ETHICS IN BUSINESS

Shivani Tiwari
EdTech Entrepreneur
Post graduate: IIT Madras
 SYLLABUS
Unit
Topic/Unit
No.

Introduction to Ethics in Business – Morality, Ethics and Ethical Theory, Business Ethics- Nature and Scope. Business Ethics and Law,
Importance of Business Ethics, Sustainability-:A key goal for Business Ethics.

Values - Meaning and Comprehensive View, Types of Value- Subjective Vs Objective, Instrumental Vs Terminal, Logical or Knowledge Value,
Ethical or Good Values, Aesthetic Values, Absolute Values, Universal Human Values, Socio-Economic, and Types, Cultural Values, Value
1 Hierarchy.

Corporate Governance - Concept and Thrust Areas, Why Codes Needed, Indian Model of CG, Good Corporate Governance. Corporate
Governance and Ethics, Infosys Technologies Case

Dilemma and Action - Understanding and Defining Dilemmas; Understanding and Defining Ethics leading to application as Business Ethics.
Dilemma and Action- Prisoners’ Dilemma, What is Ethical, Continuum of Behavior- Moral- Amoral- Immoral Choices, Major Ethical Issues-
2 Whistle- Blowing (Satendra Dubey Case and Amit Jethwa Case), Discrimination and Affirmative Action, Sexual Harassments. Advertisement
and Ethical Issues.
Unit
Topic/Unit
No.
ETHICS AND DECISION MAKING
• Ethics & Functional Areas: Marketing Ethics – Ethics in HR – Ethics & Finance. Case study http://public.tepper.cmu.edu/ethics/AA/mgtmini.htm
• Ethical Codes, Managing Ethics, Ethical Activities, Ethical Dilemmas,

3
ETHICS AND CORPORATE GOVERNANCE
• Basics of Corporate governance: Meaning – Nature – Purpose – Consequences of bad corporate governance
• Corporate Governance Theories – Agency theory – Stakeholder Theory – Stewardship Theory
• Corporate Governance System – Anglo American Model – German Model – Japanese Model – Indian Model.
Meaning & Definition of CSR, History & evolution of CSR. Concept of Charity, Corporate philanthropy, Corporate Citizenship, CSR-an overlapping concept.
CORPORATE GOVERNANCE FRAMEWORK IN INDIA
STUDENTS PRESENTATION
• Companies Act Provisions
4 • SEBI
• RBI
• IRDA
• Competition Commission Introduction
Others
5 Project Presentation
 UNIT 1

Values - Corporate
Introduction to Sustainability-: A Why Codes
Business Ethics Meaning and Governance -
Ethics in key goal for Needed, Indian
and Law Comprehensive Concept and
Business Business Ethics. Model of CG
View Thrust Areas,

• Corporate governance (set of rules and policies) is driven by

the strategic team i.e. board of directors and implemented by
management of organization.

• Vision of a company is reflection of, where they want to be

and mission is set of processes which guides all employees
that how shall they achieve vision

• Code of ethics is one of the strongest pillars of value system

of an organization through which all mission statements shall
comply
NEED OF ETHICS
PRIMARY SOURCES OF ETHICS
 Ethics Morality
Principles or habits with
The rules of conduct respect to right or wrong
recognized in respect to a conduct. While morals also
particular class of human prescribe dos and don'ts,
actions or a particular group morality is ultimately a
What are they? or culture. personal compass of right
and wrong.

Where do they come Social system - External Individual - Internal

from?

Because society says it is the Because we believe in

Why we do it? something being right
right thing to do.
or wrong.
Ethics are dependent on
others for definition. They tend Usually consistent, although
Flexibility to be consistent within a can change if an individual’s
certain context, but can vary
beliefs change.
between contexts.
Business Ethics can be defined as written and unwritten code of principles and values that govern decision
and action within the company.

