1) Explain the concept of Dharma in detail. Ans.

Management is really the art of integration of various objectives, faculties, techniques, strategies, resources, personalities, temperaments, emotions, interests, ethical and spiritual values, individual interest and community interest. In India, from time immemorial, Dharma is made an integral part of day-to-day life. The three goals of life, comprises Artha (Acquiring wealth), Kama (fulfilling natural worldly desires) and Dharma (the pursuit of righteousness in all endeavors). The first two objectives should always be considered by Dharma. The pursuit of wealth, and the pursuit of pleasures, both of which are considered necessary and desirable, has to be done in a manner that is fully integrated with righteousness, which is partly relative but essentially of an intrinsic nature, not at all difficult to identify and of universal validity. The concept of Dharma is an integrated, harmonious and practical way of life, combining economics with ethics as also private interest and initiative with public interest. The Dharma principle also means a scientific approach to management, calling for the utmost use of all available techniques, quantitative and qualitative, in performing managerial tasks such as forecasting, planning and decision-making, rather than going to the astrologer or a palmist. Study of any great company, institution and organization will reveal that its founders were involved strongly with certain fundamental values on which they built their enterprise and the enterprise prospered and served the community well because those values were followed by successive generations of owners and managers. This, for study would reveal that when the great values are eroded, that is when Adharma (forces of unrighteousness) gained the upper hand, the enterprise started going down, becoming sick, very sick and in some cases going out of existence altogether. The moral is that the basic values enshrined in the broad concept of Dharma have to be pursued. Moral dilemmas also arise when economic laws operate inexorably. In situations of acute shortage of supplies, especially of essential commodities, should the manufacturer allow prices to shoot up and thus secure balance between supply and demand, besides making handsome profits or make efforts to check the price rise through other devices to ensure fair distribution, the latter calling for more effort, cost discrimination and likely breakdown of the effort. The world is now rudderless, bereft of all fundamental values, selfishness and greed having usurped their place. There is also utter lack of leadership, political or social, nearly everywhere. The message is let there be reestablishment of Dharma everywhere; only this can save the world from destruction and catastrophe. Most

religious and ethical systems have counterparts to the Indian concept of Dharma, all worthy of following. The order of Artha, Kama, Dharma and Moksha corresponds to the human nature, the order of importance for todays 21st century man. Dharma is always held higher than Artha and Kama. In fact, Dharma is that which helps man to fulfil the obligations of Artha and Kama. If Artha is higher as social aim, social life will be dominated by violence and universal corruption, as we see in modern times. If Kama is the predominant aim of life, it will lead to a social system based on pleasure. Moral decay and disintegration will follow. In either of the case, moral vacuum will follow and people would have little chance to pursue the path of the highest good. The conception of society where people are pursuing Artha and Kama within the confines of Dharma and thus preparing themselves for the final beatitude is the basis of the doctrine of the Purushartha. The doctrine of Purushartha, is the answer given to the most perennial question of human life namely, what is the summum-bonum of human life? Man can live a fulfilled life provided he follows the four Purusharthas meticulously. In the 21st century youngsters are seen to run after negative, false ideals. It is observed that they try to find solace in extreme materialism. However, with all these things also they do not seem to be happy and contented. The ancient wisdom of Purushartha can be used and garbed in modern ways and it can definitely help one to find PEACE OF MIND which is the birth right of every human being. Q. 2) Explain the Agency Theory of Corporate Governance. An s. Corporations today are based on Agency Theory (a branch of organizational behavior) wherein the owners of funds (alias principals) invest their money in a company that is managed by altogether different group of people called directors and managers (alias agents). This agency relationship between the shareholders and directors is based on the premise of trust; shareholders lend their money to directors under trust that the latter shall deploy the money in a manner that would maximize shareholders interests. This theory assumes that the agent management will not always take decisions that will maximize long-term ownership value. Managers often take decisions, which further their own interest but are detrimental to the interest of the organization. This theory states that agents/managers/employees cannot be trusted to act in the best interests of the shareholders and should be monitored and controlled to ensure that they follow the set policies, procedures and plans of the corporation. Agency Theory is defined by Chartered Institute of Management Accountants as Hypothesis that attempts to explain elements of organizational behavior through an understanding of the relationship between principals (shareholders) and agents (

directors and managers). A conflict may exist between the actions undertaken by agents in furtherance of their own self-interest and those required to promote the interest of principals. Some of the instances wherein a conflict can exist between owners and managers are as follows: 1) Managers are interested in short-term profits against long-term shareholders value, as it has a positive impact on their compensation, incentives, bonus and promotion. The episode of sub-prime crises in United States exemplifies this conflict wherein the investment bankers and financial institutions took recourse to highly complex derivative products in order to inflate short-term profits and thereby inflate their incentives. 2) Management myopia on short-term profits also motivates them to resort to creative accounting, inflating the top line and bottom line. Enrons episode best exemplifies such myopia where the company resorted to creative accounting to show better profitability. 3) Quite often, managers having financial interest in their own company tend to send wrong cues to the market in order to inflate the share prices and ultimately increase their own wealth. 4) Managers deploy shareholders funds in risky investments so as to get quick and immediate returns, at the cost of preserving shareholders wealth. 5) Shareholders funds are siphoned into projects in which the management may have personal interest; examples of this can be deploying funds in a company that is owned by a relative of the managing director or awarding a contract to a vendor company that is operated by a relative of one of the executives. 6) Managers of companies that are subject to a takeover bid often put up a defence to repel the predator, even though such a takeover may be in the long-term interest of shareholders of the acquired company; managers of the acquired company do so in fear of losing their jobs to the managers and functional heads of the predator company. Thus, Agency Theory basically exposes the unstable ground on which any corporation stands as it is handled by people having conflicting motives. It is the job of corporate governance to ensure that both the parties behave in the way ideally expected from them. Governance is concerned with the intrinsic nature, purpose, integrity and identity of the institution, with a primary focus on the entitys relevance, continuity, and fiduciary aspects. Governance involves the monitoring and overseeing of strategic direction, socio-economic and cultural context, externalities, and constituencies of the institution. On the other hand, management is more of hands on activity. It is

characterized as conducting or supervising action with the judicious use of means to accomplish certain ends. Management primarily focuses on specific goal attainment over a definite time frame and in prescribed organization. Differences are listed in the following wayCorporate Governance Corporate Management External focus Internal focus Governance assumes an open system Management assumes a closed system Strategy-oriented Task-oriented Concerned with where the company is going Concerned with getting the company there