ETHICS AND HUMAN INTERFACE

Aranyak Saikia

Ethics 

· Study of what is right and what is wrong

· Set of standards society or individual places on itself to guide behavior, choices and actions

· Dimensions of ethics: meta, normative/descriptive, applied 

When ethical standards ignored, ‘knower-doer’ split takes place, and the person is ridden with guilt. – Swami Dayananda

Success of a administrator depends on two things: skills and contribution to society which depend on values he imbibes. Eg: Laden, Harshad Mehta high skill but low values.

Ethical values imbibed in Constitution, religious codes and Indian philosophy.

Values

· Set of beliefs to evaluate a particular situation or people

· Can be positive (optimism, tolerance, perseverence, confidence etc) or negative (pessimism, intolerance, overconfidence, greed, envy, anger etc)

· Affects our behavior

· Helps in placing relative importance to objects or situations 

· Eg: those who condemned 9/11 value peaceful life and non-injury, but the terrorists value violence.

· Different social environments decide our value systems. But there are certain Universal Values like tolerance, love etc.

· Role of family, friends, teachers, media and education in inculcating values

Desire, anger and greed are the gateways to the hell: Gita

Basic positive human values: Truth, love, peace, responsibility, justice

Morals 

· That subset of positive values that helps in differentiating good from bad

· Honesty,integrity, commitment etc

· Ethics is "morality in action"

Sometimes moral convictions can be harmful. Eg: commitment is a moral value. But excessive commitment to one's religion is fanaticism 

Ethics v/s Laws

· Laws are also standards, but enforced by the state/govt with sanctions for their violation

· They usually enforce the bare minimum ethical standards, eg: PCA 1988, Protection of Civil Rights Act 1965

· But sometimes laws can be unethical. Eg: Rowlatt Act or Apartheid system. Gandhi, Mandela etc fought against such laws

Beliefs

Beliefs are assumptions we hold to be true. When we use our beliefs to make decisions, we are assuming the causal relationships of the past, which led to the belief, will also apply in the future.

· Values are a subset of beliefs.

· Other beliefs: religious beliefs, superstitions, belief in superiority of science etc.

Virtues v/s values

If values are the goals, then virtues are a way to get there. A Virtue is a characteristic of a person which supports individual moral excellence. Eg: wisdom, courage, justice and temperance (4 cardinal virtues). It reflects a good trait of a character and a good habit. Virtues are values in action.

3 Preconditions for ethical scrutiny of human actions

· Free will

· Knowledge

· Voluntary Action

Determinants of Ethics

Whether something is right or wrong comes from 4 inter-related sources:

· Social customs or rules, usually enforced by law or Constitution

· Religious beliefs based on absolute dogma. Eg: Koran, Bible etc

· Conscience and intuition developed over many years and depending on environment

· Common sense rules

Theories of Ethics

Refer Mrunal Lecture E1/P2

Guiding Ethical decision making

Managers faced with these kinds of tough ethical choices

often benefit from a normative approach - one based

on norms and values to guide their decision making:

Utilitarian Approach: a decision maker is expected to

consider the effect of each decision alternative on all

parties and select the one that optimizes the satisfaction

for the greatest number of people.

Indvidualism Approach: contends that acts are

moral when they promote the individual’s best longterm

interests

Moral Rights Approach: asserts that human beings

have fundamental rights and liberties that cannot be

taken away by an individual’s decision. Thus all ethically

correct decision are ones that best maintain the rights

of those people affected by it. Moral rights that could be

considered during decision making are: privacy, due process, conscience, free speech, life

Justice Approach: moral decisions must be

based on standards of equity, fairness, and impartiality.

Factors Affecting Ethical Choices

· Personal needs, family influence, and religious background

· External rewards and punishments, especially laws, CS Conduct Rules

· Role of society: people learn to conform to the expectations of good behavior as defined by colleagues, family, friends, and society. Meeting social and interpersonal obligations is important.

· Values of an organization in which the person works

· Moral development: Person decides not to obey laws or orders that go against moral principles or conscience. Eg: police officer decides not to kill a criminal in a fake encounter even when ordered by superior.

Consequences of ethics in human actions

· Officers perform their tasks with honesty, integrity, objectivity and with tolerance and compassion. This improves public service delivery and accountability, transparency in public administration

· Improves corporate governance practices in companies. They care for the shareholders, consumers and the environment. Managers look after their employees, while companies follow the law. Helps prevent scandals like Satyam, PNB bank fraud, etc

· Helps resolve conflicts between legality and conscience. Eg: whether to catch a criminal or kill him in a fake encounter.

