BUSINESS ETHICS IN THE SCENARIO OF CORPORATE GOVERNANCE

INTRODUCTION
Business ethics is a kind of applied ethics. It is the application of moral or ethical norms to business.
The term ethics has its origin from the Greek word “ethos”, which means character or custom- the
distinguishing character, sentiment, moral nature, or guiding beliefs of a person, group, or
institution. Ethics is a set of principles or standards of human conduct that govern the behaviour of
individuals or organization. Ethics can be defined as the discipline dealing with moral duties and
obligation, and explanation what is good or not good for others and for us. Ethics is the study of
moral decisions that are made by us in the course of performance of our duties. Ethics is the study of
characteristics of morals and it also deals with the moral choices that are made in relationship with
others.

Business ethics comprises the principles and standards that guide behaviour in the conduct of
business. Businesses must balance their desire to maximise profits against the needs of the
stakeholders. Maintaining this balance often requires tradeoffs. To address these unique aspects of
businesses, rules- articulated and implicit are developed to guide the businesses to earn profits
without harming individuals or society as a whole.

Ethics is concerned with truth and justice, concerning a variety of aspects like the expectations of
society, fair competition, public relations, social responsibilities and corporate behaviour.

ETHICS PHILOSPHIES
The following are some of the ethical philosophies:

 DEONTOLOGICAL THEORY
Deontological theory is an approach to ethics that focus on the rightness and wrongness of
actions themselves as opposed to the rightness or wrongness of the circumstances of those
actions. If a manger decides that it is duty to always be on time to meetings is running late
for reasons not in his control, how is he supposed to drive to reach the meetings on time? Is
he supposed to speed, breaking his duty to uphold the law or is he supposed to arrive at his
meeting late, breaking his duty to be on time?

 TELEOLOGY
Teleology is the philosophical study of design and purpose.

 ENLIGHTENED EGOISM
This model takes into account harms, benefits and rights. Therefore, under this model an
action is morally correct if it increases benefits for the individual in a way that does not
intentionally hurt others, and if these benefits are believed to counterbalances any
unintentional harm that ensue.

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  UTILITARINISM
It is an idea that the moral worth of an action is solely determined by its contribution to
overall utility, that is, its contribution to happiness or pleasure as summed among all
persons.

 RELATIVISIM
It is an idea that some elements or aspects of experience or culture are relative to other
elements or aspects.

 VIRTUAL ETHICS THEORY

It is a branch of moral philosophy that emphasizes character rather than rules or
consequences as the key elements of ethical thinking.

 JUSTICE
It is a concept of moral rightness in action or attitude. It is closely linked to fairness.

SCOPE OF BUSINESS ETHICS

Ethical problems and phenomena arise across all the functional areas of companies and at all levels
within the company.

 ETHICS IN COMPLIANCE
Compliance is about obeying and adhering to rules and authority. The motivation for being
compliant could be to do the right thing out of the fear of being caught rather than a desire
to be abiding by the law. An ethical climate in an organization ensures that compliance with
law is fuelled by a desire to abide by the laws.

 ETHICS IN FINANCE
The ethical issues in finance that companies and employees are confronted with include
window dressing, misleading financial analysis, related party transactions, insider trading,
executive’s compensation, bribery, kickbacks et.al.

 ETHICS IN HUMAN RESOURCE

Human resource management plays a decisive role in introducing and implementing ethics.
Ethics should be a pivotal issue for HR specialists. The ethics of human resource
management covers those ethical issues arising around the employer-employee
relationship, such as the duties and rights owed between employer and employee.

 ETHICS IN MARKETING
Marketing ethics is the area of applied ethics which deals with the moral principles behind
the operation and regulations of marketing. The ethical issues confronted in this area are
pricing, anti-competitive practice, misleading advertisements, content of advertisements,
children and marketing etc.

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  ETHICS IN PRODUCTION
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. 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.

ADVANTAGES OF BUSINESS ETHICS

More and more companies recognize the link between business ethics and financial performance.
Companies displaying a clear commitment to ethical conduct consistently outperform companies
that do not display ethical conduct.

 ATTRACTING AND RETAINING TALENT

People aspire to join organizations that have high ethical values. Companies are able to
attract the best talent and an ethical company that is dedicated to talking care of its
employees being equally dedicated in taking care of the organization. The ethical climate
matters to the employees. Ethical organizations create an environment that is trustworthy,
making employees willing to rely, take decisions and act on the decisions and actions of co-
employees.

 INVESTOR LOYALTY
Investors are concerned about ethics, social responsibility and reputation of the company in
which they invest. Investors are becoming more and more aware that an ethical climate
provides a foundation for efficiency, productivity and profits.

 CUSTOMER SATISFACTION
Customer satisfaction is a vital factor in successful business strategy. Repeat purchases or
orders and enduring relationship of mutual respect are essential for the success of the
company. The name of a company should evoke trust and respect among customers for
enduring success. This is achieved by a company that adopts ethical practices. When a
company because of its beliefs in high ethics is perceived as such, any crisis or mishaps along
the way is tolerated by the customers as a minor aberration.

