Professional Documents
Culture Documents
2016
Note by Bala
The most important human endeavor is the striving for morality in our
actions. Our inner balance and even our very existence depend on it. Only
morality in our actions can give beauty and dignity to life. - Albert Einstein (in
a letter 11/20/50)
The historian Arnold Toynbee observed: "Out of 21 notable civilizations, 19
perished not by conquest from without but by moral decay from within."
In sharp contrast, let us also see what modern young generation feels about
ethical standards.
According to a recent poll of college seniors, 73% agreed with the statement that
What is right or wrong depends on differences in individual values and cultural
diversity. Only 25% agreed with the statement that There are clear and uniform
standards of right and wrong by which everyone should be judged."
Relative and absolute standards of morals:
Relative is what is suitable for the circumstances and could vary from situation to
situation or from time to time; absolute standards remain the same, standing the
test of time well. It is the absence of absolute standards that leads to corruption
of moral standards through their dilution. The following lines explain the effect of
relative standards.
Relativism allows for oppression of those with minority views by allowing the
majority in any particular circumstance to define what is morally right or wrong.
In Germany they first came for the Communists, and I didn't speak up
because I wasn't a Communist.
Then they came for the Jews, and I didn't speak up because I wasn't a Jew.
Then they came for the trade unionists, and I didn't speak up because I
wasn't a trade unionist.
Then they came for the Catholics, and I didn't speak up because I was a
Protestant.
Then they came for me and by that time no one was left to speak up.
German anti-Nazi activist, Pastor Martin Niemller
Business ethics
1.
a. Examples of ethical practices by employees:
i. Work habits
ii. Ethics in sales
iii. Ethics in advertisement
iv. Ethics in purchase function
b. Unethical practices usually done by employees etc.
Padding of labour charges and expense accounts
Personal long distance phone calls on company accounts
Untidy work areas, break areas and rest rooms
Taking office supplies home
Excessive breaks or sick days
Improper use of copy machines and computer equipment
Cheating the company in the matter of leave, absence, advance etc.
Not conforming to expected business etiquette while dealing with
external customers of the organization
Abusive behaviour
Undue credit for any work, result, achievement etc.
excessive profit
greed
coercion or inducement
betrayal of trust
breaking confidentiality
unfairness
Unkindness
other people concerning their own lives. This is also called the principle
of human dignity. It gives us a negative duty not to interfere with the
decisions of competent adults, and a positive duty to empower others
for whom were responsible.
Corollary principles: honesty in our dealings with others & obligation to
keep promises.
alternative drug that costs less than one-fourth as much. Can you in good
conscience aggressively promote the $2,500-per-dose drug?
If you do not, could lives be lost that might have been saved with that 1
percent increase in effectiveness?
3.
4. You are the accounting manager of a division that is $15,000 below profit
targets. Approximately $20,000 of office supplies were delivered on
December. The accounting rule is to pay expenses when incurred. The
division general manager asks you not to record the invoice until February.
5. You have been collaborating with a fellow manager on an important
project. One afternoon, you walk into his office a bit earlier than scheduled
and see sexually explicit images on his computer monitor. The company
has a zero-tolerance sexual harassment policy, as well as strict guidelines
regarding personal use of the Internet. However, your colleague was in his
own office and not bothering anyone else.
7. Three steps to solve ethical dilemmas: they flow upwards involving utility
(value delivered to the stakeholders), Rights & Justice
a. Know your values strongly
b. Select a model of ethics suitable for the organization
c. Use a problem solving process
8. Three pillars of an ethical organization:
Pillar 1 Ethical individuals
a. Integrity
b. Honesty
c. Inspire trust
d. Treat people right
e. Play fair
f. High level of moral development
Pillar 2 Ethical leadership
a. Role modelling
b. Uphold ethical values in organization
c. Communicate about ethics and values
d. Reward ethical behaviour
e. Swift discipline of unethical behaviour
Pillar 3 Organizations structures and systems
a. Corporate culture
b. Code of ethics
c. Ethics committee
d. Chief ethics officer
e. Ethics training
f.
