Business Ethics and CSR - Own Notes

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Business Ethics & CSR

Business Ethics and Corporate Code of Conduct

Definition -

Business Ethics are those principles, policies or philosophies that are concerned withmoral judgment and good conduct as they are applicable to a business situation.

Business ethics refers to right or wrong behavior in business decisions.

Business ethics involves morally accepted behavior in business practices. It deals with norms relating to customers, shareholders, employees, dealers, govt.

and competitors.Characteristics/Features of Business Ethics -

Business ethics is the code of conduct which businessmen should follow whileconducting their normal business activities.

Business ethics has universal application.

It is a relative term. It changes from one business to another. It differs from countryto country.

It is strictly followed in western countries and is not followed properly in the poor anddeveloping countries.

It has universal application- Large or small.

It is more about earning long-lasting relationships in business.

It includes self control, service to society, fair treatment to social groups and not toharm others.

It gives protection to customers and other social groups such as shareholders,employees and the society at large.

It suggests legal, social, moral, economic and cultural limits within which businesshas to be operated.

It must be accepted as self-discipline by businessmen.

Businessmen should be given proper education, guidance and training in order tomotivate them to follow ethical business practices.

It is not against profit-making. It is against profiteering by cheating and exploitingconsumers, employees or investors.

It supports expansion of business activities but by fair means and not through illegal

activities or corrupt practices.Approaches to Business Ethics -

Empirical, Intuitive, Rational and Revelation

Empirical: It states that ethics is derived through experiences of businessmen whodetermine what is right and what is wrong.

Intuitive: It states that business is not necessarily derived from experience ofbusinessmen or logic but businessmen automatically process an understanding ofwhat is good and what is bad.

Rational: It states that businessmen need not require any past experience fordetermination of ethics.

Revelation: It states that religious moral principles help life to rise to its greatestpotential.

Scope for Business Ethics -

Criminal behavior and legal framework.

Human values and personal behavior.

Corporate and business ethics.Importance of Business Ethics -

Customers will be satisfied only if the business follows all the business ethics.

Business ethics is needed in order to make businessmen conscious as regards theirduties and responsibilities towards consumer and other social groups.


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Business ethics is needed to make business activities fair to consumers. It checksbusiness malpractices and offers protection to consumers.

It is needed in order to improve the confidence of consumers as regards quality,price, reliability etc. of goods and services supplied.

It is needed for the protection of rights of consumers at the business level such asright to health and safety, right to be informed, right to choose, right to be heard etc.

It is needed in order to protect the interest of all those concerned with business- theemployees, shareholders, dealers and suppliers. It avoids their exploitation throughunfair trade practices.

To create good image of businessmen in the society and also to avoid publiccriticism.

Business Ethics and Profits -

Profit and Only Profit concept.

Firms-Non performance means huge liabilities.

Promotes inefficiency and cannot discharge social responsibility.Corporate Code of Conduct -

Values and principles that determine the purpose of the company. Defineresponsibilities to different groups of the stakeholders.

This is how we except you to behave Must and Must not.

Prohibitions-Penalties for violating the rules can be identified.

Realistic and focus on the potential ethical dilemmas faced by employees, it must becommunicated to all employees and enforced.

Managers must attend not only to the content of the code but also to the process ofdetermining that content.

Code should be developed and disseminated in an open, participate environmentinvolving as many employees as possible.

Beliefs and norms of an org. can be turned into an ethical code.

It is generally proposed, discussed and defined by the senior executive in the firmand then published and distributed to the employees and shareholders.

Codes of standards of behaviour, the way the managers want the other people in theorganisation to act when confronted with a given situaton.

The norms are usually stated as a series of negative statements, what the employeesshould not do.

The beliefs in the code are standards of thought, the ways that the managers in theorg. want the others to think.

The beliefs are stated in a positive way.Reasons-Code of Ethics -

Manage or respond to internal organisational activity.

Means for making roles and expectations within the organisation clear.

To define the framework of the acceptable behaviour.

To follow high standards of practice.

To create benchmarks for self-evaluation.

To enhance sense of community.

Codes of ethics can be a dishonest way of gaining legitimacy in the eyes ofshareholders. The goal of the code can also be to control or regulate the behaviour ofemployees in order to follow legal requirements as it is-

To create transparency in business activities.

To foster higher standards of business ethics.

To comply with government laws and norms.Highlights of Code of Ethics -

Do not cheat/exploit consumers through business malpractices such as artificialproducts and adulteration.


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Do not resort to hoarding, black marketing, profiteering and sale of harmful goods.

Do not destroy healthy competition, which offers certain benefits to consumers. Donot tarnish the image of competitors by unethical means.

Ensure accuracy in weighing, packing and quality while supplying goods toconsumers.

Pay taxes and other charges to the concerned authorities honestly and regularly.

Avoid bribing officials and lobbying for favours. Maintain accurate accounts and make them available to all authorized persons and

authorities.

Pay fair wages, provide facilities and incentives and also give human treatment toemployees.

Supply reliable information to shareholders regarding financial position and otherpolicy decisions of the company.

Avoid injustice and partiality to employees in transfers and promotions. Avoiddiscrimination among them on the basis of gender, religion and language.

Do not make secret agreement with fellow businessmen for controlling production,pricing or for any other activity harmful to consumers.

Accept the principles of service first and profit next

Make your business efficient and dynamic. Give the benefits of these features toconsumers.

Avoid formation of private monopolies and concentration of economic power.

Adjust your business activities as per the needs and expectations of consumers.

Give due respect and honour to the basic rights of consumers.

Honour responsibilities towards different social groups on voluntary basis and not byforce.

Charge fair and reasonable price.

Ensure that intermediaries do not manipulate the prices.

Provide product warranty in clear terms.

Not to trade in smuggled products.

No public misleading and deceptive advertisements.Corporate Codes -

Corporate Ethics Corporate Practices

Code of conduct or behavior

Steps involved in implementation of code of ethics:

Drafting and preparation

Communication

Enforcement/Disciplinary action

Periodic review

Measures to improve ethical conduct of business

At Institutional level

At Government level

At Society level

At Institutional level: Code of ethics, Increase in transparency, Rewards, Punishment, Continuous

appraisal, Lectures/Seminars

At Government Level:

Enactment of laws, Institution of awards, Awareness through mass media, Takingquick action

At Society level:

Consumer awareness programmes, Public interest litigation, Consumers association,Publishing journals, Liaison with government agencies, Boycotting products,


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Measures for effective implementation of ethical standards and morals, Ethical audit,Ethical training, Business ethics consultants, Ethical code of conduct, Ethicscommittee, Ethics hotlines, Rewarding exemplary conduct, Disciplinary action,Efficient systems, Government Laws

Egoism and Altruism & Entrepreneur and Manager-Roles andResponsibilities

Introduction -

Human values decide the standard of behaviour.

Altruism is an aspect of moral philosophy in which it is argued thatmoral decisions should be based upon the interests or well-being of

others rather than on self-interest. Ethical egoism is belief that one ought to do what is in ones own self-

interest. What is in ones self-interest may incidentally be detrimentalto others, beneficial to others, or neutral in its effect.

What is Altruism?

Altruism revolves around the question of morality I ought to act in theinterest of others.

In ethical altruism the issue of morality revolves around the idea thatin order to live a morally correct life one must act in the interest ofothers. But acting in the interest of others does not imply a reward

E.g. A politician donates money to a charity because it is the rightthing to do, is honest act of altruism.

But, the politician who donates money to a charity in order to gainfavourable public opinion is not act of altruism.

What is Egoism?

Egoism revolves around the question: I ought to act in the interest ofmyself.


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In ethical egoism the issue of morality revolves around the idea thatpeople must do what is best for themselves in order to live a morallycorrect life.

