Chapter 9: Ethical Decision Making

Question 1

Advantages of ethical business conduct (4)

Answer 1

1 Increase in Employee Commitment
- trust by employee
- sense of ownership as business benefits general public
- unethical conduct leads to unethical employees (disloyal etc.)
- unethical conduct creates negative culture within organisation > bad in long run

2 Increase in investor’s confidence:
- Ethical culture is important for business growth
- unethical business is risky due to bad reputation, loss of customers, lawsuits
- ethical company stays in business for a long time period > sense of security

3 Increase in customer satisfaction
- Customer would prefer an ethical business over an unethical one > competitive advantage
- unethical practices could result in loss of customers leading to lower revenue and hence lower profits

4 Profits
- Unethical practices not only lead to low revenue due to customer losses but also result in lawsuits and litigations > unwanted expenses and recovery of reputation(marketing etc) is also costly

Question 2

Steps of the American Accounting Association (AAA) model

Answer 2

1. Establishing the facts of the case
   (What Who Where When How)
   (no ambiguity about what is under consideration)
   (identify what we know or need to know to define the problem)
2. Identify the ethical issues in the case.
   (examining the facts and asking what ethical issues are at stake)
   (complete account of key ethical issues and dilemmas is developed)
   (threats to compliance with fundamental principles are identified and explained)
3. An identification of the norms, principles and values related to the case
   (placing the decision in its social, ethical, professional behaviour context)
   (code of ethics, social expectations, norms, values, principles)
4. Each alternative course of action is identified.
   (compiling a complete set of major practical alternatives or likely decisions) (should not consider the norms, principles and values)
   (there would be high ethical opportunity costs of each alternative)
5. Matching norms, principles, and values to options
   (find overlap between norms, principles and values identified in Step 3 and alternatives identified in Step 4)
6. The consequences of the outcomes are considered.
   (analysis of implications and consequences of each possible alternative)
   (analysis should be about LR, SR, POSITIVE, NEGATIVE)
   (problem of human preference vs focus on short run benefits/harms vs long run)
7. The decision is taken.
   (final decision requires application of professional judgment)

Question 3

Tucker 5-question model (5)

PLFRS

Answer 3

1. Profitable
2. Legal
3. Fair
4. Right
5. Sustainable (environmental impact)