ethical bahaviour and corporate ethics
Post on 18-Nov-2014
48 Views
Preview:
DESCRIPTION
TRANSCRIPT
ETHICAL BAHAVIOUR
Ethical behavior is a subset of human behavior. Human behaviour
means the attitudes, disposition and actions, exhibited by a person in
a particular circumstance. Ethical behaviour is human conduct that is
guided by the moral principles of what is good or bad in a particular
circumstance,
Accountants are normally expected to behave ethically in the
conduct of their professional works. Behaving ethically means that
accountants are expected to comply with fundamental principles,
standards, guidelines, rules and regulations stipulated by the
professional institute (ICAN) as well as complying with the legal
framework within their business environment. More importantly, the
accountants are expected to desist from any misconduct that will
bring the names of their institute and other members into disrepute.
Generally, it is however important to note that, ethical behaviour of a
person depends on the individual/personal influences and situational
influences:
INFLUENCES ON ETHICAL BEHAVIOUR/FACTORS
AFFECTING BEHAVIOURS
A. PERSONAL INFLUENCES
There are various influences that shape individual ethical decision
and behaviours, namely
1. The Age and Gender: The age and gender of person are
factors that may influence his/her ethical decision also
studies have shown that women are more emotional on
moral issues than men. However we must note that Kohlberg
has shown in his ethical moral development theory that age
has low correlation with ascendance on ethical
development level
2. Family Influence: This defines what is right or wrong for
an individual at early age in life.
3. Educational Institution: As person passes through
primary, secondary and tertiary institutions, he learned a lot
and his ethical perception varied. This consequently has that
has direct effect on his ethical decisions and behaviours.
4. Religious Organs: Institution like church, churches, shrines
attended by person influence their ethical behaviours
through various religious indoctrinations and acceptance of
their faiths.
5. Peer Group : This includes the age mate, school mates,
colleagues etc. that can influence a person’s ethical behavior
through acceptable norms; failure to abide, he/she faces peer
sanctions.
6. Institution/Organization Affiliation:
Organization/Institution to which are of affiliated define the
acceptable and unacceptable behaviours and values. Some
employing organizations have ethical codes for their
employees.
7. Culture and Tradition: The norms and values of the society
indicate what is right and acceptable for people in the
community. Otherwise, he/she faces social sanctions
8. LAW: This defines what is legally right and wrong within a
particular business environment which a person is under a
duty to comply with; otherwise he/she faces legal sanctions.
B.SITUATIONAL INFLUENCES
The situational influences explain why an individual manifest
different ethical selfs in different situations. An individual ethical
decision and behaviors changes with situations, this observation
can be explained by
a. Issues -related factors
b. Context-related factors
A.Issues related factors
These are issues on the moral considerations and moral
framing, such as:
i. Magnitude of Consequences : The degree of harms or
benefits that will result from a particular ethical decision. If
either of the consequences is high, the ethical decision is
significant and if low, it is not.
ii. Social consequences The degree at which the society
with accept or reject the ethical decision of a particular
person(s). If either of the consequences is high, the ethical
decision is significant and if low, it is not.
iii. Proximity to those affected The closer or nearer the
decision maker is close/related to those affected, the more
significant the issues involved are.
iv. Depthness/Degree of effect: Whether more people will
be affected by the ethical decision it is significant;
otherwise it insignificant.
v. Temporal Factor effect: If the effect of the ethical
decision on the issue is immediate, it is significant but if
such effect will be in future it is insignificant.
i. Also –Moral Framing
In work place, moral considerations of issues are usually
based on corporate interest. Managers of business
organizations usually avoid issues of morals while taking
decision that promote corporate objectives.
However, where the approach to moral dilemmas tends to
the ‘principles-based’ (i.e ethical words like integrity,
honesty, fairness, etc are mentioned) then reframing moral
decisions is inappropriate. There are no rules to follow,
therefore ethics must be discussed and actions justified
based on sound ethical judgment.
B. Context related factor
This explains how particular issues will be viewed within
certain context. The context-related factors are:
1. System or Reward
Where rewards are based oh achievement (e.g. number
of sales made) then ethical decision making may be
affected. Unethical decision may also increase where
unethical behaviour is unpunished or even supported by
the organization.
2. Authority
Junior managers tend to follow instructions from senior
managers. Where senior managers make unethical
decisions these are likely to be followed by juniors.
