Auditors and accountants Essay
However, after observing the numerous corporate scandals enveloping the business world, It became apparent that ethics and morality had to be upheld by management and the impasses as a whole in order to avert such misdemeanors. It was not until four decades ago that the concept of business ethics was formally introduced and incorporated in business practices and school curriculums. As leaders of organizations, managers bear a great responsibility to the company and to the society to enforce and promote an environment that fosters ethical and moral conduct.
The main challenge that managers are faced with Is to adhere to ethical conduct and to deliver In terms of performance. Ethics not only covers the top management but also affects the conduct of the personnel in the lower levels of the organization. Corporate bodies are concerned with ethics in management so that the values the top-management are picked-up by their subordinates and the overall conduct of the company is perceived as good and that they avoid all legal problems that come as a result of being unethical.
The most Infamous ethical misconduct of our time was by Enron where the management colluded with the accountants and they presented false figures of the company’s
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Application of ethics in management and in business allows deeper discernment of situations so as to conclusively arrive at the right decision. Because of this, ethics in management is vital, not only for the organization, but for the society as a whole. ETHICS AND MORALITY Ethics refers to the established customs that govern human relations by distinguishing wrong and right behavior. Morality refers to the rightness or wrongness of an action. These two concepts go hand in hand and are very crucial to the management while making certain decisions.
Ethical behavior of management therefore refers to the behavior that has been accepted as good right as opposed to bad wrong. In order to promote ethics in the work place, management has to provide a set of values to which the entire organization abides by. The values are relatively permanent and deeply held principles of a company. They form the foundation of ethics because the organization culture and the manner of handling things shall be eased on and reflective of this.
There are two kinds of values that managers enforce on their organizations: Instrumental Values: These are values that outline the desirable attributes one can prescribe while implementing a task. They are also called means-oriented values. Such as these include: courage, ambition, precision. Terminal Values: These are the values that we work towards or we believe are important and are most desirable – terminal values are desirable states of existence. They include things like, respect, recognition, inner harmony, professional excellence, etc.
They are end-oriented values. However, Terminal Values can be changed and this can be seen when there is a change of top management or CEO and they introduce a new goal of the company that is different from the previous CEO. While choosing the values that a company seeks to abide by, the management need to strike a balance between the instrumental values and the terminal values in order to maximize the ethical potential of the whole organization and guarantee harmony in all sectors.
In many cases, the values of the managers and the top personnel become integrated into the entire organization. They become institutionalized and are taken up as part f the organizations culture. If a manager has positive values, the company will take- up those values and incorporate them into their work ethic. Likewise, is the manager has negative values, the staff under his authority are likely to adopt the same work ethic. (Barrack, ) For example: Robert Wood Johnny’s ideas are the foundation of the values entrenched in Johnson & Johnson Company.
Johnson & Johnson Corporation follows a page-long document company strives to uphold; everything from the responsibilities to families and their employees to environmental concerns. One would expect to find these values extended into the private life of Robert Wood Johnson, the man who originally crafted The Credo for his company (Unclenched, 2005). If one did not, it would be difficult to give credibility to the leader, Robert Wood Johnson, or to his company. This document, is part and parcel of what makes Johnson and Johnson one of the most respected companies in business today (Unclenched, 2005).
For this reason, the management of the company ought to uphold ethics and morality as individuals and serve as examples to all those below them. (Barman. Behavior of the management not only influences the organizational work culture but also the employees as individuals. It also creates a good work environment for them. Hence, management are faced with the challenge of developing, sustaining and reviewing ethical and socially responsible behavior. MORAL MANAGEMENT OF ETHICS When focusing on an ethical position, managers should analyze various organizational characteristics.
One study examined ethical norms, motives, goals, orientation toward law, and strategy and used these characteristics to define three distinct types of management: Immoral Management, Amoral Management and Moral Management Immoral Management: This is called the presentational level of management. This is the kind of management where managerial decisions and behavior are completely opposite of what is ethical and upright. There is active and evident opposition to what is right. The motives of the management are selfish be it for company gains or personal gains.
With this style of management, profitability and organizational success are deemed to be the ultimate goal and are sought after at any price. Their perception of industry laws, standards and regulations are simply means that hinder them from truly accomplishing what they desire. The strategies they apply involve exploitation of resources, opportunities and all else so as to achieve corporate gain. When it appears necessary, managers that apply this style take as many short-cuts as possible to reach their desired goal.
For Example: Nothing in the history of modern financial scandals rivals the saga of the Bank of Credit & Commerce International (B. C. C. I. ), the $20 billion rogue empire. Basics bank fraud in 1991, possibly the biggest in banking history, included numerous counts of fraud and a huge misappropriation of funds, and served as a front for drug money. Hundreds of thousands of people around the world lost their savings after the bank’s senior executives fraudulently siphon off funds.
