Role Of Ethics In Corporate Governance

Executive Summary
In an assessment of the recent financial crisis, poor risk controls and massive risk-taking were really symptoms of a much worse disease. Most analysts have suggested that the root of the financial crisis is ethical. One must say that the root cause of the crisis was the gradual but ultimately complete collapse of ethical behavior.
Ethics is pivotal in determining the success or failure of a company. It affects company’s reputation and help defines business model that will thrive even in adversity.
Introduction
Corporate governance has become a phenomenon in today’s business world. With greater technology and the rise of social media, investors and the general public are increasingly monitoring and demanding for better

Effective leaders who can see the problems and prospects ahead must use this knowledge to set the right tone across their company. This tone from the top is vital in all aspects of governance. In ethics, the management’s personal perspective is crucial. Once the leader is not virtuous, the whole organization follows. But leaders must go much further than being merely aspirational. Policy statements need to be supplemented by action that is clear, effective and brings about changes in direction. These changes demonstrate to managers that their leaders mean what they say. If they realize that there is a genuine corporate commitment to a particular course of action, they are more likely to support it in practice. Also, managers need to be given explicit and implicit authority to speak up where they believe that the welfare of the organization and its employees is being threatened. In cascading the right corporate values, companies undergo training, but some companies have people as leaders influential enough to promote an ethics-based

Strong ethical policies can add great value to a company, whereas a failure to do the right thing can cause social, economic and environmental damage, undermining a company’s long-term reputation. Once companies have adopted an ethical approach, companies will often find there are bottom line benefits. In addition, corporate communications and reporting on sustainability need to provide hard evidence of the positive impact on society, the environment and the strategic returns for the business, and how any negative effects are being addressed. When we talk about sustainability, it is really about reputation and whether people trust a