chapter 3 theory and practice of ethicsshodhganga.inflibnet.ac.in/bitstream/10603/28728/9/09_chapter...
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12. Ethics is power because those higher in the organization are more inclined
to listen to someone who is ethical versus someone who they believe in
trying to advance personal agendas.
Chapter 3 THEORY AND PRACTICE OF ETHICS 3.1 Ethics – Meaning & Relevance
3.2 Theory and Applications
3.3 Ethics in Different Functions of Management
3.4 Ethics in Different Departments of Management
3.5 Growing Unethical Instances
3.6 Ethical Codes
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3.7 Code of Ethics Followed by Professional Bodies
3.8 Code of Ethics Followed by Business Organisations
3.9 Ethical Management System in Organisations
3.1 ETHICS - MEANING AND RELEVANCE Hindu Mythology :
‘Esa sarveshu bhuteshu gudho atma na prakasate
Drsyate tvagryaya buddhya sukshmaya sukshma darshibi’
Atma is in all beings, but it is hidden and therefore is not manifest. It can be
realized, however by the concentrated reasoning of those who have trained
themselves in perceiving in truth and values.
Ramayana, Mahabharata and Bhagavad-Gita in Sanskrit, Tirukkural, Vemana
Sathakam, Sumathi Sathakam as well as several other scriptures in regional
Indian languages of Hindu Mythology embody some moral values. Every royal
family had a ‘Rajaguru’ who taught moral values and human virtues to the
Princes (Viswamitra’s teachings to Sri Rama and his brothers, Panchatantra).
Chanukya Sastra written by Chanukya, is an authority of international
diplomatic relations consisting of several ethical concepts. In Mahabharata,
Dhrithrashtra’s brother Vridula counsels him to leave aside his undue support
to his son Duryodhana. His series of advices is full of morals and human values
called Vridula Neethi. Again in Mahabharata the episode of Yaksha Prashna,
Dharmaraja answers a series of queries on the precepts of Dharma (Ethical
dilemmas) posed by King Nahusha in a serpent form.
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Dharmic Principles:
Life is construed to be based on righteous principles (also
called Dharmic Principles) which are elaborated by Lord Krishna in the
Bhagawad Gita as:
Fearlessness
Purity of the inner world
Disciplined pursuit of knowledge
Ability to give
Control over the outer dominated senses
Educating oneself
Meditation
Simplicity
Non-violence
Sticking to truth
Ability to overcome anger
Giving up unnecessary possessions
Inner peace, refused to discuss other’s faults
Compassion
Lack of greed
Softness
Repentance
Lack of fickleness
Restrained talkativeness
Inner strength
Forgiveness
Patience
Cleanliness
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Not given to feeling of enmity
Not feeling puffed up or egoistic
These qualities that are called ‘daiva’ qualities are the basic
ethical values according to Indian ethics1.
------------------------------------------------------------------------------------------------ 1.R P Banerjee of Institute of Finance and International Management, Book
‘Ethics In Business And Management’, Pg. 22-30.
According to the Bhagawad Gita
Sattwam Sukhae Sanjayatae rajasa karmani bharata
Jnanam abritya tu tamah premade Sanjayatyuta
(Sattwa resides in a condition of happiness, rajas reveal a set of continuous
action; tamah depicts the picture of illusion shielding knowledge)
Three sets of qualities are present in all individuals in
different proportions. One cannot be perceived in isolation of others. The
quality which dominates, shows the type of the personality.
3.1.1 Personality types S(Satwa) R(Rajas) T(Tamas) S Long term, concerns,
sustainability, ethical rectitude
Moderate ethical concern, Progress through turbulence
Invite darkness, makes Collapses, redundant leader
R High cash flows, high market share, moderate concern for people
Dynamism, high volatility, randomness
High risk, low mobility
T Death of expectation, high sounds, lower bottom lines
Rigid command and control, inactive participation
Inertial movement, black future
Personality types as mentioned above could be changed from
one set to the other. The goal obviously is to reach the Sattwa.
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The Ten Commandments:
The Ten Commandments, or Decalogue, according to the Hebrew Bible, is a
list of religious and moral imperatives that were given by God to the people of
Israel from the mountain referred to as Mount Sinai or Horeb1. The Bible
describes their form as being spoken by God and subsequently as an inscription
God wrote with his finger on two stone tablets, which God gave to Moses. The
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1.http://en.wikipedia.org/wiki/Ten_Commandments
ten Commandments are recognized as a moral foundation in Judaism and
Christianity.
The passage in Exodus 20 contains more than ten imperative statements,
totaling 14 or 15 in all. While the Bible itself assigns the count of "10", using
the Hebrew phrase aseret had'varim ('the 10 words', 'statements' or 'things'),
this phrase does not appear in Exodus 20. Various religions parse the
commandments differently.
3.1.2 Ten Commandments by religion
Commandment Jewish (Talmudic)
Anglican, Reformed, and other Christian
Orthodox Christian
Roman Catholic, Lutheran
I am the Lord your God 1 preface You shall have no other gods before me 1
1
You shall not make for yourself an idol 2
2 2 1
Do not take the name of the Lord in vain 3 3 3 2
Remember the Sabbath and keep it holy 4 4 4 3 Honor your father and mother 5 5 5 4 You shall not kill/murder 6 6 6 5 You shall not commit adultery 7 7 7 6 You shall not steal 8 8 8 7
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You shall not bear false witness against your neighbor 9 9 9 8
You shall not covet your neighbor's wife 9
You shall not covet anything that belongs to your neighbor
10 10 10 10
Early critical historians also believed that another trend in the history of
religion was the progression from a concern with ritual to a concern with ethics.
Thus, the early Hebrews were concerned with sacrifice, and later prophets such
as Amos and Micah were more concerned with ethics; this trend presaged
Jesus's emphasis on love. According to this scheme, Deuteronomy 5 does not
represent Josiah's attempt to identify himself with the Mosaic tradition; rather,
Exodus 20: 2-17 are an interpolation of the Deuteronomic Decalogue into the
Jewish narrative. The argument is that this form of the Ten Commandments,
which emphasize ethical principals, can only be a late development in the
history of Israelite religion. Definition of Ethics:
The word ethics is derived from the Greek word Ethos, which means
‘character’ and from the Latin word Mores, which means ‘customs’. Many
corporate failures can be attributable to human error rather than technical.
Human errors would include negligence and lack of ethical commitment.
Max Weber talked about the Protestant ethic as being a strong work oriented
culture with a high sense of commitment and responsibility. R. H. Tawny
carried forward the thought to argue that the rise in capitalism was related to
the protestant ethic.
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Known as Moral judgment
Ethics means living by values. In ‘Webster’s ninth new collegiate dictionary,
ethics is defined as “the discipline dealing with what is good and bad with
moral duty and obligation.”
Ethics is defined as a set of principles or standards of human conduct that
govern the behavior of individuals or organizations. Philosophically speaking,
ethos is concerned with what is morally right and morally wrong in a given
field of human activity. Cambridge Encyclopedia defines ethics as the branch
of philosophy dealing with the concepts and principles of morality.
3.1.3 Meaning of Ethics
Ethics can be considered as the source of character of a person expressed as
right or wrong conduct or action.
Ethics means ‘respect to others’ (Immanuel Kant).
Happiness is the goal of each conduct (Spinoza, one of the most powerful
philosophers). ‘Right’ in ethics or conduct is different from ‘right’ in
Taken together considered as
Decided by
Leads to Character
of a man Conduct of a person
Series of actions
Good or bad Right or wrong Moral or immoral
Moral standards
By which we can judge again
Requires
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mathematics or engineering, it means correct, fit, what works best to the best
result (Aristotle). Bringing in ‘effective harmony of the whole’ has been the
basic ethical view of Plato.
Gandhiji wanted a freedom from within. People become a prey to unethical
practices as a result of the lack of inner freedom. A lack of inner freedom
makes people dependent upon externals and allows externals to give a shape to
things in their chosen ways – ethics becomes a causality in most of the cases.
Gandhi’s concept of Swaraj helps to attain an inner swaraj (freedom) to attain a
collective swaraj for the country. Strengthened by the inner voice, man then
lives on the spirit of morals and ethics in individual as well as collective life.
The essence of Buddhist Ethics lies in the choice of the middle pat that yields
the various rights for the human entity. Buddha identifies desire as the main
enemy to ethical actions. Ethics demands a purity of character.
Ethics says, “Not me but thou”. Do not injure others. Love every one as your
own self. The individual self is the cause for all sorts of selfishness, hatred,
jealousy, misery, struggle and all other evils (Swami Vivekananda).
R T De George, a distinguished Professor of Philosophy and Business
Administration at the University of Kansas, has observed that a company’s
reputation is one of its key assets ands opines that “reputation is a result of
continuous ethical action and of an ethical corporate culture”.
The concept of moral behavior is as old as the man himself. The first of pre-
historic man was a social animal without any moral values struggling for food
and shelter. After he found a female partner, he started families and then
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communities. They then framed certain rules of how to behave with the women
and children and with rival tribes so as to have harmonious inter-relationships.
In the early 1990s, an organization by the name People United to Serve
Humanity (PUSH) led a consumer’s boycott in the US for the products of Nike,
when it learnt that the labour laws were floated by the company by employing
children for manufacturing shoes in illegal sweatshops in Indonesia. It was
inappropriately attributed in the company’s business reports as “outsourcing” to
maintain low production costs. Because of the declining sales, the company
agreed to sign up a code of conduct to ensure that all its products would be
made under ethical conditions.
The ethics of management - the determination of what is ‘right’ and ‘proper’
and ‘just’ in the decisions and actions that affect other people – goes far beyond
simple questions of bribery, theft and collusion. It focuses on what our
relationships are – and ought to be – with our employees, our customers, our
stockholders, our creditors, our suppliers, our distributors and our neighbors –
members of the communities in which we operate. This is the most critical
issue in the ethics of management: the continual conflict between the economic
performance of the firm, measured by revenues, costs and profits and owed to
the stockholders and the social performance of the firm, much more difficult to
measure but represented by obligations to employees, customers, creditors,
suppliers, distributors and members of the general public.
Manuel Velasquez of the University of Santa Clara was of the view that in
perfectly competitive free market s, the pursuit of profit will by itself ensure
that the members of society are served in the most socially beneficial ways.
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The Indian Government set up a 15 member Lok Sabha Committee on Ethics in
April 2005 headed by Mr. Chandra Sekhar, former Prime Minister of India. It
will oversee the moral and ethical conduct of members. But it never succeeded.
To be ethical is profitable, but to be ethical because it is profitable is not
ethical. And one might add, it is also not profitable in the long run (Peter
Koestenbaum – Heart of Business, Ethics, Power and Philosophy).
We never use the same brain twice. Every time we use it, we alter it in physical
ways that affect our capacities, our actions and even our perceptions. Our best
hope for maintaining appropriate ethical boundaries and behavior in a rapidly
shifting environment is to empower individuals with a strong sense of their own
identity and values and to provide them with a society that allows them to act
ethically. The biological connection between behavior and pleasure might very
well work to the benefit of ethics (Dr. Pierre J. Magistretti - Swiss
Neuroscientist).
Religion will continue to be important in not only the next ten but the next fifty
years to ensure ethics to flourish. The first step in pursuing ethical behavior is
to establish a firm identity with in individuals (Dr. Christoph Struckelberger,
Director of the Institute for Theology and Ethics of the Federation of Swiss
Protestant Churches).
Ethical behavior does strengthen a company in the long term, but in the short
term it can weaken profitability. Hedge funds that prosper by quick trades in a
fluctuating market work against the kind of long term perspective that ethical
business behavior requires. Pension funds which have a long term outlook were
suggested as a possible counter weight to the pressure for short term profit.
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Sixty two world business leaders in energy, construction, mining and
engineering signed a statement with the World Economic Forum’s Partnering
against Corruption Initiative, declaring that they would have no tolerance for
bribery and would implement or strengthen already existing policies to make
sure corruption was not present in their dealings (Christian Kornevall, ABB).
The Universal Declaration of Human Rights, adopted by the United Nations
General Assembly in 1948, was suggested as a good guideline for ethical
standards that could apply across cultures in a rapidly changing world. During
military war, respect for other’s human rights is required and ethical progress in
the next ten years could see more attention being paid to the rights of
combatants. The use of non lethal weapons should be encouraged.
Despite cultural and religious differences, some things are considered unethical
by every one, every where – there are some agreed ethical norms. Bribery and
corruption are unacceptable every where (Paquerette Girard Zappelli –
International Olympic Committee).
Ethical thinking has its origins in the writings of the great philosophers of early
ages such as Socrates and Confucius. Further business ethics received the
attention of the philosophers in the mid-1970s – although the subject certainly
existed before that time – especially in many catholic institutions. The date of
the birth of business ethics in the USA is November, 1974 – the date of the first
conference on business ethics at the University of Kansas (Norman Bowie,
1986).
A work ethic can be defined at the basic level as about
discipline, namely coming to work on time, behaving with respect and dignity
in relation to subordinates, colleagues and superiors, staying at the workplace
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during working hours, not wasting the time of the worker and the others by
wandering around for fruitless chatter etc.
There is a philosophical distinction between knowledge, ethics and aesthetics.
Knowledge is the pursuit of truth; ethics is the pursuit of goodness and esthetics
is the pursuit of beauty (William Davis).
In times of shortages and economic crisis waste,
inefficiency and slovenly work become ethically abhorrent, not only to
managers but to the workers themselves. Ethics is about fairness, moral is about
individual tastes (Frederick Hertzberg). 3.2 THEORY AND APPLICATIONS Theoretical approaches : A number of theoretical approaches to deal with moral issues have been offered
by philosophers. Some of the approaches described by Velasquez (1996) are :
The Utilitarian Approach:
Utilitarianism was conceived by Jeremy Bentham
and John Stuart Mill. According to this approach, ethical actions are those that
provide the greatest good for the greatest number and the least harm.
