Corporate Governance ,Values and Ethics MBA-042

Dr. Ruchi Srivastava

MBA 042 : CORPORATE GOVERNANCE, VALUES & ETHICS

Max. Hours : 40 UNIT-I (8 Sessions) Corporate Governance: Issues, need of corporate governance code, Code of Corporate Practices, Social Responsibility of Corporates, Corporate Social Reporting, Corporate Governance and the Role of Board (BOD),Corporate Governance System Worldwide, Corporate Disclosure and Investor Protection in India UNIT-II (10 Sessions) Values impact in Business: Indian Value System and Values, Teaching from scriptures and tradition (Geeta, Ramayana, Mahabharata, Upanishads, Vedas, Bible and Quran) UNIT-III (10 Sessions) Ethics impact in Business: Ethical Issues in Capitalism and market systems, Ethics and social responsibility, Ethics and marketing, Ethics in finance, Ethics and human resource, Ethics and Information Technology. Ethical theories and approaches, Intellectual property rights like designs, patents, trade marks, copy rights, UNIT-IV (12 Sessions) Corporate Strategy: Global industrial competition, Information Technology, Competitive Strategy, Benchmarking, Total Quality Management, Brand Building, Promotional Strategies, Corporate Restructuring, Mergers and Acquisitions, Supply Chain Management, Horizontal Organisation, Diversification, The Indian Scene. Suggested Readings: 1) S.S. Iyer - Managing for Value (New Age International Publishers, 2002) 2) Laura P Hartman Abha Chatterjee - Business Ethics (Tata McGraw Hill, 2007) 3) S.K. Bhatia - Business Ethics and Managerial Values (Deep & Deep Publications Pvt.Ltd, 2000) 4) Velasquez Business Ethics Concepts and Cases (Prentice Hall, 6th Ed.) 5) Reed Darryl Corporate Governance, Economic Reforms & Development (Oxford). 6) Mathur UC Corporate Governance & Business Ethics (Mc Millan).

2G Spectrum Scam Telgi Scam Satyam Scam Bofors Scam The Fodder Scam Hawala Scandal IPL Scam Harshad Mehta & Ketan Parekh Stock Market Scam
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Corporate Governance
Definitions
Deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment (The Journal of Finance) Corporate Governance is about promoting corporate fairness, Transparency, and Accountability( J. Wolfensohn )

Definitions
Corporate Governance refers to the way a corporation is governed. It is the technique by which companies are directed and managed
Corporate governance refers to the set of SYSTEMS, PRINCIPLES AND PROCESSES by which a company is governed. They provide the GUIDELINES as to how the company can be directed or controlled such that it can fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the BOARD OF DIRECTORS, MANAGEMENT, SHAREHOLDERS TO CUSTOMERS, EMPLOYEES AND SOCIETY Corporate Governance is the INTERACTION BETWEEN VARIOUS PARTICIPANTS (shareholders, board of directors, and companys management) in shaping corporations performance Corporate Governance deals with the manner the providers of FINANCE GUARANTEE THEMSELVES OF GETTING A FAIR RETURN ON THEIR INVESTMENT.
Corporate Governance ensures TRANSPARENCY WHICH ENSURES STRONG AND BALANCED ECONOMIC DEVELOPMENT

Benefits of CG
Good corporate governance ensures corporate success and economic growth. Strong corporate governance maintains investors confidence, as a result of which, company can raise capital efficiently and effectively. It lowers the capital cost. There is a positive impact on the share price. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests of the shareholders and the organization. Good corporate governance also minimizes wastages, corruption, risks and mismanagement. It helps in brand formation and development.

It ensures organization in managed in a manner that fits the best interests of9all.

Objectives of CG
To align Corporate goals with goals of its stakeholders (Society, Shareholders etc) To strengthen Corporate functioning & discourage mismanagement. To achieve corporate goals by making investment in profitable investment outlets.

To specify responsibility of the board of directors & managers in order to ensure good corporate performance.
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Need for Corporate Governance

Separation of Ownership with Management

Global Capital
Investor Protection Foreign Investments Financial Reporting & Accountability Banks & Financial Institutions Globalization of Economy

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Importance Of Corporate Governance

Shapes growth & future of Capital markets of the economy.

Helps in raising funds from capital markets. It links management with its financial reporting system. Enables management to take innovative decisions for effective functioning of the enterprise within the legal framework of accountability. Good Corporate Governance enhances the structures through which objectives the corporations are set, means of attaining such objectives are determined & performance is monitored. Supports investors by making corporate accounting practices transparent. Provides adequate & timely disclosure reporting requirements ,code of conduct etc.

Provides efficiency & effectiveness of the enterprise & adds to wealth of the economy.
Improves International image of the corporate sector & enables home companies to raise global capital.
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CG & Organizational Success

Maintain good relations with the stakeholders

Motivate the employees

Vision Mission Goals Objectives

Develop plans to achieve the objectives Define the authority & responsibility of managers
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CG Environment
Internal Environment Shareholders value Concern for customers Investor Protection Corporate Governance External Environment

Board of Directors Internal Stakeholders

Government Regulations
SEBI Guidelines

Companys mission, values & norms

Transparency Management Developed Corporate Sector

External Stakeholders Corporate Sector Influences

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Principles of CG
Oversight of preparation of the Entitys Financial Statements. Internal Controls & Independence of the entitys auditors. Review of the compensation arrangements for the chief executive officer & other senior executives. The way in which individuals are nominated for positions on the board The resources made available to directors in carrying out their duties.

Oversight & management of risk

Dividend Policy
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Principles of CG
Transparency Accountability Independence Reporting
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Code of Corporate Practices.

Code of Practice
The CEO & Chairperson of the board of directors should be separate. The CEO is responsible for managing day-to-day operations of the company& Chairman should manage the affairs of the board. The day-to-day activities include Planning, Organising & implementing strategies approved by the board. The Organisation should have non executive directors to the advantage of their experience & expertise.
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Combined Code of Practice

There should be a foolproof system of internal control to safeguard the investment of shareholders& assets of the company.

Directors hold a fiduciary relationship with their stakeholders , ie, relationship of trust & faith.
The directors should annually conduct a review of internal control system of the firm. The review should be disclosed to the shareholders as it is important for the company to satisfy its shareholders. Most of the shareholders are small investors who invest their life time savings in companies in order to earn regular dividents & capital gains.

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Corporate Governance in India

Birla Committee Report
Board of Directors Audit Committee

Remuneration Committee
Accounting Standards & Financial Reporting

Management
Shareholders
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SEBI Code on Corporate Governance

Board of Directors Audit Committee Remuneration to Directors Board Procedure Management Shareholders

Report on Corporate Governance

Compliance

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CII Code on Corporate Governance

The key to good corporate governance is well functioning, informed board of directors.
The board should meet a minimum of 6 times a year, preferably at an interval of 2 months Any listed companies with a turnover of Rs. 100 crore & above should have professionally competent, independent , non executive directors who should constitute
At least 30 % of the board if the chairman of the company is a non executive director or At least 50 % of the board if the chairman & managing director is the same person.

No single person should hold directorships in more than 10 listed companies.

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CII Code on Corporate Governance

For non executive directors to play a material role in corporate decision making & maximizing long term shareholder values. To secure better efforts from non executive directors While re-appointing members of the board, companies should give the attendance record of the concerned directors. Key information that must be reported to, & placed before the board must contain
Annual operating plans & budgets together with updated long term plans. Capital budgets ,manpower & overhead budgets Quarterly results for the company as a whole & its operating divisions or business segments.

Listed companies with either a turnover of over 100 crore or a paid of Rs. 20 crore should set up audit committees within 2 hrs. Under additional shareholders information ,listed companies should give data on
High & low monthly averages of share prices in a major stock exchange where the company is listed for the reporting year.
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CII Code on Corporate Governance

Major Indian stock exchanges should gradually insist upon a compliance certificate signed by the CEO & CFO which clearly states that
The management is responsible for the preparation , integrity & fair presentation of the financial statements & other information in the annual report, & which also suggests that the company will continue in business in the course of the following year The accounting policies & principles conform to standard practice & where they do not, full disclosure has been made of any material departures.

