Ethics and Business – Governance, Risk Management, Compliances and Ethics Important Questions

Question 1.
In a branch of ABC Bank, Branch Manager throughout the year has been under acute pressure to achieve the business targets. At the year-end, he finds that despite his best efforts, he has not been able to achieve the targets given by his team leader. Simultaneously, he found that there are various cash credit limits sanctioned which are not being utilized.

On 31st March, he makes debit entries as withdrawals in such unutilized cash credit limits and transfers to current accounts of the borrowers and again reverses these entries on 1st April. In addition, to avoid the mounting pressure of reduction in NPAs, he makes credit transfer entries in cash credit limits not transacted since last six months and reverses these entries on next day after year-end, i.e. 1st April.

In this way, he has been able to manage the achievement of his deposits and advances targets. Also, he has temporarily engaged a boy as attendant. As to employ a casual staff, he was required compliance of laid down policy of the bank, he shown payments made to him as water and cleaning charges under different names. He argues that as no loss has been caused to any one, hence he is right.

In the light of above answer the following questions:
(i) Evaluate his actions in the light of ethical practices and mention which types of ethical issues are there at his branch.
(ii) What do understand by ‘Ethics in Compliance’? Describe by citing an example and a case study involving issues of ethics in compliance.
Answer:
(i) In the given case, the Branch Manager, in order to achieve the targets assigned to him adopted the following unethical practices:

Making debit entries in unutilized cash credit limits and transfer to current account of the borrowers.
Making credit transfer entries in cash credit limits not transacted since last 6 months and reversing the said entries on 1st April i.e. after the year end.
Temporarily engaging an attendant and showing payments made to him as water and cleaning charges.

In light of the above the ethical issues may be summarized as under:

Window dressing of the financials by inflating deposits and to suppress non-performing assets (NPAs), he makes ever-greening of NPAs in violation of RBI directives by manipulating books of account.
This amounts to cooking of the balance sheet of the branch without real business. Hence these are issues of Ethics in Accounts and Finance.
To avoid compliance of laid down procedure to employ a casual worker, he shows the payments as water and cleaning charges in miscellaneous expenses. Hence this is an issue of Ethics in compliance.

(ii) Compliance is about obeying and adhering to rules and authority with letter and spirit. The motivation for being compliant could be to do the right thing out of the fear of being caught rather than a desire to abide by the law. An ethical climate in an organisation ensures that compliance with law is fuelled by a desire to abide by the laws. Organisations that value high ethical values comply with the laws not only in letter but go beyond what is stipulated or expected of them.

Ethical compliance:
Ethical compliance helps companies to develop a work culture that abides by the workplace laws and reduces the costs associated with fines and lawsuits. One of the disadvantages of an ethical compliance program is that it requires the comprehensive support of management in order to ensure its effectiveness.

If members of the management team decide to apply their own version of corporate ethics to the way they manage their departments, then this clash of principles can cause confusion in the workplace. For example, a manager who tends to compromise when his fellow employees are involved in taking bribe, it may set a precedence of undermining the entire corporate culture.

Question 2.
“What is considered ethical behaviour in one society might be considered unethical in another. For example, euthanasia (mercy killing) is permitted in some countries but it is considered strictly unethical in most of the other countries.”
In the light of the above statement discuss the common features of ethics.
Answer:
The common features of ethics may be listed as follows:

Ethics is a conception of right or wrong conduct. Ethics tells us when our behaviour is moral and when it is immoral. It deals with the fundamental human relationship, how we think and behave towards others and how we want them to think and behave towards us.

Ethics relates to the formalised principles derived from social values. It deals with the moral choices that we make in the course of performing our duties with regard to other members of society. Hence, it is relevant in the context of a society only.

Ethical principles are universal in nature. They prescribe obligations and virtues for everybody in a society. They are important not only in business and politics but in every human endeavour.

There exist no sharp boundaries between ethical and non-ethical. Therefore, people.often face ethical dilemmas wherein a clear cut choice becomes very difficult.

The concepts of equity and justice are implicit in ethics. Fair and equitable treatment to all is its primary aim.

Ethics and legality of action do not necessarily coincide. What a society interprets as ethical or unethical ends up expressed in laws. The legality of actions and decisions does not necessarily make them ethical. For example, not helping an injured person in a road accident may be unethical but not illegal.

