MANAGEMENT ETHICS

Nasir G Khwaja Munshi

(Reg No: CC0015BK25AM42AAB)

GREAT EASTERN MANAGEMENT SCHOOL, BANGALORE

2009-2012
 CERTIFICATE

This is to certify that the Project work “Customer Relationship

Management” is submitted to the college by the candidate Mr. Nasir G
Khwaja Munshi bearing Reg. No. CC0015BK25AM42AAB is the product
of research carried out by the candidate under my supervision in
Advertising and Promotions.

GUIDE

Bangalore,
May 15 .2010 Lecturer. In Management Ethics
Great Eastern Management
School
 CONTENTS

Page No.

ACKNOWLEDGEMENT 04

Executive Summary 05

Three Pillars of Modern Business “Business Ethics, Professionalism &

Corporate Governance 07

Importance/Advantages of Business Ethics – Profitability and Morality 09

Ethics of Consumer Production and Marketing 13

Corporate Objectives 16

Corporate Scandals & Corporate malpractices 18

Corporate Roles 20

Ethics and Business: Objections 24

Conclusion 25

Annexure 1 – A Case Study: Profitability with Morality 27

Management of Quality, Leadership, Vision and Core Values 28

Organisation Structure, Work Practices & People 30

Growth Plans 31

References 31
 ACKNOWLEDGEMENT

The Project work was carried out under the remarkable guidance of MRS.
Pamela Lecturer, Great Eastern Management School. I am grateful for his
guidance, valuable suggestions and for the constant encouragement and
co-operation.

I also express my sincere gratitude and thanks to all the subjects

participated in the study.
 EXECUTIVE SUMMARY
Business and society have been coeval since time immemorial and also
have been inter-dependant. This relationship between business and society
is appreciated in Rigveda also : “Corporate should work like a honeybee,
which takes the nectar of a flower without the flower being losing its shape
and fragrance and provides honey for the wellbeing of the society.” It
means that both have to work on a symbiosis manner for each one’s
survival and success. The business history is replete with evidences to
believe that business flourishes only where society thrives. On the contrary,
business dies when society condemns and rejects it. No business can
survive without societal approval and sanction. The inter-dependant nature
of relationship between the business and the society is best illustrated by
the management guru Peter Drucker (1954) by the example of a ship and
sea. He states that the relationship between business and society is “like
the relationship between a ship and the sea which engirds it and carries it,
which threatens it with storm and shipwreck, which has to be crossed but
which is yet alien and distant.” No doubt, business has been conducted
primarily to earn profit and / or create wealth. However, there are reasons
and evidences to believe that the mindless obsession with profit
maximization at any cost carried to any extreme has led to spurt in sordid
activities in business causing harm to both the business and society and
ultimately leading business to flounder and fizzle out. Enrons Parmalats,
Union Carbide, and World.com are to name a few representing examples
of such business collapses. Business history is also replete with examples
that only the businesses that are conducted through good or right practices
enjoy societal sanction and survive and last for long. Johnson & Johnson,
Maruti Limited, Reliance Industries Limited, and Tata Iron and Steel
Company are such examples that indicate that being good in conducting
business activities proves good for businesses also. Hence, there has been
increasing concern for conducting business in a good or ethical manner.
Though there has been a spurt in research activities on business ethics or
ethics in business, not much research has so far been conducted on what
actually makes business ethics and how being ethical or good is good for
business also.

Every business has an ethical duty to each of its associates namely,

owners or stockholders, employees, customers, suppliers and the
community at large. Each of these affects organization and is affected by it.
Each is a stakeholder in the enterprise with certain expectations as to what
the enterprise should do and how it should do it.

Business ethics is applied ethics. It is the application of our understanding

of what is good and right to those assortments of institutions, technologies,
transactions, activities and pursuits that we call business. Ethical behavior
is the best long term business strategy for company , however this does not
mean that occasions may never arise when doing what is ethical will prove
costly to a company nor does it mean that ethical behavior is always
rewarded or that unethical behavior is always punished.

On the contrary, unethical behavior sometimes pays off and the good
sometimes lose. Strategy means merely that over the long run and for most
of the part, ethical behavior can give a company significant competitive
advantages over companies that are not ethical.

In an age of liberalization and globalization corporations can grow, survive

and prosper in the long run only if they adopt policies and programmers,
which can be considered ethically, economically, socially and
environmentally good to vast sections of society with whom they are
intricately linked. In the wake of revelations of serious scandals,
irregularities, malpractices perpetrated by corporate entities anywhere and
everywhere in the world, the need for good corporate governance and
application of ethical values and principles in the conduct of business
operations at every level of a corporate organization right from top level is
felt more relevant now than before to serve the varied needs, aspirations
and expectations of different segments of stakeholders who have a stake in
the healthy functioning of a corporate entity as a socially responsible
member of the civil society.
 Three Pillars of Modern Business

“Business ethics, Professionalism and

Corporate Governance”
Business ethics, Professionalism and Corporate Governance are the
important imperatives for survival and growth of a modern business
organization confronted with multiple challenges including financial scams,
dying sentiments of investors, fixing accountability, transparency,
independence in decision making, rule of law, fairness in deals, etc. from
the different stakeholders, i.e., investors, creditors, industry, government
and society, in the present knowledge based, global and competitive
environment.

