School of Distance Education

MODULE V

BUSINESS ETHICS

Meaning
Ethics is the branch of philosophy concerned with the meaning of all aspects of human
behaviour. Theoretical ethics, sometimes called normative ethics, is about delineating right from
wrong. It is supremely intellectual and, as a branch of philosophy, rational in nature. It is the
reflection on and definition of what is right, what is wrong, what is just, what is unjust, what is
good, and what is bad in terms of human behaviour. It helps us develop the rules and principles
(norms) by which we judge and guide meaningful decision-making.

Business ethics, also called corporate ethics, is a form of applied ethics or professional
ethics that examines the ethical and moral principles and problems that arise in a business
environment. It can also be defined as the written and unwritten codes of principles and values,
determined by an organization’s culture, that govern decisions and actions within that
organization. It applies to all aspects of business conduct on behalf of both individuals and the
entire company. In the most basic terms, a definition for business ethics boils down to knowing
the difference between right and wrong and choosing to do what is right.

There are three parts to the discipline of business ethics: personal (on a micro scale),
professional (on an intermediate scale), and corporate (on a macro scale). All three are
intricately related. It is helpful to distinguish among them because each rests on a slightly
different set of assumptions and requires a slightly different focus in order to be understood.
Ethics are a central concern for businesses, organizations, and individuals alike. Behaving in a
way that adds value without inappropriate conduct or negative consequences for any other
group or individual, organizational leaders in particular must be completely aware of the
consequences of certain decisions and organizational trajectories, and ensure alignment with
societal interests. There are many examples of ethical mistakes in which organizational decision
makers pursued interests that benefited them at the cost of society. The 2008 economic collapse
saw a great deal of poor decision-making on behalf of the banks. The Enron scandal is another
example of individuals choosing personal rewards at the cost of society at large. These types of

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situations are extremes, but they highlight just how serious the consequences can be when ethics
are ignored.

There are four schools of thought that are useful for framing future strategic decisions to
ensure ethical behaviour. These perspectives are utilitarian, deontological, virtuous, and
communitarian approaches.

Utilitarian Approach

Perhaps the cleanest and simplest perspective on ethical behavior, a utilitarian will
always ask one question: what is the ideal outcome for the highest number of people? This
approach simply considers the impact of ones actions on others, and tries to ensure that the best
outcome for the most people is what ultimately occurs. While this outcome-based reasoning is
quite useful, it has one fatal flaw. The definition of ‘best’ when discussing what’s best for the
most people can become quite subjective. As a result, when utilizing this ethical reasoning to
make decisions, it is important to set terms and create definitions that enable the reasoning to
have applicable and measurable logic. Simply put, one must ensure they define their terms, and
what they mean by good, when pursuing this ethical line of reasoning.

Deontological Approach

Popularized by Emmanual Kant, the central term in this point of view is duty. Kant
disliked the concept of utilitarianism for one simple reason: the ends should not justify the
means. Indeed, Kant’s ethical argument is that moral maxims of respect for one another and
appropriate behavior serve as a groundwork for all ethical reasoning. It is these core concepts
which can never be sacrificed for the greater good.

Virtue Ethics

Popularized by Greek philosophers such as Aristotle, this point of view assumes that
virtue is a central benchmark for all ethical behavior. What is meant by virtue in this context is a
desire to perform a certain act as a result of deep contemplation on the value of that act. To
make this act virtuous is to perform it with excellence. As a result, we have a deep
contemplation of the value of a certain behavior or decisions, which we apply great practice and
consideration. Following this, we can approach the perfect execution of that act or behavior
through our rational minds. In this school of ethical thought, it is similarly important to discard

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the justification of a means by the ends of that means. Which is to say this an act should be
performed because it is desirable in and of itself, and not for the sake of something else. Each
behavior is therefore considered carefully, rationally and virtuously to ensure it is valid,
beneficial, and valuable.

Communitarian Ethics

In this perspective, the individual decision-maker should ask about the duties owed to
the communities in which they participate. This is a relatively simple frame of reference, where
the individual decision maker will recognize the expectations and consequences of a given
decision relative to the needs, demands and impacts of a certain preferred community.

Nature of Business Ethics

The characteristics or features of business ethics are:

 Code of conduct: Business ethics is a code of conduct. It tells what to do and what not to do
for the welfare of the society. All businessmen must follow this code of conduct.
 Based on moral and social values: Business ethics is based on moral and social values. It
contains moral and social principles (rules) for doing business. This includes self-control,
consumer protection and welfare, service to society, fair treatment to social groups, not to
exploit others, etc.
 Gives protection to social groups: Business ethics give protection to different social groups
such as consumers, employees, small businessmen, government, shareholders, creditors, etc.
 Provides basic framework: Business ethics provide a basic framework for doing business.
It gives the social cultural, economic, legal and other limits of business. Business must be
conducted within these limits.
 Voluntary: Business ethics must be voluntary. The businessmen must accept business ethics
on their own. Business ethics must be like self-discipline. It must not be enforced by law.
 Requires education and guidance: Businessmen must be given proper education and
guidance before introducing business ethics. The businessmen must be motivated to use
business ethics. They must be informed about the advantages of using business ethics. Trade
Associations and Chambers of Commerce must also play an active role in this matter.

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 Relative Term: Business ethics is a relative term. That is, it changes from one business to
another. It also changes from one country to another. What is considered as good in one
country may be taboo in another country.
 New concept: Business ethics is a newer concept. It is strictly followed only in developed
countries. It is not followed properly in poor and developing countries.

Scope & Importance of Business Ethics

Ethical problems and phenomena arise across all the functional areas of companies and
at all levels within the company.

