2. IPCC
PRINCIPLES OF BUSINESS ETHICS
1.ETHICS - Greek word “Ethos”
Ethos are value concepts
Which guide us to say
What is Right and Wrong
What is good and bad
What is proper and improper
2.
Ethics are applicable to all sections of the society.
3. Business too has ethics
2
3. IPCC
PRINCIPLES OF BUSINESS ETHICS
What do you mean by the term 'Ethics' ?
The term 'ethics' is derived from the Greek word 'ethos' which means
character. Ethics are the principles of conduct governing an individual
or a group. It is concerned with norms for conduct of people as
members of society as it relates to what is good or bad, and having to
do with moral duties and obligations.
Definition :
defined ethics as
“the application of moral values or codes to complex problems using a
rational decision making process”.
The outcome of this process is usually a behaviour or set of behaviors.
3
4. IPCC
PRINCIPLES OF BUSINESS ETHICS
What is 'Business Ethics' ?
Definition :
“Business Ethics is the study of what constitutes right and
wrong or good and bad human conduct in business context”.
Thus, business ethics deals with morality in business
environment.
It involves moral judgement based on understanding of the
society.
It extends beyond the legal questions and involves goodness
and badness of an act.
4
5. IPCC
PRINCIPLES OF BUSINESS ETHICS
1. Business ethics refers to the application of everyday moral or
ethical norms to business. It requires an awareness of how the
products and services of an organisation and the actions of its
employees, can affect its stakeholders and society as a whole, either
positively or negatively.
2. Ethics in business organisation relates to a
culture, values, leadership, programs and enforcement.
corporate
3. It is that set of principles or reasons which governs the conduct of
business - at the individual or collective level by the application of
ethical reasoning to specific business situations and activities.
4. Business Ethics deal with the morality for conducting business
activities.
5. It is the behaviour of businessmen in business situations.
5
6. IPCC
PRINCIPLES OF BUSINESS ETHICS
What is the difference between ethics and morals ?
Basis of
difference
Ethics
Morals
Meaning
Ethics relates to what is
good or bad, moral duties
and obligation.
Moral relates to principles of
right and wrong.
Origin
Greek word “Ethos” means
character.
Latin word “MO” means
customs.
Group/
Personal
Character
attribute.
Custom is an attribute of a
group or society.
6
is
a
personal
7. IPCC
Scope
Expression
PRINCIPLES OF BUSINESS ETHICS
Ethics is much wider in scope. It
examines the moral standards of a
Morals have smaller scope than
group or society to determine
ethics. It addresses, human needs
whether these standards are
for belonging and emulation.
reasonable or unreasonable in
situations.
Moral norms are usually
Ethical norms are comparatively
expressed as general rules and
abstract. It cannot be described in
statements, e.g. " always tell the
general rules and statements.
truth"
Ethics are adopted or absorbed by
an individual gradually by taking
Absorption reasonable decisions in
appropriate situations.
7
Morals are typically adopted or
Absorbed since childhood from
family, friends, school, religious,
leaders and so on.
8. IPCC
PRINCIPLES OF BUSINESS ETHICS
In what way Ethical Practices relate to functional area of Business ?
Functional Area of
Business
1.Plant location
2.Production
3.Purchase
4.storage
5.Marketing
6.Advertising
7.Administration
8.Finance
10.Personnel
8
Ethical Practice.
No adverse impact on local community
Control of Pollution
No hoarding of raw material
No hoarding of finished goods
Fair treatment to customers
Truthful and realistic claims
Concern for social values
Protection and appreciation of Capital
Just and equitable treatment to
employees.
9. IPCC
PRINCIPLES OF BUSINESS ETHICS
Explain the social sins listed by Mahatma Gandhi. (Nov. 10)
1. Politics without Principles
2. Wealth without work
3. Commerce without morality
4. Knowledge without character
5. Pleasure without Conscience
6. Science without humanity
7. Worship without sacrifice
9
Non-Violence, Justice
& Harmony among
people of all faiths
10. IPCC
PRINCIPLES OF BUSINESS ETHICS
What are the benefits of Business ethics ?
