PowerPoint Presentation

Ethics A Crisis!By Allen Thomas KannattuAkriti JainNikhita GuptaRicha GoelSangita GhoshVenkat A V R GovindWhen we speak of images and reputations, take a look at some of these issues. We have heard of and/or heard something negative about all of these just in the last few years. What are your thoughts on these occurrences? What is your viewpoint of these people? What is your image of some of these institutions?1ETHICSCan Business be Ethical?Do Ethics matter More Now than Before? Whose Ethics are They?Isnt the Best Ethic maximizing Shareholder Value?Deceptive AdvertisingSexual HarassmentDefective productsEnron,Worldcom,SatyamAbuse Of ResourcesIllegal Business PracticesTheftDiscriminationInsider Trading2What Is Ethics?A set of rules and values that define right and wrong conduct. They indicate when behavior is acceptable and when it is unacceptable.

Ethical vs. Unethical DecisionsEthical decision- reasonable and acceptable because it aids stakeholders, organization, and society.

Unethical decision- decision that a manager would prefer to disguise or hide from other people because of individual gain is placed above others needs.Role Play!!

SAHARA VS SEBIKey playersSahara India Pariwar chief Subrata RoySahara India Real Estate Corp (SIREC) Sahara Housing Investment Corp (SHIC)Securities and Exchange Board of India (SEBI)Supreme Court of IndiaInvestorsPromoters, accredited agents

The Curious case of Subrata Roy- DNASahara India Real Estate Corp (SIREC) and Sahara Housing Investment Corp (SHIC) issued Optionally Fully Convertible Debentures (OFCDs) through subscriptions from 30 million investors with effect from 25th April 2008 to 13th April 2011and raised an amount of Rs. 24,000 Crore.

The case came into light when SEBI reviewed the Red Herring Prospectus of Sahara Prime City Limited.

November 2010 - SEBI restricted the promoters and directors of SIREC and SHIC from raising any capital through the issue of securities including any form of securities.The red herring prospectus contains substantial information on the company, including use of proceeds from the offering, market potential for its product/service, financial statements, details of officers, directors and major shareholders, pending litigation, etc.7June 2011 - SEBI ordered Sahara firms to immediately refund the money collected through sales of OFCDs.

Securities Appellate Tribunal (SAT) and Supreme Court of India ruled in favor of SEBI and ordered Sahara to refund over Rs. 24,400 crores to investors within six weeks.

Supreme Court issued a non-bailable warrant against Subrata Roy, he was arrested on 28th February 2014.

Violations (1/2) Money was raised through OFCDs under the guise of Private Placements.The sheer size of the issue makes it a public issue.Issuance of securities to 50 or more investors required SEBIs approval.

Non- compliance with SEBIs requirements for public offerings of securitiesIf OFCDs are issued, the whole process must be completed in 10 working days. Sahara kept on raising money for a period of 2 years.

Majority of investors of Sahara were villagers, who do not have a clear idea about the fraud associated with this model of business practice.

The sale of securities to a relatively small number of select investors as a way of raising capital.Private placement is the opposite of a public issue, in which securities are made available for sale on the open market. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds.

9Violations (2/2)Untrue Red Herring ProspectusLack of transparency and information pertaining to the issue of OFCDs.Lack of credibility of investor documents.

Sahara sent 127 trucks containing 31,669 cartons full of over three crore application forms and two crore redemption vouchers to Sebi office.

Some more ScamsAdarsh Society Scam-Bending of rules & regulations to allow for the construction of the buildingIllegal possession of flats

2G scam- Improper allocations of the 2G-spectrum technology, causing heavy loss to the Govt. of India

Coalgate scam

Satyam scam Inflation of the accounts in order to show the companys good image

The Ethics of Corporate FraudAccording to a 2012 Global Fraud Study conducted by the Association of Certified Fraud Examiners (ACFE) -The Ethics of Corporate Fraud Ethics no longer remain a matter of personal opinion and strict guidelines need to be enforced in order to clearly differentiate between right and wrong.Companies that commit fraud cross ethical lines that have far reaching consequences.Financial costs of corporate scams have deepethical considerations and significantimplications in our lives.Many of these scams include taxpayer money that would ideally go toward improving amenities for citizens. Money lost to fraud could have been otherwise used to produce goods and services.

Some Daily Life Situations!!!Some ExamplesAbusive or Intimidating BehaviorAccurate but Incomplete DisclosuresDiscrimination against Protected ClassReceiving/Offering Bribes, Kickbacks or IncentivesTheft or Fraud: Personal Use of Company Property or Expense Account MisrepresentationsSexual HarassmentTermination without Fair Notice or Cause15Why is it important?Ethics influence and contribute to:Employee commitment.Investor and customer loyalty and confidence.Legal problems and penalties.Customer satisfaction.The ability to build relationships with stakeholders.Cost control.Performance, revenue, and profits.Reputation and image.

