sheq integrated management system ims module 1- … · welcome to the learning unit apply ethical...

SHEQ INTEGRATED MANAGEMENT SYSTEM

IMS

MODULE 1- SECTION 1.3

APPLY ETHICAL PRINCIPLES TO IMPROVE

ORGANISATIONAL CULTURE

LEARNER GUIDE

Approved by: Prime Link management Authorized: 06.10.2015 Next revision: 06.10.2015 Developed by: M Engelbrecht UNCONTROLLED IF PRINTED Doc. Nr.: SHEQ-IMS-001 COPYRIGHT PROTECTED 2 | P a g e

SHEQ – IMS COURSE

Edition 1-2013

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INTRODUCTION

You made the right choice by attending this course! Nobody can ever guarantee you a job after you

received your qualification, but we can equip you with skills to obtain a job much easier or to create your

own work and be self-employed.

Nobody can guarantee you that the future will be bright, that you are going to reach the stars and all your

goals will come true after you attended this course, BUT what I can guarantee you is that this course will

be a positive experience in your life that you will definitely use in future.

My personal experiences in life are something that I would like to share so that you can learn from my

mistakes and my achievements. The facilitators that will assist me in facilitating the SHEQ IMS course are

all well qualified and experienced Auditors, Teachers and all running their own businesses. They share my

passion to empower people through training and will, in their own style, transfer knowledge to you. Your

responsibility is to make the information your own, participate and ask the “Why?, Why not?, How?

Where, etc. questions every day.

I aim with this course to inspire, motivate and transfer knowledge on a practical manner. Therefore, you

will find Pictures, Videos, Diagrams, Mind Maps, Process flows and learning examples that are practical

and applicable in real life! If you still find that the examples is not applicable to you, we will provide a

student support structure on-line where you can discuss matters further with the Prime Link team of

experts.

After this course you will have a better idea of what career will suite you the best and from there, the

sky is the limit!

If you are already in a work environment, you have such a benefit! Most of the business processes will be

familiar, but to control these processes might be a challenge. We show how NOT to re-invent the wheel.

Learn how to prioritize, enhance and make the control of an Integrated SHEQ Management System

manageable!

You are not supposed to struggle to obtain information, old documents, slow processes, manual

processes, non-conforming products, injuries or Non-conformances that are not completed which result

in a unstable, unsustainable SHEQ system.

I believe that this course will be the first of many that will be presented and will improve continuously as

we receive feedback from you, our student for life !

Learning Greetings

Marianne Engelbrecht


SHEQ IMS – CONTENT

1. LEARNING PROGRAMME INFORMATION

1.1 Introduction

Welcome to the learning unit Apply Ethical Principles to Improve Organisational Culture, which forms

part of the SHEQ IMS Course.

The purpose of this course is to provide the candidate assessor with the necessary knowledge and skills

to be able to Apply Ethical Principles to Improve Organisational Culture in a work situation. The

achievement of the credits for this course will contribute towards the achievement of the qualification

66189: National Certificate: Quality Management Systems.

Given a learning programme that consists of a combination of facilitation and back-at-work

implementation over a period of two days, the learner will have the foundational, practical and reflexive

competence to effectively communicate according to Unit Standard 252042.

1.2 Unit Standard Alignment

Learner Tip: The following table illustrates the unit standard alignment of this Learning Unit:

Learning Unit: Apply Ethical Principles to Improve Organisational Culture

NLRD US Title Level Credits

252042 Apply the principles of ethics to improve

organisational culture 5 5


1.3 Learner Support

Please remember that the programme is outcomes based. This implies the following:

You are responsible for your own learning – make sure you manage your study, practical, workplace

and portfolio time responsibly

Learning activities are learner driven – make sure you use the Learner Guide and Portfolio Guide in the

manner intended, and are familiar with the Portfolio requirements

The Facilitator is there to reasonably assist you during contact, practical and workplace time of this

programme – via e-mail, fax and telephone. Make sure that you have his/her contact details

Self-test checks, formative assessments with feedback

Extra reading lists or web information are provided on request

2. ASSESSMENT

2.1 Learning Outcomes:

Please refer to the beginning of each module for the learning outcomes that will be covered per module.

2.2 Formative Assessment

In the Learner Assessment Guide, several activities are spaced within the content to assist you in

understanding the material through application. Please make sure that you complete ALL the activities,

whether it was done during the contact session, or not! These activities will form part of your Portfolio

of Evidence.

2.3 Summative Assessment

You will be required to complete a Portfolio of Evidence for summative assessment purposes. A portfolio

is a collection of different types of evidence relating to the work being assessed. It can include a variety

of work samples.

The Portfolio Guide will assist you in identifying the portfolio and evidence requirements for final

assessment purposes. You will be required to complete Portfolio activities in your own time.

Portfolio Activity:

DO NOT WAIT until the end – the programme is designed to assist you in evidence preparation as you go

along – make use of the opportunity!

Remember:

If it is not documented, it did not happen!

In some evidence, the process you followed is more important than actual outcome / end-product

Therefore … please make sure that all steps of the Portfolio Activities are shown where required

3 LEARNER ADMINISTRATION

Learner Tip:

The following Learner Administration is critical in assisting your provider in managing this programme

effectively

Please take a moment to familiarise yourself with the requirements

3.1 Attendance Register

You are required to sign the Attendance Register every day of attendance. Please make sure you sign

daily!

3.2 Learner Registration Form

Pease refer to the end of the first section of the Learner Assessment Guide for the Learner Registration

Form. Make sure you complete it, using the Key Document. Submit the form to your Facilitator before the

end of the contact session, together with a copy of your ID document.

Learner Tip/Truths:

Without the Learner Registration and ID Documents we will not be able to print your certificate.

3.3 Programme Evaluation Form

At the end of the program, your facilitator will provide you with a Learning Programme Evaluation Form.

Please complete the form before the end of the contact sessions, as this will assist us in improving our

service and programme material. Your assistance is highly appreciated.


The learning outcomes of this Section is explained on the next page. You will be assessed according to the following

assessment criteria as per South African Qualifications Authority Requirements.

The Unit Standard applicable is: US252042. More information about this unit standard is available on request.

This Learner Guide is the property of Prime Link and copyright protected. The content of this guide is approved by

the South African Institute for Occupational Health and Safety (SAOISH). The content of the manual are based and

written in a way suitable for candidates on NQF level 5.

The Author want to thank you for choosing Prime Link as Service Provider. We constantly aim for continuous

improvement and appreciate your feedback for improvements on the content of this guide.

Learning Program Title Apply Ethical Principles to Improve Organisational Culture

Duration 2 days formal facilitation

5 Credits= 50 Notional Hours: Average learners will require 16 notional

hours of learning to reach the specified outcomes. This will be made

up of time spent in work based training, practical workplace

experience, self- study and research time, work based projects and the

compilation of a portfolio of evidence

Nature of the Program Part of Qualification 66189, but can also be a Skills Programme

Purpose The purpose of this course is to provide the candidate with the

necessary knowledge and skills to

• Demonstrating understanding of the relationship between

values, ethics and organisational culture and its impact on

achieving goals and objectives.

• Applying the concept of corporate ethics to a unit.

• Analysing the unit in relation to the principles of corporate

ethics.

• Formulating recommendations for promoting organisational

values, the code of conduct and ethical practices within a unit

and entity

Focus Area Change in a business, and the organisational culture of a business

Unit Standards Covered 252042

Level of Training 5


Target Population Persons in a business that are managers in all economic sectors.

These managers would typically be second level managers such as

heads of department, section heads or divisional heads, who may

have more than one team reporting to them

Entry Requirements • Communication at NQF Level 4.

• Mathematical Literacy at NQF Level 4.

• Computer Literacy at NQF Level 4.

Mode of Delivery Presented in two days. The programme will deal with completed units

of learning, but unit standard outcomes will be integrated to ensure

effective integration of foundational, practical and reflexive

competence.

Trainer-led: Facilitation and participative presentation

Self-study

Back-at-work practical/ implementation (can lead to portfolio

development)

Experiential and action learning

Learning Environment Classroom and back-at-work implementation

Learning Methodologies Lecturing, facilitation, case-studies, experiential exercises, role-plays,

video-based discussions and group work

Learner Support Self-test checks, formative assessments with feedback

Facilitator support via e-mail, fax and telephone

Extra reading lists or web information are provided on request

Assessment Formal (Summative) assessments will be conducted back at work

A pre- (diagnostic) assessment and formative assessments will take

place during and after learning and can be submitted as a part of the

summative assessment

Moderation If assessments took place: A 10% sample (minimum) of all assessment

are moderated and assessments that are drawn will be retained for

external verification

Recognition of Prior Learning RPL can be applied in two instances:


Assessments of persons who wish to be accredited with the

learning achievements

Assessments of learners to establish their potential to enter

onto the learning program

Certification A certificate of competence will be issued to learners who were

assessed formally and found competent against the unit standard

outcomes

Certificates of attendance can be made available to candidates who

completed the skills programme successfully

Review of the learning

program

Learning programme is reviewed informally before every training

session


5. LEARNING OUTCOMES AND UNIT STANDARD INFORMATION

LEARNING OUTCOMES – UNIT STANDARD 252042– Apply the principles of ethics to improve organisational

culture

SAQA US ID UNIT STANDARD TITLE

252042 Apply the principles of ethics to improve organisational culture

ORIGINATOR REGISTERING PROVIDER

SGB Generic Management

FIELD SUBFIELD

Field 03 - Business, Commerce and Management

Studies

Generic Management

ABET BAND UNIT STANDARD TYPE NQF LEVEL CREDITS

Undefined Regular Level 5 5

REGISTRATION

STATUS

REGISTRATION START

DATE

REGISTRATION END

DATE

SAQA DECISION

NUMBER

Registered 2007-11-28 2010-11-28 SAQA 0474/07

LAST DATE FOR ENROLMENT LAST DATE FOR ACHIEVEMENT

2011-11-28 2014-11-28

This unit standard does not replace any other unit standard and is not replaced by any other unit

standard.

PURPOSE OF THE UNIT STANDARD

This Unit Standard is intended for managers in all economic sectors. These managers would

typically be second level managers such as heads of department, section heads or divisional heads,

who may have more than one team reporting to them.

The qualifying learner is capable of:

Demonstrating understanding of the relationship between values, ethics and

organisational culture and its impact on achieving goals and objectives.

Applying the concept of corporate ethics to a unit.

Analysing the unit in relation to the principles of corporate ethics.

Formulating recommendations for promoting organisational values, the code of conduct and

ethical practices within a unit and entity.


LEARNING ASSUMED TO BE IN PLACE AND RECOGNITION OF PRIOR LEARNING

It is assumed that learners are competent in:

Communication at NQF Level 4.

Mathematical Literacy at NQF Level 4.

Computer Literacy at NQF Level 4.

UNIT STANDARD RANGE

The learner is required to apply the learning in respect of his/her own area of responsibility.

Unit refers to the division, department or business unit in which the learner is responsible for

managing and leading staff.

Entity includes, but is not limited to, a company, business unit, public institution, small

business, Non-Profit Organisation or Non-Governmental Organisation.

Corporate ethics includes business ethics and the ethical norms and standards of public sector

entities.

Specific Outcomes and Assessment Criteria:

SO1 Demonstrate understanding of the relationship

between values, ethics and organisational culture

and its impact on achieving goals and objectives

AC1 The relationship between personal

values, organisational ethics, and the

entity`s culture is demonstrated

through examples from the South

African workplace




AC2 The complexity of the conflicts between

personal values and the entity`s values

and ethical codes is illustrated with

examples from the South African

workplace




AC3 The potential impact of organisational

values and culture on the entity`s triple

bottom line are analysed and described

SO2 Apply the concept of corporate ethics to a unit AC

1

The imperatives for ethical conduct in

South African organisations are

explained with reference to acts,

regulations, codes and other documents

relevant to the entity

SO2 Apply the concept of corporate ethics to a unit AC2 The role of corporate governance within

an entity is analysed to determine the

contribution of a unit in promoting


internal organisational codes and ethical

practices.

SO2 Apply the concept of corporate ethics to a unit AC3 The specific ethical practices of a unit in

different areas are analysed with

examples.

SO3 Analyse a unit in relation to the principles of

corporate ethics.

AC1 An instrument is selected for analysing

individual and organisational conduct in

respect of organisational values, codes

of conduct and corporate ethics


corporate ethics.

AC2 The instrument is applied to gather and

record information within a unit in

respect of organisational values, codes

of conduct and corporate ethics


corporate ethics.

AC3 The instrument is applied to evaluate

the current state in a unit against the

desired state in respect of

organisational values, codes of conduct

and corporate ethics

SO4 Formulate recommendations for strengthening

shared organisational values, the code of conduct

and ethical practices

AC1 An implementation plan is prepared

that described the strengthening of the

entity`s values, code of conduct and

ethical practices in the unit




AC2 The role and responsibilities of the

manager are described in terms of

decision making to strengthen the

values, code of conduct and ethical

practices in a unit and the entity




AC3 The communication activities for

promoting the entity`s values, code of

conduct and ethical practices are

outlined in the plan, with role allocation

and time frames




AC4 The communication activities for

promoting the entity`s values, code of

conduct and ethical practices are

outlined in the plan, with role allocation

and time frames


UNIT STANDARD ACCREDITATION AND MODERATION OPTIONS

Anyone assessing a candidate against this Unit Standard must be registered as an assessor with the relevant

ETQA or an ETQA that has a Memorandum of Understanding with the relevant ETQA.

Any institution offering learning that will enable achievement of this Unit Standard must be accredited as

a provider through the relevant ETQA or an ETQA that has a Memorandum of Understanding with the

relevant ETQA.

Moderation of assessment will be overseen by the relevant ETQA according to the moderation guidelines

and the agreed ETQA procedures.

UNIT STANDARD ESSENTIAL EMBEDDED KNOWLEDGE

The South African Constitution.

King Report on Corporate Governance.

National and international best practices in respect of business/corporate ethics.

Personal and organisational values.

Principles of business/corporate ethics.

UNIT STANDARD DEVELOPMENTAL OUTCOME

N/A

UNIT STANDARD LINKAGES

N/A

Critical Cross-field Outcomes (CCFO):

UNIT STANDARD CCFO IDENTIFYING

Identify and solve problems using critical and creative thinking processes in applying ethical principles

in the unit.

UNIT STANDARD CCFO WORKING

Work effectively with others as a member of a team, group, organisation or community to improve

the culture of the unit.

UNIT STANDARD CCFO ORGANISING

Organise and manage oneself and one`s activities responsibly and effectively in order to demonstrate

ethical conduct.

UNIT STANDARD CCFO COLLECTING

Collect, analyse, organise and critically evaluate information in order to identify areas of unethical

conduct in the unit.