Marketing itself as a savior to third world countries by providing financing to underdeveloped nations, BCC attracted distinguished spokespeople such as Jimmy Carter and Henry Kissing to promote its cause. Its facade of morality was enhanced with worthy contributions and charity work yet the funds were used for selfish and unethical things. Eventually, in late 1992, immoral and illegal business practices resulted in a complete demise of the organization and the loss of billions of dollars. (Hoffman et al. 1994], Deluge 1996) Amoral Management This is the conventional level of management. These are the managers who are moral awareness which they can apply in their position of leadership. They lie outside the sphere to which moral Judgments apply. They have good intentions for the firm and all stakeholders but they are selfish in the sense that the impact on other parties shall not be considered. While in a position of leadership, such a manager shall only view profitability as the goal and the end of the firm.
They are en to follow the laws of the state regarding the business. Because of their weak ethical disposition, they find it k to do wrong things as long as the law does not catch up to them. Their strategy for governance is that of free reign where the subordinates may have ethics as part of their values but it is not necessary for everyone to follow up on the same. For example: Backer Spiegel Bates, a French advertising agency, used a naked and blindfolded young girl in a European glossy advertisement for Purification, a cutlery, glass and jewelry shop.
Critics of the advertisement raised the question of exploitation of hillier, as children had been sexualities and used heavily as marketing tools in recent years. The copy;Ritter of the advertisement and the chief editor defended the advertisement claiming that it was simply a very stylized image not a question of skin and flesh, Just lines that are very symbolic and pure (Hall 1991). One observer of the advertisement stated that it was not an attempt to exploit a young woman’s body but was Just a reflection of creative people trying to be different.
Moral Management: This is the post conventional or principled level of management . Lat is the system of management that conforms to a standard of ethical or right behavior. Managers strictly adhere to accepted professional standards of conduct and ethical leadership is common place on the part of management. They also seek to associate only with partners that hold moral standards as core to their work ethic. The success of the company is also important to the organization but it is only sought after once it is in line with the ethical precepts of Justice fairness and due process.
Also the means of attaining it also need to confine to legal obedience. They obey the law to the letter UT view it as Just the minimal requirements to maintain an orderly society, hence they always strive to operate above what the law mandates. This management strategy lives by sound ethical standards and actively apply ethics in the event dilemmas arise. For Example: Charles Billion AS, is a catalogue company in Lausanne, Switzerland. In 1993, Billion decided to add oriental carpets to its product line, but then discovered associated problems.
When Director General Jacques Swollen learned about the use of child labor in carpet weaving, he proceeded to check his whole supplier network. He quested the help of Swiss importers. Only one out of four was willing to give supplier addresses and to cooperate in checking them out. Billion decided to cut its business ties with the other three importers and sought out suppliers willing to be governed by guidelines developed by his that prohibit child labor and other injustices. Meek & Carroll ) ETHICAL ROLE OF MANAGERS be said to be inherently ethics-laden tasks because every managerial decision affects either people or the natural environment in some way-?and those effects or impacts need to be taken into consideration as decisions are made. A narrower construction of the ethical role of the manager is that managers should serve only the interests of the shareholder and only endeavor to maximize shareholder wealth. An ethical manager has to be concerned with the behavior of all businesses that operate in the supply chain – I. E. Suppliers Contractors Distributors Sales agents The ethical role of managers is broad and goes beyond fiduciary responsibility when consideration is given to the multiple stakeholders of the organization. Business decisions affect both stakeholders and the environment at large. Therefore, a logical conclusion is that decisions should have ethical content inherently and that managerial decisions, behaviors, and actions should therefore be ethical in nature. The ethical role of managers, or what the business ethicist Linda Terrine and her colleagues call ethical leadership, is a combination of being a moral person and being a moral manager.
Being a moral person rests on a combination of key traits such as integrity, honesty, and trustworthiness. Integrity involves not only frankness and honesty or truthfulness but also consideration for the soundness of the whole entity that one manages as well as of the society in which the organization is located. Integrity also means firm adherence to a code, such as an ethical code of conduct (Reese A. A ) Thus, being a moral person suggests that the individual has integrity and can be trusted.
In addition to these traits, being a moral manager also involves behaviors such as doing the right thing, concern for people, being open, and standards of personal integrity. The essence of ethics, of course, is doing the right thing, especially under difficult circumstances. That involves being able to reason ell about what the right thing to do is. To be able to make good decisions ethically, an individual needs to have thoughtfully developed his or her personal set of standards or values, a personal code of conduct or integrity.