For all companies with paid up capitals of Rs. 20 crore or more ,the quality & quantity of disclosure that accompanies a GDR issue should be the norm for any domestic managing diversity issue. Government must allow for greater funding to the corporate sector against the security of shares & other paper. It would be desirable for FIs as pure creditors to rewrite their convents to eliminate having nominee directors except
In the event of serious & systematic debt default In case of the debtor company not providing 6 monthly or quarterly operational data to the concerned FI(s)

If any company goes to more than one credit rating agency , then it must divulge in the prospectus & issue document the rating of all the agencies that did such an exercise.
Companies that default on fixed deposits should not be permitted to
Accept further deposits & make inter corporate loans or investments until the default is made good Declare dividends until the default is made good.
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Corporate Governance & Social Responsibility Corporate Social Reporting

Objectives of Corporate Social Reporting
To measure contribution of firm to the society To determine whether firms social activities are consistent with the wider social priorities persistent in the society. To provide information on firms goals, policies, & contribution to social goals. To establish meaningful communication with the firms stakeholders which will demonstrate its performance & plans for future improvement. To improving firms reputation by demonstrating its concern about environmental & social issues & by fostering transparency & accountability. To improve firms environmental & social risk management by identifying its risks & their management.
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Ethics and Social Responsibility

Social Responsibility is an organizations obligation to benefit society in ways that transcend the primary business objective of maximizing profit.

CSR is the continuing commitment by the business to behave ethically & contribute to economic development while improving the quality of life of the workforce & their families as well as as of the local community & society at large.

Nature of SR
Focus on Business Firms
Deals with Moral Issues It is commensurate with the objective of Profit Maximization

Pervasive Activity
Continuous activity

Levels of SR
Obeyance of Law Catering to Public Expectations Anticipation of Public Expectations Creation of Public Expectations

Historical Perspective
Profit Maximization Trusteeship Management Quality of Life Managemment

Philosophical Perspective of SR
Traditional Philosophy Stakeholder Philosophy Affirmative Philosophy

Phases of SR
I -Top Executives aware of social problems & solve them through oral or written commitment. II Top executives consult staff specialists or hire additional staff specialists to frame plans to discharge SR.

III Top executives integrate social goals with organizational goals.

Approaches TO SR
Social Obstruction Social Obligation Social Response Social Contribution

Principles of CSR
Supply Chain Responsibility Stakeholder Involvement Transparency & Reporting Independent Verification

Models of CSR
Philanthropic Model European Model Trusteeship Model Stakeholder Model

Theories of CSR
Feminist Theory Stakeholder Theory

Social Contract Theory

Ethics & Nature Pragmatism

Reasons of Social Concerns of Managers

Social Forces
Avoid Govt. Interference

Strength of the Labor Force

Consumer Protection

Self Enlightenment
Professionalization

Arguments In Favor of CSR

Long run survival of Business concerns Profitable for the business concerns Moral & Social Commitment Improvement in Public Image Helps in Avoiding government regulation Resources

Arguments Against CSR

Business is an Economic Activity Quantification of Social Benefits Cost Benefit Analysis

Lack of Competence & Skill

Transfer of Social Costs
Increase in Prices Reduction in Wages Reduction in Profits

Sub optimal Utilization of Resources

Dimensions Of CSR
Shareholders
Dividends Value of Investment Safety of Investment Disclosure

Dimensions Of CSR
Employees
Working Conditions Financial Gains Participation in Decision Making Training & Motivation Recognition of their Rights Obey the labor laws Job Security

Dimensions Of CSR
Customers
Quality Goods Complete Information Customer Service Need based Products Regular Supply of Goods Safety of Products

Dimensions Of CSR
Community
Pollution free environment Promote artistic & cultural activities Assistance in Rural & Urban Planning & Development Support Local Health Care Programmes Employment Opportunities Optimum Utilization of Resources Social Programmes Solve Social Problems Conform to Business Ethics

Dimensions Of CSR
Organizations
Healthy Competition Sharing of Resources

Government
Payment of Taxes Obeyance of Law Contribution to national Goals

Philanthropy Vs CSR
Philanthropy
Narrower Perspective Focus more on financial activities

CSR
Wider Perspective Focus on profits, people & planet Deals with business basics & ethics Focus on Emp, shareholders, customers Involves entire co organization & culture Requires Outside expertise Focus on long run sustainability of business firms

Deals with humanitarian cause Focus on Profit Max. for shareholders Starts with top Mgt values Does not require outside expertise Focus on short run viability of companies.

CSR Voluntary Guidelines 2009

Fundamental Principle Core Elements
Care for all Stakeholders Respect for Workers Rights & Welfare Ethical Functioning Respect for Human Rights Respect for Environment Activities for Social & Inclusive Development Implementation Strategy Budget Allocation Share Experiences & Network Disseminate information on CSR Policies

Implementation Guidance

Role of Government & Legislation in enforcing Ethical Business Practices

In a country already suffering from plethora of rules & regulations the solution lies not in more rules & but in bringing more transparency & encouragement to adhere to the established norms. There should be a shift in emphasis for government to acting rather as a facilitator to stimulate & co-ordinate action. There is little need to pass new laws. Rather there is need to reinforce the resources & structures that are already in place. It is evident from experience that great deal of work is being done by companies to address a wide range of social & environmental issues.

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Corporate Governance & Role of Board of Directors CG is a systematic process by which it is directed & controlled to enhance its wealth generating capacity . Basic principles that govern CG: Management should have the power to take decisions in the interest of the company & Management should be accountable for its decisions.

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1. Governance at the level of BOD

To represent shareholders & create shareholder value. To allign the interests of management with those of the shareholders & also protect the interests of other stakeholders like creditors, customers, suppliers etc. To define cos mission & goals To establish or approve strategic plans & ways to achieve goals framed in the plans.

To set pace for the cos current operations & its future development.

To determine the values to be promoted in the co.

To appoint senior executives to manage the co. according to established plans, policies, strategies, procedures..
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Governance at the level of BOD

To review & evaluate the present & future environmental opportunities & threats in relation to cos internal strengths & weaknesses. To determine strategic options, business strategies & plans & ensure that organization structure is appropriate to implement these plans & strategies. To delegate authority to managers & determine the monitoring criteria to evaluate the implementation of plans, policies & strategies.
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Governance at the level of BOD

To ensure effective communication with senior management, shareholders & other stakeholders & maintain effective internal control systems. To maintain & monitor relations with stakeholders by gathering relevant information. To develop & approve compensation, pension,& post retirement benefit plans & other long term benefits like stock options for the executives. To approve the cos major operating ,investing & financial activities. To evaluate the performance of the board, its committees & members of each committee. To hold the board, its committees & directors accountable for fulfilling the assigned fiduciary duties. To approve dividends, financing, capital changes & other extraordinary corporate matters.
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2. Responsibilities of BOD
To maintain proper books of account To pay cos debts To act in the best interest of the co. as they are in a position of trust & faith. In case of conflict b/w the cos interest & their own ,they should favour the co.

To act in due care & skill

To determine the organizations mission & purpose To select the Executive To support the Executive & review his or her performance. To ensure availability of adequate resources To manage resources effectively To determine & monitor organizations programmes & services. To enhance the organisations public image To serve as a court of appeal To assess its own performance To review financial reports, audited annual financial statements ,quarterly reviewed financial statements & other 50 imp financial disclosures such as management discussion & analysis ,earnings releases & reports filed with the regulators or

3. Powers of the BOD

Entry or exit from any business or product line except those which are delegated to CMC
Making business plans , annual operating plans, budgets, long term business plans including strategies, budgets, revenues & profits. Promoting or closing divisions, subsidiaries, cos in India & abroad.

Invest/divest in equity or preference capital of any co.

