Value Of Integrity In Corporate Governance In The Age Of Growing Economic Inequality

Corporate Governance refers to a structure of rules, practices, and processes which aims to manage a company and forms the framework of a company’s operations and its dealings with various stakeholders such as customers, management, employees, government and industry bodies.

Ethical Issues Involved in Corporate Governance

• Ethical Issues and Business: The objective of any business is to make and supply goods or services to customers, which will lead to prosperity of the economy. Businesses, which make goods like alcohol, cigarettes, drugs, etc., are in ethical dilemma, as society sees these as products that are not harms the health and well-being of the people. The contradiction is that these companies offer employment and livelihood opportunities to many people in the society.
• Moral Rights between Company and Stakeholders: To keep the stakeholders happy, companies indulge in various unethical activities like manipulating the book of accounts to show higher profits, reducing the work force to show higher earnings, etc.
• Ethical Issues Relating to Relationship Between Companies: In business, takeover is acquisition of one company by another. In case of hostile takeover, the company acquires a target company without the willingness of the target company board. The contradiction here is that the company might have indulged in hostile takeover which can result in higher profits for both the business, hence more employment opportunity in the society. Industry espionage also when the activities such as theft of trade secrets, bribery, blackmail, spying on commercial organizations etc. are used to increase profits, or for survival.
• Political Contribution made by Companies: In a country like India, corporate groups contribute a part of their profit to the political parties and in return they expect that the ruling government frame policies which will help grow their business. The contradiction here is that the companies may divert funds towards the growth of the political parties which may not reflect the growth of people and society.

Ethical Issues in Corporate Governance give way to Income Inequality

The above mentioned ethical issues result in increasing income inequalities in following ways–

• Maximization of prices of corporations’ capital stock by changes in compensation practices, labor and employment practices and changes in tax law due to corporate lobbying.
• There is drastic increase in top incomes without any increase in wages of those at bottom.
• Market manipulation by top executives; encouraged by institutional investors, hedge funds, and their own compensation structures.
• Absence of a strong equity-based financial market.
• Concentration of industry in the hands of its founders or big families, where financiers are relatively unimportant.
• Capital growth from within by reinvesting their earnings in the business or making acquisitions, and growing into enormous sizes, which may also lead to monopolization.

Role of Value of Integrity in Corporate Governance

Integrity indicates soundness of moral principles, the character of uncorrupted virtues, uprightness, honesty and sincerity. A man of integrity consistently behaves in an open, fair and transparent manner and honour one’s commitments and work.

• The value of integrity inculcates the following qualities which help in dealing with ethical issues involved in corporate governance in the age of growing economic inequality:
• Avoiding being placed in a position of obligation to anyone by accepting favors such as free service.
• Treat people impartially, regardless of political, social, demographic, geographic, circumstances or bias.
• Enforce law, public service values and rules of conduct even in difficult situations.
• Have the courage and conviction to make and stand by the right decisions, even at significant personal cost.
• Ensure full disclosure, by sharing the political implications of the decisions being made.
• Challenge powerful and influential people, and hold them accountable so that they make the right decision.
• Stand firm when dealing with unreasonable requests and demands.
• Be accountable for own actions and create a culture for others to be accountable for their own actions.