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Posted on October 8th, 2012, by

Linex Corporation has developed steadily and successfully, but its decision to expand its operations nationally confronted a serious challenge, involving ethical issues. To put it more precisely, a rival company, Datacore Inc. filed a lawsuit against Linex accusing the company of using its product. In such a way, Linex, being a company operating in the knowledge-based industry, faced a problem of the violation of intellectual property rights since its Prep-aid, the main product of the company at the moment, was alleged to be created on the bases of Datacore’s product, which was truly similar to Linex’s Prep-aid. In such a situation, the company needed to avoid the legal sanctions and defends itself having considerable chances to success in the trial. On the other hand, the company had to be audited to prove its openness, reliability and its respect to intellectual property rights. In addition, the company needed auditing to maintain a positive public image since, in such a way, the company could prove that it has nothing to be accused of.

In fact, the major ethical dilemma Linex faced at the moment was to prove that the company did not use developments of other companies, namely Datacore Inc. and, therefore, Lindex did not violate intellectual property rights. At the same time, the company needed to prove its readiness to auditing, which was essential to ensure the public that the company has nothing to hide and, therefore, the company is still trustworthy. On the other hand, it is obvious that the lawsuit would apparently have a negative impact on the public image of the company whether Linex could win the trial or lose it. In such a context, the company faced a dilemma whether include the existing problem related to the presumable violation of the intellectual property rights or not. On the one hand, the promulgation of the case would undermine the positive public image of the company, but it will contribute to the formation of an image of a fair and reliable company. On the other hand, if Linex decided to hide the case, the public could remain ignorant of the existing problem that allowed the company to maintain its current position and expand its operations nationally successfully, but this would also undermine the confidence of customers in the reliability of the company if the case became the subject of public debates. In addition, the Linex’s choice of the auditing company in favor of the Donaldson, Holmes and Irwin was also ethically imperfect because the company would not only audit Linex but it would also provide consulting services to Linex. In other words, the Donaldson, Holmes and Irwin would be interested in the maintenance of the current position of Linex and its steady development. This interest of the auditing company could influence outcomes of the auditing process and make its outcomes unreliable.

In such a situation, it is possible to distinguish the major stakeholders involved in the ethical problem of Linex. First of all, it is Linex, as a company which is directly involved in the conflict with Datacore Inc. because it is Linex that is supposed to be using the Datacore’s product.

At the same time, Linex faced an internal conflict between Thomas and Jason on the company which should audit Linex and concerning the problem of the revelation of the fact of the lawsuit. On the other hand, both Thomas and Jason are interested in the stable work and successful marketing performance of Linex. Another stakeholder is Datacore Inc. which actually attempts to protect its intellectual property rights and it is interested in winning the trial. In addition, there are three auditing companies which are equally interested in the auditing of Linex, but Donaldson, Holmes and Irwin is the winner and it has interests not only in auditing Linex but also in providing consulting services to the company. Thus, it is possible to distinguish three major stakeholders: Linex, Datacore Inc. and Donaldson, Holmes and Irwin.

On analyzing possible solutions, it should be said that there are several solutions to the ethical dilemma Linex has faced. First of all, the company can attempt to hide the problem which it has faced. To put it more precisely, it can omit the lawsuit in its official reports and the auditing company involved in the auditing of Linex should not publicize the lawsuit. Basically, this approach will allow Linex to preserve its current position as long as the public remains unaware of the lawsuit, but as soon as the public gets information about the lawsuit the customer confidence in Linex will drop dramatically. Alternatively, the company can give all the information concerning the lawsuit and allow the auditing company to publicize this information, but such openness will rather pose new problems for the company than help to solve them because the company will deteriorate its public image and it will get no ways to improve it. In such a situation, the third solution seems to be optimal since the company can involve the auditing company which will not only audit Linex but provide consulting services.

In such a way, Linex will be able to give essential information concerning the case but the auditing company will help Linex to minimize its negative effects and provides recommendations concerning the maintenance and improvement of the public image of the company.

Obviously, the latter solution was chosen by Linex, although it also evokes certain ethical concerns.

On analyzing the solution Linex has chosen, it should be said that it was grounded on the strategic interest of the company. To put it more precisely, Linex had the strategic goal to expand its operations nationally. To meet this goal, the company needed a good reputation and customer confidence in reliability of the company. Obviously, the lawsuit undermined the reliability of the company and customer confidence because customer could not trust the company accused of the violation of intellectual property rights. Naturally, the company needed to minimize potential negative effects of the lawsuit and to demonstrate its openness and reliability. As a result, the company agreed on auditing, but it was obvious that auditing would pose new problems the company will not be able to solve effectively without external assistance. In such a situation, the company logically chose Donaldson, Holmes and Irwin as its auditing company because this company offered the lowest price of its services and, what was even more important, Donaldson, Holmes and Irwin offered consulting services Linex needed badly in the current situation. As a result, the solution was highly beneficial for the company since it allowed not only to maintain its positive public image but also to get a significant external support, which could facilitate overcoming the ethical problem of the company.

In such a way, this solution was justified and logic. Firstly, this solution could secure the position of Linex because the auditing would reveal that the company had nothing to hide and that it had never violated intellectual property rights. Secondly, it was the optimal solution because it balanced auditing and consulting services since all the problems auditing could have revealed would be solved with the help of consulting services provided by Donaldson, Holmes and Irwin. In such a way, the solution is apparently beneficial to Linex.

Finally, the aforementioned solution had a number of practical advantages. First of all, the solution allowed Linex to save costs on auditing and decrease its expanses on consultations. In addition, this solution allowed the company to minimize financial losses caused by the lawsuit and auditing since the consulting services could minimize such losses and assist the company to overcome the crisis easily.

However, it is obvious that Linex would not be able to overcome the ethical dilemma it had faced without any losses because ethical problems are extremely important in the contemporary business environment. Therefore, while solving these problems, the company should be primarily concerned with the minimization of its losses and negative effects of ethical problems rather than on their denial and ignorance. Consequently, the solution Linex had chosen met perfectly the current requirements to the solution of ethical dilemmas.

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