becg assignment roll no.31. class bfm 2

8/2/2019 BECG Assignment Roll No.31. Class Bfm 2

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Assignment on Business Ethics and Corporate

Governance.

Submitted by: Prasni Prakash

Roll No: 31Class: BFM (II)


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Q. How do you differentiate between ethics and morality? How do Indian value systems promote ethics in

business?

Ans: Ethics is concerned with the discipline of the right and wrong conduct of individuals concerned. The

origin of the word ethics can be traced to the Greek word ethikos which refers to human character and

conduct.

The word ethos, also originated from Greek means: the distinguishing character, sentiment, moral nature,

or guiding beliefs of a person, group, or institution.

Ethics and morality are terms that are used more or less in unison. However, there are some differences

between the two terms. Ethics are concerned with actions that are proper or improper, conduct that is right or

wrong, decisions that are fair or unfair. Morality varies from individual to individual because the values and

cultural traits of individuals may differ. What is moral according to one person may be immoral according to

another. Generally, what is moral or immoral depends more on religious tenants of various groups of persons

in the world. However, ethical standards may be common to all major religions. Ethics is something which

speaks a universal language, whatever is your religion, nationality, and you have to abide by certain set

principles.

A good executive (manager), first of all, has to be good person and then a high-flying business minded

person with a penchant for achieving maximum profit for his company. He should be conversant with issues

such as right and wrong behaviour towards other people, proper and improper actions and fair and unfair

decision. Ethical and other moral standards are based on beliefs and codes of human conduct. These issues

extend far beyond the commonly discussed problems of bribery, collusion, forgery, impersonation, thefts and

Honesty and goodness are dominant principles in ethics and in morality as well in all major religions. Good

human behaviour that is governed by ethical principles enhances life in the individual, society and business.

Gita's solution to the ethical failure and downfall of corporations and society and family is controlling the

senses with spiritual strength. Ethics is linked to spirituality. For the last century or more, western businesses

separated work and spirituality. Kurukshetra was also about mind control. Every one of us, whether as

manager or employee, is fighting his own battle, his own Kurukshetra.

The key to the individual and social ethics of Hinduism is the conception of Dharma, whose full implications

cannot be conveyed by such English words as religion, duty, or righteousness. Derived from a root, which

means to support, the word signifies the law of inner growth by which a person is supported in his present

state of evolution and is shown the way to future development. A persons Dharma is not imposed by society

or decreed by an arbitrary god, but is something with which he is born as a result of his actions in previous

lives. Dharma determines a mans proper attitude toward the outer world and governs his mental and physical

reactions in a given situation. It is his code of honour.

Hinduism emphasizes the relative nature of Dharma, and does not recognize absolute good or evil; evil may

be described as what is less good. One cannot stipulate what is absolutely good or evil for all men at all times.

The attempts to do so, and to judge all people by a single concept of Dharma or impose upon all a single idea

of righteousness, has been the cause of much injustice to humanity. If one wants to give a comprehensive

definition of good and evil, one may say that what helps men toward the realization of God or the unity of

existence is good, and its reverse is evil. But one faces difficulties when one tries to work out practical details.

The injunction of non-killing cannot therefore have a universal application, at least at the present state of


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human evolution. A man must not give up his imperfect Dharma, determined by his inborn nature; all actions

have elements of imperfection in them. He should follow his own Dharma and should not try to imitate the

Dharma of anotherhowever perfect the latter may be. By performing his duties in a spirit of worship without

seeking any personal result, a man ultimately realizes God, in whom alone all duties and values of life find

fulfilment. The Mahabharata narrates the stories of a housewife and an untouchable butcher who, by

following their respective Dharmas, realized the highest truth and became teachers of the knowledge of

Brahman.

Dharma, Artha, Kama, Moksha.

The affirmative attitude of Hinduism toward life has been emphasized by its recognition of four legitimate

and basic desires: Dharma or righteousness, Artha or wealth, Kama or sense pleasure, and Moksha or freedom

through communion with God or the Infinite. Of these, three belong to the realm of worldly values; the fourth

(Moksha) is called the supreme value. The fulfilment of the first three paves the way for Moksha. Enjoyment,

if properly guided, can be transformed into spiritual experience. The suppression of legitimate desires often

leads to an unhealthy state of body and mind, and delays the attainment of liberation.

Dharma, or righteousness, we have already seen, to be the basis of both individual progress and socialwelfare. Artha, or wealth, is legitimate; money is indispensable in the present state of society. Voluntary

poverty, as practised by religious mendicants, is something quite different; pious householders provide for the

monks few necessities in recognition of their efforts to keep alive the highest spiritual ideal. But a man of the

world without money is a failure; he cannot keep body and soul together. According to an injunction of

Hinduism, first comes the body and next the practice of religion. Furthermore, money is needed to build

hospitals, schools, museums, and educational institutions, which distinguish a civilized from a primitive

society. Money gives leisure, which is an important factor in the creation of culture. But money must be

earned according to Dharma; otherwise it debases a man by making him greedy and cruel.

The object of the third legitimate desire is Kama, or the enjoyment of sense pleasure. This covers a vast area-from the enjoyment of conjugal love, without which the creation cannot be maintained, to the appreciation of

art, music, or poetry. Life becomes drab and grey unless one cultivates aesthetic sensitivity. Wealth and sense

pleasure, which are only means to an end, are valuable in so far as their enjoyment creates a genuine yearning

for spiritual freedom in the mind of the enjoyer. The hedonists alone regard sense pleasure as an end in itself.

The Charvaka School of thinkers, out-and-out materialists, rejects righteousness and spiritual freedom and

admits only two values, namely, those related to wealth and sense pleasure. The Upanishads make a sharp

distinction between the ideal of the pleasant and of the good, and declares that the former, created by

ignorance, ultimately brings about suffering and misery. Even Dharma, or duty, for its own sake, is regarded

as empty and dry by Hindu philosophers. It is a worthy end in so far as it helps the soul to attain its spiritual

goal. But the illumined person serves the world not from a sense of duty, but because of his overflowing love

for all created beings.