Personal standards allow an individual to think through a decision with a clear rationale in mind. When decisions involving ethical considerations need to be made, Terrine argues, the moral manager sticks to their core values, tries to be objective and fair, exhibits concern for society and the welfare of those in society, and follows ethical decision making rules. But being a moral person is not the only requirement for becoming a moral leader. Moral leadership also includes being a moral manager, which involves recognition that the leader or manager serves as a role model for others in all his or her duties.
It also means providing rewards and discipline around the ethical and unethical decisions made by others, so that a clear message is sent about what behaviors are and are not acceptable in the organization or situation. In addition, moral management means communicating openly, explicitly, and frequently about ethics and values. One question that frequently arises in considering the ethics of management is whether individuals can be considered moral leaders or managers in their work lives if they act unethically in their personal lives or vice versa. Actions, such an inconsistency would reflect badly on the individual as a whole. ETHICAL DILEMMAS An ethical dilemma involves a situation that makes a person question what is the ‘right’ or ‘wrong’ thing to do. Ethical dilemmas make individuals think about their obligations, duties or responsibilities. These dilemmas can be highly complex and difficult to resolve. Easier dilemmas involve a ‘right’ versus ‘wrong’ answer. A majority f people will agree, for example, that it is morally unacceptable to pretend that someone else’s work is their own. However, complex ethical dilemmas involve a decision between right and right.
An example might be where you uncover a friend’s misdemeanors: You have a duty to your employer to report it, but also a duty to be loyal to your friend in a situation that could lead to his or her dismissal. Below are other examples of ethical dilemmas managers could face: Ethical Dilemmas Managers Face Harassment: There are a variety of types of harassment that can occur in the workplace. Workplace harassment can be verbal or physical. Managers should ensure that all cases of harassment can be reported and that those implicated can be dealt with.
Some managers are faced with a dilemma when their top employee is the one implicated of harassment and they get torn between laying them off and retaining them. Poor working condition: One area of dilemma for managers is how to balance expense control with the health and safety interests of employees. Manufacturing plants and other workplaces where employees use dangerous equipment or engage in physically demanding work should have strong safety standards that not only meet federal requirements, but that also make eliminating accidents a priority.
Even standard office workplaces pose health risks to employees who are asked to sit or stand all day. Unfortunately, certain organizations opt to cut corners on safety controls, equipment and training to save money. This is both unethical and potentially damaging in the long run if major accidents occur. Labor Issues: Managers have the responsibility of ensuring the success of a company. They may want to do this by increasing the labor force. Some managers go to the extent of using child labor so as to guarantee astronomical profits, yet this is not right.
Other angers may impose very long work hours for their employees Just so that sales can increase at the expense of their health and well being. Other labor issues include: Production in sweatshops Violation of the basic rights of workers Ignoring health, safety and environmental standards Receiving of gifts and incentives: When strong financial incentives are in place, many managers will cross ethical boundaries to earn them, convincing themselves that the ends Justify the means. When they value a reward, they often choose the shortest, easiest path to attaining it.
This tendency to rationalize our own behavior is so rivalries that psychologists Carol Atavist and Elliot Irons recently published a book called Mistakes Were Made (but not by me) to explain how we Justify harmful decisions and unethical acts. Managers may also give gifts and incentives to suppliers and potential clients with the aim of receiving favors in return. Inflating costs etc. Fraud is a serious ethical breach in the workplace. A manager who is made aware of fraudulent activities within the workplace is ethically required to report this to the relevant authorities.
This can be particularly awkward if the fraud is being perpetrated by the manager’s employers. Becoming a whistler’s is not what most managers want to do, but it has to be done if managers are serious about maintaining and promoting an honest and fair workplace. Discrimination: Discrimination in employment takes many forms, and occurs in all kinds of work settings. It entails treating people differently because of certain characteristics, such as race, tribe, nationality, social status or sex. This results in the impairment of equality of opportunity and treatment.
In other words, discrimination results in and reinforces inequalities. Conflict of interest: A conflict of interest arises in any situation n which an interest interferes, or has the potential to interfere, with a person’s ability to act in accordance with the interest of the organization, assuming that the person has a legal, conventional or fiduciary obligation to do so. For instance, a manager may have conflict of interest when he conducts his personal business during company work hours. His focus on personal matters may compromise his performance as manager to the company.
Transparency: Management may find it difficult between exposing a huge financial fault and losing the company or Just staying mum about it and continuing with business. Prominent business and recent accounting scandals have made it mandatory that companies operate with openness and transparency. For public corporations, this includes honest, accurate and complete reporting on mandated financial accounting reports. For large and small businesses, transparency includes communicating messages, including marketing messages, that arena open to misinterpretation and that clearly represent the intentions of the company and its messages.