Thus, the statement ‘What is considered ethical behaviour in one society might be considered unethical in another’ is correct.

Question 3.
Write short notes on the following; Theory of Relativism.
Answer:
Theory of Relativism:
Theory of Relativism promotes the idea that some elements or aspects of experience or culture are relative to i.e. dependent on, other elements or aspects. It holds that there are no absolute truths in ethics and that what is morally right or wrong varies from person to person or from society to society.

The term often refers to truth relativism, which is the doctrine that there is no absolute truth, i.e. that truth is always relative to some particular frame of reference, such as a society or a culture. For example, killing animals for sport (like bull fighting) could be right in one culture and wrong in another.

Question 4.
“Good corporate governance practices cannot guarantee corporate success, but the absence of such governance definitely lead to questionable practices and corporate failures, which surface suddenly and massively”.
Discuss this statement and highlight the need for business ethics.
OR
Briefly comment on the following; Business ethics play a vital role for an organisation.
Answer:
Good corporate governance goes beyond rules and regulations that the Government can put in place. It is about the ethics and the values which drive companies in the conduct of their business.

Ethics is also the first line of defense against corruption, while law enforcement is remedial and reactive. It is, therefore, all about the trust that is established over time between the companies and their different stakeholders through their ethical business conduct.

Need of Business Ethics – The need for business ethics may be highlighted in following points :
1. Ethical conduct is in the long-term interests of businessmen. A business enterprise that is honest and fair to its customers, employees, and other stakeholders earns their trust and goodwill. It ultimately results in customer satisfaction, healthy competition, industrial growth and high earnings.

2. Businesses must balance their desire to maximize profits against the requirements of stakeholders. To address this unique aspect of business, rules are articulated to guide it to earn profits without harming individuals or society as a whole. While referring to business activity profile, Mahatma Gandhi once mentioned that all business entrepreneurs should ask themselves the question whether the activities they are contemplating would be of some use to the common man.

3. Ethical business behaviour is not only about good business but about good citizenship as well. Morally conscious businessmen have created names and built great business empires. They serve customers with good quality products at fair prices, treat their employees with great respect, reward their shareholders with good returns and pay their taxes honestly.

4. A business organisation that adheres to a code of conduct gains a competitive advantage and builds long-term value. On the other hand, unethical practices lead to the ultimate downfall of big organisations too.

5. Business can prosper only when a society is stable and peaceful. Unethical practices at times create distrust, disorder and turmoil in society.

Thus Good corporate governance practices cannot guarantee corporate success, but the absence of such governance definitely lead to questionable practices and corporate failures, which surface suddenly and exert a massive impact.

Question 5.
Green washing is a form of corporate misrepresentation. Explain.
OR
“Green washing is an evil practice amongst the corporates.” Comment.
OR
Discuss the following; Green Washing.
Answer:
Green washing is a form of corporate misrepresentation where a company presents a green public image and publicize green initiatives that are false or misleading. A company might release misleading claims or even true green initiatives while privately engaging in environmentally damaging practices. Companies try to take advantage of the growing public concern and awareness for environmental issues by promoting an environmentally responsible image.

Green washing is used by companies to win over investors (especially those interested in socially responsible investing), create competitive advantage in the marketplace, and convince critics that the company is well-intentioned. There is a profit-driven motive to green washing as well-green products are among the fastest growing segments in the market. Internationally, the increase in green advertising claims has become a cause for concern.

Question 6.
Briefly comment on the following statements; Ethical conduct is in the long-term interest of business.
Answer:
Ethical conduct is in the long-term interests of business. A business enterprise that is honest and fair to its customers, employees, and other stakeholders earns their trust and goodwill. It ultimately results in customer satisfaction, healthy competition, industrial growth and high earnings. Businesses must balance their desire to maximise profits against the, requirements of stakeholders.

Question 7.
Write short note on the following; Characteristics of ethics decision.
Answer:
According to Sueanne, in her book, Ethical Dilemma, characteristics and theory (2008), following characteristics of ethical decision are stated :

Most ethical decisions have mixed outcomes.
Most ethical decisions have personal implications.
Most ethical decisions have multiple alternatives.
Most ethical decisions have extended consequences.
Most ethical decisions have uncertain consequences.

