MGMT 3304 Applied International Business Study Paper

MGMT 3304 Applied International Business Study Paper

MGMT 3304 Applied International Business Study Paper

Summary

This paper focuses on corporate scandals. Specifically, the write-up is about the United Airlines case study where the employees forcefully ejected a passenger from the plane after he allegedly refused to willingly leave his seat for crew members who were to quickly attend to another plane in the next destination. The action was captured on video by a passenger, and the video quickly went viral, leading to a huge backlash and losses to the company. While their action was within their regulations and laws, it was not ethically right, and the company faced a lawsuit where they had to reach an agreement with the passenger at an undisclosed fee. Some of the recommendations to prevent such from happening are making ethical behavior to be part of employee performance reviews, implementing laws against overbooking, and implementing measures such as a few days’ operation suspension.

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Introduction

Over the years, the world has experienced various corporate scandals or corporate frauds, with some shocking the world. While some of these incidences were illegal and hence had to face various lawsuits, others proved to be unethical even if they were lawful, hence receiving considerable public backlash from individuals who heard about such practices. Unethical behaviors entail those activities or actions which are unacceptable in day-to-day business operations. Hence they do not conform to the expected standards of the normal corporate world (Lian et al.,2022). The scandals or frauds have the potential to tarnish the reputations of the companies beyond repair, apart from negatively impacting every individual in the organization. Such practices can also make customers lose trust, and the company’s stocks plummet. In addition, the employees or executives of such companies may find it difficult to secure future employment opportunities. The implication is that organizations should be aware of everything that can go wrong and put in place measures to stop such. Therefore, the purpose of this assignment is to explore the corporate scandal involving United Airlines on bad customer service.

Background

United Airlines is one of the main American airline companies. The company has its headquarters in Chicago, Illinois, at the Willis Tower. The company is known to operate a large international and domestic route network that covers cities in America and other continents. The company has been rewarded for its exceptional services. However, in the year 2017,  it was hit by one of its well-known corporate scandals. This scandal involved a forceful removal of a passenger from the flight. The plane was overbooked, and it was traveling from Chicago to Louisiana (Cheng & Shen, 2020). The airline needed to free up four seats for additional crew members who were required to go to Louisiana as soon as possible so that they could attend to another flight that was facing a cancelation if they did not present themselves.

The company requested that four individuals volunteer. However, nobody agreed to volunteer. Hence they conducted an involuntary de-boarding. While three of the selected passengers agreed to leave the plane, one passenger, David Dao, refused to disembark. The passenger had a valid reason that he was a doctor and he was supposed to go and see a patient the next morning, so he could not manage to leave the plane (Varma, 2021). The airline then called security officers, who forcefully evicted the passenger by dragging him onto the ground. In a video that was shared a million times, the passenger could be heard screaming, and his glasses could be seen sliding off his face.

After the video went viral, United Airlines chose to issue a formal apology. However, the apology did little to protect the company from facing a severe backlash. Within a short duration, some of the customers chopped up their United Airlines credit cards. One of the consequences is that the company’s stock fell by four percent. In addition, United Airlines’ market value went down by US$1 billion (Liang & Holland, 2019). The then chief executive officer, Munoz, described the customer as belligerent and disruptive while praising their staff for following the company’s established procedures. After widespread backlash, Munoz had to issue another statement that indicated that the event was a horrific event and accepted full responsibility. The company had to reach an undisclosed settlement with the Airline and the airport police after a lawsuit. The board of directors then decided that Munoz could not continue as United Airlines’ chairman. In addition, passenger complaints also arose by 70%

Statement of Problem

Corporate fraud or scandal can lead to significant damage when it happens. The scandal can affect the company’s image, the employee’s image, the company’s finances, and its operations. Therefore, there is a need for corporate executives to identify potential problems or incidences that could lead to corporate scandal or fraud and formulate frameworks that can help prevent them. Such corporate fraud can touch on the legal and ethical aspects and turn out to be unethical or illegal. The scandal, which involved United Airlines, was largely unethical.

