Ethical Dilemma And Anti-Competitive Activities: A LendLease Essay.

The Neo-Liberalism Approach

The daily life of people is full of such decisions which seem right, but where only one of the possible actions can be undertaken, thus giving rise to an ethical dilemma. In other words, a person has to choose between alternative approaches, which seem to be correct on a particular level (Chan, 2015). The ethical dilemma is decided on the basis of the ethics which a person follows and the same is true for organizations, which are faced with ethical dilemmas on frequent basis. Ethics are the governing codes on which the decisions and the behaviour of an individual are directed and are influenced by the moral and the values which are upheld by such person (Noddings, 2013). There is a need to base the ethical decisions on trust and integrity, particularly when the situation has complex matters relating to compliances, governance and diversity. Particularly when the organizations are faced with ethical issues, they have to uphold the respect towards human dignity, towards the ethical theories and towards the concepts of corporate governance (Dewey, 2016).

The neo-liberalism approach is a new approach which has been adopted by the governments towards the business regulations. As per this approach, the markets are deemed to be free from the intervention of state and have to be allowed to operate in free competition. This would allow the self interest of the individuals to be supported by ideas of hard work, freedom and opportunity (Ibrahim, 2012). This approach supports the globalization of markets so as to create new markets in places where they did not exist. However, when this approach is adopted, a question is raised regarding the need of the stakeholders being upheld. If the government allows such a free trade to continue, the ethics are most likely to be breached (Springer, Birch and MacLeavy, 2016).

This can be said with a particular reference to the cosy deals which are offered by the companies (Murray, 2016). One of such cosy deals which had been offered to the consumers was that of LendLease where the workers were offered a cosy work deal, which on paper looked very comfortable, but the reality was very different. This was a deal where the workers were given a deal for a four year period and the staff had to be paid the rates contained in this deal. This price rigging activity and similar such activities are banned through the anti-corruption building code which is attempted to be enforced by ABCC (Collier, 2017). This led to the company making a case against this code, which is still pending in the court regarding the company claiming that the code is onerous (Hannan, 2017).

Through this report, an attempt has been made to analyse this case in context of the ethics which were contravened. In doing so, the discussion would firstly highlight the background of this case study, followed by the ethical issues raised and the impact on different stakeholders. Once this is done, before drawing the conclusion, certain recommendations would be drawn out, regarding the key learning of this case.  

Lend Lease Case Study

When it comes to the Senate crossbench, the majority was looking to pass the Australian Building and Construction Commission (ABCC) bill. However, the construction giant LendLease is making constant attempts at swaying the key crossbenchers for negotiating for an exemption to be brought to the anti-corruption building code, which is set to be enforced by ABCC. The code aims to prevent any kind of anti-competitive conduct by the big building giants, included in which is the LendLease in order to protect the subcontractors from any sort of unconscionable treatment, in addition to making certain that the taxpayers get the value for the money paid by them when it comes to  the infrastructure projects. The company however, is making constant efforts to escape from this code (Collier, 2016a).  

As a result of this, the company, i.e., LendLease is attempting to amend the code and states that legislation should not be retrospective and where it was, there was a need to put the proper transition measures. However, this is a very clever approach by the company. The industry has known that this code was under construction since last two and a half years. There were a number of warnings given which were completely ignored by the industry giant. And just weeks before the code was set to be implemented, the company poked the government by signing a four year deal, i.e., the enterprise bargaining agreement which was a complete breach of this code (Collier, 2016a).

This agreement resulted in alarm bells ringing as it covered wage increase of around 20%. However, this was not the key cause of concerns as the company barely has any employees and $1 million can be paid every year to the employees. The real problem here was related to this deal being forced on each subcontractor, who was interested in working on the site of the company, where he/she had to compulsorily sign up to the agreement and pat the rates contained in it to the staff. And this price-rigging activity is sought to be given away with through this code. However, the company wants the crossbenchers to give it extraordinary allowance in order to permit its anti-competitive and unethical behaviour (Collier, 2016b).

