BY PROF KR GANESH

BUSINESS ETHICS AND CORPORATE

GOVERNANCE

The origin of the word ETHICS can be traced to the Greek word ETHIKOS / ETHOS which refers to human character and conduct. According to WEBSTER’S collegiate thesaurus , the word ETHICS can be defined as :

The code of conduct governing an individual or a group

The discipline dealing with good and bad and with moral duty and obligation

The complex of ideals, beliefs or standards that characterises a group , community or community or people

A group of moral principles or set of values

Let us understand what is Business ethics now. Business is buying and selling of goods or

services for a price with the intention of making profits.

The moral principles and set of values governing Business is called as BUSINESS ETHICS

Ethics is concerned with the discipline of the right and wrong conduct of individuals. More especially, in modern times, problems in business are more often concerned with terms such as FAIR PRICE , RIGHT PRODUCT and PROPER QUALITY

Eg- Case OF Mc Donald’s “BEEF FRIES” Controversy

Ethical issues often arise leading to dilemmas, paradoxes and baffling situations. It is therefore necessary to understand the ethical principles that govern human behaviour.

ETHICS and MORALITY are terms that are used more or less interchangeably. However, there is some difference between the two terms .

ETHICS is concerned with actions that are proper or improper, conduct that is right or wrong, decisions that are fair or unfair.

MORALITY varies from individual to individual , because the values and cultural traits of individuals may differ. Further, what is moral according to one person may be immoral according to another.

MORAL STANDARDS ,THEREFORE CANNOT BE CONSIDERED AS ETHICAL STANDARDS IN CERTAIN CONTEXTS.

Generally , what is moral or immoral depends more on religious tenets of various groups of people in the world. However ethical standards may be common to all major religions

Mc Donald’s “ BEEF FRIES” Controversy – OVER VIEW

The case examines the controversy involving the global fast food major MC Donald’s which was accused of wrongfully selling its French fries as 100% Veg products when they contained beef flavouring. It explores in detail the events that led to the allegations. The case also discusses the eventual settlement of the law suit with the company paying damages to vegetarian groups and accepting it had gone wrong

HISTORYThe French fries controversy began in 2000 when

a Hindu jain software engineer working in the U.S.A happened to read a news article ,which mentioned that the French fries at MCD contained beef. Upon being questioned Mc Donald claimed that it was for enhancing the flavour of their French fries.

They also cited that as per The CODE OF FEDERAL REGULATIONS which ,they followed, restaurants are not required to explicitly state the ingredients .

ACTION TAKEN BY AGGRIEVED PARTY Shortly thereafter Mr Harish Bharti a U.S

based attorney filed the class action lawsuit against Mc Donalds

He quoted , “ Hindus and vegetarians all over the world feel shocked and betrayed by Mc Donald’s deception and ultimate greed. Not only did they deceive millions of people who may not want to have beef extract fries for religious, ethical or health reasons , but also suggest that it is these people who are at fault, that they are stupid, adding insult to injury”

DEFENCE BY COUNTER PARTY In response Mc Donalds reverted by claiming

that it never ever claimed that the fries sold in the USA were vegetarian. They added that fries were cooked in pure Veg oil but seasoned with beef flavourings and it was upto the customer to enquire about the flavour and its source and that they were in no way to be held responsible to the customers not enquiring about the source of those flavourings

FURORE IN INDIA

Some of the outlets in India were vandalised by Shiv sena ,VHP , The Bajrang Dal who also staged a demonstration in Delhi protesting the alleged use of beef flavouring. They submitted a memorandum to the P.M demanding the closure of all Mc Donald’s outlets in India

Officials Of MCD in India claimed that the vegetarian products served in India did not have any non vegetarian content.

INVESTIGATION Prima facie ,while it was found true that Mc

Donald's adhered to the Federal food and drug administration ( FDA) guidelines by classifying beef extract as NATURAL FLAVOUR , critics claimed that the company was trying to play with words to brush off allegations.

However interestingly enough, MCD’s statement that it never claimed its French fries were vegetarian was proved to be completely wrong after Bharthi found a 1993 letter sent by the companies corporate head quarters to a consumer in response to an inquiry about vegetarian menu items.

The letter clearly bundled French fries with garden salads, english muffins and whole grain cereals as a completely vegetarian item

THE AFTER MATH Post the brouhaha , Mc Donald’s issued an

apology stating that it would provide more details about its products to customers. However a mere apology angered various sects of the Hindu community by and large and resulted in filing of 4 more lawsuits

In the 11th month of it’s courtroom battle Mc Donald’s announced that it would issue a new apology and pay $10million to vegetarians and religious groups in a proposed settlement

of all law suits in march 2002. The company also decided to pay $4,000 to

each of the 12 plaintiffs in the five lawsuits and post a new and more detailed apology on the company web site and in various other publications.

It also decided to convene an advisory board to advise on vegetarian matters.

THANK YOU