Question 8.
Discuss the importance of organization’s structure in the study of business ethics.
OR
Discuss briefly the following; Organisation structure and ethics.
OR
In a centralized organization decision making authority is concentrated in the hands of top level managers and little authority is delegated to the lower levels in the light of this statement. Discuss the importance of an – organization structure in the study of business ethics.
OR
An organization’s structure is a significant factor to the study of business ethics. Comment
Answer:
In a centralized organization, decision making authority is concentrated in the hands of top-level managers, and very little authority is delegated to the lower levels. Responsibility, both internal and external, rests with top management.

Applicability: This structure is especially suited for organizations that make high-risk decisions, and whose lower-level managers are not highly skilled in decision-making. It is also suitable for organizations in which production processes are routine and efficiency is of primary importance.

Centralized organizations stress on formal rules, policies, and procedures, backed up by elaborate control systems. Their codes of ethics may specify the techniques to be used for decision-making.

An organization’s structure is important to the study of business ethics. Organisational structure touches on many issues related to ethics. Such as:

The alienation experienced by workers doing repetitive work.
The feelings of oppression created by the exercise of authority.
The responsibilities heaped on the shoulders of managers.
The power tactics employed by managers who are anxious to advance their career ambitions.
Health problems created by unsafe working conditions.
The absence of due process for non-unionised employees.

Question 9.
Do you think that an organisation having centralized organisation structure can lead to unethical acts? Why?
Answer:
In a centralized organization, decision making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels. Responsibility, both internal and external, rests with top management. These organizations are usually extremely bureaucratic, and the division of labour is typically very well defined. Centralized organizations stress on formal rules, policies, and procedures, backed up with elaborate control systems.

Centralized organizational structures may lead to unethical acts because of the top down approach and the distance between employee and decision maker. If the centralized organization is very bureaucratic, some employees may behave according to “the letter of the law” rather than the spirit.

Question 10.
Writing code of conduct supporting it at top levels and communicating it to employees is just a beginning are should have an ethics committee comprising of independent non-executing directors enumerate the statement and state the functions of ethics committee.
Answer:
Companies should have a committee of independent non-executing directors who are responsible for ensuring that systems are place in the company to assure employ compliance with the code of ethics

The role of Ethics Committee may involve the following:

Review of the standards and procedures.
Facilitate compliance.
Due diligence of prospective employees.
Oversight of communication and training of ethics programme.
Monitor and audit compliance.
Enforcement of disciplinary mechanism.
Analysis and follow-up.

Question 11.
Over the number of years Seasons Ltd., fully owned by Calmitech Corportation Ltd., a listed entity, of which you are now the company secretary, has adopted aggressive growth strategy via targeted acquisition together with organic growth plan. Therefore, the disclosure requirements are based upon the listing rules. Recently Seasons acquired Hijobs Ltd., for geographic exposure, revenues and profits. During the negotiation process there were issues regarding management structure, values and due diligence.

Post completion the process of acquisition the problems started to emerge like lack of data provided in due diligence, reflected the fact that it either didn’t exist or was incomplete. Now it was time for preparation of the year end accounts. There were issues regarding incomplete H accounting records and incorrect exchange rates. In short preparation of the Annual report and the financial statements was a significant challenge. You investigated relatively limited available information on the branch and tentatively concluded that is not material.
i. What would you do knowing that disclosure of such information to the auditors and the Board may delay the parent company’s result, announcement to the market?
ii. What fundamental ethical principles would you take into consideration for making a prudent decision?
Answer:
i. The basic principle of Corporate Governance is to maintain the ethical standards, adequate disclosures, transparency and work in the interest of all the stakeholders.

Being a Company Secretary of the company:

I would act in the best interest of the company and disclose the findings immediately to the Board of directors, Board of the parent company and the auditors.
In addition, I would look for a code of conduct which provides guidance on such matters. Proper qualitative and quantitative assessment on materiality of the new facts can be initiated in the best interest of the company.
A team may be formed to expedite correcting the entries and making correct disclosures.

