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2 Why Ethics

3 Ethics in Business: Is it an Oxymoron?

• Ethics within Organization: Finance
• Toshiba
• An independent committee found that from a period of 2008 to 2014, the company had
reported fraudulent earnings of 151.8 billion yen ($1.2 billion) higher than its actual
estimate.
• the pressure to book immediate profits was tremendous, and lower level management could
not go against the will of the top management
• Unreasonable effort to enhance profit
• Lead to Profit padding
• Tarnished the brand image
• Affected trust
•
4 Product

5 Product

6 Product

7 Pricing
• Predatory Pricing: Taxi service providers
• Price Fixing: Two refrigerator companies coming together to fix the price of compressor
• Deceptive Pricing:
• China filing a case against Walmart and Carrefour for misleading the customers in the name
of sales, discounts and charging high original prices so that after discounts also they earn a
heavy margin.
• Price gouging: Odisha Super cyclone 1999
•
•
•

8 Place

9 Promotion
• Fairness skin cream
• https://www.youtube.com/watch?v=dGepwMtV7R8
• Demeaning references to races, age, sex, or religion
• Using fear tactics
• Using women as sex symbols
•

10 Responsibility of Business

11 Managing for Stakeholders

• Business is a set of relationships among groups which have a stake in the activities that make
up the business.
• Business is about how customers, suppliers, employees, financiers (stockholders, bondhold?
ers, banks, etc.), communities and managers interact and create value.

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• To understand a business is to know how these relationships work. And, the executive's or
entrepreneur's job is to manage and shape these relationships
• Building and leading a great company has always been about managing for stakeholders.

12 Managing for stakeholders

• Trade-off in the interest of shareholder alone:
• Is it just
• From a managerial perspective, if managers look for trade-offs among stakeholders, then
they will create trade-offs and they may never find the "sweet spot" that signifies the joint
interest of all key stakeholders.
• Three ideas
• No stakeholder stands alone in the process of value creation
• seeing the stakeholder’s interest as joint
• The primary responsibility of the executive is to create as much value as possible for
stakeholders.
• Stakeholders have names, faces and children

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14 Immoral Management
• Motives are Selfish and that he/she cares only or principally about her/his own or (at most)
his/her company’s gain
• The decisions and actions are discordant with Ethical Principles
Strategy:
• His/her strategy is focused on exploiting opportunities for corporate or personal gain
• AIM FOR: “Can we make money with this action, decision, or behavior, regardless of what it
makes?”

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• Founded in 1948 at New Jersey by Charles Lazarus
• Already in 35 countries
• Produces toys, children’s clothing and infants products
•
• Managers were altering the worker’s time records (secretly deleting hours) to cut their pay

16 Moral Management
Aspires to succeed being within the confines of ethical percepts – Fairness, Justice, Respect for
Rights, Due Process
Sensitivity to and responsiveness to ethical principles
Would not pursue profits at the expense of Sound Ethical Standards
Operating Strategy: [Integrity Strategy]
Ethical Values shape “Management's search for opportunities,” “Design of Organizational
Systems,” and “Decision-making Process”
WORRY FOR: “Will this action, decision, behaviour, or practice be fair to all stakeholders
involved as well as to the organization?”

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 3M Company: Minnesota Mining and Manufacturing Company, an American multinational
corporation based in Minnesota in 1902 by five businessmen
Chemical ‘Perfluorooctane Sulfonate (PFO)’ was being used

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Chemical ‘Perfluorooctane Sulfonate (PFO)’ was being used

In Mid-2000 – Conducted blood scans of its factory workers

Phase out PFOs, and products containing such chemicals

Loss of $500 million in annual sales

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 Merck & Co.: Established in 1891 United States Subsidiary of the German Company known as
Merck KGaA
In 1917, as an Independent Company, now Seventh Largest Pharmaceutical Company in the
World
Invested millions of dollars to develop a drug for treating ‘River Blindness’
A disease found to be prevalent in sub-Saharan Africa, and later reported in the isolated Areas
of Central and South America that was affecting almost 18 million people – 270, 000 cases of
blindness (Sourced: https://en.wikipedia.org/wiki/Onchocerciasis)
No Government and no aid organization agreed to buy.
Pledged to supply the drug for free forever


19 Amoral Management
 Neither intentional nor unintentional
 Not between moral and immoral
Operating Strategy: (may/may not get) oriented not towards ethics and integrity, but more
towards a compliance with existing regulatory standards

20 Stake holder approach to Moral Management

• Injustice to none, justice to all
• Going beyond legal requirements, conforming to the ethical standards of society
• Instead of thinking of trade off, planning for optimizing interests of all the concerned
stakeholders
•

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22 How people justify their Unethical actions

• The belief that the activity is not really illegal or immoral
• It is in the individual’s and corporate’s best interest
• It will never be found out
• Because it helps the company, the company will condone it