Skip to main content

Ethical Decision Making

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

Join me


Do you like to be updated in Accountancy ?

Get updates by Email in your inbox


Or


Subscribe in a reader

SAP Store, UK


Visit MA Stores ? You will find something you are looking for ....

Management Accountant Store, US - Powered by Amazon
Management Accountant Store, UK Stores - Powered by Amazon, UK
Digital Store, US


You may also like to read

  1. Ethics on ACCA website 11-Feb-2008
  2. Combined of Corporate Governance UK 20-April-08
  3. 100 Most Influential People in Business Ethics 18-Feb-08
  4. Professional Body 28-April-07
  5. Resistance to Change 26-Apr-08
  6. Business, Customer Value & Management Accounting 19-June-08
  7. Activity Based Management - Dispelling the myths Par I - 13-June-08
  8. How to Share Blog posts with friends 25-May-08
  9. Management Accountant Blog Home
Post a Comment

Popular posts from this blog

Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.


Areas of consequence:
A Standard Costing

Throughput Accounting

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.


Cost (or Management) accounting is an organization's internal method used to measure efficiency. Since no one outside the organization uses such internal accounts for investment or other decisions, any methods that an organization finds helpful can be used.


Throughput accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables (throughput, inventory, and operating expense — defin…

Resistence to Change - Approaches of Kotter and Schlesinger

The Six (6) Change Approaches of Kotter and Schlesinger is a model to prevent, decrease or minimize resistance to change in organizations.
According to Kotter and Schlesinger (1979), there are four reasons that certain people are resisting change: Parochial self-interest (some people are concerned with the implication of the change for themselves ad how it may effect their own interests, rather than considering the effects for the success of the business)Misunderstanding(communication problems; inadequate information)Low tolerance to change (certain people are very keen on security and stability in their work)Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process) Kotter and Schlesinger set out the following six (6) change approaches to deal with this resistance to change: Education and Communication - Where there is a lack…