Business ethics (also known as Corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values.

Ethical issues occur frequently in management and extend far beyond the commonly discussed problems of bribery, collusion and theft, reaching into areas such as corporate acquisitions, marketing policies and capital investments. For example, after the merger of two firms, ethical question arises whether to demote or fire the employees those who have been serving honestly for so many years.

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Ethics may be referred to as some standardized form of conduct/behavior of individuals understood and accepted in a particular field of activity. Ethics is a mass of moral principles or sets of values about what conduct ought to be. They give an idea what is right or wrong, true or false, fair or unfair, just or unjust, proper or improper, e.g. honesty, obedience, equality, fairness, etc. and respect and then doing the right thing. Ethics is a fundamental, personal trait, which one adopts and follows as a guiding principle in one s life. Those placed in positions of trust and recognized for their knowledge and expertise like managers, shall perform their duty with integrity, independence, sincerity and honesty. That is the basic norm of professional ethics. A professional cannot justify his failure, negligence of compromise, with excuses and explanations. Every rational human being practices ethics for his own and others welfare and safety.

Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. The concept of Business Ethics has come to mean various things to various people, but generally it's coming to know what it 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. Caveat emptor: This ancient Latin proverb let the buyer beware, tells us that business ethics has been a societal concern going back a long ways indeed. Business Ethics is a form of the art of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. In the increasingly consciencefocused marketplaces of the 21st century, the demand for more ethical business processes and actions ~ Ethicist, is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws. In the business world, ethics often are displaced by greed when there is a periodic frenzy of rising stock market prices. Inevitably, a steep downturn then inflicts losses on investors and on businesses with a concomitant reduction in the work force. An excessive competitive spirit tends to induce unethical business practices so the business world becomes a battlefield where the normal rules are flouted, skirted or simply disregarded. The ensuing instability is bad for the economy and for the government.
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NATURE OF ETHICS:Deals with Human Conduct

Science of Ethics

Nature of Ethics

Concept Of Ethics

Study of Ethics

y y y y Study of human behavior. Establishes moral standard/norms of behavior. Makes judgment on human behavior based on these norms. Prescribes moral behavior.

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Social Responsibility: Business ethics is a means of making business socially responsible for its actions. Consumer Movement: The growth in consumer movement is also another important factor that has necessitated the need for business ethics. Business ethics can be used to check malpractices like adulteration. Better Relations with the Society: Business ethics is needed to develop good relations between business and society. employees. consumers. Protection of Consumer rights: Consumer is the centre of all business activities. and (d) proper utilization of natural resources. The tendency of big business firms is always to dominate the market and drive away the small scale industries out of the market. VI. Therefore. (b) public accountability. The spread of education and awareness among consumers about their rights has made the business community to conduct business on ethical principles. competitors and government. Interest of Industry: Business ethics are necessary to safeguard the interests of small scale business firms.y Express an opinion or attitude about human conduct in general. is quite common in all types of business. V. Profit is a sing of business skill and talent. business is essentially meant for satisfaction of consumer wants. discriminate use of natural resources. (c) protection of worker s interests. Small scale units can establish their position and fight for their rights if the industry follows a code of ethics. VII. consumers are the most neglected and exploited group. Compliance to ethical standards will ensure (a) protection of consumer rights. II. Buyer s Market: There has been a structural change in the concept of business. success should be shared by all concerned. The relationship of business with society has various dimensions such as its relations with shareholder. Suppliers and others contribute to the success of the business. consumers. etc. The concept of profit has been gradually taken over by consumer satisfaction. employees. Unfortunately. III. The large scale production and increased 4|P ag e . IV. In fact. The application of business ethics will help to confer and implement consumer rights. shareholders. unfair trade practices and to make the working of business consumer oriented. Employees. Business ethics will help to promote and protect the interest to various groups. distributors. NEED AND IMPORTANCE OF BUSINESS ETHICS The following points explain the need for and importance of business ethics: I. Profit is also a result of group efforts. Concept of Socialism: The concept of socialism in business states that gains of a business must be shared by all and just by the owner of business. Exploitation of consumers.

sincerity. etc. economic and cultural values of the society. ethical and unethical. CONCEPT OF BUSINESS ETHICS The business ethics code of an organization may contain the following aspects: 1. fairness. It also brings an element of honesty. transfers. business ethics is needed to redefine the traditional concept of profit and replace it by a balance between profit and consumer satisfaction. Business Ethics towards Government: y Timely filing returns and other records. etc. Business Ethics towards Suppliers: y Proper supply contact. 5|P ag e . y Ethical promotion including advertising. y Proper personnel policies relating to promotion. etc. It ensures healthy and competitive business atmosphere. performance appraisal. 3. consumer and labor welfare. to businessmen. 5.competition in the market has changed the business scene from a seller s market to a buyer s market. Beneficial to Business and Society: Ethics suggests what is good and bad. y Payment of proper dues including taxes. and human touch to business activities. 6. 7. y Proper dealer contact. etc. etc. y Provision of proper facilities. Business Ethics towards Customers: y Right pricing. y Provision of proper information about products etc. y Restraining from pressure tactics on the dealers. right and wrong. 2. suppliers or dealers or competitors etc. y Timely payment of dues. y Restraining from pressure tactics on the dealers. Business Ethics towards Dealers: y Timely delivery of products. Society is also benefited by the introduction of business ethics. VIII. Business Ethics towards Employees: y Payment of right wages and salaries. 4. In a changed situation. Business Ethics towards Shareholders/Stakeholders: y Provision of proper information. Business Ethics towards Competitors: y Fair competitive practices. y Restraining from instigating employees. y Restraining from maligning competitors names. y Supporting Government in social development activities. and improvement in social.

8. y Restraining form insider trading on the stock markets. Descriptive Ethics and Meta-Ethics. It involves how people ought to act on the principles. More often. NORMATIVE ETHICS: This was the prevalent form of ethics in philosophy until the end of the 19th century. and a discussion of the limits of a human's responsibility for moral decisions and for the consequences of actions. etc. This is the traditional way of doing Ethics. Managerial mischief. such as the Christian tradition. though. business ethics is a matter of dealing with dilemmas that have no clear indication of what is right or wrong. What things are good and bad and what kind of actions / behavior are right and wrong. such as potential conflicts of interest. Moral mazes. in their book "Essentials of Business Ethics" explain that "managerial mischief" includes "illegal. Consideration for the role of conscience in moral decision making is also a part of normative ethics. y Timely repayment of advances and interest. etc. and how rules apply to individual lives. The other broad area of business ethics is "moral mazes of management" and includes the numerous ethical problems that managers must deal with on a daily basis. 6|P ag e . mismanagement of contracts and agreements. 2. wrongful use of resources. involves systematizing. or questionable practices of individual managers or organizations. defending. TWO BROAD AREAS OF BUSINESS ETHICS 1. or it may be based on some other way of thinking.y Timely payment of dividend. Business Ethics towards Financial Institutions: y Proper information about firm s financial position." There has been a great deal written about managerial mischief. and recommending concepts of right and wrong behavior. unethical. Madsen and Shafritz. etc. Philosophers today usually divide ethical theories into three general subject areas or three main approaches to ethics Normative Ethics. leading many to believe that business ethics is merely a matter of preaching the basics of what is right and wrong. THREE APPROACHES TO ETHICS The field of ethics. how they make moral choices. also called moral philosophy. This may come from an established group of culture. as well as the causes of such behaviors and remedies to eradicate them. It includes a consideration of the importance of human freedom.

