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Go Out of Business or Risk Surviving? A Case Study on Challenges of...

Go Out of Business or Risk Surviving? A Case Study on Challenges of Ethical Decision Making in Complex Business Situations
Payam Saadat

1. The PCO's Case

Steve was a senior executive at PCO, an American construction and civil engineering firm in Dubai with headquarters in Portland, Oregon.
This company engaged in projects including residential and business construction (buildings and superstructures), bridge erection,
roadway, excavations, and large scale repair work. The 2008 global financial crisis caused widespread instability in Dubai's economy and
contributed to PCO's financial struggles as well as the collapse of many construction firms in the region. In addition, significant numbers of
Chinese civil engineering companies manipulated Dubai's construction business by offering low rates and fast-paced performance. This
vastly reduced the number of available projects within PCO's domain of operations. In a corporate meeting, a report analyzing the financial
status of PCO indicated that a failure to devise an effective survival strategy within the next three months could lead to the branch's
closure.
As a highly competent manager, Steve's strategic and tactical success at PCO for over 15 years transformed him into a valuable asset for
the company. PCO's strategic sector highly trusted and valued Steve's opinion and incorporated his insights and solutions into the firm's
decision making framework. Influenced by his decentralized and facilitative management style, Steve's relationship with his employees was
highly positive and based on care, trust, and mutual respect. As a team leader, Steve placed great emphasis on sustaining and popularizing
values, such as integrity, transparency of actions (open agendas), and moral conduct on both individual and collective levels. Accordingly,
PCO's executives always used Steve's assistance to develop ethics training programs. In addition, Steve advocated for holistic and fact-
based decision making, which led him to engage in actions including gathering information from multiple resources and involving
stakeholders in the decision making process.
Frustrated by PCO's financial situation in Dubai, Steve felt responsible to find a solution to reduce the high costs of engineering, designing,
and drafting in order to save the company and his workforce from losing their jobs. While sitting in his office thinking about potential
options, Steve received a phone call from Ali, a close and trustworthy friend who owned a startup civil engineering and design company in
Iran. Prior to establishing his company, Ali worked as a civil engineer in Dubai for over five years, which helped him become familiar with
laws, regulations, key success factors, and nature of construction business in UAE. Ali invested a significant amount of money in his
company and hoped to expand his business rapidly. However, Iran's unstable economy, which primarily resulted from political conflicts and
issues related to foreign policies, posed many challenges to Ali and his business. From experience, Ali knew that sealing a business deal
with a Dubai-based Western construction firm
could help his business survive during Iran's economic and political instabilities. More specifically, the successful completion of a business
contract with a Western firm could enhance the reputation of Ali's company and stabilize its position locally, which in turn would attract
more business to his firm. Considering the unpleasant business conditions, Ali had prioritized the survival of his startup at any price.
In the course of their discussion regarding PCO's challenges, Ali presented a solution that could solve a substantial portion of PCO's
financial problems. Ali proposed that his company could assume PCO's engineering, design, and draft work for approximately one fifth of
the cost that PCO spent on these sectors. Steve asked, "How is this even possible?" In response, Ali highlighted that each
U.S. dollar was being traded for 3,500 Toman (a super unit of Iranian currency), which implied a value difference of over three times.
Further, Ali told Steve that his staff salaries were much lower compared to those of PCO employees because of the company's startup
status and the average pay in Iran. By leveraging a favorable exchange rate and lower cost of labor in Iran, Steve determined he could
reduce PCO's overall expenditure in three crucial areas of business.
While listening to Ali's appealing proposal, Steve recalled that U.S. companies could not engage in business with Iranian firms because of
U.S. economic sanctions on Iran. Steve interrupted Ali and asked, "What about the economic sanctions restricting business between the
U.S. and Iran? I can't engage in illegal business." Ali responded, "No worries, I also have a strategy to work around those sanctions. There
are no business restrictions between the United Arab Emirates and Iran. If we establish a [middleman] company in Dubai, we can exchange
business through this mutual source. I assure you that the quality of my service will exceed your expectations. So what do you say, Steve?"
Steve was amazed by Ali's proposal and its details. He believed this cost-saving strategy could help PCO survive and buy itself time to
devise additional plans to secure business success. Steve realized that if he decided to engage in business with Ali, he would not be able to
discuss the Iran-end portion of the contract with his corporate office. This is because, in the eyes of the industry and the U.S. government,
working around sanctions is perceived as unethical, and demonized by other U.S. entities. Therefore, one option for Steve was to engage
with Ali's company through the Dubai-based intermediary while concealing the fact that PCO would indirectly collaborate with an Iranian
firm. Even as a temporary solution until reaching financial stability, this option would pose serious risks to Steve and PCO. On the other
hand, disregarding Ali's proposal would most likely push PCO-Dubai towards closure because the corporate office possessed no feasible
plans to save this branch within the specified timeframe.
Steve faced a critical decision making challenge primarily because he was not able to easily determine the rightness of a potential course
of action. An additional layer of complexity that contributed significantly to the difficulty of Steve's decision making process related to the
presence of two groups of stakeholders (PCO's executives and Steve's employees) with distinct needs and agendas; the firm's executives
preferred to comply with the U.S. government's foreign policies while Steve's employees prioritized keeping their jobs. Moreover, Steve's
emotions and personal values (e.g., feeling frustrated due to time pressure, caring for employees, and valuing moral conduct) further 숿
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increased the complexity of his decision making. Steve's situation signifies a highly complicated case of decision making in the realm of
management. 

