ETHICS • Values: guiding constructs or ideas, representing deeply held generalized behaviors, which are considered by the holder

, to be of great significance. • Morals: a system or set of beliefs or principles, based on values, which constitute an individual or group’s perception of human duty, and therefore which act as an influence or control over their behavior. Morals are typically concerned with behaviors that have potentially serious consequences or profound impacts. The word “morals” is derived from the Latin mores (character, custom or habit) • Ethics: the study and assessment of morals. The word "ethics" is derived from the Greek word, ethos (character or custom). Morality “The most important human endeavor is the striving for morality in our actions. Our inner balance and even our very existence depend on it. Only morality in our actions can give beauty and dignity to life. Absolutism vs. Relativism • Ethical Absolutism: What is right or wrong is consistent in all places or circumstances. There are universally valid moral principles. (“… only by obedience to universal moral norms does man find full confirmation of his personal uniqueness and the possibility of authentic moral growth.” - Pope John Paul II • Ethical Relativism (also called “Situational Ethics”): What is right or wrong varies according to the individual/society/culture or set of circumstances. There are no universally valid moral principles. OVERVIEW OF ETHICS VALUE SYSTEM Ethics correspond to basic human needs , Values create credibility with the public ,Values give the management credibility with its employees ,Values help in better decision making ,Ethics and profit go together ,Law cannot protect the society & ethics . ETHICS & SOCIAL RESPONSIBILITY What are ETHICS ?? “ It’s the study of who is and should be benefited/ harmed by an action, is called ethics.” • Ethics deals with both conflict & opportunity in human relationship. ( right & wrong) • It is also the study of people’s rights & duties, the moral rules that people apply in making decisions and nature of the relationships among people. • Ethics provide the glue that holds our relationships and the larger society, together. Ethical questions fall under one or more of following levels: Level 1: Society Level 2: Stake holders Level 3: Internal policy Level 4: Individual • Individual level: personal level interactions, obligations and rights as human beings • Internal policy: ethics in practices of organization w.r.t. employment, rights of employees, etc. • Stake holders: suppliers, creditors, customers, etc. • Society: External agencies, social institutions, etc.

Tools of Ethics:

• Change: sharing profits of business with the society. etc. needy/ backward section of society. Social Responsibility & Ethics: Social responsibility of corporates: what an organization does to influence the society in which it exists. corporations recognized a responsibility towards society • Answerable to Employees. nations) Respect for persons (regard other people as an end in themselves) Respect for property ( obtain consent of owners before using their property.. Rights & Duties : Right:. such as through volunteer assistance programmes.entitlement for an action Duty: other person’s duty or obligation on the other person Moral Rules : To solve disagreements. LEADERSHIP & ETHICS 2 . etc. donating for cause. Ethics committees. Concept of CSR • Originated in 1950s in USA & came into public debate during 1960s & 1970s • During 1980s to 2000. Suppliers.malevolence (prevent violent conflicts) Mutual aid (among people. Ethics training programmes. Communities & Society. exploitation of employees. Customers. Ethics in business • Ethical Audits. etc. Aspect of moral life. scholarships.Awareness of social responsibility & response to it. etc. following rules of Govt.. following principle of charity.• • • • Values : Corporate values: quality services.relationships are imp.interest of the organizations to be socially responsible • Corporate social responsiveness:. Common Morality Morality is body of rules governing the ordinary ethical problems Promise keeping Non.s SOCIAL RESPONSIBILITY • Change in corrupt practices. unethical practices.these relationships reflect our have ethical policies in business • Groups to whom corporate ethics codes apply?? * Employees & their families * Local communities * Suppliers * Share holders * Country Govt. charitable assistance. become internalized as values Human Relationships : Exchange of mutual support & accomplishment of goals through relationships. judicial boards. employee development. imbalance of nature. social undertaking (Stewardship principle) • Self. * Foreign Govt. societies. :.

