A STRATEGY FOR AMERICAN INNOVATION, GROWTH AND SUSTAINABLE DEVELOPMENT.''

A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs

"History should be our guide.  The United States led the world’s economies in the 20th century because we led the world in innovation.  Today, the competition is keener; the challenge is tougher; and that is why innovation is more important than ever. It is the key to good, new jobs for the 21st century.  That’s how we will ensure a high quality of life for this generation and future generations. With these investments, we’re planting the seeds of progress for our country, and good-paying, private-sector jobs for the American people."

-President Barack Obama, August 5, 2009

SEPTEMBER 2009

EXECUTIVE SUMMARY

Since taking office, President Obama has taken historic steps to lay the foundation for the innovation economy of the future. The Obama Innovation Strategy builds on well over $100 billion of Recovery Act funds that support innovation, additional support for education, infrastructure and others in the Recovery Act and the President’s Budget, and novel regulatory and executive order initiatives. It seeks to harness the inherent ingenuity of the American people and a dynamic private sector to ensure that the next expansion is more solid, broad-based, and beneficial than previous ones. It focuses on critical areas where sensible, balanced government policies can lay the foundation for innovation that leads to quality jobs and shared prosperity. It has three parts:

1. Invest in the Building Blocks of American Innovation. We must first ensure that our economy is given all the necessary tools for successful innovation, from investments in research and development to the human, physical, and technological capital needed to perform that research and transfer those innovations.

• Restore American leadership in fundamental research. President Obama implemented the largest increase in basic R&D in history, which will lay the foundation for new discoveries and new technologies that will improve our lives and create the industries of the future.
   
• Educate the next generation with 21st century knowledge and skills while creating a world-class workforce. President Obama has proposed initiatives to dramatically improve teaching and learning in K-12 education, expand access to higher education and training, and promote student achievement and careers in STEM (Science, Technology, Engineering, and Mathematics) fields.
   
• Build a leading physical infrastructure. Through the Recovery Act, the President has committed to a historic investment in our nation’s roads, bridges, transit, and air transportation networks to connect our people and our businesses.
   
• Develop an advanced information technology ecosystem. For America to lead the world in the technologies of the future, President Obama believes that all Americans must have affordable 21st century access to the Internet.
   

2. Promote Competitive Markets that Spur Productive Entrepreneurship. It is imperative to create a national environment ripe for entrepreneurship and risk taking that allows U.S. companies to be internationally competitive in a global exchange of ideas and innovation. Through competitive markets, innovations diffuse and scale appropriately across industries and globally.

• Promote American exports. Exports will play an increasingly critical role in the future of the American economy, and the President’s plans will ensure fair and open markets for American producers.
   
• Support open capital markets that allocate resources to the most promising ideas. Open capital markets are one of the greatest strengths of the American economy, and the President is committed to making sure these markets work.
   
• Encourage high-growth and innovation-based entrepreneurship. The Obama Administration believes it is essential that entrepreneurs continue to create new and vibrant businesses that lead to new jobs and economic growth.
   
• Improve public sector innovation and support community innovation. Innovation must occur within all levels of society, including the government itself. The Obama Administration supports the broad adoption of community innovations that work and is committed to making government perform better and more efficiently, including by working more openly.

3. Catalyze Breakthroughs for National Priorities. There are certain sectors of exceptional national importance where the market is unlikely to produce the desirable outcomes on its own. These include developing alternative energy sources, reducing costs and improving lives with health IT, and manufacturing advanced vehicles. In these industries where markets may fail on their own, government can be part of the solution.

• Unleash a clean energy revolution. Historic investments in smart grid, energy efficiency, and renewable technologies like wind, solar, and biofuels will help unleash a wave of ingenuity and progress that creates jobs, grows our economy, and ends our dependence on oil.
   
• Support advanced vehicle technologies. Record battery grants announced last month are part of a concerted effort to place the U.S. on the cutting edge of advanced vehicle technology, from electric cars to biofuels to advanced combustion.
   
• Drive innovations in health care technology. The President’s health IT initiative is designed to drive technological innovation that will help prevent medical errors, improve health care quality, reduce costs, and cement U.S. leadership of this emerging industry.
   
• Harness science and technology to address the "grand challenges" of the 21st century. The President’s commitment to science and technology will allow the United States to set and meet ambitious goals, such as educational software that is as effective as a personal tutor and smart anti-cancer therapeutics that deliver drugs only to tumor cells.

I –PROBLEMS WITH THE BUBBLE-DRIVEN GROWTH OF THE PAST
A strong economy, but too reliant on precarious, bubble-driven growth, is unsustainable
Despite the American economy’s historic strength, our economic growth has rested for too long on an unstable foundation. Explosive growth in one sector of the economy has provided a short-term boost while masking long-term weaknesses. In the 1990s, the technology sector climbed to new heights. The tech-heavy NASDAQ composite index rose over 650 percent between 1995 and 2000, but then lost two-thirds of its value in a single year, triggering a painful recession.
After the tech bubble burst, a new one emerged in the housing and financial sectors. During the course of the decade, the formula for buying a house changed: instead of saving to buy their dream house, many Americans found they could take out loans that by traditional standards their incomes could not support. The financial sector willingly propped up real estate prices, funneling money into real estate and finding innovative ways to spread the credit risk throughout the economy. From 2000 through 2006, house prices doubled while the financial sector grew to account for fully 40 percent of all corporate profits.
This too proved to be unsustainable. House prices lost a quarter of their value in two and a half years. The housing decline and accompanying stock market collapse wiped out over $13 trillion in wealth in 18 months. The bursting of the bubble based on inflated home prices, maxed-out credit cards, over-leveraged banks, and overvalued assets wreaked havoc on the real economy, triggering what is expected to be the longest and deepest recession since World War II and driving the unemployment rate to its highest level in a quarter century.
This type of growth isn’t just problematic when the bubble bursts, it is not entirely healthy even while it lasts. Between 2000 and 2007 the typical working-age household saw their income decline by nearly $2,000. As middle-class incomes sank, the incomes of the top one percent skyrocketed. This phenomenon has a number of causes, but among them were the rising asset prices and the proliferation of financial sector profits.
A short-term focus has neglected essential fundamental investments
A short-term view of the economy masks underinvestments in essential drivers of sustainable, broadly-shared growth. It promotes temporary fixes over lasting solutions. This is patently clear when looking at how education, infrastructure, healthcare, energy, and research – all pillars of lasting prosperity – were ignored during the last bubble.
Too many children are not getting the world class education they deserve and need to thrive in this new innovative economy.

• Despite research documenting that quality matters greatly in early childhood education settings and that investments in high-quality early learning have the highest potential rates of return, the Federal government lacks the level of investment needed to transform the quality of, and enhance access to, early education for our youngest children. Studies show a school readiness gap as early as kindergarten –and as wide as 60 points –between children from the highest socio-economic background and their less affluent peers.
   
• We have neglected to provide our children with the rigorous curriculum and instruction needed to prepare them for college and career. By the end of high school, African American and Latino students have math and reading skills equivalent to those of 8th grade white students. Across the nation, the students with the greatest need for a qualified and effective teacher are also exactly those students most likely to be taught by teachers who lack sufficient background in the subject they teach.
   
• The problems persist when students look toward continuing their education past high school. The average tuition and fees at public, four-year institutions rose 26 percent between the 2000-2001 school year and the 2008-2009 school year. As a result, while 94 percent of high school students in the top quintile of socioeconomic status continue on to post-secondary education, barely half of those in the bottom quintile do so.
   
• Given rising costs of four-year institutions, many Americans are turning to community colleges for quality higher education. Yet the Federal government has historically under-invested in community colleges, giving them one-third the level of support per full-time equivalent student that it gives to public four-year colleges.
   

Our physical and technological infrastructure has been neglected, threatening the ability of American businesses to compete with the rest of the world.

• The American Society of Civil Engineers grades our country’s physical infrastructure as a "D." In 2007, drivers on our clogged highways and streets experienced over 4.2 billion hours of delay and wasted 2.8 billion gallons of fuel.
   
• The United States once led the world in broadband deployment, but now that leadership is in question. Wireless networks in many countries abroad are faster and more advanced than our own.
   
• Our electrical grid is still constructed around the same model employed immediately after World War II. Power interruptions and outages cost American individuals and businesses at least $80 billion each year.

Health care costs have been allowed to spiral out of control, squeezing individuals and businesses at a time when they are feeling pressure on all sides.

• Since 2000, health insurance premiums have increased about 60 percent, 20 times faster than the average worker’s wage.
   
• At the same time, the number of uninsured Americans has jumped by 7 million to 46 million.
   
• Overall, healthcare is consuming an increasing amount of our Nation’s resources. In 1970, healthcare expenditures were 7 percent of GDP; now they are 16 percent of GDP; at this rate they will hit 20 percent of GDP by 2017.
   

Our economy has remained dependent on fossil fuels, exposing consumers and businesses to harmful price shocks, threatening our economic and national security, and resulting in a missed opportunity to lead the clean energy economy of the future.

• Between 1999 and 2004, the production tax credit for renewable energy was allowed to expire on three separate occasions. In each subsequent year (2000, 2003, and 2004) new wind capacity additions in the U.S. fell by more than 75 percent from the year before.
   
• Instead of focusing on finding ever more fossil fuels, other countries made aggressive investments in renewable energy, creating jobs and growing domestic energy sources.
   

Furthermore, we have compounded the problem by ignoring essential investments in high-technology research that will drive future growth.

• Over the last four decades, Federal funding for the physical, mathematical, and engineering sciences has declined by half as a percent of GDP (from 0.25 percent to 0.13 percent) while other countries have substantially increased their research budgets.

