flowchart LR R[1. Recognise<br/>the issue] --> F[2. Facts] F --> S[3. Stakeholders] S --> A[4. Alternatives] A --> T[4 lenses test<br/>Utility · Rights · Justice · Virtue] T --> D[5. Decide] D --> RF[6. Reflect] RF -. feedback .-> R style R fill:#E3F2FD,stroke:#1565C0 style D fill:#E8F5E9,stroke:#2E7D32
12 Ethical Issues and Dilemma
12.1 What is an Ethical Dilemma?
An ethical issue is a situation that has moral implications — someone could be harmed or benefited by the choice. An ethical dilemma is the harder case: a situation in which every available course of action has some morally undesirable feature. There is no clean choice, only the least bad one.
Velasquez’s working definition: an ethical dilemma exists when “two or more ethical principles point in different directions, and the decision-maker must choose which one to violate” (velasquez2014?). The classic structure has three elements:
TipThree Hallmarks of an Ethical Dilemma
| Hallmark | Meaning |
|---|---|
| Conflict | Two or more values or duties conflict |
| Stakes | Real consequences for real people |
| No clean choice | Every option carries some moral cost |
The accountant who discovers a senior partner inflating revenue: honesty (report it) conflicts with loyalty and job security (do not).
12.2 Common Ethical Issues in Business
12.2.1 Conflict of interest
A conflict of interest arises when a person’s private interest interferes — actually or apparently — with their official duty. Examples: a board director who is also a vendor; a procurement officer with an undisclosed stake in a supplier; an analyst recommending a stock owned by a relative. The standard remedy is disclosure, supplemented by recusal from the affected decision.
12.2.2 Insider trading
Trading in a listed security based on unpublished price-sensitive information (UPSI). Insider trading damages market fairness and is criminalised under the SEBI (Prohibition of Insider Trading) Regulations, 2015 in India and the Securities Exchange Act in the US (sebi2015?). Penalties include disgorgement, fines and imprisonment.
12.2.3 Whistleblowing
A whistleblower exposes illegal, unethical or fraudulent conduct in their organisation, internally or externally. Famous cases include Sherron Watkins (Enron), Cynthia Cooper (WorldCom), Mark Felt (Watergate), and Edward Snowden. Every framework distinguishes:
TipInternal vs External Whistleblowing
| Type | Where the disclosure goes | First port of call |
|---|---|---|
| Internal | Up the organisation — line manager, audit committee, ethics officer | Yes |
| External | Outside — regulator, media, court | When internal channels fail |
The Companies Act, 2013, Section 177(9) mandates a vigil mechanism (whistleblower channel) for listed companies and certain other classes. India’s Whistleblowers Protection Act, 2014 provides public-sector cover; private-sector protection is patchier.
12.2.4 Bribery and corruption
The Prevention of Corruption Act, 1988 (amended 2018) criminalises bribery of public officials in India. The 2018 amendment makes the bribe-giver — including a commercial organisation — directly liable. The UK Bribery Act and the US Foreign Corrupt Practices Act apply extra-territorially to many Indian firms with overseas operations.
12.2.5 Discrimination and workplace harassment
Discrimination based on caste, gender, religion, disability and sexual orientation is prohibited by Articles 14–16 of the Constitution and a network of statutes. The Sexual Harassment of Women at Workplace Act, 2013 (the POSH Act), responding to the Vishaka judgment, requires every employer with 10 or more workers to constitute an Internal Committee.
12.2.6 Environmental ethics
Pollution, waste, biodiversity loss, climate change. The legal scaffold in India: Water Act 1974, Air Act 1981, Environment Protection Act 1986. The polluter-pays principle and the precautionary principle, recognised by the Supreme Court in Vellore Citizens’ Welfare Forum v Union of India (1996), are now part of Indian environmental jurisprudence.
12.2.7 Marketing ethics
Misleading advertising, manipulation of children, predatory pricing, sale of harmful products to vulnerable consumers (cigarettes, sugary drinks). The Consumer Protection Act, 2019 strengthened consumer rights; the Central Consumer Protection Authority (CCPA) can act against misleading advertisements.
12.2.8 Data privacy and surveillance
The Digital Personal Data Protection Act, 2023 is India’s first comprehensive data-privacy law. Ethical issues span consent, profiling, surveillance, algorithmic discrimination, and the right to be forgotten.