When someone strives to reach a goal and sees others as an obstacleto their success, they could be viewed as egoists. In some cases of

egoism, the idea of acting out of ones self interest sometimes evenextends to overlooking others interests in order to satisfy your own.

Is Altruism Really Egoism?

One should not get fooled by the egoism.

For e.g. Doctors, social workers, engineers and humanitarians alikegive up their time and expertise to improve the life of those living inimpoverished countries.

These humanitarians must have had some self- interest in order tobuild on the foundation of knowledge they have acquired. It took someactions on their own self-interest to get where they are now.

Whether it was motivation driven by the interest to attain moreknowledge or the lure of future financial success, is irrelevant.

Either way these people were clearly acting according to thefoundation of egoism, by acting out of ones self interest.

When someone helps a fellow human being because they enjoy thefeeling it gives them, is in fact a quality of egoism. Altruism rather thanegoism, has a better outline for how one should live life. Combinationof the two is probably more realistic.

Altruism rather than egoism has a better outline for how one shouldlive life, combination of the two is probably more realistic.

Definition: Entrepreneur and Manager -

An entrepreneur is a person who initiates of a new enterprise, ventureor idea and assumes significant accountability for the inherent risksand the outcome.

An entrepreneur is one who undertakes an enterprise. Entrepreneur isa person who sets up a business or businesses, taking on greater thannormal financial risks, in order to do so.

Ideology-Milton Friedman -

The Social Responsibility of Business is to Maximise its profits.

Profit maximization is the exclusive goal of business management.

The expectations of others (as reflected in law, ethical custom, andpotentially hostile reactions) serve as constraints on a managers

ability to achieve the exclusive goal or profit.Personal Ethics V/s Professional Ethics

There are two kinds of ethical obligation in business:

There are obligations that business people have simply as humanbeing.

There are further obligations they have as members of a profession.

Personal ethics question-


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What should I do as a human being?

What should I do as a professional?

If there is a conflict, how should I resolve it?Why Professional ethics?

Expertise is a particular area, The disposition to apply it responsibly.

The members of a profession profess. Special obligation of Managers- To generate wealth, To provide meaningful and gainful employment.

To contribute to social order and stability.Manager-Who is he/she?

One who identifies and achieves organizational objectives through thedeployment of appropriate resources.

Responsibilities- Managing activities, managing resources, managinginformation, managing people and managing him or herself.

Planning and directing the work of a group of individuals, monitoring

their work and taking corrective action when necessary.Difference between Entrepreneur and Manager

The main reason for an entrepreneur Comprehends the venture forhis individual satisfaction and has personal stake in it. A managerprovides his services in an enterprise established by someone.

An entrepreneur-Bears all risk and uncertainties where as a managerdoesnt own it.

Entrepreneur- Innovative. Managers-Supervise and create routines.

Entrepreneur- Faced with more income uncertainties as his income iscontingent on the performance of the org. Managers compensation isless dependent on the performance of the organization.

Entrepreneur- Not induced to involve in fraudulent behavior. Manager-May cheat.

Entrepreneur- Qualities like high accomplishment motive, innovativethinking, fore thought, risk bearing ability but not qualified to be agood entrepreneur. Manager- To be educated in the fields ofmanagement theories and practices.

Entrepreneur- Faults and Failures as a learning exp. Managers- Makesevery effort to avoid mistakes and he postpones failure.

Ethics and MoralityEthicsIt is about choosing actions-

Choose actions that are inherently good rather than ones that areinherently bad.

How do people actually decide what is ethically right or wrong?

It feels right- E.g. Loophole in security of internet.

Listen to your conscience.

Avoid making a mistake by doing nothing.

Be sure you are right, then go ahead


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-Davy Crockett (1786-1836).

We will not lie, steal or cheat nor tolerate among us anyone whodoes

-Which do you think is the harder part?Perception of countries as least/ most corrupt

Least Corrupt Countries: Finland, Denmark, New Zealand, Iceland, Singapore, Canada, UK

Most Corrupt Countries: Pakistan, Bangladesh, India, Nigeria, Kenya, Indonesia

Swami Vivekanands Views on Ethics

The basis of Indian subjectivity lies in the belief of GOD.

Supreme Oneness is the rationale of All Ethics and Morality.

He suggested fundamental law of ethics.

Do not injure others, love everyone as your own self because the wholeuniverse is one.

Ethical Learning from Srimad Bhagavad-Gita

Fight of evil and unethical between Kauravs and Pandavas.

The work or karmas is driving force of the life and this work has to beethical.

Managers who resort to unethical means to grab the immediate resultsare successful only for short time like Dhuryodhan.

Perform prescribed duties with the utmost devotion, sincerity andhumility.

The distinction is to be made between ethical work which is uselessand work which is downright immoral.

Ethical decisions are: Equitable (Justice for all)

Morally correct

Good and Fair

Appropriate to situation

British Airways Vs Virgin Airlines

BAs framed a baseless story that in Night Club of Richard Bransonthere were HIV infected needles that were found.

They also hacked the Virgin Reservation Software, called the

customers and told them that flights had been cancelled and switchedthem to British Airways.

Other examples

Mumbai based TATA VSNL employee was caught while leakinginformation to competitor.

Gillette Engineer who led the Razor blade was also supplying theimportant details to its competitors.

Satyam Case.


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Coca Cola and Pepsi.Expert Opinion-Prof Arya

In India, you cannot just grow unless you compromise.

There is rampant corruption here and all the shortcuts and unfairmeans are correct.

Most of the Top Corporates have set of designed values but hardly anyof them walk their talk.

It is not only in India but world too.Moral-Normative Ethics

Examines standards for the rightness and wrongness of actions.

Divided into the sub-disciplines of moral theory and applied ethics.

Highest values by which moral judgments are made are often referredto as norms, principles, ideals or standards.

Absolutism, Authority, Relativism, Subjectivism.Perspective ethics and Applied EthicsSocial evils:

Abortion

Euthanasia

Allocation of scarce health resources

Human embryos for research.

Morality

Latin term Moralis (custom).

Actions are good if they are good or worthy of praise.

Code of conduct.

Human behavior.

Principles.

To educate a person in mind and not in morals is to educate menaceto society

- Teddy Roosevelt .

Its a fact of life, to win consistently, you need to play by rules.

In life, play hard and play fair.

In life and business-Ethical standards must be set and Ethicalstandards must be met.


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Ethics in Global MarketingWhat is Marketing?

Process of bringing together businesses with customers and involvesnumerous components e.g. product development, PR, Advertising.

What is Global Marketing and Ethics?

Depends on culture to culture and place to place. Globalization and International Marketing Ethics problems are closely

related to each other.Ethical Problems in Global Marketing

Country to country differs.

E.g. In USA-Giving business gifts of high value, is generallycondemned, but in many countries world gifts are not only acceptedbut are also expected.

Major Ethical Problems

Traditional small scale bribery

Large scale bribery

Gifts/Favors/Entertainment

Pricing

Products/Technology

Tax Evasion Practices

Illegal/Immoral Activities in the host or domestic countries

Questionable commissions to channel members

Cultural differences

Involvement in political affairs.Guidelines to solve global business ethics problems

Do not direct intentional harm.

Produce more good than harm for the host country.

Respect the rights of employees and of all others affected by onesactions or policies.

To the extent consistent with ethical norms, respect the local cultureand work with and not against it.

Multinationals should pay their fair share of taxes and cooperate withthe local govts. in developing equitable laws and other backgroundinsts.

International institutions should manage, regulate the global marketplace and promote the establishment of multinational treaties to

govern the global business system.What is Advertisement?

Paid for communication to public or section of it.

Purpose-Influence opinion or behavior of those to whom it isaddressed.

ASCI-(Advertising Standard Council of India) - 1985

Self-Regulation in Advertising, ensuring the protection of the interestsof consumers.


