Examination of a Business Ethics Dilemma

Business Ethics Case

The Examination of a Business Ethics Dilemma: A Case History of a Medical Supply Company

Introduction of Dilemma:

The functionality and long-term viability of an organization may be as much contingent upon the strength of its ethical resolve as on the quality of its physical output. This is a reality which I became distinctly aware of during my two-year tenure as the head manager for Allied Medical Products. A company which specialized in the production and sale of products specifically geared toward wound-care, Allied Medical was only three years old at the time that I joined its staff. It was fraught with operational problems that I soon learned stemmed primarily from the ineffectiveness of my boss. Mr. Caldwell, as we will fictionally refer to was the founder, owner and CEO of Allied.

In addition to being somewhat difficult to communicate with, Mr. Caldwell was extremely dishonest with both clients and debt collectors. While Allied was a legitimate business, Mr. Caldwell’s willingness to lie to clients about the availability of products as well as to creditors about the status of payments was a major detraction to the company’s credibility. He was extremely unethical as a provider of services to customers, causing inconvenience and even crisis for medical device suppliers by failing to meet orders and likewise failing to inform said suppliers of this condition. Often, Allied was unable to meet its orders due to Mr. Caldwell’s being in financial arrears with suppliers of materials needed for the manufacture of products.

This condition was one resultant both from Caldwell’s poor business acumen and the developmental stage in which the company was then operating. It created a difficult and permeating management dilemma. I found myself in the difficult position of having to contend with the circumstances created by Mr. Caldwell’s ethical faults. Herein arose the major ethical dilemma upon which this research is trained to focus. As the manager of an organization with an important social role, I was divided by my loyalty and responsibility to Mr. Caldwell and by my desire to behave only in advocacy of ethically-based behavior.

Case History:

Management systems theorist Craig Johnson identifies five major bases for the ability to levy authority over others, with said bases varying in their dependence upon structural parameters such as in the relationship between a boss and an employee. Citing coercive, reward, legitimate, expert and referent power all as potential characteristics within a hierarchical relationship, Johnson illustrates that our motives for submitting to the demands or others are highly contingent upon context, relational definitions and the specific nature of such demands. Likewise, our ability to brandish such authority as to compel the compliance of others will be highly reliant upon these same variables. (Johnson, 10).

In practice, at Allied Health Products, there existed a highly fluctuating dynamic with regard to such conditions. The relationship between myself and Mr. Caldwell was subject to the conditions of a reward-based relationship with his power extending from his ability to provide me with a satisfactory salary, a professionally reputable title, the prospect of advances and raises, the provision of healthcare and the general offer that organizational growth would translate to personal ascension.

The relationship between myself and the staff of six workers over whom I presided was one based in a combination of expert and referent power. Due to the highly applied nature of my position, a managerial title endowed with many of the practical labor responsibilities as are given to lower ranking members of the team, I was able to develop a close relationship with my staff that enabled me to earn their loyalty and confidence through example. Engaging in the production, task-orientation and scheduling of day-to-day operations, I played a role in working directly with the staff in addition to serving as its leader. In this capacity, I most often served as the communicational liaison between the CEO and my staff.

These characteristics, as they apply both to the relationship between myself and Mr. Caldwell, and between myself and the staff, are central to the investigation of the ethical dilemma there. The loyalty which I have to Mr. Caldwell is defined by the relationship articulated above. Likewise, as the Ethics Triangle will further illustrate, the relationship between myself and my staff will be crucial to addressing these ethical concerns. In the face of the dynamics described here, the dilemma is enforced by the unwavering condition of the practicality in ethical business practice: “For discerning the needs of clients, monitoring the moves of competitors, benefiting from the experience of associates, and serving others well, it’s hard to see how there could be anything ultimately more important than truth.” (Morris, 26)

Dilemma Evaluation Through the Ethics Triangle:

Findings and Recommendations for Allied Medical Products:

In his 1996 text on leadership Integrity, author Stephen Carter describes this title quality as something which is subject to a collective favor and a multi-layered matrix of hypocrisy. On the topic of integrity in the public sector, he explains this paradox:

Scarcely a politician kicks off a campaign without promising to bring it to government; a few years later, more often than is healthy for our democracy, the politician slinks cravenly from office, having been lambasted by the press for lacking that self-same integrity; and then the press, in turn, is skewered for holding public figures to a measure of integrity that its own reporters, editors, producers, and most particularly, owners could not possibly meet. And for refusing to turn that critical eye inward, the press is mocked for — what else? — a lack of integrity. (Carter, 6)

