1. Ethics, Values and the
Corporate Governance
Corporate Governance and Corporate Social
Responsibility
2. • The justifiable balance between pursuing market opportunities and
keeping accountability and ethical integrity has been a old challenge
for businesses, mainly during the early stages of industrialization
since the inception of the joint-stock company.
• Throughout history, the accountability and responsibility of business
enterprises have often come under scrutiny.
3. • The global financial crisis highlighted evident failures in corporate
governance and business ethics
• This has intensified the search for improved ethical frameworks and
governance within the business sphere.
• The financial crisis emphasized the need for businesses to highlight
ethical conduct and responsible decision-making.
4. • In recent years, there has been a notable rush in corporate social and
environmental initiatives, indicating a heightened awareness of the
importance of ethical considerations in business practices.
• This shift suggests that businesses are recognizing the material impact
of adopting a more ethically-informed approach.
• Despite the challenges involved, there are encouraging signs that
large corporations are gradually prioritizing their social and
environmental responsibilities.
5. • Moreover, these issues are gaining better importance on the business
agenda, reflecting a growing recognition of their significance in the
broader societal context.
• Overall, the quest of market opportunities must be balanced with a
persistent commitment to accountability and ethical integrity.
• By embracing ethical principles and incorporating them into their
governance structures, businesses can not only enhance their
reputation and mitigate risks but also contribute positively to society
and the environment.
6. • The industrial revolution brought about significant technological
advancements, leading to the expansion of many large companies.
• This growth necessitated a wider diffusion of ownership, as no single
individual, family, or group of managers could provide the necessary
capital to sustain such expansion.
• There had been a profound implications of this separation of
ownership and control within corporations.
• This fragmentation meant that those who controlled the corporation
did not necessarily have direct ownership interests in it.
• this new concept of the corporation could lead to a broader sense of
accountability to the community.
7. • the few individuals who controlled these giant corporations had
exerted immense economic power.
• This power had the potential to impact countless individuals, entire
regions, and even shift the course of trade. It could bring prosperity
to some communities while causing ruin to others.
• This emphasized the importance of understanding the complex
dynamics between ownership, control, and accountability within
modern corporations.
8. • A succession of cycles of booming economies, followed by market
collapse and recession, culminated in 2007–2008 in the first global
financial crisis, which was also a crisis in governance and regulation.
• The most severe financial disaster since the Great Depression of the
1930s exposed the dangers of unregulated markets, nominal
corporate governance, and neglected risk management.
• Managers role had reduced to mere agents of shareholder principles.
shareholder value is the ultimate corporate objective which managers
are incentivised and impelled to pursue
9. • The financial crisis has shown that managers are often incapable of
resisting pressure from shareholders.
• In their management decisions, the short-term market value counts
more than the long-term health of the firm
• As governments, regulators, and financial institutions examined what
had gone wrong during the crisis, a new sense of the importance of
robust regulation, alert corporate governance, and stronger ethical
guidelines became widespread.
• In effect what is now emerging is an integration of corporate
governance, corporate social responsibility and corporate
sustainability which potentially offers a new framework for ethical
business.
10. • This newly-emerging ethical framework for business provides a
stronger base for the exercise of moral values and ethical reasoning.
• People in business are ultimately responsible as individuals, but they
are responsible as individuals in a corporate setting where their
responsibilities are at least in part defined by their roles and duties in
the company
• Businesses in turn are defined by their role(s) and responsibilities in
the larger community. This suggests an ethical alignment of
individuals, corporations, and the economic system, which is captured
in the definition of corporate governance offered by Cadbury, and
adopted by the World Bank:
11. • Corporate governance is concerned with holding the balance between
economic and social goals and between individual and communal
goals. The governance framework is there to encourage the efficient
use of resources and equally to require accountability for the
stewardship of those resources.
• The aim is to align as nearly as possible the interests of individuals,
corporations and society.
• This definition highlights the importance of corporate governance in
providing the incentives and performance measures to achieve
business success, and secondly in providing the accountability and
transparency to ensure the equitable distribution of the resulting
wealth.
12. • Business ethics is too often conceived as a set of impositions and
constraints, obstacles to business behavior rather than the motivating
force of that behavior.
• Properly understood, ethics does not and should not consist of a set of
prohibitive principles or rules, and it is the driving force of a successful
life .
• It is a motivation and in the best companies’ moves along with the
easy flow of interpersonal relations and a mutual sense of mission and
accomplishment.
13. • The balance between seeking market opportunities and maintaining
ethical accountability and integrity has proven to be a defining
challenge for the commercial enterprise since the advent of
corporations in the early years of industrialization.
• The evident failures of corporate governance and business ethics in
the global financial crisis have increased the urgency to seek a better
ethical and governance framework for business.
14. • The substantial increase in the scope, significance and impact of
corporate social and environmental initiatives in recent years suggests
the growing importance of adopting a more ethically informed
approach.
• These are signs that large corporations are taking their social and
environmental responsibilities more seriously, and that these issues
are becoming more important on the business agenda.
