Business Ethics and Corporate Governance

PART A (Descriptive Type) = 16

PART B (Case Study) = 2
PART C (Multiple Choice) = 85
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PART A
Descriptive Type Question
Question 1 (a): Write notes on the following:
(i) Role of Company Secretary in ensuring risk management (ii) Corporate governance in public
sector undertakings
Question 2: "The Chairman's primary responsibility is to lead the Board and ensure its
effectiveness." Elucidate this statement.
Question 3: Discuss the principles of corporate governance evolved by the Institute of Company
Secretaries of India.
Question 4: "Corporate Social Responsibility (CSR) is also called corporate citizenship or
corporate responsibility." Discuss
Question 5: (a) Describe briefly the following:
(i) Barriers to 'visionary leadership',
(ii) Diligence report in banks.
(iii) Scope of work of the Asian Corporate Governance Association.
Question 6: Describe and differentiate 'risk reduction' and 'risk retention'.
Question 7: You are the Company Secretary of Universal Development Ltd. The company often
faces ethical dilemma. The Board wants to circulate a guidance note for its managers to resolve
ethical dilemma. Draft guidance note for the consideration and approval of the Board.
Question 8: "An organization's structure is important to the study of business ethics." Comment
Question 9: "The Chairman's primary responsibility is to lead the Board and ensure its
effectiveness." Elucidate this statement.
Question 10: Board of Directors (BOD) plays very important role in the process of Corporate
Governance. Discuss.
Question 11: What is a code of good Corporate Governance? Do you consider it can serve any
useful purpose in improving governance? Support you answer with examples.
Question 12: Chairman of the BOD, has pivotal role in the performances of BOD. Do you
agree? Support your answer with reasons and examples.
Question 13: What are three major committees of the board? Discuss their role and usefulness?
Question 14: "It is strongly felt that the contribution of non executive directors is critical in
establishing, maintaining and improving standards of governess in organisation". Comment.
Question 15: "People with different perspective will have different expectations of the
Remuneration Committee". Do you agree? Support your answer with reasons?
Question 16: What are "Best Boards"? What parameters were set for the evaluation of the "best
boards" by The Business Today - AIMS study of the Best Boards, 1977.


PART B
Case Study 1
Trade in human Organs
An entrepreneur in a certain country conceives of a business that is designed to avoid
waste and is committed to recycling. One of the first actions is to contact an undertaker
with a view to purchasing spectacles from the deceased with a view to setting up a shop
that sells such recycled goods. The undertaker saw no problem with that idea and
entered into an arrangement to sell the goods, they being of no further use to the former
owner.
That was such a successful venture that the entrepreneur extended the idea and
suggested to the undertaker that artificial dentures would be a good next venture. With
some misgivings the undertaker agreed, but with the proviso that they were properly
sterilised first. Among the reservations by the undertaker here was the notion of who is
the owner? Should the relatives be consulted? How were the proceeds to be divided?
Having solved that problem satisfactorily the entrepreneur found business so good that
he wished to extend it further.
The next stage was seen as a rather personal form of recycling, that of body organs.
Where a corpse had an undamaged and potentially useful, organ that too might be
harvested. Here the problems become more complicated. The recycling of organs
needs much more technical knowledge than is available to the average undertaker.
Among the technical problems are those of tissue typing, of preservation and prompt
use, of the setting up of a register and of financial compensation and to whom. Add to
this is the problem of whose permission is needed.
If this venture is successfully exploited with a proper setup is then the demand could
well increase. Suppose that the entrepreneur is so successful that he wanted to extend
the supply and, ideally, have fresh organs from young healthy cadavers. Being a lateral
thinker he contacted prison authorities who might have a supply of those executed. At
least, he argued, they were not put to death in vain. If the prison authorities agreed and
appropriate rules were framed, then the pressure might be on the system to ensure a
steady supply and thus affect the rate at which prisoners were condemned to death.
One of the interesting ideas that the entrepreneur had was a prisoner who was not
condemned to death might agree to the removal of a non-vital removal (say, one
kidney) in return for a commutation of sentence and thus save the state the cost of
further imprisonment as well as providing the prisoner with funds to start a new life.
Suppose, instead of a prison situation there is a hospital one. In a hospital there are
always those who are very ill and in need of a transplant. For organ removal one needs
to be certain that the donor is really dead before removal and dead from natural causes
rather than being 'helped' along the way because of an urgent need for the organ. The
criteria of 'death' then becomes a crucial one. A patient might be physically surviving,
put be brain dead. Could one harvest an organ from a brain dead patient, which would
involve ignoring other vital signs?
In this case one can see the escalation of a comparatively small moral issue into one
which has very wide ramifications. This engaging case has some further aspects: one is
the moral position of starting with simple items from the dead and escalates into a
problem involving some very complex issues. Put in interrogative form here are some of
the issues and questions for solution.
Q1: Is the selling of spectacles from cadavers morally correct provided permission is
given?
Q2: Does that same point apply to full dentures?


