Answer: Corporate Governance represents the value framework, the ethical framework and the moral framework under which business decisions are taken. In other words, the investors want to be sure that not only their capital is handled effectively and adds to the creation of wealth, but the business decisions are also taken in a manner which is not illegal or does not involve moral hazards. In recent years, corporate governance has received increased attention because of high profile scandals involving abuse of corporate power in some cases, like the IL&FS, Satyam Fraud, Kingfisher Airlines Fraud etc. As a part of ethical corporate governance, it must uphold the rule of law, transparency, accountability and protection of public interest in the management of a company’s affairs in the prevailing global and competitive market milieu. Ethical governance necessitates not only structure but also the right spirit:

• Ethical governance does not only relate to how the board is constituted and how it performs its role. It encompasses issues of board composition and structure, the board’s remit and the spirit in how it was carried out and the framework of the board’s accountability to its stakeholders. The spirit also includes how credible the appointed board is in drawing inspiration from the company and stakeholders. The ethics of the board members, or the managing director, directly channels into the governance of the company.
• An effective corporate governance regime not only includes structural provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of organizations, but also the spirit, which lies in how quickly action is initiated and processes are invoked for unbiased enquiries and necessary curative measures taken.
• A right combination of spirit and structure would include ensuring that a code of ethics is not only developed but also endorsed by the board of directors. Most Corporate Governance codes must provide guidance on the process of adopting ethical governance, what parameters decide ethical performances, outline processes and protocols to be followed, guidelines related to kickbacks etc. For instance, the most comprehensive recommendations on the ethics of governance are to be found in the Narayana Murthy Committee report on Corporate Governance.
• In making ethics work in an organization, it is important that there is synergy between vision statements, mission statements, core values, general business principles and code of conduct. An effective ethics programme requires continual reinforcement of strong values through corresponding structures in an organization.

Thus, the questions of ethics, or the right way to run a business, are inherent in all aspects of corporate governance. Ethical choices are relevant within the core business strategies that the boards pursue and the way that directs the business as a whole to achieve them.