NAME SUJAL AMROT
ROLL NO. 101
CLASS TYBFM
SUBJECT BUSINESS ETHICS AND CORPORATE GOVERNANCE
1. Explain the characteristics of Business ethics.
Characteristics/Features of Business Ethics: are the important features of
business
The following (1) Code of conduct: Business ethics is a code of conduct.
It tell what to do and what not to do for the welfare of society. All
businessmen must follow this code of conduct. ethics
(2) Based on moral and social values: Business ethics is based on moral
and social values. It contains moral and social principles (rules) for doing
business. This includes se prind consumer protection and welfare, service
to society, fair treatment to social groups, not exploiting others, etc.
(3) Gives protection to social groups: Business ethics give protection to
different social groups such as consumers, employees, small
businessmen, government, shareholders, creditors, etc.
(4) Provides basic framework: Business ethics provide a basic framework
for doing business. It gives the social cultural economic, legal and other
limits of business. Business must be conducted within these limits.
(5) Voluntary: Business ethics must be voluntary. The businessmen must
accept business ethics on their own. Business ethics must be like
self-discipline. It must not be enforced by law.
(6) Requires education and guidance: Businessmen must be given proper
education and guidance before introducing business ethics. The
businessmen must be motivated to use business ethics. They must be
informed about the advantages of using business ethics. Trade
Associations and Chambers of Commerce must also play an active role in
this matter.
(7) Relative Term: Business ethics is a relative term. That is, it changes
from one business to another. It also changes from one country to
another. What is considered good in one country may be taboo in another
country.
(8) New concept: Business ethics is a newer concept. It is strictly followed
only in developed countries. It is not followed properly in poor and
developing countries.
(9) Business ethics are the principles, which govern and guide business
people to perform business functions and in that sense business ethics is
a discipline.
(10) It is considered both a science and an art.
(11) It continuously tests the rules and moral standards and is dynamic in
nature.
(12) It is based on principles such as sincerity, human welfare, service,
good behaviour etc.
(13) It is based on reality and social customs prevailing in business
environment.
(14) It studies the activities, decisions and behaviour that are related to
human beings.
(15) It has universal application because business exists all over the
world.
(16) Business ethics keep harmony between different roles of
businessman, with every citizen, customer, owner and investor.
(17) Business ethics concentrate on moral standards as they apply to
business policies, institutions and behaviour.
(18) It is a specialized study of moral right or wrong. It is a form of applied
ethics.
Law + Knowledge = Ethics
(19) Business ethics is the systematic handling of values in business and
industry.
2. breiefly explain importantance of business ethics ?
importance/Purpose/Need of Business Ethics:
(1) Positive Consequences: Business depends on the approval of society,
acceptance of rules, mutual trust, and confidence. When ethical conduct
is displayed, it puts some kind of trust and confidence in the relationship.
So a business with ethics always leads to positive consequences.
(2) Goodwill of the Business and Businessman: Good ethical behaviour
will increase the goodwill of both businesses as well as the businessman.
A strong public image is a symptom of success in the long run. On the
other hand, once an organization's image is tarnished it would have direct
consequences on sales, profits, morale, or the day-to-day running of the
business.
(3) Protection Both Sides: If ethical implications are there in organization
businessmen act more sincerely and the level of commitment would be
higher. Ethics protects people in dealing with each other. Good ethics are
sound business insurance.
(4) Self-satisfaction: In the dynamic world, businessmen are seeking self
satisfaction, mental relief, free from anxiety, and release of tension. To
attain inner satisfaction certain people consider only good ethics can
promote good business, As a businessman is first a member of the
society than a businessman, some do not implement a decision that
stands on the unethical ground because it wouldn't provide the
satisfaction to their sub-conscious mind. Good ethics not only promotes
professionalism in management but it purifies the inner mind of every
businessman
(5) Encourage Others: When a few people start following ethics side by
side with profit-making, they encourage, motivate others and set
examples for them. The businessman wha follows the ethical principles in
the conduct of business, motivates others also, to follow the same
principles.
(6) Success and Development: Ethical conduct of business leady to
development and a series of successes. A sincere person Who does hard
work becomes ethical and always succeeds in his efforts but an unethical
person cannot.
(7) New Management: In the era of the global economy, new principles
are required in new management. Management cannot become a
profession so far as it does not follow good ethics. An important feature
of a profession is that it has a laid down code of conduct that remains on
all the principles of "service to humanity.
