CORPORATE GOVERNANCE AND ETHICS

DEFINITION

CG is defined as holding the balance between economic and social goals & also between individual and communal goals

By Sir Adrian Cadbury

Corporate Governance is stated as course of conduct that is managed by various ethical approach.

EFFECT OF CG

1. Right of shareholder2. Equitable treatment of shareholder3. Role of stakeholder in CG4. Disclosure and transparency5. Responsibilities of the board

PRINCIPLES OF CORPORATE GOVERNANCE

1. Ensuring the Basis for an effective Corporate Governance Framework

2. The Rights of Shareholders and Key Ownership Functions

3. The Equitable Treatment of Shareholders4. The Role of Stakeholders in Corporate

Governance5. Disclosure and Transparency6. The Responsibilities of the Board

BENEFITS OF GOOD CG

1. Congruence of interest of boards, management

2. Stability and growth to company3. Confidence in investors4. Reduce risk and cost of capital5. Motivate employees to acquire and develop

skills6. Competitive advantage in financial market7. Relationship with enterprise

It deals with problems that results from the separation of ownership & control

Shareholders

Boards

Management

Employees

INDIAN MODEL OF GOVERNANCE

External environment Internal environment

ROLE OF BOARD OF DIRECTORS

Definition of DirectorA Director may be defined as a

person having control over the direction, conduct, management or superintendence of the affairs of a company

Definition of BODThe Board of Directors of a

company includes all directors elected by shareholders to represent that their interest is vested with the power of management

STRUCTURE OF BOARD OF DIRECTOR IN INDIA

BOD

Executive Director Non-Executive Director

Independent Director Nominee Director

ROLE

1. Commitment2. Clear their stand3. Efficient CEO4. Anticipate business events5. Meet demand of market place6. Earn profit for shareholder, ethical and

social obligation to society throughi. Transparencyii. Pay for performanceiii. Process for determinationiv. Severance paymentsv. Pension for non-executive Directors

CONTD…….

7. Steer discussions8. Long term focus and shareholder interests9. Promoting overall interests of the company

ROLE OF SHAREHOLDERS

1. Financing2. Operations3. Governance4. Control5. Considerations

RIGHTS OF SHAREHOLDERS

1. Voting power2. Right to increased share values3. Right to transfer ownership4. Dividend Entitlement5. Right to inspect corporate books & records6. Suing for wrongful Acts

RESPONSIBILITIES OF SHAREHOLDERS

1. To remain informed2. To be vigilant3. To participate and vote in general meetings4. To exercise one’s right on one’s own or as a

group

ROLE OF STAKEHOLDERS

ISSUES/PROBLEMS IN CG1. Distinguishing the roles of Board and

Management2. Composition of the board3. Separation of the roles of CEO and chairperson4. Board have committees5. Appointments to the board and director’s re-

election6. Director’s and executives remuneration7. Disclosure and audit8. Protection of shareholder’s rights and

expectations9. Dialogue with institutional shareholders

SECURITY EXCHANGE BOARD OF INDIA (SEBI)

History of SEBI

Members

1. Chairman

2. 2 members for finance and administration

3. 1 member from Reserve Bank

4. 5 members appointed by Central Govt.

Collective Investment Scheme

Finance, Accounts & Audit of SEBI

OBJECTIVES OF SEBI

1. Protection

2. Promotion

3. Regulation

4. Incidental

Functions

Powers

SEBI’s Role in promoting CG5. Disclosure Standards

6. Efficient and Effective market system

7. Reliable & Effective Enforcement

8. Highest Standard of Governance

ETHICS

Business ethics is the art & discipline of applying ethical principles to examine & solve complex moral dilemmas.

Why should business act ethically?

Unethical Issues

Benefits due to ethics

CORPORATE SOCIAL RESPONSIBILITY

To create positive impact with business.

Practical Steps to CSR

Scope of Social Responsibility1. Protecting & promoting shareholder’s interest

2. Social concern & promotion of common welfare programmes

3. Art of philanthropy

4. Good CG itself is SR

5. Corporate in the vanguard of rendering social service

6. Sponsoring social & charitable causes

7. Corporations should supplement state efforts

8. Ensuring ecological balance

CHAMBER OF COMMERCE REFERS 9 STEPS TO CSR

1. Confirm CEO

2. State company purpose

3. Identify key stakeholders

4. Define business principles and policies

5. Establish implementation, procedures and management system

6. Benchmark

7. Setup internal monitoring

8. Language that everyone can understand

9. Set objectives

Social through process

ETHICS

Ethics are some standardized form of conduct or behavior of individuals understand & accept in a particular field of activity.

