ETHICS
• How we behave - Std by which we guide
• Determine what to do day-today affairs
• Ethics refers to high standard of professional
conduct, while ethics are grounded in moral
standards.
• Relations with others
• How we treat others – even though Don’t Know
Ethics
• There are many definitions as to what ethics
encompasses:
* The discipline dealing with what is good
and bad and with moral duty and obligation;
* Decisions, choices, and actions we make
that reflect and enact our values;
* A set of moral principles or values;
* A theory or system of moral values; and/or
* A guiding philosophy.
LEVELS OF ETHICS
• How we act as individuals
• How we structure our organizations and
their work
• How we structure our society, our laws,
our systems - Applicable Implication
Ethics can be consider any one of these
three
BUSINESS ETHICS
• How we act as individual in business
• How we structure our business
organization and the way they work –
Direct / Guide – People to act
• How we structure our business society ,
our laws affecting business, our systems Incorporate Organization Participation
in Commerce, Laws & Regulations bind
• “Study of standard of business behavior
which promote human welfare and the
good”
• “Business Ethics” is the critical, structured
examination of how people & institutions
should behave in the world of commerce.
• In particular, it involves examining
appropriate constraints on the pursuit of selfinterest, or (for firms) profits, when the
actions of individuals or firms affects others.
• Business ethics are principles, practices
and philosophies that guide the business
people in their day today business
decisions.
• It related to the behavior of a business of a
businessman in a business situation and
concerned primarily with the impacts of
decision of the society, with and outside
business organization.
• REASONS OF ETHICS MANAGEMENT
IN BUSINESS
1. Ethics creates credibility / Integrity
2. Close relationship with employees
3. Increase profits
4. Protect pollution
5. Ethics provides leadership in business
Business benefits for market sustainability
• Enhanced rapport and good-will, re-creating brand
power and stock market value
• Reduced risks, costs & wastage. Enhancing quality.
• Co-operation from their own employees & business
associates
• Revenue generation
• Wider access to capital, credit and foreign investment
• National & international accreditation
• Create a climate of excellence & contribute to the
economic wellbeing
• Maintaining national/international environmental
standards for sustainable development
THE 3 R’S24: PREREQUISITES FOR A
COMPANY TO EMBARK ON THE
BUSINESS ETHICS JOURNEY
• The 3R’s, which are the prerequisites for business
ethics are Respect, Responsibility, and Results.
• Building these three factors into the organization’s
culture would help to align the behavior of its
employees in the ethical direction.
Respect: People, organizational resources, and the
environment (internal and external)
Examples
• Treating all stakeholders with dignity and
• Politeness
• Making effective use of company resources for
business purposes only drawing a clear
• Abiding by the law
• Refraining from abusing the natural environment in
which the company operates.
Responsibility: Demonstrating responsible behavior
towards stakeholders and towards oneself is a
prerequisite for business ethics.
Examples
• Delivering competitively priced
• Products and services of high quality at the right time,
• Working together to achieve the organization’s goals
• Meeting performance expectations.
Results:
• Employees need to be encouraged to achieve results
by employing means that are ethical.
• Expected to delivering terms of the organization’s
results using the ‘right 'Method
IMPORTANCE OF ETHICS
• Various steps for ethics improved society as a whole
Through Laws and regulations
• Guides people to act properly in varied situation
• Ethics programs cultivate strong teamwork and
productivity
• Creates confidence for facing real reality – both good
and bad
• Helps avoid conflicts with employees – Highly
ethical principles and policies
• Detection of violations helps in timely action
• Ethics programs promote a strong public image –
Trust and respect of all its stakeholders.
• Strengthens organizational work culture – Greater
consistency in Std and Qualities of products
• Enhances overall benefit – Inculcate Integrity and
ethical practices – results
Increase organizational effectiveness.
SIGNIFICANCE OF ETHICS
• Creates goodwill in public- Honor and respect public
• Develop mutual faith between management and
employees- Sense of oneness with employee
• Better decision making
• Economic success and development – leads to bring
positive impact – Long run, Improve Profitability
• Develops trust and lay foundation for relationship
development and positive future interactions.
ROOTS OF UNETHICAL BEHAVIOR
• Profit maximization may lead to exploitation –
Carries down the company culture
• Ethics is not considered a compulsory responsibility
Philanthropic – Charitable , Humanitarian
• Unethical practices deter others to report honestly –
Less opportunity for whistle blower – stop
• Ethics may be avoided to satisfy others interest –
pressure from stakeholders to earn more and more
profits.
• Corruption encourages unethical behavior
• Lack of social Resp and Integrity – Corporate
wants money and success – with no consideration
to ethical values.
