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INTRODUCTION : ETHICS AND GOVERNANCE - Dheeraj · PDF file · 2017-08-21INTRODUCTION : ETHICS AND GOVERNANCE ... The new and emerging concepts in management like corporate governance,

May 07, 2018





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    CONTENTS Introduction

    Governance through Innerconscience


    Ethics inBusiness

    Corporate GovernanceEthics

    Theories ofEthics

    Scope of BusinessEthics

    Advantages of BusinessEthics


    INTRODUCTION Today, the corporate world as a whole is in the process of acquiring

    a moral conscience.

    The new and emerging concepts in management like corporate governance, business ethics and corporate sustainability are some of the expressions through which this emerging ethical instinct in the corporate world is trying to express and embody itself in the corporate life.


    Inner consciousness is the awareness, the capacity to listen to

    the inner voice that tells us that there is someone who is

    looking up at us and also warns that there is someone who is

    watching us.

    The soul and core of Corporate Governance is internalized

    values that an organization and its top management follow.

    An important quality of this higher part of our conscience is self-


    This ideal of self-governance must be highest goal of all


    corporate governance shouldendeavour to create corporate

    consciousness and an environment in which those who are

    charged with governance and those who are governed display

    genuine ethical, social and ecologicalresponsibilities.

    ETHICS The term ethics is derived from the Greek word ethos which refers




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    guiding beliefs,

    standards and


    that pervade a group, a community or people.

    The Oxford Dictionary states ethics as the moral principle

    that governs a persons behaviour or how an activity is


    The synonyms of ethics as per Collins Thesaurus are

    conscience, moral code, morality, moral philosophy, moral

    values, principles, rules of conduct and standards.

    Ethics refers to well-founded standards of right and wrong that

    prescribe what humans ought to do, usually in terms of rights,

    obligations, benefits to society, fairness, or specific virtues.

    Thus, ethics relates to the standards of conduct and moral

    judgements that differentiate right from wrong.

    Ethics is not a natural science but a creation of the human

    mind. For this reason, it is not absolute and is open to the

    influence of time, place and situation.


    Ethics has following features:

    F Ethics relates to the formalised principles derived from social values. It deals with the moral choices that we make in the course of performing our duties with regard to the other members of society. Hence, it is relevant in the context of a societyonly

    O The concepts of over allequity and justice are implicit in ethics. Fair and

    equitable treatment to all is its primary aim.


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    C Ethics is a conception of right or wrong conduct. Ethics tells us when our behaviour is moral and when it is immoral.

    U Ethical principles are universal in nature. They prescribe obligations and virtues for everybody in a society. They are important not only in business and politics but in every human endeavour

    S Sharp boundariesdo not exist between ethical and non-ethical. Therefore, people often face ethical dilemmas wherein a clear cut choice becomes very difficult.

    Ethics and legality of action do not necessarily coincide. What a society

    interprets as ethical or unethical ends up expressed in laws. The legality of actions

    and decisions does not necessarily make them ethical. For example, not helping an

    injured person in a road accident may be unethical but not illegal


    Business ethics is one of the important branches of applied ethics.

    Business ethics is the application of general ethical ideas to business.

    Business ethics refers to the moral principles and standards and a code of conduct that businessmen are expected to follow while dealing with others.

    Business essentially is a means of society to use scarce resources to produce in an efficient manner those goods and services which society wants and is willing to pay for



    M Morally conscious businessmen have created names and built great

    business empires. They serve customers with good quality products at

    fair prices, treat their employees with great respect, reward their

    shareholders with good returns and pay their taxeshonestly

    O Outstandingsocial contract between the society and business by which

    the society expects the business to work in its interest. Society creates

    and accepts business enterprises, hence it expects them to work in a

    manner which is not detrimental to its well being and interests

    R Ethical policies and practices enable a business enterprise to build

    reputation for itself. A businessorganisation that adheres to a code of

    conduct gains a competitive advantage and builds long term value.

    A A stable and peaceful is needed where business can prosper

    L long-term interests of businessmen ,A business enterprise that is

    honest and fair to its customers, employees, and other stakeholders

    earns their trust and good will. It ultimately results in customer

    satisfaction, healthy competition, industrial growth and high earnings.


    Business ethics refers to a code of conduct which businessmen are


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    expected to follow while dealing with others.

    Code of conduct is a set of principles and expectations that are

    considered binding on any person who is member of a particular

    group. The alternative names for code of conduct are code of ethics

    and code of practice

    Business ethics comprises of the principles and standards that guide

    behaviour in the conduct of business. Businesses must balance their

    desire to maximize profits against the needs of the stakeholders.

    Maintaining this balance often requires tradeoffs.

    ethics is very wide as it deals with norms relating to a company and its

    employees, suppliers, customers and neighbors, its fiduciary

    responsibility to its shareholders

    Mahatma Gandhi once mentioned that all businesses have a

    social responsibility which has nothing to do with its ordinary

    economic activity. For instance, if there is a natural calamity in an

    area adjoining a business organisation, the society would expect

    the business to participate in the relief work. Such a social

    responsibility arises out of ethical considerations and not out of

    profit-making considerations


    Business ethics and corporate governance of an organization go

    hand in hand. In fact, an organization that follows ethical practices in

    all its activities will, in all probability, follow best corporate

    governance practices as well.

    Corporate governance is meant to run companies ethically in a

    manner such that all stakeholders including creditors, distributors,

    customers, employees, the society at large, governments and even

    competitors are dealt with in a fair manner.

    Good corporate governance should look at all stakeholders and not

    just the shareholders alone.


    Ethical theories arise in different contexts, so they address different problems.

    They also represent some ethical principles.

    There are many ethical theories but in general there are two major kinds of ethical theories

    : Deontological and

    Teleological ethical theories. DEONTOLOGICAL THEORIES KANTIAN ETHICS

    Deontology is defined as an ethical theory that the morality of an action should be based on whether that action itself is right or


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    wrong under a series of rules, rather than based on the consequences of the action.

    Deontology is the study of that which is an "obligation or duty," and consequent moral judgment on the actor on whether he or she has complied.

    According to Deontological theories, though the consequences of an

    act is good, some acts are always wrong.

    In deontological theories actions are judged as ethical or unethical

    based on duty or intentions of an actor. The most important

    defender of deontological ethics is Immunuel Kant who forward his

    moral theory in 1788.

    universal place in business world

    Kant's three significant form are:

    Act only according to that maxim by which you can also will that it

    would become a universal law.

    Act in such a way that you always treat humanity, whether in your

    own person or in the person of any other, never simply as a means,

    but always at the same time as an end.

    Every rational being must so act as if he were through his maxim

    always a legislating member in a universal kingdom of end.


    Teleology is derived from the Greek word 'telos' meaning ends or

    purposes. This theory holds that ends or consequences of an act

    determine whether the act is good or bad.

    Rightness of actions

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