Business_Ethics

BE BUSINESS ETHICS AND CORPORATE GOVERNANCE Course content: 1. Evolution of ethics in business – culture and ethics - overview of ethics value system, attitude, belief, a life patterns – social economics values and responsibility trusteeship management – Gandhian philosophy of wealth management – Ethics and Indian management. Basic framework of Normative ethics and decision making, social responsibility of business – Ethical aspects of corporate policy, morality and rationality in Formal Organisation – Moral relationship between Individual and Organisations. 2. Relationship between Ethics and Corporation Excellence – Approaches for developing various orientation towards Ethical Business Behaviour. 3. Corporate Governance – including suggestions of the Adrian Cadbury report, the Kumaramangalam report and their ethical ramifications. 4. Ethics in International scenario – focusing on the unique nature of ethical dilemmas in a cross – cultural setup, guidelines for resolving and examples of corporate transgressions as well as corporate courage and ingenuity. 5. Moral Evolution of the firm – dealing with the stages of Ethical Growth and Organisations and categorization of Indian trains – national corporate at various stages of growth. Reference text: 1. Ethics of Management by Hosmer 2. Ethics of Management by Chakraborty 3. Ethics by Chandra sekhar 4. What is ethical in Ethics by John Henderson. 5. Business Ethics by Manish Paliwal 6. A study in Business Ethics by Rituparna Raj 7. Business Ethics and Professional Values by A.B.Rao 8. Business Ethics by C.V.S. Murthy 9. Foundations of Ethics in Management by Bani Banerjee INDEX TO TOPICS "Without civic morality communities perish; without personal morality their survival has no value." - Bertrand Russell | SL. |NAME OF TOPICS |PAGE NOs. | |NOs. | | | |1 |An Overview of Business Ethics |03 | |2 |Evolution of Ethics in Business |16 | |3 |Culture and Ethics |22 | |4 |Overview of Ethical Value System |25 | |5 |Attitudes, Beliefs and Life Patterns |29 | |6 |Ethical Dilemma and Decision Making |41 | |7 |Trusteeship Management - Gandhian Philosophy of Wealth Management |55 | | | | | |8 |Basic Framework of normative Ethics |78 | |9 |Social Responsibility of Business |86 | |10 |Ethical Aspects of Corporate Policy – Ethics in Marketing, Finance and Human Resources |93 | | | | | |11 |Morality & Rationality in Formal Organisations |113 | |12 |Moral Relation Between Individual & Organisation |120 | |13 |Approaches for Developing Various Orientation towards Ethical Business Behaviour |124 | | | | | |14 |Corporate Governance |127 | |15 |Ethics and Indian Management |139 | |16 |Ethics in International Scenario |141 | 1. BUSINESS ETHICS AN OVERVIEW OF BUSINESS ETHICS Some were asked as to what they understood by the word “ethics’ and they answered like this, the first one being Baumhart: "Ethics has to do with what my feelings tell me is right or wrong." "Ethics has to do with my religious beliefs." "Being ethical is doing what the law requires." "Ethics consists of the standards of behavior our society accepts." "I don't know what the word means." These replies might be typical of our own. The meaning of "ethics" is hard to pin down, and the views many people have about ethics are shaky. Like Baumhart's first respondent, many people tend to equate ethics with their feelings. But being ethical is clearly not a matter of following one's feelings. A person following his or her feelings may recoil from doing what is right. In fact, feelings frequently deviate from what is ethical. Nor should one identify ethics with religion. Most religions, of course, advocate high ethical standards. Yet if ethics were confined to religion, then ethics would apply only to religious people. But ethics applies as much to the behavior of the atheist as to that of the saint. Religion can set high ethical standards and can provide intense motivations for ethical behavior. Ethics, however, cannot be confined to religion nor is it the same as religion. Being ethical is also not the same as following the law. The law often incorporates ethical standards to which most citizens subscribe. But laws, like feelings, can deviate from what is ethical. Our own pre-Civil War slavery laws and the apartheid laws of present-day South Africa are grotesquely obvious examples of laws that deviate from what is ethical. Finally, being ethical is not the same as doing "whatever society accepts." In any society, most people accept standards that are, in fact, ethical. But standards of behavior in society can deviate from what is ethical. An entire society can become ethically corrupt. Nazi Germany is a good example of a morally corrupt society. Moreover, if being ethical were doing "whatever society accepts," then to find out what is ethical, one would have to find out what society accepts. To decide what I should think about abortion, for example, I would have to take a survey of American society and then conform my beliefs to whatever society accepts. But no one ever tries to decide an ethical issue by doing a survey. Further, the lack of social consensus on many issues makes it impossible to equate ethics with whatever society accepts. Some people accept abortion but many others do not. If being ethical were doing whatever society accepts, one would have to find an agreement on issues which does not, in fact, exist. What, then, is ethics' Ethics is two things. First, ethics refers to well based standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well founded reasons. Secondly, ethics refers to the study and development of one's ethical standards. As mentioned above, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to constantly examine one's standards to ensure that they are reasonable and well-founded. Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly-based. DEFINING BUSINESS ETHICS: Understanding the landscape of business ethics can be problematic. The field is vast, often encompassing such concerns as corporate governance, reputation management, accurate accounting and audits, fair labor practices and environmental stewardship to name but a few. In fact, the field addresses the entire scope of responsibilities - or obligations - that a company has to each of its stakeholders: those who have a vested interest - or stake - in the decisions and actions of a company, like clients, employees, shareholders, suppliers and the community. Depending upon the company in question, one may even be able to identify additional stakeholders. The field of business ethics is further complicated by the fact that many terms exist to refer to corporate offices and programs intended to communicate, monitor, and enforce a company's values and standards. In theory, one can make some rough distinctions among the various domains related to business ethics, e.g., corporate responsibility, social responsibility, corporate compliance, etc. In practice, however, such distinctions blur because corporate offices of compliance established in the 1970s may now function similarly to an office of corporate and social responsibility. For the purpose of clarity, definitions will be provided for each of the terms that can be understood as related to the goal of improving the conduct of business, namely, business ethics, corporate compliance, corporate responsibility and corporate and social responsibility. Please note that these definitions are not being offered as official definitions, but only to impart how they are commonly used in the business ethics industry. Business Ethics: Business ethics is a form of applied ethics. It aims at inculcating a sense within a company's employee population of how to conduct business responsibly. Because the term "ethics" can pose problems in an international context, i.e., the term does not translate well and it can be difficult to find a common understanding of the term, some organizations choose to recast the concept of business ethics through such other terms as integrity, business practices or responsible business conduct. Business Ethics in nothing but the application of ethics in business. Business ethics is a form of applied ethics that examines ethical rules and principles within a commercial context, the various moral or ethical problems that can arise in a business setting and any special duties or obligations that apply to persons who are engaged in commerce. Business Ethics is the study and evaluation of decision making by businesses according to moral concepts and judgments. Ethical questions range from practical, narrowly defined issues, such as a company's obligation to be honest with its customers, to broader social and philosophical questions, such as a company's responsibility to preserve the environment and protect employee rights. Many ethical conflicts develop from conflicts between the differing interests of company owners and their workers, customers, and surrounding community. Managers must balance the ideal against the practical—the need to produce a reasonable profit for the company's shareholders with honesty in business practices, safety in the workplace, and larger environmental and social issues. Ethical issues in business have become more complicated because of the global and diversified nature of many large corporations and because of the complexity of government regulations that define the limits of criminal behavior. For example, multinational corporations operate in countries where bribery, sexual harassment, racial discrimination, and lack of concern for the environment are neither illegal nor unethical or unusual. The company must decide whether to adhere to constant ethical principles or to adjust to the local rules to maximize profits. As the costs of corporate and white-collar crime can be high, both for society and individual businesses, many business and trade associations have established ethical codes for companies, managers, and employees. Government efforts to encourage companies to adhere to ethical standards include President Clinton's Model Business Principles (1995), in a program overseen by the Dept. of Commerce. INTRODUCTION Managers across the world have now realised that the reputation and success of their organisations are linked to their compliance with the ethical standards. Business ethics is about ensuring acceptable standards of behaviour throughout all the operations of a business. It involves complying with the company, legal, professional and regulatory standards, and abiding by the principles like fairness, honesty, respect and truth. It implies to the understanding of what is right and wrong in the work place. A highly respected philosopher has said about seven sins of current times i.e. a) Business without morality b) Politics without principles c) Education without character d) Worship without sacrifice e) Wealth without hard work f) Human existence without regard for scriptures and g) Devotion without austerity. Ethics is something related to propriety which means fitness/ righteousness/ correctness. What is right is ethical and what is wrong is unethical To refer something as ‘ethically wrong’ is called as an “Oxymoron”. Anything that is ethical is simply right, proper, fair and just. “Ethical does not speak of something right or wrong. This world would have been a different place and difficult to imagine. The world would have been really wild and difficult to manage. This is because the world believes in values, which are our standards of right or wrong in the context of ethics. Colloquially, values are strong set of beliefs that are passed on from one generation to another. They could be theoretical, economical, aesthetic, social, political, religious etc. Values are important because they are universally accepted and influence our lives by making us aware good and bad aspects of life. UNDERSTANDING OF ETHICS: Business Ethics can be compared to Human Conduct. And based on our human moral judgements we term things are good or bad, right or wrong, and moral or immoral, similarly Business Ethics can also be termed as above. Thus, Ethics can be simply termed as the “science of Character”. Deepak Parikh in his JRD Tata Corporate Leadership Award Lecture on 27.02.1997 has given one line definition of Ethics: “Do not do something that you would be ashamed of, if it becomes public”. It is not too difficult to achieve this. There is no pillow as soft as a clear conscience. What can we expect to gain from an ethics class' ● More clarity and better understanding about what is right and wrong, therefore, more confidence about our choices and about the reasoning process we use to defend our behavior ● Understanding about other possible and legitimate ways to arrive at ethical answers; tolerance about different approaches ● Understanding about some of the pitfalls involved in trying to differentiate right from wrong ● Preparation for situations different from ones we usually encounter (in daily life, most people will reason analogically--in terms of like cases and answers which worked previously) MEANING/ DEFINITION The word “Ethics” is coined from the Latin word ‘Ethicus’ and Greek word ‘Ethikos’ which goes to mean ‘Character’. Ethics is thus said be a “Science of conduct”. Business Ethics are moral principles and standards that guide behaviour in the world of business. According to Johnson Donaldson, “Business Ethics can be described as systematic study of moral (ethical) matters pertaining to business, industry or related activities, institutions or practices and beliefs. It is the systematic handling of values in business and industry”. According to Mc Namara, “Business Ethics is generally coming to know what is right or wrong in the work place and doing what is right with regards to the effect of products/ services and the relationships with the stockholders. Attention to ethics in the work place sensitizes managers and staff as to how they should act so that they retain a strong moral compass. Consequently ethics can be strong preventive medicine”. NATURE OF ETHICS 1. The concept of ethics is applied to human beings only as they only have the freedom of choice and means of free will. It is the human being who can distinguish between good or evil, right or wrong and such attributes. 2. The study of ethics is nothing but a field of social science in which a set of systematic knowledge about moral behaviour and human conduct is learned. 3. Ethics deals with human conduct which is voluntary not forced by circumstances or humans. So we can say that at the ground level ethics deals with moral judgement set to achieve a directed human conduct. 4. This science of ethics is a normative science. Normative science involves establishment of norms (moral standards) to regulate right conduct and stop wrongs so as to have ideal actions. 5. Business ethics has become important as businesses have produced corruption, favouritism and nepotism, thereby deteriorating human values. There have series of scams in businesses which are scandalous to the society. 6. Businesses around the world are rapidly increasing but are said to be violating the principles of public conduct. That is why the world around are now adopting ethical conduct, code of ethics. 7. In the ever growing business world, with emerging intense competition and desecration of human values, when people seem to lose faith in laws and courts, application of ethics are called for. 8. The AICTE which regulates the management education in India have recommended inclusion of business ethics in the study curriculum. OBJECTIVES OF BUSINESS 1. The very basic objective is to define the greatest good of man and establish standards for the same. 2. To study human behaviour and assess moral and immoral behaviour. 3. To set/establish moral standards/norms of behaviour and to enable to right judgements on them. 4. To prescribe moral behaviour to recommend as to how and how not be behave. ETHICS & RELATED TERMS Ethics and Morality: Morals are a set of accepted rules and standards of human behaviour and morality refers to the degree of conformity to those moral principles. Truly, differentiation between the two is very difficult and so often both are assumed to be one and the same only because ethics and morality speak of standards of human behaviour. What’s the difference between ethics and morality' Aren’t my personal moral values enough to guide my decision making' Morals and the expression, “moral values” are generally associated with a personal view of values. Personal morals tend to reflect beliefs relating to sex, drinking, gambling, etc. They can reflect the influence of religion, culture, family and friends. Ethics is concerned with how a moral person should behave. Ethical values are beliefs concerning what is morally right and proper as opposed to what is simply correct or effective. i.e. An individual may personally believe that drinking is immoral. However, drinking is not, in and of itself, unethical. Further, it is unethical to impose your personal moral values on another. Ethical values transcend cultural, religious, or ethnic differences. Ethical values embrace a more universal worldview. The Josephson Institute of Ethics recommends six, core ethical values to abide by: Trustworthiness, Respect, Responsibility, Fairness, Caring and Citizenship. Whether the circumstance is business or life, ethical values should be ground-rules for behavior. When we live by these values we are demonstrating that we are worthy of trust. In “What Do You Stand For'”, former New Jersey Governor Christie Whitman talks about stopping short of being sworn-in as governor when it was discovered that her campaign manager had spread false information that her victory was made possible by bribing local religious leaders. Whitman took the ethical stand that she would delay her inauguration until a thorough investigation into the matter was complete. The investigation proved her innocent of any voter fraud. Ethics and Religion: All the religions give due importance to ethics as ethics are said to the expression of divine will that reveals right/wrong, good/bad and moral/immoral behaviour in all spheres of our lives. According to Thomas Garrett – the religion derive their moral precepts not from human experience but from divine revelation that are only to be believed. Ethics get idea from religion and through experiments it approves them a ‘code of conduct’. So ethics and religion though related are different from one another. Ethics and Law: Law is a code of conduct which the authority in power prescribes for the society. It is concerned with the minimum regulation necessary for public order which is enacted by government. So government gives shape to only those minimum social obligations, customs or traditions which are essential to be complied with, by the public. The most important distinction between ethics and laws is that ethics concentrate on the do’s and laws on the don’ts. Further, ethics is much wider term than laws. Ethics and values: Values are deep seated ideas and beliefs that manifest themselves as behaviour or conduct that are universally judged as right. Values are not easy to measure or express in words. There is a very thin line to distinguish the two because both drive what is right and wrong in human behaviour and what ‘ought to be’. We can convert values into rules of behaviour that can be derived as ethics. Sources of Business Ethics Religion Cultural Experiences The legal system Genetic inheritance SIGNIFICANCE OF BUSINESS ETHICS “GOOD BUSINESS ETHICS PROMOTES GOOD BUSINESS”. - Robert Day He says that good ethics not only promote professionalism in management but it also purifies the inner mind of every businessman. Acc. - Thomas Donaldson, there are some key reasons why business ethics is vital and why ethics play a key role in business. They are:- 1) B. Ethics leads to positive consequences: Business depends on the approval of the society, acceptance of rules, mutual trusts and confidence which always leads to positive consequences. 2) It increases goodwill of the business and the businessman: Good ethical behaviour increases the goodwill of both business and the businessman leading to their strong image, profits, growth etc in the long run. But if the organisation’s image is tarnished, the result could be negative. 3) It protects the interests of people in dealing with each other: Prof. Robert Day writes that ‘good ethics is sound business insurance’. 4) It leads to self satisfaction in people: To attain inner self satisfaction certain people believe that only good ethics can promote good business. In this dynamic world, businessmen seek mental relief, freedom from anxiety, tension etc. 5) Ethics encourage others in good business: Many seem have realised that businessmen whop follow ethical principles in the conduct of business, tend to motivate others to follow the same principles. 6) Ethical conduct leads to success and development: Prof. Learned writes that ‘ a sincere person who does hard work becomes ethical and always succeeds in his life, whereas an unethical person does not’. 7) It causes new outlook: Prof. Day states that management cannot become a profession without ethics. Improved codes of conduct will result not only ‘service to humanity’ but also can cause change in the outlook of the society at large. ETHICAL DIMENSIONS 1. GLOBALISATION. 2. TECHNOLOGY. 3. INTANGIBLE ASSETS. 4. THE WAR FOR TALENT. FACTORS CAUSING UNETHICAL BEHAVIOUR 1. Competition. 2. Greed / pressure to earn more profit. 3. Ambiguity in selection of alternatives that give higher return but at the cost of losing integrity. 4. Political corruption –demand for gifts, donation and bribes from businessmen for political gain. 5. Social values and customs, not followed by new generation- people neglect social responsibility, integrity and discipline. Some of the unethical conducts are: Encourage practices of corruption, False representation of returns and income statements, Ignoring of social interests, Political donations, Exploitation of consumers, Illegal trade with enemy countries, Exploitation of scare natural resources EXAMPLES:- A) Johnson and Johnson- unethical commitment to health and safety of consumers - many persons died after consuming tylenol Capsules contaminated with poison. Company called back for all the capsules world -wide and this incident worked as a catalyst to boost the image of J&J. B) Coke Company (Coca-cola) – promoting sales of a harmful product to school children through exclusive contracts with schools who complained of headache, nausea, vomiting and shivering – negative implications of advertising to school children. FACTORS THAT BUILD AN ETHICAL INFRASTRUCTURE Commitment from Top Management. Code of Ethics. Communication of Ethics. Ethics training. Ethics Response and Enforcement. Audits, Revisions and Refinements. RELATIONSHIP BETWEEN BUSINESS AND ETHICS THE UNITARIAN VIEW: Since business is a subset or sub-structure of the moral structure of the society, business and morality cannot be separated and that business must play the rules of morality and ethics of the community in the interest of the community. This view was held by the Church in the European countries stating that business must exist to do only good to the society. The only role of the business was to serve society and usher social welfare through altruistic motives. According to them profit was a dirty word. Unitarian View: Business & morality cannot be separated and it must play by the rules of ethics of the community. THE SEPARATIST VIEW: Milton Friedman, Nobel Prize winner for Economics in 1976 along with Adam Smith, hold the view that that the goal of business should be profit maximisation and that morality plays no part in business conduct. They further iterated that business should go on with the business of producing goods and services efficiently and leave the solutions of social problems to government agencies and concerned individuals. In short, managers should focus on what they know the best – that is how to make profits. They also felt that the business should be left alone to play by the rules of the prevalent market system and the introduction of ethics would make an imbalance of the market dynamics. Accordingly, managers should only manage the interests of the shareholders and shareholders in return should be put in a position to decide how their wealth and resources will be used. They believe that business should not have any responsibility beyond obeying certain legal codes in achieving its economic and business goals. Proposed by Adam Smith and Milton Friedman: Business is a distinct entity and does not include ethics and morality. THE INTEGRATED VIEW This view was proposed by Talcott Parsons, wherein he sought to integrate ethical behaviour and business in a new way called “Business Ethics”. This view stated that business is an economic entity and it has the right and need to make profits, but it must also discharge its obligations to the society where it exists and operates. Profit is neither a dirty word nor morality and ethics in business. Further it was stated that society consists of sub-systems of which business and morality are the ones. And since all subsystems are interlinked and interdependent with the society, business and morality are also interlinked. Therefore, business decisions are guided by moral considerations and that business constitutes ethics in itself, even while it pursues profits. Ex. A sick and bankrupt organisation is a social liability when it can hardly contribute in the area of social responsibility. Hence it has to first generate surplus for the business. However, this must be done ethically by carrying on business on morally sound principles and go out to assume social responsibility. Business Ethics When business people speak about “business ethics” they usually mean one of three things: 1. Avoid breaking the criminal law in one’s work related activity 2. Avoid action that may result in civil law suits against the company 3. Avoid actions that are bad for the company image Businesses are especially concerned with these three things since they involve loss of money and company reputation. Laws and moral standards overlap to a certain extent Law does not always represent collective moral judgements Law represents a minimum set of standards for producing a desired human behaviour Ethics often represents a standard that exceeds the legal minimum Common Unethical Acts... lying and withholding needed information abusive or intimidating behavior misreporting time worked discrimination and sexual harassment stealing breaking environmental and safety laws falsifying records drug or alcohol abuse giving or accepting bribes Why Misconduct Is Not Reported... belief that nothing will be done fear of retaliation fear of being viewed as a troublemaker fear of being seen as a snitch/informer Why ethical behavior is important''' Business is a subsystem of society Empowers all stakeholders concerned Reduction in cost of friction with social environment Why Ethical problems occur' Personal gain Individual values widely differ with organizational goals Managers values and attitudes Competitive pressures Cross-Cultural contradictions Sources of Ethical Norms Factors influencing Business Ethics SOME ETHICAL POBLEMS Price – price level selected can have harmful effects upon some customers. Truth in advertising – is complex and emotional. Wildly exaggerated would be illegal as well as ineffective. Product promotions – use of ‘free’ gifts and price rebates to attract customers. Working conditions – improper temperature, humidity, noise, lighting, ventilation, dusty, smoky and dirt collected atmosphere in workplace. Quality of a product – quality maintained may be in declining order, with the cost of raw materials. Workforce reductions – downsizing operations by discharging some of the employees. Environmental pollutions – disposal of toxic wastes and effluents, garbage collection etc all to cause air, water and noise pollution only to harm people and animal around. Ethical Commitment Ethical commitment refers to a strong desire to do the right thing, especially when behaving ethically imposes financial, social or emotional costs. Surveys taken by the Josephson Institute reveal that, regardless of profession, almost all people believe that they are, or should be, ethical. While most are not satisfied with the ethical quality of society as a whole, they believe that their profession is more ethical than others and that they are at least as ethical as those in their profession. Unfortunately, behavior does not consistently conform to self-image and moral ambitions. As a result, a substantial number of decent people, committed to ethical values, regularly compromise these values - often because they lack the fortitude to follow their conscience. People need to understand that ethical principles are ground rules of decision making -not just factors to consider. It is OK to lose; in fact, it is preferable to lose than to lie, steal, or cheat in order to win. People who are unwilling to lose have to be willing to do whatever it takes to win. Ethics has a price and sometimes people must choose between what they want and what they want to be. But ethics also has a value, which makes self-restraint and sacrifice, service and charity, worthwhile. 2. EVOLUTION OF ETHICS IN BUSINESS IN INDIAN SCENARIO In India, the subject of ethics was almost neglected in the past. However, since the recent past, this subject has been gaining much importance. We have known of the Harshad Mehta’s incident or the episode that create ethical awareness in the country. There have been number of issues pertaining to corruption, cases of cheating small investors, misappropriation of accounts etc involving predominantly big industries. The development of business ethics in Indian corporate sector can be divided into three distinct phases. They are:- ● 1st –Licence Quota Permit Raj. ● 2nd–Socialistic Frenzy. ● 3rd –Economic Reforms. Licence Quota Permit Raj – During this phase the ethical standards were low. This was the phase that lasted from the beginning of independence to the late 1960’s, when the corporate sector was dominated by only 20 family groups. These family groups developed strong political connections and took full advantage of the licensing system to control a large portion of the industrial activity. Each of the groups controlled several corporations, each with different shareholders and significant public shareholdings. The companies were managed by the members of the family groups so much so that all the senior management positions were being held by them. Socialistic Frenzy – During this phase of development from the early 1970’s to the mid of 1980’s, the traditional family groups came under intense pressure as a Monopolies Commission was established and restrictions were imposed on the expansion of the family groups. This was all done by the government with the intention of encouraging entrepreneurship and broadening of entrepreneurial base in the country. During this phase there was also the emergence of the financial institutions as shareholders in large companies, giving the financial institutions a commanding presence in the corporate sector. This was because there was access to credit from the financial institutions which helped in converting loans into equity. As the financial institutions were under the control of the government, the government controlled a large part of India’s private corporate sector. However, due to the nexus that developed between the political system and the family groups, the presence of the financial institutions was used more to the advantage by the family groups than to their detriment/ harm / damage. This resulted in malpractices in the corporate sector being either condoned or connived at. It was common for the groups to obscure corporate accounts or divert funds for making contributions elsewhere only to the detriment of the small investors. There was hardly any transparency in all these activities. It was common for the members to start independent trading activities only to act as agents for procurement of raw materials or sale of finished goods. They would even divert funds through an unfair transfer-price mechanism. Thus, the system that existed in the past still continued. The promotions to management positions were not based on merit but on the closeness to the family. However, this led to family disputes leading to division of the companies only to the detriment of the shareholders. Manipulation of prices in the stocks was not unusual and so the small investors enjoyed very little protection. The financial institutions were blind to such practices deliberately or turned a blind eye to the happenings in business. Economic Reforms – This phase began only after 1991 with the coming of liberalisation and globalisation in the Indian economy. There has been a sea change in the present times. The business organisations have started recognising the importance of ethics in their managerial structures and systems. The companies have started to realise that good ethics means good business. The objective of ethical orientation is to provide persons with guidelines and support to decide what is right and what ought to be done to keep the stakeholders satisfied. This has been definitely helped organisation to sustain in the long run. REASONS FOR THE RECENT EVOLUTION OF BUSINESS ETHICS The growing attention to and awareness of business ethics can be attributed to a number of factors. These include: the increased globalisation and decentralisation of business, an expanded corporate response to ethics and the influence of various stakeholders groups focusing attention on both ethical successes and challenges. THE GLOBAL ECONOMY With the globalisation of the economy, media and the growth of the Internet, the companies are increasingly being held accountable for their ethical conduct and the conduct of their business partners throughout the world. In addition, a range of new economic reforms and issues such as the shifting of production to developing economies, what constitutes a “living wage” and how companies respond to cultural differences, is being cast in ethical frames by a variety of advocacy groups. INTERNATIONAL AGREEMENTS AND ACTIONS A number of governmental and non-governmental orgnisations and associations have joined in international agreements to fight against corruption and bribery around the world. International agreements relating to corruption include the 1996 Inter-American Convention Against Corruption and the 1997 Organisation for Economic Cooperation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In addition to this, number of countries are now developing their own anti-corruption and bribery standards. Moreover companies in India have also been influenced by various initiatives taken at the global level to ensure ethical business practices. These include:- Global Sullivan Principles Social Accountability -8000 United Nations Global Compact International Ethics Standards for Business –Caux Principles Business Ethics Resources Centres Ethics Officers and Ombudsmen. Global Sullivan Principles These comprise of a set of internal ethical business operating principles. The Global Sullivan Principles have a tripartite structure that includes corporations, higher education and civic involvement. This tripartite initiative exemplifies Sullivan’s commitment to ethical conduct, which, he believed, not limited to businesses alone but to the entire community. Currently, over 170 countries (including public sector and religious organisations) subscribe to these principles. Social Accountability -8000 Social Accountability 8000 is a standard based on a commitment to establishing a cross –industry standard for workplace conditions and independent verification. This was formed in 1997 by the Social Accountability Institute (SAI), a non –profit, non governmental organisation, and by the council on Economic Priorities (CEP). This SA 8000 focuses on the core labour rights of the ILO conventions, the International Declaration of Human Rights and the UN Convention on the Rights of the Child, addressing key issues such as child labour, compulsory labour, health and safety, freedom of associations, increased educational attainment for employees, discrimination and working hours and wages. It applies to manufacturers and suppliers, but retailers can also adhere to it. The auditing process is required every three years and includes minimum performance requirements, employee interviews, as well as a open complaints and appeals system. Presently, there are more than 190 companies in 31 countries that have SA 8000 clarifications. United Nations Global Compact On Januaary31, 1999, the United Nations Secretary General- Kofi Annan presented the World Economic Forum at Davos, his proposal for a global compact. On July 26, 2000, Kofi Annan’s vision was set into action. The secretary general’s global compact made the issue of corporate social responsibility paramount, challenging business leaders around the world to take part in the global initiative. The Global Compact is comprised of nine principles, surrounding the issues of human rights, labour standards and environment. Participating companies must publish annual reports and display on their websites specific examples of how they put the global compact principles into practice. Global Compact is voluntary and has no enforcement arm. The initiative’s openness is designed “to stimulate and promote good corporate citizenship and encourage innovative solutions and partnerships’’. Its openness was also designed to carry out the Global Compact’s two objectives: (1) Incorporate the Global Compact and its nine principles into a business strategy and operations, (2) Facilitate a partnership among key stakeholders and promote partnership in support of UN goals. The United Nations’ reputation and moral authority is one reason why more than 649 companies and cities have adopted this Global Compact. International Ethics Standards for Business –Caux Principles The Caux Round Table consisted of a group of international executives based in Caux, Switzerland. The group shared a belief that business organisations can be a powerful force for positive change in the quality of life for the world. The Caux Principles are based on the conviction that we can all live together and act for the common good. The Caux Principles are rooted in two basic ethical ideals: Kyosei and Human Dignity. The Japanese concept of Kyosei means “living and working together for the common good”. Human dignity is defined as “value of each person as an end, not simply as a means to the fulfillment of other’s purposes or even majority prescription”. The mobility of employment, capital, produce and technology is making business increasingly global in its transactions and its effects. Laws and market forces are necessary but provide insufficient guidelines for conduct. Responsibility for the politics and actions of business and respect for the dignity and interests of its stakeholders are fundamental. Shared values, including a commitment to shared prosperity are as important for a global community as for communities of smaller scale. For these reasons and because business can be a powerful agent of positive social change, the following principles are laid as a foundation for actions by business leaders in search of business responsibility. Principle 1: The responsibility of businesses: Beyond shareholders towards stakeholders. The value of a business to society is the wealth an employment it creates and the marketable products and practices it provides to consumers at a reasonable price commensurate with the quality. To create such a value, a business must maintain its own economic health and viability, but survival is not a sufficient goal. Businesses have a role to play in improving the lives of all their customers, employees and shareholders by sharing with them the wealth they have created. Suppliers and competitors as well should expect businesses to honour their obligations in a spirit of honesty and fairness. As responsible citizens of the local, national, regional and global communities in which they operate, businesses share a part in shaping the future of those communities. Principle 2: The Economic and social Impact of Businesses: Toward Innovation, Justice and world Community. Businesses established in foreign countries to develop, produce or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizens. Businesses also should contribute to human rights, education, welfare and vitalization of the countries in which they operate. Businesses should contribute to economic and social advancement not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition and emphasis upon innovation in technology, production methods, marketing and communications. Principle 3: Business Behaviour: Beyond the Letter of the Law toward a Spirit of Trust While accepting the legitimacy of trade secrets, businesses should recognise that sincerity, keeping of promises and transparency contribute not only to their own credibility and stability but also to the smoothness and efficiency of business transactions, particularly on international level. Principle 4: Respect for the Rules To avoid trade frictions and to promote free trade, equal conditions for competition and fair and equitable treatment for all participants, businesses should respect international and domestic rules. Principle 5: Support for Multilateral Trade Businesses should support the multilateral trade systems of the GATT / World Trade Organisation and similar international agreements. They should cooperate in efforts to promote progressive and judicious liberalization of trade and to relax those domestic measures that unreasonably hinder global commerce, while giving due respect to national policy objectives. Principle 6: Respect for the Environment A business should protect and where possible improve the environment and promote sustainable development. Principle 7: Avoidance of Illicit Operations A business should not participate in or condone bribery, money laundering or other corrupt practices. Indeed, it should seek cooperation with others to eliminate them. It should not trade in arms or other materials used for terrorist activities, drug traffic or other organised crime. BUSINESS ETHICS RESOURCES GLOBALLY In recent years, several new ethics resource centres have been established around the globe. Some of these entities focus on business ethics exclusively while others deal with ethics more broadly. These include efforts by the Ethics Resource Center to help build or expand centers in Hong Kong, South Africa and the Middle East and the Berlin based Transparency International which works specifically to curb corruption and bribery world wide. ETHICS OFFICERS AND CORPORATE OMBUDSPERSONS: The number of corporate ethics officers’ positions has dramatically increased over the past several years. In 1998, more than 500 US companies had ethics officers as against only 200 in 1992. In addition, a growing number of corporations have added the position of Ombudsperson, an individual who serves as a neutral, impartial arbitrator who aids in dispute resolutions. On the other hand, more and more companies that have identified ethics as an issue of critical importance have chosen not to create a special ethics officers position, deciding instead to develop a decentralized approach whereby all managers are viewed as responsible for ethical decision making. 