Unit IV

ETHICAL FOUNDATION
Chapter No 9- Ethical behavior, Code of Conduct and Corporate moral
development
Chapter No 10- Internal Social Responsibility, Health and safety at work, Human
development and training in the workplace.

Chapter No: 9
Ethical behavior, Code of Conduct and Corporate moral development

INTRODUCTION

Some years ago, one sociologist asked business people, "What does an ethic mean
to you?" Among their replies were the following: "Ethics has to do with what my
feelings tell me is right or wrong." "Ethics has to do with my religious beliefs."
"Being ethical is doing what the law requires." "Ethics consists of the standards of
behaviour our society accepts."

DEFINITION

The term "ethics" is derived from the Greek word "ethos" which refers to character or customs or
accepted behaviour’s. The Oxford Dictionary states ethics as "the moral principle that governs a
person's behaviour or how an activity is conducted".
The synonyms of ethics as per Collins Thesaurus are - moral code, morality, moral philosophy,
moral values, principles, rules of conduct, standards. Ethics is a set of principles or standards of
human conduct that govern the behaviour of individuals or organizations. Using these ethical
standards, a person or a group of persons or an organization regulate their behaviour to
distinguish between what is right and what is wrong as perceived by others.
Business ethics are a kind of applied ethics. It is the application of moral or ethical norms to
business. The term ethics has its origin from the Greek word ‘ethos’, which means character or
custom- the distinguishing character, sentiment, moral nature, or guiding beliefs of a person,
group,
or institution. Ethics are a set of principles or standards of human conduct that govern the
behaviour of individuals or organisations.
Ethics can be defined as the discipline dealing with moral duties and obligations, and explanation
regarding what is good or not good for others and for us. Ethics is the study of moral decisions
that
are made by us in the course of performance of our duties. Ethics is the study of characteristics
of
morals and it also deals with moral choices that are made in relationship with others. Business
ethics comprises the principles and standards that guide behaviour in the conduct of business.
Businesses must balance their desire to maximize profits against needs of its stakeholders.
Maintaining this balance often requires trade-offs. To address these unique aspects of businesses,
rules, articulated and implicit, are developed to guide the businesses to earn profits without
harming individuals or society as a whole.

BUSINESS ETHICS

Business ethics is a form of applied ethics or professional ethics that examines ethical principles
and moral or ethical problems that can arise in a business environment. It is also known as
Corporate ethics. It applies to all aspects of business conduct and is relevant to the conduct of
individuals and entire organizations.

SOURCES

The various sources from where ethical values have been evolved. The main sources are
◦ Religion: The acceptance of religion as ‘law’ has its roots before the onset of the legal
system. Psychologically, this belief or faith in the religion which makes people comply to
the imposed restrictions to accept any unsolicited behaviour in the society.
◦ Society: Public expectations and social pressure can influence companies to act ethically to
maintain reputation and customer trust.
◦ Legal System: It has been rightly said that “Laws represent a rough approximation
of a society's ethical standards”. The prevailing societal evils like hoarding of essential
commodities, exorbitant charging, concealing facts, deceiving, falsified statements, etc.
amount to unethical behaviour and need to be curbed by necessary formulation,
amendment and implementation of a stringent legal framework.
◦ Genetic inheritance: Traits like cooperation and selflessness stand centric to the ethical
system and it has been witnessed to be carried from one generation to the other.
Schooling focuses on ethics to be core of the child development. This is complemented
with the learning from the parents and the society.

◦ Marketplace: Business ethics considers the impact of actions on all stakeholders, including
employees, customers, suppliers, and society.
◦ Nature: Business ethics provides guidelines on what is right or wrong in business conduct, not
just what is legal.
◦ Culture: Culture also drives ethics. Customs, societal norms, traditions and standards get
passed on to next generations. Culture varies from one religion to the other but the ethical
essence doesn’t differ much. Unethical practices are not supported by the culture
irrespective of the wide geographical differences.
Code of Conduct: The society plays a crucial role in framing the code of conduct for
ethics. The workplace ethics are based on common beliefs and are broader in nature. To
further enhance them, the company formulates a framework of operating policies which
direct the decision making from the ethical perspective. This framework indicates the
ethical decision making in matters pertaining, but not limited to, customer complaint
handling, stakeholders, employee and vendor hiring, etc. Besides the organisational level,
ethics are framed for a particular industry level also irrespective of the number of
companies being served by that industry. For example, the advertising vertical
encompasses extending services to various companies and this vertical has formulated
‘Indian Association of Advertising Agencies’ to develop an ethical code of conduct for
advertising agencies, firms etc. which is to be followed by the concerned professional and
industry associations.

