In the 21st century, the environment of global business has become very complex as the companies at every level are facing a huge range of ethical issues. It is the responsibility of the business to develop code of conducts and ethics to be followed by all the members of the organization and the company needs to make sure that they also put it into action (Ferrel & Fraedrich, 2015). This paper will be taking the case of one of the biggest telecommunications company that is present in Kenya, Safaricom, and analysing the company’s inability to maintain business ethics and the situation they are in at the moment. One of the fundamental ethical issue that is faced by many companies is related to the promoting of the conduct that is set by the company, and making sure that the integrity of the company is up kept. As new companies are joining the economy, new ethical issues will always be likely to be introduced into the business community that will be concerning the accounting practices, social media trends, harassment in the workplace and problems dealing with equal pay within the ranks.
Maintaining corporate social responsibility and ethical behaviour can bring various benefits to the company. It is important for every company to have their own version of moral principles and guidelines they wish to follow, and the more specific to the company it is, the easier it will be for the company to adhere to it. Following business ethics will prove to be more beneficial to the company than it will be to not follow it (Brusoni & Vaccaro, 2017). Not following the respective company’s business ethics will label that company as being unethical, and this could lead to a great loss in trust from the target audience along with the stakeholders of the company. Reputation is a very important asset of the company, and it also proves to be the hardest to build up back again once it is lost. Maintaining a strong business ethics reputation will also prove to be important in terms of employee retention because it will motivate them to stay with the company for longer.
Safaricom PLC is a mobile network in Kenya that has their headquarters in Nairobi, Kenya (Tuwei & Tully, 2017). The company was found in the year 1997 as a supplementary business by Telkom Kenya, and the Vodafone Group PLC then acquired a stake of 40% in Safaricom, they also decided to also take care of the management responsibility of the company. Safaricom is considered as the one of the biggest telecommunication provider in Kenya and has also achieved the title of being the most profitable company in the Eastern and Central region in Africa. Safaricom offers a range of services like mobile service, money-transferring channels, other consumer products, cloud computing with mobile data, music streaming applications and also Wi-Fi options with fibre optic services. The company has been able to control almost 64.2% of the Kenyan market because of their 25.7 million subscribers as of the end of 2018 (Kenyan WallStreet, 2017). This essay will be addressing the ethical challenges that Safaricom is facing in the existing business environment of Kenya with respect to the expectations by the stakeholders and their engagement in the company.
Companies in Kenya have done very little in enforcing ethical laws but are known to be doing pretty well with the enacting of the laws. This is because there is a lack of a political force that will ensure that companies to take accountability if the laws are to be broken. This cannot be blamed on the company solely because the judiciary and the various government institutions have also failed to prosecute the people and in recovering the assets (Mpuga, 2017). Some of these institutions including the Ethics and Anti-Corruption Commission, the Office of the Director of Public Prosecutions and the Directorate of Criminal Investigations. Similar to the case of Enron in the United States where the CEO had been successfully convicted for the crime of insider trading and fraud, there should be the same happening in the Kenyan companies so that they will be able to set an example for the other companies as a deterrent for corporate fraud. It is very unfortunate that the corruption has become an usual way of life in Kenya, which has been worsened by the government’s unwillingness to fight the war on corruption and motivated more corporate thugs to start engaging in fraud (Muthuri and Gilbert, 2011). Along with the government’s unwillingness, the problem was heightened because of the shareholders unwillingness to raise any questions about the financial on goings of the company. The governor of the Central Bank of Kenya encourages the shareholders to raise questions to the directors of the company relating to the insider loans occurring within the company (Gichure, 2015).
