Ethics Mod 1 & 2
Ethics Mod 1 & 2
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ETHICS AND MORALITY
ETHICS ETHOS
1. Generally universally accepted 1. Generally individual specific
2. Helps in getting to know how to behave 2. Helps in creating impression on how we like to
behave
3. Violations are prescribed with consequences 3. Consequences depends the context in which / how the
individual acts
4. Change is possible only with the help of the 4. Change is in the hands of the individual
formulators
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ETHICS, ECONOMICS AND LAW
Responsibility-Corporate-Examples_fig2_261827186
Case-related Additional Resources
Film Recovery Systems, US – Case Summary
https://sci-hub.tw/https://www.jstor.org/stable/27801081
https://www.nytimes.com/1985/06/15/us/3-executives-convicted-of-murder-for-unsafe-
workplace-conditions.html
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OBJECTIVES / BENEFITS OF ETHICS
• Making evaluative assessment about human behaviour as moral or immoral.
• Defining the greatest good of man and establish a standard for the same.
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Broad Types of Values
(Rokeach)
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VIEWS OF VALUES (Cont…)
THE TRADITIONAL VIEW OF VALUES
(RELIGION):
• From the traditional viewpoint any
group, i.e. any social unit, is
defined by its possession of shared
values.
• A group‘s values derive from the
ancient traditions of the group or are
presented if they did.
• By turning their gaze inwards and not
outwards to other groups and
societies, they fail to recognize the
fragmentation and diversity of
values that surrounds them.
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VIEWS OF VALUES (Cont…)
THE MODERNIST VIEW OF VALUES
(REASONING)
• Characterized by value
fragmentation.
• Through the application of reason,
the pieces can be put back together
and true values defined.
• Believe that values are tangible, and
can be unambiguously stated and
defined through formal and rational
debate.
• The modernist believes that values
can be determined by ethical study.
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VIEWS OF VALUES (Cont…)
THE NEO-TRADITIONAL VIEW OF
VALUES (CULTURE)
• Values originate from organizational and
social cultures.
• fragmentation of values should be
overcome as organizations and societies
have unified values.
• But such an end cannot be achieved by
rational analysis, which sees values as
objects for analysis and not as shared
myths, which is how neo-traditionalists
view them.
• Myths can act as the glue that holds and
organization or society in unity because of
their simplicity (which needs no
sophisticated explanation) and because of
their ability to skilfully or effortlessly deal
with dilemmas. 10
VIEWS OF VALUES (Cont…)
THE POSTMODERN VIEW OF
VALUES (NO VALUES)
• Sees nothing in the social and
intellectual world as tangible or ?
fixed. ?
• No eternal truths of values.
No
• What we think of as objectively ? Values
true emerges through
discourses. ?
?
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BENEFITS OF VALUES IN
MANAGEMENT / BUSINESS
• Values provide basis for business decisions
• Values improve service quality
• Values facilitate innovation to support
competitiveness
• Values provide good knowledge of business KPIs
• Values enhance communication and teamwork
• Values bring commitments among the stakeholders
ETHICAL THEORIES
ETHICAL
THEORIES
Ethics of Conduct
Ethics of Character
What is the right choice of
action in an ethical dilemma What sort of person should we
be
Non-
Consequentialism Consequentialism
The right action is that which The right action is that which
achieves the best outcome is good-in itself, or follows a
rule
DEONTOLOGY / TELEOLOGICAL /
ETHICAL EGOISM /
INDIVIDUALISM JUSTICE APPROACH VIRTUE THEORY /
UTILITARIANISM
Best of Oneself (Randism) Best for Everybody (Benthamism)
To perform one’s moral duty (Kantism)
* No exemptions to the Categorical
MORAL RIGHTS
* Reasoning We should be virtuous, i.e., act with virtue
Imperative
* Rational Self-interest (Aristotlism)
* Act Utilitarianism * Formula of Universality
* Laissez-faire Capitalism * Rule Utilitarianism 4 Cardinal Virtues:
* Formula of Autonomy
* Formula of Humanity * Prudence
* Temperance
* Courage
* Justice
INDIAN VALUES/ETHOS IN MANAGEMENT/BUSINESS
(A Comparison to the Western Business World)
MODULE-II: BUSINESS
ETHICS
Concepts, Importance and Benefits, Theories of Business Ethics
Ethical Displacement
CONCEPT OF BUSINESS ETHICS
Business Ethics means conducting all aspects of
business and dealing with all stakeholders in an
ethical manner.
