Business Ethics
Dr. Reena Mehta
1
Why do you have subject of Business
Ethics?
2
What are your expectation from the course
of Business Ethics?
3
What is Business?
4
What is Ethics?
5
What is Business Ethics?
Do you think business can be run
ethically?
6
Ethics is
personal
Information
is neutral
and amoral
5 Myths
Good
business
means
good ethics
Business
and ethics
don’t mix
Business
ethics is
relative
7
8
Vanessa-Mae
Violinist Vanessa-Mae has been banned from skiing for four
years after results were manipulated to help her qualify for
the Sochi Winter Olympics.
 Vanessa-Mae - from child prodigy to Olympian
 A skier since the age of four, it was her ambition to
compete in the Olympics for more than 20 years.
 Made her international professional musical debut at the
age of 10 in 1988 and the same year made her concerto
debut.
 Released her first album, Violin, when she was 13 years
old.
 She has amassed worldwide record sales in excess of 10
9
million.
• Some of the findings of the FIS investigation:
• The results of two giant slalom races on 19 January included a
competitor who was not present at, and did not participate in the
Krvavec competitions.
• Another competitor was placed second in one race despite the fact
she fell. Her time is understood to have been adjusted afterwards by
more than 10 seconds.
• A previously retired competitor with the best FIS points in the
competition took part for the sole purpose of lowering the penalty to
the benefit the participants in the races.
• The weather conditions were so bad that no regular race could be
held and "any comparable competition in Slovenia would have been
cancelled" according to the competition referee.
10
11
• He was made director of Infosys Ltd.2000,
• Fired from the company in 2002.
• He became the Chief Executive Officer of iGate
Corporation in 2003
• Murthy became President in 2006
• Re-elected in 2010.
• The board of iGate sacked its President and CEO Murthy
in May 2013, following an investigation into a
relationship that he had with a subordinate employee
and a claim of sexual harassment.
12
13
Jeffrey Skilling
• He received a full scholarship to for his engineering from a
University in Dallas.
• After graduation, he went to work for a Houston bank, which
sent him to Harvard Business School. Graduating in the top 5%
of his class as a Baker Scholar.
• He became a consultant at Mckinsey & Company in the
energy and chemical consulting practices.
• Skilling became one of the youngest partners in the history of
McKinsey.
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15
• He placed 11th in the World Championship Road Race,
with the best time of any American since 1976.
• From 1999 to 2005, Armstrong won seven consecutive
Tour de France titles, inspiring others with his cancer
survival.
• In 2012, the U.S Anti-Doping Agency stripped Armstrong
of his seven Tour titles—as well as other honors he
received from 1999 to 2005—and banned him from
cycling for life,
16
17
Vikram Narula of SKS finance
• He led the company to a successful IPO in 2010 reaching a market
capitalization of $2.2 billion and an outreach of 7.3 million low-income
borrowers in 2011 by which time it had disbursed more than $5 billion in
micro-loans as well as micro-insurance products.
• For his work in financial inclusion, he was named by TIME Magazine as
one of the 100 most influential people in the world in 2006.
• He has a BA from Tufts, an MA from Yale, a Ph.D. from the University of
Chicago, was a Fulbright Scholar.
• Has worked with McKinsey & Company and the Worldwatch Institute. He
was named the Ernst & Young (Start Up) Entrepreneur of the Year in India,
the World Economic Forum’s Young Global Leader, the Schwab Social
Entrepreneur of the Year in India, and was a 1998 Echoing Green Public
Service Fellow.
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19
Suzuki Alto 800
Tata Nano
Ford Figo
Hyundai i10
The Figo and the Polo were the only ones which had
stable frames, while the others failed the tests
completely.
• Recently they tested the Maruti Suzuki Swift and Datsun
Go, both of which failed the tests.
•
•
•
•
•
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• India ranks sixth largest in the world for the production
and sale of passenger cars
• Could become the world’s third largest market by 2020.
• The export share of the country’s passenger car
production has risen over the last ten years from 10% to
21%
• Of the 1.24 million people who lose their lives each year
on the world’s roads, more than one in ten is an Indian.
