Ethics
Ethics
Ethics
The term ethics is derives from the Greek word ethos which means character. Ethics are
the principles of conduct governing an individual or a group. It is concerned with norms of
conduct of people as members of society as it relates to what is good or bad, and having to
do with moral duties and obligations.
In general sense, ethics is the concern for good behavior doing the right things. Human
beings have always been puzzled with morel question of right or wrong behavior; struggling
to develop a system that produced the maximum good for the individual and for the group.
Definition: Churchill defined ethics as the application of moral values or codes to complex
problems using a rational decision making process. The outcome of this process is usually a
behavior or set of behaviours.
2. What is the difference between ethics and morals?
Both 'ethics' and 'morals' deal with right and wrong conduct. But they are not same. Ethics
deals with individual character which is a personal attribute. Ethics is the response of
individual to a specific situation e.g. whether in this situation, it is ethical to state the truth.
Morals deal with customs set by groups or some authority like religion. Morals are general
principles e.g. you should speak truth.
ETHICS
MORALS
Meaning
Nature
Scope
Expression
Absorption
reasonable decisions in
appropriate situations.
business enterprises must use their massive financial and public power to address social
problems such as poverty, crime, public health, environmental protection, education etc.
To be ethical in business, one must be aware of the need for complying with the laws,
customs and expectations of the society. The actions of people working in business,
products and services must contribute positively to the welfare of the society.
In general, ethical behaviour is becoming increasingly significant in business due to the
following reasons:
1. Moral Consciousness: Moral Consciousness leads the businessmen to avoid adulteration,
over charging, spurious goods, black marketing, false advertising etc. Long before such
practices were declared illegal by the law.
2. Selfinterest: Ethical business conduct is in the self interest of businessmen in long run.
Goodwill, sales and profits of the business enterprise will increase, if businessmen serve
then customers with good quality and fair prices reward then shareholders with good
dividends, pay taxes honestly, treat their employees with respect and dignity.
3. Environmental pressure: Environment pressure has mad many businessmen realize that
they use resources which belong to society and they must discharge their social obligation
through ethical behaviour and must adhere to social values.
4. Legal imperative: Laws reflect ethical conduct and businessmen must follow them. If
businessmen disobey laws and regulation of government, they are surely to lose their
power, prestige and their survival will be in danger.
Ethical influence on business
Ethical Practice
Plant location
Production
Control of pollution
Purchase
Storage
Marketing
Advertising
Administration
Finance
Personnel
Ethical dilemma is a situation where the decision maker has to choose not between right
and wrong
but between right and right.
In business many issues may seem straight forward and easy to solve but in most cases
conflict arise and no one option is a clear choice. Businessmen are faced with moral and
ethical dilemmas while making choice from various alternatives. Business interest comes
into conflicts with moral values. Ethical dilemmas faced by managers are often highly
complex with no clear guidelines.
However, the following guidelines can be used to ease ethical dilemmas
1. Problem definition
i. Clearly identify the problem
ii. How would you define the problem if you stood on the other side of the fence?
iii. How did the situation arise?
2. Decision making
i. What is your intention in making this decision?
ii. How does this intention compare with the problem results?
iii. Will your decision change or be valid over a long period of time at it seems now?
9. What are the principles of business ethics?
Special nature of business, it requires certain basic specific principles. The late American
President Woodrow Wilson has laid down four important principles for the proper conduct of
business. They are as follows:
(a) The rate of Publicity: This rule describes the necessity and importance of maintaining
transparency in business. The people should be adequately informed about the nature,
purpose and consequences of business dealings. This principle states that let the people
know what it is going to do. Usually misunderstandings, suspicion and false conjuncture
arise out of secretiveness. Therefore people must be properly acknowledged about what the
business is going to do.
(b) The rate of equivalent price: this rule states that let the public receive goods and
services fully equivalent to the money paid. In other words the buyers should get the best
return of their spending. The business should see that it offers products having utility and
quality when the business gets the price for what it renders as a reward, the consumer must
get a satisfaction due to the fulfillment of his/her need for the sacrifice which he/she has
made by way of spending.
(c) The rule of conscience in business: this principle emphasizes that the rules of
business games must be of a higher order than those of an ordinary game, sustained by
moral judgment of honourable men because business is very special type of activity. It uses
the societys resources as input and offers an output to the society for material satisfaction.
for the full development of humanity. Virtue ethics asks of any action, what kind of person
will I become if I do this? or is this action consistent with my acting at my best?. Honesty,
courage, compassion, generosity, tolerance, fairness and prudence are a few examples of
virtues.
