Business Ethics and Sustainability

Assessment Task 2 Individual

Essay
Min Joo Sung | 11219108 | Charles Okumu

Table of Contents

1. Introduction
2
2. Main ethical
issues
.2
3. Key
Stakeholders
.5
4. Effect on
stakeholders
.6
5. Are these issues organisation-specific or industry
wide?.................................7
6. Background and organizational
context8
7. Internal or
external?.........................................................................................
...8
8. What is the organisational
response?................................................................9
9. Suggestions
..9

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10.

Conclusions

10
11.
References
11
12.
Appendices
.12

1. Introduction
In this report, I will be addressing the main ethical issues that surface
within the construction and trades industry focusing on the key
elements and findings from the interview that I conducted with Johnny.
Johnny is a tiling subcontractor for E__ Trading Pty, Ltd. and has worked
in the trades and construction industry for approximately 20 years.
With his experience, he was able to provide a very detailed insight onto
certain ethical issues surrounding the industry in relation to the private
and public projects that his firm has partaken in.
Drawing from the interview, a central figure to most of the unethical
behaviours seems to be money. Money seems to be the main
instigator and catalyst for the unethical decisions made within the
industry and is often at times used as a means of justification. Profits
need to be made and as Ashforth and Anand (2003) state, individuals

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engage in a process of rationalization where self-serving ideologies are

developed to justify corruption. The industry has become a
commonplace for numerous unethical behaviours, drawing upon the
studies of J.L. Craft (2013) and Palazzo, G. et al, (2012) I will
deconstruct the main issues of ethical blindness and unethical
justification within the industry.

2. Main Ethical Issues

Money
1 Timothy 6:10 For the love of money is the root of all kinds of evil
Bible, NIV
Money plays a key figure in most if not all the unethical behaviours and
decision making processes within the industry. If it is not the instigator
for many unethical behaviours, it is surely the influencer. For many
individuals within the industry, the end goal for any activity or project
is to be profitable, to make a profit. As Johnny states, usually the
biggest factor in our decision making is money, whether or not this
project is profitable for us. So how does money play a role in the
decision making process? For the tradesmen, each project has a set list
of requirements, the date of completion, the measurement
specifications and the materials required. In regards to the materials,
like any other product on the market, there exists a wide variety of
brands and different products, some of higher quality and in the
context of money, some cheaper or more expensive. Often, tradesmen
will be faced with the ethical dilemma of whether or not to use the
specifically requested material because 1) they may feel from
experience that the specified product is not ideal, 2) an alternative

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product is cheaper thus maximizing profits. Furthermore, the issue of

money plays a larger role if the specified product tags along with other
difficulties. These difficulties can often include the supply and
transportation of materials which can in turn create additional costs as
well as affecting work scheduling. This is a common issue amongst
tradesmen as they search for methods of maximizing their profits.
A minor secondary issue relates to hourly payments. Often, certain
projects will be quoted via the amount of work required or the hourly
rate. In cases where tradesmen are paid an hourly rate, they may
indeed work slower than normal, take longer breaks, create
complications to extend the work required in order to receive a larger
profit. However, if they were working on a project that pays by the
amount of work they complete, they may rush their work and aim to
finish as quickly as possible. Both scenarios are heavily influenced by
the factor of how much money they will earn.
Ethical Blindness and the blurring of good and bad
In a survey conducted by FMI, in conjunction with Construction
Management Association of America, the respondents were asked
whether they had experienced or observed unethical behaviour in
construction industry and 84% of respondents answered yes. It is a
growing concern that within the construction industry, it has become a
commonplace for unethical behaviours to manifest and this is further
emphasized by Johnnys statement that this is very common practice
within private projects. Which raises the question of why unethical
behaviour is deemed as common practice within the industry. In line
with Craft, J.Ls (2013) statement that ethical decision-making was not
simply a choice between bad and good or black and white I believe
that the tradesmen arent completely aware of whether or not their
actions are of corrupt nature. This can be attributable to the fact that
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this sort of behaviour has been going on for many generations. These
actions are no longer viewed as ethically corrupt but as common
practice. This can be partly attributable to ethical blindness, a state in
which people are unaware that what they are doing is unethical. This
situation was highlighted in my interview with Johnny on a particular
case. In this case, Johnny was working on a private project and was
told by the builder to take his time, we are paid hourly. Everyone on
the project took longer breaks and slowed their work down. Studying
this case, it is apparent that amongst the industry there exists a
culture in which these acts arent deemed unethical, because everyone
is doing it.
Why do these issues occur?
These issues occur for a number of reasons:
1) Maximisation of profits.
Each firm essentially wishes to maximise its profits per project and
cutting corners is to them an appropriate way. Additionally, due to the
competitiveness of the industry, multiple tradesmen have lowered
their quotes to receive the project and thus feel obliged to make the
cut-offs elsewhere. Lastly, some even feel forced into the situation or
else they will not make a profit.
2) Chaotic Industry
The construction industry is one of chaotic nature whereby numerous
activities are going on simultaneously. Multiple trades are working
simultaneously and often the site foreman may find difficulty in
keeping track of everyones actions. The site foreman, as the middleman between the project manager and the tradesmen will often have
other responsibilities and will obviously not be able to observe every

