Professional Documents
Culture Documents
CHAPTER 1
CHAPTER 2
1. Meaning of Directors
2. Classification of directors:- shadow, additional, alternate, nominee, executive, non-executive,
independent
3. Appointment of directors
4. Legal position of directors
5. Role of Board of directors
6. Responsibilities of Bod:-1. Representation :-representative of shareholders, representative of
company to the outside world. 2. Strategic guidance & Decision making:- setting policy
framework, overseeing corporate activities, defining corporate philosophy, providing strategic
direction, appointment of CEO, Succession planning, setting risk management framework. 3.
Accountability:- monitoring & evaluating performance, reporting to the stakeholders &
regulators.
7. Powers of BOD
8. Duties of Directors:- 1. Duty of good faith, 2. Duty of reasonable care, 3. Duty to attend board
meetings, 4. Personal attendance towards work, 5. Duty to disclose interest.
9. Liabilities of Directors:- 1. Contractual liability, Civil liability to the company, liability for fraud,
liability for secret commission/bribe, liability for personal profits,liability for default of
executives, liability for act of co directors, liability for statutory violations, liability of
independent directors.
10. Shareholders rights & their protection
11. Board meeting and how n when r they conducted
12. Board committees:-
13. Audit Committees:- Composition, meetings, powers, role,
14. Remuneration Committee:- composition, meetings, role:- framework for remuneration,
company’s policy on duration of contract, individual remuneration package, performance
related schemes, selection of eligible directors & employees, ESOPs framework.
15. Nomination Committee:- composition, meetings, role
16. Shareholders/Investors Grievance committee:- composition, meetings, statutory mandate,
responsibilities & functions
CHAPTER 3 CORPORATE GOVERNANCE IN INDIA
1. The regulators of CG in India:- Corporate laws like Companies Act,2013, SEBI, Listing Agreement
2. CG Reforms in India
3. Initiatives in India on CG:-
1. CII Initiative
2. SEBI Initiative
Kumar Mangalam Birla Committee:- Mandatory and non-mandatory recommendations
3. Govt of India Initiative :- Deptt of Company Affairs
Naresh Chandra Committee
Narayan Murthy Committee:- Mandatory and non-mandatory recommendations
4. Revised Clause 49 of Listing Agreement:- Mandatory and non-mandatory clauses
5. J. J. Irani Committee
6. Corporate Governance Voluntary Guidelines, 2009
7. Issues of CG in India:- Whistle Blower, Insider Trading
8. Credit Rating Agencies: Meaning, Functions, Benefits to agencies, benefits of issuers
9. Corporate Governance Ratings
CHAPTER 4
1. Meaning of CSR
2. Best practices of CSR
3. Need of CSR
4. Reasons for business to assume Social responsibility
a. Dependence of business on society
b. Change in public expectations
c. Concept of corporate citizenship makes them to have some civic responsibilities
d. Business responsibility
e. Pressure from different groups like consumers.
5. Models of CSR
a. Friedman Model:- According to him, to ask a business man to contribute towards social
development is to ask him to steal from the shareholders money to perform social
responsibility. A business man has no duty other than developing his business. If he
looks after his business well, he is performing a social as well as moral duty. So a
businessman has no other social responsibility to perform except to serve his
shareholders & stockholders.
b. Stockholders & stakeholders model:- The model talks about two types of social
orientations of a firm towards its economic stockholders and social stakeholders. Also,
there are two types of motives under these two orientations i.e. self-interest and moral
duty.
Productivism and philanthropy are two orientations of stockholders. Productivists
believe that the only mission of a corporation is to maximize the self interest i.e. profit.
Philanthropists believe that helping the poor and the needy can be justified in terms of
morality. However, their motive towards CSR is dominated by moral obligations and not
self interest. But they believe that the primary social duty of a corporation is to obtain
profits.
Progressivism and Ethical Idealism are the two orientations of stakeholders model.
Progressivists are of the view that although corporate behavior is basically motivated by
self interest, yet there should be some scope for a social change that can transform the
society towards becoming more humanistic. Progressivists are in favor of enlightened
self interest where, in spite of self interest, socially good works can be undertaken. To
ethical idealists, the line of demarcation between business ad society is rather thin, and
they believe in sharing the corporate profits for humanitarian activities. According to
them, CSR is justified when business corporations support stakeholders.
c. Ackerman Model:- This model depicts four critical stages to arrive at the evaluation of
the social performance audit stage:-
i. Identification of project
ii. Intensive study of the problem by hiring experts and getting their suggestions to
make it operational
iii. The project is made public and is implemented
iv. Evaluation stage:- Needs of society are considered very minutely and problems
& issues are addressed.
