Online Final Examination Fall 2020 (SMCHS)

Student ID: __15228________ Date: 04/Jan/2021

Course Title: Business Ethics Course Code: SSC 251

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Program: B. Com Teacher: Sylvia Kaiser

Semester: B. Com 4 (A) Marks: 40

Instructions:

 Type your Student ID in the box given above.

 Read the given questions carefully. All the 5 questions are compulsory.
 Do your assessment in font style Times New Roman in font size 12. For headings,
use font size 14 and make the headings bold. JUSTIFY each of your answers.
 After uploading the assessment, don’t forget to use the TURN IN option.

Question 1 Case Study

GlaxoSmithKline is one of the leading pharmaceutical companies in the world. They are
headquartered in London but they sell their products all over the world. In 2012, GSK agreed
to plead guilty to three criminal cases. Two cases were of introducing misbranded drugs,
Paxil and Wellbutrin, and one case of failing to report safety data about the drug Avandia to
the Food and Drug Administration. GSK paid a settlement of 3.5 billion dollars to support the
criminal and civil charges. GSK had attempted to influence doctors by bribing the doctors so
in turn the doctors would use their medications. They also claimed that GSK had aimed at
promoting the use of the drug Paxil in children by helping to publish a medical journal article
that misreported data from a clinical trial. GSK was falsely advertising many of their
products by leaving out or adding in false information. One of their products, Avandia
(diabetes medication), was linked to an increase in heart attacks and congestive heart failure;
they had illegally marketed Avandia by paying doctors, and manipulating medical research to
promote the drug. Also Paxil (antidepressant) was not approved for patients under 18, but
GSK illegally marketed the drug for use in children and teens. GSK also gave lavish and
expensive vacations to convince medical professionals to prescribe the antidepressant
Wellbutrin for weight loss, even though the drug is FDA approved only to treat depression.
The rules regulating pharmaceutical companies are very clear – they cannot market a drug for
a non-approved use. Doing so breaks the law. GSK broke the law. GSK had committed
multiple acts of unethical behavior. Another one is when it made a study on 24, 000 children,
out of which 14 died. Reasons given were; the firm failed to get proper consent from the
children’s parents before injecting Synflorix, one of its bestselling vaccines, kept inadequate
records of the children’s ages, medical histories and relied on permission from under-age
parents or illiterate grandparents. 

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The stakeholders that were involved with this case were consumers, upper management,
doctors who were subscribing the medication, and stockholders. 

Thus, in contrast to the ethical theories, Utilitarianism, Kantianism, and Virtue Theory.
GlaxoSmithKline violated all of the ethical theories because of their illegal and potentially
life threatening medicine they produced. 

Answer the following questions:

a. GSK has performed several unethical practices. In the light of the above case,
highlight the unethical practices in the marketing areas of
i. Product Management iii. Personal Selling
ii. Advertising iv. Research (8 marks)
Answer 1(a)
GSK was focused on creating as much profits as possible they did not remain
within the legal systems. They were selling their products illegally and this
resulted in the 3.5 billion dollar settlement. They knew of these actions they were
taking and new that they were illegal but they still took park in these activities.
GSK violated this theory due to the fact that they ignored all know regulations in
their production and marketing of their products. Utilitarianism believes that you
should try to maximize overall happiness within all stakeholders. in the case of
GSK, they were selling their medications to millions of people, but they had
illegally marketed some of their products and also withheld crucial information
about Avandia which was linked to an increase in heart attacks. This violated
utilitarianism because in doing so they did not raise overall happiness they were
only concerned with the happiness of the company which was about making
profits. All of their customer’s happiness was reduced because they were giving
them potentially life threatening medication and also the consumer was buying
their medication for conditions it was never designed to treat. GSK clearly
violated this theory because they reduced the overall happiness for its stakeholders
from its actions.

(1) Product Management:

Ethical issues surrounding the management of products are central to marketing
because the marketing process generally begins with a product (broadly defined as
goods, services, or ideas).

(2) Advertising:
Pakistan Electronic Media Regulatory Authority
(Reporting name: PEMRA), is an independent and
Constitutionally established federal institution responsible
For regulating and issuing channel licenses for
Establishment of the mass-media culture, print and
Electronic media.

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 Motto improving the standards of Information, Education and Entertainment

(3) Personal selling:

There are number of ethical issues in personal selling. The
First one that comes to mind is the manipulation of potential
Customer, some salespeople are pushy and make
Unrealistic claims about product and give improbable
(Unbelievable, impossible) guarantee.
Likewise some sales people give gifts, money or favor in
Exchange of purchase.

(4) Research:
During research process it is the responsibility of the researcher to keep the
information secret (confidential) which he has collected from respondents. Misuse
of this information creates unethical issues in marketing.

b. List down the three ethical theories mentioned in the case. Explain any one of the
three theories and then give an example of an unethical practice for it from the above
case.
Answer 1(b)
In contrast to the ethical theories, Utilitarianism, Kantianism, and Virtue Theory.