· Ensures that the poor, minorities, Dalits and women can live with dignity. Provides for greater diversity and tolerance

Dimensions of Ethics

· Meta ethics – Questions what is ‘right’ and ‘wrong’

· Normative ethics – What ought to be done. Utilitarianism, Hedonism, Egoism, Deontological, Virtue, Rights based

· Descriptive ethics- Empirical estimation of people’s morality. Value free ethics

· Applied ethics- Applying ethics to practical issues and scenarios.

· Bio-ethics- biology, medince etc: Euthanasia, stem cell research, abortion, animal trials, GM crops etc

· Business ethics- how to conduct business, corporate governance, flouting rules, paying taxes etc

· Organisation ethics- codes of conduct within the org, training of employees, confidential reporting systems

· Military ethics- how to fight war, should prisoners be killed, whether to kill civilians, immunity (AFSPA), world heritage convention

· Politicial ethics: use of money, muscle power, appealing to caste, religion, spoils system, office of profit, keeing promises, privilege of members

· Development and environmental ethics- displacement of people by dams, land acquisition, FRA, sustainable devt, pollution during Diwali, stubble burning etc

· Media ethics- yellow journalism, paid news, fake news, protection of journalists (Shujaat Bukhari killing), regukation or self-regulatiion.

Some unethical practices in India

· Illegal medical practitioners, private hospitals making 1000% profits by exorbitant charging of illiterate patients

· Food adulteration. Eg: maggi

· Hooch and bootlegging

· Child labour. Some middle class HHs employ child labour and beat them up, while providing the best facilities to their own children

· Cheating foreign tourists

· Frauds and Ponzi schemes, Nirav Modi, Mallya, Harshad Mehta etc

· Female foeticide

· Watching downloaded pirated movies

How to inculcate values?

· Family: If parents informally talk bad things about a particular caste or religion, if they knowingly violate traffic rules, child will imbibe the same. Respect for girl learnt at home if women treated with respect at home. If parents are meticulous about cleanliness in both private and public property, child will follow the same.

· Type of family also matters: Nuclear- can lead to individualism and liberalism with focus on women’s rights. Joint- values of sharing and caring with negative values on gender stereotypes

· Society: If egalitarian society, then values of giving and sharing. If society has communal tensions, then child will acquire communal values. If society has people from different castes, languages etc, then respect for diversity. If corruption rampant, then tolerance for corruption.

· Educational institutions: teachers as role models, values of liberty/equality/fraternity taught in textbooks, values of our freedom struggle, learn about Indian Constitution, participation in games, debates etc, discipline, team work, etc, ragging of juniors, excessive focus on exams without actually learning the basics, scientific temper, but gender stereotypes can be perpetuated as found in UNESCO report.

· Role of teachers: teachers need to live by example. GK Gokhle was the political guru of Gandhi

· Should value education be imparted?: Yes: so as to inculcate values of honesty, respect for diversity, non-violence, tolerance, integrity etc. No: can be used as propaganda by state to further its own ideals and suppress dissent. Textbooks should only impart Constitutional values -democracy, secularism and human values (truth, love, compassion).

· Other ways: Telling inspirational stories, documentaries and movies like PINK, Rang de Basanti, etc; media and journalists through unbiased reporting and showing both sides of the debate, etc; festivals and cultural centres

Ethics in personal life

· Being truthful and honest with family members

· Not harming others: physically or mentally

· Teaching moral values of honesty, integrity and compassion/tolerance to children

· Treating both son and daughter equally

· Not engaging in any form domestic violence or verbal abuse

· Taking paternity leave and allowing wife to work outside home

· Protecting the family from bad influence like alcohol, drugs, partying late at night

· Giving time to family

· Protecting the environment by switching off lights, saving water, not using plastic bags, tgetting rid of use-and-throw culture, especially for e-goods. etc

· Helping someone in need without expecting anything in return.

Ethics in public and private relationships: some issues

· If a person becomes bankrupt because of his lavish “private” lifestyle (Hedonism), then he is automatically ineligible from various constitutional / statutory “public” posts in India. Thus, private life does have bearing on the public life of a person.

