80

12. Ethics is power because those higher in the organization are more inclined

to listen to someone who is ethical versus someone who they believe in

trying to advance personal agendas.

Chapter 3 THEORY AND PRACTICE OF ETHICS 3.1 Ethics – Meaning & Relevance

3.2 Theory and Applications

3.3 Ethics in Different Functions of Management

3.4 Ethics in Different Departments of Management

3.5 Growing Unethical Instances

3.6 Ethical Codes

81

3.7 Code of Ethics Followed by Professional Bodies

3.8 Code of Ethics Followed by Business Organisations

3.9 Ethical Management System in Organisations

3.1 ETHICS - MEANING AND RELEVANCE Hindu Mythology :

‘Esa sarveshu bhuteshu gudho atma na prakasate

Drsyate tvagryaya buddhya sukshmaya sukshma darshibi’

Atma is in all beings, but it is hidden and therefore is not manifest. It can be

realized, however by the concentrated reasoning of those who have trained

themselves in perceiving in truth and values.

Ramayana, Mahabharata and Bhagavad-Gita in Sanskrit, Tirukkural, Vemana

Sathakam, Sumathi Sathakam as well as several other scriptures in regional

Indian languages of Hindu Mythology embody some moral values. Every royal

family had a ‘Rajaguru’ who taught moral values and human virtues to the

Princes (Viswamitra’s teachings to Sri Rama and his brothers, Panchatantra).

Chanukya Sastra written by Chanukya, is an authority of international

diplomatic relations consisting of several ethical concepts. In Mahabharata,

Dhrithrashtra’s brother Vridula counsels him to leave aside his undue support

to his son Duryodhana. His series of advices is full of morals and human values

called Vridula Neethi. Again in Mahabharata the episode of Yaksha Prashna,

Dharmaraja answers a series of queries on the precepts of Dharma (Ethical

dilemmas) posed by King Nahusha in a serpent form.

82

Dharmic Principles:

Life is construed to be based on righteous principles (also

called Dharmic Principles) which are elaborated by Lord Krishna in the

Bhagawad Gita as:

Fearlessness

Purity of the inner world

Disciplined pursuit of knowledge

Ability to give

Control over the outer dominated senses

Educating oneself

Meditation

Simplicity

Non-violence

Sticking to truth

Ability to overcome anger

Giving up unnecessary possessions

Inner peace, refused to discuss other’s faults

Compassion

Lack of greed

Softness

Repentance

Lack of fickleness

Restrained talkativeness

Inner strength

Forgiveness

Patience

Cleanliness

83

Not given to feeling of enmity

Not feeling puffed up or egoistic

These qualities that are called ‘daiva’ qualities are the basic

ethical values according to Indian ethics1.

------------------------------------------------------------------------------------------------ 1.R P Banerjee of Institute of Finance and International Management, Book

‘Ethics In Business And Management’, Pg. 22-30.

According to the Bhagawad Gita

Sattwam Sukhae Sanjayatae rajasa karmani bharata

Jnanam abritya tu tamah premade Sanjayatyuta

(Sattwa resides in a condition of happiness, rajas reveal a set of continuous

action; tamah depicts the picture of illusion shielding knowledge)

Three sets of qualities are present in all individuals in

different proportions. One cannot be perceived in isolation of others. The

quality which dominates, shows the type of the personality.

3.1.1 Personality types S(Satwa) R(Rajas) T(Tamas) S Long term, concerns,

sustainability, ethical rectitude

Moderate ethical concern, Progress through turbulence

Invite darkness, makes Collapses, redundant leader

R High cash flows, high market share, moderate concern for people

Dynamism, high volatility, randomness

High risk, low mobility

T Death of expectation, high sounds, lower bottom lines

Rigid command and control, inactive participation

Inertial movement, black future

Personality types as mentioned above could be changed from

one set to the other. The goal obviously is to reach the Sattwa.

84

The Ten Commandments:

The Ten Commandments, or Decalogue, according to the Hebrew Bible, is a

list of religious and moral imperatives that were given by God to the people of

Israel from the mountain referred to as Mount Sinai or Horeb1. The Bible

describes their form as being spoken by God and subsequently as an inscription

God wrote with his finger on two stone tablets, which God gave to Moses. The

-----------------------------------------------------------------------------------------------

1.http://en.wikipedia.org/wiki/Ten_Commandments

ten Commandments are recognized as a moral foundation in Judaism and

Christianity.

The passage in Exodus 20 contains more than ten imperative statements,

totaling 14 or 15 in all. While the Bible itself assigns the count of "10", using

the Hebrew phrase aseret had'varim ('the 10 words', 'statements' or 'things'),

this phrase does not appear in Exodus 20. Various religions parse the

commandments differently.

3.1.2 Ten Commandments by religion

Commandment Jewish (Talmudic)

Anglican, Reformed, and other Christian

Orthodox Christian

Roman Catholic, Lutheran

I am the Lord your God 1 preface You shall have no other gods before me 1

1

You shall not make for yourself an idol 2

2 2 1

Do not take the name of the Lord in vain 3 3 3 2

Remember the Sabbath and keep it holy 4 4 4 3 Honor your father and mother 5 5 5 4 You shall not kill/murder 6 6 6 5 You shall not commit adultery 7 7 7 6 You shall not steal 8 8 8 7

85

You shall not bear false witness against your neighbor 9 9 9 8

You shall not covet your neighbor's wife 9

You shall not covet anything that belongs to your neighbor

10 10 10 10

Early critical historians also believed that another trend in the history of

religion was the progression from a concern with ritual to a concern with ethics.

Thus, the early Hebrews were concerned with sacrifice, and later prophets such

as Amos and Micah were more concerned with ethics; this trend presaged

Jesus's emphasis on love. According to this scheme, Deuteronomy 5 does not

represent Josiah's attempt to identify himself with the Mosaic tradition; rather,

Exodus 20: 2-17 are an interpolation of the Deuteronomic Decalogue into the

Jewish narrative. The argument is that this form of the Ten Commandments,

which emphasize ethical principals, can only be a late development in the

history of Israelite religion. Definition of Ethics:

The word ethics is derived from the Greek word Ethos, which means

‘character’ and from the Latin word Mores, which means ‘customs’. Many

corporate failures can be attributable to human error rather than technical.

Human errors would include negligence and lack of ethical commitment.

Max Weber talked about the Protestant ethic as being a strong work oriented

culture with a high sense of commitment and responsibility. R. H. Tawny

carried forward the thought to argue that the rise in capitalism was related to

the protestant ethic.

86

Known as Moral judgment

Ethics means living by values. In ‘Webster’s ninth new collegiate dictionary,

ethics is defined as “the discipline dealing with what is good and bad with

moral duty and obligation.”

Ethics is defined as a set of principles or standards of human conduct that

govern the behavior of individuals or organizations. Philosophically speaking,

ethos is concerned with what is morally right and morally wrong in a given

field of human activity. Cambridge Encyclopedia defines ethics as the branch

of philosophy dealing with the concepts and principles of morality.

3.1.3 Meaning of Ethics

Ethics can be considered as the source of character of a person expressed as

right or wrong conduct or action.

Ethics means ‘respect to others’ (Immanuel Kant).

Happiness is the goal of each conduct (Spinoza, one of the most powerful

philosophers). ‘Right’ in ethics or conduct is different from ‘right’ in

Taken together considered as

Decided by

Leads to Character

of a man Conduct of a person

Series of actions

Good or bad Right or wrong Moral or immoral

Moral standards

By which we can judge again

Requires

87

mathematics or engineering, it means correct, fit, what works best to the best

result (Aristotle). Bringing in ‘effective harmony of the whole’ has been the

basic ethical view of Plato.

Gandhiji wanted a freedom from within. People become a prey to unethical

practices as a result of the lack of inner freedom. A lack of inner freedom

makes people dependent upon externals and allows externals to give a shape to

things in their chosen ways – ethics becomes a causality in most of the cases.

Gandhi’s concept of Swaraj helps to attain an inner swaraj (freedom) to attain a

collective swaraj for the country. Strengthened by the inner voice, man then

lives on the spirit of morals and ethics in individual as well as collective life.

The essence of Buddhist Ethics lies in the choice of the middle pat that yields

the various rights for the human entity. Buddha identifies desire as the main

enemy to ethical actions. Ethics demands a purity of character.

Ethics says, “Not me but thou”. Do not injure others. Love every one as your

own self. The individual self is the cause for all sorts of selfishness, hatred,

jealousy, misery, struggle and all other evils (Swami Vivekananda).

R T De George, a distinguished Professor of Philosophy and Business

Administration at the University of Kansas, has observed that a company’s

reputation is one of its key assets ands opines that “reputation is a result of

continuous ethical action and of an ethical corporate culture”.

The concept of moral behavior is as old as the man himself. The first of pre-

historic man was a social animal without any moral values struggling for food

and shelter. After he found a female partner, he started families and then

88

communities. They then framed certain rules of how to behave with the women

and children and with rival tribes so as to have harmonious inter-relationships.

In the early 1990s, an organization by the name People United to Serve

Humanity (PUSH) led a consumer’s boycott in the US for the products of Nike,

when it learnt that the labour laws were floated by the company by employing

children for manufacturing shoes in illegal sweatshops in Indonesia. It was

inappropriately attributed in the company’s business reports as “outsourcing” to

maintain low production costs. Because of the declining sales, the company

agreed to sign up a code of conduct to ensure that all its products would be

made under ethical conditions.

The ethics of management - the determination of what is ‘right’ and ‘proper’

and ‘just’ in the decisions and actions that affect other people – goes far beyond

simple questions of bribery, theft and collusion. It focuses on what our

relationships are – and ought to be – with our employees, our customers, our

stockholders, our creditors, our suppliers, our distributors and our neighbors –

members of the communities in which we operate. This is the most critical

issue in the ethics of management: the continual conflict between the economic

performance of the firm, measured by revenues, costs and profits and owed to

the stockholders and the social performance of the firm, much more difficult to

measure but represented by obligations to employees, customers, creditors,

suppliers, distributors and members of the general public.

Manuel Velasquez of the University of Santa Clara was of the view that in

perfectly competitive free market s, the pursuit of profit will by itself ensure

that the members of society are served in the most socially beneficial ways.

89

The Indian Government set up a 15 member Lok Sabha Committee on Ethics in

April 2005 headed by Mr. Chandra Sekhar, former Prime Minister of India. It

will oversee the moral and ethical conduct of members. But it never succeeded.

To be ethical is profitable, but to be ethical because it is profitable is not

ethical. And one might add, it is also not profitable in the long run (Peter

Koestenbaum – Heart of Business, Ethics, Power and Philosophy).

We never use the same brain twice. Every time we use it, we alter it in physical

ways that affect our capacities, our actions and even our perceptions. Our best

hope for maintaining appropriate ethical boundaries and behavior in a rapidly

shifting environment is to empower individuals with a strong sense of their own

identity and values and to provide them with a society that allows them to act

ethically. The biological connection between behavior and pleasure might very

well work to the benefit of ethics (Dr. Pierre J. Magistretti - Swiss

Neuroscientist).

Religion will continue to be important in not only the next ten but the next fifty

years to ensure ethics to flourish. The first step in pursuing ethical behavior is

to establish a firm identity with in individuals (Dr. Christoph Struckelberger,

Director of the Institute for Theology and Ethics of the Federation of Swiss

Protestant Churches).

Ethical behavior does strengthen a company in the long term, but in the short

term it can weaken profitability. Hedge funds that prosper by quick trades in a

fluctuating market work against the kind of long term perspective that ethical

business behavior requires. Pension funds which have a long term outlook were

suggested as a possible counter weight to the pressure for short term profit.

90

Sixty two world business leaders in energy, construction, mining and

engineering signed a statement with the World Economic Forum’s Partnering

against Corruption Initiative, declaring that they would have no tolerance for

bribery and would implement or strengthen already existing policies to make

sure corruption was not present in their dealings (Christian Kornevall, ABB).

The Universal Declaration of Human Rights, adopted by the United Nations

General Assembly in 1948, was suggested as a good guideline for ethical

standards that could apply across cultures in a rapidly changing world. During

military war, respect for other’s human rights is required and ethical progress in

the next ten years could see more attention being paid to the rights of

combatants. The use of non lethal weapons should be encouraged.

Despite cultural and religious differences, some things are considered unethical

by every one, every where – there are some agreed ethical norms. Bribery and

corruption are unacceptable every where (Paquerette Girard Zappelli –

International Olympic Committee).

Ethical thinking has its origins in the writings of the great philosophers of early

ages such as Socrates and Confucius. Further business ethics received the

attention of the philosophers in the mid-1970s – although the subject certainly

existed before that time – especially in many catholic institutions. The date of

the birth of business ethics in the USA is November, 1974 – the date of the first

conference on business ethics at the University of Kansas (Norman Bowie,

1986).

A work ethic can be defined at the basic level as about

discipline, namely coming to work on time, behaving with respect and dignity

in relation to subordinates, colleagues and superiors, staying at the workplace

91

during working hours, not wasting the time of the worker and the others by

wandering around for fruitless chatter etc.

There is a philosophical distinction between knowledge, ethics and aesthetics.

Knowledge is the pursuit of truth; ethics is the pursuit of goodness and esthetics

is the pursuit of beauty (William Davis).

In times of shortages and economic crisis waste,

inefficiency and slovenly work become ethically abhorrent, not only to

managers but to the workers themselves. Ethics is about fairness, moral is about

individual tastes (Frederick Hertzberg). 3.2 THEORY AND APPLICATIONS Theoretical approaches : A number of theoretical approaches to deal with moral issues have been offered

by philosophers. Some of the approaches described by Velasquez (1996) are :

The Utilitarian Approach:

Utilitarianism was conceived by Jeremy Bentham

and John Stuart Mill. According to this approach, ethical actions are those that

provide the greatest good for the greatest number and the least harm.

The Rights Approach :

Having its roots in the philosophy of Immanuel

Kant, the 18th century thinker, this approach operates on the principle that

human beings have the ability to choose freely what they will do with their

lives and this fundamental moral right should be respected by others. This

implies that people are not inanimate objects to be manipulated. In addition, the

92

rights approach also throws light on other rights, such as the right to the truth,

the right to privacy, the right not to be harmed or injured (unless one does

something to deserve punishment), and the right to know what has been

promised by those with whom we have freely entered into a contract or

agreement.

