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Project Report Self Regulation and Business Ethics
Legal Aspects of Management

Submitted By
Moitrayee Majumdar (wmp7104) Nitin Kumar Tonk (wmp7105) Vikram Arora (wmp7136) Dipyaman Paul (wmp7093) Dibyendu Dhara (wmp7092)



Introduction 2. He will help other members in finalizing the project.Project Report on Self Regulation and Business Ethics Tasks Assignment: Note: Vikram Arora is the coordinator and responsible for coordination among group members as well as with the professor. Use this template. Your Views. Compliance and Enforcement mechanism and their effectiveness 5. Role of Judiciary (Nitin) 6. Role of NGOs/Civil Society Groups and Business/Industry Associations² (Dibyendu) 7. Dead Line is Sunday evening (20/11/11). Noida Campus Page 2 . Conclusion (Vikram) & Suggestions IIM Lucknow. Status of the problem/ International and national (Moitrayee) 3. 1. Legal measures adopted ---------------------------------------(Dipyanman) the project is relevant for you a business manager 8. text your inputs and send it to Vikram for final compilation.

in turn making it easier to justify self-regulation. business ethics. seemingly little attention has been paid to how the nature of rules may or may not affect ethical decision making. largely because of this assertion of common interest. than on development or enforcement of any existing regulations. and the lack of recognition of the role of criminal law. In a global economy. such as that associated with the private service sector. this project explores how several characteristics of rules may interface with the process of reaching and implementing ethical decisions. Drawing on work in the law. ³business itself is more pervasive and more powerful.´Regulating self-regulation´ has always meant more emphasis on persuasion. Noida Campus Page 3 . training and education.Project Report on Self Regulation and Business Ethics 1 INTRODUCTION Despite the recent rash of corporate scandals and the resulting rush to address the problem by adding more laws and regulations. its assumption of common interest in the workplace. The idea of self-regulation within legislative parameters can be interpreted as a move away from state responsibility and as a form of deregulation. made promotion for corporate social responsibility (CSR) increasingly attractive for government agencies.´ while at the same time the power and scope of government was seen to be dismissed and heightened media activity led to far reaching criticisms of business. such as collaboration. IIM Lucknow. which ignores unequal power between capital and labor. management and self regulations. Such a relationship would have practical implications for regulatory policy and managers of organization. Alongside a deregulatory tendency ushered in by globalization and economic liberalism and not unconnected with it was a growing pressure on business to behave in a socially responsible manner. The self-regulatory approach in general include its inability to take account of relatively new forms of work. As well the move to a goal setting approach to employer responsibilities with fewer resources allocated to say inspection and enforcement in favor of more workplace initiatives. outsourcing work intensification and the casualization of work.

for example. it is because of the dictates of your conscience.Project Report on Self Regulation and Business Ethics 1. For example. It basically differs from ethics in its option to use force if and when necessary and by the fact that it is backed by power. Noida Campus Page 4 . there is no law to prohibit you from doing so. it is ethical to love and respect your parents. There are many situations in life. if your next door neighbor has just today lost their only son in a motorcycle accident. This is done to ensure traffic control and the traffic discipline. just when you wanted to celebrate the birthday of your only son with gaiety. not because of the dictates of the law. There are many laws which do not involve any ethicality questions . Your conscience. but a question of ethics is not involved here. Laws are. IIM Lucknow. Law represents the minimum standards of behavior expected from people.1 LAW AND ETHICS Law is a code of conduct which the authority in power prescribes for society. But it is not easy to accept that laws can be the foundations of ethics. not all laws have moral choice. fair and moral. Again. ethical behavior encourages us to do certain things and explains the benefits. For example. If you decide not to. The law has no role to play in such a situation. Another aspect of the legal system is that it prohibits us of certain actions. music. where just following the law does not make one ethical. the law tells us not to steal. speak the truth. we are required to walk on the left hand side of the road.that is legal punishment. your ethical value system and your principles forbids you to rejoice when someone else nearby is in sorrow. It also spells out the negative consequences of our not following the law . i. However. Merely following the law. but ethics tells us to do good. except when they are deliberately mistreated by their children. by and large. enjoyment and much merry making. not to kill. For example. all moral and ethical actions do not involve the law. the positive aspects of this ethical behavior. but there is no law for it.. guests. or even that laws can ensure ethical behavior.e. does not make one ethical. Moreover. help others in distress.

