Question

Who are the key stakeholders affected by the United Airlines scandal - What is the result?

Answer 1

Primarily impacted below stake holders:

Customers

Employees

CEO

Stock/share holders

United Airlines suffers near $1bn loss in value after passenger was violently dragged off overbooked flight

U.S. airlines have recently hit some ethical turbulence, April 2017 when United Airlines personnel physically dragged a passenger from an overbooked flight and culminating last week when a “near riot” broke out in Fort Lauderdale after Spirit Airlines canceled 11 flights during a labor dispute with its pilots. The public has become increasingly critical of air travel.

Yet the business community seems to disincentive airlines from pursuing a more ethics-forward approach.

The shareholder value model (e.g., Rappaport, 1986), which posits that corporate strategy should revolve around increasing investor returns, began to gain steam in the 1980s, encouraging malfeasant earnings management practices that led to numerous corporate scandals such as Enron’s infamous bankruptcy in 2001 (Dobbin & Zorn, 2005). But even in its infancy, the shareholder value model was challenged by stakeholder theory, which takes into account all parties with a stake in the firm, including customers, suppliers, owners, managers, employees, and even communities (Freeman, 1984).

In short, stakeholder theory presents an opportunity to infuse business analysis with ethical standards (Freeman, 2015). Nevertheless, shareholder value retains a tenacious hold on the minds of investors. At Ethical Systems, we contend that these two approaches should go hand in hand, because good ethics is good for business. In fact, there is evidence that shareholder value is improved by bettering relationships with primary stakeholders (Hillman & Keim, 2001) and may be positively influenced by customer satisfaction (Anderson, Fornell, & Mazvancheryl, 2004). Even CSR activities aimed at secondary stakeholders or society at large may enhance shareholder value by furnishing goodwill and insurance-like protection from negative events (Godfrey, Merrill, & Hansen, 2008).

If U.S. airlines (and corporations generally) wish to improve their long-term value, especially in an increasingly transparent global environment, they could do worse than to take an ethical orientation toward employees, customers, and stakeholders writ broad.

The United incident and stakeholders

For many reasons — among them how they are presented in social media — we think about issues like the united incident primarily with respect to the impact to customers of the brand. This situation is no different. And I would venture to say it has elevated the social media frenzy beyond many public responses to other incidents. Video in this case has incited the large, loud and ongoing emotional reaction and public outcry. And with that, it has unleashed every type of creative interpretation and rendition describing, reacting or pivoting from the situation. This one below, for example, has gotten a great deal of attention.

Most social media outcry and discussions about this situation focus on customers. But here is what seems to be missing from the conversation in the aftermath of the United incident is this:

HOW ARE EMPLOYEES OF THE BRAND IMPACTED?

We’ve all seen United’s responses publicly to the incident and professed actions for improvement. It is compelling to note that in its aftermath United’s net profit was down 69% end of April 2017.   It is still too soon to tell of course what the long term implication of this incident will be to United’s financial condition.

Beyond addressing the financial impact of such an incident, I am also very interested in the discussing the employee impact. I am most interested to know how United is helping employees in the wake of this situation.   How are they are reaching employees to answer questions, resolve concerns and work to restore any potentially tarnished pride in the company that they work for.

I am also very interested in, and have been waiting to see how United will also reach out to their customers to address and begin to repair their potential concerns as a customer of the airline. Watching this incident over and over and over again struck a personal chord in passengers whether they are a United customer or not. And there is an opportunity here for contrition and fence-mending that I have not yet seen.   As people we yearn for it. And we applaud leaders and companies who put themselves out there with customers to begin to repair that impacted emotional connection.

For example, Jeff Bezos of Amazon is fearless in communicating directly to customers when they have course-corrected. He is lauded for it and it strengthens the brand. People can and will forgive but they yearn for leaders to extend grace and accepting accountability directly with their customers.

IMPACT ON EMPLOYEE MORAL, PRIDE & DIGNITY

In these situations, employees get a great indication about the true values and leadership disposition than in almost any other situation where they might observe their leaders. How a company reacts in these situations really is a humanity litmus test. How a company repairs, removes the pain and puts the company and its people back together again show the true colors of the organization.