Sears Auto Center Scandal Essay

LGST001 Ethics and Social Responsibility

Sears Auto Center Scandal
Managing Business Ethics Text (pp.207 - 210)

Ethical Decision-making Issue:
Should Sears remove its commission-based compensation scheme?

Group Stand:
The majority of the group believes that Ellen should be removed from the team.

Support for Motion:
Rawl's theory/Egalitarianism
The underlying inequality is that car owners are paying for repair services they do not require while Sears benefits by earning higher profits. This is a result of information asymmetry given that the repair advisors are in a more knowledgeable position regarding the available and required services, and clients act upon their advice. Thus, there is an opportunity for advisors …show more content…
We feel that using the Participative Model in businesses is not economical and feasible for the company because first, allowing customers to take part in the decision processes of companies takes away the autonomy of the company which hinders the use of business strategies; Second, the carrying out of the Participation Model will be very costly to the company as the process of attaining the feedback takes time and money to administer; And last, if the Participation model is followed, the company will lose potential revenue it could have earned had it continued to use the current compensation system as a motivator for its workers. We therefore feel a better Procedural Justice model to use is the Balancing Model because the utility achieved from using the Participative Model does not balance out the costs when applying it. A balance must be struck between the cost of errors and the costs of the process.
Principal-Agent Relationship
According to the Principal-Agent Relationship between employers and employees, an employee has to be loyal to the company and their goals. As such, we feel the incentive pay system should not be removed because even though this system might not be liked by Sears' workers, it is this system that is used successfully in most service industries to increase sales and profits, which Sears is trying to achieve. Therefore, the workers should push

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