2 Managerial ethicsManagerial ethics are focused on workplace behavior ethics and ethics in leadership.

Ethics and ethical

reasoning are necessary characteristics for business cultureEthics is difficult to define in a precise way. In a general sense,
ethics is the code of moral principles and values that governs to behaviors of a person or group with respect to what is right
or wrong

3 There are two broad areas associated with the concept of managerial ethics
1) Managerial mischief 2) Moral mazes. "managerial mischief" includes "illegal, unethical, or questionable practices of
individual managers or organizations, as well as the causes of such behaviors and remedies to eradicate them" the "moral
mazes of management" include the numerous ethical problems that managers must deal with on a daily basis, such as
potential conflicts of interest, wrongful use of resources, mismanagement of contracts and agreements, and misuse of power
and influence.

4 Factors influencing workplace ethics

Individual moral standardsInfluence of mangers and co-workersEffective control

5 Managing ethics in workplace

Integrated ethics managementPro-active roleOpen communicationAtmosphere of trustCode of conduct & ethicsPolicies
/proceduresGroup decision – makingCross – functional teamsOmbudspersonGrievance redressal

6 Ethical issues in workplace

Ethical dilemmaBusiness relationshipConflicts interestFairness and honesty

7 Ethical dilemmaA situation that arises when all alternatives choice or behaviors have been deemed undesirable because of
potentially negative consequences making it difficult to distinguish right from wrong.

8 CORPORATE SOCIAL RESPONSIBILITY

9 CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workforce and their families as well as of the local community and
society at large

10 Definitions and Relationships

Corporate social responsibility (CSR) is the process by which businesses negotiate their role in societyIn the business world,
ethics is the study of morally appropriate behaviors and decisions, examining what "should be done”Although the two are
linked in most firms, CSR activities are no guarantee of ethical behaviorCompanies can engage in CSR activities even while
they are acting in unethical ways. For example, Enron was a champion of community involvement, but used off-balance-sheet
partnerships to bilk investors and eventually ruin the company. Similarly Parmalat helped many Parma people and gave $2
million to restore the sixteenth-century Correggio frescoes at Parma Cathedral. But he diverted hundreds of millions from
publicly held Parmalat to family owned companies like soccer team Parma AC and Parmatour.Companies can say one thing
and do another.

11 Need for C.S.R The iron law responsibility Long term business interest
Better public imageConversion of resistance into resourcesAvoid government regulation or controlAvoid misuse of natural
resources and economic powerMinimize the environmental damageWealth creation

12 Key developments of C.S.R

Increased stakeholder awarenessTransparency and reportingValue chainCodes ,standards, and indicatorsCSR and corporate
governanceInvestor Pressure and Market- based incentivesCSR ‘’ROI”

13 Arguments in Favor of CSR

Long –run survival of the business concernsProfitable for the business concernsMoral and social commitmentImprovement in
public imageHelps in avoiding government regulationResources
14 Arguments Against CSR Business is an economic activity
Quantification of social benefitsCost –benefit analysisLack of skill and competenceTransfer of social costsIncrease in
priceReduction in wageReduction in profitSub- optimal utilization of resources

15 Is CSR the same as business ethics?

There is clearly an overlap between CSR and business ethicsBoth concepts concern values, objectives and decision based on
something than the pursuit of profitsAnd socially responsible firms must act ethicallyThe difference is that ethics concern
individual actions which can be assessed as right or wrong by reference to moral principles.CSR is about the organization's
obligations to all stakeholders – and not just shareholders.

16 There are four dimensions of corporate responsibility

Economic - responsibility to earn profit for ownersLegal - responsibility to comply with the law (society’s codification of right
and wrong)Ethical - not acting just for profit but doing what is right, just and fairVoluntary and philanthropic - promoting
human welfare and goodwillBeing a good corporate citizen contributing to the community and the quality of life

17 Social Responsibility...
an organization’s obligation to maximize its positive impact on stakeholders and to minimize its negative impactincludes legal,
ethical, economic, and philanthropic (discretionary) dimensions

18 Legal Dimension... refers to obeying governmental laws and regulations

civil law: rights & duties of individuals and organizationscriminal law: prohibits specific actions and imposes fines and/or
imprisonment as punishment for breaking the law

19 Ethical Dimension...behaviors and activities that are expected or prohibited by organizational members, the community,
and society (not codified into law)standards, norms, or expectations that reflect the concern of major stakeholders

33 Creative Accounting What is creative accounting?

Creative accounting, also called aggressive accounting, is the manipulation of financial numbers, usually within the letter of
the law and accounting standards, but very much against their spirit and certainly not providing the “true and fair” view of a
company that accounts are supposed to.Can be done through:Accounting induced operational and financial decisionsChoice
of accounting policiesManipulation of accounting estimatesFraudulent transactions

34 Impact of Creative Accounting

Creative accounting can be used to signal internal informationHelps outsiders to understand more about the firmCreative
accounting can be used to “undo” temporary situations, that are not expected to persistUS Government and manipulations

35 Impact of Creative Accounting

Creative accounting can be used unethically, to manipulate markets and benefit the preparerImpact is often a failure of
marketsPrice protection: Would you buy leather jackets from the trunk of a car? At what price?Intent is what matter!

36 Solutions to the Creative Accounting problem

Limit the flexibility within GAAPTransactions can be designed around/within GAAPMay reduce the usefulness of financial
statements in generalChange performance measure  Cash flow is a hard measureCash flow is easier to manipulate  This is
why we have earningsGive accountants an ethics course

37 Solutions to the Creative Accounting problem

Impose legal liability on those who get caughtSecurities regulators may not have the resourcesHow do you define something
illegal?Sarbanes-Oxley ActLet the market forces workGrant firms that commit to full disclosure a lower cost of capitalPenalize
firms that do not through a higher cost of capital (price protect)Increase investors’/analysts’ training“Remove” “bad” managers
from the job market
Whats in it for the manager?

 These qualities make a respected manager

 Proactive manager is a balanced individual who is
passionate about the challenges and meaning of
his/ her work.
 Proactive management must make good business
sense.
 Unethical activities may have adverse impacts on
these managers on both personal and professional
levels.