Inthis research paper the author try to Relate Business ethics with corporategovernance. Governance important for ethics; if a company wantsto be an ethical player then Governance guidelines must be followed. It perhaps an important partof ethics .Several challenges may be there while confrontingBusiness ethics and corporate governance.
Both mechanisms may contribute in very high level projects.Therelationship between Business ethics and corporate governance tried to explainwith the help of a simple example i.e. theoretical.
Various concepts regardingbusiness ethics and corporate governance have been discussed for the purpose.Thediscussion of relation between business ethics and corporate governance is verycontributing for business entities to understand the requirement standards forthe survival in the competitive global market. Business entities must followthe corporate governance attributes and must behave in an ethical manner. Inthis paper the author discussed the same.IntroductionItis a common perception that a business cannot be run ethically under currentconditions and so most businessmen would be essentially unethical. A majorreason for such misperception by the common man about ethics in business is thevagueness regarding the meaning of the word ethics itself.
If A steals Rs 1000from B, A is happy. But if B steals from A the same Rs 1000, A becomes unhappy.Therefore, ‘stealing’ is unethical .Let’s talking about the related concepti.e. Corporate Governance.
Corporate Governance comprises two words; corporate- An entity formulated to earn Profit, governance -The way that a corporate is controlled by the peoplewho run it. Actually Corporate Governance is the code of practice for the companies. The purpose of this Code of Practice is to ensure thatlisted companies implement corporategovernance that clarifies the respective roles of shareholders, the board ofdirectors and executive management more comprehensive than is required bylegislation.
Inthis research paper the author try to Relate Business ethics with corporategovernance. Governance important for ethics; if a company wantsto be an ethical player then Governance guidelines must be followed. It perhaps an important partof ethics .Several challenges may be there while confrontingBusiness ethics and corporate governance. But on the other hand both mechanisms may contribute in very high level projects.Therelationship between Business ethics and corporate governance tried to explainwith the help of conceptual method.
Various concepts regarding business ethicsand corporate governance have been discussed for the purpose.Thediscussion of relation between business ethics and corporate governance is verycontributing for business entities to understand the requirement standards forthe survival in the competitive global market. Business entities must followthe corporate governance attributes and must behave in an ethical manner. Inthis paper the author discussed the same.BusinessEthics Business ethics has different meanings fordifferent people, but generally it is to decide what is right or wrong in thebusiness. Actually, Business ethics as a self-conscious way of looking atbusiness activities. For example , If a chemical production unit A pays the Pollutioncontrol Inspector (B) a bribe to get a clearance without having done adequateeffluent treatment (action X), both A and B would be happy even after B takesthe place of A.
But what about the farmers nearby (C) whose crop yield goesdown owing to contaminated water? Here, A interchanging with C will make A,unhappy. Therefore, not treating the effluent properly is unethical. We thussee that ethics is applicable universally amongst all human beings. It cannotbe different between different societies and over long periods of time .Inshort, Ethics are universal. In the words of Crane & Matten (2004), “Thestudy of business situations, activities, and decisions where issues of rightand wrong are addressed”. BusinessEthics has some aspects such as: Ethical values; shared beliefs about right and wrong, good and bad,Govern the behaviour of aperson or a group.
Ethicalissues;problems or dilemmas whichpresent a conflict of values, Pay a ‘living wage’ or personal financial gain. Ethical choices;decisions about whichoption to take in response to a problem or dilemma,difficult decisions,because each option has its own drawbacks.BusinessEthics: In PracticeThereare many companies in the world, but not all do business ethically. EthisphereInstitute, an American think-tank, has come out with a list that shows that 145companies in countries like the US, Great Britain, Japan, Portugal and Indiastood out for setting high standards of employee behavior and conduct.
Let’stake a look amongst two companies from India that has been rated most ethicalby the institute. TataSteel Ltd. Nearly a century old, Tata Iron andSteel Company Ltd. (TISCO), more popularly known as Tata Steel, is one ofIndia’s oldest companies. Established in 1907 by Mr.
Jamshed ji Tata. It isAsia’s first and India’s largest integrated private sector steel company. Sinceits inception, the company has focused on the customer, operational excellence,employee welfare, organizational leadership, and social responsibilities and citizenship.
Consistent with its thrust on these dimensions, the company is one of the mostrespected companies in the country for its value-based practices, ethical anddynamic practices, and competitive performance. The name ‘Tata’ has always beensynonymous with trust.Various steps have been taken by the company withregard to ethical activities. One of the activities for cause in the frame ofautomotive industry.
The government has passed lawstargeting the reduction in tailpipe emissions. However, this only looks at caremissions in the ‘use’ phase, rather than those caused by manufacturing andscrapping vehicles. Use-phase emissions are to make the car lighter as lighterweight cars use less fuel. Materials such as aluminum, magnesium orcarbon-fibre reinforced plastics have high environmental costs in manufacturingand they are not as easy to recycle as steel. The savings made from using themare usually outweighed by the CO2 produced in the other life-cycle phases.
