 ETHIC = A set of moral principles that distinguish what is right and wrong and govern

a person’s or group’s behaviors.

Why business has to be ethical/moral?

1. Corporate reputation

 Credibility, reliability, trustworthiness and responsible

2. Gaining better public image

 Any unethical behavior such as untrustworthy, dishonest, lie, cheat, steal and
manipulators – end of a business career
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Three important issues from MILTON FRIEDMAN’S
THEORY :
1) The deviation from a profit-only focus does not mean that profit
will fall – in fact, profit may rise.
 Even if business deviates away from profit, it would not be
bad for business
 Business must also consider other aspects which contribute to
the well-being of the company as a whole, such as the
aspect of corporate social responsibilities/green environment
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2) Profit is now recognized as an incomplete measure of corporate

performance and therefore an inaccurate measure for resource allocation.
 Profit alone is not a complete measure of corporate performance
 Friedman believes that profit is not the sole indicator of corporate success.
Company with good corporate social responsibility reputation can also put the
companies on the forefront of excellent companies.

3) Friedman explicitly expected that performance would be within the law

and ethical custom.
 Performance must always be achieved within the limit of the law and ethical
custom.
 Eg: Even though by continuing selling the product could maximizes company’s
profit, it is more ethical for the company to stop selling the product as they know
that it is not safe to consume

NEW EXPECTATION FOR BUSINESS

(cont’d)
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2) New governance & accountability
 Governance objectives and processes must reflect the stakeholder interest.
 Must focus in different and broader set fiduciary relationship than in past.
3) Reinforced fiduciary role for professional accountants
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 Primary fiduciary responsibility of professional accountants should be to the
public.
 If the expectation of the public is not met, the credibility and reputation of the
corporation and the accounting profession will erode.
 NEW EXPECTATION FOR BUSINESS

4 4) Emerging governance and stakeholder accountability models

 Corporation takes greater interest in how ethical their activities were and how to
ensure that ethical problems did not arise
 There is need to monitor the behavior and actions of employees, thus the
corporations develop the code of ethics/conduct.
5) Management based on values, reputation and risks
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 The reputation of the company and the degree of support from the stakeholders
depends on the understanding of their stakeholders’ interest.
 Hyper norms – values that are expected by most group or cultures around the
world(basic values) underlying stakeholders interest: honesty, fairness,
compassion, integrity, predictability and responsibility.

NEW EXPECTATION FOR BUSINESS

6) Accountability
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 Must be more transparent and accurate
 Must observe the integrity so that the information provided covers the
interest of the stakeholders effected.