Utilitarianism:
The first ethical system in normative ethics, utilitarianism, is often equated with the
concept of “the greatest good for the greatest number.” The idea is that ethical
decisions are made based on the consequences of the action, which is why it is also
sometimes called consequentialism. Interestingly, Curtin, Gallicano and Matthew
found that, when faced with ethical situations in public relations, “Millennials will use
utilitarian reasoning to avoid confrontation and achieve consensus.” The attraction of
this ethical perspective may lie in the fact that it appears to be a way to weigh out the
impact of behavior and determine the greatest good for the greatest number.

Example:
GlaxoSmithKline has acted in multiple unethically activities, they have taken
advantage of their customers and put their lives at risk because of their greed and
focus on profit. In the future GSK will hopefully avoid this illegal actions and realize
that being ethical can actually be more profitable because of the great image that goes
along with it. 
(4 marks)

Question 2

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 a. Define Information Technology and explain any three unethical uses of IT in
businesses.
Answer 2 (a)

INFORMATION TECNOLOGY:
Information technology is the study, design, development, implementation, support or
management of computer-based information systems particularly software applications and
computer hardware. IT workers help ensure that computers work well for people.
The study or use of systems (especially computers and telecommunications) for storing,
retrieving, and sending information.

Unethical uses of IT in business:

(1) Ransomware Attacks:

Thieves like to use the anonymity of the internet to attack businesses. By hacking into a
company's main server, cyber attackers can hold a business hostage. The hacker encrypts the
entire website, shutting the business down until the business owners pay the hackers a fee –
the ransom – in what is called a denial-of-service attack. This type of cyberattack can happen
to any business or organization anywhere in the world. Reducing susceptibility to this
unethical computer use requires constant updates to server security platforms including
protection from spyware, malware and viruses.

(2) Identity Theft:

Along with protecting a business against ransomware, businesses must protect consumer
information. Identity theft concerns consumers. Companies of all sizes are susceptible to data
breaches. Major companies from leading industries have been hacked with consumer
personal information stolen. Hackers obtain everything from names, dates of birth and Social
Security information to addresses and other contact information that is used to create phony
accounts. Not properly protecting private information is costly to businesses and can result in
legal fines and private lawsuits.

(3) Financial Theft:

Some hackers don't steal the information but instead hack systems to divert financial
information input away from the company to steal money. For example, a hacker might
redirect the donation system of a non-profit organization and have the money sent to an
offshore account controlled by the hacker. This unethical practice essentially tricks a website
buyer into thinking a website transaction is complete when, in fact, the business never gets
notice of the sale, and the money is lost offshore.

b. Give three differences between ethics and law and give an example of an action that is
ethical & illegal. (7 marks)
Answer 2b:
.
DIFFERNCE BETWEEN LAW AND ETHICS:
Law:
(1) The law refers to a systematic body of rules that governs the whole society and the actions
of its individual members.

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(2) Violation of law is not permissible which may result in punishment like imprisonment or
fine or both.

(3) Set of rules and regulations

Ethics:
(1) Ethics is a branch of moral philosophy that guides people about the basic human conduct.

(2) There is no punishment for violation of ethics.

(3) Set of guidelines

Example:
When a child is hungry and he stole a loaf of bread from a shop to feed?

This action is ethical because a child is hungry and he wants something to eat but this is
illegal because stealing is illegalized throughout the world.

Question 3:
a. Explain Price Fixing and Predatory Pricing with examples.
b. Explain what unethical marketing is taking place in the following images.

1. 2.

Answer 3(a)

Price fixing:
Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors
that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws
require that each company establish prices and other terms on its own, without agreeing with
a competitor. When consumers make choices about what products and services to buy, they
expect that the price has been determined freely on the basis of supply and demand, not by an
agreement among competitors. When competitors agree to restrict competition, the result is
often higher prices. Accordingly, price fixing is a major concern of government antitrust
enforcement.
For example:
A group of competing optometrists agreed not to participate in a vision care network unless
the network raised reimbursement rates for patients covered by its plan. The optometrists
refused to treat patients covered by the network plan, and, eventually, the company raised
reimbursement rates. The FTC said that the optometrists' agreement was illegal price fixing

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and that its leaders had organized an effort to make sure other optometrists knew about and
complied with the agreement.

Predatory pricing:
Predatory pricing is the practice of using below-cost pricing to undercut competitors and
establish an unfair market advantage.

Predatory pricing is a method in which a seller sets a price so low that other suppliers cannot
compete and are forced to exit the market. A company that does this will see initial losses,
but eventually, it benefits by driving competitors out of the market and raising its prices
again. This predatory pricing practice often results in the formation of monopolies controlling
market power for a lengthy period of time.

