Ethics

- concerned with the right and wrong.

- Fundamental aspect of the companys mission.
- guides behavior.
Relatism
- wide variety of acceptable ethical beliefs and practices exist.
- subjective and arrive from culture, blfs or emotion of the speaker.
- for int. biz, difficult for them to comprehend as the cultures and norms differ
from theirs. (dunno what rules to follow)

STRENGTHS
WEAKNESSES
- highlight how being ethical depends on - based on a fundamental contradiction.
wad ppl observe and biases.
- leads to a philosophy that anything
-highlights differences in cultural blfs.
goes, denying the existence of morality.
-resolve moral conflicts that occur in
absolutist.
- more flexible that lead to greater
success.

- Objectivity and final truth have value.

Absolutism
- unchanging set of ethical principles that apply in all situations, all the time in all
forms of society.
- objective, universally applicable moral truth that exist and can be known.
( Religion, Law, Natural Law, Deontological approaches)
- ethical rules differ in cultures but some still remain the same.

STRENGTHS
- lays down certain unambiguous rules
that ppl are able to follow.

WEAKNESSES
- x take into acc of evolving norms within
the society & advance in morality.

- absolute truth does exist.

- unclear source where absolutist ethics

can be derived.
- conflict in the absolutist positions may
occur. (tell lie to save life)

Deontological ethics
- the application of absolute, universal ethical principles to arrive at a rule of conduct.
- criteria by which actions are judged in advance. (outcomes of the actions irrelevant)
- Immanuel Kants approach: criteria come from within based on a sense of what is
right, and intuitive awareness of the nature of good.
- Kants motivation to act in terms of imperatives
- Kants view - moral conduct defined by categorical imperatives.
- act in a certain manner coz its right to do so.
HYPOTHETICAL
CATEGORICAL
- course of action to achieve a certain - course of action in terms of moral duty
result.
w/o reference to the outcome.
- Kants 3 formulations- Principles of:
* Consistency
- Golden Rule : do to others what
others do to you.
- Kant : # certain actions were
universally right/wrg, regardless of
the culture.
# hv duty to not act by means
that results in logical solution
# act by universally accepted
maxims.

* Human Dignity
- treat people as an end in themselves.
(x as a means to an end unless we
recognize their right to be treated as
distinct human beings.)
- distinguishes people from object.

* Autonomy
- x subject to any particular interest
- only subject to the laws they make for
themselves. (mz b binding on others or
x universal & not be laws)

Criticisms of Kant
# Contradiction
- dualism:- Humans actions explained in terms of natural causes.
- Humans are capable of self-determination with freedom of action and to act in
accordance wt the principles of duty.
- Man, capable of rising above nature, conflicts wt the view that man is a
natural animal.

# Consequences
- one must take into acc the consequences of their actions.(Kant: consq. x always
known)

# Self-Reform
- people fail to apply Kants approach to themselves: x exercise moral laws / x punish
Themselves when they are morally incorrect.

Teological / Consequentialist ethics : Utilitarianism & Egoism

- courses of action that take into acc their outcomes/ consequences
- Right / wrong based on Benefit / Harm.
UTILITARIANISM

EGOISM

- greatest good principle.

- choose decision based on the
greatest good for the greatest number
of ppl.

- subject to all ethical decisions is self

- act is justified if freely pursue own
interest ST / LT.
- proclaimed to be ethics of the thiefs as
well as ST-ist.

-underlining assumption: operation

of the free market produces the best
possible consequences.
Problems
# ST selfish desires = LT, > benfl Interests
- useful guide to conduct: used to
derive wide range rules applied to
make judgments.

Problems:
# defining what is good for the ppl.
- happiness was the measure of
good.
- actions taken based on the
happiness it brings to the
ppl/relieving unhappiness.

# Markets do not function perfectly

- people benefit themselves at the
expense of someone else.

# Sustainability
# impact on minorities.
- large majority achieve happiness at
the expense of the minority.
- not ethically desirable.

Pluralism
- different views exist, but consensus may be reached ( unanimous decision)
- emphasizes on the importance of morality as a social phenomenon.
- rules n regulation needed to live together.
- important to understand the diff moralities encountered.

Influences on ethics
INDIVIDUAL
Age & Gender
Nat.& Cultural
Blfs
Edu. & Emplymt
Psychological
Locus of Control

EXPLAINATION
Difficult to decipher if men/woman, young/old; who is more ethical.
4 areas of sig.: individualism/collectivism, power distance,
uncertainty avoidance, masculinity/femininity.
Diff in eth. DM present between those of diff edu & prof. experiences.
How ppl think; how they perceive what is right/wrg morally.
How much inf. ppl think they hv over the course of their own lives.
[Internal(ownself inf.)/External(circumstance or luck)]
Personal Integrity To adhere to moral principles/values.
Moral Imagination Lvl of awareness abt the various moral consq. of what they do.
SITUATIONAL INF.
-ppl hv multiple ethical selves : make diff decision under diff circumstances.
- include issue-related factors n context-related factors.
ISSUE-RELATED
Moral Intensity

Nature of the issue & how it is viewed in the org.

