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1. the dviation from a profit only focus dows not mean that profit will fall 2. profit is now recognized as an incomplete measure of coporate performance and therefor an inaccurate measure for resource allocation 3. Friedman explicitly expected the performance would be within the law and ethical custom
Issues with Milton Friedman's profit only world.
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The public's expecatations for trustworthy reports on corporate performance cannot be met unless the professional accountants who prepare or audit those reports focus their primary loyalty on the public interest and adopt principles such as (3) that protect the public interest.
independence of judgement, objectivity, and integrity
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Expanding legal liablitiy for coporate directors
management assertions to shareholders on the adequacy of internal controls, and a state intention to manage risk and protect reputation
Trends develpoed as a result of economic and competitive pressures that have an effect of ethics of business and professional accountants.
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delayers, employee empowerment, and the use of electronic data interfaces and an increased reliance by management on non financial performance indicators used on a real time basis.
Significant changes in how oranizations operate regarless of economic and competitive pressures that have an effect on ethics of business and professional accountants.
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the system of shared values that drive action
corporate culture
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general training and training to instill decision frameworks; compliance check off lists, encouragement of internal whistle-blowing, mind focusing scorecards and categorizations, inclusion of ethical performance as a factor in internal and external reports, creation of specific ethical operating goals, creation of whistleblowing programs and positions like chief ethics or bompliance officer
mechanisms developed to ensure that ethical principles were understood, reinforced, and not lost sight of.
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added to directors responsibilities the requirement of proactively seeking out ethical problems
Caremark National Case
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includes shareholders, employees, customersm suppliersm competitiors, lenders & creditors, governemnts, activitists, and others(media)
Stakeholders corporations must be accountable to
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include surveys, focus groups, and mapping accoding to stereotypes.
approaches to examine the interests of stakeholders
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values that are respected by most groups or cultures around the world. Should be built into a corporations code of conduct, policies, strategies, and activities.
hypernorms
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Set Guidance and Boundaries (policies, codes, culture, copliance) Set Direction (strategies, goals, remuneration, incentives), Appoints CEO, who appoint other executives and CFO, Arrange for resources, Monitor Feedback(opperations, policy compliance, financial reports,) Reports to shareholders, Govern) Nominantes/decides on auditor
Key board control funcions (look over Figure 1.2 pg 15)
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Hypernorms involve the demonstration of 6 basic values:
Honesty, Fairness, COmpassion, Integrity, Predictability, Responsibility
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4 determinates of Corporate Reputation
Credibility, Reliability, Responsibility, Trustworthiness
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Risk events causing drops of over 25% share value 4
Strategic, Operational, Financial, Hazard and other ( table 1.3 pg 16 is more descriptive)
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the chance of something happening that will have an impact on objectives
risk
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inclues the culture, processes, and structures that are directed toward the effective managemnt of potential opportunities and adverse effects includes the systematic application of managemnt policies, proceduresm abd practives to the tasks of establishing the context, identifying, analyzing, assessing, managing, monitoring, and communicating risk
risk management
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Stakeholder expectation not met by stealing, misuse of funds or assets
Risk: Honesty, Integrity
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Stakeholder expectation not met by conflict of interest with officiers
Risk: predictability, responsibility
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Stakeholder expectation not met by Performance level
Risk : Responsibility, honesty
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Stakeholder expectation not met by Reporting transparency, accuracy
Risk: Honesty Integrity
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Stakeholder expectation not met by Employee Safety
Risk: Fairness
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Stakeholder expectation not met by Employees Diverstiy
Risk: Fairness
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Stakeholder expectation not met by Child/ Sweatshop labor
Risk Compassion and Fairness
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Stakeholder expectation not met by Customer Safety
Risk: Fairness
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Stakeholder expectation not met by Customer Performance
Risk Rairness, integrity
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Stakeholder expectation not met by Pollution
Risk: integrity, responsibility
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Corporate reports frequently lack ______ because they do not cover some issues, nor is there always a clear, balanced presentation of how the interest of stakeholders will be affected.
integrity
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Sometimes issues will be mentioned, but in such an obtuse or unclear manner that a lack of ____ will could the understanding of the reader
transparency
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____ or faithful representation is fundamental to an understanding of the underlying facts
Accuracy
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Stakeholder Report Topics:
1)Health and Safety
2)Sustainability
3)Philanthropy
- 1)workplace responsibility
- 2)environmental performance/impact
- 3) corporate social responsibility
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happiness is achieved by leading a virtuous life in accorance with reason. In business directors, executives and accountants should demonstarte integirty, should honor the terms of contracts, and should be loyal to their employees, customers, and suppliers, should have courage to be candid and transparent in their dealings and should be forthright when providing explanations
Aristotle
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people are ethical when they do not use other people opportunistically, and when they do not act in hypocritical manner demanding a high level of conduct for everyone else, while making exceptions for themselves
Kant
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goal of life is to max happines or min unhappinies or pain, and the goal of society is to max the net social benefits to all people - goal of business is to contribute to increasing the physical/psychological benefits of socity by providing goods and services required by society
Mill
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dociety should be structured so that there is a fiar distribution of rights and benefits, and any inequalities shoudl be to everyone's advantage. Business hould act in an ethical manner when they do not have discriminatory prices and hiring systems and should not provide g&s to one segment of society at the expense of other segments
Rawls
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the evolving relationship between corporations nd society
corporate social contract
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requires that an ethical decision have good consequence
consequentialism
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an ethical act depends upon the duty, rights, and justice involved
deontology
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considersan act ethical if it demonstartes the virtues expected by stakeholders of the participants
virture ethics
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challenging any proposed policy or action with five quesionts designed to rate the proposal on the the following scales: profitability ,legality, fairness, impact on the rights of ecah stakeholder, and the envir. specifically, and demonstration of virtues expected by stakeholders
Modified Five Question Approach
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focus on four dimensions of impact of the proposed action 1) whether it provides a net benefit to society 2) whether it is fair to all stakeholders 3) whether it is right 4) whither it demonstarts the virtures expected by stakehoders
Modified Moral Standards Approach
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taking specific account of culture within the corporation and of common problems. Any proposed decision should be evaluated in comparison to the companies ground rues, the net benefit it produces, whether it impinges on any stakeholders rights and requires rules to seolve problems.
Modified Pastin Approach
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The way employees view their own treatment by the company determines what the employees think about their
company's ethics program
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FDA approved beta-1b for tresuppliers were insufficient to meet inital demand and shorages were forecasted
the price was expected to be about $10,000 per year for each patient
The Betaseron Decions
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Purpose of the project was to develop ecuadors natrual resources and encourage colonizaiton
Ecuador recieved 98% of profit
Tribes in ecuador sued texaco for ruining water and hunting supplies
Texaco: the Ecuador Issue
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Graduate questioning whether or not to become an accountant due to ethical issues
Where were the Accountants
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Prairieland Bank was participating in unethical reporting of loans.
The bank insisted nothing was wrong.
The auditors decided to resign from the account (Ben Hunt)
To Resign or Serve
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