(8) Good business ethics promotes good business: Only those businesses
can develop on a long-term base that conducts activities on ethical
grounds.
(9) Stop business malpractices: When business ethics is put into practice,
it will stop the business malpractices. Not all businessmen involve in
business practices but there are some immoral businessman doing
business malpractices. Business malpractices involve unfair trade such
as black marketing. selling clone products, selling harmful products and
many more that can be harmful to customers.
(10) Improve customers' confidence: Business ethics are very important in
increasing customer confidence about the quality, quantity of products,
price of products, and other products offered by a company or
organization. The customers will have confidence and trust in doing
business that follows ethical rules. They will feel safe when they buy the
product of those companies that follows business ethics.
(11) Survival of business: For business survival, business ethics is
compulsory. Dealers who do not follow business ethics usually will have a
short-term success only. For example, they have created the customer at
once, but the customer can remember and they will not buy the goods
again from that businessman besides tell their friends about that cheating.
So the image of that businessman will be negative and lead to failure in
the business or in the market. From that, it is important to follow business
ethics in appropriate ways.
(12) Safeguarding consumers' rights: Businessmen must protect or
respect the consumer's rights. Example of consumer right is the right to
choose, the right to complain, the right to be informed, and others.
Applying good business ethics among businessmen will safeguard the
consumers' rights.
(13) Protecting employees and shareholders: In business ethics, it is
required to protect the interest of employees, shareholders, dealers,
suppliers and many more from exploitation through unfair trade practices.
(14) Develops good relations: In developing a good relationship between
business and society, business ethics is essential. This will cause a
regular supply of good quality items and services at lower prices to the
community. It will also lead to profit for the business thereby causing
economic growth.
(15) Creates a good image: If a businessman follows all regulations of
ethics, then the user acceptance is good. People can accept the goods
from business and will not criticize it besides supporting the business
conducted by those businessmen. It will create a good image for society
when implementing good business ethics.
(16) Consumer satisfaction: The consumer gives a lot of contribution to
the market. Without consumers, the business cannot survive in the market.
In business transactions, the user or consumer satisfaction must be
taken seriously. When following the business ethics, the consumer will be
satisfied with the services then the business can gain a lot of profit.
(17) Healthy competition: Healthy competition will exist in business when
the businessman implements business ethics while dealing with
competitors. For example, the businessman will avoid monopoly in
business when practicing business ethics.
3.what are the principal of business ethics?
Principles of Business Ethics: The Principles of business ethics are as
follows:
(1) The Sacredness of means and ends: The first and most important
principle of business ethics emphasizes that the means and techniques
adopted to serve the business ends must be sacred and pure. It means
that a good end cannot be attained with the wrong means, even if it is
beneficial to society.
(2) Not to do any evil: It is unethical to do a major evil to another or to
oneself, whether this evil is a means or an end.
(3) Principle of proportionality: This principle suggests that one should
make a proper judgment before doing anything so that others do not
suffer from any loss or risk of evil by the conduct of business.
(4) Non-co-operation in evils: It clearly points out that a business should
not co-operate with anyone for doing any evil acts.
(5) Co-operation with others: This principle states that businesses should
help each other.
(6) Publicity: According to this principle, anything that is being done or to
be done, should be brought to the knowledge of everyone. If everyone
knows, none gets an opportunity to do an unethical act.
(7) Equivalent price: According to this principle, the people are entitled to
get goods equivalent to the value of money that they will pay.
(8) Universal value: According to this principle, the conduct of business
should be done on the basis of universal values.
(9) Human dignity: As per this principle, man should not be treated as a
factor of production and human dignity should be maintained.
(10) Non-violence: If a businessman hurts the interests and rights of the
society and exploits the consumer by overlooking their interests this is
equivalent to violence and an unethical act.
Myths about Business Ethics:
Business ethics in the workplace is about prioritizing moral
values for the workplace and ensuring behaviours are aligned
with those values-it's values management. Yet, myths abound about
business ethics. Some of these myths arise from general confusion about
the notion of ethics. Other myths arise from narrow or simplistic views of
ethical dilemmas.
4. breiefly explain myths of biusiness ethics ?
MYTHS
Myth 1: Business ethics is more a matter of religion than management.
It asserts that "altering people's values or souls isn't the aim of an
organizational ethics program managing values and conflict among them
is..."
Myth 2: Our employees are ethical so we don't need attention to business
ethics.
