Mb321 - Jan 07

Question Paper Business Ethics & Corporate Governance (MB321) : January 2007 Section A : Basic Concepts (30 Marks) • • • •

1.

Five R’s sum up the business responsibilities of corporations towards their employees. Which of the following is not one of these R’s? (a) (b) (c) (d) (e)

2.

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Right benefits Right quality Right quantity Right place Right price.

Which of the following financial frauds committed while preparing a financial statement can be detected by comparing financial statements over a period of time, examining unusual journal entries, verifying supporting sales documents and unusual sales transactions? (a) (b) (c) (d) (e)

3.

This section consists of questions with serial number 1 - 30. Answer all questions. Each question carries one mark. Maximum time for answering Section A is 30 Minutes.

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Fictitious revenues Fraudulent timing differences Concealed liabilities and expenses Fraudulent asset evaluations Fraudulent disclosures or omissions.

Which of the following statements is/are true, with respect to a macro social contract?

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I. It consists of norms that apply equally to all individuals. II. They provide global norms. III. They are developed for a community, group and organization. (a) (b) (c) (d) (e) 4.

Which of the following is a characteristic of a nominee director? (a) (b) (c) (d) (e)

5.

Only (I) above Only (II) above Only (III) above Both (I) and (II) above Both (I) and (III) above.

Performing a dual role as a member of the board of directors and as an executive in the organization Not holding an executive position in the organization Being appointed by major shareholders or financial institution Acting as a substitute in the absence of an original director Influencing the decisions of the board without formally being present on the board.

Which of the following is a legal document that governs the relationship between a business and an employee? (a) (b) (c) (d) (e)

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Knowledge contract Employment contract Efficiency contract Psychological contract Social contract.

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6.

The word ethics is derived from the Greek word ethikos, which means (a) (b) (c) (d) (e)

7.

8.

(a) (b) (c) (d) (e)

(a) (b) (c) (d) (e)

Only (II) above Both (I) and (II) above Both (III) and (IV) above (I), (III) and (IV) above All (I), (II), (III) and (IV) above.

(d) (e)

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It has an external focus. It assumes a closed system. It is strategy oriented. It is concerned with specific goal attainment in a definite time frame. Only (II) above Both (I) and (III) above Both (II) and (IV) above Both (III) and (IV) above (I), (III) and (IV) above.

12. Which of the following is not a rational assumption that managers make to justify their behavior in resolving ethical dilemmas? (a) (b) (c)

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Coercion. Deceptive information. Theft. Bribery.

11. Which of the following statements pertain to ‘corporate management’? I. II. III. IV.

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Consequentialism Utilitarianism Ethical relativism Corporate citizenship Kantian ethics.

10. Which of the following constitute/s unethical behavior in the market system? I. II. III. IV.

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Establish moral intent Gather the relevant factual information for evaluation of the decision Judge the decision based on certain morel principles Analyze the facts to determine the most appropriate moral values Identify the stakeholders who will be affected by the decision.

Jiya, Corporate Ethics Officer of Deccan Corporation, expresses this belief: “We should be judged by our company’s announced views of what is right and wrong. We have a right to decide what behavior is acceptable or unacceptable, and we should be judged based upon how we live up to the standards we set for ourselves.” Jiya’s views imply an inclination for which of the following ethical theories? (a) (b) (c) (d) (e)

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Detect frauds in financial statements Help employees resolve ethical dilemmas Enhance the efficiency of audit procedures Enhance employee morale Evaluate the effectiveness of the ethical decision-making process.

Which of the following is the first step in the ethical decision-making process? (a) (b) (c) (d) (e)

9.

Character Righteousness Values Humility Ideals.

There can be many ethical issues at the workplace. At the workplace, the ‘Believe’ approach is used to (a) (b) (c) (d) (e)

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Their actions are within reasonable ethical and legal limits and hence are not illegal or unethical Their actions are aimed at the individuals or corporation’s best interest Their actions will not be disclosed or published and hence there is no danger to them or their company They will be protected by their company They will be protected by their community.

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13. Which of the following includes short and long-range studies of the internal requirements of the company and the external supply markets? (a) (b) (c) (d) (e)

Purchase feedback Purchase contract Purchase research Purchase invoice Purchase schedule.

14. Nations depend on the dynamics of the market system to allocate goods and services. Which of the following is not a prerequisite for the effective functioning of a market system? I. II. III. IV. (a) (b) (c) (d) (e)

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The right to own and control private property. Freedom of choice in buying and selling goods or services. Government protection of local industry against threat posed by multinational companies. Access to quick, reliable and precise market information. Only (III) above Only (IV) above Both (I) and (II) above Both (III) and (IV) above (I), (II) and (IV) above.

15. Which of the following environmental laws in India allows private rights to use groundwater by viewing it as an attachment to land? (a) (b) (c) (d) (e)

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The River Boards Act The Water Cess Act The Water Act The Water Cess Rules The Easement Act.

16. Which of the following statements pertain/s to the strategic role of the board?

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I.

Addressing issues like what changes in the structure of the company can help achieve the growth aspirations of the board. II. Ensuring a broad game plan for implementing the policies and strategies is in place. III. Framing guidelines or policies to ensure that the business plans and management decisions conform to the corporate strategy. IV. Reviewing plans, policies and strategies of the corporation in the light of the changing competitive environment. (a) (b) (c) (d) (e)

Only (I) above Only (III) above Both (I) and (II) above Both (II) and (III) above (II), (III) and (IV) above.

17. Which of the following is a consistent set of universal rules that are widely published, generally accepted and usually enforced? (a) (b) (c) (d) (e)

Moral standards Business ethics Corporate credos Law Compliance codes.

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18. Based on their relationship with the organization, stakeholders can be categorized as internal stakeholders and external stakeholders. Which of the following are internal stakeholders of a company? I. II. III. IV. (a) (b) (c) (d) (e)

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Shareholders. Management. Consumers. Suppliers. Only (I) above Both (I) and (II) above Both (II) and (III) above Both (III) and (IV) above (I), (II) and (IV) above

19. Ferrell and Gresham have identified three factors that determine the code of ethics framed by marketers as individual factors, significant factors and opportunity factors. Which of the following constitute/s significant factors?

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I. Moral values inculcated in a person by family, education and culture. II. The extent to which reference groups, top management and peers influence marketers. III. Ethical codes and standards promoted in an organization. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Only (III) above Both (I) and (III) above All (I), (II) and (III) above.

20. According to which of Hellriegal, Slocum and Woodman’s principles do workers feel strong because of the presence of trade unions and can achieve goals through muscle power? (a) (b) (c) (d) (e)

Hedonist Might equals right Conventionalist Disclosure Distributive justice.

