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Stakeholders of Better Business Bureau (BBB)

Question :

Case study of Better Business Bureau from book 10th edition of business ethis and corporate social responsibility. Please include in body is Better Business Bureau company following CSR or not??

The present report discusses the ethical issue case of BBB. The ethical issues that the organization faced is with its ‘pay for play’ scheme which honored A plus rating to the businesses that paid them for their membership and gave F rating for the business that refused paying pees to BBB. The report is continued with a discussion of important stakeholders of BBB that this NAD division must focus on. It is found that the stakeholders and also the consumers are the significant stakeholders that the organization must focus on to develop a trustworthy group. To properly understand the ethical issues, the report aligns the ethical issues with two different theories one is the stakeholder theory and other is the corporate social responsibility theory. Further the four different obligations of the corporate social responsibility are also analyzed. To help BBB to overcome the issues, some of the solutions with strategies have been recommended before conclusion. The report is concluded by summarizing the overall report.

In United States, the National Marketing Division, Better Business Bureau is a very popular self-regulatory trade association. The principle objective of this trade association is to develop a circumstance where the buyers and the sellers will have mutual trust. The Better Business Bureau is one of the best known watchdog groups and it has a very popular scheme termed as “pay for play”. In this scheme, A plus ratings are bestowed upon the individuals for paying the membership fees. On the other hand, F ratings are given for punishing the individuals who do not. This rating implies that it will not be worthy for the consumers and it also identified to be misleading. It is associated with lack of trust and honesty and anybody could come to the association for lodging complains about the Better Business Bureau. It has been found that the activities of Better Business Bureau were financed by the enrollment fees paid by the business firms. Major ethical issues arise due to the presence of monetary influence in the rating framework. This paper will focus on analyzing the ethical issues and misconducts undertaken by Better Business Bureau (BBB) and how it affected the stakeholders of the organization. Additionally, this paper will include recommendations in order to cease the unethical practice leading to significant negative impact on the stakeholders.

Stakeholders refer to the elements the elements which get directly or indirectly influenced in a positive or negative manner by the decisions and activities of the organization. It has been observed that there are various stakeholders of a business firm. Stakeholders may include shareholders, employees, customers, suppliers, government, local community, ecosystem etc. In case of Better Business Bureau, it has been indentified that for all recognized business, they have set a policy of paying membership fees in order to join the association in order to provide the advantages of higher rating in comparison the other businesses. It has been found that the “pay to play” is a scheme which has a potential negative impact on the businesses. The unreliable rating procedure of the company has given higher ratings to the companies which have paid the fees and poor rating to the companies which have not. In case of the non-accredited business, rating procedure plays a crucial role (Watson and Weaver, 2003). The rating significantly influences the purchasing decision of the consumers. This scheme has significantly influenced the consumers in selecting the accredited business rather than the non-accredited business. Consequently, the non-accredited businesses are losing their clients in spite of being offering better quality goods and services (Vitell and Paolillo, 2004). Better Business Bureau requires several business firms to join them in order to provide better service to the customers. It is evident the association will be unable to develop trust without the participation of business firms. Hence, it can be stated that the business firms are one of the most important stakeholders of BBB.

Consumer Perception

It has been found that BBB had developed an advanced platform where the consumers can easily access the website of the organization without paying any charges. The consumers can check out the ratings of the business firms accredited by Better Business Bureau. It must be noted that the consumers started to rely upon the BBB more than Federal Trade Commission. The business firms have significantly supported BBB in order to enhance the brand image and brand reputation. If the consumers do not give significant weight to BBB or ignore BBB, the business firms will not invest anymore in BBB. Hence, it can be stated that the consumers are the principal stakeholders of Better Business Bureau.

The ethical consideration helps in confirming the rightness or misdirecting nature of specific firm which operates free from any kind of social or stakeholder liabilities. Market orientation is considered as a key imperative part of the marketing techniques. But the role of the consumers in improving the ethical activities s well as social obligation is still dicey. The business firms are participating in the competitive market  and in this situation, the orientation of the market and customer focus are considered to be the major factors for determining the performance of the marketing activities (Tuttle, 2013). Often extensive competition encourages the business firms to adopt unethical practices. When the Better Business Bureau provides unjustified rating, the consumers get misguided. The customers are interested pay for the same products or services that a licensed business must provide compensation for the amount paid to BBB in order to raise the cost.