Recommendations on the boards of subsidiary& associate cos of chairman, managing director & other directors. Accept membership of other boards by executive directors. Appoint trustees to the trust created by the co. Make changes in rules relating to pension & superannuation funds of the co. Long term & short term borrowing except those which need the approval of CMC.

Loans made by cos to individuals other than employees & corporate.

Donations within the overall the statutory limit but in excess of limits of CMC. Changes to be made in cos logo, appointment or extension of individuals for fixed time periods as consultants or in any other capacity irrespective of the amount of remuneration to be paid to them.
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Governance by the corporate management committee(CMC)

Roles of CMC
To provide leadership to the board & CMC To work for cos goal according to the chapter approved by the board. To ensure that issues discussed in the meetings are on the agenda. To ensure that all directors & CMC members are enabled to participate in activities of the board & CMC.

To keep the board & CMC informed on all matter of importance

To preside over general meetings of shareholders.
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Responsibilities of CMC
To formulate business plans, objectives & strategies of the co. To formulate policies & processes of the organisation. To formulate risk management systems. To formulate personnel policies regarding recruitment, selection, compensation & development of the human resource. To review the implementation of plans & obtain feedback. To review compliance to statutory requirements. To keep the board informed of developments in all the businesses.

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Responsibilities of Executive Chairman

To preside at he meeting of shareholders, board &CMC. To help the board in formulating & achieving the co. objectives. To initiate the process of change for organizational growth. To ensure healthy corporate communication. To appraise the performance of executive directors & functional heads. To maintain healthy relationships with shareholders, government, regulatory bodies & other sections of the society. To sustain & enhance cos image as a responsible corporate citizen by catering to socially responsible activities.
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Responsibilities of Executive Directors

To work for strategic goals of the cos business & be responsible to the board & CMC for the same. To guide the divisional head in management of his business. To focus on development of human resource through career planning processes. To intermediate b/w divisional business & CMC/Board. To ensure conformity to effective to effective management processes at the divisional level. To attend divisional management committee meetings when required.
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3. Powers of the CMC

Powers of Corporate Management Committee
All key projects which require huge capital outlays & execution plans. Issue of bank guarantees for and on belief of the co.

Opening & closing of bank accounts & changes in authorized signatories to cos bank a/cs.
Appointment of DMC members which are based on the recommendations of the director. Write off & disposal of fixed assets. Write off advances, receivables, claims & other amounts due to the co. Forming any task force/committee for specific objectives /assignment Recruitment & confirmation of managers from a particular grade to a different grade. For giving gratuities, awards, rewards. For all types of systems , policies , control manuals & other types of policy framework, aimed at excising operational & risk management controls. If there are some approved plans , it must be approved by CMC. For retrenchment , lockout, & layoffs , prior approval of CMC is needed.
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Powers of Executive Chairman

Executive chairman of the co. has the power to allocate business/ management portfolios among executive directors in relation to macro structuring of business groups.
He can supersede any decision made by any other manager/executive director/DMC. In this case CMC is required to record everything in writing & getting it rectified at the next meeting of the CMC & they take the responsibility till it is rectified in the next meeting. He can take any decision listed under the powers of CMC to meet the business exigencies. Appoint divisional heads in consultation with CMC. He can approve subscription to souvenirs/advertisement in brochures.

He has the power to approve foreign travel of executive directors, heads of divisions & corporate functional heads of the co.
He has the power to approve any event/people sponsorship.
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Powers of Executive Directors

To exercise all powers delegated below the level of the executive directors as long as they are recorded in writing & communicated to the manager who was originally empowered to take the major decisions. In case of meeting emergencies , he has the power to bypass any decision taken by the DMC by recording it in writing & getting it rectified at the next meeting of the CMC & taking the responsibility for such decision till such rectification. He can approve foreign travel of DMC members & corporate managers. He can recommend CMC appointments , increments & promotions in respect of DMC members.
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Governance by Divisional Management committee( DMC)

1. Roles of the DMC
Roles of Divisional Heads

2. Responsibilities of the DMC

Helps in formulating & recommending divisional business plans including objectives & strategies to CMC. Monitors effective implementation of approved business plans. Determination & recommendation of business specific policies ,systems policies & processes. Monitors business Environment

Ensures implementation of approved plans of human resources & policies at empowered levels.
Determines & ensures right implementation of industrial/employee relation policies. Ensures all statutory compliance in right functioning of the division.
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Responsibilities of the Divisional Head

Effective executive management of the divisional business within CMC/board approved plans. Presides over DMC meetings. Provides effective leadership to the DMC Signs statutory compliance to confirm statutory compliance. Reports to the board /CMC jointly with the divisional financial controller.
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Powers of the DMC

All business plans including business strategy, functional strategies, related action plans, revenues , cost, profits, investments for recommendation to CMC. Pricing of divisions product. Recommendation for CMCs approval for policy & control system manuals relating to major areas of risk management. Policy guidelines relating to maintenance & management of inventories of raw materials , finished goods & spares. For any kind of rebates/allowances/discounts pertaining to policy of pricing ,DMC may delegate the power to any designated managers up to the specified limits. Approved within the CMC sanctioned, item wise cost over winds up to the value of each item, provided total specified budget is not exceeded. Policy framework in relation to credit sales including terms & conditions of sale. All these powers can be delegated to a designated manager also. For writing off fixed assets, raw material spare parts, inventories, receivables, claims etc. for the approval of CMC. Appointment & transfers of experts Matters relating to dismissal of non management staff, workmen & secretaries. Issues relating to sale, disposal of assets to management staff.
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International Corporate Governance Practices

Monarchy Oligarchy Democracy
Legislature Judiciary Executive Media

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CG in Global Context
Anglo American Model( English Speaking countries)
Main Role is played by Chief Executive All cos need to make profits with ethics taken as a statement on corporate governance. Short term action is pervasive in nature Capital markets are active for takeovers & control There is poor management & co. is exposed to takeover threats. Anglo American shareholder centered model
Liberal model used in US,UK and gives priority to interests of shareholders. It encourages radical innovation & cost competition. Strong Legal protection to shareholders.

Anglo American shareholder and stakeholder model

Recognizes interests of workers, managers, suppliers, customers & community. It facilitates innovation & quality competition.
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CG in Global Context
Non Anglo American Model
In East Asian countries family owned companies dominate. Pakistan, Indonesia, Malasia , Phillipines, brazil, Argentina, italy etc Japanese Style of CG is followed where (Monitoring by large shareholders & banks)
There is inactive capital market More imp given to long term goals Mergers & Acquisitions are very few Firms are able to build a monitoring system of non executive directors as banks & FIs have sizable stakes in the equity capital of the cos.
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United Nations Global Compact Policy

10 principles launched in 2000 at UN headquarters in areas of human rights, labour standards and environment by UN General secretary Kofi Annan

Support & Respect the protection of internationally proclaimed human rights Ensure that they are not complicit in human rights abuses Uphold the freedom of association & effective recognition of the rights to collective bargaining Support the elimination of all forms of forced & compulsory labour.
Support the effective abolition of child labour Eliminate discrimination with respect to employment & occupation Support a precautionary approach to environmental challenges Undertake initiatives to promote greater environmental responsibility Encourage the development & diffusion of Environment friendly technologies Business should work against corruption in all its forms including extortion.

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Indian Style
In order to provide good CG some laws under the lRLF of the country are: Companies Act 1956 (constitution of BOD, appointment ,removal of Directors, Acquisitions mergers etc.) Securities contracts regulation Act 1956 (Listing agreement of stock exchange.

