SYLLABUS

 

UNIT-I:

 

Business ethics: meaning, principles of business ethics, characteristics of ethical organization, ethics, ethics of corporate governance, globalization and business ethics, stake holders protection, corporate governance and business ethics.

UNIT-II:

 

Conceptual frame work of corporate governance: meaning, governance vs. good corporate governance, corporate governance vs. corporate excellance, insider trading, rating agencies, benefits of good corporate governance, corporate governance reforms, initiatives in India.

UNIT-III:

 

Major corporate governance failures: junk bond scam(USA),bank of credit and commerce international(UK),Maxwell communication corporation and mirror group newspapers(UK), enron(USA),world com(USA),Anderson worldwide(USA)and satyam computers services limited(INDIA); common governance problems in various corporate failures

UNIT-IV:

 

Regulatory frame work of corporate governance in India, SEBI norms base on km Birla committee, clause 49 of listing agreement, corporate governance in public sector undertakings.

UNIT-V:

 

Corporate social responsibility: meaning, CSR & corporate sustainability, CSR & business ethics, CSR & corporate governance, environmental aspect of csr, csr models.

 

 

 

Introduction to Business Ethics

UNIT -1

Business Ethics

Business ethics is the application of general ethical ideas to business behavior. Ethical business behavior facilitates and promotes good to society, improves profitability, fosters business relations and employee productivity. The concept of business ethics has come to mean various things to various people but generally it's coming to know what is right or wrong in the workplace and doing what's right. This is in regard to effects of products/ services and in relationships with stakeholders.

Meaning of Business Ethics

Business Ethics refers to the principles performs and philosophies that direct the business people in the day to day business choice. It relates to the behaviour of a businessman in a business condition Business ethics is principally concerned with those issues not covered by the law or where there is no definite consensus on whether something is correct or incorrect.

Definition of Business Ethics

According to Wheeler, "Business Ethics is an art and science for maintaining harmonious relationship with society, its various groups and institutions as well as reorganizing the moral responsibility for the rightness and wrongness of business conduct".

According to Rogene A. Buchhole, Business ethics refers to right or wrong behaviour in business decisions

According to Thomas M. Garett, "Business Ethics is primarily concerned with the relationship of business goals and techniques to specific human needs.

According to Andrew Crane, Business ethics is the study and decisions where issues of right and wrong are addressed

OBJECTIVES OF BUSINESS ETHICS

 

1.      The various objectives of business ethics are:

2.      To provide a comprehensive framework for ethical decision-making in business.

3.      To examine the intensity of ethical issues as an important element influencing the ethical decision- making process.

4.      To introduce individual factors that may influence ethical decision-making in business.

5.      To introduce organizational factors that may influence ethical decision-making in business.

6.      To explore the role of opportunity in ethical decision making.

7.      To explain how knowledge about the ethical decision-making framework can be used to improve ethical leadership.

8.      To provide leadership styles and habits that promotes an ethical culture.

9.      To develop the power and influence of business in society is greater than ever before. Business ethics helps us to understand why this is happening, what its implications might be and how we might address this situation.

10.  To provide a major contribution to the societies, in terms of producing the products and services that people want, providing employment, paying taxes and acting as an engine for economic development and thereby increases the goodwill.

PURPOSES / IMPORTANCE OF BUSINESS ETHICS

 

Business ethics is important for the following purposes:

1.  Business ethics improve customers confidence

Business ethics are needed to improve the customers' confidence about the quality, quantity,price, etc. of the products. The customers have more trust and confidence in the businessmen who follow ethical rules. They feel that such businessmen will not cheat them

2.  Survival of business

Business ethics are mandatory for the survival of huminess. The businessmen who do not follow it will have short-term success, but they will fail in the long run. This is because they can cheat a consumer only once. After that, the consumer will not bay goods from that businessman This will result in failure of the business.

3.  Safeguarding consumers rights

The consumer has many rights such as right to health and safety, right to be informed. right to choose, right to be heard, right to redress, etc. But many businessmen do not respect and protect these rights. Business ethics are must to safeguard these rights of the consumers.

