Profits plunging Essay
This paper has been written to discuss and highlight how important ethics are when it comes to an organizations running. We further pick up an example of one of these organizations who lost sight of ethics and study the way it came tumbling down to a very steep turn in the road. To Believe or Not To Believe? Almost everything we come across in the many different paths of life brings with it a set of rules or a code of conduct implying what is and isn’t acceptable, these rules or codes are known as ethics.
Ethics can be anything from the way you carry yourself in a particular environment to how quickly you can stuff pies down your throat in a pie eating contest. Ethics lay the foundation stone upon which the rest of the structure is built, an uncertain foundation will lead to an unstable structure in the long run. A question that holds much importance, though is; is it possible for the foundation to weaken after some time? The answer sadly is yes it is, when the ability to differentiate between success and greed become blurry, the foundation weakens instantly.
This is the sad story which has been lived by many big names including Enron, Martha Stewart and WorldCom. The events and penalties faced by these should have alerted the rest of the world about how bad a situation can become if ethical sensibility is lost. Sadly, though when greed for more takes over, all sensibility is lost leading to dire consequences. An example of such an organization which didn’t learn from the others mistakes is Parmalat SpA, an Italian dairy company. European Enron? This is the sad story which has been lived by many big names including Enron, Martha Stewart and WorldCom.
The events and penalties faced by these should have alerted the rest of the world about how bad a situation can become if ethical sensibility is lost. Sadly, though when greed for more takes over, all sensibility is lost leading to dire consequences. An example of such an organization which didn’t learn from the others mistakes is Parmalat SpA, an Italian dairy company. The script of Parmalat’s collapse was written along with many others, by its founder Calisto Tanzi who at the age of 22 started a small family run pasteurization plant and turned it into a huge multinational with operations all over the world leading in dairy products.
The company was doing very well for itself and expanding its feelers into more diverse industries when the losses started to build up in early 2001 leading to the biggest European financial scandal of our times, one so big that it was dubbed “ European Enron” by many. Parmalat made the deliberate mistake of cooking its books to reveal a healthy balance sheet when infact it had a huge cavernous hole in it, which went unnoticed or remained “invisible” to everyone, including the accountants for a very long time. That’s very astonishing considering the debt hole was €14 billion or US$ 20 billion big.
Once the hole was “discovered” investigations were put underway by the Italian government to find out how healthy or unhealthy Parmalat really was. The findings left the whole corporate world in shock. Not only was Parmalat conspiring against its stakeholders were many entities willingly or unwillingly, one may never be certain. Citigroup, Morgan Stanley, Bank of America, UBS and Deutsche Bank were also named in the litigation that followed Parmalat for the next few years ending with Calisto Tanzi being sentenced to 10 years imprisonment and various rulings for the rest of the script writers.
Parmalat has been steadily brought back to its feet after such a harsh defeat by Enrico Bondi , the new CEO who also managed to bring in €1. 3billion with him from various banks and closing the cavernous hole bit by bit. The wrong doings of the top few at Parmalat have affected many world-over but it is Parmalat that has and will face difficulties due to the imprint that has been left on the minds of its stakeholders and those that might have been potential stakeholders.
It didn’t follow the rules of the book which lead to such a drastic reaction which has taken thwm a long time to recover from but even worse than that is its lost its stakeholders’ trust. Gaining that will literally cost them an arm and a leg and maybe even more. Banks will be wary of doing business with them, investors will think real long and hard over whether they want to put in their money into Parmalat, good employees won’t be that easy to hold onto, making Parmalat the loser from all perceivable angles. Ethics are a very important factor that is involved in the strategic planning of an organizations long term existence.
They guide the strategists and policy makers on the direction that is to be taken by them and more importantly to be upheld allowing them to build a reputation in the market coupled with commitment ,to do what is the best for them. The market is a very volatile place with fierce competition just waiting to pounce on competitors mistakes and take advantage of the situation to portray them in the better light of things, leaving the strayed organization on the ground in crumbs. One also witnesses market share and profits plunging faster than is believable, making recovery near to impossible.
Rather than cashing up and playing on its strengths, the organization in this way strengthens its weaknesses making them vulnerable at the present and most probably in the future too. Its strengths are no longer thought to be as strong anymore but a weekend bunch of so called strengths which now only exist n blinded minds. The weaknesses grow many folds over in a heartbeat. Opportunities to expand and enter new markets or industries become nonexistent with roadblocks everywhere the organization may seem to think of turning to.
No one will want to be associated with the company and will avoid having to do anything with it, this could be the government stakeholders or even its former supporters. Threats of takeovers, legal proceedings and bankruptcy rise at jet speed leaving the organization unaided at this time with vultures closing in for the kill as soon as the chance arises Conclusion The decisions made by the directors have to be thought through very carefully as wrong ones leave extremely horrific impacts on the market and stakeholders but they leave scars on the organization itself which may or may not heal.
References http://web. ebscohost. com/src/detail? vid=1&hid=114&sid=ce449838-d2d2-43a3-b096-15d5e18465cf%40sessionmgr102&bdata=JnNpdGU9c3JjLWxpdmU%3d#db=nfh&AN=7EH1044180623 http://web. ebscohost. com/src/detail? vid=1&hid=114&sid=9c34e72f-763c-4387-9c01-2a7014d92864%40sessionmgr107&bdata=JnNpdGU9c3JjLWxpdmU%3d#db=nfh&AN=9FY635880180 Singh, K. (2004). Parmalat’s Fall. Accessed on April 29, 2009 from http://www. zmag. org/znet/viewArticle/9101
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 28 October 2016
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