21. Which of the following is not a principle or standard of purchasing established by the National Association of Purchasing Management? (a) (b) (c) (d) (e)

(b) (c) (d) (e)

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Refrain from accepting favors or services from potential suppliers Handle confidential information belonging to employers or suppliers with due care Discourage indulging in forward buying Refrain from reciprocal agreements that restrain competition Discourage purchasing involvement in employer-sponsored programs of personal, non-business related purchases.

22. Standards for ethical conduct can be established with respect to competence, confidentiality, integrity and objectivity of employees. Which of the following standards for ethical conduct relate to ‘integrity?’ (a)

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Performing professional duties in accordance with relevant laws, regulations and technical standards Refraining from disclosing confidential information unless authorized Communicate information fairly and objectively Recognizing and communicating professional limitations or other constraints that would preclude responsible judgement or completion of an activity Disclosing fully, all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, comments and recommendations presented.

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23. Which of the following is/are fiduciary duties of directors of a board?

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I.

In performing their duties, they should exercise the same prudence that they would in their personal matters. II. Not to use unpublished and confidential information belonging to the company for their own purpose. III. They should not enter into contract with a company (belonging to their relatives) without the consent of the board of directors. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Only (III) above Both (II) and (III) above All (I), (II) and (III) above.

24. Which of the following is/are responsibilities of an organization towards its shareholders?

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I. Conserving, protecting and increasing the shareholders’ assets. II. Managing the company efficiently. III. To be honest in communication with employees. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Only (III) above Both (I) and (II) above All (I), (II) and (III) above.

25. Organizations perform a number of tasks or functions in society. The tasks which help in ensuring the normal flow of communication in society are referred to as (a) (b) (c) (d) (e)

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Financial tasks Economic and production tasks Maintenance tasks Political tasks Adaptive tasks.

26. Corporations serve to fulfill a number of purposes. Which of the following are among the various purposes of a corporation?

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I. Human satisfaction. II. Centralized management. III. Ubiquity and flexibility. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Only (III) above Both (I) and (III) above All (I), (II) and (III) above.

27. Which of the following unethical practices is/are possible when management buyout is attempted? I. II.

Management may leak confidential information for its benefit during the buyout. Management may stall the buyout attempt in the hope that another more favorable company will try to take them over. III. Management may attempt to bring down the share price and buyout the company at a cheaper price. IV. Management may promote its own interests at the time of biding. (a) (b) (c) (d) (e)

Only (II) above Both (I) and (II) above Both (I) and (III) above Both (III) and (IV) above (I), (III) and (IV) above.

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28. Which of the following is not true about corporate codes? (a) (b) (c) (d) (e)

They can be developed in various formats They are designed to govern the conduct of employees They enhance the clarity of strategy, decision-making and clearer communication They are mandatory for all organizations They are formulated by the top management.

29. Which of the following is not considered an unethical practice in France and Germany, instead treated as a way of doing business, as opposed to in America? (a) (b) (c) (d) (e)

Violation of human rights Discrimination in hiring Legal noncompliance Child labor Paying money to bribe.

30. Among the 4Ps in the marketing mix, which of the following is an unethical practice with respect to ‘place’? (a) (b) (c) (d) (e)

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Manipulating the availability of the product for the purpose of exploitation Concealing the risks associated with product usage Misleading advertising Deceptive sales promotions Price fixing.

END OF SECTION A

Section B : Caselets (50 Marks) • • • • •

This section consists of questions with serial number 1 – 6. Answer all questions. Marks are indicated against each question. Detailed explanations should form part of your answer. Do not spend more than 110 - 120 minutes on Section B.

Caselet 1 Read the caselet carefully and answer the following questions: 1.

What is the ethical dilemma that the CEO of Greenwell. Ltd faces? What would be the appropriate course of action for him in the given situation? Discuss.

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(8 marks) 2.

“Ethical selection should essentially be honest, fair, non-coercive and legal means. When the principle of ethical selection is not followed, an unsuitable candidate may be hired for a job.” Explain some of the unethical practices involved in hiring/recruitment.

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(9 marks) Greenwell Ltd. is an organization manufacturing consumer durables. The company has a large workforce of white collared employees for office and factory management and blue collared employees for factory work. There are a number of technical supervisors in the factory. While the managers at all levels work at the corporate office, the technical supervisors of the factory have also had a channel/avenue for promotion to the management cadre in the corporate office, provided the corporate office has a separate wing dealing with any special aspect of a particular shop. There are some shops like the finished product section, millwright, sample testing sections, etc., which fall in this category. Atul Roy, who has specialized in Human Resource Development, is the personnel manager of the company. Pratap Khare, a colleague of Atul, deals with technical matters of the company and belongs to another department. Whenever any promotion is sought to be given by the company to any of the posts in the category of lower level managers, the recommendations of these two are required to be submitted which the top brass considers and orders the promotion.

There arose one vacancy for lower level manager in the finished product division at the corporate office. This section was facing problems with workers. Apart from handling his normal duty, the new manager had to handle workers problems also. Recommendations were to be made. Sailesh and Deepak were the eligible contenders for that post. Papers were accordingly put up, stating that both of them were good in their work. Sailesh was a go-getter, used to take quick decisions (sometimes wrongly also) while Deepak was a non-interfering type, permitting decisions to be taken at lower levels. There were also reports that on one or two earlier occasions, Sailesh was sought to be charged, owning to his certain unpalatable decisions, which could not ultimately be implemented. Work turnout under his supervision was very good and a number of workers liked him for the simple reason that he used to take decision one way or the other without procrastination though some subordinates branded him as a controversial person. Another reason for calling him as a controversial person was that he had been following some unethical practices in the organization like producing false medical bills and claiming money for that, using organizational resources like stationary and telephone for his personal use, etc. Deepak, a non-interfering, non-controversial person and was giving suggestions whenever required, but still did not want any one to quote him anywhere (particularly to the top or whenever his guidance has resulted in something going wrong). Atul, the personnel manager, wanted to recommend Sailesh on the ground that he was a go-getter and good at decision-making. Pratap, however, wanted to recommend Deepak for that post on the ground that he was noninterfering and had never involved himself in any unethical practice. The personnel manager argued with his colleague in favor of his recommendation stating that in an organization, particularly at the level of manager in a section be it lower, middle or higher, performance is very important. Decisions, he argued, depend upon many factors including circumstances, and may be unpalatable to some and this cannot be avoided. Pratap argued that Sailesh is a controversial person since he used to show his authority and assert himself and this was not advisable in the present day context and present position where he had to handle a very important section of blue collared staff and he was also unethical in his conduct. Mr. Atul did not agree with this view and argued that since Deepak is one who plays safe and avoids taking decisions, he may not be a good manager. It is human nature that some persons cannot keep quiet without commenting on others and their action. They have to say something bad or adverse about the performers and this makes them controversial. Since they did not see eye-toeye, they sent in their recommendations separately to the CEO recommending both Sailesh and Deepak, respectively, giving inter-alia the reasons mentioned above leaving the choice to the head. The CEO found that Sailesh was a very close relative of his wife and he could have personal problems, if he did not select Sailesh. He knew very well that though Sailesh is definitely a good performer he has indulged in unethical behavior many times. Now, the CEO faces an ethical dilemma.

