Business ethics and corporate governance

Module-1 Indian ethos for management

Ethos

 Ethics is concerned with what is right and what is wrong in human behavior judged
on the basis of a standard form conduct/ behavior of individuals, as approved by
society in a particular field of activity.
 “Ethos” is a discipline that examines one’s morality or the moral standard of the
society whereas “ethics” means expected standards in terms of your personal and
social welfare.
 It is a set of beliefs, ideas, etc., about social behavior and relationship of a person or
group.
 Indian Ethos is all about what can be termed as “National ethos”. Indian ethos refers
to the principles of self-management and governance of society, entity or a system
by wisdom as revealed and brought-forth by great scriptures like Veda, Upanishads,
Gita, Mahabharata, Bible and Quran.
 This wisdom evolved through the old practices of Indian mystics, philosophers and
religious ‘Gurus’, and is now found to have profound implications for self-
management and good governance of a stormy society and business environment,
or even a politically divided world.

According to Oxford Advanced Learner’s Dictionary, “Ethos are the moral ideas and
attitudes that belong to a particular group or society”.

Features

1. Balance or Equilibrium: Balance or equilibrium is a stable state of Indian thought,

i.e., balance between desire and desire lessness, spiritual and secular values,
subjective and materialistic
2. Divinity of Human Being: Indian ethos focuses on the existence of human being as
truth. There is nothing more perfect than the supreme soul.
3. Balance of Personal and Work Life: Indian ethos focuses on the concept that if you
are good then the world is also good for you. So, every individual should have an
effective management and balance of personal and work life in the organization.
4. Importance to Character: The Indian ethos gives much importance to character not
to the knowledge It is the character which is the real power and wealth
5. Cosmic or Pure Consciousness: The divine element, which is an inner part of an
individual, is a part of cosmic or pure consciousness. It gives a base for mutual trust,
cooperative, teamwork and common good.
6. Whole-Man Approach: Indian ethos is based on Indian scripture like-Shruties of Gita
and Upanishad and Smruties of Puranas. Indian thought provides the whole-man
 approach through knowledge of creation, cosmos and internal relation between
spiritual and materialistic life.
7. Duty and Responsibility: Indian ethos rarely talks of rights and prevails ages. It
always emphasizes only on the duties and responsibilities of human beings.
8. Work in Worship: Indian ethos works with the fact that all work is worthy and
honorable. 'Work is worship' is the guiding principle for all effort as advocated in the
Indian ethos.
9. Excellence at Work: According to Indian ethos, total quality management can be
assured through excellence at work, through self-motivation and self-development.
10. Knowledge: Indian ethos deals with two types of knowledge:
 Knowledge of creation
 Knowledge of creator

Need and Relevance of Indian Ethos

1. Elucidate Motivation: Concept of motivation can be explained holistically by Indian

ethos. Considering motivations as internal, every human being has the same divine
atman with immense potentialities within. Vedanta brings infinite expansions of the
mind, breaks down all the barriers and brings out the God in man. Motivation is to
be internal and not external. Such motivation involves the inner beauty and does not
promote any greed in an individual to have more and more in return for his work.
2. Maintain Holistic Universe: Modern science has accepted that in this holistic
universe, all minds and matters are interconnected at a deeper level. The basic unity
of life cannot be broken. Love, sacrifice therefore emerges as the only means for a
meaningful living. On the basis of this holistic vision, Indians have developed work
ethos of life. This helps in living life to the fullest.
3. Welfare: Indian ethos teaches welfare of all (yagna spirit). "Atmano Mokharth Jagat
Hithay Cha” (serve your personal interest but do not forget others). This philosophy
is needed in modern times.
4. Evenness of Mind: Indian ethos helps in evenness of mind. Means are equally
important as the ends. Thus, society acceptable values are to be followed in
determining the objectives as well as in the process of achieving these objectives.
5. Unique Work Culture: Indian ethos helps in development of unique work culture.
Work is considered as duty or Sadhana and there is no difference between
Karma(work) and Dharma(religion). The term Dharma does not indicate any
particular religion. Dharma is a duty to be performed in a given situation. Thus,
Dharma is possible through Karma only.
6. Provides Concentration: Vedanta provides the ways and means of controlling the
mind. It helps to concentrate, increase efficiency, productivity and prosperity. It is
not religion of resignation and retirement. One cannot renounce their action. As the
Gita says "You have to be a man of action, do not run away from your action or
Karma but the same should be according to your Dharma". The second aspect, is
 while doing the Karma; do not be tempted by worldly pleasures, materialism and the
results. One has to be man of action, working in a spirit of renunciation.
Renunciation does not mean living a life of isolation or living in a forest. One has to
face the world and should not run away from your action. Do not get attached to
anything.
7. Self-Development: Integrated human personality of self-developed manager can
assure best and competent management of any enterprise, involving collective
works and efforts. The refined or higher consciousness will adopt holistic attitude. It
will bring out the divine in man. It will achieve perfection or excellence in
whatsoever sector of work. One shall achieve peace, harmony and prosperity within
and without, i.e., in the internal world and in the external world simultaneously.
8. Establishes Value System: Many of the present ills are the results of decline in our
value system and loss of character. Forces of intense competition in the technology
driven era of globalization have taken a heavy toll of traditional values. People need
to re-imbibe the sanatan values of honesty, integrity, compassion, care and
cooperation.

Indian ethos for management

 It means the applications of principles of management as revealed in our ancient

wisdom brought forth in our sacred books like“Gita”, “Upanishads”, “Bible” and
“Quran”.
 Indian Ethos in Management refers to the values and practices that the culture of
India (Bharatheeya Sanskriti) can contribute to service, leadership and management.
These values and practices are rooted in Sanathana Dharma (the eternal essence),
and have been influenced by various strands of Indian philosophy.

Formally, the body of knowledge which derives its solutions from the rich and huge Indian
system of ethics is known as Indian Ethos for Management.

Management is behavioral science and it has to be culture specific. Indian ethos for
Management has as its basis, the cultural base of India and as a country whose culture has
its roots in religion - it does draw its lessons from the religions of the land - be it Hinduism,
Buddhism, or any other. There are some basic ideas and thoughts revealed by our ancient
scriptures which are applicable in today’s management world. They are:

 “Atmano Mokshartham, Jagathitaya cha”: All work is an opportunity for doing well to
the world and thus gaining materially and spiritually in our lives.
 “AtmanaVindyateViryam”: Strength and inspiration for excelling in work comes from
the Divine, God within, through prayer, spiritual readings and unselfish work.
 “Yogahkarmashu Kaushalam, Samatvam yoga uchyate”: He who works with calm and
even mind achieves the most.
  “Paraspar DevoBhav”: Regard the other person as a divine being. All of us have the
same consciousness, though our packages and containers are different.

Basic principles of Indian Ethos of Management

1. Each soul is a potential God : Immense potential, energy, and talents for perfection
as a human being have the spirit within his heart. A human being has a soul, a spark
of the divine. The Divine resides in the heart of a person. The Divine means
perfection of knowledge, wisdom, and power. Therefore a human being has the
immense potential power or energy for self-development. Thus, human efforts can
achieve even an apparently an impossible goal and convert into a reality.
2. Holistic approach: It indicates the unity between the Divine (The Divine means
perfection in knowledge, wisdom, and power), individual self and the universe. The
holistic approach of management is based on the spiritual principle of unity,
oneness, and non-dual concept. Under these principles of unity, the Universe is an
undivided whole where each and every particle is connected with every other
particle. Hence, entire humanity is one.
3. Equal importance to subjectivity/ objectivity: Subtle, intangible subject and gross
tangible objects are equally important. One must develop one’s Third Eye,
“JnanaChaksu”, the Eye of Wisdom, Vision, Insight and Foresight. Inner resources are
much more powerful than outer resources. Divine virtues are inner resources.
Capital, materials and plant &machinery are outer resources.
4. Inner resources are much more powerful than outer resources: Divine virtues are
inner resources. Capital, materials and plant and machinery are outer resources.
5. “Karma Yoga”: “Karma Yoga” (selfless work) offers double benefits, private
6. benefit in the form of self-purification and public benefit. is a good pathway for–
self-purification and self-development, individual as well as collective growth and
welfare, minimum play of passion, jealousy, hatred, greed, anger and arrogance,
team spirit, teamwork, autonomous management, minimum control and
supervision, etc. The result is all-round happiness and prosperity.
7. “YogahKarmasuKaushalam”: It indicates excellence at work through self-
motivation and self-development with devotion and without attachment. This
theory is mainly based on the concept of “Karma Yoga” as indicated by Lord Krishna
in “Bhagavad-Gita”. Endowed with the wisdom of evenness of mind, one casts off in
this life, both good deeds and evil deeds: therefore, devote yourself to yoga. Skill in
Action is Yoga.
8. Co-operation: Co-operation is a powerful instrument for teamwork and success in
any enterprise involving collective work. The idea of cut-throat competition is
founded on the concept of “struggle for existence” and survival of the fittest. Indian
ethos denotes that the royal road for human beings is co-operation which is a
powerful motive for the teamwork. We are human beings having the mind and the
power of discrimination.
Management lessons from veda

1. Vasudha-Eva-Kutumbakam (Accepting the whole world as one and one’s family):

Yes, he did support the idea of nation-states, yet he strongly upheld the Vedic belief
that the nation-state exists “not just for the welfare of its citizen” but also for “the
whole world.
2. Samarpan Bhaav (Dedication): When he saw the sad state of his nation, Chanakya
was depressed and sought revocation. He then decided to work to establish a single
empire for the greater good. He certainly dedicated many years of his life to it.
Legend has it that he found Chandragupta when was a teenager, then educated,
nurtured and mentored him to be King. It was at least over a span of two decades.
This is a testimony of Samarpan Bhaav (Dedication),
3. Lokasangraha (Welfare of all beings): According to Chanakya, this was the supreme
duty of everyone, including the King. This is evident in Book I of the Arthashastra
4. Shubh Laabh (Ethical Profits): This was the key economic objective which the King
had to observe not just among his subjects but also for himself. He may enjoy in an
equal degree the three pursuits of life, charity, wealth and desire, which are
interdependent on each other. Anyone of these three, when enjoyed in excess, hurts
not only the other two but also itself
5. Nishkaama Karma (Deeds without greed): Apart from other altruist attitudes,
Chanakya upheld the idea of deeds without greed. While mentioning the “Duties of
the King” he writes, “A King by overthrowing the aggregate of the six internal
enemies, namely lust, anger, greed, vanity, haughtiness and overjoy, shall restrain
the sense organs.
6. Ati-Hyaastha-Varjayet (Shunning extremes): Balance is a key ingredient according to
teachings of Kautilya in Arthashastra. While he clearly shunned negative qualities, he
also mentioned that people should shun extreme and senseless goodness for the
sake of unworthy people. The essence of life, according to him was ” finding the
balance between good and bad actions, happiness, and unhappiness, pain and
pleasure, cries and laughter.”

Management Lessons from Mahabharata

Mahabharata, the biggest epic ever written ages ago. It’s said that whatever is not there in
the Mahabharata, cannot be found anywhere else. The legendary tale continues to find
prominence in every form of art and continues to overwhelm us even today.

1. Right Leadership and Mentorship- Kauravas had a one-man leadership hierarchy.

The whole of the army was under one person’s command. On the other hand,
Pandavas had different generals directing the operations and had authority to take
decision. The Pandavas had Lord Krishna, and the Kauravas had Karna. Shri Krishna’s
help in mentoring was one of the significant parameters that led to the success of
Pandavas.
 2. Target and Smart Strategy- At the end, War was the target for both Kauravas and
Pandavas. Karna went to subdue other kings so that Kauravas may get wealth. On
the other hand, Arjuna, Bheema and Yudhisthra set out to acquire Divyastras,
strength and strategic wisdom. If Pandavas didn’t have Krishna and his master plan,
they wouldn’t have witnessed the victory they did.
3. Learning and Development- Arjuna grasped whatever came his way. Not only did he
learn the best of military science from Drona, but he was also interested in learning
about divine weapons from Indra. Also, he treated Yudhishter and Krishna as his
mentors too, and continued learning whatever they had to offer.
4. Commitment and Common Goal- In Kauravas side every one had personal bias. On
the other side, Pandavas were committed wholeheartedly and were willing to
achieve the common goal. The Pandavas never stopped fighting for what rightfully
belonged to them. Their courage and determination is definitely something to
admire and learn from.
5. Participation of Women- Pandavas always gave respect to women and their
decisions. Kunti, Draupadi, Subhadra are few influencing female characters in
Mahabharata. On the other side, Kauravas were all patriarchal structure. Gandhari
was not heard and there was no participation of women in decision-making.

Management lessons from the bible

According to bible, Management" is another word for "stewardship.” "Stewards,” or

"managers,” are responsible over something entrusted to them by someone else.
Management is the process of accomplishing God's purposes and plans through proper use
of human, material, and spiritual resources. Management is evaluated by whether or not
these plans and purposes are accomplished.