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Support from 4sectors-Advertisers, Ad Agencies, Media (Broadcastersand Press) and PR Agencies, Market Research cos.

Advertising reminds the target market about the companys offerings.

At home-TV, shopping malls, street and subways.

Social effects, its creation of consumer desires and its effects on

consumer beliefs. It shifts consumption away from one product to another.

Privacy enables certain professional relationships to exist.

Information and one who gives information.

Competition in Advertising- Aspirations, comfort, convenience,economy, efficiency, fear, love, nostalgia, pride, health, luxury,patriotism, safety-Ideas that touch the hearts of target audience andultimately motivate them to respond.

Ethical issues: Truth, Use of children in ad., False claims, ComparativeAd., Use of nudity in ad.

Code of Conduct: ASCI-

To ensure the truthfulness and Honesty of Representations and Claimsmade by Advertisements and to Safeguard against misleadingAdvertisements.

To ensure that Advertisement are not offensive to generally acceptedstandards of Public Decency.

To safeguard against the indiscriminate use of Advertising in situationsor of the Promotion of Products which are regarded as Hazardous orHarmful to society or to individuals, particularly to minors.

To ensure the Ad. observe fairness in competition such that the

consumers need to be informed on choice in the market place and thegenerally accepted competitive behaviour in business are both served.


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Indian Perspective of Ethics - PurusharthasWhat is Ethics?

Ethics - Code of conduct for personal behavior.

Ethics in Business: Applying personal ethics into business.

Business Ethics: Ethics of business, what is good & bad, right or wrongfor business.

Governance: Methods and practices of doing business in anyorganization.

Corporate Governance: Set of practices business is carried on incorporate business organization.

Good: A code of best management Corporate practice which leads toGovernance achievement of corporate mission.

Ethics-Definition

Greek word Ethos- refers to character.

A code of conduct for personal behavior.

Driving force- guide- value content.

A moral code based on generally accepted standards.

Personal Ethics Vs. Ethics in Society.

Role of Ethics to discipline thoughts based on God and religion. Role of law to regulate external behavior.

Developing personal code of conduct

For developing self-confidence/ personality/ courage- Need to knowwhat is Good & Bad for you.

For avoiding conflicts/trauma and for achieving success.

Code should be built around your personal goals.Purusharthas

Purusha- means person or self.

Artha- means aim or goal of human life or end.

What is sought by men.Purusharthas-Four forms

Dharma : Righteousness, Duty

Artha : Wealth Kama : Desire, pleasure

Moksha : Liberation

One of the tenets of Hinduism is: ekam sat viptra bahuda vedantiwhich means the truth is one but perceived and spoken in different


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forms. If GOD has many forms and they are all same in the finalessence, it logically follows that He can be worshipped in many waysand that we can reach Him through any of his forms and manifestation.

Akasat patitam toyam yatha gacchati saagaram, Sarva devanamaskara kesavam pratigacchati which means..

Just as the rain water wherever it falls finally flows down into theocean, so also worship offered to any GOD will ultimately reach theSupreme GOD.

Dharma (Duty)

Rightful duty of a person.

Examples of a person's dharma are to be a doctor, teacher, writer,warrior, priest, parent etc.

Sometimes a person's dharma is decided by their birth, but it need notnecessarily so.

As a person progresses through life, different stages of life may call fordifferent dharmas and purposes.

Tuning into the inner guide of the heart allows a person to identifytheir dharma, their true calling.

Means to the attainment of certain ends.

Ends like artha and kama should be acquired through righteousness,honesty and straightforwardness.

Stealing for luxurious life is no Dharma.

Dharma is duty. It is the higher good to achieve the highest i.e.,moksa.

Eg. An IAS officer has to execute his task with utmost sincerity andhonesty and not by bribing or other mal-practices.

Artha (Wealth)

Artha is the pursuit of material wealth, which brings material comfortsto a person.

The important thing to remember is not to be attached to thepossession or attainment of wealth.

It can be sought with detachment, and with awareness, and when donein this state of mind, the pursuit of wealth is not different from thepursuit of the Divine, because one sees abundance, or wealth as aform of the Divine.

And in this state of detachment, one recognizes when one has attainedtheir financial objectives, and hence the desire to pursue moreautomatically dies away, paving the way for Moksha.

Artha is said to mean-meaning, money, a thing, andpossessions.

Artha also means the attainment of riches and worldly prosperity,advantage, profit and wealth.

It is a powerful urge in human nature.

Acquisition of means for the material well-being, therefore, is alegitimate social and moral purpose.


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Kama (Pleasure)

Kama is fulfilling one's desires.

Desires are in various forms -to be wealthy, powerful, recognition,service, etc.

The Kama purushartha advocates that one's desires in this lifetime

need to be fulfilled, albeit in a state of awareness and without harminganyone in the process.

For a person to evolve spiritually and to reach the ultimate destination,the barrier of desires needs to be crossed.

This can be done either by fulfilling the desires, or by sublimatingthem. Suppressing of desires is certainly not recommended.

Moksha (Liberation)

Moksha means liberation, realizing of the Self, and is the ultimatedestination for this human birth.

It is the stage of inner realization that the individual self is the same asthe Supreme Self.

It is the experience of union, oneness, with the Universe.

It also means release.

In Bhagavad-Gita, moksa is mentioned as the supreme tranquility andthe highest bliss.

It is delight in the self, contentment with the self, selfsatisfaction andself-fulfillment.

It is not that on death moksa is ttained.

Being the ultimate value of mans social existence, the purushartha ofmoksa is an end in itself.

Beyond that, man has nothing to attain.

It is the stage where mans cravings cease and along with that ceasesthe need for attainment and fulfillment.

It is total destruction of egoism. We can call moksa as a sublime goal.

It can be known through mystical experience.Concept of Dharma

Means to nourish, to uphold and signifies whatever supports theuniversal order and also the individual life in society.

An individual undertakes in harmony with divine injunctions and hisown sense of morality and justice.

Dharma is characterised by certain common human values like truth,

generosity, compassion, sympathy, self-restraint, forgiveness, non-enmity, friendliness, absence of envy etc.

Dharma is closely linked with the idea of original human indebtednessor inescapable obligation.

Every human being is born with three debts. The first is towards hisancestors, the second is towards the sages and the third is what heowes to the Gods.


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The two great epics of India, the Ramayana and the Mahabharata bothemphasise the role of Dharma in individual life as well as in collectiveexistence.

If the Ramayana illustrates the need to subordinate wealth andenjoyment to dharma, thus making it the mirror of Indian culture, the

Mahabharata expounds on the challenges that dharma faces fromgreed and wealth in personal and public life

Good Dharma = Good Karma.

Hinduism accepts the concept of reincarnation, and what determinesthe state of an individual in the next existence is karma which refers tothe actions undertaken by the body and the mind.

. In order to achieve good karma it is important to live life according todharma, what is right.

This involves doing what is right for the individual, the family, the classor caste and also for the universe itself.

Anything that helps human being to reach god is dharma and anythingthat hinders human being from reaching god is adharma.

According to the Bhagavat Purana, righteous living or life on a dharmicpath has four aspects: austerity (tap), purity (shauch), compassion(daya) and truthfulness (satya); and adharmic or unrighteous life hasthree vices: pride (ahankar), contact (sangh), and intoxication(madya).

The essence of dharma lies in possessing a certain ability, power andspiritual strength.

The strength of being dharmic also lies in the unique combination ofspiritual brilliance and physical prowess.

Profit Making and Responsibilities towards StakeholdersWhat is profit? Business Ethics is not against Profit Profit is- Return on capital Reward for risk Plough-back for growth It is a driving force in business, but without exploiting market,

consumers and other stakeholders. In the Indian concept- Kama and Artha are considered to be valid

human pursuits.