Although, the process may defer the declaration of results in the market, but it is better than declaring the wrong results and then provide significant additional disclosures at a later date. This delay for the broader interest is inevitable.

ii. The following ethical principles would be considered to form a prudent decision:

Integrity – Accounts and reports should be prepared in accordance with accounting standards and other principles so that they reflect the true and fair position of the company.
Honesty – The aim should be to be honest to the company for the interest of various stakeholders. Truthfulness and correct disclosures cannot be sacrificed at any cost for immediate gains.
Objectivity – Disclosures must be made at adequate places sup-ported by proper annexures and other related evidences. In case there is a delay in making disclosures, it should be justified with proper reasons.
Professional Competence – Professional ethics and standards including due care and diligence should be maintained in all circumstances.
Confidentiality – Confidentiality of the company affairs should be maintained. The situation should be controlled to avoid panic in the organisation in order to ensure that the market standing and the stock prices are not negatively affected.

Question 12.
Write short note on the following; Ethical dilemma.
OR
Briefly comment on the following statements; An ‘ethical dilemma’ involves a situation, when a person is indecisive as to what is right and what is wrong.
Answer:
An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. Dilemma is a situation that requires a choice between options that are or seem equally unfavorable or mutually exclusive. It involves the need to choose from among two or more morally acceptable courses of action, when one choice prevents selecting the other; or, the need to choose between equally unacceptable alternatives.

These dilemmas can be highly complex and difficult to resolve. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer; whereas, complex ethical dilemmas involve a decision between a right and another right choice.

Question 13.
You are a company secretary of the Mentor Products Ltd. you are made responsible for tender filing for the company your company is looking forward to win the tender by a government department a junior worker joins your company after working with your competitor Genius Products Ltd. for 5 years.

The worker informs you that in his previous company he has access to the bids made by the company and that he had know ledge of what standards of cost were set by that company. He offers for assistance in writing the bid by providing information of the competitor.

How would you resolve the ethical dilemma. Explain with reasons.

Would you take input from him for preparation of the tender?
Avoid such input and found on your own statement, or
If you decide to retain him how will you ensure that such things do not happen in future.
Ask him to leave the company for proposing to leak trade secret of competitor as that effect his integrity.

Answer:

No, we would not take inputs from him for preparation of the tender because it is against ethics.
Yes, we will avoid such input and focus on our own standard because if our competitor knows the leakage of information they will ask for retendering.
We will post him in any other division where our confidential matters should not be known to him.
Yes, we will ask him to leave the company for proposing to leak trade secret of competitor as that reflects his integrity because for some gains we can suffer a great loss by the said employee to leak our secrets to our competitor in future.

Question 14.
What are the areas in which a company may face ethical issues? Explain with the help of case study as to how investors can force ethical issues on company’s agenda. Answer:
A company may face ethical issues in different areas. Some of these issues are given below:
a. The ethical issues in finance that companies and employees are con-fronted with include:

In accounting – window dressing, misleading financial analysis.
Related party transactions not at arm length.
Insider trading, securities fraud leading to manipulation of the financial markets.
Fake reimbursements.

b. The ethical issues faced by Human Resource Management include:

Discrimination issues, i.e., discrimination on the bases of age, gender, race, religion, disabilities etc.
Sexual harassment.
Discrimination of whistle-blowers.

c. The ethical issues .confronted in marketing area include:

Pricing: price fixing, price discrimination and price skimming.
Anti-competitive practices, like manipulation of supply, exclusive dealing arrangements and tying arrangements.
Misleading advertisements.

d. The ethical issues confronted in production area include:

Defective, addictive and inherently dangerous products.
Ethical relations between the company and the environment include pollution, environmental ethics and carbon emissions trading.
Ethical problems arising out of new technologies, for example, genetically modified food.

Case Study on how investors can enforce ethical issues on company’s agenda:
Tesco a UK based Supermarket Chain Company faced an unprecedented revolt over the meagre wages it pays to workers in the developing world to supply its supermarkets with everything from cheap clothing to fruit.

Shareholders at the company’s annual meeting in London also voiced their anger at a controversial pay scheme for chief executive Sir Terry Leahy, which could see him pocket over £11 million if Tesco’s expansion into the US market succeeded. 8.75% of shareholders refused to back the company’s remuneration policy while 17.71% refused to back Sir Terry’s special US bonus.

