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Question Paper
Business Ethics & Corporate Governance (MB3I2): October 2008
Section A : Basic Concepts (30 Marks)
- This section consists of questions with serial number 1 - 30.
- Answer all questions.
- Each question carries one mark.
- Maximum time for answering Section A is 30 Minutes.
Mr. Anand Desai is in an ethical dilemma regarding purchase of a machine. If he buys the machine from Best
Electronics, who are ready to give 5 years warranty, he will not get any monetary benefit for himself. Therefore
he decides to buy the machinery from GL Electronics, who is giving only 1year warranty, in order to gain the
personal monetary benefit. Which of the following factors involved in decision-making affects the ethical
dilemma of Mr. Anand Desai?
(a) Concentration of effect
(b) Time interval
(c) Proximity
(d) Social agreement
(e) Magnitude of consequence.
When the implications and consequences of managers’ decisions become more evident, managers are faced with
the challenge of ethical dilemma. To avoid ethical dilemmas managers can follow the approaches by Clutterbuck
and Drummond and Carmichael’s. Which of the following does not belong to Clutterbuck’s approach?
(a) It includes ethics in recruitment criteria
(b) It uses reward and punishment mechanisms
(c) It establishes openness and transparency into decision-making processes
(d) It provides mechanism for negotiating concerns
(e) It draws up personal and corporate ethics checklist.
When a company adopts an anti-pollution environment policy, it is said to be ‘going green’. Organizations adopt
green initiative due to which of the following reasons?
I. Economic benefits from increased efficiency.
II. Competitive advantage through innovation.
III. Set a standard or code for moral behavior.
IV. Public image.
(a) Only (I) above
(b) Only (II) above
(c) Both (II) and (III) above
(d) (I), (II) and (IV) above
(e) (I), (III) and (IV) above.
If Vijay Motors is taken over by Vishnu Motors, Mr. Feroz and many other top executives are going to lose their
jobs. Therefore in order to discourage the unwanted takeover attempt, the management of Vijay Motors gave
stock options, bonuses and severance pay to all the top executives. By adopting which of the following
techniques, was the management of Vijay Motors able to protect themselves from hostile takeover?
(a) Golden parachute
(b) Sandbag
(c) Greenmail
(d) People pill
(e) Poison pill.
The primary role of the board is to supervise the quality of strategic thinking of the executive committee and
performs its role in strategy development at various levels. Structural and portfolio level of strategic thinking
involves discussions among the board of directors and the management, relating to which of the following?
I. External environment.
II. Mergers and acquisitions.
III. Potential market trends.
i.exe
IV. Strategic alliance.
(a) Only (IV) above
(b) Both (I) and (III) above
(c) Both (II) and (IV) above
(d) (I), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
Prakash Industries Ltd. concentrates on profits so that they can continue to sponsor the blind school and the other
social activities they have undertaken. They measure their success not only in financial terms but also in terms of
contribution to society. In which of the following stages of ethical consciousness Prakash Industries Ltd., can be
placed?
(a) Law of the jungle
(b) Corporate citizenship
(c) Profit maximizing in the long-term
(d) Stakeholder concept
(e) Anything for profit.
The accountants who look into the operations of internal accounts of various departments and make a record of
the financial activities are management accountants and financial accountants. Which of the following is/are true
regarding management accountants?
I. The role of management accountant is to provide information that the management needs for
formulating policies.
II. The management accountant provides economic information to the investors.
III. The role of management accountant also involves advising directors on the items that have to be
included in the financial statement.
IV. The task of management accountant is to provide trustworthy and credible information on which
management can base its decisions.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (IV) above
(d) (I), (II) and (III) above
(e) All (I), (II), (III) and (IV) above.
Global Tech Ltd., as a corporation enjoys the right to make donations to the leading political parties to push an
agenda in favor of it. Which of the following characteristics of a corporation, is Global Tech Ltd. enjoying?
(a) Transferability
(b) Limited liability
(c) Liability for investors
(d) Centralized management
(e) Legal personality.
Apart from taking strategic decisions and carrying moral risks of the business, a leader even has to maintain a
healthy relationship with stakeholders through ‘contracts’. Psychological contract is one among the various
Cannon contracts. Psychological contract
I. Aims at motivating employees and giving recognition to stakeholders and also offers some security.
II. Enables managers to use their competence and skills for the benefit of the enterprise.
III. Helps managers to make decisions that minimize wastage and at the same time, maintain a consistent
effort in reward standards.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (II) above
(e) Both (II) and (III) above.
Governance is concerned with the intrinsic nature, purpose, integrity and identity of the institution. Corporate
management is more of hands on activity. Which of the following is/are true regarding corporate management?