1. Rejection strategy
2. Adversary strategy
3. Resistance strategy
4. Compliance Strategy
5. Accommodation Strategy
6. Proactive Strategy
d. Carroll’s model of CSR:- is a Four part model being a multi layered concept. Four inter
related aspects are economic, legal ethical and philanthropic responsibilities.
CSR is actually Corporate Social Responsiveness which refers to the capacity of a corporation to respond
to social pressures. Four strategies of social responsiveness are:-
1. Reaction:- The corporation denies any responsibility for social issues by claiming that these are
the responsibility of government
2. Defense:- The corporation admits responsibility but fights it, doing the very least that seems to
be required.
3. Accommodation:- The corporation accepts responsibility and does what is asked by its
stakeholders.
4. Proaction:- The corporation seeks to go beyond industry norms and anticipate future
expectations by doing more than is expected.
There are three elements in the concept of Corporate Social Performance:-
1. The principle of being socially responsible
2. The process of social responsiveness
3. Socially responsible outcome.
Or
Or
CSR rules shall come into force on the date of their publication in the official gazette and shall be
applicable from the financial year 2014-15.
CSR Committee :- CSR Committee should consist of atleast 3 directors out of which atleast 1 director
should be independent director. Some companies many not be mandatorily required to appoint
independent directors as per provisions of Companies Act 2013 but CSR applicability may be there
for those companies. How will this criteria of independent director be met in case of those
companies need to be clarified.
i. Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall
indicate the activities to be undertaken by the company as specified in Schedule VII of the
Act.
ii. Recommend the amount of expenditure to be incurred on the activities referred to in clause
(a); and
iii. Monitor the Corporate Social Responsibility Policy of the company from time to time.
iv. Prepare a transparent monitoring mechanism for ensuring implementation of the projects /
programmes / activities proposed to be undertaken by the company.
· To ensure that atleast 2% of average net profit of last 3 preceding years is spent on CSR activities
every year.
· ‘Net Profit’ shall mean, net profit before tax as per books of accounts and shall not include profits
arising from branches outside India.
· 2% CSR spending would be computed as 2% of the average net profits made by the company
during every block of three years. For the purpose of First CSR reporting the Net Profit shall mean
average of the annual net profit of the preceding three financial years ending on or before 31 March
2014.
·To approve the CSR Policy after considering recommendations of CSR Committee.
· To disclose CSR policy and initiatives in Board’s report and Company’s website.
· To ensure that activities reflected in CSR policy are actually undertaken by company.
· If the company does not spend 2% of net profits as required, then Board to report the reasons in
the Board’s report.
Contents of CSR Policy :- CSR policy of the company should reflect the following:
· Projects and programmes that are to be undertaken by the company in pursuit of CSR.
· List of CSR projects/programmes which a company plans to undertake during the implementation
year, specifying modalities of execution in the areas/sectors chosen and implementation schedules for
the same.
· A statement that surplus arising out of the CSR activity will not be part of business profits of a
company.
Activities which may be included by companies in their Corporate Social Responsibility Policies
Activities relating to:—
· Tax treatment of CSR spend will be in accordance with the IT Act as may be notified by CBDT.
· A Company may set up an organization which is registered as a Trust or Section 8 Company, or Society
or Foundation or any other form of entity operating within India to facilitate implementation of its CSR
activities in accordance with its stated CSR Policy.
· A company may also conduct/implement its CSR programmes through Trusts, Societies, or Section 8
companies operating in India, which are not set up by the company itself.
· Companies may collaborate or pool resources with other companies to undertake CSR activities and
any expenditure incurred on such collaborative efforts would qualify for computing the CSR spending.
· Only such CSR activities will be taken into consideration as are undertaken within India.
· Only activities which are not exclusively for the benefit of employees of the company or their family
members shall be considered as CSR activity.
· Company shall give preference to the local area and areas around it where it operates, for spending the
amount earmarked for Corporate Social Responsibility activities.
· Format of annual report on CSR initiatives to be included in the board report by qualifying companies
has been prescribed under draft Rules.
Wrapping up
Companies Act, 2013 has introduced the concept of CSR in the Act itself and even though the Act
advocates it strongly but it has still prescribed a “comply or explain” approach only. This means as per
the new norms, the two per cent spending on CSR is not mandatory but reporting about it is mandatory.
In case, a company is unable to spend the required amount, then it has to give an explanation for the
same.
1. Definition of Ethics:- Ethics is the study of what is right or good human conduct.
2. Distinction between Morality and Ethics: Morality involves individual character but ethics
studies how one should behave in a group or society.