· For the same reason, Judges have to ‘recuse’ themselves from the cases involving their relatives or friends.

· Kesab Chandra Sen opposed child marriage but married his own underage daughter to Maharaja of Cooch Bihar. Similarly, renounce caste system in public but prevent inter-caste marriage in own family.

· State should stay away from private life of an individual. But it is the private life, from where most injustices begin such as domestic violence and malnutrition of girls in a family.

· Bringing officers’ assets under Lokpal can affect their privacy and also threaten their lives

· Orthodox Christians consider contraceptive (birth control) drugs and abortion as sinful. So, what if he becomes a chemist or doctor? Should he run away from his duties? Private religion vs public duty

· Religion is private: but should state intervene if unethical things taking place in the name of religion

· Should different ethical standards apply in public and private r/s? eg: honesty in household r/s but should IB officer talk about secret ops to wife? Does she have the right to know about an op where her husband’s life is in danger?

· Manager of a company makes misleading ad on a product, but tells his own family to know procure it.

Lessons from leaders, reformers and administrators

REFER PG 179-180 OF LEXICON (MUST)

ATTITUDE

It’s a state of mind- your positive/negative feeling towards a person, object, event, idea, environment. It determines how people will arrive at a correct judgement.

Aptitude, on the other hand, is the competence and skill required to accomplish a task. Eg: Aptitude for civil services, for computer science, engineering, performing arts etc.

Attitudes are directed towards an object, event, person or organization and give specific reaction to them.

Attitude affects group behavior e.g. Jury service, racial prejudice, work environment, voting pattern and more.

They help us understand ourselves and others.

They can be explicit – formed by recent events

They can be implicit- derived from past memories and traumatic experiences.

They protect us from acknowledging harsh realities of life and thereby help coping up with emotional conflict.

They’re situational.

Some thinkers say Attitude is permanent, forms habit and becomes predictable

Some thinkers say Attitude is tentative- a person will form attitude from his past experience but if new situation comes he’ll evaluate and change attitude. Thus, Attitudes are spontaneous reaction to environment.

Persuasion can change attitude of a person. If a trustworthy, expert, likable person says, “rich people’s love for fur-clothes has led to extinction of xyz. Species”. Then next time you see a rich lady, you’ll feel repulsed.

Attitudes shaped by:

· Values and beliefs. Eg: If we value our own religion over others, then we will have an intolerant attitude towards other religions

· Experiences. Eg: After forced to give bribe to policeman, I will have negative attitudes towards police

· Education and persuasion. Eg: Textbooks can teach about the importance of being optimistic, tolerant, humble etc. teachers can be role models

· Peers and family, culture, social influence. Society, tradition, and the culture teach individuals what is and what is not acceptable. Eg: In cultures where people help each other out, a cooperative attitude develops.

· Economic background: A rich man might think privatisation of edu is okay.

· IEC campaigns and propaganda: Social media

Recent examples include no-smoking health campaigns and political campaign advertising emphasizing the fear of terrorism.

Relation of attitude with thought and behaviour

Thought is what we think about a particular situation, object or person. A is a subset of T. Eg: Seeing a river, I might think: What a beautiful river (positive attitude about nature) or where the source of the river is (random thought).

The term ‘behavior’ can be described as the way of conducting oneself. It is the manner of acting or controlling oneself towards other people.

While attitude is a mental construct on how we evaluate things, situations or people, behaviour is an outward manifestation in the form of action. A is what you think, B is what you do. B can change depending on situations and be affected by A.

Above figure explains how attitudes shape behaviour.

Moral Attitudes

Moral attitudes are based on moral convictions of what is “Right” and what is “wrong”. Evaluation of an object or situation from a moral/ethical perspective. Family, society, religion and education play important role in framing those moral convictions.

Political Attitudes

Areas on public/political life. Deals with the views on nationalism, liberalism, conservatism, communalism, secularism etc.

Involves issues of rights based, utilitarian and deontological ethics

APTITUTE AND FOUNDATION VALUES IN CIVIL SERVICES

Examples of aptitude

· Quantitative aptitude

· Verbal aptitude

· Reasoning aptitude

· Finger dexterity

· Visual memory

Integrity

Quality of being honest and having strong moral principles. Integrity can stand in opposition to hypocrisy. One can describe a person as having ethical integrity to the extent that the individual's actions, beliefs, methods, measures and principles all derive from a single core group of values.

