Business Ethics Lecture 15

Wee
Topic Learning Objective
k

PART THREE Q.1 What is the importance of Ethics in Functional

Areas?
13 UNIT 4 ETHICAL Q.2 Discuss the role of Ethics in Marketing?
ISSUES IN THE Q.3 Discuss the role of Ethics in Advertising?
FUNCTIONAL AREA Q.4 Discuss the role of Ethics in Takeover and
Merger?

Q.1 What is the Importance of Ethics in Functional Areas?

Ethical issues are a part and parcel of any business as unethical practices can take place
across the organization in all departments. Ambiguity, concealed facts, exaggeration and
psychological appeal are certain methods by which organizations may be following unethical
practices while advertising. Facts are almost always concealed in advertisements, which is
absolutely unethical. Similar practices are common in the finance and human resources
departments also. Effective consumer laws, policies and practices can limit fraudulent and
misleading commercial conduct.

Ethical in the functional areas of any business is necessary to ensure a good rapport between
the management and the employees. In fact, all functional areas, namely marketing, finance,
human resources as well as information technology should follow a code of ethics so as to
function well and give maximum output.
Only one person alone cannot achieve this. Each employee should feel responsible and try to
stand by what is right in any given situation. In other words, it should be a team effort across all
levels of the organization
Ethical issues can arise in various functional areas of a business such as marketing, research
and development, HRM, production and finance. Ethical issues in all these functional areas
must be controlled or coordinated by the chief executive officer (CEO) of the enterprise.

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Q.2 Discuss the role of Ethics in Marketing?
Marketing is a technique that is used to attract and persuade customers. The main aim of
marketing is to makes customers aware of the products and services. It also focuses on
attracting new customers and keeping existing customers interested in the product. The
marketing department consists of various subdivisions, such as sales, after-sales service and
marketing and research.

Unethical issues in the field of sales:

1. Not supplying the products made by the company as per the order.
2. Not accepting responsibility for the defective product.
3. Not giving details about the hidden costs, such as transportation cost,while making the
contract with the client.
4. Changing the specifications of the product without giving any priorinformation to the
customer.
5. Changing the terms of the business without taking any approval from the client.
6. Delaying the delivery of the goods without giving any proper reason.
7. Treating two customers differently.
8. Not providing the after sales service as per the contract.
9. Selling the same product at different prices to different customers.

Unethical communication practices in Advertising and promotion:

1. Making false commitments to the customers about the benefits of the product
2. Supplying products that are different from those that are advertised
3. Giving wrong prices to the customers during advertising
4. Not giving the promised gift in the promotional campaign
5. Hiding major flaws of the product
6. Providing wrong testimonials about the product to prospective customers
7. Not providing the advertised service to the customers as a part of the promotional plans
8. Increasing the price of the product before starting its promotional campaign
9. Making false references about the competitive products While selling the product to the
customer, a company provides some extended features or facilities along with the product,

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 such as after-sales service. These facilities are provided to increase the sale of the
product.

Unethical behavior in after -sales service:

1. Using below-standard material for the service and charging for relatively better material
from the customer.
2. Using outmoded service equipment’s which can be harmful for the products during service.
3. Not taking the service calls if the location is not easy to reach, while free service was
promised before the sale of the product.
4. Making only temporary adjustment in the product, which can last only for a short time or to
make the product useful for the time being?
5. Not keeping proper service records of major products for future use, as they can help in
easy diagnosis of problem.
6. Overbilling the service charges, when the customer is not aware of the actual rates
7. Using rejected or below-standard components for customer’s temporary relief
8. Refusing the service of the product due to personal reasons.
9. Exchanging healthy parts with below-standard parts when the product comes for servicing

Unethical behavior in Marketing research:

1. Research is conducted only to substantiate the viewpoint of the manager.

2. Research is focused on the areas that do not need to be covered.
3. Some old research is presented as the new one just for the purpose of financial gain.
4. A biased research report is prepared to suit the marketing manager.
5. The research report is sold to the competitor.
6. The report does not include important facts.