Question 15.
In a branch of ABC Bank, Branch Manager throughout the year has been under acute pressure to achieve the business targets. At the year-end, he finds that despite his best efforts, he has not been able to achieve the targets given by his team leader. Simultaneously, he found that there are various cash credit limits sanctioned which are not being utilized.

In the light of above answer the following questions; Evaluate his actions in the light of ethical practices and mention which types of ethical issues are there at his branch.
Answer:
In the given case, the Branch Manager, in order to achieve the targets assigned to him adopted the following unethical practices:

Making debit entries in unutilised cash credit limits and transfer to current account of the borrowers.
Making credit transfer entries in cash credit limits not transacted since last 6 months and reversing the said entries on 1st April i.e. after the year end.
Temporarily engaging an attendant and showing payments made to him as water and cleaning charges.

In light of the above the ethical issues may be summarised as under:

Window dressing of the financials by inflating deposits and to suppress non-performing assets (NPAs), he makes ever-greening of NPAs in violation of RBI directives by manipulating books of account. This amounts to cooking of the balance sheet of the branch without real business. Hence these are issues of Ethics in Accounts and Finance.
To avoid compliance of laid down procedure to employ a casual worker, he shows the payments as water and cleaning charges in miscellaneous expenses. Hence this is an issue of Ethics in compliance.

Question 16.
Dilemma is a situation that request a choice between options that are seen equally unfavourable or mutually exclusive in the light of this statement. Elaborate the ethical dilemma. State the steps to resolve an ethical dilemma.
OR
You are the company secretary of Universal Development Ltd. the company often faces ethical dilemma. The board wants to circulate a guidance note for its manager to resolve ethical dilemma. Draft guidance note for the consideration and approval of the board.
Answer:
To,
The Board of Directors Universal Development Ltd.
Subject: RESOLVING ETHICAL DILEMMA
Dear Sir,
An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. They make individuals think about their obligations, duties or responsibilities. These dilemmas can be highly complex and difficult to resolve. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer; whereas, complex ethical dilemmas involve a decision between a right and another right choice. However, any dilemma needs to be resolved.

1. What are the options?
List the alternative courses of action available.

2. Consider the consequences
Think carefully about the range of positive and negative consequences associated with each of the different paths of action available.

Who/what will be helped by what is done?
Who/what will be hurt?
What kinds of benefits and harms are involved
What are their relative values?
What are the short-term and long-term implications?

3. Analyse the actions
Actions should be analysed in a different perspective i.e. viewing the action perse disregard the consequences, concentrating instead on the actions and looking for that option which seems problematic. How do the options measure up against moral principles like honesty, fairness, equality, and recognition of social and environmental vulnerability? In the case you are considering, is there a way to see one principle as more important than the others?

4. Make decision and act with commitment
Now, both parts of analysis should be brought together and a conscious and informed decision should be made Once the decision is made, act on the decision assuming responsibility for it.

5. Evaluate the system
Think about the circumstances which led to the dilemma with the intention of identifying and removing the conditions that allowed it to arise.

Sd/-
Mr. X
Company Secretary

Question 17.
Apex Pharmaceuticals Company Ltd. is a well reputed multinational company dealing in manufacturing and marketing of life saving drugs and formulations. Company’s Research and Development (R&D) Department is actively engaged in development and formulations of new drugs in general and life saving drugs in particular.

While experimenting with a chemical molecule, R&D department sees the possibility that a molecule may be developed into a drug that may prove very helpful in the treatment of a rare, painful and life threatening genetic disease, for which no effective drug is available at present in the market, but which afflicts to only one child in one million. However, development of the drug will require investment of huge sum of investors’ money of the company, despite the drug may not have saleability.

The R&D department of the company brings this to the notice of Mr. Ram, who is the CEO of the company. Taking the above facts into consideration, answer;
i. What dilemma Mr. Ram is facing?
ii. As a CEO, in place of Mr. Ram, how you would have acted in such i situation?
Answer:
i. Dilemma is a situation that requires a choice between options that are or seem equally unfavourable or mutually exclusive. Ethical dilemma involves the need to choose from among two or more morally acceptable courses of action, when one choice prevents selecting the other; or, the need to choose between equally unacceptable alternatives. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer; whereas complex ethical dilemmas involve a decision between a right and another right choice.