So. who is guilty and how shall justice be done. there is no specific outcome of an unethical action. the law is a universally accepted. on the other hand. the law clearly specifies what action would be taken against a person if he or she violates the provisions of the legal system. For example. 1. But. An unethical action may have many repercussions and widespread consequences. whereas the law is more concerned about negative behavior. whereas ethics do be not yet have a universally accepted. published document. but they are generally considered to be unethical in our society and are commonly covered in codes of ethics. consistent and published concept . not always the same and not universally accepted. in case of ethics. These include parking laws. dress codes and other laws covering similar matters.2 Relationship between Ethics & Law Perhaps the easiest way to think about the relationship between business ethics and the law is in terms of a Venn diagram. the domain of ethics IIM Lucknow. Some Laws have nothing to do with morality because they do not involve serious matters.Project Report on Self Regulation and Business Ethics Thus there is a positive aspect inherent in ethical behavior. Again. we can see that there is a great deal of overlap between what's legal and what's ethical. Generally speaking. Yet another aspect of the law is that ethics precedes the action. the law follows it. If we think of the law as reflecting society's minimum norms and standards of business conduct. Noida Campus Page 5 . most people believe that law-abiding behavior is also ethical behavior. But there are many standards of conduct agreed upon by society that are not codified in law. What would be the consequences of an unethical action is not very clear. Ethics tells us what we should strive to develop in ourselves (high moral standards). Moreover. law tends to be more concerned with the consequences of the negative action .it is abstract.what punishment would follow. culture specific and left to the individual for interpretation and action. conflicts of interests may not be illegal.

but not completely. theft. Finally there are times when you might encounter a law that you believe is unethical. or unethical but not covered by law. It is conceivable to think of something as being legal and unethical. IIM Lucknow. For example. the legal and ethical domains certainly overlap to a large degree. to eliminate and are consequently much more dangerous and threatening to business. Covert ethical problems are more complex. marketing and personnel policies. not so long ago racial discrimination was legal in the United States.Project Report on Self Regulation and Business Ethics includes the legal domain but extends beyond it to include the ethical standards and issues that the law does not address. it should possess the following characteristics. types of problems occur in corporate acquisitions. capital investment. LAW Ethics Overlap area 1. For a decision to be ethical. Overt ethical problems like bribery.that which is morally correct and due. 2. Noida Campus Page 6 . They are difficult to locate. Therefore. market war etc.3 NATURE OF ETHICS IN BUSINESS 1. It should be: (a) RIGHT. In business activities. sabotage etc are clear for everyone to see and are generally considered reprehensible. most ethical questions could be of two types---overt and covert.

4. Hence ethical decisions do not have unique solutions. & d. It is abstract in concept. mainly because: a. but a multitude of alternatives.Project Report on Self Regulation and Business Ethics (b) EQUITABLE-that which is just and equal. Hence the ethical practices of people are also different. b.e. 2 lac per day. IIM Lucknow. (d) PROPER-that which is appropriate and acceptable. The value system of people depend upon their background & childhood experience. or work may not be stopped at all. However. but a different manager. The background & experience of people are vastly different. For example. (c) GOOD-that which brings in the highest good for all concerned. it does not have a structured format or framework. (f) JUST-that justice is not only done. 1. if operations are stopped. Hence it does not have universal acceptance. Work will definitely be stopped to search for the missing man. (e) FAIR-that which is honest and due. how long should work be stopped. Ethics is unstructured. will depend upon the value system of the manager & what according to him is the ethical thing to do. Ethical decisions differ with the individual perspective of different persons. Each person views the ethical question in terms of his or her own frame of reference. if the man is not found within a day or two. 3. work will be stopped only unto what that manager thinks is the ethical course of action. The very concept of being ethical means that it results in some well for the larger society and not just for oneself. In case of a Dam building project. but is also seen to have been done. the company loses Rest. Given the same situation. One day during work. And this frame of reference is the person¶s own unique value system. Noida Campus Page 7 . it is found that a worker is missing inside the dam. i. Ethical decisions should express some obligations to others. Moral standards depend upon our value system. inspire of the losses to the company.. Ethics depends upon our moral standards. c.4 CHARACTERISTICS OF BUSINESS ETHICS 1.

