Business Ethics & Corporate Governance

Session 6 & 7
ITM, Kharghar
Professional Ethics
• Professional ethics encompass the personal, organizational and corporate standards of
behavior expected of professionals
Indian Scenario
• In most cases, professional ethics are covered under general business ethics drawn up by
each company specifically for its organization and employees
• There is no code of ethics for media and media professionals (which is in fact need of the
hour) while there is a standard code of ethics by the professional body for medical
professionals (Code of Medical Ethics Regulations, 2002)
• Prevailing unethical practices, reasons, and need for ethical standards vary as per
profession :
– Production & Product Management, Human Resource Management
– Marketing professionals, Finance & Accounting professionals
– Advertising, Media, Health care services
Ethics in Production and Product Management
Prevailing unethical practices:

• New technologies that are deleterious to health, safety and environment:

– genetically modified food , radiations from mobile phones, medical equipment
• Defective services and products or products those are innately harmful
– alcohol, tobacco,
• Exploiting for testing or experimentation
– Animal testing and their rights, use of economically or socially deprived
• Operations that harm environment
– Air and noise pollution, global warming, increase in water toxicity ,abuse of natural
resources
• Toxic products and by-products
– Chinese toys, Acid whey (toxic by-product of Greek Yogurt)
 Ethics in Production and Product Management -2
Reasons for unethical behavior observed in Indian scenario
Competition resulting into
• Achieving cost efficiency at the cost of reduced quality
• Negligence towards safety, health and environment factors under tight deadlines
• Side-effects / long-term effects compromised for immediate gains
Preventive measures
• Enacting new laws
• Global Frameworks
• Training for awareness, sensitization
 Ethics Of Marketing Professionals -1
Prevailing unethical practices
• Cyber fraud during on-line financial transaction
• Confidential / personal data theft
• Defective / harmful products sell using e-commerce technology
Reasons for unethical behavior observed in Indian scenario
• Easy to cheat customers on new platforms due to advanced technology
• Easy to target internet users for on-line marketing / tele-marketing due to advanced technology
• Easy access to personal data and need for such data in new products / services
Preventive measures
• Members of the American Marketing Association (AMA) - one of the largest marketing
associations in the world- are committed to ethical professional conduct
• India does not have a similar society although Market Research Society of India (MRSI) has its
code of ethics for market research
 Ethics Of Marketing Professionals -2
Current affairs
A uniform code of pharmaceutical marketing practices (UCPMP) has been introduced by for Department of
Pharmaceuticals, Government of India on December 12, 2014 which became effective from 1 January 2015
(Some parts)
• medicinal products must be accurate, balanced, fair, and objective
• must not mislead either directly or by implication
• necessary to declare the clear information about the medicinal products because it may somehow cause danger
to the consumers
• not allowed to use brand names of products of other companies in comparison without prior consent of the
companies
• all do's and don'ts, dates of manufacturing and expiration to be mentioned on all products
• Promotional material such as mailings and journal advertisements of the medicinal products prohibited
• free samples of medicinal products shall not be supplied to any person who is not qualified to prescribe such
product
• no gifts, pecuniary advantages or benefits in any kind may be supplied, offered or promised to persons qualified
to prescribe or supply drugs, by a pharmaceutical company or its agents i.e. distributors, wholesalers, retailers…
Ethics In Human Resource Management
SHRM India is a part of the world’s largest professional, not-for-profit Human Resource
association, SHRM – The Society for Human Resource Management. It has over
275,000 members in 160 countries.