Eg: Person does not have integrity if he keeps his house clean but litters public places.

Intellectual integrity is defined as recognition of the need to be true to one's own thinking and to hold oneself to the same standards one expects others to meet. Eg: US talks about HR abuses in other countries, but itself carries out drone strikes in Af-Pak

Professional integrityfor Doctors, pharmacists, chartered accountants etc. It is enforced by their regulatory bodies.

Organizational integrity Includes ethical principles of workers/ officers in the organization+ work culture+ ethical standards of the organization, and their interaction. Determines the output and productivity of the organization

Objectivity

Dedication to public service

The quality of being dedicated or committed to effective public service delivery and ethical public administration

Empathy

Empathy means that you feel what a person is feeling (“put yourself in others’ shoes”). Sympathy means you can understand what the person is feeling. Compassion is the willingness to relieve the suffering of another.

The main difference is that when you have sympathy, you are not experiencing another’s feeling. Instead, you are able to understand what the person is feeling. For example, if someone’s father has passed away, you may not be able to viscerally feel that person’s pain. However, you can employ your cognitive skills to understand that your friend is sad.

Empathy helps us understand others’ emotion, therefore empathy required to increase your emotional intelligence.

Compassion towards weaker sections

When you are compassionate, you feel the pain of another (i.e., empathy) or you recognize that the person is in pain (i.e., sympathy), and then you do your best to alleviate the person’s suffering.

· Awareness of suffering.

· Sympathetic concern related to being emotionally moved by suffering.

· Wish to see the relief of that suffering.

· Responsiveness or readiness to help relieve that suffering.

Neutrality (non-partisanship)

Civil servants must provide free, frank, impartial advice and same level of professionalism in administration irrespective of the govt in power. CS must be apolitical.

But this no longer holds as changes in govts lead to wholesale transfer of CS.

· Many CS get identified with particular political tendencies

· CS seek to cultivate patronage from politicians for suitable posts

Result of politicisation of CS:

· Affects the principle of hierarchy. Most CS develop lateral links with politicians and do not listen to superior officers.

· Affects discipline.

Eg: Delhi IAS officers on informal strike. Shows that service is getting politicised

Impartiality

Act without bias of client nature (rich vs poor) or social pressure (caste, religion etc.).

Anonymity (not in syllabus)

Bureaucrat is supposed to work behind the curtain and avoid media limelight and public gaze.

He’ll not get credit for the success and he’ll not be blamed for the failure. It’ll be responsibility of the political executive to handle all the applause and criticism.

EMOTIONAL INTELLIGENCE

The capacity to be aware of, control, and express one's emotions, and to handle interpersonal relationships judiciously and empathetically.

"Emotional intelligence is the key to both personal and professional success"

Refer handwritten notes

PUBLIC CIVIL SERVICE VALUES AND ETHICS IN PUBLIC ADMINISTRATION

Must refer notes on 2nd ARC Chapter 4: Ethics in Governance

Also read Public Service Values in last page of ‘Important Ethics Terms’

Weber: “Don’t misuse public office for personal benefit”

Accountability

Obligation of those exercising power to take responsibility for their actions.

3 elements:

1. Answerability: Providing justification for one’s actions

2. Enforcement: Sanctions imposed if the justification is unsatisfactory

3. Responsiveness: Those held accountable to respond to the demands made on them.

6 types of accountability (can make circular diagram)

· Managerial: From the department or senior officers, ACR, Result Framework Document (RFD) prepared by each dept with a ummary of the most imp results that it intends to achieve each year.

· Political: Legislature/politicians

· Institutional: CAG, CVC, CBI, Lokpal

· Legal: Judiciary

· Social: Civil society, NGOs, media, citizen’s charter

· Professional: Local bodies (73rd, 74th CA), RTI, CPGRAMS etc

Obstacles to ethical accountability

· Special expertise and info that administrators have which cannot be passed on to citizens

· Full-time status and security of tenure, eg: Art 311, Prior sanction in PCA 1988

· Expansion of bureaucracy in last 30 years making it difficult for effective surveillance of all personnel

· Lack of coordination among state and central investigative bodies. Lokpal not yet setup. Slow judiciary

· Misinterpretation of role and obligation: Excise dept may want more beer shops to get more revenue. Police personnel may respnd more to politicians’ demands than to properly investigate a case, to maximise promotion chances

