Courseware from the course on Business Ethics that I taught at St. Joseph\'s College of Business Administration in 2009

1. Business
Ethics
Tathagat
Varma
Session
5/12:
13-­‐Aug-­‐09

2. General
Business
Ethics
• This
part
of
business
ethics
overlaps
with
the
philosophy
of
business,
one
of
the
aims
of
which
is
to
determine
the
fundamental
purposes
of
a
company.
If
a
company's
main
purpose
is
to
maximize
the
returns
to
its
shareholders,
then
it
should
be
seen
as
unethical
for
a
company
to
consider
the
interests
and
rights
of
anyone
else.[3]
– Corporate
social
responsibility
or
CSR:
an
umbrella
term
under
which
the
ethical
rights
and
duQes
exisQng
between
companies
and
society
is
debated.
– Issues
regarding
the
moral
rights
and
duQes
between
a
company
and
its
shareholders:
fiduciary
responsibility,
stakeholder
concept
v.
shareholder
concept.
– Ethical
issues
concerning
relaQons
between
different
companies:
e.g.
hosQle
take-­‐overs,
industrial
espionage.
– Leadership
issues:
corporate
governance.
– PoliQcal
contribuQons
made
by
corporaQons.
– Law
reform,
such
as
the
ethical
debate
over
introducing
a
crime
of
corporate
manslaughter.
– The
misuse
of
corporate
ethics
policies
as
markeQng
instruments.

3. Ethics
of
AccounQng
InformaQon
• CreaQve
accounQng,
earnings
management,
misleading
financial
analysis.
• Insider
trading,
securiQes
fraud,
bucket
shops,
forex
scams:
concerns
(criminal)
manipulaQon
of
the
financial
markets.
• ExecuQve
compensaQon:
concerns
excessive
payments
made
to
corporate
CEO's
and
top
management.
• Bribery,
kickbacks,
facilitaQon
payments:
while
these
may
be
in
the
(short-­‐term)
interests
of
the
company
and
its
shareholders,
these
pracQces
may
be
anQ-­‐
compeQQve
or
offend
against
the
values
of
society.
• Cases:
accounQng
scandals,
Enron,
WorldCom

4. Ethics
of
Human
Resource
•
Management
covers
those
ethical
The
ethics
of
human
resource
management
(HRM)
issues
arising
around
the
employer-­‐employee
relaQonship,
such
as
the
rights
and
duQes
owed
between
employer
and
employee.
– DiscriminaQon
issues
include
discriminaQon
on
the
bases
of
age
(ageism),
gender,
race,
religion,
disabiliQes,
weight
and
a^racQveness.
See
also:
affirmaQve
acQon,
sexual
harassment.
– Issues
arising
from
the
tradiQonal
view
of
relaQonships
between
employers
and
employees,
also
known
as
At-­‐will
employment.
– Issues
surrounding
the
representaQon
of
employees
and
the
democraQzaQon
of
the
workplace:
union
busQng,
strike
breaking.
– Issues
affecQng
the
privacy
of
the
employee:
workplace
surveillance,
drug
tesQng.
See
also:
privacy.
– Issues
affecQng
the
privacy
of
the
employer:
whistle-­‐blowing.
– Issues
relaQng
to
the
fairness
of
the
employment
contract
and
the
balance
of
power
between
employer
and
employee:
slavery,[4]
indentured
servitude,
employment
law.
– OccupaQonal
safety
and
health.
• All
of
the
above
are
also
related
to
the
hiring
and
firing
of
employees.
A
employee
or
future
employee
can
not
be
hired
or
fired
based
on
race,
age,
gender,
religion,
or
any
other
disciminatory
act.

5. Ethics
of
Sales
and
MarkeQng
• MarkeQng,
which
goes
beyond
the
mere
provision
of
informaQon
about
(and
access
to)
a
product,
may
seek
to
manipulate
our
values
and
behavior.
To
some
extent
society
regards
this
as
acceptable,
but
where
is
the
ethical
line
to
be
drawn?
MarkeQng
ethics
overlaps
strongly
with
media
ethics,
because
markeQng
makes
heavy
use
of
media.
However,
media
ethics
is
a
much
larger
topic
and
extends
outside
business
ethics.
– Pricing:
price
fixing,
price
discriminaQon,
price
skimming.
– AnQ-­‐compeQQve
pracQces:
these
include
but
go
beyond
pricing
tacQcs
to
cover
issues
such
as
manipulaQon
of
loyalty
and
supply
chains.
See:
anQ-­‐compeQQve
pracQces,
anQtrust
law.
– Specific
markeQng
strategies:
greenwash,
bait
and
switch,
shill,
viral
markeQng,
spam
(electronic),
pyramid
scheme,
planned
obsolescence.
– Content
of
adverQsements:
a^ack
ads,
subliminal
messages,
sex
in
adverQsing,
products
regarded
as
immoral
or
harmful
– Children
and
markeQng:
markeQng
in
schools.
– Black
markets,
grey
markets.
• Cases:
Bene^on.

