Business Ethics FINAL EDITED 9.00

8/8/2019 Business Ethics FINAL EDITED 9.00

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SYBMS BUSINESS ETHICS 20TH FEB., 2009

IMPORTANCE OF ETHICS:

1. ETHICS CORRESPONDS TO BASIC HUMAN NEEDS:It is a human trait that the man desires to be ethical not only in his private life but

also in his business affairs. Moreover most of the people want to be a part of the

organization which they can be publicity proud of and be respected.

2. VALUES CREATE CREDITABILITY WITH PUBLIC:If a company is perceived to be ethically and socially responsive, it will be

honoured and respected even by those who do not have intimate knowledge of its actual

working.

Since the people believe that the company offers value for money there will be instinctive

prejudice in favour of its products.

3. VALUE GIVES CREDITABILITY TO MANAGEMENT:Organizational goals, when perceived by the employees as genuine, create common

goals, values and language. The management has credibility with its employees because it

has credit with the public.

4. VALUES HELP BETTER DECISION MAKING:Ethical attitude helps management make better decisions i.e. decisions that are in

the interest of the public, their employees and the company s long term good, though the

decision making is slower.

5. ETHICS AND PROFITS:Both ethics and profits go together. A company which is inspired by ethical

conduct is a profitable one. Value driven companies are sure to be successful in the long

run.

6. LAW CANNOT ALWAYS PROTECT SOCIETY:Technology develops faster than the government can regulate. People in an

industry often know the dangers in a particular technology better than the regulatoryagencies. Further the government cannot always regulate all activities which are harmful

to the society. Where law fails, ethics can succeed. An ethical oriented management takes

measures to prevent pollution and protect workers health.

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BUSINESS ETHICS :

Business ethics is a form of applied ethics thatexamines ethical principles and moral or ethicalproblems that arise in a business environment.

In the increasingly conscience-focusedmarketplaces of the 21st century, the demand for moreethical business processes and actions is increasing.Simultaneously, pressure is applied on industry toimprove business ethics through new public initiativesand laws.

The range and quantity of business ethical issues reflects the degree to whichbusiness is perceived to be at odds with non-economic social values. Historically, interest

in business ethics accelerated dramatically during the 1980s and 1990s, both within majorcorporations and within academia. For example, today most major corporate websites layemphasis on commitment to promoting non-economic social values under a variety ofheadings. In some cases, corporations have redefined their core values in the light ofbusiness ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

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ETHICAL CORE VALUES FOR BUSINESS:

_ TRUST

_ HONESTY_ FAIRNESS

_ DIGNITY AND RESPECT FOR HUMANITY

_ RESPECT FOR LAW

_ RESPECT FOR PROPERTY

_ FREEDOM AND AUTONOMY

_ OBJECTIVITY

_ COMPASSION

PRINCIPLES:

_ Live up to your agreements

_ Provide each employee with equal opportunity

_ Respect trade secrets of your company

_ Provide sound advice to clients

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In addition to causing the Bhopal disaster, UCC was also guilty of prolonging the miseryand suffering of the survivors. In February 1989, UCC offered to pay US$470 million ascompensation in full and final settlement provided Government of India (GoI) did notpursue any further legal proceedings against the company and its officials. GoI acceptedthe offer without consulting with the victims.

The Accident was waiting to happen

In May 1982, three American engineers from the chemical products andhousehold plastics division of UCC came to Bhopal. Their task was to appraise therunning of the plant and confirm that everything was functioning according to thestandards laid down by UCC. The report, presented to UCC officials revealed thatall was not well with the Bhopal plant. The report described the surroundings of

the site as being strewn with oily old drums, used piping, pools of used oil andchemical waste likely to cause fire. It condemned the shoddy workmanship oncertain connections, the warping of equipment, the corrosion of several circuits,and the absence of automatic sprinkles in the MIC and phosgene production zones,and the risk of explosion in the gas evacuation flares. It also reported leaks ofphosgene, MIC and chloroform, ruptures in pipework and sealed joints, absence ofany earth wire on one of the three MIC tanks and poor adjustment of certaindevises where excessive pressure could lead to water entering the circuits. At thesame time, the report expressed concern at the inadequately trained staff,unsatisfactory instruction methods and sloppy maintenance reports.