Significance of the Identified Problem

The identified problem is a business scandal. The passenger had no obligation to leave the plane since he had paid his ticket in time. In addition, he was a medical doctor who was supposed to see a patient the following morning. As such, dragging him out of the plane was both unethical and illegal. This problem was a significant one since it led to substantial public backlash upon the video going viral. The company had to issue a formal apology which further played a role in enhancing its damage (Soltani et al.,2023). United Airlines also had to face a lawsuit where they had to settle for a settlement with the passenger at an undisclosed fee. The significance of the problem was also revealed in the number of passenger complaints increasing by 70% and United Airlines’ market value going down by US$1 billion.

History in Business of This Problem

The problem described in the United Airlines case is not the only case in history. It is important to note that, with an increased number of people flying every year, problems are bout to occur, ranging from mistreatment of passengers to fuel surcharges and excess charges. In a similar incident, American Airlines allegedly offloaded a New York-bound woman cancer patient in Delhi. The woman had undergone surgery and needed to travel to New York from Delhi. However, the airline offloaded her after claiming that she refused to comply with the crew’s instructions that she needed to keep her handbag in the overhead cabin (Ayyappan& Sinha, 2023). The passenger indicated that she had asked for help to lift the luggage since she had undergone recent surgery and was therefore wearing a cast. Instead, they refused to help her and commanded her to alight from the plane. American Airlines late gave a statement that they removed a disruptive customer who refused to abide by the instructions from the crew members and that they would contact the customer to refund her the portion of her ticket that she did not use. During the incident, the crew insisted that the woman should be able to lift her bag and keep it in the overhead bin since it is not their work to do so. The pilot insisted that a decision had already been made that the customer should disembark from the plane.

Current Trends and Issues

Such incidents have led to public uproar, with the companies involved forced to apologize to the customers who have been offended and the public in general. However, cases are still being reported similar to what happened with United Airlines. Therefore, customers usually complain every year of various incidents. Some of the current trends and issues observed include misleading advertisements, discrimination, over sales, misconnection, disability, refunds, fares, delays, reservations, ticketing and boarding, cancellation, and baggage (Varma, 2021).

Societal Concerns

The incidences have led to various societal concerns. For example, many people have viewed treating customers in such a way as inhuman. Some have suggested that stricter rules be enacted to help protect customers from such harassment. In addition, some have also been concerned with the happenings as they argue that airlines should not be left to go scot-free and even their licenses should be revoked if need be.

Future Implications

Legally, the airlines are sometimes allowed to remove customers who have paid from the planes. As a usual practice, customers have to agree with conditions and rules when purchasing tickets regarding the services offered by the airlines (Crane et al.,2021). For example, United Airlines has rules and regulations which address boarding priority regulations. For example, in cases a flight is oversold, no one should be denied boarding against their will until carrier personnel or UA first asks for volunteers who should go ahead and willingly leave their reservations for compensation as indicated by the airline. In cases where there is no volunteer, then other passengers may be denied boarding. Therefore three of the passengers agreed, and United Airlines followed the required protocol. The first explained to Dao why he would be removed before one of the officers approached him aggressively out of the plane.

Even though the airline was within its legal mandate to do what it did, it does not mean that it is practically and ethically correct. Indeed, the act of dragging the passenger from the plane aggressively was ethically inappropriate. Even though legal and ethical rights overlap, they don’t overlap completely. The airline may have had the legal right to eject the passenger under specific circumstances. Nonetheless, such a right does not make the action ethically appropriate or permissible in reference to how they dragged the passenger out of the plane.