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trades work in progress. In these instances, going un-watched,

tradesmen find it easy to get-away with their unethical behaviours.
Furthermore, if the site foreman is not experienced or highly
knowledgeable, they can be easily influenced or manipulated by the
tradesmen.
3)

Oblivious Client

In most cases, the client will possess little to no knowledge of the

construction industry and its related activities in which case gives birth
to a perfect scenario for corrupt/unethical activities to take place.
Clients with little to no knowledge may find themselves victim to
misinformation and manipulation by tradesmen. If the tradesmen
believe that they can act unethically unnoticed, they are more than
likely to take the opportunity, especially if it results in a larger profit
margin. Some examples include, use of alternative materials,
additional charges, etc.

3. The Key Stakeholders

Public Projects
For public projects, the key stakeholders that are most affected by the
unethical behaviour of tradesmen are the clients, the owners of the
project, and the construction companies that have been employed by
the clients to manage the project. Minor stakeholders may vary
depending on the project, for instance if it is a hospital, the minor
stakeholders may be doctors, nurses, patients, etc, whereas if the
project was an apartment, the tenants living in the apartments would
be the minor stakeholders.

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For example, if Mr. A wishes to build an apartment complex on a piece

of land that he owns, he may go to a construction company such as
Dyldam. Dyldam will then place one of their project managers in
charge of this particular project. They in turn will start employing
different subcontractors. These subcontractors will then delegate their
tradesmen to the project. Ultimately, Mr. A will be most affected by
these unethical behaviours due to his investment. Mr. A might then cut
off his relationship with Dyldam, thus Dyldam will lose a client and
damage their reputation. Additionally, there may be backlash towards
the project manager for letting these acts go under the radar and
ultimately, the subcontractor may lose future business with Dyldam.
Private Projects
Private projects work similarly but on a much smaller scale. The clients,
will often play the role of a construction company and will seek certain
tradesmen such as a builder, concreter, tiler, etc. Therefore the main
stakeholder would be the client with the minor stakeholders being the
tradesmen that they employ.

4. The effect on stakeholders

Depending upon the issue at hand, the effect onto the stakeholders
may be very minimal or completely catastrophic. Firstly, the client
would obviously feel deceived having paid for something in which they
did not receive. Furthermore, depending upon the situation, they may
often be faced with damages or additional costs to have the project reestablished in its specified form. This will then ultimately affect the
construction company that was associated to the project because it will
become their responsibility to foresee this project once more. This

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would entail them having to reassign staff onto this project

immediately which may disrupt their other projects and scheduling.
Additionally, resources will now need to be directed back onto this
project till it is resolved. However, these additional costs associated
with this complication will later fall directly onto the subcontractor at
fault. The subcontractor will be alerted of the situation and will be
called upon to resolve the matter. All costs associated with resolving
the issue will then be forwarded to them. This would ultimately result
in a huge financial backlash against the subcontractor. For instance in
the cases provided by Johnny, having used tiles from a different source
may have minimal to no effect at all and may go unnoticed in which
case he will have increased his profit margin, however if for instance
Johnny used a waterproof membrane that was of a lesser quality than
the specified waterproof and a problem arose due to it, the effect
would have considerably large ramifications. They would then need to
demolish the area affected and re-do the whole area that has been
effected because the waterproof membrane is one of the first
procedures to be completed before other procedures. For instances,
this may involve having the concrete dug up, the plumbing redone,
etc, which will add up to considerably large costs.

