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BUSINESS ETHICS AND

CORPORATE
GOVERNANCE

BY PROF KR GANESH

The origin of the word ETHICS can be traced to


the Greek word ETHIKOS / ETHOS which refers to
human character and conduct. According to
WEBSTERS collegiate thesaurus , the word
ETHICS can be defined as :

The code of conduct governing an individual or a


group
The discipline dealing with good and bad and with
moral duty and obligation
The complex of ideals, beliefs or standards that
characterises a group , community or community
or people
A group of moral principles or set of values

Let us understand what is


Business ethics now.

Business is buying and selling of goods or


services for a price with the intention of making
profits.

The moral principles and set of values


governing Business is called as BUSINESS
ETHICS

Ethics is concerned with the discipline of the


right and wrong conduct of individuals. More
especially, in modern times, problems in
business are more often concerned with terms
such as FAIR PRICE , RIGHT PRODUCT and
PROPER QUALITY
Eg- Case OF Mc Donalds BEEF FRIES
Controversy

Ethical issues often arise leading to dilemmas,


paradoxes and baffling situations. It is
therefore necessary to understand the ethical
principles that govern human behaviour.

ETHICS and MORALITY are terms that are


used more or less interchangeably. However,
there is some difference between the two
terms .
ETHICS is concerned with actions that are
proper or improper, conduct that is right or
wrong, decisions that are fair or unfair.

MORALITY varies from individual to


individual , because the values and cultural
traits of individuals may differ. Further, what is
moral according to one person may be
immoral according to another.
MORAL STANDARDS ,THEREFORE
CANNOT BE CONSIDERED AS ETHICAL
STANDARDS IN CERTAIN CONTEXTS.
Generally , what is moral or immoral depends
more on religious tenets of various groups of
people in the world. However ethical standards
may be common to all major religions

Mc Donalds BEEF FRIES


Controversy OVER VIEW

The case examines the controversy involving


the global fast food major MC Donalds which
was accused of wrongfully selling its French
fries as 100% Veg products when they
contained beef flavouring. It explores in detail
the events that led to the allegations. The
case also discusses the eventual settlement of
the law suit with the company paying
damages to vegetarian groups and accepting
it had gone wrong

HISTORY
The French fries controversy began in 2000 when a
Hindu jain software engineer working in the U.S.A
happened to read a news article ,which mentioned
that the French fries at MCD contained beef. Upon
being questioned Mc Donald claimed that it was
for enhancing the flavour of their French fries.
They also cited that as per The CODE OF
FEDERAL REGULATIONS which ,they followed,
restaurants are not required to explicitly state the
ingredients .

ACTION TAKEN BY AGGRIEVED PARTY

Shortly thereafter Mr Harish Bharti a U.S


based attorney filed the class action lawsuit
against Mc Donalds
He quoted , Hindus and vegetarians all over
the world feel shocked and betrayed by Mc
Donalds deception and ultimate greed. Not
only did they deceive millions of people who
may not want to have beef extract fries for
religious, ethical or health reasons , but also
suggest that it is these people who are at fault,
that they are stupid, adding insult to injury

DEFENCE BY COUNTER PARTY

In response Mc Donalds reverted by claiming


that it never ever claimed that the fries sold in
the USA were vegetarian. They added that
fries were cooked in pure Veg oil but seasoned
with beef flavourings and it was upto the
customer to enquire about the flavour and its
source and that they were in no way to be held
responsible to the customers not enquiring
about the source of those flavourings

FURORE IN INDIA

Some of the outlets in India were vandalised by


Shiv sena ,VHP , The Bajrang Dal who also
staged a demonstration in Delhi protesting the
alleged use of beef flavouring. They submitted
a memorandum to the P.M demanding the
closure of all Mc Donalds outlets in India
Officials Of MCD in India claimed that the
vegetarian products served in India did not
have any non vegetarian content.

INVESTIGATION

Prima facie ,while it was found true that Mc


Donald's adhered to the Federal food and
drug administration ( FDA) guidelines by
classifying beef extract as NATURAL
FLAVOUR , critics claimed that the company
was trying to play with words to brush off
allegations.

However interestingly enough, MCDs


statement that it never claimed its French
fries were vegetarian was proved to be
completely wrong after Bharthi found a 1993
letter sent by the companies corporate head
quarters to a consumer in response to an
inquiry about vegetarian menu items.
The letter clearly bundled French fries with
garden salads, english muffins and whole
grain cereals as a completely vegetarian item

THE AFTER MATH

Post the brouhaha , Mc Donalds issued an


apology stating that it would provide more
details about its products to customers.
However a mere apology angered various
sects of the Hindu community by and large
and resulted in filing of 4 more lawsuits

In the 11th month of its courtroom battle Mc


Donalds announced that it would issue a new
apology and pay $10million to vegetarians and
religious groups in a proposed settlement

of all law suits in march 2002.


The company also decided to pay $4,000 to
each of the 12 plaintiffs in the five lawsuits
and post a new and more detailed apology on
the company web site and in various other
publications.
It also decided to convene an advisory board
to advise on vegetarian matters.

THANK YOU