Please read the paper and help the following questions.

1.    What ethical issues are present in the case? Please discuss.

2.    Conduct a stakeholder analysis to obtain an accurate understanding of each primary stakeholder involved in the case (emphasis on
individual interests and influence). Prior to responding to this question, please conduct some research to find and review sample
stakeholder analyses.

3.    Looking at the case, we realize that the involved stakeholders (e.g., Steve, Ali, the company's executives, etc.) come from different
cultural backgrounds. Explain how cultural factors inform and influence your analysis of the case. Ideally you draw on some published
sources, and for this question ensure you draw on your own critical thinking skills and life experience.

4.    (a) What role do Steve's personal values and emotions play in determining the nature of his decision? Is this considered a common
challenge in international business? Explain. (b) Analyze Ali's emotional state based on the information presented in the case. How could his
emotional state influence his behavior and considerations for moral conduct?

5.    Place yourself in the position of Steve and assess the morality of the act of imposing sanctions on a nation. How could your judgment
(and biases) influence Steve's decision?

6.    Analyze and assess some consequences of Steve's decision options using consequentialism (i.e. utilitarianism ethics) to assess a
decision. Initially, list 3-4 potential courses of action that Steve can take -based on apply the rationale associated with consequentialist
ethics. Then, comment on potential consequences and implications of/for each of the each of the 3-4 alternatives you listed.

7.    Analyze again -this time in the context of deontological theory of ethics. Assess the rightness or wrongness of the 3-4 decision options
that you identified in question 6 (i.e., using deontology to assess the ethics of each of the 3-4 options you identified).

8.    Informed by the analysis and assessment that you conducted for questions 6 and 7, determine your recommendation, i.e. If you were
Steve, what option (final decision) would you choose out of the 3-4 options that you proposed? Justify why you think this is the best option,
and explain any risks or potential consequences for Steve, the compay, and/or other stakeholders.

9.    Based on your knowledge of consequentialism (aka utilitarianism ethics) and deontological ethics, and how you applied these
perspectives to analyze the case, as an organizational leader, would you utilize these frameworks individually to assess and inform your
decision making, or do you think by integrating them you might be able to generate a more useful and effective framework for your decision
making? Discuss, and justify your response. (20 pts)1.    What ethical issues are present in the case? Please discuss.

