Corporate Ethics & Social Responsibilities

 Your R&D dept has modernised one of your

products. Its not really ‘new & improved’. But
you know printing these statements on the
package & using it in advertisements will increase
its sales.
 What would you do??
 You are interviewing a former product manager
who just left a competitor’s company. You are
thinking of hiring him. He would be more than
happy to tell you the competitor’s plans for the
coming year.
 What would you do?
Defining Ethics
• Understanding of right and wrong
• Ability to distinguish between the right and
the wrong.
• Integral part of life
• Running a business is a part of life
Corporate Ethics
• Based on principles of integrity and fairness
• Focuses on -
• Stakeholders, and employees.
• Quality of product and services
• Customer satisfaction.
• Community and environment
 Corporate Ethics are implemented
to-
• Define the framework of the acceptable behavior.
• Follow high standards of practice.
• Create benchmarks for self evaluation.
• Enhance sense of community.
• Create transparency in the business activities.
• Foster higher standards of business ethics.
• Comply with government laws and norms.
Who is responsible for
ethics in the company?

“Everyone”
 Approaches to Bring a Code of
Corporate Ethics to Life
• Emphasize values, in creating the code of corporate
ethics supported by rules.
• Employees should be Educated about the corporate
ethics code to make it relevant and real.
• Reinforce the code within and beyond the
organization.
• Encourage employees to become active participants
in upholding the corporate. ethics code and its
values.
• Gather feedback, measure effectiveness and
continually improve the code of conduct.
 Corporate ethics: the Indian
Perspective
• Indian business culture puts a premium on
favors, friendship and clanship.
• Friendship is highly valued, whether based on
multigenerational family friendships, school
friendships or personal friendships.
• The Western concept of conflict of interest
does not always mesh well with the Indian
value of loyalty.
Case: Infosys Technologies
• Have a distinctive work culture and value system.
• Great importance on customer delight, leadership,
integrity, transparency, fairness and pursuit of
excellence.
• Open door policy.
• Value employees and encourage them to make
decisions about their own work.
• Treated as a flat organization when it comes to
communication and information sharing
Does Satyam’s story tell the
myth and reality of Indian
corporate ethics?
Some e.g. of privacy & ethical issues-

 IT- No privacy in a computer based system. Employees are

viewed on CC TV, phones are tapped, company files are read
without employee’s notice, etc
 WHISTLE BLOWING- Like blowing of a whistle by a
referee to indicate violations of the rules on a playing field,
WB in business setting refers to disclosure by former/
current organisation member of any illegal, immoral,
illegitimate practices involving their employers.
 Employees either make the misconduct public or inform it to
top level officials.
 Whistle Blowing is advantageous when it is used to bring
to notice of the people of employer’s corrupt practices but
it can also have a negative impact if it is used by some
frustrated employee who has some personal grievance/
grudge against his employers. It impacts the corporate
image of the company in a negative way.

 How far does Right To Information (RTI) act help

promote ethical conduct in government depts. & business
firms?
INSIDER TRADING
 American TV tycoon Martha Stewart went to jail for five
months. When she was allowed out on probation, she wore an
electronic ankle bracelet so that the police would know if she
has stepped out of her house.
 Her crime? She was told by her friend, Sam Waksal, that his
company Imclone's cancer drug has been rejected by the FDA.
Before this information was made public, Stewart told her
broker to sell her 4,000 shares in the company and escaped
unhurt when the stock got hammered. The day after she sold
the stock, it dropped 16 per cent to $46 and Stewart saved
$45,673.
 From the above example, it is evident that those trading on the
basis of insider information have an opportunity to enter and
exit at the correct time
 Any person who, is or was connected with the company, and
who is reasonably expected to have access to unpublished
price-sensitive information about the stock of that particular
company, or who has access to such unpublished price
sensitive information is an Insider.
 Information includes periodical financial results of a
company, issue or buyback of securities, any major
expansion plans or execution of new projects, amalgamation,
merger, takeovers, disposal of the whole or substantial part of
the undertaking and any other significant changes in policies,
or operations of the company.
 However, insider trading isn't always illegal. Trading by a
company insider in its shares is not violation and is legal.
 What is illegal is the trading by an insider on the basis of
unpublished price-sensitive information.
 Insider trading violations may also include 'tipping' such
information and the person using it
 While it's common knowledge that insider trading takes
place, it is very difficult to prove. Insiders may not trade on
their own account. Flow of information is another important
factor, but difficult to track. Regulations are in place to
prevent this but still it continues.
Corporate Ethics: Individual’s
Perspective
• Signs of ethical deterioration.
• In business, people have made
immoral millions
• In government, public officials are
involved in bribery.
• In education, cheating scandals
among students are common.
• under-the-table payments for
admission
• People believe that they have to
cheat to win.
• They believe that nice guys finish
last.
 Corporate ethics: Management
perspective
What is included in Factors to be kept in
corporate ethics? mind
• Purpose of the • Involvement of The
Business Senior Management
• People • Involvement of The
• Society Employee
• Government • Picking The Well
• Environment Tested Model
Management of ethics; an important
function of the board
• Accountable for corruption or impropriety in
a company.
• Board’s decisions on resource allocation,
performance targets or promotions always
trump official statements of ethical values.
• Whistleblowers are to be given protection
• Influence the ‘pressures’ which the CEOs
handle in managing ethics
Corporate Social Responsibilities (CSR)
 CSR is a form of corporate self-regulation.
 Ideally, CSR policy would function as a self-regulating
mechanism whereby business would monitor and ensure its
adherence to law, ethical standards, and international norms.
 Business would embrace responsibility for the impact of their
activities on the environment, consumers, employees,
communities, stakeholders and all other members of the
public sphere.
 Furthermore, business would proactively promote the public
interest by encouraging community growth and development,
and voluntarily eliminating practices that harm the public &
society at large.
 The practice of CSR is subject to much debate and criticism

 Critics argue that CSR distracts from the fundamental

economic role of businesses; others argue that it is nothing
more than superficial window-dressing