Ethical Issues and Business Ethics

Researchers found that 10 percent of employees at all levels report feeling pressured to compromise ethical standards in the workplace (Managing Business Ethics by Trevino and Nelson 2007). Ethical issues are faced by every industry in the business world as well as communities, public and private organizations and individuals. Leadership, internal practices, and training may impact the proper implementation of business ethics. Halliburton is one of the many large corporations involved in unethical business practices.

This paper examines ethical issues faced by public sector employees and employees of private sector firms that conduct business with and for government agencies.

The paper discusses Halliburton, a U. S. defense contractor (former vice president Dick Cheney’s old firm), ethical issues and the impact on stakeholders involved. The goal is to highlight the ethical issues and make recommendations for how prospective employees and managers can handle similar situations.

Background

Since 2001, energy services company Halliburton and its former subsidiary Kellogg Brown & Root (KBR) have performed unspecified services to the United States military in Iraq, Kuwait, and several other countries under a no-bid, long-term global logistics contract, (LOGCAP).

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In February 2003, Halliburton received a five-year extension, $7 billion no-bid contract for services in Iraq. During the course of awarding and executing these contracts at least two people made the decision to become whistle blowers, a government employee, and a Halliburton/KBR procurement employee.

The government employee disclosed that Halliburton/KBR was involved in closed-door meetings with the Army Corps of Engineers that resulted in the no-bid, multi-year, billion dollar contract awarded exclusively to Halliburton/KBR (Morning Edition October 29, 2004).

The procurement employee disclosed the specific activities within Halliburton/KBR that resulted in overcharging the government and taxpayers for goods and services while simultaneously eliminating competition among potential vendors.

Some allegations include soliciting higher priced products and services because the government pays a fee based on the total of goods/services procured and manipulating purchases orders to maintain a maximum of $2,500 to avoid the bidding process between prospective vendors. Specifically, Halliburton's subsidiary Kellogg, Brown & Root hired a Kuwaiti company, Altanmia, to supply fuel at about twice the going rate, then added a markup, for an overcharge of at least $61 million, according to a December 2003 Pentagon audit. The only problem is that $61 million is taxpayer money.

Perception of Unethical Practices of Dick Cheney

From the beginning many American citizens raised an eyebrow towards the decision to have Halliburton as a U. S defense contractor. This public outrage stemmed from the former vice president’s former employment as the chief executive officer (CEO) of Halliburton from 1995 through August 2000. KBR, the company's former subsidiary has been the main government contractor working to restore Iraq's oil industry that was awarded without competitive bidding in 2001. According to Cheney's 2001 financial disclosure report, the vice president's Halliburton benefits included three batches of stock options comprising 433,333 shares.

He also has a 401(k) retirement account valued at between $1,001 and $15,000 dollars. His deferred compensation account was valued at between $500,000 and $1 million, and generated income of $50,000 to $100,000. Halliburton has contracts worth more than $1. 7 billion for its work in Iraq, and it could make hundreds of millions more from a no-bid contract. During Cheney’s tenure as the defense secretary, the Pentagon chose Halliburton’s subsidiary KBR to study the cost effectiveness of outsourcing some military operations to private contractors.

Based on the results of the study, the Pentagon hired KBR to implement an outsourcing plan (Washington Post Sep 26, 2003). Many companies like Bechtel, Exxon, Blackwater and Halliburton have profited from the Iraq war. It is no secret that war creates wealth for those companies canny enough to exploit it, and not be killed by it. Is Dick Cheney one of these? After his departure from office former vice president Cheney will be free to profit in whatever way he feels. The ethical question is, however, has he ever really left it?

And by not leaving it, was he in ethical violation of his oath of office, at the very least? Stakeholders The stakeholders in this situation are the client, which is the U. S. government and American taxpayers who are the investors or funders of the government; the vendors, who through the bidding process maintain a competitive and profitable business environment; and employees who make sure that their employers receive the best value for the services and products they procure. Ethical dilemmas The first ethical dilemmas is if employees should bring wrongdoing to the surface and if so, how?

Will the decision violate the privacy of vendors or other employees? Is it legal to disclose certain activities related to defense contracts? Secondary ethical issues relate directly to the stakeholders. Is the U. S. government unfairly awarding contracts? Is that awarding process facilitating a culture of overcharging, which is absorbed by U. S. taxpayers? Are vendors intentionally overcharging Halliburton/KBR? Are Halliburton/KBR’s procurement practices eliminating competition in the marketplace? Analysis The primary issue in this situation is whistle blowing.

“Whistle blowing means calling attention to wrongdoing that is occurring within an organization. ”(Nadler and Schulman 2006) Halliburton is still under investigation by the FBI. Perhaps the negative publicity and the case caused the contract to be divided with Halliburton winning one of the parts in a public bid. The underlying secondary issues include exposing potentially fraudulent business activities, financial irresponsibility, and illegally profiting from public funding. The government employee wrote and spoke to superiors about the activities.

The government employee sought legal counsel upon deciding to go public with their disclosure. Finally, both made their testimonies to the proper investigating bodies including the FBI, the U. S. House of Representatives Committees on Government Reform and Energy and Commerce. For their troubles, the government employee and Halliburton/KBR procurement employee were forced into a whistle-blowers protection program. Conclusion In the public sector, whistle blowers are often faced with the dilemma that their choice to disclose can constitute a criminal act.

In both cases these employees called attention to suspected activities within their organizations before going outside or public. Employees faced with this dilemma must identify the stakeholders and ethical issues that concern them, and then make calculated decision whether or not to disclose. The facts surrounding whether or not the U. S. government are unfairly awarding contracts will be an ongoing issue. Despite all the measures set forth to regulate the procurement of contracts, greed for money will play a critical factor for the people that have weak ethical character. Whether you are the employee or employer being the standard bearer in ethical situations will earn the respect of others as well as keeping you out of big trouble.

References

1. Analysis: FBI investigates whether Pentagon officials committed fraud in their handling of a no-bid contract to a subsidiary of Halliburton before the Iraq War. (10:00-11:00 AM)(Broadcast transcript). (Oct 29, 2004).
2. Morning Edition, p. NA. Retrieved February 08, 2009, from General OneFile via Gale.
3. Donahue, J. (Nov-Dec 2005). Treading on the taxpayer. Multinational Monitor, 26, 11-12.p. 7(2). Retrieved February 08, 2009, from General OneFile via Gale.
4. Nadler, J. & Schulman, M. Whistle Blowing in the Public Sector. Santa Clara University Markkula Center for Applied Ethics. Retrieved February 9, 2008, from http://www. scu. edu/ethics/practicing/f ocusareas/government_ethics/introductio n/whistleblowing. html.
5. Profile: US Army will allow bidding for contract work in Iraq initially given to Halliburton. (10:00-11:00 AM)(Broadcast transcript). (Sept 8, 2004). Morning Edition, p. NA. Retrieved February 08, 2009, from General OneFile via Gale.