CORPORATE

GOVERNANCE
TOPIC: ETHICAL ISSUES IN CORPORATE
GOVERNANCE

Aditya Parekh – 1105 (Marketing)

Isha Badiyani- 1170 (HR)
Malay Agrawal – 1174 (Marketing)
Sauktika Panda – 1190 (HR)
Sharvary Bhrushundi – 1191 (HR)
Mayank Shandilya – 1206 (Marketing)
Nitin Agrawal -1237 (HR)
 Introduction to Corporate
Governance
Corporate Governance has evolved to control business activities which will always
lead to economic growth

Businesses could collapse for a lot of reasons but primarily because of the
dishonesty and greed of the employees

Corporate Governance comes into picture as it defines the responsibilities for all
the employees and also studies business decisions

It also defines the guidelines and standards for conducting business in compliance
with the code of ethics
Shareholder Activism – Ethical Issues
Ethics is a field of study dealing with what is right and what is wrong
Refers to examination of ethical problem that arise in business environment
Main objective of the business is to maximize the profit without compromising on Principles
Shareholder Activism is the way in which shareholders assert their powers as owners of the
company to influence the business operations
It includes not voting, private discussion, blogging, press campaign, etc
Sometimes is directed against larger shareholders
 Three Models of Management
Ethics
Immoral management
This type of management is devoid
of ethical principles and opposes
what is ethical. They care only
about their company and their goal
is to achieve profitability and
organizational success at any cost.
They exploit opportunities for
corporate gains
Moral management Amoral management
This type of management are casual
or careless about ethical
This type of management conforms considerations in business. Their
to high standard of ethical main objective is profit. They give
behaviour. They want to succeed by managers full power for profit
following ethical practices maximization
 Ethical Views of Corporate
Governance
 Unitarian view  Separatist view  Integration view
According to Unitarian view,
• Morality and ethics are
related to business According to Separatist view, According to Integration view,
• Shareholder activism • Business is to generate • Ethical behaviour and
against immoral profits and ethics and business are integrated
management and amoral morality do not form a part • Shareholder activism
management is ethical, as of any business against immoral
they bring positive change • Immoral management and management and amoral
to the company and gives amoral management is management is ethical, as
an opportunity to change ethical, because the these external forces guide
the management and this management is working the ethical behaviour of
ensures smooth running of towards generating profits business
the business
 ETHICAL ISSUES IN BUSINESS MARKETING

ETHICAL ISSUES IN BUSINESS ACCOUNTING

Fraudulent Financial
Reporting :- Most accounting
scandals over the last two
decades have centered on
fraudulent financial reporting.
Fraudulent financial reporting is
the misstatement of the
financial statements by
company management.
Misappropriation of Assets :-
On an individual employee level,
the most common ethical issue
in accounting is the
misappropriation of assets.
Misappropriation of assets is
the use of company assets for
any other purpose than
company interests.
Disclosure:- As a subtopic of
fraudulent financial reporting,
disclosure violations are errors of
ethical omission. While intentionally
recording transactions in a manner
that is not in accordance with
generally accepted accounting
principles is considered fraudulent
financial reporting, the failure to
disclose information to investors that
could change their decisions about
investing in the company could be
considered fraudulent financial
reporting, as well.
Penalties:- Penalties for violations of
accounting ethics laws have increased
greatly since the passage of the
Sarbanes-Oxley Act of 2002. This
legislation allows for harsh penalties
for manipulating financial records,
destroying information, interfering
with an investigation and provides
legal protection for whistle-blowers.
In addition, chief executives can be
held criminally liable for the
misreporting of their company..
ETHICAL ISSUES IN HUMAN RESOURCE MANAGEMENT

• The major objective is to improve the working condition of labors and to ensure that
they are well compensated
Represent • But, top executives feel that unions decrease the company’s productivity which might
Employees- affect the growth and profits of the company leading to non- performance of work
UNION

• This refers to the monitoring of phone-calls, emails and internet activities of employees by
employers as a result of which they feel there is lack of privacy
Privacy • This is done to ensure no confidential information is transmitted out of the organization and
of Employees the company has full right to access this information as per the law

• This is again a part of the privacy of employees where there is a person who raises an
alarm on the wrong doing within the organization
Whistle- • Wrong doing includes-violation of law, rules and regulations, fraud, any threat to
Blowing public, corruption, health/safety violation

• This is the responsibility of every organization but some companies consider their
investments to be a waste of money and do not provide safety
Employee • To enforce safety, there are various quality standards from ISO, but some organizations
Health & feel that investing in ISO is an expenditure, rather share money with the employees
Safety
ETHICAL ISSUES IN SALES AND MARKETING

• Some companies intentionally fix a high price to get maximum

1. PRICING- profits, even though the cost of production is less
Price discrimination and Price • Their main objective is to make money and they do not care about
Skimming the market segment who will be interested in buying their product
at a lower cost

• Some companies indulge in anti-competitive practices, like pricing

their product too low ensuring the products are sold and the
competitors lose market share and eventually back out
• This can also be viewed as an opportunity for the competitor to
2. Anti- Competitive Practices price the product which is competitive
• Companies having huge fund come with cheaper prices, create
huge demand, thus destroying the competitor, resulting in profit
making
 Introduction to Galleon Scam
 Founded by Mr. Raj Rajaratnam
 Privately owned Hedge Fund – provides financial services to investors
 Galleon invests in equity markets all over the world
 Internal research team performs fundamental and technical analysis for short and long term
Problem:
Hedge Fund was charge sheeted on Oct 16th 2009 and the CEO was arrested on the same day
The company involved in insider trading of Google Inc Shares; Hilton Hotel Shares, etc.
Statistics of Hedge Fund:-
◦ Managed funds over $7 billion
◦ The fund had been giving an average return of 21% every year since 1992
◦ However, S&P index only 7% every year

Charge sheet was filed with 13 frauds and conspiracy

The Hedge Fund has made millions of dollars by investing tips got from the credit rating firms.
Ethical Issues of the Galleon Scam
Mr. Rajaratnam, being a
In spite of so many insider
billionaire and running a Galleon management followed
trading frauds and other
billion dollar hedge fund, has immoral management style.
financial frauds, Mr.
engaged in unethical The management was selfish
Rajaratnam failed to learn
behaviour of insider trading, and their main objective was
from the mistakes others have
risking all that he has earned profit making.
done.
for over the period of time

This scam has brought the

Mr. Rajaratnam allowed public and US government
Mr. Rajaratnam also expected
their traders, directly in question the need for further
his traders to demand The culture of the company
charge for the large amount regulation for financial and
sensitive information about accounting transparency and
did not encourage morality
of the capital, which is
companies, before those disclosure on how fund and ethics for individuals.
against the industry
information were made public managers make money for the
standards
company
 Conclusion
To address all ethical issues related to business, organizations should create a new role – Chief
Ethical Officer, who will be responsible to look into the code of ethics followed by each groups.

The new role should conduct periodic internal audit and ensure that all the groups are in
compliance with the standards.

The organization should also ensure that each group’s goal/mission should have high ethical
standard.

The organization should also have code of ethics for its business, which should be strictly
followed by all the employees.

The company should give periodic training to all its employees, to ensure that all business
operations are done ethically.

The company should also have a dedicated team – Ethical Management, who shall help/mentor
managers in taking moral judgment.
THANK YOU