Carter’s characterization here is indicative of an almost universal dilemma within any industry which has the potential to command large capital investment and return. The private sector is given over to a wide array of inter-organizational dependencies, such as those which develop between retail companies, their clients and their creditors. In any of these relationships, there is a level of contractual submission which each makes to the accountability of the other. Whether this is a system dependent upon regular payment upon receipt of services, dutiful fulfillment of promised services or the efficient execution of any number of contracted obligations, a business organization is subject to the conceits of its partners and its trade.

One of the troubling revelations which I came upon during my experiences at Allied was that my employer’s ethical condition was not uncommon. To the contrary, it was directly reflective of the way in which many of the proprietors within the industry were prone to behave. The clients with whom we conducted much of our business– nursing homes, long-term care facilities and large-scale medical-supply concerns — were often as likely to commit to lapses in honesty. As the chief customer relations officer for the organization, I was given direct exposure to both the impact of my employer’s ethical shortcomings and the proportional behaviors present in our business partners. They often behaved to scale with one another, conducting business with a hostile logic that exists outside the traditional governing principles of morality.

As a prime example, my employer’s failure to fill a client’s order in a timely and efficient fashion would result in said client’s withholding on payments for previous orders. In this relationship, ‘wrongs’ are being committed according to contract by both parties. However, there are no victims. It is the entitlement of either party to discontinue a dissatisfying relationship. It was often the case though, given the nature of Allied Medical’s extremely affordable product, that the financial benefits to the client outweighed the detriments of the poor service. The resulting rationale would be the strong-arming approach which involved a system of verbal deceit, tactical aggression and a financial dependency. Within the scope of Craig Johnson’s power-base discussion, there is evidence that the relationship between client and provider in the small-scale medical supply business is based in part on a coercive-power structure and in part a rewards structure. Therefore, my employer’s behavior seemed generally reflective of the integrity-shortfall which dominates the trade. With the increasing competitiveness to supply low-cost medical supplies that contend with a national nursing shortage and rising healthcare expenses, the capacity for power to be brokered by petty economic coercion and a pricing rewards system has given over to widespread ethical abuse. It is an abuse which is generally tolerated, providing root for one of the more difficult dilemmas to assimilate into strategy.

The corruption within a small business, especially one that has a variety of comparatively large business partners, can often be so institutionalized and seemingly inconsequential that the notion of acting as a whistleblower is entirely impractical.

In his 2001 book on the topic, business analyst C. Alford characterizes such a dilemma, especially within the context that one has acknowledged the futility in addressing the issues of integrity in the absence of a central force for the implementation thereof. To Alford’s view, it can be a revelation to find that those in roles of leadership or industry pacesetting are often at the root of permeating and systemic iniquities. Alford reports that “for some, the earth moves when they discover that people in authority routinely lie and that those who work for them routinely cover up. Once one knows this, or rather once one feels this knowledge in one’s bones, one lives in a new world. Some people remain aliens in the new world forever. Maybe they like it that way. Maybe they don’t have a choice.” (Alford, 52).

With respect to the case study at hand here, this was an experience which afflicted me with heavily mixed feelings at Allied. The vacuum of integrity in the industry was counterintuitive to my understanding of business practices that were sensible in the long-term and that abided traditional moral conditions in their execution. As a major consequence of this paradox, I found myself often in a position where balance was crucial. The major divide between my commitment to my principles and my loyalty to an employer’s whose principles were divergent from my own was one only driven wider by the difficulties of context. Within an industry that appeared to not only encourage but cater to the vices in honesty and integrity which were my employer’s, I had to choose carefully my approach to the daily operation of the company.

Indeed, the fact that Mr. Caldwell was bolstered in his behavior by similar standards throughout the industry would exacerbate the complexity of my dilemma. With consideration to the dilemma over whether or not to attempt to alter an organizational atmosphere that deviates from conventional terms of ethicality, research has assessed that “the putative benefits depend upon the assumption that the corruption transgresses a wrong or inefficient economic policy, overcomes limitations in an imperfect political system, or gets around imperfections in organizational rules. In short, if the prevailing system is bad, then corruption may be good.” (DeLeon, 35)

Therefore, in evaluating circumstances at Allied, I was often forced to consider whether or not the connotation which I would attribute to a set of behaviors such as dishonesty or fiscal irresponsibility was merely shaped by personal prejudice rather than by the relevant conditions within the workplace.