UNIT STANDARD CCFO COMMUNICATING

Communicate effectively using visual, mathematical and/or language in the modes of oral and/or

written persuasion to promote ethical conduct in the unit.


UNIT STANDARD CCFO SCIENCE

Use science and technology effectively and critically, showing responsibility to the environment and

health of others in promoting ethical practices in the unit and entity.

UNIT STANDARD CCFO DEMONSTRATING

Demonstrate an understanding of the world as a set of interrelated systems by recognising that

mathematical problem-solving contexts do not exist in isolation to demonstrate how personal, social,

organisational and national values and beliefs impact on the entity`s culture.

UNIT STANDARD CCFO CONTRIBUTING

Participating as responsible citizens in the life of local, national and global communities by promoting

ethical practices in the unit and entity.


MODULE 1– VALUES, ETHICS AND ORGANISATIONAL CULTURE

US ID 252042

US Title Apply the principles of ethics to improve organisational culture

Specific Outcomes 1

Demonstrate understanding of the relationship between values, ethics and organisational culture and its

impact on achieving goals and objectives.

Assessment Criteria

The relationship between personal values, organisational ethics, and the entity`s culture is demonstrated

through examples from the South African workplace

The complexity of the conflicts between personal values and the entity`s values and ethical codes is

illustrated with examples from the South African workplace

The potential impact of organisational values and culture on the entity`s triple bottom line are analysed

and described.

Critical Cross field Outcomes

Identifying

Working

Organising

Collecting

Communicating

Demonstrating

Contributing

Essential Embedded Knowledge

National and international best practices in

respect of business/corporate ethics.

Personal and organisational values



Module One – Values, Ethics and Organisational Culture

Introduction

In any business there are values, ethics and a specific organisational culture. Let’s look at definitions and

descriptions of each of these:

Values

Values are traits or qualities which have worth that should be in every person and business, such as courage,

respect, responsibility, caring, truthfulness, self-discipline, and fairness. Values determine the actions and decision-

making of people and businesses and guide what intentions and interests of employees in the organisation are.

The values of a business define the culture in a business.

Each employee’s approach to management will reflect his or her values, as well as those of the business. Building

trust starts with creating culture, based on shared values. Values affect how an employee looks at other people

and groups, and therefore they influence relationships between people in the business. Values affect how an

employee looks at situations and solves problems. Values affect how an employee determines what is ethical

behaviour and what is not. Values affect how an employee leads and controls employees. Employee’s often base

behaviour on values that they see in others - it is therefore critical to make sure that what they see and experience

reflect organisational values. Employees must communicate, encourage and reinforce the desired values and good

behaviours in order to make them part of the business culture.

Ethics

Ethics are the rules or standards governing the conduct of a person or the conduct of the members of a profession.

Ethical behaviour relates to rightness or wrongness within an individual or a group. Thus, ethical behaviour can be,

and sometimes is, anti-social!

Three levels of business ethics

There are three levels into which the diverse elements in business ethics can be classified:

The macro level: The role of business in the national and international organisation of society. The relative

virtues of different political/social systems, such as free enterprise, centrally planned economies,

international relationships and the role of business on an international scale

The corporate level: Corporate social responsibility are ethical issues facing individual corporate entities

(private and public sector) when formulating and implementing strategies

The individual level: The behaviour and actions of individuals within organisations


At the highest (macro) level, we ask the fundamental question of the role of business in society and what

governance model works best to deliver the most benefits in a moral and responsible way. Morality itself is, of

course a widely interpretable concept but for this purpose we will assume a broad understanding: that of "proper

behaviour" and "knowing the difference between right and wrong", without specifying what constitutes right and

wrong. Suffice it to say here that morality sets the stage for ethics, and therefore the code of conduct by which

business activity is carried out and allowed to be carried out by national and international rules and standards.

At the corporate level, the interpretation of those rules and standards is often what defines business ethics,

affected by the specific circumstances and socio-cultural context in which the business or public sector organisation

is operating. While all corporate entities in theory are directly influenced by personal morality and ethics, in

practice there is often a gap between the behaviour of individuals within the working environment and outside it.

This is one of the major factors leading to mistrust of big business, where the separation of ownership and

management is greatest, and so open to abuse. Even if directors/senior managers are not acting unethically, it is

likely they would act differently if the money and the company about which they are making decisions were their

own.

At the individual level, this separation creates a distinct ethical model - business ethics - which, depending on

factors like personality, peer pressure and the socio-political environment, can be closer or further away from the

individual’s own moral/ethical code of conduct. With limited liability, meaning individuals are protected, this can

affect smaller businesses too as the consequences of one's actions have a greatly reduced impact on personal

circumstances. Clearly, every corporate entity is directly affected by the individual's moral and ethical stance - and

any difference between business and personal ethics is itself arguably an indictment of that individual stance as it

implies some level of double standards.

Organisational Culture

Organisational culture is the behaviour of humans within an organisation and the meaning that people attach to

those behaviours. Culture includes the organisation's vision, values, norms, systems, symbols, language,

assumptions, beliefs, and habits.

Personal Values, Organisational Ethics, and the Culture of the Business (SO1 AC1)

Corporate Ethics and Values and their Influence on Corporate Governance

Business ethics is concerned with good and bad or right and wrong behaviour and practices that take place within

the business context. Concepts of right and wrong are increasingly being interpreted today to include the more

difficult and subtle questions of fairness, justice, and equity. Values are the individual’s concepts of relative worth,

utility, or importance of certain ideas. One’s values, therefore, shapes one’s ethics.


Ethics – including business ethics – concern doing what is right and good, or a way of life that goes beyond the

demands of the law and regulations. The role of ethics in public life is changing. In sectors of democratic society –

the public sector, driven by the ballot; the private sector, driven by the market forces; and the non-governmental

sector, driven by voluntarism and the institution of civil society – ethics is assuming a new importance. Everywhere

are signs of new moral consciousness, with people who strive to live morally, and insist that their institutions do

the same.

Ethics are not an optional extra or a discretionary add-on to normal business. We do not first set up and manage a

marketing function devoid of “ethics”, only to consider adding “ethics” as an afterthought when we run into

difficulties with misleading advertisements or irate customers. Another example is that we do not first develop a

financial investment product and then ask whether it is ethical. The product itself, together with our disclosure or

nondisclosure to the public, is in essence an ethical process. In short, ethics are woven into the fabric of the

business. There are five core concepts that capture the essence of ethics, which are:

1. Values are standards for proper conduct. Whereas facts inform us about the way the world is, ethical values

hold up ideals for our conduct – how our conduct should be. Basic ethical values are those of life, respect, integrity,

honesty and truthfulness.

2. Obligations – ethics concern discharging our duties and obligations to others. These may be specific because of

relationships arrangements – for example, our specific obligations to identifiable others to honour promises or

agreements, such as contracts. They may also be general because of considerations of well-being that apply to all

– for example, our general ethical obligation not to harm others, whether customer or stranger.

3. Rights – ethics involve rights that are claims or entitlements others hold in respect of something against us, and

these may correspond with our obligations. If we contract to deliver a service, the client holds an ethical and legal

right to that service against us.

4. Consequences – ethics are about making the world a better place through the consequences of our actions,

practices and institutions. Business affects the well-being of individuals and communities, and the ethics of

consequences requires us to promote good consequences (benefit) and prevent, remove or reduce bad ones

(harm).

5. Character – we are not robots who mechanically or without emotion adopt values, discharge obligations, respect

rights and promote good consequences. Being an ethical person means that what we do somehow matches who

we are inside. Ideally, ethical actions flow from someone who is virtuous i.e. honourable and compassionate.

The above five concepts form the core of the “ethics of business”. They apply to all stakeholders, individually and

collectively, from CEO to the most junior employee, as well as each business in all its functions and corporate SA.


Corporate Culture and its Influence on Corporate Governance

What does corporate culture mean?

Every company has a unique organisational culture. Each has its own business philosophy and principles, its own

way of approaching problems and making decisions, its own work climate, its embedded patterns of “how we do

things around here”, its own lore (stories told over and over to illustrate company values and what they mean to

stakeholders), its own taboo and political don’ts-in other words, its own ingrained beliefs, behaviour and thought

patterns, business practices, and personality that define its corporate culture.

Organisational culture is used to describe sacred values and beliefs of members about the activities of the

organisation and interpersonal relationships. Therefore, corporate culture refers to a company’s values, beliefs,

business principles, traditions, ways of operating, and internal work environment.

Where does corporate culture come from?

The taproot of corporate culture is the organisation’s beliefs and philosophy about how its affairs ought to be

conducted – the reasons why it does things the way it does. A company culture is manifested in:

The values and the business principles that management preaches and practices;

Its ethical standards and official policies

Its stakeholder relationships – being dealings with employees, unions, stockholders, vendors and the

communities in which it operates

The traditions the company maintains

Its supervisory practices

Its employees’ attitudes and behaviour

The legends that people repeat about happenings in the organisation

The peer pressures that exist

The organisation’s politics

And in the chemistry and the vibrations that permeate the work environment.

Strong versus Weak cultures

A company’s culture can be strong and cohesive in the sense that the company conducts its business according to

a clear and explicit set of principles and values, that management devotes considerable time to communicating

these principles and values to organisation members and explaining how they relate to its business environment,

and that the values are shared widely across the company – by senior executives and rank-and-file employees alike.

Strong cultured companies typically have creeds or values statements, and executives regularly stress the

importance of using these values and principles as basis for decisions and actions taken throughout the

organisation.


The weak cultured company would do the exact opposite of a strong cultured company. A strong cultured company

would be in a better position to effectively implement good and sustainable corporate governance, mainly because

of a conducive and well-cultured organisational environment.

Building Ethics into the Culture

A strong corporate culture founded on ethical business principles and moral values is a vital driving force behind

continued strategic success (e.g. implementation of a corporate governance programme). Many executives are

convinced that a company must care about how it does its business, otherwise a company’s reputation, and

ultimately its performance, is put at risk.

They argue that corporate ethics and values programs are not window dressing, they are typically undertaken to

create an environment of strongly held values and convictions and to make ethical conduct a way of life. Moral

values and high ethical standards nurture the corporate culture in a very positive way – they connote integrity,

“doing the right thing,” and genuine concern for stakeholders.

Value statements serve as a cornerstone for culture building; a code of ethics serves as a cornerstone for

developing a corporate conscience. The table below, indicates the kinds of topics such statements cover.

Topics Frequently Covered in Value Statements and Codes of Ethics

Topics covered in Values Statements Topics covered in codes of Ethics

Importance of customers and customer service.

Commitment to quality.

Commitment to innovation.

Respect for the individual employee and the duty

the company has to employees.

Importance of honesty. Integrity, and ethical

standards.

Duty to stockholders.

Duty to suppliers.

Corporate citizenship.

Importance of protecting the environment.

Honesty and observance of the law.

Conflict of interest.

Fairness in selling and marketing practices.

Using inside information and securities trading.

Supplier relationships and procurement practices.

Payments to obtain business/Foreign Corrupt

Practices Act.

Acquiring and using information about others.

Political activities.

Use of company assets, resources, and property.

Protection of proprietary information.

Pricing, contracting, and billing.


Source: Thompson & Strickland (2003)

Companies establish values and ethical standards in a number of different ways. Tradition-steeped companies with

a rich tradition rely heavily on word-of-mouth indoctrination and the power of tradition to instil values and enforce

ethical conduct. But many companies today convey their values and codes of ethics to stakeholders and interested

parties in/on:

Their annual reports

Their websites

Documents provided to all employees

Orientation courses for employees

Refresher courses for managers

The trend of making stakeholders aware of a company’s commitment to ethical business conduct is partly

attributable to greater management understanding of the role these statements play in culture building and partly

attributable to a growing trend by consumers to search out “ethical” products, a greater emphasis on corporate

social responsibilities by large investors, and increasing political and legal pressures on companies to behave

ethically.

There is a considerable difference between saying the right things, through having well-articulated corporate value

statement or code of ethics, and truly managing a company in an ethical and socially responsible way. Companies

that are truly committed to ethical conduct make ethical behaviour a fundamental component of their corporate

culture. They put a stake in the ground, explicitly stating what the company intends and expects. Values statements

and codes of ethical conduct are used as benchmarks for judging both company policies and individual conduct.

For example, the company’s CEO as “the unifying force for our corporation” referred to Johnson & Johnson’s Credo,

one of the most publicised and celebrated codes of ethics among U.S. companies.

Once values and ethical standards have been formally set forth, they must be institutionalised and ingrained in the

company’s policies, practices, and actual conduct. Implementing the values and codes of ethics entails several

actions:

Incorporating the statement of values and code of ethics into employee training and educational

programmes.

Explicit attention to values and ethics in recruiting and hiring to screen out applicants who do not exhibit

compatible character traits.

Communication of values and ethics code to all employees and explaining compliance procedures.

Management involvement and oversight, from CEO down to first-line supervisors.

Strong endorsement by CEO

Word-of-mouth indoctrination


In the case of codes of ethics, special attention must be given to sections of the company that are particularly

vulnerable-procurement, sales, and political lobbying. Employees who deal with external parties are in ethically

sensitive positions and often are drawn into compromising situations.

Embedding Company Culture

Embedding a culture amounts to teaching employees about the organisation’s preferred values, beliefs,

expectations, and behaviours. This is accomplished by using one or more of the following mechanisms:

Formal statements of organisational philosophy, mission, vision, values, and materials used for recruiting,

selection, and socialisation

The design of physical space, work environments, and buildings

Slogans, language, acronyms, and sayings

Deliberate role-modelling, training programmes, teaching, and coaching by managers and supervisors

Explicit rewards, status symbols, and promotion criteria

Stories, legends, and myths about key people and events

The organisational activities, processes, or customers that dealers pay attention to, measure, and control

Leaders’ reaction to critical incidents and organisational crises

The workflow and organisational structure

Organisational systems and procedures

Organisational goals and associated criteria used for recruitment, selection, development, promotion,

layouts, and retirement of people

Belief Systems and Company Culture

Companies often experience that differences in belief systems result in

conflict between individuals

disciplinary action

grievances

need for dispute resolution

An understanding of the role of belief systems in these issues will result in generally improved relationships and a

tolerance for diversity.


Personal Values and the Values and Ethical Codes of the Business (SO1AC2)

In South Africa, today's work force is composed of people who are more diverse than ever in nationality, culture,

religion, age, education, and socio-economic status. These people enter the work force with differing backgrounds,

values, goals, and perceptions of acceptable behaviours. Many of them have career expectations that will be

difficult, if not impossible, to realise in today's society. This diverse, multicultural population of workers is being

asked to work together in a spirit of co-operation and respect for the good of the organisation and the public they

serve. However, on the job, workers face decisions that have implications for their job security, their salaries, and

the success of their employing organisations--decisions that bring pressures for them to protect their own interests,

sometimes at the risk of losing their personal and corporate integrity.

