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Business Ethics

By Prof. Reena Mehta

Uphaar Tragedy (1997)


59 people died and 103 were seriously injured Family of Dead Awarded Rs.15-18 Lacs each in 2003. Injured got Rs. 1 lac each 9% for the period of 6 years from 1997 to 2003

Exxon Valdez Oil Spill 1989


Paid $860 million Including interest to 38,000/- people in Alaska

Philip Morris (2001)


$ 3 bn to a smoker

MTBE
Chevron, BP and 10 other oil companies paid $423 million to water supplies of US for contaminating ground water with chemical MTBE.

Johns- Manville Corp.(2004)


Asbestos producing company paid $500 million for people who got affected for lung disease

FIVE BUSINESS ETHICS MYTHS

BUSINESS ETHICS LEVELS

FIVE BUSINESS ETHICS MYTHS

STAKEHOLDERS MAP OF A LARGE ORGANIZATION

Saraswati

Shri Parvati

Naked Draupadi

Lord Hanuman and Goddess Sita sitting on thigh of Ravana

Prophet's Daughter Fatima

M.F. Hussein's Mother

Teresa fully clothed

Hussein's Daughter

clothed Muslim Lady.

poets Faiz, Galib

Durga with Tiger

Everybody doing it
Your refraining from this behavior will not unavoidably lead others to engage in it in ways that are substantially more harmful than would have been the case had you chosen to engage in it yourself and this would be true if your refraining from this behavior were to become public knowledge.

Everybody doing it
Will refraining from bribery cause you (or those you care for or for whom you are responsible) serious and unavoidable harm or loss? Will your engaging in bribery also cause significantly more harm or loss to others? Will your engaging in bribery lead others to engage in it in ways that are equally or more harmful, and would this still be true if your engaging in bribery were to become public

Everybody doing it
Will your refraining from bribery lead others to refrain from it, and would this still be true if your refraining from bribery were to become a public knowledge. Will your refraining from bribery unavoidably lead others to engage in if in ways that are substantially more harmful than would have been the case had you chosen to engage in it.

Lakshmi on Shree Ganesh's head

DEFINITION
Ethics : Ethos means character It is science of morals It is recognised rule of conduct It is science of character of a person expressed as right or wrong conduct or action.

"Business Ethics" can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. In particular, it involves examining appropriate constraints on the pursuit of selfinterest, or (for firms) profits, when the actions of individuals or firms affects others.
Figure 1 Four Universal Moral Principles

Nature of Ethics
Ethics deals with human beings only Ethics is a field of social science It is a normative science :
Normative science judge the value of the facts in terms of an ideal. What ought to be?

It deals with human conduct which is voluntary and not forced or coerced by persons and circumstances

Stakeholders theory of the firm


The corporation should be managed for the benefits of its stakeholders The rights of the group must be ensured The group should participate in some sense in decision that substantially affect their welfare.

Trusteeship
Capitalism Socialism Egalitarian
(The principle of equal rights for all persons) Non-Violence,Ahimsa,Stealing,Non-possession

Gandhian Philosophy of Wealth Management


It does not recognise right to individual property. Ends and means cannot be separated and both needs to be equally moral to achieve moral results The enterprise of the entrepreneur, the worker and the consumer, all being co-trustees of the enterprise, responsible to the society at large

Enjoy your wealth by renouncing it


Earn your crores by all means. But understand that your wealth is not yours it belongs to the people. Take what you require for your legitimate needs, and use the remainder for society Trusteeship seeks to convert through a nonviolent process, private property into social property.

