1.5 EB&CG-CH-6

Ethics in Business and

Corporate Governance

S K MANDALDeveloped by: Anubhuti Jain

Professional Ethics

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TMH Copyright © 2010 Ethics in Business and Corporate Governance

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Professional ethics refer to the moral standards demonstrated by the professionals working in the business of managing, promoting, marketing or developing (products).

In India, there have been two directions to remedy the damage caused by dishonest professional practices:

(a) the government and regulatory authorities (SEBI, RBI, Department of Company Affairs, etc.) enacting new laws and reinforcing existing laws and procedures, on the one hand; and

(b) the professional establishments and institutions (IMA, ICAI, Institution of Engineers (India), etc.), under which professionals conduct their respective practices, incorporating minimum ethical standards for their members.

PROFESSIONAL ETHICS


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To maintain ethics in professional activities and services, there is no better regulation than what can be exercised by professionals themselves.

For professionals to be ethical, organisations must provide them with an honest work environment and ethical working platform.

Organisations must hold on to principles of business ethics and demand ethics in the professional discharge of the duties of their managers.

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Production management comprises supervising and managing a set of pre-determined processes and activities, being carried out by people with the help of certain tools and equipment, for the outcome of some marketable products.

In such a set up, there are two sets of ethical issues: (a) ethics relating to the conduct of the process where people are involved

in working with machines or equipments in a given environment; and (b) ethics about the uses and utility of the products concerned.

ETHICS IN PRODUCTION AND PRODUCT MANAGEMENT


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Ethics in production management include care about safety, health hazard, reliability, pollution, contamination, adulteration, waste generation, etc.

Management is ethically duty-bound to ensure that the production process and the product does not cause any harm to the employees, consumers or the locality.

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Rules of ethical behavior demand that, as a professional, a marketing person also has his or her own professional discipline and commitment to ethics. These ethical standards should apply to the customers and people they serve, as much as to their professional behavior within the organisation.

Ethics are more like a service transaction with a ‘customer-supplier relationship’ between the company and the marketing person on the one hand, and the marketing person and the customer on the other; this relationship aims to fulfill each other’s needs and expectations.

ETHICS OF MARKETING PROFESSIONALS


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The ethics of marketing professionals comprise sharing information and data about a product in the most transparent manner so that the customer can judge for himself what he or she is buying.

The advent and advancement of Internet marketing and E-commerce has lend even greater importance to the role of marketing professionals and their ethical behavior.

Companies dealing with E-commerce will have to train their workforce to maintain the ethics of custodianship—so that people working in E-commerce must not cross the ethical lines.

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Marketing is not merely campaigning or providing information or selling products and services; it is about marketing the “rule of a product”

Misleading product advertisement, price fixing, operating a cartel, price discrimination, black marketing, etc are ethical offences.

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Commonly observed unethical practices in the area of human resource are: discrimination by sex, creed and religion, unfair employment contract, pressure tactics in the workplace, favoritism, matters promoting occupational health hazard, biased performance assessment, disinformation by the managers to serve special interests, etc.

Even today, industries suffer huge losses due to unethical HR practice such as strikes, low productivity and damage to assets, the losses are even more pronounced especially in traditional or small industries e.g. jute and sugar mills

ETHICS IN HUMAN RESOURCE MANAGEMENT


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Traditionally, ethical issues concerning HR professionals pertain to interactions between the company and its employees e.g. propagating and regulating rights and duties between the employer and employees.

More recently, in India, the Society for Human Resource Management (SHRM), and the National Institute of Personnel Management are taking steps to reinforce ethical practices of their affiliate members, through measures such as ethics training.


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SHRM recommends the following principles to guide the code of professional conduct and ethics amongst HR professionals:

1. Adhere to the highest standards of ethical and professional behavior. 2. Measure the effectiveness of HR in contributing to or achieving

organisational goals. 3. Comply with the law. 4. Work consistent with the values of the profession. 5. Strive to achieve the highest levels of service, performance and social

responsibility. 6. Advocate for the appropriate use and appreciation of human beings as

employees. 7. Advocate openly and within the established forums for debate in order

to influence decision making and results.

