Australian Wheat Board Study

Introduction

A United Nations report on October 27, 2005 found that the Australian Wheat Board (AWB) had paid $US221.7million in kickbacks to the Iraqi government under the United Nations Oil-for-Food program (Whitton 2007). Acting in such a manner they cheated their shareholders out of those monies as well as damaging Australia's trade reputation. This paper will examine the environments the organization was operating in, the managerial ethical issues and corporate social responsibility. The academic theories behind each managerial issue will be identified and other relevant cases will be introduced as well in an attempt to understand the situation in greater depth and what led to such decisions being made.

Part A: The environment

A.1 External

Four main groups make up the specific external environment (Robbins et al, 2006), customers, suppliers, competitors and public pressure groups. "Each has a direct and immediate influence on managers' decisions and actions and is directly relevant to the achievement of the organization's goals". In this case factors in the external environment encouraged the organization to behave in an unethical way.

A.1.1 Customers

In an unusual twist, it was the customer that was asking AWB to conduct business in an inappropriate manner. As part of the sale of wheat to Iraq, AWB was asked to pay "discharge and land transport" fees to transport wheat to silos throughout Iraq (Attorney General's Department 2006). They were informed that, should they not pay this fee, Iraq would not purchase any wheat from them.

All companies exist to serve the needs of their customers. The old adage "the customer is always right" is not always true, but the seller must always behave as though it is. Generally a company will not question how the customer would like to do business, but rather go out of their way to ensure their needs are met.

A.1.2 Suppliers

The suppliers of an organization are also key to its success. For AWB, its suppliers are Australian grain growing farmers. AWB's corporate structure and constitution requires AWB to act in a manner that maximizes net returns to growers who deliver to the AWB National Pool (AWB 2006), acting more as a distributor than a traditional customer. The farmers/suppliers expect AWB to get the highest possible price for the grain they have placed in their care.

The largest hurdle to success for a company is often its competitors. AWB faces competition from around the globe and every country that is producing a surplus of wheat. While this is challenging enough in and of itself, it was one of their competitors that led to the illegal payments being discovered. Canada was turned down for a wheat contract with Iraq when it refused to pay the additional fees. Iraq alluded to the fact that Australia was happy to pay them, and so should Canada (AGD 2006). This led to a complaint being filed with the United Nations regarding the payments and their eventual discovery.

A.1.3 Pressure Groups

Like many large companies, AWB faces pressures from a variety of groups encouraging environmentalism, social responsibility and other special interests. In response they have a variety of programs that give back to the community, provide international aid and show stewardship of the environment. AWB is aware of the importance of its public reputation, but apparently gave no thought to it when undertaking the activities that now see them being sued by their own shareholders.

A.1.4 General environment

The general external environment (Robbins et al 2006) includes a variety of factors that may affect the organization. Economic conditions, political and legal conditions, sociocultural and demographic conditions and technological and global conditions should all be monitored for possible market changing affects.

In respect to AWB's current position it has been the political and legal conditions that they did not account for. Neither war in Iraq has seen much popular support. The Oil for Food Program was introduced for humanitarian reasons to lesson the suffering of a people who had no way to improve their situation. Participating in the program could have been a positive, support building event. At the same time, abusing such a program would be seen as overwhelmingly negative and as such they are now paying the price.

Breaking international law has also involved the Australian government and damaged the entire country's reputation. The long term consequence of their actions is yet to be seen.

A.2 Internal

The internal environment of an organization is its culture - the system of shared meaning and beliefs held by organizational members that determines, in large part, how employees act (Robbins et al 2006).

A.2.1 Dimensions

There are seven dimensions that shape culture, each of which may or may not be a focus of the company; attention to detail, innovation and risk taking, stability, aggressiveness, team orientation, people orientation and outcome orientation. It is safe to say that in this case ABW exhibited a high degree of innovation and risk taking in their flaunting of international sanctions and laws, a high degree of outcome orientation in doing whatever it took to make the sale, and a high degree of aggressiveness in their behavior. A low degree of people orientation was present, allowing funds to go into the pocket of an abusive dictator, and a low degree of attention to detail in the fact they were caught in their illicit activities.

A.2.2 Words vs Actions

According to their own corporate governance documents, one of their guiding principles is to:

"Promote ethical and responsible decision making...establish a code of conduct to guide the directors, the chief executive officer, the chief financial officer and any other key executives as to the practices necessary to maintain confidence in the company's integrity; and responsibility and accountability of individuals for reporting and investigating reports of unethical practices" (AWB 2006).

According to the Australian Government Attorney General's Department:

"The conduct of AWB and its officers was due to a failure in corporate culture...is a closed culture of superiority and impregnability, of dominance and self-importance. Legislation cannot