MK3S85 Ethics - Safaricom's Challenges: Stakeholder Engagement

This case study critically analyzes the ethical challenges faced by Safaricom, a major telecommunications company in Kenya, with a particular focus on stakeholder expectations and engagement. It highlights the company's struggle to maintain business ethics amidst issues such as corruption, lack of political enforcement, and shareholder activism. The study delves into the importance of corporate social responsibility, ethical behavior, and adherence to the 'Code of Ethics for Business in Kenya' established by the Nairobi Securities Exchange (NSE) and the UN Global Compact. It also examines the consequences of violating ethical standards and the role of shareholder activism in driving change. The analysis further discusses the prevalence of corruption in Kenya and its impact on companies like Safaricom, emphasizing the need for stronger ethical frameworks and accountability within the business environment. Desklib offers similar solved assignments and past papers for students.

Running head: ETHICAL CHALLENGES WITH SAFARICOM
Ethical Challenges with Safaricom
Name of the Student:
Name of the University:
Author Note:

1ETHICAL CHALLENGES WITH SAFARICOM
In the 21st century, the environment of global business has become very complex as
the companies at every level are facing a huge range of ethical issues. It is the responsibility
of the business to develop code of conducts and ethics to be followed by all the members of
the organization and the company needs to make sure that they also put it into action (Ferrel
& Fraedrich, 2015). This paper will be taking the case of one of the biggest
telecommunications company that is present in Kenya, Safaricom, and analysing the
company’s inability to maintain business ethics and the situation they are in at the moment.
One of the fundamental ethical issue that is faced by many companies is related to the
promoting of the conduct that is set by the company, and making sure that the integrity of the
company is up kept. As new companies are joining the economy, new ethical issues will
always be likely to be introduced into the business community that will be concerning the
accounting practices, social media trends, harassment in the workplace and problems dealing
with equal pay within the ranks.
Maintaining corporate social responsibility and ethical behaviour can bring various
benefits to the company. It is important for every company to have their own version of
moral principles and guidelines they wish to follow, and the more specific to the company it
is, the easier it will be for the company to adhere to it. Following business ethics will prove to
be more beneficial to the company than it will be to not follow it (Brusoni & Vaccaro, 2017).
Not following the respective company’s business ethics will label that company as being
unethical, and this could lead to a great loss in trust from the target audience along with the
stakeholders of the company. Reputation is a very important asset of the company, and it also
proves to be the hardest to build up back again once it is lost. Maintaining a strong business
ethics reputation will also prove to be important in terms of employee retention because it
will motivate them to stay with the company for longer.

2ETHICAL CHALLENGES WITH SAFARICOM
Safaricom PLC is a mobile network in Kenya that has their headquarters in Nairobi,
Kenya (Tuwei & Tully, 2017). The company was found in the year 1997 as a supplementary
business by Telkom Kenya, and the Vodafone Group PLC then acquired a stake of 40% in
Safaricom, they also decided to also take care of the management responsibility of the
company. Safaricom is considered as the one of the biggest telecommunication provider in
Kenya and has also achieved the title of being the most profitable company in the Eastern and
Central region in Africa. Safaricom offers a range of services like mobile service, money-
transferring channels, other consumer products, cloud computing with mobile data, music
streaming applications and also Wi-Fi options with fibre optic services. The company has
been able to control almost 64.2% of the Kenyan market because of their 25.7 million
subscribers as of the end of 2018 (Kenyan WallStreet, 2017). This essay will be addressing
the ethical challenges that Safaricom is facing in the existing business environment of Kenya
with respect to the expectations by the stakeholders and their engagement in the company.
Companies in Kenya have done very little in enforcing ethical laws but are known to
be doing pretty well with the enacting of the laws. This is because there is a lack of a political
force that will ensure that companies to take accountability if the laws are to be broken. This
cannot be blamed on the company solely because the judiciary and the various government
institutions have also failed to prosecute the people and in recovering the assets (Mpuga,
2017). Some of these institutions including the Ethics and Anti-Corruption Commission, the
Office of the Director of Public Prosecutions and the Directorate of Criminal Investigations.
Similar to the case of Enron in the United States where the CEO had been successfully
convicted for the crime of insider trading and fraud, there should be the same happening in
the Kenyan companies so that they will be able to set an example for the other companies as a
deterrent for corporate fraud. It is very unfortunate that the corruption has become an usual
way of life in Kenya, which has been worsened by the government’s unwillingness to fight

