BE Notes 2021

UNIT – 1
BUSINESS ETHICS
MEANING OF BUSINESS ETHICS
The word ethics is derived from Greek word ethos which refers to character, guiding beliefs or
standards guide a group, community or individual.
Business Ethics refers to the assessment of ethical values, philosophy and principles of human
being conduct and its purpose in daily life to establish acceptable human performance.
SCOPE/IMPORTANCE OF BUSINESS ETHICS
1. Ethics as normative science. It deals with moral goodness of the manager by following
ethics practically in his spring of actions, motives, intentions, voluntary actions and so on.
2. Absolute Good. Ethics is concerned with the highest good or absolute good. It investigates
the nature of its fundamental duties of the person i.e. right or wrong, good or bad.
3. Compliance. It means obeying rules and authority. The motivation for being compliant could
be to do the right thing when all employees follow laws.
4. Finance. The finance manager should be in a position to convince all stake holders about
company accounts and fund management. This enhances level of trustworthiness of the
company in the market.
5. Human Resources. The organization may select suitable employees for the work, but some
of them may come up with some issues like, safety in work, health concerns, not
understanding the work, etc. It is the responsibility of HR manager to understand the issues
and manage the same according to the situation.
6. Marketing. The managers have to follow the regulations made by various governments
associated in trading activities. He also should look after about many ethical issues like usage
of children in marketing, pricing, misleading ads, etc.
7. Production. The managers can build ethical values among workers, so that the organization
may reduce mistakes, avoid defects and accidents.
8. Intellectual Property. It is very essential to have ownership over your idea by registering
and taking Intellectual property rights in time. Otherwise you may lose your capacity to
implement your own idea for commercial use.
9. Knowledge and Skills. It is very essential to understand with whom you are extracting the
work. Because the potential or capacity of the person in the work execution may get differ
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from one country to another. Avoid unethical practices like exploitation of work, copyright
misuse, etc.
10. Moral Judgments. It is our voluntary actions includes not to be biased or in the favor of any
one while showing your viewpoints. Manager’s personal sentiments, feelings should not be
considered.
11. Free human acts. Freedom should be given by the Manager to his peer members to
constitute (conclude) the outcome of situation as good, bad, correct, incorrect etc.
12. Moral goodness. The manager should follow the words, what he teach to his peer members
and subordinates about ethics or ethically work in the organization. This contains many
moral values, philosophies and principles.
13. Applied ethics. It is influenced by situations. Where the manager should understand how to
act at different situations. This contains the contribution of many subject areas like;
sociology, cultural, religion, environmental.
TYPES OF ETHICS
1. Transactional ethics. Maintenance of relationships is all to be considered as Transactions.

Every human being will be having his own interests in his life and those are getting
associated with his Private/Personal and Professional life.
In his personal life with his parents and friends whatever the activities takes place he need to
consider as transaction. This helps him to have control over his emotions.
It is very much essential not to mix transaction taken place in his personal and professional life.
In his professional life also he need to maintain the same relationship which should not hurt
emotional values carried across his life.
2. Participatory ethics. The best managers will follow participatory ethics as according to their
own style. That can be explained as follows
 Suggestions. It is good to receive all participants who are ready to get involved in the topic
or situations. But when they are good to hear your values then only you are allowed to give
suggestions.
 Advices. It is very essential the manager have to listen to problems of everyone in the
organization. Problems may be relating to issues associated with understanding the work,
with peer members, etc.

 Decisions. It is worth to take some decisions on behalf of every organizational member
regarding supporting the employees in their work, work environment, activities to be
conducted, departmental relationship, etc. The managers have to take the decisions, if the
team members are ready to accept it.
3. Recognition ethics. This is very much required to follow by our own self, whatever we teach
or preach ethical concepts to others. The managers are so much under the observation in this
point of view with majorly two points.
 Moral Judgments. It is our voluntary actions includes not to be biased or in the favor of any
one while showing your viewpoints. Manager’s personal sentiments, feelings should not be
considered.
 Moral goodness. The manager should follow the words, what he teach to his peer members
and subordinates about ethics or ethically work in the organization. This contains many
moral values, philosophies and principles.
CHARACTERISTICS OF ETHICS
Business ethics brings together two apparently contradictory concepts that business is inherently
bad and ethics is highest science of good, hence the nature and characteristics can be
understood in following points.
1. Business ethics is above law. Ethics requires a behavior which is socially desirable towards
all communities and groups although it may not be legally binding.
2. Important for all business. It is important across all business large or small, manufacturing
or service because the customers are also divided based on their economic capabilities and
performances.
3. It is a dynamic term. Over a period of time ethics may also be diluted or concentrated based
on the way of life and expectation of society. Eg. Once generally there were only vegetarian
hotels, today multi menu hotels are more but maintained in separate kitchen.
4. It is systematic. It is a systematic handling of values in business and industry as different

society and community have different set of ethics, which may vary from state or country to
country.
5. It is a normative science. It judges the value of facts in terms of idea with judgments of
what ought to be, but not with factual judgments what it is.

6. Business and ethics are not contradictory. It concentrates on moral standards, can be
applied to business and still profit can be made over a period by establishing brand and
reputation.
7. It is specialized study. It is a specialized study of moral right or wrong in a particular

organization at a given situation it is a form of applied ethics.
8. It deals with human beings only. As only human beings have sense to understand a given
situation, respect, honor and feel for others, only human beings are endorsed with freedom of
choice.
FACTORS INFLUENCING BUSINESS ETHICS
Individual Factors
 Personal moral philosophy. Conflict occurs when people encounter situations that they
cannot exactly control or resolve. In this situation people tend to base their decisions on their
own principles of right and wrong and act accordingly in their daily lives, people learn these
principles and rules through socially by family, social group, religion, education, etc.
 Stages of moral development. Factors influencing business ethics at individual or personal

level has also stages according Prof. Lawrence Kohlberg.
The pre conventional stage of moral development in which individual focus on their own
needs and desires.
The conventional stage of moral development, in which individual focus on group centered
values and conforming to expectations.
The principled stage of moral development in which individuals are concerned with up
hording the basic rights, values and rules of society.
Organizational Factors
 Organizational culture. Organizations like societies have created a culture that includes
shared set of values, beliefs, goals, norms and ways to solve problems. Over the years
organization comes to be seen as living organization with mind and will of its own. If any
company derives its profit from unethical of illegal activities, individuals who join this
organization will have a difficult time serving unless they also participate in these activities.
 Influence of coworkers and supervisors. Employees look for particular type of people with
whom they work. Managers and coworkers help people deal with unfamiliar task and provide
advice and information both formally and informally while manager provides direction of
work actively. Coworkers offer help inform of discussion over lunch, hence role of informal
culture cannot be under-estimated, finally individuals also learn ethical and unethical conduct
from close colleagues.
 Opportunity. Together organizational culture and influence of coworkers may faster