Despite this underinvestment in key drivers of growth, the American economy remains the most dynamic, innovative, and resilient in the world. We still have world-class research universities, flexible labor markets, deep capital markets, and an energetic entrepreneurial culture. Americans are twice as likely as adults in Europe and Japan to start a business with the intention of growing it rapidly. We must redouble our efforts to give our world-leading innovators every chance to succeed. We cannot rest on our laurels while other countries catch up.
II –A VISION FOR INNOVATION, GROWTH, AND JOBS
Innovation is Necessary to Fuel Our Recovery
Amidst the worst recession since the great depression, the Administration’s initial economic objective has been to rescue our economy. We have taken – and will continue to take – bold and aggressive steps to stabilize the financial system, jumpstart job growth, and get credit flowing again.
But as the economy begins to stabilize, we must move on from rescue to recovery. Reflecting on the lessons of the past, we must rebuild a new foundation for durable, sustainable economic growth.
Innovation and investment must be a pillar of this new foundation. The basis of competition and the nature of the economy have changed, and we must change with them. Twenty years ago, the United States was losing domestic manufacturing firms and was competing with other countries to sell its goods. Now, manufacturing and services have merged, knowledge is a key factor of production, and services we thought could only be provided in particular countries are available anywhere. We need new ideas to provide Americans with new jobs, new services that take advantage of our globally interconnected world, and new skills that improve our manufacturing capabilities (See Box 1). Other countries understand that innovation is fundamental to their economic well-being and are finding new ways to advance their innovation agendas. We can be even more ambitious, even more successful, and even more focused on building the essential sidewalks of innovation.
Box 1. The Importance of a National Innovation Strategy
Fundamentally, innovation is the development of new products, services, and processes. In our increasingly interconnected and globally competitive world economy, unleashing innovation is an essential component of a comprehensive economic strategy. As global competition erodes the return to traditional practices, the key to developing more jobs and more prosperity will be to create and deploy new products and processes. Put another way, the greatest job and value creators of the future will be activities, jobs, and even industries that don’t exist yet today. The countries that catalyze their development will reap the greatest rewards.
Innovation is essential for creating new jobs in both high-tech and traditional sectors. In recent years, innovation has led to new jobs in high-tech and advanced manufacturing sectors as diverse as aerospace, nanotechnology, life sciences, and alternative energy. At the same time, innovations ripple through the economy, creating jobs for workers installing broadband networks, manufacturing biopharmaceuticals, and building advanced infrastructure.
A more innovative economy is a more productive and faster growing economy, with higher returns to workers and increases in living standards. America’s average standard of living will double every 23 years if innovation catalyzes annual productivity growth of three percent, but it will take 70 years if productivity growth is only one percent. Currently, the U.S. enjoys a significant productivity advantage: one study calculates that the average productivity advantage of the United States over all other OECD countries as a group accounted for a full three quarters of the per capita income advantage the U.S. enjoys. Continued innovation in products, business practices, and technology is essential for extending our productivity gains.
Innovation is also crucial for maintaining the dynamism and resilience of our economy. Future challenges are impossible to predict, but what is certain is that an economy better able to switch gears, innovate solutions, and re-deploy old activities, jobs, and industries will be least susceptible to adversity.
Finally, innovation is itself the key to meeting some of the greatest challenges facing our nation and the world. It will be pivotal to ending our dependence on fossil fuels, helping Americans live longer, healthier lives, and protecting our freedom and our troops both at home and abroad.
Innovation is the key to global competitiveness, new and better jobs, a resilient economy, and the attainment of essential national goals. A strategy is clearly needed to direct our government’s funding and regulatory decisions in order to capture the innovation opportunity.
Our Vision for American Innovation
Our vision of America’s future is one where prosperity is built by skilled, productive workers and sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovation and discoveries that will shape the 21st century.
Innovation will create new jobs and catalyze broadly shared economic growth. The lives of every American will improve as innovations diffuse and scale throughout the economy, leading to breakthroughs in health, education, energy, transportation, information, and much more. We can set and meet grand challenges such as developing solar cells as cheap as paint, building anti-cancer drugs that spare healthy cells, and fitting the contents of the library of congress on a device the size of a sugar cube.
Sustained innovation will drive a dynamic evolution in the nation’s workforce towards better paying jobs. American workers will continue to lead across a broad range of industries and sectors old and new, and will prosper accordingly. Workers making innovation-induced shifts to new jobs within and across industries will receive the transition and training support necessary to ensure no one is left behind.
The American economy is and will remain highly diversified. To a large extent these jobs of the future will be spread across major industries in a similar distribution to today’s economy. As the Council of Economic Advisors described in a July report, one forecast that uses the most recent data available to project employment growth finds that the distribution of jobs across industries in the economy of 2020 will strongly resemble the distribution of 2008. Health and education services will see the most significant growth, while there will be proportionally fewer jobs in business and financial services as well as retail trade, in part because the growth in consumer spending is expected to slow. But by and large the picture is similar to today.
Of course, such forecasts are necessarily imperfect. They cannot capture the growth in industries that may not yet exist. For example, in the late 1980s there were no models that predicted the rapid growth of Internet-based information and computing services that now employ several million workers. Innovation in this sector –initially catalyzed and continuously supported by government investment –has made key contributions to our economy. Some experts estimate that the Internet adds as much as $2 trillion to annual GDP, over $6,500 per person.
Box 2. The Transformation of the Semi-Conductor Industry
In the 1980s, the U.S. semiconductor industry lost its market share to Japanese competitors. But then it innovated its way back, replacing the old jobs in the dynamic-random-access-memory (DRAM) business with jobs producing microprocessors, digital signal processors, microcontrollers, and automotive semiconductors. Companies like Intel, Texas Instruments, and Motorola invested and succeeded, creating better jobs for hundreds of thousands of Americans. Throughout this shift to higher-value-added jobs, the total number of U.S. jobs in the industry held constant.
Another shortcoming of these models is that they fail to capture many of the most important innovations and developments occurring in sub-industries. Yet the U.S. has a history of innovating towards higher-wage jobs within industries. The experience of industries as diverse as semi-conductors and boatbuilding illustrate this point amply (see Boxes 2 and 3).
We see an American future where this process of innovation in next-generation technologies and business ideas becomes pervasive, diffusing throughout the economy and generating better jobs and improved lives for all Americans. It is imperative that we turn this vision into a reality.
Box 3. Boat Builders along Maine’s Eastern Coast
The Maine boat building industry is an example where innovation-led transformations occur on a smaller, more local scale. Maine boat builders have a 400-year heritage of skilled craftsmanship, but technological change was threatening to leave them behind. Instead, the boat builders have enthusiastically embraced cutting edge innovation in advanced composite technologies, replacing old jobs with better jobs in the same industry. Today, the Maine boat building industry produces a highly regarded product line that includes racing yachts, pleasure craft, workboats, and military vessels. As a result, wages in Maine’s boat building industry have risen 19 in percent in real terms over the last decade while employment has risen 12 percent.
III –THE APPROPRIATE ROLE FOR GOVERNMENT
Framework for Government Involvement
While it is clear that a new foundation for innovation and growth is needed, the appropriate framework for government involvement is still debated. Some claim that the laissez-faire policies of the last decade approach the right strategy, and that the recent crisis was the result of too much rather than too little government support. This view calls for cutting government regulation and gutting public programs, hoping the market will take care of the rest.
However, the recent crisis illustrates that the free market itself does not promote the long-term benefit of society, and that certain fundamental investments and regulations are necessary to promote the social good. This is particularly true in the case of investments for research and development, where knowledge spillovers and other externalities ensure that the private sector will under-invest –especially in the most basic of research.
Another view is that the government must dominate certain sectors, protecting and insulating those areas thought to be drivers of future growth. This view calls for massive, sustained government investment supported by stringent oversight, dictating the type and direction of both public and private investments through mandates and bans.
But historical experience in this country and others clearly indicates that governments who try to pick winners and drive growth too often end up wasting resources and stifling rather than promoting innovation. This is in part due to the limited ability of the government to predict the future, but also because such exercises are distorted by lobbyists and rent seekers, which are more likely to favor backward looking industries than forward looking ones. In the United States such failures at picking winners and losers includes most prominently the Synthetic Fuel Corporation, a $20 billion Federal project in the 1980s that failed to provide the promised alternative to oil.
Therefore, we reject both sides of this unproductive and anachronistic debate. The true choice in innovation is not between government and no government, but about the right type of government involvement in support of innovation. A modern, practical approach recognizes both the need for fundamental support and the hazards of overzealous government intervention. The government should make sure individuals and businesses have the tools and support to take risks and innovate, but should not dictate what risks they take.
We propose to strike a balance by investing in the building blocks that only the government can provide, setting an open and competitive environment for businesses and individuals to experiment and grow, and by providing extra catalysts to jumpstart innovation in sectors of national importance. In this way, we will harness the inherent ingenuity of the American people and a dynamic private sector to generate innovations that help ensure the next expansion is more solid, broad-based, and beneficial than previous ones.
Examples of Successful Innovation Programs
We have been successful in the past, and we can be successful in the future. Take the example of DARPA, the historically innovative central research and development organization of the Defense Department. DARPA is tasked with maintaining U.S. technological superiority, and has a history of creating new industries in information technology and advanced manufacturing (see Box 4).
Box 4. DARPA’s Successful Innovations
Thirty years ago, DARPA supported the creation of the internet’s predecessor, ARPANET, despite discouragement from the private sector. Today, over 1.6 billion people use the Internet. DARPA’s innovative research has created entirely new capabilities for the U.S. military such as stealth aircraft, GPS, the M-16 assault rifle, and night vision goggles. It has provided the foundation for new industries like optical networking, supercomputers, and design tools for computer chips. DARPA’s commitment to high-risk, high-return research will help ensure America is prepared to meet the 21st century’s national defense challenges while also catalyzing breakthroughs in technological innovations that will create new industries and improve people’s lives.
Government support has also helped push America to the cutting edge in emerging fields such as nanotechnology, which involves engineering materials and devices on the atomic and molecular level (see Box 5).
The Administration is committed to strengthening and focusing investments in our world-class nanotechnology research and development pipeline; targeting support for nanotechnology transfer and facilitating commercial start-ups; and cross-disciplinary training and education of scientists and engineers in the new-generation workforce. This will enable us to capitalize on our investments and stay at the cutting edge of this rapidly growing technology.
This pattern of government support driving innovations that improve lives and catalyze industries is pervasive. Of the 88 U.S. entities that received "R&D 100 Awards" as the nation’s best innovations in 2006, 77 had received government support. We must build on this record of successful support to build a new foundation for innovation and growth.
Box 5. The Growing Fields of Nanotechnology and Personalized Medicine
A nanometer is a billionth of a meter – or one hundred thousand times smaller than the diameter of a human hair. Nanotechnology promises to transform multiple industries: capturing and storing clean energy, developing next-generation computer chips, early detection of diseases, smart anti-cancer therapeutics that deliver drugs only to tumor cells, and enabling all-new approaches to a wide range of manufacturing activities, among many other examples. While the commercial impact of nanotechnology to date has been limited primarily to nanomaterials applied to a range of consumer goods from healthcare and food products to textiles, automotive composites and industrial coatings, nanotechnology innovation is beginning to accelerate. The ten-year history of U.S. leadership in fundamental nanotechnology research and development under the National Nanotechnology Initiative has laid the crucial groundwork for developing commercial applications and scaling up production, creating demand for many new nanotechnology and manufacturing jobs in the near-term.
Nanotechnology is being applied in the developing medical engineering and personalized medicine industries. The practice of tailoring medical treatment to an individual’s unique genetic make-up makes not only treatment, but early detection and prevention, more effective. It also reduces medical costs in cases where expensive treatments are unnecessary or futile. Researchers are currently experimenting with nanotechnology to develop drugs capable of targeting a disease without triggering the body’s natural immune response.
The federal government’s support has been essential in the development of this technology and this industry. The NIH, a major supporter of medical research, saw its budget increase 163% from 1993 to 2003 before stagnating until this year. President Obama has reversed the recent trend with $10 billion in additional NIH funding in the Recovery Act and a pledge for more sustained increases going forward. This funding will help these emerging industries flourish.
IV –A STRATEGY FOR AMERICAN INNOVATION
For our communities and for our country to thrive in this new century, we need to harness the spirit of innovation and discovery that has always moved America forward. We must foster innovation that will lead to the technologies of the future – which will in turn lead to the industries and jobs of the future.
President Obama has already taken historic steps to lay the foundation for the innovation economy of the future. In the Recovery Act alone the President committed over $100 billion to support groundbreaking innovation with investments in energy, basic research, education and training, advanced vehicle technology, innovative programs, health IT and health research, high speed rail, smart grid, and information technology (see Figure 1). His commitment also includes broader support in the Recovery Act and in his FY2010 budget on initiatives from education to infrastructure. The President’s commitment is not just limited to more government funding, but extends to important regulatory and executive order initiatives such as patent reform, coordinated fuel efficiency standards, net neutrality, permit policy for offshore wind farms, and naming the first ever Chief Technology Officer of the U.S. Government.
Figure 1. Innovation Funding in the Recovery Act

