Historical Ethical Dilemma

            Introduction

            Nortel Networks Company is commonly known as Nortel was an international company whose origin was based in Canada.  At its peak during the beginning of 2000’s the company had comprised more than one-third of the general valuations of all the corporations that had been listed on the stock exchange of Toronto (Knox, Payne, Ryals, Maklan, Peppard, 2007).  The corporation was established in 1895 in Quebec, Montreal with the manufacturing centers being situated at Ontario, Mississauga.  The corporation was involved in the manufacturing of networking data equipment together with the offering of telecommunication services. The company had employed approximately ninety-four thousand and five hundred workers internationally (Knox, Payne, Ryals, Maklan, Peppard, 2007).

            The downfall of the corporation started when the company failed to live up based on the expectations of their investor.  The financial situation of the corporation, therefore, failed to support the statements that were provided by the management.  As a result, the price of the stock took a dive nose. This, therefore, resulted in the investors losing huge sums of money.  Most of the investors were therefore forced to withdraw their investments from the corporation thus leaving Nortel on bankruptcy verge (Knox, Payne, Ryals, Maklan, Peppard, 2007).  However the corporation continued to operate by debt means financing and since the damage had already been created in 2009 the company fell into liquidation.  In this analysis report, I will be utilizing topics such as unethical business behaviors in explaining the importance of ethics in conducting business.  Ethical decisions development would assist in the operations of the business based on ethical traits.

            Question 1

            The Nortel corporation rise was rapid and quick similarly to its downfall.  The top position era that was held by Roth resulted in drastic changes to the corporation’s fortunes.  From the ethical view, it is clear that several reasons are associated with the shooting up and spiraling down of the corporation (Knox, Payne, Ryals, Maklan, Peppard, 2007).  The first task that was conducted by Roth after becoming the Nortel CEO was to expand the business into the line of internet Nortel acquired 17 distinct companies across the United States and Canada. During this period Roth was utilizing media and press power to his own interests and advantage. This was, therefore, unethical.  Despite the fact that the corporation was developing at a slower pace, Roth utilized the advantage of the media channel in exaggerating financial reports and projections. This unethical conduct, therefore, resulted in attracting huge investments which resulted in the increased growth of Nortel (Knox, Payne, Ryals, Maklan, Peppard, 2007).

            Once the corporation had started attracting more investors and developed its fund's sources, Roth together with his team decided that their investors did not require selling their shares in higher return pursuit on other bases thus choosing to hold the investors stocks to Nortel (Mallin, 2016). The management, therefore, acted in an unethical manner as they started to report in financial performances that were optimistic which indicated the highest earning for the shares. The investors, therefore, were attracted by the growing deal and continued to invest in more shares.  This can thus be illustrated as a mistake that was developed by the company and resulted in the company’s growth thus becoming one of the most authoritative corporations in Canada (Mallin, 2016).

 An additional issue that is related to the corporation fall due to the unethical conduct was the executive’s compensations which stood higher despite the fact that the rise of the shares was declining (Mallin, 2016). In an ethical perspective, it would be necessary for the corporation directors to avoid attaining the bonuses that were highly rated as well as other incentives that were involved as the corporation was slowly losing its credibility thus the business operation side was faced with debt crunches. This was, however, a different case in Nortel as the management officers like Roth was receiving high rates bonuses which were viewed to be more as compared to the norm of the industry.  The unethical conduct of the management, therefore, becomes the center of the corporation's downfall.  In ethical nature, the management was expected to utilize the GAAP concepts in stating all the per share earnings instead of utilizing pro forma strategy which was unethical.  The conduct was, therefore, unfair because it focused on benefiting the company thus falling to consider the investors which eventually resulted in communication failure in Nortel (Mallin, 2016).

            Question 2

One of the major mechanisms would be the use of organization decisions in emphasizing on ethical conducts in the company’s dealings (Wright, Siegel, Keasey, & Filatotchev, 2013).  Maintaining ethical conduct is a crucial guideline in conducting business which can impact the corporation’s sustainability as well as growth. Based on the suggestions made by most theories it is thus clear that ethical conduct application amongst the individuals in the management of any corporation is essential in creating a responsibility sense towards the corporation’s stakeholders. This, therefore, implies that if in Nortel there would have been ethical conduct from the start the management would therefore not have acted in unethical ways as it did. This would, therefore, help the company in growing continuously and remaining healthy to the present.  Another distinct mechanism that can be utilized is developing executives limit set in order for them to earn in equivalent t the norms of the industry thus offering the executives with better options of shares which would thus eliminate the urge of the management to engage in manipulation of operations as well as the general accounts (Wright, Siegel, Keasey, & Filatotchev, 2013). The utilization of these mechanisms would help in ensuring that the management interests are well aligned with the shareholders interest thus creating growth.