SHRM Code of Ethics: Code Provisions

• Professional Responsibility
• Professional Development
• Ethical Leadership
• Fairness And Justice
• Conflicts Of Interest
• Use Of Information
 Ethics Of Finance Professionals
Code of financial professional ethics as per the guidelines of Financial Planning Standards Board India (FPSB):
• Code of Ethic 1 – Client First
Place the client’s interests first
• Code of Ethic 2 - Integrity
Provide professional services with integrity
• Code of Ethic 3 – Objectivity
Provide professional services objectively
• Code of Ethic 4 - Fairness
Be fair and reasonable in all professional relationships. Disclose and manage conflicts of interest
• Code of Ethic 5 – Professionalism
Act in a manner that demonstrates exemplary professional conduct
• Code of Ethic 6 - Competence
Maintain the abilities, skills and knowledge necessary to provide professional services competently
• Code of Ethic 7 - Confidentiality
Protect the confidentiality of all client information
• Code of Ethic 8 - Diligence
Provide professional services diligently
 Ethics Of Accounting Professionals
Code of accountancy professional ethics as per the guidelines of Institute of Cost Accountants of
India (ICAI):
Objectives:
• Credibility
• Professionalism
• Quality of Services
• Confidence
Fundamental Principles
• Integrity
• Objectivity
• Professional Competence and Due Care
• Confidentiality
• Professional Behavior
• Technical Standards
The over-riding motto: ‘pride of service in preference to personal gain’
 Ethics Of Advertising -1
Prevailing unethical practices
• Misleading advertisements, especially in rural India
Reasons for unethical behavior observed in Indian scenario
• Insensitivity, lack of care, concern
• Competition, greed
• New emerging media that is free, easily accessible, easy to use, has mass outreach and no
control
Preventive measures
• Advertising Standards Council of India (ASCI), - a self-regulatory voluntary organization of
the advertising industry – prescribes standards and code of conduct which needs to be
followed strictly
• Training for awareness, sensitivity
 Ethics Of Advertising - 2
Legal Action scan be taken against advertisements that -
• Ridicule caste, race, nationality, color and creed
• Goes against any provision of the Indian Constitution
• Incite people towards criminal activity, provocative, cause disorder and/or violence in the
country
• Breach laws and/or glorify obscenity or violence in any form
• Glorify terrorism, communal massacres, criminality and so on
• Ridicule the father of the nation, the national emblem, part of Constitution or the image of a
national leader or a state dignitary
• Depict women in a deprecating manner
• Females portrayed in a manner that is obscene, exploitative or vulgar
• Display distasteful visual content that goes beyond the established norms of good taste and
decency
• Exploit and encourage social evils like child marriage, bride burning and dowry system
 Ethics Of Media Reporting - 1
Prevailing unethical practices
• Inaccuracy in reporting (breaking news)
• No Privacy for media subjects (Nirbhaya)
• Unfairness in presenting all sides (viewpoint)
• Non-confidentiality of sources (respect wish to stay anonymous)
• Preferential reporting (news content coverage)
• Sensationalizing content (crime)
• Supporting stereotyping (community)
• No check on to verify if content age appropriate (crime photos)
• Empowering society (more initiatives such as “letters to editors”)
 Ethics Of Media Reporting - 2
Reasons for unethical behavior observed in Indian scenario
• Competition between growing number of channels, accuracy compromised for speed
• Competition between growing number of media platforms, morals compromised for
popularity or other interests
• Possibility to take advantage of new technology, new platforms breaching privacy
Preventive measures
Society of Professional Journalists’ (USA) code of ethics has 4 main tenants:
• Seek truth and report it; Minimize harm; Act independently; Be accountable
India does not have code of ethics for media professionals
Current Affairs
. The need of the hour is to have a media council with robust media ethics and code of
conduct, similar to the due diligence as provided in the Banking sector by the RBI – Dr.
Subhash Chandra, Chairman, Essel Group
 Ethics Of Healthcare Services-1
Prevailing unethical practices
• Refusal or delay in treatment
• Unnecessary preventive tests and avoidable surgeries like c-sections, knee replacements etc.
• Negligence / malpractice
• Self-advertisement
• Quack / fake medical degrees
• False reports, bills
Reasons for unethical behavior observed in Indian scenario
• Lack of care, concern
• Lack of facility, availability
• Greed, stress
 Ethics Of Healthcare Services-2
Preventive measures
The Medical Council of India (MCI) is a statutory body with the responsibility of establishing and
maintaining high standards of medical education and recognition of medical qualifications
in India. It registers doctors to practice in India, in order to protect and promote the health
and safety of the public by ensuring proper standards in the practice of medicine

Indian Medical Association (IMA) is the only representative, national voluntary organisation of
Doctors of Modern Scientific System of Medicine, which looks after the interest of doctors
as well as the well being of the community at large
In 2011, the Medical Council of India (MCI), in a rare act, suspended the licences of the president
and secretary of the Indian Medical Association (IMA) for six months, on the grounds that they
had performed an unethical act in endorsing products of PepsiCo and Dabur
 Ethics Of Healthcare Services-3
Current Affairs
• The Indian Medical Association is drawing up a digital code of conduct for doctors to help
them maintain the profession's code of ethics as a growing number of portals connect
them with patients
• The doctors' body says soliciting patients through websites, paying fees to agents that
host such portals and doctors boasting of achievements in the social media would be
dubbed unethical under this code
• Many portals which aggregate doctors' databases and host them seeking to fix
appointments with one doctor over the other are violating the law by advertising and
soliciting patients, which is not allowed under Medical Council of India's ethics regulations
• Portals like Practo and Help-MeDoc don't charge doctors for registration Many tech
startups in health care say they offer consumers more choice and help them to make
informed decisions. Such a code of conduct, if framed, shouldn't stifle innovation
Jago Grahak Jago…
 Business Ethics: Influencing Factors
Factors that may influence ethical corporate culture
• land of law
• local culture
• corporate goal and strategies
• employee needs and performance
• prevailing corporate culture at human level (leadership, peers)
• prevailing corporate culture at system level (processes, transparency)
• constraints for all above
 Effective Codes Of Ethics
Effective Code Of Ethics should be

1. Regulative
2. Measurable
3. Enforceable
4. Dynamic
5. Protect the interest of its profession as well as public interest

Highlights from Deloitte's Compliance Trends Survey Report (August 2015)

