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NATIONAL INSTITUTE OF RETAIL MANAGEMENT

Business Ethics Max. Marks: 80 SECTION - A 1. Answer any ten of the following in about 3-4 lines each: (2x10-20) a) Business Ethics. Answer: - Business ethics refers to the measurement of business behavior based on standards of right and wrong, rather than relying entirely on principles of accounting and management. Ethics the way those morals are applied to decisions. b) Morality. Answer: - Ethics can be distinguished from Morality which are rules or duties that govern our behavior a person to persons and from values, which are ends or goals of individuals. Morality is the ones personal guiding principles, ethics the way those morals are applied to decisions. c) Religion and ethics are related. Answer: - No theory or approach to the evaluation of actions is more rules based than religion. Whether one is Christian, Jewish, Muslim, Buddhist, or another faith, the deitys laws or ethics are viewed as absolutes that must shape the whole of ones life including work. Faith, rather than reason, intuition or secular knowledge, provides the foundation for a moral life built on religion. d) Ethical dilemma. Answer: - As we know that ethics refers to the measurement of business behavior based on standards & decisions or values, when an ethical dilemma exits when two or more values are in conflicts, and seek from ethics a resolution to this conflict. g) The psychological egoism. Answer: - Psychological egoism is closely related to libertarianism. Ethical egoism is the maximization of the individuals self interest according to that individual. Ethical egoism identifies the mean toward decision making, while also identifying the greatest good as that which is the greatest good for the decision maker.

h) Two unethical practices in Software Company. Answer: - To observe downloaded files, to filter sites, to restrict your access to certain sites and to know how much time you have spent on various sites. These include products such as Websence, Net access Manager, Web track and Internet watch dog. A software company that also monitors calls placed to beepers within certain vicinity. i) Tax ratios. Answer: - One of the distribution branches is a scheme of taxation in which tax ratios are there which is for raising revenue to cover the costs of public goods, to make transfers payments and the like. Mainly these are for assuming that income is fairly earned in return for productive efforts. j) Features of utilitarianism. Answer: - Utilitarianism directs us to make decisions based on the greatest good or utility for the greatest number as the end result. The most basic form of utilitarian analysis where you tally the costs and benefits of a given decision and follow the decision that provide for the greatest overall gain. k) Whistle blowing. Answer: - The term whistle blowing is a relatively recent entry into the public lexicon. A corporate whistle blower is an honest and conscientious individual who discloses in public interest, and as an ethical duty, information relating to gross corruption, mismanagement, abuse of authority or grave injustice prevailing in a company. l) Software privacy? Answer: - Specifically in connection with privacy, ethical issues arise with gathering information, assessing its accuracy, correcting it and disclosing it, as well as issues related to the substance of the information itself. We dont not like people knowing things about us. It comes down to ones ability to be autonomous in controlling ones personal information.

SECTION

Answer any three of the following. Each question carries 5 marks. (3x5=15) 2. Explain the significance of ethics in business planning and decision making. Answer: - Business ethics is one mode of decision making in the making in the corporate environment. It is possible to persuade corporate managers that ethics should be the basis of their decisions? Of course, if ethical behavior always led to higher profits as well as higher quality products or services, the market would take care of everything. The ethical businessperson would be more likely to succeed than the unethical businessperson. However ethical higher ethics may lead to higher profits. As long as there is some perceived benefit to unethical behavior, some decision makers may be persuaded to leave their ethics at the door. The Institute for Business, Technology and Ethics suggests the following Nine Good Reasons to run a business ethically: 1. Litigation/indictment avoidance 2. Regulatory freedom 3. Public acceptance 4. Investor confidence 5. Supplier/partner trust 6. Customer loyalty 7. Employee performance 8. Personal pride 9. Its right n 5. What do you mean by classical utilitarianism? Explain its principles. Answer: -The classical utilitarianism generally have placed the superiority of mental over bodily pleasures chiefly in the grater permanency, safety, uncostliness, etc. of the former that is in their circumstantial advantages rather than in their intrinsic nature. And on all of these points utilitarians have fully proved their case; but they might have taken the other and as it may be called, higher ground with entire consistency. 1. It is indisputable that the being whose capacities of enjoyment are low has the greatest chance of having them fully satisfied and a highly endowed being will always feel that any happiness which he can look for as the world is continued , is imperfect.

