SAHYOG COLLEGE OF ARTS, COMMERCE AND SCIENCE

Bachelor of Business Administration

Semester IV

Business Ethics and Corporate Governance

SYLLABUS

Unit I: Business Ethics:

Introduction, Concepts and theories - Introduction,

definitions, need for Business ethics, Values and morals, Management and ethics,
Normative Theories, – Gandhian Approach, Friedman‟s Economic theory.

Unit II : Business, Organisational Ethics & CSR -

The Indian Business scene, Ethical Concerns, Global trends in business ethics,
Business ethics rating in India, Organisational culture, Types of Organizations,
Advantages of Corporate code of ethics, Formulating & implementing
professional ethics code;

Unit III : Corporate Governance, Globalisation & Business ethics -

Introduction, systems of corporate governance, Factors facilitating Globalisation,

Impact of globalization on Indian corporate and social culture, Advantages and
disadvantages of MNC‟s to the Host Country, International codes of Business
Conduct, Whistle blowing and its codes. .

Unit IV: Environment Ethics, Marketing Ethics & Ethics in HRM –

India’s Environment Policy, Environment Risk Management, Environment Audit,

Areas in Marketing Ethics, Ethics in HRM, Role of HRM in creating an ethical
organisation.
 Unit I: Business Ethics
Ethics are the moral principles guiding our behaviour and judgments, helping us to
determine what’s right and wrong.

Business ethics concern the application of ethical values to business activities and
functions. This applies both to the conduct of individuals and that of organisations
as complete entities.
Any organisation can aim or choose to carry out its business in an ethical manner.
This involves making choices that are ethically the right thing to do, rather than
focussing on short-term profit generation.

Whether an organisation is considered ethical will involve a combination of factors,

eg:

 the type of products or services

 priorities, goals, and values
 reputation
 treatment of staff and customers
 corporate social responsibility (CSR)

Meaning of Business Ethics

The concept of business ethics began in the 1960s as corporations became more
aware of a rising consumer-based society that showed concerns regarding the
environment, social causes, and corporate responsibility. The increased focus on
"social issues" was a hallmark of the decade.

Business ethics is a practice that determines what is right, wrong, and

appropriate in the workplace. Business ethics is often guided by laws, and these
principles keep companies and individuals from engaging in illegal activity such
as insider trading, discrimination and bribery.

Business ethics concerns ethical dilemmas or controversial issues faced by a

company. Often, business ethics involve a system of practices and procedures
that help build trust with the consumer. Some business ethics are embedded in
the law, such as minimum wages, insider trading restrictions, and
environmental regulations. On another, business ethics can be influenced by
management behavior, with wide-ranging effects across the company.

Business ethics guide executives, managers, and employees in their daily actions
and decision-making. For example, consider a company that has decided to
dump chemical waste that it cannot afford to dispose of properly on a vacant lot
it has purchased in the local community. This action has legal, environmental,
and social repercussions that can damage a company beyond repair.

Definition of Business Ethics

Cambridge dictionary defines business ethics as “the rules, principles, and

standards of deciding what is morally right or wrong when working.” So,
business ethics refers to the implementation of appropriate business practices
and policies in the workplace.

Examples of business ethics in the workplace

1. Report conflicts of interest

Many organizations have a policy regarding receiving gifts from clients or other
external parties. Some may even have rules about part-time work, freelance
opportunities and other side jobs. In all cases, these rules are meant to ensure
employees operate within the limitations of conflicts of interest, which can
impact an employee’s integrity.

2. Take care of company property

Tools, technology, equipment and supplies provided by employer. These items

are typically reserved for work use only. Follow any business ethics related to
the use and maintenance of these items to ensure you are using company
property respectfully.

3. Lawfulness

Business ethics also includes abiding by legal regulations and obligations

regarding their business activities like taxes, worker safety and employment and
labor laws. Companies that work within the boundaries of the legal system are
more credible and honorable, which can establish a strong positive reputation as
an employer that encourages high-quality candidates to apply for roles.

Types of Business Ethics

There are several theories regarding business ethics, and many different types
can be found, but what makes a business stand out are its corporate social
responsibility practices, transparency and trustworthiness, fairness, and
technological practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of

stakeholders while accounting for the impact meeting those needs has on
employees, the environment, society, and the community in which the business
operates. Of course, finances and profits are important, but they should be
secondary to the welfare of society, customers, and employees—because studies
have concluded that corporate governance and ethical practices increase
financial performance.

Businesses should hold themselves accountable and responsible for their

environmental, philanthropic, ethical, and economic impacts.

Transparency and Trustworthiness

It's essential for companies to ensure they are reporting their financial
performance in a way that is transparent. This not only applies to required
financial reports but all reports in general. For example, many corporations
publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but
how and why decisions were made, if goals were met, and factors that
influenced performance. CEOs write summaries of the company's annual
performance and give their outlooks.

Press releases are another way companies can be transparent. Events important
to investors and customers should be published, regardless of whether it is good
or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently

comes with a need for a business to ensure the technology and information it
gathers is being used ethically. Additionally, it should ensure that the technology
is secured to the utmost of its ability, especially as many businesses store
customer information and collect data that those with nefarious intentions can
use.

Fairness

A workplace should be inclusive, diverse, and fair for all employees regardless
of race, religion, beliefs, age, or identity. A fair work environment is where
everyone can grow, be promoted, and become successful in their own way.

Need or Importance of Business ethics

 Improved employee retention. Strong business ethics often encourage
managers to show appreciation for an employee’s hard work. As a result,
team members may be more loyal to the company and strive to be more
productive. It also means employees at all levels are less likely to be let go
for reasons related to unethical behavior.

Stronger collaboration. Team members who practice business ethics

have respect for one another and work well together. This camaraderie
not only fosters a pleasant work environment but also helps with team
collaboration and productivity.