1. Work to well done- Excellent work is worthy work. Do everything for a bigger
purpose and a nobler cause. Innovate. Always improve and strive to make products
and service better. Always Upgrade and Improve. Think long term. Think eternally.
Show Your Value Through Products that are of High Quality. One essential attitude
that to practice excellence at all times and in all situations. The apostle Paul wrote
these critical words in Colossians 3:23,24. He said "Whatever you do, work at it with
all your heart, as working for the Lord, not for human masters, since you know that
you will receive an inheritance from the Lord as a reward. It is the Lord Christ you
are serving."
2. Know Your Yes’s and Your No’s- Be decisive and make great decisions. Make
decisions based on values. Know You "No's." Say Yes to those things that will make
you and organization better. Live up to your Word. Make your signature mean
something. Fulfill your commitments. Jesus gives a secret to leaders when in
Matthew 5:36, 37 he states "And do not swear by your head, for you cannot make
even one hair white or black. All you need to say is simply ‘Yes’ or ‘No’; anything
 beyond this comes from the evil one." The power to say yes or no quickly means that
you know where you are going and what you are trying to accomplish.
3. Think of others first, Treat others like you want to be treated: Practice
thoughtfulness. When you think of the customers, they will think of you. A helpful
Biblical Principle on which to build a business is found in Luke 6:31. This verse, which
is known as the Golden Rule, states that we should "Do unto others as you would
have them do unto you." Many great businesses use this principle as the foundation
for their business.
4. Maximize resources by "multiplying" to accomplish God's purpose and plans.
5. Minimize disorder by "subduing.”
6. Maintain order by "ruling" (dominion). These three are based on,
The message from God to man was on the subject of management. God told Adam
and Eve: Be fruitful, and multiply, and replenish the earth, and subdue it...and have
dominion over...every living thing that move upon the earth (Genesis 1:28)
7. The mother of James and John, the sons of Zebedee brought them to Jesus and
respectfully asked for a favour. She wanted her sons to sit on both sides of the
throne of Jesus. Jesus indicated that anybody who wants to be a leader must be a
servant. (Mt 20:20-28) and Mark (10:35-45).
Management Lessons in Quran.
1. Create an opportunity before you create a company. Before making your big
announcement, come up with a unique product or a service. There is a promised
land. Moses has to gather the people of God from Egypt and settle them in this
blessed region.
2. Great ideas can’t go too far if they don’t accompany a solid action plan. Develop a
plan on how you would like to take your vision from point A to point B. Even when
you do have the plan, remember to lead from the front. So loosen that tie knot,
come out of the office and get ready to sweat. Moses leads his people across the
path created in the river.
3. Time management- Chapter Al-Mu'minun begins by listing the qualities of a true
believer. Interestingly, the list begins and ends with salah, with the remaining
qualities sandwiched in between. Verse 2 mentions the quality of having khushu'
(humility and submissiveness) in prayer. Verse 9 talks about being "hafidh" of your
prayers, which means performing the prayers within their set time limits.
A true believer prays five times every day no matter where he is or in what
condition. Even if he is lying semi-paralyzed in the ICU or is being chased by a
bloodthirsty hyena, if he is sane and able to move his head, he has to perform all five
prayers within their fixed time limits. They are like pillars around which he should
arrange the rest of his life.

Arthashastra an overview
Vishnugupta Chanakya (son of Chanak) Kautilya, who was addressed as an Acharya
(professor) and statesman, wrote The Arthashastra, the treatise on Economic
Administration in the 4th century before Christ. It consists of 15 chapter, 380 Shlokas and
4968 Sutras. In all probability, this treatise is the first ever book written on Practice of
Management. It is essentially on the art of governance and has an instructional tone.
The Arthashastra develops three interlinked and mutually complementary parts:
 Arthaniti (economic policies) to promote economic growth;
 dandaniti (administration of justice) to ensure judicial fairness; and
 videshniti (foreign affairs policy) to maintain independence and to expand the
kingdom.
Arthashastra literally means ‘the science of wealth’ or ‘economics’ as we know about it in
modern parlance. However, collectively study of Arthashastra, one gets a sense that it's not
meant to throw light simply on the subject of handling materialistic material resource,
however additionally on the wealth that's intangible and can't be measured. The meaning of
‘wealth’ takes a completely new paradigm in Arthashastra.
In Kautilya’s treatise, the government was the organisation and its basic philosophy was to
create a welfare state where the king was the leader. The successful achievement of the
organisational purpose largely depended on the king. The leader’s primary goal according to
Arthashastra is to fulfil the basic purpose of the existence of the organisation

Indian heritage in production and consumption

According to Indian heritage man's attitude towards his social existence shifted towards
duties, obligations, and sacrifice. The belief in Indian heritage is of Simple living and high
thinking'.
Indian heritage emphasised that the essence of civilisation lies not in multiplication of wants
but in the purification of human character. There is very little knowledge about the social
organisations. administration, and systems of production of people living in India.
Production can be defined as conversion of inputs into output through a transformation
process. Men, money, machines, material, and management are different elements of
input. The result of this may be finished products, goods and services. Goods produced
means manufacturing products and services like hospitals, communication, and rental
transport services, etc.
Consumption can be defined as consuming the produced goods and services. For example,
car manufacturer customers buy it and consume it. Customers are those who buy products
and finally consume the product.
Production and consumption are directly connected to each other. If there is no demand
of product and services, then there is no need of production. The consumption of products
and goods increases, then production will get increase automatically
In the early days Indian economy was totally based on agriculture. People used to produce
whatever they required for their self-consumption. There was no need for sale or
exchange of goods. But later on, needs of the people increased and so did the production.
People began to specialise in producing different items of luxury and daily use and did not
have skills and time left for producing others items of their use. However, they were able
to produce surplus items with increase in their efficiency.
A. Indian Heritage in Production- From the point of view of economists, production
from local resources for local needs is the most rational way of economic life. In the
beginning, humans tend to produce goods and products according to their basic
requirements, that we can say needs. Needs, want, and desires are the part of one's
life and production are required for fulfilling these needs, wants, and desires of
human beings. With the development of human beings’ ways of production have
also changed in the modern world. Nowadays, many natural resources of non-
renewable resources are used in excess to produce goods and services. Productive
resources should be diverted produce most essential goods
B. Indian Heritage in Consumption- According to modern economist, a measure of
standard of living being judged by the amount of annual consumption. Consumption
is mainly meaning to the welfare human being. The aim should be to obtain the
maximum welfare with minimum of consumption
Lessons from Indian Heritage for Production and Consumption
The production and consumption have completely changed over the new trend is to move
towards more reliable, more efficient and safer methods of production and consumption. It
is very much evident that production process at any country focuses on social benefits.

1. Impact of Spiritual Consideration: In early times there was a coordination between

Artha (money) and Karma (desire). During that time welfare creation was important
but not the focus. So, the focus was on striking proper balance between the amount
of efforts and amount of remuneration attached to it.
2. Role of Great Economist: Role of great economists in their theories on production
and consumption cannot be ignored. Great intellectual persons like Mahatma
Gandhi, Vivekananda, and Buddha believed in one principle of more of giving and
less of grabbing.
3. Use of Resources: Indian heritage advocates the prudent und economic use
resources in the development of man but does not advocates the irresponsible and
indiscriminate use of resources. It prefers the optimum use of resources and
conservation of natural resources because they are available at least quantity
4. Increase in Per Capita Income: A performance of the plan is judged by the criteria of
how quickly a country is able to increase its per capita income. Indian heritage
System did not pay much attention to increase in per capita come the prime focus
was on spiritual growth.
 Module -2 Indian practices

Indian and western management.

Western management theory originated from the philosophy of ancient Greece. In addition
to the. deep philosophical origin of ancient Greece, it is more important to rely on the
development of. science and technology since modern times. Because they are closely
related to the different.

Basics Western management Indian management

Belief Profit oriented Profit also belief oriented
Guidance Decisions are guided by facts In addition to brain work and
and brain work. There is no facts, emotions are also
scope for sympathy considered
Profit Money based Money, corporate image and
social work based
Marketing Based on competence Based on price variation,
schemes, strategies etc.
Nature Is more open, direct and Puts greater value on
confrontational seniority, relationships and
family ties
Scope Is more productivity-oriented Equal weightage to
than people-oriented productivity-orientation and
people-orientation
Organization Is more flexible and creative Is likely to be paternalistic
Quality Emphasize on machinery and Emphasize on machinery and
facilities facilities also human aspects

Time Everyone maintains a There is no professionalism.

professional relationship at We become friendly on time,
work, even if they are family and then there’s no stopping
members or very close to our physical and emotional
friends. activities towards each other.

