Flashcards in Ch 1 Ethics Expectations Deck (54)
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?
- Host Committees
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
- 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
4) Ethics must be reinforced
Should executives and directors be sent to jail for the acts of their corporation's employees?
- 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.
- 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:
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?
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?
- 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)