In the present case Mr. Ram is certainly in dilemma. He is required to choose between carrying out the development of a drug for a rare, painful and life threatening disease which afflict to only one in a million and the action of spending huge sum of shareholder’s money. As one can see, both are positive and ethically right choices. As a socially responsible person, he has to think in terms of eliminating a serious but at the same time he must be careful in dealing with shareholder’s money. Thus, it is a classic case of ethical dilemma.

ii. As CEO in place of Mr. Ram, I would have opted for the following course of action to resolve this ethical dilemma:

Defining the problem clearly.
Getting the collection of the statistical data across the globe, the previous history of such type of genetic disease and probable cause of its spreading in the coming time.
Searching and developing all possible options available.
Evaluating each available option carefully in term of pros and cons of each of them.
Taking the senior management (Board of Directors,- etc.) in confidence and keep them apprising of the situation.
Comparing positive and negative consequences of each option.
Choosing the best available action keeping resources and other prevailing situations of the company in mind.
Properly implementing the decision taken and keeping the follow-up of the same.

Question 18.
What are the causes of ethical dilemma and how will the senior management handle ethical dilemma?
Answer:
An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. They make individuals think about their obligations, duties or responsibilities. These dilemmas can be highly complex and difficult to resolve. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer; whereas, complex ethical dilemmas involve a decision between a right and another right choice. Ethical dilemmas are caused as there exist no sharp boundaries between ethical and non-ethical and, therefore, people often face ethical dilemmas wherein a clear cut choice becomes very difficult.

Steps to Resolving an Ethical Dilemma

Considering the options available
Considering Consequences
Analysing Actions
Decision making and commitment
Evaluating system

Question 19.
A code of ethics should reflect upon to management’s desire for compliance with the values rules and policies that support an ethical climate, Elucidate.
OR
Write short note on the following; Code of ethics.
Answer:
Code of ethics outlines a set of fundamental principles which could be used as the basis for operational requirements (things one must do), operational prohibitions (things one must not do). It is based on a set of core principles and values and is by no means designed for convenience.

Corporate code of ethics often contains six core values which include :

Trustworthiness
Respect
Responsibility
Fairness
Caring
Citizenship

Question 20.
Most of the companies begin the process of establishing organizational ethics programme by developing codes of conduct. What are the core values or principles contained in these codes of conduct. Briefly discuss the legal provisions in respect of codes of conduct in India and USA .
OR
Your company is listed in the Bombay Stock Exchange there is a proposal set-up its business in USA. You are required to prepare a brief note for the chairman explaining the code of conduct and business ethics in both the countries.
Answer:
The Chairman
XYZ Limited
Sub: Note on code of conduct and Business Ethics Dear Sir,
Code of conduct and Business Ethics India
1. Regulation 17(5)

The board of directors shall lay down a code of conduct for all members of board of directors and senior management of the listed entity.
The code of conduct shall suitably incorporate the duties of independent directors as laid down in the Companies Act, 2013.

2. Regulation 25(5)
An independent director shall be held liable,” only in respect of such acts of omission or commission by the listed entity which had occurred with his knowledge, attributable through processes of board of directors, and with his consent or connivance or where he had not acted diligently with respect to the provisions contained in these regulations.

3. Regulation 26(3)
All members of the board of directors and senior management personnel shall affirm compliance with the code of conduct of board of directors and senior management on an annual basis.

4. Regulation 16(d)
“Senior Management” shall mean officers/personnel of the listed entity who are members of its core management team excluding board of directors and normally this shall comprise all members of management one level below the executive directors, including all functional heads.

Code of conduct and Business Ethics United States of America:

In the United States of America, Section 406 of the Sarbanes Oxley Act, 2002 requires public companies to disclose whether they have codes of ethics, and also to disclose any waivers of those codes for certain members of senior management. Section 406(a) of the Regulation requires companies to disclose:
Whether they have a written code of ethics that applies to their principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Any waivers of the code of ethics for these individuals.
Any changes to the code of ethics.

Question 21.
Write short notes on the following; Ethical Consumerism.
Answer:
Ethical consumerism is the purchasing of products that do not harm or exploit the workers who help in producing a product, and to minimise their impact on the environment. Ethical consumer practices aim at the fulfilment of the objectives of socially responsible trade.

