Lying to Outside Stakeholders

August 16th, 2022

The ethical practices in business play a major role in shaping the success and the future of business organizations. A business entity has numerous stakeholders both inside and outside stakeholders that define the future and the success of the business organization (Campbell, 2014). The relationship between an organization and the stakeholders is very imperative and critical as far as the performance of the business is concerned. Trust is the main component in business and corporate ethics. An investor must establish a formidable trust circle with all the outside stakeholders. The suppliers, consumers or service users, shareholders, funders, customers, and policymakers comprise the list of the outside stakeholders, and the organization deals with its daily activities and operations (Campbell, 2014). The organization has to demonstrate trust, and act responsibly in all the business relations and practices with the outside stakeholders if it wants its objectives to be accomplished. Many businesses and organizations have succeeded and others have failed because of the nature and characteristics of the relationship that exist between the organizations and outside stakeholders (Campbell, 2014). Lying to stakeholders marks the end of a business organization as the act of lying destroys and kills the business trust that exists between the two parties.

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Lying to Suppliers and Partners

Suppliers and partners are part of the outside stakeholders that a business organization relates with on a daily basis. A company, suppliers, and partners operate under strict agreement laws that preserve their trade unity (Whitford, & Elkind, 2013). Terms and conditions of work to define the duties and obligation of each party in the business unity are expected to abide by the rules and regulations that govern their union. A company has a part to play just like the suppliers and business partners (Whitford, & Elkind, 2013; Smoliar, 2012). At the moment when the company starts being dishonest to the partners or suppliers, the unity between the three parties shatters. The binding connection is largely based on the existence of openness, shared risk, and transparency. An organization needs supplies to remain available on the market by offering the consumers what they need. Therefore, it has to keep a cohesive and mutual relationship with the suppliers so as not to break the company’s supply chain.

There are business organizations that lie to their suppliers and partners for their selfish gains. For example, a company can provide wrong financial statements about the progress of the company to the partners (Whitford, & Elkind, 2013). Partners take part in decision making and designing of the company’s product. It is the moral obligation of the company to keep the partners and suppliers updated with information on the performance of various products in the market and their prices, about needs, and other important details. Some company conceals information (Smoliar, 2012), related to the product market price as a strategy to make extra benefit from the partnership.

There are companies that quote high production prices to the suppliers in order to be supplied with products and raw materials at low prices. Actually, the company produces goods at very low prices and sells at high prices putting the higher cost of production. In such case, the suppliers receive very little while the managers of the manufacturing companies make double profits (Whitford, & Elkind, 2013). A company needs to quote the exact cost of producing a product so that the supplier can determine the supply price. Once the supplier gets to know that the company that it supplies with goods or services does not act ethically or does not honor the business agreement, the suppliers cut their supplies to the company and seek other business partners that will operate ethically and honor the work agreement.

Once the suppliers disconnect from the company, the company lacks the raw material to produce its goods or services and the business operation starts to decrease. Suppliers are part of the heart of a business organization (Smoliar, 2012). Business partners and suppliers need credible information so that they can put full support and trust in the business organization they work with. In the event that the partners realize the company they part with has been lying to them, they are more likely to withdraw from their partnership. The withdrawal by the partners marks the beginning of the downfall of the company (Whitford, & Elkind, 2013). The worst of it is ruining the public reputation of the company. Losing partners because of planned miscommunication and the falsehood of the managers as a part of the executive ruins the public image of the company. Falsehood in business is a deliberate act by managers and employees to make much profit by taking advantage of the other player in the organization’s partnership.

Companies such as Enron Corporation failed after many years of success when the manager introduced a culture of telling lies in the company (Campbell, 2014). The company executives lied about the business operations outside the company that were performed without the consent of all the stakeholders. When some employees realized something was wrong with the company, the corrupt official bribed them to tell lies about what they know, or they did not know. After a long period of lies and unethical practices, the company failed and collapsed in 2001. The employees lost jobs, investors and shareholders suffered massive losses. Another example of a company that failed due to miscommunication and inaccurate information is Nokia. For a decade or so, Nokia was one of the largest phone trading companies in the world. When other companies such as Samsung introduced smartphones in the market, Nokia was unable to compete with other companies because of arguments with key partners in the market. Since then, the company has never reached the levels it was a decade ago.

British Petroleum became famous globally following the Deepwater Horizon offshore Oil Rig Blowout in April 2010. The research showed that miscommunication and the failure to share important information between key stakeholders were the reasons for the disagreement. The argument caused a massive crisis in the British Petroleum and its partners. These three examples are just a few of the real-life scenarios of companies that have fallen from their national and global status due to poor communication systems and lying among the key stakeholders. If a company wants to keep its partners and suppliers in place, it must ensure that there is no lying about the business operations and activities.