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SHRM also expressed that HR professionals are expected to exhibit individual

leadership as a role model for maintaining the highest standards of ethical conduct in the company

Act ethically in every professional interaction Ethically responsible for promoting and fostering

fairness and justice for all employees in the organisation

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One of the critical areas of business where ethical violations are frequent is finance and accounting.

Professional bodies like the Institute of Chartered Accountants of India and the Institute of Cost Accountants have since formulated their code of ethics that is mandatory for practicing in their respective fields of work.

ICAI has now mandated that Indian accounting norms must converge with the International Financial Reporting Standards (IFRS) by 2011, to ensure better disclosure norms and prevent profit book frauds.

ETHICS OF FINANCE AND ACCOUNTING

PROFESSIONALS


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To promote ethical work culture amidst practicing accountants, ICAI prohibits its members from pursuing another profession, soliciting clients, taking financial interests other than fees, and writing of books of accounts of the auditee-company in order to prevent conflicts of interests that may lead to violation of conduct.

Professional ethics of accounting professionals are critical for a nation’s economic progress, the health of its financial markets and the confidence of other countries in its financial and governing systems, to protect the welfare of public and the society.

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Most developed countries, have now made it compulsory that:

(a) countries must have an oversight office or an independent review board;

(b) auditors of firms seeking to do business with the EU or listing themselves at stock exchanges must be registered in the country;

(c) audit firms must have a website wherefrom all details and ‘sensitive’ information can be obtained; and

(d) the audit practice must conform to a recognized accounting and disclosure practice (e.g. GAP, IFRS, etc.).

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Advertising is a means to provide information about products and services to consumers. It comprises of two parts (1) designing information and (2) delivering or advertising that information for public utilisation. Page no 242

The benefits of advertising should be looked into from the viewpoint of information supply chain.

Ethics of advertising are not only about the gain or loss from advertising; they are also about the correctness, appropriateness, openness and fairness of the content of an advertisement in relation to its recipients, customers or the society at large.

ETHICS OF ADVERTISING


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Page no 243Golden rules of advertising ethics

Ensure trustfulness and honesty of representation Safeguard against misleading advertisement Ensure that advertisements are not offensive to caste,

religion color and creed Avoid promotion of product hazardous or harmful to

society, particularly to children's and minors Ensure fairness of competition and adherence to social

welfare

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Ethical issues related to advertising: (a) The social effect of advertising (b) Advertising is a means to create consumer desires (c) The effect of advertising on consumer belief Advertising professionals have to self-regulate their conducts and

creations in order to help the society for realization of its utility. In recognition to the present state of advertising ethics,

Advertising Standards Council of India (ASCI) a self-regulatory body of advertisers, ad-agencies, media, and associate professionals, are planning to check the contents of advertisements and crack whip on erring advertisers.

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Ethical issues related with media reporting: (a) Non-accountability over content of media advertisements (b) Partial coverage of events (c) A number of shows shown which are not suitable for children

Highlights of the codes for journalism: (a) Seek truth and report (b) Minimize harm (c) Act independently (d) Be accountable

ETHICS OF MEDIA REPORTING


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Healthcare ethics demand credibility, professionalism, quality of service, and patients’ confidence reposed in the doctors.

The state or the government has the duty to create facilities and resources (trained medical personnel) in the country and administer the health policy to assure people of their basic rights.

Both, the profession and the professionals engaged in health care have the ethical responsibility to act and practice the profession with trust, care and credibility.

ETHICS OF HEALTHCARE SERVICES


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The codes enshrined in the respective national medical council must be obeyed and administered with the spirit of faithful compliance and the conscience that doctors are duty-bound to serve people to the best of their ability and honesty.

Another aspect of healthcare professional ethics is self-advertisement.

The Medical Council of India (MCI) forbids advertising of medical doctors and rules advertising by doctors as unethical.

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Documents

1.5 EB&CG-CH-6