Point out the ethical issues in the case and suggest the remedy for the same

Business Ethics

 

Point out the ethical issues in the case and suggest the remedy for the same

 

Case Studies

Case 10 (20 Marks)

What is the biggest bane of the Indian system? Corruption. Statistics and action plan released to PT by the Excise Department (Pune Zone) testifies to this. Tax evasion for excise duties for the year 20022003 has almost doubled from the previous year, this year it is Rs. 174 crore. R.K Tewari, Chief Commissioner, Customs and Central Excise, Pune zone says, “We have launched a two year program. In our first year, we have made an attempt to get the actual evasion figures. Figures till last year were highly understand. This year we are going to crack the whip on defaulters and we have a toughened action plan for the same.” Another striking feature is that the collection of arrears is remarkably low. For the year 20012002, it stood at Rs. 22 crore. However, now with tax evasion for this year pegged at Rs. 174 crore, the department has fixed a target of Rs. 42 crore for arrears collection. “Our action plan is especially designed for the same”, says Tewari. Why is collection so lukewarm? “This is basically because of our legal system. Any defaulter fights us till the apex court and that takes years to sort out,” he explains. As for the corruption in the department, Tewari says “Some people in the department could be working handinglove with the defaulters.” Tewari claims that the biggest defaulters are not the big corporates, but the small and medium scale industries.

Answer the following question.

Q1. Point out the ethical issues in the case and suggest the remedy for the same

Q2. Give the unethical aspects in the above case and suggest the remedy for the same.

Case (20 Marks)

A certain cooperative bank, named after a great saint attracted a number of depositors, became customer friendly, and carried on good business transactions. However during an audit by the cooperative department, irregularities to the tune of Rs. 10 crore surfaced. It was found that the chairman of the bank himself used Rs. 10 crores through several loan accounts. Due to these irregularities, RBI had to stop the transactions and account holders could not operate their accounts. The cooperative Department had to appoint an Administrator.

Answer the following question.

 

Q1. Is it proper and ethical on the part of the authorities to mislead the account holders and customers by carrying on irregular activities, especially when the bank was named after a holy personage?

 

Q2. Is there any breach of ethical conduct on the part of the chairman of the bank for using Rs. 10 crores of the bank through loan accounts? If so, give reasons

Case (20 Marks)

Most people want to be ethical — and consider themselves to be. But incidents ranging from stolen library books to rogue trading illustrate that many people do not act as ethically as they want to, or as they think they do. “With all the evidence to support rational, good choices in the workplace or the marketplace, why don’t we all behave that way?” said Ann Skeet, director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University. Skeet gave an introduction to a May 11 forum called, “The Behavioral Movement: What Business Professionals Should Know About Human Nature,” sponsored by the Business Ethics Partnership of the Markkula Center. Two speakers addressed what we know about why people behave unethically – and how the

conditions that contribute to this behavior may be particularly acute in high pressure environments like Silicon Valley. “The culture of Silicon Valley is different than in most other places,” said Hersh Shefrin, the Mario L. Belotti Professor of Finance at Santa Clara University’s Leavey School of Business and a pioneer in the field of behavioral finance. “This is a risk taking culture and a culture where goals are set very high.” This can make Silicon Valley workers especially vulnerable to the pressures that can lead to unethical decisions. For example, the increasing use of global teams, which can require phone calls early in the morning and late at night as well as regular hours in the office, may contribute to fatigue – a risk factor for poor decision making. Still, Shefrin said, “we’re not as unique as we think we are – just more so.” Workers in Silicon Valley are subject to the same psychological issues as workers anywhere else. For example, all workers have blind spots, said Ann E. Tenbrunsel, professor in the College of Business