Swaraj- self rule and self discipline Ahimsa - Non violence, non exploitation, equality and freedom Economic Equality Equal Distribution Concept of theft

Trusteeship
Raw material should be purchased to ensure a living wage to producers Natural resources not digging cost, replacement cost. Reduce disparity the ratio between lowest and highest 1:7 in the initial stages

Expansionism and centralization shall be resisted , decentralization should be encouraged Enterprise is ultimately responsible to the world at large Consumer should be on the board Capital for such enterprises should be interest free

Gandhian Philosophy of Wealth Management


Seven greatest sin : Politics without principles Education without character Commerce without morality Pleasure without conscience Wealth without work Science without humanity Worship without sacrifice

Ethics in Marketing
Product Pricing Physical distribution Product promotion

Intellectual Property Rights


Copyright Trademarks Patents Industrial designs Geographical indications

Product
No safety Hazardous products Duplication

Product Pricing
Dumping Deceptive pricing Predatory pricing Price fixation Insider trading

Product Promotion
Making false claims and misleading advertisement Ethics in advertisement Lower the dignity of women False promise

Physical distribution
Territorial restrictions Full line forcing Exclusive dealing arrangement Artificial scarcity of the product

Corporate Social Responsibility


Philip Kotler and Nancy Lee as CSR is a commitment to improve community well being through discretionary business practices and contribution of corporate resources.

Corporate Social Responsibility


Corporate Citizenship Corporate Philanthropy Corporate Giving Corporate Community involvement Societal Marketing Community Relations Community Affairs Community Development Global Citizenship

DIFFERENCE
GOOD COMPANY Excellent Products & Services GREAT COMPANY Excellent Products/services & Makes the world a better place

a) 50% of children under 4 malnourished b) 33% of children below 14 out of school c) 60% women anemic d) 5 Mln.++ are HIV positive growing at a compounded rate of 10% each year e) f) 500,000 child deaths/year due to respiratory disease 1 Mln. preventable infant deaths (63/1000 for India, 13/1000 in Kerala)

g) 130 Mln. without basic health h) 226 Mln. without safe drinking water

Can Government alone do?

NO

Corporate Social Responsibility


Corporate Cause promotion
Persuasive Communication Building awareness and concern Persuading people to
to find out more about the cause to donate their time to donate their Money To donate non monetary resources To participate in the event

Corporate Cause promotion


Ben & Jerrys : Global warming One Sweet Whirled Body Shop : Animal Testing for Cosmetics Tata : Jagore

Cause Related Marketing


as the process of formulating and implementing marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue providing exchanges that satisfy original and individual objectives. American express Bank

ITC notebook contributes Re. 1 from the purchase of each notebook for the education of the under privileged children Indian Oil Corporation contributes a fixed percentage of its profits for the development of SC and ST community Lifebuoy contributes Re.1 from the purchase of each soap for NGO Motorola Mobile phone - Motoslvr and Motorazer V3i (every purchase of the same contribute $8.50 to the global fund that fights AIDS in Africa Surf Excel saves two buckets of water on every wash and preserves the water Hall Mark cards - 8% of the net wholesale sales goes to the global fund that fights AIDS in Africa

5 STAGES OF ENVIRONMENT CORPORATE COMMITMENT

Stage

Manager Mindset

Resource Commitment
Minimal resource commitment Budgets for problems as they occur Consistent yet minimal budget Generally sufficient funding

Top-Level Support & Involvement


No Involvement

1. Beginner

Environmental management unnecessary Environmental issues addressed when necessary Environmental management is a worthwhile function Environmental management is an important business function Environmental management is a priority item

2. Firefighter

Piecemeal Involvement Commitment in theory

3. Concerned citizen

4. Pragmatist

Aware and moderately involved

5. Proactivist

Open-ended funding

Actively involved

Corporate Social Marketing


Means whereby a corporate supports the development and/or implementation of a behavior change campaign intended to improve public health, safety, the environment , community well being.

Corporate Social Marketing


Health issues Injury prevention Community involvement Corporate Philanthropy

Whistle blowing
The disclosure by organisation members (former or current) of illegal, immoral or illegitimate practices under the control of their employers to persons that may be able to effect action.

