INDEX

Sr. Page
Content
No. No.

1 INTRODUCTION 8
RELEVANCE OF BUSINESS ETHICS,
2 LEGAL COMPLIANCE AND CODE OF 9
CONDUCT
DECIDING CORPORATE CULTURE
3 12
AND MAKING IT WORK
THE BEST COMPANIES FOR
4 19
CORPORATE CULTURE IN 2018
CONCEPT OF CORPORATE
5 21
GOVERNANCE
6 CONCEPT OF LEGAL COMPLIANCE 27
ORGANIZTIONAL STRUCTURE AND
7 33
BUSINESS ETHICS
ROLE OF TECHNOLOGY FOR
8 35
COMPLIANCE MANAGEMENT
WORLD’S MOST ETHICAL
9 39
COMPANIES
10 CONCLUSION 40
11 REFERENCE 41

12 CONCLUSION 33

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 Introduction
Business ethics which also known as corporate ethics is a form of applied ethics or professional
ethics, that examines ethical principles and moral or ethical problems that can arise in a business
environment. It applies to all aspects of business conduct and is relevant to the conduct of
individuals and entire organizations. These ethics originate from individuals, organizational
statements or from the legal system. These norms, values, ethical, and unethical practices are the
principles that guide a business. They help those businesses maintain a better connection with
their stakeholders. Business ethics also refers to principles, organizational standards, and sets of
values and norms that govern the actions and behaviour of an individual in the business
organization.
Legal compliance is the procedure to ensure that an organization follows relevant laws,
regulations and business rules. There are two requirements for an enterprise to be compliant with
the law, first its policies need to be consistent with the law. Second, its policies need to be
complete with respect to the law.
Every organization have their own objectives which they strive to achieve. But during this long
term process they need to ensure that the operations are according to the business ethics and
follows proper legal compliance. The failure to follow the business ethics and legal compliance
may create problems for the organization.
Organization ensuring proper legal compliance does not mean that it also follows the business
ethics very well. But ignoring one of these aspects may become risky for the organization.
Business ethics and legal compliance should be ensured simultaneously. It helps an organization
to reduce the risk in terms of flow of business activities, sustainability in the market, value in the
eyes of customers and shareholders and so on.
The code of conduct is also referred to as the code of ethics, varies from the company to
company. It is a set of principles designed to guide workers to conduct themselves with honesty
and integrity in all actions representing the company. Large companies generally, have two code
of business conduct rules; one for global employees and one for non-employee directors, who
still represent the company. It provides the guidance for behaviour in the organization to the
people who are internally connected with company.

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 Relevance of Business Ethics, Legal Compliance and Code of Conduct

Business ethics, legal compliance and code of conduct has become so important that every
company is considering these factors seriously to improve its efficiency and productivity. So,
before understanding how it is practiced in actual terms, let’s understand the relevance of them to
the business world.
• Improved operations and safety :
Many business rules and regulations can help you more than harm overall environment of
business. For example, rules regarding discrimination and harassment help to create a better
working environment for employees, which can lead to more worker productivity. Following
safety and security rules helps prevent injuries, fires or building evacuations that hurt the
profitability of the companies.
The leadership of an organization holds the key to its long-term success, and remaining
consistent with a management philosophy built on a foundation of ethics creates a positive
example for all workers. To work effectively, all the staff need healthy and safe work
environment. Proper compliance of ethics and code of conduct also restricts employee to do any
immoral activities, such as, harassment, consumption of alcohol at workplace, physical fights,
etc.
• Employee Retention:
It has been proven that employees who are satisfied with the environment in which they work are
more productive than workers who are unhappy. Unethical practices in the workplace can make
employees fearful and unrestful, leading to a greater sense of dissatisfaction with the work they
and their employers are doing. However, when business ethics are encouraged from management
by setting the examples by rewarding or praising the ethical activities of employees, the
willpower as well as ability of employees to focus on the work they need to complete to make
themselves and the organization successful increases exponentially. Productivity increases when
fewer distractions are there in the workplace and morale is high, this leads to greater profit levels
for the company. Employee happiness can also have an impact on turnover and retention, as
unsatisfied workers are more prone to seek out other opportunities, regardless of higher pay or
benefits offered by their current employer. Continuous recruitment and training of new
employees can reduce the capital a company can spend on revenue-producing activities,
ultimately shrinking its long-term profits.
Many business compliance issues deal with protecting employees. The more employees feel they
work in a fair, professional and safe environment, the more likely they will be to stay with that
particular organization. Even if employers don’t harass or discriminate against any employees, if
they don’t take steps to ensure none of their employees do, they can lose valuable workers.
Providing policies and procedures in employee handbook that mirror legal compliance
obligations will help them to act according to that. . If employers provide equal opportunities to
their employees and when it recruits new workers, if it highlights its commitment to both
physical safety and mental health by referencing key policies and benefits dedicated to proactive
healthcare and wellbeing, such as extended maternity and paternity leave or free gym
memberships then job seekers will also get attracted towards such companies.

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• Better Public Relations:
Companies are nothing without shareholders and investors, and operating with business ethics in
mind is most important when interacting with these crucial members of a companies. It is
common for the profitability of publicly traded companies to decline rapidly when they
encounter situations where information regarding unethical behaviour is discovered. When
investor confidence is lost, it can be a difficult for a company to regain the trust of the public.
Profitability may take years to build up again. Companies that lay the framework for business
ethics in all aspects of operation are more likely to become and remain profitable in the long run
than those that conduct business in an unethical manner.
When company meet legal obligations, one of the benefits of compliance is the ability of
marketing is enhanced. If employers provide equal opportunities to their employees and when it
recruits new workers, if it highlights its commitment to both physical safety and mental health by
referencing key policies and benefits dedicated to proactive healthcare and wellbeing, such as
extended maternity and paternity leave or free gym memberships then job seekers will also get
attracted towards such company.
When it is public relations, consumers are also considered along with shareholders and investors,
as they are the crucial part or cause of a core business operations. Hence, maintaining good
relations with them is necessary. Ensuring proper ethics and compliance along with maintaining
proper code of conduct helps to develop good relations with them. For example, maintaining
customer care helplines and centers, providing proper training to the customer care executive and
setting some rules and regulation for them enable companies to maintain good relations with
customers.
• Better Decision Making:
Decision making will be better if the decisions are in the interest of the public, employees and
company’s own long term good. If a company consider business ethics, legal compliance and
code of conduct while making any crucial business decision then it might be appreciated and
supported by all the individuals and organizations which are related to that particular company.
For example, if a company has an opportunity to diversify into tobacco industry, then it would
have to think upon all the three factors. Even if legal factor allowing them to do so, but
company’s ethics and code of conduct is such that it does not permit it then the decision would
be not to diversify which might be appreciated by employees, consumers, shareholders, general
public, etc.
• Prevents Business Malpractices:
Some people in the organization do business malpractices by indulging in unfair trade practices
like black-marketing, artificial high pricing, adulteration, corruption, cheating in weights and
measures, selling of duplicate and harmful products, hoarding, etc. These business malpractices
are harmful to the consumers as well as business environment. So, welcome attitude towards
business ethics, legal compliance and code of conduct will help organization to prevent
malpractices by putting restrictions and setting examples in front of employees and other
concerned individuals.