Upon close inspection, I would generally find my position of objection vindicated by operational failures. Within the cyclical pattern to which my employer seemed beholden, there was a tendency for dishonesty and fiscal irresponsibility to share a reciprocal relationship with operational failures. Our poor service with clients would, while not necessarily ending the relationships susceptible to such, have the impact of reducing the level of reliance which some customers would place on our company’s services. This translated to diminished sales with individual clients, obviously a condition which contrasts with the goals of any production and retail organization.

In drawing the determination that the contextual vagaries of the industry were not sufficient justification for the ethical shortcomings which had become institutionalized at Allied, I was also able to establish a connection between specific operational problems and this deviation from ethical soundness. It had become clear to me that through a more efficient system of inventory maintenance, through better ergonomic production processes, through more thorough communication with clients, we could establish a circumstance in which deviations from ethicality would become less necessary and less practical.

This awareness begot the further revelation that a stratified approach to the ethical conditions at Allied which sought to work with the structural opportunities there available rather than against the internal bottleneck that was Mr. Caldwell might create a more favorable working environment for all. This invokes the decision-problem tool from Evan Berman’s the Ethics Edge, the Ethics Triangle. (See Figure Below). By devising three separate and related strategies which appeal to alternative means to addressing ethical shortcomings in a developing company, I was able to bring gradual improvement to the circumstances at Allied. The three-part strategy was composed with the notion in mind that the dilemma between organizational loyalty and business ethicality could be resolved neutrally by way of the aforementioned rectification of basic operational problems, the diffusion of ethical appropriateness to the general personnel and the self-directed orientation toward ethical behavior.

The conditions at Allied Medical Products challenged my managerial sensibilities and my understanding of the appropriate ways to conduct business. It was essentially my observation that the methods selected by my employer, Mr. Caldwell, to routinely conduct business not only diverged from my sense of ethical rightness but also tended more often than not to compromise the company’s efficiency. My position, officially denoted as General Manager of Operations, was constituted of a diverse range of responsibilities too extensive and varied to list in full. Such responsibilities were often contingent upon day-to-day and gradual changes in priority and procedure. This was one of the hallmarks of a small and developing company that had the effect, within the context of Allied, of forcing errors and practical shortcomings such as inventory errors, client misinformation and the general failure to stay on schedule.

This invokes the demand for the first leg of the Ethics Triangle which applies to Allied. In the drive to bringing ethical behavior into routinization at Allied, it became a top priority to determine and eliminate some of the root motives for unethical behavior. In this case, much of the behavior in question was coming from directly above. It was the prerogative of Mr. Caldwell to employ a set of very questionable tactics in walking the precarious balance between meeting the financial demands of creditors and the supply requisites of clients while sustaining overall organizational growth. Allied underwent a number of common setbacks in achieving all of such goals in simultaneity, including customer dissatisfaction, slow sales periods, production errors and the standard ebb and flow of creating lasting relationships with customers. Within the framework of these challenges, Mr. Caldwell oversaw an atmosphere in which creditors were issued bad checks, debts were accrued with major provision suppliers, extensive back-logs of product demand were accumulated with clients who were often de-prioritized for personal reasons and by in large long-term clients and creditors were never kept abreast of financial hardships or other extenuating circumstances at Allied. Rather, they were subjected to poor maintenance of accounts and inconsistent service.

It had become gradually apparent to me that the company for which I was working was not engaged in broad-based corruption but in systemically unethical behavior. My loyalty to my boss was resulting in a circumstances where I, against my better judgment, was engaging in unethical behavior. Much of the implementation of my responsibilities had to be tailored to be consistent with the circumstances created by Mr. Caldwell. This might have included the explicit command to give clients false information, to engage in ‘stall tactics’ with clients that included sending them incorrect orders or to simply tell telephoning debt collectors that Mr. Caldwell was ‘in a meeting.’ It became my personal policy at Allied to eliminate the conditions which I had begun to find were transgressing my sense of rightness by refining the day-to-day operations at Allied. As communication breakdown often served as Mr. Caldwell’s de facto explanation for the issuance of bad checks and his failure to submit proper inventory requests, I took the opportunity to hone communication lines within the facility. I instituted an action-journal system in which all inventory requests, line item entries, production responsibilities, schedule changes and other operational concerns were to be recorded in a stationary journal accessible to all. It was thereafter the responsibility of all team members to participate in and monitor the daily entries which comprised this journal.

