Ethical Aspects of

Good Governance
 Corporate Governance Definition
• Corporate governance is the system of rules, practices and
processes by which a company is directed and controlled.
Corporate Governance essentially involves balancing the
interests of the many stakeholders in a company, and these
include its shareholders, management, customers, suppliers,
financiers, government and the community where the company
is working.
 Corporate Governance Definition
• In a narrow sense, Corporate Governance deals with maximizing the
shareholders’ wealth, and in a broader perspective, it considers the welfare
of all stakeholders and society.
• Corporate Governance also provides the framework for attaining a
company’s objectives, and it encompasses practically every sphere of
management from action plans and internal controls to performance
measurement and corporate disclosure.
 Following are the aspects which should be covered by
Management of any organization in its Corporate
Governance Policy:
1. Rights of Shareholders and equality treatment to
shareholders: Every Organization should respect the
rights of shareholders and should help them exercise
their rights properly, openly and effectively. There should
be proper communication by an organization aiming to
encourage shareholders’ rights.
Following are the aspects which should be covered by
Management of any organization in its Corporate
Governance Policy:

• 2. Other stakeholders: Organizations should fix their

responsibilities,e. legal, contractual, social, and market-
driven responsibilities, for shareholders including other
stakeholders such as investors, employees, creditors,
customers, suppliers, local communities and
policymakers.
 Following are the aspects which should be covered by
Management of any organization in its Corporate Governance
Policy:

• 3. Roles and responsibilities of the Board of

Directors: The board of any organization should be
inclusive of proper and sufficient management skills,
educational qualifications and understanding to review
of policies and challenges of management performance.
Furthermore, there should be a proper and appropriate
commitment.
 Following are the aspects which should be covered by
Management of any organization in its Corporate Governance
Policy:

• 4. Integrity and ethical behaviour: Integrity is an

important factor of success for any of the organizations.
Integrity is the fundamental requirement of the
organization, corporate officers and board members who
are required to follow the principle of integrity. Every
organization should develop its code of conduct for its
employees, executives directors and promoters,
respectively.
 Following are the aspects which should be covered by
Management of any organization in its Corporate Governance
Policy:

• 5. Transparency and Disclosure: Organizations should

follow the principles of transparency and disclosure for
the best interest of organizational stakeholders.
Transparency and disclosure are the responsibilities of
the board and management of the organization. This
function provides accountability to stakeholders.
 Ethics Under Corporate Governance

• Ethics is a conception of right and wrong

behaviour, defining for us when our actions are
moral and when are immoral so, therefore, ethics
is at the core of corporate governance, and
management must reflect accountability for their
actions on a global community scale.
 Business Ethics
• Business is the art and discipline of applying ethical principles to examine
and solve complex moral dilemmas. A business is considered to be ethical
only if it tries to reach a trade-off between pursuing the economic
objective and its social obligations.
• Ethical is all about developing trust maintaining it fruitfully so that the
firm flourishes profitably and maintain a good reputation. Trust leads to
predictability and efficiency of the business.
 Importance of Business Ethics
• Trust is used as an indicator variable of ethics. Basically, trust is three-
dimensional i.e., trust in supplier relationship, trust in customer
relationship and employee relationship.
• If any organization is maintaining a relationship of trust with its
stakeholders, then we say that the company is an ethical company.
• Tata Steel, Boeing, Ford and J&J are the organizations which follow the
principle of business ethics, therefore, the organizations are top in their
segment.
 Following things need to stop to increase the
ethical value of any organization:
• Bribery
• Coercion
• Insider Trading
• Conflicts of Interest
• Unfair Discrimination
• Political Donations and Gifts
• Presentation of false returns of income and statements
• Accumulation of profits by illegal means
 Stakeholders In A Company
• Internal Stakeholders: Internal Stakeholders are engaged in economic
transactions with the business. (For example, Directors, Shareholders,
Employees and Managers etc.)
• External Stakeholders: External Stakeholders are affected by or can
affect a business’s actions of any Organization (for example, the
Customers, Financial Groups, Special Interest Groups, Suppliers, Pressure
Group, Competitors, Business Support Group, Government, activist
groups and business support groups and media)
 How to maintain a relationship with
Stakeholders
• communication and trust, any organization can maintain a perfect
relationship among various internal and external stakeholders.
• Every organization should ensure that all the stakeholders are involving in
its decision-making process. Therefore, we can say that building and
maintaining a long-term relationship with stakeholders is based on two
fundamental principles i.e. communication and trust.
Management of any organization should do the
following things for Stakeholders Relationship:
• To encourage stakeholders participation in the decision-making process
• To provide timely information to Stakeholders
• To communicate with honesty
• To listen to stakeholder concerns
• To respect the diverse opinion
• To find a mutually beneficial solution
• To learn from each other
 Conflicts may arise as follows:

• The conflict between stakeholders groups

• The conflict between stakeholders groups, whereas one
is a client
• Companies interests may conflict with their
stakeholders
  Reasons for Conflict of Interests among
Stakeholders:
• Board wants more profit so the board may cut staff benefit services now conflicts arise between an
organization and its employees.
• The supplier wants full product price on time.
• Shareholders may get disappointed of overpaid remuneration payable to top management. Furthermore,
shareholders may argue for the rate of distribution of dividends or profit, and also employees may want
better benefits or wages.
• The government wants more revenue through Direct/Indirect tax.
• Local Community wants reservation in job opportunities provided by an organization.
• Investors want huge profit or best capital return on invested money.
• The customer wants high-quality products at affordable prices.
THANK YOU!!!