· Loyalty and unwillingness to question unethical actions of superiors

· Use of cars, offices etc for personal benefit

· Corruption: Baksheesh system under Mughal system

· Subversion : Selling govt. secrets to other countries, or revent efficient functioning of govt. schemes

· Absence of protection to whistleblowers, lack of code of ethics, absence of transparency

Ethical Dilemmas Faced by Public Servants

Some of the most common ethical dilemmas with which public servants are confronted, revolve around aspects such as:

• Administrative discretion

• Corruption

• Nepotism

• Administrative secrecy

• Information leaks. Eg: leaking of budget docs, or any policy that will adversely affect national security, or corruption taking place in defence deals

• Public accountability

• Policy dilemmas

Examples:

· Favouring family, friends over others.

· Outside or future employment considerations that conflict with your public duty. Eg: Many officers from petroleum ministry join Reliance Pteroleum industry after retirement. So, policy decisions might be influenced by such considerations

· Whistelblowing on corruption and nepotism when it can potentially damage your career

· Is it ethical to delay a decision because of timining of election cycle?

· Speaking truth to power

· If family member offered a job by someone who has official business with you, do you let him accept it?

· Informing citizens about what is happening in dept.

Some unethical acts in public administration

· Suppressing facts

· Protecting criminals

· Promising results that cannot be delivered

· Postponing to serve vested interests

· Taking bribes

· Pressurising editors to carry propaganda material/ paid news

· Not addressing citizen grievances

Dilemma of the public servant

The potential areas for conflict are not necessary ethical dilemmas in themselves. It is what the public servant does when he is confronted by activities pertaining to these phenomena that could prove to be the ethical dilemma:

1. Would he keep silent when he finds that administrative discretion is abused, or that corruption or nepotism are practiced?

2. Or should he blow the whistle?

3. Should he actively engage in pressure group activities because he sympathizes with their views?

4. Should he actively participate in party politics?

5. Or should he endeavor only to promote the public good and uphold the high standards of public office?

Possible conflicts

include: (remember this for case studies)

1. Obeying supervisors’ directives versus following his own personal values

2. Choosing to serve the best interests of the community versus the need to be responsive to the government of the day; and

3. Following his professional ethics versus his desire to maintain his career.

Legal, institutional and organizational factors affecting public servant’s decisions:

· Legal: Whistleblower Protection Act, RTI Act, what is considered legal/illegal for govt servants

· Institutional: Codes of conduct that outline ethical behaviour and reward/punish ethical/unethical behaviour

· Organizatonal: Whether there is a relationship of trust between employees and whether past behaviour has been condoned/punished by ministers or authorities.

Significance of ethics in public administration

Scriptures do not favour pursuit of wealth through foul means. Interestingly, Thiru Valluvar’s Kural, written two thousand years ago in Tamil Nadu, emphasises that earning wealth brings fame, respect and an opportunity to help and serve others, but it should be earned through right means only.

Salient features of ethics in public administration

· Legality and rationality: follows rule of law and not based on emotions

· Responsibility and accountability of the administrator

· Work commitment and Excellence

· Fusion of individual, organisational and national goals

· Responsiveness and resilience to challenges and difficulties

· Utilitarian: Greatest good for greatest number

· Compassion

· National interest/ patriotism

· Justice

· Transparency

· Integrity

Source of ethical guidance (can also refer to points above under Ethics and Human Interface)

· Laws, rules, regulations

· Conscience

Strengthening ethical and moral values in governance

· Refer 2nd ARC Report Chapter 4

· Political structure: bringing good people into politics, reduce money, muscle power in elections (2nd ARC recommendations see), declaration of assets etc . SC judegments

· Statutory: PCA, Black Money Act, Fugitive Economic Offenders Act, PMLA, SFIO, PCPNDT Act, RTI , False Claims Act

· Institutional: CVC, CBI, Lokpal, ethical training of CS, Lateral entry, Parliamentary committees, Code of ethics for CS, e-governance

· Social structure:

1. Ethics in education

2. Awareness among citizens

3. Role of NGOs, Civil Society

4. Role of media

5. Citizens charter and grievance redressal. Eg CPGRAMS

6. Integrity pacts and social audits

Ethics in international relations: Some issues

· Management of commons:

· High Seas (SCS dispute, EEZ, piracy, dumping of plastics),

· Antarctica (peaceful uses, Antarctic treaty, melting of ice, conservation of marine living resources)