The fairness or Justice Approach:

This approach is rooted in the teachings of

Aristotle, the ancient Greek philosopher. Based on his teachings, this approach

lays down the principle that equals should be treated equally and un-equals,

unequally.

The Common Good Approach:

This approach is based on the writing and

teachings of ancient philosophers such as Plato, Aristotle and Ciero. Common

good is defined as “certain general conditions that are … equally to everyone’s

advantage”. One has to view himself as a member of the community to which

he belongs and ensure that the social policies, social systems, institutions and

environments on which we depend are conducive to the good of all. Examples

include affordable healthcare, effective public safety, and peace among nations,

a just legal system and a pollution free environment. The latter is of key

relevance to businesses that are known to cause environmental pollution with

far – reaching consequences.

The Virtual Approach:

Virtues are character traits that enable us to act in

ways that develop our highest potential. Examples of virtues are honesty,

courage, compassion, generosity, fidelity, integrity, fairness, self-control and

93

prudence. A virtuous person is one who has cultivated these virtues. Such a

person is the ethical person.

Modern theories :

Many modern theorists insists that employers must modify

their attitudes towards employees and be willing to grant an expanding and

increasingly well defined set of ‘employee rights’. Some are:

1. The right of an employee to complain about dangerous products and

practices without being penalized.

2. The right of an employee to a hearing before being fired.

3. The right of an employee to refuse immoral orders without being penalized.

4. The right of an employee to refuse lie-detector tests without being

penalized.

5. The right of an employee to participate in political and personal activities

outside the work place without being penalized. Principles Of Ethics :

Larry Colero has compiled a list of ethical principles along personal,

professional and global dimensions. All these three dimensions are of utmost

significance considering that an organisation’s operations have far – reaching

implications, intended or unintended. Moreover, the arena in which many

organizations wish to operate in the near or distant future has extended beyond

one’s country to overseas locations1.

Principles of Personal Ethics :

94

Personal ethics might also be called morality, since they

reflect general expectations of any person in any society, acting in any capacity.

These are the principles one tries to instill in their children and expects out of

others without needing to articulate the expectation or formalize it in any way. --------------------------------------------------------------------------------------------------- 1.Sumati Reddy of ICFAI, Magazine ‘Global CEO’, Article ‘Ethical Leadership –

The New Base of Power’, May 2007, Pg. 55-60

They include :

• Benevolence : Doing good

• Concern for the well-being of others

• Respect for the personal freedom of others

• Trustworthiness and honesty

• Preventing harm

• Willing compliance with the law

• Being fair

• Refusing to take unfair advantage

Principle of Professional Ethics :

These principles prescribe the required behavior with

in the context of a profession, such as in medicine, law accounting or

engineering. They take the form of written codes which provide rules of

conduct and standards of behavior based on the principles of professional

ethics, which include:

• Openness; full disclosure

• Confidentiality

• Impartiality; objectivity

• Due diligence / duty of care giving

• Fidelity to professional responsibilities

• Avoiding potential or apparent conflict of interest

95

Principle of Global Ethics :

Principle of global ethics are in a nascent stage and

are the least understood as they are open to wide interpretation as to how or

whether they should be applied. However, for businesses, it is always wise to

think globally. This is especially true for multinational corporations and for

those organizations whose influence spans several countries. A modern and

complete model of success should consider the impacts on ecology, humanity,

society and nation. This is the reason why certain progressive companies are

now adopting models of corporate social responsibility to enhance their

corporate reputations and performance. Principles of global ethics include:

• Global justice

• Putting society before self / social responsibility

• Environmental stewardship

• Reverence for workplace

• Interdependence and responsibility for the ‘whole’ Ethics in different areas of business:

Values pervade everywhere in the organization and are vital for the viability of

the firms1. Five areas of business where, apart from economic rationality, there

is no escape from ethics:

Decision Making: Being essential part of all business activities, there is

inevitably an ethical dimension when decision may involve sacking people

or promoting them, or deciding whether to buy supplies from countries such

as Zimbabwe or Iran. Business decisions of this type cannot be ethically

neutral.

96

Leadership: Business leaders today need to give moral guidance as much as

anything. None of them can be treated as automatic, relying on orders being

blindly and unquestionably obeyed. They have to persuade and cajole; they

have to be diplomats and teachers.

----------------------------------------------------------------------------------------------- 1.Beth Kresna, Book ‘Thinking Ethics’, Chapter ‘Ethics & Knowledge’, Pg. 30-57,

Profile Books, 2006.

Organizational structures and systems: This relates, for example, to the

ways in which an employee’s performance is appraised and rewarded, or

people are promoted and moved around the organization they work for.

Relationship between business and society: The idea of corporate social

responsibility has gained much ground in recent years. Companies have

been shifting from a mono-functional view of their purpose (namely the

maximization of shareholder’s wealth and value) to a broader view of the

moral responsibilities they have to a wider range of stakeholders –

employees, suppliers and the communities in which the company works.

Corporate functions such as marketing, finance etc. : The raising of money

for new projects cannot be ethically neutral and nor can the selling of new

products. Drug companies regularly have to decide whether to invest in one

potential cure or another. By deciding not to invest in one direction, they put

at risk the chances of a specific group of patients ever finding a cure for

their complaint. More and more drug companies are prepared to invest in

potential cures not only for diseases that afflict large numbers of people.

They see this as the sole way of finding the blockbuster product they are all

looking for – the next Zantac or Viagra, for instance. The consequences are

that if you have a complaint that only a few other people share, the chances

of science finding you a cure these days are small. 3.3 ETHICS IN DIFFERENT FUNCTIONS OF MANAGEMENT

97

Ethics in Planning

Planning is the intended, coordinated, emergent

and realized pattern of integrated, multidimensional decision processes and

actions that provide organizational direction and prioritize objectives1. Planning

with integrity requires some form of systematic planning processes as given

below1 (Mintzberg, 1994).

1. Planning scanning: Planning awareness through environmental scanning of

current external and internal factors by using future forecasting, surveying

and benchmarking tools to develop stakeholder voice.

2. Planning formulation and choice : Planning formulation, analysis and

choice through development of the vision of a desired future; gap analysis

between current rhetoric and reality; mission statement with prioritized,

quantified objectives and prioritized, qualitative goals; analysis of planning

action options; and resolution of planning choice by using various matching

tools to judge alternatives and endorsement of a justified course of action

that will develop organizational processes for resource alignment.

3. Planning implementation: Selected planning implementation to coordinate

organizational readiness to act through intentional enactment of policies,

processes, procedures, rules, programs, projects and personal / unit

performance standards by using scheduling, budgeting, team building,

project management and organizational character / health assessment tools.

4. Planning evaluation, control and improvement : Evaluation, control and

improvement of the results and impact of the selected plan by using a

variety of measures, standards, audits, causal analysis, acceptable process

variations assessment, improvement techniques and feedback information

98

tools to ensure organizational performance according to plan and sustained

reputation development.

--------------------------------------------------------------------------------------------------- 1.Joseph A Patrick & John F Quinn, ‘Management Ethics – Integrity at Work’, Pg.

110-47

Planning with ethical integrity means addressing the

elements of the four ethics processes in the context of their parallel planning of

sub-processes to ensure that no step in the planning function neglects its moral

dimension. Managers may lack integrity in planning by neglecting to

adequately perform the subtasks entailed in ethics and planning processes,

thereby exposing themselves and their organizations to ethical risk.

3.3.1 Planning with Integrity Processes Step-1 Step-2 Step-3 Step-4 Ethics processes Ethical

awareness Ethical judgment

Ethical intension

Ethical conduct

Planning sub processes

Planning, scanning

Planning, formulation, choice

Planning, implementation

Planning, evaluation, control, improvement

Ethics in Organizing

Organizing is the intended, coordinated, emergent and

realized pattern of integrated, multidimensional decision processes and actions

that assemble, arrange and allocate human and nonhuman resources into

structures, people and technology that can activate organizational plans. To

organize in a fully meritorious manner, therefore some form of systematic

organizing process must be used.

99

1. Organizing scanning: Scanning of current external and internal factors,

using bench marking and process mapping (Camp, 1995).

2. Organizing formulation and choice: Organizing formulation, analysis and

choice of relationship arrangements among structural, people and

technological factors that can most efficiently align and allocate resources to

accomplish strategic plans by using inter and intra organizational cross –

functional integration and reengineering simulation tools.

3. Organizing implementation: The chosen blend of structure, people and

technology is implemented and coordinated with organizational readiness to

act by using scheduling, budgeting, team building, project management and

organizational character / health tools.

4. Organizing evaluation, control and improvement: Evaluation, control and

improvement of the results and impact of the chosen blend of structure,

people and technology by using a variety of performance indicators, audits,

international quality standards, feedback and process improvement tools. Ethics in Leading

Leading is the intended, coordinated, emergent and

realized pattern of integrated, multidimensional decision processes and actions

that induce or influence the character and conduct of organizational members in

appropriate directions by using appropriate resources.

1. Leading scanning : Scanning of current external and internal factors

affecting the leadership of people and processes, such as awareness of best

leadership practices inside and outside the industry, existing leadership

talent at all levels with in the organization and internal system incentives

and measures of leadership development progress.

100

2. Leading formulation and choice : Leading formulation, analysis and choice

of the blend of people and processes that will constitute organizational

leadership by creatively combining the three ingredients :

• Leader traits, skills, conduct and decision making styles

• Follower conduct, power relationships, leader-member exchanges,

transactional and transformational interactions and follower

performance motivations

• Contingent and TQ system processes that support or inhibit leaders.

3. Leading implementation: Strengthening the resources of people and

processes through personal selection, performance expectations, appraisal,

rewards and development as well as empowerment readiness assessment,

ongoing character and learning community development, in order to

enhance the personal and organizational readiness to act responsibly.

4. Leading evaluation, control and improvement: Evaluation, control and

improvement of people and processes by using a variety of ethics, quality,

social and environmental audit instruments, performance indicators,

acceptable process variation feedback measurements, social responsibility

plus sustainable development measures and ongoing improvement

initiatives. Ethics in Controlling

Leading is the intended, coordinated, emergent and

realized pattern of integrated, multidimensional decision processes and actions

that evaluate current performance in light of expected standards and

organizational plans in order to take corrective and / or improvement measures

in future.

101

1. Controlling scanning : Enhanced awareness through domestic and global

scanning of current external and internal best practices relating to

assessment, improvement and control instruments, tools and measurements

that optimize control benefits.

2. Controlling formulation and choice : Control formulation, analysis and

choice of process system and human performance standards that can most

efficiently reduce variation and align resources to accomplish strategic plans

and improve organizational performance.

3. Controlling implementation : Implementing control measures of system and

human performance in such a way that interaction is emphasized by using

operating management tools to improve the organizational readiness to act.

4. Controlling evaluation and improvement : Evaluation and improvement of

the measured outputs and outcomes of system and human performance by

using a variety of performance indicators, audits, international quality

standards, feedbacks and process improvement tools. 3.4 ETHICS IN DIFFERENT DEPARTMENTS OF MANAGEMENT Ethics in Production

About 1/10th of the work force suffers a job related injury or illness each year

for a loss of over millions of work days annually. While death and loss of

biological parts are common, the slow causes for death such as heart diseases,

cancer and respiratory conditions are thought to be job related. Even stress on

the job is now being recognized as a work place hazard that is responsible for

headaches, back and chest pains, stomach ailments and a variety of emotional

diseases.

Safety hazards generally involve :

102

Loss of limbs

Electrical shocks

Bruises

Burns

Cuts

Sprains

Broken bones

Impairment of sight and hearing

The diseases associated with specific occupations are

• Pneumoconiosis or black lung disease (minors sickness)

• Silicosis or the white plague (associated with stone cutters)

• Caisson disease (among drivers)

• Contracts (glass blowers)

• Skin cancer (among chimney sweeps)

• Prosperous poisoning (in match makers)

• Mercury poisoning (common among felt workers)

Regardless of the ethical reasoning used though workers

have an undeniable right not to be injured or killed in the job. The right of

employees to a safe and healthy work place might seem to be too obvious to

need any justification. This right and the corresponding obligation of employers

to provide working conditions free of recognized hazards – appears to follow

from a more fundamental right, namely the right of survival. Dangerous

working conditions threaten the very existence of employees and cannot be

countenanced when they are avoidable (Patricia H. Werhane).

103

In the modern work place, most occupational health

problems result from routine exposure to hazardous substances.

• Fine particles such as asbestos (causes asbestosis)

• Cotton dust (byssinosis)

• Heavy metals such as lead, cadmium and beryllium

• Gases including chlorine, ozone, SO2, carbon monoxide, hydrogen sulphide,

hydrogen cyanide (damages the lungs and cause neurological problems)

• Solvents such as benzene, carbon tetrachloride, carbon disulphide.

• Certain classes of chemicals like phenols, ketones and epoxies

• Pesticides (serious threat to agricultural workers)

• Radiation (in an occupational hazard to x-ray technicians and workers in the

nuclear industry)

People have right that protect them from others who

would enslave them or otherwise use them for their own purposes. In bringing

this idea to bear on the problem of occupational safety, many people have

thought that workers have an inalienable right to earn their living free from the

ravages of job caused death, disease and injury (Mark MacCarthy).

Product Safety :

The use of virtually any product involves certain degree of

risk. Questions of safety are essentially questions of acceptable and known

levels of risk. Product is safe if its attendance risks are known and judged to be

‘acceptable’ or ‘reasonable’ by the buyer in view of the benefits the buyer

expects to derive from using the product. This implies that the seller complies

with his part of a free agreement if the seller provides a product that involves

only those risks she says it involves, and the buyer purchases it with that

understanding.

