Ethics A Crisis!

By
Allen Thomas Kannattu
Akriti Jain
Nikhita Gupta
Richa Goel
Sangita Ghosh
Venkat A V R Govind

The

ft

ETHICS

Can Business be Ethical?

Do Ethics matter More Now
Whose Ethics are They?

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Isnt the Best Ethic maximizing

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Sexual Harassment
Abuse Of Resources

What Is
Ethics?

A set of rules and values that define right and wrong conduct.
They indicate when behavior is acceptable and when it is
unacceptable.

Ethical vs. Unethical Decisions

Ethical decision- reasonable and acceptable because it aids
stakeholders, organization, and society.
Unethical decision- decision that a manager would prefer to
disguise or hide from other people because of individual gain is
placed above others needs.

Role Play!!

SAHARA VS SEBI

Key players
Sahara India Pariwar chief Subrata Roy
Sahara India Real Estate Corp (SIREC)
Sahara Housing Investment Corp (SHIC)
Securities and Exchange Board of India (SEBI)
Supreme Court of India
Investors
Promoters, accredited agents

The Curious case of Subrata Roy

- DNA
Sahara India Real Estate Corp (SIREC) and Sahara Housing

Investment Corp (SHIC) issued Optionally Fully Convertible

Debentures (OFCDs) through subscriptions from 30 million
investors with effect from 25th April 2008 to 13th April 2011and
raised an amount of Rs. 24,000 Crore.

The case came into light when SEBI reviewed the Red Herring Prospectus of
Sahara Prime City Limited.

November 2010 - SEBI restricted the promoters and directors of SIREC and SHIC
from raising any capital through the issue of securities including any form of
securities.

 June 2011 - SEBI ordered Sahara firms to immediately

refund the money collected through sales of OFCDs.

Securities Appellate Tribunal (SAT) and Supreme Court of

India ruled in favor of SEBI and ordered Sahara to refund
over Rs. 24,400 crores to investors within six weeks.

Supreme Court issued a non-bailable warrant against

Subrata Roy, he was arrested on 28th February 2014.

Violations (1/2)
Money was raised through OFCDs under the guise of Private
Placements.

The sheer size of the issue makes it a public issue.

Issuance of securities to 50 or more investors required SEBIs approval.

Non- compliance with SEBIs requirements for public offerings of

securities

If OFCDs are issued, the whole process must be completed in 10 working

days. Sahara kept on raising money for a period of 2 years.

Majority of investors of Sahara were villagers, who do not have a

clear idea about the fraud associated with this model of business
practice.

Violations (2/2)
Untrue Red Herring Prospectus
Lack of transparency and information pertaining to the issue

of OFCDs.
Lack of credibility of investor documents.

Sahara sent 127 trucks

containing 31,669 cartons
full of over three crore
application forms and two
crore redemption
vouchers to Sebi office.

Some more Scams

Adarsh Society ScamBending of rules & regulations to allow for the construction of the
building
Illegal possession of flats

2G scam-

Improper allocations of the 2G-spectrum technology, causing heavy loss to

the Govt. of India

Coalgate scam

Satyam scam
Inflation of the accounts in order to show the companys good
image

The Ethics of Corporate Fraud

According to a 2012 Global Fraud Study conducted by the
Association of Certified Fraud Examiners (ACFE) -

projected annual fraud

US $3.5
trillion
loss of 5% of its annual
loss of

revenue of an organization

1,388 incidents
of fraud worldwide

The Ethics of Corporate Fraud

Ethics no longer remain a matter of personal opinion and

strict guidelines need to be enforced in order to clearly
differentiate between right and wrong.
Companies that commit fraud cross ethical lines that have far
reaching consequences.
Financial costs of corporate scams have deepethical
considerations and significantimplications in our lives.
Many of these scams include taxpayer money that would
ideally go toward improving amenities for citizens.
Money lost to fraud could have been otherwise used to
produce goods and services.

Some Daily Life Situations!!!

Some Examples

Abusive or Intimidating Behavior

Accurate but Incomplete Disclosures
Discrimination against Protected Class
Receiving/Offering Bribes, Kickbacks or Incentives
Theft or Fraud: Personal Use of Company Property or
Expense Account Misrepresentations
Sexual Harassment
Termination without Fair Notice or Cause

Why is it important?
Ethics influence and contribute to:
Employee commitment.
Investor and customer loyalty and confidence.
Legal problems and penalties.
Customer satisfaction.
The ability to build relationships with stakeholders.
Cost control.
Performance, revenue, and profits.
Reputation and image.