Q.3 Discuss the role of Ethics in Advertising?

In the advertising field, the ethical issues include the decisions on what business and market a
corporate organization should enter. Decision on what product should be provided by a
corporate organization to its customers. Though it is important that ethical standards be
provided for the advertising of a particular product, it is not easy to establish common ethical
standards which are agreed upon by different organizations.

According to Ferrell and Gresham,

‘There is no clear consensus about ethical conduct; those ethical standards are neither
absolute nor constant; and that attempts to determine whether particular marketing
activities are ethical or non-ethical cannot produce a definitive code of marketing
behavior’.

However, organizations follow various methods that are unethical while advertising for their
products and services. These methods are:
1. Ambiguity

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2. Concealed facts
3. Exaggeration
4. Psychological appeal
Ambiguity:
Ambiguous advertisements are mostly deceiving for customers. Advertisements become
ambiguous when they are wrongly interpreted and also with, the use of words through which
organizations can avoid making direct statements. Organizations must provide clear
information about products even though their advertisements can be interpreted differently by
individuals. Ambiguity in advertisements can affect the health, loyalty and expectations of
people who will be purchasing the product that has been advertised.

Concealed Facts:

Organizations can conceal information related to a product that may result in less selling of
that product thereby resulting in loss. Organizations may conceal facts that may be important
in fulfilling the needs of customers. This way the organizations may be exploiting the
customers’ and causing serious health injuries to them. Customers may also not be able to
obtain the products of their choice.

Exaggeration:

Organizations may mislead the customers by providing exaggerated information in the

advertisements of their products. The exaggerated information is information that is not
supported by evidence. For example, if a washing powder manufacturing organization uses the
phrase, ‘best loved by housewives’ then no harm may be caused to consumers of washing
powders.

Psychological Appeal:
A psychological appeal is the appeal made considering the emotions of customers. The main
objective of psychological appeal is to persuade customers to purchase products by appealing
to their emotions and not to reason. For example, a life insurance company may use
emotions, such as pity and fear in its advertisement to persuade people to take insurance
policies. Through psychological appeal, the organizations make promises about their product
that are not fulfilled when customers buy the products.

Q.4 Discuss the role of Ethical Issues in Takeovers and Mergers ?

Mergers and takeovers are stimulated by the urge to diversify or to anchor the new market
rather than to dominate an industry. This diversification may decrease overhead costs or
protect the organization from economic descent in its actual industry.

Reasons of Merger:

1. Lack of funds to compete with organizations with better facilities, new equipment’s and a
large workforce.

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2. A growing number of competitors who have recovered from their respective economic
conditions with the help of mergers and acquisitions.
3. Liberalization has weakened the economy in many Indian organizations as they have not
been able to adjust with the competitive market.
4. Due to technological advancements, there is technical competition making it difficult to
attain economies of scale and to retain skillful personnel.
5. Emergence of multinationals that have substantial resources to pose a challenge to the
market share of Indian organizations.

Characteristics of the Merger Process: Every merger and takeover has certain
characteristics. The merger process involves:
1. The decision to consider options of merging
2. Search of a suitable merger partner
3. The decision to merge with a specific partner
4. Making a proposal to a suitable partner
5. Negotiation of merger agreements
6. Formulation of implementation plans
7. Accomplishing the implementation plan
8. Review and evaluation

Issues during the merger process:

Some organizations are not prepared to face issues and problems that come up during the
merger process due to the following reasons:
1. Often, the steps taken during the merger are in response to internal and external stress.
So, there is always the question of whether the merger will be able to achieve the
organizational objectives.
2. As average organizations do not have experience in mergers, it is tough for them to
identify their problems and formulate alternatives.
3. The initial problems that follow mergers mark a chain of events that affects jobs and
work assignments. The top management neglects the long-term effects on relevant
stakeholders under the pressure of mergers.
4. Mergers lead to new organizations with new management structures, so it becomes
difficult to determine directions and policies.