· Climate change: Issue of common but differentiated responsibility, funding for adaptation

· Outer Space: satellites by many countries creating space debris, who cleans that up, China launched Anti-Satellite system (can open space warfare), Outer Space Treaty

· Humanitarian interventions: NATO and West justify interventions in Middle east etc on HR violations etc, but it is only to have access to oil. Saudi Arabia is a violator of HR, but US ally. So, no sanctions

· Disarmament: Advocated by US which first used nuclear bomb. Case of Iran, NK, Libya etc. NPT treaty recognises only P5 as nuclear states. New START treaty between US-Russia leading to reduction in N weapons stockpiling in the two nations

· IPR: especially wrt medicines and life-saving drugs, plant varieties for farmers

· Trade negotiations

· Many countries exploring Arctic sea routes and minerals as ice melts. Is it ethical? Should not they instead focus resources on preventing global warming?

· Dumping hazardous wastes in poor countries. This benefits them in terms of jobs etc. But hurts environemtn and future generation. Basel, Rotterdam Conventions etc

· Foreign Aid and Grant: Source of corruption and influencing poor country.

· Immigration and refugee protection: Conflict between the vulnerable migrnts and economic security of the citizens

Ethical issues in Funding

· Development Aid/grants:

· Source of corruption and ensures that only those in power get access to funds

· Opens up the domestic market to the donor countries’ companies, they may end up selling things that can be harmful to the population. Eg: fast food and soft drinks

· Countries forced to buy overpriced goods from donors

· Large projects undertaken which do not help the vulnerable, as these are not spent in the social sector.

· Poor countries continue to remain dependent as their industries do not develop

· All of this due to conditionality in foreign funding- can affect the country’s democracy and sovereignty as policies indirectly controlled by donors

· Funding of clinical trials

· Potential risk of harm to participants

· Whether participants are fully informed of the implications and potential harm

· Usually, poor people take up trials for extra money

· Funding for Human Rights

· NGOs accept grants from developed countries

· But some of them accused of subversive activities in the name of defending HR. Recently, govt cancelled licenses of many such NGOs

John Rawls List of IR Ethics

· Respect for each others’ sovereignty

· Observe treaties and agreements. All states equal in these agreements

· Non-intervention in each others affairs

· Right of self defence but no right to instigate war

· Honour HR

· Observe certain specfified codes of conduct in warDuty to assist people under unfavourable conditions

Can talk about Panchsheel, NAM, UN charter, SDGs, UNFCCC , Pacifism (total opposition to war. Japan has pacifist constitution) etc

Corporate Governance

Read handwritten notes

Uday Kotak Committee Recommendations:

https://currentaffairs.gktoday.in/recommendations-uday-kotak-committee-corporate-governance-10201748780.html

a) Panel proposed more powers for independent directors, limiting chairmanship to non-executive directors, and called for a greater focus on transparency and disclosures to improve corporate governance.

b) The panel recommended that a listed company should have at least six directors on its board. Current Sebi regulations do not mandate a minimum number. The panel has suggested at least one independent director be a woman.

c) It also proposed that directors attend at least half the total board meetings held in a financial year. If they fail to do so, they would require shareholders’ nod for continuing.

d) Companies have asked to make public the relevant skills of directors, and the age of non-executive directors has been capped at 75 years.

e) In addition, the chairperson of a listed company will be a non-executive director to ensure that s/he is independent of the management.

f) An independent director cannot be in more than eight listed companies and a managing director can hold the post of an independent director in only three listed companies.

g) The committee has recommended that the number of independent directors on a company board be increased from 33% to 50%.

h) The minimum sitting fees of independent directors has been halved from the current Rs1 lakh per meeting as stipulated by the Companies Act 2013 to Rs50,000 for the top 100 companies by market capitalization.

i) Detailed reasons would need to be furnished when an independent director resigns. This is to ensure that they remain independent of the company management.

j) An audit committee is being proposed with the mandate to look into utilization of funds infused by a listed entity into unlisted subsidiaries, including foreign subsidiaries in cases where the total investment is at least Rs100 crore or 10% of the asset size of the subsidiary.

k) The committee has also recommended that Sebi should have clear powers to act against auditors under the securities law.

l) For government companies, the committee has recommended that the board have final say on the appointment of independent directors and not the nodal ministry.

m) The panel has also proposed to tweak the definition of a “material” subsidiary to one whose net worth or income exceeds 10% (currently 20%) of the consolidated income, or net worth of the listed entity. This has been done to improve disclosure, since only the activities of material subsidiaries are disclosed to shareholders.