6. Ethics
of
ProducQon
• This
area
of
business
ethics
deals
with
the
duQes
of
a
company
to
ensure
that
products
and
producQon
processes
do
not
cause
harm.
Some
of
the
more
acute
dilemmas
in
this
area
arise
out
of
the
fact
that
there
is
usually
a
degree
of
danger
in
any
product
or
producQon
process
and
it
is
difficult
to
define
a
degree
of
permissibility,
or
the
degree
of
permissibility
may
depend
on
the
changing
state
of
preventaQve
technologies
or
changing
social
percepQons
of
acceptable
risk.
– DefecQve,
addicQve
and
inherently
dangerous
products
and
services
(e.g.
tobacco,
alcohol,
weapons,
motor
vehicles,
chemical
manufacturing,
bungee
jumping).
– Ethical
relaQons
between
the
company
and
the
environment:
polluQon,
environmental
ethics,
carbon
emissions
trading
– Ethical
problems
arising
out
of
new
technologies:
geneQcally
modified
food,
mobile
phone
radiaQon
and
health.
– Product
tesQng
ethics:
animal
rights
and
animal
tesQng,
use
of
economically
disadvantaged
groups
(such
as
students)
as
test
objects.
• See
also:
product
liability
• Cases:
Ford
Pinto
scandal,
Bhopal
disaster,
asbestos
/
asbestos
and
the
law,
Peanut
CorporaQon
of
America.

7. Ethics
of
IP,
Knowledge
and
Skills
• Knowledge
and
skills
are
valuable
but
not
easily
"ownable"
as
objects.
Nor
is
it
obvious
who
has
the
greater
rights
to
an
idea:
the
company
who
trained
the
employee,
or
the
employee
themselves?
The
country
in
which
the
plant
grew,
or
the
company
which
discovered
and
developed
the
plant's
medicinal
potenQal?
As
a
result,
a^empts
to
assert
ownership
and
ethical
disputes
over
ownership
arise.
– Patent
infringement,
copyright
infringement,
trademark
infringement.
– Misuse
of
the
intellectual
property
systems
to
sQfle
compeQQon:
patent
misuse,
copyright
misuse,
patent
troll,
submarine
patent.
– Even
the
noQon
of
intellectual
property
itself
has
been
criQcised
on
ethical
grounds:
see
intellectual
property.
– Employee
raiding:
the
pracQce
of
a^racQng
key
employees
away
from
a
compeQtor
to
take
unfair
advantage
of
the
knowledge
or
skills
they
may
possess.
– The
pracQce
of
employing
all
the
most
talented
people
in
a
specific
field,
regardless
of
need,
in
order
to
prevent
any
compeQtors
employing
them.
– BioprospecQng
(ethical)
and
biopiracy
(unethical).
– Business
intelligence
and
industrial
espionage.
• Cases:
private
versus
public
interests
in
the
Human
Genome
Project