4.  Stop business malpractices

Some unscrupulous businessmen do business malpractices by indulging in unfair trade practices like black- marketing. artificial high pricing, adulteration, cheating in weights and measures, selling of duplicate and harmful products, boarding, etc. These businesa malpractices are harmful to the consumers. Business ethics help to stop these business malpractices

5.  Protecting employees and shareholders

Business ethics are required to protect the interest of employees, shareholders, competitors. dealers, suppliers, etc. It protects them from exploitation through unfair trade practices

6.  Develops good relations

Business ethics are important to develop good and friendly relations between business and society. This will result in a regular supply of good quality goods and services at low prices to the society. It will also result in profits for the businesses thereby resulting in growth of economy.

7.  It creates good image

Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted and not criticized by the society. The society will always support those businessmen who follow this necessary code of conduct.

8.  Smooth functioning

If the business follows all the business ethics, then the employees, shareholders, consumers, dealers and suppliers will all be happy. So they will give full cooperation to the b210215

will result in smooth functioning of the business. So, the business will grow, expand and diversify easily and quickly. It will have more sales and more profits.

9.  Consumer movement

Business ethics are gaining importance because of the growth of the consumer movement. Today, the consumers are aware of their rights. Now they are more organized and hence cannot be cheated easily. They take actions against those businessmen who indulge in bad business practices. They boycott poor quality, harmful, high-priced and counterfeit (duplicate) goods. Therefore, the only way to survive in business is to be honest and fair.

10.  Consumer satisfaction

Today, the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too. Consumer will be satisfied only if the business follows all the business ethics and hence are highly needed.

 

CHARACTERISTICS OF BUSINESS ETHICS

 

The following are the important characteristics of business ethics:

·         Business ethics are the principles, which govern and guide business people to perform business functions and in that sense business ethics is a discipline.

·         It is considered both as a science and an art.

·         It continuously tests the rules and moral standards and is dynamic in nature.

·         It is based on theological principles such as sincerity, human welfare, service, good behavior etc.

·         It is based on reality and social customs prevailing in business environment.

·         It studies the activities, decisions and behavior which are related to human beings

·         It has universal application because business exists all over the world. 8. Many of the ethical principle develop the personal dignity.

·         Business ethics keeps harmony between different roles of businessman, with every citizen customer, owner and investors

 

PRINCIPLES OF BUSINESS ETHICS

 

The Principles of business ethics developed by well-known authorities like Cantt, J. S. Mill, Herbert Spencer, Plato, Thomas Ganet, Woodrad, Wilson etc. are as follows:

1.  Principle of proportionality: This principle suggests that one should make proper judgment before doing anything so that others do not suffer from any loss or risk of evils by the conducts business.

2.  Principle not to do any evil: It is unethical to do a major evil to another or to oneself, whether this evil is a mean or an end

3.    Principle of purity of means and ends: The first and most important principles of business ethics emphasize that the means and techniques adopted to serve the business ends must be blessed and pure. It means that a good end cannot be attained with wrong means, even if it is beneficial to the society.

4.   Principle of non-co-operation in evils: It clearly points out that a business should with any one for doing any evil acts.

5.   Co-operation with others: This principle states that business should help others only in that condition when other deserves for help

6.   Principle of Publicity: According to W. Wilson, anything that is being done or to be done, should be brought to the knowledge of everyone. If everyone knows, none gets opportunity to do an unethical act.

7.  Equivalent price: According to W. Wilson, the people are entitled to get goods equivalent to the value of money that he will pay,

8.   Universal value: According to this principle the conduct of business should be done on the hasis of universal values.

9.  Principle of Human dignity: As per this principle, man should not be treated as production and human dignity should be maintained.

 

ETHICAL ORGANIZATION

An ethical organization consists of leaders and employees adhering to a code of ethics. Organizational ethics is the ethics of an organization, and it is how an organization responds to an internal or external stimulus.

Organizations focusing on encouraging ethical practices are commonly viewed with respect by employees, the community and corresponding industries. Ethical business practices of organizations has resulted in a solid financial bottom-line. This has been seen through greater sales and increased revenue by companies retaining talented personnel and attracting newly skilled employees. More importantly, an ethical organization will have the ability to retain employees that are experienced and knowledgeable (generally referred to as human capital). This human capital results in less employee turnover, less training time for new employees, and greater output regarding services (or production of goods).