CHAPTER -2
CORPORATE GOVERNANCE
AND CORPORATE SOCIAL RESPONSIBILITY
1. What is the concept of Corporate Governance?
MEANING:
Corporate Governance is about promoting corporate fairness, transparency and
accountability. It is concerned with structures and processes for decision making,
accountability, control and behaviour at the top level of organization. It influences (i) The
organizations objectives (ii) risk monitoring (iii) performance optimization.
DEFINITION:
Corporate Governance can be defined as the formal system of accountability and control for
ethical and socially responsible organizational decisions and use of resources.
Accountability is related to how well the content of workplace decision is aligned with the
organizations stated strategic direction.
Control involves the process of auditing and improving organizational decisions and actions.
APPLICABILITY:
The need of good Corporate Governance arises in all categories of Indian companies.
1. Public sector units (PSUs) where the government is the dominant share holder and the
general public holds minority stake.
2. Multinational Companies (MNCs) where the foreign parent is the dominant shareholders.
3. Domestic business groups where the promoters (with their friends and relatives) are the
dominant shareholders, government owned financial institutions holds a comparable stake
and the balance is held by the general public.
SCOPE:
Corporate Governance arrangements are key determinants of an organizations relationship
with the world. It encompasses the following aspects:
(i) The power given to management and control over managements use of power
(ii) Managements accountability to stakeholders
(iii) The formal and informal processes by which stakeholders influence management
decisions
2. What is meant by the term stakeholders?
Management is not accountable solely to investors (shareholders) but also to other interest
group or constituents who are affected by corporate activity. The term stakeholders
describes such constituents of an organization the individuals, groups or other
organization which is affected by, or can affect the organization in pursuit of its goals.
Stakeholders of a company constitutes:
1.
2.
3.
4.
5.
6.
7.
8.
Employees
Trade Unions
Suppliers
Government
Competitors
Customers
Shareholders and investors
Local communities
Participatory
Consensus oriented
Accountable
Transparent
Responsive
Equitable and inclusive
Efficient and effective; and
Follows the rule of law.
(i) The corporate structure should constitute an audit committee comprising of independent
directors with significant exposure on financial transaction.
(ii) The committee should have the sole power to hire and fire the companys auditors and
approve non audit service from the auditor.
(iii) Compensation of top management should be determined by measurable performance
goals.
(iv) The compensation rate should also be set by an independent compensation committee
and should be fully disclosed to the shareholders.
3. Stock options:
(i) Sometimes executive Board directors grant generous stock options to top managers.
(ii) Stock options offer managers an incentive to perform well; overloaded stock option
accounts create the possibility of unwanted share value dilution.
5. What is the concept of Corporate Social Responsibility (CSR)?
MEANING:
Corporate Social Responsibility is the continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of life of the
workforce and their families as well as of the local community and society at large.
Corporate Social Responsibility focuses on the idea that a business has social obligation
above and beyond making a profit. It is companys responsibility to produce an overall
positive impact on the society.
Corporate Social Responsibility is a way of integrating the social, economic and
environmental imperatives of business activities. Shareholders, analysts, regulators, labour
unions, employees, mass media and community organizations hold companies to be
accountable not only for their own performance but for the performance of their entire
supply chain.
Issues like peace, sustainable development, environmental quality, human rights and
security are having performed effect on business and its environment.
DEFINITIONS:
Some definitions of Corporate Social Responsibility are as follows:
Corporate Social Responsibility is an integrated combination of policies, programs,
education and practices which extend throughout a corporations operations and into the
communities in which they operate.
Corporate Social Responsibility is the continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of life of the
workforce and their families as well as of the local community and society at large.
Corporate Social Responsibility is achieving commercial success in ways that honour ethical
values and respect people, communities and the natural environment.
SCOPE:
Corporate Social Responsibility is a way of integrating the social, economic and
environmental imperatives of business activities. The term corporate Citizenship denotes the
expert to which business meet the legal, ethical, economic and voluntary responsibilities
placed on them by their stakeholders. Its all about how companies voluntarily manage the
business processes to produce on overall positive impact on society.
Decrease in crime
Easier labour recruitment
Reduced employee turnover and absenteeism
Easier access to international capital, better conditions for loans on
international money markets.
