Ethics for Effective Management Prof KK AHUJA

1. Ethics for Effective Management Prof KK AHUJA

2. The Globalization is ushering… Undesirable consequences like: -Economic disasters -Social unrest -Individual stress levels Posing the question of Values & Ethics

3. The World has witnessed… Enron Parmalat WorldCom Baring Bank Arthur Anderson Global Trust Bank Satyam They had everything...But…

4. These all lacked… INTEGRITY “Doing the right things, even if nobody is watching” …AND THEIR HISTORY IS WRITTEN … Ethics Moral principles of duty and virtue that prescribe how one should behave; the foundation of ones internal control.

5. Relationship Between Values & Performance Organizational Values Harmony in Values Discord in Values Positive Impact On Performance Negative Impact On Performance

6. Ethics & Corporate Governance To be truly effective, ethics must: Be an integrated part of the organizational culture rather than an appendage grafted onto administrative systems Be modeled by the leadership team, even when it is painful (audit disclosure) Be designed to prevent problems before they occur & resolve issues when they arise Prevent concealment or obfuscation Encourage recruitment & retention of the best & the brightest Increase public confidence

7. Dilemma of Decision Making • “Thorny judgment calls” • Dealing with • Changing norms • Mixed messages • Ambiguity • Competing pressures

8. Effective Ethical Leaders? An effective ethical leader will … … Foster an environment of “Trust” among individuals in the Workplace… …and this trust will encourage openness among team members without fear of retribution.

9. Framework for Ethical Decision Making • Who will be affected by my decision? • What general rules or principles underlie my decision? Are you handling similar matters consistently? • What are the implications of my decision for the University and the Laboratory? • What does my decision say about my values? (We all know people who say one thing & do another.) • One can be unethical without breaking the law. • What is right, what is fair and what is in your best interest may not be the same. Put your bias aside.

10. The Desire Effective Leaders Will Have: Willingness & Courage … ... to “Do What’s Right”

11. Ability Effective Leaders Will Have: to resolve ethical issues by using traditional methods of inquiry, namely: • Listing options • Testing the options • Making a decision, and • Most importantly, Acting !

12. DEVELOPIG FUTURE LEADERS Competitive Advantage Integrity Values & Ethics Leadership Qualities High Emotional And Intellectual Quotient Professional Competency Business Instincts Creative Thinking Techniques Conceptual & Analytical Planning Customer Focus Result Orientation Positive Attitude Proactive Approach Dynamism Team Work “Where Modernity Blends With Tradition”

13. Ethical Leader Imperatives • Establish shared values • Establish a positive leadership climate • Develop self & others • Think strategically • State & communicate your intent • Decentralize • Empower the work force • Emphasize continuous improvement In closing... Note: An organization takes on the character of its leader!

14. Most of the time, we know what we should do. The real test of ethics and character is whether we are willing to do the right thing … even when it is likely to cost more than we want to pay.

15. Satyam Scandal

16. Introduction • After a steady journey of 20yrs, from an early start-up in Hyderabad to a global $2.5 billion corporation, Satyam computers has, in a dramatic turn of events, landed itself at the crossroads, with uncertainty staring in its face. • Rated as country’s 4th largest IT service provider employing 53000 people with operations in 66 locations across the globe & 185 fortune-500 companies as clients, the company commanded respect from all quarters and all stakeholders till the middle of Dec.08 • With barely Rs 100 crore revenue in 1995, the company’s business built mainly on the Y2K opportunity & system integration work, gradually transformed itself into a full services provider building on various verticals. • As it grew, building on scale, Satyam was amongst the first Indian companies to be listed on the New York Stock Exchange.