Along with the internal executives working in the company, also a big responsibility of the shareholders to be able to detect anything wrong may be happening at the company. Financial reports and annual reports are always given to the shareholders, so it is up to them to raise any critical questions that may arise during the general meetings (Chell et al., 2016). Since the shareholders at Safaricom were not able to do so, either because of lack of knowledge with these matters, or blatant ignorance, is what caused the fraud to occur within the company. It is basic to understand that if an individual takes the responsibility of being an employer of a company, they are required to have a moral obligation to their employees to make sure that they are being treated and compensated fairly in the workplace. However, if some employees feel that their integrity is being hampered with at the workplace, then it is also the responsibility of the employer to make sure that they are providing a safe place for their grievances to be heard and to be taken action against.
In 2016, the Nairobi Securities Exchange (NSE) had announced that they had joined the Global Compact by the UN by signing the “Code of Ethics for Business in Kenya”. This took place because NSE wanted to go forward with promoting more practices of corporate sustainability as they have accepted a set of core values relating to “human rights, labour standard, the environment and anti-corruption” (Kobuthi et al., 2018). This code of ethics came into place so to enhance the business ethics conducted by the companies in Kenya in accordance to the ten principles that are in place as a part of the UN Global Company. These codes deal with issues that relate to human rights, the standard of the labour in the company and if the company is adhering to the terms set by the Environment and Anti-Corruption commission. The code has clear distinction between the consequences that will be faced if the company is violating the terms placed in the code. If the companies that have signed for the Code are found to be violating the terms of the agreement, there is a 3-step process outlined by the UN in the Code as to how they will be dealt with (Global Compact Network Kenya, 2015). The offending company will first meet with the representatives of the other organized businesses and discuss what the company has been found guilty with. The next step is to release a public statement that expresses the overall moral disappointed by the other businesses, and a show of disapproval. Even though companies would be keen to not let their dirty laundry to be aired in public, this negative push will result in a positive outlook for the future as they would stay in the right lane so to no face such embarrassment. The final step would be to exclude the offending company out of the Code until they have been able to rectify what has transgressed. The importance of this step is that this exclusion will slowly deteriorate the consumer’s view of the company, so they would want to rectify the mistake as soon as possible – enabling change to be implemented in a short span of time.
Activism is the vehicle that drives change into any situation, and this is where shareholders turn to when they believe that the company’s management is not maximizing the company’s potential. The lack of shareholder activism is a result of the high levels of poverty present in the country (Gupta et al., 2018). This means that only a very small percentage of the country’s population is active on the stock market, while the majority of the others do not even concern themselves with what is happening. This is because the ownership of the biggest firms is in the hands of only the wealthy investors, and they use this as an excuse to exercise dominance in the boardroom while decisions are being made. Activism does not always have to become a full-blown problem for the company, but can also be the shareholders asking for disclosure on an issue they think needs to be taken a look at or a proposal to change or modify a company policy that exists (Bourveau and Schoenfeld, 2017).
Before getting into what Safaricom is doing wrong, it is important to know about the basic principles that must be followed by all companies so that are able to perform business properly. Business ethics, which is also known as corporate ethics, is an application of professional ethics that will examine the principles and the moral problems, which can arise in a company environment (Ramirez, 2018). These set of ethics rule applies to everyone and all aspects of business being conducted, and is relevant to all individuals of the company or organization. For these sets of rules to be properly implement in the workplace, the ethical way of work should originate from the individuals that are working there already. In other words, business ethics lays out a set of values and norms that will govern the actions of an employee at the company (Ciocirlan, 2017).
In some cases, it proves to be a great challenge for the companies to maintain ethical while carrying out their business. Most of the times, the decisions that need to be made are usually very complex and there is never enough time for reflection on the decision to be made that may result in some information to be missing from the decision making process (Tilt, 2016). In the process of achieving the desired result, many business executives can end up doing things that should not be done because that is not what they are being paid for. The reluctance of the shareholders to put forward any problems they may notice comes from the prevalence of the beaurecratic culture in many of the companies in poverty-stricken areas, where they are reluctant to change and have a negative outlook on the people who want to implement change (Ferrell et al., 2019).