1.Ethics in Compliance

Compliance is about obeying and adhering to rules and authority. The motivation for
being compliant could be to do the right thing out of the fear of being caught rather than a desire
to be abiding by the law. An ethical climate in an organization ensures that compliance with law
is fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the
laws not only in letter but go beyond what is stipulated or expected of them.

2.Ethics in Finance

The ethical issues in finance that companies and employees are confronted with include:

 In accounting – window dressing, misleading financial analysis.

 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial markets.

3.Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and

implementing ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human
resource management (HRM) covers those ethical issues arising around the employer-employee
relationship, such as the rights and duties owed between employer and employee.

The issues of ethics faced by HRM include:

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 Discrimination issues i.e. discrimination on the bases of age, gender, race, religion,
disabilities, weight etc.
 Sexual harassment.
 Affirmative Action.
 Issues surrounding the representation of employees and the democratization of the
workplace, trade ization.
 Issues affecting the privacy of the employee: workplace surveillance, drug testing.

4. Ethics in Marketing

Marketing ethics is the area of applied ethics which deals with the moral principles
behind the operation and regulation of marketing. The ethical issues confronted in this area
include:

 Pricing: price fixing, price discrimination, price skimming.

 Anti-competitive practices like manipulation of supply, exclusive dealing arrangements,
tying arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.

5.Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products
and production processes do not cause harm. Some of the more acute dilemmas in this area arise
out of the fact that there is usually a degree of danger in any product or production process and
it is difficult to define a degree of permissibility, or the degree of permissibility may depend on
the changing state of preventative technologies or changing social perceptions of acceptable
risk.

 Defective, addictive and inherently dangerous products and

 Ethical relations between the company and the environment include pollution, environmental
ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically modified food.

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Role of Ethics in Business

More and more companies recognize the link between business ethics and financial
performance. Companies displaying a “clear commitment to ethical conduct” consistently
outperform companies that do not display ethical conduct.

1. Attracting and retaining talent

People aspire to join organizations that have high ethical values. Companies are able to
attract the best talent and an ethical company that is dedicated to taking care of its employees
will be rewarded with employees being equally dedicated in taking care of the organization. The
ethical climate matter to the employees. Ethical Organizations create an environment that is
trustworthy, making employees willing to rely, take decisions and act on the decisions and
actions of the co-employees. In such a work environment, employees can expect to be treated
with respect and consideration for their colleagues and superiors. It cultivates strong teamwork
and Productivity and support employee growth.

2. Investor Loyalty
Investors are concerned about ethics, social responsibility and reputation of the company
in which they invest. Investors are becoming more and more aware that an ethical climate
provides a foundation for efficiency, productivity and profits. Relationship with any
stakeholder, including investors, based on dependability, trust and commitment results in
sustained loyalty.

3. Customer satisfaction
Customer satisfaction is a vital factor in successful business strategy. Repeat
purchases/orders and enduring relationship of mutual respect is essential for the success of the
company. The name of a company should evoke trust and respect among customers for
enduring success. This is achieved by a company that adopts ethical practices. When a company
because of its belief in high ethics is perceived as such, any crisis or mishaps along the way is
tolerated by the customers as a minor aberration. Such companies are also guided by their ethics
to survive a critical situation. Preferred values are identified ensuring that organizational
behaviours are aligned with those values. An organization with a strong ethical environment

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places its customers’ interests as foremost. Ethical conduct towards customers builds a strong
competitive position. It promotes a strong public image.

4. Regulators
Regulators eye companies functioning ethically as responsible citizens. The regulator
need not always monitor the functioning of the ethically sound company. The company earns
profits and reputational gains if it acts within the confines of business ethics. To summaries,
companies that are responsive to employees’ needs have lower turnover in staff.

 Shareholders invest their money into a company and expect a certain level of return from
that money in the form of dividends and/or capital growth.
 Customers pay for goods, give their loyalty and enhance a company’s reputation in return for
goods or services that meet their needs.
 Employees provide their time, skills and energy in return for salary, bonus, career
progression, and learning.

Law and ethics

In simple terms, the law may be understood as the systematic set of universally accepted
rules and regulation created by an appropriate authority such as government, which may be
regional, national, international, etc. It is used to govern the action and behavior of the members
and can be enforced, by imposing penalties.
The law is described as the set of rules and regulation, created by the government to
govern the whole society. The law is universally accepted, recognized and enforced. It is created
with the purpose of maintaining social order, peace, justice in the society and to provide
protection to the general public and safeguard their interest. It is made after considering ethical
principles and moral values. The law is made by the judicial system of the country. Every
person in the country is bound to follow the law. It clearly defines what a person must or must
not do. So, in the case of the breach of law may result in the punishment or penalty or
sometimes both.

By ethics, we mean that branch of moral philosophy that guides people about what is
good or bad. It is a collection of fundamental concepts and principles of an ideal human
character. The principles help us in making decisions regarding, what is right or wrong. It
informs us about how to act in a particular situation and make a judgment to make better

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choices for ourselves. Ethics are the code of conduct agreed and adopted by the people. It sets a
standard of how a person should live and interact with other people.

BASIS FOR
LAW ETHICS
COMPARISON

Meaning The law refers to a systematic body of Ethics is a branch of moral

rules that governs the whole society philosophy that guides people
and the actions of its individual about the basic human
members. conduct.

What is it? Set of rules and regulations Set of guidelines

Governed By Government Individual, Legal and

Professional norms

Expression Expressed and published in writing. They are abstract.

Violation Violation of law is not permissible There is no punishment for

which may result in punishment like violation of ethics.
imprisonment or fine or both.

Binding Law has a legal binding. Ethics do not have a binding

nature.

