Philippine Tax Academy-Integrity

Education Program (PTA-IEP)

Course #1: 3001

Ethics, Integrity and
Compliance
Ethics, Integrity and Compliance
for Good Public Finance
19 May 2020 Department of Finance | Philippine Tax Academy® 1
 Outline of the Presentation

I. Introduction
II. Ethics
III. Integrity
IV. Compliance
V. Value-based and Compliance Approach to
Integrity Education in Public Finance
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 I. Introduction

Integrity in public finance management and governance is important

condition for the effective functioning of the nation-state.

Public trust in the government builds conditions for sustainable social

and economic development.

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 I. Introduction

Ethics, integrity and compliance training for public officials is an

instrument in building public trust in public servants and state
institutions and ensuring good quality public governance.
Building a culture of integrity and compliance starts with
establishing and acting based on ethical values.

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 I. Introduction
In the past, Public Financial Management reforms focused on
achieving and securing overall economic and fiscal stability, allocative
efficiency and operational efficiency through technical, modernization
and automation of PFM processes, revenue collection, public
expenditure management and procurement systems; streamlining
budget processes, supporting revenue administration, improving
procurement processes and strengthening external oversight.
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 I. Introduction

Recent trends call for moving beyond technical reforms and paying
more attention to transparency, integrity, accountability and public
participation in PFM, manifested by Global initiatives, such as the Open
Government Partnership, the Global Initiative for Fiscal Transparency
(GIFT) and the International Budget Partnership,

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Objectives
Upon completion of this lecture-discussion,
participants are able to:

Define personal values and integrity; and,

Explain concepts and major theoretical

approaches to integrity and ethics

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 II. Ethics

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 What is Ethics?

Ethics aims to answer one big question--How should I live?

Ethical beliefs shape the way we live – what we do, what we make
and the world we create through our choices. It is at the core of
everyday life.

[Reference: Markkula Center for Applied Ethics, Santa Clara University (2010). What is Ethics?]

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 What is Ethics?

As human beings, we are ethical-- rational, thinking, choosing

creatures and with capacity to make conscious and conscientious
ethical choices if we wanted to.

Ethics is not only for the 'big issues'. Should we execute

criminals?

[Reference: Markkula Center for Applied Ethics, Santa Clara University (2010). What is Ethics?]

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 What is Ethics?
Ethics covers more than big things and directs our day-to-day
interactions. Should we tell the truth even though we know it will
upset him/her?

Ethics refers to well-based standards of right and wrong that

prescribe what humans ought to do, usually in terms of duties,
principles, specific virtues, or benefits to society.
[Reference: Markkula Center for Applied Ethics, Santa Clara University (2010). What is Ethics?]

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 Dimensions of Ethics

BENEFITS
DUTIES VIRTUES PRINCIPLES
TO SOCIETY

The behaviors Qualities that Fundamental truths Actions that

expected of persons define what a that form the basis produce the
who occupy certain good person is; for behavior; “kinds greatest good for
roles; that is, the moral excellence of action that are the greatest
obligations taken on right or obligatory” number
when assuming a (Frankena 1963:49)
role or profession
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 Dimensions of Ethics
Each dimension of ethics can be expressed in a basic question:

Duty What are the expectations of persons holding public offices?

Vir tue What are the qualities of a good person?

Principle What is the right thing to do?

Benefits to
What is the most beneficial action to take?
Society
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 ‘Ethics’ is a system of accepted beliefs, mores and values, which
influence human behavior. More specifically, it is a system based
on morals. Thus, ethics is the study of what is morally right, and
what is not

John Kennedy, during his Presidency (1961-1963) had averred: “No

responsibility of government is more fundamental than the
responsibility of maintaining the higher standards of ethical
behavior.
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The current discipline of public administration accords primacy to the
`values’ of equity, justice, humanism, human rights, gender equality
and compassion. The movement of Good Governance, initiated by
the World Bank in 1992, stresses on the ethical and moral conduct of
administrators. While the New Public Management movement is more
concerned with administrative effectiveness, the New Public
Administration focuses on administrative ethics in its broader
manifestation.
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 Ethics of Public Administrators
The ethics of public administrators founded on duty

D U T Y means the “action required by one’s organization, occupation,

or function” and “the action or behavior due by moral or legal
obligation.” Duty implies obligations, responsibilities, and meeting
expectations that are imposed on the individual from outside sources.