104

Ethics in HRD:

The organization, a “living company” is a community

where membership is variable, not only through individuals entering and

leaving over time, but also by enlargement or reduction. Some members are

suppliers, some are contactors, some are investors etc. They network and

perform various roles. There is mutual trust that people will act fairly. Thus the

reality is that people are the heart of the business. Ethical implications of various HRM practices

These are :

• The type of people the organization hires, carelessness of hiring who are

trustworthy; dishonest people very ambitious, achievement oriented, wealth

oriented. They may achieve high level performance but also a greater

incidence of unethical behavior. Content of training is important.

• The behaviors that the performance appraisal and compensation systems,

encourage. Extremely high compensation levels, sometimes provide a very

strong enticement to achieve results by unethical means. Punishments (lack

of promotions, layoffs) might also create conditions under which people

behave unethically.

• Is the performance of employees are actually discussed by superiors? Little

monitoring of behavior – greater tending for ethical problems to occur.

• Collective bargaining or employee governance system of a company also

affects how managers behave towards their employees. If the organization

views the employees or their unions as enemies. There is higher likelihood

of non-trust and mistreatment. Employees do judge their HRM system as

ethical or unethical. These assessments are made on the basis of degree to

105

which such HRM system correspond to culturally determined norms of

procedural justice.

• Discrimination.

• Sexual harassment.

HRD Prayer:

The HRD prayer depicts the desired dream of HRD culture

and values for adapting ethics in any corporation or nation. When all those are

established there will be everlasting peace, prosperity and happiness.

The Prayer :

Where every individual speaks the truth and no one needs to verify.

Where everyone believes everything said by every other individual without

doubt.

Where every individual feels free to express his own opinions, views and

feelings fearlessly and is respected for the same.

Where every individual shows concern for other members of the team and is

willing to extend a helping hand and collaboration without hesitation.

Where people are not divided by narrow identities and groups.

Where societal and national interests take precedence over organizational

interests.

Where organizational interests take priority over the departmental or narrow

team interests, and the group or team interests take priority over the

individual or role-related interests.

Where collaboration and team work is a way of life.

Where trust and trustworthiness is fully practiced.

Where every individual has some autonomy to experiment and discover his

own talents and enjoy the freedom and dignity of life.

Where every individual has the opportunity to take initiative and be proactive.

106

Where individuals proactively discover more and more about themselves, their

talents and potential.

Where issues and problems are confronted, discussed and solved without fear

and innovativeness leading to abounding happiness.

There I pray to thee Master lead me, my team, my organization and my

country.

Ethics in Finance: The present financial sector was built upon trust as trillions of transactions take

place every day based on trust. The global crisis has led to a near breakdown to

trust in the process of globalization. Faith and economic development were

profoundly interrelated in theory and practice. The present meltdown has

exposed the issue of moral hazard in the banking system – the privatization of

profit and socialization of costs. Satyam and Lanko scams exposed the larger

occurrences of unethical behavior in the financial sector. The status and

recognition are being accorded according to how much profit is made

regardless of how it is made. If a public sector bank fails, the Indian

government will bail out as it will affect the public but not the shareholders and

management. The ultimate aim of economics is to foster greater social justice

though it is unpredictable and purely based on human behavior. The values

followed by Reserve Bank of India are to safe guard the interests of depositors

and to ensure every household, including remote areas, has a bank account and

restrict banks not to impose excessive rates on personal loans and credit cards1.

Innumerable organizations in India have cheated many highly ethical people

who trusted them and their companies. Hard earned money has been put by

many people in cash to seek their better living in the post retirement stage.

Ethical issues in finance are important because they bear on our financial well

107

being. Ethical misconduct as every one knows, may be by individuals acting

alone, or by organizations having the potential to rob people of their life

savings and government money. As huge money is involved in financial

dealings, there must be well developed and effective safe guards in place to

ensure personal and organizational ethics. Though the law governs much

financial activity, strong emphasis must be placed on the integrity of the

financial professionals and on ethical leadership in our organizations.

--------------------------------------------------------------------------------------------------- 1.Mr. D. Subba Rao, Governor, Reserve Bank of India, International seminar on

‘Ethics and the world of finance’ at Sri Satya Sai University, 28th Aug. 09 Creative Accounting :

The most common practice relates to ‘creative accounting’, a

phrase which is popularly associated with ‘cooking of books’ in a way which is

legal although morally dubious. This is not unethical as two accountants could

present the accounts of the same firm in two entirely different ways. E.g.

• A firm whose profits are modest in a given financial year may decide to sell

off some of its capital and treat the proceeds as profits.

• Equity accounting is another technique of enhancing profits. In UK, if the

firm owns more than 20% of another firm, it may declare that proportion of

the other firm’s profits as its own.

• Due to a problem of dropping sales, a firm might enhance its sales figure by

allowing the bank to ‘buy’ goods when in reality the goods are being

appeared as security for a loan. The company would buy back its stock at a

later date and for a higher price- exactly the same monitory transaction as

taking out a loan the goods themselves do not change position, remains in

the warehouse without any necessity for the company to deliver them

physically to the bank and back again.

108

• There can actually be ambiguity about where a sale represents a profit or a

loss. If a firm has sold a consignment of product, one would imagine that

such a sale would be reflected in the accounts. If the buyer has been given

the credit, not only is it possible for the vender to omit the sale figure in

accounts during the period of credit but it is possible for the vender to

consider the sale as a loss of goods without payment and hence a debit. He

may thus omit the sale figure in accounts during the period of credit.

• Another form of creative accounting involves placing a hypothetical

monitory value on ‘intangibles’. Companies are often worth more than the

physical assets. If a firm has built up enough ‘good will’ amongst customers

and suppliers then its name is surely worth something. E.g. Coca Cola, if

sold to another firm be of substantial value, even perhaps if that firm

consists of functional directors, Coca Cola has never tried to sell it – no one

has ever tried to buy the name. Any figure therefore that is placed on its

value must be a ‘guesstimate’ or may be even just a guess. Well known

firms quite typically include intangible assets in their annual accounts.

• Creative accounting can be described in a variety of ways, not all ways are

correct. Some are certainly false and some although not false, can be down

right misleading. E.g. legally one may not claim under the head of

‘expenses’ costs of entertaining one’s colleagues to dinner or keeps two sets

of account books, one for personal use and the other for the auditors.

• For creative accounting freedom is important, which is fundamental human

right. Companies should enjoy the fundamental right of deciding how to

organize their own affairs, including how they decide to present their

accounts. One system of accounting may be particularly appropriate to one

firm, but inappropriate to another. The law recognizes that small businesses

are not necessarily run by those who excel in accounting. Consequently a

sole trader or partnership which has no limited liability is not obliged to

109

present accounts with the same degree of exactitude as a public limited

company. The affairs of an educational establishment, a charity, a chain

store and a multinational company are all very different. No standard

accounting scheme could be devised.

• A company like an individual, has the right to enjoy the best possible

advantage within the law (like IT returns), a car sales firm to treat a part

exchange as a reduced – price single sale, rather than two separate

transactions in which the new car is sold for the full price and the old car

bought as a separate deal. Business executives have the duty of securing for

their shareholders the best possible return for their investment. Creative

accounting is favored by many since they seem to be convincing.

To prevent accountants questioned in these types of

conflicts:

American Institute of CPAs publishes their professional rules.

Financial Accounting Standards Board governs accounting practices and

establishes the generally accepted accounting principles (GAAP) that

stipulate the methods by which accountants gather and report information.

International Accounting Standards Committee is in the process of

developing standards that would allow foreign companies to sell securities

in the US as long as their accounting confirm to the International standards,

though not comply with the GAAP.

Accountants are also governed by the American Institute of Certified Public

Accountants (AICPA) which has a code of professional conduct. The code

relies on the judgment of accounting professionals in carrying out their

duties rather than stipulating a set of extremely specific rules.

Indian financial statements present a true and fair view of the financial

position, financial performance and cash flows of an entity. Presentation of

110

true and fair view requires the faithful representation of the effects of

transactions, other events and conditions in accordance with the definitions

and recognition criteria for assets, liabilities, income and expenses set out in

the framework. The application of Indian Accounting Standards, with

additional disclosure when necessary, is presumed to result in financial

statements that present a true and fair view. Ethics in Marketing:

Ethics in marketing is the function and process of

marketing keeping to the standard norms of it and achieving the ends through

sound means. The sources of ethical lapses could be :

• Misrepresenting one’s own company in sales dealing.

• Using strategic advantages like size, location etc. to intimidate or to

threaten.

• Discriminating buyers and sellers on age, sex, country of origin, racial

identity, complexion, caste, creed, faith etc.

• Reciprocating in dealings.

• Sabotaging in any dealings or misreporting.

• Disclosing premature offerings.

• Using confidential information for any benefit.

• Trying to steal information or getting it by willful deceit.

• Violating patents and copy rights.

• Giving or accepting bribes, gifts or any kind of obligation created through

any dealings of the individual or groups.

• Depriving customers and clients of the desired / expected benefits.

• Not listening to or working on customer opinions.

• Products susceptible to erosion of values and in qualities.

111

• Products safety not ensured for any kind of accidental abuse.

• Not willing to have fair and open relations with suppliers and retailers.

• Not helping business partners improve their quality and standard of

operations and performance.

• Be indifferent to or against the standards of the global environment.

• Disallow employee’s participation in social and humanitarian activities.

• Deprive owners of fair annual return and due recognition.

• Absence of opportunities for employee achievement, creativity and personal

reward.

• Not behaving as a good citizen in the society and the market.

• Sacrificing personal values to achieve corporate returns.

• Creating problems for the society in the pursuit of corporate success.

• Not having a well defined corporate policy towards securing market share

and the means of making sales.

• Corporate mission not properly communicated to all concerned.

• Disallowing favour for survival to the weaker persons or the weaker sections

of the society.

• Not having a clear policy on the direct and indirect personal gains that might

accrue from the corporate activities and transactions.

• Presence of double standards in managing the affairs of the company and

effecting marketing of its product and services

• Allowing syndicated supplies or indulging in syndications for selling

products.

Some extreme critics appear to think that marketing is

completely unethical. Others find it hard to see anything unethical about

attempting to meet customer’s needs with appropriate goods and services.

These contrasting viewpoints span a variety of differing opinions on what

112

constitute ethical practice in marketing. Marketers must adopt a broadly based

view of ethics if they really want to understand and meet the needs of today’s

customers. Price discrimination is illegal as it makes a number of important

exemptions (Robinson-Patman Act, 1936). Unethical marketing behavior:

PRODUCT

• Safety Manufacture of flammable stuffed animals

• Shoddy goods Products that cannot withstand ordinary wear

and tear

• Inadequate warranty Warranty with insufficient time or parts

coverage

• Environmental pollution Manufacture of non-biodegradable plastic

products

• Mislabeled products Flavored sugar water sold as apple juice for

babies

• Development Bribery of FDA officials to secure agency

approval of generic pharmaceuticals

• Manufacturing Unauthorized substitutions in generic drugs after

FDA approval

• Brand ‘knock-offs’ Counterfeit branded goods sold as originals

PRICE

• Excessive markups High prices used by retailers to connote quality

• Price differentiation Yield management pricing of airline tickets,

resulting in day to day differential pricing of

adjacent seats

113

• Price discrimination Favored pricing to preferred ethnic groups

PROMOTION

Exaggerated claims One blade company claims its razor as ‘the

smoothest, most comfortable shave known to

man’. Another company challenges.

Advertising Sexual innuendoes and gender disparagement,

deception

Inappropriate targeting Persuasive role models, Celebrity spokes persons in

beer, liquor, cigarette advertisements targeted to for

inappropriate youth products

Naïve audiences Bill boards for cigarette and alcohol in poor urban

neighborhoods where many people are dying from

related causes

Telemarketing Offers of fabulous prizes in return for credit card

purchases of touted goods

Captive audiences Mandatory viewing of TV commercials by students

in schools

DISTRIBUTION

Fraudulent sales Phony markdowns based on ‘kited’ retail prices

Bait and Switch tactics Luring consumers with ads for low priced merchandise

for the purpose of switching them to high priced models

Direct marketing Deceptive, misleading product size and performance

claims

PACKING

114

Deceptive quantities Some marketers use ‘packaging –to-price’ tactics that

mark a decrease in product quantity while maintaining

the same price and traditional package size.

American Marketing Association (AMA) has established

a code of ethics to provide guidelines for ethical conduct. It says, in part, that,

‘marketers shall uphold and advance the integrity, honor and dignity of the

marketing profession, by being honest in serving consumers, clients,

employees, suppliers, distributors and the public’. The code then outlines the

responsibilities for each component of the marketing mix.

3.4.1 Guidelines in the Marketing mix

Products & Services

Advertising Distribution Pricing

Marketers have the responsibility to ensure product safety to disclose all product risks and to identify any factor that might change product performance. E.g. General Motors failed to fulfill the responsibilities by providing faulty brakes for 1.1million X-body cars.

Marketers must avoid deceptive and misleading communications must repeat high pressure sales tactics and must avoid manipulating consumers to buy. E.g. Warner Lambert failed to fulfill the responsibilities when advertised ‘Listerine’ as preventing colds.

Suppliers should not coerce their intermediaries into taking unwanted products. They should not create false shortages to drive up prices of their products. E.g. Chrysler did not fulfill these responsibilities in early 1960s when it forced dealers to take unwanted cars during an economic downturn.

Marketers must not engage in price fixing or predatory pricing and must disclose all prices associated with the purchase including service, installation and delivery. E.g. GE did not fulfill these responsibilities in early 1960s when several of its executives were indicated for price fixing.

115

3.5 GROWING UNETHICAL INSTANCES

As civilization progresses, technology advances, the world witnessed some of

the worst frauds. Demand generated for the ethical practices in every sphere of

life. Some of the unethical instances found through newspapers, magazines etc.

are listed below : Major Corporate Frauds In The World :

WorldCom: Improperly booked $3.8 billion in expenses, thus inflating

profits. The founder, Bernie Ebbers, borrowed

$408million from the phone company to cover

personal debts.

Enron : Created outside partnerships that helped hide its poor

financial condition. Executives earned millions of

dollars selling company stocks. The company had to

go to bankruptcy court.

Anderson : The accounting firm was accused of shredding Enron

documents and was convicted for obstruction of

justice.

