Business Ethics & Corporate

Governance
Class of 2009
By Dr. P K Banerjea
 Business Ethics & Corporate
Governance
• Course Code: MGT 619

• Class 0f: 2006 Semester: IV

• Sessions: 33 Credit 3 Units

• By Prof. P K Banerjea
Role Of Business in
Society
 Role Of Business in Society
Business meets the societal needs. Hence society and
business needs each other.
While business is expected to generate wealth and
opportunity, society is expected to provide an
environment conducive to growth of business
“One and only social responsibility of Business is to
increase profits so long as it stays within the rules of
the game, which is to say, engages in open and free
competition without deception & fraud”
Milton Friedman
 TASKS OF BUSINESS IN
SOCIETY
• Financial Task: With the advent of Public Limited
companies statutory audit is mandatory
• Economic & Production Task: This relates to
production of goods & services that meet societal
needs and thereby create wealth. Tendency to
create monopoly thru’ M & A, cartels , and other
manipulations to ensure better returns to the
share holders. Good ethical companies normally
refrain from doing so
• Maintenance Tasks: Activities that help shape the
society; educational, health care, religious &
other welfare activities
Tasks of Business in Society
…
Continued
• One such example is Technology grants awarded by
Microsoft every year to non profit organisations such as
American Heart Association, Red Cross etc.Even Nobel
Prizes awarded by Alfred Nobel could be classified as
encouragement to Scientists, Doctors, Economists and
peace promoters
• Adaptive Tasks: The task by which a society responds to
change is referred as adaptive functions
• The Management or Political Tasks: The corporations are
expected to
a) Support or promote Human Rights
b) Not to suppress Freedom of Expression, rights
to form associations etc.
 Role of Business in
Society…
continued
• Exploitation of labor, environmental
destruction, trampling of human rights are
done by some companies to maximise
profit, with or without connivance of with
government (those which are dictatorial).
Shell’s operation in Niger Delta in Nigeria
is am example of environmental & human
exploitation connected with oil
exploration. The recent cases of painting
of rocks (Natural Heritage) by Coke &
Pepsi is another example.
 Role of Business in
Society…
continued
• Environmental Tasks: Degradation of environment is one bad
effect of industrial development. Most of the countries have
legislation for safeguarding the environment such as Air, Water
Pollution Control Acts and Noise Pollution Act in many advanced
countries. But without corporations’ own regulatory action it is
impossible to enforce such acts.
• COALITION FOR ENVIROMENTALLY RESPONSIBLE ECONOMIES
(CERES) is one exemplary partnership embraced by large
American companies like COKE, GM American Airlines etc.
• CERES principles addresses issues like informing public about
hazardous materials, reduction in risk of buying unsafe products,
restoring environment etc
• A 10 Points charter or Code of Environmental Conduct encourages
corporate to commit to conditional improvements in activities that
prevent degradation of the environment
 Role of Business in
Society…
continued
Code of Ethics & Compliance Guidelines of
UNOCOL

“We are committed to meeting the highest ethical

standards in all our operations, whether at home
or abroad. This includes treating everyone fairly
and with respect, maintaining a safe and healthy
workplace, and improving the quality of life,
wherever we do our business in a way that
engenders pride in our employees and respect
from the world community”
 Role of Business in
Society…
continued
Core Values of UNOCOL one of the
largest independent oil and gas
exploration & production companies
in the world are
1. Honesty
2. Integrity
3. Excellence
4. Trust
 Role of Business in
Society…
continued
Approach of Clutterbuck
Institutional & oriented Approach

1. Set a Clear Goal

2. Publish A Code of Ethics
3. Use Reward & Punishment Mechanism
4. Use Ethics in Recruitment Criterion
5. Reinforce Policies Thru’ Training & Development
6. Provide Negotiation of Concerns
7. Establish Openness & Transparency into Decision
making Process
8. Provide Feedback
 Role of Business in Society…
continued

Drummond & Carmichael’s Approach

Personalised Development Approach
• Acknowledge the Personal Dimension of Ethical Behavior
• Monitor Symptoms of Ethics related Stress
• Analyse Feelings about Venture & Its Activities---Link Analysis to Diagnose
Problems
• Draw Up Personal & Corporate Ethics checklist
• Set Up Systems of Justice & Reinforce these thru’ Contracts & Ethics
Statement
• Communicate Ethics Position
• Explain your Ground Rules to Others
 Role of Business in
Society…
continued
Important Aspects To Be Considered

• Ensure Proper Systems for Corporate Values &

Ethics
• Clear Understanding of Questions Related to
Compliances
• Serving The Community By Looking Into The
Needs of The Economically & Socially
Disadvantaged
• Bringing Environment Friendly Products
 Guiding Principles of Proctor &
Gamble
• We show respect for all Individuals
• The interests of the company and
that of the individuals are
inseparable
• We are strategically focused in our
wok
Leadership & Entrepreneurship
 Introduction to Leadership