I. External focus.
II. Management assumes an open system.
III. Task oriented.
IV. Concerned with where the company is going.
The stakeholders of an organization are all those who participate in some way in the activities of the
organization. A company’s relationship with which of the following stakeholders must be based on mutual
respect to foster long-term stability in return for value, quality, competitiveness and reliability?
(a) Creditors
(b) Suppliers
(c) Community
(d) Employees
(e) Competitors.
The board of directors can exercise some powers on behalf of the company. Which of the following powers can
be exercised only with the consent of the company at the general meeting?
I. The power to invest funds of the company.
II. Power to remit debt due by a director.
III. Power to appoint sole selling agents.
IV. Power to borrow in excess of capital and reserves for the company.
(a) Both (I) and (II) above
(b) Both (III) and (IV) above
(c) (I), (III) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
Law can be defined as a consistent set of universal rules that are widely published, generally accepted and
usually enforced. Which of the following is not true regarding the characteristics of law?
(a) Laws are enforced when people disobey them
(b) If a minority of members do not obey the law, it becomes difficult to enforce it
(c) The requirement how to act or not to act in a particular situation has to be published in written form
(d) Law is applicable to everyone who faces similar circumstances
(e) There should be any contradiction between two requirements of the act.
Focus on corporate responsibility was highlighted through the industrial revolution and the years thereafter.
Which of the following happenings pertain to the industrial revolution during ‘nonconformist challenge’ in
Britain?
I. Wealth and industry were approached in different ways from the perspective of the religion that people
heading big businesses followed.
II. Quakers played an important role in shaping values of new entrepreneurial groups.
III. It reflected the needs of people who failed to prosper from the industrial revolution.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
A research was conducted by the Center for Advanced Purchasing Studies to find out the relationships of the
American buyers with the foreign suppliers. Which of the following is not a result of this study?
(a) Buyers who were least satisfied with the supplier relationship were those who perceived their suppliers
to be most involved in unethical activities
(b) Significant differences did exist between buyers’ and suppliers’ perceptions regarding how each
believed the other to be involved in these activities
(c) Buyers believed that suppliers are involved in unethical practices and felt that suppliers are performing
less effectively
(d) It appeared that American buyers realized that employing unethical practices will result in short-term
success, but the foreign suppliers did not give hear to this aspect
(e) There is no relationship between the supplier’s nationality and the level of unethical activity in the
buyer-supplier relationship.
Which of the following is/are not true regarding the study conducted to examine ethical practices in the US,
France and Germany?
I. The American managers said that bribery was unethical and illegal under the Foreign Corrupt Practices
Act.
II. Only one third of the French managers felt signing a purchase order with the cost price more than the
current market price, would be dishonest.
III. It was concluded that the US and German executives were more concerned with ethical and legal
questions.
(a) Only (I) above
(b) Only (III) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
At times of recession it has become common for businesses to reduce their size and overhead costs by
discharging some of the employees, and creating which of the following styles of management?
(a) Autocratic
(b) Bureaucratic
(c) Lean and mean
(d) Hire and fire
(e) At-will.
Laws can be enforced only if they are unduly accepted. Which of the following is not a process involved in the
formulation of law?
(a) Society process
(b) Political process
(c) Group process
(d) Individual process
(e) Economic process.
Money laundering can be defined with reference to situations such as
I. Acquisition, ownership, possession or transfer of any proceeds of crime.
II. Knowingly entering into a transaction related to the proceeds of crime, directly or indirectly.
III. Concealment or aiding in the concealment of the proceeds of crime.
IV. Those that violate equality of opportunity.
(a) Both (I) and (II) above
(b) Both (III) and (IV) above
(c) (I), (II) and (III) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
Which of the following financial frauds can be detected by comparing financial statements over a period of
time, examining unusual journal entries, verifying supporting sales documents and unusual sales transactions?
(a) Fraudulent asset evaluations
(b) Concealed liabilities and expenses
(c) Fictitious revenues
(d) Fraudulent timing differences
(e) Fraudulent disclosures or omissions.
Which of the following is known as an assessment of the social impact of a corporation on society?
(a) Social audit
(b) Venture philanthropy
(c) Social initiative
(d) Ethical audit
(e) Cause-related marketing.
The enlightenment matrix is used to measure corporate giving. As per the matrix, a company that is high in
philanthropy and high in self-interest is involved in which of the following activities?
(a) Social responsibility
(b) Pure philanthropy
(c) Cause-related marketing
(d) Enlightened self-interest
(e) Community involvement.
Which of the following is the main purpose of corporate governance?
dynamic and successful technology companies in India. Infosys highlights its
perspectives at www.infosys.com.
On July 31, 2006, Murthy opened the NASDAQ market from his corporate
headquarters in Mysore. He said, “Twenty-five years ago, we founded Infosys with
a vision of the global delivery model. That vision has been validated as the tide of
globalization has swept across the world and businesses are dramatically changing
how they run their organizations. Opening the NASDAQ market from India is not
only a great honor for Infosys, but also illustrative of the emerging new world.”