Competition Act (issues relating to promoting competition & controlling monopolistic trade activities)
FEMA (Control activities related with foreign flow of funds)

Board of industrial & financial reconstruction (Revival of Industries that have fallen sick)
SEBI( Insider trading, unfair trade practices, regulation of stock exchange)

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CG in India
The govt has renamed company affairs to corporate affairs vide presidential notification dated 9th May 2007 amending the govt. of India Rules 1961. Setting up of investor education & protection fund. Empowering investors through the medium of education & information with the help of investor associations, NGOs, ect. Launching of Websites- www.investorhelpline.in and www.watchout investors.com
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Growth through Governance Reliance Reliance is in the forefront of implementation of Corporate Governance best practices Corporate Governance at Reliance is based on the following main principles: Constitution of a Board of Directors of appropriate composition, size, varied expertise and commitment to discharge its responsibilities and duties. Ensuring timely flow of information to the Board and its Committees to enable them to discharge their functions effectively. Independent verification and safeguarding integrity of the Companys financial reporting. A sound system of risk management and internal control. Timely and balanced disclosure of all material information concerning the Company to all stakeholders. Transparency and accountability. Compliance with all the applicable rules and regulations. Fair and equitable treatment of all its stakeholders including employees, customers, shareholders and investors.

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 Disclosure

Corporate Disclosure Practices & investor Protection

It is the process through which business enterprise communicates with the external parties.

It is the communication of various details regarding activities of the business which are to be disclosed either statutorily or otherwise.
purpose is to convey a true & fair view of the operating results and financial positions to the users of the financial reports.
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Factors affecting Disclosure

Divorce between ownership & mgt of corporate enterprise.
Increasing complexities & size of corporations

Growing awareness of public & their interest in the corporate affairs.

Changing socio-political environment in the country.

Greater emphasis on rational decision making has enhanced the need for disclosure of information. For making sound investment decision

Helps in assessing the risk of a company

Facilitates inter & intra corporate comparisons Provide scope for improvement in internal conduct of the company.
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Objectives of Disclosure
To disclose information in a timely, consistent, & appropriate manner. To protect & prevent the improper use or disclosure of material information & company information. To disseminate material information in accordance with all legal & regulatory requirements.
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Investor Protection in india

Organizational Framework for investor protection

On april 12 1988 SEBI was established to protect the rights of small investors & regulate & develop the stock market in India. In 1992 BSE Leading stock exchange in india witnessed the first major scam mastermind by Harshad Mehta. It was felt that if more powers would have given to SEBI this scam would have been prevented. As a result govt. of india introduced a separate legislation by the name of SEBI Act 1992 & conferred statutory powers to it.

Since then SEBi introduced several stock market reforms which transformed the face of indian stock markets.

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SEBI (Securities and Exchange board of India)

Established in april 12, 1992 in accordance with provisions of the securities & exchange board of India act 1992.

Primary function is to protect the interests of investors in the security markets in india & to regulate the security market to ensure its orderly operation.
It monitors & regulates CG of listed companies in India through clause 49 of the listing agreement.

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SEBI (Securities and Exchange board of India)

Kumar Mangalam Birla
A committee set up by SEBI in 1999 under shri Kumar Mangalam Birla to promote and raise the standards of good CG.

The primary objective of the committee was to view CG from the perspective of the investors & shareholders and to prepare a code to suit the indian corporate environment.
It identified 3 key constituents of CG as Shareholders, BOD, Management and outlayed their roles & responsibilities in context of good CG.
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N. R. Narayana Murthy Commitee

Committee set by SEBI under N. R. Murthy to review clause 49 and suggest measures to improve CG standards. Committee included captions of industry, academicians, public accountants, people from financial press & industry forums. Objectives were
Review the performance of CG and Determine the role of companies in respond to rumor and other price sensitive information circulating in the market in order to enhance the transparency & integrity of the market.
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SEBI & Clause 49 Kumar Mangalam Committee

Mandatory Requirements
BOD with respect to their composition ,independence, procedure, code of conduct, and disclosure. Audit committee & its composition ,power, role & responsibilities. Subsidiary co. to ensure their better control & supervisions. Disclosure in the context of related party transaction ,risk mgt & minimization procedure, utilization of proceed from initial public offering for investor education & protection. CEO/CFO certification regarding the correction of the financial statements & compliance with the prescribed accounting standards. Separate report on CG in the annual report with respect to compliance of mandatory & non mandatory requirement Compliance certificate obtained either from the auditor or practicing co. secretaries.
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SEBI & Clause 49 Kumar Mangalam Committee

Non Mandatory Requirements
Max tenure of the independent directors
Formation of a remuneration committee for determining the remuneration packages foe ED.

Moving towards a regime of unqualified financial statements.

Training of board members.

Evaluation of non executive board members

Establishing a mechanism for emp to report unethical behaviors to the mgt under a whistle blower policy.
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 BOD

CG Voluntary Guidelines 2009

Appointment to the board
Cos should issue formal letters of appointment to NED & independence directors specifying Term of appointment The expectation of the board from appointed director, the board level committee in which director is expected to serve & its tasks. Fiduciary duties that come with such an appointment along with accompanying liabilities. Provision for directors & officers insurance Code of business ethics that the co. expects its directors & employees to follow. List of actions that a director should not do while functioning as such in the co. The remuneration including sitting fees & stock options Such letter should form a part of the disclosure to shareholders at the time of the ratification of his/her appointment or reappointment to the board. The letter should be placed by the co on its website & in case the co is listed also on the website of the stock exchange.

Appointment of Directors

Separation of offices of chairman & CEO

To prevent unfettered decision making power with a single individual there should be a clear demarcation of the roles & responsibilities of the chairman of the board & that of MD/CEO.

Nomination committee
The co should have a nomination committee comprising of majority of independent including its chairman.

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Value System and Values

Values are beliefs that guide peoples action. Represent a persons belief about what is right or wrong.

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Reliance

Our growth and success are based on the ten core values of Care, Citizenship, Fairness, Honesty, Integrity, Purposefulness, Respect, Responsibility, Safety and Trust

TaTa Core values

Tata has always been values-driven. These values continue to direct the growth and business of Tata companies. The five core Tata values underpinning the way we do business are: Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve. Excellence: We must constantly strive to achieve the highest possible standards in our day-today work and in the quality of the goods and services we provide. Unity: We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation. Responsibility: We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to 80 the people many times over.

TCS
Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves

Integrity and Transparency: To be ethical, sincere and open in all our transactions
Fairness: To be objective and transaction-oriented, and thereby earn trust and respect Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and products to become the best

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Characteristics of Values Human values are Social and ethical norms common to all Cultures, Societies and Religions Represent synthesis of social progress, justice and spiritual growth. A set of principles that people cherish as they enhance the quality of individual and collective life. Guiding force to take specific decisions in specific societal issues. Comprehensive standards that direct conduct in variety of ways. Deep rooted Practicing values eliminate conflict ,misery, wars and enhance quality of life. Refers intrinsic worth of goodness Beliefs that guide actions and judgments across a variety of situations Manifested in thoughts, speech and actions of every human being They transform the of consciousness to purer higher levels Dynamic and change with changing times Means of perfection Cultivate love and understanding Provide the standard of morality Contain judgmental elements as they help people in deciding what is right and desirable Are a powerful source to affect behaviour Everyone does hold the same values Concerned with the internal development of the person purifying mind and heart
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TYPES OF VALUES
Albert Schweitzer( Classification)
Operative Values Conceived Values Objective Value

Rokeach (Classification)
Terminal Values (Happiness, Satisfaction in life, Knowledge & Wisdom,Paece & Harmony in the World, Pride in Accomplishment,Prosperity,Wealth,Lasting Friendship,Recognition from Peer,Salvation,Finding eternal Life,Security, Freedom from Threat Instrumental Values(Assertiveness,Standing up for yourself, Being helpful or caring towards towards others,Dependability being counted upon by others,Education and Intellectual Persuits,Hardwork and Achievement,Obedience,Following the wishes of others,Open mindedness,Receptivity to new ideas,Self Sufficiency,Independence,Truthfulness,honesty,Being well mannered and courteous towards others.