But Lobha (greed) and Moha (delusion) being excessive are deemedbad. Making profit would seem to be permissible while profiteering would

not be. Profit Maximisation and ethical approach can be explained as under: Maximise the business long-run profits within the limits of the law. Based on the Laisse Fair Theory of Capitalism first expressed by Adam

Smith in the 18th Century.


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Argues total social welfare is optimised if humans are permitted towork toward their own selfish goals.

The role of govts. and the law is limited solely to ensuring the workingsof a free market (by NOT interfering with economic liberty, eliminatingcollusion among competitors, & promoting accurate information in the

marketplace.Strengths and Weakness (Criticism) Strengths- Allocation of societys resources to those units that are

most efficient increases overall productivity and maximizes total socialutility.

Criticism- Doesnt concern itself with HOW wealth is allocated in society. The ability of laws and market forces to control corporate behavior is

limited.TBL (Tripal Bottom Line)

As per TBL, Profit is the economic value created by the org. after

deducting the cost of all inputs, including the cost of the capital tiedup.

It is the real economic impact the org. has on its economicenvironment.

Boardrooms address ethical behaviour based on the concept of TripleBottom Line.

It refers to Triad of profit, social responsibility and stewardship of theenvironment.

Sustainability is the core philosophy from which the TBL is derived. Managers put the ethics of TBL in practice- Greater client satisfaction resulting from mutual trust.

A more positive public image for the org. Savings from less waste and more effective mgt.of resources

developing sustainable practices combined with the activeengagement of clients, community etc.

Work Culture and Ethics Ethics in the workplace requires abolition of all kinds of discrimination

and exploitation. Public concerns about the ethical practices in business usually relate to

issues such as: Fraud and embezzlement Accepting bribes or lying

Financial scams Deceptive advertising of food and beverages.

Unfair Competitive practices Factors influencing workplace ethics- The individual moral standards Influence of managers and co-workers Opportunity to engage in misconduct

Ethical issues faced by individual at workplace


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Relationships with suppliers and business partners- Bribery and immoral entertainment Discrimination between suppliers Dishonesty in making and keeping contracts. Relationship with customers-

Unfair pricing Cheating customers Dishonest advertising. Relationship with employees- Discrimination in hiring, promoting etc Unequal treatment. Management of resources- Misuse of official funds Tax evasion.

Measures to ensure ethics in the workplace Have a code of conduct and ethics

Establish open communication Make ethics decisions in group and make decision public wherever

appropriate Integrate ethics mgt. with other mgt. practices Use of cross-functional teams when developing and implementing the

ethics mgt prog. Appointing an ombudsman Creating an atmosphere of trust Regularly updating of policies and procedures Include a grievance policy for employees Ethical issues faced by individuals can be classified as-

Business relationship, Conflicts of interest, Fairness and Honesty andCommunication.

Responsibilities Towards Stakeholders Business Ethics comprises- Ethics of Mgt. Corporate Ethics Industry Ethics Corporate Ethics- Corporations develop their own of ethics based on their mission and

prevalent industry specific ethics. Such ethical framework provides strategic advantage over

competitors, helps them achieve long terms business results in all themarkets they operate.

What is CREDO? Codified ethical principles for carrying on business. Dictionary Meaning: Oxford- A statement of belief; a creed. Relevance of CREDO-


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Credo will help corporations to face challenges of today and tomorrowand help them to stay on course and achieve their mission.

Credo of Johnson and Johnson helped them to achieve their mission. Corporation mission of J&J: To be the best and the most competitive and comprehensive health

care company in the world.Johnson and Johnson It has embodied its ethical principles in their well known document

called Our CredoCREDOWe believe our first responsibility is to the doctors, nurses and patients, tomothers and fathers and all others who use our products and services.In meeting their needs everything we do must be of high quality.We must constantly strive to reduce our costs in order to maintainreasonable prices.Customers orders must be serviced promptly and accurately. Our suppliers

and distributors must have an opportunity to make a fair profit.We are responsible to our employees, the men and women who work with usthroughout the world. Everyone must be considered as an individual. Wemust respect their dignity and recognize their merit. They must have a senseof security in their jobs.Compensation must be fair and adequate, and working conditions clean,orderly and safe.We must be mindful of ways to help our employees fulfill their familyresponsibilities.Employee must feel free to make suggestions and complaints.There must be equal opportunity for employment, development and

advancement for those qualified. We must provide competent management,and their actions must be just and ethical. We are responsible to thecommunities in which we live and work and to the world community as well.We must be good citizens- support good works and charities and bear ourfair share of taxes. We must encourage civic improvements and betterhealth and education. We must maintain in good order. The property we areprivileged to use protecting the environment and natural resources. Our finalresponsibility is to out stakeholders. Business must make a sound profit. Wemust experiment with new ideas. Research must be carried on, innovativeprograms developed and mistakes paid for. New equipment must bepurchased, new facilities provided and new products launched. Reserves

must be created to provide for adverse times. When we operate according tothese principles, the stockholders should realize a fair return.Four Responsibilities

Responsibility to Customers Responsibility to Employees Responsibility to Community Responsibility to Stockholders (Shareholders)


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Responsibility to Customers- Produce high quality products and services. In order to maintain reasonable prices, be cost conscious in everything

we do to reduce the prices.

Constantly strive to provide value for money in our products andservices. Give an opportunity to our suppliers and distributors to make a fair

profit. Servicing our customers orders promptly and accurately.

Responsibility to Employees Each one to be considered as individual by respecting his/her dignity. Recognize the merit of the individual and provide opportunity for

promotion/ advancement. Provide clean and safe working conditions. Provide fair and adequate compensation.

Help create a sense of security and provide an environment to makesuggestions and also complaints.

Encourage ways to help employees fulfill their family responsibilities. Provide equal opportunity for employment, development and

advancement for those qualified. Encourage open communication in the org. Provide competent, just and ethical management.

Responsibility to Community Be a good corporate citizen by following the laws of the land. Support good works and charities. Encourage civic improvements and better health and education.

Take care of the property we are using. Take steps to protect the environment and natural resources.

Responsibility to Stockholders The business must make a sound profit. Experiment with new ideas and develop innovative systems and

practices. Activities related to research and development. Investment in new equipment and facilities. Launch new products. Reserves must be created for adverse times. Stockholders should realize a fair return.


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Corporate Governance

Meaning It promotes corporate fairness, transparency and accountability. It is concerned with structures and processes for decision making,

accountability, control and behavior at the top level of the org. Transparency in decision-making. Accountability which follows from transparency because

responsibilities could be fixed easily for actions taken or not taken and The accountability is for the safeguarding the interests of the

stakeholders and the investors in the organization.Definition

According to Sir Adrian Cadbury, World Bank Publication, Corporate

Governance is holding the balance between economic and social goalsand between individual and community goals.

According to SEBI Committee, Corporate Governance is the system bywhich the companies are directed and controlled by the managementin the best interest of the stakeholders and others, ensuring greatertransparency and better and timely financial reporting.

Scope Shareholders rights; Enhancing the shareholders value; Issues concerning the composition and role of the Board of Directors; Deciding the disclosure requirements;

Prescribing the accounting systems; Putting in place effective monitoring mechanism etc.

Objectives of CG A properly structured board capable of taking independent and

objective decisions is in place at the helm of affairs. The board is balanced with representation of adequate no. of non-

executive and independent directors who will take care of theirinterests and well-being of all the stakeholders.

The board adopts transparent procedures and practices. The board keeps the shareholders informed of relevant developments

impacting the company.

The board effectively and regularly monitors the functioning of themgt. team.

The board remains in effective control of the affairs of the co. at alltimes.

To confirm that rules are followed. To confirm that proper accounting is done. To confirm that responsibilities are followed.


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To confirm that proper control is created in simple words- Team of Mgt(Control & Mgt.)