condition that limit or permit misconduct. When these conditions provide rewards of
financial goals recognition promotion or simply the good feeling from job well done, the
opportunity for unethical conduct may be encouraged or discouraged.
ARGUMENTS FOR AND AGAINST BUSINESS ETHICS
 FOR (FAVOR)
 Business response to create demands of society. The below mentioned points are making
the Business ethics to be supportive in creation of demands of society
Finance. The finance manager should be in a position to convince all stake holders about
company accounts and fund management. This enhances level of trustworthiness of the
company in the market.
Human Resources. The organization may select suitable employees for the work, but some
of them may come up with some issues like, safety in work, health concerns, not
understanding the work, etc. It is the responsibility of HR manager to understand the issues
and manage the same according to the situation.
Marketing. The managers have to follow the regulations made by various governments
associated in trading activities. He also should look after about many ethical issues like usage
of children in marketing, pricing, misleading ads, etc.
Production. The managers can build ethical values among workers, so that the organization
may reduce mistakes, avoid defects and accidents.
 Serve the aspirations of society. The Business adopted Ethics helps them to have long-term
self-interest over social responsibilities and people who have good environment, education
and opportunity make better employees and customers for the business.
 Improve the public image of business. The business will retain the needed credibility with
the public if it performs its social obligations. Good relations with workers, consumers and
suppliers will lead to success of business.
 It is the moral thing to create social responsibilities. The social responsibilities of business
managers must be proportionate to their social power. If the business managers do not
assume social responsibility, their social power will be taken away by the society through
government control and regulations and other measures.

 AGAINST
 Responsibility of Government. Welfare of the society is the sole responsibility of the

government. Business should not have any relationship with welfare schemes in the name of
CSR.
 Conflicting considerations of private market mechanism and social responsibility.

Private market mechanism and social responsibilities are opposite to each other and therefore
a businessman will have to be guided by any one of the two considerations.
 Disregard of Market Mechanism. Market mechanism is the appropriate way to allocate

scarce resources to alternative use. The doctrine of social responsibility interferes with the
market mechanism and results in an inappropriate way to allocate scarce resources.
 Arbitrary (Autocratic) power to Businessmen. Businessmen will get arbitrary powers in the
matter of allocation of resources in the welfare of society. They should have no right to
interfere with governmental responsibility.
BASICS OF BUSINESS ETHICS
 Honesty has to do with ethical advertising and a reasonable cost for the quality of the
product or service as well as the company keeping its word to everyone it deals with and in
everything it does.
 Integrity covers a wide range of ethics, but includes issues such as social and environmental
responsibility.
 Fairness considers the simplest form of treating all people in commercial dealings, whether
buyers, employees or customers, fairly.
 Benefits have to extend to all stakeholders of the business.
 Emerging Business Ethical issues and management concerns, stakeholders’ relationships,

etc.
 Ethics as dimension of Social Responsibility
 Understanding ethical decision making and Corporate Governance.
 Individual factors like moral philosophies, moral development, etc.
 Ethics Program Audit and Implementation in the business.
 Stress Management of employees at every level of the organization.

 Protection of Stakehodlers through better production of quality products with proper
delivery of the same to customers.
CORPORATE SOCIAL RESPONSIBILITY
 Increased employee loyalty and retention. CSR activities enhance the loyalty level with
the promising nature.
 Increased quality of product and services. Business enterprises got more responsibility to
look after about quality of product and services to enhance the culture of CSR.
 Increased customer loyalty. Customers are getting loyal towards enterprises due to CSR
activities and they start believing over brand also.
 Increased reputation and brand image. It enhances the status of the enterprise and brand
image, where CSR reaches to the public directly.
 Greater productivity and quality. Employees become more courageous towards working
environment that increases the level of productivity and quality.
 Reduced regulatory oversight. Government reduced their focus over regulations on social
welfare activities conduct by the business enterprises.
 Access to capital and market. CSR increases the Goodwill value the institutions and helps
them to access capital and market.
 Product safety and decreased liability. Applying ethical values makes the organization to
facilitate production safety and helps the management to decrease their liability.
 Less volatile stock value. CSR enhances the institutions become more responsible towards
society. It helps in less volatile stock value.
ISSUES MANAGEMENT
 Improved customer Attention. Many times CSR activities of any company are for the
purpose of motivating their brand name in the market. But consumers’ attention is at high
level, they are checking CSR is for your selfishness or for public welfare.
 Rising investor stress. Investors are changing the way they assess companies’ performance
and are making decisions based on criteria that include ethical concerns.
 The decreasing responsibility of government. In the past, governments have relied on

legislation and regulation to deliver social and environmental objectives. Now government is
liberalizing in shifting their responsibility over business enterprises.
 Quality of Work life of employees. The quality work life is essential for continuous
attraction of future employees and retention of current employees. This also helps employees
in their satisfaction, strengthening of workplace learning and helping employees to have a
better change and transition management.
 Workforce Treatment and Workforce Discrimination. The work treatment and the work
discrimination have dimensions like status, race, gender, etc.
 Transparency. There is a growing demand for corporate transparency from stakeholders,

including customers, suppliers, employees, communities, investors and activist organizations.
CRISIS MANAGEMENT
 Crisis Management Cycle. Preparation – Management – Evaluation. Preparation consists

of identifying number of issues to be addressed. Management takes step regarding the
allocation of resources according to plan made. Evaluation deals with issues such as the post
crisis lesson learning and accountability.
 Planning in detail for responses to as many potential crisis as possible.
 Establishing monitoring systems and practices to detect early warning signals of any
possible crisis.
 Establishing and training a crisis management team or selecting an external crisis

management firm with a proven track record in your business area.
 Involving stakeholders as possible in all planning and action stages.

UNIT – 2
PERSONAL ETHICS
MEANING
Personal ethics is a category of philosophy that determines what an individual believes about
morality of right and wrong. It has some characters like Honesty, Responsibility, Reliability,
Goal-Oriented, Job-Oriented, etc.
FEATURES OF PERSONAL ETHICS
1. Honesty. This means remain honest to be associated with the work and the organization.
That kind of employee will get more trust implicitly from the management.
2. Responsibility. Employees who take responsibility, they will be more trusted in the
organization and it is very much essential to the employee to accept responsibility to be
ethical.
3. Reliability. Where the employees are more ethical, they are reliable also to the organization.
This enhances institution and employee relationship to the greater extent.
4. Goal-Oriented. Ethics of employees makes themselves as goal oriented. This enhances the
efficiency of the person as well ensure him as the asset of the organization.
5. Job-Focused. Employees follow ethics will always be focused towards their work and not
get distract from their duties.
EMOTIONAL HONESTY
Emotional honesty means expressing the true feelings. To be emotionally honest someone must
be emotionally aware. This emotional awareness is related to the emotional intelligence.
Parenting can create an emotionally safe environment, where the child and adolescent are free
to be emotionally honest or they may create just the opposite.
Elements of emotions
1. Love refers to variety of different things, states and attitudes that ranges from interpersonal
affection to pleasure.
2. Fear is an emotion induced by a threat perceived by living entities, which causes a change in
brain and organ function and ultimately a change in behaviour.