3. CULTURE AND ETHICS Countries like US, Japan, Germany, France, Korea and others have developed management styles in consonance with their cultural ethos, while India is still in the process of evolving Indian Management Styles in accordance with Indian ethos and culture. ● Culture colloquially means style of living of a particular group of people in society with reference to their dressing habits, rituals, beliefs, rules and regulations, conduct, behaviour and ethical practices. Cultures are different from society to society, (communities to communities), state to state and country to country. And so each society has its own ethical practices. In fact, the basic values of the society constitute a part of the culture. Thus, ethics has an intimate relationship with the culture of a place. Ethics is a normative science of the conduct of human beings living in societies. We cannot study the moral values without studying the culture from where it originates. INDIAN CULTURE –Philosophy based on Upanishads –considers the entire human race as “Vasudeva Kutumbam”-meaning “Family of God”. If conduct is good, everything is good. Hence Swami Vivekananda exhorted people “Be good and Do good always”. Culture and Ethics Social Contract Theory : Hobbes, Locke and Rousseau Collectivism or Socialism Theory : Plato and Aristotle Organic Theory : Leslie Stephen and Herbert Spencer Idealistic or Group Mind Theory : Plato Social Contract Theory: Thomas Hobbes, John Locke and Jacques Rousseau put forward this theory. It was stated that people established societies out of social contract. It was theoretical that previously each man was an independent unit by himself and a law unto himself. At that time, the jungle rule that ’might is right’ was prevalent. But with the growth of the number of men and consequent conflicts arising out of the division and right to individual property, men felt the need for some rules for universal conduct. Hence, they all entered into a social contract and established their own ethical rules of conduct. According to this theory, men would seem to have consciously and collectively established rules and regulations, laws and ethics over themselves to govern social life. Thus according to this theory, it is man who has control over societal norms and values. Collectivism or Socialism Theory: Plato and Aristotle propounded this theory which is the exact opposite of the Social Contract Theory. According to them, man had always lived in societies and it is impossible to imagine man existing without a society. This theory states that it is impossible for a man to develop either intellectually or ethically, without participating in social life. This theory also states that man cannot exist without society, though society can exist without the man. Society makes it obligatory for the man to follow its rules, regulations, norms and ethics, which he cannot afford to ignore. This view would seem to suggest that cultural norms of the society makes it imperative for the individual to follow its norms and standards of behaviour. Thus, according to this theory, society or social norms and values control a man, but the man (i.e. an individual) has no control over societal norms and values. Organic Theory: Leslie Stephan and Herbert Spencer states that the relation between individuals and society is organic and not mechanical. The individuals belonging to the society are interdependent among themselves and in turn to the society. Hence, individuals cannot exist without a society and the society cannot exist if there are no individuals. Social process and social rules and regulations, norms and values are organic in nature, forever changing, forever evolving. Just like living organisms, social cultures also pass through stages of birth, growth, maturity and decay. Though society resembles a living organism in many respects, an individual is not controlled by the society in many areas. An individual has his interdependent existence and his actions are guided by his free will. His mental faculties can never be controlled or guided by the society. Though social values and ethics may compel a man to think and evaluate them, his own free will, will guide him in choosing his own moral standards and ethical behaviour. This can be illustrated with the example of Raja Ram Mohan Roy – though the practice of Sati and Child Marriage were the norms of olden times, he opposed both these norms of the society stating that they were unethical practices. He got them abolished through laws also introduced the concept of Widow Marriage. Similarly many people opposed at various period of times the concept of caste system, introduced inter-caste marriages in the Hindu Society. Many people opposed the concept of unsociability of the Indian Hindu Culture, terming these practices as unethical and oppressive, notable amongst them being Mohandas K. Gandhi. Thus individual concept of morality and ethics may differ widely from that of the society. Idealistic or Group Mind Theory: This theory was propounded by many philosophers including Plato. This theory states that the relation between society and an individual is spiritual. A man living outside society cannot strive for and attain excellence. Without the society, man cannot develop his moral character or ethical value system. Without society, he cannot be termed as a complete man and he remains only as a fragment of humanity. It is understood and accepted that the value system and the moral standards of the society affects the value system and the moral standards of the individuals of the society and the value system of the individuals make up the moral standard of the society. The culture of a particular society is intimately linked to the individual ethical values of the people in the society. Some cultures consider acts to be highly unethical, while some other cultures may accept these very acts to be part and parcel of daily living and an acceptable practice. However, there are certain immoral acts which are universally condemned as unethical, irrespective of the culture involved. For example all cultural systems deplore the practice of fraud, dishonesty and so on as unethical, while all cultures systems recognise the need for equality, honesty, truth and so on. Similarity of ethical Values in Different Cultures It is unethical to cause harm to society in pursuit o one’s happiness Every person has a responsibility towards the welfare of the society A man is indebted to society Principle of fairness Principle of Integrity and Honesty Principle of human Dignity 4. OVERVIEW OF ETHICAL VALUE SYSTEMS The system of Universalism The Universalism theory states that the moral worth of an action of an individual should be judged by the intentions of the person performing the action, and not by the outcomes of the action. Even if the outcome is not as desired but the intention of the person was good, then the action is to be termed as good action. The underlying philosophy of this concept is that good intentions should always result in good outcome, ultimately, if not immediately. The theory of Universalism is based on the duties or obligations of an individual in society. Personal duties and obligations of an individual are universal. No one can escape from discharging these duties and obligations, without adverse repercussions. It focuses on individuals not as means but as ends in themselves, worthy of dignity ad respect. It is based on Emmanuel Kant’s Categorical Imperative, which helps to evaluate an individual’s moral conduct. According to it, one should act only in ways that one would wish all others to act, faced with the same set of circumstances and also to treat others with dignity and respect. What is morality right for oneself must be morally right for others as well. Everyone’s value is equal. Hence, no one’s rights should be subordinated to those of others. While praiseworthy in theory, the Universalism approach finds itself in difficulty during practical application. It depends to a large extent, for its interpretation, upon the situation that the individual finds himself in. not all people may be agreed upon the same moral standards. Similarly, it would be difficult for an oraganisation to think of its people – its employees – as ends in themselves, rather than as means in the pursuit of corporate excellence. System of Universalism This theory is based on the duties or obligations of an individual in society It states that the moral worth of an action of an individual should be judge by his intentions and not by the outcome of his action The underlying philosophy is that good intentions would always result in good outcome, ultimately, if not immediately Actions performed under it are in accordance with categorical imperative and therefore morally correct The system of Utilitarianism This approach is concerned not with an act itself, but with the consequences of the act. Thus, the emphasis is upon the outcome of individual actions, and not on the intent of the individual. That is why this is sometimes referred to as ‘ends – based ethics’ or ‘Consequentialism’. The Utilitarianism ethical system was originated by the British thinker Jeremy Benthem. Utilitarianism aims at creating greatest degree of benefits for the largest number of people while incurring the least amount of harm possible. Thus, utilitarianism is concerned with maximizing ‘welfare’ for the society. According to it, an action is good if it results in benefits for society and it is bad if it leads to damages or harm to the society. It demands cost benefit analysis. In situations where the outcomes can be measured in financial terms, the utilitarianism system has great merit. It is s powerful and widely accepted ethical theory that has specific relevance to problems in business. Most of public policies and legislations are enforced with this in mind. However, the utilitarian system has certain limitations also. As a determinant of moral action, this system fails to provide a balance between the benefits of the majority against the sacrifices of a minority. Moreover, utilitarianism prescribes ‘the greatest good for the greatest number’. In most cases it is very difficult to reconciled ‘greatest good’ with the ‘greatest number’ of people. There has to be trade-off somewhere and the degree to which this trade-off will be possible, is not provided by Utilitarianism. System of Utilitarianism This approach is concerned not with the act but the consequence of the act Aims at creating the greatest degree of benefit for the largest number of people while incurring the least amount of harm possible Main difficulty in Accurately measuring costs and benefits The system of Distributive Justice The theory of Distributive Justice which is founded by the single value of justice was proposed by John Rawls. Justice is thought to be the most likely outcome of an ethical process of decision making. All rules and laws must, necessarily, first and foremost, be just. Prof. Rawls, a member of the faculty of Harvard University, believes that the base of all distribution systems should be just and the primacy of justice in the basic structure of our system of society requires greater equality. These distributive systems should result in compensating benefits for all and particularly for the least fortunate members of our society. The moral value of an action, according to this approach, can be determined by the degree of co-operation it generates within the members of the society. If it leads to greater cooperation among the members of the society, then that action is termed ‘morally good’ and if it results in lesser cooperation and more conflicts, then it is termed as ‘morally wrong’. The essential feature of this system is transparency and full participation of those affected in the decision making process. The only problem in applying this system to evaluate the moral worth of an action is that in this system, individual effort is down played, if not completely ignored. System of Distributive justice All rules and laws must be just Emphasis on equal distribution of burden and benefits Moral value action can be determined by the degree of cooperation it generates within the members of our society Individual Freedom of Choice ‘Freedom’ whether of an individual, a society or a country has great value and freedom of choice refers to an individuals being at perfect liberty to make enlightened choices of action, without being curbed either by another individual, a group or the society at large. Of course, these ‘choices’ must be within the law and the same freedom enjoyed by on individual in the society, must be extended to all within the society. Everyone should act to ensure greater freedom of choice by all in the society. All individuals must be allowed to make informed choices among alternative courses of action leading to their own welfare. This freedom of choice must be used in a wider context and with a broader meaning. For example: the right to work must not be limited to only providing work, but must also include the right to opportunities for promotion and advancement, the right to growth and development on the job etc. Similarly, the right to wages does not men only the right to get a minimum amount of money, but also the right to have access to some basic standards of living through educational opportunities for one’s children and medical assistance for the family. Individual Freedom of Choice All individuals must be allowed to make choices among alternatives leading to their own welfare These choices must be within law The Legal System and Professional Codes The moral worth of an action can also be determined through the legal system. If an action of an individual is within the purview of the law, then it is considered to be ‘right ‘ but if the action is illegal, then it is considered to be ‘wrong’. Similarly, professional codes are also value-based norms of desired behaviour within a particular profession. For example: if a doctor does not violate the Hippocratic code, then his actions are said to be within good moral standards. Though this approach appears to be simple in theory and easy to practice, it suffers from serious limitations. Law may be a convenient institutional means for implementing values. But if these laws are themselves a product of an unfair power game, if they are unjust and unethical, then adhering to these laws and following such laws would in fact, be unethical and against one’s conscience. Moreover, ethics is not just legal law. Ethics represent and encompass much more than mere rules and regulations and it is much more wider in scope than the legal system. The law prescribes only the minimum standard of human conduct within the society, while ethics is concerned not only with ‘legal actions’ but also with ‘moral actions’. Similarly, a doctor following the Hippocratic Code is just doing the bare minimum for his patients. His legal obligations are covered as long as he stays within the Hippocratic code, whereas his ethics will dictate that he should do everything in his power, even at great personal sacrifice, to bring about the welfare of his patient to give him a new lease of life and to strengthen his will to live. Legal System& professional Codes Moral worth of an action can be determined through Legal System Professional codes are value-based norms of desired behavior within a particular profession 5. ATTITUDES, BELIEFS, NORMS, VALUES AND LIFE POSITIONS “Things are the way you think they are, because you think they are that way” ATTITUDES - DEFINITIONS P.R.LAWRENCE “Attitudes represent the cluster of beliefs, assessed feelings and behavioural intentions towards an object.” GORDON ALLPORT “Attitude is a mental and neural state of readiness, organised through experience, exerting a directive or dynamic influence upon the individual’s response to all objects and situations with which it is related.” Attitudes can be thus referred to as evaluative statements regarding people, objects or events which may be either favourable or unfavourable. Attitudes may be further defined as relatively lasting feelings, beliefs and behavioural tendencies directed towards specific people, groups, ideas, issues or objects. Attitudes reflect an individual’s background and experiences. It is formed due to strong influence of significant people in a person's life like parents, elders, friends, teachers, and members of social and work groups. Concept of Attitude Are pre-conceived evaluative feelings of people about objects, people or events Express either favourable or unfavourable feeling about something Express one’s way of thinking They are found from childhood learning experiences and one’s value system Wrong Attitudes and Unethical behaviour To achieve success in life, one has to be manipulative and calculative Envy, Jealousy and competition is normal and necessarily exists if an organization wants to succeed It is difficult to get ahead in life without cutting corners here and there There is nothing wrong in taking credit for something I have not done in the organization if it furthers my cause Right Attitudes and Ethical behaviour One should take action when one is sure that it is ethically correct I have no right to use my colleagues to further my career Promotions are earned through hard work, perseverance and fair play Most people are basically good and can be trusted To me means are important as ends since it is impossible to achieve ethical goals with unethical means BELIEFS Beliefs are the foundation of one’s value system. They are ideas or principles that people hold dear and give ordinance to. They are standards of thought. They are the ways the ways in which an individual expects people to think about given concepts. In organisations, these are the ways that senior executives want others to think. The intention is to encourage ways of thinking and patterns of attitudes that will pave way towards the wanted behaviour. Beliefs and Ethical behaviour Beliefs are ideas or principles that people hold dear and give ordinance to Beliefs are the foundation of one’s value system They are standards of thought They are the ways in which an individual expects people to think about given concepts NORMS Norms are expectations of proper behaviour,, not requirements for that behaviour, a major difference between a norm and law. In other words, they are criteria of behaviour. They are ways an individual expects all people to act when faced with a given situation. Asian students normally bend slightly while addressing professors of other universities of a western country. The bow is their norm or expectation of behaviour under that situation. The norm is not published, may not be obeyed and cannot be enforced. They are neither logically consistent nor universally applied. Norms Expectations of proper behaviour, not requirements Are ways an individual expects all people to act when faced with a given situation They are neither logically consistent nor universally applied. Moral Standards Norms, beliefs and values together form moral standards of every individual in the society. They are first formed as a child from family, friend and various societal influences such as temples, mosques, churches, schools, magazines and associations. As the person grows up, his experiences, learning and intellectual developments may lead to maturing person and even revise these standards. They deal with matters that we think is of serious consequence, base on good reasons and not on authority. They are not established or changed be decision of particular authoritative bodies. They override self interest and are based on impartial considerations. Points Deal with matters that we think are of serious consequence Are not established or changed by decision of particular authoritative bodies Overrides self interest Are based on impartial considerations VALUES Individuals have a basic set of general beliefs passed on from one generation to another. These stable, long-lasting beliefs represent values. They are evaluative standards that help us define what is right or wrong / good or bad. Ex. Some value money while others morals as more important. Values can be defined as “ a specific mode of conduct or end state of existence, which is personally or socially preferable to an opposite or converse mode of conduct or end state of existence”. Character-Behaviour Matrix B – Strong C – Weak Strategic Man B – Weak C – Weak Avoid and Discard B – Strong C – Strong Desired Mix B – Weak C – Strong Needs correction S S W W Behaviour Character Value and Ethics Edward Spranger defines the values “as the constellation of likes, dislikes, view points, inner inclinations, rational and irrational judgements, prejudices and association patterns that determines a persons view of the world. They are deeply embedded in people’s sub conscious and manifest themselves in their behaviour A Value is a sustained and assimilated mode of acting, thinking or merely being Features of Values : DNA Descriptive (‘is’ of Ethics) Normative (‘ought to be’ of Ethics) Analytical (‘why’ of Ethics) Value and Ethics : People Values Rom Lebow, former director of marketing at Microsoft and William L Simon offer an important set of values for a successful organization Treat others with uncompromising truth Trust your associates Mentor unselfishly Be receptive to new ideas Give credit where due Take risks for the good of the organisation Be honest in all dealings Put the interests of others before your own social conscience Responsibility Accountability Value and Ethics: Business Values Quotes of management thinker of international repute, Dr. M. B. Athreya (“Business values for the 21st century”): Righteousness (Dharma) Public Good (Loka Sangraha) Efficacy (Kausalam) Innovation (Vividhata) Learning (Jigyasa) Dharmayudh Righteousness: It is important for businesses to follow ‘dharma’ in the creation and sharing if wealth, maintaining the highest standards of ethics and integrity in every action we take. Public Good: Individuals and organisations should not just work for private gain, but also for the well being of the community including internal and external stakeholders. Efficacy: It is critical that all businesses pursue efficiency, resource optimization and conserve resources so as to internalise the values of efficiency in the best interest of preserving mother earth for future generations. Innovation: Businesses have to be engines of innovation, constantly seeking more effective solutions to meet economic and social expectations. Learning: Business will be the key instrument to solve problems of growth, unemployment, education, consumption ……… and quality of life. Business will have to keep learning from the feedback and also through internal process of question, challenge, viability and health of nations and global society will depend on the skills of learning and utilisation of such learning by business. Respect for individual and human dignity will increase creativity and team play. Dharmayudh: Business should be aggressive and competitive to increase the market share. But if it is not done ethically, in the long run it will erode business. TRANSACTIONAL ANALYSIS (TA) TA offers a theory of personality and interpersonal communication. It is a useful tool for helping people to understand and improve their interactions with others, both at work and in their private lives. The objective of TA is to provide better understanding of how people relate to each other so that they may develop better communications and improved human relationships. Any discussion on TA necessarily starts with the name Dr Eric Berne, the pioneer of the concept. He started the TA movement with his books “Games People Play”. Another book “I am OK – You are OK” by Thomas Harris further popularized TA. This TA originated after Dr. Wilder Penfield, a neurosurgeon, made a thought provoking discovery while experimenting on middle aged patient that his said to be literally re-living his fifth birthday party with all the scenes no sooner did the doctor’s electrode touched his particular part of the brain. During the development of TA, based on the experiment of the brain, Berne observed that one can see people changing before one’s eyes. There may be changes in gestures, movements, facial expressions, posture, communications pattern and apparent changes in manner, appearances, words and tone of voice. Soon it was discovered that there are three “ego states’ in the structure of our personality. These three ego states are roughly equivalent to the Freudian concepts of Id (Child), Ego (Adult) and Superego (Parent) in the psychoanalytical theory. Id is the core of the ‘unconscious mind’. It is constantly struggling for gratification and pleasure. Aggressive impulses of id are destructive and include the urges to fight, dominate and generally destroy. Ego is the ‘conscious mind’ which represents logic and reality. It keeps the id in check through intellect and reason and it interprets reality of external environment. Superego is again the ‘conscious mind’. It provides norms that enable the ego to determine what is right and what is wrong. These three id – ego - superego – warring factors within human personality, stimulate, monitor and control behaviour. These three basic concepts in Freud’s psychoanalytical theory are simplified further in TA through the concept of the P-A-C ego-states. TA believes that a healthy personality is able to move from one ego state to another. Through proper understanding of the Parent, Adult and Child, one can understand and predict the behaviour of the individual. Better insight and awareness of the personalities develops with the knowledge of ego-states. Parent Ego State (A taught concept of life) Adult Ego State (A thought concept of life) Child Ego State (A felt concept of life) I. PARENT EGO STATE: The Parent Ego State reflects the “taught concept of life”. It incorporates the attitudes and behaviours of all emotionally significant people who serve as parent figure when an individual was a child. The values and the behaviours of these people are recorded in the mind of the individual and these become the basic values of the personality. Parent ego state is a result of the messages (conditioning) people receive from their parents, older brothers and sisters, school teachers and other authority figures during their early childhood. These messages are like little cassettes tape in people’s heads that is played in the mind on certain messages are given. For instance, if children are not eating properly and start playing with it, a common parent message ‘to eat everything and to clean up the plate ‘ is given through parent tapes. With this the children are taught that it’s good to clear up the plate and bad to leave food on the plate. The parent Ego State is the evaluate part of one’s personality and it evokes value laden behaviour. It gives advice and guidance, protects and nurtures, establishes standards and rules of behaviour. Accordingly, every individual should update this state by retaining some and rejecting some other values. If individuals do not update this, they may be carrying some junk in it which consists of things like prejudices and this certainly affects the capacity for making probability judgements on the basis of reality. Updating this ego is possible when one uses his Adult Ego State. II. ADULT EGO STATE: This state reflects “thought concept of life”. This is the mini-computer in us that makes probability judgements and presents facts to others. There is no emotion in adult. This state is based upon reasoning, seeking and providing information and problem solving. Individuals interacting with this state view people as equal, worthy and responsible human beings. It is based on rationality and characterised by logical thinking rational decision making. individuals operating in this state take the emotional content of their Child Ego State and the value laden content of their Parent Ego State and check them out in the reality of the external world. Adult behaviour generates mutual respect. This state can be identified by verbal and physical sighs which include thoughtful concentration and factual discussion. This process of adult formation goes through one’s experience and continuously updating parental injunctions by verifying. This update determines what is right and what is not. As an individual updates his parent, similarly he also updates child data to determine which feelings should be expressed. Thus he controls and keeps emotional expressions appropriate. Thus, the Adult ego state is that part of an individual which is reality-oriented and problem centred. It attempts to take life’s experience as data and rationally deal with them. III. CHILD EGO STATE: This state reflects the ‘felt concept of life’. It is the receding of internal events, the responses of the individual to what he sees and hears and feels. Child ego-state is the centre of all one’s emotions, feelings and creativity. It is the source of one’s energy, curiosity and intuition. It is the most important ego-state in terms of its actual “control over one’s life”. Characteristics of this state include conformity, depression, dependence, anxiety, fear, love and hate. Physical and verbal clues that the individual is acting in the child ego-state are silent compliance, attention seeking, temper-tantrums, giggling and coyness. It is also characterised by non-logical and immediate actions which result in immediate satisfactions. It reflects early childhood conditions and experiences perceived by individuals in their early years of life say up to the age of five years in the process of growing up. The child is inept, clumsy, without understanding and ability to construct meanings. It takes life as it comes in stride. Child ego-state contains the early recordings of imaginations, spontaneity and excitement. It includes feelings of joy and love as well as feelings of frustration, inadequacy and helplessness. Life positions and Ethical behaviour The 4 – Life Positions by Thomas A. Harris help us to understand our own selves and our behaviour in particular. These positions help us to describe the attitudes and beliefs, and consequently the ethical behaviour with each life position. Life Position 1 – “I AM NOT OK – YOU ARE OK” Persons feel inferior to others in some way while the rest of the world is alright He is focused only on getting others to like and appreciate him In this life position, the person feels that he in not alright. He considers himself inadequate and inferior in some way, while the rest of the world (people around him) to be alright. In this position, he feels he is at the mercy of others. He feels a great need for stroking (love and affection in early childhood and recognition and praise in later childhood). In this position one feels of gaining strokes or approval from others. Beliefs of this position: 1. I am inferior to others in some way. 2. My self-esteem is totally dependent on my appraisal by others. 3. I am too insignificant to challenge, question or rebel against other’s judgment about me. 4. It must exist at the mercy of others. 5. My identity comes from others – those who like me. 6. It will be terrible if others do not like me. Attitudes of this life position: 1. I must win the approval and liking of my superiors, colleagues and subordinates, to stay on in the organisation. 2. Disapproval by anyone I meet means that he or she hates me. 3. If I want to come up in life, I must see that my colleagues do not look too good in the eyes of my boss. 4. The best way to handle people is to tell them what they want to hear and what pleases them. 5. If I teach my subordinates all I know, one day, one of them might replace me. 6. I should go out of my way to cultivate friendship with powerful and influential people. 7. I must stay at the right side of my boss, no matter what happens or how he behaves. Implications for ethical behaviour: 1. People operating from this life position, suffer from a severe inferiority complex and they and break and blend all ethical rules just to be on the ‘right’ side of those who matter. 2. They resort to manipulation and flattery to win the approval of others. 3. They are insecure with their own positions and roles in the organisations and thus they resort to calculations and schemes to make themselves look good in the eyes o the boss and their colleagues not too good. 4. when they themselves become the boss or the manager, they would like to be surrounded by their own category of ‘yes man’ who does everything at their bidding, just to make their ego feel good. Such bosses and mangers are terribly insecure and hence they cannot give credit where it is due and rather would try to keep all recognition to themselves. 5. they are fearful of capable and intelligent subordinates, and may resort to underhand dealings from the position and unethical tactics just to keep them down. Since they operate from the position of I’m NOT OK, they will try everything in their power to hide the not – OK in themselves, while being fearful of the OK ness of others. Life Position 2 - “I AM NOT OK – YOU ARE NOT OK” Person concludes that there is something wrong with both – himself and world He views everything negatively and with suspicion People in this position conclude quite early in life, in fact sometimes by the second year of their life, that thee is something wrong with both himself and the world. In adult life, a person operating from this life position stops developing, since one of its primary functions i.e. getting strokes is thwarted. A person in this life positions gives up hope. He simply gets through life an ultimately may end up in a mental institutions in a state of extreme withdrawal. If not he may exhibit worthlessness feeling of self and the world around and may think of ending his life or even taking others lives. He may prove to be nuisance to the society. Beliefs of this position: 1. Both you and I are not alright and there is something wrong with both of us. 2. Both you and I are helpless to change our positions. 3. What happens to you and me will happen and no one can change their destiny. 4. There is no use trying to improve our situation. 5. this world is a lousy place to stay in. Attitudes of this life position: 1. Envy, jealousy and competition in work life is normal and must necessarily exist in every organisation. 2. Getting promoted is basically a matter of being lucky. 3. It is only wishful thinking to believe that I can influence what happens in my life. 4. Anyone who trusts others is asking for trouble. 5. Everybody’s self interest is more important to him than the interests of the organisation. 6. It is no good trying to do something good in the workplace because ultimately the boss will take all the credit. 7. I am incompetent fool in the organisation and my colleagues and the boss is no better. Implications for ethical behaviour: 1. People operating from this life position have no faith in themselves or in others. 2. This makes them extremely suspicious and they view everything in life negatively. 3. They put a lot of value on Fate, luck or destiny and thus put in no effort to better their positions in life. 4. They are suspicious of others. They cannot trust anyone, not even those who come forward to help them. 5. Since they operate from this position, they feel even those who want to help them must have some evil motive for wanting to help. 6. It is very difficult for such people to differentiate between right and wrong. 7. They believe that all people are untrustworthy, evil and bad. They do not relate to anyone and consequently become extremely withdrawn from life. 8. they mist inflict all sorts of harm to themselves as also to others without being aware of it, because they feel that they and the others are not worth living. Life Position 3 - “I AM OK – YOU ARE NOT OK” A person with this life position is always convinced that he is ok no matter whatever he does and total fault in every situation lies in others This is a potentially criminal position A child who is brutalized long enough by the parents he initially felt were OK, will switch positions to this state. He feels that he is alright an it is only the others who are not alright. Beliefs of this life position: 1. I am somehow better than you are. 2. You are the cause of any mess that I fine myself in. 3. It is your fault that I ache and pain. 4. I am superior to you and you are inferior to me. 5. My actions are justified in whatever I do. 6. I can control people and situations and bend them to my advantage. 7. None has right to question my behaviour. Attitudes of this life position: 1. To achieve success in life, I have to be manipulative, calculative and maneuvering. 2. If I have acquired wealth and other possessions, I must exhibit them, so that others respect and fear me. 3. Morality and ethics do not pay any dividend in life. 4. It is difficult to get ahead in life without cutting corners here and there. 5. In order to get ahead, it is necessary to keep self interest above the interests of the organisation. 6. If you can take advantage of others, it only shows how smart you are. Implications for ethical behaviour: 1. They are persons without a conscience who are convinced that they are OK no matter what they do and the total fault in every situation lies in others. 2. People operating from this life position will be a law unto themselves in the organisation. 3. Careful not to break the law openly and not to flaunt rules publicly, they will resort to all sorts of manipulations and office politics. 4. They will have no qualms about taking advantage of others or making scapegoats of their colleagues and subordinates in order to get their own way. 5. They will always be power centres and make and break groups and teams. Life Position 4 - “I AM OK – YOU ARE ALSO OK” Persons accepts himself and the world as alright Person with this life position is always in harmony and peace with himself and world Beliefs of this life position: 1. I am a part of this world and I have as much right to exist and develop here as anybody else. 2. There is mutual interdependence between me and the people I live and work with. 3. My job is only one part of my being and I have a much higher integrated life beyond the workplace. 4. I have been sent to this world with a higher mission and I must live out my life as worthy of my having existed here. 5. The purpose of my life, as of everybody else’s, in this world is to see that we do as much good as possible during out stay here. 6. Mutual interdependence between man and man, between man and nature and between nature and the animal kingdom is the rule, rather than the exception. Attitudes of this position: 1. My success and happiness in life is not dependent on how much wealth I amass or an anybody else, but on myself. 2. I must follow the dictates of my conscience and be at ease with myself under all circumstances. 3. My worth as a person is not dependent on how much I achieve in life. 4. One should take action only when one is sure it is ethically correct. 5. There is really no reason for me to take credit for someone else’s work. 6. I have no right to use my subordinates or colleagues to further my career. 7. Most people are basically good and dependable. 8. There is no excuse for doing something ethically wrong. 9. I am the master of my own fate. 10. My worth as a person does not fluctuate. It stays constant. Implications for ethical behaviour: 1. A person operating from this life position is basically at peace with himself and with the rest of the world. 2. He envies nobody because he knows that he can achieve all he wants by means of his capability and hard work. 3. He is not over bothered by what others think, because he knows that his true worth does not come from people’s opinions but from his own conduct and his inner goodness. 4. Consequently, he has no incentive for resorting to unethical behaviour. As far as possible, without surrendering his conscience, he tries to be on good terms with all persons. 