16. Ethics, sustainability and corporate responsibility Flashcards
Define ethics.
A system of behaviour which is deemed acceptable in the society or context under consideration.
On what three levels does business ethics exist?
- Personal ethical behaviour
- Business ethics
- Corporate responsibility - This is the belief that a firm owes a responsibility to society and its wider stakeholders, as well as to shareholders.
What are ethical stances that an organisation can adopt?
- Meet minimum legal obligations and concentrate on short-term shareholder interests.
- Recognise that long-term shareholder wealth may be increased by well-managed relationships with other stakeholders
- Go beyond minimum legal and corporate governance obligations to include explicitly the interests of other stakeholders in setting mission, objectives and strategy.
- Public sector organisations, charities, etc, where the interests of shareholders are not relevant.
The ethical stance taken by an organisation is often reflected in its mission statement.
In what ways does ethical business regulation operates?
- Forbidding or constraining certain types of conduct or decisions
- Disclosure of certain facts or decisions
What are the five fundamental principles of the ICAEW Code of Ethics (2020) applicable to chartered accountants?
- Integrity
- Objectivity
- Professional competence and due care
- Confidentiality
- Professional behaviour
What are the five threats to compliance with the fundamental principles of the ICAEW Code of Conduct?
- Self-interest
- Self-review
- Advocacy
- Familiarity
- Intimidation
What are examples of safeguards that might be applied in the work environment to overcome the threats to compliance with the fundamental principles of the ICAEW Code of Conduct?
- The employing organisation’s systems of corporate oversight or other oversight structures.
- The employing organisation’s ethics and conduct programs.
- Recruitment procedures in the employing organisation emphasising the importance of employing
high calibre competent staff. - Strong internal controls.
- Appropriate disciplinary processes.
- Leadership that stresses the importance of ethical behaviour and the expectation that employees will act in an ethical manner.
- Policies and procedures to implement and monitor the quality of employee performance.
- Timely communication of the employing organisation’s policies and procedures
- Policies and procedures to empower and encourage employees to communicate to senior levels
- Consultation with another appropriate professional accountant.
In exercising professional judgement, what might an accountant consider?
• relevant information might be missing from the facts known to the accountant
• there is inconsistency between the known facts and the accountant’s expectations
• the accountant’s expertise and experience are sufficient to reach a conclusion. Is there a need to consult experts on the issues involved?
• the information provides a reasonable basis on which to reach a conclusion
• the accountant’s own bias might be affecting the exercise of professional judgement
What safeguards might be applied to the professional accountant’s work environment?
- Assigning additional time and qualified personnel to required tasks when an engagement has been accepted might address a self-interest threat.
- Having an appropriate reviewer who was not a member of the team review the work performed or advise as necessary might address a self-review threat.
- Using different partners and engagement teams with separate reporting lines for the provision of non-assurance services to an assurance client might address self-review, advocacy or familiarity threats.
- Involving another firm to perform or re-perform part of the engagement might address self-interest, self-review, advocacy, familiarity or intimidation threats.
- Disclosing to clients any referral fees or commission arrangements received for recommending services or products might address a self-interest threat.
- Separating teams when dealing with matters of a confidential nature might address a self-interest threat.
What are the three tests that the Institute of Business Ethics offer?
- Transparency - Is the situation characterised by integrity, openness and honesty? Would a third party construe it as honest and straightforward?
- Effect - Whom does the situation potentially affect or hurt? Have the interests of all stakeholders been considered?
- Fairness - Would the situation or proposed course of action be considered fair by those affected and by third parties?
What are the four questions that are asked when using the philosophical model of ethical decision-making?
(a) Do the benefits outweigh the harm to oneself?
(b) Do the benefits outweigh the harm to others?
(c) Are the rights of individual stakeholders considered and respected?
(d) Are the benefits and burdens justly distributed?
What are some potential areas for conflict between ethics and business strategy?
• Cultivating and benefiting from relationships with legislators and governments
• Fairness of labour contracts
• Privacy of customers and employees
• Terms of trade with suppliers
• Prices to customers
• Managing cross cultural businesses
What is the most fundamental ethical issue facing marketing?
The most fundamental ethical issue facing marketing is the potential accusation that marketing wastes the world’s resources by making things that people don’t really need and then using promotion to convince people that they are not satisfied without them.
What are some points that can support marketing in terms of ethical issues?
- Value judgements
- Employment effects
- Proper target marketing may reduce waster
- Ethical marketing
What is sustainability?
Sustainability: The ability to ‘meet the needs of the present without compromising the ability of future generations to meet their own needs’
Sustainable development: Is the process by which we achieve sustainability.