Seven principles of Admirable Business Ethics:

1:Be trustful Keep an open mind

2:Meet obligation
3: Have clear documents
4: Become community involved
5: Maintain accounting control
6: Be respectful
 BENEFITS OF IMPLEMENTING ETHICAL BUSINESS
PRACTICES

• Building on a foundation of ethical behavior can create long-lasting positive effects for your company.
• It can attract and retain highly talented individuals.
• It can also earn a positive reputation within the community and foster greater stability within the company.
• Running your business ethically from the top down establishes stronger bonds between individuals on the
management team.
• Employees make better decisions when business ethics are a guiding principle in less time. This increases productivity
and overall employee morale.
• With consistent ethical behaviour comes an increasingly positive public and brand image.
 UNETHICAL PRACTICES IN BUSINESS

Finance Human Resource Marketing Production

• Misleading Financial analysis • Discrimination on basis of • Price discrimination • Defective products
• Bribery age, gender, caste, religion, • Misleading adv. • Product testing
• Over Billing of expenses race • Black marketing • Ethical relation between
• Fake reimbursements • Privacy (surveillance) • Content of advertisement company and environment
• Occupational safety like carbon foot prints
• Sexual harassment
CASE STUDIES
 VALUES
VA L U E S BELIEFS PERCEPTION AT T I T U D E S B E H AV I O UR I N T E R E S T A N D
PERSONALITY

A company's values statement encompasses the operation of the entire organization, whereas a tagline attaches itself to a
single product as a marketing tool. A company's values statement also has great power to shape product development and the
way the business chooses to advertise.
 IMPORTANCE OF VALUES

• A powerful force affecting behavior

• Values contain a judgmental element in that they carry an individual's ideas as
to what is right or desirable
• Provides a way to understand organization
• Helps in differentiation
• Determines their intentions
FUNDAMENTALS BUSINESS VALUES
 TYPES OF VALUES

Types of Value:

• Subjective Vs Objective
• Instrumental Vs Terminal
• Logical or Knowledge Value
• Ethical or Good Values, Aesthetic Values
• Absolute Values
• Universal Human Values
• Socio-Economic and Types
• Cultural Values
• Value Hierarchy
Objective value:The objectivist believes that value is a property of the object itself, independent of
any particular subject's judgment
1: An oak tree has value in and of itself, regardless of what anyone may think, how anyone, human or squirrel, may judge it.
2: It was wrong for Joe to lie to Sue, even though he did it to protect her feelings. That is not merely because it is my
opinion, but because lies are wrong in and of themselves.

Subjective Values:The subjectivist believes that value is not a property of the object itself, but is merely assigned
or imputed to the object by the judgment of the subject.

1:,Like its beauty, any value of an oak tree lies in the perception of its beholder, not in the oak tree itself
2: There is fundamentally no dilemma in one person judging a lie wrong and another judging it morally acceptable
 Logical value:Logic is linked with the study of reasoning and the specific principles involved in the
process of inference and analysis.

Knowledge Values: The theory of knowledge promotes the exercise of logic with reference to the situations
that one encounters; however, with an absence of a motive knowledge loses its essence.

Aesthetic value: Aesthetic values involve an appreciation of the innate perfection of nature and all its exquisite
beauty.
Instrumental value: These are the values that are a means to an end, not an end in itself.

• Honesty
• Respectfulness
• Responsibility
• Courage Loyalty

Absolute/Intrinsic/Terminal Values: While many of our values are instrumental (they help us achieve a deeper
goal), others represent an end-goal. We call these terminal values.

• Happiness
• Freedom
• Inner Harmony
• Health
• Friendship
• Beauty
• Love
Cultural value: Sociologists recognize that values tend to be spread, maintained, and
reproduced within cultural groups

• Honesty
• Tradition
• Religious faith
• Patriotism
• Humility

Organizational values:These are the fundamental beliefs upon which a business or

organization operates

• Team work
• Integrity
• Work Ethic
• Customer Service
Socio-Economic Factors and Values: Ethics function as control measures to keep in check the negative activities
of a society such greed, malpractices and wrong-doings. With contributions from various disciplines, namely economic,
politics, science and psychology, ethics as a domain has been influenced greatly and in return it hugely impacts the thoughts
and actions of people and shapes the structure of society at large.