The Rights Approach :
Having its roots in the philosophy of Immanuel
Kant, the 18th century thinker, this approach operates on the principle that
human beings have the ability to choose freely what they will do with their
lives and this fundamental moral right should be respected by others. This
implies that people are not inanimate objects to be manipulated. In addition, the
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rights approach also throws light on other rights, such as the right to the truth,
the right to privacy, the right not to be harmed or injured (unless one does
something to deserve punishment), and the right to know what has been
promised by those with whom we have freely entered into a contract or
agreement.
The fairness or Justice Approach:
This approach is rooted in the teachings of
Aristotle, the ancient Greek philosopher. Based on his teachings, this approach
lays down the principle that equals should be treated equally and un-equals,
unequally.
The Common Good Approach:
This approach is based on the writing and
teachings of ancient philosophers such as Plato, Aristotle and Ciero. Common
good is defined as “certain general conditions that are … equally to everyone’s
advantage”. One has to view himself as a member of the community to which
he belongs and ensure that the social policies, social systems, institutions and
environments on which we depend are conducive to the good of all. Examples
include affordable healthcare, effective public safety, and peace among nations,
a just legal system and a pollution free environment. The latter is of key
relevance to businesses that are known to cause environmental pollution with
far – reaching consequences.
The Virtual Approach:
Virtues are character traits that enable us to act in
ways that develop our highest potential. Examples of virtues are honesty,
courage, compassion, generosity, fidelity, integrity, fairness, self-control and
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prudence. A virtuous person is one who has cultivated these virtues. Such a
person is the ethical person.
Modern theories :
Many modern theorists insists that employers must modify
their attitudes towards employees and be willing to grant an expanding and
increasingly well defined set of ‘employee rights’. Some are:
1. The right of an employee to complain about dangerous products and
practices without being penalized.
2. The right of an employee to a hearing before being fired.
3. The right of an employee to refuse immoral orders without being penalized.
4. The right of an employee to refuse lie-detector tests without being
penalized.
5. The right of an employee to participate in political and personal activities
outside the work place without being penalized. Principles Of Ethics :
Larry Colero has compiled a list of ethical principles along personal,
professional and global dimensions. All these three dimensions are of utmost
significance considering that an organisation’s operations have far – reaching
implications, intended or unintended. Moreover, the arena in which many
organizations wish to operate in the near or distant future has extended beyond
one’s country to overseas locations1.
Principles of Personal Ethics :
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Personal ethics might also be called morality, since they
reflect general expectations of any person in any society, acting in any capacity.
These are the principles one tries to instill in their children and expects out of
others without needing to articulate the expectation or formalize it in any way. --------------------------------------------------------------------------------------------------- 1.Sumati Reddy of ICFAI, Magazine ‘Global CEO’, Article ‘Ethical Leadership –
The New Base of Power’, May 2007, Pg. 55-60
They include :
• Benevolence : Doing good
• Concern for the well-being of others
• Respect for the personal freedom of others
• Trustworthiness and honesty
• Preventing harm
• Willing compliance with the law
• Being fair
• Refusing to take unfair advantage
Principle of Professional Ethics :
These principles prescribe the required behavior with
in the context of a profession, such as in medicine, law accounting or
engineering. They take the form of written codes which provide rules of
conduct and standards of behavior based on the principles of professional
ethics, which include:
• Openness; full disclosure
• Confidentiality
• Impartiality; objectivity
• Due diligence / duty of care giving
• Fidelity to professional responsibilities
• Avoiding potential or apparent conflict of interest
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Principle of Global Ethics :
Principle of global ethics are in a nascent stage and
are the least understood as they are open to wide interpretation as to how or
whether they should be applied. However, for businesses, it is always wise to
think globally. This is especially true for multinational corporations and for
those organizations whose influence spans several countries. A modern and
complete model of success should consider the impacts on ecology, humanity,
society and nation. This is the reason why certain progressive companies are
now adopting models of corporate social responsibility to enhance their
corporate reputations and performance. Principles of global ethics include:
• Global justice
• Putting society before self / social responsibility
• Environmental stewardship
• Reverence for workplace
• Interdependence and responsibility for the ‘whole’ Ethics in different areas of business:
Values pervade everywhere in the organization and are vital for the viability of
the firms1. Five areas of business where, apart from economic rationality, there
is no escape from ethics:
Decision Making: Being essential part of all business activities, there is
inevitably an ethical dimension when decision may involve sacking people
or promoting them, or deciding whether to buy supplies from countries such
as Zimbabwe or Iran. Business decisions of this type cannot be ethically
neutral.
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Leadership: Business leaders today need to give moral guidance as much as
anything. None of them can be treated as automatic, relying on orders being
blindly and unquestionably obeyed. They have to persuade and cajole; they
have to be diplomats and teachers.
----------------------------------------------------------------------------------------------- 1.Beth Kresna, Book ‘Thinking Ethics’, Chapter ‘Ethics & Knowledge’, Pg. 30-57,
Profile Books, 2006.
Organizational structures and systems: This relates, for example, to the
ways in which an employee’s performance is appraised and rewarded, or
people are promoted and moved around the organization they work for.
Relationship between business and society: The idea of corporate social
responsibility has gained much ground in recent years. Companies have
been shifting from a mono-functional view of their purpose (namely the
maximization of shareholder’s wealth and value) to a broader view of the
moral responsibilities they have to a wider range of stakeholders –
employees, suppliers and the communities in which the company works.
Corporate functions such as marketing, finance etc. : The raising of money
for new projects cannot be ethically neutral and nor can the selling of new
products. Drug companies regularly have to decide whether to invest in one
potential cure or another. By deciding not to invest in one direction, they put
at risk the chances of a specific group of patients ever finding a cure for
their complaint. More and more drug companies are prepared to invest in
potential cures not only for diseases that afflict large numbers of people.
They see this as the sole way of finding the blockbuster product they are all
looking for – the next Zantac or Viagra, for instance. The consequences are
that if you have a complaint that only a few other people share, the chances
of science finding you a cure these days are small. 3.3 ETHICS IN DIFFERENT FUNCTIONS OF MANAGEMENT
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Ethics in Planning
Planning is the intended, coordinated, emergent
and realized pattern of integrated, multidimensional decision processes and
actions that provide organizational direction and prioritize objectives1. Planning
with integrity requires some form of systematic planning processes as given
below1 (Mintzberg, 1994).
1. Planning scanning: Planning awareness through environmental scanning of
current external and internal factors by using future forecasting, surveying
and benchmarking tools to develop stakeholder voice.
2. Planning formulation and choice : Planning formulation, analysis and
choice through development of the vision of a desired future; gap analysis
between current rhetoric and reality; mission statement with prioritized,
quantified objectives and prioritized, qualitative goals; analysis of planning
action options; and resolution of planning choice by using various matching
tools to judge alternatives and endorsement of a justified course of action
that will develop organizational processes for resource alignment.
3. Planning implementation: Selected planning implementation to coordinate
organizational readiness to act through intentional enactment of policies,
processes, procedures, rules, programs, projects and personal / unit
performance standards by using scheduling, budgeting, team building,
project management and organizational character / health assessment tools.
4. Planning evaluation, control and improvement : Evaluation, control and
improvement of the results and impact of the selected plan by using a
variety of measures, standards, audits, causal analysis, acceptable process
variations assessment, improvement techniques and feedback information
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tools to ensure organizational performance according to plan and sustained
reputation development.
--------------------------------------------------------------------------------------------------- 1.Joseph A Patrick & John F Quinn, ‘Management Ethics – Integrity at Work’, Pg.
110-47
Planning with ethical integrity means addressing the
elements of the four ethics processes in the context of their parallel planning of
sub-processes to ensure that no step in the planning function neglects its moral
dimension. Managers may lack integrity in planning by neglecting to
adequately perform the subtasks entailed in ethics and planning processes,
thereby exposing themselves and their organizations to ethical risk.
3.3.1 Planning with Integrity Processes Step-1 Step-2 Step-3 Step-4 Ethics processes Ethical
awareness Ethical judgment
Ethical intension
Ethical conduct
Planning sub processes
Planning, scanning
Planning, formulation, choice
Planning, implementation
Planning, evaluation, control, improvement
Ethics in Organizing
Organizing is the intended, coordinated, emergent and
realized pattern of integrated, multidimensional decision processes and actions
that assemble, arrange and allocate human and nonhuman resources into
structures, people and technology that can activate organizational plans. To
organize in a fully meritorious manner, therefore some form of systematic
organizing process must be used.
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1. Organizing scanning: Scanning of current external and internal factors,
using bench marking and process mapping (Camp, 1995).
2. Organizing formulation and choice: Organizing formulation, analysis and
choice of relationship arrangements among structural, people and
technological factors that can most efficiently align and allocate resources to
accomplish strategic plans by using inter and intra organizational cross –
functional integration and reengineering simulation tools.
3. Organizing implementation: The chosen blend of structure, people and
technology is implemented and coordinated with organizational readiness to
act by using scheduling, budgeting, team building, project management and
organizational character / health tools.
4. Organizing evaluation, control and improvement: Evaluation, control and
improvement of the results and impact of the chosen blend of structure,
people and technology by using a variety of performance indicators, audits,
international quality standards, feedback and process improvement tools. Ethics in Leading
Leading is the intended, coordinated, emergent and
realized pattern of integrated, multidimensional decision processes and actions
that induce or influence the character and conduct of organizational members in
appropriate directions by using appropriate resources.
1. Leading scanning : Scanning of current external and internal factors
affecting the leadership of people and processes, such as awareness of best
leadership practices inside and outside the industry, existing leadership
talent at all levels with in the organization and internal system incentives
and measures of leadership development progress.
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2. Leading formulation and choice : Leading formulation, analysis and choice
of the blend of people and processes that will constitute organizational
leadership by creatively combining the three ingredients :
• Leader traits, skills, conduct and decision making styles
• Follower conduct, power relationships, leader-member exchanges,
transactional and transformational interactions and follower
performance motivations
• Contingent and TQ system processes that support or inhibit leaders.
3. Leading implementation: Strengthening the resources of people and
processes through personal selection, performance expectations, appraisal,
rewards and development as well as empowerment readiness assessment,
ongoing character and learning community development, in order to
enhance the personal and organizational readiness to act responsibly.
4. Leading evaluation, control and improvement: Evaluation, control and
improvement of people and processes by using a variety of ethics, quality,
social and environmental audit instruments, performance indicators,
acceptable process variation feedback measurements, social responsibility
plus sustainable development measures and ongoing improvement
initiatives. Ethics in Controlling
Leading is the intended, coordinated, emergent and
realized pattern of integrated, multidimensional decision processes and actions
that evaluate current performance in light of expected standards and
organizational plans in order to take corrective and / or improvement measures
in future.
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1. Controlling scanning : Enhanced awareness through domestic and global
scanning of current external and internal best practices relating to
assessment, improvement and control instruments, tools and measurements
that optimize control benefits.
2. Controlling formulation and choice : Control formulation, analysis and
choice of process system and human performance standards that can most
efficiently reduce variation and align resources to accomplish strategic plans
and improve organizational performance.
3. Controlling implementation : Implementing control measures of system and
human performance in such a way that interaction is emphasized by using
operating management tools to improve the organizational readiness to act.
4. Controlling evaluation and improvement : Evaluation and improvement of
the measured outputs and outcomes of system and human performance by
using a variety of performance indicators, audits, international quality
standards, feedbacks and process improvement tools. 3.4 ETHICS IN DIFFERENT DEPARTMENTS OF MANAGEMENT Ethics in Production
About 1/10th of the work force suffers a job related injury or illness each year
for a loss of over millions of work days annually. While death and loss of
biological parts are common, the slow causes for death such as heart diseases,
cancer and respiratory conditions are thought to be job related. Even stress on
the job is now being recognized as a work place hazard that is responsible for
headaches, back and chest pains, stomach ailments and a variety of emotional
diseases.
Safety hazards generally involve :
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Loss of limbs
Electrical shocks
Bruises
Burns
Cuts
Sprains
Broken bones
Impairment of sight and hearing
The diseases associated with specific occupations are
• Pneumoconiosis or black lung disease (minors sickness)
• Silicosis or the white plague (associated with stone cutters)
• Caisson disease (among drivers)
• Contracts (glass blowers)
• Skin cancer (among chimney sweeps)
• Prosperous poisoning (in match makers)
• Mercury poisoning (common among felt workers)
Regardless of the ethical reasoning used though workers
have an undeniable right not to be injured or killed in the job. The right of
employees to a safe and healthy work place might seem to be too obvious to
need any justification. This right and the corresponding obligation of employers
to provide working conditions free of recognized hazards – appears to follow
from a more fundamental right, namely the right of survival. Dangerous
working conditions threaten the very existence of employees and cannot be
countenanced when they are avoidable (Patricia H. Werhane).
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In the modern work place, most occupational health
problems result from routine exposure to hazardous substances.
• Fine particles such as asbestos (causes asbestosis)
• Cotton dust (byssinosis)
• Heavy metals such as lead, cadmium and beryllium
• Gases including chlorine, ozone, SO2, carbon monoxide, hydrogen sulphide,
hydrogen cyanide (damages the lungs and cause neurological problems)
• Solvents such as benzene, carbon tetrachloride, carbon disulphide.
• Certain classes of chemicals like phenols, ketones and epoxies
• Pesticides (serious threat to agricultural workers)
• Radiation (in an occupational hazard to x-ray technicians and workers in the
nuclear industry)
People have right that protect them from others who
would enslave them or otherwise use them for their own purposes. In bringing
this idea to bear on the problem of occupational safety, many people have
thought that workers have an inalienable right to earn their living free from the
ravages of job caused death, disease and injury (Mark MacCarthy).
Product Safety :
The use of virtually any product involves certain degree of
risk. Questions of safety are essentially questions of acceptable and known
levels of risk. Product is safe if its attendance risks are known and judged to be
‘acceptable’ or ‘reasonable’ by the buyer in view of the benefits the buyer
expects to derive from using the product. This implies that the seller complies
with his part of a free agreement if the seller provides a product that involves
only those risks she says it involves, and the buyer purchases it with that
understanding.
