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

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 thiswould 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 knowledge?

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.

DEFINITION

Ethics : “Ethos” means character • It is science of morals• It is recognised rule of conduct• It is science pf character of a person expressed

as right or wrong conduct or action.

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 non-violent 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) 500,000 child deaths/year due to respiratory disease

f) 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 & Jerry’s : 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

Top-Level Support & Involvement

1. Beginner Environmental management unnecessary

Minimal resource commitment

No Involvement

2. Firefighter Environmental issues addressed when

necessary

Budgets for problems as they occur

Piecemeal Involvement

3. Concerned citizen Environmental management is a

worthwhile function

Consistent yet minimal budget

Commitment in theory

4. Pragmatist Environmental management is an important business

function

Generally sufficient funding

Aware and moderately involved

5. Proactivist Environmental management is a

priority item

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

1.Environmental scanning and

issues identification

2.Issues analysis

3.Issues rankingand prioritizing

4.Issues resolution

strategizing

5. Issues response and

implementation

6.Issues evaluation

and monitoring

6 STEP ISSUE MANAGEMENT PROCESS

FOUR SOCIAL RESPONSIBILITY MODES AND ROLES

ORIENTATIONS

1

Productivism

2

Progressivism

3

Philanthropy

4

Ethical Idealism

Stockholder

Model

Stakeholder

Model

Self-Interest

Moral Duty

MO

TIV

ES

STATES WITH HIGHEST POLLUTANT EMISSIONS FROM POWER PLANTS

Rank State Pollutant Emissions (millions of pounds)

1 Ohio 95.2

2 West Virginia 62.3

3 Pennsylvania 58.9

4 Florida 58.0

5 North Carolina 48.4

6 Georgia 47.2

7 Kentucky 44.8

8 Indiana 44.3

9 Michigan 33.8

10 Illinois 32.1

11 Alabama 28.7

12 Tennessee 26.7

GREENHOUSE GAS EMISSIONS:

UNITED STATES, JAPAN, AND SELECTED EU COUNTRIES

Country Reduction Target Increases by 2008 –

2012*

Emission Change 1990 - 1999

Spain 15% 23.2%

Ireland 13.0 22.1

United States - 7.0 16.0

Japan - 6.0 7.8

Netherlands - 6.0 6.1

Italy - 6.5 4.4

Denmark - 21.0 4.0

European Union - 8.0 - 4.0

Britain - 12.5 - 14.0

Germany - 21.0 - 18.7

* Kyoto Protocol and E. U. burden sharing

ENVIRONMENTAL DIMENSIONS AFFECTING INDUSTRIES, ORGANIZATIONS AND JOBS

STAKEHOLDER ANALYSIS

1. Social ControlMicrosoft dominates market for PC operating systems; OS/2 and Mac OS fail

2. Political AwarenessNetscape Navigator is introduced; Microsoft retaliates. Clinton administration takes position against Microsoft.

3. Legislative EngagementJudge 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.

1 2 3 4

High

Low

Soc

ieta

l Aw

aren

ess

AN ISSUE DEVELOPMENT LIFE CYCLE OF

MICROSOFT ANTITRUST CASE

Type 4

MIXED BLESSINGS

Strategy:

COLLABORATE

Type 1

SUPPORTIVE

Strategy:

INVOLVE

Type 3

NONSUPPORTIVE

 

 

Strategy:

DEFEND

Type 2

MARGINAL

 

 

Strategy:

MONITOR

High Low

High

Low

Sta

keho

lder

s po

tent

ial

for

Coo

pera

tion

with

Org

aniz

atio

n

DIAGNOSTIC TYPOLOGY OF ORGANISATIONAL STAKEHOLDERS

Stockholder's Potential for Threat to Organisation

POTENTIAL FOR THREAT

Type 4

Mixed Blessing Stakeholders

Strategy: Collaborate

Many Customers

Employees

Type 1

Supportive Stakeholders

Strategy: Involve

Suppliers

Trade Associations

Shareholders

Many Customers

Type 3

Nonsupportive Stakeholders

Strategy: Defend

Federal Government

State Government

Browser Suppliers (Netscape and Spyglass)

Sun Microsystems

AOL

Netscape

18 States

Type 2

Maginal Stakeholders

Strategy: Monitor

OEMs, ISPs, OLS, ICPs

Media

Apple (OS)

IBM (OS/2)

High Low

Hig

hLo

w

Pot

entia

l fo

r C

oop

erat

ion