BBA-Indian Ethos in Management

Unit-1(Have to add on page no. 45)

Q. 13 “Media has a very important role to play in ensuring Corporate Governance”. Discuss the statement with suitable examples.

Ans. Corporate Governance has emerged as a response to many of corporate failures and

widespread dissatisfaction about the functioning of the corporate sector. They are powerful

system by which corporate bodies are directed and controlled. Primarily concerned with

Power and Accountability of Corporate.

The Corporate Governance refers to relationship between Owners, Directors and

Managers. BODs are the Centre of Corporate Governance. Corporate governance serves not

only the company’s interest but also the society at large. Distribution of Rights And

Responsibilities among different participants-Board, Manager, Shareholders, Stakeholder It

covers issues like- The legal issues of investors, The system of Electing the BODs, The

Composition of Board and its various Committees, System of Checks and balances, Ethics,

Maximization of Owners wealth by Managers, The ability of the board to maintain

Surveillance.

Need for Corporate Governance in India

Post liberalization period (1993-1995) was a boom period, Capital through Public

issues, Many Fake companies came in, which are now nowhere, Indian companies getting

Global thus more transparency demanded by Foreign investors, Collaborators, buyers.

Stories of Accounting Juggleries, Family owned business (family leaders appointed directors

which are teethless), Growing awareness towards Good Corporate Governance, Improving

Ethical climate, Shadow Directors

Good governance

Good governance has 8 major characteristics. It is participatory, consensus oriented,

accountable, transparent, responsive, effective and efficient, equitable and inclusive and

follows the rule of law. It assures that corruption is minimized, the views of minorities are

taken into account and that the voices of the most vulnerable in society are heard in

decision-making. It is also responsive to the present and future needs of society.

Characteristics of good governance:

Participation

Participation by both men and women is a key cornerstone of good governance.

Participation could be either direct or through legitimate intermediate institutions or

representatives. It is important to point out that representative democracy does not

necessarily mean that the concerns of the most vulnerable in society would be taken into

consideration in decision making. Participation needs to be informed and organized. This

means freedom of association and expression on the one hand and an organized civil society

on the other hand.

Rule of law

Good governance requires fair legal frameworks that are enforced impartially. It also

requires full protection of human rights, particularly those of minorities. Impartial

enforcement of laws requires an independent judiciary and an impartial and incorruptible

police force.

Transparency

Transparency means that decisions taken and their enforcement are done in a

manner that follows rules and regulations. It also means that information is freely available

and directly accessible to those who will be affected by such decisions and their

enforcement. It also means that enough information is provided and that it is provided in

easily understandable forms and media.

Responsiveness

Good governance requires that institutions and processes try to serve all

stakeholders within a reasonable timeframe.

Consensus oriented

There are several actors and as many view points in a given society. Good

governance requires mediation of the different interests in society to reach a broad

consensus in society on what is in the best interest of the whole community and how this

can be achieved. It also requires a broad and long-term perspective on what is needed for

sustainable human development and how to achieve the goals of such development. This

can only result from an understanding of the historical, cultural and social contexts of a

given society or community.

Equity and inclusiveness

A society’s well being depends on ensuring that all its members feel that they have a

stake in it and do not feel excluded from the mainstream of society. This requires all groups,

but particularly the most vulnerable, have opportunities to improve or maintain their well-

being.

Effectiveness and efficiency

Good governance means that processes and institutions produce results that meet

the needs of society while making the best use of resources at their disposal. The concept of

efficiency in the context of good governance also covers the sustainable use of natural

resources and the protection of the environment.

Accountability

Accountability is a key requirement of good governance. Not only governmental

institutions but also the private sector and civil society organizations must be accountable to

the public and to their institutional stakeholders. Who is accountable to whom varies

depending on whether decisions or actions taken are internal or external to an organization

or institution. In general, an organization or an institution is accountable to those who will

be affected by its decisions or actions. Accountability cannot be enforced without

transparency and the rule of law.

