BPK5B Corporate Ethics and Governance. Unit : I - V

Transcription

1 BPK5B Corporate Ethics and Governance Unit : I - V

2 Unit I - Syllabus Concept of ethics Ethics and morals Justice Fairness Values Normative ethical theory Relevance of business ethics Arguments for and against Business values for 21 st century Ethics in Indian business BPK5B - Corporate Ethics and Governance 2

3 Concept of Ethics Ethics A code of moral standards of conduct for what is good and right as opposed to what is bad or wrong. BPK5B - Corporate Ethics and Governance 3

4 Sources of Ethical Norms BPK5B - Corporate Ethics and Governance 4

5 content: font size 20 BPK5B - Corporate Ethics and Governance 5

6 Ethics and Culture BPK5B - Corporate Ethics and Governance 6

7 Justice, Fairness,Values Values are the criteria for determining good and bad, fair and unfair, just and unjust. Values are important and lasting beliefs or ideals shared by the members of a culture about what is good or bad and desirable or undesirable. Values have major influence on a person's behavior and attitude and serve as broad guidelines in all situations. Managers who are fair in their dealings are generally more successful in motivating their subordinates than those who are not. A reputation for being unfair or biased is surely going to be a liability for managerial success. BPK5B - Corporate Ethics and Governance 7

8 Normative ethical theory BPK5B - Corporate Ethics and Governance 8

9 Relevance of business ethics BPK5B - Corporate Ethics and Governance 9

10 Arguments for and against business ethics Objections to Bringing Ethics into Business The pursuit of profit will ensure maximum social benefit A manager s most important obligation is to the company Business ethics is limited to obeying the law BPK5B - Corporate Ethics and Governance 10

11 Arguments for and against business ethics Arguments Supporting Ethics in Business Ethics applies to all human activities Business cannot survive without ethics Ethics is consistent with profit seeking Customers and employees care about ethics BPK5B - Corporate Ethics and Governance 11

12 Business values for 21 st century Businesses in the 21st century have to be responsible; they must respond to the legitimate demands of their environment and make commitments to the societies in which they have a presence. They have two very important motives for doing so: conviction and their own interest: conviction because ethics and positive values must constitute the nucleus of their corporate culture; and interest because companies have to relate with an increasingly better-informed and demanding society and therefore need greater legitimacy to successfully engage in their activities in the medium and long term. BPK5B - Corporate Ethics and Governance 12

13 Ethics in Indian business BPK5B - Corporate Ethics and Governance 13

14 Ethics in Indian business A substantial number of small, medium and large businesses in India avoid such corrupt practices today by simply adhering to the rules and regulations correctly.... Top bosses have realised that their prestige in the society and the goodwill for theirbusiness are dependent on their adhering to ethical standards. BPK5B - Corporate Ethics and Governance 14

15 Unit II - Syllabus Ethical management Strengthening of personal and organizational integrity Complexity and group dynamic Spiritual core of leadership Leaders and the value references Does ethics pay? Corporate scams and its effects Law as an investment of ethics BPK5B - Corporate Ethics and Governance 15

16 Ethical Management Ethical managementrefers to corporate management that not only fulfills economic, legal and ethical responsibilities, but also strives to achieve sustainability through the company acting as a responsible member of society. BPK5B - Corporate Ethics and Governance 16

17 Strengthening of personal and organizational integrity Here are four things you can do to build personal and organizational integrity. 1. Start by keeping your word to yourself 2. Lead by example and keep your word to others 3. When you are not able to keep your word (or keep it on time), let everyone know immediately and clean up the mess this causes 4. Commit to building and maintaining integrity as a lived organisational value BPK5B - Corporate Ethics and Governance 17

18 Complexity and group dynamic Group dynamics is a system of behaviors and psychological processes occurring within a social group (intragroup dynamics), or between social groups (intergroup dynamics). Types of Group Group Formal Informal Command Interest Task Friendship BPK5B - Corporate Ethics and Governance 18

19 Spiritual core of Leadership spiritual core may have everything to do with leadership. While modern perspectives have sought to divorce spirituality from the earthly realms, we see that, as we develop our consciousness, the wisdom and compassion of our spiritual life come right to the center and influence everything we do. BPK5B - Corporate Ethics and Governance 19

