Pride of Mewar Sangam University VC Prof BR Natarajan gave a talk on "'Ethics - The Foundation of Good Corporate Performance and Governance" at the Technical Session in SIP organized by the ICSI - Bhilwara Chapter 26 July 2013

1. Ethics is the Foundation of Good Corporate
Performance and Governance

2. Ethics is study of standards of behavior
which promote human welfare and the
good. Ethics is about how we behave, about
the standards we hold ourselves to as well
as how we treat each other even those we
do not know.
Ethics is not just feelings or conscience, not
the same as religion, not just following the
law, not following what everybody does, not
technology or science.

3. Business Ethics is study of standards of
business behavior which promote human
welfare and the good.
Business Ethics is how we act as individuals
in business, how we structure our business
organizations and the way they work, how
we structure our business society, our laws
affecting business and our systems.

4. According to the great German
Philosopher Immanuel Kant “In Law, a
man is guilty when he violates the rights
of others, in Ethics; he is guilty if he only
thinks of doing so.”
To quote Albert Einstein, “try not to
become a man of success but rather try
to become a man of value.”

5. Most violations of corporate governance
processes are a result of the absence of
properly structured ethics management
processes in organizations. Ethical cultures
must anchor the development and practice of
sound governance paradigms in today's
organization.
Corporate governance is basically about rules
and procedures and ethics is about values.
Corporate governance rules and regulations
will remain ineffective for as long as they are
not supported by strong ethical values.

6. An ethical foundation in corporate governance is
decisive because it helps to build enduring
corporate governance processes that thrive even
in the most difficult of circumstances.
It is the rock upon which ethical businesses stand
and ethics is the tower of strength which
intrinsically police the behavior of every leader
including those in key positions.
Business ethics must be embedded in business
strategy and embedding ethics in strategy goes
beyond merely mentioning ethics in the corporate
governance policy document.

7. It entails company leaders making a deliberate
effort to unlock the ethical value in the policy
document by asking tough questions such as:
•Has the company assigned someone to co-
ordinate the ethics function?
•Does the company have a helpline to assist
employees report observed misconduct and seek
help on ethical issues?
•Has the company embedded ethics in the reward
management systems?
•Does the company monitor, evaluate and audit
ethics performance?
•Does the company reward ethical behavior and
punish unethical behavior?

8. Globally, companies are moving towards building
business ethics performance indicators and
measurements into employee performance
objectives as a way of cementing the impact of
ethics on the overall performance of the
organization.
The resultant ethics performance metrics and
competencies are then used during promotions,
salary increases and to inform decisions on all
other key staff issues, thus sending a clear
message to all and sundry that both job
performance and ethics matters.

9. Corporate governance rules cannot simply be
written to address every possible leadership
moral breakdown and imposing more
governance rules without creating a strong
ethical culture will not grow responsible
behavior either.
Rather, it is when leaders embrace ethics and
make a deliberate effort to embed it in
business operations that ethical cultures are
built to form the basis for good corporate
governance.

10. Real and lasting governance imperatives can
become a reality only when leaders foster a
genuine commitment to grow ethical behavior
right across the organization. When leaders
embrace ethical leadership as the basis for
good governance, they become good
communicators of ethics to staff and all
stakeholders through their deeds and actions.
Companies must build ethical cultures that
should anchor their governance processes and
help to improve business competitiveness.

11. Personal modelling of ethical behavior, and
exhibiting accountability and transparency in
one's dealings with the business of the
organization are visible elements that will
ensure the leader's positive tone reaches
everyone in the organization.
In today's highly competitive global
marketplace ethical leadership is emerging as
a key competence for impactful business
leaders and company executives.

12. Ethical leadership is not simply a matter of a
good upbringing. Ethical leadership goes
beyond morality to focus on the acquisition of
ethical skills through regular ethical leadership
training.
Corporate leaders must understand that it is
commitment to practicable ethics that makes all
the difference, not simply a corporate
governance and ethics policy statement.

13. The best written set of corporate governance
principles are bound to fail if ethics are given lip
service or fail to get the seriousness they
deserve.
The Ethical Leadership Quotient of an
organization is now a key indicator for business
success on the global marketplace. For more
details about Ethical Leadership Scales and
Quotients see
http://www.ethicalleadership.com/EthicalLead
ershipScales.html

14. In companies today, maximum
performance will only be achieved by
those companies able to trust their people
to make sound decisions within a
condensed time-frame.
Such people will need to exercise a
considerable degree of autonomy. Yet, at
the same time, risk to the company must
be minimized.