The fourth legitimate desire, equally irresistible, is related to Moksha or freedom from the love and

attachment prompted by the finite view of life. Man, who in essence is spirit, cannot be permanently satisfied

with worldly experiences. The enjoyment of desires cannot be satisfied by enjoyment, any more than fire can

be quenched by pouring butter into it; the more they are fulfilled, the more they flare up. Nor can man attain

his divine stature through correct social behaviour, economic security, political success, or artistic creation.

Charity for the needy may be a corrective for selfishness, but cannot be the ultimate goal.


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Q. How does an individual adjust his individual ethics when working for an organization? How do you

expect him to control his own actions within a corporate culture?

Ans: What areright and proper and just? These terms and that question, are becoming more important

now than in the past as our society becomes more crowded, our economy more competitive, and our

technology more complex. These questions are particularly important for a business executive, whosedecisions can effect so many people in ways that outside their own control.

The ethics of managementthe determination of the above issues, in decisions and actions that affect other

people- goes beyond simple questions of bribery, theft and collusion reaching into many areas such as

marketing policies, capital investments, corporate mergers and acquisitions. It focuses on what our

relationships are and ought to be- with our employees, managers at different level having various

functions, workers of different skills and backgrounds, suppliers, distributors, creditors, stock holders, our

neighbours- members of community in which we operate, the State. What do we owe to an employee who

has been with the company for past twenty eight years, yet now is longer needed? What do we owe to a

distributor who helped us to establish a major product line years ago, yet now represents an inefficient meansof reaching the market? What do we owe to our stock holders, and how do we balance our duties to our stock

holders and our obligations to these other groups. Benefit for one may be denial of an obligation to another

group. These obligations comprise- protection to loyal employees, maintaining competitive and healthy

markets and producing useful and safe products and services.

A good executive (manager), first of all, has to be good person. He should be conversant with issues such as

right and wrong behavior towards other people, proper and improper actions and fair and unfair decision.

Ethical and other moral standards are based on consistent beliefs and codes of human conduct. These issues

extend far beyond the commonly discussed problems of bribery, collusion, forgery, impersonation, thefts and

Honesty and goodness are dominant principles in ethics and in morality as well in all major religions. If a

society is to function within the framework of laws, social order and freedom, then every person of good

conduct and morals should detest crime, hypocrisy, dishonesty and destructive anti- social behavior and

function ethically. Good human behavior that is governed by ethical principles enhances life in the individual,

society and business. A good society alone can encourage people to love their neighbours, and make their

living decent and profitable in a world of competition and strife. An ethical businessman has to provide goods

of quality and proper services with all humility to the community. Ethics has to underline principles such as

(a) Not to harm others, (b) to benefit others.

I belong to different social group your behavior at a certain situation may be quite different from that of mine.For example, A, an American from US and B, a Brazilian, work for one company. B believes that it is morally

acceptable to pay small bribes to expedite import clearance and shipment. A believes that it is morally un-

acceptable. They differ. A and B go to Brazil and together get an important shipment cleared through

customs. A returns to US and tells his friends that he had to pay a bribe to clea r the shipment. As friends are

shocked. B talks to his friends in Brazil about A and says he didnt want to pay. They are shocked! Both are

right as long as we base our standards on what we believe to best for society. B thinks Customs agents need

money. The Government sets their salary assuming that they get a small percentage. The system would work

better if everyone were much more honest.


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The companys work has to be done with least delay. So, both A and B agree to accept the difference in

morals of different social system. This is how an individual should control his actions in a corporate culture

and modify his personal ethics accordingly.

Since 1992, the two words scam and scandal have become very common. They cover corrupt

financial/economic practices of vast magnitude affecting large sections of the public. The B-P-C triangle hasbeen prominently involved in these episodes. Newspaper columnists and editorials often come down heavily

on the perpetrators of such economic terrorism, yet the general mood is one of resignation. Business

enterprises themselves, with some highly honorable exceptions, often consider such practices to be part of the

normal business process. The intellectually articulate class usually chooses to ascribe these events to

systems flaws and weaknesses. This was clearly evident in the stand taken regarding the 1992 stock-

exchange scam. In the course of such elaborate system directed explorations, the basic issues of personal

character and integrity get side-tracked. Although terms like accountability and transparency are thrown

in during public pronouncements, culpability on such scores is still dodged at all levels.

The capacity to corrupt and the willingness to be corrupted seem to be moving in alliance in several cases,e.g., the Enron contract for power generation in Maharashtra. Leaving aside other aspects, it has been reportedthat Rs. 650 million were ostensibly spent on educating the Indian counterparts involved in managing the

project.

In a Times of IndiaMODE opinion poll (1995) to rank tens segments of Indian society in the matter ofcorruption. In the said opinion poll business ranked fifth in a list of ten segments evaluated for corruption.

Seventy-six percent of the respondents rated business as a corrupting force. Politicians and Ministers hadthe highest rank by virtue of receiving 98 percent score as being corrupt. Teachers fell in the ninth rank 43

percent of the respondents ranking them as corrupt. Liberalization of the economy has not reduced

corruption. Ordinary people were seen as corrupt by only 38 percent of the respondents, the lowest rank(Times of India, January 14, 1995).


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Q. Explain Trusteeship Management- Gandhian philosophy of wealth management.

Ans: Mahatma Gandhi in 1939 said to questioner: Just imagine that I have a crore of rupees in mypossession. I can either squander the amount in dissipation; or take up the attitude that the money does not

belong to me, that I do not own it, that it is a bequest, that it has been put in my possession by God and thatonly so much of it is mine as is enough for my requirements. ..My requirements cannot be greater because Ihappen to be son a rich man The man who takes for himself only enough to satisfy the needs customary inhis society and spends the rest for social service becomes a trustee.

This theory of trusteeship had evolved as a response from Gandhi to the issue of usurpation (seize and hold)of the property of princes and zamindars. Continuinghis reply, he also said: We also wish that the Princesand the millionaires too should do manual work and maintain themselves on eight annas a day, considering

the rest of their property as national trust.

The notion of trusteeship espoused by Gandhi centered on denying material pursuits and coveting of wealth,with practitioners acting as trustees of other individuals and the community in their management of

economic resources and property. The rich should serve the society after satisfying his needs and not merelyenjoy his life. Throughout his life, Gandhi sought to develop ways to fight India's extreme poverty,backwardness and socio-economic challenges as a part of his wider involvement in the Indian independencemovement. Gandhi's championing ofSwadeshiand non-cooperation wascentered on the principles ofeconomic self-sufficiency.

