Question

1-What are the two approached to promote ethical behavior? Express your opinion about which approach is better and why?

2- Discuss how ‘poison pill’ and ‘Golden parachute’ can increase the cost of takeover?

3- Discuss how microfinance can be a useful CSR technique.

4- Do you agree with the statement that “one way to deal with excessive CEO pay is the Clawback provision”? If yes, then please explain why?

Answer 1

1. Ethical behavior : Demonstrating the behavior and values what society is expecting is called ethical behavior. The best way to judge whether the act is ethical or not is to apply the act in the overall society. If the society is getting positive impact than the act is ethical otherwise not.

Hence ethical behavior is best suited for business as it is in line with kep principle , rights and employee's justice.

To promote these behavior is must. The two approaches to promote ethical behavior is

• Adopting written ethical programs
• Instituting Ethics program

1. Written Ethical Codes : The big companies like Johnson & Johnson or Starbucks or Dell have adopted this type of approach. In this the return code of conduct is adopted to the let employees know how to behave in ethical manner. These are basically the codes which are drafted keeping in mind the various possibilities and violation of these codes is the punishable offense. For eg. the CREDO of Johnson & Johnson clearly explains what employee needs to do and what are their duties towards their clients. Hence this is basically the written draft of ethics.
2. Instituting Ethics Program : The business school now have gained popularity as a matter of fact. The experience would help the organization to learn about the ethical behavior. By conducting programs and seminars on ethical value will help to adopt the behavior in smooth manner. These are conducted by the organization on their cost to make the employee understand the need.

According to me if both are to be compared then Adopting Written ethical coding or program is better option. The employees always have written draft in their hand therefore this will keep them intact with the core values. Moreover instituting program is costly affair and employee will remember only for shorter duration. However if everything is in writing they cannot deny that. Code of conduct or code of ethics in written form is benefiting to company and is the reason many big corporate are adopting this way to promote ethical behavior.

2.The poison Pill is a kind of tactic adopted to prevent the hostile takeover as it helps in increasing the cost of takeover and when there is increase in cost than expected the taking over company have to think again about its decision.

Poison Pill strategies is that the offer to purchase share is given to existing shareholder and the offer is at discounted price . This means that the total value of the shares will increase and thereby increasing the actual value of take over. Hence in this way hostile takeover is prevented.

Golden Parachute is also the tactic to prevent takeover. In this strategy there is the agreement between the employee( eligible and deserving) and company where the employees is mark to receive privileged benefits. These benefits can be in any form like cash bonus or stock option or increase in package.Now if the employee is given these privileges than the overall cost of takeover will increase as the increase in pay of these employees will add to the cost of takeover.Although this is unfair for the shareholders but at time of hostile take over adopting this can prevent the company from take over as the contract cannot be declared null and void in any case.

3. Many banks are using the micro finance as a tool in Corporate social responsibility technique. The CSR is to serve the society either suo moto or out of the profits earned. In helps in adding growth in economic, social and other parts of the developing countries.The Micro finance is used as a tool to gain knowledge of the market and with this gain they will be identifying the poor entrepreneurs. Hence once these are identified than the banks will engages themselves with holistic perspective to serve them. Serving them means serving the society and unintentionally the banks are using the micro finance to serve the society. The Micro finance is the tools used to fight against the poverty and it help to make aware about the realistic situation awareness create urge to serve and thereby committing the Corporate Social Responsibility.

Micro finance sectors has given new market to commercial banks to serve them . As this sector is for developing countries and have social impact therefore gaining knowledge from this sector and thereafter working for this sector will promote the CSR technique.

Hence basically micro finance sector has social impact and identifies the poor entrepreneurs or poor sector which is later served by these banks. Serving those sectors becomes their duties thereby having the integral part of CSR technique.

4. The given statement is appropriate as this tools is used to retain the earning of the company.

How it works?

According to Clawback Clause where the Executive officer or any such officer prescribed

• failed to serve properly
• engaged in accounting restatement
• uses incorrect information to get promotion
• engaged in activities of making performance report flawed
• or any other activities prescribed by the company

then the officers have to return the incentives or bonus awarded to them .

Basically it is a type of clause to reduce the excessive pay of executive where the they are in default. The company has the right to take back the incentives or bonus given to officer(executives) for its performance . This clause has been added in contract of executives so that they cannot gain undue advantage of their position.

Hence the statement is correct and lead to positive and ethical impact on the organization.