Economist or Materialist View: Materialism is based on the principles of continuous pursuit, acquisition, and
consumption. This is instrumental in running the processes of the economy. Other associated feelings with a materialist
orientation include envy, possessiveness and non-generosity. Materialism puts other intangibles such as ethics, friendship,
sharing and caring attitude at a lower priority, thereby increasing the possibility of assuming unethical behavior.

Humanist-Materialist View: In response to the negative impact of the economist-materialist view, contributions
from the disciplines of psychology and sociology helped in the evolution of a relatively humane, the humanist-materialist
view. distribution of income and financing in the hands of the government elected by the people. However, this thought
system also suffers from a drawback in the form of the corruption of and excessive regulation imposed by the government

Humanist View: The humanist perspective emphasizes on the inner–self and its capability to first recognize the
existence of both materialist and non-materialist paths and subsequently strike a balance between the two. It focuses on
the importance of cultivating values of integrity, duty, and discipline that in return contributes towards the economic
development.
Culture and Values: Values form an all important element of a culture and shape the ways things are done in a society.
Depending on a specific culture, the deep-rooted values are disseminated with the people belonging to the culture and are
ingrained in the way of being..

Western Culture: Scientific principles based on data, observation and experience became the foundations of the
western culture. It facilitated a drive in people to discover new aims and desires and work towards fulfilling them. The
features of western culture include a self-centered way of life, market oriented creation of new needs, exploitation of
natural resources and setting up of large industries for massive production.

India Culture: The Key features of Indian culture comprise of spiritual growth of self, deep connection with the nature,
discipline in individual efforts, and a sense of communion with others.
 HUMAN VALUE

Basic human values refer to those values which are at the core of being human. The values which are considered basic
inherent values in humans include:
Truth, honesty, loyalty, love, peace, etc. because they bring out the fundamental goodness of human beings and society at
large.
Importance of Human Values:
• Provides understanding of the attitudes, motivation and behaviors
• Influences our perception of the world around us .
• Represents interpretation of “right and wrong”.
• Provides a way to understand humans and organization.
The five human values which are expected in all human beings, irrespective of whether they are employees or not in
whichever profession or service, are:

• Right Conduct – Contains values like self-help skills (modesty, self-reliance, hygiene etc.), social skills (good
behavior, good manners, environment awareness etc.), ethical skills (courage, efficiency, initiative, punctuality etc.)
and Ownership.
• Peace – Contains values like equality, focus, humility, optimism, patience, self-confidence, selfcontrol, self-esteem
etc.
• Truth – Contains values like accuracy, fairness, honesty, justice, quest for knowledge, determination etc. Peaceful
co-existence – Contains values like psychological (benevolence, compassion, consideration, morality, forgiveness
etc.) and social (brotherhood, equality, perseverance, respect for others, environmental awareness etc.)
• Discipline – Contains values like regulation, direction, order etc.
 CORE VALUES IN MANAGERS

1.Control on mind and senses

2. Knowledge
3.Viveka
4.Yoga
5. Swadharma or Duty Consciousness
 VALUES FOR MANAGERS

Planning Organizing Leading Decision Problem

• Care of mind • Absence of • Sacrifice Making Solving
• Objectivity hatred • Compassion • Visualizing • Patience
• Consciousness • Control of • Energy outcome • Empathy
anger • Intelligence • Courage and • Forgiveness
• Effectiveness will power • Creativity
 CORPORATE GOVERNANCE

• Corporate governance refers to the accountability of the Board of Directors to all stakeholders of the
corporation i.e. shareholders, employees, suppliers, customers and society in general; towards giving the
corporation a fair, efficient and transparent administration.
 CORPORATE GOVERNANCE AND
MANAGEMENT