Social Performance of Business in IndiaMany business organizations in India have also contributed greatly in the area of

social responsibility. Associated cement companies (ACC) has been rendering social service

for over four decades. The company has set up the schools, health centers, bunds, local

countryside and agro- based industries, and cooperative societies in village with the sole

objective of providing employment and improving the quality of rural life. Following help

from ACC, farmers in Andhra Pradesh have doubled their per acre yield of rice, whereas

those in Bihar began to raise a crop of protein- rich soyabeans as a matter of routine.

ACC is spending approximately Rs. 6 lakh annually on its staff, which works for rural

development programmes with direct investment. The Mafatlal Group follows a slightly

different line in social performance. It spends a huge fund on rural welfare programmes for

helping the poor. It constructs homes for the homeless, provides drinking water, and

distributes book, stationery and scholarships in rural areas.

The Tata Iron and Steel Company is the first industrial organization in the country to

have carried out a social audit of its performance in the year 1979. In the public sector,

Bharat Heavy Electrical Ltd. (BHEL) is endeavouring to play a prominent role in the area of

social responsibility. All division of BHEL, are aware of their social role and have drawn

comprehensive scheme for the welfare of their employees in social role and have drawn

comprehensive scheme for the welfare of their employees in township and for those living in

nearby areas. The company is engaged in identifying specific problems of communities and

in coordinating the efforts with the local bodies, authorities and voluntary agencies in

providing speedy relief to them.

The active involvement of BHEL and its employees in the welfare of the surrounding

communities is helping the organization to earn the goodwill of the local population and to

have a better understanding of their problems. Jobs done by BHEL units in this respect

include provision of drinking water facilities, construction of external sewers, roads and

culverts, providing health facilities, improving the quality of life by redesigning jobs,

improving educational facilities and so-on.

Many Indian companies have given ‘Value Added Statement’ in their annual reports

in place of a social reporting. This statement exhibit the contribution and surplus made by

them through their business activities and also disclosure as to how the same has been

distributed to different segment of the society such as employees, government and

shareholders, etc. Beside, Social Income Statement and Social Balance Sheet given by some

Indian companies in their annual reports would prove very useful to the users and other

interested persons. The government should make it obligatory on the part of the companies

to report their ‘Social Performance’ during the year through statements and/or other means

of disclosure.

Introduction of Media

In general, "media" refers to various means of communication. For example,

television, radio, and the newspaper are different types of media. The term can also be used

as a collective noun for the press or news reporting agencies. In the computer world,

"media" is also used as a collective noun, but refers to different types of data storage

options.

Types of media and history

Media especially refers to two main divisions, the print media such as Newspapers &

Magazines and the electronic media such as Radio and Television. The role of the media in a

democratic country is to relay the facts to the people. Media especially categorized in to two

main divisions. One is Print Media and another one is Electronic Media.

1) Print Media would be Newspapers and Magazines.

2) Electronic Media would be Radio and Television.

Role of mediaMedia role can be seen as key to creating awareness of Corporate Governance in

business houses. Communication between Media and Corporate bodies directly and through

efficient public relations or mass communications can be vital to ensure good governance

and human rights. Media must be on the front line in disseminating impartial news for

ensuring transparency in the corporate sector. Media have a watchdog role to ensure

accountability and transparency of corporate sector. Media also need to improve their

capacity to play the watchdog role.

The Media can play a role in Corporate Governance by affecting reputation at least 3

ways that Anyone seeing the ad would read it, Anyone reading the ad would understand it,

Anyone understanding it would feel free to ask questions of any board members they

encountered

Media attention can drive politicians to introduce Corporate Law reforms in the

belief that inaction would hurt their future political careers or shame them in the eyes of

Public opinion In the Traditional understanding of Reputation, Managers wages in the future

depend on Shareholders’ and Employer’s belief that how much advantage they are going to

take of the situation that they are not monitored. Thos concern about Monetary Penalty

that they may have to face they always behave like good managers Image in the eyes of the

Public. As given in the first example, Robert Monk said bout the Advertisement.

Role of Media in pressuring corporate managers and directors to behave in ways

those are socially acceptable. Sometimes this coincides with Shareholder’s value

maximization. Media affects companies’ policy toward the environment and the amount of

corporate resources that are diverted to the sole advantage of controlling shareholders.