Dynegy : Energy company was under investigation for accounting

and trading malpractices in part related to California

power crisis.

Waste Management: Massive accounting fraud from 1992 to 1997 that

resulted in a $17billion restatement of earnings. The

auditor was Arthur Anderson.

Adelphia Communications: Made illegal loans to founder Rigas’ family

members and was under investigation for accounting

malpractices.

116

Tyco : Amid questions about accounting malpractices, the CEO,

L. Dennis Kozlowiski, was charged with deliberately

dodging sales tax on purchase of art work for his New

York residence.

Imclone Systems : CEO Samuel Waksal was charged with insider trading

after company’s drug application got rejected.

Peregrine Systems : Overstated revenue by $100 million over three years.

Rite Aid : Three executives of drug store chain were indicted for the

charges of securities and accounting fraud. Corruption In Government Schemes :

The consultant firm ‘Cfore’ conducted a survey regarding government schemes

in four randomly selected districts - Tonk (Rajasthan)

Jhansi (Uttar Pradesh)

Rangareddy (Andhra Pradesh)

Saran (Bihar)

In all, 1013 villagers were surveyed. Not surprisingly, over half of them are not

satisfied with government schemes. 71% villagers say, there is high corruption

in the schemes (Outlook, 7th April,08). State’s Staff – Biggest Human Rights Abusers :

As per Mr. V. Appa Rao, District Judge and Secretary, AP State Human Rights

Commission (APSHRC) most common cases they found, are harassment of the

common man by the police, manhandling of subordinates or domestic help,

torture of prisoners in jail, non-registration of police complaints, not taking

action in dowry cases, illegal arrests, not investigating properly by invoking

relevant sections of the Indian Penal Code and slapping a comparatively milder

charge.

117

There are plenty of cases against government officials for things like delays in

issuing pensions, provident fund, gratuity and other retirement benefits,

discrimination in promotion matters, not issuing white ration cards to below

poverty line people, incorrect assessment by the revenue department and so on.

According to the retired Chief Justice of the High Court and former Chair

Person of the APSHRC, Justice Subhashan Reddy, even though various

beneficial social security schemes exist, like pensions for old people, widows

and the disabled, the rights assessment, survey and eligibility enquiry by

government officials are not done to enable people to avail of them. The United

Nations has recently declared freedom from corruption a human right alongside

freedom from hunger, illiteracy and pollution (The Deccan Chronicle, dt. 13

Dec. 2010). Padma Bhushan to hotelier Chatwal :

The honour of Padma Bhushan was given to the controversial US based

hotelier, Sant Singh Chatwal, for the assessment period 2008. the Indian

Government defended that Mr. Chatwal had been a tireless campaigner for

India – US ties. There were three criminal complaints with the Kerala police

and four cases in the Delhi and Kerala high courts that name Mr. Chatwal and

his associates. In two of theses cases, he was served summons. The case

reportedly relate to alleged ‘non-payment of bills’ by Mr. Chatwal to suppliers

of furnishings for his newly constructed Kochi hotel and alleged ‘criminal

intimidation’ of them on the night of the launch party (DC, Feb.6, 2010).

MEDICAL ETHICS :

A study done by the Mumbai based forum for Medical Ethics in 2003 revealed

that drug companies sponsored weddings and handed out cell phones to

Doctors if they thought this could get them to prescribe their brand. While the

118

more expensive gifts – such as an exotic cruise – are reserved for high value

prescribes, expensive cutlery, home accessories are handed out as candies to

medical practitioners.

Moreover, drug companies take advantage if the practice in India of patients

going directly to the drug stores, giving chemists a say in their choice of drugs.

Chemists often substitute a Doctor’s prescribed brand for another of the same

drug if it gets them better margins. This has led to some companies to promote

medicines directly to the trade of 1,000 percent margins and keep their

maximum retail price unchanged1.

Legalization of Human Organ Sale :

An Australian kidney specialist, Dr. Gavin Carney, professor at the National

University, called that organ sale to be legalized to save lives. In Australia, it

carries a penalty of six months jail and a fine of $(A) 4,400. The average wait

for the transplant is 4 years. But the ministry rejected it saying it would be open

to many ethical issues and abuses. Philippines announced that foreigners would

be banned from receiving kidneys for transplant in that country, in a fresh

attempt to crack down on a thriving black market in organs sold by poor people

(Hindu, 6May08).

Euthanasia – An Ethical Concern :

Terminally ill patients on life support should have the right to die if they want

to, Germany’s highest civil court said recently in a landmark ruling. Legal

experts and doctors hailed the decision as a watershed ruling. But our moral

values would not let us to do. Patients on deathbeds can be kept alive on

ventilators and other machines but they live as vegetables. It requires great

1. Business India , Monthly Magazine, 30July2007

119

courage and a scientific approach to look at this problem objectively. Choosing

to die should not be confused with suicide though, suicide is committed in a fit

of depression or due to an emotional turmoil, they end their life recklessly. “the

right to die is one of the basic human right. The freedom to choose to die

should be accepted as a birth right of every human being. The process of dying

is a beautiful spiritual experience, the crescendo of life” – Osho (DC, Aug. 30,

2010).

Private Hospitals Cash On Avoidable Surgeries:

There is a marked difference in the number of surgical procedures carried out in

government and corporate hospitals in the city of Hyderabad for simple cases

like appendicitis, Tonsillitis, ovarian cysts and pregnancy.

3.5.1 Cases resulting in surgeries Type of surgery Private hospitals Govt. hospitals

(for every 100 patients) Hysterectomy 30 to 40 operations 4 to 5 operations Tonsillectomy 40 operations 20 operations Caesarean 60 operations 20 operations Appendectomy 50 operations 3 to 4 operations

The superintendent of Osmania General Hospital, Dr. Sampat Kumar said out

of every 100 patients admitted with abdominal pain, only three or four patients

actually require an appendicitis operation. This clearly indicates private

hospitals are thriving on unethical surgeries. Depending on the status of private

hospital and the category of room the patient chooses, a caesarian delivery can

cost anywhere from Rs.20,000 to Rs.1 lakh, while a normal delivery costs only

Rs.10,000 to Rs.20,000 (Deccan Chronicle, Sept. 1, 2010)

Killing With The Scalpel:

120

Unqualified doctors, paramedics and even quacks are callously performing

surgeries on sedated and clueless patients across India, though legally these acts

amount to murder. Such botched up surgeries are common in rural areas where

there are no specialist doctors. Video recording of surgeries is almost a norm in

the west but is not done in here though it would be helpful for keeping medico

legal records, says senior orthopedic surgeon Dr. Jairam Chander Pingle of

Apollo Hospital (Deccan Chronicle, Nov. 8, 2010).

There shall be no compromise on the rule that only surgeons can operate on

people. If an individual other than the surgeon uses the scalpel to cut open a

person, it amounts to attempt to murder (Dr. K. Ramesh Reddy, chairman of the

AP Medical Council Ethics Committee).

UNETHICAL INSTANCES IN THE FIELD OF SPORTS :

Commonwealth Games 2010 – Delhi :

The sports ministry admitted in the Parliament that the estimates for the games

have risen 17.5 times – from 655 crore to 11,454 crore – compared to the bid

estimates of 2003. It has been rocked with scandals. The corruption could

amount to Rs. 200 million in the projects analyzed, which included a number of

stadiums as well as games related bridges and flyovers. On 26th July, just three

weeks after it was inaugurated, the ceiling at the swimming pool gave way just

before a test event was to take place at the venue (DC, 1st Aug. 10).

Triple Olympic gold medalist Stephanie Rice announced that despite shoulder

surgery, she would take part in the Commonwealth Games. She has shown her

presence of high ethical attitude as other star athletes Usain Bolt, Shelly Ann

121

Fraser, Chris Hoy, Lleyton Hewitt and Samantha Stosur have already decided

to give New Delhi, a miss (The New Indian Express, 20 Aug. 10).

During the Pakistan’s cricket teams visit to England in Aug. 2010, there was an

allegation involving Pakistani fast blowers Mohammad Amir and Mohammad

Asif, that they had deliberately bowled three no balls during the test match at

Lords, after accepting handsome amounts. Formula One Race :

During 2008, Singapore Grand Prix, French Formula One team, the Renault,

influenced its driver Nelson Piquet to crash in order to help another driver

Fernando Alonso wins a race. This breach not only compromised the integrity

of the sport but also endangered the lives of spectators, officials, other

competitors and Piquet himself. The team was banned for seasons up to 2011.

Incidentally the team fired their two leading directors responsible for the

incident, managing directors Flavio Briatore and the chief of engineering Pat

Symonds for cooperating in the investigation. Having dreamt of being a

Formula One driver and having worked so hard to get there, the suspended

driver cried that he was at the mercy of his manager (The New Indian Express,

dt.21 Sept. 2010).

UNETHICAL INSTANCES FOUND IN THE ‘MEDIA’ FIELD:

Sting Operation:

News channels have spun news in pursuit of better ratings. But it took a fake

‘sting’ operation by Hindi channel LIVE INDIA at a government school in

Delhi to show us to what depths some of the channels have sunk.

122

Media audit company Spatial Access ran a quick study on the area of corporate

responsibility; apparently, advertisers do not raise ethical issues as long as the

channel in question had critical mass in viewer ship. In the cold hard calculus

of commerce, one person’s suffering does not count for much. Tomorrow, you

may be that human being1.

Unethical Promotional Campaigns :

In March 08, a few news channels aired a telephonic conversation of cricketer

Sreesanth proclaiming his love for Priyanka Chopra. To clarify this incident,

the cricketer called a press conference. It later turned out that this press

conference was nothing but a promotional strategy to launch Lux’s new

strawberry flavored soaps. To what extent is this publicity, ethical? Where

should one draw the line? May be the answer lies in the question “ can artificial

controversies like these sustain as an effective promotional strategy?” (Deccan

Chronicle, 30April, 08)

Pictures of minor victims:

Although there are several restrictions against publishing pictures of minors in

conflict with the law, several regional papers from Tambaram, Chennai have

flashed pictures of 16 year old Kavitha across their pages with headlines like

‘Flesh trade busted’, screaming for the attention of the readers.

The Supreme Court maintains a standard while conducting cases related to rape

victims. Vidhya Reddy, Center for the Prevention and Healing of child sexual

abuse explains the Care and Protection of Children Act, 2000. No report in any

newspaper, magazine, news-sheet or visual media of any inquiry regarding a

123

juvenile in conflict with law or a child in need of care and protection under this

Act shall disclose the name, address or school or any other particulars

----------------------------------------------------------------------------------------------

1.Business India, 24Sept.07

calculated to lead to the identification of the juvenile or child be published. The

IPC Prohibition of Immoral Traffic Act prohibits the publishing of pictures of

victims of rape to maintain their privacy, says Geeta Ramaseshan, advocate

with the High Court. (Deccan Chronicle, 19May08).

UNETHICAL INSTANCES IN CORPORATE FIELD:

Ethical Standards In British Arms Firm:

On allegations that payments were made to win a major arms deal with Saudi

Arabia in the 1980s, British arms firm, B Ae Systems board had appointed an

independent committee, chaired by LordHarry Woolf of Barns, who was

former chief justice of England and Wales, to publicly report upon the

company’s ethical policies and processes. The committee was to identify the

high ethical standards to which a global company should adhere; identify the

extent to which B Ae Systems currently met these standards and recommend

the action that company should take to achieve such standards (Deccan

Chronicle, 7th May, 08).

Satyam’s Fiasco:

Satyam Computer Services, a New York Stock Exchange (NYSE) – listed

company disclosed the biggest fraud of Rs.7000crores in the company’s

balance sheet. It’s independent directors (one on ISB board) failed in their duty,

the auditors have blundered, all internal and external checks and balances went

124

haywire and the regulatory authorities, the SEBI, the stock exchanges and the

company law administration have been lax.

Some of the recognitions that came Satyam’s way are – ‘Best Risk Manager’

from Gartner group, ‘India’s top 10 Employers’ awarded by CNBC & Hewitt,

‘Best Corporate Citizen’ conferred by Business World and Ficci, ‘Recognition

of Commitment’ by no less a body than the American Institute of Internal

Auditors in 2006-07 when the company had already begun cooking its books,

‘Most Innovative Recruiter’ from RASBIC (2007) even as their headcount

claim is in doubt.

The gap in the balance sheet has arisen purely on account of inflated profits

over a period of last seven years. What started as a marginal gap between actual

operating profit and the one reflected in the books of accounts continued to

grow over the years. It has attained unmanageable proportions as the size of

company operations grew significantly (annualized revenue run rate of

Rs.11,276crore in September quarter, 2008 and official reserves of

Rs.8,392crore). The deferential it he real profits and the one reflected in the

books was further accentuated by the fact that the company had to carry

additional resources and assets to justify higher levels of operations – thereby

significantly increasing the costs. Every attempt made to eliminate the gap

failed. The aborted Maytas acquisition deal was the last attempt to fill the

fictitious assets with the real ones. The Satyam group paid heavily for having

invested huge funds in the real estate business which has suffered badly in the

last two years. What expedited Satyam’s fall was its appallingly bad (say

fraudulent) financial management, coupled with an unprecedented fall in stock

market prices world over. At long last, accounting firm Price Waterhouse,

Bangalore has accepted the truth (The Hindu, 19 Jan 2009).

125

Lanco Infratech Insurance Scam:

Lanco Infratech had submitted a policy numbered 610200/44/08/03/60000027

to the AP Health, Medical Housing and Infrastructure Development

Corporation and secured reimbursement for Rs 1.89 cr. Lanco Infratech

claimed to have taken the policy for the Rs 308 cr IIIT complex that it is

building in Basar. Under the contract terms, the contractor insures the project

and the government reimburses the insurance amount to the company.

Lanco Infratech, an infrastructure major, handling mega construction projects

for the state government, including the AP Health and Medical Housing and

Infrastructure Development Corporation (APHMHIDC), unethically

renegotiated premium amounts with insurance companies and pocketed huge

refunds. Even Lord Balaji was not spared. It managed refunds of Rs. 1.53Cr.

from New India Assurance Comprehensive risk policy for IIIT Basar, Rs. 15.36

lak from United India Insurance Risk Coverage for RIMS Ongole, Rs. 11 lak

from United India Insurance Risk Coverage for RIMS Srikakulam and Rs.