Ethics includes … • Responsibility • Putting things in right order • Accountability • Empathy • Courage • Imagination • Balanced priorities • Some triggers of Unethical behavior Poor Leadership  Work hours. work load  Lack of management support  Little or no recognition  Company politics  Poor internal communications  Excessive task orientation Principles of Ethics • Self interests • Personal virtues • Religious / Community affinity • Governmental / Legal needs • Societal benefits • Universal rules • Individual rights • Economic efficiency • Distributive justice 3 .

and feel good about myself. I don’t need the acceptance of other people to feel important. PERSPECTIVE: 4 . look straight in the eye. especially when it seems inconvenient to do so. I don’t need everything to happen right now. I let my conscience be my guide. A balanced self-esteem keeps my ego and my desire to be accepted from influencing my decisions. My behaviour is consistent with my intentions.• Contributive liberty The Ethics Check IS IT LEGAL Will I be violating either any law of the country or policy of the company? IS IT BALANCED Is it fair to all concerned in the short and long term? Does it promote win-win relationships? HOW WILL IT MAKE ME FEEL ABOUT MYSELF Will it make me proud? Would I feel good if my decision was published in the newspaper? Would I feel good if my family knew about it? Cost of being unethical in business Five P’s of Ethical Power PURPOSE: I see myself as being an ethically sound person. No matter what happens. PATIENCE: I believe that things will eventually work out well. I am always able to face the mirror. PRIDE: I feel good about myself. I am at peace with what comes my way! PERSISTENCE: I stick to my purpose.

” “Attention to ethics in the workplace sensitizes managers and staff to how they should act so that they retain a strong moral compass. making evaluative assessment about them as moral or immoral • To establish moral standards and norms of behavior • To make judgement upon human behavior based on these standards/norms. train your employees Encourage open communication Be consistent BUSINESS ETHICS Carter McNamara has defined: “Business ethics is generally coming to know what is right and wrong in the workplace and doing what is right-this is in regard to efforts of products/ services and in relationships with stakeholders. • To study human behavior. • Interest in business ethics has been increasing since 1960’s • Interest has been spurred by headlines of business scandals • A 1982 study reported that of the Fortune 500 companies. • To prescribe moral behavior and making recommendations about how to behave or vice versa To express an opinion or attitude about human conduct in general.e: deal with complex problems like psychological. by your actions and by your values Assume the responsibility for instilling ethical behaviour Determine what you consider to be ethical practice Articulate your values. political in nature. Global Ethical Issues • Wages and hours • Child labour • Discrimination • Legal and ethical business practices • Product safety and quality Environment Culture & Ethics FACTORS THAT AFFECT ETHICAL BEHAVIOUR 5 .       I take time to enter each day quietly in a mood of self-reflection. morals and values. Creating an Ethical Organisation Make the decision to commit yourself to ethics Recognise that you are a role model by definition. Objectives of Ethics • To define the highest good of man and set a standard for the same.115 companies (23%) had been convicted of at least one major crime or paid penalties of serious misbehavior • Is the importance of business ethics declining in business and government practices? • Greater focus on ethics.This helps me to get myself focused and allows me to listen to my inner self and to see things more clearly. i. commercial. legal.

What causes unethical behavior • Stress • Confusion • Pressure to perform at expected levels • Competition within the industry • No knowledge Some of the Unethical Business practices are :  Cutting corners on quality  Covering up incidents  Abusing or lying  Lying customers  Stealing from the company  Taking credits from co-workers ideas/work  Taking or giving bribe  Government corruption  Financial scandals  Product safety  discrimination  Sexual harassment  Firing an employee for whistle blowing  Divulging confidential information 6 .

