Sample Case Study Paper on Kitchen Best: Business Ethics

  1. Kitchen Best has a culture of offering entertainment and kickbacks to potential clients and business partners. What legal risks does this pose to the company in a cross-border setting?
The enterprise is exposed to the legal risks of:
  • Legal action being instituted against it or its employees for infringing on the provisions related to ‘Bribery and Corruption under the Criminal Law of the People’s Republic of China’
  • Legal action against it or its employees for being in default of the law on Prevention and Suppression of Bribery in the Private Sector, Macau Special Administrative Region
  • Prosecution under the Provisions on the ‘Prevention of Bribery Ordinance (Laws of Hong Kong CAP 201)
  1. What are some of the shortcomings of the management and governance systems of Kitchen Best? What kind of mechanisms should Kitchen Best put in place to prevent unethical behavior and malpractice and to strengthen system control?
Some of the shortcomings of management are:
  • Offering contracts for the supply of special gift sets tocompanies in return for special consideration that undermines the quality of products sourced from such companies
  • Failing to have clear guidelines or vetting procedures for expenses incurred from wining and dining or entertainment provided to suppliers and customers. This allowedfor employees to overstate the accounts
  • The failure to take remedial action upon the reception of evidence or information relating to misappropriation of funds or unethical behavior by employees
  • Lacking proper controls to monitor business operations across the border and the conduct of staff with different backgrounds and cultural values
Some of the mechanisms that Kitchen Best should put in place to prevent unethical behavior and strengthen system control include:
  • Annual auditing of the books of account
  • Awarding of contracts on a competitive basis. Such companies should also be vetted
  • Hiring a legal team to advise management and employees on the guidelines of ethical conduct and operations where the company may be in default of certain laws
  • Prosecuting or taking remedial action against employees who are found to be involved in malpractice activities
  • Playing a more active role in company operations instead of leaving it to middle-level management
  1. Many of the problems at Kitchen Best are related to Horatio Sze and Ma Luk. Where has the company gone wrong in managing its staff and how can they address this issue?
  • Management hires staff through recommendations by family members
  • Staff are also hired based on their relationship to top management
  • Management also turns a blind eye to irregularities occasioned by staff members and takes no remedial action for such
  • Managerial decision-making is left to middle-level management who exploit company resources for personal gain
Kitchen Best can address the issue of staff management through:
  • Making hiring decisions based on employee competence and skills
  • Conducting frequent performance appraisals and employee audits
  • Taking remedial action against employees who are involved in unethical practices or malpractice
  • Setting up a hierarchal decision-making process whereby decisions by middle-level management have to be vetted by senior management
  • Setting clear guidelines or vetting procedures for expenses incurred from wining and dining or entertainment provided to suppliers and customers by employees
  1. Why is it important for SMEs to practice ethical management? How can Henry Chan enhance his role in this regard?
It is important for SMEs to practice ethical management because it:
  • Prevents legal claims being taken up against the Corporation
  • Reduces misappropriation of funds which leads to an upsurge in profitability
  • Prevents the loss of business owing to claims of unethical conduct
  • Leads to better management and governance of the company
  • Builds customer confidence and loyalty that ultimately transforms into profitability and sustainability
  • Leads to honesty and loyalty by employees and increases employee productivity
To enhance his role in instituting ethical management, Henry Chan should:
  • Be more actively involved in business operations
  • Institute remedial action against employees involved in unethical conduct
  • Institute mechanisms for vetting employees and controlling their use of company resources
  • Vet all major decisions carried out by company employees