More effective leadership. When a manager follows business ethics,

they’re more likely to treat employees well. As a result, teams are more
inclined to follow their lead. This minimizes discipline issues and teams’
trust in managers and supervisors when tough decisions need to be made.

Values and Morals

A person who knows the difference between right and wrong and chooses right
is moral. A person whose morality is reflected in his willingness to do the right
thing – even if it is hard or dangerous – is ethical. Ethics are moral values in
action.

Management Ethics

Managerial ethics are the standards that affect the conduct of employees within
an organization. Good managerial ethics leads to a culture of positivity within the
workplace, which makes employees feel supported and valued. Poor managerial
ethics leads to employee distrust and negativity and can affect a company's
bottom line.his practice allows managers to prioritize the well-being of
employees, customers and the community

Managerial ethics are the set of principles and rules dictated by upper
management that govern employee behavior. It's how managers make decisions
when there are conflicts of values. Ethics in management are essential to ensure
a positive culture within an organization and to ensure employees feel supported
and valued.

Managerial ethics are moral principles employees in a leadership position follow

to guide their actions and behaviours. These ethics may be personal or related to
the company's beliefs and values. They help managers decide what's wrong and
right in the workplace so they can create a welcoming, inclusive environment.

Why is ethics important in management?

Ethics are important in management, because these policies provide managers
firm guidelines to follow when a conflict of values is presented. They also
provide the manager with written support that the company supports a decision
that follows these guidelines.
What are the types of managerial ethics?
Moral ethics and legal ethics are the key types of managerial ethics. Moral ethics
management is when decisions are made not because there is a legal
requirement to do so, but because management feels it is the right thing to do,
such as being honest, treating others with respect, etc. Legal ethics is when a
decision is made because it is the law, such as not taking bribes and not falsifying
documents.

Examples of unethical behaviour as a manager

To help you understand what's appropriate at work, consider the following

examples of unethical behaviour you may want to avoid as a manager:

Misusing company time: When you're working, it's important to use

your time wisely, as your employer is paying you to do so. Taking
extended breaks, arriving at work late, using your phone during work, or
talking to your team about personal topics are all examples of actions you
can avoid so you aren't misusing company time.

Lying: Lying to your team is a sign of unethical behaviour. If you aren't

able to tell them the truth about something, such as an upcoming closure,
be honest about it so everyone can be on the same page.

Taking sides in a disagreement: As a manager, it's your responsibility

to handle conflict among your team members. It's important to remain
neutral or one party may feel unheard and disrespected.

Stealing or damaging company property: If you take company

property, such as tools or supplies, out of your workplace, your employer
may reprimand you. Purposely damaging property by misusing it is also
an unethical action that can lead to discipline.

Normative Theories
Gandhian Approach

Milton Friedman‟s Economic theory.

Milton Friedman's theory is sometimes called the ‘Shareholder Theory’. The

Friedman Doctrine has a few different names. According to this view of business
ethics, "an entity's primary duty resides in the happiness of the shareholders,"
created by American economist Milton Friedman, the company should put
shareholder interests first. Therefore, the company should continually try to
raise its sales to benefit its owners.

In Friedman's view, the shareholders represent the organisation's lifeblood and

need special consideration. To maximise profits, a company must seek avenues
for expanding its revenue base via activities like value creation and product
expansion, all while keeping expenses as low as possible. Instead of having an
outsider make essential choices like funding for social activities, Friedman
argued that shareholders should have such authority.

American economist Milton Friedman developed the doctrine as a theory

of business ethics that states that “an entity’s greatest responsibility lies in the
satisfaction of the shareholders.” Therefore, the business should always
endeavor to maximize its revenues to increase returns for the shareholders.

Friedman believes that the shareholders form the backbone of the entity, and
they should be treated with the utmost respect. Profits maximization requires
the entity to find ways of generating additional revenues through value addition
and creating more products and services while minimizing costs. Friedman also
 stated that shareholders should be in charge of key decisions such as social
initiatives rather than getting an outsider to make the decision on their behalf.

Summary

 The Friedman Doctrine, also known as the Shareholder Theory,

provides insights on how to increase shareholder value.
 According to the doctrine, shareholder satisfaction is an entity’s
greatest responsibility.
 However, the doctrine also faces expansive criticism since it turns a
blind eye to social responsibility activities.
 Unit II
Business Organizational Ethics & CSR

The Indian Business scene

Ethical Concerns

Global trends in business ethics

Globalization has led to an increase in cross-border trade and investment, which

has created new ethical challenges for businesses. Companies need to consider
the cultural, social, and environmental impacts of their operations in different
countries and ensure that they comply with local laws and regulations.

1. Environmental Sustainability: With the growing concern about climate

change and environmental degradation, businesses are expected to adopt
sustainable practices to reduce their carbon footprint and minimize their impact
on the environment. This includes reducing waste, conserving energy, and using
eco-friendly materials.

2. Corporate Social Responsibility (CSR): CSR has become an important aspect

of business ethics, where companies are expected to go beyond their profit-
making objectives and contribute to the well-being of society.

This includes supporting local communities, promoting ethical labor practices,

and investing in social and environmental initiatives.
3. Ethical Leadership: Ethical leadership is critical for promoting a culture of
integrity and ethical behavior within organizations. Leaders need to set a
positive example and create a work environment that encourages ethical
decision-making and whistleblowing.

4. Technology and Privacy: The increasing use of technology in business has

raised new ethical issues, particularly around data privacy and security.
Companies need to ensure that they protect the personal information of
their customers and employees and comply with data protection
regulations.

5. Diversity and Inclusion: Businesses are expected to promote diversity and

inclusion in their workforce and create a culture of respect and fairness. This
includes addressing issues of discrimination and bias and providing equal
opportunities for all employees.