Dependable and preferred as suppliers, exporter/ importer, retailer of
responsibly manufactured components and products.
A better society would produce a better environment in which the business may gain long
term
profit maximization.
Responsibility reporting?
1. GRI: Global Reporting Initiative:
(i) It is a reporting standard rather than a performance standard. It was established to
design globally applicable guidelines for preparing enterprise level sustainability reports
including social and environmental indicators.
(ii) GRI is conveyed by CERES (Coalition for Environmental Responsible Economics) and
involves the active participation of corporations, non governmental organizations,
international organizations, business associations, Universities and other stakeholders from
around the world.
(iii) GRI first released its sustainability reporting Guidelines in 1999 and is now a
permanent, independent, international body with a multi stakeholder governance structure.
Its core mission is maintenance, enhancement and dissemination of the guidelines through
a process of ongoing consultation and stakeholders engagement. GRI has begun to add
sector specific supplements, beginning with financial services and tour operators.
2. AA 1000 (1999):
(i) It is an accountability standard designed to complement the global reporting initiative
(GRI) reporting guidelines, and improve accountability and performance by learning through
stakeholder engagement.
(ii) This helps to establish a systematic stakeholder engagement process that generates the
indicators, target and reporting systems needed to ensure its effectiveness in overall
performance of the organization.
3. Social Accountability 3000:
(i) It specifies requirements for special accountability to enable a company to develop,
maintain and enforce policies and procedure in order to manage those issues which it can
control or influence demonstrate to interested parties that policies procedures and practices
are in compliance with the requirement of this standard.
(ii) This standard is maintained by social accountability international. It covers standards
and monitoring programs for child labour, wages of benefits, working hours, health and
safety, freedom of association and collective bargaining and management system.
4. Union Nations Global Compact (2000):
(i) It is a set of nine principles which the companies can voluntarily embrace and exact in
their individual corporate practices and to support complementary public policy initiatives.
(ii) This standard includes those practices that endorsing companies would commit to enact
as well as a section describing the benefits to business for embracing each principles.
5. OECD Guidelines for Multinational Enterprises (1976/2000):
(i) Organization for Economic Corporation and Development (OECD) guidelines are
recommendations addressed by Governments to multi national enterprises.
(ii) These are not legally enforceable and are voluntary principles and standards.
Governments encourage the companies operating within the countries to observe the
guidelines wherever they operate. These guidelines were first published in 1976 and
updated in June 2000.
6. ICCR Guidelines
(i) The Interfaith Centre on Corporate Responsibility (ICCR) has published Principals for
Global corporate Responsibility which is not a standard but a collective distillation of the
issues of
concern to religions oriented institutional investors developed by groups in the U.K., U.S.
and Canada.
(ii) This guideline comprises of more than 275 religious institutions that use their
investments to promote social change.
(iii) The principles cover the entire spectrum of Corporate Social Responsibility issues which
includes workplace, community, environment, human rights, ethics, suppliers and
consumers. The principles are published as a reference tool that companies can use to
monitor their own policies or those of the companies in which they invest.
7. Caux Round Table (CRT):
(i) CRT has produced Principles for Business a document which seeks to express a world
wide standard for ethical and responsible corporate behaviour for dialogue and world wide
action by business and leaders.
(ii) CRT promotes principled business leadership and the belief that business has a crucial
role in identifying and promoting sustainable and equitable solutions to key global issues
affecting the physical economic social environment.
(iii) CRT is comprised of senior business leaders from Europe, Japan & North America and is
based in CAUX Switzerland.
(iv) This principles include
(a) Social impact of company operations on a local community
(b) A respect for rule and ethics
(c) Support for multilateral trade agreement that promote Judicious liberation of trade.
(d) Respect for the environment and avoidance of illicit operation.
8. Global Sullivan Principles (1999):
The objectives of the Global Sullivan Principles are
(i) To support economic, social and political justice by companies where they do business.
(ii) To support human rights
(iii) To encourage equal opportunity at all level of employment
(iv) To train and advance disadvantaged workers for technical supervisory and management
opportunities.
(v) To assist with greater tolerance and understanding among people.
(vi) To improve the quality of life for communities, workers and children with dignity and
equality.
