Business Ethics and Corporate Governance
Scope
This domain tests business ethics and corporate governance: ethical decision-making, conflicts of interest, whistleblowing, CSR and board accountability.
Ethics
Business ethics concerns standards of right conduct beyond legal minimums. Utilitarianism judges an action by overall consequences; deontology by duties and rules; virtue ethics by character. A code of conduct sets expected behaviour, but it works only with training, tone at the top and enforcement. Conflicts of interest must be disclosed and managed. Insider trading is both unethical and prohibited by securities law. Whistleblowers need confidential reporting channels and protection from retaliation.
Corporate governance
Governance is the system by which companies are directed and controlled. Its pillars are transparency, accountability, fairness and responsibility. The Companies Act, 2013 provides for independent directors, board committees, related party transaction approval, vigil mechanisms and CSR. SEBI's LODR norms impose further requirements on listed companies. Good governance separates ownership from control through independent oversight and reliable disclosure.
CSR
Section 135 applies to companies meeting thresholds of net worth, turnover or net profit. They must constitute a CSR committee and spend at least 2% of average net profits of the preceding three financial years on eligible activities. CSR is not a substitute for legal compliance or political donation.
Worked example
A CFO learns that a large supply contract was awarded to a director's relative without disclosure. She should not approve it quietly. She must escalate to the audit committee and ensure the related party transaction is placed before the board or members as required. She should also preserve records and avoid trading in company shares until the information is public.
Traps
Legality is the floor, not the whole of ethics. CSR is not discretionary charity for covered companies. An independent director is not an employee or promoter. Whistleblower protection is not merely an internal slogan; retaliation can itself be a governance failure.