ethical issues in business

Ethical issues arising from the nature of markets

- The 18th Century economist Adam Smith demonstrated how in a free
market the self interest of producers and consumers will produce an
outcome desirable to all concerned
- But the market can also lead to inequality of income, wealth and
market power:
• Monopoly suppliers can exploit consumers
• Monopsony buyers can exploit supply firms
• World wide inequality of income can result in unethical practices
such as the child labour
Ethical issues and society - examples
• Involvement in the community
• Honesty, truthfulness and fairness in marketing
• Use of animals in product testing
• Agricultural practices e.g. intensive faming
• The degree of safety built into product design
• Donation to good causes
• The extent to which a business accepts its alleged responsibilities
for mishaps, spillages and
• leaks
• The selling of addictive products e.g. tobacco
• Involvement in the arms trade
• Trading with repressive regimes
Ethical issues arising from internal and industry practices - examples
• Treatment of customers - e.g. honouring the spirit as well as the
letter of the law in respect to warranties and after sales service
• The number and proportion of women and ethnic minority people
in senior positions
• The organisation’s loyalty to employees when it is in difficult
economic conditions
• Employment of disabled people
• Working conditions and treatment of workers
• Bribes to secure contracts
 • Child labour in the developing world
• Business practices of supply firms
Unethical practices in marketing - examples
• Pricing lack of clarity in pricing
• Dumping – selling at a loss to increase market share and destroy
competition in order to subsequently raise prices
• Price fixing cartels
• Encouraging people to claim prizes when they phoning premium
rate numbers
• “Bait and switch” selling - attracting customers and then
subjecting them to high pressure selling techniques to switch to
an more expensive alternative
• High pressure selling - especially in relation to groups such as the
elderly
• Counterfeit goods and brand piracy
• Copying the style of packaging in an attempt to mislead
consumers
• Deceptive advertising
• Irresponsible issue of credit cards and the irresponsible raising of
credit limits
• Unethical practices in market research and competitor
intelligence
Unethical practices relating to products - examples
• Selling goods abroad which are banned at home
• Omitting to provide information on side effects
• Unsafe products
• Built in obsolescence
• Wasteful and unnecessary packaging
• Deception on size and content
• Inaccurate and incomplete testing of products
• Treatment of animals in product testing
Ethics and the supply chain
- It would be hypocritical to claim to be a ethical firm if it turned a
blind to unethical practices by suppliers in the supply chain. In
particular:
 • The use of child labour and forced labour
• Production in sweatshops
• Violation of the basic rights of workers
• Ignoring of health, safety and environmental standards
An ethical producer has to be concerned with what is practiced by all
firms (upstream and downstream) in the supply chain.
Bribery
This is a key ethical issue in business
• It first needs to be stated that bribery to secure a contract
(especially a contract with a public sector body) is against the
law and severe penalties can result
• However, it is sometimes seem (wrongly) as a victimless crime
and is often rationalised in terms of “if we don’t offer a bribery,
others will”
• From a moral or ethical perspective it should be approached not
in terms of “can we get away” with it but is it right to offer a
bribe to secure a contract
Institute of Business Ethics Suggestions for Good Practice
The Institute recommends that organisations issue statements of
ethical practice in respect of:
• Relations with customers
• Relations with shareholders and other investors
• Relations with employees
• Relations with suppliers
• Relations with the government and the local community
• The environment
• Relations with competitors
• Issues relating to international business
• Behaviour in relations to mergers and takeovers
• Ethical issues concerning directors and managers
• Compliance and verification
What is an Ethical code?
- This is a set of principles governing morality and acceptable
behaviour
It is likely to cover:
 • Personal behaviour e.g. when dealing with customers and
suppliers
• Corporate behaviour e.g. when negotiating deals
• Behaviour towards society e.g. when recruiting
• Behaviour towards the environment e.g. when deciding on
process
Ethical audit
- This is an audit of all the firms activities
Purpose:
• To check that ethical principles are being pursued
• To check the extent to which actions are consistent with the
organisation’s stated ethical intentions
• And to establish action plans if they are not
 Ethical issues
Ethical issues are very important in research these
days. Universities are required by law to have Human
(and Animal) Ethics Committees which vet and
oversee all research that is conducted under the
University�s name. Their main responsibility is to
check for issues in the study that might interfere with
a participant�s right to not participate, or with
possible harm, deception, or embarrassment to
participants.
A major issue is that potential participants are clearly
informed about what they are agreeing to participate
in. Also, even if a participant agrees to participate they
have the right to withdraw their participation at any
time without prejudice. These two issues need to be
spelt out on the Consent form.
Consider the earlier example in which we deliberately
gave false feedback to participants so that we could
manipulate their sense of success. This study therefore
required deception of the participants. This has
ethical implications as to whether the information
gained is worth subjecting people to such deception.
For the study to be approved by a Research Ethics
committee, you would have to debrief the participants
afterwards. You would also have to nominate a source
of counselling or assistance if a participant was
adversely affected. It might be unlikely, but consider
what might happen if only one person is
"psychologically" injured by believing they scored in
the top 5% of the population and are later told that it
was all a lie. What might they do to themselves? What
effect might it have on later behaviour or
relationships? So consent forms also need to have
names and contact numbers for a participant who
might later have trouble dealing with this. Notice the
difficulty of clearly informing the potential participant
about the study without telling them about the
deception manipulation. Ethics committees need to see
a very good reason for deception before they will allow
it. They will on occasions but the benefit of the
information obtained needs to clearly outweigh the
risks associated with deception and considerable care
has to be taken to prepare for problems that might
occur.
As another example of an ethical issue, consider the
other previous example in which the researcher was
interested in whether exposure to violent TV programs
increases aggressiveness. Perhaps as a consequence
of our exposure some child starts a fight and hurts
another child or gets hurt themselves. This might have
further consequences in terms of shame or
embarrassment, social isolation, or altered
relationships with parents, teachers, and friends.
Obviously the researcher and the Ethics Committee
should anticipate such problems and take all the
precautions they can.