The major responsibility of Better Business Bureau is to provide strong legal protection to the consumers. It will be helpful in building as well as developing mutual expectation. It also creates trust and ensures fair dealing. The Moral Management model has stated that the legal orientation, ethical code of conduct, goals and objectives of the organization are the major factors which contribute sin maintain the ethical standards towards the customers. According to this model, the management needs to focus on achieving success through ethical practices. Hence, ethical leadership is essential in this case. This approach helps the organization to identify the right direction of undertaking the organizational activities. The Moral Management model focuses on following the ethical standards as it as an important aspect of integrity strategy and it ensures the success of the organization. Ethical values significantly help in shaping the management as well as assists in providing opportunities for making effective decision (STEVENS and BROWNELL, 2000). Additionally, the ethical values develop a proper organizational system. Better Business Bureau needs to focus on the ethical value for developing the rating framework.  The integrated rating methodology of BBB will help the organization in selection of a common reference point and provide a better service to the stakeholders.  In this manner, BBB will be able to ensure fair rating system to its consumers in order to lead them towards a right direction (Jamnik, 2011).

Better Business Bureau has been confronting major controversial issues regarding their rating policies. The major ethical concern has significantly affected the reputation and image of the organization. The controversy was initiated while the famous restaurant “Ritz-Carlton Hotel” had received F rating from BBB, although it has not received any complaints. The consumers were very confused as they failed to make out why such a good restaurant had received such a poor grade. Later, it was explored that the companies obtaining higher rating by Better Business Bureau used to pay high charges to the association. On the other hand, the companies which did not pay any charges to the BBB used to receive poor ratings. The Better Business Bureau has been badly criticized for this allegation. The “pay for play” is a potential fraudulent framework which offers higher ratings against money. The discriminating and unethical practice of BBB was terribly criticized. BBB used to award good ratings only to the companies which used to pay huge amount regularly. Although the companies, offering high quality products were receiving poor ratings by BBB and it misguided the consumers. These issues took place as the Los Angeles branch of Better Business Bureau was involved in the misconduct. Additionally, several business firms had lodged complains as it had adopted unjustified rating system. The business owners also identified the policy of the Better Business Bureau.

Ethical Considerations

Another major issue was associated with Better Business Bureau. It was identified that BBB was very friendly with the business organizations.  When the consumers used to lodge complaints against any company, Better Business Bureau used to ask the consumers to fill up additional information in the complaint form. Therefore, these information were sold to the business firms in order to help them in identifying their weaknesses and work on it. The consumers were upset with this behavior of Better Business Bureau. 

Additionally, it was identified that Better Business Bureau was engaged in launching partnership with some business organizations for ensuring profit for both the associations. According to the non-accredited business firm, the Better Business Bureau ignored the business firs which refused to pay the fees. The ethical responsibility of a firm was completely ignored by BBB. Thus, the unethical practice of the organization had affected the reputation of the organization by degrading its value to the customers. 

Analyzing the major issues of BBB, it can be found that the organization needs to emphasize on the stakeholder approach. The stakeholder theory essentially assists the management of an organization by facilitating the investigation in order to identify the best suitable approach for the organization for fitting with the dynamic environment. Additionally, it helps in the identification of the working mechanisms which will have a positive influence on the stakeholders. Freeman had recommended that each firm needs to fill the generic stakeholder map (Redwardfreeman.com, 2015).  According to this theory, disregarding the wide range of stakeholders is not ethically justified and it may have a negative impact on the firm. On the other hand, the theory of the corporate social responsibility has identified major four responsibilities of an organization: legal, economical, ethical and social responsibility (Kimber, 2005).  According to the theory, the company must concentrate on the achieving profit through their organizational activities in ethical manner. BBB has failed in meeting this responsibility (Banerjee, 2007). 