The Company’s Vision is: “To be a globally respected corporation that provides
best-of breed business solutions, leveraging technology, delivered by best-in-class
people.” And, its Mission is: “To achieve our objectives in an environment of
fairness, honesty, and courtesy towards our clients, employees, vendors and society
at large.”
Infosys has built a state of the art office complex in Bangalore with all modern
facilities which helps in giving its employees a sense of belonging. While offering
stock options to its employees, it ensures that the workforce has a stake in its overall
growth. Actions speak louder than words and leaders must speak in a way that
inspires integrity and a vision for the company.
Corporate Governance is an area of critical importance to Infosys and one where it
has sought to be a global leader. It is seeking to use its model example to promote
far higher standards in India and Murthy has been one of the most vocal and
influential advocates of corporate governance reform in his country.
The company states: “We believe that sound corporate governance is critical to
enhance and retain investor trust. Accordingly, we always seek to ensure that we
attain our performance rules with integrity. Our Board exercises its fiduciary
responsibilities in the widest sense of the term. Our disclosures always seek to attain
the best practices in international corporate governance. We also endeavor to
enhance long-term shareholder value and respect minority rights in all our business
decisions.”
The Infosys corporate governance philosophy is based on the following principles:
- Satisfy the spirit of the law and not just the letter of the law.
- Corporate governance standards should go beyond the law.
- Be transparent and maintain a high degree of disclosure levels. When in doubt,
disclose.
- Make a clear distinction between personal conveniences and corporate
resources.
- Communicate externally, in a truthful manner, about how the company is run
internally.
- Comply with the laws in all the countries in which the company operates.
- Have a simple and transparent corporate structure driven solely by business
needs.
- Management is the trustee of the shareholders’ capital and not the owner.
Infosys stresses that at the core of its corporate governance practice is the Board,
which oversees how the management serves and protects the long-term interests of
all the stakeholders of the company. It states: “We believe that an active, well-
informed and independent Board is necessary to ensure the highest standards of
corporate governance.
Majority of the Board, 9 out of 16, are independent members. Further, Infosys has
compensation, nomination, investor grievance and audit committees, which are
comprised of independent directors.”
“As a part of our commitment to follow global best practices, we comply with the
Euroshareholders Corporate Governance Guidelines 2000, and the
recommendations of the Conference Board Commission on Public Trusts and
Private Enterprises in the U.S.
We also adhere to the UN Global Compact Programme.” To promote corporate
social responsibility the company established a philanthropic foundation in 1996,
which is mostly engaged in social, health and education programs in India.
Murthy is the chairman of the governing body of the Indian Institute of Information
Technology, Bangalore and the Indian Institute of Management, Ahmedabad. He
was the Chairman of the Committee on Corporate Governance appointed by the
Securities and Exchange Board of India (SEBI) in 2003. He is a member of the
Board of Overseers of the University of Pennsylvania’s Wharton School; Cornell
University Board of Trustees; Singapore Management University Board of Trustees;
INSEAD’s Board of Directors and the Asian Institute of Management’s Board of
Governors. He is also a member of the Advisory Boards and Councils of the
William F. Achtmeyer Center for Global Leadership at the Tuck School of Business,
the Corporate Governance initiative at the Harvard Business School, and the Yale
University President’s Council on International Infosys Foundation, the
philanthropic arm of Infosys Technologies Ltd., came into existence on 4th
December 1996 with the objective of fulfilling the social responsibility of the
company by supporting and encouraging the underprivileged sections of society. In
a short span of time, the Foundation has implemented numerous projects in its
chosen areas. The Foundation has undertaken various initiatives in providing
medical facilities to remote rural areas, organizing novel pension schemes and in
aiding orphans and street children. It has undertaken a large rural education program
titled “A library for every school” under which 5500 libraries have been set up in
government schools spread across many villages. Other activities include the
reconstruction of old school buildings, setting up of rural Science Centers and
schemes to provide support to dying traditional art and culture forms.
END OF
CASELET
Caselet 2
Read the caselet carefully and answer the following questions:
3. Bribery, of course, is the most widespread form of corruption, and corporate
strategies for dealing with bribe requests vary. With respect to the caselet, discuss
the strategies for saying no to bribe and explain risks and costs abound for
companies that succumb to the bribery game.
( 7 marks)
4. There’s no doubt that corruption, endemic in emerging economies around the world.
Discuss the various unethical behaviors that constitute in business and their impact
of corruption on market system.
( 8 marks)
In Turkey, the apartment buildings that collapse during earthquakes are known as
“bribe buildings.” In Africa, bridges dot the landscape with no roads to connect
them. There’s no doubt that corruption, endemic in emerging economies around the
world, throws economic development into chaos. It affects decisions made by
bureaucrats, degrades the quality of those in power, and discourages foreign
investment. It’s also an increasingly hot business topic, with a growing number of
influential business and political leaders from around the globe regularly
pinpointing corruption as one of the greatest threats to global economic
development.
