business ethics & corporate governance ibs, hyderabad june – sept 2010 1rajan mani: ibs,...

Rajan Mani: IBS, Hyderabad 1

Business Ethics & Corporate Governance

IBS, HyderabadJune – Sept 2010


Course outline• Introduction to Business Ethics – 4 sessions• Typical problems in Business Ethics - 6• Corporate Social Responsibility - 2• Complexity of ethical issues -3• Ethical Leadership -1• History of Corporate form & models - 3• Nature & Evolution of Corporate Governance - 3• Internal CG mechanisms -3• External CG mechanisms -3• C G Ratings -1• CG in India - 4


Ethics, rights, justice• Ethics – business ethics – morality – moral

reasoning• Utilitarianism – utility – intrinsic good –

instrumental good – need – wants• Rights – legal, moral, negative, positive,

contractual• Justice – distributive, retributive, compensatory,

egalitarian, capitalist, socialist, libertarian, as fairness, equal liberty, fair equality of opportunity


Caring, Business Ethics• Caring – ethic of caring, concrete relationship• Virtue - ethic of virtue• Business: Ideology – individualistic, communitarian;

command economy, free market, private property, natural rights, surplus value, alienation, bourgeois, proletariat, invisible hand, natural price, natural liberty, survival of the fittest, Darwinism, mixed economy, intellectual property

• Market place: perfect competition, demand & supply, equilibrium point, monopoly, oligopoly, price fixing, price discrimination, price setting, price leadership, countervailing power, oligopoly power, anti-trust, regulation


Ethics & the environment• Pollution, toxic substance, nuclear wastes• Exponential depletion, peaked depletion, free

good, unlimited good• Ecological system, ecological ethic, right to a

livable environment• Absolute ban, private costs, social costs, external

costs• Cost-benefit analysis, risk, social audit• Right of consent, conservation, rights of future

generations, multiple access, doomsday scenario


Ethics of Consumer Protection & Marketing• Contractual theory (of seller’s duties), duty to comply,

implied claim, reliability, service life, maintainability• Product safety, reasonable risk, duty of disclosure,

duty not to misrepresent, duty not to coerce• Manufacturer’s implied warranty, disclaimer, caveat

emptor• Due care theory, Theory of advertising & market

power (Kaldor), Theory of creation of consumer desires (Galbraith), bait advertisements, deception


Ethics of job discrimination• Job discrimination: institutionalised / isolated,

intentional / non-intentional, statistical indicators, discriminatory practices

• Formal policy of ‘equality’, affirmative action, programme, utilisation analysis, reverse discrimination

• Compensation argument for preferential treatment, end goals of affirmative action programmes, invidious content, comparable pay


The individual in the organisation• Rational model of the organisation• Employee’s obligations to the firm, law of agency,

conflict of interest, actual / potential conflicts of interest• Commercial bribe, commercial extortion, theft, fair

wage, OSHA• Horizontal / vertical job specialisation, job satisfaction• Political model of the organisation, organisational

politics, political tactics• Right to privacy – physical / psychological, right to

freedom of conscience, whistle blowing, right to participate, right to due process


Theory & practice of CG• Board procedures – board processes – broad

vision• Disclosure – valuation – compliance –

misgovernance – transparency• Agency theory, Sociological Theory, Stewardship

theory• Governance mechanisms & practices• Managerial obligations to customers, employees,

investors, society• Stakeholders - shareholders


Landmarks in emergence of CG

• World Bank – McKinsey report• OECD, Cadbury & Hampel reports• CII code• Kumar Mangalam Birla, Irani & Narayana

Murthy Committees• SEBI’s initiatives


Board of Directors• Statutory duties – roles & responsibilities – de

facto – de jure• Directors’ remuneration – remuneration

committee – performance bonus – severance – executive pay

• Family owned business – independent directors – nominee directors – management structure

• Legal position – liability of directors – unlimited liability – validity of Acts


Auditors

• Auditors’ roles & responsibilities – audit failures – conflict of interest - independence of auditors – audit failures – objectives of an audit – fraudulent auditing practices – mis-statement of financial statements

• Cost audit – internal auditors – non-audit services – quality audit

• Oversight – board - penalties


Monopoly, Competition & CG

• Agreement – combination• Competition Commission of India – regulation of

competition – ownership – concentration• Political governance – political influence• Capital market – securities market – product

market


Role of Government

• Corporate constitutionalism• Government regulation – relations with

business – power of coercion – limits of power – limiting corporate power

• Political governance• Regulatory role• Role of judiciary• State intervention


Transition & emerging economies and CG

• Anti corruption strategies• Contract law – enforcement – exit mechanism –

bankruptcy & foreclosure• Fair taxation – property rights• Governance: challenges – frameworks – models –

settings• Institutional framework: media, judiciary,

banking systems


CG in Indian context• Accounting standards – best practices -

transparency• CG rating – rating methodology• Legislative changes• Self regulation• Serious fraud office• RBI• Emergence of SEBI – jurisdiction – primary market

reforms – role of securities market - clause #49


Intended take-away• Business Ethics is not an oxymoron• Business can be done profitably, successfully and

ethically• Ethical action is complex because needs of different

stakeholders have to be balanced• Ethical dilemmas often force choice between two rights • As long as human greed exists , corporate scams will

take place• Regulators have perforce to play catch-up • There are organisations which consciously practice

ethics in business as well as set new standards for corporate governance


Three Es

• Education• Enlightenment• Entertainment

• You decide how much of each ‘E’ you had !!!!!


IRISH BLESSING

May there always be work for your hands to do;

May your purse always hold a coin or two;

May the sun always shine on your windowpane;

May a rainbow be certain to follow each rain;

May the hand of a friend always be near you;

May God fill your heart with gladness to cheer you.


Thank you and

God bless !

business ethics & corporate governance ibs, hyderabad june – sept 2010 1rajan mani: ibs,...

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