Senior management may also provoke a climate where
unethical decision making is accepted.
Bureaucracy
Bureaucracies tend to make employees follow rules
rather than think about the ethics of decisions being
made. More bureaucracy may therefore mean a lower
level of ethical decision making — although this
depends on authority — see above.
Work Roles
Managers tend to follow the ‘work role’ expected —
hence an ethical role such as an accountant will
normally find managers behaving ethically — because
that is expected. In other roles where ethics are
believed to be compromised regularly, managers will
usually also behave less ethically.
Organizational group norms and culture
Managers tend to share the norms of the group they are
in, so what may be described as unethical behaviour
overall may be ‘ethical’ for the group. E.g. A group may
decide that copying work-related software at home is
‘ethical’ and therefore all members of the group
participate in this behaviour.
National and cultural context
Different countries or cultures will have different ethics.
Whether a decision is ethically correct or not may
therefore depend on the specific culture.
CONSEQUENCES OF UNETHICAL BEHAVIOURS
Consequences of unethical behaviours fall not only on the individual
but also on the profession and the society at large. Unethical
behaviours include:
a. Any act or behaviour which is not in agreement with
professional conduct
b. Bahaviour outside the moral principles or ethics of a profession
c. Any act which does not follows the norms of a profession.
d. A bahaviour that negates the code of conduct guiding on
operation
e. Any attitude that is not in consonance with the accepted
norms
f. Conduct that is adjudged wrong, unbecoming and below
expectation
g. Behaviour that is not based on moral principles
h. Deviation from standards and known norms
i. Any act that is not normally right.
See enforcement of ethical standards – P.79-80 of ICAN member
book
SANCTIONS FOR UNETHICAL BEHAVIOUR
Sanction that are usually imposed on members for unethical
behaviours are as follows
(a) Reprimand/ Warning
(b) Payment of cost
(c) Fine
(d) Withdrawal of practicing license
(e) Suspension from Member List
(f) Expulsion from Member List
DISADVANTAGE TO THE PROFESSIONAL INSTITUTE AND
SOCIETY
1. Ripple effect of unethical behaviours and sanction of that by
family, business & economy.
2. Negative consequence of the form stakeholders (creditors,
supplier,etc.
3. Economy suffer (loss of tax, income to workers, partnership,
collapse, etc
4. Negative effect on the professional and the institute
5. Society at large suffer to consequences generally
ETHICS IN CORPORATION ENVIRONMENTS
NOTE: A review of company law will be necessary to
understand
better.
Corporation and its Interest
A corporation is an entity established either by enactment of law by
legislature or incorporation/registration by Corporate Affairs
Commission in Nigeria. A corporation once established is
i. A body corporate; therefore has its own district legal personality
ii. It can pursue her objectives; that is corporate objectives,
A List of forms of business – companies , corporation,
partnership etc.
Corporate Objectives
Corporate objectives are relevant for the organization as a whole and
are related to key business success factors, namely:
Profitability
Increase in market share
Expansion and growth
Cash flow
Customer satisfaction
Quality products
Employee welfare & good industrial relation
Social responsibility
Welfare of management, etc.
STAKEHOLDERS OF CORPERATION
These are groups of individuals or other corporate bodies that are
affect by the activities of the firm. These groups can be classified as
follows.
1. IMMEDIATE/INTERNAL
i. Manager/Directors
ii. Employers
iii. Unions
2. CONNECTED
i. Shareholders
ii. Customers
iii. Debt holders
iv. Bank
v. Supplier/creditors
vi. Competitors
3. REMOTE. EXTERNAL
i. Regulatory Institution/Government
ii. Inland Revenue
iii. Professional bodies, where applicable
iv. Local community
v. Researches – academic, business, analysis etc.
OBJECTIVES OF EACH STAKEHOLDER
EMPLOYEES
They strive to maximize their reward in form of pay packages,
career development, job satisfaction and continuation of
employment. Risks with this group are: refusal to relocate, pursue
their selfish interest, etc.
Managers /Directors
To maximize their rewards and continuity of the organization.
Risks with this group are: pursue their selfish interest,
mismanagement, etc.
Union
To promote the welfare of staff and continuation of employment –
Risk are strike and industrial action
SHAREHOLDERS
Ordinary/equity shareholders provide capital and want to
a. Protect their investment
b. Maximize their wealth
c. Continuity of their investment
CUSTOMER & DEBTORS
They want quality goods at affordable prices and continuity of the
organization.