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ROLE OF ETHICS IN BUSINESS
• Builds trust
• Promotes confidence
• Validates relationships
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THEORIES OF BUSINESS ETHICS
Maximiz
e profit STOCKHOLDER
CORPORATE
THEORY
Maximize the
SHAREHOLDER C
shareholder PROFESSIONAL / INDUSTRY
value THEORY
SOCIAL CONTRACT D
Maximize the
agreed and
THEORY LAW
voluntary
contributions for
mutual interest
A B
CONSEQUENTIALIST / CATEGORICAL /
TELEOLOGICAL DEONTOLOGICAL
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FORMS OF UNETHICALITY IN BUSINESS
• Accounting fraud
• Deceptive advertising
• Unfair competitive /
labor practices
• Internet theft
Top 10 Crime Types as reported to the Internet Crime
Complaint Centre (IC3) by Victim Loss
• Trademark infringement
• Unauthorized substitution of one brand of
goods for another
• Misappropriation of trade secrets
• False representation of products or services
• Violating HR Policies and Labor Laws
• Harassment / Discrimination / Bias
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CONCEPT OF ETHICAL
CORPORATE BEHAVIOUR (ECB)
Ethical Corporate Behavior (ECB) is how the corporates
behave with the stakeholders of the business.
STAKEHOLDER GROUPS
• Shareholders (BODs)
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STEPS TO DEVELOP CORPORATE ETHICAL
BEHAVIOUR (CEB)
(1) Ethical Training Programme: focus on official policy on ethical issues
(2) Code of Ethics: General, Stakeholders, Stockholders, Employees and
Community/Neighbourhood
(3) Organisation Ethics Development System (OEDS):
• Moral Leadership,
• Regular Assessments,
• Strategy and Structure &
• Ethics Steering Committee
(4) Ethics Committees:
• Working Group by the Companies Act,
• Confederation of Indian Industry (CII),
• Kumaramangalam Birla Committee / Audit Committee by SEBI,
• Naresh Chandra Committee,
• Narayan Murthy Committee
(5) Integration of Ethical Concepts
(6) Checklist Method
(7) Reward-Punishment System and
(8) Whistle Blowing
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The Confederation of Indian Industry (CII), 1987
• to create and sustain an environment conducive to the development of India, partnering
Industry, Government and civil society, through advisory and consultative processes.
• non-government, not-for-profit, industry-led and industry-managed - around 9000
members from the private as well as public sectors, including SMEs and MNCs - an
indirect membership of over 300,000 enterprises from 286 national and regional sectoral
industry bodies.
• charts change by working closely with Government on policy issues, interfacing with
thought leaders, and enhancing efficiency, competitiveness and business opportunities for
industry through a range of specialized services and strategic global linkages - provides a
platform for consensus-building and networking on key issues.
• assists industry to identify and execute corporate citizenship programs - including
affirmative action, livelihoods, diversity management, skill development, empowerment
of women, and sustainable development, etc.
• the Theme for 2022-23 as Beyond India@75 - Competitiveness, Growth, Sustainability,
Internationalisation has prioritized 7 action points under these 4 sub-themes that will
catalyze the journey of the country towards the vision of India@100.
• With 62 offices, including 10 Centres of Excellence, in India, and 8 overseas offices in
Australia, Egypt, Germany, Indonesia, Singapore, UAE, UK, and USA, as well as
institutional partnerships with 350 counterpart organizations in 133 countries, CII serves
as a reference point for Indian industry and the international business community.
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Kumaramangalam Birla Committee /
Audit Committee by SEBI (1999) (contd…)
• To promote and raise the standards of good corporate
governance
• Chaired by Sri Kumar Mangalam Birla
• Released the first report of “Code of Corporate
Governance” to Indian corporates
• Suggests suitable amendments to the listing agreement to
SEBI
• Areas covered are: continuous disclosure of material
information, responsibilities of independent and outside
directors, drafting a code of corporate best practices, and
offering suggestions on the best practices of insider
trading and insider information. 25
Kumaramangalam Birla Committee /
Audit Committee by SEBI (1999)
Mandatory Recommendations Non-Mandatory Recommendations
• The mandatory recommendations apply to the listed • Role of chairman
companies with paid up share capital of 3 crore and
• Remuneration committee of board
above.
