FOREIGN TRADE UNIVERSITY

SOLUTION TEAM
Group 8
TOPIC: LEADERSHIP ETHICS IN SHARING BAD NEWS

Course name: Business Ethics

Lecturer: Dr. Duong Thi Hoai Nhung
Class: The Advanced Program of International Business Administration,
English 01, Batch 59
Team members: Vuong Minh Ngoc 2012280027
Kieu Yen Ngoc 2013280025
Dinh Le Quynh Thu 2013280034
Nguyen Thi Yen Phuong 2013280029
Nguyen Ngoc Hai 2012280014
Truong Duc Huy 2012280016
Doan Thu Phuong 2013280027
Tran Hoang Kien 2012280019

Hanoi, June 08, 2023

SUMMARY OF CASE

Novasys Medical is a medical device company that makes a nonsurgical treatment for female
stress urinary incontinence. The company's key product, developed by Novasys Medical, has
recently been rejected by the FDA. The CEO, Debra Reisenthel, has been informed that there
is only a 20% chance of eventually gaining FDA approval for the product, which poses a
significant challenge to the company and may lead to employees dissatisfaction. The CEO is
grappling with the decision of how much bad news to share with employees following the
FDA's rejection of their key product. She recognizes the moral responsibility to inform her
employees, but also acknowledges the potential consequences and conflicting expectations
from different constituents.

ETHICAL ISSUES

In the case of Novasys Medical, due to the low probability that its key product gets the
acceptance from the FDA, the CEO is confronted with a situation whether to exercise her
moral responsibility to inform employees or not. Both approaches have their own advantages
and disadvantages as one will come at the cost of another. Particularly, the CEO is apparently
believed to hold a moral obligation to promote truth, honesty and transparency at the
workplace. However, the reputation of the company, as well as anxiety spreading towards
employees are inevitable. On the other hand, if the truth is concealed, it can be implied that
the CEO is not practicing her duty as a manager. In other words, this dilemma has araised one
of the most ubiquitous ethical issue in the business environment:

● Issue of Honesty and Integrity: It is the leaders’ responsibility to create and build an
organization with the foundation on integrity in which all information is available to
employees and stakeholders.
● The rights of employees to access information, to be aware and informed of matters
and to make contributions to solve the issues.

Both ethical issues are prone to have significant impact on the business if not being
considered carefully. As a result, the development of a holistic solution based on several
ethical theories is of significant importance.
SOLUTIONS

Solution 1: Reveal the Whole Truth

One solution to address the situation is to reveal the whole truth to the employees in a
transparent manner. Essential details, such as the FDA rejection and the low chances of
approval, will be shared while considering how the information is conveyed to minimize
unnecessary anxiety and panic among employees.

Kant’s Theory of Morality

Applying Kant's theory, it is crucial to acknowledge the autonomy of the employees and
recognize their right to be informed about matters that directly impact their job security. By
sharing the truth, employees can exercise their autonomy in making decisions about their
careers and future plans. Although there may be short-term challenges and concerns about
potential employee turnover, the long-term benefits of open communication outweigh the
risks.

Treating employees as ends in themselves, rather than mere means to achieve trust and
integrity, is crucial. It avoids depriving employees of their freedom to decide their future
actions and upholds their dignity and autonomy. By keeping the promise to protect employees
and provide them with accurate information, the organization demonstrates its commitment to
their well-being.

Overall, by revealing the whole truth to employees and creating an environment of trust and
integrity, the organization can empower employees to make informed decisions and
contribute effectively to navigate the challenges posed by the situation.

Utilitarianism

Total pleasure

Firstly, the revelation significantly increases trust in the leadership. By openly sharing the
challenging situation, the CEO demonstrates a high level of transparency and honesty, which
fosters a stronger bond of trust between the employees and the leadership team.

This act also enhances the employees' sense of ownership and empowerment. Being informed
about the potential disapproval allows employees to understand the gravity of the situation
and the need for collective effort. It provides them with an opportunity to contribute their
ideas and solutions to navigate the challenges ahead.
Open communication about the potential disapproval allows the employees to freely express
their concerns and receive the required help in a supportive environment. Since they are
aware of the possible consequences and are able to choose their job choices with knowledge,
they are respected for their right to make plans for the future.

Total pain

Initially, there will be a feeling of shock and concern as employees absorb the news and
contemplate its implications. Their job security being vague can create anxiety and
uneasiness about the future. The possibilities that some employees will consider quitting
increases when the risk of disapproval is made public. People may reconsider their
professional options and look into alternative chances that provide more stability and security
as a result of the news.

Total utility

Comparing the total pleasure and total pain, the first solution can be considered of high
utility. The high utility resulting from employee empowerment and open communication
extends beyond the employees themselves. The pain can be considered as a high-velocity
risk, which has only a short-term impact. The pleasure will influence the whole company on a
long-term scale, which will considerably outweigh the total pain.

Solution 2: Reveal Partial Truth: Still under the Verification and Inspection Process

The second solution for this case is that the CEO may choose to reveal partial truths by
saying the FDA approval is still under the verification and inspection process. She choose to
be vague about the situation and not share any specific details with the employees.