Whistle blowing
Cynthia Cooper of World com, Sherron Watkins of Enron Coleen Rowley of FBI Satyendra Dubey

Whistle blowing
There is a misdeed or illegal activity in the organization A perception that either the management can prevent it or that it has been initiated by management or certain employees. Important factor is the presence of an individual or group of people who view that some action should be taken against the illegal activity. There is a process by which the individuals or group try to expose the problem to the authorities who can take action.

6 STEP ISSUE MANAGEMENT PROCESS


1. Environmental scanning and issues identification 6. Issues evaluation and monitoring

2. Issues analysis

6 Step Issue Management


5. Issues response and implementation 3. Issues ranking and prioritizing 4. Issues resolution strategizing

FOUR SOCIAL RESPONSIBILITY MODES AND ROLES

ORIENTATIONS
Stockholder
Model

Stakeholder
Model

MOTIVES

Self-Interest

1 Productivism 3 Philanthropy

2 Progressivism 4 Ethical Idealism

Moral Duty

STATES WITH HIGHEST POLLUTANT EMISSIONS FROM POWER PLANTS


Rank 1 2 3 State Ohio West Virginia Pennsylvania Pollutant Emissions (millions of pounds) 95.2 62.3 58.9

4
5 6 7 8 9 10 11 12

Florida
North Carolina Georgia Kentucky Indiana Michigan Illinois Alabama Tennessee

58.0
48.4 47.2 44.8 44.3 33.8 32.1 28.7 26.7

GREENHOUSE GAS EMISSIONS:

UNITED STATES, JAPAN, AND SELECTED EU COUNTRIES


Country
Spain Ireland United States Japan Netherlands Italy Denmark European Union Britain Germany

Reduction Target Increases by 2008 2012*


15% 13.0 - 7.0 - 6.0 - 6.0 - 6.5 - 21.0 - 8.0 - 12.5 - 21.0

Emission Change 1990 - 1999


23.2% 22.1 16.0 7.8 6.1 4.4 4.0 - 4.0 - 14.0 - 18.7

* Kyoto Protocol and E. U. burden sharing

ENVIRONMENTAL DIMENSIONS AFFECTING INDUSTRIES, ORGANIZATIONS AND JOBS

STAKEHOLDER ANALYSIS

AN ISSUE DEVELOPMENT LIFE CYCLE OF

MICROSOFT ANTITRUST CASE


High

2. Political Awareness Netscape Navigator is introduced; 1. Social Microsoft Control retaliates. Clinton Microsoft administration dominates takes position market for PC against Microsoft. operating systems; OS/2 and Mac OS fail

3. Legislative Engagement Judge Jackson declares Microsoft a monopoly.4. Litigation Microsoft is currently engaged in settlement talks with the U.S. Department of Justice and State Attorneys General.

Societal Awareness

1
Low

DIAGNOSTIC TYPOLOGY OF ORGANISATIONAL STAKEHOLDERS


Stockholder's Potential for Threat to Organisation

High
Stakeholders potential for Cooperation with Organization Type 4 MIXED BLESSINGS

Low
Type 1 SUPPORTIVE

High
Strategy: COLLABORATE Strategy: INVOLVE

Type 3 NONSUPPORTIVE
Low Strategy: DEFEND

Type 2 MARGINAL

Strategy: MONITOR

POTENTIAL FOR THREAT


High
Type 4 Mixed Blessing Stakeholders Strategy: Collaborate

Low
Type 1 Supportive Stakeholders Strategy: Involve Suppliers Trade Associations Shareholders Many Customers Type 2 Maginal Stakeholders Strategy: Monitor OEMs, ISPs, OLS, ICPs Media Apple (OS) IBM (OS/2)

High

Potential for Cooperation

Many Customers Employees

Type 3 Nonsupportive Stakeholders Strategy: Defend

Low

Federal Government State Government Browser Suppliers (Netscape and Spyglass) Sun Microsystems AOL Netscape 18 States