Typical Problems in Business Ethics

Lecture- 6 (BECG)

Prof. C. Anand Faculty IBS, Hyderabad

Contents
Typical Problems in Business Ethics: Factors that determine Code of Ethics Ethical Issues in Strategic Management Ethical Decision Making Model Typical Problems in Business Ethics (Advertising, Product Promotion, Working Conditions, Downsizing Workforce, Environmental Pollution, Supplier Relations and Service Conditions)

Factors that determine Code of Ethics

There are many ethical issues in marketing starting right from framing marketing strategies to finally delivering the products to the customers. Ferrell and Gresham have identified three factors that determine the code of ethics framed by marketer: Individual, Significant and Opportunity factors that have bearing on the ethical nature of marketing decisions. Ethical issues play an important role on the 4 Ps (Product, Place, Price and Promotion) of marketing.
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Factors that determine Code of Ethics (Contd.)

Individual Factors (Moral values inculcated in a person by family, education and culture. They play an important role in framing a marketing decision). Significant Factors (Those which Reference groups, Top management and Peers influence the marketer. These have more to do with the organizational climate of the marketer) Opportunity Factors (Ethical codes & standards that are promoted in an Organization. These are the rules and policies framed by Organization, which all the employees are expected to adhere.)
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Ethical Issues in Strategic Management

While making following strategies, organizations may incur strategic changes: Developing Vision Statements (priorities, culture and values) Fixing Managerial Remuneration Implementing strategic changes (Changes in ownership thru M&As or thru Exchange Offers, Share Purchase, Going Private or Leveraged Buyouts or thru Computerization) which have both positive and negative effects.
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Ethical Decision Making Model

It is a 4 step process as follows: 1. Evaluate decision from ethical standpoint (Identify affected stakeholders; Are rights of stakeholders violated?) 2. Evaluate decision from ethical standpoint in the context of moral principle 3. Establish moral intent 4. Engage in moral behavior

Typical Problems in Business Ethics

Ethical issues in Marketing Strategy:
Marketing Strategy is the plan designed to achieve marketing objectives. The ethical issues are: The stance adopted towards competitors Competitive pricing Effective advertising Distributing strategies Product development strategies Efficient supply chain The above strategies may raise ethical issues when they wipe out competitors in the market.
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Typical Problems in Business Ethics (Contd.)

Marketing Issues:

The 4 Ps play an important role in framing marketing strategies. They also include service aspects of people, physical evidence and process. Issues pertaining to products, price, place and promotion involve both ethical and commercial considerations. With public attention focused on ethics, there is a need for stricter control in business practices, right from framing marketing strategies to finally delivering a product to the consumer.
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Product, Pricing and Place

Products also embody the ethical decisions made at the corporate level. Products should be regulated rather than advertisements (e.g. tobacco and alcohol). Consuming these products are dangerous to the health. The issues involve the interplay between ethical and commercial considerations. The tobacco industry faced an ethical issue when the government considered banning of the products. Another issue is the slow reduction of plastic bags for packing based on commercial considerations. In India, the tobacco industry faced an ethical dilemma when the government once considered banning of the products.
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Product dilemmas

Ethical aspects of products include updating of products, which is considered as unethical by some critics. In updating the products some may lose their basic characteristics, thus depriving them of the original product. Product which are hazardous are not acceptable (CFC gas in refrigerators). Hazardous products give way to eco-friendly products (Plastic bags are banned for certain purposes).

