Ethics for Effective Management Prof KK AHUJA

Ethics for Effective Management

Prof KK AHUJA

The Globalization is ushering…

Undesirable consequences like: -Economic disasters-Social unrest-Individual stress levels

Posing the question of

Values & Ethics

The World has witnessed…

Enron Parmalat

WorldCom Baring Bank

Arthur Anderson Global Trust Bank

Satyam

They had everything...But…

These all lacked…

INTEGRITY“Doing the right things, even if nobody is watching”

…AND THEIR HISTORY IS WRITTEN …

Moral principles of duty and virtue that prescribe how one should behavebehave; the foundation of ones internal control.

Relationship Between Values & PerformanceRelationship Between Values & Performance

OrganizationalOrganizationalValuesValues

Harmony in Harmony in ValuesValues

Discord inDiscord inValuesValues

Positive ImpactPositive ImpactOn PerformanceOn Performance

Negative ImpactNegative ImpactOn PerformanceOn Performance

Ethics & Corporate GovernanceEthics & Corporate Governance

To be truly effective, ethics must:To be truly effective, ethics must:

Be an integrated part of the organizational culture Be an integrated part of the organizational culture rather than an appendage grafted onto rather than an appendage grafted onto administrative systemsadministrative systems

Be modeled by the leadership team, even when it is Be modeled by the leadership team, even when it is painful (audit disclosure)painful (audit disclosure)

Be designed to prevent problems before they occur Be designed to prevent problems before they occur & resolve issues when they arise& resolve issues when they arise

Prevent concealment or obfuscationPrevent concealment or obfuscation

Encourage recruitment & retention of the best & the Encourage recruitment & retention of the best & the brightestbrightest

Increase public confidenceIncrease public confidence

•“Thorny judgment calls”

•Dealing withChanging normsMixed messagesAmbiguityCompeting pressures

Dilemma of Decision MakingDilemma of Decision Making

Effective Ethical Leaders?Effective Ethical Leaders?

An effective ethical leader will …

… Foster an environment of “Trust” among individuals in the Workplace…

…and this trust will encourage openness among team members without fear of retribution.

1. Who will be affected by my decision?2. What general rules or principles underlie my

decision? Are you handling similar matters consistently?

3. What are the implications of my decision for the University and the Laboratory?

4. What does my decision say about my values? (We all know people who say one thing & do another.)

5. One can be unethical without breaking the law.6. What is right, what is fair and what is in your best

interest may not be the same. Put your bias aside.

Framework for Ethical Decision MakingFramework for Ethical Decision Making

The Desire

Willingness &

Courage …

... to “Do What’s Right”

Effective Leaders Will Have:Effective Leaders Will Have:

Ability

Listing optionsTesting the optionsMaking a decision,

and Most importantly, Acting !Acting !

to resolve ethical issues by using traditional methods of inquiry, namely:

Effective Leaders Will Have:Effective Leaders Will Have:

DEVELOPIG FUTURE LEADERS

ResultOrientation

PositiveAttitude

Leadership Qualities

Business Instincts

Competitive Advantage

CustomerFocus

Team Work

DynamismProactiveApproach

Integrity

High Emotional And

IntellectualQuotient

ProfessionalCompetency

Creative Thinking

Techniques

Conceptual &Analytical Planning

Values & Ethics

““Where Modernity Blends With Tradition”Where Modernity Blends With Tradition”

Establish shared valuesEstablish shared values

Establish a positive leadership Establish a positive leadership climateclimate

Develop self & othersDevelop self & others

Think strategicallyThink strategically

State & communicate your intentState & communicate your intent

DecentralizeDecentralize

Empower the work forceEmpower the work force

Emphasize continuous improvementEmphasize continuous improvement

Ethical Leader ImperativesEthical Leader Imperatives

The real test of ethics and character is whether we are willing to do the

right thing

… even when it is likely to cost more

than we want to pay.

After a steady journey of 20yrs, from an early start-up in Hyderabad to a global $2.5 billion corporation, Satyam computers has, in a dramatic turn of events, landed itself at the crossroads, with uncertainty staring in its face.

Rated as country’s 4th largest IT service provider employing 53000 people with operations in 66 locations across the globe & 185 fortune-500 companies as clients, the company commanded respect from all quarters and all stakeholders till the middle of Dec.08

With barely Rs 100 crore revenue in 1995, the company’s business built mainly on the Y2K opportunity & system integration work, gradually transformed itself into a full services provider building on various verticals.

