ETHICAL ISSUES IN FUNCTIONAL AREAS

Module 4

WHAT IS ORG. FUNCTIONAL AREA

FUNCTIONS

Marketing HR Production IT/Systems Finance

MARKETINGEthics in

MARKETINGMarketing is the process of communicating the value of a product to customers, for the purpose of selling that product (goods or services)

Marketing ethics addresses principles and standards that define acceptable conduct in the market place.

Unethical activities usually develop from the pressure to meet performance objectives.

Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behavior.

Some obvious ethical issues in marketing involves clear cut attempts to deceive or take advantage of a situation

ETHICS IN MARKETING

SOME UNFAIR MARKETING PRACTICES

• False and misleading presentation of facts.• Deliberate omitting of required information.• Implying a benefit that hardly exists.• Trade puffing and exaggerationsOpinions rather than facts - Statements such as "this car is in good shape" and "your wife will love this watch" constitute puffing.• Open criticism of competitors.

ETHICAL ISSUES IN MARKETING FUNCTION

1. ETHICS IN MARKETING RESEARCH

• Consumers are concerned about privacy, and Internet has increased privacy concerns.

• government also maintains a Do Not Call Registry to prevent unwanted telemarketing.

2. ETHICS IN PRODUCT STRATEGY

• Example: Package strategy.

• Larger packages are more noticeable on the shelf.

• Oddly sized packages make price comparison difficult.

3.ETHICS IN DISTRIBUTION

• Manufacturer’s offers not getting passed on

• Should a company distribute its products in marginally profitable outlets that have no alternative source of supply?

4.ETHICS IN PROMOTION

• Truth in advertising is the bedrock of ethics in promotion.

• Marketing to children has come under increased scrutiny.

• Marketing beer to college students, including through providing promotional items such as shirts and hats, raises ethical questions.

5.ETHICS IN PRICING

• Artificial scarcity & Black marketing

• Fixing a high price and charging less – false impression

Customers

ProductIssues

PricingIssues

PromotionIssues

DistributionIssues

Ethical Issues & the Marketing Mix

HUMAN RESOURCEEthics in

ETHICS IN HRM

• The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee

HR Activities

• HR Planning and Analysis• Equal Employment Opportunity• Staffing• HR Development• Compensation and Benefits• Health, Safety, and Security• Employee and Labor/Management

Relations

How HR Spends Its Time

What Organizations expect from Employees

Commitment Intelligent & hard work Discipline Loyalty Maintaining confidentiality Value addition

What Employees expect from organizations

Non statutory benefitsCompensationCollective bargainingWhistle blowingPrivacyData SecurityPsychological contractOutplacement

Recruitment

• Recruitment of kith and kin without assessing abilities• Recruitment based on financial favours• Recruitment of relatives of other employees• Recruitment of under-qualified persons• Recruitment of over-qualified persons • Gender based recruitments • Employing child behavior • Giving less than minimum wages as fixed by

government.

Training • Arranging training for only pet employees • Getting outsiders to train at high costs when insiders are

available• Planning training programmes without assessing their real need• Organizing training programmes during peak seasons, upsetting

the business rhythm.• Getting high profile trainers with expectations of a reciprocal

favour. • Training programmes without proper preparation just to show

achievements in the annual report. • Extending the duration of training programmes • Supplying outmoded training materials • Getting useless trainers as an obligation

Administration • Tampering with leave records of employees• Playing with employee records – adverse remarks in

a few cases• Allow selective absenteeism on personal

considerations• Giving promotion letters to favourites earlier than

others (making him more senior)• Favourite supplier for office purchases• Favourite security agency• Favourite uniform suppliers• Unclean premises.

IR • IR Managers not averse to siding wherever there were monetary

benefits• Bargaining with the management till they want to be seen as true

in the eyes of workers• IR Managers felt they were a superior lot with great powers and

used this to recruit their known ones• Try to delay the solution as far as possible as their work depended

on IR disputes• Incite (Provoke) workers to go on strike. • Inducing Management/Workers to indulge in unhealthy practices. • Pressurize workers and state their genuine demands as not

genuine• Divide and Rule• Frame stringent and complicated rules to keep the conflicts going.

PRODUCTIONEthics in

• This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm.

ETHICAL ISSUES IN PRODUCTION• Defective, addictive and inherently dangerous products and

services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing)

• Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading

• Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health.

• Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.

• Medical products – duty to test adequately, side effects, safety instructions, risk factors in financial products.

• Substitutes for published ingredients

IT/SYSTEMSEthics in

Ethics and IT

• Developments that took place in the last 50 years in the field of science is more than the entire period before.

• Transition from man – tool – machine – automation – chip – a progression that has made the human race less and less human.

• As a result of technological growth, materialism took precedence over ethical considerations and meeting the end through any means became standards of society.

IT & SOCIETY

• The use of information technology in business has major impact on society, thus raises serious ethical considerations in the areas such as privacy,crime,health,working-condition, inividuality,employment.

UNETHICAL PRACTISES

• CRIME IN THE COMPUTER• MONEY THEFT• SERVICE THEFT - (bypassing) a utility meter so that the

true level of consumption is understated• DATA THEFT• MALICIOUS ACCESS• COMPUTER VIRUS• HEALTH ISSUES• CYBER ETHICS.• SOFTWARE OWNERSHIP.• CENSORSHIP.

FINANCEEthics in

ETHICS IN ACCOUNTANCY

Accounting is - The process by which any business keeps track of its Financial activities by recordings its Debits and Credits and balancing its accounts…. Accounting by its nature, is a system of Principles applied to present the Financial position of a business and the results of its operations and cash flows..

ETHICAL ISSUES SURROUNDING ACCOUNTING PRACTICES:

o Underreporting incomeo Falsifying Documents o Illegally evading income taxeso Or otherwise engaging in Fraudso Creative Accounting

Example- The accounting Fraud case of Mr. Ramalinga Raju in Satyam Computers

IN ORDER TO PREVENT SUCH ACCOUNTING FRAUDULENT--

• GAAP(Generally Accepted Accounting Principles)

• AICPA Code of Professional Conduct (American Institute of CPAs)

• Indian Accounting Standard

ETHICAL ISSUES IN FINANCIAL MARKETS:

Ethical issues are related to- savings and credit banks, investment banks finance companies and fund managers, intermediaries and advisers, insurance companies and financial managers of large industrial

organizations.

STOCK MARKET FRAUD The country has witnessed various stock market frauds by brokers in

collusion with corporate to cheat investors and fool regulator SEBI. There were two major securities scam in the recent past – Harshad Mehta securities fraud and Ketan Parekh scam.

Brokers pushed the prices of selected shares through artificial trade to attract retail investors and than suddenly withdraw from the trade. In several cases the shares of bogus and paper companies were raised to unreasonable levels. Once the scandal was exposed, the share prices collapsed resulting in huge loss to investors, especially those who invested their money on rumour without ascertaining the credentials of the company. Heard mentality proved expensive for many. Having suffered huge losses, few investors even committed suicide

ETHICAL ISSUES IN Merger & Acquisition

o Adverse Effect on Competition in the Market

o Anti competitive Business Practices

o Monopoly Business activities

o Forced M&A