Ethics ± A live example of Merck

Dr. P. Roy Vagelos, There may be no

inherent conflict between ethical behavior
and pursuit of profit. On the contrary ethical
behavior creates the kind of goodwill and
reputation that expand opportunities for
profit.
 ETHICS AND MORALITY

ï Ethics is the study of Morality. It is a kind of

investigation that includes both the activity of
investigating and the results of investigation.
ï Morality is the subject matter that ethics investigates
ï Morality are the standards that an individual or a group
has about what is right and wrong , or good or evil
ï CASE: B.F Goodrich v/s Kermit Vandivier
ï Characteristics: injury, not establishes by authoritative
bodies, moral standards v/s self-interests, justice,
emotions
 Ethics ± Trying to Define

Ethics is a mass of moral principles or

sets of values about what conduct ought
to be.
Business ethics is a specialized study of
moral standards as they apply to
business policies, institutions and
behavior.
 Scope of Business Ethics
At Societal Level:
v Concern for poor and downtrodden
v No discrimination against any particular section
or group
v Concern for clean environment
v Preservation of scarce resources
v Contributing to better quality of life
 Scope of Business Ethics
At Stakeholders Level:
A. Employees
v Security of job
v Better working conditions
v Better recommendation
v Participative management
v Welfare activities
 Scope of Business Ethics
At Stakeholders Level:
B. Customers
v Better quality of goods
v Goods and services at reasonable price
v Not to practice discriminatory pricing
v Not to make false claims about products in
advertisements
 Scope of Business Ethics
At Stakeholders Level:
C. Shareholders
v Ensure capital appreciation
v Ensure steady and regular dividend
v Disclose all relevant information
v Not to window dress balance sheet
v Protect interest in times of mergers,
amalgamations and takeovers
 Scope of Business Ethics
At Stakeholders Level:
D. Banks and other lending institutions
v Guarantee safety of borrowed funds
v Prompt repayment of loans
 Scope of Business Ethics
At Stakeholders Level:
E. Government
v Complying with rules and regulations
v Honesty in paying taxes and other dues
v Acting as partner in the progress of the country
 Scope of Business Ethics
At Internal Policy Level:
v Fair practices related to internal issues
v Better communication at all levels
 Scope of Business Ethics
At Personal Policy Level:
v Not to misuse others for personal ends
v Not to indulge in politics to gain power
v Not to spoil promotional chances of others
v Not to use office facilities for personal use
 Myths about Business Ethics
v Business Ethics is more a matter of religion
than management
v Our employees are ethical so we don¶t need
attention to business ethics
v An action is either right or wrong
v Good employees do not do bad things
v You are born with your morality
 CSR ± Trying to Define

A commitment to improve community

well being through discretionary
business practices and contributions of
corporate resources«.á

 



 CSR ± Trying to Define
CSR is the continuing commitment by
businesses to behave ethically and
contribute to economic development
while improving the quality of life of
the workforce and their families as well
as of the local community and society
at large «.( 

 




 CSR ± Common Principles
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 CSR ± A Historical Perspective

The concept of CSR in India is not new, the

term may be.

Philosophers like Kautilya from India and

pre-Christian era philosophers in the West
preached and promoted ethical principles
while doing business
 CSR ± A Historical Perspective

The idea was also supported by several

religions where it has been intertwined with
religious laws.
³Zakaat´ followed by Muslims
³Dhramada´ followed by Hindus
³Daashaant´ followed by Sikhs
 CSR ± A Historical Perspective

In the global context, the recent history goes

back to the seventeenth century when in
1790s, England witnessed the first large
scale consumer boycott over the issue of
slave harvested sugar.
 CSR ± A Historical Perspective

The term CSR came into common use in the

early 1970s.

By late 1990s, the concept was fully

recognized, people and institutions across
all sections of society started supporting it.
 CSR ± A Historical Perspective

Facts: 1977 less than half of the Fortune 500

firms mentioned CSR in their Annual
Report.
By the end of 1990, 90% of the Fortune 500
firms included CSR in their Organizational
Goals and actively promoted their CSR
activities in Annual Reports.
 Social Responsibility...