It seeks to understand the meaning and function moral language. META-ETHICS: This is sometimes called moral philosophy or philosophical ethics. It can be described as moral sociology or moral anthropology. say the Christian Church. or traditions of. and what it means by a right sexual action as opposed to a wrong one. It involves different approaches inside one society to the resolution of ethical problems. a description of the moral code prevailing in different societies. Meta Ethics has produced a number of different schools. This group attracts most interest today. A meta-Ethical response would be more interested in what you mean by right. It looks at the logic used in arriving at the conclusion of an argument that justifies a moral choice. or some other group. Posing an ethical question illustrates the different ways the two positions respond to it. of ethical terms like good and bad. If you asked the question "Is pre-marital sex right. which we will look at over the coming few weeks: y Ethical Naturalism (Definism) y Ethical Non-naturalism (Intuitionism) y Ethical Non-cognitivism (Emotivism) FOUR VIEWS OF ETHICS 7|P ag e ." a Normative Ethical answer would be more concerned with the reasons why it might be right or wrong. how they relate to certain teachings.DESCRIPTIVE ETHICS: It is the study of ways in which different people and different societies have answered moral questions.

and due process. RIGHTS VIEW of ethics is concerned with respecting and protecting individual liberties and privileges such as the rights to privacy. y Organizational rules are enforced fairly and impartially and follow all legal rules and regulations y Protects the interests of underrepresented stakeholders and the rights of employees 4. INTEGRATIVE SOCIAL CONTRACTS theory proposes that ethical decisions be based on existing ethical norms in industries and communities in determining what constitutes right and wrong.1. and due process y To make ethical decisions. free speech. y Respecting and protecting individual liberties and privileges y Seeks to protect individual rights of conscience. Greatest good is provided for the greatest number Encourages efficiency and productivity and is consistent with the goal of profit maximization 2. UTILITARIAN VIEW of ethics says that: y y y Ethical decisions are made solely on the basis of their outcomes or consequences. y Acts are moral when they promote the individual s best long-term interests. managers need to avoid interfering with the fundamental rights of others 3. which ultimately leads to the greater good y Individualism is believed to lead to honesty and integrity because that works best in the long run 8|P ag e . Theory of Justice View of ethics is where managers impose and enforce rules fairly and impartially and do so by following all legal rules and regulations. life and safety. free speech.

affecting it and affected by. secondary. The following groups are identified for understanding purpose.Suppliers and Business Partners 3. The stakeholders can be segregated as primary. and non-social.Non human species 3.Customers 4. and linked together for any objective.Employees and Managers 1.Investors 5. social.the natural environment 2.The Stakeholder Concepts: The stakeholders are those individuals or entities which are related to the organization directly or indirectly. Stakeholder Primary Social Stakeholder Primary Non Social Stakeholder Secondary Social Stakeholder Secondary Non Social Stakeholder 1.Local communities 2.Future Generations Government and Civil Society )Social and third world pressure groups and unions )Media and communications )Trade bodies )Competitors Environmental pressure groups )Animal welfare pressure groups 9|P ag e .

Law reform. Corporate Social Responsibility (CSR) is increasingly being used as a term to refer to the discharging of responsibilities by organisations. industrial espionage. then it could be seen as unethical for a company to consider the interests and rights of anyone else. provided we bear in mind the context and think carefully about what this might mean in practice. For that reason it tends to be associated with a primarily inward-looking perspective. hostile takeovers. For example.g. 10 | P a g e . such as the ethical debate over introducing a crime of corporate manslaughter. voluntary sector. acting as corporate entities. We will take the conservative view that ethics directly relates to people. competitive business markets. stakeholders and objectives. capabilities and even virtues. If a company's main purpose is to maximize the returns to its shareholders. shareholder concept.GENERAL BUSINESS ETHICS This part of business ethics overlaps with the philosophy of business. to society as a whole (similar to the second sense of business ethics above).Organisations may also have legally defined duties and it may be useful to refer to organizational characteristics such as culture. An issue of some theoretical interest is whether the concepts and tools of analysis used within philosophical ethics can really be directly applied to an agent which is a legal entity (such as a business) rather than a person. public service. This title is used independently of the environment within which the organisation operates (e. Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility. etc. Leadership issues: corporate governance. though we may use words like duty and values in relation to organizations when these have been defined in some way. as people we have fundamental duties and characteristics referred to as virtues . Ethical issues concerning relations between different companies: e. duties. Political contributions made by corporations. one of the aims of which is to determine the fundamental purposes of a company. roles and responsibilities of people working together within a formal structure which itself has owners. ORGANISATIONAL ETHICS This very broad title applies to the ethics of working in an organisation. that is the individual actions.g. CORPORATE SOCIAL RESPONSIBILITY OR CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated. stakeholder concept v. The misuse of corporate ethics policies as marketing instruments.) and is therefore used for situations which are independent of that context.

Amoral Management ± ± Intentional .does not consider ethical factors Unintentional . say. Moral Management Conforms to high standards of ethical behavior. It is also possible that some senior and highly paid employees will have no responsibility for the management of others but have considerable effect on how the organization works and relates to its environment. much of organisational ethics is about the process of management. few levels in the hierarchy and many individuals reporting to one team leader) may mean that few people have the title manager . For these reasons we will tend to use the phrase organisational ethics unless we wish to draw particular attention to the issues involved in managing people and systems. 2. Indeed in some organisations with a strong professional base.MANAGEMENT ETHICS In practice. One curiosity of the management profession is that the title manager may be widely used in one organisation to include. 3 Models of Management Ethics 1. the only manager may be an administrator with little if any supervisory responsibilities.e. supervisors and team leaders while in another organisation a very flat structure (i.casual or careless about ethical considerations in business 11 | P a g e . Immoral Management A style devoid of ethical principles and active opposition to what is ethical. 3. the relationships between managers and the relationships between managers and other employees.

that is we are referring to the ethics of people working within a business in the accepted sense of the word. then we can signal this by using the phrase business ethics . it is more useful to talk about organisational ethics. The first meaning is simply the area of work we have called organisational ethics but with the added stipulation of a competitive market environment. Where the issues to be discussed are common to competitive and non-competitive contexts. 12 | P a g e . If we are talking about ethical dilemmas which only arise within a competitive environment.BUSINESS ETHICS Unfortunately this widely used phrase has two meanings which are related but which can lead to confusion.