Ethics & Values

Ethics and Values together lay the foundation for sustainability. While they are
sometimes used synonymously, they are different, wherein ethics are the set of rules that govern
the behaviour of a person, established by a group or culture. Values refer to the beliefs for
which a person has an enduring preference. Ethics and values are important in every aspect of
life, when we have to make a choice between two things, wherein ethics determine what is
right, values determine what is important. In the world of intense competition, every business
entity work on certain principles and beliefs which are nothing but the values. Likewise, ethics
is implemented in the organisation to ensure the protection of the interest of stakeholders like
customers, suppliers, employees, society and government.

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The fundamental differences between ethics and value are described in the given below
points:

1. Ethics refers to the guidelines for conduct, that address question about morality. Value is
defined as the principles and ideals, which helps them in making the judgement of what
is more important.

2. Ethics is a system of moral principles. In contrast to values, which is the stimuli of our
thinking.

3. Values strongly influence the emotional state of mind. Therefore it acts as a motivator.
On the other hand, ethics compels to follow a particular course of action.

4. Ethics are consistent, whereas values are different for different persons, i.e. what is
important for one person, may not be important for another person.

5. Values tell us what we want to do or achieve in our life, whereas ethics helps us in
deciding what is morally correct or incorrect, in the given situation.

6. Ethics determines, to what extent our options are right or wrong. As opposed to values,
which defines our priorities for life.

Ethical principles in business

1. HONESTY. Be honest in all communications and actions. Ethical executives are, above
all, worthy of trust and honesty is the cornerstone of trust. They are not only truthful, they are
candid and forthright. Ethical executives do not deliberately mislead or deceive others by
misrepresentations, overstatements, partial truths, selective omissions, or any other means and
when trust requires it they supply relevant information and correct misapprehensions of fact.
2. INTEGRITY. Maintain personal integrity. Ethical executives earn the trust of others
through personal integrity. Integrity refers to a wholeness of character demonstrated by
consistency between thoughts, words and actions. Maintaining integrity often requires moral
courage, the inner strength to do the right thing even when it may cost more than they want to
pay. The live by ethical principles despite great pressure to do otherwise. Ethical executives are
principled, honorable, upright and scrupulous. They fight for their beliefs and do not sacrifice
principle for expediency.
3. PROMISE-KEEPING. Keep promises and fulfill commitments. Ethical executives can be
trusted because they make every reasonable effort to fulfill the letter and spirit of their promises

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and commitments. They do not interpret agreements in an unreasonably technical or legalistic

manner in order to rationalize non-compliance or create justifications for escaping their
commitments.
4. LOYALTY. Be loyal within the framework of other ethical principles. Ethical executives
justify trust by being loyal to their organization and the people they work with. Ethical
executives place a high value on protecting and advancing the lawful and legitimate interests of
their companies and their colleagues. They do not, however, put their loyalty above other
ethical principles or use loyalty to others as an excuse for unprincipled conduct. Ethical
executives demonstrate loyalty by safeguarding their ability to make independent professional
judgments. They avoid conflicts of interest and they do not use or disclose information learned
in confidence for personal advantage.
5. FAIRNESS. Strive to be fair and just in all dealings. Ethical executives are fundamentally
committed to fairness. They do not exercise power arbitrarily nor do they use overreaching or
indecent means to gain or maintain any advantage nor take undue advantage of another’s
mistakes or difficulties. Ethical executives manifest a commitment to justice, the equal
treatment of individuals, tolerance for and acceptance of diversity. They are open-minded;
willing to admit they are wrong and, where appropriate, they change their positions and beliefs.
6. CARING. Demonstrate compassion and a genuine concern for the well-being of
others. Ethical executives are caring, compassionate, benevolent and kind. They understand the
concept of stakeholders (those who have a stake in a decision because they are affected by it)
and they always consider the business, financial and emotional consequences of their actions on
all stakeholders. Ethical executives seek to accomplish their business objectives in a manner
that causes the least harm and the greatest positive good.
7. RESPECT FOR OTHERS. Treat everyone with respect. Ethical executives demonstrate
respect for the human dignity, autonomy, privacy, rights, and interests of all those who have a
stake in their decisions; they are courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin. Ethical executives adhere to the Golden Rule, striving
to treat others the way they would like to be treated.
8. LAW ABIDING. Obey the law. Ethical executives abide by laws, rules and regulations
relating to their business activities.
9. COMMITMENT TO EXCELLENCE. Pursue excellence all the time in all
things. Ethical executives pursue excellence in performing their duties, are well-informed and
prepared, and constantly endeavour to increase their proficiency in all areas of responsibility.

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10. LEADERSHIP. Exemplify honour and ethics. Ethical executives are conscious of the
responsibilities and opportunities of their position of leadership and seek to be positive ethical
role models by their own conduct and by helping to create an environment in which principled
reasoning and ethical decision making are highly prized.
11. REPUTATION AND MORALE. Build and protect and build the company’s good
reputation and the morale of its employees. Ethical executives understand the importance of
their own and their company’s reputation as well as the importance of the pride and good
morale of employees. Thus, they avoid words or actions that that might undermine respect and
they take affirmative steps to correct or prevent inappropriate conduct of others.
12. ACCOUNTABILITY. Be accountable. Ethical executives acknowledge and accept
personal accountability for the ethical quality of their decisions and omissions to themselves,
their colleagues, their companies, and their communities.

Ethics in business functional areas

Just as different functions in the human body are performed and regulated by different
organs, different functions within a business are performed and controlled by different parts of
the business. One of the reasons for separating business operations into functional areas is to
allow each to operate within its area of expertise, thus building efficiency and
effectiveness across the business as a whole. The key functional areas of a business are the
following:

 Management

 Operations

 Marketing

 Accounting

 Finance

Management

The primary role of managers in business is to supervise other people’s performance.

