Spicer Adventist University

Ganeshkind, Aundhroad, Pune, Maharashtra -411007

Term paper on Business Ethics and Corporate Governance

Course No- MGNT-631

Submitted on 5th October 2018

Submitted by: Gracious Tigga

ID No: 17561015

Submitted to: Dr. Roney Varghese

Business Ethics and Corporate Governance
Business ethics is a kind of applied ethics. It is the application of moral or ethical

norms to business. The term ethics has its origin from the Greek word “ethos”, which

means character or custom- the distinguishing character, sentiment, moral nature, or

guiding beliefs of a person, group, or institution. Ethics is a set of principles or

standards of human conduct that govern the behaviour of individuals or organization.

Ethics can be defined as the discipline dealing with moral duties and obligation, and

explanation what is good or not good for others and for us. Ethics is the study of moral

decisions that are made by us in the course of performance of our duties. Ethics is the

study of characteristics of morals and it also deals with the moral choices that are made

in relationship with others. Business ethics comprises the principles and standards that guide

behaviour in the conduct of business. Businesses must balance their desire to maximise

profits against the needs of the stakeholders. Maintaining this balance often requires trade-

offs. To address these unique aspects of businesses, rules- articulated and implicit are

developed to guide the businesses to earn profits without harming individuals or

society as a whole.

Corporate governance is the system of rules, practices and processes by which a firm is

directed and controlled. Corporate governance essentially involves balancing the interests of

a company's many stakeholders, such as shareholders, management, customers, suppliers,

financiers, government and the community. Corporate governance is the system by which

companies are directed and controlled. Boards of directors are responsible for

the governance of their companies. The shareholders' role in governance is to appoint the

directors and the auditors and to satisfy themselves that an appropriate governance structure

is in place.

Defining and communicating Ethics in your Business

Ethics can be summed up as 'standards of behaviour'. Being ethical means applying standards

of behaviour to the way we live our lives. This covers both our personal lives and our

working lives.

The steps involved in developing an effective communication system are as follows:

-Examine the intention

The intention needs to be examined for the establishment of the company ethics. How ethical

is the intention to spin a partially-true or untrue perception, and by whose standard? The

rationale will help determine how and why to communicate the messages to employees.

-Highlight the company’s ‘legends’ that personify its ethics

By identifying and communicating ethical behaviour we can get our ethics into mainstream

organizational discourse. By appreciating the work done by an employee.

-Make it a company norm-in-action

Be an example to the employees and help them adopt ethical behaviour by demonstrating it.

-Provide parameters and examples

Ethics can’t be taught but we can ask employees to follow the guidelines and tactics that

support the organization’s standard of ethics.

-Incorporate new ways of understanding ethics

When topic as sensitive as ethics is concern, use these methods that respect participant’s

differences and insecurities around the subject matter and the source of their believe in ethics

should be respected.

-Meld ethics with business

Make ethics as one of its metric’s in all of the activity. An attorney to establish parameters

before making the decision that makes more sense for the organization.

-Tie ethics to individual and departmental goals

The organization needs to link to something that employees care about. If they don’t, aa little

change will be there to be seen which would bring out difference between the employees and

the organization.

-Develop safe feedback mechanisms

A safe feedback needs to be developed from the organization from the employees without

them thinking of their jobs put into jeopardy. A communication approach can help overcome

an individual sharing such information.

-Use an advisor

Getting positive critics from a person outside the organization can help you improve and

defuse the anxiety around this topic. This would help the organization to face the reality.

Ethics is the first line of defence against corruption while law enforcement id remedial and

reactive. Good corporate governance goes beyond rules and regulations that the government

can put in place. It is also about ethics and the values which drive companies in the conduct

of their business. It is therefore all about the trust that is established over time between

companies and their different stakeholders. Good corporate governance practice cannot

guarantee any corporate failure. But the absence of such governance standards will definitely

lead to questionable practices and corporate failures which surface suddenly and massively.

Thinking Ethically: A Framework for Moral Decision Making

This chapter deals with acting ethically as individuals, creating ethical organization and

government, and making our society as a whole ethical in way it treats everyone. Ethics

simply means the standard behaviour one behaves or which tell us how human being are to

act in many situations in which they find themselves as friends, parents, children, citizen and

professionals.

There are five sources of ethical standards

The utilitarian approach

The ethical corporate action is one that produces the greatest good and does least harm for all

who are affected like customers, employees, shareholders, the community and the

environment. To analyse we must first identify the course of action and second what benefits

or causes harm and then we choose the action that is beneficial and causes least harm.

The right approach

This approach starts from the belief that human have dignity based on their ability to choose

freely what they do with their lives. The right to make one’s own choices about what kind of

life to live.

