Business Ethics and Corporate Governance

Dr Nandini Desai
 Course Objectives:

• a. Knowledge :
• 1. To enable students to have knowledge of Business Ethics, Corporate
Governance and Social Responsibility
• 2. To understand different theory of Corporate Governance and evaluate
the Governance from the stakeholder’s perspective.
• b. Skills :
• 1. To diligently understand the effect of good governance and apply to
the operations of the organization
• 2. To achieve level of Behavioral Competencies whereby be able to
accept and embrace the logic of good Ethics and good Governance and
apply that in the organization.
Course Outcome:
• 1. Be able to assess existing Ethical Practices and Corporate
Governance.
• 2. Be able to understand the problem arising out of separation and
ownership of the corporate.
• 3. Be able to rectify conflicting interests of various stakeholders.
• 4. Be able to understand the concept of social responsibility in
philanthropically and statutory requirement and implement in the
organization.
Books
• 1. Business Ethics and Corporate Governance Fernando A. C.
Pearson
• 2. Corporate Governance Malin Christine Oxford
• 3. Business Ethics Velasquez M. G. PHI
• 4. Corporate Governance IICA TAXMANN
Module No .1
• Introduction to Ethics:
• Principles of personal, professional and business ethics.
• Importance of Business Ethics, Ethical dilemmas in management.
• Code of conduct and ethics for Indian Managers.
• Ethics in Marketing and Advertisement, Financial Ethics. Ethics in IT.
• Whistle Blower Protection .Act
Module No . 2
• Ethics in Insurance Companies:
• Unethical practices and control of IRDA.
• Corporate Social Responsibility.
• CSR Provisions of Companies Act 2013.
Module No . 3
• Concept of Corporations. Different stakeholders, Ownership structures.
• Theoretical basis of Corporate Governance.
• Corporate Governance: Historical Perspective Global Corporate
Governance
• Models – Anglo-American Model, German Model, Japan Model and
Indian Model for Private Sectors and PSUs
Module No . 4
• OECD and other reports of various committees in US, UK and India.
• CII and SEBI initiatives.
• Board of Directors – Duties and responsibilities, Types of Directors,
• Remuneration Committee, Audit Committee, Separation of CEO from
Chairman Position
Module No . 5
• Corporate Disclosures – Role of SEBI.
• Role of Government and regulators.
• Role of IRDA in Insurance Industries.
• Role of Institutional Investors.
• Corporate misconduct and mis-governance – Reasons, Factors
responsible for mis-governance.
• Corporate Governance ratings.
Module No .1
• Introduction to Ethics:
• Principles of personal, professional and business ethics.
• Importance of Business Ethics, Ethical dilemmas in management.
• Code of conduct and ethics for Indian Managers.
• Ethics in Marketing and Advertisement, Financial Ethics. Ethics in IT.
• Whistle Blower Protection Act
Beliefs- Moral standards- Values- Attitude- behavior
SLOKA from RIGVEDA
A businessman should benefit from business like a honey- bee which
sucks honey from the flower without affecting its charm and beauty
 Introduction to Ethics:

Ethics is about how we meet the challenge of doing the right thing when that will
cost more than we want to pay.

The Josephson Institute of Ethic

Business ethics is the study of appropriate business policies and
practices . regarding potentially controversial subjects
including corporate governance, insider trading, bribery,
discrimination, corporate social responsibility, and fiduciary
responsibilities
Corporate Governance
• What Is Corporate Governance?
• Corporate governance is the system of rules, practices, and
processes by which a firm is directed and controlled. Corporate
governance essentially involves balancing the interests of a
company's many stakeholders, such as shareholders, senior
management executives, customers, suppliers, financiers, the
government, and the community.
Corporate Governance
• Corporate Governance also provides the framework for
attaining a company's objectives, it encompasses practically
every sphere of management, from action plans and internal
controls to performance measurement and
corporate disclosure.
 Importance of Business Ethics

