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Managerial Ethics End Term Exam (Academic Year 2015-16)

Batch: 2014-16
HRM Section C
Kruthi T P
Roll No H14146
Case 11.1 - The Maggi Controversy and the FSSAI Response
Date of examination: 26-Aug-2015

1. Latest developments:
August 26th: The Union consumer affairs ministry on Tuesday filed a complaint against the company
before the National Consumer Disputes Redressal Commission (NCDRC), seeking financial
compensation for consumers of Maggi noodles.
(http://www.livemint.com/Companies/5rWThfcBq5qYp0uW2b83KP/Govt-to-seek-Rs426-crore-asdamages-from-Nestle-India.html)
August 23rd: Nestle plans to bring back Maggi by year-end. Bolstered by the Bombay High Court order
overturning the ban on Maggi, Nestle India plans to bring back the popular instant noodles back in the
market by end of this year subject to certain clearances
(http://www.business-standard.com/article/pti-stories/trying-to-bring-back-maggi-by-end-of-this-yearnestle-india-115082300222_1.html)
August 23rd: Maharashtras food and drug administration (FDA) has sought the opinion of the
department of law and judiciary on approaching the Supreme Court against the high court order lifting the
ban imposed on Nestl Indias Maggi noodles
(http://www.business-standard.com/article/companies/maha-fda-seeks-state-l-j-dept-s-view-regarding-hcorder-lifting-maggi-ban-115082300419_1.html)
August 18th: Food safety regulator FSSAI is reviewing the Bombay High Court order that last week
quashed its order to ban Maggi, and has not yet decided if it will challenge the order in Supreme Court
(http://www.business-standard.com/article/pti-stories/fssai-reviewing-court-s-order-yet-to-decide-onfuture-course-115081800585_1.html)
August 18th: The nation's top consumer court on Monday issued a notice to Nestle seeking its response
to the government's allegations that the company had resorted to unfair trade practice and sold defective
goods. The National Consumer Disputes Redressal Commission (NCDRC) will hear the Rs 640 crore
class action suit filed by the government next on September 30
(http://articles.economictimes.indiatimes.com/2015-08-18/news/65530426_1_consumer-court-nestleindia-maggi)
August 13th: Bombay High Court lifts Maggi ban for 6 weeks. The High Court faulted FSSAI and
Maharashtra FDA for not giving a proper hearing to Nestle India. The court, however, ordered Nestle to
get Maggi samples tested in three independent laboratories
(http://economictimes.indiatimes.com/et-now/corporate/bombay-high-court-lifts-maggi-ban-for-6weeks/videoshow/48463860.cms)
August 12th: Belying the claims of Nestl India, the US Food & Drug Administration (FDA) has not
issued any notification to the company on the purported clean chit given to Maggi noodles. When
contacted the US FDA, the regulator remained non-committal, saying it had no response on the matter
yet. I don't have a response for you yet, and will share it when I do, the US FDA said in a two-line
statement.
(http://www.business-standard.com/article/companies/no-notification-by-us-fda-on-clean-chit-to-maggi115081101598_1.html)
August 11th: United States Food and Drug Administration (FDA) cleared Nestle's two-minute snack
Maggi noodles late on Monday night, the seventh country to do so, even as national food regulator Food
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Safety & Standards Authority of India (FSSAI) has refused to give a clean chit to the noodles brand for
sale in India
(http://brandequity.economictimes.indiatimes.com/news/business-of-brands/us-fda-gives-clean-chit-tomaggi-noodles/48431665)
The reason for choosing Maggi case in terms of currency, social impact and critical importance are:

Nestle being one of trusted companies in the world is embroiled in this controversy where in
recently it was issued a notice on a Rs.640-crore suit against it. Nestle posted its first quarterly
loss in 17 years and has lost Rs 450 crore, including destroying over 30,000 tonnes of the instant
noodles since June when it was banned. This is an important matter in terms of currency or the
loss incurred.
The social impact it has had has been tremendous as Nestle had become the ubiquitous snack in
India in the past 20 years. There are many households from all possible sections of the society
who consume Maggi. The trust has been shattered and the outrage has been huge thus having
major social impact.
This case is particularly importance for India as FSSAI has been lethargic and inefficient in the
past. It can be because of many reasons such as financial constraints, untrained manpower, etc.
But now it has started to act and that is good for the food consumers as finally there will be
stringent guidelines to ensure the safety of food which has been dismal in recent times.