Hostile Take-overs:

Mergers and takeovers seem friendly but they are increasingly evolving into bitter conflicts.
A merger can be referred to as the coming together of two organizations in their mutual
interests and combining to form a large organization. In case of a conflict, one organization
takes over an unwilling partner, which is called a hostile takeover. The first group may disagree
with the existing policies of the organization. Their aim would be to replace the top
management with the people who share their concerns and will implement the required
changes. To prevent such discrepancies, many organizations adopt complex defensive
strategies.

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Business Ethics Lecture 16
Wee
Topic Learning Objective
k
Q.1 Discuss the role of Ethics of Finance?
PART THREE Q.2 Discuss the role of ethics in HR and Information
Technology?
13 UNIT 4 ETHICAL Q.3 What is the role of Ethics in Information
ISSUES IN THE Technology?
FUNCTIONAL AREA Q.4 Why Consumer should be provided Protection in
the Context of E -Commerce?

Q.1 Discuss the role of Ethics in Finance?

Finance is an important element of an organization it plays an important role in making
resources available in an organization. The finance manager of the firm is responsible for
arranging the finances for the firm. The finance can be raising from the two sources: Internal
Sources like deposits and loans given by owner or External Sources like borrowing money
from friends and relatives or financial institutions

Unethical practices in finance department:

1. Overestimating promoters’ capital utilization.

2. Over budgeting project costs
3. Using underhand tactics with the financers to gain benefits for the firm as well as for
themselves
4. Purchasing capital equipment’s at a time when there is no requirement for it.
5. Selling the capital equipment’s in order to raise additional and unaccounted funds.
6. Misrepresentation of funds for personal benefit.
7. Investing unapproved funds in order to gain extra profits.
8. Claiming insurance cover for losses that never happened.
9. Overpricing the current assets in order to gain more working capital than permitted.
10. Using working capital funds for personal gains.

Unethical practices in accounts department:

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1. Playing inflated vendor bills in order to get discounts or commissions.
2. Showing inflated salaries and getting receipts from employees for an amount larger than
what they actually get.
3. Paying overtime wages when there is no requirement for them.
4. Maintaining two different sets of books, one for the management and the other for income
tax.
5. Refusing to reject unacceptable raw materials when the vendor bills have to be paid.
6. Delaying the clearance of the bills payable in order to get maximum interest for the amount
to be paid.
7. Allotting extra travelling allowances to favorite employees.
8. Showing wrong figures in the monthly trial balances for personal benefits.

Unethical practices of costing manager:

1. Reducing manufacturing costs by manipulating work hours.

2. Ignoring cost of rejects
3. Ignoring cost of rework
4. Not accounting for man-hours lost due to strikes and absenteeism and maintenance work.
5. Not considering the work stoppages due to change in models
6. Ignoring the man-hours lost due to change in the manufacturing process.
7. Ignoring time lost in failed experimentations
8. Not taking into account the benefits of economies of sales and experience curve.

Unethical behavior of the auditing manager:

1. Ignoring major deviations from the budgets.

2. Rejecting the tender having lowest cost among all due to personal reasons
3. Helping in hiding black money in order to reduce the tax payable amount
4. Ignoring inflated travel bills of selected employees
5. Accepting payments made by the directors for personal purchases as official payments
6. Enabling the directors in sending and receiving money from overseas through
unofficialhawala channels
7. Approving payments to suppliers without checking bills or deliverables.
8. Approving the substandard construction made by the constructor and approving their bills
for payment.

Q.2 Discuss the role of ethics in HR and Information Technology?

Ethics in (HRM):

HRM is concerned with the management of the ‘people’ of an organization. HRM is

responsible for performing various functions like planning, organizing, directing and controlling
of human resources. HRM also involves activities like procurement, development,
compensation and maintenance.

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According to Ivancevich and Gluck:

‘Human resource management is the function performed in organizations that facilitates the
most effective use of people (employees) to achieve organizational and individual goals .’

Objectives of HRM:

1. To recruit trained and spirited employees.

2. To help the organization reach its goals.
3. To train the employees for best results.
4. To communicate HR policies to the employee.
5. To ethically respond to the needs of the society.