Gandhi was averse to all notions of class warfare and concepts of class-based revolution, which he saw ascauses of social violence and disharmony. Gandhi's concept ofegalitarianism (a belief in human equality esp.with respect to social, political, and economic rights and privileges) was centered on the preservation of

human dignity rather than material development. Some of Gandhi's closest supporters and admirers includedindustrialists such as Ghanshyamdas Birla, Ambalal Sarabhai, Jamnalal Bajaj and J. R. D. Tata, who adoptedseveral of Gandhi's progressive ideas in managing labour relations while also personally participating inGandhi's ashrams and socio-political work.

Gandhian economics do not draw a distinction between economics and ethics. Economics that hurts the moralwell-being of an individual or a nation is immoral, and therefore sinful. The value of an industry should begauged less by the dividends it pays to shareholders than by its effect on the bodies, soul and spirits of thepeople employed in it. In essence, supreme consideration is to be given to man than to money. In fact, the first

basic principle of Gandhis economic thought is a special emphasis on plain living which helps in cuttingdown your wants and being self-reliant. Accordingly, increasing consumer appetite is likened to animal

appetite which goes to the end of earth in search of their satisfaction. Thus a distinction is to be made between' Standard of Living and Standard of Life, where the former merely states the material and physicalstandard of food, cloth and housing. A higher standard of life, on the other hand could be attained only if,along with material advancement, there was a serious attempt to imbibe cultural and spiritual values andqualities.

Under the Gandhian economic order, the character of production will be determined by social necessity andnot by personal greed. Gandhi has often quoted that if mankind was to progress and to realize the ideals ofequality and brotherhood, it must act on the principle of paying the highest attention to the prime needs of theweakest sections of the population. Therefore any exercise on economic planning on a national scale would befutile without uplifting these most vulnerable sections of the society in a direct manner. In the ultimate

analysis, it is the quality of the human being that has to be raised, refined and consolidated. In other words,economic planning is for the citizen, and not the citizen for national planning. Everybody should be given the
http://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Non-cooperation_movementhttp://en.wikipedia.org/wiki/Self-sufficiencyhttp://en.wikipedia.org/wiki/Egalitarianismhttp://en.wikipedia.org/wiki/Birla_familyhttp://en.wikipedia.org/wiki/Sarabhai_familyhttp://en.wikipedia.org/wiki/Jamnalal_Bajajhttp://en.wikipedia.org/wiki/J._R._D._Tatahttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Self-sufficiencyhttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Standard_of_livinghttp://en.wikipedia.org/wiki/Self-sufficiencyhttp://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/J._R._D._Tatahttp://en.wikipedia.org/wiki/Jamnalal_Bajajhttp://en.wikipedia.org/wiki/Sarabhai_familyhttp://en.wikipedia.org/wiki/Birla_familyhttp://en.wikipedia.org/wiki/Egalitarianismhttp://en.wikipedia.org/wiki/Self-sufficiencyhttp://en.wikipedia.org/wiki/Non-cooperation_movementhttp://en.wikipedia.org/wiki/Swadeshi


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right to earn according to his capacity using just means. The rich should serve the society after satisfying hisneeds and not merely enjoy his life.Gandhian economics places importance to means of achieving the aim of development and this means mustbe non-violent, ethical and truthful in all economic spheres. In order to achieve this means headvocated trusteeship, decentralization of economic activities, labour intensive technology and priority toweaker sections. Gandhi claims that to be non-violent an Individual needs to have a rural mindedness. It alsohelps in thinking of our necessities of our household in terms of rural mindedness. The revival of the economyis made possible only when it is free from exploitation, so according to Gandhi industrialization on a mass-scale will lead to passive or active exploitation of the people as the problem of competition and marketingcomes in. Gandhi believes that for an economy to be self-contained, it should manufacture mainly for its useeven if that necessitates the use of modern machines and tools, provided it is not used as a means ofexploitation of others. The path of socialism should only be through non-violence and democratic method andany recourse to class-war and mutual hatred would prove to be suicidal.

Gandhian economics is a school ofeconomic thought based on the socio-economic principles expoundedby Indian leader Mohandas Gandhi. It is largely characterized by its affinity to the principles and objectives ofnonviolent humanistic socialism, but with a rejection of violent class war and promotion of socio-economicharmony. The path of socialism should only be through non-violence and democratic method and any

recourse to class-war and mutual hatred would prove to be suicidal. Gandhis economic ideas also aim topromote spiritual development and harmony with a rejection ofmaterialism. The term "Gandhian economics"was coined by J. C. Kumarappa, a close supporter of Gandhi.

Gandhian economics brings a socialist perspective of overall development and tries to redefine the outlook ofsocialism. Gandhi espoused the notion of trusteeship whichIn the ultimate analysis, it is the quality of the human being that has to be raised, refined and consolidated. Inother words, economic planning is for the citizen, and not the citizen for national planning. Everybody shouldbe given the right to earn according to his capacity using just means.

General Issues concerning Trusteeship Theory:

Trusteeship, as applicable to the corporate world, refers to the act of holding and managing resources onbehalf of the stakeholders of the firm. Whats new about that, one may query. Given that the traditional take

on wealth has almost always been tilted towards owners of corporations, this concept brings in an element ofequity, by placing other stakeholders such as employees, customers and society on the same rung as large andsmall shareholders.

The idea is that all wealth, including human, financial and technological resources, belongsTo society and the rewards accruing from their use must revert to society at large. The principles oftrusteeship can be traced to the concept of collective endeavor and community living.Briefly, these are:

Resources must be held and utilized for the benefit of society. Managers are the trustees of the stakeholdersand must work towards optimizing stakeholder value, not merely maximizing shareholder value. The smallinvestor has as much a say in decisions as the large investor. Overall approach is towards the macro and thelong-term perspective, rather than the short-term perspective which is often geared exclusively to suit theshareholder and top management.