EXAMPLES OF CSR
CSR is not new to India, companies like TATA and BIRLA have been
imbibing the case for social good in their operations for decades long before
CSR become a popular cause. Inspite of having such life size successful
examples, CSR in India is in a very nascent stage. It is still one of the least
understood initiatives in the Indian development sector. It is followed by a
handful of public companies as dictated by the very basis of their existence,
and by a few private companies, with international shareholding as this is
the practice followed by them in their respective foreign country. Thus the
situation is far from perfect as the emphasis is not on social good but rather
on a policy that needs to be implemented.

A lack of understanding, inadequately trained personnel, non availability

of authentic data and specific information on the kinds of CSR activities,
coverage, policy etc. further adds to the reach and effectiveness of CSR
programmes. But the situation is changing. And CSR is coming out of the
purview of ‘doing social good’ and is fast becoming a ‘business necessity’.
The ‘business case’ for CSR is gaining ground and corporate houses are
realising that ‘what is good for workers - their community, health, and
environment is also good for the business’.

Corporate Social Responsibility Practices - the survey on CSR is timely and

apt. The survey is expected to facilitate formation of an alliance of CSR
initiatives so that such initiatives can be further stream lined, focused and
converged to a powerful force of intervention. One of the major objectives
of the survey is to bring out in open the current status of CSR thereby
giving both the NGOs and the common man an understanding of the
various initiatives undertaken by corporates and the role that is played by
the government in the field.

The survey underlines the various issues - current CSR policies, major
stakeholders - their current and future plans, geographical areas covered,
role of civil society and government, challenges, recommendations etc.
Corporate Social Responsibility Practices in India – A Preview