Lying to Banks

Organization and companies lie to banks to get loans and funding for the businesses. Sometimes getting a loan or credit from the banks is hard especially for the upcoming businesses and investors. Entrepreneurs and managers in such business tend to present falsified information to maneuver the bureaucracies of the financial banks and get funding (Arcimowicz, Cantarero, & Soroko, 2015). Companies use close allies in the bank who help to convince the bank to credit them with a certain amount of money. Bankruptcy pushes the companies to seek financial support to avoid collapsing and evading from the market.

In most cases, the companies normally have nothing to present in the bank as pledges of their loans. In such case, they have to devise the strategies and methods to get capital, which involves lying to the bank (“Why do Some Chinese Lie in Business?”, 2015). There are business organizations that take huge loans from the bank without indicating whether they are on the verge of collapsing or they are indeed bankrupt to continue operating at profitability margins. Presentation of business proposals for ghost business is common in the world of business as a strategy to get credit financing. Another strategy of companies to get credit from the banks is the use of fake documents and invalid pay slips and fake checks.

The consequences of lying to the bank are dire for the banks and the perpetrators (Arcimowicz, Cantarero, & Soroko, 2015). The bank loses huge sums of money on the company taking wrong actions. The company, on the other hand, once caught, faces the full force of the law. The culprits and perpetrators are imprisoned and jailed for attempted theft. Stealing from the banks affects the bank shareholders and stakeholders financially (Groysberg & Slind, 2012). Alternatively, the reputation of the banks erodes due to a theft or an attempted theft. The company, or employee, that used to access credit from the banks is under risks of the termination of their operational license.

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Lying to Customers

There are companies that sell substandard product that bears writing that does exist in the products itself. Through an intensive market study, the manufacturers understand what entices the customers or which products are first moving in the market. To ease the competition, such companies opt to produce counterfeit products that feature the characteristics of the original product in their packaging (Arcimowicz, Cantarero, & Soroko, 2015). The company lies to customers that the products contain certain ingredients that the clients want but it does not. Lying about the product is done to maximize profit and return from the sale of products. Another strategy the companies use to lie to the customer is through the inaccurate measurement and packaging of products. For instance, most companies have been in the limelight for reducing the measure of the products but retaining the price (“Why do Some Chinese Lie in Business?”, 2015). For instance, a packet of one kilogram of sugar containing nine hundred grams but is marked at the same price as a kilogram sells. The customers buy less for more unknowingly.

The consequences of such actions are losing the customer once the vice is brought into the public limelight and the risk of losing the business license for fraudulent activities (Arcimowicz, Cantarero, & Soroko, 2015; Elliot, 2011),). In addition, besides selling products that do not meet the quality and quantity, companies sell products at exorbitantly high prices that differs drastically from the cost of production. Rice Krispies and J.P Morgan Chase Bank are among the companies that have been lying to their customers for years before they were noticed. They offered substandard products and services to customers who thought that the products and services were at the same high prices of the value products and services.

Lying to Employees

The employees are the most important inside stakeholders in the company. They have the power to make the business succeed or fail through their contribution and efforts in the running and performance of the company (Campbell, 2014). They have the power to attract or repel customers from the company. The employees are always on the ground and understand what happens in the company all the time. Enron, which was established in 1985 through a merger of companies, was considered to be among the largest corporations in the U.S (Keyton & Turnage, 2013). Its total asset was estimated to be $7 billion, placing it as the 7th largest corporation in the USA. (Hiscott, 2014).

The causes of failure and collapse of the company were due to miscommunication and relaying of incorrect information within the company departments, to stakeholders, and especially to the junior employees. The company executive lied to the junior and subordinate employees about the activity the company was involved in outside and inside the company (Keyton & Turnage, 2013). They bribed the employees to keep them from telling the truth about the ill activities that were undertaken in the company. The company was damaged by corruption dealing and activities that were operating outside the company system of codes and values. Some members of the executive were stealing from the company without any fear because they had managed to establish a bribing cult in the company. They lied to employees that the business was on course and in shape. Any employees who appeared to notice the reality were bribed to deny any malpractice (Keyton & Turnage, 2013). In the end, the company went bankrupt and the employees lost their jobs. In the public limelight, the company had lost reputation as the best investment company in America.


The future of the business depends on the culture that exists in the company. Ethical practices are important in the firm because they define its success and future. Companies such as Enron failed and collapsed because of the lack of ethic in practice and during the operation of the business. Companies lie to banks to source more credits, lie to customers to increase returns and minimize competition, and lie to the employees to stop them from reporting or bring into public the reality of the activities the company is involved in. Lying is an ethical act and practice in the running and operations of a business entity. Companies such as Rice Krispies benefited for a short period of time but failed in the end and have struggled to reposition themselves to the initial market position. Lying to stakeholders marks the end of a business organization because the act of lying destroys and kills the business trust that exists between the two parties.

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