Discuss “what business professionals should know about human nature”,
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Business Ethics
Case Studies
Case 10 (20 Marks)
What is the biggest bane of the Indian
system? Corruption. Statistics and action plan released to PT by the Excise
Department (Pune Zone) testifies to this. Tax evasion for excise duties for the
year 20022003 has almost doubled from the previous year, this year it is Rs.
174 crore. R.K Tewari, Chief Commissioner, Customs and Central Excise, Pune
zone says, “We have launched a two year program. In our first year, we have
made an attempt to get the actual evasion figures. Figures till last year were
highly understand. This year we are going to crack the whip on defaulters and
we have a toughened action plan for the same.” Another striking feature is that
the collection of arrears is remarkably low. For the year 20012002, it stood at
Rs. 22 crore. However, now with tax evasion for this year pegged at Rs. 174
crore, the department has fixed a target of Rs. 42 crore for arrears
collection. “Our action plan is especially designed for the same”, says Tewari.
Why is collection so lukewarm? “This is basically because of our legal system.
Any defaulter fights us till the apex court and that takes years to sort out,”
he explains. As for the corruption in the department, Tewari says “Some people
in the department could be working handinglove with the defaulters.” Tewari
claims that the biggest defaulters are not the big corporates, but the small
and medium scale industries.
Answer
the following question.
Q1.
Point out the ethical issues in the case and suggest the remedy for the same
Q2.
Give the unethical aspects in the above case and suggest the remedy for the
same.
Case (20 Marks)
A certain cooperative bank, named after
a great saint attracted a number of depositors, became customer friendly, and
carried on good business transactions. However during an audit by the
cooperative department, irregularities to the tune of Rs. 10 crore surfaced. It
was found that the chairman of the bank himself used Rs. 10 crores through
several loan accounts. Due to these irregularities, RBI had to stop the
transactions and account holders could not operate their accounts. The
cooperative Department had to appoint an Administrator.
Answer
the following question.
Q1.
Is it proper and ethical on the part of the authorities to mislead the account
holders and customers by carrying on irregular activities, especially when the
bank was named after a holy personage?
Q2.
Is there any breach of ethical conduct on the part of the chairman of the bank
for using Rs. 10 crores of the bank through loan accounts? If so, give reasons
Case (20 Marks)
Most people want to be ethical — and
consider themselves to be. But incidents ranging from stolen library books to
rogue trading illustrate that many people do not act as ethically as they want
to, or as they think they do. “With all the evidence to support rational, good
choices in the workplace or the marketplace, why don’t we all behave that way?”
said Ann Skeet, director of leadership ethics at the Markkula Center for
Applied Ethics at Santa Clara University. Skeet gave an introduction to a May
11 forum called, “The Behavioral Movement: What Business Professionals Should
Know About Human Nature,” sponsored by the Business Ethics Partnership of the
Markkula Center. Two speakers addressed what we know about why people behave
unethically – and how the
conditions that contribute to this
behavior may be particularly acute in high pressure environments like Silicon
Valley. “The culture of Silicon Valley is different than in most other places,”
said Hersh Shefrin, the Mario L. Belotti Professor of Finance at Santa Clara University’s
Leavey School of Business and a pioneer in the field of behavioral finance.
“This is a risk taking culture and a culture where goals are set very high.”
This can make Silicon Valley workers especially vulnerable to the pressures
that can lead to unethical decisions. For example, the increasing use of global
teams, which can require phone calls early in the morning and late at night as well
as regular hours in the office, may contribute to fatigue – a risk factor for
poor decision making. Still, Shefrin said, “we’re not as unique as we think we
are – just more so.” Workers in Silicon Valley are subject to the same
psychological issues as workers anywhere else. For example, all workers have
blind spots, said Ann E. Tenbrunsel, professor in the College of Business
Administration at the University of
Notre Dame and the Rex and Alice A. Martin Research Director of the Institute
for Ethical Business Worldwide. She
addressed the psychology of ethical decision making, or “why people behave
unethically despite the best intentions.” There have been significant efforts
to improve ethics: at the regulatory level; at the organizational level, with
millions spent on training; and at the educational level, with ethics being
infused into the curriculum at many universities, Tenbrunsel said. Still, the
headlines announcing bad behavior keep coming. “We haven’t taken the psychology
of the decision maker into account,” Tenbrunsel said. She listed four ethical
blind spots that contribute to poor decision making — ethical illusions,
ethical fading, dangerous reward systems and motivated blindness — and
elaborated on the first two. Ethical illusions are based on “illusions of our own
ethicality,” Tenbrunsel said. She cited studies showing that library books on
ethics – presumably checked out by people who think about ethics – are stolen
more often than non ethics books. And when people are asked to rate how honest
they are, a majority of people rate themselves above average, which is
statistically not possible. “We really seem to engage in hyperinflation about
things related to morality and ethicality,” Tenbrunsel said. “If everyone
thinks their companies are ethical, we don’t do a good job of really trying to
find the problems.” It helps to think of three stages of the decision making process,
Tenbrunsel said: prediction, action and recollection. Before making a decision,
people generally predict that they will act in accordance with their values.