CHARACTERISTICS OF BUSINESS ETHICS

1. Business ethics are based on social values, as the generally accepted norms of good or bad and
‘right’ and ‘wrong’ practices.
2. It is based on the social customs, traditions, standards, and attributes.
3. Business ethics may determine the ways and means for better and optimum business
performance.
4. Business ethics provide basic guidelines and parameters towards most appropriate perfections
in business scenario.
5. Business ethics is concerned basically the study of human behaviour and conducts.
6. Business ethics is a philosophy to determine the standards and norms to make mutual
interactions and behaviour between individual and group in organisation.
7. Business ethics offers to establish the norms and directional approaches for making an
appropriate code of conducts in business.
8. Business ethics are based on the concepts, thoughts and standards as contributed as well as
generated by Indian ethos.
9. Business ethics may be an ‘Art’ as well as ‘Science’ also.
10. Business ethics basically inspire the values, standards and norms of professionalism in
business for the well-being of customers.
11. Business ethics is to motivate and is consistently related with the concept of service motives
for the customers’ view point.
12. Business ethics shows the better and perspective ways and means for most excellences in
customization.
13. Business ethics aims to emphasize more on social responsibility of business towards society.

IMPORTANCE OF BUSINESS ETHICS

Now, let us understand why Corporate Ethics matter to business. Ethics matter because ethical
conduct is the right conduct. However, in the absence of a time-culture, and context-neutral
definition of ‘right’, it is very difficult to develop a code of conduct on this basis alone. It
basically says that businesses avoid many risks and gain reputation by acting in an ethical
manner.
A good ethics process, operationalised in such a way that all decision making procedures and
structures support it on a day-to-day basis, will give an organisation the best chance possible for
finding out about potential problems early so that they can be dealt with before they become a
disaster. There are also market advantages to be gained from an ethical reputation.
Ways in which Ethics are Important -
Major scandals such as WorldCom, Enron, Lehman Brothers etc., in the US and Satyam in India
tell us why ethical business practices are becoming increasingly important. There are several
reasons why ethics are important to business:
• To understand reasons behind increasing influence of corporates in society.
• To ensure that no harm is done to society.
• To meet ethical expectations more effectively.
• To enable companies to identify employee and customer concerns at an early stage.
• To improve the quality of a firm’s relationships with its key stakeholders.
The government is interested in ensuring ethical business practices to ensure a basic level of
integrity
in the market place. This promotes international competitiveness of the economy and improves a
country’s image concerning ease of doing business.
Even domestically, predictable levels of ethical behaviour ensures that costs of business such as
transaction costs, hedging and insurance etc., are kept to a minimum.
Unethical behaviour imposes costs on the government and taxpayers. Bad behaviour by a few
impacts on all businesses and might also have an adverse impact on the country’s international
competitiveness.
Ethics can help improve decision making by providing managers with the appropriate
knowledge
and tools that allow them to correctly identify, diagnose, analyse, and provide solutions to the
ethical problems and dilemmas they are confronted with.

ELEMENTS OF BUSINESS ETHICS

(i) A Formal Code of Conduct:

Code of conduct is statements of organizational values. The Sarbanes-Oxley Act, 2002(The
Sarbanes-Oxley Act of 2002 (SOX) is a U.S. federal law that aims to protect investors by
improving the accuracy and reliability of corporate disclosures. It was enacted in response to
major accounting scandals like Enron and WorldCom, which shook investor confidence) made it
important for businesses to have an ethics code, something in writing which will help the
employees know – with both ease and clarity – what is expected of them on the job. The code
should reflect the managements desire to incorporate the values and policies of the
organization.

Code of Ethics: For every new business incorporated, it is important for the management to
have a code of ethics for his business. It is usually unwritten for small businesses. It is basically a
buzzword for the employees to observe ethical norms and form the basic rules of conduct. It
usually specifies methods for reporting violations, disciplinary action for violation and a
structure of the due process to be followed. A code of ethics must summarize the beliefs and
values of the organization. For a large business empire, it is important to hire talent to assist
existing personnel with regards to integrity, understanding, responsibility, and cultural norms of
the country.

(ii) Ethics Committee: Ethics committees can rise concerns of ethical nature; prepare or update
code of conduct, and resolve ethical dilemma in organization. They formulate ethical policies
and develop ethical standards. They evaluate the compliances of the organisation with these
ethical standards. The committee members should be conscious about the corporate culture
and ethical concise of the organisation.

The following committees are to be formed:

a. Ethics committee at the board level- The committee would be charged to oversee
development and operation of the ethics management programme.

b. Ethics management committee – It will be charged with implementing and administrating an

ethics management programme, including administrating and training about policies and
procedures, and resolving ethical dilemmas.

