book

Business Ethics and Corporate Governance

by A.C. Fernando

April 2012

Beginner

624 pages

32h 41m

English

Pearson India

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IntroductionPrinciples of Personal EthicsPrinciples of Professional EthicsWhat Is Business Ethics?What Is Not Business Ethics?Code of Conduct and Ethics for ManagersEvolution of Ethics Over the YearsImportance and Need for Business EthicsSignificance of Business EthicsHonesty, Integrity and Transparency Are the Touchstones of Business EthicsValues and Ethics in BusinessValues, Ethics and Business StrategyDistinction Between Values and EthicsRoots of Unethical BehaviourWhy Does Business Have Such a Negative Image?Why Should Businesses Act Ethically?Ethical Decision-makingHow Corporations Observe Ethics in Their Organizations?Changing Business Environment and Ethical ChallengesCorporate Governance EthicsHow Ethics Can Make Corporate Governance More MeaningfulBenefits from Managing Ethics in WorkplaceCharacteristics of an Ethical OrganizationRecognizing Ethical OrganizationsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Satyam Computer Services Limited
IntroductionDefinitions of EthicsPersonal Ethics and Business EthicsMorality and LawHow Are Moral Standards Formed?Religion and MoralityMorality, Etiquette and Professional CodesManagement and EthicsNormative TheoriesEthical Theories in Relation to BusinessSome More Normative Theories of Business EthicsTeachings of the ChurchIndian Ethical TraditionsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Biocon—India’s Own Home-grown Biotech Company
IntroductionConsumer—An Important StakeholderHidden Taxation on SocietyStakeholder AllianceConsumer and Consumer ProtectionParties to Consumer ProtectionHistory and Growth of Consumer ProtectionRalph Nader’s Contribution to Consumer ProtectionConsumer Protection, Why and HowConsumer Duties and ResponsibilitiesConsumer Protection: Indian ScenarioSpate of Consumer-oriented LegislationsHow Are Indian Consumers Exploited?Consumer Protection in IndiaLegal Protection to ConsumersConsumer Protection Act, 1986Consumer Protection (Amendment) Act, 2002Prevention of Food Adulteration Act, 1954Institutional Arrangements Under COPRAQuality StandardsStandards of Weights and MeasuresRole and Initiatives of Voluntary OrganizationsOther Initiatives to Promote Consumer ProtectionSummaryKey WordsDiscussion QuestionsFurther ReadingCase Study: Wockhardt Ltd—Divergence Between Precepts and Practices