CASE STUDY - 2
Trade in human Organs

An entrepreneur in a certain country conceives of a business that is designed to
avoid waste and is committed to recycling. One of the first actions is to contact an
undertaker with a view to purchasing spectacles from the deceased with a view to
setting up a shop that sells such recycled goods. The undertaker saw no problem
with that idea and entered into an arrangement to sell the goods, they being of no
further use to the former owner.

That was such a successful venture that the entrepreneur extended the idea and
suggested to the undertaker that artificial dentures would be a good next venture.
With some misgivings the undertaker agreed, but with the proviso that they were
properly sterilized first. Among the reservations by the undertaker here was the
notion of who is the owner? Should the relatives be consulted? How were the
proceeds to be divided? Having solved that problem satisfactorily, the entrepreneur
found business so good that he wished to extend it further.

The next stage was seen as a rather personal form of recycling, that of body
organs. Where a corpse had an undamaged and potentially useful, organs too
might be harvested. Here the problems become more complicated. The recycling of
organs needs much more technical knowledge than is available to the average
undertaker. Among the technical problems are those of tissue typing, of
preservation and prompt use, of the setting up of a register and of financial
compensation and to whom. Add to this is the problem of whose permission is
needed.

If this venture is successfully exploited with a proper setup is then the demand could
well increase. Suppose that the entrepreneur is so successful that he wanted to
extend the supply and, ideally, have fresh organs from young healthy cadavers.
Being a lateral thinker he contacted prison authorities who might have a supply of
those executed.

At least, he argued, they were not put to death in vain. If the prison authorities
agreed and appropriate rules were framed, then the pressure might be on the
system to ensure a steady supply and thus affect the rate at which prisoners were
condemned to death.

One of the interesting ideas that the entrepreneur had was a prisoner who was not
condemned to death might agree to the removal of a non-vital removal (say, one
kidney) in return for a commutation of sentence and thus save the state the cost of
further imprisonment as well as providing the prisoner with funds to start a new
life.

Suppose, instead of a prison situation there is a hospital one. In a hospital there
are always those who are very ill and in need of a transplant. For organ removal
one needs to be certain that the donor is really dead before removal and dead from
natural causes rather than being 'helped' along the way because of an urgent need
for the organ. The criteria of death, then becomes a crucial one. A patient might be
physically surviving, put be brain dead. Could one harvest an organ from a brain
dead patient, which would involve ignoring other vital signs?

In this case one can see the escalation of a comparatively small moral issue into
one which has very wide ramifications. This engaging case has some further
aspects: one is the moral position of starting with simple items from the dead and
escalates into a problem involving some very complex issues. Put in interrogative
form here are some of the issues and questions for solution.
Questions:

Q1: Is the selling of spectacles from cadavers morally correct provided
permission is given?
Q2: Does that same point apply to full dentures?