3. Grief/Sadness is emotional pain associated with or characterized by feelings of
disadvantage, less, despair, helplessness and sorrow. Sadness makes us all smaller and
returns us to a sense of privacy in being alone with ourselves.
4. Anger is an emotional response related to one’s psychological interpretation of having been

offended, wronged or denied.
5. Hate is a deep and emotional extreme dislike that can be directed against individuals,
entities, objects or ideas. People hate when anger is not a constructive working part of their
emotional tools box.
6. Gratitude, thankfulness, gratefulness or appreciation is a feeling acknowledgement of a

benefit that one will receive. Gratitude knowing what enough is and appreciating blessings.
7. Joy is a feeling of great pleasure and happiness. Joy the function is to feel free. Fun can be a
substitute for real joy.
8. Humor is the quality of being amusing or comic, especially as expressed in literature or

speech. Humor makes the difficult task also bearable.
VIRTUE OF HUMILITY
“Consists in keeping oneself within one’s own bounds, not reaching out to things above one, but
submitting to one’s superior”.
Benefits of Humility
Confidence is key to getting ahead in life. It helps you better at work, in relationships, and in
interviews, although confidence is essential, it is essential to be humble as well.
People respond well to humility because shows that you place yourself at the same level as them,
and not above them also it has other benefits too, here are few benefits of humility which
may occur in your personal and professional life.
o Calm and selflessness. Humble people are better able to cope with anxiety about their
morality. Instead of erecting self defenses against death, humble people tend to find it
provides a useful perspective on life and how it should be lived. When it’s not all about you,
it makes death easier to contemplate.
o Higher self control. Having high self control is one key to a successful life. In fact studies
have found that an obsession with the self an paradoxically lead to lower self control. The
humble, though because they place less importance on the self, exhibit higher self control in
many situations, perhaps this is partly due to the fact that humble people tend to know their
limits.
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o More helpful. Humble people are, on average, more helpful than who are egotistical. In
study by La Buff, participants who were humble, were more likely to offer help and offered
more of their time to those in need. Non surprising, humble people have also been found to
be more generous.
o Positive start. New employees or starters will have a very positive start when they find their
employer humble and kind. A recent study found that there may be some connection with
positive thoughts of kindness and social contact.
o Command, respect and excellent leader. Humble leaders are not only better, as you might
imagine, but they are also more effective, as the staff would strive there maximum to fulfill
every aspiration of their boss who cares them to the core.
o Better work performance. The humble not only make better mangers, but they also make
better employees. A study of employee’s supervisors found that being honest and humble
was good predictor of people’s job performance.
o Less prejudice. One of the characteristics of being humble is having a low sense of
entitlement. Humble people don’t think they are oared things. This leads to less prejudiced
view of the world encouraging them to tolerant to others and less defensive about their
beliefs.
PROMOTE HAPPINESS
According to Mahatma Gandhi, “Happiness is when what you think, what you say and what you
do are in harmony”.
According to Aristotle, “Happiness is the meaning and the purpose of life. The whole aim and
end of human existence”.
Promoting happiness at different places.
 Promote happiness among employees at workplace. The key to keeping your employees
happy is to genuinely care, that’s just the golden key that unlocks other doors of happiness.
 Provide opportunities for growth. Compensate continued learning, fund conferences and
make resources available so employees have the option of advancing in the company. This
makes them feel enriched every single day.
 Recognize and respect employees. You want employees to be self motivated, take ownership
of the work, and take pride in what they do. Recognize progress in any stage big or small.
Reward them how they want to be rewarded.

 Set clear goals, but grant independence. Setting clear goals infuses daily work with a sense of
purpose, employees should be thoughts personal goals and understand big picture. So that
they know what they are working towards, this will achieve company’s goal.
 Make yourself available. Build internal loyalty like you do with you customers. When your
employees know you, they will feel closer to the companies’ identity, each other and you.
Human needs to bond, so schedule face time with all your employees.
 Practice open communication. Be transparent, be honest, be real and be constructive.

Encourage your employees to do the same, with you and with their coworkers. By doing so
you will foster an environment of acceptance, understanding appreciation and respect.
 Promoting happiness at home.
Leo Tolstoy was right, happy families are all alike. At least they share certain basic
characteristics. Some ways to promote happiness at home are.
 Create cuddle time. It is important for families to spend time cuddling, reading talking or
playing games. This kind of positive touch helps kids feel loved and secure, plus its fun for
parents.
 Sing together, stay together. Singing together is a terrific way to bond as a family, make up
your own words to your favorite times, dance around the living room with your children and
use music to motivate room cleaning.
 Create healthy habits. Junk food high in salt and sugar may create healthy snacking habits by
leaving out bowls of fruit, cut up vegetables, nuts or dried fruit.
 Reward good behavior. It is important to reinforce your child good behavior. But there is no
need to be extravagant. A trip to zoo, a movie and popcorn can do.
 Remember sorry is not enough. When one of the family member hurts the feeling of other, it
is not enough to apologize that person, must also find a way to help heal the hurt he or she
has caused, by helping in distress.
 Promoting happiness in society.
Our collective aim should be a society with greatest possible human happiness and wellbeing
policies, institutions and social attitudes that help people to lead flourishing times.
 Ensure a stable economy. A healthy economy is the foundation for happiness and well being.
We need an equitable economic system which puts long term stability and high levels of
employment ahead of growth at all cost.