(iii) Ethical Communication System: Ethical communication system helps the employees in
making enquiries, getting advice if needed and reporting all the wrong done in the organisation.

Objectives of ethical communication system are:

a. To communicate the organizations values and standards of ethical conduct or business to

employees.

b. To provide information to employees on the company’s policies and procedures regarding

ethical code of conduct.

c. To help employees get guidance and resolve queries.

d. To set up means of enquiries such as hotlines, suggestion boxes and e-mail facilities. Top
management can communicate the ethical standards to the lower management which can be
further transferred to the operational level.

(iv) An Ethics Office with Ethical Officers:

The job of an ethics officer is to communicate and implement ethical policies amongst
employees of the organisation. Ethics officer should develop a reputation for credibility,
integrity, honesty and responsibility.
Functions of ethics officer are:
a. Assessing the needs and risks that an ethical programme must address.
b. Develop and distribute code of conduct.
c. Conduct ethical training programme.
d. Maintain confidential service to answer employee’s questions about ethical issues.
e. To ensure that organisation is in compliance with governmental regulations.
f. To monitor and audit ethical conduct.
g. To take action on possible violation of company’s code.
h. To review and update code in time.
(v) Ethics Training Programme: Any written ethical code will not work unless supported and
followed by a proper training programme. Some companies have an in-house training
department while others may opt for an out-source expert. To ensure ethical behaviour, a
corporate training programme is established which deals in assisting employees to understand the
ethical issues that are likely to arise in their workplace. When new employees are to be recruited,
the induction training should be arranged for them. Training will help them to familiarize with
company’s ethical code of behaviour.
(vi) A Disciplinary System: A disciplinary system should be established in the organisation to
deal with ethical violations promptly and severely. If unethical behavior is not properly dealt
with, it will result in threatening the entire social system. A company should adopt fair attitude
towards everyone without any discrimination.
(vii) Establishing an Ombudsperson: An ombudsperson is responsible to help coordinate
development of policies and procedures to institutionalize moral values in the workplace.
(viii) Monitoring: To make an ethical programme, a successful monitoring programme needs to
be developed. A monitoring committee is formed. Monitoring can be done by keen observation
by ethics officer, surveys and supporting systems.

Code of Conduct and Corporate moral development

“A written document expressing the policies or principles that enterprises undertake to follow.
By their very nature, voluntary codes contain the commitments that enterprises make,
especially to respond to the expectations of the market, without being obliged by the legislation
or regulation. However, since it is a question of public declarations, one considers it normal that
these codes have legal implications, taking into account the laws that govern declarations of
enterprises, advertising and competition (in the case of joint action of several enterprises).”
(ILO. Governing Body. GB 273/WP/SDL/1, November 1998)

According to the International Employers Organisation – IEO –, “the code of conduct is an

operational declaration of policies, values or principles which guide the operations of an
enterprise according to the development of its human resources, management of the
environment and interaction with consumers, clients, governments and the community where
they operate”. The IEO adds that, “enterprises and their organisations are free to choose
whether or not to develop, to establish, adopt, make known and follow a code of conduct. They
are free to decide whether or not to develop a code of conduct within the enterprise, on their
own or with a third party.” (IEO, June 1999)

For the OECD, “the code of conduct is a commitment made voluntarily by enterprises,
associations or other entities which set standards and principles for the conduct of activities of
the enterprises on the market”. (OECD, Corporate Social Responsibility, 2001)

For the WCL (Western Coalfields Limited) it is a series of indicative prescriptions or rules that
persons or groups of persons could establish together in order to improve their relations or to
attain the objectives of their association or grouping.

This term, which is used in the private sector, is also common practiced in the economic and
social areas.

For example, it could be:

■ Code governing a sector of production or trade in order to signing avoid making contracts
with sub-contractors employing children;

■ Code specifying the fundamental social rights that a sub-contractor undertakes to respect;

■ Code on occupational health and safety or working conditions in a sector;

■ Code specifying the objectives to be attained to advance equal treatment (employment,

wages, qualification) between men and women;

■ Code in the area of environment to avoid pollution of streams, rivers and waterways.

There are several categories of codes of conduct

We can classify codes of conduct into three categories:

• Codes internal to enterprises, employers association, those formulated within the enterprise
itself and put into practice without the intervention of a third party;

• Codes which are formulated and written by the enterprises with the participation of a third
party (trade union organisations, NGOs);
 • Codes formulated by NGOs, foundations or independent bodies, of the Social Accountability
8000 type, or by NGO coalitions that grant labels (including trade union organisations).