6.Transparency and Accountability: There is a growing demand for

transparency and accountability in global business. This includes disclosing
information about business practices, financial performance, and social and
environmental impact. Companies are expected to be transparent about their
operations and accountable for any negative impact they may have on society.

7. Human Rights: Respect for human rights has become an important trend in
global business ethics. This includes ensuring fair labor practices, promoting
diversity and inclusion, and respecting the rights of employees, customers, and
other stakeholders. Companies are expected to respect human rights and avoid
any practices that may lead to exploitation or discrimination.

What is Organization?

Organization refers to a collection of people who are working towards a common

goal and objective.

In other words, it can be said that organization is a place where people assemble
together and perform different sets of duties and responsibilities towards
fulfilling the organizational goals.

Types of Organization and their Structure

There are two broad categories of organization, which are:
1. Formal Organization
2. Informal Organization
Formal Organization:

 Formal organization is that type of organization structure where the

authority and responsibility are clearly defined.
 The organization structure has a defined delegation of authority and roles
and responsibilities for the members.
 The formal organization has predefined policies, rules, schedules,
procedures and programs. The decision making activity in a formal
organization is mostly based on predefined policies.
 Formal organization structure is created by the management with the
objective of attaining the organizational goals.
There are several types of formal organization based on their structure,
which are discussed as follows:
1. Line Organization

2. Line and Staff Organization

3. Functional Organization

4. Project Organization

5. Matrix Organization

Line organization also known as hierarchical structure

 A hierarchical structure, also known as a line organization, is the most
common type of organizational structure.
 A hierarchical structure refers to a company's chain of command, typically from
senior management and executives to general employees.
 In other words, this structure applies to organizations with a sole leader and a
flow of subordinates underneath them.
 Power flows from top to bottom. This makes the hierarchical structure a
centralized organizational structure.
 In a hierarchical structure, a staff director often supervises all departments
and reports to the CEO.

For example, let's say a company has 10 employees. The employees are then divided
into groups and each group reports to their manager. Their manager then reports to
the chief executive officer. Therefore, the company has multiple levels, with the highest
level holding the highest power. Hierarchical structures are typically represented in a
pyramid shape.

CEO

Managers

Employees

These are some advantages of a hierarchical structure:

 It clearly defines reporting relationships and division of authority.

 Companies with a hierarchical structure have different levels of authority and
power. This means employees will have direct supervisors who they can report
to. This eases the flow of communication and ensures employees know who
their direction and working orders are coming from. Rather than having a
company with a sole executive leader, a hierarchical structure allows for better
employee management and clearly defined executive positions.

 It details corporate ladder and promotional structure, thereby

encouraging high-quality work.

There is a clear career path through this type of organization, with

employees gradually advancing through the various levels of
management over a number of years. Those reaching senior positions
tend to have built up massive experience with the company.

 It helps to specialize each employee's work.

Having a hierarchical structure and therefore, various departments, allows

employees the opportunity to become specialized in a particular field.

For example, a newspaper company could separate employees by news

reporters, sports reporters and designers. In this case, news reporters would
specialize in general and breaking news, sports reporters can specialize in
sports writing and designers can hone in on their artistic abilities.

Disadvantages of the Hierarchical Structure

 Restricted information. Information tends to flow toward the top

of the organizational structure, so that the management team has a
complete set of information with which to run the business.
However, the reverse is not the case. There is very little downward
flow of information to the lower levels of the organization, which
tends to cramp any initiatives that might otherwise originate in
these areas.
 Slow decision making. The hierarchical system takes time for
management decisions to percolate down through the various levels
of management and be enacted. If a company operates in a swiftly-
changing environment, this can mean that the business is slow to
react to competitive and environmental pressures, and so can lose
market share.

 It can make employees feel like they have no say in how to approach their
projects.
2. Line and Staff Organization
Line and staff organization is a modification of line organization and it is more
complex than line organization.

A line-staff organization is a structure that distributes work responsibilities from

upper management to lower-level employees. The managers establish standards
for the quality of the work and deadlines for employees to finish their tasks, and
they communicate their expectations to the team. It's the team's responsibility to
meet those expectations in the assigned time.

A line-staff organization is more flexible than a line structure. Instead of one

professional leading the entire company alone, they appoint qualified
supervisors to manage associates, which maintains the authority of the
leadership. They also hire industry experts to complement the work of the line
managers. Medium-sized and large corporations often use line-staff formats to
stabilize the chain of command with large organizational membership

MANAGING Director
↓ ↓ ↓
Production Marketing Finance
Manager Manager Manager
↓ ↓ ↓
Plant Supervisor Market Supervisor Chief Assisstant
↓ ↓ ↓
Foreman Salesman Accountant

Advantages of Line and Staff Organization

This organisation has the following advantages:

1. Specialization
Line and staff organisation introduces a specialization in a very systematic
manner. Specialized knowledge and hierarchy roles are combined here.

2. Better Discipline
The unity of command is maintained by the line managers hence in this type of
organisation discipline is maintained. The workers get command from the line
personnel and are accountable directly to them. This creates a better moral and
discipline among the employees.

3. Balanced and Prompt Decisions

The managers have the advantage of expert advice from the staff managers while
taking important decisions. Also the staff are too consulted to investigate and
advise, and thus dual advice creates balanced and prompt decisions.

4. Growth and Expansion

The line and staff organisation, both are well suited for the growth and
expansion.

5. Development of Employees
This organisation provides great scope for advancement of career to the talented
employees.

3.Functional structure

A functional organization is a common type of organizational structure in which

the organization is divided into smaller groups based on specialized functional
areas, such as IT, finance, or marketing.

The functional structure is a centralized structure that greatly overlaps with the
hierarchical structure. Each department has its own staff director, who reports
to the CEO.