The advantages or benefits of Business Ethics are as follows :1. Improvement of society : Focus on Business Ethics has substantially
improved society.
2. Ethical Practices: Exploitation of workers and children, monopolistic
price fixing and profiteering, harassment of employees at workplace
etc. cannot be practiced by business enterprises now.
3. Maintaining moral course in turbulent times: Business Ethics is
helpful during times of fundamental change, when there is often no
clear moral compass to guide leaders through complex conflicts
about what is right or wrong.
10
11. IPCC
PRINCIPLES OF BUSINESS ETHICS
4. Strong teamwork and productivity : Employees feel strong
alignment between their values and those of the organization, as
well as motivation and performance of employees are also
improved.
5. Employee growth : Focus on ethics in the workplace helps
employees face reality, both good and bad, in the organization.
6. Ensure that policies are legal : Attention to ethics ensures highly
ethical policies and procedures in the workplace. For example, in
matters of hiring, evaluating, disciplining, firing, etc.
11
12. IPCC
PRINCIPLES OF BUSINESS ETHICS
7. Compliance with law : Ethical programs helps to avoid criminal acts"
of omission" and reduce fines,
8. Total Quality Management (TQM) : Ethical programs helps in
identifying preferred values and ensuring that organizational
behaviours are aligned with those values for TQM purposes.
9. Diversity Management : Ethics management programs are useful in
managing diversity.
10. Strengthens the organization :
i. Managing ethical values legitimizes managerial actions
ii. Strengthens balance of the organization's culture
iii. Improves trust in relationship between individuals and groups
iv. Supports greater consistency in standards.
12
13. IPCC
PRINCIPLES OF BUSINESS ETHICS
State the ancestry of ethical standards. (RTP - May 12)
1. The Utilitarian Approach -
(Increase Good done &
Reduce Harm done)
2. The Rights Approach -
(Choose freely your life and
decide what you want to do
with your life)
3. The Fairness/ Justice Approach - (Equals to be treated equally.)
4. Common Good Approach -
(Respect & Compassion for
common good.)
5. Virtue Approach -
(Our habits that enable us to
take ethical actions. Truth/
Compassion/ Love/ Self
Control/ Integrity/ Honesty etc.)
13
14. IPCC
PRINCIPLES OF BUSINESS ETHICS
What is meant by the term 'Stakeholders'?
Management is not accountable solely to Investors (shareholders) but
also to other interest groups or constituents who are affected by
corporate activity. The term "Stakeholders" describes such constituents
of an organisation - the individuals, groups or other organization which
are affected by, or can affect the organization in pursuit of its goals.
Stakeholders of a company constitutes:1. Employees
2. Trade Unions
3. Suppliers
4. Government
5. Competitors
6. Customers
7. Shareholders and investors
8. Local Communities.
14
15. IPCC
PRINCIPLES OF BUSINESS ETHICS
Write a note on Stakeholders.
(Constituents of an organisations - The individuals, groups or other
organisations which are affected by, or can affect the organisation in
achieving its goals. )
Stakeholders
Internal Stakeholders
Shareholders
Employees
Management
Trade Union
15
External Stakeholders
Consumers
Suppliers
Creditors
Competitors
Local Community
Government
16. IPCC
PRINCIPLES OF BUSINESS ETHICS
PRINCIPLES OF BUSINESS ETHICS
ETHICAL DILEMMA
Business issues are straight forward and hence easy to resolve.
But ethical issues bring a number of alternatives to choose from.
So, one is confused – This is called ethical dilemma.
We are not caught in a conflict between right and wrong, but
16 between right and right.
17. IPCC
PRINCIPLES OF BUSINESS ETHICS
How to handle ethical dilemmas ?
1. Analyse all the alternatives
2. Make choice between personal values and goals organizational
values and success
3. Define the problem clearly
4. Stand on the other side and see the problem
5. How did the situation arise ?
17
18. IPCC
PRINCIPLES OF BUSINESS ETHICS
6. What is the intention of the solutions ?
7. Can your decision injure anyone ?
8. Can you discuss the problem with the affected persons ?
9. Can you be confident that your position will be valid for a long
period, as it seems now ?