Resolving Ethical Dilemmas and Value Conflicts

Discussion, analysis, problem solving, and decision making are critical to the ethical resolution of conflicts. Four

competing claims are

1. Conflict between two or more personally held values

2. Conflict between personal values and the values held by another person or the organisation

3. Conflict between basic principles and the need to achieve a desired outcome

4. Conflict between two or more individuals or groups to whom one has an obligation

The resolution of conflict cannot rest in the hands of one or two individuals. All stakeholders in a situation must be

involved--for legal as well as ethical reasons. Decisions often involve a multidisciplinary team that consists of some

or all of the following: patient, family, significant others, nurses, dieticians, social workers, psychologists, physical

therapists, clergy, and so forth. In this way, the knowledge, opinions, and expertise of all "stakeholders" in the

decisions are considered. The same principle can be applied in business, with decisions based on the expressed

viewpoints of all stakeholders in a given situation--even indirect stakeholders. Potential clients should also be

recognised as stakeholders because their choice to do business with a firm may be based on the firm's reputation

for ethical behaviour.


Resolving ethical dilemmas, therefore, requires interpersonal and negotiation skills as well as the new application

of employability skills--honesty, ability to work co-operatively, respect for others, pride in one's work, willingness

to learn, dependability, responsibility for one's actions, integrity, and loyalty. For years, employers have sought

workers with these skills and school curricula have stressed their importance for successful employment. Today,

businesses are training their employees in critical thinking and conflict resolution skills required for ethical decision

making. Schools are also focusing on developing students' critical thinking skills, but to date little has been

published about the application of those skills in resolving potential ethical dilemmas specific to given

jobs/occupations.

Ethics Training or Discussions and its Application

All levels of workers--management to entry-level--need to recognise the factors that guide ethical behaviour and

develop strategies for assessing their personal and organisational ethics. There are three "ethics checks" to help

individuals decide what is right:

1. Is it legal? Will I be violating either the law or company policy?

2. Is it balanced? Is it fair to all concerned in the short term as well as the long term? Does it promote win-

win relationships?

3. How will it make me feel about myself? Will it make me proud? Would I feel good if my decision was

published in the newspaper? Would I feel good if my family knew about it?

The purpose of training, or discussions on ethics during meetings, is to make employees aware of the issues they

encounter and enable them to deal with those issues in an ethical manner. Employees should be helped to

1. Recognise which decisions involve ethics (not all decisions do)

2. Understand values—of the organisation, their own values, and the values of other people

3. Weigh the potential impact of various business options on those values

Ethics training or discussions is beneficial in its focus on ways to apply the organisation's credo or code of ethics in

a business setting. Ideally, they offer a mechanism for discussion and problem solving to lead workers through the

resolution of complex issues.

Responses when Confronted with Unethical Behaviour

Organisation members have only three choices when confronted with unethical behaviour: exit, voice, or loyalty.

Exit is the most direct response: if you can't live with behaviour that does not meet your own ethical standards,

leave. However, exit is not only a direct response, it is a final one, so the personal and organisational consequences

must be considered. The most important personal consequences are the costs. Where do you go from there? What

other options are available? How marketable are you? Can you afford the financial loss?


There are specific organisational consequences as well: Will the ethics of the organisation's leaders change? Will

they do business with someone else who doesn't have the high standards you do? In leaving, one gives up the

ability to influence the organisation directly. When considering exit, one must ask, "Could I have had more of an

impact by remaining in the organisation and trying to change it from within?"

Voice: This means expressing discomfort with and opposition to the observed unethical behaviour. To whom do

you voice your objections? The obvious choice is your supervisor. But what if your supervisor condones the

unethical behaviour, or worse, is its source? You may be jeopardising your position, and maybe your membership

in the organisation. A second choice is to go to senior management. This also has potential risk. The senior

leadership may be condoning or even directing the unethical behaviour. This action may bring your loyalty into

question. If so, your objections may be covered up or ignored, and you may end up being forced out of the

organisation.

On the other hand, it may be that the senior leadership is unaware of the unethical behaviour, and you may have

initiated an organisational response eliminating unethical behaviour and restoring ethical standards. A third option

is to go public, to engage in "whistleblowing." This is also risky, because it can lead to reprisals with negative

consequences. The level of risk depends on the commitment of the organisation to high ethical standards and on

its willingness to encourage whistleblowing in its own best interests. Many organisations have shown commitment

to ferreting out unethical individuals and maintaining high ethical standards by establishing procedures for

anonymous reporting of ethical breaches and safeguards to protect whistle-blowers.

Exit and voice may be combined. An individual resigns in protest and goes public with his or her reasons for leaving.

This leaves the individual vulnerable to the label of an employee who quit before being fired, but it also can lead

to increased credibility as someone acting on conviction in spite of personal cost. Exit combined with voice is most

effective if taken by someone at the upper levels of the organisation. An organisation can more easily ignore the

"exit + voice" of a lower level employee than it can the resignation of a strategic leader, followed immediately by

a press conference.

Loyalty: The final response to unethical behaviour in an organisation is loyalty. This is the alternative to exit. Instead

of leaving, the individual remains and tries to change the organisation from within. Loyalty thus discourages or

delays exit. Loyalty also may discourage public voice, since being loyal to the organisation means trying to solve

problems from within without causing public embarrassment or damage. Loyalty can also encourage unethical u

particularly in organisations which promote loyalty above all. These organisations discourage exit and voice, and

basically want their members to "go along" with organisational practices. An interesting question is, "Can an

individual be loyal to an organisation by engaging in exit or voice as a response to unethical behaviour?"

Both exit and voice must exist for continued organisational effectiveness. Additionally, an organisation cannot

maintain high ethical standards without mechanisms for eliminating unethical behaviour. Also, loyalty is not always

a virtue. Loyalty should be predicated on the organisation's ethical demonstration that it is worthy of loyalty. If the

organisation condones unethical behaviour, it relieves the individual of any responsibility to be loyal.


Building an Ethical Climate

How can the strategic leaders of an organisation build an ethical climate? There are a number of steps that foster

corporate ethics.

First are the actions of the strategic leadership and the way they deal with ethical issues. The pattern of top leaders'

behaviour determines organisational values. A second step is to make explicit ethics policies. Ethical codes are one

common example. The next step is to increase awareness of how to apply those ethical codes. Training on how to

deal with situations with an ethical dimension, and how to anticipate situations that involve ethical choices, can go

a long way toward ethical institutional practices.

Another step to increase the salience of ethics is to expand the information system to focus on areas where ethics

may come into play. Knowing what actually is going on in the organisation is essential to understanding the ethical

principles which govern behaviour. The information system should also support ethical behaviour, and allow the

strategic leader to know when or where there are potential ethical breaches so that corrective action can be taken.

The real danger is that when unethical behaviour is unnoticed, or not punished, members will assume it is

condoned by the organisation's leadership.

Values, Culture and the Triple Bottom Line of the Business (SO1AC3)

The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of a British consultancy

called Sustainability. His argument was that companies should be preparing three different (and quite separate)

bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account.

The second is the bottom line of a company's “people account”—a measure in some shape or form of how socially

responsible an organisation has been throughout its operations. The third is the bottom line of the company's

“planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus

consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental

performance of the corporation over a period of time. Only a company that produces a TBL is taking account of the

full cost involved in doing business.

In some senses the TBL is a particular manifestation of the balanced scorecard. Behind it lies the same fundamental

principle: what you measure is what you get, because what you measure is what you are likely to pay attention to.

Only when companies measure their social and environmental impact will we have socially and environmentally

responsible organisations.

Increasingly, boardrooms address ethical behavior based on the concept of the triple bottom line. The triple bottom

line refers to the triad of profit, social responsibility, and stewardship of the environment, which are now part of

the expanded scope of corporate concerns. Sustainable practices are those that seek to minimize environmental

impact.


The good news for business is that behaving ethically in a sustainability sense has enormous benefits. Investments

in re-orienting a company onto a path of sustainability will almost certainly produce significant win-win scenarios.

Among the benefits of adopting sustainability are:

Improved financial performance. Companies listed on the Dow Jones Sustainability Index and those on

the 2001 Business Ethics Best Citizen list performed significantly better than their peers.

Reduced operating costs. Corporations that pollute less, use less energy, and use resources more

efficiently will significantly reduce both resource costs and liability exposure. Increasing recycling and

reducing emissions can lower operating costs and can even generate income.

Enhanced brand image and reputation. Businesses are finding that customers, banks, and insurers are

more favorably disposed to companies with an image of responsible behavior. This enhanced image

produces more sales, increases access to capital, and lowers risk. Surveys indicate that social

responsibility ranks above brand reputation and business fundamentals when customers are seeking a

product or service.

Increased sales and customer loyalty. Companies perceived as socially and environmentally responsible

are more likely to experience increased sales and profitability compared to their peers.

Increased productivity and quality. Better working conditions and lower environmental impacts translate

to increased productivity and a lower error rate in the workplace. The result is far fewer defective

products and greatly reduced costs in handling customer complaints.

Increased ability to attract and retain employees. Prospective employees are likely to evaluate a

company's behavior toward the environment and the company's values prior to signing on for a career. A

recent survey by the Aspen Institute Initiative for Social Innovation through Business confirmed this. It

found that over 50% of MBA students would seek another job if there was a conflict between their values

and those of the business where they worked.

Reduced regulatory oversight. Government agencies are likely to reward organizations that have a

record of proactive efforts that carry beyond mere compliance. The result is that companies that are

considered more responsible are subject to fewer inspections and less paperwork.

Access to capital. Investments in socially responsible companies are growing at a rate well beyond that

being experienced by their peers.

Putting the Triple Bottom Line into Practice

A growing number of companies exercise social responsibility. Tierra Pacifica Corporation of Irvine, California, is

one of those companies. President and founder Debbie Aguirre combines her business expertise with her concern

for the community and the environment. She started the design, engineering, and construction firm several years

ago and is determined to be socially responsible as well as successful. Her philosophy was one she found lacking in

the large corporations where she worked previously.

Tierra Pacifica specializes in public building projects, such as low-income housing, schools, libraries, and the

renovation of historic buildings. As part of her commitment to her clients, Aguirre monitors the cost of these


projects by reducing waste on construction sites. Instead of throwing away unused lumber, for example, she saves

it for another project or turns it into mulch for landscaping. Controlling waste not only helps the environment, but

also eliminates the cost of hauling it away, thereby saving the client money.

Aguirre also tries to give something back to each community where her company works. While restoring a historical

office building in Pasadena, for example, her company donated time and materials to renovate a shelter for

battered women, construct a reading corner for seniors in the library, and organise a food drive for the needy.

Body Shop International is another business that attributes much of its success to its socially responsible practices.

A retailer of natural cosmetics, the Body Shop promotes environmental causes in its stores through posters and

literature. In addition, salespeople are given time off for volunteer work. The company also builds plants in

depressed areas to stimulate local economies. Founded in 1976 in England by Anita and T. Gordon Roddick, the

Body Shop now has stores worldwide, including 196 in the United States.

The Role of Management

Increasingly, it is the role of management to develop, deliver, and record innovative solutions that address an

organization’s needs in relation to the triple bottom line. Beyond being aware of the importance of net profits,

management must increasingly evaluate their roles in their organizations’ stewardship-striving to reduce the

"footprint" of organizations’ on the environment as well as increasing the level of commitment to the communities

and people where the organization conducts business.

This triple bottom line approach must include a growing awareness and application of sustainability principles to

areas such as water usage, energy consumption, waste management and materials selection. Today, managers

who put the ethics of a triple bottom line into practice are discovering rewards that include:

Greater client satisfaction resulting from mutual trust

A more positive public image for the organization

Savings from less waste and more effective management of resources

Developing sustainable practices combined with the active engagement of clients, tenants, and the

community will allow management to engage in ethical and productive practices from within their

organizations’.


Module 2– Apply the Concept of Corporate Ethics to a Unit

US ID 252042


Specific Outcomes

Apply the concept of corporate ethics to a unit.

Assessment Criteria

The imperatives for ethical conduct in South African organisations are explained with reference to acts,

regulations, codes and other documents relevant to the entity.

The role of corporate governance within an entity is analysed to determine the contribution of a unit in

promoting internal organisational codes and ethical practices.

The specific ethical practices of a unit in different areas are analysed with examples.


Identifying

Working

Organising

Collecting

Communicating

Demonstrating

Contributing






The South African Constitution.

King Report on Corporate Governance.


The Imperatives for Ethical Conduct in South African Organisations (SO2AC1)

There are several imperatives for ethical conduct in South African organisations. That means that there are several

laws, constitutions, acts, etc. that commands South African organisations to behave ethically. The following will be

discussed only in summary, but comprehensive information on each of these can easily be found on the internet,

or in libraries.

South Africa`s Constitution, including the Bill of Rights

The King Report

PFMA

The principles of Batho Pele

Acts, regulations and codes governing the sector or specific industry.

South Africa`s Constitution

The Constitution of South Africa is the supreme law of the country of South Africa. It provides the legal foundation

for the existence of the republic, sets out the rights and duties of its citizens, and defines the structure of the

government. The current constitution, the country's fifth, was drawn up by the Parliament elected in 1994 in the

first non-racial elections. It was promulgated by President Nelson Mandela on 10 December 1996 and came into

effect on 4 February 1997, replacing the Interim Constitution of 1993.

The Constitution of South Africa is a lengthy document, of which a summary follows below:

Section 1: Values

The Republic of South Africa will be one, sovereign, democratic state founded on the following values:

human dignity, equality, advancement of human rights and freedoms;

non-racialism and non-sexism;

the Constitution will be supreme;

the rule of law will be supreme;

all adults will be able to vote;

there will be a common voter's roll;

there will be regular elections; and

there will be a multi-party system of democratic government to make sure there is accountability and

openness


Section 2: The Constitution

The Constitution is the highest law in the law in the country and everyone will be bound by the Constitution. Any

laws that go against the Constitution will be changed or set aside.

Section 3: Citizenship

All South Africans are South African citizens. Every citizen is equal and has a right to the rights and privileges of

being a citizen of South Africa. Everyone also has duties, obligations and responsibilities of being a citizen of South

Africa.

Section 4: The National Flag

The national flag will be black, gold, green, white, red and blue.

Section 5: The National Anthem

The national anthem will be decided by the President.

Section 6: The Official Languages

There are 11 official languages. These are: Sepedi, Sesotho, Setswana, siSwati, Tshivenda, Xitsonga, Afrikaans,

English, isiNdebele, isiXhosa and isiZulu.


The Bill of Rights

Section 7: Introduction

Chapter 2 contains the human rights which will be protected in South Africa. These are put in the Constitution for

these reasons:

to make them law so that people can use them in court to protect themselves;

to make them difficult to change;

The Bill of Rights can only be changed by a Bill passed by:

the National Assembly, if at least two-thirds (66%) of the members of Parliament vote for it, AND

the National Council of Provinces, if at least 6 provinces vote for it.

