A.

15 Ethics
Ethics refers to a system of moral principles a sense of right and wrong, and
goodness and badness of actions and the motives and consequences of
these actions. As applied to business firms, ethics is the study of good
and evils, right and wrong and just and unjust actions of businessmen.

Ethics is a body of principles or standards of human conduct that govern the

behavior of individuals and groups. Ethics arise not simply from man's
creation but from human nature itself making it a natural body of laws from
which man's laws follow.

Ethics is a branch of philosophy and is considered a normative science

because it is concerned with the norms of human conduct, as distinguished
from formal sciences such as mathematics and logic, physical sciences such
as chemistry and physics, and empirical sciences such as economics and
psychology.

Ethics is seen as an individual’s own personal attitude and a believe

concerning what is right or wrong, good or bad. It is important to note that
ethics reside within individuals and that organization doesn’t have ethics.
People have ethics. Consequently, its definition and understanding
varies from person to person. These are not absolute, but are relative.
Ethical behaviors are in the eye of beholder. What is right or wrong is a
personal individual matter, but is still influenced by socially accepted norms.

Right, and proper and fair are the ethical terms. It expresses a judgment
about behavior towards people they felt to be just. Ethics are useful tools for
sorting out the good and bad components within complex human interactions.
Business ethics does not differ from generally accepted norms of good or bad
practices. If dishonesty is considers to be unethical and immoral in the
society, then any business man who is dishonest his or her employees,
customer’s shareholders, or competitors is unethical and immoral person.
Businessmen should not try to evolve their own principles to justify ‘what is
right and what is wrong’

A.16 Formation of ethics

An individual’s ethics are formulated through the operation of forces in the
individual’s environment. These are discussed in the succeeding paragraphs.

 Family influences
The formation of ethics begins when the individual is a child. Thus the family
environment has a significant influence in determining what the child learns
about good and bad, right and wrong.

 Peer influences
As the child develops contacts outside the home through home, school,
play and work, peers exert considerable influence on the individual’s ethical
beliefs.

 Experiences
As a person matures and develops as a human being, he or she will be
exposed to many critical experiences that will be affect his or her ethical
standards.

 Values and morals

One’s ethical standards are also greatly influenced by values and morals.
People who place high value on money and material possessions may not
have strong ethical standard regarding behaviors that facilitate the
accumulation of that wealth.

 Situation Factors
People often change their ethics in response to unknown situational factors.
An employee, who is threatened with loosing a job that has been held for
years, may commit unethical acts in order to save the job.

 Religion
One of the oldest sources of ethical inspiration is religion. More than 1,00,000
different religion exist across the globe .Despite doctrinal differences, the
major religion coverage on the believe that ethics is an expression of divine
will that reveals the nature of right and wrong in business and others walks of
life.

 The legal system

Laws are rules of conduct, approves by legislatures, that guide human
behavior in any society .They codify ethical expectations and change as new
evils emerge. But law cannot cover all ethical expectation of society.
Whenever ethics the law codifies, it is binding on businesses. The society
expects businesses to abide by the law. Obeying the law is presumed to be
ethical behavior .Law breaking in business is common. Taxes are evaded,
hundred of employees die because of occupational disease, many perish
because of industrial accidents, and million others receive disabling injuries
on the job. The blame for these death and injuries had to be shared by
employees and employers who fail to adhere to occupational health and
safety laws. Consumer suffer because of poor quality and high
priced products by the supplied by the businessmen .Businesses
that degrade the environment by disregarding environment
protection laws cause misery to the society.

A.17 IMPORTANCE OF BUSINESS ETHICS

Ethics is important to business in general and HR in particular, for several

reasons as stated below:
 Ethics corresponds to basic human needs. It is men basic nature that
he desires to be ethical, not only in his private life but also in his business
affairs where, being a manager he knows that his decisions may affect
the life of thousands of employees. Moreover, most people want to be
the part of organization which they can respect and be proud of, because
they perceive its purpose activities to be honest and beneficial to society.
Most HR manager would like to respond to this need of their employees
and, they (managers) themselves feel an equal need to be genuinely
proud of the company they are directing. These bases ethical needs
compel the organizations to be ethical oriented.

