Harish Dunakhe- Assignments- Business Ethics & Corporate Governance


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Harish Dunakhe- Assignments- Business Ethics & Corporate Governance

  1. 1. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012Disclaimer:This is a restricted document…. It is created for academic purpose only. The author reservesrights of this document and prohibits the readers from copying, distributing or reproducingthis material. Kindly take permission before using. Please write to:harish_dunakhe@yahoo.com / harish09.rd@gmail.com Assignment in Business Ethics & Corporate GovernanceQ1: What are the factors affecting Business Ethics. Explain withexamples.Though there are many factors which affect Business Ethics, a few are mentioned below: • Corporate culture • Existence of written Code • Norms of acceptable behavior • System of recognition of accomplishments • Company attitude towards employees • Hiring policy • Company’s decision making process • Financial rewards systemLet’s groups above factors in to 4 factors and discuss those in detail. 1. Behavior: Personal code of conduct 2. Policies & Framework 3. Ethical standards of top management 4. Ethical climate of the countryI believe the above-mentioned factors are mutually exclusive and collectively exhaustive. Let’s look atthem one by one.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  2. 2. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012 1. Behavior: Personal Code of ConductAs we know, the boundaries of legally acceptable behavior Unethical behavior is any actionare wider than those of Ethical Behavior. A person’s behavior that does not conform to themay be legally correct however it may not necessarily be standards of conduct establishedethically appropriate. by the organization.e.g. à • Disclosing commercial details of a competitor to a potential customer. While this is quite rampant in the business world, it is not ethical. Inappropriate Computer Use: • Employees may use company computers to engage in unethical behavior. For example, an employee who is not permitted to use the Internet for personal reasons commits an unethical act by shopping online while at work. Random Internet surfing takes away from the time he/ she spend on work-related activities. Employees sometimes use company email to spread inappropriate websites or videos to co-workers, some of which could be deemed offensive by the recipients. Time Misuse • Unethical behavior can include stealing time from the company, as the company is compensating employees and receiving no productivity in return. In addition to time spent on aimless Internet surfing, time misuse can consist of extending breaks beyond the allotted time, congregating around the water cooler or engaging in lengthy gossip sessions during working time, falsifying time sheets, coming into work late or leaving early and running personal errands while traveling on company business. Sexual Harassment and Bullying • An employee could commit unethical behavior by sexually harassing co-workers. This could involve making lewd comments, touching inappropriately or making unwanted sexual advances. Bullying typically involves attempting to intimidate a co-worker by making demeaning comments about him, spreading gossip or even making verbal or physical threats. In general, a bully attempts to make the workplace as uncomfortable as possible for a co -worker. In some cases, ongoing bullying can escalate into violence in the workplace.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  3. 3. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012 Illegal Acts Legally • Some unethical acts can also be illegal. For example, Acceptable an employee who has access to a companys financial Behavior records, such as a bookkeeper or accountant, could use his/her access and expertise to misuse company funds. An HR representative could commit identity Ethical theft or sell personal data to other companies. Behavior 2. Policies & Framework Organizational policies & available framework to deal with ethical issues / cases affect ethical behavior of an employee. The policies and framework decide how committed a company is to implement ethical practices.Policies mean: 1. List down what is ethical behavior and what is unethical behavior 2. Enforce upon employees to comply with the expected behavior. 3. Link their performance appraisal / confirmation / survival in the company with their ethical behavior.Framework necessarily means 1. Ombudsman process in case of a situation.e.g. à Large IT companies and a few business houses (such as Tata Sons, Wipro, Infosys) are particularabout their employees adhering to the Policies & Framework available. Wipro has a COBC Certificationcourse, which is mandatory for every employee to pass. Secondly Wipro has Ombudsman in place andemployees undergo routine training on ethical & unethical cases which have happened in recent times. 2. Fair Trial (Unethical behavior)In case an employee crosses the boundaries of ethical behavior, he / she shouldbe provided with a fairtrial. Wipro’s Ombudsman process provides the accused and victim fair chance to put forth his/herpoint. 