Learning Activity #1 This week\'s chapter explains the role of boards of directo
ID: 358174 • Letter: L
Question
Learning Activity #1
This week's chapter explains the role of boards of directors in the corporate governance of organizations such as large, publicly traded corporations, focusing on their ethical behavior and social responsibility performance.
1. Conflict of Interest was identified as a potential ethical issue that may confront a board member of a corporation. For this exercise:
a) Discuss two ways a corporate board member might engage in inappropriate ethical behavior, and explain why each is a problem for the company and shareholders.
b) Describe how these situations could have been avoided?
2. Discuss the difference between Conflict of Interest and Moral Reasoning.
Explanation / Answer
1.
a)
i) An unethical behavior by a board member would be if he takes advantage of its position in terms of salaries and perks, misappropriation of company assets, self-dealing, appropriating corporate opportunities, insider trading, and neglecting board work.
If a board member is found accepting bribes or working with competing company, it can result in conflict between the company and board member because it will cause loss to the company as important information is being disclosed to rival company, so it will cause losses to shareholders too.
ii) conflicts arise when a board member’s duty of loyalty to stakeholders or the company is compromised. This would happen when certain board members exercise influence over the others through compensation, favors, a relationship, or psychological manipulation.
some independent directors form a distinct stakeholder group and only demonstrate loyalty to the members of that group. They tend to represent their own interest rather than the interests of the companies.
b)
The first situation can be avoided by signing a code of conduct at the time of appointment and keeping a check on board members from time to time
In the second situation, directors can determine whether they have been overly influenced is by asking themselves, “Have I been influenced or manipulated in order to agree with others?”
Boards should comprise a greater number of independent directors to ensure that business decisions are not disproportionately influenced by powerful stakeholders.
2.
Moral reasoning applies critical analysis to specific events to determine what is right or wrong, and what people ought to do in a particular situation.
A conflict of interest arises when what is in a person’s best interest is not in the best interest of another person or organization to which that individual owes loyalty.
Example of moral reasoning include if a person thinks whether I should tell the truth or lie?
Conflict of interest would be if an employee helps himself but hurt the employer by purchasing bad quality products for company's use.
Our moral reasoning is influenced by intuitive or emotional reaction while conflict of interest arises when one causes others harm or disloyalty knowingly or unknowingly for his individual gain or benefit.
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