In the autumn of 1983, Jagannathan Mukund ordered the shutting down ofthe principal safety systems in the plant. According to analysts, JagannathanMukund did not pay attention to the fact that sixty tons of MIC was stored in thetanks. These tanks might possibly save a few hundred rupees worth of electricity aday, but it violated a fundamental rule laid down by UCCs chemists, whichstipulated that MIC must in all circumstances be kept at a temperature close to zerodegree Celsius. In order to save a few hundred weight of coal, the flame thatburned off any toxic gases emitted into the atmosphere in the event of an accident.Other essential equipments, such as the scrubber cylinder used to decontaminateany gas leaks, were subsequently deactivated.

Efforts to overcome tragic event

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UCCs reaction to the tragic incident was never apologetic. TheGovernment of India filed a compensation lawsuit against the UCC for anestimated US$3 billion. However, UCC felt that the Government of India was toblame for the disaster. In December 1986, UCC filed a countersuit against theGovernment of India and the State of Madhya Pradesh. The company charged the

governments with contributory responsibility for the leak of poisonous gases,saying both governments knew of the toxicity of MIC, but failed to take adequateprecautions to prevent a disaster.One of the strategies employed was that of corrective action and this formed apart of the UCCs document titled Safety Emphasized. UCC tried to argue that itshould not be held responsible for the disaster because No analysis of UnionCarbides reaction to the Bhopal tragedy is possible without recognizing theconsiderable emphasis the company and its affiliates had placed on safeoperations.

Under the two sections First Steps at Control and Contingency Planning

and Experience Help, UCC listed all the things that it did immediately followingthe first call it got about the tragedy. The document said that the UCC facility-making was to make shut down MIC and medical and technical teams weredispatched to the site of the tragedy within 24 hours. The document also saidthat Union Carbide had a contingency plan for emergencies. However, analystsfelt that contrary to what was said in UCCs document, UCC did not have any kindof emergency plans in place at its Indian subsidiary. So much so, that when theaccident occurred and people started pouring into the hospitals in Bhopalcomplaining about the various ailments, the hospital staff had no idea of what hadhappened or what to do.

The settlement

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Within months after the disaster, the Government of India issued anordinance appointing itself as the sole representative of the victims for any legaldealings with UCC as regards for compensation. The ordinance was later replacedby the Bhopal Gas Leak (Processing of Claims) Act, 1985. With this power, theGovernment of India filed its suit for compensation and damages against UCC in

the United States District Court for the Southern District of New York. Besidesfiling the suit, one of its prime responsibilities was to register the claims of eachand every gas victim in Bhopal. Analysts felt that this job was never done, orrather, not with any seriousness for the next ten years. The government set upvarious inquiry commissions to investigate the causes of the disaster, they remainedhalf-hearted initiatives at best. UCC, on the other hand, moved more quickly withits investigations: it announced by March 1985 that the disaster was due to an actof sabotage by a Sikh terrorist. Then they shifted blame to a disgruntled worker.On December 1987, a Bhopal District Court Judge passed an order directing UCCto pay Rs. 3.5 billion as interim relief. UCC challenged this order in the MP high

court on the grounds that the trial judge was not authorized to pass the order underany provisions of the Indian Civil Penal Code.

On April 4, Justice S. K. Seth of the High Court upheld the liability of UCCfor the Bhopal disaster, but reduced the interim compensation to Rs. 2.5 billion.UCC appealed to the Supreme Court of India against the High Court order sayingNo court that we know of in India or elsewhere in the world has previouslyordered interim compensation where there is no proof of damages or where liabilityis strongly contested. On February 14, 1989, the Supreme Court directed UCC topay up US $ 470 million in full and final settlement of all claims, rights andliabilities arising out of the disaster. The Supreme Court of India ruled that the

$470 million settlement was just, equitable and reasonable.UCC described the courts decision as fair and reasonable, and the companys stocksoared in the London market. Analysts felt that the Bhopal Gas disaster, which leftthousands of people dead and injured, was settled for a mere US $ 470 million which worked out to around Rs. 10,000 per victim. In the same year, a lendingnational daily stated that approximately US $ 40,000 was spent on the rehabilitationof every sea otter affected by the Alaska oil spill. Each sea otter was given rationsof lobsters costing US $ 500 per day. Thus, the life of an Indian citizen in Bhopalwas clearly much cheaper than that of a sea otter in America.

Conclusion

Growing Awareness

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There is a growing awareness and realization about the need for industry to bemore ethical and responsible in its actions, whether towards its employees,suppliers or customers; or towards the environment and the society at large.

Help To Both Faculty And Students

It helps to faculty and students by providing knowledge about business ethics andcorporate governance.Adhering to appropriate norms and regulations pertaining to corporate governanceand maintaining financial and fiscal integrity are also gaining importance.

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Business Ethics FINAL EDITED 9.00

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