When it comes to taking action, that is not always what happens. But after the
fact, “we remember that we did better than we did,” Tenbrunsel said. Why don’t
people behave as they predict they will? One reason, said Tenbrunsel, is that
prediction involves high level ideals, whereas the action phase is more about
the details and what is feasible at that particular moment. Forces such as hunger,
fatigue and fear come into play, for example, and may overwhelm idealistic
plans. “The body and mind’s goal is to mitigate it,” Tenbrunsel said. Ethical
fading, the second blind spot Tenbrunsel discussed, happens when a person
making a decision doesn’t view the decision as one that involves ethics. People
use financial criteria to make financial decisions and legal criteria to make
legal decisions, for example. So if a decision can be categorized as something
other than an ethical one, it makes it easy to not consider ethics. Language plays
a role in this area, as well: For example, a decision about “runoff” may be
viewed differently than one about “pollution.” Shefrin continued the
conversation by examining rogue trading, an example of how “finance and
psychology and ethics all interconnect.” Because trading involves taking risks,
it is useful to understand the psychology behind risk taking. For example, most
people will choose a sure gain over a smaller chance to win a larger amount.
But they will choose the risk of a large loss over a sure loss. “Three of the
most important emotions associated with what happens when you face a risk are
fear, hope and aspiration,” Shefrin said. “People who are excessively fearful
tend not to take risks that are worth taking in an actuarial sense, and people
who are excessively hopeful tend to shoot for the stars when it’s not
appropriate. In a situation like the rogue trading cases, traders find themselves
in a situation where the pressures to succeed are so great that they take
imprudent risks.” In addition to the psychology of the individuals involved,
the strength of corporate processes and the way corporate culture encourages or
discourages risk taking play a role. “Strong corporate cultures that include an
ethical dimension can help deal with the vulnerabilities,” Shefrin said. “The tone
always starts at the top.”
Answer
the following question.
Q1.
Give your comments on “Strong corporate cultures that include an ethical
dimension can help deal with the vulnerabilities,” said by Shefrin.
Q2.
Discuss “what business professionals should know about human nature”,
Case (20 Marks)
George is a junior at a small
university in Washington State. He is a frequent user of Amazon to purchase
materials for college including textbooks and school supplies. In fact, George
has an Amazon Prime account to save money on shipping, since he uses the
site so often. George has recently
started to take advantage of his prime account by purchasing almost everything
on Amazon, from clothing to books to head massagers. On average, George uses
the website three to four times a month. One day, George is perusing the
Internet and notices an article headline that shocks him: Worse than WalMart: Amazon’s
sick brutality and secret history of ruthlessly intimidating workers. George
reads that Amazon is not only scientifically managed to the T, but that the
employees are treated more as cogs in a machine than as human beings. He reads
that Amazon uses monitoring technology to track movements and performance of
employees. The company has conducted several studies to find the fastest way to
perform tasks in the warehouse. All employees are instructed to follow the “one
best way” of completing tasks for maximum efficiency. The logic behind this
strategy is to ensure that employees are customer centric, creating a “cult of
the customer.” George goes on to read that workplace pressure at Amazon pushes
up employee productivity while keeping hourly wages at a barely livable rate.
The speed required to complete tasks
causes many employees to struggle to
meet targets and less skilled employees often fail. If an employee fails three
times, Amazon uses a three strike policy and fires him or her. George is
shocked by this article, but at the same time he doesn’t know what to do. He has
already paid for his Amazon prime membership and relies on the website for most
of his purchases now.
Answer
the following question.
Q1.
Should customer satisfaction be held with utmost regard, even if that means
that employees are treated as robots and pushed to unrealistic limits? Debate
Q2.
What can George do to better the circumstance of the Amazon workers, if anything?
Explain.
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