Modern Issues In Business

BY

Niranjan Kumar S

3510920077

Nikitha Gupta

3510920076

DEPARTMENT OF MANAGEMENT STUDIES

SRM UNIVERSITY
RAMAPURAM CAMPUS

CHENNAI – 89
 ETHICAL ISSUES IN BUSINESS

Ethical issues arising from the nature of markets

- The 18th Century economist Adam Smith demonstrated how in a free market the self
interest of producers and consumers will produce an outcome desirable to all concerned
- But the market can also lead to inequality of income, wealth and market power:

 Monopoly suppliers can exploit consumers

 Monopsony buyers can exploit supply firms
 World wide inequality of income can result in unethical practices such as the child
labour

Ethical issues and society - examples

 Involvement in the community

 Honesty, truthfulness and fairness in marketing
 Use of animals in product testing
 Agricultural practices e.g. intensive faming
 The degree of safety built into product design
 Donation to good causes
 The extent to which a business accepts its alleged responsibilities for mishaps,
spillages and leaks
 The selling of addictive products e.g. tobacco
 Involvement in the arms trade
 Trading with repressive regimes

Ethical issues arising from internal and industry practices - examples

 Treatment of customers - e.g. honouring the spirit as well as the letter of the law in
respect to warranties and after sales service
 The number and proportion of women and ethnic minority people in senior positions
 The organisation’s loyalty to employees when it is in difficult economic conditions
 Employment of disabled people
 Working conditions and treatment of workers
 Bribes to secure contracts
 Child labour in the developing world
 Business practices of supply firms

Unethical practices in marketing - examples

 Pricing lack of clarity in pricing

 Dumping – selling at a loss to increase market share and destroy competition in order
to subsequently raise prices
 Price fixing cartels
 Encouraging people to claim prizes when they phoning premium rate numbers
  “Bait and switch” selling - attracting customers and then subjecting them to high
pressure selling techniques to switch to an more expensive alternative
 High pressure selling - especially in relation to groups such as the elderly
 Counterfeit goods and brand piracy
 Copying the style of packaging in an attempt to mislead consumers
 Deceptive advertising
 Irresponsible issue of credit cards and the irresponsible raising of credit limits
 Unethical practices in market research and competitor intelligence

Unethical practices relating to products - examples

 Selling goods abroad which are banned at home

 Omitting to provide information on side effects
 Unsafe products
 Built in obsolescence
 Wasteful and unnecessary packaging
 Deception on size and content
 Inaccurate and incomplete testing of products
 Treatment of animals in product testing

Ethics and the supply chain

- It would be hypocritical to claim to be a ethical firm if it turned a blind to unethical

practices by suppliers in the supply chain. In particular:
 The use of child labour and forced labour
 Production in sweatshops
 Violation of the basic rights of workers
 Ignoring of health, safety and environmental standards
 An ethical producer has to be concerned with what is practiced by all firms (upstream
and downstream) in the supply chain.

Bribery

- This is a key ethical issue in business

- It first needs to be stated that bribery to secure a contract (especially a contract with a
public sector body) is against the law and severe penalties can result
- However, it is sometimes seem (wrongly) as a victimless crime and is often
rationalised in terms of “if we don’t offer a bribery, others will”
- From a moral or ethical perspective it should be approached not in terms of “can we
get away” with it but is it right to offer a bribe to secure a contract

Institute of Business Ethics Suggestions for Good Practice

- The Institute recommends that organisations issue statements of ethical practice in

respect of:
- Relations with customers
- Relations with shareholders and other investors
 - Relations with employees
- Relations with suppliers
- Relations with the government and the local community
- The environment
- Relations with competitors
- Issues relating to international business
- Behaviour in relations to mergers and takeovers
- Ethical issues concerning directors and managers
- Compliance and verification

What is an Ethical code?

- This is a set of principles governing morality and acceptable behaviour

It is likely to cover:

 Personal behaviour e.g. when dealing with customers and suppliers

 Corporate behaviour e.g. when negotiating deals
 Behaviour towards society e.g. when recruiting
 Behaviour towards the environment e.g. when deciding on process

Ethical audit

- This is an audit of all the firms activities

Purpose:

 To check that ethical principles are being pursued

 To check the extent to which actions are consistent with the organisation’s stated
ethical intentions
 And to establish action plans if they are not

Ethical issues

Ethical issues are very important in research these days. Universities are required
by law to have Human (and Animal) Ethics Committees which vet and oversee
all research that is conducted under the University�s name. Their main
responsibility is to check for issues in the study that might interfere with a
participant�s right to not participate, or with possible harm, deception, or
embarrassment to participants.