These investments and initiatives are part of The Obama Innovation Strategy, which focuses on critical areas where sensible, balanced government policies can lay the foundation for innovation that leads to quality jobs and shared prosperity. It has three parts:
1. Invest in the Building Blocks of American Innovation. We must first ensure that our economy is given all the necessary tools for successful innovation, from investments in research and development to the human, physical, and technological capital needed to perform that research and transfer those innovations.
2. Promote Competitive Markets that Spur Productive Entrepreneurship. It is imperative to create a national environment ripe for entrepreneurship and risk taking that allows U.S. companies to be internationally competitive in a global exchange of ideas and innovation. Through competitive markets, innovations diffuse and scale appropriately across industries and globally.
3. Catalyze Breakthroughs for National Priorities. There are certain sectors of exceptional national importance where the market is unlikely to produce the desirable outcomes on its own. These include developing alternative energy sources, reducing costs and improving lives with health IT, and manufacturing advanced vehicles. In these industries where markets may fail on their own, government can be part of the solution.
1. INVEST IN THE BUILDING BLOCKS OF AMERICAN INNOVATION
A. Restore American Leadership in Fundamental Research
President Obama recognizes the fundamental role of government in fostering groundbreaking scientific and technological breakthroughs, and has committed resources and energy to ensure America leads the world in the innovations of the future.

• Enact the Largest R&D increase in our nation’s history. With $18.3 billion in research funding, the Recovery Act is part of the largest annual increase in research and development in America’s history.
   
• Double the R&D budget of key science agencies. The President’s Budget proposed to double the research budgets of three key science agencies: the National Science Foundation, the Department of Energy's Office of Science, and the National Institutes of Standards and Technology. These investments will expand the frontiers of human knowledge and create the foundation for the industries and jobs of the future, such as the convergence of bio, info, and nanotechnologies. The Obama Administration will increase the impact of this investment by providing more support for high-risk, high-return research, for multidisciplinary research, and for scientists and engineers at the beginning of their careers.
   
• Invest three percent of GDP in R&D. The President has proposed a goal that as a country, we invest more than three percent of our GDP in public and private research and development. This will exceed the level achieved at the height of the space race.
   
• Make the R&E tax credit permanent. The President’s Budget includes the full $75 billion cost of making the research and experimentation tax credit permanent. This will provide businesses with the greater confidence they need to invest, innovate, and grow.

B. Educate the Next Generation with 21st Century Knowledge and Skills While Creating a World-Class Workforce
America's high levels of education were an important contributor to rising living standards in recent years. For America to continue to lead the world in science and technology innovation, it must have the most knowledgeable and skilled workers in the world.

• Reform public schools to deliver a complete and competitive education. The President is committed to an education system that will prepare every child for success in a new, global economy. The Obama Administration is supporting the improvement of teaching and learning to ensure that students master world-class knowledge and critical skills for the 21st century; enhance and reward success in the teaching profession; drive innovation in America’s classrooms; and expand successful models to improve outcomes for middle- and high-school students. The President’s Race to the Top in America’s schools will deliver a historic investment and challenge the states to design and enforce higher and clearer standards, attract and keep outstanding teachers in the classroom, and use effective approaches to turn America’s lowest-performing schools around.
   
• Restore America to first in the world in college graduates. Colleges, universities, and their students are bedrocks of American innovation. President Obama has called for restoring America to first in the world in the proportion of college graduates by 2020. Between the Recovery Act and the 2010 budget, the Administration is seeking nearly $200 billion over the next decade for scholarships and tax credits to help students complete college. The Obama Administration is investing in innovative strategies to support college persistence, simplify the student aid application and reform the student loan program to shift billions in wasteful spending toward greater help for students to reach and complete college. The Administration has been actively working with Congress to fund these priorities by eliminating waste in the student aid program.
   
• Improve America’s Science, Technology, Engineering and Math (STEM) education. STEM education is particularly important to America’s future scientific progress and economic growth. As part of his effort to promote innovation in K-12 education, the President has challenged governors, philanthropists, scientists, engineers, educators and the private sector to join with him to dramatically improve achievement in STEM subjects. The President’s Race to the Top fund aims to reinvigorate the teaching of STEM in America’s classrooms and support advanced learning in these subjects, especially for women, girls and other underrepresented groups. The President is also committed to using the $4 billion Race to the Top fund to encourage states to put STEM at the center of their reform efforts. Finally, the Recovery Act provided a down payment toward the goal of tripling the number of NSF Graduate Research Fellowships in science and engineering.
   
• Develop new career pathways in community college programs. Given the innovation and advances coming in future years, jobs requiring at least an associate’s degree are projected to grow twice as fast as those requiring no college experience. President Obama has proposed the American Graduation Initiative to produce 5 million more community college graduates by 2020, a key part of his college completion goal. The initiative would invest in promising reforms to raise graduation rates, tie courses to business needs, improve remedial education and strengthen transitions with high schools and four-year colleges. It would also leverage $10 billion in facilities modernization and repairs amongst other projects.
   
• Design world-class online courses for post-secondary students. The President is proposing to invest up to $500 million over the next 10 years to create world-class online courses available at community colleges for students to gain knowledge, skills and credentials. These courses will be freely available, and enable students to extend learning opportunities and successfully complete their course work. Colleges, universities, publishers, and other groups will be invited to compete to create state-of-the-art online courses that combine high-quality subject matter expertise with the latest advances in cognitive and computer sciences.
   