At first sight, this seemingly idealistic concept invariably raises a few protests. The owner/s must be

rewarded for bearing risks and supplying expertise: Definitely. But the reward must be in proportion to the

skills and expertise supplied. The increasing instances of ethical transgressions on the part of leaders andCEOs indicate the need for better balance in the risk-reward relationship. The Enron fiasco and the sale of

shares worth over $70m by erstwhile chief Rebecca Mark, a few months before its bankruptcy, is a case inpoint.
http://en.wikipedia.org/wiki/Trusteeship_(Gandhism)http://en.wikipedia.org/wiki/Decentralizationhttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Socio-economichttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mohandas_Gandhihttp://en.wikipedia.org/wiki/Socialismhttp://en.wikipedia.org/wiki/Class_conflicthttp://en.wikipedia.org/wiki/Materialismhttp://en.wikipedia.org/wiki/J._C._Kumarappahttp://en.wikipedia.org/wiki/Trusteeship_(Gandhism)http://en.wikipedia.org/wiki/Trusteeship_(Gandhism)http://en.wikipedia.org/wiki/Trusteeship_(Gandhism)http://en.wikipedia.org/wiki/J._C._Kumarappahttp://en.wikipedia.org/wiki/Materialismhttp://en.wikipedia.org/wiki/Class_conflicthttp://en.wikipedia.org/wiki/Socialismhttp://en.wikipedia.org/wiki/Mohandas_Gandhihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Socio-economichttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Decentralizationhttp://en.wikipedia.org/wiki/Trusteeship_(Gandhism)


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Corporations exist for profits: No, they exist to fulfill the needs of society and in the process, generate

profits. Even if profits were to be the only determinant of policies, trusteeship would still score overinequitable sharing of wealth, since better wealth management automatically leads to more lasting and stableequations with stakeholders. This, in turn, leads to higher profits, goodwill and trust. Trusteeship might lead

to a disincentive for efficiency and efforts: When individual and group efforts are correctly aligned withsocial needs, the possibility of de-motivation or deliberate inefficiency does not arise. Conviction in the utilityof the concept, coupled with the commitment of top leadership, would ensure efficiency as well aseffectiveness.

Q. What are six stages of moral development of an Individual as explained by Lawrence Kohlberg?

Ans: According to researcher Lawrence Kohlberg, conscience is only one of several ways in which [ethical]

values are represented in the personality. Kohlberg believes there are higher levels of moral development and

these are acquired in stages.

Pre-conventional

According to Kohlberg, punishment orientation is the stage in which actions are evaluated in terms of possible

punishment, not goodness or badness. Obedience to power is emphasized. Similar to this is pleasure-seeking

orientation in which right action is determined by one's own needs. Concern for the needs of others is largely a

matter of potential reciprocation, not of loyalty, gratitude or justice.

Conventional

The next stage in ethical decision-making is where motivation to make a choice is based on authority

orientation or good boy/good girl orientation. In order, this is where emphasis is on upholding law, order and

authority as doing ones' duty or in doing that which will please others and give immediate praise.

Post-Conventional

Final stages of moral development according to Kohlberg focus on individual decision making. Social contract

orientation is where one bases support of laws on rational analysis and mutual agreement. Rules are recognized

as open to question but are upheld for the good of the community and in the name of democratic values.

The final stage is morality of individual principles where behaviour is directed by self-chosen ethical principles

that tend to be general, comprehensive or universal. High value is placed on justice, dignity and equality.

Ethical Decision-making in Eastern Religions

Traditions such as Confucianism, Hinduism, Islam, Buddhism, Taoism, have had a similar impact on their

cultures. However, they all tend to emphasize different aspects of decisions than does Western academic ethics,

which is said to suffer badly from a "God's Eye view" problem. By contrast, these non-Western traditions haveemphasized the following:


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Trust relationships

Trust relationships are the foundations of all ethical decisions. One must learn what is good and ethical from

some role model or moral example. Religion often raises certain stories about certain people to this level

deliberately.

Consistent description

All ethical and moral judgement attempts to make consistent descriptions of complex situations and difficult

decisions. It is considered to be important because, to those who practice the ethical tradition in which the

descriptions are applied, it answers the big question: "How should we live?"

The very questions presupposes that we can define 'how' (method), 'should' (ambition), 'we' (a group seeking

consensus), 'live' (beings with bodies).

Q. Explain the importance of US Model Business Principle (1995) and the Caux Round Table Principle for

Indian multi nationals doing business in and with foreign countries.

Ans: The Caux Round Table (CRT) Principles for Responsible Business set forth ethical norms for acceptable

businesses behaviour.

Trust and confidence sustain free markets and ethical business practices provide the basis for such trust and

confidence. But lapses in business integrity, whether among the few or the many, compromise such trust andhence the ability of business to serve humanitys needs.

Events like the 2009 global financial crisis have highlighted the necessity of sound ethical practices across the

business world. Such failures of governance and ethics cannot be tolerated as they seriously tarnish the positive

contributions of responsible business to higher standards of living and the empowerment of individuals around

the world.

The self-interested pursuit of profit, with no concern for other stakeholders, will ultimately lead to business

failure and, at times, to counterproductive regulation. Consequently, business leaders must always assert ethical

leadership so as to protect the foundations of sustainable prosperity.

It is equally clear that if capitalism is to be respected, and so sustain itself for global prosperity, it must be both

responsible and moral. Business therefore needs a moral compass in addition to its practical reliance on

measures of profit and loss.

The Caux Round Table (CRT) is an international network of business leaders working to promote a morally

and sustainable way of doing business. The CRT believes that its Principles for Responsible Business provide

necessary foundations for a fair, free and transparent global society.


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The Caux Round Table was founded in1986 by Frits Philips Sr, former President of Philips Electronics, and

Olivier Giscard dEstaing, former Vice-Chairman of INSEAD, as a means of reducing escalating international

trade tensions between Europe, Japan and the USA.

At the urging of Ryuzaburo Kaku, then Chairman of Canon, Inc, the CRT began to focus attention on the

importance of global corporate responsibility in reducing social and economic threats to world peace and

stability. This led to the development of the 1994 Caux Round Table Principles for Business around three

ethical foundations, namely: responsible stewardship; the Japanese concept of Kyosei - living and working formutual advantage; and respecting and protecting human dignity.