Whistle-blowing mechanisms
9. Ethical leadership:
a. Ethics originates from the Greek word Ethos. It means character,
conduct or customs
b. With respect to leadership, ethics is about who leaders aretheir
character and what they do, their actions and behaviours.
c. Ethical leaders treat their followers with respect and dignity
d. Their personal values determine what kind of ethical climate will
develop in their respective organizations
e. Ethical leadership principles:
i. Respect for others
ii. Service to others
iii. Justice to others
iv. Honesty/integrity to others
v. Building community with others
f. Ethical leader would ask the following questions to himself/herself:
i. Is this the right and fair thing to do?
ii. Is this what a good person would do?
iii. Am I respectful to others?
iv. Do I treat others generously?
v. Am I honest towards others?
vi. Am I serving the community?
g. Principled leadership:
Principled leaders make a conscientious effort to get all the relevant
information to make an informed decision and to see that their
decisions are consistent with their values and those of the organization.
h. How to get principled leadership?
i. Upbringing and life experiences
ii. Reflection
iii. Role models
iv. Code of ethics and communication
i. The challenges of principled leadership:
i. They should be model citizens
ii. Stick to what you are good at
iii. Establishing an inclusive corporate culture
iv. Have sound whistleblower protection or processes for
information flow
v. Boards of directors should encourage CEOs to speak out
responsibly on critical issues instead of scuttling them
j.
Table 1:
Is humble
Is concerned for the greater good
Is honest and straightforward
Fulfils commitments
Strives for fairness
Takes responsibility
Shows respect for each individual
Encourages and develops others
Serves others
Table 3: Criteria
for evaluation of
ethical
leadership
Ethical
Unethical Leadershi
Leadership
Handling diverse
interests of multiple
stakeholders
Development of a
vision for the
organization
Integrity of leader
behaviour
Communication of
relevant information
operations
Response to criticism
and dissent by
followers
Encourages critical
evaluation to find better
solutions
Development of
follower skills and
self-confidence
m. Three actions that will ensure compliance with ethical standards in the
organization:
The research finds that three ethics-related actions by management and
coworkers have the greatest impact on employee ethics and compliance
an influence more profound than formal ethics programs and organized
activities. They are:
i. Setting a good example;
ii. Keeping promises and commitments; and
iii. Supporting others in adhering to ethics standards.
n. 5 key
i.
ii.
iii.
iv.
v.
shareholders
trustees
guarantors
investors
funding bodies
distribution partners
marketing partners
licensors
licensees
approving bodies
regulatory authorities
endorsers and 'recommenders'
advisors and consultants (yes, these people have something at stake too)
employees - staff, managers, directors, non-executive directors
customers
suppliers
the local population (community)
the regional general public
national general public
international communities
humankind
Many of these groups would not conventionally be considered to be stakeholders, but
think about it: each of these groups could have an interest in and could be affected by
the activities of an organisation. If a connection is not easy to see and understand it
doesn't mean the connection doesn't exist.
Given that this sort of modern stakeholder perspective produces such a wide-ranging
and extensive list of stakeholder groups, it's essential to apply (for any given
situation) some method of evaluating and expressing relative stakeholder interests and
needs, and also to measure and show the varying significance of the stakeholder
relationships; the degree of impact or dependence.
Germany
Anglo-American
Profits
The implications of these differences in priorities are quite profound and can
be depicted in tabular form as follows:
Japan People have priority Emphasis on market sharecrop is a generalist
Germany Products have priority Emphasis on technology & engineering CEO
is an engineer
Anglo-American Profits have priority Emphasis on share-holder value CEO is
an MBA or an accountant.
Source: Lehmann, (1997).