CHARACTERISTICS OF ETHICAL ORGANIZATION

Important characteristics of Ethical Organization are given bellow:

1.  Respect

As an entrepreneur building a business, you need to respect yourself and surround yourself with people you can respect. Remember, strong respect doesn't mean you can fly on auto-pilot While you can assume your people will do their job as well as they can, they do need coaching. training and direction, but

respect and trust make it easier for you to avoid micro-managing them. Do not hire or do business with people you don't respect, or who don't respect you.

2.  Honour

Good people are a fundamental part of good ethics. They are also great ambassadors for doing things right. Give special attention to strong performers and people who exemplify the spirit of your organization. Most companies recognize top achievers and producers. Go beyond quotas and sales figures. Point out and show your gratitude to the people who exhibit exemplary behaviour and who have made sacrifices on your behalf. These are people have helped you be successful and you need to acknowledge and honor their contributions publicly, as well as privately

3.  Integrity

When it comes to integrity, it is impossible to avoid sounding preachy or parental. Do not lie, steal, or cheat. Make your word your bond and always stand by your word. When you are wrong, own up to it and make good on the deal. Treat others as you'd want to be treated. Do not hire or retain people who do not have integrity. Other employees, customers and vendors will not trust them.

4.  Customer focus

A company is nothing if it does not have customers. More to the point, if a company does not produce what people want and will pay for, there is no point to that company. A focus on your customers reinforces the responsibility you have to the market. Your decisions affect your people, your investors, your partners and ultimately, your customers. Serving all of these people is part of your ethical responsibility. Selling your customers short not only risks compromising your ethics, it also risks the long-term health of your company.

5.  Results-oriented

Good managers clearly identify the results they expect, then support their employees and help them achieve those results. They provide feedback on performance in an effort to help the employee achieve their potential and the results the company needs for success. In a good company (and an ethical company), results are more than just numbers. They are benchmarks and lessons for the future as well as goals for the present.

6.  Risk-taking

Great companies attract employees who are willing to take risks and they encourage, support and reward them for taking calculated risks. When the risks pay off, they share the rewards with those who produced. When the risks do not pay off, they take the time to analyze what went wrong and learn what to do better next time.

7.  Passion

Great organizations are composed of people who have a passion for what they are doing. These are people who are working for you for the thrill and challenge, not merely putting in time to collect a pay- check. They are excited, driven, and believe that their work and efforts can make a difference. People can

demonstrate their excitement in many ways, so be aware that extra effort on a project or working on the weekend shows passion as much as enthusiastic cheerleading.

8.  Persistence

People in awesome organizations have the will to persist. They will keep working even when results are not what they hoped, or when customers refuse to buy. Their persistence is tied to their passion for what they are doing and a belief that this group of people, this company. has the best chance of "making it" of any company they could join. And so, they work harder. They continue to take risks. They behave with honour and integrity. They keep their focus on the customer's needs and wants. And, they are not satisfied until they achieve the goals and results that are expected.

BUSINESS ETHICS AND CORPORATE GOVERNANCE

INTRODUCTION:

Ethics of corporate governance is a very relevant topic these days Ethics is the lifeblood of the corporate governance. No one can deny the importance of ethical conduct in managing a large corporate house. Moreover, due to recent corporate frauds and collapses (at Worldcom. Tyco, Enron and Satyam, attention has been drawn to ethical standards accepted within the company. On account of these frauds, the concept of corporate governance has come under criticism. As a result, here has been a renewed emphasis on corporate governance.

DEFINITION:

Organization for Economic Cooperation and Development (OECD has defined Corporate Governance in the following way

"Corporate governance is the system by which business corporations are directed and controlled The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers shareholders and other stakeholders and spells out the rules and procedures for making decisions in corporate affairs. By doing this, it also provides the structure through which the Company objective are set and the means of attaining those objectives and monitoring performance”.

ETHICS OF CORPORATE GOVERNANCE

The concept of business ethics is very much relevant in corporate governance. Corporate strategies framed to achieve its goals and objectives must be ethically correct. A business policy /corporate strategy not based upon ethical principles may succeed in the short run, but in the long run, it is bound to fail. Unethical practices like greed for quick profits, unethical means, unethical business targets, lack of care of the stakeholders etc. are mainly responsible of major business failures in the recent past.

A Company must include the following ethical measures in its ourporate governance strategy

1. It must adopt a transparent policy of management and governance

2 must adopt à corporate governance policy based on code of et les regulations and the principle of holistic approach.