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 Ethics of Public Administrators
The ethics of public administrators founded on duty

P U B L I C A D M I N I S T R AT I O N E T H I C S is rooted in duty in the

sense that persons who seek positions in government or nonprofit
organizations are commonly motivated by a sense of duty to serve,
sometimes called the public service motivation (Perry and Wise 1990).

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 Ethics of Public Administrators
The ethics of public administrators founded on duty

The P U B L I C S E R V I C E M OT I VAT I O N is indicated by an “attraction to

policy making and the political process; “commitment to the public
interest/civic duty,”: “what is best for the whole community”; “compassion” or
being “moved by the plight of the poor”; and “self-sacrifice” that is indicated
by a commitment to work “for a cause bigger than myself” or being “prepared
to make enormous sacrifices for the good of society” (Perry 1997, 187). The
indicators are not ethical commitments in themselves, but they provide the
basis for ethical values rooted in duty.

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 Characteristics of Public
Administrators
Public administrators should be honest, independent, competent, and
committed to doing their best, and they should demonstrate integrity.
These are virtues.

They should treat all persons fairly and equally, observe the law, and follow
the direction set by their leaders and their organizations.

Public administrators should try to achieve the greatest good for the most
people. the other dimensions of administrative ethics based on the
philosophical traditions of virtue, principle, and consequences are integrally
linked to conceptions of duty.
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 Universal ethical principle

Social contract

Kohlberg’s Society maintaining/law

and order
Model “Good boy; nice girl”

Instrumental relativist

Punishment and obedience

[Reference: Kohlberg (1981: 19, 411-412]
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 Guide Questions in Making
Ethical Decision
1. Would I be happy for this decision
(to be headlining the news tomorrow)?
it’s the ‘don’t be ashamed’ test not the ‘don’t get caught’ test.

2. Is there a universal rule that applies here?

i.e., never act in ways that undermine the equality and dignity of all
people – ourselves included. The rules are often associated with duties.

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 Guide Questions in Making
Ethical Decision
3. Will the proposed course of action bring about a good
result?
'The greatest good for the greatest number' is a maxim many people
recognize and accept. Consequences are an important part of ethical
decisions, but are they everything? Consider, what we are sacrificing to
bring about good consequences. Are we violating an important
principle? Are we compromising our own values? Consider these facts
when balancing harms and benefits?

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 Guide Questions in Making
Ethical Decision

4. What would happen if everybody did this?

Would you be happy if your reason for action was used by everyone in
the same circumstance? If not, then what makes you so special? Most
ethical frameworks suggest the right decision for one person should be
right for everybody in the same position. This test helps guard against
'special pleading' – when we make an exception for ourselves or different
groups.

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 Guide Questions in Making
Ethical Decision
5. What will this proposed action do to my character or the
character of my organization?
Our decisions shape our character and vice versa. That is, we can't lie and
cheat without becoming a fraudulent liar. Subsequently, if we're a liar
we'll tend to lie more often.

Think about whether your action is establishing a habit either for you or
your organization. Is it a good habit (virtue) or a bad one (vice)? If I cut
corners on a work job today am, I developing a habit of laziness that may
affect my future work?
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 Guide Questions in Making
Ethical Decision
6. Is the proposed course of action consistent with my
values and principles?
Plenty of people and organizations are happy to tell you what they stand
for – but do they walk the talk? Are my actions reflecting my ethical
beliefs? Most ethical systems have no time for hypocrisy.