These are some advantages of a functional structure:

Efficient communication. Communication can be more fluid and flow through

top-down and bottom-up chains, which is more efficient.

Greater skill development. People with similar skills and knowledge work
together and perform similar functions, which allows their skills to be further
developed.

Accountability. Clear management lines allow each position to be responsible

for its functional area.

These are some disadvantages of a functional Structure

Organizational silos. Each department operates independently. Thus, people in
one department are reluctant to share information or knowledge with people in
other departments.

The conflict between departments. Each department has different and

sometimes conflicting targets. For example, the marketing department targets
increasing sales, which requires more budget. On the other hand, the finance
department has an efficiency target, saving more budget. And often, these
contradictions can lead to disharmony and conflict.

Coordination problems. Each department is often more concerned with the ego
and its functional area. Eventually, it leads to poor coordination. Such problems
become a danger when the business environment requires companies to change.
And, coordination problems make it slow for companies to respond to changes
appropriately.

4.Project Organisation

 In a projectized structure, the focus is on one project at a time. In this

centralized organizational structure
 Project managers act as supervisors, not just resource allocators and
decision-makers.
 Unlike other structure types, a projectized structure involves the
demobilization of teams and resources upon a project's completion.
These are some advantages of a projectized structure:

 It fosters more efficient decision-making and communication.

 The sense of urgency around project completion increases employee
cooperation.
 It increases employee flexibility and versatility.

These are some disadvantages of a projectized structure:

 The strict deadlines could increase workers' stress.

 The power might be too strongly centralized with the project manager.
 It lacks the opportunity for long-term skill development among
employees.

Matrix structure

A matrix organizational structure is a workplace format in which employees report to

two or more managers rather than one manager overseeing every aspect of a project.
For example, an employee may have a primary manager they report to as well as one
or more project managers they work under. This type of structure is often useful when
skills need to be shared across departments to complete a task and can allow
companies to utilize a wide range of talents and strengths.

These are the main advantages of a matrix organization:

 Supervisors have the flexibility to choose the best employees for a project.
 It allows a dynamic org chart with varying responsibilities for employees.
 Employees have the opportunity to learn and foster skills outside their
primary roles.
These are some disadvantages of a matrix organization:

 There could be conflicts of interest between the needs for project

organization and department organization.
 The organizational chart is prone to regular changes.

Informal Organization: Informal organizations are those types of organizations

which do not have a defined hierarchy of authority and responsibility. In such
organizations, the relationship between employees is formed based on common
interests, preferences and prejudices.

Organizational culture

Any business decision will be influenced by the organisation’s culture.

Culture is a term used to define the customs, achievements, values, norms and
general beliefs of a certain group of individuals.

Organizational culture therefore defines the environment for everything that

happens within a company.
Organizational culture, also known as corporate culture, is the set of values,
beliefs, attitudes, systems, and rules that outline and influence employee
behavior within an organization. The culture reflects how employees, customers,
vendors, and stakeholders experience the organization and its brand.

Organizational culture is unique for every organization and one of the hardest
things to change and consists of written and unwritten rules that have been
developed over time.
Organizational culture is the rules, values, beliefs, and philosophy that
dictate team members’ behavior in a company. The culture consists of
an established framework that guides workplace behavior. Examples include
integrity, teamwork, transparency, and accountability.

Organizational culture therefore defines the environment for everything that

happens within a company. It’s the spoken and unspoken behaviors and
mindsets that define how your business functions on a day-to-day basis. It also
codifies what it’s like for employees to work there. Organizational culture
includes the mission and objectives along with values, leadership and employee
expectations, structured performance management and overall engagement
levels. By building a strong culture, businesses can provide consistency and
direction, guide decisions and actions, fuel the workforce and help reach their
potential.
While organizational culture is an integral part of a business, it’s not always
visible to long-term employees. It blends into the daily routine and becomes
second nature. Regardless of whether you’ve just joined the company and you
are overwhelmed with new routines or you’re a seasoned employee who no
longer notices the fast-paced environment around you, organizational culture
continues to exist. The longer you’re at a business, the more it becomes ingrained
into who you are.

Different Types of Organizational Culture

There are hundreds of different types of organizational cultures, but a few
categories tend to dominate most industries.
Clan culture :- tends to focus on interpersonal connections, mentoring
programs and aims to create a feeling of family.

Market culture :- focuses on promoting competition and rewarding winners.

Adhocracy culture :- is geared toward innovation and tends to eliminate

traditional structures of an organization. Finally,
Hierarchical culture focuses on top-down business decisions. This has been
fairly efficient in the past and is common in businesses today, but many people
no longer value working in this type of culture.
For example, the cultural values and environment of a daycare center will be
different than a surgical center where precision and standard practices are vital
to business success.

Importance of Organizational Culture

Organizational culture is one way that people determine whether or not they’ll
do business with a company. The overall branding image, values and mission
statement needs to align with both a candidate’s and potential client’s needs.
This ongoing alignment is important to any profitable business, but culture offers
far more than just that. Here are seven reasons why organizational culture is
important in today’s society.
1. Improved Recruitment Efforts
Finding qualified talent can be an uphill battle, especially with so many up-and-
coming businesses. This has caused many individuals to refine their job search
and hiring criteria. Over a third of employees claim that they would pass on their
dream job opportunity if the corporate culture wasn’t a fit.
By fostering a strong organizational culture, you’ll improve recruitment efforts
and gain the interest of top candidates. However, what one person sees as ideal
company culture, another may view as a culture they don’t fit in with—everyone
is different.Create a strong company culture that aims to attract the type of
individuals that you want working at your business and over time, the right
talent will follow.
For example, some people prefer the fast pace of an entrepreneurial culture,
where others might prefer the steady pace of a more established, traditional
business and culture. It’s important to note, one size does not fit all.
2. Smoother Onboarding
Companies with strong organizational cultures tend to have smoother
onboarding experiences. This is because there are repeatable systems in place to
ensure new employees have access to the resources they need to adapt and
integrate with the culture of your office the transition period. Better onboarding
procedures often translate to increased employee loyalty and overall
longevity. During this process, communicating culture will help new employees
understand core values and day-to-day operations.