Section 7 also says the government must respect, protect, promote and fulfill the rights in the Bill of Rights.

Section 8: Application of the Bill of Rights

The Bill of Rights applies to all laws. It must be followed by all branches of government and all government bodies.

This means it must be followed by:

the legislatures (bodies that make laws);

the executive (bodies that carry out the laws); and

the judiciary (the courts)

It must be followed by these government bodies at all levels, in other words, National, Provincial and Local

government level.

The Bill of Rights applies to all matters between citizens and the Government. This means it applies in a vertical

way between government and citizens. It protects citizens from things done to them by the government. The Bill

of Rights also works in a horizontal way. This means it applies to matters between ordinary people or businesses,

but only if this makes sense. It protects people from things done to them by other people.

Section 9: The right to equality

1. Everyone is equal before the law and has the right to equal protection and benefit of the law.

2. The government must take active steps to change the inequalities of the past.

3. It is against the law to discriminate against anyone on any of the following grounds:

race and colour

sexual orientation: being gay, lesbian or heterosexual

marital status: being single, married or divorced

gender: social and cultural male or female roles


pregnancy

age

disability

ethnic origin: being from a particular background, such as a clan or language group

culture: having a shared culture and traditional practices

language

religion, conscience, belief

birth

4. No person can unfairly discriminate against another person, directly or indirectly, on any of the grounds under

(3).

5. Discrimination on any of these grounds is unfair unless the person or state can say why it is fair.

Section 10: The Right to Human Dignity

Everyone has dignity and the right to have their dignity respected and protected.

Section 11: The Right to Life

Everyone has the right to life.

Section 12: Freedom and security of the person

This includes the following rights:

not to be put in prison without good reason;

not to be detained without trial;

to be free from all kinds of violence in both public and private areas;

not to be treated or punished in a cruel, inhuman or degrading way. Torture is not allowed.

to make decisions about reproduction (having children);

to have control over our own bodies;

not to be forced to have medical or scientific experiments done on people.

Section 13: Slavery, Servitude and Forced Labour

No form of slavery or forced labour is allowed.


Section 14: Right to Privacy

Everyone has the right to privacy, including the right not to:

be body-searched without a court order;

have your home searched without a court order;

have your things taken from you;

have your letters opened or your telephoned tapped

Section 15: Freedom of Religion, Belief and Opinion

Everyone has the right to believe or think what they want, even if their opinion is different to the government.

Everyone has the right to practise the religion they choose.

Section 16: Freedom of Speech and Expression

Everyone has the right to say what they want, including the press and other media.

There are certain kinds of speech that are not protected. These are:

propaganda for war;

inciting (encouraging) people to use violence;

hate speech

Section 17: Freedom of Assembly, Demonstration, Picket and Petition

Everyone has the right to assemble with other people, hold a demonstration, picket or present petitions. They must

do this in a peaceful way and they may not carry weapons.

Section 18: Freedom of association

Everyone has the right to associate with whoever they want, for example, workers joining together and meeting in

a trade union.

Section 19: Political rights

Everyone has the right and is free to make political choices, such as the right to:

form a political party;

join any political party;

encourage other people to join a political party;

Campaign for a political party or cause.


Every adult citizen has the right to free, fair and regular elections. They have the right to:

vote in these elections;

vote in secret in elections;

stand for election.

Section 20: Citizenship

A person's citizenship is protected and cannot be taken away from you.

Section 21: Freedom of movement and residence

Everyone has the right to:

move anywhere in South Africa

leave South Africa if they choose

Every citizen has the right to:

enter South Africa and stay there;

live anywhere in South Africa; and have a passport

Section 22: Freedom of trade, occupation and profession

Every citizen has the right to choose their trade, occupation or profession freely. Laws can be passed to regulate

how people practise their trade, occupation or professions.

Section 23: Labour relations

Everyone has the right to fair labour practices.

Section 24: Environment


an environment that is not harmful to their health or well-being;

have the environment protected for present and future generations

The government must pass laws that:

prevent pollution and damage to our natural resources;

promote conservation; and

make sure that natural resources are developed while also promoting the economic and social

development of people.


Section 25: Property

No one can have their property taken away from them unless this is done according to a law (e.g., legally

expropriating private property).

Section 26: Right of Access to Housing

Everyone has the right to have access to adequate housing. The government must take reasonable steps within its

available resources to provide people with housing and access to land.

Section 27: Right of access to health care, food, water and social security

Everyone has the right to have access to:

health care services (including child birth facilities);

enough food and water; and

social security (which means support for people who can't support themselves or their dependants)

Section 28: Children's rights

A child is anyone who is under the age of 18. Every child has the right:

to a name and a nationality from the day they are born;

to proper care by parents or a family member, or by someone else if the child has to be taken away from

the family;

to enough food, shelter, basic health care and social services;

to be protected from being mistreated, neglected or abused;

not to be forced to work or given work which is not suitable for a child;

to have a lawyer paid for by the government, if the child has to appear in court;

not to be used in wars;

to be protected during times of war

Whenever a decision is made about a child, the most important thing that must be thought about is what would

be in the best interests of the child.

Section 29: Education


a basic education, including adult basic education; and

further education, which the government must make available and accessible


Everyone has the right to be taught at a government school in their own language but only if this is practical and if

the government can afford it.

Section 30: Language and culture

Every person has the right to use their own language and follow the culture that they choose.

Section 31: Cultural, religious and linguistic communities

Communities have the right to enjoy a shared culture, practise a shared religion and use their language. But they

cannot do anything that goes against the rights that other people have.

Section 32: Access to information

Everyone has the right to have access to:

information which the government has; and

information that someone else has if they need it to protect any of their rights

Section 33: Just administrative action

This protects people against unlawful, unjust and unreasonable decisions from government officials or

departments.

Section 34: Access to courts

Everyone has the right to have any legal problem or case decided by a court or an independent body.

Section 35: Arrested, detained and accused persons

Arrested people, detained people and accused people have specific rights.

Section 36: Limitations on rights

The rights in the Bill of Rights can be limited if this is reasonable and justifiable in an open and democratic society

that is based on human dignity, equality and freedom.


Section 37: States of emergency

It may be necessary for a government to declare a state of emergency to deal with a major problem facing the

country. During a state of emergency the Bill of Rights is usually affected. The government can only call a state of

emergency when:

the life of the nation is threatened by war, invasion, disorder, natural disaster or other public disorder, AND

the state of emergency is necessary to restore peace or order

Section 38: Enforcing rights

The following people can take a case to court, if they believe that a right has been threatened or infringed:

anyone representing themselves;

anyone acting on behalf of another person who cannot take the case to court;

anyone acting as a member of a group, or in the interests of a group or class of people;

anyone acting in the public interest;

an association acting in the interests of its members

Section 39: Interpreting the Bill of Rights

When the courts are deciding a case on the Bill of Rights, they must promote the values of an open and democratic

society based on freedom and equality. They must look at international laws (such as the Universal Declaration on

Human Rights) and at the way courts in other countries have decided similar cases.


The King Report

The release of King III report on 1 September 2009 represents a significant milestone in the evolution of corporate

governance in South Africa and brings with it significant opportunities for organisations that embrace its principles.

The Need for King III

King III became necessary because of the anticipated new Companies Act and changing trends in international

governance. As with King I and King II, the King Committee endeavoured to be at the forefront of governance

internationally and this has again been achieved by focusing on the importance of reporting annually on how a

company has both positively and negatively affected the economic life of the community in which it operated

during the year under review. In addition, emphasis has been placed on the requirement to report on how the

company intends to enhance those positive aspects and eradicate or ameliorate any possible negative impacts on

the economic life of the community in which it will operate in the year ahead.

The Benefits of Self-Regulation

In addressing the link between governance principles and law, the introduction to the Report observes:

"The ultimate compliance officer is the company's stakeholders who will let the board know by their continued

support of the company if they accept the departure from a recommended practice and the reasons furnished for

doing so."

It can be convincingly argued that self-regulation, in which an organisation voluntarily monitors its own adherence

to legal and ethical standards, is far preferable to having an outside agency such as government monitor and

enforce those standards. This approach allows organisations to maintain control over the standards to which they

are held by successfully self-policing themselves. Apart from the bureaucratic burden that would be imposed by

external enforcement, the cost of setting up such a mechanism is also avoided.


Key Principles of King III

King III has broadened the scope of corporate governance in South Africa with its core philosophy revolving around

leadership, sustainability and corporate citizenship.

These key principles are given prominence:

Good governance is essentially about effective leadership. Leaders need to define strategy, provide

direction and establish the ethics and values that will influence and guide practices and behaviour with

regard to sustainability performance.

Sustainability is now the primary moral and economic imperative and it is one of the most important

sources of both opportunities and risks for businesses. Nature, society, and business are interconnected in

complex ways that need to be understood by decision makers. Incremental changes towards sustainability

are not sufficient – we need a fundamental shift in the way companies and directors act and organise

themselves.

Innovation, fairness, and collaboration are key aspects of any transition to sustainability – innovation

provides new ways of doing things, including profitable responses to sustainability. Fairness is vital because

social injustice is unsustainable and collaboration is often a prerequisite for large-scale change.

Social transformation and redress is important and needs to be integrated within the broader transition to

sustainability. Integrating sustainability and social transformation in a strategic and coherent manner will

give rise to greater opportunities, efficiencies, and benefits, for both the company and society.

King II required companies to implement sustainability reporting as a core aspect of corporate governance.

Since 2002, sustainability reporting has become a widely accepted practice and South Africa is an emerging

market leader in the field. However, sustainability reporting is in need of renewal in order to respond to:

o The lingering trust deficit among civil society of the intentions and practices of big business

o Concerns among business decision makers that sustainability reporting is not fulfilling their

expectations in a cost-effective manner.

Governance Framework

King III has opted for an 'apply or explain' governance framework. Where the board believes it to be in the best

interests of the company, it can adopt a practice different from that recommended in King III, but must explain it.

Explaining the different practice adopted and an acceptable reason for it, results in consistency with King III

principles.

The framework recommended by King III is principles-based and there is no 'one size fits all' solution. Entities are

encouraged to tailor the principles of the Code as appropriate to the size, nature and complexity of their

organisation. This is good news for companies in South Africa as it avoids some of the pitfalls seen in the United

States where a 'one size fits all' approach was initially adopted.


Application of the Code

In contrast to King I and King II, King III applies to all entities regardless of the manner and form of incorporation or

establishment. Principles are drafted on the basis that, if they are adhered to, any entity would have practiced

good governance.

It is recommended that all entities disclose which principles and/or practices they have decided not to apply or

explain. This level of disclosure will allow stakeholders to comment on and challenge the board to improve the

level of governance within an organisation.

Public Finance Management Act (PFMA)

Summary of the Public Finance Management Act, no. 1 of 1999 (With Amendments)

The Public Finance and Management Act regulates the management of finances in national and provincial

government. It sets out the procedures for efficient and effective management of all revenue, expenditure, assets

and liabilities. It establishes the duties and responsibilities of government officials in charge of finances. The Act

aims to secure transparency, accountability and sound financial management in government and public

institutions.

The Act clarifies the laws in relation to the National and Provincial Treasuries, the National and Provincial Revenue

Funds, and the National Budgets. It also governs the management of finances in departments, public entities (like

ESKOM and TELKOM), Parliament and the provincial legislatures, and constitutional institutions (like the Human

Rights Commission, the Commission on Gender Equality and the Independent Broadcasting Authority).

The act consists of the following sections:

1. The National Treasury and Revenue Fund

2. Provincial Treasuries and Revenue Funds

3. National and Provincial Budgets

4. Accounting Officers

5. Public Entities

6. Loans, Guarantees and Other Commitments

7. Treasury Regulations

8. Offences


The National Treasury and Revenue Fund

The National Treasury, consisting of the Minister of Finance and national departments responsible for financial and

fiscal matters, is the main body that oversees the implementation of the Act. The Treasury promotes the national

government’s fiscal policy framework and monitors provincial budgets in government departments and other

institutions to which the Act applies. The Treasury must prescribe norms and standards and has the right to

investigate any system of financial management in any department, public entity or constitutional institution.

The National Treasury submits annual financial statements for auditing to the Auditor-General for the following

bodies:

national departments,

public entities under the ownership control of the national executive,

constitutional institutions,

the South African Reserve Bank,

the Auditor-General, and

Parliament.

Once the statements have been audited, they are consolidated and submitted to Parliament for tabling in both

houses. This process must be made public, and the National Treasury may publish financial statistics about all

spheres of government in the Government Gazette.

The National Treasury is also in charge of the National Revenue Fund, into which money received by the national

government must be paid. (This includes most money paid to the government, although there are some exclusions.)

No unauthorised money may be withdrawn from the fund.

SARS must also deposit all taxes, levies, duties, fees into a Revenue Fund and may only withdraw money to refund

a person or organisation.

Only the National Treasury may withdraw money (and this must be authorised) from the National Revenue Fund.

The Minister of Finance may authorise the use of money for emergency purposes in exceptional circumstances,

but these may not exceed two per cent of the total amount appropriated in the national budget.

Provincial Treasuries and Revenue Funds

Provincial treasuries, consisting of the MEC for finance in and the provincial departments responsible for finance

in that province, work much like the national treasury, but on a provincial level. They are responsible for preparing

and controlling the provincial budgets and oversee the implementation of this Act in their provinces. A provincial

treasury must prepare and submit financial statements for their departments, for public entities that fall under

their control, and for the provincial legislature. The consolidated financial statements must be made public.


The provincial treasury is also in charge of the provincial revenue fund for its province, and, as with the national

treasury, no unauthorised money may be withdrawn from provincial revenue funds. All money paid to provincial

government must be deposited into the revenue fund, apart from a few exclusions.

The national treasury has the right to withdraw any exclusions paid into the Provincial Revenue Funds, as long as

it first consults with the provincial treasury concerned. Other than the national treasury, only provincial treasuries

are allowed to withdraw money.

As with the National Treasury, provincial treasuries are allowed to withdraw funds for emergency situations. Such

withdrawals must be reported to the Auditor-General and the provincial legislature and they must be attributed to

a vote.

National and Provincial Budgets

The Minister of Finance must table the annual budget and multi-year budget projections for the financial year for

the National Assembly, and the MEC for finance in each province must table the provincial annual budget as well

as multi-year budget projections for the national legislature. Budgets set out estimated revenue and expenditure

for the year or over a period of years.

Accounting Officers

All departments and constitutional institutions must appoint an accounting officer to ensure that money is

managed effectively, efficiently and transparently. The accounting officer ensures that resources are used

economically and that assets are looked after. He or she maintains an internal audit system and a system for

evaluating projects. In general, the accounting officer keeps the finances of the department or institution in order.