Answering these questions doesn't guarantee everyone will accept our

decision. Moral disagreement is extremely common.

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 Necessity and Importance
of Ethics in Public Office
THE LIMIT OF LAWS
In public administration, it is impossible to create universally
applicable rules and regulations;
There are areas characterized by dynamism, uncertainty and
flexibility that policies cannot handle with precision;
The discretionary power of civil servants demands that they
act according to a set of ethical standards to safeguard the
overall legitimacy of the political system

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 Necessity and Importance
of Ethics in Public Office
THE ROLE OF EXPERTISE

Civil servants provide elected politicians with analyses and advice in

the preparation of laws and policies and the expertise should be
provided in an impartial and nonbiased way. They should function
ethically and prevent private ideological encroachment and gains.

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 Necessity and Importance
of Ethics in Public Office
THE LIMIT OF STEERING BY INCENTIVES

Behavioral social scientists look at the organizations as a common

culture held together by strong social norms about motivation and
professional ethics. Management inspires individuals to share the
goals and ethics of the organization, and to cooperate accordingly to
attain them. Steering should not be done purely by incentives.
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 Necessity and Importance
of Ethics in Public Office
PUBLIC ETHICS AND HUMAN NATURE

Generally, when a person comes into a position of power in public

life, the natural tendency is to use this power to promote self-interest,
family, kin and clan and even the interest of religious faction, business
interest, or political party.

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 In a nutshell, ethics is about:
 Relationships.

 Struggling to develop a well-informed conscience.

 Being true to the idea of who we are and what we stand for.

 Having the courage to explore difficult questions.

 Accepting the cost of doing what we think is right.

 Asking one simple question – ‘what ought I to do?’

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 “Ethics can be considered a form of
self-accountability, or an `inner-
check’ on public administrators’
conduct” (Rosenbloom and Kravchuk,
2005).

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 III. Integrity

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 What is Integrity?

Integrity implies professional wholeness or responsibility : “integrity means

that a professional exercises his/her tasks adequately, carefully and
responsibly, taking into account all relevant interests” (Karssing: 2007) and
other values like incorruptibility; honesty; impartiality; accountability (as
also in many codes of conduct). (Dobel, 1999, 2016)

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 What is Integrity?

Integrity is an umbrella concept, that combines sets of values that are

relevant for an official being judged-- legal view that seems attractive
because of the clarity of laws and rules on what matters (Lee &
Rosenbloom, 2005; Rosenbloom, 2011),

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 What is Integrity?

“integrity is something to strive for—integrity as the “stuff of moral

courage and even heroism” (Brenkert, 2004, p. 5), which means that it
“stands for complying in an exemplary way with specific moral standards”
(Van Luijk, 2004:39).

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 What is Public Integrity?

 ” consistent alignment of and adherence to shared ethical values,

principles and norms for upholding and prioritizing the public interest in
the public sector” (OECD, 2017:7)

 essential for advancing the public good and ensuring the legitimacy of
public organizations and considered an antithesis to corruption

 public integrity - refers to the use of powers and resources entrusted to

the public sector effectively, honestly and for public purposes

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 Ethics and Integrity
E T H I C S is a system of principles
that guide how we make
decisions and lead our lives and
integrity is a consistent
application of ethical principles.
Sometimes, there is a conflict
between ethics and law--people
can choose not to follow a law
that they fundamentally disagree
with on ethical grounds.
19 May 2020 Department of Finance | Philippine Tax Academy®
I N T E G R I T Y is "consistency
between beliefs, decisions and
actions, and continued
adherence to values and
principles" (Malan, 2007, p. 278).
It suggests that we should carry
out ethical principles in our daily
lives and activities, rather than
espousing an ideal and then
doing something contradictory.
37
 Integrity of Public Officials
and Employees
Integrity is also known as moral uprightness and strong adherence to
honesty and fairness wholeness and completeness.

