Ethics For Business Decisions

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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).

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

End Semester Examinations – SEPT /OCT. 2014

MIB – III semester

ETHICS FOR BUSINESS DECISIONS 

Duration: 3 Hrs                                                                                           Max. Marks: 100

Section – A

 

1. I) Answer any SEVEN Each carries 5 marks.                       (7 x 5 = 35)

 

1. Discuss the ethical Code of Conduct expected from managers while performing their duties. Why is it mandatory for business act ethically?
2. Briefly discuss the relevance of “Prisoner’s dilemma argument” and its implications in business.
3. What precautionary tests are advised to be taken by a manager before making effective decisions?
4. Comment on the general ethical issues encountered by marketing managers with suitable examples.
5. What are the Ethical issues associated with pricing which demands regulations in pricing?
6. Compare and contrast the three main kinds of arguments (Utilitarian, Rights and Justice) against racial and sexual job discrimination.
7. What are the expected standards of ethical behaviour code, the financial management personnel should maintain while discharging their duties? What are the circumstances under which financial management indulge in fraudulent behaviour?
8. Who is an Insider? What is meant by Insider Trading? Give a few examples of “unpublished price sensitive information.”
9. In your judgment, what kinds of ethical guidelines should be recommended for attaining sustainable development of the environment?
10. Enumerate the steps taken by SEBI for strengthening corporate governance in India.

Section – B

1. II) Answer any THREE Each carries 15 marks.                        (3 x 15   = 45)

 

11. Describe various dimensions of the concepts “Individualism and Collectivism” and its implications under business organizational environment.
12. Critically evaluate producer’s duties to the consumer. In your judgment, which theory is more adequate? Explain.
13. Elucidate the ethical issues companies make in relation with human resource management.
14. Discuss the structure and functioning of Banking Ombudsman Scheme 2006. What are the benefits of the Banking Ombudsman Scheme.
15. In view of the contractual agreement that every employee makes to be loyal to the employer, do you think that whistle blowing is ever morally justified? What is “Whistle Blower Protection” and how is it dealt with under India’s situation. Explain your answer with proper examples.

 

Section – C

 

III)    Compulsory Case study.                                                                               (1 x 20 = 20)

 

16. Off your face on face book?

 

You are the personnel manager of AllCure Pharmaceuticals. It’s a busy time and the guys in the product approval department have called you up because they desperately need to hire a new team member to assist them with clinical tests of what could become the next block buster drug for the company. You get to work and within a week have actually managed to get three well qualified applicants for the job. The interviews went well and there are two really good applicants. Bothe are women, recent college graduates,  and you find it hard to decide among them.

The clinical trials that the new hire will work on are very important. They require a very reliable, meticulous work attitude, but also good social skills to manage the different relations between the  clinics, the approving authorities, and various departments in the company. A colleague suggests you check the two finalists out on Myspace, Facebook, or any other social networking site. Later at home you go on Facebook, and yes, one of them is there! Surfing through the posts and her photos you see a very sociable, obviously well travelled individual. The other candidate is a bit more difficult to locate. This is too bad, as she already has some work experience and is slightly better candidate of the two. Her details are available only to her friends, but browsing through her list of some 400 friends, you find that one of your current interns is actually on her list. Next morning you ask your intern, who it turns out briefly met this second candidate on a course they took  together at college years ago, whether you could have a look at the Facebook page of the second candidate. Doing so you make some interesting discoveries: not only do you find a number of photos of her at parties with precious few clothes on, but there are even two pictures where she enjoys what undoubtedly looks like a line of cocaine.

You thank your intern for her help and walk back to your office wondering what to do. You certainly do not want to hire someone who has this kind of reputation or where patients in trials or people from approving bodies say: “Heard about Dr. X.? You really have to see these pictures.”

 

Questions:

 

1. What are the main ethical issues in this case?
2. What are the main ethical arguments for and against the use of social network sites for potential employers in this situation?
3. How would you finally decide as the personnel manager in this situation?