Here I have quoted two examples though not Indian but will very well explain the effect of

Media on corporate governance.

EXAMPLE 1. In April 1992, the Wall Street Journal published a strange

advertisement. It was a full-page picture of a silhouette (outline) of the board of directors of

Sears Roebuck with the title “The nonperforming assets of Sears” This advertisement was

paid for by shareholders activist Robert Monks. He exposed all the directors, identified them

by name that were responsible for the poor performance of Sears Stock. The Directors

greatly embarrassed by the advertisement chose to adopt many of the proposals which

were given by Robert Monks even though he had received only 12% of the votes in the

previous election for board members and had failed to get a seat on the board.

EXAMPLE 2. On March 8 1988, all the major US networks broadcast a tape of a Panamanian

tunaboat – the Maria Luisa, killing hundreds of dolphins while fishing for tuna. Building on

Public outrage, the Earth Island Institute, GREENPEACE and the Humane Society launched a

boycott of Tuna.

The Restaurant chains took tuna off the menu and many stopped using tuna until it

was “dolphin safe” i.e. fished with nets that were not killing dolphins. On April 12, 1990,

Heinz announced that it would sell dolphin safe tuna .Within hours the two other largest

tuna producers made a similar commitment. These episodes suggest that the Media may

play a role in shaping corporate policy

EXAMPLE 3: Dhaka, Oct 1 (BDNEWS) - Media's role is crucial to create awareness about

corporate governance in business houses, speakers said at a roundtable in Dhaka Saturday.

Communications between media and corporate bodies directly and through efficient public

relations (PR) or Mass Communications (MC) personnel can be vital to ensure good

governance and human rights, they told the roundtable titled "Corporate Governance:

Bridging Corporate Sector and Media".

Management and Resources Development Initiative (MRDI) organized the

roundtable with support from Manusher Jonno at a city hotel, which was participated by

business association leaders, chief executives/representatives of insurance, mobile phone,

cement, hospitality companies and newspaper editors. Moazzem Hossain, editor of the

Financial Express, moderated the roundtable. Jamal Uddin Ahmad, managing director of

Jaroms Industries Ltd said, CSR is (Corporate Social Responsibility) the vehiclet serve

humanity.

Media must be at the frontline in disseminating impartial news for ensuring

transparency in the corporate sector, said Ahmed, also the former deputy prime minister of

Bangladesh. Dewan Sultan Ahmed, vice president of Federation of Bangladesh Chambers of

Commerce and Industry (FBCCI), told that the business people should focus on business, not

politics. Mohiudding Babar, communication manager of Lafarge Surma Cement Ltd, said

media have a watchdog role to ensure accountability and transparency of the corporate

sector.

Media also need to improve their capacity to play the watchdog role, he

added. Nasir A Choudhury, managing director of Green Delta Insurance Company Ltd., said

government should introduce incentives for companies that practice corporate social

responsibilities. He sought media role to promote corporate governance and social

responsiveness. Shyamal Dutt, acting editor of the daily Bhorer Kagoj, said business interest

of media overshadows role towards social responsiveness. He also stressed on governance

in media to ensure accountability.

Media do affect Corporate Policy

The extent of Diffusion of the Press also affects the role it has. Press cannot be

important if it is not read. Press freedom and Independence also has some impact on the

effect it has. Countries with a large newspaper circulation have better environmental

responsiveness on average. Religion is major factor affecting literacy of the country and its

propensity to read.

Shareholder Activists and the Press

Shareholder activists such as Robert Monks have found the press useful in their fight

with

Management in US but some recent events in the Republic of Korea indicate that there is a

Strong Shareholders take advantage of their position at the expense of small investors.

National Corporate Laws give few rights to outside investors. The strength of protection for

minority shareholders and expectations in relation to law enforcement is low. The beginning

of efforts to force change in Korea dates back to 1996. The formation of PSPD (People’s

Solidarity for Participatory Democracy) driven by Jang Ha Sung of Korea University As in the

US the Investor Activists relied on both one.