Time All employees are very Get late to work and have to
particular about coming to informer into our offices and
and leaving from the office. work until late night to cover
up for the time. consider
work to be our first priority
whereas it should be of equal
importance to personal life.
Work ethos and values for Indian managers
 Work Ethos is at the heart of why we work, what drives us and gives us purpose
and meaning in the workplace. It is a state of mental being that leads to what
Gallup describes as employee engagement (or Disengagement).
 Work ethic is a belief that work and diligence have a moral benefit and an inherent
ability, virtue or value to strengthen character and individual abilities.
 It is a set of values centred on importance of work and manifested by determination
or desire to work hard.
 An individual that possesses a positive work ethics will consider the moral
implications of everything he does and will establish clear boundaries between what
he considers appropriate and what he doesn't, according to his own values and
principles.
 Companies should establish and promote a set of organizational values that can be
observed to perform adequate assessments and goals for each individual that
connects somehow with the organization.
Levels of work ethos
1. Stakeholder Level- At the stakeholder level, ethical work practices extend to
customers, vendors, stockholders and the communities in which the company
operates. What the stakeholders see, the public sees and companies seen by the
general public as being unethical can lose customers and market share. When
stakeholders gain a sense of trust in the company, customers keep company back.
2. Compliance Level- At the compliance level, ethical work practices help the company
to stay within the law. Working against compliance laws can cost you your job, and
can cost your company money if fines are incurred. Acting to stop unethical business
practices shows the rest of the workforce that ethics do matter. Compliance not only
keeps the business legal it is also promoting sustainable business by proving value to
stakeholders.
3. Employee Level- At the employee level, ethical work practices build a positive
environment founded on trust. Distrust in the workplace causes stress. Energy that
should be applied to work is applied to coping with anxiety, instead. You work better
when you can trust that your colleagues will work with you ethically. Your company
also works better when ethical values drive all of its work. Employees, not brick and
mortar, establish a company's brand image.
Values for Indian mangers
1. Integrity- Honesty and integrity are the cornerstone of sustainable success.
Managers who are open, truthful and consistent in their behaviours are more likely
to inspire trust, loyalty and commitment in their teams.
2. Willingness to take Risk- Leaders are not afraid of taking risks or making mistakes.
The best leaders learn from their mistakes and emerge from them resilient and
ready to take on the next challenge.
3. Optimism and Enthusiasm- A great manager inspires others with their infectious
enthusiasm, their disarmingly genuine keenness, passion and their zeal for what they
do. Rather than dwelling on problems they are solution-oriented and focus on how
to make things work and succeed.
4. Commitment to Growth- Leaders recognize that learning is a life-long process and
never stop doing what it takes to grow professionally and personally and maintain a
grip with emerging trends and tools and business realities and technologies.
5. Vision- Leaders know precisely what they want and make clear detailed and
achievable plans to get there. They are not vague or ambiguous in their goals nor do
they leave anything to chance. Leaders are also able to articulate and communicate
their vision clearly and in no uncertain terms and inspire and win others to their
platform with their vision.
6. Pragmatism- While leaders may have lofty visions and ideals, they do not hide their
heads in the clouds and are mindful of the hard facts and figures that surround
them. They are very realistic when it comes to assessing the landscape they operate
in and practical about the decisions they make.
7. Responsibility- Leaders can be depended on to take responsibility for their actions
and to live up to their responsibilities completely. They stand firmly behind the
commitments they make and do not let their teams down; nor do they assign or
allocate blame to deflect from their own responsibilities.
8. Hard Work and Conscientiousness- Leaders work hard and accept no short cuts. The
best leaders lead by their example demonstrating a stellar work ethic by being the
first in the office, the last out and the most productive, persistent and dedicated
while at work.
9. Self confidence
10. Emotional intelligence: Empathy, self-awareness, decisiveness, self-discipline,
intuitiveness and social competence are all key to successful leadership and all are
associated with high levels of emotional intelligence.
11. Expertise in Industry- While there are many generalists in leadership positions the
best leaders become generalists not by knowing a little about many fields but my
being experts in a multitude of fields.
12. Ability to Engage Others- A key leadership trait is inspiring, motivating, engaging and
bringing out the best in others. The best leaders encourage leadership in all around
them and strive to develop and empower others to assume roles of leadership and
responsibility.
Stress
 Stress is a normal reaction the body has when changes occur, resulting in physical,
emotional and intellectual responses.
 Stress is a normal human reaction that happens to everyone. In fact, the human
body is designed to experience stress and react to it. When experience changes or
challenges (stressors), body produces physical and mental responses. That’s stress.
 Stress management training can help you deal with changes in a healthier way.
When a person has long-term (chronic) stress, continued activation of the stress response
causes wear and tear on the body. Physical, emotional and behavioural symptoms develop.
Physical symptoms of stress like Chest pain or a feeling like your heart is racing, Exhaustion
or trouble sleeping, Headaches, dizziness or shaking, High blood pressure, Depression,
Sadness. Often, people with chronic stress try to manage it with unhealthy behaviours like
Drinking alcohol too much or too often etc.
Stress Management
Stress management is defined as the tools, strategies, or techniques that reduce stress and
reduce the negative impacts stress has on your mental or physical well-being. A variety of
techniques can be used to manage stress. These include mental, emotional, and behavioural
strategies.
Stress management approaches include:
 Learning skills such as problem-solving, prioritizing tasks and time management.
 Enhancing your ability to cope with adversity.
 Practicing relaxation techniques such as deep breathing, yoga, meditation, tai chi,
exercise and prayer.
 Improving your personal relationships.
 Sleep
 Interpersonal communication and social support
 Study and practice relaxation techniques-Taking the time to relax every day helps to
manage stress and to protect the body from the effects of stress. You can choose
from a variety of techniques, such as deep breathing, imagery, progressive muscle
relaxation.
 Diet- The benefits of eating health foods extend beyond your waistline to your
mental health. A healthy diet can lessen the effects of stress, build up your immune
system, level your mood, and lower your blood pressure.
 Make time for hobbies and interests.
 Don't rely on alcohol, drugs, or compulsive behaviours to reduce stress. Drugs and
alcohol can stress your body even more.
Meditation
 Meditation has been practiced for thousands of years. Meditation originally was
meant to help deepen understanding of the sacred and mystical forces of life. These
days, meditation is commonly used for relaxation and stress reduction.
 Meditation is considered a type of mind-body complementary medicine. Meditation
can produce a deep state of relaxation and a tranquil mind.
 During meditation, you focus your attention and eliminate the stream of jumbled
thoughts that may be crowding your mind and causing stress. This process may
result in enhanced physical and emotional well-being.
Benefits of meditation
Meditation can give you a sense of calm, peace and balance that can benefit both your
emotional well-being and your overall health. You can also use it to relax and cope with
stress by refocusing your attention on something calming. Meditation can help you learn to
stay centred and keep inner peace.
 Meditation Reduces Stress and Anxiety
 Increases Immunity- Meditation also increases resistance to disease and improves
recovery time after surgery and illness. These health benefits of meditation are
attributed to the fact that meditation helps slow down the brain waves to a state of
calm, which allows the body to also become calmer and more relaxed.
 Relaxes the Body
 Calms the Mind
 Meditation Improves Concentration
 Improves our Communications
 Building skills to manage your stress
 Increasing self-awareness
 Focusing on the present
 Reducing negative emotions
 Increasing imagination and creativity
 Increasing patience and tolerance
Yoga
It is an ancient practice that builds strength and awareness and brings together the mind
and body. It includes breathing exercises, meditation and asanas or poses that stretch and
flex various muscle groups. These asanas are designed to encourage relaxation and reduce
stress.
The importance of yoga cannot be stressed enough. There are different kinds of yoga
practices. There are beginner classes in every style, and the modifications in every yoga
pose make it possible for anyone to start. There are many advantages of yoga. Practising
yoga is said to come with many physical and psychological wellness benefits
 1. Physical Health Benefits
 Prevents Heart Diseases - Practising yoga may help improve your heart health and
reduce several risk factors for various coronary heart diseases. Regular yoga practice
can lower blood pressure, pulse rate, BMI, cholesterol levels, and circulatory strain.
 Reduces Chronic Pain - Several researches and studies suggest that practising yoga
can help reduce many types of chronic pain in conditions like carpal tunnel syndrome
and osteoarthritis. Yoga is claimed to be better than exercise-based recuperation for
lower back pains, as well.
 Improves Flexibility and Balance - Through the use of specific asanas or poses yoga
can help increase the flexibility of your body. Regular yoga practice helps improve
balance and mobility in older individuals.
 Increases muscle strength - Yoga is an excellent addition to your exercise routine for
its strength-building benefits. There are specific poses or asanas in yoga that are
designed to increase strength and build muscle. It also aids in weight loss and
decreases body fat percentage.
 Improves respiration - Yogic breathing, also known as Pranayama, is a practice that
focuses on controlling your breathing through various breathing exercises and
techniques. It helps increase the vital capacity of the lungs and keeps asthma and
other lung diseases at bay.
2. Mental Health Benefits
 Reduces stress - It is a well-known fact that yoga promotes relaxation, and hence
you can turn to yoga for stress relief. It leads to an improved quality of life and
mental health.
 Relieves anxiety - Many people feel on edge every now and then. Yoga can help you
cope with feelings of anxiety and fear. Yoga is also proven to help reduce anxiety and
Post-Traumatic Stress Disorder (PTSD).
 Fights depression
 Promotes sleep quality - Incorporating yoga into your daily routine will enhance
your sleep quality as it increases the secretion of melatonin, a hormone responsible
for regulating sleep and wakefulness. As a result, you will fall asleep faster, sleep for
longer and feel well-rested in the morning.
 Stimulates brain function - As per a few studies, regular yoga practice can improve
your mind’s capacity and lift vitality levels. It also enhances the speed and precision
of working memory, mental adaptability, task exchanging, and data review
capabilities.
Contemporary approaches on leadership
most widely-recognized, contemporary approaches to leadership include:
1. Transformational Leadership
The theory distinguishes transformational and transactional leaders.
Transformational leaders lead employees by aligning employee goals with the leader’s
goals. Thus, employees working for transformational leaders start focusing on the
company’s well-being rather than on what is best for them as individual employees. On the
other hand, transactional leaders ensure that employees demonstrate the right behaviours
and provide resources in exchange.
 First, transformational leaders are charismatic. Charisma refers to behaviour’s
leaders demonstrate that create confidence in, commitment to, and admiration for
the leader.
 Second, transformational leaders use inspirational motivation, or come up with a
vision that is inspiring to others.
 Third is the use of intellectual stimulation, which means that they challenge
organizational norms and status quo, and they encourage employees to think
creatively and work harder.
 Finally, they use individualized consideration, which means that they show personal
care and concern for the well-being of their followers. Examples of transformational
leaders include Steve Jobs of Apple Inc.;
transactional leaders use three different methods. Contingent rewards mean rewarding
employees for their accomplishments. Active management by exception involves leaving
employees to do their jobs without interference, but at the same time proactively predicting
potential problems and preventing them from occurring. Passive management by exception
is similar in that it involves leaving employees alone, but in this method the manager waits
until something goes wrong before coming to the rescue.
Research shows that transformational leadership is a very powerful influence over leader
effectiveness as well as employee satisfaction. transformational leadership effective
because the key factor may be trust. Trust is the belief that the leader will show integrity,
fairness, and predictability in his or her dealings with others. Research shows that when
leaders demonstrate transformational leadership behaviours, followers are more likely to
trust the leader.
2. Leader-Member Exchange (LMX) Theory
Leader-member exchange (LMX) theory proposes that the type of relationship leaders
have with their followers (members of the organization) is the key to understanding how
leaders influence employees.
a. In high-quality LMX relationships, the leader forms a trust-based relationship with
the member. The leader and member like each other, help each other when needed,
and respect each other. In these relationships, the leader and the member are each
ready to go above and beyond their job descriptions to promote the other’s ability to
succeed.
b. In low-quality LMX relationships, the leader and the member have lower levels of
trust, liking, and respect toward each other. These relationships do not have to
involve actively disliking each other, but the leader and member do not go beyond
their formal job descriptions in their exchanges. In other words, the member does
his job, the leader provides rewards and punishments, and the relationship does not
involve high levels of loyalty or obligation toward each other.
Research shows that high LMX members are more satisfied with their jobs, more
committed to their companies, have higher levels of clarity about what is expected of
them, and perform at a higher level. since they receive higher levels of resources and help
from their managers as well as more information and guidance. If they have questions,
these employees feel more comfortable seeking feedback or information. Because of all the
help, support, and guidance they receive, employees who have a good relationship with the
manager are in a better position to perform well.
3. Servant Leadership
 Servant leadership is a leadership approach that defines the leader’s role as serving
the needs of others. According to this approach, the primary mission of the leader is
to develop employees and help them reach their goals.
 Servant leaders put their employees first, understand their personal needs and
desires, empower them, and help them develop in their careers.
 Unlike mainstream management approaches, the overriding objective in servant
leadership is not limited to getting employees to contribute to organizational goals.
Instead, servant leaders feel an obligation to their employees, customers, and the
external community. Employee happiness is seen as an end in itself, and servant
leaders sometimes sacrifice their own well-being to help employees succeed.
 In addition to a clear focus on having a moral compass, servant leaders are also
interested in serving the community. In other words, their efforts to help others are
not restricted to company insiders, and they are genuinely concerned about the
broader community surrounding their organization.
 According to historian Doris Kearns Goodwin, Abraham Lincoln was a servant leader
because of his balance of social conscience, empathy, and generosity.
4. Authentic Leadership
 The authentic leadership approach embraces this value: Its key advice is “be
yourself.” Think about it: We all have different backgrounds, different life
experiences, and different role models. These trigger events over the course of our
lifetime that shape our values, preferences, and priorities.
 Instead of trying to fit into societal expectations about what a leader should be, act
like, or look like, authentic leaders derive their strength from their own past
experiences. Thus, one key characteristic of authentic leaders is that they are self
aware.
 They are introspective, understand where they are coming from, and have a
thorough understanding of their own values and priorities.
 Secondly, they are not afraid to act the way they are. In other words, they have high
levels of personal integrity. They say what they think. They behave in a way
consistent with their values. As a result, they remain true to themselves. Instead of
trying to imitate other great leaders, they find their own style in their personality
and life experiences.
  One example of an authentic leader is Howard Schultz, the founder of Starbucks
Corporation coffeehouses. As a child, Schultz witnessed the job-related difficulties
his father experienced as a result of medical problems. Even though he had no idea
he would have his own business one day, the desire to protect people was shaped in
those years and became one of his foremost values. When he founded Starbucks, he
became an industry pioneer by providing health insurance and retirement coverage
to part-time as well as full-time employees.
‘Gurukul’ system of learning
The Gurukul education system was a form of residential education system where the
students lived in a Gurukul which was the home of the teacher or ‘Acharya’ and served to
be the centre of education. The kernel of this education system lies in the principles of
discipline and hard work. Students were expected to learn from their gurus and use their
knowledge in practical life. The relationship that existed between the student and teacher
is sacred and it often didn’t involve any formal payments but a Gurudakshina that the
student offered the teacher as a homage to their relentless support.
This education system began in ancient times during the Vedic age when there was no
particular form of formal education but the learning was skill-based and religiously rooted
in Vedas, Puranas and holy texts which were the imperative guide for students to expand
their horizon of knowledge.
The ‘Gurukul’ system of education is the epitome of Indian style of learning. Basically, a
gurukul is a school where students live along with their mentors and receive education,
moral values and life skills under their guidance. This process of learning is being practiced
since early ages in India. Gurukul has mythological connotations. ‘Luv-Kush’, the ‘Pandavas’,
‘Pralaadh’, ‘Arjun’ and even Lord Krishna studied in a ‘Gurukul’. Even today, gurukul holds
significance as it is known to develop the students holistically.

Objectives
The gurukul education system was based on multifarious objectives. The guidance provided
through this form of education system helped the students create a life of their own and
sustain themselves through the hardships of life. Listed below are some of the major
objectives of the Gurukul education system.
 Holistic Development
 Personality growth
 Spiritual Awakening
 Awareness about nature and society
 Passing on of knowledge and culture through generations
 Self-control and discipline in life
Advantages of ‘gurukul’ system
 The students of gurukul are more disciplined and organized. They are taught to
follow a well- planned schedule in school.
 The students are more focused and possess more concentration power than normal
students. This is because they are trained through techniques such as meditation
which enhances their focusing power.
 The ‘guru-shishya parampara’ is an integral part of Gurukul. Here, the students
highly respect their teachers and share a good bond with them. They are moulded
under the guidance of their mentors.
 In a gurukul, ‘gurus’ also take complete responsibility for their ‘shishyas’. They share
their experiences, inculcate good habits and mold the character of the students in a
positive direction.
 Gurukul students are taught to value nature. So, they are very close to nature. They
worship nature and also learn a lot of things from it.
 Gurukul emphasizes on practical knowledge which is quite beneficial to build the
concepts of the students.
 Students are taught to follow the principle of ‘simple living and high thinking’ which
is a great lesson for life.