 Focus on well being. We need our governments to measure people’s well being and consider
the impact on well being for both current and future generations in all policy decisions.
 Support disadvantaged. Priority should be given to improving the well being of those who
are most in need, not just through financial support but also by empowering, people and
helping them to help themselves.
 Education for life. Education is about learning for life, not just gaining academic
qualifications. We need schools that help children develop character and learn essential life
skills, like emotional intelligence, mindfulness and resistance.
 Balanced media. The way we perceive the world affect, what we do and how we treat each
other. We need a media that portrays a balanced view of what’s good as well as bad in our
world not constant diet of cynicism and negativity.
 Not just earning for living. Our working lives should be about more than just earning a
living. Whatever job we do, we should aim to make a meaningful contribution and help
create a workplace culture, which is gusting friendly and responsible.
KARMA YOGA
Karma yoga or the discipline of action is a form of yoga based on the teachings of Bhagavad
Gita a Sacred Sanskrit sculpture of Hinduism, of the four path of realization of KarmaYoga is
the process of achieving perfection in action. KarmaYoga is derived from the spiritual life
found in Bhagavad Gita, it is a part of nature.
The importance of Karma Yoga
It is been summarized as follows.
 Karma yoga is the pathway of yoga that achieves mystical knowledge through work done in
day to day life, by doing ones duty and works in such a way that innermost knowledge comes
through. Karma means work or action.
 It is used in a particular sense when defining the law of Karma, which states we always
receive the results of our action good results for good action and bad results for bad action.
 The description of such a law is usually tied up with the ancient Hindu belief of incarnation,
in which it is used to mean that our karma will determine the kind of body we get in the next
world.
 Karma yoga is concerned with the correct way of doing work.
 It sets out to teach what our duties are and how we should perform them to attain the sense.
 Karma yoga is the path to be followed by those who cannot or don’t abandon worldly life,
yet are filled with the thirst to have mystical knowledge.
 It states as we care for our family so should be for society, it leaves us with many duties at
social level.
 Karma yoga teaches us how to do the work in such a way that, even by working we are led
closer to the truth of universe.
 It appears impossible to hold on to our search for true knowledge, while at the same time
amidst such storms of joys and sorrows, karma yoga helps to gain knowledge amidst all
emotions.
Important teachings of Karma Yoga
As you sow, so shall you reap. Swamy Vivekananda says that if one sows a lemon seed, one
cannot expect mango. He narrates the story of a shepherd boy who runs to his mother telling
that there is an abusive demon in the hills who always speaks harshly to him.
Reactions are time bound. Different reactions occur in different time frames. It is very
difficult to understand and define every reaction of individuals.
Reactions should not be assumed as reward for instant action. It also happens to us good or
bad, we must do only well to others. We do not know what we have sown in the past but we
can at least ensure that we sow only good seeds for the future.
There is no scope from action or reaction. Lord Krishna says in the Bhagavad Gita that action
is inevitable. Every moment of our lives we are performing action. The only time we cease to
perform action is when we die, this in turn means that every moment of our lives, we are
constantly generating reactions good and bad, which we have to experience in future or in
future lives.
Karma yoga can be presented in cycles of 4 actions.
 Action for sake of action. Doing work in office is for money, doing work at home because
we have nothing else to do, we do not enjoy it so errors and mistakes happen this action is
not expected.
 Action done with dexterity. (Yogaha Karmasu Kaushlam). Here, a person does good job, but
aspects salary, appreciation and rewards. Though this is a better form of action, its
disadvantages is it’s based on expectations.
 Action done with dexterity without expectation (Karma phala Tyaga). In this kind of action,
the person involved performs his/her best. There is no expectation of any kind of reward
from others. Swamy says this action is better than above two, there is the danger off one
losing motivation. He thinks “why am I doing this” or “world thinks me as foolish”.
 Pure action (Pavittra Karma). According to Bhagawan Budha, this is the highest form of
action. That which constitutes Krma Yoga. Every action is done to please God/ Atma/ One
puts his best and gets the reward that the lord is pleased. Thus, all actions are done not only
selflessly without expectation of any reward, but also actions are Pavitra Karma, God accepts
actions, and one is able to break from the chains of action-reaction.
PROACTIVE
Thinking and acting ahead of anticipated events; this means using foresight.
Suggestions for proactive person;
1. Self respect, look at you and ask some questions.
What kind of task you do and what kind of respect you are expecting?
Need some attention?
Whether beneficiary of work as alone or group?
2. Examine critically how you might perform those tasks more efficiently. Before the next rush.
3. Try to prevent problems from ever arising.
4. Develop a mindset that looks to solve problems instead of dwelling on them.
5. Get and stay ahead of less urgent, day to day tasks.
6. Know which tasks are priorities and which can wait.
7. Eliminate any task that is unnecessary.
8. Evaluate your procedures and processes as you use them.
9. Look for ways to automate routine tasks.
UNIT – 3
ETHICS IN MANAGEMENT

INTRODUCTION
‘Management Ethics’ is related to social responsiveness of a firm.
It is the discipline dealing with what is good and bad, right and wrong, with moral duty and
obligation.
It is a standard of behavior that guides individual managers in their works.
MARKETING ETHICS
 Marketing consist of the performance of business activities that directly flow of goods and
services from producers or manufacturers to consumers or users.
 A member of distinct function incoming under broad characterization which includes product
development, distribution, pricing, promotion and sales.
 Virtually all aspects of marketing raise ethical questions that do not always have easy
answers marketing has become a field for both fair and unfair practices and hence need
careful watch.
 ETHICAL RESPONSIBILITIES TOWARDS CONSUMERS.
Corporate ethical responsibilities are more apparent during warranty period, corporate explain
various facilities, services and advantages, for their products through their catalogues.
Advertisements and explanations, which will become consumer rights, once they buy the
product. Some of the standard consumer rights are as follows:-
1. Right to safety. Consumers need to be protected from harm or injury to their body and
environment during and after use of the product.
2. Right to choose. The consumers should be free to choose any alternate product of their
thinking.
3. Right to know how. The consumer has right to know the truthful details of the product to be
able to select the product of his choice.
4. Right to be heard. The dealer or manufacturer must hear the complaints about any
inconvenience or injustice taken place due to the business transactions with them.
5. Right to competition. Asking compensation or free replacements is the right of the consumer
in case of harm done due to faulty product.
 MARKETING STRATEGIES AND ETHICS

 Information. The company must inform the consumers about the product, content, quality
safety matters, usage purpose etc. to be truthful in service to society.
 Clarity. There should be clarity in nomenclature of the product to avoid confusion with
similar names. There should be no misrepresentation to copy any brand, color, effect or
symbol of popular brand.
 Avoid force. The dealers or traders should not lead the buyer to buy only a specific product.
There should be choice and freedom to buy what they like.
 Safety. There should not be internal or external injury in usage of the product.
 UNETHICAL PRACTICES IN MARKETING
1. Rural products.
Mixing of low quality rice with high quality rice after getting sample approved for high
quality.
Mixing of palm oil in groundnut oil to generate more profits.
Selling local grown fruits and vegetables as exported products.
2. Industrial products. In case of industrial products there are various issues to bee attended
from point of performance, packing and transport.
 There are instances in an industrial product of damages, which occur in trying to save cost,
by poor packing and transformation, somehow hurriedly push product to customer.
 Many of the industrial products need to be erected, commissioned and trail runs to be taken.
They should be able to prove the product and ensure that the quality and performance is
assured on continual basis.
3. Consumer goods.
 Unethical trade practices of unworkable schemes like free stay in a distant luxury hotel,
collecting A to Z stickers, getting a gold coin in soap pack, etc.
 Unethical marketing strategies are used like similar color package, print and look and popular
brand.
 Giving comparison of competitor product and trying to display their product as superior by
taking only selective points.
 Marketing false claims like pure ghee or natural sandal or herbal, which in fact are not.

4. Pharmacy products.
 Production and sale of duplicate (generic) popular drug and tablets.
 Printing in small letters and figures which are very difficult or impossible to read.
 Not giving full details of contents and side effects and selling pediatric medicine to adult and
vice versa.
Similarly in food products some of the colors and ingredients are harmful to health.
In case of selling shares in primary market many companies have used names of popular
executives of corporate (retired) as directors, in reality they would be paid to use their name.
Ethics in HRM
 Human resource management is a function in organization designed to maximize employee

performance in service of their employer’s strategic objectives.
 Unethical practices by employer. They indulge in unfair practices like one or more of the
following.
 Unethical practices by employer. They indulge in unfair practices like one or more of the
following.
 Creating split in union by creating regionalism, castes and ego problem.
 Not caring for demands of workers.
 *Bias in selection, transfer and promotions.
 Giving different benefits for people at same level.
 Unethical practices by employees.
 False claim of age, qualification and experience and forge marks cards.
 Fake certificate of SC/ST categories for jobs.
 Head of department short listing candidates of his community, caste or region.
 Creating transfers, openings, promotions which suit his conveniences.
 Government agencies.
 Announcing the vacancies and not taking any action further.

