Module II

Managerial Ethics

•Categories of management morality

•Ethical Problems-Dilemma at Work-Sources and
Resolutions
•Overview of Creative Accounting-Its role in
business scandals
•Corporate Ethical Leadership
•Whistle Blowing
 Categories of management morality

• Introduction:
• Management ethics is the ethical treatment of
employees, stockholders, owners and the public
by a company.
• It is the study of standards of business behavior
which promote human welfare and the good
Ethics in the workplaces helps ensure that when
leaders and managers are struggling in times of
crises and confusion, they retain a strong moral
compass.
• Managerial ethics is a set of principles and
rules dictated by upper management that
define what is right and what is wrong in an
organization.
• It is the guideline that helps direct a lower
manager's decisions in the scope of his or her
job when a conflict of values is presented.
• Three types of management ethics or standards of conduct are
identified by Archie B. Carroll:
• 1. Immoral management:
• It implies lack of ethical practices followed by managers.
Managers want to maximise profits even if it is at the cost of legal
standards or concern for employees.
• Immoral management not only lacks ethical principles but also is
actively opposed to ethical behaviour. This perspective is
characterized by principal or exclusive concern for company gains,
emphasis on profits and company success at virtually any price,
lack of concern about the desires of others to be treated fairly,
views of laws as obstacles to be overcome, and a willingness to
"cut corners".
• 2. Moral management:
• According to moral management ethics, managers aim to
maximise profits within the confines of ethical values and
principles. They conform to professional and legal standards of
conduct. The guiding principle in moral management ethics is “Is
this action, decision, or behaviour fair to us and all parties
involved?”
• In contrast to immoral management, moral management strives
to follow ethical principles and percepts. While moral managers
also desire to succeed, they seek to do so only within the
parameters of ethical standards and the ideals of fairness, justice,
and due process. As a result, moral managers pursue business
objectives that involve simultaneously making a profit and
engaging in legal and ethical behaviours.
• 3. Amoral management:
• This type of management ethics lies between
moral and immoral management ethics.
Managers respond to personal and legal ethics
only if they are required to do so; otherwise
there is lack of ethical perception and
awareness.
• There are two types of amoral management:
• A-Intentional: A moral managers do not
include ethical concerns in their decision -
making, or behaviour, because they basically
think that general ethical standards are more
appropriate to other areas of life than to
business.
B- Unintentional:
• Managers do not deliberately avoid ethical
practices but unintentionally they make decisions
whose moral implications are not taken into
consideration.
• Overall amoral managers pursue profitability as a
goal and may be generally well meaning, but
intentionally or unintentionally they pay little
attention to the impacts of their behaviours on
others.
Ethical Problems-Dilemma at Work-
Sources and Resolutions
• All of us, as producers, distributors and even as
consumers, confront situations where our moral
behaviour is put to test.
• There are innumerable occasions when they may have to
fight in courts, sellers try to suppress facts about their
products or services; buyers collude with sellers in order
to evade cases and taxes that are due to the government.
• Buyers more often refuse to take bills if taxes are added
to the prices they pay for the products they buy.
• On every such occasion, we come across an ethical
dilemma. In this chapter, we analyse the whys and
wherefores of such dilemmas and how these can be
surmounted by moral and upright behaviour.
 What is an ethical dilemma?
• A dilemma is a situation where a difficult
choice must be made between two or more
options.

• An ethical dilemma is a moral situation in

which a choice has to be made between two
equally undesirable situations.
 Conti…
An ethical dilemma is a moral problem with a choice
between potential right and wrong. Some questions
to consider are

• Who will be helped by what you do?

• Who will be hurt by what you do?
• What are the benefits and problems of such a
decision?
• Will the decision survive the test of time?
 What is business Dilemma?
• A business dilemma exists when an
organisational decision make faces a choice
between two or more options that impacts on
(a) the organisation’s profitability and
competitiveness, and (b) its stakeholders.
• In situations of this kind, one must act out of
prudence to take a better decision. As we can see,
many of these ethical choices involve conflicts of
values.’
• According to Louis Alvin Day, these conflicts can
arise on different levels. ‘Sometimes, there is an
inner conflict involving the application of general
societal values.’ A production manager, when
asked to produce a commodity by his company
may face an ethical dilemma, when he knows that
it will harm the large number of consumers who
buys and uses the same.
• Sometimes, there may arise a conflict between general
societal values, as in the case of minimizing harm to
others and professional values. For example, news
reporters may willingly hide a sacrilege a mob committed
in a place of worship if they feared that it would result in
a communal frenzy and mass slaughter.
• ‘Ethical dilemmas involve problem solving situations in
which decision rules are often vague or in conflict.’ The
outcome of an ethical decision cannot be predicted with
any degree of accuracy or precision.
• We cannot be sure whether we have made the right
decision; nor can any one tell us so. There is neither a
magic formula nor a software available to find a solution
to this problem.
• Even the most astute businesspersons do
commit ethical mistakes while deciding
business issues. In such cases, people have no
other alternative but to think well and deeply
before they make decisions and once decided,
to take the responsibility for such decisions.
• A person’s intentions and what factors would
prompt him or her to take the final decision
are the ‘last steps in the ethical decision
making process’.
• When peoples’ intentions and their final
decisions are at variance with one another,
they may feel guilty for what they have done.
Businesspersons and professionals come
across several such situations in their lives.
• An advertising agent may be asked by the director of a
mediocre B-school to draft an advertisement for
admission stating that since its inception, the institute has
100 per cent placement.
• Though the advertiser knows it to be untrue, he or she
may be prompted to draft and release the blatantly
untrue advertisement due to extraneous factors.
• The advertiser’s refusal to release the advertisement
would mean loss of business, income and loss of a big
client, all of which would affect the bottom-line of the
company’s business.
• The management may argue that as an advertising
agency, they were expected to act according to the wishes
of their client. Personally, the advertiser may also be
affected if he or she disagrees with the boss, which might
adversely impact his or her career and income. These
external factors might influence his or her decision in
favour of a resolution to his or her ethical dilemma
Fig. 1 Structure of Ethical Dilemma
• (Fig. 1). This decision might be unethical
though the agent knows it is morally wrong.
Such wrong decisions may lead to a feeling of
guilt in a person.
 HOW ETHICAL DILEMMAS IN BUSINESS
AFFECT THE STAKEHOLDERS?