Public Entities

All public entities listed in Schedule 2 and Schedule 3, which is subject to change by the Minister, must appoint a

person or body who will be held accountable for the purposes of this Act.

The accounting authority (either a board or other controlling body or a CEO) must protect the assets and records

of the public entity and must do everything possible to prevent damaging the financial interests of the State.

Accounting authorities who represent Schedule 2 public entities must submit an annual budget and corporate plan

to the accounting officer. These must show a projection of expected revenue and expenditure and any activity

plans for the next three years.

Accounting officers who represent Schedule 3 public entities that are not government business enterprises must

submit a budget of estimated revenue and expenditure to the executive authority.

Public entities must seek approval from the relevant treasury before doing any of the following:


setting up a company or starting or ending an important business activity,

participating in an important partnership, joint venture or trust or changing the nature of an existing

interest in a partnership or trust; and

acquiring or doing away with a significant shareholding in a company or a significant asset

The accounting authority of a public entity must keep full and proper financial records of the affairs of the company

and must submit statements for auditing, either to the Auditor-General or by a registered external auditor. An

annual report, fairly representing the state of affairs of the entity, must also be submitted to the executive

authority.

Loans, Guarantees and Other Commitments

The institutions to which this Act applies may not borrow money or enter into any transaction that binds them

financially, unless it is authorised by the Act or some other law.

If it is permissible to enter into a binding transaction, financial interactions may only be conducted through the

following persons:

For Government: Only the Minister may act on behalf of the National Revenue Fund, and only the MEC for

finance in a province may act on behalf of a provincial revenue fund.

For Schedule 2 public entities: Only the accounting authority can borrow money or conduct binding

transactions.

For a national government business enterprise listed in Schedule 3: Only the accounting authority, and the

action must be authorised in the national Government Gazette by the Minister of Finance.

For a provincial government business enterprise listed in Schedule 3: Only the Minister of Finance or a

Cabinet Minister who is the executive authority of the entity (with the approval of the Minister).

Any other public entities require the approval of the Minister of Finance or, where relevant, the Cabinet Minister

who is the executive authority for the public entity.

Treasury Regulations

The National Treasury issues regulations concerning financial management for the institutions to whom this Act

applies. These regulations cover issues such as the recovery of losses and damages and gifts or donations by or to

the State, and any matter prescribed for departments in terms of this Act. These are published in the Government

Gazette and are made available on the National Treasury website.

Offences

The Minister of Finance must set up system for dealing with financial misconduct and criminal charges.

Criminal offences include the following:


wilful or gross negligence on the part of an accounting officer;

wilful or gross negligence on the part of an accounting authority; and

unauthorised loans or entering into a binding financial contract without permission on behalf of a

department, public entity or constitutional institution

If a person is found guilty, they will be liable to a fine or imprisonment for a period of up to five years.

The principles of Batho Pele Batho Pele (Sotho: "People First") is a South African political initiative. The initiative was first introduced by the

Mandela Administration on October 1, 1997 to stand for the better delivery of goods and services to the public. It

is also now used to imply the dissolvement of government organisations deemed corrupt or obsolete.

The Batho Pele initiative aims to enhance the quality and accessibility of government services by improving

efficiency and accountability to the recipients of public goods and services.

Eight Batho Pele principles were developed to serve as acceptable policy and legislative framework regarding

service delivery in the public service. These principles are aligned with the Constitutional ideals of:

Promoting and maintaining high standards of professional ethics;

Providing service impartially, fairly, equitably and without bias;

Utilising resources efficiently and effectively;

Responding to people's needs; the citizens are encouraged to participate in policy-making; and

Rendering an accountable, transparent, and development-oriented public administration

The Batho Pele principles are as follows:

1. Consultation

There are many ways to consult users of services including conducting customer surveys, interviews with individual

users, consultation with groups, and holding meetings with consumer representative bodies, NGO’s and CBO’s.

Often, more than one method of consultation will be necessary to ensure comprehensiveness and

representativeness. Consultation is a powerful tool that enriches and shapes government policies such as the

Integrated Development Plans (IDP’s) and its implementation in Local Government sphere.

2. Setting service standards

This principle reinforces the need for benchmarks to constantly measure the extent to which citizens are satisfied

with the service or products they receive from departments. It also plays a critical role in the development of

service delivery improvement plans to ensure a better life for all South Africans. Citizens should be involved in the

development of service standards.


Required are standards that are precise and measurable so that users can judge for themselves whether or not

they are receiving what was promised. Some standards will cover processes, such as the length of time taken to

authorise a housing claim, to issue a passport or identity document, or even to respond to letters.

To achieve the goal of making South Africa globally competitive, standards should be benchmarked (where

applicable) against those used internationally, taking into account South Africa's current level of development.

3. Increasing access

One of the prime aims of Batho Pele is to provide a framework for making decisions about delivering public services

to the many South Africans who do not have access to them. Batho Pele also aims to rectify the inequalities in the

distribution of existing services. Examples of initiatives by government to improve access to services include such

platforms as the Gateway, Multi-Purpose Community Centres and Call Centres.

Access to information and services empowers citizens and creates value for money, quality services. It reduces

unnecessary expenditure for the citizens.

4. Ensuring courtesy

This goes beyond a polite smile, 'please' and 'thank you'. It requires service providers to empathise with the citizens

and treat them with as much consideration and respect, as they would like for themselves.

The public service is committed to continuous, honest and transparent communication with the citizens. This

involves communication of services, products, information and problems, which may hamper or delay the efficient

delivery of services to promised standards. If applied properly, the principle will help demystify the negative

perceptions that the citizens in general have about the attitude of the public servants.

5. Providing information

As a requirement, available information about services should be at the point of delivery, but for users who are far

from the point of delivery, other arrangements will be needed. In line with the definition of customer in this

document, managers and employees should regularly seek to make information about the organisation, and all

other service delivery related matters available to fellow staff members.

6. Openness and transparency

A key aspect of openness and transparency is that the public should know more about the way national, provincial

and local government institutions operate, how well they utilise the resources they consume, and who is in charge.

It is anticipated that the public will take advantage of this principle and make suggestions for improvement of


service delivery mechanisms, and to even make government employees accountable and responsible by raising

queries with them.

7. Redress

This principle emphasises a need to identify quickly and accurately when services are falling below the promised

standard and to have procedures in place to remedy the situation. This should be done at the individual

transactional level with the public, as well as at the organisational level, in relation to the entire service delivery

programme.

Public servants are encouraged to welcome complaints as an opportunity to improve service, and to deal with

complaints so that weaknesses can be remedied quickly for the good of the citizen.

8. Value for money

Many improvements that the public would like to see often require no additional resources and can sometimes

even reduce costs. Failure to give a member of the public a simple, satisfactory explanation to an enquiry may for

example, result in an incorrectly completed application form, which will cost time to rectify.

Acts, regulations and codes governing the sector or specific industry

In each industry there will be specific acts and codes that govern that specific industry. It is the responsibility of

management to ensure that all these acts and codes are adhered to.

Each organisation must also have its own policies and procedures, which should include the ethical behaviour that

is expected of management and employees of the organisation.

Code of Conduct / Ethics A code of Ethics or Conduct should be drawn up for each organisation.

A code of conduct is a set of conventional principles and expectations that are considered binding on any person

who is a member of a particular group.

A code of conduct is a tool to "help people do well at what is expected of them in a particular role or function". It

sets out specific standards of conduct expected in a range of realistic circumstances and is as such of great

importance to the integrity of employees.

"Codes of conduct specify actions in the workplace and codes of ethics are general guides to decisions about those

actions," explains Craig Nordlund, Associate General Counsel and Secretary at Hewlett Packard. He suggests that

codes of conduct contain examples of appropriate behaviour to be meaningful.


An organisation could be sued for breach of contract if its practices are not in accord with its policies. That’s why

legal departments should review codes of conduct and other ethics policies. Also, that’s why it’s critical for

organisations to review their policies at least once a year to ensure that they are in accordance with laws and

regulations.

Employees who breach the organisation’s code of conduct can face disciplinary procedures, depending on the

seriousness of the breach.

The principles stipulated in the code of conduct of an organisation are usually based on the Bill of Rights. It is

necessary for an organisation to have a code of conduct in order to give the employees a set guideline as to the

correct ethical behaviour in the organisation.


Below are two examples of codes of conducts:

Example 1: ORGANISATIONAL CODE OF CONDUCT

(Insert name of company) commits to encouraging a safe, supportive and productive work environment. This

can only happen when everyone cooperates and agrees to suitable standards of conduct.

The following are acts which the company considers unacceptable. Any employee found engaging in these acts

will be subject to disciplinary action which may include reprimand, warning, suspension or

dismissal:

being absent from work without a valid reason

wilfully damaging, destroying or stealing property belonging to fellow employees or the

company

fighting or engaging in horseplay or disorderly conduct

refusing to follow or failing to carry out the reasonable instructions of a supervisor

ignoring work duties or wasting time during working hours

coming to work under the influence of alcohol or any drug, or bringing alcoholic beverages

or drugs on to company property

intentionally giving any false or misleading information to obtain a leave of absence

using threatening or abusive language towards a fellow employee

smoking contrary to established policy or violating any fire protection regulation

wilfully or habitually violating health and safety regulations

failing to wear clothing conforming to standards set by the company

being late or taking unexcused absences from work

not taking proper care of, neglecting or abusing company equipment or tools

using company equipment in an unauthorised manner

possessing firearms or weapons of any kind on company property.


Example 2: ORGANISATIONAL CODE OF CONDUCT

ORGANISATIONAL CODE OF CONDUCT

Instructions: This document is intended as an aid to assist non-State entities in establishing an organisational

code of conduct. It is not intended to be used verbatim, but rather to serve as a template for non-governmental

organisations as they craft their individual code of conduct.

This example includes definitions of what is considered unacceptable, and the consequences of any breaches

thereof. Each organisation that chooses to use this template should take care to make changes that reflect the

individual organisation. For example, anywhere “the organisation” is used should be replaced with the name of

your organisation.

Organisational Code of Conduct:

The organisation and its employees must, at all times, comply with all applicable laws and regulations. The

organisation will not condone the activities of employees who achieve results through violation of the law or

unethical business dealings. This includes any payments for illegal acts, indirect contributions, rebates, and

bribery. The organisation does not permit any activity that fails to stand the closest possible public scrutiny.

All business conduct should be well above the minimum standards required by law. Accordingly, employees must

ensure that their actions cannot be interpreted as being, in any way, in contravention of the laws and regulations

governing the organisation’s operations.

Employees uncertain about the application or interpretation of any legal requirements should refer the matter

to their supervisor, who, if necessary, should seek appropriate legal advice.

General Employee Conduct:

The organisation expects its employees to conduct themselves in a business-like manner. Drinking, gambling,

fighting, swearing, and similar unprofessional activities are strictly prohibited while on the job.

Employees must not engage in sexual harassment, or conduct themselves in a way that could be construed as

such, for example, by using inappropriate language, keeping or posting inappropriate materials in their work

area, or accessing inappropriate materials on their computer.

Conflicts of Interest:

The organisation expects that employees will perform their duties conscientiously, honestly, and in accordance

with the best interests of the organisation. Employees must not use their positions or the knowledge gained as

a result of their positions for private or personal advantage. Regardless of the circumstances, if employees sense

that a course of action they have pursued, or are presently pursuing, or are contemplating pursuing may involve


them in a conflict of interest with their employer, they should immediately communicate all the facts to their

supervisor.

Outside Activities, Employment, and Directorships:

All employees share a serious responsibility for the organisation’s good public relations, especially at the

community level. Their readiness to help with religious, charitable, educational, and civic activities brings credit

to the organisation and is encouraged.

Employees must, however, avoid acquiring any business interest or participating in any other activity outside

the organisation that would, or would appear to:

Create an excessive demand upon their time and attention, thus depriving the organisation of their

best efforts on the job.

Create a conflict of interest - an obligation, interest, or distraction - that may interfere with the

independent exercise of judgment in the organisation’s best interest.

Relationships With Clients and Suppliers:

Employees should avoid investing in or acquiring a financial interest for their own accounts in any business

organisation that has a contractual relationship with the organisation, or that provides goods or services, or

both, to the organisation if such investment or interest could influence or create the impression of influencing

their decisions in the performance of their duties on behalf of the organisation.

Gifts, Entertainment, and Favours:

Employees must not accept entertainment, gifts, or personal favours that could, in any way, influence, or appear

to influence, business decisions in favour of any person or organisation with whom or with which the

organisation has, or is likely to have, business dealings. Similarly, employees must not accept any other

preferential treatment under these circumstances because their positions with the organisation might be

inclined to, or be perceived to, place them under obligation to return the preferential treatment.

Kickbacks and Secret Commissions:

Regarding the organisation’s business activities, employees may not receive payment or compensation of any

kind, except as authorized under the organisation’s business and payroll policies. In particular, the organisation

strictly prohibits the acceptance of kickbacks and secret commissions from suppliers or others. Any breach of

this rule will result in immediate termination and prosecution to the fullest extent of the law.

Organisation Funds and Other Assets:

Employees who have access to organisation funds in any form must follow the prescribed procedures for

recording, handling, and protecting money as detailed in the organisation’s policies and procedures or other

explanatory materials, or both. The organisation imposes strict standards to prevent fraud and dishonesty. If


employees become aware of any evidence of fraud and dishonesty, they should immediately advise their

supervisor or seek appropriate legal guidance so that the organisation can promptly investigate further.

When an employee’s position requires spending organisation funds or incurring any reimbursable personal

expenses, that individual must use good judgment on the organisation’s behalf to ensure that good value is

received for every expenditure.

Organisation funds and all other assets of the organisation are purposed for the organisation only and not for

personal benefit. This includes the personal use of organisational assets, such as computers.

Organisation Records and Communications:

Accurate and reliable records of many kinds are necessary to meet the organisation’s legal and financial

obligations and to manage the affairs of the organisation. The organisation’s books and records must reflect in

an accurate and timely manner all business transactions. The employees responsible for accounting and

recordkeeping must fully disclose and record all assets, liabilities, or both, and must exercise diligence in

enforcing these requirements.

Employees must not make or engage in any false record or communication of any kind, whether internal or

external, including but not limited to:

False expense, attendance, production, financial, or similar reports and statements

False advertising, deceptive marketing practices, or other misleading representations

Dealing With Outside People and organisations:

Employees must take care to separate their personal roles from their organisation positions when

communicating on matters not involving organisation business. Employees must not use organisation

identification, stationery, supplies, and equipment for personal or political matters.

When communicating publicly on matters that involve organisation business, employees must not presume to

speak for the organisation on any topic, unless they are certain that the views they express are those of the

organisation, and it is the organisation’s desire that such views be publicly disseminated.