3ETHICAL CHALLENGES WITH SAFARICOM
the war on corruption and motivated more corporate thugs to start engaging in fraud (Muthuri
and Gilbert, 2011). Along with the government’s unwillingness, the problem was heightened
because of the shareholders unwillingness to raise any questions about the financial on goings
of the company. The governor of the Central Bank of Kenya encourages the shareholders to
raise questions to the directors of the company relating to the insider loans occurring within
the company (Gichure, 2015).
Along with the internal executives working in the company, also a big responsibility
of the shareholders to be able to detect anything wrong may be happening at the company.
Financial reports and annual reports are always given to the shareholders, so it is up to them
to raise any critical questions that may arise during the general meetings (Chell et al., 2016).
Since the shareholders at Safaricom were not able to do so, either because of lack of
knowledge with these matters, or blatant ignorance, is what caused the fraud to occur within
the company. It is basic to understand that if an individual takes the responsibility of being an
employer of a company, they are required to have a moral obligation to their employees to
make sure that they are being treated and compensated fairly in the workplace. However, if
some employees feel that their integrity is being hampered with at the workplace, then it is
also the responsibility of the employer to make sure that they are providing a safe place for
their grievances to be heard and to be taken action against.
In 2016, the Nairobi Securities Exchange (NSE) had announced that they had joined
the Global Compact by the UN by signing the “Code of Ethics for Business in Kenya”. This
took place because NSE wanted to go forward with promoting more practices of corporate
sustainability as they have accepted a set of core values relating to “human rights, labour
standard, the environment and anti-corruption” (Kobuthi et al., 2018). This code of ethics
came into place so to enhance the business ethics conducted by the companies in Kenya in
accordance to the ten principles that are in place as a part of the UN Global Company. These

4ETHICAL CHALLENGES WITH SAFARICOM
codes deal with issues that relate to human rights, the standard of the labour in the company
and if the company is adhering to the terms set by the Environment and Anti-Corruption
commission. The code has clear distinction between the consequences that will be faced if the
company is violating the terms placed in the code. If the companies that have signed for the
Code are found to be violating the terms of the agreement, there is a 3-step process outlined
by the UN in the Code as to how they will be dealt with (Global Compact Network Kenya,
2015). The offending company will first meet with the representatives of the other organized
businesses and discuss what the company has been found guilty with. The next step is to
release a public statement that expresses the overall moral disappointed by the other
businesses, and a show of disapproval. Even though companies would be keen to not let their
dirty laundry to be aired in public, this negative push will result in a positive outlook for the
future as they would stay in the right lane so to no face such embarrassment. The final step
would be to exclude the offending company out of the Code until they have been able to
rectify what has transgressed. The importance of this step is that this exclusion will slowly
deteriorate the consumer’s view of the company, so they would want to rectify the mistake as
soon as possible – enabling change to be implemented in a short span of time.
Activism is the vehicle that drives change into any situation, and this is where
shareholders turn to when they believe that the company’s management is not maximizing
the company’s potential. The lack of shareholder activism is a result of the high levels of
poverty present in the country (Gupta et al., 2018). This means that only a very small
percentage of the country’s population is active on the stock market, while the majority of the
others do not even concern themselves with what is happening. This is because the ownership
of the biggest firms is in the hands of only the wealthy investors, and they use this as an
excuse to exercise dominance in the boardroom while decisions are being made. Activism
does not always have to become a full-blown problem for the company, but can also be the

5ETHICAL CHALLENGES WITH SAFARICOM
shareholders asking for disclosure on an issue they think needs to be taken a look at or a
proposal to change or modify a company policy that exists (Bourveau and Schoenfeld, 2017).
Before getting into what Safaricom is doing wrong, it is important to know about the
basic principles that must be followed by all companies so that are able to perform business
properly. Business ethics, which is also known as corporate ethics, is an application of
professional ethics that will examine the principles and the moral problems, which can arise
in a company environment (Ramirez, 2018). These set of ethics rule applies to everyone and
all aspects of business being conducted, and is relevant to all individuals of the company or
organization. For these sets of rules to be properly implement in the workplace, the ethical
way of work should originate from the individuals that are working there already. In other
words, business ethics lays out a set of values and norms that will govern the actions of an
employee at the company (Ciocirlan, 2017).
In some cases, it proves to be a great challenge for the companies to maintain ethical
while carrying out their business. Most of the times, the decisions that need to be made are
usually very complex and there is never enough time for reflection on the decision to be made
that may result in some information to be missing from the decision making process (Tilt,
2016). In the process of achieving the desired result, many business executives can end up
doing things that should not be done because that is not what they are being paid for. The
reluctance of the shareholders to put forward any problems they may notice comes from the
prevalence of the beaurecratic culture in many of the companies in poverty-stricken areas,
where they are reluctant to change and have a negative outlook on the people who want to
implement change (Ferrell et al., 2019).
According to an article on Reuters, Kenya was losing almost one-third of the state’s
budget to corruption every year, which is equivalent to almost US$6 billion. The Chairman of