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Answer & Explanation Solved by verified expert 숨 Rated

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Challenges of Ethical Decision Making in Complex Business Situations: The PCO's Case

 
Introduction
 
Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.
Ethical decision-making refers to the process of evaluating and choosing among alternatives in a manner consistent with ethical principles.
Most ethical decisions have multiple alternatives, consequences that extend beyond the immediate situation, uncertain consequences,
outcomes that mix various economic, legal, and social benefits, and personal implications.
 
Steve was a senior executive at PCO, an American construction and civil engineering firm in Dubai with headquarters in Portland, Oregon.
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Frustrated by PCO's financial situation in Dubai, Steve felt responsible to find a solution to reduce the high costs of engineering, designing,
and drafting in order to save the company and his workforce from losing their jobs.

Step-by-step explanation

Question 1

A frustrated Steve, felt responsible to find a solution to reduce the high costs of operations and save the Company and his
workforce from losing their jobs. Ali, who owned a startup civil engineering and design company in Iran, presented a solution that
could solve a substantial portion of PCO's financial problems. He proposed that his company could assume PCO's engineering,
design, and draft work for approximately one fifth of the cost that PCO spent on these sectors, highlighting that the U.S. dollar was
being traded for 3,500 Toman (a super unit of Iranian currency), which implied a value difference of over three times.

By leveraging a favorable exchange rate and lower cost of labor in Iran, Steve determined he could reduce PCO's overall expenditure
in three crucial areas of business. However, that meant unethical shifting of work and employment from his Company to Ali's
Company.

Steve recalled that U.S. companies could not engage in business with Iranian firms because of U.S. economic sanctions on Iran.
However, Ali had formulated an unethical strategy of establishing a 'middleman' company in Dubai, where they could exchange
business through a mutual source.  In the eyes of the industry and the U.S. government, working around sanctions is perceived as
unethical.

With distinct needs and agendas; the firm's executives preferred to comply with the U.S. government's foreign policies while Steve's
employees prioritized keeping their jobs.

Question 2

Stakeholder analysis

High power, highly interested people; the (highly influential with low impact) stakeholders that have to be satisfied.

PCO's executives.

High power, less interested people; the (highly influential, with high impact) stakeholders to work with.

Steve, a senior executive at PCO.

Ali, as a possible external contractor, lies in this category.

Low power, highly interested people; the (low influence, with low impact) stakeholders that has to be monitored.

Other US entities

The (low influence, high impact ) stakeholders that have to always be informed

The employees of POC

Question 3

Culture may also affect the decision-making process. Cultural beliefs can influence the ethical aspect of a decision. Even the the
organizational culture influences decisions by its members and the way in which it influences its members' acceptance or rejection
of the decision. What may seem ethical, from Ali's perspective, influenced by Asian, Middle Eastern, Iranian culture, may be perceived
unethical in the Western culture. Ali has no problem in formulating strategies that would enable his company to work around the
sactions, while in the eyes of the industry and the U.S. government, working around sanctions is perceived as unethical, and
demonized by other U.S. entities.

Question 4

a)

Steve faced a critical decision making challenge primarily because he was not able to easily determine the rightness of a potential
course of action. Steve's emotions and personal values; feeling frustrated due to time pressure, caring for employees, and valuing
moral conduct, further increased the complexity of his decision making.

The relationship between ethics and international business is extensive and is impacted by local perceptions, values, and beliefs. 
Each professional is influenced by the values, social programming, and experiences encountered from childhood on.

b) Ali invested a significant amount of money in his company and hoped to expand his business rapidly. However, Iran's unstable 숿
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economy posed many challenges to Ali and his business. Considering the unpleasant business conditions, Ali had prioritized the
survival of his startup at any price.

One way that behavior is affected by emotions is through motivation, which drives a person's behavior. When a person feels
frustration, anger, tension or fear, they are more likely to think and act aggressively in formulating decisions.