In the years to come, not only corporate governance is going to be the

major concern of management but also the basic ingredient of corporate
governance is going to change. In addition to full disclosure of the
workings of the company, a professional and good management has to
identify and quantify the risk being undertaken by various stakeholders.
And then the management has to apply all its innovative qualities to ensure
that the risk for each stakeholder is reduced to an accepted level and that
each stakeholder is rewarded properly for the risk undertaken by him. The
success of any company would largely depend on maintaining a business
model wherein all the stakeholders are made comfortable. Being
transparent in all the dealings/workings can further enhance the comfort
level of the stakeholders.

A key element of good governance—corporate or otherwise—is

transparency projected through a code of good governance which
incorporates a system of checks and balances between key players—
boards, management, auditors and shareholders. Transparency in turn
requires the enforcement of the right to information and the nature,
timeliness and the integrity of the information produced at each level of
interface defines the real issue. All of this can only succeeds if the
responsibilities of each entity and their interface is defined with great clarity
and understood by all.

For effective corporate governance, a company must symbolize

harmonious alignment of various interests of individual, corporation and
society. In yet another perspective, corporate reputation, competitive
credibility and governance have become increasingly inter-oven.
Therefore, corporate governance must be driven by ethical and
philosophical concerns as well as legal structural imperative. In short,
promoting corporate fairness, transparency and accountability are the
hallmark for corporate governance.

Profit: Measure of Success

No doubt profit is the yardstick to measure the success of every business
enterprise whether it is run by the Government or a private organisation.
Nevertheless a modern business corporation cannot run its business
operations solely with a profit motive, but as an enlightened corporate
citizen to serve the varying needs and aspirations of different segments of
society. This is reflected by the brilliant statement made by Henry Ford at
the time of Dodge v. Ford trial about his company’s philosophy - “I do not
believe that we should make such as an awful profit on our cars. A
reasonable profit is right, but not too much. So it has been my policy to
force the price of the car down as fast as production would permit, and give
the benefits to the users and the labourers (meaning workers) with
surprisingly enormous profits to ourselves”.

What Mr. Ryuzaburu Kaku, the dynamic and social oriented President of
Cannon said severally years ago is valid forever under whose visionary
leadership that company had made great strides and progress in every
area of its operations. He said “If corporations run their business with the
sole aim of gaining more market share or earning more profits, they may
lead the world with economic, environmental and social ruin. If they work
together for the common good they can bring food to the poor, peace to
war torn areas and renewal to the natural world. It is our obligation as
business leaders to join together to build a foundation for world peace and
prosperity”.

Importance/Advantages of Business Ethics

 Profitability & Morality
Frequently the impression of most people is that ethics and profits are
mutual, opposed to one another and that if a company is ethical, it may
forget about making profits. People also frequently seem to believe that a
profitable company must necessarily be unethical. This is like saying that a
company can make profits only through unethical means. Nothing can be
more have ethical companies made profits, but more importantly it is, only
ethical companies which discharged its social responsibilities, that have
survived competition and turbulent changes through the years and have
contributed to social welfare and have contributed to flourished
undiminished.

In fact, considered from all angles, it is unethical, NOT to make profit. It is

unethical, for a company, to make losses. Because, a company which can
not make profits and makes losses, mis-utilises scarce national resources
can not pay back creditors, does not make wealth for its shareholders,
make huge liabilities, upsets the economy, promotes inefficiency and most
importantly, can not, at any cost discharge its social responsibility, meet its
welfare commitments and jeopardizes the future of its employees. Such a
loss- making company becomes a nuisance and a burden to the economy
and has not right to exist in the market place. Moreover, it has no business
to force its employees into economic insecurity, which is highly unethical.

Thus instead of profits being contradictory to ethics, business ethics

dictates that the first responsibility of business is to remain profitable and
generate revenue from the shareholders and the society. Rather, it is
unethical, not to make profits. Hence, the first and foremost ethical
obligation of every business is to make profits for its shareholders, for its
employees, for its creditors and most importantly, for itself, so that it can
discharge its social responsibilities and welfare commitments. But how
much profits to make, the means and methods of making it, and at what
cost- that is the ethical question.