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BUDGET AND BUDGETING CONTROL MECHANISM

                Budget and Budgetary Control''''

• . INTRODUCTION:''''' For effective running of a business, management must know: where it intends to go i.e. organizational objectives how it intends to accomplish its objective i.e. plans whether individual plans fit in the overall organizational objective. i.e. coordination whether operations conform to the plan of operations relating to that period i.e. control “ Budgetary control is the device that a company uses for all these purposes.”
•  WHAT IS A BUDGET? “ A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure and the capital to be employed. May be drawn up showing incremental effects on former budgeted or actual figures, or be compiled by Zero-based budgeting.”
•  WHAT IS BUDGETARY CONTROL ? Budgetary control is the use of the comprehensive system of budgeting to aid management in carrying out its functions like planning, coordination and control. This system involves: Division of organization on functional basis into different sections known as a budget centre. Preparation of separate budgets for each “budget centre”. Consolidation of all functional budgets to present overall organizational objectives during the forthcoming budget period. Comparison of actual level of performance against budgets. Reporting the variances with proper analysis to provide basis for future course of action.
• . CLASSIFICATION OF BUDGETS ACCORDING TO ACCORDING TO ACCORDING TO TIME FUNCTION FLEXIBILITY Long term budget 1. Sales budget 1. Fixed budget Short term budget 2. Production budget 2. Flexible budget Current budget 3. Cost of Production budget Rolling budget 4. Purchase budget 5. Personnel budget 6. R & D budget 7. Capital Expenditure budget 8. Cash budget 9. Master budget
•  SALES BUDGET: Sales budget is the most important budget based on which all the other budgets are built up. This budget is a forecast of quantities and values of sales to be achieved in a budget period. 2. PRODUCTION BUDGET: Production budget involves planning the level of production which in turn involves the answer to the following questions: What is to be produced? When is it to be produced? How is it to be produced? Where is it to be produced?
• . COST OF PRODUCTION BUDGET: This budget is an estimate of cost of output planned for a budget period and may be classified into – Material Cost Budget Labour Cost Budget Overhead Cost Budget 4. PURCHASE BUDGET: This budget provides information about the materials to be acquired from the market during the budget period.
• . PERSONNEL BUDGET: This budget gives an estimate of the requirements of direct labour essential to meet the production target. This budget may be classified into – a. Labour requirement budget b. Labour recruitment budget 6. RESEARCH AND DEVELOPMENT BUDGET: This budget provides an estimate of expenditure to be incurred on R & D during the budget period. A R&D budget is prepared taking into consideration the research projects in hand and new R & D projects to be taken up.
• . CAPITAL EXPENDITURE BUDGET: T his is an important budget providing for acquisition of assets necessitated by the following factors: a. Replacement of existing assets. b. Purchase of additional assets to meet increased production c. Installation of improved type of machinery to reduce costs. 8. CASH BUDGET: This budget gives an estimate of the anticipated receipts and payments of cash during the budget period. Cash budget makes the provision for minimum cash balance to be maintained at all times.
• . MASTER BUDGET: CIMA defines this budget as “ The summary budget incorporating its component functional budget and which is finally approved, adopted and employed”. Thus master budget is a summary of all functional budgets in capsule form available in one report. 10. FIXED BUDGET: This is defined as a budget which is designed to remain unchanged irrespective of the volume of output or turnover attained. This budget will, therefore, be useful only when the actual level of activity corresponds to the budgeted level of activity.
• .. FLEXIBLE BUDGET: CIMA defines this budget as one “ which, by recognising the difference in behaviour between fixed and variable costs in relation to fluctuations in output, turnover or other variable factors such as number of employees, is designed to change appropriately with such fluctuations”. 12. PERFORMANCE BUDGETING: These days budgets are established in such a way so that each item of expenditure is related to specific responsibility centre and is closely linked with the performance of that standard.
• .. ZERO BASE BUDGETING: The zero base budgeting is not based on the incremental approach and previous figures are not adopted as the base. Zero is taken as the base and a budget is developed on the basis of likely activities for the future period. A unique feature of ZBB is that it tries to help management answer the question, “Suppose we are to start our business from scratch, on what activities would we spent out money and to what activities would we give the highest priority?”
• . RESPONSIBILITY ACCOUNTING: Responsibility accounting fixes responsibility for cost control purposes by establishing responsibility centres namely – a. Cost centre b. Profit centre c. Investment centre Principles of responsibility accounting are as follows: 1. Fixation of targets for each responsibility centre 2. Actual performance is compared with the target 3. The variances therein are analyzed so as to fix the responsibility of centres. 4. Taking corrective action.
• . CONCLUSION: Preparation of budgets is the first step in the budgetary control system. Implementation of budgets is the second phase. But preparation and implementation of budgets alone will not achieve much unless a comparison is made regularly between the actual performance and the budgeted performance. Continuous and proper reporting makes this possible. To ensure the success of budgetary control system, proper follow up action has to be taken immediately for the reports submitted.
• . CAPITAL BUDGETING
• . CAPITAL BUDGETING Capital budgeting is a decision situation where large funds are committed (invested) in the initial stages of the project and the returns are expected over a long period of time. These decisions are related to allocation of investible funds to different long-term assets. Capital budgeting is a continuous process and it is carried out by different functional areas of management such as production, marketing, engineering, financial management etc.
• 18. BASIC FEATURES OF CAPITAL BUDGETING Capital budgeting decisions have long-term implications. These decisions involve substantial commitment of funds. These decisions are irreversible and require analysis of minute details. These decisions determine and affect the future growth of the firm.
• . CAPITAL BUDGETING DECISION INVOLVES THREE STEPS Estimation of costs and benefits of a proposal or of each alternative. Estimation of the required rate of return, i.e., the cost of capital Selection and applying the decision criterion .
• . 1. ESTIMATION OF CASH FLOWS The costs and benefits for a capital budgeting decision situation are measured in terms of cash flows. An important point is that all cash flows are considered on after tax basis. The rule is that all financial decisions are subservient to tax laws. The cash flow from the project are compared with the cost of acquiring the project.
• . The cash flows may be grouped into relevant and irrelevant cash flows as follows: Relevant cash flows Irrelevant cash flows Cost of new project Sunk cost Scrap value of old / new plant Allocated overheads Trade-in-value of old plant Financial cash flows Cost reduction / savings Effect on tax liability Incremental repairs Working capital flows Revenue from new proposal Tax benefit of incremental depreciation
• . Calculation of different cash flows may be summarized as follows: INITIAL CASH OUTFLOW: Cost of new plant + Installation expenses + Other Capital expenditure + Additional working capital – Tax benefit on account of capital loss on sale of old plant (if any) – Salvage value of old plant + Tax liability on account of capital gain on sale of old plant (if any).
• . SUBSEQUENT ANNUAL INFLOWS: Profit after tax + Depreciation + Financial charge ( 1-t) – Repairs (if any) – Capital Expenditure (if any). TERMINAL CASH FLOW: Annual cash inflow + Working capital released + Scrap value of the plant (if any).
• . 2. DECISION CRITERIA TECHNIQUES OF EVALUATION Traditional or Time-adjusted or Non-discounting Discounted cash flows 1. Payback period 1. Net Present Value 2. Accounting Rate of 2. Profitability Index Return 3. Internal Rate of Return
• . TRADITIONAL OR NON-DISCOUNTING TECHNIQUES I . PAYBACK PERIOD: # The payback period is defined as “the number of years required for the proposal’s cumulative cash inflows to be equal to its cash outflows.” # The payback period is the length of time required to recover the initial cost of the project. # The payback period may be suitable if the firm has limited funds available and has no ability or willingness to raise additional funds.
• . II . ACCOUNTING RATE OF RETURN (OR) AVERAGE RATE OF RETURN (ARR) # The ARR may be defined as “the annuali zed net income earned on the average funds invested in a project.” # The annual returns of a project are expressed as a percentage of the net investment in the project. COMPUTATION OF ARR: Average Annual profit (after tax) ARR = x 100 Average Investment in the Project
•  DISCOUNTED CASH FLOWS OR TIME ADJUSTED TECHNIQUES These are based upon the fact that the cash flows occurring at different point of time are not having same economic worth. I . NET PRESENT VALUE (NPV) METHOD : The NPV of an investment proposal may be defined as the sum of the present values of all the cash inflows less the sum of present values of all the cash outflows associated with the proposal. The decision rule is “ Accept the proposal if its NPV is positive and reject the proposal if the NPV is negative”.
•  II . PROFITABILITY INDEX METHOD : This technique is a variant of the NPV technique and is also known as BENEFIT - COST RATIO or PRESENT VALUE INDEX . Total present value of cash inflows PI = Total present value of cash outflows. Accept the project if its PI is more than 1 and reject the proposal if the PI is less than 1.
• . III. INTERNAL RATE OF RETURN (IRR) METHOD : The IRR of a proposal is defined as the discount rate which produces a zero NPV, i.e., the IRR is the discount rate which will equate the present value of cash inflows with the present value of cash outflows. The IRR is also known as Marginal Rate of Return or Time Adjusted Rate of Return . The time-schedule of occurrence of future cash flows is known but the rate of discount is not. The discount rate calculated will equate the present value of cash inflows with the present value of cash outflows. - - - - - - - - - - - - - - - - - - - - -
• . CAPITAL BUDGETING PRACTICES IN INDI Capital budgeting decisions are undertaken at the top management level and are planned in advance. The Corporates follow mostly top-down approach in this regard. Discounted cash flow techniques are more popular now. High growth firms use IRR more frequently whereas Payback period is more widely used by small firms. PI technique is used more by public sector units than by private sector units. Capital budgeting decisions are of paramount importance as they affect the profitability of a firm, and are the major determinants of its efficiency and competing power.
•  WORKING CAPITAL MANAGEMENT
• . WORKING CAPITAL MANAGEMENT Working capital management is concerned with the problems that arise in managing the current assets, current liabilities and the interrelationships between them. GOAL : To manage the firm’s current assets and liabilities in such a way that a satisfactory level of working capital is maintained.
• . CONCEPTS : GROSS WORKING CAPITAL – The current assets which represent the proportion of investment that circulates from one form to another in the ordinary conduct of business. NET WORKING CAPITAL – The portion of current assets financed with long term funds or current assets – current liabilities
•  PURPOSE : The NWC is necessary because the cash outflows and inflows do not coincide. The purpose of NWC is to measure the liquidity of the firm. DETERMINING FINANCING MIX : Financing mix is the choice of sources of financing of current assets. SOURCES OF ASSET FINANCE : 1. Short term sources (Current liabilities) 2. Long term sources (Share capital, long term borrowings). 
•  
•  INSTRUMENTS OF SHORT TERM FINANCING Trade Credit Bill Discounting Inter Corporate Deposits Public deposits Commercial papers Factoring
• . APPROACHES TO DETERMINE FINANCING MIX 1. Hedging approach 2. Conservative approach 3. Trade off between the above mentioned two approaches.
• . HEDGING APPROACH (MATCHING APPROACH) This is the process of matching maturities of debt with the maturities of financial needs. According to Hedging approach, the permanent portion of funds required should be financed with long term funds and the seasonal portion with short term funds . Under this approach working capital = 0 since CA are not financed by long term funds (CA = CL).
•  CONSERVATIVE FINANCING APPROACH : This is a strategy by which the firm finances all funds requirement, with long term funds and uses short term funds for emergencies or unexpected outflows. TRADE OFF BETWEEN HEDGING AND CONSERVATIVE APPROACHES : One possible trade off could be equal to the average of the minimum and maximum monthly requirements of funds during the given period of time. This level of requirement of funds may be financed through long run sources and for any additional financing need, short term funds may be used.
• . FACTORS DETERMINING AMOUNT OF WORKING CAPITAL Purchase Payment for Sell product Receive resources resource purchase on credit cash Inventory Receivable conversion conversion period period Payables Cash period Conversion period Operating cycle
• . The ‘length of the operating cycle’ is the most widely used method to determine working capital need. The longer the production cycle, the larger is the working capital need or vice versa. Manufacturing and trading enterprises require fairly large amount of working capital to support their production and sales activity. Service enterprises like hotels, restaurants etc., need less working capital. During boom conditions need for working capital is more. Growth industries and firms need more working capital. Working capital requirement are to be determined on the basis of cash cost i.e excluding depreciation.
• . THANK YOU......