Values create credibility with the public. A company perceived by the

public to be ethical and socially responsive will be honored ands respected
even by those who have no intimate knowledge of its actual working.
There will be an instinctive prejudice in favour of its products, since people
believe that the company offers value for money. Its public issues will
attract an immediate response.

Valued give the management credibility with its employees. Values are
supposed to be a common language to bring the leadership and its people
together.Organisational ethics, when perceived by employee as genuine,
create common goals, values, and language. The HR management can
have credibility with its employees simply because it has credibility with the
people. Neither a sound business strategy, nor a generous compensation
policy and fringe benefits can win employee credibility, but perceived
moral and social uprightness can.

Values help better decision making. Another point of great importance

is that an ethical attitude helps the management make better decisions,
that is ,decision which are in the interest of the public, their employees,
and the company’s own long-term good, even though the decision making
is slower. This is so because respect for ethics will force a management to
take various aspect- economic, social and ethical-in making decision.
 Ethics and profit go together. A company which is inspired by ethical
conduct is also profitable. Value-driven companies are most likely to be
successful in long run, though in the short run, they may lose money.

Law can’t protect society, ethics can. Ethics is important because, law
and lawyer cannot do every thing to protect society. Technology develops
faster than the government can regulate. People in an industry know the
dangers in the particular technology better than the regulatory
agencies.Futher; the government cannot always regulate all activities
which are harmful to the society. Where law fails, ethics can succeed. An
ethically-oriented management takes measures to prevent pollution and
protect workers health even before being mended by law .An ethically
sound HR manager, who can reach out to agitated employees, will quell a
trouble more effectively than the police.

A.18 Code of ethics

Code of ethics has become popular .Nearly 95 percent of the Fortune 500
companies have codes, and a trend is visible in the corporate sector in India
also.

Industry association have evolved codes of conduct their own. For example,
the council of fair business practices (CFBP) established in 1916, by leading
private sector industrialist in western India, and adopted a code of fair
business practices.

The code constitutes a primary level, self regulation character for enlighten
citizenship among business entities. The CFBP has initiated a set of prizes
and awards called ‘Jamnalal Bajaj Uchit Vyavahar Puraskar’ or(Jamnalal
Bajaj prize for fair Business Practices) to promote exemplary application of
the above norms .The CFBP president claimed that sustained pressure from
his council has resulted in creation of Advertising standards Council of India
(ASOI) and in promulgation of the consumer protection act (CPA) ,1986.The
Federation of Indian chambers of commerce industry (FICCI,which includes
the MNCs)has recently issued a declaration on Norms of business consisting
of ten points. The Punjab, Haryana and Delhi chamber of commerce has also
lately formulated a code of ethics.

Whoever evolves the code, its purpose is to provide guidance to manager

and employees when they face ethical dilemma. The most effective codes
are those drawn up with the cooperation and widespread participation of
employees. An internal enforcement mechanism, including penalties for
violating the codes, adds teeth to the code.

Code of ethics is guidelines to steer the conduct of both the organizations

and its employees in all business activities. These are intra and inter
organizational in nature and relate to all activities of an organization and its
environment. They provide positive and productive orientation and direction
to the code of business, besides giving an individual identity to that
organization.

Code of ethics provide general guidelines with respect to the values and
ethical standards of the company

Business ethics is concerned with truth and justice and has a variety of
aspects, such as expectation of society, fair completion, advertising, public
relations, social responsibilities, consumer autonomy, and corporate
behaviors with in and with out. A code is a statement of policies, Principles, or
rules that guide behaviors.

A.19 Objectives of code of ethics

A code of ethics aims at the following:

  Guidance: It provides direction to the most important element of an
organization namely the “People”, so that they know how to conduct
themselves in terms of ethical behavior and give them a sense of
common identity.

 Confidence: It inspires public confidence besides enhancing the

reputation of the organization.

