Business Ethics and Stakeholders in Hospitality Industry

This report delves into the crucial aspects of business ethics within the hospitality industry, emphasizing the importance of ethical practices in building and maintaining strong stakeholder relationships. It begins by defining business ethics and highlighting the impact of unethical conduct, using the Freedom Insurance case as an example of unfair sales tactics and the resulting damage to a company's reputation. The report then explores the ethical issues surrounding sales practices, particularly the impact of commission-based structures on sales executives, and suggests strategies to promote ethical behavior, such as incorporating morality and quality of work into reward systems. Furthermore, it addresses cultural considerations within the hospitality industry, emphasizing the need for sensitivity to different cultural and religious backgrounds in sales and customer interactions. The conclusion reinforces the significance of ethics in business and the critical role of stakeholder relationships in fostering goodwill within the hospitality sector.

Establish and Conduct Business
Relationships of hospitality Industry

Introduction
Business ethics is an important area of study that
defines the difference between wrong and right
(Trevino, and Nelson, 2016). In the world full of
commerce, many of the cases are used to be reported in
media where business breach their ethics and ignore
greater good of its one or more stakeholders. The case
selected for this presentation is of Freedom insurance
association, an insurance company of Australia.

Ethical Issue
The issue is related to unfair sales tactics. In the
selected case, sales executive of the company
unethically sold company’s policy. In some of
the cases, they have sold the policy to people
who were not even able to understand their
factors, reasoning, and consequences. The issue
has been found by Royal commission and
reported in its final report (Treasury.gov.au,
2019).

Explanation
The conducts done by sales executive were
unethical ones for many reasons. Firstly being
an insurance company, it becomes the duty of
the same to work in the best interest of customer
but Freedom did not do so. Sales executives sold
irrelevant policies to customers. Secondly, the
company refused to cancel the policies later on
that again affected the interest of customers
badly and for this reason, it was unethical.

Importance of issue
The incident badly affected the reputation of the
company in the market and set an example of
business ethics. One may check how badly a
business can be affected when the same neglect
interest of one or more stakeholders. This is the
reason that marinating an ethical bond with
stakeholders is important. For businesses in the
hospitality industry, goodwill highly matters and
therefore the issue is significant.

Reason
Freedom insurance-linked commission of sales
executives with the amount of sale. This was
the reason that executives made their full focus
on increasing the sale volume. They have tried
to sell policies on any cost in order to attain
maximum commission.

Strategies
Here the company can choose different practices than Freedom. Providing commission to employees is good but the same must be regulated. Further to maintain a good level of ethics, the quantity of sale must not be the only criteria but factors
such as the morality of actions and quality of work must be included while providing rewards and recognition. In the case of business form hospitality industry, such practices can be detected and therefore staff must be instructed with a proper
code of conduct.

Cultural issues
In the case of Freedom, it targeted mostly those
people who were not able to understand elements
of a policy. Sometimes, the company did the
same to people with mental disability
(Calderwood, 2018). In order to discuss the
same in the context of the hospitality industry,
this is to state that the same consist of people with
different cultures and religious background.

Cultural issues Cont…
If executives of this industry will do unethical
practices with respect to sale increment, it can hurt
the religious sentiments of customers. This is the
reason that religious beliefs are required to keep in
mind while developing sales practices of the
organization.

Conclusion
In a conclusive way, this is to state that ethics is
very important for business and relationship of
business with stakeholders is very crucial for
marinating goodwill. While thinking of sales
strategies and other aspect, company is required
to consider interest of all the stakeholders.

References
Calderwood, K. (2018) Banking royal
commission: Inside the 'ultra-competitive'
sales culture at Freedom Insurance. [online]
Available from:
https://www.abc.net.au/news/2018-09-24/ins
ide-ultra-competitive-sales-culture-at-
freedom-insurance/10299480 [Accessed on
12/08/2019]

References cont..
Treasury.gov.au. (2019) Final Report. [online]
Available from:
https://treasury.gov.au/sites/default/files/201
9-03/fsrc-volume-2.pdf [Accessed on
12/08/2019]
Trevino, L.K. and Nelson, K.A.,
2016. Managing business ethics: Straight talk
about how to do it right. John Wiley & Sons.