Ethical dilemmas in product

development
 The contract view

• Duty to provide consumers with a product

that lives up to expectation.
• Factors affecting the claims:
– Reliability
– Service life
– Maintainability
– Product safety
 The due care theory

• Have an obligation to exercise due care to

prevent the consumer from being injured
by defective products.
• Areas:
– Design
– Production
– information
 Ethical issues in product decisions in
seven stages
1. When the idea is first mooted
2. Screening of product designs
3. Product development and evaluation.
4. Marketing strategy
5. Test marketing
6. Introducing in the market
7. Product decline stage.
• The other areas where the ethical issues
plays a major role is
– Violation of the laws
• Patent
• Trademark
• Copyrights
Ethical dilemmas in finance
Finance
◆ Can be classified into
☺Financial services- stock exchanges
☺Financial markets- investment banks, commercial
banks, mutual fund companies etc.
Financial services
◆ Operates through personal selling by
stockbrokers , insurance agents, tax advisors ad
other financial professionals.
◆ Creates innumerable opportunity for abuse
◆ Churning
◆ Twisting
◆ Flipping
◆ Three objectionable practices in selling
financial products to clients are
☺Deception
☺Churning
☺Suitability
Deception
◆ Salespeople avoid speaking of commissions
◆ Misleading information through promotional
materials
◆ Can also occur when essential information is
not revealed.
Churning
◆ Defined as excessive or inappropriate trading
for client’s account by a broker who has control
over the account with the intent to generate
commissions rather than to benefit the client
Suitability
◆ The most common cause of unsuitablity are:
☺Unsuitable types of securities
☺Unsuitable grades of securities
High finance
◆ Operations that are highly vulnerable to risk.
◆ 4 major types of high finance are:
☺Stock market operations
☺Bank operations
☺Stock market operations through international
swapping transactions and derivatives
☺Mergers and acquisition.
◆ Most ethical issues are in the area of high
finance
The special ethical features of high finance are
◆ Rewards are from speculative forecasting
◆ Focus of org is to fulfill the naked greed
◆ Decisions are highly risky and are equivalent to
gambling
◆ No transparency in systems
◆ Systems are such that rewards for risk taking go to
one set of persons while cost have to be incurred by
others
◆ The rewards are huge and therefore tempt the risk
takers
◆ Internal controls are weakened coz of the mystique of
the subject
Insider trading
◆ Insiders are chairman directors officers etc and
principal shareholders with 10 % or more stock.
◆ Can access confidential information
◆ Not all insider trading is illegal or unethical
Mergers and acquisitions
◆ They have been castigated for destroying
industries, capital structures, causing
unemployment, unsettling suppliers, customers
and traditional power relations and responsible
for many of the ills of modern economies.
What will happen during takeover
◆ Swap ratios for shareholders will go in favor of
predator company
◆ Employees employed in the predative company
get less advantage
◆ Suppliers of materials gets lesser importance
◆ Culture change in the case of cross border
mergers
What can be done????
◆ Firstly, the specific agreements entered into
have been legitimate arrangements. That
means, not all undertakings are legitimate for
business. So the question is, whether all
expectations of stakeholders are legitimate.
◆ Secondly, such expectations are to be
respected if they are created by formal, written
contracts or promises made. Unethical breach
of contracts will badly affect business in the
long run.
What can be done????
◆ Thirdly, if inappropriate expectations have
been created by the management to facilitate a
takeover, it becomes unethical. For example,
workers could be promised of a higher pay, job
security, etc. in view of a merger.
◆ if the unethical undertakings were simply
suggested, business has no obligation to fulfill
them. So the new acquirer will have to assess
how strong and how long were the
expectations.
Ethical Dilemmas In Human
Resource Management
HRM
◆ Includes personal management, industrial
relations and most importantly management
planning and control.
◆ 2 moral obligations
– The obligation of the employee to pursue the
organizations goals and avoid any activities that
might threaten that goal
– The obligation of the employer to provide with
a fair wage and fair working conditions.
Hiring/ Recruitment
◆ Screening
◆ Tests
◆ Interviews
Promotions
◆ Seniority
◆ Inbreeding
◆ Nepotism
Discipline and discharge
◆ For proper functioning of the organization HR should
establish guidelines on
– Appearance
– Punctuality
– Dependability
– Efficiency and cooperation
◆ Concern for fairness, non injury and respect for
persons.
◆ Four types of discharge are firing, termination, layoff
and position elimination.
◆ Before discharge employee should be given sufficient
warning, severance pay and also proper counseling
Wages
◆ Factors that has to be taken into consideration
b4 determining wages and salaries
– The prevailing wages in the industry and the area
– The firms capabilities
– The nature of the job
– Minimum wage laws
– What are other employees inside the organization
earning for comparable works
– Local cost of living
Health and safety
◆ Remain foremost moral concern in the
workplace
◆ Stress and the occupational diseases are greater
The right to privacy
◆ When ever an organization infringes on an
individuals personal sphere it must justify that
infringement.
◆ Polygraph test, personality test drug test and
monitoring of employees on the job can intrude
into employee privacy.
◆ The exact character of these devices, the
rationale for using them to gather information
in specific circumstances and the moral cost for
doing must always carefully evaluated
Job discrimination
◆ Discrimination involves false assumptions
about the inferiority of a certain group and
harms individual member of that group.
◆ Discrimination on the basis of sex or race or
caste also violates people’s moral rights and
mocks the ideal of human moral equality.
Whistle blowing
◆ Term was first used for the government
employees who go to public with complaints of
corruption or mismanagement in government
agencies.
◆ Whistle blowing is an attempt by a member or
an ex-member of an organization to disclose
wrong doing in or by the organization.
Types of whistle blowing

