Business Ethics in Alcohol Industry

1. Introduction

In 2016, as Guyana celebrated its 50^th independence anniversary, a leading liquor firm, Banks DIH launched a limited edition of XM rum in the market (Banks DIH, 2016). This news was broadcast on national television and leading newspapers in Guyana. In one of the newspapers, the President of Guyana along with other MP’s was featured in the newspaper front page sipping this special rum.

In Netflix series “bad boys billionaires”, the liquor baron of India, Mr. Vijay Mallya commented un-regrettably that he does not force anyone by the neck to drink his alcohol (Netflix, 2020), while causing millions of Indians to drink irresponsibly and destroy their own health and family. In addition, while there is a ban on liquor advertising in Indian national TV, Kingfisher used a new tactic to advertize through Kingfisher Soda and mineral water. This is an indirect liquor advertising technique that impacts on the psyche of the persons with the same brand.

This year the total number of road fatalities is 129 and most are related to driving under the influence of alcohol (Guyana Chronicle, 2020). Alcohol consumption has caused misery to families who are loved-ones who have lost their lives due to alcohol-related violence. Alcohol-related mortality amounts to 2.3 million people a year worldwide (WHO, 2011). Alcohol poses a serious problem in the health of the people.

2. Business Ethics in Alcohol Industry

The alcohol industries have been robust in marketing and promoting products that are harmful to health and also causing the breakdown of families and societies. The distilleries have been focusing largely on profit-oriented business-ethics rather than focusing on all aspects of business ethics. Carroll (1991) suggested fourfold criteria of Corporate Responsibility on which an organization must be based. These fourfold criteria are as follows; 1. Economic Responsibility, 2. Legal Responsibility, 3. Ethical Responsibility, and 4. Discretionary Responsibility. Besides, alcohol industries have ignored three P’s, i.e. people, planet, and profit.

2.1 Economic Responsibility: DDL, another renowned alcohol industry in Guyana records after-tax profit of GYD $3.48 billion ($16,659,320) in 2019 that is up by 6.3% from the previous financial year (Stabroek News, 2019). Organizations have financial obligations towards stakeholders and shareholders who have invested time and resources. This obligation has to be fulfilled through ways and means of profit maximization. Through profit maximization of financial returns is an organization’s obligation towards its shareholders (Maheshwari et. al. 2006). Stark (1993) argues that financial performance might overweigh ethical standards to reflect high short-term performance measures such as ethical aspects. In this process of profit maximization, organizations strive to raise the price of the products with no consideration of the buying power of the customers. Unethical pricing on alcohol products will create disparity and hence, buying power is lower than the actual price of the product. This will have significant consequences where an alcohol addict will go to the extreme to borrow funds and hence, remain indebted. This dilemma of profit maximization and buyer power can cause hindrance towards positive ethical business behavior.

Using a contingency Framework, we can help organizations to make ethical decisions to benefit organizations and their customers.

 

This framework is used to measure ethical viability and make an informed decision to address the predicament of beneficiary and victims (organization and customer).

2.2 Legal Responsibility: The government of Guyana passed legislation to reinforce the older legislation on the intoxicating liquor licensing amendment bill. In 2017, the Minister of Finance announced that there have to be stricter measures to control and monitor liquor licensing (DPI, 2017). Despite the laws such as ‘no driving under influence’ ‘substance abuse’ ‘environmentally friendly distilleries’, there are organizations and individuals break these laws. Some of the laws are not enforced rather they are lagging behind in chastising the non-law abiders. The malum prohibitum (wrong because the sovereign says they are wrong) has ethical dimensions. Organizations have to abide by the laws of the state. Stringent measures must be implemented for those break laws, both at the organizational and customer level. Often, laws that are not implemented and enforced cause unethical behavior.

2.3 Ethical Responsibility: Ethics is characterized by good and bad human conduct and which decides what is good and evil, right and wrong, and hence what we ought to do and ought not to do (Maheshwari et. al, 2006). Ethical values determine the ethical behavior of an individual and ethical value is determined by social norms and that helps build the community at large. Ethics in an organization is determined by best practices that are set through the goals and objectives of the organization. Since ethical practices cost the industries billions of dollars a year and damage the images of corporations, the emphasis on ethical behavior in organizations has increased over recent years (Trevino, 1986). Alcohol industries tend not to follow ethical norms that are beneficial to the whole community. Through the promotion of intoxicating beverages, organizations indirectly promote violence and ill health.