15,04,188 for SVV University. Lanco Infratech would take insurance for higher

amounts, collect the refund from the government and then renegotiate with the

insurer for a cheaper policy (DC, Aug. 5, 2010).

Adarsh Housing Scam:

Adarsh Housing Society was formed in Mumbai with 103 members. It was

supposed to construct a six story building for war widows, a girl’s hostel for

children of army officers and heroes of the Kargil war and not a monstrous 31 –

floor structure. However the fact remains that the Army has been in possession

of the land for decades and if it had to give away land to the collector of

Mumbai, afterwards to the Brihanmumbai Municipal Corporation, then the

126

transfer would have had to be done in accordance with the law. This means that

the Army would have had to seek the Ministry of Defense’s permission, which

it did not do, and the land was given clandestinely for the housing society.

Since the suspected officers of the Indian Army are in the rank of joint

secretaries and above, they come under the preview of the Central Vigilance

Act 2003, and hence any investigative agency needs prior permission from the

MOD in order to register an FIR. Meanwhile in the case of the non – defense

personnel like the politicians and bureaucrats, it is the Maharashtra government

that has to take action. All the politicians and bureaucrats who flouted the laws

and gave permissions were allotted flats for themselves their sons, daughters

and even alleged girl friends. The end result is that, out of the 103 society

members, only three are Kargil soldiers (The Deccan Chronicle, dt. 7 Aug.

2010).

Bauxite Mining:

There were serious concerns about the mining giant, Vedanta Resource’s

approach to human rights and the environmental issues, particularly in Orissa.

Shakeholders much away in London such as British Charity Trust,

Marlborough Ethical Fund and Millfield House Foundation, following strict

ethical principles, sold their stakes in the firm.

Jindal South West Holdings ltd., Anrak Aluminium Ltd., and National

Aluminium Ltd., formed their business plans to set up alumina refineries,

smelter and captive power plants in Visakhapatnam and Vizianagaram districs

involving an investment of Rs. 25,000 crore. Following severe tribal resistance,

the Government refused to give forest clearance to all of them. Mining would

adversely hit water inflows into the various rivers and streams that sustain the

people in the plain. Also in the scheduled areas as per the provisions of the

127

Constitution and the guidelines issued by the Supreme Court in Samata case,

the tribals should have a significant ownership of the land (The Hindu, 23 Aug.

10). 2G spectrum scam:

The 2G spectrum scam involved officials and ministers in the Government of

India illegally undercharging mobile telephony companies for frequency

allocation licenses, which they would use to create 2G subscriptions for cell

phones1. According to a report submitted by the Comptroller and Auditor

General based on money collected from 3G licenses, the loss to the exchequer

was 176,379 crore (US$39.16 billion). The issuing of the 2G licenses occurred

in 2008, but the scam came to public notice when the Indian Income Tax

Department investigated political lobbyist Nira Radia and the Supreme Court of

India took Subramaniam Swamy's complaints on record.

Former Telecom Minister of the NDA government Arun Shourie was the

whistleblower who helped uncover the scam and also exposed many loopholes

in the UPA government's policy towards issuing telecom licenses. In 2008, the

Income Tax department, after orders from the ministry of Home and the PMO,

began tapping the phones of Nira Radia. This was done to help with an ongoing

investigation into a case where it was alleged that Nira Radia had acted as a

spy.

Some of the many conversations recorded over 300 days were leaked to the

media. The intense controversy around the leaked tapes became known in the

media as the Radia tapes controversy. The tapes featured some conversations

between politicians, journalists and corporates. Politicians like Karunanidhi and

Raja, journalists like Barkha Dutt and Vir Sanghvi and industrial groups like

the Tata Group were either participants or mentioned in these tapes.

128

----------------------------------------------------------------------------------------------

1. www.wikipedia.com

3.6 ETHICAL CODES

Ethical codes are statements of the norms and beliefs of an organization. Codes

developed by corporations are tailor-made for their specific circumstances and

the unique missions of the company, and as such they would be more widely

adapted and recognized by the employees of that corporation. Nowhere is it

insisted on proclamation of lengthy rules and regulations (The code of best

practice by Sir Adrian Cadbury).

Evolution Of The Code Of Ethics :

Code of ethics evolves from business ethics1. It helps in identifying the

business aims, directions and values. An ethics code describes the general value

system or ethical rules that are supposed to guide employees in their every day

behavior in the organization. A vast majority of the large American companies

have can ethics code. Surveys have indicated that majority of the managers

think that a self – developed code will help ethical behavior in their industries. Code Contents :

Different approaches are followed by different organizations as regarding the

contents of the code of ethics. It is recommended that a middle ground

approach be followed to structure the code of ethics so that it is neither too

brief, nor too lengthy and legalistic. A modern “best practices” code would

include the following elements:

Memorable Title:

129

The title should communicate the content clearly and at the same time be ------------------------------------------------------------------------------------------------- 1. T Krishna Kumar, Associate Professor, Osmania University, ‘Putting Business

Ethics in Practice: Some Issues’, The ICFAI Journal of Organisational Behavior, Pg. 22-25

memorable enough to grab the attention of its readers. Be creative. We suggest

that you put some thought into what you will call your document and the

message it conveys. Move beyond generic titles such as Code of Business

Practices, Code of Ethics, Code of Values, or Compliance Code. We

recommend developing a thematic title for your code. Some examples include

SHRM’s (Society for Human Resource Management) own Code of Ethical and

Professional Standards in Human Resource Management, Pricewaterhouse

Cooper’s The Way We Do Business and the World Bank Group’s Living Our

Values. Use the title of your code to inspire ethical behavior.

Leadership Letter:

The leadership letter provides a frame for the document and demonstrates your

organization’s commitment -- from the top – toward the creation of an ethical

culture. It should explain how a code can be used by the employees and outline

the reasons for its focus. Address how the code came to be and the process

behind its development. Reflect the input and questions from your leaders and

volunteers regarding your organization’s values and the direction of the code.

Some typical content areas for the leadership letter may include:

• Why does your organization need a code? Why now?

• What is the ethical/legal context in which your organization operates?

• What are some of the challenges that your employees face, and how can this

code of ethics be a helpful document for everyone at all levels?

130

• What are the major trends facing your organization that will impact and affect

the code and its implementation?

• What kind of example might this code set for others?

Table of Contents:

It is strongly recommended to include a table of contents at the beginning of the

code. It may sound simple and even obvious, but many codes overlook this

step. Codes often have a tendency to become cumbersome, making it difficult

for users to find the provisions they seek. A table of contents can give

employees a quick overview of key code provisions and resources, thereby

making the document as a whole more accessible and readable.

Introduction-Prologue:

An introduction can be used to expand upon some issues not fully addressed in

the leadership letter. Ideally, it should provide an expanded explanation for the

code and its purpose. One may need to answer the following key questions by

way of formulating your introduction:

1. Why is this code important? Will it be enforced? Is it mandatory? Does it

apply to everyone?

2. What is the purpose of the code?

3. What is the scope of the code?

• Jurisdiction: To whom does this code apply? What does it address?

• Definition: What aspects of organizational activity and impact are to be

included in the code?

• Measurement and Verification: How should organizational performance in

these areas be measured, and how should the accuracy of this

information be verified?

131

• Accountability and Reporting: To whom should the organization be

accountable for its performance, and how should this

information be made public?

Statement of Values – Core Values:

The process of laying down the ethical character of a business can be facilitated

with a clear articulation of corporate core values. Values govern the behavioral

choices (Dr. A. K. Jain, Professor, MDI, Gurgaon). Fundamental to an effective

code, your organization needs to identify and express its values and those

values need to feature prominently in the code – not simply as a list. The code

should explain what those values mean and reinforce their importance in the

context of the organization and the work it does. In essence, employees need

clear definitions of organizational values to better understand and apply them.

When possible, tie the values to individual code provisions. For example, if

diversity is one of your organization’s key values, it could be tied to a provision

of outlining the anti-harassment policy.

Code Provisions:

As discussed, codes can be brief or comprehensive depending on the objective.

They address a wide variety of issues, ranging from legal and regulatory

concerns to relations with the organization’s staff and the application of the

organization’s values. The choice of topics to be included in your code will be

influenced by three factors: 1) its purposes and objectives; 2) organization’s

environment; and 3) the questions or concerns expressed by intended users –

employees. In deciding which topics to address, one might ask:

• What are the principal laws and regulations applicable to our organization?

• What has gone wrong in the past?

132

• What else could go wrong?

• What guidance do we need to offer our employees?

• Where are the gray areas? What do we need to clarify or confirm?

Information and Resources:

This section is critical. It will direct employees to other resources (internal to

the organization and externally) should they have a question, need to seek

further clarification or simply want more information on the code provisions. It

should include specific statements such as how to access the organization’s

ethics office (or person responsible for ethical issues) and provide details on

your enforcement policy and mechanisms1.

Advantages Of Ethical Code

It is always advantageous to have an uniform code of conduct

for ethics throughout the organization to maintain objectivity. Walter W Manle

(1992) based on his interactions with top executives of 145 British and

multinational companies, has identified the benefits, a business firm would

accrue if it has a code of conduct / ethics.

• Provides guidance and inculcates the company’s values and cultural

substance and style in managers and employees.

• Sharpens and defines the company’s policies and unifies the workforce.

• Codes provide overall strategic direction.

• Contributes instruction in interactions with pressure groups from outside the

company.

• Signals expectations of proper conduct to suppliers and customers.

• Delineates rights and duties of the company, managers and employees.

133

• Effectively respond to government pressures and rules.

• Enhances the company’s public image and confidence.

• Preempts legal proceedings.

• Improves bottom line results.

• Enhances employee’s self-image and recruiting.

• Promotes excellence.

• Realizes company objectives.

• Responds to stockholder’s concerns

• Strengthens the free – enterprise system

• Nurtures a business environment of open communication

• Integrates the cultures of acquired or merged companies

• Deters improper requests to employees by supervisors and vice versa. Development of Codes of Ethics : A Model of 12 Step Process While many follow different methods to formulate a suitable code of ethics, a

most favoured 12 step process is given below :

1. Decide on Goals and Meaning of Success: As soon as possible, decide on the

goals and the meaning of success for your ethics program. As suggested earlier,

a code is typically not effective as a stand-alone document. The benefits of a

code result from its strategic use as a part of your organization’s broader ethics

initiatives. Develop your code based on a specific set of goals that go beyond

the code itself. The content of the code, the examples presented and so forth,

should allow employees to use the code in addressing their own ethics concerns

and furthering the ethics goals of your organization.

134

2. Get Leadership Buy-In: The support and commitment of leaders is necessary

for success in developing a code of ethics. Resource allocation, the buy-in of

others and communications relating to code development are among the critical

areas affected by leadership commitment. For these reasons, it is important to

---------------------------------------------------------------------------------------------------

1.http://www.managementhelp.org/ethics/ethxgde.htm

gain leadership commitment early in the process and to make this commitment

clear to everyone in your organization.

3. Create a code development task force: Create a task force or committee and

assign them responsibility and accountability for the code development. Give

careful thought to selecting appropriate task force employees. Make sure that

these employees are committed and have the time to devote to the task force. In

choosing team employees, it is often good practice to select people who

represent the diversity of your organization and the views of key employees,

volunteers and other groups.

4. Data Intake and Analysis-Interviews and Focus Groups: Gather information

from stakeholders (leadership, employees, volunteers, etc.) on key ethics

concerns. For a code to be effective, individuals must find it relevant. Leaders

should not necessarily assume that they already know what issues are important

to employees. Information gathering through interviews, focus groups and

informal discussions can be important ways to surface key issues and can set

the stage for an ongoing dialogue about ethics.

5. Keep Leadership Informed: Finally, report your findings to leadership so that

they understand how employees, volunteers and other key stakeholders view

the current environment. In reporting your findings, limit your comments to

135

items raised by multiple sources and do not indicate where or from whom

specific comments or insights were obtained.

6. Draft your Code of Ethics: Seek multiple perspectives in developing a code.

In particular, organizations should involve people who are interested or will be

affected by the code provisions in the drafting process. Some organizations

include stakeholders as employees of their formal committees, whereas others

solicit input and feedback less formally. Ideally, the involvement of others can

improve the breadth and depth of issues addressed in a code and can also

facilitate general support and buy-in. The Task Force – with input from key

leadership – will need to decide on the code values, provisions, structure and so

forth. Draft a code of ethics that is tailored to your organization and intended to

serve its unique needs. Make good use of the information from employees,

volunteers and other key stakeholders gathered during your intake process.

7. Submit Code to Leadership for Review: Ensure the support of leadership by

presenting them with the final draft of the ethics code for review and comment.

This step allows leaders to maintain a participative role in the code

development process, even if they have not been actively involved in the day-

to-day drafting of the code. Such participation tends to reinforce leadership

commitment to the overall code initiative.

8. Field Test the Code and Make any Final Revisions: Take the revised code

“out into the field” again for any final suggestions and revisions. There are

always details that will be missed in the early drafts. Once the code is nearly

final, it is often easier for individuals to bring these to boss’s attention. Make

any final necessary revisions.

136

9. Have the Code reviewed by the Legal Counsel: Once the document is ready

that one is comfortable with, take it to the legal counsel for review.

10. Obtain Board Approval of Final Draft: Before publishing and

disseminating the final code, have it formally approved by the Board of

Directors.

11. Decide on a Communications and Education Strategy: Design and develop

a comprehensive communications and education plan to increase code and

program effectiveness. Think carefully about, who needs the information and

how one can best get it to them in a cost effective manner. As noted previously,

a code of ethics is, in many ways, a vehicle for ongoing communications about

ethics. The code will have a greater impact to the extent that future ethics

communications tie into, build on, or emphasize key issues that are addressed

in the code. Communications can take many forms including ethics training,

newsletter articles, posters, e-mails, formal and informal discussions of ethics

and the like.

