Why Be Ethical ?


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Why Be Ethical ?

  1. 2. OUTLINE <ul><li>What is ethics? </li></ul><ul><li>Advantages of being ethical </li></ul><ul><li>Disadvantages of being unethical </li></ul><ul><li>Financial Crisis and the collapse of ethical behavior </li></ul><ul><li>What are Business Ethics? </li></ul><ul><li>How to follow business ethics? </li></ul><ul><li>Examples of companies which follow business ethics </li></ul><ul><li>Advantages of Business Ethics </li></ul><ul><li>Violation of Ethics by Corporations </li></ul>
  2. 3. What is Ethics? <ul><li>Deals with morality </li></ul><ul><li>“ Integrity” forms a major part of ethics </li></ul><ul><li>Distinguishing between right and wrong </li></ul>
  3. 4. Advantages of Being Ethical <ul><li>Honorable, loyal and supportive people </li></ul><ul><li>Happiness </li></ul><ul><li>Security </li></ul><ul><li>Just in affairs </li></ul><ul><li>Honest and open people </li></ul>
  4. 5. Disadvantages of Being Unethical <ul><li>“ Being unethical itself is a disadvantage” </li></ul>
  5. 6. Financial Crisis and the Collapse of Ethical Behavior <ul><li>Financial Crisis began in august 2007 </li></ul><ul><li>Was mainly due to the unethical behavior of the banks. </li></ul><ul><ul><li>Bankers first used to care about the ‘quality’ </li></ul></ul><ul><ul><li>Now they care about ‘quantity’ </li></ul></ul><ul><li>Banks just wanted to build leverage </li></ul>
  6. 7. Financial Crisis and the Collapse of Ethical Behavior <ul><li>Banks also sold mortgage loans to people who could not afford them </li></ul><ul><ul><li>Through misleading advertisements </li></ul></ul><ul><li>Other causes </li></ul><ul><ul><li>Poor risk control </li></ul></ul><ul><ul><li>Ignored the unstructured expansion of real estate market </li></ul></ul><ul><li>This resulted in a huge loss for the society. </li></ul>
  7. 8. Business Ethics <ul><li>“ GOOD ETHICS MEANS GOOD BUSINESS” </li></ul><ul><li>When business people talk about business ethics they often mean either of the following:- </li></ul><ul><ul><li>Avoid breaking the criminal law </li></ul></ul><ul><ul><li>Avoid actions resulting in civil law suits </li></ul></ul><ul><ul><li>Avoid actions that would affect the company image. </li></ul></ul>
  8. 9. How To Follow Business Ethics? <ul><li>Be Trustful </li></ul><ul><li>Have Clear Documents </li></ul><ul><li>Become Community Involved </li></ul><ul><li>Maintain Accounting Control </li></ul><ul><li>Be Respectful </li></ul>
  9. 10. The Tylenol Crisis <ul><li>Around 20 people died in America within 15 minutes after eating Tylenol. </li></ul><ul><li>65 Milligram of Cyanide found in drug capsule. </li></ul><ul><li>J & J stopped production/advertisement and recalled 31 million bottles. </li></ul><ul><li>Perrier water did something different </li></ul><ul><li>This helped J&J regain their lost reputation. </li></ul><ul><li>Tylenol marketed again </li></ul><ul><li>Product did not loose market because of ethical decision made by J&J </li></ul>
  10. 11. Levi-Strauss and Child labor <ul><li>Became aware of its suppliers in Bangladesh employing children under the age of 14. </li></ul><ul><li>Did not stain the relation with supplier but chose an alternative course of action. </li></ul><ul><li>Required the children sent to school and paid wages to families. </li></ul>
  11. 12. Aaron Feuerstein & Malden mills <ul><li>3 of the 4 buildings which formed Malden mills burned to ground </li></ul><ul><li>Employees thought Feuerstein is going to pocket insurance claims and shut down the factory. </li></ul><ul><li>He did the opposite </li></ul><ul><li>Output reached 230000 yards per week as compared to 130000 yards before. </li></ul><ul><li>The increased productivity result of employees creativity and commitment. </li></ul>