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Price Dilemmas

Price is not always an important criterion for all buyers while making their purchase decision. The ethical marketing decision involved in price is always not visible. Food considered healthy can be priced high if demand exists. Sometimes manufacturers cash in on publics demand for low fat food. Publicity with celebrities for higher claims may be unethical (Brooke Bond Taj Mahal tea with Ustad Zakir Hussain).
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Place Dilemmas

Place marketers refer to the sum of locations by which a product moves from the supplier to the consumer. Place is the point at which the customer is able to access information about a particular place or product or service and get the final product. It also includes process of distributing the product and the type of delivery. Customers who regularly buy products from those places will have to depend on other places to get products of their choices.
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Promotion

Promotion refers to advertising and public relations strategies to attract more customers. Communications to consumers are subjected to close scrutiny and subject to advertising code of ethics. On the other hand some times TV and radio programs publicize those practices that deceive consumers easily. Selling practices include soft selling and hard selling. (advertising Standards Authority of UK and American Marketing Association are committed to ethical conduct).
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Ethical Issues in Work Place:

These occur due to involvement of employees and employers in value judgments, which by their nature are not clear-cut. It can be on quality, going against rules, etc. The reasons for such dilemmas are: Power, authority and trust Secrecy, confidentiality and loyalty

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Resolving Dilemmas at Work Place by Employers:

According to Gelleraman, to resolve the dilemmas at workplace, managers use the following 4 rationalization approaches: The actions are within ethical and legal limits Their actions are aimed at the individuals or corporations best interests Their actions will not be disclosed or published and hence no danger to them or their company They will be protected by the company Since rationalization does not fully solve the problems, managers need to develop skill and experience for coping with ethical dilemmas.
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Resolving Dilemmas by Employees:

Employees should be fully trained to deal with ethical dilemmas at a work place. The step-bystep process to be followed by them (known as Believe) is as follows: Background (Study background of the case) Estimate (Make an initial estimation of case) List (List possible solutions) Impact (Study impact of possible solutions) Estimate (the totally unacceptable solutions) Assess (the remaining possible solutions) Evaluate (the solutions based on their impact & values)
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Ethical Issues in Downsizing Workforce (Firing)

Employees are retrenched due to recessionary trends, for reducing size and overhead costs. Firing is a critical decision and affects the reputation of business for unethical reasons. Employers at times include at-will clause which enables them to fire their employees at will or for a cause. Firing may have devastating effect on the morale of employee, but is considered ethical when maximizing long-term owner value. Firing to be ethical, should be honest, fair, legal or without coercion.
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Ethical Issues in Downsizing Workforce (Contd.)

Firing is ethical when it is done due to a workers poor performance, acts of sabotage, dishonesty, or misuse of authority which affect long-term owner value. Organizations come under criticism when they opt for layoffs, right-sizing, downsizing, or delayering. It would be ethical to fire only those employees who are least productive, as it would be difficult for an organization to attract fresh talent and retain the experienced employees.

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Ethical Issues in Environmental Pollution

Environmental Ethics deals with the moral basis of environmental responsibility. Any damage caused to environment will have an impact on society as well as stakeholders. The goal of environmental ethics does not merely revolve round the environment, but is concerned with the moral foundation of environmental responsibility.
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Ethical Issues in Environmental Pollution (contd.)

Environmental Issues include: Toxic Waste (solids, liquids and air) Contamination of Ground Water Oil Spills (destroying seashores) Fossil Fuels (producing CO2 ) Usage of Fluorocarbons (which deplete Ozone layer) Soil Erosion Air Pollution (vehicular and industrial smoke including noise pollution)
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Ethical Issues in Environmental Pollution (contd.)

Remedies to solve Environmental issues: Strong Governing Body for formulating and implementing an environmental policy (Regulatory Reforms) Strong environmental expertise, technology and resources for environmental protection Imposing fines for defaulters Green programs Environmental Protection Act, 1986 (India)
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Ethical Issues in Environmental Pollution (contd.)

Indian Environmental Laws: (i) Water: The Water (Prevention & Control of Pollution) Act, 1974 (also its Cess Act, 1974 and Cess Rules, 1978); Indian Fisheries Act, 1897; The River Boards Act, 1956; Merchant Shipping Act, 1970. (ii) Air: The Air (Prevention and Control of Pollution) Act, 1981; its Rules, 1982; Factories Act, 1987; Atomic Energy Act; Motor Vehicles Act, 1988.
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The End

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