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Ethics in HRD:
The organization, a “living company” is a community
where membership is variable, not only through individuals entering and
leaving over time, but also by enlargement or reduction. Some members are
suppliers, some are contactors, some are investors etc. They network and
perform various roles. There is mutual trust that people will act fairly. Thus the
reality is that people are the heart of the business. Ethical implications of various HRM practices
These are :
• The type of people the organization hires, carelessness of hiring who are
trustworthy; dishonest people very ambitious, achievement oriented, wealth
oriented. They may achieve high level performance but also a greater
incidence of unethical behavior. Content of training is important.
• The behaviors that the performance appraisal and compensation systems,
encourage. Extremely high compensation levels, sometimes provide a very
strong enticement to achieve results by unethical means. Punishments (lack
of promotions, layoffs) might also create conditions under which people
behave unethically.
• Is the performance of employees are actually discussed by superiors? Little
monitoring of behavior – greater tending for ethical problems to occur.
• Collective bargaining or employee governance system of a company also
affects how managers behave towards their employees. If the organization
views the employees or their unions as enemies. There is higher likelihood
of non-trust and mistreatment. Employees do judge their HRM system as
ethical or unethical. These assessments are made on the basis of degree to
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which such HRM system correspond to culturally determined norms of
procedural justice.
• Discrimination.
• Sexual harassment.
HRD Prayer:
The HRD prayer depicts the desired dream of HRD culture
and values for adapting ethics in any corporation or nation. When all those are
established there will be everlasting peace, prosperity and happiness.
The Prayer :
Where every individual speaks the truth and no one needs to verify.
Where everyone believes everything said by every other individual without
doubt.
Where every individual feels free to express his own opinions, views and
feelings fearlessly and is respected for the same.
Where every individual shows concern for other members of the team and is
willing to extend a helping hand and collaboration without hesitation.
Where people are not divided by narrow identities and groups.
Where societal and national interests take precedence over organizational
interests.
Where organizational interests take priority over the departmental or narrow
team interests, and the group or team interests take priority over the
individual or role-related interests.
Where collaboration and team work is a way of life.
Where trust and trustworthiness is fully practiced.
Where every individual has some autonomy to experiment and discover his
own talents and enjoy the freedom and dignity of life.
Where every individual has the opportunity to take initiative and be proactive.
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Where individuals proactively discover more and more about themselves, their
talents and potential.
Where issues and problems are confronted, discussed and solved without fear
and innovativeness leading to abounding happiness.
There I pray to thee Master lead me, my team, my organization and my
country.
Ethics in Finance: The present financial sector was built upon trust as trillions of transactions take
place every day based on trust. The global crisis has led to a near breakdown to
trust in the process of globalization. Faith and economic development were
profoundly interrelated in theory and practice. The present meltdown has
exposed the issue of moral hazard in the banking system – the privatization of
profit and socialization of costs. Satyam and Lanko scams exposed the larger
occurrences of unethical behavior in the financial sector. The status and
recognition are being accorded according to how much profit is made
regardless of how it is made. If a public sector bank fails, the Indian
government will bail out as it will affect the public but not the shareholders and
management. The ultimate aim of economics is to foster greater social justice
though it is unpredictable and purely based on human behavior. The values
followed by Reserve Bank of India are to safe guard the interests of depositors
and to ensure every household, including remote areas, has a bank account and
restrict banks not to impose excessive rates on personal loans and credit cards1.
Innumerable organizations in India have cheated many highly ethical people
who trusted them and their companies. Hard earned money has been put by
many people in cash to seek their better living in the post retirement stage.
Ethical issues in finance are important because they bear on our financial well
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being. Ethical misconduct as every one knows, may be by individuals acting
alone, or by organizations having the potential to rob people of their life
savings and government money. As huge money is involved in financial
dealings, there must be well developed and effective safe guards in place to
ensure personal and organizational ethics. Though the law governs much
financial activity, strong emphasis must be placed on the integrity of the
financial professionals and on ethical leadership in our organizations.
--------------------------------------------------------------------------------------------------- 1.Mr. D. Subba Rao, Governor, Reserve Bank of India, International seminar on
‘Ethics and the world of finance’ at Sri Satya Sai University, 28th Aug. 09 Creative Accounting :
The most common practice relates to ‘creative accounting’, a
phrase which is popularly associated with ‘cooking of books’ in a way which is
legal although morally dubious. This is not unethical as two accountants could
present the accounts of the same firm in two entirely different ways. E.g.
• A firm whose profits are modest in a given financial year may decide to sell
off some of its capital and treat the proceeds as profits.
• Equity accounting is another technique of enhancing profits. In UK, if the
firm owns more than 20% of another firm, it may declare that proportion of
the other firm’s profits as its own.
• Due to a problem of dropping sales, a firm might enhance its sales figure by
allowing the bank to ‘buy’ goods when in reality the goods are being
appeared as security for a loan. The company would buy back its stock at a
later date and for a higher price- exactly the same monitory transaction as
taking out a loan the goods themselves do not change position, remains in
the warehouse without any necessity for the company to deliver them
physically to the bank and back again.
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• There can actually be ambiguity about where a sale represents a profit or a
loss. If a firm has sold a consignment of product, one would imagine that
such a sale would be reflected in the accounts. If the buyer has been given
the credit, not only is it possible for the vender to omit the sale figure in
accounts during the period of credit but it is possible for the vender to
consider the sale as a loss of goods without payment and hence a debit. He
may thus omit the sale figure in accounts during the period of credit.
• Another form of creative accounting involves placing a hypothetical
monitory value on ‘intangibles’. Companies are often worth more than the
physical assets. If a firm has built up enough ‘good will’ amongst customers
and suppliers then its name is surely worth something. E.g. Coca Cola, if
sold to another firm be of substantial value, even perhaps if that firm
consists of functional directors, Coca Cola has never tried to sell it – no one
has ever tried to buy the name. Any figure therefore that is placed on its
value must be a ‘guesstimate’ or may be even just a guess. Well known
firms quite typically include intangible assets in their annual accounts.
• Creative accounting can be described in a variety of ways, not all ways are
correct. Some are certainly false and some although not false, can be down
right misleading. E.g. legally one may not claim under the head of
‘expenses’ costs of entertaining one’s colleagues to dinner or keeps two sets
of account books, one for personal use and the other for the auditors.
• For creative accounting freedom is important, which is fundamental human
right. Companies should enjoy the fundamental right of deciding how to
organize their own affairs, including how they decide to present their
accounts. One system of accounting may be particularly appropriate to one
firm, but inappropriate to another. The law recognizes that small businesses
are not necessarily run by those who excel in accounting. Consequently a
sole trader or partnership which has no limited liability is not obliged to
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present accounts with the same degree of exactitude as a public limited
company. The affairs of an educational establishment, a charity, a chain
store and a multinational company are all very different. No standard
accounting scheme could be devised.
• A company like an individual, has the right to enjoy the best possible
advantage within the law (like IT returns), a car sales firm to treat a part
exchange as a reduced – price single sale, rather than two separate
transactions in which the new car is sold for the full price and the old car
bought as a separate deal. Business executives have the duty of securing for
their shareholders the best possible return for their investment. Creative
accounting is favored by many since they seem to be convincing.
To prevent accountants questioned in these types of
conflicts:
American Institute of CPAs publishes their professional rules.
Financial Accounting Standards Board governs accounting practices and
establishes the generally accepted accounting principles (GAAP) that
stipulate the methods by which accountants gather and report information.
International Accounting Standards Committee is in the process of
developing standards that would allow foreign companies to sell securities
in the US as long as their accounting confirm to the International standards,
though not comply with the GAAP.
Accountants are also governed by the American Institute of Certified Public
Accountants (AICPA) which has a code of professional conduct. The code
relies on the judgment of accounting professionals in carrying out their
duties rather than stipulating a set of extremely specific rules.
Indian financial statements present a true and fair view of the financial
position, financial performance and cash flows of an entity. Presentation of
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true and fair view requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and expenses set out in
the framework. The application of Indian Accounting Standards, with
additional disclosure when necessary, is presumed to result in financial
statements that present a true and fair view. Ethics in Marketing:
Ethics in marketing is the function and process of
marketing keeping to the standard norms of it and achieving the ends through
sound means. The sources of ethical lapses could be :
• Misrepresenting one’s own company in sales dealing.
• Using strategic advantages like size, location etc. to intimidate or to
threaten.
• Discriminating buyers and sellers on age, sex, country of origin, racial
identity, complexion, caste, creed, faith etc.
• Reciprocating in dealings.
• Sabotaging in any dealings or misreporting.
• Disclosing premature offerings.
• Using confidential information for any benefit.
• Trying to steal information or getting it by willful deceit.
• Violating patents and copy rights.
• Giving or accepting bribes, gifts or any kind of obligation created through
any dealings of the individual or groups.
• Depriving customers and clients of the desired / expected benefits.
• Not listening to or working on customer opinions.
• Products susceptible to erosion of values and in qualities.
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• Products safety not ensured for any kind of accidental abuse.
• Not willing to have fair and open relations with suppliers and retailers.
• Not helping business partners improve their quality and standard of
operations and performance.
• Be indifferent to or against the standards of the global environment.
• Disallow employee’s participation in social and humanitarian activities.
• Deprive owners of fair annual return and due recognition.
• Absence of opportunities for employee achievement, creativity and personal
reward.
• Not behaving as a good citizen in the society and the market.
• Sacrificing personal values to achieve corporate returns.
• Creating problems for the society in the pursuit of corporate success.
• Not having a well defined corporate policy towards securing market share
and the means of making sales.
• Corporate mission not properly communicated to all concerned.
• Disallowing favour for survival to the weaker persons or the weaker sections
of the society.
• Not having a clear policy on the direct and indirect personal gains that might
accrue from the corporate activities and transactions.
• Presence of double standards in managing the affairs of the company and
effecting marketing of its product and services
• Allowing syndicated supplies or indulging in syndications for selling
products.
Some extreme critics appear to think that marketing is
completely unethical. Others find it hard to see anything unethical about
attempting to meet customer’s needs with appropriate goods and services.
These contrasting viewpoints span a variety of differing opinions on what
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constitute ethical practice in marketing. Marketers must adopt a broadly based
view of ethics if they really want to understand and meet the needs of today’s
customers. Price discrimination is illegal as it makes a number of important
exemptions (Robinson-Patman Act, 1936). Unethical marketing behavior:
PRODUCT
• Safety Manufacture of flammable stuffed animals
• Shoddy goods Products that cannot withstand ordinary wear
and tear
• Inadequate warranty Warranty with insufficient time or parts
coverage
• Environmental pollution Manufacture of non-biodegradable plastic
products
• Mislabeled products Flavored sugar water sold as apple juice for
babies
• Development Bribery of FDA officials to secure agency
approval of generic pharmaceuticals
• Manufacturing Unauthorized substitutions in generic drugs after
FDA approval
• Brand ‘knock-offs’ Counterfeit branded goods sold as originals
PRICE
• Excessive markups High prices used by retailers to connote quality
• Price differentiation Yield management pricing of airline tickets,
resulting in day to day differential pricing of
adjacent seats
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• Price discrimination Favored pricing to preferred ethnic groups
PROMOTION
Exaggerated claims One blade company claims its razor as ‘the
smoothest, most comfortable shave known to
man’. Another company challenges.
Advertising Sexual innuendoes and gender disparagement,
deception
Inappropriate targeting Persuasive role models, Celebrity spokes persons in
beer, liquor, cigarette advertisements targeted to for
inappropriate youth products
Naïve audiences Bill boards for cigarette and alcohol in poor urban
neighborhoods where many people are dying from
related causes
Telemarketing Offers of fabulous prizes in return for credit card
purchases of touted goods
Captive audiences Mandatory viewing of TV commercials by students
in schools
DISTRIBUTION
Fraudulent sales Phony markdowns based on ‘kited’ retail prices
Bait and Switch tactics Luring consumers with ads for low priced merchandise
for the purpose of switching them to high priced models
Direct marketing Deceptive, misleading product size and performance
claims
PACKING
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Deceptive quantities Some marketers use ‘packaging –to-price’ tactics that
mark a decrease in product quantity while maintaining
the same price and traditional package size.
American Marketing Association (AMA) has established
a code of ethics to provide guidelines for ethical conduct. It says, in part, that,
‘marketers shall uphold and advance the integrity, honor and dignity of the
marketing profession, by being honest in serving consumers, clients,
employees, suppliers, distributors and the public’. The code then outlines the
responsibilities for each component of the marketing mix.
3.4.1 Guidelines in the Marketing mix
Products & Services
Advertising Distribution Pricing
Marketers have the responsibility to ensure product safety to disclose all product risks and to identify any factor that might change product performance. E.g. General Motors failed to fulfill the responsibilities by providing faulty brakes for 1.1million X-body cars.
Marketers must avoid deceptive and misleading communications must repeat high pressure sales tactics and must avoid manipulating consumers to buy. E.g. Warner Lambert failed to fulfill the responsibilities when advertised ‘Listerine’ as preventing colds.
Suppliers should not coerce their intermediaries into taking unwanted products. They should not create false shortages to drive up prices of their products. E.g. Chrysler did not fulfill these responsibilities in early 1960s when it forced dealers to take unwanted cars during an economic downturn.
Marketers must not engage in price fixing or predatory pricing and must disclose all prices associated with the purchase including service, installation and delivery. E.g. GE did not fulfill these responsibilities in early 1960s when several of its executives were indicated for price fixing.
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3.5 GROWING UNETHICAL INSTANCES
As civilization progresses, technology advances, the world witnessed some of
the worst frauds. Demand generated for the ethical practices in every sphere of
life. Some of the unethical instances found through newspapers, magazines etc.
are listed below : Major Corporate Frauds In The World :
WorldCom: Improperly booked $3.8 billion in expenses, thus inflating
profits. The founder, Bernie Ebbers, borrowed
$408million from the phone company to cover
personal debts.
Enron : Created outside partnerships that helped hide its poor
financial condition. Executives earned millions of
dollars selling company stocks. The company had to
go to bankruptcy court.
Anderson : The accounting firm was accused of shredding Enron
documents and was convicted for obstruction of
justice.
