Global Jesuit Dialog on Business Ethics

The Issue of Price Cutting

mschulman@scu.edu (Ethics Center Student) — Thu, 28 Feb 2013 15:01:00 PST

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

ethics@scu.edu (Alexis Babb and Amanda Nelson) — Mon, 04 Feb 2013 15:06:00 PST

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?

THE DHAKA FACTORY FIRE: WHO IS RESPONSIBLE?

ethics@scu.edu (Saayeli Mukherji, Noah Rickling) — Tue, 22 Jan 2013 11:55:00 PST

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 142^nd 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

Men and Women for Others

kohanson@scu.edu (Kirk Hanson) — Fri, 11 Jul 2008 14:39:00 PST

QUESTION FOR AUGUST 2008

WHAT DOES IT MEAN TO BE A MAN OR WOMAN "FOR OTHERS" IN A BUSINESS CAREER IN YOUR COUNTRY?

Initial response:

Prof. Kirk Hanson, Santa Clara University, USA:
At Santa Clara University and at other Jesuit business schools in the USA, there is a strong sense that graduates will be directly engaged in global business operations, perhaps working in developing countries for part of their careers. They expect to be managing projects and coordinating work with employees in multiple countries. As many of our MBAs are ethnic Chinese or Indian, many expect to play a role in business development in their countries of origin. To be a "man or woman for others," our graduates will have to learn ways to make their company's operations and economic development work for the local people in these developing countries. Most of all, they need to make the economy work for the poor and marginalized. They will have to decide that their personal identity and purpose includes a commitment to the economic and social development of countries in which they work. We probably do far too little to equip our students to understand how to do that effectively. We probably talk too little about the spiritual and "mission" aspects of a business career