The income of BBB is mainly generated from the membership fees that is collected from different businesses as an accredited due fees. The BBB do not receive any kind of monetary help or funding from the government agencies. Next, the legal responsibility which means adhering to various rules and regulations, which means the firm needs to focus on various rules and regulation for better organizational ethical condition and also to develop trust among the clients and the customers. This is also where BBB lagged in. It did not have any as such proper rules and regulations that would make the organization a trustworthy group. The branches of BBB had also decreased their personnel cost which did not included any kind of rudiments that will permit the organization to judge the right complaints against the businesses. Many businesses under this association have faced issues due to the decisions taken by the unprofessional personnel.

Further, the ethical responsibility factor which deals with do thing the rights things also plays a vital role in BBB success. This theory emphasizes on the cultural aspects of the organizations. According to this theory, BBB should see its business as a citizen of society, however lacked in transparency. The BBB could not maintain transparency with its direct client that is businesses and also customers. Even, BBB did not disclose about the reason of why they were collecting the information from its customers. Later on when the customers came to know that the information collected by the firm was provided to the companies to strengthen their weakness. On this account, the customers got upset.  Further, quality was another issue that BBB had to suffer from. This directly affected the reputation of BBB which made the firm to struggle in gaining the trust from its customers. The strategy of collecting the due fees from the businesses and then rating them high instead of evaluating them on the basis of their services and products and the complaints of customers, developed many court cases and blogs against BBB. Finally, the philanthropic responsibility, which emphasizes towards the contributions to the society through their processes and activities. However, BBB also failed in doing this to their customers. The BBB developed a very confusing rating system environment. Further, the complaint system was also defective as the consumers were not able to read out the specific issues. Even the businesses were confused towards the complaints whether it is genuine or not.

Moral Management Model

The main issues with the BBB rating system “pay for play” framework was selling of membership. This is an ethical misconduct with the consumers and also the businesses. Thus to make that this misconduct is not repeated, the BBB need to focus on four main factors; Context, Effectiveness, Leadership and Values (Xaxx, n.d.).

Values: The resolution to the ethical issues needs to be guided by very rigid set of values. Some of the BBB employees agreed to overcome by greed and acted as immoral person and they have broken the law. Thus to overcome this, it is important to understand the organizational values.

Further, from the leadership perspective, the BBB employees lacked in decisive and strong leadership. The business leaders are the ideal person who can act as an example for others in enforcing ethical standards. However, there are few employees in BBB, who have broken the rules in the search of illicit again, which has led the organization to pay premium for unethical behavior.

Even though BBB followed excessive idealistic beliefs and standards, but it didn’t help the organization to be an honest company. Thus adopting a hand-on set of standards, rewarding for meeting the ethical standards and giving penalties for defying the standards would help to improve the ethics.

BBB should make sure that for justice to have a proper meaning; different situations should be considered from an individual context. Keeping all these in mind, BBB should ensure that the businesses are all aware of the various ethical procedures that BBB is carrying out and accordingly take steps (Solving ethical dilemmas, 2009).

To prevent the misconducts happening in BBB, and ensure that the consumers and the businesses are not getting confused with their “pay-for-play” rating system. The BBB must include the following steps (Kozinets and Shely, 2007):

(1) Create a proper workplace policy which should align with the philosophy of the company, code of conduct and mission statement. Incorporating the policy of the organization with the performance of the management for holding the employees accountable for their actions and also aware them about their responsibilities for upholding the professional standards with their interaction with the supervisors and peers and also their job performance. BBB can acquire signed acknowledgements forms from their employees indicating that they have well-understood the ethical policy of workplace.

(2) Secondly, training the employees about the workplace ethics would also help BBB to make its employees aware of the importance of maintain ethics in the organization. If not abide by rules it is a big loss for the organization as there is high chances of losing the business and the customers who are the main stakeholders of the organization. Following simulations method by giving the scenarios related to the improper workplace relationship would help the employees to understand the significance of ethics in workplace.