 Initiative: it provides initiative and stimulation to the suppliers and

customers for proper conduct by creating a sense of moral obligation

 Ethical culture: It promotes a culture of excellence by not just

formally teaching ethics, but by demonstrating through leaders the
commitment of the organization to ethical behavior.

A.20 Business ethics

Companies, led by top management, are increasingly adopting ethical codes

of conduct. Modern ethics codes aren't just some simple platitudes set in a
break-room plaque. Companies now commit considerable time and money to
illustrate their reliance on ethical behavior.

Ethical behavior starts at the top. Before a company can expect to be viewed
as ethical in the business community, ethical behavior within its own walls-to
and by employees-is a must, and top management dictates the mood. Ethical
behavior by the leaders of an organization will inevitably set the tone for the
rest of the company-values will remain consistent. Further, a well-
communicated commitment to ethics sends a powerful message that ethical
behavior is considered to be a business imperative.
Companies are also interested in determining whether ethical behavior can
be measured, just as efficiency and productivity companies must innovate
ways to measure ethical behavior, which in turn motivates ethical behavior.

Once training, measurement and a new ethical code have been developed,
companies are also hiring full-time ethical compliance officers, and starting
ethics hotlines to report possible policy violations. Hiring a full-time ethics
officer is another signal to employees that ethical violations will be taken very
seriously. However, this person isn't just a watchdog-they will take a proactive
approach to identifying possible violations before they develop.

Ethics are important not only in business but in all aspects of life because it
is an essential part of the foundation on which of a civilized society is build. A
business or society that lacks ethical principles is bound to fail sooner or
later.

A.21 THE MAJOR PRINCIPLES OF BUSINESS ETHICS:

 No discrimination should be done on the basis of caste ,color , and

religion,

 The polices should be fair and transparent

 Proper provision of safety should be provided by the company to

the employees.

 There should be proper honesty, loyalty, and integrity in the

employees.

 The company’s resources should not be utilized by the employees

for their personal usage

 Company should provide better environment condition

  Information about employee’s personal lives, health, and work
evaluations should be kept confidential.

 Regular measurement of employee satisfaction should by company.

 To neither give nor take any illegal payment, remuneration, gift,

donation, or comparable, benefits to obtain business or favours.

 To comply with all regulations regarding preservation of the

environment.

 Employee should report to management any actual or possible

violation of code or an event that could affect the business or
reputation of the employee’s company.

Ethics And Law

Laws and ethics have common aim- defining proper and improper behaviour.
But the two are not quite same. Laws are the society’s attempt to formalize-
that is to reduce to written rules- idea about what is right and what is wrong in
various walks of like. However, it is rarely possible for written rules to capture
all the sublet variations that people give to ethics. Ethical concepts are more
complex than writing rules. Ethics deals with human dilemmas that frequently
go beyond the formal language of laws and the meanings given to legal rules.

Similarities and differences apart, legal rules help promote ethical behaviour
in organization. Some of the acts which seek to ensure fair business
practices in our country are the followings:

 The Foreign Exchange Regulation Act, 1973, now replaced by FEMA.

 The Companies Act, 1956.

 The Monopolies and Restrictive Trade Practices Act, 1969.

  The consumer Protection Act, 1986.

 The Environment Protection Act, 1986.

 The Essential Commodities Act, 1955.

Social and ethical accountability

Social and ethical accounting is a process that can help businesses to

stakeholders, and to improve performance, social, environmental and
economic. The process typically links a company’s value to the development
of policies and performance targets and to the assessment and
communication of the performance. In this way and through engagement with
stakeholder social and ethical issues are tied into a company’s strategic
management and operations.

Social and ethical accounting model there is no standard balance sheet or

units of currency. Instead, the are defined by company’s value and aims by
the interests and expectation of its stakeholders, and by societal norms and
deregulations. With the focus on the concerns of society , the social and
ethical accounting framework implicitly concerns itself with issues as a wide
as economic performance working conditions , environment and animal
protection, human rights, fair trade and ethical trade, human resource
management and community development , and community development
and hence with the sustainability of a company’s activities.