5. Are these issues organisation-specific or industry

wide?
It is evident that these issues are industry-wide as they happen on a
large scale amongst several different organisations. Each project
utilises multiple organisations and as these issues are common
practice amongst them, and as these issues are also occurring
internationally, it can be concluded that these issues are industry-wide.

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6. Background and Organisational Context

With most of these issues, they are all fuelled by short term selfinterest. There is no real desire to maintain long-term, cohesive
relationships with the construction companies nor the clients, with
their minds set on maximising monetary gains only. These unethical
acts are made on the grounds of pure monetary gains and deceit,
biting the hand that feeds them when their backs are turned.
Often at times, due to certain complications, there will be moments
where both the construction company and the subcontractor will be
aware of a certain unethical act and allow it to go unnoticed. In these
instances it may vary due to resources available (an example would be
the required material being currently out of stock with a long waiting
period) or due to time restraints (the construction company has a
deadline for which the project must be completed). These instances
occur quite frequently within the construction industry because
numerous factors can delay work schedules causing multiple time
constraints. If one particular task gets delayed, there is a rollover effect
that ultimately will delay the commencement of another task. In these
scenarios, according to Crane and Matten (2010) following the theory
of egoism, are placing their self-interests ahead of what is morally
right. However under certain situations, they may see their decisions
as ultimately utilitarianism, especially in cases where the deed itself
may be only slightly unethical, justifying their decisions with a
multitude of benefits for all parties.

7. Internal or external?
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The issues that are prevalent within the industry are external as the
issues caused by the tradesmen ultimately affect both major
stakeholders, the construction company and the client. These issues
can only be resolved internally, they must be addressed by the
subcontractor and the construction company from early stages and
resolved in a timely manner to avoid further dilemmas and
complications that could ultimately lead to seeking further unethical
decisions.

8. What is the organisational response?

When an unethical act is uncovered, the organisations act in several
ways. 1) They correct the issue at hand 2) They dismiss the
subcontractor and his work 3) They overlook the issue. The actions
that they take rely heavily upon the severity of the issue as well as
factoring in situational aspects. As suggested before, if the act benefits
multiple parties, it may be overlooked or even be viewed as necessary.
Sometimes, it is only the client that suffers. In that sense, this
approach is very weak as it allows there to be flexibility upon ethical
decision making processes. For the project to be completely ethical,
the clients trust should not be broken and they should be getting
exactly what theyre paying for. However, due to the clients
obliviousness and lack of involvement in their projects, these acts
continue to go unnoticed and has become a cultural norm for the
industry. Although they may refrain from cutting corners where risks
are high, there is very little to stop the organisations cutting corners
where the risks and reprimands are low.

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9. Suggestions
The biggest problem and factor that enables these acts to go
unnoticed is the lack of supervision and regulation. For a chaotic
industry with multiple organisations employed for one project, there
needs to be regular check-ups on the different trades. The site foreman
should also be well educated and constantly reinforced with the plans
of the project to ensure that nothing falls away from it. However the
bigger issue at hand is the role that money plays. We could suggest
that perhaps more money to be paid to these individual organisations,
but then that money must come from the pockets of another. It is
increasingly difficult to resolve issues relating to money because in this
particular industry, every stakeholder prioritises money and is
constantly seeking to increase their monetary gains. The client wants
their project at the cheapest price possible; the construction company
wants to ensure the largest profit margin possible, the subcontractors
also want to maximise profits. The other solution would be to increase
the severity of even the most minor of offences to create a sense of
fear in acting unethically.

10.

Conclusion

The construction industry is riddled with unethical behaviour and over

the past generations has become a cultural norm within the industry. It
is a cutthroat industry with every stakeholder seizing the opportunity
to increase their self-interests. The relationships within the industry are
not viewed as highly as personal monetary gain and thus creates a
diminished view of the concept of trust. Furthermore, certain unethical
acts have become such common practice within the industry that they

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have become socially acceptable norms, so much so that it has created

a sense of ethical blindness. These issues continue to exist today as
they most likely always will because it is well within our human nature
to act for our own self-interests.

11.