3. Decreased Turnover
Organizational retention can be difficult for many businesses in today’s
competitive environment. A strong organizational culture can help decrease
turnover by creating a sense of inclusivity and community while honoring
diversity within your industry. Roughly 38% of employees report wanting
to leave their jobs due to negative company culture and 60% of employees have
left or would leave a job because of poor leadership, so taking the time to create
positive cultural values that coincide with your business’ objectives is
essential.In the U.S., 74% of respondents in a Glassdoor multi-country
survey said they would look elsewhere for work if their company culture were to
deteriorate. To continue benefiting from strong employee retention,
organizational culture needs to be a dynamic process that is nurtured over time.
4. Enhanced Employee Engagement

Employee engagement refers to how committed, connected and passionate an

individual is about their work at a specific organization. It’s how individuals
build a meaningful connection with a business and has long-lasting positive
effects.By creating an immersive organizational culture, employee engagement
increases exponentially. Obviously, this engagement will depend on the type of
culture that’s fostered and promoted, but there is a huge potential for positive
engagement with a strong organizational culture. For example, companies who
have a strong culture have up to 72% higher employee engagement rate than
those with weak cultures.

5. Increased Productivity
When employees are happy and satisfied with their job, they work harder. Even
though organizational culture can slowly become less obvious to employees, it’s
still ingrained in their daily work efforts. By creating a strong company
culture aligned with your organizational objectives, you can increase employee
productivity and therefore, increase overall work output. The majority of
workers in the U.S. believe that organizational culture is one of the biggest
influencers of their job performance. In fact, a 2019 survey found that 76% of
employees believe culture helps positively influence their culture and efficiency,
motivating them to do their best work.
6. Stronger Brand Identity
How you communicate your brand is important for both marketing efforts and
organizational culture. Your brand represents how the public sees you—it’s your
business’ reputation. While some aspects of your brand image can be controlled
 by external factors, most of it will come from your company culture and any
interactions that individuals have with employees and leaders. The stronger your
company culture, the more powerful your brand identity becomes. Your
employees may even become individual brand advocates without any additional
persuasion.

7. Stimulated Performance
When your organizational culture is one that fosters individual development,
community and inclusivity, you’ll help stimulate employee performance and
achieve more goals. Employee satisfaction combined with higher performance
creates a strong talent pool of dedicated employees who will continue to value
being a part of your company. Over time, this creates a positive cycle that can
exponentially increase the success of your organization.
Advantages of Corporate code of ethics

A code of conduct and ethics provides a framework for how a company expects
all of its stakeholders to act in relation to all aspects of its business activities. The
code should include:

 The organisation’s principles

 Its standards
 Its expectations for the ethical and moral behaviour of everyone related
to the company

Ensuring everyone understands the company’s mission and values is essential

for creating a unified workforce, all collaborating in an effective, productive and
ethical manner. Crystalising this in a code of ethics and conduct communicates
the obligations to all relevant parties.
The benefits of having a code of ethics and conduct

1 Builds a good reputation

Ethical principles in business are more important than ever. Customers,

suppliers, shareholders and other stakeholders want organisations to go about
their work in the correct manner.

Following high-profile cases of unethical behaviour, such as the LIBOR and

Enron scandals, companies are under increased scrutiny to eradicate
wrongdoing and act in a trustworthy manner.

The risks of being associated with illegal or unethical conduct are so great that
showing that you are actively seeking to create an ethical business environment
helps you gain a good reputation within the sector and enhance public trust in
your organisation.

2 Increases the attractiveness of your business

This good reputation makes ethically minded customers more likely to spend
with you. As Anna-Mieke Anderson, CEO of The Greener Diamond Foundation,
says in an article for Forbes:

“Today’s shoppers are looking for ethical, eco-friendly brands that put people and
the planet ahead of profits.”

In addition, shareholders are more likely to want to invest in a business with a

concrete policy of fairness and sustainability embedded in a code of ethics and
conduct. Where a business does not have this code, it shows that there is less
emphasis on doing the right thing, opening that organisation up to the risk of
internal wrongdoing and the reputational damage that can follow.

3 Attracts outstanding employees

Millennials make up a major proportion of the workforce and are a generation

driven by a desire for ethics and fairness in all areas of life. In employment, they
want to know that their employer is committed to fairness and to creating a
better working environment.

Your code of ethics is one way to demonstrate that your company values this
method of working, and, as a result, that makes it more attractive to candidates.
An organisation with a strong ethical stance will have the pick of the outstanding
talent on the market by offering a better quality of life than those who do not
promote these principles.

This extends to the areas of diversity and inclusion, too. If your code promotes an
inclusive attitude at all levels of your organisation, you will be more likely to
attract the best candidates, regardless of age, gender identity, race, sexual
orientation or any other demographic. Without this commitment, you miss out
on talent who feel that you will not treat them as equals because of their
background.

4 Proves your social conscience

Environmental, social and governance (ESG) are the key terms relating to
sustainable investing in today’s market. The S of ESG, or social matters, relates to
how a company looks after its people and treats its community. It is all about
employee well-being and social justice.

Your code of conduct and the way that you promote it internally and externally
acts as proof of your intentions to create a fair and equitable workplace. Recent
movements such as #MeToo and Black Lives Matter showed that there are still
many areas of life in which there is drastic inequality.