The CRT Principles for Responsible Business are supported by more detailed Stakeholder Management

Guidelines covering each key dimension of business success: customers, employees, shareholders, suppliers,

competitors, and communities.

PRINCIPLE 1 - RESPECT STAKEHOLDERS BEYOND SHAREHOLDERS

A responsible business acknowledges its duty to contribute value to society through the wealth andemployment it creates and the products and services it provides to consumers.

A responsible business maintains its economic health and viability not just for shareholders, but alsofor other stakeholders.

A responsible business respects the interests of, and acts with honesty and fairness towards, itscustomers, employees, suppliers, competitors, and the broader community.

PRINCIPLE 2 CONTRIBUTE TO ECONOMIC, SOCIAL AND ENVIRONMENTAL

DEVELOPMENT

A responsible business recognizes that business cannot sustainably prosper in societies that are failingor lacking in economic development.

A responsible business therefore contributes to the economic, social and environmental developmentof the communities in which it operates, in order to sustain its essential operating capital financial,

social, environmental, and all forms of goodwill.

A responsible business enhances society through effective and prudent use of resources, free and faircompetition, and innovation in technology and business practices.

PRINCIPLE 3BUILD TRUST BY GOING BEYOND THE LETTER OF THE LAW

A responsible business recognizes that some business behaviours, although legal, can neverthelesshave adverse consequences for stakeholders.

A responsible business therefore adheres to the spirit and intent behind the law, as well as the letter ofthe law, which requires conduct that goes beyond minimum legal obligations.

A responsible business always operates with candor, truthfulness, and transparency, and keeps itspromises.


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PRINCIPLE 4RESPECT RULES AND CONVENTIONS

A responsible business respects the local cultures and traditions in the communities in which itoperates, consistent with fundamental principles of fairness and equality.

A responsible business, everywhere it operates, respects all applicable national and international laws, Regulations and conventions, while trading fairly and competitively.

PRINCIPLE 5SUPPORT RESPONSIBLE GLOBALISATION

A responsible business, as a participant in the global marketplace, supports open and fair multilateraltrade.

A responsible business supports reform of domestic rules and regulations where they unreasonablyhinder global commerce.

PRINCIPLE 6RESPECT THE ENVIRONMENT

A responsible business protects and, where possible, improves the environment, and avoids wastefuluse of resources.

A responsible business ensures that its operations comply with best environmental managementpractices consistent with meeting the needs of today without compromising the needs of future

generations.

PRINCIPLE 7AVOID ILLICIT ACTIVITIES

A responsible business does not participate in, or condone, corrupt practices, bribery, moneylaundering, or other illicit activities.

A responsible business does not participate in or facilitate transactions linked to or supporting terroristactivities, drug trafficking or any other illicit activity.

A responsible business actively supports the reduction and prevention of all such illegal and illicitactivities.

Q. Describe a model of ethical decision making in business. How can we motivate ethical behaviour?

Ans: A unified model of organizational decision is essential, complete with the impact of ethics, morals or

values on the decision maker.

. Why do decision makers attempt to satisfy the interests of claimants with little to no power over them? In my

view, this is the question answered by Jones (1991) model. He argues that a variable called moral intensity

determines the degree to which the interests (effects of the decision) of non-powerful claimants are considered.

Moral Intensity has 6 components:


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1. Magnitude of consequences

2. Social consensus

3. Probability of effect

4. Temporal immediacy

5. Proximity

6. Concentration of effect

We would add another factor derived from the self-concept model. This factor is the degree to which the

decision makers social identity is tied to the claimant in question (identification), or the degree to which the

decision maker personally identifies with the claimants interest.

ETHICAL CONFLICTS

Frame work for Ethical Decision Making

Ethical decision making process in business includes ethical issue intensity, individual factors, organizational

factors, and opportunity.

By ethical issue intensity we mean the perceived importance the decision maker- individual, work group or the

organization- attaches to the issue on hand on which a decision is to be taken. Managers can be held liable for

the unethical or illegal actions of their subordinates. Here the moral intensity relates ones perception of social

pressure and the harm the decisions will have on others.

Individual factors: When people have to resolve ethical issues they often take their decision based on their own

values and principles of right or wrong. When you look at specific individuals in scandal plagued companies

like Enron, WorldCom, Arthur Anderson, Adelphia etc., naturally questions about those individuals personal

character and integrity arises. They appear to operate in their own self- interest in total disregard to the law and

interest of society.

At Adelphia Communications, for example, the Rigas family members who founded the company had forgotten

about general social values. A US court in 2004 convicted the founder chairman and his son on conspiracy,

securities fraud and bank fraud charges and compelled them to give up 95 % of the family assets to the State byway of compensation to the victims.

Organizational factors: In business situations no one operates in vacuum. In deed in the workplace the

organizations values often have greater influence on decisions than a persons own values. A corporate culture

can be defined as a set of values, beliefs, goals, norms and ways of solving problems that members (employees)

of an organization share. As time passes, stake holders come to view the company or organization as a living

organism, with mind and will of its own. For example, The Walt Disney Company- importance of adhering to

past traditions, the American Express Company- employees helping customers out of difficult situations.etc.


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Opportunity: Opportunity results from conditions that either provide rewards or fail to erect barriers against

unethical behavior.

Business Ethics Evaluation and Intentions

An individuals intensions and the final decision regarding what action he/she will take are the last steps of

ethical decision making. When the individuals intensions and behaviors are inconsistent with his/her ethical

judgment, the person may feel guilty.

Guilt or uneasiness is the first sign that an unethical decision has occurred. The next step is changing ones

behavior to reduce such feelings. Persons values may start shifting or the person may plan to shift away from

the situation.

Habits of strong ethical leaders:

1. Ethical leaders have strong personal character2. They have passion to do right3. They are proactive4. They consider stake holders interests5. They are role models for organizations values6. They are transparent and are actively involved in organizations decision making7. They are competent managers who take a holistic view of the firms ethical culture.

Q. Explain basics of normative ethics: there are five major systems that do have a direct relevance to

managerial decisions.

Ans:Moral reasoning requires understanding ofnormative Ethics.