CODE OF ETHICS
• Often conveys organizational values, a commitment
to standards, and communicates a set of ideals.
(Principles, Morals)
• In practice, used interchangeably with Code of
Conduct.
COC - Refer to a listing of required behaviors, the
violation of which would result in disciplinary action
• In Section 406(c), the Sarbanes-Oxley Act defines
"code of ethics" as such standards as are reasonably
necessary to promote• (1) Honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest
between personal and professional relationships
• (2) Full, fair, accurate, timely, and understandable
disclosure in the periodic reports required to be filed
by the issuer; and
• (3) Compliance with applicable governmental rules
and regulations
COE
Likely to cover
• Personal behaviour – when dealing with customer
and suppliers
• Corporate behaviour – when negotiating deals
• Behavior towards society – when recruiting
• Behaviour towards the environment – when
deciding on process
CORPORATE GOVERNANCE
“ Good Corporate Governance is essential to the
effective operation of a free market, which enables
wealth creation and freedom from poverty” (Financial
Reporting Council of the UK).
• It’s a ethical commitment to values and ethical
business conduct.
• Corporate governance deals with laws, procedures,
practices and implicit rules that determine a
company’s ability to take managerial decisions vis-à-
vis its claimants—in particular, its shareholders,
creditors, customers, the State and employees.
• Its system of directing and managing a company.
• “CORPORATE GOVERNANCE is needed to create
a corporate culture of consciousness, transparency
and openness. It refers to combination of laws, rules,
regulations, procedures and voluntary practices to
enable the companies to maximize the shareholders
long-term value. It should lead to increasing customer
satisfaction, shareholder value and wealth.”
Disclosure and transparency
• The corporate governance framework should ensure
that timely and accurate disclosure is made on all
material matters regarding the corporation, including
the financial situation, performance, ownership, and
governance of the company.
• Disclosure should include:
• The financial and operating results of the company.
• Company objectives.
• Major share ownership and voting rights.
• Members of the board and key executives and their
remuneration.
• Material foreseeable risk factors.
• Material issues regarding employees and other
stakeholders.
• Governance structures and policies.
The responsibilities of the board
The corporate governance framework should ensure
the strategic guidance of the company, the effective
monitoring of management.
board’s accountability to the company and the
shareholders.
• Board members should act on a fully informed basis,
in good faith, with due diligence and care, and in the
best interest of the company and the shareholders.
• Where
board
decisions
may
affect
different
shareholder groups differently, the board should treat
all shareholders fairly.
• Reviewing and guiding corporate strategy, major
plans of action, risk policy, annual budgets and
business plans; setting performance objectives;
monitoring
performance;
implementation
and
corporate
• Ensuring the integrity of the corporation’s accounting
and financial reporting systems, including the
independent audit, and that appropriate systems of
control are in place.
• Monitoring the effectiveness of the governance
practices under which it operates and making changes
as needed.
• Overseeing
the
communications
process
of
disclosure
and
Steps taken by
SEBI
for strengthening
corporate governance
• SEBI has taken various steps to strengthen corporate
governance. Some of these are:
• Strengthening of disclosure norms for Initial Public
Offers.
• Providing of information in director's report for
utilization of funds and variation
• between projected and actual use of funds.
• Declaration of quarterly results.
• Mandatory appointment of compliance officer for
monitoring the share transfer process and ensuring
compliance with various rules and regulations.
• Timely disclosure of price sensitive information.
• Issue of guidelines for preferential allotment at
market related prices.
The basic objective of Corporate Governance would be
"enhancement of the long-term shareholders value
while at the same time protecting the interests of
other stakeholders."
• Developing appropriate strategies that result in the
achievement of stakeholder objectives
• Attracting, motivating and retaining talent
• Creating
a
secure
and
prosperous
operating
environment and improving operational performance
• Managing and mitigating risk and protecting and
enhancing the company’s reputation.
REPORTS ON CORPORATE GOVERNANCE
• Report of the Cadbury committee
• Report of the Greenbury committee,
• the Report of Blue Ribbon committee in the U.S.
• the OECD code or Corporate Governance
• K.M. Birla Committee for suggesting changes in
Listing Agreement
• SEBI committee on corporate governance to Indian
Banks
Pillars of CG
• Accountability
• Transparency
• Predictability
• Participation
National foundation for CG was setup by the ministry of
corporate Affairs
• To provide wide platform to discuss the affairs
relating to Good CG
• Follow CG Voluntary guidelines 2009
• Report of the task force (Naresh Chandra) and
recommendations of ICSI- for Strengthen CG