“Corruption and bribery have moved to the forefront in discussions about business,”
says Wharton legal studies professor Philip M. Nichols. “The list of countries that
have been politically or economically crippled by corruption continues to grow, and
businesses with long-term interests abroad will ultimately be harmed by any plans
that include bribery.”
Bribery, of course, is the most widespread form of corruption, and corporate
strategies for dealing with bribe requests vary. According to Nichols, some
companies opt to pay, sometimes damaging their public images and making it more
difficult to refuse future requests. Others have the sheer bulk and revenues to
successfully and consistently say “no.” Oil giant Texaco, for example, has such a
formidable reputation for refusing to pay bribes that its jeeps are often waved
misallocation of resources. Yes, Africa is littered with bridges instead of hospitals.
But more damaging is the fact that in endemically corrupt systems, regular people
are not getting served by the government; they don’t trust the government so they
don’t interact with the government,” Nichols says. “But people have to get things
done. So they create their own systems to do things, such as resolve disputes or
enforce contacts or even police neighborhoods.”
These systems, however, “are not free,” Nichols adds. “They cost money. So money
goes to supporting the government system and money goes to supporting the
shadow system; twice as much money goes to bureaucracies as it should. That
means money is not going to increasing food production, or to health, or to
enlarging the economy. And that stinks.”
END OF
CASELET
Caselet 3
Read the caselet carefully and answer the following questions:
5. Define environmental ethics and explain the various approaches Fetzer Vineyards
used concerning the moral responsibility of environment.
( 9 marks)
6. Fetzer is recognized as a zero waste company by the state of California. Analyze the
initiatives adopted by Fetzer to become the zero waste company.
( 9 marks)
Imagine a football field covered in garbage. It’s a foot deep, so when you walk
around in it - slogging through office paper, food pulp, old Bic pens - it reaches up
past your ankles. Now imagine that someone has cleaned that field. The waste is the
same depth, but now it only reaches from the first to the seventh yard line, and 93%
of the field is pristine and green again. That’s a major cleanup. And that’s what
Fetzer Vineyards, in Hopland, California (Calif), has accomplished with its own
waste since 1991. Fetzer has done it during a time when sales more than doubled.
Not being one to rest on its laurels, the Fetzer winery aims to go further - to zero
waste by the year 2009. “We are already recognized as a zero waste company by the
state of California,” said Patrick Healy, environmental coordinator at Fetzer. What
they do with all that non-waste is instructive. They recycle everything from
cardboard to antifreeze; compost organic waste and turn it into fertilizer; and work
to keep materials out of the waste stream - by restoring oak barrels rather than
discarding them, for example.
There’s almost no aspect of the winery that escapes this kind of detailed
environmental scrutiny. Take the administration building, for example. This10,000-
square-foot facility, completed in 1996, is one of the world’s first large-scale
examples of rammed-earth (underground) construction. It was built almost entirely
with recycled wood. Carpets are natural fiber. Lights are on motion sensors, so they
go off as you leave the room. Heat comes from waste heat off chillers used in wine
making. And instead of air conditioning, the building uses night-air cooling.
“Computerized and motorized windows open at night to admit cool air,” Healy
explained. Even landscaping is environmentally conscious. It’s “zeroscape, “he said,
because the drought-resistant plants take little water.
And then, of course, there’s the photovoltaic array on the roof, which got up and
running in June. “It’s the largest photovoltaic display in northern California not
owned by a utility company,” Healy said. It supplies three-quarters of the building’s
energy needs. All other power used by the winery is from renewable sources, thanks
to a unique utility contract signed in May.
Most telling, perhaps, is the vineyard’s approach to grape growing itself: an organic
approach that relies on natural pest control and soil management. Techniques
include the use of “cover crops” grown between the vines, like crimson clover and
purple vetch, which attract beneficial insects. “They keep the bad guys in check, so
to speak,” said President Paul Dolan. Another technique is “canopy management,”
in which the leaf and cane canopy is opened to bring in sunlight, to reduce the
chance of mold and rot, and eliminate the need for fungicides.
The process “brings us closer to the vine,” Dolan said. “We don’t have the quick
fixes of chemicals, so we’re in the vineyards more. We find that our farmers are
better farmers as a result.” And the grapes simply taste better. That’s where the
financial payoff lies. There’s some demand for specially labeled “organic” wine,
which Fetzer meets with an organic label, Bonterra. Butit doesn’t label most of its
wine organic. Organic growing “is part of who we are,” Dolan said. “It’s not
something the consumer is aware of.”