Annually India suffers around 140,000 road traffic
fatalities, accounting for 11.3% of the total. Nissan’s
21
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
Interest 9% for the period of 6 years from 1997 to 2003
22
BUSINESS ETHICS LEVELS
International Level
Societal Level
Association Level
Organizational
LevelOO
Individual
Level
23
•
•
•
•
•
2G Spectrum scam -Rs. 1.76-lakh crore
Commonwealth Games scam -Rs. 70000 crore
Adarsh Housing scam-Rs. 900 crore
Foodgrain scam in UP -Rs. 2 lakh crore
$213 billion in illicit financial flows from the country
between 1948 and 2008.
•
http://daily.bhaskar.com/article/NAT-IDP-sunday-special-scams-put-indian-economy-on-backfoot1846614.html
24
Rediff.com » Business »
The world's biggest shoplifters; India ranks No. 1!
Last updated on: November 14, 2011 13:16 IST
India: 2.38 per cent
This is one record India does
not want to hold. For the third
consecutive year, Indians have
topped the Global Retail Theft
Barometer.
25
Corruption Perceptions Index (2013)
Rank: 94 /177
Bribe Payers Index (2011)
Rank: 19 /28
By Transparency International
http://www.transparency.org
26
Doing Business 2014
Rank
Doing Business 2013
Rank***
Change in Rank
134
134/189
131
-3
27
• A recent report from the World Bank ranked India
• 132nd out of 183 economies for ease of doing
business,
• 181st for dealing with construction permits
• 182nd for enforcing contracts.
The World Economic Forum Global Competitiveness report
for 2011–2012
• ranked India 96th of 142 economies for burden of
government regulation.
28
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.
29
Law and Ethics
Differences between law and ethic . A law is
something you must obey. Ethics is how
society expects you to behave
30
Morals and Ethics
■
Ethics and morals both relate to “right” and “wrong” conduct.
■
Ethics refer to the series of rules provided to an individual by
an external source. e.g. their profession.
■
Morals refer to an individual’s own principles regarding right
and wrong
31
What is Moral?
What is Ethical?
32
What is Moral ?
•
•
•
•
Conforming to a standard of right behaviour.
Morals are dictated to us by either society of religion
We are not free to choose
You either accept or you don’t
33
What is Ethics
• Moral is ‘Conforming’ and Ethics is ‘Choosing’
• ‘Principles of conduct’ that you choose to govern you life
is guiding principle
• Eg. of Lying in moral as well Ethics
• In moral thinking is already done, in Ethics there is
freedom to think and choose.
• Morality comes from society so relative
• Ethics come from person
34
Do unto others as you would have them
do unto you.
35
Types of Individuals, Managers, Managements
■
Immoral
■
Amoral
■
Moral
36
Immoral Management
■
It cares only about their or companies profitability and success.
They see legal standards as barriers or impediments their
strategy is to exploit opportunities for personal or corporate
gain.
37
Amoral Management
■
This management is neither immoral nor moral but is not
sensitive to the fact that their everyday business decisions may
have deleterious effects on others. These management lack
ethical perception or awareness
38
Moral Management
■
It not only confirms to accepted and high level of Professional
Conduct, they also commonly exemplify leadership on ethical
issues. Management wants to be profitable, but only within the
confines of sound legal and ethical percept, such as fairness,
justice and due process.
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Theory of Ethics
41
Tata Group
Welfare Measures
Year
Enactment of Indian Law
8 hours of working
1912
1948
Free medical aid
1915
1948
Welfare Dept.
1917
1948
Schools for employees
Children
1917
-
Works Committees for
Grievance handling
1919
1947
Leave with Pay
1920
1948
Worker’s Provident Fund
1920
1952
Workmen’s Accident
Compensation
1920
1924
Training of Apprentices
1921
1961
Maternity Benefit
1928
42
1946
Tata Group
Welfare Measures
Year
Enactment of Indian Law
8 hProfit- sharing Bonus
1934
1965
Retiring Gratuity
1937
1972
TISS
1936
Tata Memorial Centre for
Cancer Research and
Treatment
1941
TCS
1968
Tata Airlines
1932
TIFR
1945
43
Corporate Social Responsibility
44
• Human Development Report 2013 released by the United
Nations Development Programme (UNDP):
• India’s rank 136 among 186 countries on its human
development index .
45
46
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
47
DIFFERENCE
GOOD
COMPANY
GREAT
COMPANY
Excellent Products
&
Services
Excellent
Products/services
&
Makes the world a better
place
Corporate Social Responsibility
Philip Kotler and Nancy Lee say, “CSR is a commitment to
improve community well being through discretionary
business practices and contribution of corporate resources.”