Corporate Social Responsibility:Initiatives

and Examples
Anand Corporate Services Limited
Anand has a longstanding commitment to addressing the needs of the society,
in view of its belief that for any economic development to be meaningful, the
benefits from the business must trickle down to the society at large.Anand is
of the firm view that the corporate goals must be aligned with the larger
societal goals. 25 years ago, the SNS Foundation, an expression of Anand’s
corporate social responsibility, was born. The objective of SNS foundation was
comprehensive community development. The Foundation has created
programs in the fields of health, education, natural resource management and
life skills training, only to make sure that fellow humans could breathe easy.
The long term goal of Anand CSR is to implement concepts like ‘Zero
Tolerance Zone for Child Labour’, ‘Zero Waste Zone’ using strategies like
Reduce, Recycle and Reuse not only at Anand/SNSF locations but extend to
Anand residential areas.
Aptech Limited
Aptech Limited, a leading education player with a global presence, has played
an extensive and sustained role in encouraging and fostering education
throughout the country since inception.As a global player with complete
solutions-providing capability, Aptech has a long history of participating in
community activities. It has, in association with leading NGOs, provided
computers at schools, education to the underprivileged and conducted
training and awareness-camps.
Aptech students donated part of the proceeds from the sale of their art work to
NGOs. To propagate education among all sections of the society throughout
the country, especially the underprivileged, Aptech fosters tie-ups with leading
NGOs throughout the country, including the Barrackpur-based NGO, Udayan,
a residential school for children of leprosy patients in Barrackpur, established
in 1970.The company strongly believes that education is an integral part of the
country’s social fabric and works towardssupporting basic education and
basic computer literacy amongst the underprivileged children in India.
Avon Cycle Limited
The poor and ignorant of India’s rural population turnto nearest towns and
cities for healthcare. They face indifferenceand exploitation. Hope gives way to
despair.This gave inspiration to AVON for locating MATAKAUSHALYA DEVI,
PAHWA CHARITABLE HOSPITAL.Mr. Sohan Lal Pahwa, AVON's Chairman and
Principal Trustee of the hospital,spent a good part of his workinglife devoted
to philanthropy. The hospital, in its 5th yearof inception, has risen to serve a
model healthcare facility boasting of some bold experiments in its very early
yearsof existence. It’s support since inception has been of the order of Rs. 3
crore to date and it continues uninterrupted.Reaching out to the needy farther
afield, the hospitalholds regular camps in surrounding villages to propagate
scientific approach to healthcare. Recently the hospital took the social
responsibility concept a step further and formulated a scheme titled
'Celebrated Female Child' to enable and inspire positive and enduring
environment for society's all–consuming passion for 'sons only' to end.
CISCO System Inc.
Philanthropy at Cisco is about building strong and productive global
communities - communities in which every individual has the means to live,
the opportunity to learn, and the chance to give back. The company pursues a
strong “triple bottom line” which is described as profits, people and presence.
The company promotes a culture of charitable giving and connects employees
to nonprofit organizations serving the communities where they live. Cisco
invests its best-in-class networking equipment to those nonprofit
organizations that best put it to work for their communities, eventuating in
positive global impact. It takes its responsibility seriously as a global citizen.
Education is a top corporate priority for Cisco, as it is the key to prosperity
and opportunity.
ICICI Bank Ltd
The Social Initiatives Group (SIG) of ICICI Bank Ltd works with a mission to
build the capacities of the poorest of the poor to participate in the larger
economy. The group identifies and supports initiatives designed to break the
intergenerational cycle of poor health and nutrition, ensure essential early
childhood education and schooling as well as access to basic financial
services.Thus, by promoting early child health, catalyzing universal
elementary education and maximizing access to micro financial services, ICICI
Bank believes that it can build the capacities of India’s poor to participate in
larger socio-economic processes and thereby spur the overall development of
the country. The SIG works by understanding the status of existing systems of
service delivery and identifying critical knowledge and practice gaps in their
functioning. It locates cost effective and scalable initiatives and approaches
that have the potential to address these gaps and supports research to
understand their impact. This is undertakenin collaboration with research
agencies, nongovernmental organisations (NGOs), companies, government
departments, local stakeholders and international organisations.
Infosys Technologies Limited
Infosys is actively involved in various community development
programs.Infosys promoted, in 1996, the Infosys Foundation as a not-for-profit
trust to which it contributes up to 1%PAT every year. Additionally, the
Education and ResearchDepartment (E&R) at Infosys also works with
employee volunteers on community development projects. Infosys leadership
has set examples in the area of corporate citizenship and has involved itself
actively in key national bodies. They have taken initiatives to work in the areas
of Research and Education, Community Service,Rural Reach Programme,
Employment, Welfare activities undertaken by the Infosys Foundation,
Healthcare for the poor, Education and Arts & Culture.
ITC Limited
ITC partnered the Indian farmer for close to a century. ITC is now engaged in
elevating this partnership to a new paradigm by leveraging information
technology through its trailblazing 'e-Choupal' initiative. ITC is significantly
widening its farmer partnerships to embrace a host of value-adding activities:
creating livelihoods
by helping poor tribals make their wastelands productive; investing in
rainwater harvesting to bring much-needed irrigation to parched drylands;
empowering rural women by helping them evolve into entrepreneurs; and
providing infrastructural support to make schools exciting for village
children.Through these rural partnerships, ITC touches the lives of nearly 3
million villagers across India.
Mahindra & Mahindra
The K. C. Mahindra Education Trust was established in 1953 by late Mr. K. C.
Mahindra with an objective topromote education. Its vision is to transform the
lives of people in India through education, financial assistanceand recognition
to them, across age groups and across income strata. The K. C. Mahindra
Education Trust undertakesa number of education initiatives, which make a
difference to the lives of deserving students.The Trust has provided more than
Rs. 7.5 Crore in the form of grants, scholarships and loans. It promotes
education mainly by the way of scholarships. The Nanhi Kali project has over
3,300 children under it. We aim to increase the number of Nanhi Kalis
(children) to 10,000 in the next 2 years, by reaching out to the underprivileged
children especially in rural areas.
Satyam Computer Services Limited
Alambana (support) is the corporate social responsibility arm of Satyam
Computer Services Limited, formed to support and strengthen the vulnerable
and underprivileged sections in urban India. Registered as Satyam Alambana
Trust in 2000, Alambana aims at transforming the quality of life among urban
population. Alambana's services are directed primarily at the disadvantaged
sections in all the cities that Satyam has offices in. Volunteers from among
Satyam associates and their family members lead the services and perform the
required tasks.
Tata Consultancy Services
The Adult Literacy Program (ALP) was conceived and set up by Dr. F C Kohli
along with Prof. P N Murthy and Prof. Kesav Nori of Tata Consultancy Services
in May 2000 to address the problem of illiteracy. ALP believes illiteracy is a
major social concern affecting a third of the Indian population comprising old
and young adults. To accelerate the rate of learning, it uses a TCS-designed
Computer–Based Functional Literacy Method (CBFL), an innovative teaching
strategy that uses multimedia software to teach adults to read within about 40
learning hours.
DCM Shriram Consolidated Limited
Shriram Fertilisers and Chemicals, is a unit of DSCL, located at Kota, 475 kms.
Over the last 3 decades, various initiatives have been undertaken by the unit,
in the Hadoti region (Kota, Bundi, Jhalawar districts) in ICU, ambulances,
family planning, medical assistance;schools, scholarships, emphasis on girl
child education;water to people and infrastructure.