2. AOL 6:
ONE moral judgment regarding the most critical subject, object, property or event (SOPE):
Subject: Nestle
Object: FSSAI, FDA, Stakeholders, Nine variants of Maggi noodles, Bombay High court, NCDRC
Properties: 1) Many lives put at risk by Nestle by not clearly mentioning the contents on its cover as
required by regulations, categorically denied by Nestle. 2) The wake-up call for FSSAI regarding
enforcing more stringent guidelines for food safety in India.
Events: The controversy surrounding Nestle Maggi for containing higher-than-permissible levels of MSG
and Lead content.
Judgement: Since nothing is proved conclusively to declare that Maggi samples have higher-thanpermissible levels of MSG and Lead content by a common authority or forum, it is not right to call the
action of Nestle unethical. Even if the levels are more than permitted, there is no proof that Nestle was
aware of it or it intentionally included more MSG to sell better. But it was not right on Nestls part to
burn the evidence of remaining Maggi packets and not allow further tests to be conducted on it. But at the
same time it wasnt right on FSSAIs part to ban all the nine variants of Maggi while only three of them
failed the test. It was also against Natural justice to not give Nestle a fair hearing before imposing a ban
on Maggi.
Hence the act of Nestle is not unethical per se but it might have broken few laws. The consequences
(proof of health of consumers getting affected due to Maggi consumption) are yet to be seen and so cant
be judged.
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Justice Ethical Theory of

Rules Deontological Justice

Ethical Rule based on the Ethical Theory of Deontological Justice:

Did the FSSAI, FDA and society Did the Outcomes of Nestle controversy
treat Nestle by:
treat others by:

R01

Kantian Formalism: Act

inasmuch as your act is
motivated by a law that
can apply to all.
Kantian Formalism: Act
inasmuch as your act is
grounded on moral
reasons that convince
all.

Principles of Universalizability?
YES: This law does apply to all
companies.

R03

Principle of
Deontological Justice:
Safeguard economic and
social rights and duties
of the marginalized

R04

Principle of
Deontological Justice:
Also safeguard rights
and duties of corporate
executives

R05

Situationanism: When
rights/duties conflict, the
actual situation should
determine the decision
and judgment but one
must own the act and its
consequences.

Principle of Deontological
Justice among the marginalized?
NO: If the results of test samples
by FDA and FSSAI are to go by
then Nestle failed to safeguard
the personal and social rights of
its most important stakeholder
the consumers, including the
underprivileged by risking their
health and safety when they
imposed such great trust on the
brand.
Principle of Deontological
Justice among corporate
executives involved: No. FSSAI
also failed to follow the
principles of Natural justice by
not giving a hearing to the
company before banning Maggi
on the aforesaid grounds.
Principle of Existential
Situationism: No. FSSAI banned
all nine variants of Maggi while
only three variants were tested
and were found to contain excess
lead beyond the permissible
level.

R06

Existentialism: When
amidst uncertainty, risk
and ambiguity, right or
wrong, truth or
falsehood, and good or

R02

Principles of Reversibility? No.

FSSAI also failed to follow the
principles of Natural justice by
not giving a hearing to the
company before banning Maggi
on the aforesaid grounds.

Principle of Existentialism: No.

FSSAI also failed to follow the
principles of Natural justice by
not giving a hearing to the
company before banning Maggi
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Principles of Universalizability? Yes.