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LEADERSHIP, DECISION-MAKING AND ETHICS IN ORGANISATIONS

 Leadership, Decision-making, and Ethics in Organizations

ethical decision-making and leadership are the basis of ethical organisations, corporate social responsibility, 'fairtrade', sustainability, the 'triple bottom line', and other similar concepts

This article introduces the concept and reasoning behind ethical leadership and ethical organizations. Ethical principles provide the foundations for various modern concepts for work, business and organisations, which broaden individual and corporate priorities far beyond traditional business aims of profit and shareholder enrichment. Ethical factors are also a significant influence on institutions and public sector organisations, for whom the traditional priorities of service quality and cost management must now increasingly take account of these same ethical considerations affecting the commercial and corporate world. The modern concept of ethical organisations encompasses many related issues including: corporate social responsibility (CSR) - or simply social responsibility the 'triple bottom line' ethical management and leadership 'Fairtrade' globalization (addressing its negative effects) sustainability social enterprise mutuals, cooperatives, employee ownership micro-finance, and well-being at work and life balance, including psychological contracts Any other aspects of good modern leadership, management and organisations which relate to ethics, could be added to the list. Ethics is a very broad area. You will see very many different definitions and interpretations of the concept, and you should feel free to develop your own ideas about ethics in terms of meaning, composition, methods and implications. There are no universally agreed rules of ethics, no absolute standards or controls, and no fixed and firm reference points. This is fascinating given how hugely important ethics have now become in modern life and society.

What is Ethical? This explanation attempts to go deeper than the usual descriptions of ethical organisations, because ethics in work and business are both a reflection of and influenced by ethical aspects of life and the wider world. The aim of this article not to tell you what's ethical and what's not. The aim is to help you to determine better for yourself what is ethical and what is unethical. What is ethical anyhow? The short answer is that there isn't an answer. There is no absolute rule of what is ethical and what isn't. Defining what ethical and unethical mean is only a little easier. A simpler broad definition of the word ethical is 'fair'. And 'fair' to fair-minded people, especially those affected by the situation. This is not a scientifically robust definition, but as you will see, when we peel back the layers of what is ethical, it's very difficult to be scientific and firm about what it all means.

The modern Oxford English Dictionary says:
"Ethical - Relating to moral principles or the branch of knowledge dealing with these..."
Interestingly the definition continues by way of example: "...Morally correct: Can a profitable business ever be ethical?..."
N.B. This is merely an example of the word in use - it's not an opinion - nevertheless it's an example which reflects modern attitudes and the context in which ethical questions now arise which would not readily have done so a generation or two ago.
Morals and morality appear commonly in attempts to define what ethical means, although given the difficulties of defining the word morality without using quite subjective terms, this is not terribly helpful. Morality incidentally is defined in the OED as '...principles concerning the distinction between right and wrong or good and bad behaviour..." See what I mean?.. Not especially firm or scientific.
More helpfully the OED adds some extra explanation about ethics, summarised thus:
Western ethical philosophy can be divided roughly into three types:

1. Virtues such as justice, charity and generosity benefit the person and the person's society. (Largely based on Aristotle's ideas.)
2. Ethics are central to morality - a human duty - based on rational people's respect for other rational people. (Notably supported by Kant.)
3. The guiding principle is based on conduct which produces the greatest happiness or benefit to the greatest number of people. (Referred to as utilitarianism - this might be also be considered 'the greater good' concept.)

A single precise definition of ethical is not easy to agree.
Moreover to show how ideas change over time, the 1933 Oxford English Dictionary says first of ethics (when seemingly the word 'ethic' was used as an adjective like today's use of the word ethical):

1. Relating to morals 1581.
2. Treating of moral questions or of moral science 1589.
3. Characterized by ethos 1848.

This significant definition of ethos is offered, since it suggests the relative component within ethics:
"The prevalent tone of sentiment of a people or community..."
Extending this theme, in a practical sense, aside from what is covered by law or other clear standards, whether something is considered to be ethical by people (markets, customers, media, etc) is generally a matter of opinion. The same might be said of morality. Both concepts - ethics and morality - are subjective and a reflection of society and civilization, which of course implies that precise meanings will change. Both are relative in time and situation.
Certain ethical issues are represented in law, and in this respect are firm, to a point.
Ethics which are not covered clearly by law are usually a matter of subjective judgement, especially, but not exclusively, by the reasonable majority, whose view is significant in deciding whether something is ethical or not.
Such a vague way of judging whether something is ethical is not to diminish the importance of ethical factors. On the contrary.
In work and life, opinion - especially large scale opinion - can be more influential than rules and law, notably in relation to markets, publicity, and people's attitudes, which manifest especially in the behaviour of customers and employees.
The law can actually have a theoretical or marginal effect, whereas large scale opinion is an unavoidable powerful reality.
For example it is unlawful to drive a little faster than the speed limit. But the vast majority of people consider it to be acceptable, and so do it. The UK poll tax of the 1980s was lawful, yet public reaction (much of it unlawful) against it caused the law to be changed.
Ultimately people's attitudes are more powerful than law. Law is a reflection of public tolerance and views, not a cause of them (unless to produce a reaction against the law of course).
So do not for a moment underestimate the importance of ethical considerations on the basis that they could be subjectively judged and difficult to define in law. Popular public opinion is the sternest most unforgiving measurement of all.

Ethical business and ethical investment

As previously stated, the purpose of this article is not to define or describe ethical business in an absolute sense.
The explanation thus far should demonstrate why such a pronouncement is impossible.
Ethical business - as other ethical issues - are a matter of individual and collective judgement.
It is possible to go so far only in outlining ethical considerations, and to give some modern examples of interpretation which seem generally to be accepted.
Ethical investment is a useful aspect for considering ethical business, since large scale investment is ultimately subject to market forces, which largely reflect public opinion. As such ethical investment criteria and examples tend to be a good guide towards ethical attitudes of large sections of people and society, rather than the 'expert' views of leaders and gurus.
Ethical investment has been a growing aspect of business investment since the 1970s, although arguably the first types of ethical businesses can be traced back to the Quaker and Methodist movements of the 1800s.
Then as now ethical business and investments regard socially responsible activities and aims with far greater priority and emphasis than the traditional profit and free market business approach.
Traditional profit-based business models, which arose and came to dominate global commerce from the beginnings of industrialisation, inherently do not require a socially responsible element, other than compliance with the law, and a reflection of public reaction for pragmatic marketing (and ultimately profit) purposes.
Ethical business or investment is concerned with how profit is made and how much profit is made, whereas traditional profit-centred free-market based business is essentially only concerned with how much profit is made.
Traditional profit-centred business seeks to maximise profit and return on investment with no particular regard for how the profits are made and what the social effects of the business activities are.
The ethical approach to business and investment seeks to maximise profit and return on investment while minimising and avoiding where possible negative social effects.
In this context 'social' and 'socially responsible' include related factors such as:

• the environment
• sustainability
• globalization effects - e.g., exploitation, child-labour, social and environmental damage anywhere in the world
• corruption, armed conflict and political issues
• staff and customers relations - for instance education and training, health and safety, duty of care, etc
• local community
• and other social impacts on people's health and well-being

Typically the above are interpreted within ethical investment so as to regard the following sectors and activities as being difficult to reconcile with profit and investment. As with other perspectives on this page, this is not a definitive list or set of absolute criteria. It's a set of examples to illustrate typical (modern Western) concerns of ethical investors and ethical business people:

• tobacco
• armaments
• nuclear power
• animal experimentation
• oppressive or corrupt national regimes

This is not an exhaustive list and is subject to change - as the world changes.
As stated, this is not a pronouncement of what's unethical. It's a reflection of current attitudes, which you can use in your own way alongside the other information on this page to develop your own ideas as to what's ethical and what's not.
Also as stated, things change with time and situation. For example if technology is developed enabling nuclear power to be safer and less impactful on the future then obviously concerns in this area would reduce and the ethical implications would decrease or disappear.
Standards of what is considered ethical change over time, and generally these standards become more humane as humankind develops greater tolerance, awareness, and capacity for forgiveness and compassion.
Humankind's - or any society's - capacity for ethical behaviour increases with its own safety and confidence of survival and procreation.
Hence the human tendency to become less ethically flexible when under threat.
Thus ethical behaviour is a relative judgement, as well as a subjective one. We cannot impose one society's moral code onto another society with different needs and demands.
Interestingly what is considered unethical in present times, commonly becomes unlawful in the future. The leading ethical thinking of any time tends to pioneer social and civilization change.
And so here lies substantial advantage for corporations and other groups and bodies which anticipate such changes. They adapt quicker, and are seen generally to lead rather than follow. They also manage change more successfully, since they have time to do it.
Organisations and institutions which fall behind public ethical expectations find catching up a lot more difficult
.
LAW AND ETHICS......

