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Institute of Management, Nirma University

Business Ethics
Individual Assignment

Reflective Journal

Submitted to:

Prof. Sari Mattila

Date of submission: 12th March, 2012 Submitted by:

Siddharth Shah
111255 Section B


This particular incidence has made significant difference in my life. It has nothing to do with business ethics but it has changed my perception about the ethics and more of moral responsibility. Before I narrate this incident I would like to give the background about the moral ethics which I used to have. I have brought up in upper middle class family and my father is an advocate, practicing in income tax tribunal. From my childhood I listen various cases about the stashing of money, evading the taxes, paying the bribes to the income tax officers and commissioners, etc. At the end of the day I always came to the conclusion that if one wants to become too rich, one has to evade the taxes or take the advantage of the loop holes in the laws. As a kid I had asked my father this question many times. Papa, if a person is absolutely ethical cant he become very rich. Papa has replied all the times that he had not seen any of his clients who were too rich and were absolutely ethical. Or I got the reply from my father that it is not possible to become absolutely ethical in this era.

I was 8 or 9 years old when I read in the newspaper that in Rajkot, my hometown, three baggers died due to extreme cold. My grandma was sitting beside me. Spontaneously I asked her, Dadi, why cant we buy some rugs and distribute to these baggers? I got the reply that we cant afford but who are rich people should definitely do. My next question was who the rich people were then. My grandmother replied that my father pays taxes but some Mr. X, name which I dont remember does not pay the taxes and he is a rich man. Somewhere in my grandmothers tone I found the regret that my father is paying the taxes and he is not very rich. All these incidences had made the definition of the business ethics ambiguous for me.

It was December, 2010 and I had one of my entrance exams of MBA in Ahmadabad. After taking the exam I was going to my hotel room in an auto. At a traffic signal on busy CG road one boy in his teens was running crazily. Banging the doors of every car and pleading for help. He was carrying something in his hands probably a child. After some time people started gathering around him. I also left an auto and went to see what was going on. I saw that he had no shirt, was very thin, crying, shouting and

pleading. He was carrying a baby, too small. Pleading everyone to give him money so he could take that baby sister to the hospital. Nobody could say anything. Few men came forward and offered some money but everyone knew that money was of no use because that baby girl was dead. That baby might have died one or two hours back. How anyone could say to this boy that his sister had died and aggravate his agony. I could not bear that situation anymore, went into the auto. The rest of the 15-17 minutes has changed me, my moral perception and my perception about the ethics. While in auto first thought that came to my mind was why I was wearing the Adidas shoes. Why was I wearing the Wranglers denim? Why do I waste 1000-1200 on smoking? And may be many more whys. At that time I decided that I would stop smoking and would donate Rs.1000 which I would save. I did it for four months but as the time passed those wounds got healed. But above all this experience has certainly changed my perception from Capitalist to Socialist.

Across all the restaurants, motels, road side dhabas and tea stalls one can have very common observation. You just order a cup of tea and within seconds chotu, a 10-12 year boy would come and serve you a tea. Once you have your tea and look at the corner of the tea stall you could see another chotu cleaning the cups. You would immediately criticize the owner of the tea stall. How insensitive he is that for the sake of cheap labour he is employing children. But have you given a thought to other side. When a boy chotu comes to you and ask for employment you would probably refuse him. He says that he has lost his father two years back and his mother is bed ridden. He is only one to earn bread for a family of four. If you are wealthy enough, you would donate him a thousand rupees but if even you have no surpluses then what would be your action. You would give him a work and that is appropriate for the situation. Where do ones ethics stand in such situation? I am not denying the fact that child labour should be abolished or giving employment to a child is not unethical. But one has to always see the other side of the reality.

