You are on page 1of 17

Creating an Ethical Organization Ankit kumar verma IITTM,Gwalior

it appears that it is a task laced with various problems. .Creating an ethical organization Is it possible to create an ethical organization? Can we make a corporation realize its objective of catering to the interests of all its stakeholders and yet keep its activities unblemished? In the present context.

High salary does not ensure Better Governance 3. Independent Directors and Malpractices .Problems in creating an ethical organization 1. Fraudulent Accounting 4. The problem lies in the mindset of people who man the corporations 2.

This promotes self-monitoring and sanctioning in an informal way and reduces the tendency to break rules. Selection of managers based on pro-social intrinsic preferences to ensure the conditional co-operation of other employees.Suggestions to Improve Corporate Virtue Three alternatives that can improve corporate virtue are: 1. and Employees’ willingness to contribute to corporate virtue by identifying and admonishing anyone resorting to fraudulent accounting must be encouraged. Managers must be paid a fair market wage for their overall performance. . Stronger emphasis on fixed salaries to reduce the temptation to cheat. 2. 3.

These participants are 1)the shareholders. 2)the management and 3)the board of directors.Role of Corporate Governance Corporate governance can be viewed as a set of arrangements internal to the corporation that define the relationship between the owners and managers of the corporation. Corporate governance relates to the working arrangement among various participants in determining the direction and performance of corporations. .

According to the OECD.What is corporate governance? The World Bank defines corporate governance as the relations among the owners. the management board and other stakeholders. . corporate governance specifies the distribution of rights and responsibilities among different participants in the company and spells out the rules and procedures for making and monitoring decisions on corporate affairs.

goals. norms and ways of solving problems by the members of an organization. . Each firm tries to develop its own corporate culture based on the values its founder wants to transmit in the work place. beliefs.Role of corporate culture Corporate culture is a set of values.

pro-poor and welfare activities. reaches out to enrich social life through it’s philanthropic. but these promote both goodwill and human welfare. environmentfriendly. .Role of corporate social responsibility Corporate Social Responsibility refers to “an organisation’s obligation to maximise its positive impact and minimize its negative impact on society”. Such philanthropic or social welfare activities are not required or normally expected of business. we say that it is socially responsible. When an organization goes beyond its economic goal of making profit to benefit its shareholders.

. communication with workers and its manner of enforcing discipline in the organization. The HRM department of a company plays a pivotal role in ensuring ethical behaviour through its role in training.Other influences in creating an ethical organization Ethical or unethical behaviour of individual employees are influenced at the workplace both by their own moral development and the influences that the organizational culture exerts on them.

a code of conduct and a statement of values. . a code of ethics. namely. inspirational in content and specifies clearly what is acceptable or unacceptable behaviour in the workplace and beyond.Developing and Executing a Comprehensive Ethics Programme A sound ethics programme should include the following six components: 1. when employees represent their organizations outside. It is a written document. Formal codes of conduct: Codes of conduct are statements of organizational values that comprise three components.

) 2. resolve ethical dilemmas in companies. Ethics Committees: develop an ethical policy for the organization and also investigate ethical infractions by employees. They raise concerns of ethical nature. . and in the context of these norms. develop ethical standards. formulate ethics policy. evaluate the company’s compliance with them.Developing and Executing a Comprehensive Ethics Programme (Contd. prepare or update codes of conduct.

) 3. Ethics Communication System: includes the facility for employees to post queries. get advice. .Developing and Executing a Comprehensive Ethics Programme (Contd. or report any wrongdoing. The objective of the ethics communication system is to: a) Communicate the company’s values and standards of ethical business conduct to employees. b) Provide information to employees on the company’s policies and procedures regarding ethical business conduct.

Developing and Executing a Comprehensive Ethics Programme (Contd. and d) Establish means of enquiry for employees to get in touch with and get advice from competent authorities. .) c) Put in place processes to help employees obtain guidance and to resolve questions regarding compliance with the firm’s standards of conduct and values.

.) 4. conducting training programme for employees. An Ethics Office with officer(s) to oversee the process and facilitate the communication of the policy to employees. developing and distributing a code of conduct for ethics. Ethics officers are responsible for: • • • assessing the needs and risks that an organizationwide ethics programme must address.Developing and Executing a Comprehensive Ethics Programme (Contd.

. taking action on possible violations of the company’s code.Developing and Executing a Comprehensive Ethics Programme (Contd. and Reviewing and updating the code.) Responsibilities of an ethics officer • • • • Establishing and maintaining a confidential service to answer employees’ questions about ethical issues. Making sure that the company is in compliance with government regulation. Monitoring and auditing ethical conduct.

Developing and Executing a Comprehensive Ethics Programme (Contd. Ethics training programmes: These programmes are aimed at ensuring ethical behaviour in an organization.) 5. . The basic objective of such a training programme is to help employees understand the ethical issues that are likely to arise at their workplace and to offer assistance in dealing with such issues.

To have and maintain an effective ethics programme calls for a continuous monitoring of the tools used and results obtained. decisive and impartial dealings with violations. . A corporation committed to ethics has to establish a disciplinary system that would ensure prompt.) 6.Developing and Executing a Comprehensive Ethics Programme (Contd. Consistent enforcement and pursuit of disciplinary system are necessary for achieving a sound and fruitful ethics programme.