Otherwise there is no sense of social responsibility or accountability in our pleasurable activities. in terms of reputation and in terms of wounding the hearts and minds of other people who are adversely affected by those who just want to indulge and gratify themselves in the short term. Yet all too often in the academic world. even more dangerous is much knowledge without a strong. to be considerate.Mahatma Gandhi said that 7 things will destroy us 1. and enjoying all the perks of citizenship of country and membership of corporation without assuming any of the risk or responsibility.manipulating markets and assets so you don't have to work or produce added value. Pleasure Without Conscience  The chief query of the immature. to live selflessly. just manipulate people and things. Conscience is essentially the repository of timeless truths and principles . and priorities and debunking the high degree of specialization. 4. values. Adam Smith explained how foundational to the success of our systems is the moral foundation : how we treat each other. Knowledge Without Character  As dangerous as a little knowledge is. To learn to give and take. benefiting from free government programs without carrying a fair share of the financial burdens. which preceded Wealth of Nations. and partisan politics. the 7 . the most advanced and mature state. is our challenge.  How many of the fraudulent schemes that went on in the 1980s. principled character. Today there are professions built around making wealth without's only a middle position on the way to interdependence. You get distorted notions.  Justice and judgement are inevitably inseparable. "You don't even have to work for it"? That is why I would be very concerned if one of my children went into speculative enterprises or if they learned how to make a lot of money fast without having to pay the price by adding value on a day-to-day basis. Wealth Without Work  This refers to the practice of getting something for nothing .  The ultimate costs of pleasures without conscience are high as measured in terms of time and money. suggesting that to the degree you move away from the laws of nature. making much money without paying taxes. It's dangerous to be pulled or lulled away from natural law without conscience. Purely intellectual development without commensurate internal character development makes as much sense as putting a high-powered sports car in the hands of a teenager who is high on drugs. were basically get-rich-quick schemes or speculations promising practitioners.the internal monitor of natural law. departmentalization.  The people who are transforming education today are doing it by building consensus around a common set of principles. even abandoning or utterly neglecting spouses and children in the name of doing their thing. and sensuous has always been. You move away from the law of "the farm" into social / political environments 2. 3. Commerce (Business) Without Morality (Ethics)  In his book Moral Sentiment. You start telling rational lies to explain why things work or why they don't. But independence is not the most mature state of being . selfish. "What's in it for me? Will this please me? Will it ease me?" Lately many people seem to want these pleasures without conscience or sense of responsibility. to be sensitive. greedy. your judgement will be adversely affected. that's exactly what we do by not focusing on the character development of young people. often called the decade of greed.

rob and plunder might sound very much like many corporate mission statements. of service. CORPORATE SOCIAL RESPONSIBILITY 8 . Our economic system comes out of a constitutional democracy where minority rights are to be attended to as well. we go for the social facade of religion and the piety of religious practices. We may see an evolution. and they have brought about a scientific and technological explosion in the world. using such words as "teamwork. To Adam Smith. the professed mission and shared values of criminals who rape. every business transaction is a moral challenge to see that both parties come out fairly. among other things." "loyalty. "Is it fair and does it serve the interests of all the stakeholders?" That's just a moral sense of stewardship toward all of the stakeholders. Science and technology have changed the face of most everything else. Politics Without Principle But if you get a sick social will behind the political will that is independent of principle. inside many corporations with lofty mission statements. If a church or religion is seen as just another hierarchical system. Instead they will be into outward observances and all the visible accoutrements of religion. of contribution." "profitability.the sacrifice of our own pride and prejudice. Fairness and benevolence in business are the underpinnings of the free enterprise system called capitalism." "cooperation. Religion Without Sacrifice Without sacrifice we may become active in a church but remain inactive in its gospel. you could have a very sick organization or society with distorted values. All the old inequities and injustices are still with us. And if there is no social will behind the principles of due process. About the only thing that hasn't evolved are these natural laws and principles . Or they are being robbed of self-esteem. if not immoral.   6. many people are being mugged in broad daylight in front of witnesses. and if you can't get due process. an occasional "revolution" in science." "innovation. of mutual benefit. If we ignore the moral foundation and allow economic systems to operate without moral foundation and without continued education. But the fundamental things still apply.the true north on the compass. of fairness for all concerned. There is no real walking with people or going the second mile or trying to deal with our social problems that may eventually undo our economic system. It takes sacrifice to serve the needs of other people ." The problem is that their value system is not based on a natural law. we will soon create an amoral. but without humanity we see precious little real human advancement. Figuratively. The spirit of the Golden Rule or of win-win is a spirit of morality. Science Without Humanity The majority of the scientists who ever lived or living today.   7. But they are neither God-centered nor principle-centered. Economic and political systems are ultimately based on a moral foundation.   spirit of benevolence. its members won't have a sense of service or inner workship." and "creativity. But if all they do is superimpose technology on the same old problems. In other words. as time goes by. 5. For instance. nothing basic changes. or position without due process. Paraphrasing one of the mottos of the Rotary Club. money. you have to go to the jury of your peers and engage in counterculture sabotage. society and business.