The fairness approach

The fairness approach focuses on the fair and equitable distribution of good and harm, and

social cost, across the spectrum of society. It starts with the premise that all equals should be

treated equally, and those who are unequal due to relevant differences, should be treated

differently in the manner that is fair and proportionate to.

Favouritism gives benefits to some people without a justifiable reason for singling them out;

Discrimination imposes burden on people who are no different from those on whom burden

are not imposed. Both favouritism and discrimination are unjust and wrong.

The common good approach

This approach calls attention to the common condition that are important to welfare of

everyone. It is suggesting that the interlocking relationships of society are the basic ethical

reasoning and that respect and compassion for all others.

The virtue approach

These are habits that enables us to act according to the highest potential of our character and

on behalf of values like truth.

Work Spirituality, and the Moral Point of View

The ethical standards of an organization have a major influence on how it conducts its

business. Business ethics are defined by the behaviour standards of management and

personnel, and the way in which business is carried out at both a strategic and operational

level. A positive approach to maintaining ethical standards can lead to competitive market

advantage and an enhanced reputation. Ethical standards are classified at three levels.

Level I- The Person

Since businesses are run by people, the ethical standards of individuals in the business are an

important consideration. Individuals may well have a very different set of ethical standards

from their employer and this can lead to tensions. Factors such as peer pressure, personal

financial position, and socio-economic status all may influence individual ethical standards.

Managers and business owners should be aware of this to manage potential conflicts.

Level II- The Organization

At a company or corporate level, ethical standards are embedded in the policies and

procedures of the organization, and form an important foundation on which business strategy

is built. These policies derive from the influences felt at macro level and therefore help a

business to respond to changing pressures in the most effective way. There can be a gap

between the company policy on ethical standards and the conduct of those in charge of

running the business, especially if they are not the direct owners, which can present an ethical

challenge for some employees.

Level III- The Social System

Sometimes called the systemic level, ethics are defined and influenced by the wider

operating environment in which the company exists. Business owners and managers must be

aware of how these pressures affect operations and relationships, and how they may impact

on markets locally, nationally and internationally.

 Integrating Ethics into Strategic Management Process: Doing

Well by Doing Good

Business ethics is a term with quite a multifaceted meaning. Most of them however, boils

down to the general and the basic conclusion that economics should serve man, not vice

versa. So, managers should not be guided in their actions solely by profit or personal gain.

Business ethics is both part of the prescriptive ethics establishing standards of conduct,

recommending certain behaviours, as well as descriptive ethics, describing the moral attitudes

and behaviours of entrepreneurs.

The interest evaluation process is both long term and short term which needs to be pushed by

strategic decision making. Organization interest process consists of I. interest identification

(which includes public interest as well as private interest) II. Interest analysis: moral

concern informs social issues which inform regulation and judicial decision. III. Interest

activation: integrate interest in organization’s function areas.

Putting Ethics into Quality

It basically means improving the quality by the implication of ethics.

An investigation into how well (or poorly) a company conforms to the ethical standards of

industry.

An ethics audit may consider the company's own practices, how it redresses grievances, how

it discloses its finances whether it punishes whistle-

blowers, and even the general cultural surrounding its business dealings.

Some companies may formally adopt a code of ethics and conduct periodic ethics audits to se

e how closely they follow their own rules. There is no statutory requirement for an external

audit. For organization with no internal audit capacity, the external ethical is likely to come

as a shock. The 5 steps are:

1. Deny everything (to accept the legitimacy of such external social audit involves a

philosophical and emotional wrench.

2. If denying fails to work, try to discredit whoever made the charge.

3. When no action results, and legal or legislative action is pursued, oppose everything.

4. If legislative is passed, or regulation written , try to defame anything that is enacted

by work against implementation or getting an opponent of the appointed to administer

it

5. Do something about the problem.

Social audit is a way of measuring, understanding, reporting and ultimately improving an

organization’s social and ethical performance. A social audit helps to narrow gaps

between vision/goal and reality, between efficiency and effectiveness. It is a technique to

understand, measure, verify, report on and to improve the social performance of the

organization.

Corporate Social Responsibility and Business Success
Corporate social responsibility is a business approach that contributes to sustainable

development by delivering economic, social and environmental benefits for all stakeholders.

The primary expectation of consumers towards the corporations is a stable supply of goods

and services. So, companies must meet that expectation by delivering the right product or

service with desirable quality at the right time, right place, and fair price.