3. Concept of Business ethics:- normative & descriptive
4. Meaning:- Business ethics deals with certain moral principles that can tell us whether a
particular business concern is run in a morally right or wrong way.
5. Relation between ethics and business ethics:
There are definite interconnections between ethics and business ethics. Many theories,
principles, concepts of ethics are used in business ethics. He theories of ethics can effectively
contribute to the growth of the subject of business ethics. There are atleast following three
inter-relations between these subjects:-
1. Ethical theories offer various concepts which are relevant to business managers in certain
ethical issues relating to business.
2. Ethical theories provide a set of analytical guidelines and moral standards, which can be
directly or indirectly applied to the solutions of business problems in a fairly just and
satisfactory way.
3. Ethical theories can contribute to business management in the building up of ethical models
about ethical decision making, ethical audit, solving ethical dilemmas etc.
6. Issues of Business ethics:-
a. Systematic:- Economic system, political system, legal system, social system
b. Corporate:- activities, policies, practices, organizational structure
c. Individual:- Actions, decisions and character of an individual
d. International
7. Need and objective of Business Ethics:- BE is necessary to give guidance to uphold the interests
of stakeholders including consumers, shareholders, suppliers, distributors and investors. BE is
necessary to remind the business firm that it is the moral duty of the firm as a part of the society
to undertake some social responsibilities. Five objectives are:-
a. BE teaches us the ethical rules and principles that are relevant for business.
b. BE is concerned with the application of ethical standard and values to business.
c. BE teaches the manager as to how to run the business on ethical lines.
d. It helps identifies the areas which are not practicing ethical principles and therefore can
prescribe the necessary ethical code.
e. BE can help a firm to make business decisions and strategy which are morally fair and
just.
8. Importance of Business ethics:-
Broad framework for giving guidance
Trusted by stakeholders
Ethics improves its social image
It improves and strengthens its organizational culture
Generates a sense of empowerment among employees
Have strong team work
It avoids many types of work related conflicts
It saves a lot of money of organization every year as it can avoid criminal and legal
involvement
Many types of market failures are prevented by ethically run organisations.
9. Approached to business ethics:- Three approaches are there:-
Profit based morality approach:- When the profit of the firm is high, its morality gets a
better priority.
Law base morality approach:- Laws of the country are mostly based on moral principles.
Thus, if a firm or a person obeys the established laws of a country then morality is also
obeyed.
Natural laws approach:- According to this approach, there are five moral obligations for
business ethics.
o Veracity principle:- A business firm should follow the truth under all situations
o No harm principle:- A business firm should not harm anybody
o Honesty/Fairness principle:- A business firm must remain honest in its dealings.
o Human rights principle:- A business firm must respect and maintain human
rights.
o Autonomy principle:- A business firm must ensure that it does not make
infringement of human choice for goods and services.
10. Sources of ethical knowledge for business:- Six primary sources are:-
Legal system
Code of conduct
Cultural experience
Genetic inheritance
Religion
Philosophical system
11. Business ethics involves five kinds of activities
a. Applying general principles of ethics to practices in business
b. Analysis of presuppositions of business
c. Meta ethical
d. Fundamental norms of behavior
e. Macro moral issues
12. Ethical issues in Marketing, Finance & Accounting, Human resource management
13. There are five dimensions of business ethics:-
1. Business ethics are analytical in nature:- Its purpose is to analyze things as they are.
2. Diagnostic in nature
3. Evaluative in nature
4. Prescriptive in nature
5. Business ethics sets the moral standards in business.
14. Theories of Business Ethics
a. The Utilitarian approach (Consequential Approach)
Utilitarianism is an ethics of welfare. Business guided by utilitarian approach focuses on
behaviours and their results, not on the means of such actions. It can be described by
the phrase, “the greatest good for the greatest number.” The utilitarian approach
prescribes ethical standards for managers in the areas of organisational goals, i. e.,
maximisation of profits; and having efficiency which denotes optimum utilization of
scarce resource. Utilitarianism prescribes that the moral worth of an action is solely
determined by its contribution to overall utility, that is, its contribution to the happiness
and satisfaction of the greatest member. For example, one may be tempted to steal
from a rich wastrel to give to a starving family. Hence, this approach is also referred as
consequential approach. Utilitarianism is a general term for any view that holds that
actions and policies should be evaluated on the basis of the benefits and costs they
impose on the society. The policy which produces the greatest net benefit on lowest net
costs in considered right. The best way to analyse any decision including a business
decision is by doing a cost benefit analysis. Several government agencies, legal theorists
and moralists advocate utilitarianism. Jeremy Bentham is considered as the founder of
traditional utilitarianism. He propagates on objective basis for making value judgments
that would provide common acceptable norm for determining social policy and social
legislation. The utilitarian principle states, “an action is right from ethical point of view if
and only if they seem total of utilities produced by that act are greater than the sum
total of utilities produced by any other act that can be performed at that point of time
by any person”. This approach gives precedence to good over right. There is some
limitations utilitarian approach. It is impossible to measure utility of different actions on
a common scale. How can utility of one action be compared to that of the other? At
times benefits and cost of an action cannot be even predicted accurately. For example,
it is not possible to predict advantages of building housing for the underprivileged.