9. Asian Pacific Economic Cooperation (APEC) Business code of conduct (1999):
(i) APEC is known as the primary international organization for promoting open trade and
CHAPTER - 3
WORKPLACE ETHICS
1. What do you mean by Workplace Ethics?
Workplace ethics refers to how one applies values to work in actual decision making. It is a
set of right and wrong actions that directly impact the workplace. Workplace ethics are an
extension of the personal standards or lack of them that is intrinsic in the people comprising
the workplace. It is all about making choice that may not always feet good or seem
beneficial but are the right choices to make. Ethics in the workplace require abolition of all
kinds of discrimination and exploitation.
2. Why workplace ethics is needed?
Public concerns about the ethical practices in business usually relate to issues such as
1. Fraud and embezzlement
2. Accepting bribes or lying
3. Financial scams
4. Deceptive advertising of food and beverages.
Unfair competitive practices etc. strengthen the public perception that ethical standards in
business need to be improved. The pressure of sound values and ethics is a vital and
ongoing part of good governance in organization and an integral part of good management
practices.
3. What are the factors influencing Workplace ethics?
The main factors influencing the level of workplace ethics are as follows:
1. The individual moral Standards: The moral standards and sound personal values of a
person exercise a significant impact on ethics in the workplace. An employee has to make a
choice between right and wrong in different situations. His ethical behaviour affects his
reputation within the company as well as the reputation of his company. His choices and
actions depend upon his personal beliefs and value as well as reflect the understanding of
his ethical responsibility as an employee.
2. Influence of managers and coworkers: managers and coworkers exert significant control
on ones choices at workplace through authority. For gaining consistent ethical compliance in
the companys workplace, activities and examples should be set by coworkers along with
Ethical/unethical
choices in work
place
Individual
standards
and values
Manager's
and
coworker's
influence
Opportunity
to engage in
misconduct
false stereotypes, or (iii) other kind of morally unjustified attitude against members of the
class to which the employee belongs,
3. Harmful impact: The discriminatory decision has a harmful or negative impact on the
interests of the employees, perhaps costing the jobs, promoters or better pay.
7. What are the commonly recognized employment discrimination practices?
The commonly recognised discriminatory practices are as follows:
1. Recruitment practices: Business firms that rely solely on the word of mouth referrals of
present employees to recruit new workers tend to recruit only from those racial and ***ual
groups that are already represented in their labour force. For example, when job vacancies
are advertised in media that are used by only men and not minorities or women,
recruitment will tend to be discriminatory.
2. Screening Practices: Discriminatory job qualification arises when they are not relevant
to the job to be performed. E.g. requiring a high school diploma for a manual task. Job
interviews becomes discriminatory if the interviewer routinely disqualifies certain class of
people assumptions about occupations suitable for women or the priority of putting women
in male environments.
3. Promotion practices: Promotion, job progression and transfer practices become
discriminatory when (i) employers place makes on job tracks separate from those open to
women and minorities. (ii) Promotions rely on the subjective recommendations of
immediate supervisors.
4. Condition of Employment: Discrimination in condition of employment include non
compliance with the following aspects:
(i) Equal wages and salaries to people who are doing essentially the same work.
(ii) Fair wages based on industry standards and working environment conditions.
(iii) Fair treatment to workers for e.g. facilities like child labour that abuse and for underpay
their workforces is termed as sweatshops and that should be avoided.
5. Dismissal: Firing an employee on the basis of his or her races or *** is a clear form of
discrimination. Lay off policies become discriminatory if they rely on a seniority system in
which minorities and women have the lowest seniority on account of past discrimination.
8. What is meant by harassment in context of Workplace Ethics?
Harassment is tormenting by subjecting to consent interference or intimidation. It acts and
conduct creates an intimidating, hostile or offensive working environment. which could be
adherence to superiors instructions, being reliable and prompt, prohibiting from accepting
gifts etc. codes become more effective when the top management actively supports and
applies it.
2. Open communication: Many of the ethical problems arising in a business are ambiguous
and uncertain. Therefore there is necessary to create a work environment where employee
understands that it is acceptable. To have an ethical dilemma management should explain
the purpose and contents of ethical policy. Training may be required to sensitize employees
to potential ethical issues. Necessary resources need to be provided to help employees
resolve ethical dilemmas.
3. Group decision making: Ethical decisions can be made in groups and then made public as
appropriate. It produces better quality decisions by including diverse interests and
perspectives and increases the credibility of the decision process and outcome by reducing
suspicion of unfair basis.