15. There was a time when people thought that risk
could be controlled through the application of
detailed rules, regulations and compliance
regimes. It is now known that this approach is
highly unstable and relatively costly.
Things move too fast and are too ambiguous for
the old paradigm of command and control to
work. Instead, prudent boards and management
should evolve corporate cultures in which
decisions are based on the application of
general values and principles – rather than
specific rules and regulations.

16. The challenge for companies is therefore to
create an environment in which its people feel
that the values and principles at work within the
company are real.
The trouble is that it is extremely difficult to do
this if the company adopts a minimalist approach
and therefore seems prepared to sacrifice
anything and everything in the name of
increasing shareholder wealth. Paradoxically, the
key to shareholder wealth is to be found in
sincerely believing in a purpose for the company
that goes beyond this

17. Various research studies have shown that a proper concern
with the ethical environment of a corporation is essential
to long-term business success. Many are familiar with an
interesting book, Built to Last: Successful Habits of
Visionary Companies authored by James Collins and Jerry
Porras. Visionary companies pursue a cluster of objectives,
of which making money is only one – and not necessarily
the primary one. Yes, they seek profits, but they're equally
guided by a core ideology – core values and a sense of
purpose beyond just making money.
While the visionary companies such as 3M, American
Express, Boeing, Citigroup, Disney, Ford, General Electric,
HP, IBM, Johnson & Johnson etc outperformed the stock
market by 15 times while their competing companies did
by only 2 times.

18. An organization that deals with the ethical
dimension of all its activities will be, at the same
time, building a high-trust environment. As we
know, high-trust correlates with low cost. This is
especially so when ethical commitments are
reinforced so that they become part of the deep
structure of organizations.
In these circumstances, blind rule following is
replaced by compliant behavior based on the
voluntary expression of dispositions that accord
with desired practices. A certain degree of
vigilance is still appropriate. However, far less
supervision is required. And where rules are
silent or ambiguous, there is still a basis for
proper action.

19. All of this relates to the performance of boards in
a very direct way. Directors are required to
provide leadership to the corporation. As such,
they need to model the very values and principles
that they rely upon for the overall success of the
company. But beyond this, there is a further
requirement that was touched upon above.
This is that directors have a capacity to engage in
the wider kind of debate that current and future
companies will have to address. This ability is not
a skill that can be picked up overnight. Rather, it
needs to be fostered under the careful guidance
of a chairman. Yet, not all chairmen are equipped
for this task.

20. Working at the chairman's right hand, a
proficient COMPANY SECRETARY will be far
more than an amanuensis - a person
employed to write or type what another
dictates or to copy what has been written by
another.
He or she will also be a trusted professional
adviser possessed of sound, independent
judgment – part of the management team
and yet, somewhat apart.

21. Business Corporations are like ships at sea. A
marginally competent sailor can get by when
the wind and weather is fair. However, a
combination of technical
excellence, experience and sound judgment is
required by those who would survive the
occasional tempest.
Many boards are forced to pretend that they
are coping – even as they feel themselves
caught between Devil and the Deep Sea.

22. Every captain needs a confidante who can
act as a sounding board when tough
decisions must be made and executed.
This means that there will be occasions
when the corporate secretary may need
to adopt a position of providing
disinterested advice that goes beyond
that of setting out the formal
requirements of the law and applicable
regulations.

23. Indeed, it could be argued that corporate
secretaries are bound to adopt this role
because of their chosen status as
professionals.
Belonging to a profession means accepting
that there is a significant (if not overriding)
duty to act in a spirit of public service. In
fact, this determination to act in this spirit is
the key defining characteristic of a
professional.

24. If the idea of a profession is to have any
significance, then it must hinge on this notion
that professionals make a bargain with society
in which they promise conscientiously to serve
the public interest – even if to do so may, at
times, be at their own expense.
That is, to be a professional is to face the very
real prospect of having to act with moral
courage.

25. Ten facets of Ethical Leaders are:
1. Articulate and embody the purpose and
value of the organization
2. Focus on organizational success rather
than on personal ego
3. Find the best people and develop them
4. Create a living conversation about ethics,
values and the creation of value for
stakeholders
5. Create mechanism of dissent

26. 6. Take a charitable understanding of others’
values
7. Make tough calls when being imaginative
8. Know the limits of the values and ethical
principles they live
9. Frame actions in ethical terms
10.Connect the basic value proposition to
stakeholder support and societal
legitimacy.
For more details see http://www.corporate-
ethics.org/pdf/ethical_leadership.pdf