Explain with suitable examples the ethical issues in corporate governance.

Core ethical issues

• Agency conflict: managers treat the firm as a personal vehicle while shareholders, depositors, or the taxpayer carry the risk.
• Board capture: “independent” directors who do not dissent, related-party deals, and family control without minority protection.
• Disclosure failure: cooked books, hidden debt, and earnings that exist only in a slide.
• Auditor and rating capture: the watchdog paid by the watched.
• Insider trading and unequal information.
• Labour, safety, and environment treated as externalities to be dumped on a town.
• CSR as advertising while the core business bribes or pollutes.
• Political funding and revolving doors that buy policy.

Examples

• Satyam (2009): inflated cash and a chairman’s confession showed that a celebrated board and auditor can still miss a lie; governance failed as truth-telling.
• IL&FS: a systemically important group hid stress until a cascade hit mutual funds and infrastructure; complexity was used as fog.
• Punjab National Bank–Nirav Modi: letters of undertaking without the core banking trail; internal control and ethical silence of a branch.
• Volkswagen diesel software: deceit of regulators and buyers as a business model.
• ICICI–Videocon loan controversy: the appearance that a CEO’s family interest sat too close to a large loan; conflict, even when courts later parse facts, is itself a governance wound.
• NSE co-location episode: a public-utility market allegedly giving some brokers a time edge; fairness of the market is an ethical good.
• Kingfisher / large wilful default stories: personal brand and public banks’ money, with weak recovery ethics.

What good ethics looks like

• Companies Act, 2013: independent directors, audit committee, and Section 135 CSR as duties, not posters.
• SEBI LODR: related-party and disclosure rules for listed firms.
• Whistle-blower access to the board, rotation of auditors, and a culture where a junior can stop a fake invoice.

Public link

• Banks, pension money, and air and water mean corporate ethics is not a private club issue; the civil servant as regulator or as PSU director is inside the same story.