Corporate Social Responsibility

&
International Management

BAGB 99002
 Section A:

Business Ethics & Ethical Conflict

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 Learning Outcomes:

• Demonstrate an understanding of the importance of ethics to

society, business and the professional accountant.

• Explain the need and requirements for students and members

in adopting the highest standards of ethical behaviour.

• Explain the various means of regulating ethical behaviour,

recognising different parties’ perspectives towards ethical
dilemmas.

• Identify ethical dilemmas and how they may be resolved.

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Business Ethics

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 Introduction
• Ethics is a branch of philosophy that involves examining,
categorising, justifying and recommending concepts of right
and wrong behaviour.

• Ethics also deals with the moral principles that govern a

person's decisions and behaviour.

• Ethical standards within business have become very

important and poor ethics often leads to fines, loss of trust
and falls in shareholder value.

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 What influences the Ethics of a
person?
The law
• Legislation (laws passed by parliament) makes it very clear what is
acceptable as a minimum standard. However, ethics is more than
just obeying the law.

Government regulations
• For example, regulations banning the use of polythene.
Unfortunately, some firms will still find ways to get round such
regulations.

Personal policies and values

• An individual's personal characteristics such as gender, age and
religious beliefs can also influence their approach to ethics. 6
Social pressure
• Many people draw their values from what they see other
people doing, whether on the news or people they know.

Codes of Ethics
• The code of ethics implemented by the company individual
works for and a code of ethics enforced by the professional
body the individual is a member of (Ex. CIMA code of ethics)
would influence the person’s behaviour.

Corporate culture
• This refers to the influence of the culture prevalent among the
staff in a company.

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 Ethical Approaches
Absolute value theorists
• Assume that there is only one set of moral rules that are
unchanging and always true.

Relative value theorists

• Accept that there are many moral/ethical codes each of which
evolves over time and each could be different from every
other.
• More open acceptance of differing codes of ethics. The
relative theorists do not believe in the “one moral truth”.
• They accept the need for evolution of moral codes.
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 Discuss
The Ethics of Abortion

In May 2009 Dr. George Tiller was shot to death in Kansas outside his abortion clinic where
he had performed late term abortions. 10
 Schools of Ethics
Teleology/utilitarianism/consequentialism

Holds that any action must be viewed in terms of the

consequences that the action produces: do the consequences
serve some intrinsic good?

Utilitarianism proposes that one should act in such a way to

produce the greatest good for the greatest number.

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Deontology (Duty Bound ethics)

Suggests that ethics arise from the rightness or wrongness of

actions themselves, as opposed to the rightness or wrongness of
the consequences of those actions.

It argues that decisions should be made considering the factors

of one's duties and other's rights

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Virtue Ethics

Emphasises the virtues, or moral character, in contrast to the

approaches that emphasises duties or rules (deontology) or that
emphasises the consequences of actions (consequentialism).

Moral character can allow a person to flourish through a life

well-lived and this state is achieved by practicing the virtues.

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 Consequences of Poor Ethics
• An ethical organisation will suffer less from legal penalties and
damages.
• An ethical approach reduces risk for investors and this will
reduce the return they require. Cheaper finance means higher
profits.
• Better people are likely to be attracted to become employees
of ethical companies.
• Customers might boycott and abandon unethical companies.
• Ethical companies will find other companies more eager to
cooperate
• Ethical companies will be trusted to deliver what they
promised in the way they promised.
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 Discuss
• You are a pharmaceutical company developing new drugs. How much
testing should be carried out before the drugs can be marketed?

• Your factory is old and inefficient and you are thinking of moving to
new one with more efficient use of energy, in another area of the
country with better transport connections.

• You run an airline. You transport passengers for business and leisure
and to visit overseas family members.

• House builders create accommodation for families.

• You are an accountant reporting to a lender on the prospects of a

client. A poor report will lead to business closure and redundancies
but an optimistic report might lead to the lender losing their
investment.
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 Public Interest
The “public” includes all users of financial information and
decisions

“Interest” describe the responsibilities that professional

accountants have to society.