weight and attractiveness. y Discrimination issues include discrimination on the bases of age (ageism). strike breaking. Executive compensation: concerns excessive payments made to corporate CEO's. gender. kickbacks. as a distinct entity. y ETHICS OF HUMAN RESOURCE MANAGEMENT The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship. Bribery. Obviously in reality all the actions of the business as an entity are actions of individual entrepreneurs. the ethics of health care and so forth if we wish to signal a focus on issues which are specific to these environments. Therefore provided we are aware of any possible confusion. Indeed the phrase is used by some writers in discussions of the ethical problems of doing business in general. forex scams: concerns (criminal) manipulation of the financial markets. See also: affirmative action. though are not used in this book. disabilities. race. voluntary sector ethics . religion. though. acting competitively. perhaps.and outward-looking approaches. sexual harassment. and facilitation payments: while these may be in the (short-term) interests of the company and its shareholders. In a similar fashion we might also wish to refer to public sector ethics . earnings management. y Issues surrounding the representation of employees and the democratization of the workplace: union busting. 13 | P a g e . securities fraud.g.The other use of business ethics is to refer to the business itself. such as the rights and duties owed between employer and employee. bucket shop. PROFESSIONAL ETHICS Professional ethics covers the myriad practical ethical problems and phenomena which arise out of specific functional areas of companies or in relation to recognized business professions. these practices may be anti-competitive or offend against the values of society. market ethics might be more helpful in referring to a competitive market-based economic system. construction projects) and hence even terms such as partnership ethics might be useful. managers and employees. it can be very useful to talk about business ethics if the environment is competitive and we wish to balance a consideration of inward. ETHICS OF ACCOUNTING INFORMATION y y Creative accounting. Insider trading. misleading financial analysis. In particular it is worth remembering that much public sector work is carried out in partnership with private sector organizations (e.

sex in advertising. chemical manufacturing. ETHICS OF SALES AND MARKETING Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behavior. subliminal messages. mobile phone radiation and health. tobacco. Occupational safety and health. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery. y Specific marketing strategies: greenwash. planned obsolescence. employment law. or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk. y Ethical problems arising out of new technologies: genetically modified food. spam (electronic). pyramid scheme. because marketing makes heavy use of media. media ethics is a much larger topic and extends outside business ethics. environmental ethics. motor vehicles. y Product testing ethics: animal rights and animal testing. but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics. alcohol. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility. Issues affecting the privacy of the employer: whistle-blowing. weapons. y Content of advertisements: attack ads. addictive and inherently dangerous products and services (e. shill. price skimming. bait and switch. price discrimination. To some extent society regards this as acceptable. y Defective. carbon emissions trading. y Ethical relations between the company and the environment: pollution. bungee jumping). indentured servitude. viral marketing.y y y y Issues affecting the privacy of the employee: workplace surveillance. 14 | P a g e . ETHICS OF PRODUCTION This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. drug testing. y Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. products regarded as immoral or harmful y Children and marketing: marketing in schools. y Pricing: price fixing. However. use of economically disadvantaged groups (such as students) as test objects.g.

copyright infringement. global view on business ethical matters. y Patent infringement. y Comparison of business ethical traditions from various religious perspectives. trademark infringement. Many new practical issues arose out of the international context of business. attempts to assert ownership and ethical disputes over ownership arise. patent troll. regardless of need. KNOWLEDGE AND SKILLS Knowledge and skills are valuable but not easily "ownable" objects. y Varying global standards . or the company which discovered and developed the plant's medicinal potential? As a result. the use of child labour. copyright misuse. y Even the notion of intellectual property itself has been criticised on ethical grounds: see intellectual property. y Bioprospecting (ethical) and biopiracy (unethical). the fair trade movement. Issues and subfields include: y The search for universal values as a basis for international commercial behavior.ETHICS OF INTELLECTUAL PROPERTY. y Misuse of the intellectual property systems to stifle competition: patent misuse. in order to prevent any competitors employing them. Nor is it obvious who has the greater rights to an idea: the company who trained the employee or the employee themselves? The country in which the plant grew. y Issues such as globalization and cultural imperialism. transfer pricing. y The practice of employing all the most talented people in a specific field. international business ethics did not emerge until the late 1990s. bioprospecting and biopiracy in the pharmaceutical industry.e.g. Other. y Comparison of business ethical traditions in different countries.g. looking back on the international developments of that decade. 15 | P a g e . INTERNATIONAL BUSINESS ETHICS AND ETHICS OF ECONOMIC SYSTEMS The issues here are grouped together because they involve a much wider. y Ethical issues arising out of international business transactions. submarine patent. y Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. older issues can be grouped here as well. e. INTERNATIONAL BUSINESS ETHICS While business ethics emerged as a field in the 1970s. y Business intelligence and industrial espionage.

y y The way in which multinationals take advantage of international differences. call centre s) to low-wage countries.g. A/C PADDING BID RIGGING UNSAFE PRODUCTS INVASION OF PRIVACY JOB SAFETY VIOLATIONS Prof Neeraja   16 | P a g e .g. such as outsourcing production (e. clothes) and services (e. ETHICAL IMPERFECTORS CRIMES INVOLVING EMPLOYEES CRIMES BETWEEN FIRMS CRIMES AGAINST SOCIETY CONFLICT OF INTEREST EMBEZZLEMENT DUMPING ECOLOGICAL DISASTERS MONEY LAUNDERING PRICE FIXING KICKBACKS JOB DISCRIMINATION EXP. The permissibility of international commerce with pariah states.

worldwide from the back room to the board room. The Worldwide Code of Business Conduct reflects their commitment to manage their business affairs responsibly. you should wait until you ve worn them two or three times. President and CEO of jeans maker Levi Strauss & Co. For more than 155 years. the companies Global Anti-Bribery and Anti-Corruption Policy is designed to help LS&Co. employees worldwide to report ethics concerns anonymously. This somewhat unusual advice comes courtesy of John Anderson. Rules and Regulations and Government Officials. It s always been very 17 | P a g e . and company policies strictly prohibit retaliation against anyone for raising or helping to address any issue related to the Worldwide Code of Business Conduct or the Global Anti-Bribery and Anti-Corruption Policy. you shouldn t wash your jeans each time youwear them. It offers guidance to their employees on a host of potential business situations and emphasizes the importance of making business decisions through the lens of their values. Recognizing that anti-bribery and anti-corruption laws vary by jurisdiction and are not always easy to understand. a company promoting itself as a socially responsible corporation that supports environmental and humanitarian causes. the company has demonstrated the highest ethical standards in the conduct of our business. WHY IS LEVIS ETHICAL?? For the sake of the environment. An Ethics and Compliance Reportine allows LS&Co. The Global Anti-Bribery and Anti-Corruption Policy provides additional.ETHICAL COMPANY LEVIS LEVIS as a company is built upon an unwavering commitment to responsible business practices. Integrity has always been at the heart of how Levis operate and is one of Levi Strauss & Co.) core corporate values. with the utmost integrity and in compliance with all applicable laws. employees worldwide identify and avoid situations that may potentially violate ethics laws. specific guidance on two critical sections of the Worldwide Code of Business Conduct Compliance with Laws. Anderson says the company s values are rooted in the communities in which it operates. s (LS&Co. Compliance with the Worldwide Code of Business Conduct and the Global AntiBribery and Anti-Corruption Policy is mandatory for everyone at LS&Co. Championing Levi s ethos of profits with principles .