Most management activities fall into the following categories:

 Planning: Managers plan by setting long-term goals for the business, as well short-term
strategies needed to execute against those goals.
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 Organizing: Managers are responsible for organizing the operations of a business in the
most efficient way, enabling the business to use its resources effectively.
 Controlling: A large percentage of a manager’s time is spent controlling the activities
within the business to ensure that it’s on track to achieve its goals. When people or
processes stray from the path, managers are often the first ones to notice and take
corrective action.
 Leading: Managers serve as leaders for the organization, in practical as well as symbolic
ways. The manager may lead work teams or groups through a new process or the
development of a new product. The manager may also be seen as the leader of the
organization when it interacts with the community, customers, and suppliers.

Operations

Operations is where inputs (factors of production) are converted to outputs (goods and
services). Operations is like the heart of a business, pumping out goods and services in a
quantity and of a quality that meets the needs of the customers. The operations manager is
responsible for overseeing the day-to-day business operations, which can encompass everything
from ordering raw materials to scheduling workers to produce tangible goods.

Marketing

Marketing consists of all that a company does to identify customers’ needs and design
products and services that meet those needs. The marketing function also includes promoting
goods and services, determining how the goods and services will be delivered, and developing a
pricing strategy to capture market share while remaining competitive. In day’s technology-
driven business environment, marketing is also responsible for building and overseeing a
company’s Internet presence (e.g., the company Web site, blogs, social media campaigns, etc.).
Today, social media marketing is one of the fastest growing sectors within the marketing
function.

Accounting

Accountants provide managers with information needed to make decisions about the
allocation of company resources. This area is ultimately responsible for accurately representing
the financial transactions of a business to internal and external parties, government agencies,
and owners/investors. Financial Accountants are primarily responsible for the preparation of
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financial statements to help entities both inside and outside the organization assess the financial
strength of the company. Managerial accountants provide information regarding costs,
budgets, asset allocation, and performance appraisal for internal use by management for the
purpose of decision-making.

Finance

Although related to accounting, the finance function involves planning for, obtaining,
and managing a company’s funds. Finance managers plan for both short- and long-term
financial capital needs and analyze the impact that borrowing will have on the financial well-
being of the business. A company’s finance department answers questions about how funds
should be raised (loans vs. stocks), the long-term cost of borrowing funds, and the implications
of financing decisions for the long-term health of the business.

Ethics is vital in all the functional areas irrespective of tis functions. The top
management should device and monitor the implementation of ethical code for all the functional
areas. Integration of functional areas is the basic necessity in this regard.

Management of Quality
Quality management consists of four key components, which include:

 Quality Planning – The process of identifying the quality standards relevant to the
project and deciding how to meet them.
 Quality Improvement – The purposeful change of a process to improve the confidence
or reliability of the outcome.
 Quality Control – The continuing effort to uphold a process’ integrity and reliability in
achieving an outcome.
 Quality Assurance – The systematic or the planned actions necessary to offer sufficient
reliability that a particular service or product will meet the specified requirements.

The aim of quality management is to ensure that all the organization’s stakeholders work
together to improve the company’s processes, products, services, and culture to achieve the
long-term success that stems from customer satisfaction. The process of quality management
involves a collection of guidelines that are developed by a team to ensure that the products and
services that they produce are of the right standards or fit for purpose. The process starts when
the organization sets quality targets to be met and which are agreed upon with the customer.
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The organization then defines how the targets will be measured. It then takes the actions that are
required to measure the quality. They then identify any quality issue that arises and initiates
improvements. The final step involves reporting the overall level of the quality achieved. The
process ensures that the products and services produced by the team match the customers’
expectations.

The quality improvement methods comprise three components: product improvement,

process improvement, and people-based improvement. There are numerous methods of quality
management and techniques that can be utilized. They include Kaizen, Zero Defect Programs,
Six Sigma, Quality Circle, Taguchi Methods, the Toyota Production System, Kansei
Engineering, TRIZ, BPR, OQRM, ISO, and Top Down & Bottom Up approaches among others.
A model example of great quality management is the implementation of the Kanban system by
Toyota Corporation. Kanban is an inventory control system that was developed by Taiichi Ohno
to create visibility for both the suppliers and buyers to help limit the upsurge of excess
inventory on the production line at any given point in time. Toyota used the concept to execute
its Just-in-time (JIT) system, which helps aligns raw material orders from suppliers directly with
the production schedules. Toyota’s assembly line rose in efficiency and the company received
enough inventories at hand to meet customer orders as they were being generated.

Principles of Quality Management

There are several principles of quality management that the International Standard for
Quality Management adopts. These principles are used by top management to guide an
organization’s processes towards improved performance. They include:

1. Customer Focus

The primary focus of any organization should be to meet and exceed the customers’
expectations and needs. When an organization can understand the customers’ current and future
needs and cater to them, it results in customer loyalty, which in turn increases revenue. The
business is also able to get new customer opportunities and satisfy them. When business
processes are more efficient, quality is higher and more customers can be satisfied.

2. Leadership

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Good leadership results in an organization’s success. Great leadership establishes unity

and purpose among the workforce and shareholders. Creating a thriving company culture
provides an internal environment that allows employees to fully utilize their potential and get
actively involved in achieving its objectives. The leaders should involve the employees in
setting clear organization goals and objectives. It motivates employees, who can significantly
improve their productivity and loyalty.