Session no.2:15th Feb and session 5: 22nd Feb (Ford Pinto case and Vioxx case) What is the motive of the business? Is it only profit seeking? There are many answers of this question. Rober Barron, one of the wealthiest industrialists of 19th century, would say the motive of any business should be only profit maximization and amassing the wealth. Sir Jamsetji Tata would answer to implement technologies and creating new avenues for the society. Warren Buffet would say creating the value for the shareholders. Narayan Murthy would say creating the processes based on the values which can be emulated across the industry. Ford Pinto and Vioxx cases are also raises serious questions regarding what is the motive of the business. Ford Pinto case discusses extensively about accountability of the company and its moral responsibility to not to hide anything which the customers are bound to know. Ford Pinto case also highlights the role of whistle blowing. I remember the incident of whistle blowing when I was working at Rajmoti Industries. It had operations in manufacturing and refining of edible oil. For quite a sometime some of the drivers of the tankers were used pilfer the oil. One of the cleaner had provided the information about the pilferage. Vioxx case The companies invest huge amount in the product development. At the time of investing they keep a timeline in mind about when the product would be launched and what would be the payback period. Especially the genetically modified products, pharmaceutical products and technologies have very short shelf life. In the event of delay in launching or failure the company incurs huge loss. Many times the newly developed product is not tested from all the angles due to haste in launching it. Such product may possess inherent risk for the consumers. In such situation the issue of ethics arises. I would suggest that in the situation where it is not known that whether a product possesses any risk or not, the Precautionary Principle should be followed. According to this principle even if a product possesses 1% risk, it should not be used. The responsibility to prove that the product is 100% safe is of the producer and not of the consumer. In February, 2009 a great debate had taken place in India about how much the genetically modified brinjal (BT brinjal) are safe. In this case the impact of the BT brinjal on the environment and health of

the soil was uncertain. After a lot of debate and agitations a wise decision was taken to not to use BT brinjal until further experiments prove it absolutely safe. Today evening I was surfing through the television channels. On one channel I saw an advertisement of a pill which claims that it can reduce 5 kg weight in a week. I had come across this advertisement many times before but never paid attention. After I started writing this journal I thought that I should quote this example. It is very obvious that any pill cannot provide such a drastic weight loss in a week. The claims are exaggerated and misleading. The company has to be accountable of what it shows in its advertisement. The advertisements like these are serious breach of the business ethics. Another two issues which requires debate are marketing as brainwashing and marketing as indoctrination. Many times advertisements hammer so much that even the fake claims done in the advertisement looks real. Such hammering can also change the life style of the consumers. On the other hand some of the advertisement inculcates the liking for the product so much so that the consumer hardly questions the claims made by the product. For example in the advertisement of Boost, the claims are made such that the children who drink Boost have 3 inch more height then who does not drink. Till now nobody has questioned. Many children and their mothers gets inspired after watching such advertisement and buy the Boost.

Session no.6 23rd February, 2012 Many businesses have grown on information sharing models. Every day I receive at least 10 mails and 5 sms of various product offers. From where these marketers get my email id and phone number. The cellular service provider makes revenues by providing the leads to such marketers. I had registered to many websites providing information about the management education at time of my admission. These sites provide leads to the MBA colleges. Till this date I receive mails from many colleges. I have cancelled my registration from these websites but still I receive such mails. Such kind of mails, calls from insurance and finance companies and sms create an issue of privacy. For many websites the source of revenue is sharing the information about the people who have registered with it. But by sharing the information they are violating the privacy of these individuals.

