Doingbusiness is not only about buying and selling, but also about feelingresponsible for those to whom you are providing your goods and services.Nowadays, after globalization the prior focus of the firms is to embellish thelong term relationships with their customers to build their brand image andprogress in their sales. Our country being a democratic country has providedvarious rights to its citizens, one of which speaks for the welfare ofcustomers.
As Customer satisfaction is not only confined to buying of productbut also to its after sales services and facilities that ensure the security ofusing that product of particular firm, thus it becomes very important for thebusiness organization to inculcate and follow the ethical behavior in theiremployees and their services. Thecurrent research aims to a) find the relationship between business ethics andcorporate governance b) to check the impact of corporate governance on theprofitability of the firm c) how ethics can make governance meaningful?Keywords: Revamping,Business Ethics, Corporate governance, Embellish § INTRODUCTIONConventional wisdom and opinion leaders such as the DalaiLama and the late Basil Cardinal Hume believe that the decade of greed isevolving into an era in which many people are seeking the meaning of life. Working withethics provides a blissful success to firm by forming the foundation of workculture.
Ethics is a philosophical branch that deals with human values inrelation to their conduct regarding what is good or bad and what is right orwrong. It also refers to organizational standards, principles, sets of valuesand norms that govern and control the actions and behavior of an individual inthe business. Two dimensions which efficiently explain the real meaning ofethics are normative or descriptive. As a corporate custom and a careerspecialization, the field is primarily normative. Academics attempting tounderstand business behavior employ descriptive methods. With the advent ofbusiness ethics, a fruitful relation has been developed between ethics andcorporate governance as the benefits received from ethics are the goals of goodgovernance.
Corporate Governanceis the system of rules, practices and processes by which a company is directedand controlled. It essentially involves balancing the interests of acompany’s stakeholders,such as shareholders, management, customers, suppliers, financiers, governmentand the community. Good Governance should look at all stakeholders not justshareholders alone and ensuring that provisions of companies act is followed byletter and spirit both.§ REVIEWOF LITERATUREKshatriya (2014)exclaims that business world across globe has started looking east,particularly India, for Ethical Business Models.
He suggests that a culturethat is conservative in monetary terms attaches a very high value to createdwealth, in turn, leading to business practices bringing change in lives of manyand ensuring the process of wealth creation. Gehlot , Sharma and Kalla (2013), This paper concentrates uponethical business practices adopted by the MNC’s of Indian origin. Through thispaper 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 homecountry. The paper also brings in light real examples of ethical practices fromthe Indian corporate that set lessons for other organizations operatingworldwide. Kanda (2013), In thisresearch paper the writer has expressed his views about importance of businessethics ,some of the Indian ethical programs and a review of ethical practicesall over the world. Soni (2011) , Inthis paper she has discussed the concept of corporate goverence ,its emergencein India , its various ways of implementation and important issues in corporategovernance. Verma and Prakash (2011), In this the researchers have examined the actualcorrelation of ethics and corporate governance, the requirements of an ethicalbase of business, the emerging trends in corporate governance, relateddevelopments and their relevance.
This paper discusses the controversialquestion 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 forcomparison and to present the ethical standards based on this information. Theresearch dwells upon good governance as key to economic and socialtransformation and social responsibility which is the prime duty to setstandards of quality and integrity to protect the environment and safeguard theinterests of customers, employees, suppliers and the community rather thanconcentrating on the maximization ofprofits. The paper is an attempt in the direction of appreciating the conceptof social accounting in monetary terms, its impact on objectives, policies, andprocedure. Barman, &Gunasekera (2010) observes that strong ethical policies that go beyondupholding the law can add great value to a brand, whereas a failure to do theright thing can cause social, economic and environmental damage, undermining acompany’s long-term prospects in the process. They recommends that Corporatecommunications and reporting on sustainability need to do more than just paylip service to the green agenda, and hence, ethics must be embedded in businessmodels, organizational strategy and decision making processes. Sullivan (2009) ,This publication targets the private sector stakeholders whowant to reduce a companys risk and vulnerability to corruption.
It aims toprovide guidance and recommendations for integrating ethical programs intocorporate governance mechanisms to safeguard against corruption. Theresearche has also recognised a strong relation of ethical business practiceswith corporate governance. Murthy (2007), In this paper the researcher have argued that business ethics and social responsibility are notunrelated. Through this distinction, itdevelops a framework that relates the two – business ethics and CSR. It alsostates that there is a paradigm shift in the philosophy of business. This shiftleads to a framework wherein a new perspective on business ethics and social responsibilityemerge.
It is coined as CorporateResponsibility. It consists of (a) good governance (b) corporate socialresponsibility (“CSR”) (c) environmental accountability. It discusses the roleof top managers in achieving Corporate Responsibility through OrganizationalTransformation.§ Pioneering businessethics into business culture Abusiness is considered to be ethical only if it tries to reach a trade offbetween pursuing economic objective and its social obligation.