4. Integrated ethics management: Ethics need to be integrated into management policies
and practices. Ethical values preferred in the workplace should be included while developing
the value statement during strategic planning. Similarly, ethical principles should be
considered when developing personnel policies and then design policies to produce these
behaviours.
5. Grievance policy: A grievance policy should be created for employees to use to resolve
disagreement with supervisors and staff.
6. Atmosphere of trust: Creating an atmosphere of trust is critical in encouraging employees
to report unethical activities they come across. So, a suggestion box may be installed so
that employees may report suspected ethical violations activities in an anonymous basis.
7. Cross functional teams: Cross functional teams should be used when developing and
implementing the ethics management program so that employees feel a sense of
participation and ownership in the program if they are to adhere to its ethical values.
8. Ombubs person: The ombuds person establishes a point of contact where employees can
go to ask questions in confidence about the work situations they confront and seek advice.
In order to institutionalize the moral values in the workplace, the ombuds person facilitates
the development of the policies and procedures.
9. Example from leadership: Top executives and managers should endorse strict standards
of conduct and also follow it themselves. They must create an impression on employees that
unethical behaviour will not be tolerated. Employees need to be informed that they must
report any wrongdoing they encounter top executives must assure both by words and
actions that no discrimination will take place against those who report ethical breaches.
10. Updating policies and procedures: Policies and procedures concerning ethics at the
workplace should be reviewed and updated on a regular basis. To produce behaviours
preferred from the code of conduct, job descriptions, performance appraisal forms,
management by objectives. Expectations, standard firms, checklist, budget report formats
and other relevant control instruments to ensure conformance to the code of conduct.
CHAPTER -4
ENVIRONMENT & ETHICS
1. What is the concept of Sustainable development?
1) Sustainable development is Development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.
2) A nation or society should satisfy its requirements social, economic and others without
jeopardizing the interest of future generations.
3) High economic growth means high rate of extraction, transformation and utilization of
non renewable resources. This concept of sustainable development refers to maintaining
development over time.
4) As per Brudtland Report the concept of Sustainable development, recognizes that
economic growth has to be environmentally sustainable, since there is no economic growth
without ecological cost.
5) Sustainable development as a balance concept between ecology and development has
been accepted as a part of the customary international law. Right of a person to
environement which is pollution free is a part of basic jurisprudence of the land.
6) Increased development and higher GNP are related to environmental damage and
resource depletion. Therefore, on element of resource regeneration and positive approach to
environment have to be incorporated in all developmental programmes.
2. What are the main forms of Pollution & Resource Depletion and their
detrimental effects?
POLLUTION: It refers to the undesirable and unintended contamination of the environment
by the
manufacture or use of commodities.
RESOURCE DEPLETION: It refers to the consumption of finite or scarce resources.
Pollution may also
be a type of resource depletion because contamination of air, water or land diminishes their
beneficial qualities.
The main forms of pollution and resource depletion are as follows:
1. AIR POLLUTION: According to U.S. Public Health Services, air pollution means, the
presence in the outdoor atmosphere of one or more contaminations or combination thereof,
in such quantities and of such duration as may be, or may tend to be injurious to human,
plant or animal life, or property, or which unreasonably interfere with the comfortable
enjoyment of life, or property, or the conduct of business
Causes: Air pollution may be caused by
(i) Gases and particulate spewed out by vehicles and industrial processes
(ii) Increase in population
(iii) Urbanization
(iv) Industrialization
(v) Industrial accidents and disasters
Effect: Adverse effects of Air pollution are given bellow:
(i) Affect vegetation by decreasing agriculture yields
(ii) The air we breath, becomes hazardous to health and life
(iii) Deteriorate exposed construction materials through corrosion.
(iv) Disastrous global damage (global warning, ozone layer, destruction & acid rains)
2. WATER POLLUTION: Water is essential to human life and also for industrial growth and
development. Any human activity which spoils the quality of water may be called water
pollution.
Water is regarded as polluted when it becomes harmful for all living creatures. Sources:
Water pollution is caused by
(i) Industrial effluence
(ii)Using water bodies as dumping yards/ disposal sites for wastes,
(iii) Nuclear power plants
(iv) Disasters (e.g. oil spills) etc.
Effects:
The worlds per capital supplies of water are shrinking and are now 30% smaller than 25
years ago. It is due to increase in population and economic activity in urban areas, to meet
urban demands, water is being increasingly diverted from agriculture irrigation to provide
water for cities.