3. Ethical Standards of Top ManagementEmployees follow Top Management’s behavior without expressing. If the Chief of the company behavesunethically ill-treats his female colleagues, misuses company funds, then the employees are more likelyto be unethical & corrupt.e.g. à Many example can be cited…. Satyam Computers’ CEO Ramalinga Raju’s behavior was a classicalcase. Enron’s CEO and Chairman were at the peak of unethical practices which led Enron down thedrain.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  4. 4. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012 4. Ethical climate of the countryActually Ethical Climate of the company is resultant of the above 3 parameters. Nevertheless, EthicalClimate is essential for the company’s survival and growth in ethical manner. Companies may haveethical people at top leading the company in right direction, it may also have Policies & Framework inplace at the same time it may also have ethical employees… even after this, the company may getcaught in the web of unethical business practices. Climate also gets affected by the Financial Rewardsystem of the company. If company is able to investigate and pick out unethical behavior and punishaccordingly it passes a a strong message to its employees. Similarly if the company rewards ethicalbehavior regardless of the amount of commercial success this behavior has brought, it creates ethicalclimate and encourages people to behave ethically.e.g. à Many examples can be cited again here. Let’s look at Coca Cola India and Pespsico India… whileit’s not clear whether the top management was involved in the pesticide case or not, the climatedefinitely was not promoting ethical practices.Other examples could be: Dow Chemicals in Dehu Road, Union Carbide’s Bhopal Gas Tragedy and postgas leak. Everything points to the ethical climate of a company.Summary:The above mentioned factors, if managed well can create highly ethical work environment. Ethicalbehavior is a less understood area. Companies need to spend time, money and energy in communicatingtheir expectations to their employees. Top Management’s behavior is watched and emulated by others.Hence big bosses must behave in ethical & legally acceptable manner.Q2: What are the principles of admirable Business Ethics? What arethe common excuses given by the people to rationalize unethicalbehavior?Following are the Principles of Admirable Business Ethics. • Trustful • Open mind • Meet obligations • Clear document • Enforcement of commitment • Maintain accountable conduct • Be respectfulAssignment Confidential SIBM, Pune Exec. MBA 2010-13
  5. 5. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012The above principles are like guiding lighthouse for an individual as well as for a company. While anemployee may try to act as ethical as possible a few of the above principles are a must to be admired inthe business environment.Trustful: Employees, shareholders, customers, suppliers & other Trust is the foundation of ethicalstake-holders must trust the individual running the show. Whencustomers want a supplier for long-term they essentially look at business.trustworthiness of that supplier. Being trusted is also emotionallysatisfying. It increases our self-esteem and validates our goodcharacter. In professional affairs trust is a valuable asset.e.g. à Toyota / Maruti Suzuki look for trustworthy suppliers. They are concerned about their supplier’sbackground, financial strength and ethical standards.Open Mind: Learning can happen from anywhere. Though companies try to demarcate Ethical &Unethical behavior it’s difficult to pen-down everything. Besides, employees can also make mistakesunknowingly. Open mind is needed to learn this time & again. Looking for suggestions, feedback andimproving is essential for the survival & growth of the company.e.g. à Classic example can be SONY Walkman…. Suggestions, feedback said, unsaid was picked up by -SONY to create a Walkman.Meet Obligations: Organizations should take efforts to satisfy customer expectations… One must thinkbefore committing something to his/her customer… However once given a commitment, regardless ofthe circumstances, do everything in your power to honor that commitment. The cost of acquiring newcustomers is fairly high. Hence take efforts and gain the trust of past customers and clients, particularlyif something has gone wrong. Maintain customer satisfaction.e.g. à Wipro takes sincere efforts to listen to customer’s voice and take necessary actions. It’s quitecommon in service industry that customers will have ever increasing wish-list. Managing customerexpectation is a huge task. Through its quarterly customer feedback system Wipro tries to meetcustomer obligations and commitments.Have Clear Documents: Re-evaluate all print materials including small business advertising, brochures,and other business documents making sure they are clear, precise and professional. Most important,make sure they do not misrepresent or misinterpret.e.g. à HUL takes efforts in maintaining synergy in the message they pass to market.Become Community Involved: Remain involved in community-related issues and activities, therebydemonstrating that your business is a responsible community contributor. In other words, stay involved.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  6. 6. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012e.g. à Wipro’s involvement in primary education through Azim Premji Foundation or Tata’s communityinvolvement through its various initiatives in well-known.Maintain Accounting Control: Take a hands-on approach to accounting and record keeping, not only asa means of gaining a better feel for the progress of your company, but as a resource for any"questionable” activities. Gaining control of accounting and record keeping allows you to end anydubious activities promptly.e.g. à Lately most of the well-known companies (known for their ethical business practices) havestarted complying to GAAP, IFRS, SOX and various other international accounting standards. Third partyaudit by internationally reputed audit firms is a norm. Many examples can be cited. KPMG, PWC, E&Y,Botliboy & Co. etc. are well-known audit firms which are known for their Accounting Control standards.Be Respectful: Treat others with the utmost of respect. Regardless of differences, positions, titles, ages,or other types of distinctions, always treat others with professional respect and courtesy.Recognizing the significance of business ethics as a tool for achieving your desired outcome is only thebeginning. A business that instills a deep-seated theme of business ethics within its strategies andpolicies will be evident among customers. Its overall influence will lead to a profitable, successfulcompany.e.g. à American professionals walk up to the doorway when the visitor is about to leave. This is out ofrespect for the person. Also they find it highly unethical if someone doesn’t respect their time.Excuses given by people for not conforming to Admirable Business Ethics: 1. A belief that it is in realm of legal ethical limits.As explained earlier, sometimes a particular behavior may be legal but may not necessarily be ethical.For example driving a car is legally allowed but it increases pollution. Hence in some countries wheregood quality public transport is available driving a car is considered as unethical. Another example couldbe smoking. The passive smokers are at no fault than being in the company of smokers. One moreexample can be using official software programs for personal use. We rationalize saying it mightincrease productivity it actually is depriving the software company of sale of a license copy. 2. It is in the best interest of company/stake-holdersRationalizing unethical behavior as it’s in the best interest of company is another form of justification forunethical behavior.e.g. à CEOs generally show non-performing assets as part of another subsidiary so that their books are‘clean’. What they actually do is just remove the dirt from one location and put it at another. This waythey do ‘good’ to the company.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  7. 7. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012 3. It is safe because it will be never publicized.This is another form of rationalization. Generally this kind of behavior is seen in people associated withSales & Marketing, R & D etc. Let’s look at following examples.e.g. àProduct Representations – The salesman told me it would outperform the competition but he didn’t tellme that was only under limited conditions.Product Quality – We needed to meet our delivery schedule so we sent the product out and planned tosend a patch for that bug later.Sales Dealings – She is a good customer so of course I gave her a 5% discount because I knew we hadraised our prices by 10% just before advertising the sale. 4. The company will condone it.Many employees who know that their CEO/ MD or even share-holders, government is ‘ok’ with somekind of behavior if that behavior brings in benefit to the company, will cross the borders of ethicalbehavior.e.g. à The company will condone it was conspicuous in Enron’s case.Mr. Jeffry Skilling - COO & President and Mr. Kenneth Lay- CEO of Enron committed financial fraud,misrepresented their numbers and enticed their staff to outperform Enron’s competitors. Back of theirmind they knew they were being smart, they are making money for the company … Sinc the money ethey will make was for the company they knew the company will overlook their behavior(in case of anyissue).Summary:Employees should be taught to question their decisions byasking; “Am I rationalizing unethical behavior?” Businesses Businesses need to reinforceneed to reinforce their ethics policy by instructing employees, their ethics policy by instructingwhen there is doubt; “Take the high road”. When followed, employees, when there is athis simple rule will help employees avoid unethical behavior. doubt “Take the high Road”.Unethical behavior creates a victim who is negativelyimpacted by the employee’s actions. If there is a victim thenthe employees behavior is likely unethical.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  8. 8. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012Q3: “While resolving the defining moments, the successful managersundertake introspection of their core values and principles, whichleads them to take shrewd, pragmatic, politically astute action.” ProfJoseph Badaracco of Harvard Business School. Explain the definingmoments for the individuals, managers and company with suitableexamples.Defining moment is that one moment in a person’s life which alters course of his life.Defining Moment for Individual:I think for an individual the ethical dilemma he/she faces while performing his/her duties can create adefining moment. Not everybody will be exposed to the ‘greater grey’ area of ethical behavior.Generally sales & marketing professionals operate in that area. They have to deal with governmentofficials, purchase staff of a company and various other people who can influence a deal.My defining moment was when I turned down a bribery demand from a government official. He askedmoney for some work… I politely refused. It was a tough discussion but I did it.I agree with Prof Joseph Badaracco of Harvard Business School when he says, “While resolving thedefining moments, the successful managers undertake introspection of their core values and principles,which leads them to take shrewd, pragmatic, politically astute action”. Indeed, I had to be politicallycorrect when I was dealing with that guy… a little difficult stand could have turned that ‘small talk’ in toan argument. We got to be seasoned and politically mature to handle such scenario.Defining Moments for Managers:Managers face ethical issues quite often… They need to clear travel claims, approve leaves, work withdifficult colleagues, also need to work with cross-functional teams etc. Defining moment for anymanager may not be any different than that for an individual. Considering the sphere of influence he /she need to take a decision.e.g à I know a case when a senior manager at one of the major IT company in India asked one of hiscolleagues to leave. This colleague was an extraordinary person with very high business acumen.However he was asked to leave due to the breach of Code of Business Conduct (COBC) at this company.A lady colleague had complained of unethical behavior against this colleague.The manager had tough mental battle. The manager immediately referred it to the Ombudsman. Helooked at the guidelines available at this company and also asked for expert opinion in this scenario.Post that they gave an opportunity to explain his stand to this colleague. After hearing his views andconsidering the plea from this lady colleague the manager asked this colleague to resign.Assignment Confidential SIBM, Pune Exec. MBA 2010-13
  9. 9. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012Defining Moments for company:Companies face such scenarios once in a while. Cases where employees behave unethically, suppliers doshort supply or try to influence their purchase staff and many other examples.Tata Power Co Ltd had such an experience recently. The purchase manager came across a supplier whotried to influence him. He referred this case immediately to his manager. The top boss and this purchasemanager referred to Tata Code of Conduct and (TCOC) decided to blacklist this supplier.Umpteen examples can be cited for companies to mention their defining moments. Companies need totake tough, politically correct and astute decisions to remain morally and ethically correct.Q4: For ensuring achievement of long term goals it is sometimesprudent to act like a fox rather than a lion. This may be morepragmatic approach. Discuss this with known cases.How praiseworthy it is for a person to keep good faith and live with integrity, and not with astuteness?Still the experience shows that those people to have done great things who have had little regard forgood faith, and have been able by astuteness to confuse mens brains, and who have ultimatelyovercome those who have made loyalty their foundation.We know that there are two methods of fighting, the one by law, the other by force: the first method isthat of men, the second of beasts. But as the first method is often insufficient, one must have recourseto the second. It is therefore necessary to know well how to use both the beast and the man. A managermust know how to use both natures, and that the one without the other is not durable. A manager,being obliged to know well how to act as a beast must imitate the fox and the lion. The lion cannotprotect himself from traps, and the fox cannot defend himself from wolves. One must therefore be a foxto recognize traps, and a lion to frighten wolves.Those that wish to be only lions do not understand this. Therefore, a prudent manager ought not tokeep faith when by so doing it would be against his interest, and when the reasons which made himbind him no longer exist. Not all men are good… a few are good and a few bad…. Since some of them arebad, and would not observe their faith with you, so you are not bound to keep faith with them.The fox and lion analogy is about faith and integrity. One needs to understand that if we live with ourintegrity all the while and are not vigilant of ulterior motives of other people, we are bound to gettrapped in issues… Just the way a lion gets trapped in a cage. On the other hand, if fox cannot fightagainst wolves… this necessarily means regardless of how clever & astute you are, you must keep yourAssignment Confidential SIBM, Pune Exec. MBA 2010-13
  10. 10. HARISH DUNAKHERoll No. 33310 Business Ethics & Corporate Governance May 27th 2012faith & integrity intact. They are your forces, which protect you from the temptation of unethicalbehavior.e.g. à Companies have loyal as well as astute employees. A manager must be both. He needs to knowwhat is right and ‘where’ it is right. While dealing with some of our colleagues my manager considersloyalty as well as astute behavior from his employees.Thank you.Harish DunakheRoll No. 33310SIBM Exec MBA 2010-13Assignment Confidential SIBM, Pune Exec. MBA 2010-13