The contract was set to raise the pay by twenty percent over duration of four years where the work was being undertaken for thirty six hours in a week, apart from facilities like domestic violence leave and much more. The company claimed that this had been the standard deal of industry. The key problem of this case was not claimed to be the deal being generous as the same was concentrated on the employees being directly hired by the company in a direct manner. But the problem was that that deal was being imposed over the smaller businesses. So, for every site of the company, standards would be set for the subcontractors. This would mean that the smaller businesses would not get any work till the time they sign up the deal of LendLease and pay the staff. So, LendLease essentially gets the control over the income and expenditure of such small businesses. This would result in the competition being suppressed and also in maximization of the profits. This deal would also allow LendLease to be untouchable and the partners in this arrangement and the trade unions would be left to take the entire blame (Collier, 2016b).

Ethical Issues

The claim of the company was that the bill presented by ABCC was a bad one and that the industry would be better off without it. As per the company, the concessions were onerous and that any benefits which could have been garnered from this code, were lying in the parliamentary waste paper bin. This led to the company gearing up to terminate the contract by creating negotiated code complaint agreements (Sloan, 2016). However, the Construction, Forestry, Mining and Energy Union (CFMEU) have filed a lawsuit against the company for the building code compliant enterprise agreement. The reason for the claim is that the engineering arm of the company in New South Wales was recklessly or knowingly making false and misleading misrepresentations with regards to the rights at workplace of the unionised workforce during the ballot for agreement and giving the impression that the deal had been backed by the unions. The approval of this agreement of the Fair Work Commission in June, along with the successful ballot in April presented the initial cracks in the stringent opposition of CFMEU to the code (Marin-Guzman, 2017).

There were a number of ethical issues which were presented through this case, and all of these revolve around LendLease trying to evade a code in order to indulge in anti-competitive activities. The company completely ignored to the needs of its stakeholders and failed to consider the impact of its actions on the different stakeholder groups (Shaw and Barry, 2015). In order to best analyse these issues, there is a need to compare them in context of ethical principles of business sustainability. A major ethical principle for business sustainability which is given by United Nations is Principle 1. Under the human rights segment, Principle 1 requires that the businesses have to respect and support he human rights protection and the second principle provides that the businesses have to make certain that they do not indulge in human right abuse. However, LendLease failed to do so (United Nations Global Compact, 2017).

The code which the company opposes is meant to be a protection to the workers, which includes the one of the small businesses. In order to earn more, the company indulged in anti-competitive activities where the small businesses and those associated with it had to bear the burn. The human rights were abused in the sense that the people associated with the trade unions and the partners of the company had to bear consequences of this trade agreement, instead of company, as it protected itself at stake of others. Where the company had been ethical, it would not have abused the rights of others associated with it, which were blatantly put at stake by the company.

The company ignored the key principles of sustainability where it was required to conduct business keeping in mind the complex social, economic and environmental activities and also failed to work towards the wellbeing of the communities and the individuals, as sustainability requires the businesses to contribute to all forms. The company ignored the three pillars of model sustainable development, particularly with reference to the society. Even though the environment was not a stakeholder in this case study, but the components of society and economy, were. The company, through its actions, posed a danger over the society in terms of the risk put over the trade unions and its associates, apart from the small businesses over it gained control (DesJardins and McCall, 2014). So, even while it was showcasing that it was working in favour of the employees by offering higher growth rate, in essence it was indulging in anti-competitive behaviour, where the other companies had to bear the burn of LendLease’s on paper pay growth. The company completely ignored the competitors in the industry and indulged in anti-competitive behaviour, which damaged this stakeholder group.

Apart from the principles of business sustainability, the company failed on different ethical theories. The first and foremost theory where the company failed was utilitarianism. This theory makes such actions ethical where the greater good is attained and the utility of an action is maximized (Blowfield, 2013). By indulging in the conduct where the company was challenging the code making bodies and stating the code was wrong, and then adopting an approach where it stated that it was modifying its agreement in order to be code complaint, where it again indulged in misleading or deceptive conduct shows the company putting its interests before the others. By removing the competition from the market, a number of stakeholders were affected in a direct and indirect manner. Businesses have to focus upon maximizing happiness for the people who are affected by the business actions and this was unashamedly ignored by the company (Crane and Matten, 2004). They continued to emphasize upon their interests, instead of working towards promoting competition, which ultimately benefits the consumers, the government and the investors.