When dealing with anyone outside the organisation, including public officials, employees must take care not to

compromise the integrity or damage the reputation of either the organisation, or any outside individual,

business, or government body.

Prompt Communications:

In all matters relevant to customers, suppliers, government authorities, the public and others in the organisation,

all employees must make every effort to achieve complete, accurate, and timely communications - responding

promptly and courteously to all proper requests for information and to all complaints.


Privacy and Confidentiality:

When handling financial and personal information about customers or others with whom the organisation has

dealings, observe the following principles:

Collect, use, and retain only the personal information necessary for the organisation’s business.

Whenever possible, obtain any relevant information directly from the person concerned. Use only

reputable and reliable sources to supplement this information.

Retain information only for as long as necessary or as required by law. Protect the physical security of

this information.

Limit internal access to personal information to those with a legitimate business reason for seeking

that information. Use only personal information for the purposes for which it was originally obtained.

Obtain the consent of the person concerned before externally disclosing any personal information,

unless legal process or contractual obligation provides otherwise.

The Role of Corporate Governance (SO2AC2)

Corporate governances is the framework of rules and practices by which a board of directors ensures

accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers,

customers, management, employees, government, and the community).

The corporate governance framework consists of (1) explicit and implicit contracts between the company and the

stakeholders for distribution of responsibilities, rights, and rewards, (2) procedures for reconciling the sometimes

conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and (3) procedures for

proper supervision, control, and information-flows to serve as a system of checks-and-balances.

The Importance of Corporate Governance

When people think about organisations, they usually imagine a large company with hundreds or even thousands

of employees. With so many people working within one company, there has to be an order and structure that

keeps the areas of communication clear and easy to understand. This form of structure is known as corporate

governance.

Corporate governance isn’t just one structure though, but instead it consists of the various duties, obligations, and

rights that control and direct an organisations. The point of this governance is to properly distribute the

responsibilities that those who participate in the organisations have, such as the managers, stakeholders, creditors,

regulators, and of course those in the board of directors. In addition to informing these people of their

responsibilities, the corporate governance also informs people of their rights within the organisations.


Corporate governance is an important aspect of business. There’s a lot that goes into running a business obviously,

and understanding things like corporate governance is only one small part of the big picture.

The Goals of Corporate Governance

When corporate governance is done properly, it allows the organisation to work smoothly due to the existence of

a clear level of accountability and communication amongst the organisation, as well as people understanding what

their roles and responsibilities are.

To properly understand and utilise corporate governance it is important to understand and follow its most

important principles. These principles help establish the roles and responsibilities of the key members of the

organisations. The general principles of all forms of corporate governance are generally related to the shareholders,

board members, and stakeholders. In addition to this, corporate governance also places a strong emphasis on the

behaviour of the corporation and how much the organisations discloses to the public.

Below you can find a detailed explanation of the principles that the corporate governance follows and the people

that these principles have an effect on.

Keep the Interest of Stakeholders in Mind

Corporate governance acknowledges that the stakeholders in the company must be recognised in all areas of

society, the market, legality, and their contracts. The stakeholders are important members of the organisation that

don’t hold any shares. Stakeholders include people such as investors, creditors, customers, suppliers, and

employees.

Treating Shareholders Equally

As an organisation, the business should not only respect shareholders and their rights, but help the shareholders

when it comes to exercising their rights. The best way this is done is by allowing and encouraging shareholders to

participate in the activities in the company such as meetings.

Identifying the Roles of the Board of Directors

The board of the directors are those that stand at the head of an organisation. The responsibilities of the board are

diverse and it requires people needing both skill and knowledge to evaluate employee performance. In addition to

this, the corporate governance helps to make sure that the board has the level of commitment and the size that it

needs in order to properly run the business.


Ethical Behaviour

Ethics and integrity are also key principles of corporate governance. The integrity of anyone placed in organisational

office or in the board should have a high level of integrity. They must also follow a code of conduct and exhibit

ethical behaviour during the decision-making process of the business.

Transparency

The final principle of corporate governance is the concept of disclosure or transparency. This is the idea that the

organisation should always let it be known what the responsibilities and duties are of those that work for the

organisation as well as who is management in order to keep stakeholders accountable. Another aspect of

transparency is disclosing material related to the organisation that should be given out in a way that promises

anyone who is invested in the company can have clear access to information.

A company’s corporate governance sets the stage for how it is run, as well as what the roles and duties of those

who work in the organisation may be. When creating a business plan, it would be wise to consider how corporate

governance will be implemented into the business model. A company with a poor business plan is essentially

doomed to fail.

The Importance of Corporate Governance

Through seeing how corporate governance works, you can tell why it is important. It helps streamline the process

and gives people accountability. The point of corporate governance is to help the decision making process. As

mentioned above in the principles of corporate governance, one of the main goals is to clearly explain to the board,

the stakeholders, and the shareholders what their duties and responsibilities are within the company.

With knowing those roles and responsibilities, the people within the organisation can understand what they are

held accountable for. For example, the board has the responsibility of properly evaluating the management in the

company. If the company has poor management, then it is the fault of the board for not properly evaluating the

manager. In this regard, the blame cannot be placed on other members of the organisation. This prevents situations

in which there is no way to know who is accountable for what action.

Accountability is what helps people within the company make decisions, whether it is finding out what person

should be terminated from their position due to the mistakes that they’ve made or who should be acknowledged

for their good work due to doing something exceptional in their field. With good corporate governance, it’s pretty

simple to know what the key members of the business are supposed to do.


Lowering Risk

Another important aspect of corporate governance is mitigating or reducing the amount of risk that is involved.

Through corporate governance, scandals, fraud, and criminal liability of the company can be prevented or avoided

altogether.

Since the people involved in the organisation know what they are accountable for, the actions of one person

doesn’t mean the downfall of the entire organisation. Properly identifying what the roles in the organisation are

allows decisions to be made that won’t have a negative effect on the overall organisation, and it means that the

offender can be much more quickly identified and punished instead.

Corporate governance is also great because it is a form of self-policing. Before outside forces are able to do anything

to an organisation, it’s possible for the organisation to handle matters itself. With corporate governance, everyone

is held to a specific standard and communication is made easier due to their being an established hierarchy and

role that everyone involved in the organisation plays. This level of handling business on its own instead of being

forced into making decisions outside of the company helps keep the organisation sustaining itself.

Public Acceptance

In terms of business, a company with corporate governance is widely accepted by the public. This is mostly due to

the idea of disclosure and transparency that comes with corporate governance. With full disclosure and the ability

for people who work in the business to get information, as well as the general public, there is a higher level of trust.

There’s also the fact that due to the way that corporate governance is set up, there is a lower chance of fraud and

company-wide criminal activity, which helps gain the trust of the public as well.

Public Image

Today many organisations hold a high level of corporate governance. This is because an organisation has a public

image to maintain. With corporate governance, the organisation takes more responsibility for its actions, and also

allows it to keep tabs on what is going on as well as helps those in charge remain more aware of the public image

of the organisation.

With the way that businesses are run today, it can be difficult for an organisation to become successful just by

having a high level of profit. Due to the fact that an organisation is also evaluated based on its image, corporate

governance is established to help ensure that image remains clean. Making sure there is a high level of awareness,

ethical behaviour, and understanding of what the public wants is all encompassed in corporate governance.


Ethical Practices of an Organisation (SO2 AC2)

Accounting information

Accounting and financial professionals must abide by ethical standards that regulate what kind of business they

conduct, who they serve and how they use their skills. Ethical standards are determined largely by professional

accounting and finance organisations and bodies like the South African Institute of Chartered Accountants (SAICA),

Association of Accounting Technicians (AATSA), Independent Regulatory Board for Auditors (IRBA), etc. Small-

business owners who plan to perform their own accounting services or hire accountants should be aware of

accounting principles and general financial ethical standards so they can maintain a positive reputation for their

businesses.

Generally Accepted Accounting Principles

Generally accepted accounting principles are standards that determine how accountants conduct and format their

reports. Accounting records must be seen by a number of people outside of the organisation for transparency

purposes. If each company created its own accounting reporting methods, comparing financial statements would

be inefficient and hiding information would be easier.

Competence

Professional organisations list competence as one of the key ethical standards finance professionals must uphold.

To be competent, accountants and financial professionals must not only have secured education and practice that

prepares them for their positions, but they must also continue that education by learning new information that

can affect their practices. Among other things, they must stay up-to-date with GAAP (Generally Accepted

Accounting Principles), and they must be honest and display integrity.

Objectivity

Accountants must be objective, avoiding conflicts of interest. They must not, for instance, perform accounting

services for firms that they have a vested interest in. Even if they can conduct themselves objectively, working for

a company owned by a relative, for example, would not look objective and could cast doubt on the finance

professional's intentions. Although it is sometimes impossible to avoid conflicts of interest -- such as in the case of

a family business -- all associations of financial professionals warn against dishonest practices, such as manipulating

records to show a predetermined result.

Confidentiality

When working with a client's financial information, financial professionals have access to a great deal of personal

information. This is not only limited to financial information but also includes the names and contact information

of employees as well as the names and locations of firms with which the company does business. Ethical standards

require financial professionals to keep that information private except when ordered to disclose it by a court of

law. Financial professionals also must not use this information to gain "unethical or illegal advantage."


Sales and Marketing

Your sales and marketing activities have to follow ethical standards if you hope to avoid sanctions from regulatory

agencies and loss of reputation with customers. You can get guidance on ethical practices from industry and

marketing associations and develop your own internal policies. Ethical companies know how to respect the rights

of all stakeholders in the business while making decisions that are in the interests of the company.

Professional Conduct

Ethical conduct in sales and marketing means using a professional approach to customers, competitors, members

of regulatory bodies and company colleagues. Characteristics of such conduct include respectful interactions,

consideration for cultural diversity and non-discriminatory behavior towards people who are different than you.

You have to behave honestly, portray situations and products accurately and make constructive contributions to

discussions about problems and solutions, and you must observe the applicable laws and regulations at all times

and adhere to company ethics policies.

Competition

Healthy competition delivers value to customers while allowing companies that compete to earn an appropriate

return on their investment. Ethical behavior in a competitive environment includes supporting fair competition,

competing on the basis of accurately representing your products and services in the marketplace and fulfilling your

obligations in good faith.

Pricing

Following ethical guidelines in pricing means prices have to be clear without hidden charges. The consumer has to

know how much he/she is going to pay when making the purchase. Your prices have to reflect both the cost you

incur in delivering the product or service and the value the customer expects to receive.

Products

Ethical sales and marketing offer only safe products that are suitable for their intended use. Supply of the product

includes supplying instructions that the customer can follow to make the product work as intended, providing

customer service to resolve problems and dealing with problems objectively by applying appropriate solutions.

Following these ethical guidelines is good business practice because it increases customer satisfaction.

Research

Businesses obtain personal information about their customers during sales activity and marketing research. Ethical

practice means you respect the privacy of customers and safeguard their data. You have to follow privacy legislation

and inform customers that you are collecting their data, let them know its intended use, use the data only for that

purpose and destroy it securely when you no longer need it.


Promotion

Sales and marketing include promoting your products and services to potential customers. Ethical promotion

portrays your offers honestly and accurately, without links to attractive lifestyles that are not relevant. You have

to promote your products and services on their own merits and highlight those features that members of a target

market might find valuable when promoting to that market segment.

Production

This area of business ethics usually deals with the duties of a company to ensure that products and production

processes do not needlessly cause harm. Since few goods and services can be produced and consumed with zero

risk, determining the ethical course can be problematic. In some case consumers demand products that harm them,

such as tobacco products. Production may have environmental impacts, including pollution, habitat destruction

and urban sprawl. The downstream effects of technologies nuclear power, genetically modified food and mobile

phones may not be well understood. While the precautionary principle may prohibit introducing new technology

whose consequences are not fully understood, that principle would have prohibited most new technology

introduced since the industrial revolution. Product testing protocols have been attacked for violating the rights of

both humans and animals.

Intellectual property

Intellectual property (IP) encompasses expressions of ideas, thoughts, codes and information. "Intellectual

property rights" (IPR) treat IP as a kind of real property, subject to analogous protections, rather than as a

reproducible good or service. According to the World Intellectual Property Organisation (WIPO, 2012), it is simply

defined as: “Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and

symbols, names, images, and designs used in commerce.

International standards relating to Intellectual Property Rights are enforced through Agreement on Trade Related

Aspects of Intellectual Property Rights (TRIPS). The South African Institute of Intellectual Property Law, which was

established more than 60 years ago, in 1954, promotes and regulates various aspects of Intellectual Property in

South Africa

Ethical and legal issues include: Patent infringement, copyright infringement, trademark infringement, patent and

copyright misuse, submarine patents, biological patents, patent, copyright and trademark trolling, Employee

raiding and monopolising talent, Bio prospecting, bio piracy and industrial espionage, digital rights management.


Tendering processes

The ten commandments of good, ethical tender practice are the features of a constitutionally compliant and legally

acceptable tender process, as set out below:

1. An objective and unbiased approach in which an equitably based and fair decision is made on the bids by those

competing to win the tender is universally needed in the adjudication of all tenders.

2. Professionalism and a high standard of ethics must be maintained throughout the tender process by the

tenderer tasked with formulating invitations to tender, processing tenders and their adjudication.

3. The efficient, economical and effective use of public resources and human resources involved in the tender

process must be promoted.

4. Openness, accountability and responsiveness to people's needs must permeate the tender process.

5. The public must have access to information regarding tenders in a manner which is timely and accessible. The

information must be accurate. This is part of transparency. Proper advertising of tenders, briefings on their

requirements where necessary and a level playing field for all prospective tenderers are also required if the

process is to be transparent.

6. Any hint of cronyism, nepotism, corruption, bias, and favouritism should nullify the tender process summarily.

7. If the lowest tender is not accepted, sound and sufficient reasons for rejecting it and accepting a higher tender

should be made public at the time of the tender award.

8. Corruption, collusion and any other forms of criminality should invalidate any tender process infected with

these features and a swift, sure and fair means of addressing irregularities ought to be available through the

Courts to those prejudiced by any tender process irregularities. This includes not only unsuccessful tenderers

but also the public whose funds are used to pay successful tenderers and/or their representatives (opposition

political parties).

9. Politicians should have no role whatsoever to play in the process of fairly and objectively adjudicating tenders.

Nor should they submit tenders to government because of the risk of abuses and the presence of conflicts of

interest which render tenders voidable in law.

10. Good human resource management and career development practices must be promoted for public servants

involved in tender processes and in particular they should be precluded from entering any part of the private

sector, either directly or indirectly, involved in tendering after they leave the public service for whatever

reason.

