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Flashcards in Ch 1 Ethics Expectations Deck (54)
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The support for business, and business in general, depends on what three things?

1) Credibility that stakeholders place in corporate commitments
2) Company's rep
3) Strength of company's competitive advantage


It is unlikely that businesses or professions can achieve their LT strategic objectives w/o the support of key stakeholders like whom?

- S/Hs
- Employees
- Customers
- Creditors
- Suppliers
- Governments
- Host Committees
- Activists


What does authenticity mean?

- Being true to your own personality, values, and spirit, regardless of the pressure that you're under to act otherwise


What could professional accountants have done to prevent the development of the "credibility" and "expectations" gap?

Auditors could have:
- Focus on primary loyalty to public
- Ensure independence before accepting an engagement
- Develop a culture of integrity at firm through clear communication, tone at top, integration, reinforcement, education


Why might ethical corporate behavior lead to higher profitability?

According to authors, ethical behavior can help corporations avoid costly items like:
- Clean up of pollution problems
- Fines
- Low morale, high turnover
- Loss or reputation


How can corporations ensure that their employees behave ethically?

- Develop a culture of integrity through
1) Clear communication
2) Personal commitment by senior management
3) Integration
4) Ethics must be reinforced
5) Education


Should executives and directors be sent to jail for the acts of their corporation's employees?

- Depends
- US Sentencing Guidelines of 1991 impose harsh penalties on organizations whose employees have committed federal crimes
- Should not have to be responsible for corporate psychopaths who have no sense of right and wrong


Why are philosophical approaches to ethical decision making relevant to modern corporations and professional accountants?

- Provide insights into key dimensions of ethical reasoning
- Greater and growing ethical awareness and sensitivity; power of stakeholders can make a difference to the reputations and fortunes of companies and professional accountants
- Laws and codes often silent and philosophical approaches help us make well-rounded decisions


Is a professional accountant a businessperson pursuing profit or a fiduciary that is to act in the public interest?

- not an "OR" statement but an "AND" statement
- But when there is conflict b/w roles, professional accountant must place fiduciary duty above business duty


According to the authors, during the last 30 years, there has been an increasing expectation that business exists for what purpose?

To serve both S/Hs and society


Governance failures resulted from what?

- Directors, executives, and professional accountants serving themselves to the detriment of other stakeholders and the public interest


Success in business increasingly depends on what?

- Maintaining the support and trust of stakeholders


Stakeholders increasingly expect that a corporation's activities will reflect what?

Stakeholders' values and interests


We are increasingly environmentally sensitive. Give an example of how public health is affected by corporate behavior.

Air pollution
- Initially a local problem (smog)
- Later it can spread (acid rain)
- Now there's global warming and climate change


When did we become increasingly sensitive to the lack of fairness and equitable treatment?

1980s and 1990s
- Feminist movement
- Persons with disabilities
- Consumer protection
- Employment laws
- Child labor


Where did ethical investors emerge from?

- Nike products manufactured in sweatshops by children


What sorts of economic pressures lead to ethical lapses?

- Pressure from economic downturns like recession
- Growing pressure from global competitors


The difference b/w what the public thinks it is getting in audited f/s and what the public is actually getting is known as:

Expectations gap


Financial malfeasance has led to a crisis in confidence over what?

Corporate reporting and governace


Financial malfeasance has led to doubts in other spheres of corporate activity. What is this gap known as?

Credibility gap


What scandals made it clear that corporate governance was inadequate and governance reform was needed?

- Enron, Anderson, WorldCom scandals made clear that then existing corporate governance was not working
- Directors and executives were more worried about enriching themselves than identifying, assessing, and managing risk


Which corporate report discusses subjects that include environmental, health and safety, philanthropic, and other social impacts?

Corporate social responsibility report


Scandals have caused cumulative heightening of public's awareness and desire for controls w/r/t unethical corporate behavior. This heightened awareness of the need for controls has led to what sorts of publications?

- U.S. Sentencing Guidelines


Now, public expectations have changed to exhibit what three things?

1) Less tolerance
2) Heightened moral consciousness
3) Higher expectations of business behavior


Now, what watchdogs have emerged?

- Greenpeace
- Ethical investors
- Ethical mutual funds


According to the authors, change in public expectations has triggered an evolution in the mandate for business. What is this evolution?

- From laissez-faire, profit only world view of Milton Friedman
- To view that business exists to serve society (and not the other way around)


According to the authors, ethical corporate behavior is expected to lead to what:

Higher profitability in the long term


True or false.

Most ethical companies significantly underperform the S&P 500.

False (they often outperform the S&P 500)


According to the authors, judgements of the future success of corporations will be made w/i what broader framework?

W/i broader stakeholder-oriented framework (including both what is achieved and how it is achieved)


What are key BOD control functions?

1) Set guidance and boundaries likes policies, codes, and culture
2) Set direction like strategies, goals, remuneration
3) Appoints CEO and CFO
4) Arranges for resources
5) Monitors feedback
6) Reports to S/Hs
7) Nominates and decides on auditor