 Function of government office not transparent, non reliable and lazy.
 Selection committee excessively cautious about reservation quotas, strike and court cases.
 Selection suited for low paid jobs not directions or executive level.
 Manpower consultants. By and large consultants do good job as they are hired by private
organization. However certain unfair strategies do take place.
 Consultants play cast and regional game as they are free to operate the way they like.
 They along with HRD manager organize bias selection.
 Some consultants guide candidates to create bio data to suit corporate.
 Cash and incentives. Salary and incentives are fixed based on merits, experience and
qualification; however there are certain irregular and disparities.
 Wages are kept lower for women of same level position compared to men.
 Some companies avoid payment of PF, Gratuity, ESI plan and pension.
 Disparity in payment of salaries, scales, increment and non monitory benefits.
 Delay in paying salaries, installments payment taking signature on higher amount, etc.
 Employment issues.
Workers are employed during season and recovered when season is over it is policy of
hiring-fixing.
Women are treated with same work policy that of man, they have also home and children to
maintain, which is ignored.
The senior and experiential employees find themselves not equipped to new technologies,
sometimes prevent constructive changes.
 Sexual harassment. Governments all over the world have made rules to protect women
against sexual violations. Such as;
 Unwelcome sexual advances, request for favors, verbal and physical conduct of nature.
 Unreasonably interfering with individual work performance, and create intimidating, hostile
and offensive work environment.
 Favoritism and giving undue excess facilities and increments may also have implicit threat.

 Writing on bathroom walls display of pornographic picture, etc.
Ethical aspects of Financial Management
Managerial ethics is a major factor affecting how socially responsible. An enterprise will be
in long term, it is managers who react between the forces of change and stability, hence
managerial ethics is a paramount importance.
Accountants should present true and fair views. The picture accountant’s paints can either
enlightening or misleading depending on how he chooses to deficit it, cooking of accounts
are misleading to investors and customers.
Encourage people to be financially ethical. Finance will be impossible without ethics, as we

place our assets in hands of others, which require trust like brokers, insurance agents,
untrustworthy physicians and attorneys, hence ethical impact have to be encouraged at every
level.
Fair markets. Thought marketer exchanges an advantageous to both parties, involvement in

stock market is like playing sports. The aim is not to prevent losses, but to ensure the game is
fair. Hence rules and regulation of financial market protects general public apart from
individual investors.
Minimize inside trading. Stop or minimize inside trading as it is unethical and also illegal as
person who trades on inside information steals information and gets unfair advantage and it
disturbs financial status of outsider.
Honest human resource officers. Honest and sincere HR manager and labor inspectors need
to be appointed for routine check to find all social sealing measures like PF, Bonus and ESI
are properly implemented by directors and there is no irregularity in payments to workers.
Lifting of corporate veil. Whenever the shareholders or investors find any art of ultra virus,
they have right to approach either court or government to pierce veil to find over accounts
and transactions.
Unethical Practices in Finance
The unethical practices are accounting and finance is more in proprietary, partnership and private
limited companies and MNC’s. Some of the unethical practices in financing and accounting.
I. Irregularities in payments
 Deliberate abnormal delay in payments to vendors, dealers and commission agents.
 Delay in paying wages, interest to financiers, incentive and bonus to employees.

 Not prompt in statutory payment of ESI, PF, Sales and Excise Tax, etc.
 Creating bogus bills of purchase to show higher costs to avoid paying bonus and tax.
II. Misleading the investors.
 Copy vision statement of a reputed company of high sounding words.
 Blame general recession of world for non growth of company.
 Confusing finance figures by giving 45 years data, where one gets lost in figures and letters.
 Trying to release broachers of proposed companies, which are still not registered.
III. Public issue of shares.
 Share process is artificially hiked before fresh issue to make it noticeable and attractive.
 Attractive future plan is shown to mislead and impress investors.
 Print names of popular corporate executives as directors by bribing them.
 The word new or high technology is use to mislead and fool public.
IV. Issues in insider trading.
 Insider trading in unethical as it violets people’s equality right based on unjust advantage.
 Corporate executives’ knowledge gives fair idea, company which will put them to advantage.
 Companies’ executives can create unstable market by giving information to brokers.
 In-side trading is unethical as it disturbs financial status of outside trader.
V. Issues in merger and acquisitions.
Although objective is show as synergy advantage, new product development, better management
but in fact merger happens.
 To save tax by adjusting book of accounting profit of the company makes merging with a
sick company.
 To kill competition, acquisitions are resorted, which will help in hike prices, cheek dealers.
 To take advantage of image of reputed company and later discord them.
Technology and Ethics

technology is both a problem and a solution to various issues of mankind. Some of the issues
related to technology are, due to unethical practices in technology today we find,
 Due to sting operations with hidden cameras people private life is encroached specifically
politicians, actors and of top officials.
 The sophisticated weapons, which are developed for solders are now common among
terrorists, nexolites and even rioters.
 Explosive developed for mining the minerals are now used by terrorists.
 Technology creates various methods of family planning but today used by unmarried
youngsters.
Some of the IT related unethical practices are;
 Unauthorized access to information, theft of software’s, CD, floppies etc.
 Use of computer to enable funds and assets.
 Altering or destroying computer data.
 Creating a virus by writing program which embeds existing program.
 Reading the message of others.
 Copying or use of others program (software piracy)
 Hacking people and government account and collecting confidential information.
Creating fake lottery announcements and collecting money from public for its delivery.
Professional Ethics
General professional ethics of management
Act in professional and ethical manner at all times.
Act in the benefit of client’s interest.
Act with independence and objectivity.
Act with skill, competence and diligence.
Communicate with client in timely and accurate manner.
With regard to investment of client

 Place clients interests before own.
 Preserve confidentiality of information of his environment.
 Refuse to accept any gift or participate in any business which could be against of existing
investors.
 Use reasonable care and prudent judgment in managing client’s assets.
 Evaluate client involvement, objective, tolerance and risk.
UNIT – 4
ROLE OF CORPORATE CULTURE IN BUSINESS
Corporate culture is the total sum of the values, customs, traditions and meaning that make a
company unique corporate culture is often called “the character of an organization”, since it
embodies the vision of the company’s founders.
FUNCTIONS or FACTORS INFLUENCING CORPORATE CULTURE

