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AFM 131 (194)
Lecture 13

AFM 131 Lecture 13: Module 13 - Chapter 5

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Accounting & Financial Management
AFM 131
Bob Sproule

Chapter 5 – Ethics Ethics is more than just legality: Legality is laws we have written to protect ourselves from fraud, theft, and violence Ethics reflects on people’s proper treatment with one another. How should people treat each other? What responsibility do people have to one another? Ethics: standards of moral behaviour; behaviour that is accepted by society as right vs. wrong 1. Is it legal? Company policy? 2. Is it balanced? Fairly? Do unto others as you would have them do unto you. 3. How will it make me feel about myself? Is it proper and profitable? Compliance-based ethics codes: preventing unlawful (outside standards – laws and regulations) behaviour by increasing control and penalizing wrongdoers (avoiding criminal misconduct). Lead by lawyers and done through education, reduced employee discretion, etc. Integrity-based ethics codes: define organization’s guiding values, create an environment that supports ethically sound behaviour (responsible employee conduct), and stress a shared accountability among employees, Conform to outside standards (laws and regulations) and chosen internal standards. Lead by managers with the aid of lawyers and others. Done through education, leadership, accountability, decision processes, controls and penalties, etc. Examples: 1. Top management must adopt and unconditionally support corporate code of conduct 2. Expectations of ethical behaviour begins at the top and senior management expects all employees to act accordingly 3. Training to consider ethical implications of all business decisions 4. Ethics office needs to be set up where whistleblowers can go. Lead by ethics officer. a. Whistleblowers: people who report illegal or unethical behaviour 5. External stakeholders must be told about ethics program 6. Ethics code must be enforced Sarbanes-Oxley Act of 2002: stronger standards to prevent misconduct and improve corporate governance practices. Publicly traded companies in US. Bill C-11: The Public Servants Protection Disclosure Act  Canada’s only national whistleblower legislation (passed in 2005)  applies to almost entire public sector  significant powers to investigate wrong doing, clear legal prohibition from penalizing whistleblowers, proposes measures to protect the identity of whistleblowers Corporate Social Responsibility: a business’s concern for the welfare of society as a whole Issues of just profits vs. responsibilities business has towards society 1. Corporate Philanthropy: dimensions of social responsibility that include charitable donations to non-profits (Canadian Tire Foundation for Families, etc.) 2. Corporate Social Initiatives: dimensions of social responsibility
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