Doing stakeholders, such as shareholders, management, customers, suppliers,

Doing
business is not only about buying and selling, but also about feeling
responsible for those to whom you are providing your goods and services.
Nowadays, after globalization the prior focus of the firms is to embellish the
long term relationships with their customers to build their brand image and
progress in their sales. Our country being a democratic country has provided
various rights to its citizens, one of which speaks for the welfare of
customers. As Customer satisfaction is not only confined to buying of product
but also to its after sales services and facilities that ensure the security of
using that product of particular firm, thus it becomes very important for the
business organization to inculcate and follow the ethical behavior in their
employees and their services. The
current research aims to a) find the relationship between business ethics and
corporate governance b) to check the impact of corporate governance on the
profitability of the firm c) how ethics can make governance meaningful?

Keywords: Revamping,
Business Ethics, Corporate governance, Embellish

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§  INTRODUCTION

Conventional wisdom and opinion leaders such as the Dalai
Lama and the late Basil Cardinal Hume believe that the decade of greed is
evolving into an era in which many people are seeking the meaning of life. Working with
ethics provides a blissful success to firm by forming the foundation of work
culture.  Ethics is a philosophical branch that deals with human values in
relation to their conduct regarding what is good or bad and what is right or
wrong. It also refers to organizational standards, principles, sets of values
and norms that govern and control the actions and behavior of an individual in
the business. Two dimensions which efficiently explain the real meaning of
ethics are normative or descriptive. As a corporate custom and a career
specialization, the field is primarily normative. Academics attempting to
understand business behavior employ descriptive methods. With the advent of
business ethics, a fruitful relation has been developed between ethics and
corporate governance as the benefits received from ethics are the goals of good
governance. Corporate Governance
is the system of rules, practices and processes by which a company is directed
and controlled. It essentially involves balancing the interests of a
company’s stakeholders,
such as shareholders, management, customers, suppliers, financiers, government
and the community. Good Governance should look at all stakeholders not just
shareholders alone and ensuring that provisions of companies act is followed by
letter and spirit both.

§ 
REVIEW
OF LITERATURE

Kshatriya (2014)
exclaims that business world across globe has started looking east,
particularly India, for Ethical Business Models. He suggests that a culture
that is conservative in monetary terms attaches a very high value to created
wealth, in turn, leading to business practices bringing change in lives of many
and ensuring the process of wealth creation. Gehlot , Sharma and Kalla (2013), This paper concentrates upon
ethical business practices adopted by the MNC’s of Indian origin. Through this
paper an attempt has been made to identify some of the best ethical practices,
Indian Business should adopt while operating in foreign land and in the home
country. The paper also brings in light real examples of ethical practices from
the Indian corporate that set lessons for other organizations operating
worldwide. Kanda (2013), In this
research paper the writer has expressed his views about importance of business
ethics ,some of the Indian ethical programs and a review of ethical practices
all over the world. Soni (2011) , In
this paper she has discussed the concept of corporate goverence ,its emergence
in India , its various ways of implementation and important issues in corporate
governance. Verma and Prakash (2011), In this the researchers have examined the actual
correlation of ethics and corporate governance, the requirements of an ethical
base of business, the emerging trends in corporate governance, related
developments and their relevance. This paper discusses the controversial
question about the compatibility, inimitability, and interface flanked by business ethics and social responsibility.
The rationale for choosing the two principles together is to provide a base for
comparison and to present the ethical standards based on this information. The
research dwells upon good governance as key to economic and social
transformation and social responsibility which is the prime duty to set
standards of quality and integrity to protect the environment and safeguard the
interests of customers, employees, suppliers and the community rather than
concentrating on the maximization of
profits. The paper is an attempt in the direction of appreciating the concept
of social accounting in monetary terms, its impact on objectives, policies, and
procedure. Barman, &
Gunasekera (2010) observes that strong ethical policies that go beyond
upholding the law can add great value to a brand, whereas a failure to do the
right thing can cause social, economic and environmental damage, undermining a
company’s long-term prospects in the process. They recommends that Corporate
communications and reporting on sustainability need to do more than just pay
lip service to the green agenda, and hence, ethics must be embedded in business
models, organizational strategy and decision making processes. Sullivan (2009) ,
This publication targets the private sector stakeholders who
want to reduce a companys risk and vulnerability to corruption. It aims to
provide guidance and recommendations for integrating ethical programs into
corporate governance mechanisms to safeguard against corruption. The
researche has also recognised a strong relation of ethical business practices
with corporate governance. Murthy (2007), In this paper the researcher have argued that business ethics and social responsibility are not
unrelated. Through this distinction, it
develops a framework that relates the two – business ethics and CSR. It also
states that there is a paradigm shift in the philosophy of business. This shift
leads to a framework wherein a new perspective on business ethics and social responsibility
emerge. It is coined as Corporate
Responsibility. It consists of (a) good governance (b) corporate social
responsibility (“CSR”) (c) environmental accountability. It discusses the role
of top managers in achieving Corporate Responsibility through Organizational
Transformation.

§  Pioneering business
ethics into business culture

A
business is considered to be ethical only if it tries to reach a trade off
between pursuing economic objective and its social obligation. Being ethical is
all about developing trust maintaining it fruitfully so that the firm
flourishes profitably and maintain good reputation. For a business firm ethics
are really important because:

ü  Ethics lays the strategic decision-making as they allow all the stakeholders to participate in the
decision-making process.

