Business ethics and corporate governance

Business Ethics

Environmental Management and Ethics in Management

• Ethics involves a discipline that examines good or bad practices within the context of a moral duty

• Moral conduct is behavior that is right or wrong

• Business ethics include practices and behaviors that are good or bad


Business Ethics Definitions

• What is?

• What ought to be?

• How to we get from what is to what ought to be?

• What is our motivation for acting ethically?


Four Important Ethical Questions

1. Immoral Management—A style devoid of ethical principles and active opposition to what is ethical.

2. Moral Management—Conforms to high standards of ethical behavior.

3. Amoral Management1. Intentional - does not consider ethical factors2. Unintentional - casual or careless about ethical

considerations in business


3 Models of Management Ethics


Three Approaches to Management Ethics

Business Ethics: What Does It Really Mean?

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Ethical Problem

Ethical Problem

Society’s Expectations of Business Ethics

Actual Business Ethics

1950s Early 2000sTime

Business Ethics:Today vs. Earlier Period

• Employee-Employer Relations

• Employer-Employee Relations

• Company-Customer Relations

• Company-Shareholder Relations

• Company-Community/Public Interest


Ethical Issues in Business


CORPORATE GOVERNANCE

‘An internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity.

Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes'.

By: Gabrielle O'Donovan


Definition

• Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management and the board of directors. Other stakeholders include customers, creditors (e.g., banks, bond holders), employees, suppliers, regulators, and the community at large.


http://en.wikipedia.org/wiki/Process

http://en.wikipedia.org/wiki/Policies

• Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation.

• Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled.

• Internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations

• succeeded in attracting a good deal of public interest.

• the economic health of corporations and society.

• Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment


The Triple-Bottomline Impact

Business Impact

environment society

economics

Environmen

t Social

Economic

An Enterprise’s Triple Effect on Society

BusinessImpact

Sustainable Development Equal Opportunities

Waste Control Education & Culture

Emissions Community Regeneration

Energy Use Human Rights

Product EmployeeLife-cycle Volunteers

Product Wealth Productive Ethical Value Generation Employment Trading

Impact of Corporate Governance

• strengthened economy, hence socio-economic development

• Role of Institutional Investors

Institutionalised

• Parties to corporate governance

Regulatory body

Commonly accepted principles of corporate governance include

• Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings.

• Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders.

• Role and responsibilities of the board: The board needs a range of

skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. The key roles of chairperson and CEO should not be held by the same person.

Cont…• Integrity and ethical behaviour: Ethical and responsible

decision making is not only important for public relations, but it is also a necessary element in risk management and avoiding lawsuits. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. Because of this, many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries.

• Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.

Issues involving corporate governance principles include:

• internal controls and the independence of the entity's auditors

• oversight and management of risk • oversight of the preparation of the entity's

financial statements • review of the compensation arrangements

for the chief executive officer and other senior executives

• the resources made available to directors in carrying out their duties

• the way in which individuals are nominated for positions on the board

• dividend policy

Internal corporate governance controls monitor activities and then take corrective action to accomplish organisational goals.

• Monitoring by the board of directors• Balance of power • Performance-based remuneration

External corporate governance controls encompass the controls external stakeholders exercise over the organisation. competition

• debt covenants • demand for and assessment of

performance information- financial statements

• government regulations • managerial labour market • media pressure • takeovers

In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise.

References• www.encycogov.com • en.wikipedia.org/wiki/Corporate_governance • www.iba.org.in/events/1.N.

• searchfinancialsecurity.techtarget.com/sDefinition • www.icmrindia.org/courseware/Business%20Ethics

%20&%20Corporate%20Gover .

• Presentation by Asha(MBAHospital 07-09)