The word 'ethic' always comes with a lot of heated discussion, probably because standard ethics cannot be practically be defined. They vary at every level. Let us have a look on business ethics that should be administered in a corporate environment.
2. ORIGIN IN GLOBAL SCENARIO -
ï¶ Approximately in early 1970s, the term
'business ethics' came into common
use in the United States. Originally, this
term was used in academy and
research.
ï¶ As the term entered more general
usage in the media and public
discourse, it often became equated with
either business scandals or more
broadly with what can be called "ethics
in businessâ.
ï¶ After the mid-70s, business ethics
became institutionalized at many levels.
ï¶ By the mid-1980s, there were at least
100 courses in business ethics taught
across the country to more than 40,000
students.
ï¶ âBusiness ethicsâ involves applying
ethical principles to the activities of
business and to the relationships
between businesses and various
stakeholders. It applies to a wide
range of business activities such
relationship with suppliers,
employees, consumers as well as
the overall governance system by
which a company is directed and
controlled.
ï¶ Business ethics, as a movement,
referred to the development of
structures internal to the
corporation which are likely to help
it & its employees to act ethically,
as opposed to the structures that
provide incentives to act
unethically.
JRA & Associates
3. LEGALIZING BUSINESS ETHICS -
Foreign Corrupt Practices
Act, 1977
ï¶ Established after a series
of scandals involving
bribery by U. S. firms
abroad
Sarbanes-Oxley Act,
2002
ï¶ Passed as a result of a rash of
scandals involving Enron,
WorldCom, Arthur Andersen
and other prominent
corporations
ï¶ The Act requires, that the CEO
and CFO certify the fairness
and accuracy of corporate
financial statements (with
criminal penalties for knowing
violations) and a code of ethics
for the corporation's senior
financial officers, as well as
requiring a great deal more
public disclosure
ï¶ First piece of legislation
that attempted to control
the actions of U.S.
corporations in foreign
countries
ï¶ 20 years later, the OECD
countries agreed to adopt
similar legislation
JRA & Associates
4. FUNDMENTAL PRINCIPLES OF
BUSINESS ETHICS -
âą All rules & norms should
be equally applicable to
all
âą In other words,
favoritism and partiality
should not be allowed
Standardized
âą The prospective effects
of business ethics
should be objectively
available to all in the
form of stated policy
statements
âą As such, âothersâ are so
important for its
successful
implementation
Workable
âą Commitment on top
managementâs part is
critically important
âą Only when the top
management
demonstrates its
commitment to
business ethics, then
only it is likely to work
Driven from
the Top
JRA & Associates
5. CASE STUDIES
(ETHICAL FALLOUTS) -
Nike â
ï¶ Since the mid 90âs, Nike has
faced a barrage of criticism
from labour rights activists,
media and others for human
rights violations in their
factories in the third world
countries
ï¶ Ernst and young,
commissioned by Nike to audit
one of its factories, reported
presence of unacceptable
standards of chemicals and
cases of employee health
problems
Primark â
ï¶ The BBC's Panorama program,
which carried out a six-month
investigation, alerted Primark to
the problem of the suppliers sub-
contracted smaller firms, which
were using child labour to carry
out embroidery and sequin work
ï¶ New code of practices for
suppliers were established which
prohibited the use of child labour
in its manufacturing chain
JRA & Associates
6. PREVALENT CORRUPTIONâŠ!!
BIGGEST CHALLENGE AHEAD
ï In the past years, India has witnessed
several scams of unprecedented
magnitude. Amongst the ones are-
âą 2G spectrum
âą Adarsh Housing Society
âą Commonwealth Games
âą Land scams in Karnataka
These scams have established a
dangerous nexus between politicians-
administrators-businessmen.
âState practices exhibit substantial legal and policy incoherence and gaps. The most
common gap is the failure to enforce existing lawsâ
- John Ruggie
SOLUTION?? âŠâStringent Code of Ethics for Indian Industryâ
JRA & Associates
7. CORPORATE GOVERNANCE -
Corporate Governance
&
Business Ethics
ï± Both have cognate interests
ï± Both promote greater transparency of functioning &
accountability within business houses
ï§ Need of external Chairman in the
Board of Directors
ï§ Regular meetings of the Board
ï§ Accurate financial reports and
extensive disclosures in this
regard
Norms of Corporate Governance -
With this in view, corporate governance would do well
to be more proactive on management issues & take
within its ambit the following tasks as well-
ï§ Evaluation of Companyâs strategic planning
process
ï§ Assessment of the level and clarity of upstream
and downstream communication
ï§ Implementation of a risk management mechanism
that would safeguard interest of stakeholders
ï§ Conducting orientation & educational workshops
JRA & Associates
Section 134 casts responsibility on the Board of Directors to disclose in Boardâs report-
ï§ Composition of CSR Committee
ï§ Details of CSR policy
ï§ CSR related initiatives taken during the financial year
8. India At Work (SURVEY) :
What Our Employees Think Of Job Ethics..??
