Chapter 1-6: Introduction to Governance and Management PDF

***CHAPTER !: Introduction to Governance and Management*** **What is Goverance and Management?** - The terms **\'governance\'** and **\'management\'** are often used interchangeably, but there are important differences between the two. - **Governance** is the process of making and enf...

***CHAPTER !: Introduction to Governance and Management*** **What is Goverance and Management?** - The terms **\'governance\'** and **\'management\'** are often used interchangeably, but there are important differences between the two. - **Governance** is the process of making and enforcing rules, regulations and policies. Management is the application of those rules, regulations and policies. **Governance** involves setting clear objectives, policies and procedures for an organization, and ensuring that they are adhered to. -It also involves ensuring that all organization members are aware of their responsibilities and are held accountable for their actions. This includes ensuring that decisions are taken in the organization\'s and its stakeholders\' best interests. **Management** involves the day-to-day operations of the organization, such as planning and budgeting, setting goals and objectives, organizing resources and personnel, and overseeing operations. Management\'s responsibility is to ensure that the organization\'s objectives are achieved. **GOVERNANCE & MANAGEMENT** - In essence, governance is the process of setting the rules and regulations, while management is the process of implementing them. - **Governance** ensures that the organization is managed in a way that aligns with its objectives and values. - In contrast, **management** ensures that the organization is run efficiently and cost-effectively. INTRODUCTION - **Ethics** is the branch of philosophy that studies the values and behaviour of a person. - **Value study of a person** is used to determine his positive and negative attitude towards life. - **Ethics** studies concepts like good and evil, responsibility and right and wrong. **3 CATEGORIES OF ETHICS**: normative ethics, descriptive ethics and metaethics. **Metaethics** focuses on the issues of universal truths, ethical judgements and the meaning of ethical terms. **Normative ethics** can be used to regulate the right and wrong behaviour of individuals. **Descriptive ethics**, also called applied ethics, is used to consider controversial issues, such as abortion, animal rights, capital punishment and nuclear war. **ETHICS AND BUSINESS ETHICS** \- defines the standards that bear on right and wrong issues of society. Business ethics is thus a set of professional standards, which emphasize principles of honesty and duty to the business and the general public. The other significant principles included in business ethics are: - Fairness - Integrity - Commitment to agreements - Broad-mindedness - Considerateness - Importance given to human esteem and self-respect - Responsible citizenship - Attempt to excel - Accountability These principles, if strictly pursued, lead to a decent business environment and create healthy relationships in the organization. However, deviations from these principles can occur due to the following factors: - Ignorance and indifference to issues - Selfishness - Imperfect reasoning **CONCEPTS OF BUSINESS** Just like human beings function with limbs, corporations or companies function through their businesses. The term business can be broken as **'busy-ness'**, meaning an activity that keeps an individual busy. In the economic sense, the creation of utility is called business while in the commercial sense, the activities concerned with the purchase and sale of goods and services are called business. A **business** includes that **part of production**, which is equally exchanged and results in mutual benefits to the parties who exchanged goods in the transaction. **BUSINESS DEFINITIONS** **According to Peterson and Ploughman** - **Business** may be defined as an activity in which different persons exchange something of value, whether goods or services for mutual gain or profit. **According to James Stephenson** - **Business** is the sum total of those processes which are engaged in the removal of hindrances of persons (trade), places (transport and insurance) and time (warehousing) in the exchange (banking) of commodities. **According to F.C. Hooper** - **Business** means the whole complex field of commerce and industry, the basic industries, processing and manufacturing industries and the network of ancillary services, distribution, banking, insurance, transport, and so on, which serve and interpenetrate the world of business as a whole. **According to Section 2(13) of the Indian Income Tax Act, 1961** - **Business** means, 'any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture'. **NATURE OF BUSINESS** **Business** is a wide term. It includes all occupations in which people are busy in earning income either by production or purchase, sale and exchange of goods and services to satisfy the needs of people and to earn profit. The following points may be discussed to reveal the true nature of a business: - **Economic activity**: Business is an essential economic activity. The profit motive is the key element that inspires a businessman to work efficiently. - **Human activity**: Business is a human activity. In this sense, business is considered to be an economic activity of human beings only. A business is by the people and for the people. - **Social process**: Business is a social process. All the individuals involved in a business, such as owners, customers and employees, are an integral part of society. The business has to fulfil its social responsibilities. - **System**: A system is a combination of things or parts forming a unitary whole. It is an established arrangement of components for the attainment of