10. Can you disclose your decision to your boss, CEO, Family
members, Board Of Directors and Society ?
18
19. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Introduction
Managers / Owners have realized that profits should be
19 made by conducting business honestly, legally and morally.
20. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Definition
“Corporate Governance is about promoting corporate
fairness, transparency and accountability.”
CORPORATE
GOVERNANCE
20
Definition
Formal system of Accountability and control for Ethical
and socially responsible organizational decisions and
use of resources.
Scope
1.Accountability to stakeholders / employees / unions /
govt. /sh.holder / suppliers / competitor /community
2.Power to the management
3.Control over the above powers.
21. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
What is the characteristics of good Corporate Governance?
Good
Corporate
Governance
is
a
formal
system
of
accountability, decision-making and control of ethical and socially
responsible organisational decisions and use of resources. Good
corporate governance has some major characteristics. They are as
follows :
1.
2.
3.
4.
5.
6.
7.
8.
21
Participatory
Consensus oriented
Accountable
Transparent
Responsive
Equitable & inclusive
Efficient and effective, and
Follows the rule of law.
22. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Role played by different committees in regulating Corporate
Governance.
1. Board of Directors
2. Audit Committee
3. Compensation Committee
4. Nomination Committee
5. Investor Services Committee
6. Corporate Management Committee
7. Divisional Management Committee
22
24. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Introduction
Business is a part of the society.
Business needs support of society.
Healthy business cannot exist in a sick society.
1. Definition of H.R. Bowen
2. Business must take care of the quality of life of
society.
3. Protect environment and human rights.
24
25. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
What is corporate social responsibility? (RTP May 11)
Definition of H.R. Bowen
1.
“The obligation of business to pursue those policies, to
make those decisions or to follow those lines of actions
which are desirable in terms of the objectives and
values of our society”
2.
“CSR is achieving commercial successes in ways that
honor ethical values and respect people, communities,
and the natural environment”
25
26. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Need for CSR
1. Iron Law of Responsibility
Society gives charter to business
This charter can be revoked or amended if business
fails to respond.
2. Business can use its skills to develop society.
3. Wealth creation for society.
4. Effective use of resources and power
5. Long term benefits.
6. Better public image.
7. Avoid government intervention
8. Minimize environmental damage
26 9. Avoid misuse of power.
27. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Benefits for CSR
1. Improve financial performance
2. Reduce operating cost
Recycling, waste water use, flexi time
3. Increased sales (use of environment friendly, equipments, No
child labour etc.
4. Brand image
5. Productivity and quality(better working conditions reduced
defective role.
6. Attract and retain employees
7. Reduce govt. intervention
8. Access to capital market
27 9. Preference for awarding govt. contracts (UID – Infosys)
28. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
STRATEGIES USED BY COMPANIES FOR IMPLEMENTS CSR
SEVERAL COMPANIES ADOPT DIFFERENT MECHANISM FOR
HANDLING CSR ISSUES
28
29. IPCC
Corporate Governance and Corporate Social responsibilities (CG & CSR)
Some of the strategies that companies use for implementing
CSR policies are
1. Mission / Vision statements
E.g. Tata steel, ITC, etc.
2. Cultural values
3. Management structure (A shown above)
4. CSR Planning to identify area
5. Employee recognition
6. Communication
7. Education & training
8. CSR Reporting (in Annual Report)
9. Use of influence (Some model companies can influence
29 others in the locally)
31. IPCC
WORK PLACE ETHICS
Work Place Ethics
“How one applies values to work that is a set of Right
and wrong actions at the work place”
It covers issues relating to :
Or List the commonly recognized Employment Discrimination
practices.
(May 11)
1. Recruitment and selection
2. Promotion
3. Conditions of Employment
4. Wage payment
5. Transfer etc. of the Human Resources of an organisation.
6.
31 Dismissals
32. IPCC
WORK PLACE ETHICS
What points/ factors are to be considered for creative a sound ethical
environment in a company?
(RTP - Nov. 10)
1. Ensuring that employees are aware of their legal and ethical
responsibilities.
