You are on page 1of 39

A SEMINAR ON BUSINESS ETHICS

TABLE OF CONTENTS

ETHICS ....................................................................................................................................................................... 3
Introduction: .......................................................................................................................................................3
Why Ethics is Important? ...............................................................................................................................5
What are the key elements of a proper Ethics? .....................................................................................5
BUSINESS ETHICS ................................................................................................................................................. 6
Introduction: .......................................................................................................................................................6
Definition: ............................................................................................................................................................6
Why Business Ethics? ......................................................................................................................................7
Business Ethics and the Law: .......................................................................................................................7
Bringing Ethics Down To Size: .....................................................................................................................8
Taking Away the Mystery: .............................................................................................................................9
Business Ethics from a Management perspective:............................................................................ 10
Managing Unethical Behavior: .................................................................................................................. 11
Focus on the Positive, the Ethical, and the Socially Responsible: ............................................... 12
Is Business Ethics Just A Fad? ................................................................................................................... 13
Can Business Ethics Be Taught? ............................................................................................................... 14
The Ethical Decision Making Process: ................................................................................................... 15
Principles of Admirable Business Ethics: ............................................................................................. 16
ISSUES ..................................................................................................................................................................... 17
A. Overview of Issues in Business Ethics: ......................................................................................... 17
1. General Business Ethics: ................................................................................................................ 17
2. Professional Ethics: .......................................................................................................................... 17
a. Ethics of accounting information: .......................................................................................... 17
b. Ethics of Human Resource Management: ........................................................................... 18
c. Ethics of Sales and Marketing: ................................................................................................. 18
d. Ethics of Production: ................................................................................................................... 19
e. Ethics of Intellectual Property, Knowledge and Skills: .................................................. 19
3. International Business Ethics And Ethics Of Economic Systems: .................................. 20
a. International business ethics:.................................................................................................. 20
b. Ethics of economic systems: ..................................................................................................... 20
B. Theoretical Issues in Business Ethics: .......................................................................................... 21
1. Conflicting interests:........................................................................................................................ 21
2. Ethical Issues and Approaches: ................................................................................................... 21
C. Business Ethics in the Field: .............................................................................................................. 23
1. Corporate Ethics Policies: .............................................................................................................. 23
2. Ethics Officers: ................................................................................................................................... 24
D. Religious Views on Business Ethics: .............................................................................................. 25
CASE STUDIES OF COMPANIES .................................................................................................................... 26
The McDonald’s ‘Beef Fries’ Controversy ............................................................................................. 27
Coca-Cola & Pepsi Harm India's Ecology .............................................................................................. 30
Google's Problems in China ........................................................................................................................ 33
CONCLUSION ........................................................................................................................................................ 36
REFERENCES........................................................................................................................................................ 37
ETHICS
Introduction:
Ethics is the branch of study dealing with what is the proper course of action for man. It is
the study of right and wrong in human endeavours. At a more fundamental level, it is the
method by which we categorize our values and pursue them [14]. The field of ethics (or
moral philosophy) involves systematizing, defending, and recommending concepts of right
and wrong behaviour [13].

Philosophers today usually divide ethical theories into three general subject areas: Meta
ethics, normative ethics, and applied ethics [13].

Meta Ethics:

Meta ethics investigates where our ethical principles come from, and what they mean [13].
Meta-ethics is the branch of ethics that seeks to understand the nature of ethical
properties, and ethical statements, attitudes, and judgments. The semantics of ethics
divides naturally into descriptivism and non-descriptivism. Descriptivism holds that ethical
language (including ethical commands and duties) is a subdivision of descriptive language
and has meaning in virtue of the same kind of properties as descriptive propositions. Non-
descriptivism contends that ethical propositions are irreducible in the sense that their
meaning cannot be explicated sufficiently in terms of descriptive truth-conditions.

Correspondingly, the epistemology of ethics divides into cognitive and non-cognitive; a


distinction that is often perceived as equivalent to that between descriptivist and non-
descriptivist. Non-cognitive may be understood as the claim that ethical claims reach
beyond the scope of human cognition or as the (weaker) claim that ethics is concerned with
action rather than with knowledge. Cognitive can then be seen as the claim that ethics is
essentially concerned with judgments of the same kind as knowledge judgments; namely
about matters of fact.

The ontology of ethics is concerned with the idea of value-bearing properties, i.e. the kind
of things or stuffs that would correspond to or be referred to by ethical propositions. Non-
descriptivist and non-cognitivists will generally tend to argue that ethics do not require a
specific ontology, since ethical propositions do not refer to objects in the same way that
descriptive propositions do. Such a position may sometimes be called anti-realist. Realists
on the other hand are left with having to explain what kind of entities, properties or states
are relevant for ethics, and why they have the normative status characteristic of ethics [2].

3
Normative Ethics:

Traditionally, normative ethics (also known as moral theory) ethics takes on a more
practical task, which is to arrive at moral standards that regulate right and wrong conduct.
This may involve articulating the good habits that we should acquire, the duties that we
should follow, or the consequences of our behaviour on others. The Golden Rule is a classic
example of a normative principle: We should do to others what we would want others to do
to us [13].

At the turn of the 20th century, moral theories became more complex and are no longer
concerned solely with rightness and wrongness, but are interested in many different kinds
of moral status. During the middle of the century, the study of normative ethics declined as
meta-ethics grew in prominence. This focus on meta-ethics was in part caused by an
intense linguistic focus in analytic philosophy and by the popularity of logical positivism [2].

Applied Ethics:

Applied ethics is a discipline of philosophy that attempts to apply ethical theory to real-life
situations [2]. It involves examining specific controversial issues, such as abortion,
infanticide, animal rights, environmental concerns, homosexuality, capital punishment, or
nuclear war [13]. This discipline has many specialized fields, such as bioethics and business
ethics [2].

Two features are necessary for an issue to be considered an “applied ethical issue.” First,
the issue needs to be controversial in the sense that there are significant groups of people
both for and against the issue at hand. The issue of drive-by shooting, for example, is not an
applied ethical issue, since everyone agrees that this practice is grossly immoral. The
second requirement for in issue to be an applied ethical issue is that it must be a distinctly
moral issue. On any given day, the media presents us with an array of sensitive issues such
as affirmative action policies, gays in the military, involuntary commitment of the mentally
impaired, capitalistic versus socialistic business practices, public versus private health care
systems, or energy conservation. Although all of these issues are controversial and have an
important impact on society, they are not all moral issues. Some are only issues of social
policy [13].

4
Why Ethics is Important?
Ethics is a requirement for human life. It is our means of deciding a course of action.
Without it, our actions would be random and aimless. There would be no way to work
towards a goal because there would be no way to pick between a limitless numbers of
goals. Even with an ethical standard, we may be unable to pursue our goals with the
possibility of success. To the degree which a rational ethical standard is taken, we are able
to correctly organize our goals and actions to accomplish our most important values. Any
flaw in our ethics will reduce our ability to be successful in our endeavours [14].

What are the key elements of a proper Ethics?