Dynegy : Energy company was under investigation for accounting
and trading malpractices in part related to California
power crisis.
Waste Management: Massive accounting fraud from 1992 to 1997 that
resulted in a $17billion restatement of earnings. The
auditor was Arthur Anderson.
Adelphia Communications: Made illegal loans to founder Rigas’ family
members and was under investigation for accounting
malpractices.
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Tyco : Amid questions about accounting malpractices, the CEO,
L. Dennis Kozlowiski, was charged with deliberately
dodging sales tax on purchase of art work for his New
York residence.
Imclone Systems : CEO Samuel Waksal was charged with insider trading
after company’s drug application got rejected.
Peregrine Systems : Overstated revenue by $100 million over three years.
Rite Aid : Three executives of drug store chain were indicted for the
charges of securities and accounting fraud. Corruption In Government Schemes :
The consultant firm ‘Cfore’ conducted a survey regarding government schemes
in four randomly selected districts - Tonk (Rajasthan)
Jhansi (Uttar Pradesh)
Rangareddy (Andhra Pradesh)
Saran (Bihar)
In all, 1013 villagers were surveyed. Not surprisingly, over half of them are not
satisfied with government schemes. 71% villagers say, there is high corruption
in the schemes (Outlook, 7th April,08). State’s Staff – Biggest Human Rights Abusers :
As per Mr. V. Appa Rao, District Judge and Secretary, AP State Human Rights
Commission (APSHRC) most common cases they found, are harassment of the
common man by the police, manhandling of subordinates or domestic help,
torture of prisoners in jail, non-registration of police complaints, not taking
action in dowry cases, illegal arrests, not investigating properly by invoking
relevant sections of the Indian Penal Code and slapping a comparatively milder
charge.
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There are plenty of cases against government officials for things like delays in
issuing pensions, provident fund, gratuity and other retirement benefits,
discrimination in promotion matters, not issuing white ration cards to below
poverty line people, incorrect assessment by the revenue department and so on.
According to the retired Chief Justice of the High Court and former Chair
Person of the APSHRC, Justice Subhashan Reddy, even though various
beneficial social security schemes exist, like pensions for old people, widows
and the disabled, the rights assessment, survey and eligibility enquiry by
government officials are not done to enable people to avail of them. The United
Nations has recently declared freedom from corruption a human right alongside
freedom from hunger, illiteracy and pollution (The Deccan Chronicle, dt. 13
Dec. 2010). Padma Bhushan to hotelier Chatwal :
The honour of Padma Bhushan was given to the controversial US based
hotelier, Sant Singh Chatwal, for the assessment period 2008. the Indian
Government defended that Mr. Chatwal had been a tireless campaigner for
India – US ties. There were three criminal complaints with the Kerala police
and four cases in the Delhi and Kerala high courts that name Mr. Chatwal and
his associates. In two of theses cases, he was served summons. The case
reportedly relate to alleged ‘non-payment of bills’ by Mr. Chatwal to suppliers
of furnishings for his newly constructed Kochi hotel and alleged ‘criminal
intimidation’ of them on the night of the launch party (DC, Feb.6, 2010).
MEDICAL ETHICS :
A study done by the Mumbai based forum for Medical Ethics in 2003 revealed
that drug companies sponsored weddings and handed out cell phones to
Doctors if they thought this could get them to prescribe their brand. While the
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more expensive gifts – such as an exotic cruise – are reserved for high value
prescribes, expensive cutlery, home accessories are handed out as candies to
medical practitioners.
Moreover, drug companies take advantage if the practice in India of patients
going directly to the drug stores, giving chemists a say in their choice of drugs.
Chemists often substitute a Doctor’s prescribed brand for another of the same
drug if it gets them better margins. This has led to some companies to promote
medicines directly to the trade of 1,000 percent margins and keep their
maximum retail price unchanged1.
Legalization of Human Organ Sale :
An Australian kidney specialist, Dr. Gavin Carney, professor at the National
University, called that organ sale to be legalized to save lives. In Australia, it
carries a penalty of six months jail and a fine of $(A) 4,400. The average wait
for the transplant is 4 years. But the ministry rejected it saying it would be open
to many ethical issues and abuses. Philippines announced that foreigners would
be banned from receiving kidneys for transplant in that country, in a fresh
attempt to crack down on a thriving black market in organs sold by poor people
(Hindu, 6May08).
Euthanasia – An Ethical Concern :
Terminally ill patients on life support should have the right to die if they want
to, Germany’s highest civil court said recently in a landmark ruling. Legal
experts and doctors hailed the decision as a watershed ruling. But our moral
values would not let us to do. Patients on deathbeds can be kept alive on
ventilators and other machines but they live as vegetables. It requires great
1. Business India , Monthly Magazine, 30July2007
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courage and a scientific approach to look at this problem objectively. Choosing
to die should not be confused with suicide though, suicide is committed in a fit
of depression or due to an emotional turmoil, they end their life recklessly. “the
right to die is one of the basic human right. The freedom to choose to die
should be accepted as a birth right of every human being. The process of dying
is a beautiful spiritual experience, the crescendo of life” – Osho (DC, Aug. 30,
2010).
Private Hospitals Cash On Avoidable Surgeries:
There is a marked difference in the number of surgical procedures carried out in
government and corporate hospitals in the city of Hyderabad for simple cases
like appendicitis, Tonsillitis, ovarian cysts and pregnancy.
3.5.1 Cases resulting in surgeries Type of surgery Private hospitals Govt. hospitals
(for every 100 patients) Hysterectomy 30 to 40 operations 4 to 5 operations Tonsillectomy 40 operations 20 operations Caesarean 60 operations 20 operations Appendectomy 50 operations 3 to 4 operations
The superintendent of Osmania General Hospital, Dr. Sampat Kumar said out
of every 100 patients admitted with abdominal pain, only three or four patients
actually require an appendicitis operation. This clearly indicates private
hospitals are thriving on unethical surgeries. Depending on the status of private
hospital and the category of room the patient chooses, a caesarian delivery can
cost anywhere from Rs.20,000 to Rs.1 lakh, while a normal delivery costs only
Rs.10,000 to Rs.20,000 (Deccan Chronicle, Sept. 1, 2010)
Killing With The Scalpel:
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Unqualified doctors, paramedics and even quacks are callously performing
surgeries on sedated and clueless patients across India, though legally these acts
amount to murder. Such botched up surgeries are common in rural areas where
there are no specialist doctors. Video recording of surgeries is almost a norm in
the west but is not done in here though it would be helpful for keeping medico
legal records, says senior orthopedic surgeon Dr. Jairam Chander Pingle of
Apollo Hospital (Deccan Chronicle, Nov. 8, 2010).
There shall be no compromise on the rule that only surgeons can operate on
people. If an individual other than the surgeon uses the scalpel to cut open a
person, it amounts to attempt to murder (Dr. K. Ramesh Reddy, chairman of the
AP Medical Council Ethics Committee).
UNETHICAL INSTANCES IN THE FIELD OF SPORTS :
Commonwealth Games 2010 – Delhi :
The sports ministry admitted in the Parliament that the estimates for the games
have risen 17.5 times – from 655 crore to 11,454 crore – compared to the bid
estimates of 2003. It has been rocked with scandals. The corruption could
amount to Rs. 200 million in the projects analyzed, which included a number of
stadiums as well as games related bridges and flyovers. On 26th July, just three
weeks after it was inaugurated, the ceiling at the swimming pool gave way just
before a test event was to take place at the venue (DC, 1st Aug. 10).
Triple Olympic gold medalist Stephanie Rice announced that despite shoulder
surgery, she would take part in the Commonwealth Games. She has shown her
presence of high ethical attitude as other star athletes Usain Bolt, Shelly Ann
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Fraser, Chris Hoy, Lleyton Hewitt and Samantha Stosur have already decided
to give New Delhi, a miss (The New Indian Express, 20 Aug. 10).
During the Pakistan’s cricket teams visit to England in Aug. 2010, there was an
allegation involving Pakistani fast blowers Mohammad Amir and Mohammad
Asif, that they had deliberately bowled three no balls during the test match at
Lords, after accepting handsome amounts. Formula One Race :
During 2008, Singapore Grand Prix, French Formula One team, the Renault,
influenced its driver Nelson Piquet to crash in order to help another driver
Fernando Alonso wins a race. This breach not only compromised the integrity
of the sport but also endangered the lives of spectators, officials, other
competitors and Piquet himself. The team was banned for seasons up to 2011.
Incidentally the team fired their two leading directors responsible for the
incident, managing directors Flavio Briatore and the chief of engineering Pat
Symonds for cooperating in the investigation. Having dreamt of being a
Formula One driver and having worked so hard to get there, the suspended
driver cried that he was at the mercy of his manager (The New Indian Express,
dt.21 Sept. 2010).
UNETHICAL INSTANCES FOUND IN THE ‘MEDIA’ FIELD:
Sting Operation:
News channels have spun news in pursuit of better ratings. But it took a fake
‘sting’ operation by Hindi channel LIVE INDIA at a government school in
Delhi to show us to what depths some of the channels have sunk.
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Media audit company Spatial Access ran a quick study on the area of corporate
responsibility; apparently, advertisers do not raise ethical issues as long as the
channel in question had critical mass in viewer ship. In the cold hard calculus
of commerce, one person’s suffering does not count for much. Tomorrow, you
may be that human being1.
Unethical Promotional Campaigns :
In March 08, a few news channels aired a telephonic conversation of cricketer
Sreesanth proclaiming his love for Priyanka Chopra. To clarify this incident,
the cricketer called a press conference. It later turned out that this press
conference was nothing but a promotional strategy to launch Lux’s new
strawberry flavored soaps. To what extent is this publicity, ethical? Where
should one draw the line? May be the answer lies in the question “ can artificial
controversies like these sustain as an effective promotional strategy?” (Deccan
Chronicle, 30April, 08)
Pictures of minor victims:
Although there are several restrictions against publishing pictures of minors in
conflict with the law, several regional papers from Tambaram, Chennai have
flashed pictures of 16 year old Kavitha across their pages with headlines like
‘Flesh trade busted’, screaming for the attention of the readers.
The Supreme Court maintains a standard while conducting cases related to rape
victims. Vidhya Reddy, Center for the Prevention and Healing of child sexual
abuse explains the Care and Protection of Children Act, 2000. No report in any
newspaper, magazine, news-sheet or visual media of any inquiry regarding a
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juvenile in conflict with law or a child in need of care and protection under this
Act shall disclose the name, address or school or any other particulars
----------------------------------------------------------------------------------------------
1.Business India, 24Sept.07
calculated to lead to the identification of the juvenile or child be published. The
IPC Prohibition of Immoral Traffic Act prohibits the publishing of pictures of
victims of rape to maintain their privacy, says Geeta Ramaseshan, advocate
with the High Court. (Deccan Chronicle, 19May08).
UNETHICAL INSTANCES IN CORPORATE FIELD:
Ethical Standards In British Arms Firm:
On allegations that payments were made to win a major arms deal with Saudi
Arabia in the 1980s, British arms firm, B Ae Systems board had appointed an
independent committee, chaired by LordHarry Woolf of Barns, who was
former chief justice of England and Wales, to publicly report upon the
company’s ethical policies and processes. The committee was to identify the
high ethical standards to which a global company should adhere; identify the
extent to which B Ae Systems currently met these standards and recommend
the action that company should take to achieve such standards (Deccan
Chronicle, 7th May, 08).
Satyam’s Fiasco:
Satyam Computer Services, a New York Stock Exchange (NYSE) – listed
company disclosed the biggest fraud of Rs.7000crores in the company’s
balance sheet. It’s independent directors (one on ISB board) failed in their duty,
the auditors have blundered, all internal and external checks and balances went
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haywire and the regulatory authorities, the SEBI, the stock exchanges and the
company law administration have been lax.
Some of the recognitions that came Satyam’s way are – ‘Best Risk Manager’
from Gartner group, ‘India’s top 10 Employers’ awarded by CNBC & Hewitt,
‘Best Corporate Citizen’ conferred by Business World and Ficci, ‘Recognition
of Commitment’ by no less a body than the American Institute of Internal
Auditors in 2006-07 when the company had already begun cooking its books,
‘Most Innovative Recruiter’ from RASBIC (2007) even as their headcount
claim is in doubt.
The gap in the balance sheet has arisen purely on account of inflated profits
over a period of last seven years. What started as a marginal gap between actual
operating profit and the one reflected in the books of accounts continued to
grow over the years. It has attained unmanageable proportions as the size of
company operations grew significantly (annualized revenue run rate of
Rs.11,276crore in September quarter, 2008 and official reserves of
Rs.8,392crore). The deferential it he real profits and the one reflected in the
books was further accentuated by the fact that the company had to carry
additional resources and assets to justify higher levels of operations – thereby
significantly increasing the costs. Every attempt made to eliminate the gap
failed. The aborted Maytas acquisition deal was the last attempt to fill the
fictitious assets with the real ones. The Satyam group paid heavily for having
invested huge funds in the real estate business which has suffered badly in the
last two years. What expedited Satyam’s fall was its appallingly bad (say
fraudulent) financial management, coupled with an unprecedented fall in stock
market prices world over. At long last, accounting firm Price Waterhouse,
Bangalore has accepted the truth (The Hindu, 19 Jan 2009).
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Lanco Infratech Insurance Scam:
Lanco Infratech had submitted a policy numbered 610200/44/08/03/60000027
to the AP Health, Medical Housing and Infrastructure Development
Corporation and secured reimbursement for Rs 1.89 cr. Lanco Infratech
claimed to have taken the policy for the Rs 308 cr IIIT complex that it is
building in Basar. Under the contract terms, the contractor insures the project
and the government reimburses the insurance amount to the company.
Lanco Infratech, an infrastructure major, handling mega construction projects
for the state government, including the AP Health and Medical Housing and
Infrastructure Development Corporation (APHMHIDC), unethically
renegotiated premium amounts with insurance companies and pocketed huge
refunds. Even Lord Balaji was not spared. It managed refunds of Rs. 1.53Cr.
from New India Assurance Comprehensive risk policy for IIIT Basar, Rs. 15.36
lak from United India Insurance Risk Coverage for RIMS Ongole, Rs. 11 lak
from United India Insurance Risk Coverage for RIMS Srikakulam and Rs.