 

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End Semester Examinations – OCTOBER 2014

MIB – III semester

Ethics for Business Decisions   [Answer Key]

1. Managers must observe the following ethical values while performing their duties:

Impartiality, Responsiveness to public interest, Accountability, Honesty, Transparency, Integrity. The reasons for an organization to be ethical include: To protect its own interest,

To protect the interests of the business community as a whole so that the public will have trust in it, To keep its commitment to society to act ethically, To meet stakeholder expectations, To prevent harm to the general public, To build trust with key stakeholder groups, To protect themselves from abuse from unethical employees and competitors, To protect their own reputations, To protect their own employees, and To create an environment in which workers can act in ways consistent with their values.

2.

	Prisoner B Cooperates with prisoner A	Prisoner B does not Cooperates with prisoner A
Prisoner A cooperates with prisoner B	A gets 1 year B gets 1 year	A gets 3 years B goes free
Prisoner A  does not cooperates with prisoner B	A goes free B gets 3 years	A gets 2 year B gets 2 year

In real life individuals have to have an ongoing relationship with each other. If one takes advantage of the other in one interaction, the victim can retaliate by doing the same in the next interaction. This threat of future retaliation makes it more rational for the parties in a series of repeated exchanges to cooperate than to take advantage of the other.  Implications in business: Business interactions with employees, customers , suppliers and creditors are repetitive and on going. If business tries to take advantage of employees, customers , suppliers and creditors through unethical behavior today, the latter will find a way to retaliate.

3. Relevant Information Test, Involvement Test, Consequentialist Test, Ethical Principles Test, Fairness Test, Universality Test.
4. 1. Shady and aggressive tactics: Harms consumers. E.g., preserving fish, vegetables. 2. Unfair practices. 3. Out right deception and fraud. 4. Invasion of privacy issues. 5. Price fixing:

An agreement among firms to set their prices at artificially high levels (happens under oligopoly market). 6. Manipulation of supply. 7. Exclusive dealing arrangements. 8. Tying arrangements. 9. Retail price maintenance agreements. 10 Price discrimination.

 

5. 1. Deceptive pricing: A. Bait and Switch pricing, B. Inflated Price. 2. Unfair Pricing:Uses pricing practices to drive competitors out of business. A. Predatory Pricing: 3.  Price Discrimination, 4.  price Fixing; It is an agreement among firms in an industry to set prices at certain levels. The Sherman Act prohibits it because such actions restrict price competition. Two types of price fixing are: A. Horizontal price Fixing: B.  Vertical Price Fixing.
6. Utility: discrimination leads to inefficient use of human resources. Rights: discrimination violates basic human rights. Justice: discrimination results in unjust distributions of benefits and burdens.
7. Ethical behaviour code: 1. Competence in Performing their professional duties, 2. Refrain from disclosing confidential information, 3. Integrity, 4. Objectivity. Circumstances: Unjustifiably aggressive financial Targets, Domination by person or group without controls, Aggressive accounting practice to keep stock prices high, Pressure to reduce tax liabilities, Major performance related compensation, Non-Financial personnel involved in accounting matters.
8. Insider: Person who is/was connected with the company or is deemed to have been connected with the company and is reasonably expected to have access, by virtue of such connection, to unpublished price sensitive information in respect of securities of the company, or who has received or has had access to such unpublished price sensitive information. Insider trading: Trading of a corporation`s stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company. Unpublished price sensitive information: i. Financial results of the company, ii. Intended declaration of dividends, iii. Issue of shares by way of public rights, bonus, etc,  iv. Any major expansion plans or execution of new projects,  v. Amalgamation, mergers and takeovers, vi. Disposal of the whole/ substantial of the undertaking.
9. i. Harvest rates should not exceed the reproduction rates, ii.The wastages have to be recycled, iii. Environmental governance should be a commitment to all organizations, iv. Too much consumerism has to be controlled by persuasion and ethical education, v. Efforts should be made to promote bio-diversity, vi. There should be the promotion of non-consumption values such as aesthetic , cultural , tourist and future.
10. i. Strengthening of disclosure norms for Initial Public Offers, ii. Providing of information in director’s report for utilization of funds and variation between projected and actual use of funds, iii. Declaration of quarterly results, iv. Mandatory appointment of compliance officer for monitoring the share transfer process and ensuring compliance with various rules and regulations,  v.Timely disclosure of price sensitive information.
11. Individualism is defined as an assessment of the emotional independence and autonomy of the person. It relates to an individual’s self-image or self-esteem. The foundation of individualism lies in one’s moral right to pursue one’s own happiness,initiative, and self-responsibility, personal sense of accomplishment.

