Ethical Corporate Governance

The quality of corporate governance is also determined by the manner in which top management, particularly the Board of Directors, allocates the financial resources of the company as between themselves and other interest groups such as employees, customers, government, etc. the basic qualities invariably expected in this regard are trust, honesty, integrity, transparency and compliance with the laws of the land. There is an increasing body of public opinion that would expect a business enterprise not only to be a mere economic unit but also to be a good corporate citizen.

Lack of transparency and fairness have been resorted to by adopting misgovernance to meet the ends of individual self goals against the cardinal principles of maximizing share holders value. An analysis of recent corporate frauds revealed that top bosses have taken unilateral decisions and later roped in managers, auditors and bankers, consequently found innocence on the part of the others holding the individual CEO solely responsible. Some of them not knowing the intricacies and consequences of decisions by the CEOs they have participated in the management process.. Thus the alleged accomplices who are not having mens rea have cooperated with the fraudsters during the discharge of their duties and responsibilities.

WHISTLE BLOWING: The concept of whistle blowing has not yet been popularized or encouraged in the corporate sector. The recommendations of the Expert Committee by the Government have not yet been considered. The informers have to be properly protected as they are forewarning the possibility of impending frauds and saving the stakeholders of their respective shares. Further the position of auditors, bankers and professional directors have to be made practically independent and lessons can be learnt from the rules and regulations of security exchange commission of USA.

ETHICS: All the stakeholders have faith in the ability of code of ethics, which if practiced in letter and spirit shall prevent corporate mishaps. Most unethical actsare perpetuated by the individual top bosses with the involvement of other managers and other agencies. More often than not some of the professional managers are dragged or imposed in the management process for decisions and few individuals are not party to such nefarious activities and discharged their duties in right earnestness.

Ethics and values visa-a-vis corporate governance

No discussion on public affairs will be complete without a reference to ethics and values. For this corporate governance must be based on a genuine respect for Business Ethics and Values. The ethics code is more based on individual beliefs and adoptions and such codes should be integrated with all the transactions. 

3 R’s - Three R’s of business ethics are Respect, Responsibility and Results

Respect comprises a positive attitude to people, organizational resources and environment; treating customers, coworkers, vendors with dignity and courtesy; using company supplies, equipment, time, money appropriately and efficiently; among others.

Responsibility - the process being responsible towards customers, coworkers, organization and CEO providing timely, high quality goods and services and working collaboratively;

Results are based on assessing means and ends processed from the planned action, careful execution which are legally and morally obtained

Organizational Culture: The organizational culture may be evolutional and or envisioned in the management process without making it percolate down from top. Organization ethical culture or, more specifically, the ethical environment within the firm created through management practices and espoused values may be the most important deterrent to unethical behavior; ethically depends on the ability to recognize that ethical issues exist, to see and respond ethically may be related rather to attributes of organizational culture. Corporate governance means theory or model of society which is likely to be sufficient for understanding little consensus governance for the resolution of group or individual problems within the firm. No leadership style can solve alone the entire situation in which emphasis carrying out the organizational mission through ethically corrects work.

The model codes and mandatory codes as applicable to corporate sector is peripherally honored only in letter and thus there is inevitable need to resort to legal diligence including governance audit to prevent corporate frauds.

The author is a researcher in Corporate Governance, email vgopinath2@yahoo.com

Disclaimer: Views expressed are out of objective analysis and not related to any individuals or corporate bodies.

By: Dr.Vedula Gopinath,