Caselet 2 Read the caselet carefully and answer the following questions: 3.

Poison pills have become a commonly used tool for companies to counter abusive takeover tactics and unsolicited bids. Discuss some other counter strategies that companies can adopt against hostile takeovers.

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(9 marks) 4.

Is the criticism against hostile takeovers justified? Is it ethical for a company to adopt the strategy of ‘poison pill’ to counter a hostile takeover?

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(7 marks) Hostile takeovers have become a part of business life. Firms with money or credit buy up those that can no longer afford to operate independently. Large firms buy small ones at a fraction of their true value. Consider the case of Philippine Long Distance Company (PLDT) - The company armed itself with a “poison pill” as a defense against a possible takeover. This was done, though it did not face any such threat. The company was vulnerable because of its weak stock price, its dominance of the domestic phone market and its easy access to credit. According to the proposal, a hostile bid would automatically trigger a rights offering. This would allow all shareholders - except the raider - to buy new shares at half the market price. Triggers were also fixed. The rights offer would trigger when any investor acquired 10% or more of the company’s shares or made an offer to acquire 10%, or when an existing shareholder raised his stake by 5%. This would have made it expensive for a prospective raider to acquire management control. This was a case where there was no takeover threat. Yet, the company wanted a defense mechanism that would have tied up the ownership and management for all time to come, unless somebody could overcome the prohibitive price

tag that was created with the `poison pill'. In the corporate world, companies to avert a hostile takeover create a “poison pill” that the raider will not want to swallow. A “Poison Pill” also known as “Shareholders Rights Plan” is designed primarily to make it difficult, time-consuming and expensive for a hostile acquirer to consummate offers that may not offer fair value to all shareholders. It is usually an issue of convertible preferred stock distributed as a dividend to current stockholders. The preferred stock is convertible into common shares equal to or greater than the number of shares outstanding. The takeover attempt becomes its own poison because it vastly increases the price to be paid for a company. A “Shareholders Rights Plan” works by threatening to substantially dilute the unfriendly acquirer's equity interest. Upon the occurrence of certain takeover events, the company's shareholders (other than the acquirer) can exercise rights or warrants. On exercising this option, the shareholders can buy additional equity securities in the company or of the acquirer at a substantial discount. The risk of dilution, combined with the authority of a target's board of directors to redeem the rights prior to a triggering event, compels the potential acquirer to negotiate with the target’s board of directors, rather than proceeding unilaterally. Steel Technologies Inc., Louisville, adopted a shareholder's right plan under which a preferred stock purchase right was distributed as a dividend on each outstanding share of common stock. The plan would protect shareholders in the event of a takeover bid by an outside company. "The company's solid increase in earnings was a factor in the board's adoption of a shareholders' rights plan,” The plan was adopted to protect the interest of shareholders and to help ensure that potential acquirers do not use coercive tactics to deprive the board and officers of the opportunity to determine the company's future and to realize the full value of shareholders' investment in Steel Technologies." In the event that any person or group either acquires or makes a tender offer for 20 % or more of common stock, holders of the rights (other than the acquiring person) will be able to purchase a number of shares for $50 though it has a market value of $100. (50% discount to the prevailing market price in 1998). Adopting a pill is the first step to protect a company against takeovers. A poison pill makes a raider negotiate, and buy time for a target company to get a proper evaluation of the offer. It gives the company an opportunity to investigate other alternatives. Economic studies suggest that takeover premiums are higher when rights plans are in effect. For example, Markel Corp., Glen Allen, Va., launched a $187 million bid to acquire Gryphon Holdings Inc., in October 1998; Gryphon had a "poison pill" provision that would have allowed it to issue new stock. Gryphon, however, did not activate the provision, because Markel Corp. raised its offer from $18 to $19 a share. Even though poison pills may lead to higher premiums and do not reduce bid completion rates, they still might prevent the occurrence of some bids which act against the economic interest of shareholders of the unrealized target companies. Pursuers may be squeezed by the intense competition caused by deregulation and may be desperate for a product market extension or diversification. They may consider the implementation of their strategy to be a survival issue and acquisition of a possible prey may be the heart of their strategy.

Caselet 3 Read the caselet carefully and answer the following questions: 5.

“As market forces increasingly replace government controls, corporate governance is gaining prominence and becoming a prerequisite in business.” Write about the (i) evolution of corporate governance and (ii) analyze the condition of corporate governance in India.

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(5 + 4 = 9 marks) 6.

Codes for corporate governance serve as a guideline. Explain the guidelines recommended by the OECD committee report.

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(8 marks) In the event of globalization, when investments take place in emerging markets, the investors want to be sure that not only are the capital markets or enterprises with which they are investing, run competently but they also have good corporate governance. In other words, when investments take place across national borders, the investors want to be sure that not only is their capital handled effectively and adds to the creation of wealth, but the business decisions are also taken in a manner which is not illegal or involving moral hazard. Corporate governance therefore calls for transparency in decision-making, accountability – which follows from