No business, however great or strong or wealthy it may be at present, can

exist on unethical means, or in total disregards to its social concern, for
very long. Resorting to unethical behavior or disregarding social welfare is
like calling for its own doom. Thus business needs, in its own interest, to
remain ethical and socially responsible. As V.B. Dys in "The Social
Relevance of Business " had stated-

"As a Statement of purpose, maximizing of profit is not only unsatisfying, it

is not even accurate. A more realistic statement has to be more
complicated. The corporation is a creation of society whose purpose is the
production and distribution of needed if the whole is to be accurate: you
cannot drop one element without doing violence to facts."

Business needs to remain ethical for its own good. Unethical actions and
decisions may yield results only in the very short run. For the long
existence and sustained profitability of the firm, business is required to
conduct itself ethically and to run activities on ethical lines. Doing so would
lay a strong foundation for the business for continued and sustained
existence. All over the world, again and again, it has been demonstrated
that it is only ethical organisation that have continued to survive and grow,
whereas unethical ones have shown results only as flash in the pan,
quickly growing and even more quickly dying and forgotten.
Business needs to function as responsible corporate citizens of the country.
It is that organ of the society that creates wealth for the country. Hence,
business can play a very significant role in the modernization and
development of the country, if it chooses to do so. But this will first require it
to come out from its narrow mentality and even narrower goals and
motives.

Ethics at Market Place

Free markets are justified because they allocate resources and distribute
commodities in ways that are just, that maximize the economic utility of
society’s members and that respect the freedom of choice of both buyers
and sellers. These moral aspects of a market system depend crucially on
the competitive nature of the system. If firms join together and use their
combined power to fix prices, drive out competitors with unfair practices or
earn monopolistic profits at the expense of consumers, the market ceases
to be competitive and the results are injustice, a decline in social utility and
a restriction of people’s freedom of choice.

Fairness is getting paid fully in return for what one contributes and it is this
form of justice that is achieved in perfectly competitive free markets.
Perfectly competitive markets embody capitalist justice because such
markets necessarily converge on equilibrium point and the equilibrium point
is the one point at which buyers and sellers on an average receive the
value of what they contribute.

In a monopoly market situation, however conditions change as compared

to perfectly competitive market conditions particularly with respect to the
number of buyers and sellers and also the entry is not so easy.
Unregulated monopoly markets fall short of the values of capitalist justice
and economic efficiency. The high prices the seller forces on a buyer in a
monopoly situation are unjust and these unjustly high prices are the source
of the sellers, excess profits. The high profits in a monopoly market indicate
a shortage of goods. Other firms are blocked entering the market; their
resources cannot be used to make up the shortages indicated by the high
profits. Thus monopoly market results in a decline in the efficiency with
which it allocates and distributes goods. Oligopoly markets which are
dominated by a few large firms are said to be highly concentrated i.e. there
are relatively small number of firms. It is relatively easy for the managers of
these firms to join forces and act as a unit. By explicitly or implicitly
agreeing to set their prices at the same levels and to restrict their output
accordingly, the oligopolistic can function like a single giant firm. This
uniting of force together can create barriers to entry and result in the same
high prices and low supply levels that are characteristics of a monopoly
markets. As a consequence oligopoly market, like monopolies can
generate a decline in social utility and can fail to respect basic economic
freedom.

What do you do when you find yourself confronted with an opportunity to

learn exactly what a competitor is doing or is about to do. What Mr. John E.
Pepper, the Former Chairman and Chief Executive of The Procter &
Gamble Co. (P&G) narrated in his talk on 30th January, 1997 at the Florida
University about the philosophy of business ethics practiced by P&G by two
live cases will be of great interest and relevance for our discussion.

Case No.1: An individual made a call from Europe to a Senior Manager of

P&G informing him that he had in his possession very sensitive and useful
documents about the future plans of its competitor – a Lever brand– which
he was willing to sell to P&G. The Senior Manager of P&G immediately
passed on the information to the Head of Security at Unilever, who in turn
alerted the police. The police swung into action and arrested the culprit.

Case No. 2: A Senior Executive of one of the advertising agencies of P&G

while travelling in a cab in New York found lying on the floorboard, a
computer disk that included the marketing plans of the P&G’s main
competitor who was giving serious headache to one of P&G’s flagship
brand in the market place. The Senior Executive immediately sent back the
disk to the Chairman of the competitive company and assured him that
neither the agency nor anyone at P&G had looked at the contents of the
disk. In his letter he said “We will always compete with commitment and
intensity but will never compromise our ethics to win”.

Ethics of Consumer Production and

Marketing
People are exposed daily to astonishingly high levels of risk from the use of
consumer products. Each year people suffer serious accidental injuries and
few others are killed due to accidents involving consumer products.
Examples are often reported of injuries requiring hospital treatment inflicted
on youngsters and adults using toys, nursery equipment and playground
equipment, people using home, workshop equipment, people requiring
treatment for injuries involving home construction materials.