objectives. Similarly, business is a system consisting of various subsystems that are operated in a balanced and coordinated way. **TYPES OF BUSINESS ACTIVITIES** - All human activities concerned with earning money are included under the term business. Cultivation by a farmer, teaching by a teacher and treatment taken by a patient from a doctor are also treated as business activities. There are different types of business activities, which may be classified as follows: **INDUSTRY** \- An industry includes the activities connected with the production and processing of goods. Manufacturing enterprises are engaged in the production of goods. These kinds of industries can be classified as follows: - **Analytical Enterprises** \- An oil refinery that separates crude oil into petroleum, kerosene and diesel oil is an analytical concern - **Sythetic Enterprises** \- An enterprise which combines several materials to produce one product is a synthetic enterprise. All soap mills and cement factories are synthetic enterprises. - **Assembling Enterprises** \- All those plants engaged in the production of products, such as radios, scooters and television sets are assembling enterprises. A few enterprises involved in mining are involved in mineral resource production, for example, iron ore, coal, gold and silver. **COMMERCE** \- It is the total of all those activities that are engaged in the removal of hindrances of persons or trade, places or transportation, risk of loss or insurance and time, such as warehousing, banking and financing of commodities. Commerce can be divided into two categories: **trade and aid to trade.** **TRADE** can be further divided into two categories, which are as follows: - \- includes the trade that is done with the country, such as wholesale and retail trade. - \- includes the trade that is done with various countries, such as export and import. **Aid to trade** can be divided into transport, banking and insurance **TYPES OF BUSINESS ACTIVITIES** **CHARACTERISTICS OF BUSINESS** Business means the creation of utilities. There are many features of business activities and, thus, the business. The essential characteristics of business may be summarized as follows: - **Exchange or sale**: A business includes the sale, purchase and exchange of goods and services. - **Creation of utilities:** A business creates transfers and utilities of goods by making them available in proper form at the appropriate time and place. - **Social institution:** A business deals with the people of society. All the persons engaged in the business, such as owners, customers, employees and other professionals, belong to the society. A business has to fulfil its social responsibilities towards each part of the community and has to follow business ethics as well. - **Profit motive**: Business activities are carried out to make a profit. A nonprofitable business cannot continue to exist for long. Profits are essential for the growth of a business. - **Risk and uncertainty**: There are two types of risks in a business. The first type of risk is floods and thefts. The second type of risk is loss due to a fall in demand and labour trouble. - - - **Customer satisfaction:** A business always tries to satisfy its customers with better quality and reasonable prices. **BUSINESS GOALS** The term 'goals' denotes what an organization expects to achieve in the future. - A **goal** describes clearly the activities and tasks to be completed by an individual and a department or an organization. - A business has several goals, which describe a desired future state for which efforts are directed. The goals are like a measure to evaluate the success of the business. - It helps the management to keep the organization and the individuals working for it, away from distractive activities which come in the way of the success of an organization. The characteristics of **business goals** are as follows: - derived from mission statements. - task-oriented and, therefore, they must state what is to be achieved by an organization. - short-term in nature. - challenging as they challenge the individuals who are responsible for their attainment. - must specify the conditions that are necessary for the attainment of organizational goals. OBJECTIVES OF BUSINESS **Objectives of Business** Objectives are needed in every field where performance and results affect the survival and prosperity of a business. Success in a business cannot be achieved without the proper selection of objectives. The structure, direction and management of a business closely depend upon its objectives. Some of the important objectives are as follows: - ***Economic Objectives*** Profit earning is the most important objective of a business. Profits must be earned by a business to provide for its survival, coverage of risks, growth and expansion. It is a necessary motivating force and it is in terms of profits that the efficiency of a business is measured. All business activities are performed to achieve the following economic objectives: - - - - - - ***Social Objectives*** The purpose of a business is not only to earn profits but also to discharge responsibilities towards society as well as employees. These objectives are as follows: - ***Service to society***: A business must serve the society by considering the following factors: - - ***Service to employees:*** A business must serve its employees by considering the following features: - ***Human Objectives*** The production process consists not only of materials, machines and land but also of the workers working for the organization. Different human objectives can be listed as below: - - - - - - - - ***National Objectives*** Apart from the other objectives, there are some national objectives as well which are as follows: - - - - - **Role of Objectives** Business objectives play a very significant role in strategic management. They help the