IntroductionEnvironmental ConcernsHistory of EnvironmentalismEnvironmental PhilosophyEnvironmental Preservation: Role of StakeholdersFuture Outlook on EnvironmentPartnershipsInternational IssuesSustainable DevelopmentCosts and Benefits of Environmental RegulationTrade and the EnvironmentIndustrial PollutionRole of Corporations in Environmental ManagementInnovative Business Responses to Environmental RegulationsWaste Management and Pollution ControlImproving Corporate Environmental PerformanceNeed for a New ApproachEnvironmental AuditManaging Environmental IssuesProduct DifferentiationManaging RegulationRedefining MarketsEnvironmental Risk ManagementEnvironmental Management in IndiaCharter for Voluntary Pollution ControlCorporate India Gets Eco-friendlyIndia’s Environment PolicySummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study-1: E-Waste: The Latest Contributor to Environmental DegradationCase Study-2: Tirupur—A Study on Its Environmental Degradation
IntroductionRole of MarketingDefining Marketing EthicsThe Context of Indian EconomyNormative Marketing EthicsAreas in Marketing EthicsBeyond the Four PsSummaryKey WordsDiscussion QuestionsFurther ReadingCase Study: The Cola Conundrum
IntroductionDefinitionGenesis and Growth of Human Resource ManagementScope of Human Resource ManagementDifferent Aspects of Human Resource ManagementDifferent Functional Areas of HRMEmerging Challenges of HRMChanging Profile of HR ProfessionalsHR-related Ethical IssuesRole of HRM in Creating an Ethical OrganizationInstitutional CultureCreating an Ethical OrganizationHuman Resource Development in IndiaFunctionsHuman Development IndexSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study-1: The Phaneesh Murthy Sexual Harassment CaseCase Study-2: HMSI—Better Wages Cannot Suppress Workers’ Demand for Their RightsCase Study-3: The HR Intervention at Rourkela Steel Plant: Involving People in Quality-driven Improvement Culture
IntroductionFinancial AccountingManagement AccountingFinancial ManagementEthical Issues in FinanceFrauds in BanksMeasures Against Bank FraudsConstraints to Ethical Practices in Indian Nationalized BanksFrauds in the Insurance SectorEthical Issues Arising out of Activities of Professional PlayersMini Case 1: Xeroxing CorruptionMini Case 2: Foul Play by Soundcraft Industries’ PromoterMini Case 3: Tricking Investors for Personal GainMini Case 4: Dereliction of Duty by a CFOKey WordsDiscussion QuestionsFurther Readings
IntroductionEthical Governance Needed to Protect StakeholdersTheoretical Basis—Agency CostsLong-term Shareholder ValueRights of ShareholdersViews of Various Committees on the IssuePoor Track Record of Shareholder Protection in IndiaGuide for Investors/ShareholdersInvestor Protection in IndiaN. K. Mitra Committee on Investor ProtectionProblems of Investors In IndiaLaw Enforcement for Investor ProtectionLacunae in Investor ProtectionSEBI’s Poor Performance and Suggestions for ImprovementSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: On Insider Trading (HLL–BBLIL Merger)
IntroductionWhy Social Responsibility of Business?Definitions of CSRToday’s Corporate Social ResponsibilityTheoretical Justification for CSRWhat Are Corporations Expected to Do?Models for Implementation of CSRCSR As a Business Strategy for Sustainable DevelopmentAdvantages of CSRScope of CSRSteps to Attain CSRExternal Standards on CSRPrestigious Awards for CSRThe Indian PerspectiveIndia on the Ethical/CSR MatrixCore-BCSD IndiaEthics and Social Responsibility of BusinessSocial Responsibility and Indian Corporations—A Score CardFuture of Indian CSRSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Dr Reddy’s Laboratories: Commitment to All-round Corporate Excellence
IntroductionWhat is an Ethical Dilemma?How Ethical Dilemmas in Business Affect the Stakeholders?Corporate Dilemma Over Ethical BehaviourSources of Ethical ProblemsWhy Does Business Have a Negative Image?Why Businesses Should Act Ethically?How Corporations Observe Ethics to Reduce Dilemmas?Code of Personal Ethics for EmployeesHow to Create an Ethical Working Environment?How Does a Company Establish Ethical Standards?Walton’s Six Models of Business ConductHow to Resolve an Ethical Problem?How to Resolve Ethical Dilemmas?SummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: HLL’s Folly: Mercury Spill in Kodaikanal
IntroductionEthical Models That Guide Decision MakingWhich Approach to Use?Ethical Decision Making with Cross-holder Conflicts and CompetitionApplying Moral Philosophy to Ethical Decision MakingKohlberg’s Model of Cognitive Moral DevelopmentInfluences on Ethical Decision MakingPersonal Values and Ethical Decision MakingCorporate Values and Ethical Decision MakingRole of Corporate Governance In Ensuring Ethics in the WorkplaceA Framework of Ethical Decision MakingThe Process of Making Good Ethical DecisionsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Global Trust Bank: The Bank That Went Bust
IntroductionGrowth of Global CorporationsFactors Facilitating GlobalizationDoing Business in a Diverse WorldRole of Multinational CorporationsCurrent Issues—Multinational CorporationsInternational Business IssuesBenefits of MNCs to the Host NationDisadvantages of MNCs to the Host CountryInternational Codes of Business ConductThe Limits of Voluntary ApproachCaux Round Table: Principles for BusinessChallenges of Globalization in the Context of Growing Market EconomiesPublic Awareness and ScrutinyTechnological Challenges and OpportunitiesThe Physical EnvironmentThe Social EnvironmentKey Global Issues for BusinessCorporate Governance Is a Prerequisite for GlobalizationGlobal CompactSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Sterlite: Using Money Clout to Maximum Advantage
