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MAN 20005 - Lec 3

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