6 criteria to dcide hw ethcly sig.: magnitude of consq., social consq,
probability of effect, temporal immediacy, proximity,
concentratn of effect.
Moral Framing
Sets the context on how issues r viewed in the org.(wrds,language)
CONTEXT-RELTD
Expectations & Dds placed on ppl working in the org.
System of Reward Reward mechanisms affect ethical behavior ( good / bad)
Authority
Managers encourage ethical behv. (ex: direct instructions)
Bureaucracy
Underpins Reward & Authority; impact on ind:
Suppression of moral autonomy, Instrumental Morality, Distancing,
Denial of Moral Status.
Work Roles
Edu.& exp build expectation on how ppl in respective roles will act.
(Work expectation override ind. ethics)
Org. Field
Org wthn org share common biz env, norms, values, etc.
Org. Culture
Ways of act-g, talkg, thinkg, evaluatg; include shared:
values, blfs. behvs, taken for granted assumptions.
Nat. & Cultural Ctxt Work in other ctry LT, views on Eth. Issues shaped/ chged by
norms of that country.(nation whr decision is made rthr than the
nationality of the DM)

Kohlbergs cognitive moral development

- relates to the thought processes ppl go thru when making ethical decisions.
- consists of 3 levels of moral dvlpmt wt 2 levels wthn the 3 lvls.
- people at diff level make the same moral/ethcl decision for diff reasons.

# Level 1 : Pre-conventional
- ntng to do with being ethical, rather personal adv/disadv.
Stage 1: Punishment-obedience orientation
- see ethical decisions in terms of reward/punishment.
Stage 2: Instrumental-relativist orientation
- make ethical decision that act in their best interest.
- does the decision benefit them / is it fair to them
- you scratch my back, I scratch your back

# Level 2 : Conventional
Stage 3: Good Boy-Nice Girl Orientation
- do thgs that are expected of them by their immediate circle
- follow the norms & practices of those arnd you.
Stage 4: Law & Order Orientation
- operate in line wt the rules laid by society. / what society feels is
socially/culturally acceptable.
- look at what society want in general.
- not just merely comply wt the law, but go beyond the law to be ethical.

# Level 3 : Post-conventional
- the most advanced level; relates to how ppl make their own ethical decisions.
- what they perceive to be right/wrong.
Stage 5: Social Contract Orientation
- ind. act according to their versions of wad basic values are.(nt influenced)
Stage 6: Universal Ethical Principle
- make decision based on wider universal ethical principles.
- what is universally accepted as the right thg to do. (Kants approach)
- Comes wt a cost ( nvr comply wt local norms, regs.)
Criticisms of Kohlberg
Biased Sample
- sample is too narrowly founded on typical subjective principles like fairness, impartiality.

 Own Values
- he base the framework on his own moral judgements.
- values fairness and justice abv anythg else. (x value peace, harmony)

Influences on Acceptability
- acceptability of a solution depends on their method of reasoning(their process)

Method of Reasoning
- people make moral judgements w/o consideration to the reasoning behind the actions.

Assuming Individual Development

- assume indv. may nt progress in their lives or only up to a certain extent. Thus their
usage of different stages in and out the workplace.

American Accounting Association (AAA) Model

- 7 Step Model
# Step 1 : FACTS OF THE CASE

- show what the issue is. Provide a brief summary.

# Step 2 : ETHICAL ISSUE IN THE CASE
- based on the facts in the case.
# Step 3 : NORMS, PRINCIPLES AND VALUES RELATED TO THE CASE
- place decisions in its social, ethical & prof behavior.
- Eg: fairness, integrity, objectivity, justice.
# Step 4 : ALTERNATE COURSES OF ACTION
- state the courses of action available w/o reference to norm, principles,
values.
- consider the guilty position when answering.
# Step 5 : THE BEST COURSE OF ACTION, CONSISTENT WITH N.P.V.
- combine step 3 & 4. See which one accords the norm.
# Step 6 : CONSEQUENCES OF EACH ACTION.
- to ensure outcome is unambiguous.
# Step 7 : DECISION
- based on step 1-6.

Tuckers 5 Q Model
- determine the most ethical outcome.
- used after AAA model to ensure that the correct decision has been reached.
- 5Qs :
Profitability
Legal
Fair
Right
Sustainable / Environmentally Sound
ACCA Code of Ethics
- guidance for its members to follow.
- ensure accountants fulfill the public interest n meet expectations of the society.
Professional Competence and Due Care

- duty to maintain prof knowledge & skill.

- to ensure client/employer receives competent prof services
- act diligently in accordance wt applicable technical prog standards.

Integrity
- be straightforward & honest in all biz & prof relationships.

Professional Behavior
- comply wt relevant laws & regulations.
- avoid actions that discredit the profession.

Confidentiality
- respect the confidentiality of info acquired. (dont disclose client info w/o consent)
- info acquired shud nt be used for personal gain/ 3 rd party gain.

