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 Ethical Dilemmas In Human Resource ManagementResource Management

HRMHRM

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

Whistle blowing types

Internal

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

Virus

Trojan horse

Salami slicing

Methods of attack

Data tampering/diddiling

Programming techniques

Preventing computer crime

Hire carefullyEncrypt data and programsMonitor system transactionsSeparate employee functionsConduct frequent auditsRestrict system useEducate people in security measuresProtect 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 competitionMonopoly competitionOligopolistic competition

Price fixingManipulation of supplyExclusive dealing arrangementsTying arrangementsRetail price maintenance arrangementsPrice discrimination