Collectivism: Means greater emphasis on the views, needs, and goals of the in-group (A group whose norms, goals, and values shape the behavior / attitude of its members). Great readiness to cooperate with in-group members. Collectivism stresses human interdependence, focus on community and society, and seek to give priority to group goals over individual goals.

Individualism and collectivism: Individualism allows employees to directly engage corporate management and negotiate wages, salaries and benefits. Collectivism: Under the collectivism concept, individuals choose to benefit from the collective bargaining power of a union.

Horizontal Individualism: I’d rather depend on myself than others. Vertical Individualism: Competition is the law of nature. Horizontal Collectivism: The well-being of my coworkers is important to me. Vertical Collectivism: It is my duty to take care of my family, even when I have to sacrifice what I want.

 

12. 1. Contract View of Business Firms Duty to Customers: Relationship between a business firm and its customers is essentially a contractual relationship. When a consumer buys a product, the consumer voluntarily enters into a sales contract with the firm. Contractual theory of business firms’ duties to consumers claims that a business has four main moral duties: Basic duty: i. complying with the terms of sales contract, Secondary duties: ii. Disclosing the nature of the product, iii. Avoiding misrepresentation, and vi. Avoiding the use of duress and undue influence.  2. The Due care Theory: Manufacturer has a duty to exercise due care to prevent others from being injured. Due care must enter into: The design of the product, The choice of reliable materials for the constructing the product, The manufacturing process involved in putting the product together, The quality control used to test and monitor production, The warnings, Labels, instructions attached to the product. 3. The Social Cost View of the Manufacturer’s Duties: A legal doctrine that holds that manufacturers must bear the cost of injuries resulting from product s regardless of fault.
13. 1. Discrimination issues: Age, Gender, Race, Religion, Disabilities, Weight, Attractiveness
14. Suppression of Democratization in the Work Place: Suppression of democratic rights of employees, Suppression of employees rights of representation of employees in bodies that would promote their collective interests, Tempting and bribing pliable union leaders, Union busting, Strike breaking. 3. Privacy issues : protecting a person’s private life from intrusive and unwarranted action by others (employers), Work place surveillance on viewing through CCTVs, tapping phones, reading computer files, Some contentious areas are: drug testing, aids testing, so on. 4. Recruitment and selection: Information about past employer, Seeking financial status, caste and family matters, Unwanted personal details. 5. Performance tracking, 6. Privacy issues of computerized employee records, 7. Electronic surveillance, 8. Safety and health, 9. Performance appraisals
15. RBI facilitated the formulation of Fair Practices Code for Lenders and Codes of Conduct. RBI prescribed: proper disclosures by banks, simplified procedures to facilitate expeditious and hassle free settlement of claims of deceased depositors, Customers’ Service Committee of the Board to bring about ongoing improvement in the quality of customer service rendered, hassle free settlement of claims of deceased depositors. RBI facilitated the formulation of Banking Code and Standards Board of India, to place all the awards passed by the Banking Ombudsman before the Customer Service Committee. Legal Basis: Notified in terms of Sec 35A of Banking Regulation Act 1949. Purpose of the Scheme: Expeditious and inexpensive redressal of customer complaints, Deficiency in banking services, deficiency in sanctioning of loans and advances, Other specified matters. Vision: To provide an inexpensive, transparent and credible mechanism ensuring fair treatment of the common person utilizing Banking services

Goals: To ensure customer facilitation and protection through redressal of grievances of users of banking services in an inexpensive, expeditious, fair, reasonable and hassle free manner that will provide impetus for improved customer service on a continuous basis, Provide feedback for framing appropriate and timely guidelines, Enhance awareness of the scheme itself

Benefits: Prompt and impartial resolution of complaints, No cost to the customer, Assessment based on overall fairness, good business practices, accepted banking law and practice.