transparency because responsibilities could be fixed easily for actions taken or not taken – and the accountability is for the safeguarding the interests of the stakeholders and the investors in the organization. Implementation of corporate governance has depended upon laying down explicit codes, which enterprises and the organizations are supposed to observe. The Cadbury’s code in United Kingdom was the starting point, which led to a number of other codes. In India itself there is the Kumaramangalam Birla code as a result of the committee headed by him at the behest of the SEBI. Earlier the CII came up with the code for corporate governance recommended by the committee headed by Shri Rahul Bajaj. Besides these two there is also the OECD committee report. The codes, however, can only be a guideline. Ultimately effective corporate governance depends upon the commitment of the people in the organization. The very first issue of corporate governance in India is – do the Indian managements really believe in corporate governance? Corporate governance depends upon two factors. The first is the commitment of the management for the principle of integrity and transparency in business operations. The second is the legal and the administrative framework created by the government. If public governance is weak, there cannot be good corporate governance. The dramatic Enron case has highlighted how companies, which were the darlings of the stock market and held up as models for vigorous and innovative growth, can, ultimately collapse like a house of cards as they were based on fraud and dishonesty. The association of the accounting firm Anderson has also raised a doubt about the credibility of even well regarded global players. In the Indian context, the need for corporate governance has been highlighted because of the scams that are almost an annual feature ever since liberalization from 1991. India has seen the Harshad Mehta scam, Ketan Parikh scam, UTI scam, Vanishing Company scam, Bhansali scam and so on. In the Indian corporate scene, global standards must be inducted so that at least while the scope for scams may still exist, the scope can be reduced to the minimum. The legal and administrative environment in India provides excellent scope for corrupt practices in business. As a result, unless a management is committed to be honest and observe the principles of propriety, the atmosphere is too tempting to observe good corporate governance in practice. The corporate governance issue in India should be approached not merely from the point of view of the guidelines but look at the entire network of various rules and regulations impinging on business so that there is a integrated holistic system created for ensuring that transparency and good corporate governance prevail. The ethical temperature of any business or capital market depends on three factors. The first is the individual’s sense of values. The second is the social values accepted by the business and industry. When the Harshad Mehta scam took place, it was claimed that the manner in which the bank receipts were being treated was the prevailing norm. Perhaps a similar argument would have been given in the Ketan Parikh scam. In other words practices, which are later on found to be highly objectionable, became acceptable because that was the prevailing market practice. Social values will depend upon the standards set up by professional bodies like the Association of Chartered Accountants or Cost Accounts of India and so on. The third and perhaps the most decisive factor is the system. It is here that India faces the main challenge. The Indian system encourages lack of corporate governance. In India today the system has a poor level of public governance. There is no fear of punishment at all. This is not to override that there are honorable companies in India, which are following ethical practices but if the general environment is such that there is no fear of punishment, people are bound to be tempted to indulge in corrupt practices and moral hazards, which go totally against corporate governance. In order to bring in better corporate governance, introduction and strict observance of the code mentioned above is necessary. In the ultimate analysis, it is the observance of corporate governance at the enterprise level or at the level of a body like the capital market will depend upon the top managements in-charge of the organization or the body. It is necessary that they remember the three way tests for the ethics - a) Is the decision being taken legal? If it is not legal, it is not ethical. b) Is the decision being taken fair? In other words, it should be a win-win situation for both the parties entering into an agreement or if it is a general policy or a multi-level agreement, there should be equal risk and reward to all concerned. If it is not fair then the decision is not ethical. c) If the decision being taken is such that if known publicly through the media, it will make its endorsers feel ashamed, then it is not an ethical decision. Better corporate governance and corporate management may result from more exposure to other companies' ways of doing this, and the need to self-organize in ad hoc committees or other reactive bodies. Ultimately, corporate governance is the net result of the individual sense of values, the values held in society or part of a society like professional bodies or business associations and finally the system of public governance. If those who violate the norms are effectively punished, then there is a fear and there will be adherence of the principles of corporate governance. END OF SECTION B

Section C : Applied Theory (20 Marks)

• • • • 7.

This section consists of questions with serial number 7 - 8. Answer all questions. Marks are indicated against each question. Do not spend more than 25 -30 minutes on section C.

Various theories of ethics help in understanding the nature of ethics and its relationship with business. Explain the following three areas into which ethics’ theories can be divided i.

Meta ethics.

ii.

Normative ethics.

iii.

Applied ethics.

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(10 marks) 8.

Although many private companies are involved in social responsibility activities, the level of success they have attained in this area is still a question mark. Explain i. ii.

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How corporate giving can be measured, with respect to the ‘Enlightenment Matrix’. How corporates can systematically approach social responsibility projects or activities, with respect to the ‘Community Involvement Choice Flow’. (3 + 7 = 10 marks) END OF SECTION C END OF QUESTION PAPER

Suggested Answers Business Ethics & Corporate Governance (MB321) : January 2007 Section A : Basic Concepts 1.

Answer : (a) Reason: The five R’s that sum up the business responsibilities of corporations towards their employees are right quality, right quantity, right place, right price and right time.

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2.

Answer : (a) Reason: Fictitious revenues are those, which are shown in the books but are not actually earned. The method by which this takes place is booking non-existent revenue and simply creating journal entries by debiting accounts receivable and crediting sales. Sometimes false sales are shown to existing customers. Smart accountants select transactions with a few major customers, such as large organizations and governmental agencies that they know will be difficult to confirm. Comparing financial statements over a period of time, examining unusual journal entries and verifying, supporting sales documents and unusual sales transactions, can detect fictitious revenues.

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3.

Answer : (b) Reason: A macro social contract provides global norms. Hypernorms consists of norms that apply equally to all individuals. A micro social contract is developed for a community, group and organization. Hence only statement (II) is true with respect to macro social contract and option (b) is the answer.

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4.

Answer : (c) Reason : Nominee directors are those who are appointed to the board of directors by the major shareholders or financial institutions like banks, mutual funds etc. These directors work towards safeguarding the interests of their principles. Even though external stakeholders like banks appoint them, they along with other directors should act in the overall interest of the company.

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5.

Answer : (b) Reason: Employment contract is a legal document that governs the relationship between a business and an employee.

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6.

Answer : (a) Reason: The word ethics is derived from the Greek word ethiko, which means character.

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Answer : (b) Reason : A step-by-step process known as Believe is one way of resolving ethical dilemma. Believe is an acronym for background, estimate, list, impact, eliminate, value, and evaluate.

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8.

Answer : (e) Reason: Identifying the stakeholders who will be affected by the decision is the first step in the ethical decisionmaking process.

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9.

Answer : (c) Reason : Jiya’s view shows preference to the theory of ‘Ethical relativism’. According to ‘Ethical relativism theory’ there is no universal set of principles by which to judge morality. Each society has its rules and it is inappropriate to compare the ethical rules of one society with that of another. Relativism cannot pass judgment on the actions of societies other than their own.

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10.

Answer : (e) Reason : The following constitute unethical behavior in the market system: I. Coercion. II. Deceptive information. III. Theft. IV. Bribery.

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11.

Answer : (c) Reason : The following statements pertain to ‘corporate management’ and distinguish it from corporate governance II. It assumes a closed system. IV. It is concerned with specific goal attainment in a definite time frame. Statements (I) and (III) pertain to corporate governance.

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12.

Answer : (e) Reason : They will be protected by their community is not a rational assumption that managers make to justify their behavior in resolving ethical dilemmas.

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13.