In other words. The consequences of both may not be immediate and may not be clear. where it is done. during a vote of confidence of a government. until it disturbs the water in the entire pond. There has to be a trade-off. Every person is individually responsible for the ethical or unethical decision & action that he or she takes.If you want some benefits for your organization or for yourself. profits & responsibilities are two ends of a single spectrum. something positive would result from an ethical decision and something negative from an unethical one. Maximum concern for task or productivity cannot go hand in hand with maximum concern for people. he is doing so. 5. One cannot get everything for nothing. is taken on behalf of the entire government. results in a decision being ethical or unethical. The same is the case with ethical or unethical actions. somehow. The only certainty is that somewhere. not for his own sake alone. One ethical action is like a pebble thrown into a pond of water. but have widespread consequences. 4. maximum profits cannot go hand in hand with maximum social responsibilities or maximum welfare obligations. sometime. In case of parliamentary democracy. but affect a wide range of other situations as well. will depend upon his own conscience & upon what he is comfortable with. Similarly. unethical decisions do not end in themselves. Taking an ethical or unethical decision cannot be an impersonal activity as it involves the person¶s individual & unique value system along with his moral standards. The consequence of most ethical decisions is not clear. you need to incur some costs or make some sacrifice. a compromise.Project Report on Self Regulation and Business Ethics 2. And this compromise. but to save the entire government. Ethical decisions are not limited only to them. Most ethical decisions involve a trade-off between costs incurred & benefits received.For example. how it is done. Similarly the single unethical action is not limited to the individual in the company who commits it. Every person has to take decisions. if the prime minister of the country pays bribes to a few independent MPs to buy their votes in the favor of the government. Noida Campus Page 8 . His own value must justify his actions . it produces endless ripples in the pond. the unethical action & decision of bribery. & whether this decisions are ethical or unethical. but spreads within the entire organization and one unethical organization affects the entire industry. It needs to be clearly understood that costs & benefits. 3. & not merely on his own IIM Lucknow. Similarly. They are ambiguous in nature. Both cannot be mixed simultaneously .

Yet he alone is personally & individually responsible for the crime. Even under compelling situations. Ethical decisions are voluntary human actions . & not his entire government. 2 Status of the problem/ International and national Human rights: y Business should support and respect the protection of internationally proclaimed human rights. y Eliminate discrimination in respect to employment and occupation. y Encourage the development and diffusion of environmentally friendly technologies. Ex: in Hindu mythology Rants (Sage Valrico).unglobalcompact. 6. Environment: y Business should support a precautionary approach to environmental challenges. Hence all ethical or unethical actions are supposed to result from voluntary human actions & not from situations beyond their control.A person cannot escape his personal liability for his crimes by saying that he was forced to pay the bribe in order to get the job. y The effective abolition of child labor. y Make sure they are not complicit in human rights abuses. many men have refused to divert from the ethical way of life. no one can excuse himself or herself of his or her actions by citing force of circumstances or pressure of men for his or her unethical activates. including extortion and bribery (Source: www. Labour: y Business should uphold the freedom of association and the effective recognition of the right to collective bargaining.Project Report on Self Regulation and Business Ethics behalf. IIM Lucknow. Noida Campus Page 9 . Anti-corruption: y Businesses should work against all forms of corruption. y The elimination of all forms of forced and compulsory labor. All human beings have the freedom of choice & of free will. y Undertake initiatives to promote greater environmental responsibility.

and strict protection of the integrity of company-sponsored pension plans. Respect for the rights of minority shareholders.1 2. Commitments by the enterprise for contributions to pension plans. The board will act in a fiduciary capacity on behalf of all the shareholders. compensation. promotions. A number of basic principles typically guide the attitudes of successful enterprises toward their employees: y y y y y y Due regard for labor laws. Investors and lenders must be satisfied with the manner in which shareholders oversee the performance of management and participate in key decisions. IIM Lucknow.2 Delineating in the company charter the respective roles and responsibilities of both management and shareholders. RELATIONSHIP WITH EMPLOYEES Enterprises have an important responsibility towards their employees. A well-functioning board of directors who have the skills. Open communications with shareholders through the provision of audited accounts and information about the progress and operations of the company. These principles do not limit the right of an enterprise to enforce discipline on its labor force or to terminate workers in accordance with applicable law.1 Problem and Codes of Business Conduct CORPORATE GOVERNANCE: RELATIONSHIPS WITH SHAREHOLDERS A trusting relationship between management and shareholders is critical. Respect for the rights of workers to engage in union activity. Non-discrimination in the recruitment.1. the time. and the access to information needed to discharge its responsibilities effectively. Clearly stated and transparent policies relating to compensation. Transparency of voting rules. and other employment conditions. Commitment to adequate standards of worker health and safety. benefits. and promotion of employees.Project Report on Self Regulation and Business Ethics 2. Noida Campus Page 10 . Effective systems for consultation with employees on employment conditions and other issues that affect the employees.1. Sound principles of corporate governance include the following: y y y y y y 2.