The session. 3: 17th Feb, session 7:24th Feb and session 8: 25th Feb, 2012 In December 2001, Enron was the most searched word on Google. In early 90s it seemed that Jeff Skilling and Andrew Fastow invented a magic wand. The profits of Enron sky rocketed and the stock price soared. Fastow was expert in manipulating the accounts and when the water reached above the head, he could not sustain the manipulation. Whole fraud was unearthed in December, 2001. The company had filed the bankruptcy suit. Who were the people affected the most from this scam. 1. Employees 2. Share holders 3. People who had retired and who lost their pension funds The Enron case proved an old adage correct. How many times you may repeat the lie, a lie cannot become truth. When the questions were raised regarding the profits and stock price over and again but the management of the Enron had kept lying about the facts. In session no.3 a short case of emperors cloths was discussed which can be applied in this case. When Enron used to showcase huge profits and regarded as the most innovative company in the US, no one dared to question these claims. The reason being even some of might have thought that the claims made by Enron were false but they thought that if everyone is agreeing with the claims they should also agree. Until a child told that the emperor had not worn the cloths, no one believed in the emperors cloths case, in a same manner until a journalist and an independent investor questioned the claims made by Enron, no one believed that the claims were false. The same case is very relevant to find the reasons why recession could take place in 2008. There were enough signs that Wall street was overheating and sub-prime bubble was taking place in 2006 and 07 but nobody believed because people who had raised the questions very few in numbers. The other video shown in the class was even more interesting where a researcher from Massachusetts Institute of Technology conducted an experiment on how much cheating people would do and could still remain without guilt. Very interesting outcome of this experiment was people remain less

conscious or guilt free when they are cheating non monetary things. The benefits, stock options given to top executives directly related to this experiment. On the ethical side I would like to quote some examples. During the down turn of 2008 Merrill Lynch lost $19.2 billion but its CEO John Thain curtailed its bonus from 40% to 33%. Whether this decision was ethical? During that time Citi bank announced Vikram Pandit as its CEO. After much criticism in the press regarding the moral responsibility of the top executives to take pay cuts, Mr. Pandit agreed to take just a pay of $1 till Citi bank came out of the crisis. The Satyam scam is also worth mentioning here. Question arises what drives the individuals to plan such a scam and defraud the people. Whether is it an ambition, greed, envy or something else? The answer varies in each case. In the capitalist system there always remains scope for unscrupulous people to thwart the laws or bend the laws for their benefit at the cost of the society.

Session no 9: 27th Feb (IBM case ) The IBM case threw some important insights on what a corporate citizenship is all about. The corporate citizenship is the responsibility of the company towards the society. There is a thin line between the corporate citizenship and corporate social responsibility. The CSR is more related to the philanthropy done by the organisation where as the corporate citizenship is much broader concept and CSR can be its part. The corporate citizenship includes 1. To remain accountable to the customers 2. Not to indulge in unethical practices with the competitor 3. Not to cause harm to the environment and biodiversity 4. The corporate social responsibility 5. Not to exploit the employees The most remarkable thing about the IBM is that it has preserved the values since its inception. But very defining change came at IBM in 1993 when CEO Louis V. Gerstner Jr. took the reins of the corporation. Earlier a lot of importance was given to the corporate governance. The care was taken

that no flaws take place in the internal processes. But since 1993, IBM changed its focus towards corporate social responsibility. IBM was very clear that it would not donate money in cash but it would harness its technical knowhow and human resources for the betterment of the society. On 2nd March I attended a seminar on Corporate social responsibility at Ahmadabad Management Association. The seminar was taken by Bimal Bhatt, chartered accountant and former auditor at ICICI bank and venture capital. He is now an active Right to Information (RTI) activist. He discussed various CRS measures taken up by the companies. Some of the CSR measures which attracted my attention were form TATA Salt and Wisper. Each 200 gm packet of TATA Salt cost 10 rupees. TATA donates 10 paise to education of the girls at Mithapur where the TATA Salt is manufactured. Other initiative from TATA was Titans 10% employees are handicap. P&G Wisper donate 1 Ruppe form every pack of Wisper sold. The seminar compelled me to think if I become an executive and I can decide the companys CSR activity then what CSR activity I would pursue. After thinking for a while I decided that it would be in the field of education. I believe that CSR activity should reach to the poorest of poor. Suppose there is a poorest family whose income is 50 rupees per day. It would take at least two generation for this family to come out of the poverty. I had heard about the institution named Super 30 in Bihar. There were two teachers, one taught maths and another taught physics and chemistry. They started this institution in 2001. They hand pick 30 bright students from the poorest families, train them for the IIT entrance exam JEE without any fees. All the expenses including boarding and lodging are borne by them. The success ratio is out of 30 at least 28 clears the entrance exam. Once these students are into the elite institute their future is secured. By such effort lives of thousands have changed. As CSR activities I also would like to take similar path. Thousands of vacant government jobs are created every year. If the proper training is given to poor deserving candidates, they can get qualified for these jobs. In this way if two generations were required earlier to take the poor family out of the poverty now it would take just one generation.

