Corporate governance is a critical issue in so far as business is concerned --- particularly in the financial sector. The system employed to direct and control a corporation is referred to as 'corporate governance' that defines the rights and responsibilities of major corporate participants --- shareholders, directors, members of the board, officers, managers, employees, and other stakeholders.
A few years back, some big financial crimes took place in the US economy, which raised a lot of widespread uproar, giving birth to the question of ethical values in business conduct---the standard of conduct or moral judgement. Nowadays, most of the businesses and financial communities in the developed countries have been engaged in developing and enforcing ethical standards. The major goal of these ethical standards is to motivate business and market participants to adhere, in both letter and spirit, to laws and regulations concerned with business and professional practice.
People, in general, would believe that businesses actually strengthen their competitive positions by maintaining high ethical standards. Renowned financial analyst and writer Laurence J. Gitman rightly pointed out, "An effective ethics is believed to enhance corporate values. An ethics programme can produce a number of positive benefits. It can reduce potential litigation costs, maintain a positive corporate image, build shareholder confidence and gain loyalty, commitment and respect of the firm's stakeholders."
Today, an increasing number of firms are directly addressing the issue of ethics by establishing corporate ethics policies and requiring employees' compliance with them. The famous Sarbanes-Oxley Act, 2002 is the outcome of development of corporate ethics policies.
In fact, a work is well done whenever it is done with one's spontaneity and inward urge. Invariably, practice of ethics in business, and anywhere else, entails different positive dimensions linked with inner urge and willingness. This is because in an ethically sound environment, man works on his own accord. Environment makes man, and man tries to respond to the call of his conscience if he feels it in his way about real equity and justice as moral issues are closely aligned with these virtues. One corruption instance begets another. Ethical practice prevents this tendency and leads man and environment to play a proper and just role in a society, free comparatively of what is unethical.
There is a saying that charity begins at home. Hence, directors or sponsors or owners of a corporation or a firm should, at first, look at the structure and operation of the entity, whether they are correctly and properly drawn, and commence the practice of ethics at their end. It would positively influence managers, employees and other stakeholders of the firm concerned to behave ethically, leading to positive changes in business environment. Both the owners and the managers of the firm should be sound, but the board or board members should be more in degree. If that is so, it is goodwill that might prevail all around and the business will pave the way for getting flourished with its name, fame, strength and productivity.
Obviously, there might be theoretical discussions, presentations, and nice theories of governance, but what is more important and has been drawing increased focus over the past few years is the ethical issue in corporate governance system. It is not, actually, a financial issue, but is linked to it and intersects with corporate governance closely. Many big corporations of the world like Hewlett-Packard and Siemens have realised this fact and tried to improve the ethical standard of their employees, as they are involved in production process as well as financial dealings, where there is much scope for moral issues to be applied. And thus, the moral issue essentially impacts the financial issue.
It may be mentioned here that HP attaches importance to maintaining integrity of each employee working in every country, in which it does business. HP has issued "Standards of Business Conduct", which include the warning: "HP employees at every level must comply with these standards and associated policies & guidelines. Failure to do so is considered misconduct and may lead to termination of employment. In particular, all executive officers and senior financial officers, their staffs, and managers and other employees contributing to HP's finance record-keeping must comply strictly with HP finance and accounting standards, policies and guidelines." To be sure, they consider ethics as number one personal attribute --- more than interpersonal skill, communication skill, decision-making ability, or computer skill. Being quite aware of this, they have institutionalised ethics in their culture and policies.
Ethics is a great problem in modern society, where everything is judged and weighed in terms of money and gains. Now this writer would like to conclude by sharing an experience of his own. Here he is recalling a seminar held many days ago on 'Ethics in Banking' at the Bangladesh Institute of Bank Management (BIBM) auditorium, where the then Finance Minister was present as the chief guest. Valuable articles and comments were presented by the speakers. At last, the chief guest stood on the dais and said: "It is very good to speak about ethics, but it is a rare commodity now."
What could be a more poignant observation!
The writer is Deputy General Manager, Bangladesh Bank Head Office, Dhaka.
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