Customers: Responsibilities that companies have towards consumers are improving the

standard of living through delivery of high quality products as well as treating the customers

equally in the different aspects of the business interaction. And of course, customer

satisfaction is no longer a plain objective of companies but it has now turned into a

responsibility as an important factor for a firm to succeed. The powerful “word of mouth”

advertisement of a company product or brand is proven to be effective in increasing product

sales and revenue.

Employees: Employees are said to be the true assets of an organization. Even the best of

technology or best of infrastructure would not be of much use if employees do not perform

up to the mark and are not satisfied with their current profiles.

Business Partners: To procure parts from our suppliers in a fair and transparent manner in

all aspects of our transactions, while strictly observing related laws and regulations, and

establishing the relationship built on the trust with them as their partner. We also proceed our

procurement activities taking into consideration of the concept of both CSR and the

environmental conservation for developing sustainable societies.

Environment: The environmental management system covers a broad range of our activities,

from energy conservation, resource conservation, waste reduction and appropriate chemical

substance management through environmentally friendly product development.

Governance Matters
Corporations need comprehensive governance frameworks that give themselves the tools to

prevent risk and make effective decisions. Once a company establishes its rules of

governance; board members, steering executives, as well as managers should know exactly

what their roles are and how they play into the overall organizational structure. Governance

solidifies each person's position so that they don't stray from the mission. Proper governance

structures identify the distribution of rights and responsibilities among different participants

in the corporation and outline the rules and procedures for making decisions in corporate

affairs. Effective governance structures allow organizations to create value, through

innovation, development and exploration, and provide accountability and control systems

commensurate with the risks involved. Good governance can offer a number of important

benefits to organizations, including:

• Better organizational strategies and plans

• Improved operational and process effectiveness/efficiency

• More prudent regulatory compliance, financial and risk management

• Increased agility to which an organization can deliver on its purpose and goals

Effective governance structures allow organizations to create value, through innovation,

development and exploration, and provide accountability and control systems commensurate

with the risks involved. Proper governance requires time and thought from committed leaders

who understand the benefits of aligning every level of an organization to produce desired

results. Good corporate governance ensures that a business’s environment is fair and

transparent and that employees can be held accountable for their actions. Conversely, weak

corporate governance leads to waste, mismanagement, and corruption. Regardless of the type

of venture, only good governance can deliver sustainable and solid business performance.

Role of Information Technology in Corporate Governance

Corporate governance has taken centre-stage across boardrooms around the world. The term

applies to all aspects of a business. Given the fact that technology is expected to play a key

role in helping organisations achieve their business objectives, it is imperative to discuss the

role of corporate governance over technology.

The role of IT has changed throughout the years. It has begun serving as a technology

provider to finish its role as the backbone of all business. The existence of IT in life of every

enterprise has become more essential and thus this new role influences its function in the life

of the enterprise. The role of IT within an organization has changed from being a server to a

provider of services to customers and continues to evolve. Organizations today are subject to

many regulations governing the protection of confidential information, financial

accountability, data retention and disaster recovery, among others. They're also under

pressure from shareholders, stakeholders and customers. Most IT governance frameworks are

designed to help you determine how your IT department is functioning overall, what key

metrics management needs and what return IT is giving back to the business from its

investments.

Where COBIT and COSO are used mainly for risk, ITIL helps to streamline service and

operations. Proper governance requires time and thought from committed leaders who

understand the benefits of aligning every level of an organization to produce desired results.

Good corporate governance ensures that a business’s environment is fair and transparent and

that employees can be held accountable for their actions. Conversely, weak corporate

governance leads to waste, mismanagement, and corruption. Regardless of the type of

venture, only good governance can deliver sustainable and solid business performance.

In this report, an explanation of business ethics was done. Business ethics is described as the

standards of conduct by which moral and acceptable decisions and actions are based. There

exist various theoretical approaches to these standards of business moral behaviours. There

are various implications for a business and its stakeholders to operate ethically. This aspect

was also looked into and finally, appropriate conclusion and recommendations made for

today’s business.

It is evident from above that it is essential that good governance practices must be effectively

implemented and enforced preferably by self-regulation and voluntary adoption of ethical

code of business conduct and if necessary through relevant regulatory laws and rules framed

by Government.

The effective implementation of good governance practices would ensure investors’

confidence in the corporate companies which will lead to greater investment in them ensuring

their sustained growth. Thus good corporate governance would greatly benefit the companies

enabling them to thrive and prosper. Further, it needs to be emphasized that practices and

principles of good corporate governance have been evolved which stimulate business rather

than stifle it. In fact, in good corporate governance structure what is ensured is that

companies must preferably follow voluntarily ethical code of business conduct which are

conducive to the expansion of investment in them and ensure good outcome in terms of rates

of return.