Session no. 10: 29th Feb, 2012 (bp case)

The business ethics for the environment protection and conservation was at the center stage in todays discussion. Very important concept of Greenwashing was discussed in bp case. The greenwashing is used for those companies which at one hand portray its image as green companies or sensitive towards the environment but that is just a veil. In actual they indulge in activities which pollute the environment. They are hypocrites who want to establish their image as environment friendly companies. The concepts of the strict liabilities and absolute liabilities are also important in the conservation of the environment. I recollect a landmark case from where the principle of absolute liability was initiated in India. On the night of2-3 December, 1984 Bhopal gas tragedy took place. Around 10 thousand people were killed and many are suffering from various disabilities. The United Carbide Corporation had defended that they were not responsible for the leakage of Methyl Iso Cyanide (MIC). They had taken every possible care to prevent any such leakage to put forward the argument that the leakage might have happened by the forces of the nature. At that time the principle of the strict liability used to be in practice. On 4 December 1985 hydrochloric gas leaked from Delhi cloth mill and fertilizers. One person was killed and several were injured. Hearing this case Justice Bhagwati of the Supreme Court established the principle of absolute liability. According to the principle of the absolute liability the person is liable for the harm caused by the substance which he has kept in his possession. There can be no argument for his defense. The principle of absolute liability is very important to plug the loopholes in the laws and to prevent the incidents like Bhopal Gas Tragedy. The traditional knowledge also has significant importance. Firstly there is an urgent need for documenting this knowledge. Over the years such knowledge propagates from one generation to next generation. The practitioners of this traditional knowledge are decreasing and there is threat that we may lose it. The other aspect is protecting it from intellectual property rights (IPR). If patents are granted then the local people who know from the generations can be adversely affected. Other important subject discussed was environment friendly products. There are people who are willing to buy such products even when they are quite costly because they are environment conscious people. In marketing there is a concept called lovemarks. These are the marks which attaches the

customers emotionally very strongly. The environment friendly products can also fall under this category. In one of the article I had read that in Netherland there is a poultry farm which has priced its eggs significantly higher than the competitors. The reason being it does not keep its hens in the cage. It allows hens to roam freely in the large farm. So if the consumer wants the freedom of the hens, they should by these eggs. I dont know to what extent it is a marketing gimmick or a sincere effort to take care of the hens. In many such areas to demarcate the business ethics and gimmick is difficult.

Session no.11: 2nd March (ethics in media) All of a sudden in last decade Media has emerged as very significant word. Today you ask any politician about who scares them the most. The answer would be not the opposition party or leader but it would be media. Today media is in position where it can make or break the fortunes of many people, companies and political parties. In this context the role of media has become ambiguous. Narrowing down further what is the exact role of news papers and news channels. The reading discussed in the class focused on the issues which the media often experiences. The dilemma which the news reporters face while reporting the news. The newspapers and news channels has to strike a balance between the profitability and the contents which they provide. The content like entertainment news, celebrity gossips, page 3 parties and health or cooking tips are more interesting to the readers. Such content would increase the readership or viewership but at the same time the newspapers and news channels have moral responsibility to provide news items which can make the reader and viewer well informed about the current affairs. The content which forces the reader and viewer to think about the situation. The other very recent phenomenon in electronic news media is sensationalisation of the news. I remember some time back I was surfing through the television and I saw the headline breaking news on one of the news channel News 24. It is a Hindi news channel. The breaking news was flashing in the back ground that the reporter of the channel had found the treasure of Ravana hidden in SriLanka for time immemorial. After watching the show and wasting half an hour the reporter told that the

treasure might be at that place but as that place was surrounded by huge boulders he could not find it. If someone put labour and move those gigantic boulders the he would surely find the treasure. I dont understand what kind of news program was that.