Prerequisites Political Responsibility-Legitimate law, respect for rights and

principles of constitutional state.

Social Responsibility- Shared values. Economic Responsibility- Managements obligation of maximising

shareholders value. BOD- Adequate internal controls and reports to the co. in a tranparent

manner. Shareholders- Appoint Directors and the auditors to hold the board

accountable Mgt.- Adequate control systems and to ensure their operation and to

provide information to the board on a timely basis.Principles of CG

Integrity and Fairness

Transparency and Disclosures Accountability and Responsibility Honesty Trust and Integrity Openness Performance orientation Mutual respect and commitment to the org.

Basic essentials of CG Role and power of Board Legislation Board Independence

Board Skills Management Environment Board Appointment Board Meetings Strategy Setting Business and Community Obligations Financial and Operational Reporting Monitoring the Board Performance Audit Committee Risk Management

Issues of CG Internal controls and internal auditors. The independence of the entitys external auditors and the quality of

their audits. Oversight and mgt. risk. Oversight of the preparation of the entitys financial statements. Review of the compensation arrangements for the chief executive

officer and other senior executives. The resources made available to directors in carrying out their duties.


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The way in which individuals are nominated for positions on the board. Dividend policy.

Advantages of Corporate Governance It takes care of all stake holders i.e. share holders, creditors, debtors,

workers, customers etc.

It avoids to disturb the ethics. It creates transparency in all activities. It creates good image of organization.

Mechanism of CG The Companies Act. Securities Law. Discipline of the Capital Market. Nominees on company boards. Statutory audit. Code of conduct.

Roles of SEBI Issue of guidelines. Public interest ads. Dealing with complaints of investors. Investor education. Investor surveys. Disclosures by companies. Code regarding takeovers.

Concepts in CG Insider Trading Whistle Blowing

CG represents the value framework, the ethical framework and themoral framework under which business decisions are taken.

CG principles of transparency and accountability are crucial to theintegrity and legal credibility of our market system.

One of the major problems of CG in India (be it the public sector, themultinationals or the Indian pvt. Sector) is that of disciplining thedominant shareholder and protecting the minority shareholders.

The Corporate Governance codes are only a guideline. Effective CGdepends upon the commitment of the people in the organization.

The key to good CG is a well functioning board of directors. The boardshould have a core group of excellent, professionally acclaimed non-

executive directors who understand their dual responsibility role-ofappreciating the issues put forward by the management, and ofhonestly discharging their fiduciary responsibilities towards thecompanys shareholders as well as creditors.


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Cross Cultural Ethics - Global DimensionWestern and Indian Cultures

Western Culture is based upon industrialisation and large-scaleproduction.

Self-centred-Motivated by principle of personal benefit.

Exploitation of nature- Exploit natural resources to satisfy desires.

Capital intensive- Industrialisation and large scale production. Market oriented- Creating fresh needs to develop and expand the

market.Indian Culture

2400 BC-Indus Valley civilisation.

Vedic Religion-Seeking truth and harmless life.

Vedas and Upanishads.

Hindu Teachings-Oneself, Others and Society.

Development of self- Spiritual pre-eminence.

Harmony with nature- Living with nature.

Labour intensive- Importance to individual skills of production. Society oriented- Importance to family and community as a unit.

A ComparisonFactors Western Culture Indian CultureThinking Compartmentalized IntegratedMan Material being Spiritual beingHappiness For oneself For AllPossessions Acquisitiveness Aparigraha (Non-

possession)Motive Profit ServiceConsumption Consumerism Restrain consumption

NaturalResources

For Exploitation Living with Nature

Relationship Rights-oriented,consciousness of othersduties

Duty-oriented,consciousness of othersrights

Economy Rising cost of production due Declining prices and


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to scarcity of resources. abundance of production due tosustainable use ofnatural resources

Market Institutionalized capitalism

(patens, brands, copyrights,cartels, etc.)

Individualized free

competition withoutmanipulated markets.

Ethical Values and Culture

Cultural Relativism: Right or Wrong- On culture

Norman E Bowie (1990): Analysis of Cultural relativism and itsrelationship to ethical decision-making in MNC.

There are Universal moral principles which apply to all cultures.

Once these moral principles are identified, cultural relativism does nothold at all.

A whole range of behaviour, e.g. torture, murder of the innocent,racism, and casteism, would be accepted as wrong by everyone.

Individual Relativism-Right or Wrong on Feelings or Attitudesof Individual

If individual relativism were the prevailing view, a stable society wouldbe impossible, life would be difficult and brutish.

To rest on ones conduct on the ethics of mere relativity is sure tocause moral drifting and create an unstable and unsafe world.

Moral Absolutism and Relativism

Morality that is absolute which is not dependent on society or situation.

Actions as inherently good or bad.

For. Eg. Lying for instance would always be a bad action, even if it isdone to promote some other good (like say saving a life).

But morality of an action is dependent on the context or consequence

of that action. A person would be obligated to tell a lie to save a life so as to minimize

the harm done.

Moral relativism believes that moral standards are not absolute, butinstead emerge from social customs and other sources.


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Environmental EthicsIntroduction

Air, water, land pollution. Bhopal Gas Factory-3000 lives lost in 1984. Global Warming- Heavy flood from South Pole. Ozone depletion- Heavy consumption distraction of ozone which has

generated global warming. Acid Rain- Rain with acidic factor-TAJ MAHAL.

Water Pollution- River affecting life. Land Pollution- Artificial fertilizers mixes in soil effects the quality of

soil.Contents

1. Rules against any pollution.2. Proper wastage clearing system.3. System for reducing the wastage.4. Increasing the eco-friendly product.5. Resource of wastage.6. Creating awareness amongst workers.7. Minimizing uses of natural resources.

8. Green Accounting System-Environmental factors and accounting ofenvironmental ethics.

Steps taken in India Indian Govt. passed AIR control and prevention of Pollution Act 1981. Water Pollution Act was passed. Factories Act was amended. Industries (Development and Regulation) Act passed in 1951. Mines and Minerals (Regulation and Development) Act passed in 1957.


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Environment Limitations Pollution Consumption of non renewable resources like oil. Use of renewable resources such as water above the rate of natural

replenishment.

Change in the universal balance in the rapid feeling of trees and fastremoval of forests. The outlook of winning a war against the nature through the scientific

activities. Inviting climatic change through the rapid feeling of trees and fast

removal of forests. Toxic waste. Contamination of ground water. Oil spills destroying the seashores. Fossil fuels producing carbon dioxide resulting in green house effect. Usage of fluro carbons that deplete the ozone layer.

Support Environment Responsibility Anthropocentrism approach Anxiological approach Eco-centric approach

West-Impact Netherlands had to face industrial pollution due to the dumping of

industrial wastes and the release of hazardous chemicals into therivers.

Air pollution an soil erosion have been quite severe in Spain.

NRA (National Rivers Authority)-1991 According to NRA, investigation on Air, Water and Soil pollution-Farm,

Industrial, Oil and sewage and water industry. Reports revealed-Chemical industry recorded highest percentage of

environmental pollution. Most industrial polluter- Mineral Industry followed by Chemical

industry. Court Action: NRA imposed fines against offenders and issued a formal

caution notice for any irresponsibility. European Legislature: Framed 120 different acts. Promoting the benefits of pollution prevention. Customizing legislation to meet the requirements of European member

states. Developing and enforcing a polluters pay policy with an aim to

impose fines for the defaulters. Initiative by Several Govt.: Green agenda- Encourage org to participate in conservation

programmes.


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Some orgs. Initiated environment protection measures such asinstallation of desulphurization plants and introduced energy savingmeasures.

Environmental Issues in India Rapid industrialisation and urbanisation has caused more harm than

good. Eg. Deforestation, Soil erosion, water pollution etc. The Govt. of India (GOI) has adopted a comprehensive policy to protect

public health, forest and wildlife. But the policy has an importantlimitation that no court can enforce it.