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• Encourages healthy competition:
Competition is an unavoidable part of a business which every company faces. Every company
wants to be the best in their sector. Some companies may practice some unethical and illegal
practices which might seem favourable for short period but it results failure in the long run. It
may result in heavy loss for that particular industry and ultimately society. To avoid this situation
there are usually an association in every industry which supervises and regulates the companies.
For example, The Automotive Component Manufacturers Association of India (ACMA) is the
nodal agency for the Indian Auto Component Industry, Federation of Hotel and Restaurant
Associations of India (FHRAI) is the association for hotels and restaurant, The Federation of
Indian Export Organizations (FIEO) is the association for export companies, National
Association of Software & Service Companies (NASSCOM) is the association for IT-BPO
sector in India, etc.
An association ensures business ethics and proper legal compliance within the industry. It leads
every company within the industry to deal with competition in a fair manner which encourages
healthy completion.
• Survival of Business:
Business ethics are mandatory for the survival of business. A company which does not follow it
will have short-term success, but they will fail in the long run. This is because they can cheat a
consumer only once. After that, the consumer will not buy goods from that businessman. If a
company is doing negative publicity of competitor then ultimately it is doing the same for itself.
This will result in failure of the business. Therefore, if a company does not follow ethical rules,
he will fail in the market. So, it is always better to follow appropriate code of conduct to survive
in the market.
• Improves profitability:
Ensuring business ethics, proper legal compliance and maintaining suitable code of conduct help
a company to create satisfies workforce, healthy competition and good public relations as well as
prevents unethical activities and malpractices which ultimately enable a company to improve its
profitability.

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 Deciding Corporate Culture and Making it Work
A corporate culture is the shared beliefs top managers have in a company about how they should
manage themselves and other employees, and how they should conduct their business. It is a
general combination of beliefs, morals, customs, value systems and behavioural norms, and ways
of doing business that are unique to each corporation, that set a pattern for corporate activities
and actions, and that describe the implicit patterns of behaviour and emotions characterizing life
within the organization. The following are the characteristics of a good corporate culture.

• Vision:
A great culture starts with a vision or mission statement. These simple turns of phrase guide a
company’s values and provide it with purpose. That purpose, in turn, orients every decision
employees make. When they are deeply authentic and prominently displayed, good vision
statements can even help orient customers, suppliers, and other stakeholders. Non-profit
organizations often excel at having compelling, simple vision statements. The Alzheimer’s
Association, for example, is dedicated to “a world without Alzheimer’s.” And Oxfam envisions
“a just world without poverty.” A vision statement is a simple but foundational element of
culture.
• Values:
A company’s values are the core of its culture. While a vision articulates a company’s purpose,
values offer a set of guidelines on the behaviours and mindsets needed to achieve that vision.
McKinsey & Company, for example, has a clearly articulated set of values that are prominently
communicated to all employees and involve the way that firm vows to serve clients, treat
colleagues, and uphold professional standards. Google’s values might be best articulated by their
famous phrase, “Don’t be evil.” But they are also enshrined in their “ten things we know to be
true.” And while many companies find their values revolve around a few simple topics
(employees, clients, professionalism, etc.), the originality of those values is less important than
their authenticity.
• Practices:
Of course, values are of little importance unless they are enshrined in a company’s practices. If
an organization professes, “people are our greatest asset,” it should also be ready to invest in
people in visible ways. Wegman’s, for example, heralds values like “caring” and “respect,”
promising prospects “a job [they’ll] love.” And it follows through in its company practices,
ranked by Fortune as the fifth best company to work for. Similarly, if an organization values
“flat” hierarchy, it must encourage more junior team members to dissent in discussions without
fear or negative repercussions. And whatever an organization’s values, they must be reinforced
in review criteria and promotion policies, and baked into the operating principles of daily life in
the firm.
• People:
No company can build a coherent culture without people who either share its core values or
possess the willingness and ability to embrace those values. That’s why the greatest firms in the
world also have some of the most stringent recruiting policies. According to Charles Ellis, as

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 noted in a recent review of his book What it Takes: Seven Secrets of Success from the World’s
Greatest Professional Firms, the best firms are “fanatical about recruiting new employees who
are not just the most talented but also the best suited to a particular corporate culture.” Ellis
highlights that those firms often have 8-20 people interview each candidate. And as an added
benefit, Steven Hunt notes at Monster.com that one study found applicants who were a cultural
fit would accept a 7% lower salary, and departments with cultural alignment had 30% less
turnover. People stick with cultures they like, and bringing on the right “culture carriers”
reinforces the culture an organization already has.
• Narrative:
Marshall Ganz was once a key part of Caesar Chavez’s United Farm Workers movement and
helped structure the organizing platform for Barack Obama’s 2008 presidential campaign. Now a
professor at Harvard, one of Ganz’s core areas of research and teaching is the power of narrative.
Any organization has a unique history — a unique story. And the ability to unearth that history
and craft it into a narrative is a core element of culture creation. The elements of that narrative
can be formal — like Coca-Cola, which dedicated an enormous resource to celebrating its
heritage and even has a World of Coke museum in Atlanta — or informal, like those stories
about how Steve Jobs’ early fascination with calligraphy shaped the aesthetically oriented culture
at Apple. But they are more powerful when identified, shaped, and retold as a part of a firm’s
ongoing culture.
• Place:
Why does Pixar have a huge open atrium engineering an environment where firm members run
into each other throughout the day and interact in informal, unplanned ways? Why does Mayor
Michael Bloomberg prefer his staff sit in a “bullpen” environment, rather than one of separate
offices with soundproof doors? And why do tech firms cluster in Silicon Valley and financial
firms cluster in London and New York? There are obviously numerous answers to each of these
questions, but one clear answer is that place shapes culture. Open architecture is more conducive
to certain office behaviours, like collaboration. Certain cities and countries have local cultures
that may reinforce or contradict the culture a firm is trying to create. Place — whether
geography, architecture, or aesthetic design — impacts the values and behaviour of people in a
workplace.
There are other factors that influence culture. But these six components can provide a firm
foundation for shaping a new organization’s culture. And identifying and understanding them
more fully in an existing organization can be the first step to revitalizing or reshaping culture in a
company looking for change.
❖ Every company has different corporate culture according to their vision, mission and goals. But
there are some fundamental elements which are common and need to be considered. These
elements are:

• Employee interaction:
Initially, every company ensures whether the employees are competing with each other or
inclined more towards team spirit and also contemplate on whether the company require a
competition amongst the employees or need to develop team spirit within them. The answers of

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 both the questions makes the clear way to create proper work culture which is suitable for the
company. If the company wants to build team spirit within the employees who are more inclined
towards competing with each other then the company will create such a culture which promotes
team spirit and not competition amongst them.
• Workplace mood:
A company also has to ensure the workplace mood which is the mood of the employees within
the working area. Likewise, employees’ interaction, here a company has to first find which mood
is required in their workplace. Secondly, find the actual mood of employees within the
workplace. After finding the answers for these two questions a company will find its way to
create work culture according to the mood of workplace. For example, if company requires
energetic mood in workplace, whereas, the actual mood in the workplace is very boring; then a
company has to make effort to make the workplace mood as energetic as they want. For
example, Many Volkswagen dealerships are remarkable for their huge windows and sunlight; it’s
a kind of work environment for the sales staff meant to encourage an open, airy feel conducive to
car buying. Elevated heating and cooling costs go along with all that glass, however, and
different workplaces where money is valued more than ambience may choose to cut operating
costs with a drabber space. Going beyond the architecture, different offices have different
moods. It’s very rare that the practical jokes or trash-basket basketball games going on at the
dentist’s office.
• Workplace personalized:
Some office cubicles burst with family snapshots and personal memory stuffs. It helps
employees to get motivated for work. Hence, the management of the company also consider this
factor to inculcate proper work culture in the employees.
• Dress codes:
It reflects the organization’s values. Dress code was a compulsory part of the work culture. The
purpose behind dress code is to inculcate that every person in a company is a part of a company.
But nowadays the compulsion for dress code varies from industry to industry. It depends on what
kind of culture a company or management wants to inculcate in their employees.
• Social cause activism:
It is another element of corporate culture. A company make the employees involved in their CSR
activities by offering them opportunity to work as a volunteer for the company’s CSR activities.
The shoemaker TOMS Shoes fights rural poverty in developing nations by donating shoes. Other
companies focus entirely on doing well in the for-profit marketplace. Godrej Group offers their
employees the opportunity to serve for their campaign ‘Teach For India’ by teaching poor
children who can’t go to the school.

• Workplace Utility:
A company has to fulfill the basic utilities for the employees to ensure the roper work culture
within the organization, such as, toilets, canteen, availability of stationeries, etc. Failure to

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 provide basic utilities for the employees may create a negative image of the management in the
minds of employee which will affect to the proper work culture.
• Unethical grouping/ union:
A company has to ensure that no unethical grouping or union is taking place within the
organization. A company has to make a proper regulation against such acts. A company also has
to ensure that employees are satisfied with the created work culture, failure to which may also
lead to grouping for ethical reason but against the management. Hence, management should also
take care of every employee to avoid such situations.

• Types of Corporate Culture:

Corporate culture can be instilled or inculcate within the organization based on the various
factors, such as situations, behavioural pattern of employees, vision, mission and goals of a
company. But it can be broadly classified into following five major types:
1. Team-first Corporate Culture:
This culture is also: known as a comrade culture as more focus is on team in this type of culture.
Team-oriented companies hire for culture fit first, skills and experience second. A company with
a team-first corporate culture makes employees’ happiness its top priority. Frequent team
outings, opportunities to provide meaningful feedback, and flexibility to accommodate
employees’ family lives are common markers of a team-first culture. Netflix is a great example –
their recent decision to offer unlimited family leave gives employees the autonomy to decide
what’s right for them.
The management of a company knows happy employees make for happier customers. It’s a great
culture for any customer service-focused company to embody, because employees are more
likely to be satisfied with their work and eager to show their gratitude by going the extra mile for
customers.
Zappos is famous for its fun and nurturing culture, as well as its stellar customer service. As their
CEO once famously said, “Zappos is a customer service company that just happens to sell
shoes.” And the way they keep employees satisfied with their job is by not only letting them
express themselves with whacky desk decor (which everyone loves), but by giving employees
the autonomy to help customers the way they see fit, rather than following strict guidelines and
scripts. Customers appreciate the straightforward, personable service. The larger the company,
the more difficult it is to maintain this type of culture. That’s why having a team member
dedicated to cultivating culture is a great strategy for any company.
You may have a team-first culture if:
▪ Employees are friends with people in other departments
▪ Your team regularly socializes outside of work
▪ You receive thoughtful feedback from employees in surveys
▪ People take pride in their workstations

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2. Elite Corporate Culture:
This culture is also known as “the athlete” corporate culture. Companies with elite cultures are
often out to change the world by untested means. An elite corporate culture hires only the best
because it’s always pushing the envelope and needs employees to not merely keep up, but lead
the way (think Google). Innovative and sometimes daring, companies with an elite culture hire
confident, capable, competitive candidates. The result? Fast growth and making big splashes in
the market.
Companies with elite cultures are often out to change the world by untested means. Their
customers are often other businesses that need their products to remain relevant and capable in a
new environment—one often of the elite-cultured company’s creation.
SpaceX is a high-profile example of an innovative (and relatively young) company doing big
things in aerospace manufacturing and space transport. Employees report feeling elated to
literally launch rockets, but expectations are extremely high and 60 to 70-hour work weeks are
the norm. Still, knowing that they’re doing meaningful, history-making work keeps most
employees motivated. Such intensity can lead to competition between employees and people
feeling pressure to always be on. Perks like team outings, peer recognition programs and health
initiatives can combat this.

You may have an elite culture if:

▪ Employees aren’t afraid to question things that could be improved
▪ Employees make work their top priority, often working long hours
▪ Your top talent moves up the ranks quickly
▪ You have many highly qualified job applicants to choose from

3. Horizontal Corporate Culture:

This culture is also known as “the free spirit” corporate culture. Titles don’t mean much in
horizontal cultures. Horizontal corporate culture is common among startups because it makes for
a collaborative, everyone-pitch-in mindset. These typically younger companies have a product or
service they’re striving to provide, yet are more flexible and able to change based on market
research or customer feedback. Though a smaller team size might limit their customer service
capabilities, they do whatever they can to keep the customer happy—their success depends on it.
Titles don’t mean much in horizontal cultures, where communication between the CEO and
office assistant typically happens through conversations across their desks to one another rather
than email or memos. This is the experimental phase, where risks are necessary and every hire
must count.
Basecamp is the perfect example of a successful company that maintains a startup-like mindset.
Originally founded as 37Signals, Basecamp announced last year that it would focus exclusively
on its most popular product and maintain its relative small size rather than grow into something
much bigger and broader. Horizontal cultures can suffer from a lack of direction and
accountability. Try to encourage collaboration while still maintaining clearly defined goals and a
knowledge of who’s primarily responsible for what. Horizontal structure shouldn’t mean no
structure.