Many believe that the word ethical equates to lawful, and that by being lawful an organisation or activity is automatically ethical.
This is not so.
While many things that are unethical are also unlawful, ethics do not equate to law.
Many unethical things are entirely lawful (although some can only be tested when/if they get to court).
Moreover sometimes the law (of any land) can produce extremely unethical effects.
In fact while most unlawful actions will also tend to be unethical, certain situations can contain a strong ethical justification for breaking the law, or changing the law.
Notable examples are situations in which the law, or the way law is applied, is considered unethical ('wrong' is the typical description) by sufficient numbers of people to pressure the legal system to change. You can perhaps think of examples when this has happened, and such cases are examples of an ethical viewpoint being ultimately more powerful than the law.
Examples of this happening through (Western) history illustrate the tendency for ethical considerations to drive the law: women's suffrage (women's right to vote); the abolition of slavery; and modern human rights and equality legislation are examples of ethical pressures causing change in law.
The independence of nations and the break-up of colonial rule are further examples of ethical pressures overwhelming the force of law.
Unlawful acts are not always unethical. Ethical acts are not always lawful.
Lawful therefore does not equate to ethical, and unethical does not equate to unlawful.
Interestingly, the UK Consumer Protection Regulations effective on 26 May 2008 are a good example of unethical business practices becoming prohibited in law. For example it has always been unethical to mislead customers into buying products or services. Now it is illegal to do so (in respect of consumers - 

RELIGION AND ETHICS''

For many people, ethics and ethical judgements are based on a religious belief.
However religion is not a basis for arriving at consistent standards of ethics, any more than the law is.
To illustrate the point:
A particularly dangerous implication arising from mixing decision-making with religion is the one which provides the decision-maker with a sort of safety net if everything goes wrong.
"God will be my judge..."
For people who are not religious, or who have a different religious faith to decision-maker, these words are a little disturbing in the context of ethical decision-making.
Whose god? Your god? My god? Their god? All gods? The good gods? The collective gods committee?
And when? When will (the whatever chosen) god be judging this decision? While the decision is being made? Before the decision is implemented? Immediately after the decision's implementation (when on Earth some serious monitoring, checking and managing needs to be happening)? Far into the future when the decision-maker has expired and gone to whatever version of heaven his (it's generally a man) particular faith promises him?
The inference is the latter of course. A bit bloody late in other words.
And by what criteria will (the whatever chosen) god be judging the decision? To whose and with precisely what standards are we being asked to agree here?
And what will be the results of (whatever chosen) god's decision, especially if it's a mighty god-like thumbs down? What are (the whatever chosen) god's contingencies for putting it all straight again?
It's anyone's guess..
Do you see how religion is not a brilliant aid for decision-making.
Religion is a personal matter. It has no place in decision-making affecting other people.
Worse, using religion as a personal safety net for serious decision-making is a reckless desertion of leadership responsibility.
Right-minded people want leaders to take ultimate full absolute responsibility for decisions. They do not want a leader to seek refuge or personal salvation in (whatever chosen) god or heaven or a confession box.
This is an additional reason for not mixing religion with leadership and ethical decision-making: too many people simply do not accept the basic premise that a leader can delegate responsibility in such a very strange and unaccountable way.
Aside from anything else, if religion were useful in leadership and decision-making then all human organisations would be run by the clergy. Civilization tried that a few thousand years ago and it doesn't work.
Please note: If you are religious and believe that religion has a place in leadership and decision-making then you might disagree with this section. If so please understand that I am not berating religion or religious people. I accept that through humankind's existence - especially in the last few hundred years - religion in various forms has often provided an essential code (of ethics arguably) for civilizations and societies to live positively, harmoniously, generously, peacefully, lovingly, etc. I am making a different point, namely: reference to religion, and especially a strong personal faith, is not generally very helpful towards achieving great objectivity, which is vital for ethical decision-making. Moreover religion of certain types can be extremely divisive, which is obviously not useful for decision-making entailing diverse groups of people, as commonly arises in today's increasingly diverse world.

SOME UNETHICAL BEHAVIOURS''

Instead of trying to arrive at a standard or all-encompassing rule of what is ethical, it is helpful to illustrate the depth and variety of ethics through suitable examples.
This is an extension of the ethical business investment items listed above, and goes into far greater detail of different behaviours which might often be regarded as unethical.
The first category might seem obvious and clear-cut, and actually it's a reasonable starting point for the vast majority of ethical decisions, but this one point cannot be applied exclusively in assessing whether something is ethical or not:

• anything unlawful in the territory or area covered by such law - is probably unethical. Not always...

Conversely, and more importantly, very many legal activities and behaviours can be extremely unethical. For example, behaviours that are not necessarily unlawful but which are generally considered to be unethical to Western society would now typically include:

• dishonesty, withholding information, distortion of facts
• misleading or confusing communications or positioning or advertising
• manipulation of people's feelings
• deception, trickery, kidology, rule-bending, fooling people
• exploitation of weakness and vulnerability
• excessive profit
• greed
• anything liable to harm or endanger people
• breach of the Psychological Contract - the Psychological Contract represents trust and expectations between people in a relationship - notably within employer/employee relationships, extending to other organizational relationships too - (aside from psychological contracts theory, specialized theory within Transactional Analysis helps explain this aspect of trust and expectations in human relationships)
• avoidance of blame or penalty or payment of compensation for wrong-doing
• inertia-based 'approvals' and 'agreements' (in which action proceeds unless objected to)
• failing to consult and notify people affected by change
• secrecy and lack of transparency and resistance to reasonable investigation
• coercion or inducement
• harming the environment or planet
• unnecessary waste or consumption
• invasion of privacy or anything causing privacy to be compromised
• recklessness or irresponsible use of authority, power, reputation
• nepotism (the appointment or preference of family members)
• favouritism or decision-making based on ulterior motives (e.g., secret affiliations, deals, memberships, etc)
• alienation or marginalisation of people or groups
• conflict of interests (having a foot in two or more competing camps)
• neglect of duty of care
• betrayal of trust
• breaking confidentiality
• causing suffering of animals
• 'bystanding' - failing to intervene or report wrong-doing within area of responsibility (this does not give licence to interfere anywhere and everywhere, which is itself unethical for various reasons)
• unfairness
• unkindness
• lack of compassion and humanity

You will perhaps think of other examples of behaviours or activities which are not necessarily unlawful, but which a reasonable majority of people (especially those directly affected by the activities) would consider to be unfair, unjust or simply wrong and therefore effectively unethical.
Most of the above are subject to extent or degree, whereby serious extensive examples are more likely to be unethical than minor transgressions and negligible effects.

Ethics and public opinion

Ethical considerations are not wholly determined by majority view, just as they are not wholly defined by law or religion.
Ethics are not a matter of a referendum or vote.
Popular opinion alone is an unreliable measurement of what is ethical for several reasons:

• A poorly informed majority of people - or anyone poorly informed - is not able to make an informed decision about the ethics of a particular decision. The extent to which people are helped to understand longer-term consequences of a situation is also a limiting factor in the value of majority opinion.
• Democratic decision-making is vulnerable to whim and 'herding' instincts - especially if the national press and other mainstream media have anything to do with it.
• Leadership - as a function within civilizations - features in the organisation of human systems and societies because people generally accept that many sorts of complex and large scale decision-making are best made by full-time experts working in the areas concerned, rather than such decisions being left to the vagaries of popular inexpert view. This is not to say that people have no right to consultation or a vote on crucial issues (in fact generally people need more involvement in decisions which affect them) - it is more to illustrate that majority view, especially when coloured with apathy or misinformation or prejudice for whatever reason, is not the only basis for deciding what's ethical or not.

Popular opinion is a significant factor in the consideration of what is ethical, but it is not the only factor, and the significance of popular opinion in determining ethical decisions will vary according to the situation.

'For the greater good' ethical considerations

A significant influence on ethical judgement is the 'flip-side' of whatever situation is under question: the effects of the 'ethical' decision.
Upholding an ethical principle might not be sensible if the effect of doing so causes a wider or greater disadvantage.
This sort of justification when used for unethical actions and policies, etc., is often referred to as being 'for the greater good'.
Such a viewpoint is associated with a 'utilitarianism' approach to ethics.
Looking at the flip-side and assessing the 'greater good' implications can be helpful, ideally leading to the facilitation of a compromise solution. Considering the flip-side (or sides) is actually necessary for relatively straight-forward uncontroversial decisions and actions, especially when opinions on all sides can be aired, debated, and understood.
However the 'greater good' approach can be a risky angle if used subjectively and proactively, not least because it tempts the decision-maker to play god, and to attempt a god-like appreciation of a wide and complex situation, instead of adopting a less personal and more detached approach.
The combination of the following factors in ethical decision-making is rarely effective:

• risk
• proactivity (decision-maker instigated)
• borderline ethical/unethical
• affecting lots of people.

'The greater good' argument is commonly used to support actions containing these elements, when usually a less risky and aggressive stance is best.
Remember a significant inescapable part of ethical actions are the views and needs of the rational majority, of the people affected by the action or decision.
If you don't know reliably what these (views and needs) are then you don't understand the flip-side enough to justify anything, let alone a risky borderline decision.
Beware of this 'greater good' dimension also when you see it used by others, because the defence of an unethical decision as being "...for the greater good..." is often used cynically and dishonestly.
The 'greater good' can be a big trap - especially for anyone prone to subjective high-minded thinking.
The 'greater good' angle also illustrates the dilemma aspect within many ethical decisions.
Ethics are not clear-cut, especially on a large scale.
Ethical leadership in the face of big ethical decisions is characterised by wisdom and objectivity, not by subjective personal belief, worse still when it protected by control mechanisms and the recklessness which often accompanies emotional insecurity, or a strong personal 'faith' or power delusion.
Beware the leader for whom the personal victory of the decision appears to be more important than the decision's outcome, whatever the scale and situation - and recognise these tendencies in yourself if they arise.
Objectivity is the key to ethics, not personal belief or religion or personal power.
Leaders who make decisions subjectively and personally for reasons of building power, reputation and wealth, entirely miss the point about ethics, and their fundamental philosophy (or lack of) effectively prevents any real ethical objectivity.
If the motive is wrong, then everything else will be too.