The Case of the ticking time bombsA man who has planted several bombs in crowded areas has been apprehended, the bombs will go off in a short time and hundreds of people may die. The authorities cannot make him divulge the location of the bombs by conventional methods or otherwise. would it be morally justifiable to torture the bomber's innocent wife if that is the only way to make him talk?

Yes, because it will save hundreds of livesNo, because it violates the rights of the innocent wifeCant be sure which to choose

Business v/s BrotherA lady from out of town calls you to list her deceased parents home in Bangalore. She is not sure what it is worth. She feels it might be around worth around Rs. 20,00,000 but lets you determine the worth. You look at the home and feel it is worth at least Rs. 25,00,000 and realize it would be perfect for your brother, but he cannot pay more than Rs. 20,00,000 for a house he urgently needs. What do you do?

Lie to the lady and sell the house to your brother at Rs. 20,00,000 Tell the real worth to the lady and let her decide if she can sell the house at 20,00,000 to your brother

The Case of the Sadistic GuardYou are an inmate in a concentration camp. A sadistic guard is about to hang your son who tried to escape and wants you to pull the chair from underneath him. He says that if you don't he will not only kill your son but some other innocent inmate as well. You don't have any doubt that he means what he says. What should you do?

Pull the chair, it might save the life of othersDont pull the chair, you cannot kill your own sonCant Decide

The Case of the Stakeholder in dilemma You are a substantial shareholder of a alcohol manufacturing company and the company has recently declared bumper dividends. The management has made a proposal to diversify and move into retail which will make your financial position weak and you oppose this. Recently your son has turned to alcoholism. What do you do?

Turn a blind eye and continue to oppose the managementSupport the management even though you lose substantial amount of your wealth

The Ethical DilemmaThere is no perfect method for dealing with ethical dilemmasHowever there are two ways to at least help you come to a decision:Choose the course that is least morally problematicSelect a course of action with the least harm FORCES THAT SHAPE BUSINESS ETHICSIsDecisionor BehaviorEthically andSociallyResponsible?Beliefs and ValuesMoral DevelopmentEthical FrameworkFounderHistoryDefining MomentsStories of DevelopmentGovernment RegulationsCustomersSpecial Interest GroupsMarket ForcesStructurePolicies and RulesCode of EthicsReward SystemSelection and TrainingExternal StakeholdersOrganizational SystemsPersonal EthicsOrganizational CultureThe Role of Leaders In EthicsDevelop ethical behavioral influences.Provide sound ethics trainingInstill strong organizational valuesImplement plans and strategies to achieve ethical excellenceBuild an integrity based organization

Perhaps, now you can see how ethics is much more than, and goes beyond, a code of conduct. There is so much more to it than could ever be included in a code of conduct briefing or document. Simply put, organizational/business ethics starts at the top of the organization.with leadership! Leaders have the responsibility to create a culture of ethics in their organizations, where ethics becomes a part of behavior that is desired rather than something mandated, complete with penalty provisions.

And that brings us to the question, how do leaders create the ethical organization? The role of leaders starts with simply setting the example for all internal and external stakeholders. In short, it starts with the behavior of leaders, themselves, as a basis for enacting and creating purposeful and ethical values.

23Ethical Perspectives for Evaluating BehaviorSocietalOrganizationalIndividualLegalSocietal PerspectiveSocietal Ethics standards that govern how members of a society are to deal with each other on issues of fairness, justice, poverty, and individual rights.

The idea of what is ethical behavior is largely influenced by the society in which the behavior occurs.

Various public opinion surveys suggest a growing disenchantment with the lack of ethical behavior Legal Perspective Ethics are not laws by any means, simply beliefs about what is right or wrong.Legality of actions and decisions doesnt make them ethicalLaws move with the current culture and moral principlesLag behind because they are written and setDo no ensure or even promote ethical behaviorOften laws and ethics are in conflict

Organizational PerspectiveTo provide guidance for employees, an organization can define ethical and unethical behaviors.

Organizations can also guide employee actions both formally and informally.

Individual PerspectiveDespite prevalent societal, legal, and organizational interpretations of what is ethical, individuals have their own values and a sense of what is right or wrong.

Lawrence Kohlberg Suggested people develop morally, much as they do physically, from early childhood to adulthood.

As they develop, their ethical criteria and patterns of moral reasoning go through stages of moral development what actually works in guiding employees ethical behavior ?Setting the right exampleFraming ethics to highlight preventionStress the importance of means

Ethics! Important to All Stakeholders

High Ethics Companies are at ease interacting with internal and external stakeholders; are obsessed with fairness, honesty, and integrity; see actions and decisions driven by values; are confident with the ethical activities of individuals and work groups; value ethical purpose; and can make ethics a core competency in strategic planning.Video!Thank You!!!