Question

Which company is unethical practices will tend to incur mainly internal administrative costs?

A) Company U must retrain its employees who are working in a toxic culture due to widespread reports of sexual harassment.
B) Company V's tax evasion practices are revealed, leading to a dramatic drop in its stock price and simultaneously rising costs of debt.
C) Company W incurs penalties of $1.0 billion for auto and mortgage loan abuses.
D) Company X pays its male employees higher wages than female employees even ugh it has been propagating messages of workplace equality and fair play.
E) Company Y experiences massive customer defections when it is made public that it aging in price gouging, or selling low cost products at high prices.

Answer 1

Administrative costs incurred by a company due to its unethical practices, such as the need for employee retraining in response to a toxic work culture from sexual harassment, would exemplify primarily internal expenses, as seen with Company U.

Step-by-step explanation:

Unethical practices in a company that incur mainly internal administrative costs are generally related to internal issues requiring remediation, such as retraining or policy changes, as opposed to external penalties or market reactions. An example of this would be Company U that must retrain its employees who are working in a toxic culture due to widespread reports of sexual harassment. This situation indicates an issue with the company's organizational culture that is contained within the enterprise and necessitates internal administrative action rather than external fines or market-based consequences.

A discriminatory business, such as Company X paying unequal wages, may face both internal and external pressures that drive change. Internally, there might be turnover and the cost of replacing workers, and externally, there could be market pressure from employees leaving for better-paying competitors. Re-training or adjusting wage policies would incur administrative costs internally. However, the effects of widespread sexual harassment in Company U are primarily internal and arguably more isolated from market pressures than discriminatory pay practices are.

Legislation and internal policies, such as those regarding sexual harassment, may require a company to take action to correct cultural issues. Sometimes the cost of internal action, if not taken, can lead to larger external consequences, but initially, the expenditures are within the company’s administrative domain.