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 You may have a horizontal culture if:
▪ Teammates discuss new product ideas in the break room
▪ Everybody does a little bit of everything
▪ The CEO makes his or her own coffee
▪ You still have to prove your product’s worth to critics

4. Conventional Corporate Culture:

This culture is also known as “the traditionalist” corporate culture. Traditional companies have
clearly defined hierarchies and are still grappling with the learning curve for communicating
through new mediums. Companies where a tie and/or slacks are expected are, most likely, of the
conventional sort. In fact, any dress code at all is indicative of a more traditional culture, as are a
numbers-focused approach and risk-averse decision making. Your local bank or car dealership
likely embodies these traits. The customer, while crucial, is not necessarily always right—the
bottom line takes precedence.
But in recent years, these companies have seen a major shift in how they operate. That’s a direct
result of the digital age, which has brought about new forms of communication through social
media and software as a service (SaaS). Today, traditional companies still have clearly defined
hierarchies, yet many are grappling with the learning curve for communicating through new
mediums that can blur those lines. Facing this challenge can be a big opportunity for learning
and growth, as long as it’s not resisted by management. While new office technology is often
low on management’s list of concerns, more traditional companies are starting to experiment
with it as more millennials enter higher-up positions.
Founded in 1892, General Electric is about as traditional as they come and is well-known for its
cut-and-dry management practices. Just recently, however, it eliminated its traditional
performance review in favour of more frequent conversations between management and
employees and is even launching an app to help facilitate feedback. It’s the perfect example of an
old-school company embracing technology and change.
This very cut-and-dry approach leaves little room for inspiration or experimentation, which can
result in a lack of passion or resentment from employees for being micromanaged. Getting
employees to understand the company’s larger mission—and putting more trust in employees to
work toward it.

You may have a conventional culture if:

▪ There are strict guidelines for most departments and roles
▪ People in different departments generally don’t interact
▪ Major decisions are left up to the CEO
▪ Your company corners the market

5. Progressive Corporate Culture:

This culture is also known as “the nomad” corporate culture. Uncertainty is the definitive trait of
a transitional culture, because employees often don’t know what to expect next. Mergers,
acquisitions or sudden changes in the market can all contribute to a progressive culture.
Uncertainty is the definitive trait of a progressive culture, because employees often don’t know
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what to expect next (see almost every newspaper or magazine ever). “Customers” are often
separate from the company’s audience, because these companies usually have investors or
advertisers to answer to.
But it’s not all doom and gloom. A major transition can also be a great chance to get clear on the
company’s shifted goals or mission and answer employees’ most pressing questions. Managing
expectations and addressing rumours that pop up through constant communication are the best
things a company can do to prevent employees from fleeing or cowering. Change can be scary,
but it can also be good, and smart employees know this. They embrace change and see it as an
opportunity to make improvements and try out new ideas. And hopefully, they rally their
colleagues to get on board.
LinkedIn’s $1.5 billion acquisition of Lynda.com is one recent example of companies in
transition. Ultimately, it’s a match that makes sense—the companies’ goals are in alignment with
one another, and LinkedIn’s users benefit from the partnership. LinkedIn still has a lot to prove
to its stockholders (their shares fell after the company attributed its annual revenue forecast to
the acquisition), and it recently reorganized its sales team and changed its advertising methods.
But by being straightforward and showing how these changes will ultimately lead to greater
benefits, both LinkedIn and Lynda.com can thrive.
Progressive culture can instil fear in employees for obvious reasons. Any change in management
or ownership—even if it’s a good thing for the company—isn’t always a seen as a good thing.
Communication is crucial in easing these fears. It’s also a good opportunity to hear feedback and
concerns from employees and keep top talent engaged.
You may have a progressive culture if:
▪ Employees talk openly about the competition and possible buyouts
▪ Your company has a high turnover rate
▪ Most of your funds come from advertisers, grants or donations
▪ Changes in the market are impacting your revenue

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 The Best Companies for Corporate Culture in 2018

The best companies which has a proper corporate culture in the year 2018 was published by
Forbes magazine. The companies were selected based on series of over fifty structured and
comprehensive workplace questions that dug deep beyond personality. The questions were
related to the critical themes of corporate culture like compensation, perks & benefits, leadership,
professional development and work-life balance.
Following are the Top 10 Large Companies (More than 500 employees):
1. Costco (Issaquah, WA)
2. Google (Mountain View, CA)
3. T-Mobile (Bellevue, WA)
4. Hubspot (Cambridge, MA)
5. Aflac (Columbus, GA)
6. Insight Global (Atlanta, GA)
7. Intuit (Mountain View, CA)
8. Salesforce (San Francisco, CA)
9. Blizzard Entertainment (Irvine, CA)
10. Starbucks (Seattle, WA)

Forbes also publish the common statement of majority of employees in the top three companies:
Costco - "I love the fact that while I’m at work, I don’t feel like I’m working. Most of my
colleagues are having fun doing what they do every day, which makes for an extremely happy
work atmosphere."
Google - "Employees are encouraged to be productive without overexerting themselves. We’re
encouraged to take our vacation."
TMobile - "People are happy and upbeat. We live out our culture every day. Magenta isn't just a
colour it’s a verb and a big part of what makes us different."
These statements makes the point clear that why these companies have best in the corporate
culture. It can be implied from the above common statements of the employees that the corporate
culture should be such that the efficiency and productivity of the employees should be improved
but not at the cost of their happiness which is required for the long term favourable results.