15,04,188 for SVV University. Lanco Infratech would take insurance for higher
amounts, collect the refund from the government and then renegotiate with the
insurer for a cheaper policy (DC, Aug. 5, 2010).
Adarsh Housing Scam:
Adarsh Housing Society was formed in Mumbai with 103 members. It was
supposed to construct a six story building for war widows, a girl’s hostel for
children of army officers and heroes of the Kargil war and not a monstrous 31 –
floor structure. However the fact remains that the Army has been in possession
of the land for decades and if it had to give away land to the collector of
Mumbai, afterwards to the Brihanmumbai Municipal Corporation, then the
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transfer would have had to be done in accordance with the law. This means that
the Army would have had to seek the Ministry of Defense’s permission, which
it did not do, and the land was given clandestinely for the housing society.
Since the suspected officers of the Indian Army are in the rank of joint
secretaries and above, they come under the preview of the Central Vigilance
Act 2003, and hence any investigative agency needs prior permission from the
MOD in order to register an FIR. Meanwhile in the case of the non – defense
personnel like the politicians and bureaucrats, it is the Maharashtra government
that has to take action. All the politicians and bureaucrats who flouted the laws
and gave permissions were allotted flats for themselves their sons, daughters
and even alleged girl friends. The end result is that, out of the 103 society
members, only three are Kargil soldiers (The Deccan Chronicle, dt. 7 Aug.
2010).
Bauxite Mining:
There were serious concerns about the mining giant, Vedanta Resource’s
approach to human rights and the environmental issues, particularly in Orissa.
Shakeholders much away in London such as British Charity Trust,
Marlborough Ethical Fund and Millfield House Foundation, following strict
ethical principles, sold their stakes in the firm.
Jindal South West Holdings ltd., Anrak Aluminium Ltd., and National
Aluminium Ltd., formed their business plans to set up alumina refineries,
smelter and captive power plants in Visakhapatnam and Vizianagaram districs
involving an investment of Rs. 25,000 crore. Following severe tribal resistance,
the Government refused to give forest clearance to all of them. Mining would
adversely hit water inflows into the various rivers and streams that sustain the
people in the plain. Also in the scheduled areas as per the provisions of the
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Constitution and the guidelines issued by the Supreme Court in Samata case,
the tribals should have a significant ownership of the land (The Hindu, 23 Aug.
10). 2G spectrum scam:
The 2G spectrum scam involved officials and ministers in the Government of
India illegally undercharging mobile telephony companies for frequency
allocation licenses, which they would use to create 2G subscriptions for cell
phones1. According to a report submitted by the Comptroller and Auditor
General based on money collected from 3G licenses, the loss to the exchequer
was 176,379 crore (US$39.16 billion). The issuing of the 2G licenses occurred
in 2008, but the scam came to public notice when the Indian Income Tax
Department investigated political lobbyist Nira Radia and the Supreme Court of
India took Subramaniam Swamy's complaints on record.
Former Telecom Minister of the NDA government Arun Shourie was the
whistleblower who helped uncover the scam and also exposed many loopholes
in the UPA government's policy towards issuing telecom licenses. In 2008, the
Income Tax department, after orders from the ministry of Home and the PMO,
began tapping the phones of Nira Radia. This was done to help with an ongoing
investigation into a case where it was alleged that Nira Radia had acted as a
spy.
Some of the many conversations recorded over 300 days were leaked to the
media. The intense controversy around the leaked tapes became known in the
media as the Radia tapes controversy. The tapes featured some conversations
between politicians, journalists and corporates. Politicians like Karunanidhi and
Raja, journalists like Barkha Dutt and Vir Sanghvi and industrial groups like
the Tata Group were either participants or mentioned in these tapes.
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1. www.wikipedia.com
3.6 ETHICAL CODES
Ethical codes are statements of the norms and beliefs of an organization. Codes
developed by corporations are tailor-made for their specific circumstances and
the unique missions of the company, and as such they would be more widely
adapted and recognized by the employees of that corporation. Nowhere is it
insisted on proclamation of lengthy rules and regulations (The code of best
practice by Sir Adrian Cadbury).
Evolution Of The Code Of Ethics :
Code of ethics evolves from business ethics1. It helps in identifying the
business aims, directions and values. An ethics code describes the general value
system or ethical rules that are supposed to guide employees in their every day
behavior in the organization. A vast majority of the large American companies
have can ethics code. Surveys have indicated that majority of the managers
think that a self – developed code will help ethical behavior in their industries. Code Contents :
Different approaches are followed by different organizations as regarding the
contents of the code of ethics. It is recommended that a middle ground
approach be followed to structure the code of ethics so that it is neither too
brief, nor too lengthy and legalistic. A modern “best practices” code would
include the following elements:
Memorable Title:
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The title should communicate the content clearly and at the same time be ------------------------------------------------------------------------------------------------- 1. T Krishna Kumar, Associate Professor, Osmania University, ‘Putting Business
Ethics in Practice: Some Issues’, The ICFAI Journal of Organisational Behavior, Pg. 22-25
memorable enough to grab the attention of its readers. Be creative. We suggest
that you put some thought into what you will call your document and the
message it conveys. Move beyond generic titles such as Code of Business
Practices, Code of Ethics, Code of Values, or Compliance Code. We
recommend developing a thematic title for your code. Some examples include
SHRM’s (Society for Human Resource Management) own Code of Ethical and
Professional Standards in Human Resource Management, Pricewaterhouse
Cooper’s The Way We Do Business and the World Bank Group’s Living Our
Values. Use the title of your code to inspire ethical behavior.
Leadership Letter:
The leadership letter provides a frame for the document and demonstrates your
organization’s commitment -- from the top – toward the creation of an ethical
culture. It should explain how a code can be used by the employees and outline
the reasons for its focus. Address how the code came to be and the process
behind its development. Reflect the input and questions from your leaders and
volunteers regarding your organization’s values and the direction of the code.
Some typical content areas for the leadership letter may include:
• Why does your organization need a code? Why now?
• What is the ethical/legal context in which your organization operates?
• What are some of the challenges that your employees face, and how can this
code of ethics be a helpful document for everyone at all levels?
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• What are the major trends facing your organization that will impact and affect
the code and its implementation?
• What kind of example might this code set for others?
Table of Contents:
It is strongly recommended to include a table of contents at the beginning of the
code. It may sound simple and even obvious, but many codes overlook this
step. Codes often have a tendency to become cumbersome, making it difficult
for users to find the provisions they seek. A table of contents can give
employees a quick overview of key code provisions and resources, thereby
making the document as a whole more accessible and readable.
Introduction-Prologue:
An introduction can be used to expand upon some issues not fully addressed in
the leadership letter. Ideally, it should provide an expanded explanation for the
code and its purpose. One may need to answer the following key questions by
way of formulating your introduction:
1. Why is this code important? Will it be enforced? Is it mandatory? Does it
apply to everyone?
2. What is the purpose of the code?
3. What is the scope of the code?
• Jurisdiction: To whom does this code apply? What does it address?
• Definition: What aspects of organizational activity and impact are to be
included in the code?
• Measurement and Verification: How should organizational performance in
these areas be measured, and how should the accuracy of this
information be verified?
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• Accountability and Reporting: To whom should the organization be
accountable for its performance, and how should this
information be made public?
Statement of Values – Core Values:
The process of laying down the ethical character of a business can be facilitated
with a clear articulation of corporate core values. Values govern the behavioral
choices (Dr. A. K. Jain, Professor, MDI, Gurgaon). Fundamental to an effective
code, your organization needs to identify and express its values and those
values need to feature prominently in the code – not simply as a list. The code
should explain what those values mean and reinforce their importance in the
context of the organization and the work it does. In essence, employees need
clear definitions of organizational values to better understand and apply them.
When possible, tie the values to individual code provisions. For example, if
diversity is one of your organization’s key values, it could be tied to a provision
of outlining the anti-harassment policy.
Code Provisions:
As discussed, codes can be brief or comprehensive depending on the objective.
They address a wide variety of issues, ranging from legal and regulatory
concerns to relations with the organization’s staff and the application of the
organization’s values. The choice of topics to be included in your code will be
influenced by three factors: 1) its purposes and objectives; 2) organization’s
environment; and 3) the questions or concerns expressed by intended users –
employees. In deciding which topics to address, one might ask:
• What are the principal laws and regulations applicable to our organization?
• What has gone wrong in the past?
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• What else could go wrong?
• What guidance do we need to offer our employees?
• Where are the gray areas? What do we need to clarify or confirm?
Information and Resources:
This section is critical. It will direct employees to other resources (internal to
the organization and externally) should they have a question, need to seek
further clarification or simply want more information on the code provisions. It
should include specific statements such as how to access the organization’s
ethics office (or person responsible for ethical issues) and provide details on
your enforcement policy and mechanisms1.
Advantages Of Ethical Code
It is always advantageous to have an uniform code of conduct
for ethics throughout the organization to maintain objectivity. Walter W Manle
(1992) based on his interactions with top executives of 145 British and
multinational companies, has identified the benefits, a business firm would
accrue if it has a code of conduct / ethics.
• Provides guidance and inculcates the company’s values and cultural
substance and style in managers and employees.
• Sharpens and defines the company’s policies and unifies the workforce.
• Codes provide overall strategic direction.
• Contributes instruction in interactions with pressure groups from outside the
company.
• Signals expectations of proper conduct to suppliers and customers.
• Delineates rights and duties of the company, managers and employees.
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• Effectively respond to government pressures and rules.
• Enhances the company’s public image and confidence.
• Preempts legal proceedings.
• Improves bottom line results.
• Enhances employee’s self-image and recruiting.
• Promotes excellence.
• Realizes company objectives.
• Responds to stockholder’s concerns
• Strengthens the free – enterprise system
• Nurtures a business environment of open communication
• Integrates the cultures of acquired or merged companies
• Deters improper requests to employees by supervisors and vice versa. Development of Codes of Ethics : A Model of 12 Step Process While many follow different methods to formulate a suitable code of ethics, a
most favoured 12 step process is given below :
1. Decide on Goals and Meaning of Success: As soon as possible, decide on the
goals and the meaning of success for your ethics program. As suggested earlier,
a code is typically not effective as a stand-alone document. The benefits of a
code result from its strategic use as a part of your organization’s broader ethics
initiatives. Develop your code based on a specific set of goals that go beyond
the code itself. The content of the code, the examples presented and so forth,
should allow employees to use the code in addressing their own ethics concerns
and furthering the ethics goals of your organization.
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2. Get Leadership Buy-In: The support and commitment of leaders is necessary
for success in developing a code of ethics. Resource allocation, the buy-in of
others and communications relating to code development are among the critical
areas affected by leadership commitment. For these reasons, it is important to
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1.http://www.managementhelp.org/ethics/ethxgde.htm
gain leadership commitment early in the process and to make this commitment
clear to everyone in your organization.
3. Create a code development task force: Create a task force or committee and
assign them responsibility and accountability for the code development. Give
careful thought to selecting appropriate task force employees. Make sure that
these employees are committed and have the time to devote to the task force. In
choosing team employees, it is often good practice to select people who
represent the diversity of your organization and the views of key employees,
volunteers and other groups.
4. Data Intake and Analysis-Interviews and Focus Groups: Gather information
from stakeholders (leadership, employees, volunteers, etc.) on key ethics
concerns. For a code to be effective, individuals must find it relevant. Leaders
should not necessarily assume that they already know what issues are important
to employees. Information gathering through interviews, focus groups and
informal discussions can be important ways to surface key issues and can set
the stage for an ongoing dialogue about ethics.
5. Keep Leadership Informed: Finally, report your findings to leadership so that
they understand how employees, volunteers and other key stakeholders view
the current environment. In reporting your findings, limit your comments to
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items raised by multiple sources and do not indicate where or from whom
specific comments or insights were obtained.
6. Draft your Code of Ethics: Seek multiple perspectives in developing a code.
In particular, organizations should involve people who are interested or will be
affected by the code provisions in the drafting process. Some organizations
include stakeholders as employees of their formal committees, whereas others
solicit input and feedback less formally. Ideally, the involvement of others can
improve the breadth and depth of issues addressed in a code and can also
facilitate general support and buy-in. The Task Force – with input from key
leadership – will need to decide on the code values, provisions, structure and so
forth. Draft a code of ethics that is tailored to your organization and intended to
serve its unique needs. Make good use of the information from employees,
volunteers and other key stakeholders gathered during your intake process.
7. Submit Code to Leadership for Review: Ensure the support of leadership by
presenting them with the final draft of the ethics code for review and comment.
This step allows leaders to maintain a participative role in the code
development process, even if they have not been actively involved in the day-
to-day drafting of the code. Such participation tends to reinforce leadership
commitment to the overall code initiative.
8. Field Test the Code and Make any Final Revisions: Take the revised code
“out into the field” again for any final suggestions and revisions. There are
always details that will be missed in the early drafts. Once the code is nearly
final, it is often easier for individuals to bring these to boss’s attention. Make
any final necessary revisions.
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9. Have the Code reviewed by the Legal Counsel: Once the document is ready
that one is comfortable with, take it to the legal counsel for review.
10. Obtain Board Approval of Final Draft: Before publishing and
disseminating the final code, have it formally approved by the Board of
Directors.
11. Decide on a Communications and Education Strategy: Design and develop
a comprehensive communications and education plan to increase code and
program effectiveness. Think carefully about, who needs the information and
how one can best get it to them in a cost effective manner. As noted previously,
a code of ethics is, in many ways, a vehicle for ongoing communications about
ethics. The code will have a greater impact to the extent that future ethics
communications tie into, build on, or emphasize key issues that are addressed
in the code. Communications can take many forms including ethics training,
newsletter articles, posters, e-mails, formal and informal discussions of ethics
and the like.
