After graduation you obtain a management position with a rapidly growing start-up preparing for an initial public offering (IPO). The company has secured huge investments from venture capitalists. You, as well as many other managers, receive a modest amount of stock options to encourage hard work and loyalty. And everyone does work hard and long, sometimes up to 20 hours a day, including required attendance at an occasional 2:00 a.m. meeting.
The 40-year-old founder and CEO, Andy, is the company’s largest shareholder at 30%. Andy has a dynamic personality, a dominant physical presence at 6 feet 5 inches, and nonstop energy. He is an eloquent visionary who attracts trust and a cultlike following from employees, despite being highly impulsive. Andy lives a lavish lifestyle and owns three luxury homes and a private jet. Company expenses are out of control with $1 billion in losses last year, but that money could be recovered quickly if the upcoming IPO meets current expectations.
During your first few weeks of employment you observe Andy occasionally join hardworking employees for a shot of tequila and a marijuana break, which he supplies. Some employees think this is “cool” and down to earth; others feel awkward. During the summer you attend the often-talked-about company-wide weekend retreat where the wild “work hard, play hard” water cooler stories are confirmed. The brainstorming, planning, and goal-setting meetings are interspersed with college fraternity and sorority type activities involving excessive consumption of alcohol and drugs and drunken sexual harassment by both men and women.
On the Monday following the retreat, after a series of tense meetings preparing for the IPO, you lunch at an isolated restaurant quite a distance from work to get away from everyone. To your surprise, eating by herself, with an empty chair next to her, is a board member. It’s obvious she’s not expecting anyone to join her. Board members have a legal obligation to make decisions based on the best interests of the company. You wonder if the board member knows the extent to which the CEO has developed a reckless work culture and how that might impact the upcoming IPO as more information about the company becomes public. The opportunity to speak confidentially with her about your work experiences will not likely happen again.
Critical Thinking Questions
What could you do?
What would you do?
A. Ask to join her and share what you know about the CEO’s behavior and work culture
B. Write an anonymous note documenting some of the worst misbehaviors and secretly leave it on her table when she’s not looking or mail it to her
C. Do nothing because many employees enjoy the work environment, and this is way beyond your job description
D. Something else (if so, what?)
Why is this the right option to choose?
What are the ethics underlying your decision?
Chapter Questions:
- What are the roles of ethical values for the six traditional shareholder-oriented governance systems?
- What are the two primary ways boards of directors determine the shareholders’ best interests?
- How can companies implement three innovative stakeholder-oriented governance systems?
- What are some of the best practices for good corporate governance?
- What are several common governance problems and issues?
Essay: Ensuring Ethical Governance in a Rapidly Growing Start-Up
Introduction
In the fast-paced world of start-ups, ethical governance is often put to the test, especially when faced with situations that challenge the boundaries of acceptable behavior within a company. This essay will explore the ethical dilemmas faced by a manager in a rapidly growing start-up preparing for an initial public offering (IPO) and the critical decisions that need to be made to uphold ethical values and corporate governance standards.
Thesis Statement
The key to ensuring ethical governance in a rapidly growing start-up lies in upholding transparency, accountability, and integrity. Managers must navigate complex ethical dilemmas, such as addressing reckless work cultures and questionable behaviors of top executives, to protect the interests of stakeholders and uphold the company's reputation.
Ethical Dilemma: Observing Reckless Work Culture and CEO Behavior
As a newly appointed manager in a start-up gearing up for an IPO, you are faced with a challenging ethical dilemma. The CEO, Andy, known for his charismatic yet impulsive nature, has fostered a work culture characterized by excessive partying, substance abuse, and inappropriate behavior. Despite the company's financial success and potential for growth, these questionable practices threaten to tarnish its reputation and impact the upcoming IPO.
Critical Thinking Questions
What Could You Do?
Ask to join the board member: Share your observations about the CEO's behavior and work culture, highlighting potential risks to the company's reputation.
Write an anonymous note: Document instances of misconduct and leave it for the board member to review.
Do nothing: Rationalize inaction based on the perceived acceptance of the work environment by some employees.
What Would You Do?
Choosing to ask to join the board member and candidly discuss your concerns about the CEO's behavior and its implications for the company is the most ethical course of action. By initiating an open dialogue with a board member, you demonstrate a commitment to upholding ethical values and corporate governance standards.
Ethics and Decision-Making
Transparency and Accountability
Engaging in a conversation with the board member demonstrates a commitment to transparency and accountability. By raising awareness about potential ethical breaches within the organization, you fulfill your duty to act in the best interests of the company and its stakeholders.
Integrity and Responsibility
Addressing unethical behavior within the company showcases your integrity and sense of responsibility as a manager. Upholding ethical values in the face of adversity sets a precedent for ethical conduct and fosters a culture of integrity within the organization.
Conclusion
In conclusion, navigating ethical dilemmas in a rapidly growing start-up requires courage, integrity, and a commitment to upholding ethical values. By addressing questionable behaviors and promoting transparency and accountability, managers play a crucial role in safeguarding the interests of stakeholders and fostering a culture of ethical governance. As the IPO approaches, prioritizing ethics over complacency is essential for long-term success and sustainability in today's competitive business landscape.
Chapter Questions
Roles of Ethical Values: Ethical values play a pivotal role in shaping governance systems that prioritize shareholder interests while upholding integrity and transparency.
Determining Shareholders' Best Interests: Boards of directors determine shareholders' best interests through strategic decision-making that aligns with long-term value creation.
Implementing Stakeholder-Oriented Governance Systems: Companies can implement innovative governance systems that prioritize stakeholder engagement, accountability, and sustainability.
Best Practices for Corporate Governance: Good corporate governance practices include strong board oversight, transparent reporting, and a commitment to ethical conduct.
Governance Problems and Issues: Common governance challenges include conflicts of interest, lack of diversity on boards, and inadequate risk management practices that undermine organizational integrity.
By addressing these chapter questions, stakeholders can gain valuable insights into the complexities of corporate governance and the importance of ethical decision-making in today's dynamic business environment.