MAN 20005 - Lec 3

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MAN 20005 - Lec 3

  1. 1. MAN 20005 LECTURE 3 Professional Ethics & Developing Codes of Practice in Ethics Updated 3.10
  2. 2. Professional Ethics <ul><li>Concern with what a professional should or should not do in the work place. </li></ul><ul><li>A professional needs to adopt ethical conduct in all of his dealings when providing a service to the public - additional moral responsibilities </li></ul><ul><li>moral issues that arise because of his specialist knowledge </li></ul><ul><li>Example of Code of Ethics, Code of Conduct </li></ul><ul><li>http://www.td.com/governance/code_ethics.pdf </li></ul>
  3. 3. Code of Conduct and Code of Ethics
  4. 4. <ul><li>provide guidelines for integrity - detailed do’s and don’ts </li></ul><ul><li>have a positive tone </li></ul><ul><li>use vague words </li></ul><ul><li>often have no disciplinary teeth </li></ul><ul><li>short statement of general principles </li></ul><ul><li>provide rules to be loyally followed - statements of mission and value </li></ul><ul><li>have a negative tone </li></ul><ul><li>are specific and explicit </li></ul><ul><li>detail mechanisms for corrective action </li></ul><ul><li>Long provision </li></ul>Code of Ethics Code of Conduct
  5. 5. Purpose of codes of conduct & ethics <ul><li>Damage limitation </li></ul><ul><li>To reduce damages awarded by courts in the event of the company being sued for negligence by one of its employee </li></ul><ul><li>Guidance </li></ul><ul><li>A reminding role for employees when faced with ethically complex situation </li></ul><ul><li>Regulation </li></ul><ul><li>Prescribe qualities expected (ie : truthfulness, compliance) </li></ul><ul><li>Proscribe qualities prohibited (ie : bribery) </li></ul><ul><li>Discipline and appeal </li></ul><ul><li>A benchmark for an organization to decide whether an employee has contravening conduct and punishment that ensues </li></ul><ul><li>A basis for the accused to appeal </li></ul>
  6. 6. <ul><li>Information </li></ul><ul><li>Information for external audiences of standard of behaviour that can be expected of employees </li></ul><ul><li>Proclamation (for professional bodies) </li></ul><ul><li>To assure the public that monopoly rights granted to them will not be abused. </li></ul><ul><li>Negotiation </li></ul><ul><li>Tool to negotiate disputes </li></ul>
  7. 7. Arguments against Codes <ul><li>Justification </li></ul><ul><li>Lack of universally accepted set of common principles </li></ul><ul><li>The inability of rules to shape behaviour </li></ul><ul><li>A signal of lack of trust on the employee </li></ul><ul><li>Support structures </li></ul><ul><li>Availability of a support structure within the organization to facilitate employees to act in accordance to the code </li></ul><ul><li>The marginality of codes </li></ul><ul><li>Codes being treated as garnishing corporate activities </li></ul><ul><li>The loss of individual responsibility </li></ul><ul><li>“ I was only following orders” </li></ul>
  8. 8. Best Practices Standards
  9. 9. <ul><li>Best practices standards </li></ul><ul><li>Different from code of conducts and ethics – meant to cover a wider scope of application </li></ul><ul><li>Not written for a particular organization </li></ul><ul><li>Set the minimum benchmark of behavior </li></ul><ul><li>Often give accreditation to organizations that meet the minimum standard </li></ul>
  10. 10. <ul><li>Accountability 1000 (AA 1000) </li></ul><ul><li>A standard for ethical performance </li></ul><ul><li>Produced by the Institute for Social and Ethical Accountability </li></ul><ul><li>to encourage ethical behavior in any profit and non-profit organizations and of any size </li></ul><ul><li>set standard for measuring and reporting ethical behavior in business </li></ul><ul><li>a means for others to judge the validity of claims </li></ul><ul><li>The Ethics Compliance Management System Standard </li></ul><ul><li>guideline for organization which aim to establish, apply, maintain and consistently improve an ethical-legal compliance management system. </li></ul>
  11. 11. <ul><li>Social Accountability 8000 </li></ul><ul><li>a voluntary, universal standard for companies interested in auditing and certifying labour practices, for the business itself and their suppliers and vendors. </li></ul><ul><li>It is designed for independent third party certification. </li></ul><ul><li>measures company’s performance in 8 key areas : child labour, forced labour, health and safety, free association and collective bargaining, discrimination, disciplinary practices, working hours and compensation. </li></ul>
