Chapter 2

KEY CONCEPTS IN BUSINESS AND

PROFESSIONAL ETHICS
Outcomes
• Become familiar with the major terms involved in ethics
and business ethics in particular
• Identify the three levels of business at which ethics is
evaluated and the core issues involved
• Insight into why ethics is necessary on the personal and
organisational level
• Distinguish between ‘morality’ and ‘legality’
• Indicate why professional ethics and professional
virtues are important.
Overview
• Ethics consists of three core concepts: ‘self’,‘good’, and
‘other’
• Within business ethics, major concepts include moral
dilemmas, organisational ethics, and law
• A principal distinguishing feature of the accounting and
auditing profession is its ethical code of conduct.
Ethics and morality
• The terms ‘ethics’ and ‘morality’ are used
interchangeably
• Refers to character and manners in interaction with
others
• Ethical behaviour is that which considers what is good
for the self and for others
• The golden rule.
• We must however still consider our own interests
Ethics and values

• Values are principles about what is good or right

• Values are convictions of what is good and desirable
• What are some commonly shared values today?
• Values differ and even conflict
– People may disagree on what is good
– People may disagree on what is more important
– These conflicts may occur within one person
• What are some other causes of differing values?
- culture, religion, gender, economic status etc
• Not all values are ethical values
Ethics and values
• Organisations also have values
• In organisations you will find strategic values, work
values and ethical values
Moral dilemmas
• No grey area in ethics in society and organisations but
sometimes there are ethical dilemmas
• Dilemmas force you to choose 2 or more options thare
are to some extent wrong
• Personal versus social dilemmas
• Compromise as a ‘creative middle way solution’
• Compromise is reached by discussing with one another
Ethics and the law
• There are similarities between ethics and the law.
• Both intend what is right
• An action can be both legal and ethical or it can be legal
and unethical or both unethical and illegal
• Sometimes it means we need to go further than the law
Business ethics
• Economic activity has ethical dimension (inferior
products of customer not paying)
• Business ethics- what is good and right in economic
activity.
• Three levels of moral analysis (evaluation):
– Economic system (macro-economic level)
– Organisational (meso-economic level)
– Intra-organisational (micro-economic level).
Economic system level – macro-
economic ethics
• Policy framework at national level by political powers.
• National level
• Evaluation of economic systems, macro-economic
policies and trade agreements
• Ethical dimension: impact on people
• May increase freedoms of people
• May have social or political objectives
• Systems and policies usually justified in ethical terms,
according to effect on well-being of society.
Economic system level – macro-
economic ethics
At international level
•Macro-economic policies and trade agreements
•Are they fair and just
Organisational level - meso economic
ethics
• Relation of corporations to state, civil society, local
communities, and natural environment (Business and
society)
• Broad impact of business on pple, customers and
suppliers, environment, societies etc
• Can be beneficial or detrimental
• Social responsibility
• Issues in debate:
– Responsibility of business to community
– State regulation
– Business as a corporate citizen.
Intra-organisational level – micro-
economic ethics
• Activity within business itself (practices, policies,
decisions, behaviour)
• Includes practices, policies, decisions, and behaviour
• Broader effects of business activity on employees,
managers, etc.
– Duties versus personal values
– Harassment, discrimination, victimisation
– Health risks
– Trust
– Quality of life in general is impacted.
Personal and organisational ethics
• Ethical behaviour is not just an individual matter
• Orgns can also influence individuals
• Moral environment and expectations of an organisation
will affect behaviour of employees
• Consider the metaphor of apples and barrels and
prevention or promotion of bad or good behaviour.
Professional ethics and virtues
• Ethics: when a group imposes on itself a set of ethical
standards
– Ideally, personal, professional, and organisational ethics
coincide
– For KPMG case- personal ethics, professional ethics and
organisational ethics did not coincide
• - purpose of standards is to ensure that members of
a profession act in spirit and purpose of profession
• Virtues: character traits that make you do the right
thing and learned forms of behaviour
– What are the main virtues of the accounting profession?
Virtues
• Opposite of virtue is vice
• Training involves developing these virtues
Conclusion
• Understand moral vocabulary – ethics, values, virtues,
and dilemmas
• Apply features of ethics in business further.
Questions

1. Define the concept ethics

2. What do business ethics entail and professional ethics
and how can they be differentiated?
3. Give an example of an action or practice within the
accounting or auditing profession for each of the
following categories:
- ethically right
- Ethically wrong
- Ethical dilemma