Being ethical isall about developing trust maintaining it fruitfully so that the firmflourishes profitably and maintain good reputation. For a business firm ethicsare really important because:ü Ethics lays the strategic decision-making as they allow all the stakeholders to participate in thedecision-making process.ü Employees always want to stay longer in a business where theemployers value their rights and opinions. To them, their basic needs aresatisfied.ü A business that promotes ethics in its management and operations createan investment-friendly environment. Investors like putting their money wherethey are sure it is safe.ü Fewer funds are spent in employee recruitment since most employeesare retained in the businessü Ethics in a business attracts more employees.
When your company is reputable, more people will be interestedto work for you.ü Good Business ethics is the key to enhancing productivity. People will work harder at their jobs if they believe thatwhat they are doing is ethical.
They will not be held back by moral qualms, andthey may feel extra motivated to work because they feel that by doing so theyare making the world a better place. So if you want to make a normal profitrise and rise until you are making big bucks, you need to keep your businesstotally ethical.ü Ethics create customer loyalty. Areputation build on good ethics helps create a positive image in themarketplace.
This, in turn, makes customers trust your products and services.They also pass information to their friends and family, hence, creating morecustomers for you.§ Emergence of CorporateGovernance in IndiaCorporate governance theory emerged in Indiaafter 1996 due to economic liberalization and deregulation of industry andbusiness. The changing times called for a need of greater accountability ofcompanies to their shareholders and customers. The report of Cadbury Committeeon the financial aspects of corporate Governance in the U.K.
has given rise tothe debate of Corporate Governance in India. Need for corporate governancearises 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 befair with producers, shareholders, customers etc. It has variousresponsibilities towards employees, customers, communities and at last towardsgovernance and it needs to serve its responsibilities at the best at allaspects. CadburyCommittee (U.K.
), 1992 has definedcorporate governance as such:”Corporate governance is the system by whichcompanies are directed and controlled. It encompasses the entire mechanics ofthe functioning of a company and attempts to put in place a system of checks and balances between the shareholders, directors, employees, auditor and themanagement.”Some of the ethical practices ofIndian CompaniesCappelliand Singh in their study found that almost every Indian company has a missiontoward society. The best example of it ‘TataNano’ the small car produced by Tata Motors especially for the middle classsegment 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 tocharity. Maruti Udyog Limited is another name associated with socialresponsibility.
In the year 1997, of the entire car’s sold between January andApril. This responsible company recalled about 50000 of their most popularproducts, Maruti 800 from the Market because they suspected them to be made ofinferior steel. This made newspaper headlines as it was the biggest ever recallof cars from the Indian Marketplace.§ Business ethics andGood governance – impact on profitability of a firmA number of facets playa part in making a business profitable, including expert management teams,dedicated and productive employees, consistent consumer demand and carefulwatch over the bottom line. 1. BusinessEthics in Management: The leadership of anorganization holds the key to its long-term success, and remaining consistentwith a management philosophy built on a foundation of ethics creates a positiveexample for all workers. Ethical accountingpractices, treatment of employees,interactions with the public and information disseminated to shareholders areall responsibilities of the leadership team and can have a direct impact on theoverall profitability of the company.
When these integral aspects of businessare 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 potentialto falter in the short or long term.2. BusinessEthics and Employee Morale: It has been proven timeand again that employees who are satisfied with the environment in which theywork are more productive than workers who are unhappy. Unethical practices inthe workplace can cause widespread unrest with employees, leading to a greatersense of dissatisfaction with the work they are doing and their employers.
However, when business ethics are encouraged from management and companyexecutives lead by example, the ability of employees to focus on the work theyneed to complete to make themselves and the organization successful increasesexponentially. Productivity increases when fewer distractions are present andmorale is high, and this leads to greater profit levels for the company. 3.
Goodgovernance and Public Image: Companies would benothing without shareholders and investors, and as such, operating withbusiness ethics in mind is most important when interacting with these crucialplayers. It is common for the profitability of publicly traded companies todecline rapidly when they encounter situations where information regardingunethical behavior is discovered. When investor confidence is lost, it can be astruggle for a company to regain the trust of the public, its investors and itsvaluable shareholders;profitability may take years to build up again. Companies that lay theframework for business ethics in all facets of operation are more likelyto become and remain profitable than those that conduct business in anunethical manner. Whata company should do in various situations is presented in the below corporategovernance 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 Compassof Companies: Business Ethics and Corporate Governance as Anti-Corruption Toolsby John D. Sullivan. § Conclusion/ Personalview point: Withthe above research carried by me and my co-author, we came to the conclusionthat from ethical point of view, many companies position their CSR reportsannually which act as the cost centres in corporate accounts. Secondly, we haveanalysed that if the following unethical practices such as:o Pressure to meetunrealistic objectives and deadlineso Increase in acutecompetitiono Economic greed o Information ofunethical acts through mediao Pressure to earnmassive profitso Lack of managementsupport and poor leadership, are encountered and given a productive andrealistic channels of achievement then ethics can make governance meaningful.