Answer : (c) Reason : ‘Purchase research’ involves studying the present trends regarding the cost of various input materials and also that of the general economic conditions, industrial conditions and national and international developments that may be of importance to the organization. (a) It refers to the feedback given after the purchase of materials. (b) It refers to the study carried over before going for a purchase. (d) It refers to the requirements of the purchase (e) It refers to the schedule prepared for purchase of materials.

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14.

Answer : (a) Reason : ‘Government protection of local industry against threat posed by multinational company’ is not a prerequisite for the effective functioning of a market system.

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15.

Answer : (e) Reason: The Easement Act allows private rights to use groundwater by viewing it as an attachment to land.

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16.

Answer : (c) Reason: The following statements are true about the strategic role of the board: I. Addressing issues like what changes in the structure of the company can help achieve the growth aspirations of the board. II. Ensuring a broad game plan for implementing the policies and strategies is in place. Statement (III) – framing guidelines or policies to ensure that the business plans and management decisions conform to the corporate strategy pertains to the policy making role of the board. Statement (IV) – reviewing plans, policies and strategies of the corporation in the light of the changing competitive environment pertains to the monitoring and supervisory role os the board.

1.

7.

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17.

Answer : (d) Reason : Law is a consistent set of universal rules that are widely published, generally accepted and usually enforced. (a) Moral standards deal with desired right or wrong human behavior. (b) Business ethics deal with following ethical values in conducting businesses. (c) Corporate credos are broad general statements of corporate commitments relating to constituencies, values and objectives. (e) Compliance codes are directive statements providing guidance on conduct to be adopted.

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18.

Answer : (b) Reason: The following are internal stakeholders of a company: I. Shareholders. II. Management. Suppliers and consumers are external stakeholders.

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19.

Answer : (b) Reason: The extent to which reference groups, top management and peers influence marketers, constitute significant factors.

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20.

Answer : (b) Reason: According to the principle of might equals right workers feel strong because of the presence of trade unions and can achieve goals through muscle power.

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21.

Answer : (c) Reason: Discourage indulging in forward buying is not a principle or standard of purchasing established by the National Association of Purchasing Management.

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22.

Answer : (d) Reason: Recognizing and communicating professional limitations or other constraints that would preclude responsible judgement or completion of an activity relates to integrity. Option (a) relates to competence. Option (b) relates to confidentiality. Options (c) and (e) arelate to objectivity.

23.

Answer : (b) Reason: Statement (II) – not to use unpublished and confidential information belonging to the company for their own purpose – is a fiduciary duty of directors. Statement (I) is a duty of care and statement (III) is a statutory duty. Hence, option (b) is the answer.

24.

Answer : (d) Reason: The following are responsibilities of an organization towards its shareholders: I. Conserving, protecting and increasing the shareholders’ assets. II. Managing the company efficiently. Statement (III) - to be honest in communication with employees is the responsibility of an organization towards its employees.

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25.

Answer : (c) Reason: The tasks which help in ensuring the normal flow of communication in society are referred to as maintenance tasks.

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26.

Answer : (d) Reason: The following are among the various purposes of a corporation: I. Human satisfaction. III. Ubiquity and flexibility. Statement (II) - centralized management is a characterisitc of a corporation and not a purpose.

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27.

Answer : (e) Reason : The following unethical practices are possible when management buyout is attempted: I. Management may leak confidential information for its benefit during the buyout. III. Management may attempt to bring down the share price and buyout the company at a cheaper price. IV. Management may promote its own interests at the time of biding. Statement (II) – management may stall the buyout attempt in the hope that another more favorable company will try to take them over – pertains to the anti takeover device of sandbag.

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28.

Answer : (d) Reason: Coporate codes are voluntary for organizations. Hence, option (d) is the answer.

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29.

Answer : (e) Reason: Paying money to bribe is not considered an unethical practice in France and Germany, instead treated as a way of doing business, as opposed to in America.

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30.

Answer : (a) Reason: Manipulating the availability of the product for the purpose of exploitation is an unethical practice with respect to place or distribution in the marketing mix (4Ps strategy).

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Section B : Caselets 1.

The ethical dilemma faced by the CEO is whom to select for the post of the lower level manager. Sailesh and Deepak were the eligible, entitled contenders for that post. Papers were accordingly put up, stating that both of them were good in their work. Sailesh was a go-getter, used to take quick decisions (sometimes wrongly also) while Deepak was a non-interfering type permitting decisions to be taken at lower levels. There were also reports that on one or two earlier occasions, Sailesh was sought to be charged, owning to his certain unpalatable decisions, which could not ultimately be implemented. Work turnout under his supervision was very good and a number of workers liked him for the simple reason that he used to take decision one way or the other without procrastination though some subordinates branded him as a controversial person. Another reason for calling him as a controversial person was that he had been following some unethical practices in the organization like producing false medical bills and claiming money for that, using organizational resources like stationary and telephone for his personal use etc. Deepak, apart from being a non-interfering, non-controversial person, also wanted, whenever required, others in the organization to come to him for guidance but not to quote him anywhere (particularly to the top or whenever his guidance has resulted in something going wrong). Inspite of the fact that Sailesh was a great performer and was capable of taking decisions quickly, he was unethical in his conduct whereas Deepak was ethical even though a little slow. The CEO of Greenwell Ltd. Should rightfully choose Deepak. Even though he is a little slow in making decisions, he has always carried out the job assigned to him. The most important point is that he is an ethical person. So, he will be a role model for his subordinates and other employees. In future also there may be many decisions to be made where Sailesh can show unethical behaviour. Even though Sailesh is a performer and can take decisions quickly but his conduct is not right. By indulging in unethical practices he is violating the organizational culture and code of ethics. This can also prove as a bad example to other employees.

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2.

Some of the unethical practices in hiring are related to: Discrimination: The first step towards ethical selection is to prevent discrimination. What are the relevant criteria for ethical selection? The right answer would be the functional qualities or abilities that are required to do the job: for example, the ability to teach for a teacher, the ability to act for an actor, the ability to paint for a painter, etc. Sometimes the character of a person plays an important role in the process of selection for a job (purchase officer, policemen, etc) that demands a high level of honesty and integrity. Here again, judging a person's functional abilities or qualities on the basis of age, gender, religion, nationality or social background is considered discriminatory. If a business uses such irrelevant criteria for hiring a candidate, it unknowingly limits the pool of talent from which it can select a candidate who can contribute towards maximizing long-term owner value. A business frequently rejects candidates who are considered over qualified having too much experience or education, even when hiring them would not cost the business anything more than the less qualified candidates. This form of discrimination is unethical as it goes against the very principle of ethical selection, i.e. hiring the right person for maximizing long-term owner value. The primary reason for a business rejecting overqualified