A. Individual working in corporate. Employees in their own way contribute to corporate culture
then attitude, mental ability, interest, perception and even the thought process of employees
affect corporate culture.
B. Gender of employees corporate where more men employees are employed, do work till late
in the evening, employees are more aggressive. So pare to lady employees as they are kind
and lenient.
C. The nature of business. Industries like stock broking financial service, banking on dependent
on external factors of demand and supply, if market crashes it will lead to tension, unrest.
Where management also helpless and employees are not sure about their career and growth.
D. Culture is affected by goals and objectives. The strategies and procedures designed to
achieve the target of the organization also contribute to its culture, fast paced companies like
advertising, event management expect employees to be more aggressive, attentive and hyper
active compared to government companies
E. The client also affect culture the client and external parties also affect the work culture,
corporate catering to UK or US clients have no option but to work in shifts to match then
timings.
F. Workers participation in management. There are certain corporate where management allows
workers to take their own decisions and let them participate in strategy, this leads to culture
of belongingness and responsibility as against some organization where employees only
work for money.
IMPACT or IMPORTANCE OF CORPORATE CULTURE
a. Culture decides employee’s interaction at workplace. A healthy culture encourages the

employees to stay motivated and loyal towards management.
b. Culture promotes healthy competition. Employees try them best to perform better than fellow
work and earn recognition and appreciation of superior. It is culture of workplace, which
actually motivates employees.
c. Culture represents pre-defined policies. The policies guides the employees and give them a
sense of direction at work place, every individual is clear of his role and responsibility to
accomplish the task.
d. Corporate have different cultures. No two corporate have same work culture, culture goes
long way in creating brand image, it gives identity to the organization, in other words, an
organization is known by its culture.

e. Culture brings all employees in a common platform. All employees must be treated equally
and no one should be neglected or left-out. It also empowerment for employees to adjust
themselves goes give them best.
f. The work culture unites employees. Employees of different background, families, attitude
and mentality all unite under a common culture, culture goes a sense of unity at work place.
g. Corporate culture creates healthy relationship. No one treats work as a burden and moulds
himself according to the culture.
h. Culture develops habits. A culture where management is particular of any issue, encourages
every staff member to fulfill it no matter how busy he is, this creates a sense of discipline and
responsibility which lead to healthy habit.
CROSS CULTURAL ISSUES IN ETHICS
a. Difference of language. The problem of translation often make it different for business
people to express exactly what they mean eg. Bacardi created a fruity drink for the French
market, it attempted to market the drink both in France and Germany by name Pavia
unfortunately Pavia translates baboon in German. Blunder in communication may have their
humorous side, they frequently offend or anger others derail important business transactions
or even damage international relations.
b. Difference in body language can also lead to misunderstanding. Body language consist of the
non verbal, usually unconscious way that one communicates through gestures, posture and
facial expressions. Eg. America nods their head vertically to indicate ‘yes’. Albania nod it for
‘No’ and British indicate that the person has heard only pointing index finger is common in
America but rude in South Asia.
c. Differences of perception. Perception time may likewise differ from country to country.
Americans value promptness but business people from other countries approach punctual in a
more relaxed manner. An American firm lost a contract in Greece after it tried to impose it
customs on local negotiators by setting time limit for meeting. Greeks deem such limits
insulting a lacking in fineness.
d. Differences in culture. Culture can also became a liability when firm transfer personnel.
Consequently, large corporations spend thousands of dollars to ensure that the employees
sent abroad are culturally prepared. Eg. Eastman chemical company has devised a
preparation program so effectively that 99% of participating employees successfully
complete then term in a foreign country, it provides cultural orientation for entire family not
just employee, and includes language training, house hunting, trip and counseling.

e. Difference of religion. Divergent religious values can also create ethical issues in
international business. Eg. Hamburger fast food, before entering Indian market, its market
research indentified member of hindu community abstain from eating beef for religious
reasons and although other Indian religions have no taboo regarding the consumption of beef,
the British firm decided not to use beef for its burgers to avoid giving offense.
f. Differences in race various US and European laws prohibit business from discriminating on
the basis of sex, race religion or disability in their hiring, firing and promotion decisions and
problem of social discrimination is still a reality. Eg. UK East India Company paid least
salary to Indians, Germany never grants citizenship to Turkish who works there from
decades. In Russia job specifications specify age and gender, female face endless
bureaucratic problems.
g. Issues on human rights. Companies struggling with human rights issues. Sometimes make
short term decisions to boost profitability that have negative long term implication. These
issues concern about treatment of minorities and women, issues of child labor and employees
right. Multinational companies face even greater challenge in this area because of nature of
their relationship with manufacturer and subcontractor in other cultures. It is estimated that
250 million children work in developing countries. Although only 5% work in export
industry, but still it represents ethical issue.
h. Price discrimination issue. A major ethical issue in international business is how products
sold in other countries are priced. When a firm changes different prices to different groups of
customers it may be accused of price discrimination, it may became ethical issue or illegal
when;
 the price violates either countries law
 market cannot be divided into segments
 the segmenting result in customers dissatisfaction
i. Harmful product. Governments in advanced industrial nations have banned the sale of certain
products considered harmful. However some companies in those nations continue to sue such
products in other countries where they remain legal. Eg. Genetically engineered products
have become controversial in US, Japan, Australia and European Union, hence these
countries want labeling of genetic produce.
Tobacco sales are declining in USA as it because illness, hence US exports cigarette to other
countries, its business exceeds $200 billion.
j. Pollution and natural environment. Where, as many legal and ethical violations have limited
impact, in case of environment issues, the effects of abuses can be far reaching and long
term. Eg. Global warming has increased pressure on companies to increase energy efficiency
pressure from environmentalist also ordering companies to reduce supply of wood and paper
eventually stopping de forestation.
UNIT – 5
CORPORATE GOVERNANCE
DEFINITION AND MEANING
Cadbury committee defines “Corporate governance is defined as the system by which companies
are directed and controlled”.
SCOPE OF CORPORATE GOVERNANCE
They are several scopes of corporate governance and they play a great role, all the issues are
inter related, interdependent to deal with each other, each issue have different priorities in
each corporate bodies.
A. Value based corporate culture. It is a set of beliefs, ethics, principles which are inviolable. It
can be motto. It is a short phrase which is unique and helps in running organization. It can be
a vision, dream, mission, purpose, objective, goal, and target. For any organization to run in
effective way.
B. Holistic view. The holistic attitude of a corporate culture helps to cater all aspects to govern a
company as the company needs to be socially responsible, profit oriented, accountable to
investors, beneficial to governments, etc.
C. Compliance with laws. Those companies which really progress, have ethical values and they
abide and comply with laws of Securities Exchange board of India (SEBI), Foreign Exchange
Regulation Act, Competition Act 2002, Cyber Laws and Banking Laws, etc.
D. Disclosure, transparency and accountability, these are important aspect for good governance.
Timely and accurate information should be disclosed on the matters like the financial
position, performance etc. transparency is needed in order that government has faith in
corporate bodies.
E. Corporate governance in HR. employees and staff are just like family. Every individual
should be treated with respect, his achievements should be recognized, and each individual
should be given best opportunity to prove their worth.
F. Innovation. Every corporate body needs to take risk of innovation, that is innovation in
products in service, research and development (R & D) development need to be set up for
this purpose.
G. Corporate governance helps judicial reforms. Changing times of globalization and