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Forbes also published Top 10 small/mid-size companies (Less than 500 employees):
1. Highspot (Seattle, WA)
2. Drift (Boston, MA)
3. SendGrid (Denver, CO)
4. TripActions (Palo Alto, CA)
5. Phenom People (Ambler, PA)
6. Pipedrive (New York, NY)
7. People.ai (San Francisco, CA)
8. CultureIQ (New York, NY)
9. Sitetracker (Palo Alto, CA)
10. Greenhouse Software, Inc. (New York, NY)

Forbes also publish the common statement of majority of employees in the top three companies
in:
Highspot - "We have a very open and collaborative company culture. Every Friday, we have a
full company meeting where everyone is updated on the latest and greatest things happening at
Highspot - from Marketing to DevOps. Anyone can ask questions and provide input that will
genuinely be heard. "
Drift - "At Drift, there's autonomy with a willingness to help from all. Everyone is trusted to do
their job, no micromanaging. But at the same time, if you need help, anyone is willing to drop
everything and help."
SendGrid - “When you see the entire office take a moment to eat lunch together, it really shows
the positivity of the culture and the enjoyment we have hanging out with each other.”
Forbes provided some suggestion to the companies who are looking forward to create proper
work culture:
▪ Diversify the corporate communication strategies and appeal to all learning styles by using
different ways to communicate with company’s teams such as podcasts, coaches and
gamification.
▪ Develop company’s leaders. They are a vital part of the business’s foundation, and if they
don’t live then company’s behaviours and values from a place of authenticity, no one else will
either.
▪ Put employee wellness first. Burnt out employees are costly on all fronts.

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 Concept of Corporate Governance
To understand the actual compliance of law and ethics in the business, it is necessary to
understand the corporate governance as it is process which determines how a corporation is
administered or controlled. It includes both business ethics and legal compliance.
It is a set of processes, customs, policies, laws and instructions affecting the way a corporation is
directed, administered or controlled. The participants in the process include employees,
suppliers, partners, customers, government, and professional organization regulators, and the
communities in which the organization has presence. Corporate Governance is needed to create a
corporate culture of transparency, accountability and disclosure.
Good corporate governance systems attract investment from global investors, which
subsequently leads to greater efficiencies in the financial sector. The relation between corporate
governance practices and the increasing international character of investment is very important.
International flows of capital enable companies to access financing from a much larger pool of
investors. In order to reap the full benefits of the global capital market and attract long-term
capital, corporate governance arrangements must be credible, well understood across borders and
should adhere to internationally accepted principles.
Corporate Governance has a broad scope. It includes both social and institutional aspects.
Corporate Governance encourages a trustworthy, moral, as well as ethical environment. In other
words, the heart of corporate governance is transparency, disclosure, accountability and integrity.
It is to be borne in mind that mere legislation does not ensure good governance. Good
governance flows from ethical business practices even when there is no legislation.
Confederation of Indian Industry defined Corporate Governance as, “Corporate governance deals
with laws, procedures, practices and implicit rules that determine the company’s ability to take
informed managerial decisions vis-à-vis its claimants - in particular, its shareholders, creditors,
customers, the State and employees. There is a global consensus about the objective of ‘good’
corporate governance: maximising long-term shareholder value.”
Following are some of the advantages of Corporate Governance:
1. Good corporate governance ensures corporate success and economic growth.
2. Strong corporate governance maintains investors’ confidence, as a result of which, company
can raise capital efficiently and effectively.
3. There is a positive impact on the share price.
4. It provides proper inducement to the owners as well as managers to achieve objectives that
are in interests of the shareholders and the organization.
5. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.
6. It helps in brand formation and development.
7. It ensures organization in managed in a manner that fits the best interests of all.

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• Need for Corporate Governance:
Corporate Governance is integral to the existence of the company. Corporate Governance is
needed to create a corporate culture of transparency, accountability and disclosure.
• Corporate Performance:
Improved governance structures and processes ensure quality decision-making, encourage
effective succession planning for senior management and enhance the long-term prosperity of
companies, independent of the type of company and its sources of finance. This can be linked
with improved corporate performance- either in terms of share price or profitability.
• Enhanced Investor Trust:
As individuals and institutions invest capital directly or through intermediary funds, they look to
see if well governed corporate boards are there to protect their interests. Investors who are
provided with high levels of disclosure and transparency such as relating to data on matters such
as pay governance, pay components, performance goals, and the rationale for pay decisions etc.
are likely to invest openly in those companies. On Apple's investor relations site, for example,
the firm outlines its leadership and governance, including its executive team, its board of
directors and also the firm's committee charters and governance documents, such as bylaws,
stock ownership guidelines etc.
The consulting firm McKinsey surveyed and determined that global institutional investors are
prepared to pay a premium of up to 40 percent for shares in companies with superior corporate
governance practices.
• Better Access to Global Market:
Good corporate governance systems attract investment from global investors, which
subsequently leads to greater efficiencies in the financial sector. The relation between corporate
governance practices and the increasing international character of investment is very important.
International flows of capital enable companies to access financing from a much larger pool of
investors. In order to reap the full benefits of the global capital market and attract long-term
capital, corporate governance arrangements must be credible, well understood across borders and
should adhere to internationally accepted principles. On the other hand, even if corporations do
not rely primarily on foreign sources of capital, adherence to good corporate governance
practices helps improve the confidence of domestic investors, reduces the cost of capital, enables
good functioning of financial markets and ultimately leads to more stable sources of finance.
• Combating Corruption:
Companies that are transparent, and have sound system that provide full disclosure of accounting
and auditing procedures, allow transparency in all business transactions, provide environment
where corruption would certainly fade out. Corporate Governance enables a corporation to -
compete more efficiently and prevent fraud and malpractices within the organization.
• Easy Finance from Institutions:
Several structural changes like increased role of financial intermediaries and institutional
investors, size of the enterprises, investment choices available to investors, increased

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 competition, and increased risk exposure have made monitoring the use of capital more complex
thereby increasing the need of Good Corporate Governance. Evidences indicate that well-
governed companies receive higher market valuations. The credit worthiness of a company can
be trusted on the basis of corporate governance practiced in the company.
• Enhancing Enterprise Valuation:
Improved management accountability and operational transparency fulfill investors’ expectations
and confidence on management and corporations, and in return, increase the value of
corporations.
• Reduced Risk of Corporate Crisis and Scandals:
Effective Corporate Governance ensures efficient risk mitigation system in place. A transparent
and accountable system makes the Board of a company aware of the majority of the mask risks
involved in a particular strategy, thereby, placing various control systems in place to facilitate the
monitoring of the related issues.
• Accountability:
Investor relations are essential part of good corporate governance. Investors directly/ indirectly
entrust management of the company to create enhanced value for their investment. The company
is hence obliged to make timely disclosures on regular basis to all its shareholders in order to
maintain good investor relation. Good Corporate Governance practices create the environment
whereby Boards cannot ignore their accountability to these stakeholders.

