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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – OCTOBER 2013
M.COM – III SEMESTER
ETHICS FOR BUSINESS DECISIONS
Duration: 3 hours Max. Marks: 100
SECTION – A
I) Answer SEVEN questions out of Ten. ( 7×5 = 35)
1. What is business ethics? Is it the same as “Religion, Law, Cultural traits, Feelings, a
branch of Science a collection of values?” Discuss.
2. Discuss the basis of moral rights according to Immanuel Kant? State the criticisms
against Kantian view.
3. “The six pillars of character taken together act as a multi level filter through which
ethical decisions can be processed, and they believe, these can dramatically improve
the ethical quality of our decisions, and thus our character and lives.” Comment.
4. Explain the concept “marketing ethics”? Discuss the areas where changes are
required to happen to acquire moral development and enhancement of marketing
ethics in the context of Indian environment.
5. Write a note on the emerging challenges in the functional areas of HRM.
6. Discuss ethical issues involved with creative accounting?
7. Identify the various elements responsible for the commission of bank frauds. What
are the measures suggested against bank frauds?
8. “Preservation of a healthy environment is everybody’s concern” What role is
expected of stakeholders to play in ensuring environmental preservation?
9. Write an account of environmental audit.
10. Elucidate the key contributions of good corporate governance to a corporation.
SECTION – B
II) Answer any THREE questions out of Five. (3 x 15 = 45)
11. Discuss the “concept of ethical dilemma.” What is the reason behind the ethical
dilemma that takes place under an organizational set up? How do ethical dilemmas
in business affect the stakeholders? How can a business organization resolve ethical
dilemmas?
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12. What are the models that guide managers and executives in making Ethical
decisions? Discuss a suitable framework for ethical decision making. What are the
most important issues to be tackled in the process?
13. “In a general sense, marketers must accept overall responsibility for the
consequences of their actions.” Identify some universal ethical guidelines on which
marketers action should be based. Elaborate on ethical issues concerned with four
Ps of marketing with suitable examples.
14. To achieve fairness, HR executives, apart from having an ethical conscience, follow a
well-laid system of procedures that address the range of human resource issues in
the pursuit of organizational justice. Discuss the various ethical issues that arise out
of the employer-employee relationship.
15. Explain what constitutes good corporate governance from the context of different
stakeholders.
SECTION – C
III) Compulsory Case study (1 x 20 = 20)
Jerome Kerviel: Rogue Trader or Misguided Employee
Socie’te’ Ge’ne’rale: is a French Bank, which is globally recognized. The French
company Socie’te’ Ge’ne’rale (ScoGen) was founded on May 4, 1864. The bank serves
19.2 million individual customers in 76 countries. It employs 103,000 workers from 114
different nationalities. SocGen operates in three major businesses: (i). retail banking &
financial services, (ii). global investment management & services and (iii). corporate &
investment banking. The core values of the company were professionalism, team spirit
and innovation. In 2006, SocGen ranked 67 on Fortune’s 2006 Global 500.
The turmoil in 2006 revolved around the collapsing housing market and a mortgage
industry that witnessed loan defaults in record numbers. Several banks were engaged
in purchasing high-risk mortgage loans. It constrained SocGen’s financial status.
SocGen saw its stock price cut almost in half throughout the year, but it was not the
only potential pitfall for this once robust company. It was the actions of one rogue
trader, Jerome Kerviel, that could have signaled the ultimate downfall of SocGen.
On January 24, 2008, SocGen announced to the world that it discovered a $7.14 billion
trading fraud caused by a single trader Kerviel. Additionally, a nearly $3 billion loss
was posted due to loss in investments in the U.S. subprime mortgage industry. SocGen
halted its shares to avoid complete market collapse on the price of the stock. Jerome
Kerviel, 31 year old, unmarried, did not profit from his scheme. He had been an
employee of SocGen since 2000. He was working in the futures trading desk of the
bank. Kerviel saw his trading profits increase throughout 2007. By the end of the year
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he needed to mask his significant gains, so he created fictional losing positions to erode
his gains. By mid-January, Kerviel had lost over $3 billion. He was hedging more than
73.3 billion, an amount far in excess of trading limits created by SocGen for a single
trader. This amount even exceeded SocGen’s overall market cap of $52.6 billion.
Despite five levels of increased security to prevent traders from assuming positions
greater than a predetermined amount, and a group compliance division in charge of
monitoring trader activity, Kerviel was able to bypass internal controls for over two
years.
Kerviel’s motive was not to steal from the bank, but to have his significant trading gains
catapult his career and to cash in on a significant bonus given to traders who exhibit the
type of profitability he created for the company. Red flags were triggered, but e-mails to
his superiors on his trading activity were ignored due to his overall profitability for the
company. Kerviel admitted his wrong doing, but stated that SocGen was partially
responsible for not monitoring his activities correctly and rewarded his behavior with a
proposed bonus of $440, 000. Kerviel stated that his actions were similar to those of
other traders; he was just being labeled as the scapegoat in this investigation.
Once the fraud was detected in mid-January, 2008, SocGen immediately reported it to
France’s central Bank, Bank of France. After Kerviel admitted his guilt, his employment
was terminated along with that of his supervisors. CEO David Bouton submitted a
formal resignation, along with second-in-command, Phillipe Citerne; however, both
were rejected by the Board of Directors. employees of the company staged
demonstrations where they showed their support for Bouton.
The bank has stated that since the activity was brought to light, there was tightening on
the internal controls, so that actions such as Kerviel’s are no longer possible for a trader.
On January 25, 2008, SocGen took out a full page news paper article apologizing to its
customers for the scandal.
Kerviel was able to evade detection because of his experience in monitoring the traders
in his early years at SocGen. Falsifying bank records and compute fraud were part of
the intricate scheme that Kerviel created. Kerviel knew when he would be monitored by
the bank and avoided any activity during those periods. He created a fictitious
company and falsified trading records to keep his activity under wraps. Kerviel also
used other employee’s computer access codes and falsified trading documents.
Questions:
1. Is Kerviel the only one who is guilty in this case with regard to his actions? Explain.
2. Should other individuals and the bank be legally held responsible and liable for
Kerviel’s actions? Why or Why not? Explain.
3. Describe what you believe to have been Kerviel’s personal and professional ethics?
(Use the terms that you have studied in module 1).
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