Fig. 2 Ethical Dilemma in Business

Ethical dilemmas in business can be best explained by the

triangle in Fig. 2 with the stakeholders as its vertices.
The stakeholders in this case can be broadly classified into
shareholders, employees and the society at large.
• Shareholders are the real owners of the company
through their shareholdings in the firm. They
expect a decent return on their investments (ROI).
Corporations have to repay them for the
opportunity costs they have incurred in investing in
their firm. They have to be compensated through
dividends, bonuses, bonus shares etc.
• In many corporations, the management is
predominantly loaded with promoter family
members holding a few shares. For instance,
before the Indian economy opened up many
promoter families had as little as 1.5–3 per cent
shareholdings in the companies they had
promoted, while the rest of the capital was
contributed by the public, government-owned
financial institutions and others.
• These promoter families, all the same, ran the
corporations as if they were their personal
fiefdoms and resorted to ‘asset-stripping’ and
siphoned off the profits. The shareholders are
given a raw deal in spite of their higher
stockholdings.
• In other cases, corporations themselves
indulge only in bettering the interests of the
shareholders leaving the employees and the
society high and dry. Such companies devote
themselves entirely in furthering the interests
of the promoter families and their
shareholders. The employees are given a raw
deal. One look at the employee attrition rate
would be an eye-opener.
• At the other extreme, in some organizations,
employees become militant and demand huge
bonuses even when the organization itself is
facing severe losses.
• The unions demand huge bonuses every year
and at the slightest provocation go on strikes,
forcing the embattled management to declare
lock-outs causing huge financial losses, and
losses in market share. There had been
numerous such instances in India.
• In Kerala and West Bengal several industries
had to be closed because of communist-led
militant trade unions. Even elsewhere, in
Mumbai and Coimbatore, hundreds of cotton
textile mills had to be closed because of high
workers’ demands even when these units
were running into losses.
• Society can be construed as creditors,
competitors, suppliers, distributors and the
common public in and around the organization.
Corporations have to pay their suppliers on time.
They have to repay their creditors due
instalments of capital and the interests in time.
• They have to have partnership relations with
their distributors, wholesalers and retailers so
that all of them benefit from the channel
partnership.
• Corporations owe a lot to the society at large. A
corporation, for instance, utilizes the
infrastructure, resources, trained manpower and a
host of other things provided by the society.
• So it has to repay with gratitude what it receives
from the society. After all, the organization is there
because the society allows it to be there. It is
because managements have understood the logic
behind this reasoning that they are coming
forward increasingly to show their concern for
public welfare, especially those of the
disadvantaged sections of society in and around
their facilities, and some of them, even beyond.
• When there is an equitable distribution of
wealth among all the three, namely, the
shareholders, employees and the society, there
will be peace and harmony and all-round well
being.
• The corporation will earn the goodwill and the
support from all of them. If this balance is tilted
in favour of anyone in particular, then the
corporation will be in trouble ultimately.
 Negative Image
• Negative image is the bad impression of a
company or any individual because of wrong or
dishonest activity.
• only focusing on the economic profit rather
than social welfare.
• low quality products.
• Most often companies have negative image to
favor anyone of the stakeholders
 Corporate Dilemma Over Ethics
• Several corporate managements are in a dilemma
whether it is worth their while to act ethically and
practice corporate governance in their companies.
• Investing in ethical practices and being fair to all
stakeholders will cost the corporates dearly. Therefore,
most of them are in a dilemma.
• Moreover, in business, more than elsewhere, we are
faced with moral and ethical dilemmas daily. We are
faced with moral choices not only between right and
wrong, but also between right and right.
• According to Joseph Badaracco, ‘We have all
experienced situations in which our
professional responsibilities unexpectedly
come into conflict with our deepest values.
We are caught in a conflict between right and
right. And no matter which options we
choose, we feel like we've come up short.’
• Those in business come across several ethical problems
that cause ethical dilemmas. The following are some
instance:
• They feel that there is lack of clear linkage between
business ethics and financial success; they know of
several instances where unethical businesspersons
flourish and often enjoy fruits of others’ labour, while
many others, scrupulously honest and ethical, have
failed in their businesses and fallen by the wayside;
there is no magical formula that would help in
resolving such a dilemma.
• They are not clear as to how much they should
invest in the business ethics system; they would
like to know how much is good enough.
• They are unclear about the right balance
between business ethics and the investment
required for the same; many business concerns
may be at a loss to know when and where to
strike a balance in the allocation of time, efforts
and resources between the two.
• The seemingly long gestation periods and the
lack of short-term gains also is an obstacle.
Investments in ethical business may be large, in
diverse areas and multi-dimensional. They may
bear fruits after a very long time.
• For instance, companies that are working in
restoring ecological balance, may have to wait
very long to know the fruits of their labour.
Sometime, it may be even a fruitless wait.
 Sources of Ethical Problems
• According to Keith Davis and William C Frederick ethical
challenges in business take several forms and raise
different kinds of ethical dilemmas.
• Ethical challenges and their attendant dilemmas may
arise due to
(i) failure of personal character;
(ii)Conflict of Personal Values and Organizational Goals:
(iii) Organizational Goals Versus Social Values:
(iv) Personal Beliefs Versus Organizational Practices:
(v)Production and sale of hazardous but popular products:
• Added to these, there may arise other ethical
challenges when corporations cross boundaries
and become multinational companies.
• Newer technologies, diverse religious, cultural
and social beliefs, different economic systems,
political systems and ideologies may bring in their
own dilemmas and problems. The issues and
problems confronting business are large, varied
and ever growing.
• Different functions of management
(marketing, production, financial, human
resource management, sales, service, etc.)
throw up different problems and dilemmas.
• ‘The primary tasks for business are to be
aware of the ethical dimension, to learn how
to reason ethically as well as economically,
and to incorporate ethical considerations into
the firms’ operations.’
 Sources of Ethical Problems
I. Failure of Personal Character: A major source of
ethical problems is failure of personal character.
• Companies, through no fault of their own, may
recruit workers whose personal values are not
desirable, without knowing the workers’
background. When they recruit their
employees, they look for people with
educational qualifications and experience that
will match their job profiles.
• If the recruiters know that among otherwise
qualified persons, some are undesirable, they
will weed them out, but it is very difficult to
spot persons with unethical qualities or to
anticipate them to be so in future or to
measure their ethical nature.
• Without such knowledge if recruiters take
them in, those employees ‘may embezzle
funds, steal supplies from the company, pad
expense accounts, take unjustified leave, shirk
obligations to fellow-workers, take bribes for
favouring suppliers, use inside information for
their personal benefit and to the detriment of
others’.
• Such unethical persons reflect the manner of
their upbringing, early family and childhood
experience, the type of schools they attended,
the friends they had, and values of their
immediate society.
• Since business does not have an ‘ethics
screen’, if it recruits and employs some such
persons, it is not to be blamed for the
situation.
II Conflict of Personal Values and Organizational
Goals: The company uses methods or pursues
goals unacceptable to the manager.
• Reported case: George Couto, an employee of
Bayer AG exposed that Bayer AG used to re-label
Cipro and sell it to another pharmaceutical
company, Kaiser Permanente, with a different
identification number so that it could claim more
money from the Medicaid programme.
• Another source of conflict that gives rise to an
ethical dilemma is when the company uses
methods or pursues goals unacceptable to the
manager or an executive.
• A typical example was that of George Couto, a
marketing executive of the pharmaceutical