3. LAND POLLUTION
Solid Wastes: People living in cities produce tons of solid wastes every year. City garbage
dumps are significant sources of pollution, containing tonic substances such as cadmium,
copper, Zink, etc. problem of ethicswaste dumping are increasing day by day due to rapid
advancement in the IT industries and it cant be reused also.
Hazardous or Toxic Substances: these can cause
(i) Increase in mortality rates
(ii) Irreversible or incapacitating illness
(iii) Seriously adverse health or environmental effects.
For example, Benzene is a common industrial toxic chemical used in plastic, dyes, nylon,
food additives, detergents, drugs, fungicides and gasoline. Benzene workers are several
times more likely than the general population to get leukemia.
Vinyl Chloride is used in the production of plastics, which is released in small amounts when
plastic products deteriorate causes liver damage. Birth anomalies, liver, respiratory and
bone damage, brain and lump cancer etc.
4. DEPLETION OF FOSSIL FUELS
Depletion of fossil fuels at an exponentially rising rate led to loss of nonrenewable source of
energy. The loss of forest habitats combined with the effects of pollution has led to the
extinction of a phenomenal number of species and danger of many existing species
disappearing forever.
3. What is Global Warming & Acid Rains? What are the effects of Global warming
and Acid rains?
(a) GLOBAL WARMING:
Greenhouse gases: Carbon dioxide, nitrous oxide, methane and CFCs (Chloro fluoro
carbons) occurs naturally in the atmosphere to absorb and hold the heat from the sun. It
prevents heat to escape back into space, to keep the earths temperature at right levels so
that life can evolve and flourish. Industrial and other human activities during the last 50
years have released subs tactically more greenhouse gases into the atmosphere, particularly
by the burning of fossil fuels resulting in increasing amounts of heat, and raising
temperatures around the globe.
(b) DEPLETION OF OZONE LAYER:
Ozone layer in the lower stratosphere protects all life on the earth from harmful untriviolet
radiation.
This ozone layer is destroyed by CFC gases, which are used in Aerosol cans, Refrigerators,
Air conditioners, Industrial Solvents etc. When release into air, CFC gases rise, and reaches
the stratosphere in 7 to 10 years, where they destroy ozone molecules and remain for 75 to
150 years continuing all the while to break down additional ozone molecules. Shrinking of
the ozone layer and subsequent increase of UV rays will lead to
(i) Skin cancer
(ii) Destruction of 75% of the worlds major crops those are sensitive to UV light.
(c) ACID RAIN:
(i) Acid rain is a threat to the environment i.e. closely related to the combustion of burning
of fossil fuel which are heavily used by utilities to produce electricity.
(ii) Burning fossil fuels, containing high level of sulphur releases large quantities of sulphur
oxides into the atmosphere. When these gasses are carried into the air, they combine with
water vapour in clouds to form nitric acid and sulphuric acid. These acids are then carried
down in the rain, thus, raising the acidity of the water source.
Adverse effect of global warming
Average global temperatures are now higher than before. This increasingly heat will have
the following effects
Acid rain falls directly on trees and other vegetation and soaks into soils. It
directly damages forests and indirectly destroys the wildlife and species that
depend on forests for food and breeding.
Water sources become highly acidic. Many fish populations and other aquatic
organisms are unable to survive I lakes and rivers that have become highly
acidic due to acid rain.
Acidic rain water releases toxic metals from the soil and carries these into
waterways, where it contaminate drinking water which lead to various diseases.
Acid rain can corrode and damage buildings, status and other objects
specifically made up of iron. Limestone and marble.
Awareness:
In the earlier times, business enterprises were mainly concerned with using the economic
resources in the best possible manner. Now awareness increases to conserve the ecological
resources.
Awareness of social responsibility need to adopt ethical values and more statutory
requirement towards pollution control, environment friendly practices etc. have translated
into providing safety for the workers at workplace, reducing pollution, health concern for
them and incorporating environmental values in governance.
6. What is meant by environmental ethics?
Meaning: Environmental ethics concerns the value system of societies the value system
that has brought the state of environment to the present situation.
Impact: Problems such as global warming, ozone depletion and disposal of hazardous
waste affect the entire world. They require international cooperation and have to be tackled
at the global level.
Pervasive: Environmental ethics is a issue that concerns ethical bahaviour of all types of
organizations ranging from international Bodies, National Governments, Opinion makers,
media, intelligentsia, public and private enterprises and NGOs.
