Lecture-2
CORPORATE ETHICS
· The term 'corporate ethics' came into existence in 1970's
· Originally the term was used in Academy and Research
· With the coming of business scandals, the terms 'Ethics in business' became important
· Corporation adopted ethics codes, Ethics Office and Ethics Committee
· In normal sense, Ethics means everyday moral or ethical norm to business
· At many places, ethical norms are influenced by religious beliefs
· Legislations at National and International level have also been developed like Global compact for corporations. This compact largely focuses on human rights, labour standards and protection of environment
· Yet, there are many rolations of fixed standards of ethics by multinational corporations like use of child labour, paying low wages etc
Why there is a need of standardised ethical code?
· Ideally, the companies should adopt ethics voluntarily but, there is empirical evidence for firms doing financially well by doing social welfare activities and ethical practices
· Direct economic gain is the sole motive of many corporations these days. Therefore we need a practicable 'Code of Ethics' for corporation
· Noble laureate Milton friedman had once commented 'Business of Business is Business'
· Therefore, ignoring social welfare would be detrimental to the health of business
· At larger level, there is growing demand for accountability in corporations. Therefore there is a need of mutual threshold that would be acceptable to the society
· Beside this, there should be minimum mandated threshold and this minimum threshold can be expanded as and when needed
· India is signatory to global compact and millenium development goals
· There is a lack of code for promoting ethical business in India. Therefore, Indian need a code of ethics in Indian industry so that human rights and ethics can be protected, reopected and remedied Indian industry
· Beside UN organisation for economic cooperation and development and International Labour Organisation (I.C.O.) have also come out with guidelines to promote ethical business practices
· By adopting code of corporate ethics, Indian corporations can emerge as a role model for others to follow as this will bring Indian corporations to become in time with latest Global practices and Standards
· Even at business level, marketing of a product required the social acceptability of a product similarly, the organisation based on certain core values can protect against harassment or victims, fines and sanction
· A Sustainable business requires economic Sustainability, social Sustainability, ecological Sustainability, ethical and Human Rights aspect
· But we have emphasised only the first aspect
· At International level, these norms are being studied in the light of Corporate norms, behaviour, accountability and responsibility
· UN also promotes corporate ethics for bringing better life and transparency in business
· The pioneering Endeavour of corporate ethics in India has became important after liberalization, Privatization and globalization( LPG)
· The LPG has increased global competition for India. Therefore, Indian industry need value creation and sustainability for developing new model of management to pay attention to corporate needs
· The globalisation of Markets and increase in presence of multinational corporations has also promoted poor human rights records in India
· The whole process of business process outsourcing (BPO) is based on concept of cheap labour in developing countries, at exploitative low wages
· In this context, a welfare state like India needs two way strategy-
It needs to protect against human rights
It needs to fix corporate responsibility to respect human rights
· The international law requires state to protect its citizen against corporate human right abuses which are largely non-state Human Right abuses
· Therefore, state have duty under International Law to protect its people from abuses by private entities else, it might face serve legal and reputational consequences for the state itself at an international level
· In the world of extra territorial business, state needs:
Ø To protect its citizens from foreign companies in the matter of human right
Ø To make its own companies more compatible to International standards of ethics so that Indian companies might not set unethical standards for India at international level
Legal problems to hold multinational corporations accountable:
· The potential cost to insure compliance are very high
· The complexity of legal process and procedures create a lack of legal representation to those affected by human right violations
· The states agreement with trans-national corporations on jurisdiction also creates hurdles for filling of the cases
· The general limitations to avoid frivolous and veracious claims against trans-national corporations are exploited to save this corporations for genuine implementation of laws
· The state Agencies lack sufficient enforcement capacity against these multinational company Corporations
· Many a times, state itself allows human rights violation for having some economic gain from these Corporations
· The concept of limited liability of corporations also stop enforcement of full legal liability against the corporations
· The corporate structure are formed in such a way that only specific segment of corporation can be held accountable for a particular violation since, corporations are body corporate, they protect their directors and employees in the veil of body corporate
· A report by NASCOM, titled, 'Good Corporate Governance and Ethics', has made a certain recommendation for Ethical governance
· A detailed guidelines has been created for whistle blower policy and ombudsman concept in corporate sector
· A fair and transparent procurement process and transaction for vendor partners
· Provision of equal opportunity to all, appropriate grievance handling, enabling process, providing a congenial and safe work environment have been recommended
· Confidently of information, protecting company's assets, adherence to company policies and processes have been fixed as duties of employees
· Towards competitors sharing of best practices respecting intellectual property rights, ethical hiring having have been included
· Towards customers, ethical practices for contracts, clear accountability, compliance with legal issues, data security, privacy have been fixed
· In exceptional circumstances, Board of directors have been allowed to more move from traditional advisory to strategic oversight of company affairs