Unethical practices during the recruitment processof a company:

1. Recruitment of known persons without assessing their abilities.

2. Recruitment on the basis of financial favors.
3. Recruitment of the relatives of other employees.
4. Recruitment based on the recommendations of friend, business associates and other
persons close to the leader.
5. Recruitment of under qualified persons.
6. Recruitment of overqualified persons.
7. Recruitment of less acceptable men when there are better suited women available for the
job.
8. Employing children below fourteen years for the job.
9. Giving less than minimum wages fixed by the government.

Unethical practices by training manager of the company:

1. Arranging training only for favorite employees, whether they deserve it or not
2. Employing outsiders for providing training to trainees even when there are several persons
available inside
3. Planning and organizing the training programme without even knowing the need for training
4. Organizing training during peak seasons or on days when workload is very high
5. Starting training programmes in an ill-prepared manner

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6. Extending the time of the training programme to allow the trainees to have a relaxed time
7. Supplying outmoded and old training materials for the purpose of training
8. Experimenting with trainees by asking them to set their own timetable for training

Unethical practices in administration:

1. Tampering leave records of the employees

2. Giving leaves continuously to favorite employees.
3. Giving promotions to non-eligible persons merely on the recommendations of a friend.
4. Ignoring issues related to the security of the company.
5. Interference in various activities of the administration from the top management.
6. Giving the contract for uniforms of the employees to the wrong companies just for the sake
of personal benefits.

Q.3 What is the role of Ethics in Information Technology?

Information technology refers to the gathering, processing, creation, delivery and storage of
information and all the processes that make all this possible. It is a particular field which has no
geographical boundaries but application of IT may affect culture and environment differently.
The features which are acceptable in one culture may be unethical in another.

Computer ethics has been described in the following manner by James Moor:

‘A typical problem in computer ethics arises because there is a policy vacuum about how
computer technology should be used. Computers provide us with new capabilities and these in
turn provide new choices for action. Often, either no policies for conduct in these situations
exist or existing policies seem inadequate.’

Ethical Issues in IT: There are various ethical issues involved in information technology. In
1986, Masovi had classified ethical issues in the following four groups:
1. Accessibility: It involves the right of accessing the required information as well as the true
payment of charges to access the information.
2. Privacy: It deals with the degree of privacy and dissemination of information about an
individual.
3. Property: It talks about ownership and value of information.
4. Accuracy: The information which is viable and being accessed is now much more accurate
and authentic.

The tencommandments of computer ethics:

1. You will not use computer to harm other people.

2. You will not interfere with the computer network of other people.
3. You will not snoop around in files of other people’s computer.
4. You will not use a computer to steal.
5. You will not use a computer to bear false witness.
6. You will not copy or use proprietary software for which you have notpaid.

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7. You will not use other people’s computer resources without authorization.
8. You will not use other people’s intellectual output.
9. You will think about the social consequences of the programme you are writing or the
system you are designing.
10. You will always use a computer in ways that demonstrate considerations and respect for
your fellow humans.

Q.4 Why Consumer should be provided Protection in the Context of E -Commerce?

Consumer laws, practices and policies limit misleading, fraudulent, and unfair commercial
conduct. These guidelines apply only to business-to-consumer e-commerce and not to
business-to-business transactions.

General Principles:

1. Transparent and effective protection Consumers who participate in e-commerce should

be afforded effective and transparent consumer protection that is not less than the level of
protection afforded in other forms of commerce.

2. Fair business, advertising and marketing practices:

 Businesses engaged in e-commerce should pay due regard to consumers’ interests and
act in accordance with fair advertising, business, and marketing practices.
 Businesses should not make any representation or omission, or engage in any practices
that are likely to be fraudulent, deceptive, misleading, or unfair.
 Businesses should not engage in practices that are likely to cause unreasonable risk or
harm to consumers.
 Businesses should try to present accurate, clear, information available about the goods or
services in easily accessible manner.
 Businesses should comply with any presentations they make regarding practices or policies
relating to their transactions with consumers.
 Businesses should take into account the global nature of e-commerce and wherever
possible.
 Businesses should not hide their true location or identity, or to avoid compliance with
consumer protection standards and/or enforcement mechanisms.
 Businesses should avoid using unfair contract terms.
 Marketing and advertising should be clearly identifiable on whose behalf the advertising or
marketing is being conducted.
 Businesses should be able to substantiate any expressed representations for a reasonable
time thereafter.

