CHAPTER 5

ETHICAL ISSUES IN MANAGEMENT AND

THE INSTITUTIONALIZATION OF
BUSINESS ETHICS
Table of Contents
Part I
 Ethical Issues in Management
 Ethical issues in Marketing
 Ethical issues in Human Resource Management
 Ethical issues in Finance
 Ethical issues in Information Technology
Part II
 Recognizing Ethical Issues in Business
 Common Ethical Issues and Dilemmas in Business
 Lying
 Intimidating or Bullying or Abusive Behaviour
 Discrimination
Cont’d
 Sexual Harassment
 Misuse of Organizational Resources
 Conflict of Interest
 Bribery
 Corporate Espionage
 Fraud
 Customer's deception
 Financial Misconducts
 Insider Trading
 Environmental Issues
 Infringement of Intellectual Property Rights
 Privacy Concerns
 Employee Theft
Ethical Issues in Management
 An ethical issue is a problem or situation faced by an individual or organization, which requires
thorough investigation and deliberation before arriving at any decision.

 In a dynamic business world, new ethical challenges keep on arising and it should be dealt in a
rational and judicious manner. A good ethics makes good business and ethics should not be
treated as a constraint in achieving business objective.

 The recent scandals have besmirched the reputation of business to a great extent. Many of the
business leaders and their employees involved in scandals have graduated from the best schools
but it seems that their education taught them the art of manipulation but failed to inculcate
proper value system, ethics and social responsibility in them.
Ethical issues in Marketing
 The ethical issues related to marketing in the light of 4P’s of McCarthy i.e.
Product, Price, Promotion and Place are as follow:
 The ethical issues related to Product:
 sales and distribution of low quality unsafe products,
 not honouring warranties and guarantee of the product,
 making inaccurate and false claims for selling the product,
 unsafe packaging of the product, planned obsolescence .
 Ethical issues related to Price:
 Price Fixing, Price Skimming and Prestige Pricing
 Price Discrimination, Variable Pricing, Predatory Pricing.
 Price Gouging, Dumping Pricing Policy, Price War and Tying.
Cont’d
 Ethical issues related to Promotion:
 Deceptive and Untruthful Advertisement
 Advertised goods and services cost more to the customers
 Advertising to children
 Offensive Advertisement
 Advertisement linked to bad habits such as alcohol, tobacco, cigarettes
etc.
 Ethical issues related to Place:
 Collusion between the retailers and manufacturers to limit competition.
 The channel members may be forced by the suppliers to sell the entire
product line
 The suppliers may choose to deal with only selected distributors and
refuse to deal with other distributors
Ethical issues in Human Resource Management
 Some of the important roles being played by human resource managers and
the ethical implications of those roles are:
 Recruitment and selection done on the basis of nepotism and favoritism.
 Selecting trainers not on the basis of their skill and knowledge but on the basis
of favoritism and nepotism.
 Misuse of Performance Appraisal Feedback.
 Stalling or hindering the growth prospects of the employees is unethical.
 Making arrangements with contractors for personal gains.
 Giving differential treatment to top level, middle level, low level and non-
managerial employees
Ethical issues in Finance
 Some of the most common unethical practices observed in the area of finance
are:
 Fraud and Manipulations
 Portfolio Churning
 Insider Trading
 Unsuitable Recommendation
 Tax avoidance and Tax evasion
Ethical Issues in Information Technology
Some of the most common ethical issues observed in the area of information
technology are:
 Downloading, copying and unauthorized usage of materials like movie, music,
research materials, subjective contents etc. available on internet also give rise
to many ethical issues.
 Plagiarizing the contents from internet, downloading movies and music
illegally is a violation of copyright law.
 Software piracy and counterfeiting is another important problem that IT
industry is facing.
 Environmental hazards caused due to electronic-waste (e-waste).
 Playing games, shopping online, using social sites, email chats, net surfing on
the employer’s times.
The common Ethical Issues

 The three important attributes that are helpful in dealing with ethical issues in
business are:

i. Honesty

ii. Fairness

iii. Integrity
The common Ethical Issues and Dilemmas in
Business.
Some of the important ethical issues that are pertinent to most business
organizations are as follows:

1. Lying: Lying refers to making a false statement or not telling the truth. It is one
of the most common wrong acts in the workplace.

2. Intimidating or Bullying or Abusive Behaviour: An abusive behaviour can

thus be defined as, a harmful and wrong behaviour done with wrong intention. It
includes shouting, personal insult, bullying, stalking, coercion, deliberate
exclusion, offensive comments and jokes, passing sarcastic comments etc.
Cont’d
3. Discrimination: Discrimination refers to giving unfair, unjust and prejudiced
treatment to a person on the basis of the group, class, or category he represents.

4. Sexual Harassment: According to Australian Human Rights Commission,

“Sexual harassment is an unwelcome sexual advance, unwelcome request for
sexual favours or other unwelcome conduct of a sexual nature which makes a
person feel offended, humiliated and/or intimidated, where a reasonable person
would anticipate that reaction in the circumstances”.

5. Misuse of Organizational Resources: Companies have policies to prevent the

misuse of its resources. However, it is not uncommon to see some employees
being engaged in misuse of company’s resources either advertently or
inadvertently. One such common but difficult to be measured practice is, “Time
Theft”
Cont’d
6. Conflict of Interest: Conflict of interest is a situation wherein a person is in a
position to derive personal gains from actions or decisions taken in official
capacity.

7. Bribery :means offering something valuable to influence the action of an

official in charge. It may be in the form of cash, gold, silver, shares, goods,
services, property, privilege, promotion, etc. or any other favour.

8. Corporate Espionage: It is an act of gathering secret information about

government policies, customers, business rivals, or any other group.
Cont’d
9. Fraud: It is a deceptive act deliberately committed to derive any unfair or
illegal gains. It is a punishable offence and may invite fines, imprisonment or
even both.

10. Customer’s deception: Fraud by customers involves all types of deceptive

practices adopted by the customers to deceive businesses for their personal gains.
Customers resort to shop lifting, price tag switching, lying to get discounts related
to income and age, returning items after using it with price tag still attached

11. Financial Misconducts: Wherein Fraud includes wide range of irregular and
illegal acts committed for making unfair or illegal gains, the financial misconduct
includes violation of rules, regulation, internal polices and ethical standards.
Cont’d
12. Insider Trading: According to Securities and Exchange Commission, an
insiders are promoters, chairman, directors, officers, etc and principal
shareholders having 10 percent or more stock of a company.

13. Environmental Issues: Some important environmental hazards caused by

business and industry are:
a. Air Pollution
b. Water Pollution
c. Soil or Land Pollution

14. Intellectual Property Rights : It refers to legal protections given to

intellectual properties like books, movies, music, inventions etc. The infringement
of the intellectual property rights is a punishable offence that may invite penalty
or imprisonment or both.
Cont’d

15. Privacy Concerns : According to Professor Westin, “privacy is the concern

of individuals, groups or institutions to determine for themselves how and to what
extent information about them or about other individuals, groups or institutions is
communicated to others”

16. Employee Theft: Employee theft is one of the major problems that
organizations face. According to a report submitted by US Chamber of
Commerce, the employee theft costs $ 40 billion annually to US business.
 Normally, it is presumed that employee theft is mainly limited to stealing of
inexpensive items like pen, pencils, paper weight etc however, it is untrue,
because employees have been caught stealing money, goods, services and
information.
THANK YOU