A major issue is that potential participants are clearly informed about what they
are agreeing to participate in. Also, even if a participant agrees to participate
they have the right to withdraw their participation at any time without prejudice.
These two issues need to be spelt out on the Consent form.

Consider the earlier example in which we deliberately gave false feedback to

participants so that we could manipulate their sense of success. This study
therefore required deception of the participants. This has ethical implications as
to whether the information gained is worth subjecting people to such deception.
For the study to be approved by a Research Ethics committee, you would have to
debrief the participants afterwards. You would also have to nominate a source of
counselling or assistance if a participant was adversely affected. It might be
unlikely, but consider what might happen if only one person is "psychologically"
injured by believing they scored in the top 5% of the population and are later
told that it was all a lie. What might they do to themselves? What effect might it
have on later behaviour or relationships? So consent forms also need to have
names and contact numbers for a participant who might later have trouble
dealing with this. Notice the difficulty of clearly informing the potential
participant about the study without telling them about the deception
manipulation. Ethics committees need to see a very good reason for deception
before they will allow it. They will on occasions but the benefit of the
information obtained needs to clearly outweigh the risks associated with
deception and considerable care has to be taken to prepare for problems that
might occur.

As another example of an ethical issue, consider the other previous example in

which the researcher was interested in whether exposure to violent TV programs
increases aggressiveness. Perhaps as a consequence of our exposure some child
starts a fight and hurts another child or gets hurt themselves. This might have
further consequences in terms of shame or embarrassment, social isolation, or
altered relationships with parents, teachers, and friends. Obviously the researcher
and the Ethics Committee should anticipate such problems and take all the
precautions they can.
 

EXAMPLES OF CSR

CSR is not new to India, companies like TATA and BIRLA have been imbibing the case for
social good in their operations for decades long before CSR become a popular cause. Inspite
of having such life size successful examples, CSR in India is in a very nascent stage. It is still
one of the least understood initiatives in the Indian development sector. It is followed by a
handful of public companies as dictated by the very basis of their existence, and by a few
private companies, with international shareholding as this is the practice followed by them in
their respective foreign country. Thus the situation is far from perfect as the emphasis is not
on social good but rather on a policy that needs to be implemented.

A lack of understanding, inadequately trained personnel, non availability of authentic data

and specific information on the kinds of CSR activities, coverage, policy etc. further adds to
the reach and effectiveness of CSR programmes. But the situation is changing. And CSR is
coming out of the purview of ‘doing social good’ and is fast becoming a ‘business necessity’.
The ‘business case’ for CSR is gaining ground and corporate houses are realising that ‘what
is good for workers - their community, health, and environment is also good for the business’.

Corporate Social Responsibility Practices - the survey on CSR is timely and apt. The survey
is expected to facilitate formation of an alliance of CSR initiatives so that such initiatives can
be further stream lined, focused and converged to a powerful force of intervention. One of the
major objectives of the survey is to bring out in open the current status of CSR thereby giving
both the NGOs and the common man an understanding of the various initiatives undertaken
by corporates and the role that is played by the government in the field.

The survey underlines the various issues - current CSR policies, major stakeholders - their
current and future plans, geographical areas covered, role of civil society and government,
challenges, recommendations etc.

Corporate Social Responsibility Practices in India – A Preview

Corporate Social Responsibility:Initiatives and Examples

Anand Corporate Services Limited

Anand has a longstanding commitment to addressing the needs of the society, in view of its
belief that for any economic development to be meaningful, the benefits from the business
must trickle down to the society at large.Anand is of the firm view that the corporate goals
must be aligned with the larger societal goals. 25 years ago, the SNS Foundation, an
expression of Anand’s corporate social responsibility, was born. The objective of SNS
foundation was comprehensive community development. The Foundation has created
programs in the fields of health, education, natural resource management and life skills
training, only to make sure that fellow humans could breathe easy.

The long term goal of Anand CSR is to implement concepts like ‘Zero Tolerance Zone for
Child Labour’, ‘Zero Waste Zone’ using strategies like Reduce, Recycle and Reuse not only
at Anand/SNSF locations but extend to Anand residential areas.