As it grew, building on scale, Satyam was amongst the first Indian companies to be listed on the New York Stock Exchange.

• The IT sector is in the limelight again, but for all the wrong reasons. • The scale of fraud is unprecedented in Indian corporate world and how this continued for a long period needs through a probe.

• The Satyam fiasco is a stand-alone case of failure of corporate governance. • More than 3000 satyam employees posted their resumes with job consultants as well as job portals like monster.com, naukri.com etc.

• More than 1500 applications had received in a single day…..said an employee of job consultancy.

While satyam was on rise in the corporate and IT firmament of the country, its promoters spread their presence in society.

Ironically, today’s revelations of fraud and overstatement in the company’s books have seriously dented the image of the promoter chairman of Satyam computer.

Paradoxically, the company’s auditors Price water house Coopers, which is in the dock for various accounting flaws now surfacing with Mr. Raju’s disclosures, also helped satyam to become the 1st Indian company to comply with IFRS.

The auditors have to be independent, that’s why they are called independent auditors.

They should not be under the thumb of the management.

Given the current mess, the company is in with a valuation of about $600 million, it may find suitors hard to come by.

In its growth story, the major contracts it bagged included work for FIFA world Cup & World Bank jobs, but it also suffered several set-backs

These include the recent ban by World Bank- a long time client, & case of fraud filed by paid in a Texas court.

You need principles, you need culture, that’s why corporate governance is not just filling up check list.

It is about mindset. It is about the honesty and the willingness of the management and the shareholders at large.

It is about your values, it is about your aspirations and what you go after in life.

If you want respectability, then you will automatically do all the right things.

Firstly, it is about the management realizing honesty is the best policy.

Secondly, it is about creating an environment where there could be whistle blowers.

Thirdly, it is about creating an environment where anybody will standup and say NO, what we are doing is wrong are not agree with it.

Fourth, it is about creating an environment where respect matters more than jus money or power.

Focus on gratification is a good thing

Focus on respectability is very important.

Good governance in the long term will make people happier or peaceful and will bring tremendous rewards.

Middle class values are the best values.

Dec 16 : Satyam announces plan to buy building firms part-owned by the outsourcer’s founders for $1.6 billion. It does not rapid U-turn, killing the deal jus 12 hours later following a 55% plunge in the company’s share prize in hectic US trading.

Dec 18 : Satyam board says it will meet on Dec.29 to consider a share buyback in a bid to restore confidence.

Dec 23 : Satyam barred from business with the World bank for eight years for providing staff with improper benefits. Its shares fall another 14% to their lowest in more than 4.5yrs

Dec 24 : Satyam shares rally amid market talk the outsourcer may have become an attractive takeover prospect given the steep share price fall.

Dec 26 : Mangalam Srinivasan, an independent director. resigns.

Dec 28 : Satyam defers board meeting until Jan. 10 to give itself time to consider options to shore up investor confidence.

Dec 29 : : Three more independent directors quit.

Jan 2 : Satyam says its founder’s stake fell by a third to 5.13%. Analyst say this means the company is more attractive bid target.

Jan 5 : Satyam shares tumble 9% on concern that corporate governance issues could hit new business.

Jan 6 : Shares rise more than 7% on a newspaper report Satyam had been approached by smaller rivals Tech Mahindra for an all-share merger.

Jan 7 : Mr. Ramalinga Raju confesses manipulation of financial statements of Satyam; Rs 5040crore cash hole in balance sheet.

WHAT IS A VALUE ?

• An enduring belief that a specific mode of conduct is personally and socially preferable to another.

• A value can change with the changing character of society as well as a person’s maturity.

A VALUE IS A VALUE IF IT IS

• Chosen freely

• Prized and publicly affirmed

• Acted upon repeatedly

• Enhances personal growth

OUR VALUES

B – Business Ethics

C – Customer Focus

O – Organizational & Professional Pride

M – Mutual Respect & Trust

I – Innovation & Speed

T – Total Quality for Excellence

B-C-O-M-I-T

BENEFITS OF NEW VALUES Business Ethics --- In all dealings. Will raise

NTPC image; corporate governance; and business risk management.

