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BBA 1st Year Business Ethics Gandhian Philosophy of Wealth Management Long Question Answer

The third important element of his philosophy is non-violence. It not only means non-killing, non-aggression or non-injury, but also being free from prejudice, jealousy, hatred, animosity, pride and ego. Since these elements too implicitly cause some kind of perturbation, a sort of violence

towards one’s self or others can be evoked. As a researcher in the fields of science and management, I have always experienced, be it with myself or my peer group, that presence of the above said elements inhibit the recognition of truth in others’ work, and create hurdles in searching for the truth within and assessing oneself truthfully. Truth and science, hence scientific management, are closely linked to each other.

Q.3. “Ethical approach is a slow path on the way to enduring success.” Explain.

Ans. Even though, prima facie, it appears to be the act of stock market cartel of brokers, it is hard to give the bank management a clean chit. Concentration of power to generate large profits comes from sound business strategy. Strategy is after all a business plan to develop sustainable competitive advantage. Deception/decoy is the most important element of any strategy. Deception can be against competitors, suppliers or customers. Many companies price their products in a manner that customers are fooled into believing that product is very cheap where as it could be much costlier. Or they market their product to the customers who the companies are fully aware that do not require it.

Thus, on the face of it, ethics and strategic management look like two banks of a river who can never meet. On one hand, you want to strategize your business to earn more profit (for shareholders sake), and on the other hand you want to surrender a legal opportunity to earn profit in the name of ethics (for other stakeholders’ sake). What a paradox! But such paradoxes are not impossible. There are many such paradoxes which exist in real life and a fine balancing act is required in such situations. Give the customer honest prices through efficiency in production and give the shareholder bumper profits through productivity and growth in business rather than rip-off pricing. Honesty does not always mean bad business. Similarly, following business ethics does not always mean yielding profits. Often a profit opportunity surrendered in the short run becomes the key to the larger door of profits in the long run. Ethical practices in strategic management create a new resource called Social Capital through “Trust”; trust of society, trust of customers, trust of suppliers and soon. This capital manifest profits in terms of customer loyalty and increased sales, lesser requirement marketing effort, higher leverage in dealings, lesser employees turnover etc. Strategic Management is the starting point for ethical conduct of a company. As brought out earlier, a company’s business plan, the products it plans to offer, its positioning, market segmentation, marketing strategy, promotion, pricing, capital structuring etc. are all decided at the strategy session. Deception and decoy being an integral part of the strategy, dilemma lies in deciding their extent. The ethical challenge in companies is often triggered by financial problems. When financial problems occur, it is tempting to do business with people you might not normally choose to do with or in ways that you might not normally use. it is very hard to consider ethical issues when a company is in trouble. So, as a general rule, the best approach to avoiding temptation is to try and make sure that the “strategic approch” of the company involves achieving early and fast success. Small wins not only provide feedback to guide a company, ut also reinforce the strategic perspective of the company. The paradox surfaces here once again. Ethical approach is a slow path on the way to enduring success. Rarely does any one get spectacular success in the initial phase of business through ethical means. Probably, what this rule suggests is that achieve some early and fast success by use of not so ethical means and once you have feet firmly planted on the terra-firm of the business world, turn ethical. Many empirical studies have proved that companies following ethical practices have generally gained in the long-term. It is not to say that unethical companies have not gained ever. We have a few examples in our own country where a few most unethical companies have risen in corporate ladder to dizzying heights. But exceptions don’t make the rule. Situations promoting unethical behaviour never yield good returns in the long-run.

Q.4. Discuss morality in advertising.

