JLBS PPT Business Ethics & CSR PDF

BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY UNIT 1 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  UNIT 1 CORPORATE GOVERNANCE OVERVIEW EVOLUTION ISSUES AND CHALLENGES TRENDS IN...

BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY UNIT 1 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  UNIT 1 CORPORATE GOVERNANCE OVERVIEW EVOLUTION ISSUES AND CHALLENGES TRENDS IN GOVERNANCE PRACTICES CORPORATE GOVERNENCE REFORMS IN INDIA 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Overview / Concept – Governance is a set of process involving internal management and external relationship. Process of internal management will include functional areas of management like Finance, Operations, Marketing, Human Resources, Supply Chain Management, Utility and Safety & Security – Good governance in Finance function means the money being invested in business is being utilized by authorities for the same purpose it has been given / allotted or provided – Good Governance in operations means the process control should result in sustainable usage of depleting natural resources for manufacturing products or providing services – Good Governance in Marketing is to promote the product or services without using any feature which is not present in either 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Overview / Concept Contd… – Similarly HR and other functions should also adhere to Governance by complying all the rules and regulations and adhering to good practices – Governance in process involving external agencies like Customs, GST authority, Police, Local bodies, regulatory bodies and testing agencies etc., means adopting ethical, moral and values when dealing with such offices and adopting zero tolerances in misuse of any laws or policies to avoid any kind of conflict between Business and external agencies Definition: - – Corporate Governance is defined as the system by which companies are directed and controlled – Corporate Governance to a large extent is a set of mechanism through which investors and outsiders protect themselves against any misappropriation done by insiders – Corporate Governance describes the way of taking actions ensuring the fair usage of assets and all stake holders contribution are directed towards a common 8/5/2024 motive of achieving objectives copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Evolution / History – The need for Corporate Governance arises due to Globalization, Economic Changes, Financial Reporting, Shareholder’s accountability and management accountability on transparency in carrying out the business – Globalization has created a need for Corporate Governance as the structures and Process of conducing business is not necessarily same in all countries. Companies have their establishment in most of the countries are bound to adopt the different compliance procedures and rules in carrying out business of these subsidiaries or independent ventures – However one structure and rule is common in all countries which specifies that policies and procedures by the Board of Directors (which is recognized as the authority to carry out business through Good Governance) to run the entity is accepted as most appropriate form of governance – Corporates have to survive changing economic environment. Countries have restricted policies and liberal policies, hence corporates have to align their procedures to achieve new objectives under different economic conditions facing competition domestically as well as internationally – An organization has to follow Good Governance as it helps in making right selection from the options and alternatives available. 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Evolution / History / Need Contd… – The outlook of the management cannot be regulated by legislation alone as it deals with running the affairs of the company in such a way that it is fair to all stakeholders and its transactions benefit the large number of stakeholders. Such standards and common framework of procedures adopted by the business reflects in its financial statements, which is the only document through which parent / holding companies can be sure of Good Governance in each of their subsidiaries – Confidence of foreign and domestic investors is maintained and upheld due to the trustworthiness that comes from good management measures adopted by companies – In1998, the confederation of Indian Industry (CII) made public a desirable and voluntary code of conducting business. This marked the beginning of corporate governance initiatives in India. Then on the basis of Kumaramangalam Birla Committee report in Feb 2000, SEBI made the 8/5/2024 first regulatory framework of good governance for listed companies copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Issues and Challenges – Corporate Governance is a concept and not individual tool for measurement or yardstick for conducting business, it encompasses management control structures, rules for power distribution between owners, board of directors, stakeholders and others – Corporate governance is concerned with the ownership, control and accountability of companies, and how the corporate pursuit its economic objectives relates to a number of wider ethical and societal considerations. It is application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management, distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders – Accountability is a key element as well as requirement for corporate governance, fortifying the latter in such a way that it provides a transparent template for governing critical decisions, procedures, and activities – Corporate Governance represents the moral framework, the ethical framework and the value framework under which an enterprise takes decisions. In the long run ethical behavior has a positive impact on the company'scopyright performance @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024 8/5/2024  CORPORATE GOVERNANCE Issues and Challenges