Corporate Governance : Governance comes from the word “govern,” which means to control the actions of a group for the
benefit of the whole. In the business world, this refers to policies that specifically restrict or direct how people can act.
For example:
• Governance policies might include prohibiting a board of directors from awarding contracts to board members’ companies or
the companies of family members.
• A business might require its accounting department to have two signatures on any check it writes to reduce the threat of
fraud.
Corporate Management : Management refers to the actions taken by a company to lead the business in a positive direction.
For Example:
• Management include setting budgets, giving staff members directions and making strategic plans about marketing or product
development.
• Corporations usually have management teams once the company becomes too big for the founder or one individual to
oversee the entire business.
• Management team members include titles such as department head, director, vice president and manager, chief executive
officer, chief operating officer and chief financial officer.
 CONCEPTS OF CORPORATE
GOVERNANCE

Need
Benefits
Indian corporate governance
Code of conduct, good CG and Ethics
 NEED OF CG

• Wide Spread of Shareholders

• Changing Ownership Structure
• Corporate Scams or Scandals
• Greater Expectation of Society of the Corporate sector
• Hostile take – overs
• Huge increase in Top Management Compensation Globalization
 BENEFITS OF CG

• 1. Good corporate governance ensures corporate success and economic growth.

• 2. Strong corporate governance maintains investors’ confidence, as a result of which, company can raise capital
efficiently and effectively.
• 3. It lowers the capital cost.
• 4. There is a positive impact on the share price.
• 5. It provides proper inducement to the owners as well as managers to achieve objectives that are in interests
of the shareholders and the organization.
• 6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.
• 7. It helps in brand formation and development.
• 8. It ensures organization in managed in a manner that fits the best interests of all
 CODE OF CONDUCT

• Whilst the contents of a Code of Conduct are generally unique to each organisation, there are some universal behaviours that should be included
in each Code and these include:
Act with honesty and integrity: be open and transparent in dealings with all stakeholders, use power responsibly and avoid any conflict of
interest;
Act in good faith and always in the best interests of the organisation: be accountable individually and collectively, accept responsibility for
your decisions, always be mindful of the reputation of the organisation and act accordingly;
Act fairly and impartially: avoid bias, discrimination, self interest; act in a respectful, professional and courteous manner; disagree but do not be
disagreeable;
Use information appropriately: apply the information received as a director only in the manner for which it was intended;
Use your position appropriately: do not seek to gain from your position nor gain benefits for your family, friends or colleagues; apply
independence in judgement and decision making;
Be prepared: to contribute, to analyse and make decisions; allocate appropriate time and resources to do the job;
Comply with established legislation, regulations and the constitution: act within both the letter and spirit of the compliance
requirements;
Demonstrate both stewardship and leadership: apply the principles of good governance at all times.
This list is not intended to be exhaustive and it should be developed in words and statements that are reflective of your organisation’s culture.
 BAD CG EXAMPLES

•
• .
•
 BAD CG EXAMPLES

Satyam Scandal (2009): This is one of the biggest corporate governance failures in India. The founder of Satyam Computer
Services, Ramalinga Raju, admitted to committing a massive fraud, inflating the company's profits and assets by several billion
dollars. This led to the company's collapse and a major loss of investor confidence in Indian companies.

Nirav Modi Scandal (2018): Nirav Modi, a jeweler and diamond merchant, was accused of perpetrating a fraud of over $2
billion at the Punjab National Bank. Modi and his associates allegedly obtained fraudulent letters of undertaking from the bank,
which they used to obtain loans from overseas banks.

Yes Bank Scandal (2020): Yes Bank, one of India's largest private sector banks, was found to have engaged in several
irregularities and fraudulent activities. The bank's founder, Rana Kapoor, was accused of granting loans to companies in exchange
for bribes. The bank was eventually rescued by the Reserve Bank of India.
GOOD CG EXAMPLES
 GOOD CG EXAMPLES

