ACCAspace ACCA P1. Provided by ACCA Research Institute. Governanace, Risk and Ethics (GRE) 公司治理, 风险管理及职业操守 ACCA Lecturer: Cindy Li

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1 ACCAspace Provided by ACCA Research Institute ACCA P1 Governanace, Risk and Ethics (GRE) 公司治理, 风险管理及职业操守 ACCA Lecturer: Cindy Li ACCAspace 中国 ACCA 特许公认会计师教育平台 Copyright ACCAspace.com

2 What is P1 About? Part A Governance and responsibility Part B Internal control and review Part C Identifying and assessing risk Part D Controlling risk Part E Professional values, ethics and social responsibility 2

3 P1 Chapter 8 Ethical Theories 1 Ethics and corporate governance 2 Ethical Relativism versus absolutism 3 Kohlberg s stages of human moral development 4 Deontological and teleological approach 3

4 1. Ethics and corporate governance Ethical considerations are at the root of many perceived problems with corporate governance in actual practice, by members of the board. Individuals are expected to behave in an ethical way, and ethical issues are more difficult to be regulated. Corporate governance can only provide a system and procedures that are seen to be ethical and fair to the shareholders. Without ethical conduct, regulations and codes of practice will not work. Individuals in positions of power will be able to circumvent rules and break the laws, and unless they act ethically, might be tempted to do something illegal or improper in order to obtain personal gain. 4

5 P1 Chapter 8 Ethical Theories 1 Ethics and corporate governance 2 Ethical Relativism versus absolutism 3 Kohlberg s stages of human moral development 4 Deontological and teleological approach 5

6 Ethical Relativism versus absolutism 2.1 Ethical relativism 2.2 Ethical absolutism 6

7 2.1 Ethical relativism Definition: Ethical relativism is the theory that, because different societies have different ethical beliefs, there is no rational way of determining whether an action is morally right or wrong other than by asking whether the people of this or that society believe it is morally right or wrong. To put it another way: Ethical relativism is the view that there are no eithical standards that are absolutely true and that apply or should be applied to the companies and people of all societies. For example, business bribery When is Rome, do as the Romans do. 7

8 2.2 Ethical absolutism Definition Ethical absolutism, also known as universalism, maintains that there are absolute moral truths, not relative to culture, which all entities obey at all times without exception. According to this view, eithical judgements are universalwhich means that if an action is wrong in one country, it is also wrong in other countries. 8

9 P1 Chapter 8 Ethical Theories 1 Ethics and corporate governance 2 Ethical Relativism versus absolutism 3 Kohlberg s stages of human moral development 4 Deontological and teleological approach 9

10 3. Kohlberg s stages of human moral development Level 1: Pre-Conventional Stage 1. Obedience and punishment Stage 2. Instrumental relativist orientation Level 2 :Conventional Stage 3:Good boy nice girl orientation Stage 4: Law and order orientation Level 3 :Post-Conventional Stage 5: Social contract orientation Stage 6. Universal ethical principles orientation Level 1: Pre-Conventional (the individual is focused on self-interest, external rewards and punishment) Stage 1. Obedience and punishment Punishment and obedience orientation where the right acts are done to avoid punishment. Obeying the rules is a means to avoid punishment Stage 2. Instrumental purpose and exchange Right behavior being defined by what is in one s own best interest 10

11 3. Kohlberg s stages of human moral development Level 2 :Conventional (the individual tends to do what is expected of them by others) Stage 3:Good bog nice girl orientation Actions are defined by what is expencted of individuals by their peers and those close to them. Live up to others expectations in order to be seen to be good and then self-regard as being good Stage 4: Law and order orientation This stage of moral development, people begin to consider society as a whole when making jedgments. Fulfils docial duties in order to keep the social system going Level 3 :Post-Conventional (the individual starts to develop automomous decision making which is based on internal perspectives of right/wrong ethics, etc. rather than based on any external influences) Stage 5: Social contract orientation People begin to account for the differing values, opinions, and beliefs of other people. Right and wrong are determined by reference to basic rights, values and contracts of society Stage 6. Universal ethical principles orientation Final stage is based upon universal ethical proinciples and abstract reasoning. Follows selfchosen ethical priinciples which theyt believe everyone should follow. 11