we said we re going to do this. we re going to take a leap of starts because we believe the industry will follow us. that s what it went up. And our company survived just fine. until they hit rough patches. How they integrate them into their business and how they stay true to them when times are tough. strongly supports CSR. suppliers and contractors. Consumers will find you out if you only go halfway down that journey. rigorous society-wide approaches to corporate social responsibility are exactly what healthy companies do. says Anderson.important to us that we give back as much as we take out. The test of Levi s commitment. 50 cents. I can also tell you it has to start from the top. we need to make the case that serious. Anderson says Levi pioneered workplace policies and practices that were adopted by its employees around the world. Because consumers will find you out. says Anderson. We believe consumers will continue to vote with their wallets and support companies who embed their values in their products and work to create positive changes in the world. When asked why Levi s management decided to accept the significant increase in costs. Our active involvement in confronting the HIV AIDS problem in South Africa through our Levi Red Tab For Life programme has helped to make the brand number one in a country. To be sure. More than two decades ago. because otherwise it would not be successful. 18 | P a g e . including the prevention of child labour. the board. a code of conduct for its employees. Certainly Levi s CSR initiatives have incurred costs in the short term. Those days we were making 400 million pairs of jeans. it was among the first companies to raise awareness about HIV AIDS. with 75 per cent of the young people saying this issue is important to them. (it s) much easier when times are good. But from the top down. says Anderson. which would not be tenable without the support of key stakeholders. who was the keynote speaker at an American Chamber of Commerce luncheon in Singapore recently. and that management believed it s the right thing to do . Think about it. Levi has notched up numerous achievements in championing humanitarian and environmental causes over the years. which controls the privately-held company. and the promotion of the health and safety of workers. As business leaders. But Anderson acknowledges that it s easy for companies to talk up their commitment to corporate social responsibility (CSR) during the good times. And guess what? Ninety per cent of the industry today is working with us after we implemented that. The real test is how companies live up to those values. The cost for us went up 50 cents a pair of jeans. Corporate social responsibility focuses on the responsibility to people and to the environment which we work. management have to believe in this. Anderson explains that the Haas family. This details Levi s expectations of workplace conditions. Anderson recalls. Shareholders. They will find you out if you re only doing it in good times and you back off in hard times. came when the company introduced its socalled terms of engagement . You can imagine the furore within the company: We can t afford to do it .

Levi s recent marketing campaign asked consumers to trade in their old jeans.THE WAY MOTOROLA WILL ALWAYS ACT Motorola's Key Beliefs have been in existence for decades. One of the dilemmas that we ve been dealing with over time is that there are many people who say let s do it regardless of the impact on profit . To that end. So we wanted to link the environment through our guided market process and we also want to tie it to profitable growth. its Code of Business Conduct has provided Motorola employees guidance for their business activities. they have asked suppliers not to use cotton from that country until the government shows progress in ending the practice. Anderson added that Levi has been working for the past two years with other apparel brands. companies have to sustain their commercial viability to be able to continue to do the right thing . That has led Levi to produce apparel made from recycled soda pop and blended organic cotton. Motorola does this by designing and delivering the "must have" products. And I think both can fit very closely together. Inspired by its vision of Seamless Mobility. which could then be recycled by Levi for its own commercial use. MOTOROLA Motorola is known around the world for innovation and leadership in wireless and broadband communications. KEY BELIEFS . That s why it s very important we link it to profits with principles. says Anderson. If you do that. Anderson says Levi is aware that cotton farming requires significant amounts of water and pesticide. Notably. So you got to have that tension there. can t be done. says Anderson. No. the people of Motorola are committed to helping people get and stay connected simply and seamlessly to information. he adds. and Motorola continues to have a strong culture of corporate ethics and citizenship. if we deliver sustainably-profitable growth . And that s a commitment we still have today.3 billion in 2005. I say to many people. and entertainment that you want and need. to stop the practice of using child labour in harvesting cotton in Uzbekistan.So we built the brand by aligning with an issue the government struggled to confront. it is not enough 19 | P a g e . Since its original establishment in the 1970s. A Fortune 100 company with global presence and impact. But you have to be pragmatic. as well as non-governmental organisations. Our vision is this: we will build environmental sustainability into everything we do so that our profitable growth helps restore our environment. I ll be honest. However. you ve got to demand profitable growth but you can t tie it to environmental and social issues. Turning to the environment." In the final analysis. people can really align behind what you want to do. I can only guarantee I can keep contributing to the community in which we operate. placing a priority on establishing trust with its stakeholders. Motorola had sales of US$35. "must do" experiences and powerful networks along with a full complement of support services. We do it because it s the right thing to do but it s also got to make business sense.

fairness and doing the right thing without compromise. injuries and unsafe equipment. Use it to discuss any concern or problem . even when circumstances make it difficult. It highlights key issues and identifies policies and resources to help Motorolans reach decisions that will make Motorola proud. ETHICAL PRACTICES PRACTICED BY MOTOROLA Times will change. talents and achievements. The key beliefs define who they are as individuals and as a company . its suppliers. The Code of Business Conduct is a guide to help Motorolans live up to Motorola's high ethical standards -. Our customers will change. The EthicsLine offers information. Constant respect for people means how Motorola treats everyone with dignity. They are responsible for immediately reporting accidents. Uncompromising integrity means staying true to what they believe. The Code goes beyond the legal minimums. its customers. and will comply with local and national employment laws. whether verbal. Our products will change. harassing or offensive conduct is unacceptable. Abusive. discreetly and thoroughly. advice and suggestions. such as qualifications.and their declare its good values. Our people will change. The Code is neither a contract nor a comprehensive manual that covers every situation Motorolans throughout the world might encounter. They will value the difference of diverse individuals from around the world. Constant respect applies to every individual they interact with around the world. Motorolans will treat each other with respect and fairness at all times. its shareholders. They are all responsible for maintaining a safe workplace by following safety and health rules and practices. Motorola is committed to keeping its workplaces free from hazards. What will not change is our commitment to our key beliefs.not just for emergencies. Employment decisions will be based on business reasons. practices or conditions to a supervisor or other designated person. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. each of them must report to work free from the influence of any substance that could prevent 20 | P a g e . Motorola is committed to acting on them through the potential of its technology and the way they conduct their business. Motorola adheres to honesty. its competitors and its communities. by describing the ethical values we share as Motorolans. MOTOROLA s RESPONSIBILITY TO MOTOROLANS We respect the dignity of each Motorolan. physical or visual. It summarizes many of the laws that Motorola and all Motorolans are required to live by. The Ethics Line strives to make sure that all questions or concerns are handled each other. To protect the safety of all employees. however. The Motorolans are encouraged to speak out if a co-worker's conduct makes them uncomfortable and to report harassment if it occurs.