Now the dilemma which arises is where does the consumer’s duty to
protect his or her own interests end and where does the manufacturer’s
duty to protect consumers’ interest begin? Three different theories on the
ethical duties of manufacturers have been developed, each one of which
strikes a different balance between the consumer’s duty to himself or
herself and the manufacturer’s duty to the consumer – the contract view,
the ‘ due care’ view, and the social cost view. The contract view would
place the greater responsibility on the consumer, whereas the due care and
social costs views place the larger measure of responsibility on the
manufacturer. Consumers are also bombarded daily by an endless series
of advertisements urging them to buy certain products. Although
sometimes defended as sources of information, advertisements are also
criticized on the grounds that they rarely impart additional information and
only give the barest indications of the basic function a product is meant to
serve and sometimes misrepresent and exaggerate its virtues.

Economists argue that advertising expenditure is a waste of resources

while sociologists bemoan the cultural effects of advertising. The
advertising business is a massive business. The question however is who
pays for these advertising expenditures? In the end, the prices consumers
pay for the goods they buy must cover advertising costs–the consumer
pays. What does the consumer get for his or her advertising rupee?
According to most consumers, they get very little. However, the advertising
industry sees things differently. Advertising, they claim is before all else
communication. Its basic function is to provide consumers with information
about the products available to them – a beneficial service. The question to
be discussed therefore is whether advertising is a waste or a benefit? Does
it harm consumers or help them? Discussion of the ethical aspects of
advertising can be organized around the various features like its social
effects, its creation of consumer desires and its effects on consumer
beliefs. Studies have shown that advertising frequently fails to stimulate
consumption of a product and consumption in many industries has
increased despite minimal advertising expenditures. Thus advertising
appears to be effective for individual companies not because it expands
consumption but only because it shifts consumption away from one product
to another. If this is true then economists are correct when they claim that
beyond the level needed to impart information , advertising becomes a
waste of resources because it does nothing more than shift demand from
one firm to another. The moral issues raised by advertising are complex
and involve several still unresolved problems. However there are few
factors like its social effects, its effect on desire, effects on belief that
should be taken into consideration when determining the ethical nature of a
given advertisement. Advances in computer processing power, database
software and communication technologies have given us the power to
collect, manipulate and disseminate personal information about consumers
on a scale unprecedented in the history of the human race. This new power
over the collection, manipulation and dissemination of personal information
has enabled mass invasions in the privacy of consumers and has created
the potential for significant harms arising from mistaken or false
information.

The purpose of rights is to enable the individual to pursue his or her

significant interests and to protect these interests from the intrusion of other
individuals. It is also important because it has several enabling functions.
Privacy enables certain professional relationships to exist. In so far as the
relationships between doctor and patient, lawyer and client, and
psychiatrist and patient all require trust and confidentiality, they could not
exist without privacy. It is clear then that our interest in privacy is important
enough to recognize it as a right that all people have, including consumers.
However this right must be balanced against the rights and legitimate
needs of others. For example, consumers benefit from having life insurance
available to them. However there are significant consumer benefits that
businesses can provide but they can provide only if there exists agencies
that can collect information about individuals and make that information
available to businesses. Thus consumers’ rights to privacy have to be
balanced with these legitimate needs of businesses.

Ethics in HRM

Ethics in Accounting

Ethics in Marketing

Ethics in Advertising

Corporate Objectives
To achieve a planned, orderly and consistent growth in a competitive
environment and a free market economy, a company must try to improve
its methods of production, processes and systems by using updated and
relevant technologies using its vast financial and human resources
judiciously. Naturally every company must conduct its affairs economically,
efficiently and progressively on ethical lines to serve the public interest,
with probity, accountability and transparency of company finances in a
socially responsible manner. A company incorporated in a particular
country has the nationality of that country though like a natural person it
cannot change its nationality. The era of corporate autocracy is coming to
an end. In simple terms the success or failure of a corporation in the long
run will be based on cherished values and ideals acceptable to society as
an enlightened corporate citizen and which understands, appreciates and
recognizes its pivotal role to look after the rights and interests of various
segments of society such as shareholders, employees, consumers, local
community and society at large. Spiritual health of an organisation is based
on internal and external connectivity. Level of cohesion, co-operation,
partnership, community involvement and social responsibility are important
indicators to measure the spiritual health of a company.

In order to enable everyone dealing with a company to understand its basic

objectives and aims, a company must define its vision, mission and value
statements in a clear cut manner for the benefit of various segments of
society and also frame a business code of conduct based on ethical values
and principles analyzed above. These should be integrated into the
organization’s systems, procedures and practices. Let us briefly discuss
and understand the relevance and purpose of these statements.

Vision statement: Essentially every vision statement brings to the notice

of everyone dealing with the company what is its intention with regard to
the future it desires to create by using all its resources at its command
more so by its motivated and inspiring human resources. It will assure the
society that the company will take up of social issues and make its
contribution for a meaningful living of mankind.