• only 26% Indian companies have full- time chief compliance officers as opposed to 58% of the surveyed
companies at the global level
• Here has been a sudden increase in the regulatory enforcement in India however regulatory regime
continues to be complex requiring regular interactions with multiple regulators
• The most common metrics used to measure compliance effectiveness are internally focused: internal
audits, analysis of self-assessment results, feedback from employee ethics survey, analysis of hotline calls
 Law and Ethics At Work Place

• Law and ethics play a complementary role

• Ethics goes a step further to cover wider social issues
• Ethical standards not only prevents “bad” but also influences “good”
• Both law and ethics required for “good behavior” and “good effect”
• To be moral and ethical, one has to obey law
• Business being “an immortal fictitious person”, equally responsible as an
individual employee for legal and ethical behavior
Ethics- Internal Environment: Rights and Duties

Organization Employee
• Safety • Quality work
• Health • Help growth
• Environment • Discipline
• Fair wages • Loyalty
• Equal Opportunity • No Fraud
• No Exploitation • No Theft
Ethics- External Environment: Operations

Operations Stakeholders
• Purchasing • Suppliers
• Manufacturing • Vendors
• Advertising • Partners
• Marketing • Customers
• Servicing • Government
• Reporting • Shareholders
• Partnering • Society
 Business Ethics: Facilitation
• Any business operate in internal and external environment so company has to work in these
interlinked environment
• must have a mechanism in place to promote and control its internal environment for a good
ethical work culture that will also have impact on its external environment
– Ethics committee
– Ethics counselor
– Code of ethical conduct
– Monitoring systems for ethics
– Transparent rules and regulations to deal with violation
– “Leading by example” model of leadership
– Promoting practice of self-examining at employee level about “what is morally wrong /
right” may help drastically to reduce risk of doing immoral / unethical business activities
 Violation of Rights: Labor
Indian Labor Law

• Constitutional rights
• Contracts and right laws (200 state laws control the relationships between the worker and the
company)
• Employment contracts
• Wage regulations
• Compensation in case of health, safety issue
• Pension and insurance
• Right to form association, unions
• Equality
• Sex discrimination
• Migrant workers
• Vulnerable groups (Child Labour)
 Violation of Rights: Consumer
• The Consumer Protection Act, 1986(amended in 2002)
legislation enacted to provide for effective safeguards to consumers
against various types of exploitations and unfair dealings

• Consumer Court
alternative to the ordinary process of instituting actions before a civil
court for consumer disputes

• Consumer Awareness
”Jago Grahak Jago” campaign by Ministry
 Whistle Blowers Protection Act

• The Whistle Blowers Protection Act, 2011, notified in 2014, provides a

mechanism to investigate misuse of power by public servants
• It encourages anybody to question the wrongdoing of any form of fraud,
corruption or mismanagement
• The Act seeks to protect whistle blowers, i.e., persons making a public
interest disclosure related to an act of corruption, misuse of power, or
criminal offense by a public servant
India’s Very First Whistle Blower

• Vibhishan - Younger brother of the king of Lanka, Ravana

 Informs Ram about the whereabouts of Sita

 Joins Ram's army and fights against Ravana
Satyendra Dubey (1973-2003) - Project Director @ National Highways Authority of India (NHAI)

Spots huge financial irregularities in handling of Golden Quadrilateral project

Sends an anonymous letter to the PMO with a separate CV attached telling the PM how
many contractors had "submitted forged documents to justify their technical and financial
capabilities" to win bids for the contract
Requests PM not to reveal his identity
 Letter is forwarded along with the CV to the Ministry of Road, Transport and Highways
On Nov 27,2002,shot dead in Gaya
Case is presented as that of robbery by CBI
Shanmugam Manjunath (1978–2005) - Marketing Manager (grade A officer), Indian Oil Corporation (IOC)

was murdered for sealing a corrupt petrol station in Lakhimpur Kheri, UP

This incident inspired several students at IIM, IIT and other institutes culminating
with the IIM students setting up the "The Manjunath Shanmugam Trust“ -an
international corporate community initiative, to improve governance in Indian
public life
Ashok Khemka (born in 1950) - Indian Administrative Service officer, transferred 46 times in 22 years

After Khemka dug out details of the land deals of Robert Vadra, son-in-law of
Congress President Sonia Gandhi, he was for major penalties

 additionally accused of speaking to the media against the government

Breaking rules and regulations, In April 2015, BJP government in Haryana

transferred him within 128 days of posting him as transport commissioner in the
state, sending him to the archaeology department. The rules say an officer should
be posted on a tenure of at least two years
Sanjiv Chaturvedi (born in 1974) - Indian Administrative Service officer, Ramon Magsaysay awardee, 2015

An officer of the Indian Forest Service (IFS), Chaturvedi unearthed scams in every
place of posting (including at AIIMS where he was CVO and was removed in August
2014)

According to a profile by the Hindu, today he is one of the most sought after
speaker on ‘Anti-corruption Strategies’ for probationers at the IAS, IPS and IFS
training academies
 The End

Any Questions or Suggestions?

(Read Chapter 3, 4,5,6)
Jago Grahak
https://www.youtube.com/watch?v=pTCr9wGJ4NQ