A proper foundation of ethics requires a standard of value to which all goals and actions
can be compared to. This standard is our own lives, and the happiness which makes them
liveable. This is our ultimate standard of value, the goal in which an ethical man must
always aim. It is arrived at by an examination of man's nature, and recognizing his peculiar
needs. A system of ethics must further consist of not only emergency situations, but the day
to day choices we make constantly. It must include our relations to others, and recognize
their importance not only to our physical survival, but to our well-being and happiness. It
must recognize that our lives are an end in themselves, and that sacrifice is not only not
necessary, but destructive [14].

5
BUSINESS ETHICS

Introduction:
Business ethics (also known as corporate ethics) is a form of applied ethics or professional
ethics that examines ethical principles and moral or ethical problems that arise in a
business environment. It applies to all aspects of business conduct and is relevant to the
conduct of individuals and business organizations as a whole [1]. In concept, business ethics
is the applied ethics discipline that addresses the moral features of commercial activity. In
practice, however, a dizzying array of projects is pursued under its rubric [5].

Business ethics can be both a normative and a descriptive discipline. As a corporate


practice and a career specialization, the field is primarily normative. In academia
descriptive approaches are also taken. The range and quantity of business ethical issues
reflects the degree to which business is perceived to be at odds with non-economic social
values. Historically, interest in business ethics accelerated dramatically during the 1980s
and 1990s, both within major corporations and within academia. For example, today most
major corporate websites lay emphasis on commitment to promoting non-economic social
values under a variety of headings (e.g. ethics codes, social responsibility charters). In some
cases, corporations have redefined their core values in the light of business ethical
considerations (e.g. BP's "beyond petroleum" environmental tilt) [1].

Definition:

"Business Ethics" can be defined as the critical, structured examination of how people &
institutions should behave in the world of commerce. In particular, it involves examining
appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the
actions of individuals or firms affects others [8].

The study and examination of moral and social responsibility in relation to business
practice and decision making in business is known as “Business Ethics” [4].

6
Why Business Ethics?
Discussion on ethics in business is necessary because business can become unethical, and
there are plenty of evidences as in today on unethical corporate practices. Even Adam
Smith opined that 'People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the public, or in some
contrivance to raise prices'. Firms and corporations operate in the social and natural
environment. By virtue of existing in the social and natural environment, business is duty
bound to be accountable to the natural and social environment in which it survives.
Irrespective of the demands and pressures upon it, business by virtue of its existence is
bound to be ethical, for at least two reasons: one, because whatever the business does
affects its stakeholders and two, because every juncture of action has trajectories of ethical
as well as unethical paths wherein the existence of the business is justified by ethical
alternatives it responsibly chooses. One of the conditions that brought business ethics to
the forefront is the demise of small scale, high trust and face-to-face enterprises and
emergence of huge multinational corporate structures capable of drastically affecting
everyday lives of the masses [1].

Business Ethics and the Law:


Having defined business ethics in terms of issues of right and wrong, one might quite
naturally question whether this is in any way distinct from the law. Surely the law is also
about issues of right and wrong? This is true, and there is indeed considerable overlap
between ethics and the law. In fact, the law is essentially an institutionalization or
codification of ethics into specific social rules, regulations, and proscriptions. Nonetheless,
the two are not equivalent. Perhaps the best the way of thinking about ethics and the law is
in terms of two intersecting domains.

The law might be said to be a definition of the minimum acceptable standards of behavior.
However, many morally contestable issues, whether in business or elsewhere, are not
explicitly covered by the law. For example, just as there is no law preventing you from
being unfaithful to your girlfriend or boyfriend (although this is perceived by many to be
unethical), so there is no law in many European countries preventing businesses from
testing their products on animals, selling landmines to oppressive regimes, or preventing
their employees from joining a union—again, issues which many feel very strongly about.
Similarly, it is possible to think of issues that are covered by the law, but which are not
really about ethics. For example, the law prescribes whether we should drive on the right
or the left side of the road. Although this prevents chaos on the roads, the decision about
which side we should drive is not an ethical decision as such. In one sense, then, business
ethics can be said to begin where the law ends. Business ethics is primarily concerned with
those issues not covered by the law, or where there is no definite consensus on whether
something is right or wrong. Discussion about the ethics of particular business practices
may eventually lead to legislation once some kind of consensus is reached, but for most of
the issues of interest to business ethics, the law typically does not currently provide us with
guidance. For this reason, it is often said that business ethics is about the ‘grey areas’ of
business [15].
7
Ethics

‘Grey
Area’

Law

The relationship between ethics and the law

Bringing Ethics Down To Size:

Most ethics texts focus almost exclusively on “big” dilemmas that reflect a corporate
position: “Should the company market this product or do business in this particular
country? Are executive compensation plans fair and equitable?” “Should you blow the
whistle on your employer? Should you accept a gift from a supplier? Should you hire your
spouse’s company to provide an important service to your firm?” These are the kinds of
ethical dilemmas people face every day in work organizations and the kinds of problems
that can short-circuit individual careers if they’re mishandled [3].

8
Taking Away the Mystery:
In other situations mystery may stimulate interest. But mystery only serves to make ethics
inaccessible to most students and managers. For most people, the word “ethics” means
something esoteric and far removed from reality. But organizational ethics isn’t
mysterious. It’s about us—people making decisions in organizations every day. All of us
belong to organizations. We’re members of schools, fraternities, sororities, clubs, sports
teams, religious organizations, and work organizations. As members of these organizations,
we frequently find ourselves facing ethical dilemmas—situations concerning right and
wrong where values are in conflict.

As a student, you may have observed a friend cheating and wondered what to do. Which is
the more important value—sticking by a friend, or complying with the honor code that
requires you to turn in a cheater? In a work setting, perhaps you’ve been tempted to do
something you believe is wrong (for example, lie to a customer about a delivery date)
because your boss encourages you to focus on short-term financial results. Which is more
important—honesty to the customer or adherence to your supervisor’s expectations?
Loyalty is an important value for most of us. But, what happens when one of your
employees (a good friend) hasn’t been meeting agreed-on performance expectations for
some time? Which is more important—loyalty to the organization or loyalty to your friend?
All of these examples represent values in conflict. All are ethical dilemmas.

Until about fifteen years ago, so little was known about the topic of organizational ethics
that a book like this probably couldn’t have been written. With rare exceptions, knowledge
was limited to a few surveys saying that, yes, ethics is a problem in organizations. But in
recent years, researchers have begun to rigorously study organizational ethics as social
science. Although there is much left to learn, we’re beginning to understand the factors that
influence ethical conduct in organizations, and what works and what doesn’t in ethics
management. That’s the kind of information we’ll share with you so that you’ll understand
yourself and others better, and you’ll be a better manager who will understand how to
influence others’ behavior in an ethical direction [3].

9
Business Ethics from a Management perspective:
Business ethics, which is generally defined in terms of the social, communal and
environmental responsibilities of business professionals, requires managers to take into
account much more than the bottom line when making business-related decisions. This
means that those in supervisory positions need to reflect on the manners in which their
decisions affect employees, associates, the environment and society as a whole. While some
experts contend that the responsibility of a firm’s management team should focus
exclusively on meeting the needs of its shareholders, it is important to keep in mind that
most times, being socially and ethically responsible, results in more profitable business
ventures.