(3) Appoint an ombudsperson who would be responsible for handling the concerns of the employees related to the ethics of workplace. Further, BBB can also implement confidential hotlines which would help the employees to contact the management as soon as they encounter any king of ethical misconduct happening in the organization. This is an effective way to make sure that the employees’ unethical behavior is considered effectively (Fort and Schipani, 2004).

Recommendations

(4) Apply the workplace policy developed, constantly for addressing the ethical issues related to workplace. This principle would help in each circumstance, even if the employees are not involved in the process. BBB must communicate the ethical expectation to all level of employee’s right from operation level to the top management; this approach would help to make sure that all the employees are aware of the company policy.

(5) Proactively managing the risks: BBB should implement a proper reporting system that would help to examine the issues that the organization is facing and also what is happening around the business environment. BBB must make sure that the team is reporting the properly the issues that are against the policies. For making the process more effective, the BBB can use the six sigma process, through which the BBB can make the reporting mechanism more effective and also resolve the compliance risks. The BBB must ensure that all the reporters who are mainly responsible for reporting the issues, should provide details of witness, issue, name etc so that they can recognize similar issues later on.

(6) Selecting third party vendor: identifying and partnering with a third party vendor would give more trusted and safe resources. 

Conclusion

To conclude, the current report demonstrates the ethical issues that the BBB has faced due to its unethical rating system. The report also highlights that their scheme “pay for play” was unethical for both the consumers and the businesses. To solve the issues it was very important to understand the important stakeholders involved in the process. Thus the report also highlighted that the important stakeholders of NAD division was both the consumers who were their indirect stakeholders and businesses which were the direct stakeholders. It is a myth that the BBB process is impartial instead the scheme created discrimination among the non-accredited and accredited business through collection of due fees. The case analyzed that the businesses that paid due fees to the BBB team received a “A” rating where as other businesses that did not paid fees received a “F” grade despite having no complaints from their customers or best quality services. To understand the overall ethical process of misconduct, the report tries to align the ethical issue with some of the theories like stakeholder theory and also the corporate social responsibility theory. To resolve the misconduct, the report highlights few strategies focusing on four main principles values, effectiveness, leadership and context. 

Reference

Fort, T. and Schipani, C. (2004). The role of business in fostering peaceful societies. Cambridge: Cambridge University Press.

Jamnik, A. (2011). THE CHALLENGES OF BUSINESS ETHICS – MANAGEMENT AND THE QUESTION OF ETHICS. Tourism and Hospitality Management, 17(1), pp.141-152.

Kimber, D. (2005). Corporate Governance and Business Ethics in the Asia-Pacific Region. Business & Society, 44(2), pp.178-210

Kozinets, P. and Shely, L. (2007). Managing ethical issues in your day-to-day practice. Eau Claire, WI: National Business Institute.

Redwardfreeman.com, (2015). Stakeholder Management » R. Edward Freeman. [online] Available at: https://redwardfreeman.com/stakeholder-management/ [Accessed 15 Jan. 2015].

Solving ethical dilemmas. (2009). Veterinary Record, 165(14), pp.3-4.

STEVENS, B. and BROWNELL, J. (2000). Ethics: Communicating standards and influencing behavior. The Cornell Hotel and Restaurant Administration Quarterly, 41(2), pp.39-43.

Tuttle, B. (2013). Why the Better Business Bureau Should Give Itself a Bad Grade | TIME.com. [online] TIME.com. Available at: https://business.time.com/2013/03/19/why-the-better-business-bureau-should-give-itself-a-bad-grade/ [Accessed 15 Jan. 2015].

Vitell, S. and Paolillo, J. (2004). A cross-cultural study of the antecedents of the perceived role of ethics and social responsibility. Business Ethics, 13(2-3), pp.185-199.

Watson, S. and Weaver, G. (2003). How internationalization affects corporate ethics: formal structures and informal management behavior. Journal of International Management, 9(1), pp.75-93.

Xaxx, J. (n.d.). The Most Important Criteria for Solving Ethical Dilemmas in Business. [online] smallbusiness.chron.com. Available at: https://smallbusiness.chron.com/important-criteria-solving-ethical-dilemmas-business-21971.html [Accessed 19 Jan. 2015].

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