Analysis of the Case Study ‘John Smith at Horizon Trading Company’

Term Paper 2004 10 Pages

Business economics - Business Ethics, Corporate Ethics


Table of Contents

1. Introduction

2. Summary

3. Kohlberg’ Moral Dilemmas
3.1. Preconventional Level
3.1.1. Stage 1
3.1.2. Stage 2
3.2. Conventional Level
3.2.1. Stage 3
3.2.2. Stage 4
3.3. Postconventional Level
3.3.1. Stage 5
3.3.2. Stage 6

4. The Teleological and the Deontological Approach
4.1. Teleological Approach
4.1.1. Egoism
4.1.2. Utilitarianism
4.2. Deontological Approach
4.2.1. Justice based principles
4.2.2. Rights based principles


1. Introduction

The present assignment is based on the case study ‘John Smith at Horizon Trading Company’. After a short summary the objective is to analyse and to evaluate the case study from an ethical perspective. Furthermore, the teleontological and deontological approaches will be applied as well as Kohlberg’s model of moral dilemmas.

2. Summary

‘John Smith at Horizon Trading Company’ is the title of the case study which will be analysed. John Smith is a 28 years-old M.B.A. graduate who was recruited by Horizon at the end of his studies. Horizon is an international trading company which is led by its owner and CEO Dan Du-Wong and operates in Russia, Taiwan and the United States. As a Regional Supervisor, John should be responsible for different satellite offices in Russia for the next two years. John was not happy to go to Russia but he recognized that it would be very difficult to find such a highly paid job within the US. The night before his first day of work John had a celebration with some managers and he first heard something about bribery in Russia. During the next two weeks John experienced a training programme in sales, information systems warehouse operations, retail and accounting. By the end of the training Bob Elder and Doug Howard, CFO at Horizon, met John and explained to him that in Russia other problems exist besides bribery. Taxes are extremely high. Consequently, John completed an additional training in how to avoid paying the bulk of taxes. Two weeks later John was working at Horizon’s retail location when he perceived that the store manager handed out paper receipt tickets to the sales team in order to lower the daily sales numbers and therefore the tax burden. This information worried John. However, he was even more worried when a Russian inspector entered the store and asked him why the register was not working.

3. Kohlberg’ Moral Dilemmas

From 1958 on Lawrence Kohlberg defined the theory of cognitive moral development after the Swiss psychologist Jean Piaget did preparatory work at the beginning of the 1930s (Maclagan 1998 p. 21). Kohlberg’s model of individuals’ moral development can be divided into three different levels with two stages each.

3.1. Preconventional Level

At this level, the individual reacts to cultural rules and is able to characterize good or bad, right or wrong (www.xenodochy.org). The decision about what is right or what is wrong depends on the expected reward or punishment.

3.1.1. Stage

Individuals of stage 1 are guided by obedience for their own sake. This means that they focus on avoiding breaking rules which lead to punishment or further consequences (tigger.uic.edu). With regard to the case study ‘John Smith at Horizon Trading Company’ we can say that John Smith is exposed to three situations in which his ethical values were stressed. At the party John was surprised how prevalent it is to provide bribes in daily work in Russia. Furthermore, he had an uneasy feeling when he heard that the company evades tax and that he should be trained in such techniques. The third time John was troubled as he worked at Horizon’s retail location and the Russian tax inspector talked to him. Within these main points we can observe that John becomes troubled and feels uncomfortable due to the fact that this behaviour does not fit with his ethical value of things you do and you do not do.

3.1.2. Stage

On the contrary to stage 1, stage 2 focuses on personal reward, satisfaction and a sense of duty to oneself (Treviño 1999 p. 104). In other words: Motivation consists of rewards and profits. Moreover, reciprocity in the way of ‘If someone hits you, you hit them back’ exists. This means that rules are only followed when a deal or an agreement is for someone’s immediate interest (tigger.uic.edu). Concerning our case study we can discover the ‘you scratch my back and I will scratch yours’ mentality in the phase as John talked to Bob Elder and Doug Howard about tax evasion. Both Bob Elder and Doug Howard justified the company’s tax evasion policy with the sentence ‘… in an unethical environment, unethical actions are necessary.’ This sentence clarifies how the stage 2 of the preconventional level works.



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Anglia Ruskin University – Ashcroft Business School
Analysis Case Study Smith Horizon Trading Company’ Business Ethics



Title: Analysis of the Case Study ‘John Smith at Horizon Trading Company’