In case of a commercial dispute. and Show tolerance for people of other cultures. Abide by all mandatory government and local regulations. Once the reputation of an enterprise is tarnished. licenses. Respect for the sanctity of rule of law. RELATIONSHIP WITH THE GLOBAL COMMUNITY 2. Caring for the environment is a responsibility of the enterprise towards the immediate community. a willingness to negotiate and compromise in order to reach an amicable solution. Abide by all applicable environmental laws and regulations.3 RELATIONSHIP WITH OTHER ENTERPRISES A relationship of mutual trust in which all parties benefit is the most significant aspect of relations between partners in joint ventures. Noida Campus Page 11 . To maintain a sound relationship with governmental authorities. A number of basic principles that typically promote mutual trust in business relations include: y y y y y Commitment to excellence in products and services. Commitment to gain respect and trust in all business relations. including abiding in a timely manner with decisions of any court. but it also extends to all communities and areas whose environment may be affected by the enterprise¶s activities.5 Be sensitive to concerns of the local population. contractual arrangements.Project Report on Self Regulation and Business Ethics 2.4 As a company is an integral part of the community in which it operates. races. enterprises must: y y y y Pay all taxes that are owed and due.1. arbitral panels. and make no attempts to improperly influence governmental decisions.1. or business relations with other enterprises. a sound relationship with the community is essential.1. The reputation of a company is its most valuable asset. and approvals required to do business. or other administrative bodies. it is very difficult to gain trust with the same or other business relations. and countries. RELATIONSHIP WITH GOVERNMENT AUTHORITIES Well-managed enterprises are law abiding enterprises. beliefs. Enterprises must: y y y y 2. Communicate with the local population. Deal with government authorities on an arm¶s length basis. Respect for the sanctity of contracts and business relations. IIM Lucknow. Obtain all governmental permits.

demand or accept a bribe.1. The enterprise must then take appropriate corrective action. offer or give a bribe. but will also protect enterprises that are subject to attempts at extortion.6 Principles concerning prevention of extortion and bribery are intended as a method of self-regulation by businesses. All enterprises should observe both the letter and spirit of the following rules: y y y No one may. and any demands for such a bribe must be rejected. Contributions to political parties or to individual politicians may be made only in accordance with applicable law. The voluntary acceptance of these principles by enterprises will not only promote high standards of integrity in business transactions. The board of directors of the enterprise should periodically review compliance with these principles. The business community objects to all forms of extortion and bribery. and in accordance with all applicable requirements for public disclosure of such contributions. y y y IIM Lucknow. and take appropriate action against any director or employee who acts in a manner inconsistent with these principles. Enterprises should take measures reasonably within their power to ensure that any payment made to any agent represents no more than an appropriate remuneration for legitimate services rendered by the agent. whether between enterprises and public bodies or between enterprises themselves. All financial transactions must be properly. directly or indirectly. No enterprise may.Project Report on Self Regulation and Business Ethics y y Establish transparent procedures regarding transactions engaged in by enterprises with any government agency or official or in dealings with any enterprise owned or controlled by a government agency or official. Bribery and extortion threaten democratic institutions and cause grave economic distortions. directly or indirectly. The highest priority should be directed to ending extortion and bribery involving politicians and senior officials. include appropriate provisions to ensure compliance with international or national codes against extortion and bribery. and In transactions with any government agency or officials or with any enterprise owned or controlled by a government or government official. Enterprises must take all necessary measures to establish independent systems of auditing in order to bring to light any transactions that contravene these principles. PREVENTION OF EXTORTION AND BRIBERY 2. and fairly recorded in appropriate books of account available for inspection by the board of directors as well as by auditors. that no part of any such payment is passed on by the agent as a bribe or otherwise in contravention of these principles. accurately. Noida Campus Page 12 .

and provide guarantees for confidential counseling. for an enterprise to live by sound business standards and ethical practices it must develop a culture that fosters such standards of integrity.Project Report on Self Regulation and Business Ethics 2. Employee training. Noida Campus Page 13 . IIM Lucknow. Steps that management and key shareholders may take to promote this positive attitude throughout the company include: y y y y The preparation and dissemination within the company of a code of conduct for employees.1. Encourage proper conduct and sanctions against misconduct. and Creation of an ethics office and ethics officers to advise and educate employees. This effort must be led by management and key shareholders.7 CREATION OF A CULTURE THAT FOSTERS SOUND BUSINESS STANDARDS AND CORPORATE PRACTICES Ultimately.

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