Being caught in a lie or avoiding full disclosure may cause irreparable harm to small businesses. False marketing: Because of the huge financial incentive hat lies behind effective marketing, there is a strong motive to engage in practices that might be considered dishonest. Managers who work in a marketing environment may be asked to engage in marketing and publicity activities that aren’t 100 percent transparent; for example, they might have to develop advertisements that misrepresent a product or hide its negative health effects. This presents a clear ethical dilemma for a conscientious manager.
DECISION MAKING FRAMEWORK In many instances, the process of reaching a decision that is morally upright may prove to be very difficult and not as straight forward as perceived. To enable the managers to conclusively arrive at an ethical decision they can apply a decision making framework that shall enable them to make the right decisions The following are the approaches lines that ensure ethical behavior is enforced once reaching a dilemma: Utilitarian Approach: Decisions are based on the overall good that will result from the decision. It Judges the actions, the plans, policies and consequences of a choice.
The cost or the benefits seeks to determine the outcome that shall have more good than harm. It assesses the greatest possible good to the greatest number of people. Drawbacks It may be difficult to measure the costs and benefits particularly those of social nature. Majority beneficiaries overrides the rights of the minority which are overlooked in this method Human Rights Approach: This is also called the rights and duties approach. As the name suggests, this approach allows managers to make decisions based on the moral entitlement and rights of human beings.
It is based on the belief that all people are in possession of rights and they cannot be revoked. Such as these include the right to privacy, to autonomy, to survival and to self-realization. These are enforced by laws contained in authoritative documents such as the United Nations treaties and the declaration of human rights. Drawback It may prove difficult to balance conflicting rights. For example, a manager may find it necessary to go through the e-mails of an employee suspected of leaking financial information so as to guarantee their honesty.
However, this goes against their right of privacy. Justice approach: In this approach, decisions are based on equitable, fair and impartial distribution of benefits, rewards & costs amongst groups and individuals. Although everyone wants o be treated fairly, in reality, Justice is not always realized. Even so it is still very much applicable and through this, all the needs of various stakeholders can be met. Draw back The cost and/or benefits of the decisions made through this method cannot be precisely measured.
For a company to ensure that it has to put in place certain mechanisms that shall promote the development of ethics in the organization. These are means that help uphold ethics in the organization, promote a good environment for ethics to flourish and provide the necessary means for unethical conduct to be reported without improvising the confidentiality of the whistler’s. The section below outlines various means that allow ethics to be fostered in an organization: Code of Ethics This is a general value system that contains ethical principles and rules that a company follows.
It covers a wide range of potential issues and problems that may arise. The code of conduct is rooted in the company’s goals, values, cultures and traditions. It also highlights what is expected of the employees, including the top management, in the event they face unethical decisions and what will come their way hen they breach the code. The code of ethics appears as asset of regulations with restrictions (e. G. ‘Our employees should not… ‘) aspirations (e. G. ‘Our employees should… ‘) and general statements (e. G. ‘The organization is committed … ‘).
Below are the characteristics of a code of ethics: They govern and regulate activities by ensuring compliance They ask more from employees than is expected of them They serve in the long-term interest of the organization The real challenge of management is to create an environment that not only document is hardly sufficient to enforce ethics. Management have to ensure that all ethical expectations are conveyed. They also have to ensure that all their associates (suppliers, potential employees, investors,) uphold moral conduct as an integral part of their work ethic.
Lastly, the management ought to commit to it and serve as an example of what is expected. Ethics Training Programs These includes the attending of workshops and seminars that teach ethical principles that can be applied in the work place. This will help employees and managers alike to rationally analyze situations as they will already be equipped with he necessary knowledge of how to go about tricky situations. Such seminars clarify ethical framework and practice of self-discipline while making decisions in difficult circumstances.
More importantly, ethical know shall be entrenched in the individual which will in turn make the organization ethical because it is the individuals who make the organization. Whistle blowing This involves exposing the misconduct of an organization to the public. They do so in order to preserve ethical standards and protect against illegal acts. The mode in which it is done is also subject to ethical questioning. Is it done out of malice or to protect stakeholders? Are the alleged claims falsified or inflated or truthful?
To avoid possible tarnishing of the image of both the company and the whistler’s, many organizations today have become receptive to complaints by employees. This has been done by providing channels that are exclusively for reporting misdemeanors and keeping the identity of the person reporting under wraps. In some cases, management may make it difficult for employees to raise concern over unethical conduct in the organization because they are in cahoots with the parties conducting he wrong doing. For example, managers may collude with auditors and accountants such that any report on fund embezzlement is never acted upon.