Jones and Gerand (Classification)

Positive Negative
83

Factors Affecting Values

Institutions Organizational Values

Peers and Colleagues

Situational Factors Personal Factors
84

Development of Value system in Organization

Trend towards individualism Public Apathy Accountability Less Professional Dealing
85

Values in Business Management

Honesty is a form of Social service Fraternal Relations bring industrial Harmony

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Objectives of Value Based Management

Optimum Decisions Ensures Long run Survival of the Business Develop Credibility amongst stakeholders

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Trans Cultural Human Values in Management

Multicultural Education and Trans Cultural Values
Assimilation or Melting Pot Perspective Pluralism or Global Perspective

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Dimensions of Global Perspective of Multicultural Education

Multicultural Competence Equity Pedagogy Curriculum Reform Teaching for Social Justice
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Goals of Global Perspective of Multicultural Education

Develop multiple historical perspective Strengthen cultural consciousness and inter cultural competence To develop Responsibility towards world community and appreciate cultural diversity

Increase awareness about Global dynamics

Reduce racism and other forms of discrimination to build social action skills
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Benefits of Global Perspective of Multicultural Education

Increase Productivity and promote moral growth amongst people of all nations. Increases creative problem solving skills by applying different perspectives to same problems.

Increase positive relationship through achievement of common goals ,respect , appreciation and commitment to equality among the intellectuals at institutions of higher education.
Decreases prejudice amongst diverse individuals through direct contact and interactions. Energizes the society through the richness of different cultures and develops a broader and more sophisticated view of the world.
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Teachings from Scriptures and Tradition

Education and Universal Human Values
Material Values Non Material Values

Five Principles of Ethical Power for Organizations

Purpose Pride Patience Persistence Perspective
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Spiritual Values
Related with inner feelings of a person Develops true Human Being Aims to maximize satisfaction on spiritual gains

Teaches to a person to be responsible towards God,self and society at large.

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Features Of Spiritual Values

Divine Qualities Right Livelihood

Wisdom and Skills

High Level of Consciousness Compassion Selfless Service Strong Beliefs in Religion Faith Hope
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Spiritual Managerial Values

Ego- Lessness Holistic Ways Responsible corporate Citizens

The new Vision

Rising Stakes Complete Freedom Universal or Unconditional Love
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Teachings from GITA

Deals with KARMA yoga(Selfless action),GNANA Yoga(Self Knowledge),BHAKTI yoga(Love,Devotion).

Yoga Means link.

Meditation is the process while yoga is the result, The connection TYPES OF MANAGERS(4) Who believe in Doing things right and resist change(Conservatives) Who relish change and believe in Doing the things Right(Entrepreneurs) Who represent change and also get others to do the right things(Leaders) Who complicate the issues about being Right(Politicians)
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5cs and Holistic view to management

1) Capital(Men ,Machine, Money, Methods)
Nothing is ever lost in following ones dharma, but competition in anothers dharma breeds fear and insecurity.
You have the right to work, but never to the fruit of work. When consequences is unified, however ,all vain anxiety is left behind. There is no cause for worry, whether things go well or ill.
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5cs and Holistic view to management

2) Capability
Reshape yourself through the power of your will ,never let yourself be regarded by self will. The will is the only friend of the self, and the will is the only enemy of the self. The wise see that there is action in the midst of inaction and inaction in the midst of action. Their consciousness is unified, and every act is done with complete awareness. The wise ever satisfied, have abandoned all external supports. The security is un affected by the results of their actions, even while acting they really do nothing at all.
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5cs and Holistic view to management

3) Connections
OM TAT SAT (OM is Roadmap of sadhna, States of consciousness, TAT is supreme reality ,SAT promotes good & harmony ASAT (Truth & Faith are bases of all work.

4) Communications (Process through which inter consecutivities is maintained) 5) Commitment( commitment to business is the root cause of success)
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Gita & Management

Utilization of Resources(Quality rather than quantity matters) Attitude towards work (Visionary perspective & commitment) No attachment to work (non attachment to results/fruits) Cause and Effect (Responsible for our own consequence) Nishkam Karma(ego less karma without attcahment)

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Nishkam Karma
Benefits
Frees from bondages of Love No effort to Nishakam Karma is wasted There are no obstacles in Nishkam Karma It protects one from the greatest fears It leads to ek-buddhi(Clarity)

According to S. K Chakraborthy one can yield following through

Stress free mind at work Pure & Transparent Mind Abiding instinct for Ethical Rightness Inner Feelings of Fullness
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Kauravas Preparation

Teachings from Mahabharat Pandavas When in exile tried to overcome weakness & acquired strengths from other sources. Made allies from all over India to strengthen their power. Distributive Leadership. As many commandants as no. divisions.

Invaded other kingdoms & acquired Wealth. Centralized power. made allies from far off places & old relations like Gandhar, Sindhu. Centralized Leadership. Head of Army had supreme authority over the entire force.

Making Allies

Leadership

Team Spirit Individual vs Group Goals

Fragmented spirit. Worked as an individual approach

Individualistic way. Nobody other than Duryodhana wanted the war.

One leader whom they obeyed in complete harmony & coordination

Believed in group goals. Yudhishthira worked as effective team captain on the day of war. Seeked blessings of elders in pandavas camp. Brought in footills of Himalayas Female influence was respected.102

Effective Managers Sense of Sharing Brought up in palaces with name,fame & wealth. Gender Balance Did not invite women in decision making process.

Teachings from RAMAYANA

Every person should have a vision and cause for Planning.(Cause for battle was to rescue Sita & vision was to defeat evil forces)

4 Fundamental characteristics of a leader are Character Courage Ethics Valor

Rama characterized the horses drawing the chariot with strength, energy and passion Rama depicted 4 reins of horse as forgiveness, compassion, consistency (Firmness in decision making) and equanimity(mental composure)
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Teaching from Mahabaharat

Preparation Making Allies Leadership Team Spirit Individual vs Group Goals Effective Managers Sense of Sharing Gender Balance
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Teachings from BIBLE

Stress Management
Environment Mental Outlook Imagined Threat Wrong Perceptions

Time Management
Making a list of Activities Prioritize the tasks Follow schedules and Target Dates Delegation Record
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Teachings form QURAN

Obey and Respect the Authority( to get things done through others) Obey the Allah & His messenger & those in position of authority among you. Cooperation & Teamwork (Mgt. is not by 1 person it is group activity) Pass over(their faults) & ask for(Gods) forgiveness for them & consult them in affairs (of movement) Then, When you have taken a decision put your trust in God, for God loves those who put their trust(in Him)
Equal Opportunities for all (Everyone should be treated equally in the organization) O People we created you from a single male & female couple & then you divided in Nations & tribes so that you may recognize one another. Verily the most honorable among you in the sight of Allah is he who is most righteous of you.
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Teachings form QURAN

Motivation and Commitment (People should be committed to their jobs which can be achieved through motivation) (telling the prophet). If you had been stern & fierce of heart they (the companions & followers) would have disappeared from around you. So pardon them & ask forgiveness for them & consult them in the conduct of affairs.. Quality Management System (Business has to satisfy its customers even if market & economic forces do not result in profit maximisation) And come not nigh to the orphans property, except to improve it, until he attain the age of full strength: give measure & weight with (full) justice;- no burden do we place on any soul, but that which it can bear;- whenever ye speak, speak justly, even if a near relative is concerned ; & fulfill the covenant of Allah. Thus doth he command you that ye may remember. Fulfilling Commitments Allah says,Fulfill your contracts ,contracts will be asked about. And the Almighty says, Be true to Allahs contract when you have agreed to it. And the Almighty says O you who believe! Why do you say what you do not do? It is deeply abhorrent to Allah that you say what you do not do. 107

Teachings form UPNISHADS

Shrutis Smritis SHRUTIS
Mantra, Brahamana, Aaranyaka & Upnishad

Teachings of Upnishads
Nishkam Karma Work is Worship Help Others Self Motivation Self Development leads to excellence of work Help Others Entire world is one family(Vasudeva Kutumbikam)
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Teachings form UPNISHADS

10 Upanishads
Isha Kena Katha Prashna :- Deals with God & God realization :-Sacrifices & other forms of workship :- Q & A b/w Yama & Nachiketa :-Q & A (What is the root cause of universe, functioning of vital force of life.) :-Course of soul after death(Pran & Moksha) :-God has no form(Nirakaar) :-Creation of God :-Atman & birth of atman :-Sacrifice & other form of workship :- Negations of all conceptions of self
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Kaushitaki Mandukya Taittariya Aitreya Chandogya Bruhadaranyaka

Teachings from UPNISHADS

Another Classifiation(Vedas)
Rig Veda(Deals with General Knowledge)

Yajur Veda(Knowledge of Action)

Saam Veda(Knowledge of Ownership) Atharva Veda (Knowledge of Science)
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Teaching from VEDAS

Unity of Existence

Divinity is inherent in all existence (includes the potentials divinity of human souls) The entire human race is like one extended family(vasudeva kutumbhkam)
Essential unity of all Religions The welfare ,Progress, Development and happiness of all
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Teachings from UPNISHADS

SMRUTIS(Purusharths)
Explain the external principles & processes for current life style & integrated welfare.