5. He does not compare needlessly with others, for he knows that comparing himself with others will only make him feel bitter, for there will always be greater or lesser person than himself. Thus he tries to achieve his cherished ends through just means. As a result, such a person has very little reason to stoop to immoral conduct or ethical behaviour. Conclusion: Thus, it stands to reason that a person’s ethical behaviour at the work place and in life in general is governed by what life position he or she operates from. 6. Ethical Dilemma and Decision Making Ethical Dilemmas Ethical dilemma is nothing but the confusion, problem or constraints in decision making one faces, when one has to make choice of the best alternative from among the available alternatives as a solution to the problem. This dilemma is faced by people who need to make decisions in their place of work and that they need to make more and more decisions at a faster and faster pace. Now a days management is simply has become the process of decision making. all the parts of management pass through decision making towards goal achievement. GOAL ACHIEVEMENT MANAGEMENT -planning -organising -staffing -leading -controlling etc. DECISION MAKING According to ‘Rushworth Kidder’ in ethical dilemmas, the toughest choices are “Right Versus right”. They are genuine dilemmas precisely because each side is firmly rooted in one of the core values. Four such dilemmas are very common to our experience are: -Truth versus Loyalty -Individual versus Community -Short term versus Long term -Justice versus Mercy. Some generally known ethical dilemmas are the following: Self interest: this concept of self interest has been one of he most important elements in attitude and mental makeup of a person. Personal goal are often at variance with societal objectives and it the two can be made to converge, individual as well as societal effectiveness is bound to increase. Even this is, however, influenced and vitiated by the viewpoint of the viewer. Thus Marxist scholars speak of alienation, exploitation and private accumulation of public wealth, placing a label of immorality squarely at the door step of the society at large. Utilitarianism: In its original sense, utility is the want –satisfying power of a good or a commodity. Utilitarianism states that human beings maximise their pleasure and minimise their pains. In doing so, they act rationally and consistently choosing between alternatives. However, the concept of pleasure and pain may vary between individuals and cannot, therefore, be socially generalized. Categorical Imperative: In today’s social terms, it means that there should be an ‘honour Code’ for society just as for the armed forces. The constant endeavour to put ethical and other interests of the society and the nation above all interests must prevail throughout the society at all levels. Duty: Duty assumes a hierarchy, a set of obligations and a range of stated and unstated obligations regarding modes o behaviour. This is interpreted by many in terms of ‘individual prerogatives’. Three thought provoking questions become pertinent in this connection: 1. How can societies protect themselves from members who behave unethically' 2. Are unethical actions usually the work of an unscrupulous few or does society inadvertently corrupt members who are ordinarily honest' 3. Do reward systems and disciplinary procedures or even ethical codes themselves induce honest members to do dishonest things' Tied closely to the question of ‘duty’ is the issue of ‘loyalty’. The question is – loyalty to whom, for whom and by whom' Can unethical behaviour be excused or justified in the name of loyalty' Duty is thus a nebulous term to say the least and is usually defined by the personal preferences of the actors. Justice: Every decision maker makes must be on a strict code of ethics to ensure fairness to all. For this, decision makers must ask themselves – and honestly answer – some specific questions. Once again, the answers are subjective. Hence, it is only through self discipline alongside of a general up gradation is social consciousness that a just policy can be followed. David Vogel opines that much of the public interest in ethics stems from the media depiction of the present times as an era of greed. His opinion may be considered by many to be too drastic. However, it can be demonstrated how ethical perceptions varied with the perceiver’s political/economic position and with the contingency of the situation. Social justice is indeed mostly used as an excuse to distort facts and mystify reality by the key players of the game. It is essential therefore, to look behind the letter of the law to gauge societal expectations and agendas. The law should be found to be nothing but codified class relationships and justice can be seen only in the context of strictures passed to serve the interest of the class in power. Legality: the concept of Hannah Arendt’s Action Philosophy is a fit manifestation of this. Under pressure from the organisation and solidarity demanded by their peer group, decision makers tend to discard their conscience and obey orders. This can either be in the form of conditioning and cooperating with harmful behaviour for personal gains or cooperating with harmful behaviour for what the decision makers consider to be a greater mission for the organisation. Significant value conflicts among differing interests Real alternatives that are equally justifiable Significant consequences on "stakeholders” in the situation SOURCES OF ETHICAL DILEMMAS Several ethical dilemmas confront a manager. The ethical dilemmas stem from three sources viz. face to face ethics, corporate policy ethics and functional area ethics. FACE TO FACE ETHICS: These arise mainly because there is a human element in most transactions. For example: A purchasing agent may develop personal relationship with the sales representatives who sells supplies to a company. They may frequently know one another on a first name basis, have lunch together and talk often on the phone. A company’s best customer may be well known to people in the production department which helps to ensure that the company’s product fit the customer needs. Because of these human transactions in business, it should not be surprising that face to face ethical dilemmas arise often. It is likely that the quality assurance man winks at minor defects and approves a lot delivered by a supplier because of the personal relationship the two enjoy between them. It is also not unlikely that the supervisor over rates the performance of an employee because of the similar relationship that exists between the two. CORPORATE POLICY ETHICS: Companies are often faced with ethical dilemmas that affect their operations across all departments and divisions. Following conflicting situations are typical: a. Your R&D department has modernised one of your products. It is not really ‘new and improved’ but you know printing this statement on the package and suing it in the advertisement will increase sales. What would you do' b. You work for a cigarette company and up to now you have not been convinced that cigarettes cause cancer. A recent report has come across your desk that clearly establishes the connection between cigarette smoking and cancer, what would you do' Another issue relates to the consequences of employment contraction in labour intensive basic industries because o the improved methods of production. Modern technology replacing older methods of production results in hundreds being rendered jobless. The issue therefore is: global economic competitiveness or local social-psychological stability' FUNCTIONAL AREA ETHICS: Functional areas of business are likely to confront ethical issues. Accounting is a critical function of any business. Accounting statements reveal to the managers and owners about the financial soundness of accompany. Managers, investors, regulating agencies, tax collectors and trade unions rely on accounting requirements of the accounting function. Professional accounting organisations have evolved generally accepted accounting standards whose purpose is to establish uniform standards for reporting accounting data. When they are followed, these standards ensure a high level of honest and ethical accounting disclosures. Rarely are they followed in practice. Ethical dilemmas crop up in purchasing department where strong pressures are felt to obtain the lowest possible prices from suppliers and where suppliers too feel a similar need to bag lucrative contracts. Bribes, kickbacks and discriminator prices are temptations to both the parties. Marketing is another are of the ethics issue. Pricing, promotions, advertisements, product information, relations between ad agencies and their clients and marketing research are potential areas of ethical dilemmas. Difficulties in ethical decision making Cross –cultural contradictions: Some of the knottiest ethical problems occur as corporations do business in other societies where ethical standards differ from those at home Competitive Pressures: When companies are squeezed by severe competition, managers sometimes engage in unethical activities to beat out a competitor. Individual values in conflict with organisational goals: Ethical conflicts in business frequently occur when a company pursues goals or uses methods that are not acceptable to some of its employees. Managers confront a distinction between facts and values when making ethical decisions: Facts are statements about what is and values are statements about what ought to be. What is can never define what ought to be. For example, the cost of researching, developing and producing a life saving drug may necessitate fixing a high price, as far as the company is concerned. But the price may be perceived by users as exploitative. Knowledge about the consequences of an action is limited: One of the principles of decision making is utilitarian. This implies that if an act results in the greatest good of greatest numbers, it is taken as morally acceptable. This principle assumes that the consequences of the act are knowable. But in an uncertain business environment consequences cannot be easily predicted. Antagonistic interests frequently use incompatible ethical arguments to justify their intentions. Ethical stand of a corporation is often based on entirely different premises from the ethical stand of critics. Animal lovers may argue against slaughter on the ground that beasts are entitled to rights similar to those enjoyed by humans, including the right to life. Poultry growers, on the other hand, contend that raising food animals bring benefits to the society. Some ethical standards vary with the passage of time: Donations to political parties were forbidden earlier but it is allowed now. In addition, certain bribes and payments are accepted in Asian, African and Latin American countries but are not regarded as ethical in the US. Doing business with close friends and family is a standard practice in the Arab world but is treated as nepotism in western Europe. Suggestions for Ethical Decision Making: The CEO should realise that the best index of success of a corporation is its longevity. The long term success of a corporation is predicted on maintaining harmonious relations with employees, customers, vendor partners, the government and society. Developing an ethical environment is a long term process in business. Top Management Commitment: This is an indispensable component of an ethical programme. It should not only have consistent commitment but it also provides continuous leadership in establishing and maintaining internal ethical environment. In such an environment members of the top management set examples of behaviour for managers and employees down the line. These practices when followed by others become a part of corporate culture. To encourage the adoption of ethical practices by others, top managers often institute a system of incentives and rewards. Code of Ethics: The code describes the principles and rule of conduct and behaviour and lists the practices that ate desired and that are prohibited. Codes of ethics help employees understand what is expected from them. The code themselves don’t ensure ethical practices but provide valuable guidelines the deviation from which can be detected and dealt with. Communication System: For the code or ethics to be followed by all employees of an organisation, it is essential to have a good communication system between the management and the employees. Moreover, people learn ethical behaviour from interacting with their colleagues and others which also requires proper communication. Some of the communication channels include letters, meetings, newsletter, e-mails and interactive training. Control System: If a company is to maintain ethical behaviour enforcement of ethical standards is required as all the employees may not voluntarily adopt such standards. Corporations keen to maintain an ethical environment should institute systems of both incentives and disincentives to encourage the employees to adopt recommended codes of conduct. These measures are deposited both to prevent the malpractices and punish the wrongdoers. Approaches to Ethical Decision Making Utilitarian Criteria: Utilitarianism is an ethic of welfare. The best known consequentialist theory of ethics is known as Utilitarianism. Utility means to denote the capacity in actions to have good results. It has come from the word “Utility”. As early as in 1800, Jeremy Benthem (1748 -1832) a British philosopher and social reformer is remembered for his class formulation i.e. Utilitarianism. Utilitarian is the philosophy which preaches maximum good for the maximum number of people as result of an action. An action of a business causes both a benefit and a cost and an analysis of such an action is done in terms of a cost-benefit analysis. According to this analysis, a decision should be undertaken if the expected benefit exceeds cost. The utilitarian theory focuses on the end result rather than the means that produce the result under this approach. A loss making unit should be closed down if the resources so released are utilised in other plants or activities that cause net increase in employment, income or taxes to the government which are spent back to increase public welfare. There cannot be unanimity over the logic of such a philosophy. In this example, owners and managers of a firm may lend their support to such a decision but the workers would oppose it. The Utilitarian method of Reasoning is: 1. Accurately state the action to be evaluated. 2. Identify all those who are directly and indirectly affected by it. 3. Specially all the pertinent good and bad consequences of action for all those directly affected and imaginatively consider varied possible outcomes and the likelihood of their occurrence. 4. Weigh the total good results (the degree of happiness produced against the total bad results, considering such matters: the quantity and duration of the harms and benefits involved). 5. Carry out a similar analysis, if necessary, for those indirectly affected and for society as a whole. 6. Sum up all the good and bad consequences. If the action produces more good than bad, the action is morally right and if it produces more bad than good, the action is morally wrong. Rights Criteria: This calls on managers to make decisions consistent with fundamental liberties and privileges as laid in the constitution, to respect and protect the basic rights of individuals. For example – right to speech etc. These criteria world provide protection to“Whistle Blowers” when they report unethical or illegal practices by their organisations to government agencies or to the media. Justice Criteria: This requires individuals to improve and enforce rules fairly and impartially so that there is equitable distribution of benefits and costs. It justifies paying the same wages for a given job and using seniority as the main determinant in making a retrenchment decision. Ethics of Care Criteria: Emphasizes that we exist in a web of relationships and should preserve and nurture these relationships and we should exercise special care and respond positively to the needs/ values of those who are dependent on our care. However, demands of caring are sometimes in conflict with demands of justice. For example, one supervisor catches her friend stealing from the company. In this case, criteria of impartial justice prevail over ‘ethics of care’ criteria. The wisest strategy is to ensure that all the above mentioned four criteria are given weightage in making an ethical decision. Stakeholder Analysis Stakeholder analysis is one process by which a firm or an individual can apply to reach an ethical decision. “Stakeholders” includes all those groups and/or individuals affected by a decision, policy or operation of a firm or individual. stakeholder theory suggests that, to reach ethical decisions, following is the decision making process: Identification Facts Alternatives Stakeholders Impact Guidance Constraints Comfort Assessment A. IDENTIFICATION: What is the moral dimension' What is the ethical issue' Often we don’t even notice the ethical dilemma. B. FACTS: Gather all of the relevant facts. It is critical at this stage that we do not unintentionally bias our later decision by gathering only those facts in support of one particular outcome. C. ALTERNATIVES: Identify the alternatives for your decision. Once you have gathered the facts, you will now be equipped to determine the variety of decision possibilities at your disposal. Explore not only the obvious choices , but also those that are less obvious and require some creative thinking or moral imagination to create. D. STAKEHOLDERS: Now you are at a stage to identify the interested parties (i.e. stakeholders) based on the compiled facts and alternatives. Who is affected by any of our alternative decisions' What are their relationships, their priorities to me, and what is their power over my decision' Who has a stake in the outcome' Do not limit your enquiry only to those stakeholders to whom you believe you owe your duty, sometimes it arises as result of the impact. For instance, you might not necessarily first consider your competitors as stakeholders, however , once you understand the impact of your decision on those competitors, an ethical duty may arise. E. IMPACT: What is the impact of each alternative on each stakeholder must be analysed. F. GUIDANCE: Can you discuss the case with relevant others, gather additional opinion perspectives' Now is the time to consider the theories – What values are involved' G. CONSTRAINTS: Are you comfortable with the decision' Can you live with it' H. ASSESSMENT: Have you built in mechanism for assessment of your decisions and possible modifications, if necessary' Characteristics of an ethical decision Right – morally correct Equitable - Just and equal Good – Highest good for all concerned Proper – Appropriate and acceptable Fair – Honesty Just – Action Ethical Decisions The end- outcome sought The means –methods employed The motive Foreseeable consequences Guiding factors for managers in ethical decision making A person’s personal code of ethics The company’s formal policies, values and culture The ethical climate in the industry Government regulations, Morality transcends conformity to law Behaviour of management in the company Deep belief to abide by the laws Ethical conduct/Standards tend to rise due to greater public exposure/image Lets Judge how ethical are we'' Example 1 You're applying for a new job as a database administrator. You're currently a software engineer, but due to layoffs, you've been performing most of your department's database-related projects for almost a year now. You want your resume to be taken seriously for the database administrator position. What Do You Do' Options Use the title database manager on your resume -- after all, you've been performing the duties of the person who last had that role. Use your official title, software engineer, on your resume, even though it doesn't accurately reflect the database skills you perform each day. Come up with a new job title altogether that better describes what you do each day. It's not your official title, but it delivers the message. Example 2 You are the entire information technology department for a small firm with 20 employees. The president of the company believes some of the employees are spending far too much time on the Internet doing tasks not related to work. The president asks you to start monitoring employees' Internet usage without their knowledge, something you could easily do from a technological standpoint. Options Start monitoring employees' email and Web usage, as the president has asked. Suggest that an acceptable Internet-use policy be developed. Talk to employees and tell them what the president has in mind so they'll change their habits Kohlberg's stages of moral development Kohlberg's stages of moral development are planes of moral adequacy conceived by Lawrence Kohlberg to explain the development of moral reasoning. Created while studying psychology at the University of Chicago, the theory was inspired by the work of Jean Piaget and a fascination with children's reactions to moral dilemmas. He wrote his doctoral dissertation at the university in 1958, outlining what are now known as his stages of moral development. Her theory holds that moral reasoning, which is the basis for ethical behavior, has six identifiable developmental constructive stages - each more adequate at responding to moral dilemmas than the last. In studying these, Kohlberg followed the development of moral judgment far beyond the ages originally studied earlier by Piaget,] who also claimed that logic and morality develop through constructive stages. Expanding considerably upon this groundwork, it was determined that the process of moral development was principally concerned with justice and that its development continued throughout the lifespan, even spawning dialogue on philosophical implications of such research. |Kohlberg used stories about moral dilemmas in his studies, and was interested in how people would justify their actions if they were put in a similar | |moral crux. He would then categorize and classify evoked responses into one of six distinct stages. These six stages are grouped into three levels: | |pre-conventional, conventional and post-conventional. | Stages Kohlberg's six stages were grouped into three levels: pre-conventional, conventional, and post-conventional. Following Piaget's constructivist requirements for a stage model (see his theory of cognitive development), it is extremely rare to regress backward in stages - to lose functionality of higher stage abilities. Even so, no one functions at their highest stage at all times. It is also not possible to 'jump' forward stages; each stage provides a new yet necessary perspective, and is more comprehensive, differentiated, and integrated than its predecessors. Level 1 (Pre-Conventional) 1. Obedience and punishment orientation (How can I avoid punishment') 2. Self-interest orientation (What's in it for me') Level 2 (Conventional) 3. Interpersonal accord and conformity (Social norms) (The good boy/good girl attitude) 4. Authority and social-order maintaining orientation (Law and order morality) Level 3 (Post-Conventional) 5. Social contract orientation 6. Universal ethical principles (Principled conscience) Pre-Conventional The pre-conventional level of moral reasoning is especially common in children, although adults can also exhibit this level of reasoning. Reasoners in the pre-conventional level judge the morality of an action by its direct consequences. The pre - conventional level consists of the first and second stages of moral development, and are purely concerned with the self in an egocentric manner. In Stage one (obedience and punishment driven), individuals focus on the direct consequences that their actions will have for themselves. For example, an action is perceived as morally wrong if the person who commits it gets punished. "The last time I did that I got spanked so I will not do it again" The worse the punishment for the act is, the more 'bad' the act is perceived to be. This can give rise to an inference that even innocent victims are guilty in proportion to their suffering. In addition, there is no recognition that others' points of view are any different from one's own view] This stage may be viewed as a kind of authoritarianism.[ Stage two (self-interest driven) espouses what's in it for me position, right behavior being defined by what is in one's own best interest. Stage two reasoning shows a limited interest in the needs of others, but only to a point where it might further one's own interests, such as "you scratch my back, and I'll scratch yours". In stage two concern for others is not based on loyalty or intrinsic respect. Lacking a perspective of society in the pre-conventional level, this should not be confused with social contract (stage five), as all actions are performed to serve one's own needs or interests. For the stage two theorist, the perspective of the world is often seen as morally relative. Conventional The conventional level of moral reasoning is typical of adolescents and adults. Persons who reason in a conventional way judge the morality of actions by comparing these actions to societal views and expectations. The conventional level consists of the third and fourth stages of moral development. In Stage three (interpersonal accord and conformity driven), the self enters society by filling social roles. Individuals are receptive of approval or disapproval from other people as it reflects society's accordance with the perceived role. They try to be a good boy or good girl to live up to these expectations, having learned that there is inherent value in doing so. Stage three reasoning may judge the morality of an action by evaluating its consequences in terms of a person's relationships, which now begin to include things like respect, gratitude and the 'golden rule'. "I want to be liked and thought well of; apparently, not being naughty makes people like me." Desire to maintain rules and authority exists only to further support these social roles. The intentions of actions play a more significant role in reasoning at this stage; 'they mean well.... In Stage four (authority and social order obedience driven), it is important to obey laws, dictums and social conventions because of their importance in maintaining a functioning society. Moral reasoning in stage four is thus beyond the need for individual approval exhibited in stage three; society must learn to transcend individual needs. A central ideal or ideals often prescribe what is right and wrong, such as in the case of fundamentalism. If one person violates a law, perhaps everyone would - thus there is an obligation and a duty to uphold laws and rules. When someone does violate a law, it is morally wrong; culpability is thus a significant factor in this stage as it separates the bad domains from the good ones. Most active members of society remain at Stage four, where morality is still predominantly dictated by an outside force. Post-Conventional The post-conventional level, also known as the principled level, consists of stages five and six of moral development. Realization that individuals are separate entities from society now becomes salient. One's own perspective should be viewed before the society. It is due to this 'nature of self before others' that the post-conventional level, especially stage six, is sometimes mistaken for pre-conventional behaviors. In Stage five (social contract driven), individuals are viewed as holding different opinions and values. Along a similar vein, laws are regarded as social contracts rather than rigid dictums. Those that do not promote the general welfare should be changed when necessary to meet the greatest good for the greatest number of people. This is attained through majority decision, and inevitably compromise. In this way democratic government is ostensibly based on stage five reasoning. In Stage six (universal ethical principles driven), moral reasoning is based on abstract reasoning using universal ethical principles. Laws are valid only insofar as they are grounded in justice, and that a commitment to justice carries with it an obligation to disobey unjust laws. Rights are unnecessary as social contracts are not essential for deontic moral action. Decisions are not met hypothetically in a conditional way but rather categorically in an absolute way (see Immanuel Kant's 'categorical imperative'). This can be done by imagining what one would do being in anyone's shoes, who imagined what anyone would do thinking the same (see John Rawls's 'veil of ignorance'). The resulting consensus is the action taken. In this way action is never a means but always an end in itself; one acts because it is right, and not because it is instrumental, expected, legal or previously agreed upon. While Kohlberg insisted that stage six exists, he had difficulty finding participants who consistently used it. It appears that people rarely reach stage six of Kohlberg's model. Ethics of care The ethics of care is a normative ethical theory; that is, a theory about what makes actions right or wrong. It is one of a cluster of normative ethical theories that were developed by feminists in the second half of the twentieth century. While consequentialist and deontological ethical theories emphasize universal standards and impartiality, ethics of care emphasize the importance of relationships. The basis of the theory is the recognition of: 1. The interdependence of all individuals for achieving their interests 2. The belief that those particularly vulnerable to our choices and their outcomes deserve extra consideration to be measured according to i) The level of their vulnerability to one's choices ii) The level of their affectedness by one's choices and no one else's 3. The necessity of attending to the contextual details of the situation in order to safeguard and promote the actual specific interests of those involved. Carol Gilligan's Stages of Moral Development [pic] Historical background The ethics of care was initially inspired by the work of psychologist Carol Gilligan. Early in her career, Carol Gilligan worked with psychologist Lawrence Kohlberg while he was researching his theory of moral development. Gilligan's work on women's moral development arose in response to the seemingly male-based results that arose from Kohlberg's studies. Gilligan and others have suggested that the history of ethics in Western culture has emphasized the justice view of morality because it is the outlook that has traditionally been cultivated and shared by men. By contrast, women have traditionally been taught a different kind of moral outlook that emphasizes solidarity, community, and caring about one's special relationships. This "care view" of morality has been ignored or trivialized because women were traditionally in positions of limited power and influence. The justice view of morality focuses on doing the right thing even if it requires personal cost or sacrificing the interest of those to whom one is close. The care view would instead say that we can and should put the interests of those who are close to us above the interests of complete strangers, and that we should cultivate our natural capacity to care for others and ourselves. Carol Gilligan's Stages of Moral Development |Stage |Goal | |Pre-conventional |Goal is for individual survival and right conduct is viewed in a selfish manner solely as what is good for oneself. | |conventional |Self sacrifice is goodness. Importance is not on hurting others and willing to sacrifice one’s interest and help others, | | |which is the characteristic feature of women. | |Post-conventional |Principle of nonviolence: do not hurt others or self. At this level, balances are found between caring about others and | | |pursuing one’s own interests. | Comparing ethics of care with traditional ethical positions Ethics of care contrasts with more well-known ethical views, such as utilitarianism and deontology or Kantian ethics. This sort of outlook is what feminist critics call a 'justice view' of morality. A morality of care rests on the understanding of relationships as a response to another in their terms. It focuses on the moral value of being partial toward those concrete persons with whom we have special and valuable relationships, and on the moral importance of responding to such persons as particular individuals with characteristics that demand a response to them that we do not extend to others. Ethics of care and feminist ethics While some feminists have criticized care-based ethics for reinforcing traditional stereotypes of a “good woman” others have embraced parts of this paradigm under the theoretical concept of care-focused feminism. Care-focused feminism is a branch of feminist thought, informed primarily by ethics of care as developed by Carol Gilligan and Nel Noddings. This body of theory is critical of how caring is socially engendered to women and consequently devalued. “Care- focused feminists regard women’s capacity for care as a human strength” which can and should be taught to and expected of men as well as women. Noddings proposes that ethical caring has the potential to be a more concrete evaluative model of moral dilemma, than an ethic of justice. Noddings’ care-focused feminism requires practical application of relational ethics, predicated on an ethic of care. Ethics of care is also a basis for care-focused feminist theorizing on maternal ethics. Critical of how society engenders caring labor, theorists Sara Ruddick, Virginia Held, and Eva Feder Kittay suggest caring should be performed and care givers valued in both public and private spheres. Their theories recognize caring as an ethically relevant issue. This proposed paradigm shift in ethics encourages that an ethic of caring be the social responsibility of both men and women. 7 Principles of Admirable Business Ethics 1. Be Trustful: Recognize customers want to do business with a company they can trust; when trust is at the core of a company, it's easy to recognize. Trust defined, is assured reliance on the character, ability, strength, and truth of a business. 2. Keep An Open Mind: For continuous improvement of a company, the leader of an organization must be open to new ideas. Ask for opinions and feedback from both customers and team members and your company will continue to grow. 3. Meet Obligations: Regardless of the circumstances, do everything in your power to gain the trust of past customer's and clients, particularly if something has gone awry. Reclaim any lost business by honoring all commitments and obligations. 4. 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. 5. Become Community Involved: Remain involved in community-related issues and activities, thereby demonstrating that your business is a responsible community contributor. In other words, stay involved. 6. Maintain Accounting Control: Take a hands-on approach to accounting and record keeping, not only as a 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 any dubious activities promptly. 7. 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 the beginning. A small business that instills a deep-seated theme of business ethics within its strategies and policies will be evident among customers. It's overall influence will lead to a profitable, successful company. By recognizing the value of practicing admirable business ethics, and following each of the 7 principles, your success will not be far off. 7. Trusteeship Management - Gandhian Philosophy of Wealth Management Gandhism (or Gandhianism) is a collection of inspirations, principles, beliefs and philosophy of Mohandas Karamchand Gandhi (known as Mahatma Gandhi), who was a major political and spiritual leader of India and the Indian Independence Movement. It is a body of ideas and principles that describes the inspiration, vision and the life work of Gandhi. The term also encompasses what Gandhi's ideas, words and actions mean to people around the world, and how they used them for guidance in building their own future. Gandhism also permeates into the realm of the individual human being, non-political and non-social. A Gandhian can mean either an individual who follows, or a specific philosophy which is attributed to, Gandhism. Main article: Satyagraha Satya is the Sanskrit word for “truth,” and aagraha (from the Sanskrit root aagrah cognate with English word “grab”) can be rendered as “effort/endeavor/insist.” The term was popularized during the Indian Independence Movement, and is used in many Indian languages including Hindi. Gandhi stated that “I have nothing new to teach the world. Truth and non-violence are as old as the hills.”[ The pivotal and defining element of Gandhism is satya, a Sanskrit word usually translated into English as truth, whose literal meaning is 'what actually is' (deriving from the root verb as meaning 'to be'). Truth must pervade all considerations of politics, ego, society and convention. Gandhi did not consider himself to be a pacifist, socialist or on any definable spectrum of politics. He professed to adhere to the pure, existing facts of life to make his decisions. Gandhi’s commitments to non-violence, human freedom, equality and justice arose from his personal examination. Truth is interpreted subjectively. Gandhism does not demand that its adherents agree to Gandhi’s own principles to the letter, but in spirit. If one honestly believes that violence is sometimes necessary, it is truthful to believe in it. When Gandhi returned to India in the middle of World War I, he said he would have supported the British in the war. It would have been wrong, according to Gandhi, to demand equal rights for Indians in the Empire, and not contribute to its defence. On the other hand, by the time of the advance of the Japanese in World War II, Gandhi had given up notions of fighting alongside the British and argued for nonviolence instead. Gandhi developed a way of life by his constant “experimenting with truth” — a phrase that formed the subtitle to his autobiography. He was prepared to learn through trial and error, often admitting to mistakes and changing his behaviour accordingly. This was particularly notable when Gandhi stopped all nationwide civil resistance in 1922 after the Chauri Chaura incident. He would forsake political independence for truth — believing that Indians should not become murderers and commit the very evils they were accusing the British of perpetrating in India. Gandhism is more about the spirit of Gandhi’s journey to discover the truth, than what he finally considered to be the truth. It is the foundation of Gandhi’s teachings, and the spirit of his whole life to examine and understand for oneself, and not take anybody or any ideology for granted. Gandhi said: “The Truth is far more powerful than any weapon of mass destruction.” Gandhi’s philosophy encompassed ontology and its association with truth. For Gandhi, "to be" did not mean to exist within the realm of time, as it has in the past with the Greek philosophers. But rather, "to exist" meant to exist within the realm of truth, or to use the term Gandhi did, satya. Gandhi summarized his beliefs first when he said "God is Truth", which his experimenting later prompted him to change to "Truth is God". The first statement seemed insufficient to Gandhi, as the mistake could be made that Gandhi was using truth as a description of God, as opposed to God as an aspect of satya. Satya (truth) in Gandhi's philosophy is God. It shares all the characteristics of the Hindu concept of God, or Brahman, and is believed by Gandhians to live within each person as their conscience while at the same time guiding the universe. Brahmacharya and Ahimsa The concept of nonviolence (ahimsa) and nonresistance has a long history in Indian religious thought and has had many revivals in Hindu, Buddhist, Jain and Christian contexts. Gandhi explains his philosophy and way of life in his autobiography, The Story of My Experiments with Truth. He was quoted saying: "What difference does it make to the dead, the orphans, and the homeless, whether the mad destruction is wrought under the name of totalitarianism or the holy name of liberty and democracy'" "An eye for an eye makes the whole world blind". "It has always been easier to destroy than to create". "There are many causes that I am prepared to die for but no causes that I am prepared to kill for". At the age of 36, Gandhi adopted the vow of brahmacharya, or celibacy. He committed himself to the control of the senses, thoughts and actions. Celibacy was important to Gandhi for not only purifying himself of any lust and sexual urges, but also to purify his love for his wife as genuine and not an outlet for any turmoil or aggression within his mind. Ahimsa, or non-violence, was another key tenet of Gandhi's beliefs. He held that total non-violence would rid a person of anger, obsession and destructive impulses. While his vegetarianism was inspired by his rearing in the Hindu-Jain culture of Gujarat, it was also an extension of ahimsa. On July 6, 1940, Gandhi published an article in Harijan which applied these philosophies to the question of British involvement in World War II. Homer Jack notes in his reprint of this article, "To Every Briton" (The Gandhi Reader) that, "to Gandhi, all war was wrong, and suddenly it 'came to him like a flash' to appeal to the British to adopt the method of non-violence." In this article, Gandhi stated, I appeal to every Briton, wherever he may be now, to accept the method of non-violence instead of that of war, for the adjustment of relations between nations and other matters [...] I do not want Briton to be defeated, nor do I want her to be victorious in a trial of brute strength [...] I venture to present you with a nobler and braver way worthier of the bravest soldier. I want you to fight Nazism without arms, or, if I am to maintain military terminology, with non-violent arms. I would like you to lay down the arms you have as being useless for saving you or humanity. You will invite Herr Hitler and Signor Mussolini to take what they want of the countries you call your possessions. Let them take possession of your beautiful island, with your many beautiful buildings. You will give all these but neither your souls, nor your minds. If these gentlemen choose to occupy your homes, you will vacate them. If they do not give you free passage out, you will allow yourself, man, woman, and child, to be slaughtered, but you will refuse to owe allegiance to them [...] my non-violence demands universal love, and you are not a small part of it. It is that love which has prompted my appeal to you. Professional management based on the segregation of executive power from ownership, in the best traditions of western Democracies, is what made it possible for our well known multinational companies to adapt their corporate objectives and management practices to our changing environment, and thus achieve sweeping success in terms of growth, diversification, profits and social acceptance. Gandhian Principle of Trusteeship:  Trusteeship principle advocated by Gandhiji provides a means of transforming the present capitalist order of society into an egalitarian one. It is in many ways different from the concept from socialism as Gandhiji did not believe in using force either by the individual or by the state. Trusteeship, as a concept is not absolute but relative in time and space to the needs of the society. The essence of trusteeship as a moral principle however is not relative but absolute: what is relative or tentative is the frame work of practical economic arrangements based on the moral philosophy. Macro Perspective:  The concept of property, compromising productive assets, is central to capitalism, socialism productive assets, is central to capitalism, socialism and trusteeship. The three elements in  the concept of property, ownership, its management and rewards from ownership  and its use vary in all the three. At an time the gains from economic use of assets that is used in business results in [pic]                In history, the civilizations which had lesser between wealth and ethics had less class conflicts and survived long. Trusteeship is freedom of ownership, of property in the hands of community and the state but as a trustee of the masses. It does not rest at providing “ equal opportunity”. It believes in generating wealth with efficiency where the index of measurement is not wealth accumulation but wealth distribution in the society. Its means are non-violent and therefore does not believe in forceful methods adopted but the states for reducing class conflicts. Gandhiji envisaged an egalitarian society free from exploitation of man by man. It believes in class collaboration. Micro perspective: Irrepressible desire to acquire wealth and power is at the root of all individual, social, economical and political conflicts. Gandhiji however believed that restructuring of institutions would be of no avail unless men who operate these institution accept, within their own volition, the implicit ethics of the new system. He believed that the change in the man is the basic to the change in the society. The freedom, the choice the Swaraj must come from within. Ghandhiji therefore put primary emphasis on change of mind and secondarily, but not less specifically on material forces of production. For it is the mind from which emanates not only intellectual (competence) to mange material forces but also attitude, social behavior etc. which determine whether to use the power of possession for good or bad, to exploit or to serve those who do not possess, to be compassionate or cruel, to accumulate for personal gain or to use for social good. Once the right attitude to the use of possession of material-economic power is established, the ownership becomes a matter of secondary importance. How will you bring about trusteeship' Was the question repeatedly asked to which he replied “not merely by verbal persuasion. My means are non-co-operation with recalcitrant.” The idea of holding wealth as a trust may be visionary or even utopian. But a thought does not become irrelevant because of an element of a distant vision in it. Truth in personal life and non violence in the affairs of nation do not become irrelevant because they are almost impossible to practice. We must not underrate the business talent and know-how which the owning class has acquired through generations of experience and specialization. They should be allowed to retain the stewardship of their possession and use their talents to increase their wealth. Concomitants:  When the principle of trusteeship is accepted by any individual voluntarily and without any reservation, certain concomitants flow from such acceptance:- 1. Simplicity of life style, the rejection of all extravagance and the flaunting of wealth is the first and the immediate result. 2. It rules out any wrong means outside the legal and moral framework, in his pursuit of wealth. Even surplus wealth already in one’s possession is regarded as wealth held in trust for society by an individual, to be utilized only for the benefit of society.       Where then is the question of acquiring more wealth by adopting unfair or unjust or unfair means' 1. Any activity harmful to society (although it may result in wealth to particular institution or individual) has thus to strictly avoided. 2. One has to treat others as human beings and not as units of labour to be purchased at the lowest price for increasing production and maximizing profits. 3. One stands committed to giving full opportunities to workers in the enterprise, to learn to take greater responsibility, and to participate in decision making at all levels, according to the in actual and potential capacities. This includes the decision, of the formula for apportioning profits and surpluses generated by the institute. 4. Since trusteeship presupposes voluntary acceptance, all violence is scrupulously avoided. Trusteeship is to promoted only by love and persuasion. Insights :  Trusteeship can be viewed as an attitude to life. The trustee has to so behave that he can command the confidence of others in his honesty, integrity and in the reasonable frame of mind he brings to his work and behavior. The nearer a person’s attitude and behaviour is to the trusteeship ideal, the greater the confidence others are likely to have in him. This command over the people he comes into contact with, gives him not merely mental and spiritual happiness, but in fact very much material benefit also. Without depriving others of their just share, he shares with them increased benefits. Gandhiji is seen as a “practical visionary” he never approved the use of legislation for implementation of his views. Trusteeship means personal gain together with social gain. [pic]  Paths to achieve the goal:  Scott Bader Common Wealth of the U.K. was successfully converted an organization based on the Capitalist, free enterprise system of organization and management into pioneering Trusteeship concern permeating all its activities. They appointed a distinguished Social Worker a M. P. and the Economic Adviser and director of statistics of the National Coal Board as Trustee. The maximum ratio between the lower and the highest salaries stood at 1:7. As a registered charity it distributed its income for various charitable causes.  