Ethics and Values and 2G Scam

Introduction:

The 2G spectrum scam involved politicians and government officials in India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would then use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money that the law mandated to be collected is estimated to be 176,645 Crore (US$32. 15 billion), as valued by the Comptroller and Auditor General of India based on 3G and BWA spectrum auction prices in 2010. However, the exact loss is disputed. The Supreme Court declared allotment of spectrum as "unconstitutional and arbitrary" and quashed all the 122 licenses issued in 2008 during tenure of A. Raja(then minister for communications & IT) the main official accused in the 2G scam case. In 2011, Time magazine listed the scam at number two on their “Top 10 Abuses of Power” list.

Ethical Issues

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• 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.
• Spirit of collective responsibility not conserved: An ethics of co-responsibility is required and can only be implemented through mechanisms well beyond the legal system. In the 2G scam, almost all of the entire media and nation has put the name of Mr A.Raja as the responsible person for the corruption but the actual decision of telecom policy was passed through the cabinet.
• Too much power in hands of very few: This is what actually happened in case of 2G scam. The entire decision making power rested in the hands of selected bureaucrats.
• Middle men used for access to those in power: Middlemen were used to by company officials and other illicit channels to reach the ministers. People in power were lured by money. Those who did not bend to the power of money were either transferred or were threatened.
• Neutrality of media questionable: In the 2G Spectrum Scam Case, instead of providing valuable insights, the media is trying to become the judiciary. The media has targeted easy scapegoats, revolving their stories around a selected few because even they know that it is difficult for them to target certain big names like the Tatas, Ambanis and Ruias.
• 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. air dealing and transparency was completely kept aside to enjoy the false fruits. * 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.

Ethical Dilemma’s

Dilemma Faced By A. Raja:

Mr A. Raja was in a dilemma whether he should disclose the name of every main conspirator of the plot, or should he wait for his fellow mates having a reputed position in the government and corporate world to help him get out .

Role of A. Raja

A Raja has received 3,000 crore (US$546 million) as bribe for bringing forward the cut-off date for applications for spectrum from the initial 1 October 2007 to 25 September 2007. At the time of taking decision he might have got influenced of the dilemma related to it but money made him blind and despite of knowing the risk associated and at the stake of his personal values, he took the decision of performing the 2G Scam. There was also a clear conflict of interest among promoters, shareholders and other stakeholders of company.

The conflict of public shareholders and stakeholders put them in very interesting position. There was also a dilemma when the case uncovered which was more or less can be termed as the prisoners dilemma as should he tell the names of all the person associated or only few because it was a very high end case consisting of many renowned politicians and bureaucrats 3. 1. 2. Ethical Theories: Depending on the dilemma faced by different people in this case there are different ethical theories that can be applied.

Mainly we can apply 2 theories:

• Utilitarianism: Utilitarianism is a theory in normative ethics holding that the proper course of action is the one that maximizes utility, specifically defined as maximizing happiness and reducing suffering. In this theory person compares the benefits with its cost and take decision accordingly.
• Hedonism: It is a school of thought that argues that pleasure is the only intrinsic good. In very simple terms, a hedonist strives to maximize net pleasure (pleasure minus pain).

Ethical hedonism is the idea that all people have the right to do everything in their power to achieve the greatest amount of pleasure possible to them. It is also the idea that every person's pleasure should far surpass their amount of pain.

Cost and Benefit Analysis:

Going by the theory of utility, A. Raja might have done the benefit cost analysis as follows:

Benefits Loss

• A. Raja will be getting lots of money
• A. Raja can be caught, but the chances are very less because in India politicians are never caught
• With money there will be power.
• Moreover he will be a friend of big corporate personalities.
• Shareholders will get affected with this decision
• The huge benefit of under-pricing or unfair subsidiary was given to the mobile telephone services
• The person who is not a shareholder or customer of any mobile telephony company has sold his share in spectrum on cheap prices and lost his money which would have been spent for the development of his nation
• The subsidy was given to all industry majors, who regularly lobby against the subsidy to basic human need like food, water, education and shelter. When call rates were high, there would be an exclusion of masses from this information revolution. This is a simple math not a magic formula to fool all stakeholders
• The huge benefit of under-pricing or unfair subsidiary was given to the mobile telephone services
• So, he might have found that he can easily escape by doing this scam and chosen to give away the licence at cheaper rate.