15. A whistleblower is a person who exposes misconduct, alleged dishonest or illegal activity occurring in an organization. The ethics of whistle blowing: 1. From the people’s point of view: i. need for truth, ii. The trust factor, iii. Better relation between the general public and  company.    2. From the company’s point of view: i. Accuses whistle blowers of breaching the confidentiality agreement, ii. view whistle blowing as an act towards money and fame.
16. From the whistle blower’s point of view: Caught up between integrity, commitment and truth. Consequences of blowing the “whistle” is pretty immense and heavy. “Whistleblower protection”refers to laws and regulation that offers protection who exposes wrongdoing and dishonest activities.  The wrongdoing may take the form of fraud, corruption or mismanagement. Also, it offers punishment against false or frivolous complaints.  Indian situation: It was passed by the Lok Sabha on 27^th December, 2011 and by Rajya Sabha  on  21^st February, 2014 and is still waiting president’s assent.

 

 

 

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – OCTOBER 2014

M COM – III SEMESTER

  ETHICS FOR BUSINESS DECISIONS

Duration: 3Hrs.                                                                                          Max. Marks: 100

Section – A

1. Answer any SEVEN questions. Each carries 5 marks.                          (7×5=35)
2. What is insider trading? What is unethical about it? Give 2 examples.
3. Explain the significance of the RTI Act. Give 2 examples.
4. Why is surrogate advertising unethical? Explain with examples.
5. What is whistle blowing? What is its role in corporate ethical behaviour?
6. Outline the concept of distributive justice and compensatory justice.
7. Discuss the basic objectives of SEBI.
8. Explain two cases of unethical practices in HRM in Indian context.
9. Explain Green Production and Green Washing.
10. Discuss CSR and its role in business ethics.
11. Briefly explain Kantianism and its relevance to business organisations.

Section – B

1. Answer any THREE questions. Each carries 15 marks.                      (3×15=45)
2. Discuss the six stage model of Kohlberg. In which stage will a whistle blower be, and why?
3. Explain the areas in marketing ethics (the 4 Ps) with suitable examples.
4. What is the role of Board of Directors in ensuring ethical business?
5. Discuss consumerism and its role in society. List out five laws passed in India in the context of consumerism.
6. Discuss the different possibilities of bank frauds in India with examples.

 

 Section –C

 

• Case Study – Compulsory                                                              (20 marks)

16. Marketers targeting Children – the ethical aspects

During the last ten years, there have been several controversies surrounding marketers and advertisers targeting children.  Though there are strict guidelines and laws against advertising many products targeted at children in USA and UK, in India, there are no such regulations. In USA, for example, there are strict restrictions on promoting fast-food for children, in view of the social concerns of obesity- related health problems. President Obama has introduced even a ‘Sin Tax’ to curtail fast-food sales and consumption especially by children.

Every advertisement has a target audience. The question is whether there should be stricter regulations for advertising that focus on more vulnerable sections, especially children. Is it alright to show smart looking middle class mothers, usually played by popular actresses or models, serving their children a meal of instant noodles or cereals fortified with small quantities of vitamins? Is it ethical for marketers to persuade children to eat Burger or French-fries instead of the traditional cereal food?

A WHO report mentions that there has been intense lobbying by the private sector against proposals restricting ads of food products for children. Everything from chocolates to consumer durables and even cars are advertised targeting children, mainly because of their pestering power to influence the buying decisions of their parents. This sector of marketing has been growing in tandem with globalisation and the fastest growth has been registered in China and India, in spite of the fact that many people consider it as unethical marketing practices.

 

Questions – (explain with examples)

1. Why do marketers target children? Explain with Indian examples. (10 marks)
2. What are the pros and cons of this strategy? (10 marks)