3. Engagement of People

Staff involvement is another fundamental principle. The management engages staff in

creating and delivering value whether they are full-time, part-time, outsourced or in-house. An
organization should encourage the employees to constantly improve their skills and maintain
consistency. This principle also involves empowering the employees, involving them in
decision making and recognizing their achievements. When people are valued, they work to
their best potential because it boosts their confidence and their motivation. When employees are
wholly involved, it makes them feel empowered and accountable for their actions.

4. Process Approach

The performance of an organization is crucial according to the process approach

principle. The approach emphasizes on achieving efficiency and effectiveness in the
organizational processes. The approach entails an understanding that good processes result in
improved consistency, quicker activities, reduced costs, waste removal and continuous
improvement. An organization is enhanced when leaders can manage and control the inputs and
the outputs of an organization, as well as the processes used to produce the outputs.

5. Continuous Improvement

Every organization should come up with an objective to be actively involved in

continuous improvement. Businesses that improve continually experience improved
performance, organizational flexibility and increased ability to embrace new opportunities.
Businesses should be able to create new processes continually and adapt to new market
situations.

6. Evidence-based Decision Making

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Businesses should adopt a factual approach to decision-making. Businesses that make

decisions based on verified and analyzed data have an improved understanding of the
marketplace. They are able to perform tasks that produce desired results and even justify their
past decisions. Factual decision making is vital to help understand the cause-and-effect
relationships of different things and even explain potential unintended results and consequences.

7. Relationship Management

Relationship management is about creating mutually beneficial relations with supplier

and retailers. Different interested parties can impact the company’s performance. The
organization should manage the supply chain process well and promote the relationship between
the organization and its suppliers to optimize their impact on the company’s performance. When
an organization manages its relationship with interested parties well, it is more likely to achieve
sustained business collaboration.

Corporate excellence
The term Excellence literally means the quality of being outstanding or extremely good.
The achievement of corporate excellence is the most important objective of every organization.
Corporate governance is the one and only route to achieve corporate excellence. Corporate
excellence refers to a transformation from the status of a good company to the status of a great
company. The essence of corporate excellence is to have a competitive advantage over other
firms in the industry. Corporate excellence is about developing and strengthening the
management system and process of a company to improve performance and create value for
stakeholders.
The key elements of corporate excellence is transparency projected through a code of
good governance which incorporate a system of checks and balances between key players
boards, management, auditors, shareholders and others. Good Corporate Governance is a source
of competitive advantage and a critical input for achieving excellence in all productive,
economic and social pursuits. A company’s most valuable asset is the goodwill it enjoys with its
stakeholders, which can only be earned by actions, not demanded. The European Foundation
for Quality management (EFQM) defines excellence in business as “outstanding practices in
managing the organization and achieving results, all based on a set of eight fundamental
concepts. These concepts are value addition for customers, creating sustainable future,
developing organizational capability, harnessing creativity and innovation, leading with vision,

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inspiration and integrity, managing with ability, succeeding through the talent of the people and
sustain outstanding results.”
Corporate governance plays most important role in every organization. It provides a
structure through which the objectives of a company are set and how they are achieved and
monitored. A good governance practice enhances the efficiency of corporate sector and helps
achieving excellence in all areas in the organization. The following are the key points for
achieving and maintaining corporate excellence in an organization with the help of good
corporate practices.
1. Monitoring the Performance
Excellent companies adopt effective and consistent strategies for monitoring and
evaluating performance of the organization. Corporate governance is sets of rules and guidelines
for monitoring and evaluating performance of the organization. Monitoring of governances by
the broad also includes continuous review of the internal structure of the company to ensure that
there are clear lines of accountability and responsibility for management throughout the
organization.
2. Inculcate Moral Values and Principles in Business
Corporate governance regulations are based on moral values and principles than law and
it helps to the business identify, analysis the different moral issues involved. It is essential that
the organization’s guiding ethics and code of conduct are clearly understood and followed by
each and every members of the organization and communicated to all stakeholders. These moral
values, principles and code of conduct help the organization to become an excellent company.
3. Fair and Equitable Treatment of Shareholders
Corporate governance frameworks ensure the fair and equitable treatment of all
shareholders including minority shareholders. There should be no discrimination between
shareholders. All shareholders have opportunity to obtain effective redress for violation of their
rights. Fair and equitable treatment of shareholders helps an organization to excel in all
functional areas.
4. Transparency and Full Disclosures
Transparency and full disclosures are the basic principles of corporate governance and
essential ingredients for achieving excellence in an organization. Corporate governance aims at
ensuring a higher degree of transparency in an organization by ensuring full disclosure of all
material matters regarding the business ,including the financial statement ,performance,
ownership, and governance of the company.
5. Fair and Equitable Treatment of Employees and Workers

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Fair and equitable treatment of employees and workers is the important tool for
excellence in an organization. It ensures equal opportunity in all aspects of employment
regardless of race, colour, religion, sex, nationality, age, marital status, disability, etc. The goal
of corporate governance is to avoid all kinds of discrimination, harassment, and ill-treatment of
the workforce.
6. Strong Internal Control
Excellent companies built a concrete and strong internal control system for its
outstanding performance and it is the mechanism for reducing mismanagement and fraud.
Internal control procedures are policies implemented by an entity's board of directors, audit
committee, management, and other personnel to provide reasonable assurance of the entity in
achieving its objectives related to reliable financial reporting, operating efficiency, and
compliance with laws and regulations.
7. Safeguard the Interest of All the Stakeholders
Corporate governance framework adopts effective, consistent, friendly measurers and
strategies to safeguard the interest of all the stakeholders. It protects and respects the rights of
all stakeholders. Corporate governance mechanisms are usually established for safeguarding
and protecting interest of all the stakeholders
8. Reduce Misconduct and Frauds
Strong corporate framework reduces misconduct and fraud and it is the path way to
corporate excellence. The corporate misconduct stretches beyond malpractices in accounting,
reporting, operations etc. Corporate governance attempts to implant moral values and principles
in business.
Corporate culture
Among the many factors that affect an organization’s ability to innovate, compete, and
engage employees and customers is corporate culture. Corporate culture is the amalgamation of
values, vision, mission, and the day-to-day aspects of communication, interaction, and
operational goals that create the organizational atmosphere that pervades the way people work.
It’s hard to define and even harder to get right. No amount of modern furnishings, stocked
kitchens, happy hours, or young, hip workers can create a corporate culture.