Core Values and Principles

Code of Conduct of Reliance

1. Integrity and Ethics

Employees are expected to act honestly and fairly in every business situation. This means being
truthful, transparent, and doing the right thing even when no one is watching. They should
avoid any personal interests that could interfere with their job responsibilities. If there’s a
chance of conflict between personal and professional interests, they must disclose it
immediately to maintain trust.

2. Compliance with Laws and Policies

Employees must follow all laws, rules, and internal company policies that apply to their work.
This ensures that Reliance operates legally and ethically. By adhering to these standards,
employees help the company avoid legal problems and maintain a good reputation.

3. Respect and Fairness

Everyone at Reliance should be treated with respect and kindness—whether they are
colleagues, customers, or partners. The company promotes a work environment where
discrimination, bullying, or harassment is not tolerated. Fair treatment helps build a positive
and inclusive workplace culture.

4. Confidentiality and Privacy

Employees must protect sensitive information about the company, its employees, and its
customers. This means keeping data private and sharing it only with people who need to know
for legitimate business reasons. Safeguarding information helps prevent misuse and builds
confidence with stakeholders.

5. Responsible Use of Company Resources

Company property, including computers, vehicles, and work time, should be used responsibly
and primarily for business purposes. Misusing or wasting resources harms the company and can
lead to serious consequences. Employees are expected to take care of the company’s assets as if
they were their own.

6. Health, Safety, and Environment

Reliance commits to providing a safe and healthy workplace for everyone. Employees must
follow safety procedures, report hazards, and participate in efforts to protect the environment.
This ensures that the workplace remains safe and sustainable for all.

7. Reporting Violations

Employees are encouraged to report any unethical behavior or violations they witness. The
company provides clear channels to do this confidentially and guarantees protection against
retaliation. This helps maintain a transparent and accountable work environment.

8. Commitment to Excellence

Reliance encourages all employees to continuously improve their skills, innovate, and deliver
high-quality work. Supporting teamwork and collaboration helps the company achieve its goals
and maintain leadership in the industry.
 THE TATA CODE OF CONDUCT

CORPORATE CONDUCT

1. National Interest

A TATA Company shall be committed in all its actions to benefit the economic
development of the countries in which it operates and shall not engage in any
activity that would adversely affect such objective. It shall not undertake any
project or activity to the detriment of the Nation’s interests or those that will have
any adverse impact on the social and cultural life patterns of its citizens. A TATA
Company shall conduct its business affairs in accordance with the economic,
development and foreign policies, objectives and priorities of the Nation’s
government and shall strive to make a positive contribution to the achievement of
such goals at the international, national and regional level as appropriate.

2. Financial Reporting and Records

A TATA Company shall prepare and maintain its accounts fairly and accurately in
accordance with the accounting and financial reporting standards which represent
the generally accepted guidelines, principles, standards, laws and regulations of the
country in which the Company conducts its business affairs.

Internal accounting and audit procedures shall fairly and accurately reflect all of
the Company’s business transactions and disposition of assets. All required
information shall be accessible to company auditors and other authorised parties
and government agencies. There shall be no wilful omissions of any company
transactions from the books and records, no advance income recognition and no
hidden bank account and funds.

Any wilful material misrepresentation of and/or misinformation on the financial

accounts and reports shall be regarded as a violation of the Code apart from
inviting appropriate civil or criminal action under the relevant laws.
3. Competition

A TATA Company shall fully strive for the establishment and support of a
competitive open market economy in India and abroad and shall co-operate in the
efforts to promote the progressive and judicious liberalisation of trade and
investment by a country. Specifically, a TATA Company shall not engage in
activities which generate or support the formation of monopolies, dominant market
positions, cartels and similar unfair trade practices.

A TATA company shall market its products and services on its own merits and
shall not make unfair and misleading statements about competitors’ products and
services. Any collection of competitive information shall be made only in the
normal course of business and shall be obtained only through legally permitted
sources and means.

4. Equal-Opportunities Employer

A TATA Company shall provide equal opportunities to all its employees and all
qualified applicants for employment without regard to their race, caste, religion,
colour, ancestry, marital status, sex, age, nationality, disability and veteran status.
Employees of a TATA Company shall be treated with dignity and in accordance
with the TATA policy to maintain a work environment free of sexual harassment,
whether physical, verbal or psychological. Employee policies and practices shall
be administered in a manner that would ensure that in all matters equal opportunity
is provided to those eligible and the decisions are merit-based.