Mission statement: Every mission statement is meant to keep the

energies of the company rightly focused around its core business areas,
which can ensure robust growth and sustainable profits. Often every
mission statement is very concise, inclusive and easily memorized. Every
mission statement is addressed to various segments of society such as
shareholders, employees, customers and society at large.

Tom Chappell, co-partner and CEO of Tom’s of Maine present values in

the form of credo about his organizational goals and beliefs as under which
cover the best one can think of in every organization:-

“We believe that both human beings and nature have inherent worth and
deserve our respect.

We believe in products that are safe, effective and made of natural

ingredients.

We believe that our company and our products are unique and worthwhile
and that we can sustain these genuine qualities with an ongoing
commitment to innovation and creativity.

We believe that we have a responsibility to cultivate the best relationships

possible with our co-workers, customers, owners, agents, suppliers and our
community.

We believe in providing employees with a safe and fulfilling work

environment and an opportunity to grow and learn.
We believe that our company can be financially successful while behaving
in a socially responsible and environmentally sensitive manner”.

Corporate Scandals & Corporate

Malpractices
There are a number of scandals rocking the corporate world day in and day
out anywhere and everywhere in USA, France, Germany, Japan, South
Korea and in our own country relating to various types of corporate crimes
such as falsification of accounts by showing inflated profits, embezzlement
of company funds by dubious ways, siphoning of company’s funds by
entering into fictitious transactions, making fraudulent investments, financial
irregularities, breach of fiduciary duty, breach of trust, breach of confidential
information, dishonesty, non-disclosure of material facts, insider trading,
misfeasance, misappropriation, mal-administration, corruption and bribery
and milking the company by fat salaries, amenities, facilities, stock option
schemes, severance benefits without any regard to company’s
performance or profitability to Board Members, CEO’s and other key
executives harming the rights and interests of various segments of society.
The World Bank has identified corruption as “the single greatest obstacle to
economic and social development” of the universe hitting the poor and
vulnerable section of the world population.

John T. Noonan, a Judge of the United States Court of Appeals in his book
“Bribes” which is considered one of the most comprehensive book on
bribery ever written provides various reasons as to why bribery has to be
morally condemned. A company, which pays bribes to clinch a business
deal, will get itself sucked into more murkier deals in future as it will turn
into a regular practice. In reality it is often found that many multinational
corporations in the business of arms sale, ships, aircrafts, sophisticated
plant and machinery which involves staggering amount of business deals
are the real culprits for payment of bribes to people in power through
middlemen. In the circumstances many international business corporations
which attach significant importance to ethical values and principles have
prescribed a corporate code on bribery, which says – “The offer, payment,
demand or acceptance of bribes in any shape or form, in any
circumstances is totally unacceptable to this organisation, discovery will be
followed by severe disciplinary and possibly legal action”.

Besides there are a number of misdemeanors exist in our corporate

working such as sexual harassment of women by other employees,
employment and exploitation of child labor, discrimination in employment
and pay based on color, sex, race etc. and wanton destruction of precious
natural resources thereby affecting ecological balance and biodiversity of
the universe. Many of our corporate entities use share buy back by using
the funds of such companies as a device to strengthen the control by the
promoter groups or foreign companies on them (which can otherwise be
used for new projects, modernization or expansion of their activities) and
later go for de-listing in stock exchanges totally disregarding the interest of
small investors. Similarly many companies in India make preferential
allotments to promoter groups or others primarily intended to achieve the
same objective.
In the US 2002 can be considered as the year of “whistle blowers” in as
much as Sherron Watkins of Enron and Cynthia Cooper of World-com two
insiders were responsible to bring in the open the serious accounting
irregularities committed by the said companies. Another serious impact of
the scandals in USA is the exposure of auditing profession to strong
criticism by all about its dubious role in not disclosing vital financial
information for public scrutiny and blindly providing support and assistance
to scam related corporate entities. The Sarbanes-Oxley Act, 2002 which is
the outcome of the demise of Enron and the scale of misreporting of vital
financial information at World-com is the most sweeping reform of
corporate governance in USA since the Great Depression in 1930s. It is
becoming the global benchmark for all corporate entities for setting up
proper internal control systems, framing of tighter disclosure norms for due
compliance, establishment of tough financial reporting standards and
requiring certification by people at the helm of management about the
correctness and accuracy of financial information, appointment of
independent audit committee, disclosure of off–the-books transactions that
would have big effect on their financial position and putting in place a
proper ethical code of conduct to reassure all stakeholders that corporate
organisation will carry on their business activities for common good. The
Public Company Accounting Oversight Board (PCAOB), which was created
by the aforesaid Act, to replace self-regulation of US audit profession has
already prohibited auditors doing non audit work to their corporate clients.