management in the following ways: - - - - - **Responsibilities of a Business towards Various Interest Groups** Interest groups consist of the various persons connected with a business, such as consumers, shareholders and the community. The responsibilities of a business towards various interest groups are as follows: - ***Responsibilities towards consumers:*** A consumer is a person who determines what goods shall be produced and whether they should be sold in the market or not. Consumers not only determine the income of the business but also affect the success and survival of the business. Therefore, a business has some basic responsibilities towards the consumers and these are as follows: - - - - - - - **Responsibilities towards shareholders**: A business\'s primary responsibility is to ensure investment safety and higher returns. Owners, including proprietors, partners, and shareholders, have an interest in participation and regular dividends. Management must improve communication with shareholders by providing information through newsletters, annual reports, or holding general meetings at appropriate times and locations for maximum participation. - ***Responsibilities towards the community:*** The management has the responsibility of informing the community about the organizational policies, activities and contributions towards the betterment of society. The various other responsibilities towards the community are as follows: - - - - ***Business Ethics*** Business ethics has different meanings for different people, but generally, it is to decide what is right or wrong in the business. According to Wallace and Pekel, 'attention to business ethics is necessary during times of fundamental change as the moral values that were not taken seriously are strongly questioned at that time'. Business ethics enables the leaders and employees to act at the time of crises and confusion in the business. Therefore, business ethics helps to deal with business ethical issues that are vague. **CHAPTER 2: ETHICAL CONCEPTS** **Ethics** is the branch of philosophy that is used to evaluate human actions. Some basic ethical concepts in business are as follows: **Ethical subjectivism**: This concept emphasizes that the moral choice of the individual decides the rightness or wrongness of his behavior. **Ethical relativism**: According to this concept, no principle is universally applicable, so it would be inaccurate to measure the behavior of one society with another\'s principles or standards. Relativism overlooks the fact that there may be enough evidence to believe that an ethical practice is based on false belief, illogical reasoning, and so on. **Consequentialism**: Consequentialism is based on two ideas: the concept of value and the maximization of value. If, for example, honesty is considered a value, an act is considered ethical only if it maximizes this value. An act, which does not maximize the said value, is not ethically permissible. **Deontological ethics**: This concept stresses that ethical values can be developed from the concepts of reason as all rational individuals possess the ability to reason. We may, for example, end up causing pain unknowingly while trying to create happiness. Therefore, the ethical value of an action cannot be determined by its consequences. Instead, it is the motive that lies behind the particular action. **Ethics of virtue**: This concept emphasizes those traits that give the individual a sense of satisfaction from the ethical point of view. Virtuous acts like courage, honesty, tolerance and generosity are done as a way of living and not by chance. **Whistle-blowing**: Whistle-blowing refers to the attempt of an employee to disclose what he or she believes to be illegal behavior in or by the organization. From one point of view, this seems to deceive the principle of honesty in business ethics, as it is taken for granted that the employees of an organization need to be loyal to its workings. However, when loyalty to one\'s organization in particular is perceived to be harming one\'s general loyalty to mankind, the act of whistle-blowing is justified. Failure on the part of the management of the organization to fulfil its social obligations calls for whistle-blowing. It is the responsibility of the whistle-blower to be careful about revealing the organization\'s secrets and to consider the harm it may cause to his colleagues and shareholders. The steps that should be taken into consideration by the whistle-blower are: Ascertain the gravity of the situation before whistle-blowing Scrutinize the purpose Authenticate and keep a record of the concerned information Determine the type of offence and to whom it should be reported Assert your claim in a proper way Stick to the facts Determine if the whistle-blowing needs to be external or internal Decide it the whistle-blowing should be anonymous or otherwise Make sure to follow proper rules in reporting the offence Consult a lawyer (if required) Anticipate and document vengeance **Ethical dilemmas in business**: An organization\'s ethical problems indicate a conflict between its economic and social performance. This results in a dilemma for managers. Since people handle business, it is a crucial requirement to check and ascertain ethical behavior at a personal level. This will confirm ethically correct responses from the organization to the mutual actions of individuals. **ETHICAL MODELS** can be used to define ethical situations and manage ethical dilemmas that may occur in organizations. The Golden Rule Model and The Right-driven or Kantian model are two operational models that have emerged from the work of philosopher Immanuel Kant. **THE GOLDEN RULE MODEL** The model, originating from the New Testament and known as the Golden Rule, advises treating others as one would like to be treated. This principle, central to many cultures and