(Trade and motivate employees in ethics programme. Eg. Wipro
ltd.)
2. Providing a communication system between the management and
the employees.
(Report about fraud without any fear of being reprimanded)
3. Ensuring fair treatment to those who act as whistle blowers. (RTP May 11)
(Appreciate whistle blowers. Enron Ltd.)
32
33. IPCC
WORK PLACE ETHICS
Importance of Work Place Ethics :
1. No man or woman should be exploited in his / her work, or
alienated through his / her work.
2. Therefore, employer / organization must take steps to
create a work. Environment where employers have a clear
understanding of what is right and wrong.
3. Employers should feel free to discuss ethical
issues.
4. Employees should feel to report violation of ethical
standards.
33
34. IPCC
WORK PLACE ETHICS
Else, What Happens?
1. Employees perform unethical activities.
2. Report violations to outsiders.
3. Lack of trust in infernal forum.
4. Inability to retain good people.
5. Loss of competitive advantage in the market.
6. Loss of Reputation.
7. More legal battles in the court of law
34
35. IPCC
WORK PLACE ETHICS
Bring out some examples of ethical issues faced by the
individual in the workplace. (RTP Nov. 10, ICAI Nov. 10)
Vis-à-vis Suppliers
and Business
Partners
Bribery and immoral
entertainment
Vis-à-vis
Vis-à-vis
Customers
Employees
Unfair pricing
Discrimination
Cheating Customers
between suppliers
Dishonesty in
making and keeping
contracts
Deceitful
Advertising
Research
35
Confidentially
Discrimination in
hiring and treatment
of employees
Harassment in
workplace
Vis-à-vis
resource
Management
Misuse of
company funds
Tax evasion
vis-à-vis resource
Management
36. IPCC
WORK PLACE ETHICS
Factors Influencing
Ethical Behaviour
Individual
1. The Individual employees
beliefs & values will decide
his behaviour.
2. Every employee is everyday
has choices before his role.
3.
Sometimes values are
compromised in the process
of making quick decisions to
achieve targets
4. E.g. gift from supplier
report or fudging of A/c?
36
5. Need for self Actualisation
Colleagues
Corporate Culture
1. Boss
1. Company’s Policies
and codes.
2. Press
2. Companies culture
Provides directors
3. Subordinates
set examples for ethical
conduct
3. E.g. The best
employee finds his
boss using Company
telephone for
personal calls.
37. IPCC
WORK PLACE ETHICS
FORMS OF DISCRIMINATION
1. Sexual Discrimination
2. Sexual Harassment
3. Religions Discrimination
37
38. IPCC
WORK PLACE ETHICS
FORMS OF DISCRIMINATION
4. Age Discrimination
5. Nationality Discrimination
6. Handicapped Discrimination
38
39. IPCC
WORK PLACE ETHICS
HARASSMENT
“Intimidating & Tormenting an Individual through
constant interference”
SEXUAL HARASSMENT
1. Improper sexual conduct at work place
2. Includes :
Lewd Comments
Touching
Comments
Persistent Attention
Requests for sexual favors
39
40. IPCC
WORK PLACE ETHICS
3. Man – Woman / Boss – Subordinate
4. Deprives Women of opportunities
5. Hurts sensitively and honor of women
6. Degradation of moral values
7. Legal costs to the firm
8. Productivity declines
40
41. IPCC
WORK PLACE ETHICS
HOW TO PREVENT SEXUAL HARASSMENT OF WOMEN?
1. Prepare Sexual Harassment policy
2. Declare strict actions
3. Educate and warn all employees
4. Adopt procedure to handle
5. Assurance of Confidentiality - of the victim
6. Assurance of non – retaliation
7. Take disciplinary action
41
8. Pay compensation to victim
42. IPCC
WORK PLACE ETHICS
GUIDELINES FOR MANAGING ETHICS AT WORK PLACE
1. Prepare code of conduct
2. Ombudsman
3. Leadership Example
4. Open Communication
5. Ethical Culture
6. Group Decision Making
7. Cross Functional Teams
8. Anonymous Suggestion
9. Grievance Procedure
42 10.