The Environment Protection Act (1986) focused on reducing industrialpollution. The report stated that the estimated annual cost ofenvironmental,degradation is 4.5% of GDP (average).

Environmental Issues: Air Pollution, Energy Consumption, CarbonEmissions, Energy and Carbon intensity.

Green Initiatives

Green initiatives in business range from environmentally friendlytechnological innovation, green tourism, green community,environmental campaigning and environmental counselling, e.g.:

An environment friendly technology innovation such as recyclabletoner cartridges in laser printers reduces wastage.

Hero Honda introduced an environmental friendly bike.Reasons for adopting green initiatives

Economic benefits from increased efficiency-1. Firms by reducing the wastage can decrease handling expenses, fines

and costly inputs. Competitive advantage through innovation-

1. Efficient product ensures the usage of cleaner technologies, process,innovation and waste reduction.

Public image-1. Consumers, investors and employees respond positively to companies

with a reputation for good environmental performance.2. For future generations.

Environmental Social Audit The Confederation of British Industry has defined environmental

auditing as the systematic examination of the interactions betweenany business operation and its surroundings.

Industry and Environment Relationship-

Article 2(f) of the European Union Eco Management And Audit Schemedefines EA as A management tool comprising a systematic,documented, periodic and

objective evaluation of how well environmental org., mgt. andequipment are performing in the aim of helping to safeguard theenvironment by:

Facilitating mgt. and control of environmental practices,


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Assessing compliance with company policies, which would includemeeting regulatory requirements.

Reasons for EA EA can highlight areas of inefficiencies in process e.g. where the

amount of resources used are out of proportion to the amount of

saleable items/services produced. It can highlight excessive wastes. Can provide opportunity for business to decrease its wastes output and

reduce the cost of waste treatment or waste disposal.Seeking answer to questions

Goals- What are we doing? In particular, are we in compliance withgovernment regulations, guidelines, codes of practice, permitsconditions?

Can we do it better? In particular, are there non regulated areas whereoperations can be improved to minimize the impact on theenvironment?

Can we do it more cheaply? What more should we do?

Steps for EA Pre-audit activities which include: Selection and scheduling of facility to audit. Selection of audit team. Contact with facility and planning of the audit. Site activities: which are divided into 5 steps- First understanding of internal controls. Gathering of audit evidence. Evaluation of audit findings.

Report of findings to facility.Scope of EA

Material Audit Energy Audit Water Audit Health and Safety Audit Environmental Quality Audit Water Disposal Audit Engineering Audit

Merits Facilitating comparison and interchange of information between

operation or plants, Increasing employee awareness of environmental policies and

responsibilities, Identifying cost-savings including those resulting from waste

minimisation, Evaluating training programmes and providing data to assist in training

personnel,


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Providing an information base for use in emergency responsearrangements,

Assuring an adequate, up-to-date environmental database for internalmanagement awareness and decision making in relation to plantmodifications, new plans etc.,

Helping to assist relations with authorities by convincing them thatcomplete and effective audits are being undertaken, by informingthem of the type of procedure adopted.

Indian Perspective-EA There is no Statutory requirement for EA in Corporate sector or in the

Govt. sector. Few pvt. Sector companies like TISCO, ITC are periodically conducting

EA. It was first notified under the EPA of 1986 by the Ministry of

Environment of Forests. It requires submission of an Environmental Audit Report or statement

to the concerned state Pollution Board. As per the Indian Companies Act, 1956, details relating to energy

consumption/energy conservation are presented in the DirectorsReport as annexure and it highlights the environmental related policiesand problems.

The concept of environmental auditing in industrial units in India wasformally introduced in March 1992 with the overall objectiveminimizing consumption of

resources and promoting use of clean technologies in industrialproduction to minimize generation of wastes.

A gazette notification on environmental audit has been issued by the

Ministry of Environment and Forests on March 13, 1992 (amended videnotification GSR (E) dated April 22, 1993).

This notification applies to every person carrying on an industry,operation or process requiring consent to operate under Section 25 ofthe Water (Prevention and Control of Pollution) Act, 1974 (6 of 1974) orunder section 21 of the Air (Prevention and Control of Pollution) Act,1981 (14 of 1981), or both, or authorisation under the HazardousWaste (Management and Handling) Rules, 1989, issued under theEnvironment (Protection) Act, 1986 (29 of 1986).

The notification requires that an Environmental Statement for thefinancial year ending the 31st March be submitted to the concerned

State pollution Control Board, on or before the 30th September of thesame year.

Green Marketing Are less toxic Are more durable Contain reusable materials Are made of recyclable material.


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Ethics and IT, E-Commerce and Internet PrivacyHighlight

Data Mining: Post 9/11 world as part of a widespread pattern ofinvasions of privacy carried out by American intelligence experts.

The practices of the Total Information Awareness Progress in particular

were thought to pry into the day-to-day lives of innocent people by ITethics experts and civil liberations. Social Networking- Beacon 2007 pulled personal info. as ad.-

Facebook. Cases of abduction on Orkut and MySpace. E-Mail Spam- Spam mails (AOL and Yahoo). Intellectual Property and IT- Since 1990s. Napster, Livewire

and other peer-to-peer downloading networks brought the issueof infringing on artistic property to the fore.

There are questions from ethicists about the practicality ofseeking out unknown artists and writers for something as minoras a blog.

Filtering Online Content- Comcast blocked downloads from BitTorrent. The major ethical debate raged between ISP, the FederalCommunications Commission (FCC) and end users is whether Internetservice should be content-neutral.

E-Commerce Buying and selling of products and services over electronic systems. Electronic transactions- Questions on recognition, authenticity and

enforceability of electronic documents and signatures. Marketing-Personal information easily available.

Internet Privacy Peoplesearch.com allows anyone to do background searches, asset

verification checks and criminal background checks-Fee. Likewise Whowhere.com too. The IT Act, 2000 passed the first Cyber Law. It provided the legal infrastructure for electronic commerce in India. To provide legal framework so that legal sanctity is accorded to all

electronic records and other activities carried out by electronic means. This helps in reducing the unethical activities online.

IT Act Acceptance in an electronic form of any offer, culminating in an

electronic contract, has also been declared legal and enforceable. It has recognised digital signature for the first time in Indian Law-

Financial transaction. It has also set up a controller for certifying authorities, adjudicating

officers and cyber appellate tribunal. Hacking has been defined for the first time. Punishable upto 3 yrs.

Imprisonment and a fine which may exceed to Rs.200000 or with both. The Act has also proposed a legal framework for the authentication of

electronic records/communications through digital signature.


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Certain Legal framework for the Authentication and Origin ofElectronic Records or Communication

E-mail would be valid and legal form of communication-Duly producedand approved in a court of law.

Companies shall now be able to carry out electronic commerce usingthe legal infrastructure provided by the Act. Digital signature have been given legal validity and sanction in the Act. It opens doors for the entry of corporate companies in the business of

being Certifying Authorities for issuing Digital Signature Certificates. It now allows the Govt. to issue notification on the web thus heralding

e-governance. It enables the cos. To file any form,application or any other document

with any office, authority, body or agency owned or controlled by theappropriate govt. in electronic form by means of such electronic formas may be prescribed by the appropriate govt.

Important issue of security-Secure digital signatures to pass through asystem of security procedures.

It would be possible for corporates to have a statutory remedy in caseanyone breaks into their computer systems or network and causesdamages or copies data. The remedy provided by the Act is in the formof monetary damages, not exceeding Rs. 1 crore.


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Responsibilities and Rights of Investors and ShareholdersWho is a Shareholder?