Supporting local industries that hire local artisans as designers, using cruelty-free cosmetics, shopping with reusable bags, drinking with a metal straw, or carrying a tumbler to reduce plastic waste-consumers now think about the ethical supply chain.

Thus, in the global context ethical consumerism deals with the ethical and moral aspects of product value chain from production, i.e. sourcing of materials, down to retailing of the products. The ethical consumer ideal implies that individual consumers can have a significant role, through their daily purchasing decisions, in promoting ethical corporate practices.

Question 22.
Elucidate the following; Code of Conduct.
Answer:
The Code of Conduct or the Code of Business Conduct contains standards of business conduct that must guide actions of the Board of Directors and Senior Management of the company. A code of conduct is a written document that may contain some inspiration statements but | usually specifies acceptable or unacceptable types of behavior. A code I of conduct is more akin to a regulatory set of rules and as such tends to I elicit less debate about specific actions.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:
Regulation 17(5) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 provides that the board shall lay down a code of conduct for all Board members and senior management of the Listed Entity.

The code of conduct shall be posted on the website of the Listed Entity. All Board members and senior management personnel shall affirm compliance with the code on an annual basis. The Annual Report of the Listed Entity shall contain a declaration to this effect signed by the CEO.

Companies Act, 2013:
The Code of Conduct of a company shall suitably incorporate the duties of j Independent Directors as laid down in the Section 149(8) of the Companies i Act, 2013 which provides that the company and the Independent Directors | shall abide by the provisions specified in Schedule IV.

Question 23.
Elucidate the following; Contents of a code of conduct.
OR
The code of conduct for each company summarises its philosophy of doing business. In the light of the above statement, enotnerate the contents of such code.
Answer:
The code of conduct may include the following:

Company Values
Avoidance of Conflict of Interests
Accurate and timely disclosure in reports and documents that the company files before Government agencies as well as in the company’s other communications
Compliance of applicable laws, rules and regulations including Insider Trading Regulations
Maintaining confidentiality of the company affairs
Standards of business conduct for the company’s customers, communities, suppliers, shareholders, competitors, employees
Prohibition for the Directors and senior management from taking corporate opportunities for themselves or their families
Review of the adequacy of the Code annually by the Board
No authority to waive off the Code should be given to anyone in any circumstances.

Question 24.
The code of conduct of a company summarizes its philosophy of doing business the exact details of this code area matter of discretion enumerate the principles of drafting the code of conduct as following in most of the companies.
OR
The code of conduct of each company summarises its philosophy of doing business the exact details of this code are a matter of discretion but there are some common principles in drafting of the code in most of the companies. What are these principles.
Answer:
Code of conduct, which is popularly known as Code of Business Conduct contains standards of business conduct that must guide actions of the Board and senior management of the company.

The Code of Conduct for each company summarises its philosophy of doing business. Although the exact details of this code are a matter of discretion, the following principles have been found to occur in most of the companies:

Use of company’s assets.
Avoidance of actions involving conflict of interests.
Avoidance of compromising on commercial relationship.
Avoidance of unlawful agreements.
Avoidance of offering or receiving monetary or other inducements.
Maintaining confidentiality.
Collection of information from legitimate sources only.
Safety at workplace.
Maintaining and Managing Records.
Free and Fair competition
Disciplinary actions against the erring person.

Question 25.
Ethics is the study of moral decisions that are made by us in the course of performance of our duties and its advantages.
OR
“Companies showing commitment to ethical conduct consistently outper- I form in comparison to those which do not show.” Comment.
OR
How do good business ethics practices help in attracting and retaining talent in the organization and achieve customer satisfaction.
OR
A commitment by corporate management of follow an ethical code of confers a variety a benefits. What are these benefits?
OR
You are the company secretary of Innovative Products Ltd. The board of directors desires to know the advantages of business ethics draft a note for consideration of the board of directors.
Answer:
To,
The Board of Directors Innovative Products Ltd.
Subject: RESOLVING ETHICAL DILEMMA
Dear Sir,
Business Ethics: Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment.

More and more companies have begun to recognize the relation between business ethics and financial performance. Companies displaying a “clear commitment to ethical conduct” consistently outperform those companies that do not display an ethical conduct. Adherence of business ethics results in the following benefits –

1. Attracting and retaining talent
The ethical climate matters a lot to the employees. A company that adheres to ethical values and dedicatedly takes care of its employees is rewarded with equally loyal and dedicated employees. Talented people like to offer their services on continuous basis in such organisations which adhere to ethical values.