Organisations that refuse to challenge this and make a positive change will find
that shareholders seeking responsible investments will avoid them in favour of
issuers who have a proactive policy on social responsibility and other ethical
principles.

5 Helps disclose and manage conflicts of interest

By including this in your code of conduct, you ensure that employees understand
the severity of failing to comply with the regulation and its consequences for
them as individuals and for the business.

Encourage open reporting of conflicts of interest by adding it to your code. This

creates a speak-up culture that prizes such declarations. Employees are likely to
be more honest, and you can deal with the issues raised before they cause
problems.

6 Creates standard best practices for internal behaviour

By having a centralised code of conduct, there is no room for ambiguity in how

internal stakeholders perceive their obligations. You can standardise those
processes and principles that are important to how your business operates
internally.

These professional standards include the onboarding process, grievance

procedure, whistleblowing investigations, chain of command, job duties and
other aspects of your internal processes.

7 Creates standard best practices for external behaviour

Similarly, your code can set boundaries for external behaviour, such as
confidentiality requirements, intellectual property protection, customer
communication protocols and more.
This ensures that employees consistently act with integrity. Not only do they
maintain a compliant and equitable environment within the office, but they also
adhere to this approach at all times.

Your code should cover the behaviour of employees outside of the organisation
to prevent the leaking of private information or use of protected company
material and to reduce the risk of any activities that could damage the
relationship between the business and its clients.

8 Improves compliance

There are many regulations and directives to which you must adhere as an
organisation. For compliance departments, keeping up to date with the
intricacies of EU legislation is part of the job. However, for other employees, it is
unlikely they will read and consume vast legal documents.

Your code of ethics and conduct is the place to outline the important areas of
compliance on which they must act. Whether it is recording all conversations
relating to trades as required by the Markets in Financial Instruments Directives
(MiFID II) or what to do if an employee is added to an insider list.

Formulating & implementing professional ethics code

Developing and implementing a professional ethics code is a critical process for organizations to
ensure ethical behavior among their members. Whether you're a business, professional association,
or any other entity, here's a step-by-step guide to formulate and implement a professional ethics
code:

A code of professional ethics is a set of customs that outline an organisation's

mission and values. A page on an employee handbook would often list rules for
behaviour to help employees conduct their business with honesty and integrity.
A code of ethics acts as a model of moral standards that employees are required
to comply with. It ensures that every individual is personally accountable for
their actions and their treatment of others.

Employers expect professionals to act in line with these principles, especially

when approaching problems or making decisions that have a wider impact on
society. People who violate the code of ethics compromise their trustworthiness
and an organisation's reputation. It may lead to serious consequences, such as
the termination of your contract.

Why Are Professional Ethics Important?

 Many firms have adopted professional ethics because it is an important tool

that establishes rules for behaviour.
 When structured clearly, it sends out a coherent message to employees
about expectations in the workplace.
 A code of professional ethics acts as a warning, informing people about the
consequences when they break any guidelines.
 A moral statement is also valuable to a company's reputation in society
because it is a public declaration of its principles.

Components Of A Professional Code Of Ethics

Organisations set clear guidelines on professional ethics to maintain

transparency with key stakeholders inside and outside a business. Here are four
key components your professional code of ethics are required to include:

1. Work environment

A code of professional ethics are required to establish the acceptable norms and
practices within your organisation's work environment. It helps determine your
corporate culture and encourages people to model similar values among their
colleagues. By implementing explicit rules and policies, your work environment
can be a place of sound moral judgement.

Here are some examples of professional ethics for the work environment

Equal opportunity

Professional dress code

Policy against discrimination and harassment

Privacy policy

Safety policy

Non-violence policy

Policy against destructive behaviour, including substance abuse and

gambling

2. Conflicts of interest

A conflict of interest occurs when there is a clash between an individual's

competing interests or loyalty and the organisation. A code of professional ethics
is essential to define the relationships and activities you are required to avoid
that could be deemed unfair or damaging to an organisation's reputation.

Examples of conflicts of interest to avoid include:

Significant financial interests in other companies

Running for public office

 Insider trading or similar unfair financial practices

Investing in competing organisations

3. Protecting company assets

Whether you are taking care of office equipment or handling sensitive

information and customer data, a code of professional ethics compels you to
prioritise the organisation's safety and its customers.

Examples of policies to protect company assets include:

Information security

Protecting intellectual property

Use of company property

Use of property owned by others

Right to privacy

4. Anti-bribery and corruption

Trust is key to business operations. That is why a code of professional ethics is

an effective tool to set clear boundaries on lawful and unlawful behaviour for
employees. It ensures you uphold an attitude of honesty and fairness in your
day-to-day operations.

Here are some examples of policies against bribery and corruption:

Receiving gifts of significant monetary value

Accepting loans or bribes

Relationships with government entities, competitors, customers or

former employers

How To Develop A Code Of Ethics?

Follow the five steps below to help your organisation develop a code of
professional ethics:

1. Review your mission statement

 Your code of ethics are required to reflect the values of your organisation. It is
required to clearly state how employees are expected to behave to manifest the
reputation you want to portray among your coworkers and customers.

For example, if your business values compassion, your code of ethics are
required to outline how people treat each other, such as using polite language or
attentive listening skills.

2. Gather feedback from employees

Ask key stakeholders in your company about their thoughts on professional

ethics. Ask them about the values that they believe best represent the business.
Also, gather feedback on professional, ethical practices they would like to see
improved. Receiving input from various parts of an organisation would inspire
coworkers to take greater responsibility when governing their own behaviour.

3. Understand past ethical issues

If you are unsure where to begin, it is best to examine the functions of the
business that require improvement. Look for trends of employee or customer
dissatisfaction. For example, if you discover that customers require to wait too
long to speak to a customer service representative, implement ethical guidelines
that target this issue. In this case, your guidelines may suggest that employees
speak to clients with respect and care.

