1. BUSINESS ETHICS-
BUSINESS AND ITS
SHAREHOLDERS
BY – ANUSHA JOSE, SEC-A ,ROLL-5 , 23-
4-09

2. TOPICS DISCUSSED:-
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 ETHICS
 BUSINESS ETHICS
 STAKEHOLDERS
 RESPONSIBILITY TO INVESTORS
 THE ETHICAL QUESTION
 SHAREHOLDERS AND THEIR RIGHTS
 ENRON- AN EXAMPLE
 CORPORATE GOVERNANCE
 SHARE PRICE GAME
 BUSINESS AND SHAREHOLDERS -
RELATION

3. ETHICS:-
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“A set of moral standards for judging whether
something is right or wrong”
BUSINESS ETHICS
“Business Ethics means conducting all aspects
of business and dealing with all stakeholders in
an ethical manner…”
The purpose of ethics is to enhance business
and its relationships both inside and outside of
the organization

4. Major Corporate Stakeholders
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5. Responsibilities to Investors
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Investors or shareholders or owners
PERSONS WHO BUY SHARES OF A COMPANY
Businesses follow:-
 proper accounting procedures,
provide information to shareholders about financial performance,
 protect shareholder rights and investments
 Proper financial management
 Generate profits and pay dividends to share holder

6. THE ETHICAL QUESTION ??
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The first and foremost ethical obligation of
every business is to make profits for its
shareholders , creating value for shareholders and
increasing its stock prices.
“But how much profits to make, the means
and methods of making it, and at what cost
and how the profit earned should be properly
distributed -----is the ethical question.”

7. SHARE HOLDERS AND THEIR
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RIGHTS
Shareholders risk their hard earned money by
supplying capital to companies
SOME RIGHTS:-
a. The right to sell their stock.
b. The right to attend general meetings.
c. The right to vote and elect in general
meetings.
d. The right to correct information about the
company.
e. The right to sue mangers for their

8. Corporate Governance
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Corporate governance describes the process by
which shareholders seek to conform that “their”
corporation is run according to their intentions.
 define relationships between a company’s
management, its board, shareholders and other
stakeholders
 provide a structure through which the
company’s objectives are set, and how they are
achieved and monitored
 recognize the value of business ethics and
corporate awareness of society interests to
reputation and long-term success

9. GREATEST FRAUDS OF
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HISTORY
 WORLDCOM -02
 ENRON -01
 ADELPHIA -02
AN EXAMPLE - ENRON
June -01 share price 500(price in US dollar).
was the most sought after company
share.
July -01 Enron reports $618MM Q3 loss
Sep -01 Ken lay CEO reassures investors that
worst is behind.
Nov -01 Enron discloses massively overstated

10. Enron (contd)
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Dec – 01 Enron files for chapter 11 bankruptcy
protection
Jan -02 CEO Ken Lay resigns and company
declared
bankrupt.
 Shareholders were very happy with their
investment in company as stock prices were
rising.
 Shareholders rely on information provided by
companies, assured by independent auditors
and research reports by research analyst.
 Shareholders faced heavy losses .

11. TWO MAJOR PROBLEMS:-
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 SHAREHOLDERS IDENTITY CRISIS:-
million of shares trade daily.
specific identity of shareholders changes by
sec.
directors feel that they are not responsible to
any specific shareholders, hence are casual.
 INSIDE TRADING:-
stock option to employees, and directors.
they gain access to inside information
unknown to other shareholders
they become wealthy by selling their stock at
inflated prices when things are about to be
unfavorable

12. SHARE PRICE GAME:-
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1. Offensive strategy (maximizing investors
perception and confidence in sustained future
growth):-
a. set aggressive growth targets and commit
publicly to meet them
b. adjust business practices
c. move stock prices temporarily
2. Defensive strategy ( minimize investor
perception of risk):-
a. make earning growth appear as smooth as
possible.

13. Some companies that do not pay
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dividends.
 CISCO
 WARNER BROTHERS
 EBAY
 DELL COMPUTERS
 SUN MICROSYSTEM

14. Business and shareholders-
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relation
 Good relation between shareholders and
business can be brought by:-
a. Commit to independence loyalty and
care.
b. Ensure transparency and fair disclosure.
c. Direct lines of communications.
d. Direct nominations by shareholders in
board.
e. Electing and removing directors.

15. REFERENCES.
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 CORPORATE GOVERNANCE - Scott c.
newquist
 BUSINESS ETHICS - Andrew
crane
Dirk matten
Prof V Sreeraman
www.wikipedia.com
www.financialperspective.com