ETHICS IN INTERNATIONAL SCENARIO

In India, the subject of ethics was almost neglected in the past. However, since the recent
past, this subject has been gaining much importance.

We have known of the Harshad Mehtas incident or the episode that create ethical
awareness in the country. There have been number of issues pertaining to corruption, cases of cheating small investors, misappropriation of accounts etc involving predominantly big industries. The development of business ethics in Indian corporate sector can be divided into three distinct phases. They are:1st Licence Quota Permit Raj. 2ndSocialistic Frenzy. 3rd Economic Reforms. Licence Quota Permit Raj During this phase the ethical standards were low. This was the phase that lasted from the beginning of independence to the late 1960s, when the corporate sector was dominated by only 20 family groups. These family groups developed strong political connections and took full advantage of the licensing system to control a large portion of the industrial activity. Each of the groups controlled several corporations, each with different shareholders and significant public shareholdings. The companies were managed by the members of the family groups so much so that all the senior management positions were being held by them. Socialistic Frenzy During this phase of development from the early 1970s to the mid of 1980s, the traditional family groups came under intense pressure as a Monopolies Commission was established and restrictions were imposed on the expansion of the family groups. This was all done by the government with the intention of encouraging entrepreneurship and broadening of entrepreneurial base in the country. During this phase there was also the emergence of the financial institutions as shareholders in large companies, giving the financial institutions a commanding presence in the corporate sector. This was because there was access to credit from the financial institutions which helped in converting loans into equity. As the financial institutions were under the control of the government, the government controlled a large part of Indias private corporate sector. However, due to the nexus that developed between the political system and the family groups, the presence of the financial institutions was used more to the advantage by the family groups than to their detriment/ harm / damage. This resulted in malpractices in the corporate sector being either condoned or connived at. It was common for the groups to obscure corporate accounts or divert funds for making contributions elsewhere only to the detriment of the small investors.

There was hardly any transparency in all these activities. It was common for the members to start independent trading activities only to act as agents for procurement of raw materials or sale of finished goods. They would even divert funds through an unfair transfer-price mechanism. Thus, the system that existed in the past still continued. The promotions to management positions were not based on merit but on the closeness to the family. However, this led to family disputes leading to division of the companies only to the detriment of the shareholders. Manipulation of prices in the stocks was not unusual and so the small investors enjoyed very little protection. The financial institutions were blind to such practices deliberately or turned a blind eye to the happenings in business. Economic Reforms This phase began only after 1991 with the coming of liberalisation and globalisation in the Indian economy. There has been a sea change in the present times. The business organisations have started recognising the importance of ethics in their managerial structures and systems. The companies have started to realise that good ethics means good business. The objective of ethical orientation is to provide persons with guidelines and support to decide what is right and what ought to be done to keep the stakeholders satisfied. This has been definitely helped organisation to sustain in the long run. REASONS FOR THE RECENT EVOLUTION OF BUSINESS ETHICS The growing attention to and awareness of business ethics can be attributed to a number of factors. These include: the increased globalisation and decentralisation of business, an expanded corporate response to ethics and the influence of various stakeholders groups focusing attention on both ethical successes and challenges. THE GLOBAL ECONOMY With the globalisation of the economy, media and the growth of the Internet, the companies are increasingly being held accountable for their ethical conduct and the conduct of their business partners throughout the world. In addition, a range of new economic reforms and issues such as the shifting of production to developing economies, what constitutes a living wage and how companies respond to cultural differences, is being cast in ethical frames by a variety of advocacy groups. INTERNATIONAL AGREEMENTS AND ACTIONS A number of governmental and non-governmental orgnisations and associations have joined in international agreements to fight against corruption and bribery around the world. International agreements relating to corruption include the 1996 Inter-American Convention Against Corruption and the 1997 Organisation for Economic Cooperation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In addition to this, number of countries are now developing their own anti-corruption and bribery standards.

Moreover companies in India have also been influenced by various initiatives taken at the global level to ensure ethical business practices.

These include:Global Sullivan Principles Social Accountability -8000 United Nations Global Compact International Ethics Standards for Business Caux Principles Business Ethics Resources Centres Ethics Officers and Ombudsmen.

Global Sullivan Principles

These comprise of a set of internal ethical business operating principles. The Global Sullivan Principles have a tripartite structure that includes corporations, higher education and civic involvement. This tripartite initiative exemplifies Sullivans commitment to ethical conduct, which, he believed, not limited to businesses alone but to the entire community. Currently, over 170 countries (including public sector and religious organisations) subscribe to these principles.

Social Accountability -8000

Social Accountability 8000 is a standard based on a commitment to establishing a cross industry standard for workplace conditions and independent verification. This was formed in 1997 by the Social Accountability Institute (SAI), a non profit, non governmental organisation, and by the council on Economic Priorities (CEP). This SA 8000 focuses on the core labour rights of the ILO conventions, the International Declaration of Human Rights and the UN Convention on the Rights of the Child, addressing key issues such as child labour, compulsory labour, health and safety, freedom of associations, increased educational attainment for employees, discrimination and working hours and wages. It applies to manufacturers and suppliers, but retailers can also adhere to it. The auditing process is required every three years and includes minimum performance requirements, employee interviews, as well as a open complaints and appeals system. Presently, there are more than 190 companies in 31 countries that have SA 8000 clarifications.