Going by the Hedonism theory the pleasure that power and money will bring to him will be much more than that of pain so he thought of choosing the wrong path of earning money.

Recommendation for resolving the Dilemma:

• The 2G Spectrum scam is at the final stage. Now as all the politicians, Bureaucrats, Major Telecom company officials have been exposed. But if would have followed the following simple tests or models they would have definitely selected the ethically right path and avoided the consequences that followed.
• Peter Drucker’s Model: “Above all, do no harm”. Peter Drucker wanted to convey to any individual that if any of his/her decisions harms any other person then that decision is unethical. Raja had thought of this philosophy then he would have avoided his actions and maintained transparency in allocating 2G spectrum.
• The government officials would have brought the issue in front of the judicial system if they followed this simple principle. Corporate executives would have refused help from A. Raja as profit making is ethical but profiteering is not
• Warren Buffet’s first page of the4 Newspaper’s Test: If all the people imagined the newspaper headlines that were published all throughout 2010, 2011 and 2012, they probably would have not done what they did.

Some examples are included below:

• Court issues notice to CBI on A. Raja's 2G spectrum scam plea
• Why did not PM act on A. Raja: SC
• Raja informed Manmohan Singh about change in policy: Siddharth Behura

Dilemma Faced By Corporates:

The basic dilemma faced by the Corporates was whether to abide by the law of the country and obtain the licenses they were capable of obtaining in an ethical manner or whether to unethically obtain licenses in order to increase customer base and earn instant profits.

On account of Utilarianism, benefits they achieved were that they were able to attain the shares at much lower cost and thereby incurring huge profits and it also thus provided them with an competitive edge over their competitors as they were able to outrun them that too in such short duration. Also if they did not buy these licences some other companies will buy and attain profits so without considering the harmful repercussions they went on with buying with the licences.

Role of Corporates:

India found itself in the centre of such protests in 2010-2011 over the scam in 2G spectrum allocation to telecom companies. The 2G scam went a long way to show how the Indian economy, one of the fastest growing in the world, is dominated by a small set of tightly connected power players. Industry observers felt that if not checked soon, the deep-rooted problem of crony capitalism in the country could adversely affect India’s growth and development. They wondered how the accountability could be fixed and the unholy nexus broken. The distributive justice states that equal people should be treated equally. There is nothing wrong in, corporate making profits but it should not be at the cost of other people.

When the corporates involve in a scam like this, the tax payers are burdened which is not fair. Ultimately it is the tax payer, who pays for each Scam. Corporate as a part, of the society has got some social responsibility which means, they have every right for making profit but not profiteering by harming the society. Their rights should not harm the interest of the common man. The corporates by involving in the scam are not only cheating the common man but its own people like its shareholders. Transparency in the long run pays of great results.

Here being ethical should not only an instrumental value to the corporates, but should be an intrinsic value. Business ethics plays a very important role. th legal frame work may not be always be ethical but here observing the legal standards provides an important ethical dimension. The business values like transparency, fairness and justice are universal. Observing these values as an intrinsic value would benefit the business in the long run. When business is ethically strong, it will have the same impact on its employees. When employees are ethically strong, consumer satisfaction will be high and so the business has to sustain. Corporations involved were: Allianz Infra, Aircel, Dishnet wireless, loop mobile, Reliance communications, S Tel, Swan telecom, Tata Tele Services, Unitech Group, Videocon Telecommunications Limited, Vodafone Essar, Virgin Mobile India. Corporate Personalities involved were: Anil Ambani (Reliance Group-ADAG), Ratan Tata, Shahid Balwa (DB Reality and Etisalat DB Telecom), Vinod Goenka (Dinamix Group), Venugopal Dhoot (Videocon Group), and Prashant Ruia (Essar Group).

Ethical Theories:

Utilitarianism:

Going by this theory, the corporates involved Utilitarianism i. e. aximising their profits, specifically defined as maximizing happiness and reducing suffering. For them what is good is that which produces pleasure, happiness, contentment or welfare and what is right is that which maximizes one or more of these things. Utilitarian’s call the method for maximizing good the principle of utility and they use the term optimific to describe the achievement of this maximization. The Corporates on their part in order to maximise their profits instantly and in an easy manner went on 2G scandal, without considering the ramifications.