Indian experiences of  Aditya Birla Group, Jamana Lal Bajaj, Amul, Tata House(JRD) and Infosys  as some of the examples display the different experiments conducted by individuals and/or companies which are committed to the larger goal of what Gandhiji said “Sarvodaya”. To conclude:  The doctrine of trusteeship is Gandhiji’s contribution towards the peaceful transformation of Indian Society, or any society. It is a call for peaceful revolution, a new social order. It requires an integrated political, moral and economic approach. A struggle both by masses and the leaders. Areas of debate and Research:  ●  The belief that men create wealth for self gratification beyond their basic needs is not universally true. Quite often the basic urge the joy of creation, the urge to achieve and the acclaim of success. ●  It is possible for one man or a group of men to harm another without also harming himself/themselves. ●  Generation of wealth with efficiency in trusteeship like capitalism ●  Developing equi-poised mind to serve the society. ●  “Most revered men do not put a price on what they gave to mankind”. People like to be like the whom they revere. ●  Not rights but the obligations were the basis of moral life, and one’s rights were embedded in and grew out of others’ discharge of their duties. |Professional management based on the segregation of executive power from ownership, in the best traditions of western Democracies, is what made it | |possible for our well known multinational companies to adapt their corporate objectives and management practices to our changing environment, and | |thus achieve sweeping success in terms of growth, diversification, profits and social acceptance. | |Gandhian Trusteeship as an" Instrument of Human Dignity" | |By Y.Kesavulu | |Gandhi's economic ideas were part of his general crusade against poverty and, exploitation against socio-economic injustice, and deteriorating moral| |standards. Gandhi was an economist of the masses. His approach was rooted in human dignity. His economic philosophy is a result of innumerable | |experiments which he conducted in the course of his life. His pragmatic approach gave a new direction to the existing socio-economic problems in the| |process of protecting human dignity. | |The fluid international conditions fraught with ideological tensions in the economic domain demanded a fresh approach to economic philosophy, with | |emphasis on the ideals of human rights like democracy, economic freedom, and social justice. Gandhism as a socio economic philosophy suits not only | |to accomplish the higher ideals of democratic freedom and socialism but it was also thoroughly developed to meet the challenge of national and | |international forces of communism and capitalism. | |The core of Gandhian economic thought is the protection of the dignity of human person and not mere material prosperity. He aimed at the | |development, upliftment, and enrichment of human life rather than a higher standard of living with scant respect for human and social values. The | |fundamental ethical values dominated his economic ideas. He wanted to liberate the modern economic philosophy from the quagmire of materialism and | |bring it to a higher spiritual plane. Human actions were motivated by social objectives of the protection of human rights. | |Gandhi's efforts towards "spiritualizing economics" are truly reflected in his concept of trusteeship. He based his doctrine of trusteeship on the | |first sloka of Isopanisad, according to which one is asked to dedicate everything to God and then use it only to the required extent. The principal | |condition laid down in it is that one must not covet what belongs to others. In other words, in the first instance, everything must be surrendered | |to God and then out of it one may use only that which is necessary for the service of God's creation, according to one's strict needs. This makes it| |clear beyond doubt that it is not in industrial and business sectors only that the doctrine of trusteeship is to be made applicable. The spirit of | |this doctrine is detachment and service. Unless these two virtues are inculcated, it is impossible to obey the command "covet not anybody's riches."| |Therefore Gandhi's idea of trusteeship arose from his faith in the law of non-possession. It was founded on his religious belief that everything | |belonged to God and was from God. Therefore the bounties of the world were for His people, as a whole, not for any particular individual. When an | |individual had more than  his respective portion, he became a trustee of that portion for God's people. God who is all-powerful has no need to | |store. He creates things afresh everyday. Therefore man should also live his life from day to day without trying to store things for future. If this| |principle was imbibed by people in general, it would have become legalised and trusteeship would have become a legalised institution. Gandhi wished | |it became a gift from India to the world (Harijan, 23 February 1947). | |Basically Gandhi suggested this doctrine as an answer to the economic inequalities of ownership and income-a kind of nonviolent way of resolving all| |social and economic conflicts which grew out of inequalities and privileges of the present social order. Gandhi never ceased to believe in | |trusteeship in theory from the beginning or, at any 'rate, towards the later part of life, though the method was proving ineffective. He believed in| |the indispensability of nonviolence, non co-operation and Satyagraha in converting the privileged classes into trustees. He even advocated violence| |as a last resort to dispossess property-owners of their wealth. | |Therefore man's dignity, and not his material prosperity, is the centre of Gandhian economics. Gandhian economics aims at a distribution of material| |prosperity keeping only human dignity in view. Thus it is dominated more by moral values than by economic ideas. According to Gandhi, trusteeship is| |the only ground on which he can work out an ideal combination of economics and morals. In concrete form, the trusteeship formula reads as follows: | | (i) Trusteeship provides a means of transforming the present capitalist order of society into an egalitarian one. It gives no quarter to | |capitalism, but gives the present owning class a chance to reform itself. It is based on the faith that human nature is never beyond redemption. | |(ii) It does not recognise any right of private ownership of property except so far as it may be permitted by society for its own welfare. | |(iii) It does not exclude legislation of the ownership and use of wealth. | |(iv) Thus under state regulated trusteeship, an individual will not be free to hold or use his wealth for selfish satisfaction in disregard to the | |interests of society. | |(v) Just as it is proposed to give a decent minimum living wage, a limit should be fixed for the maximum income that would be allowed to any person | |in society. The difference between such minimum and maximum incomes should be reasonable and equitable and variable from time to time, so much so | |that the tenancy would be towards the obliteration of the difference.          . | |(vi) Under the Gandhian economic order, the character of production will be determined by social necessity and not by personal greed. | |The theory of trusteeship applies equally to both tangible and intangible property, "such as the muscular energy of the laborers and the talents of | |a Helen Keller" (K.G. Mishawaka, Gandhi and Marx, Nava Ivan Trust, Ahmedabad, 1951, p. 79). According to Gandhi, all property belongs to God and in | |his concept of trusteeship the trustees have no right to destroy that property deliberately and wantonly. Besides, trusteeship aims at the rising of| |the morale of the people by giving them a sense of security in the hands of the trustees. The trustees, in their turn, are beholden to creating an | |urge among the masses for a higher standard of life. | |As man advances from a narrow sphere of personal satisfaction to the nobler concept of the welfare of all, he marches closer towards | |self-realization. The whole idea of possessing wealth only to guard it from being misused and to distribute it equitably aims at protecting human | |dignity. If it is possessed for any other objective, it is objectionable on moral grounds. Gandhi enjoins this moral obligation on the part of the | |trustees as he is fully aware of the ills of capitalism which widen the gap between the rich and the poor. | |The Gandhian theory of trusteeship departs significantly from Marxian economic philosophy too. If Marxism is the child of the Industrial Revolution,| |Gandhian theory can be understood only in the context of certain basic spiritual values of the Indian tradition. Marxian socialism aims at the | |destruction of the class called capitalists, whereas the Gandhian approach is not to destroy the institution, but to reform it. Gandhian socialism, | |being ethical, is different from Marxian'" socialism. Man, to him, is an ethical being first and a social being later. | |The most significant difference between Marxian socialism and Gandhian socialism lies in the method they recommend to achieve it. Whereas Marxian | |socialism harps on violence, Gandhian socialism aims at a change of heart on the part of the rich. There is no place for violence, but only trust. | |The common man trusts his trustee and the latter plays the role of a custodian. Thus Gandhian socialism radically departs from both capitalism and | |socialism; it is trusteeship socialism. Though this kind of socialism is difficult to achieve, Gandhi advocated it as he believed in the basic | |strength of the goodness of man and the value of morals. All other "isms" address the problem superficially, whereas trusteeship strikes it at the | |root. | |Gandhi wanted Seminars to act as trustees of their lands and allow them to be used by tenants. This idea was based mainly upon the fact that India | |is an agricultural country where more than 80 percent of the population lives in villages. By providing them trust land, Gandhi was solving one of | |the major economic problems of an independent India to be. In the socialist collective agricultural system, we find the same idea implemented. The | |success of this system in certain countries shows that the concept is not impracticable at all. The failure of this system is often attributed to | |the will of the people. But a more sound reason seems to be the force that was being applied while putting this system into practice. | |At the centre of this concept is the urge to protect human dignity. They are, broadly speaking, the demands or desires of the modem man. The | |revolutions that are raised from time to time in different countries are motivated by the same objectives of human dignity, justice, and equity. It | |is very clear that the idea is relevant today as it aims at the social, economic, and political changes in the world. One of the first steps to | |achieve this human dignity, justice, and equity is to eliminate the ever-present troublesome element of class struggle in the society. Though the | |Gandhian concept of trusteeship does not seek to destroy any particular class, it provides us with an idea of how to narrow the class gap. The | |practice of all the democratic nations has been to reduce the gap between the rich and the poor to a minimum. In India we find this motive behind | |our cooperative policies, the community development projects, and the taxation policy that heavily taxes the upper class and gives some relief to | |the lower strata of society. We find the manifestations of the Gandhian concept of trusteeship in these policies. | | | |Trusteeship in Practice | |By Arvin A Deshpande | | | |Trusteeship as perceived by Gandhi is a all embracing. It is an attitude first, then a technique and finally a constitutional form. It tells us that| |to the extent that we command scarce resources, we are answerable to  others. All human rights convey corresponding duties. Thus the Gandhian | |concept of trusteeship expresses the inherent responsibility of business enterprise to its workers, shareholders, consumers and the community and | |the mutual responsibilities of each to the other. This is the price of democracy. Without virtue in the individual and in the organs of society, | |democracy cannot survive. | |At an international seminar on Trusteeship which took place in Bangalore from October 26 to 29, 1979 the one conclusion that was arrived at was that| |business and industry includes such a variety of firms and companies with members ranging from a handful to many thousands and that any one model of| |a responsible enterprise cannot serve for all. There must be a multiplicity of models and the best will emerge through experience. Hence the | |importance of making a start. | |One way was shown by Ernest Bader of Scott Bader Commonwealth who gave his company freely to his employees but retained a life pension and life | |chairmanship. | |Sedan Lewis gave his much larger company to this employees in return for a payment of $ one million over a period of time. | |Ernest Abe Zeus gave to his employees freely but at the same time made sure that a deed of trust would protect the interest of consumers and | |community alike. All surplus profits went permanently to the University and town of Gina in which the Zeus Foundation was situated. Then take an | |individual proprietor of a business who ventures his saving in order to create something new.  He is also a social benefactor and one to be | |respected. Now suppose a generation has passed. The proprietor has no heir and has to settle his business. What can he do' Trusteeship tells him | |that he may execute a deed of trust in favour of his employees and give his shares free of for a payment to be made to his family over a period of | |time. | |What about a medium sized company jointly owned. Here the capital formation is critical. If there is  equity capital it should over time, say 50 | |years, be repaid. Alternatively, the shares can be put up on the open market and put into trust for the employees or converted into fixed interest | |preference shares. There is no warrant in the moral law for permanent debts and all debts must in time be cancelable or repayable in any society | |that pretends to respect freedom. This gives the director a way of creating a trusteeship company via share ownership. | |Another way is by a declaration of Corporate purpose that can be overseen by an independent group of social auditors. | |Trusteeship becomes essential rather than desirable when we come to larger companies including nationalized industries and multinational | |corporations. Here the declaration of Corporate purpose and social audit can serve the purpose. Social responsibility is the beginning of | |Trusteeship. It can be expressed in many ways including sharing power and profits and management functions. It can be expressed in the existence of | |social purpose and objectives in companies' articles and management's role becomes that of balancing all claims including those of community and the| |consumers. If the company has no soul, it had better develop one. | |Then there is the experience of several British and Spanish common ownership firms. Common ownership is different from co-operative societies, | |because here capital is sought on a loan basis and there is no equity capital. | |An enlightened industrialist can, in the Indian conditions, float a private limited company by contributing the seed capital and the balance will | |come from a public financial institution like a bank. All the other directors will function as trustees and represent different interests like those| |of the community and the consumers without having any financial stake. The profits after payment of tax will be distributed as follows: | |25% to pay back to the bank; 25% to build reserves for the future; 25% to be distributed equally among the workers and 25% to be given back to the | |community for rural development and other such causes. | |The other alternative is to start a common ownership enterprise under Section 25 of the Indian Companies Act. The company will be registered with | |limited liability under Section 25 and as a public company. Such a company may be further registered both under the Public Trust Act as well as | |under Section 12 A of the Income Tax Act and can seek exemption under Section 10 (23) C (IV). It can secure exemption also under Section 80G for | |contribution to the seed capital and also under Section 35 CCA it is established in a rural area. | |In the context of our situation, acceptance of social obligations not only means acceptance of normal business obligations but a commitment to | |national and community goals which include participation in the wider fields of rural | |development creating entrepreneurship and self-employment. | | | |Basic Principles Of Gandhism | |By K. Santana | | | |Mahatma Gandhi was an intensely active personality. He was interested in everything that concerns the individual or society. He is best known as the| |matchless political leader who evolved the new technique of “satyagraha”. His fight against untouchability and the notions of superiority and | |inferiority by birth are also fairly well known. For India, his greatest service was, perhaps, the emancipation of Indian women. | |It is generally known that he lived an austere life, practised strict vegetarianism and abstained from alcoholic drinks, tobacco and even the milder| |stimulants like coffee and tea. His attachment to simple natural remedies against illness and disease and his radical ideas on education are not so | |well known to the outside world and, even in India, they have not made much impact. Gandhi deliberately refrained from making these public issues | |and thereby confusing the people. The only exception was prohibition of intoxicating drinks which became a tool in the armoury of satyagraha. | |Therefore it became a plank in the Congress program but it was well known that many an important supporter of Gandhi was privately addicted to drink| |and the great leader did not take undue notice of it. Even though it got into the Constitution in the form of a Directive Principle, there has been | |no honesty about prohibition among the Congress Governments and Congressmen in general. Gandhi’s views on language, government and economics played | |a considerable part in his political movements; and in the program of Khadi and Village Industries included in the Five Year Plans and in the | |Panchayat Raj which has recently been established, they have been accepted and implemented to some extent. | |If all these ideas and activities are viewed in isolation, they constitute a miscellaneous and rather archaic collection, the importance of which | |will dwindle and fade away with time. It is only when it is realised that Gandhi was fundamentally a moral and social philosopher and that, through | |these items, he sought to experiment with certain far-reaching fundamental principles, of whose absolute truth he was convinced beyond all doubt, | |that their true significance becomes clear. | | | |The Gandhian Principles | | | |The first principle which guided all his thoughts and activities is the complete unity and integrity of body, mind and soul in the individual human | |being. He was never tired of saying that the body should be controlled by the mind and the mind by the soul. But this control is not to be achieved | |by despising or neglecting either the body or the mind or in the mystic exaltation of the soul by itself. He attached to physical health and | |well-being as much importance as to plain and logical thinking or moral responsibility. He was one of the most logical and powerful writers; yet, he| |was never tired of decrying all idle and purposeless playing with words and ideas or deification of thought as such. He was convinced that real | |thought must be organically connected to moral purposes on the one side and useful and right action on the other. | |It has been claimed that the greatest achievement of Gandhi was the spiritualization of politics. This is undoubtedly true; but he had no faith in | |spirituality by itself as an abstract virtue. He conceived it as a kind of illumination or fragrance which should accompany every thought and | |action. It is difficult to define it, except, perhaps, through the verses of the Bhagavad-Gita which constituted his daily prayer. | |The second principle of Gandhian philosophy may be stated as follows: All social action should be governed by the same simple set of moral values, | |of which the main elements are selflessness, non-attachment, nonviolence and active service. It will take me too long to define and elaborate his | |ideas in respect of each of these; but he believed that the growth of a mans personality is proportionate to his faith in and practice of these | |virtues. This is possible only when he identifies himself more and more with an ever-increasing circle till it embraces all humanity and even all | |living beings. He judged the value and vitality of social institutions by their capacity to foster such growth. | |His third conviction was that no society, state or any other institution has any worth or importance apart from its part in contributing to the | |growth of the individuals of which it is composed. The State, the Nation, the community and other traditional groupings had no intrinsic value for | |him. In the pages of Young India in the earlier years, he defended the caste system as a great scheme of social and sexual discipline; but in the | |light of actual experience he abandoned it as an impractical system, though to the end he believed in some kind of voluntary and ideal social groups| |based on qualifications and capacity for service. | |It was Gandhi's firm conviction that means are at least as important as, and often even more important than, ends. It is, of course, desirable that | |ends should be good and reasonable. But they merely give a direction to life while the means adopted constitute life itself. Therefore, if the means| |are right, that is, if they conform to the tests of truth and nonviolence, even mistakes, errors and failures aid the growth of the individual. On | |the other hand, wrong means corrupt the soul and no good can ever come out of them. Gandhi repudiated categorically the idea that ends justify the | |means. This implies the rejection of war, espionage and crooked diplomacy, even when they are adopted for the so-called noble ends of defending the | |country, religion or humanity. | |Faith in God is, according to Gandhi, the foundation of all moral values. He never defined God and was prepared to allow every person to have his | |own idea of God. For himself, he was inclined to think of Him as the Upanishadic Brahman. But, so long as a person believes in some source of | |spiritual life and holds it superior to the material universe, he is a believer in God. Gandhi had no objection even to a formal profession of | |agnosticism, so long as a person demonstrated by his attachment to moral values that this outlook was essentially spiritual in essence. | |I believe that the influence of Gandhi in the future will depend more and more on the realisation that these fundamental principles constitute the | |core of his teachings and that all his actions were merely illustrations of their application. He considered his life as a series of experiments | |with truth. Therefore, it is his conception of truth that is central to his life and work. I do not claim that the principles I have indicated | |exhaust his conception; but I believe that they constitute its basic elements. | Looking at Gandhian trusteeship more closely, we might ask what it actually means to be a trustee. A trustee is one who self-consciously assumes responsibility for upholding, protecting and putting to good use whatever he possesses, acquires or earns. For an individual to be a trustee in any meaningful sense implies that he is self-governing and morally sensitive. He is acutely aware of the unmet needs of others and, simultaneously, is capable of controlling and transmuting his own appropriating tendencies. He is deeply committed to cultivating his most generous feelings and altruistic hopes for others while consciously and patiently freeing himself from all recognized exploitative attitudes and relationships. He strives to become self-regulating, reliable and sacrificial. But he must become so in a courageous and intelligent way. He must learn to think and feel altruistically. He must learn by degrees the heart's etiquette – to speak, touch and act with the utmost purity and solicitousness. He must become, by virtue of self-training, very attentive to every resource at his disposal – both inner and outer. It is precisely because he sees his abilities and possessions as belonging to God, mankind or to future generations that he is eager to use them to the maximum. His posture towards his overall resources is therefore not one of a lazy or selfish indifference. He is not concerned with hoarding nor is he fearful of multiplying his gifts, talents and possessions. Like the good servant in the New Testament, he wishes to increase his meagre "talents", but not for his own sake, nor merely for his own family.     The best trustee is indeed someone who has attained an inward moral balance. He is serenely detached, magnanimous and imaginative. But his detachment is never cold or narrow. It is an expression of his unshakeable confidence in the ontological plenty of Nature and the inexhaustible resourcefulness of Man. His steadfastness and trustworthiness are principally due to this broader focus of concentration. Likewise, his motive is benevolent and self-sustaining because it is not mixed with the turgid waters of personal aggrandizement. Instead, he expresses a quality of love and appreciation for what he has that enhances its moral and practical value for others. He might even possess little, but his sense of when, where and how to use what he has increases its potential good a hundredfold.     If this conveys the invisible grandeur of the Gandhian trustee, then what steps can we take to become more like such sage-like trustees and less like small-minded appropriators' Gandhi might well suggest that our first steps should be the fruit of honest self-examination. Grandiose gestures about giving up external possessions and impulsive statements about our good intentions have little practical impact on our character. The initial step should be at the level of thought. We should think clearly and deeply about the principles of trust and trusteeship. What does trusteeship mean as an idea and as an ideal' What are its practical implications' And what would we have to give up for it to become a potent mantram in our lives' This form of reflection and self-questioning initiates a period of "mental gestation". It allows us to strengthen our understanding, dispel illusions and light the subtle fire of altruism.      Once we have grasped the principle of trusteeship at a rudimentary level – and recognized its radical implications for our personal lives and impersonal relationships – then we could commit ourselves wholeheartedly to the moral heroism of non-possession. Thus moral commitment would be fused with clarity of thought and psychological honesty. Clarity in relation to the ideal of non-possession is vital, as is firmness of resolve. Mentally, we must see where we are going – even though it be only the next step – and we must be unconditional if we hope to approximate the end in view. Otherwise, we will neither overcome nor transform the possessive attitudes that self-examination reveals. This is a fundamental theme in Gandhian thought. We must be courageous and unflinching in our efforts to fulfil our self-adopted vows. Only an unqualified resolve can generate the curve of growth necessary to negate and transcend our appropriating tendencies.     If wholeheartedness or total renunciation is the ideal, we might ask ourselves, do little renunciations count' Yes, so long as they are unconditional. If, for example, I promise myself to return all that I borrow, then this promise is binding in relation to my children, to people I like, to people I dislike and to those who rarely return what I lend them. This illustrates the principle that non-possession (aparigraha) presupposes a change of heart, not merely a change of intellectual viewpoint. To be genuine, the change of heart must come about non-violently through the tapas of a self-imposed discipline. This is why Gandhi encourages us to integrate unconditional commitment with both philosophical thought and mature self-honesty.     A second step towards instilling the spirit of trusteeship is taken when we simplify our wants. This is a pivotal point in Gandhi's concept of non-possession. If we want to make the most deliberate and compassionate use of our individual talents, gifts, faculties and skills, then we need to simplify our desires and wants. Gandhi insisted upon this minimal moral asceticism for the trustee because he saw that unrestrained wants waste our internal capital and channel our resources into selfish uses. Inordinate wants obscure perceptions both of basic needs and deeper human aspirations. They diminish our sense of dignity as self-governing agents and corrode our credibility with others. Furthermore, when the multiplication of possessive desires proceeds far enough, it leads to self-destruction. This is compellingly depicted in Tolstoy's short story "How Much Land Does a Man Need'", in which a petty landowner is undone by his unchecked desire for land and wealth. He is initially simple and good, but his wish to improve his lot in life is progressively corrupted by a swelling ambition to own and possess more. In the end, Tolstoy answers the question raised in the story's title by wryly stating that the only land we truly need is a grave six feet long by three feet wide.     We might ask ourselves what it means to simplify our wants or needs in a Gandhian manner. It would seem that we can simplify our lives in at least two primary senses. First of all, we can make a concerted effort to reduce the sheer number of encrusted desires and habit-patterns that vitiate our altruistic impulses and fond dreams for others. We self-consciously check the tendency of the aggressive and expansive self to acquire more at the expense of others. But secondly, we take care to do this discriminatingly. We must, like the smelter and the goldsmith, extract and refine the pure metal from the crude ore. We want not just less possessive desires but more benevolent ones. Furthermore, as we cleanse the energy of desire, we purify our imagination. When we gain control over imagination, we establish mind control and render ourselves capable of using all personal, financial and other resources skilfully. We are more earthed, so to speak. With minds unclouded by vain imaginings, we feel more in charge of ourselves and are more responsive to the needs of fellow human beings. Our feeling for what others may attain is gradually enriched, whilst our fantasies about what we hope to acquire wane. We eventually insert our resources into the expanding circle of human interdependence.     Two other factors contribute crucially to our becoming authentic trustees – the art of silence and the ability to put trust in others. Silence or "speech control" is a precondition for all moral and intellectual growth. A trustee must guard his speech if he is to uphold and extend the good. This is not secretiveness but healthy common sense. A trustee's intentions should be as pellucid as crystal and visible to all. But wisdom is needed in all relationships. Hence, a trustee gradually learns not to speak prematurely or out of turn. He fosters a refreshing candour and reserve in speech which enables him to initiate constructive activity in season. He views wise silence and worthy expression as golden keys to maximizing the appropriate use of resources. No one would entrust us with anything precious or worthwhile if we were known to be garrulous, profligate, promiscuous or indiscreet. Nor could we be credible to ourselves and others if our speech is compulsive.     If the ears are the gates of learning and the eyes the windows of the soul, the tongue is the key to the alchemical transmutation of resources and the freemasonry of benevolence. Thus, a benign and intelligent silence is the precursor of effective, beneficial action. It aids mind control and augments true wealth. For example, parents often discern certain admirable qualities in their own children and those of others. These qualities are frequently at a germinal stage. We notice them intuitively but only partially observe them at an empirical level. By a sage-like silence we can help these virtuous traits to grow and luxuriate, thus becoming serene and sacred trustees of the good. Without drawing premature attention to what we perceive, we are ready to acknowledge or welcome the child's unfolding abilities when it seems helpful or important to do so. This makes every man and woman a custodian of the good in others. This is a high responsibility assumable by the poorest and most destitute as well as by the wealthy. Whenever any one of us treasures the finest qualities and exemplary contributions of another, we add to the store of human good. This commonwealth grows unseen but yields great benefits to all. Its value is especially apparent when we help someone going through difficult times. To remind someone gently of the best in himself is to remind him of what is most salutary and what is relevant to the moment of death.     Finally, we strengthen our desire to act as trustees for the good when we imaginatively extend our trust and the sacred responsibility for our riches in relation to others. This is integral to Mahatma Gandhi's idea of trusteeship. But what is the obstacle' According to him, the root of the problem lies in a fearful refusal to relinquish attachments. We often fail to confer equal trust on others or fail to share responsibilities with others because we will not distance ourselves from our suspicions and mental images of them. This is noticeably true with respect to parents faced with granting their own and other children a wider circumference of choice. It seems that a detached love is the only cure because there is no growth unless we expand the circle of opportunity continually and appropriately. This is not always easy, and good results are certainly not automatic. To confer upon the untried or inexperienced that which we have so judiciously cultivated is no simple task. To retire, like the court musicians of Akbar, from the limelight at the right time is a sign of self-mastery, while avoiding the sorry humiliation of hanging on to offices and honours. Such renunciation calls for a great deal of thought and a definite degree of risk-taking, but at least the risks are on the side of the potential good in others.     If every man or woman has some innate recognition of the true and the good, enriched by active participation in a theatre of political interaction, then a collectivity of citizens is a mature moral community. It necessarily rests upon and reinforces social sympathy born of self-awareness and a shared consciousness of "the species nature", the common humanity and essential similarity, of individuals in diverse roles, situations and circumstances. With this wider perspective, it is possible to derive a viable conception of the common good or public welfare from the individual's pursuit of the good in the privileged company of other men and women. This humane pursuit requires a reasoned reflection upon oneself in relation to others and an imaginative empathy with an expanding circle of human fellowship. The germs of noetic change – hidden within the depths of human beings – can become the basis of communities, communes, conceptions of community, at several levels and in concentric circles, in a novel and more intentional sense than any known in recorded history. They serve as the seeds of a rich variety of modes of participation in the politics of perfectibility. An ideal community is as utopian as the ideal man or the ideal relationship. But every human being is constantly involved in some kind of correction from his external environment, so that he engages in criticism of others (often his own way of criticizing and defining himself). Everyone can see through formal laws and coercive sanctions and recognize constructive alternatives among true friendships for an easier, more natural, trustful context in which one can free oneself and grow.     If this is what is involved in becoming better and abler trustees, then what concrete implications could trusteeship have in relation to day-to-day matters' In other words, if we wish to embody the quintessential principle of trusteeship more fully, how might it affect our attitude and response towards (i) property, (ii) money, (iii) time and (iv) skills'.     Several points should be kept in mind when considering trusteeship and property. In the first place, most of us do not own property, but we all occupy, use and share it. As trustees we should make every effort to look upon all private and communal property with gratitude. We should be grateful for what we have and treat it with respect – whether it be our bodies, our books or the flowers in public parks and private gardens. This mental posture helps us to divest ourselves of the false modern expectation that there is always more, that everything is replaceable, and that there is always someone else available to tend, fix or clean our material possessions – whether a gardener or a doctor. When we treat all matter with respect, we develop an immense appreciation for those who willingly help in the physical upkeep of our homes and grounds. Those who perform this specialized familial and communal service are thereby less likely to fall prey to an often unarticulated resentment when they see our authentic gratitude and the meticulous care we take with all our possessions and resources.     What could it mean for us to be scrupulous trustees of our money' What attitude and conduct are compatible with the living ideal of trusteeship' Money is a means of meeting certain basic needs, and not an end in itself. It must be handled with the same degree of care that we exercise in relation to electricity. We should plan for its proper use so that it fits into the overall purpose and rhythm of our individual and collective lives. It works best when it is in its proper place, and it can be put to noble, mundane and ignoble uses. Balance is required and so are balance sheets. If we specify suitable uses for our funds – from donations to necessities – they can aid private and collective endeavours. Often our bad habits make it seem as though we lack money, and we seek to earn or grab more. This merely creates an unnatural strain. If, however, we study our spending patterns, tracing them back to their roots, we will frequently find the existence of an unacknowledged trait or hidden desire that needs to be transmuted. As we simplify our wants, establish good patterns and set clear priorities, we generate opportunities to build capital for a higher use. Wealth is not itself the source of vice. Its moral meaning depends entirely upon why we seek it, how we acquire it and how we use or pollute it.     Custodianship of time can confront needlessly possessive and demanding attitudes in relation to time. This appears to be especially true in relation to 'open time' or non-compulsory time. It is undoubtedly true of obligatory time as well. When we are at work or performing necessary responsibilities at home, how conscientiously do we use our time' Is it well thought out' Is it properly coordinated' Are we cheerfully open to unexpected needs' Do we somehow manage to dissipate time through several 'chat sessions' a day' More significantly, how high is our precise level of constant attentiveness' How often does someone have to repeat the same points to us' Time is, to some degree, a function of conscious attention to duty. The more attentive we are, the more we learn and the more helpful we are to others with our time. This is because, paradoxically, the more concerned we are to do our best with and for others, the more we forget ourselves. Our troubles and trials are largely forgotten when we shift our focus of awareness to a higher and more considerate level of human involvement.     How possessive are we about our leisure – limited though it may be' Do we insist that this 'free' time is 'my' time because well earned' We may be quite entitled to what we term our 'private time'. Private time is an elementary human need (although not to the yogin, for whom time is a continuous inward state called 'living in the eternal'). But, whilst we are entitled to leisure time, we must, as ethical trustees, be willing to utilize it well. Furthermore, our chaste or corrupt visualization and use of free time often tells us something about the colour and direction of our spiritual will. If, for example, we use our leisure time constructively, then, in fact, time is a friend and not an enemy – either to us or to others. We work with the critical points within time – called cyclic recurrences – to regenerate ourselves within the spacious transcendental realm of the timeless. If we are wholly unable to use voluntary time well, then we sadly diminish ourselves and rapidly subtract from our opportunities to add to the sum of good. Adharma inevitably invites destructive Karma, "for whatsoever a man soweth, that shall he also reap".     When we turn to individual skills, we can appreciate the full significance of trusteeship – its subtle power of reconciliation and its ineffable moral beauty. In what sense, we might ask, are our individual skills to be held in sacred trust for others' In what sense can we badly abuse our skills and even use them to exploit others' The litmus test as to whether or not we are true trustees of our skills lies in our expectations of return for using them. Our motivation and our expectations are generally interwoven. In the modern West, and increasingly in the modernizing East, skills and specialized knowledge are felt to be convertible into personal success and personal status. We might suppose that we are too mature to fall for the 'lure of filthy lucre', the cancer of greed, the canker of soulless competition. However, we are often all too susceptible to self-deception in this regard. We are subject to the satanic temptation that our hard-earned skills should purchase some intangible reward – from spiritual salvation to public praise. If we receive no external acknowledgements, then we are almost certain to be insidiously tempted to retreat into the tortured world of self-pity and self-approbation. This is because the tenuous exercise of borrowed knowledge and routinized skills is inescapably bound up with a fragile and fugitive self-image. Our frail sense of self-regard is disastrously opposed to the Aquarian spirit of effortless renunciation and intelligent sacrifice.     In practice, our daily approximation to distant ideals will depend upon the extent to which a substantial number of individuals balance their timid concern with individual claims to freedom against a calm willingness to consider the moral claims of the larger community of mankind. Can even the most ingenious organization of industry be dynamized by the innate desire to serve, not merely the desire to be served, the readiness to hold in trust and not the urge to appropriate' Psychologically, the spontaneous commitment to serve a community selflessly may be a self-conscious development, but the primary impulse to serve others is as much rooted in the universal desire for self-expression as the familiar instinct of self-preservation. The noble impulse to serve others, first displayed in the family, could progressively develop into the Bodhisattvic vow to serve the community of souls. This rests upon the compelling assumption that as citizens mature into creative individuals, the very process of individuation requires the growing recognition of the just claims of other individuals and of concentric communities, as well as a deepening concern with self-transcendence and the pilgrimage of humanity.     