Review & Revision
44. IPCC
ENVIRONMENT & ETHICS
1.
Environmental Ethics deal with the “Rights &
wrongs” with regard to the conduct of business
vis-à-vis its impact of environment.
2.
Industrial & Technological
brought material prosperity.
3.
They have also
environment.
44
equally
developments
brought
threats
have
the
45. IPCC
ENVIRONMENT & ETHICS
Explain the concept of Sustainable Development. (RTP - Nov. 10)
OR
There is no economic growth without ecological costs. Explain.
(RTP - May 11, May 12)
1. High economic growth means higher rate of extraction and
utilisation of resources.
2. Sustainable development is to meet the needs of future
generations.
3. Therefore, satisfy present requirements without affecting future
generations
4. Economic growth should be environmentally sustainable
5. Efforts are to be made for resource regeneration.
45
46. IPCC
ENVIRONMENT & ETHICS
Sustainable Development (SD)
1.
Simple meaning of SD – maintaining development for a
period over time
2.
But a widely cited definition is Development that meets
the needs of the present without compromising the
needs of the future generations.
3.
Economic growth has to be environmentally sustainable.
4.
Hence need for resource regeneration.
5.
Adopt positive approach to environment
46
47. IPCC
ENVIRONMENT & ETHICS
Pollution & Resource depletion
1.
2.
Global Warming
3.
Ozone depletion
4.
Acid rain
5.
Water pollution
6.
Land pollution
7.
47
Air pollution
Nuclear pollution
8.
Soil pollution
48. IPCC
ENVIRONMENT & ETHICS
GREETING AND GREEN INITIATIVE
When any company adopts anti pollution environment policy, it is said to be
“going green”
Why go green ?
Economic
Benefits
Reduced wastage
So reduced handling
expenses
Avoid fines
Competitive
Advantage
1.Efficient products
2.Better / cleaner
technology
3.Waste reduction
Public
image
Better image
Employees feel proud
Investors are happy
Consumers are
delighted
Examples [Recycling – Carbon reduction – CFC free – CFC Bulbs – Save Power –
BEE star works for electrical units – paper glass –
paper less offices – ITC Hotels recycling of used water – 5/7 Star
48
49. IPCC
ENVIRONMENT & ETHICS
GREEN ACCOUNTING
1.
Conventional accounting leads to policy decision which are now
sustainable for the country.
2.
Green Accounting focuses on such deficiencies.
3.
The environmental costs must be properly reflected in the
goods and services.
4.
Costs will increase, but consumer is willing to adjust according to the
market environment.
5.
This helps to reduce damage to environment.
6.
The prices charged will influence consumer behaviour to avoid
exploitation of resources.
7.
Over utilization of resources will come down.
8.
49
9.
Adopt rule “Polluter Pay Principle” – “PPP”
Remove subsidies adopt rule “PPP”
process for
52. IPCC
Q.
ETHICS IN MARKETING & CONSUMER PROTECTION
Explain the relationship between ethics
and marketing
OR
Short Note on Ethical dilemma in marketing
P
1. Marketing objectives
P
4 PS
2. Ethics Right or wrong
Good or bad
3. Dilemma
a. Class of objectives
b. One cannot be at the cost of another
c. Need to balance
52
P
P
53. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
NEED FOR ETHICAL BEHAVIOUR IN MARKETING
OR
WHY ETHICS ARE NEEDED IN MARKETING ?
1.
To restore / reverse declining public confidence in marketing
2.
To reduce govt. control on marketing
3.
To regain the power granted by the society
(Ratan Tata / Anand Mahindra / A.M. Naik / Mukesh
Ambani / Kumar Birla / R.K. Bajaj / etc. have great deal of
social power and speak out on economic issues)
4.
To protect image of the organization.
5.
To uphold the well-being of the consumer and society.
53
54. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
COMPETITION ACT, 2002
1. Earlier MRTP Act, 1969
2. Competition Act, 2002
3. Similar laws in all countries.
4. Whole of India except Jammu and Kashmir.
5. Objectives
a.To establish C.C.I. (Completion Commission of India)
b. To prevent adverse impact of competition
c. To promote healthy competition
d. To protect consumer
e. To ensure freedom of trade
6. Prohibit anticompetitive agreements like Tie-up sales, cartels,
Resale price, manmade
54 Regulate – mergers, takeovers, etc.
7.
55. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
What are the Parameters/ Provisions of Competition law/
Competition Act 2002?
(RTP - May 11, ICAI - Nov. 11)
1. Prohibition of certain agreements.
2. Abuse of dominant position.
3. Regulation of combinations.
55
56. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
Explain the eight consumer Rights and Themes. (RTP - May. 12)
OR
State the objectives of the Consumer Protection Council in India.
(Nov. 10)
1. Right to basic needs
2. Right to safety
3. Right to choose
4. Right to redress
5. Right to information
6. Right to consumer education
7. Right to representation
8. Right to healthy environment
56
57. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
Explain the consumer protection councils in India.
1. The Central Consumer Protection Councils.
2. The State Consumer Protection Councils.
3. The District Consumer Protection Councils.
57
(RTP - Nov. 11)
58. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
Particulars
Consumer Interest
Public Interest
1. Meaning
2. Interested Class
Society refers to the collection of
Consumer is a member of a broad
sub-systems, e.g. consumers,
class of people who purchase,
manufacturers,
distributors,
use, maintain and dispose of
input
suppliers,
service
products and services.
providers, etc.
3. Scope
58
Area
which
benefit
the Area in which the society as a
“Consumer”
as
a
whole, whole has some interest is called
constitute Consumer Interest.
Public Interest.
Consumer is only a sub-system of
a larger system i.e. general public Public Interest is wider in scope
/ society. Hence, consumer than consumer interest.
interest is restricted in scope.
Contd…
59. IPCC
ETHICS IN MARKETING & CONSUMER PROTECTION
Particulars
Consumer Interest
Public Interest
4. Factors
5. focus
If Consumer welfare is at the centre Government policy decisions
of any Governmental policy, such which are intended to benefit the
measures / decisions are said to be society as a whole, constitute
taken in “Consumer Interest”.
Public interest.
6. Examples
59
Consumers are affected by pricing
Public interest reflects the morals
policies, financing, practices, quality
during period and the established
of goods and services and various
interest of the society.
trade practices.
Maintaining law and order,
Formulation of Competition Act,
providing for the defence of the
Regulation of Consumer Protection
country, maintenance of
Councils, Consumer Courts /
monuments of national
Adalats, etc.
importance, etc.
61. IPCC
ETHICS IN ACCOUNTING & FINANCE
What are the general reasons for unethical behaviour in
context of Accounts & Finance?
1. Money-Mindedness.
2. Accounting Complexities.
3. Short-Term Profitability.
4. Ignoring small unethical issues.
5. Economic Cycles.
61
62. IPCC
ETHICS IN ACCOUNTING & FINANCE
Explain “Ethical Dilemma” in the context of a Finance and
Accounting Professional.
(RTP - Nov. 11)
1. Ethical Dilemma
a. Value-conflicts
b. Multiple alternatives
c. Consequences to stakeholders
2. Examples:
C.A.
Profit Forecast for a new project
a. Unrealistic projection of revenue
b. Projecting realistic but insufficient revenue.
(Both have their own risks)
62
63. IPCC
ETHICS IN ACCOUNTING & FINANCE
What are the Fundamental Principles related to ethics.
(Nov. 10, May 11, RTP - Nov. 11)
1. Principles of Integrity: (Honesty and straightforwardness)
2. Principles of objectivity: (No Bias)
3. Principles of Confidentiality:
4. Principles of Professional Competence
5. Principles of Professional Behaviour: (Code of Conduct of
ICAI)
63
64. IPCC
ETHICS IN ACCOUNTING & FINANCE
What are the various threats which can be faced by the Finance
and Accounting Professional while working as an Auditor,
Consultant or an Employee in an organization. (RTP - May 12.)
1. Self-Interest Threats
2. Self Review Threats
3. Advocacy Threats
4. Familiarity Threats
5. Intimidation Threats
64