Cost and Benefit Analysis:

Swan Telecom paid Rs. , 537 crore for 2G licences in 13 circles, they soon sold 45 per cent equity in this company to Etisalat for Rs. 4,200 crore. Unitech obtained licences in 22 circles for Rs. 1,658 crore and then sold 60 per cent equity in the company to Telenor for Rs. 6,100 crore. Thereby, providing them with instant benefits.

Recommendation for Resolving the Dilemma:

Peter Drucker’s model:

“Thou shalt not steal” and “Primum Non Nocere. ” Which in English means, above all (or first) do no harm. According to Peter Drucker wanted to convey that an individual’s decision is unethical if it harms any other person’s.

Thus, abiding by the Peter Drucker model to resolve this ethical dilemma involved the corporate personalities involved should have rejected the proposal offered by A. Raja as achieving profit is fairly ethical but what turned out in this case was ‘profiteering’ which is unethical.

Dilemma faced by the Government:

In this context ethical dilemma was on the part of the government after the case got uncovered as it involved many politicians, bureaucrats, & ministers so either to put charge on all of them showing the vulnerable state of the nation or to allege a single minister for the same.

Role of Government:

The list had many well known ministers like Dayanidhi Maran(Union cabinet minister for textiles), P. Chidambaram(Union cabinet ministers for home affairs), Andimuthu Raja (Union cabinet minister for communication & information technology), Kanimozhi Aravindhan (Member of Rajya Sabha) and also many renowned bureaucrats like Siddharhta Behura, Pradip Baijal, R K Chandolia.

Ethical Theories:

Utilitarianism:

Going by the this theory, it states that actions and policies should be evaluated on the basis of the benefits and costs they produce for everyone in society and also referred to as consequentialism. It holds that morally right course of action in any situation is the one that, when compared to all other possible actions will produce the greatest balance of benefits over costs for everyone affected.

Hedonism:

A school of thought that argues that pleasure is the only intrinsic good. In very simple terms, a hedonist strives to maximize net pleasure (pleasure minus pain). In this context going by the above mentioned theory in order to maximize the net profits its better on the part of government not to disclose anything and spare from the pain that can incur f they do so.

Cost and Benefit Analysis:

In the context of 2G scam the cost and benefit analysis can be done as follows:

Cost:

The major threat was the impact on stock market and investment in India. The mobile phone market is the world’s fastest growing making it a must-invest market for any major global operator but after looking at the corruption level and the people involved they might not willing to come over and invest. Moreover it will also shatter the trust factor of the citizens and they will not have any faith in the government. Benefit: Disclosure of all the names involved in the scam will lead to a situation of distrust. In a globalized world such a situation will negatively affect the Indian corporate scenario and may even jeopardize the economy as a whole. Going by the above mentioned theory it was certainly better on their part to go for benefits and not to disclose any names.

Recommendation for resolving the Dilemma:

To resolve the dilemma’s 3 steps can be followed, they are:

Step 1: Analyze the consequences Assuming that the resolution to the ethical dilemma is to be found within the confines of law.

Ethical dilemma that arise should be resolved at least within the bare minimum of law and legal framework as otherwise it will lead to a sort of mafia business. One has to look at the consequences that would follow one’s proposed actions. And when one has several options to choose from, there will be an array of consequences connected with each of such options, both positive and negative. Before one acts, answers to the following questions will help find the type of action that can be contemplated;  Who are the beneficiaries of your action? . Who are likely to be harmed by your action? What is the nature of the ‘benefits’ and ‘harms’? (the answer to this question is important because some benefits may be more valuable than others. Letting one enjoy good health is better than letting one enjoy something which gives trivial pleasure. Likewise, some ‘harms’ are less harmful than others. ) How long or how fleetingly are these benefits and harms likely to exist? *

Step 2: Analyze the actions Once option is identified, concentration should be on the actions.