20 Leaders and the value reference The Value Reference Model (VRM) lists all categories of processes required to support and enable the value chain execution under Govern and Plan categories. This includes processes supporting human capital management, assets management, performance management, etc. BPK5B - Corporate Ethics and Governance 20

21 Does Ethics pay? The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond. As with all business initiatives, the ethical operation of a company is directly related to profitability in both the short and long term. BPK5B - Corporate Ethics and Governance 21

22 Corporate scams and its effects Activities undertaken by an individual or company that are done in a dishonest or illegal manner, and are designed to give an advantage to the perpetrating individual or company. Corporate fraud schemes go beyond the scope of an employee's stated position, and are marked by their complexity and economic impact on the business, other employees and outside parties. BPK5B - Corporate Ethics and Governance 22

23 Law as an Investment of ethics Law Vs Ethics Law and ethics are two important terms associated with the science of management. Law is a set of universal rules that are framed, accepted when usually enforced. Ethics on the other hand define how individuals prefer to interact with one another. The word ethics is derived from the Latin ethos meaning character. The word ethos combines with another Latin word, mores meaning customs to give the actual meaning. BPK5B - Corporate Ethics and Governance 23

24 Unit III - Syllabus Corporate social responsibility Promoting Stakeholder s satisfaction Corporate responsiveness Managing socially responsible business Environment responsibility Ethics and ecology Advertise and information disclosure Work ethics and professional responsibility BPK5B - Corporate Ethics and Governance 24

25 Corporate Social Responsibility Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship or responsible business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and national or international norms. BPK5B - Corporate Ethics and Governance 25

26 Promoting Implement and Encourage Green Practices for Corporate Social Responsibility. Implement green practices to assist in environmental waste reduction, while promoting and encouraging stewardship growth, better corporate ethics and long-lasting practices that promote both personal and corporate accountability BPK5B - Corporate Ethics and Governance 26

27 Stakeholder s Satisfaction content: font size 20 BPK5B - Corporate Ethics and Governance 27

28 Corporate Responsiveness content: font size 20 BPK5B - Corporate Ethics and Governance 28

29 Managing socially responsible business content: font size 20 BPK5B - Corporate Ethics and Governance 29

30 Environment responsibility content: font size 20 BPK5B - Corporate Ethics and Governance 30

31 Ethics and ecology content: font size 20 BPK5B - Corporate Ethics and Governance 31

32 Advertise and information disclosure content: font size 20 BPK5B - Corporate Ethics and Governance 32

33 Work ethics and professional responsibility content: font size 20 BPK5B - Corporate Ethics and Governance 33

34 Unit IV - Syllabus Corporate governance Transparency Disclosures share holders welfare vs stakeholders approach Board of directors Role, duties, responsibilities Independent directors Executive and compensation Agency problem Agency costs Stock option plan BPK5B - Corporate Ethics and Governance 34

35 Corporate governance Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of acompany's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. BPK5B - Corporate Ethics and Governance 35

36 Transparency Transparency means openness, a willingness by the company to provide clear information to shareholders and other stakeholders. For example, transparencyrefers to the openness and willingness to disclose financial performance figures which are truthful and accurate. BPK5B - Corporate Ethics and Governance 36

37 Disclosures share holders welfare vs. stakeholders approach Shareholder-Oriented Maximizes shareholder value and looks after shareholder interests Stakeholder-Oriented Looks after all stakeholder interests, especially public Seeks profitability and efficiency Less concerned about profit than value for money Hard-nosed and commercial Looks for survival, long-term growth and stability BPK5B - Corporate Ethics and Governance 37

38 Wide Ownership (Shareholder- Oriented) Narrow Ownership (Stakeholder- Oriented) Ownership scattered with managers given a great of freedom, but subject to market forces, such as takeovers and proxy fights content: font size 20 Ownership concentrated with a few people with strong power over management, sometimes through an executive chairman All shareholders need protection, with close attention to management actions Minority shareholders poorly protected and need independent director support BPK5B - Corporate Ethics and Governance 38

39 Single-Tier Board (Shareholder- Oriented) Heading: font size 32 Two-Tier Board (Stakeholder-Oriented) Anglo-American model where executive and non-executive directors sit together content: font size 20 Continental European model where supervisory board consists solely of non-executive directors and a lower-level management board consists of full-time managing directors Chairman and chief executive officer work closely together and there are board committees for audit, remuneration and nomination Supervisory board totally independent from management board BPK5B - Corporate Ethics and Governance 39