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Business Ethics Lecture 17

Week Topic Learning Objective

Q.1 How widespread is Job discrimination? Why it is

wrong to discriminate?
Q.2 What is Affirmative action program, why it is
PART FOUR
controversial.?
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The Ethics
Q.3Define sexual harassment? Mention one way in
of Employees
which unethical sales campaigns can
affect women and which guidelines should organizations
follow to avoid sexual harassment?

Q.1 How widespread is Job discrimination? Why it is wrong to discriminate?

The wrongful act ofdistinguishing illicitlyamong people not onthe basis of individualmerit, but on
the basisof prejudice or someother invidious or morallyreprehensible attitude.

Forms of Job Discrimination:

1. Intentional discriminationis conscious anddeliberate discrimination.

2. Unintentionaldiscrimination isdiscrimination that is notconsciously or
deliberatelysought,butis broughtabout by stereotypes or asan unintendedoutcome.
3. Individual discrimination isthe discrimination of oneor a few individuals actingon their
own.
4. Institutional discriminationis discrimination that is theresult of the actions of allor many of
the people inan institution and of theirroutine processes andpolicies.

Indicatorsof Job Discrimination:

1. Average benefitsminorities and womenreceive compared toothers

2. Proportions of minoritiesand women at lowesteconomic levels
3. Proportions of minoritiesand women at highesteconomic levels.

Arguments AgainstDiscrimination:

The argumentsagainst discrimination generally fall into three groups:

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a. Utilitarian: Discriminationleads to inefficient useof human resources, butopponents reply
that someforms of discriminationmay actually benefitsociety.
b. Rights-based:Discrimination violatesbasic human rights byholding minorities andwomen
as “inferior,”assigning them lowersocial and economicpositions; discrimination cannot be
universalized.
c. Justice-based:Discrimination resultsin unjust distributionsof benefits and
burdensaccordingto John Rawls,and it violates the formalprinciple of equality
bydifferentiating betweenpeople on the basis ofcharacteristics thatare not relevant to
jobperformance.

Discriminatory Practices:

1. Recruitment PracticesFirms that rely solely on the word-of-mouth referrals ofpresent

employees to recruit new workers tend to recruit only from those racial andsexual groups
thatare already represented in their labor force. When a firm’s laborforce is composed of
only white males, this recruitment policy will tend to discriminateagainst minorities and
women.

2. Screening PracticesJob qualifications are discriminatory when they are not relevantto the
job to be performed. Aptitude or intelligence tests used to screenapplicants become
discriminatory when they serve to disqualify members from minoritycultures who are
unfamiliar with the language, concepts, and social situationsused in the tests, but who are
in fact fully qualified for the job. Job interviewsare discriminatory if the interviewer routinely
disqualifies women and minoritiesby relying on sexual or racial stereotypes.

3. Promotion PracticesPromotion, job progression, and transfer practices have

discriminatoryoutcomes if pastdiscrimination has eliminated minorities and women from the
higher, more seniorpositions on the advancement ladder.

4. Conditions of EmploymentWages and salaries are discriminatory to the extentthat equal

wages and salaries are not given to people who are doing essentially thesame work. If past
discrimination or present cultural traditions result in some jobclassifications being
disproportionately filled with women or minorities (such as secretarial,clerical, or part-time
positions), steps should be taken to make their compensationand benefits comparable to
those of other classifications.

5. Sexual harassment
Under certain conditions,unwelcome sexualadvances, requests forsexual favors, and other
verbal or physical contactof a sexual nature.

6. Discharge:Firing an employee on the basis of race or sex is a clear form of discrimination.

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 Less blatant but still discriminatory are layoff policies that rely on aseniority system in
whichwomen and minorities have the lowest seniority becauseof past discrimination and so
are last to be considered for promotion and first to beconsidered for layoffs.