8. InternaQonal
Business
Ethics
• While
business
ethics
emerged
as
a
field
in
the
1970s,
internaQonal
business
ethics
did
not
emerge
unQl
the
late
1990s,
looking
back
on
the
internaQonal
developments
of
that
decade.[6]
Many
new
pracQcal
issues
arose
out
of
the
internaQonal
context
of
business.
TheoreQcal
issues
such
as
cultural
relaQvity
of
ethical
values
receive
more
emphasis
in
this
field.
Other,
older
issues
can
be
grouped
here
as
well.
Issues
and
subfields
include:
– The
search
for
universal
values
as
a
basis
for
internaQonal
commercial
behaviour.
– Comparison
of
business
ethical
tradiQons
in
different
countries.
– Comparison
of
business
ethical
tradiQons
from
various
religious
perspecQves.
– Ethical
issues
arising
out
of
internaQonal
business
transacQons;
e.g.
bioprospecQng
and
biopiracy
in
the
pharmaceuQcal
industry;
the
fair
trade
movement;
transfer
pricing.
– Issues
such
as
globalizaQon
and
cultural
imperialism.
– Varying
global
standards
-­‐
e.g.
the
use
of
child
labor.
– The
way
in
which
mulQnaQonals
take
advantage
of
internaQonal
differences,
such
as
outsourcing
producQon
(e.g.
clothes)
and
services
(e.g.
call
centres)
to
low-­‐wage
countries.
– The
permissibility
of
internaQonal
commerce
with
pariah
states.
• Foreign
countries
oken
use
dumping
as
a
compeQQve
threat,
selling
products
at
prices
lower
than
their
normal
value.
This
can
lead
to
problems
in
domesQc
markets.
It
becomes
difficult
for
these
markets
to
compete
with
the
pricing
set
by
foreign
markets.
In
2009,
the
InternaQonal
Trade
Commission
has
been
researching
anQ-­‐dumping
laws.
Dumping
is
oken
seen
as
an
ethical
issue,
as
larger
companies
are
taking
advantage
of
other
less
economically
advanced
companies.

9. Ten
Principles
of
Highly
Ethical
Business
Leaders
1. Treat
all
employees
as
unique
individuals.
– Don’t
reduce
people
to
a
uQlity
—
a
means
to
accomplish
your
ends.
2. Support
each
person’s
freedom
to
grow
and
develop.
– Never
view
anyone
through
stereotypes,
or
as
fixed
and
unchangeable.
3. Communicate
to
people
by
name
with
respect.
– Never
use
hurnul
labels
or
refer
to
a
person
by
his
or
her
job
funcQon.
4. Model
and
encourage
a
balanced
life
of
good
work
and
rest.
– Don’t
make
long-­‐term
demands
on
employees
that
undermine
balanced
lives.
5. Honor
and
respect
families
of
others.
– Don’t
forget
that
each
person
lives
in
a
broader
context
beyond
his
or
her
work.
6. Value
life,
safety,
and
health.
– Work
processes
or
products
should
not
create
unnecessary
risk
or
harm.
7. Keep
your
promises.
– Don’t
violate
wri^en
or
verbal
commitments,
or
look
for
loopholes
to
do
so.
8. Be
fair
and
just
in
financial
maOers.
– Don’t
tolerate
unfair
wages,
prices,
or
financial
pracQces.
9. Communicate
honestly
and
truthfully.
– Never
misrepresent
people,
products,
services,
or
facts.
10. Recognize
the
accomplishments
of
others.
– Don’t
claim
the
success
of
others
for
yourself.

10. Why
have
a
Code
of
Conduct
• A
code
of
conduct
is
intended
to
be
a
central
guide
and
reference
for
users
in
support
of
day-­‐to-­‐day
decision
making.
It
is
meant
to
clarify
an
organizaQon's
mission,
values
and
principles,
linking
them
with
standards
of
professional
conduct.
As
a
reference,
it
can
be
used
to
locate
relevant
documents,
services
and
other
resources
related
to
ethics
within
the
organizaQon.
• A
code
is
an
open
disclosure
of
the
way
an
organizaQon
operates.
It
provides
visible
guidelines
for
behavior.
A
well-­‐wri^en
and
thoughnul
code
also
serves
as
an
important
communicaQon
vehicle
that
"reflects
the
covenant
that
an
organizaQon
has
made
to
uphold
its
most
important
values,
dealing
with
such
ma^ers
as
its
commitment
to
employees,
its
standards
for
doing
business
and
its
relaQonship
with
the
community.“

11. Why
have…
• A
code
is
also
a
tool
to
encourage
discussions
of
ethics
and
to
improve
how
employees/members
deal
with
the
ethical
dilemmas,
prejudices
and
gray
areas
that
are
encountered
in
everyday
work.
A
code
is
meant
to
complement
relevant
standards,
policies
and
rules,
not
to
subsQtute
for
them.
• Codes
of
conduct
offer
an
invaluable
opportunity
for
responsible
organizaQons
to
create
a
posiQve
public
idenQty
for
themselves
which
can
lead
to
a
more
supporQve
poliQcal
and
regulatory
environment
and
an
increased
level
of
public
confidence
and
trust
among
important
consQtuencies
and
stakeholders

12. Common
Ethic
Code
Provisions
• Below
are
some
common
provisions
found
in
organizaQonal
codes.
• The
list
of
provisions
is
not
exhausQve,
nor
are
the
category
headings
definiQve.
OrganizaQons
tend
to
label
and
categorized
their
code
provisions
in
many
different
ways
depending
on
their
unique
characterisQcs,
their
goals
for
the
code
and
so
forth.
• Similarly,
code
content
(i.e.
provisions)
can
vary
substanQally
across
organizaQons
depending
on
their
industry,
regulaQons/requirements
and
goals
for
the
code.