PART C
Objective Question Set 1
1 Which markets embody sense of justice?
A Mixed markets
B Liberal markets
C Free markets
D None of the above

2 Which of the following choices does NOT describe a situation that is covered by
the concept of rights?
A The absence of prohibitions against an activity
B The authorization to do something to secure one's interests
C The necessity of doing something required by authority
D The existence of prohibitions on others to enable individuals to pursue an activity

3 Which theory claims that people would be lazy without private property?
A Capitalism
B Socialism
C Utilitarianism
D None of the above

4 The most influential economic institutions are designed to achieve? Select correct
option:
A Production of the goods
B Distribution of the goods
C Both a & b
D None of the above

5 According to Aristotle's view, how do we learn virtue?
A By habit
B By dialectical argument
C By rational instruction
D By learning from our mistakes

6 Which philosopher defended the idea that we should always treat humanity as an
end in itself rather than a means?
A Kant
B Mill
C Bentham
D Rawls

7 The concept that there are no relevant differences among people that can justify
unequal treatment is known as?
A Egalitarianism
B Utilitarianism
C Socialism
D None of the above

8 Commodities that are considered valuable only because they lead to other good
things are called:
A Instrumental goods
B Instrumental values
C Intrinsic goods
D Intrinsic values

9 Socialist view on distribution is best described as:
A From each according to his ability, to each according to his needs
B The benefits a person receives should be proportional to his contribution
C From each they choose, to each as they are chosen
D Always treat humanity as an end in itself rather than as a means

10 Factual evidence has the following properties except?
A Time bound
B Accurate
C Relevant
D Complete

11 In which country Locke's property rights have been influential?
A England
B Germany
C America
D Greek

12 Which of the following are the criteria for determining moral right and wrong?
A Universalizability
B Reversibility
C Both a & b
D None of the above

13 Utilitarianism is unable to deal with following kind of moral issues?
A Rights
B Justice
C Both a & b
D None of the above

14 What are the levels on which ethical decision making occurs?
A Individual
B Organizational
C Business system
D All of the given

15 Privacy is an example of?
A Positive right
B Basic need
C Negative right
D None of the above

16 Which theory includes means of production and selling one's labor?
A Capitalist systems
B Free economy system
C Socialist system
D None of the above

17 Equality of income and equality of opportunity is refers to:
A Equality
B Political equality
C Economic equality
D Human equality

18 Through utilitarianism offers a clear-cut method of calculating morality. What is
the number of problems identified with this method?
A 5
B 4
C 3
D 2

19 Who presented the theory of absolute advantage?
A Adam Smith
B Friedrich A. Hike
C Murray Roth bard
D Eric Mack

20 Which of the following are components of free market systems?
A Private property system
B Voluntary exchange system
C Both a & b
D None of the above

21. The most important reason for having a Code is that:
A it provides a formal frame of reference for values
B it is required by the Board
C it helps establish a good reputation D it gives employment to HR staff

22. Despite cultural diversity it is important that we consider:
A various principles of value
B always follow the UN principles
C give salience to the dominant national culture
D follow only your own religious laws

23. Cultural relativism means
A One culture is quite as good as any other nominated culture
B Culture is the only reference point for a values system
C activities should be interpreted in terms of one's own culture
D One culture should be compared to another

24 It is the function of an ethics code to:
A set standards
B apply sanctions
C neither Dboth

25. Ethics is about
A -improvement in standards
B rewards and sanctions
C reputation
D all of the above

26. Ethics is about
A tangible and intangible benefits
B only tangible benefits
C only intangible benefits
D something other than the above

27. Ethics is the same as
A legality
B strict compliance
C conformance to agreed values
D following black letter law

28. Where does ethical loyalty primarily lie?
A towards family
B towards agreed principles
C towards the company
D towards professional standards

29.Ethics is concerned about
A the means of achieving something
B the ends to be achieved
C neither of those
D both of those

30. Time frames are
A crucial part of ethics
B irrelevant to ethics
C of marginal interest to ethics
D an explanation of spatiality

31 Circumstances that leave a person uncertain but not altogether unsure about
what he or she is doing is a feature of
(a)Excusing Conditions
(b)Moral reasoning
(c)Mitigating factors
(d)Ignorance

32 What type of resource depletion is marked by increasing rates of usage and
sudden, complete depletion within a short period of time?
(a) Depletion of fossil fuels
(b)Exponential Depletion
(c)Peaked depletion
(d)Species depletion