Corporate culture is, above all else, the most important factor in driving innovation. So
the question on the minds of business leaders should be how to create an effective corporate
culture. If corporate culture can make the difference in performance, innovation, and employee
development and retention, then what is the bottom line for fostering that organizational

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environment? The fact of the matter is that, at the most basic level, an organization is simply a
group of individuals working towards a goal—the generation of corporate culture, therefore,
stems from the individuals who make up the organization, from leadership to the front-line
workers.

Components of a Corporate Culture

1. Vision: A great culture starts with a vision or mission statement. These simple turns of phrase
guide a company’s values and provide it with purpose. That purpose, in turn, orients every
decision employees make. When they are deeply authentic and prominently displayed, good
vision statements can even help orient customers, suppliers, and other stakeholders. Nonprofits
often excel at having compelling, simple vision statements. The Alzheimer’s Association, for
example, is dedicated to “a world without Alzheimer’s.” And Oxfam envisions “a just world
without poverty.” A vision statement is a simple but foundational element of culture.

2. Values: A company’s values are the core of its culture. While a vision articulates a company’s
purpose, values offer a set of guidelines on the behaviors and mindsets needed to achieve that
vision. McKinsey & Company, for example, has a clearly articulated set of values that are
prominently communicated to all employees and involve the way that firm vows to serve clients,
treat colleagues, and uphold professional standards. Google’s values might be best articulated by
their famous phrase, “Don’t be evil.” But they are also enshrined in their “ten things we know to
be true.”

3. Practices: Of course, values are of little importance unless they are enshrined in a company’s
practices. If an organization professes, “people are our greatest asset,” it should also be ready to
invest in people in visible ways. Wegman’s, for example, heralds values like “caring” and
“respect,” promising prospects “a job [they’ll] love.” And it follows through in its company
practices, ranked by Fortune as the fifth best company to work for. Similarly, if an organization
values “flat” hierarchy, it must encourage more junior team members to dissent in discussions
without fear or negative repercussions. And whatever an organization’s values, they must be
reinforced in review criteria and promotion policies, and baked into the operating principles of
daily life in the firm.

4. People: No company can build a coherent culture without people who either share its core
values or possess the willingness and ability to embrace those values. That’s why the greatest
firms in the world also have some of the most stringent recruiting policies.

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5. Narrative: Marshall Ganz was once a key part of Caesar Chavez’s United Farm Workers
movement and helped structure the organizing platform for Barack Obama’s 2008 presidential
campaign. Now a professor at Harvard, one of Ganz’s core areas of research and teaching is the
power of narrative. Any organization has a unique history — a unique story. And the ability to
unearth that history and craft it into a narrative is a core element of culture creation. The elements
of that narrative can be formal — like Coca-Cola, which dedicated an enormous resource to
celebrating its heritage and even has a World of Coke museum in Atlanta — or informal, like
those stories about how Steve Jobs’ early fascination with calligraphy shaped the aesthetically
oriented culture at Apple. But they are more powerful when identified, shaped, and retold as a part
of a firm’s ongoing culture.

6. Place: Why does Pixar have a huge open atrium engineering an environment where firm
members run into each other throughout the day and interact in informal, unplanned ways? Why
does Mayor Michael Bloomberg prefer his staff sit in a “bullpen” environment, rather than one of
separate offices with soundproof doors? And why do tech firms cluster in Silicon Valley and
financial firms cluster in London and New York? There are obviously numerous answers to each
of these questions, but one clear answer is that place shapes culture. Open architecture is more
conducive to certain office behaviours, like collaboration. Certain cities and countries have local
cultures that may reinforce or contradict the culture a firm is trying to create. Place — whether
geography, architecture, or aesthetic design — impacts the values and behaviours of people in a
workplace.

Managing cultural diversity in Organisation

The Oxford Dictionary defines cultural diversity as “the existence of a variety of
cultural or ethnic groups within a society.” Culture is considered to be the underlying values
that direct how people behave. Cultural diversity in the workplace is a result of practices,
values, traditions, or beliefs of employees based on race, age, ethnicity, religion, or gender.
Economic globalization is one of the driving forces of cultural diversity in the workplace. The
modern workforce is made up of people of different genders, ages, ethnicity, religions, and
nationalities. Employers have realized that workforce diversity provides both material and
intangible benefits. In order for employers to reap the benefits of cultural diversity in the
workplace, they must communicate their commitment to addressing the challenges of a

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diverse workforce. Employers must be seen to be celebrating their employees’ diversity to

avoid workplace issues, like awkwardness and hostility.
The following are some of the different types of diversity in the workplace:

 Education – There can be tension between employees who have undertaken the
academic route to employment and those whose experience is of a vocational nature.
This cultural difference could result in a conflict where it’s disputed whether practical
or theoretical experience will help the company achieve maximum growth.

 Ethnicity – This type of cultural diversity at work can be apparent when there are
language barriers or a difference in how business is carried out. Some companies have
specialist ethnic groups like the Hispanic Chamber of Commerce for under-
represented communities.