ü  Employees always want to stay longer in a business where the
employers value their rights and opinions. To them, their basic needs are
satisfied.

ü  A business that promotes ethics in its management and operations create
an investment-friendly environment. Investors like putting their money where
they are sure it is safe.

ü  Fewer funds are spent in employee recruitment since most employees
are retained in the business

ü  Ethics in a business attracts more employees. When your company is reputable, more people will be interested
to work for you.

ü  Good Business ethics is the key to enhancing productivity. People will work harder at their jobs if they believe that
what they are doing is ethical. They will not be held back by moral qualms, and
they may feel extra motivated to work because they feel that by doing so they
are making the world a better place. So if you want to make a normal profit
rise and rise until you are making big bucks, you need to keep your business
totally ethical.

ü  Ethics create customer loyalty. A
reputation build on good ethics helps create a positive image in the
marketplace. This, in turn, makes customers trust your products and services.
They also pass information to their friends and family, hence, creating more
customers for you.

§  Emergence of Corporate
Governance in India

Corporate governance theory emerged in India
after 1996 due to economic liberalization and deregulation of industry and
business. The changing times called for a need of greater accountability of
companies to their shareholders and customers. The report of Cadbury Committee
on the financial aspects of corporate Governance in the U.K. has given rise to
the debate of Corporate Governance in India. Need for corporate governance
arises due to separation of management from the ownership. For a firm success,
it needs to concentrate on both economical and social aspect. It needs to be
fair with producers, shareholders, customers etc. It has various
responsibilities towards employees, customers, communities and at last towards
governance and it needs to serve its responsibilities at the best at all
aspects. Cadbury
Committee (U.K.), 1992 has defined
corporate governance as such:”Corporate governance is the system by which
companies are directed and controlled. It encompasses the entire mechanics of
the functioning of a company and  attempts  to  put 
in  place  a  system  of  checks  and 
balances between the shareholders, directors, employees, auditor and the
management.”

Some of the ethical practices of
Indian Companies

Cappelli
and Singh in their study found that almost every Indian company has a mission
toward society. The best example of it ‘Tata
Nano’ the small car produced by Tata Motors especially for the middle class
segment of society. Adjusted for price inflation Nano is cheaper than Ford’s’
Model T ‘launched in America in 1908.Tata Steel donates 65% of its profit to
charity. Maruti Udyog Limited is another name associated with social
responsibility. In the year 1997, of the entire car’s sold between January and
April. This responsible company recalled about 50000 of their most popular
products, Maruti 800 from the Market because they suspected them to be made of
inferior steel. This made newspaper headlines as it was the biggest ever recall
of cars from the Indian Marketplace.

§  Business ethics and
Good governance – impact on profitability of a firm

A number of facets play
a part in making a business profitable, including expert management teams,
dedicated and productive employees, consistent consumer demand and careful
watch over the bottom line.

 

1.      Business
Ethics in Management: 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. Ethical accounting
practices, treatment of employees,
interactions with the public and information disseminated to shareholders are
all responsibilities of the leadership team and can have a direct impact on the
overall profitability of the company. When these integral aspects of business
are not performed with a resounding theme of business ethics from the top down,
each facet of the business beneath the management team has a greater potential
to falter in the short or long term.

2.      Business
Ethics and Employee Morale: It has been proven time
and again 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 cause widespread unrest with employees, leading to a greater
sense of dissatisfaction with the work they are doing and their employers.
However, when business ethics are encouraged from management and company
executives lead by example, the 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 present and
morale is high, and this leads to greater profit levels for the company.

3.      Good
governance and Public Image: Companies would be
nothing without shareholders and investors, and as such, operating with
business ethics in mind is most important when interacting with these crucial
players. It is common for the profitability of publicly traded companies to
decline rapidly when they encounter situations where information regarding
unethical behavior is discovered. When investor confidence is lost, it can be a
struggle for a company to regain the trust of the public, its investors and its
valuable shareholders;
profitability may take years to build up again. Companies that lay the
framework for business ethics in all facets of operation are more likely
to become and remain profitable than those that conduct business in an
unethical manner.

 

 

 

What
a company should do in various situations is presented in the below corporate
governance matrix.

ETHICAL

 

CORPORATE GOVERNCE FRAMEWORK

WEAK

STRONG

WEAK

FOCUS ON OVERCOMING
SYSTEMATIC CORRUPTION

FOCUS ON BUILDING AN
ETHICAL ORGANISATION

STRONG

FOCUS ON IMPROVING
CORPORATE GOVERNANCE FRAMEWORK

FOCUS ON COMPLIANCE
DISSEMINATING BEST PRACTICE

ü  Source- The Moral Compass
of Companies: Business Ethics and Corporate Governance as Anti-Corruption Tools
by John D. Sullivan.

 

§  Conclusion/ Personal
view point:

With
the above research carried by me and my co-author, we came to the conclusion
that from ethical point of view, many companies position their CSR reports
annually which act as the cost centres in corporate accounts. Secondly, we have
analysed that if the following unethical practices such as:

o  
Pressure to meet
unrealistic objectives and deadlines

o  
Increase in acute
competition

o  
Economic greed

o  
Information of
unethical acts through media

o  
Pressure to earn
massive profits

o  
Lack of management
support and poor leadership, are encountered and given a productive and
realistic channels of achievement then ethics can make governance meaningful.

x

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