33 Which of the following is not considered as part of the three stages of moral
development proposed by Carol Gilligan?
(a)Social Contract Orientation
(b)Principled morality
(c)conventional morality
(d)progressing from selfish

34 Which of the following is the type of moral standards?
A Utilitarianism
B Rights
C Justice
D All of the above

35 What are the levels on which ethical decision making occurs?
A Individual
B Organizational
C Business system
D All of the given

36 Which one of the following is not an essential component of moral reasoning?
Select correct option:
A Understanding of reasonable requirement of moral standard
B Evidence or information regarding these moral standards
C Botha&b
D None of the given options

37 Which of the following refers to the ability of a person or a country to produce a
particular good at a lower opportunity cost than another country?
A Absolute advantage
B Comparative advantage
C Resource efficiency
D Natural advantage

38 Which one of the following is not a basic type of moral standards?
A Utilitarianism
B Rights C Justice D Relevant

39 Which philosopher defended the idea that we should always treat humanity as
an end in itself rather than a means?
A Kant
B Mill
C Bentham
D Rawls

40 Which one of the following is NOT a trait of character that makes an individual a
morally good human being?
A Courage
B Temperance
C Hope
D Justice
Objective Question Set 3
1. Essence of Corporate Governance is:
a) Effective accountability
b) Good management
c) Codes of conduct
d) Transparency

2. Corporate Governance is a system of:
a) Structuring, operating and controlling a company
b) Good management
c) Investing company's finances properly
d) Ensuring maximum profits for the shareholder

3. The concept of Corporate Governance is applicable to:
a) Private sector only
b) Public sector only
c) Government only
d) Both private and public sector

4. The question of Corporate Governance has come up mainly due to:
a) Liberalization of economy
b) Deregulation of industry and business
c) Public demand for better performance
d) All the above

5. As per Raja J Chelliah, weakness in the system of governance in India can only
be remedied through:
a) Stricter laws
b) Movement of moral regeneration
c) Codes of conduct
d) More privatization

6. A Corporate must be socially responsible for:
a) Society expect so
b) It is in the self interest of the corporate
c) It mitigate pressure and government regulations
d) All the above
7. BOD stands for:
a) Board of Director
b) Board of Directors
c) Boards of Decision
d) Directors of the Board

8. Which one of the following is not a category of shareholders in India?
a) Promoters
b) Financial institutions
c) Individual investors
d) Ministries of Government of India

9. In the private sector who has the firm hold over the companies:
a) Individual investors
b) Promoters
c) Financial institutions
d) Customers

10. In the public sector who selects/ appoints the board members:
a) The PSU concerned
b) Controlling administrative ministry
c) The BOD
d) Financial institutions

11. The head of the BOD is normally called:
a) CEO
b) President
c) Chairman
d) Managing Director

12. For effective corporate governance CEO of the company:
a) Should always head the BOD
b) Should never head the BOD
c) Be allowed to exercise his choice to head the board
d) Should be allowed to appoint the head of the BOD

13. The BOD should consist of:
a) Only executive directors
b) Majority of executive directors
c) Only non-executive director
d) A good mix of executive and non-executive directors

14. Which one of the following is not a parameter of best boards?
a) Accountability of share holders
b) Maximization of profits
c) Independence of decision making
d) Transparency of disclosures

15. Which one of the following is not a duty of the directors?
a) Duty of care and skill in discharge of their function
b) Duty to manage the operational functioning of the company
c) Duty to attend board meetings and devote sufficient time and attention to affairs
of the company
d) Duty not to exceed powers

16. Directors are liable for:
a) Negligence and breach of trust
b) Misfeasance
c) None of the above
d) Both (a) and (b) above

17. The directors appointed by financial institutions on the BOD are called:
a) Non-executive directors
b) Executive directors
c) Nominee directors
d) Institutional directors

18. The Companies Act 1956 came into force on:
a) 1 January 1956
b) 1 January 1957
c) 1 April, 1956
d) 1 April, 1957

19. The Companies (Amendment) Act, 1996 came into force on:
a) 1 January 1996
b) 1 March 1997
c) 1 April 1996
d) 1 January 1997