Session12: 5th March, 2012 (Satyam case) As far as I remember, it was 2007; the interview of Ramalingam Raju, CEO of Satyam Computers had featured on CNN IBN. Satyam had then begged two large clients, one FIFA and another Malaysias oil giant Petronet. The interviewer Rajdeep Sardesai asked Mr. Raju about why he chose name Satyam. In reply Mr. Raju said that truth was very close to his heart. At the time of starting the company he had asked his father to christen the company. His father insisted that whatever name he might choose, name must signify the value. Mr. Raju zeroed down to Satyam as it means Always truth in Sanskrit. A year and half later what transpired were hardly believable. Question raised was again related to the corporate governance and the role of regulatory authorities. Also what kind of role does executive directors play in the company was a question. The board of Satyam consisted eminent personalities such as the professors from the Harvard. The big question arises after a time and again is whether it is possible to plan a scam of such magnitude without even giving hint to the regulatory authorities.

Session 13: 6th March, 2012 (Ethical code.How ethical are you) I have some notions or perhaps everyone has notions. At the start of this course I thought what the need to include this course is. Everyone knows about what ethics are and ethics comes from within, it cannot be taught. May be many would have thought the same. Today what I witnessed in the class was quite surprising. When the students were asked to write the Code of ethics, the areas where they would like to be ethical, all most all of us could not write much. It was funny to see every one of us looking so uncomfortable. Many of us peeping into neighbors book to get some clues.

At this point of time I realized that to talk about ethics is easy but when it comes to how and where one would practice, it becomes difficult. For me the unethical thing which I cannot think about and I am very sure that I would never do is exploiting the people and environment. Exploitation is everywhere around us. Today the results of Uttar Pradesh election were out. The situation in UP is pitiable. The prime reason is exploitation. The politicians are exploiting the ignorance and faithfulness of the poor. The political parties in UP wants people to remain poor and uneducated so they can exploit them election after election. Mahatma Gandhi ones said these words of wisdom, There are enough natural resources to satiate the needs of the humans but very few to satisfy the greed of the humans. As one becomes richer one starts consuming more natural resources. I would say myself fortunate that in my childhood I got many opportunities to attend the nature education camps as well as water harvesting camps. These camps have ossified the sense of responsibility towards environment so much that I am confident that I would always remain ethical for any issues related to the environment. One more area which I had mentioned in my code of ethics was honesty and truth. Again speaking truth all the time is the most difficult thing. I had not told my father that I used to smoke and now I have quit. Once my father had told me that he was really proud that I had no bad habits. Should I have said that I used to smoke? If I have said the truth then he would have been hurt. Even on many occasions I do not speak truth to myself. I had put some things in my CV which I had never done. After repeating these lies in every interview, the lies became so internal to me that I really believed that I have done those things. Honesty in every relation matters. But is it possible to remain 100% honest. I guess it is not impossible but quite difficult. I have a bike and I live in a hostel. Everyday five of my friends come and ask me to lend them my bike. Without any objection I had lent them my bike but I had to pay heavy maintenance. I started lying when someone asked me to lend. The question of ethics arises when one has to make a tradeoff between honesty and practicality. The ethical issues for me in The code of ethics are in this priority 1. I would never exploit the people 2. I would never exploit the environment 3. I would like to speak truth as far as possible. I would like to have improvement all the time

4. I would always be honest in all the relationships, be it with my parents, friends, peers, subordinates, girl friend or wife.

