinds of fraudulent activities it is essential for BBB to enforce several strategies that enable business establishments to disseminate authentic data to consumers in the form of advertisements.Another fundamental need is that business establishments should refrain from infringing the

rights of other companies in order to fulfill the aspirations and requirements of consumers (Schumacher & Wasieleski 2013).

Conclusion

To conclude, it is significant for bodies that act as watchdogs for establishments to follow ethical conduct in doing their business activities. BBB and especially NAD monitor advertising and this helps to develop certain practices that aid consumers. Also, consumers are aided as they get accurate information before taking a decision with respect to purchase. Despite the fact that the institution along with its affiliate bodies has been unsuccessful on some constructs, it is essential for the business environment to recognize the functions of BBB and the contributions to sensitize consumers regarding myriad problems (Lacho 2010). BBB has successfully tried to determine accurate data from advertisers as well as made informed decisions. However, the main limitation of BBB is that most of its funding comes from several sources and hence the possibility of the stakeholders to influence the activities of BBB cannot be ruled out. Despite pitfalls, the institution has so far strived to protect customer interest.

4. Discuss the concept of institutionalization and how it helps to shape ethical conduct within an organization like Better Business Bureau

An activity pertaining to institutionalization is explained as a behavioral conduct in which an organization in engaged over a period of time and its existence favorably impacts all systems and processes that help in conducting routine activities of the organization. Scholars maintain that organizations can institutionalize ethical principles in diverse manners by providing due consideration to meeting several short and long term constituents. In order to institutionalize ethics in the long term strategies of a firm, it is essential to develop and restructure the organizational climate of a firm to support learning and if required relearning of values supporting and encouraging ethical conduct in all business activities and dealings. The communication of decisions to employees should be substantiated with the ethical concerns that consider every single alternative reviewed. It is essential for firms to nurture and develop an organization environment that encourages ethical conduct. Short term strategies should include issuing public statements promoting and mandating ethical conduct in a firm. The

establishment of committees responsible for socially conducting business also helps in legitimizing an ethical angle to all business activities and symbolically conveying external stakeholders and personnel about the commitment of the firm to abide by ethical benchmarks in carrying out routine tasks.

The next significant way to institutionalize ethics is to develop and implement an ethical code for conducting business. Better Business Bureau should strive to not only do this but also encourage its employees to follow ethical values while conducting routine business functions. The ethical code of conduct details the value system in general by explaining the purpose of the firm and accordingly provides a set of regulations to be adhered to while making decisions. Another method that has gained popularity is to provide formal training on ethics. Several firms organize corporate training for its employees. As a part of the corporate training they also include a special training that concentrates on ensuring that employees are aware of the ethical considerations that needs to be undertaken while conducting routine business functions (Koonmee et al. 2010). It is essential for Better Business Bureau to ensure that employees are imparted training in ethics so that they can work towards building an ethical

organization.

5. Discuss the importance of ethical leadership and corporate governance. What impact do they have on ensuring ethical conduct within organizations?

Corporate governance and ethical leadership has gained momentum over the past decade following several scams and scandals that highlighted ethical malpractices in business operations. Furthermore, these concepts are essential for maintaining optimal health of the society as well as corporations in general. One of the significant challenges in developing and implementing corporate governance is its discrepancies across organizations operating in diverse nations. This discrepancy is mainly due to the fact that the code of ethical conduct varies from one country to another. Hence, there exist no formal guidelines for conducting corporate governance. In this scenario, it is extremely essential to display ethical leadership. This is mainly because there is a significant influence of culture and values on ethical sensitivity thereby determining the kind of corporate governance practices and systems being followed and implemented across nations (Chan & Cheung 2012).

Adhering to ethical conduct in business operations is corporate governance. It is not dependent on legislations and laws. Corporate governance should be based on certain principles rather than legal frameworks. It should be formed in a manner so that it helps in the formation of strategic benchmarks for ethical practices in firms and should be proactive as compared to reactive so as to prevent errant conduct including innovative and proactive

conduct that may not comply with ethical standards. It is not just a set of rules but the display to conduct activities by abiding to certain values, ethics and principles. Scholars maintain that just having a set of laws does not help in organizations to conduct business in a sustainable and ethical manner. Along with corporate governance an organization should ensure that it has ethical leadership that helps in translating and implementing values and ethics in conducting activities in a socially responsible manner. Hence, both corporate governance and

ethical leadership are significant elements for a firm so that it behaves in an ethically responsive manner (Tuan 2012).

It is essential for a firm to have ethical leadership as well as corporate governance for successful implementation of ethical conduct. It is the responsibility of the top management to display ethics in all business functions and processes by abiding to the set of principles and values of conduct. Corporate governance functions should not only be established but should trickle down from the top management to the lowest levels of the employees of a firm. This can only take place if there is strong ethical leadership. Most firms have set corporate

governance and ethical codes, despite this there are several instances of ethical malpractices (Wu et al. 2015). This situation takes place mainly because of the lack of ethical leadership. Hence, it is extremely significant for organizations to not only have a documented code of conduct as well as strategies supporting corporate governance but the existence of ethical leadership for successful implementation of corporate governance strategies.