Include:Panth
(Kalpa sutra in jainism, DhampadTriptakas in Buddhisim, Guru Granth Saheb in Sikkhism) (18 main puranas 46 up puranas which explain that it is virtue (punya) to help others & sin(paap) to harm others. (Shakta, Shaiva,Jain,Vaishnava) Shilpa (Architecture), Dhanur (Defense), Gandharva (Music)

Puranas

Agamas Upavedas Darshans

To see. Deals with philosophy of life & contain principles to guide ones life.
(Vaisheshika (Maya), Nyaya (Logical quest for God & phases of creation),Yoga (Practice of medicine & samadhi for renunciation),Sankhya (Liberation for mental & physical gains),Vedanta (soul,moksha,& creation),Mimansa (Vedas are eternal & divine)
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Vedanges

Vyakaran (Sanskrit Grammer), Shiksha (Pronunciation of vedic mantra), Jyotisha ( Science of astrology & astronomy),Nirukta (Vedic Dictionary), Chanda (Poetic Stanzas), kalpa Sutra (Rules related to performance of vedic religion))
Ramayan (Valmiki), Mahabharat(Ved Vyas)

Itihas

Dharam Shastras include Scriptures Like:Manu Smiriti Parashara Smriti Upasmritis Tirukural Niti Shashtra Arths Shashtra Yagnavalkya Smriti Other like Briihaspati ,Daksha,Gautama etc

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UNIT III Capitalism(Free Market Economy)

Is a form of economic system in which major portion of production & distribution is in private hands.

Phases of Capitalism
Mercantile (Mutual interest b/w state & commercial interests) Industrial (Promotion of large scale industries) Financial(pool, trust,holding companies) State Welfare (Govt. playing imp role in regulating economic activities)

Features of Capitalism
Companies Profit Motive Competition Private Property Capital

Capitalism & Society

Arguments in favor
Right to Property Brings a free & unstrained market which is more efficient & productive . Allows people to pursue activities of their own

Arguments in Against
Inequality Human Nature Competition
Breeds Oligopolies Govt. corporate welfare programmes protect many businesses from true marketplace competition Neither beneficial nor desirable
Negatively related with Performance Does not result in optimum utilization of resources

Exploitation & Alienation

Ethics in Marketing
Adulteration Spurious Products

False Measures
Sale of Duplicates Hoarding and Black Marketing Tie in Sales In genuine Sales Promotion Techniques Misleading Advertising Sale of Sub Standard Goods Environmental Ethics
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Ethical issues in Finance

Insider Training Financial Services
Deception Churning Suitability

Financial Markets
Efficiency Unfairness in Markets
Fraud and Manipulation Unequal Information Unequal Bargaining Power Efficient Pricing

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Ethics in HRM
Discrimination Whistle Blowing Occupational Health Care Suitable Working Time Appropriate Salary Recognition of Work Life Issues Commitment to Improvement Formation of Quality of Work Life Teams Training to Facilitators Conduct Focus Group

Analyze Information from Focus Group Identify and implement Improvement opportunities Reward and Recognition Provide Growth Opportunities Respect and Boosting Self Esteem Provide Vision Mutual Commitment Provide good working Environment Empowerment Hiring The Right People Work/Life Balance Out of the Way Help
120

Benefits of Ethics in HRM

Helps in Employee Recruitment and Selection

Reduce Absenteeism
Improve the Quality of Peoples Working Lives Matching People who wouldnt otherwise work with job. Benefiting families and communities
121

Ethics in IT
Privacy Property Accuracy Accessibility
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Ethics in Intellectual Property Rights

Copy Rights
Protect expression of ideas. This gives an author exclusive rights to make copies of the expression & sell them to public. Copy right act 1957 & copy right

Copyrightable work
Recording of sound Cinematograph Films Pictorial ,Graphic and Sculptural works Dramatic works Literacy works (Books and other writings, Musical compositions, paintings, Computer programmes Musical Works & Accompanying Lyrics etc

Patents Trademark

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Ethical issues of Intellectual Property

Using of Writing or Property of someone else without permission Misuse of software Making and using pirated softwares and hacked accounts Secret distribution of information to others
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Ethical practices in IPR should ensure

The legal laws should catch people engaged in unethical IPR activities. People should develop moral values and avoid using unethical means to IPR Legal laws and moral values complement to each other .Laws should work when moral values fail and moral values should work when laws fail. Information in the public domain should be equally accessible to all irrespective of social ,cultural, and political differences. A person whose data has been misused or lost should have the right to claim compensation for damage. Adequate security measures should be provided against unauthorized access, alteration or destruction of personal data. People should honor intellectual property rights and not copy any property without taking permission from the owner. People should respect the privacy of others and not make unauthorized use of their data. People should prefer licensed software rather than pirated software People should not tamper with computer hardware People should not send annoying messages to others and cause the 125 system to crash by any means.

Ethical Theories
Moral Reasoning
Theory of value or theory of good Theory of the right

Moral Theories
Consequentialist or Teleological Theories Rightness/wrongness of action is always determined by its tendency to produce certain consequences which are intrinsically good or bad. Non Consequentialist or non teleological/deontology theories
126

Features of Teleological Theories

Gives priority to what is good over what is right. All actions that contribute to good are moral actions.

Results or consequences determine the rightness or wrongness of moral action.

127

Forms of Consequentialism(Consequential Theories)

Theory of Ethical Egoism Utilitarianism
Benthams approach to utilitarianism
Limitations of the approach
All actions are not followed by pleasures. He more or less talks of quantitative pleasures

Mills approach
Pleasures differ in quantity as well as quality Morality is internal and not external
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Deontological Theories
Act Deontology Rule Deontology

129

Deference between Teleological and Deontological Theories

Deontological Theories
Rightness or wrongness of an action is determined by its morality and not its consequesnces. Rawls

Teleological Theories Rigthness or wrongness of an action is determined by its consequenes.

Prominent thinkers are Bentham and Mill Prominient thinkers are Kant,Ross,
They give priorty to right over good
Right action may not necessarily max. good Right actions may or many not bring happiness to all people They are the theories of ethics that deal with duties and obligations

They give priorty to good over right Right action is that which max the good Right actions bring happiness to individual performing the action (egoist theory) or happiness to greatest number of people(utilitarianism) They are the theories of ethics that deal with goals and end results of actions.
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UNIT IV Corporate Strategy Global Competition

Need for Economic Reform/(Liberalisation) Major Economic Reforms/Liberalisation

Major Features of Liberalization (1991)

Monetary Policy Fiscal Policy Price Policy Trade Policy Industrial Policy Foreign Investment Policy Public Sector Policy

Globalization
Growing economic interdependence of companies worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and widespread diffusion of technology.

Features of Globalization
Free flow of goods & services across national borders. Free flow of capital, technology & factors of production amongst countries across the world. Competitive position of cos is determined by managerial abilities of corporate houses rather than land, labor and capital. Cos plan & organize their business at the global level. Corporate houses produce & distribute goods & services in countries where they hope to maximize profits & market share. Cos have global consumers. Flow of information across the globe Entire world seen as a single market for producing & marketing goods & services.