6ETHICAL CHALLENGES WITH SAFARICOM
the Ethics and Anti-Corruption commission, Philip Kinisu, had said that it was becoming
increasingly difficult, due to the shortage of staff and the lack of equipment, to tackle this
problem. The real twist in the story came when the President Uhuru Kenyatta, unwillingly,
had corrected Kinisu and blamed the loose estimate of the amount lost to bad condition of the
paperwork while unconsciously admitted that the corruption had started to threaten the
national security of the country (Miriri, 2016).
During the launch of Safaricom’s sixth Sustainable Development report in 2017, the
newly appointed CEO Bob Collymore promises to fight a successful fight against corruption
and to promote healthy ethical behaviour that will better the firm’s corporate social
responsibility (Bellows, 2017). During this launch, he had also mentioned that almost 52
employees of Safaricom were fired from the company due to charges of fraud that had
occurred in the period of the report. With almost 98% of the company’s suppliers are part of
the signatory that deals with the Code of Ethics for all businesses in Kenya. With Safaricom
contributing 6.5% to the Kenyan GDP, their business proceedings are of a big concern for the
government of Kenya, if they are not able to keep up any ethical standard (Acquaah and
Kiggundu, 2017). Collymore stated that the company would start maintaining their business
proceedings to run in an ethical manner while keeping these processes transparent and
accounted for, so they do not have to face any legal or reputation risks.
Virtue ethics provides an opportunity for the managers and the business leaders of the
company to analyse the kind of people they become with respect to their actions and
decisions made (Wang, Cheney and Roper, 2016). This shapes the business policies, culture
present in the environment of the company. According to the theory, what makes something
good or bad is its capability of promoting or embodying one of those traits mentioned. For
Safaricom, it will be important for them to embody this ethical theory for their business

7ETHICAL CHALLENGES WITH SAFARICOM
proceedings in the future, as it will guarantee that their actions are not negatively influencing
the livelihood of the consumers, along with that of the company’s.
With the CEO of the company, Collymore, taking the initiative to eradicate corruption
from the company’s roots, the same energy seemed was passed onto the shareholders as well.
At a recent annual general meeting, some Safaricom shareholders had protested how they
were only getting a small portion of the divided amount, and questioned why and how there
was a heavy spending occurring in the company. This initiative gave real hope that, after a
long time, the purpose of those meetings were finally reaching their full potential. After the
company faced a huge storm because of their SIM-card swap scandal caused by a former
employee at Safaricom, there was a lot of tension amongst its existing users on the credibility
of the company (De Beukelaer and Eisenberg, 2018). This tension was exacerbated by the
fact that it was a user of the SIM card that detected that his personal information was leaked
to a third-party promoter company. If this same problem were to have been detected by a
company executive then the matter could have been handled internally, without the
consumers feeling that the people in charge are not doing their job properly. However,
Safaricom since then has been able to add almost 60,000 new subscribers from the month of
December in the last year, after the scandal. As mentioned earlier, a good reputation is
something that is very difficult for the company to earn back but in this case, they were able
to do so only because they had completely changed their company’s statement of purpose
(Taghian, D’Souza and Polonsky, 2015). They were now going to focus more on
transforming lives by providing the people a medium through which they can be closer to the
information that will be made available to them with a subscription with Safaricom.
Business ethics governs how a company should behave internally. It can be very easy
for a company to gain profit in way that is not ethical, just because it may be the easiest thing
to do. However, maintaining good ethics while achieving profits says more about an

8ETHICAL CHALLENGES WITH SAFARICOM
organization than just profit would. Consumers are more moved by the story of struggle that a
company experiences to get to the level that they have, and that almost always proves
beneficial to the company. Being one of the biggest companies in the country, Safaricom lost
the trust of many of its users, however they have been able to gain their reputation and their
consumers back. The entire business climate of Kenya has exacerbated the corruption
occurring in most of the companies, however as more attention is falling on those businesses,
they are being pushed towards proper ethical conduct because the consequences of behaving
otherwise will prove to be very disadvantageous.