giant, Bayer AG. In 2003, the company hatched
a conspiracy to overcharge the American
Medicaid programme for the antibiotic Cipro.
• Thanks to Couto’s effort to let the country know
of the conspiracy, Bayer AG pleaded guilty to the
criminal charge and paid a fine of $257 million
when Couto’s exposure brought to the
knowledge of public authorities (Food and Drug
Administration) that Bayer AG used to relabel
Cipro and sell it to another pharmaceutical
company, Kaiser Permanente, with a different
identification number so that it could claim more
money from the Medicaid programme.
• In this case, Couto’s personal values conflicted
with the goal of Bayer, which was to profit by
overcharging the Medicaid programme by
duping the authorities.
• He had heard Helge Wehmeier, head of Bayer’s
US Operations say in a compulsory ethics
training programme: ‘You will never be alone in
adhering to the high standards of the law’ (in
following ethical business) and continued
‘should you feel prodded, speak to a lawyer or
call me. I am serious about that’.
• In most cases, companies resort to unethical
practices due to the following two reasons:
• intensive competitive pressures; and
• exclusive focus on economic goal of making
profit.
• Employees like George Couto were not trouble
makers but, in fact, trouble shooters. Their
personal values and goals of their companies
threw up an ethical dilemma.
III. Organizational Goals Versus Social Values:
• Activities of a company taken as unethical by
the stakeholders, due to changing social
scenario or milieu.
• Johnson & Johnson cleared all retail shelves of
its Tylenol analgesic within days of the
discovery that some containers have been
poisoned.
• company acted with alacrity with a view to
protecting their reputations in the market
place as responsible companies and being
aware of the high value placed by the public
on consumer safety. Obviously, they were
praised for their ethical alertness.
• Though company was in no way directly
responsible for the tragic deaths, they decided
that in matters of life and death, it is better to
be proactive than reactive, even though these
withdrawals cost the company dearly in money,
but in the long run, company made up all losses
and preserved their trust with the stakeholders.
IV. Personal Beliefs Versus Organizational
Practices:
• Ethical dilemmas in organizations arise when
they employ multi-racial and multi-religious
employees. Several organizations are accused
of racial discriminations and gender bias in the
work place and have been paying fines of
billions of dollars or opting for out-of-court
settlements
• In the United States, mega corporations like
Boeing have paid huge payments ‘for gender bias
and racial profiling’.
• Infosys Technologies paid its former employee
Reka Maximovitch $3 million in compensation in
an out-of-court settlement ‘for alleged verbal
sexual harassment, unwanted sexual
advancements and unlawful termination of
employment’ against the company and Phaneesh
Murthy, the highest paid America-based
executive of Infosys.
• In India too, there have been instances when
companies run by a majority community
organize religious functions in their premises
in which persons belonging to other faiths are
made not only to contribute towards expenses
but also take part in religious rituals.
• Several ethical dilemmas may arise because of
this.
 V. Production and sale of hazardous
but popular products:
• In our society, there are a number of harmful
products that is produced and sold to their
users notwithstanding the fact that a vast
majority of people is aware of their harmful
effects.
• People know that smoking cigarettes causes
cancer, excessive drinking causes accidents
and liver problems, use of drugs causes both
psychological and mental problems, and yet
these products are being produced and
consumed.
• Is this practice ethical?
• Ethicists may pose a very relevant question:
Those who defend sale of many harmful and
obnoxious products argue that in a free
society consumers use these products on their
own volition, without any outside compulsion.
Producers only cater to the consumers’
demands.
• If due to ethical considerations, these
products are banned, it will create a black
market leading to adulteration, profiteering
and several undesirable consequences.
Additionally, it will cause unemployment and
loss of incomes to families.
• If for instance, companies like ITC Ltd. that
produces cigarettes, and United Breweries Ltd.
that manufactures and sells liquor are to be
closed, will it not throw thousands of its
employees out of their jobs? What, then,
happens to their families?
• On the other hand, there are others who argue
that allowing business people to produce these
harmful products increase social costs through
higher health and insurance costs. Therefore, it
calls for strong social controls on businesses that
produce and sell these risk items such as alcohol,
cigarettes and harmful drugs.
• Where does the ethical burden lie, when business
sells products known to be actually or potentially
harmful to society?
• ‘A cigarette is a roll of tobacco, fire at one end,
and a fool at the other,’ said G.B. Shaw.
• Cigarettes cause a series of diseases: lung
cancer, heart disease, circulatory disorders and
yet companies like Philip Morris and ITC
produce billions of cigarette sticks, sell them
and make huge profits.
• Likewise, alcohol causes vehicular mishaps,
irreversible brain damage, kidney failure,
accentuates heart problems, and results in
cirrhosis of the liver.
• Yet not only are companies like United
Breweries permitted to manufacture liquor,
sell and make money, but many state
governments like Tamil Nadu have their own
distribution outlets to sell it.
• The ostensible purpose is, of course, that the
money thus earned is badly needed to provide
welfare measures for the poor.
• But this reasoning does not seem to make any
sense when it is known that it is mostly the
recipients belonging to the very same poor
families who waste their incomes and destroy
their health through heavy drinking.
• Often, they drink with the money and the
resources provided by the government, leaving
their families penniless and starving.
• Is the principle of caveat emptor in mercantile
law to be adapted suitably in all these cases?
Even that is now being relegated in view of
consumer rights!
• Should individual rights and free choice
override social costs?
• Could drunken drivers and carefree smokers
deprive others of their legitimate rights to life
and safety?
• Even items like hard drugs, dynamite and
guns—could free trading in these be ethical?
• Will the ineffective Statutory Warning in the
form of an inscription on the cigarette packet
‘Smoking is Injurious to Health’ legitimatize
the unethical business?
• Could drunken drivers and care free smokers
deprive others of their legitimate rights to life
and safety?
• Could free trading in hard drugs, dynamite
and guns be considered ethical?
• Will the ineffective control ‘Smoking is
Injurious to Health’ and that too give n as a
‘Statutory’ warning legitimatize the unethical
business?
VI. Other Ethical Challenges:
• Price fixing and profiteering due to monopoly,
and often by artificially created scarcity.
• Shifting unfair shares to the producer
stakeholders and employees.
• Discriminatory wage structure
• Shifting or locating business at the cost of society
• Overworking women and children.
 WHY DOES BUSINESS HAVE A
NEGATIVE IMAGE?
• We have already noted that ‘Competitive
pressures, individual greed, and differing cultural
contexts generate ethical issues for organizational
managers’.
• Further, in almost every organization some people
will have the inclination to behave unethically (the
ethical egoist)—necessitating systems to ensure
that such behaviour is either stopped or detected
(after unethical behaviour occurs) and remedied.
• Business has always been portrayed negatively by
media, books, and movies.
• When companies do some good, they are
hardly highlighted, while any wrongdoing by
them is heavily publicized. There are several
reasons why business has to confront ethical
issues.
• When consumers in particular, and people in
general observe that most of the businessmen
have only one objective, namely, the single
minded pursuit of profit even at the cost of
consumers’ legitimate interests;
• when they try to profiteer; create artificial
scarcity to charge a premium price for their
goods and services; use low-quality inputs, do
not honour their warranties and guarantees;
people are prone to have a negative image of
business.
• There are also many enterprises that are
honest, scrupulous in their dealings and are
passionately involved in community welfare
and environmental protection, but they are
not publicized much by the media.
 WHY BUSINESSES SHOULD ACT
ETHICALLY?
There are a number of reasons why business should act
ethically:
• to meet stakeholder expectations (and protect business
reputations);
• to prevent harm to the general public;
• to build trust with key stakeholder groups;
• to protect themselves from abuse from unethical
employees and competitors;
• to protect their own employees; and
• to create an environment in which workers can act in
ways consistent with their values.
How corporates are observing ethics in their organization?