References

1. Crane, A. and Matten, D. (2010) Business ethics: managing

corporate citizenship and sustainability in the age of
globalization, 3nd edition. Oxford: Oxford University Press.
2. Palazzo, G., Krings, F. & Hoffrage, U. (2012) Ethical Blindness,
Journal of Business Ethics, 109 (3): 323-338
3. Craft, J.L. (2013) Living in the Gray: Lessons on Ethics from
Prison, Journal of Business Ethics, 115 (2): 327-339
4. Budiman, A., Roan, A. & Callan, VJ (2013) Rationalizing
Ideologies, Social Identities and Corruption Among Civil Servants
in Indonesia During the Suharto Era, Journal of Business Ethics,
116 (1): 139-149
5. 'Construction Ethics: How Do You Make These Tough Calls?'
2003, Contractor's Business Management Report, 2003, 6, p. 6,
Business Source Complete, EBSCOhost
6. 'Survey Shows Unethical Behavior a Concern for the Construction
Industry' 2004, EC&M Electrical Construction & Maintenance,
103, 7, p. 22, Business Source Complete, EBSCOhost

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12.
Appendices
12.1 Interview Consent Form

PAGE 13

12.2 Interview Transcript

Interview Transcript Business Ethics and Sustainability
Introduction
Interviewer: Min Joo Sung 1121 9108
Interviewee: Johnny (Last name excluded for privacy)
Date/Time: August 28, Midday
Location: Johnnys Office

The interview focuses on the ethical issues past and present that
Johnny has had to overcome during his 22 years of being a tiling
Subcontractor for E__(blanked out for privacy) Trading Pty Ltd. During
the interview, Johnny goes into details of the trade industry and the
various ethical decisions he faces, particularly in regards to profit
generation and deception. Furthermore, the interview brings into light
how Johnny himself has been affected by the practices of unethical
business decisions to his own business and the extremities that he has
had to manage.

Transcript

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Min Joo: Hi Johnny, firstly thank you for your time and agreeing to do
this interview, I wont take up too much of your time. Could we begin
with an introduction? Your name and your line of work?
Johnny: My name is Johnny and I am a subcontractor for E__ Trading
Pty Ltd. I have been a subcontractor for roughly 14 years prior to which
I was working as a tradesman.
Min Joo: How long were you working as a tradesman before becoming
a subcontractor?
Johnny: Around about 8 years. I partook in several trades such as
bricklaying, tiling
Min Joo: As a tiling subcontractor, what are the main duties and tasks
that are required of you on a daily basis?
Johnny: Being a subcontractor, I receive a lot of upcoming
construction projects from various construction building companies
such as Mirvac, Steve-Watts, Ichor, Dyldamas well as private
individuals, and its my job to review these projects, study the
blueprints and submit a quotation back to them on the approximate
prices for the project specific tasks required. These tasks range from
demolition, supplying of materials, installations, labour charge, etc.
From there, the companies compare the prices submitted by all the
subcontractors that they have approached and essentially take their
pick of the lot. If and when they contact me saying that my quotation
has been approved and accepted, it is my duty then to meet up with
the project manager and go into the finer details of the project to
finalise or make adjustments to the quotation. Afterwards, depending
on the project, I have to arrange various procedures and organise a
team to begin working. Then throughout the duration of the project I
have to stay in communication with the project manager and the site
foreman to ensure that everything is proceeding accordingly and within
schedule. If there is any complication, which there usually is, I am one
of the first people to be alerted which then needs to be sorted between
me and the project manager.
Min Joo: In this particular line of work, you must be faced with a lot of
different issues and dilemmas. Have there or are there any situations
where youve dealt with unethical practices? Or have had to make an
unethical decision yourself?

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Johnny: Most certainly. The construction business is so vast and