Hindustan Construction Company (HCC)

HCC plays an active role in CSR initiatives in the fields of Health, Education,
Disaster Management, and Environment.Disaster Resource Network DRN is a
worldwide initiative,promoted by the World Economic Forum (WEF).Trained
volunteers and equipment resources from Engineering Construction &
Logistics companies will complement the existing efforts of Government,
NGO's and International Organizations in disaster management. It was during
the WEF annual meet that the massive earthquake struck Gujarat in January
2001. The need for a trained and effective participation from industry was first
felt there. The members of Engineering and Logistics segment of WEF came
together to establish this network. The idea was further strengthened during
the 9/11 incident where again the industry participated in the relief operations.
DRN Worldwide was formally launched in New York in January 2002. And
shortly thereafter, DRN - India Initiative was launched.
Larsen & Toubro (L & T) Limited
Considering that construction industry is the second largest employer in India
after agriculture, employing about 32 million-strong workforce, L&T set out to
regulate and promote Construction Vocational Training (CVT) in India by
establishing a Construction Skills Training Institute (CSTI) on a 5.5 acre land,
close to its Construction Division Headquarters at Manapakkam,Chennai. CSTI
imparts, totally free of cost, basic training in formwork, carpentry, masonry,
bar-bending, plumbing and sanitary, scaffolder and electrical wireman trades
to a wide spectrum of the rural poor.
As a result of the good response it received in Chennai, CSTI set up a branch
at Panvel, Mumbai, initially offering training in formwork, carpentry and
masonry trades. The Manapakkam and Panvel facilities together provide
training to about 300 candidates annually who are inducted after a process of
selection, the minimum qualification being tenth standard. Since inception,
these two units have produced about 2,000 skilled workmen in various trades,
with about sixty percent of them being deployed to L&T’s jobsites spread
across the country. The success of this training-initiative demonstrates that
adoption of systematic training techniques are bound to yield efficient and
skilled personnel in the shortest possible time, and in the power to convert the
potential of the Rural Youth in Construction and upgrading Rura Economy in a
small way