Corporate Governance Challenges in PSUs

· Unclear and sometimes conflicting ownership objectives: price controls, output targets, social welfare, employment goals etc

· Weak ownership: Owner is the govt., which is financed by taxpayer. So, owners (citizens) do not have direct control over the PSU

· Low transparency and disclosure

· Unprofessional Board of Directors as appointments made based on political considreations

Eg: NPAs in PSBs including PNB. BBB trying to make appointments but final decision with cabinet

Corporate scandals

· 2G

· Satyam

· Sahara: Money laundering and duping investors

· Saradha Ponzi Scheme

· PNB

· ICICI

· Bhopal Gas Tragedy, Union Carbide

· False advertising or make dubious claims

· Food adulteration or not divulging details of harmful ingredients

Why we should care about Corporate Fraud

· In many cases, taxpayer money involved. Eg: PNB

· Sometimes these large frauds disrupt the whole value chain, destroying businesses and leading to unemployment

· Black money can be laundered away or NPAs can arise

· Investors can lose their hard-earned money in an instant. In some cases, these are very poor people such as Saradha

· Poor CG standards can dissuade foreign investors from investing in our country

How CG and CSR can help companies?

· If a business is caught doing illegal acts, or ignoring workers’ safety, cheats consumers, or destroys environment, then expenses incurred in litigation, fines and compensation will outweigh the short-term gain.

· Reputation gained through product quality and consumer care can help in brand loyalty

· Concern for workers’ safety: workers feel better, reduce strikes and improves productivity

· Prompt payment to suppliers and creditors inspire confidence in the two. They are willing to provide inputs or loans at better rates

· Concern for environment adds to brand value

· Can raise stock value in share markets as well

· Reputation also helps in tiding over difficulties as state more willing to help

PROBITY IN GOVERNANCE

Refer to summary and notes of ARC Reports

Governance: it describes the structures and decision-making processes that allow a state, organization or group of people to conduct affairs.

Governance refers to the exercise of political, economic and administrative authority in the management of a country’s affairs, including citizens’ articulation of their interests and exercise of their legal rights and obligations. (UNESCO)

Probity = Integrity + honesty + uprightness

More than honesty, involves public service values to administration and governance, like impartiality, transparency, accountability etc

Philosophical basis of governance and probity

· Found in texts like Arthashastra, Hitopedesha Manusmriti, Panchatanra, Mahabharata, Confuscius, Aristotle

· Administratos are guardians of state. So, expected to honour pubic trust and not violate it.

· Can refer other ethical dilemmas, foundational values, ethical guidance and significance of ethics in public administration to explain this point.

· NPM: 3E- efficiency, economy and effectiveness

Objectives of probity

· Ensure accountability

· Maintain integrity (mention other foundational values)

· Compliance with processes

· Preserve public confidence in govt

· Avoid potential for misconduct, corruption and fraud

Examples of conflict of interest

· DM decides on circle rates which affect property prices. If he owns property in the district, he can change circle rates

· Own family member is applicant in an interview in which I am the judge

· Own shares in a company that is bidding for a govt. tender in my dept.

· Judge dealing with a case in which he is himself involved

Transparency

Openness of decision making + freedom of info to citizens and media

Measures for transparency

· 2nd ARC Report

· Parliamentary oversight and control through committees, question hour, debates etc

· Legislative : RTI, whistleblower protection act, reduction in number of procedures, liberalization

· Single window processes, e-governance

· TORA

· Independent judiciary, quasi judicial bodies like SEBI, RBI, NGT, CAT etc

· Ombudsman: Lokpal and Lokayukta

· Free press, social audit and role of NGOs

RTI

Refer ARC report

Also refer written handwritten note

Two issues: Threat to RTI activists, inclusion of political parties under RTI (even NGO substantially financed by govt. declared public authority under RTI)

Codes of ethics and conduct

Refer handwritten notes

Refer 2nd ARC for code of ethics for CS, ministers and legislators

Also see Public Service Bill 2006 pg 408 Lexicon

Citizens’ Charter

Refer handwritten notes

Refer 2nd ARC report

Work culture

Refer handwritten notes

Set of attitudes+ values + behaviours towards performance of duty, providing service delivery and concerns for economy and effectiveness