3.  Someone who does not know how to obey will never learn to command This proposition must be kept in mind in framing corporate governance policy

4.  A company must become fair in business goals

5.  Authority is the strongest and most effective measure to get work done hence it must be used in a careful way.

6.  Companies must be very much transparent in market dealings, duties rules procedures and other relevant issues

7.  Companies should be governed by people with lot of experience and the inexperienced fellows should not be allowed to work at top positions. There is no prudence in appointing untried men to important posts of direction.

8.  Companies must try to eam profits in the most fair and equitable manner

9.   Company must take ethical decisions. All stakeholders should be treated equitably, and in an ethical manner

10.  Companies must try to be objective and impartial in the sue of corporate governance

 

BUSINESS ETHICS IN A GLOBAL ECONOMY

 

"Ethics Must Be Global, Not Local. To build a truly great, global business, business leaders need to adopt a global standard of ethical practices."                         -Bill George

INTRODUCTION:

Modern era is the era of globalization. Globalization has brought the various countries of the world closer than before. As a result of globalization cross-border exchange of goods, services, capital, technology, ideas, information and people has taken place. Now as a result of globalization, the world has become a global village. MNCs have started operating in a number of countries and mobility of labour and capital has increased manifold. These MNCS need guidelines in their world-wide operations as far as ethical issues are concerned. These MNCS operate in countries having different cultures and different levels of economic development.

MEANING OF GLOBALISATION:

Globalisation is the increasing economic and financial integration of economies around the world. Now national boundaries have become irrelevant for the financing, production, sale and distribution of goods and services. MNCs ( Multinational Corporations) and TNCs (Transnational corporations) that see the world as a single market have facilitated the process. Two major recent driving forces are advances in telecommunications infrastructure and the growth of the internet. In general, as economies become more connected to other economies, they have increased opportunity but also increased competition. Thus, globalization has become a more and more common feature of business today.

DEFINITION OF GLOBALISATION:

-Martin Albrow 1. "Globalisation refers to all those processes by which the peoples of the world are incorporated into a single world society, global society.

The following ethical considerations are much relevant

1.  CSR AS A STRATEGIC TOOL IN GLOBAL MARKET:

Companies should use CSR methodologies as a strategic tool to gain public support for their presence in global markets. It will help them in sustaining a competitive advantage by using their social contributions to provide a subconscious level of advertising. It has become a public relation tool of global corporations to convince consumers. As globalisation accelerates, large corporations have progressively recognized the benefits of providing CSR programs in their various locations. CSR activities are now being undertaken throughout the globe. Everyone judges companies, whether he invest in them, buys from them, works for them, or just lives near them.

2.  CORPORATE RESPONSIBILITY REPORTS:

Today more and more of the global corporations issue corporate responsibility reports and the public expects visible CSR initiatives from businesses of all sizes Many companies use CSR is a way to improve their public image, generate brand equity, increase employee loyalty, promote wide-ranging policies and labour rights. Generally, ethics value standards about what is "right" and "wrung" But in case of global economy, it is not as easy as it seems to decide what is right and what is wrong. MNCs operate in a global world

3.  MAKE USE OF GLOBAL BENEFITS:

It is clear that a company operate in other countries to reap some benefits like cheap labour, tax exemptions and to take benefit of natural resources of host country. But in order to earn more and more profits, these companies may cause damage to the environment may give improper treatment to workers and may use faulty production leading to consumer inconvenience. Global competition among MNC's has created a unique scenario for these companies; these have to incur additional costs in implementing ethical standards

4.  UNIVERSAL ETHICAL STANDARDS:

The growth of international business urged the MNCs to develop universal ethical standards. MNCs must establish a corporate code of ethics that is globally integrative yet locally responsive and create an ethical culture which never allows discrimination against LDCs in deciding ethical issues. To establish codes of ethics are essential but not sufficient to conduct ethical behavior. Buller and Mellvoy suggest that ethical capabilities can be an important source of sustainable advantage in addition to strategic technological, financial and organizational capabilities as a source of competitive advantage.

5.  CULTURE

Ethics is embedded in the culture of a nation. Hotstede defines culture as the collective programming of the mind that distinguishes the members of one group or category of people from another. The core

element in culture is values. Thus, ethics is subject to cultural values and norms Ethics may be considered negatively or positively.