5. Gifts and Donations

A TATA Company and its employees shall neither receive nor offer or make,
directly or indirectly, any illegal payments, remuneration, gifts, donations or
comparable benefits which are intended to or perceived to obtain business or un-
competitive favours for the conduct of its business. However, a TATA Company
and its employees may accept and offer nominal gifts which are customarily given
and are of commemorative nature for special events.

6. Government Agencies

A TATA Company and its employees shall not offer or give any company funds or
property as donation to any government agencies or their representatives, directly
or through intermediaries, in order to obtain any favourable performance of official
duties.

7. Political Non-Alignment

A TATA Company shall be committed to and support a functioning democratic

constitution and system with a transparent and fair electoral system in India. A
TATA company shall not support directly or indirectly any specific political party
or candidate for political office. The Company shall not offer or give any company
funds or property as donations, directly or indirectly, to any specific political party,
candidate or campaign.

8. Health, Safety and Environment

A TATA Company shall strive to provide a safe and healthy working environment
and comply, in the conduct of its business affairs, with all regulations regarding the
preservation of the environment of the territory it operates in. A TATA Company
shall be committed to prevent the wasteful use of natural resources and minimise
any hazardous impact of the development, production, use and disposal of any of
its products and services on the ecological environment.

9. Quality of Products and Services

A TATA Company shall be committed to supply goods and services of the highest
quality standards backed by efficient after-sales service consistent with the
requirements of the customers to ensure their total satisfaction. The quality
standards of the Company’s goods and services should at least meet the required
national standards and the Company should endeavour to achieve international
standards.

10. Corporate Citizenship

A TATA company shall be committed to be a good corporate citizen not only in

compliance with all relevant laws and regulations but also by actively assisting in
the improvement of the quality of life of the people in the communities in which it
operates with the objective of making them self reliant. Such social responsibility
would comprise, to initiate and support community initiatives in the field of
community health and family welfare, water management, vocational training,
education and literacy and encourage application of modern scientific and
managerial techniques and expertise. This will be reviewed periodically in
consonance with national and regional priorities. The company would also not treat
these activities as optional ones but would strive to incorporate them as integral
part of its business plan. The company would also encourage volunteering amongst
its employees and help them to work in the communities. Tata companies are
encouraged to develop social accounting systems and to carry out social audit of
their operations.

11. Co-operation of TATA Companies

A TATA Company shall co-operate with other TATA Companies by sharing

physical, human and management resources as long as this does not adversely
affect its business interests and shareholder value.

In the procurement of products and services a TATA Company shall give

preference to another TATA company as long as it can provide these on
competitive terms relative to third parties.

12. Public Representation of the Company & the Group

The TATA Group honours the information requirements of the public and its
stakeholders. In all its public appearance with respect to disclosing company and
business information to public constituencies such as the media, the financial
community, employees and

shareholders, a TATA Company or the Tata Group shall be represented only by

specifically authorised directors and employees. It will be the sole responsibility of
these authorised representatives to disclose information on the Company.

13. Third Party Representation

Parties which have business dealings with the TATA Group but are not members
of the Group such as consultants, agents, sales representatives, distributors,
contractors, suppliers, etc. shall not be authorised to represent a TATA Company if
their business conduct and ethics are known to be inconsistent with the Code.

14. Use of the TATA Brand

The use of the TATA name and trademark owned by Tata Sons shall be governed
by manuals, codes and agreements to be issued by Tata Sons. The use of the TATA
brand is defined in and regulated by the TATA Brand Equity & Business
Promotion Agreement.

15. Group Policies

A TATA company shall recommend to its Board of Directors the adoption of

policies and guidelines periodically formulated by Tata Sons.

16. Shareholders

A TATA Company shall be committed to enhance shareholder value and comply

with all regulations and laws that govern shareholders’ rights. The Board of
Directors of a TATA Company shall duly and fairly inform its shareholders about
all relevant aspects of the Company’s business and disclose such information in
accordance with the respective regulations and agreements.

EMPLOYEES’ CONDUCT

1. Ethical Conduct

Every employee of a TATA Company, which shall include Whole-time Directors

and the Managing Director, shall deal on behalf of the Company with
professionalism, honesty, integrity as well as high moral and ethical standards.
Such conduct shall be fair and transparent and be perceived to be as such by third
parties.

Every employee shall be responsible for the implementation of and compliance

with the Code in his professional environment. Failure to adhere to the Code could
attract the most severe consequences including termination of employment.

2. Regulatory Compliance

Every employee of a TATA Company shall, in his business conduct, comply with
all applicable laws and regulations, both in letter and in spirit, in all the territories
in which he operates. If the ethical and professional standards set out in the
applicable laws and regulations are below that of the Code then the standards of
the Code shall prevail.

