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Global Jesuit Dialog on Business Ethics
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Global Jesuit Dialogue on Business Ethics

This blog features dialog among students at Jesuit business schools around the world.

  •  The Issue of Price Cutting

    Thursday, Feb. 28, 2013 3:01 PM

    Background

    The increased competition among the Cement dealers in Kerala (India) has resulted in many of them selling cement at a lesser price than the stipulated market price. The intense price cutting has been worrying the cement companies and the KCDA (Kerala Cement Dealers Association) as it negatively affects the market price of cement and also the profit margin of the dealers. This has also resulted in unhealthy competition among the dealers. After many discussions and trials, the KCDA and the cement companies have arrived at a conclusion that they’ll suspend the dealers, for a stipulated period, if they are caught in price cutting. This decision has been able to bring things under control to a certain extent.

    However, the rule breakers have started finding their way out to beat the system. They do not mind running the risk of a suspension as the punishments currently in place are not stringent enough. Some of the dealers use false proofs with which, the chances of getting caught are bleak. Some of them negotiate with the customers and promise them to give them the cement for a lesser price, provided they keep it a secret. Some of them promise the customers to give huge discounts on other items they buy. Due to many such issues, which are beyond control, the company and the association have not been able to bring in a fool-proof system. This is making the life very difficult for dealers who are ethical. Furthermore, the rule breakers end up making undeserved profits. Hopelessness in finding a fool-proof solution has forced some dealers who are ethical to take up unethical ways.

    My view

    As it is difficult to make the system fool-proof and as it is hard to bring proof against the offenders, the KCDA and Cement companies should make the punishments harsh. In the present scenario, if a dealer breaks the price limit and sells a cement brand say ‘xyz’ to a customer, he is suspended from selling only the brand ‘xyz’ for 3-7 days. However, this does not affect him much as he still has the freedom to sell other brands. So, I feel that if a dealer is caught for price breaking, his minimum suspension should be for 2 weeks and he should be suspended from selling all the other brands. Repeated offence should attract punishments as severe as dismissal. Fear of harsh punishments would force many dealers to refrain from indulging in such unethical practices. KCDA and companies should also look at identifying (though it is very difficult) and rewarding those following ethics, since rewards are more influential than punishments (Trevino and Youngblood (1990)).

    This ethics case was written by Skaria Ephrem, a student at Loyola Institute of Business Administration, Chennai. 

  •  Instagram and the Ethics of Privacy

    Monday, Feb. 4, 2013 3:06 PM

    Background

    Founded in 2010, Instagram considers itself to be “a fun and quirky way to share your life with friends through a series of pictures.” By downloading the free Instagram mobile application (or app), users snap a photo with their mobile phone, then choose a filter to transform the image, and can share it on various sites such as Facebook and Twitter. The company views itself as more than just a photo-storage tool but a way “to experience moments in your friends' lives through pictures as they happen. We imagine a world more connected through photos.”

    In April 2012, the 13-employee company was acquired by social networking giant Facebook for approximately $1 billion. In less than three years, Instagram has become one of the fastest growing social media platforms as seen by its estimated 12 million daily users.1

    Dilemma

    In December 2012, several months after being acquired by Facebook, Instagram announced new changes to its privacy policy and terms of use. According to the updated terms, "a business or other entity may pay Instagram to display users' photos and other details in connection with paid or sponsored content or promotions, without any compensation to you," and there was no apparent option to opt out.2 The backlash was immediate. Photographers and celebrities were particularly upset, given that their photos were a part of their own businesses and brand images.

    Instagram was quick to respond that its intention was simply to improve advertising. Co-founder Kevin Systrom posted, “Our intention in updating the terms was to communicate that we’d like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos.”3

    Instagram's privacy policies and terms of use were once again updated in January 2013. The current terms state, “You hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use the Content that you post.”4 Instagram also reserves the right to share users information (including analytics information, log files, cookies, and location data, as well as the content users post) with companies affiliated with Instagram (mainly Facebook), third-party service providers, third-party advertisers, and “other parties.”5

    While the initial backlash against Instagram has been quelled, there is still uneasiness among users regarding privacy issues. Instagram has to walk a fine line to keep its users happy and still turn a profit. On one hand, Instagram offers a free service to users, which up until this point has been free of advertisements, unlike other social media platforms like Facebook. In order to remain a viable company, Instagram has to bring in revenue somehow, and advertising seems the obvious choice.

    Our Response

    We believe that it is not unreasonable for Instagram to try to make money using member photos for several reasons. Firstly, it would be foolish for Instagram to walk away from such a lucrative revenue opportunity. On January 17, 2013, it announced the following powerful statistics6 :

    • 90 million Monthly Active Users
    • 40 million Photos Per Day
    • 8,500 Likes Per Second
    • 1,000 Comments Per Second

    With staggering numbers such as these, how could a zero-revenue company not optimize these opportunities? And let us not forget that Facebook purchased the company for $1 billion in cash and equity in April 2012. Facebook owes it to its shareholders to try to monetize Instagram considering how much it spent on this company in addition to Facebook’s subpar performance since going public last year.