13. Common…
• Employment
PracUces
– Workplace
Harassment
– Equal
Opportunity
– Diversity
– Fair
Treatment
of
Staff
– Work-­‐Family
Balance
– DiscriminaQon
– Illegal
Drugs
and
Alcohol
– Use
of
OrganizaQon
Property
• Employee,
Client
and
Vendor
InformaUon
– Maintaining
Records
and
InformaQon
– Privacy
and
ConfidenQality
– Disclosure
of
InformaQon
• Public
InformaUon/CommunicaUons
– AdverQsing
and
MarkeQng
– Development
and
Fundraising
– Clarity
of
InformaQon
– Access
to
InformaQon
– Transparency
of
InformaQon

14. Common…
• Conflicts
of
Interest
– Giks
and
GratuiQes
– PoliQcal
AcQvity
– Outside
Employment
– Family
Members
• RelaUonships
with
vendors
– Procurement
– NegoQaQng
Contracts
• Environmental
Issues
– Commitment
to
the
Environment
– Employee
Health
and
Safety
• Ethical
Management
PracUces
– Accuracy
of
books
and
records
and
expense
reports
– Proper
use
of
organizaQonal
assets
– ProtecQng
proprietary
informaQon
• Employment
PracUces
– Proper
Exercise
of
Authority
– Employee
Volunteer
AcQviQes
• Conflicts
of
Interest
– Disclosure
of
Financial
Interests
• PoliUcal
Involvement
– PoliQcal
AcQviQes

15. Quiz
1/2
• Why
people
engage
in
unethical
behavior?
(2.5)
• What
are
the
major
ethical
dilemmas
of
today’s
business?
(2.5)
• IdenQfy
ethical
issues
in
the
following
situaQon,
and
suggest
an
ethical
response
to
those
issues:
(5)
– Satyam
works
for
a
pharma
company
as
a
sales
rep.
He
is
based
out
of
Bangalore
but
travels
frequently
for
work.
He
a^ends
an
interview
with
a
compeQtor
on
a
weekday
in
Mumbai,
and
he
files
expense
report
with
his
company
claiming
the
travel
as
business
travel.
During
interview,
he
is
promised
heky
bonus
if
he
could
bring
at
least
25%
of
his
current
business
to
the
compeQtor
in
next
3
months.
In
Mumbai,
he
also
met
an
old
friend
over
lunch,
and
included
lunch
bill
as
business
entertainment.
While
retuning
from
Mumbai,
he
picked
up
a
Barbie
doll
for
his
boss’s
daughter
whose
birthday
was
on
coming
Sunday.

16. Quiz
2/2
-­‐
Yes
/
No
1. Business
ethics
focuses
mostly
on
personal
ethical
issues
2. Business
ethics
deals
with
right
or
wrong
behavior
within
a
parQcular
organizaQon
3. Business
ethics
contributes
to
investor
loyalty
4. If
an
acQvity
is
approved
by
most
members
of
an
organizaQon
and
it
is
also
customary
in
the
industry,
it
is
probably
ethical
5. The
primary
method
for
resolving
business
ethics
disputes
is
through
the
criminal
court
system
6. Whistle-­‐blowers
oken
retain
their
posiQons
and
conQnue
to
advance
within
the
organizaQon
7. A
person
who
behaves
unethically
and
is
rewarded
is
likely
to
conQnue
to
act
unethically
8. SocializaQon
refers
to
the
process
in
which
a
person
learns
the
values
and
behaviors
considered
appropriate
by
the
organizaQon
9. The
accountability
and
responsibility
for
appropriate
business
conduct
rest
with
top
management
10. Management’s
total
loyalty
to
maximizaQon
of
profit
is
a
principle
obstacle
to
achieving
higher
standards
of
ethical
pracQce