12. Revise and Update Regularly: Codes of ethics should not be viewed as
static documents. While they seek to capture timeless ethical principles, the
guidelines, examples and related information they contain should be revisited in
light of changes that may occur in an organization’s environment. New issues
may arise that were overlooked in previous versions. In addition, periodic
revision of the code can send a symbolic message to employees that ethics is an
area that requires ongoing attention. An organization that does not revisit ethics
issues in its code may unintentionally send just the opposite message
(http://www.managementhelp.org/ethics/ethxgde.htm).
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3.7 CODE OF ETHICS FOLLOWED BY PROFESSIONAL BODIES Caux Round Table Principles for Business
In the context of promoting world trade in a principled
manner, the Caux Round Table (CRT) has done yeomen service. The CRT, an
international network of principled business leaders working to promote a
moral capitalism was found in 1986 by Frederick Phillips, former President of
Phillips Electronics and Oliver Giscard d’Estaing, former vice-chairman of
INSEAD, as means of reducing escalating trade tensions. In due course of time,
the CRT began focusing attention on the importance of global corporate social
responsibility in reducing social and economic threats to world peace and
stability. Caux Round Table principles are rooted in two basic ethical ideas:
kyosei and human dignity. The Japanese concept of kyosei means living and
working together for the common good – enabling cooperation and mutual
prosperity to coexist with healthy and fair competition. Human dignity refers to
the sacredness or value of each person as an end, not simply as a means to the
fulfillment of other’s purposes or even majority prescription.
The general principles are
Customers :
We believe in treating all customers with dignity,
irrespective of whether they purchase our products and services directly from
us or otherwise acquire them in the market. We therefore have a responsibility
to -
• Provide our customers with the highest quality products and services
consistent with their requirements.
• Treat our customers fairly in all aspects of our business transactions,
including a high level of service and remedies for their dissatisfaction.
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• Make every effort to ensure that the health and safety of our customers, as
well as the quality of their environment, will be sustained or enhanced by
our products and services.
• Ensure respect for human dignity in products offered, marketing and
advertising.
• Respect the integrity of the culture of our customers.
Employees :
We believe in the dignity of every employee and in
taking employee interest seriously. We therefore have a responsibility to –
• Provide jobs and compensation that improve worker’s living conditions.
• Provide working conditions that respect each employee’s health and dignity.
• Be honest in communications with employees and open in sharing
information, limited only by legal and competitive restrains.
• Listen to and where possible, act on employee suggestions, ideas, requests
and complaints.
• Engage in good - faith negotiations when conflict arises.
• Avoid discriminatory practices and guarantee equal treatment and
opportunity in areas such as gender, age, race and religion.
• Promote in the business itself the employment of differently abled people in
places of work where they can be genuinely useful.
• Protect employees from avoidable injury and illness in the workplace.
• Encourage and assist employees in developing relevant and transferable
skills and knowledge.
• Be sensitive to serious unemployment problems frequently associated with
business decisions, and work with governments, employee groups, other
agencies and each other in addressing these dislocations.
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Owners / investors :
We believe in honoring the trust that our investors place in
us. We therefore have a responsibility to –
• Apply professional and diligent management to secure a fair and
competitive return on our owner’s investment.
• Disclose relevant information to owners / investors subject only to legal
requirements and competitive constraints.
• Conserve, protect and increase the owner’s / investor’s assets.
• Respect owner’s / investor’s requests, suggestions, complaints and formal
resolutions.
Suppliers :
Our relationship with suppliers must be based on mutual
respect. We therefore have a responsibility to –
• Seek fairness and truthfulness in all our activities, including pricing,
licensing and rights to sell.
• Ensure that our business activities are free from coercion and unnecessary
litigation.
• Foster long term stability in the supplier relationship in return for value,
quality, competitiveness and reliability.
• Share information with suppliers and integrate them in to our planning
processes.
• Pay suppliers on time and in accordance with agreed terms of trade.
• Seek, encourage and prefer suppliers and subcontractors whose employment
practices respect human dignity.
Competitors :
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We believe that fair economic competition is one of the
basic requirements for increasing the wealth of nations and ultimately, for
making possible the just distribution of goods and services. We therefore have a
responsibility to –
• Foster open markets for trade and investment
• Promote competitive behavior that is socially and environmentally
beneficial and that demonstrates mutual respect among competitors.
• Refrain from either seeking or participating in questionable payments or
favors to secure competitive advantages.
• Respect both tangible and intellectual property rights.
• Refuse to acquire commercial information by dishonest or unethical means,
such as industrial espionage.
Communities :
We believe that, as global corporate citizens, we can
contribute to such forces of reform and human rights as are at work in the
communities in which we operate. We therefore have a responsibility in those
communities to –
• Respect human rights and democratic institutions and promote them
wherever practicable.
• Recognize government’s legitimate obligation to society at large and
support public policies and practices that promote human development
through harmonious relations between business and other segments of
society.
• Collaborate with those forces in the community dedicated to raising
standards of health, education, work place safety and economic well –
being.
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• Promote and stimulate sustainable development and play a lead role in
preserving and enhancing the physical environment and conserving the
earth’s resources.
• Support peace, security, diversity and social integration.
• Respect the integrity of local cultures.
• Be a good corporate citizen through charitable donations, educational and
cultural contributions and employee participation in community and civic
affairs. Global Standards In Ethics
The Universal Declaration of Human Rights, adopted by the United General
Assembly in 1948, was suggested as a good guideline for ethical standards that
could apply across cultures in a rapidly changing world. The first ten are :
• All human beings are born free and equal in dignity and rights. They are
endowed with reason and conscience and should act towards one another in
a spirit of brotherhood.
• Everyone is entitled to all the rights and freedoms set forth in this
Declaration, without distinction of any kind, such as race, colour, sex,
language, religion, political or other opinion, natural or social origin,
property, birth or other status. Furthermore, no distinction shall be made on
the basis of the political, jurisdictional or international status of the country
or territory to which a person belongs, whether it be independent, trust, non-
self-governing or under any other limitation of sovereignty.
• Everyone has the right to life, liberty and security of person.
• No one shall be held in slavery or servitude; slavery and the slave trade shall
be prohibited in all their forms.
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• No one shall be subjected to torture or to cruel, inhuman or degrading
treatment or punishment.
• Everyone has the right to recognition everywhere as a person before the law.
• All are equal before the law and are entitled without any discrimination to
equal protection of the law. All are entitled to equal protection against any
discrimination in violation of this Declaration and against any incitement to
such discrimination.
• Everyone has the right to have an effective remedy by the competent
national tribunals for acts violating the fundamental rights granted him by
the constitution or by law.
• No one shall be subjected to arbitrary arrest, detention or exile.
• Everyone is entitled in full equality to a fair and public hearing by an
independent and impartial tribunal, in the determination of his rights and
obligations and of any criminal charge against him. Guidelines For Multinational Companies
The business ethicist Thomas Donaldson has
suggested a minimal list of international rights that has been widely reprinted as
an example of guidelines for multinational companies. These are
1. The right to freedom of physical movement
2. The right to ownership of property
3. The right to freedom from torture
4. The right to a fair trial
5. The right to nondiscriminatory treatment
6. The right to physical security
7. The right to freedom of speech and association
8. The right to minimal education
9. The right to political participation
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10. The right to subsistence Code Of Ethics For Government Service
The U.S. federal government has established the following
code. Any person in government service should :
1. Put loyalty to the highest moral principles and to country above loyalty to
persons, party or government department.
2. Uphold the constitution, laws and regulations of the United States and of
all governments there in and never be a party to their evasions.
3. Give a full day’s labor for a full day’s pay; giving earnest effort and best
thought to the performance of duties.
4. Seek to find and employ more efficient and economical ways of getting
tasks accomplished.
5. Never discriminate unfairly by the dispensing of social favors or privileges
to anyone, whether for remuneration or not; and never accept, for himself
or herself or family members, favors or benefits under circumstances
which might be construed by reasonable persons as inefficiency for
performance of government duties.
6. Make no private promises of any kind bending upon the duties of office,
since a government employee has no private word that can be binding on
public duty.
7. Engage in no business with the government, either directly or indirectly
which is inconsistent with the conscientious performance of government
duties.
8. Never use any information gained confidentially in the performance of
government duties as a means of making private profit.
9. Expose corruption whenever discovered.
10. Uphold these principles, ever conscious that public office is public trust.
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Code of ethics For Indian Agencies Most corporations (over 80% ) have emphasized or discussed issues related to
compliance procedures, reporting concerns and monitoring mechanisms /
punishment for non-compliance. In many cases employees are required to give
periodical undertakings to comply with these codes while discharging their
responsibilities. A few companies have even facilities for such reporting
through their web site. On the other hand there seem to be no formal code
(53%) that monitors or ensures the same. Of the nine corporations that laid an
organizational set-up such as ethics offices / coordinators / committees to look
after ethics management, eight belong to the Tatas.
Codes of conduct play an important role in a corporation’s effort to
instituationalise ethics. The imperative of their implementation and compliance
has been widely recognized by corporations across the world. A great many
codes in India are aspirational in character ( Journal of Human Values, 12:1,
2006).
Evolution of code of conduct has an authority of its own and will be more
honored in practice rather than in the breach. The manner in which Sri
T.N.Seshan implemented the code of conduct during the elections gives us the
hope that it is possible by systematic building up of public opinion to have
codes of conduct which can be effectively implemented (N.Vittal, Chairman,
PESB).They tend to be relatively long and detailed as they frequently spell out
the company policies on
• business practices
• relationships with the customers and suppliers
• relationships with government agencies
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• compliance with government regulations
• health and safety issues
• issues related to environmental protection
• equal employment opportunity
• discrimination and sexual harassment
• diversity and ethnic tolerance 1987 Code of ethics of the Society of professional journalists
Journalists at all times will show respect for the dignity, privacy, rights and
well-being of people encountered in the course of gathering and presenting the
news.
The news media should not communicate unofficial charges affecting
reputation or moral character without giving the accused a chance to reply.
The news media must guard against invading a person’s right to privacy.
The media should not ponder to morbid curiosity about details of vice and
crime.
It is the duty of news media to make prompt and complete correction of
their errors.
Journalists should be accountable to the public for their reports and the
public should be encouraged to voice its grievances against the media. Open
dialog with our readers, viewers and listeners should be fostered.
Although these journalists have their self-censorship standards
of fair play, they experience the urgent market pressure for breaking a story,
exposing a personal scandal, or at least not being ‘scooped’ by other media. Code of conduct and ethics for HRD professionals
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There is no accepted and enforced code of conduct or ethics
for HRD managers in India. This is a sensitive profession as an HRD manager
can make or mar careers of a large number of individuals. The standards and
ethics formulated by the Academy of HRD are noteworthy here. The National
HRD Network has constituted a committee to formulate standards of conduct,
ethics and values. So far nothing has come to concrete stage.
Standards on ethics and integrity, Academy of HRD
• HRD professionals provide services, teach and conduct research only with
in the boundaries of their competence, based on their education, training,
supervised experience or appropriate professional experience.
• HRD professionals maintain a reasonable level of awareness of current
research and professional information in their fields of activity and
undertake ongoing efforts to maintain competence in the skills they use.
• HRD professionals rely on research and professionally derived knowledge
when making research or professional judgments.
• In their work related activities, HRD professionals respect the rights of
others to hold values, attitudes and opinions that differ from their own.
• Integrity: HRD professionals seek to promote integrity in their research,
teaching and practice. They are honest, fair and respectful of others. In
describing or reporting their qualifications, services, products, fees, research
or teaching, they do not make statements that are false, misleading, or
deceptive. They strive to be aware of their own belief systems, values, needs
and limitations and the effect of these on their work.
• Professional Responsibility: HRD professionals uphold professional
standards of conduct, clarify their professional roles and obligations, accept
appropriate responsibility for their behavior and adapt their methods to the
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needs of different populations. They consult with, refer to, or cooperate with
other professionals and institutions to the extent needed to serve the best
interests of their clients.
• Concern for other’s welfare: HRD professionals seek to contribute to the
welfare of those with whom they interact professionally. They arte sensitive
to real and ascribed differences in power between themselves and others,
and they do not exploit or mislead other people during or following their
professional relationships.
• Social responsibility: HRD professionals are aware of their professional
responsibilities to the community, the society in which they live and the
planet. They work to minimize the adverse effect on individuals, groups,
organizations, societies and the environment.
• Delegation and supervision of subordinates: HRD professionals delegate to
their employees, supervisors and research assistants, only those
responsibilities that such persons can reasonably be expected to perform
competently on the basis of their education, training or experience, either
independently or appropriately, provided there is supervision. HRD
professionals provide proper training and supervision to their employees and
take reasonable steps to see such persons perform services responsibly,
competently and ethically. Ethical Code For The Banks
This is a voluntary Code, which sets minimum standards of banking practices
for banks to follow when they are dealing with individual customers. It
provides protection to you and explains how banks are expected to deal with
you for your day-to-day operations.
The standards of the Code are covered by the key commitments.
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2.1.1 To act fairly and reasonably in all our dealings with you by
2.1.2 To help you to understand how our financial products and services work
by
2.1.3 To help you use your account or service by
2.1.4 To deal quickly and sympathetically with things that goes wrong by
2.1.5 To treat all your personal information as private and confidential
2.1.6 To publicize the code
2.1.7 To adopt and practice a non - discrimination policy
3.8 CODE OF ETHICS FOLLOWED BYBUSINESS ORGANISATIONS
Tata Code Of Conduct
Foreword:
The values and principles which have governed the manner in which the Tata
Group of Companies and their employees have conducted themselves, have
never been articulated. It was therefore considered worthwhile to prepare a
clearly defined document which could serve as a guide to each employee on the
values, ethics and business principles expected of him or her.
I urge each employee to read this document and take pride in upholding the
high standards of corporate and personal behavior on which the Tata Group’s
reputation and respectability have been built over the past 120 years (Ratan N.
