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Case Study Report

Learning Outcome Assessed: a - e

Weighting: 30%

Written Report Case Study Analysis (2000 words)

Assessment -2
Ethics, morality and leadership: The AWB scandal
The series of corporate scandals and transgressions that have emerged over the last decade, including those associated with Fannie Mae, Freddie Mac, Alcoa, Enron, HIH, Merck, Lehman Brothers, Parmalat, Union Carbide and WorldCom, have not only contributed to global financial crises. They have also raised questions about the quality of corporate leadership and ethics, and damaged the psychological relationships between such companies and their multiple stakeholders. Studies of such scandals and transgressions in Australia suggest that fraud, including corporate scandals and institutional corruption, has cost the Australian economy dearly. This is supported by extensive research on corruption carried out by Transparency International, which targets particular countries in Asia and Africa and their governments for special attention. In response, many governments and enlightened corporations have established tighter corporate governance (CG) and personal accountability regulations and mechanisms, together with a wide range of corporate social responsibility (CSR) programs. While the former are aimed specifically at preventing fraud and other unethical practices, CSR is primarily intended to enhance corporate reputations through undertaking socially responsible community activities. In the case of the Australian Wheat Board (AWB), the government-owned monopoly wheat exporter, a combination of incompetence, pragmatism and clear deception led to the scandal that engulfed AWB in 2006. Together with other competitors, AWB was found to have been involved in the provision of large amounts of kickbacks to government representatives in Iraq in order to ensure the continuing supply of their wheat, in contravention of explicit Australian government legislation. It was revealed that AWB had participated in such illegal activity, including the startling revelations that of the US$1.8 billion that had flowed to Iraq during Saddam Hussein’s regime through bribes and the rorting of the United Nations Oil-for-Food program, a large proportion (US$300 million) came from just one company, AWB. Of the more than 3000 companies that had contracts with Iraq, 2253 paid kickbacks, but none more so than Iraq’s biggest wheat supplier, AWB. The local and global media went on a rampage, with one commentator describing the events unfolding at the time as ‘Deceit by the Truckload’. Finally, in response to overwhelming publicity, the Australian government established the Cole Inquiry to investigate the scandal. Corporate deception and incompetence, and the Australian government’s apparent predisposition not to initially accept the claims of AWB’s accusers, were the consistent themes throughout the 12-week inquiry into the so-called ‘oil-for-food’ scandal. Among other ill effects, this affected Australia’s reputation internationally; for example, its ranking on the Transparency International Corruption Index fell from 9 to 11 The Cole Inquiry raised a number of specific issues about AWB’s values and operating procedures, as well as broader issues about corporate ethics, morality and leadership. It questioned how such illegal and immoral activities had been allowed to occur; the apparent absence of internal auditing procedures, the AWB managers’ ethical and leadership shortcomings; and the company’s cover-up of its actions. However, it also questioned the Australian government’s apparent lack of monitoring, and its reluctance to confront the problems despite a mountain of diplomatic...