Internal Customer --- Also to receive the necessary empathy, understanding and support from all the staff functions and internal service providers.

Professional Pride --- All executives and workmen to continuously learn, develop and perform their tasks to high professional standards.

Respect --- Also for every employee and vendor.

Innovation --- In every aspect, big and small, hard and soft areas.

Excellence --- As the end objective, for which there is need for quality in all areas.

BENEFITS OF NEW VALUES

LEADING A POWERFUL LIFE

An individual - who has had profound influence on others, on institutions or on society.

Any parents whose influence has been intergenerational.

Anyone who has really made a difference for good or ill.

Possessed three common attributes: vision, discipline and passion.

VISION, DISCIPLINE & PASSION RULE THE WORLD

The life of all great achievers those who have had the greatest influence on

others, those who have made significant

contributions, those who have simply made things happen

you will find a pattern.

They have greatly expanded their four native human intelligence or capabilities.

Express Your Voice

The highest manifestations of these four intelligences are:

Mental - vision; Physical - discipline; Emotional - passion; Spiritual - Conscience. These manifestation represent our highest

means of expression - our voice.

Express Your Voice

Vision is seeing with the mind’s eye. What is now proved was once only imagined.

Discipline is paying the price to bring that vision into reality.

Passion is the fire, the desire, the strength of conviction and the drive that sustains the discipline to achieve the vision.

Conscience is the inward moral sense of what is right and what is wrong, the drive toward meaning and contribution.

Vision

Idealistic

Dreamer

Philosophical

Achiever

Long term perspectiveAnticipating

Future

People behaviour

Pioneering

Mental Intelligence/Capacity

IQ

Discipline

Realistic

Execution

Hard- working

Tenacious

Focused

Constant Takes Initiative

Committed

Physical Intelligence/Capacity

Autonomous

Willing in Sacrifice Self Disciplined

PQ

Passion

Optimistic Hope

Synergetic

EmpatheticAffirming

Emotional Intelligence/Capacity

Courageous

Challenging

FearlessInclusive

EQ

Conscience

Enthusiastic Intuitive

IntegrityWise

Spiritual Intelligence/capacity

Takes Responsibility

Humble Fair

Moral

Servant

InspiredEthical

Compensations

SQ

Corporate Social Responsibility

What is Responsibility?

What is Social Responsibility

Definition of CSR?

37

Some Issues

How does it matter if CSR is not done?

Can a small company go for CSR?

In a monopoly market is there a need

to go for CSR?

38

CSR through NGOs

Some Issues

Corrupt NGOs

Accommodation of volunteers

Unjust demand for publicity

39

Politics of CSR

Some MNCs are malign

hence

Opposition by Activists Justified.

Beating up corporations is easy

but

Economy rolls social transformation 40

Contd…

Therefore,

NGOs critical about Voluntarism

But

Corporations Against Mandatory Regulations

41

Contd…

Now A Million Dollar Question

Should CSR be Voluntary or Mandatory?

42

Contd…

In a battle between Voluntary vs. Mandatory

Voluntarism Won Hands Down

UK for An ‘Enlightened Voluntarism’ in WSSD at Johannesburg

43

Economics of CSR

Expanding customer base

Getting an edge over competitor

Increasing sales and profit

Sustainability of the company

44

Emerging Perspective

Nation State to Vanishing Territoriality Activists against MNCs

A Better Demographics New Corporate Governance

45

Contd…

So Business depends more on Reputation Capital than

Tax Benefit only

Profit Optimization than Profit Maximization

Social Responsibility than Philanthropy

46

Barriers of CSR (WB Study Report)

Business short-term, CSR long-term

All buyers not CSR focused

No clear business benefit

Local government not strict

Young CEOs deny CSR

47

Contd…

Time passing activity of CEO’s wives?

Transparency not aggressively enforced

Corporate donations often hazardous.

Deciding CSR strategy is very difficult.

48

Strategy Issues

Should it be charity or business?

How to select the region?

Selecting the Cause

How much to Invest?

Selecting the Partner

49

Benchmarking CSR

Socially responsible product

Corporate Governance

Employees

Voluntary contribution

50

Impact Analysis

HR Index

Environment

Economic

Cost of CSR?

51

If the “Ethics Rope” BreaksIf the “Ethics Rope” Breaks