Professional Documents
Culture Documents
Ethics is a system of moral principles and attitude that guides our actions to
be morally correct, fair and just.
However, ethics are not the law itself nor are they instruments parallel to the
laws of the land.
Ethics is seen as an individual's own personal attitude and a belief concerning what
is right or wrong, good or bad. It is important to note that ethics reside within
individuals and that organization doesn't have ethics. People have ethics
Nature of Ethics
1. The concept of ethics deals with human beings only. Only human beings are
endorsed with the freedom of choice.
2. The study of ethics has become a set of systematic knowledge about moral
behavior & conduct;- field of social science.
3. The science of ethics is a normative science.
4. It deals with human conduct which is voluntary & not coerced by persons. It is
basically an area dealing with moral judgment regarding voluntary human
conduct
1B.
The Organization for Economic Cooperation & Development was one of the
earliest non-governmental organizations to work on & spell out principles &
practices that should govern corporate in their goal to attain long tern
shareholder value
The OECD principles have won universal acclaim on the subject of CG
OECD Principles
They include the following aspects:
1. Rights of Shareholders
2. Equitable Treatment of Shareholders
3. Role of Stakeholders in Corporate Governance
4. Disclosure and Transparency
5. Responsibilities of the Board
2A.
Social Contract Theory
It stresses that all businesses are ethically duty bound to increase the welfare
of the society by catering to the needs of the consumers & employees
based on the principles of social contract, wherein it is assumed that there
is an implicit agreement between the society and any created entity such as
a business unit, in which the society recognises the existence of a condition
that it will serve the interest of the society in certain specified ways.
What conditions would have to be met for the members of a society to agree
to allow a corporation to be formed? (Assumed Contract)
Therefore, the social contract theory is based on an assumed contract
between businesses & members of the society who grant them the right to
exist in return for certain specified benefits.
Corporations are expected to create more value to society that it consumes.
Social contract:
1. Social welfare corporations must produce greater benefits for the society
2. Justice corporations must pursue profits legally, without fraud or
deception, and avoid actions that harm society.
It implies that members of the society are interested to authorize the
establishment of a business firm only if they gain some advantage by doing
so. Such gains occurs to them in two ways; as consumers and employees
As consumers increased economic activity; stable level of production and
channels of distribution
As Employees income potential, social identity, income allocation scheme
Thus to produce social welfare element of social contract, the business firms
should act in such a manner so as to:
The Church always supports and promotes the welfare of the poor. People
often think how we can relate business and ethical teachings of Church. But
now the trend has changed and organizations and institutions relate business
with religion and ethics. This transition is due to the increased importance of
ethics in business. The Church's concerns and ethical teachings are found in
several papal encyclicals, i.e, letters the pope writes to his followers.
Gitas message in an organization
When applied to an organization where one is only worried of the result, he is
likely to fall into improper activities. On the other hand, if he is ready to do his
duty to the utmost of his ability and set aside the result, he will be an ethical
person in the organization
Business and Islam
For Islam, all principles covering business originate from the Holy Quran, as
they are explained and amplified in the Hadith (collection of the Prophets
sayings)
The Prophet Mohammed ordained that businesses should promote ethical and
moral behaviour and should follow honesty, truthfulness and fulfilment of
trusts and commitments, while eliminating fraud, cheating, cut-throat
competition, lending money at interest to people in need and false
advertising.
2B
1. Recognise and identify the kind of ethical issue you need to resolve
2.Pause and Think
3. Make Sure of Your Goals
4. Get Your Facts Right
5. Evaluate choices from Different Ethical Perspectives
6. Consider the Consequences
7. Make a Decision
8. Act, then Reflect on the Decision Later
3A
Sarbanes-Oxley Act, 2002
The Sarbanes--Oxley Act (SOX Act), 2002 is a serious attempt to address all
the issues associated with corporate failures to achieve quality governance
and to restore investor confidence.
The Act was formulated to protect investors by improving the accuracy &
reality of corporate disclosures.
Contains a number of provisions that dramatically change the reporting
structure of public companies.
Important provisions of SOX
1. Establishment of Public Company Accounting Oversight Board (PCAOB)
2. The SOX provides for a new improved audit committee
3. Conflict of interests
4. Audit partner rotation
5. Improper influence on conduct of audits
6. Prohibition of non-audit services7. CEOs and CFOs required to affirm/certify financials
8. Loans to Directors9. Attorneys
10.Securities Analysts
3B
CSR as a business strategy for sustainable development
When CSR is adopted as a business strategy for sustainable development, it
goes to improve corporate performance: It offers multiple benefits to corporations both internally & externally Externally it creates a positive image & goodwill among the public & earns a
special respect amongst different stakeholders which go a long way in
promoting long term shareholder value & sustainable development
Internally it cultivates a sense of loyalty & trust amongst employees
It provides workers a feeling of satisfaction & a meaning to their lives
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6.
There are different models of corporate governance around the world & they
differ according to the economic style, social priorities & business philosophy
of the country or state in which it operates
CG model provides a framework of effective accountability to stakeholders
It influences the process of decision making
Procedures to set companys objectives
Means to achieve the desired results
Models of CG:
The Anglo-American Model
The Coordinated Model
CLASSIFICATION OF
ETHICAL THEORIES
Egoism
The view that links morality with self interest is referred to as egoism. (the
desired is the long-term self-interest 0f the individual)
Therefore it can be said that egoism is an ethical theory that treats self
interest as the foundation of morality.
Egoism contends that an act is morally right if and only if it best promotes an
agent's (persons, group or organizations) long term interests
makes use of self interest as the measuring rod for actions performed
Decisions based on egoism mainly are intended to provide positive
consequences to the party's interest without considering the consequence to
the other parties
Two kinds of egoism: Personal & Impersonal
The Personalist theory argues that person should follow their long term
interest & do not dictate what others should do.
Impersonal egoists argue that everyone should follow their best long term
interest , but it doesnt mean that an egoist will act against the interest of the
society.
Criticism
1. Egoism as an ethical theory is not really a moral theory at all.
A just act respects your rights. A just act treats you fairly.
retributive justice
3. compensatory justice.
5B
Independent non executive directors are those directors on the board who are
free from any business or other relationship, which could materially interfere
with the exercise of their independent judgment in the process of decision
making as a member of the board
e.g: director may have links with a major supplier, or may be a partner in a
professional firm that supplies services to the company or may be a retired top
management professional of the company.
In case a company has a non executive chairman, at least one third of the
board should comprise independent directors & in case a company has an
executive chairman, at least half of the board should be independent.