• organizations have started to implement ethical

behaviour by the following actions:
• publishing in-house code of ethics
• employing people with a reputation for high
standards of ethical behaviour at the top levels
• starting to in corporate consideration of ethics
into performance reviews
• Starting to reward ethical behaviour
• conducting an ethics audit
 CODE OF PERSONAL ETHICS FOR
EMPLOYEES
• Most company codes list the following
values that are expected from their
employees:
• Respect confidential information to which
you have access.
• Maintain high standard of professional
responsibility.
• Avoid being placed in situations involving
conflict of interest.
• Act with integrity.
• Do not discriminate against anybody or
anything on any bias.
• Maintain professional relations based on
mutual respect for individuals and
organizations.
• Be committed to the goals of the organization.
• Do not give up your individual professional
ethics.
 HOW TO CREATE AN ETHICAL
WORKING ENVIRONMENT?
• Make the decision to commit to ethics.
• Recognize that you are a role model by definition, by
your action, and by your values.
• Assume the responsibility for instilling ethical
behaviour.
• Articulate your values.
• Train the staff.
• Encourage open communication.
• Be consistent.
• Abide by the laws of the land.
 How to resolve a dilemma?
IS A POLICY, A DECISION OR AN ACTION

Ethical? Unethical?
 ASK THREE QUESTIONS

• To resolve these questions that create a dilemma,

ask three
• questions
• Utility: Do the benefits exceed the cost ( Share
Holder) ?
• Rights: Do they respect human rights (Society) ?
• Justice: Does it distribute benefits and burdens
evenly ( Employees) ?
 HOW TO RESOLVE ETHICAL
DILEMMAS?
• Ethical issues take centre-stage in organizations
today as managers, executives and employees
face increasingly complex decisions.
• Most of these decisions are made in an
organizational environment with different
value systems, moral philosophies, competitive
pressure and political ideologies, all of which
provide ample opportunity for misconduct.
• A KPMG survey in 2000 which revealed that
76 per cent of a the nearly 24,000 workers
covered in the survey indicated that they had
observed violations of the law or of company
standards during the previous year.
• With such abundance of opportunities for
unethical behaviour, ‘companies are
vulnerable to both ethical problems and legal
violations if their employees do not know how
to make the right decisions’.
• Therefore, it is absolutely necessary that each
company puts in place an ethics programme and
makes it known to all its employees so that they
know its values, mission and vision and comply
with the policies and codes of conduct, all of
which create its ethical climate.
• Many MNCs and several Indian companies
have such ethics programmes and their
employees are being made aware of the
ethical values they stand for. To a great extent,
this awareness reduces ethical dilemmas.
• There are two basic approaches in resolving
ethical dilemmas: deontological and
teleological.
• Under the deontological (action-oriented)
approach, an ethical standard is consistent with
the fact that it is performed by a rational and
free person.
• These are the inalienable rights of human
beings and reflect the ‘characteristic and
defining features of our nature’.
• These fundamental moral rights are inherent
in our nature and are universally recognized as
part of human beings, defining their very
nature.
• These fundamental human characteristics are,
rights to fairness, equality, honesty, integrity,
justice and the respect of our dignity. If we follow
a deontological outlook while analysing an
ethical dilemma, we are led to a much narrow
focus.
• We confront such questions as: ‘Which actions
are inherently good?’ ‘Does it respect the basic
rights of everyone involved?’ ‘Does it avoid
deception, coercion and manipulation?’ ‘Does it
treat people equitably?’
• Ethicists are of the view that the major problem with
this approach is its inflexibility and uncompromising
stance. There could be occasions when people may
lie to help someone in dire straits.
• A co-worker may feign ignorance if the management
makes a big fuss about the loss of worthless scrap of
asbestos when he or she knows that one of his or
her colleagues has taken them to provide roof
material for inhabitants of several hutments who
otherwise would suffer when it rained cats and
dogs.
• It may produce more good than harm.
Likewise, a person may steal a loaf of bread to
feed a group of hungry children. A
deontological approach to either of these
cases will still condemn these acts.
• The other approach to ethical dilemmas and
their resolution lies in teleological (results-
oriented) ethics. This approach to ethics takes
a pragmatic, commonsense, layman’s
approach to ethics.
• According to this school of thought, ‘The moral
character of actions depends on the simple,
practical matter of the extent to which actions
actually help or hurt people.
• Actions that produce more benefits than harms
are “right”; those that don’t are “wrong”.
• A teleological approach to the above mentioned
examples will tend to condone those acts of
charity.
• When we analyse an ethical dilemma in the
context of these two approaches with a view
to finding a solution to it, then we see the
basic elements converge in determining the
ethical character of our actions.
• While one school of thought points to the
actions, the other points to the results that
arise from the actions.
• Between them they reflect a wide spectrum of
internal and external factors of human action
that have moral consequence.
• While the deontological and teleological
approaches to ethical issues seem to
contradict each other in theory, in practice
they complement each other.
• In the process of identifying and finding
pragmatic solutions to ethical dilemmas, we
should not ignore either of them, since each
acts as a check on the limitations of the other.
• From these two philosophical standpoints to
ethics, we can draw two methods for resolving
ethical dilemmas; one that focuses on the
practical consequences of what can be done,
and the other that focuses on the actions.
• While the first school of thought argues that as
long as no harm is done, there is nothing
wrong, the other considers that some actions
are always wrong.
• The Center for Ethics and Business offers ‘a
brief, three-step strategy’ in which both the
deontological and teleological approaches
converge.
• STEP 1: ANALYSE THE CONSEQUENCES
• Assuming that the resolution to the ethical
dilemma is to be found within the confines of
law—ethical dilemmas that arise in business
should be resolved at least within the bare
minimum of law and legal framework as otherwise
it will lead to a sort of mafia business—one has to
look at the consequences that would follow one’s
proposed actions.
• And when one has several options to choose from,
there will be an array of consequences connected
with each of such options, both positive and
negative.
• Before one acts, answers to the following
questions will help find the type of action that
can be contemplated:
• Who are the beneficiaries of your action?
• Who are likely to be harmed by your action?
• What is the nature of the ‘benefits’ and ‘harms’?
• The answer to this question is important because
some benefits may be more valuable than others.
• Letting one enjoy good health is better than
letting one enjoy something which gives trivial
pleasure.
• Likewise, some ‘harms’ are less harmful than
others.
• How long or how fleetingly are these benefits and
harms likely to exist?
• After finding answers for each of one’s actions,
one should identify the best mix of benefits or
harms.
• STEP 2: ANALYSE THE ACTIONS
• Once you identified the best possible option,
concentrate on the actions. Find out how your
proposed actions measure against moral
principles such as ‘honesty, fairness, equality,
respect for the dignity and rights of others,
and recognition of the vulnerability of people
who are weak, etc.’
• Then there are questions of basic decency and
general ethical principles and conflicts
