Ethical dilemma: An overseas distributor sanctioned over corruption

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I was recently quoted in a BBC Capital’s work ethic article titled “Treading a fine line: A case of corruption?” by Chana Schoenberger. However, some rather important details were omitted from my response to a reader’s ethical dilemma involving one company’s business relationship with an overseas distributor that was recently sanctioned over a corruption issue with another company’s products.

Offered in a Q and A format, here (in its entirety) is what I wrote:

Question:

Our company has a contract with an overseas distributor that has recently been sanctioned for some corruption-related dealings involving another company’s products that they also distribute. We are wary of doing business with them now, although we have no reason to believe that there is anything improper about the way they are selling our products. With a large outstanding order that is material to our worldwide sales results, we don’t want to dump them altogether. What can we do?

Answer:

This is indeed a conundrum. I can certainly understand why this issue is a difficult one to tackle. On the one hand, the “large outstanding order” indicates that the business this overseas distributor brings in is a significant contribution to your company’s overall worldwide sales. Financial gain is not something that can be quickly dismissed, especially since it plays an important part in a company’s financial health and, ultimately, its survival.

On the other hand, I got the distinct impression (based on the wording “we are wary of doing business with them”) that while financial profit is important, that there is more at stake for you and your organization.

There are two related points which you may want to consider. The first point is the possible–but very real–damage to your own company’s reputation if and/or when it is revealed that your company “has a contract with an overseas distributor that has recently been sanctioned for some corruption-related dealings involving another company’s products that they also distribute.” Your organization would then be guilty by association. In other words, just being associated with this overseas distributor might cause your company to also look guilty, even if there is absolutely no evidence to support this.

Apple Inc. serves as an example of what one company decided to do once it discovered that one of its supplier was involved in unethical behaviors. Apple decided to cut ties with one supplier after it discovered that the supplier was involved in using underage workers (Blagdon, 2013). And, to ensure greater transparency, Apple also posted information about supplier responsibility and how Apple would hold itself and its supplier accountable (Apple.com).

The second point is about being an ethical leader and what ethical leadership means. Let’s not forget that there is such a thing as ethical leadership and that ethical behaviors and decisions by leaders influence the ethical behaviors of employees and permeate throughout an organization. Ethical leaders can promote and model ethical behaviors in the workplace and the organization. In addition, and perhaps most relevant to your particular situation, ethical leaders can also discourage unethical behaviors by “refus[ing] to share in the benefits provided by unethical activities” (Yukl, 2010, p. 430).

Alas, I cannot make this difficult choice for you. Ultimately, the final decision is up to you and the decision-makers at your company. In the book Leadership in Organizations, professor Gary Yukl explained that there are three criteria people consider when judging whether a decision or act is ethical: (a) purpose (ends), (b) how much behavior is consistent with moral standards (means), and finally (c) what the results or consequences will be for self and others (outcomes).

I have found that rather than giving answers, sometimes it helps to ask more probing questions to get people to look deep within and come up with a decision that they can live with. My hope is that the two points I have raised and the three criteria for judging the ethics of a decision will help guide you and your company in your decision-making process. Good luck.

Written By: Steve Nguyen, Ph.D.
Leadership and Talent Consultant

References

Apple – Supplier Responsibility at Apple
http://www.apple.com/supplierresponsibility/accountability.html

Apple – We believe in accountability — for our suppliers and for ourselves
http://www.apple.com/supplier-responsibility/accountability/

Blagdon, J. (2013, Jan 25). Apple cuts ties with supplier after audit reveals 74 cases of underage labor. Retrieved from http://www.theverge.com/2013/1/25/3914252/apple-severs-ties-with-supplier-after-audit-reveals-74-cases-of

Yukl, G. (2010). Leadership in organizations (7th Ed.). Upper Saddle River, NJ: Prentice Hall.