The most imp successful challenge to date has been the battle to stop insider dealings in

SK Telecom

SK Telecom has been an extremely profitable company but its financial results did

not show it up because the company used transfer pricing to benefit two companies (almost

100% owned by the Chairman of SK Telecom and his relatives). The PSPD draw attention to

these Policies. After the London based Newspaper Financial Times picked up the Story, a

media campaign ensued to attract proxy votes. This campaign involved publishing

advertisements in newspapers and using television and Radios. In March 1998 – SK

Telecom‘s Directors capitulated and agreed to the PSPD’s request.

Institutional Investors

While institutional investors have many legal mechanisms to encourage change in

corporate policies, the presence of an active Press increases their influence. It provides

cheap way to impose penalties on companies and to coordinate the response of other

investors.

Unit-3(have to add on page no.75)Q.7 Write short note on : Democracy Judiciary Machinery.

Ans. Democracy is a political system in which the chosen representatives of the people

govern the country. All the adult citizens have the right to vote without any discrimination of

caste, creed, religion, sex or economic status. People cast votes on the principle of universal

adult franchise to elect the candidates. The candidate who gets the maximum number of

votes is declared elected.

The party which either has the majority of members or has the support of members from

other parties to make the majority forms the government. Thus, in effect, the power to elect

the government lies in the hands of the people. In a democracy, all the functions are

executed as per the provisions of the Constitution which inter alia upholds the values of

equality between the citizens. Abraham Lincoln aptly called democracy “the government of

the people, for the people and by the people.”

In a democratic system as is evident from the Indian democratic system, there are three

major wings-the legislature, the executive and the judiciary. No democracy can work if any

of these is missing or does not work properly. The legislature means the members of central

or state government machinery who have the power to make laws. The executives mean the

body of officials and administrators who have the power to implement the laws enacted by

the legislature.

The judiciary is comprised of the total judicial system in the country, viz. courts, judges and

justices and is vested with the power to ensure justice, fairness and the rule of law by

deciding cases filed by the people who have been denied some genuine right or privilege.

All the three parts of democratic system are important in their respective way. But the

judiciary is considered to be the most important. In the Indian democratic system, the

judiciary consists of lower as well as district level courts-whether civil or criminal, the High

Courts of the State and the Supreme Court of India. The lower courts decide the small cases

of theft, cheating, etc. while the higher courts decide the cases of fraud, crime, assault and

betray and murder, in their jurisdiction.

They also have the power to decide on the appeals filed against the decision of the lower

court. The respective High Courts of the State have the power to hear the appeals against

the decision of the District or Sessions Courts within the State. The Supreme Court is the

apex court of the country. The cases which can be filed in the Supreme Court include: (i)

appeals against the decisions of any High Court of any State; (ii) cases where an issue of

fundamental rights is involved; (iii) disputes between two or more Indian States; (iv) disputes

in which there are Centre and one or more States on one side and one or more States on the

other. The decision of the Supreme Court of India is final and binding on all the parties

involved.

Democracy gives equal rights to all the citizens without any discrimination. But what

happens if a citizen is denied some right or is discriminated against? He can immediately go

to a court of law and seek justice. The court will consider his case and give decision as per

law. If the person has been denied some right, he will get decision in his favour. Democracy

thrives on equality of all citizens. Where there is no equality among the citizens there is no

democracy. It is only the judiciary which ensures this equality.

India’s Constitution has given the citizens certain fundamental rights such as: right to

equality, right to practise any religion, right to adopt any profession and to live in any part of

India, right to assemble peacefully and without arms, etc. There is also freedom of speech,

travel, get education and prosper in life. Some new rights have been given to the people of

India like the Right to Information, which though not a fundamental right has a legal

sanction. Under this, a person can ask for any official information from the concerned

department or office which is required by him in execution of a function or activity.

These rights-fundamental or otherwise, freedoms and liberties are the lifeline of democracy.

If they are not protected, democracy will lose its meaning. In India, the judiciary protects

these rights and is, therefore, called the watchdog of democracy. Under certain

circumstances some of the rights are temporarily suspended. For example, if the law and

order situation worsens in a particular area due to violence, arson, etc. curfew is imposed

which means people cannot move out of their home for particular hours.