*Source: Hindustan Times, C-Fore
Certain number of working professionals across sectors and salary brackets were
quizzed to analyze the level of honesty and dedication that Indians felt towards their
professional lives. Extracts are hereunder-
11%
28%
23%
38%
âHow much time is it okay to
waste time at work..?â
1 hour
Taking a short break of 15 minutes
every few hours is okay
I believe in completing work first
before thinking of leisure
I see no harm as long as I'm
completing my duties on time
JRA & Associates
9. 66%
11%
18%
5%
âDo you think it is important to report to
work on time..?â
Yes Absolutely
No
Only on days where there is some
meeting deadline
Only juniors/trainees should report
on time
Findings :
More than half (52%) of working professionals in India do not enjoy their work and do not
look forward to new challenges at work. About 29% of the work force in both organised as
well as unorganised sectors feels that wasting time at work has become an unwritten office
culture.
The majority is working because of compulsions; obviously there is a little chance of them
putting their best foot forward. It's often also the lack of a happy work atmosphere that
results in compromised work ethics.
JRA & Associates
10. NEED FOR ETHICAL WHISTLE
BLOWING -
JRA & Associates
Whistle blowing is a necessary facet within an organization. Without it, fraud,
misconduct, and failure become prominent within an organization.
Thus, by promoting clear communication, keeping the organization's goals in focus for the
entire organization, one can certainly minimize their chances of reaching an organizational
disaster
ï¶ Section 177 of the Companies Act,
2013 requires every listed company
to establish a vigil mechanism for
the directors and employees, thereby
providing a framework for
responsible and secure whistle
blowing/vigil mechanism
ï¶ Provision for direct access to the
chairperson of the Audit Committee
in appropriate or exceptional cases
has also been made
ï¶ With effect from Oct 1, 2014-
Clause 49 of the Listing Agreement
between listed companies and the
Stock Exchanges, inter alia, provides
for a non-mandatory requirement
for all listed companies to establish
a mechanism called âWhistle Blower
Policyâ for employees to report to the
management instances of unethical
behaviour, actual or suspected,
fraud or violation of the companyâs
code of conduct
11. PROMOTING AN ETHICAL
WHISTLE BLOWING CULTURE -
JRA & Associates
ï Creating a Policy -
ï§ Formal mechanisms for reporting violations, such as hotlines and mailboxes
ï§ Clear communications about the process of voicing concerns and bans on retaliation
ï Getting Endorsement From Top Management -
ï§ Demonstrating a strong commitment to encourage whistle blowing
ï§ Communicated by line managers at all levels, who are trained continuously in creating an
open-door policy regarding employee complaints
ï Publicizing the Organization's Commitment -
ï§ Publicly acknowledging and rewarding employees who pinpoint ethical issues is one way to
send the message that management is serious about addressing issues before they become
endemic
ï Assess the Organizationâs Internal Whistle blowing System -
ï§ Finding out employees' opinions about the organization's culture vis-Ă -vis its commitment to
ethics and values
ï Investigate and Follow Up -
ï§ Managers be required to investigate all allegations promptly and thoroughly, and report the
origins and the results of the investigation to a higher authority
12. CONCLUSION -
ï± Stakeholders want to be associated with responsible organisations. Operating with
integrity must be a key part of sustainable success for business. More recently, the
concept of sustainability has become important in the notion of ethical and responsible
business. By definition, this adds a long term dimension
ï± Having clearly articulated values and an ethics policy is seen to be good governance
practice; it is one of the hallmarks of a well-run business
Companies Act, 2013 mandates increased corporate transparency and
accountability in order to strengthen corporate governance and provides for
provisions to ensure ethical and vigilant activities of directors and other
professionals in the company
JRA & Associates
Ethics go far beyond the legal requirements for a company and is, therefore,
about discretionary decisions and behaviour guided by values