as long as they make it clear that their views and actions are not those of Motorola. Motorola provides fair. charity and political organizations and causes of their choice. have access to confidential information. Motorola protects its customer information that is sensitive. Employees' outside activities must not interfere with job performance. Motorolans must comply with Motorola's environmental policies and programs. travel and entertainment is in the Conflicts of Interest section of this Code. Maintaining Motorola's valuable reputation requires complying with its quality processes and safety requirements. private or confidential .them from conducting work activities safely and effectively. the Motorola Foundation and Motorolans throughout the world provide generous financial and voluntary support to thousands of worthwhile community programs. Requests from financial analysts and shareholders are forwarded to Investor Relations. Motorola creates products and provides services that benefit people around the world. Motorola. Guidance on customer gifts. Notify management if hazardous materials come into contact with the environment or are improperly handled or discarded. Motorola respects the environment by complying with all applicable environmental laws in all countries in which they conduct operations. Motorola builds long-term relationships with its customers by demonstrating honesty and integrity. Motorolans are free to support community. religious or charitable causes. 21 | P a g e . Only those who have a need to know. Deliberately misleading messages. They obtain business legally and ethically. To ensure professional and consistent handling. accurate. Bribes or kickbacks are unacceptable. MOTOROLA s RESPONSIBILITY TO CUSTOMERS AND CONSUMERS We earn customer loyalty by delivering on our promises. or to contribute to or support political. requests from the media are forwarded to the local communications group or Corporate Communications. timely and easy to understand information to the public. omissions of important facts or false claims about its competitors' offerings are unacceptable.just as carefully as they protect their own. MOTOROLA s RESPONSIBILITY TO COMMUNITIES As a global corporate citizen. and by actively supporting the communities in which they operate. Its marketing and advertising will be accurate and truthful. Threats or acts of violence or physical intimidation are prohibited. Motorola serves society by providing life-enhancing products and services at a fair price. No Motorolan may pressure another employee to express a view that is contrary to a personal belief. Motorola is committed to protecting the environment by minimizing the environmental impact of its operations and operating its businesses in ways that foster sustainable use of the world's natural resources.

000 have died since the accident from gas-related diseases. Some 26 years after the gas leak. Around midnight on December 2 3. 516. India. 38. Company Union Carbide Corporation (UCC).000 each.478 (6. which identified 30 major hazards & accidents that occurred over a period of years before the tragedy and that they were not fixed in Bhopal but were fixed at the company's identical plant in the US. An eighth former employee was also convicted but had died before judgment was passed.8%) were temporary partial disablement while 0. which is now a subsidiary of Dow Chemical Company. cardiac failure secondary to lung injury. The quality of the epidemiological and clinical research varies. A government affidavit filed in the Supreme Court in 2006 stated that of the 558.000 have since died from gas-related diseases. the maximum punishment allowed by law. 390 tons of toxic chemicals abandoned at the UCIL plant continue to leak and pollute the groundwater in the region and affect thousands of Bhopal residents who depend on it.900) were severely and permanently disabled.UNETHICAL PRACTICES THE BHOPAL GAS TRAGEDY Introduction The Bhopal disaster or Bhopal Gas Tragedy is the world's worst industrial catastrophe.000 people are estimated to have permanent injuries. 22 | P a g e . immune and neurological disorders. Madhya Pradesh. Another 100. female reproductive difficulties and birth defects among children born to affected women.S. were convicted in Bhopal of causing death by negligence and sentenced to two years imprisonment and a fine of about $2. India. Anderson knew about a 1982 safety audit of the Bhopal plant. At that time. By the end of 2009. UCIL was the Indian subsidiary of the U. Greenpeace asserts that as the Union Carbide CEO. against Union Carbide with an Indian arrest warrant also pending against Warren Anderson. In June 2010. Reported and studied symptoms are eye problems.7% (~3. certain civil and criminal cases remain pending in the United States District Court. It is estimated that 20.000 to 200.000 deaths. there was a leak of methyl isocyanate (MIC) gas and other toxins from the plant.406 (92. 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal. Government agencies estimate 15.5%) were minor. Over two decades since the tragedy. Others estimate that 8.000 people.000 had died and around 600. 1984. resulting in the exposure of over 500.000 died within the first weeks and that another 8. CEO of Union Carbide at the time of the disaster. though there is some dispute as to whether the chemicals still stored at the site pose any continuing health hazard. seven ex-employees.125 cases of injury resulting from the disaster. Manhattan and the District Court of Bhopal. including the former chairman of UCIL. respiratory difficulties.000 people were affected due to gas-related disorders. It occurred on the night of December 2-3. it was estimated that 25.

23 | P a g e . Mr.Anderson went to the US and never returned. This appeared to give an indication of the sentencing severity to come. However. According to the estimate of government agencies about 15.000 rupees each and jail for two years! To add insult to injury. A FIR was filed with the police.3 billion in stock and debt. Union Carbide Corporation and the Government of India. That was sold by UCC in 1994 and renamed Eveready Industries India limited. methyl isocyanate gas leaked from a tank at Union Carbide India s Bhopal plant. y Safety systems beingswitched off to save money including the MIC tank refrigeration system which alone would have prevented the disaster. 1984 Warren Anderson. The problem was made worse by the plant's location near a densely populated area. 1984 Shortly after midnight. Analysis shows that the parties responsible for the magnitude of the disaster are the two owners. Chief judicial magistrate Mohan Tiwari stated that An American corporation cynically used a third world country to escape from the increasingly strict safety standards imposed at home. non-existent catastrophe plans and shortcomings in health care and socio-economic rehabilitation. however the court went on to convict the seven accused guilty of criminal negligence And the sentence of a fine of 100. Factors leading to the disastrous gas leak include: y The use of hazardous chemicals (MIC) instead of less dangerous ones y Storing these chemicals in large tanks instead of over 200 steel drums. were also arrested. December 4. he was later released on bail. then CEO of Union Carbide Corporation (UCC). Announcing the verdict in a local court.000 people die and several thousands were maimed. y Possible corroding material in pipelines. the convicted walked out within hours of the sentencing as they were all granted bail. y Poor maintenance after the plant ceased production in the early 1980s y Failure of several safety systems (due to poor maintenance and regulations). contrary to the belief that Dow should be equally responsible for the disaster. A Deadly Timeline of Events December 3. Several others accused. Union Carbide India Limited (UCIL).000 have died in the years that have passed. and 10 more are dying every month due to exposure-related diseases. Dow has publicly stated several times that the Union Carbide settlement payments have already fulfilled Dow's financial responsibility for the disaster. including Union Carbide Indian chairman Keshub Mahindra. Came to India and was arrested. Dow did not purchase UCC's Indian subsidiary. The wrecked MIC plant that caused at least 10. However.The Dow Chemical Company purchased Union Carbide in 2001 for $10.