religions, forms the basis of modern human rights and is also called the ethics of reciprocity. it encourages empathy by considering others perspectives but must be applied with awareness of context and the specific situation. It should not be mistaken for revenge or punitive justice. The rule allows freedom of action as long as it does not harm others. However, applying it rigidly can lead to unethical outcomes and potential harassment due to differing ideologies and cultural backgrounds. **THE KANTIAN MODEL** This model operates on the principle that ethical actions minimize the collective violation of fundamental rights among stakeholders, aiding in internal audits and managerial decisions. Kant\'s philosophy diverges from the idea of intrinsic goodness and instead focuses on \"goodwill,\* which is acting out of a sense of duty rather than personal traits like intelligence or courage. He argued that true moral actions require freedom and are not predetermined. Kant distinguished between external duties, which involve following orders from others, and internal, self-imposed duties. He believed motivation comes from internal values rather than external factors. According to Kant, while people may become indifferent to others\' suffering due to personal struggles, they can still act morally through patience and endurance. Kant identified two types of imperatives: a hypothetical imperatives, which are conditional and goal-oriented, categorical imperatives, which are unconditional and universally binding, such as the rule to always tell the truth. Kant also introduced maxims, which are subjective rules that guide actions and help an individual to act according to the relevant description. There is sufficient generality in the description. All actions have maxims like: Never lie to your colleagues. Never act in a manner that would make your family or organization ashamed of o Always work hard to be the best performer. It\'s acceptable to cheat if the pattern demands it. **VIRTUE ETHICS - AN ALTERNATIVE MODEL OF ETHICS** Traditional ethical models like utilitarianism and Kantian ethics focus mainly on the actions themselves rather than the character of the person performing them. Utilitarianism judges actions by their outcomes on happiness, while Kantian ethics emphasizes acting according to rules that could be universal laws. Critics argue that ethics should also consider the character of the person and their virtues or vices. An approach that focuses on virtue evaluates a person\'s moral character and habitual behavior, suggesting that true morality is reflected in being a virtuous person, like being honest. Honesty as a virtue means consistently telling the truth out of respect for the truth itself, not for personal gain or out of fear. Unlike natural traits, virtues like honesty are acquired and require effort. Aristotle saw moral virtues as habits that balance extremes, aligning actions with reason. For example, courage is the virtue between fear and recklessness. St.Thomas Aquinas added theological virtues like faith to Aristotle\'s list. Critics argue that virtue ethics often lacks practical guidance for specific moral decisions and dilemmas. **CHAPTER 3: ETHICAL VALUES** Ethical values and actions are central to ethical societies, guiding individuals and groups toward improving life for themselves and future generations. These actions, also known as categorical imperative actions, reflect a commitment to creating a better world. The world is shaped by actions, and future outcomes depend on these actions. Ethical actions are carried out by various groups-social, national, or personal--- with a spirit of service and commitment to the common good. The dimensions of ethical actions can be divided into two major categories. These categories are: Community service: Community service aims at helping the organizations and the people in the community. **Social issues support**: Social issues support aims at giving emotional and physical support to organizations and the people in society. Social issues support can come in different forms. These forms are: Emotional support Informational support Instrumental support Personal feedback Sharing view points **Types of Ethical Actions** Ethical actions can be of two types. These types are: **DESTRUCTIVE ACTIONS** Destructive actions are those that can hurt both the person doing them and others. It can be challenging to figure out which actions are harmful because the same action might be damaging in one situation but helpful in another. Buddhist ethics suggests that to identify destructive actions, we should look at the motivation behind them and the state of mind of the person performing them. Specifically, destructive actions often come from negative feelings like passion, anger, and ignorance about their effects. According to Buddhist ethics, many mental, physical, and verbal actions can be harmful if driven by these negative motivations. The ten destructive actions determined by Buddhist ethics are: Taking the life of others Taking something from others that has not been given to them Lying Talking and speaking insensitively Using cruel language Using language consisting of idle words Thinking thoughts of meanness Thinking jealous thoughts Distorted and aggressive thinking Behaving like a moderator **CONSTRUCTIVE ACTIONS** Constructive actions are also considered as desire-prompted duties. Constructive actions are always done by people who consider it their responsibility or duty to perform these actions. These actions can be performed either daily or at some special time. These actions always provide a purposeful result and self-determined. Constructive actions can be of three different types. These types are: **Obligatory actions**: These actions can be performed by any type of person in the society. These actions do not affect any special category of people. Every