Corporate Roles
“The next wave of enduring great companies will be built not by technical or
product visionaries but by social visionaries – those who see their company
and how it operates as their ultimate creation and who invent entirely new
ways of organizing human effort and creativity”

– Jim Collins

A socially oriented corporate entity can serve the needs, expectations and
aspirations of various segments of society in many ways. However it is
thought it fit to cover three important segments of society as under with
which every company will be more interlinked than with others.

Shareholders: Every Company should provide all required information

under the statute to the shareholders from time to time to enable them to
understand the financial working of the Company, present and future
prospects, level of business competition etc. Similarly every company
should organize, call and conduct general meetings according to the
provisions of the Articles of Association and mandatory legal requirements.
Every corporate entity should reward their shareholders by paying a decent
dividend regularly and offer bonus and rights shares at frequent intervals. It
should be the responsibility of every corporate entity to provide good
investor services. Incidentally a recent report of Organization for Economic
Co-operation and Development (OECD) urges Asian Governments to
ensure minority shareholders are adequately protected by strengthening
disclosure requirements, ensuring regulators have real powers and
resources to monitor companies and impose substantial sanctions for any
wrong doing, strengthening the fiduciary duty of directors to act in the
interest of all shareholders and provide shareholders who suffer financial
losses with private and collective rights to sue controlling shareholders and
directors.

Employees : Since people are the most critical component of every

business for its sustenance, survival, continued growth and success
companies are paying more attention how to attract and retain good talent
especially of persons with critical skills and knowledge. Realising the
importance of labour a modern company gives enough importance to
human resources development function to frame a realistic salary structure
with good benefits and facilities to their work force but also focuses greater
attention for their personal development and career prospects for future
advancement by intensive in house and outside training. Every company
should create a healthy environment for individual development, teamwork,
job satisfaction and a distinct corporate culture by trying to tap and unearth
an employee’s hidden creative energy and innovation to achieve its
organisational goals. Employees need to feel a sense of fairness,
commitment, right of privacy, right of meaningful work, equality, recognition,
responsibility and pride in their work. Too much control, use of excessive
authority, exploitation, poor working relationships between employees are
sure signs of poor emotional health of an organisation. Every organisation
should encourage its employees to grow both in their personal and
professional lives. Personal growth builds emotional intelligence and
professional growth builds skills and intellect. When employees have a
common identity, common vision and shared values they work for the
common good and develop a strong sense of loyalty to the company. It
should be appreciated that true power lies not in the ability to control staff
but in the ability to trust. People like organizations which encourage them to
explore their own creativity because in doing so the company gives them
the meaning of their very existence. Creativity will not blossom in a rigid
over controlled bureaucratic setup and punishes employees severely even
for minor failures. Unfortunately there is a wrong mind set in many
organizations to the effect that a worker’s job is to execute a work in the
way the management wants and he cannot use his intuition and latent
talent power to make improvement on it. However if employees are
allowed to use their knowledge and creativity there will be shared feelings
for good of the organisation. Every transnational organisation is uniting
people under a single corporate culture with shared values that transcends
cultural, racial and national boundaries. Employees should have adequate
authority, enough independence in their functional area of work and they
must be made accountable for their action. The second preferred employer
in India Procter & Gamble Group spends a lot of money on training and
career development opportunities right from entry level recruitments to
develop their trainees as future leaders.

In a booklet titled “A Business and its beliefs” Thomas J. Watson, a former

IBM Executive succinctly states that “the real difference between success
and failure in a corporation can be very often traced to the question of how
well the organization brings out the great energies and talents of its people”
.

Consumers: The old rule of caveat emptor is no more valid for sale or
provision of services. A company is required to provide adequate and
reliable information to enable a consumer to make his own decision to
purchase or avail of a service or not. Naturally a company must produce
goods or offer a service of an acceptable standard to suit the needs and
purchasing power of the consumers giving due regard to their safety and
quality aspects and price its products or services on a fair basis with a
reasonable profit margin with full back up facilities for after sale service and
maintenance through out the working life of a product. The company should
not try to increase the cost of a product by mere change in style without
adding value to the product to benefit its user. Since a customer relies on
the reputation and integrity of the supplier to provide a good quality product
or service, it is the responsibility of a company to make product
improvement on a continuous basis, or introduce new products or services
to match the changing consumer preferences, emerging needs, aspirations
and expectations of the community. Realising the importance of customer
goodwill every company should set up a grievance cell to monitor and
understand the feed back and reaction of its customers with a view to
ensure that every product manufactured or service provided shall be within
the accepted norms and standards set out by the company. A company
should not indulge in false publicity, misrepresentation of facts, give false
guarantee and workmanship or tempt to offer substandard goods or
services to raise revenues. A company should provide products or services
of high quality and value that improve the life style of world’s consumers.
Companies with a genuine consumer commitment earn the respect and
support of the local community and local governments. A growing numbers
of consumers are choosing products manufactured and or services
provided by socially responsible companies. In France a recent survey
conclusively revealed that companies, which produce and market fair trade
products even if they are costing a little more are having ready market
demand and good acceptability from the discernable consumers. In other
words consumers are reluctant to lend support to companies for sale of
products produced by exploitation of child labour or by not providing good
working condition according to accepted international labour norms.
Society accepts and rewards companies, which follow strict environmental
and ethical standards in the manufacture and marketing of consumer
products.