17. The IT sector is in the limelight again, but for all the wrong reasons. The scale of fraud is unprecedented in Indian corporate world and how this continued for a long period needs through a probe. The Satyam fiasco is a stand-alone case of failure of corporate governance. More than 3000 satyam employees posted their resumes with job consultants as well as job portals like monster.com, naukri.com etc. More than 1500 applications had received in a single day…..said an employee of job consultancy. Satyam

18. While satyam was on rise in the corporate and IT firmament of the country, its promoters spread their presence in society. • Ironically, today’s revelations of fraud and overstatement in the company’s books have seriously dented the image of the promoter chairman of Satyam computer. • Paradoxically, the company’s auditors Price water house Coopers, which is in the dock for various accounting flaws now surfacing with Mr. Raju’s disclosures, also helped satyam to become the 1st Indian company to comply with IFRS.

19. The auditors have to be independent, that’s why they are called independent auditors. • They should not be under the thumb of the management. • Given the current mess, the company is in with a valuation of about $600 million, it may find suitors hard to come by. • In its growth story, the major contracts it bagged included work for FIFA world Cup & World Bank jobs, but it also suffered several set-backs • These include the recent ban by World Bank- a long time client, & case of fraud filed by paid in a Texas court.

20. Corporate governance is about principles, mindset • You need principles, you need culture, that’s why corporate governance is not just filling up check list. • It is about mindset. It is about the honesty and the willingness of the management and the shareholders at large. • It is about your values, it is about your aspirations and what you go after in life. • If you want respectability, then you will automatically do all the right things.

21. Contd… • Firstly, it is about the management realizing honesty is the best policy. • Secondly, it is about creating an environment where there could be whistle blowers. • Thirdly, it is about creating an environment where anybody will standup and say NO, what we are doing is wrong are not agree with it. • Fourth, it is about creating an environment where respect matters more than jus money or power.

22. Good saying • Focus on gratification is a good thing • Focus on respectability is very important. • Good governance in the long term will make people happier or peaceful and will bring tremendous rewards. • Middle class values are the best values.

23. The Satyam saga • Dec 16 : Satyam announces plan to buy building firms part-owned by the outsourcer’s founders for $1.6 billion. It does not rapid U-turn, killing the deal jus 12 hours later following a 55% plunge in the company’s share prize in hectic US trading. • Dec 18 : Satyam board says it will meet on Dec.29 to consider a share buyback in a bid to restore confidence. • Dec 23 : Satyam barred from business with the World bank for eight years for providing staff with improper benefits. Its shares fall another 14% to their lowest in more than 4.5yrs

24. Contd… • Dec 24 : Satyam shares rally amid market talk the outsourcer may have become an attractive takeover prospect given the steep share price fall. • Dec 26 : Mangalam Srinivasan, an independent director. resigns. • Dec 28 : Satyam defers board meeting until Jan. 10 to give itself time to consider options to shore up investor confidence. • Dec 29 : : Three more independent directors quit.

25. Contd… • Jan 2 : Satyam says its founder’s stake fell by a third to 5.13%. Analyst say this means the company is more attractive bid target. • Jan 5 : Satyam shares tumble 9% on concern that corporate governance issues could hit new business. • Jan 6 : Shares rise more than 7% on a newspaper report Satyam had been approached by smaller rivals Tech Mahindra for an all-share merger. • Jan 7 : Mr. Ramalinga Raju confesses manipulation of financial statements of Satyam; Rs 5040crore cash hole in balance sheet.

26. WHAT IS A VALUE ? • An enduring belief that a specific mode of conduct is personally and socially preferable to another. • A value can change with the changing character of society as well as a person’s maturity.

27. A VALUE IS A VALUE IF IT IS • Chosen freely • Prized and publicly affirmed • Acted upon repeatedly • Enhances personal growth

28. OUR VALUES B – Business Ethics C – Customer Focus O – Organizational & Professional Pride M – Mutual Respect & Trust I – Innovation & Speed T – Total Quality for Excellence B-C-O-M-I-T

29. BENEFITS OF NEW VALUES Business Ethics --- In all dealings. Will raise NTPC image; corporate governance; and business risk management. Internal Customer --- Also to receive the necessary empathy, understanding and support from all the staff functions and internal service providers. Professional Pride --- All executives and workmen to continuously learn, develop and perform their tasks to high professional standards.