Contd… King code of governance principles commonly refereed to as King III and its report is issued by South Africa due to changes in international Governance trends Johannesburg Stock Exchange, Socially Responsible Investment Index 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Trends in Corporate Governance Practices – The object is to improve quality of Governance and instead of following practice of comply and explain, it is better to follow employ and explain – Good Governance involves fairness, accountability, responsibility, transparency and honesty. Most of the business in India are of promoter – family – driven nature, hence they face more scrutiny as funding is normally availed from private equity funds, venture capital funds, angel investors, qualified institutional placement and recently added Anchor Investors as funding agency – Board Succession Planning: Tenure of the Independent Directors is now restricted to maximum two continuous terms of 5 years each – Board Continuity: - Companies to adopt overlapping terms and rotation policy so that the entire board is does not become due for retirement in the same period copyright @ Dr Niranjan Mudliar / JLBS / BCM & 8/5/2024 BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Trends in Governance Practices Contd… – Board Gender Diversity: - It is regulatory requirement that the board appoint at least one female member for certain companies based on their paid – up capital. It is one of the criteria to recognize collegiality amongst board members, which is integral to effective governance – Remuneration under monitoring: - The remuneration in terms of amount and net profit percentage has statutory limits, but with approval of the shareholders and board through recommendation of remuneration committee can exceed the limit, but its wrong to have skewed ration of remuneration in favor of promoter Director. The companies should consider some benchmarking and study the prevailing remuneration in the sector and then propose in same range – Increasing Scrutiny of the Auditors: - these days the Auditors statutory or internal members are equally held responsible for wrong financial statements and wrong declarations, the statutory Auditors have found themselves on regulatory radar due to auditor – companies relation ship in terms of fees copyright @ Dr Niranjan Mudliar / JLBS / BCM & 8/5/2024 BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Corporate Governance Reforms in India – A number of initiatives like amendment in Companies Act 2013 providing framework for independent directors, provision for greater accountability, transparency and responsibility, mandatory appointments of Key Managerial Personnel (KMP’s), appointment of complaint handling officer and legal compliance officers in Data companies and telecom companies, stricter regulations, independent audit of related party transactions etc. – Enhanced disclosures such as board report on compliances of ESG, Financial statements, filings and reporting with registrar of companies and Executive statement in shareholder meetings to mandatorily include progress made by company on Governance and Ethics – Adopting accounting standards and incorporation of rules have increased copyright @ Dr Niranjan Mudliar / JLBS / BCM & 8/5/2024 BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Corporate Governance Reforms in India Contd… Institutional Investors such as Pension Funds, Mutual Funds, Insurance Companies, Private Equity Funds, Venture Capital Funds, Qualified Institutional Investor Funds and Anchor Investor Funds actively participate in functioning of the companies through their Boards and they put pressure on the Boards to improve performance of the company, wherever there is a possibility seen copyright @ Dr Niranjan Mudliar / JLBS / BCM & 8/5/2024 BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Corporate Governance Reforms in India Contd… – Top management makes guidelines towards creating values in terms of achieving the objectives of the company. These guidelines should be clear and communicated down the line as well as visible through their activities too – When top management behaves responsibly, then the employees get inspired to follow and work in the same way with same enthusiasm Role of CEO is the main focus of Corporate Governance, any adverse action taken by the individual can affect firm’s operations to a great extent example Vishal Sikka of Infosys. The CEO in an organization deals with organizational politics, he assumes role of a negotiator, role as communicator, role as a motivational leader and role as mentor for building the next line in leadership 8/5/2024 copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE Corporate Governance Reforms in India Contd… The four P’s serve as foundational principles for both existence and operations of governance in an organization – People associated with companies like founders, stakeholders, board of directors, suppliers, customers and government agencies etc. – Purpose: each part / branch / functions of the company which has a purpose to work must fulfill the objectives of that purpose and have plans, policies and procedures aligned with that purpose – Process: Governance is the process that allows all those associated with the business to work together to achieve company goals. This process is designed for manufacturing product or providing services in such a way that it must ensure optimum utilization of natural resources and generate minimum wastage. Process must follow green principles in energy consumption and making product or services. Good governance is to improve the process continuously to achieve SDG – Performance: Governance has analyze its performance and decide if is successful in 8/5/2024 giving positive results every time for the organization copyright @ Dr Niranjan Mudliar / JLBS / BCM & BCHO III / Jul Dec 2024  CORPORATE GOVERNANCE NK H A T OU Y copyright @ Dr Niranjan Mudliar / JLBS / BCM & 8/5/2024 BCHO III / Jul Dec 2024