Ethical Objectivity

So, law alone is not a basis for ethical decision-making. Nor is religion. Nor is 'the greater good'. And even the rational views and needs of the affected majority are not a basis alone for ethical decision-making.
So what is the basis of ethical decision-making?
My best suggestion is:
Objectivity and fairness are the basis of ethical decision-making.
In simple terms this means you must be able to see the other people's points of view. This might seem a simple statement of the bleeding obvious, and it might be, but it is not often practised. True objectivity is quite difficult to achieve, especially for leaders under pressure. Similarly, fairness is difficult to define, let alone apply.
Detachment is a huge part of the process. Objectivity is impossible without personal detachment. Fairness cannot begin to be achieved without detachment, since it's about other people, not the leader, nor the leader's supporters and environment.
Being ethical is not a matter of evangelizing or imposing your standards and views on other people.
Being ethical is being fair. Being fair means understanding implications from other people's perspectives - not your own. The more widely and well you appreciate other people's issues and implications, then the easier you will find it to be ethical.
CYBERMETRICS is a really useful way to look at objectivity. Objectivity entails understanding how systems work and inter-relate. But systems here means merely the general sense of people and the way life is organised. Systems does not refer to complex mathematics or scientific formulae. Again, it requires you to step back - to detach yourself, resist personal bias and emotion - step back, be objective, adult, mature - fair.
Objectivity is a wonderfully potent and extremely flexible ability to pursue. Especially if you can combine it with the ability to  facilitate rather than influence.
Objectivity is flexible because it can be approached and achieved in so many different ways - intuitively, logically, systematically, creatively - anyone can do it. In the same way that the truth - purity, probity - is available to anyone who cares to look for it.
What does ethical objectivity entail?
Here are some suggestions of the main angles.
The list is not exhaustive - you will see other significant perspectives for different situations. For small local decisions most of the list might not apply. But if your decision has potentially significant effects, consider these different perspectives in striving for as much objectivity as you can.
Ethical considerations comprise several variables in one combination or another, if you are striving for real objectivity:

• The society and/or situation.
• Short-term and long-term effects.
• 'The greater good' - the flip-side of the issue; i.e., what are the other options and their consequences - the costs or implications of the choices?
• Cultural issues.
• Issues of personal conscience - of those affected - beware of relying on your own ideas of 'faith' or 'belief' or 'what is right', because this will not be the view held by many people affected by your decision. You are not a god, nor an agent of a god.
• Religious influence and personal beliefs - of those affected, rather than the decision-makers, really, I cannot emphasise this enough. Religion is a subjective belief system. Your own religion is therefore not a basis for objective ethical decision-making.
• Informed enlightened educated and truly objective views.
• Majority views.
• Significant minority views.
• Unrepresented very small minority views.

Some principles for ethical decision-making

1. Step back from every decision before you make it and look at it objectively. check-list to see if you might possibly be falling into one of these traps. It's easily done: to get swept along by excitement and urgency; or by apparently demanding expectations, whether self-imposed or otherwise. Aim for objectivity and fairness - not for personal power, 'winning', strategic plotting, high drama, etc.
2. Strive for fairness rather than polarised 'winner takes all' outcomes. Try to facilitate solutions rather than actually deciding and imposing decisions, unless all parties are happy for you to do so.
3. Understand the psychological aspects and how it applies to your situation. Concepts such as Epathy and the Johari Window are useful in gaining appreciation of other people's situations and feelings, which is central to managing the Psychological Contract.
4. Learn from history and previous situations. Reviewing how previous situations were handled reduces the risks of making daft mistakes: not many things are fundamentally new in this world, despite how unique you believe your situation to be. Also history is a superb store of already invented wheels, which can often save you the time and agonies of trying unsuccessfully to invent a new one.
5. Get the facts from all possible perspectives. Often a challenging issue offers three main options: (a) your instinctive or personal view; (b) a main alternative option; and (c) the commonly under-estimated ever-available third main option of doing nothing. Doing nothing in times of real emergency can be disastrous, but for a very large number of situations doing nothing is the only truly wise way. Doing nothing is not weakness or procrastination if it done in the right way for the right reasons.
6. Understand the long-term consequences. Model or braintorm the 'what if' scenarios. Again look at previous examples and history.
7. Check the law. In whatever territories are affected by the decision. But do not base your decision wholly on the law. See the ethics and law notes.
8. Consult widely - especially with critical people, and especially beyond your close circle of (normally) biased and friendly advisors, colleagues, friends, etc. You have not properly consulted if you merely seek and obtain confirmation from a tame advisor. After the event such 'consultation' can very easily be interpreted as a conspiracy, in which your 'advisor' is deemed not to have been an advisor but a co-conspirator. Consult especially the people affected by the situation and potential actions, and if using a survey of any sort then ensure the positioning and questions used are balanced and objective, because to be otherwise is unethical in itself. You should even consult about how to frame the survey and wording of the questions if the issue is anything but a minor one.
9. Consider cause and effect in the deepest possible sense. Life and all that surrounds it is one huge interconnected system. If you are making big decisions - or even apparently little fleeting decisions within a potentially big and sensitive environment - these decisions will affect many people and aspects of life, now and especially into the future.
10. Resist the delusion and arrogance that power and authority tends to foster. This is especially important to guard against if you live and work in a protected, insulated or isolated situation, as many large scale leaders and decision-makers tend to do. Being a leader for a long time, or for any duration in a culture of arrogance, privilege and advantage, provides great nourishment for personal delusion. Many unethical decisions are borne of arrogance and delusion. Guard against becoming so dangerous.
11. Beware of justifying decisions according to religious faith. There is nothing wrong with having a religious faith, but there are various risks in leaning too heavily on a god or faith when making serious decisions. See the ethics and religion notes.
12. Aim for solutions and harmony, objectivity and detachment. Facilitate rather than influence. Help, don't sell. Diffuse situations - find common ground - don't polarise or inflame. Whenever you see a big swell of expectation looming (among your immediate team, not those affected by your decision) which is borderline ethical/unethical, remember the ever-available third option to decide clearly and firmly to do nothing, in the right way for the right reason. The best ethical decisions are usually decided by people who are most affected by them, rather than by leaders who don't trust the people.

Different personalities see ethical organisations in different ways

Different people relate to ideas about how to run organisations in different ways.
Not everyone readily relates strongly to the principles of corporate integrity, sustainability, the 'Triple Bottom Line', etc.
These are essentially idealistic views and as such will mostly appeal to idealistic people.
If you are an idealist, remember that not everyone is idealistic.
For example, many entrepreneurial personalities are actually more likely to prefer and utilise logical and critical thinking, and relatively dispassionate decision-making, than idealistic principles. These qualities enable entrepreneurs to do what they do well, and most organisations need a good sprinkling of these types of people. These personalities need hard and fast reasons why the triple bottom line and ethics and CSR are important to achieving solid performance outcomes.
Process-oriented people; routine-centred, reliable, dependable types, will also not automatically buy in to idealistic principles, because these people are strongly focused on facts and real data, rather than ideas and feelings. These people will often need systemic evidence and predictable processes to assimilate and support idealistic concepts and philosophies.
People won't simply buy in to the ethical zeitgeist because they are told to.
Therefore when explaining the importance and aims of corporate ethics, consider the audience. People have different strengths and styles, and some need their own reasons for buying in to idealistic aims, outside of idealism itself.
Idealists and humanitarians usually have difficulty accepting that processes and financials should be the primary drivers of organisations. By the same token, people who are driven and motivated by concrete thinking and performance outcomes will not naturally accept that organisations should place significant emphasis on idealistic humanitarian philosophies and aims.
Aside from explanation and understanding, we must also be careful to manage the mix of organisational obligations. Without efficiency, competitiveness and profit, there'll be no organisation to look after the people and planet. It's a question of balance.
As ever we need different people's strengths to be able to achieve this. (And while this is an over-simplification), some people are better taking care of the profit, some the people, and some the planet - but everyone needs to be aware of all three, and the fact that the future great organisations will be the ones whose people can best manage the mix.