It was no different for upper and middle
class consumers.
Principles of Reversibility? NO: It was
not convincing for all that morally
Nestle did the right thing though it
cant be proved conclusively

Principle of Deontological Justice

among the marginalized? NO: Maggi
risked the lives of its consumers
including those from lower sections of
society.

Principle of Deontological Justice

among all the corporate executives
involved: Yes. The controversy had no
bearing on the other corporates.

Principle of Existential Situationism:

NO: if the management knew about the
problem with Maggi and still hid it, this
conflict of its reputation going for a
toss and the health of its consumers,
especially the underprivileged, should
have resulted in them admitting the
problem
Principle of Existentialism: NO. If the
management knew about the problem
with Maggi and still hid it, this conflict
of its reputation going for a toss and the
health of its consumers, especially the

R07

evil cannot be clearly

distinguished, and then
act in the midst of doubt.
Legalism: Legitimacy of
government laws and
industry ordinances

R08

Contractualism: Binding
capacity of freely agreed
on contracts.

R09

Parenesis: A Code of
ethics that counsels and
exhorts action. The
obligation is parenetic or
hortatory.

on grounds it did.

underprivileged, should have resulted

in them admitting the issues.

Compliance to legitimately
promulgated and enforced
government laws and industry
ordinances? No. FSSAI also
failed to follow the principles of
Natural justice by not giving a
hearing to the company before
banning Maggi on grounds it did.
Compliance to freely agree on
contracts? YES: There was no
contact per se on Nestle and it
was free to agree on contracts.
Yes. There is certain code of
ethics that was enforced on
Nestle like any other company.

Compliance to legitimately
promulgated and enforced government
laws and industry ordinances? NO.
Nestle didnt mention anything about
the amount of lead or MSG on its cover
thus violating the rules.

No. No obligation to use Nestle

products only.

No. Nestle did not stick to the code of

ethics that counsels and exhorts action
as it burnt all the evidence which seems
to be an act done in guilt.

AOL6: Table 11.5B: Applying Teleological Justice Rules to Justify Wealth Maximization by the
Superrich
Justice Ethical Theory of
Rules Teleological Justice

Ethical Rule based on the Ethical Theory of Teleological Justice:

Did the FSSAI, FDA and
Did the Outcomes of Nestle controversy
consumers treat Nestle by:
treat others by:

R10

Hedonism: Satisfaction
and Pleasure of all
(Jeremy Bentham)

R11a

Utilitarianism (J. S.
Mill): Maximize utility
of all

Yes. The actions of Nestle did

bring satisfaction to people in the
society as they loved Maggi and
used to consume it regularly.
Yes. The consumers were happy
with Maggi before the
controversy and utilized it to the
maximum.

No. As a result of the controversy the

consumers were extremely unhappy
with the Maggi products due to lead
content.
Yes. The maximum utility was obtained
by Nestle as by selling Maggi it made
maximum number of people happy
before the controversy.

R11b

Consequentialism (E.
Anscombe 1920-2001):
Maximally reduce
harmful consequences to
all.
Eudemonism (Aristotle):
Principle of happiness of
the maximum

No. The consumers were

unhappy with the consequences.

No. Nestle risked the lives of many

which was the consequence of its act

Yes. The principle of happiness

of the consumers was maximum
and fulfilled before the
controversy broke out.

No. No. As a result of the controversy

the consumers were extremely unhappy
with the Maggi products due to lead
content.

R12

AOL 6: Table 11.6: Assessing the Morality of Indias Superrich Wealth Maximization Outcomes by
Applying Moral Rules Based on Distributive Justice Ethical Theories
[See Case 11.3: Indias Superrich, as also Case 10.1]
Distributive
Justice
Rules
R13

Ethical Theory
of Distributive
Justice (DJ)

Ethical Rule based on the Ethical Theory of Distributive Justice:

Did the FSSAI, consumers and FDA
Did the Outcomes of Nestle controversy
treat Nestle by:
treat others by:

Formal Justice:
Egalitarianism
(Canon 1)