 Generations – Generation X, millennials, and traditionalists are some of the different

generations that make up a diverse workforce. This type of diversity is characterized
by differences in how work is viewed. For example, millennials are known for seeking
flexibility in their work and doing jobs that align with their personal values.

 Gender – According to the Bureau of Labor Statistics, nearly 36% of women had a
bachelor’s degree by the age of 31 in comparison to 28% of men. However, research
by the Pew Research Centre found that, in 2017, women earned 82% of what men
earned. As well as pay disparities, women also face other workplace issues such as
harassment.

 Religion – Various religious beliefs may be over in the workplace, for example,
different dress, dietary requirements, and requesting particular days off. However,
religion may be more understated, for instance, how the person interacts with their
team members.

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 Lesbian, Gay, Bisexual, and Transgender (LGBT) – The LGBT community is made up
of distinct groups who have unique needs and experiences. Companies need to bear
this in mind when creating LGBT strategies in order to address this group’s needs.

 Workers with disabilities – This group is very diverse in relation to the challenges they
face and their needs. The range of disabilities can include vision, learning, and mental
health. As a result, companies need to ensure that their diversity and inclusion
programs recognize and make provision for the wide spectrum of disabilities.

Workplace issues involving cultural diversity

 Conflict – This occurs when discrimination, prejudice, lack of respect, and racism are
allowed to fester in a workplace. Intolerant attitudes can turn into open conflict if
companies don’t take the correct steps to show that any type of discrimination won’t
be tolerated.

 Harassment – This issue can present itself in a diverse workplace where leaders fail to
recognize the signs and deal with perpetrators. Training should be provided as to what
constitutes harassment. Employees who harass others should be dealt with according
to company procedures. Like all the other issues arising from diversity in the
workplace, harassment can have a devastating effect on employees and the company as
a whole. Uber is an example of a company that has suffered damage as a result of
harassment claims.

 Disregarding needs – Some companies ignore the needs of disabled employees by

failing to provide them with the necessary equipment to access all facilities and to
undertake their jobs. Employers need to lead the way in creating a comfortable
workplace for all of its employees, irrespective of whether they have a disability.

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Managing diversity in the workplace

 Create written policies – Companies should include their policy in relation to diversity
in their employee handbook. The policy should contain information about non-
discrimination laws, the code of conduct and the compensation and benefits policy.

 Provide sensitivity training – Employees should be provided with sensitivity training

to create a better workplace culture. Sensitivity training can help employees to value
views that are different, understand words, and actions that cause offense and what
needs to be done if they’ve been offended.

 Impose a zero-tolerance policy – After employees have received the handbook and
training about diversity issues, the company needs to set the tone about how violations
will be dealt with. Employees should be aware that inappropriate behavior will not be
tolerated and every reported incident will be taken seriously.

The advantages of cultural diversity

 Innovation – Where everyone in a company is from the same background, they’re

likely to have similar ideas. In order to remain competitive, companies need new ideas
and concepts. A diverse workforce brings unique perspectives on how to solve
problems and innovate to gain a competitive edge.

 Respect – A diverse workforce enables team members to appreciate the differences in

others because of the positive contribution that different people bring. Where co-
workers are open to learning from each other, they appreciate that diversity enables
them to function better as a team. Therefore, gain a mutual respect for colleagues who
are different.

 Reputation – A commitment to diversity demonstrates that a company values fairness

and equality. These characteristics have a positive effect on its reputation with
suppliers and consumers. A company that openly recruits the best candidates for a job,

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irrespective of which group they are in, will gain customer loyalty and a good
reputation.

 Productivity – The diversity of a company is an indication of how productive its

employees will be. The Forbes Global Diversity and Inclusion Fostering Innovation
Through a Diverse Workforce report found that 77% of companies used productivity
as a measure to gauge the success of diversity programs. Respondents in the Forbes
research advised that their companies have experienced an increase in productivity due
to a diverse workforce.

 Growth – Where a company has a diversified workforce, they position themselves to

build relationships with people from different cultures. Diverse employees can advise
the companies about the best strategies to use to gain new customer bases. Employees
who speak different languages and are aware of the cultural norms of international
markets can be vital to a company’s growth.

 Recruitment – Research shows that 67% of job seekers advised that a company’s
diverse workforce is a key factor when evaluating job offers. These findings
demonstrate that diversity is a key aspect when recruiting the best talent. Job seekers
are aware of the importance of a diverse workforce and want to be part of a company
that will value and appreciate their difference.

 Compliance – Companies need to comply with both federal and state laws that ban
them from carrying out discriminatory practices. Promoting a diverse workplace where
everyone is respected helps companies to obey the law and also ensures that every
employee is treated with the respect he or she deserves.

Building corporate image

Corporate Image is simply the image of the creator of your products. That could be you,
your company, or any group within your organization. If you are having trouble with
understanding that a group within your organization may have a corporate image, a few
examples are in order. Lockheed Martin’s Advanced Development Programs is called the

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Skunk Works. It has an image of creating radical innovation within the organization. Boeing has
a similar group known as Phantom Works. Groups within the U.S. Military also have corporate
images. The one that many have heard of is Seal Team Six.

It governs the way the rest of the world thinks about you. The right image creates a bond
of trust between you and the marketplace, enables you to achieve your goals, and boost your
earnings. The wrong one can block attainment of your goals and deplete your bank account. If
you don’t create the image you want for yourself or your company, the marketplace will create
one for you. Since many in the marketplace (especially competitors) have their own agenda, it is
unlikely they will brand you with a corporate image that is as favourable as the one you would
create for yourself. By beating them to the punch, you plant your desired corporate image in
buyer brains before your detractors can.