There is indeed no external cure for egotism or pride in what we have accomplished – especially when we strive and hope to see that it has truly benefited others. It is only through pain and patience that we learn to enjoy giving freely without expectation. However, if we readily recognize that trusteeship is a form of sacrificial action (yajna) natural to man, then it can truly help us to release the exhilarating sense of soul-satisfaction and soul-emancipation taught by the Ishopanishad and exemplified by Mahatma Gandhi. Our daily sacrifices merge into the mighty stream of Adhiyajna or cosmic sacrifice. Such ungrudging contributions cannot be measured and meted out in the meagre coinage of thank yous and material rewards. Voluntary sacrifice (tapas) releases its own incomparable spiritual elixir. The sacramental yearning to use everything wisely for the greater welfare of our Teachers and for all Humanity could progressively dissolve the noxious sense of 'mine' and 'thine'. The raging fires of rampant greed, insatiable craving and demonic possessiveness could gradually subside because there would be less and less fuel to sustain them. There would then arise, Phoenix-like, the incandescent spirit of love and longing for Lokasangraha, universal welfare, the ceaseless celebration of excellence and promise. Meanwhile, courageous pioneers could light up all over the globe the sacred fires of creativity, altruism and universal fellowship in the common cause of Lokasangraha, human solidarity and welfare, enlightenment and emancipation. According to Gandhiji, 7 greatest sins could wreck the moral and ethical fabric of society. Let us find out their relevance to the modern business society. a) Politics without Principles: Needless to say, this sin is the foundation of all things unethical in society. Corrupt political practices ultimately corrupt business and society. When people resort to principle-less politics only to cling to power and wealth, not only do they themselves become morally corrupt and unethical, but also they leave behind them a trail of destruction of all moral and ethical values held by sacred by the society. And business too gets sucked into this whirlpool of corruption and destruction of the society and all things ethical in it gets shaken and ultimately shattered. The ethical value system gets eroded and all morality stands crumpled. Such a society, where value-less and principle-less politics is practiced, it cannot stand on its feet. After a while, moral and ethical decadence sets in. b) Education without Character: The main aim of education is character building. If students feel that the aim of education is only securing more and more marks through cut throat competition, then there is something lacking in the focus of the education system, as it is happening at present. When students rely heavily on the results and not on the learning process, character building takes a back seat and later on in adult life, the students finds himself or herself ill equipped to meet the challenges of life. Moreover, education should be a life long process. Those who stop learning as soon as the academic life is over, are those whose character had not been fully developed in the initially formative years. Such people, sometimes with numerous degrees to their names, remain literate but uneducated in the true meaning of life. Their degrees, without their character, does them no good in their pursuit of the really meaningful things in life. c) Pleasure without conscience: All over the world today, in every society and every country, people are seen primarily obsessed with securing and with pursuing pleasure. Most of the people confuse happiness with pleasure. Happiness is not pleasure and neither do all pleasures result in happiness. Happiness is spiritual gladness, a quite contentment and inner joy, whereas for many people, pleasure is merely vulgar sense gratification. People today go to any length to gratify their senses and that too immediately and instantaneously. That is why we see incidents like pre-marital sex, where it is asking for too much to wait for after the wedding and more commonly, without the wedding, killing of innocent animals to gain hunting ‘pleasure’ eating and drinking of intoxicating things to get oneself a ‘high’ drug abusing to excite the senses and so on. Pleasure to the senses, without the sanction of one’s conscience are futile and meaningless, it degrades human dignity and generally brings about all round destruction for all concerned. d) Wealth without Hard Work: This sin is spreading like wild cancer in today’s society and has given rise to many to get-rich fast, with high risk half-baited schemes. Today’s crimes are mostly committed because one wants to get rich quickly, without investing the time and efforts of earning it. People desire to get into certain professions, including politics, because the wealth can be made without working for it. Militants start revolutions and then resort to extortions, because then wealth can be made without working for it. Youths spend their most productive years dreaming about schemes, business or otherwise, to get rich quickly, because then wealth can be made without working for it. It can be said that wealth without work can only come through dishonest means and one has no moral or legal rights to such wealth. e) Science without Humanity: Science is a wonderful and tremendous force at the service of humanity. However, science has also the potential for great destruction. It can destroy people’s peace of mind. Ways of thinking, his position in the society and in fact, his whole life. When technology - the application of science, is used indiscriminately, it results in wide spread destructions in society. The Bhopal gas tragedy on December 3, 1984, which killed some 2000 people and injuring another 2,00,000 people is a case in point. When Alfred Bernard Nobel (1838 – 1896) invented the dynamite, he did not do so that it could be used in making Atom Bombs for mass massacre of people and animals. f) Commerce without Morality: Commerce/ business also needs to apply ethics in its functioning. Even before it became fashionable to speak about ethics in business, Gandhiji considered conducting business without morality and ethics as a great sin. What happens when business is conducted without morality, has been the running theme of all the topics of this subject. Gandhiji considered the customer as an important guest and he should be focus of business, for without him there can be no business. g) Worship without Sacrifice: Finally, Gandhiji, believed in sacrifice during worship. It is important to understand the meaning and significance of the term ‘sacrifice’ here. Worshipping God, without sacrificing one’s evil intentions, one’s immoral character, one’s unethical conduct, can never lead us to inner peace and contentment. Sacrifice here means doing away with one’s ego, one’s selfish motives, one’s jealousies, one’s envy, one’s passion and replacing them with compassion, generosity, helpfulness, truth and basic goodness of character. Thus, Gandhiji believed it was a sin to worship god without sacrificing something evil in oneself and replacing that with genuine goodness. 8. Basic Framework of normative Ethics Normative ethics is the branch of philosophical ethics that investigates the set of questions that arise when we think about the question “how ought one act morally speaking'” Normative ethics is distinct from meta-ethics because it examines standards for the rightness and wrongness of actions, while meta-ethics studies the meaning of moral language and the metaphysics of moral facts. Normative ethics is also distinct from descriptive ethics, as the latter is an empirical investigation of people’s moral beliefs. To put it another way, descriptive ethics would be concerned to determine what proportion of people believe that killing is always wrong, while normative ethics is concerned to determine whether it is correct to hold such a belief. Hence, normative ethics is sometimes said to be prescriptive, rather than descriptive. However, on certain versions of the meta-ethical view called moral realism, moral facts are both descriptive and prescriptive at the same time. Broadly speaking, normative ethics can be divided into the sub-disciplines of moral theory and applied ethics. In recent years the boundaries between these sub-disciplines have increasingly been dissolving as moral theorists become more interested in applied problems and applied ethics is becoming more profoundly philosophically informed. Traditional moral theories were concerned with finding moral principles which allow one to determine whether an action is right or wrong. Classical theories in this vein include utilitarianism, Kantianism, and some forms of contractarianism. These theories offered an overarching moral principle to which one could appeal in resolving difficult moral decisions. In the 20th century, moral theories have become more complex and are no longer concerned solely with rightness and wrongness, but are interested in many different kinds of moral status. This trend may have begun in 1930 with D. W. Ross in his book, The Right and the Good. Here Ross argues that moral theories cannot say in general whether an action is right or wrong but only whether it tends to be right or wrong according to a certain kind of moral duty such as beneficence, fidelity, or justice (he called this concept of partial rightness prima facie duty). Subsequently, philosophers have been questioned whether even prima facie duties can be articulated at a theoretical level, and some philosophers have urged a turn away from general theorizing altogether, while others have defended theory on the grounds that it need not be perfect in order to capture important moral insight. In the middle of the century there was a long hiatus in the development of normative ethics during which philosophers largely turned away from normative questions towards meta-ethics. Even those philosophers during this period who maintained an interest in prescriptive morality, such as R. M. Hare, attempted to arrive at normative conclusions via meta-ethical reflection. This focus on meta-ethics was in part caused by the intense linguistic turn in analytic philosophy and in part by the pervasiveness of logical positivism. In 1971, John Rawls bucked the trend against normative theory in publishing A Theory of Justice. This work was revolutionary, in part because it paid almost no attention to meta-ethics and instead pursued moral arguments directly. In the wake of A Theory of Justice and other major works of normative theory published in the 1970s, the field has witnessed an extraordinary Renaissance that continues to the present day. TELEOLOGICAL THEORY DEONTOLOGICAL THEORY THTTHEORYTHEORY ETHICAL EGOISM UTILITARIAN PRINCIPLE ALTRUISM DISTRIBUTIVE JUSTICE KANTIANISM UNIVERSALISM NORMATIVE ETHICS Normative ethical theories Teleological ethics (Greek telos, “end”; logos, “science”) is a theory of morality that derives duty or moral obligation from what is good or desirable as an end to be achieved. ● Consequentialism (Teleology) argues that the morality of an action is contingent on the action's outcome or result. Some consequentialist theories include: ○ Utilitarianism, which holds that an action is right if it leads to the most value for the greatest number of people (Maximizes value for all people). ○ Egoism, the belief that the moral person is the self-interested person, holds that an action is right if it maximizes good for the self. ○ Situation Ethics, which holds that the correct action to take is the one which creates the most loving result, and that love should always be our goal. ● Deontology argues that decisions should be made considering the factors of one's duties and other's rights. Some deontological theories include: ○ Immanuel Kant's Categorical Imperative, which roots morality in humanity's rational capacity and asserts certain inviolable moral laws. ○ The Contractarianism of John Rawls or Thomas Hobbes, which holds that the moral acts are those that we would all agree to if we were unbiased. ○ Natural rights theories, such that of Thomas Aquinas or John Locke, which hold that human beings have absolute, natural rights. ● Virtue ethics, which was advocated by Aristotle, focuses on the inherent character of a person rather than on the specific actions he or she performs. There has been a significant revival of virtue ethics in the past half-century, through the work of such philosophers as G. E. M. Anscombe, Philippa Foot, and Rosalind Hursthouse. Teleological Ethical Theory President Harry Truman had a difficult decision to make in 1945, near the close of World War II. The Japanese military refused to surrender even though it was quite clear that their defeat was inevitable. Truman's military advisors, however, were estimating that a land invasion of Japan might result in the deaths of as upwards of 1,000,000 American service men and prisoners of war, as well as many thousands of Japanese casualties, both civilian and military. There was another option: drop the atomic bomb on a Japanese city. Estimates of the deaths and injuries for such a drop were high, but not as high as the estimates for land invasion. Truman, of course, made the choice to drop the bomb, first on Hiroshima, and then, when an offer of surrender did not materialize, a second bomb on Nagasaki. The gamble worked: the Japanese surrendered. But the cost was indeed horrific: two populous Japanese cities destroyed, with upwards of 200,000 Japanese civilians killed either immediately or by radiation poisoning. It is not difficult to understand Truman's thinking. Dropping the bomb had the potential to save lives. Thus, although dropping the bomb would certainly cause widespread death and destruction, and although it was far from certain that a land invasion would cause as many deaths as estimated, there was still a high probability, in Truman's view, that lives would be saved. Truman's decision remains one of the most controversial political decisions of recent times. Could further diplomatic efforts have brought about an offer of unconditional surrender without further bloodshed' Could a drop of the atomic bomb off the coast of Japan, or on an isolated military target, have convinced the Japanese of the futility of continuing the war without the horrible loss of life caused by the drops over Hiroshima and Nagasaki' What about the longer range risks of the nuclear arms race, that did eventually put the entire world at risk of nuclear holocaust' The issues are complex. But despite this, the principle behind the complexities of this ethical debate is quite straightforward: which alternative would bring about the end of the war in the least costly manner' Teleological (Consequentialist) Ethics The case of Truman's difficult decision reveals something important about the manner in which we make moral judgments in many situations: our judgments often boil down to thinking through the consequences of our actions, and doing what in the end we believe will bring about the greater good. Ethicists commonly call this approach to moral judgment "teleological ethics" (from the Greek roots telos = end or aim + logos = reason), or "consequentialism." The basic intuition behind teleological ethics is that the purpose of moral judgment is to bring about what is good in the world, and avoid what is bad or evil. The task of teleological ethical theory is to define in explicit terms the principle behind consequentialist moral judgment, and resolve some fundamental issues concerning its application.       In this course, we will consider two consequentialist ethical theories: ethical egoism and utilitarianism. We will find that these two theories represent consequentialist moral judgment in quite distinct ways. The common ground of these theories, however, is the view that in moral judgment, the consequences are what matter, and are all that matter.   Ethical Egoism Only a small minority of ethicists have considered ethical egoism to be a viable normative theory, and very often ethicists who on first glance appear to be offering an ethical egoist position turn out to be offering a version of rule utilitarianism instead (a theory we will be discussing below). Nonetheless, at times people do make decisions that are best represented by ethical egoist reasoning, and so it is worthwhile to consider the theory, if only as a way of understanding a common error of ethical reasoning.   The ethical egoist makes this fundamental normative claim: all moral decisions should be made on the basis of a consideration of what serves the interests of the moral agent him or herself, that is, the person who is making the decision. Accordingly, the proper basis for moral judgment, for the ethical egoist, can be accurately expressed in the form of the following normative principle:   One ought to do whatever is in one's own best interests. It is important to be clear about what the ethical egoism is not saying. First, the ethical egoist is not saying that we, as moral agents, ought to act selfishly, that is, that we should never promote the interests of others. Acting in the interests of others is quite consistent with ethical egoism, so long as acting in other people's interests is at the same time acting in one's own interests. Given the fact that very often what is good for others is also good for ourselves, it is a fair bet that an ethical egoist would do things in many circumstances that promote the interests of others.       Second, an ethical egoist is not saying that a moral agent should do what he or she wants to do. Our desires are often inconsistent with our best interests, as is clear from the fact, for example, that many people desire to smoke even though they understand that smoking is not in their long-term interests with regard to their health. Rather, the proposed criterion for moral judgment for the ethical egoist is what is sometimes called "enlightened self-interest": the most reasonable judgment, in light of all available evidence, concerning what in fact will promote one's interests, both physically and psychologically.       As we noted earlier, it is not enough simply to propose an ethical viewpoint; one must also offer an argument for why the ethical view should be accepted. So, why should we accept ethical egoism' The argument for ethical egoism is typically based on a factual theory of human motivation, sometimes called psychological egoism: the claim that in fact all voluntary action is motivated by the fundamental aim of achieving some good for oneself. According to psychological egoism, altruism is an illusion. We never truly act for the benefit of others. Those actions that appear to be altruistic always turn out, upon closer examination, to be motivated by self-interest. So the parent who suffers the economic burdens and the inevitable trials and tribulations of parenthood, in what appears to be a self-sacrificing manner, is really looking for their own self-satisfaction--such as the satisfaction of pride in the accomplishments of one's child. On the basis of this theory of human motivation, the ethical egoist concludes that we should, as a matter of moral obligation, seek our own interests.       This argument for ethical egoism raises the issue of the naturalistic fallacy: isn't the ethical egoist fallaciously arguing for a normative claim on the basis of a descriptive claim' Clearly this is what the ethical egoist does. But against this charge, the ethical egoist might make this point: if it is true that we all in fact seek our own interests, it is unlikely that we could do anything else. Thus, even if one could reasonably suggest that we should seek some other aim as a basis for moral action, the suggestion would be pointless, since we simply could not follow it. Thus, the best we can do as moral agents is to seek to fulfill our own interests in the most reasonable and circumspect manner possible. This point is well taken only if psychological egoism is true. But there are good reasons to question whether it is true. One reason is the fact that there are countless cases on record of self-sacrifice: parents who sacrifice their well-being, at times their very lives, for the sake of their children; soldiers who in battle sacrifice themselves for the sake of their comrades in arms. These cases clearly suggest the implausibility of psychological egoism. Typically the psychological egoist will explain such cases by claiming that the aim of an apparent self-sacrifice is a feeling of satisfaction. as indicated above in regard to parenting. But in cases where someone sacrifices their life for the sake of others, we must conclude, if the psychological egoist is right, that the satisfaction that the person receives briefly before their death outweighs the satisfactions of living out their natural lives--a rather far-fetched idea.       The error behind psychological egoism seems to be a confusion of wants and interests. It does appear to be true that we always do what we want to do in some sense of the word "want." When we claim that we do what we do not want to do, typically this refers to an unpleasant means that we utilize to achieve a wanted end. I might not want to go to the dentist, considering the experience in its own right. But I do want healthy teeth, and in the light of my understanding that the unpleasant experience of going to the dentist is necessary for dental health, I want to go to the dentist for the sake of the end. The same might be said of the self-sacrificing act. The self-sacrificing altruist does not want to die, but in light of the fact that one's own death is necessary to save others, the altruist might be said to want to sacrifice his or her own life for the sake of others. But now, psychological egoism fallaciously infers from the fact that we can understand all acts as proceeding from personal wants to the conclusion that all acts proceed from an assessment of personal interests. This inference is invalid deductively, and inductively there is little evidence to support it. People who sacrifice themselves for others may want, in the sense explained above, to sacrifice themselves, but this in no way implies that they have a personal interest in the sacrifice, or that they act from a perceived personal interest. The most straightforward way of interpreting such actions is that they are instances where people sacrifice their own interests for the sake of others. The psychological egoist, because of the confusion of wants and interests, searches for some manner of understanding the motives of such acts in terms of self-interest, and is led by faulty logic to the implausible explanations of self-satisfaction considered above.       Ethical egoism, then, is based on a theory of human motivations that is quite implausible, and thus the theory itself has little to recommend its adoption. We should also note that if ethical egoism is not a viable ethical theory, then collective ethical egoism is equally unacceptable. Such a collective form of egoism would say that one ought simply to serve the common interests of one's social group, whether that group is one's community, one's religious denomination, or one's nation, irrespective of how one's actions affect people outside one's social group. If psychological egoism is false, then we can act for the interests of people outside our social group, and there is no basis for the claim that we ought not do so when the effects of our acts on those interests are significant. This leads us to the normative theory of utilitarianism. Utilitarianism A system of ethics according to which the rightness or wrongness of an action should be judged by its consequences. The goal of utilitarian ethics is to promote the greatest happiness for the greatest number. Jeremy Bentham, an English philosopher, was the founder of utilitarianism; John Stuart Mill was its best-known defender. The utilitarian, like the ethical egoist or the collective egoist, is a teleologist in approach: the utilitarian will claim that the moral status of what we do is determined by the consequences of what we do. But unlike the ethical egoist or collective egoist, the utilitarian will insist that the principle of equality should be applied to the interests of objects of moral concern. In other words, the interests of all objects of moral concern must be considered on an equal basis in all ethical deliberation. One's own interests, or the interests of people within one's own social group, should not be given a favored status over the interests of others. This is not to say that these interests are irrelevant to moral judgment. It would be as illegitimate to disregard one's own interests in moral judgment as it is to disregard the interests of others. The claim of the utilitarian is simply that the weight given to the personal or group interests of the moral agent in moral deliberation ought to be a function of the degree to which those interests are affected by the action under evaluation, not on the basis of who has those interests. Thus, if I am attempting to determine the moral status of my actions, and my interests will be affected by my actions to the same degree that the interests of each of nine other people are affected, then I ought to give my interests no greater weight in moral deliberation than the interests of any one of these other nine people.       Why should we accept this view' Perhaps the best argument for utilitarianism is, simply, the failure of ethical egoism and collective egoism as viable ethical theories. If there is no basis, and as we saw there appears to be none, to claim within a teleological framework that we ought morally to favor our own interests or those of one's social group in moral judgment, then the correct moral viewpoint is that all interests should be treated with equal weight. Thus, the nonmoral value of the consequences of action for anyone who is affected by an action must be taken into account in moral judgment.      The next step in the development of utilitarian theory is to consider what sorts of nonmoral values define our interests as objects of moral concern. In other words, what sorts of consequences provide the criterion by which we can decide the amount of good or evil that is produced by our actions. Classical utilitarians such as Jeremy Bentham (1782-1832) and John Stuart Mill (1806-73) argued that the proper moral criterion was happiness, and that happiness can be understood as the presence of pleasure and the absence of pain. This view is sometimes called "hedonic utilitarianism" (from the Greek word hedone = pleasure). We should note that Bentham's and Mill's understanding of pleasure was quite broad. Any experience that we would call "pleasant" was considered pleasurable: listening to music, reading good literature, achieving success and satisfaction in one's career. Similarly, "pain" was used to describe any disagreeable experience, whether it involved physical pain or psychological pain, such as emotional anguish and disappointment. According to this view, then, a moral agent ought to aim at the production of pleasures and the alleviation of pains of whatever sort for anyone affected by the moral agent's actions. There are a number of problems with hedonic utilitarianism. One problem is that the view interprets pleasure and pain so broadly that the terms lose any meaningful reference to a specific aspect of experience that could be used to determine the value of our experience. The terms "pleasure" and "pain" are used meaningfully when they point to specific feelings within experience, such as physical pleasure and pain, that can be distinguished from other sorts of feelings. But when used as broadly as Bentham and Mill used them, the terms simply become synonyms for good and bad experience, and it becomes useless to employ them. G.E. Moore (1873-1958) argued that any attempt to define what constitutes good and bad experience commits the naturalistic fallacy, and is therefore pointless. The best that we can say with respect to the moral criterion for judgment under a utilitarian perspective is that moral agents should aim at the production of good experience, and the avoidance of bad experiences. This more recent viewpoint is often called "ideal utilitarianism," and it is currently the accepted viewpoint among most working utilitarian ethicists.      We have considered an issue concerning the correct moral criterion for judgment within utilitarianism. There is another issue concerning how this criterion should be applied in moral judgment, an issue that has given rise to two distinct versions of utilitarian theory, commonly called act and rule utilitarianism. Act utilitarianism was the common approach among utilitarians up until the 1950s (although there is reason to believe that John Stuart Mill argued at times from a rule utilitarian perspective). Since then, rule utilitarianism has been adopted by some ethical theorists, so that today both theories are used in ethical discussions. Ethical egoism is the normative ethical position that moral agents ought only to do what is in their own self-interest. It differs from psychological egoism, in that the last-mentioned claims that people do only act in their self-interest. Ethical egoism also differs from rational egoism (which holds that it is rational to act in one's self-interest) and individualism, neither of which claims that acting in one's self-interest is necessarily right. Ethical egoism is not, however, necessarily opposed to either of these latter philosophies. Altruism is selfless concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions such as Judaism, Christianity, Islam, Hinduism, Buddhism, Confucianism, Sikhism, and many others. Also, altruism is a key aspect of many humanitarian and philanthropic causes, exemplified in leaders such as Dr. Martin Luther King, Jr. Gandhi and Mother Teresa. This idea was often described as the Golden rule of ethics. Altruism is the opposite of selfishness. Altruism can be distinguished from feelings of loyalty and duty. Altruism focuses on a motivation to help others or a want to do good without reward, while duty focuses on a moral obligation towards a specific individual (for example, God, a king), a specific organization (for example, a government), or an abstract concept (for example, patriotism etc). Some individuals may feel both altruism and duty, while others may not. Pure altruism is giving without regard to reward or the benefits of recognition and need. The concept has a long history in philosophical and ethical thought, and has more recently become a topic for psychologists (especially evolutionary psychology researchers), sociologists, evolutionary biologists, and ethologists. While ideas about altruism from one field can have an impact on the other fields, the different methods and focuses of these fields lead to different perspectives on altruism. Research on altruism was sparked in particular after the murder of Kitty Genovese in 1964,[1] who was stabbed for over half an hour in front of passive witnesses who refrained from helping her. Distributive justice concerns what is just or right with respect to the allocation of goods in a society. Thus, a community whose individual members are rendered their due would be considered a society guided by the principles of distributive justice. Often contrasted with procedural justice, which is concerned with just processes such as in the administration of law, distributive justice concentrates on just outcomes and consequences. A prominent contemporary theorist of distributive justice is the philosopher John Rawls, although this subject matter has now received wide treatment across philosophy and the social sciences.  9. Social Responsibility of Business Business for Social Responsibility BSR speaks of corporate social responsibility in the following terms: "Socially responsible business practices strengthen corporate accountability, respecting ethical values and in the interests of all stakeholders. Responsible business practices respect and preserve the natural environment. Helping to improve the quality and opportunities of life, they empower people and invest in communities where a business operates." Currently, companies in Europe seem to be adopting offices of corporate and social responsibility more often than in other part of the world. It should be noted that some business ethics organizations - the Institute included - believe that corporate responsibility encompasses all responsibilities that a company has to all of its stakeholders, which includes social and environmental responsibilities. Meaning of CSR By the term ‘Corporate Social Responsibility’ (CSR) what is generally understood is that business has an obligation to society that extends beyond its obligation to its shareholders or owners. Definition of CSR CSR means operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that the society has of business”. (BSR 2003). The World Business Council for Sustainable Development defines CSR as: “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”. Ten Principles: The Global Compact Human rights 1. Businesses should support and respect the protection of internationally proclaimed human rights; and 2. Make sure that they are not complicit in human rights abuses. Labor standards 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; 4. The elimination of all forms of forced and compulsory labor; 5. The effective abolition of child labor; and 6. The elimination of discrimination in respect of employment and occupation. Environment 7. Business should support a precautionary approach to environmental challenges; 8. Undertake initiatives to promote greater environmental responsibility; and 9. Encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption 10. Business should work against all forms of corruption, including extortion and bribery. There are now some 90 Indian companies, which have signed up to the UN Global Compact. More than 649 companies globally have signed the Global Compact. Key Elements in Definition of CSR Corporations have responsibilities that go beyond the production of goods and services at a profit. These responsibilities involve helping to solve important social problems. especially those they have helped create. Corporations have a broader constituency than stockholders alone. Corporations have impacts that go beyond simple marketplace transactions. Corporations serve wider range of human values than can be captured by a sole focus on economic values. To whom Business Organizations are responsible''''' Primary Stakeholders Secondary Stakeholders Relations between a business firm and its primary stakeholders BUSINESS FIRM MANAGERS Wholesalers (Retailers) Creditors Suppliers Customers Stockholders Employees (Unions) Invest capital Lend money Sell materials Bu How Does CSR benefit Business''' Reputation Loyal Employees & Customers Less Law Suits Less Media Harassment Access to Capital Improves Improves Productivity Community Goodwill Better Environment Social Responsibility Debate: Arguments Against In Friedman’s view business has only one social responsibility and that is to maximize the profits of its owners. His very famous statement says it all, “The business of business is business.” Distorts allocation of Resources Business lacks training in social issues, and lacks social skills necessary to carry out social programs. Social policy is the jurisdiction of governments, not business Increase in business Power Social Responsibility Debate: Arguments in Favor Corporations have too much power In 1999 the United Nations reported that the world’s then three richest people-Bill Gates of Microsoft, the Sultan of Brunei and the Walton family of the Wall Mart retail chain were worth more than the combined GDP of the world’s 34 poorest nations. “With great power and size comes great responsibility.” Developments of CSR in India First Phase: Merchant charity – Dates back to Vedic period – Religious and social ethics ● Relief in natural disasters ● Dharma Shalas ● Drinking water Second Phase: Trusteeship Social responsibility was brought into community’s consciousness goes principally to business leaders like JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal, Kasturbhai Lalbhai. Vinoba Bhave on whom Gandhiji’s mantle had fallen wanted businessmen to interest themselves in humanitarian, educational and other beneficial social activities and consider business as a social mission while promoting the ‘trusteeship of wealth’ theory of Gandhiji whereby owners and workers were co-trustees of business for society. Third Phase: Declaration of social responsibility Role of Jaiprakash Narayan – Organized Conferences on responsibilities of business Setting up of ‘Fair Trade Practices Association’ by Tata, Bajaj and others Fourth Phase :Managerial Trusteeship 1970s & later – realization that continued profitability depended on involvement towards development of society Importance of ethical business practices and concern for the environment in which the business operates was also recognized. Fifth Phase Corporate citizenship Realization that if social development is neglected, business cannot prosper Government alone cannot handle all social issues. CSR and its link to Corporate Strategy Centrality: measures the closeness of fit between a CSR Policy and Organization's mission and objectives Specificity: ability of an organization to internalise CSR program Pro-activity: reflects the degree to which behavior is planned in anticipation of emerging economic, technological, social, or political trends and in the absence of crisis conditions Voluntarism: indicates the scope of discretionary decision making by the organisation and absence of external imposed compliance requirements Visibility: indicates both observability of a business activity and an organization's ability to gain recognition from internal and external AREAS OF SOCIAL RESPONSIBILITY Respecting Human Rights: not discriminating against caste, creed, gender, etc Contributing to socio-economic development Employee Welfare: which includes the right to organize, eliminating child labour, non-discrimination, living wage and social security, training, safety, health and wellbeing, lifelong learning, empowerment of employees, share ownership schemes etc. Consumer Protection: includes right to information, impact of product on local market, etc Respect for national sovereignty and local communities by multinationals. Participating in academic research Share resources with under-privileged communities: e.g. transportation and medical facilities with the community senior citizens, etc. Community Investments: e.g. companies can invest in sustainable development Programmes for the community. Socially Responsible Investments: e.g. Investors should to invest in companies who follow responsible business practices Share expertise and knowledge: with peers and learn from others experience. Respect for the Environment Environmental friendly technologies: investment in eco- friendly technologies Use, conserve and discharge: energy, material and water in an eco-friendly manner Adopt preventive and precautionary measures for environment pollution control Educate employees and the community to take collective, preventive and precautionary measures to reduce environmental pollution. Rectify environmental damage at source: Treat waste before disposing it. Bio - diversity preservation Promote and implement an environmental policy for sustainable energy and sustainable environment. Steps to implement CSR Mainstreaming CSR vision in Articles of Association Develop a written policy CSR and make it available in the public domain Assessment of internal environment ■ Identification of drivers and barriers to change ■ Assessment of core competencies of the company ■ Building in the strategic business case Assessment of external environment - Legal Context & Development Context Identification & prioritization of the opportunities for corporate collaboration Putting CSR policy in the public domain Translating CSR policy into action Reporting, experience sharing and mutual learning External reporting and certification Why Companies do not take up CSR ' ● Markets do not reward ethical companies ● Lack of clear definition of CSR ● Systematic denial of wrong doings ● Location of CSR on the periphery of the corporate structure. 10. Ethical aspects of corporate policy (a) - Ethical Issues in Marketing Marketing ethics can be best understood in the light of its all marketing mix- product price, place, promotion and people. 1. Ethics in Pricing Price is a critical element of Marketing mix which produces revenue. It communicates to the market the company's intended value positioning of its product or brand. Companies generally do not go for a single price rather a price structure that has Some variations according to purchase timing, order levels, geographical demands, market segment requirement like- • Price Discounts • Discriminatory Pricing • Geographical Pricing' At this stage ethics comes into the picture. Here four major areas are most common, in which unethical practices in pricing may occur- a. Price Discrimination-It occurs when a company sells a product/service at two or more prices that do not reflect a proportional differences in costs but it becomes illegal when seller offers different price terms to different people within the same group. b. Predatory Pricing - Selling below the cost when just having the intention to destroy competition. c. Deceptive Pricing - Deceive the customers to show them the wrong picture about the prices either by (a) Low price offer (b) Inflated price d. Price Fixation- Prices are fixed at certain levels by firms either by- • Horizontal price fixing - To fix the prices at artificially high levels. • Vertical price fixing - Price fixing agreements between manufacturers and retailers or between manufactures and distributions. It says that product will be sold at the manufacturer's suggested price and will not be discounted by the retailer or wholesaler. Here the concept of distributive justice given by (John Rawl's) can-be applied as we say if unique universal pricing is established, then it would be against the distributive justice. On the other hand if a favourable price is providing towards the weaker section, though it would be a sort of discrimination but this would provide a desired justice to the weaker segment of society and this would be any where consider as ethical. 2. Ethical Promotion Promotion plays an important role in marketing of any product/Service. It would come up with perfect outcomes only if the perfect means would have been adopted. Promotional mix consist of sales promotion, advertising, sales force, public relation, direct mail etc. Promotional claims must be of such type that the reality of the company and its standard must match. Symmetry of information between the buyer and seller is an essential prerequisite for the ethicality of market system. Unethical promotions are those where the company's offer varies significantly from its claims. Advertising is multi dimensional. It is a form of mass communication, a powerful marketing tool, a component of the economic system, a social institution, an art form, an instrument of business management a field of employment and a profession or Advertising can be defined as any paid form of non-personal presentation of ideas, goods and services by an identified sponsor. Advertisement is judged by its impact, by its acceptance, by the consumers, what it promises to provide must be actually there in the performance of products, As advertising is a social process, it must honor time tested norms of social behavior and should not affront our moral sense. Advertising play two important functions: a. Economic functions b. Social functions - Economic Functions The very basic function of all the advertisements is to promote any product/service by its unique strategies. So the advertisement agencies must accomplish all the ads with communicating properly and effectively: • Communicating to right people • Communicating right message • Put across thru brilliant and persuasive language • Not only marketing the products but introducing and spreading corporate ethos and corporate philosophy. Social Functions Advertising must reflect the cultural values of that society as ads have affected not only the core cultural values but successful advertisement is consistent with society cultural values. It can transfer some cultural values of one society to another at a given point of time. Advertising Critics Advertising critics has several adverse effects on society: It degrades people's tastes, it wastes valuable resources, and it creates monopoly power. The criticisms are: Psychological Effects in Advertising Advertisements sometimes employ images that many people find vulgar, offensive, disgusting and tasteless. For example, advertisements of toothpaste, mouth washes, deodorants and undergarments. It debases the tastes of the public by presenting irritating and aesthetically unpleasant displays Moreover it gradually and subtly inculcates materialistic values and ideas about how happiness is achieved. Personal efforts are divested from 'non-materialistic1 aims and objectives, which are more likely to increase the happiness of the people and are instead channeled into expanded material consumption. Advertising is Wasteful It is another major criticism. Economics distinguish between production costs and selling costs. Production costs are the costs of the resources consumed in producing or improving a product. Selling costs are the additional costs of resources that do not go into changing the product, but are invested instead in persuading people to buy the product (advertisements do not add anything to the utility of the product). Such resources, critics conclude are wasted because they are expended without adding to consumer utility in any way. It is felt that many advertising serves to produce a beneficial rise in demand for all products. It shifts consumption away from one product to another. If this is true, beyond the level needed to impart information, advertising becomes a waste of resources since it does nothing more than shifting the demand from one firm to another. Even if advertising were an effective spur to consumption, many argue that this is not necessarily a blessing. Several economists like H. F. Schumacher and Herman (b) - Ethical issues in Finance Hostile Takeovers Takeovers are labeled 'hostile' not because they are against the interests of the stakeholders, or because they are damaging. Hostile Takeovers are those that elicit opposition from the boards or employees of the target company. They are typically those takeovers to which managers of the target company are against. Reasons for Takeover 1. Protecting their own interests If managers feel that his job is threatened or if he will not be occupying the same managerial position then he can oppose the takeover. 