Tata). National Interest:
A TATA Company shall be committed in all its actions to benefit the economic
development of the countries in which it operates and shall not engage in any
activity that would adversely affect such objective. It shall not undertake any
project or activity to the detriment of the Nation’s interests or those that will
have any adverse impact on the social and cultural life patterns of its citizens. A
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TATA Company shall conduct its business affairs in accordance with the
economic, development and foreign policies, objectives and priorities of the
Nation’s government and shall strive to make a positive contribution to the
achievement of such goals at the international, national and regional level as
appropriate. Financial Reporting And Records :
A TATA Company shall prepare and maintain its accounts fairly and accurately
in accordance with the accounting and financial reporting standards which
represent the generally accepted guidelines, principles, standards, laws and
regulations of the country in which the Company conducts its business affairs. Competition:
A TATA Company shall fully strive for the establishment and support of a
competitive open market economy in India and abroad and shall co-operate in
the efforts to promote the progressive and judicious liberalization of trade and
investment by a country. Equal-Opportunities Employer:
A TATA Company shall provide equal opportunities to all its employees and
all qualified applicants for employment without regard to their race, caste,
religion, colour, ancestry, marital status, sex, age, nationality, disability and
veteran status. Employees of a TATA Company shall be treated with dignity
and in accordance with the TATA policy to maintain a work environment free
of sexual harassment, whether physical, verbal or psychological. Employee
policies and practices shall be administered in a manner that would ensure that
in all matters equal opportunity is provided to those eligible and the decisions
are merit-based. Gifts And Donations:
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A TATA Company and its employees shall neither receive nor offer or make,
directly or indirectly, any illegal payments, remuneration, gifts, donations or
comparable benefits which are intended to or perceived to obtain business or
un-competitive favors for the conduct of its business. However, a TATA
Company and its employees may accept and offer nominal gifts, which are
customarily given and are of commemorative nature for special events. Government Agencies:
A TATA Company and its employees shall not offer or give any company
funds or property as donation to any government agencies or their
representatives, directly or through intermediaries, in order to obtain any
favorable performance of official duties. Political Non-Alignment:
A TATA Company shall be committed to and support a functioning democratic
constitution and system with a transparent and fair electoral system in India. A
TATA Company shall not support directly or indirectly any specific political
party or candidate for political office. The Company shall not offer or give any
company funds or property as donations, directly or indirectly, to any specific
political party, candidate or campaign. Health, Safety And Environment:
A TATA Company shall strive to provide a safe and healthy working
environment and comply, in the conduct of its business affairs, with all
regulations regarding the preservation of the environment of the territory it
operates in. A TATA Company shall be committed to prevent the wasteful use
of natural resources and minimize any hazardous impact of the development,
production, use and disposal of any of its products and services on the
ecological environment. Quality Of Products And Services:
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A TATA Company shall be committed to supply goods and services of the
highest quality standards backed by efficient after-sales service consistent with
the requirements of the customers to ensure their total satisfaction. The quality
standards of the Company’s goods and services should at least meet the
required national standards and the Company should endeavor to achieve
international standards. Corporate Citizenship:
A TATA Company shall be committed to be a good corporate citizen not only
in compliance with all relevant laws and regulations but also by actively
assisting in the improvement of the quality of life of the people in the
communities in which it operates with the objective of making them self reliant. Co-Operation Of Tata Companies:
A TATA Company shall co-operate with other TATA Companies by sharing
physical, human and management resources as long as this does not adversely
affect its business interests and shareholder value. Third Party Representation:
Parties which have business dealings with the TATA Group but are not
members of the Group such as consultants, agents, sales representatives,
distributors, contractors, suppliers, etc. shall not be authorized to represent a
TATA Company if their business conduct and ethics are known to be
inconsistent with the Code. Use Of The Tata Brand:
The use of the TATA name and trademark owned by Tata Sons shall be
governed by manuals, codes and agreements to be issued by Tata Sons. The use
of the TATA brand is defined in and regulated by the TATA Brand Equity &
Business Promotion Agreement. Group Policies:
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A TATA Company shall recommend to its Board of Directors the adoption of
policies and guidelines periodically formulated by Tata Sons. Shareholders:
A TATA Company shall be committed to enhance shareholder value and
comply with all regulations and laws that govern shareholders’ rights. The
Board of Directors of a TATA Company shall duly and fairly inform its
shareholders about all relevant aspects of the Company’s business and disclose
such information in accordance with the respective regulations and agreements. Ethical Conduct:
Every employee of a TATA Company, which shall include Whole-time
Directors and the Managing Director, shall deal on behalf of the Company with
professionalism, honesty, integrity as well as high moral and ethical standards.
Such conduct shall be fair and transparent and be perceived to be as such by
third parties. Regulatory Compliance:
Every employee of a TATA Company shall, in his business conduct, comply
with all applicable laws and regulations, both in letter and in spirit, in all the
territories in which he operates. If the ethical and professional standards set out
in the applicable laws and regulations are below that of the Code then the
standards of the Code shall prevail.
Concurrent Employment:
An employee of a TATA Company shall not, without the prior approval of the
Managing Director of the Company, accept employment or a position of
responsibility (such as a consultant or a director) with any other company, nor
provide “free-lance” services to anyone. In the case of a Whole-time Director
or the Managing Director such prior approval must be obtained from the Board
of Directors of the Company.
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Conflict Of Interest:
An employee of a TATA Company shall not engage in any business,
relationship or activity which might detrimentally conflict with the interest of
his Company or the Group. A conflict of interest, actual or potential, may arise
where, directly or indirectly, (a) an employee of a TATA Company engages in
a business, relationship. or activity with anyone who is party to a transaction
with his Company, (b) an employee is in a position to derive a personal benefit
or a benefit to any of his relatives by making or influencing decisions relating
to any transaction, and (c) an independent judgment of the Company’s or
Group’s best interest cannot be exercised. Securities Transactions and Confidential Information:
An employee of a TATA Company and his immediate family shall not derive
any benefit or assist others to derive any benefit from the access to and
possession of information about the Company or the Group which is not in the
public domain and thus constitutes insider information. Protecting Company Assets:
The assets of a TATA Company should not be misused but employed for the
purpose of conducting the business for which they are duly authorised. These
include tangible assets such as equipment and machinery, systems, facilities,
materials, resources as well as intangible assets such as proprietary information,
relationships with customers and suppliers, etc. Citizenship:
An employee of a TATA Company shall in his private life be free to pursue an
active role in civic or political affairs as long as it does not adversely affect the
business or interests of the Company or the Group. Integrity Of Data Furnished:
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Every employee of a TATA Company shall ensure, at all times, the integrity of
data or information furnished by him to the Company. Reporting Concerns:
Every employee of a TATA Company shall promptly report to the management
any actual or possible violation of the Code or an event he becomes aware of
that could affect the business or reputation of his or any other TATA Company.
Code Of Business Conduct And Ethics For Wipro
Values encapsulated in the Spirit of Wipro form the essence of Wipro. They
guide us through difficult situations, controversies and moral dilemmas by
defining parameters for right and wrong actions. They are the touchstone of our
morality and our way of life. As employees of Wipro, you are the manifestation
of our Values. By joining us, you have also joined a movement, a way of life
and we are honoured to have you with us as partners and custodians of our
value system. One of the Values we cherish is Integrity. Very simply it means
that we deliver what we commit. Honesty and fairness in action in whatever we
do (Azim Premji).
1 Policy on Business Relationships
2 Conflict of Interest Policy
3 Controllership Policy
4 Policy on Insider Trading
5 Policy on Fraudulent and Unfair Trade Practices in the Securities Market
6 Policy on Intellectual Property
7 Policy on Competition
8 Foreign Corrupt Practices Act
9 Electronic Resources Usage Policy
10 Privacy and Confidentiality Policy
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11 Wipro Equal Employment Opportunity Policy, Employment Policy and
Policy on Prohibition of Harassment & Discrimination
12 Media Policy
13 Advertisement Policy
14 Environment, Health and Safety Policy
15 Policy on Separation
16 Maintaining and Managing Records
17 Export Controls
18 Records on Legal Hold
19 Confidential Information
20 Selecting Suppliers
21 Lobbying
22 Government Contracts
23 Elimination of child labour
24 Anti-boycott
25 Freedom of association
26 Abolition of forced labour.
27 General
28 Procedure for reporting Concerns Ethical Code For Johnson And Johnson - ‘Our Credo’
We believe our first responsibility is to the doctors, nurses and patients, to
mothers and all others who use our products and services.
In meeting their needs, everything we do must be of high quality.
We must constantly strive to reduce our costs in order to maintain reasonable
prices.
Customer’s orders must be serviced promptly and accurately.
Our suppliers and distributors must have an opportunity to make a fair profit.
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We are responsible to our employees, the men and women who work with us
throughout the world.
Every one must be considered as an individual.
We must respect their dignity and recognize their merits.
They must have a sense of security in their jobs.
Compensation must be fair and adequate and working conditions clean, orderly
and safe.
Employees must feel free to make subjections and complaints.
There must be equal opportunity for employment, development and
advancement for those qualified.
We must provide competent management and their actions must be just and
ethical.
We are responsible to the communities in which we live and work and to the
world community as well.
We must be good citizens – support good works and charities and bear our fair
share of taxes.
We must encourage civic improvement and better health and education.
We must maintain in good order the property we are privileged to use.,
protecting the environment and natural resources.
Our final responsibility is to our stockholders.
Business must make a sound profit.
We must experiment with new ideas.
Research must be carried on, innovative programs developed and mistakes paid
for.
New equipments must be purchased, new facilities provided and new products
launched.
Reserves must be created to provide for adverse times.
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When we operate according to these principles, the stockholders should realize
a fair return. 3.9 ETHICAL MANAGEMENT SYSTEM IN ORGANISATIONS ETHICAL DILEMMAS
Dilemmas are conflicts of interests. Ethical dilemmas involve conflicts of
values and are quite common at work. Both employers and employees have to
face dilemmas in an organization. Conflicts are bound to arise when an
organization has people who are diverse in nationality, age, education, race,
religion, sex, socioeconomic status and employment experience. The most
common ethical dilemmas at work include power, authority, confidentiality,
honesty and loyalty. While resolving these dilemmas, both the employer and
the employee have a different perspective (http://ezinearticles.com).
Employees should be trained to resolve conflicts. However, they need to
develop the skills and experience required for tackling ethical dilemmas.
Analysis would be proper if they are able to locate the root cause of the
conflict. Decisions should be taken after consultation with the affected parties.
The consequences of the decision should be analyzed and explained to the
management.
The thing that makes ethical problems difficult to deal with is that they involve
making value judgements, which by their nature are rarely clear cut. In coming
to a decision about an ethical dilemma you are required to make a decision
which will uphold the values that you feel are most important. However, in
making that decision what often occurs is that some values may be violated.
The best solution to an ethical problem therefore will involve upholding the
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most important values to the greatest extent possible whilst violating the least
number possible (www.bc.edu).
Strategy for Resolving Ethical Dilemmas
There is a strategy for resolving ethical problems in a step by step process so
that others will be able to believe and understand the decision. It is based on
assessing the principles and values relevant to a particular problem and results
in a decision which is believable and defendable. The steps are:
Background :State the background of the case including context, its origin and
any other important details.
Estimate : Make an initial estimation of the ethical dilemma present, that is,
what the core issues are.
List : List the possible solutions to the problem.
Impact : Consider the likely impacts of each of the initial solutions.
Eliminate : Eliminate the totally unacceptable solutions e.g. significant harm to
people.
Values : With the remaining possible solutions, assess which values are
upheld and violated by each solution. Compare with the stated
organisational values.
Evaluate : Evaluate the solutions considering the likely impacts and the values
which will be upheld or violated. One must determine which
values are most important, why is one solution better or worse
than another and is there another solution haven’t considered.
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Decision : Make a decision, state it clearly including why it is best, justify it
and defend it against criticism (www.acping.net).
WHISTLE BLOWING
Whistle-blowing by employees and insiders is a useful mechanism for
uncovering corporate misbehavior, with clear economic and governance impact
on the companies involved, according to a new academic study. In the wake of
scandals at Enron, WorldCom and other companies, the Sarbanes-Oxley Act of
2002 incorporated provisions to encourage and protect whistle-blowers
(http://business-ethics.com).
According to George Kerevan, ‘Word of the Week’ columnist for The
Scotsman, the etymological origins of whistle blowing are gloriously obscure.
He suggests the obvious one being a police officer shrilling on a whistle when
he or she catches a crime in progress. Whistle blowing means calling attention
to wrongdoing that is occurring within an organization. There are four ways to
blow the whistle:
• reporting wrongdoing or a violation of the law to the proper authorities
• testifying in a legal proceeding
• leaking evidence of wrongdoing to the media
Whistle blowing goes on in the private sector. It should be predominant in
government sector as by its very nature, is supposed to be open and transparent.
Full disclosure of unethical or illegal behavior is particularly important as huge
public money is involved. Even outside vendors, contractors, and individuals
can participate in and even breed government corruption.
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Whistle blowing has much to do with ethics because it represents a person’s
understanding, at a deep level, that the action his harmful for the organization,
it interferes with people’s rights or is unfair or detracts from the common good.
Whistle blowing also calls upon the virtues, especially courage, as standing up
for principles can be a punishing experience. Even though laws are supposed to
protect whistle blowers from retaliation, people are still threatened for the
revelations. On the other hand, there have been occasions when the role of
whistle blower has actually catapulted people into higher office and has earned
the respect of constituents.
In an article about whistle blowing in a business context , Lilanthi Ravishankar
makes a useful distinction between external and internal whistle blowing. She
argues that companies should encourage internal whistle blowing so that
problems are solved within the organization before employees feel they must
go outside to get action. She makes several suggestions about how to encourage
internal whistle blowing in companies. Reporting illegal or unethical practices
should include:
o Formal mechanisms for reporting violations, such as hotlines and mailboxes
o Clear communications about the process of voicing concerns, such as a
specific chain of command, or the identification of a specific person to
handle complaints
o Clear communications about bans on retaliation
Ethical dilemmas for the whistle blower
When a person encounters wrongdoing in the organisation, his or her first step
should probably be to use the organization’s internal whistle blowing
mechanisms. Whistle blowers in the public sector often face the unique
problem that their disclosure may constitute a crime. This can create an ethical
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dilemma when the ongoing misconduct is severe and there is no reasonable
prospect that the accused is punished. If this process does not produce results,
there may come a time to move outside to the local government or to the press.