United Nations Global Compact

On Januaary31, 1999, the United Nations Secretary General- Kofi Annan presented the World Economic Forum at Davos, his proposal for a global compact. On July 26, 2000, Kofi Annans vision was set into action. The secretary generals global compact made the issue of corporate social responsibility paramount, challenging business leaders around the world to take part in the global initiative. The Global Compact is comprised of nine principles, surrounding the issues of human rights, labour standards and environment. Participating

companies must publish annual reports and display on their websites specific examples of how they put the global compact principles into practice. Global Compact is voluntary and has no enforcement arm. The initiatives openness is designed to stimulate and promote good corporate citizenship and encourage innovative solutions and partnerships. Its openness was also designed to carry out the Global Compacts two objectives: (1) Incorporate the Global Compact and its nine principles into a business strategy and operations, (2) Facilitate a partnership among key stakeholders and promote partnership in support of UN goals. The United Nations reputation and moral authority is one reason why more than 649 companies and cities have adopted this Global Compact.

International Ethics Standards for Business Caux Principles

The Caux Round Table consisted of a group of international executives based in Caux, Switzerland. The group shared a belief that business organisations can be a powerful force for positive change in the quality of life for the world. The Caux Principles are based on the conviction that we can all live together and act for the common good. The Caux Principles are rooted in two basic ethical ideals: Kyosei and Human Dignity. The Japanese concept of Kyosei means living and working together for the common good. Human dignity is defined as value of each person as an end, not simply as a means to the fulfillment of others purposes or even majority prescription. The mobility of employment, capital, produce and technology is making business increasingly global in its transactions and its effects. Laws and market forces are necessary but provide insufficient guidelines for conduct. Responsibility for the politics and actions of business and respect for the dignity and interests of its stakeholders are fundamental. Shared values, including a commitment to shared prosperity are as important for a global community as for communities of smaller scale. For these reasons and because business can be a powerful agent of positive social change, the following principles are laid as a foundation for actions by business leaders in search of business responsibility. Principle 1: The responsibility of businesses: Beyond shareholders towards stakeholders The value of a business to society is the wealth an employment it creates and the marketable products and practices it provides to consumers at a reasonable price commensurate with the quality. To create such a value, a business must maintain its own economic health and viability, but survival is not a sufficient goal. Businesses have a role to play in improving the lives of all their customers, employees and shareholders by sharing with them the wealth they have created. Suppliers and competitors

as well should expect businesses to honour their obligations in a spirit of honesty and fairness. As responsible citizens of the local, national, regional and global communities in which they operate, businesses share a part in shaping the future of those communities.

Principle 2: The Economic and social Impact of Businesses: Toward Innovation, Justice and world Community. Businesses established in foreign countries to develop, produce or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizens. Businesses also should contribute to human rights, education, welfare and vitalization of the countries in which they operate. Businesses should contribute to economic and social advancement not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition and emphasis upon innovation in technology, production methods, marketing and communications. Principle 3: Business Behaviour: Beyond the Letter of the Law toward a Spirit of Trust While accepting the legitimacy of trade secrets, businesses should recognise that sincerity, keeping of promises and transparency contribute not only to their own credibility and stability but also to the smoothness and efficiency of business transactions, particularly on international level. Principle 4: Respect for the Rules To avoid trade frictions and to promote free trade, equal conditions for competition and fair and equitable treatment for all participants, businesses should respect international and domestic rules. Principle 5: Support for Multilateral Trade Businesses should support the multilateral trade systems of the GATT / World Trade Organisation and similar international agreements. They should cooperate in efforts to promote progressive and judicious liberalization of trade and to relax those domestic measures that unreasonably hinder global commerce, while giving due respect to national policy objectives. Principle 6: Respect for the Environment A business should protect and where possible improve the environment and promote sustainable development.

Principle 7: Avoidance of Illicit Operations

A business should not participate in or condone bribery, money laundering or other corrupt practices. Indeed, it should seek cooperation with others to eliminate them. It should not trade in arms or other materials used for terrorist activities, drug traffic or other organised crime.

BUSINESS ETHICS RESOURCES GLOBALLY

In recent years, several new ethics resource centres have been established around the globe. Some of these entities focus on business ethics exclusively while others deal with ethics more broadly. These include efforts by the Ethics Resource Center to help build or expand centers in Hong Kong, South Africa and the Middle East and the Berlin based Transparency International which works specifically to curb corruption and bribery world wide.

ETHICS OFFICERS AND CORPORATE OMBUDSPERSONS:

The number of corporate ethics officers positions has dramatically increased over the past several years. In 1998, more than 500 US companies had ethics officers as against only 200 in 1992. In addition, a growing number of corporations have added the position of Ombudsperson, an individual who serves as a neutral, impartial arbitrator who aids in dispute resolutions. On the other hand, more and more companies that have identified ethics as an issue of critical importance have chosen not to create a special ethics officers position, deciding instead to develop a decentralized approach whereby all managers are viewed as responsible for ethical decision making.