Business Ethics & 2G Scam

Posted: September 3, 2011 in Uncategorized

Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviours tend to undermine the economy over time.

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP’s “beyond petroleum” environmental tilt).

 

Overview of issues in business ethics

General business ethics

 

  • This part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company’s main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else.
  • Corporate social responsibility or CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated.
  • Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.
  • Ethical issues concerning relations between different companies: e.g. hostile take-overs, industrial espionage.
  • Leadership issues: corporate governance.
  • Political contributions made by corporations.
  • Law reform, such as the ethical debate over introducing a crime of corporate manslaughter.
  • The misuse of corporate ethics policies as marketing instruments.

 

2G Scam

Introduction:

Indian telecommunications in­dustry has witnessed unprecedent­ed growth in recent years. The rap­id expansion of the mobile telephony mar­ket has been simultaneously accompanied by allegations that the government manip­ulated its rules and policies and selectively interpreted the recommendations of the regulator, the Telecom Regulatory Authority of India (TRAI) to benefit a few firms, some of which had no prior industry expe­rience.

Former Union Minister for Com­munications and Information Technology Andimuthu Raja is accused for this fiasco. The former minister deliberately ignored recommendations to ensure a transparent and fair system of spectrum allocation that had been made from time to time not only by senior officials within the DoT but also by officials of the union ministries of law and finance.

The Comptroller and Auditor General (CAG) of India has contended that (a) by under-pricing second generation (2G) spectrum, (b) by allowing companies to use two com­peting technologies – the global system of mobile (GSM) communications and the code division multiple access (CDMA) technology – with the same licence, and (c) by allocating more spectrum to companies than what their licences specified, the total “presumptive” or “notional” losses incurred by the country would be in excess of Rs 1,76,000 crore.

Highlights of the Issue:

On 10 January 2008, an announcement gets posted on the DoT’s website stating that letters of intent for issuance of licences bundled with the electromagnetic spectrum would be given to private companies between 3.30 pm and 4.30 pm. The announcement added that application fees would have to be paid immediately by demand draft, along with supporting documentation. It was made clear that the Letter of Intent (LoI) would be issued to those who deposit their fees first i.e. on First Come First Served basis. It has been pointed out in the report by CAG that many ap­plicants had advance information about the issue of this notification by the DoT, which enabled them to take appropriate advance action to draw the DDs (demand drafts) and prepare other relevant docu­ments for complying with the LoI conditions in spite of the changed time limit for compliance from 15 days to about half a day.

The importance of (the) date of submission of (the) application was altogether removed by giving precedence to the date of compliance to the LoIs. As a result, applicants who had submitted the applications even a year later were given the chance of getting precedence over earlier applicants if they could comply with the LoIs conditions earlier. Thus, a company like Swan Telecom, which had submitted its application on 2 March 2007, was given a licence with spectrum for the Delhi service area on 28 August 2008, while Spice Communications which had submitted its application in August 2006 has still not been given spectrum for the same Delhi service area.

Some of the Major Issues were as follows:

  1. Some ap­plicants had advance information about the issue of the notification by the DoT.
  2. Letter of Intent (LoI) was issued to those who deposited their fees first i.e. on First Come First Served basis, which was not desirable.
  3. The importance of (the) date of submission of (the) application was altogether removed by giving precedence to the date of compliance to the LoIs.
  4. The arbitrary manner in which the DoT changed its cut-off date for applications was highly controversial.
  5. In Section 17 of the guidelines, the DoT curiously dropped the word “acquisitions” and retained only the word “mergers” which allowed the DoT to permit operators to sell their stake to certain multinational companies.
  6. The CAG found that as many as 85 licences out of the 122 new licences issued to 13 companies in 2008 did not satisfy the eligibility conditions prescribed by the DoT.

Ethical Issues

With the outbreak of the 2G spectrum scam, the following ethical issues on the part of the Government, Regulatory bodies, media and industry came into the forefront.

Governance

 

  • Spirit of Collective responsibility not conserved
  • Too much power in hands of very few
  • Seemed like a throwback to “License Raj” era

Industry

 

  • Spirit of fair competition not observed
  • Middle men used for access to those in power
  • Pure pursuit of profit from companies – Uninor & Swan
  • Profit was the main driving force – no intention to serve consumers
  • Neutrality of media questionable

Regulation

 

  • Toothless with only advisory powers
  • Appointment process aids conflict of interest
  • Insufficient manpower worsens the situation

Personal greed puts business ethics at stake: Raja was the mastermind of this whole scam and his personal greed made him do all the corrupt things. The 2 fundamentals of business i.e. fair dealing and transparency was completely kept aside to enjoy the false fruits.

Transparency and objectivity of DOT was put to question because of some corrupt officials:  Few senior officials supported the moves by Raja, some due to their willingness and some by the force of the higher authority. Many of the rules and policies of TRAI were violated in order to benefit the few.

Wrong use of power leads to a great turmoil: Raja being the Telecom minister, tried to influence the senior officials of DOT by all means. Those who didn’t get influenced were either transferred or removed from their posts.

Measures for Improvement

 

  • Democracy by governance than by coalition
  • Precedence to fairness rather than precedent
  • More accountability of govt departments to regulators
  • Regulatory bodies equipped with more resources
  • Separation of Duties and Conflict of Interest to be noted in public appointments
  • Internal control measures from the media industry to preserve credibilit
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