The airport security and the United Airlines employees followed the protocol as later highlighted by the then CEO, Munoz. However, obeying the protocol and orders from the authority led to physical harm and embarrassment to the passenger, who was forcefully removed from the plane. The actions of the employees and the airport police led to a significant backlash and damage to the company’s public relations. Further damages were to shortly follow as some of the airport security were also sacked for their involvement in the scandal. This incident had future implications as companies started to put measures in place to help avert such incidences where legal and ethical rights overlap.

Encouraging Ethical Behavior

As earlier highlighted, some actions carried out by companies or organizations can be legally right, but that does not mean such actions are ethically acceptable, as was evident in the case of United Airlines pulling a passenger out of their plane. Therefore, companies have an obligation to uphold ethics even as they try to ensure that their operations are within the laws. Business leaders can engage in various practices to ensure that their employees are empowered to be ethical by encouraging ethical behavior (Ferrell& Fraedrich, 2021). Therefore, business leaders can perform various actions to encourage ethical behavior. One of the actions is the training of employees. Training ensures that the employees have an idea and know well what ethical behavior entails and why it is important to uphold ethics in their everyday work. In addition, appropriate training can also help the employees to understand some of the ramifications of failing to behave ethically. Such training can be accomplished by holding regular workshops on ethics and using practical examples to show how employees can solve ethical dilemmas.

Business leaders can also use a reward system to encourage employee ethical behavior. In most cases, leaders expect ethical behavior, but they fail to acknowledge such behavior. Therefore, it is important that business leaders reward such behaviors whenever they see their employees showing them. They should thank the employees for engaging in ethical behavior and possibly reward them for reinforcing the behavior. Business managers should also strive to lead by example. There are higher chances that the employees will show ethical behavior if they see their business managers showing ethical behavior. In the cases where business leaders hold high standards of ethical behavior, then they will have credibility in expecting their employees to hold similarly higher stands (Ferrell& Fraedrich, 2021). As such, when everyone is pulling in the same direction, it becomes easier for every employee to adopt and practice a set of ethical behaviors.

 Business managers should also endeavor the treat the employees well. The management should not just be emphasizing ethical behavior at work but treat the employees poorly. As such, business leaders should respect their employees for the development of a trusting relationship which then becomes a springboard for ethical behavior. The leaders should be reasonable with their demands and invest in the employees well being to help create a culture with ethical principles as the foundation.

 The effective application of ethical principles requires that individuals understand the differences between duty-based ethical standards and outcome-based ethics. While duty-based ethical standards are obtained from philosophical principles or religious precepts, outcome-based ethics usually focus on the action’s consequences and not on religious beliefs, pre-established moral values, or the nature of the action (Ferrell& Fraedrich, 2021). In the case of United Airlines, the company, and the employees should have considered the potential outcomes of pulling the passenger from the plane; therefore, this is a case of outcome-based ethics. They should have known that, even if it was within their regulations and laws to make a passenger forfeit their booking, it was ethically wrong to forcefully and violently accomplish it by dragging the passenger out of the plane.

Recommendations

The case of United Airlines dragging a passenger out of their plane borders on both ethical and legal rights. It was the passenger’s ethical right to be treated as a human, while it was the airline’s legal right to eject the passenger from his seat. Therefore, it is important to make recommendations that would ensure that such do not happen again. One of the recommendations is that ethical behavior should form part of performance reviews for every employee, starting from the executives down to other employees. Such a regulation or law would implore employees to always watch their actions and practice restraint even when performing actions within their legal rights. If such regulation or law had been in place at United Airlines, then the then CEO, Munoz, could not have issued the first reckless statement.

Another recommendation is enacting a law that prohibits airlines from overbooking. This case would not have been there if the plane was not overbooked. Such a law will ensure that there are a few seats available so that in case an emergency boarding is needed, then there will be enough space. It is sometimes difficult to prosecute unethical behavior in the courts of law. However, another recommendation that can prevent such incidences from happening again is introducing laws that suspend the operations of offending companies for a period of two to three days to ensure that they adhere. One of the policies I would implement is the requirement that Airline companies be part of a collective agreement that they would uphold ethical standards and use the provisions of the law up to a point where there are no ethical violations.