Another key ethical theory which can be applied here to analyse the ethical issues is Kantianism. Had LendLease been a Kantian thinker, it would have put its focus on the entire process of promoting competition in the market and complying with the code in the true sense (Beiser, 2014). The company instead focused on taking actions against the code, which were not reasonable in the context of competition. There was a clear lack of properly informed decision making with regards to all sides of this ethical issue and even after the occurrence of this incident, they kept misleading the public by stating that they would bring out new contracts which were compliant with the code, and instead adopted deceptive and misleading conduct. They gave more significance to the bottom-line and posed their stance as the correct one (Weiss, 2014). They failed to respect the ability of people to make rational decisions regarding the entire controversy. The replacement announcement was a repetition of their earlier mistake, where instead of anti-competitive behaviour they opted for misleading or deceptive conduct.

On the basis of the issues highlighted here, certain recommendations can be drawn for LendLease and even for the companies in general, as learning from the major disregard of the company towards the business ethics.

• There is a need for the companies to be compliant with the codes which have been set out by the government or the regulatory bodies. Where the company feels that a particular code or even a piece of legislation is wrongly drafted, or is something which would negatively affect them, they have to raise the voice when the invitations are garnered from the public regarding such law. Apart from this, when the companies have a clear knowledge that a particular code is being drafted, they can raise their voice against the code during that duration (Gillers, 2014).
• There is also a need for the companies to not do something which would be deemed as against or opposed to the code or law which is about to be rolled out, even when they raised their voice against such code. Codes are such instruments which are drawn after careful consideration, instead of just rushing to it. As a result of this, there is a need to comply with the code in the true spirit instead of taking advantage of its loopholes.
• The companies have to work towards enhancing the competition in the market, so that the different stakeholders associated with the company and in that industry, can be benefitted. However, this was not the theme of actions undertaken by LendLease and such actions have to be avoided, as this case acts as example of anti-competitive behaviour, which is deemed as unethical.
• The companies have to refrain from indulging in misleading or deceptive misrepresentation as the same attracts legal provisions, particularly in line with the consumer related legislations.
• There is a need for the companies to uphold the true essence of law and ethics and not to breach one law after another, just to correct the first breach.
• The company needs to adhere to the different ethical theories and the Ethical principles for business sustainability in a strict manner, so as to make certain that incidents like LendLease are not repeated (Trevino and Nelson, 2016). This would allow the stakeholders to be benefited from the ethical conduct of the companies.
• The company i.e., LendLease , needs to prove it before their stakeholders that they have adopted a different approach towards the matters and that they are not only reviewing the actions, but are also analysing the problems which can be faced with its future actions. The company needs to address the issues at hand; and there is a need to adopt and show before the world that there is a compliance with the drawn code in its true essence in the company, followed by the testimonials of the trade unions and associated partners, to show that the company promotes competition.

Conclusion

To conclude the entire discussion, the case of LendLease regarding the building code and the enterprise agreement presents a major ethical issue for the company. In this case, the company was indulged in unethical conduct as it worked against the code which was formulated in order to keep a tab on the anti-competitive activities of the giants of this industry. Before the code could be applicable, the company went forward with a four year agreement which a complete flouting of this code. Apart from this, the company blamed the code for being onerous instead of complying with it. And ultimately the company brought out new agreements which were deemed as code compliant. However, here also the company continued its unethical conduct, as a result of which the matter is pending before the court of law for the matter has been raised by CFMEU as the company had been engaged in misleading or deceptive conduct.  

The companies have to undertake this incident as a key lesson and needs to work in a manner which highlights ethics and also adherence to the different ethical theories. The company did not consider the ethical business principles, which required the company to respect the human rights. As the company is an industry giant, where the actions of the company impact the different companies within the industry, LendLease owed a duty to all the stakeholders of the nations, to provide such services which were ethical and legal and which promoted issues like competition and protection of human rights of the personnel of the associated entities. The company failed to fulfil the ethical business theories, in terms of utilitarianism and Kantianism. This becomes all the more important in this highly competitive environment, where the focus is majorly over the bottom-line, instead of the ethics, which the businesses need to adhere to, for being deemed as an ethical and a sustainable organization.

Hence, it can be concluded that the conduct of LendLease was unethical and it breached the duties which it owed to its fellow companies in the industry as it failed to take into consideration that by indulging in anti-competitive, it impacted their revenues. The entities associated with the company were left to bear the consequences of its actions as it safeguarded itself by creating the four year contract. Even though it seemed good for a particular group of stakeholders, i.e., the employees, but the handful number of employees proved that this was just an attempt of the company to be anti-competitive and blame the code for being restrictive. This case is the key example of why neo-liberalism approach proves to be fatal as the companies have to be regulated strictly, as even in such restrictions they continue to flout the different legal and ethical norms.