of course.k.  Corporate Citizenship: As receptacles of vast wealth and power. the law holds directors and officers to a high standard of care in performing these fiduciary duties. “most”) profits. which:  9 . without regard to any underlying concept of duty or morality. and the communities in which the corporation does business.  Profit Maximization: Corporate directors and officers have a paramount duty to act in the shareholders’ best interest. OUTCOME  Duty-Based Ethics: Ethics based upon an underlying concept of duty regardless of the consequences of action taken or foresworn in keeping with duty. certain guides are available to businesses trying to meet or exceed the moral minimum (i.e.  Ethical Behavior: Even where a contemplated action is clearly legal (or. retirees.  Categorical Imperative: In deciding whether an action is ethical. one should consider what effect her actions would have on the fundamental rights of others. Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977.  public opinion and sentiment. where probability. will guide the decisionmakers.  Stakeholder Theory: Corporations must also consider the effects of their actions and policies on their employees. “best”) profits.. many decisions faced by businesses fall within one or more “gray areas” of the law. creditors. rather than maximum (i.S.  Utilitarianism dictates that a decision to act or not act should be directed to producing the greatest good for the greatest number of people.”  While personal ethics are (or can be) subjective.  Applying utilitarianism (or any outcome-based ethical rule) requires a cost-benefit analysis of the negative and positive effects of the proposed act or omission on the individuals who are likely to be affected by it. one should consider what the effect would be if everyone similarly situated acted in the same way.  For businesses operating in more than one place. One compromise may be to pursue optimal (i. personal morality.e. the minimally acceptable standard for ethical business behavior): corporate and professional codes of ethics and compliance programs.  Outcome-Based Ethics (a. Because of the special relationship between the directors and officers of a corporation and its shareholders.. ETHICAL  Legal Behavior: While certain actions are clearly legal or illegal. customers.Corporate Social Responsibility: The concept that corporations can and should act ethically and be accountable to society for their actions. FOREIGN CORRUPT PRACTICES ACT  In response to numerous scandals involving U. illegal). corporations should act to further societal interests at the expense of the corporation’s own profit interest. and. rather than certainty. LEGAL VS. in some circumstances. DUTY VS.e. Duty-based ethics generally arise from religious belief or philosophical reasoning.a..  Principle of Rights: In deciding whether an action is ethical. the moral minimum may vary from place to place – particularly when businesses operate abroad. suppliers. business decisionmakers should also consider whether the action is “ethical. “situational ethics”): Ethics based upon the consequences of action taken or foresworn. companies paying bribes to foreign government officials in order to gain strategic concessions.