between principles and the rights of different
people involved in the process of choice of the
options that have to be considered and
answered in one’s mind.
• After considering all these possible factors in
the various options, it is sensible to choose
the one which is the least problematic.
• STEP 3: MAKE A DECISION
• Having considered all factors that lead to
choices among various options, analyse them
carefully and then take a rational decision.
• This three-step strategy should give one at
least some basic understanding to resolve an
ethical dilemma.
 HOW DOES A COMPANY ESTABLISH
ETHICAL STANDARDS?
• It is very necessary these days for organizations
to establish ethical standards so that their
workers have least doubts as to what their
company stands for. Most companies in
advanced countries and some even in
developing countries have developed their own
codes of conduct which provide some ethical
standards for their employees.
• Such codes of conduct may not help in
resolving every ethical issue that arises but
they help employees and executives deal with
‘ethical dilemmas by prescribing or limiting
specific activities’. It should be emphasized
here that it is not enough for a company to
merely have the codes of ethics, but these
should be effectively communicated to
employees so that they are aware of them and
abide by them.
• The effectiveness of the exercise, of course,
will depend on how serious the top
management is in implementing them, and
the good example they set in observing them.
In a widely reported instance in Wipro
Technologies, a very senior executive who had
put in long years of service in the company
and had contributed significantly to its growth
had to be dismissed because he claimed in his
travel expenses more than his due.
• Disciplinary actions like this send a strong
signal that the company means business in
expecting ethical behaviour from its
employees and it will get it in a large measure.
Generally, taking such a severe action against
one of the senior most executives will cause a
serious ethical dilemma to the management
and resolving it in a manner that Wipro’s top
brass did is an abject lesson in ethical
management.
• Think and reflect about yourself, about the
management, about the people, and about
the relationship and the values you wish to
incorporate. Create time for thinking and
reflection. Periodically take time off to reflect
and consider ‘where I am’, ‘where I have to go’
and ‘how I am going there’.
 WALTON’S SIX MODELS OF BUSINESS
CONDUCT
• To understand business conduct, Walton13 has
classified it into six models.
• The austere model: It gives almost exclusive
emphasis on ownership interest and profit
objectives.
• The household model: Following the concept of
an extended family, the model emphasizes
employee jobs, benefits and paternalism.
• The vendor model: In this model, consumer
interests, tastes and rights dominate the
organization.
• The investment model: This model focuses on the
organization as an entity and thus on long-term profits and
survival. In the name of enlightened self-interest, it gives
some recognition to social investments along with
economic ones.
• The civic model: Its slogan is ‘corporate citizenship’. It goes
beyond imposed obligations, accepts social responsibility
and makes a positive commitment to social needs.
• The creative model: This model encourages the
organization to become a creative instrument, serving the
cause of an advanced civilization with a better quality of
life. Employees in such organizations behave and perform
as artists, building their own creative ideas into actions,
resulting in new contributions not originally contemplated.
• These six models may be thought of as points on a
continuum from low to high social responsibility. As a
result, employees become proud of their company’s
performance, and develop a sense of belonging and
creativity.
• Regardless of the model adopted by an organization,
one of its most important jobs is to establish and blend
its value together so that it becomes a consistent,
effective system that is known and accepted by the fair
primary claimant groups—investors, employees,
customers and society, including government.
• The system must be strong enough to
withstand changes by partisan pressure
groups but flexible enough to move with the
changing society.
• The primary responsibility of management is
to reduce conflict areas among different
claimants for sharing benefits of business and
to bring about harmony of interest among
diverse stakeholder groups.
• Frederick C. Crawford has rightly expressed this idea
thus: Management stands in the middle of a triangle.
At the lower right corner is labour, with a rope round
the management’s right leg yanking for raises. At the
lower left corner is capital, with a rope round
management’s left leg, yanking for dividends. The top
corner, the market corner, is the worse. It has a rope
round the management’s neck like a noose yanking for
ever bigger bargains.
• It is necessary, therefore, that an enlightened
management must continuously balance the diverse
objectives without allowing any conflict to arise
between two or more objectives.
Overview of Creative Accounting-Its
role in business scandals
 INTRODUCTION
• The accountants of joint stock companies prepare
financial statements and accounting reports, which
have taken on a public character; they have become
basic data for the investors, employees, consumers,
financial institutions, regulators and the
Government.
• The accountant must ensure that all material
information about which an average prudent
investor ought to reasonably be informed and which
will not mislead the users of information, must be
disclosed fully, fairly and in very clear terms.
• Due to many reasons, the books and ledgers
presented by accountancy may have errors. It
was thought that the fraud both internal as well
as external has to be detected by the auditors
through their periodic audit.
• Now it is clear that auditors can only check for
the compliance of a company‟s books to
generally accepted accounting principles,
auditing standards and company policies.
• In this era of cutthroat competition, it
becomes very important for every business to
find new and innovative ways of running the
business and one of the new ways is creative
accounting as this assist management in
accomplishing personal goals.
• In this new system of accounting, the
preparers of accounts and reports try to find
out the loopholes in accounting rules to
reflect what the management wants to tell the
stakeholders.
• Managers may choose to exploit their
privileged position by managing financial
reports in their own favour.
 DEFINITIONS OF CREATIVE
ACCOUNTING
• A trick by which purposeful intervention is done in
reported figures to obtain the predestined results can
be termed as creative accounting.
• In the words of L. Griffiths, “Every company in the
country is fiddling its profits. Every set of published
accounts is based on books, which have been gently
cooked or completely roasted. The figures, which are
fed twice a year to the investing public, have all been
changed in order to protect the guilty. It is the biggest
con trick since the Torjan horse..... In fact, this
deception is all in perfect good taste. It is very
legitimate. It is creative accounting”.
• According to K. Naser, “Creative accounting is the
transformation of financial accounting figures from
what they actually are to what preparer desires by
taking advantage of the existing rules and/or
ignoring some or all of them”.
• Copeland defined creative accounting “Involves
the repetitive selection of accounting
measurement or reporting rules in a particular
pattern, the effect of which is to report a stream of
income with a smaller variation from trend than
would otherwise have appeared”.
• Thus, Creative accounting is considered an art
to manipulate the financial accounts, while
remaining within the jurisdiction of
accounting laws and rules to reflect what the
management wants to tell the stakeholders
instead of showing the actual position of the
company.
Creative Accounting