2. It may be objected that many who are capable of the higher pleasures occasionally, under the influences of temptation, postpone them to the lower. 3. I may be further objected that many, who begin with youthful enthusiasm for everything noble, as they advance in years, sink into indolence and selfishness. 4. It may be questioned whether anyone who has remained equally susceptible to both classes of pleasures ever knowingly and calmly preferred the lower, though many, in all ages, have broken down in an ineffectual attempt to combine both. This may according to utilitarian opinion the end of human action, is necessarily also the standard of morality, which may accordingly be defined the rules and precepts for human conduct by the observance of which an existence such as has been described might be, to the greatest extent possible, secured to all mankind; and not to them only, but so far as the nature of things admits, to the whole sentient creation. 6. Explain the benefits of good corporate governance.

Answer: - Every organization has governance, represented by a shared pattern of beliefs, expectations and meanings that influence and guide the thinking and behaviors of the members of an organization or group. Though somewhat ethereal, it is important to consider the governance of firms because it is the culture that encourages and influences decisions making. Therefore, without additional guidance from the top a firm is sending a clear message that a worker should do whatever it takes to reap profits. Following are the benefits: 1. 2. 3. 4. 5. 6. 7. 8. Openness and humility from top to bottom of organization. An environment of accountability and personal responsibility. Freedom from risk-taking within appropriate limits. A fierce commitment to doing it right. A willingness to tolerate and learn from mistakes. Unquestioned integrity and consistency. A pursuit of collaboration, integration and holistic thinking. Courage and persistence in the face of difficulty.

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Answer any three of the following. Each question carries fifteen marks. (3x15=45) 7. Explain the ethical issues involved in managing finance with an objective of maximizing shareholders wealth rather than shareholders interests. Answer: - Ronald Duska lays out the basic ethical problems facing financial markets. The articles begin by defending the role of financial markets in spite of centuries of suspicion against them. Financial markets create capital and investment as well as help people to manage risk to ensure enough income so that they can live well. Thus financial markets contribute to the well being of society. The easy explains how the markets work and examines that type of ethical problems found in the operation of those markets. This ethical indictment of the financial services industry even carries over in some views of contemporary popular culture. In managing finance ethics is a normative enterprise that has as its subject matter individual actions, practices, institutions and systems. Financial systems mirror the complexities of a nations economic system and its level of economic development, development being a normative that implies a desirable point. We will focus on the ethics of and in the financial systems of the United States where economic development is advanced and the financial markets, instruments and institutions set the benchmark for the rest of the world. Financial markets can be categorized according to purpose. They can divided into money market and] capital markets. Money market trade is securities with original maturity of one year or less; whereas capital markets trades in securities like shares, bonds, debentures with maturity greater than one year. Most people are probably more familiar with secondary markets than with primary markets. Secondary markets are constantly referenced in the daily media. They are either exchange, like NYSE, or over the counter markets. These securities exchange includes (1) a physical location (2) a set of rules governing trading, operations and behavior and (3) members who have purchased right to conduct transactions.

Financial instruments are the securities that are traded. Classified according to time, money market securities are those having original maturity of one year per less while capital market instruments are those with a maturity of more than a year. Classified according to contractual reference, financial instruments are either debt or equity claims. Debt claims usually provide the owner with a periodic return called a coupon interest payment, and the return of the principal at the end of the contract. Examples of debt claims include the fixed income securities such as bonds and mortgages, along with the money market securities and life and long term care insurance policies and annuities. The chief ethical issue in this domain will involve the responsibility to honor contracts. Equity claims are exemplifies by common and preferred stock. Equity claims imply ownership, whereas debt claim holders have no claim to ownership. If a company is dissolved debt holders have first legal claims on the assets. Whereas debt claims mature, most equity claims are perpetuities and whereas debt claims come with fixed obligations as to periodic or coupon return and the return of principal, most equity claims make no fixed promise as to future cash flows. Common stock, the most familiar equity claim, may pay the owner of investor a periodic return in the forms of dividends, but there is no fixed or legal obligation to make the payment. 9. Explain the impact of corporate governance of Narayana Murthy Committee. Answer: - The term corporate governance is used to denote the extent to which companies run in an open and honest manner in the best interest of all stake-holders. The key elements of good corporate governance are transparency and accountability projected through a code which incorporates a system of checks and balances between all key players viz., board of directors, auditors and stake holders. For the best corporate governance following are the recommendations of the committee: Non-executive directors whose most important role is to bring an independent judgment to bear on issues of strategy, performance, resources, etc. should be picked through a formal selection process on merits. Companies should have remuneration committees consisting wholly or mainly of non-executive directors which should recommend to the board executive directors emoluments.