What is normative ethics philosophy? Philosophy is the study of thought and conduct. Normative ethics

philosophy is the study of the proper thought and conduct: i.e. how we should behave. Normativephilosophers have been looking at these issues for more than 2400 years since the time of Plato who lived

from 427 to 347 B.C. They have attempted to establish a logical thought process, based up on first principle,

that would determine whether an act were right or wrong, good or evil, fair or unfair. They have

not been successful yet. The discussion goes on. But many of their concepts and methods are relevant to

managerial ethics. All hard ethical decisions are compromises, between economic and social performance in

the case of a business firm, between wants and duties in the case of an individual. Normative philosophy

provides some help in making those compromises. That is why we need to know something about normative

philosophy of morality and ethics.

Ethical relativism


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of thought. A theory, however useful and complete, has to be rejected or revised if it is found to be untrue. In

the same manner our laws and institutions, no matter how efficient or accepted, must be reformed or abolished

if they are unjust.

Personal Liberty: The existing pattern of holding of each person, in income, wealth and other bases of self-

respect are derived other people in exchange of some good or service, or received from other people in theform of a gift. The distribution of these wealth might have taken place according to the above five principles.

But the pattern will be changed by transfers. Those transfers by exchange or gift may be considered just as

long as they are voluntary. Non-voluntary exchanges, based on the use of social force or other coercive

means, are unjust. This the principle of personal liberty propagated by Professor Robert Nozick, also a

Harvard faculty.

Q. What is corporate culture? Explain the habits of strong ethical leaders. How do the leaders affect the

corporate culture?

Ans:Corporate culture is a term used to describe the collective beliefs, value systems, and processes that

provide a company with its own unique flavour and attitude. Businesses of all sizes possess some type of

corporate culture, in that every company has a set of values and goals that help to define what the business is

all about. Here are some examples of elements that go into creating and defining a corporate culture.

At the foundation of any company culture are the standards that govern the operation of the business. These

standards are usually expressed in terms of the policies and procedures that define how the company will

operate. This will include how different departments or functions relate to one another in the productionprocess, the line of communication established between management and departmental employees, and rules

governing acceptable conduct of everyone who is part of the company. This basic organizational culture makes

it possible to develop other layers of corporate culture based on these foundational factors.

Above and beyond organizational and procedural factors, corporate culture is further informed by the attitude

of everyone involved with the organization. When executives, managers, and rank and file employees are all on

the same page as far as basic corporate values, it becomes possible to have general agreement on the

relationships that must be in place to accurately reflect the desired corporate culture. For example, when

employees are provided with ways to make suggestions that could improve the productivity or the general

working environment of the company, it can be said that the corporate culture is inclusive, as it allows for free

communication between everyone employed by the business.

As with many types of cultures, corporate culture usually involves the inclusions of some rites or rituals. This

can be something as simple as the annual holiday bonus, a week in the summer when the entire company shuts

down, or even the naming of an employee of the month. These rites help to bond people together and provide

some sense of collective identity, which is very important to the creation of a positive corporate culture.

It is important to note that a particular corporate culture may be positive or negative. Businesses where the rules

constantly change, employee input is not encouraged, and rites tend to change constantly could be said to have

a negative or counter-effective corporate culture. Since most companies cannot survive without the support of


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all employees and a dedication to core values, any business that develops negative corporate attitudes and

culture is likely to be extremely limited in growth, or will fail to survive.

The roles of leadership in a corporate culture

1. Conduct a rigorous self-assessment of the film's values and its existing ethics and

Compliance program.

2. Maintain commitment from top managers.

3. Publish, post, and make codes of ethics available and understandable.

4. Communicate ethical standards through multiple channels.

5. Provide timely training to reinforce knowledge.

6. Provide confidential resources.

7. Ensure consistent implementation.

8. Respond and enforce consistently, promptly, and fairly.

9. Monitor and assess using appropriate methods.

10. Revise and reform to ensure continuous improvement.

Leadership styles influence ethical decisions

1. The coercive leader demands instantaneous obedience and focuses on achievement,

Initiative and self-control.

2. The authoritative leader considered to be one of the most effective styles inspires

An employee to follow a vision, facilitate change, and creates a strongly positive

Performance climate.

3. The facilitative leader values people, their emotions, and their needs and relies on

Friendship and trust to promote flexibility. Innovation, and risk taking.

4. The democratic leader relies on participation and teamwork to reach collaborative

Decisions.

5. The pacesetting leader can create a negative climate because of the high standards that he


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Or she sets.

6. The coaching leader builds a positive climate by developing skills to foster long term

Success, delegates responsibility, and is skilful in issuing challenging assignments.

Habits of strong ethical leaders

1. Ethical leaders have strong personal character.

2. Ethical leaders have a passion to do right.

3. Ethical leaders are proactive.

4. Ethical leaders consider stakeholders' interests.

5. Ethical leaders are role models for the organization's values.

6.Ethical leaders are transparent and actively involved in organizational decision making.

7. Ethical leaders are competent managers who take a holistic view of the film's ethical

Culture.

Q. Explain principles and codes of corporate governance.

Ans: The basic guidelines for corporate governance are:

1. Ensuring the basis for an effective corporate governance framework,

2. The rights of shareholder and key ownership functions;

3. The equitable treatments of shareholders;

4. The role of stakeholders in corporate governance;

5. Disclosure and Transparency; the responsibilities of the board.

OECD code or principles attempt to cover the issues of CGmore comprehensively than the Cadbury Code, inorder toguide the growing international trade between countries andthe rapidly enhancing the stock marketsacross the globe.

Rights and equitable treatment of shareholders: Organizations should respect the rights ofshareholders and help shareholders to exercise those rights. They can help shareholders exercise theirrights by openly and effectively communicating information and by encouraging shareholders toparticipate in general meetings.

Interests of other stakeholders: Organizations should recognize that they have legal, contractual,social, and market driven obligations to non-shareholder stakeholders, including employees, investors,creditors, suppliers, local communities, customers, and policy makers.


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Role and responsibilities of the board: The board needs sufficient relevant skills and understandingto review and challenge management performance. It also needs adequate size and appropriate levelsof independence and commitment.