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 Creative accounting: Its role in Business
Scandals

• Accounting practices that follow required laws and regulations,

but deviate from what those standards intend to accomplish.
• Creative accounting capitalizes on loopholes in the accounting
standards to falsely portray a better image of the company.
Although creative accounting practices are legal, the loopholes
they exploit are often reformed to prevent such behaviors.

120
 Conti……..
• Creative accounting, also called aggressive
accounting, is the manipulation of financial
numbers, usually within the letter of the law
and accounting standards, but very much
against their spirit and certainly not providing
the “true and fair” view of a company that
accounts are supposed to.

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 Creative accounting
Could involve:

• Inflating reported profits and EPS

• Accounting for losses via balance sheet reserves and all
profits through P & L
• Reporting profits without generating equivalent cash
• Reporting lower borrowings
• Assets and liabilities may also be manipulated

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• The term “window dressing” has similar meaning when
applied to accounts, but is a broader term that can be applied
to other areas.

• In the US it is often used to describe the manipulation of

investment portfolio performance numbers.

• In the context of accounts, “window dressing” is more likely

than “creative accounting” to imply illegal or fraudulent
practices, but it need to do so.

123
 Methods of Creative Accounting
Innumerable, but managers can, for example,
manipulate income, expenses, assets and liabilities

1. Income Recognition
2. Interest payable e.g., capitalisation
3. Stock
4. Depreciation
5. Goodwill and Intangibles
6. Off balance sheet financing

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 Prevention of Creative Accounting:

• Those companies most at risk for fraudulent

financial reporting tend to be those that have
one or more of the following attributes:
• weak internal control; no audit committee; a
family relationship among directors and/or
officers; assets and revenue less than $ 100
million; and/or a board of directors dominated
by individuals with significant equity ownership
and little experience serving as directors of other
companies.
• To prevent creative accounting, the experts opine
that accountants and managers should divide the
duties of an internal control checklist.
• Furthermore, an independent audit committee
should always have someone with a strong
accounting background and audit experience who
deals directly with outside auditors.
• The investors should diversify their investment
portfolio to avoid the problems related to the
creative accounting by few unscrupulous
companies.
• The company has to adhere strictly to the
ethical values it has set itself with the long-run
and the short-run of the life of the company.
The accounting and accounting practices have
to be consistent and show to the investors
that it is following the ethical practices in all
its financial dealing as well as reporting.
 Accounting scandals
• Accounting scandals, or corporate accounting scandals,
are political and business scandals which arise with the disclosure
of misdeeds by trusted executives of large public corporations.

• Such misdeeds typically involve complex methods for misusing or

misdirecting funds, overstating revenues, understating expenses,
overstating the value of corporate assets or underreporting the
existence of liabilities, sometimes with the cooperation of officials
in other corporations or affiliates.