According to an article on Reuters, Kenya was losing almost one-third of the state’s budget to corruption every year, which is equivalent to almost US$6 billion. The Chairman of the Ethics and Anti-Corruption commission, Philip Kinisu, had said that it was becoming increasingly difficult, due to the shortage of staff and the lack of equipment, to tackle this problem. The real twist in the story came when the President Uhuru Kenyatta, unwillingly, had corrected Kinisu and blamed the loose estimate of the amount lost to bad condition of the paperwork while unconsciously admitted that the corruption had started to threaten the national security of the country (Miriri, 2016).
During the launch of Safaricom’s sixth Sustainable Development report in 2017, the newly appointed CEO Bob Collymore promises to fight a successful fight against corruption and to promote healthy ethical behaviour that will better the firm’s corporate social responsibility (Bellows, 2017). During this launch, he had also mentioned that almost 52 employees of Safaricom were fired from the company due to charges of fraud that had occurred in the period of the report. With almost 98% of the company’s suppliers are part of the signatory that deals with the Code of Ethics for all businesses in Kenya. With Safaricom contributing 6.5% to the Kenyan GDP, their business proceedings are of a big concern for the government of Kenya, if they are not able to keep up any ethical standard (Acquaah and Kiggundu, 2017). Collymore stated that the company would start maintaining their business proceedings to run in an ethical manner while keeping these processes transparent and accounted for, so they do not have to face any legal or reputation risks.
Virtue ethics provides an opportunity for the managers and the business leaders of the company to analyse the kind of people they become with respect to their actions and decisions made (Wang, Cheney and Roper, 2016). This shapes the business policies, culture present in the environment of the company. According to the theory, what makes something good or bad is its capability of promoting or embodying one of those traits mentioned. For Safaricom, it will be important for them to embody this ethical theory for their business proceedings in the future, as it will guarantee that their actions are not negatively influencing the livelihood of the consumers, along with that of the company’s.
With the CEO of the company, Collymore, taking the initiative to eradicate corruption from the company’s roots, the same energy seemed was passed onto the shareholders as well. At a recent annual general meeting, some Safaricom shareholders had protested how they were only getting a small portion of the divided amount, and questioned why and how there was a heavy spending occurring in the company. This initiative gave real hope that, after a long time, the purpose of those meetings were finally reaching their full potential. After the company faced a huge storm because of their SIM-card swap scandal caused by a former employee at Safaricom, there was a lot of tension amongst its existing users on the credibility of the company (De Beukelaer and Eisenberg, 2018). This tension was exacerbated by the fact that it was a user of the SIM card that detected that his personal information was leaked to a third-party promoter company. If this same problem were to have been detected by a company executive then the matter could have been handled internally, without the consumers feeling that the people in charge are not doing their job properly. However, Safaricom since then has been able to add almost 60,000 new subscribers from the month of December in the last year, after the scandal. As mentioned earlier, a good reputation is something that is very difficult for the company to earn back but in this case, they were able to do so only because they had completely changed their company’s statement of purpose (Taghian, D’Souza and Polonsky, 2015). They were now going to focus more on transforming lives by providing the people a medium through which they can be closer to the information that will be made available to them with a subscription with Safaricom.
Business ethics governs how a company should behave internally. It can be very easy for a company to gain profit in way that is not ethical, just because it may be the easiest thing to do. However, maintaining good ethics while achieving profits says more about an organization than just profit would. Consumers are more moved by the story of struggle that a company experiences to get to the level that they have, and that almost always proves beneficial to the company. Being one of the biggest companies in the country, Safaricom lost the trust of many of its users, however they have been able to gain their reputation and their consumers back. The entire business climate of Kenya has exacerbated the corruption occurring in most of the companies, however as more attention is falling on those businesses, they are being pushed towards proper ethical conduct because the consequences of behaving otherwise will prove to be very disadvantageous.
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