12 P1 Chapter 8 Ethical Theories 1 Ethics and corporate governance 2 Ethical Relativism versus absolutism 3 Kohlberg s stages of human moral development 4 Deontological and teleological approach 12

13 4. Deontological and teleological approach 4.1 Teleological approach Egoism Utilitarianism 4.2 Deontological approach Ethics of duties Work ethics 13

14 4.1 Teleological approach Definition Also called Consequentialist appraoch, which based the moral jedgment on the outcomes of a certain action. If these outcomes are desirable then the action, in question is morally right if the outcomes of the action are not desire, the action is morally wrong. The moral judgment in these theories is thus based on the intended outcomes, the aims, or the goals of a certain action. There are two main consequentiality theories: Egoism Utilitarianism 14

15 4.1.1 Egoism Definition Following the theory of egoism, an action is morally right if the decision maker freely decides in order to pursue either either (short term) desires or their (long term) interests. The justification for egoism lies in the underlying concept of man: as man has only limited insight into the consequences of his actions, the only suitable strategy to achieve a good life is to pursue his own desires or interest. Adam Smith (1793) argued that in the economic system, this pursuit of individual self-interest was acceptable because it produced a morally desirable outcome for society through the invisible hand of the market place. This means one is likely to find a moral outcome as the end-product of a system based on free competition and good information. 15

16 4.1.2 Utilitarianism Definition According to utilitarianism, an action is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action. This principle, also called the greatest happiness principle is the ultimate consequentialist principle as it focuses solely on the consequences of an action and weights the good results against the bad results and finally encourages the action which results in the greatest amount of good for all people involved. Unlike egoism, it does not only look at each individual involved to ask whether their individual desires and interests are met, but it focuses on the collective welfare that is produced by a certain decision. 16

17 4.2 Deontological approach Definition Also called non-consequentialist appraoch, which based the moral judgment on the underlying principles of the decision-maker s motivation. An action is right or wrong, is not because we like the consequences they produce but because the underlying principles are morally right. There are two main non-consequentiality theories: Ethics of duties Ethics of rights and justice (out of scope) 17

18 4.2.1 Ethics of duties Introduction German philosopher Immanuel Kant ( ) thought that morality was a question of certain eternal, abstract, and unchangeable principles- a set of priori moral laws that humans should apply to all ethical problems. He saw humans as rational actors who could decide these principles for themselves. Kant subsequently developed a theoretical framework through which these pinciples could be derived, called the categorical imperative 18

19 4.2.1 Ethics of duties The categorial imperative consists of three parts Maxim 1: Act only according to that maxim by which you can at the same time view that it should become a univeral law Maxim 2: Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only. Maxim 3: Act only so aht he will through its maxims could regard itself as the same time as universally lawgiving According to Kant, these three maxims can be used as tests for every possible action, and an action is to be regarded as morally right if it survives all three tests. 19

20 4.2.2 Work ethics AAA model American Accounting Association (AAA) model Step 1: What are the facts of the case? Step 2: What are the ethical issues in the case? Step 3: What are the morms, pinciples, and values related to the case? Step 4: What are the alternative courses of action? Step 5: What is the best course of action that is consistent with the norms, pinciples, and values identified in Step 3? Step 6: What are the consequences of each possible course of action? Step 7: What is the decision? 20

21 4.2.2 Work ethics Tucker model Tucker s 5-question model 1. Is it profitable? 2. Is it legal? 3. Is it fair? 4. Is it right? 5. Is it sustainable or environmentally sound? In summary, the AAA model invites the decision maker to explicitly outline their norms, pinciples and values, while Tucker s model allows for discussion and debate over conflicting claims. Both are useful to senior decision makers. 21

22 ACCAspace Provided by ACCA Research Institute ACCAspace 中国 ACCA 特许公认会计师教育平台 Copyright ACCAspace.com