As a businessman under pressure, anxiety, tension and fear, Ali could depict an aggressive behaviour without any consideration for
moral conduct.

Question 5

Economic sanctions raise serious moral questions. If properly enforced, they have the potential to cause significant harm to the
people of the target state. Most of sanctions are politically instigated and as such, lack a moral basis.

Based on this argument, should adopt the presented cost-saving strategy that could help PCO survive and buy itself time to devise
additional plans to secure business success.

Question 6

Consequentialism is a theory that suggests an action is good or bad depending on its outcome. An action that brings about more
benefit than harm is good, while an action that causes more harm than benefit is not.

i) Steve can opt to adopt Ali's proposal, help PCO survive and give a second chance to secure business success, despite the ethical
aspect of such an option.

Potential consequences and implications;

Both the PCO and Ali's company would survive the financial crisis and secure not only their future but also their employees and
stakeholders' futures as well. As per the consequentialism theory, this option would be ideal, as its results would benefit all the
involved stakeholders.

Such a move (working around the sanctions) would be viewed unethical and demonized by the industry and entire US entities.

ii) Steve can opt not to adopt Ali's proposal, due to its perceived unethical aspect, and formulate another strategy.

Potential consequences and implications

This option might spell the end of POC and Ali's company and jeopardise their future chances of business success, however, Steve
would be hailed as an ethical leader who stands up for what is right. As per the consequentialism theory, this would be a wrong
option, as none of the stakeholders would benefit in this case and scenario.

iii) Steve can continue with the existing strategy and hope for the best.

Potential consequences and implications;

POC would likely lose the financial and survival battle to the financial crisis and shut its Dubai branch. Once again, an unacceptable
decision as per the consequentialism theory.

Question 7

Deontology is a theory that suggests actions are good or bad according to a clear set of rules.

i) Steve can opt to adopt Ali's proposal, help PCO survive and give a second chance to secure business success, despite the ethical
aspect of such an option.

Potential consequences and implications

Both the PCO and Ali's company would have a chance to survive, but this option as per deontological theory, would contravene the
universal industrial ethical rules.

ii) Steve can opt not to adopt Ali's proposal, due to its perceived unethical aspect, and formulate another strategy.

Potential consequences and implications

 Both the PCO and Ali's company would lose a chance to survive the financial crisis. However, as per the deontology ethical theory,
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this would be the correct option.
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iii) Steve can continue with the existing strategy and hope for the best.

Potential consequences and implications

Once again this option would really jeopardise POC's chances of surviving the financial crisis, but according to the deontology
theory of ethics, this option would still be in line with the ethical and moral standards rules.

Question 8

Steve should adopt Ali's proposal. This proposal would not only enable Steve to reduce PCO's overall expenditure in three crucial
areas of business, but would offer PCO a chance to survive the financial crisis and a future business success.

However, this option would mean breaking the ethical rules relating to working around sanctions. Such a move is not only perceived
as unethical, but it is also demonized by US entities.

Adopting this option would mean sending some of PCO's employees home, because their work, duties and responsibilities would be
traded to Ali's company.

Question 9

Deontological ethics holds that at least some acts are morally obligatory regardless of their consequences for human welfare, while
Consequentialism is an attractive ethical approach because it provides clear and practical guidance (Brown 2020). As such, it is
important for leaders to utilize these frameworks  individually to assess and inform their decision making.

 
Reference;

Brown, C. (2020). Deontology, consequentialism and reciprocity in contemporary just war thinking. European Review of International
Studies, 7(2-3), 317-337.

Ruedy, N. E., & Schweitzer, M. E. (2010). In the moment: The effect of mindfulness on ethical decision making. Journal of Business
Ethics, 95(1), 73-87.

O'Fallon, M. J., & Butterfield, K. D. (2013). A review of the empirical ethical decision-making literature: 1996-2003. Citation classics
from the journal of business ethics, 213-263.
 
 

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