Performance levels of ethics1. Societal level

2. Stakeholder level

3. Internal policy level

4. Personal policy level

BUSINESS ETHICSMoral principles that define right or wrong

behavior in the world of business.

7 Principles1. Be trustful

2. Keep an open mind

3. Meet obligations

4. Have clear documents

5. Become community involved

6. Maintain accounting control

7. Be respectful

3 C8. Compliance

9. Contribution

10. Consequence

ETHICAL DILEMMAS

1. Truth Vs Loyalty

2. Individual Vs Community

3. Short term Vs Long term

4. Justice Vs Mercy

Values for Managers5. Establish boundaries

6. Establish presence of fairness

7. Establish trust

8. Establish honesty

9. Establish the expectation & commitment

OBJECTIVES OF ETHICS1. Study human behavior

2. Establishes moral standards of behavior

3. Judgments

4. Moral behavior

5. Human conduct in general

Deals with Concept of

Human conduct Ethics

Nature of Ethics

Science of Study of Ethics

Ethics

MODEL OF ETHICS IN MANAGEMENT

Consumers shareholders Unions

Marketplace Work place

Environment Community

NGO/Govt Local

community

Impact on society

Quality of manageme

nt

DIFFERENT TYPES OF ETHICS

1. Transactional Ethics Principle of honesty Principle of reciprocity

2. Participatory Ethics

3. Recognition Ethics

Need for Business Ethics

Society Busines

s

INDIAN ETHOS

Principles

1. Potential and talent

2. Work as worship

3. TQM

4. Achieve highest human welfare

5. Character is power and wealth

6. Business is sacred

7. Self-introspection

8. Brain-stilling

9. Sound & prompt decisions

WORK ETHICS

4 P’s

1. Pay

2. Prospects

3. Promotion

4. Performance

Improving Work Ethics5. Man-making education

6. Sympathy for employees Attitude of sport towards work Taking to giving modes Master and not slave Renunciation & Service

3. Rewards and penalties

4. Discipline

5. Result of pride

6. Employee involvement

7. Developing attitude in work

GOOD WORK CULTURE

Values which get manifested in behavior of employees at work place as hard work, loyalty to organization, quality of work life, job satisfaction, etc

1. Productivity and Quality

2. Utilizing resources effectively

3. Worker development

4. Develops work culture

FACTORS HINDERING WORK CULTURE

1. Lack of sense of discipline & min work ethos

2. Lack of hard work & commitment

3. Too many holidays

4. Wasting resources, energy

5. Absence of spirit of nationalism

6. Poor quality of service & working condition

7. Absenteeism

8. Accidents/injuries

FEATURES OF INDIAN ETHOS AND INSIGHTS

Balance, harmony You are good, world is good Rights and privileges of individuals Knowledge of creation and creator.

Insights into Indian Ethos1. Management attitude

2. Humanizing organization

3. Interiorizing management

4. Self-introspection

5. Brain-stilling

6. Stepping Back

7. Self-dynamic Meditation

8. Role of Intuition in management

VALUES Relevance of values in management

Values shape Beliefs Perceptions Attitude

Behavior

Features1. Force affecting behavior

2. Content

3. Intensity

4. Change over time

5. Stable and enduring

6. Values differ

Importance of values

TYPES OF VALUES1. Instrumental

2. Terminal

3. Personal

Formulating values

Family influence

Peer influences Situational factors

Individual Ethics

Experiences Values and morals

ETHICS IN GLOBAL BUSINESS

Differences Foundation

Between in variance

each human in their personal

on earth value structure

people accept

these differences as

valuable than threatening

if peoplebecome more

familiar with this

HOLISTIC APPROACH FOR DECISION MAKING

Steps in decision making

1. Identify the problem

2. Generate alternative solution

3. Evaluate alternatives

4. Selection of solutions

5. Implement the chosen solution

ETHICAL DECISION MAKING CRITERIA

1. Utilitarian Criteria

2. Focus on rights

3. Focus on justice