Companies have begin to open themselves up to their stakeholders, partly

because of the “push” factor of the pressure group activities but also because
the realize that a greater awareness of the impact of their activities and how
they are perceived is necessary to improve strategic decision making. More
and more companies are now incorporating stakeholder in their decision
making processes. Much of this is, of course, standard business practice
talking to customers and suppliers to identify the issues as they arise to
satisfy new needs and a company realize that it is failing to involve important
groups or there is mistrust or misleading in its relations with stakeholder.

Principle of social and ethical accounting

These principles can be used in designing and managing a process, or in
assessing its quality. The dominant principle of social and ethical accounting
is inclusively. This principle requires that the aspirations needs of all
stakeholder groups are taken into account at all stages of the social and
ethical accounting process.

Other principles can be put into three broad relating to the:

 Scope and nature of the company’s social ethical accounting process.

 Meaningfulness of the information created by the process.

 Continuous management of the process.

Scope and nature of the process

 Completeness- The inclusion in the accounting process of all

appropriate areas of activity relating to an organization’s social and
ethical performance.
 Materiality- The inclusion of significant information that is likely to affect
stakeholder groups and their assessment of an organization’s social
and ethical performance.

 Regularity and timeliness- The need for regular, systematic and

timely action of the accountings process to support the decision making
of an organization and its stakeholders.

Meaningfulness of information

 Quality Assurance- The audit of an organization’s process by an

independent and competent third party. The audit is concerned with
building credibility in the process with all stakeholder groups, and hence
developing meaningful stakeholder engagement.

 Accessibility – Appropriate and effective communication to an

organization’s stakeholders of its accounting process and its
performance.

 Comparability- The ability to compare information on an organization’s

performance with previous periods, performance targets, or external
benchmarks drawn from other organizations, statutory regulation or non
statutory norms.

 Reliability- The characteristic that allows an organization and its

stakeholders to depend on the information provided by the accounting
to be free from significant error or bias.

Continuous management of the process

 Embedded ness, or systems integration- Making the accounting
process part of an organization’s operations, systems and policy
making; that is, not just a one-off exercise to produce a report.

 Continuous improvement- Steps taken to improve performance in

response to the results of the accounting process.

The Social and Ethical accountability model

Embedding

Planning

Stakeholder
Engagement

Auditing
And Accounting
Reporting
The generic model of social & ethical accounting includes six elements in a
continuing process that a business undergoes in order to manage & improve
its accountability & performance.

 PLANNING- The company commits to the process of social & ethical

accounting, auditing & reporting, & defines & reviews its values & social
& ethical objectives & targets.

 ACCOUNTING- The scope of the process is defined, information is

collated & analysed, & performance targets & improvement plans are
developed.

 REPORTING- A report on the company’s systems & performance is

prepared.

 AUDITING- The process of preparing the report & the report itself are
externally audited, & the report is made accessible to stakeholder in
order to obtain feedback from them.

 EMBEDDING- To support each of the stages, structure & systems are

developed to strengthen the process & to integrate it into the company’s
activity.

 STAKEHOLDER ENGAGEMENT- The concerns of stakeholder are

addressed at each stage of the process through regular involvement.
 At every stage a company should incorporate useful experience from
the previous cycle- it must be flexible enough to learn & innovate from
the process.

Section 1 – Membership of any class shall be contingent upon

conformance with the established principle of professional Ethics.

Section 2 – Honesty, Integrity, Loyalty, fairness, Impartiality, Fidelity to

trust, and inviolability of confidence are incumbent upon every member as
professional obligations.

Section 3- Members shall not make false, misleading or unwarranted

statements, representation or claims in regards to professional matters,
nor shall they engage in false or deceptive advertising.

Section 4- Members shall not falsely or maliciously attempt to injure the

reputation of others.
 Section 5 – Member shall endeavor to cooperate with others in profession
and shall encourage the ethical dissemination of geoscientific knowledge.