ï an organization¶s obligation to maximize its

positive impact on stakeholders and to
minimize its negative impact
ï includes legal, ethical, economic, and
philanthropic (discretionary) dimensions
 Legal Dimension...
ï refers to obeying governmental laws and
regulations
ï civil law: rights & duties of individuals and
organizations
ï criminal law: prohibits specific actions and
imposes fines and/or imprisonment as
punishment for breaking the law
 Ethical Dimension...
ï behaviors and activities that are expected or
prohibited by organizational members, the
community, and society (not codified into
law)
ï standards, norms, or expectations that
reflect the concern of major stakeholders
 Economic Responsibilities...

ï how resources for the production of goods

and services are distributed within the social
system
ï Do you think consumers favor socially
responsible companies or are they most
enamored with companies that maximize
profits?
 Philanthropic Dimension...

ï business¶s contributions to society

ï strategic philanthropy
± Strategic philanthropy is a unique and powerful
way to combine your company marketing goals
with your desire to increase the well-being of
mankind.
± Two of the more popular names are cause -
related marketing or community partnering.
 Why Social Responsibility for Business?

ï Arguments against Social Responsibility

Contrary to basic functions of business
Domination of Business Values
Inefficiency in the system

ï Arguments for Social Responsibility

Business: A Part of the Society
Avoidance of Govt Regulations
Long-run self interest of Business
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1) Engages in fair and honest business practices in its relationship with stakeholders.
2) Sets high standards of behavior for all employees.
3) Exercises ethical oversight of the executive and board levels.
4) Strives to manage the company for the benefit of all stakeholders.
5) Initiates and engages in genuine dialogue with stakeholders.
6) Values and implements dialogue.
7) Fosters a reciprocal relationship between the corporation and community.
8) Invests in the communities in which corporation operates.
9) Respects the rights of consumers.
 CASE: Lifebuoy Swasthya Chetna

ï HLL is a premier fast moving consumer goods company operating in India.

ï Its various products have been categorized into three broad groups-home &
personal care, food & beverages, and industrial and agricultural.
ï Lifebuoy is the brand name of toilet soap manufactured and marketed by HLL.
This soap is positioned as a means for improving health & hygiene.
ï In order to increase awareness of health & hygiene in rural India, HLL launched
a five-year Lifebuoy Swasthya Chetna (LSC) programme in 2002 in eight states
across India.
ï The objective of this programme was to educate around 200 million people in
rural areas about the importance of health & hygiene practices.
ï The programme aimed to debunk the misconception that visibly clean is safe
clean.
ï It spread awareness about germs and their adverse impact on health, and how
proper health & hygiene practices, such as bathing and washing hands with soap
could prevent diseases like diarrhea, the 2nd largest cause of death among
children in India.
ï The LSC programme was implemented in various phases.
ï In initial phase, HLL executives interacted with school children and other
influencers like medical practitioners and panchayat members.
ï People were educated about health & hygiene practices through lectures,
demonstrations, use of visual aids, & quizzes.
ï The programme used media vehicles like cinema vans, wall paintings, weekly
markets, fairs, & festivals.
ï The programme was later extended to parents & other adults.
ï The messages on health & hygiene were reinforced through regular contact
programmes.
ï Finally, children & parents were recruited as volunteers to start health clubs that
would help sustain the health & hygiene awareness.
ï At each stage, LSC programme involved local community in the programme so
that the beneficiaries saw this as their own programme & felt a sense of
ownership.
ï For making LSC programme successful, HLL had committed Rs. 240 million to
be spent over a period of five years.
ï By the end of 2006, HLL had covered around 27,000 villages across the country.
ï According to the company, LSC programme was not a philanthrophic activity,
but a marketing programme with a social benefit.
ï HLL sought to grow Lifebuoy brand in India by attracting consumers who never
used a soap.
ï In th eprocess, the company sought to bring about a behavioural change by
convincing people to use soaps more frequently, thus, creating more users for its
brands.
ï On April 7, 2006, on the occasion of Wworld Health Day, the Department of
Posts of Govt of India released a special Lifebuoy Swasthya Chetna Postal
Cover, making Lifebuoy the India¶s brand to be featured on a postal cover.
ï The special cover was released in recognition of the work done by HLL to
increase awareness of health & hygiene in rural India.
 ·uestions:

ï Comment on the social responsiveness of

HLL that is reflected in Lifebuoy Swasthya
Chetna programme.

ï In what way, will this programme benefit to

the society?