“The true leaders serves. Serves People. Serves

their best interests, and in so doing will not
always be popular, may not always impress.
But because true leaders are motivated
loving concern rather than a desire for
personal glory, they are willing to pay the
price.”
Eugene B Habeckar
‘The other side of Leadership’
 Introduction to Leadership
Cntd…..
“ Waste no time arguing what a good man
should be. BE ONE”
Marcus Aurelius

“ Courage not complacency- is our need

today. Leadership not Salesmanship “
John F Kennedy
 Four Competencies of
Leadership
“ An Institution is a lengthened Shadow of
one person “ Voltaire
This statement highlights the critical role of
leadership. Leadership deals with people,
so the new person centric approach has
important role of a leader. The
understanding of transpersonal
psychology and the ability to attain
voluntary control of one’s inner state of
mind are important to work effectively
with people; as people are always involved
in leadership.
 Four Competencies of Leadership
Contd…..
• The first leadership competency is
management of attention thru' a set of
intentions or a vision, not in a mystical or
a religious sense, but in the sense of
outcome, goal or direction.
• The second leadership competency is
management of meaning. For leaders to
make their dreams apparent to others
and to align people with those dreams,
leaders must communicate dreams.
 Four Competencies of Leadership
Contd….
• The third leadership competency is
management of trust, which is essential to all
organisations, be it a political party, or social
set up. The main determinant is reliability
(Bennis calls it constancy)
• The fourth leadership competency is
management of self, knowing one’s skills and
using them effectively. Management of self is
critical, without it, leader can not know their
own flaws; this will make it difficult for them to
improve him/herself.
 Leadership As Seen by Various
Thinkers
“ Leaders are those who know what to do next,
know why that is important, and know what
appropriate resources to bring to bear on the
problems at hand. Then, through effective
communications they influence others to follow “.
By Berry Bowater
“ Leadership is not something that you learn once
and for all. It is an ever evolving pattern of skills,
talents, and ideas that grow and change as you
do “

By Sheila Murray Bentel

 Leadership As Seen by Various
Thinkers
“The nature of Leadership has changed dramatically over the
years; in this new business environment, the power comes from
recognizing these patterns of change. Leadership was
synonymous with authority, you had the power, you had the
corner office and you had the title and perks that go with it. But
it is becoming more and more evident that leadership is not a
title; it is a set of behavior. A fancy title is not only an
opportunity, it is also an obligation to engage in certain
behaviors………Traditionally, senior executives are expected to
have all answers to the problems the organization is faced
with. Senior executives no longer have all the answers, this is
the ‘crisis’. And the ‘paradox’ is that the answers exists in the
organization itself, it is just drawing them out”.
Deepak Sethi
CEO, Organic Leadership LLC
 Leadership As Seen by Various
Thinkers
“ Leaders are those who know what to do next,
know why that is important, and know what
appropriate resources to bring to bear on the
problems at hand. Then, through effective
communications they influence others to follow “.
By Berry Bowater
“ Leadership is not something that you learn once
and for all. It is an ever evolving pattern of skills,
talents, and ideas that grow and change as you
do “
By Sheila Murray Bentel
 Leadership As Seen by Various
Thinkers
“ Failing organisations are usually over managed and under led “.
-Warren G Bennis
(Leadership Inspirational Quotes & Insights for Leaders)