Various steps for the same cause have been takenby the industry. Tata Steel is now influencing the next generation oflegislation to move towards an LCA (Life Cycle Analysis ) approach rather thanjust looking at ‘tailpipe’ emissions.Second activity has been taken for Cause in theframe of the packaging industry. Many consumer brandsare keen to give an image of environmental responsibility by reducing packagingor its weight. LCA studies by Tata Steel have shown that focusing on weightreduction does not necessarily make for more sustainable packaging. Targetsjust on weight reduction could lead to the wrong decision, for example, to usealternative packaging materials that could take more energy to produce and arenot always completely recycled when they are disposed of. So in this regard step for cause have beentaken by Tata Steel and its industry partners used their LCA approach topersuade regulators to take a different view on steel used in packaging.
Thisresulted in national recycling targets taking a full life-cycle approach byusing actual recycling rate as the measure, rather than reducing the totalweight of cans.Third activity has been taken by the Tata Steelindustry for the Cause in the frame of the construction industry. Therehas been a revival in the use of timber frames for buildings such assupermarkets, warehouses and schools. Timber is perceived as being asustainable and ‘green’ resource. However, when Tata Steel looked at the LCA oftimber in terms of where it came from and how it was recycled, it found thatcarbon emissions were similar to a typical steel framed building. How thetimber is dealt with once the building as most timber from demolished buildingsis either land-filled or incinerated.So,the Tata steel industry has been taken some steps for the cause.
The results from the LCA study of buildingstructures are being used to provide facts to architects, engineers andlegislators regarding material choice.Tentative unethical behavior by Tata Steel Ltd.Thyssen and Tata Sign Deal to Forge Europe’s No. 2 Steel maker (updated on 20 September,2017)Joint venture may create synergies of up to 600 million Euros.
Companies flagpossible 4,000 job losses from combination. Unions, politicians concerned aboutjob cuts of planned merger .The headquarters of the new venture will shift tothe Netherlands, and the move could see 4,000 steel jobs cut from a combinedworkforce of 48,000.ThyssenKrupp AG and Tata Steel Ltd.
reached atentative deal to merge their European steel businesses in a bid to create theregion’s second-largest producer and tackle overcapacity in the industry. TheGerman and Indian companies have signed a memorandum of understanding for thejoint venture to be named Thyssen Krupp, Tata Steel which will be equally ownedby both parties. The transaction is expected to be finalized at the beginningof next year and will require the approval of the European Union. The twoforesee annual synergies of 400 million Euros ($480 million) to 600 millionEuros and the venture will be closer in size to Europe’s top producer, ArcelorMittal. Savings will be made in areas including capacity utilization, sales, administration,research and development. But, thecompanies flagged the possible loss of as many as 4,000 jobs, from a newlycombined workforce of about 48,000.
CorporateGovernance: An IntroductionIf we talking about another related concept withbusiness ethics i.e. Corporate Governance ;CorporateGovernance comprises two words; corporate – An entity formulated to earn Profit, governance -The way that a corporate is controlled by the peoplewho run it. Actually Corporate Governance is the code of practice for the companies. The purpose of this Code ofPractice is to ensure that listed companies implement corporate governance that clarifies the respectiveroles of shareholders, the board of directors and executive management morecomprehensive than is required by legislation.Thus, The way in which organizations are directed andcontrolled.
-Cadbury (1992) The processby which corporations are made responsive to the rights and wishes of stakeholders – Demb and Neuberger (1992), are referred toas corporate governance. CorporateGovernance: Principle BehindAgency Theory;One of the principle behind the concept of corporate governance is Agency Theory. Agency relationships arise whenever oneparty delegates decision-making authority or control over resources to another.This theory describes Principal-agent relationships where; Principal- Persondelegating authority, Agent- person to whom authority is delegated. TheAgency Problem says, Agents andprincipals may have different goals, Agents may pursue goals that are not inthe best interests of their principals, and Agents may take advantage of information asymmetries to maximizetheir interests at the expense of principals.
In agency problem there may besome hurdles for principal while confronting with Agent in the context ofagency problem such as: Shape the behavior of agents so that they act inaccordance with goals set by principals, Reduce information asymmetry betweenagents and principals , Developmechanisms for removing agents who do not act in accordance with goals andprincipals .The agency problem may be reduced if Principal tryto deal with these challenges through a series of governance mechanisms. Governancemechanism could be a tool for combating agency problem.
Governance mechanismsserve to limit the agency problem by aligning incentives between agents andprincipals and by monitoring and controlling agents.For example: The Board of Directorsunder the governance mechanism ; Electedby stockholders , Legally accountable, Monitors corporate strategy decisions,Authority to hire, fire, and compensate, Ensures accuracy of audited financialstatements, Inside directors, Outside directors etc .