Ethics And Business: Objections

People taking objections to bringing ethics into business argue that persons
involved in business should single mindedly pursue the financial interests
of their firm and not side track their energies or their firm’s resources into
doing good works. Some argue that in perfectly competitive free markets
the pursuit of profit will by itself ensure that the members of society are
served in the most socially beneficial ways. However what experts like
Manuel G Velasquez argue is that often assumptions behind this argument
like perfectly competitive market situation do not exist. Another argument is
that business managers should single-mindedly pursue the interests of
their firms and should ignore ethical considerations. This argument finds its
basis in ‘loyal agent’s argument’, which suggests that a manager engaged
in certain illegal or unethical conduct be excused because he did it not for
himself but to protect the interests of his company. However again the
assumptions behind this argument can be questioned on several grounds.

The third kind of objection is that to be ethical it is enough for business

people merely to obey the law. Business ethics is essentially obeying law. It
is wrong however to see law and ethics as identical. It is true that some
laws require behaviour that is same as the behaviour required by our moral
standards. However law and morality do not always coincide. Some laws
have nothing to do with morality because they do not involve serious
matters. These include dress codes, parking laws and other laws covering
similar matters. Beyond these arguments for and against the role of ethics
in business, discussions happen whether ethical companies are more
profitable than unethical ones. There are many different ways of defining
ethical, many different ways of measuring profits and the findings of
different studies remain inconclusive. However studies do suggest that by
and large ethics do not detract from profit and seems to contribute to
profits.

Conclusion
Change is the only constant factor in everyday life. It is witnessed from the
Stone Age to civilized age. When change affects life it also affects the
environment and business. The business environment becomes extremely
complex as change inflicts variety and diversity leading to deep and
fundamental ways. Change in the values, environments of business based
on the expectation of society has alerted business houses to realign its
priorities. The changing economic, political, legal and social environment
has also made the business and businessmen to consider the ethical
approach to business. Therefore, there is paradigm shift from the goal of
maximization of profit or wealth to ethical means to achieve them. The last
150 years have been marked the world over for rapidity of change ushered
in by the advent of technology and industrial revolution. This period has
also been marked for its attempt to generate unquestioning faith in human
reason and intellect. The last century has witnessed that the intellect are
becoming the cornerstones of the society. The rapid changes have
improved the standard of living, also establishing a lot of sensible
relationships in and around the society.

There is a growing realization all over the world that ethics is virtually
important for any business and for the progress of any society. Ethics
makes for an efficient economy. Ethics is good in itself, ethics and profit go
together in the long run and ethics alone can protect the society. An
ethically responsible organization is one, which has developed a culture for
caring for the people and for the betterment of society as a whole. Ethics
has a considerable influence on the economy for efficient and smooth
functioning. The government, the laws cannot always resolve certain key
problems of the society and business. Ethical behavior enhances the
quality of life. An ethically based economy can do wonders in the way of
creating wealth or society.

The task of business is to optimize the outcome of economic activity. It is

the economic environment of business, which is the primary consideration
in evaluating the business tactics. The present day economic environment
of business is a complex phenomenon. The economic relations with the
government, public, society and community influence the trend and
structure of economy. People and society are part and parcel of an
organization. People want and need to be ethical not only in their private
life but also in public. The people are the ultimate sufferers if the affairs of
the organization were conducted unethically which are detrimental to the
society. Therefore, they have a concern over this. Over the last two
decades, there has been a shift in the attitudes of corporate and their
executives towards ethics. A silent revolution is in under way in business
ethics today. The ideas, beliefs and attitudes associated with the profit ethic
are being challenged as never before. The historical idea of the divine right
of capital no longer applies. The changes in the values, cultures and
customs lead to change, which in turn lead to re-engineering of ethics.

The world of business ethics is quite broad and its tentacles spread into a
number of areas in the larger sphere of business society relationship. The
social responsibilities of businessmen, for instance, clearly involve ethics
and morality. There is always a doubt in the mind of the businessmen
about what is and what is not ethical. It is difficult to understand business or
business society relationships, without knowledge of the ethics. Business
ethics is what society expects from business. Mark Twain once said: “To be
good is noble. To tell people how to be good is even nobler”.

In short “Corporate Houses can earn Profit with Morality”

Annexure I

A Case Study: Profitability with Morality

Mr. Suresh B. Hundre (65), Chairman and Managing Director of Polyhydron
Private Limited (PPL), Belgaum, an entrepreneur running his business for
more than 25 years, who has given his people operational freedom and
liberated them in a "Business Ashram".