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 CREATIVE ACCOUNTING: SOME CASE
STUDIES
• Financial statement fraud has significantly increased
vagueness and instability in safety and liquidity of both
capital and debt market.
• Top-level management commits accounting fraud to
obscure true financial performance, to safeguard
personal status and boost personal income and gain.
• Middle and lower level management misrepresent
statements to hide their poor performance or to get
bonus and increment. Excessive use of creative
accounting led to the downfall of numerous high
profile companies.
• Collingwood reported on how a change in accounting method
boosted K -Mart‟s quarterly figure by some $ 160 million, by a
happy coincidence, distracting attention from the company slipping
back to being the largest retailer in the USA.
• Grover gave an example of US film industry, which claimed huge
expenses against successful movie to lower the remuneration of
writers, producers and actors. US SEC fined Microsoft heavily for
using manipulative revenue recognition policy. To hide substantial
profits, to avoid complacency and to report smoothed earnings to
its shareholder it recognized only a small percentage as revenue at
the time of sale and remaining amount was kept as provision for
further after sales service. Thus, major scandals must be studied for
„tactics to follow‟ and „lessons learned‟ to lessen the incidents of
such scandals in future. We have taken following examples to show
that the use of creative accounting practices lead to the collapse of
the company:
• World Com Scandal
• World Com was one of the biggest success stories of
the 1990s. World Com admitted in March 2002 that it
would have to restate its financial results to account for
billions of dollars in improper bookkeeping. Company
overstated its cash flow by booking $ 3.8 billion in
operating expenses as capital expenses and its founder
received $400 million in off-the-books loans. It agreed
to pay $ 500m to SEC, the highest fine ever imposed by
the regulator. The original figure of $ 1.5 billion was
scaled down as company declared itself bankrupt.
• Enron Scandal
• Enron Corporation was formed in July 1985. In
just 15 years, it grew to be America‟s seventh
largest company, employing 21000 staff in
more than 40 countries. Fortune magazine
named it the most innovative company in
America six years in a row. Its scandal was
discovered in 2001.
• Enron used creative tactics to lie about its profits
(earnings manipulation), used off-the-books
partnerships to conceal $ 1 billion in debt and to inflate
profits, imposed quarterly earnings targets for each of
the company‟s business unit based on EPS goals and
not on true forecasts, manipulated reserve accounts to
maintain the appearance of continual earnings,
structured earnings through fraudulent inflation of
assets values, manipulated California energy market,
bribed foreign governments to win contracts abroad,
used make-to-market accounting and created Special
Purpose Entities to move assets and liabilities of the
balance sheet.
• Apart from this, senior managers were
charged with insider trading and indicted.
Company filed for chapter 11, bankruptcy, its
auditor Andersen was convicted of
obstruction of justice for destroying Enron
documents.
• PARMALAT
• PARMALAT was founded in 1961. It was a leading
multinational Italian dairy and food corporation
company. However, in 2003 its frauds came under
scanner, when it failed to place bonds worth up to
EUR 500m with investors.
• The company had made several investment
disasters and fake transactions, used a scanning
machine to forged Bank of America document,
showed net profit of EUR 252 million by not
complying with accounting standards and to hide
these facts it performed accounting fraud of $ 20
billion.
• The company had taken some debts, which
were not disclosed in the account books, and
to pay off the debt liabilities, it had no funds
and subsequently went into administration in
December 2003.
• Health South Corporation
• Health South Corporation, a leading healthcare
service provider was founded in 1984 in Alabama,
USA.
• In 2003, it was discovered that to meet investor‟s
expectations the company overstated its income
by some $ 1.4 billion. It was also revealed that
from 1996, the company was engaged in
fraudulent accounting practices and overstated
its revenues by as much as 4700 percent.
• Xerox Corporation
• In June 2000, it was discovered that Xerox
Corporation has falsified its financial
statements for five years to boost income by
some $ 6.4 billion and improperly posted
revenues before they were actually made.
• Kanebo Japan
• Kanebo was a cosmetics and textile giant
incorporated in 1887. In 2003, a major
accounting fraud of Kanebo was revealed
which was measured as the largest fraud in
Japan. Over a period of five years, using
creative tactics the profit was inflated by $ 2
billion.
• Waste Management Inc
• Waste Management Inc, a foremost U.S.
company offering environmental services and
services for waste management, was founded in
1894 in Houston, Texas.
• In 2002, company‟s scandal came into exposure.
The tactics used by the company was
understatement of depreciation expense on the
company‟s property and equipment and thus
income was inflated by $ 1.7 billion.
• Bank of Credit and Commerce International
• Bank of Credit and Commerce International was
founded in 1972. It was a major international bank
operating in 78 countries with 30000 employees.
• In 1991, it was closed as it was involved in the largest
scandal in the financial history with more than $ 20
billion.
• More than $ 13 billion funds were unaccounted. Other
allegations against bank imposed include use of
bribery, money laundering and smuggling, sale of
nuclear technology and support of terrorism.
• Satyam Computer Services Limited
• Satyam Computer Services Limited, once a „rising star‟
in Indian outsourcing IT industry was founded by Raju
brothers in Hyderabad in 1987.
• It was an example of India‟s growing success. Satyam
won many prestigious awards like Global Peacock Award,
Leader in India in Corporate Governance and
Accountability etc.
• In 2007 Ernst & Young awarded, Mr. Raju with the
„Entrepreneur of the year award. From 2003-2008 the
company grew measurably. Its compound growth rate
was 35%, earning per share grew with more than 40%
compound rate and share price grew by over 300% over
that period.
• On 7th January 2009 Ramlinga Raju confessed a fraud of
Rs.7800 crore, consequently they were arrested for
cheating, breach of trust, forgery and criminal conspiracy
as criminals under IPC.
• Mr. Raju and the company‟s global head of internal audit
used a number of fraudulent tactics.
• They overstated assets, overstated income to meet
analyst expectations, used deceptive accounting
practices, falsified bank accounts to inflate balance sheet,
created fake accounts of customers to generate fake
invoices to inflate revenues, issued ESPOs(Employee Stock
Ownership Plan) to those who helped in preparing fake
bills , obtained loans with forged documents and used
many more tricks to satisfy their greed and ambitions.
• Interesting fact is that global auditing firm Price
water house Cooper audited firm‟s books for
nearly 9 years but did not uncover the frauds,
while Merrill Lynch discovered the fraud in merely
10 days.
• Thus, loopholes in accounting policies and rules,
unethical conduct of Raju brothers, questionable
role of auditors, inactive board of directors,
diligent role of bankers and ineffective whistle
blower policy are the major reasons for collapse of
Satyam.
 Summary of Companies with Nature of
Creativity Used
Company Nature of Creativity
World Com Inflated revenue by using improper bookkeeping, charged operating
expenses as capital expenses, received off-the-books loans

Enron Lied about its profits (earnings manipulation), used off-the-books

partnerships, imposed quarterly earnings targets based on EPS goals and
not on true forecasts, manipulated reserve accounts, structured
earnings through fraudulent inflation of assets values, manipulated
California energy market, bribed foreign governments, used make-to-
market accounting and created Special Purpose Entities to move assets
and liabilities of the balance sheet, used insider trading.
PARMALAT Entered fake transactions, used scanning machine to forged documents,
showed increased net profit by not complying with accounting
standards, performed accounting fraud.
Bank of Credit and Unaccounted funds, used bribery, money
Commerce laundering and smuggling, sale of nuclear
International technology and support of terrorism.
Health South Overstated income, engaged in fraudulent
Corporation accounting practices, overstated revenues by as
much as 4700 percent.
Xerox Corporation Falsified financial statements for five years to
boost income and improperly posted revenues
before they were actually made.
Kanebo Japan Over a period of five years, using creative tactics
the profit was inflated by $ 2 billion
Waste Management Understated depreciation expense on the
Inc company‟s property and equipment and thus
income was inflated by $ 1.7 billion.
Satyam Computer overstated assets, overstated income to meet
Services Limited analyst expectations, used deceptive accounting
practices, falsified bank accounts, created fake
Corporate Ethical leadership

What is ethical leadership??

Ethical leadership involves both acting and leading ethically

over time all the time.

147
 Why practice ethical leadership?

• Ethical leadership models ethical behavior to the organization

and the community.

• Ethical leadership builds trust.

• Ethical leadership brings credibility and respect, both for you

and for the organization.

• Ethical leadership can lead to teamwork.

148
• Ethical leadership creates a good climate within the

organization.

• If you have opposition, or are strongly supporting a position,

ethical leadership allows you to occupy the moral high ground.

• Ethical leadership is simply the right way to go.

• Ethical leadership affords self-respect.

149
 Conti….

• Ethical leadership is leadership that is involved

in leading in a manner that respects the rights
and dignity of others.