Literature review

Article 1

Wipro gets PHDCCI's Ethics in Business Award

Our Corporate Bureau
30 November 2002

Mumbai: Wipro has been awarded the “Ethics is Good Business” award for
the Year 2002. The award, instituted by the Punjab, Haryana and Delhi
Chamber of Commerce and Industry (PHDCCI), recognizes Wipro’s ethics
and value-based business performance.

Wipro has compiled an "Integrity Manual" that defines the way Wiproites
should deal with their customers. Wipro has also introduced a helpline known
as “Wipro SOS”. This helpline comprises senior members of the company,
like Chairman Azim Premji, who are available for guidance on any moral,
legal or ethical issues that a Wiproite may face.

Article 2
Press release, 3 November 2004

Reliance Industries ranks No.2 in 'India's Most Respected

Companies'
Reliance emerges as India's 'Most Dynamic Organization' Reliance Industries
ranks No.2 in 'India's Most Respected Companies' survey - India's Most
Respected Companies Survey IMRB International - Business world, 2004.

RIL is the first and only private sector company from India to feature in the
2004 Fortune Global 500 list of 'World's Largest Corporations' and ranks
amongst the world's Top 200 companies in terms of profits. RIL also emerged
as the only Indian company in the list of global companies that create most
value for their shareholders.

Article 3

Thursday, 3 September, 1998

Infosys Technologies is chosen Company of the Year

The Economic Times today announced its Awards for Corporate Excellence,
in consonance with its philosophy of recognizing and celebrating business at
its best. The company has arguably pioneered in India the concept of valuing
intellectual capital, and has aggressively attempted to introduce employee
stock options - it, however, has an employee stock offer plan in place for five
years now. Infosys is expected to be the first Indian company to have its
shares listed on an American stock exchange.

Article4

``Ethics in business has to reflect ethics in society'

Our Bureau

Kolkata, June 22
 Mr. S.M. Dutta, Chairman, Castrol India Ltd, and former Chairman of HLL
said that, “Ethics was such an inborn concept that all of it cannot be
contained in our law. Nobody teaches us ethics; no formal instructions as
such, and we are just left to learn it through experimentation. While admitting
that the primary task of business was to create wealth by adding economic
value to society, the ethical dimension of business has to rest on the
three key aspects of "legitimacy, equitability and transparency".

Article 5

Date: 2005/7/19

Contact person: Mr. Saket Gupta, Supdt. Engineer (E&T)

“ONGC's Communication on Progress on Global Compact”

Our corporate mission also explicitly requires us to maintain high

standards of business ethics and to enrich the quality of community life
through our commitment to Safety, Health and the Environment.
Because we are a public sector corporation, an integral part of our business
is reaching out to the community. We have a Corporate Citizenship Policy,
administered by our HR Department. It has its own budget, funded from a
percentage of our profits; the figure is substantial.

Ranbaxy
Founded in 1962, Ranbaxy is India’s largest pharmaceutical company. The
company is now moving from a generic company to a research oriented
company and it is at the same time increasing its international presence. It
manages operations with a high concern for safety and the
environment. It stresses the fact that the company is a responsible
corporate citizen. As a responsible corporate citizen, Ranbaxy ensures
transparency in their dealings with enforcement agencies, and extends their
co-operation to officers of statutory bodies for the purpose of audits and
inspections. The company also urges its employees to avoid actions or
relationships that might conflict with their job responsibilities, or the interests
of Ranbaxy.As for the environment, it ensures responsible consumption of
natural resources through processes that are eco-friendly.

Reliance Industries Limited

Reliance is India’s largest private sector enterprise and it plays a major role in
India’s petrochemicals sector. Reliance has India’s largest marketing network
and all its brands are market leaders. As for business ethics practices,
Reliance stresses environmental responsibility. The company has its own set
of environmental policies and the policies are available to the public.