Session 1:13th February, 2012 and Session 14:7th March, 2012 (Globalisation and business) In this session the ethical issues rising after the globalization were discussed. The focus was on the corruption and the labour practices. Corruption Take a newspaper and flip the pages. One does not need to search the news on corruption. The corruption has spread its tentacles deep into our society. People want to become a politician or a civil servant not to serve the country or society but to make money. The reason being corruption is so pervasive is that we have accepted it in our lives. Another reason which I think has contributed in escalating the corruption is our weak judiciary. It is very difficult to bring the people with corruption charges to the justice. When a common man hears about the corruption or graft done by an influential person his first reaction would be nothing would happen. After few months or years everyone would forget about the case. Such kind of situation provides incentive to indulge in corruption to many who are honest. Many argue that if they would not indulge in corruption then someone else would do. I think in India and in other developing countries the corruption would grow as the income disparity would grow further. Also in developing countries red tape and bureaucracy are major reason for high corruption. An important issue which was discussed in the class was the role of developed countries in paying bribes in the developing countries. The defense and energy are two such fields where developing countries depend heavily on the developed countries. On many occasions allegations are made on the foreign MNCs of paying bribes to the government of the developing country to secure the large contracts. Few years back many US based MNCs were accused of paying bribes to the government officials of the developing countries. These MNCs use to defend that if they want to do business in these countries then they have to indulge in the corrupt practices because that was the way of life in these countries. The US legislator enacted the Foreign Corrupt Practice Act in order to restrict such kind of

practices. I believe that the law on this line must be enacted internationally by the UN. Its implementation should be on the lines of CTBT or international human rights binding to all the signatory nations. Such step would really make positive impact on curbing the corruption. Nike case Globalisation has given an opportunity to low income countries to become a manufacturing hub for the developed countries. The cheap labour in these countries attracts many MNCs to open their manufacturing centers in these countries. But at the same time there is another side of the globalization which is exploitation. These MNCs can exploit natural resources and human resources of the developing countries. Nike has been accused for long for dual standards it practices in paying and recruiting laborers in the developing and the developed countries. It has also been accused of recruiting child laborers in its factories in Pakistan, Cambodia, Vietnam and China. The issue of cross subsidy in agriculture is another such issue which has arisen after the globalization. Looking into this issue, it is unethical from the developed countries side to provide cross subsidy to the agriculture in order to keep the agri commodities price low and increase the market share. The issue has been discussed at Doha round extensively over the years but no concrete solution has been found. Dumping of hazardous waste in African countries is another such issue which has come up after the globalization.

I was absent in session no.4 and no.15

Learning outcome Definitely I have gained something by writing this journal. In first four sessions I neglected the subject. I had not done pre reads nor participated in the class. I had a perception that the ethics cannot be neither taught nor can be learnt. The ethics are internal thing which one has imbibed over the years. I think from the fifth session I started liking the subject and more when I started writing the journal. The Reflective Journal gave me the opportunity to ponder over so many issues and variety of topics. I

may be still right that ethics cannot be taught but when one reads the outcomes of the cases where the people were cheated or defrauded, one further develops sympathy towards the victims. For example, in the Enron case so many common people had lost their retirement funds or in the Satyam case so many retail small investors lost their life savings. When one studies such cases, one develops ethics unconsciously. At the end I would say that perhaps ethics cannot be taught but they can be imbibed.

Grading I have combined the sessions of the journal and not followed the guidelines. I have done this because by doing so I could explain the concepts in a better way. I have made a genuine effort. I have tried my level best to think deeply each and every issue. The grading is difficult. It depends on the perception. I would give A grade for my efforts. A minus for the learning which I have got. A minus for my honesty in writing and B positive for introspection. The final grades depends upon the evaluator.

Insights into group assignments Right now I am facing an ethical issue. Should I reveal the truth or become pragmatic. I guess ethical. The group topic was selected by me. I am doing Masters of Business Laws, so I had chosen the topic related to the laws. The group members had different compulsions and were engaged in their obligations. I fully support their commitments and I personally know that those commitments were more important. I have received help and inputs from all the members, they had asked me to delegate the work. But I insisted that I could complete the project. I do not feel that I have done most of the work. In some other projects the same guys had worked for me. In no sense the group members had neglected the work.