Ans. Anyone who has worked in business organisations learns that the specific challenges thrown up in the marketing area are amongst the most taxing ones. Advertising is in effect attracting customers to buy your product by first informing of availability of.the product and then promising them better value for their money. Should advertising make the promises that the product is not capable of delivering? Or use means that are damaging to the society, like, indecent pictures or promoting harmful products among children etc. We have to admit that there is plenty of grey area in advertising. The distinction between misrepresentation, or making claims which are false and surreptitiously exaggerated (believable by the gullible public) and transparent exaggeration (which even idiots wont believe to be true) to make a commercial eye catching is too thin. Let us see it with a live example. On one hand we have gigantically exaggerated claims, like Fevicol ads (Exaggeration has been adopted as a theme by Fevicol. People travelling Fevicoled to sides of the bus, or egg not breaking by hammer because hen was feeding from a Fevicol can etc), where exaggeration is transparent enough for every viewer to know that it is exaggeration for the sake of making the advertisement eye catching and driving the message home. No one is even remotely likely to believe the suggestions in the advertisement as true. On the other hand, we get exaggerated claims in the advertisement designed to be passed as truth. It is most common in personal care segment and services sector. An advertisement suggests that drinking a special brand of Whisky will transport one into a fairyland of delights. The unspoken pre-supposition here of course is that the potential customer will be not only resistant but also sensible and reasonable in assessing the claims for various good and services and will not take it all absolutely literally. It is in such areas particularly that regulation and monitoring of advertisements have an important social function by protecting the vulnerable in the society from being exploited. Another more ethically interesting sphere in which advertising needs to be scrutinized is the pressure on individuals to make particular choices. There are many health care and insurance companies who create a fear psychosis through their advertisement to sell their product to people who might not need them. Take the case of child life insurance plans and water purification machines. People, in developing and under developed countries, generally develop fair amount of immunity to water borne diseases by virtue of being constantly exposed to less than pure water. Many doctors also advise against use of ultra pure water produced by machines like Aqua Guard. Medical science believes that regular use of ultra pure water kills or hampers development of auto immunity by the body and exposes the person to illness even with slightest impure water which is inevitable given that it is impossible to get ultra pure water everywhere. We have all heard how British, Australian and New Zealand teams suffer from gastric problems whenever they travel to Indian subcontinent despite taking all precautions. Same is the case with breast milk supplements (tinned milk) being sold by pharma companies. Their advertisements push the use of tinned milk against established wisdom of use of breast feed for infants. In addition, there are plenty of wrong and false allurements and promises, like

(a) Advertising unhealthy products (Cigarettes).

(b) Advertising to Children (Cola ads—injurious to children’s health in the long run.

(c) Using Puffery in advertising (Free Dental Insurance if you buy 20 worth tooth paste). In reality, there are strings attached! And finally there are cases of omitting certain facts about the product or being economical with the truth which is ethically wrong. But companies do it nevertheless. There have been cases of pharma companies pushing sales of certain drugs in poor countries even after their harmful effects were well documented and drugs had been banned in certain advanced countries.

Q.5. Write a detailed note on philosophy of trusteeship. (2011)

Or What is philosophy of trusteeship? (2012, 13)

Ans. Philosophy ofTrusteeship Trusteeship, as applicable to the corporate world, refers to the Act of holding and managing resources on behalf of the stakeholders of the firm. “What’s new about that”, one may enquire. Given that the traditional take on wealth has almost always been that towards owners of corporation, this concept brings in an element of equity, by placing other stakeholders such as employees, customers and society on the same rung as large and small shareholders.

The idea is that all wealth, including human, financial and technological resources, belongs to the society and the rewards accruing from their use must revert to society at large. The principles of trusteeship can be traced back to the concept of collective endeavour and community living. Briefly, these are: Resources must be held and utilized for the benefit of society. Managers are the trustees of the stakeholders and must work towards optimizing stakeholders value, not merely maximizing shareholders value. The small investor has as much a say in company’s decisions as the large investor has.

Thus, the overall approach is towards the macro and long-term perspective, rather than the short-term, micro perspective which is often geared exclusively to suit the shareholder and top management. At first sight, the seemingly idealistic concept invariably raises a few protests.

“The owner/s must be rewarded for bearing risks and supplying expertise.” Definitely, but the reward must be in proportion to the skills and expertise supplied. The increasing instances of ethical transgressions on the part of leaders and CEOs indicates the need for better balance in the risk-reward relationship. The Enron fiasco and the sale of worth over $70m by erstwhile chief Rebecca Mark, a few months before its bankruptcy, is a case in point. “Corporation exist for profits.” They exist to fulfill the needs of society and in the process, generate profits. Moreover, even if profits were to be the only determinant of policies, trusteeship would still score over inequitable sharing of wealth, since better wealth management automatically leads to more lasting and stable equations with stakeholders. This, in turn, leads to higher profits, goodwill and trust. “Trusteeship might lead to a disincentive for efficiency and efforts.” When individual and group efforts are correctly aligned with social needs, the possibility of de-motivation or deliberate inefficiency does not arise. Conviction in the utility of the concept, coupled with the commitment of top leadership, would ensure efficiency as well as effectiveness.

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