About 20% to 30% of grapes used now are organic, but Fetzer plans to reach 100%
by 2010. Toward that end, it formed “Club Bonterra” to help share ideas on
sustainable farming among its outside farmers, who provide more than 90% of the
grapes.
Does all of this environmental focus cost more? Yes and no. Organic methods are a
little more expensive to begin with, but not in the long run. The solar array really
won’t pay for itself, but it was built with the help of grants. Renewable power is
slightly more expensive, but Fetzer is offsetting that by pursuing efficiencies in
usage. And recycling is decidedly less expensive than land filling. It all does make
economic sense. “But it’s not like we’re using it as a competitive edge,” Dolan said.
It simply fits with how the company does business. Fetzer’s vision statement is to
enhance the quality of life.
What’s remarkable is that Fetzer takes this holistic approach as a publicly held
company. This $160 million firm is owned by the $2 billion Brown-Forman Corp.,
based in Louisville, Kentucky (Ky). “They’ve been great about it,” Dolan said.
Fetzer runs its own show, as long as the profit is there. And as Dolan says, Fetzer is
“very profitable.” Over the last six years, profits and revenues have grown at a 15%
annual compounded rate.
It’s a model worth showcasing for a new century - a thoughtful and deep
commitment to the environment, combined with financial excellence. As Dolan
said, “it helps other people see it can be done.”
END OF CASELET 3
END OF SECTION B
Section C : Applied Theory (20 Marks)
ons with serial number 7 - 8.
ach question.
30 minutes on Section C.
Marian, a top graduate from Loyola in Humanities, has applied to Spin Colors
position. The CEO was questioned by other panel members after the in
necessity to hire Marian, as she is a black woman with unpleasant personal
good academics the CEO wants to appoint her. In this regard, discuss t
selection.
The role of the management involves in balancing the multiple claims of
Knight Restaurants gives preferential treatment to some of its stakeholder
Therefore the task of the management to keep the relationships among t
balanced. When these relationships become imbalanced, the survival of K
jeopardy. Discuss why it is important for Knight Restaurants’ to maintain goo
stakeholders.
Suggested Answers
Business Ethics & Corporate Governance (MB3I2): October 2008
Section A: Basic Concepts
Answer Reason
1. C Six factors are involved in ethical decision-making. Proximity says while solving
ethical dilemmas a manager may adopt those decisions that are beneficial to him or
those affected socially, culturally, psychologically or physically by the decision.
< TOP >
2. E Businesses operating with social responsibility should have standard rules and
regulations for efficient functioning. To avoid ethical dilemmas managers can follow
the approaches by Clutterbuck (institutional and control oriented approach) and
Drummond and Carmichael’s (personalized development approach). Clutterbuck’s
approach:
- It includes ethics in recruitment criteria.
- Using reward and punishment mechanisms.
- Establish openness and transparency into decision-making processes.
- Provide mechanisms for negotiating concerns.
Draw up personal and corporate ethics checklist is among Drummond and
Carmichael’s (personalized development approach).
< TOP >
3. D When a company adopts an anti-pollution environment policy, it is said to be ‘going
green’. Organizations adopt green initiative due to the following reasons:
- Economic benefits from increased efficiency.
- Competitive advantage through innovation.
- Public image.
To set a standard or code for moral behavior is an objective of ethics.
< TOP >
4. A When a company is taken over, many top executive are likely to lose their jobs. So to
discourage an unwanted takeover attempt, a company gives lucrative benefits to its
top executive – these benefits are awarded to those executives who lose their jobs
after a takeover. Benefits include stock options, bonuses and severance pay etc., such
golden parachutes can run into millions of dollars and can cost the firm a lot of
money.
< TOP >
5. C Structural and portfolio strategy is concerned with decisions regarding the structure
of the company and the businesses that it should enter into. This level of strategic
thinking involves discussions among the board of directors and the management,
relating to acquisitions, mergers, strategic alliances or sale of a part of the business.
< TOP >
6. D In the fifth stage, “stakeholders concept,” companies concentrate on profits to have a
social as well as economic mission. They measure their success not only in financial
terms but also in terms of contribution to society.
< TOP >
7. C The role of management accountant is to provide information that the management
needs for formulating policies, planning and controlling the activities of the
employees, decision-making, disclosures to shareholders and others who are external
to the business. The main task of a management accountant is to provide trustworthy
and credible information on which the management can base its decisions.
The financial accountant provides economic information to the investors. The role of
the financial accountant also involves advising directors on the items that have to be
selected for inclusion in the financial statement.
< TOP >
8. E A corporation is a legal person, enjoying the following rights: - Corporations can make donations to political parties and thus can push an
agenda in favor of it.
- Corporations can give reasonable protection to individuals working for it from
penalty or jail, which individuals would not enjoy as outsiders to the corporation.
- As a legal person, a corporation can own property, including real estate,
copyrights and intellectual property.