IntroductionCapitalism at CrossroadsAmerica’s Hall of Shame—2002Corporate Misgovernance in IndiaSeries of Scams That Shook Investor ConfidenceIllegal Tactics of Indian CorporatesReasons for Corporate MisgovernanceIncreasing AwarenessGlobal ConcernsWhat Is Corporate Governance?Narrow Versus Broad Perceptions of Corporate GovernancePerceptional Differences in DefinitionsGovernance Is More Than Just Board Processes and ProceduresA Historical Perspective of Corporate GovernanceThe Growth of Modern Ideas of Corporate Governance from the USAThe Aftermath of the Cadbury ReportCorporate Governance in the Banking SectorRevival of Corporate Governance Issues in the New MillenniumIssues in Corporate GovernanceRelevance of Corporate GovernanceGovernance and Corporate PerformanceInvestors’ Preference for Good GovernanceBenefits to SocietyBenefits of Good Corporate Governance to a CorporationSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Infosys Technologies: The Best Among Indian Corporates
IntroductionThe Concept of CorporationWhat Is a Corporate?The Concept of GovernanceTheoretical Basis of Corporate GovernanceWhy Corporate Governance?Contemporary Corporate Governance SituationGrowing Awareness and Societal ResponsesCorporate Governance SystemsThe Anglo-American ModelGerman ModelThe Japanese ModelCommon Features in the German and Japanese ModelsIndian Model of GovernanceWhat is ‘Good’ Corporate Governance?Obligation to Society at LargeObligation to InvestorsObligation to EmployeesObligation to CustomersManagerial ObligationSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Tata Steel: A Company That Also Makes Steel
IntroductionDevelopments in the USDevelopments in the UKCorporate Governance CommitteesCadbury Committee on Corporate Governance, 1992The Paul Ruthman CommitteeThe Greenbury Committee, 1995The Hampel Committee, 1995The Combined Code, 1998The Turnbull Committee, 1999World Bank on Corporate GovernanceOECD PrinciplesMcKinsey Survey on Corporate GovernanceSarbanes–Oxley Act, 2002Indian Committees and GuidelinesThe Confederation of Indian Industry’s InitiativeSEBI’s InitiativesKumar Mangalam Birla Committee, 1999Non-mandatory RecommendationsSEBI’s ResponseNaresh Chandra Committee Report, 2002SEBI’s Follow-up on Birla Committee ReportRationale for a Review of the Birla CodeNarayana Murthy Committee Report, 2003Mandatory RecommendationsDr J. J. Irani Committee Report on Company Law, 2005Independent Directors in Listed CompaniesPyramidal StructuresPower to ShareholdersSingle Person CompanySelf-regulationStringent PenaltiesAccounts and AuditsGovernance StandardsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: ITC Limited: Is Corporate Governance Only Skin Deep?
IntroductionCorporate Management StructureCompany Director and the BoardWho is a Director?Kinds of DirectorsDirectors’ AppointmentLegal Position of a DirectorDuties and Responsibilities of DirectorsQualifications and Disqualifications of DirectorsThe Board of DirectorsPowers of the BoardNominee DirectorsLiabilities of DirectorsThe Directors’ Liability to the CompanyLiability for Breach of Statutory DutiesLiability for Acts of His Co-directorsPower of Court to Grant ReliefDirectors with Unlimited LiabilityPublic Examination of DirectorsValidity of Acts of DirectorsDe Facto and De Jure DirectorsDisablities of DirectorsPrevention of Management by Undesirable PersonsFraudulent PersonsEffectiveness of the Board of DirectorsRole of the Board in Ensuring Corporate Governance Role of the BoardGovernance Issues Relating to the BoardBoard of Directors and Corporate GovernanceThe Role of DirectorsIndependent DirectorsDirectors’ RemunerationExecutive Pay, an Unsettled IssueEmphasis on Transparency and DisclosurePay As a Reward for PerformancePerformance HurdlesRemuneration CommitteeSeverance PaymentsOther Remuneration PackagesDirectors’ Remuneration in IndiaProhibition of Tax-free PaymentsFamily-owned Businesses and Corporate GovernanceSome Pioneering Indian BoardsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: How Unethical Practices Almost Destroyed Worldcom
IntroductionRole of AuditorsDefining AuditObjectives of an AuditTypes of AuditDefining AuditorTypes of AuditorsDuties of an AuditorResponsibilities of AuditorsResponsibilities Regarding the Mis-statement of Financial StatementsResponsibilities of an Audit FirmAudit Failures Leading to Corporate ScamsThe American Law Governing Auditors’ ResponsibilitiesIndian SituationPreventing Fraudulent Auditing PracticesAudit CommitteeRotation of AuditorsNaresh Chandra CommitteeCompanies (Amendment) Bill, 2003Companies (Auditors Report) Order (CARO), 2003Corporate Governance and Internal AuditorsSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: The Rise and Fall of Arthur Andersen
