Ethics & Management (1)

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 witnessedEnron ParmalatWorldCom Baring BankArthur Anderson Global Trust Bank SatyamThey had everything... But

These all lacked

INTEGRITYDoing the right things, even if nobody is watching

AND THEIR HISTORY IS WRITTEN Moral principles of duty and virtue that prescribe how one should behave; the foundation of ones internal control.

Relationship Between Values & PerformanceOrganizationalValuesHarmony in ValuesDiscord inValuesPositive ImpactOn PerformanceNegative ImpactOn Performance

Ethics & Corporate GovernanceTo be truly effective, ethics must:

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

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

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

Prevent concealment or obfuscation

Encourage recruitment & retention of the best & the brightest

Increase public confidence

Thorny judgment calls

Dealing withChanging normsMixed messagesAmbiguityCompeting pressuresDilemma of Decision Making

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.

Who will be affected by my decision?What general rules or principles underlie my decision? Are you handling similar matters consistently?What are the implications of my decision for the University and the Laboratory?What does my decision say about my values? (We all know people who say one thing & do another.)One can be unethical without breaking the law.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 Making

The Desire Willingness & Courage ... to Do Whats RightEffective Leaders Will Have:

Ability Listing optionsTesting the optionsMaking a decision, and Most importantly, Acting !to resolve ethical issues by using traditional methods of inquiry, namely:Effective Leaders Will Have:

DEVELOPIG FUTURE LEADERSResultOrientationPositiveAttitudeLeadership QualitiesBusiness InstinctsCompetitive AdvantageCustomerFocusTeam WorkDynamismProactiveApproachIntegrityHigh Emotional And IntellectualQuotientProfessionalCompetencyCreative Thinking TechniquesConceptual &Analytical PlanningValues & EthicsWhere Modernity Blends With Tradition

Establish shared values

Establish a positive leadership climate

Develop self & others

Think strategically

State & communicate your intent

Decentralize

Empower the work force

Emphasize continuous improvementEthical 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 countrys 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.08With barely Rs 100 crore revenue in 1995, the companys 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, todays revelations of fraud and overstatement in the companys books have seriously dented the image of the promoter chairman of Satyam computer.

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

The auditors have to be independent, thats 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, thats 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 outsourcers founders for $1.6 billion. It does not rapid U-turn, killing the deal jus 12 hours later following a 55% plunge in the companys 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 founders 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 persons maturity.

A VALUE IS A VALUE IF IT ISChosen freely

Prized and publicly affirmed

Acted upon repeatedly

Enhances personal growth

OUR VALUES B Business Ethics C Customer Focus O Organizational & Professional PrideM Mutual Respect & Trust I Innovation & SpeedT Total Quality for ExcellenceB-C-O-M-I-T

BENEFITS OF NEW VALUESBusiness 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.

BENEFITS OF NEW VALUESRespect --- 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.

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 achieversthose 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 minds 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.

Corporate Social ResponsibilityWhat is Responsibility?

What is Social Responsibility

Definition of CSR?*

Some IssuesHow 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? *

CSR through NGOs

Some IssuesCorrupt NGOs Accommodation of volunteersUnjust demand for publicity*

Politics of CSRSome MNCs are malign

henceOpposition by Activists Justified.

Beating up corporations is easy

but

Economy rolls social transformation*

Contd Therefore,

NGOs critical about Voluntarism

But

Corporations Against Mandatory Regulations*

ContdNow A Million Dollar Question

Should CSR be Voluntary or Mandatory?*

ContdIn a battle between Voluntary vs. Mandatory

Voluntarism Won Hands Down

UK for An Enlightened Voluntarism in WSSD at Johannesburg*

Economics of CSRExpanding customer base

Getting an edge over competitor

Increasing sales and profit

Sustainability of the company*

Emerging Perspective Nation State to Vanishing Territoriality Activists against MNCs A Better Demographics New Corporate Governance*

ContdSo Business depends more onReputation Capital than Tax Benefit onlyProfit Optimization than Profit Maximization Social Responsibility than Philanthropy*

Barriers of CSR (WB Study Report)Business short-term, CSR long-termAll buyers not CSR focusedNo clear business benefitLocal government not strictYoung CEOs deny CSR

*

ContdTime passing activity of CEOs wives? Transparency not aggressively enforced Corporate donations often hazardous.Deciding CSR strategy is very difficult.*

Strategy IssuesShould it be charity or business?

How to select the region?

Selecting the Cause

How much to Invest?

Selecting the Partner*

Benchmarking CSRSocially responsible product

Corporate Governance

Employees

Voluntary contribution

*

Impact AnalysisHR IndexEnvironmentEconomicCost of CSR?*

If the Ethics Rope Breaks

***