2. Disagreements overprice Managers of the target company can sometimes quote a price higher than what the company is actually worth and if the bidding company docs not accept it then it may result in opposition of the takeover. The likelihood of conflict is more in hostile takeovers because of involvement of number of opposing parties like the bidding company and the target company, their managers and boards and minority and majority shareholders. Strategies used by Management to protect from takeovers Management use many strategies to protect themselves from unruly predators which are as follows: Poison pills "Poison pill" is an anti-takeover devices used by a company's management to make a takeover prohibitively expensive for the bidder! The company under target changes the 'Articles of Association' so that a group of shareholders have special rights, which are evoked by a takeover. These rights include: special voting rights, and the right to buy and sell preferred stock at highly favorable prices (at times below market price). These rights can be exercised only when someone is attempting a takeover to make the takeover prohibitively expensive. Properly designed poison pills can make a company bid proof or shield the company 'from the threat of takeovers. Poison pills' arc prohibited in Britain by the Takeover code because they prevent open competition between the bidders for shares-and the bidders who are favored by the management of the target company succeed in their takeover attempt. But devising Poison pills is considered legal in the United States of America. When companies face hostile takeovers, the shareholders have the right to buy or sell shares to their own company or potential acquirer at a non-market price. The use of poison pills is ethical if they are designed to protect the share holders against unwanted takeover bids. If however they are used to protect the management at the expense of the shareholders, then they are being used unethically. Poison pills have been used unethically, especially in the management dominated Boards.. The power vested in management to prevent takeovers can sometimes be misused. It is therefore necessary to have properly structured boards that are represented by members who are fully committed to maximizing long-term owner value. Greenmail Greenmail occurs where a potential takeover agent purchases stock in a company. After the purchases have totaled five percent, the agent must announce his intention to take over the company, if that is the intent. The stock price goes up in anticipation of the takeover battle. The takeover agent ends up selling the shares back 10 the company for this increased price or somewhat higher negotiated price, when the attacked company struggles to thwart the takeover, Management of the target company sends green mails to prevent a shareholder from taking over the company by himself or by teaming up with any other competing company. Greenmails are considered unethical because the target company may be forced to incur debts to raise funds to finance the buyback of the shares at a premium price. Generally, the management is responsible for this unethical practice as they usually send greenmails financed by owners' money without their knowledge. The acts of the potential bidder arc also considered unethical if he increases his slake in anticipation of gelling a greenmail from the company. Golden parachute When a company is taken over, many top executives are likely to lose their jobs. So to discourage an unwanted takeover attempt, a company gives lucrative benefits to its top executives- these benefits are awarded to those executives who lose their jobs after a takeover. Benefits include stock options, bonuses, and severance pay, etc. Such Golden parachutes can run into millions of dollars and can cost the firm a lot of money. Another quality of golden parachutes is that they act as a deterrent to anti-takeover tactics. The presence of a parachute allows management to evaluate a takeover bid more objectively. People Pill This is a defensive strategy for warding off a hostile takeover. In this case, management threatens that, in the event of a takeover, the entire management team will resign. This is a very effective method, if they are a good management team in place, the loss of which would harm the company. But if the managers act in their own interest rather than the company’s long term value, then they are acting unethically. Management Buyouts Management buyouts occur when the management decides to bid for the company. When successful in the management buyouts they can convert the company into a private company and at a later date, bring it back to market to make substantial profits. Management buyouts are a kind of takeover in which the managers of the target business make the bid. When mangers making the bid come from the outside the target firm then it is called management buy in. Since the management of a company is considered the guardian of the shareholders money, management’s involvement in a buyout is viewed with suspicion by the shareholders. Shareholders believe that management may resort to unethical practices to bring down share prices and buyout the company at cheaper rate. Mangers can act unethically by promoting their own interests at the time of bidding. They can give preference to those activities that have their own long-term interests. Moreover unethical activities can also involve leaking confidential information by the managers for their benefit during the buyout. Such acts by the managers are unethical as it does not promote the long-term ownership value and also because they violate their duties and responsibilities to the company. Insider Trading Insider trading refers to trading on price sensitive information by company employees or individuals closely connected with the firm. This information has not been disclosed to other market participants. So the person who is practicing insider trading in true manner steals this information and enjoys the unfair advantages over the member of the general public. Insider dealing has been criminalized and blamed for many financial scandals. Insider dealing is considered unethical because of the following reasons: 1. Violates equality of opportunity: Insider trading has been criticized because it does not give a level playing field between insiders and outsiders. Shareholders who are entitled to know information about the company are limited to the information sharing. The primary victims of unethical insider trading are the shareholders as they can lose money when corporate insiders harm the ownership value and cause the company's share price to fall. Unethical insider trading in the stock market can harm the exchange as a whole because investors will not be willing to trade on that exchange that does not give the shareholders their rights. 2. The information that the insider trader uses (information does not belong to him). 3. The resources they work with, including the information available to them are resources that belong collectively to shareholders. 4. Tends to reduce the size of the market and harms every one. Reduced size of the market will have a number of harmful effects as under: • A decline in the liquidity of stocks • An increase in the variability of stock prices • A decline in the markets ability to spread risk • A decline in market efficiency (due to reduced number of buyers and sellers) ● A decline in the utility gains available to traders • Increases the costs of buying and selling stocks in the market. 5. Insider trading is unethical on the grounds that it violates peoples rights based on an unjust informational advantage; harms society's overall utility; violates our standards of rights, of justice, and of utility. Fraud in Financial Statements Accounting is defined as "the process by which any business keeps track of its financial activities by recording its debits and credits and balancing its accounts." Accounting provides a system of rules and principles, which govern the format, and content of financial statements. By adhering to the principles and practices in the system of an organization, accounting can provide a fair and accurate reporting of the financial position of a business. The ethical issues surrounding accounting practices are under reporting income, falsifying documents, allowing or taking questionable deductions, illegally evading income taxes and engaging in fraud. Fraud in Financial Statements can be committed in Five Ways: 1. Fictitious Revenues Fictitious revenues are those, which are shown in the books but are not actually earned. The method by which this takes place is to book non existent revenue and simply creating journal entries by debiting accounts receivable and crediting sales. Sometimes false sales are shown to existing customers. Smart accountants select transactions with a few major customers, such as large organizations and governmental agencies that they know will "be difficult to confirm. Sometimes -major vendors are willing to provide false confirmations about their accounts to the auditors. 2. Fraudulent Timing Differences Another way companies overstate assets and income is by taking advantage of the accounting cutoff period to either boost sales and/or reduce liabilities and expenses. 3. Concealed Liabilities and Expenses These are the liabilities and expenses that are not shown in the financial statements of a "company”. These occur when companies do not record certain liabilities or Contingencies understate or omit warranty costs/liabilities and report revenue rather than a liability when cash is received. 4. Improper or Fraudulent Disclosures or Omissions Fraudulent disclosures or omissions are tile intentional or reckless conduct that results in- materially misleading financial statements. One form of fraudulent financial reporting is creative accounting. This is done by using accounting principles selectively and interpreting transactions or events in such a way as to provide a misleading picture of the operations. The manipulation of fixed assets such as buildings or machinery is a common strategy. 5. Fraudulent Asset Valuations These arc the valuations that take place usually in estimating the inventory. Managers can sometimes falsely state the amount of inventory present. The Ethical Audit Just as a financial audit examines a businesses financial statements to ensure that they have been generated, according to Generally Accepted Accounting Principles, the main purpose of an ethical audit is to check the actions of a linn, which arc directed at maximizing long-term owner value. An ethical audit assesses the business structures and procedures, systems and policies. It also measures the extent to which the activities of a business comply with the standards it has publicly declared to its external customers. The value of the ethical audit is that it enables the company to see itself through a variety of lenses: it captures the company's ethical profile. Companies recognize the importance of their financial profile for their investors, of their service profile for their customers, and of their profile as an employer for their current and potential employees. An ethical profile brings together all of the factors which affect a company's reputation, by examining the way in which it does business. One of the greatest benefits of the ethical audit is that it assists the company to scan the environment to identity the issues which are most likely to provoke action by pressure groups, and in turn gives the company the opportunity to encourage such groups to participate in the decision making process, or at the very least lo inform them fully of the company's position. The main objectives of an ethical audit arc summarized below: 1. To determine the extent to which the decision taken at all the levels of an organization arc towards maximizing long-term ownership value and how well they are framed towards achieving distributive justice. 2. To help in providing a critical assessment of how well a business is actually run by systematically evaluating its business practice, 3. To help in scrutinizing the basis on which accounts are drawn and also evaluates whether management has reliable information in running the business. 4. To help businesses undergo major alterations like restructuring. Ethical audits are important for investigating into acquisitions or restructuring operations. 5. To determine the type of training necessary for the employees if the objectives and standards of business arc either misunderstood or not properly implemented by them. An ethical measure to the effectiveness of such training. 6. To help in establishing ethical conduct of business and this helps in attracting valuable investments. 7. To help in establishing an ethical code of conduct for a business. This provides an objective measure when external auditors are performing audit. 8. To enhance, measure and promote the quality that increases business performance by assessing them against the ethical business objective. 9. To improve the quality of governance by evaluating the performance and ensuring that financial information is both available and reliable. 10. To help the stakeholders to evaluate the performance of the directors and also the directors to evaluate the performance of the stakeholders. It is important to note that ethical auditing is a comprehensive and integral approach; integral, because it combines different approaches with different methodologies and comprehensive, because it takes the entire organization (including its environment) into consideration with ail the different perspectives that prevail in different functional areas. By conducting an ethical audit, a business can show its stakeholders that it is committed to ethical performance. Common unethical activities in Finance – Unsuitability Insurance agents, brokers and other sales-person cheat innocent investors by recommending unsuitable securities and financial products. Deception , Deception is quite common unethical practice in India by strengthening the returns and minimizing the weaknesses and risk factors. Sales persons, agents, advisers deceive the public using the misleading statements like tax free or 0% interest etc. they make public unable to make rational choices among so many alternatives. Inappropriate and Excessive Trading This situation arises when the broker keeps an intention to generate commission rather than benefits to client in the standing of having control over the client's account. It is known as churning. Fraud and Manipulation in Markets Fraud means when a company fails to report proper information and manipulation of buying and selling of securities for the purpose of creating misleading impression about price to misguide the investors to buy or sell the securities. The important information lays in the hands of issuing firms so the investors whether buyer/seller are vulnerable to fraud and manipulation. They have to rely on the information available to them which is hard to verify. Unequal Bargaining Power It's a quite common unfair practice along with unequal information in the financial market. .The principle of equal bargaining power says that all the parties have relatively equal bargaining power. Unequal bargaining power results from many sources such as unequal information, resources, etc A hostile takeover is a type of corporate takeover which is carried out against the wishes of the board of the target company. This unique type of acquisition does not occur nearly as frequently as friendly takeovers, in which the two companies work together because the takeover is perceived as beneficial. Hostile takeovers can be traumatic for the target company, and they can also be risky for the other side, as the acquiring company may not be able to obtain certain relevant information about the target company. Companies are bought and sold on a daily basis. There are two types of sale agreements. In the first, a merger, two companies come together, blending their assets, staff, facilities, and so forth. After a merger, the original companies cease to exist, and a new company arises instead. In a takeover, a company is purchased by another company. The purchasing company owns all of the target company's assets including company patents, trademarks, and so forth. The original company may be entirely swallowed up, or may operate semi-independently under the umbrella of the acquiring company. Typically, a company which wishes to acquire another company approaches the target company's board with an offer. The board members consider the offer, and then choose to accept or reject it. The offer will be accepted if the board believes that it will promote the long term welfare of the company, and it will be rejected if the board dislikes the terms or it feels that a takeover would not be beneficial. When a company pursues takeover after rejection by a board, it is a hostile takeover. If a company bypasses the board entirely, it is also termed a hostile takeover. Publicly traded companies are at risk of hostile takeover because opposing companies can purchase large amounts of their stock to gain a controlling share. In this instance, the company does not have to respect the feelings of the board because it already essentially owns and controls the firm. A hostile takeover may also involve tactics like trying to sweeten the deal for individual board members to get them to agree. An acquiring firm takes a risk by attempting a hostile takeover. Because the target firm is not cooperating, the acquiring firm may unwittingly take on debts or serious problems, since it does not have access to all of the information about the company. Many firms also have trouble getting financing for hostile takeovers, since some banks are reluctant to lend in these situations. Poison pill is a term referring to any strategy, generally in business or politics, to increase the likelihood of negative results over positive ones for a party that attempts any kind of takeover. It derives from its original meaning of a literal poison pill carried by various spies throughout history, taken when discovered to eliminate the possibility of being interrogated for the enemy's gain. Created in the 1980s by M&A lawyer Martin Lipton, the so-called “poison pill” is a tactic public companies use to thwart hostile takeovers. In effect, it is an agreement adopted by a company’s board of directors that makes the target’s stock prohibitively expensive or otherwise unattractive to an unwanted acquirer. To date, no takeover bid has ever seen a poison pill fully executed — management teams typically have used the strategy as a deterrent and negotiation tool, buying their company time to bargain for a better purchase price. But shareholders often rail against the tactic, arguing that they don’t always have the right to vote on the bid, and that a takeover bid that management finds unwanted could actually be in their best interest. Consequently, many public companies that become acquisition targets face the awkward decision to either appease investors or lose one of their most effective weapons against hostile takeovers. A tactic by a company targeted for takeover to make its stock less appealing to the acquiring company in the hope of blocking the takeover. For example, the company might issue preferred stock that gives shareholders the right to redeem their shares at a premium after the takeover. # A corporate provision to combat hostile takeovers. When triggered, the poison pill allows shareholders to acquire additional shares at below market price, thereby increasing the number of shares outstanding and making the takeover prohibitively expensive. Such plans are relatively new in corporate Canada and are the subject of some controversy regarding whom they are designed to protect. # Financial device designed to make unfriendly takeover attempts unappealing, if not impossible. For instance, a firm might issue a new series of preferred stock that gives shareholders the right to redeem it at a premium price after a takeover, a measure which would likely raise the cost of an acquisition and cause dilution. # Refers to an attempt to discourage an acquisition by making it more expensive or by reducing the value of the acquired business. Several methods are used by companies to achieve this. # A device designed to prevent a hostile takeover by increasing the takeover cost usually through the issuance of new preferred shares that carry severe redemption provisions. Greenmail is money paid by a company to acquire its own shares of stock from a shareholder who is threatening to take control of, or unwanted influence over, the company. Greenmail is a sum of money paid by a company to someone who holds a large share of the company's stock, with the goal of preventing a hostile takeover. The term is a portmanteau of “greenback,” a slang term for American currency, and “blackmail.” Some businesses also refer to greenmail as a goodbye kiss or bon voyage bonus, referencing the fact that the company essentially says goodbye to a substantial sum of money when it pays greenmail. This term originated in 1983, during the height of the hostile takeover boom in the United States. In the 1980s, numerous companies swallowed each other up, taking advantage of increased liquidity to snag a variety of new assets. Some companies were naturally displeased with this state of affairs, and they attempted to fight such takeovers. Greenmailers saw a potential for making substantial amounts of money, and seized upon it. A greenmail attempt requires a lot of accessible funds, because the greenmailer must be able to purchase enough shares in a company to legitimately threaten a takeover. Once the shares are acquired, the greenmailer can alert the company to the situation, if the company hasn't already realized, and the company is invited to make an offer to buy the shares back. The company will typically pay a premium above the actual value of the stock to regain control of the shares, allowing the greenmailer to profit, sometimes substantially. When a company pays greenmail, it may also attempt to negotiate an agreement with the greenmailer, usually to the effect that the attempt will not be repeated. Many companies also try to keep greenmail attempts a secret, to discourage any further attempts, and because capitulating to what is really just blackmail can be a bad public relations move. However, greenmailers may go public in the hopes of forcing a high settlement, an attempt which sometimes backfires. This practice is perfectly legal: there's nothing to stop someone from buying a controlling share in a company, and nothing to stop a company from buying that share back. However, some people believe that it is a rather slimy business practice, and these individuals would prefer to see regulations which could prevent greenmail. At the very least, greenmail attempts could potentially be prosecuted by savvy attorneys if the greenmailer slipped up and crossed the line into blackmail, because blackmail is most certainly illegal. OTHER FORMS OF HOSTILE TAKEOVERS What Does Hostile Takeover Mean' A takeover attempt that is strongly resisted by the target firm. Investopedia explains Hostile Takeover Hostile takeovers are usually bad news, as the employee morale of the target firm can quickly turn to animosity against the acquiring firm. Black Knight What Does Black Knight Mean' A company that makes a hostile takeover offer on a target company. Investopedia explains Black Knight An allusion to the fairytale villains, this term demonstrates how a targeted company sees its adversary. Fairytale black knights are associated with kidnapping princesses, slaying peasants, burning villages, and generally having unpleasant personalities. White Knight What Does White Knight Mean' A company that makes a friendly takeover offer to a target company that is being faced with a hostile takeover from a separate party. Investopedia explains White Knight The knight in shining armor gallops to the rescue! Yellow Knight What Does Yellow Knight Mean' A company that was once making a takeover attempt but ends up discussing a merger with the target company. Investopedia explains Yellow Knight The implication is that the company attempting the takeover has chickened out, deciding to discuss things instead of making an aggressive move. People Pill What Does People Pill Mean' A defensive strategy to ward off a hostile takeover. Management threatens that, in the event of a takeover, the entire management team will resign. Investopedia explains People Pill This is a variation of the poison pill defense. Poison Pill What Does Poison Pill Mean' A strategy used by corporations to discourage a hostile takeover by another company. The target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills: 1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. 2. The "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger. Investopedia explains Poison Pill 1. By purchasing more shares cheaply (flip-in), investors get instant profits and, more importantly, they dilute the shares held by the competitors. As a result, the competitor's takeover attempt is made more difficult and expensive. 2. An example of a flip-over is when shareholders have the right to purchase stock of the acquirer on a 2-for-1 basis in any subsequent merger. This is similar to the macaroni defense, except it uses equity rather than bonds. Lobster Trap What Does Lobster Trap Mean' A strategy used by a target firm to prevent a hostile takeover. In a lobster trap, the company passes a provision preventing anyone with more than 10% ownership from converting convertible securities into voting stock. Investopedia explains Lobster Trap Examples of convertible securities include convertible bonds, convertible preferred stock, and warrants. Whitemail What Does Whitemail Mean' A strategy that a takeover target uses to try and thwart an undesired takeover attempt. The target firm issues a large amount of shares at below-market prices, which the acquiring company will then have to purchase if it wishes to complete the takeover. Investopedia explains Whitemail If the whitemail strategy is successful in discouraging the takeover, then the company can either buy back the issued shares or leave them outstanding. Greenmail What Does Greenmail Mean' A situation in which a large block of stock is held by an unfriendly company. This forces the target company to repurchase the stock at a substantial premium to prevent a takeover. It is also known as a "bon voyage bonus" or a "goodbye kiss". Investopedia explains Greenmail Not unlike blackmail, this is a dirty tactic, but it's very effective. Macaroni Defense What Does Macaroni Defense Mean' An approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over. Investopedia explains Macaroni Defense Why is it called Macaroni Defense' Because if a company is in danger, the redemption price of the bonds expands like Macaroni in a pot! Bankmail What Does Bankmail Mean' An agreement made between a company planning a takeover and a bank, which prevents the bank from financing any other potential acquirer's bid. Investopedia explains Bankmail Bankmail agreements are meant to stop other potential acquirers from receiving similar financing arrangements. (c) - Ethical issues in Human Resource Management Hiring - The Principle of Ethical Selection The most important step in hiring is selecting the person who should be hired. Whatever the purpose of the business, the right principle of selection would be to hire trial individual who is perceived as having the ability to contribute most to the long-term owner value. This principle of selection applies to other activities of personnel management like promoting able employees and deciding who should be fired. t Ethical selection is all about acting in a way that is honest, fair, non-coercive and legal. An ethical personnel officer evaluates the candidates for a given post based on the same criteria. He ensures that all the requirements and benefits of a job are clearly-conveyed to the applicants. When the principle of ethical selection is not followed, a wrong candidate may be hired for a job. This breeds dissatisfaction among employees. Dissatisfied employees waste the valuable resources of the organization, as their contribution either to the present business or for its future growth is minimal. In selecting the right candidate, the recruiter's job is not just to eliminate the unsuitable candidates. !t is not always possible for a business lo find the best person for a given post. Sometimes it is forced to accept the best among the available applicants / candidates. But a business can continue its search for a suitable candidate if the expected contribution from this candidate is more than the cost of the search. Some of the unethical practices in hiring are related lo discrimination on the basis of age, gender, religion and nationality. 1. Discrimination The first step towards ethical selection is to prevent discrimination. However, when the nature of the job demands that the business practice discrimination, adequate care should be taken to see that this discrimination is based on relevant criteria i.e. maximizing long- term owner value. Discrimination based on any other criteria is immoral. What arc the relevant criteria for ethical selection' The right answer would be the functional qualities or abilities that are required to do the job: for example, the ability to teach for a teacher, the ability to act for an actor, the ability to paint for a painter, etc. Sometimes the character of a person plays an important role in the process of selection for a job (purchase officer, policemen, etc) that demands a high level of honesty and integrity. Here again, judging a person's functional abilities or qualities on the basis of age, gender, religion, nationality or social background is considered discriminatory. If a business uses-such irrelevant criteria for hiring a candidate, it unknowingly limits the pool of talent from which it can select a candidate who can contribute towards maximizing long-term owner value. Some businesses depend on referrals for hiring employees. Although this referral network is extremely beneficial to business, depending solely on this network for recruitment, it is unethical as good candidates who have no access to this referral network are denied employment. Other criteria used in selection that are considered to be discriminatory are: over qualification, ageism and other shortcut methods of selecting based on credentials and testing. A business frequent rejects candidates who arc considered over qualified having too much experience or education, even when hiring them would not cost the business anything more than the less qualified candidates. This form of discrimination is unethical as it goes against the very principle of ethical selection, i.e. hiring the right person for maximizing long-term owner value. The primary reason for a business rejecting overqualified applicants is that a candidate with superior qualifications and expectations may not feel comfortable in his job and may end up disrupting the balance of the business/firm. Besides, managers sometimes fear that subordinates with greater experience and expertise pose a threat to their own positions. These arguments do not sound reasonable to maximize long-term owner value. A business should evaluate applicants on the basis of their individual merit and care should be taken to see that no applicant is rejected for being overqualified, unless such qualification and experience is counter-productive for the firm. 2. Ageism Ageism is another basis of discrimination, which restricts certain applicants from applying for a job. Too often we come across employment ads that read. "Wanted, young and energetic management trainees under 25 years, or "Required managers to head a challenging business; the ideal applicant should be under 45 years." These recruiting practices limit the acceptable age range of the job applicants. Business considers age as a factor to gauge a person's functional abilities. Young employees are perceived to be more capable of adapting to new circumstances, and more willing to learn new skills. On the other hand, older employees are considered for jobs that demand experience and responsibility. This practice of correlating age to functional abilities may sometimes be counter-productive. An applicant rejected for being above a particular age may master a new skill faster than his juniors. Age criterion is a highly unreliable measure of an applicant's ability to contribute towards maximizing owner value. Hence using it as a recruitment criterion is unethical. An in-depth assessment of every candidate who applies for a job is not always feasible. In these circumstances, businesses often base their appraisal of candidates on their credentials and objective tests. But this is a short-cut employed to screen out the least capable applicants and whether this method aids ethical selection is debatable. 3. Credentials Credentials are the degrees, certificates, or citations, a person has. Recruiters generally rely on these credentials to screen out applicants who do not possess the required academic or vocational qualifications. Although this method simplifies the job of a recruiter, it fails to differentiate between academic qualifications and intelligence, and, vocational qualification and expertise in a particular field. These credentials may not always reflect an applicant's functional abilities to do a job. While businesses have every right to look for highly-qualified people, they must also look for characteristics that can help a candidate contribute towards increasing owner value. 4. Testing Testing is a relatively better method of assessing an applicant than credentials. Objective tests focus on the specific aptitude or psychological characteristics that are required to perform the job most effectively. Though these tests directly test the applicants proficiency in the job, (typing, writing, programming etc.) they arc only the next best alternative to good judgment in hiring. The outcome of tests may be deceptive, unless they arc well designed and their results interpreted and translated to just hiring decisions. Tests that challenge the applicant's right to privacy are considered unethical. However intrusive they may seem, psychometric tests, which attempt to measure personality traits such as extroversion: and stability, can help businesses to identify traits-that help maximize long-term owner value. Remuneration Remuneration is the act of rewarding employees in proportion to their contributions to maximizing long-term owner value. This remuneration is considered ethical when it is just and equitable. Remuneration is not only monetary rewards for work, but includes fringe benefits, perks, recognition and promotions. Equitable remuneration plays a crucial role in employee motivation. Lack of equitable remuneration de-motivates the employees and adversely affects their contribution to the business. An ethical business doesn't reward anything other than results. An employee's needs his efforts, ability, seniority and loyalty is of no importance in deciding his remuneration, unless they play a role in achieving results. Thus, ethical remuneration is about rewarding any action that contributes to long-term owner value. Let us see why need, ability, effort or seniority alone does not deserve rewards. Ethical Remuneration - Need, Effort and Ability According to the principle of ethical remuneration a business should not reward anything other than contributions to long-term owner value. The need of an employee is not a criterion for deciding his remuneration. Although effort, talent and abilities are desired in a person, possessing them alone will not lead to rewards. An employee is rewarded only when these qualities translate into results that contribute to long-term owner value. According to the principle of ethical remuneration: 1. A person with pressing needs do not automatically qualify for greater remuneration; (Remuneration is not driven by employee's need) 2. Mere possession of superior skills and abilities do not determine the remuneration. (Remuneration depends solely on results) - 3. Employees who work hard to perform a task need not be rewarded more than those who do it effortlessly. 4. A person, who works hard but fails to achieve results, deserves no reward but sympathy. These principles may seem to be mechanistic in approach and rather harsh, but rewarding moral behavior irrespective of the results achieved, may depreciate the long-term owner value and the very existence of the business will be at stake. An employee with problems in his personal life will be less productive. In this case, the business can either part with him or try to help him out. The second course of action is ethical as business can benefit more by helping the employee lo solve his problem. This will lead to higher productivity, loyalty and a sense of support and confidence. Business can help its employees who are in problems by giving "remedial" benefits like loans, grants, medical assistance etc., which are clearly distinguished from standard remuneration. The ultimate purpose of such assistance by any business is lo "help itself by helping its employees in need." When the purpose of assistance is anything other than that of helping the business, it will be counter-productive. Ethical Remuneration - Seniority and Loyalty Experience that does not translate into higher degree of contribution is of no use to a business and cannot in other words be a relevant factor for deciding ethical remuneration. Seniority of a person in an organization may result in useful experience, but it0may not always result in expertise. Sometimes a junior with expertise may be more productive than his senior who has many years of experience. In this case, according to the principle of ethical remuneration the junior deserves a better reward than his senior. Downplaying the importance of seniority or experience does not mean that employees putting in their best efforts should not be rewarded, but to highlight the fact that loyally is not longevity but productive commitment to business purpose. Thus, ethical / remuneration recommend rewards for seniority and loyalty only, when they result in contributions to long-term owner value. (Employees who can understand the long-term goals of the business and who are prepared to forego rewards in order to achieve them are the employees who can make the greatest contribution to the business. A business should reward those employees who have willingly foregone their pay rise or perks when the business faced a financial crunch). It is unethical for the business to dishonor its commitments to employees office business is back to normal. When a business fails to honor its commitments, the employees' trust is .broken and this leads lo decreased long-term owner value. Ethics in Retrenchment The turn of the new millennium saw the world economics slump. Many industries faced the/'heat of recessionary trends in the world economy. This has compelled many businesses to retrench or lay off people. Many businesses did not have the expertise, lo handle the issue of retrenchment and ended up in sullying their corporate image. At limes of recession it has become common for businesses to reduce their size and overhead costs by discharging some of the employees, and creating a "lean and mean" style of management. Organizations usually resort to downsizing in response to an increase in competitive pressures. Firing Employers at times include an "at-will" clause in the employment contract that enables them to fire their employees "at-will" or for a "cause". Firing may have a devastating effect on employee morale, but it is considered ethical when the dismissal is aimed at maximizing long-term owner value. Firing, lo be ethical, should be honest, fair, legal and without coercion or physical violence. In fact firing is a critical decision, which affects the reputation of the business. Many organizations follow arbitrary firing practices and the reputation of such organization will suffer if word gets out that the organization is discriminatory, unfair, or vindictive in its hiring and firing practices. Arbitrary firing practices like firing "at will" or for unjust reasons are considered to be unethical, as it will lower the morale of the remaining employees, and result in decreased long-term owner value. Firing at will for unjust reasons has a devastating impact on the performance of an organization. It is very difficult to measure the negative effect of firing on the basis of "at-will" clause in an employment contract. But, clearly, when esprit de corps declines, productivity will inevitably be affected. Thus, firing at-will for unjust reasons do not serve the purpose of enhancing long-term owner value, as it will create an atmosphere of fear and uncertainly. It is unethical as it depletes the trust, which is essential for business to survive and make profits. Firing is considered to be ethical when it is a result of a particular cause. This cause may be related to a worker's poor performance, acts of sabotage, dishonesty or misuse of authority, which are considered to have an effect on the long-term owner value. Organizations come under criticism when they opt for layoffs, right-sizing, downsizing or delayering. An organization can answer its critics effectively when it makes it clear to them that the purpose of business is to enhance the long-term owner value in difficult times who should be fired first'. This is a difficult question j because (he decision whether or not to fire an employee has nothing to do with his I age or years of association with the organization. The ethical decision would be to j fire the employees who are least productive or those who contribute the least towards long -term owner value. Even though dismissing employees is correct according to law, when it is not carried out in the right manner would result in spread of fear in the employees. This atmosphere of fear and mistrust within an organization would make it difficult for the organization to attract fresh talent and retain the experienced employees. Thus, it is very important for business to adopt and practice ethical hiring, remuneration and firing policies that are directed towards enhancing the long-term owner value. 11. MORALITY & RATIONALITY IN FORMAL ORGANISATION Organizational Culture It enforces an-unspoken ethos that requires managers to balance social and per morality, if they are to survive and succeed. Organization culture has three elements: 1. Basic values, attitudes and beliefs of the organization, 2. Organizational goals, policies, structures and strategies which are shaped by these basic values, attitudes and beliefs, and 3. Organizational way of doing things, i.e. everyday accepted, unchallenged processes and procedures. Organizational Values Organizational values are found in mission statement or code of ethics. They state what the organization stands for and describe the ethical perspective the organization's leaders. Different organizations have different values that based on the policies of the particular organization, but there are some intrinsic values that form the basis of organizations. These values of the company are what every employee must, aware of. This helps him to get his priorities right and know the company goals Corporate Code of Ethics Ethical codes as statements of the norms and beliefs of an organization and as the ways in which organizational leaders want others to think. The intention is t encourage ways of thinking and patterns of attitudes that will lead towards the wanted behavior. One way that man)' business organizations can address the issue of ethics within (heir corporate structure is by means of a code of business conduct. These business codes can contain provisions that arc designed to advise, guide and regulate behavior on the job. Companies need specific guidelines to translate the core human values into core values for business. Organizations need to formulate codes of ethics to: 1. Be a socially responsible organisation, 2. Provide guidelines for employees behaviour, 3. Comply with the law and government guidelines, 4. Establish a better corporate culture, 5. Avoid conflict of interest, 6. Make proper use of company assets and property, 7. Safeguard proprietary information; and 8. Avoid insider trading. Need for a Code of Ethics 1. To act as a philosophical basis 2. To shape ethical behavior 3. for self regulation 4. For improving self image 5. To take moral responsibility 6. To provide inner strength. Some of the codes of ethics are given below as illustrations. Ethical Codes for Organizational Employee 1. Demonstrate courtesy, respect, honesty and fairness in relationships with customers, suppliers, competitors, and other employees, 2. Comply with safety, health, and security regulations, 3. Do not use abusive language or actions 4. Follow proper code of dressing 5. Follow directive from superiors. 