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applicants is that a candidate with superior qualifications and expectations may not feel comfortable in his job and may end up disrupting the balance of the business/firm. Besides, managers sometimes fear that subordinates with greater experience and expertise pose a threat to their own positions. These arguments do not sound reasonable to maximize long-term owner value. Ageism: Ageism is another basis of discrimination, which restricts certain applicants from applying for a job. Business considers age as a factor to gauge a person's functional abilities. Young employees are perceived to be more capable of adapting to new circumstances, and more willing to learn new skills. On the other hand, older employees are considered for jobs that demand experience and responsibility. This practice of correlating age to functional abilities may sometimes be counter-productive. An applicant rejected for being above a particular age may master a new skill faster than his juniors. Age criterion is a highly unreliable measure of an applicant's ability to contribute towards maximizing owner value. Hence using it as a recruitment criterion is unethical. An in-depth assessment of every candidate who applies for a job is not always feasible. In these circumstances, businesses often base their appraisal of candidates on their credentials and objective tests. But this is a short-cut employed to screen out the least capable applicants and whether this method aids ethical selection is debatable. Credentials: Credentials are the qualifications and experience a person has. Recruiters generally rely on these credentials to screen out applicants who do not possess the required academic or vocational qualifications. Although this method simplifies the job of a recruiter, it fails to differentiate between academic qualifications and intelligence, and, vocational qualification and expertise in a particular field. These credentials may not always reflect an applicant's functional abilities to do a job. While businesses have every right to look for highlyqualified people, they must also look for characteristics that can help a candidate contribute towards increasing owner value. Testing: Testing is a relatively better method of assessing an applicant than credentials. Objective tests focus on the specific aptitude or psychological characteristics that are required to perform the job most effectively. Though these tests directly test the applicants proficiency in the job,(typing, writing, programming etc.) they are only the next best alternative to good judgment in hiring. The outcome of tests may be deceptive, unless they are well designed and their results interpreted and translatcd to just hiring decisions. Tests that challenge the applicant's right to privacy are considered unethical. However intrusive they may seem, psychometric tests, which attempt to measure personality traits such as extroversion and stability, can help businesses to identify traits that help maximize long-term owner value. 3.

Managements use many strategies jo to protect themselves from unruly predators. They are commonly referred to as Shark repellants. Some of the counter strategies that managements adopt, besides poison pills, to protect themselves from unruly predators are. Greenmail: Greenmail occurs where a potential takeover agent purchases stock in a company. After the purchases have totaled five percent, the agent must announce his intention to take over the company, if that is the intent to takeover the company. The stock price goes up in anticipation of the takeover battle The takeover agent ends up selling the shares back to the company for this increased price or somewhat higher negotiated price, when the attacked company struggles to thwart the takeover. Management of the target company sends greenmails to prevent a shareholder from taking over the company by himself or by teaming up with any other competing company. Greenmails are considered unethical because the target company may be forced to incur debts to raise funds to finance the buyback of the shares at a premium price. Generally, the management is responsible for this unethical practice as they usually send greenmails financed by owners' money without their knowledge. The acts of the potential bidder are also considered unethical if he increases his stake in anticipation: of getting a greenmail from the company. The use of greenmail is unethical because instead of using a company's money productively, it uses the money to avert the takeover. However, greenmail is not inherently unethical as it is not a form of extortion where a business is forced to pay a price. Golden Parachute: When a company is taken over, many top executives are likely to lose their jobs. So to discourage an unwanted takeover attempt, a company gives lucrative benefits to its top executives- benefits that are awarded to those executives who lose their jobs after a takeover. Benefits include stock options, bonuses, and severance pay, etc. Such Golden parachutes can run into millions of dollars and can cost the firm a lot of money. Another quality of golden parachutes is that they act as a deterrent to anti-takeover tactics. The presence of a parachute allows management to evaluate a takeover bid more objectively. Without a golden parachute provision in place, executives might selfishly implement costly defensive tactics to save their jobs, regardless of what is in the best interest of shareholders. Whether a golden parachute dissuades a takeover or not, it can benefit a corporation by attracting top executives, thwarting costs associated with takeovers and promoting stability. People Pill: This is a defensive strategy for warding off a hostile takeover. In this case management threatens that, in the event of a takeover, the entire management team will resign. This is a very effective method if they are a good management team. in place. the loss of which would harm the company. But if the manager act in their own interest rather than the company’s long term value then they are acting unethically. Sandbag: This is another tactic used by management to stop takeover attempt. The company stalls the attempts in the hope that another, more favorable, company will try to take them over. Management should no waste too

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much of time in trying to find a more favorable company. 4.

Hostile takeovers are often criticized for not taking into consideration the interests of the target company. But this is not a legitimate criticism as the bidding company’s main objective is to maximize its own long-term owner value and not that of its target company, The likelihood of conflict is more in hostile takeovers because of involvement of number of opposing parties, like the takeover company and the target company, their managers and boards and minority and majority shareholders. Some of the criticisms levied against hostile takeovers are not justified. One technique where the criticism against hostile takeovers is not valid is the two-tier tender offer- one of the American bidding techniques. In this type of takeover 51 % of the shareholders, who tender their shares to the bidder receive a premium over the then market price, while the remaining 49% receive only promissory notes for the tender amount, which are encashable in the future. This process has been criticized, as it is being unethical as it offered different shareholders different prices for their shares. But when shareholders sell their shares through stock exchanges, the prices they receive for the shares depend upon the market conditions and the same case can be considered for the two tier tender offer. The bidding technique is ethical, as the bidder does not use coercion or violence to force the shareholders to sell their shares. ‘Poison pill’ is an anti-takeover devices used by a company's management to make a takeover prohibitively expensive for the bidders. The company under target changes the' Articles of Association' so that a group of shareholders have special rights, which are evoked by a takeover. These rights include, special voting rights, and the right to buy and sell preferred stock at highly favorable prices (at times below market price). These rights can be exercised only when someone is attempting a takeover to make the takeover prohibitively expensive. Properly designed poison pills can make a company bid proof or shield the company from the threat of takeovers. ‘Poison pills’ are prohibited in Britain by the Takeover code because they prevent open competition between the bidders for shares and the bidders who are favored by the management of the target company succeed in their takeover attempt. But devising Poison pills is considered legal in the United States of America. When companies face hostile takeovers, the shareholders have the right to buy or sell shares to their own company or potential acquirer at a non market price. The use of poison pills is ethical if they are designed to protect the shareholders against unwanted takeover bids. If however they are used to protect the management at the expense of the shareholders, then they are being used unethically. Poison pills have been used unethically, especially in the management dominated boards. They have been used to diminish long-term owner value. The power vested in management to prevent takeovers can sometimes be misused. Sometimes managers reject takeovers, as they are contrary to their own interests. Taking such decisions is unethical. It is therefore necessary to have properly structured boards that are represented by members who are fully committed to maximizing long-term owner value.