9ETHICAL CHALLENGES WITH SAFARICOM
References:
Acquaah, M. and Kiggundu, M.N., 2017. Prospects and Challenges in Managing Africa’s
Future: An Introduction.
Bellows, S., 2017. It takes more than motivational talks, training to be successful.
Bourveau, T. and Schoenfeld, J., 2017. Shareholder activism and voluntary
disclosure. Review of Accounting Studies, 22(3), pp.1307-1339.
Brusoni, S., and Vaccaro, A. 2017. Ethics, technology and organizational innovation. Journal
of Business Ethics, 143(2), 223-226.
Chell, E., Spence, L.J., Perrini, F. and Harris, J.D., 2016. Social entrepreneurship and
business ethics: Does social equal ethical?. Journal of business ethics, 133(4), pp.619-625.
Ciocirlan, C.E., 2017. Environmental workplace behaviors: Definition matters. Organization
& Environment, 30(1), pp.51-70.
Code of Ethics for Business in Kenya. (2015). Retrieved from
http://www.globalcompactkenya.org/index.php/en/about/code-of-ethics
De Beukelaer, C. and Eisenberg, A.J., 2018. Mobilising African music: how mobile
telecommunications and technology firms are transforming African music sectors. Journal of
African Cultural Studies, pp.1-17.
Ferrell, O. C., and Fraedrich, J. 2015. Business ethics: Ethical decision making & cases.
Nelson Education.
Ferrell, O.C., Harrison, D.E., Ferrell, L. and Hair, J.F., 2019. Business ethics, corporate social
responsibility, and brand attitudes: An exploratory study. Journal of Business Research, 95,
pp.491-501.

10ETHICAL CHALLENGES WITH SAFARICOM
Gichure, C.P., 2015. Towards instilling ethics in African business and public service: the case
of Kenya.
Gupta, V.K., Han, S., Mortal, S.C., Silveri, S.D. and Turban, D.B., 2018. Do women CEOs
face greater threat of shareholder activism compared to male CEOs? A role congruity
perspective. Journal of Applied Psychology, 103(2), p.228.
Kobuthi, E., K’Obonyo, P. and Ogutu, M., 2018. Corporate Governance and Performance of
Firms Listed on the Nairobi Securities Exchange. International Journal of Scientific
Research and Management, 6(01).
Miriri, D. 2016. Third of Kenyan budget lost to corruption: anti-graft chief. [online] Reuters.
Available at: https://www.reuters.com/article/us-kenya-corruption/third-of-kenyan-budget-
lost-to-corruption-anti-graft-chief-idUSKCN0WC1H8 [Accessed 24 Mar. 2019].
Mpuga, P. 2017. Sustainable marketing at Safaricom Limited: The power of a good
strategy. African Journal of Marketing Management, 9(6), 70-85.
Muthuri, J.N. and Gilbert, V., 2011. An institutional analysis of corporate social
responsibility in Kenya. Journal of business Ethics, 98(3), pp.467-483.
Ramirez, S.A., 2018. Diversity and Ethics: Toward an Objective Business Compliance
Function. LOY. U. CHI. LJ, 49, pp.569-595.
Safaricom Analysis. 2017. Retrieved from https://kenyanwallstreet.com/safaricom-analysis/
Taghian, M., D’Souza, C. and Polonsky, M., 2015. A stakeholder approach to corporate
social responsibility, reputation and business performance. Social Responsibility
Journal, 11(2), pp.340-363.
Tilt, C.A., 2016. Corporate social responsibility research: the importance of
context. International journal of corporate social responsibility, 1(1), p.2.

11ETHICAL CHALLENGES WITH SAFARICOM
Tuwei, D., and Tully, M. 2017. Producing communities and commodities: Safaricom and
commercial nationalism in Kenya. Global Media and Communication, 13(1), 21-39.
Wang, Y., Cheney, G. and Roper, J., 2016. Virtue Ethics and the Practice–Institution
Schema: An Ethical Case of Excellent Business Practices. Journal of Business Ethics, 138(1),
pp.67-77.