“A Leader is one who knows the way, and shows the way”
- John Maxwell
“ Leadership is interpersonal influence, exercised in situations and
directed through the communication process, towards the
attainment of goals “
Tannebaum
( Leadership and Organization Behavior Science Approach )
Qualities of Leadership
students’ perspective
 Common Leadership
Qualities
• Motivating
• Initiation
• Inspiring
• Goal Oriented
• Good Listener
• Lead By Example
• Good Communicator
• Planner
 Common Leadership
Qualities
• Planner
• Avid & Quick Learner
• Rule Breaker
• Delegates
• Good Negotiator
• Commander
• Visionary
• Creative
 Common Leadership
Qualities
• Emotional Stability
• Knowledge of Human Relations
• Empathy
• Objectivity
• Personal Motivation
• Communication Skill
• Teaching Ability
 Common Leadership
Qualities
• Social Skills
• Technical Competence
• Physical & Nervous Energy
• Persuasiveness
• Creativity & Vision
• Inspirational Ability
• Imaginative Mind
• Courageous Outlook
 Attributes of a Leader
Standard Bearers:
Establish an ethical framework within an
organization. These demand a commitment
to live and defend the climate and culture
that one wants to permeate in one’s
organization. What one set as an example
will soon become the rule as unlike skills or
knowledge, ethical behavior is learned more
by observing than by listening. Being a
standard bearer creates trust and openness
in one’s employees who in turn fulfill one's
vision
 Attributes of a Leader
DEVELOPERS: Help others learn through
teaching, training, and coaching. This
creates an exciting place to work and
learn. Never miss an opportunity to teach
or learn something new yourself. Coaching
suggests some one who cares enough to
get involved by encouraging and
developing others who are less
experienced. Employees who work for
developers know that they can take risks,
learn by making mistakes and winning in
the ends
 Attributes of a Leader
INTEGRATORS:
Orchestrate the many activities that take
place through out an organization by
providing a view of the future and the
ability to obtain it. Since integrators have
sixth sense about where problems are
likely to occur, they can be available to
help during critical times; they know their
employees do their best when they are left
to work within a vision based frame work.
 Douglas Mc Arthur’s Principle
of Leadership
• Do I heckle my subordinates or strengthen &
encourage them?
• Do I use moral courage in getting rid of
subordinates who have proven themselves
beyond doubt to be unfit?
• Have I done all in my power by encouragement,
incentives and spur to salvage the weak and
erring?
• Do I know by NAME and CHARACTER, a maximum
number of subordinates for whom I am
responsible? Do I know them intimately?
• Am I thoroughly familiar with technique,
necessities, objectives and administration of my
job?
 Douglas Mc Arthur’s Principle
of Leadership
• Do I loose my temper on individuals?
• Do I act in such a way that my subordinates WANT to follow
me?
• Do I delegate jobs that should be mine?
• Do I arrogate everything to myself and delegate nothing?
• Do I develop my subordinates by placing on each one as
much responsibilities as he can stand?
• Am I interested in the personal welfare of each of my
subordinates, as if he were a member of my family?
• Have I the calmness of my voice and manner to inspire
confidence, or am I inclined to irascibility and excitability?
 Douglas Mc Arthur’s Principle
of Leadership
• Am I a constant example to my
subordinates in character, dress,
deportment and courtesy?
• Am I inclined to be nice to my superior and
mean to my subordinates?
• Is my door open to my subordinates? Do I
think more of position than job?
• Do I correct subordinates in front of
others?
Leadership Theories
 Profile of An
Entrepreneur
1. Problem Solver
2. Calculated Risk Taker
3. Innovator
4. Delegate Tasks
5. Handle Rejection Well
6. Take Help From Support System
7. Ability to Handle Stress
Why Small Business Fail?
• Procrastination
• Ignoring competition
• Ineffective Marketing
• Ignoring Customer’s Needs
• Incompetent Employees
• Lack of Versatility
• Poor Location
• Cash Flow Problem
Why Small Business Fail?
• A closed Mind
• Inadequate Planning
• Lack of Foresight
• Pennywise pound foolish Attitude
• Lack of Application of Technology
• Unsatisfied Employees
• Siphoning of Money for Other
Activities
 Introduction to
Entrepreneurship
“ Entrepreneurship is the process of
creating something different with
value of devoting necessary time and
effort, assuming the accompanying
financial ,psychic, and social risks,
and receiving the resultants rewards
of monetary and personal
satisfaction and independence”
 Introduction to
Entrepreneurship
Benefits & Opportunities of Entrepreneurship
1. To control One’s destiny
2. The opportunity to reach full potential
3. Opportunity to unlimited profit
4. Opportunity to make contribution to society & get
recognition for the same
5. To play positive role in Economic Development in
the Region/Nation
6. It allows one to take risk/s
 What is
Entrepreneurship?
The word ‘entrepreneurship’ came from
French language which means “between
taker “ or “ go between “ It involves
i) Taking initiative
ii) Organizing and reorganizing resources
and situation to to create wealth by
meeting societal needs
iii) Acceptance of Risks and failures
 What is
Entrepreneurship?
Economists say s/he brings resources,
labors, materials, and other assets to do
value additions.
Psychologists think s/he driven, by a force to
attain something, to experiment, to
accomplish, and perhaps escape authority
To one of set of Businessmen s/he is a
threat, to another section an ally, a source
of supply, a customer or some one good to
invest in.
 Entrepreneurial
Characteristics
1. Desire for Responsibilities
2. Preference for Moderate Risks
3. Confidence in Personal Success
4. Desire for immediate Feedback
5. High Level of Energy
6. Future Orientation
7. Skilled in Organization
8. Feeling of Achievement More Important
than Money
 Managerial Vs
Entrepreneurial
Decision Making
Strategic Orientation
Group Perception Individual Perception
Commitment to Opportunity
I) Slow to action Opportunity Need for action
ii) Long time for single action Short Decision Window
iii) Stop Review of action taken Will to take Risks
Commitment to Resources
i) Using committed resource Own efforts; limitations
ii) Look for Rewards Look for Milestones
Management Structure
i) Organized Personal Discretion
ii) Hierarchical Flat Organization
iii) Formal Informal