man, society and the universe would be affected by these actions. Prohibited actions: Prohibited actions do not prove to be of worth to the people. The nonperformance of prohibited actions is also obligatory. **Optional action**: Optional actions are also called hypothetical imperative actions. These actions prove to be beneficial to human beings and are also performed by people to secure their benefits. Therefore, ethical actions are responsible for performing the obligatory and optional actions successfully and avoiding the prohibited actions. The different characteristics of ethical actions are: Ethical actions are not only activities to serve others but also the inner temperament of the mind. Ethical actions give importance to helping others. Ethical actions are not the instrumental value but the intrinsic value. Ethical actions are performed for prosperity, success and sound decisions. Ethical actions are used to avoid prohibited constructive actions and to promote obligatory and optional actions. Ethical actions are performed as duties or responsibilities of individuals. **KARMA YOGA** Karma Yoga, also known as Buddhi Yoga or the discipline of actions, is one of the four main types of yoga. It focuses on performing ethical actions without worrying about the results or rewards. By acting ethically and unselfishly, individuals can achieve Moksha (liberation) and divine blessings. This practice promotes performing duties without attachment to outcomes and is a key part of Indian Hindu culture. People who follow Karma Yoga can handle any situation in life and explain their ethical actions to others. By adhering to Karma Yoga principles, they lead a moral and fulfilling life. These principles satisfy both logical and moral aspects of human awareness. People following the principles of karma yoga understand that: They have to perform only ethical actions. They should not be concerned with the results of their ethical actions. They should not perform ethical actions to get a predefined result. These principles do not force people to sit **MORALITY** To carry out ethical actions successfully, people need self-discipline. Morality involves distinguishing right from wrong. Those who steadfastly resist temptation and avoid wrongdoing lead a morally good life. Ethical actions should be performed as a community standard rather than as an individual responsibility. Individuals in a society can perform three types of ethical actions. These actions are: **Morality**: Morality actions are performed to secure the future of others. **Religion**: Religion is the collection of ethical actions that can affect a group or society. **Civil law**: Civil law actions are a collection of ethical actions that can be used to change or control the behavior of an individual in society. Morality is the set of ideas and attitudes that cultures or groups use to gaide or influence individual behavior. Different societies have their own views on what is considered moral or ethical. Morality can apply broadly to how people interact within their own communities or across different ones. Some societies impose strict behavioral rules, while others allow more personal freedom. Morality also includes the personal ethical standards that individuals create for themselves. The terms **\"morality**\" and \"**ethics**\" are closely related: morality refers to the principles and standards of behavior, while ethics is the formal study of these principles. Essentially, morality is about putting ethical principles into practice. The mind controls an individual\'s thoughts and feelings, and all activities and existence are driven by the mind. A person\'s emotions and opinions are shaped by their mental state: a calm and positive mind leads to good feelings, while a troubled mind results in negative emotions. Professor Gardner suggests five types of minds. The ethical mind is one of them. The others are disciplined mind, synthesizing mind, creating mind and respectful mind. The ethical mind of a person is affected by the nearby surroundings and culture. Ethical minds can be of two types. These are: **Subjective mind**: The subjective mind faces motivation from the different objects of the world. This type of human mind is also called the outer mind. **Objective mind**: This type of mind reacts to the encouragement received from the outside world. This type of human mind is also called the inner mind. The objective mind (rational thinking) and the subjective mind (emotional and personal desires) can be out of sync due to egoistic desires. When these two aspects of the mind are far apart, it leads to confusion and insecurity. This distance can cause nervousness and a loss of confidence. If emotions and mental power are not aligned, a person might make poor decisions and act irrationally. To improve clarity and confidence, it\'s important to reduce the gap between the subjective and objective minds through mental training. This helps maintain mental energy and patience, supporting a more balanced and ethical life. Training of the mind can be accomplished by two methods. These methods are: **Art of Disengagement**: This involves developing a focused and concentrated mind free from distractions and fragmented feelings. Individuals should identify their roles and keep their subjective and objective minds aligned to perform their roles effectively. An integrated mind helps maintain awareness and prevents crossing boundaries. **Self-Denial**: This method involves rejecting external distractions to maintain focus and achieve goals. Examples include a student\'s concentration before an exam or a dancer\'s focus before a performance. **SELF-DEVELOPMENT** **Self-development** means taking personal responsibility to grow and improve oneself. It involves assessing where you are, reflecting on your strengths and weaknesses, and taking action to enhance your skills and