or avoid completely conflicts of interest . (2) requires U. (3) prohibits anyone from making false statements or false entries in said records. Fairness : Protect Shareholders rights . Purpose of corporate governance is to have a demonstrable IMPACT on a corporation’s FINANCIAL PERFORMANCE.e. free from the influence of others. Transparency : Ensure timely. shareholder.Provide effective redress for violations. Independence : Procedures and structures are in place so as to minimise.(1) prohibits any U. performance.S. ownership and corporate governance. the Securities and Exchange Board of India (SEBI) set up a committee under Kumar Mangalam Birla to design a mandatory-cum-recommendatory code for listed companies The Birla Committee Report was approved by SEBI in December 2000 • Became mandatory for listed companies through the listing agreement. 10 . Independent Directors and Advisers i. officer.Ensure that the Board is accountable to shareholders. companies to keep detailed accounting records that “accurately and fairly” reflect all foreign activities. “Corporate Governance is the application of best management practices. and implemented according to a rollout plan • 2000-01: All Group A companies of the BSE or those in the Nifty index… 80% of market cap. Compliance of law in true spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders”. and (4) provides sanctions against both companies and individual agents who violate the FCPA. equitably . Principles of Corporate Governance • Rights and Equitable treatment of Shareholders • Role and Responsibility of the Board • Integrity and Ethical Behavior • Disclosure and Transparency • Following CII’s initiative. employee. director.Treat all shareholders including minorities. as long as such payments are legal in the foreign country. including the financial situation.S. or agent from bribing any foreign government official if the purpose of the payment is to get the official to act in her official capacity to provide business opportunities to the party offering the bribe. CORPORATE GOVERNANCE  Contemporary corporate governance started in 1992 with the Cadbury report in the UK  Cadbury was the result of several high profile company collapses  Cadbury report is concerned primarily with protecting weak and widely dispersed shareholders against self-interested Directors and managers Four Pillars of Corporate Governance  Accountability  Fairness  Transparency  Independence Accountability : Ensure that management is accountable to the Board . accurate disclosure on all material matters.  The FCPA does not prohibit bribery of minor officials whose acts are purely ministerial. company.

minutes of committee’s meeting. Information sharing with shareholders. manner and frequency of such disclosures. Securiities And Exchange Board of India(SEBI) had set up a committee under Shri Kumaramangalam Birla. the Board of Directors and the management as the three key constituents of CG. their roles & responsibilities & their rights in context of good CG.3 crore & above Composition of Board of Directors– optimum combination of executive & non-executive directors. Draft a code of corporate best practices Suggest safeguards to be instituted within the companies to deal with insider information. The report submitted by the committee is the first formal and comprehensive attempt to evolve a ‘CODE OF CORPORATE GOVERNANCE’ in the context of prevailing condition of governance in Indian Companies. The recommendations which are absolutely essential for CG can be enforced by classifying as ‘mandatory’. quarterly results. 2002-03: All companies with paid-up capital of Rs.Atleast 4 meetings of the Board in a year with maximum gap of 4 mnths between 2 meetings.250 million or more. namely mandatory and nonmandatory. It attempted to identify in respect of each of these constituents. a member of SEBI Board. to promote and raise the standards of good governance . responsibilities of independent & outside directors. Sale of whole or substantial part of the undertaking Further use of capital Venturing into new business 11 . The sole and primary objective of the committee was to view Corporate Governance from the perspective of the investors & shareholders and to prepare a ‘code’ to suit the Indian corporate environment. Committee’s terms of reference To improve the standards of CG in the listed companies. in areas such as continuous disclosure of material information. To review operational plans. MANDATORY RECOMMENDATIONS Applies to listed companies with paid up capital of Rs. Others which are either desirable or may. both financial & non-financial. MANDATORY & NON-MANDATORY RECOMMENDATIONS The committee divided recommendations into two broad categories. covering critical matters like alteration in memorandum etc. may for time being classified as non-mandatory.100 million or more or net worth of Rs.with 3 Independent Directors with one having Financial & Accounting Knowledge Board procedures. Audit committee.30 million or more Suggestions of the Kumaramangalam Birla Committee In the early 1999. capital budgets. The committee had identified the Shareholders. as well as the state of capital markets. for time being require change of laws. NON-MANDATORY RECOMMENDATIONS Role of Chairman Remuneration Committee of Board Shareholder’s right for receiving half yearly financial performance. director shall not be a member of more than 10 committees and shall not act as chairman of more than 5 committees across all Companies.• • • • • • • • • • • • • • • • • • • • • • • 2001-02: All companies with paid-up capital of Rs.