6.  LABOUR PRACTICES:.

Global competition places particular pressure on multinational corporations to examine not only their own labour practices, but also those of their entire supply chain from a CSR perspective. There is a tendency to apply international labour standards across the countries. The standards can be regarded as "basic human rights. In addition, they are universal standards in the sense of being independent of a country's economic development.

STAKEHOLDERS PROTECTION

A person, group or organization that has interest or concern in an organization is known as stakeholder. The term stakeholder can encompass a wide range of interests: it refers to any individual or group on which the activities of the company have impact. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources.

ü  Public

ü  Employees

ü  Shareholder

ü  Government

ü  Stakeholders

ü  Manager

ü  Supplier

ü  Customer

ü  Manager

In general, stakeholders are motivated to participate in an organization if they inducements that ond the value of the contributions they are required to m Inducinents are rewards such as money, power, the support of beliefs or values and organizational status. Contributions are the skills, knowledge, and experthe that ganizations require of their members during task performance. There are two main groups of organizational stakeholders

1. Inside stakeholders 2 Outside stakeholders.

1.  Inside Stakeholders

Inside stakeholders are people who are closest to an organization and have the strong or most direct claim on organizational resources shareholders, managerial employees, and non-managerial employees.

A.   Shareholders

Shareholders are the owners of the organization, and, as such, their claim organizational resource is often considered superior to the claims of other inside stakeholders. The shareholders contribution to the

Organization is to invest money in it by buying the organization's shares or stock. The shareholders inducement to invest is the prospective money they can earn on their investment in the form of dividends and increases in the price of the stock they have purchased. Investment in stock is risky, however, because there is no guarantee of a return. Shareholders who do not believe that the inducement (the possible return on their investment) is enough to warrant their contribution (the money they have invested) sell their shares and withdraw their support from the organization.

B.   Managerial Employees

The employees of the company have an interest in the company because it provides their livelihood in the present day and at some future point, employees will often also be in receipt of a pension provided by the company's pension scheme Managers are the employees who are responsible for coordinating organizational resources and ensuring that an organization's goals are successfully met.

C.   Non managerial Employees

An organization's workforce cons of non-managerial employees. These members of the workforce have responsibilities and duties (orally outlined in a job description) that they are responsible for performing: An employee’s contribution to the organization is the performance of his or her duties and responsibilities:

2.  Outside Stakeholders

Outside stakeholders are people who do not own the organization (uch as shareholders) are not employed by it but do have some interest in it or its activities Customers suppliers, the government, trade and other unions local communities special interest groups, and the general public are all outside stakeholders

A.   Customers

A company's customer will want to try to make sure that they can buy the same product time and again from the company. The company itself will presammably be building op s customers loyalty through by various marketing exercises, and customers themselves will get used to a familiar product that they will want to buy in future Customers are usually an organization's largest outside stakeholder group. Customers are induced to select a product or service and thus an organization) from potentially many alternative products or services

B.   Suppliers

Suppliers, another important outside stakeholder group, contribute to the organization by providing reliable raw materials component parts of other services that allow organization to reduce uncertainty in its technical or production operations, thus allowing cost efficiencies Suppliers therefore can have a direct effect on the organization's officien and an indirect effect on its ability to attract customers.

C.  Government

The government has an interest in companies for various reasons

1.      Local and environmental issues

2.                  Employment issues

3.                  Monetary policy

4.                  Fiscal policy

Historically, various governments have had a major influence upon both the markets and the operating environment. This involvement has been both proscriptive and prescriptive in nature. As business operates within, and contributes to our society, governments have several claims on an organization. waste management or quotas on the harvesting of natural resources, governments may enact various legislation originating at the federal, provincial, or municipal level

D.   Unionized Employees

The relationship between a trade or other union and an organization can be one of conflict or cooperation. The nature of the relationship has direct effect on the productivity and effectiveness of the organization, the union membership, and even other stakeholders Cooperation between managers and the union can and to positive long-term outcomes i both parties agree on an equitable division of the gains from an improvement in a company's fortunes Managers and the union might agree.

E.   Local Communities

Local communities have number of interests in the companies that operate in the r First, the companies will be employing large numbers of local people and it will be interest of sustained employment levels that companies in the locality operates in an e way.

 

 

 

 

 

 

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