Administration at the University of Notre Dame and the Rex and Alice A. Martin Research Director of the Institute for Ethical  Business Worldwide. She addressed the psychology of ethical decision making, or “why people behave unethically despite the best intentions.” There have been significant efforts to improve ethics: at the regulatory level; at the organizational level, with millions spent on training; and at the educational level, with ethics being infused into the curriculum at many universities, Tenbrunsel said. Still, the headlines announcing bad behavior keep coming. “We haven’t taken the psychology of the decision maker into account,” Tenbrunsel said. She listed four ethical blind spots that contribute to poor decision making — ethical illusions, ethical fading, dangerous reward systems and motivated blindness — and elaborated on the first two. Ethical illusions are based on “illusions of our own ethicality,” Tenbrunsel said. She cited studies showing that library books on ethics – presumably checked out by people who think about ethics – are stolen more often than non ethics books. And when people are asked to rate how honest they are, a majority of people rate themselves above average, which is statistically not possible. “We really seem to engage in hyperinflation about things related to morality and ethicality,” Tenbrunsel said. “If everyone thinks their companies are ethical, we don’t do a good job of really trying to find the problems.” It helps to think of three stages of the decision making process, Tenbrunsel said: prediction, action and recollection. Before making a decision, people generally predict that they will act in accordance with their values. When it comes to taking action, that is not always what happens. But after the fact, “we remember that we did better than we did,” Tenbrunsel said. Why don’t people behave as they predict they will? One reason, said Tenbrunsel, is that prediction involves high level ideals, whereas the action phase is more about the details and what is feasible at that particular moment. Forces such as hunger, fatigue and fear come into play, for example, and may overwhelm idealistic plans. “The body and mind’s goal is to mitigate it,” Tenbrunsel said. Ethical fading, the second blind spot Tenbrunsel discussed, happens when a person making a decision doesn’t view the decision as one that involves ethics. People use financial criteria to make financial decisions and legal criteria to make legal decisions, for example. So if a decision can be categorized as something other than an ethical one, it makes it easy to not consider ethics. Language plays a role in this area, as well: For example, a decision about “runoff” may be viewed differently than one about “pollution.” Shefrin continued the conversation by examining rogue trading, an example of how “finance and psychology and ethics all interconnect.” Because trading involves taking risks, it is useful to understand the psychology behind risk taking. For example, most people will choose a sure gain over a smaller chance to win a larger amount. But they will choose the risk of a large loss over a sure loss. “Three of the most important emotions associated with what happens when you face a risk are fear, hope and aspiration,” Shefrin said. “People who are excessively fearful tend not to take risks that are worth taking in an actuarial sense, and people who are excessively hopeful tend to shoot for the stars when it’s not appropriate. In a situation like the rogue trading cases, traders find themselves in a situation where the pressures to succeed are so great that they take imprudent risks.” In addition to the psychology of the individuals involved, the strength of corporate processes and the way corporate culture encourages or discourages risk taking play a role. “Strong corporate cultures that include an ethical dimension can help deal with the vulnerabilities,” Shefrin said. “The tone always starts at the top.”

Answer the following question.

Q1. Give your comments on “Strong corporate cultures that include an ethical dimension can help deal with the vulnerabilities,” said by Shefrin.

 

Q2. Discuss “what business professionals should know about human nature”,

Case (20 Marks)

George is a junior at a small university in Washington State. He is a frequent user of Amazon to purchase materials for college including textbooks and school supplies. In fact, George has an Amazon Prime account to save money on shipping, since he uses the

site so often. George has recently started to take advantage of his prime account by purchasing almost everything on Amazon, from clothing to books to head massagers. On average, George uses the website three to four times a month. One day, George is perusing the Internet and notices an article headline that shocks him: Worse than WalMart: Amazon’s sick brutality and secret history of ruthlessly intimidating workers. George reads that Amazon is not only scientifically managed to the T, but that the employees are treated more as cogs in a machine than as human beings. He reads that Amazon uses monitoring technology to track movements and performance of employees. The company has conducted several studies to find the fastest way to perform tasks in the warehouse. All employees are instructed to follow the “one best way” of completing tasks for maximum efficiency. The logic behind this strategy is to ensure that employees are customer centric, creating a “cult of the customer.” George goes on to read that workplace pressure at Amazon pushes up employee productivity while keeping hourly wages at a barely livable rate. The speed required to complete tasks

causes many employees to struggle to meet targets and less skilled employees often fail. If an employee fails three times, Amazon uses a three strike policy and fires him or her. George is shocked by this article, but at the same time he doesn’t know what to do. He has already paid for his Amazon prime membership and relies on the website for most of his purchases now.

Answer the following question.

 

Q1. Should customer satisfaction be held with utmost regard, even if that means that employees are treated as robots and pushed to unrealistic limits? Debate

 

Q2. What can George do to better the circumstance of the Amazon workers, if anything? Explain.

 

 

Point out the ethical issues in the case and suggest the remedy for the same

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