5.

(i) Evolution of Corporate Governance Earlier the government was expected to ensure good corporate conduct. Most shareholders believed that stringent government controls would prevent malpractices of corporations. However, subsequently there war realization that government was not always the best guardian of public interest. Shareholders began to feel the need for market driven corporate governance that would be more democratic and flexible. This led to the birth of self imposed corporate governance within the corporate system. Many factors have contributed to the evolution of corporate governance. Some of these are: The responsibility for ensuring good corporate conduct shifted from government to a free-market economy: With the relaxation of direct and indirect administrative controls by the government, alternative mechanisms became necessary to monitor the performance of corporations in free-markets. Shareholders believed that market forces could ensure good corporate conduct (self imposed) by way of rewarding success and punishing failures of corporations. Many free-market economies laid down effective regulations to monitor the corporations. However, regulations alone do not ensure good governance. To become effective, they must be enforceable by law. Active participation of individual and institutional investors: The second factor that boosted corporate governance is the growth of global fund management business. Earlier Institutional investors did not monitor the activities of the corporations in which they invested. But the competition in the fund management business has forced them to take an active role in governance in order to safeguard their investments in the corporations. Now, many institutional investors express their views strongly with regard to various matters such as financial and operational performance, business strategy, remuneration of top-level managers etc. Along with the nonexecutive directors, these institutional investors monitor the performance of corporations. The active investor demands good performance in the form of return on investment and they also expect timely and accurate information regarding the performance of the company. Institutional investors can exert pressure on the management as they own a considerable share in the capital and any criticism from these investors can have a major impact on the share prices. Investors believe that only strong corporate governance mechanisms and practices can save them from the ever-growing power of corporations, which can influence public policy to the detriment of investors. Increasing competition in global economy: The enhanced competition in the global economy has compelled

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corporations to perform better by going in for cost-cutting, corporate restructuring, mergers & acquisitions, downsizing etc. All these activities can be carried out successfully only if there is proper corporate governance. Thus, market forces, active individual and institutional investor participation, and enhanced competition have helped corporate governance to evolve beyond a set of static rules. In India, the concept of corporate governance is still in its nascent stage. The recommendations of Kumaramangalam Birla and CII committees' reports are the first steps in India towards ensuring better corporate governance. Prior to these recommendations SEBI has take various steps to strengthen corporate governance in India. (ii) Analysis of Corporate Governance in India

6.

•

In the Indian context, the need for corporate governance has been highlighted because of the scams that are almost an annual feature ever since liberalization from 1991. The very first issue of corporate governance in India is – do the India managements really believe in corporate governance? Corporate governance depends upon two factors. The first is the commitment of the management for the principle of integrity and transparency in business operations. The second is the legal and the administrative framework created by the government. If public governance is weak, there cannot be good corporate governance, which is the case in India.

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The legal and administrative environment in India provides excellent scope for corrupt practices in business. As a result, unless a management is committed to be honest and observe the principles of propriety, the atmosphere is too tempting to observe good corporate governance in practice. The corporate governance issue in India should be approached not merely from the point of view of the guidelines but look at the entire network of various rules and regulations impinging on business so that there is a integrated wholistic system created for ensuring that transparency and good corporate governance prevail.

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The ethical temperature of any business or capital market depends on three factors. The first is the individual’s sense of values. The second is the social values accepted by the business and industry. The third and perhaps the most decisive factor is the system. It is here that India faces the main challenge. The Indian system encourages lack of corporate governance.

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The India system has a poor level of public governance because there is no fear of punishment at all. People are easily tempted to indulge in corrupt practices and moral hazards, which go totally against corporate governance.

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In order to bring in better corporate governance, introduction and strict observance of the code mentioned above is necessary. In the ultimate analysis, it is the observance of corporate governance at the enterprise level or at the level of a body like the capital market will depend upon the top managements’ in-charge of the organization or the body.

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Better corporate governance and corporate management may result from more exposure to other companies' ways of doing things ethically, and the need to self-organize in ad hoc committees or other reactive bodies.

•

Ultimately, corporate governance is the net result of the individual sense of values, the values held in society or part of a society like professional bodies or business associations and finally the system of public governance. If those who violate the norms are effectively punished, then there is a fear and there will be adherence of the principles of corporate governance.

The Principles recommended by OECD fall into five broad areas: The rights of shareholders: The corporate governance framework should protect shareholders' rights. The protection of the rights of shareholders and the ability of shareholders to influence the behaviour of the corporation are the key for effective corporate governance. Shareholders have the right to secure ownership and registration of shares, as well as the right to share in the residual profits of the company. The ability to participate in basic decisions concerning the company, chiefly by participation in general shareholder meetings is forth as an important right. The Principles call for disclosure of corporate structures and devices that redistribute control over the company in ways that deviate from proportionality to ownership. Transfers of controlling interest in the company should take place under fair and transparent conditions and anti-takeover defenses not be used to shield management from accountability The equitable treatment of shareholders: The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. In many cases, controlling shareholders, boards and management use their control over the corporation and over information to the detriment of non-controlling and foreign investors. The principles stipulate that board members, management and controlling shareholders should deal fairly with all shareholders. It also states that insider trading and self-dealing should be prohibited. The principles call for maximum transparency regarding the distribution of voting rights among all categories of shareholders and the ways in which voting rights are exercised. The role of stakeholders: The corporate governance framework should recognize the rights of stakeholders (as

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established by law) and encourage active cooperation between corporations and stakeholders in creating wealth, jobs, and financially sound enterprises. This principle states that the corporate governance framework should recognize the legal rights of stakeholders and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises. However, a good corporate governance structure also has to be concerned with finding ways to encourage the various stakeholders in the firm to make the much-needed investment in human and physical capital. Teamwork draws contributions from a range of different sources: investors, employees, creditors, and suppliers. It is ultimately in the long-term self-interest of firms to recognize that their employees and other stakeholders constitute a valuable resource for building competitive and profitable companies, whether or not those employees or other stakeholders have a legal place in the corporate governance structure. Disclosure and transparency: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. Transparency is widely recognized as a central and indispensable element of an effective corporate governance system. The principles require the timely and accurate disclosure of information on all material matters regarding the financial situation, performance, ownership, and governance of the company. This information should be prepared in accordance with high quality standards. The principles also requires for an annual independent audit so as to impose an external, objective control on the preparation and presentation of financial statements. The role and responsibilities of the board: The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board's accountability to the company and the shareholders The board is the main mechanism for monitoring management and providing strategic guidance to the company. Some boards emphasize the monitoring of management conduct while other boards are more concerned with providing a strategic vision for the corporations. The accountability of the board to the company and its shareholders is a basic tenet of sound corporate governance everywhere. The principles make it clear that it is the duty of the board to act fairly with respect to all groups of shareholders, to deal fairly with stakeholders and to assure compliance with applicable laws. The responsibilities of the board include: reviewing corporate strategy and planning; overseeing management (including remuneration); managing potential conflicts of interest; and assuring the integrity of accounting, reporting and communication systems. The Principles also stress the need for objective judgment on corporate affairs by board members, independent of the opinion of management.

