Business: Ethics, Governance & Risk

Session 3
Chapter 4: Ethical Issues in Functional Areas
of Management

Prof. Anita Chouhan

 1. Ethical Issues in Marketing
• Moral and ethical principles and problems arising in the marketplace
practices
• Concerned with negative aspects such as false claiming of product features
(puffery) and unfair competitive strategies.
• With increasing awareness and easy access to correct information,
customers can easily differentiate between honest and deceptive marketing
practices.
• This kind of unethical behaviour cost the organization the trust and loyalty
of customers & consumers.
• Organisations that follow an ethical code of conduct in marketing practices
benefit in the long run and are rewarded with loyalty and repeat buy as well
as advocacy & word of mouth
• Eg Maggi Noodles, Cadbury chocolates, McDonalds etc

Story of Stuff: https://www.youtube.com/watch?v=9GorqroigqM

Chapter 4
 2. Ethical Issues in Marketing
• To apply ethics to decisions related to marketing a product, an
organisation needs to carry out a systematic process involving the
following steps.
– Clarify
• Define the basis for taking any marketing decision.
• Formulate various alternatives for making decisions.
• Determine ethical principles and values involved in each alternative. .
– Evaluate
• Assess the options if they do not stand on ethical principles.
• Determine the credibility of the option.
• Eliminate undesirable and impracticable alternatives that do not match the
value system/ philosophy
• Consider benefits, problems and risks associated with stakeholders.
– Decide
• Determine the most possible consequences based on facts.
• Give ranking to values to determine their priority.

Chapter 4
 2. Ethical Issues in Marketing...
– Implement
• Develop a plan for the implementation of a decision.
• Maximize benefits and minimise costs and risks associated.
– Observe and modify
• Detect the effect of decisions and modify them if required.
• Adjust according to new changes..

Chapter 4

Chapter 4
 3. Ethical Issues in Marketing
Major Marketing Decisions and Related Ethical Issues
• Product-related ethical issues: Caselet: Maggi in a soup
– Packaging and labelling practices
– No information on value, safety, usage & associated risk
– Maintaining quality standards for products
• Promotion-related ethical issues: Overlooking social, ethical & legal aspects
of promoting a product or service through mass media.
– Deceptive advertising
– Sales promotion gimmick
• Price-related ethical issues:
– Price fixing
– Bid rigging
– Price war
– Deceptive pricing
• Distribution-related ethical issues: May result into increased prices, misled
investors and fluctuations in demand. eg
– Creating artificial scarcity
– Creating monopoly market

Chapter 4
 Caselet : Maggi in a Soup

• Facts of the case by student volunteers

• https://www.youtube.com/watch?v=ko8pIdcr5xk.
Questions:

Q1. What are the ethical issues involved in the caselet?

Q2. Which of Nestle’s steps / response do you agree with and why?

Q3. Which of Nestle’s response do you disagree with ? Why?

Q4. What could have been done better / different ?

Q5. Some lessons learnt from this case.

Chapter 4
 Ethical Issues in HRM
• HRM is related to the management of people & plays a crucial role in
maximising employee performance - to accomplish organisational goals and
objectives.
• It involves recruitment, selection, training and development, compensation,
rewards, induction and orientation.
• Any unethical issue in HRM may negatively affect employee motivation &
moral as well as organisational performance.
• Human rights abuse issues like discrimination of employees on the basis of
age, gender, religion or disability in workplace,
• sexual harassment,
• discriminatory work conditions,
• safety & health,
• privacy issues,
• unfair performance appraisal etc

Chapter 4
 Ethical Issues in IT
Advancement in technology have enabled access any type of information from
all over the world leading to various new challenges and issues.
• Rights and responsibilities regarding the ethical use of information create
ethical dilemmas that significantly affect a business organisation. eg the
Data Privacy Debate & subsequent regulation consideration in India
• Plagiarism: Derived from Latin word ‘plagiarius’, meaning ‘kidnapper’. It
implies stealing ideas, thoughts, expressions or writings of other persons. It
is a type of intellectual theft.
• Piracy and hacking: are two major threats to the security of software
applications & information sources. It is related to the unlawful replication
of software without the owner’s permission.
• Invading others’ privacy: IT, with its massive power to store, communicate,
analyze and retrieve information, can be used as an easy medium to invade
others’ privacy. The role of information in decision making is increasing
gradually, the risk of invading others’ privacy is becoming more serious.
• Cybercrimes: These include illegal activities, such as theft, financial fraud,
embezzlement, online harassment, virus infection and sabotage, which are
performed by using a computer.

Chapter 4
 Ethics in Production and Operations Management (POM)
• The POM function of an organisation aims at producing in the right
quantity at the right time and cost, thereby fulfilling the needs of
customers and increasing organisational efficiency and effectiveness.
• The aim is to ensure that the production function follows ethical norms
and values, which are set by the society.
• Ethics in production is intended to guarantee that the production capacity
or processes is not harming the buyer or the general public.
• Eg Ranbaxy, KFC & McDonalds

Measures against unethical Practices:

• Create a code of conduct
• Safe & hygienic working conditions mandatory
• Strictly adhere to SOP’s & specifications
• Focus on TQM & environment sustainability
• Cross check / reference supplier background

Chapter 4
 1. Ethics in Finance and Accounting
• Ethical dilemmas and violations in day-to-day financial transactions.
The following are some ethical practices in finance:
– Following truthfulness and authenticity in business transactions
– Seeking the fulfilment of mutual interests
– Getting economies and financial units freed from greed-based
methodologies
• Finance & accounting are one of the most important business functions
accountable to act in the public interest instead of satisfying the needs of
an individual or an organization.
• It helps determine how to make moral decisions regarding the
preparation, presentation and revelation of financial information.
• Common unethical practices include: Fraudulent financial reporting,
misuse of assets, incomplete or false disclosures, insider trading,
budgetary slack etc

Chapter 4
 2. Ethics in Finance and Accounting

• It is better for organizations to have safeguards that may reduce the

chances for the occurrence of unethical behavior. Such safeguards may
fall into two categories, which are:
– Safeguards created by law: They may include corporate governance
regulations, professional standards, regulatory monitoring and
disciplinary procedures.
– Safeguards created by organizations: They include employing
competent staff, ethical programs, strong disciplinary processes,
solid leadership and robust internal control, and monitoring the
quality of employee performance and encouraging employee
communication with senior levels.

Chapter 4