Internal

Whistle
blowing
types

External
Arguments
◆ Argued that external whistle blowing is always
wrong because employees have a contractual
duty to be loyal to their employer and to keep
all the business aspects confidential.
◆ External whistle blowing can be justified only
if other means such as internal whistle blowing
of preventing a wrong has been tried but have
failed
Moral justification for external
whistle blowing
◆ Wrong is serious enough.
◆ Clear substantiated reasonably comprehensive
evidence.
◆ Reasonably serious attempts (if internal whistle
blowing has failed)
◆ Reasonable certain (that external whistle
blowing will prevent the wrong)
Companies whistle blowing
policy
◆ Components are:
– An effectively communication statement of
responsibility for the employees
– A clearly defined procedure for reporting
– Well trained personnel to receive and investigate
reports
– A commitment to take appropriate actions
– A guarantee against retaliation
Ethical dilemmas in
technology management
J k Galbraith defines technology as a
systematic application of scientific or
other organized knowledge to
practical task.
Some technological innovations are
wonders, some other are horrors.
All ethical issues raised by new
technologies are related in one way
or another to question of risk.
Use of IT

To monitor the activities of other

companies
May invade the privacy of individuals.
Ethical issues

Privacy
Accuracy
Property
Accessibility
Specific threats
Loss , theft or corruption of data
Inappropriate use of data
Theft of mainframe computer crime
Theft of equipment / programs
Errors in handling , entering processing
transferring or programming of data
Equipment malfunction
Destruction from viruses and similar
attacks.
Computer crimes

Use of computers to embezzle funds

or assets
Destruction of alteration of s/w or data
Unauthorized access or theft of s/w
equipment or data
Unauthorized use of computers and
computer services.
Attacks on computer
systems
Methods of attack

Data tampering Programming

/diddiling techniques

Virus
Trojan horse
Salami slicing
Preventing computer
crime
Hire carefully
Encrypt data and programs
Monitor system transactions
Separate employee functions
Conduct frequent audits
Restrict system use
Educate people in security measures
Protect sources with password or access
cards
Virus detection /eradication software
packages
Main moral dimension of
an info society
Information rights and obligations-spell out
corporate privacy and due process policies
Property rights and obligations- clarify how
corporation will treat property rights of
software owners.
Accountability and control- clarify who is
responsible and accountable for info
System quality- identify methodologies and
quality stds to be achieved.
Ethical analysis as a five
step methodology for
analyzing a situation
Identifying the facts
Identifying the values
Identifying the stake holders
Identifying the options
Consequences of action
Competition and ethics
Perfect competition
Monopoly competition
Oligopolistic competition
Price fixing
Manipulation of supply
Exclusive dealing arrangements
Tying arrangements
Retail price maintenance arrangements
Price discrimination