• Shareholders’ right for receiving half yearly
• Composition of board of directors should be
financial performance.
optimum combination of executive & non-executive
directors. • Postal ballot covering critical matters like alteration
in memorandum
• Audit committee should contain 3 independent
directors with one having financial and accounting • Sale of whole or substantial part of the undertaking
knowledge. • Corporate restructuring
• Remuneration committee should be setup • Further issue of capital
• The Board should hold at least 4 meetings in a year • Venturing into new businesses
with maximum gap of 4 months between 2 meetings
to review operational plans, capital budgets, quarterly
results, minutes of committee’s meeting.
• Director shall not be a member of more than 10
committee and shall not act as chairman of more than
5 committees across all companies
• Management discussion and analysis report covering
industry structure, opportunities, threats, risks,
outlook, internal control system should be ready for
external review
• Any Information should be shared with shareholders
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in regard to their investments.
Naresh Chandra Committee (2012)
• The 14-member task force was headed by Naresh Chandra, a former bureaucrat
who has held top administrative jobs in the Ministry of Defense and the PM’s
Office.
• To review the Kargil Review Committees’ recommendations and issues relating
to border management and restructuring the apex command structure in the
armed forces have not been implemented
Major recommendations:
• Creation of a new post of Intelligence Advisor to assist the NSA and the National Intelligence
Board
• Amendment to Prevention of Corruption Act
• A permanent Chairman of the Chiefs of Staff Committee
• Expediting the creation of new instruments for counter-terrorism, such as the National Intelligence
Grid and National Counter Terrorism Centre
• Deputation of officers from services up to director’s level in Ministry of Defense
• Measures to augment the flow of foreign language experts into the intelligence and security
agencies, which face a severe shortage of trained linguists
• Promotion of synergy in civil-military functioning to ensure integration.
• Establishment of a National Defense University (NDU) and the creation of a separate think-tank on
internal security.
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Narayan Murthy Committee on
Corporate Governance (2003)
• to evaluate the existing corporate governance
practices and
• to improve these practices as the standards
themselves were evolving with market dynamics.
• The committee’s recommendations are based on
– the relative importance, fairness, accountability, transparency,
ease of implementation, verifiability and enforceability related
to audit committees, audit reports, independent directors,
related parties, risk management, directorships and director
compensation, codes of conduct and financial disclosures.
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Narayan Murthy Committee on Corporate Governance
(2003) contd…
Mandatory Recommendations:
• Strengthening the responsibilities of audit committees - At least one member should be ‘financially
knowledgeable’ and at least one member should have accounting or related financial management proficiency.
• Quality of financial disclosures - Improving the quality of financial disclosures, including those related to
related party transactions.
• Proceeds from initial public offerings - Companies raising money through an IPO should disclose to the Audit
Committee, the uses / applications of funds by major category like capital expenditure, sales and marketing,
working capital, etc.
• Other recommendations
– Requiring corporate executive boards to assess and disclose business risks in the annual reports of
companies.
– Should be obligatory for the Board of a company to lay down the code of conduct for all Board members
and senior management of a company.
– The position of nominee directors: Nominee of the Government on public sector companies shall be
similarly elected and shall be subject to the same responsibilities and liabilities as other directors
– Improved disclosures relating to compensation paid to non-executive directors.
Non-mandatory recommendations:
• moving to a regime where corporate financial statements are not qualified;
• instituting a system of training of board members; and
• the evaluation of performance of board members.
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Source - Harvard Business Review
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ETHICAL DECISION MAKING INVOLVING ETHICS,
ECONOMICS AND LAW OF A BUSINESS
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UNETHICAL ISSUES IN BUSINESS
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GLOBAL ENVIRONMENTAL ISSUES - THREAT OF EXTINCTION
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CONCEPT OF ETHICAL DILEMMA