Process of globalization
First phase Second phase Third phase

Benefits of globalization
World development Access to new markets & new technology Replacement of import substitution by export promotion Integration of economies Labor abundance benefits Improvement in competitive strength Cost reduction benefits Growth and expansion Improvement in standard of living

Limitations of Globalization
Discriminatory flow of capital Inappropriate transfer of technology Blow in handicrafts Take over Competition with domestic firms Unemployment

Competitive Analysis
It is the exploration of companies in a given industry sector or markets that are competing with products & services for a definite market share.

Benefits of Competitive Analysis

Understand the competition Build Domain Knowledge Identify best business practices Strengths and areas of improvement

Sources of Competitors Data

Recorded Data
Annual report & A/C Press Release Newspaper Article Analysis Report Regulatory Report Government Report Presentations/Speeches

Sources of Competitors Data

Observation Data
Pricing/Price List Advertising Campaigns Promotions Tenders Parent Applications

Sources of Competitors Data

Opportunistic Data
Meetings with Suppliers Trade Shows Sales Force Meetings Seminars/Conferences Recruiting ex-employees Discussion with shared Distributors Social Contacts with Competitors

Techniques of Competitive Analysis

Rankings & Ratings User Performance Search Engine Positioning

Diamond Model for Competitive Advantage of Nations

Threat of Entry of New Competitors Bargaining Power of Buyers Threat of Substitute Products Bargaining Power of Suppliers Rivalry among existing firms

DIAMOND MODEL(PORTER)

Factor conditions are human resources, physical resources, knowledge resources, capital resources and infrastructure.[Specialized resources are often specific for an industry and important for its competitiveness.Specific resources can be created to compensate for factor disadvantages.

Demand conditions in the home market can help companies create competitive advantage, when sophisticated home market buyers pressure firms to innovate faster and to create more advanced products that those of competitors Related and supporting industries can produce inputs which are important for innovation and internationalization.[These industries provide cost-effective inputs, but they also participate in the upgrading process, thus stimulating other companies in the chain to innovate Firm strategy, structure and rivalry constitutes the fourth determinant of competitiveness. The way in which companies are created, set goals and are managed is important for success.[But the presence of intense rivalry in the home base is also important; it creates pressure to innovate in order to upgrade competitiveness Government can influence each of the above four determinants of competitiveness. Clearly government can influence the supply conditions of key production factors, demand conditions in the home market, and competition between firms. Government interventions can occur at local, regional, national or supranational level Chance events are occurrences that are outside of control of a firm.They are important because they create discontinuities in which some gain competitive positions and some lose.

IT and Decision Making

Meaning
Processed data or data arranged to in a useable or meaningful form. Role
Processes data in a meaningful form Adds to managers database of knowledge for faster & better decision making. Facilitates financial, legal & managerial activities of the organization. Communicates people goals of organization & policies, procedures & methods to achieve those golas.

IT
Use of computers in carrying various business activities. It implies application of computers to use & store information for business. Components of IT
Hardware Software Databases Network Problem Solving Skills Office Productivity Tools Internet, e-commerce & Cyber Laws

Impact of IT
Improves Customer Relations Improves communication with customers through advertising Improves cos image in the national & international markets Reduces cos cost of communication Reduces time & cost in producing materials & sending outputs Improves Relationships with suppliers Enhances the business network of the co. Improves e-commerce operations Provides attractive business opportunities

Kinds of Information Systems

MIS(Management information system) DSS(Decision Support System)

Features of MIS
Timeliness Accuracy Relevance Concise Completeness

DSS
Is an interactive computer system that is easily accessible to and operated by non computer specialists to assist them in planning and decision making functions.

Features of DSS
Powerful decision making tool that searches information for specific decisions. Helps in solving non routine problems. Is a complex system Improves quality of information

DSS Decision

MIS vs DSS
Managers can have access to information in MIS. Information can be stored & retrieved in MIS. Managers have to wait for information till they get from the MIS dept. Helps managers in making routine decisions in structured situations like sales reports, p& l a/c It is an information provider Is relatively inflexible. Managers can manipulate information in DSS Managers can get information when they need. It is directly operated by its users through on line system. it helps managers in making non routine decisions in unstructured situations. It is a decision making tool It is more flexible than MIS

Corporate Strategy
The basic goals & objectives of the organization, the major programmes of action chosen to reach these goals & objectives and major patterns of resource allocation used to relate the organization

Features of Strategy
Long term Effectiveness cannot be known in near future Is an action plan Single use plan made for non repetitive activities Formulated by top level managers & provides a guide for middle & lower level managers to make sub strategies. coordinates organizations internal environment with its external environment. Allocates scarce organizational resources over different areas for their optimum utilisation. Enables firm to compete with competitors It is pervasive

Benchmarking
Is the process of determining who is the best who sets the standards and what that standard is. benchmarking is the process of comparing the business processes and performance metrics including cost, cycle time, productivity or quality to another that is widely considered to be an industry standard benchmark or best practices.
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Features of Benchmarking

It is a process
Enables cos to improve their efficiency(doing the things right) & effectiveness( doing the right things) Enhances productivity & Quality of companies & improves their competitive strength in the market. It applies to all facets of the business It is a process of enabling the co. to know itself.

It enables the company of to know its leaders or competitors.

The core of benchmarking is learning from those that are better than you. Its a relative concept where superior business practices are compared to ones own business.

It is an outward looking process where a business looks outside its own business, organization, industry, region, or country to understand how others are achieving their performance level.
It is not a one time exercise. It is an ongoing process.
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Importance of Benchmarking
Provides an objective evaluation of cos business process against similar processes in other organizations. It serves as a source of improvement of business as compared to ideas taken from other organizations. It enables an organization to become learning organization providing insights into systems & methods that work in the best interest of the company.

It improves competitive position of the company by providing it the opportunity to know its position and improve the efficiency & effectiveness of its business processes.
It provides external focus to companys operations as companies compare their performance with co. superior to them. It provides a powerful driving force to promote positive change within the company. Through benchmarking investigations, cos incorporate the best practices into business operations ,promote innovative changes in their operations , become competitive in the 161 market & thus lead over others in the marketplace.

Process of Benchmarking
Planning Analysis Integration Action

162

Types of Benchmarking
Strategic Benchmarking Performance or Competitive Benchmarking Process Benchmarking Functional Benchmarking Internal Benchmarking External Benchmarking

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 Quality
A good Product Sturdy Durable Easy to Operate Good in Appearance

TQM

When associated with products

Satisfies customers wants & Desires Observes the terms of delivery Has good documentation Is Available at reasonable price Meets all specifications with respect to standards of the product quality. 164

Factors affecting Quality

Markets Money Men Materials Machines Management

Motivation
Management Information Systems

165

Quality Control
Traditional Way To manage Quality Quality control is checking & reviewing the work that has been done. 3 PHASES for inspection
Raw materials are received While products are going through production process. When products are finished
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Problems with inspection under Traditional Quality Control.

Adds no value Costly Sometimes done too late in Production Process. Usually done by the wrong people. Not compatible with the modern techniques like JIT Often disagreement as to what constitutes a quality product.
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Objectives of Quality Control

To establish quality standards for the products & the process which are capable of being achieved.
To lay down standards of measurement which facilitates manufacture of products. To maintain records that facilitates the measurement of performance at various stages of production process. To analyze the performance to detect & correct deviations beyond the acceptable range of errors. To find causes of deviation to avoid their recurrence. To obtain feedback for correction & improvement of the products & production.
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 Helps in detecting errors prior to production of outputs.

Importance of Quality Control

Promotes quality efforts that encourages joint participation of workers & management. Promotes Quality & Productivity. Improve sales & creates customer loyalty Matches customers actual experience with goods & services against their requirement for the product. Provides continuous improvement in the products/services & provides opportunities for achieving new & higher targets. Coordinates activities of all departments & promotes communication amongst them. Improves employee motivation & morale to contribute to organizational output to the best of their abilities by resorting to ways as quality circles. Improves cos image in National & International markets & societies.
169

Effective Quality Control

Define quality control being sought in terms of cos objectives. Cooperation amongst manufacturing & operative personnel. Cost of Quality Reporting Search for Potential Sources of Difficulties Conduct a pilot or an experiment run
170

Marketers should carry out their work properly & define customers specifications. Specifications have to be defined to conform to these requirement.