Shareholder is an individual, group or org. that holds one or more

shares in a firm and in whose name the share certificate is issued. Shareholder is the one who owns shares of stock in a corporation or

mutual fund. Along with the ownership comes a right to declared dividends and the

right to vote on certain company matters. Either Shareowner, stockholder or Investor

Companys Responsibilities Managing the company efficiently in order to secure a fair and

competitive return on the owners investment. Disclosing relevant information to shareholders, subject only to legal

requirements and competitive constraints.

Conserving, protecting and increasing the shareholders assets. Respecting the shareholders requests, suggestions, complaints and

formal resolutions.Responsibility of Shareholders

Demand an explanation on the annual report or on the overallfunctioning of the company.

Shareholders should use the forum of general body meetings forensuring that the company is being properly stewarded for maximisingthe interest of the shareholders.

For effective participation, shareholders must maintain decorum duringthe General Body Meetings.

Great degree of interest and involvement in the appointment of thedirectors and the auditors.

Rights of Shareholders To receive the share certificates on allotment or transfer as the case

may be, in due time. To receive copies of the abridged Annual Report, the Banlance Sheet

and the P&L account. To participate and vote at the General Meetings either personally or

through proxies. To receive dividends in due time once approved in the General

Meetings. To receive corporate benefits like rights, bonus, etc. once approved. To apply to Company Law Board (CLB) to call or direct holding of the

Annual General Meeting. To inspect the minutes book of the GMs and to receive copies thereof. To proceed against the Co. by way of civil or criminal proceedings. To apply for the winding-up of the Co. To receive the residual proceeds.


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To receive offer to subscribe to right shares in case of further issue ofshares.

To receive offer under takeover or buyback offer under SEBIregulations.

To receive all benefits/material information declared for the investors

by the Company. Prompt services from the Co. such as transfers, sub-divisions and

consolidation of holdings in the Co. As an equity holder they have a right to subscribe to further issue of

capital by the co. Investors can expect delivery of shares purchased/ value of shares sold

within 15 days from the end of settlement period. Access to the Exchange arbitration facilities in case of dispute with

broker. Receipt of the contract note from the broker in the specified format

showing transaction price and brokerage separately.

Approach concerned regional Arbitration Centres of the StockExchange, by confirming geographical jurisdiction.

Right to transfer ownership means, shareholders are allowed to tradetheir stock on an exchange.

To sue for Wrongful Acts- In the form of Shareholder class-actionlawsuit.

Shareholder as a group has following rights: To put requisition for an Extraordinary General Meeting. To demand a poll on any resolution. To apply to CLB to investigate the affairs of the Company. To apply to CLB for relief in cases of oppression and or

mismanagement.Role of Director in CG

Power exclusive to BODs (Sec 292)- To issue debentures. To borrow money otherwise than through debentures. To invest the funds of the company. To make loans.


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Role of CEO, Chairman and Board of DirectorsRole of CEO

Equitable treatment of shareholders.

Interests of other stakeholders.

Role and responsibilities of the board.

Integrity and ethical behaviour.

Disclosure and Transparency.

Foster corporate culture.

Maintain positibe and ethical work climate.

Develop and recommend to the Board a long-term strategy and visionfor the group.

Ensure that the day-to-day business affairs are appropriately managedby the MDs and that proper systems and controls are in place foreffective risk mgt. of the group.

Ensure co-operation with the Board.

Recommend to the board the appointment of MDs and ensuresuccession plans are in place for those MDs.

Consistently strive to achieve the companys financial and operatinggoals and objectives.

Ensure continuous improvement in the quality and value of the cos.products and service provided.

Ensure that the co. achieves and maintains a satisfactory competitiveposition within the industry.

Formulate and oversee the implementation of major corporate policies.

To assist the executive directors in formulating strategic proposals thathave to be endorsed by the board.

To provide leadership and direction to all his executive directors.

To develop a plan for implementing the strategy formulated by theboard and/or mgt. and to convince the non-executive directors that thestrategy can work.

To act as representative of the executive directors when interactingwith the non-executive directors.

To present the company to major investors, the media and govt.

To be a source of inspiration, leadership and direction to theemployees, customers and suppliers.


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To be able to identify the situation that requires intervention.

To run the org. in an efficient manner.

The CEO shall certify or report to the board that no transactionsentered into by the co. during the year were fradulent, illegal or violatecompanys code of conduct.

Role of Chairman The Directorate, Chairman of the Board is an active representative of

the investors.

To set standards and ensure that policies and practices are in place.

To ensure that the directors make good decisions.

To make sure that directors are continuously upgraded to the levelsrequired by investors to meet the current and future needs of thecompany.

To act decisively in times of a crisis.

To act as representative of the co.

To manage the board and ensure that its policies are put into practiceby the mgt.

To work closely with the co. secretary to address legal issues.

The chairman must have a good understanding of the financialstanding of the co.

He must keep a strict watch on the companys actual performance.

Proactive and identify problems before CEO does corrective actions.Role of the Board

The board are directly accountable to the shareholders.

At AGM-The directors must provide a report to shareholders on theperformance of the company, what its future plans and strategies are

and also submit themselves for re-election to the board. Purpose-Ensure the company's prosperity by collectively directing the

company's affairs, whilst meeting the appropriate interests of itsshareholders and stakeholders.

Establish vision, mission and values

Set strategy and structure

Delegate to management

Exercise accountability to shareholders and be responsible to relevantstakeholders

Responsibilities of Directors

Directors look after the affairs of the company, and are in a position oftrust.

They might abuse their position in order to profit at the expense oftheir company, and, therefore, at the expense of the shareholders ofthe company.

Consequently, the law imposes a number of duties, burdens andresponsibilities upon directors, to prevent abuse.


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Directors are responsible for ensuring that proper books of account arekept.

The directors must always exercise their powers for a 'proper purpose' that is, in furtherance of the reason for which they were given thosepowers by the shareholders.

Directors must act in good faith in what they honestly believe to be thebest interests of the company, and not for any collateral purpose.

This means that, particularly in the event of a conflict of interestbetween the company's interests and their own, the directors mustalways favour the company.

Directors must act with due skill and care.

Directors must consider the interests of employees of the company.Role of Directors

Disclosure of interest.

Divulging information jeopardising interest of the co.

Abiding by all laws. Protection of companys assets.

Discharging duties to the best judgment.

Maintaining confidentiality.

Exercising powers within ambits.

Reporting to Chairman for illegal/unethical conduct of any employee.

Public Disclosure.

ETHICS - An Introduction Ethics is not definable, is not implementable, because it is not

conscious, it involves not only our thinking but also our feeling.

Integrity is telling myself the truth where as honesty is telling thetruth to other people.

Live so that when your children think of fairness and integrity, theythink of you.

Ethics, also known as moral philosophy, is a branch of philosophythat addresses questions about moralitythat is, concepts such asgood and evil, right and wrong, virtue and vice, justice, etc.

Integrity without knowledge is weak and useless, and knowledgewithout integrity is dangerous and dreadful.

Why should one learn ethics?

A set of right conduct and a theory or a system of moral values.

A moral code, morals, morality, values, rights and wrongs, principles,ideals, standards (of behaviour), value system, virtues, dictates ofconscience.


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Ethical dilemmas occur whenever two or more values conflict with oneanother.

When people are faced with decisions that require one value to win atthe expense of another (for example, profit winning out overemployees keeping their jobs).

Businesspeople- it provides another perspective and the moreinformation a person has, the better decisions he can make.

Stakeholders:

To identify the various stakeholders in every decision.Corporate Leadership:

If a leader appears to be unconcerned about breaking rules, then thosebelow him will likely do the same. This can often end in legal troublefor the company.

Social Responsibility:

To balance serving their bottom line, their shareholders and theircommunity

Advantages of Ethics

Creates high degree of trust and integrate and motivate and empowerstakeholders. Eg. TATA group of cos.