Information Technology

Information ethics has been defined as "the branch of ethics that focuses on the relationship between the creation,

organisation, dissemination, and use of information, and the ethical standards and moral codes governing human

conduct in society". It provides a critical framework for considering moral issues concerning informational privacy,

moral agency (e.g. whether artificial agents may be moral), new environmental issues (especially how agents

should behave in the info sphere), problems arising from the life-cycle (creation, collection, recording, distribution,

processing, etc.) of information (especially ownership and copyright, digital divide, and digital rights). Information

ethics is related to the fields of computer ethics and the philosophy of information.


Dilemmas regarding the life of information are becoming increasingly important in a society that is defined as "the

information society". Information transmission and literacy are essential concerns in establishing an ethical

foundation that promotes fair, equitable, and responsible practices. Information ethics broadly examines issues

related to ownership, access, privacy, security, and community.

Information technology affects common issues such as copyright protection, intellectual freedom, accountability,

privacy, and security.

Professional codes offer a basis for making ethical decisions and applying ethical solutions to situations involving

information provision and use which reflect an organisation’s commitment to responsible information service.

Evolving information formats and needs require continual reconsideration of ethical principles and how these

codes are applied. Considerations regarding information ethics influence personal decisions, professional practice,

and public policy. Therefore, ethical analysis must provide a framework to take into consideration many, diverse

domains regarding how information is distributed.

Human Resources Human resource management occupies the sphere of activity of recruitment selection, orientation, performance

appraisal, training and development, industrial relations and health and safety issues. Business Ethicists differ in

their orientation towards labour ethics. Some assess human resource policies according to whether they support

an impartial, unbiased workplace and the dignity of the employees.

Issues including employment itself, privacy, and compensation in accord with comparable worth, collective

bargaining (and/or its opposite) can be seen either as non-negotiable rights or as negotiable rights. Discrimination

by age (preferring the young or the old), gender/sexual harassment, race, religion, disability, weight and

attractiveness. A common approach to remedying discrimination is affirmative action.

Once hired, employees have the right to occasional cost of living increases, as well as raises based on merit.

Promotions, however, are not a right, and there are often fewer openings than qualified applicants. It may seem

unfair if an employee who has been with a company longer is passed over for a promotion, but it is not unethical.

It is only unethical if the employer did not give the employee proper consideration or used improper criteria for

the promotion.

Potential employees have ethical obligations to employers, involving intellectual property protection and whistle-

blowing. Employers must consider workplace safety, which may involve modifying the workplace, or providing

appropriate training or hazard disclosure. Larger economic issues such as immigration, trade policy, globalisation

and trade unionism affect workplaces and have an ethical dimension, but do not often affect individual companies.


Trade unions

Unions for example, may push employers to establish due process for workers, but may also cost jobs by

demanding unsustainable compensation and work rules. Unionised workplaces may confront union busting and

strike breaking and face the ethical implications of work rules that advantage some workers over others.

Management strategy

Among the many people management strategies that companies employ are a "soft" approach that regards

employees as a source of creative energy and participants in workplace decision making, or a "hard" version

explicitly focused on controlling the workforce. None ensure ethical behaviour. Sustainable success requires a

humanely treated and satisfied workforce.


Module 3– Analyse the Principles of Corporate Ethics

US ID 252042


Specific Outcomes

Analyse a unit in relation to the principles of corporate ethics.

Assessment Criteria

An instrument is selected for analysing individual and organisational conduct in respect of organisational

values, codes of conduct and corporate ethics.

The instrument is applied to gather and record information within a unit in respect of organisational values,

codes of conduct and corporate ethics

The instrument is applied to evaluate the current state in a unit against the desired state in respect of

organisational values, codes of conduct and corporate ethics


Identifying

Working

Organising

Collecting

Communicating

Demonstrating

Contributing







There are several instruments available to analyse the ethical conduct in a business. Once you have selected and

applied the instrument, it is then possible to evaluate what the current state in your organisation is, to compare it

to what the desired stated should be, and to compile an action plan to get the ethics in your business to the desired

state.

We are going to discuss three of these instruments: Five Step Model to Conduct an Ethical Analysis, The Seven

Step Method for Analysing Ethical Situations, and the 8-Step Model for Ethical Analysis and Decision Making.

Five Step Model to Conduct an Ethical Analysis Ethical analysis is a systematic approach to figuring out the right moral decision in a particular situation. By

analysing the situation logically, in accordance with your ethical code, you can figure out which options are both

effective and moral. Ethical analysis principles encourage you to form an accurate picture of the situation and think

through the effect of your decisions before you act. In business, you can use ethical analysis to get your company

back on track when your co-workers or supervisors perform unethical actions.

Instructions

Gather the facts.

A high-quality ethical analysis requires gathering as much information as possible, making sure the facts are

accurate, and being aware of what information you don't have available.

Define the ethical issues involved.

When deciding on a course of action you may have to consider quality of life issues, the use or abuse of power,

safety, property rights, the right of privacy, and honesty. The specific moral issues involved will vary from case to

case.

Identify the parties involved.

If you discover, for example, that a supervisor is pushing his subordinates to sell defective goods rather than lose

money by destroying them, then salespeople, bosses, customers, and the company's owners would all be affected

if this comes to light.

List potential solutions and the possible consequences if you act on them.

In the defective goods case, for example, you could report the supervisor to upper management, offer the

salespeople your support if they refuse his orders, report what's going on to a regulatory agency or the media, do

nothing, or find a job elsewhere. Each decision will have different consequences.

Pick the most ethical action to follow.

Judge which action will generate the most good for the most people or which is most likely to fix the problem.

Reporting defective goods to management could benefit everyone involved -- assuming management acts


promptly -- except the dishonest supervisor. Reporting the problem to an outside agency will pressure

management to fix the problem quickly and make sure it doesn't happen again. Ultimately, you'll have to make

your decision based on the specific circumstances you're dealing with.

The Seven Step Method for Analysing Ethical Situations A useful instrument for analysing ethical situations is to follow the Seven Step Method to decide what action to

take in a situation. The method involves answering seven “what” questions:

1. What are the facts?

2. What are the ethical issues?

3. What are the alternatives?

4. How will the stakeholders be affected?

5. What are the ethics of the alternatives?

6. What are the practical constraints?

7. What are actions to take?

One reason for using the seven step method is to provide a mental checklist to insure completeness in making the

ethical analysis. A person making an ethical decision needs a procedure to follow to insure that he/she makes her

decision with rationality and respect--a decision procedure that can ensure that he/she has considered all the

relevant factors and have taken into account the interests of others as well as herself. Manuel Velasquez has

developed a seven step method for this purpose.

Most decision makers, when confronted with an ethical decision, would consider most of the elevant factors. The

seven step method provides a mental checklist to ensure that the essential factors are ncluded.

The method also provides a framework for locating difficulties and disagreements. By separating facts from ethical

issues, for example, the framework allows us to determine whether a disagreement is over the facts or over the

ethical issues. In discussing a social policy to control violence with firearms, for example, the question of whether

cheap handguns are used in a significant percentage of violent incidents is a factual question. The question of

whether South African. citizens have a right to bear arms and whether the society has a legitimate claim to limit

that right are ethical issues. Factual questions and ethical issues require a different kind of investigative process to

produce answers so it is important to be clear as to which kind of question we are asking.

Ethical decision making is a analytic process. The fact that the seven steps are listed in numerical order does not

indicate a strict logical or chronological order. The presence of certain facts will alert us to the need to consider

certain ethical issues, but without some prior acquaintance of the ethical issues, these facts would not have any

ethical significance. Determining what the alternatives are, who the stakeholders are, or what the practical

constraints are may send us in search of additional facts. Considering who the stakeholders are may generate new

alternatives. The insight generating capacity of the ethical principles used to determine the ethics of the

alternatives may raise new ethical issues or point us toward additional stakeholders. Thus each step should be


taken in progressive numerical order but each step remains open to revision by subsequent steps. The steps are

related in a analytical way in that the completion of one leads us to see inadequacies in previous steps that need

revision. The requirement to decide on a real time response to the situation sets a limit on how much of this

analytical thinking we can engage in. The proper response to a competitor’s marketing program may allow very

little time for consideration whereas a decision on an affirmative action hiring policy may allow quite a bit of time

for consideration and revision.

A Description of the Seven Steps

The following example will be used in describing the seven steps:

Stern Products, Inc. has for the past 30 years paid the entire cost of health coverage for workers and their

dependents. Recent increases in health insurance premiums on the order of 25% per year have made this coverage

a significant cost item on the firm's income statement. The three members of the compensation committee are

directed to review the health coverage policy and make recommendations at the next board meeting.

STEP 1 - THE FACTS.

What facts make this an ethical situation? What are the significant features of the particular situation which

make it an ethical situation? Is there some actual or potential harm involved for an individual or group?

Does the situation relate to some basic human goods which are being created, distributed, denied or

threatened? Does the situation affect human welfare in some significant way? Does it involve

considerations of justice or rights?

Health coverage for workers involves deciding how to divide up the goods of the corporation which is not

only an economic question of how to maximise the value of the firm but an ethical question of what is the

best distribution, the most just distribution, or the distribution which fulfills each groups rightful claims on

the value of the firm.

What facts are relevant to making an ethical decision? What facts should we know in order to decide how

to act in this situation? Steps 1 and 2 are closely related. What facts are relevant will depend on what the

ethical issues are and the ethical issues will be determined by the presence of certain facts. Thus the initial

assessment of facts will have to be augmented once the ethical issues have been determined.

The facts in the Stern case would include: the cost to the company of the various coverage options, the

short and long term economic prospects for the firm, worker demographics such as age, health status, level

of economic sophistication, availability and cost of individual coverage, the effects of a change or lack of a

change in coverage on the employees and the firm.


STEP 2 - THE ETHICAL ISSUES.

What level of ethical issues are we dealing with: systemic, corporate, or individual? Knowing the level of the

problem will help us to decide who will be affected by the decision and will therefore qualify as stakeholders

and who will be required to make the decision--the society as a whole, decision makers within the corporation,

or myself as an individual.

The Stern case involves corporate level issues, though reflecting on the high number of uninsured persons in

the society and how that impacts on the corporation's cost of coverage may prompt the firm to get involved

with the issue on an systemic level.

What specific ethical issues does this situation raise? Is it a question of how to maximise benefits and minimise

harms? Is it a question of whether an action can be universalised? Of whether individuals are being treated as

ends and not merely as means? Of whether all rational persons would agree that a particular action is right or

good? Is it a question of a possible violation of rights or a conflict between rights? Is it a question of the fair

distribution of benefits and burdens? Is it a question of how or whether to apply some specific ethical principle?

The ethical issues could be stated as follows:

What level of health coverage do employees have a right to expect, given the history of the company?

What level of coverage will maximise worker productivity while contributing the most to the profitability

of the firm?

Should the firm involve itself in the national debate on health care coverage?

What level of generality is required? The ethical issues need to be stated at a level of generality which will

allow the issue to be discussed in as broad a terms as possible, so as to see all the possible ramifications,

while yet being specific enough to lead to alternative actions in the case at hand.

The issue of health benefits for an organisation’s employees should allow reference to the standards of the

society as a whole but should refer to a decision to be made by this particular organisation.

STEP 3 - THE ALTERNATIVES

Given the facts and the ethical issues, what alternative actions are possible in this situation? Initially we should

state as many alternatives as possible without making judgments as to their plausibility. Having generated as

many as possible, the most plausible should be chosen for further examination.

The organisation can provide no health benefits, co-pay with the employee, provide full benefits for the

employee only, provide family benefits, open an HMO, and so on.

STEP 4 – THE STAKEHOLDERS

Who will be affected by the alternatives and to what degree? We must determine who will be affected to a

degree significant enough to include them among the primary stakeholders worthy of consideration. For

systemic issues, which individuals, groups, institutions, and aspects of the physical, economic and social

environment will be affected. For corporate issues, who and what inside and outside the corporation will be

affected: stockholders, government, society, the environment, suppliers, customers, local community,

employees, managers and so on. For individual issues, who will be affected by the decision, both inside the


company such as peers, superiors, other departments, and outside the company such as customers and

suppliers;

In the health care example, the stakeholders include the corporation as a viable economic entity, the

stockholders, the employees, their families and the local community;

How to rank stakeholder claims? Part of the decision making process will be to establish how much weight

each stakeholder's claim deserves. This weighing of claims is often done intuitively. For purposes of justifying

why the decision is the right one, however, the process for weighing the competing claims should be spelled

out as much as possible;

The firm's claim on resources in order to continue as a viable economic unit would have be given the greatest

weight, since without the firm none of the other stakeholders could receive any benefit. The competing claims

of stockholders and workers would have to be given the next greatest weight since they contribute directly to

the value of the firm and have legitimate claims on that value;

Deciding on how much weight to give each group's claims would require and understanding of the capital

structure of the firm (debt--equity balance, availability and relative cost of debt financing, and so on) and the

history of the firm's relations with the employees (degree of worker contribution to finished product, loyalty

and productivity of workers, average length of employment and rate of turnover, and so on).

Families and the community would have less weight unless they have made equally important contributions to

the firm.

STEP 5 - THE ETHICS OF THE ALTERNATIVES

Use ethical principles to decide on the best alternative. The ethics of each of the most plausible alternatives is

assessed using ethical principles or rules. For each alternative, for example, we could ask the questions

associated with the utilitarian, rights and justice principles to determine how the alternative is rated by each

theory. When the alternatives have all been rated as right or wrong, good or bad, the object is to select the

best alternative. In the ideal situation, all the ethical principles will point to the same alternative as the best

one.

Utilitarian Principle: Given the relative importance of the firm, the stockholders and the employees, which

alternative would provide the greatest benefit to the greatest number? How would costs and benefits be

measured in this case?

Rights Principle: What does each stakeholder have a right to expect with regard to health coverage? What

alternatives would you not want imposed on you if you were in the position of any of the other stakeholders?

Justice Principle: Which alternative distributes the burdens and benefits most fairly among the stakeholders?

Which stakeholders carry the greatest burden under each alternative?

How to decide when the theories point to different alternatives. There are situations in which different ethical

principles will recommend different alternatives. In a case where the principles provide a mixed

recommendation, we must choose which recommendation to follow and be prepared to justify that choice as

best we can. Justification can be provided by showing why the theory(ies) indicates that alternative as the best

and how this fits better into our conception of what the good life is than the alternatives suggested by the

other theories.


It may come down to the simple fact that, after inspecting all the alternatives with rationality and respect, I

just do value one alternative, or one theoretical approach, or one point of view as highlighted by one

theoretical approach, or one state of affairs provided by that alternative, or one value embodied by one

alternative more than the others.

I may not be able to say why I prefer that alternative except in terms of the way I choose to live my life and

what my experience has shown me. Does the fact that I do not have another definite standard to appeal to, if

two ethical theories should disagree mean that my decision is irrational or unjustified? The decision is rational

in that I have made it on the basis of the careful consideration required by the seven step method and it is

justified by showing why it is the best alternative according to at least one ethical theory. To say that I am

willing to live by the decision is the only remaining justification.