6. Be reliable in attendance and punctuality. Legalistic Ethical codes 1. Maintain confidentiality of customers, employees, and corporate records; information. 2. Avoid outside activities, which conflict with or impair the performance of duties at work. 3. There is no place for friendship or persona] gain in decision making. 4. Do not accept bribe. 5. Any payment to business, person, political organization, or public official for unlawful or unauthorized purpose is unacceptable. 6. Comply with all relevant laws, regulations, and policies in the conduct of business dealings. 7. Do not provide false or misleading information to the corporation, its auditors, or a government agency. 8. Do not use company property or resources for personal benefit or any other improper purpose.9.Employee is accountable for company funds over which he has control. Customer Orientation Ethical Codes 1. Strive to provide products and services of the highest quality, 2. Perform assigned duties to the best of capability while providing customer support. 3. Convey true claims for product and services Personal and Cultural Ethical Codes 1. Exhibit standards of personal integrity and professional conduct, 2. Do not discriminate on religious, class –caste, racial, ethnic or sexual considerations, 3. Report questionable, unethical, or illegal activities to superiors, 4. Seek opportunities to participate in social service and other cultural activities, 5. Conserve resources and protect the quality of environment. Implementing the code of ethics Manley (1992) provides the following factors, as crucial to the implementation of a code of conduct: 1. Management involvement and supervision. 2. Constant consciousness of these codes. 3. Stressing code values during training. 4. Recognition for conduct exemplifying desired values and standards. 5. Ombudsmen or other designated persons assigned for this purpose. 6. Thorough concentration on high-risk jobs and areas in terms of violation of code values and standards. 7. Periodic auditing to assure compliance. 8. Well-defined and fair enforcement procedures. Critical Elements Some of the crucial elements in implementing corporate code of ethics are given below and described in detail later. 1. Clarity There should be a clearly written statement of the organization's ethical values. Ideally statements should contain; a. A description of the organization's fundamental mission, purpose, or beliefs, b. A description of the main constituencies," e.g. shareholders, employees, suppliers, consumers, and society whom the organization believes it is obligated in the pursuit of its mission. c. Specific obligations the organization believes it has towards these groups d. Concrete examples of the behavior required or permitted by these obligations. 2. Commitment of the Top Management Top management plays a crucial role in securing a company's commitment to ethics. A top rung person in the organization should be made responsible for development, implementation and monitoring of an ethics programme to make it successful. The commitment of top management is essential to ensure that adequate resources are invested in the company's ethics programme. The management must support ethic behavior throughout the company and provide constant leadership through personal example, to ensure that ethics are integrated into every aspect of the organizational life, including the strategic planning process. Inclusion of ethics in strategic planning can be done by formulating and implementing policies in the following areas, which encourage ethical behavior: ● Strategic decision making ● Human resource development ● Industrial relation ● Quality management ● Customer interaction ● Product promotion Ethical consideration should be integrated into each of these areas. The formulation of corporate goals and objectives central to the company's emphasis on strategic decision making process should be explicitly conducted in light of the ethical values to which the company has committed itself and which it views as crucial for its survival. 3. Quality Policy Quality management policies should be such that they are inbuilt into the system and processes, and employees should be encouraged to participate in these by giving them the highest level of trust and respect. 4. Customer Care Organizations should create an atmosphere where the customer can trust the products and services of the company. The company should show that it cares for its customers at all points of contact with a customer. Product promotion should be such that customers do not feel that they are being manipulated or used to improve the bottom line of the company. 5. Building Systems An organization has to build systems to monitor and enforce the ethical behavior described in the code of ethics, and has to make sure that its systems provide incentives rather than disincentives for ethical behavior. 6. Communication Communication plays a key role in securing an organization's commitment to ethics. Three kinds of communication systems are required: a. The organization has to communicate its standards to all employees through orientation programmes, training programmes, in-house communications, newsletters, word of mouth, and personal examples set by the management. b. Organizations have to have channels through which employees can alert the management of any unethical behavior or practice happening in the organization. c. Companies should create an advisory system, since a written code cannot cover every contingency. Employees sometimes have questions about whether or not something is ethical. 7. Human Resource Policies Employees should be treated as the internal customers of the company. In fact, the Human Resource Department should be renamed as the Internal Customer Service Department. There should be ethical approaches to precise areas such as continuous development, employee data, equal opportunities, employee involvement and participation, redundancy, harassment and counseling. There should be ethical recruitment and selection procedures in every organization. 8. Employee Training Implementation of an ethics programme will succeed if employees are given adequate training in ethics regularly,, are made aware of the company's commitment to ethics, the means by which company supports ethics, and are instructed about the contents of the company's ethics code. Ethics workshops in organizations involve a number of elements: a. An overview of the company's code of ethics, b. Discussion of several cases or incidents that illustrate the code, c. Discussion of some cases that involve dilemmas possibly not covered by the code, d. Description of some practical methods of making an ethical decision when faced with an issue not covered by the code. e. Explanation of any assistance that the company provides when faced with a dilemma, f. Discussion of the factors that employees believe impede or discourage ethical behavior in their departments. Stages of Ethical Consciousness in Business Ethical standards vary between cultures and countries. These variations are more evident among entrepreneurs or corporations in a given nation. One can better understand these variations if the different levels of ethical consciousness in business are well defined. It has been found that moral (ethical) development follows a specific sequence of stages, irrespective of cultures and countries. In the business context, the stages of ethical consciousness are as follows: ■ Law of the Jungle ■ Anything for profit ■ Profit maximizing in the short term ■ Profit maximizing in the long term ■ Stakeholder concept ■ Corporate Citizenship. In the first stage of law of jungle, businesses were run on brute strength; business decisions were driven by the philosophy of "might makes right". Business ills like price fixing etc are common in this stage. In the second stage of "Anything for Profit", business was ready to do anything to make profit. Businesses at this stage had only one goal i.e., profit. To generate profits, businesses resort to false representation of products, bribery of government officials, tax evasion etc. Business in this stage of ethical consciousness strongly believes that "anything goes as long as one does not get caught by the law or by the customer". In the third stage, maximizing profits in the short term, businesses operated on the socially and generally accepted business practices. In this stage, business believed that "good business is good ethics". The performance of businesses was measured based on short term growth in sales and profits. The main aim of business in this stage was to maximize profits within the constraints of the law. The fourth stage, maximizing profits in the long term, saw shift in focus from "business" to "ethics". In this level of ethical consciousness, businesses acknowledge that "sound ethics is good business" in the long run. Although the interest of the shareholders remain primary concern of businesses, there was equal concern for conducting business in a manner that is both 'right' and which will also prove to be profitable over the longer term, even if other alternatives might produce greater short-term profits. At this stage of consciousness, firms created the post of an 'ethics officers' to supervise the ethical aspect of the business. In the fifth stage, "stakeholders concept", companies concentrated on profits to have a social as well as economic mission. In this stage business objectives included profit sharing, development of community service projects and philanthropy. The driving assumption of this concept is, business wanted to strike a balance between providing services to stakeholders and working towards the good of society. The focus at this stage is on building and maintaining mutually enabling relationships, which in turn create value for others and justified the firms' profit. Success was measured not just in financial terms but also in terms of contribution to society. Some companies have gone so far as to publish regular annual social reports similar to their annual financial reports. The sixth stage of "Corporate Citizenship" proposes a higher level of ethical consciousness and redefines the mission of business in society. The world Business Academy and Business for Social Responsibility, both associations and networks of business leaders, are among the principal proponents of this higher level of ethical consciousness. This “social responsibility” school of thought also present in stage Five, but to a lesser degree, maintains that business has a major responsibility' to contribute to the necessary transformation of what they consider to be a very unhealthy society today. Their belief is based on the premise that a business can be healthy, only if society around it is healthy and that no other institution in society, including governments and religious institutions, has the resources or the credibility to bring about this transformation. Entrepreneurs operating on this level would seek to achieve certain social objectives such as promoting community health, participating in job creation, employing handicapped people, and self-realization of employees as well as financial success of the company. 12. Moral Relation between Individual and Organization OSHA- (Occupation Safety and Health Administration) Before OSHA came in 1970, Government regulation of occupational health and safety was almost entirely the province of US States. The work done by latter was not effective as it was understaffed and under funded. OSHA was created by Congress under the Occupational Safety and Health Act, signed by President Richard M. Nixon, on December 29, 1970. It is an agency of the United States Department of Labor. The Occupational Safety and Health Administration aims to ensure employee safety and health in the United States by working with employers and employees to create better working environments. Since its inception in 1971, OSHA has helped to cut workplace facilities by more than 60 percent and occupational injury and illness rates by 40 percent. At the same time, U.S. employment has increased from 56million employees at 3.5 million worksites to more than 135 million employees at 8.9 million sites. In Fiscal Year 2007, OSHA has 2,150 employees, including 1,100 inspectors. The agency's appropriation is $486.9 million. Under the current administration, OSHA is focusing on three strategies: 1) strong, fair and effective enforcement, 2) outreach, education and compliance assistance, and 3) partnerships and cooperative programs. Strong, Fair, and Effective Enforcement A strong, fair and effective enforcement program establishes the foundation for OSHA's efforts to protect the safety and health of the nation's working men and women. OSHA seeks to assist the majority of employers who want to do the right thing while focusing its enforcement resources on sites in more hazardous industries — especially those with high injury and illness rates. Less than 1 percent of inspections — about 467 (FY 2006) — came under the agency's Enhanced Enforcement Program, designed to address employers who repeatedly and willfully violate the law. At the same time, injuries and illnesses continue to decline. Outreach, Education, and Compliance Assistance Outreach, education and compliance assistance enable OSHA to play a vital role in preventing on-the-job injuries and illnesses. OSHA offers an extensive Web site at www.osha.gov that includes a special section devoted to small businesses as well as interactive e-Tools to help employers and employees address specific hazards and prevent injuries. In FY 2006, 80 million visitors logged onto OSHA's Web site The agency provides a variety of publications in print and online. In addition, workplace safety and health information or assistance for employees is available during business hours through OSHA's call center at 1-800-321-OSHA. The hotline remains open 24 hours a day for fatality and accident reporting during non-business hours. OSHA strives to reach all employers and employees, including those who do not speak English as a first language. The agency maintains a Spanish Web page, and Spanish-speaking operators can be reached at the OSHA national call center during business hours. Various publications, training materials and videos are available in Spanish, and OSHA continues to issue new publications. Many regional and area offices also offer information in other languages such as Japanese, Korean and Polish. Free workplace consultations are available in every state to small businesses that want on-site help establishing safety and health programs and identifying and correcting workplace hazards. In addition, OSHA has a network of more than 70 Compliance Assistance Specialists in local offices available to provide employers and employees with tailored information and training. Cooperative Programs OSHA's Alliance Program enables employers, labor unions, trade or professional groups, government agencies, and educational institutions that share an interest in workplace safety and health to collaborate with OSHA to prevent injuries and illnesses in the workplace. A signed formal agreement between OSHA and the organization provides goals addressing training and education, outreach and communication and promoting, the national dialogue on workplace safety and health. In the Strategic Partnership -Program, OSHA enters into long-term cooperative relationships with groups of employers, employees, employee representatives and at times, other stakeholders to improve workplace safety and health. These partnerships focus on safety and health programs and include enforcement and outreach and training components. Written agreements outline efforts to eliminate serious hazards and provide ways to measure the effectiveness of a safety and health program. The Safety and Health Achievement Recognition Program is designed to provide incentives and support to employers to develop, implement and continuously improve effective safety and health programs at their worksite(s), SHARP provides recognition for employers who demonstrate exemplary achievements in workplace safety and health. Employee Rights in an Ethical Organisation Right to Privacy Whistle Blowing Freedom of Conscience Right to participate Right to organize Employee Privacy Employee workplace privacy rights are virtually nonexistent in private-sector employment. That's because up to 92% of private-sector employers conduct some type of electronic surveillance on their employees, according to estimates. Most may do so even without the consent or knowledge of their employees. George Brenkert has described the right to privacy as involving three place relations between a person A, some information X and another person Z. The right to privacy is violated only when Z deliberately comes to possess information X about A and no relationship between A and Z exists that would justify Z's coming to know X about A. Hence, an employee's right to privacy is violated whenever personal information is requested, collected or used by an employer in a way that is irrelevant or in violation of contractual relationship that exists between employer and employee. Privacy is closely related to individual liberty and autonomy. There are some areas of a person's life that should remain totally a matter of the person's discretion. Employers want to be sure their employees are doing a good job, but employees don't want their every sneeze or trip to the water cooler logged. That's the essential conflict of workplace monitoring. New technologies make it possible for employers to monitor many aspects of their employees' jobs, especially on telephones, computer terminals, through electronic and voice mail, and when employees are using the Internet. Such monitoring is virtually unregulated. Therefore, unless company policy specifically states otherwise (and even this is not assured), your employer may listen, watch and read & most of your workplace communications. Recent surveys have found that a majority of employers monitor their employees. They are motivated by concern over litigation and the increasing role that electronic evidence plays in lawsuits and government agency investigations. A 2005 survey by the American Management Association found that three-fourths of employers monitor their employees' web site visits in order to prevent inappropriate surfing. And 65% use software to block connections to web sites deemed off limits for employees. About a third track keystrokes and time spent at the keyboard. Just over half of employers review and retain electronic mail messages. Disclosure of information by an employee is ethical when: 1. It must arise out of the informed consent of both parties 2. Must be free from coercion 3. Presupposes a legal system to be enforceable Whistle Blowing Whistle blowing is when an employee tells an employer, who is breaking the law. It was first used for government employees who made complaints to public about corruption and later it was used in private sectors in similar situations. In true sense in whistle blowing, the employee must tell of the illegal act to someone outside the company. It must be a government or law enforcement agency. Employees who blow the whistle on their employers are protected by laws. Whistle blowing takes place within an organization and it can be done only day member/ex-member of an organization. Whistle blowing can be of two types: Internal : Report the wrong doing to higher authorities in the same organization. External : Report the wrong doing of individuals in an organization to external bodies (govt. or private), media, newspaper or public interest groups. As far as internal whistle blowing is concerned, it is more or less a kind of complaints and sometimes the employee is not protected by the whistle blower laws. However the employee may be protected under other laws for exit is unfair and illegal to fire someone for complaining of sexual harassment or discrimination. If we talk about external whistle blowing not all whistle blowing is equally adversarial to the affected organization, even though it is at least an embarrassment for an organization to be exposed as one that cannot correct its own problems. There are many regulatory agencies such as OSHA (The Occupational Safety and Health Organization) that exist to perform oversight and to which whistle blowers' can go anonymously. But we can see that going to these agencies is usually less adversarial than going to the media. If the employee has reported the allegedly illegal activity to a government or law- enforcement agency, he or she is protected. The employer cannot retaliate against the employee. The employer cannot mistreat the employee for whistle blowing. In fact it is not; necessary that the employer actually broke the law. The employee could be whistle blowing or something that isn't illegal in the first place. The employee is still protected from retaliation or termination but the most important thing in whistle blowing that the employee's belief about violation of law about which he/she is going to blow the whistle must be reasonable. 13. Approaches for Developing Various Orientation towards Ethical Business Behavior The CEO should realize that the best index of success of a corporation is its longevity. The long-term success of a corporation is predicted on maintaining harmonious relations with employees customers, vendor-partners, the government and society. This is predicted on trust and 3 confidence. For example, at Infosys the value system can be summed up as: The softest pillow is a clear conscience. Developing an ethical environment is a long term process in business. An ethical environment is not only a social responsibility but also to generate goodwill assets which have their own returns in financial as well as non-financial forms. However, it requires a sustained effort and a key role of the top management in creating a suitable human resource environment. Elements of Programmes for Developing Ethical Corporate Behavior in the Organization: 1. Commitment from Top Management As the top executives are the leaders, so if an ethical initiation is taken by them, it would be easy to spread it downside. Ethical behavior should be fully supported by the top management. They must set some examples in front of the employees from their own level if commitment to ethics. 2. Code of Ethics To establish and to encourage ethical conduct formal codes of ethics for organization members must be framed. These corporate codes of ethics vary in quality and substance. Some of these consist of a set of specific rules, a list of do's and don'ts. Ethical codes are statements of the norms and beliefs, which form the ethical rules of the organization as defined by the top management.They are the ways in which the top management in the organization wants others to act when confronted with a given situation. A code of ethics states an organization's basic arid primary values and the ethical rules, so the rules of conduct are like a general value statement which lacks a framework of meaning and purpose. Code of conduct are not merely rules and regulations, their scope is somewhat different. A code cannot list and mandate every form of ethical and unethical conduct. A good corporate code of values and conduct should include certain managerial and employee guidelines for making ethical decisions. Some organization have reduced voluminous codes of conduct to just a few core values. For example, Texan Instruments a global semiconductor company, ended up their codes of conduct with just 3 words - Integrity, Innovation and Commitment. A list of code of ethics is given below: • Do not use abusive language • Manage personal finance well • Demonstrate courtesy, respect, honesty, fairness • Exhibit good attendance • Conduct business in compliance with law • Follow all accounting rules and control • True claims in product advertisements. 3. Communication System For the code or ethics to be followed by all employees of an organization, it is essential to have a good communication system between the management and the employees. Some of the communication channels include letters, meetings, newsletter, c- mails and interactive training. 4. Ethics Committee Formation of ethics committee is also new concept. In some corporation a standing commit is formed to implement ethical concept into practice, these committees are headed, directed by Board of directors (Internal as well as external): The salient features and functions of this committee are: a. Periodical assessment, b. Frequent meetings about ethical issues, c. Proper communication about the codes of ethics from top to bottom level, d. Establish reward and punishment system, e. Enforcing the codes, f. Timely reporting to BOD's 5. Ethics Advocate An ethics specialist or officer is a member of board of directors who plays a key role to guide for ethical conduct, a good and wide contribution in board's decision making. He shows a correct path to board members as well as other decision makers in the light of ethics. 6. Reward Punishment System As we know motivation is having a great impact on employees behavior so the best way to get people on ethical path is establishment of reward system. So when ever people behavior is an unethical manner, they do it for some hidden reward so the organisation must develop a kind of system in which whosoever shows ethical behavior must be rewarded and whosoever shows unethical behavior must be punished visibly. So for the future conduct people v/ill take lesson and try to act in ethical manners. 7. Whistle Blowing To develop ethical infrastructure in organization, companies must develop some policies regarding whistle blowing like: a. A clearly defined procedure for reporting. b. A guarantee against retaliation. c. An effective communication statement of responsibility for the employees. d. Well trained HR professionals to receive and investigate reports. e. A clear defined procedure for reporting. f. A commitment from higher authority to take appropriate actions. 8. Ethics Training There is a great need for ethics training because only communicating well is not sufficient to convert values into practice, sometimes employee may think that they know each and every aspect about ethics, ethical decision making but they might be unaware of the ideas of the actual evaluation process, implementation and consequences of the decision making. Therefore ethical training program are very crucial. Effective ethics training should have – 1. Employee participation to exchange views with each other and open discussion of realistic ethical issues. 2. Clarify the ethical values and enhance the ethical awareness of employees. 3. Define criteria for ethical decision making within the organization. 4. To make employees aware of company policy on ethical issues. 5. Investigate ethical environment, analyse the activities, strategies, resources, policies and goals and after examining go on enriching them. 9. Other Guidelines a. Establish audit agency reporting to outside directors. b. Practice what you preach should be followed by the leaders of the company c. Surprise and unpredictable audits d. Ethics should be evaluated in terms of long range consequences for the individual mid the organization. 14. CORPORATE GOVERNANCE Background Corporate Governance and Responsibility issues have come into the limelight in India since the 1990s because of major corporate debacles and scandals that occurred during the decade. During the nineties a large number of companies failed and the economy witnessed a number of rating downgrades, both in the manufacturing and financial sectors. Immediately after liberalization and opening up of the economy, there was a spate of public issues by a large number of companies which thereafter just vanished from the scene leaving thousands of small investors in the lurch. Even their addresses are reportedly not available with SEBI. These incidents had shaken the faith of small investors in the stock market. Hence prolonged depression in the capital markets was on account of such frauds and breach of trust in the corporate sector. This raised an important question: Why were the Board of directors, auditors and the regulatory authorities not able to detect and pre-empt these irregular practices' In such scenario CII was the first to appoint a committee under the chairmanship Mr. Rahul Bajaj in 1999 as a national level private initiative to evolve desirable rules for corporate governance. This was followed by appointment of as many as- four national level committees- two appointed by SEBI, namely Kumar Mangalam Birla Committee in 1999 and N.R. Narayana Murthy committee in2003, another Committee on financial sector governance, known as Gangly committee Report in 2002 and the fourth committee appointed by the Govt. of India known as Report of the Naresh Chandra Committee on Corporate Audit and Governance. This shows that corporate governance is being practiced in India on an even pedestal with anywhere else in the world. i Factors behind the origin of Corporate Governance a). As we are increasingly moving towards open and market driven economic systems, a number of companies catering to international markets arc required to fall in line with international best practices. b). Many Indian companies are floating GDR and ADR issues and getting listed on the NASDAQ/ New York Stock Exchange etc. These companies are required to comply with enhanced disclosure and stringent listing requirements. c). Institutional investors, both foreign and domestic are becoming important players in the stock market. They are increasingly demanding more information and transparency in operations. The Kumar Mangalam Birla Committee constituted by SEBI has observed that: d). "Strong corporate governance is indispensable to resilient and vibrant capital markets and is an important instrument of investor protection. It is the blood that fills the veins of transparent corporate disclosure and high quality accounting practices. It is the muscle that moves a viable and accessible financial reporting structure." e). Government of India has also implemented strict rules and laws to be followed, like Kumar Mangalam Birla committed appointed by SEBI, some professional CJI Codes etc. f). No. of International events (like joint ventures, mergers, takeovers) in the wake of globalization are taking place so it is required that proper corporate governance practices should be followed. Definitions "Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance, OECD April 1999. Sir Adrian Cadbury has defined corporate governance as "corporate governance basically has to do with power and accountability: who exercise power, on calf of whom and how the exercise of power is controlled." Objectives of Corporate Governance Good Governance is integral to the very existence of a company. It inspires and strengthens investor's confidence by ensuring company's commitment to higher growth and profits. It seeks to achieve following objectives: a). A properly structured Board capable of taking independent and objective decisions is in place at the helm of affairs; b). The board is balanced as regards the representation of adequate number of non- executive and independent directors who will take care of the interests and well being of all the stakeholders; c). The Board adopts transparent procedures and practices and arrives at decisions on the strength of adequate information; d).The Board has an effective machinery to sub serve the concerns of stakeholders; e). The Board keeps the shareholders informed of relevant developments impacting the company; f). The Board effectively and regularly monitors the functioning of the management team; and g). The Board remains in effective control of the affairs of the company at all times. The overall endeavor of the Board should be to take the organization forward, to maximize long term value and share holder's wealth. Ingredients of Good Governance a). Board of Directors has to set proper organization structure, systems, norms and processes for direction, supervision and accountability of their corporate entity. b). A code of best practices covering the constitution of the board, its various committees, defining their goals and responsibilities, exploring preferred internal systems and disclosure requirements, c). Accountability of board of directors to the shareholders, d). Transparency in timely disclosures and right information, e). Clarity in responsibilities of Chairman and Managing Director, other directors through empowerment to enhance accountability. f). Quality, competence and track record of the directors, g).Checks and balances in governance conforming to laws, rules and spirit of codes. Issues in Corporate Governance ● Ethical Issues ● Efficiency issues ● Accountability issues ● Ethical issues are concerned with the problem of fraud, which is becoming spread in capitalist economies. Corporations often employ fraudulent means achieve their goals. They form cartels to exert tremendous pressure on the government to formulate public policy, which may sometimes go against the interest's individuals and society at large. At times corporations may resort to unethical means like bribes, giving gifts to potential customers and lobbying under the cover of public f relations in order to achieve their goal of maximizing long-term owner value. Efficiency issues are concerned with the performance of management. Management is reasonable returns on investment made by shareholders. The issues relating to efficiency of management is of concern to shareholders as there is no control mechanism through which they can control me activities of the management, whose efficiency is detrimental for returns on their (shareholders) investments. The management of a corporation is accountable to its various stakeholders. Accountability issues emerge out of the stakeholders' need for transparency of management in conduct of business. Since the activities of a corporation influence the workers, customers and society at large, some of the accountability issues arc concerned with the social responsibility that a corporation must shoulder. The growing scale of corporations and their style of functioning have raised many new issues that must be addressed corporate governance. Some of these issues are: ● The growth of private companies ● The magnitude and complexity of corporate groups ● The importance of institutional investors ● Rise in hostile activities of predators (take over) ● Insider trading , ● Litigations against directors ● Need for restructuring of boards ● Changes in auditing practices The emergence of private companies and the growing complexity of corporate groups is one of the main concerns of corporate governance. Initially, limited liability companies were incorporated to raise outside capital. Later "these corporations used their powers as a legal person under law lo acquires shares in other companies. This resulted in the formation of new companies that took over the assets and liabilities of the original companies before winding them up. This led lo a spate of mergers and acquisitions in the late nineteenth and twentieth centuries. The magnitude of complexities associated with corporate groups increased in the twentieth century characterized by shareholding by varied investors. Such complex group structure creates difficulties in understanding the ownership, power and influence over the group companies. Corporate governance is also concerned with the growing influence of institutional investors on the corporations, which create suspicion in the minds of minority investors. Minority investors believe that larger and influential investors pressure the corporations' management to act in their own interest. Issues concerning hostile takeovers, particularly management buy-outs, arc also addressed by corporate governance. Insider trading, unbalanced boards and compliance with international accounting standards are other issues that arc addressed by corporate governance. Functions of the Board The primary function of the Board of directors is to take responsibility for the performance of the corporation and work to promote its interests on behalf of the shareholders, to whom it is accountable. Corporate boards oversee the performance of the corporation, its CEO and the lop-level managers. The board ensures that timely and accurate reports are provided on corporate performance, including the financial conditions and non-financial indicators of the corporation. It monitors corporate performance by closely following the progress of the corporation towards the pre-set goals and targets. The board provides strategic guidance to the corporation. It studies the future trends so that the corporation has the necessary and adequate resources to secure its long-term position. The board has to maintain good relations with the stakeholders and try to keep the shareholders happy. I. Strategic Role of the Board The primary role-of the board is to supervise the quality of strategic thinking of the executive committee. When necessary, the board can take corrective measures to guide the top management to develop strategies to achieve corporate goals. At limes, non-executive directors on the board identify and warn the CEO about operational issues that may lead to a crisis situation. The hoard performs its role in strategy development in the following levels. • Systematic level strategy • Structural and portfolio strategy • Implementation strategy Systematic level strategy formulation is based on the board's understanding of what is happening in the national, international and global environment. The board's knowledge about the external environment extends too many areas: socio-political environment, potential market trends, the impact of changes in technology and the international competitive forces that have an effect on the company. Since the board members scan the external environment regularly, they can provide the executives/management crucial inputs for effective decision-making. Structural and portfolio strategy is concerned with decisions regarding the structure of the company and die businesses that it should enter into. The board addresses issues like what changes can be done in the structure of the company to achieve the growth aspirations of the board. This level of strategic thinking involves discussions among the board of directors and the management, relating Jo acquisitions, mergers, strategic alliances or sale of a pan of the business. Implementation strategy is concerned with the board's role in ensuring that the strategy is feasible. The board ensures that a broad game plan for implementing the policies and strategies is in place, so that the management can deliver the desired results. 2. Policy Making Role of the Board The board of directors frames guidelines or policies to ensure that the business plans and management decisions conform to the corporate strategy. These policies cover all the key areas like marketing, finance, personnel, operations, customer relations and research and development. These policy statements are usually, published and made available lo employees. 3. Monitoring and Supervisory Role The board monitors and supervises the corporation to ensure that it adopts the right strategic direction. It regularly checks whether the business is following the policies laid down for achieving the goals and inquires into the causes of deviations, if any. The board reviews the plans, policies and strategies of the corporation in the light of the changing competitive environment. If necessary it makes changes in the corporations' strategies. Committees of the Board The board relies on independent outside directors to monitor management performance. Some important committees use the board, comprising outside directors are: ● Audit committee ● Remuneration committee ● Nomination committee Audit Committee The committee usually consists of independent directors who report to the board. These committees act as a link between the board and the external auditors. The audit committee looks into all the matters raised by the external auditors relating to the management systems and tries to resolve any objections that the auditors raise about the published financial accounts. Some of the functions of a corporate audit committee are: 1. To discuss with independent auditors any problems that they experience completing the audit 2. To review the interim and final accounts 3. To inform the board about the effectiveness of internal controls and the quality of financial reporting as pointed out by the independent auditors 4. To make recommendations regarding the audit fee selection and replacement of auditors. Remuneration Committee Shareholders arc becoming concerned about the lack of transparency regarding the remuneration of directors and top-level managers. The board sets up the remuneration or compensation committee to objectively review the remuneration packages of the executive directors and other top-level managers. This committee, which is made up of independent directors, chalks out the remuneration policy. Such a policy checks the unreasonable increase of executive remuneration. Nomination committee Those committees are usually set up to select the new non-executive directors. Usually, it is headed by the chairman and it shortlists and interviews the final candidates. The Role of CEO / The primary role of a CEO is to run the organization in an efficient manner to produce the desired results. Apart from running the business effectively, the CEO is expected to have a constructive working relationship with the chairman and the directors. Relation with the Chairman The CEO should establish a constructive working relationship with the chairman. This requires a high degree of trust, respect, and an ability to communicate openly with each other. When the CEO and chairman know each others strengths and weakness they can work closely, complementing each others strengths to set the future course of the company. Relation with Directors The CEO should maintain cordial relationships with the directors to ensure that they act in the interest of the whole organization instead of pursuing the narrow interests of the owners (shareholders, employees, banks, government etc.) The CEO can use his good relations with the directors to motivate them to participate actively in improving the performance of various departments of the organization. Functions of the CEO 1. To assist the executive directors in formulating strategic proposals that nave to be endorsed by the board 2. To provide leadership and direction to all his executive directors 3. To develop a plan for implementing the strategy formulated by the board and/or management, and to convince the non-executive directors dial die strategy can work 4. To act as representative of the executive directors when interacting with the non executive directors 5. To present the company to major investors, the media arid government 6. To be a source of inspiration, leadership and direction to the employees, customers and suppliers 7. To be able to identify die situations dial requires intervention. Professionalizing - Corporate Governance Some ways of reforming corporate governance in practice that have been developed are as follows: 1. Distinguish Management from Control The Cadbury committee report say, "The board should retain full and effective control over the company and monitor the executive management". It means that there must be a separation between control and management. It is advisable that CEO and his team should handle ail the functions of management, and the function of control should be under Board of directors. But if in unavoidable situation to combine the role of chairman and MD/CEO, then the board comprising non executive directors must be very strong. 