Last year I came across a good example of unethical practices in a market that is very traditionally linked to German culture (at least stereotypically). Back in mid 2014 more than 20 German sausage-making firms had been fined hundreds of millions of euros when the government realized that they colluded in order to collectively raise prices:
By raising prices, competing firms could enjoy higher revenues since consumers would not deviate into purchasing a different brand due to the fact that all of the other brands were also more expensive. Therefore, the natural relationship between price and demand was manipulated for the benefit of companies. Consumers, on the other hand, took on the burden of a price increase. If they wanted to buy sausages they would now have less disposable income to spend on other goods compared to the disposable income they would have had if no collusion had occurred.
This move goes against Edward Freeman’s stakeholder theory as German firms did not take into consideration the well-being of all of the stakeholders involved in the processed meat market. As a result – and as predicted by Prof. Freeman – their actions were regulated by the government.
Furthermore, As Milton Friedman discussed in “The social responsibility of a business is to increase its profits”, the pursuit of profit through illegal means was ultimately counterproductive for the firms involved. While firms do not have to necessarily engage in pro-social behaviour altruistically, directly harming the community by breaking the law should be avoided.
Take a look at Kevin’s blog for an insight on some positive and ethical business practices.
Check out The Ethics Business Blog’s latest post for an analysis of business culture and its effects on employee morale.
KevinLo
September 16, 2015 — 10:39 pm
Hey Jacobo, this is a clear example of oligopolies colluding and in my opinion, it is definitely unethical because they are not taking into consideration the consumer’s burden.
MiguelAltamirano
September 16, 2015 — 11:53 pm
I believe this is an excellent example of what happens to businesses that try to go beyond social conventions, laws, regulations, among other important factors, just with the goal of maximizing profit. Jacobo, I strongly agree with the idea that this case goes against the Stakeholder Theory, and that is why, at the end, this companies where harmed and not benefited. Feel free to check out my blog entry titled “Ethics and Business:How They Work Together”, so that you can compare and contrast the different outcome that a company which has a corporate executive that, aside from caring about profit, fulfills the social responsibility of his company, had. It is clear than when taking business decisions, one must consider ethics, since those, as stated by Freeman, are the ones that keep every component of the wheel of a business happy and content. This itself, results in a stronger, growing, and more successful business.