BUSINESS ETHICS by ert554898


• 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
• Relations with others
• How we treat others – even though Don’t Know

• There are many definitions as to what ethics
  * 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.
• 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

• 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
• “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 self-
  interest, 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
• 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.
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
• 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 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)
• 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.
• Delivering competitively priced

• Products and services of high quality at the right time,

• Working together to achieve the organization‘s goals

• Meeting performance expectations.
• 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
• 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
• 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.
• 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.
• 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

• Corruption encourages unethical behavior

• Lack of social Resp and Integrity – Corporate
  wants money and success – with no consideration
  to ethical values.
• Often conveys organizational values, a commitment
  to standards, and communicates a set of ideals.
  (Principles, Morals)

• In practice, used interchangeably with Code of

  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
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

― 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

• Material foreseeable risk factors.

• Material issues regarding employees and other

• 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

• 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        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     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

• 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.
• 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
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

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