1996 The Supreme Court amended the charges against the accused to 304(A) (causing death by negligence). which attract a maximum punishment of two years imprisonment. The chief judicial magistrate subsequently framed charges against the accused under the Section 304 Part (II) (culpable homicide not amounting to murder). May 1986 All litigations against Union Carbide were shifted to Indian courts by the US district court judge.3 billion instead.December 6. 24 | P a g e . Section 326 (voluntarily causing grievous hurts by dangerous weapons or means) and other sections of Indian Penal Code. which was appealed against. January 1987 The US Court of Appeals affirmed the transfer of litigation December 1. January-December 1988 Arguments and appeals went on throughout the year before the Indian Courts regarding compensation for the victims. 15 years after reaching settlement. 336(acts endangering life or personal safety of others). 337 (causing hurt by endangering life or personal safety of others) and other sections of IPC. March 1985 The government enacted the Bhopal Gas Leak Disaster Act that enabled it to act as the legal representative of the victims in claims arising of or related to the disaster. April 1985 Union Carbide offered $5 million for a relief fund before a US district court but the Indian government rejected the claim and demanded $3. September 13. Anderson was declared fugitive from law for ignoring court summons. Mr. 1984 The case was transferred to the CBI. 1992 Part of the $470 million was disbursed among victims. 1987 The CBI filed the charged sheet after investigation. July 2004 The Supreme Court of India ordered the release of remaining settled funds to victims. 1989. February 1989 The Indian government and Union Carbide arrived at an out-of court settlement and the latter was to give $470 million by March 31. November 1988 The Supreme Court of India asked the Government of India and Union Carbide to settle the matter of compensation to the victims.

was out of action for unknown reasons. 9. works manager. 2. 6. the refrigeration system. had been left idle the MIC was kept at 20 degrees Celsius (room temperature). there had been a reduction of safety management due to reducing the staff. No maintenance supervisor was placed on the night shift and instrument readings were taken every two hours. not the 4. the location of the plant was close to a densely populated area. SP Choudhary. rather than the previous and required one-hour readings in order to cut down cost. the flare tower itself was improperly designed and could only hold one-quarter of the volume of gas that was leaked in 1984. KishoreKamdar . unlike Union Carbide plants in the US. designed to inhibit the volatilization of MIC. then UCIL chairman. its Indian subsidiary plants were not prepared for problems regarding equipment or safety regulations. The flare tower and the vent gas scrubber had been out of service for five months before the disaster. It emerged in 1998. Furthermore. The MIC tank alarms had not worked for four years. during civil action suits in India that. production manager. managing director. There was a lack of skilled operators due to the staffing policy. died during the trial.5 degrees advised by the manual. 7. J Mukund. compared to a four-stage system used in the US. which might have brought the concentration down to a safe level. 2010 All eight accused -. KV Shetty. No action plans had been established to cope with incidents of this magnitude. Problems Contributing to the Tragedy 1. Even if the scrubber had been working. there was insufficient maintenance of the plant and there were only very loose plans for the course of action in the event of an emergency. One of the accused RB Roy Choudhary. and the plant depended on manual operations. plant superintendent. S L Qureshi. The operators chose a dangerous method of manufacturing pesticides. then former assistant works manager of Union Carbide India.June 7. 25 | P a g e . This included not informing local authorities of the quantities or dangers of chemicals used and manufactured at Bhopal. Deficiencies in the management of UCIL were also identified. and some of the coolant was being used elsewhere.Keshub Mahindra. vice president. There was only one manual back-up system. there was large-scale storage of MIC before processing. according to investigations in the aftermath of the disaster discovered that the maximum pressure it could handle was only one quarter of that which was present in the accident. 8. To reduce energy costs. production assistant of UCIL held guilty for the disaster after 26 years of tragedy. intended to clean the pipes. 4. 5. Vijay Gokhale. The steam boiler. 3. there was under-dimensioning of the safety features. The gas scrubber therefore did not treat escaping gases with sodium hydroxide (caustic soda).

the average sum paid out was Rs 62. In court. It took permission from the government to clean up the site and carried out the work under the direction of state and central government authorities. and treats the condition with a combination of Western and traditional Indian medicines. The build-up in temperature and pressure is believed to have affected the magnitude of the gas release. more money spent on treatment. 4. for a period of 8 years of free treatment. Effects of interim relief were more children from the affected area are sent to school. Other tanks had been used for that week. 2. 5. SOLUTIONS IMPLEMENTED OVER THE YEARS 1. Water sprays designed to "knock down" gas leaks were poorly designed set to 13 meters and below. However the amount of the pension rate is paltry and should thus be revised. even though they corrode when exposed to acid. UCC admitted in their own investigation report that most of the safety systems were not functioning on the night of December 3. The pipe was not repaired because it was believed it would take too much time and be too expensive. The MIC tank had been malfunctioning for roughly a week. 3. the US government paid an average of $1.A clinic established by a group of survivors and activists known as Sambhavna established in 1995. From 1990 interim relief of a mere Rs 200 was paid to everyone in the family who was born before the disaster. or the subsequent water poisoning. The final compensation (including interim relief) for personal injury was for the majority Rs 25. 11. Having adopted some measures to control the disaster. The average compensation works out to Rs 12. 7. One-time ex-gratia payment of Rs 1.410 per victim at the 1989 value of the rupee. Their installation had been omitted from the cleaning checklist. 26 | P a g e . 6.500 to families with monthly income Rs 500 or less was decided.8 million per victim of 9/11. Compared to this. Each claimant was to be categorized by a doctor.Slip-blind plates that would have prevented water from pipes being cleaned from leaking into the MIC tanks through faulty valves were not installed. UCC initiated an effort to identify the cause. the claimants were expected to prove "beyond reasonable doubt" that death or injury in each case was attributable to exposure. a leaking carbon steel valve was found. more money spent on food. 10.000 (US$ 830). allowing water to enter the MIC tanks. 1984. For death claim.000. rather than repairing the broken one. In 1992. Carbon steel valves were used at the factory. Sambhavna is the only clinic that will treat anybody affected by the gas. 13. which was left to "stew". Widow pension of the rate of Rs 200/per month (later Rs 750) was provided in the year 1990. 44 percent of the claimants still had to be medically examined. and they could not spray high enough to reduce the concentration of escaping gas. improvement of housing condition. On the night of the disaster. 12.

