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Recently BBC uncovered in the report on Child Labour practices in India where suppliers of the clothes of high street retailer Primark had used child labour to finish the goods. Primark fired all the three firms involved. The question is about Ethics and Ethical values.

What is Ethics ?

Business ethics is the broadest of the three terms. It addresses the morality of both economic systems (e.g., the free market, socialism, communism) and the conduct of the organizations found within these systems (e.g., corporations in a free market system).

Corporate ethics may be viewed as a subset of business ethics. Corporate ethics focuses specifically on issues of morality associated with business enterprises. These include relations internal to the organization (e.g., treatment of employees, dealings with shareholders, questions concerning product quality and customer service, etc.) as well as external relations (e.g., interactions with government, specific communities, society as a whole, the impact of corporate activities on the natural environment, etc.).

Source: Hovefly

Ethical dilemmas

An ethical dilemma is a situation that will often involve an apparent conflict between moral imperatives, in which to obey one would result in transgressing another.

Eg.

• Trading with rogue governments can be seen as either contribution to the continuation of the regime or supporting economic growth that benefits all concerned
• If a foreign subsidiary of a company is operating in a country where it is legal to employ child labour, should the company take advantage of it ?
• Should you bribe to get your work done ? In some countries it is a common practice where it is referred as Suvidha or Baksheesh.

An article on on Santa Clara University explains  " A Framework on Ethical Decision Making"

Recognize an Ethical Issue

1. Is there something wrong personally, interpersonally, or socially? Could the conflict, the situation, or the decision be damaging to people or to the community?

2. Does the issue go beyond legal or institutional concerns? What does it do to people, who have dignity, rights, and hopes for a better life together?

Get the Facts

3. What are the relevant facts of the case? What facts are unknown?

4. What individuals and groups have an important stake in the outcome? Do some have a greater stake because they have a special need or because we have special obligations to them?

5. What are the options for acting? Have all the relevant persons and groups been consulted? If you showed your list of options to someone you respect, what would that person say?

Evaluate Alternative Actions From Various Ethical Perspectives

6. Which option will produce the most good and do the least harm?

Utilitarian Approach: The ethical action is the one that will produce the greatest balance of benefits over harms.

7. Even if not everyone gets all they want, will everyone’s rights and dignity still be respected?

Rights Approach: The ethical action is the one that most dutifully respects the rights of all affected.

8. Which option is fair to all stakeholders?

Fairness or Justice Approach: The ethical action is the one that treats people equally, or if unequally, that treats people proportionately and fairly.

9. Which option would help all participate more fully in the life we share as a family, community, society?

Common Good Approach: The ethical action is the one that contributes most to the achievement of a quality common life together.

10. Would you want to become the sort of person who acts this way (e.g., a person of courage or compassion)?

Virtue Approach: The ethical action is the one that embodies the habits and values of humans at their best.

Make a Decision and Test It

11. Considering all these perspectives, which of the options is the right or best thing to do?

12. If you told someone you respect why you chose this option, what would that person say? If you had to explain your decision on television, would you be comfortable doing so?

Act, Then Reflect on the Decision Later

13. Implement your decision. How did it turn out for all concerned? If you had it to do over again, what would you do differently?

If you as an Accountant are faced with Ethical dilemmas, apply the above principles. Further refer to your institute’s code of ethics. If you are still in doubt, then consult your Institute or Association.

I would like to hear your views on this subject for further discussion. You are welcome to comment on this blog post.

Regards,

Santosh Puthran

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The authors of the Code believe that new directors have to be properly trained. This means an effective induction process when the director joins the board and an on-going programme of professional development. In the words of main principle A.5, directors should “regularly update and refresh their skills and knowledge”. (If they do not they cannot possibly hope to keep up with the pace of legislative and regulatory change. The new code of directors’ duties in the Companies Act 2006 – see the section on Directors’ duties – is only one recent development.)

“The company,” says the Code, “should provide the necessary resources for developing and updating its directors’ knowledge and capabilities”. Note also the obligation in Listing Principle 1: “A listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors.”

Source: Paula

The essential point is that directors must be given the right “equipment” and get the right preparation to do their jobs/discharge their duties. There is reference to “tailored induction”. Thus the Code recommends that new non-executives get the chance to meet major shareholders as part of their induction process (A.5.1) and that “consideration should be given to visiting sites and meeting senior and middle management” (Higgs’ Suggestions for Good Practice).

For all directors, the right “equipment” includes “accurate, timely and clear information”. The company secretary, under the direction of the chairman, must, say the supporting principles, ensure “good information flows within the board and its committees and between senior management and non-executive directors”.

The words “clear” and “good” here are sometimes forgotten when directors are first appointed. Companies can tend to overburden an individual. As ICSA says in its guidance notes on the induction process, “it has become apparent that some newly appointed directors have been completely overwhelmed with the sheer volume of documents and other papers provided by the well meaning company secretary to such an extent that some have been completely put off by it”. To avoid this, ICSA suggests giving the director essential information only on their appointment and providing further necessary information in the subsequent few weeks. Subsidiary information can follow once the first two batches have been digested.

The company should also be prepared to pay for independent professional advice where the directors judge it necessary.

Source: Out-Law

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