The issue of business ethics heavily spotlights the abilities and inabilities of some managers
to prevent ethical violations from becoming costly issues for the company. However it is
unrealistic to expect managers to resolve these matters without proper edification of the
issues involved. While many managers acknowledge their responsibility to stay informed
of changing issues such as sexual harassment, insider trading, equal hiring practices and so
on, the problem is that they often feel they do not have the authority to effectively resolve
such matters. It is a fact that corporations, and societies that desire a prosperous economy
are forced to compete with lower salaries, taxation, safety regulations and standards for
environmental protection that can send gross expenditures through the roof. . This makes
it extremely difficult for managers to perform their duties in a manner that benefits both
the shareholders and the whole of humanity.

In order to “untie the hands” of managers facing ethical dilemmas, discussing the
responsibility of individual corporations or managers is important, however open
communications regarding the moral adequacy of the institutional frameworks within the
organization’s daily operations is equally essential. It is therefore not so much the moral
fiber of individual managers that needs to be addressed as it is the ethical structure and
overall agenda of the company itself. No matter how ethically sound and socially aware a
manager is, if company policy prevents him from acting as he thinks he should, how much
liability can reasonably be placed in his lap?

Corporations and entire areas of business have developed numerous systems designed to
incorporate ethical issues into their decision-making procedures. These guiding principles
include industry concerns, health issues, safety and environmental policies, disclosure
responsibilities and a variety of other pertinent issues. The effects of the business
operations in relation to these issues must be examined from a manager’s perspective in
order to ensure proper implementation. However along with the ability to examine these
issues must come the responsibility to deal with them effectively?

Social and environmental issues must also be scrutinized in every level of the organization,
which would imply that the responsibility of the effects of business activities could be
included in the normal decision making procedures of the company’s managers. When

10
properly executed and inspected, these factors make up a large portion of the criterion that
determines the reputability of a corporation, its managers and its employees.

In accordance with ethical standards, every manager in a corporation is responsible to


those whom his or her actions affect. Consequently, since managers' decisions can
influence so many diverse aspects of not only the business itself, but of society as a whole,
it is critical that management’s current level of accountability and responsibility be
thoroughly examined [9].

Managing Unethical Behavior:


It is a sad truth that the employees of just about every business, in every business, will
occasionally encounter team members who are taking part in unethical behaviors. Such
unethical behaviors include a wide variety of different activities. Among the most common
unethical business behaviors of employees are making long-distance calls on business
lines, duplicating software for use at home, falsifying the number of hours worked, or much
more serious and illegal practices, such as embezzling money from the business, or
falsifying business records.

Though there is sometimes a difference between behaviors that are unethical and activities
that are actually illegal, it is up to the business itself to decide how it deals with unethical
behavior - legal or not.

Many employees find that discovering unethical behavior among co-workers actually tests
their own values and ethical behaviors. After all, unethical behavior that is not illegal
frequently falls in a grey area between right and wrong that make it difficult to decide what
to do when it is encountered. Furthermore, different people have different views regarding
what is ethical and what is unethical. For example, some people feel that it is alright to tell a
little "white lie", or to make one long distance call on the company's nickel, as long as they
can justify it in their mind.

When employees discover other employees doing something that they know is wrong by
the company's standards, their own sense of what is right and what is wrong instantly
comes into question. That employee needs to consider how s/he feels about that particular
activity, as well as informing about that activity, or turning a blind eye.

Even by deciding to do something about it, the employee who has discovered the unethical
behavior is presented with a number of difficult choices. Should the employee speak to the
individual directly, or should the employee head directly to a company supervisor?

To make this decision a bit easier, many companies have adopted several techniques that
allow for the management of unethical activities. The first step is to create a company
policy, in writing, that is read and signed by each employee. This erases most feelings of
ambiguity when it comes to deciding what to do after witnessing an unethical behavior.

11
The second is to give a clear outline of what is expected of the person who has discovered
the unethical behavior. It should include the person who should be contacted, and how to
go about doing it. With clear instructions, there will be less hesitation in reporting
unethical activities, and then they can be dealt with quickly and relatively easily, before
they develop into overwhelming issues.

Furthermore, the repercussions of unethical behaviors should be clearly stated. This way,
both the person doing the activity, and the witness to the activity will be well aware of the
way that things will be dealt with, and there won't be any risk of someone not reporting
unethical behavior because they're afraid that the culprit will be unfairly treated.

Communication is key in the proper management of unethical behavior in today’s


workplace [7].

Focus on the Positive, the Ethical, and the Socially Responsible:


We would also like to focus on the positive and the ethical in people and in organizations.
We’re not Pollyannas, but we see plenty of positive evidence and real-world examples that
inspire us to keep ourselves and our organizations moving in a positive and ethical
direction.

Ethical conduct is alive and well at work. In an Industry Week survey, three out of four
respondents claimed that their company’s code of ethics or ethics in general, actually
means something to them in their day-to-day work. Similarly, the Ethics Resource Center’s
2000 survey of business ethics found that about seventy percent of respondents from for-
profit organizations have never observed conduct that either violated the law or the
organization’s own ethics standards. Only six percent of employees said that they had
observed such misconduct often, and only about five percent said that they frequently
experience pressure to compromise their company’s ethical standards in order to achieve
business objectives. More than seventy percent of employees said that the values of
honesty, respect, and trust are applied frequently in their workplace. Finally, about eighty-
five percent of employees said that supervisors and executives in their organization model
ethical business behavior. Clearly, most employees are having a positive ethical experience
at work. You might want to conduct your own survey among the people you know. Ask
them these questions and see what they say. If your findings are similar to those reported
above, perhaps you will begin to question the widespread cynicism conveyed by the media
and pay more attention to the many examples of positive and ethical business behavior.

From a social responsibility perspective, many organizations are acknowledging that


they’re not islands, isolated from the larger communities that surround them. In fact, they
know that they function best within healthy communities. The leaders of these
organizations have been referred to as “enlightened capitalists.” They reject the notion that
business’s sole responsibility is to maximize profits. Although they’re true believers in the
free market system, these “enlightened capitalists” acknowledge that the free market
system can also produce negative side effects such as pollution and “poverty-amid-plenty.”

12
They believe that it’s better for business to voluntarily help solve these problems than to be
forced to do so by the government. One corporate lawyer estimated that one new law
results in 200 to 300 pages of regulations, all of which have to be followed by the
corporations affected by the law. Furthermore, enlightened business leaders argue that
business has a responsibility to address certain social problems because of its unique
abilities, and because a healthy social environment is a prerequisite for a healthy business
environment. Therefore, they maintain that when a business serves its multiple
stakeholders best (i.e., customers, employees the community—essentially, any party who
has a stake in what the organization does and how it performs), it also serves its
shareholders best in the long run [3].

Is Business Ethics Just A Fad?


Management researchers began to study business ethics during the 1960s by conducting
surveys of managers’ attitudes toward business ethics. Some thought that business ethics
was just a fad then (related to media attention to the burgeoning consumer rights
movement, for example) and that interest in the topic would quickly fade. But research has
found that management fads generally last only about 10 years, and interest in business
ethics has climbed for more than 40 years. This interest is fueled in part by regular media
coverage of ethical lapses in the business community.