IntroductionThe Concept, Logic and Benefits of CompetitionRegulation of CompetitionCorporate Governance Under Limited CompetitionConstraints to Competition in Developing CountriesBanks’ Role in Restraining Emergence of Securities MarketsLack of Competition Promotes Ownership ConcentrationBenefits of Competition to StakeholdersCompetition in the Product MarketCompetition in a Capital MarketEconomic Power and Political InfluenceCompetition and Political GovernanceEffects of Monopoly on Political GovernanceEffects of Monopoly on Corporate GovernanceEncouraging Good GovernanceRegulating Good GovernanceEnforcement of Good GovernanceChallenges to Good EnforcementCompetition Agencies and Competition PoliciesWhat Is a Good Competition Policy?Indian Competition ActObjectives of the BillThe Competition Act, 2002Competition Commission of IndiaThe Three Focus Areas of Competition ActThe MRTP Act and the Competition ActRestrictions on the Applicability of the ActChange in the Mindset NeededCompetition Boosts Corporate GovernanceSummaryKey WordsDiscussion QuestionsFurther Readings
IntroductionGovernment Interference in Market EconomiesDifferent Roles of Government in the EconomyRegulatory RolePromotional RoleEntrepreneurial RoleState Intervention in a Developing EconomyPublic Governance and Corporate GovernancePolitical Governance Requires Restraints of PowerForms of Government RegulationRole of Governments in Limiting Corporate PowerThe Limits of Corporate PowerDemand for Corporate Constitutionalism Is a Knee-jerk ReactionCorporations Are Voluntary AssociationsCorporate Governance Requires the Freedom to Create and to ExecuteCorporations Do Not Possess the Power of CoercionPublic Versus Corporate Governance—A Study of ComparisonCorporate Governance Can Be an End by ItselfBetter Public Governance Can Accelerate Corporate GovernanceRole of Globalization and Information TechnologyRole of the JudiciaryGovernance Is a Matter of Continuous LearningOf Governance and GovernmentThe Scope of Government’s Relations with BusinessGovernments Have to Be Proactive in the Following AreasEnactment of LawsAs a Role ModelAreas That Need Special AttentionSummaryKey WordsDiscussion Questions
IntroductionProblems Faced by Developing and Transition EconomiesThe Why and Wherefore of Corporate GovernanceDefining Corporate GovernanceCorporate Governance ModelsInsider SystemOutsider SystemDeveloping a Corporate Governance FrameworkThe Institutional Framework for Effective Corporate GovernanceSound Stakeholder Relationships are Good for BusinessCorporate Governance Challenges in Developing, Emerging and Transition EconomiesCorporate Governance Is Not Only a Private Sector AffairSuccessful Strategies—One Size Does Not Fit AllCurrent Corporate Governance Settings in Transition EconomiesIndian Companies Committed to Best Global PracticesSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Problems and Issues of Corporate Governance in Emerging Economies: Russian Example
IntroductionWhy Is Corporate Governance Important?The Need for Corporate Governance in IndiaEthics and Values in Corporate GovernanceThe Companies Act, the Harbinger of Corporate GovernanceThe Emergence of Corporate Governance Issues in IndiaEfforts to Initiate Corporate Governance in the CountryNaresh Chandra Committee, 2002Narayana Murthy Committee, 2003Legislative ChangesIntroduction of RegulationsImplementation of the Recommendations of Birla Committee ReportProvisions and Requirements of ClauseDifferences in the Key Provisions of the Original Clause and the New ClauseCEOS Accountable for Companies’ Risk SystemsRules of the GameReserve Bank’s and Other RegulationsSelf RegulationPioneers in Good Governance PracticesCorporate InitiativesIndividual InitiativesBanks and Corporate GovernanceTransparency in the Private SectorInitiatives of the Department of Company AffairsSetting up of Centre for Corporate ExcellenceNational Award for Excellence in Corporate Governance ExcellenceCorporate RestructuringBest PracticesEstablishment of the Serious Fraud OfficeEstablishment of the National Foundation of Corporate GovernanceNeed for Accounting StandardsCorporate Governance RatingICRA’s Rating MethodologyCorporate Governance in India—A Performance AppraisalA Report Card That Does Not ImpressThe Future of Corporate Governance in IndiaImpetus for the Growth of Corporate Governance in IndiaSummaryKey WordsDiscussion QuestionsFurther Readings
IntroductionCapital MarketPhenomenal Growth of the Indian Capital MarketNature of the Indian Capital MarketDevelopment of the Indian Capital MarketDeficiencies in the Indian Capital MarketImpact of GlobalizationRole of Securities Market in Economic GrowthAbolition of Controller of Capital Issues and Emergence of SEBIThe Securities and Exchange Board of IndiaObjectives of the BoardFunctions of the BoardPowers of the BoardMatters to Be Disclosed by the Companies to the Board (Section 11A)Power to Issue DirectionsRegistration of IntermediariesEstablishment of Securities Appellate TribunalsCivil Court Not to Have JurisdictionStrengthening of SEBISEBI (Amendment) Bill, 2002SEBI’s Role in Promoting Corporate GovernanceDisclosure StandardsEfficient and Effective Market SystemReliable and Effective EnforcementHighest Standards of GovernanceSEBI’s Record of PerformanceSEBI’s Role in the New EraPrimary Market ReformsSecondary Market ReformsSEBI’s ShortcomingsDhanuka CommitteeSuggestions for SEBI’s ImprovementSummaryKey WordsDiscussion QuestionsFurther ReadingsCase Study: Ketan Played Around with Others’ Money