References 

Blowfield, M. (2013) Business and Sustainability. Oxford: Oxford University Press.

Chan, D. K. (2015) The concept of human dignity in the ethics of genetic research. Bioethics, 29(4), pp. 274-282.

Collier, G. (2016a) Senate crossbench must ignore construction giant Lendlease. [Online] The Australian. Available from: https://webcache.googleusercontent.com/search?q=cache:VXUc1H5jy_QJ:www.theaustralian.com.au/opinion/columnists/grace-collier/senate-crossbench-must-ignore-construction-giant-lendlease/news-story/2ec4ef63e6932dfa9d13c89824f938c5+&cd=4&hl=en&ct=clnk&gl=in [Accessed on: 20/10/17]

Collier, G. (2016b) Taxpayers milked in LendLease’s cosy work deal. [Online] The Australian. Available from: https://www.theaustralian.com.au/opinion/columnists/grace-collier/taxpayers-milked-in-lendleases-cosy-work-deal/news-story/0c7edb6e481cac9be1758bf3bb0b2b16 [Accessed on: 20/10/17]

Collier, G. (2017) Michaelia Cash nailed ABCC’s value by calling out building cartels. [Online] The Australian. Available from: https://webcache.googleusercontent.com/search?q=cache:NiUH8dBA1Z0J:www.theaustralian.com.au/opinion/columnists/grace-collier/michaelia-cash-nailed-abccs-value-by-calling-out-building-cartels/news-story/1e2148eff4e02c663adc51b7c9bfb676+&cd=2&hl=en&ct=clnk&gl=in [Accessed on: 20/10/17]

Crane, A., and Matten, D. (2004) Business Ethics: A European Perspective. Oxford: Oxford University Press.

DesJardins, J. R., and McCall, J. J. (2014) Contemporary issues in business ethics. New York: Cengage Learning.

Dewey, J. (2016) Ethics. Worcestershire: Read Books Ltd.

Gillers, S. (2014) Regulation of Lawyers: Problems of Law and Ethics. The Netherlands: Wolters Kluwer Law & Business.

Hannan, E. (2017) CFMEU threatens building chaos. [Online] The Australian. Available from: https://webcache.googleusercontent.com/search?q=cache:xxNLB_JUfRwJ:www.theaustralian.com.au/national-affairs/industrial-relations/cfmeu-threatens-building-chaos-over-new-code/news-story/4c04e788fbf47b2160c4aa7ea09c1123+&cd=3&hl=en&ct=clnk&gl=in [Accessed on: 20/10/17]

Ibrahim, A. (2012) Strengths and Weaknesses of the Neo-Liberal Approach to Development. The Netherlands: GRIN Verlag.

Marin-Guzman, D. (2017) CFMEU battles building code with court challenge to Lendlease agreement. [Online] The Australian Financial Review. Available from: https://www.afr.com/news/policy/industrial-relations/cfmeu-battles-building-code-with-court-challenge-to-lendlease-agreement-20170625-gwy2bq [Accessed on: 20/10/17]

Murray, P. (2016) Cosy deals are not so sweet. [Online] The West Australian. Available from: https://thewest.com.au/opinion/paul-murray/cosy-deals-are-not-so-sweet-ng-b88319584z [Accessed on: 20/10/17]

Noddings, N. (2013) Caring: A relational approach to ethics and moral education. California: University of California Press.

Shaw, W. H., and Barry, V. (2015) Moral issues in business. New York: Cengage Learning.

Sloan, J. (2016) Lendlease and CFMEU win again. [Online] Catallaxy Files. Available from: https://catallaxyfiles.com/2016/11/30/lendlease-and-cfmeu-win-again/ [Accessed on: 20/10/17]

Springer, S., Birch, K., and MacLeavy, J. (2016) Handbook of Neoliberalism. Oxon: Routledge.

Trevino, L. K., and Nelson, K. A. (2016) Managing business ethics: Straight talk about how to do it right. West Sussex: John Wiley & Sons.

United Nations Global Compact. (2017) The Ten Principles of the UN Global Compact. [Online] United Nations Global Compact. Available from: https://www.unglobalcompact.org/what-is-gc/mission/principles [Accessed on: 20/10/17]

Weiss, J. W. (2014) Business ethics: A stakeholder and issues management approach. Oakland, California: Berrett-Koehler Publishers.