Relationship between Corporate Governance and Business Ethics

Are they the same? No. Are they related? Inseparable.

The Intersection

1. Ethics without Governance: Good intentions, but chaos.
   • Example: An honest CEO who doesn't have a Board to check his math errors or strategic blunders.
2. Governance without Ethics: "Compliance Culture".
   • Example: Enron. They had all the committees, codes, and meetings. But the intent was to defraud.
3. Ethics + Governance: Sustainable Success.
   • Values are codified into Rules.
   • Rules are enforced with Values.

Summary: The Feedback Loop

• Ethics creates the Culture.
• Culture drives Behavior.
• Governance monitors Behavior.
• Governance reinforces Ethics (by punishing bad behavior).

Conclusion of Unit 1

We have established that business is not just about money (Profit Maximization). It is a social institution.

• Ethics helps us decide What to do.
• Governance ensures We actually do it.

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