Ethical lapses aren’t limited to business; such problems affect every institution of our
society. For example, in the 1970s the Watergate scandal focused attention on ethical
problems in government. This focus continued with questions about the faulty decision
making that led to the Challenger disaster, check-writing scandals in Congress, Irangate,
Whitewater, sexual harassment in the military, questionable election fund-raising tactics,
and the sex scandals in the Clinton White House.

Religious, educational, philanthropic, and sports organizations haven’t been immune.


Catholic priests (and other religious leaders) have sexually abused children, students have
cheated on exams and plagiarized papers, philanthropic organizations have spent
contributors’ funds irresponsibly, student athletes have run afoul of National Collegiate
Athletic Association (NCAA) rules, and Olympic judges have been accused of fixing scores.
Although we don’t want to leave it to the media to define ethical business practice, the
media’s continuing interest in ethical issues suggests that ethics isn’t just a fad.

Articles and books have proliferated in the academic and professional press, suggesting
that these communities are becoming increasingly interested in ethics as well. And
organizations of every kind are addressing the “ethics problem” in a number of ways. Many
of them are establishing high-level ethics committees, drafting codes of ethical conduct, and
conducting ethics training programs. Such ethics initiatives have increased quite steadily
since the 1970s.21 The Ethics Resource Center 2000 survey found that 79 percent of
respondents reported that their companies have a written set of ethical standards
(compared with 60 percent in 1994).

13
The wider American community also seems very interested in ethics and values these days.
An ethicist writes a column for the Sunday New York Times and appears regularly on
National Public Radio. Character education has also been growing in the public schools
with multiple public and private initiatives. So, while there is certainly a focus on the
negative—the ethical lapses—there also seems to be a need in our society to focus on the
positive. We want to celebrate ethical “heroes” in private and public life and we are anxious
to discuss and teach our children positive ethical values.

As we’ve seen, interest in ethics reflects the reality of life in all sectors of our society, and it
has continued to grow over the past 40 years. Of course, ethical lapses are a part of human
behavior that’s here to stay. That’s one reason why we wrote this book. If the ethics
“problem” isn’t just a fad, then managers have an ongoing concern that they must
anticipate, understand, and manage. We also believe that the interest in ethics as a positive
force hasn’t been adequately tapped in the business world. Although they do not get as
much media attention, there are many positive examples of business people doing good
and doing well [3].

Can Business Ethics Be Taught?


Despite growing interest in ethics and ethics training, dissenters from both the business
and academic communities have raised questions about whether ethics can or should be
taught. Felix Rohatyn, a noted New York investment banker, said that ethics can’t be taught
past the age of 10. Lester Thurow, former dean of the Massachusetts Institute of
Technology’s Sloan School of Management, echoed this view when he stated that business
schools can do little if students haven’t already learned ethics from their families, clergy,
previous schools, or employers.

In the wake of the insider trading scandals of the 1980s, Thurow and a chief operating
officer of a large Wall Street investment firm claimed on a television news program that
educational institutions or business organizations could have done little about the
unethical individuals who participated in insider trading. These people just hadn’t been
raised with the proper values.

If they’re correct, ethics education is a waste of time and money. “Bad apples” are just
tainted people who can’t be trained or rehabilitated. Therefore, resources should be
devoted to identifying and discarding bad apples, not educating them. We disagree, and the
evidence is on our side [3].

14
The Ethical Decision Making Process:

Characteristics of Individuals

• Individual Differences
• Cognitive Biases

Individual Ethical Decision Making & Behavior

Moral Moral Ethical


awareness judgment Behavior

Characteristics of Organizations

• Group & Organizational Pressures


• Organizational Culture

15
Principles of Admirable Business Ethics:
One of the most important attributes for small business success is the distinguishing
quality of practicing admirable business ethics. Business ethics, practiced throughout the
deepest layers of a company, become the heart and soul of the company's culture and can
mean the difference between success and failure.

1. Be Trustful: Recognize customers want to do business with a company they can


trust; when trust is at the core of a company, it's easy to recognize. Trust defined, is
assured reliance on the character, ability, strength, and truth of a business.

2. Keep An Open Mind: For continuous improvement of a company, the leader of an


organization must be open to new ideas. Ask for opinions and feedback from both
customers and team members and your company will continue to grow.

3. Meet Obligations: Regardless of the circumstances, do everything in your power to


gain the trust of past customers and clients, particularly if something has gone awry.
Reclaim any lost business by honouring all commitments and obligations.

4. Have Clear Documents: Re-evaluate all print materials including small business
advertising, brochures, and other business documents making sure they are clear,
precise and professional. Most important, make sure they do not misrepresent or
misinterpret.

5. Become Community Involved: Remain involved in community-related issues and


activities, thereby demonstrating that your business is a responsible community
contributor. In other words, stay involved.

6. Maintain Accounting Control: Take a hands-on approach to accounting and record


keeping, not only as a means of gaining a better feel for the progress of your
company, but as a resource for any "questionable” activities. Gaining control of
accounting and record keeping allows you to end any dubious activities promptly.

7. Be Respectful: Treat others with the utmost of respect. Regardless of differences,


positions, titles, ages, or other types of distinctions, always treat others with
professional respect and courtesy.

Recognizing the significance of business ethics as a tool for achieving your desired outcome
is only the beginning. A small business that instils a deep-seated theme of business ethics
within its strategies and policies will be evident among customers. Its overall influence will
lead to a profitable, successful company. By recognizing the value of practicing admirable
business ethics, and following each of the 7 principles, your success will not be far off [6].

16
ISSUES

A. Overview of Issues in Business Ethics:


1. 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
could be seen as unethical for a company to consider the interests and rights of
anyone else.
Corporate social responsibility or CSR: an umbrella term under which the ethical
rights and duties existing between companies and society is debated.
Issues regarding the moral rights and duties between a company and its
shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.
Ethical issues concerning relations between different companies: e.g. hostile take-
overs, industrial espionage.
Leadership issues: corporate governance.
Political contributions made by corporations.
Law reform, such as the ethical debate over introducing a crime of corporate
manslaughter.
The misuse of corporate ethics policies as marketing instruments [16].

2. Professional Ethics:
Professional ethics covers the myriad practical ethical problems and phenomena
which arise out of specific functional areas of companies or in relation to recognized
business professions [16].
a. Ethics of accounting information:
Creative accounting, earnings management, misleading financial analysis.
Insider trading, securities fraud, bucket shops, forex scams: concerns
(criminal) manipulation of the financial markets.
Executive compensation: concerns excessive payments made to corporate
CEO's and top management.
Bribery, kickbacks, facilitation payments: while these may be in the (short-
term) interests of the company and its shareholders, these practices may be
anti-competitive or offend against the values of society [16].

17
b. Ethics of Human Resource Management:
The ethics of human resource management (HRM) covers those ethical issues
arising around the employer-employee relationship, such as the rights and
duties owed between employer and employee.

Discrimination issues include discrimination on the bases of age (ageism),


gender, race, religion, disabilities, weight and attractiveness.

Issues surrounding the representation of employees and the democratization


of the workplace: union busting, strike breaking.

Issues affecting the privacy of the employee: workplace surveillance, drug


testing. See also: privacy.