Cause and effect: the effect i.e. the problems relating to protection of environment or
nature in terms of pollution, resource utilization or waste disposal.
The basic cause i.e. the issue of exploitive human nature and attitude should be addressed
in a rational way.
Ethical practices in Business: Ethical practices make good business sense especially the
organizations engaged in exports of products and satisfy the importer in regard the quality,
ethics and environmental standards.
Developments in India: The Chipko movement (1973) in India is a proof of peoples concern
about the balance in ecosystem. Air pollution measures were enacted through:
(i) The factories act 1948
(ii) The industrial (Development and Regulation) Act 1951
(iii) Mines and Mineral (Regulation and Development) Act 1957
(iv) Air (Control and prevention of pollution) Act 1981
(v) The motor Vehicles Act.
7. What do you mean by Environment friendly behaviour of Business enterprise?
CHAPTER -5
ETHICS IN MARKETING
AND CONSUMER PROTECTION
1. What are the ethical dilemmas in todays marketing scenario?
Marketing executives face the challenge of balancing their own best interest in the form of
recognition, pay and promotion, with the best interests of consumer, their organizations and
society into a workplace guide for their daily activities. They must be able to distinguish
between ethical and unethical and act accordingly regardless of the possible
consequences.
Ethical guidelines: Many organizations have code of ethics that identify specific acts (bribery
accepting gifts) as unethical and describe the standards employees are expected to live up
to these guidelines will:
(i) Lessen the chance that en employee will knowingly or unknowingly violate a companys
standards.
(ii) Strengthen a companys hand in dealing with customers or prospects that encourage
unethical behaviour.
(iii) Valuable guides for young or inexperienced executives, to resist pressure to compromise
personal ethics in order to move up in the organization.
Limitation of ethical guidelines:
(i) Every decision cannot be taken by the manager.
(ii) Determination of what is right and what is wrong can be extremely difficult in adverse
situation.
(iii) Difficult for any enterprise to construct a twocolumn (ethical V. Unethical) list of all
possible practices.
So, a marketing manager must be able to evaluate a situation and formulate a response.
2. What are the reasons for ethical behaviour in marketing?
The reasons for ethical behaviour in marketing are as follows:
1. Well being of consumers: Management should be concerned with the well being of
consumers, since they are the lifeblood of a business. Ethical behaviour in marketing
strategies, policies and campaigns ensure acknowledgement of consumers interest.
2. Role of business leaders in marketing: Marketing activities should not be interpreted
wrongly by public as consisting of misleading package labels, false claims in ads, phony list
prices, and infringements of well established trademarks. To reverse the damaged
reputation, business leaders must demonstrate convincingly that they are ware of their
ethical responsibility and will set and enforce high ethical standards.
3. Reduced Government regulation: Unethical marketing behaviour increases the probability
of government control on business. Most of the governmental limitations on marketing are
most of the countries have the competition authority commonly known as the Competition
commission.
8. How are Goods and services defined in Sales of Goods Act, 1932?
Goods: Section 2(7) of the sale of Goods Act, 1932 defines goods as every kind of
moveable property other than actionable claims and money, and includes stock & shares,
growing crops, grass and thing attached to and forming part of the land which are agreed to
be severed before sale of under the contract and sale.
Services: As per section 2(U) Services means service of any description which is made
available to potential users services also includes the provision of services in connection with
business of any individual or commercial matters such as banking communication,
education, insurance, financing, chit funds, real estate, transport, storage, material
treatment, processing, supply of electrical or other energy, boarding, lodging,
entertainment, amusement, construction, repair, conveying of news or information and
advertising.
9. Consumer as per competition Act V/s. consumer as per consumer protection Act
Competition Act defines consumer substantially same as U/s. 2(d) of the Consumer
Protection Act 1986. However, following are the wording difference:
Clause
Consumer
of
(i)
Goods
(ii)
Services
Basis of
difference
Consumer interest
Public interest
Meaning
Members
Factors
Scope
Examples
11. When does conflict arise between consumer interest and public interest?
Government policies may be fashioned and introduced in the name of public interest may
not be in the ultimate interest of the consumers. This arises due to the fact that all
producers are consumers but all consumers are not producers as such.
Example: A farmer wants the price of goods he consumes to be as cheap as possible but
they wants highest price for his produce. A government wishing for self sufficiency in food
as a national security measurement, faces the conflict i.e. should it support high prices to
encourage production or low prices to protect the consumers?
