Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
2016
Note by Bala
Background:
In handout 2, we could learn the different provisions under various acts and the
relevant statutory authorities in India. In this handout, let us see some finer
points of corporate ethics and how great organizations are built around the
globe. This would be in terms of:
1. Ethics in work place
2. Ethical decision making
3. Ethical leadership and new thinking on the same
4. Concept of organizational trust and when this gets eroded &
5. Steps in building great organizations
6. More about CG & CSR including:
I.
Narayana Murthy committees mandatory recommendations
II.
Gist of survey report, 2013 conducted by TERI & NFCG
Note: This handout has to be read in conjunction with other material
given and the PPT slides.
As has been detailed in the class during the lectures, it would be good to
remember the difference between the following terms:
1. Profit making and profiteering
2. Good profits and bad profits
3. Responsibility and accountability
g.
h.
i.
j.
k.
l.
m.
n.
limits of their own emotions and cognitive abilities when those limits
threaten the development of the individual or the dynamism of the
team or group.
Trust men and they will be true to you; treat them greatly, and they will
show themselves great. Ralph Waldo Emerson wrote this about the
courage it takes to develop business relationships in his 1944 essay,
Prudence. He emphasized that such relationships can develop only after
one has carefully assessed the present times, persons, property, and
existing forms of organizations.
There are four different types of trust in general - Basic, simple, blind and
authentic.
The different characteristics of these four types of trust are captured in the
following matrix:
Basic
Simple
Blind
Authentic
Without thought Remains
Exposed
to Reflective
and
or reflection
unthinking
or violation
and honest
reflective
betrayal but not
open
to
possibility
Open ended
Is uncritical and Willfully
self- Open
to
unquestioning
deceptive
possibilities
of
betrayal and can
cope
with
situations
Indiscriminate
Does not even Refuses
to Focused
on
conceive
consider
relationships
possibility
of evidence
of rather
than
distrust
distrust
single
transactions and
outcomes
May be inherited Based
on Developed
Not naive or self
as innate
familiarity
through beliefs destructive
about
other
people
Enhanced
or Takes
security Maintained with Self confident
undermined by for granted
effort
experience with
others
Basis for ones Developed
Strong, intensive Self scrutinizes
personality and through beliefs and emotional
demeanour
about
other
people
Largely negative, Reaction
to Betrayal
is Demands
believes
bad betrayal is denial devastating
reasons for trust
things
will
happen
Relies on ones Cannot
be Results
in Chosen
and
own security
recovered once defensiveness
maintained with
Conditional
lost
Conditional
and narrowness
Unconditional
effort
Develops
through relations
with others
Involves choices
Matter
of
commitment and
integrity
Cannot be taken
for granted
Conditional
Basic trust is the ability and willingness to meet people without inordinate
suspicion, the ability to talk comfortably to and deal with strangers, and the
willingness to enter into intimate relationships. Basic trust provides the basis
for ones entire personality and demeanor toward the world.
Blind trust has been exposed to violation and betrayal but refuses to believe
it has occurred. Blind trust denies the possibility that anything could shake or
betray the trust.
Galford and Seibold Drapeau list several factors that hinder organizational
cultures of trust. These factors include:
Employees with personal agendas and needs for promotion, power, and
recognition that do not align with the organizations strategies.
Employees with volatile personalities that reflect a need for vengeance.
Employees who intentionally clutter communication channels.
Employees who are incompetent or perceive their co-workers or management
to be incompetent.
An organizational environment with a history of underperformance, complex
situations, numerous reorganizations, or management changes.
Organizations with inflexible or inconsistent organizational policies and
standards. Strong leadership can help organizations overcome these barriers
to organizational trust.
A leader who can inspire trust is invaluable for bringing together individuals and
holding them together until trust can form. John Gardner
Practice humane leadership. Ensure employees know you are aware of,
sensitive to, and understanding of their individual feelings, thoughts, and
experiences. Assure them promises will be kept, confidences maintained, and
sensitive information handled judiciously.
Be a paragon of trustworthiness. Be honest by saying what will be done, act
with integrity by doing what was said will be done, and be credible by
following through with commitments.
Be willing to acknowledge, accept responsibility for, and repair perceived
breaches or betrayals of trust with employees.
Hire Wisely
Norm Brodsky, a longtime Inc. columnist and founder of CitiStorage in New York
City, says that culture starts with hiring. "It takes almost a year to find out what
people who work for you are like," he explains. "We give every new hire 90 days
probation. I hire for attitude not for aptitude; we can train for the skills we need
them to have. Education is the key to sustainability of your culture while you are
growing."
Alexandria, Minnesota. "When people have hope for the future they will have
power in the present." To share your vision, Strahan suggests you lay out your
goals on a "dream map" that you post in public areas.