Issues affecting the privacy of the employer: whistle-blowing.

Issues relating to the fairness of the employment contract and the balance of
power between employer and employee: slavery,[4] indentured servitude,
employment law.

Occupational safety and health [16].

c. Ethics of Sales and Marketing:


Marketing which goes beyond the mere provision of information about (and
access to) a product may seek to manipulate our values and behaviour. To
some extent society regards this as acceptable, but where is the ethical line to
be drawn? Marketing ethics overlaps strongly with media ethics, because
marketing makes heavy use of media. However, media ethics is a much larger
topic and extends outside business ethics.

Pricing: price fixing, price discrimination, price skimming.

Anti-competitive practices: these include but go beyond pricing tactics to


cover issues such as manipulation of loyalty and supply chains. See: anti-
competitive practices, antitrust law.

Specific marketing strategies: green wash, bait and switch, shill, viral
marketing, spam (electronic), pyramid scheme, planned obsolescence.

Content of advertisements: attack ads, subliminal messages, sex in


advertising, products regarded as immoral or harmful

Children and marketing: marketing in schools.

Black markets, grey markets [16].

18
d. Ethics of Production:
This area of business ethics deals with the duties of a company to ensure that
products and production 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 production process and it is difficult to define a
degree of permissibility, or the degree of permissibility may depend on the
changing state of preventative technologies or changing social perceptions of
acceptable risk.
Defective, addictive and inherently dangerous products and services (e.g.
tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, bungee
jumping).
Ethical relations between the company and the environment: pollution,
environmental ethics, carbon emissions trading
Ethical problems arising out of new technologies: genetically modified food,
mobile phone radiation and health.
Product testing ethics: animal rights and animal testing, use of economically
disadvantaged groups (such as students) as test objects [16].

e. Ethics of Intellectual Property, Knowledge and Skills:


Knowledge and skills are valuable but not easily "ownable" as objects. Nor is
it obvious that 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
potential? As a result, attempts to assert ownership and ethical disputes over
ownership arise.
Patent infringement, copyright infringement, trademark infringement.

Misuse of the intellectual property systems to stifle competition: patent


misuse, copyright misuse, patent troll, submarine patent.
Even the notion of intellectual property itself has been criticised on ethical
grounds: see intellectual property.
Employee raiding: the practice of attracting key employees away from a
competitor to take unfair advantage of the knowledge or skills they may
possess.
The practice of employing all the most talented people in a specific field,
regardless of need, in order to prevent any competitors employing them.
Bio prospecting (ethical) and bio piracy (unethical).
Business intelligence and industrial espionage [16].

19
3. International Business Ethics And Ethics Of Economic Systems:

The issues here are grouped together because they involve a much wider, global
view on business ethical matters [16].

a. International business ethics:

While business ethics emerged as a field in the 1970s, international business


ethics did not emerge until the late 1990s, looking back on the international
developments of that decade. Many new practical issues arose out of the
international context of business. Theoretical issues such as cultural
relativity 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 international commercial


behaviour.

Comparison of business ethical traditions in different countries.

Comparison of business ethical traditions from various religious


perspectives.

Ethical issues arising out of international business transactions; e.g. bio


prospecting and bio piracy in the pharmaceutical industry; the fair trade
movement; transfer pricing.

Issues such as globalization and cultural imperialism.

Varying global standards - e.g. the use of child labour.

The way in which multinationals take advantage of international differences,


such as outsourcing production (e.g. clothes) and services (e.g. call centres)
to low-wage countries.

The permissibility of international commerce with pariah states [16].

b. Ethics of economic systems:

This vaguely defined area, perhaps not part of but only related to business
ethics, is where business ethicists venture into the fields of political economy
and political philosophy, focusing on the rights and wrongs of various
systems for the distribution of economic benefits. The work of John Rawls
and Robert Nozick are both notable contributors [16].

20
B. Theoretical Issues in Business Ethics:

1. Conflicting interests:

Business ethics can be examined from various perspectives, including the


perspective of the employee, the commercial enterprise, and society as a whole.
Very often, situations arise in which there is conflict between one and more of the
parties, such that serving the interest of one party is a detriment to the other(s). For
example, a particular outcome might be good for the employee, whereas, it would be
bad for the company, society, or vice versa. Some ethicists (e.g., Henry Sidgwick) see
the principal role of ethics as the harmonization and reconciliation of conflicting
interests [16].

2. Ethical Issues and Approaches:

Philosophers and others disagree about the purpose of a business ethic in society.
For example, some suggest that the principal purpose of a business is to maximize
returns to its owners, or in the case of a publicly-traded concern, its shareholders.
Thus, under this view, only those activities that increase profitability and
shareholder value should be encouraged, because any others function as a tax on
profits. Some believe that the only companies that are likely to survive in a
competitive marketplace are those that place profit maximization above everything
else. However, some point out that self-interest would still require a business to
obey the law and adhere to basic moral rules, because the consequences of failing to
do so could be very costly in fines, loss of licensure, or company reputation. The
noted economist Milton Friedman was a leading proponent of this view.

Other theorists contend that a business has moral duties that extend well beyond
serving the interests of its owners or stockholders, and that these duties consist of
more than simply obeying the law. They believe a business has moral
responsibilities to so-called stakeholders, people who have an interest in the
conduct of the business, which might include employees, customers, vendors, the
local community, or even society as a whole. They would say that stakeholders have
certain rights with regard to how the business operates, and some would suggest
that this includes even rights of governance.

Some theorists have adapted social contract theory to business, whereby companies
become quasi-democratic associations, and employees and other stakeholders are
given voice over a company's operations. This approach has become especially
popular subsequent to the revival of contract theory in political philosophy, which is
largely due to John Rawls' A Theory of Justice, and the advent of the consensus-
oriented approach to solving business problems, an aspect of the "quality
movement" that emerged in the 1980s. Professors Thomas Donaldson and Thomas
Dunfee proposed a version of contract theory for business, which they call
Integrative Social Contracts Theory. They posit that conflicting interests are best

21
resolved by formulating a "fair agreement" between the parties, using a combination
of i) macro-principles that all rational people would agree upon as universal
principles, and, ii) micro-principles formulated by actual agreements among the
interested parties. Critics say the proponents of contract theories miss a central
point, namely, that a business is someone's property and not a mini-state or a means
of distributing social justice.

Ethical issues can arise when companies must comply with multiple and sometimes
conflicting legal or cultural standards, as in the case of multinational companies that
operate in countries with varying practices. The question arises, for example, ought
a company to obey the laws of its home country, or should it follow the less
stringent laws of the developing country in which it does business? To illustrate,
United States law forbids companies from paying bribes either domestically or
overseas; however, in other parts of the world, bribery is a customary, accepted way
of doing business. Similar problems can occur with regard to child labour, employee
safety, work hours, wages, discrimination, and environmental protection laws.

It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical
practices drive out good ethical practices. It is claimed that in a competitive business
environment, those companies that survive are the ones that recognize that their
only role is to maximize profits [16].