Corresponding to these corporate governance models one can notice the
following three government industry models to see the impact of governmentindustry relationships on corporate governance. These models can be
summarised as shown in the following table:
Models
Government as referee
Countries
USA, UK, HK, Australia
& NZ
Government as
manager
Government as coach
Germany, Austria,
Japan, SZ, Netherlands,
Sweden, Norway,
Denmark, Finland,
Korea, Chinese Taipei,
Salient features
Govt. totally impartial to the markets
Govt. stands on the sidelines
It interferes only if abuses need to be p
crimes need to be punished
Its emphasis on unregulated market for
Minimize regulations
Open, transparent and accountable form
Auditors and lawyers have an importan
Corruption tends to be low
Govt. neither recognizes nor respects m
markets
Economic nationalism and protectionism
Govt. Intervention and control
Promotion of national corporate champi
Corporate governance is opaque, secre
publicity
Bureaucracy is powerful
Sidelines partiality
Administrative guidance, support system
Organized competition
Semi-transparent, semi-opaque corpora
public accountability
Considerable scope for corruption
Appointment process
a. In the Indian capital markets, promoters have a controlling stake in the
company. The provisions for appointment of directors under the
Companies Act require a positive vote by a majority of shareholders,
effectively making the promoter's nod in the appointment a
prerequisite. Regulations in many countries mandate or suggest that
boards have a nominating committee preferably comprising nonexecutive and independent directors. In India, the proposed Companies
Bill stipulates that listed companies have to constitute a nomination
and remuneration committee consisting of non-executive and
independent directors. The Committee shall identify candidates,
recommend their appointment to the board and also carry out
performance evaluation. Limiting the say on pay of promoters with
regard to remuneration of independent directors could be a good way
of insulating the latter from the influence of the executive
management.
b. There is, however, a difference between being independent and
unconnected. To be effective contributors, independent directors have
to bring in knowledge, experience, insight and skill and industry
expertise to enable them to ask the right questions. Companies can
profit immensely from the presence of independent directors who are
courageous enough to voice genuine concerns and constructively
challenge executive decisions.
c. Having the right qualifications, experience and pedigree is only half the
battle won. The time and more importantly, the quality of time spent
by independent directors are what make a difference. Mere presence
and participation in board meetings could best have an ornamental
value. Interactions with executive management, reviewing industry
publications and analysing data about the company's competitors are
some of the ways to deliver value. Matured corporates follow a practice
of prior circulation of pre-meeting material, focusing on quality rather
than quantum. Right people need to be armed with the right tools in
order to make the right impact.
d. Orientation and training programmes giving a background of a
company's operations and organisational structure, its line of products
and services, strategies, and key challenges and opportunities can
tremendously shorten the learning curve of independent directors.
Current Liability Regime
a. The Indian law does not explicitly distinguish between executive and
non-executive directors when it comes to determining penal
consequences. The breather to independent directors given by the
Ministry of Corporate Affairs gives them a shield in cases where
contravention occurred without their knowledge or connivance and the
directors have been diligent on their part.
Sustainability reporting in India for the top 100 listed companies (known
as BRR):
which issued a circular on 13 August 2012 mandating the top 100 listed
companies to report their ESG
initiatives. These are to be reported in the form of a BRR as a part of the
annual report. SEBI has provided a
template for filing the BRR. Business responsibility reporting is in line with the
NVG published by the Ministry of Corporate Affairs in July 2011. Provisions
have also been made in the listing agreement to incorporate the submission of
BRR by the relevant companies. The listing agreement also provides the
format of the BRR. The BRR requires companies to report their performance on
the nine NVG principles. Other listed companies have also been encouraged by
SEBI to voluntarily disclose information on their ESG performance in the BRR
format.
a. the environment
b. sustainability
c. globalization effects - e.g., exploitation, child-labour, social and environmental
damage anywhere in the world
d. corruption, armed conflict and political issues
e. staff and customers relations - for instance education and training, health and
safety, duty of care, etc
f. local community and other social impacts on people's health and well-being
***End of document***