E.g. In the Darlington Bus War, Stagecoach Group offered free bus rides in order to put the
rival Darlington Corporation Transport out of business.
Amrat Cola against Pepsi or Coke.
Answer 3(b):
Image 1:
Bribe
This image tells us that is unethical marketing practice when one person taking bribe to
another person. A bribe is a sum of money or something valuable that one person offers or
gives to another in order to persuade him or her to do something. If one
person bribes another, they give them a bribe.
Image 2:
Unethical advertising:
This image is about the unethical advertising. Unethical advertising is the misrepresentation
of a product/service in some way or the use of subliminal messaging to fit a hidden agenda.
This form of advertising uses deceptive ways to manipulate or convince the consumer to buy
the product or service.

(6 marks)

Question 4
a. What are the reasons which will force an accountant to be unethical in his profession?

Answer 4(a)
Management Pressure:
The burden for public companies to succeed at high levels may place undue stress
and pressure on accountants creating balance sheets and financial statements.
Unethical accountants could easily alter company’s financial records and maneuver
numbers to paint false pictures of company successes.
This may lead to short-term prosperity, but altered financial records will ultimately
spell the downfall of companies when the National Accountability Bureau discovers
the fraud.

Greed in the business:

Greed in the business and finance world leads to shaving ethical boundaries and
stepping around safeguards in the name of making more money.

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 An excessive desire of the accountant to acquire or possess more than what
one needs or deserves, especially with respect to material wealth.
An accountant who keeps his eyes more on his own bank account than on his
company's balance sheet becomes a liability to the company and may cause real
accounting violations, resulting in sanctions from the NAB.

Fraud:
Fraud is an intentional deception, misappropriation of a company’s assets, or
manipulation of its financial data to advantage the perpetrator (person responsible
for).

b. Explain the Pyramid of Corporate Social Responsibilities (CSR). (7 marks)

Answer 4(b)

Pyramid of Corporate Social Responsibilities (CSR):

In general, businesses have a hierarchy of responsibilities to meet, ranging from the basic
making a profit to the benevolent benefiting society. Here are some examples:
Economic Responsibilities:
A business exists to make a profit for shareholders. If it fails to do so, it likely won’t be able
to pay its employees, taxes and other obligations. A corporate social responsibility program
(CSR program) cannot be implemented until a business is profitable.
Legal Responsibilities:
Following the law is the foundation of corporate responsibility. A company cannot benefit
society if it does not adhere to labor and tax laws or applicable industry regulations.
Ethical Responsibilities:
Once a company is profitable and meets its legal responsibilities, it can move up the ladder to
ethical responsibilities, which might include paying higher wages, offering employees better
benefits, avoiding trade with dishonest companies or providing jobs to those who would
otherwise have difficulty finding work.
Philanthropic Responsibilities:
As a company meets its economic, legal and ethical responsibilities, it can consider taking on
philanthropic responsibilities. Corporate philanthropy ranges in size and scope, and can
include everything from donating time to a local charity to building a children’s hospital.

Question 5: Four HRM responsibilities are given below:

i. Discrimination & Harassment iii. Diversity
ii. Privacy iv. Recruitment & Retention
You have to very briefly explain the responsibilities and then give one example of an HRM
unethical practice in each of the 4 areas. (8 marks)

Answer 5:

1. Discrimination and Harassment:

A framework of laws and regulations has been evolved to avoid the practices of treatment of
employees on the basis of their caste, sex, religion, disability, age etc. No organization can
openly practice any discriminatory policies, with regard to selection, training, development,
appraisal etc. A demanding ethical challenge arises when there is pressure on the HR

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manager to protect the firm or an individual at the expense of someone belonging to the
group which is being discriminated against.

2 Privacy:
HR is involved in most aspects of employee relations including hiring, firing,
compensation, benefits and leaves. Human resource management representatives have access
to extremely sensitive information. Keeping this information private is an ethical matter
facing HR. Human resources personnel have an obligation to maintain the confidentiality of
an employee's personal data. The private life of an employee which is not affecting his
professional life should be free from intrusive and unwarranted actions.

3 Diversity:
Workplace diversity includes the various qualities, characteristics and experiences that
distinguish one worker from another. These characteristics can be differences in race, gender,
age, social status or other traits, talents & skills that make an individual unique. Treating a
person differently because of these differences poses an ethical issue that faces human
resources. HR personnel implement policies that promote diversity in the workplace and
welcome the differences of the entire workforce.

4 Recruitment & Retention:

While recruitment and retention may seem like a given for HR management systems, it is
the anchor of all HR's policies and systems. Finding qualified workers, keeping them engaged
with the company, training them to effectively do their jobs and providing incentives for
further education, benefits and compensation are all drivers to organizational success and
should be constantly on the minds of HR managers.

Example:
Unethical is an action that falls outside of what is considered morally right or proper for a
person, a profession or an industry. Individuals can behave unethically, as can businesses,
professionals and politicians. Using your position of power at work to sexually harass
someone and selling a house and not disclosing known defects to the buyers and selling a car
and lying about the vehicle's accident history.

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