Aptech Limited

Aptech Limited, a leading education player with a global presence, has played an extensive
and sustained role in encouraging and fostering education throughout the country since
inception.As a global player with complete  solutions-providing capability, Aptech has a long
history of participating in community activities. It has, in association with leading NGOs,
provided computers at schools, education to the underprivileged and conducted training and
awareness-camps.

Aptech students donated part of the proceeds from the sale of their art work to NGOs. To
propagate education among all sections of the society throughout the country, especially the
underprivileged, Aptech fosters tie-ups with leading NGOs throughout the country, including
the Barrackpur-based NGO, Udayan, a residential school for children of leprosy patients in
Barrackpur, established in 1970.The company strongly believes that education is an integral
part of the country’s social fabric and works towardssupporting basic education and basic
computer literacy amongst the underprivileged children in India.

Avon Cycle Limited

The poor and ignorant of India’s rural population turnto nearest towns and cities for
healthcare. They face indifferenceand exploitation. Hope gives way to despair.This gave
inspiration to AVON for locating MATAKAUSHALYA DEVI, PAHWA CHARITABLE
HOSPITAL.Mr. Sohan Lal Pahwa, AVON's Chairman and Principal Trustee of the
hospital,spent a good part of his workinglife devoted to philanthropy. The hospital, in its 5th
yearof inception, has risen to serve a model healthcare facility boasting of some bold
experiments in its very early yearsof existence. It’s support since inception has been of the
order of Rs. 3 crore to date and it continues uninterrupted.Reaching out to the needy farther
afield, the hospitalholds regular camps in surrounding villages to propagate scientific
approach to healthcare. Recently the hospital took the social responsibility concept a step
further and formulated a scheme titled 'Celebrated Female Child' to enable and inspire
positive and enduring environment for society's all–consuming passion for 'sons only' to end.

CISCO System Inc.

Philanthropy at Cisco is about building strong and productive global communities -

communities in which every individual has the means to live, the opportunity to learn, and
the chance to give back. The company pursues a strong “triple bottom line” which is
described as profits, people and presence. The company promotes a culture of charitable
giving and connects employees to nonprofit organizations serving the communities where
they live. Cisco invests its best-in-class networking equipment to those nonprofit
organizations that best put it to work for their communities, eventuating in positive global
impact. It takes its responsibility seriously as a global citizen. Education is a top corporate
priority for Cisco, as it is the key to prosperity and opportunity.

ICICI Bank Ltd

The Social Initiatives Group (SIG) of ICICI Bank Ltd works with a mission to build the
capacities of the poorest of the poor to participate in the larger economy. The group identifies
and supports initiatives designed to break the intergenerational cycle of poor health and
nutrition, ensure essential early childhood education and schooling as well as access to basic
financial services.Thus, by promoting early child health, catalyzing universal elementary
education and maximizing access to micro financial services, ICICI Bank believes that it can
build the capacities of India’s poor to participate in larger socio-economic processes and
thereby spur the overall development of the country. The SIG works by understanding the
status of existing systems of service delivery and identifying critical knowledge and practice
gaps in their functioning. It locates cost effective and scalable initiatives and approaches that
have the potential to address these gaps and supports research to understand their impact.
This is undertakenin collaboration with research agencies, nongovernmental organisations
(NGOs), companies, government departments, local stakeholders and international
organisations.

Infosys Technologies Limited

Infosys is actively involved in various community development programs.Infosys promoted,

in 1996, the Infosys Foundation as a not-for-profit trust to which it contributes up to 1%PAT
every year. Additionally, the Education and ResearchDepartment (E&R) at Infosys also
works with employee volunteers on community development projects. Infosys leadership has
set examples in the area of corporate citizenship and has involved itself actively in key
national bodies. They have taken initiatives to work in the areas of Research and Education,
Community Service,Rural Reach Programme, Employment, Welfare activities undertaken by
the Infosys Foundation, Healthcare for the poor, Education and Arts & Culture.

ITC Limited

ITC partnered the Indian farmer for close to a century. ITC is now engaged in elevating this
partnership to a new paradigm by leveraging information technology through its trailblazing
'e-Choupal' initiative. ITC is significantly widening its farmer partnerships to embrace a host
of value-adding activities: creating livelihoods
by helping poor tribals make their wastelands productive; investing in rainwater harvesting to
bring much-needed irrigation to parched drylands; empowering rural women by helping them
evolve into entrepreneurs; and providing infrastructural support to make schools exciting for
village children.Through these rural partnerships, ITC touches the lives of nearly 3 million
villagers across India.