12. Revise and Update Regularly: Codes of ethics should not be viewed as

static documents. While they seek to capture timeless ethical principles, the

guidelines, examples and related information they contain should be revisited in

light of changes that may occur in an organization’s environment. New issues

may arise that were overlooked in previous versions. In addition, periodic

revision of the code can send a symbolic message to employees that ethics is an

area that requires ongoing attention. An organization that does not revisit ethics

issues in its code may unintentionally send just the opposite message

(http://www.managementhelp.org/ethics/ethxgde.htm).

137

3.7 CODE OF ETHICS FOLLOWED BY PROFESSIONAL BODIES Caux Round Table Principles for Business

In the context of promoting world trade in a principled

manner, the Caux Round Table (CRT) has done yeomen service. The CRT, an

international network of principled business leaders working to promote a

moral capitalism was found in 1986 by Frederick Phillips, former President of

Phillips Electronics and Oliver Giscard d’Estaing, former vice-chairman of

INSEAD, as means of reducing escalating trade tensions. In due course of time,

the CRT began focusing attention on the importance of global corporate social

responsibility in reducing social and economic threats to world peace and

stability. Caux Round Table principles are rooted in two basic ethical ideas:

kyosei and human dignity. The Japanese concept of kyosei means living and

working together for the common good – enabling cooperation and mutual

prosperity to coexist with healthy and fair competition. Human dignity refers to

the sacredness or value of each person as an end, not simply as a means to the

fulfillment of other’s purposes or even majority prescription.

The general principles are

Customers :

We believe in treating all customers with dignity,

irrespective of whether they purchase our products and services directly from

us or otherwise acquire them in the market. We therefore have a responsibility

to -

• Provide our customers with the highest quality products and services

consistent with their requirements.

• Treat our customers fairly in all aspects of our business transactions,

including a high level of service and remedies for their dissatisfaction.

138

• Make every effort to ensure that the health and safety of our customers, as

well as the quality of their environment, will be sustained or enhanced by

our products and services.

• Ensure respect for human dignity in products offered, marketing and

advertising.

• Respect the integrity of the culture of our customers.

Employees :

We believe in the dignity of every employee and in

taking employee interest seriously. We therefore have a responsibility to –

• Provide jobs and compensation that improve worker’s living conditions.

• Provide working conditions that respect each employee’s health and dignity.

• Be honest in communications with employees and open in sharing

information, limited only by legal and competitive restrains.

• Listen to and where possible, act on employee suggestions, ideas, requests

and complaints.

• Engage in good - faith negotiations when conflict arises.

• Avoid discriminatory practices and guarantee equal treatment and

opportunity in areas such as gender, age, race and religion.

• Promote in the business itself the employment of differently abled people in

places of work where they can be genuinely useful.

• Protect employees from avoidable injury and illness in the workplace.

• Encourage and assist employees in developing relevant and transferable

skills and knowledge.

• Be sensitive to serious unemployment problems frequently associated with

business decisions, and work with governments, employee groups, other

agencies and each other in addressing these dislocations.

139

Owners / investors :

We believe in honoring the trust that our investors place in

us. We therefore have a responsibility to –

• Apply professional and diligent management to secure a fair and

competitive return on our owner’s investment.

• Disclose relevant information to owners / investors subject only to legal

requirements and competitive constraints.

• Conserve, protect and increase the owner’s / investor’s assets.

• Respect owner’s / investor’s requests, suggestions, complaints and formal

resolutions.

Suppliers :

Our relationship with suppliers must be based on mutual

respect. We therefore have a responsibility to –

• Seek fairness and truthfulness in all our activities, including pricing,

licensing and rights to sell.

• Ensure that our business activities are free from coercion and unnecessary

litigation.

• Foster long term stability in the supplier relationship in return for value,

quality, competitiveness and reliability.

• Share information with suppliers and integrate them in to our planning

processes.

• Pay suppliers on time and in accordance with agreed terms of trade.

• Seek, encourage and prefer suppliers and subcontractors whose employment

practices respect human dignity.

Competitors :

140

We believe that fair economic competition is one of the

basic requirements for increasing the wealth of nations and ultimately, for

making possible the just distribution of goods and services. We therefore have a

responsibility to –

• Foster open markets for trade and investment

• Promote competitive behavior that is socially and environmentally

beneficial and that demonstrates mutual respect among competitors.

• Refrain from either seeking or participating in questionable payments or

favors to secure competitive advantages.

• Respect both tangible and intellectual property rights.

• Refuse to acquire commercial information by dishonest or unethical means,

such as industrial espionage.

Communities :

We believe that, as global corporate citizens, we can

contribute to such forces of reform and human rights as are at work in the

communities in which we operate. We therefore have a responsibility in those

communities to –

• Respect human rights and democratic institutions and promote them

wherever practicable.

• Recognize government’s legitimate obligation to society at large and

support public policies and practices that promote human development

through harmonious relations between business and other segments of

society.

• Collaborate with those forces in the community dedicated to raising

standards of health, education, work place safety and economic well –

being.

141

• Promote and stimulate sustainable development and play a lead role in

preserving and enhancing the physical environment and conserving the

earth’s resources.

• Support peace, security, diversity and social integration.

• Respect the integrity of local cultures.

• Be a good corporate citizen through charitable donations, educational and

cultural contributions and employee participation in community and civic

affairs. Global Standards In Ethics

The Universal Declaration of Human Rights, adopted by the United General

Assembly in 1948, was suggested as a good guideline for ethical standards that

could apply across cultures in a rapidly changing world. The first ten are :

• All human beings are born free and equal in dignity and rights. They are

endowed with reason and conscience and should act towards one another in

a spirit of brotherhood.

• Everyone is entitled to all the rights and freedoms set forth in this

Declaration, without distinction of any kind, such as race, colour, sex,

language, religion, political or other opinion, natural or social origin,

property, birth or other status. Furthermore, no distinction shall be made on

the basis of the political, jurisdictional or international status of the country

or territory to which a person belongs, whether it be independent, trust, non-

self-governing or under any other limitation of sovereignty.

• Everyone has the right to life, liberty and security of person.

• No one shall be held in slavery or servitude; slavery and the slave trade shall

be prohibited in all their forms.

142

• No one shall be subjected to torture or to cruel, inhuman or degrading

treatment or punishment.

• Everyone has the right to recognition everywhere as a person before the law.

• All are equal before the law and are entitled without any discrimination to

equal protection of the law. All are entitled to equal protection against any

discrimination in violation of this Declaration and against any incitement to

such discrimination.

• Everyone has the right to have an effective remedy by the competent

national tribunals for acts violating the fundamental rights granted him by

the constitution or by law.

• No one shall be subjected to arbitrary arrest, detention or exile.

• Everyone is entitled in full equality to a fair and public hearing by an

independent and impartial tribunal, in the determination of his rights and

obligations and of any criminal charge against him. Guidelines For Multinational Companies

The business ethicist Thomas Donaldson has

suggested a minimal list of international rights that has been widely reprinted as

an example of guidelines for multinational companies. These are

1. The right to freedom of physical movement

2. The right to ownership of property

3. The right to freedom from torture

4. The right to a fair trial

5. The right to nondiscriminatory treatment

6. The right to physical security

7. The right to freedom of speech and association

8. The right to minimal education

9. The right to political participation

143

10. The right to subsistence Code Of Ethics For Government Service

The U.S. federal government has established the following

code. Any person in government service should :

1. Put loyalty to the highest moral principles and to country above loyalty to

persons, party or government department.

2. Uphold the constitution, laws and regulations of the United States and of

all governments there in and never be a party to their evasions.

3. Give a full day’s labor for a full day’s pay; giving earnest effort and best

thought to the performance of duties.

4. Seek to find and employ more efficient and economical ways of getting

tasks accomplished.

5. Never discriminate unfairly by the dispensing of social favors or privileges

to anyone, whether for remuneration or not; and never accept, for himself

or herself or family members, favors or benefits under circumstances

which might be construed by reasonable persons as inefficiency for

performance of government duties.

6. Make no private promises of any kind bending upon the duties of office,

since a government employee has no private word that can be binding on

public duty.

7. Engage in no business with the government, either directly or indirectly

which is inconsistent with the conscientious performance of government

duties.

8. Never use any information gained confidentially in the performance of

government duties as a means of making private profit.

9. Expose corruption whenever discovered.

10. Uphold these principles, ever conscious that public office is public trust.

144

Code of ethics For Indian Agencies Most corporations (over 80% ) have emphasized or discussed issues related to

compliance procedures, reporting concerns and monitoring mechanisms /

punishment for non-compliance. In many cases employees are required to give

periodical undertakings to comply with these codes while discharging their

responsibilities. A few companies have even facilities for such reporting

through their web site. On the other hand there seem to be no formal code

(53%) that monitors or ensures the same. Of the nine corporations that laid an

organizational set-up such as ethics offices / coordinators / committees to look

after ethics management, eight belong to the Tatas.

Codes of conduct play an important role in a corporation’s effort to

instituationalise ethics. The imperative of their implementation and compliance

has been widely recognized by corporations across the world. A great many

codes in India are aspirational in character ( Journal of Human Values, 12:1,

2006).

Evolution of code of conduct has an authority of its own and will be more

honored in practice rather than in the breach. The manner in which Sri

T.N.Seshan implemented the code of conduct during the elections gives us the

hope that it is possible by systematic building up of public opinion to have

codes of conduct which can be effectively implemented (N.Vittal, Chairman,

PESB).They tend to be relatively long and detailed as they frequently spell out

the company policies on

• business practices

• relationships with the customers and suppliers

• relationships with government agencies

145

• compliance with government regulations

• health and safety issues

• issues related to environmental protection

• equal employment opportunity

• discrimination and sexual harassment

• diversity and ethnic tolerance 1987 Code of ethics of the Society of professional journalists

Journalists at all times will show respect for the dignity, privacy, rights and

well-being of people encountered in the course of gathering and presenting the

news.

The news media should not communicate unofficial charges affecting

reputation or moral character without giving the accused a chance to reply.

The news media must guard against invading a person’s right to privacy.

The media should not ponder to morbid curiosity about details of vice and

crime.

It is the duty of news media to make prompt and complete correction of

their errors.

Journalists should be accountable to the public for their reports and the

public should be encouraged to voice its grievances against the media. Open

dialog with our readers, viewers and listeners should be fostered.

Although these journalists have their self-censorship standards

of fair play, they experience the urgent market pressure for breaking a story,

exposing a personal scandal, or at least not being ‘scooped’ by other media. Code of conduct and ethics for HRD professionals

146

There is no accepted and enforced code of conduct or ethics

for HRD managers in India. This is a sensitive profession as an HRD manager

can make or mar careers of a large number of individuals. The standards and

ethics formulated by the Academy of HRD are noteworthy here. The National

HRD Network has constituted a committee to formulate standards of conduct,

ethics and values. So far nothing has come to concrete stage.

Standards on ethics and integrity, Academy of HRD

• HRD professionals provide services, teach and conduct research only with

in the boundaries of their competence, based on their education, training,

supervised experience or appropriate professional experience.

• HRD professionals maintain a reasonable level of awareness of current

research and professional information in their fields of activity and

undertake ongoing efforts to maintain competence in the skills they use.

• HRD professionals rely on research and professionally derived knowledge

when making research or professional judgments.

• In their work related activities, HRD professionals respect the rights of

others to hold values, attitudes and opinions that differ from their own.

• Integrity: HRD professionals seek to promote integrity in their research,

teaching and practice. They are honest, fair and respectful of others. In

describing or reporting their qualifications, services, products, fees, research

or teaching, they do not make statements that are false, misleading, or

deceptive. They strive to be aware of their own belief systems, values, needs

and limitations and the effect of these on their work.

• Professional Responsibility: HRD professionals uphold professional

standards of conduct, clarify their professional roles and obligations, accept

appropriate responsibility for their behavior and adapt their methods to the

147

needs of different populations. They consult with, refer to, or cooperate with

other professionals and institutions to the extent needed to serve the best

interests of their clients.

• Concern for other’s welfare: HRD professionals seek to contribute to the

welfare of those with whom they interact professionally. They arte sensitive

to real and ascribed differences in power between themselves and others,

and they do not exploit or mislead other people during or following their

professional relationships.

• Social responsibility: HRD professionals are aware of their professional

responsibilities to the community, the society in which they live and the

planet. They work to minimize the adverse effect on individuals, groups,

organizations, societies and the environment.

• Delegation and supervision of subordinates: HRD professionals delegate to

their employees, supervisors and research assistants, only those

responsibilities that such persons can reasonably be expected to perform

competently on the basis of their education, training or experience, either

independently or appropriately, provided there is supervision. HRD

professionals provide proper training and supervision to their employees and

take reasonable steps to see such persons perform services responsibly,

competently and ethically. Ethical Code For The Banks

This is a voluntary Code, which sets minimum standards of banking practices

for banks to follow when they are dealing with individual customers. It

provides protection to you and explains how banks are expected to deal with

you for your day-to-day operations.

The standards of the Code are covered by the key commitments.

148

2.1.1 To act fairly and reasonably in all our dealings with you by

2.1.2 To help you to understand how our financial products and services work

by

2.1.3 To help you use your account or service by

2.1.4 To deal quickly and sympathetically with things that goes wrong by

2.1.5 To treat all your personal information as private and confidential

2.1.6 To publicize the code

2.1.7 To adopt and practice a non - discrimination policy

3.8 CODE OF ETHICS FOLLOWED BYBUSINESS ORGANISATIONS

Tata Code Of Conduct

Foreword:

The values and principles which have governed the manner in which the Tata

Group of Companies and their employees have conducted themselves, have

never been articulated. It was therefore considered worthwhile to prepare a

clearly defined document which could serve as a guide to each employee on the

values, ethics and business principles expected of him or her.

I urge each employee to read this document and take pride in upholding the

high standards of corporate and personal behavior on which the Tata Group’s

reputation and respectability have been built over the past 120 years (Ratan N.