  12. 12. <ul><li>Global Reporting Initiative </li></ul><ul><li>Develop standardized sustainability reporting framework - through consensus-seeking process with participants drawn globally from business, civil society, labor, and professional institutions. </li></ul><ul><li>GRI sustainability reports framework can be used to benchmark organizational performance with respect to laws, norms, codes, performance standards and voluntary initiatives; demonstrate organizational commitment to sustainable development; and compare organizational performance over time. </li></ul>
  13. 13. Code of Corporate Governance
  14. 14. 1992 Cadbury Report 1995 Greenbury Report 1998 Hampel Report & Combined Code 2003 Smith & Higgs Combined Code 1999 Turnbull Report 2001 Myners OECD principles 2002 Sarbanes -Oxley 2004 Reports and Governance Codes Significant recent reports and developments in corporate governance
  15. 15. CADBURY REPORT <ul><li>The notion of Corporate Governance was initially brought from America to Britain during the early 90s </li></ul><ul><li>Cadbury Committee was set up in May 1991– by Sir Adrian Cadbury </li></ul><ul><li>Cadbury Report and the Code of Best Practice were issued in December 1992 </li></ul>
  16. 16. <ul><li>The Cadbury Code emphasized on : </li></ul><ul><li>a) content of annual report </li></ul><ul><li>b) accuracy of financial information disclosed </li></ul><ul><li>c) board responsibility to assert that the annual account of the company show the company to be or not to be a going concern </li></ul><ul><li>d) steps which the board has taken to put in place internal controls </li></ul><ul><li>The Code of Best Practice was voluntary in nature. </li></ul>
  17. 17. GREENBURY REPORT <ul><li>Established 3 years after the publication of the Cadbury Report </li></ul><ul><li>Purpose : to consider questions relating to Directors’ remuneration and emoluments. </li></ul><ul><li>require PLCs to establish a Remuneration Committee </li></ul><ul><li>consist exclusively of Non-Executive Directors. </li></ul><ul><li>determines company’s policy on ED’s remuneration packages </li></ul><ul><li>Chairman of the RC is required to attend AGM to answer questions about Director’s remuneration. </li></ul><ul><li>Every PLC must state in its annual report whether it has complied with this code and if it has not, to explain and justify its non-compliance. </li></ul>
  18. 18. <ul><li>established in November 1995 </li></ul><ul><li>Main purpose :- </li></ul><ul><li>a) to review the Cadbury and Greenbury Report </li></ul><ul><li>b) to review the role of directors, executive and </li></ul><ul><li>non-executive </li></ul><ul><li>c) to review the role of shareholders and auditors </li></ul><ul><li>Recognized the need for company to take into account interest of stakeholders. </li></ul>HAMPEL REPORT
  19. 19. SARBANES OXLEY <ul><li>United States federal law passed in response to the increasing number of corporate failure </li></ul><ul><li>contains 11 sections ranging from Board responsibilities, criminal penalties, auditor independence, financial disclosure ETC </li></ul><ul><li>created a new quasi-public agency called the Public Company Accounting Oversight Board - to oversee, regulate, inspect and discipline accounting firms. </li></ul>
  20. 20. <ul><li>Major Provisions : </li></ul><ul><li>a) PLCs to disclose effectiveness of the internal controls of their financial reporting – report must be attested by independent auditors </li></ul><ul><li>b) Certification of financial reports by Chief Executive Officers (CEO) and Chief Financial Officers (CFO) </li></ul><ul><li>c) Require PLCs to have a fully independent audit committees </li></ul><ul><li>d) Ban on personal loans to any Director </li></ul><ul><li>e) Increase requirement for reporting of insider trading </li></ul><ul><li>f) Enhanced criminal and civil penalties for violations of securities law </li></ul><ul><li>g) Significantly longer maximum jail sentences and larger fines for corporate executives who knowingly and willfully misstate financial statements. </li></ul><ul><li>h) Protections for whistleblowers – reinstatement, back pay, benefits, compensatory damages, abatement orders, attorney fees and costs. </li></ul>
  21. 21. END

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