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50
Reason for CSR
•
•
•
•
Getting Visibility
Rectifying Image
Strategic CSR
Doing good for the society
51
Corporate Social Responsibility
•
•
•
•
•
•
•
•
•
Corporate Citizenship
Corporate Philanthropy
Corporate Giving
Corporate Community involvement
Societal Marketing
Community Relations
Community Affairs
Community Development
Global Citizenship
Cause Related Marketing
• “The public association of a for-profit company with a
nonprofit organization, intended to promote the
company's product or service and to raise money for the
nonprofit."
• American Express 1980s -restore the Statue of Liberty.
American Express made a one-cent donation to the
Statue of Liberty whenever an American Express charge
card was used. The result :
• 45% increase in the number of new card holders
• card usage increased by 28%.
• millions of dollars were raised for the Statue of Liberty.
53
Who Must Comply?
■
Every registered company with:
■
Net worth
Rs 500cr or
■
Turnover
Rs 1,000cr or
■
Net profit
Rs 5cr; during any financial year
54
Who Will Be Accountable?
■
Company to constitute a CSR Committee of the board
members consisting of at least 3 directors
■
At least 1 committee member to be an independent director
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What Will The CSR Committee Do?
■
Formulate and recommend to Board, a CSR Policy which shall
indicate the activities to be undertaken
■
Recommend amount of expenditure to be incurred on activities
■
Monitor CSR Policy of the company from time to time
56
What Will Be The Role Of The Board Of Directors?
■
Review recommendations made by the CSR Committee
■
Approve CSR Policy for the company
■
Disclose contents of the Policy in company's report/website
■
Ensure that company spends at least 2% of its average profits
during previous 3 financial years.
57
What Are The Activities A Company Can
Undertake?
■
As per Schedule VII, activities, as a Project Mode:
■
Eradication of hunger and poverty
■
Promotion of education
■
Promotion of gender equality and women empowerment
■
Health - reducing child mortality, improving maternal health,
combating HIV, AIDS, malaria
■
Such other matters as may be prescribed
58
What Are The Activities A Company
Can Undertake?
■
Employment enhancing vocational skills
■
Contribution to PM's fund or other fund set up by central govt or
the state govts for socio-economic development and relief and
funds for the welfare of SC, ST, backward classes, minorities
and women
■
Ensuring environmental sustainability
■
Social business projects
59
CSR
• Project Nanhi Kali reaches out to over 78,000 girls from
socially or economically deprived communities across
nine states in India. Sponsorship program Rs.2,300/- per
year for sponsoring one girl child.
• Shiv Nagar's in U.P: Kunal Bahl, 15 hand pumps: cost
only $5000
• SCM: 33,000 people participated raising 20 crore in
charity.
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61
What is Whistleblowing?
• Term Whistleblowing comes from Whistle Blower- the
perpetrator of exposure of misconduct, dishonesty or
illegal activity occuring in an organization.
• Reference drawn from games where refree blows a
whistle to indicate foul or illegal gameplay.
• The term Whistle-Blower coined in 1970s by US civic
activist Ralph Nader
Types of Whistle Blowers
Internal Whistleblower- Who
report misconduct within the
organization
External Whistleblower- are
those who report misconduct to
outside persons or entities.
Purpose of whistle blowing
• To draw attention to unethical, inappropriate or
incompetent conduct which has or may have detrimental
effects either for the institution or for those affected by
its functions.
• It extends to situations where an individual believes that
an activity is harmful while others involved are not aware
of it.
Stages of Whistle blowing
• Stage One – Is There a Potential Whistle Blowing
Scenario ?
• Stage Two – Seriousness Test
• Stage Three– Becoming Aware of the Big Picture
• Stage Five – Forcing Management Recognition of the
Problem
• Stage Six – Taking the Problem to Upper Management
• Stage Seven – Going Outside the Organization
• Stage Eight – Living with The Results
Determinants of Whistleblowing
Magnitude of consequences
• An employee considering whistleblowing must ask
himself or herself these questions:
How much harm has been done or might be done to
victims? Will the victims really be "beneficiaries"?
• If one person is or will be harmed, it is unlikely to be a
situation that warrants whistleblowing.
Determinants of Whistleblowing
Probability of effect
• The probability that the action will actually take place
and will cause harm to many people must be considered.
• An employee should be very sure that the action in
question will actually happen.
• If the employee does not know if the action will happen
and if the action will harm people (or the environment),
the employee should reconsider his or her plan to blow
the whistle.