3. Concurrent Employment

An employee of a TATA Company shall not, without the prior approval of the
Managing Director of the Company accept employment or a position of
responsibility (such as a consultant or a director) with any other company, nor
provide “free-lance” services to anyone. In the case of a Whole-time Director or
the Managing Director such prior approval must be obtained from the Board of
Director of the Company.

4. Conflict of Interest

An employee of a TATA Company shall not engage in any business, relationship

or activity which might detrimentally conflict with the interest of his Company or
the Group. A conflict of interest, actual or potential, may arise where, directly or
indirectly, (a) an employee of a TATA Company engages in a business,
relationship or activity with anyone who is party to a transaction with his
Company, (b) an employee is in a position to derive a personal benefit or a benefit
to any of his relatives by making or influencing decisions relating to any
transaction, and (c) an independent judgement of the Company’s or Group’s best
interest cannot be exercised.

The main areas of such actual or potential conflicts of interest would include the
following:

(i) Financial interest of an employee of a TATA Company or his relatives

including the holding of an investment in the subscribed share capital of any
company or a share in any firm which is an actual or potential competitor,
supplier, customer, distributor, joint venture or other alliance partner of the
TATA company. (The ownership of upto 1% of the subscribed share capital of
a publicly held company shall not ordinarily constitute a financial interest for
this purpose.)

(ii) An employee of a TATA company conducting business on behalf of his

Company or being in a position to influence a decision with regard to his
Company’s business with a supplier or customer of which his relative is a
principal officer or representative resulting in a benefit to him or his relative.
 5

(iii)Award of benefits such as increase in salary or other remuneration, posting,

promotion or recruitment of a relative of an employee of a TATA Company
where such an individual is in a position to influence the decision with regard
to such benefits.

(iv)Acceptance of gifts, donations, hospitality and/or entertainment beyond the

customary level from existing or potential suppliers, customers or other third
parties which have business dealings with the Company.

Notwithstanding that such or other instances of conflict of interest exist due to any
historical reasons, adequate and full disclosure by the interested employees should
be made to the company’s management. It is also incumbent upon every employee
to make a full disclosure of any interest which the employee or the employee’s
immediate family, which would include parents, spouse and children, may have in
a company or firm which is a supplier, customer, distributor of or has other
business dealings with his Company.

Every employee who is required to make a disclosure as mentioned above shall do

so, in writing, to his immediate superior who shall forward the information along
with his comments to the person designated for this purpose by the MD/CEO who
in turn will place it before the MD/CEO and/or the Board of Directors/Executive
Committee appointed by the Board and, upon a decision being taken in the matter,
the employee concerned will be required to take necessary action as advised to
resolve/avoid the conflict.

If an employee fails to make a disclosure as required therein and the management

of its own accord becomes aware of an instance of conflict of interest that ought to
have been disclosed by the employee, the management would take a serious view
of the matter and consider suitable disciplinary action against the employee.

5. Securities Transactions and Confidential Information

An employee of a TATA Company and his immediate family shall not derive any
benefit or assist others to derive any benefit from the access to and possession of
information about the Company or the Group which is not in the public domain
and thus constitutes insider information.
An employee of a TATA Company shall not use or proliferate information which
is not available to the investing public and which therefore constitutes insider
information for making or giving advice on investment decisions on the securities
of the respective TATA Company on which such insider information has been
obtained.