22
C. Business Ethics in the Field:
1. Corporate Ethics Policies:
As part of more comprehensive compliance and ethics programs, many companies
have formulated internal policies pertaining to the ethical conduct of employees.
These policies can be simple exhortations in broad, highly-generalized language
(typically called a corporate ethics statement), or they can be more detailed policies,
containing specific behavioural requirements (typically called corporate ethics
codes). They are generally meant to identify the company's expectations of workers
and to offer guidance on handling some of the more common ethical problems that
might arise in the course of doing business. It is hoped that having such a policy will
lead to greater ethical awareness, consistency in application, and the avoidance of
ethical disasters.
An increasing number of companies also requires employees to attend seminars
regarding business conduct, which often include discussion of the company's
policies, specific case studies, and legal requirements. Some companies even require
their employees to sign agreements stating that they will abide by the company's
rules of conduct.
Many companies are assessing the environmental factors that can lead employees to
engage in unethical conduct.
Not everyone supports corporate policies that govern ethical conduct. Some claim
that ethical problems are better dealt with by depending upon employees to use
their own judgment.
Others believe that corporate ethics policies are primarily rooted in utilitarian
concerns, and that they are mainly to limit the company's legal liability, or to curry
public favour by giving the appearance of being a good corporate citizen. Ideally, the
company will avoid a lawsuit because its employees will follow the rules. Should a
lawsuit occur, the company can claim that the problem would not have arisen if the
employee had only followed the code properly?
Sometimes there is disconnection between the company's code of ethics and the
company's actual practices. Thus, whether or not such conduct is explicitly
sanctioned by management, at worst, this makes the policy duplicitous, and, at best,
it is merely a marketing tool.
To be successful, most ethicists would suggest that an ethics policy should be:
• Given the unequivocal support of top management, by both word and
example.
• Explained in writing and orally, with periodic reinforcement.
• Doable....something employees can both understand and perform.
• Monitored by top management, with routine inspections for compliance and
improvement.
• Backed up by clearly stated consequences in the case of disobedience.
• Remain neutral and non-sexist [16].
23
2. Ethics Officers:
Ethics officers (sometimes called "compliance" or "business conduct officers") have
been appointed formally by organizations since the mid-1980s. One of the catalysts
for the creation of this new role was a series of fraud, corruption and abuse scandals
that afflicted the U.S. defence industry at that time. This led to the creation of the
Defence Industry Initiative (DII), a pan-industry initiative to promote and ensure
ethical business practices. The DII set an early benchmark for ethics management in
corporations. In 1991, the Ethics & Compliance Officer Association (ECOA) --
originally the Ethics Officer Association (EOA)-- was founded at the Centre for
Business Ethics(at Bentley College, Waltham, MA) as a professional association for
those responsible for managing organizations' efforts to achieve ethical best
practices. The membership grew rapidly (the ECOA now has over 1,100 members)
and was soon established as an independent organization.
Another critical factor in the decisions of companies to appoint ethics/compliance
officers was the passing of the Federal Sentencing Guidelines for Organizations in
1991, which set standards that organizations (large or small, commercial and non-
commercial) had to follow to obtain a reduction in sentence if they should be
convicted of a federal offense. Although intended to assist judges with sentencing,
the influence in helping to establish best practices has been far-reaching.
In the wake of numerous corporate scandals between 2001-04 (affecting large
corporations like Enron, WorldCom and Tyco), even small and medium-sized
companies have begun to appoint ethics officers. They often report to the Chief
Executive Officer and are responsible for assessing the ethical implications of the
company's activities, making recommendations regarding the company's ethical
policies, and disseminating information to employees. They are particularly
interested in uncovering or preventing unethical and illegal actions. This trend is
partly due to the Sarbanes-Oxley Act in the United States, which was enacted in
reaction to the above scandals. A related trend is the introduction of risk assessment
officers that monitor how shareholders' investments might be affected by the
company's decisions.
The effectiveness of ethics officers in the marketplace is not clear. If the
appointment is made primarily as a reaction to legislative requirements, one might
expect the efficacy to be minimal, at least, over the short term. In part, this is
because ethical business practices result from a corporate culture that consistently
places value on ethical behaviour, a culture and climate that usually emanates from
the top of the organization. The mere establishment of a position to oversee ethics
will most likely be insufficient to inculcate ethical behaviour: a more systemic
programme with consistent support from general management will be necessary.
The foundation for ethical behaviour goes well beyond corporate culture and the
policies of any given company, for it also depends greatly upon an individual's early
moral training, the other institutions that affect an individual, the competitive
business environment the company is in and, indeed, society as a whole [16].

24
D. Religious Views on Business Ethics:
The historical and global importance of religious views on business ethics is
sometimes underestimated in standard introductions to business ethics. Particularly in
Asia and the Middle East, religious and cultural perspectives have a strong influence on
the conduct of business and the creation of business values.

Examples include:
• Islamic banking, associated with the avoidance of charging interest on loans.
• Traditional Confucian disapproval of the profit-seeking motive.
• Quaker testimony on fair dealing [16].

25
CASE STUDIES

OF

COMPANIES

26
Case Study No.1

The McDonald’s ‘Beef Fries’ Controversy

Abstract:

The case examines the controversy involving the global fast food major McDonald's, which
was accused of wrongfully selling its French fries as 100% vegetarian products when they
contained beef flavouring.

It explores in detail the events that led to the controversy and the company's reactions to
the allegations.

The case also discusses the eventual settlement of the lawsuit with the company paying
damages to vegetarian groups and accepting that it had gone wrong [10].

Issues:

Corporate owning up responsibility for a mistake and making amends to those affected,
Legal, ethical, social and moral implications of a decision taken by a company [10].

A Controversy Erupts:

In May 2001, a class action lawsuit1 was filed against the world's largest fast-food chain
McDonald's, in Seattle, US. The lawsuit alleged that the company had, for over a decade,
duped vegetarian customers into eating French fries that contained beef extracts.

The lawsuit followed a spate of media reports detailing how the French fries served at
McDonald's were falsely promoted as being '100% vegetarian.' Although McDonald's
initially declined to comment on the issue, the company issued a 'conditional apology,'
admitting to using beef flavouring in the fries. The furore over the matter seemed to be
settling down, when to McDonald's horror, some of its restaurants in India were
vandalized. Activists of Hindu fundamentalist groups - the Shiv Sena, the Vishwa Hindu
Parishad (VHP) and the Bajrang Dal, staged a demonstration in front of the McDonald's
head office in Delhi protesting the alleged use of beef flavouring. They submitted a
memorandum to the Prime Minister, demanding the closure of all McDonald's outlets in the
country.

Activists also staged protests in front of McDonald's restaurants in south Mumbai and
Thane. Mobs ransacked the outlet at Thane, broke the glass panes and smeared the
McDonald's mascot Ronald with cow dung [10].

27
About 30 people were arrested and later let off on bail. Company officials estimated the
loss to the outlet at Rs 2 million. Officials at McDonald's India quickly announced that the
vegetarian products served in India did not have any non-vegetarian content.

However, despite this reassurance, the anti-McDonald's wave refused to die down.
Meanwhile, more cases were being filed against McDonald's - this time in California, US and
Canada. It seemed certain that the company would have to shell out millions of dollars to
settle the class action lawsuit representing the 1 million US based Hindus and 15 million
other vegetarians [10].