20. SEBI stands for:
a) Securities and Exchange Board of India
b) Securities and Enterprises Board of India
c) Selection of Enterprises Board of India
d) Small Exchanges Board of India
21. Cadbury committee report was published in UK in:
a) 1990
b) 1980
c) 1992
d) 1993

22. Cadbury Committee was set up to address the:
a) Problem of good corporate governance
b) Financial aspects of corporate governance
c) Problem of degeneration of values
d) Malpractices in the corporates

23. Cadbury Committee along with its report published a document which was
called:
a) Code of conduct for corporates
b) Code of ethical conduct
c) Code of best practices
d) None of the above

24. Which one of the following was not a section of the above document?
a) Role of board of directors
b) Role of the outside non-executive directors
c) Executive directors and their remunerations
d) Evaluation of the BOD

25. In respect of auditing which of the following aspects is not a part of Cadbury
Report.
a) Importance of audit
b) Professional objectivity
c) Rotation of auditors
d) Fixed auditors

26. Which one of the following organizations have not contributed to rising
awareness about good corporate governance.
a) EEC
b) OPEC
c) GATT
d) WTO

27. Who prepared the report titled "Desirable Corporate Governance in India -A
Code":
a) Government of India
b) FICI
c) CII's Task Force
d) UTI

28. The above report was based on the draft report prepared by:
a) Dr. Goswami
b) FICCI
c) Dr. C V Alexander
d) Mr. Kumaramangalam

29. The number of recommendations made in above report were:
a) 5
b) 17
c) 13
d) 9

30. Desirable Corporate Governance: A Code (DCGC) recommends that the full
board should meet minimum of following items:
a) Six times a year
b) Once a year
c) Twice a year

31. The National Task Force on Corporate Governance (set up by CII) was headed
by:
a) Dr. Goswami
b) Mr. Rahul Bajaj
c) Dr. Omkar Goswami
d) Mr. C K Birla

32. The word "value" is derived from the French/Latin word:
a) Valeo
b) Vaelram
c) Valoir
d) Valer

33. A value is a concept ___________ (choose the word most suited to fill the
blank).
a) Behavioural
b) Perceptual
c) Management
d) Decision

34. Which one of the following is not a major stakeholder in Corporate Governance?
a) Employees
b) Customers
c) Suppliers
d) Auditors

35. The ethics of Corporate Governance is therefore the determination of what is
right, proper and ___________ .
a) Good
b) Pleasing
c) Just
d) Practical

36. The word "Ethics" is derived from:
a) The Greek word "Ethos"
b) The French word "Valoir"
c) The Latin word "Valeu"
d) The Latin word "Vallis"

37. The subject of business ethics is multi-leveled. The three levels normally
considered are individual, organization and______________.
a) Government
b) Society
c) Industry
d) Business

38. Many managers think of ethics as a question of personal
__________________.
a) Judgment
b) Values
c) Thinking
d) Scruples

39. Ethical issues are truly managerial dilemma because they represent a conflict
between an organization economic performance and its:
a) Reputation
b) Growth
c) Social/ethical performance
d) Employees job satisfaction

40. Which one of the following is not a method of analysis of an ethical decision:
a) Economic analysis
b) Legal analysis
c) Ethical analysis
d) Cost-benefit analysis

41. Feedback cycle (Evaluation of performance) in BOD was advocated by:
a) Robert William
b) Zander A
c) Sir Adrian Cadbury
d) Peter F Drucker

42. Which one of the following is not a feature of implementing evaluation process
in corporate governance?
a) Vision
b) Planning
c) Ownership
d) Results

43. Which one of the following is not an essential feature of conducting board's
performance evaluation?
a) The directors themselves
b) The role of the board
c) The working style of the board
d) The composition of the board

44. Who should evaluate the performance of the boards as whole:-
a) Chairman
b) CEO
c) Whole Board
d) The Promoters and the chairman

45. Who should evaluate the performance of the CEO (when he is not the
Chairman)?
a) Chairman
b) Whole board
c) Whole board (less CEO)
d) Promoters
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