150
When and by whom should ethical leadership be
practiced?

151
 How do you practice ethical leadership?
General guidelines:

• Ethical leadership requires a clear and coherent ethical

framework on which the leader can draw in making
decisions and taking action.
• Your ethical framework should agree with the ethical
framework, vision, and mission of the organization or
initiative.
• Ethics should be a topic of discussion.
152
• Ethics should be out in the open.

• Ethical thought must be connected to action.

• Ethical leadership is a shared process.

Specific components of ethical leadership:

• Put the good of the organization and the general

good before your own interests and ego.

• Encourage the discussion of ethics in general

• Institutionalize ways for people to question your

authority.

154
• Consider the consequences to others of your
decisions, and look for ways to minimize harm.

• Treat everyone with fairness, honesty, and respect all

the time.

• Treat other organizations in the same way you treat

other people – with fairness, honesty, and respect.

155
 Specific components of ethical leadership
(cont.):
• act as a team inside and outside the organization.

• Communicate.

• Work to become increasingly culturally and interpersonally

competent.

• Take cultural sensitivity and cultural competence seriously.

• Take your leadership responsibility seriously, and be accountable

for fulfilling it.

• Constantly strive to increase your competence.

• Never stop reexamining your ethics and your leadership. 156

 WHISTLEBLOWING

Our lives begin to end the day we become silent

about things that matter.
-Martin Luther King, Jr.

157
 What is Whistle blowing?
• Whistle blowing is…

'raising concerns about misconduct within an organization or within an

independent structure associated with it'

(Nolan Committee on Standards in Public Life)

'bringing an activity to a sharp conclusion as if by the blast of a whistle‘

(Oxford English Dictionary)

'giving information (usually to the authorities) about illegal and underhand

practices‘
(Chambers Dictionary)

158
 INTRODUCTION
• If there is anything or any act or behaviour of an
employee that has evoked either strong endorsement or
condemnation in equal measure, it is what has come to
be known as “Whistle blowing.” We could cite the
following two quotes in support of this assertion.
• James Roche, the former president of General Motors
once observed: “Some critics are now busy eroding
another support of free enterprise — the loyalty of a
management team with its unifying values and
cooperative work. Some of the enemies of business now
encourage an employee to be disloyal to the enterprise.
• They want to create suspicion and disharmony and pry
into the proprietary interests of the business. However,
this is labeled —
industrial espionage, ...
• A whistleblower is a person who tells the public or someone
in authority about suspected dishonest or illegal activities
occurring in a government department, a public or private
organization, or a company.

• Of course, whistle blowing goes on in the private sector,

where some of the most famous figures include former Enron
Vice President Sherron Watkins

160
 TYPES OF WHISTLE-BLOWING

• Internal whistle blowing: who report misconduct to a

fellow employee or superior within their company.

• External whistle blowing: report misconduct to outside

persons or entities.

161
 How to Blow the Whistle
• Do it anonymously:
let the evidence speak for itself and protect yourself if possible

• Do it in a group:
charges have more weight and won’t seem like a personal vendetta.

• Present just the evidence:

leave interpretation of facts to others.

• Work through internal channels:

start with your immediate supervisor or follow the standard reporting
procedure

• Work through external channels:

go public (biggest risk)

162
 Negative & Positive effects of
Whistle-blowing
- effects: + effects:

• Loss of job/fired • Positive effects

• Loss of job • Others will be
responsibilities motivated to blow
• Harassment by whistle
superiors

163
 Ethical dilemma in whistle-blowing
• The mum effect
reluctant to blow the whistle

• The deaf effect

reluctant to hear the effect

• The blind effect

reluctant to see the need to blow the whistle

164
Satyendra Dubey Case Study

165
• Corruption in GQ ( Golden Quadrilateral) project became rampant,
unskilled labour and substandard materials were in place.
• Dubey sent a letter to Prime Minister and the concerned ministry
revealing the corruption
• He had requested that his name be kept secret, but his request was
not honored.
• No protection was provided in spite of death threats.
• He was murdered in Gaya, Bihar after fighting corruption in
the Golden Quadrilateral highway construction project.

166
 Case Study on Satyendra Dubey

• Three persons were on Saturday sentenced to

life imprisonment by a special CBI court for
murdering NHAI engineer Satyendra Dubey,
the young whistleblower who had exposed
corruption in the Golden Quadrilateral
highway project in Bihar in 2003.
• Special CBI court judge Raghvendra Singh
found Mantu Kumar, Udai Kumar, Pinku
Ravidas guilty of murdering the 31-year-old
IIT-Kanpur graduate and awarded life term to
them.
• Satyendra Dubey, a project engineer of the
National Highway Authority of India (NHAI)
who had exposed several cases of large-scale
flouting of rules and corrupt practices in the
construction project, was gunned down in the
early hours of November 27, 2003 in front of
the Circuit House in Gaya when he was going
to his residence after alighting from a train
from Varanasi.
• Mantu was convicted under sections
for murder (Section 302 IPC), voluntary
causing hurt in committing robbery (Section
394 IPC) and the Arms Act for possessing
unlicensed weapon.
• The other two accused were convicted of
murder committed in furtherance of common
intention (Section 302/34 IPC) and also for
voluntary causing hurt in committing robbery.
• After the three were convicted on March 22,
Dhananjay Dubey, brother of the victim, had
said he was “really disappointed” as those
convicted were “purely innocent” and claimed
that the real culprits were still on the loose.
• Satyendra Dubey had even written directly to the
then Prime Minister Atal Bihari Vajpayee detailing
the financial and contractual irregularities in the
construction project.
• The murder had sparked protests across the
country amidst calls for a legislation to protect
whistleblowers who expose corruption.
• The CBI, which had taken over the investigation
of the case from Bihar police on December 14,
2003, had filed a charge sheet in the case on
September 3, 2004.
• During the investigation, CBI arrested four persons,
namely Mantu, Udai, Pinku and Sharvan Kumar, all
residents of Katari village in Gaya, the investigating
agency said.
• “They had all assembled near Circuit House, Gaya
on the fateful intervening night of November
26/27, 2003. Around 3.30 am on November 27
when (Satyendra) Dubey was passing in front of
Circuit House, Gaya in a cycle-rickshaw, the
accused persons robbed him of his belongings and
during the ensuing scuffle, Mantu shot him dead
with a country-made weapon,” it said in a
statement in New Delhi.
• The CBI said a briefcase containing documents
belonging to Satyendra Dubey including his
Identity Card were recovered from an
abandoned well and also the country-made
pistol was recovered during investigation.
• The agency said Sharvan gave full and
voluntary disclosure about the incident and
was made an approver.