Creates awareness of CSR of business. The power to co-exist.

Helps in professional life- Harmony and at peace.Business Ethics

It is Ethics of Business, study of what is good or bad, right and wrong,just and unjust, fair and unfair in the business as against in personallife.

Code of conduct for businessman for carrying on business consistent

with what others follows. Different from Personal Ethics.

Buddha on Business Ethics

Trader is like honey bee, who sucks honey out of flower, without harmto flower.

Also helps flower pollinating- process of fertilisation- when takingprofit, no harm to be done in quest of personal gain.

Business Ethics is inseperable part of modern business.

It is vital for long term growth of business.

Managers Ethics and Corporate Ethics are parts of Business Ethics.

Professional Manager-Ethical ManagerEthics in Bhagwat Geeta:

Lord Krishna said Manager should look at the task set for him more forits satisfaction, the fulfillment that gives, rather than for personal gainor profit.


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Elliot Jacques, American Scholar called Professional Manager asPropertyless Manager, who manages the company successfully, butdoes not own any part of it as personal property.

He does job not for personal gain, but for satisfaction he drives.Objectives of Business Ethics

Check malpractices- rapid business growth threw up many unethicalpractices- desire for money and economic power breeded many evils,which harmed society.

Prevent exploitation of market, society and consumers.

Drive home social responsibility to gain confidence of consumer- theking in competition.

Forge cordial relation with the society.Some Principles of Business Ethics

Take care of stakeholders, owners, employers, customers, suppliers,community and environment.

Fair dealings and fair practices in business.

Avoid exploitation of consumers.

Avoid profiteering.

Encourage healthy competition.

Accept social responsibility.Importance of Business Ethics

The business is not only for growth of businessman, also for long termgrowth of business itself.

Long term creation of wealth.

Creation of better social image, and

Build investor confidence.

Important issues in Business Ethics What is the role of profit and charity in Business Ethics?

Is honesty the best policy and good in the long run?

Is there a difference between ethical/ unethical/ unethical practices inbusiness and in personal life?

Do you agree that the business practice which is legally sound shouldbe treated as ethically sound and some may not be morally sound?

Why is Ethics Important?

Ethics corresponds to basic human needs:

The first obvious reason for being ethical is of course that the top

bosses might otherwise land in jail and the company be hit with aheavy fine.

However, this is not really an ethical consideration. It is rather a matterof expediency.

We believe that most people want, even need, to be ethical not only intheir private lives, but also in their business affairs where a managerknows his decisions may effect lives of thousands of people.


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Most people want to be part of an organisation which they can respectand be publicly proud of because they perceive the purpose andactivity to be beneficial to society.

Values create credibility with the public:

A company perceived by the public to be ethically and socially

concerned will be honoured and respected even by those who have nointimate knowledge of its actual working.

Its public issues, whether in the form of equity, convertible bonds orfixed deposits will attract an immediate response.

Values give management credibility with employees:

Values provide a common language for aligning a companysleadership and its people Robert Haas of Levi Strauss.

TISCO- Hamari company. Association is strong, value as a family,employees are convinced of firms honesty and decency to ease thetransition of workers from the firm either to retirement or to someother job.

No strike, no unrest unlike the industry.Values help better decision making:

Helps management make better decisions.

Interest of the public- Economic, social and ethical aspects.

Eg. Layoff of workers, closing of plants toxic waste management safetyin production processes and in the final product as certain examples toname a few.

o Business Ethics in Management streams

Finance/Accounting Field

HRM

Marketing Operations/Production etc.


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Business Ethics RevisionBusiness and Society

Business unit to be specific, it should control economic growth of thenation. Helps in the Regional development. Contributes to Social welfare of the country. Creates and develops employment opportunities. It generates income to government. Nation depends on them for Capital formation.

Advantages of Business Ethics Enhancement of society. Maintaining moral course in turbulent period. Strong teamwork and productivity.

Employee development. Guarantee that policies are legal. Compliance with law. Total quality mgt. Diversity Mgt. Strengthen the business.

Ethics and Legality Ethics and Law are both variants of social rules which ensure

predictability in society. Predictability is essential for security, survival, continuity and growth. It represents a system of internal controls whereas Law represents a

mechanism for external controls. Ethics is generally unwritten and vocabulary whereas Law is

purposefully written and enforced by the state. Ethics is guided by moral principles whereas Law is guided by reality

principles. Ethics fills in the gaps in Law. They supplement and complement each

other. Ethics is always current and operative, Law has to be invoked to be

active and needs to be updated periodically to keep it relevant.Ethics and Law

Ethics Ethics examines both the individual and social goodwill in all directions. Ethics contains all the social obligations, customs and traditions which

are essentially implemented in the society. Law Law is concerned with the minimum regulation necessary for public

order. The social customs and traditional beliefs cannot get a place in law.


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The people who reject the ethical principles have to face social boycottand be subjected to societys accusation.

The scope of ethics is broad. Ethics means the rules or principles that define right or wrong conduct. People have to obey provisions of law, otherwise they will be subjected

to punishment. The scope of law is narrow. Laws are written rules about what is right and what is wrong in various

walks of life. It does not use force. Ethical behaviour will always be covered under ethics. It is not backed by power. Ethics concentrates on Dos. It uses force when necessary. Ethical behaviour may or may not be covered by law. It is backed by power.

Law concentrates on the Donts.Ethics and Morality

Meaning:Ethics- Relates to what is good or bad, moral duties and obligations.Morals- Relates to principles of right and wrong.

Analysis:Ethics- It is a greek word from ethos which means character i.e. personalattitude.Morals- Latin word mos or moralis meaning customs i.e. attribute of groupof society.

Nature:

Ethics- It arises from personally accepted principles.Morals- It is accepted due to an authority which may be religious or cultural.

Scope:Ethics-Wider and examines whether moral stds are reasonable orunreasonable.Morals- Smaller and addresses human need for belonging and emulation.

Expression:Ethics- Abstract and cannot be described in general rules and

statements.Morals- Expressed as general rules and statements E.g. Always to tell

the truth.

Absorption:Ethics- Adopted or absorbed by an individual gradually by taking

reasonable decisions in appropriate decisions. Morals- It is typically adopted or absorbed since childhood from family,

friends, school, religion and so on.Ethical Influence on Business

Plant Location- No adverse impact on local community. Production- Control on pollution.


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Marketing- Fair treatment to customers. Advertising- Truthful and realistic claims. Administration- Concern for social values. Finance- Protection and appreciation of capital. HRM- Just and equitable treatment to employees.

Fair and Unfair Business Practices A sound ethical environment may be created and corporate scandals

may be avoided by adopting following methods- Making employees aware of their legal and ethical responsibilities. Creating policies to motivate and promote employee ethical attitude. Creating a proper communication channel free from fear and insecurity

feeling. Ensuring fair treatment to whistle blowers.

Western and Indian Ethical Approach/ Perspective Principle 1: Productivity before Profitability. Principle 2: Customer is not sheep that can be sheered.

Principle 3: Buyers Domain is more. Principle 4: Be Diplomatic with your Competitors. Basically all the value systems throughout the world teach similar

things. They are- Humanity- Helping others of our kind, harmony, cooperation and

fairness. Humility- Be humble and kind, adjustment and assimilation. Self-development- Through social betterment, gratitude. Respect- Respect for elder, parent and others etc. Eastern Culture Gives more importance to personal relations and contacts.

A very conservative society. Demand high respect for elders, parents teacher, etc. Western Culture More importance is given to material concepts. A very open society. Not much concern for respect of elders, parents, teachers, etc. Importance is given to ethics and business. No concern for time, things are taken for granted and things are done

at ones own convenience. More concern to profit only. Time is valued, timeliness and punctuality is expected as well as

appreciated.

Business Ethics and CSR - Own Notes

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