session 5(1)dc

Business relationships & Ethics

Week 5Ethical domains

Objectives

• Understand the ethical issues in business with emphasis on Indian context

• Become aware of ethical issues in business domains such as HR, finance, IT/IS

• Bribery – one buys power of influence of another person to satisfy selfish need

• Corruption – acceptance of money, stealing funds, use of public office

• Black money – illegal earning of money• Coercion – forcing a being to act against self-will• Insider trading – misuse of vital organizational

information • Tax evasion• Conflicts of interest - when an individual/organization

is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other

• Pollution

ethical issues in India

• Software Piracy• Nepotism• Gift giving• Firing of older employees• Marketing unhealthy products in domestic markets• Environmental issues• Dishonesty in advertising• Marketing unhealthy products• Padding expense accounts

Some questionable business practices

• Socio-cultural factors; • Fear of losing jobs; • Lax government structures and regulations;

Factors affecting ethical issues in Indian corporations

• Strong family traditions and laws of inheritance; • A tendency to adopt an easy option when confronted

with difficult ethical choices; and • A belief that business and ethics are irreconcilable.

Factors affecting ethical issues in Indian corporations

There is a general perception that it is very difficult for managers working in Indian corporations to be ethical because of

a. All pervading corruptionb. The manner in which governments function –

licenses, quotas, permits etc.c. The unholy nexus between politicians, bureaucrats

and contractors - The electoral system, the heavy investments politicians make in it to win elections

Ethical Dilemmas of Indian Managers

e. The take-it-easy attitude of people even when they come across corrupt and unethical behaviour;

f. The attitude of the population – oriental spirit of hospitality, concept of return gifts, help is to be matched by help and the feeling that when one makes some money, one can share it with those who made it possible;

g. Lack of education

Ethical Dilemmas of Indian Managers (Contd.)

There are four reasons why business should be ethical:• Ethics responds to the best in us• Values create credibility for company with the public• Values give management credibility with its

employees• Values help better decision making

Why Should Indian Business be Ethical?

Ethical Issues in Human Resource Management

Definition of HRM

• HRM is a management function.• Refers to a system of principles, policies,

practices, that influence employee behaviour, attitude and motivation

• Determining human resource needs (job descriptions);

• Attracting & retaining potential employees;• Choosing employees;• Teaching/preparing;• Rewarding;• Evaluating performance; and• Creating a positive work environment

• Discrimination issues• Suppression of democratization in the workplace • Privacy issues

Recruitment and selection Performance tracking Privacy issues (computerized employee records,

Electronic surveillance) • Safety and health

HR related ethical issues

• The top management should be committed to ethical behaviour – act as role models to their employees

• The organization should evolve codes of ethics for its employees and enforce them.

• Ethics committees should be formed with top executives as members to advice on ethical issues.

Role of HRM in creating an ethical organization

• Company journals to publish articles on ethical issues and pose hypothetical ethical dilemmas and discussions on how to resolve these

• An ethics office with ethics officers to oversee the process and help communicate policy to employees.

• Organize employee ethics training which can play an integral role in ensuring compliance with the ethics code.

• A disciplinary system to deal with ethical violations promptly and decisively.

Role of HRM in creating an ethical organization (Contd.)

Marketing Ethics

Defining marketing ethics

• Marketing ethics means a standard by which a marketing action may be judged ‘right’ or ‘wrong’

• It can also be defined as how moral standards are applied to marketing decisions, behaviours, and institutions.

In the context of Indian economy• Corrupt governments• Archaic & Lax implementation of existing laws • Lackadaisical consumers • Very few independent monitors

Areas in marketing ethics

• In product development• Safe products, disclose risks in use & service• Make existing products safer

• In pricing• In promotions (advertising)

Ethical issues in IT Industry

Unethical practices are prevalent in the industry in areas relating to:

• Information security: Lack of information security processes; disclosure of confidential information about customers to unauthorized people; forcing of customers to part with confidential information; hacking; cookies; conspiracy among IT employees/organizations to help clients perform unethical transactions

Ethical perspective of IT-ITES industry

• Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.

• IP rights: software piracy; illegal use of intellectual properties; reverse engineering of programs to gain access to the business logic and intellectual property of the vendor company.

Ethical perspective of IT-ITES industry (Contd.)