Focus on Consensus
"Ask yourself as CEO, "If I make this decision without employees, could this hurt
the culture more than it helps?'" says Traci Fenton, founder and CEO of WorldBlu
in Austin. "You have to decide what decision-making method is going to work
best for your company. I love working by consensus because I don't have all the
answers."
Share Responsibility
"We put a tremendous amount of responsibility on those we hire, and make sure
that that's what they're craving," says Darren Paul co-founder of New York Citybased Night Agency. "We try to talk people out of working for us. When they say
yes this is what I want, those are the ones who shine."
about Corporate
Responsibility
Governance
&
Corporate
Social
The very first step towards regulating corporate practices in India outside the
provisions of The Companies Act, 1956 is the establishment of Securities
Exchange Board of India (SEBI) in 1992. As most of us would be aware, SEBI
replaced the earlier Capital Controller of India (CCI). To recap the evolution of
corporate governance globally, let us revisit what we have seen in HO 1.
1. The Cadbury Committee, 1992 recognizes Corporate Governance as the
system by which companies are directed and controlled. This has
subsequently become the Anglo-American model.
2. According to the OECD (Organization for Economic Co-operation &
Development), Principles of Corporate Governance, first in 1998 & 2004,
"Corporate governance involves a set of relationships between a companys
management, its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives of the
3.
4.
5.
6.
7.
company are set, and the means of attaining those objectives and monitoring
performance are determined."
The Cadbury Report (UK, 1992) and the Principles of Corporate Governance
(OECD, 1998 and 2004) present general principles around which businesses
are expected to operate to assure proper governance
The Desirable Corporate Governance A Code was developed by the
Confederation of Indian Industries (CII) in 1998 based on the then existing
three global models for CG. To recap what we have seen in HO 1, there are
three different models for CG globally:
a. The Anglo-American model
b. The German model &
c. The Japanese model
This was followed by the first full-fledged CG recommendations for India by
the Kumar Mangalam Committee report. This was immediately adopted by
SEBI and the result was inclusion of Clause 49 in the listing agreement with
Stock Exchanges for all listed companies.
The Narayana Murthy committee report further amended the requirement of
CG by limited companies in India (2003). The recommendations were also
incorporated by SEBI and clause 49 was duly amended. The current clause 49
of the listing agreement includes both KMB committee and Narayana Murthy
committee recommendations. The revised clause came into effect from 2006
aimed at enhancing the responsibilities of the boards of directors and the
management in all limited companies towards corporate governance.
Details of Narayana Murthy committee terms of reference and
recommendations:
Terms of Reference
To review the performance of corporate governance; and
To determine the role of companies in responding to rumour and other price
sensitive information circulating in the market, in order to enhance the
transparency and integrity of the market.
Mandatory recommendations
Audit committees of publicly listed companies should be required to
review the following information mandatorily:
Financial statements and draft audit report, including quarterly / halfyearly financial information;
Management discussion and analysis of financial condition and results of
operations;
Reports relating to compliance with laws and to risk management;
Management letters / letters of internal control weaknesses issued by
statutory/ internal auditors; and
Records of related party transactions
All audit committee members should be financially literate and at least
one member should have accounting or related financial management
expertise.
Explanation 1 The term financially literate means the ability to read
and understand basic financial statements i.e. balance sheet, profit and
loss account, and statement of cash flows.
Explanation 2 A member will be considered to have accounting or related
financial management expertise if he or she possesses experience in
For all listed companies, there should be a certification by the CEO (either
the Executive
Chairman or the Managing Director) and the CFO (whole-time Finance
Director or other person discharging this function) which should state that,
to the best of their knowledge and belief:
o They have reviewed the balance sheet and profit and loss account
and all its schedules and notes on accounts, as well as the cash flow
statements and the Directors Report;
o These statements do not contain any material untrue statement or
omit any material fact nor do they contain statements that might be
misleading;
o These statements together present a true and fair view of the
company, and are in compliance with the existing accounting
standards and / or applicable laws / regulations;
o
They are responsible for establishing and maintaining internal
controls and have evaluated the effectiveness of internal control
systems of the company; and they have also disclosed to the
auditors and the Audit Committee, deficiencies in the design or
operation of internal controls, if any, and what they have done or
propose to do to rectify these;
o They have also disclosed to the auditors as well as the Audit
Committee, instances of significant fraud, if any, that involves
management or employees having a significant role in the
companys internal control systems; and
o They have indicated to the auditors, the Audit Committee and in the
notes on accounts, whether or not there were significant changes in
internal control and / or of accounting policies during the year.
Legal provisions must specifically exempt non-executive and independent
directors from criminal and civil liabilities under certain circumstances.
SEBI should recommend that such exemptions need to be specifically spelt
out for the relevant laws by the relevant departments of the Government
and independent regulators, as the case may be.