liberalization need reforms in judicial systems, HR & Marketing which results various
judicial reforms creating sound judicial system.
H. Help Indian companies to become global. In today’s age of competition and due to
globalization, several Indian corporate bodies are becoming global grants which are possible
due to good corporate governance.
I. Lessons from corporate failure. Every story has a moral to learn from, every failure has
success to learn from, good CG will learn from failures and move to path of success.
BOARD OF DIRECTORS
Director is a person who is in charge of an activity, department or organization. He/she is a
member of board, that manager or oversees the affairs of a business. In other words director
is a person who leads, manages and supervises an organization, program and project.
Composition of board of directors
A. BOD carry day to day affairs. The board of directors are appointed to act on behalf of the
shareholders to run day to day affairs of business. The BOD is directly accountable to
shareholders.
B. BOD must provide report. At annual general meeting the directors must provide a report to
shareholders on the performance of the company, what its future plan and strategies and
submit themselves for re-election.
C. Directors should possess knowledge and experience. Since directors act behalf of
shareholders to manage company, it is expected that they possess complete knowledge of
technical and legal aspects of business besides being generally smart and hyper active.
Further he is also aspect to be a man of ethical principles for the reason that he handles public
finance.
D. Directors should understand obligation. Director should fully understand his obligation and
practice with a commitment to create long term values to the business and shareholders,
which would further lead to growing confidence of shareholders and investors, thereby
creating brand image.
E. Size of the board. It is a challenge how to fill all needs without weighing down board with
too many members. Guising the boards’ ideal size takes careful thought if it is too large some
members may feel disengaged and decision making becomes cumbersome. If the board is too
small, board members may be over burdened and board may not have breadth of prospective,
expertise and other resources, according to board source survey of chief executive the size of
average board is now about 17 members.
F. Size also depends on type of organization and activeness of members. Size of organization
depends on revenue, expenditure, source of funds, programs or services that organization
offers, it also varies on activeness of the members of board, some organizations have very
active board members which allows the board to accomplish a lot with only few members.
G. No general rule or consensus on the size. Whether a small board is better or large there is no
consensus, it depends on facts and circumstances, generally small boards are more intimate
and congenial, hence decisions can be effective and quick.
Larger boards have more people to provide technical expertise and assistance with more events
and funds but the negative side is that it has potential for more disagreements and discord.
H. Structure is important in governance. Since structure defines the shape and boundaries of an
organization and the inter-relationship between its elements. Structure enables individuals to
locate themselves in the company and identify their own interrelationship with the support of
job description, structure enables employees to identify the people to whom they owe
services and from whom they may expect support.
BENEFITS OF CORPORATE GOVERNANCE
1. Competitive advantage. Competitive advantage growth naturally when a corporate or its

services facilitate the creation of value for its buyers. Creating competitive advantage regains
both vision to innovate and strategy to manage the process of delivering value, good CG will
accommodate opportunities and threats and compete for the future.
2. CG presents fraud and malpractices. The code of best conduct, policies and procedures
governing the behavior of individuals of a corporation form point of corporate governance.
This enables corporation to compete more effectively and prevents fraud and malpractice that
destroy business from inside.
3. Providing protection to share holders. CG is rules that focus on transparency of information

and management accountability. It imposes a duty of trust on management to act in the best
interest of share holders and properties disclose operations. It is important when ownership
and management are in different hands.
4. Enhancing value of enterprise. Improved management accountability and operational

transparency fulfill investor’s expectation and confidence on management and corporations
and return increase the value of corporation.
5. Ensuring compliance of laws and regulations. With development of capital market and
increasing instruments by share holders, jurisdictions around the world have been developing
comprehensive regulatory frameworks to protect investors. Number of rules and regulations
addressing corporate governance has been released.
6. Minimizes wastages, corruption and risk. With adequate CG, thee management do comply
with every statutory regulation there by leaving no room for corruption by bureaucracy or
inspection team, further there is no factor of risk involved as there is proper insurance cover.
7. It helps in brand formation. As it is said ethics and profits go to gather, good CG would help
company to grow over a period of time there by creating a brand image known for holistic
and comprehensive development.
LIMITATIONS OF CORPORATE GOVERNANCE

A. Different roles for board and management. The business in manage by board under CEO, but
the ownership is with shareholders, as per it the board has following functions.
 Select CEO, evaluate him and decide his salary.
 Over see the conduct of the company and objectives.
 Render advice and counsel to top management.
 Identify candidates and recommend to be appointed as directors.
 All other functions required by law.
B. Illegal inside trading. The term corporate insiders refers to corporate officers, directors and
employees because they may have access to confidential, non public information about the
corporation that might affect the value of its share, insider, who possess such information do
inside trading, thereby put outside traders into financial disadvantage.
C. Misleading financial statements. There are ways to present factually inaccurate information
on financial statements to mislead the investors, the picture financial analyst paints can either
be encouraging or mislead to the public.
D. Costs of regulation. The abuse of corporate governance has triggered the enactment of large
body of state and federal laws designed to present such abuses from recurring compliance
with these laws can be burdensome and expensive to the corporation.
E. Rigidity in accounts. There may be a trend towards rigidity in applying the accounting
standards. The demand for standards comes largely from the insatiable appetite for rules.
F. Directors and executives remuneration. This is one of the mixed and annoyed issues of
corporate governance that come to the center stage during the massive corporate failure in
USA between the years 2000 to 2002. Executive compensation has also in recent times
become the most visible and politically sensitive issue relating to corporate governance.
G. Composition of the board and related issues. A board of directors of a limited company to be
responsible for the policy of the company. Their composition refers to the number of
directors of different kinds that participate in the work of the board. Executive director is also
a member of board of directors, while a nonexecutive director is independent and free from
any business or other responsibilities and could materially interfere in exercise of decision
making of board.
H. Role of CEO and Chairperson. The role of CEO is to lead the senior management team in
managing enterprise, while role of chairperson is to lead the board and evaluate
responsibilities of senior executives. It is now increasingly being realized that the practice of
combining the role of the chairperson with that of the CEO is done in countries like US and
India leads to conflict in decision making and too much concentration of power in one person
results in unsavory consequences.
CADBURY COMMITTEE ON CORPORATE GOVERNANCE, 1992
The standard objective of Cadbury committee was to help raise the standards of corporate
governance and the level of confidence in financial reporting and auditing by setting out
clearly what it sees as the respective responsibilities of those involved and what it believes is
expected of them.
The committee investigated the accountability of board of directors to shareholders and to the
society. It submitted its report and associated “code of best practice” in December 1992,
where in it spelt out the methods of governance needed to achieve a balance between the
essential powers of the board of directors and their proper accountability.
The resulting report and associated “code of best practices” was generally well received while
the recommendation themselves were not mandatory, the companies listed on the London
stock exchange were required to clearly state in their statement of accounts whether or not
the code had been followed. The companies, which did not comply, were required to explain
the reason for the lapse.
The Cadbury code of best practices had some recommendations. They are recommendations in
the nature of guidelines directors, executive directors and those on reporting and control.
Recommendations of Cadbury committee
1. Relating to board of directors
 The board should meet regulatory, retain full and effective control over the company and
monitor executive management.
 There should be clearly accepted division of responsibilities at the head of a company, which
will ensure balance of power and authority, so that no individual has unquestioned power of
decision.
 The board should include non-executive directors of sufficient caliber and number, for their
view to carry significant weight in board’s decisions.
 The board should have formal schedule of matters specifically reserved for its decision to
ensure control of company is in its hands.
 There should be agreed procedure for directors in furtherance of their duties to take
independent professional advice, at companies cost.
 All directors should have access to the advice of and services of company secretary.
 It recommended for setting up of an audit committee with independent members.
2. Non executive directors. The non executive directors should bring an independent judgment
to bear on issues of strategy, performance, resources, including key appointments and
standards of conduct. The majority of non-executive directors should be independent of
management and free from any business or other relationship which could materially
interfere with the exercise of their independent judgment.
3. Executive director. There should be full and clear disclosure of directors’ total revenue and
those of chairman and highest paid directors, including pension, contributions and stock
options, in the company’s annual report, including separate figures of salary and performance
related pay.
4. Financial reporting and control. It is the duty of the board to present a balanced and
understandable assessment of their company’s position, in reporting of financial statement
for providing tree and fair picture of financial reporting. The board should maintain
professional relationship with auditors.
KUMARMANGALAM BIRLA COMMITTEE ON CORPORATE GOVERNANCE (2001)
SEBI had constituted a committee on May 7, 1999 under chairmanship of Sri Kumarmangalam
Birla, then member of SEBI Board to promote and raise standards of Corporate Governance.
There recommendations were applicable to listed companies, their directors, management