4. Learn from other companies

Investigate case studies of what your competitors have done, right or wrong.
Look at the principles they have put in place to run their business efficiently. You
can choose to emulate their successes and learn from their ethical failures.

5. Share your code of ethics with others

Once you have put together a code of professional ethics for your business,
communicate it throughout the organisation. Send a copy to each individual and
update your employee handbook to communicate ethical expectations to new
recruits. Run training exercises to model ethical guidelines for your colleagues.
This would help them understand the moral standards of the company and learn
how to act accordingly.

.
Implementation:
.
 Integrate the code of ethics into various organizational processes, such as hiring,
performance evaluations, and promotions.
 Establish mechanisms for reporting ethical concerns and violations.
.
Enforcement and Accountability:
.
  Clearly outline the consequences for violating the code of ethics.
 Implement a fair and consistent enforcement mechanism.
 Ensure that leaders set an example by adhering to the code.
.
Regular Review and Updates:
.
 Schedule regular reviews of the code of ethics to ensure it remains relevant.
 Update the code as needed to reflect changes in the industry, laws, or
organizational structure.
.
Monitoring and Reporting:
.
 Implement monitoring mechanisms to track adherence to the code.
 Establish a reporting system for ethical concerns, ensuring confidentiality and
protection for whistleblowers.
.
Continuous Improvement:
.
 Foster a culture of continuous improvement by seeking feedback on the
effectiveness of the code and making necessary adjustments.
.
Recognition and Rewards:
.
 Recognize and reward individuals or teams that consistently demonstrate ethical
behavior.
 Reinforce the positive aspects of ethical conduct within the organization.
.
External Recognition:
.
 Consider seeking external recognition or certification for ethical practices to
enhance the organization's reputation.

Remember, the successful implementation of a professional ethics code requires ongoing

commitment, communication, and reinforcement throughout the organization.

Unit III
Corporate Governance, Globalisation & Business ethics -
Introduction, systems of corporate governance

Corporate governance is the system of rules, practices and processes by

which a company is directed and controlled. Corporate Governance refers to
the way in which companies are governed and to what purpose. It identifies
who has power and accountability, and who makes decisions.

Corporate governance is the structure of rules, practices, and processes used

to direct and manage a company.
A company's board of directors is the primary force influencing corporate
governance.
Bad corporate governance can destroy a company's operations and ultimate
profitability.
The basic principles of corporate governance are accountability, transparency,
fairness, responsibility, and risk management.

Factors facilitating Globalisation

Technology – Has reduced the speed of communication manifolds. The phenomenon of social
media in the recent world has made distance insignificant.

 LPG Reforms: The 1991 reforms in India have led to greater economic liberalisation
which has in turn increased India’s interaction with the rest of the world.
 Faster Transportation:Improved transport, making global travel easier. For example,
there has been a rapid growth in air-travel, enabling greater movement of people and
goods across the globe.
 Rise of WTO and multilateral organisations:The formation of WTO in 1994 led
to reduction in tariffs and non-tariff barriers across the world. It also led to the increase
in the free trade agreements among various countries.
 Improved mobility of capital: there has been a general reduction in capital barriers,
making it easier for capital to flow between different economies. This has increased the
ability for firms to receive finance. It has also increased the global
interconnectedness of global financial markets.
 Rise of MNCs: Multinational corporations operating in different geographies have led to
a diffusion of best practices. MNCs source resources from around the globe and sell
their products in global markets leading to greater local interaction.
 Above factors have helped in economic liberalization and globalization and have
facilitated the world in becoming a “global village”.

Impact of globalization on Indian corporate and social culture

Introduction

Globalization has a wide role to play worldwide. It has left back its footprints at every sphere of life.
Not only in India, but the interchange of world views and ideas has resulted in a major
transformation of the lifestyle and living standard of people globally. Indian culture is no bar to this
transformation process. Our deep rooted traditions and customs have loosened up their hold with
the emergence of globalization. India has a rich cultural background and pride of its culture is
famous throughout the world. Globalization has not only inculcated the westernization in India, but
conversely the Indian culture has also spread its impact globally. Culture and traditions of any
geographic region hold a special significance with respect to its uniqueness and that is the
differentiating factor for a population within a geographic boundary from the other. This uniqueness
has been disturbed to the varying degrees in lieu of globalization. Such an impact is very much
pronounced when they hit a developing country like India.

Globalization

The term ‘Globalization’ is itself self-explanatory. It is an international platform for maintaining

evenness in the living mode of the people all over the world. Globalization is the resultant of the
interchange of worldly views, opinions and the various aspects of the culture everywhere around
the world. This is the means for providing the international arena for intermingling of people from
different sectors, culture and dialects and learns to move and approach socially without hurting
and affecting each others’ prestige.

Globalization initiated with the masses travelling to other geographic areas for exploration, then
with the interest of travel and enjoying the personal space, then came the era of searching
employment opportunities anywhere on the globe to win the contest of ‘survival of the fittest’. With
every advancement of human approach, the globalization started on rooting its footprints at every
place. In today’s era the various means of telecommunication, social media, and most importantly
the Internet has a big role to play in the spread of globalization.

Globalization has both positive and negative impacts throughout the globe. Right from the
environmental challenges from the climatic influence, the air, water soil pollution etc., to the cyber
crime; globalization has a huge contribution to all the ill-effects of scientific advancements. May it
be business, trade, and work exposure or the economic and financial status of the country, no field
is left behind the reach of globalization.