Characteristics of healthy work culture

· Respect fellow employees

· Minimum conflicts and reolution through mutual discussion

· Employee satisfaction important

· Performers rewarded and encouraged. The ones who cannot are asked to pull up their socks

· Employee feedback taken into consideration. Workshops, etc held to upgrade skills

Importance of positive work culture

· Citizen centric admin with grievance redressal and transparency

· Organizational and professional integrity

· Efficiency in service delivery and compassion to the weak

· Ensures integrity, non-partisanship and impartiality

Work ethics

Commitment to fulfilment of official responsibilities with dedication, impartiality, integrity, objectivity and compassion.

Benefits as written above in positive work culture.

Lack of work ethics in Indian public administration

How to inculcate positive work ethics/culture

· There should be prescribed specific norms of productivity and work performance for organisational units and even individuals.

· A comprehensive and inclusive performance appraisal system should be adopted. This would be feasible only if job is descriptive and role and responsibilities of each position are specified.

· There should be maximum delegation of powers at every level with a concurrent system of effective monitoring and work audit.

· Punctuality and promptness in administrative affairs must be valued and along with the quality of work performed

· The seniors should lead by setting an ethical example. They should motivate their juniors to take initiative, and responsibility, and also be enterprising and efficient.

· While bureaucracies are expected to be guided by laws and rules, it is not necessary to make them mechanistically rule-centric. Public administrative organisations are human organisations and they ought to be humane in their policies, decisions, orientation and behaviour.

· Courtesy and politeness in administrative behaviour, a desire to help resolve their problems, and satisfy them even when, extra help cannot be rendered and matters have to be disposed off in accordance with the legal and formal requirements of the system.

· Two areas where administrators ought to show an attentive and caring attitude is to provide correct and useful information to clients when they need it and to redress satisfactorily the citizens’ grievances.

Quality of service delivery

Refer handwritten notes

Reasons for poor quality of service delivery

· Lack of transparency and accountability

· Political interference

· Citizen far away from decision making and stock-taking

· Absence of a positive work culture

· Absence of verification mechanisms

Utilization of public funds

Refer handwritten notes

Can also refer ARC Report on Financial Management

Corruption

Refer handwritten notes on 2nd ARC Report Chapter 4

Read last page of Important Ethics Terms on Types of corruption

Challenges and costs of corruption

· Resource diversion: Resources diverted from social sector spending like health and education. This leads to inferior human capital investment and underemployment. Also, low tax collection if collusion between tax inspector and firm

· Environmental degradation: Eg: Forest lands cleared for industries after giving bribe to forest officials, industries pollute water bodies after colluding with inspectors

· Poverty and inequality: Perpetuation as low human capital. Only those who can pay the govt. official gets access to schemes like PDS Ration Cards

· Moral fiber of the society: People accept it as a way of life in public administration. So, people stop raising their voice.

· Quality of policy making is affected

· Economic growth and Flight of capital: License raj, pay bribes to get permits etc. Raises costs of doing business.

· Institutional capacity falls as elections decided by money power, judges take bribes in deciding cases, cops do not investigate cases, teachers do not teach, scientists use funds to buy homes than to do research.

· Alienation of people from government

Ways to reduce corruption (same as ways to increase accountability)

· Refer 2nd ARC Report Chapter 4

· Political structure: bringing good people into politics, reduce money, muscle power in elections (2nd ARC recommendations see), declaration of assets etc . SC judegments

· Statutory: PCA, Black Money Act, Benami Transactions Prohibition Act, Fugitive Economic Offenders Act, PMLA, SFIO, PCPNDT Act, RTI , False Claims Act, IPC 169, 409

· Institutional: CVC, CBI, CAG, Lokpal, ethical training of CS, Lateral entry, Parliamentary committees, Code of ethics for CS, e-governance

· Social structure:

7. Ethics in education

8. Awareness among citizens

9. Role of NGOs, Civil Society

10. Role of media

11. Citizens charter and grievance redressal. Eg CPGRAMS

12. Integrity pacts and social audits (Meghalaya)

The 4 Cs in Culture Building

Commitment by senior management

Clear set of values and standards of behaviour

Communication of the values and standards to staff

Continuous and consistent actions in promoting integrity