Background Note:

McDonald's was started as a drive-in restaurant by two brothers, Richard and Maurice
McDonald in California, US in the year 1937. The business, which was generating $ 200,000
per annum in the 1940s, got a further boost with the emergence of a revolutionary new
concept called 'self-service.' The brothers designed their kitchen for mass production with
assembly line procedures. Prices were kept low.

Speed, service and cleanliness became the critical success factors of the business. By mid-
1950s, the restaurant's revenues reached $ 350,000. As word of their success spread,
franchisees started showing interest. However, the franchising system failed because the
McDonald brothers observed very transparent business practices. As a consequence, they
encouraged imitators who copied their business practices and emerged as competitors.
The franchisees also did not maintain the same standards for cleanliness, customer service
and product uniformity. At this point, Ray Kroc (Kroc), an exclusive distributor for
milkshake machines expressed interest in the McDonald brothers' business. Kroc finalized
a deal with the McDonald brothers in 1954.

He established a franchising company, the McDonald System Inc. and appointed


franchisees. In 1961, he bought out the McDonald brothers' share for $2.7 million, and
changed the name of the company to McDonald's Corporation. In 1965, McDonald's went
public.

By the end of the 1960s, Kroc had established over 400 franchising outlets. McDonald's
began leasing/buying potential store sites and then subleased them to franchisees initially
at a 20% markup and later at a 40% markup. To execute this, Kroc set up the Franchise
Realty Corporation. The real estate operations improved McDonald's profitability. By the
end of the 1970s, McDonald's had over 5000 restaurants with sales exceeding $3 billion.
However, in the early 1990s, McDonald's was facing problems due to changing customer
preferences and increasing competition. Customers were becoming increasingly health
conscious and they wanted to avoid red meat and fried food. They also preferred to eat at
other fast food joints that offered discounts [10].

28
The Troubled History:

McDonald's has had a long history of lawsuits being filed against it. It had been frequently
accused of resorting to unfair and unethical business practices - October 16th is even
observed as a 'World anti-McDonald's day.' In the late 1990s, the company had to settle
over 700 incidents of scalding coffee burns.

Reportedly, McDonald's kept the coffee at 185° - approximately 20° hotter than the
standard temperature at other restaurants - which could cause third degree burns in just 2-
7 seconds. An 81-year old woman suffered third degree burns on her lower body that
required skin grafts and hospitalisation for a week [10].

The Beef Fries Controversy:

With an overwhelming majority of the people in the West being non-vegetarian, products
often contain hidden animal-based ingredients. Incidents of vegetarians finding non-
vegetarian food items in their food abound throughout the world.

Whether a person has chosen to be a vegetarian for religious, health, ethical or


philosophical reasons, it is not easy to get vegetarian food in public restaurants.

According to the manager of a Thai food cafe in the US, "We have a lot of customers already.
We don't need to have any vegetarian food."

Commenting on this dilemma, a US based Hindu vegetarian said, "We can't blame anybody.
You have to find out for yourself. If you have any doubts, try to avoid it. Otherwise, you just
have to close your eyes and try to eat.” [10]

The Aftermath:

The courtroom battle had entered the 11th month when McDonald's announced that it
would issue a new apology and pay $ 10 million to vegetarians and religious groups in a
proposed settlement of all the lawsuits in March 2002 [10].

29
Case Study No.2
Coca-Cola & Pepsi Harm India's Ecology

Abstract:

The case discusses the controversy surrounding the Indian subsidiaries of multinational
cola majors Coca-Cola and Pepsi in 2002-03. The two companies had caused severe
ecological damage in the state of Himachal Pradesh by painting their advertisements on
rocks. The case describes the ecological importance of these rocks and the nature and
extent of environmental damage caused by the companies. Besides giving a detailed
account of the legal proceedings initiated against them, the case also discusses the efforts
taken by the companies to repair the damage. The case also gives information on the
various other controversial activities of Coca-Cola and Pepsi in India [11].

Issues:

Rationale behind seasoned companies exploiting natural resources for commercial gains
from the business ethics perspective [11].

A Novel Controversy!

On August 10, 2002, Coca-Cola India (Coke) and Pepsi Foods Limited (Pepsi), the Indian
subsidiaries of multinational cola majors Coca-Cola and PepsiCo, found themselves under
attack. In an article published by leading Indian newspaper, Indian Express (titled 'Rape of
the Rock'), the two companies were accused of destroying the ecological balance of the
Himalayan state of Himachal Pradesh (HP).

Coke and Pepsi had allegedly defaced rocks that were over 45 million years old along the
Manali-Rohtang road in the state. These companies had painted their advertisements on
the rocks, thus harming the ecosystem and disfiguring the beauty of the mountainous
region. While many other companies were also found to have damaged the rocks in this
way, Coke and Pepsi were the most high profile organizations involved in this activity as a
result they attracted the maximum criticism. This news report (and many other related
reports that followed) generated wide-spread outrage against the companies and their
illegal use of government-land for advertising products. Many environmentalists referred
to this act as 'commercial vandalism.'

One such protestor, P. K. Manohar, a Supreme Court (SC) advocate and member of the Legal
Action for Wildlife and Environment (LAWE), said, "This is not a free-for-all, and painting
old, geologically valuable rocks this way cannot be allowed."

30
Environmentalists argued that the damage done by the companies to the fragile ecosystem
was irreparable. They pointed out that though the damage might seem to be repairable on
paper, in reality it was virtually impossible. Commenting on this, Professor Ashok Sahni
(Sahni) of Punjab University said, "It becomes a very expensive proposition trying to wash
off the paint with gallons and gallons of thinner and then too completely cleaning it and
restoring the original surface is impossible." Worldwide, companies following good
corporate governance policies do not exploit natural formations for commercial purposes.
Analysts said that by harming the ecology of the Manali-Rohtang road area, Coke and Pepsi
had shown a gross negligence of their duties as socially responsible corporate citizens.

Both the companies, however, refused to acknowledge responsibility for the damage done.
Instead, they tried to pass the buck to their local partners (distributors, advertisers etc.).
While Pepsi stated that it had little operational control over the affected Manali-Rohtang
region, Coke argued that it was an 'extremely environment conscious' company and that
the incident was a local mistake. As media coverage of this issue intensified, Coke and Pepsi
began fearing the damage the controversy could cause to their image and popularity [11].

Damaging the Environment:

The matter attracted the attention of the judiciary when a three judge bench headed by the
Chief Justice of India B.N. Kripal pointed out the incident while hearing a public interest
litigation regarding the conservation of forests in the country. The Supreme Court (SC)
expressed concern over such acts by companies and said that they should be "made to pay"
for the damage they did to the ecology in order to promote their business. Disturbed over
the damage done to rocks in forests, Justice Kripal said that it would be proper to take up
the matter in court. A person named Harish Salve was appointed amicus curiae (friend of
the court) by the SC to investigate the matter and take the necessary legal action.

Salve filed a case against the companies for commercial vandalism. The SC stated that the
painting of the rocks was a non-forest activity and could not be carried out without the
prior permission of the concerned authorities. Therefore, it asked the companies to explain
why they painted the rocks.