STEP 6 - THE PRACTICAL CONSTRAINTS.

Can the best alternative be put into effect? Having decided on one alternative, we need to see whether there

are any practical constraints which might prevent that alternative from being acted upon. When practical

constraints rule out an alternative, we must return to Step 5 to select the next best alternative and subject it

to the practical constraints test.

The best alternative may be to pay employees the maximum practicable wages and let them provide for their

own health benefits. There may be a law mandating some level of company provided health coverage which

would prevent our adopting this alternative.

Distinguish ethical from practical constraints.

Ethical decision making involves ruling out alternatives on ethical grounds in Step 5 and on practical grounds

in Step 6. In actual practice we often do not bother to distinguish the two different kinds of reasons for rejecting

an alternative. It is be helpful to keep them distinct as far as possible in order to be clear as to what kind of

reason we are giving. The difference between practical constraints and ethical considerations can best be

illustrated by example. In deciding on the level of health coverage from a rights perspective, we would weigh

the competing rights of employees and the stockholders to the benefits of the company's operations. This

ethical consideration would be different, however, from asking the question of whether the stockholders or

the workers would agree to accept a particular division of the benefits.

STEP 7 - ACTIONS TO TAKE

a. Implementing the best alternative. Having selected the best alternative which is not ruled out by practical

constraints, we need to decide on the steps necessary to carry it out. If a larger co-payment by employees is the

best alternative, how will it be implemented?

a. A summary of the justification. We should also be prepared, at the close of this decision process, to provide a

justification of why this course of action is the right or good one in this situation. Going through the seven steps

justifies the decision in the fullest sense. We should be prepared, however, to respond in some briefer form to the


legitimate requests of others--our superiors, our peers, the agents of society--for an explanation of why this

alternative is the best approach to this situation. This summary based on the seven steps will also provide us with

a briefer account to apply to similar situations in the future. The worst punishment would be to face the full seven

step process for each and every ethical decision we make in our lives. We would have no time for living

8-Step Model for Ethical Analysis and Decision Making

Step One: Gather relevant information

Identify relevant “facts” as applicable

Clinical indications (as appropriate)

Patient preferences (as appropriate)

Quality of life (as appropriate)

External factors

o Organisational factors (policies, procedures, structure)

o Professional factors (expectations, requirements)

o Financial and other resource factors Ethic

o Legal factors and precedents

o Social factors (society, family, culture, etc.)

Step Two: Identify the practical problem

What specific decision(s) must be made in order to take action?

Step Three: Identify the ethical issues and questions

Identify the most significant ethical issue in the case.

Formulate the ethical question you wish to answer.

Identify additional ethical issues that must be addressed.

Formulate the additional ethical questions you wish to answer.

Step Four: Select the ethical principles and/or frameworks to be considered

Identify the pertinent ethical principles and ethical theories to be considered in your analysis.

Step Five: Conduct an analysis and prepare a justification

Identify the possible answers to each question and evaluate using the principles and theoretical perspective

identified above.

Step Six: Consider one or more counterarguments

Identify the major counter argument for your own argument. Identify the strengths and weaknesses of the counter

argument. Consider the circumstances under which you might abandon your own argument.


Step Seven: Explore the options for action

Identify potential actions to be taken and test each action against your arguments. Include the option of taking no

action.

Step Eight: Select, complete and evaluate the action

Upon reflection, does the action remain justified?)


Module 4– Recommendations and implementation plan for strengthening

shared organisational values, the code of conduct and ethical practices US ID 252042


Specific Outcomes

Formulate recommendations for strengthening shared organisational values, the code of conduct and ethical

practices.

Assessment Criteria

An implementation plan is prepared that described the strengthening of the entity`s values, code of conduct

and ethical practices in the unit.

The role and responsibilities of the manager are described in terms of decision making to strengthen the

values, code of conduct and ethical practices in a unit and the entity

The communication activities for promoting the entity`s values, code of conduct and ethical practices are

outlined in the plan, with role allocation and time frames

The process for monitoring and evaluating improvements in relation to the entity's organisational values,

code of conduct and ethical practices in a unit is described with role allocation and time frames


Identifying

Working

Organising

Collecting

Communicating

Demonstrating

Contributing







Shared Value

Shared value is a management strategy focused on companies creating measurable business value by identifying

and addressing social problems that intersect with their business. The shared value framework creates new

opportunities for companies, civil society organisations, and governments to leverage the power of market-based

competition in addressing social problems.

There are three ways in which shared value can be created:

Reconceiving products and markets

Defining markets in terms of unmet needs or social ills and developing profitable products or services that remedy

these conditions.

Example: In America, BD developed a new type of safety syringe to reduce healthcare worker needle-stick injuries.

This product innovation grew to $2 billion, approximately a quarter of the company’s revenue.

Redefining productivity in the value chain

Increasing the productivity of the company or its suppliers by addressing the social and environmental constraints

in its value chain.

Example: By reducing packaging and improving delivery logistics, Walmart saved $200M in distribution costs while

growing the quantities being shipped.

Local cluster development

Strengthening the competitive context in key regions where the company operates in ways that contribute to the

company’s growth and productivity.

Example: Cisco reduced a key constraint to growing its addressable server market by launching the Networking

Academy to train over four million network administrators globally.

Shared value is not about redistributing value created through philanthropy or about including stakeholders’ values

in corporate decisions. Rather, shared value focuses on the creation of meaningful economic and social value –

new benefits that exceed the costs for the business and society.

The Shared Value framework defines a new role for business in society that goes beyond traditional models of

corporate social responsibility. Rather than focus on mitigating harm in the company’s existing operations, shared

value strategies engage the scale and innovation of companies to advance social progress. At the same time, shared

value offers new ways for other societal actors to engage with corporations in delivering social impact:

NGOs can evolve their strategic priorities in order to more effectively partner with companies on shared

value strategies

Philanthropic and government bodies can find new ways to incentivise private sector investment in solving

pressing social issues


Investors can gain insight into companies’ future growth and profit potential by understanding how shared

value strategies address social issues that directly impact performance

Individual practitioners, academics, and students around the world can deepen the understanding and

application of shared value within their companies, social enterprises, and academic institutions

While shared value is still early in the adoption cycle, the approach has been embraced by many of the world’s

most respected companies, to address social problems at scale as a core part of their corporate strategies.

Ways to Promote Ethical Conduct

It is important for staffers to focus on accomplishing key company goals and developing good working relationships

in the office, but it is equally important to ensure ethical conduct among employees. Ethical conduct ensures that

your business maintains a reputation for sound professional principles and values that are directly in line with the

company mission. There are a few different ways that you can promote ethical conduct among your staff.

Train Employees

You can't expect your staff to act ethically in accordance with your company's code of ethics if they don't know

what that code is or why it's important. Hold regular sessions on ethics and how to approach ethical dilemmas

among staff. The more training and resources you provide, and the greater emphasis you place on being ethical

and acting accordingly, the more your staff understands exactly what you expect in the office.

Reward Ethical Behaviour

Far too often, companies simply expect ethical behaviour; however, if you want to promote this as a prominent

behaviour among staff, then you need to show and prove, so to speak. Provide rewards for solid ethical behaviour;

for example, if you have an employee that goes above and beyond to put her personal interests aside to always do

what is best for her clients, that is considered ethical behaviour and she should be rewarded and held up as an

example for others to strive to do the same. The more you reward employees for sound ethical decisions, the more

likely the masses will follow suit.

Lead by Example

Expect more of your management team; employees generally follow company examples set forth for them by

management employees. Hold your managers to a higher ethical standard so that they are credible when they

communicate expectations to their staffers to do the same. Challenge management staff to hold regular discussions

with employees to work through potential ethical issues that may come up and find ways to brainstorm through

them as a team. If everyone is on the same page, it is more likely that the team as a whole will adopt the same

types of ethical behaviours.


Consider Work-Life Balance

According to the Accounting Web website, a 2007 Ethics and Workplace survey by Deloitte & Touche states that

91 percent of employees surveyed said they are most likely to make good ethical decisions at work when they have

a better sense of work-life balance. Pay attention to signs of burnout or discontent among staff, and take steps to

address these types of issues when they present themselves.

Developing an Implementation Plan An implementation plan is designed to document what the organisation is doing and its plans for the future. Each

organisation has its own style of planning and different needs regarding its Code of Conduct / Ethics.

The following are some suggestions and questions that might be considered when developing an implementation

plan. It is recommended that plans are kept short and that they include clarity on what needs to be done, by whom

and when.

1. Task Group

Management form a task group to guide discussion with wider staff, management and board etc.

Organise a workshop with relevant staff.

Decide on the outline structure of what should be contained in the implementation plan; include the

aims/objectives, tasks, persons responsible, timeframe etc.

2. The Organisation's Materials

Undertake an Audit of Materials

Undertake an Audit of Existing Materials (Brochures, leaflets, marketing and promotional materials,

development education and campaigning materials, websites, social media accounts/pages, pictures and

posters on office walls etc.).

What materials are currently in compliance with the principles of the Code of Conduct / Ethics and what

materials need to be changed?

Identify and Agree Internal Criteria/Guidelines for Compliance with the Code of Conduct / Ethics

Within the context of your organisation's 'Tone of Voice' or Brand guidelines, philosophy etc., and in line with your

communication strategy, identify and agree internal on criteria/guidelines for compliance with the Code of Conduct

/ Ethics


What Areas Need Improvement?

Identify and agree on areas which need guidelines for best practice, for e.g.

On compiling, storing, sourcing and use of documents.

On staff training

For volunteers, head office and field office staff or contractors.

3. Implementation Mechanisms and Compliance Commitments

Review the minimum criteria in the Code of Conduct / Ethics - What tasks need to be undertaken to ensure

organisational compliance with the Code? Consideration of the areas below will help to identify points for an

implementation plan.

Management Responsibilities

What are the responsibilities of management in relation to compliance with the Code of Conduct / Ethics?

What can management do to ensure compliance with the principles of the Code of Conduct / Ethics?

How can the board ensure that it discusses compliance with the Code of Conduct / Ethics on a regular basis

(at least annually)?

Information Sharing and Training

What information sharing/training is needed within the organisation on the Code of Conduct / Ethics?

Who needs training and what kind and level of training do they need?

Who will develop the organisation-wide training plan?

Responsibility for Implementation of the Code of Conduct / Ethics within the Organisation

Who is responsible for implementation of the Code of Conduct /Ethics within the organisation and how do

they relate to various sections within the organisation?

What mechanisms need to be put in place to ensure appointment and support for a Code Champion?

Who is responsible for reporting on implementation of the Code of Conduct / Ethics?

Who takes part in the annual monitoring meeting on the progress of and feedback on Code of Conduct /

Ethics ?

Who will ensure that reference is made to the Code of Conduct / Ethics in the organisation's annual report

and on the website?

How will the feedback mechanisms be implemented?


Code of Conduct on Images and Messages and Strategic Planning

How do the above decisions relate to the organisation's strategic planning and QA processes?

Evaluation of Code Implementation

How is the implementation of the Code of Conduct /Ethics reviewed or evaluated within the organisation, how

often and by whom?

4. Your Organisation's Plan

Once you have undertaken a process of review and decision making, it is time to write your organisation's

implementation plan. This should include details on:

Aims and Objectives of the Implementation Plan

Areas and commitments to be addressed in the implementation of the Code of Conduct

Tasks to be completed in each area

Timeframe

Person(s) Responsible

Evaluation of the implementation of the Code of Conduct within the Organisation

Chart to assist with the development of an Implementation Plan

Areas and Commitments

to be addressed in Code

Implementation

Tasks to be

completed in each

area

Timeframe Person(s)

Responsible

Task Group Established

Workshop

Outline of Areas which need

to be addressed in

Implementation Plan

Materials Development

Audit

Internal Criteria / Guidelines

Agreed –

Areas for improvement

identified

Organisational

Implementation

Mechanisms


Management

Responsibilities

Information Sharing and

Training

Responsibility for Code

Implementation within the

Organisation

How plans on The Code

relate to Strategic Planning

Evaluation of Code

implementation in the

organisation

4.4 Monitoring and Evaluating Improvements

Leadership: setting the tone at the top

Does the leadership of the organisation demonstrate high standards of integrity? Do they practice what

they preach and set a good example?

Do directors and senior management provide a clear signal to other employees and outside stakeholders

that integrity is important to the performance and reputation of the organisation? Does adhering to the

principle of integrity override short-term gain?

Does the organisation’s leadership ensure that strategy, policies, information and culture sustain a

reputation for integrity?

Strategy: aligning objectives

Is the promotion of integrity seen as an integral part of the organisation’s strategy?

Does the board devote resources and management time to it? Do directors discuss integrity issues at board

meetings on a regular basis and act upon those discussions as appropriate? Are discussions on integrity on

the risk agenda? Does the organisation have someone responsible for monitoring and promoting integrity?

Are the organisation’s objectives and strategy in line with its standards of business conduct? For example,

does the strategy impose unrealistic short-term performance targets which may encourage behaviour

which lacks integrity? Does the organisation openly encourage honesty?


Policies and procedures: embedding the strategy

Does the code of conduct define integrity and outline the behaviour it expects directors, employees and

other stakeholders to uphold?

Does the organisation provide effective training so that individuals understand organisational values and

what these mean for their role?

Does the appraisal process include a discussion of how individuals have upheld the organisation’s values

and standards of behaviour?

Does the reward and performance policy take into account how these objectives are attained as well as

whether they are met?

Is support provided to employees on ethical matters? Does the organisation have guidance on how to

resolve ethical problems such as conflicts of interest? Does it provide access to a confidential helpline?

Do individuals who are responsible for dealing with ethical matters have the authority and back-up to be

effective?

Information: monitoring performance

Do directors and management obtain feedback about the performance of the organisation and its

leadership against its stated objectives in this area?

Is there a process for gathering information on the organisation’s commitment to integrity? Sources of

information could include:

o risk reporting;

o team meetings;

o employee or stakeholder surveys;

o helplines;

o breaches of the organisation’s codes of conduct; and – ethical assurance reports

Is this information discussed and acted upon by the board?

Culture: supporting ethical behaviour

Does the organisation’s culture promote integrity and encourage individuals to speak up and voice their

concerns, without fear of reprimand? Is it supported by openness, transparency and accountability?

Does the leadership encourage and support individuals to make decisions aligned to the organisation’s

values?

Does the organisation monitor and discipline individuals who behave without integrity?


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http://sharedvalue.org/about-shared-value

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https://www.icaew.com/~/media/Files/Technical/Ethics/instilling-integrity-in-organisations.pdf

THE END

https://www.icaew.com/~/media/Files/Technical/Ethics/instilling-integrity-in-organisations.pdf