“As public officials and employees, we have the duty of protecting not only
our integrity but also that of the government. We owe it to the Filipino
people to have integrity. It means we cannot be bribed, bought, swayed,
coerced, or made to do something that does not adhere to the highest
moral standards”.
(CSC Chairman Francisco T. Duque III:2014)
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 Types of Integrity Violations
Breaking
rules/misuse Misuse and
Corruption: Fraud and manipulation
theft of power (also for
Favoritism of information
resources the
Waste and organization)
abuse of
resources
Corruption: Indecent
Private time
Bribing Conflict of treatment
misconduct
interest (gifts, (intimidation,
jobs, etc.) discrimination)

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 Views of Corruption
(unethical behavior or violation of integrity)

Corruption is acting in a particularistic interest because of advantages

promised or given – bribery; influence peddling, kickbacks, and forms of
favoritism and conflict of interest.

Corruption is the abuse of office for private gain (Pope, 2000): examples
include fraud, theft, and embezzlement

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 Views of Corruption
(unethical behavior or violation of integrity)

Corruption as synonymous with all types of wrongdoing by

functionaries: acting contrary to the public interest and broadly
include vices, maladies, and sicknesses of politics and bureaucracy. In
this latter definition, corruption is identical to unethical behavior or
the violation of integrity.

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 As explained The course uses a two-pronged approach
(after Ferrell and Fraedrich: 2014)

1. Value-based or integrity-based program

(relies upon self-policing and motivation, rather than
coercion)

2. Compliance-based program (uses legal terms, training,

rules of conduct and penalties for noncompliance)

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 Ethics and compliance are essentially different sides of the
same coin.

Compliance is following the law, while ethics is doing what is

right regardless of what the law says. Compliance is
something that the government requires you to do. Ethics,
on the other hand, is something you choose to consider
when taking action.

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 Dictionary Based Definition

 A system of accepted  The act of obeying an order,

beliefs that control behavior rule, or request (formal)
(based on morals).  The state of being too willing
 The study of what is morally to do what other people
rights and what is not. want you to do.
[Source: Cambridge English Dictionary]

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 Different Focus Areas of Ethics
and Compliance Practitioners
ETHICS COMPLIANCE
• External and internal standards
• Internal standards
• Rules, directives, regulations,
• Values and culture
standards
• Chosen
• Required
• Reward ethical behavior
• Discipline unethical behavior
• Best Practice
• Lowest standard
• Associated with networks
• Associated with hierarchy
• Dynamic
• (Relatively) statics
• Transformational and aspirational
• Transactional and directive
• Performative (walk)
• Demonstrative
[Source: file:///D:/Food%20System/ibe_ethics_and_compliance_handbook_south_africa_2017.pdf ]
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 Main Difference Between Ethics
and Compliance in an Organization

[Source: file:///D:/Food%20System/ibe_ethics_and_compliance_handbook_south_africa_2017.pdf ]

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 The 20:60:20 Rule
Strong ethical standards,
prepared to take personal
Average attitudes to ethics within an risk to make sure ethical
values are reflected in
organization behavior.
20%
Try to behave
ethically but need
to be supported 60% 20%
and guided Low ethical standards,
specially when tend to be cynical and
under pressure. focus on personal, short
term gains

Strong Ethical Standards Low Ethical Standards Try to Behave Ethically

[Source: file:///D:/Food%20System/ibe_ethics_and_compliance_handbook_south_africa_2017.pdf]

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 References

https://qog.pol.gu.se/digitalAssets/1663/1663513_2017_12_rothstein_sorak.pdf
Ethical Codes for the Public Administration. A Comparative Survey Bo Rothstein
Nicholas Sorak QoG Working Paper Series 2017:12 November 2017 ISSN 1653-
8919

L. W. J. C. Huberts (2018) Integrity: What it is and Why it is Important, Public

Integrity, 20:sup1, S18-S32, DOI: 10.1080/10999922.2018.1477404 To link to this
article: https://doi.org/10.1080/10999922.2018.1477404.

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 Salamat Po

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