Ethics in Business Organisation


Business organisation is faced with a number of issues when it endeavours to achieve the corporate goals and the social responsibilities. One of problems is in maintaining the ethical standards. Ethics refers to the set of principles, rules and moral obligations bestowed upon specialists to perform well and reveal the wrongs. Businesses therefore, are expected to maintain a high ethical standard. On the other hand, business firms ought to deliver a promising return to the investors a position that leads some leaders to compromise ethical standards (Paliwal, 2006) . This paper addresses the use of misleading advertisements in business organizations as reflected in “Tesco Horse Meat Scandal” and “Australia Health Service Union Scandal”. The two cases present examples of cases of misleading advertisement and misrepresentation of facts as applies to business firms.


Misleading advertising is one of ethical issues that major businesses face these days. Ethics demand that a buyer should be furnished with accurate information in regard to what he or she purchases so as one can make a sound buying decision. The information should clearly describe the product. However some firms go overboard by issuing misleading advertisements to customers in order to grow profits.

The first case is a ‘horsemeat scandal’ – misrepresentation of facts about the products that is processed. The scandal was about selling burgers made from beef meat that proved to contain some horsemeat (Neate & Moulds, 2012) . The supply chain included a number of companies and influential personalities in the United Kingdom and around Europe. Horsemeat was used to make burgers and sell to millions of people across Europe by ‘Anglo-Irish beef processor (ABP)’. The company is a leading European beef-processing firm. The supply to Tesco for instance found 29% of horsemeat (Lawrence, 2013) . Though not expressly stated, the company added horsemeat to the burgers and mislead the public through advertisements as a means towards increasing the sales volume.

A matter of concern however, is the fact that no one has been convicted to date in connection ethical issue. The problem cited by the prosecution was that it is quite difficult to identify the real culprit since the supply chain is so long and sophisticated to pinpoint the one. On its private investigation, the Guardian newspaper found that the owner of ABP was Larry Goodman who had connections with the Irish highest authority.

To complicate matters, ABP source of horsemeat was from a businessman from Holland. His name is Willy Seltan and he owned a meat plant at Rotterdam. There is involvement of horsemeat mixing as some of the workers acknowledge in the investigation. The company even came to an agreement with ABP of financial compensation although the event was not made public. To date the findings of the scandal investigation remains a mystery.

The fault of buying the horsemeat for burger processing was passed on managers of silvercrest site in Monaghan, who acted without the authority. They bought frozen meat for making the burgers from a list of supplies that did not have the right to supply. The company furthermore admits breach of contract, but claims that they acted without knowledge that it was horsemeat. While the use of horsemeat was by itself a breach on ethical codes, going forth to mislead the prospective and present customers of the company through the misleading advertisement faulted not only the ethical codes, but also the consumer protection law.

The source of meat in Selten can be traced back to the United Kingdom from a company called Red Lion. The slaughter house owner is the Tuner family who also own a cargo handling company in Dundalk, Ireland. The company had been under investigation before the meat scandal had erupted. This was in regard to suspected animal abuse and for this case horses. Hidden cameras were set in the plant to investigate the matter (Lawrence, 2013) . Selten’s employees concur and claim that Red Lion truck delivers the horsemeat one time in a week.

To add on to that, the horsemeat from Red Lion originated from organised crime circumstances. The supplier of the horses to Red Lion ‘Laurence McAllister’ was from North Ireland. There was evidence that he transported horses and donkeys that proved to be unfit. Others were transported without passport via Scotland. On his return journey he used to ship a load of cannabis approximated to be worth 500,000 pounds. He was arrested in 2012 and charged for drug smuggling. Later, he was convicted with a count in animal cruelty as the horses he transported included some infections of the chest sepsis while others had diarrhoea. Turner family claims that all they delivered to Selten was appropriate and legal. They however admit the recall of a horse on the grounds that it tested positive for ‘Bute’. Coupled with the crime history of those involved in the case, the misleading advertisement describing the burgers as containing beef just happened to worsen the situation.

All the players in the supply chain Tesco, Burger King have sent apologies to the consumers. They claim to be victims of fraud circumstances (Lawrence, 2013) . The also gave an assurance that the adulteration as confirmed by the authorities did not have any healthy threat to the consumers. They however failed to clarify to the Guardian query the destination of the contaminated burgers and the question whether Seltan or Northwest was involved (Diamond & Swann, 2012) . Nevertheless, investigations indicate that some employees were aware that the burgers contained horsemeat and they did not stop the company from airing misleading advertisements. They also failed to assume the moral ground of informing the authorities about the misleading advertisements until the case became discovered.

