Chapter 15 : Business ethics and ethical behaviour

Definition of business ethics

• Ethics is the analysis of right and wrong, and associated responsibility.
• Business ethics is the application of ethical values to business behaviour.

What is “right” or “wrong”?

1 The consequences

2 The motivation of the parties concerned

3 Guiding principles

4 Duties

5 Key values

Why business ethics is important?

Determining whether a decision is ethical :

• Is it legal?
• Is it contrary to a published code of ethics?
• Is it a fair use of power?
• Would you be embarrassed if you had to justify the decision to your mother

What is profession?

• the mastering of specialised skills during a period of training
• governance by a professional association
• compliance with an ethical code
• a process of certification before being allowed to practise

Accountant’s role in promoting ethical behaviour

Accounting issues :

• Creative accounting
• Directors’ pay arrangements
• Bribes
• Insider trading

Production issues :

• Should the company produce certain products at all?
• Effects on the environment
• Test products on animals?

Sales and marketing issues :

• Price fixing and anti-competitive behaviour
• Target advertising at children?
• Advertised by junk mail or spam mail.

Personnel issues :

• discrimination
• fair balance of power between employer and employee
• safety and health of the workplace

Codes of ethics and codes of conduct

The policies can either be broad generalisations or can contain specific detailed rules.

Example : IFAC Code of Ethics & ACCA Code of Ethics

By : Yichun