2. Investor loyalty
Investors are concerned about ethics, social responsibility and reputation of the company in which they invest. Investors are becoming more and more aware that an ethical climate provides a foundation for efficiency, productivity and profits.

3. Customer satisfaction
Customer satisfaction is a vital factor of a successful business strategy. Repeated purchases/orders and an enduring relationship with mutual respect are essential for the success of the company. Ethical conduct towards customers builds a strong competitive position for the company.

4. Regulators
Regulators eye companies functioning ethically as responsible citizens, The regulator need not always monitor the functioning of the ethically sound company.

Further, any organisation that acts within the confines of business ethics not only earns profit but also gains reputation publicly.

Sd/-
Mr.X
Company Secretary
Innovative Products Ltd.

Question 26.
“In the globalised world, ethical assessments are based on relativism.” Comment on this statement in the light of business practices adopted by corporates in different parts of the world.
Answer:
In the globalised world, ethical assessments are based on relativism. Some elements or aspects of experience or culture are relative to, i.e., dependent on, other elements or aspects. There are no absolute truths in ethics and that what is morally right or wrong varies from person to person or from society to society. The term often refers to truth relativism, which is the doctrine that there is no absolute truth. The truth is always relative to some particular frame of reference, such as a society or a language or a culture. For example, killing animals for sport (like bull fighting) could be right in one culture and wrong in another.

Adjustments in the holiday calendar, dress code, formality in business dealings, promotional policies adopted by the companies, all vary across regions. Banks in Middle East do not charge interest on housing loans; they buy property and sell at higher prices to be paid in form of instalments. Similarly, Me Donald changes its ingredients in similar products to match worldwide cultural sensitivity.

Question 27.
Describe the following terms: “Indian Ethos”.
Answer:
Indian Ethos in Management refers to the values and practices that can contribute to service, leadership and management. According to Indian ethos the long-term solution lies in an inner discipline or education which brings a greater light, strength, energy and discrimination to our mind and heart and our higher aspirations and ultimately transforms our consciousness and life.

The mental, moral and psychological discipline described in these Indian spiritual traditions provides a practical system of “value education” which can lead to a deeper and more lasting moral transformation than the mostly intellectual and superficial approach to ethics taught in modern academic and management education. The present ethical debate in the corporate world is focused mostly on values like honesty, integrity, fairness or transparency. But the scope of ethics is not confined to these values only.

Thus the essence of good governance and leadership lies not in the paraphernalia of systems and procedures but on the quality of people who create, govern or operate the systems, which is knows as Sanathana Dharma (the eternal essence), and have been influenced by various strands of Indian philosophy. .

Question 28.
Compliance should be ethical and in spirit of good intention for compliance of laws. In view of this, describe the term ‘Compliance with Spirit of Law’.
Answer:
Meaning of compliance – In the context of corporate governance, compliance means adhering to the law. Ethics is the intent to observe the spirit of law. In other words, it is the expressed intent to do what is right. In the wake of recent corporate scandals, a program that strongly emphasizes both ethics and compliance is good business.

Meaning of ethical compliance – An ethical compliance management programme ensures that the mechanisms are in place to provide early warning of deviations from guidelines and regulations. It is essential to create or expand a culture of trust, enthusiasm, and integrity – critical attributes that can produce measurable results in terms of productivity, employee satisfaction, customer satisfaction, and, ultimately, brand equity.

Conclusion – It is true to say that ‘Compliance should be ethical and in spirit of good intention for compliance of laws’. The enterprise response to compliance mandates seems to be to create and implement whatever compliances are prescribed – to ‘get it done’. The goal is to simply meet the ‘letter of the law’. The effort is directed towards completing Compliance tasks as quickly as possible so all could return to ‘real’ business tasks. But ensuring compliances as per the “spirit of law” is more important.

Ethics and Business – Governance, Risk Management, Compliances and Ethics Important Questions

Ethics and Business – Governance, Risk Management, Compliances and Ethics Important Questions

Governance Risk Management Compliances and Ethics Notes