This does not mean that democracy is in danger. Actually, these measures are taken to save

the citizens from being the victims of subversive activities. Similarly, during emergency some

rights are suspended. But these are temporary phases and make no difference to the spirit

of democracy. Under normal circumstances, all the citizens enjoy the rights given to them by

the Constitution.

If any of the rights is encroached by another individual, organisation, body corporate, a

group of people or even by the State, the aggrieved person can go to a court of law and seek

justice. If his claim is found genuine, that person will get justice, and at times with adequate

compensation for damages or harm caused to him by the denial of that right. There are

examples of lakhs of cases in India where the people have got fair decisions through the

courts.

Under some circumstances, the court has the power to direct the government to take

certain action so that the values of democracy are upheld. Sometimes the judiciary directs

the state or central government to desist from certain partisan action. It can ask a certain

department or even the government to explain the reason of some action which in its eyes

was uncalled for. For example, the Supreme Court directed the former ministers to vacate

the government allotted residences, after losing the ministership, up to certain date. The

apex court has asked some governors to explain their action of dismissing a government or

of not calling the majority party to form the government. Such actions can be called to

checks and balances of the judiciary on the legislative machinery.

Each citizen also has certain duties to abide by like paying the taxes, respecting the rights of

others, obeying the law, etc. These duties are necessary to maintain equality and law and

order. The rights can be enjoyed by all the citizens if there is peace, social and economic

security. The court has the power to punish those who disobey the law or fail to perform

their duties as citizens of the country. Judiciary upholds the values of democracy, but it has

several constraints which hinder the efficient performance of the courts.

In the first place there is a shortage of courts and judges which results in the inordinate

delays in deciding the cases. Thousands of cases are pending in various courts in India

including the Supreme Court. It is often said that justice delayed is justice denied. How can

the democracy be said to exist if the justice is denied in this manner? The government has

established Fast Track Courts and Lok Adalats to clear the pendency and separate minor

cases from the major ones. The Panchayati Raj Institutions (PRIs) are also being given powers

to decide a certain type of cases so that the courts are not clogged with a pile of cases. The

situation is improving as a result of these measures.

Corruption in the courts, expensive dispensation of justice, malpractices and exploitative

attitude of the lawyers, lack of evidence in some cases, frequent changes in the stances of

eyewitnesses and other witnesses, interference of politicians, officials and other powerful

persons are maladies from which our judicial system suffers. Media is doing a good job in

exposing the cases involving such malpractices. It needs collective efforts from people,

officials and those directly engaged in meting out justice to purge the judicial system from

these ills so that it can become the true savior of democracy even under trying

circumstances.

Case study solution

Questions/Answers:

Q.1 how successful do you think Helen Bower’s new plan will be?

Ans. Helen bowers new plan will not be successful, because of her working approach. She wants to change her father’s approach. Human resource is the life blood of any organisation, so we have to treat them like a part of organisation. Human resource is very important part of any company, because they work for organisation. We have to ask their ideas and advise, and spend time to listen their complaints whenever required. When they share their ideas and complaints about organisation, then it is good for organisation. Helen had done a big mistake of not taking advice of employees. She introduced a new plan without discussing with employees, and because of this her plan was failed.

Q.2 what challenges does Helen confront?

Ans. Helen bower’s confronted so many challenges, because of her new plan.

1. She increased production quotes by twenty percent but output was only marginally higher than before. Scrap rates had soared.

2. Payroll costs were indeed lower, but other personnel costs were up.

3. Performance reports indicated that turnover had increased substantially and training costs had gone up.

4. She has shuts down company softball field which her father built, but employees use it much.

5. Helen changed a number of operational procedures, she stopped asking employees advice.

Q.3 If you were Helen’s consultant, what would you advise her to do?

Ans. If I were Helen’s consultants then, advise her to apply her father’s humanistic approach. Because human resources are the life blood of any organisation, their ideas and advice is very necessary for company growth. For introducing new working approach, she has to discuss with employees and treat them like her father treat. Employee’s ideas and advice plays very important role in a company.