Find out how the proposed actions measure against moral principles such as ‘honesty, fairness, equality, respect for the dignity and rights of others, and recognition of the vulnerability of people who are weak, etc. ’ Then there are questions of basic decency and general ethical principles and conflicts between principles and the rights of different people involved in the process of choice of the options that have to be considered and answered in one’s mind. After considering all these possible factors in the various options, it is sensible to choose the one which is the least problematic.

Step 3: Make a decision After considering all factors that lead to various options, choose an option and analyze it carefully and then take a rational decision. 3. 4. Dilemma faced by Media: It is media’s duty to show the truth to the public, moreover it also considered as a trustworthy source which helps in creating awareness regarding the actual happenings in the world. The Media persons accused faced the ethical dilemma of whether to diligently follow the duties of a journalist and uncover the real truth or be loyal to their friends.

Role of media

The 2G spectrum scam, which has snowballed into a major controversy involving Indian politicians and businessmen, became hotter for journalists to handle when it allegedly involved two of their senior members. Media sources such as OPEN and Outlook reported that two senior journalists Barkha Dutt (group editor of NDTV) and Vir Sanghvi (editorial director of Hindustan Times) knew that corporate lobbyist Nira Radia was influencing the decisions of appointment of telecom minister. Radia wanted A Raja to be made telecom minister. The two magazines made public the telephone conversations between Nira Radia, Barkha Dutt & Vir Sanghvi.

Radia's phones were being tapped by the Income Tax Department. Critics allege that Barkha Dutt and Vir Sanghvi knew about nexus between government and the media industry but still they supported this corrupt activity and suppressed news reporting the discovery of the corrupt practice. In November 2010, OPEN magazine carried a story which reported transcripts of some of the telephone conversations of Nira Radia (a political lobbyist) with senior journalists, politicians, and corporate houses, many of whom have denied the allegations.

The Central Bureau of Investigation has announced that they have 5,851 recordings of phone conversations by Radia, some of which outline Radia's attempts to broker deals in relation to the 2G spectrum sale. The tapes appear to demonstrate how Radia attempted to use some media persons to influence the decision to appoint A. Raja as telecom minister. Vir Sanghvi, editorial director of Indian national daily Hindustan Times and India’s television news channel NDTV’s group editor Barkha Dutt are apparently featured in the transcripts.

They are heard promising to fix things for Radia, who is known to be close to the sacked minister A Raja, and her clients besides her political cronies. While Sanghvi allegedly took notes from Radia on what he could point out in his weekly Sunday column of Hindustan Times even as Radia asked him to write against Reliance Group's Anil Ambani and the high court decision on the gas pricing issue. Barkha Dutt had allegedly assured Radia of getting ruling Congress party’s general secretary Ghulam Nabi Azad to talk to the supremo of his party’s chief ally in the government M.

Karunanidhi to fix portfolios for the ally according to wishes of Karunanidhi’s daughter Kanimozhi. One thing to be noticed in this case was, initially the news gained prominence following sustained pressure on social networking sites Twitter and Facebook against an attempted blackout orchestrated by many prominent Indian TV channels and newspaper. Initially, only handful of newspaper like Deccan Herald and The Indian Express wrote about the tapes. Some newspaper like HT Media, mint and NDTV told that the authenticity of these transcripts cannot be ascertained.

Not Touching Corporate Biggies:

Now media is deliberately trying to highlight a few names like those of Shahid Balwa, A Raja, Kanimozhi, Sanjay Chandra, Karim Morani, and Vinod Goenka while not touching corporate biggies such as Tatas and Ambanis. It is quite clear that in this 2G spectrum case, only a few are conspired to be indicted in the case while others are clearly kept out. Instead of providing valuable insights, the media is trying to become the judiciary.

The media has targetted easy scapegoats, revolving their stories around a selected few because even they know that it is difficult for them to target certain big names like the Tatas, Ambanis and Ruias. It is a well-known fact that the trial for 2G Spectrum case is going on, and nobody can be proved guilty unless and until it is proved in court, but, without taking it into account, our media has started blaming people and highlighting a only few names without mentioning the rest of the suspects.

Ethical Theories: Utilitarianism:

If we apply utility theory on media then cost in hiding the facts was that people will not trust the media if they come to know that facts were hidden from them but the benefits were that they will not spoil their relations with big politicians and corporate biggies. So benefits were more than the cost, as it is said that common man has very short memory and you can cheat them. But as pressure started building from opposite party and moreover opposite party had their friends in the media, the names of big politicians came into picture.