    Secondly, users pay absolutely nothing for using Instagram's services; there is no price per photo uploaded, monthly/annual subscription required, or pricing scheme of any sort. Individuals and celebrities are not the only ones who derive personal benefit from Instagram, but businesses, too. Many small businesses like to use Instagram as a marketing tool because it is free and effective. For instance, some will upload pictures of new product arrivals to lure new and/or existing customers to come in and purchase. Not to mention, businesses like to have Instagram accounts because the service allows them to build their brand and customer loyalty through daily/weekly posts, thus, giving them the venue to engage and interact with customers in ways they could not do previously.

    Question

    How much, if any, of our information should Instagram be able to share with third-parties and advertisers? OR Why are Instagram users making such a fuss about the revised privacy policy if they are gaining so much personal satisfaction and/or business from a service that is free?

     

    1 http://www.theatlanticwire.com/technology/2013/01/how-many-users-does-instagram-have/61139/

    2 http://money.cnn.com/2012/12/18/technology/social/instagram-sell-photos/index.html?iid=s_mpm#comments

    3 http://blog.instagram.com/post/38252135408/thank-you-and-were-listening

    4 http://instagram.com/about/legal/terms/

    5 http://instagram.com/about/legal/privacy/#section3

    6 http://www.forbes.com/sites/tjmccue/2013/01/21/instagram-reports-90-million-active-monthly-users-plus-three-business-tips/

     

    This ethics case was written by Alexis Babb and Amanda Nelson, both seniors at Santa Clara University and Hackworth Fellows in Business Ethics at the Markkula Center for Applied Ethics.

  •  THE DHAKA FACTORY FIRE: WHO IS RESPONSIBLE?

    Tuesday, Jan. 22, 2013 11:55 AM

    Case by Saayeli Mukherji and Noah Rickling, both Seniors at Santa Clara University and Fellows in Business Ethics at the Markkula Center for Applied Ethics at SCU

    BACKGROUND: The largest Bangladesh factory fire in recent times killed 112 people this last November. This horrible incident raises once again the dilemma of who bears responsibility in such a tragedy. As we examine this case, we have singled out specific players who might bear significant responsibility for this particular event. The Bangladeshi government has the dual responsibility of taking care of its citizens as well as maintaining its economy by supporting the $20 billion a year garment industry that serves as 80% of its total export earnings. The workers, mostly women, earn as little as $37 per month and depend on the government for their safety; however, corruption runs rampant in Bangladeshi politics and the country is currently ranked 142nd out of a 176 countries according to the Transparency International Corruption Perception Index. In this case, there are also implications of arson to further political interests of specific parties. Additionally, the owner of the factory constructed five more illegal floors beyond the original structure, and the factory location was in an area that large vehicles, specifically fire trucks, could not easily enter. Major international retailers have often been criticized for not taking responsibility for their subcontractors; companies whose products were produced at this particular factory include major retailers such as Walmart and Sears.

    THE QUESTION: Do you think that it is the government’s responsibility to enforce safety regulations and bring these factories up to date, or should more be done by multinational corporations that use these factories in order to ensure the safety of their supply chain employees?

    OUR RESPONSE: We assign the majority of responsibility in this case to the government, which has failed to protect its citizens and factory workers on multiple occasions. This most recent factory fire, although more deadly than any in recent memory, is unfortunately not a rarity in Dhaka. The Bangladeshi government fails to properly enforce safety standards they set because of the fear of the impact that those regulations would have on the garment exports. Although there has been an initial outcry against major companies, such as Sears and Walmart, who have subcontracted labor to different Bangladeshi factories, we believe that they are less culpable than the Bangladeshi government because of their degrees of separation from the actual event. Although we recognize the financial constraints and the associated corruption faced by the Bangladeshi government, we believe that only a local authority could create significant change in how safety is valued.  The bottom line is that if the government regulations were properly enforced, factory fires, which are all too common in Bangladesh, would reduce in number resulting in safer working conditions for factory employees. Bringing these factories up to code would, however, create another cost for factory owners. This cost could either cut into the owner’s profits, cut the wages of factory workers, or be paid for by an increase is production costs paid for by subcontractors, which would be passed on to the multinational corporations that use these facilities to create goods. Ultimately, there is a tradeoff here between profit and safety. It has been estimated that a quarter of the factories in Dhaka are not up to current safety codes. If the government enforces these regulations, there will be less business generated because costs would increase, but the factory employees would be able to work in a safe environment and disasters like this fire would become much less likely.

    YOUR RESPONSE: Who do you think bears responsibility for this tragedy? What other ethical frameworks (social, political, etc…) can help unpack this complicated scenario? How would you use these other frameworks to decide who is responsible? We look forward to hearing what you have to say and to entering into a conversation with you.

     

    Photo by BatulTheGreat used under a Creative Commons License