Q.2 What is Affirmative action program, why it is controversial.?

Any program designed to ensure that minorities, women, or members of some other group, are
adequately represented within an organization and itsvarious levels by taking positive steps to
increase their number when underrepresented; whatcounts as “adequate representation”
depends on the objectives of the program: some aimat having the same proportion of women
or minorities as exists in the pool from whichnew members are drawn, others aim at achieving
the diversity needed to meet organizational objectives. Equal Employment Opportunity
Commission A federal agency that investigates claims of on-the-job discrimination.

Q.3Define sexual harassment? Mention one way in whichunethical sales campaigns can
affect women and which guidelines should organizations follow to avoid sexual
harassment?
Sexual harassment is a type of harassment involving the use of explicit or
implicit sexual overtones, including the unwelcome and inappropriate promise of rewards in
exchange for sexual favors. Harassers or victims may be of any sex or gender. In most
modern legal contexts, sexual harassment is illegal.
A sexually-harassed person would be one who:
1. Is subjected to an unwelcome act of physical intimacy
2. Has been asked for sexual favors in return for employment, payment of wages or a
promotion
3. Has been at the receiving end of sexually explicit compliments, or sexist remarks or jokes
with sexual connotations
4. Has been forced to view sexually explicit pictures, cartoons, calendars or even e-mails, etc.
5. Has been subjected to offensive gestures, sounds or any conduct of asexual nature which
could be either verbal or non-verbal
6. Has been threatened for refusing to cooperate with the person demanding sexual favor
7. Has been repeatedly asked out by the boss or forced to answer queries (by the boss)
regarding personal life
8. Has been made to feel embarrassed by a group of colleagues joking or sniggering about
sexual conduct at the workplace, asking for sexual favors in exchange for work benefits and

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threatening the victim with dismissal or impossible/stressful working conditions in case of non-
cooperation

Guidelines and norms to avoid from Sexual Harassment

1. Duty of the employer or other responsible persons in workplaces and other
institutions. It shall be the duty of responsible persons or the employer in institutions and
workplaces to take the required and necessary steps for prevention of acts of sexual
harassment, for determent of the commission of sexual harassment acts, and provide the
procedure for the settlement, resolution, and prosecution of sexual harassment acts.

2. Preventive steps. All persons in charge of the workplace or employers be it in the private
or public sector, should take suitable steps for prevention of sexual harassment. To further
guarantee that there is friendly environment towards women at the workplace, appropriate
work conditions should be provided in respect of health, work, leisure and hygiene and no
woman employee should have reasonable grounds to believe that she is disadvantaged in
her current employment.

3. Disciplinary action. The employer should initiate disciplinary action in accordance with
the rules, where the conduct of the accused amounts to misconduct in employment under
the relevant service rules.

4. Complaint mechanism. For the redressal of the complaint made by the victim, the
employer is required to create an appropriate complaint mechanism in his organization to
decide whether or not the conduct of the accused constitutes a breach of service or an
offence under law. The time bound disposal of complaints should be ensured by such a
complaint mechanism.

4. Complaint committee: The complaint mechanism should be adequate to provide where

necessary a complaint committee, a special counselor, or other support service should be
provided with maintenance of confidentiality.

6. Workers’ initiative. In order to prevent and control sexual harassment at the workplace,
The issues of sexual harassment should be affirmatively discussed in employer–employee
meetings.

7. Awareness. In order to create awareness about the right of female employees in regard to
sexual harassment, the employer should prominently notify the guidelines in a suitable
manner.

8. Third party harassment. Where sexual harassment occurs as a result ofan act or
omission by any third party or outsider, the employer andpersons in charge are required to
take necessary and reasonable steps toassist the affected person in terms of support; and
take preventive action.

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9. Steps to be taken by the government. The Central and state governments are required to:
(i) Take suitable measures (including legislation)
(ii) Ensure that the guidelines are observed by the employers in private sector

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