Karma
 Karma means action, work, or deed.
 It is ‘the sum of a person’s actions in this and previous states of existence, viewed
as deciding their fate in future existences.’
 In other terms, karma is often referred to as the good luck or bad luck that has
resulted from one’s own actions, much like the saying, “what goes around comes
around”. If you promote and give off positive energy, it will come back to you in a
circular motion. On the flipside, negativity and evil deeds will promote bad karma.
 For the believers in spirituality the term also refers to the spiritual principle of cause
and effect, often descriptively called the principle of karma, wherein intent and
actions of an individual (cause) influence the future of that individual (effect): Good
intent and good deeds contribute to good karma and happier rebirths, while bad
intent and bad deeds contribute to bad karma and bad rebirths.
 Also, karma in the present affects one's future in the current life, as well as the
nature and quality of future lives one's samsåra. This concept has also been
adopted in Western popular culture, in which the events which happen after a
person's actions may be considered natural consequences.
 There is also a saying, “Karma is a boomerang”
Importance of karma to managers
Karma is a chameleon. You cannot always see it, but it is an energy that transforms from
good to bad and to neutral. This energy is derived typically from our actions - what we say
and what we do. It is that simple.
But, in a fast-paced environment, such as a place of work, considering someone else's
thoughts and feelings before we 'act', can easily get overlooked for prioritising results and
getting the job done. And why should this matter if we are constantly producing cracking
results? It matters.
When it comes to karma in the workplace, even the smallest of things matter. From our
body language to our tone of voice (both written and verbal), to the way we say hello to our
colleagues in the morning. The way we act can have a huge impact on work relationships
and getting the job done.
With the right team in place, the benefits of creating and maintaining positive energy and
good karma can manifest into higher productivity, job satisfaction and more healthy,
cohesive teams. This in turn can save time and money by way of employee retention and
enhancing business results.
For managers, along with the demands of daily workflow and routines, it is important to
instil the concept of good karma into the workplace. This can be achieved as simply as
setting some basic fundamentals:
 Show gratitude and respect of others
 Offer praise for efforts
 Be honest
 Listen effectively and communicate succinctly
 Be patient
 Be mindful of others' workloads
 Be sensitive to others' feelings
 Support colleagues and act collaboratively
 Module -3 Indian value system
Work ethos and values for Indian managers
 Work Ethos is at the heart of why we work, what drives us and gives us purpose
and meaning in the workplace. It is a state of mental being that leads to what
Gallup describes as employee engagement (or Disengagement).
 Work ethic is a belief that work and diligence have a moral benefit and an inherent
ability, virtue or value to strengthen character and individual abilities.
 It is a set of values centred on importance of work and manifested by determination
or desire to work hard.
 An individual that possesses a positive work ethics will consider the moral
implications of everything he does and will establish clear boundaries between what
he considers appropriate and what he doesn't, according to his own values and
principles.
 Companies should establish and promote a set of organizational values that can be
observed to perform adequate assessments and goals for each individual that
connects somehow with the organization.
Levels of work ethos
4. Stakeholder Level- At the stakeholder level, ethical work practices extend to
customers, vendors, stockholders and the communities in which the company
operates. What the stakeholders see, the public sees and companies seen by the
general public as being unethical can lose customers and market share. When
stakeholders gain a sense of trust in the company, customers keep company back.
5. Compliance Level- At the compliance level, ethical work practices help the company
to stay within the law. Working against compliance laws can cost you your job, and
can cost your company money if fines are incurred. Acting to stop unethical business
practices shows the rest of the workforce that ethics do matter. Compliance not only
keeps the business legal it is also promoting sustainable business by proving value to
stakeholders.
6. Employee Level- At the employee level, ethical work practices build a positive
environment founded on trust. Distrust in the workplace causes stress. Energy that
should be applied to work is applied to coping with anxiety, instead. You work better
when you can trust that your colleagues will work with you ethically. Your company
also works better when ethical values drive all of its work. Employees, not brick and
mortar, establish a company's brand image.
Values for Indian mangers
13. Integrity- Honesty and integrity are the cornerstone of sustainable success.
Managers who are open, truthful and consistent in their behaviours are more likely
to inspire trust, loyalty and commitment in their teams.
14. Willingness to take Risk- Leaders are not afraid of taking risks or making mistakes.
The best leaders learn from their mistakes and emerge from them resilient and
ready to take on the next challenge.
15. Optimism and Enthusiasm- A great manager inspires others with their infectious
enthusiasm, their disarmingly genuine keenness, passion and their zeal for what they
do. Rather than dwelling on problems they are solution-oriented and focus on how
to make things work and succeed.
16. Commitment to Growth- Leaders recognize that learning is a life-long process and
never stop doing what it takes to grow professionally and personally and maintain a
grip with emerging trends and tools and business realities and technologies.
17. Vision- Leaders know precisely what they want and make clear detailed and
achievable plans to get there. They are not vague or ambiguous in their goals nor do
they leave anything to chance. Leaders are also able to articulate and communicate
their vision clearly and in no uncertain terms and inspire and win others to their
platform with their vision.
18. Pragmatism- While leaders may have lofty visions and ideals, they do not hide their
heads in the clouds and are mindful of the hard facts and figures that surround
them. They are very realistic when it comes to assessing the landscape they operate
in and practical about the decisions they make.
19. Responsibility- Leaders can be depended on to take responsibility for their actions
and to live up to their responsibilities completely. They stand firmly behind the
commitments they make and do not let their teams down; nor do they assign or
allocate blame to deflect from their own responsibilities.
20. Hard Work and Conscientiousness- Leaders work hard and accept no short cuts. The
best leaders lead by their example demonstrating a stellar work ethic by being the
first in the office, the last out and the most productive, persistent and dedicated
while at work.
21. Self confidence
22. Emotional intelligence: Empathy, self-awareness, decisiveness, self-discipline,
intuitiveness and social competence are all key to successful leadership and all are
associated with high levels of emotional intelligence.
23. Expertise in Industry- While there are many generalists in leadership positions the
best leaders become generalists not by knowing a little about many fields but my
being experts in a multitude of fields.
24. Ability to Engage Others- A key leadership trait is inspiring, motivating, engaging and
bringing out the best in others. The best leaders encourage leadership in all around
them and strive to develop and empower others to assume roles of leadership and
responsibility.
Value Based Management in global change
Value Based Management (VBM) is the management philosophy and approach that
enables and supports maximum value creation in organizations, typically the
maximization of shareholder value.
VBM encompasses the processes for creating, managing, and measuring value.
The value creation process requires an understanding of the attractiveness of the market or
industry where one competes, coupled with one’s competitive position relative to other
players. Once this understanding is established and is linked with key value chain drivers for
cash flow and profitability, competitive strategy can be established or modified to maximize
future returns.
Value Based Management aligns a company’s overall aspirations, analytical techniques,
and management processes with the key drivers of value.

The three elements of Value Based Management

1. Creating Value. How the company can increase or generate maximum future value.
More or less equal to strategy.
2. Managing for Value. Governance, change management, organizational culture,
communication, leadership.
3. Measuring Value. Value Based Management is dependent on the corporate purpose
and the corporate values. The corporate purpose can either be economic
(Shareholder Value) or can also aim at other constituents directly (Stakeholder
Value).
Importance of Value Based Management
Any (large) company operates and is competing in multiple markets:
 The market for its products and services.
 The market for corporate management and control (competition on determining
who is in charge of an organization, threat of takeover, restructuring and/or a
Leveraged Buy-out).
 The capital markets (competing for investors' favour and money).
 The employees and managers market (competition for company image and ability to
attract top talent).
Benefits of Value Based Management
 Can maximize value creation consistently.
 It increases corporate transparency.
 It helps organizations to deal with globalized and deregulated capital markets.
 Facilitates communication with investors, analysts and communication with
stakeholders.
 Improves internal communication about the strategy.
 Prevents undervaluation of the stock.
 Facilitates to improve decision making.
 Encourages value-creating investments.
 Improves the allocation of resources.
 Streamlines planning and budgeting.
 It sets effective targets for compensation.

Phases to developing a Value-based corporate culture:

1. Assessment: Determine the company's position on its values culture and figure out
what the values need to be.
2. Improve initiatives: To develop improvement initiatives that tightly align to the
strategies developed means that they must contain measures and outcomes that
link directly to the measures and outcomes stated in the strategy. This requires that
management to communicate its strategies and objectives.
3. Program development: Once the company determines where it stands on its
selected values, it decides how to make progress towards them. Create a code of
conduct that represents the ethical values established during assessment. Keep the
code precise, based directly on the selected values. Establish a training plan for
getting the required information to everyone working with the company.
4. Program Implementation: Communicating the program effectively throughout the
organization is an essential to a successful program. Distribute the "Code of
Conduct" and train people so they understand it. Verify that all levels of staff are
getting the desired message. Establish an anonymous reporting system to raise
questions about the values and any suspected lapse. If the company is successful
with investigations, several things can happen.
5. Re-assessment and Modification: After the initial implementation of the program's
major elements, review if again. Find out the communications effective in getting the
right message to all levels of staff.
6. Evaluation: This process is more comprehensive than the re-assessment. It comes on
a less frequent basis, usually annually. This will not only help the evacuation process
but can also moderate the costs of gathering such information. Re-evaluating the
program and keeping it relevant are essential to its continued health. Remember
that ethics are about people and how they interact.
Importance of value on stakeholders
The concepts of stakeholder value are important for organisations because they help to
focus the organisation on its mission, purposes and objectives. Stakeholders can also make a
major contribution to the general strategic direction of the organisation. Key stakeholders
and values include:
 Customers- Many would argue that businesses exist to serve their customers.
Customers are actually stakeholders of a business; in that they are impacted by the
quality of service/products and their value. For example, passengers traveling on an
airplane literally have their lives in the company's hands when flying with the airline
 Employees- Employees have a direct stake in the company in that they earn an
income to support themselves, along with other benefits (both monetary and non-
monetary). Depending on the nature of the business, employees may also have a
health and safety interest (for example, in the industries of transportation, mining,
oil and gas, construction, etc.).
 Competitors- For businesses to do well in the market place for the benefit of
customers there is the need for competition between different brands, companies
and parties. It gives incentives for self-improvement. Business parties and
competitors must do so in a mutual and fair manner taking into consideration the
welfare of customers.
 The general public/society- Communities are major stakeholders in large businesses
located in them. They are impacted by a wide range of things, including job creation,
economic development, health, and safety. When a big company enters or exits a
small community, there is an immediate and significant impact on employment,
incomes, and spending in the area. With some industries, there is a potential health
impact, too, as companies may alter the environment.
 Government- Governments can also be considered a major stakeholder in a
business, as they collect taxes from the company (corporate income taxes), as well
as from all the people it employs (payroll taxes) and from other spending the
company incurs (sales taxes). Governments benefit from the overall Gross Domestic
Product (GDP) that companies contribute to.
Work values
Work values are beliefs or principles relating to your career or place of work. They describe
what you believe matters regarding your career.
For instance, some people believe that getting a sense of achievement through their work is
a core priority in their career. For others, a healthy work-life balance trumps anything else.
Employees typically have their own set of core values, but so will organizations. For
example, some companies value transparency, while others will see value in teamwork and
communication.
Some workplace values are,
 Being accountable
 Making a difference
 Focusing on detail
 Delivering quality
 Being honest
 Keeping promises
 Being reliable
 Being positive
 Meeting deadlines
 Helping and respecting others Being a great team member
 Respecting company policy and rules
 Showing tolerance

Importance of Workplace Values

1. Values are the foremost thing which makes a company: Nowadays, the companies
are not only mere business entities, but they are more than that. Now companies
breathe, live by focusing on many brands at a time. The companies are tapping large
part of the market, changing the demands and building altogether different
environment to work in.
2. It promotes a cooperating environment in the company: The company is known by
the employees who work in it. If the employees leave the company one by one, the
company will not work and may come to an end. So, this is the behaviour of the
employees which promotes a good and cooperating environment in an organization.
3. Promotes positivity among the employees: If the employees will not adhere to good
behaviour in an organization, it will ultimately affect the work and the output. So, in
order to promote happiness and positivity among employees, good values are
expected within an organization.
4. Enhances the interpersonal behaviour: Interpersonal behaviour means the
communicating behaviour among the employees within an organization. If there will
be no rules and code of conduct for the employees to follow and the employees are
unwilling to talk to one another, then it promotes negativity within the organization.
5. To prevent chaos within the organization: No values in the workplace, no ethics in
the workplace to follow, no codes of conduct, and then, this is not at all possible. So,
in order to make it possible, the first and the foremost thing is to let employees
adhere to the values. Else there would be only chaos and no work within the
organization. To avoid all those, the values are important for workplaces.
 6. To maintain discipline within the organization: Discipline is the father of success. If
you are disciplined in your work, you are going on the right track, but if you are not
disciplined you are astray from your path. So, if you want to achieve the goals you
have desired, it is important to work with values within the company.
7. Values within the workplace attracts more employees: The values are something
which attract more employees. This is because if the company will follow proper
values, it will establish a good work culture and if the work culture is satisfying then
ultimately more employees would want to work within the organization.
8. Helps in the growth of the company: The values form a good work culture. If there
will be no values, no rules to follow, no one would want to work unless the
environment is work friendly. So, the more valuable work environment is, more it
will be good for the growth of the company itself.

Secular vs spiritual values

Secularism
 Secularism means non- spiritual.
 These values are based on facts and science.
 Secularism is a professional value which completely ignores the difference of caste,
colour, religion, culture etc.
 Which means being materialism and task oriented for managers
 The fundamental principle of Secularism is that in his whole conduct, man should be
guide exclusively by considerations derived from the present life itself. In one sense,
secularism may assert the right to be free from religious rule and teachings, and the
right to freedom from governmental imposition of religion upon the people within a
state that is neutral on matters of belief.
Secular values and the ethical guidance derived from them in neither arbitrary nor aligned
with dominant global economies. Instead, they are associated with a branch of moral
philosophy based on universal human faculties such as logic, empathy, reason, altruism,
or moral intuition.
Secular values are not limited to particular local cultures, communities, and beliefs, or
those values that are based on supernatural claims or religious beliefs.
Examples- Trust worthiness, discipline, logic, empathy, reason, moral intuition, altruism
etc.
Features of secularism
 It emphasizes on material and cultural improvement of human being
 In management, it should maximize the profit without discriminating the work force
 It has the concern for current age or world and its improvement
 It has the responsibility towards society, that is one should take maximum efforts for
the well-being of society.
 It give importance to professionalism (which means the decision that has been taken
should not be on the basis of religion, caste, color etc.)
Secular values in management
 Profits: Business is done for profit for the organization by which it can survive and
develop. This profit should be justified in context of service and development of
society.
 Productivity: Business value emphasis on productivity through which an organization
serve the society. It doesn't make any difference on the basis of caste, religion or any
other difference of customer.
 Goodwill and Reputation: Goodwill is the important things for the business people.
All the customer of any society should be satisfying from the services of any
organization. It makes an organization a real unit of service oriented industry.
 Strategy and Achievement: All the professionals of an organization have their
strategy for achieving their goal and objective to serve the society and make profit
again for the development.
 Responsibility: Business people and organization are equally responsible to the
whole society for the safe development and harmony.