Integrity and ethical behaviour: Integrity should be a fundamental requirement in choosingcorporate officers and board members. Organizations should develop a code of conduct for theirdirectors and executives that promotes ethical and responsible decision making.

Disclosure and transparency: Organizations should clarify and make publicly known the roles andresponsibilities of board and management to provide stakeholders with a level of accountability. Theyshould also implement procedures to independently verify and safeguard the integrity of thecompany's financial reporting. Disclosure of material matters concerning the organization should betimely and balanced to ensure that all investors have access to clear, factual information.

Corporate governance principles and codes have been developed in different countries and issued from stock

exchanges, corporations, institutional investors, or associations (institutes) of directors and managers with the

support of governments and international organizations. As a rule, compliance with these governance

recommendations is not mandated by law, although the codes linked to stock exchange listing

requirements may have a coercive effect. For example, companies quoted on the London, Toronto andAustralian Stock Exchanges formally need not follow the recommendations of their respective codes. However,

they must disclose whether they follow the recommendations in those documents and, where not, they should

provide explanations concerning divergent practices. Such disclosure requirements exert a significant pressure

on listed companies for compliance.

One of the most influential guidelines has been the 1999 OECD Principles of Corporate Governance. This was

revised in 2004. The OECD guidelines are often referenced by countries developing local codes or guidelines.

Building on the work of the OECD, other international organizations, private sector associations and more than

20 national corporate governance codes, the United Nations Intergovernmental Working Group of Experts on

International Standards of Accounting and Reporting (ISAR) has produced their Guidance on Good Practices in

Corporate Governance Disclosure. This internationally agreedbenchmark consists of more than fifty distinct

disclosure items across five broad categories:

Auditing Board and management structure and process Corporate responsibility and compliance Financial transparency and information disclosure Ownership structure and exercise of control rights.

Q. Trace the beginning of concept of Corporate Governance from 1983 through Cadbury Committee Report,

Sarbanes Oxley Act and OECD principles.

Ans: According to Sir Adrian Cadbury,

Corporate Governance is concerned with holding the balance between economic and socialgoals and between individual and communal goals.


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The corporate governance framework is there to encourage the efficient use of resources andequally to require accountability for the stewardship of those resources.

The aim is to align as nearly as possible the interests of individuals, corporations and society.

Corporate governance is "the system by which companies (sic) are directed and controlled" (Cadbury

Committee, 1992). It involves a set of relationships between a corporation's stakeholders. The potential for

conflict of interests between stakeholders can be prevented or mitigated by the processes, customs, policies,

laws, and institutions that influence the way a corporation iscontrolled. An important theme of discussions

concerning corporate governance is the nature and extent of accountability of decision makers inside the

corporation, and mechanisms that try to decrease the principalagent problem.

Corporate governance includes the relationships among the many stakeholders involved and the goals for

which the corporation is governed. In contemporary business corporations, the main external stakeholder

groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the

corporation's activities. Internal stakeholders are the board of directors, executives, and other employees. A

sustained thread of discussion regarding good governance is the need for corporations to be directed in a

responsible and transparent manner in the best interest of the corporation. For profit-oriented corporations

with external shareholders, ensuring good governance is intended to increase the confidence of shareholders

and capital-market investors.

A related discussion thread focuses on the impact of corporate governance systems on economic efficiency,

with a strong emphasis on shareholders' welfare; this aspect is particularly present in contemporary public

debates and developments in regulatory policy (see regulation and policy regulation).

There has been renewed interest in the corporate governance practices of modern corporations since 2001,

particularly due to the high-profile collapses of a number of large corporations, most of which involved

accounting fraud. Corporate scandals of various forms have maintained public and political interest in the

regulation of corporate governance. In the U.S., these include Enron Corporation andMCI Inc. (formerly

WorldCom). Their demise is associated with the U.S. federal government passing the Sarbanes-Oxley Act in

2002, intending to restore public confidence in corporate governance. Comparable failures in Australia are

associated with the eventual passage of the CLERP 9 reforms. Similar corporate failures in other countries

stimulated increased regulatory interest.

Contemporary discussions of corporate governance in Anglo-American systems tend to refer to principles

raised in three documents released since 1990: The Cadbury Report (UK, 1992), the Principles of CorporateGovernance (OECD, 1998 and 2004), the Sarbanes-Oxley Act of 2002 (US, 2002). The Cadbury and OECD

reports present general principals intended to assure "proper" governance. The Sarbanes-Oxley Act,

informally referred to as SOX, is an attempt by the federal government in the United States to legislate some

of the principles recommended in the Cadbury and OECD reports.

Rights and equitable treatment of shareholders: Organizations should respect the rights ofshareholders and help shareholders to exercise those rights. They can help shareholders exercise their

rights by openly and effectively communicating information and by encouraging shareholders to

participate in general meetings.


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Interests of other stakeholders: Organizations should recognize that they have legal, contractual,social, and market driven obligations to non-shareholder stakeholders, including employees, investors,

creditors, suppliers, local communities, customers, and policy makers.

Role and responsibilities of the board: The board needs sufficient relevant skills and understandingto review and challenge management performance. It also needs adequate size and appropriate levels

of independence and commitment.

Integrity and ethical behaviour: Integrity should be a fundamental requirement in choosingcorporate officers and board members. Organizations should develop a code of conduct for their

directors and executives that promotes ethical and responsible decision making.

Disclosure and transparency: Organizations should clarify and make publicly known the roles andresponsibilities of board and management to provide stakeholders with a level of accountability. They

should also implement procedures to independently verify and safeguard the integrity of the

company's financial reporting. Disclosure of material matters concerning the organization should be

timely and balanced to ensure that all investors have access to clear, factual information.

Q. Trace the beginning of concept of Corporate Governance in India from CII Report 1998,

Kumaramangalam Birla Report of 2000. What is the significance of Clause No 49 of Indian Listing

Agreement in the matter of Corporate Governance in India?

Ans:Corporate governance initiatives in India began in 1998 with the Desirable Code of Corporate

Governance a voluntary code published by the CII, and the first formal regulatory framework for listed

companies specifically for corporate governance, established by the SEBI. The latter was made in February

2000, following therecommendations of the Kumarmangalam Birla Committee Report.