After this, Salve, upon the court's direction, approached the National Environment
Engineering Research Institute (NEERI5) to inspect the entire Rohtang-Manali road for
advertisements painted on the rocks. Three days after the first news report was published,
the court issued notices to the cola companies, charging them of violating the Forest
Conservation Act 1980. A detailed report on the damage done by the companies (submitted
by Salve) stated that "from the village Kothi to Rallah waterfalls to Beas Kund, a stretch of
about 56 kilometers, advertisements have been plastered on the entire mountainside."6
Environmentalists pointed out that these mountainous facades were home to huge
ecosystems that had developed over millions of years [11].

31
The Legal Tangle - Proceedings & Arguments:

Over the decades, many companies in India had painted their advertisements on rocks but
nobody seemed to have been bothered by this practice till the Indian Express reported the
damage to the ecosystem.

Once the controversy erupted, many people suddenly found that they had something to say
about the issue. Analysts felt that companies opted for this mode of advertisement since it
was very cost-effective - they only had to invest in the paint and labour.

Since they did not seek permission from the government, to whom the land belonged, they
did not have to make any payment in this regard.

The advertisements ranged in size from 10 square feet (sq.ft.) to about 100 sq.ft. Most of
the Coke and Pepsi advertisements were between 10 to 20 sq.ft. each, with many smaller
ones (painted by other companies) in clusters along the road and the river bed [11].

Implications for the Companies:

Analysts felt that the court's ruling sent a clear and firm message to corporate who had
been abusing natural creations for commercial purposes.

This case was regarded by many corporate, lawyers and environmentalists as one of the
fastest to be resolved - the court took a little more than a month to convict those who were
found guilty and order restoration work. Applauding the court's decision, Professor C K
Varshney, School of Environmental Sciences, Jawaharlal Nehru University, New Delhi, said,
"This is really a decision in the right direction, and perhaps ought to have been taken long
back, for it really sets the rigor India needs in dealing with environmental issues. Such
defacing of rocks is not something restricted to the Himalayas in India. I have seen this
across the country. In supporting the protection of nature in its original form, in whatever
way possible, the courts have set a great precedent" [11].

32
Case Study No.3
Google's Problems in China

Abstract:
Google, the leading Internet search engine based in the US, started providing its services in
China in the year 2000. Though the company became one of the leading search engines in
the Chinese market, it started losing its market share rapidly to the local players like Baidu.
In order to remain competitive, Google decided to launch a Chinese website www.google.cn
and agreed to censor the content, in January 2006. Though Google was criticized by the
industry experts for its decision to censor the content, the company defended its stance by
claiming that providing censored results was better than not providing any details at all.

However, soon Google started facing problems, and its website was blocked several times
for its quality of censorship, spreading obscene content etc [12].

The company remained second to Baidu in the local search engine market. Google's other
services like YouTube, Blogger, and Picasa were also blocked. By the end of 2009, Google
realized that its website was being attacked and the attacks originated in China. Google also
found that Gmail accounts of some of the advocates of human rights in China were broken
into. In January 2010, Google reported that its corporate infrastructure had been subjected
to a targeted attack from China and announced that it would not censor its results anymore
and was ready to shut down its Chinese operations, if required. The case discusses in detail,
Google's operations in China and the events leading to its decision to stop censoring the
search results. It also examines the impact of this decision on Google's operations in China
[12].

Issues:
Understand the business and regulatory problems faced by multinational companies in
China, examine the reasons for media censorship in China and the methods used by the
Chinese government to filter searches, evaluate the growth opportunities of the Internet
businesses in China, and analyze Google's operations in China and the reasons that led to
the loss in its market share [12].

33
Google to Exit China:
On January 12, 2010, David Drummond (Drummond), Senior Vice President, Corporate
Development and Chief Legal Officer of the US-based Google Inc. (Google), said in a post on
the company's official blog, "Like many other well-known organizations, we face cyber
attacks of varying degrees on a regular basis. In mid-December 2009, we detected a highly
sophisticated and targeted attack on our corporate infrastructure originating from China
that resulted in the theft of intellectual property from Google.
However, it soon became clear that what at first appeared to be solely a security incident -
albeit a significant one - was something quite different."

On the same day, Google announced its investigations into the attacks which showed that at
least twenty more large companies in different fields like finance, technology, media,
chemicals, etc. had come under similar attacks. According to Google, the main aim of
attacking its website was to access Gmail accounts of some advocates of human rights in
China located in Europe, the US, and China. Several Gmail accounts were accessed by third
parties originating from China through phishing and malware.

The company also mentioned that the attackers had failed to achieve their objectives. It
said that the attackers were able to see only the subject lines and dates of e-mails but not
the content [12].

Background Note:

Google was founded by Larry Page and Sergey Brin (Brin), students at Stanford University,
California, US. Its first version was released on the Website of Stanford University in August
1996. Google opened its first office in Menlo Park, California, in September 1998 [12].

Problems Persist:

After Google agreed to censor its search, its blogging site, www.blogger.com, also became
accessible in China. The site had been unavailable since 2002, when Google and other
websites were blocked in China [12].

Google Takes a Final Call:

In late 2009, Google discovered that its site was being attacked. The company approached
Rafal Rohozinski and Ron Deibert, cyber security experts who had published a report on
'Tracking GhostNet' in 2009, about the existence of a malware-based cyber espionage
network, based on their research across the world between June 2008 and March 2009 [12].

34
The Aftermath:

Some industry experts opined that Google was planning to exit the country as it was unable
to compete with Baidu. It had found a logical reason to exit the country by reporting that its
site was being attacked [12].

The Road Ahead:

Industry analysts opined that if Google decided to exit China, it would be the first major
foreign company to leave the country citing freedom of speech as the main reason. The exit
of Google would benefit both Baidu and Tencent, which operated China's most popular
instant messaging service [12].

35
CONCLUSION

It’s critically important that we all understand ethics because good ethics represents the
very essence of a civilized society. Ethics is the bedrock on which all of our relationships
are built; it’s about how we relate to our employers, our employees, our co-workers, our
customers, our communities, our suppliers, and one another. Ethics is not about the
connection we have to other beings—we are all connected—rather, it’s about the quality of
that connection. That’s the real bottom line [3].

36
REFERENCES

[1]http://en.wikipedia.org/wiki/Business_ethics
[2]http://en.wikipedia.org/wiki/Ethics
[3]http://media.wiley.com/product_data/excerpt/45/04712305/0471230545.pdf
[4]http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_I/Pdfs/2_1.pdf
[5]http://plato.stanford.edu/entries/ethics-business/
[6]http://sbinformation.about.com/od/bestpractices/a/businessethics.htm
[7]http://www.anonymousemployee.com/csssite/sidelinks/unethical_behavior.php
[8]http://www.businessethics.ca/definitions/business-ethics.html
[9]http://www.essortment.com/all/ethicsbusiness_pqn.htm
[10]http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG017.htm
[11]http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG023.htm
[12]http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR374.ht
m
[13]http://www.iep.utm.edu/ethics/
[14]http://www.importanceofphilosophy.com/Ethics_Main.html
[15]http://www.oup.com/uk/orc/bin/9780199255153/ch01.pdf
[16]http://www.slideshare.net/siddharth4mba/ethics-presentation-969590

37