Business ethics

Chapter no :12
Ethical management
system
Group members:
• Murk Afzal Gujjar
• Mahrunnisa
• Bharti Kewalramani
• Samer Hussain
• Nawal Saeed
• Parsa Rafique
 ETHICAL MANAGEMENT SYSTEM
• A system that basically helps minimizing the unethical acts in an
organization.

• Better “Corporate Governance” ensures a good Ethical

Management System.
• Better Corporate Governance ??
 CORPORATE GOVERNANCE

• Corporate governance is the set of

processes, customs, policies, laws and
institutions affecting the way a corporation
is directed, administered or controlled
 CORPORATE GOVERNANCE

• Structure vary from country to

country

• Standardized on American
patterns

• Globalized Capitalism…
Self Governance

• Substituting Governmental
regulation of market
IMPORTANCE

• McKinsey & Co. investor Survey, 2002

• “85% investors consider corporate

governance to be equally or more important
than financial issues, in deciding which
company to invest in”
 CORPORATE GOVERNANCE SHOULD

• Ensure that managers effectively execute

the strategy laid down
by the B.O.D’s

• Avoid fraud, deception, malpractices

within the corporation.

• Provide opportunities to share holders to

examine the functioning and true
performance of the corporation
Principles of Corporate
Governance
• Fairness-stake holders interest should also be
considered.

• Accountability

• Responsibility

• Transparency-especially of financial performance.

Moral Responsibilities
• Maximization of long run profits

• Diligent and competent in performing the

duties

• Recognize that directors are agents of the

shareholders
Minimizing Corporate Risk
• A major objective of corporate strategy
• Types of Risk:
• Business
• Financial
• Operational
• Political
How to Minimize Risk?
• A key element of the ethical management system is
a mechanism for identifying and minimizing ethical
risk.
• Risk is minimized mainly by an ethics committee.
• The risk of unethical behavior within the corporation
is determined by the firms culture , policies and
operational procedures .
• Stakeholders’ perceptions should be considered
both for evaluating the corporations ethical
performance and for identifying stakeholders’
expectations.
Triple bottom line
• Approach to achieve cost savings and
improve environmental performance.
• Enhanced reputation
• Benefits of TBL:
• Benchmarked performance
• Improved operations and management
• Improved risk management
• Increased confidence from investor,
insurers
and I financial organizations
• Improved communication with
stakeholders.
Contd…

• Improved Communication with stakeholders

• Increased confidence from investors and
financial organizations
• “Corporations should show that their actions
will have beneficial consequences on
selected stakeholders”
ETHICAL MANAGEMENT AND
REPORTING

• For minimizing risk, corporations should take

Ethical Management and Reporting seriously

• Ethical Risks is identified by Ethics

Committee
BETTER RISK MANAGEMENT

• Identify stakeholders whose ethical

perspective matter
• Prioritization of stakeholders interest in terms
of legal, technological, social, political and
financial power of different stakeholder
groups
• Planning
• Formulation
CODE OF ETHICS
• A statement which explicates morally
acceptable behavior within a corporation

• Raises Ethical awareness & expectations

• Provide guidance for ethical decision making

Contd…

• External code of ethics target

stakeholders– specially customers

• Codes may be imposed by management

on employees

• Likely to be effective when they are

genuinely negotiated
ASPIRATIONAL OR
DIRECTIONAL CODES

• Aspirational Code is relatively short

statement of expected ethical norms

• Directional codes provide guidelines about

employee behavior in different
circumstances
DIRECTIONAL CODES

• A statement of the rationale for the code

• Expected ethical standards of behavior

• Guidelines for conduct in specified situations

• Sanctions for violating of guidelines

Continued…

• Codes should be regularly revised for

improvements

• They should be continuously re-negotiated

 Second
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