knowledge. This ongoing process helps you stay updated and prepared to handle new challenges in life. Self-development also determines one\'s future career direction. Some of the characteristics of self-development are: The person undergoing self-development does not depend on the support of the outside world. Such a type of person becomes self-sufficient. Self-development in individuals makes them independent. Self-development brings in the feature of objectivity in individuals. Such a feature gives individuals an impersonal attitude. A self-developed person looks happy in life. His inner nature looks full of cheer and joy. He will not be depressed and miserable. A self-developed person becomes dynamic, active and brighter in life. A self-developed person is more lovable. **SELF-DEVELOPMENT METHODS** Individuals can use different methods for self-development. Some of the methods are: **PATH OF ACTION** The path of action is also called karma yoga. Karma Yoga, one of the four pillars of yoga, teaches that people should focus on performing their duties without worrying about the results. This Indian philosophy emphasizes acting ethically and selflessly, focusing on the task itself rather than the outcome. **PATH OF KNOWLEDGE** The path of knowledge means to move towards acquiring knowledge. The path of knowledge also eliminates the distance between the subjective mind and the objective mind. Thus, the path of knowledge makes a man confident and self-developed. **PATH OF DISCRIMINATION** The path of discrimination assists a person to identify his inner faults. The person has to transform the inner motives and mental attitudes to train the mind. The path of discrimination forces individuals to control the emotions of attachment, fear and anger. **PATH OF SELF-CONTROL** Self-control is an internal characteristic of individuals. Self-control can be of five types. These are: Non-injury Truthfulness Non-stealing Celibacy Non-acceptance of gifts **PATH OF MIND-CONTROL** The path of mind control, also known as the path of yoga, involves concentration and meditation. Concentration means focusing intently on a task, often aided by devotion to God. Meditation is a relaxed state where the mind becomes more focused, helping to achieve better concentration. Yoga helps maintain a calm and focused mind, facilitating effective concentration. **CHAPTER 4: BUSINESS ETHICS** Business involves activities where people work to make money by buying and selling goods. For a business to thrive, ethics and values are crucial. **Business ethics** are standards that help determine what is right or wrong in business practices. Key principles include fairness, integrity, honoring agreements, and respect for people. **Business ethics** are especially important during times of change or crisis. They guide leaders and employees in making ethical decisions and handling complex situations. Essentially, business ethics help navigate unclear issues and maintain moral standards in a business environment. **UNETHICAL PROBLEMS IN A BUSINESS** **MANAGERIAL MISBEHAVIOR** Managerial misbehavior includes illegal and unethical practices involved in the management of an organization. **MORAL MAZES** It is a part of business ethics which deals with the \'moral mazes of management\'. It addresses issues like conflicts of interest, contract misconduct, and misuse of resources. Since the 1960s social responsibility movement, it has evolved into a management discipline focused on using business resources to tackle social problems like poverty, crime, and illiteracy. The field of human resources emerged to improve relationships within organizations as commerce became more complex. Simplifying trade within organizations fosters better partnerships. Consequently, business ethics developed to guide these processes, governed by the organization\'s ethical code and conduct standards. **MYTHS REGARDING BUSINESS ETHICS** Business ethics maintains moral values and ensures that the behavior of employees is aligned with these values Still, there are certain myths regarding business ethics, which are as follows: Business ethics is a matter of belief rather than management. Organizations believe that their employees are ethical so they are not required to pay attention to business ethics. According to Wallace, ethical conflicts arise in the following situations: When there exist significant value conflicts among differing interests of employees. When other alternatives are equally acceptable. When there are significant consequences on the \'stakeholders\' of an organization. When there exist significant value conflicts among differing interests of employees. According to Kirrane, people consider honesty and courtesy as the only business ethics. But when complex ethical problems come into play, most people realize that it is difficult to apply ethical principles in real-life situations. Business ethics is the new trend. Many think business ethics is a recent trend, but it is actually an old concept that has only gained significant attention recently. Business ethics is unmanageable by an organization. ethics isnt directly managed by an organization; instead, team leaders\' behavior, organizational goals (like profit and cost management), and laws significantly influence ethical standards. While some believe ethics can\'t be managed, these factors play a crucial role in shaping ethical behavior and reducing business harm. Business ethics is a social responsibility. Some view ethics as merely a social responsibility with little practical application. However, Madsen and Shafritz define business ethics as applying ethical corporate world, helping to clarity business responsiblties and address Business ethics is not needed if the organization has no legal problems. Some believe unethical behavior can remain within legal limits, such as constant complaining or withholding