< TOP >
9. A According to Cannon psychological contract aims at motivating employees and
giving recognition to stakeholders and also offers some security.
Efficiency contract helps managers to make decisions that minimize wastage and at
the same time, maintain a consistent effort in reward standards.
Knowledge contract enables managers to use their competence and skills for the
benefit of the enterprise.
< TOP >
10. B Statement (I), (II) and (IV) are not true regarding corporate governance. Since
corporate management focuses internally, it assumes a closed system and it is
concerned with getting the company there.
< TOP >
11. E Jitendra Mishra and Molly Morrissey have identified the following factors that
promote trust in an organization:
- Open communication.
- Sharing of critical or important information.
- Encouraging employee participation in decision-making.
- Sharing of perceptions and feelings.
< TOP >
12. C According to Gelleraman, a manager uses the following rationalizations: - They will be protected by their company. - Their actions are aimed at the individuals or corporations best interest. - Their actions are within reasonable ethical and legal limits. - Their actions will not be disclosed or published.
< TOP >
13. D Marketing mix is crucial for the marketing decision making process. Assembling and
managing the 4P’s is an important task for any marketer. Marketing mix also includes
the service aspects of people, physical evidence and process.
< TOP >
14. C Shadow directors are those who influence the decisions of the board without formally
being present on the board. This type of directorship is seen in some family owned
companies. But when there is evidence to prove their influence, they can be held
responsible for the acts of the company along with the directors of the board.
< TOP >
15. A Circulated letters reflects the company’s policies on certain issues concerning
suppliers, contractors and buying agents.
< TOP >
16. B The stakeholders of an organization are all those who participate in some way in the
activities of the organization. A company’s relationship with suppliers and
subcontractors must be based on mutual respect to foster long-term stability in return
for value, quality, competitiveness and reliability.
17. D Powers can be exercised only with the consent of the company at the general meeting
are
- Power to remit debt due by a director.
- Power to appoint sole selling agents.
- Power to borrow in excess of capital and reserves of the company.
< TOP >
18. B The characteristic of Law: - Laws are enforced when people disobey them - If the majority of the members do not obey the law, then it becomes difficult to
enforce it
- The requirement how to act or not to act in a particular situation has to be
published in written form
- Law is applicable to everyone who faces similar circumstances
- There should be any contradiction between two requirements of the act.
< TOP >
19. C During the Victorian rule there was a variance in the practice of christianity
especially between catholicism of the Irish migrants and the determined quakerism.
These quakers constituted the nonconformist section of the society. Noncoformism
was with respect to religion.
Therefore, the following happenings pertain to the ‘nonconformist challenge’ in
< TOP >
28. A The main purpose of corporate governance is disbursement of organizational
resources to individuals based on positive contributions made to the organization.
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29. C In the Japanese model of corporate governance, the financial institutions have a
major say in the governance mechanism. The shareholders, along with the banks,
appoint the members on the board. In this model even the president is appointed on
the basis of a consensus between the shareholders and the banks.
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30. A The conformance role is a tricky role as it involves the director monitoring and
evaluating his own performance.
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Section B : Caselets
1. The Company’s Vision statement: “To be a globally respected corporation that provides best-of breed business
solutions, leveraging technology, delivered by best-in-class people.” And, its Mission is: “To achieve our
objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and
society at large.”
Ethical issues while developing the vision statement:
The Vision statement plays a major role in influencing the strategy of an organization. It reflects the values and
priorities of strategic decision makers. It provides managers with a unity of direction and also projects a sense of
worth and intent that can be identified and assimilated by the insider and outsiders of the company i.e.,
stakeholders.
A company’s vision statement reflects company’s culture and values. For instance, Infosys vision statement
declares that the company seeks to be a globally respected corporation that provides best-of-breed software
solutions delivered by best people.
Infosys global presence: On July 31, 2006, Murthy opened the NADSAQ market from his corporate headquarters
in Mysore. Murthy said that, twenty-five years ago they founded Infosys with a vision of the global delivery
model. That vision has been validated as the tide of globalization has swept across the world and businesses are
dramatically changing how they run their organizations. Opening the NASDAQ market from India is not only a
great honor for Infosys, but also illustrative of the emerging new world. Infosys employs over 58,000 people
worldwide.
Best-of-breed software: Murthy has pioneered a technology revolution and his corporation has become firmly
established and very successful. It provides consulting and IT services. It is one of the pioneers in strategic
offshore outsourcing of software services.
Respected corporation: Murthy’s approach to corporate governance and workplace values has been no less
influential on the most dynamic and successful technology companies in India. Corporate Governance is an area of
critical importance to Infosys and one where it has sought to be a global leader. It is seeking to use its model
example to promote far higher standards in India and Murthy has been one of the most vocal and influential
advocates of corporate governance reform in his country.