DEBTHOLDERS
They want constant returns on their investment and protection of
their investments – to receives interests & capital
BANK/SUPPLIER/CREDITORS
They want protect to loan/credit and continuity of the organization.
COMPETITORS
They want to out perform the organization and ensure its divestment
from the industry
REGULATORY BODIES/GOVERNMENT
To ensure the organization complies with government policy and
standards, raise growth and development of the economy, via
increase in jobs etc
INLAND REVENUE BOARD
To collect the right taxes and continuity of the organisations
PROFESSIONAL BODIES
To ensure members complies with standards and ethical principles
LOCAL COMMUNITY
To ensure the organization is socially responsible to the people and
her environment
RESEARCHER
To gain an increased knowledge and ensure the organization
promotes the interest of her environment; both immediate and
remote.
INFLUENCE OF STAKEHOLDERS
Each stakeholder can exert pressure on corporate objectives,
strategy and operations. The greater the power of a particular
stakeholders, the greater her influence on the corporate actions
STAKEHOLDERS & CONFLICT & AGENCY
Each stakeholder group have different objectives and expectations
and these sometime conflict with one another.
1. SHAREHOLDERS & MANAGEMENT
Shareholders are the owners of the corporate entity but the
management power are given to directors by law. Hence there
exist conflict of interest between
Entity Owners Management
1. Company Stakeholders
Directors
2. Government
Parastatal Public Board appointed
This separation of ownership & management creates agency
problems. This is because directors may use their positions to reward
themselves rather more than increase shareholders’ wealth
AREAS MANIPULATION BY DIRECTORS
1. By making efforts to increase the profit or share price in the
short term in order to increase their rewards at the expense of
long term benefits.
2. By making efforts to increase sales/revenue to show artificial
performance but without profits and there could be many
debtors.
3. By embarking on empire building- creating many offices with
many staffs, this increase overhead & decrease profit
4. By resisting good takeover bid beneficial to shareholders,
because that will threaten their positions or lead to loss of their
offices.
5. By embarking on creative Accounting or window dressing
ENCORAGING GOAL CONCURANCE BETWEEN DIRECTORS
& SHAREHOLDERS
i. By making performance related pay to the directors
ii. By rewarding management with shares especially when a
private company goes public at an attractive offer price
iii.By giving management share option: that to subscribe to no of
company shares at fixed price in future. The vale of the option
goes up if the shares prices of the company goes up
iv.By providing Share qualification scheme for all directors
2. SHAREHOLDER MANAGER & DEBTHOLDERS
When Management raises funds from long term creditors that
will increase the firm’s financial gearing - i.e the risk of its
insolvency increases. The debt financé requires positive cash
flow to meet firm’ s obligations of as they fall due; otherwise the
securities they pledged, the restrictive covenants they signed or
the manager- receivership agreement they signed will be
invoked.
However when there is enough cash flow, the shareholders and
manager gain in form of the increase in dividends, retained
profit and increase in director remunerations.
CONFLICT AREAS BETWEEN
MANAGEMENT/SHAREHOLDERS AND DEBT HOLDERS
- Management may be interested in risky projects, using debt
holders’ funds, where it succeeds they shareholders/directors
gain more. Where otherwise they will all loss their investments.
- Prolong the life of the firm is the wish of the
shareholders/managers, while debtors may wish to liquidate the
firm for their return of their capital and interest. Managers may
seek further loan and increase the company’s gearing and risk
at the expenses of the debtholders and increase the operating
leverage.
- Even through, there are loans restrictions/convenants, the
manager may pay high dividends to shareholders just to
maintain/secure their appointments but at the expense of the
debtholders interest. Whereas the company’s capital
undermined/reduced.
SHAREHOLDER MANAGERS & GOVERNMENDT
Government may not have direct interest in corporate entities, but
have strong interest in the company affairs as follows:
i. Taxation; Tax on profit, VAT and Withholding Tax
ii. Government funds/grants; Government provides
funds/grants and give tax incentives in some priority sectors,
iii. Wider Spread of members through privatizations and
regulations of public companies
iv. Legislation: Government may influence to relationship among
stakeholder via legislation & regulation
v. Economic Policy: Government economic Policy acting affect
corporate interest i.e monetary fiscal policy affect interest rate
inflation economic growth employment etc.
top related