Indian Culture

The culture of any country does not only portray the region and language of the region, but it starts
with the mindset and mentality of the residing citizens. Indian culture is quite rich with respect to its
heritage and resources, and more importantly due to the welcoming approach of its citizens. India
is bouquet of flowers varying religion, dialect, edibles, tradition, custom, music, art and architecture
etc, bundled into a single unit of patriotism and unity. The common factor within all these
diversities is the Indian mindset of welcoming, greeting, celebrating in a united way with immense
affection and togetherness. This is the rich essence of the Indian culture that has attracted many
foreigners to stay back in India and mingle into its eternal fragrance.

When we analyse this rich culture with the globalization point of view, we can find many punch
holes of westernization and mixing of other traits and cultures into our beautifully woven blanket.
Let us closely analyse the impacts of globalization on Indian culture:

Family Structure

Let us start with the key attraction of Indian joint family culture. The joint families have become a
strange surprise to the Indians especially to those residing in the metropolitan cities in the small
flat culture with the nuclear families blooming up like mushrooms in the rain. We have lost the
patience to get adjusted into the joint family, imbibing the values of the elders and getting the
young ones brought up under the shadow of their grandparents. Children have started treating
grandparents like guests or visitors, and such an upbringing is one of the main reasons of
increasing old age homes, as those children consider their own parents as burden in their state of
adulthood.

Marriage Values

Similarly, marriages have also lost their values. It is very much evident from the increasing number
of divorce cases and the extra-marital affairs reported every now and then. Marriage used to be
considered as bonding of the souls which will be linked even after the death; but today marriage is
like a professional bond or a so-called commitment to share life without compromising their self-
interests. The ego factor into the Indian youth is again a product of globalization.

Adultery
Both the genders were kept at a distance, with lot many restrictions and limitations to the approach
for ages in our culture. With the emergence of globalization and western culture, youth have start
mixing up well with each other. The friendly approach and the socializing feature is worth
appreciable. But the total breakout of restrictions have adulterated the Indian mindset, playing up
with the physical relationship. This has given birth to new relationships in India like live-in
relationships. Also the increased cases of rape and sexual abuse cases are a result of the
perverted mind which again the imported values very much alien to our mother culture.

Social Values

We have the incorporated values of treating the guests as God, warm-hearted welcoming, greeting
elders with due respect and a celebrating every small festival with great colour of enjoyment and
togetherness. Such a wide gathering with full hue and light can hardly be seen today. People have
highly restricted themselves in social interaction. The interaction in present generation is highly
diplomatic considering the financial status and wealth. We have lost our social values and cheerful
blessing of togetherness. The present generation are more happy celebrating Valentine’s Day
rather than Holi and Diwali.

Food, Clothing and Dialect

Indian food, clothing and languages are varied with respect to different states. The food varies in
its taste, but every food has its own nutrient value and every region is specified and rich in its
medicinal preparations with the home remedies. Even the clothing varies in different states which
is very much particular in maintaining the dignity of woman. The varies cuisines from all over the
world though have different flavours to add, still the food ingredients that have inflicted with much
popularity are the junk food items which has increased the health disorders in the country. Again
the dressing like the suitings for the males are an inappropriate match for the Indian type of climate.
The female dresses are again a way of distraction to the perverted minds.

Even the Indians are not very much in favour of promoting their mother tongue or our national
language. Instead the youth today consider it to be a shameful condition to speak in their national
language Hindi. The way the foreign languages are getting prevalent in India like the French,
German and Spanish, right from the school level, is the example of how much we provide
importance to Indian languages in comparison to the foreign ones.

Employment and the Agricultural Sector

India was predominantly an agricultural based country. With the advanced globalization and
cropping up of MNCs, the farming has lost its prime value in India. Agricultural science has the
least focus amongst the youngsters who consider farming as a shameful profession and look down
upon the same. Employment through MNCs have lucrative deals attracting the bulk of manpower
who are working for the other countries as their customer care representatives. We are losing our
health and our status and slowly getting to the age of economic slavery due to these MNCs. This is
what the globalization has provided Indians through their emergence.

Conclusion

To conclude we can call Globalization as a slow spreading risk factor that has covered almost the
entire country with its severity. With some positivity of having a generalised knowledge of the
culture throughout the world and the happening and incidences globally, still the major negative
impacts are quite alarming for our country. Hence, we need to more very cautiously with the
globalization process preserving our nation’s pride and maintain our cultural prestige.

Advantages and disadvantages of MNCs to the Host Country

Advantage

 One of the main advantages to the host country is that MNCs boost their
economic growth. They bring with them huge investments and capital. And
then through subsidiaries, joint ventures, branches, factories they promote
 rapid industrial growth. In fact, MNCs are known as the messengers of
progress.
 A multinational corporation helps the technological growth of the country
as well. They bring new innovations and technological advancements to the
host country. They help modernize the industry in developing countries.
 MNCs also reduce the host countries dependence on imports. Imports
reduce while exports from the country see a rise.
 All MNCs have enormous capital and resources at their disposal. A good
portion of such resources is invested in R&D. This can be very beneficial to the
host countries where they set up their R&D facilities.
 Multinational corporations also promote maximum utilization of the
country’s resources. This, in turn, leads to economic development.

Disadvantages

 A multinational corporation only has a profit motive. Their interests may

not align with the national interests of the host country and be harmful to
their economy and development
 In some host countries, the presence of MNCs can restrict competition and
may even cause a monopoly or monopolistic competition.
 They also charge heavy fees and charges in their host countries. And move
all the profits to their home country. This outflow of foreign exchange can be
detrimental to the host country.
 They also use tactics like transfer pricing to avoid heavy tax liabilities

International codes of Business Conduct

Whistle blowing and its codes
Unit IV: Environment Ethics, Marketing Ethics & Ethics in HRM –
India’s Environment Policy, Environment Risk Management, Environment Audit,
Areas in Marketing Ethics, Ethics in HRM, Role of HRM in creating an ethical
organisation.