Infosys ensured best people: Infosys has built a state of the art office complex in Bangalore with all modern
facilities which helps in giving its employees a sense of belonging. While offering stock options to its employees,
it ensures that the workforce has a stake in its overall growth. Actions speak louder than words and leaders must
speak in a way that inspires integrity and a vision for the company.
There are no hard and fast rules that vision statement should be written or published. Top management usually has
a crucial role in the development of the vision statement. But in some organizations even employees are involved
in this task. The ethical question arises that to what extent do stakeholders have a right to be involved in
developing and articulating the strategic vision?
In many successful companies the CEO himself frames the vision statement of the organization. However there
are instances, where in companies failed due to this one – man approach. The ideal solution would be to involve
the CEO and senior managers in the development of the vision statement.
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2. Corporate Governance is an area of critical importance to Infosys and one where it has sought to be a global
leader. It is seeking to use its model example to promote far higher standards in India and Murthy has been one of
the most vocal and influential advocates of corporate governance reform in his country.
The company states that they believe that sound corporate governance is critical to enhance and retain investor
trust. Accordingly, they always seek to ensure that they attain their performance rules with integrity. Their Board
exercises its fiduciary responsibilities in the widest sense of the term. Their disclosures always seek to attain the
best practices in international corporate governance. They also endeavor to enhance long-term shareholder value
and respect minority rights in all our business decisions.
Boards:
Majority of the Board, 9 out of 16, are independent members. Further, Infosys has compensation, nomination,
investor grievance and audit committees, which are comprised of independent directors. Infosys exercises the
following boards or committees to oversee how the management serves and protects the long-term interests of all
the stakeholders.
Majority of the Board: In the majority of the board structure 9 out of 16, are independent members. In the
majority of the board, executive directors have a majority on the board while outside or non-executive directors
are in a minority. The non-executive directors are appointed to the board to represent the interests of stakeholder
groups like major shareholders employees, customers etc. Sometimes, organizations appoint non-executive
directors on the board to bring in the required expertise, knowledge and experience.
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bribery became a part of the normal course of business because bureaucrats worldwide expected similar
treatment.
- Lastly, there are international trade implications surrounding bribery. Bribery degrades markets. Economist
Paolo Mauro, in the article “Corruption and Growth,” finds a direct link between high levels of corruption and
low levels of foreign direct investment. Though Mauro’s work does not explain this finding, Nichols offers
three likely reasons. First, corruption actually increases the amount of time a company must spend with a
bureaucracy; second, corruption makes it more difficult to obtain information, which increases transaction
costs, and third, corrupt relationships are less predictable and less enforceable. There’s probably a fourth
reason too, which is that most business people are good people and have a distaste for endemically corrupt
environments.
- Corruption also drastically affects economic development by causing a misallocation of resources. Africa is
littered with bridges instead of hospitals. But more damaging is the fact that in endemically corrupt systems,
regular people are not getting served by the government; they don’t trust the government so they don’t interact
with the government. But people have to get things done. So they create their own systems to do things, such
as resolve disputes or enforce contacts or even police neighborhoods.
- These systems, however, “are not free.” They cost money. So money goes to supporting the government
system and money goes to supporting the shadow system; twice as much money goes to bureaucracies as it
should. That means money is not going to increasing food production, or to health, or to enlarging the
economy.
4. There’s no doubt that corruption, endemic in emerging economies around the world, throws economic
development into chaos.
- It affects decisions made by bureaucrats,
- Degrades the quality of those in power, and
- Discourages foreign investment.
- It’s also an increasingly hot business topic, with a growing number of influential business and political leaders
from around the globe regularly pinpointing corruption as one of the greatest threats to global economic
development.
Various unethical behaviors and their impact on market system are:
Coercion
The use of threat or force to prevent sellers" from dealing with certain customers, and buyers from purchasing
from certain sellers amounts to coercion. Coercion decreases effective competition and results in fewer resources
being allocated to producing goods and services than would be the case if free competition had been allowed.
Deceptive information
Deceptive information about products and services often leads customers to choose goods and services that they
would not have chosen if they had access to accurate information. Such misleading information decreases
customer satisfaction as the products and services fail to meet customer expectations.
Theft
Theft compels (he marketer or supplier to increase his product price to make up for his losses due to theft. Many
power transmission companies arc the major victims of theft. These companies are accumulating losses because
of widespread theft of power by corporations and individuals. The scale of theft is now compelling many state run
electricity boards to pass on these costs to consumers or to move out of business.
Bribery
Bribery involves offering or receiving something of value for the purpose of influencing the action of an
official in the discharge of his or her public or legal duties. A bribe induces the decision maker to choose an
alternative that may bring him some personal gain, but may not ready be best one.