40 Board of directors Role, duties, responsibilities The Board delegates to the Chief Executive Officer, and through that individual to other senior management, the authority and responsibility for managing the Company's business. The Board's role is to oversee the management and governance of the Company and to monitor senior management's performance. BPK5B - Corporate Ethics and Governance 40

41 Board of directors content: font size 20 BPK5B - Corporate Ethics and Governance 41

42 Independent directors BPK5B - Corporate Ethics and Governance 42

43 Executive compensation Executive compensation or executive pay is composed of the financial compensation and other nonfinancial awards received by an executive from their firm for their service to the organization. Executive pay is an important part of corporate governance, and is often determined by a company's board of directors BPK5B - Corporate Ethics and Governance 43

44 Agency problem The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another's best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. BPK5B - Corporate Ethics and Governance 44

45 Agency costs Agency costs are a type of internal cost that arises from, or must be paid to, an agent acting on behalf of a principal. These costs arise because of core problems, such as conflicts of interest, between shareholders and management. BPK5B - Corporate Ethics and Governance 45

46 Unit V - Syllabus SEBI and corporate governance Clause 49A of SEBI listing agreement Governance committees Audit committee Shareholders grievances committee Investor protection Management discussion analysis Shareholders information Disclosure requirements Role of accountants and auditors Accountability Professional codes and values Shareholders activism BPK5B - Corporate Ethics and Governance 46

47 SEBI and corporate governance BPK5B - Corporate Ethics and Governance 47

48 Clause 49 of SEBI listing agreement content: font size 20 BPK5B - Corporate Ethics and Governance 48

49 Governance committees content: font size 20 BPK5B - Corporate Ethics and Governance 49

50 Audit committee BPK5B - Corporate Ethics and Governance 50

51 Investor protection Definition of investor protection Actions to encourage honest advertising of financial products, and to prevent fraud to make sure that investors do not lose money if their investments default (are not repaid). Investment protection is a broad economic term referring to any form of guarantee or insurance that investments made will not be lost, this may be through fraud or otherwise. For example, the Investment Protection Bureau is a New York State legal body which is charged, according to the New York State Securities Law (the Martin Act), to protect the public from fraud by monitoring and limiting investment. Most other protection is of this form, monitoring brokers and comparable individuals, and legally preventing them from misusing investment. BPK5B - Corporate Ethics and Governance 51

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53 Management discussion analysis Management discussion and analysis (MD&A) is the section of a company's annual report in which management provides an overview of the previous year's operations and how the company performed financially. Management also discusses the upcoming year by outlining future goals and approaches to new projects. BPK5B - Corporate Ethics and Governance 53

54 Disclosure requirements Disclosure is the act of releasing all relevant information pertaining to a company that may influence an investment decision. To be listed on major U.S. stock exchanges, companies must follow all of the Securities and Exchange Commission's (SEC)disclosure requirements and regulations. On Target Corporation's first-quarter 2015 investor report, the company highlighted its after-tax return on invested capital (ROIC) as a positive. As a footnote, the company added disclosures regarding this number to clear up any confusion for shareholders. The disclosure denoted the limits of non-gaap financial measures such as ROIC, and provided a schedule that included the calculations for the company's ROIC. BPK5B - Corporate Ethics and Governance 54

55 Role of accountants and auditors An accounting audit does not only examine whether a company's financial statements are accurate, but it also tests that the company's systems are operating as they should. The systems an auditor examines include the company's internal controls, or the measures taken to reduce or eliminate accounting errors or fraud. BPK5B - Corporate Ethics and Governance 55

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58 Accountability In ethics and governance, accountability is answerability, blameworthiness, liability, and the expectation of account-giving. [1] As an aspect of governance, it has been central to discussions related to problems in the public sector, nonprofit and private (corporate) and individual contexts. In leadership roles, [2] accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences. BPK5B - Corporate Ethics and Governance 58

59 Professional codes and values BPK5B - Corporate Ethics and Governance 59

60 Shareholders activism A person who attempts to use his or her rights as a shareholder of a publicly-traded corporation to bring about social change. Some of the issues most often addressed by shareholder activists are related to the environment, investments in politically sensitive parts of the world and workers' rights (sweatshops). The term can also refer to investors who believe that a company's management is doing a bad job and who attempt to gain control of the company and replace management for the good of the shareholders. BPK5B - Corporate Ethics and Governance 60