The term corporate governance is susceptible to both broad and narrow definitions. In fact, many of the

codes do not even attempt to articulate what isencompassed by the term. The motives for the several corporate

governancepostulates engaged in these definitions vary, depending on the participantconcerned. The focal

subjects also vary accordingly. The important point is that

Corporate governance is a concept, rather than an individual instrument. It includes debate on the appropriate

management and control structures of a company. Further it includes the rules relating to the power relations

between owners, the Board ofDirectors, management and, last but not least, the stakeholders such as

employees,suppliers, customers and the public at large.

The Kumarmangalam Birla Committee on Corporate Governance SEBI had constituted a Committee on May

7, 1999 under the chairmanship of ShriKumarmangalam Birla, then Member of the SEBI Board to promote

and raise thestandards of corporate governance. Based on the recommendations of thisCommittee, a new

clause 49 was incorporated in the Stock Exchange Listing

Agreements (Listing Agreements). The recommendations of the Kumarmangalam Birla Committee on

Corporate Governance (the Recommendations) are set out in Enclosure I to this report. Report of the

Committee on Corporate Governance.

Financial reporting and disclosures


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Financial disclosure is a critical component of effective corporate governance. SEBI set up an Accounting

Standards Committee, as a Standing Committee, under thechairmanship of Shri Y. H. Malegam with the

following objectives:

To review the continuous disclosure requirements under the listingagreement for listed companies;

To provide input to the Institute of Chartered Accountants of India (ICAI) for introducing new accounting

standards in India; andTo review existing Indian accounting standards, where required and toharmonise these

accounting standards and financial disclosures on par with

International practices.

SEBI has interacted with the ICAI on a continuous basis in the issuance of recent Indian accounting standards

on areas including segment reporting, related partydisclosures, consolidated financial statements, earnings per

share, accounting fortaxes on income, accounting for investments in associates in consolidated

financialstatements, discontinuing operations, interim financial reporting, intangible assets, financial reporting

of interests in joint ventures and impairment of assets. With the introduction of these recent Indian accountingstandards, financialreporting practices in India are almost on par with International AccountingStandards.

Implementation of corporate governance requirements.

The Recommendations were implemented through Clause 49 of the ListingAgreements, in a phased manner

by SEBI.

They were made applicable to all companies in the BSE 200 and S&P C&X Niftyindices, and all newly listed

companies, as of March 31, 2001.

The applicability of the Recommendations was extended to companies with a paidup capital of Rs. 100

million or with a net worth of Rs. 250 million at any time in the past five years, as of March 31, 2002.

In respect of other listed companies with a paid up capital of over Rs. 30 million, the requirements were made

applicable as of March 31, 2003. The accounting standards issued by the ICAI, which are applicable to all

companies under sub-section 3A of Section 211 of the Companies Act, 1956, were specificallymade

applicable to all listed companies for the financial year ended March 31, 2002, under the Listing Agreements.

Q. Explain a case of excellent Corporate Governance and discharging Corporate Social Responsibility in

India.

Ans: Indias tryst with destiny heralded more than 60 years ago, is yet to be fulfilled. For all the progress that

has undeniably been made, it is as if time has stood still in Indias villages. The corporate India based in and

around cities has been flourishing and marching ahead whereas rural India still remains desperately poor. The

gap between two Indias needs to be bridged or at least narrowed if India is to be counted as a developed

country someday. The corporate India can play a key role in bridging this gap. Perhaps there is a fortune at the

bottom of the pyramid for the corporate sector and it can only be mined if rural India is brought into the

mainstream of development and not left behind. As per United Nations, Corporate Social Responsibility(CSR) entails triple bottom line: profits, protection of environment and fight for social justice. Since our


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Foundation through its Institute of Rural Research and Development (IRRAD) is heavily engaged in the last

two, we are keenly interested in learning from the survey the efforts being put in by the corporate India

towards CSR.

The concept of CSR applies equally to individuals and corporations as it does to the State. It is a joint and

shared responsibility of civil society, activist groups Government and corporate sector to create appropriate

means and avenues for the marginalized and bring them to the mainstream. The success of CSR lies in

practicing it as a core part of a companys development strategy. It is important for the corporate sector toidentify, promote and implement successful policies and practices that achieve triple bottom line results.

There are over 700,000 registered companies in India out of which about 6545 are traded on the Indian Stock

Exchange. They need to ask themselves how best they can bring about social justice, and protection of the

environment in co-operation with other sectors of the economy. To create a win-win situation, it is essential

for all of us to work together to alleviate abject poverty and improve miserable living conditions that exist in

rural India. I congratulate Times Foundation for bringing out the first ever national survey on Corporate

Social Responsibility among leading business firms, corporate houses and public sector organisations thus

paving the way for the formation of CSR alliance in India and enabling to convert issues of importance into

advocacy.

Future Social Trends in India

The CSR survey revealed, not surprisingly, those organisations targeted most of their activities close to home providing services for people who live in villages, towns, and districts near where the organisationoperates. Education, health, and the environment are the top priorities. More than likely, these priorities willcontinue.

There is one social trend in India that looms larger than all others the population tsunami. The currentpopulation of India is now over 1.1 billion. Demographers now tell us that India will overtake China by 2026as the worlds most populous nation with almost 1.5 billion people.Let us put this into perspective. At the time of Independence in 1947, Indias population was approximately

350 million. Between now and 2026, India will add almost as many people as there were in the entire nationin 1947.

The implications of this are staggering. Will the additional demands for food, water, housing, education, andhealth care overwhelm the existing infrastructure? Or can all stakeholders work together to build a literate,healthy, capable society with enough jobs to meaningfully employ all those seeking work? The greater thechallenges, the greater the ingenuity required.

For CSR in India to have a meaningful impact on society in the coming decade, a national-local approachmay be best. National in the sense that there will need to be nationwide alliances and databases in order toquickly learn best practices, share innovations, and scale-up pilot programmes. Local approach implies thatCSR will require organisations to efficiently implement programmes at the grassroots level and mobilisevolunteers to serve their local communities.

CSR is here to stay and its future is bright. There is much to learn about building world-class CSRprogrammes in the Indian context, and this survey is a very good place to start.

becg assignment roll no.31. class bfm 2

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