Today many businesses are indulging in bribing the decision makers to lake decisions in their favor. Bribes may
take the form of kickback, expensive sponsorships for travel aboard, parties, etc. Bribery distorts the market
system as the cost of the bribe is built into the cost of the project or the final product. A contractor who bags a
project to build a dam by bribing the concerned officials may try to make up for this expense by using low quality
inputs.
Bribery, of course, is the most widespread form of corruption, and corporate strategies for dealing with bribe
requests vary. According to Nichols, some companies opt to pay, sometimes damaging their public images and
making it more difficult to refuse future requests. Others have the sheer bulk and revenues to successfully and
consistently say “no.”
A key, Nichols suggests, is wiring this no-bribe ideal into a corporation’s culture, starting with a corporate code for
managers and employees, affiliates and potential business partners. But coming to grips with what appears to be an
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international groundswell of corruption is far from a simple matter. Nichols believes that unraveling and
explaining the mechanics of corruption is critical to helping the growing body of government and corporate
organizations trying to fight it.
On a practical level, what does the upswing in international corruption mean to a company? “The fact that a great
number of government officials in a great number of countries, including some potentially large markets, seem to
demand bribes is critical to any business that has a cross-border presence,” says Nichols. “Then there’s the reality
that more than 20 nations, including the wealthiest and most-active trading nations, have made bribe paying
illegal, and the fact that despite this there are still competitors who will pay bribes.
“These facts combined make for some extremely difficult terrain. Officials expect you to pay bribes, some of your
competitors will pay them, but you might go to jail if you do.”
Coercion, deceptive information, theft and bribery are all unethical behavior. They lead to a misallocation of
resources and a lack of trust between the parties involved in a business transaction. This hampers the effective
functioning of the market system.
5. Environmental ethics is a branch of applied ethics, which examines the moral basis of environmental
responsibility. Environmental responsibilities have to be weighed against the responsibilities against the
responsibilities to stakeholders and societal benefits, as any damage caused to environment has an impact on
society as well as on stakeholders. Environmental issues such as toxic waste, contamination of ground water, oil
spills destroying the seashores, usage of fluorocarbon that deplete the ozone layer etc can be tackled by espousing
environmental ethics. Thus, the goal of environmental ethics does mainly revolve around the concern about the
environment and also the moral foundation of environmental responsibility.
There are three approaches concerning the moral responsibility of environment. Although three different
approaches have been adopted, but they all in an essence, support environment responsibility. The approaches are:
- Anthropocentrism approach
- Anxiological approach
- Eco-centric approach
The Anthropocentrism approach focuses on the utility that human beings can derive by protecting the
environment. Since the survival and well being of human beings depends on the environment, it is the moral
responsibility of human beings to support and preserve the environment.
According to the Anxiological approach it is the moral responsibility to protect animals. It; implies the
responsibility of environment with regard to preservation of animals and animals' rights. This approach stales that
it is essential for a human being to have a moral standing towards the animals. Since Fetzer did not have any
connection with animals they need not use this approach.
Eco-centric approach is considered to be a radical approach to the environmental responsibility. The theory states
that, environment has to be influenced from direct moral consideration but not that one which is derived from
human interest. The term direct responsibility means, doing such activities, which aim at preserving the inherent
nature and environment. The building of Fetzer is an example of Eco-centric.
Although different approaches have been put forward to support environmental responsibility, but a successful
foundation for environmental ethics should fulfill two tasks: first, it has to explain how human beings have
degraded the environment crisis, second, it must explain how human beings can protect the environment.
Environmental degradation can be better understood by examining some of the events that have had a major
impact on the environment like the Bhopal disaster and shell oil spill.
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6. Fetzer is recognized as a zero waste company by the state of California because of the following initiatives taken
by them:
Recycle: Fetzer recycles everything from cardboard to antifreeze; compost organic waste and turn it into fertilizer;
and work to keep materials out of the waste stream - by restoring oak barrels rather than discarding them.
Benefits: Recycling is less expensive than land filling. It all does make economic sense. Though it’s not like
they’re using it as a competitive edge. It simply fits with how the company does business. Fetzer’s vision
statement is to enhance the quality of life.
Building construction: T he administration building, 10,000-square-foot facility, completed in 1996, is one of the
world’s first large-scale examples of rammed-earth (underground) construction. It was built almost entirely with
recycled wood. Carpets are natural fiber. Lights are on motion sensors. Heat comes from waste heat off chillers
used in wine making. And instead of air conditioning, the building uses night-air cooling. Computerized and
motorized windows open at night to admit cool air. Even landscaping is environmentally conscious. It’s
“zeroscape, because the drought-resistant plants take little water.
Benefits: Since the lights are on motion sensors they go off as someone leaves the room, thus saving electricity.
The photovoltaic array on the roof, which got up and running in June is the largest photovoltaic display in northern
California not owned by a utility company. It supplies three-quarters of the building’s energy needs. All other
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