Spiritual Values
The Spiritual values are the notions that allow human beings to establish a relationship with
one or more deities.
Values most treated by the theology are harmony, truth, charity, faith and hope.
These values are defined as fundamental so that the human being can establish a deep
relationship with god, outside the human and material plane.
In general, spiritual values focus on those things that contribute to the spiritual
development of human beings without any relation to the material plane.
Spiritualism
 Spiritual means religious one or the people who believe in religion.
 It involves belief in a relationship with some superior power
 Spiritual Practices or spiritual discipline (often including spiritual exercises) can be
referred as the regular or full- time performance of actions and activities undertaken
for the purpose of improving spiritual development. It may include meditation,
mindfulness, prayer etc.
 Spiritual needs are placed on top level instead of the other than in need hierarchy
theory.
 Example – Love, Hope, forgiveness etc.

Spiritual values in Management

 Ego-Lessness: Spiritual persons have a concept of unity of all life they don't have a
sense of separate or individual existence where they feel egoistic. They see
themselves in all and all themselves. They don't have greed, anger, jealousy or any
other such bad feelings, which made differences. Ego is the cause of all the evils.
  Self-fulfilment: spiritual persons should have a feeling of self-completeness. They
should have no personal desire or goal where they seek anything anybody. They
should not deficit driven personality.
 Universal or Unconditional love: Spirituality loves all the human being. It is concern
for the sharing, caring and giving out their humanness to others their conduct and
behaviour are guided by the ethics of love. They don't have any fear from anyone
and nobody has any fear from them. This is called the great spiritual value of
'Abhaya'.
 Complete freedom: Spiritual people are free from all human limitations or personal
attachments. They have overcome all dualities conflicts and suffering of life. So, they
are living a blissful life from heart and soul.

Difference between secular and spiritual values in management

Secular values Spiritual values

It refers to the thoughts and It refers to the insights thrown on
philosophies as reproduced by management by Vedas and
individuals. Upanishad or by spiritual forces.
Views on values are not generally Values are completely ethical and
ethical moral because it take references
from Geetha, Upanishad, Bible etc.
The leaders can be selected from Leaders must be one from the spiritual
anywhere believers.
Treat management values as a Treat management values as a philosophy
science
Contribution of Indian thoughts is Contribution of Indian thoughts has
comparatively poor magnificent theories.
on secular there is no reference from any On spiritual values there is reference to a
book. spiritual book whereas
Find its way from Maslow's need Find its base from Vedas and
hierarchy theory and culminate till Upanishads with special reference
most modern thoughts on to Gita, Bible etc
management
 Module 4 Need for Ethics

Ethics can be defined broadly as a set of moral principles or values. Each of us has such a
set of values, although we may or may not have considered them explicitly.
Need of ethics
 Ethical behaviour is necessary for a society to function in an orderly manner. It can
be argued that ethics is the glue that holds a society together.
 Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human
needs. Every employee desire to be such himself and to work for an organization
that is fair and ethical in its practices.
 Creating Credibility: An organization that is believed to be driven by moral values is
respected in the society even by those who may have no information about the
working and the businesses or an organization.
 Uniting People and Leadership: An organization driven by values is revered by its
employees also. They are the common thread that brings the employees and the
decision makers on a common platform. This goes a long way in aligning behaviours
within the organization towards achievement of one common goal or mission.
 Improving Decision Making: A man’s destiny is the sum total of all the decisions that
he/she takes in course of his life. The same holds true for organizations. Decisions
are driven by values.
 Long Term Gains: Organizations guided by ethics and values are profitable in the
long run, though in the short run they may seem to lose money. Tata group, one of
the largest business conglomerates in India was seen on the verge of decline at the
beginning of 1990’s, which soon turned out to be otherwise. The same company’s
Tata NANO car was predicted as a failure, and failed to do well but the same is
picking up fast now.
 Securing the Society: Often ethics succeeds law in safeguarding the society. The law
machinery is often found acting as a mute spectator, unable to save the society and
the environment.
Business Ethics
Business ethics in simple terms is application of ethics in businesses. Business has to go
with its economics as well as social obligations.
Any managerial decision has to distinguish between good and bad, right and wrong, just
and proper. It is also seen that the ethical companies which took care of their social
responsibilities have survived competition and growing. Ethical issues occur in decision
making in industry, education.
 Business ethics is the prescribed code of conduct for businesses. It is a set of
guidelines for dealing with various procedures ethically.
 The discipline comprises corporate responsibility, personal responsibility, social
responsibility, loyalty, fairness, respect, trustworthiness, and technology ethics. It
emphasizes sustainability, customer loyalty, brand image, and employee retention.
  The motive is to prevent unethical business practices, both deliberate and
inadvertent. Some unethical practices circumvent law enforcement. Even then,
businesses risk paying a hidden cost—the loss of reputation.
Principles of Business Ethics
1. Accountability: Ethics is all about taking individual responsibility. It goes both ways.
Individuals are responsible for unethical practices of the firm because they did not
come forward to become whistle-blowers. Similarly, when an employee indulges in
unethical business practices, the firm is responsible.
2. Care and Respect: Professional interactions between co-workers should be
responsible and respectful. Firms should make sure that the workplace is safe and
harmonious.
3. Honesty: The best way to gain the trust of the employees is to have transparent
communication with them.
4. Avoid Conflicts: Firms need to minimize conflicts of interest in the workplace.
Excessive competition within the workforce can end disastrously.
5. Compliance: Firms need to comply with all the rules and regulations.
6. Loyalty: The employees should be faithful to the organization and uphold the brand
image. Grievances, if any, should be dealt internally.
7. Relevant Information: It is necessary to provide information that is comprehensible.
All the relevant facts, whether positive or negative, must be disclosed. It is unethical
to hide unreasonable terms and conditions in the fine print.
8. Law Abiding: Corporate laws protect the rights of every section of society. Any kind
of discrimination is unethical. Personal biases of individuals should not affect the
decision-making of leaders.
9. Fulfilling Commitments: It is unethical to justify non-compliance by interpreting
agreements unreasonably.

Types of Business Ethics

1. Corporate Responsibility: The organization works as a separate legal entity with

certain moral and ethical obligations. Such ethics safeguard the interest of all the
internal and external parties associated with the firm. This includes the employees,
customers, and shareholders
2. Social Responsibility: Making profits should not be at the cost of society. Therefore,
corporate social responsibilities (CSR) have been a common practice where
businesses work towards environmental protection, social causes, and spreading
awareness.
3. Personal Responsibility: Employees are expected to act responsibly with honesty,
diligence, punctuality, and willingness to perform excepted duties. Individuals should
settle dues in time and avoid criminal acts.
 4. Technology Ethics: In the 21st century, companies have adopted e-commerce
practices. Technology ethics includes customer-privacy, personal information, and
intellectual property fair practices.
5. Fairness: Favouritism is highly unethical. Every individual possesses certain personal
bias. But at the workplace, personal beliefs and biases should not affect decision-
making. The firm has to ensure fair chances of growth and promotion for all.
6. Trustworthiness and Transparency: Businesses should maintain transparency in
business practices and financial reports.
Absolutism vs relativism
Absolutism
Absolutism is making normative ethical decisions based on objective rules. It maintains that
some things are always right and some things are always wrong. They are fixed for all time,
places and people.
Absolutism approaches things in an objective manner and considers an action as right or
wrong. In this sense, there is no middle ground. An action can be either right if not wrong.
A common example of Absolutism is Kantian Ethics.
Advantages of Absolutism
 It allows moral rules to be evaluated critically.
 It is fair as people are treated the same as the rules are the same for everyone.
 If a moral rule is right, then there would be no need to have different rules for
different people because the absolute rules are universal.
Disadvantages of Absolutism
 Sometimes it is not appropriate to treat people the same due to circumstances that
arise due to situations.
 Life is not simply 'black and white' and as this is the case, it is simply not right to
make everyone live by the same rules.
Relativism
Relativism rejects the objective analysis of actions and elaborates that human actions
cannot be put into rigid categories as right or wrong. Relativism stresses the importance
of the context in which an action takes place and pays attention to the intentions, beliefs,
and goals of the individual or the group. This is why it can be stated that the approach is
not excessively objective.
It is popular in the present day because there is a belief that everyone should be tolerant
towards others' beliefs and views; this idea for freedom of speech implies that there are no
‘real’ absolute truths.
Some believe that all human circumstances are different and therefore there is a need to
have different moral rules for people.
1. Cultural Relativism-
 it says that different countries - or even areas within a country - have
different values, for example, Muslims expect women to cover up (at least
some of) their bodies.
  It affirms the idea 'when in Rome do as the Romans do'.
 It allows there to be variety in different cultures.
 However, as there are no overriding standard to compare cultures to, noone
can say that one culture is better than another because of what they believe -
this could be either an advantage or a disadvantage.
 Moral truths are no more than subjective feelings about behaviour which can
therefore never achieve the status of fact as they are the result of ways of life
and opinions which vary from culture to culture or person to person
depending on circumstances.
2. Historical Relativism
 This says that what was right one hundred years ago may not be right in the
present day because times and society have moved on. 100 years ago,
women did not have the vote but due to changing opinions in society they
now do and hold principal positions in parliament, etc.
 Society also accepts the need to change sets of rules which used to be
sufficient in previous times.
Advantages of Relativism
 It allows for the diversity that is present in the world.
 It understands that life is not black and white.
 Cultures may believe that their practices are more justifiable than other cultural
practices, but by using a relativist approach, this will allow for acceptance between
different peoples.
Disadvantages of Relativism
 Just because there are different moral views, it doesn’t necessarily mean that they
are all of equal value. For example, the Nazis believed that they were right to kill
millions of Jews, homosexuals and disabled people: surely it would be wrong to say
that this had the same worth as other moral views. Cultural Relativists would not be
able to criticise the Nazis as they believe that all cultures have views of equal worth.
 Cultural Relativism also ultimately reduces the meaning of what is ‘good’ to ‘what is
socially acceptable’. For example if a culture allows wife-beating, then cultural
relativism would also have to say that wife-beating is morally acceptable.
 It may be more difficult to decide when the rules need changing in different
circumstances.
Absolutism versus Relativism
1. Relativism can take into account the reasons why something happens. Absolutists
would have to condemn. a mother who steals food for her starving children
because in their eyes all stealing is wrong, whereas Relativists can say stealing is
wrong usually but as the mother needed to feed her children, what she did was right
and should therefore not be condemned.
2. Moral Guidelines - In absolutism, the moral guidelines are definite while those of
relativism are dependent on the contexts of various situations.
 3. The Value of Tolerance- Relativism is more closely associated with the value of
tolerance since the differences in background are considered. On the contrary,
absolutism does not look into diversity as it strictly adheres to the moral guidelines;
hence, its critics argue that this perspective paves way for discrimination.
4. Intrinsic Values- Unlike relativism, absolutism holds that acts are intrinsically right or
wrong. For instance, since absolutists believe that killing is intrinsically wrong, a
woman who killed a rapist in self-defense is condemned as immoral. On the other
hand, a relativist understands the crime of passion involved in the situation and
views the woman as moral.
5. Religion- As compared with relativism, moral absolutism is more associated with
religion since church doctrines often endorse specific ethical guidelines.