When Hundre took over the executive responsibility of PPL, managing the
organisation was not easy. There was continuous problem of cash flow due
to long pending payments from the customers; also the inventory was very
high leading to high pressure on working capital management. Hundre
analyzed the problems and found the cash flow problem also resulted in
non-compliance of the statutory and regulatory requirements.

He decided to change the system radically. He is strongly influenced by a

diverse set of teachings and the books he has read which incude the
scriptures and spirituality, The Gita, Ricardo Semler's Maverick, Swami
Vivekananda and also Japanese Management techniques. He has picked
up the best from all this and runs his organisation like a ‘business
ashrama' as he calls it, where "Honesty is not the best policy, it is the only
policy! We are honest. We are transparent."

Management of Quality, Leadership, Vision

& Core Values
"We do not pay bribes" He first decided to comply with all the laws and pay
the taxes on time. Hundre also decided that he would not pay any bribe, as
he is not a willful defaulter. The customers were not given any credit, and
the business was to be done only on payment, He scrapped the material
store and established a transparent supplier management system. He took
a policy decision that he would not entertain any price bargain with the
customer and started following a transparent discount policy, known to all.

Quality in PPL is a matter of character building rather than adherence to

product or process specifications.

The Vision statement of PPL is "To create an island of excellence through

focus on customer, employee empowerment and continuous improvement".
Hundre explains that excellence is about feeling happy about ones work
and doing something impossible according to own standards.

The Mission statement reads as "To nurture an ethically managed

organisation and not to exploit Customers, Employees, Suppliers,
Government, Society, and Nature". The Mission is implemented at every
facet of the Company. Workmen are not asked to work in back shifts as
working in odd hours creates unnecessary stress and may adversely affect
health and overall performance, suppliers are also treated with respect.

He does not like pushing people to perform their duties, on the contrary he
believes in creating an enabling environment where people work without
compromising ethics and morality.

He has created an ethically managed organisation. He feels that

transparency and ethical behavior go hand in hand. These are the basic
foundations of quality. In PPL transparency is maintained in all types of
data sharing. Hundre does not object to employees looking into the balance
sheets. Information like cost per employee, productivity, profit, growth rate
and many such data are shared among all through displays on the notice
board. Any one can question a financial transaction of the Company.
Hundre strongly opposes debt based business dealings. He believes that
businesses should build their own financial strength then only sustained
growth can be achieved. He feels that the fundamental reason for
premature collapse of a company is debt trap.

The Company strongly condemns consumption of any type of intoxicant.

People with weak personalities indulge in intoxication to create an artificial
sense of well-being. One should acquire strength - physical and mental
through conscious efforts and not by artificial means. Consumption of
tobacco or cigarette is prohibited within the Company premises.

He believes that trust is an inseparable part of PPL's organizational

process. PPL does not employ watchman at the Company gate as the
honesty of people is not to be questioned. Watchman is there only during
night hours when no one is working in the factory. Suppliers and
employees are trusted. No further inspection is carried out once the product
quality is certified by the person concerned.

Organization Structure, Work Practices &

People
PPL follows a lean structure. Only one level exists between CMD and the
workmen/operators. This level is of Shop Floor Co-coordinators who are
expected to be facilitators; they coordinate various activities of the
departments/functions. There is no supervision, the supervisors work as
mentors and facilitators.

The workmen are empowered to stop production at any stage in case they
notice any product which will not be accepted by the customer. The
suppliers are also made aware about this practice.

The employees follow a common code of ethics "Each of the employees is

responsible for both the integrity and consequences of one's own actions."

The employees enjoy operational freedom. But they can not take reckless
decisions which can affect many others and can be questioned. But this
does not create a fearful atmosphere; rather the ownership of decisions
and the results there of makes every one to take a responsible decision. In
the monthly meeting all issues related to the Company are discussed. Day-
to-day information is shared through notice board displays.

Suppliers & Purchases: There is no store provided for raw materials and
incoming products. They deliver materials directly at the work stations. No
inspection is carried out the quantity is also not formally counted. PPL has
developed trust and respect from the suppliers. In case the workmen find
any problems with the material or component, they directly communicate
with the concerned supplier as it is believed that the workman knows the
problem best.

The dates of payments are decided by PPL as per the preference of the
supplier. They collect their cheques directly from their pigeon holes.
 Growth plans:
"Business should create wealth," firmly believes Hundre. But he feels that
quality of wealth is equally important and should not be collected by
exploitation. According to him, consistent, sustainable and considerable
growth is important. Size or rate of growth is not important. Hundre says,
"Taste of the fruit is the core issue not the size."

References:
http://www.scribd.com/

http://www.bookrags.com

http://www.wikipedia.or

http://www.freemba.in

www.google.ac.in

www.amazon.com