Total pleasure

Applying Utilitarianism, the company may do so in order to reduce the possibility of

employees leaving, satisfy the Board of Directors' expectations to keep secrets, and avoid
immediate negative reactions. Additionally, by doing this she can reduce uncertainty about
the future of the company.

Total pain
However, while these short-term benefits may seem appealing, the long-term negative
consequences of withholding information can be severe. One of the risks of revealing partial
truths is the erosion of trust and decreased engagement among employees and stakeholders.
When employees feel that they are not being given the full picture, they may become
disengaged and less committed to the company's goals. This can lead to decreased
productivity, increased turnover, and a general sense of apathy among the workforce. Another
risk of revealing partial truths is the feeling of betrayal that employees and stakeholders may
experience when the full truth is eventually revealed. If employees feel that they have been
misled or not given the full picture, they may lose faith in the company's leadership and
become less willing to work towards the company's goals. This can lead to a breakdown in
communication and collaboration, making it more difficult for the company to adapt to
changing circumstances. Furthermore, restricting the information shared with employees and
stakeholders limits their ability to meaningfully contribute to finding solutions and adapting
to the situation. When employees are not given the full picture, they may not be able to
provide valuable insights or suggestions that could help the company navigate difficult times.
This can lead to missed opportunities and a lack of innovation, which can ultimately harm the
company's long-term prospects. Finally, if eventually the bad news is revealed, the employees
and other stakeholders still suffer but on a less severe scale.

Total utility

In conclusion, this choice brings in medium utility. While it may be tempting for companies
to reveal partial truths in order to reduce short-term risks, the long-term negative
consequences of doing so outweighed it.

Solution 3: Conceal the Truth

The third solution for this case is that the CEO should conceal the truth from the employees.
She hides the truth to meet other constituents’ desires and maintain the stability of the
company, prevent any immediate negative reactions of employees, protect stakeholder’s
interest and preserve the company’s reputation. This decision may be useful and effective in
the short term, however, it exists potential negative consequences and ethical implications

Total pleasure
Applying Utilitarianism, it is important not to reveal the truth to maintain a positive public
image and prevent damage to the company’s reputation. This can be crucial for company's
success and long-term viability. A positive public image often translates into increased
customer trust, investor confidence, and overall stakeholder satisfaction. By not revealing the
truth, the CEO aims to protect the company's reputation, which can contribute to the
happiness and well-being of a larger number of stakeholders. Additionally, the CEO should
not tell the truth to employees so that she can retain the existing workforce and maintain
stability within the organization. This may provide short-term stability and continuity when
the CEO tends to prevent panic, unrest, or mass resignations that could disrupt the operations
and overall functioning of the company. Additionally, she can temporarily maintain trust and
avoid any immediate negative reactions.

Total pain

However, if the bad news eventually is discovered by stakeholders, the company's reputation
may suffer even more. When the truth is revealed after a prolonged period of concealment, it
can lead to a severe loss of trust and credibility, reputational damage, customer attrition,
decreased investor confidence, and potential legal consequences. Moreover, concealing the
truth from employees can have significant negative consequences for their well-being. It can
result in low job security and uncertainty, as employees may sense that something is amiss
within the organization. This can lead to increased stress, anxiety, and a negative impact on
their mental health. Furthermore, if employees discover the truth later on, they may feel a
deep sense of betrayal, eroding trust in the CEO and the organization as a whole. This can
have long-term effects on employee morale, motivation, and engagement, ultimately affecting
their productivity and job satisfaction.

Total utility

Considering the total pleasure and total pain, the third solution can be considered of medium
utility. Although concealing the truth may result in long-term negative consequences, it still
brings in a range of short-term benefits for the CEO and the company, which prevent the
employees from leaving and preserve the company’s reputation.
DISCUSSION

Do you think all scenarios should be resolved using the same ethical principle once you
settle on the best principle for yourself or do different scenarios warrant the use of
different elements from different principles?

Once a person decides which ethical rule is the best for them, they should not limit the
application of that rule to certain situations. Instead, multiple ethical principles can often be
applied in different ways depending on the situation.

Real-life circumstances frequently involve trade-offs and complexity, necessitating the

application of many principles of ethics. Similar to the above case, our group utilizes two
distinct principles (utilitarianism and theory of morality) to support our solution.

Also, people come from a variety of origins and have diverse moral philosophies and
personal beliefs. It is crucial to take into account the various cultural and individual
viewpoints when faced with ethical issues. Recognizing and respecting these differences can
lead to more inclusive and fair decision-making processes.

In short, while it is crucial to base one the preferred principle, it is just as crucial to
acknowledge the need for adaptability and flexibility in ethical decision-making. Every
circumstance should be assessed on its own merits, taking into consideration every relevant
detail and, where necessary, including aspects from other ethical concepts.
 PEER REVIEW SHEET

No. STUDENT CANDIDATE NO %*

1 Vuong Minh Ngoc 2012280027 100

2 Kieu Yen Ngoc 2013280025 100

3 Dinh Le Quynh Thu 2013280034 100

4 Nguyen Ngoc Hai 2012280014 100

5 Nguyen Thi Yen Phuong 2013280029 100

6 Truong Duc Huy 2012280016 100

7 Doan Thu Phuong 2013280027 100

8 Tran Hoang Kien 2012280019 100

All group members contributed equally (please tick)

Date: 8 / 6 / 2023

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