Business ethics (1)

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Business Ethics, Corporate Governance, Moral Code, Satyam, Enron

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Business ethics (1)

  1. 1. Vikas Kumar Tyagi
  2. 2. Why Business Ethics ?  “A business that makes nothing but money is a poor kind of business”– Henry Ford  A business that makes nothing but money (mostly) does not make it for long Vikas Kumar Tyagi
  3. 3. WHAT IS ETHICS ?WHAT IS ETHICS ?  A system of moralA system of moral pinciples,rules and standardspinciples,rules and standards of conduct.of conduct.  The branch of philosophyThe branch of philosophy that deals with issues of rightthat deals with issues of right and wrong in human affairs.and wrong in human affairs. Vikas Kumar Tyagi
  4. 4. BUSINESS ETHICSBUSINESS ETHICS ETHICAL RULES AND PRINCIPLES WITHIN A COMMERCIAL CONTEXT. THE VARIOUS MORAL OR ETHICAL PROBLEMS THAT CAN ARISE IN A BUSINESS SETTING. Vikas Kumar Tyagi
  5. 5. 3 Models of Management Ethics3 Models of Management Ethics  Three Types Of Management Ethics Vikas Kumar Tyagi
  6. 6. FACTORS AFFECTING ETHICAL OR UNETHICAL BEHAVIOUR INDIVIDUAL CHARACTERSTICS -VALUES -EGO STRENGTH STRUCTURAL VARIBLES -ORGANIZATION STRUCTURE ORGANIZATION’S CULTURE -STRENGTH ISSUES INTENSITY Vikas Kumar Tyagi
  7. 7. Mechanisms for EthicalMechanisms for Ethical ManagementManagement  Top Management CommitmentTop Management Commitment  Code of EticsCode of Etics  Ethics CommitteeEthics Committee  Ethics AuditEthics Audit  Ehics TrainingEhics Training Vikas Kumar Tyagi
  8. 8. What is similarity between all of these-What is similarity between all of these- Parmalat Royal Ahold NV Tyco international Imclone Enron WorldCom Vikas Kumar Tyagi
  9. 9. "It was like riding a tiger,"It was like riding a tiger, not knowing how to getnot knowing how to get off without being eaten."off without being eaten."-Raju. Ramalinga B.-Raju. Ramalinga B. Vikas Kumar Tyagi
  10. 10. Satyam Computer Services Ltd /Satyam Computer Services Ltd / Mahindra SatyamMahindra Satyam  Founded in 1987 byFounded in 1987 by B Ramalinga RajuB Ramalinga Raju in form of Sifyin form of Sify Limited and in textiles.Limited and in textiles.  Awards he gotAwards he got Ernst & Young Entrepreneur of the YearErnst & Young Entrepreneur of the Year Asia Business LeaderAsia Business Leader Golden Peacock AwardGolden Peacock Award  The company offersThe company offers consultingconsulting and informationand information technology (IT) services spanning various sectorstechnology (IT) services spanning various sectors  listed on thelisted on the New York Stock ExchangeNew York Stock Exchange National Stock Exchange (India)National Stock Exchange (India) Bombay Stock Exchange (India).Bombay Stock Exchange (India).  ByrrajuByrraju Foundation andFoundation and SatyamSatyam FoundationFoundation Vikas Kumar Tyagi
  11. 11. ..  In 2009, B Ramalinga Raju resigned as the SatyamIn 2009, B Ramalinga Raju resigned as the Satyam CEO, admitting to an accounting fraud to the tune ofCEO, admitting to an accounting fraud to the tune of 7136crore rupees7136crore rupees  Satyam had engaged PricewaterhouseCoopers as itsSatyam had engaged PricewaterhouseCoopers as its auditors over past 10 yearsauditors over past 10 years  Raju stated that the aborted Maytas deal was actually aRaju stated that the aborted Maytas deal was actually a last attempt to "fill the fictitious assets with real ones“last attempt to "fill the fictitious assets with real ones“  (In August 2009, IL&FS replaced as promoters of Maytas Infra.)(In August 2009, IL&FS replaced as promoters of Maytas Infra.)  In 2008, the Satyam board approved a US$ 1.6 billionIn 2008, the Satyam board approved a US$ 1.6 billion acquisition of the Maytas Infra and Maytas Propertiesacquisition of the Maytas Infra and Maytas Properties controlled by the Raju’s family.controlled by the Raju’s family. Vikas Kumar Tyagi