rehabilitation and other measures. It was obliged to give free care for survivors for eight years. 11. but these have not been entertained by the US. Rs 5 lakh to those who suffered permanent disability. Habitation rehabilitation: 2. chaired by Prime Minister Manmohan Singh.56 crore. The ex-gratia would benefit 45. In 1999.and four-story buildings were constructed in the "Widows colony" outside Bhopal. Soni said. It was not possible to keep cattle. Rs two lakh each to people who suffered cancer and total renal failure and Rs one lakh to those with temporary disability. India had made requests for Anderson's extradition (To give up the legal jurisdiction of a fugitive to another government) earlier. she said. taking the total spending to Rs 1265. Occupation rehabilitation: It is estimated that 50. Compensation from Union Carbide a) The Government of India passed the Bhopal Gas Leak Disaster Act that gave the government rights to represent all victims in or outside India. which considered the report of the Group of Ministers on the 1984 disaster. 9. c) When UCC wanted to sell its shares in UCIL. it was directed by the Supreme Court to finance a 500-bed hospital for the medical care of the survivors. The water did not reach the upper floors. However On 24 June.000 persons need alternative jobs. 10. The government also announced various packages for remediation. decided that ex-gratia of Rs 10 lakh would be given to the kin of each killed in the tragedy.000 affected people and the amount would be paid afteradjusting the compensation already paid. b) UCC offered US$ 350 million. plus interest) in a full and final settlement of its civil and criminal liability. Bhopal Memorial Hospital and Research Centre (BMHRC) was inaugurated in 1998. 27 | P a g e .486 flats in two. The Union Cabinet. the insurance sum. and that less than 100 gas victims have found regular employment under the government's scheme. The Cabinet meeting. accepted all its 22 recommendations. etc. However the facilities provided to them are very poor. was missing in the area for at least a decade.8. the last being in 2008.3 billion from UCC. a settlement was reached under which UCC agreed to pay US$470 million (the insurance sum. schools. 2010 Group of Ministers for Bhopal Gas tragedy case announced a Rs1265cr package. The Government of India claimed US$ 3. The Cabinet decided that additional material in support of the request for extradition of Anderson may be put together by concerned agencies and the External Affairs Ministry would thereafter press the request for extradition with the US government. Infrastructure like buses.

As a result of the massive fraud at Enron. Andrew Fastow. Enron was forced to file for bankruptcy in December 2001. Enron s former finance chief. Founder. an energy company based in Houston. former President.enron. Chairman and CEO of Enron International Stephen F. testified that 28 | P a g e . United States Kenneth Lay. Enron s accounting firm and certain bank officials were indicted. Interim CEO and CRO John J. As a result. Texas. Many Enron executives. III. CEO and COO Andrew Fastow. and the investigation into the extent of the fraud committed by Enron is still ongoing.Enron Fraud:Enron Corporation Type Defunct / Asset-less Shell Headquarters Houston. Ray. shareholders lost tens of billions of dollars. Chairman $101 billion (in 2000) http://www. Key people Revenue Website It was one of the largest securities fraud scandals in history. Texas. former Vice Chairman. former Chairman and CEO Jeffrey Skilling. former CFO Rebecca Mark-Jusbasche.

Jeffrey Skilling. The combination of these issues later led to the bankruptcy of the company. It was formed in 1985 when Houston Natural Gas merged with Inter North. Lay served as the chairman of the company in its last few years. Causes of downfall:Enron's nontransparent financial statements did not clearly detail its operations and finances with shareholders and analysts. Texas that deals with the energy trade on an international and domestic basis. deceptive deals done solely to create the false appearance of profits and cash flow. ". and illegal loans.. Skilling. when classified as 29 | P a g e . After several years of international and domestic expansion involving complicated deals and contracts. Prosecutors accused Lay of pocketing over 40 million of investors' money. Service providers. complex financing structures. and liabilities off the books. and processing facilities. Revenue recognition Enron and other energy merchants earned profits by providing services such as wholesale trading and risk management in addition to developing electric power plants. Andrew Fastow. Fastow and other executives. an "agent" provides a service to the customer. and approved of the actions of Skilling and Fastow although he did not always inquire about the details. asset values inflated. and the majority of them were perpetuated by the indirect knowledge or direct actions of Lay. History of Enron Enron is an energy company based in Houston. From late 1997 until its collapse. natural gas pipelines.many of the banks transactions were contrived.[16] When taking on the risk of buying and selling products. All of this debt was concealed from shareholders through partnerships with other companies.. and deals so bewildering that few people can understand them even now. pushed for the use of mark-to-market accounting and pressured Enron executives to find new ways to hide its debt. the founder of Enron whose spectacular implosion in 2001 lead to one of the biggest fraud cases in history. was convicted of fraud for duping investors over the health of Enron s finances before it plummeted into bankruptcy. and other executives. merchants are allowed to report the selling price as revenues and the products' costs as cost of goods sold. fraudulent accounting. constantly focused on meeting Wall Street expectations. In contrast. Enron was billions of dollars into debt. and Lay was charged with 11 counts of securities fraud.created off-balance-sheet vehicles. the primary motivations for Enron s accounting and financial transactions seem to have been to keep reported income and reported cash flow up. storage. Kenneth Lay. but does not take on the same risks as merchants for buying and selling.

"If you accelerate your income. As one Enron competitor pointed out. even though analysts questioned the technical viability and market demand of the service. While using the method. Enron instead elected to report the entire value of each of its trades as revenue. Enron later expanded its use to other areas in the company to help it meet Wall Street projections. Other energy companies such as Duke Energy. income was estimated as the present value of net future cash flows.S. However. even though the deal resulted in a loss 30 | P a g e .. Securities and Exchange Commission (SEC) approved the accounting method for Enron in its trading of natural gas futures contracts on January 30. Reliant Energy.agents. are able to report trading and brokerage fees as revenue. citing that it would reflect ". the company listed actual costs of supplying the gas and actual revenues received from selling it. in future years. true economic value. the viability of these contracts and their related costs were difficult to judge. the profits could not be included. when Skilling joined the company. income from projects could be recorded. cities by year-end.S. so new and additional income had to be included from more projects to develop additional growth to appease investors. This "merchant model" approach was considered much more aggressive in the accounting interpretation than the agent model. he demanded that the trading businesses adopt mark-to-market accounting. For one contract. although not for the full value of the transaction Although trading firms such as Goldman Sachs and Merrill Lynch used the conservative "agent model" for reporting revenue (where only the trading or brokerage fee would be reported as revenue). the accounting had been fairly straightforward: in each time period. investors were typically given false or misleading reports. in July 2000." Enron became the first non-financial company to use the method to account for its complex long-term contracts. Enron and Blockbuster Video signed a 20-year agreement to introduce on-demand entertainment to various U. Due to the large discrepancies of attempting to match profits and cash.. When the network failed to work. After several pilot projects. which increased financial earnings. Mark-to-market accounting requires that once a long-term contract was signed. 1992. Often." Despite potential pitfalls. then you have to keep doing more and more deals to show the same or rising income. However. Enron recognized estimated profits of more than $110 million from the deal. Blockbuster pulled out of the contract. Mark-to-market accounting In Enron's original natural gas business. Enron continued to recognize future profits. and Dynegy joined Enron in the top 50 of the Fortune 500 mainly due to the revenue gained from their trading operations. the U. However. Enron's method of reporting inflated trading revenue was later adopted by other companies in the energy trading industry in an attempt to stay competitive with the company's large increase in revenue.