According to Weaver, Trevino, and Colhram (1999), formal corporate ethics programs are very useful in creating a positive ethical the climate in the organization and typically include some or all the following elements;

Formal codes of ethics.
Ethics committees to develop ethics policies, evaluating company or employees actions etc.
Ethics officers
Ethics training
Disciplinary processes

Organizational ethics is an intricate subject since it includes a wide range of aspects to consider while determining ethical measures. For instance environmental concerns while production of alcoholic beverages which includes emission of carbon dioxide during fermentation processes, management of waste, water and energy; more than five bottles of water is used during the production of each bottle of beer (Heineken, 2012). Clinically, Alcohol can lead to brain damage, decreased IQ, mental problems, addiction and aggression, liver cirrhosis, the weakening of the immune system, and alcohol is also implicated in HIV and tuberculosis contagion, among others (WHO 2011).

Alcohol notoriously has invariably indulged in gender stereotypes in marketing strategies by portraying women to obtain consumer attention (Solomon, Ashmore, & Longo, 1992). Although alcohol is mostly consumed by men, advertisements have an unacceptable stereotypical portrayal of women to attract attention. This is ethically unacceptable to objectify women to achieve the means of gaining profit in this industry. Therefore, unethical marketing strategies have to be discouraged to safeguard the dignity of the human person and the integrity of the organization.

 3.4 Discretionary Responsibility: Outside of the laws and regulations, organizations must contribute towards the well-being of society. It is the Corporate Social Responsibility of the organization. In recent decades, there has been significant improvement in businesses growing interest in corporate social responsibility (CSR). Corporations are encouraged to give back to society for developmental works.

Philanthropic responsibilities have become a reality today due to the growing number of organizations reaching out to the needs of the people, community, environment, and eco-system. The corporations must take effort to make positive social change through philanthropic exercises. Corporations not only have economic and legal obligations, but also certain responsibilities towards society extending beyond these obligations (McGuire, 1963). These responsibilities are not coded by law but must reflect organizations care for humanity and nature. Ethical responsibilities refer to the corporate voluntary actions to promote and to pursue social goals extending their legal responsibilities (Grigore, 2010).

4. Conclusion

Alcohol industries thrive at any given time due to high demand by addicted customers and robust promotion of alcoholic beverages. Industries have benefitted and customers have lost although customers may have benefitted from the face value of the product. Due to this dilemma, alcohol industries have gained and have profited.

5. References

Boudewijn De Druin, (2013). Socially Responsible Investment in the alcohol industry: as an assessment of investor attitudes and ethical arguments. Journal of the Academy of Social Sciences. February 2013.

Dr. M. Sanjoy Singh, (2019). Ethics in Corporate Social Responsibility. IOSR Journal of Business and Management (ISOR-JBM). Vol 9, Issue 2 (March-April 2013). pp 16-21.

Newaj Avinash and Damar Ldkoo Adjnu, (2016). Distorted Facets of Marketing Ethics For Alcoholic Beer Marketing. Studies in Business and Economics no. 11 (2) 2016.

Grigore Georgeta, (2010). Ethical and Philanthropic Responsibilities in Practice. Annals of the University of Petrosani, Economics, 10(3), 2010, pp 167-174.

Banks DIH.< https://www.banksdih.com/?q=publication/golden-jubilee-rum-0> (accessed on 9 October 2020).

Netlix. <https://www.netflix.com/gy/title/80990073#:~:text=This%20investigative%20docuseries%20explores%20the,down%20%E2%80%94%20India's%20most%20infamous%20tycoons.> (accessed on 7 October 2020).

Guyana Chronicle. <https://guyanachronicle.com/2020/06/27/road-accidents/> (accessed on 5 October 2020).

Donna Wood, (1991). Corporate Social Performance Revisited. The Academy of Management Review, Oct. 1991, Vol 16. Academy of Management (JSTOR article).

WHO, 2011. <https://www.stabroeknews.com/2020/03/30/news/guyana/ddl-records-after-tax-profit-of-3-48b-for-2019/> (accessed on 10 October 2020).

Department of Public Information, Guyana. <https://dpi.gov.gy/legislation-passed-effecting-changes-to-liquor-licencing-fees-penalties/> (accessed on 11 October 2020).