• Elements of Corporate Governance:

1. Role and powers of Board:
Good governance is decisively the manifestation of personal beliefs and values which configure
the organizational values, beliefs and actions of its Board. The board is the primary direct
stakeholder influencing corporate governance.
Directors are elected by shareholders or appointed by other board members and are tasked with
making important decisions, such as corporate officer appointments, executive compensation and
dividend policy. In some instances, board obligations stretch beyond financial optimization,
when shareholder resolutions call for certain social or environmental concerns to be prioritized.
The Board as a main functionary is primary responsible to ensure value creation for its
stakeholders. The absence of clearly designated role and powers of Board weakens
accountability mechanism and threatens the achievement of organizational goals. Therefore, the
foremost requirement of good governance is the clear identification of powers, roles,
responsibilities and accountability of the Board, CEO, and the Chairman of the Board. The role
of the Board should be clearly documented in a Board Charter.

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2. Legislation:
Clear and unambiguous legislation and regulations are fundamental to effective corporate
governance. Legislation that requires continuing legal interpretation or is difficult to interpret on
a day-to-day basis can be subject to deliberate manipulation or inadvertent misinterpretation.
3. Management environment:
Management environment includes setting-up of clear objectives and appropriate ethical
framework, establishing due processes, providing for transparency and clear enunciation of
responsibility and accountability, implementing sound business planning, encouraging business
risk assessment, having right people and right skill for the jobs, establishing clear boundaries for
acceptable behaviour, establishing performance evaluation measures and evaluating performance
and sufficiently recognizing individual and group contribution.
4. Board skills:
To be able to undertake its functions efficiently and effectively, the Board must possess the
necessary blend of qualities, skills, knowledge and experience. Each of the directors should make
quality contribution. A Board should have a mix of the following skills, knowledge and
experience:
➢ Operational or technical expertise, commitment to establish leadership;
➢ Financial skills;
➢ Legal skills; and
➢ Knowledge of Government and regulatory requirement.
5. Board appointments:
To ensure that the most competent people are appointed on the Board, the Board positions should
be filled through the process of extensive search. A well-defined and open procedure must be in
place for reappointments as well as for appointment of new directors. Appointment mechanism
should satisfy all statutory and administrative requirements. High on the priority should be an
understanding of skill requirements of the Board particularly at the time of making a choice for
appointing a new director. All new directors should be provided with a letter of appointment
setting out in detail their duties and responsibilities.

• Legislative Framework of Corporate Governance in India:

The initiatives taken by Government in 1991, aimed at economic liberalization and globalisation,
led brought to the forefront the need for Indian companies to adopt corporate governance
practices and standards, which are consistent with international principles. It led to the
introduction of legislative reforms prescribing the manner in which Indian companies could
implement effective corporate governance mechanisms.
In India, the Companies Act, 2013 and the SEBI Listing Obligations and Disclosure
Requirements (LODR) Regulations, 2015 (also mentioned in this Chapter as Listing
Regulations) together deals with virtually all areas affecting corporate governance, which are
explained hereunder.

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• Principles for Corporate Governance:
As per Regulation 4 of the Listing Regulations, 2015, the listed entity which has listed its
specified securities shall comply with the corporate governance principles under following broad
headings:
(a) The rights of shareholders: The listed entity shall seek to protect and facilitate the exercise of
the following rights of shareholders:
(i) Right to participate in, and to be sufficiently informed of, decisions concerning fundamental
corporate changes.
(ii) Opportunity to participate effectively and vote in general shareholder meetings.
(iii) Being informed of the rules, including voting procedures that govern general shareholder
meetings.
(iv) Opportunity to ask questions to the board of directors, to place items on the agenda of
general meetings, and to propose resolutions, subject to reasonable limitations.
(v) Effective shareholder participation in key corporate governance decisions, such as the
nomination and election of members of board of directors.
(vi) Exercise of ownership rights by all shareholders, including institutional investors.
(vii) Adequate mechanism to address the grievances of the shareholders.
(viii) protection of minority shareholders from abusive actions by, or in the interest of,
controlling shareholders acting either directly or indirectly, and effective means of redress.

(b) Timely information: The listed entity shall provide adequate and timely information to
shareholders, including but not limited to the following:
(i) Sufficient and timely information concerning the date, location and agenda of general
meetings, as well as full and timely information regarding the issues to be discussed at the
meeting.
(ii) Capital structures and arrangements that enable certain shareholders to obtain a degree of
control disproportionate to their equity ownership.
(iii) Rights attached to all series and classes of shares, which shall be disclosed to investors
before they acquire shares.

(c) Equitable treatment: The listed entity shall ensure equitable treatment of all shareholders,
including minority and foreign shareholders, in the following manner:
(i) All shareholders of the same series of a class shall be treated equally.
(ii) Effective shareholder participation in key corporate governance decisions, such as the
nomination and election of members of board of directors, shall be facilitated.
(iii) Exercise of voting rights by foreign shareholders shall be facilitated.
(iv) The listed entity shall devise a framework to avoid insider trading and abusive self-dealing.

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 (v) Processes and procedures for general shareholder meetings shall allow for equitable treatment
of all shareholders.
(vi) Procedures of listed entity shall not make it unduly difficult or expensive to cast votes.

(d) Role of stakeholders in corporate governance: The listed entity shall recognise the rights of
its stakeholders and encourage co-operation between listed entity and the stakeholders, in the
following manner:
(i) The listed entity shall respect the rights of stakeholders that are established by law or through
mutual agreements.
(ii) Stakeholders shall have the opportunity to obtain effective redress for violation of their rights.
(iii) Stakeholders shall have access to relevant, sufficient and reliable information on a timely and
regular basis to enable them to participate in corporate governance process.
(iv) The listed entity shall devise an effective whistle blower mechanism enabling stakeholders,
including individual employees and their representative bodies, to freely communicate their
concerns about illegal or unethical practices.

(e) Disclosure and transparency: The listed entity shall ensure timely and accurate disclosure on
all material matters including the financial situation, performance, ownership, and governance of
the listed entity, in the following manner:
(i) Information shall be prepared and disclosed in accordance with the prescribed standards of
accounting, financial and non-financial disclosure.
(ii) Channels for disseminating information shall provide for equal, timely and cost efficient
access to relevant information by users.
(iii) Minutes of the meeting shall be maintained explicitly recording dissenting opinions, if any.