Kohlberg’s 6 Stages of Moral Development

 a comprehensive stage theory of moral development based on Jean Piaget’s theory
of moral judgment for children (1932) and developed by Lawrence Kohlberg in
1958. Kohlberg theorised that humans develop their moral judgements in 6 stages.
 To confirm his theory, Kohlberg interviewed boys between the ages of 10 and 16.
 He then analysed how they would justify their decision when confronted with
different hypothetical moral dilemmas.
 Superimposing the participants’ argumentation onto their cognitive development,
Kohlberg postulated, that humans progress through the stages in a hierarchical
order, as their cognitive abilities develop.
 Lawrence Kohlberg’s theory claims that our development of moral reasoning
happens in six stages. The stages themselves are structured in three levels: Pre-
Conventional, Conventional and Post-Conventional.
1. Level 1: Preconventional level
At the preconventional level, morality is externally controlled. Rules imposed by authority
figures are conformed to in order to avoid punishment or receive rewards. This
perspective involves the idea that what is right is what one can get away with or what is
personally satisfying. Level 1 has two stages.
A. Stage 1: Obedience and Punishment Orientation- The first stage highlights the self-
interest of children in their decision making as they seek to avoid punishment at all
costs. Behaviour is determined by consequences. The individual will obey in order to
avoid punishment.
B. Stage 2: Individualism and Exchange- Behaviour is determined again by
consequences. The individual focuses on receiving rewards or satisfying personal
needs. This stage observes how children begin to adopt the views taught, but also
recognize that there is more than one point of view for each matter. It relies heavily
on the exchange of favours and can be summarized with the common marketing
saying “what’s it in for me?” Children at this stage are not motivated by friendship or
respect but by the personal advantages involved.
 2. Level 2: Conventional level- At the conventional level, conformity to social rules
remains important to the individual. The individual strives to support rules that are
set forth by others such as parents, peers, and the government in order to win their
approval or to maintain social order.
A. Stage 3: Good Interpersonal Relationships/ Good Boy or Nice Girl orientation- This
stage recognizes the desire to be accepted into societal groups as well as how each
person is affected by the outcome. Behaviour is determined by social approval. The
individual wants to maintain or win the affection and approval of others by being a
“good person.”Children in the third stage are typically pre-teens or early teenagers
and have now adopted the societal norms as their own.
B. Stage 4: Maintaining the Social Order- In this stage, laws and social order reign
supreme. Rules and regulations are to be followed and obeyed. Stage four shows the
moral development of a person as a part of a whole society. Each person becomes
more aware of the impact of everyone’s actions on others and focuses now on their
own role, following the rules, and obeying authorities. While stage three highlights
the close relationships with family and friends, stage four attempts to maintain social
order in the community.
3. Level 3: Postconventional or principled level
At the postconventional level, the individual moves beyond the perspective of his or her
own society. Morality is defined in terms of abstract principles and values that apply to all
situations and societies. The individual attempts to take the perspective of all individuals.
A. Stage 5: Social Contract and Individual Rights- This stage acknowledges the
introduction of abstract reasoning as people attempt to explain specific behaviours.
B. Stage 6: Universal Principles- The final stage of Kohlberg’s theory states that moral
reasoning is based on personal values. The sixth stage was created to acknowledge
the use of justice in moral reasoning. General, universal morals and ethics are used
as a baseline for what is right and just. These are often abstract concepts that cannot
be clearly defined, only outlined. Equality, justice, dignity, and respect are all ideas
that form the basis of universal principles. Laws and rules are only effective if they
support the universal principles, which each person at this stage works to uphold.
Ethical Dilemma
 A problem in the decision-making process between two possible but unacceptable
options from an ethical perspective.
 An ethical dilemma (ethical paradox or moral dilemma) is a problem in the
decision-making process between two possible options, neither of which is
absolutely acceptable from an ethical perspective. Although we face many ethical
and moral problems in our lives, most of them come with relatively straightforward
solutions.
 Employees may experience an ethical dilemma when deciding whether to report an
incident of workplace harassment or declare a conflict of interest is an example.
  The biggest challenge of an ethical dilemma is that it does not offer an obvious
solution that would comply with ethics al norms. Throughout the history of
humanity, people have faced such dilemmas, and philosophers aimed and worked to
find solutions to them. The following approaches to solve an ethical dilemma were
deduced or managed:
 Refute the paradox (dilemma): The situation must be carefully analysed. In some
cases, the existence of the dilemma can be logically refuted.
 Value theory approach: Choose the alternative that offers the greater good or the
lesser evil.
 Find alternative solutions: In some cases, the problem can be reconsidered, and
new alternative solutions may arise.
 Understand Duties & Obligations – A great way to approach any ethical dilemmas is
from the standpoint of understanding the agent’s duties in the situation.
 Maximize the Good & Minimize the Bad – When a problem has no perfect solution,
the best approach is to analyse the outcomes of each potential action and choose
the action with the greatest positive impact and least negative impact.
Characteristics of Ethical Dilemmas
The difference between ordinary decision making and ethical decision making is the nature
of the problem to be solved. The following are examples of circumstances where ethical
dilemmas often arise:
 Uncertainty about the consequences
 Rule book does not apply
 No good options
 Disagreement, with no time for consensus building.
 They often deal with what’s legal. A large part of ethical behaviour is following the
law. For example, if someone is considering stealing money, that’s an ethical
dilemma because there is a right and wrong choice—and one choice is clearly illegal.
 There is a right and wrong choice. In an ethical dilemma, you must decide between
doing the right thing and the wrong thing.
 must have more than one course of action available.
 The agent recognizes that all available courses of action require them to compromise
on some personally held ethical standard or value.

Ethical decision making

 Ethical decisions inspire trust and with-it fairness, responsibility and care for others.
  The ethical decision-making process recognizes these conditions and requires
reviewing all available options, eliminating unethical views and choosing the best
ethical alternative.
 Ethical decision-making is a cognitive process where people consider ethical rules,
principles or guidelines when making decisions.
Ethical decision-making occurs through a series of steps or process
1. Identify ethical dimensions- Don’t jump to conclusions until the facts are on the
table. Ask yourself questions about the issue at hand, such as the 5 whys method.
Facts are not always easy to find, especially in situations where ethics plays an
important part. Some facts are not available or clearly demonstrable. Also indicate
which assumptions are made.
2. Define the ethical issue- Before solutions or new plans can be considered, the
ethical issue is clearly defined. If there are multiple ethical focal points, only the
most important should be addressed first.
3. Explore the collection of relevant information
4. Examine evaluation according to ethical standards
5. Consideration of alternatives
6. Making decision
7. Implementing the decision
8. Reviewing and modifying the decision if necessary.

Framework for ethical decision making

Countless philosophers and ethicists have attempted to answer this critical question. At
least five different ethical norms or standards have been proposed. The most important are
explained below.
1. The Utilitarian Approach- This approach dictates that the action that is the most
ethical is the action that produces the most good and causes the least harm. In other
words, the decision that strikes the greatest balance between good and evil. In a
business environment, it is therefore the decision that yields the most benefits and
causes the least damage to customers, employees, shareholders, environment, etc.
2. The Right Approach- The right approach suggests that the most ethical decision is
the one that best protects and respects the moral rights of all concerned. This
approach argues that people have a dignity based on human nature or their ability to
freely choose what they want to do with their lives. Based on that dignity, they have
the right to be treated equally by others and not just as a means to an(other) end.
3. The Fairness or Justice Approach- All equals should be treated equally. The Greek
philosopher Aristotle and others contributed to that idea. Today, this idea is used to
indicate that ethical decisions treat everyone equally. If not equal, this must be
based on a standard that is explainable. People are paid more for their hard work
when they contribute more to the organization. That is fair. But many wonders
whether the salaries of CEOs, some 100 times higher than others, are fair.
 4. The Common Good Approach- The Greek philosophers also contributed to the idea
that living in a community is a good thing. People’s actions and actions must
contribute to this. This approach suggests that relationships within society are the
basis of ethical reasoning and acting. Respect and compassion for all others,
especially the vulnerable, are prerequisites for maintaining an ethical way of life.
5. The Virtue Approach- An ancient approach to ethics is the belief that acting ethically
must be in accordance with certain virtues that ensure the development of humanity
in general. Virtues are tendencies and habits that enable man to act with the highest
potential of human character.
Advantages
 Allow ascertaining all the possible consequences of business environment.
 Building positive relationship with the customers and other stakeholders
 Allows identifying the loopholes in value system of companies and accordingly the
changes in decision making
 Ensure organization’s sustainability
 Ensuring high level positive perception towards the brand

Ethical reasoning
 Ethical reasoning is a type of critical thinking that uses ethical principles and
frameworks. It is a process of identifying ethical issues and weighing multiple
perspectives to make informed decisions.
 Ethical reasoning helps determine and differentiate between right thinking,
decisions, and actions and those that are wrong, hurtful and/or harmful to others
and to ourselves.
 Ethical reasoning assumes that everyone will make choices that will cause no harm.
Consequently, an ethical society will prohibit unethical actions, such as: slavery,
torture, sexism, racism, murder, assault etc.
The types of ethical reasoning are,
 Utilitarian (outcome based)- Moral principle that holds that the morally right course
of action in any situation is the one that produces the greatest balance of benefits
over harms for everyone affected.
 Human Right- Moral principle that holds that the morally right course of action in
any situation is the one that produces the greatest balance of benefits over harms
for the individual.
 Justice- Moral principle holds that equals should be treated equally unless there is a
sufficient reason to treat anyone (or anything) unequally

MODULE 5 – CORPORATE GOVERNANCE

Corporate Governance
Corporate governance is the system of rules, practices, and processes by which a firm is
directed and controlled. Corporate governance essentially involves balancing the interests
of a company's many stakeholders, such as shareholders, senior management executives,
customers, suppliers, financiers, the government, and the community.
Bad corporate governance can cast doubt on a company's operations and its ultimate
profitability.
The basic principles of corporate governance are accountability, transparency, fairness, and
responsibility and The four P's of corporate governance are people, process, performance,
and purpose.
Benefits of Corporate Governance
 Good corporate governance ensures corporate success and economic growth.
 Strong corporate governance maintains investors’ confidence, as a result of which,
company can raise capital efficiently and effectively.
 It lowers the capital cost.
 There is a positive impact on the share price.
 It provides proper inducement to the owners as well as managers to achieve
objectives that are in interests of the shareholders and the organization.
 Good corporate governance also minimizes wastages, corruption, risks and
mismanagement.
 It helps in brand formation and development.
 It ensures organization in managed in a manner that fits the best interests of all.
Four Principals of Corporate Governance

1. Accountability: Accountability, in essence, means a willingness or an obligation to

accept responsibility for one’s actions. It refers to the obligation and responsibility
to give an explanation or reason for the company’s actions and conduct.
Accountability answers more questions than just the one regarding who the
responsible person is. It has to be looked at from a positive standpoint as well
because it recognises accomplishments too. Accountability establishes a system in
place where everyone is held accountable for their respective work and associated
duties. Accountability holds two main things firmly in place:
 Ensures that the management is accountable to the Board.
 Ensures that the Board is accountable to the shareholders.
2. Fairness- Fairness refers to equal treatment, for example, all shareholders should
receive equal consideration for whatever shareholdings they hold. However, some
companies prefer to have a shareholder agreement, which can include more
extensive and effective minority protection.
In addition to shareholders, there should also be fairness in the treatment of all
stakeholders including employees, communities and public officials. The fairer the
 entity appears to stakeholders, the more likely it is that it can survive the pressure of
interested parties.
3. Independency- The ability to make decisions while being free from any sort of
constraint or without any influence is what independence is. And this is something
that has proven to be crucial to the smooth operation of businesses as well. It allows
the person to act with integrity and make decisions and form judgments bearing in
mind the best interests of the stakeholders. This is the reason companies appoint
independent directors, so as to ensure that there is no force of hand being used or
that the director does not have any personal interests with the company thereby
hampering his ability to make decisions freely.
4. Transparency: Transparency means openness, a willingness by the company to
provide clear information to shareholders and other stakeholders. For example,
transparency refers to the openness and willingness to disclose financial
performance figures which are truthful and accurate. Disclosure of material
matters concerning the organisation’s performance and activities should be timely
and accurate to ensure that all investors have access to clear, factual information
which accurately reflects the financial, social and environmental position of the
organization. Keeping the investors and other stakeholders informed helps build a
relationship of trust and solidarity that results in the rewards of a higher valuation
and easy access to funding.
Advantages of Corporate Governance
 Compliance with laws: With corporate governance in place, compliance with various
laws is taken care of easily, as corporate governance includes the rules, regulations
and policies that enable a business to stay compliant throughout and function
without any hassle or legal inconveniences whatsoever.
 Lesser fines and penalties: Since the legal compliance aspect is taken care of credit
to the corporate governance practices, companies are able to save a fortune on
unnecessary fines and compliances and possibly redirect those funds towards
business objectives to achieve greater heights
 Better management: Since there is a structure in place with regard to how the entity
operates, its day-to-day functioning, managing the activities and achieving targets
becomes a whole lot easier. The work atmosphere also takes care of itself under
good principles of corporate governance fostering teamwork, unity, efficiency and a
drive for success.
 Reputation and relationships: Companies with good corporate governance are able
to attract investors and external financiers with relative ease, going by their sterling
reputation and brand image. One of the pillars of corporate governance is
transparency, which is the practice of sharing key internal information with the
stakeholders. This improves the relationship of the entity with its stakeholders and
sows the seeds of trust between the company and society at large.
  Lesser conflicts and frauds: The rules instilled in the workplace encourage the
employees to be morally conscious in every situation that they encounter, thus
eliminating the possibility of fraud and conflict between employees.

Disadvantages of Corporate Governance

 The burden of staying legally compliant: Corporates generally have loads of
compliance that have to be followed, attracting different laws based on their
industry. Corporate governance ensures legal compliance, but it does come at a very
hefty price.
 Increased costs: Administrative costs for companies with corporate governance are
pretty exorbitant, considering all the requirements to be met. Here are a few
documents to be maintained- Stock sales and purchases, Legal compliance records,
Annual registration.
 Maintenance of segregation: Irrespective of the size of the corporation, the
adherence to all formalities and requirements must be met without any exceptions.
Failure to comply with these rules leaves the company with huge exposure such as
“piercing of the corporate veil”, where the separate legal entity status of the
corporation is ignored in order to understand the goings-on behind the closed doors.
 The conflict between the principal and the agent: Large corporations have made it a
common practice to appoint a well-known manager, one with a good track record to
manage the day to day operations of the business. Unfortunately, this gives rises to a
conflict between the shareholders and the managers as they both may have very
different objectives and perspectives. This often leads to a clash between the two,
thus affecting the overall ability of the business to run its operations in a smooth and
efficient manner.
Corporate Governance Initiatives in India
Corporate governance reforms in India involved a range of other initiatives including
improvement in functioning of capital markets, effective minority shareholder protection,
greater transparency & high standards of information disclosure, reforming board structures
and streamlining board processes. Several amendments were incorporated in the
Companies Act 1956 to suit the needs of good corporate governance practice and statutory
regulations were framed by the Securities and Exchange Board of India (SEBI).
1. New Companies Act 2003 – inducing good CG practices through self-regulation,
responsive legal framework based on shareholders’ democracy; disclosure based
regime; rational penal provisions with built-in deterrence and effective protection
2. Amendments to the Acts governing three professional institutes (ICAI/ICSI/ICWAI)
(ICAI/ICSI/ICWAI) with a view to strengthen the disciplinary mechanism and bring
transparency in their working.
3. Notification of Accounting Standards with a view to bring the disclosure norms in
tune with the international reporting standards;
 4. SEBI – Clause 49 – Appointment of IDs, Audit committee, Code of conduct,
disclosures of related party transactions, remunerations, compliance of accounting
standards, certifications of CEO & CFO, Compliance Certification & Whistle-blower
policy (optional);
National Committees on Corporate Governance