• In addition, the employee must have absolute proof that
the event will occur and that people (or the
environment) will be harmed.
Determinants of Whistleblowing
Temporal immediacy
• An employee must consider the length of time between
the present and the possibly harmful event.
• An employee must also consider the urgency of the
problem in question. The more immediate the
consequences of the potentially unethical practice, the
stronger the case for whistleblowing. For example, the
effects of toxic waste dumping that are likely to occur in
a week are more pressing than the firing of 100
employees next year.
Determinants of Whistleblowing
Proximity
• The physical closeness of the potential victims must be
considered. For example, a company that is depriving
workers of medical benefits in a nearby town has a
higher proximity than one 1,000 miles away.
• The question arises about matters of emotional
proximity or situations in which the ethical question
relates to a victim with some emotional attachment to
the whistleblower.
Concentration of Effort
• A person must determine the intensity of the unethical
practice or behavior.
• The question is how much intensity does the specific
infraction carry. For example, according to this principle,
stealing $1,000 from one person is more unethical than
stealing $1 from 1,000 people.
Benefits of Whistleblowing
• Some examples of serious ethical violations that have
resulted in whistleblowing. These examples represent
significant consequences to businesses:
•
•
•
•
•
Dumping of toxic waste
Padding an expense report
Violating laws about hiring and firing
Violating laws about workplace safety
Violating health laws which lead to documented illness and
even death
• Businesses that engaged in unethical practices have
been shut down because of the actions of
whistleblowers.
• Lives have been saved, and severe damage to the
environment has been averted.
• Satyendra Dubey
wasCase
an engineer
employed by NHAI
Satyendra
Dubey
2003
• He was Assistant Project Manager at Koderma Kharkhand, managing
Golden Quadrilateral managing Aurangabad-Barachatti section of
National Highway 2 (The Grand Trunk Road)
• He pointed out to his superiors subcontracting controlled by Mafia with
no action taken.
• He was then transferred to Gaya in Bihar where he exposed large scale
violations regarding subcontracting and quality control.
• He wrote letter to then PM Atal Bihari Vajpayee highlighting high level
corruption in NHAI, detailing irregularities.
• He also highlighted subcontracting issues with main contractor Larsen
and Toubro.
• On November 27, Satyendra Dubey was killed by unidentified
assailants.
• CBI took charge of his case.
Legacy
• In 2010, 3 persons found responsible for the murder were sentenced
to life imprisonment by special CDI court
• S. K. Dubey Foundation for Fight Against Corruption was founded in
the US by Ashutosh Aman (IIT Kanpur, Satyendra's batchmate) and
Atal Bansal (IIT Kanpur) to systematically fight against corruption.
• IIT Kanpur instituted an annual award in his name, Satyendra K
Dubey Memorial Award, to be given to an IIT alumnus for displaying
highest professional integrity in upholding human values.
Manoranjan Kumar and Kandla port
trust
• In 2006, IES officer Manoranjan Kumar was appointed KPT vicechairman
• In December 2007, he submitted a report to the Shipping Ministry
about a land scam of over 1,000 acres.
• In January 2008, he was asked to proceed on three months leave,
along with then chairman Janardan Roa, who was reportedly one of
the accused in the report filed by Kumar.
• With the Shipping Ministry not taking any action against his report,
Kumar moved the CVC and sent a copy of the report to CBI.
• While the CBI took up the inquiry, the CVC did not act upon it.
• Kumar moved the CAT in August 2008.
• The Shipping Ministry did not act on CAT’s order dated August 2008
for Kumar’s repatriation.
Legacy
• Kumar, who again moved the CAT, won the case in February 2009.
This time the CAT slammed CVC in strong words for failing to
protect the officer and asked the Shipping Ministry to send him back
to KPT and pay compensation of Rs 25,000.
• Kumar finally won the case on March 18 in the High Court, moved
by the shipping ministry seeking a stay on the CAT order.
Dinesh Thakur and Ranbaxy
• Dinesh Thakur, former Ranbaxy director and global head of research
information & portfolio management
• He informed the management about not violation of norms in world
class practices in two of its plants. But management failed to correct
it.
• The case went to drug authorities of US and after 8years of
investigation they found Ranbaxy guilty of it and fined USD500
million
• It leads to effective drug regulations regard less of place of its
manufacturing.
Cynthia Cooper Case
• Cynthia Cooper was the whistleblower who exposed massive
accounting fraud at WorldCom in 2002.