Section C: Applied Theory 7.

Ethical theories are commonly divided into three subject areas: (i) Metaethics: Metaethics deals with the entire gamut of ethical issues. It can be defined as "the study of the origin and meaning of ethical concepts." The field of metaethical enquiry is not very well defined. Broadly, however, metaethics deals with three issues: •

Metaphysical issues that deal with the question whether the moral values exist independently of humans or whether they arc simply human conventions: • Psychological issues that deal with the psychological basis of the 1110ral action: and • Linguistic issues that deal with the meaning of the key moral terms we use. (ii) Normative Ethics: The term 'normative' implies something that 'guides' or 'controls'. Thus, normative ethics is that branch of ethics that guides human conduct. It sets out certain moral standards that help us to determine what is right and what is wrong. The Golden Rule is an example of a normative principle: we should treat others the same’ way that we want others to treat us. By the same token, it would also be wrong for a person to lie, harass, victimize or kill others. Thus tl1e Golden Rule lays down one single principle on the basis of which an action may be adjudged right or wrong. Other nonnative theories lay down a set of fundamental principles, such as, "moral rights to life and liberty, which serve as guide to ethical behaviour. The problem here is, there is no agreement among ethicists on which moral principles arc the right ones. Most ethicists do agree, however if a moral principle is to be accepted. it must be: Prescriptive - formulated as an imperative or command, to emphasize that the proposed action is obligatory; Universal - not restricted to a particular group but is applicable to any person in a given situation; Overriding - should be a primary consideration in action assessment; Public - presupposes social interaction Practical - must be achievable by an average individual in ordinary circumstances.

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There are three normative theories each with its own set of moral principles. Each theory represents a particular approach to resolving the normative question, 'How should one act in particular circumstances?' The three theories are: •

Teleological ethical theory: The word 'Teleological' is derived from two Greek words "telos" meaning 'end', 'goal' or 'purpose' and "logos" meaning 'logic' or 'reason'. Thus, teleological means "thinking rationally about ends." Teleological theories are also called Consequentialist theories. These theories hold that an action is considered morally correct if the consequences of that action are more favorable than unfavorable. To judge whether the consequence of an action is favorable or not, one first has to list the good and bad consequences of that action, and then determine whether the good consequences outweigh the bad consequences or vice versa. If the good consequences are greater than the bad consequences, the action is morally right. The drawback of the teleogical theory is that it is very difficult to quantify the consequences of our actions. Moreover, terms such as 'good', 'bad'. 'right' and 'wrong' are perceived and interpreted differently by different persons. Consequentialists have offered three definitions of 'good'. Each of these definitions gives us a different consequentialists moral theory. These three theories are: 9 Egoism: An action is morally right if the consequences of that action are more favorable than unfavorable only to the individual performing tile action. 9 Utilitarianism: An action is morally right if the consequences of that action are more favorable than unfavorable to everyone. Altruism: An action is morally right if the consequences of that action are more favorable the all 9 unfavorable to everyone except the individual. These three theories focus on the consequences of actions for different groups of people, and lead to different conclusions. •Deontological ethical theory: The word 'deontological' is derived from the Greek word "deno" meaning 'duty' or 'obligation'. Deontological theories focus on certain fundamental duties that we have as human being, such as not committing murder or theft. The duties stress that rightness of an act is derived from some feature of the action itself, with reference to its consequences. The duties upheld by deontological theory may be classified under three headings: 9 Duties to God, including honoring him and praying to him 9 Duties to Oneself includes preserving ones life and sharing happiness 9 Duties to Others, including family duties, social duties and political duties •Virtue ethics: Virtue ethics is associated with the Greek philosopher Aristotle. Aristotle used the term 'virtue' to explain our moral obligations. 'Virtue' may be defined as any disposition of character or personality that an individual desires in himself or others. In other words virtues are those dispositions of character, which an individual considers to be good. •Virtue ethics is concerned with attaining these dispositions. The the emphasizes character development rather than the articulation of abstract moral principles that guide actions. (iii) Applied Ethics: Applied ethics is a branch of ethics that deals with specific, often controversial moral issues such as abortion, female feticide and infanticide, displacement of tribal people due to huge hydroelectrical projects, closing, testing drugs on animals etc. There are many such controversial issues in the medical field. Businesses too face many controversial moral choices such as misleading advertising, insider trading, bribery, corruption etc.

8.

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(i) Enlightenment matrix To fulfill social responsibility businesses started by instituting employee pension schemes, medicare etc. Companies operating in foreign markets often resorted to corruption or manufacturing substandard products. To cover up these practices they used their wealth to support various community projects, activities and programs. For the purpose of measuring corporate giving, the following enlightenment matrix can be used to identify the position of companies or specific endowments.

(ii) Community Involvement Choice Flow Private sector organizations cannot perform effectively in all the corporate responsibility activities like social tasks, economic tasks that include creation of jobs etc. Not all organizations can perform effectively in fulfilling their tasks to the community. There are shortages in certain areas and limitations on application elsewhere. But their scope can be expanded by mutually beneficial partnerships between companies and non-profit organizations for improving the community. In fulfilling these social responsibilities, companies must select projects carefully and then ensure that sustained involvement and quality management backs them. Clutterbuck has proposed a systematic approach for managing such activities. It is called the '’Community involvement Choice flow’'. The various steps a company that adopts this approach can take are as follows: A company should first audit its resources and capacity so that it can add real value to its activities. It means that its policies are: •

Set practical, clear and achievable objectives.

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Identifying the primary aim of the programs that the organizations want to be involved.

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Have some well-defined criteria for choosing beneficiary organizations like healthcare, education etc.

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Clearly, identify what 'not' to support

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Have fixed budgets for specific programs

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Appoint specialists and other required staff for organizing and delivering the support.

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Install systems for report evaluation, feedback and change.

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Processed information obtained form these activities have to be updated on a regular basis.

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