CORPORATE ETHICS

What Is Business Ethics?

Business ethics is the study of appropriate business policies and practices
regarding potentially controversial subjects including corporate
governance, insider trading, bribery, discrimination, corporate social
responsibility, and fiduciary responsibilities. The law often guides business ethics,
but at other times business ethics provide a basic guideline that businesses can
choose to follow to gain public approval.

Understanding Business Ethics

Business ethics ensure that a certain basic level of trust exists between consumers
and various forms of market participants with businesses. For example, a portfolio
manager must give the same consideration to the portfolios of family members
and small individual investors. These kinds of practices ensure the public receives
fair treatment.

The concept of business ethics began in the 1960s as corporations became more
aware of a rising consumer-based society that showed concerns regarding the
environment, social causes, and corporate responsibility. The increased focus on
so-called social issues was a hallmark of the decade.

Since that time period, the concept of business ethics has evolved. Business ethics
goes beyond just a moral code of right and wrong; it attempts to reconcile what
companies must do legally versus maintaining a competitive advantage over other
businesses. Firms display business ethics in several ways.

[Important: Business ethics are meant to ensure a certain level of trust between
consumers and corporations, guaranteeing the public fair and equal treatment.]

Ethical Principles in Businesses from an Indian Perspective

Essentially, any businesses that run in India comprises of these ethical principles.
Integrity
Whenever there is great pressure to do right instead of maximizing profits, this
principle is tested. The executives need to demonstrate courage and personal
integrity, by doing what-what think is right.

These are the principles, which are upright, honourable. They need to fight for their
beliefs. For these principles, they will not back down and be hypocritical or
experience.

Loyalty
No ethical behaviour can be promoted without trust. And for trust, loyalty needs to
be demonstrated. The executives need to be worthy of this trust while remaining
loyal to the institutions and the person. There should be friendship in the time of
adversity and support and devotion for the duty.

They should not use or disclose personal information. This leads to confidence in the
organization. They should safeguard the ability of a professional to make an
independent decision by avoiding any kind of influence or the conflicts of interest.

So, they should remain loyal to their company and their colleagues. When they accept
the other employees, they need to provide a reasonable time to the firm and respect
the proprietary information attach to the previous firm. Thus, they should refuse to
take part in any activity that might take the undue advantage of the firm.

Honesty
The ethical executives are honest while dealing with their regular work. They also
need to be truthful and do not deliberately deceive or mislead the information to
others. There should be an avoidance of the partial truths, overstatements,
misrepresentations, etc. Thus, they should not have selective omission by any
means possible.
Respect and Concern
These are two necessarily different forms of behaviour in the organization. But
they go in tandem that is why they have been put under one principle. When the
executive is ethical he is compassionate, kind, and caring.

There is one golden rule which states that help those who are in need. Further,
seek their accomplishments in such a manner that the business objectives of the
firm are achieved.

The executives also need to show respect towards the employee’s dignity, privacy,
autonomy, and rights. He needs to maintain the interests of all those decisions are
at stake. They need to be courteous and treat the person equally and rightly.

Fairness
The executives need not be just fair in all the dealings, but they also should not
exercise the wrong use of their power. They should not try to use over each or
other indecent manners to gain any sort of advantage. Also, they should not take
undue advantage of anything or other people’s mistakes.

Fair people are inclined more towards justice and ensure that the people are
equally treated. They should be tolerant, open-minded, willing to admit their own
mistakes. The executives should also be able to change their beliefs and positions
based on the situation.

Leadership
Any executive, if ethical, should be a leader to others. They should be able to handle
the responsibilities. They should be aware of the opportunities due to their
position. The executives need to be a proper role model for others.

Examples of Business Ethics

Here are a few examples of business ethics at work as corporations attempt to
balance marketing and social responsibility. For example, Company XYZ sells
cereals with all-natural ingredients. The marketing department wants to use the
all-natural ingredients as a selling point, but it must temper enthusiasm for the
product versus the laws that govern labelling practices.

Some competitors' advertisements tout high-fibre cereals that have the potential to
reduce the risk of some types of cancer. The cereal company in question wants to gain
more market share, but the marketing department cannot make dubious health claims
on cereal boxes without the risk of litigation and fines. Even though competitors with
larger market shares of the cereal industry use shady labelling practices, that doesn't
mean every manufacturer should engage in unethical behaviour.

For another example, consider the matter of quality control for a company that
manufactures electronic components for computer servers. These components must
ship on time or the parts manufacturer risks losing a lucrative contract. The quality-
control department discovers a possible defect, and every component in one shipment
faces checks.

Unfortunately, the checks may take too long, and the window for on-time shipping
could pass, which could delay the customer's product release. The quality-control
department can ship the parts, hoping that not all of them are defective, or delay the
shipment and test everything. If the parts are defective, the company that buys the
components might face a firestorm of consumer backlash, which may lead the customer
to seek a more reliable supplier.

CASE STUDY EXAMPLE IN CORPORATE ETHICS

The Bhopal Gas Tragedy: Introduction

In the early morning hours of December 3, 1984, a poisonous grey cloud (forty
tons of toxic gases) from Union Carbide India Limited (UCIL's)1 pesticide plant at
Bhopal spread throughout the city. Water carrying catalytic material had entered
Methyl Isocyanate (MIC) storage tank No. 610. What followed was a nightmare.

The killer gas spread through the city, sending residents scurrying through the
dark streets. No alarm ever sounded a warning and no evacuation plan was
prepared. When victims arrived at hospitals breathless and blind, doctors did not
know how to treat them, as UCIL had not provided emergency information.

It was only when the sun rose the next morning that the magnitude of the
 devastation was clear. Dead bodies of humans and animals blocked the streets,
leaves turned black, and the smell of burning chilli peppers lingered in the air.
Estimates suggested that as many as 10,000 may have died immediately and
30,000 to 50,000 were too ill to ever return to their jobs. The catastrophe raised
some serious ethical issues. The pesticide factory was built in the midst of densely
populated settlements. UCIL chose to store and produce MIC, one of the most
deadly chemicals (permitted exposure levels in USA and Britain are 0.02 parts per
million), in an area where nearly 120,000 people lived. The MIC plant was not
designed to handle a runaway reaction. When the uncontrolled reaction started,
MIC was flowing through the scrubber (meant to neutralize MIC emissions) at
more than 200 times its designed capacity.

MIC in the tank was filled to 87% of its capacity while the maximum permissible
was 50%. MIC was not stored at zero degrees centigrade as prescribed and the
refrigeration and cooling systems had been shut down five months before the
disaster, as part of UCC's global economy drive. Vital gauges and indicators in the
MIC tank were defective. The flare tower meant to burn off MIC emissions was
under repair at the time of the disaster and the scrubber contained no caustic
soda.

As part of UCC's drive to cut costs, the work force in the Bhopal factory was
brought down by half from 1980 to 1984. This had serious consequences on
safety and maintenance. The size of the work crew for the MIC plant was cut in
half from twelve to six workers. The maintenance supervisor position had been
eliminated and there was no maintenance supervisor. The period of safety-
training to workers in the MIC plant was brought down from 6 months to 15 days.