• 1. Long-term growth: sustainability comes from an ethical long-term

vision which takes into account all stakeholders. Smaller but
sustainable profits long-term must be better than higher but riskier
short-lived profits.
• 2. Cost and risk reduction: companies which recognize the
importance of business ethics will need to spend less protecting
themselves from internal and external behavioral risks, especially when
supported by sound governance systems and independent research
• 3. Anti-capitalist sentiment: the financial crisis marked another blow
for the credibility of capitalism, with resentment towards bank bailouts at
the cost of fundamental rights such as education and healthcare.
• 4. Limited resources: the planet has finite resources but a growing
population; without ethics, those resources are replete for purely
individual gain at huge cost both to current and future generations.
Types of Ethics
Transactional ethics
• Transactional ethics is the honest behavior you portray when you
speak to your customers or clients when you indulge in any
materialistic transaction.
A. Its simple not fooling people for your business benefits.
B. living on the grounds of equal importance to the customers and
revealing the facts.
 Aim of Ford Foundation :
To reduce poverty and injustice, strengthen democratic values,
promote international cooperation, and advance human
achievement
Recognition Ethics
Categories of Ethics (Personal, Professional, Business
Ethics )
Ethical Dilemmas
• Shweta covered a distance of 10 km in one hour.
• Akash covered the same distance in one and a half hours.
• Which of the two is faster and healthier??
• What if we say that Shweta covered this distance on a prepared track while
Akash did it by walking on a sandy path???
• Then our answer will be Akash.
• But when we come to know that Shweta is 50 years old while Akash is 25 years
old??
• Then our answer will be Shweta again.
• But we also come to know that Akash's weight is 140 kg while Shweta's weight
is 65 kg.
• Again our answer will be Akash
• As we learn more about Akash and Shweta, our opinions and judgments about
who is better will change.The reality of life is also similar. We form opinions very
 Ethical Dilemma

• Ethical dilemma: is a situation with

uncertainty about what is right to do from a moral or ethical
perspective.
• For example, the manager of a company may be put in a
position in which he must choose between the interests of
his employees and his investors.
• Give more profits or increase the salary?
Ethical Dilemma Defined

• Example 2 :
• A new technology is being launched which is good for the company
as well as the customers. But, if this is brought into use, a lesser
man-power is required for the organization.
• The entrepreneur is now in an ethical dilemma whether he wants
to better his clients with good services or be loyal to his employees
who have helped the company grow.
• The unpleasantness of the situation arises when neither the clients
nor the employees deserve to suffer and it is the entrepreneur’s
call to take.
Making Ethical Decisions

• Making good ethical decisions to solve Ethical Dilemma

requires a trained sensitivity to ethical issues and a
practiced method for exploring the ethical aspects of a
decision.
• Having a method for ethical decision making is
absolutely essential.
• Ethical decision should be based on ethical principles
and codes rather than on emotions, thoughts, fixed
policies.
The Framework Overview
• Step One: Describe the problem
• Step Two: Determine whether there is an ethical issue or
an ethical dilemma
• Step Three: Identify and rank the key values and
principles
• Step Four: Gather your information
• Step Five: Review any applicable Code of Ethics
• Step Six: Determine the options
• Step Seven: Select a course of action
• Step Eight: Put your plan into action.
• Step Nine: Evaluate the results.
Step One: Describe the Problem

• You must first describe the problem and ensure that it’s actually a
moral dilemma that needs to follow an ethical model.
• Consider the nature of the problem and any signs of the problem and
ensure that you’re attempting to solve the issue and not just it’s signs
• Circumstances affect the problem definition (for whom does the
problem exist? What is the surroundings?)
Step Three: Identify and Rank the Key Values and
Principles
• What reasons can you provide for prioritizing one competing value
over another?
• Understand that a decision to a dilemma which goes against an
individual’s personal set of values has very little chance of success.
Step Four: Gather Your Information

• Do you have all the known facts?

• Do you understand the applicable laws or legalities?
• Do you have all relevant policies available to review?
• Are you clear about the individual’s views and personal values?
* Don’t hesitate to seek out consultation.
Step Five: Review Any Applicable Code of Ethics

• Look for the following:

-- mission statement
-- values base of the organization
-- ethical principles to guide practice
-- ethical standards
• Codes can be revised or updated as needed
Step Six: Determine the Options

• List all possible actionable options

• Weigh the cost/benefits of each option
• Seek out additional points of view
Step Seven: Select a Course of Action

1) Remove the least desirable option.

2) Remove any which you can not put into action.
3) Remove any options which break the values
systems of those affected.
4) Recognize that your final choice will be impacted
by your personal values.
Step Eight: Put Your Plan Into Action

• Think about the outcomes with a sense that you have truly
approached this ethical dilemma with the best of intentions and to
the best of your ability.
Step Nine: Evaluate The Results

• Evaluate the cost for each person involved (client, family members,
co-workers, agency, etc.)
• Consider submitting your most difficult cases to an ethics review
board for feedback.
Ethical dilemmas in different functional areas of
Business (Marketing and Advertising, Financial
Ethics, Ethics in IT)