Ethics Theory, TLP-UPSC Mains Answer Writing
Q. 4. “Commerce without morality” is one of Gandhi’s Seven Social Sins. In this context, examine the ethical issues in corporate governance and suggest measures to ensure ethical business practices. (150 words, 10 marks)
Introduction
Gandhiji’s warning against “commerce without morality” underscores the perils of profit-driven conduct that neglects ethics. Corporate governance today faces increasing scrutiny for unethical practices that erode public trust and damage the economy.
Body
Ethical Issues in Corporate Governance
Corporate governance refers to the framework of rules, practices, and processes by which companies are directed and controlled. However, ethical lapses continue to persist.
- Conflict of Interest: Board members or executives exploit positions for personal gain.
Example: The IL&FS crisis revealed board-level negligence and conflict of interest in lending decisions. - Lack of Transparency: Concealing financial or operational information from stakeholders.
Example: The GoMechanic accounting fraud (2023) exposed inflated revenues and manipulated investor data. - Neglect of Stakeholder Interests: Prioritizing shareholder value over employee welfare, environment, or society.
Example: Amazon’s reported poor warehouse working conditions despite record profits. - Crony Capitalism: Businesses securing unfair advantages through political connections.
- Short-termism: Excessive focus on quarterly profits at the cost of long-term ethical vision.
To address these, governance must move beyond legal compliance to ethical responsibility.
Trinity of Ethical Corporate Governance
Measures for Ethical Corporate Governance
Strong ethical governance helps balance profit with integrity and long-term sustainability
- Board Accountability: Independent and diverse boards ensure unbiased oversight and ethical supervision.
Example: SEBI mandates independent directors to curb promoter dominance. - Mandatory Ethical Codes: Enforce clear codes of conduct and conflict-of-interest policies.
Example: Tata Group’s ethical charter is a benchmark in corporate ethics. - Transparent Reporting Systems: Adopt real-time ESG and CSR disclosures to enable scrutiny.
Example: Infosys’ sustainability reports include social, environmental, and governance metrics. - Whistleblower Protection: Secure channels for internal reporting of unethical behavior without retaliation.
- Stakeholder-Centric Policies: Broaden governance objectives to include employees, consumers, and communities.
- Regular Ethics Audits: Institutionalize periodic reviews of ethical conduct and compliance.
Conclusion
Corporate governance must reflect Gandhi’s ideals in today’s boardrooms. Narayana Murthy’s vision of compassionate capitalism offers a path where ethical business becomes both a duty and a competitive advantage.