Chapter No 10
Internal Social Responsibility, Health and safety at work, Human
development and training in the workplace.
Most discussions in the CSR field are driven by issues inherent to external
CSR (e.g., the preservation of the environment; companies’ involvement in the
communities where they operate), while the concept of internal CSR (I-CSR) has
been relatively ignored (I-CSR refers to how firms respond to their
responsibilities in regards to their employees, i.e., the work relations sphere.
Standards of internal social responsibility within firms are discussed in several
international documents, such as the European Union’s Green Paper (European
Commission, 2001) and the United Nations’ Global Compact (United Nations,
n.d.).
They are also dealt with detail in documents produced by entities such as the
International Labor Organization (ILO, 1998), and in the information guides of the
Global Reporting Initiative (GRI, 2011). The CSR literature discusses I-CSR
issues at the institutional, organizational and individual level of analyses.
Institutional I-CSR initiatives encompass the social dialogue on labor relations
between corporations and other organizations, such as, unions and professional
representative bodies, and address normative and regulative issues.
I-CSR initiatives on the organizational level focus the work context and entail
broad policies that aim at improving the physical environment for several
employees, such as eliminating workplace risks that might pose a threat to their
health and safety, or designing jobs in ways that promote involvement and
participation. I-CSR initiatives on the individual level focus on employees more
directly, and address their specific needs. They range from programs that center on
professional development, such as sponsoring training and professional education,
to initiatives that attend to their needs beyond the workplace, such as offering
pension plans and profit-sharing.
Although some internal CSR investments may reflect a concern with legal aspects
and aim at reducing labor-related costs, several I-CSR initiatives can promote
positive employee attitudes and their improved performance, and therefore affect
organizational effectiveness, particularly those that directly affect individual
employees. Researchers have suggested that companies with a socially responsible
culture have an intangible asset to attract, retain, and engage the workforce.
However, little is known about the outcomes of specific I-CSR investments in
terms of costs and returns.
There are many definitions of CSR as well as different perspectives on how CSR
should be introduced and implemented in organizations. According to stakeholder
theory, CSR is essentially divided into two categories: external and internal CSR.
External CSR includes three main issues, namely, corporate philanthropy,
corporate volunteerism, and environmental protection (European Commission,
2001), while the core of internal CSR involves the employees and employment
relationship. Spence and Lozano (2000) claimed that the strongest incentive for
SMEs to undertake CSR is concern for employees’ health and welfare, and thus,
SMEs are more likely to start CSR with internal aspects.
CSR and HRM (Human Resource Management) sometimes share common goals
and a common concern for responsible employment practices. Nevertheless, to
implement internal CSR, traditional HRM is required to have more capabilities and
to integrate extra aspects. In other words, internal CSR may be considered
responsible aspects of HRM. As a result, internal CSR somehow functions as
fundamental HRM activities, and is considered an effective strategy to encourage
personnel satisfaction, employee affective commitment and engagement, and
knowledge sharing activities and in turn, boost organizational creativity.
Researchers may provide different descriptions when mentioning internal CSR, but
they share key issues regarding human rights, physical and psychological working
conditions, employment relationship, and human development.
This idea is found in previous work when researchers have attempted to develop
different scales to measure internal CSR, such as Maignan and Ferrell (2004),
Papasolomou-Doukakis, Krambia-Kapardis and Katsioloudes (2005), Turker
(2009) and Welford (2005).

1. Organizational creativity

Creativity in the workplace is defined as “the production of novel and useful ideas”
(Amabile, 1988, p. 126). Additionally, creativity at the organization level may be
also referred as a creative and collaborative working climate.
An organization may need both individual creativity and organizational creative
climate which enables employees’ ideas to become measurably innovative outputs.
For measurement in empirical studies, researchers often use proxy variables, such
as personality characteristics for the individual level and organizational structure
and working environment for the organizational level of creativity. Note that
personality characteristics have also been used as measures of organizational
creativity, because individual creativity is regarded as one aspect of organizational
creativity.
According to Amabile, Conti, Coon, Lazenby and Herron (1996), personality
characteristics and organizational structures have dominated the organizational
creativity literature. However, from management perspectives, the working
environment may be more useful, because both personality characteristics and
organizational structures are harder to intervene in than the working environment.

2. Relationship between internal CSR, affective commitment, and organizational

creativity

With the focus on employees, internal CSR, a feasible option for SMEs, may also
be a possible determinant of organizational creativity, since it may promote an
open and more creative working environment through selected CSR activities, such
as diversity promotion, training programs, creation of work–life balance, and
family friendly employment. As mentioned in the introduction, internal CSR may
have positive effect on organizational creativity via affective commitment. Broadly
defined, organizational commitment refers to the psychological state that
characterizes the relationship between employees and organization, and has
implications for the decision to continue or discontinue membership in that
organization. Among three kinds of organizational commitment—namely, affective
commitment, normative commitment, and continuance commitment—affective
commitment seems to be the most beneficial for organizations as it can activate
employees’ love and desire to contribute to the organizations.

Internal CSR has been considered as a source of affective commitment. The focus
of internal CSR is on employees, and it aims to help employees have a good
working environment and develop more opportunities.
Affective event theory (Weiss & Cropanzano, 1996) implies that employees who
work for a company with better internal CSR practices are more likely to display
positive contribution to their organization’s development, as it seems to be a
natural reaction of employees when they have feelings of want, love, and
commitment to company goals. Accordingly, human practices or internal CSR in
this case influences affective states of employees through work context and events.
The better one organization is perceived by employees, the more employees feel
attached and want to contribute to its success. As a result, employees are motivated
to find better solutions for their jobs and to promote creativity within the
organization.
In line with this argument, Jafri (2010) and McLean (2005) claim that affective
commitment is very important in the creative ability development of employees.