Organizational outcomes and benefits from ethical leadership

More and more leaders of businesses and other organisations are now waking up to the reality of social responsibility and organisational ethics.
Public opinion, unleashed by the internet particularly, is re-shaping expectations and standards.
Organisational behaviour - good and bad - is more transparent than ever - globally.
Injustice anywhere in the world is becoming more and more visible, and less and less acceptable.
Reaction to corporate recklessness, exploitation, dishonesty and negligence it is becoming more and more organised and potent.
Employers, businesses and organisations of all sorts - especially the big high profile ones - are now recognising that there are solid effects and outcomes driving organisational change. There are now real incentives for doing the right thing, and real disincentives for doing the wrong things.
As never before, there are huge organisational advantages from behaving ethically, with humanity, compassion, and with proper consideration for the world beyond the boardroom and the shareholders:
competitive advantage - customers are increasingly favouring providers and suppliers who demonstrate responsibility and ethical practices. Failure to do so means lost market share, and shrinking popularity, which reduces revenues, profits, or whatever other results the organisation seeks to achieve.
better staff attraction and retention - the best staff want to work for truly responsible and ethical employers. Failing to be a good employer means good staff leave, and reduces the likelihood of attracting good new-starters. This pushes up costs and undermines performance and efficiency. Aside from this, good organisations simply can't function without good people.
investment - few and fewer investors want to invest in organisations which lack integrity and responsibility, because they don't want the association, and because they know that for all the other reasons here, performance will eventually decline, and who wants to invest in a lost cause?
morale and culture - staff who work in a high-integrity, socially responsible, globally considerate organisation are far less prone to stress, attrition and dissatisfaction. Therefore they are happier and more productive. Happy productive people are a common feature in highly successful organisations. Stressed unhappy staff are less productive, take more time off, need more managing, and also take no interest in sorting out the organisation's failings when the whole thing implodes.
reputation - it takes years, decades, to build organisational reputation - but only one scandal to destroy it. Ethical responsible organisations are far less prone to scandals and disasters. And if one does occur, an ethical responsible organisation will automatically know how to deal with it quickly and openly and honestly. People tend to forgive organisations who are genuinely trying to do the right thing. People do not forgive, and are actually deeply insulted by, organisations who fail and then fail again by not addressing the problem and the root cause. Arrogant leaders share this weird delusion that no-one can see what they're up to. Years ago maybe they could hide, but now there's absolutely no hiding place.
legal and regulatory reasons - soon there'll be no choice anyway - all organisations will have to comply with proper ethical and socially responsible standards. And these standards and compliance mechanisms will be global. Welcome to the age of transparency and accountability. So it makes sense to change before you are forced to.
legacy - even the most deluded leaders will admit in the cold light of day that they'd prefer to be remembered for doing something good, rather than making a pile of money or building a great big empire. It's human nature to be good. Humankind would not have survived were this not so. The greedy and the deluded have traditionally been able to persist with unethical irresponsible behaviour because there's been nothing much stopping them, or reminding them that maybe there is another way. But no longer. Part of the re-shaping of attitudes and expectations is that making a pile of money, and building a great big empire, are becoming stigmatised. What's so great about leaving behind a pile of money or a great big empire if it's been at the cost of others' well-being, or the health of the planet? The ethics and responsibility Zeitgeist is fundamentally changing the view of what a lifetime legacy should be and can be. And this will change the deeper aspirations of leaders, present and future, who can now see more clearly what a real legacy is.

Other ethical decision-making ideas

The  UK institute of Ethics...suggests a simple 'test' for ethical decision-making in business (see their website for their version).
Adapted below it is applicable to all decisions in all types of organisations and in life as a whole. It's a remarkably easy test to apply.
Try it next time you have to make a decision:

1. transparency - am I happy to make my decision public - especially to the people affected by it?
2. effect - have I fully considered the harmful effects of my decision and how to avoid them?
3. fairness - would my decision be considered fair by everyone affected by it (consider all stakeholders, the effects of decisions can be far-reaching)

If you can honestly answer Yes to each of the above questions then you are likely to be making an ethical decision.
If you have any doubt about saying Yes to any of the questions then you should think about things more carefully. Maybe there is an entirely different and better solution - there often is.
If you can't decide how to answer these questions, seek input from someone who has strong ethical principles, and who owes you nothing. Especially do not ask anyone to advise you about difficult decisions if they owe you some sort of allegiance.
Leaders can sometimes be blinded by their own feelings of self-importance, and more dangerously can believe that the leader's job requires them to shoulder the burden of decisions which cause anguish and suffering, or worse. Believing that leadership carries some sort of right to take risks with other people's well-being is nothing more than arrogant delusion. A strong feature of good leadership is knowing when, and having the strength, to find another way - the ethical way.

Stakeholders and ethical organisations

If we consider fully what a modern ethical organisation is, we must inevitably take a far wider view in defining modern stakeholders.
A modern definition of 'stakeholder' is broader than the conventional ideas about shareholders, investors and partners, etc.
A modern definition of a stakeholder is any group which has an interest in, involvement with, dependence on, contribution to, or is affected by, the organisation.
Individuals are stakeholders too of course, but for practical reasons most organisations will necessarily view stakeholders as groups, and for the purposes of this explanation the term 'stakeholder' here also means a stakeholder group.
A stakeholder is any group of people who could lose or gain something because of the actions of the organisation.
This is especially relevant in the context of ethics, corporate responsibility, sustainability, etc.
In fact every person on this earth is arguably a stakeholder in every organisation on this earth.
It's not acceptable to dismiss or deny a group as a stakeholder on the basis that the relationship is too difficult to measure. If the group is affected by the organisation then it's a stakeholder and the group's needs must be considered. Thus the organisation acknowledges its full responsibilities.
The question is then one of type and degree - in other words the needs of each stakeholder, and the extent of the effect of the organisation on each stakeholder.
So a good modern stakeholder model or analysis would be one which recognises all of the stakeholder and then identifies a relationship (needs and interests, etc), and also shows a degree of impact for each stakeholder. Such an analysis can be helpful in training and development, and is arguably also essential in strategic planning and decision-making.
Some impacts might seem small, but if the size of the stakeholder group is very large then the overall impact might be considerable.
By accepting that stakeholders are represented by a far wider range of people and groups than conventionally applied, we effectively expand and liberate the appreciation of what organisational (and leadership and management) responsibility really is, and how far it extends.
For example, a villager in deepest Africa is a stakeholder in all UK organisations given their (our) effect on the world's natural shared resources and the natural world as a whole. Children yet to be born on the other side of the world are stakeholders of any organisation given that its activities use, deplete, spoil, (or preferably instead) protect, enhance, and improve the resources and quality of life available to future generations.
Failure to recognise these more distant and less obvious groupings as 'stakeholders' is what has enabled organisations to ignore their wider responsibilities both to local communities and to the rest of the world beyond.
Stakeholders can be found in any or all of the following groups depending on the type of organisation. Below are examples of stakeholder groups, including conventional 'investor' stakeholders, and more modern stakeholder ideas. Remember, a stakeholder is any group that is affected in one way or another by the activities of an organisation.

• shareholders
• trustees
• guarantors
• investors
• funding bodies
• distribution partners
• marketing partners
• licensors
• licensees
• approving bodies
• regulatory authorities
• endorsers and 'recommenders'
• advisors and consultants (yes, these people have something at stake too)
• employees - staff, managers, directors, non-executive directors
• customers
• suppliers
• the local population (community)
• the regional general public
• national general public
• international communities
• humankind

Many of these groups would not conventionally be considered to be stakeholders, but think about it: each of these groups could have an interest in and could be affected by the activities of an organisation. If a connection is not easy to see and understand it doesn't mean the connection doesn't exist.
Given that this sort of modern stakeholder perspective produces such a wide-ranging and extensive list of stakeholder groups, it's essential to apply (for any given situation) some method of evaluating and expressing relative stakeholder interests and needs, and also to measure and show the varying significance of the stakeholder relationships; the degree of impact or dependence.
Logically, this can be achieved via some sort of 'weighted analysis', designed to assess, analyse, compile and prioritise all stakeholder needs for any given organisation and operating scenario. This is not a precise science, but again, the difficulty in measuring the impact is no excuse for denying the existence of the relationship, the stakeholding, and the organisational responsibility for the stakeholder group concerned. Below is a suggested basic template for this purpose, which you can adapt for your own situation.

Stakeholder analysis template

stakeholder group	effect/interest/expectation/ needs/rights/quantification	% significance or weighting	priority or ranking
shareholders
trustees
guarantors
investors
funding bodies
distribution partners
marketing partners
licensors
licensees
approving bodies
regulatory authorities
endorsers and 'recommenders'
advisors and consultants
employees - staff, managers, directors, non-executive directors
customers
suppliers
the local population (community)
the regional general public
national general public
international communities
humankind

This is not a precise science. You'll need to adapt this for your own purposes so that it helps you to identify your stakeholder groups, their needs and expectations and rights, perhaps some sort of quantification or value indicator, a relative weighting, and then maybe a ranking or a priority, or a linkage to strategic planning and decision-making.
Each of the example categories above might need to be broken down into sub-sections or shown as more precise descriptions which relate to the organisation concerned.
Using a stakeholder analysis like this helps to identify an organisation's full responsibilities, not just the obvious conventional investor requirements to produce a profit and return on investment. In the modern world an organisation's obligations extend far beyond these traditional financial aims.
If you are in doubt as to stakeholder expectations and needs, ask them what they are. Fundamentally this is all about understanding and respecting the needs of others, and as far as possible incorporating them into the philosophy, the aims, the processes, and the activities of the organisation.

Ethical leadership and management model

Below is a modern model for management and leadership in the 21st century. It's an interpretation of the 'personality' of good ethical modern management and leadership. As such it's not a process or technique - it's an attempt to characterise good modern ethical management and leadership.

MEANING OF 4PS Purpose, People, Planet, Probity (or Purity or Principles). The four cornerstones of sustainable success in any modern business venture, and a maxim for today's management and organisational philosophy. (Probity means honesty, uprightness - it's from the Latin word probus, meaning good). 'Purpose' is an apt replacement for 'Profit' and thus makes the acronym appropriate for use in not-for-profit organisations. Profit-focused corporations can of course substitute 'Profit' for 'Purpose'. This model is not a process or technique - it's the character or personality of a good ethical organisation, (or manager or leader). The aim of all good modern organisations is to reconcile the organisational purpose (whether this be profit for shareholders, or cost-effective services delivery, in the case of public services) with the needs and feelings of people (staff, customers, suppliers, local communities, stakeholders, etc) with proper consideration for the planet - the world we live in (in terms of sustainability, environment, wildlife, natural resources, our heritage, 'fair trade', other cultures and societies, etc) and at all times acting with probity - encompassing love,integrity, compassion, honesty, and truth. Probity enables the other potentially conflicting aims to be harmonised so that the mix is sustainable, ethical and successful. Traditional inward-looking management and leadership skills (which historically considered only the purpose - typically profit - and the methods for achieving it) are no longer sufficient for sustainable organisational success. Organisations have a far wider agenda today. Moreover, performance, behaviour and standards are transparent globally - the whole world can see and judge how leaders and organisations behave - and the modern leader must now lead with this global accountability...

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