Creating a Corporate Image

Creating an effective corporate image involves the following steps.

1. Mission Statement. Create a mission statement that makes it clear (1) What your company
does, (2) Who the target audience is, and (3) What makes your company unique.
2. Corporate Identity tools. Create corporate identity tools that include (1) Name, (2) Logo, (3)
Slogan, (4) Colors, (5) Type fonts, (6) Mascots, and (7) Jingles.
3. Training. Train your employees and other internal stakeholders on your mission and corporate
identity tools so they can transmit them via their word-of-mouth pyramids and social media
circles.
4. Promotion. Promote your mission and corporate identity tools to people outside your company
using traditional, online, and social media. You put them on business cards, letterhead, signs,
company vehicles, packaging, brochures, and all corporate communications.
5. Measuring results. Using your marketing information system, you need to measure how
effectively your corporate image is working.
6. Corrective action. Using the same system, you need to make necessary adjustments to the
above if they are not working according to plan.

Protection of Corporate Image

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Once you craft your corporate image, you need to protect it. The more successful you
are, the more jealous competitors, angry customers, and those with an agenda will attack you.
You have to be prepared with the following three sets of procedures.

1. Rumor Procedure. If what others say is not true, you should employ the following three steps
of the rumor procedure (1) Don’t publicize the rumor, (2) Promote the opposite of what the
rumor says without mentioning the rumor, and (3) Provide undeniable and verifiable proof to
support (2).

2. Fact Procedure. If you did something wrong, you should employ the following fact procedure
(1) Admit and apologize, (2) Limit the scope (or put the mistake in perspective), and (3)
Propose a solution so the mistake is unlikely to reoccur.

3. Turn negatives into positives. On a transactional basis, misunderstandings and other negative
situations will occur between you, your company, and your target audience. You need to do
what you can to turn these into positives to (1) neutralize the negative before it turns into a
conflagration that does serious damage to your image and (2) develop a closer relationship with
the person (or people) that feel “wronged” by your company.

Knowledge workers & knowledge management

The term “knowledge worker” was first coined by Peter Drucker in his book, The
Landmarks of Tomorrow (1959). Drucker defined knowledge workers as high-level workers
who apply theoretical and analytical knowledge, acquired through formal training, to develop
products and services. He noted that knowledge workers would be the most valuable assets of a
21st-century organization because of their high level of productivity and creativity. They include
professionals in information technology fields, such as programmers, web designers, system
analysts, technical writers, and researchers. Knowledge workers are also comprised of
pharmacists, public accountants, engineers, architects, lawyers, physicians, scientists, financial
analysts, and design thinkers.

The term 'knowledge worker' is somewhat controversial. Some people are

uncomfortable saying that some workers use knowledge, and others don't – for example, “Our
marketing team members are knowledge workers, and our production staff are not.” Statements
like this may create the impression that some jobs (and people) are better than others. On the
other hand, you could say that all work is knowledge work, to a greater or lesser degree.

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Thomas Davenport, who has studied knowledge workers for more than a decade, offers
a commonly used definition of the term: “Knowledge workers have high degrees of expertise,
education, or experience, and the primary purpose of their jobs involves the creation,
distribution or application of knowledge.” At its most basic level, knowledge work is often the
source of new ideas. So, to get the most from your knowledge workers, and to create an
environment where new ideas can flow and flourish, follow some of these basic leadership and
management practices. They will help to build trust, and improve the link between the work the
knowledge workers do and the organization's success. This may help to create the competitive
advantage.

Characteristics of Knowledge Workers

Factual and Theoretical Knowledge
Knowledge workers undergo several years of formal training to master the information
needed to perform certain specialized roles. At a minimum, most knowledge-based positions
require a college degree and their learning process is continuous even after being hired. For
example, a pharmacist requires factual and theoretical knowledge of various medications before
they can dispense medications and advise patients on the use of prescriptions and over-the-
counter drugs. Likewise, a sales manager must possess knowledge of his/her customer’s
preferences and factual information about the products sold by the company.
Accessing and Applying Information
Knowledge workers must know how to identify important information from a large
database of information that they need to be familiar with. They should be in a position to weed
out less important information and focus on essential information that will help them solve
problems, answer questions, and generate ideas. Knowledge workers use analytical reasoning
and relevant judgment to address customer service issues and new situations.

Communication Skills
Knowledge work involves frequent communication between the knowledge worker and
customers, co-workers, subordinates, and other stakeholders. They must be able to speak, read,
and write, and hold discussions with workmates and deliver a presentation when needed.
Modern organizations emphasize quality customer service and continuous product
improvements that bring knowledge workers closer to the customers. Good communication
skills enable knowledge workers to work closely with other workers in decision-making, goal
setting, and brain-storming sessions.

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Motivation
Knowledge work requires continuous growth, due to the need to keep up with
technological developments. Workers must be interested in finding new information and
applying it in their work. With new technologies being released every day, they must improve
their skills to handle complex tasks and integrate the latest technologies into their work.

Challenges and Opportunities

The demand for employees who are qualified to perform specialized roles presents both
challenges and opportunities. One of the challenges relates to the hiring and retention of
knowledge workers. With a looming shortage of knowledge workers, employers are forced to
look for more effective ways of hiring the best talents and retaining them for a long period of
time. Unlike baby boomers who stick to one organization for a long period, millennial workers,
who are the majority of knowledge workers today, often serve in one organization for just a
short period of time before moving to a more rewarding role in another organization. Employers
are forced to offer higher salaries and an appealing work environment, and to treat these
employees more as co-workers rather than as subordinates.

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