Furthermore, when employees have high affective commitment, their intrinsic

motivation is triggered, which may result in more searching, self-learning
activities, and risk taking, ultimately leading to more creativity for organizations.
Especially, in relation to our focus on the work environment aspect of
organizational creativity, employees are considered to have more intention to share
their daily lives with colleagues because they may feel more trust and friendliness
to do so.
Those activities enhance internal communication, even without knowledge sharing,
which might result in a flexible and collaborative working environment for creative
development. It is supposed to be helpful since organizational creativity in this
research focuses more on the creative working environment. From this basis, we
believe that organizations with employees who have strong affective commitment
enjoy more creativity than organizations with employees who have weak affective
commitment. Summarizing the discussion, affective commitment is a potential
mediator in the internal CSR practices and organizational creativity relationship.

Nevertheless, whether affective commitment plays a role of a full or partial

mediator is unclear in the literature. The reason is because on one hand, internal
CSR practices also include providing employees training and education, which
may directly bring new ideas, discussions, and debates via training sessions, which
fosters organizational creative environment. On the other hand, it is noteworthy
that without motivation such as affective commitment and the specific actions such
as knowledge sharing or debates, impact of training and education on organization
may not be significant. Therefore, we hypothesize:

Relationship between internal CSR, knowledge sharing, and organizational

creativity

Knowledge sharing is known as “a process that enables the knowledge of

individuals and groups to be transferred to the organizational level, where it can be
applied for the development of new products, services, and processes”. Since the
knowledge-based economy has rapidly become dominant, knowledge sharing has
become more and more essential for organizations. Previous empirical studies
show a positive relationship between HRM and knowledge sharing within
organizations. As argued, internal CSR is a kind of responsible HRM, and thus,
empirical studies that advocate positive impacts of HRM on knowledge sharing
may be applied to internal CSR as well. The policies from programs of diversity
promotion or intervention to other kinds of employee motivation (e.g., extrinsic
motivation) by compensation and reward systems will help to enhance knowledge-
sharing activities. Hence, once a company implements internal CSR that enhances
active communication and diversity among employees, knowledge-sharing
activities are supposed to occur more often.

The importance of knowledge sharing for creativity in organizations has been

highlighted in previous studies. Knowledge sharing is an essential process in
converting individual learning to organizational competences, including the
creativity of employees. Various kinds of knowledge from different people,
disciplines, and expertise provide valuable inputs for the organizational creative
climate, especially if ideas can be discussed freely and flow.
As Amabile et al. (1996) claim, a favorable working environment for employees to
create is one of the biggest factors in fostering organizational creativity, because it
allows disconnected ideas, views, facts, perspectives, experiences, expertise, and
information to be connected, shared openly, and argued. From above rationale,
knowledge sharing may mediate the internal CSR-organizational creativity path.
Nevertheless, similar to affective commitment, the question of whether knowledge
sharing fully or partially mediates the relationship needs more investigation.
Benefits of ICSR Practices:
CSR has contributed substantially ever since its discussion commences. As internal
CSR focuses on employees, it builds strong bonding between an organisation and
its employees. Internal CSR practices such as employee development, health and
safety policies, creating a motivating environment in organisations; reduce the
organisation's operation costs and enhance its productivity. Internal CSR practices
also increase employee motivation and satisfaction as employees are aware that
their organisations are taking steps to ensure their well-being. This reduces
employee absenteeism and increase employees performance.
The intangible benefits arise from increased employee motivation and satisfaction
as a result if internal CSR practices, give organisation the competitive advantage in
the agile business environment. Organisations could retain and sustained the talent
workforce to create heterogeneity organisation resource in the human resource
perspective. The advantage creates a network of association, trust and reciprocity
among the members of the organisation, which can create an unbeatable workforce
for it to sustain organisational performance and competitive advantage.
The involvement in employee-focused CSR activities above the regulatory
obligations such as laws, professional codes and requirements organisations are
lead to a wide range of benefits too. These benefits reduce the internal costs of
organisations because they allow them to enhance the organisation’s ability by way
of maintaining good levels of staff attraction and retention, increased and enhanced
employee morale, which overall, increase performance of engaged employees.
To simplify, internal CSR practices create shared value between employees and
organisation and seeking win-win outcomes with a direct positive impact on the
organisation productivity. This explain the reason for internal CSR is perceived as
the powerful “internal marketing” tool used to acquire and retain employees. This
perception holds just as organisations succeed by fulfilling the needs of their
employees by satisfying their needs through a competitive salary, reasonable
benefits packages and job responsibilities. Thus, reduces employee turnover,
whereby employee turnover typically costs organisations the equivalent of one to
two times the salary of the departing employee (and up to two to three times the
salary for executive positions), which can lead to enormous costs for organisations
with high turnover.