2. Active Role of Institutional Investors In the reforming practices of corporate governance, to strengthen the hands of institutional investors will contribute effectively as they have higher stake. 3. Expand the Role of Non-executive Directions To improve the quality of corporate governance, the role of non-executive directors must be enlarged because non executive directors can provide rich experience and good objectivity in monitoring corporate behavior. CII(Confederation of Indian Industry) has recommended code of corporate governance which are related with non- executive directors like — a. Non-executive directors should occupy at least 30% of the board seats. b. There must be a limit to the number of board on which a person can serve, CII has given the number is 10. c. An audit committee, having at least three non- executive directors must be set up and given access to all the information. d. The degree of accountability must be higher than at present. e. All the non-executive directors must be compensated well for their time and efforts. 4. Proper and Timely Information lo the Board It must be ensured that the Board is information-wise well-equipped. The board of directors should get full information about long-term plans, budgets, competitive developments, quarterly results etc. If the entire information about each and every corporate affair is easily accessible to BOD's, it would be quite easier for them to exercise the oversight functions. 5. Size of the Board Research shows that optimum size of the board should be lO-12. If board is very long, it would be less effective as the main problem of co-ordination would occur, ordinarily the board should comprise of seven members. More over if we want competent, involved, accountable and well paid directions we have to limit the size of the board. 6. Improve Accounting and Reporting Practices Accounting reports are the important means of information for the shareholders, creditors and investors of any company. We see in India, after the involvement of SEBI in corporate governance some improvement in corporate accounting and reporting practices has been seen, but still informed observer believe several reforms, improvement are required like - 1. Business line reporting- Business line reporting says that the financiers should get integrated information about the profitability of different diversions of a single company. So it should be provided by the companies in line with the practice in developed capital market. 2. The confederation of Indian Industries (CII) Code-The CII has suggested a code for its members. The main contents are like: • The role of nun-executive directors should be expanded • Proper information about companies plans, budgets, Foreign-exchange exposure, managerial remuneration should be provided to the board • More information has to be disclosed to shareholders. Work on Corporate Governance in India India has formulated codes of corporate governance through various committees some of which are discussed below; CII (Rahul Bajaj) Committee, 1996 Recommendations The Confederation of Indian Industry was the first to come out with a desirable code for corporate governance. This was a voluntary code, which was in the next course of three years adopted by almost 30 large listed companies. Board of Directors a. Simple structure should meet at least six times a year and half day's discussion, b. Listed companies with paid-up capital of Rs. 200 core and above to have t least 30% non-executive directors, c. Director should not be on the Boards of more than ten companies. d. Director who does not attend at least 50% of the meetings, not to be considered for re-appointment. e. Audit Committee to be appointed to assist the Board. f. All key information e.g. Annual operating plans and budgets, quarterly results, internal audit reports etc. to be placed before the Board of Directors. g. Members of the Board to have clearly defined responsibilities. h. Company should not accept further deposits, if they have defaulted on servicing of earlier deposits. i. Financial Institutions to divest their stake if less than 10% stake in the company. SEBI Committee I (Kumar Mangalam Birla Committee) on Corporate Governance In 1999, SEBI constituted a committee under the chairmanship of Shri Kumar Mangalam Birla, to promote and raise the standards of corporate governance. The Committee submitted its report in the year 2000 and based on these recommendations, Clause 49 was incorporated in the Listing Agreement which companies are required to sign with the stock exchanges while listing their shares. ft includes the following: a. At least 33% (in case of a non-executive chairman) and at least 5% (in case of executive chairman) of the directors of the board of a company to be independent, b. Board Meetings to be held at least four times a year, with a maximum gap of four months between any two meetings, c. No director to be a member of more than 10 boards / committees or chairman of more than 5 committees and inform the respective companies about these memberships. d. Attendance of the directors at board meetings to be disclosed to shareholders. e. Remuneration of non-executive directors to be decided by the board, f. Audit committee to be mandatory, g. Minimum three members, all independent directors h. Chairman of the committee to be financially literate i. At least three meetings a year j. Chairman of the committee to be present at AGM to answer shareholders' queries k. Companies to provide consolidated statements in respect of all its subsidiaries in which they hold 51% or more of the share capital, 1. Directors' remuneration to be fully disclosed including elements of the package, service contract, severance fee etc, m. All material, financial and commercial transactions where there is personal interest of directors or potential conflict of interest- related party transactions to be fully disclosed. n. Information to shareholders o. Management discussion and analysis report p. Full information about a director seeking appointment / re-appointment q. Un-audited quarterly results r. Date, time and venue of AGM s. Listing on stock exchanges t. Top ten Shareholders u. De-mat status SEBI Committee Il (Narayana Murthy Committee) Recommendations: SEB1 felt that there was a need to review the existing code on corporate Governance with a view to improving the existing practices. The SEBI Committee II on Corporate Governance was constituted under the Chairmanship of Shi N.R. Narayana Murthy, Chairman and Chief Mentor of Infosys Technologies Ltd. The Committee included representatives from the stock exchanges, chambers, commerce and industry, investor associations and professionals and debated on key issues and made recommendations-in the following broad areas: Enhanced role of the Audit Committee a. Audit Committee to put in place procedures to inform board members about the risk assessment and minimization procedures, b. Management to place a report certified by Compliance Officer, before the Board, on business risks faced by the company, measure to address and minimize the risk-taking capacity of the company, c. Justification for all deviations from accepted accounting standards, d. Companies should encourage a regime of unqualified financial statements, e. Companies raising money through IPO should disclose use of the same on quarterly basis. Audit Committees are required to mandatory review: a. Financial statements and draft audit reports including quarterly, half-yearly reports, b. Management discussion and analysis of financial condition, operational performance Reports relating to compliance with laws a. Letters of internal weaknesses issued by statutory / internal auditors b. Records of related party transactions Written code of conduct for Executive Management a. It should be obligatory for the Board of a company to lay down the code of conduct for all Board Members and senior management, b. Board Members and senior management to affirm compliance with the code on annual basis and the annual report to contain a declaration to this effect signed by the CEO and CEO. c. The code of conduct to be posted on the website of the company. Non-Executive Directors The age ceiling for a non-executive director is recommended at 75 years. Non-executive directors to hold office for a maximum of three terms of three years each. All compensation 10 non-executive directors may be fixed by the Board and should be approved by the shareholders in general meetings. Limits should be set for the number of stock options that can be granted to a non-executive director in any financial year and in the aggregate. The following are not considered to be as independent directors: ● Directors having any material, pecuniary relationship with the company, promoters, management ● Directors related with promoter or management ● Any former executive of the company in the last three years ● Partner or executive of auditing or legal firm ● Supplier, service provider, major customer of the company ● Individual owning 2% or more of the paid-up capital of the company. ● Whistle Blower Policy Employees who feel the need to report an unethical or improper practice (not necessarily violation of a statute) has the right to access the audit committee directly without necessarily informing any supervisor. This right of access should be communicated to all employees by the company through internal circulars. Companies should annually affirm that they have not denied any personnel access to the audit committee and they have provided protection to such whistle blower from unfair termination and other unfair and prejudicial employment practices. 15. ETHICS AND INDIAN MANAGEMENT Research has shown that the Western Managers find problems among Indian employees in the areas of: ● taking initiative ● taking responsibility ● time management & planning activities ● team work These skills are not only essential in western management but western managers expect them to be developed in (higher level) employees. Unfortunately, only very few western managers are aware that in the Indian culture these skills are not fostered nor promoted in the same way as in western countries. In this light it is important that Western managers realise that cultural values and-norms are internalised during childhood and determine much of the conduct and motivations displayed in adult life. Keeping in mind that norms and values are handed down in a similar way from generation to generation, it should not come as a surprise that Indian employees are likely to be much more traditional then they may appear in first instance. While in a day-to-day contact this may not be immediately noticeable, at times of stress people tend to reach back to values and norms they have learned to rely on in their childhood. The two aspects which are most relevant in this are the way children are brought up and the status of relationships. The Indian culture allows for a much freer form of child-rearing as compared to the west. While in the west small children are already taught simple forms of planning (for example eating and sleeping times), the Indian child is granted much more freedom in deciding when it needs what as long as it respects relationships. This difference continues throughout the whole period of upbringing. It results in the activities of the western child being shaped by concepts such as taking initiative, being responsible for their own actions and forms of time management. The Indian child, on the other hand, is given much more leeway to develop its own identity as long as it pays reverence to authority. This helps to develop tolerance, flexibility, adaptability and an easier acceptance of instructions given by respected authorities. No doubt, these are all useful skills, especially in the Indian context, but not necessarily conducive in a western management environment. The need to cultivate respect for authority stems from the need for relationships. As India provides very little in terms of security network (most people can not rely on social benefits, insurances, etc.) people count on their relationships for this. As per Maine's theories, India is a typical relationship-based society while the western society is contract-based. This means that the (family-) relationships always take precedence over obligations to the company, even in case of, to western eyes, seemingly unimportant incidents. Westerners tend to see this as a lack of responsibility. In the work environment Indian employees will try to recreate family-type relationships as this is the only form of security they know. Three Gunas The mind is composed of three basic forces called gunas, Sattva, rajas and tamas. Gunas determine character and thought processes of individuals. They exist in all beings including human beings in various degrees of concentration and combinations. Depending upon their relative strengths and combinations, they determine nature of human being, its actions, behavior, attitude and its attachment to the world in which he lives. The three Gunas competing amongst themselves for supremacy while they exist in human beings, Sattva exists by suppressing Rajas and Tamas, Rajas exists by suppressing Sattva and Tamas and Tamas by suppressing other two. Sattva is the principle of poise, conducive to purity, calmness, knowledge and joy. Rajjas is the principle of movement, leading to activity, desire, passion and restlessness. Tamas is principle of inertia resulting in inaction, dullness and delusion. Tamas causes mind to move at low level, Rajas scatters mind and makes it restless and Sattva gives mind a higher dimension. Tamas in inertia manifested in drowsiness, lethargy and ignorance. Rajjas is manifested in speed, enthusiasm, strong likes and dislikes, anguish and anger. Sattva is marked by peace, calmness, ever lasting enthusiasm, love and Relevance of Gunas: Managers make decisions Gunas influence and give direction to their decisions. Tamasaics are likely lo make decisions that are harmful even to themselves, unable to see the long-term benefits and effects on others. They do see the larger good and routed in darkness. Sattvics take decision that would do maximum good to all concerned in long term. Organizations should focus on the Gunas on their personnel and arrange for interventions that would strengthen the Sattvics. One method to arrange meetings with Sattvic personalities would be to focus on higher values. Another would be to provide opportunities for Yoga and Meditation because both purify the mind and clarify one's vision. 1. ETHICS IN INTERNATIONAL SCENARIO As recently as a decade ago, many companies viewed business ethics only in terms of administrative compliance with legal standards and adherence to internal rules and regulations. Today the situation is different. Attention to business ethics is on the rise across the world and many companies realize that in order to succeed, they must earn the respect and confidence of their customers. Like never before, corporations are being asked, encouraged and prodded to improve their business practices to emphasize legal and ethical behavior. Companies, professional firms and individuals alike are being held increasingly accountable for their actions, as demand grows for higher standards of corporate social responsibility. This page lists and rates valuable Internet resources related to business ethics, ethical business and corporate social responsibility. Complete Guide to Ethics Management[pic] This guide is a straightforward and highly practical tool designed to help leaders and managers implement comprehensive ethics management systems in their workplaces in order to deal with the complex, ethical issues that can occur in the day-to-day realities of leading and managing an organization. It provides guidelines for managing ethics, identifies key roles and responsibilities, provides instructions for setting up a code of ethics and a code of conduct. Excellent site. [pic]Business Ethics Links Library[pic] The Business Ethics Links Library (BELL) from the university of Colorado at Boulder is a comprehensive starting point for research in corporate ethics and social responsibility. The database provides access to codes of ethics for U.S. companies and trade and professional associations, ethics sites at college and university business programs, industry information resources, and company promotion of social responsibility. Excellent meta index and search engine. Do not miss the online ethics publications. [pic]Small Business Journey[pic] This site from the UK outlines corporate social responsibility as it relates to small and medium sized enterprise. It provides a roadmap for a business on how to be socially responsible. It is about direction- how you create products and services people value; culture- the way you do things in your business; policies- how you define policies and turn them into practice; relationships- how people relate to your business. Excellent site. Do not miss the how to guides and the resource centre and its 10 pages of research papers. [pic]ECS2000[pic] The Ethics Compliance Management System Standard (ECS2000) is a guideline for corporations and other organisations which are endeavouring to conduct business in an equitable and responsible manner. The ECS2000 standard has been made publicly available by the Business Ethics Research Project at the Reitaku Centre for Economic Research. Very useful document for any organisation which aim to establish, apply, maintain and consistently improve an ethical-legal compliance management system. [pic]EUROPA Corporate Social Responsibility This extremely rich site from the European Commission leads to all the works undertaken by the commission in the area of corporate social responsibility. Do not miss the ABC of CSR instruments and also the other commission web pages on CSR particularly the one from the DG Enterprise which includes a brochure on responsible entrepreneurship for SMEs. [pic]Caux Round Table[pic] The Caux Round Table (CRT) is an international network of principled business leaders working to promote a moral capitalism. The CRT advocates implementation of the CRT Principles for Business through which principled capitalism can flourish and sustainable and socially responsible prosperity can become the foundation for a fair, free and transparent global society. Very rich and interesting site. Do not miss the section on resources and the summaries of selected corporate responsibility codes and standards. Canadian Business for Social Responsibility[pic] Canadian Business for Social Responsibility (CBSR) is a non-profit, business-led, national membership organization of Canadian companies working to improve their social, environmental and financial performance. They have developed the GoodCompany Guidelines for Corporate Social Performance which are a set of guidelines that outline what companies can do to become more socially and environmentally responsible. Excellent site. Do not miss the SME resource database and the report Engaging Small Business in Corporate Social Responsibility. E-Ethics Centre[pic] The e-business ethics center from the University of Colorado provides a source of information on business ethics, corporate citizenship and organizational compliance. The goal of the e-business ethics center is to create a virtual community of organizations and individuals that share best practices in the improvement of business ethics. Excellent site with a very rich resources section. I particularly liked their examples of codes of conduct. [pic]Business for Social Responsibility[pic] Business for Social Responsibility (BSR) is a global organization that helps member companies achieve success in ways that respect ethical values, people, communities and the environment. BSR provides information, tools, training and advisory services to make corporate social responsibility an integral part of business operations and strategies. The site includes a section on Business Ethics. Do not miss the Issue brief library which covers the full spectrum of corporate social responsibility issues. Excellent site. [pic]OECD Principles of Corporate Governance[pic] The OECD Principles of Corporate Governance were endorsed by OECD Ministers in 1999 and revised in 2004. They cover six key areas of corporate governance : ensuring the basis for an effective corporate governance framework; the rights of shareholders; the equitable treatment of shareholders; the role of stakeholders in corporate governance; disclosure and transparency; and the responsibilities of the board. Essential document. Do not miss the Frequently Asked Questions and the Policy brief which is even more interesting than the principles themselves. [pic]Transparency International[pic] Transparency International is an international non-governmental organization which brings civil society, business, and governments together in a powerful global coalition, and works at both the national and international level to curb both the supply and demand of corruption. Excellent site which includes a newsletter and a rich publications section. Do not miss the business principles for countering bribery. [pic]European Corporate Governance Institute[pic] The European Corporate Governance Institute (ECGI) is an international scientific non-profit association which provides a forum for debate and dialogue between academics, legislators and practitioners, focusing on major corporate governance issues and thereby promoting best practice. Excellent and very rich site. Do not miss the section on codes where corporate governance codes on a country by country basis can be downloaded. The section on working papers is also interesting although much more technically focused. [pic]International Business Ethics Institute[pic] The International Business Ethics Institute promotes business ethics and corporate responsibility through two key program areas. First, it works to increase public awareness and dialogue about international business ethics issues through such educational resources and activities as the Roundtable Discussion Series, the International Business Ethics Review and their website. Second, the Institute works closely with companies to assist them in establishing effective international ethics programs. Excellent site. Do not miss the Business Ethics Primer in the resources section and the articles of the International Business Ethics Review in the publications section. I am also looking forward to their Comprehensive Guide on Developing Global Codes of Ethics which should be published in 2005. [pic]Ethics & Policy Integration Centre The Ethics & Policy Integration Centre (EPIC) is an ethics and policy research effort based on the belief that applying the principles and practices of organizational ethics is an eminently practical part of organizational life. Very interesting site with a rich resource section. Do not miss the section on small and medium enterprises and also Business Ethics: a manual for managing a responsible business enterprise in emerging market economies. [pic]Strategies / Corporate Social Responsibility[pic] This site from Industry Canada, a department of the federal canadian government, addresses the issue of definition, outlines tools that can be employed by businesses, presents best practices on the subject, and describes what it does to support corporate social responsibility. Excellent site. Do not miss the section on lessons learned and also the CSR monitor 2004 which is a survey of public opinion on corporate social responsibility. [pic]International Business Ethics Forum[pic] Built by MBA students at the Joseph M Katz Graduate School of Business at the University of Pittsburgh, under the direction of Assistant Professor Bradley Agle, the site contains information pertaining to the business ethics climate in a number of countries in every region of the world. For each country covered, the information is divided into 5 topics: cultural religious beliefs and traditions; law, adjudication and enforcement; stakeholders priorities and corporate social responsibility; major business ethics cases; major multinational firms operating in the country. Excellent site. [pic]Eldis Corporate Social Responsibility Resource Guide[pic] This subject-focused guide offers quick access to key documents, organizations, research themes, discussions and other key resources. Very rich and excellent site. Do not miss the list of links on corporate social responsibility. [pic]Ethical Trading Initiative[pic] The Ethical Trading Initiative (ETI) is an alliance of UK companies, non-governmental organizations (NGOs) and trade union organizations. Its objectives are to promote and improve the implementation of corporate codes of practice which cover supply chain working conditions. Very rich and interesting site. Do not miss the section on ethical trade which provides an introduction to ethical trade, codes of practice and international labour standards and also the ETI library which includes downloadable documents. [pic]UK government gateway to CSR[pic] The UK government has an ambitious vision for corporate social responsibility: to see UK businesses taking account of their economic, social and environmental impacts, and acting to address the key sustainable development challenges based on their core competences wherever they operate. The site includes sections on definition of CSR, policy and legislation, projects and programmes, practice, resources, etc. Very interesting site. Do not miss the international strategic framework on corporate social responsibility and the section on resources which provides access to a number of publications. [pic]Better Business Bureau[pic] The North American BBB system is an important force for marketplace ethics, operating a range of programs and services to promote ethical business conduct. These programs include voluntary standards and codes of practice, dispute resolution processes, and information and education programs. The site includes a code of advertising and a code of online business practices. [pic]Codes of conduct[pic] This website presents examples of codes of conduct ( a formal statement of the values and business practices of a corporation). Interesting site. Do not miss the section on interest groups which presents codes of conduct developed by NGOs and the section on government which includes guidelines for multinational companies. [pic]Center for Corporate Citizenship[pic] The Center for Corporate Citizenship at Boston College is a membership based research organization which works with global corporations to help them define, plan and operationalize their corporate citizenship. Their goal is to help business leverage its social, economic and human assets to ensure both its success and a more just and sustainable world. Very interesting site. Do not miss the section on publications where there are many documents available for download, and the section on corporate citizenship links which is very good. [pic]EthicsCentre.CA[pic] EthicsCentre.CA (Canadian Centre for Ethics and Corporate Policy) is an independent ethics centre dedicated to promoting and maintaining an ethical orientation and culture in Canadian organizations. Its mission is to champion the application of ethical values in the decision-making process of business and other organizations. Very interesting site. Do not miss Management Ethics which is a quarterly publication featuring topics of interest to the business community, and also the numerous articles and speeches included in the Resources section. [pic]Ethics Resource Center[pic] The Ethics Resource Center (ERC) is a nonprofit organization whose vision is a world where individuals and organizations act with integrity. Interesting site which includes a monthly newsletter and some free publications. Do not miss the Ethics toolkit and the publication on Ethics and compliance in a global economy. [pic]Center for Ethics and Business[pic] The Center for Ethics and Business at Loyola Marymount University in Los Angeles aims to provide an environment for discussing issues related to the necessity, difficulty, costs and rewards of conducting business ethically. Recognizing the special challenges connected with discussing ethical issues on a multicultural planet at the dawn of the 21st century, the Center encourages a secular and philosophical approach to these matters. Interesting site. Do not miss the Ethics toolbox and the section on links. [pic]Codes of Ethics Online[pic] The Center for the Study of Ethics in the Professions from the Illinois Institute of Technology has put their extensive collection of codes of ethics on the web. This includes codes of ethics of professional societies, corporations, government, and academic institutions. The Codes of Ethics Online site includes an index and a search engine. [pic]Center for Business Ethics[pic] The Center for Business Ethics at Bentley College is a nonprofit educational and consulting organization whose vision is a world in which all businesses contribute positively to society through their ethically sound and responsible operations. The site houses studies and surveys as well as the Ethics Matters Magazine. Do not miss the list of ethical newsletters in the resources section. [pic]Global Compact[pic] The Global Compact is an international initiative that will bring companies together with UN agencies, labour and civil society to support nine (now ten) principles in the areas of human rights, labour, the environment, and anti-corruption. It seeks to advance responsible corporate citizenship so that business can be part of the solution to the challenges of globalisation. Interesting site. Do not miss the Chatham House report which explores the policy options for implementing the World Summit for Sustainable Development (WSSD) commitments on Corporate Social Responsibility (CSR). [pic]CSR Europe[pic] CSR Europe is a non-profit organisation that promotes corporate social responsibility. Its mission is to help companies achieve profitability, sustainable growth and human progress by placing corporate social responsibility in the mainstream of business practice. The site includes an extensive list of publications on CSR as well as a very large list of links. Do not miss the section on CSR general information. [pic]Corporate Social Responsibility Initiative[pic] The Corporate Social Responsibility Initiative at the Kennedy School of Government is a multi-disciplinary and multi-stakeholder program that seeks to study and enhance the public role of the private enterprise. It focuses on exploring the intersection between corporate responsibility, corporate governance and strategy, public policy, and the media. Interesting site. Do not miss the very rich publications section. [pic]Corporate social responsibility news and resources[pic] This personal site of Mallen Baker presents news and articles on corporate social responsibility. The site includes a newsletter and an interesting section on resources where several documents can be downloaded. Do not miss the section on definitions of corporate social responsibility and on arguments against CSR. [pic]Online Ethics Center for Engineering and Science[pic] The Online Ethics Center for Engineering and Science was established to provide engineers, scientists and science and engineering students with resources useful for understanding and addressing ethically significant problems that arise in their work life. Very good site. The case studies are fascinating. [pic]International Society of Business, Economics, and Ethics[pic] The International Society of Business, Economics, and Ethics (ISBEE) is a professional association focusing exclusively on the study of business, economics, and ethics. The site includes a newsletter, documents and the papers from their world congress. [pic]Council for Ethics in Economics[pic] The Council for Ethics in Economics is a worldwide association of leaders in business, education, and other professions working together to strengthen the ethical fabric of business and economic life. The site includes the quarterly publication Ethics and Economics. Do not miss the 1998 publication on competitive intelligence where are the ethical limits' [pic]World Council for Corporate Governance[pic] The World Council for Corporate Governance is an independent, not for profit international network aimed to galvanize good governance practices worldwide. It was established at the first International Conference on Corporate Governance held in January 2001 in New Delhi. The site includes past conference reports. [pic]Institute for Global Ethics[pic] The Institute for Global Ethics' mission is to promote ethical behavior in individuals, institutions, and nations through research, public discourse, and practical action. Interesting site but limited. Do not miss the Ethics Newsline. [pic]Ethical Corporation Ethical Corporation is an independent publisher on business ethics and corporate responsibility. Interesting site which combines daily news and a monthly magazine. With the exception of the daily news and corresponding newsletter most of the information is accessible only if you are a paid subscriber. [pic]Ethic Scan Canada[pic] Ethic Scan Canada Ltd is a synthesis of three different services : an ethics consultancy, Canada's first corporate social responsibility research house, and a clearinghouse or resource centre for consumer and corporate ethics. Interesting site but most of the reports available have to be purchased. Do not miss the FAQs and the extensive list of links. [pic]Business Ethics Magazine[pic] Each issue of Business Ethics, the magazine of corporate responsibility, carries news and analysis of cutting edge topics in corporate social responsibility, business ethics, and social investing. Two articles of the current issue can be read online. Interesting site but limited. Do not miss the section on resources. [pic]Ethikos[pic] Ethikos is a bi-monthly publication that examines ethical and compliance issues in business. A sample issue is available as well as selected articles from past issues. You need to be a subscriber to access all the information. [pic]European Business Ethics Network[pic] The European Business Ethics Network, EBEN, is an international network dedicated to the promotion of business ethics in European private industry, public sector, voluntary organizations, and academia. The site includes a newsletter and a discussion forum but you need to be a paid member to access them. Interesting set of links. International Business Ethics Doing business transnationally raises a number of issues that have no analogue in business dealings done within a single country or legal jurisdiction. International business ethics seeks to address those issues. Where ethical norms are in conflict, owing to different cultural practices, which ethical norms ought to guide one's business conduct in other nations and cultures' Some discussions of international business ethics conceive this home country/host country question as central. On one hand, adopting host country norms is a way to respect the host culture and its members. Thus, business persons are advised that when in Rome they ought do as the Romans do—as in etiquette, so too in ethics. On the other hand, business persons are advised to resist host country norms that are morally repugnant. Therein lies the rub. When, for example, bribery of officials is central to doing business where you are, ought you to embrace the practice as a mark of cultural respect or forswear the practice on the grounds that it is morally repugnant' One common approach in international business ethics is to refer to or to construct lists of norms that ought to guide transnational business conduct. Thus, for example, the United Nations' Universal Declaration of Human Rights or, more recently, the United Nations Global Compact, is advanced as a guide to conduct. The UN Global Compact enjoins business firms to support and respect internationally recognized human rights, avoid complicity in human rights abuses, uphold freedom of association and collective bargaining, eliminate forced and compulsory labor, eliminate child labor, eliminate all forms of discrimination in employment, support a precautionary approach to environmental challenges, promote greater environmental responsibility, encourage the development of environmentally friendly technologies, and work against corruption in all its forms, including extortion and bribery. Alternatively, whether inspired by something like the UN Global Compact, a preferred moral theory, a preferred theory of justice, or some combination of these or other factors, other lists of norms are proposed as guides to the ethical practice of transnational business. DeGeorge (1993), for example, advances ten guidelines for the conduct of multinational firms doing business in less developed countries. These guidelines call for the avoiding harm, doing good, respecting human rights, respecting the local culture, cooperating with just governments and institutions, accepting ethical responsibility for one's actions, and making hazardous plants and technologies safe. Among other uses, Donaldson and Dunfee (1999) see the hypothetical, macrosocial contract in ISCT providing an ideal framework for adjudicating questions of transnational business conduct. The problems with these approaches appear to be threefold. First, they tend to minimize or ignore competitive reality. Imagine that our firm takes seriously the UN Global Compact. We do business in a less developed country with longstanding environmental and corruption problems. We are implementing a significant environmental initiative in this country, but find that our ability to do so depends upon securing licenses from a corrupt government bureaucracy. If we refuse to pay bribes, we will be unable to implement our initiative and, moreover, we will lose market share and our economic rationale for locating operations in this country to competitors who have no compunction about paying such bribes. Ought we to pay bribes for the sake of environmental improvement and maintaining a presence in this country or forsake the environment and a presence in this country in order to strike a blow against corruption' Although not focusing explicitly on the international context, Ronald Green (1991) stands virtually alone in taking seriously the question of when and under what conditions ‘everyone's doing it’ is a moral justification—a question that arises regularly when doing business transnationally and in competitive markets. Second, these approaches serve mainly to reduplicate the home country/host country question they are intended to help answer. Thus, when enjoined by DeGeorge to cooperate with just governments and institutions, which and whose sense of justice ought to guide the determination of whether the governments and institutions are to be cooperated with' Third, even when enjoining respect for local cultures and moral norms, these approaches tend to privilege Western conceptions of justice, fairness, and ethics. Thus, in Donaldson and Dunfee's ISCT, it is a hypothetical social contract—a concept itself embodying Western notions of procedural fairness—that is supposed to adjudicate clashes between home country and host country, including Western and non-Western, norms and practices. Moreover, the more interesting home country/host country cases are those where home country norms are explicitly extraterritorial and incompatible with host country norms. In ‘Italian Tax Mores’, a case widely republished in business ethics textbooks and anthologies (see, e.g., Gini 2005: 70-71), Arthur Kelly tells of American firms doing business in Italy. American securities regulations, accounting principles, and conceptions of commercial integrity require firms to account for their tax liability (including foreign tax liability) fully and correctly, with that liability matching what appears on their tax returns. Italian tax authorities, by contrast, take a firm's tax return to constitute not a full and correct accounting, but an initial negotiating position to which they then make a counteroffer. A firm's final tax liability is settled through negotiation between the tax authorities and the firm. Consequently, an American firm's tax liability for its Italian operations will likely never match what is reported on its tax return, in contravention of securities regulations, good accounting practice, and conceptions of commercial integrity back home. General principles of good conduct and hypothetical social contracts seem not to speak to what tax accountants and auditors ought to do, given the institutions and norms that actually confront them. International business ethics has taken on a new urgency with the emergence of globalization. Low transaction and communication costs, driven by advances in computer and telecommunication technologies, have made the global market, once a metaphor (and at least for some, an aspiration), truly global. Transnational business is increasingly the rule rather than the exception, especially in the production of shoes, clothing, automobiles, and other commodity goods. Nowhere has this urgency been felt more acutely than in the debate over so-called sweatshop labor—the hiring of workers in less developed countries, usually at wages and under work conditions prevailing in those countries, to manufacture products for the developed world. Opponents of sweatshop labor argue that multinational firms like Nike wrongfully exploit poor work and wage conditions in less developed countries. They argue that, when contracting for labor in less developed countries, multinational firms are duty-bound to pay living wages and ensure that work conditions more closely approximate those that prevail in the developed world. In a paper much reprinted and anthologized, Ian Maitland (1997) argues that sweatshops constitute for many less developed countries an important rung on the ladder to economic development. Although small relative to the developed world, wages paid in factories serving multinationals like Nike exceed, often by a wide margin, those prevailing in the surrounding economy. The same is true of working conditions. Consequently, sweatshops are a force for the better in the less developed countries in which they appear. They demonstrate the abilities of the local work force, serve to raise local wages as local firms and other multinationals compete for the best employees, and through the extra-market wages they pay facilitate the personal savings and capital formation on which economic development depends. Demanding that multinationals pay even more, so-called living wages—by which is generally meant wages that closely approximate those prevailing in the developed world—is to effectively deny workers in the less developed world the opportunity to compete in the world labor market. For the outcome of a mandatory living wage is not sweatshop workers being paid more, but multinationals keeping factories in places where the market wage parallels the living one (usually the developed world). This promises to leave sweatshop workers working for the (lower) prevailing wages and in the (poorer) prevailing conditions that their local economies, absent the multinationals, offer. According to Maitland, opponents of sweatshop labor are guilty of allowing the perfect to be the enemy of the good. Maitland's critics have replied generally by disputing the effects that flow from living wage mandates and other proposals for overcoming sweatshop labor. Denis Arnold and Norman Bowie (2003), for example, argue that Kantian respect for persons demands payment of a living wage. They maintain that the minimum wage research of economists David Card and Alan Krueger (1995) demonstrates that raising the wages of low-wage workers lacks the unemployment effects that Maitland predicts. As sweatshop workers earn wages that are usually below those of U.S. minimum wage workers, it is likely that they will escape the unemployment effect. Just as which corporate analogy (firm-state, firm-contract) is more compelling depends upon how one understands the relative and absolute availability of exit from the firm, which sweatshop argument is more compelling depends, at least in part, on the economics. Where the Card and Krueger study fits within the larger body of research about the minimum wage is a matter of dispute among economists. How economists come down on it will have implications for at least one, important aspect of the sweatshop labor debate in business ethics.