(f) Responsibilities of the board of directors: The board of directors of the listed entity shall have
the following responsibilities:
(i) Disclosure of information
(ii) Key functions of the board of directors
(iii) Other responsibilities

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 Concept of Legal Compliance
There are several compliance requirements that need to be adhered to, failing which there could
be consequences of disqualification of directors, attracting of penal provisions and in some cases
even imprisonment of the directors and key personnel. Such a flood of regulation is not unusual
for India. It is the path taken by several economies as they transitioned from low income
countries to advanced economies at the frontiers of development. Compliance means the
complete alliance of various parts of the business whether commercial, financial, or regulatory. It
necessitates following the rules, both external and internal. External compliance is about the
regulatory aspects, which are enforced by the law to ensure that the business is adhering to legal
parameters defined by the state. Internal compliance concerns the standards and policies
designed by the firm to deliver a product or service.
The compliance program consists of the policies and procedures which guide in adherence of
laws and regulations. The compliance audit is independent testing of level of compliance with
various laws and regulations applicable. Compliance with law and regulation must be managed
as an integral part of any corporate strategy. The board of directors and management must
recognize the scope and implications of laws and regulations that apply to the company. They
must establish a compliance management system as a supporting system of risk management
system as it reduces compliance risk to a great extent. To ensure an effective approach to
compliance, the participation of senior management in the development and maintenance of a
compliance program is necessary. They should review the effectiveness of its compliance
management system at periodic intervals, so as to ensure that it remains updated and relevant in
terms of modifications or changes in regulatory regime including acts, rules, regulations etc. and
business environment.
Corporate compliance management involves a full process of research and analysis as well as
investigation and evaluation. Such an exercise is undertaken in order to determine the potential
issues and get a realistic view about how the entity is performing and how it is likely to perform
in the future.
❖ Significance of legal compliance:
Corporate accountability is on everyone’s mind today. Business executive faces significant
pressure to comply with a steady stream of complex regulations. Many companies are adopting
comprehensive compliance plans to address emerging regulatory paradigm and those that fail to
address the new regulations risk losing business, paying hefty fines or incurring punitive
restrictions on their operations.
As the organizations face mounting pressures that are driving them towards a structured
approach to enterprise-wise compliance management, the key drivers of compliance
management encompass, the complexity of today’s business, dependency on IT and hi-tech
processes, growth in business partner relationships. Increased liability and regulatory oversight
has amplified risk to a point where it demands continuous evaluation of compliance management
systems. Furthermore, the multiplication of compliance requirements that organizations face
increases the risk of non-compliance, which may have potential civil and criminal penalties. The
following may add to the significance of the corporate compliance management:

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 • Image building of a responsible corporate citizen
• Stake holders can trust in the working of the corporate
• Prevent improper conduct in the organization
• It keeps things running smoothly and minimizes risks
• It helps the company in maintaining a good reputation
• Real time status of legal/statutory compliances
• Prevent unintended non compliances/ prosecutions
• Higher Productivity in the Company
• Building Positive Reputation
• It enhances credibility/creditworthiness being a law abiding company
• Proper compliance management avoids the penal provisions
• Saves cost in litigation by avoiding penalties/fines
• It lays down the foundation for the control environment.
• Enjoys healthy returns through employee and customer loyalty
• Benefits of compliance program far outweigh its costs

➢ The risks of non- compliance are many:

1. Cessation of business activities
2. Civil action by the authorities
3. Punitive action resulting in fines against the company/officials
4. Imprisonment of the errant officials
5. Public embarrassment
6. Damage to the reputation of the company and its employees
7. Plummeting stock price and threat of de-listing of shares (in case of listed companies)
8. Attachment of bank accounts.
➢ Compliance with the requirements of law through a compliance management programme can
produce positive results at several levels:
• Companies that go the extra mile with their compliance programs lay the foundation for the
control environment.
• Companies with effective compliance management programme are more likely to avoid stiff
personal penalties, both monetary and imprisonment.
• Companies that embed positive ethics and effective compliance management programme
deep within their culture often enjoy healthy returns through employee and customer loyalty
and public respect for their brand, both of which can translate into stronger market
capitalization and shareholder returns.

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❖ Essentials of an Effective Compliance Program:
A corporate compliance program is generally defined as a formal program specifying an
organization's policies, procedures, and actions within a process to help prevent and detect
violations of laws and regulations. The essential of a successful compliance program may be list
out as under:
1. Development of written Compliance Policies, Procedures and framing of Standards:
The successful implementation of any compliance program needs a well drafted written
document of the compliance policy. Until and unless one have a written policy, how the
deviation from the set standard will be measured. Hence it is of utmost necessary that there
shall be a compliance policy in existence duly approved by the Board of Directors. The policy
shall contain the regulatory aspects which in force as on the date of the framing of the policy,
based on the such rules and regulations in force, set a Code of Conduct / Standards, action to be
taken in case of deviations from the set standards and also the initiation of the disciplinary
actions against the erring staff. Further it is also important that the compliance policies and
procedures should be designed in such a way that it helps employees remain in compliance
while carrying out their job functions.
2. Designation of a compliance officer and compliance committee:
The Compliance Policy shall contain a clause of appointment of a designated compliance
officer, who shall take care of the regulatory compliance related functions and he shall be
responsible to ensure to have the adherence of the compliance policy and put up a note before
the Board of Directors periodically for their perusal and directions wherever required. The
Board approved note, where ever required be submitted to Regulatory Authorities.
3. Developing open lines of communication:
The Compliance Policy shall have a provision to welcome open communication as a product of
organizational culture and internal mechanisms for reporting instances of potential fraud and
abuse. This concept of whistle blower, may prove to be early warning signals and may be
effective in prevention thereof. The name and designation of the reporting official shall be kept
confidential.
4. Appropriate training and education:
For effective implementation and inculcation of the compliance policy, there is need of proper
training and education to the field functionaries and policy implementing officials.
5. Internal monitoring and auditing:
The compliance policy shall contain a clause for having the effective auditing and monitoring
plans.
6. Response to detected deficiencies:
Wherever the deficiencies in the prescribed procedure come in the knowledge of the concerned
official, there shall be a reporting system to make a report to the designated official.

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 7. Enforcement of disciplinary standards:
There shall be a clause in the compliance policy to take the disciplinary action against the
erring official, who have not adhered the prescribed set of rules and regulations.
8. Effective use of Information technology:
By using available tools of information technology compliances can be managed effectively.
There are various compliance management software available now which facilitate compliance
management.