155 million and revenue of US 4. Therefore. For example. ISO 9001 certified company offering information technology consulting & software services. many companies. A company whose employees are well-schooled in ethics will easily be able to recognize its responsibilities as a good corporate citizen 12 . Punishments should be in proportion to the problem. Profitability. Net income of US 1.176 million. According to John Schermerhorn's "Management. But. It gives workers the knowledge they need to identify ethical dilemmas and ways to make morally responsible decisions. with very strong systems. have faced costly lawsuits alleging gender discrimination. and 48 percent report committing questionable acts in the recent past. the corporate governance ratings of the Software firms are higher than those of other Indian firms. is a publicly held. in 2008. At present having US 20. PSPD Model – Predictability of Revenues. If reports of unethical behavior go unchecked. Narayana Murthy’s Global Strategy : Narayana Murthy’s Global Strategy Global Delivery Model – Producing where it is most cost effective to produce & selling where it is most profitable to sell. French financial giant Societe Generale had to pay a $7 billion tab racked up by a single rouge trader. Sustainability of Revenues. simply because it is such a problematic issue in the business world. as well as common issues like harassment and discrimination. This means acting responsibly toward the communities it operates in. Ethics Training Ethics training is the foundation of an ethical corporate culture." 56 percent of American workers have felt pressure at work to act unethically. and companies must have a zero-tolerance policy toward those who have been found guilty of engaging in unethical behavior.• • Infosys Technologies: The Best among Indian Corporates As per the Credit Lyonnais Securities Analysis (CLSA). Ethics training should also address problems such as peer pressure in the workplace. FedEx and Morgan Stanley. based in Bangalore. E-Commerce & Internet Consulting. In another example. Infosys. Software Maintenance. Moving up the Value Chain – Getting involved in a software development project at the earliest stage of its life cycle. those that ignore or neglect ethics often wind up paying a very high price in terms of monetary damages and loss of good will. a corporation must work to build a morally responsible culture. Respected across the country. high ethical values & a nurturing working atmosphere. a company then must enforce its policies. in fact. Because ethical issues are so pervasive. including behemoths such as Wal-Mart. A company with an ethical culture should also be a good corporate citizen. but repeat offenders may need to be let go. The software offered include application development. human resources must investigate all claims vigorously.4 billion market capitalisation. Ethics in Corporate Culture Ethical Problems Ethics must be a part of a corporation's culture. from making sure its business does not harm the environment to sponsoring charitable programs like health clinics and after-school services. like earning profits and gaining market share. Consequences Companies may think they have more pressing issues to deal with. Corporate Citizenship Ethical operations go hand in hand with giving back. employees will soon get the message that the company is only paying lip service to the concept of ethics. De-risking. Enforcement After providing workers with ethics training.

e Management committee or Board of trustees • The advancing process of globalization has been accompanied by deepening divisions & conflicts – both between and within societies.e by COOPERATION. These resources being a gift of nature should be made available and free to everyone irrespective of status in life • Doctrine of Gandhian trusteeship calls for protecting the resources for the enjoyment of general public rather than to permit their use for private ownership or commercial purpose • Though Gandhiji had state ownership of land and other means of production. in his opinion. water. PEACE & HARMONY. Gandhiji provides a peaceful alternative to state ownership and expropriation. there is no room for private property as he emphasized concept of “NON POSSESSION” • His ideology stressed on considering a sin to amass wealth and consequently there should be no famine or starvation. • Trusteeship alone provides a practical soln for the abolition of conflict over natural resources.interpersonal & inter-group i.TRUSTEESHIP MGT • Membership based organizations and charities are usually controlled by a governing body i. • Situation has aggravated recently over natural resources crisis. • The conflict over competing claims have given rise to resistance in many forms • Its appropriate to revitalize the Gandhian ideology of the trusteeship system • Trusteeship visualized as a means of bringing about a change and eliminating class conflict from the social horizon • Certain sources like land. 13 . • His theory aims at solving conflicts in its two forms. • In the trusteeship system. forests have such a great importance that it cannot be subjected to private ownership.