But then also media maintain its silence on corporate biggies.

Recommendation for resolving the Dilemma:

Laura Nash’s model:

Following the 12 questions that Laura Nash has raised in her model would have stopped media from taking the first step. Some of the 12 questions that would have helped the accused persons to clear their thought processes are:

• How would you define the problem, if you stood on the other side of the fence?
• To whom and with what are your loyalties? What are your intensions in making this decision?
• How does these intentions compare with the likely results?
• Whom could your actions injure?

Recommendations for avoiding

Recurrence of the Issue Modern scams are victimless in that the victims are not obvious. The victims of these crimes are the taxpayers and citizens of the country to whom this money and assets belong. The only permanent way for us to stop scams is to work on both prevention and deterrence.

Plan to avoid recurrence of such a scam

• Increase disclosure requirements by the government on all contracts and concessions involving public money or assets.
• Improve the effectiveness of parliamentary oversight on government and executive by making parliamentary committees stronger as well as more transparent to the public.
• It should be ensured that the Criminal Penal code has amendments to deal with and enable rapid prosecution of white collar crimes and scams. Judiciary should be independent and free of any external influence. It should be capable of taking strong action against the corrupt politicians.
• While severe punishment is given to a poor village officer when he takes a bribe of Rs10, politicians who cheat the public and earn crores are many a time let free by the court of law.
• There is a requirement of complete overhaul and changes in our criminal justice system that is still designed around petty crime and criminals. There is a need for new and stronger laws for dealing with sophisticated financial crimes of the day. One such example is removing the Section 311 that requires prior sanction from the government to prosecute its officers.
• Media played a very important role in forming an opinion among the citizens therefore there should be effective parliamentary oversight of the government and such oversights be transparent and available to media and citizens.
• The government must have outside legal and advisory help while negotiating contracts and not rely only on bureaucrats. There should be a creation of a new cadre of independent regulators, backed by parliamentary statutes that oversee most of these sectors.
• For example, bureaucrats must be chosen as regulators only in exceptional cases of high integrity and capability.
• Such Independent Regulators must also have oversight on them to ensure that there is no regulatory capture.
• Ensure that government policy is always about the public and not about private and personal interests.
• Legislation must be initiated to regulate lobbyists and business chambers, to prevent advocacy changing to corruption and to protect against policy capture instead of policy advocacy.
• Ensure government policies are not always bombastic rhetoric and full of loopholes for exploitation. This will minimize administrative/political discretion.
• Another way to stop corruption is to avoid the coalition form of governance.

A single party must be allowed to rule the country independently without seeking the support of innumerous minor parties. In the 2G spectrum case, the accused, A. Raja is a representative of DMK which is supporting the congress. In such a situation, an able and efficient prime minister like Manmohan Singh could not take action but had to inadvertently support him as otherwise DMK would have withdrawn their support and thus follows an utter rout for the congress.

Lastly and most importantly both media and the general public must create awareness that the government is a trustee of public money and assets and the people are the real owners. If trustees violate the trust, people should not sleep, but must react. A permanent solution, thus, to such scams and corruption is alert citizen and conscientious media.

References

1. http://aishmghrana. wordpress. com/2012/09/01/conflict-of-interests-among-stakeholders-in-2g-allocations/
2. http://www. icmrindia. org/casestudies/catalogue/Business%20Ethics/Indian%202G%20Spectrum%20ScamExce2. tm#Can%20Accountability
3. http://www. isidelhi. org. in/hrnews/HR_THEMATIC_ISSUES/Corruption/Corruption-2011. pdf
4. http://www. scribd. com/doc/71816181/2g-scam-project
5. http://www. processexcellencenetwork. com/process-improvement-case-studies/columns/drucker-on-business-ethics/
6. http://en. wikipedia. org/wiki/Radia_tapes_controversy
7. http://www. slideshare. net/amyberi/2g-spectrum-scam-casestudy
8. http://realitycheck. wordpress. com/2010/12/03/wheres-our-story-media-on-2g-spectrum-scam-shyness-or-something-more/
9. Business Ethics: An Indian Perspective by A. C. Fernando

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