❖ Process Of Corporate Compliance Management And Reporting:

Installing proper compliance process is a must for the success of compliance programme.
Systematic approach helps in chalking out a plan of action in right direction. Installing a process
presupposes planning for the activity, identification of desired objective and resources, detailed
plan of action with provision for eventualities and continuous monitoring and corrective
measures.
Some companies have a streamlined, highly efficient system for managing their compliance
requirements. By adopting a unified approach to regulatory management, companies can
minimize costs, maximize efficiency and reduce their risk exposure. Such firms, though, are in
the minority. More often, there is considerable duplication of cost and effort as organizations
attempt to deal with the requirements of multiple regulatory bodies across their operations.
It is desirable that the compliance management process is so designed that it is able to generate a
complete MIS Report for secretarial and legal data providing the key information including
company details, key dates, brief information about company’s business, certifications obtained,
addresses of office locations, details of Board of Directors, shareholding pattern, key registration
nos. such as company registration no., scrip code, ISIN code etc., contact details of agencies such
as auditors, consultant, banker, government agencies, printers, R&T agents etc. Purely for a legal
function database of immovable properties, on-going litigations, compliance reports, list of
power of attorneys issued etc. prove immensely useful and provide timely information, to take
necessary action to correct non-compliance, if any.
It is essential to segregate roles and responsibilities within the function to ensure proper
distribution of work, rotation of responsibilities where possible, avoid confusion and set focus
for each person within the function.
Considering the multiplicity of laws that are applicable to companies in India, a systematic
approach to corporate compliance management is worth doing an exercise to go through a list of
laws and identifying those relevant to the industry and business to which the company belongs
and categorizing them in future to focus on critical compliances. Critical compliance means the
severity of compliance and its impact on business, while it is true that all laws are of equal
importance and should be complied with in letter and spirit.

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❖ Scope Of Corporate Compliance Management:
Corporate compliance management should broadly include compliance of :
• Corporate Laws
• Securities Laws
• Commercial Laws including Intellectual Property Laws
• Labour Laws
• Tax Laws
• Pollution Control Laws
• Industry Specified laws
All other Laws affecting the company concerned depending upon the type of industry/activity.
The details of the above mentioned legislations are given below:
• Corporate & Economic Laws:
Corporate laws are core competence areas of a Company Secretary and corporate compliance
management broadly requires complete compliance of these laws. Some of the important
corporate laws are given below in brief:
➢ Companies Act, 1956 and the various Rules and Regulations framed there under, MCA-21
requirements and procedures.
➢ Secretarial Standards/Accounting Standards/Cost Accounting Standards issued by
ICSI/ICAI/ICAI (Cost) respectively.
➢ Emblems and Names (Prevention of Improper Use) Act, 1947.
➢ Foreign Exchange Management Act, 1999 and the various Notifications, Rules and
Regulations framed there under.
➢ Foreign Contribution Regulation Act, 1976.
➢ Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
➢ Competition Law.
➢ Special Economic Zones Act, 2005.
➢ Prevention of Money Laundering Act, 2002.
➢ Micro, Small and Medium Enterprises Development Act, 2006.
➢ Essential Commodities Act, 1955.
➢ Intellectual Property Laws.

• Securities Laws:
➢ SEBI Act, 1992
➢ Securities (Contracts) Regulation Act, 1956 and rules made thereunder
➢ Various rules, regulations guidelines and circulars issued by SEBI
➢ Provisions of SEBI (Listing Obligations and Disclosure requirements) Regulations, 2015
➢ Sarbanes-Oxley Act, 2002 and other legislations etc., wherever applicable.
➢ Depositories Act, 1996

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• Commercial Laws:
➢ Indian Contract Act, 1872
➢ Transfer of Property Act, 1882
➢ Arbitration and Conciliation Act, 1996
➢ Negotiable Instruments Act, 1881
➢ Sale of Goods Act, 1930

• Fiscal Laws:
➢ Income Tax Act, 1961
➢ Central Excise Act, 1944
➢ Customs Act, 1962
➢ Wealth Tax Act, 1957
➢ Central Sales Tax/State Sales Tax/VAT
➢ Service Tax.

• Labour Laws
➢ Minimum Wages Act, 1948
➢ Payment of Bonus Act, 1965
➢ Payment of Gratuity Act, 1972
➢ Employees’ Provident Funds and (Misc. Provisions) Act, 1952;
➢ Employees’ State Insurance Act, 1948;
➢ Factories Act, 1948;
➢ Workmen’s Compensation Act, 1923;
➢ Maternity Benefit Act, 1961;
➢ Industrial Dispute Act, 1947; and
➢ Contract Labour (Regulation and Abolition) Act, 1970.

• Industry Specific Laws:

Legislations applicable to specific categories of industries – electricity, power generation and
transmission, insurance, banking, chit funds, etc.
• Local Laws:
These would include Stamp Act, Registration Act, municipal and civic administration laws,
shops and establishments, etc. Individual companies may suitably add or delete to/from the
above list as required.

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 Organizational Structure with Ethics
An organization’s structure is important to the study of business ethics. In a centralized
organization, decision-making authority is concentrated in the hands of top-level managers, and
very little authority is delegated to the lower levels. Responsibility, both internal and external,
rests with top management. This structure is especially suited for organizations that make high-
risk decisions, and whose lower-level managers are not highly skilled in decision-making. It is
also suitable for organizations in which production processes are routine and efficiency is of
primary importance.
These organizations are usually extremely bureaucratic, and the division of labour is typically
very well defined. Each worker knows his/her job and what is specifically expected of him/her,
and each has a clear understanding of how to carry out assigned tasks. Centralized organizations
stress on formal rules, policies, and procedures, backed up by elaborate control systems. Their
codes of ethics may specify the techniques to be used for decision-making.
Because of the top-down approach and the distance between employee and decision-maker,
centralized organizational structures can lead to unethical acts. If the centralized organization is
very bureaucratic, some employees may behave according to “the letter of the law” rather than
the spirit.
In a decentralized organization, decision-making authority is delegated as far down the chain of
command as possible. Such organizations have relatively few formal rules, coordination and
control are usually informal and personal. They focus on increasing the flow of information. As a
result, one of the main strengths of decentralized organizations is their adaptability and early
recognition of external change. This provides greater flexibility to managers and they can react
quickly to changes in their ethical environment. Weakness of decentralized organizations lies in
the fact that they have difficulty in responding quickly to changes in policy and procedures
established by the top management. In addition, independent profit centers within a decentralized
organization may sometimes deviate from organizational objectives.
Organisational structure touches on many issues related to ethics. Such as:
1. The alienation experienced by workers doing repetitive work
2. The feelings of oppression created by the exercise of authority
3. The responsibilities heaped on the shoulders of managers.
4. The power tactics employed by managers who are anxious to advance their career ambitions.
5. Health problems created by unsafe working conditions.
6. The absence of due process for non-unionised employees.
A manager of any organization must ensure consistency between the structures of the
organization, the scale of its operations, the tasks at hand, the needs of all stakeholders and the
strategic direction of the organization. This consistency between structure and operations
distinguishes successful organizations from less successful ones. According to Kreitner and
Kinicki (2001, p.92), there is a tendency among managers to act unethically in the face of
perceived pressure for results. Terms of employment and compensation schemes can also create

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