Mahindra & Mahindra

The K. C. Mahindra Education Trust was established in 1953 by late Mr. K. C. Mahindra
with an objective topromote education. Its vision is to transform the lives of people in India
through education, financial assistanceand recognition to them, across age groups and across
income strata. The K. C. Mahindra Education Trust undertakesa number of education
initiatives, which make a difference to the lives of deserving students.The Trust has provided
more than Rs. 7.5 Crore in the form of grants, scholarships and loans. It promotes education
mainly by the way of scholarships. The Nanhi Kali project has over 3,300 children under it.
We aim to increase the number of Nanhi Kalis (children) to 10,000 in the next 2 years, by
reaching out to the underprivileged children especially in rural areas.

Satyam Computer Services Limited

Alambana (support) is the corporate social responsibility arm of Satyam Computer Services
Limited, formed to support and strengthen the vulnerable and underprivileged sections in
urban India. Registered as Satyam Alambana Trust in 2000, Alambana aims at transforming
the quality of life among urban population. Alambana's services are directed primarily at the
disadvantaged sections in all the cities that Satyam has offices in. Volunteers from among
Satyam associates and their family members lead the services and perform the required tasks.
Tata Consultancy Services

The Adult Literacy Program (ALP) was conceived and set up by Dr. F C Kohli along with
Prof. P N Murthy and Prof. Kesav Nori of Tata Consultancy Services in May 2000 to address
the problem of illiteracy. ALP believes illiteracy is a major social concern affecting a third of
the Indian population comprising old and young adults. To accelerate the rate of learning, it
uses a TCS-designed Computer–Based Functional Literacy Method (CBFL), an innovative
teaching strategy that uses multimedia software to teach adults to read within about 40
learning hours.

DCM Shriram Consolidated Limited

Shriram Fertilisers and Chemicals, is a unit of DSCL, located at Kota, 475 kms. Over the last
3 decades, various initiatives have been undertaken by the unit, in the Hadoti region (Kota,
Bundi, Jhalawar districts) in ICU, ambulances, family planning, medical assistance;schools,
scholarships, emphasis on girl child education;water to people and infrastructure.

Hindustan Construction Company (HCC)

HCC plays an active role in CSR initiatives in the fields of Health, Education, Disaster
Management, and Environment.Disaster Resource Network DRN is a worldwide
initiative,promoted by the World Economic Forum (WEF).Trained volunteers and equipment
resources from Engineering Construction & Logistics companies will complement the
existing efforts of Government, NGO's and International Organizations in disaster
management. It was during the WEF annual meet that the massive earthquake struck Gujarat
in January 2001. The need for a trained and effective participation from industry was first felt
there. The members of Engineering and Logistics segment of WEF came together to establish
this network. The idea was further strengthened during the 9/11 incident where again the
industry participated in the relief operations. DRN Worldwide was formally launched in New
York in January 2002. And shortly thereafter, DRN - India Initiative was launched.

Larsen & Toubro (L & T) Limited

Considering that construction industry is the second largest employer in India after
agriculture, employing about 32 million-strong workforce, L&T set out to regulate and
promote Construction Vocational Training (CVT) in India by establishing a Construction
Skills Training Institute (CSTI) on a 5.5 acre land, close to its Construction Division
Headquarters at Manapakkam,Chennai. CSTI imparts, totally free of cost, basic training in
formwork, carpentry, masonry, bar-bending, plumbing and sanitary, scaffolder and electrical
wireman trades to a wide spectrum of the rural poor.

As a result of the good response it received in Chennai, CSTI set up a branch at Panvel,
Mumbai, initially offering training in formwork, carpentry and masonry trades. The
Manapakkam and Panvel facilities together provide training to about 300 candidates annually
who are inducted after a process of selection, the minimum qualification being tenth standard.
Since inception, these two units have produced about 2,000 skilled workmen in various
trades, with about sixty percent of them being deployed to L&T’s jobsites spread across the
country. The success of this training-initiative demonstrates that adoption of systematic
training techniques are bound to yield efficient and skilled personnel in the shortest possible
time, and in the power to convert the potential of the Rural Youth in Construction and
upgrading Rura Economy in a small way