            Question 3

The Nortel corporation collapse is associated with different reasons which are mainly characterized by unethical conduct.   Most of the fall reasons lie in the wide   category of inappropriate actions as well as mismanagement which was taken by the executives of the corporation in operating the company.  Partially the fall of Nortel blames mainly lies within the actions utilized by individuals in the corporation in the general operations as well as management (Boubaker, & Nguyen, 2012).  However, the factor of individual is not fully responsible for the meltdown of the corporation. The capital market that was there additionally played a role in the meltdown as this assisted the management in regard to faulty company operation. One of the major factor that related to the failure o the management was based on the executives being entitled  to a particular  certain once they held a particular position in the company. This was therefore conducted in the quest of upholding the agency success theory. This, therefore, enabled the executives to become large stakeholders thus requiring them to earn more in order o enable them to avail their significant high returns on the holdings sales.  The human nature, as well as their conscience of the management executives, impaired their reflections and judgment thus making them acts in an unethical manner.  This was therefore conducted in pursuit of increasing the company’s stock market and increases the growth of the organization (Boubaker, & Nguyen, 2012).

            Question 4

            What occurred to Nortel corporation is equal to what  happened to Enron and WorldCom  in the beginning of 200’s  as well as to  City group, Lehman brothers as well as  other different banks during the financial  crisis of 2008.  This, therefore, raises the question on why most individuals in the world of business keep repeating the same mistake.  Ethical responding the major issue to the reoccurrence of the issue is due to greed. For instance based on Enron case fraud was utilized by the members of the corporate in order t gain capital.  This is the same ethical problems which applied to the WorldCom corporate members who acted in fraud thus failing to observe ethical practices (Wright, Siegel, Keasey, & Filatotchev, 2013).

            Ethics can thus be described as the set of principles which can be utilized by an individual in establishing whether an action can be termed as bad or good. Another reason as to why individuals in business tend to repeat the same mistake is because they are not perfect and thus tend  to get  comfortable with an event which a results in unnecessary mistakes. The business world is characterized by surrounding pressures due to frustrations as well as adversity. This, therefore, makes the business individuals to make hasty decisions which are opposed to evaluating all the situations appropriately.  This practice, therefore, results in mistakes which are costly as they are irregular (Wright, Siegel, Keasey, & Filatotchev, 2013).  The business pressures and economic expectations should be kept in achievable ranges to ensure that the mistakes are not repeated.

            Question 5

            Business education should be prioritizing to ensure that the corporate members clearly understand the ethical practices in business as well as the consequences of unethical conduct.  Regular education would thus help in ensuring that the conduct of the business is viewed as the essential basis of the general operations in the business (Fernando, 2009).

The management should, therefore, work on ensuring that the corporation practices are based on regular examinations.  Regular accounting checks priority helps in ensuring that manipulation of accounts, as well as the financial statements, do not occur at all (Fernando, 2009).  This should thus be accompanied by  regular punishments as well as incentives based on individuals conduct and performance regular punishments works in shaping individuals  conduct while incentives are developed to provide motivation. I believe that prioritize should be based on ethical practices which should be communicated through operations rules and corporate decisions.   Additionally, I believe that performance management would be essential in shaping corporate ethical practices which help in facilitating overall growth and development.

 

 

 

 

 

            References

Boubaker, S., & Nguyen, D. K. (2012). Board directors and corporate social responsibility.

            Fernando, A. C. (2009). Corporate governance: Principles, policies and practices. New Delhi: Pearson Education.

            Knox.  , S., Payne, A., Ryals, L., Maklan S., Peppard, J. (2007). Customer relationship management. Routledge. Copyright

Mallin, C. A. (2016). Corporate governance.

            Wright, M., Siegel, D. S., Keasey, K., & Filatotchev, I. (2013). The Oxford handbook of corporate governance.