TipEight Recurring Ethical Issues
| Issue | Core conflict | Indicative law in India |
|---|---|---|
| Conflict of interest | Private gain vs public/role duty | SEBI listing regulations; Companies Act |
| Insider trading | Personal profit vs market fairness | SEBI (PIT) Regulations, 2015 |
| Whistleblowing | Loyalty vs integrity / public interest | Companies Act §177(9); Whistleblowers Act 2014 |
| Bribery / corruption | Short-term wins vs rule of law | Prevention of Corruption Act 1988 / 2018 |
| Discrimination & harassment | Productivity vs dignity | Articles 14–16; POSH Act 2013 |
| Environment | Profit vs planet | EPA 1986; Water Act 1974; Air Act 1981 |
| Marketing | Sales vs consumer welfare | Consumer Protection Act 2019 |
| Data privacy | Innovation vs rights | DPDP Act 2023 |
12.3 Three Models of Moral Development
Lawrence Kohlberg’s six-stage model of moral development (1969) — grouped into three levels — explains how people reason morally (kohlberg1969?):
TipKohlberg’s Three Levels
| Level | Stages | Reasoning at this level |
|---|---|---|
| Pre-conventional | 1. Punishment-obedience; 2. Instrumental | “I won’t get caught” / “what’s in it for me” |
| Conventional | 3. Good-boy/girl; 4. Law-and-order | “What will others think” / “obey the law” |
| Post-conventional | 5. Social contract; 6. Universal ethical principles | “Greater good” / “principles above the law” |
Most adults reason at level 2 (conventional). Genuine ethical leaders reach level 3 — they recognise that some laws are unjust and act on principle.
Carol Gilligan’s In a Different Voice (1982) offered an ethics of care alternative: women, she argued, often reason from a relational, care-based perspective rather than the abstract justice perspective Kohlberg described.
12.4 Ethical Decision-Making Frameworks
A practical framework for navigating an ethical dilemma. Multiple versions exist; the consensus structure has six steps.
TipSix Steps in Ethical Decision Making
| # | Step | Question to ask |
|---|---|---|
| 1 | Recognise the issue | Is there an ethical problem here? |
| 2 | Get the facts | What do we actually know? |
| 3 | Identify stakeholders | Who is affected? |
| 4 | Generate alternatives | What are the realistic options? |
| 5 | Test each alternative | Apply the four lenses — utility, rights, justice, virtue |
| 6 | Decide and reflect | Choose, act, and review |
A useful sanity check is Kidder’s three-step trilemma test: would this action survive publicity (front-page test), role-model (would I want my child to see me do this), and future-self (will I be proud of this in five years)? (kidder1995?)
12.5 Practice Questions
Q 01
Dilemma
Easy
An ethical dilemma is best described as a situation in which:
View solution
Correct Option: B
A dilemma exists when two or more ethical principles conflict and every available choice carries a moral cost.
Q 02
Insider Trading
Medium
In India, insider trading in listed securities is primarily regulated by:
View solution
Correct Option: C
The SEBI (Prohibition of Insider Trading) Regulations, 2015 are the principal Indian framework for unpublished price-sensitive information.
Q 03
Vigil Mechanism
Medium
A vigil mechanism (whistleblower channel) for listed companies is mandated by:
View solution
Correct Option: B
Section 177(9) requires listed companies and certain other classes to establish a vigil mechanism for directors and employees to report concerns.
Q 04
Kohlberg
Medium
A manager who decides to follow a policy only because it is the law is reasoning at Kohlberg's level of:
View solution
Correct Option: B
Stage 4 ("law-and-order") within the conventional level. Pre-conventional reasons by self-interest; post-conventional by universal principle that may even override the law.
Q 05
Conflict of Interest
Easy
The standard remedy for a conflict of interest is:
View solution
Correct Option: B
Disclose the interest to the relevant authority and recuse from the decision affected. Termination is disproportionate when the interest is properly disclosed.
Q 06
POSH Act
Medium
India's POSH Act, 2013 (Sexual Harassment of Women at Workplace Act) was enacted in response to:
View solution
Correct Option: B
The Vishaka v. State of Rajasthan (1997) judgment laid down guidelines for the prevention of sexual harassment at the workplace; the 2013 Act codified them.
Q 07
Whistleblowing
Medium
Sherron Watkins is famous for whistleblowing in the case of:
View solution
Correct Option: A
Sherron Watkins, an Enron VP, alerted CEO Kenneth Lay to accounting irregularities in 2001. Cynthia Cooper blew the whistle at WorldCom.
Q 08
Polluter Pays
Medium
The "polluter-pays principle" was recognised as part of Indian environmental jurisprudence in:
View solution
Correct Option: B
Vellore Citizens' Welfare Forum (1996) recognised both the polluter-pays and precautionary principles as essential features of sustainable development.
ImportantQuick recall
- Ethical issue = situation with moral implications. Dilemma = situation in which every option violates some principle.
- Eight recurring issues: conflict of interest, insider trading, whistleblowing, bribery, discrimination/harassment, environment, marketing, data privacy.
- Indian laws to remember: Companies Act 2013 (§135 CSR, §177(9) vigil mechanism), SEBI PIT 2015 (insider trading), Prevention of Corruption Act 1988/2018, POSH Act 2013 (Vishaka), EPA 1986, Consumer Protection Act 2019, DPDP Act 2023.
- Kohlberg’s three levels: Pre-conventional (self-interest) → Conventional (law-and-order) → Post-conventional (universal principles). Gilligan: ethics of care as alternative to ethics of justice.
- Decision framework: Recognise → Facts → Stakeholders → Alternatives → 4-lenses test → Decide → Reflect.
- Sanity tests: publicity, role-model, future-self (Kidder).