Typical Problems in Business

Ethics
 Ethical Issues in meeting
responsibilities towards society
Responsibilities towards society
• Negative responsibility – should not do
something
• Positive Responsibility – should do
something
 Positive responsibilities
• Improve the standard of living – Tata Steel,
Birla mandir
• Generously compensate the dislocated
people – Salem group investment in
Nandigram in Bengal
• Charitable donations – Tsunami, Earth
quake
• Help the local community – Coke and
Atlanta Olympics
 Negative responsibility
• Don’t employ child labor – Sivakasi fire
crackers factories
• Don’t bribe – JRD Tata, Murugappa group,
Eicher group
• Don’t exploit animals
– But what about Clinical research?
• Don’t spoil communal harmony and social
integration
 Negative responsibility
• Don’t exploit resources – Coke in Kerala
• Coke – Plachimada in Palakkad Dt, Kerala
 Environmental Pollution
• Regular wastage discharges

Chemical Industries,
Paper industry- Directly results in
deforestation – Uses Chlorine to bleach
the paper
• Accidental pollutions
Hazardous leak – Leakage of mercury from
HLL’s thermo meter plant in Kodaikanal
 Protecting Environment has
economic sense also
• Tata Steel – 3000 litres of oil and grease
wastage everyday. Rs 2 per litre . In 2003-
invested Rs7 lakh to inject waste oil into
the furnaces. Every kilo of oil can replace
1.5 kg of coke which cost around Rs 10/kg
• Jubilant Orgn, Carbon dioxide wate to
Soft drinks firms
Ethical issues with Employees
 Responsibility towards employees
Adopt fair policies in the following issues
• Hiring policies
• Remuneration
• Promotion policies
• Work place environment
• Retrenchment
 Hiring policies

How do you select the employees?

Giving preferences to local community
Reservations – is it ethical – it is against
equal opportunity
Discrimination – Referrals, Gender and age,
Credentials
 Remuneration
• What basis – Needs, Skill, Education
level, effort

Promotion – Seniority, Loyalty or Talent

 Retrenchment
Is it ethical in Indian context?
• For years labor policies did not encourage
free hire and fire policies – hence
employees accustomed to it.
• Ethical if the aimed at protecting the long-
term health of the organization –SAIL
• It has to be fair, legal and importantly
without coercion
 Work place environment
Ethical issues at the workplace
Safety –Accident prevention measures,
medical equipments, ventilation and
lighting – Protection from hazardous
chemicals and radiation
 Employees’ responsibility towards
organization
• Drug and alcohol abuse,
• Fiddling of expense accounts – Intel India fired
250 employees in September 2005
• Wasting office hours – Sleeping at work – Bharat
Forge Ltd – Sacked an employee in 1984- He
challenged it in court –Supreme Court dismissed
his plea in Jan 2005
• Using abusive language and showing disrespect
– Karnataka College – Lecturer abused the
Principal and was sacked- Supreme Court
upheld the decision – December 2005
• Misuse of company assets
• Receiving gifts which may result in conflict
of interests
• Loyalty and Integrity – Espionage
• Friendly behavior with customers – The
PSU employees
Ethical issues with Customers
 Responsibility towards
Customers/Consumers
• Right product (quality and quantity), right
time, right price, and right place
 Ethical issues – 4Ps of Marketing
-Product
• Unethical product - Cigarette, CFC
refrigerator, Infant milk products,
• Safety of the product -Ford Pinto –
Recalling automobiles- Pfizer in India
Gelusil MPS, Pepsi and Coke Pesticide
controversy, Cadbury chocolates
• Product Updating- Availability of spare
parts after updating products
 Ethical issues – Price
• Cross subsidizing – King Fisher airlines
• High prices – taking advantage of patents-
Pharma products
• Arbitrary pricing – cement companies
• Mahyco Monsanto Biotech India Ltd – BT
cotton seeds are priced far higher than in
Chinese after adjusting for taxes –
• MRP- not the final price
 Ethical issues – Place
• Not selling products in some places –
Private Telecom players in rural India
• Avoid selling certain products in some
specific places – Liquor near schools and
places of worship
 Ethical issues – Promotion
• Exchange Offers - are they ethical?
• Misleading claims -
• ITC commercials for Sunfeast biscuits
• Unfair practices – Airlines cancellation
scheme
Ethical Issues with Business
Partners
Trust – the main issue
•  JV partners, Supply chain partners
 JV partners

They breakup when partners don’t trust

each others
• Press Note 18’- Foreign partner need
NOC from Indian partners before starting a
venture on their own in India.-
• in 2005- replaced with ‘Press Note 1’-
needs NOC only if the new venture is in
the same business.
Responsibility towards Suppliers
Ethical issues in dealing suppliers depends
on the type of relationship

Long-term relationship – Japan

Professional relationship- Arms length

relationship- US
 Example of Automobile
manufacturers
Why Automobile firms as example?

Supplier management is complicated in

automobile industry
Three levels of suppliers Tier 1,2 and 3
Total number suppliers run into lakhs
Components are custom made
• Which is right ….long term or arms length
relationship?

Long-term relationship proved to be better

 Features of Long-term supplier
relationship
• Understand how their suppliers work.
• Turn supplier rivalry into opportunity.
• Supervise their vendors.
• Develop their suppliers' technical
capabilities.
• Share information intensively but
selectively
• Conduct joint improvement activities.
Responsibility towards Suppliers
• Share information with suppliers – Very
important in commodities sourcing
• Pay suppliers on time
• Be fair in pricing, Avoid unilateral price cut
• Should not go for coercion (steel industry
and Automobile industry)
• Settle issues through negotiations, avoid
litigations
• Ensuring safety in supplier premises
 Responsibilities Towards
Competitors
• Adopt fair business practices
 Espionage
Spying the competitors
• P&G and Unilever
• Boeing and Lockheed Martin

Internet used to steal documents –

Scan emails of employees
now iPods and Mobiles are used for
steeling data
 Respect Property Rights
• Coca Cola and Pepsi – May 2006
 Comparative Advertisements

• Totally banned in some countries like

Germany
• In India and US - Providing wrong
information about competitor is banned
 Predatory Pricing
• Predatory pricing – Times group- entry into
Delhi and Hyderabad markets- priced at
Rs 1
• Retail Association of India
• Aviation sector in India
 Poaching
• Is it ethical?
• Generally happens when there is sudden
growth in the industry
• Telecom sector, Insurance sector, Retail
sector, Indian Aviation sector