In 2000. a series of rules dictates whether a special purpose entity is a separate entity from the sponsor. Enron's balance sheet understated its liabilities and overstated its equity. including capitalizing on loopholes found in the accounting industry's standards. where the value of the entity was removed from the balance sheet at a loss. but funded by independent equity investors and debt financing. As a result of one violation. This setup prevented Enron from being protected from the downside risk. was accused of applying reckless standards in their audits because of a conflict of interest over the significant consulting fees generated by Enron. In total. These shell firms were created by a sponsor. and LJM. Whitewing. Andersen's auditors were pressured by Enron's management to defer recognizing the charges from the special purpose entities as their credit risks became clear. The special purpose entities were used for more than just circumventing accounting conventions. Generally Accepted Accounting Principles (GAAP). Arthur Andersen.Special purpose entities Enron used special purpose entities limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assets.[26] Notable examples of special purpose entities that Enron employed were JEDI and Chewco. 31 | P a g e . Financial audit Enron's auditor firm. The company elected to disclose minimal details on its use of special purpose entities. The accountants looked for new ways to save the company money. To pressure Andersen into meeting Enron's earnings expectations. One Enron accountant revealed "We tried to aggressively use the literature [GAAP] to our advantage. For financial reporting purposes. Since the entities would never return a profit. Enron disclosed to its shareholders that it had hedged downside risk in its own illiquid investments using special purpose entities. Enron hired numerous Certified Public Accountants (CPA) as well as accountants who had worked on developing accounting rules with the Financial Accounting Standards Board (FASB). by 2001. The auditors' methods were questioned as either being completed for conflicted incentives or a lack of expertise to adequately evaluate the financial complexities Enron employed. We got to where we did because we exploited that weakness. the investors were oblivious to the fact that the special purpose entities were actually using the company's own stock and financial guarantees to finance these hedges. However. Enron had used hundreds of special purpose entities to hide its debt. accounting guidelines required that Enron should take a write-off. All the rules create all these opportunities. Arthur Andersen earned $25 million in audit fees and $27 million in consulting fees (this amount accounted for roughly 27% of the audit fees of public clients for Arthur Andersen's Houston office). and its earnings were overstated.

and to the following assessment by the Powers Committee (appointed by Enron's board to look into the firm's accounting in October 2001): "The evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron's financial statements.Enron would occasionally allow accounting firms Ernst & Young or PricewaterhouseCoopers to complete accounting tasks to create the illusion of hiring a new firm to replace Andersen. or its obligation to bring to the attention of Enron's Board (or the Audit and Compliance Committee) concerns about Enron s internal contracts over the related-party transactions . Andersen's Houston office. was able to overrule any critical reviews of Enron's accounting decisions by Andersen's Chicago partner. In one case. which performed the Enron audit. In addition. they failed to prevent conflict of interest. 32 | P a g e . Andersen attempted to cover up any negligence in its audit by shredding several tons of supporting documents and deleting nearly 30.[55] Although Andersen was equipped with internal controls to protect against conflicted incentives of local partners. Revelations concerning Andersen's overall performance led to the break-up of the firm.000 e-mails and computer files. when news of SEC investigations of Enron were made public.

ethical issues are often more complicated than those faced in personal life and effective decision making requires consistency. dishonest or socially harmful activities and do not believe in fair play and excellence. and ethnic prejudice. organizations. healthy. there are people who indulge into unfair. the development of programs to foster ethical conduct must maintain a focus on fairness. pressures for regulation and enactment of legislation to protect the interests of all parties in the exchange process will likely occur. At that point. sometimes self-regulation proves insufficient to protect the interest of customers. unjust. Because each business situation is different. but this alone cannot be the motivation for ethical culture building. However. Business has created the wealth that has given unprecedented numbers of individual s financial control of their lives. rational and exciting world.CONCLUSION Whenever and wherever there are meaningful discussions to create better socio-economic conditions in the society or to make the world a better place to live in. sexual. However. Maintaining a strong ethical culture is essential for complying with the laws and regulations. and not all decisions are simple. It has expanded immeasurably the range of goods and services available to individuals. religious. many organizations have embraced ethical codes of conduct and rules of professional ethics to guide managers and employees. encouragement. Beyond the large impact an organization s culture has on the bottom line. Because business decisions often require specialized knowledge. business has been a prime mover in making it possible for millions to pursue their lives in a wealthy. and communication at all 33 | P a g e . Those who run their business or industry on principles of honesty. the discussions invariably touch Business and Industry or Trade and Commerce also besides other areas of human activities. And it has been the vehicle for countless numbers of individuals to develop their fullest potentials in achieving their dreams. It has broken down countless centuries-old barriers of racial. integrity and justice are the ones who raise the prestige of their nation and are inspiring examples unto others. or society. In short.

employee levels. The attitudes. employees must be given the appropriate tools and models to align their behavior with company culture and engage in ethical decision-making. ~ Will Rogers 34 | P a g e . and actions of business leaders play a primary role in the creation of an organization s ethical culture and climate. A business or society that lacks ethical principles is bound to fail sooner or later. Live in such a way that you would not be ashamed to sell your parrot to the town gossip. A leader s ability to consistently promote ethical conduct in an organization is critical to ensuring that employees understand how to make doing what is right a priority. choices. Thus it can be concluded that. expectations for employees ethical behavior can only be set as high as the organization s leadership is willing to meet. Along these lines. Ethics are important not only in business but in all aspects of life because it is an essential part of the foundation on which of a civilized society is build.

com/what-is-business-ethics. Bowie & Patricia H.htm 5. Business Ethics and Global Values By: S.K.REFERENCES Books Economic Times: The Bhopal Gas Tragedy Dated: July 8. 2010 3.htm 35 | P a g e .K. Management Ethics By: Norman E. 2010 Internet Websites: 3. A. Globalisation and Business Ethics By: Karl Homann 3. Werhane Newspaper Articles 1. 2010 2. web-miner. Bhatia 2. trade. www.pdf en. management. Business Ethics By: Dr. Economic Times: Companies take On Role Of Counselors Dated: July 21.htm 7. Gavai 4. www. Times of India: Will The Guys Stop Playing At Work Dated: July 22.

org/ 36 | P a g e .edu/staff/jfieser/vita/research/Busbook.8. managementhelp.utm. 9.htm 10.

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