The Case of the ticking time

bombs
A man who has planted several bombs in crowded areas has been
apprehended, the bombs will go off in a short time and hundreds of
people may die. The authorities cannot make him divulge the
location of the bombs by conventional methods or otherwise.
would it be morally justifiable to torture the bomber's innocent wife
if that is the only way to make him talk?

Yes, because it will save hundreds of lives

No, because it violates the rights of the innocent wife
Cant be sure which to choose

Business v/s Brother

A lady from out of town calls you to list her deceased parents home
in Bangalore. She is not sure what it is worth. She feels it might be
around worth around
Rs. 20,00,000 but lets you determine the worth. You look at the
home and feel it is worth at least Rs. 25,00,000 and realize it would
be perfect for your brother, but he cannot pay more than Rs.
20,00,000 for a house he urgently needs. What do you do?

Lie to the lady and sell the house to your brother at Rs. 20,00,000
Tell the real worth to the lady and let her decide if she can sell the
house at 20,00,000 to your brother

The Case of the Sadistic Guard

You are an inmate in a concentration camp. A sadistic guard is about
to hang your son who tried to escape and wants you to pull the chair
from underneath him. He says that if you don't he will not only kill
your son but some other innocent inmate as well. You don't have any
doubt that he means what he says. What should you do?

Pull the chair, it might save the life of others

Dont pull the chair, you cannot kill your own son
Cant Decide

The Case of the Stakeholder in

dilemma
You are a substantial shareholder of a alcohol manufacturing
company and the company has recently declared bumper
dividends. The management has made a proposal to diversify
and move into retail which will make your financial position
weak and you oppose this. Recently your son has turned to
alcoholism. What do you do?

Turn a blind eye and continue to oppose the management

Support the management even though you lose substantial
amount of your wealth

The Ethical Dilemma

There is no perfect method for dealing with ethical
dilemmas
However there are two ways to at least help you come to
a decision:
Choose the course that is least morally problematic
Select a course of action with the least harm

FORCES THAT SHAPE BUSINESS

ETHICS
Personal Ethics

Organizational Culture

Beliefs and Values

Moral Development
Ethical Framework

Founder
History
Defining Moments
Stories of Development

Organizational Systems
Structure
Policies and Rules
Code of Ethics
Reward System
Selection and Training

Is
Decision
or Behavior
Ethically and
Socially
Responsible?

External Stakeholders
Government Regulations
Customers
Special Interest Groups
Market Forces

The Role of Leaders In Ethics

Develop ethical behavioral influences.
Provide sound ethics training
Instill strong organizational values
Implement plans and strategies to achieve ethical excellence
Build an integrity based organization

Ethical Perspectives for Evaluating

Behavior
Societal
Legal

Organizational

Individual

Societal Perspective

Societal Ethics standards that govern how members

of a society are to deal with each other on issues of
fairness, justice, poverty, and individual rights.

The idea of what is ethical behavior is largely

influenced by the society in which the behavior occurs.

Various public opinion surveys suggest a growing

disenchantment with the lack of ethical behavior

Legal Perspective

Ethics are not laws by any means, simply beliefs about

what is right or wrong.
Legality of actions and decisions doesnt make them
ethical
Laws move with the current culture and moral
principles

Lag behind because they are written and set

Do no ensure or even promote ethical behavior

Often laws and ethics are in conflict

Organizational Perspective
To provide guidance for employees, an organization can
define ethical and unethical behaviors.

Organizations can also guide employee actions both formally

and informally.

Individual Perspective
Despite prevalent societal, legal, and organizational

interpretations of what is ethical, individuals have their own

values and a sense of what is right or wrong.

Lawrence Kohlberg Suggested people develop morally, much as

they do physically, from early childhood to adulthood.

As they develop, their ethical criteria and patterns of moral

reasoning go through stages of moral development

what actually works in guiding

employees ethical behavior ?
Setting the right example
Framing ethics to highlight prevention
Stress the importance of means

Ethics! Important to All Stakeholders

High Ethics Companies

are at ease interacting with internal and external stakeholders;

are obsessed with fairness, honesty, and integrity;
see actions and decisions driven by values;
are confident with the ethical activities of individuals and work groups;
value ethical purpose; and
can make ethics a core competency in strategic planning.

Video!

Thank
You!!!