Objectivity
- not be bias, x hv conflict of interest/ undue influence override prof/biz judgements.

Ethical Threats to Independence

# Self-Interest

- financial interest of the accnt/immediate family member that cn

inappropriately influence the behavior/judgement.
- Employment wt client.
- Gifts & Hospitality.
- Loans & Guarantees.
- Overdue Fees.

# Self-Review
- Evaluation of the accnts own judgements/member of the same org.
- valuation, prepare the accounts, taxation & other services given to the client.

# Advocacy
- promote a position/opinion on behalf of client; compromising objectivity.
- taking the clients side in a legal dispute.

# Familiarity
- close relationships leading to excessive trust/sympathy.
- long association wt the client ( audit partner of the client for >5 yrs)

# Intimidation
- not acting objectively coz of actual/perceived pressures/threats by client.

Bribery & Corruption (B&C)

- Bribery: offer, gv, receive, solicit any item of value to influence the actions
of an official/PIC/legal duty. A promise is a form of bribery. A form of
corruption.
- Corruption:- deviation from honest behavior.
- forms of corruption: abuse of system, cartel, bid rigging,
influence peddling.
WHY!!
# lack of Honesty & Good Faith
# conlict of Interest
# International Risk Management
# Economic Issues
# Reputation
OVERCOMING B&C
Establishing Culture

Code of Conduct

Risk Assessment

Conduct of Business

Report & Whistle blowing

Monitoring
Profession

- theory & skills acqd thru training, valid thru exam, maintained thru continuing
edu.
- skills and value enhance a professionals judgement.
- a body of theory & skills, adherence to common code of values & conduct,
and acceptance of a duty to society as a whole.

Professionalism
- relates to professional behavior as it imposes obligation to act in the public
interest.
-comply wt laws & regn; avoid action that discredits the profession.
- a state of mind to take action in the public interest.

Public Interest
- the collective well being of the community of people and institutions the profs
serve.
- accountants need to satisfy need of client, employer but also the society(supply info)

Johnson & Scholes Corporate & Personal Ethical Stance

- Corporate Stance(CS): Approach taken by the org to diff theories.

- Personal Stance(PS) : Approach taken by the individual to diff theories.
Short-Term Shareholder Interest ( look at current FY)
- limit ethical stance to being responsible for ST shareholder interest.
- imply that Govt. impose wider constraints on CG.
- CS: to provide adequate return to the SHs.
- PS: - small SHs req. annual return on invmt.
- larger SHs hv little ST int. in the org.

Long-Term Shareholder Interest (look years ahead)

- consider the legitimacy of a claim in terms of its effect on LT SHs wealth.
- 2 reasons to take wider view of ethical responsibility:
# Corporate Image: enhance thru wider responsibilities taken on.
# Pressure for legal Rep: prevent build up. May have freedom of action and reg
burden lightened.
- CS: Must maintain existence.
- PS: concern wt security of investment & req capital growth.

Multiple Stakeholder Obligations

- accept the legitimacy of claims/expectations of other stakeholders other than SHs.
- legal rights of other stakeholders have to be respected.
- CS: identify stakeholder wt high power influence & attempt to satisfy their objs.
- PS: each stakeholder grp expects their interests to be understood and acted upon.

Shaper of Society
- Demanding role.
- CS: Change society by apply own power, either for corporate or social benefit.
- PS:- little cn b done to chg society individually.
- as a group, indvs can affect the org by the choices they make.

Gray, Owens and Adams 7 positions on social responsibility

 Pristine Capitalist
- underpinning value is to maximize SH wealth.
- anythg that reduce SH wealth is theft from SH.
- Agents(Directors) that take action which reduce value of return to SH, are acting w/o
mandate and are destroying value for SHs.

Expedients
- recognize some social responsibility strategically necessary to max profits.
- adopt ethical practices so long as its creates and advantage to the company in its
overall strategic positioning.

Proponents of Social Contract

- enjoy license to operate granted by society.
- biz act in accordance to what is appropriate to the society.
- biz need to know the norms and culture of the society to adapt.
- if biz act in manner that society find unacceptable, license to operate be withdrawn
by the society.

Social Ecologist
- recgd that biz hv social & env footprint n take responsibility to min it.
- adopt socially/ environmentally responsible policies because it feels it has a
responsibility to do so.

 Socialist
- actions of the biz are those of the capitalist class oppressing other classes of ppl.
- biz conducted to redress imbalances in the society.
- provide benefits to stakeholders well byond the owners of capital.

Radical Feminist
- society & biz based on feminine characteristics. As prev used to be masculine in
nature.
- represent a major challenge to the way biz is done all over the world, requiring a
complete change in biz and social culture.

Deep Ecologist (Deep Greens)

- humans hv no intrinsic right to exist than any other species.
- humans shud not control social & env systems jz bcoz they can.
- full recgn of each stakeholders claim would not allow biz to continue as it currently
does.