employees, and professionals associated with such companies and other corporate bodies.
The major recommendations of Birla Committee on corporate governance are;
The board of directors should have optimum combination of executive and non executive
director with not less than 50% of board consisting of non executive directors.
Board meetings should be held at least four times in a year with maximum time gap of four
months between two meetings.
The board should setup a remuneration committee to determine the company’s policy on
specific remuneration packages for executive directors.
The board should setup qualified and independent committee.
Companies should be required to give consolidated accounts in respect of all then

subsidiaries. Company having multiple lines of business should be segmental reporting.

The management discussion and analysis report should be submitted to share holders with
industry structure, opportunities and threats and product wise performance.
Companies should arrange to obtain certificates from auditors and send to stock exchange
and all shareholders.
NARAYAN MURTHY COMMITTEE
The SEBI appointed a second committee under chairmanship of N R Narayan Murthy, and board
composition. The objective was to examine and recommend amendments to maintain high
standards of corporate governance and to look beyond CG as only procedures and is
implemented to protect share holders. The recommendations of Narayan Murthy Committee
are;
 Audit committees should consist of members who are financially literate, that is ability to
read and understand basic financial statements.
 Audit committee of listed companies should review the financial statements and certify that
they are true and report any material deviations.
 A statement of all transactions with related parties should be placed before audit committee
for formal approval.
 Procedure should be in place to inform board members about the risk assessment and
minimization procedure.
 To lay down code of conduct, for all the board members and senior management.
 Non executive director’s compensation should be fixed by board and should be approved by
the share holders.
GREEN BURY COMMITTEE 1995
This committee was set up in January 1995 to identify good practices by the confederation of
British Industry (CBI), in determining directors’ remuneration and to prepare a code of such
practices for use by public limited companies of United Kingdom. The recommendations are;
 Aimed to provide an answer to the general concerns about the accountability and level of
directors pay.

 Argued against excess statutory control and for strengthening accountability by determining
directors remuneration, reporting to shareholders and greater transparency in the process.
 Produced the Green Bury code of best practice which was divided into the following 4
sections.
 Remuneration committee
 Disclosures
 Remuneration policy
 Service contracts
The green bury committee recommended that UK companies should implement the code as set
out to the fullest extent practicable, and also submit annual reports.
Investor’s institutions should use their power to ensure that the best practice is followed.
PAUL RUTHANN COMMITTEE
This committee was constituted later to deal with the said controversial point of Cadbury report.
It set aside Cadbury proposal on the grounds of practicality. It restricted the reporting
requirement to internal financial control only as against “the effectiveness of company’s
system of internal control”, as said by code of best practices in Cadbury report.
The final report submitted by the committee chaired by Ron Hamper had some important and
progressive elements, notably the extension of directors’ responsibilities to all relevant
control objectives including business risk assessment and minimizing the risk of fraud.

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UNIT – 1

SCOPE/IMPORTANCE OF BUSINESS ETHICS

1|Page New Horizon College - Kasturinagar

1. Transactional ethics. Maintenance of relationships is all to be considered as Transactions.

2|Page New Horizon College - Kasturinagar

4. It is systematic. It is a systematic handling of values in business and industry as different

3|Page New Horizon College - Kasturinagar

7. It is specialized study. It is a specialized study of moral right or wrong in a particular

FACTORS INFLUENCING BUSINESS ETHICS

 Stages of moral development. Factors influencing business ethics at individual or personal

 Opportunity. Together organizational culture and influence of coworkers may faster

ARGUMENTS FOR AND AGAINST BUSINESS ETHICS

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 Responsibility of Government. Welfare of the society is the sole responsibility of the

 Conflicting considerations of private market mechanism and social responsibility.

 Disregard of Market Mechanism. Market mechanism is the appropriate way to allocate

BASICS OF BUSINESS ETHICS

 Benefits have to extend to all stakeholders of the business.

 Emerging Business Ethical issues and management concerns, stakeholders’ relationships,

 Ethics as dimension of Social Responsibility

 Understanding ethical decision making and Corporate Governance.

 Individual factors like moral philosophies, moral development, etc.

 Ethics Program Audit and Implementation in the business.

 Stress Management of employees at every level of the organization.

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CORPORATE SOCIAL RESPONSIBILITY

 The decreasing responsibility of government. In the past, governments have relied on

 Transparency. There is a growing demand for corporate transparency from stakeholders,

 Crisis Management Cycle. Preparation – Management – Evaluation. Preparation consists

 Planning in detail for responses to as many potential crisis as possible.

 Establishing and training a crisis management team or selecting an external crisis

 Involving stakeholders as possible in all planning and action stages.

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FEATURES OF PERSONAL ETHICS

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4. Anger is an emotional response related to one’s psychological interpretation of having been

6. Gratitude, thankfulness, gratefulness or appreciation is a feeling acknowledgement of a

8. Humor is the quality of being amusing or comic, especially as expressed in literature or

Promoting happiness at different places.

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 Practice open communication. Be transparent, be honest, be real and be constructive.

 Promoting happiness at home.

 Promoting happiness in society.

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The importance of Karma Yoga

It is been summarized as follows.

 Karma yoga is concerned with the correct way of doing work.

Important teachings of Karma Yoga

Karma yoga can be presented in cycles of 4 actions.

Suggestions for proactive person;

1. Self respect, look at you and ask some questions.

Need some attention?

Whether beneficiary of work as alone or group?

3. Try to prevent problems from ever arising.

4. Develop a mindset that looks to solve problems instead of dwelling on them.

5. Get and stay ahead of less urgent, day to day tasks.

6. Know which tasks are priorities and which can wait.

7. Eliminate any task that is unnecessary.

8. Evaluate your procedures and processes as you use them.

9. Look for ways to automate routine tasks.

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‘Management Ethics’ is related to social responsiveness of a firm.

It is a standard of behavior that guides individual managers in their works.

 ETHICAL RESPONSIBILITIES TOWARDS CONSUMERS.