ETHICAL PROGRAMME IN BUSINESS

A company must have an effective ethics programme to ensure that all employees understand its
values and comply with the policies and codes of conduct that create its ethical climate. Most of the
companies begin the process of establishing organizational ethics programs by developing codes of
conduct. A code of ethics is the most comprehensive and consists of general statements, sometimes
altruistic or inspirational that serves as principles and basis for rules of conduct. A code of conduct is
a written document that may contain some inspiration statements but usually specifies acceptable
or unacceptable type of behaviour. One problem with code of conduct is that they tend to be
developed without broad based participation from stakeholders. The final type of ethical statement
is ethical statement is statement of values. It serves the general public and also addresses distinct
groups such as stakeholders. Value statements are conceived by management and are fully
developed with input from all stakeholders.

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 A code of ethics should reflect upper manager’s desire for compliance with the values, rules and
policies that support an ethical climate. The developments of the code of ethics should involve the
president, board of directors and chief executive offices who will be implementing the code. If the
companies do not have a code of ethics, they must explain why they have not adopted one. A
company may either file its code as an exhibit to the annual report post the code on the company’s
web site or eager to provide a copy of the code upon request and without the charge.

A code of ethics outlines a set of fundamental principles. These principles can be used both as the
basis of operational management. A code of ethics is based on a set of core principles or values and
is not designated for convenience. Those subjects to the code are required to understand,
internalize and apply in situations the code does not specifically address. Organizations except that
the principles, once communicated and illustrated, will apply in every case and that failure to apply
the principles can be a cause for disciplinary action.

DEVELOPING CODE OF CONDUCT

Code of conduct or what is popularly known as Code of Business Conduct contains standards of
business conduct that must guide actions of the board and senior management of the category. The
code may include the following:
 Company values.
 Avoidance of conflict of interest.
 Accurate and timely discussion.
 Compliance of applicable laws.
 Maintaining confidentiality of company affairs.
 Fair- marketing dealings.
 Standards of business conduct.
 Prohibiting insider’s trading.
 Review of the adequacy of the code.
 No authority of the waiver of the code.

MODEL CODE OF BUSINESS CONDUCT AND ETHICS

Commitment to ethical professional conduct is a must for every employees of the company in all of
its business. The code consists of imperative formulated as statements of personal responsibility,
identifies the elements of such commitment. The code is applicable to the Board Members and all
the employees in and around the officer’s level. All the employees must read and understand this
code and ensure to abide by it at their day to day activities.

General moral imperatives are:

 Contribute to society and human well-being.

 Avoid harm to others.
 Be honest and trustworthy.
 Be fair and take actions not to discriminate.
 Honour confidentiality.
 Practice integrity.

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Specific Professional requirements are:

 Ownership.
 Passion for winning.
 People development.
 Consumer focus.
 Teamwork Innovation.
 Integrity.
 Professional competitiveness.
 Respect existing laws.
 Professional review.
 Enhance quality of work.
 Deal with media tactfully.
 Be upright and avoid inducements.
 Observe corporate discipline.
 Good conduct.
 Accountable.
 Management of business risks.
 Protect company’s properties.

FEATURES OF GOOD ETHICS PROGRAMME

The following factors indicate the success of an ethics programme:

 Leadership.
 Consistency between words and actions.
 Fairness.
 Openness.
 Just rewards.
 Value- driven.

CONCLUSION
Ethics is the first line of defence against corruption while law enforcement id remedial and reactive.
Good corporate governance goes beyond rules and regulations that the government can put in
place. It is also about ethics and the values which drive companies in the conduct of their business. It
is therefore all about the trust that is established over time between companies and their different
stakeholders. Good corporate governance practice cannot guarantee any corporate failure. But the
absence of such governance standards will definitely lead to questionable practices and corporate
failures which surface suddenly and massively.

In making ethics work in an organization it is important that there is synergy between vision
statements, mission statements, core values, general business principles and code of conduct
confers a variety of benefits. An effective ethics programme requires continual reinforcement of
strong values. Organizations are challenged with how to make its employees live and imbibe the

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organization codes and values. To ensure the right ethical climate a right combination of spirit and
structure is required.

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BIBLOGRAPHY
1. ICSI and Taxmann Publication: “Corporate
Governance”.
2. A.C. Fernando: “Corporate Governance:
Principles, Policies and Practices”.
3. Inderjit Dube: “Corporate Governance”.
4. Sanjiv Aggarwal: “Corporate Governance:
Concepts and Dimensions”.
5. P.V. Sharma and S. Rajani: “Corporate
Governance: Contemporary Issues and Chaellenges”.
6. John Caver: “Board Leadership”.
7. Christine Mallin: “The role of Institutional
Investors in Corporate Governance”.
8. K.R. Sampath: “Law of Corporate Governance:
Principles and perspective”.

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