Total Quality Control (factors for enhancing Quality Control

Conformance to specifications should be introduced during manufacturing, planning & control.

Management has to confirm that all operators are equal to the work & holidays. Celebrations & disputes do not affect any of the quality levels. Inspections & tests are carried out & all components & materials bought in or otherwise ,conform to the specifications & the measuring equipment are accurate. Any complaints received from the customers are satisfactorily dealt with.

Feedback from the user/customer is used to review designs

Parameters for quality should include not only the material but operating ,environmental, safety, reliability & maintainability requirements also.
171 If the original specification does not reflect the correct quality requirements, quality cannot be inspected or manufactured into the product.

 Concept originated in US taken to Japan by Edwards Deming.

Japanese cos used statistical quality control to motivate their workers to produce high quality products.

Quality Circle

One of the mechanisms used by these companies to improve quality not only for their products but also their personnel was QC . QC is a group of labour & management personnel who belong to a single department do same or similar work, meet periodically to discuss manufacturing problems ,analyze them & find solutions to quality problems.
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 Concept of QC trains the workers who can themselves identify & solve the problems they face during the production process. It is an approach to improving quality & reducing the cost of producing a product/service by the voluntary efforts of small groups of workers who are generally led by a first line supervisor.
QC members themselves analyze their problem, gather relevant information ,find solutions & implement the. QC do not receive monetary rewards or pay for making presentations to management of proposed solutions but receive recognition for their services to the organisation. 173

QC

QC
QC are regular short meetings set up to solve work related problems.
5-10 people attend the meeting in work time Supervisor is nominated & he runs the meeting Flip charts, audiovisual equipment, notice boards etc. are utilized. Problems areas are put forward by the group

Problems are prioritized

Information is collected, ideas are generated via brainstorming & force field analysis.

Effectiveness costs, savings, consequences to other departments etc. are considered.

Final solution is put forward to manager & implemented by the QC group.
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Objectives of QC
Improve Quality of Products
Improve Productivity of the firm

Develop sense of confidence in the workers that they can solve their problems.
Improve employee morals

Improve employee job Satisfaction

Develop personality of employees by making them aware of their importance in the work related areas & work atmosphere. Improve interpersonal relationship b/w management & workers. Improve employees motivation & communication within the organisation.
175

 Focus on improving products quality in a planned way.

Train employees to identify problems, on their own& find & implement solutions to them without seeking the advice of technical experts. Satisfy members higher-order needs of recognition & self actualization.

Benefits of QC

Improve members participation in the work related organisational problems & thus enhance their job satisfaction.
Promote productivity ,efficiency, cost reduction, design testing & safety of the products. Since teaching is done in an informal way, employees do not feel burdened with analysing & solving their problems. They feel motivated to offer suggestions to management.

176

Effective QC
Should start with analysis of small problems & gradually move to bigger problems. Members participation in QC should be voluntary & not mandatory to get their max support. Members of QC should be taught the basic techniques of problem solving in an informal way.

Before members proposal to solve the problem is put to implementation , it must be checked by the supervisors.
Management should support the QC activities rather than leaving them totally to the employees. Members should be given recognition for their contribution to organisation.
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 Improvement

Kaizen

Kaizen strategy calls for never ending efforts for improvement involving everyone in the organization- managers & workers alike. 2 major components
Maintenance Improvement

178

Maintenance
aims at Maintaining current technological, managerial & operating standards. Management establishes rules, policies, directives & standard operating procedures (SOPs) & then works towards ensuring that everybody follows SOP. Achieved through combination of discipline & HRD measures.
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Improvement
Aims at improving current standards Management works continuously towards revising the current standards & once they have been mastered , establishing higher ones Improvement can be broken into innovation & kaizen. Innovation involves a drastic improvement in the existing process & requires large investments. Kaizen signifies small improvements as a result of coordinated continuous efforts by all employees. Kaizen is generating & implementing employee idea developed in Japan

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Professor John Oakland

Defines QC/Kaizen team as a group of workers who do similar work & who meet
Voluntarily Regularly In normal working time Under the leadership of supervisor To identify, analyze & solve work related problems. To recommend solutions to management
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Guidelines to make QC successful

Circle should not get too large Meetings should be held away from the work area. Length & frequency of QC meetings will vary. When a new circle is formed it is advised to meet for about one hour , once per week.

Each meeting should have an clear agenda & objective.

The circle should call an outside or expert if needed.
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TQM
As per ISO
That aspect of overall management function that determines & implements quality policy & as such is the responsibility of top management. Management of quality, totally & fully in all respects , small areas & all activities of organizations , right from top to bottom. Organization's long term commitment to the continuous improvement of quality throughout the organization, & with the active participation of all members at all levels to meet & exceed customers expectations.
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Concept
Total:- Everyone associated with the company is involved in continuous improvement including customers & suppliers.

Quality:- Customers stated & implied requirements are fully met. Management:- Executives are fully committed.
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Understanding Quality Control

Q- Quality First U- user is the king A- Avoid Defects L- Long Term Vision I - Innovation error proofing T-Training for all Y- Yearing for facts C- Cost consciousness O- Optimal Tolerance N- Nip the Vital Few T- Team Work R- Respect Humanity O- Operator in State of Self Control L- Leadership from Top

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Nature Of TQM
Strategic Commitment Teamwork Customer Satisfaction Continuous Improvement Prevention

Materials, Technology & Methods

Improvement tools
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TQM Model
Management Commitment Teamwork Participation Involvement

Tools & Techniques

Education Training

Consumer Satisfaction

Recognition Reward

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Steps to Implement TQM(Deming Wheel)

Plan (Product Development) Do (Manufacture) Check (Sales) Action (Market Research)
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Tools/Techniques Of TQM
Benchmarking Deming Wheel ISO-9000 JIT(Just in- Time) Quality Circles(QC) Critical Path Analysis Failure mode & effect Analysis(FMEA) Force Field Analysis Brainstorming Nominal Group Technique Suggestion Schemes C- Charts Histograms Pie-Charts 189

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Benefits of TQM
Satisfy customer demand & justifies existence of business organization.
Face competition & strengthen its competitive position Enables a firm to optimally utilize its scarce resources. Improves quality of products Adds to competence of personnel with respect to their jobs.

Leads to continuous improvement of operational activities of the firm.

Enhances communication in an organization. Increases organizational productivity Improves organizational environment Develops committed personnel who works to achieve organizational & individual goals. 191

Effective TQM
Should aim at customer satisfaction through active involvement of all people across the functional areas & organizational hierarchy. Should aim at commitment on the part of all those who are associated with TQM programme to implement it successfully. Should be a way to achieve end & not an end in itself. Continuous improvement needs sustenance for effective TQM. Quality is prime motive of TQM. It could be achieved by good intentions, moral ethic & humanity.

Firms should concentrate on quality followed by quantity & not vice versa.
Education, Training, measurement, accountability, recognition, reward, teamwork & communication are the backbone of TQM.
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Key Elements for successful TQM

Foundation Ethics ,Integrity, & Trust Building Bricks- Training, Teamwork, & Leadership Building Mortor:- Communication Roof- Recognition
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Ethics Integrity Trust

:- Discipline concerned with good/bad in any situation. :- Honesty, morals, values, fairness & adherence to facts & sincerity :- By product of integrity & ethical conduct.

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Principles of TQM
Customer Focus Leadership Involvement of People Process Approach Systems approach to management Continual Improvement to management Factual approach to management Mutually beneficial supplier relationship
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Main Principles TQM

Prevention Zero Defects Getting things right first time Quality involves everyone Continuous improvement Employee Involvement

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