Highlights of its policies are:

Prevent pollution, maximize recycling, and reduce wastes, discharges and

emissions.
Conserve natural resources by their responsible and efficient use in all our
operations.
Plant trees, develop green belt and promote lush green surroundings at
manufacturing locations to work in harmony with nature.
Emphasize every employee’s responsibility in environmental performance;
ensure appropriate operating practices and training.
Promote awareness among contractors, suppliers and customers for shared
responsibility towards environment protection.

Infosys
Founded in 1981 by a former socialist, It is located in Bangalore Infosys has
become a well-known player in the software industry for its ethical
business practices and generous treatment of employees. Its books are
open to investors, it offers a stock option plan to employees, and it was the
first Indian company to be listed on a U.S. stock exchange. "We certainly find
it useful to benchmark ourselves against companies like Infosys," said the
chairman of Hindustan Lever, the Indian subsidiary of personal care products
giant Unilever.

Indian Petrochemicals Corporation Limited (IPCL)

Indian Petrochemicals Corporation Limited, established in 1969, is the
pioneering petrochemical company in India, and one of the leading
petrochemical companies. Its products include polymers, synthetic fiber,
solvents, surfactants, catalysts and adsorbents. The company is backed by
strong R&D and is continuously innovating its processes and products.
Outside its business, the company is known for its rural development
programs. The program sets up low cost sanitation facilities to rural
families and provides school buildings, books, library furniture,
playgrounds, and a subsidized bus service for school children. It also
supports environmental preservation, constructs primary health
centers, provides ambulances and trains people in primary health care.
Furthermore, IPCL also provides technical assistance to the National Institute
for the Blind and camps for social welfare.

Balrampur Chini Mills Limited

Balrampur is India’s premier sugar company. It maintains a set of ethical
standards and emphasizes the following:

Integrity: "We demand of ourselves and others the highest ethical

standards."
Respect for People: Balrampur contributes its success today to its people
and is committed to treating its people with dignity.
Community: One of the company’s goals is to focus not only on its
earnings but also on its efforts to make the world a better place to live.

Transparency: Balrampur strives to maintain global standards of corporate

transparency, and to increase shareholder confidence in management.
 Mitsubishi Corporation
Mitsubishi Corporation, one of the major global enterprises, conducts various
businesses in India including marine product trading and automotive parts.
The company is committed to serving the welfare of world and local
communities. The company set up a Committee for Philanthropy in 1991 to
come up with ways to make corporate responsibility to society a part of the
company’s activities. In addition, the Mitsubishi International Corporation
Foundation was also established to help serve the educational needs of
economically disadvantaged young people. Environmental responsibility is
also an integral part of Mitsubishi’s corporate philosophy. The company
has its own internal environmental guidelines for business activities and has
formulated an Environmental Charter that follows the international standard
for environmental management systems.

Shell’s
Shell’s 2001 annual report provides details of disciplinary action taken by the
company against staff who has breached the company’s code with regard to
bribery.

Reported cases of bribery in Shell

Number of bribes and total value $

1997 1998 1999 2000

Bribes offered and/ or 0 1 1 0
paid by Shell company
employees directly or ($ 300) ($ 300)
indirectly to third parties
Bribes offered and /or 1
paid by intermediaries,
0+ ($ 4,562)
contractor employees * *
directly or indirectly to
third parties.
Bribes solicited and/or 23 4 3 4
accepted by Shell
company employees (small) ($75,000) ($153,000) ($89,000)
Brides solicited and/ or
accepted by
intermediaries , * * 1 1
contractor employees or
others (unknown) (Zero)
* Data not available.
+ One Case in which a shell employee used an intermediary to make
payments of us$300 has been included in the vases concerning
company employees.

HONEYWELL

No employee will give, offer or promise to give, or ask or accept anything of

value….. With the following expectations:

Items of a strictly advertising nature (that is, imprinted with the company’s
name……) which are less than $10 in value.

Standard Chartered Bank

Nothing may be given or received which might distort commercial judgment

or harm the Groups reputation….. Any business-related personal benefits
which you or your family give receive must be reported in writing within three
working days to the person to whom you normally report.
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