Companies should have audit committees consisting of minimum 3 executives directors to report on any matter relating to financial management. Audit partners should be rotate and there should be fuller disclosure of non audit work.

Following are the Benefits of Good Corporate Governance. 1. It creates overall market confidence and long-term trust in the company. 2. It leads to an increase in companys share prices. 3. It ensures the integrity of companys financial reports. 4. It maximizes corporate security by acting as a whistle blower. 5. It limits the liability of top management by carefully articulating the decision making process. 6. It improves strategic thinking at the top by inducting independent directors who bring a wealth of experience and a host of new ideas. The Securities and exchange board of India (SEBI) monitors corporate governance of listed companies in India through clause 49 which is incorporated in the listing agreement of stock exchanges with companies. All companies have to comply with the provisions of this clause which inter alia stipulates. The companies Act 2000 has introduced several provisions relating to corporate governance such as setting up of audit committees, additional grounds of disqualification of directors. The Economic Times Corporate Governance Survey 2005 In the first of its kind survey on corporate governance practices in India the Economics Times asked 147 fund managers of top broking houses and mutual funds to rank top 4 0compaies (by market capitalization) on following six parameters: 1. Accounting Quality 2. Value Creation 3. Fair Policies and Actions 4. Communication 5. Effective Governing Board 6. Reliability. In spite of the above efforts` the fact remains that good corporate governance is still a far cry in India. It is voting power at the

general meetings that count, where small shareholders who are both small in number and scattered invariably lose out. A recent study has shown that during 2002-03 only around 16% of all the Indian listed companies paid dividend. Further, a comparison of current market value of their shares with face value showed that around 90% of these companies had destroyed shareholder value. 11. Explain the corporate social responsibility towards the educational institutions. Answer: - Business has to take account of its responsibilities to society in coming to its decisions, but society has to accept its responsibility for setting the standards against which those decisions are made. By social responsibility, we mean the intelligent and objective concern for the welfare of society that restrains individual & corporate behavior from ultimately profitable, and leads in the direction of positive contributions to human betterment, variously as the latter may be defined. Two central questions arise (1) whether there exists a social responsibility of business and if so, (2) how firms can meet and evidence their fulfillment of this responsibility. The first central section is a purely profit-based social responsibility of business. Friedman is not ignoring ethical responsibility in his analysis; he is merely suggesting that decision makers are acting ethically if they follow their firms self interest. Primeaux expands on Friedmans analysis in order to find a corporate social responsibility within a profit-maximizing framework. Consider the qualities of a successful firm it meets the needs of its market. If the market demands socially responsible behavior, a firm may be only successful by demonstrating this behavior. On the other if the market places on the value at all on socially responsible behavior, it is unlikely that a firm would be encouraged by a profit to exhibit this behavior. Professor James Wilson explains that, While free markets will ruthlessly eliminate inefficient firms, the moral sentiments of man will only gradually and uncertainly penalize immoral ones. But, while the quick destruction of inefficient corporation actually seems to best articulate the balance between Primeaux and Friedman: We are not in business to make maximum profit for our shareholders. We are in business..to serve society. Profit is our reward for doing it well. If business does not serve society, society will not long tolerate our profits or even our existence.

The nature of corporate social responsibility lies somewhere in the middle of all arguments. Philosopher Ayn Rand contends that our one and only social responsibility id to ourselves, but that this concern does not act as a barrier to helping others: The moral purpose of ones life is the achievement of happiness. This does not mean that he is indifferent to all men, that human life is of no value to him and that he has no reason to help other in an emergency but it does mean that he does not subordinate his life to the welfare of others, that he does not sacrifice himself to their needs, that the relief of his suffering is not his primary concern, that any help he gives is an act of generosity, not of moral duty. Another question arises whether good ethics is there in corporate social responsibility translates into fiscal responsibility is not yet completely settled.