Tata). National Interest:

A TATA Company shall be committed in all its actions to benefit the economic

development of the countries in which it operates and shall not engage in any

activity that would adversely affect such objective. It shall not undertake any

project or activity to the detriment of the Nation’s interests or those that will

have any adverse impact on the social and cultural life patterns of its citizens. A

149

TATA Company shall conduct its business affairs in accordance with the

economic, development and foreign policies, objectives and priorities of the

Nation’s government and shall strive to make a positive contribution to the

achievement of such goals at the international, national and regional level as

appropriate. Financial Reporting And Records :

A TATA Company shall prepare and maintain its accounts fairly and accurately

in accordance with the accounting and financial reporting standards which

represent the generally accepted guidelines, principles, standards, laws and

regulations of the country in which the Company conducts its business affairs. Competition:

A TATA Company shall fully strive for the establishment and support of a

competitive open market economy in India and abroad and shall co-operate in

the efforts to promote the progressive and judicious liberalization of trade and

investment by a country. Equal-Opportunities Employer:

A TATA Company shall provide equal opportunities to all its employees and

all qualified applicants for employment without regard to their race, caste,

religion, colour, ancestry, marital status, sex, age, nationality, disability and

veteran status. Employees of a TATA Company shall be treated with dignity

and in accordance with the TATA policy to maintain a work environment free

of sexual harassment, whether physical, verbal or psychological. Employee

policies and practices shall be administered in a manner that would ensure that

in all matters equal opportunity is provided to those eligible and the decisions

are merit-based. Gifts And Donations:

150

A TATA Company and its employees shall neither receive nor offer or make,

directly or indirectly, any illegal payments, remuneration, gifts, donations or

comparable benefits which are intended to or perceived to obtain business or

un-competitive favors for the conduct of its business. However, a TATA

Company and its employees may accept and offer nominal gifts, which are

customarily given and are of commemorative nature for special events. Government Agencies:

A TATA Company and its employees shall not offer or give any company

funds or property as donation to any government agencies or their

representatives, directly or through intermediaries, in order to obtain any

favorable performance of official duties. Political Non-Alignment:

A TATA Company shall be committed to and support a functioning democratic

constitution and system with a transparent and fair electoral system in India. A

TATA Company shall not support directly or indirectly any specific political

party or candidate for political office. The Company shall not offer or give any

company funds or property as donations, directly or indirectly, to any specific

political party, candidate or campaign. Health, Safety And Environment:

A TATA Company shall strive to provide a safe and healthy working

environment and comply, in the conduct of its business affairs, with all

regulations regarding the preservation of the environment of the territory it

operates in. A TATA Company shall be committed to prevent the wasteful use

of natural resources and minimize any hazardous impact of the development,

production, use and disposal of any of its products and services on the

ecological environment. Quality Of Products And Services:

151

A TATA Company shall be committed to supply goods and services of the

highest quality standards backed by efficient after-sales service consistent with

the requirements of the customers to ensure their total satisfaction. The quality

standards of the Company’s goods and services should at least meet the

required national standards and the Company should endeavor to achieve

international standards. Corporate Citizenship:

A TATA Company shall be committed to be a good corporate citizen not only

in compliance with all relevant laws and regulations but also by actively

assisting in the improvement of the quality of life of the people in the

communities in which it operates with the objective of making them self reliant. Co-Operation Of Tata Companies:

A TATA Company shall co-operate with other TATA Companies by sharing

physical, human and management resources as long as this does not adversely

affect its business interests and shareholder value. Third Party Representation:

Parties which have business dealings with the TATA Group but are not

members of the Group such as consultants, agents, sales representatives,

distributors, contractors, suppliers, etc. shall not be authorized to represent a

TATA Company if their business conduct and ethics are known to be

inconsistent with the Code. Use Of The Tata Brand:

The use of the TATA name and trademark owned by Tata Sons shall be

governed by manuals, codes and agreements to be issued by Tata Sons. The use

of the TATA brand is defined in and regulated by the TATA Brand Equity &

Business Promotion Agreement. Group Policies:

152

A TATA Company shall recommend to its Board of Directors the adoption of

policies and guidelines periodically formulated by Tata Sons. Shareholders:

A TATA Company shall be committed to enhance shareholder value and

comply with all regulations and laws that govern shareholders’ rights. The

Board of Directors of a TATA Company shall duly and fairly inform its

shareholders about all relevant aspects of the Company’s business and disclose

such information in accordance with the respective regulations and agreements. Ethical Conduct:

Every employee of a TATA Company, which shall include Whole-time

Directors and the Managing Director, shall deal on behalf of the Company with

professionalism, honesty, integrity as well as high moral and ethical standards.

Such conduct shall be fair and transparent and be perceived to be as such by

third parties. Regulatory Compliance:

Every employee of a TATA Company shall, in his business conduct, comply

with all applicable laws and regulations, both in letter and in spirit, in all the

territories in which he operates. If the ethical and professional standards set out

in the applicable laws and regulations are below that of the Code then the

standards of the Code shall prevail.

Concurrent Employment:

An employee of a TATA Company shall not, without the prior approval of the

Managing Director of the Company, accept employment or a position of

responsibility (such as a consultant or a director) with any other company, nor

provide “free-lance” services to anyone. In the case of a Whole-time Director

or the Managing Director such prior approval must be obtained from the Board

of Directors of the Company.

153

Conflict Of Interest:

An employee of a TATA Company shall not engage in any business,

relationship or activity which might detrimentally conflict with the interest of

his Company or the Group. A conflict of interest, actual or potential, may arise

where, directly or indirectly, (a) an employee of a TATA Company engages in

a business, relationship. or activity with anyone who is party to a transaction

with his Company, (b) an employee is in a position to derive a personal benefit

or a benefit to any of his relatives by making or influencing decisions relating

to any transaction, and (c) an independent judgment of the Company’s or

Group’s best interest cannot be exercised. Securities Transactions and Confidential Information:

An employee of a TATA Company and his immediate family shall not derive

any benefit or assist others to derive any benefit from the access to and

possession of information about the Company or the Group which is not in the

public domain and thus constitutes insider information. Protecting Company Assets:

The assets of a TATA Company should not be misused but employed for the

purpose of conducting the business for which they are duly authorised. These

include tangible assets such as equipment and machinery, systems, facilities,

materials, resources as well as intangible assets such as proprietary information,

relationships with customers and suppliers, etc. Citizenship:

An employee of a TATA Company shall in his private life be free to pursue an

active role in civic or political affairs as long as it does not adversely affect the

business or interests of the Company or the Group. Integrity Of Data Furnished:

154

Every employee of a TATA Company shall ensure, at all times, the integrity of

data or information furnished by him to the Company. Reporting Concerns:

Every employee of a TATA Company shall promptly report to the management

any actual or possible violation of the Code or an event he becomes aware of

that could affect the business or reputation of his or any other TATA Company.

Code Of Business Conduct And Ethics For Wipro

Values encapsulated in the Spirit of Wipro form the essence of Wipro. They

guide us through difficult situations, controversies and moral dilemmas by

defining parameters for right and wrong actions. They are the touchstone of our

morality and our way of life. As employees of Wipro, you are the manifestation

of our Values. By joining us, you have also joined a movement, a way of life

and we are honoured to have you with us as partners and custodians of our

value system. One of the Values we cherish is Integrity. Very simply it means

that we deliver what we commit. Honesty and fairness in action in whatever we

do (Azim Premji).

1 Policy on Business Relationships

2 Conflict of Interest Policy

3 Controllership Policy

4 Policy on Insider Trading

5 Policy on Fraudulent and Unfair Trade Practices in the Securities Market

6 Policy on Intellectual Property

7 Policy on Competition

8 Foreign Corrupt Practices Act

9 Electronic Resources Usage Policy

10 Privacy and Confidentiality Policy

155

11 Wipro Equal Employment Opportunity Policy, Employment Policy and

Policy on Prohibition of Harassment & Discrimination

12 Media Policy

13 Advertisement Policy

14 Environment, Health and Safety Policy

15 Policy on Separation

16 Maintaining and Managing Records

17 Export Controls

18 Records on Legal Hold

19 Confidential Information

20 Selecting Suppliers

21 Lobbying

22 Government Contracts

23 Elimination of child labour

24 Anti-boycott

25 Freedom of association

26 Abolition of forced labour.

27 General

28 Procedure for reporting Concerns Ethical Code For Johnson And Johnson - ‘Our Credo’

We believe our first responsibility is to the doctors, nurses and patients, to

mothers and all others who use our products and services.

In meeting their needs, everything we do must be of high quality.

We must constantly strive to reduce our costs in order to maintain reasonable

prices.

Customer’s orders must be serviced promptly and accurately.

Our suppliers and distributors must have an opportunity to make a fair profit.

156

We are responsible to our employees, the men and women who work with us

throughout the world.

Every one must be considered as an individual.

We must respect their dignity and recognize their merits.

They must have a sense of security in their jobs.

Compensation must be fair and adequate and working conditions clean, orderly

and safe.

Employees must feel free to make subjections and complaints.

There must be equal opportunity for employment, development and

advancement for those qualified.

We must provide competent management and their actions must be just and

ethical.

We are responsible to the communities in which we live and work and to the

world community as well.

We must be good citizens – support good works and charities and bear our fair

share of taxes.

We must encourage civic improvement and better health and education.

We must maintain in good order the property we are privileged to use.,

protecting the environment and natural resources.

Our final responsibility is to our stockholders.

Business must make a sound profit.

We must experiment with new ideas.

Research must be carried on, innovative programs developed and mistakes paid

for.

New equipments must be purchased, new facilities provided and new products

launched.

Reserves must be created to provide for adverse times.

157

When we operate according to these principles, the stockholders should realize

a fair return. 3.9 ETHICAL MANAGEMENT SYSTEM IN ORGANISATIONS ETHICAL DILEMMAS

Dilemmas are conflicts of interests. Ethical dilemmas involve conflicts of

values and are quite common at work. Both employers and employees have to

face dilemmas in an organization. Conflicts are bound to arise when an

organization has people who are diverse in nationality, age, education, race,

religion, sex, socioeconomic status and employment experience. The most

common ethical dilemmas at work include power, authority, confidentiality,

honesty and loyalty. While resolving these dilemmas, both the employer and

the employee have a different perspective (http://ezinearticles.com).

Employees should be trained to resolve conflicts. However, they need to

develop the skills and experience required for tackling ethical dilemmas.

Analysis would be proper if they are able to locate the root cause of the

conflict. Decisions should be taken after consultation with the affected parties.

The consequences of the decision should be analyzed and explained to the

management.

The thing that makes ethical problems difficult to deal with is that they involve

making value judgements, which by their nature are rarely clear cut. In coming

to a decision about an ethical dilemma you are required to make a decision

which will uphold the values that you feel are most important. However, in

making that decision what often occurs is that some values may be violated.

The best solution to an ethical problem therefore will involve upholding the

158

most important values to the greatest extent possible whilst violating the least

number possible (www.bc.edu).

Strategy for Resolving Ethical Dilemmas

There is a strategy for resolving ethical problems in a step by step process so

that others will be able to believe and understand the decision. It is based on

assessing the principles and values relevant to a particular problem and results

in a decision which is believable and defendable. The steps are:

Background :State the background of the case including context, its origin and

any other important details.

Estimate : Make an initial estimation of the ethical dilemma present, that is,

what the core issues are.

List : List the possible solutions to the problem.

Impact : Consider the likely impacts of each of the initial solutions.

Eliminate : Eliminate the totally unacceptable solutions e.g. significant harm to

people.

Values : With the remaining possible solutions, assess which values are

upheld and violated by each solution. Compare with the stated

organisational values.

Evaluate : Evaluate the solutions considering the likely impacts and the values

which will be upheld or violated. One must determine which

values are most important, why is one solution better or worse

than another and is there another solution haven’t considered.

159

Decision : Make a decision, state it clearly including why it is best, justify it

and defend it against criticism (www.acping.net).

WHISTLE BLOWING

Whistle-blowing by employees and insiders is a useful mechanism for

uncovering corporate misbehavior, with clear economic and governance impact

on the companies involved, according to a new academic study. In the wake of

scandals at Enron, WorldCom and other companies, the Sarbanes-Oxley Act of

2002 incorporated provisions to encourage and protect whistle-blowers

(http://business-ethics.com).

According to George Kerevan, ‘Word of the Week’ columnist for The

Scotsman, the etymological origins of whistle blowing are gloriously obscure.

He suggests the obvious one being a police officer shrilling on a whistle when

he or she catches a crime in progress. Whistle blowing means calling attention

to wrongdoing that is occurring within an organization. There are four ways to

blow the whistle:

• reporting wrongdoing or a violation of the law to the proper authorities

• testifying in a legal proceeding

• leaking evidence of wrongdoing to the media

Whistle blowing goes on in the private sector. It should be predominant in

government sector as by its very nature, is supposed to be open and transparent.

Full disclosure of unethical or illegal behavior is particularly important as huge

public money is involved. Even outside vendors, contractors, and individuals

can participate in and even breed government corruption.

160

Whistle blowing has much to do with ethics because it represents a person’s

understanding, at a deep level, that the action his harmful for the organization,

it interferes with people’s rights or is unfair or detracts from the common good.

Whistle blowing also calls upon the virtues, especially courage, as standing up

for principles can be a punishing experience. Even though laws are supposed to

protect whistle blowers from retaliation, people are still threatened for the

revelations. On the other hand, there have been occasions when the role of

whistle blower has actually catapulted people into higher office and has earned

the respect of constituents.

In an article about whistle blowing in a business context , Lilanthi Ravishankar

makes a useful distinction between external and internal whistle blowing. She

argues that companies should encourage internal whistle blowing so that

problems are solved within the organization before employees feel they must

go outside to get action. She makes several suggestions about how to encourage

internal whistle blowing in companies. Reporting illegal or unethical practices

should include:

o Formal mechanisms for reporting violations, such as hotlines and mailboxes

o Clear communications about the process of voicing concerns, such as a

specific chain of command, or the identification of a specific person to

handle complaints

o Clear communications about bans on retaliation

Ethical dilemmas for the whistle blower

When a person encounters wrongdoing in the organisation, his or her first step

should probably be to use the organization’s internal whistle blowing

mechanisms. Whistle blowers in the public sector often face the unique

problem that their disclosure may constitute a crime. This can create an ethical

161

dilemma when the ongoing misconduct is severe and there is no reasonable

prospect that the accused is punished. If this process does not produce results,

there may come a time to move outside to the local government or to the press.