  12. 12. What basically happenedWhat basically happened  Inflated cash/bank balance of Rs 5040 cr.Inflated cash/bank balance of Rs 5040 cr.  A accrued interest of 376 cr.A accrued interest of 376 cr.  An understated liability of 1230 cr.An understated liability of 1230 cr.  A overstated debtors position of 490 cr.A overstated debtors position of 490 cr.  Raju had also opened multipleRaju had also opened multiple benamibenami (dummy)(dummy) accounts through relatives and friends and used themaccounts through relatives and friends and used them to trade in Satyam's sharesto trade in Satyam's shares  Benami land deals and illegal transfer of shares..Benami land deals and illegal transfer of shares..  Satyam had only 40,000 employees and not aroundSatyam had only 40,000 employees and not around 53,000 as claimed by Ramalinga Raju. 'Every month53,000 as claimed by Ramalinga Raju. 'Every month Rs.200 million (Rs.20 crore) was being withdrawn inRs.200 million (Rs.20 crore) was being withdrawn in the name of non-existent employees.the name of non-existent employees.  Total expected personal gain by Raju was of Rs. 74Total expected personal gain by Raju was of Rs. 74 billonbillon  'Investigation has revealed that money has been used'Investigation has revealed that money has been usedVikas Kumar Tyagi
  13. 13. Vikas Kumar Tyagi
  14. 14. Vikas Kumar Tyagi
  15. 15. Effects of the scamEffects of the scam  Leaving an uncertain future for the company and its 40,000Leaving an uncertain future for the company and its 40,000  Satyam Computers could have removed from the Sensex andSatyam Computers could have removed from the Sensex and NiftyNifty  World Bank barred Satyam from offering its computer servicesWorld Bank barred Satyam from offering its computer services for eight yearsfor eight years  Indian associate of Merrill Lynch terminated an agreement onIndian associate of Merrill Lynch terminated an agreement on grounds of "material accounting irregularities".grounds of "material accounting irregularities".  Satyam’s worth estimated at seven billion dollars fell to less thanSatyam’s worth estimated at seven billion dollars fell to less than 330 million dollars330 million dollars Vikas Kumar Tyagi
  16. 16.  On June 21, 2009, Satyam unveiled its newOn June 21, 2009, Satyam unveiled its new corporate identity – “Mahindra Satyam.corporate identity – “Mahindra Satyam.  Ramalinga Raju is currently in a HyderabadRamalinga Raju is currently in a Hyderabad prison along with his brother and formerprison along with his brother and former board member Rama Raju, and the formerboard member Rama Raju, and the former CFO .CFO .  They have been provided a VIP status in jail.They have been provided a VIP status in jail.  He suffered heart attack on 8He suffered heart attack on 8thth sep. and wassep. and was later taken to hospital (NIMS).later taken to hospital (NIMS).  Now he is in the same hospital.Now he is in the same hospital.  And the investigation is still going on.And the investigation is still going on. Vikas Kumar Tyagi
  17. 17. DoDo HarvardHarvard Business SchoolBusiness School syllabussyllabus don’t have a chapter ondon’t have a chapter on managerial ethics?managerial ethics? Vikas Kumar Tyagi
  18. 18. Example setting -Example setting -  Reuben Mark ,the CEO of Colgate –PalmoliveReuben Mark ,the CEO of Colgate –Palmolive calling Herb Baum , CEO of Dial corporationcalling Herb Baum , CEO of Dial corporation over the Dial’s strategic marketing plan.over the Dial’s strategic marketing plan. Vikas Kumar Tyagi
  19. 19. Where the problem isWhere the problem is lying?lying? Vikas Kumar Tyagi
  20. 20. YOU SHOULD ALWAYS FOLLOWYOU SHOULD ALWAYS FOLLOW “I LIVE BY TRUTH THAT ‘“I LIVE BY TRUTH THAT ‘NONO’ IS’ IS A COMPLETE SENTENCE”A COMPLETE SENTENCE” Vikas Kumar Tyagi
  21. 21. Vikas Kumar Tyagi

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