Moreover, non-economic goods, such as life, equality, health, beauty and justice cannot
be traded for economic goods. But utilitarianism assumes that all goods are tradable for
some quantity of another good.
b. The Deontological Approach (Rights Approach)
The concept states that the humans have a dignity based on their human nature. The
ethical approach is that which best protects and respects the moral rights of those
affected. A person has a right when he is entitled to act in a certain manner or is entitled
to have others act in a certain manner or is entitled to have others act in a certain
manner towards him. This entitlement may come from legal system or social norms of
the society. Accordingly it can be called a legal right or social right. Besides a person has
moral rights or human rights. These come from moral norms of the society. Moral rights
have no jurisdiction. These rights have three characteristics:-
1. Moral rights are correlated with duties
2. Moral rights provide individuals the equality to pursue their interests.
3. Moral rights and moral justification go hand in hand.
15. Law & Ethics:- All moral issues cannot be codified. Law and ethics are not identical. Grey area
between them. All type of ethical actions may not be governed by law. Laws prescribe the
critical minimum human behavior but ethical behavior goes beyond that limited human action
or behavior. If only law is considered in decision making, its implementation is highly dangerous
for following reasons :-
1. Certain aspects of business activity cannot be regulated by law. Everything that is
Immoral may not be illegal. It does not cover interpersonal relationship between
employer, employee and creditors.
2. Law is often slow to develop new area of concerns, as law is for responding to
problems.
3. Law often employs moral concepts that are not precisely defined, eg. Good faith,
reasonable care
4. Law itself is often not settled
5. Exclusive reliance on law will imply too much legislation and litigation when it is not
necessary.
An immoral or unethical act is not always punishable but an illegal is, and in some cases,
it is considered morally right to violate laws:-
7. Should business be ethical:- Earlier business were established with profit motive but now things have
changed and being a corporate, they have to work ethically towards society.
More and more companies have begun to recognize the relation between business ethics and financial
performance. Companies displaying a “clear commitment to ethical conduct” consistently outperform
those companies that do not display an ethical conduct. A company that adheres to ethical values and
dedicatedly takes care of its employees is rewarded with equally loyal and dedicated employees.
1. Attracting and retaining talent People aspire to join organizations that have high ethical values. Such
companies are able to attract the best talent. The ethical climate matters a lot to the employees. Ethical
organizations create an environment that is trustworthy, making employees willing to rely on company’s
policies, ability to take decisions and act on those decisions. In such a work environment, employees can
expect to be treated with respect, and will have consideration for their colleagues and superiors as well.
Thus, company’s’ policies cultivate teamwork, promote productivity and support employee-growth.
Retaining talented people is as big a challenge for the company as getting them in the first place. Work
is a mean to an end for the employees and not an end in itself. The relationship with their employer
must be a winwin situation in which their loyalty should not be taken for granted. Talented people will
invest their energy and talent only in organizations with values and beliefs that matches their own. In
order to achieve this equation, managers need to build culture, compensation and benefit packages,
and career paths that reflect and foster certain shared values and beliefs.
2. Investor Loyalty Investors are concerned about ethics, social responsibility and reputation of the
company in which they invest. Investors are becoming more and more aware that an ethical climate
provides a foundation for efficiency, productivity and profits. Relationship with any stakeholder,
including investors, based on dependability, trust and commitment results in sustained loyalty.
4. Regulators Regulators eye companies functioning ethically as responsible citizens. The regulator need
not always monitor the functioning of the ethically sound company. Any organisation that acts within
the confines of business ethics not only earns profit but also gains reputation publicly.
To summarise, companies that are responsive to employees’ needs have lower turnover in staff. –
Shareholders invest their money into a company and expect a certain level of return from that money in
the form of dividends and/or capital growth. – Customers pay for goods, give their loyalty and enhance a
company’s reputation in return for goods or services that meet their needs. – Employees provide their
time, skills and energy in return for salary, bonus, career progression and experience
7. MNCs do not care about economic growth and development of the host country.
11. Business Ethics and Corporate Governance:- They both are co related and one cannot ignore the
other one.