Revision summary
Corporate governance ethics is about who controls the firm and whether that control is truthful. Main failures: agency conflict, captured boards, fake accounts, auditor silence, insider edges, and dumped harm. Satyam, IL&FS, PNB letters of undertaking, and Volkswagen deceit are teaching cases. Law (Companies Act, SEBI) is hardware; a junior who can stop a fake invoice is software. PSU and bank money make this a public ethics file, not only a business-school file.
Model answer
Introduction
Corporate governance is how a company is directed and controlled. Ethical issues appear when directors, managers, or auditors use that control for private gain, opacity, or harm to workers, investors, and the public.
Body
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.
Flow diagram
flowchart TD B[Board] --> T[Truth to investors] M[Managers] --> C[Conflict risk] A[Auditors] --> T C --> F[Failure] T --> G[Trust]
Conclusion
Ethical issues in corporate governance are conflicts of interest, false books, captured watchdogs, and harm dumped on the public. Satyam, IL&FS, PNB, and diesel deceit are reminders that a logo is not a conscience.
Quick related
Students also ask
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What steps should be taken according to you to prevent corruption in society? Explain.
Next question in the 2022 paper (Q18). View answer →
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Is CSR the same as ethical governance?
No. CSR can be a budget line. Ethical governance is how profit is made, disclosed, and shared with risk-bearers.
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Does a family firm cannot be ethical?
It can, if minority rights, related-party deals, and succession are transparent. Family control is a risk, not an automatic sin.
Same topic · past papers
UPPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2025 · Q5 · UPGS4 · 8 marks
How would you assess the desirability of Gandhian view regarding ends and means in the context of public fund management? Discuss with suitable examples. -
2025 · Q19 · UPGS4 · 12 marks
What do you understand by "moral integrity" and "professional efficiency" in the context of corporate governance in India? Discuss with suitable examples. -
2025 · Q20 · UPGS4 · 12 marks
You hold a responsible position in district. One day in the morning you received a call from the school of your 11-year-old son that you are required to come and meet the principal. You proceed to the school and find your son in the principal's office. The principal informs you that your son had been found wandering aimlessly in the ground during the time classes were in progress. The class teacher further informs you that your son has lately become a loner and did not respond to the questions in the class, he has also been unable to perform well in the football trials held recently. You bring your son back from the school and in the evening along with your wife try to find out the reasons for your son's changed behaviour. After repeated cajoling your son shares that some children had been making fun of him in the class as well as in the WhatsApp group of the student by calling him stunted, stupid and frog. He tells you the names of a few children who were the main culprits but pleaded with you to let the matter rest. After a few days, during a sporting event, where you and your wife have gone to watch your son play, one of your colleague's son shows you a video in which students have caricatured your son. Further, he also points out to the perpetrators who were sitting in the stand. You purposefully walk past them with your son and go home. Next day you find on social media, a video denigrating you, your son and even your wife, stating that you were engaged in physical bullying of children on the sports field. The video became viral on social media. Your friends and colleagues began calling you to find out the details. One of your juniors advised you to make a counter video giving the background and explaining that nothing had happened on the field. You, in turn, posted a video which you had captured during the sports event, identifying the likely perpetrators who were responsible for your son's predicament. You have also narrated what has actually happened in the field and made attempts to bring out the adverse effects of the misuse of social media. (a) Based on the above case study, discuss the ethical issues involved in the use of social media. (b) Discuss the pros and cons of using social media by you to put across facts to counter the fake propaganda against your family. -
2023 · Q16 · UPGS4 · 12 marks
What are the major principles of public life? Discuss with suitable examples. -
2021 · Q18 · UPGS4 · 12 marks
Discuss the factors which influence the formation of an individual’s attitude towards social problems with the help of suitable examples.
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