• A native of Clinton, Mississippi, Cooper worked as the Vice President
of Internal Audit at WorldCom.
• After conducting a thorough investigation in secret, she informed
WorldCom's board that the company had covered up $3.8 billion in
losses through phony bookkeeping.
• At the time, this was the largest incident of accounting fraud in U.S.
history.
Aftermath
• Cooper was named as one of three "People of the Year" by Time
magazine in 2002.
Shanmughan Manjunath case
• MBA from IIM-Lucknow and Marketing manager of IOCL in
Lakhimpur Kheri
• Nightmare for petrol outlet owners
• Ordered two petrol pumps at Lakhimpur Kheri sealed for selling
adulterated fuel for three months.
• When the pump started operating again a month later, Manjunath
decided to conduct a surprise raid around November 19, 2005
• Manjunath was shot dead by petrol pump owner
Aftermath
Manjunath Shanmugam Trust
-Broader agenda of improving governance in Indian public life
Manjunath Shanmugam Integrity Award
-Carries a citation and a Rs. One Lakh Cash Award to honor those
who have reported and worked to rectify systemic corruption
Kerosene subsidy
-Re-look into subsidy mechanism of Kerosene by Government
• Cherly
Eckard was
Quality Control manager at GlaxoSmithKline in
Cherly
Eckard
Case
•
•
•
•
•
Cidra, Puerto Rico.
In July 2002, she found and warned her supervisors of abysmal
conditions in the production unit and requested production be
stopped immediately. But her request was ignored.
She continued to report multiple violations, including contaminated
water system, an air system that allowed products to be crosscontaminated and pills of different strengths mixed in the same
bottles, among other problems, according to a newspaper.
These reports were ignored and Cherly Eckard was eventually
blocked out by the senior officials of the company.
She was sacked in 2003 at a meeting.
She reported the company to FDA in August 2003, citing the fact
that her reports being constantly ignored by the company.
Legacy
• A lawsuit was filed under False Claims Act
• On October 27, 2010, the lawsuit was settled for $750
million out of which Cherly Eckard received $96 million as
damages.
The Insider
• Jeffrey Wigand, vice president for tobacco research and
development at Brown & Williamson.
• Wigand became the whistle-blower on Big Tobacco,
telling how the industry minimized tobacco's health and
safety issues.
• His story was told in the movie The Insider. The tale gets
nasty. Wigand was fired in 1993.
• His former employer publicized unsubstantiated
allegations of shoplifting and domestic abuse from his
past.
Aftermath
• Wigand now runs a nonprofit foundation in South
Carolina devoted to educating children about health
issues, including tobacco use and alcohol consumption.
Karen Silkwood
• Karen Gay Silkwood was an American chemical
technician and labor union activist.
• She worked at the Kerr-McGee Cimarron Fuel Fabrication
Site plant and her job was making plutonium
pellets for nuclear reactors fuel rods.
• On November 5, 1974, Silkwood performed a routine
self-check and found that her body contained almost 400
times the legal limit for plutonium contamination.
• Silkwood again tested positive for plutonium after some
time, although she had performed only paperwork.
• She thought she had been contaminated at the plant
and had assembled documentation for her claims,
including company papers.
Aftermath
• She decided to go public with this evidence.
• On November 13, 1974, Silkwood left a union meeting at
the Hub Cafe and her dead body was found in car, which
had run off the road.
JP Morgan Chase Whistle blower(2012)
• When Linda Almonte alerted her boss at JPMorgan Chase
about potential fraud in a major deal she was helping to
close, she expected him to applaud her great catch.
Aftermath:
• Instead of applauding, she got fired.
Edward Snowden’s Whistleblowing
Saga(2013)
Snowden worked for U.S. government contractors privy
to classified information and was employed by NSA
contractor.
• Snowden discovered that the NSA was spying on
Americans. Snowden violated the Espionage Act of
1917, first by stealing classified government documents,
then by making them public.
•
Aftermath:
•
Snowden is charged as a traitor who betrayed his country and a
criminal in search of a safe haven.
 Physical or psychological
Effects of Whistle-Blowing
 Forced to leave
organization/demotion
 Credibility ruined
 Family, health, and/or life in
jeopardy
 Outrage and divisiveness of
people directly or indirectly
involved
isolation
 Organization experiences loss
of money, restitution,
productivity, and positive
reputations.
 Incarceration