information. However, unethical actions often precede legal violations and can signal deeper issues. Business ethics has little practical significance in a business. Business ethics helps identify and prioritize values to guide employee behavior, and establishes policies and procedures to ensure these values are upheld. **BENEFITS OF BUSINESS ETHICS** The various benefits of managing ethics in a business are as follows: Business ethics helps in improving society by establishing government agencies, unions, laws and regulations in the society make appropriate decisions. Business ethics ensures employees align their behavior with the values preferred by top management. It helps bridge gaps between actual employee actions and organizational values, fostering strong alignment. Ethical values promote teamwork and enhance employee efficiency. Ethics supports employee growth by boosting confidence in handling various situations. According to Bennett\'s article, \"Unethical Behaviour, Stress Appear Linked,\" ethical. Ethics have become intertwined with legal requirements. Many lawsuits now involve personnel issues and organizational impacts on investors and customers. Government laws reflect major ethical principles, and an increased focus on ethics by the government ensures robust workplace policies. For instance, employees may face legal consequences for breaching contract terms. Business ethics helps prevent criminal acts of omission and reduces fines by addressing and correcting ethical violations. By establishing clear ethical guidelines, organizations can minimize penalties. For example, knowingly breaching a contract is considered a criminal act, and having robust ethical policies can help avoid such penalties. Business ethics aids in managing values related to quality, strategic, and diversity management. Ethical programs document these values, create policies and procedures, and train employees accordingly. These programs ensure effective management of quality aspects like reliability and performance, as well as strategic goals such as cost reduction and market expansion. Business ethics strengthens an organization\'s public image and boosts market goodwill. By valuing customers and adhering to ethical principles, organizations enhance their reputation and establish themselves as successful and socially responsible. Business ethics reinforces organizational culture by enhancing relationships with customers and ensuring consistent product standards and quality. Business ethics makes sure that the right activities are performed in an organization. **CHAPTER 5: ETHICAL CORPORATE BEHAVIOR** **INTRODUCTION** To understand the term \'organizational ethics\', one has to first try and understand the two terms \'organization\' and \'ethics\', An organization is a collection of individuals with a common mission while \'ethics\' may be described as an attempt or wrong our is individuals to the vital analysis of situations. Organizational design follows a set of core principles or concepts in an attempt to develop ethical corporate behaviour. Organizational ethics involves understanding and managing the moral and rational aspects of an organization. It\'s different from management ethics, which focuses on the ethical decisions and actions of individual managers. Instead, organizational ethics looks at the overall activities and impact of the organization. Organizational ethics can be addressed at three levels: Corporate mission Constituency relations Policies and Practices **Corporate mission** This is about defining the organization\' s goals and ethical responsibilities. It reflects the aspirations of both the organization and its employees, who should be engaged effectively to achieve these goals. **Constituency relations** This involves managing the organization\'s responsibilities towards different groups, such as employees, customers, suppliers, shareholders, and the public, to ensure ethical conduct. **Policies and Practices** This involves evaluating how well the organization\'s practices and commitments align with ethical principles. Organizational ethics also depends on the type of the organization. Organizations can be classified by considering their economic and ethical concerns. Organizations can be classified into four types. These are: **Exploitative** Organizations with low economic and ethical concerns are called exploitative organizations. **Manipulative** Organizations with high economic performance concerns and low ethical concerns are called manipulative organizations. **Holistic** Organizations with high ethical concerns and low economic concerns are called holistic organizations. **Balanced** Balanced organizations have high ethical and economic concerns. **CORPORATE CODE OF ETHICS** Corporate ethical codes are the standards and beliefs set by an organization\'s managers. They are designed to guide the behavior and attitudes of everyone within the organization. These codes help shape how employees think and act in alignment with the organization\'s values. Corporate ethical codes differ from ethical rules, which are specific requirements that individuals must follow. While ethical rules focus on personal behavior, corporate ethical codes provide a broader framework for the organization as a whole. Snoeyenbos and Jewell define three elements to implement ethical behaviour in the organization. These elements are: Implementing the corporate ethical code Introducing an ethics committee Introducing a management training programme that includes ethics training Organization can manage ethical issues by including a code of business conduct in their corporate structures. These codes advise, guide, and regulate how employees should behave. To create these codes, organizations translated core human values into specific guidelines. While many organization have their coded of ethics, there are also similarities