• Tata Group: One of the best example of corporate governance excellence in India is the Tata Group. The Tata Group, with its
strong ethical values and unwavering commitment to transparency, has become a beacon of trust and integrity. Through its
robust governance practices, the group has established itself as a paragon of good corporate citizenship
• HDFC Bank: The bank has consistently demonstrated its commitment to sound corporate governance practices, setting an
example for the entire banking industry. With a well-defined governance framework, HDFC Bank prioritizes transparency, risk
management, and stakeholder engagement.
• Similar to Tata Group, it’s board composition reflects a perfect blend of industry expertise and independent directors, ensuring
robust oversight and accountability. By upholding high standards of governance, HDFC Bank has built a strong reputation for
reliability, which has strengthen its financial performance and positioned it as a leader in the banking sector.
• Sun Pharmaceutical Industries: Sun Pharma has demonstrated exemplary corporate governance practices, emphasizing
the importance of stakeholder engagement and risk management.
• The company’s board not only comprises independent directors but also encourages diversity and gender representation. By
incorporating stringent internal controls and compliance measures, Sun Pharma has instilled confidence in its investors and
stakeholders.
• This commitment to governance has not only resulted in sustainabl
 QUIZ TIME..!!!!

Short Ans type Questions:

1: State few general code of conducts applicable in any organization.
Slide no. 35,
2: List 5 benefits an organization can have by adapting good
corporate governance. Slide no. 33
3: What is the need of Corporate governance, state 3 reasons. Slide
no. 32
4: What 5 core values a manager must possess? Slide 26 and 27

5: Name few fundamental values. Slide no. 15

 QUIZ TIME..!!!!
MULTIPLE CHOICE QUESTIONS

1: Which of the following is not a terminal value?

A: Happiness
B: Freedom
C: Health
D: Courage
2: Which of the following is a core organizational value?
A: Honesty
B: Religious Faith
C: Patriotism
D: work ethic
 QUIZ TIME..!!!!
MULTIPLE CHOICE QUESTIONS

3: Which of the following is an unethical practice, followed in marketing department of

an organization:
A: Misleading adv.
B: Defective products
C: Biased recruitment
D: Over billing of expense
4: Positive brand image can be related to which company:
A: Enron
B: ABG shipyard
C: Tata group
D: Kingfisher Group
 TRUE/FALSE

1: Code of conduct of an organization must include leadership but not

stewardship.
2: Strong corporate governance maintains investors’ confidence, as a result of
which, company can raise capital efficiently and effectively.
3: Aesthetic value provide understanding of the attitudes, motivation and
behaviors.
4: The Key features of western culture comprise of spiritual growth of self, deep
connection with the nature, discipline in individual efforts, and a sense of
communion with others.
5: As per point of view of subjective value: There is fundamentally no dilemma in
one person judging a lie wrong and another judging it morally acceptable
 TRUE/FALSE

6: Employees make better decisions when business ethics are a guiding principle in
less time.
7: Corporate management refers to policies that specifically restrict or direct
how people can act.
8: Sun Pharma has demonstrated exemplary corporate governance practices,
emphasizing the importance of stakeholder engagement and risk management.
9: Materialism puts other intangibles such as ethics, friendship, sharing and caring
attitude at a lower priority, thereby increasing the possibility of assuming
unethical behavior.
10: Philosophical influences and genetic inheritance are part of primary sources
ethics.
 FILL IN THE BLANKS

1: Respectfulness comes under ----------- value.

2: ----------- are the rules of conduct recognized in respect to a
particular class of human actions or a particular group or culture.
3: …………. refers to the actions taken by a company to lead the
business in a positive direction.
4: …………….. involve an appreciation of the innate perfection of
nature and all its exquisite beauty.
5: The theory of …….. promotes the exercise of logic with
reference to the situations that one encounters.
 FILL IN THE BLANKS

6: …………. are the values that are a means to an end, not an end in itself.
7:A company’s…. attaches itself to a single product as a marketing tool.
8: The features of ……………….include a self-centered way of life, market
oriented creation of new needs, exploitation of natural resources and setting
up of large industries for massive production.
9: The ……………… believes that value is a property of the object itself,
independent of any particular subject's judgment
10: ………… can be defined as written and unwritten code of principles and
values that govern decision and action within the company