  12. 13. Prisoners Dilemma <ul><li>Both players in prisoners dilemma get higher payoff when they cooperate rather than defect. </li></ul><ul><li>Businesses which follow ethical behavior get better results and add more value to society </li></ul>
  13. 14. Advantages of Ethical behavior in business <ul><li>Increase efficiency and productivity. </li></ul><ul><li>Customer loyalty and more business. </li></ul><ul><li>Increase employee motivation and efficiency. </li></ul><ul><li>Better recruitment. </li></ul><ul><li>Win Win situation for organization and various stakeholders. </li></ul>
  14. 15. Violation of Ethics by Corporations <ul><li>Social Responsibility </li></ul><ul><ul><li>Union Carbide : Dec 1984 Bhopal, India- Toxic chemical used in pesticide was stored in tank, failure to bring down temperature led to gas leak and form a toxic cloud over Bhopal. </li></ul></ul><ul><ul><li>2500 deaths and 300,000 injured and genetic birth defects. </li></ul></ul><ul><ul><li>Reaction of carbide was sceptical on basis of imperfect information. </li></ul></ul><ul><ul><li>Carbide faced negative consequences as their image was hit and led to decline in share prices and incurring a loss of market value worth 900m. </li></ul></ul><ul><ul><li>Trails were held in India in contrast to U.S. Insufficiency of strict laws regarding environment and labour in India Carbide was freed from all litigation with a fine of $425m. </li></ul></ul>
  15. 16. Violation of Ethics by Corporations <ul><li>Ethics Affecting Consumers </li></ul><ul><ul><li>Hayward and Guzman :Disposable contact lenses. </li></ul></ul><ul><ul><li>Pricing decision for two kinds of disposable lenses :1 st 2 week disp. Lenses without rigorous care. </li></ul></ul><ul><ul><li>2 nd 24 hr disp lenses to replace traditional glasses. </li></ul></ul><ul><ul><li>According to higher sales of any one of those lenses H&G would replace the bundle of lenses in other carton in order to sell other lenses would cheat their consumers </li></ul></ul>
  16. 17. Violation of Ethics by Corporations <ul><li>Employee Ethical issues </li></ul><ul><ul><li>Stamford Machine Corporation (manufacturer of typewriters, photocopiers and projectors): May 2001 </li></ul></ul><ul><ul><li>White sales manager accused of discriminating 6 black sales people </li></ul></ul><ul><ul><li>Exclude them from earning higher commission and promotions by not assigning them to profitable territories. </li></ul></ul>
  17. 18. Violation of Ethics by Corporations <ul><li>Affect of Ethics on Shareholder </li></ul><ul><li>Acme Hardware 1986 </li></ul><ul><ul><li>Managers of seven stores manipulated with net income computations leading to higher profits and more rewards and bonuses for them </li></ul></ul><ul><ul><li>Inventory was recorded as lower of cost (FIFO method) </li></ul></ul><ul><ul><li>Expenses of advertising were recorded either as a advance in the end of the year or beginning of next year rather than in period in which advertisements are run. </li></ul></ul>
  18. 19. Cost of Lack of Integrity in the US <ul><li>Employee Fraud - $400B </li></ul><ul><li>Time Theft - $230B </li></ul><ul><li>Employee Dishonesty - $120B </li></ul>
  19. 20. References <ul><li>http://www.ritholtz.com/blog/2008/12/the-financial-crisis-and-the-collapse-of-ethical-behavior/ </li></ul><ul><li>www.about.com </li></ul><ul><li>http://www.inc.com/articles/2000/11/14278.html </li></ul><ul><li>Frank, F 2004, what price the moral high ground: Ethical dilemmas in competitive environments, Princeton University Press, Oxford shire. </li></ul>
  20. 21. References <ul><li>Hartley, R (2005). Mistakes and Successes . U.S.A: Leyh Publishing. 159-171. </li></ul><ul><li>Weiss, J 2006, Business ethics: A stakeholder and issues management approach, Thomson Higher education, Mason. </li></ul><ul><li>Sharp, D (2006). Cases in Business Ethics . 4th ed. U.S.A: Sage Publications. 43-78. </li></ul>
  21. 22. <ul><li>THANK YOU </li></ul>
  22. 23. <ul><li>ANY </li></ul><ul><li>QUESTIONS </li></ul>