1. Committee 1. CII Code of Desirable Corporate Governance (1998): With the

emergence of competitions in economies under the liberalized regime, concerns
were raised regarding corporate governance practices in India. The process of
'restructuring the corporate governance framework' and development of a 'Code of
Corporate Governance' was initiated by CII in 1996. A National Task Force was set up
under the Chairmanship of Rahul Bajaj and presently he is the chairman of Bajaj
Group. The Task force made a number of recommendations related to board
constitution, role of non‐executive directors, role of audit committees and others.
The committee submitted its Code in 1998.
2. Committee 2. Kumar Mangalam Birla Committee (2000): In 1999, SEBI set up a
committee under the Chairmanship of Kumar Mangalam Birla to suggest suitable
recommendations for the Listing Agreement of Companies with their Stock
Exchanges to improve the existing standards of Corporate Governance in the listed
companies. The committee paid much attention to role and composition of the
Board of directors, disclosure laws and share transfers.
Acknowledging that accountability, transparency and equal treatment of all
stakeholders are the key elements of corporate governance. The Committee evolved
a Code of Governance in the context of the prevailing conditions in the capital
market. The Code was accepted in 2000 by SEBI and incorporated into a new Clause
49, which was inserted into the Listing Agreement of Companies with their Stock
Exchanges. Practically most of the recommendations were accepted and included by
SEBI in its new Clause 49 of the Listing Agreement in 2000.
3. Committee 3. Reserve Bank of India (RBI) Report of the Advisory Group on
Corporate Governance (2001): An advisory group on corporate governance under
the chairmanship of Dr. R.H. Patil, then Managing Directors, National Stock Exchange
was constituted by a standing committee of RBI in 2000. They submitted their report
in March 2001, which contained several recommendations on corporate governance.
4. Committee 4. Naresh Chandra Committee (2002): Consequent to the several
corporate debacles in the USA in 2001, followed by the stringent enactments of
Sarbanes Oxley Act, Government of India appointed Naresh Chandra Committee in
2002 to examine and recommended drastic amendments to the law pertaining to
auditor-client relationships and the role of independent directors.
5. Committee 5. N.R. Narayana Murthy Committee (2003): SEBI constituted this
Committee under the chairmanship of N.R. Narayana Murthy, chairman and mentor
of Infosys, and mandated the Committee to review the performance of corporate
 governance in India and make appropriate recommendations. The Committee
submitted its report in February 2003.
Theories of Corporate Governance

1. Agency Theory: Agency theory defines the relationship between the principals (such
as shareholders of company) and agents (such as directors of company). According
to this theory, the principals of the company hire the agents to perform work. The
principals delegate the work of running the business to the directors or managers,
who are agents of shareholders. The shareholders expect the agents to act and make
decisions in the best interest of principal. On the contrary, it is not necessary that
agent make decisions in the best interests of the principals. The agent may be
succumbed to self-interest, opportunistic behaviour and fall short of expectations of
the principal. The key feature of agency theory is separation of ownership and
control. The theory prescribes that people or employees are held accountable in
their tasks and responsibilities. Rewards and Punishments can be used to correct the
priorities of agents.
2. Stewardship Theory: The steward theory states that a steward protects and
maximises shareholders wealth through firm Performance. Stewards are company
executives and managers working for the shareholders, protects and make profits
for the shareholders. The stewards are satisfied and motivated when organizational
success is attained. It stresses on the position of employees or executives to act
more autonomously so that the shareholders’ returns are maximized. The
employees take ownership of their jobs and work at them diligently.
3. Stakeholder Theory: Stakeholder theory incorporated the accountability of
management to a broad range of stakeholders. It states that managers in
organizations have a network of relationships to serve – this includes the suppliers,
employees and business partners. The theory focuses on managerial decision making
and interests of all stakeholders have intrinsic value, and no sets of interests is
assumed to dominate the others.
4. Shareholder theory: The shareholder theory was originally proposed by Milton
Friedman and it states that the sole responsibility of business is to increase profits. It
is based on the premise that management are hired as the agent of the shareholders
to run the company for their benefit, and therefore they are legally and morally
obligated to serve their interests. The shareholder theory is now seen as the historic
way of doing business with companies realising that there are disadvantages to
concentrating solely on the interests of shareholders. A focus on short term strategy
and greater risk taking are just two of the inherent dangers involved. The role of
shareholder theory can be seen in the demise of corporations such as Enron and
Worldcom where continuous pressure on managers to increase returns to
shareholders led them to manipulate the company accounts
 5. Resource Dependency Theory: The Resource Dependency Theory focuses on the
role of board directors in providing access to resources needed by the firm. It states
that directors play an important role in providing or securing essential resources to
an organization through their linkages to the external environment. The provision of
resources enhances organizational functioning, firm’s performance and its survival.
The directors bring resources to the firm, such as information, skills, access to key
constituents such as suppliers, buyers, public policy makers, social groups as well as
legitimacy. Directors can be classified into four categories of insiders, business
experts, support specialists and community influential.
6. Transaction Cost Theory: Transaction cost theory states that a company has number
of contracts within the company itself or with market through which it creates value
for the company. There is cost associated with each contract with external party;
such cost is called transaction cost. If transaction cost of using the market is higher,
the company would undertake that transaction itself.
7. Political Theory: Political theory brings the approach of developing voting support
from shareholders, rather by purchasing voting power. It highlights the allocation of
corporate power, profits and privileges are determined via the governments’ favor.

Models of Corporate Governance

1. Canadian Model: Canada has a history of French and British colonisation. The
industries inherited those cultures. The cultural background in these industries
affected subsequent developments. The country has large influence of French
mechanism. In 19th century the Canadian industries were controlled by rich families.
Since last five decades wealthy Canadian families sold their stocks during stock boom
periods. Canada now resembles United States in industry structure.
2. UK and American Model: Sarbanes Oxley Act: In July 2002, the U.S. Congress passed
the Sarbanes Oxley Act (SOX), particularly designed to make US corporations more
transparent and accountable to their stakeholders. The Act seeks to re-establish
investor confidence by providing good corporate governance practice to prevent
corporate scams and frauds in business corporations, to improve accuracy and
transparency in financial reporting, accounting service of listed companies, enhance
corporate responsibility and independent auditing.
3. German Model: Germany is considering proper steps towards corporate governance
since second half of 19th century. The company law in Germany of 1870 created dual
board structure to care of small investors and the public. The company law in 1884
made information and openness as the key theme. The law also mandated minimum
attendance at the first shareholders meeting of any company. World War I saw
considerable changes in industries in Germany by dismantling the rich. As on date
Germany has large number of family-controlled companies. The smaller companies
are controlled by banks.
4. Italian Model: The Italian business was also controlled by family holdings. The
business groups and the families were powerful by mid of 20th century. Slowly the
stock market gained importance during the second half of the 20th century. The
Italian government did not intervene in the company management or their working.
The Second World War brought a change from the government side to have a direct
role in the economy, helping the weak companies and using corporate governance
to improve these companies. This helped the economic growth of Italy particularly in
capital intensive industries. Since World War II the industrial policy was introduced.
The policy had no need for investor protection. It led the investors to buy a
government bonds and not invest in company shares. The growth of Italian industry
came from the small specialised industries which remained unlisted in stock markets.
5. France Model: The French financial system traditionally was regulated by the
religion. The controlling methods, borrowing and lending with the state constituting
the main borrower. Religion had prohibited the interest to some extent. The lending
was based on mainly mortgages of real estates. In early 19th century the French
public took to hoarding gold and silver. Coins composed measure part of money
transactions in that period. The French industry was conservative in its outlook. The
business used the retained earnings of one company to build other areas of business
and companies. The business was controlled by wealthy families who funded these
business groups. The control of the company continued from generation to
generation. Stage wise the corporate government was introduced in France along
with economic development activities. This led to wealthy families controlling
corporate sector to come under the watchful guidance of the state.
6. Japanese Model: Japan was a deeply conservative country were the hereditary caste
system was important. Business families where at the bottom of the period i.e.,
beneath priests, warriors, peasants and craftsmen. Due to lack of funds at the lowest
level of the pyramid led to the stagnation of the business. The large population of
the country needed goods and services and the importance was given to prominent
mercantile families like Mitsui and Sumitomo. The World War II brought a sea
change in the business, commerce and industry and opened the Japanese markets to
the American traders. The young Japanese started taking higher education in Europe
and America and learnt foreign technology, business management. These led to
building of new culture in industry, commerce and economic outlook in Japan. The
government also started establishing stated owned companies. These companies
ended up in losses and huge debts. To come out of the problem the government
made mass privatization of most of these companies. Many of these were sold to
Mitsui and Sumitomo families.
7. Indian Model: East India Co. (EIC) in its trade had malpractices. Current practice
since 400 years since industrialisation in companies. Environmental and world
commercial are classic cases. India has long history of commercial activities 2500
years old.
  The Managing Agency system 1850-1955
 The Promoter System 1956-1991
 The Anglo-American System 1992 onwards The Securities and Exchange Board of
India (SEBI): Established SEBI Act in Jan. 1992 gave statutory powers. SEBI is part of
department of Company Affairs Govt. of India. SEBI has moved from control regime
to prudential regulation. It is empowered to regulate working of stock exchanges
and its players including all listed. SEBI is playing a key role in corporate governance
in India.
Corporate Disclosure
Corporate disclosure can be defined as the communication of information by people
inside the public firms towards people outside. The main aim of corporate disclosure is “to
communicate firm performance and governance to outside investors”. This
communication is not only called for by shareholders and investors to analyse the
relevance of their investments, but also by the other stakeholders, particularly for
information about corporate social and environmental policies
 Proper disclosure by corporations is the act of making its customers, investors, and
analysts aware of pertinent information.
 Companies often place disclosures that protect them in case their financial forecasts
are wrong due to changing economic conditions.
 Corporate disclosures also state that investors speak with a financial advisor before
investing in the stock since it might not be right for them.
Benefits of disclosure
 Shareholder value creation- Disclosure also creates shareholder value by allowing a
firm to reduce the cost of its capital
 Improvement in information held by third parties- The first mechanism relates to
the information held by third parties, whether it is favourable or not. More accurate
forecasts by financial analysts are a proof of this
 Change in managerial behaviour: better governance and a fall in agency costs
 Ensures transparency- Increased transparency in the corporations’ operations and
management makes it easier for investors to make informed decisions. It also cuts
down on the possibility of manipulation or misuse of investors’ funds.
 Avoids financial and economic crises- Severe financial and economic crises can be
avoided with increased transparency.
 Allows investors to make informed decisions- Full disclosure of relevant information
by businesses helps investors make informed decisions.
 Reduces uncertainty in the market- Full disclosure also reduces uncertainty to a
great extent in the market. Uncertainty is one of the most prominent reasons for
market volatility.

Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a self-regulating business model that helps a
company be socially accountable to itself, its stakeholders, and the public. By practicing
corporate social responsibility, also called corporate citizenship, companies can be
conscious of the kind of impact they are having on all aspects of society, including
economic, social, and environmental. CSR helps both society and the brand image of
companies. Corporate responsibility programs are a great way to raise morale in the
workplace.
Some examples of companies that strive to be leaders in CSR include Starbucks and Ben &
Jerry's.
Significance of CSR in business
1. CSR can help to attract and retain employees- CSR efforts also help foster a more
productive and positive work environment for employees. It promotes volunteering
and positive efforts from employees.
2. Improve customers' perception of brand- The competition in the business world of
today is stiff, and it can be quite challenging for a company to set itself apart in the
eyes of customers. However, businesses that take social responsibility seriously can
win consumers, as well as develop a platform to market and earn their audience's
attention.
3. Help to raise awareness for important causes and keep business top of mind.
4. Help to retain customers
5. Help to create trust with target audience
6. CSR shows a sign of accountability to investors- Businesses that are socially
responsible can also appear more attractive to investors. Investors in a business have
one common goal: to have greater returns than invested funds.
7. CSR saves money- many customers are willing to pay more for products from a
socially responsible brand, and CSR can help attract and retain employees. Given
that turnover can cost companies thousands of dollars, this is worth noting.
8. CSR can enable you to better engage with customers- Many forms of CSR involve
businesses interacting directly with members of society, who may also be customers
or potential customers. can get direct feedback on what you are doing right and
what your company needs to improve on.
Importance of CSR
 Increased Sales – Customer Matters: Companies that lead with a purpose are
perceived positively by the customers. According to a study, 88% of the people
surveyed would buy products from a responsible company. 85% of the people said
that they would support the company in their community.
 Brand Value: A well-managed CSR program can help increase brand equity,
awareness and resonate with strong values. People appreciate the company not only
for its high-quality products but also for the activities that they do for the greater
good of the people. The company has exceptional goodwill and the name exudes
trust.
  Employee Retention and Engagement: Employees enjoy working for companies that
have a positive public image. CSR initiatives incorporate volunteering programs
which foster values such as empathy and loyalty. This leads to better team-work and
camaraderie among employees. It is a well-known fact that happy employees lead to
low attrition
 Cost Savings: Cost savings as one of the factors in the importance of CSR would be
surprising a few years ago. Responsible companies have found new technologies that
have reduced the operating costs. Cochin Airport in India is a very good example of
sustainable operations leading to cost savings. It is the first Airport in the world to
operate completely on solar power.
 Poverty Alleviation: In spite of the plethora of welfare programs, the gap between
the haves and have- nots is one of the steepest in the world. CSR programs bring out
change at the grassroots level by harnessing this operational efficiency. Mahindra
and Mahindra’s Nanhi Kali is one of the pioneers when it comes to CSR projects in
India.
 Risk Management: It is no longer a debate that social and environmental risk affect
businesses in a big way. In the long term, these factors affect the growth strategies
and are completely out of its control. Mumbai incurred a loss of Rs 14,000 crore due
to floods from 2005 to 2015 according to a study conducted by the United States
Trade and Development Agency (USTDA) and leading accounting company KPMG.
Social Audit
A social audit is a formal review of a company's endeavours, procedures, and code of
conduct regarding social responsibility and the company's impact on society. A social audit
is an assessment of how well the company is achieving its goals or benchmarks for social
responsibility. Companies aim to strike a balance between profitability and social
responsibility.
The scope of a social audit can vary and be wide-ranging. The assessment can include social
and public responsibility but also employee treatment.
Some of the guidelines and topics that comprise a social audit include the following:
• Environmental impact resulting from the company's operations
• Transparency in reporting any issues regarding the effect on the public or
environment.
• Accounting and financial transparency
• Community development and financial contributions
• Charitable giving
• Volunteer activity of employees
• Energy use or impact on footprint
• Work environment including safety, free of harassment, and equal opportunity
• Worker pay and benefits
Objectives of Social Audit
  To determine the extent to which the management of an enterprise is aware about
its social responsibility.
 To identify and measure the periodic net social contribution of any enterprise. This
net social contribution to be calculated by considering the costs and benefits
available to the enterprise internally as well as the costs and benefits available
externally to different sectors of the society.
 To help determine whether an enterprise’s plans, strategies and practices which
directly affect the resources and earnings are consistent with the social principles
already in existence and accepted by the society.
 To provide to the maximum extent all the relevant information about the
enterprise’s objectives, ultimate goals, policies, programs, performances and
contributions to the social goals.
Advantages of Social Audit
• Trains the community on participatory local planning.
• Encourages local democracy.
• Encourages community participation.
• Benefits of disadvantaged groups.
• Promotes collective decision making and sharing responsibilities.
• Develops human resources and social capital.
• Helps to narrow gaps between efficiency & effectiveness.
• Helps to narrow gaps between vision & reality.
Process of Social Audit
 Initiating: In this phase, the users shall need to define a clear objective and evaluate
what they want to audit, establish an individual responsible for the overall audit
process, and secure funding accordingly.
 Planning: In this phase, the users shall need to select a strategy and identify the
stakeholders of the company and understand the government’s decision process and
then, after, collaborate on various approaches and practices and accordingly engage
the counterparts of the government.
 Implementing: In this phase, the users will need to perform the audit function,
source and analyze all the information, disseminate the results and the information,
and then consider factors like sustainability and institutionalization.
 Closing: In this phase, the users will need to follow up to ensure that the social audit
is successful.
Disadvantages
 It can be not very easy and time taking for the users.
 It does not offer any transparent methodology.
 It defines the scope that might get difficult for the users.
 It tends to be subjective is another reason why the same is highly discouraged.
 It lacks qualified trainers.
Whistle Blowing:
 whistleblowing functions as a channel for reporting misconduct, fraudulent activities and
all sorts of illicit or unethical practices within an organisation to internal and external
parties. It is a crucial mechanism in the pursuit for integrity and for public interest helping
to bring to the knowledge of the public violations and breaches that would otherwise
remain concealed. As such, the act of whistle blowing can have an extraordinary influence
on the organisation, on society and on the whistle blower.
Whistle blowing basically is done by an employee where he finds that the ethical rules are
broken knowingly or unknowingly and an imminent danger for the company, consumers or
the public. When an employee is working in an organization is part of the group where the
decisions are made and executed.
The conditions in which whistle blowing is morally justified are:.
i. Whenever and wherever the product/service of the firm will cause considerable harm to
the public.
ii. Whenever an employee feels serious threat or harm to him or anybody he should report to
the firm.
iii. Before reporting any subject an employee should have documental evidence which should
convince on impartial observer about the necessity of whistle blowing.
iv. If an immediate boss does not care for report (whistle blowing) the employee should go up
to highest level to present his case.
v. There is always some risk involved in whistle blowing. If the employee is fully convinced of
his good intentions and serves good cause for society he should go ahead with whistle
blowing.

Wrong Types of Whistle Blowers:

There are certain types of whistle blowers who do it on false accusations and with ill
intentions. Such employees should not be protected.
 In case of disclosing business secrecy, inventions, future plans and some specific
specialised practices which may be confidential and of exclusive company usage.
 Whenever an employee remarks are irrelevant to the organisations work and product.
 In case of wrong accusations which cannot be proved and which are made in vengeance
only end up demoralizing the employees.
 When an employee is complaining against transfer, demotion or discharge when such
action is taken on the basis of routine performance appraisal.

Precautions before Whistle Blowing:

Whistle blowing has consequences of moral, legal, personal, economic, family and career
demands. It is a serious step with definite consequences.
 Be clear about your intensions and likely consequences. Go ahead only if you are
convinced that the situation warrants whistle blowing.
 Compile documents to support your case. Do not depend upon hearsay.
 Allegations should be stated appropriately with documents and to be sent to the right
person/ position.
 Preferably take the internal route. If this does not work then try external route.
 Whistle blowing can be done openly or anonymously. If identity is disclosed are should
be prepared to face the consequences.
 Decide if it is appropriate to take action immediately after sometime later or during the
service.
 Consult a lawyer about possible legal battle and defence mechanism.
Trade Secret
Trade secrets are secret practices and processes that give a company a competitive
advantage over its competitors.
Trade secrets may differ across jurisdictions but have three common traits: not being public,
offering some economic benefit, and being actively protected.
U.S. trade secrets are protected by the Economics Espionage Act of 1996.
Trade secrets are defined differently based on jurisdiction, but all have the following
characteristics in common:
 They are not public information.
 Their secrecy provides an economic benefit to their holder.
 Their secrecy is actively protected.
Major CG Frauds in India
1. Satyam Computers: Satyam was the first significant fraud of its kind globally,
shocking the public and prompting the government to tighten laws, reporting, and
governance mechanisms. The company’s promoters invented ingenious strategies
for committing frauds on a wide scale with fake billings for services provided to
international clients. Fake proceeds were shown to have been received in numerous
bank accounts, opened in different countries, as a logical next move which was later
found to be non-existing. The company’s financial statements regularly showed large
bank balances out of line with other IT companies, given its size. The promoter was
in charge of the entire operation, with the aid of a separate staff dedicated to this,
what I would term a fraud factory. Fake bank confirmations and statements were
produced and presented to auditors as proof of balances when the financials were
closed and please auditors. The total amount of money involved in the scam was
 reported to be around USD 1 billion. Satyam had a robust business model and a
client list that included some of the world’s largest corporations. To save the
company, the government had to undertake an unprecedented rescue mission,
which began with the dismissal of the company’s board members, followed by
selecting professionals as board members, led by Deepak Parikh. The company was
eventually sold to the Mahindra Group, and it is now a big part of the Group’s
profitable technology sector.
2. Kingfisher Airlines: KLA was yet another corporate scam, the first of its kind in the
airline industry, which ultimately brought the King of Good Times’ empire to an end.
Vijay Mallya, also known as the “King of Good Times,” created the airline. The
company took out loans from all possible sources, including related parties and a
guarantee of the Kingfisher brand based on an overestimation of its worth. The good
times didn’t last long, and Vijay Malia was forced to sell his family’s cherished liquor
and beer company to pay off some of his debts. A consortium of banks led by SBI has
an exposure of around Rs. 9000 crores to now a virtually bankrupt airline. Most
employees lost or quit jobs as salaries were nor paid for months together. The
company went to the extent of defaulting in depositing statutory dues like PF, TDS
deducted from salaries to government authorities.
3. Jet Airways: Lenders’ exposure to airlines is around Rs 8500 crores, with overall
liabilities of around Rs 25000 crores, including debts to suppliers, staff, the AAI, and
aircraft lessors. The company engaged in a variety of misleading activities, including:
 Overstating commission paid to a Dubai related party based in Dubai for years. As a
result, costs were vastly overstated, and revenues were underreported.
 accounting of bogus Jet miles invoices
 Any other similar transactions diversion of funds by giving loans of around Rs.3353
Crores.
4. Bhusan Steel: Bhushan Steel was a once-in-a-lifetime case of big Indian banks being
defrauded. Tata Steel bought the firm, but the matter is still being litigated.
Promoters of the otherwise profitable business, which had modern large-scale
plants, engaged in a variety of deceptive activities, including:
 Transfer of funds lent by the company to various associated parties in the form of
loans or advances.
 Bills for capital and other transactions that were never made,
 Funds generated, as a result, were misappropriated by promoters for their benefit.
The sum involved was calculated to be around Rs. 50000 crores. Another group
venture, Bhushan Power and Steel (BPSL) is currently under IBC. BPS is expected to
be acquired by JSW Steel. According to the CBI, BPSL diverted around Rs 2,348 crore
through its directors and staff from the loan accounts of various banks into the
accounts of more than 200 shell companies without any apparent purpose.
5. PNB: PNB was the country’s first big banking scam, involving a considerable sum of
about Rs. 15000 crores. Nirav Modi and Mehul Choksi defrauded the public (Gitanjali
 Gems, a listed company owned by him). Both companies dealt in rough diamond
imports and polished diamond exports. Both had established retail diamond chains
in India and at well-known international destinations over time. Nirav was, mainly,
PR and showmanship savvy. At that time no one questioned the source of his
funding. After a few years, this unprecedented fraud came to light, which shocked
the nation as never before. With a few junior banking officials’ help, he was
defrauding PNB and other banks by opening large LCs with no underlying
transactions (essentially paper money). He took advantage of an IT system flaw in
which LCs opened with the underlying transactions were not reconciled. As was the
requirement for all banks, LCs were not registered in the RTGS system. As a result,
before the fraud was detected, the presence of such LCs was unknown. The amounts
involved are estimated to be in the sum of Rs 16000 crores. Several red flags were
overlooked by bank management and regulators, contributing to the fraud being
detected much sooner.
6. ILFS: The ILFS fraud was India’s most prominent corporate fraud, triggering a
financial crisis because it was an essential vehicle for its infrastructure growth. Even
though the most significant shareholders, such as LIC, SBI, and others, had members
on the board, fraud occurred. ILFS had the most extensive debt exposure of around
Rs. 91000 crores (including Rs, 20000 crores invested by PF and pension funds. The
methods through which the frauds were perpetrated are:
 Diversion of lent funds to similar companies of certain members of the top
management team
 Imprudent lending to individuals with poor credit for ulterior reasons
 Loans are “evergreened” by routing funds from one group company to another via a
third party.
 Vendor overbilling, accounting of fictitious costs, and the difference being diverted
back to relevant companies of certain top management team members
 Overstatement of profits by non- provisioning of loans, accounting of fake expense,
inappropriate recognition of project revenue etc.
 Non – disclosure of some of these companies as related parties
 Non-disclosure some of the subsidiaries, associates, joint ventures
7. DHFL: The DHFL fraud was the first-ever in a housing finance corporation, and it
arose primarily as a result of promoters’ active participation in syphoning funds and
alleged money laundering. The fraud was committed in the following ways:
 Providing loans to promoters’ associated parties
 The loans issued to parties who were either uncreditworthy or unknown, with the
same addresses in different parts of the country.
 Approximately 6 lacs dummy accounts were established at one branch, using the
names of borrowers who had already repaid their loans. These accounts were used
to issue loans to promoter firms, which were then used to syphon funds. These
loans turned out to be non- recoverable in the end.
 Borrowed funds are used for personal reasons, such as purchasing personal estate,
yachts, and so on.
 As a result, large sums that were not recoverable were shown as recoverable in the
balance sheet.
8. PMC: Promoters of DHFL, who were de facto in charge of PMC bank activities (a
cooperative bank), continued to commit fraud using the same methods. The bank
has a greater number of deposits from middle-class depositors who had placed their
hard-earned money in the bank for various reasons, including medical care,
children’s schooling, retirement, and emergency needs. About 60% of its customers
had small deposits in the bank, totalling around $10,000 each. During the inquiry, it
was discovered that real estate company HDIL had taken approximately 70% of its
total loan book of Rs 8,383 crore as of March 31, 2019. For several years, the bank
was accused of making fraudulent transactions to promote a house’s selling.
9. Yes Bank: Fraud triggered the untimely and abrupt downfall of a private bank that
had been gaining momentum as a viable rival to other private banks. The bank had a
distinct business model, emphasizing technology, a vast branch network, and a focus
on retail loans, among other things.
 The fraud was committed in the following ways:
 Imprudent lending practices
 Evergreening of loan
 The practice of charging a high commission to borrowers, which was not in line with
industry practices
 Overstatement of profits due to front-loading of commission income
 Gross under-provisioning of NPAs compared to RBI guidelines
10. Tata-Mistry fallout: Cyrus Mistry was a director of Tata Sons Ltd. since 2006. The
majority of shareholding was held by trusts of the Tata family. This was to ensure
that the control remains with the family even when Cyrus Mistry joined. The Board
frequently disagreed with the decisions of Mistry and ousted him during one such
meeting. Mistry alleged that there was dominant control by the nominee directors of
the trust, including Ratan Tata, who were the “shadow directors” of Tata Sons Ltd.
Mistry said that he was never provided with a free hand by the promoters to manage
the company and that the promoters were stubborn regarding their own projects.
He also alleged that there was no independence in the working of the independent
directors. Nusli Wadia, who was an independent director was also fired for standing
up for Cyrus Mistry to maintain his chairmanship in group companies. This shows the
clear abuse of power by the promoters.