R14

Socialist Justice
(Canon 2)

R15

Naturalist
Justice
(Canons 3 &4)

R16

Retributive
Justice
(Canon 5)

No. FSSAI also failed to follow the

principles of Natural justice by not
giving a hearing to the company
before banning Maggi on grounds it
did.
The Canon of Need: Yes. The
consumers treat Maggi by canon of
need. The FSSAI and FDA treated
Nestle with the canon of need to
enforce justice and hence filed
complaint.
The Canon of Natural Merit &
Ability: No. FSSAI also failed to
follow the principles of Natural
justice by not giving a hearing to the
company before banning Maggi on
grounds it did and banned all nine
variants though only three failed the
test.
The Canon of Effort: Yes. The efforts
by FSSAI and FDA have been
admirable towards making sure of
consumers safety in case of Maggi at
least.

R17

Capitalist
Justice
(Canon 6)

R18

Libertarian
Justice (Canon
7)
Libertarian
Justice (Canon
8)

R19

R20

R21

Individual
Justice
(Rescher)
Fair Opportunist
Justice (Rawls)

The Canon of Productivity: No.

Productivity has been low as Bombay
high court has lifted the ban on
Maggi as against FSSAI orders.
The Canon of Social Utility: Yes.
FSSAI and FDA have been striving
for the common good of all.
The Canon of Supply-demand: No.
because of the ban by FSSAI, the
demand for Maggi is not being met.
Yes. At its individual end the FSSAI
is doing all it can to bring justice to
people.
No. FSSAI also failed to follow the
principles of Natural justice by not
giving a hearing to the company
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Yes. There was equality among all the

affected people concerned.

Their level of need? Yes, Nestle tried to

give Maggi to all thus satisfying the canon
of need of consumers.

Their level of innate merit or ability? NO:

The controversy has clearly proven that
Nestle didnt do all that was in its ability to
prove its innocence by burning the
remaining evidence.

The level of effort among others? No.

Nestle though has been making efforts to
prove its innocence, it did not do right by
burning evidence. Also, it should go for retesting with a neutral authority at the
earliest.
Yes. Nestle has been productive in making
sure it is back in markets by end of the
year. Even before the controversy it was
productive for the society as a whole.
Their level of social value? NO. In the
wake of this controversy, no social value
has been added by Nestle.
No. because of the ban by FSSAI, the
demand for Maggi is not being met. But
before this Nestle was able to meet the
demand
No. Nestle should not have burnt its Magi
packets. It destroyed evidence and hence
its action is not justified.
Yes. The action of Nestle was applicable
on all.

R22

R23

R24

R25
R26
R27

R28

Libertarian
Egalitarian
Justice
(Rawls)
Libertarian
Justice (Nozick)

Nonmalfeasance
Justice (USA)
Preemptive
Justice
Protective
Justice
Procedural
Justice;
Corrective
Justice
Beneficent
Justice

before banning Maggi on grounds it

did and banned all nine variants
though only three failed the test.
No. The actions of FSSAI have not
nullified any of its past undoings.

Nullifying undeserved advantages among

all stakeholders? No. This action of Maggi
has not nullified anything.

No. FSSAI also failed to follow the

principles of Natural justice by not
giving a hearing to the company
before banning Maggi on grounds it
did and banned all nine variants
though only three failed the test.

No. Nestle if proved did wrong in not

mentioning the levels on its cover and
burning evidence.

No. FSSAI is not doing any harm

Yes. Nestle has conflicted harm to the

health of thousands.

No. FSSAI is trying to prevent all

harm to health.
No. FSSAI is trying to prevent all
harm to health.
No. FSSAI is bringing in measure for
corrective actions

Yes. Nestle has conflicted harm to the

health of thousands.
Yes. Nestle is not protecting against any
harm
No. It is taking corrective actions.

No. FSSAI is promoting good to the

maximum extent.

Yes. Nestle is not promoting any good as it

has resulted in risking peopleslives.