That is why, every organisation must have an effective ethical management

system (www.scu.edu).

ETHICS MANAGEMENT SYSTEM FOR THE WORKPLACE

Every organization needs a properly designed ethical management system to

maintain it as the most ethical organization. The following are the guidelines to

develop and ensure the ethics management system is operated in a meaningful

and prosperous fashion:

• Managing ethics is a process. Ethics is a matter of values and associated

behaviors. Therefore, ethics programs may seem more process-oriented than

most management practices. Managers tend to be skeptical of process-

oriented activities, and instead prefer processes focused on deliverables with

measurements. However, experienced managers realize that the deliverables

of standard management practices (planning, organizing, motivating,

controlling) are only tangible representations of very process-oriented

practices. For example, the process of strategic planning is much more

important than the plan produced by the process. The same is true for ethics

management. Ethics programs do produce deliverables, e.g., codes, policies,

procedures etc.

• The bottom line of an ethics program is accomplishing preferred behaviors in

the workplace. As with any management practice, the most important

outcome is behaviors preferred by the organization. The best of ethical

values and intentions are relatively meaningless unless they generate fair and

162

just behaviors in the workplace. That's why practices that generate lists of

ethical values, or codes of ethics, must also generate policies, procedures and

training that translate those values to appropriate behaviors.

• The best way to handle ethical dilemmas is to avoid their occurrence in the

first place. That's why practices such as developing codes of ethics and codes

of conduct are so important. Their development sensitises employees to

ethical considerations and minimises the chances of unethical behavior

occurring in the first place.

• Make ethics decisions in groups, and make decisions public, as appropriate.

This usually produces better quality decisions by including diverse interests

and perspectives, and increases the credibility of the decision process and

outcome by reducing suspicion of unfair bias.

• Integrate ethics management with other management practices.

When developing the values statement during strategic planning, include

ethical values preferred in the workplace. When developing personnel

policies, reflect on what ethical values you'd like to be most prominent in the

organization's culture and then design policies to produce these behaviors.

• Use cross-functional teams when developing and implementing the ethics

management program. It’s vital that the organization’s employees feel a

sense of participation and ownership in the program if they are to adhere to

its ethical values. Therefore, include employees in developing and operating

the program.

• Give importance to value forgiveness. This may sound rather religious or

preachy to some, but it’s probably the most important component of any

management practice. An ethics management program may at first actually

increase the number of ethical issues to be dealt with because people are

more sensitive to their occurrence. Consequently, there may be more

occasions to address people’s unethical behavior. The most important

163

ingredient for remaining ethical is trying to be ethical. Therefore, help people

recognize and address their mistakes and then support them to continue to try

operate ethically.

• Trying to operate ethically and making a few mistakes is better than not

trying at all. Some organizations have become widely known as operating in

a highly ethical manner, e.g., Infosys, Johnson and Johnson, Hewlett

Packard, etc. All organizations are comprised of people and people are not

perfect. However, when a mistake is made by any of these organizations, the

organization has a long way to fall. In our increasingly critical society, these

organizations are accused of being hypocritical and they are soon pilloried by

social critics (www.managementhelp.org).

Key Roles and Responsibilities in Ethics Management

Depending on the size of the organization, certain roles may prove useful in

managing ethics in the workplace. These can be full-time roles or part-time

functions assumed by someone already in the organization. The following

functions points out responsibilities that should be included somewhere in the

organization.

• The organization's chief executive must fully support the program.

If the chief executive isn't fully behind the program, employees will certainly

notice and this apparent hypocrisy may cause such cynicism that the

organization may be worse off than having no formal ethics program at all.

Most important, the chief executive should consistently aspire to lead in an

ethical manner. If a mistake is made, admit it.

• Consider establishing an ethics committee at the board level. The committee

would be charged to oversee development and operation of the ethics

management program.

164

• Consider establishing an ethics management committee. It would be charged

with implementing and administrating an ethics management program,

including administrating and training about policies and procedures, and

resolving ethical dilemmas. The committee should be comprised of senior

officers.

• Consider assigning/developing an ethics officer. This role is becoming more

common, particularly in larger and more progressive organizations. The

ethics officer is usually trained about matters of ethics in the workplace,

particularly about resolving ethical dilemmas.

• Consider establishing an ombudsperson. The ombudsperson is responsible to

help coordinate development of the policies and procedures to

institutionalize moral values in the workplace. This position usually is

directly responsible for resolving ethical dilemmas by interpreting policies

and procedures.

• Note that one person must ultimately be responsible for managing the ethics

management program.

Benefits of Managing Ethics in the Workplace

A lot has been studied about the moral benefits of attention to business ethics.

However, there are other types of benefits, as well. The following list describes

various types of benefits from managing ethics in the workplace.

• Attention to business ethics has substantially improved society:

Workers often meet with accidents and there was no compensation. Groups

controlled some markets to the extent that prices were fixed and small

businesses choked out. Employees were ill-treated based on casts, races etc.

Influence was applied through intimidation and harassment. Then society

reacted and demanded that businesses place high value on fairness and equal

165

rights. Anti-trust laws were instituted. Government agencies were

established. Unions were organized. Laws and regulations were established.

• Ethics programs help maintain a moral course in turbulent times:

Attention to business ethics is critical during times of fundamental change,

times much like those faced now by businesses, both nonprofit or for-profit.

During times of change, there is often no clear moral compass to guide

leaders through complex conflicts about what is right or wrong. Continuing

attention to ethics in the workplace sensitizes leaders and staff to how they

want to act, consistently.

• Ethics programs cultivate strong teamwork and productivity:

Ethics programs align employee behaviors with those top priority ethical

values preferred by leaders of the organization. Usually, an organization

finds surprising disparity between its preferred values and the values actually

reflected by behaviors in the workplace. Ongoing attention and dialogue

regarding values in the workplace builds openness, integrity. Employees feel

strong alignment between their values and those of the organization.

• Ethics programs support employee growth and meaning:

Attention to ethics in the workplace helps employees face reality, both good

and bad, in the organization and themselves. Employees feel full confidence.

They can admit and deal with whatever comes their way.

• Ethics programs are an insurance policy: There is an increasing number of

lawsuits in regard to personnel matters and to effects of an organization’s

services or products on stakeholders. Ethical principles are often state-of-the-

art legal matters. Attention to ethics ensures high ethical policies and

procedures in the workplace. It’s far better to incur the cost of mechanisms to

ensure ethical practices now than to incur costs of litigation later. A major

intent of well-designed personnel policies is to ensure ethical treatment of

employees.

166

• Ethics programs help avoid criminal acts “of omission” and can lower fines:

Ethics programs tend to detect ethical issues and violations early on so they

can be reported or addressed. In some cases, when an organization is aware

of an actual or potential violation and does not correct it, this can be

considered a criminal act like violating environmental norms. The major

penalties include closure of major production units. However, the guidelines

potentially lower fines if an organization has clearly made an effort to

operate ethically.

• Ethics programs help manage values associated with quality management,

strategic planning and diversity management: Ethics programs identify

preferred values and ensuring organizational behaviors are aligned with those

values. This effort includes recording the values, developing policies and

procedures to align behaviors with preferred values, and then training all

personnel about the policies and procedures. This overall effort is very useful

for several other programs in the workplace that require behaviors to be

aligned with values, including quality management, strategic planning and

diversity management. Total Quality Management includes high priority on

certain operating values, e.g., performance, reliability, measurement, and

feedback. Ethics management techniques are highly useful for managing

strategic values, e.g., expand marketshare, reduce costs, etc. Ethics

management programs are also useful in managing diversity. Diversity is

much more than the colour of people’s skin, it’s acknowledging different

values and perspectives.

• Ethics programs promote a strong public image: The fact that an

organization regularly gives attention to its ethics can portray a strong

positive image to the public. People see those organizations as valuing

people more than profit, as striving to operate with the utmost of integrity

and honour. Aligning behavior with values is critical to effective marketing

167

and public relations programs. Ethical values, consistently applied, are the

cornerstones in building a commercially successful and socially responsible

business.

• Overall benefits of ethics programs: Managing ethical values in the

workplace legitimizes managerial actions, strengthens the coherence and

balance of the organization’s culture, improves trust in relationships between

individuals and groups, supports greater consistency in standards and

qualities of products, and cultivates greater sensitivity to the impact of the

enterprise’s values and messages.

• Last and not least: Formal attention to ethics in the workplace is the right

thing to do.

Description of a Highly Ethical Organization

After designing and implementing a proper ethics management program, the

organisation will definitely becomes an highly ethical organisation. Mark

Pastin, in The Hard Problems of Management: Gaining the Ethics Edge (1986),

provides the following four principles for highly ethical organizations.

• They are at ease interacting with diverse internal and external stakeholder

groups. The ground rules of these firms make the good of these stakeholder

groups part of the organizations' own good.

• They are obsessed with fairness. Their ground rules emphasize that the other

persons' interests count as much as their own.

• Responsibility is individual rather than collective, with individuals assuming

personal responsibility for actions of the organization. These organization’s

ground rules mandate that individuals are responsible to themselves.

168

• They see their activities in terms of purpose. This purpose is a way of

operating that members of the organization highly value. And purpose ties

the organization to its environment.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Social responsibility is not the exclusive domain of the government. Corporate

social responsibility is the responsibility of business organisaions in the society

in which they are operating. It is the ‘nishkam bhavna’ (selfless service) and

with no expectations of return or awards. Many industrial philanthropists like

Tatas, Birlas understood the relation between long term profitability and the

health and welfare of the local communities where their businesses were

located.

Tracing the CSR journey may help in assessing the stage at which a company is

as it gets more involved with its responsibility towards its employees, the

community at large, stakeholders, nation building processes and the world as

such. Business has responsibilities that go beyond the production of goods and

services, and profit making. Business has impacts that go beyond simple

market transactions. Socially responsible business can help solve important

social and environmental problems, especially those that the business has

created.

CSR at Tata Group

The Tata Council for Community Initiatives is an umbrella organization that

imparts coherence to the initiatives of the group through the creation of a

participatory network of Tata Group companies, each of which undertakes CSR

initiatives on its own right. The emphasis is on imbibing the “Tata Values” on

169

community through integration with business plans. CSR at Tata steel is one of

the eight key business processes identified by the management and considered

critical to “success as a corporation”. An important segment of Tata steel’s

allocation from its CSR budget is towards the community and employees

indicating that Jamshedpur and adjoining areas are integral to Tata steel and

cannot alienate ‘a part of ourselves’ and hope to succeed.

CSR at Aditya Birla Group

Though there is no separate CSR policy or social policy, many of the group

companies that are ISO 14001 certified, have environmental policies, objectives

and targets. Most are signatories for the UN Global Compact, which is an UN

CSR initiative. Aditya Birla Centre for Community Initiatives and Rural

Development is the principal program implementing agency. It has an Apex

Team, which shoulders the responsibility of charting out a well defined

community based rural development plan and an Implementation Team which

ensures implementation through the various group companies and their Rural

Development Cells.

CSR at ICICI

ICICI has a permanent and full time group, the Social Initiatives Group(SIG),

to concentrate on its development related initiatives. Through the SIG, ICICI

seeks to define and effectively fulfil its responsibilities as a corporate citizen.

The Group’s involvement is not at the grassroots, though field visits, aimed at

assessing need and facilitating dialogue, form an integral part of their work.

SIG has an articulated mission and focused and well-drawn plans. (Kamal Singh, Article ‘Business Ethics and Corporate Social Responsibility’, Journal ‘Effective Executive’, Pg. 58-64, October 2009)

CORPORATE GOVERNANCE

170

Corporate Governance is the formal system of accountability and control for

ethical and socially responsible organizational decisions and use of resources.

The philosophy of business ethics and social responsibility that a board or firm

holds directly affects how well accountability, control and corporate

governance work in an organization. Until recently, business ethics was

considered a separate field from corporate governance and the word ‘ethics’

was rarely used in discussing the nature and purpose of corporate governance.

Thus, corporate governance is about the process and content of ethical decision

making in business organizations. (Robert A. Peterson & O.C. Ferrell, Ch. Corporate Governance and Ethical Leadership, pg. 56-81, Book ‘Business Ethics’, Prentice-Hall of India Pvt. Ltd., 2006)

In India, the Ministry of Corporate Affairs had appointed a Naresh Chandra

Committee on Corporate Audit and Governance in 2002 in order to examine

various corporate governance issues. It made recommendations in two key

aspects of corporate governance: financial and non-financial disclosures: and

independent auditing and board oversight of management. It is making all

efforts to bring transparency in the structure of corporate governance through

the enactment of Companies Act and its amendments (http://businessgov.in).

Corporate Governance and Ethics - Challenges and Imperatives

There are several key forces and directions to consider for effective corporate

governance and ethical leadership. Smt. Ranjana Kumar, Vigilance

Commissioner, has come out with ten essential governance principles. A

company should:

1. Lay solid foundations for management and oversight : Recognise and

publish the respective roles and responsibilities of board and management.

171

2. Structure the board to add value : Have a board of an effective composition,

size and commitment to adequately discharge its responsibilities and duties.

3. Promote ethical and responsible decision-making: Actively promote ethical

and responsible decision-making.

4. Safeguard integrity in financial reporting: Have a structure to independently

verify and safeguard the integrity of the company’s financial reporting.

5. Make timely and balanced disclosure: Promote timely and balanced

disclosure of all material matters concerning the company.

6. Respect the rights of shareholders: Respect the rights of shareholders and

facilitate the effective exercise of those rights.

7. Recognise and manage risk: Establish a sound system of risk oversight and

management and internal control.

8. Encourage enhanced performance: Fairly review and actively encourage

enhanced board and management effectiveness.

9. Remunerate fairly and responsibly: Ensure that the level and composition of

remuneration is sufficient and reasonable and that its relationship to

corporate and individual performance is defined.

10. Recognise the legitimate interests of stakeholders: Recognise legal and

other obligations to all legitimate stakeholders.

11. Corporate Governance Rating be made mandatory for listed companies.