Conclusion

The United Airlines scandal of forcefully removing a passenger from his seat is among the top company scandals. Even though the company acted within its regulations and legal provisions to eject the passenger, the action received a backlash and led to serious public relations damage. The incident also had serious financial impacts on the company as well as leading to the sacking of some employees. Regulations and new policies can play a central role in preventing such incidences from happening again.

References

Ayyappan, V.,& Sinha, S. (2023). American Airlines offloads New York-bound woman cancer patient in Delhi.https://timesofindia.indiatimes.com/city/delhi/cancer-patient-alleges-mistreatment-on-american-flight/articleshow/97611314.cms?from=mdr

Cheng, Y., & Shen, H. (2020). United Airlines crisis from the stakeholder perspective: Exploring customers’ ethical judgment, trust and distrust, and behavioral intentions. Public Relations Review, 46(2), 101908. https://doi.org/10.1016/j.pubrev.2020.101908

Crane, A., Matten, D., Glozer, S., & Spence, L. J. (2019). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press, USA.

Ferrell, O. C., & Fraedrich, J. (2021). Business ethics: Ethical decision making and cases. Cengage learning.

Lian, H., Huai, M., Farh, J. L., Huang, J. C., Lee, C., & Chao, M. M. (2022). Leader unethical pro-organizational behavior and employee unethical conduct: Social learning of moral disengagement as a behavioral principle. Journal of Management, 48(2), 350-379. https://doi.org/10.1177/0149206320959699

Liang, X., & Holland, P. (2019). Codes of Conduct: Are They Worth the Paper They Are Written On? In Contemporary HRM Issues in the 21st Century (pp. 183-196). Emerald Publishing Limited.https://doi.org/10.1108/978-1-78973-457-720191021

Soltani, M., Veer, E., de Vries, H. P., & A Kemper, J. (2023). “Did You See What Happened?” How Scandals are Shared via Social Media. Corporate Reputation Review, 1-16. Doi: 10.1057/s41299-023-00165-z

Varma, T. M. (2021). Responsible leadership and reputation management during a crisis: The cases of Delta and United Airlines. Journal of Business Ethics, 173, 29-45. 10.1007/s10551-020-04554-w

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Choose a company brought into the limelight or reported on in the news for some questionable (illegal or unethical) activity within the past 8 years. Try browsing Google using key words such as “corporate scandal” or “corporate fraud” for possible companies. Your paper should include a minimum of a one-page summary of the incident in question and a one- or two-page introduction about the company you choose, followed by the body of your paper which will include your analysis, recommendations, and conclusion. Based on the findings, you will evaluate what these legal and ethical implications may be and what types of laws or regulations you would recommend be put into place for this not to happen again in the future. (For example, some activities may be legal but not ethical; if this is the case, what regulations and laws would you put into place to stop this from happening again in the future? What policies would you implement?) As part of the discussion, include how business leaders can encourage their companies to act ethically, and how duty-based ethical standards differ from outcome-based ethical standards and the applicability of to your chosen company. At this point, the paper should include the revised introduction, summary, your analysis, recommendations, and conclusion for submission (a minimum of 8 pages excluding references). You may double space the paragraphs, using fonts such as Calibri, Times New Roman, or Arial. Your reference page should include all sources used for your research listed in APA or MLA style. Below is an example of how you may outline your paper:

I. Summary

II. Introduction

a.Thesis

b. Background

III. Statement of Problem

a. Significance of the identified problem

b. History in Business of this problem

c. Current trends and issues

d. Societal concerns

e. Future Implications

Analysis of Research findings and facts discussed

V. Recommendations

VI. Conclusion

The following companies MAY NOT be used for this assignment.

Wells Fargo

Volkswagen

Bank of America

BP Deep Water Horizon