chaotic that sometimes its very easy to get away with doing the wrong
thing. Obviously its not something that should be done but sometimes
youre forced into that position with no other alternative.
Min Joo: Could you please elaborate on that please? What sort of
position do you mean?
Johnny: Well, usually the biggest factor in our decision making is
money, whether or not this project is profitable for us. In recent times,
the competition in this business has become quite strong and has
forced me to lower my costs, obviously some sort of work is better
than no work. So, when I have to submit a quotation that doesnt
produce a high profits, I have to look for alternative solutions to
producing these profits whether it be using a smaller team of labourers
or in the unethical sense using cheaper materials than the ones
specified.
Min Joo: To what extent is using cheaper materials unethical?
Johnny: It all depends on what material you are cutting costs on. For
example, if the project requires us to waterproof an area using a
specific brand and type of waterproof membrane, theres a reason for
it. But sometimes, the specified brand can be very expensive and upon
judging the situation, if I feel that its not a big necessity I may make
the decision to use a much cheaper alternative. A much lighter case
would be when we supply a different brand of tile. Depending on the
project, there will be a specific type of tile that the client is after and
often it is possible to find a very similar if not identical tile to the one
specified but cheaper due to the way it is either forged or due to the
country of origin. For example, tiles from Italy are much more
expensive than tiles from Thailand. The reason why this isnt such a
serious case is because many years ago, Italian tiles were of much
higher quality, however nowadays, the quality of tiles that you can get
from China, Indonesia, Thailand can be quite good, but some clients
are very stubborn and short sighted and wont settle for non-Italian
tiles.
Min Joo: If you were the client, wouldnt you want what youre paying
for?
Johnny: Of course I would want what Ive requested, but like I
mentioned earlier, its all situational especially when it comes to the

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supply of tiles. Not only are non-Italian tiles cheaper, but theyre also
more readily available and if we are short on tiles, we are forced to
wait for the tiles to be shipped over to Australia and not only does that
incur additional costs for supply and delivery but it also pushes our
schedule back and when youre managing several projects
simultaneously, set-backs have a huge rollover effect. So when the
client requests a specific tile thatll cause difficulties, its sometimes
only profitable for me to find an alternative, which in this case
breaches their trust.
Min Joo: Have you ever been caught for using different materials?
Could you explain how you got caught and what resulted from it?
Johnny: I have been caught numerous times and usually it results in
me having to go back and re-do the entire project specific to the initial
requirements. And we usually get caught by either the client
themselves or through the site foreman. From time to time, if the issue
isnt too serious the site foreman will overlook it and in other cases the
site foreman is unaware. Remember how I said that construction work
can be very chaotic? Because there is a lot going on in one particular
site, the foreman has to keep track of multiple different trades
simultaneously and often he may forget certain specific details. For
example he may forget that we are meant to use E-Poxy grout rather
than normal grout, so in that case, we could technically proceed and
use normal grout which is cheaper and much faster. Lastly, we could
potentially even have the correct product on the site but use a
different one, making it seem like weve kept to the project
specifications.
Min Joo: Doesnt it lead to huge financial costs if youre caught?
Johnny: The costs that I have incurred have yet to be highly damaging
because I avoid these unethical practices for projects that can lead to
huge backlashes. For large scale projects, such as Sydney Water,
Woolworths I ensure that everything is carried out according to the
specifications because one little mistake can lead to huge financial
back charges. Its usually the smaller scale projects and private
projects where from time to time I will make the conscious decision to
go against client specifics.
Min Joo: Whats the difference between a public project and a private
project?

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Johnny: A public project would be one that we have obtained through

a construction company whereas private projects are ones that we
have obtained through an individual, for example someone who is
looking to have their house renovated.
Min Joo: Do you find yourself in similar ethical dilemmas or situations
while working on private projects?
Johnny: They are similar but also very different. Its similar in the way
that we will face the same questions and problems but different
because there is a lack of professionalism. Private projects are usually
less restrictive and depending on the knowledge base of the client in
terms of construction work, we as the subcontractors and tradesman
hold a lot of power. For example, in a large scale project, the site
foreman still is knowledgeable to some degree of what you are doing
whereas sometimes for private projects, the client may be oblivious to
your work, which often allows us the freedom to do what we want.
Also, in the situation where they are unaware of whats going on, it is
possible to overcharge the client or cut corners without them knowing.
This is very common practice within private projects, just the other day
for a particular project Im working on, the builder said to me take
your time, everything for this project is charged hourly. This should
give you a scope of the difference between the two.
Min Joo: It seems Im running short of time so Ill end with this
question. When you are faced with these situations and you do
perhaps deal in an unethical manner do you feel a sense of guilt?
Johnny: Initially yes I did, but Ive worked in this industry for over 20
years now and I was exposed to it from the start and as you witness it
happening around you by pretty much everyone, you start to view it as
a part of the business culture. Yes, it is unethical but as you accept it
as part of the industry, you slowly become numb to it and it becomes
second nature to look for areas in which you can cut corners.
Min Joo: I see. Well, thank you for giving me this opportunity and your
time.
Johnny: It was no problem at all, youre welcome.

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12.3 Peer Feedback

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