Conclusion: In general consumers (buyers) want competition but producers (sellers) desire
monopoly. In a society there may such divergent interests and therefore the resolution is
best left to market with Government intervention.
12. What is the relationship between Competition and Consumer Welfare?
Competition: It refers to rivalry in the market place. It is regulated by a set of policies and
laws to achieve the goals of economic efficiency and consumer welfare, and to check on the
concentration of economic power. All these goals have an interactive relationship and when
in harmony, deliver total welfare.
Effect of competition on consumers: It is the consumers who are the main losers due to
anti competitive activities in a market. The consumers are worse off because there is a lack
of capacity to deal with such problems.
Micro level effect: The design and implementation of a competition policy promotes the
advancement and increases poors welfare.
Macro level effect: An effective competition regime or consumer law (covering competition
distortions) can prevent consumer abuses, both at industry level as well in a village or
locality where one shopkeeper can cheat the whole community.
Conclusion: An appropriate and dynamic competition policy and law are necessary to
a. Location of significant error during a re evaluation of work of the finance and accounting
professionals
b. Preparation of original date used to generate records which are the subject matter of the
engagement.
c. Reporting on the operation of financial system after being involved in their design or
implementation.
d. A former director/manager of the clients firm being a member of the audit/consulting
team.
e. A member of the auditor consulting team appointed in the clients firm in a position to
exert direct and significant influence over the subject matter of the engagement.
(ii) Self review threat for finance and accounting professionals working as an
employee:
Such threats occur when business decisions or date is subject to review and also
justification is required to be given by the same professional who was responsible for
preparing such data or taking such decisions.
3. Advocacy threat: Such threats occur when professional promotes a position or opinion
to the point that subsequent objectivity may be compromised. Circumstances leading to
advocacy threats are as follows:
(i) Advocacy threat for finance and accounting professionals working as auditor/consultant
a. Promoting shares in a listed entity when that entity is a consultancy or a financial
statement audit client.
b. Acting as an advocate on behalf of an assurance client in disputes with third parties.
(ii) Advocacy threat for finance and accounting professionals working as an employee
Making false and misleading statements about the companys position, when furthering the
legitimate goals and objectives of their professionals. However, when such statements made
are neither false nor misleading, such actions generally would not create an advocacy
threat.
4. Familiarity threats: Such threats occur when a finance and accounting professional has
close relationships in the work environment and such relationships impair his selfless
attitude towards work circumstances leading to familiarity threats are as follows:
(i) Familiarity threats for finance and accounting professionals working as
auditors/consultants:
a. A member of the engagement team having a close family relationship
employee:
a. A finance and accounting professional in a position to influence financial or nonfinancial
reporting or business decisions and having an immediate or close family members who is in
a position to benefit from that influence.
b. Accepting gifts/ favours unless the value is clearly insignificant.
c. Long association with business contacts influencing business decision.
5. Intimidation threats: Intimidation threats occur when a professional may be prohibited
from acting objectively by threats, actual or perceived.
(i) Intimidation threat for finance and accounting professionals working as
auditors/ consultants:
a. Being threatened with dismissal or replacement
b. Being threatened with litigation.
c. Being pressured to reduce inappropriately the extent of work performed in order to
reduce fees.
(ii) Intimidation threat for finance and accounting professionals working as
employees:
a. Threat of dismissal of the professional or close relative over disagreement on application
of accounting principles or the way in which financial information is to be reported for
external use as well as for decision making purposes.
b. The attempt of the boss to influence the professionals decision.
6. What are the various safeguards which may be adopted by accounting & finance
professionals to overcome the threats?
Effective safeguards are required to check unethical behaviour. Thus safeguards shall
(i) Ensure an ethical environment
(ii) Eliminate or reduce the threats to an acceptable level
(iii) Increase the likelihood of identifying or deterring unethical bahaviour safeguards may
be created by the
1. Finance and accounting profession, legislation and regulation; or
2. Business firms employing the professional.
1. Finance and accounting profession legislation and regulation:
(i) Education training and experience requirement for entry into the profession
(ii) Continuing professional development requirement
(iii) Corporate governance regulation
(iv) Professional standards.
(v) Professional or regulatory monitoring and disciplinary procedures.
(vi) External review by a legally empowered third party of the reports, returns,
communication or information produced by concerned professionals.