among them. These formulated codes of ethics can be used as a tool for developing ethical conduct. Some of the ethical codes formulated by organize ions are: Ethical codes of discipline Proper code of dressing Avoiding abusive language or actions Punctuality Legalistic ethical codes Always following instructions from superiors Performance of fair performance appraisals Personal and cultural ethical codes Not using official property for personal use Performance of good quality of work Having initiative Conservation of resources and protection of quality of environment **ADVANTAGES OF A CODE OF ETHICS** Some of the advantages of a code of ethics are: A Code of ethics can be used to handle outside pressure. They can also be used in making overall strategic decisions. These codes can be used to define and implement the policies of the organization and distribute work between the employees. A code of ethics can be used to optimize the public image and confidence of the organization. They can be used to increase the skills and knowledge of the individuals. Code of ethics can also be used to respond to the different issues of stakeholders. These codes of ethics can be used to discourage improper requests from employees. They can also strengthen the enterprise system. **CHAPTER 6: DEVELOPMENT OF ETHICAL CORPORATE BEHAVIOR** Identifying Practical Issues and Assigning Responsibilities This approach explores various kinds of ethical issues that can arise in business and society. Business activities should be conducted in such a way that they do not cause any harm to society. The various ethical issues that can arise in business and society are: 1\. Employee rights 2\. Ethical business conducts 3\. Environmental protection 4\. Child labour in business 5\. Discrepancies in the wage of women employees 6\. Bonded labour 7\. Exploitation of unorganized labour 8\. Minimum wages 9\. Obligations of large and multinational corporations Analyzing Existing Practices and Framing a Code of Conduct This approach deals with the subject of public policy and with the identification of unethical practices. Various areas of conduct require some amount of government regulation. Such areas include product liability, worker rights, environmental problems, white-collar crimes and child labour. This approach also deals with the ethical guidelines that provide benchmarking for the decision-making process. **Benchmarking** is a process where an organization compares its methods and performance to the best practices and outcomes from other organizations. This helps identify areas for improvement and motivates change. The goal is to enhance quality and efficiency by learning from others, reallocating resources, and training employees. Benchmarking can be done internally (within the same organization), functionally (with similar departments from different organizations), or competitively (against industry leaders). It can be used for specific projects or daily operations to improve areas like production speed, customer service, or delivery times. The following is the sequence of steps involved in an effective benchmarking process: Determine the key performance areas that need to be benchmarked. These include products and services, customers, business processes in all departments and organizations, business culture and calibre and training of employees. Identify the most relevant competitors and best organization in the relevant industry. Set the key standards and variables that need to be measured. Measure the standard variables regularly and objectively. Develop an action plan to gain or maintain superiority over competitors. Specify programmes and actions to implement the action plan and monitor the ongoing performance of the organization. **Fundamental Philosophical Problems** Under this approach, business ethics can be defined as an attempt to keep ethical obligations. This approach deals with the relationship between the individual and the society and is used to identity the area of development of the society and its culture. It also focuses on the differences between personal morality and social morality. The main aim of this approach is to identify and define business values. **BUSINESS VALUES** Business values are core beliefs and principles that guide an organization\'s actions and decisions. Examples include focusing on customer satisfaction, encouraging enthusiastic teamwork, and using advanced technology in production. When these values are actively embraced and practiced by both management and employees, they can lead to significant success and growth for the organization. Essentially, adhering to strong business values is crucial for an organization\'s long-term success and sustainability. In general, the most common values that facilitate improving profits and the image of the organization are as follows: **Persistent progress:** It refers to an eagerness and enthusiasm on the part of the organization to keep its functioning as an ever-efficient and up-to-date working endeavour towards progress. ** Customer satisfaction**: It refers to making the customers feel important and responding to their needs, and interests and, if need be, providing solutions to their problems in case of any documentation processes regarding the purchase of the organization\'s product. ** Personnel development**: It focuses on improving employees\' skills, which enhances their satisfaction and leads to more genuine and effective performance, ultimately benefiting the organization. ** Innovation:** It refers to the enthusiasm to take on new challenges and responsibilities on the part of the employees and a desire to diversify and try out new ventures on the part of the organization. **Optimal use of resources** It refers to making sincere efforts to enhance overall business performance by maximum utilization of the organization\'s current resources.