ETHICS AND GOVERNANCE

MBA CLASS OF 2021

 About the Speaker
• Qualified Chartered Accountant/Cost Accountant/Company Secy
• Industry experience of 35 years mainly in Oil and Gas
• Was Director and CFO of Bharat Petroleum
• Rich experience in various facets of Finance, IT,Governance,
Organisational restructuring ,M&A, Strategy
• Presently Professor in TSM in Finance - teaching Ethics & Goernance
and Corporate FInancing and Funding Decision (Elective)
 About the Course
• Will cover Ethics, Corporate Governance, Sustainability and CSR
• 3 credit course - 24 sessions
• The evaluation will be MCQs
• Mid Term (40)/ End Term)40)/Quiz(15)/Attendance(5)
• All Presentations will be uploaded in Moodle
• Recommended book - Being Ethical - Prof Manikutty , IIMA
• HBR cases
 Learning outcomes

• Understand ethics and the factors that shape a manager’s ethical

decision making.

• Describe the principles of good Corporate Governance

• Understand the importance of sustainability and its implications

• Understand corporate social responsibility and explain how to

evaluate it along economic, legal, ethical, aspects
Foundation of Ethics & Governance

What is Character
Mahatma Gandhi on Ethics
Ethics in simple terms means
• MBA programs are the breeding ground for the future’s next
international leaders and thus—for better or worse—direct
contributors to a slew of high-powered, ultra-influential positions.
• Morality is not something you can hang on a hook like your coat when
you show up to work; we cannot split our ‘good’ personal selves from
our work identities.
• students need to connect with their personal values when faced with
an unexpected—and potentially dangerous—situation on the job. This
consistency “contributes to the building of character
 Basics of Ethics

• Ethics has its origin from greek word - ethos which means character or
custom - distinguishing character,sentiment, moral nature or guiding
belief , of a person, group or institution
• Synonyms of ethics are conscience, moral code, morality ,moral values
or principles , rules of conduct or standards
• Principles of conduct within organizations that guide decision making
and behavior
• Good business ethics is a pre-requisite for good management
• The study of business situations, activities, and decisions where issues
of right and wrong are addressed
From sharma lectures add her the key points
• Economist says it is not clear whether ethics can be taught?
• Are not taught the moral foundations of ethical busines practices
• Ethics courses help well intentioned students but they flounder when
faced with results vs honesy in the actual work place
• teaching ethics in today 's india - you may laugh but reality is the analogy
of a tree which is fading but if you pour water tree may revive
• Transparency international ranking of india is 80 - corruption perception
index - most corrupt country in Asia
• Self introspection or objectively self critical is needed in ethical behaviour
• Relativism - escape route - this behavior is fine in one situation but
not in other situation - this is escapism
• Simple questions for addressing any issue
• What is ethics
• Why ethics
• How to behave ethically and integrate into ones life
• When - all the time
• Where - everywhere
• Who- I have to behave ethically
• inner drive is key to behave ethically -convince youtsels
• why should i behave ehically
• why people behave unethically
• greed biggest motivator for unethical behaviour
• self interest
• selfishness - difference - old lady being crossed the road - rob the
lady and make her cross the road - win lose and win win
• ethical behaviour is in your self interest
• unethical behaviour will be rewarding but you think carefully,
objective and honest to you , you will conclue ethical behaviour is in
your interest and unethical behaviour will be harmful to you and your
near and dear ones
 Basics of ethics
• Future Managers of business should imbibe ethical values
• Ethics reflects a society's notion about the rightness or wrongness of
an act
• Business ethics is the sum total of principles and code of conduct
businessmen are expected to follow
• Ethics is a branch of philosophy and is considered a normative science
because it is concerned with the norms of human conduct
• As against formal sciences (maths and logic), physical sciences (physics
and chemistry) & empirical sciences (economics and psychology)
 Conclusion

There is nothing called business ethics but personal ethics is

what determines the ethics in the business as organsiations are
run by people.

A strong moral compass or moral character with values is what

will will determine the nature of the organisation as to whether
the same is ethical or not which ultimately gets the trust of the
society in which it exists.
 Corporate Governance

• Root of the word governance means “gomermate” which means to

steer.
• Corporate governance means to steer the organisation in the desired
direction . This responsibility lies with the board.
• There is no universal definition but at a broader level it means set of
system and procedures , policies, standards, procedures put in place
by a company to ensure relationship with various stakeholders is
maintained in a honest and transparent manner
 Pillars of corporate Governance
Accountability
Ensure that management is accountable to the Board
Ensure that the Board is accountable to shareholders
Fairness
Protect Shareholders rights
Treat all shareholders including minorities, equitably
Transparency
Ensure timely, accurate disclosures
Independence
Procedures and structures are in place
Avoid conflicts of interest
Independent Directors are free from the influence of others
 Why Corporate Governance
• Better access to external finance

• Lower costs of capital – interest rates on loans

• Improved company performance – Sustain for long period

• Higher firm valuation and share performance

• Reduced risk of corporate crisis

 Need for Corporate Governance

• To create a culture of transparency , accountability and disclosure.

• It refers to compliance to moral and ethical values, legal frameworks
and voluntary adopted practices.
• This enhances customer satisfaction and shareholder value and
wealth
 Elements of Corporate Governance

• Good Board practices

• Control Environment

• Transparent disclosure

• Well-defined shareholder rights

• Board commitment
 Conclusion

Corporate Governance will be successful only when the individuals who

don the board positions and top management , auditors, act morally
and ethically and are men of Character and Integrity

Any no of laws and regulations will not bring good corporate

governance as is evident from the numerous scandals and scams in
corporate sector through out the world inspite of the stringent laws
that exist in respective countries
 Meaning of Sustainability
• It is a broad concept that balances the needs of the economic growth, social
equity, and environment protection

• In 1987 UN world commission on environment and development introduced this

concept.(Brutland report)

• It indicates the needs of the present generation are met without compromising
the needs of the future generation.

• OECD recognised that this cannot be left only to government regulators and policy
makers but needs the support of the industry
 Fundamental principles of Sustainbility
• Need to preserve resources for future generations
• Use of natural resources in a prudent manner with minimal impact on
nature
• Take into account impact on other countries / state
 Benefits of SD

• Increase in reputation and brand value

• Gaining competitive advantage
• Compare bench marking against competition
• Increasing transparency and accountability
• Increase profitability
 Conclusion

• Sustainbiity is not a brand building exercise but should be internalised

by the all the level of management
• Top management has to set the tone at the top and lead the effort
 Corporate Social Responsibility

• The impact business has on the society at large and the societal
expectations from the business.
• Originally philanthropy is the root of CSR.
• CSR approach has to be holistic and integrated with core business
strategy for addressing social and environmental impact of business
• Needs to address the needs of all stakeholders and not only
shareholders
 Conclusion

• CSR spend should not be seen as burden by the company but

viewed as its contribution to the society to which it belongs.
CSR can also motivate employees who can volunteer to be
part of the CSR of the company