Mergers/Acquisitions: Addressing Ethical Dilemmas for Company Success - Essay Sample

Introduction

Mergers and acquisitions give organizations a chance to define their culture and values in a manner that entwines with all employees from the companies involved. According to Joseph (2016), multiple ethical dilemmas need to be addressed concerning mergers and acquisitions of the companies. Even though some managers think that ethics in the management of the companies is a personal scruple, it is notable that the success of companies depends on the confidential matter associated with ethics and individual consciences (Lamb et al., 2017). Mergers provide business associates with an opportunity to handle corporate misconduct by providing a unified ethical standard and corporate conduct (Dhir & Mital, 2012). Vital aspects for the success of the firm include establishing ethical leadership, defining the corporate culture, and planning for organizational programs and processes that can develop a framework for achieving a value-driven culture of integrity.

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Mergers mostly fail when they are unable to provide proper leadership that can enable the measures to institute the systems required to enhance ethical conduct and improve responsiveness in the execution of leadership approaches and enhancement of corporate plans (Dhir & Mital, 2012). For that reason, it is vital to ensure that the two organizations join and structure a proper leadership plan that should provide a framework to institute the systems required to facilitate ethical conduct and to share responsibility for conceiving and executing a proper corporate plan.

Ethical Theories that Can Create Value-Driven Culture

Prospect Theory

Mergers should reflect on their attitudes, values, language, beliefs, and behavior patterns to define a proper organizational culture. Mostly, prospect theory reflects on the empirical finding that connects the contrary to rational choice theory aspects and how the elements make people fear the losses that can be incurred by the value gaining process. Starting up a merger and acquisition requires the company or the management two-way rational choices and the probabilities of facing adverse outcomes, which might be heavily effective on the potential cost of the firm (Candela, n. d.). The probability of losing can be high if the farm does not ensure that it applies prospect theory in forecasting the future of the company concerning profitability index and possible approaches of aligning employees' behavior and cultural relations.

Bounded Rationality

This theory informs about behavioral economics and how they reflect on human behavior concerning economic rationality. In that manner, the theory mentions that employees' rationality is usually limited concerning the information they have about the farm and how they can apply the information on their cognitive limitations and defining finite time that is required to make reasonable decisions (Candela, n. d.). The theory defines holistic ways of making decisions in a rational process. However, the theory adds that certain conditions make people or employees in a particular company to act concerning the basis of the limited information about decision making and lack of the ability and resources to strive in the market (Lamb et al., 2017). There can be an absence of complete information or resources in the company if there is no proper plan to enhance or establish another corporate culture that captures all employees between the two companies. The need for corporate culture will establish a relationship between employees' capability to make decisions and the company's capability to provide resources for better decision-making.

Organizational Programs and Processes That Can Establish A Framework for Achieving Value-Driven Culture of Integrity

Aligning the Organization with Cultural Factors

Culture is the cornerstone of organizational success. To avoid failures in mergers, the company needs to establish an oversight that can outline all relevant adjustments required to incorporate in the new company in terms of cultural advantages and enabling employees to learn the new culture that is put in mind the employees of the two companies. Organizational fitness is the key to success and the integration of a company in the progressive steps required to enable it to maneuver in the new market (Paine, 1994). Understanding culture requires the study of the company concerning pointing out the key steps that the managers can employ to teach culture or the new culture to the employees and stakeholders of the company (Paine, 1994). Some of the steps include the diagnosis of how the company is going to ensure that work is done, setting up proper priorities as well as establishing a platform for support and hardwire change.

The Decision-Making Process That the CEO Can Focus on To Incorporate Ethical Decisions

The success of mergers and acquisitions requires CEOs to be less confident and not to portray that they are overconfident about the management of a company. For that reason, managers need to avoid overconfidence or hubris bias. It is an aspect that most CEOs fail to realize (Lamb et al., 2017). On the contrary, decision making should emphasize on the need to understand employee behaviors to prevent hubris or behavioral biases (Dhir & Mital, 2012). Besides, avoiding escalation of commitment is vital for establishing an ethical decision. In most cases, companies decided to form mergers as a measure of bringing together their strength for the better position of the company in the future (Dhir & Mital, 2012). Therefore, managerial decision-making should ensure that it avoids confirmation bias and any aspect of the escalation of commitment.

Conclusion

It has been noted that there are vital aspects for the success of the firm made through mergers. The aspects include establishing an ethical leadership, defining the corporate culture, and planning for organizational programs and processes that can establish a framework for achieving the value-driven culture of integrity. It has also been found out that the probability of losing can be high. The aspect is usually justified if the farm does not ensure that it applies prospect theory in forecasting its future. The forecast should be in terms of profitability index and possible approaches to aligning employees' behavior and cultural relations.

References

Candela, L. (n. d.). Rational and Nonrational Decision Making | Boundless Management. Courses.lumenlearning.com. Retrieved 11 June 2020, from https://courses.lumenlearning.com/boundless-management/chapter/rational-and-nonrational-decision-making/.

Dhir, S., & Mital, A. (2012). Decisionmaking for mergers and acquisitions: the role of agency issues and behavioral biases. Strategic Change, 21(12), 59-69. DOI: 10.1002/jsc.1895

Joseph, T. (2016). The integration of theoretical ethics with practical decision-making in organization and management. Journal of Leadership, Accountability, and Ethics, 13(3).

Lamb, L., Becker, G. V., & Nunes, M. P. (2017). The strategic decision-making process in mergers and acquisitions: the perspective of acquired companies from the south of brazil. BASE-Revista de Administração e Contabilidade da Unisinos, 14(2), 75-91.

Paine, L. (1994). Managing for Organizational Integrity. Harvard Business Review. Retrieved 11 June 2020, from https://hbr.org/1994/03/managing-for-organizational-integrity.