This was one of a variety of changes which began to occur throughout the workplace, changing our relationship with external organizations and changing the way we communicated with one another. Here, it had become apparent to me that my position afforded me the opportunity to shape the nature of the organization, particularly in contrast to my employer’s self-oriented approach. Paving the path for better operational functionality, I began to offer a contrast not just to my employer’s lack of ethicality but also to his lack of effective leadership. As the text by Johnson (2005) indicates, leadership is not just defined according to the degree that one commands authority. Its definition should also be entwined in an understanding of the most prudent ways to steward an organization toward success. As Johnson points out, “when we function as leaders, we take on a unique set of ethical challenges in addition to a set of expectations and task. These dilemmas involve issues of power, privilege, deceit consistency, loyalty, and responsibility. How we handle the challenges of leadership will determine if we cause more harm than good.” (Johnson, 10)

The first leg of the triangle had oriented me to offer a contrast to Mr. Caldwell that could be communicated to the rest of the staff in clear but respectfully terms.

This second leg of the Ethics Triangle under consideration was complex in execution. Having qualified and dedicated personnel is a key to maintaining a sound ethic environment in the workplace. The complexity in achieving this goal was due in large part to the fact that the major obstacle to the establishment of an ethical standard at Allied was the behavior of the CEO.

However, an obviation began to emerge during my management tenure at Allied which suggested that the CEO’s actions did not need to be a determinant for the actions of the rest of the company. Certainly, current research suggests that an effective workplace will be as much dependent upon the qualification of its staff as it is upon the leadership orientation of its chief officer. The text by Bennis (1997) reinforces this claim, contending that “a shrinking world in which technological and political complexity increase at an accelerating rate offers fewer and fewer arenas in which individual action suffices. Recognizing this, we talk more and more about the need for teamwork, citing the Japanese approach to management, for example, as a call for a new model of effective action.” (Bennis, 1)

This proved especially accurate in the setting at Allied, where I began to view my role as the general manager as the ideal vessel through which to extend such a collectivist perspective to my staff. This staff, comprised of a chemist, a mechanic and three production associates, was receptive to an approach at the workplace that was reflective of sound ethical procedure. This included honesty in correspondence with clients and an approach to operational procedure which assimilated the new strategies discussed in the first section. By addressing problems with efficiency that tended to invoke a response of ethical deviance from within ownership, the infusion of practical solutions to operational shortcomings in the behavioral approach of the staff linked this second alternative strategy to the first in accordance with Berman’s Ethics Triangle.

In order to induce the staff to engage its responsibilities with ethicality as a primary motivator, it was necessary for me to lead by example. Again, this would be a practice driven to contrast sharply with Mr. Caldwell’s rather poor leadership example.

As a general occupational proclivity, people’s professions are divided by mixed emphases on “social and individual value. By infusing occupations with a sense of calling, professions contribute to the wider civic order.” (Sullivan, 38) My experiences at Allied called into scrutiny my capacity to abide this notion. Within the boundaries of the organization, there was a sense that it was acceptable and even necessary to engage customers and creditors with a defensive dishonesty. And the industry similarly fostered this atmosphere. But such was a system at odds with my personal predisposition, particularly considering the nature of our work. The products which we manufactured were intended for elderly and infirm long-term care facility patients whose needs were often urgent and immediate. Our failure to satisfy the orders of our clients, particularly smaller scaled organizations such as the more modest nursing homes and pharmacies on the roster could potentially be detrimental to patients whose treatments depended on the punctuality of our products.

The final leg of the Ethics Triangle which is suited to the specific demands of Allied was the incorporation of personally directed ethical practices into the daily operation of the business. Within the context of the workplace dilemma “humanists argue for the primacy of individual conscience in such matters, insisting that the moral judgments of the individual must override authority when the two are in conflict.” (Blass, 2)

In determining how to prioritize my loyalty to my employer and my responsibility to ethicality, I accounted for the opportunity in any profession to achieve the satisfaction of civic duty. With the repercussions to the patient in the absence of our products being far graver than the repercussions to my employer in the exposure to clients of his misinformation, I resolved that the only way to better integrate truly ethical practice into the fabric of the company’s operations would be to keep clients privy to the status of the products. This would be done in spite of my employer’s clear desire and action to the contrary. Though it was a perspective often espoused by Mr. Caldwell that his lapses in honesty were minor infractions with no repercussions, it had become apparent that “even so-called white lies can have serious personal and social consequences, especially as they accrue over time.” (Adams, 3) This proved true in the case of Allied, where the CEO’s liberality with the truth was damaging to business. Ultimately, I resolved that by engaging in only honest exchanges with clients, even at the risk of inadvertently contradicting facts purported by ownership, I would serve the best long-term interests of the organization.