Most of the ethical dilemmas faced by managers in the workplace are
highly complex. People have a significant ethical conflict when there is
the presence of
(a) significant value conflicts among differing interests,
(b) real alternatives that are equally justifiable, and
(c) significant consequences on "stakeholders" in the situation.
when the topic of business ethics comes up, people are quick to speak of
the Golden Rule, honesty and courtesy. But when presented with complex
ethical dilemmas most people realise there's a wide "grey area" when
trying to apply ethical principles
Myth 3: Business this is a discipline best led by philosophers’
academics and theologians.
The lack of business ethics literature and discussions has led many to
believe that ethics ethics is a fad or movement, having little to do with the
day-to-day realities of running an organization.
They believe business ethics is primarily a complex philosophical debate
or a religion.
However, business ethics is a management discipline with a
programmatic approach that includes several practical tools Ethics
management programs have practical applications in other areas of
management areas, as well.
Myth 4: Business ethics is superfluous obvious: "do good!" it only asserts
the
Many people react those codes of ethics, or lists of ethical values to
which the organization aspires, are rather superfluous because they
represent values to which everyone should naturally aspire
However, the value of a code of ethics to an organization is its priority and
focus regarding certain ethical values in that workplace.
For example, all people should be honest. However, if an organization is
struggling with continuing occasions of deceit in the workplace, a priority
on honesty is very timely and honesty should be listed in that
organization's code of ethics.
Myth 5: Business ethics is a matter of the good guys preaching to the bad
guys.
Some writers do seem to claim a moral high ground while lamenting the
poor condition of the business and its leaders. However, those people well
versed in managing organizations realize that good people can take bad
actions, particularly when stressed or confused. (Stress or confusion are
not excuses for unethical actions they are reasons.)
Managing ethics in the workplace includes all of us working together to
help each other remain ethical and to work through confusing and
stressful ethical dilemmas
Myth 6: Business ethics is the new policeperson on the block. Many
believe business ethics is a recent phenomenon because of increased
attention to the topic in popular and management literature. However,
business ethics was written about even 2,000 years ago. Business ethics
has gotten more attention recently because of the social responsibility
movement that started in the
1960s. Myth 7: Ethics can't be managed.
Ethics is always "managed" but, too often, indirectly. For example, the
behaviour of the organization's founder or current leader is a strong moral
influence on the behaviour of employees in the workplace.
Strategic priorities (profit maximization, expanding market share, cutting
costs, etc.) can be very strong influences on morality Laws, regulations
and rules directly influence behaviours to be more ethical, usually in a
manner that improves the general good and/or minimizes harm to the
community.
Some are still skeptical about business ethics, believing ONE can't
manage values in an organization.
Myth 8: Business ethics and social responsibility are the same things.
The social responsibility movement is one aspect of the overall discipline
of business ethics.
Definition of business ethics includes:
(1) an application of ethics to the corporate community,
(2) a way to determine responsibility in business dealings,
(3) the identification of important business and social issues, and
(4) a critique of business.
Items 3 and 4 are often matters of social responsibility.
Writings about social responsibility often do not address practical matters
of managing ethics in the workplace, e.g., developing codes, updating
policies and procedures, approaches to resolving ethical dilemmas, etc.
Myth 9: Our organization is not in trouble with the law, so we're ethical.
One can often be unethical, yet operate within the limits of the law, e.g.,
withhold information from superiors, fudge on budgets, constantly
complain about others, etc. However, breaking the law often starts with
unethical behaviour that has gone unnoticed.
The "boil the frog" phenomenon is a useful parable here: If you put a frog
in hot water, it immediately jumps out. If you put a frog in cool water and
slowly heat the water, you can eventually boil the frog. The frog doesn't
seem to notice the adverse change in its environment.
Myth 10: Managing ethics in the workplace has little practical relevance.
Managing ethics in the workplace involves identifying and prioritizing
values to guide behaviours in the organization, and establishing
associated policies and procedures to ensure those behaviours are
conducted. One might call this "values management." Values
management is also highly important in other management practices, e.g.,
managing diversity, Total Quality Management and strategic planning
5.definition of Independent Director . explain its roles?
Although there have been a number of reforms related to corporate
governance, perhaps the single most important for the growth of
independent directors was the promulgation of Clause 49 of the Stock
Exchange Listing Agreement in 2000 by SEBI.