Misleading advertisements as illustrated in the horsemeat scandal amount to malicious lies to the public and can be very disastrous to an organisation. Customers lose trust in the products and this reflects on the sales level. Sales drop and so do the profit margin. At times, the business may fail and die completely. Tesco and Burger king for instance rose up to the occasion and apologised to the customers. They were ethically responsible by accepting their hand in the misleading advertisements as well as the use of horsemeat. The Company went a step further to clarify from the authority on the likely health effects the adulteration could have on its customers. Luckily there was no likely health effect to the consumers.

Misleading advertisements attract legal liability under the violation of consumer protection laws (Rai & Rai, 2010) . In addition, the sale of goods act clearly states that when goods are being sold, the buyer ought to receive accurate description of the product with all material facts. Misleading advertisements leave expose the company to litigation (Lawrence, 2013) . On the other hand legal authorities with the mandate to safeguard consumers could vouch for the closure of the business making it important to avoid misleading advertisements (Cory, 2005) .

The second case Australian health service union scandal also involves misleading advertisements in that the authorities unethically misrepresented information relayed to stakeholders. The probe into the scam was ignited by the successor of Williamson Kathy Jackson who engaged external auditors on suspected financial misuse and irregularities. It involved two individuals Craig Thompson who served in the union in the capacity of a national secretary and was also a labor politician. He was convicted with 65 counts of theft and fraud which ultimately led to been sentenced to twelve years in prison. By misleading the unions on the operations, activities, and finances of the union, the culprits violated the labour laws as well as the consumer protection laws (Gopal, 2009) .

Michael Williamson is the other person involved in the scandal (Bovee, Thill & Schatzman, 2004) . He happened to be a former national president and general secretary of the union. Apart from those, he was in the union and labor parties. He pleaded guilty to two counts of fraud and theft and was sentenced to seven and a half years in March 2014. He did appeal and the cases of the two individuals were pending as at end of March 2014. Michael falls guilty of misleading advertisement for publishing misleading financials of the organization and failing to disclose the rot in the union in the publicly released report (Benedek, 2012) .

The auditor’s report also raised concern pertaining misuse of funds. ‘Fair work Australia’ conducted an investigation for three and a half years to probe the alleged misuse of fund in the health service union.153 of 183 findings of the publicly released report tabled in the senate was in relation to Williamson breaches of unions rules and other acts of parliament (McClymont, 2013) . The role of auditors a business firm is to express an opinion as to whether the financial reports contain any material misrepresentations of information that explains why the involved parties become accused of misleading advertisements (Morton, 2014) .

Misrepresentation of facts in the publicly available financial reports amounts to misleading advertisements. It is also a practice that scares away investors from contributing to the organisation (Heaton, 2011) .


The two cases are loss to an organisation stemming from potential customer loss and legal liability. That is not what any organisation might intent to; moreover, the cost of being ethical is much less than that of not being ethical. Misleading advertisements in the horsemeat scandal could have produced a permanent effect and the positioning of consumers change despite the explanation (Williams, 2012) . To gain a market share, issues of ethics can also be used by competitors. Any information regarding the good should be true and cautiously presented to the public considering the likely effect they pose (Diamond & Swann, 2012) .

The workers of an organisation should be educated on the importance of being ethical to the business operations and activities. Products standards should be of the required calibre and the prices fair (Poulter, 2013) . The regulatory authorities should set the health standard. Information to the customers on the products label should be accurate and the goods should serve the purpose for which they are set (Neate & Moulds, 2014) . In the case of HSU, leaders ought to understand that financial reports are the basis of decision making for investors and information thus published should be true and fair without misrepresentations or misleading details.

According to the Kantian ethics, ethics demand doing what is morally good simply because it is the right thing. What the society may perceive to be moral is not necessarily legal. This includes ensuring that one does not air misleading advertisements or publish misleading information. In a nutshell, the Kantian ethics perspective upholds the universality of not misrepresenting facts as a morally upright and ethical behaviour. Teaching the involved parties about the Kantian ethics and other ethical frameworks would help in reducing future ethical issues over and above the misleading advertisements in the cases above.


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