30. Respect --- Also for every employee and vendor. Innovation --- In every aspect, big and small, hard and soft areas. Excellence --- As the end objective, for which there is need for quality in all areas. BENEFITS OF NEW VALUES

31. Vision (MIND) Conscience (SPIRIT) (HEART) (BODY) Passion Discipline LEADING A POWERFUL LIFE

32. An individual - who has had profound influence on others, on institutions or on society. Any parents whose influence has been intergenerational. Anyone who has really made a difference for good or ill. Possessed three common attributes: vision, discipline and passion. VISION, DISCIPLINE & PASSION RULE THE WORLD

33. The life of all great achievers those who have had the greatest influence on others, those who have made significant contributions, those who have simply made things happen you will find a pattern. They have greatly expanded their four native human intelligence or capabilities. Express Your Voice

34. The highest manifestations of these four intelligences are: Mental - vision; Physical - discipline; Emotional - passion; Spiritual - Conscience. These manifestation represent our highest means of expression - our voice. Express Your Voice

35. Vision is seeing with the mind’s eye. What is now proved was once only imagined. Discipline is paying the price to bring that vision into reality. Passion is the fire, the desire, the strength of conviction and the drive that sustains the discipline to achieve the vision. Conscience is the inward moral sense of what is right and what is wrong, the drive toward meaning and contribution.

36. Mental Intelligence/Capacity Physical Intelligence/Capacity IQ PQ Vision Discipline Idealistic Realistic Focused Long term perspective Execution Anticipating Future Constant Takes Initiative Dreamer Autonomous People behaviour Committed Hard - working Pioneering Philosophical Tenacious Willing in Sacrifice Self Disciplined Achiever Spiritual Intelligence/capacity Emotional Intelligence/Capacity SQ EQ Conscience Passion Enthusiastic Intuitive Optimistic Hope Takes Responsibility Synergetic Wise Courageous Moral Integrity Empathetic Servant Affirming Humble Fair Inclusive Fearless Inspired Ethical Challenging Compensations

37. Corporate Social Responsibility What is Responsibility? What is Social Responsibility Definition of CSR? 37

38. Some Issues How does it matter if CSR is not done? Can a small company go for CSR? In a monopoly market is there a need to go for CSR? 38

39. CSR through NGOs Some Issues Corrupt NGOs Accommodation of volunteers Unjust demand for publicity 39

40. Politics of CSR Some MNCs are malign hence Opposition by Activists Justified. Beating up corporations is easy but Economy rolls social transformation 40

41. Contd… Therefore, NGOs critical about Voluntarism But Corporations Against Mandatory Regulations 41

42. Contd… Now A Million Dollar Question Should CSR be Voluntary or Mandatory? 42

43. Contd… In a battle between Voluntary vs. Mandatory Voluntarism Won Hands Down UK for An ‘Enlightened Voluntarism’ in WSSD at Johannesburg 43

44. Economics of CSR Expanding customer base Getting an edge over competitor Increasing sales and profit Sustainability of the company 44

45. Emerging Perspective Nation State to Vanishing Territoriality Activists against MNCs A Better Demographics New Corporate Governance 45

46. Contd… So Business depends more on Reputation Capital than Tax Benefit only Profit Optimization than Profit Maximization Social Responsibility than Philanthropy 46

47. Barriers of CSR (WB Study Report) Business short-term, CSR long-term All buyers not CSR focused No clear business benefit Local government not strict Young CEOs deny CSR 47

48. Contd… Time passing activity of CEO’s wives? Transparency not aggressively enforced Corporate donations often hazardous. Deciding CSR strategy is very difficult. 48

49. Strategy Issues Should it be charity or business? How to select the region? Selecting the Cause How much to Invest? Selecting the Partner 49

50. Benchmarking CSR Socially responsible product Corporate Governance Employees Voluntary contribution 50