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Examples of accountants’ responsibilities towards
public interest are:

• Providing sound financial and business reporting to investors

and all stakeholders affected by that reporting.

• Promoting the comparability of financial reporting and

auditing across different countries.

• Reducing economic uncertainty throughout the economy.

• Requiring that accounting professionals apply high standards

of ethical behaviour and professional judgment.

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• Specifying appropriate educational requirements (including
continuing professional development) and qualifications for
professional accountants.

• Specifying regulatory and disciplinary procedures for the

accountancy profession.

• Encouraging governments and public sector organisations to

provide sound fiscal information and decision-making.

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 Sources of Professional Rules & Ethics
The law:
• Local laws must be complied with, and take precedence over
other sources.
• However, most legal frameworks give little guidance about
how professionals should approach ethical problems.

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IFAC:
• The International Federation of Accountants develops
accounting and auditing standards that it hopes will be
adopted across all countries.

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IESBA:
• The International Ethical Standards Board for Accountants
(part of IFAC) develops ethical codes and guidance

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CIMA:
• CIMA members must comply
with local laws, local financial
reporting and auditing standards
and with the CIMA Code of
Ethics.

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AMA
• Commits itself to promoting the highest standard of
professional ethical norms and values for its members
(practitioners, academics and students).

Marketers must:
• Do no harm.
• Foster trust in the marketing system.
• Embrace ethical values.

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SHRM

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 Ethical Codes
Equal
Use of the
opportunity/ Bullying
internet
discrimination

Reporting Money-
Bribery
wrong-doing laundering

Response to
conflicts of
interest
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 Rules based
Approaches to
formulating and
applying ethical codes:
Framework based

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Rule Based Approach:
• The rules based, or compliance based, approach is based on
specific checks and punishments or sanctions.
• Controls are implemented by establishing checklists that
employees are required to sign-off to provide evidence that
they have complied with the rules.

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Framework Based Approach:
• The framework based, or integrity based, approach sets out
guiding principles, and creates a culture that promotes ethical
sound behaviour.
• There are few if checklists and compliance is based on trusting
employees to ‘do the right thing’.

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Organisational and Personal Values

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The two sets of values can be brought towards
each other by:
• Recruitment: try to ensure that new employees share at least
some of the organisation’s values.

• Training: for example courses, group discussions and role play

that examine ethical dilemmas.

• Ethical codes: these explain how employees should act and

will also set out sanctions if the code is breached.

• Corporate culture: a strong emphasis from the top on how

things should be done in the organisation

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Employee Virtues and Values (Personal Values):

• Reliability: employees should do what they say they will do, both in
terms of quality and in meeting deadlines.

• Responsibility: employees should be willing to be accountable for

their actions and decisions.

• Timeliness: meet deadlines. Do not have undue delays in carrying out

tasks or communicating with others.

• Courtesy: it is important to be courteous to others both inside and

outside your organisation.

• Respect: towards other people and their views – even if you think
they are wrong.
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Professional Qualities

1. Independence –

Of mind
• It is required that the professional accountant has a state of mind free
from bias and conflict interest that permits a conclusion to be
expressed without compromising their professional judgement.

In appearance
• An accountant should avoid any behaviour or conduct that would cause
a reasonable observer to doubt the integrity or objectivity of his
professional judgment.

2. Accountability
• The accountant should responsible to someone and for his actions, and
being able to explain those actions. 34
3. Skepticism
• Professional accountants should question information given to
them. By questioning, accountants form their opinion about its
quality and reliability, reducing the risk of misinformation.

4. Social responsibility
• The professional accountant has a wider role in fulfilling their public
duty. Social responsibility is their role within the community, be it
defined as their profession, their firm or place of work, where their
place of work or home is located or howsoever the individual cares
to define community.

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 Lifelong Learning

“The provision or use of learning opportunities, both formal and

informal, throughout people's lives in order to promote
continuous development and improvement of the knowledge
and skills needed for employment and personal fulfilment”

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It is often described as being:
• ongoing
• voluntary
• self-motivated.

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END OF CHAPTER 01

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