Ultimately, I departed from Allied in 2008 to focus on my studies, but I was able to execute a number of institutional changes during my time there. Suitably, I left behind a staff which is inclined both toward an ethical standard that emphasizes honesty and toward operational efficiencies that serve as a preventative measure to deviations form ethical turpitude. It is my hope that the changes that I helped to implement would have had a significant enough impact on the economic and operational realities at the company to have become long-term policy principles.

That said, I do believe that some of the critical ethical problems at Allied were even beyond my capacity to positively effect. There is today, Mitchell (2001) warns, a reigning perception that business has “grown beyond the capacity of government to control it, creating a dangerous power imbalance in American society as well as in the rest of the world, an imbalance in which American business is perceived to overwhelm local sovereignty and culture for the sake of increasing profits.” (Mitchell, 20) to some extent, the general acceptance within the medical supply industry of the types of ethical deviations which were commonplace at Allied is an illustration that this is true. The moral standards which are said to govern the general public are seen as different in the corporate setting, creating a slippery slope for behaviors which abuse power, privilege and the rights of others. Quite certainly, as the case study denotes, this is true in such industries as the medical supply field, where expectations for low cost and expediency of delivery are often beset by industry-wide tendencies toward dishonesty and systemic inefficiency. The case study on Allied Medical could very well be used as a case study on the industry as a whole, demonstrating the research value of the chosen approach to this study. However, as the research and case history herein suggests, a strategy which attacks unethical behavior through the solidification of organizational fundamentals can be dually beneficial to both an organization’s internal structure and its potential for future viability.

In reflection, I might only consider handling the situation differently with respect to the length of time which I allowed to pass before initiating some of the changes which were ultimately so positive for the organization. Much time, money, resource and client interest had been squandered in the period during which I attempted more passively to address the situation at Allied. Today, I understand that leadership is not necessarily an appointed position but a way that one behaves when faced with such challenges as those which I confronted daily. In this way, I even reflect on my time at Allied as a unique opportunity to experience firsthand the challenges which truly penetrate all aspects of the business world.

As I move forward, I anticipate that I will be that much more eager and willing to institute changes at whatever level possible when faced with the type of critical shortcomings that were epidemic at my company. With the completion of my formal education and the expectation that I will soon assume some leadership role in the broader world of business, I will neither be shocked by the ethical shortcomings of others nor will I be hesitant to intervene in ways that are simultaneously diplomatic and meaningful.

Works Cited:

Adams. G. And Balfour, D. (1998). Unmasking Administrative Evil. Thousand Oaks, CA: Sage.

Alford, C. (2001). Whistleblowers. Ithaca, NY: Cornell University Press.

Bennis, W. & Biederman, P.W. (1997). Organizing genius: The secrets of creative collaboration. Massachusetts: Addison-Wesley.

Berman, E. et al., eds.(1998).The Ethics Edge. Washington, DC: International City/County Management Association.

Blass, T. ed. (2000). Obedience to authority: current perspectives on the Milgram paradigm. Mahwah, NJ: Elbaum.

Carter, S. (1996). Integrity. New York: Basic Books

DeLeon, P.(1993), Thinking About Political Corruption. White Plains, NY:

M.E. Sharpe.

Ermann, M. And Lundman, R. (2002). Corporate and Governmental Deviance. 6th

ed. New York: Oxford University Press.

Johnson, C. (2005). Meeting the Ethical Challenges of Leadership, 2nd edition. Thousand Oaks, CA: Sage.

Mitchell, L.(2001). Corporate Irresponsibility. New Haven, CT: Yale

Morris, T. (1997). If Aristotle Ran General Motors. New York: Holt.

Suvillan, W. (1995). Work and Integrity: The Crisis and Promise of Professionalism in America. New York: Harper Business.

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