Work culture and environment: leakage of recruitment test question papers; wastage of company time and resources; breach of employment agreements; fraudulent bills; poaching of employees from competitors; unethical means of retaining the employees; unrealistic estimations and plans; breach of privacy of the employee; non-ergonomic working conditions

Ethical perspective of IT-ITES industry (Contd.)

Environmental ethics

• Environmental philosophy which considers extending the traditional boundaries of ethics from solely including humans and associated entities to including the nature and environment we dwell in.

• Legal rights of nature?• Protection of nature: legally and morally

Two types: 1.Depletion of Natural Resources: extraction of fossil

fuels, minerals; removal of forest cover

2.Degradation of the Natural Resources: deterioration of the quality of environment

Environmental damage through industrial activity

Environmental issues in India

• Air pollution: 3rd largest CO2 producer, poorest air quality out of 132 countries

• Solid waste pollution• Water pollution• India’s golden (or toxic) corridor: Ahmedabad

to Mumbai road houses number of factories

Environmental preservation: role of stakeholders

The stakeholders are:• The Public: has the power to influence policy, provide support to various groups, buy or reject products…;

• The Media: influences public perception, duty to provide positive and negative stories;

• Environmental Groups: transition to moderate and conservative groups;

• Corporations: shift in attitudes for environment protection;

•The Government: balance between economic development, regulation, and environment protection

Waste management - pollution management1. Systematic waste reduction audit 2. Economic balance: works using benefit: cost ratio to

reduce solid waste, air, water pollutants – save on clean-up operations

3. Use of Newer, Cleaner Technologies

Key strategies for industrial pollution mgt.

Reinhardt suggests approaches to managing environmental issues

1. Investing in environment friendly processes or products.

2. Managing environmental regulations.3. Looking at environmental issues from a risk

management perspective.

Managing environmental issues

Innovative business responses to environmental regulations

There are several reasons why those managing business are becoming increasingly conscious of environmental issues: • For management morale• To cut waste & realize benefits arising from pollution

prevention• ‘Green design’ of products & Production of

environment-friendly products, packages and processes

• Eco-labelling: CPCB logo

• McDonald’s: 79% of the consumer packaging used in our eight largest markets is made from renewable (paper or wood-fiber) materials

The Environment (Protection) Act, 1986 takes into account the following:

1. Water (Prevention and Control of Pollution) Act, 19742. Air (Prevention and Control of Pollution) Act, 19813. The Factories’ Amendment Act, 1987 4. The National Environmental Policy 2004

India’s environmental policy

Creating ethical organisations

What is an ethical organisation?

• Sound corporate culture & virtues• Rigorous Corporate governance structures • Policies & programs for Corporate social

responsibility

Developing and Executing a Comprehensive Ethics Programme

A sound ethics programme should include the following six components:

1. Formal codes of conduct: Codes of conduct are statements of organizational values that comprises of code of ethics, and a code of conduct.

It is a written document, inspirational in content and specifies clearly what is acceptable or unacceptable behaviour in the workplace and beyond, when employees represent their organizations outside.

2: Ethics Committees: develop an ethical policy for the organization and also investigate ethical infractions by employees.

They prepare or update codes of conduct, resolve ethical dilemmas in companies, evaluate the company’s compliance with them.

Developing and Executing a Comprehensive Ethics Programme (Contd.)

3: An Ethics Office with officer(s) to oversee the process and facilitate the communication of the policy to employees. Ethics officers are responsible for:• developing and distributing a code of conduct

for ethics, • conducting training program for employees,• processes to help employees obtain guidance

and • Establish means of enquiry for employees


4. Ethics Communication System: includes the facility for employees to post queries, get advice, or report any wrongdoing.

Objective of the ethics communication system is to: a) Communicate the company’s values and standards

of ethical business conduct to employees; b) Provide information to employees on the company’s

policies and procedures regarding ethical business conduct;


5. Ethics training programs:The basic objective of a training programme is to help employees understand the ethical issues that are likely to arise at their workplace and to offer assistance in dealing with such issues.


6. Disciplinary system: A systems for prompt, decisive and impartial dealings

with violations. Consistent enforcement and pursuit of disciplinary

system are necessary for achieving a sound and fruitful ethics program.


Documents

session 5(1)dc