That is why, every organisation must have an effective ethical management
system (www.scu.edu).
ETHICS MANAGEMENT SYSTEM FOR THE WORKPLACE
Every organization needs a properly designed ethical management system to
maintain it as the most ethical organization. The following are the guidelines to
develop and ensure the ethics management system is operated in a meaningful
and prosperous fashion:
• Managing ethics is a process. Ethics is a matter of values and associated
behaviors. Therefore, ethics programs may seem more process-oriented than
most management practices. Managers tend to be skeptical of process-
oriented activities, and instead prefer processes focused on deliverables with
measurements. However, experienced managers realize that the deliverables
of standard management practices (planning, organizing, motivating,
controlling) are only tangible representations of very process-oriented
practices. For example, the process of strategic planning is much more
important than the plan produced by the process. The same is true for ethics
management. Ethics programs do produce deliverables, e.g., codes, policies,
procedures etc.
• The bottom line of an ethics program is accomplishing preferred behaviors in
the workplace. As with any management practice, the most important
outcome is behaviors preferred by the organization. The best of ethical
values and intentions are relatively meaningless unless they generate fair and
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just behaviors in the workplace. That's why practices that generate lists of
ethical values, or codes of ethics, must also generate policies, procedures and
training that translate those values to appropriate behaviors.
• The best way to handle ethical dilemmas is to avoid their occurrence in the
first place. That's why practices such as developing codes of ethics and codes
of conduct are so important. Their development sensitises employees to
ethical considerations and minimises the chances of unethical behavior
occurring in the first place.
• Make ethics decisions in groups, and make decisions public, as appropriate.
This usually produces better quality decisions by including diverse interests
and perspectives, and increases the credibility of the decision process and
outcome by reducing suspicion of unfair bias.
• Integrate ethics management with other management practices.
When developing the values statement during strategic planning, include
ethical values preferred in the workplace. When developing personnel
policies, reflect on what ethical values you'd like to be most prominent in the
organization's culture and then design policies to produce these behaviors.
• Use cross-functional teams when developing and implementing the ethics
management program. It’s vital that the organization’s employees feel a
sense of participation and ownership in the program if they are to adhere to
its ethical values. Therefore, include employees in developing and operating
the program.
• Give importance to value forgiveness. This may sound rather religious or
preachy to some, but it’s probably the most important component of any
management practice. An ethics management program may at first actually
increase the number of ethical issues to be dealt with because people are
more sensitive to their occurrence. Consequently, there may be more
occasions to address people’s unethical behavior. The most important
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ingredient for remaining ethical is trying to be ethical. Therefore, help people
recognize and address their mistakes and then support them to continue to try
operate ethically.
• Trying to operate ethically and making a few mistakes is better than not
trying at all. Some organizations have become widely known as operating in
a highly ethical manner, e.g., Infosys, Johnson and Johnson, Hewlett
Packard, etc. All organizations are comprised of people and people are not
perfect. However, when a mistake is made by any of these organizations, the
organization has a long way to fall. In our increasingly critical society, these
organizations are accused of being hypocritical and they are soon pilloried by
social critics (www.managementhelp.org).
Key Roles and Responsibilities in Ethics Management
Depending on the size of the organization, certain roles may prove useful in
managing ethics in the workplace. These can be full-time roles or part-time
functions assumed by someone already in the organization. The following
functions points out responsibilities that should be included somewhere in the
organization.
• The organization's chief executive must fully support the program.
If the chief executive isn't fully behind the program, employees will certainly
notice and this apparent hypocrisy may cause such cynicism that the
organization may be worse off than having no formal ethics program at all.
Most important, the chief executive should consistently aspire to lead in an
ethical manner. If a mistake is made, admit it.
• Consider establishing an ethics committee at the board level. The committee
would be charged to oversee development and operation of the ethics
management program.
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• Consider establishing an ethics management committee. It would be charged
with implementing and administrating an ethics management program,
including administrating and training about policies and procedures, and
resolving ethical dilemmas. The committee should be comprised of senior
officers.
• Consider assigning/developing an ethics officer. This role is becoming more
common, particularly in larger and more progressive organizations. The
ethics officer is usually trained about matters of ethics in the workplace,
particularly about resolving ethical dilemmas.
• Consider establishing an ombudsperson. The ombudsperson is responsible to
help coordinate development of the policies and procedures to
institutionalize moral values in the workplace. This position usually is
directly responsible for resolving ethical dilemmas by interpreting policies
and procedures.
• Note that one person must ultimately be responsible for managing the ethics
management program.
Benefits of Managing Ethics in the Workplace
A lot has been studied about the moral benefits of attention to business ethics.
However, there are other types of benefits, as well. The following list describes
various types of benefits from managing ethics in the workplace.
• Attention to business ethics has substantially improved society:
Workers often meet with accidents and there was no compensation. Groups
controlled some markets to the extent that prices were fixed and small
businesses choked out. Employees were ill-treated based on casts, races etc.
Influence was applied through intimidation and harassment. Then society
reacted and demanded that businesses place high value on fairness and equal
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rights. Anti-trust laws were instituted. Government agencies were
established. Unions were organized. Laws and regulations were established.
• Ethics programs help maintain a moral course in turbulent times:
Attention to business ethics is critical during times of fundamental change,
times much like those faced now by businesses, both nonprofit or for-profit.
During times of change, there is often no clear moral compass to guide
leaders through complex conflicts about what is right or wrong. Continuing
attention to ethics in the workplace sensitizes leaders and staff to how they
want to act, consistently.
• Ethics programs cultivate strong teamwork and productivity:
Ethics programs align employee behaviors with those top priority ethical
values preferred by leaders of the organization. Usually, an organization
finds surprising disparity between its preferred values and the values actually
reflected by behaviors in the workplace. Ongoing attention and dialogue
regarding values in the workplace builds openness, integrity. Employees feel
strong alignment between their values and those of the organization.
• Ethics programs support employee growth and meaning:
Attention to ethics in the workplace helps employees face reality, both good
and bad, in the organization and themselves. Employees feel full confidence.
They can admit and deal with whatever comes their way.
• Ethics programs are an insurance policy: There is an increasing number of
lawsuits in regard to personnel matters and to effects of an organization’s
services or products on stakeholders. Ethical principles are often state-of-the-
art legal matters. Attention to ethics ensures high ethical policies and
procedures in the workplace. It’s far better to incur the cost of mechanisms to
ensure ethical practices now than to incur costs of litigation later. A major
intent of well-designed personnel policies is to ensure ethical treatment of
employees.
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• Ethics programs help avoid criminal acts “of omission” and can lower fines:
Ethics programs tend to detect ethical issues and violations early on so they
can be reported or addressed. In some cases, when an organization is aware
of an actual or potential violation and does not correct it, this can be
considered a criminal act like violating environmental norms. The major
penalties include closure of major production units. However, the guidelines
potentially lower fines if an organization has clearly made an effort to
operate ethically.
• Ethics programs help manage values associated with quality management,
strategic planning and diversity management: Ethics programs identify
preferred values and ensuring organizational behaviors are aligned with those
values. This effort includes recording the values, developing policies and
procedures to align behaviors with preferred values, and then training all
personnel about the policies and procedures. This overall effort is very useful
for several other programs in the workplace that require behaviors to be
aligned with values, including quality management, strategic planning and
diversity management. Total Quality Management includes high priority on
certain operating values, e.g., performance, reliability, measurement, and
feedback. Ethics management techniques are highly useful for managing
strategic values, e.g., expand marketshare, reduce costs, etc. Ethics
management programs are also useful in managing diversity. Diversity is
much more than the colour of people’s skin, it’s acknowledging different
values and perspectives.
• Ethics programs promote a strong public image: The fact that an
organization regularly gives attention to its ethics can portray a strong
positive image to the public. People see those organizations as valuing
people more than profit, as striving to operate with the utmost of integrity
and honour. Aligning behavior with values is critical to effective marketing
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and public relations programs. Ethical values, consistently applied, are the
cornerstones in building a commercially successful and socially responsible
business.
• Overall benefits of ethics programs: Managing ethical values in the
workplace legitimizes managerial actions, strengthens the coherence and
balance of the organization’s culture, improves trust in relationships between
individuals and groups, supports greater consistency in standards and
qualities of products, and cultivates greater sensitivity to the impact of the
enterprise’s values and messages.
• Last and not least: Formal attention to ethics in the workplace is the right
thing to do.
Description of a Highly Ethical Organization
After designing and implementing a proper ethics management program, the
organisation will definitely becomes an highly ethical organisation. Mark
Pastin, in The Hard Problems of Management: Gaining the Ethics Edge (1986),
provides the following four principles for highly ethical organizations.
• They are at ease interacting with diverse internal and external stakeholder
groups. The ground rules of these firms make the good of these stakeholder
groups part of the organizations' own good.
• They are obsessed with fairness. Their ground rules emphasize that the other
persons' interests count as much as their own.
• Responsibility is individual rather than collective, with individuals assuming
personal responsibility for actions of the organization. These organization’s
ground rules mandate that individuals are responsible to themselves.
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• They see their activities in terms of purpose. This purpose is a way of
operating that members of the organization highly value. And purpose ties
the organization to its environment.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Social responsibility is not the exclusive domain of the government. Corporate
social responsibility is the responsibility of business organisaions in the society
in which they are operating. It is the ‘nishkam bhavna’ (selfless service) and
with no expectations of return or awards. Many industrial philanthropists like
Tatas, Birlas understood the relation between long term profitability and the
health and welfare of the local communities where their businesses were
located.
Tracing the CSR journey may help in assessing the stage at which a company is
as it gets more involved with its responsibility towards its employees, the
community at large, stakeholders, nation building processes and the world as
such. Business has responsibilities that go beyond the production of goods and
services, and profit making. Business has impacts that go beyond simple
market transactions. Socially responsible business can help solve important
social and environmental problems, especially those that the business has
created.
CSR at Tata Group
The Tata Council for Community Initiatives is an umbrella organization that
imparts coherence to the initiatives of the group through the creation of a
participatory network of Tata Group companies, each of which undertakes CSR
initiatives on its own right. The emphasis is on imbibing the “Tata Values” on
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community through integration with business plans. CSR at Tata steel is one of
the eight key business processes identified by the management and considered
critical to “success as a corporation”. An important segment of Tata steel’s
allocation from its CSR budget is towards the community and employees
indicating that Jamshedpur and adjoining areas are integral to Tata steel and
cannot alienate ‘a part of ourselves’ and hope to succeed.
CSR at Aditya Birla Group
Though there is no separate CSR policy or social policy, many of the group
companies that are ISO 14001 certified, have environmental policies, objectives
and targets. Most are signatories for the UN Global Compact, which is an UN
CSR initiative. Aditya Birla Centre for Community Initiatives and Rural
Development is the principal program implementing agency. It has an Apex
Team, which shoulders the responsibility of charting out a well defined
community based rural development plan and an Implementation Team which
ensures implementation through the various group companies and their Rural
Development Cells.
CSR at ICICI
ICICI has a permanent and full time group, the Social Initiatives Group(SIG),
to concentrate on its development related initiatives. Through the SIG, ICICI
seeks to define and effectively fulfil its responsibilities as a corporate citizen.
The Group’s involvement is not at the grassroots, though field visits, aimed at
assessing need and facilitating dialogue, form an integral part of their work.
SIG has an articulated mission and focused and well-drawn plans. (Kamal Singh, Article ‘Business Ethics and Corporate Social Responsibility’, Journal ‘Effective Executive’, Pg. 58-64, October 2009)
CORPORATE GOVERNANCE
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Corporate Governance is the formal system of accountability and control for
ethical and socially responsible organizational decisions and use of resources.
The philosophy of business ethics and social responsibility that a board or firm
holds directly affects how well accountability, control and corporate
governance work in an organization. Until recently, business ethics was
considered a separate field from corporate governance and the word ‘ethics’
was rarely used in discussing the nature and purpose of corporate governance.
Thus, corporate governance is about the process and content of ethical decision
making in business organizations. (Robert A. Peterson & O.C. Ferrell, Ch. Corporate Governance and Ethical Leadership, pg. 56-81, Book ‘Business Ethics’, Prentice-Hall of India Pvt. Ltd., 2006)
In India, the Ministry of Corporate Affairs had appointed a Naresh Chandra
Committee on Corporate Audit and Governance in 2002 in order to examine
various corporate governance issues. It made recommendations in two key
aspects of corporate governance: financial and non-financial disclosures: and
independent auditing and board oversight of management. It is making all
efforts to bring transparency in the structure of corporate governance through
the enactment of Companies Act and its amendments (http://businessgov.in).
Corporate Governance and Ethics - Challenges and Imperatives
There are several key forces and directions to consider for effective corporate
governance and ethical leadership. Smt. Ranjana Kumar, Vigilance
Commissioner, has come out with ten essential governance principles. A
company should:
1. Lay solid foundations for management and oversight : Recognise and
publish the respective roles and responsibilities of board and management.
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2. Structure the board to add value : Have a board of an effective composition,
size and commitment to adequately discharge its responsibilities and duties.
3. Promote ethical and responsible decision-making: Actively promote ethical
and responsible decision-making.
4. Safeguard integrity in financial reporting: Have a structure to independently
verify and safeguard the integrity of the company’s financial reporting.
5. Make timely and balanced disclosure: Promote timely and balanced
disclosure of all material matters concerning the company.
6. Respect the rights of shareholders: Respect the rights of shareholders and
facilitate the effective exercise of those rights.
7. Recognise and manage risk: Establish a sound system of risk oversight and
management and internal control.
8. Encourage enhanced performance: Fairly review and actively encourage
enhanced board and management effectiveness.
9. Remunerate fairly and responsibly: Ensure that the level and composition of
remuneration is sufficient and reasonable and that its relationship to
corporate and individual performance is defined.
10. Recognise the legitimate interests of stakeholders: Recognise legal and
other obligations to all legitimate stakeholders.
11. Corporate Governance Rating be made mandatory for listed companies.