(a) Definition of Independent Director:
(I) Clause 49 Article I (A) (iii) sets out the criteria for the "independence" of
independent directors. The clauses added to test the independence of
directors in the revised Clause 49 are as follows:
(a) Apart from receiving director's remuneration, does not have any
material pecuniary relationships or transactions with the company, its
promoters, its senior management or its holding company, its subsidiaries
and associated companies;
(b) is not a substantial shareholder of the company, i.e. owning two
percent or more of the block of voting shares.
(II) As per sub-section 6 of Section 149 of The Companies Ad, 2013
Independent Director means a director other than a managing director or
whole-time director or a nominee director,
(a) Who, in the opinion of the Board, is a person of integrity ( and
possesses relevant expertise and experience;
b) (1) Who is or was not a promoter of the company,
(2) Who is not related to promoters or directors in the company,
(c) Who has or had no pecuniary relationship with the company,
(d) None of whose relative has or had a pecuniary relationship or
transaction with the company.
(e) Who, neither himself nor any of his relatives:
(i) Holds or has held the position of key managerial personnel.
(ii) Is or has been an employee or proprietor or a partner, in any of the
three financial years proceeding
(iii) Holds together with his relative two percent or more of the total voting
power of the company; or
(iv) Is a Chief Executive or director, of any non-profit organization, or who
possesses such other qualifications as may be prescribed.
(b) Composition of Independent Director:
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(c) Role and Duties of Independent Directors:
The role of an independent director is considered to be of a great
significance. The guidelines, roles, functions and duties etc. are broadly
set out in a code described in Schedule IV of the Act. 2013.
The code lays down certain critical functions like:
(1) Safeguarding the interest of all stakeholders, particularly the minority
holders, harmonizing the conflicting interest of the stakeholders,
(2) Analyzing the performance of management,
(3) Mediating in situations like conflict between management and the
shareholder's interest and etc
(4) The code also lays down certain important duties like keeping
themselves updated about the company and the external environment in
which it operates,
(5) Not disclosing important and confidential information of the company
unless approved by the Board or required by law,
(6) Actively participating in committees of the board in which they are
chairperson or members,
(7) Keeping themselves updated undertaking appropriate induction and
refreshing their knowledge, skills and familiarity with the company,
(8) Regularly attend the general meetings of the company etc.
(9) In case of conflict between the objectives of the management and the
interest of the shareholders, the independent segment of the board of
directors must be able to stand up and discharge its fiduciary oversight
functions.
(10) The significance of the independent directors on the corporate board
lies in their ability to take an independent decision on a given subject
without being influenced in any manner.
(11) The shareholders, especially the minority shareholders, look to
independent directors to provide transparency in respect of the
disclosures in the working of the company as well areas. as providing
balance towards resolving conflict
(12) In evaluating the board's or management decisions 2 respect of
employees, creditors and other suppliers respect of major providers,
independent directors have significant role in protecting the stakeholders'
interests.
(13) Independent directors may be seen as watchful monitors of
promoters and management on behalf of the public shareholders.
(14) Independent directors, given their expertise, may be viewed as
reservoirs of strategic advice intended to aid promoters and managers in
maximizing overall firm value.
(15) The independent directors also play a key role as a member of the
audit committee of the company. The chairman of the audit committee is
an independent director according to the clause. The audit committee is
an operating committee of a publicly held company. The responsibilities
of the audit committee would include overseeing the functioning of the
financial reporting process, monitoring the choice of accounting policies
and principles, monitoring the internal control process and so on. One of
the mandatory requirements of audit committee is to look into the
reasons for default in payments to deposit holders, debentures,
non-payment of declared dividends and creditors
Therefore, to perform such a function, the independent directors ensure a
proper, efficient, and effective monitoring system exists in the company.
(d) Meetings: The Companies Act, 2013, requires all the Independent
directors to meet at-least once a year. The meeting must be convened
without the presence of the non-independent directors and members of
the C management. An independent director would also evaluate the
performance of the chairperson of the company. Also, the Companies Act,
2013 requires an independent director to review the performance of the
non-independent directors and the Board as a whole of the company.
These measures would immensely aid in ensuring the smooth and proper
functioning of the Board of Directors of a company.
(e) Summary: The main role of independent directors is to improve
corporate governance standards.
However, the corporate should ensure that the independent directors are
allowed to act independently for the institution of independent directors to
be successful. By independence it means that the independent directors
should have the will and the courage to say no when things are not
moving in the interest of the company and its stakeholders. Independence
has to be reviewed regularly as an instrument of good governance.
