Session 5 – Corporate Governance and Business EthicsSunil Budhiraja

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Topics to be covered today

•Business Ethics

•Ethics: Acquisitions and mergers

•Ethics of Consumer Production and Marketing

Case Study

No such thing as a free drink!!!

Ethics and Business

•What is Ethics?

▫Morality ??▫Moral principles ??▫Moral values ??▫Norms??▫Beliefs??

Definition

•Ethics is concerned with the study of morality and the application of reason to elucidate (clarify) specific rules and principles that determines right or wrong for a given situation. These rules and principles are called as Ethical theories.

Golden Rule of Ethics

"Treat others only as you consent to being treated in the same situation."

Issues in Mergers and Acquisition

•Lies•Coercion•Deception in negotiation•Maximizing of values without considering the other

party’s need•Termination of employees

Acquisitions

•Friendly and Unfriendly

Major Anti-takeover tactics

•Poison Pills•Golden parachutes•Greenmail•Change of control covenants•People pill

Consumer Protection

•Consumer Information gap•Pattern of information•Performance gap•Absence of informed participation•Poverty of consumers

Theories of Consumer Protection

•Contractual View•Due Care•Social Costs view

Contractual View

•Duty to comply with the terms of the contract •Disclose the nature of the product•Should not misrepresent the nature of the product or

agreement

Due Care

•Design – all possible features•Production - quality• Information – should include labels, notices and

instructions

•Caveat emptor is important

Social Cost Theory

•Manufacture should pay all cost of any injury sustained through any defect of the product.

•Caveat vendor is important

Ethical issues in marketing

•4 P’s

Product

•Unethical product - Cigarette, Government's ban on tobacco advertising

•Safety of the product - Pepsi and Coke Pesticide controversy, Cadbury chocolates

•Product Updating- Availability of spare parts after updating products

Pricing

•Cross subsidizing – King Fisher airlines •High prices – taking advantage of patents- Pharma

products •Arbitrary pricing – Cement companies •MRP- not the final price

• JAAGO GRAHAK JAAGO

Place

•Not selling products in some places – Private Telecom players in rural India

•Avoid selling certain products in some specific places – Liquor near schools and places of worship

Promotion

•Exchange Offers - are they ethical?•Misleading claims - Cello Pens and Stationery Pvt.

Ltd- Cello Maxriter pen is capable of writing 4000 words

•Unfair practices – Airlines cancellation scheme

Contd..

•Market research