A reputed food product company based in India developed a food product for the international market and started exporting the same after getting necessary approvals. The company announced this achievement and also indicated that soon the product will be made available for the domestic consumers with almost same quality and health benefits. Accordingly, the company got its product approved by the domestic competent authority and launched the product in Indian market. The company could increase its market share over a period of time and earn substantial profit both domestically and internationally. However, the random sample test conducted by inspecting team found the product being sold domestically in variance with the approval obtained from the competent authority. On further investigation, it was also discovered that the food company was not only selling products which were not meeting the health standard of the country but also selling the rejected export products in the domestic market. This episode adversely affected the reputation and profitability of the food company. (a) What action do you visualise should be taken by the competent authority against the food company for violating the laid down domestic food standard and selling rejected export products in domestic market? (b) What course of action is available with the food company to resolve the crisis and bring back its lost reputation? (c) Examine the ethical dilemma involved in the case. (UPSC IAS Mains 2021 General Studies Paper – 4)
The given case study presents a contest between public interest and profitability in corporate governance and highlights the problem of lack of ethics in private institutions.
a) Following actions can be taken against the company by competent authorities:
- Recall and destroy: As the products under question are eatable, they pose danger to public health. Company should be instructed to recall products from the market and destroy them under supervision of authorities.
- Monetary fine: A substantial monetary fine should be imposed to emphasize cost of ignoring public interest in pursuit of short-term business profitability.
- Criminal proceedings against top officials should be based on graded response as per consequential impact on public health, such as carcinogenic or genetic impact, effect on children etc.
- Cancel the approval to sell domestically as well as for exports till review and reapproval. This will help protect against loss of reputation for the country as a source, and promote respect for prescribed regulations.
b) The company can take following course of action to resolve the crisis and regain its reputation:
- Public apology should express genuine regret for wrong conduct.
- Internal audit and enquiry should be pursued to fix responsibility for the decisions that led to the crisis.
- Review company’s values and process of value inculcation among employees, middle-management and top-leadership. Changes in leadership may be needed.
- Changes in quality control governance with direct line of communication between top-leadership and factory floor can put quality norms on a pedestal.
- Communication of the internal emphasis on quality and health over short-term profits should reflect in benchmarking as per national and international best practices like 6-sigma.
c) The ethical dilemmas in the case are as follows:
- Public health versus private profit: Corporates have interests of private profits but they also have responsibility towards society. Commerce without morality is a one of the seven Gandhian sins.
- Kantian right versus National Interest: Taking strict action if found rightful such as criminal proceedings can affect investments, create sensationalism and undermine reputation of India as source of food products-based exports.
- Common Good versus Business Interest: Narrow focus on business interest has threatened common good from public health and exports.
- Varying compliance with standards for exports and domestic market reflects lack of respect for domestic regulation and possibility of racial prejudices within company.
The pursuit of value and not profits must guide the conduct of corporates. Trust and customer loyalty are enviable values that a company can only build on foundation of ethical governance.
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