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P1 Ethics
Fichas del conjunto (49)
- 1Deontological ethicsIt originates from the Greek word deon, meaning "duty or obligation" (logos, "science").
It is based on the concept of duty.
e.g. an obligation to tell the truth, not to harm others
An action is considered morally good because of some characteristic of the action itself, not because the product of the action (consequence) is good - 2Teleological ethics ("Consequentialist")This derives from the Greek word teos, meaning "end", since the end result of the action is the sole determining factor of its morality.
A decision is right or wrong depends on its consequences or outcome.
As long as the consequences of the action taken are more favourable than unfavourable, then the action can be considered as morally right. - 3EgoismThe quality of the outcome refers to the individual (“what is best for me?”).
- 4UtilitarianismThe quality of outcome in terms of the greatest happiness of the greatest number (“what is best for the majority?”).
Consequentialist ethics are therefore situational and contingent, and not absolute. - 5Deontological vs Teleological ethics Deontological ethicsThis is where the ‘means’ are judged more important than the ‘ends’.
The rightness of an action is judged by its intrinsic virtue
Morality is seen as absolute and not situational. An action is right if it would, by its general adoption, be of net benefit to society.
Lying, for example, is deemed to be ethically wrong because lying, if adopted in all situations, would lead to the deterioration of society. - 6Deontological vs Teleological ethics Teleological ethicsThis is where the ‘ends’ are judged more important than the ‘means’.
An act is right or wrong depending on the favourableness of the outcome (consequences)
In the teleological perspective, ethics is situational and not absolute. - 7Absolutism• Right and wrong are objective qualities that can be rationally determined and do not change regardless of the person, culture or environment
• Believes that there are ‘eternal’ rules that guide all decision making in all situations.
• There is one right course of action regardless of the outcome.
• This action should be chosen regardless of the consequences
• A Dogmatic approach means accepting without discussion or debate and is an example of absolutism - 8Relativism• A relativist will adopt a pragmatic approach and decide, in the particular situation, what is the best outcome.
• This involves a decision on what outcome is the most favourable and that is a matter of personal judgment. - 9Kohlberg levels Pre-Conventional• At the preconventional level of moral reasoning, morality is conceived of in terms of rewards, punishments and instrumental motivations.
• Rules and norms are discarded as the individual opts for more self serving attitudes. - 10Kohlberg levels Pre-Conventional Stage/Plane 1 : Punishment-obedience orientation• Children do not yet speak as members of society.
• Morality is seen as something imposed by grown-ups.
• It often is seen in terms of reward and punishment.
• Punishment "proves" that disobedience is wrong so to obey is to avoid punishment.
• "Will I be punished, if I am caught?" "Will I be rewarded, if I obey?" - 11Kohlberg levels Pre-Conventional Stage/Plane 2 : Instrumental relativist orientation• This stage recognises different sides to any issue.
• Because everything is relative, each person is free to pursue his individual interests.
• e.g. "you scratch my back and I will scratch yours" - 12Kohlberg levels Conventional• At the conventional level, morality is understood in terms of compliance with either or both of peer pressure/social expectations or regulations, laws and guidelines.
• The more compliant you are with norms, the moral you see yourself as being.
• Views the moral ‘right’ as being compliant with legal and regulatory frameworks / norms of society - 13Kohlberg levels Conventional Stage/Plane 3 : Good boy-nice girl orientation"Good" behaviour is that which pleases, impresses or helps others and is approved by them (i.e. "What will people think of me?").
- 14Kohlberg levels Conventional Stage/Plane 4 : Law and order orientation"Right" behaviour is about doing one's duty, showing respect for authority and maintaining the given social order, regardless of peer pressure.
- 15Kohlberg levels Post-Conventional• At the postconventional level, morality is understood in terms of conformance with perceived ‘higher’ or ‘universal’ ethical principles.
• Postconventional assumptions often challenge existing regulatory regimes and social norms and so postconventional behaviour can often be costly in personal terms. - 16Kohlberg levels Post-Conventional Stage/Plane 5 : Social contract orientation"Right" is defined in terms of protecting individual rights according to standards which have been agreed on "in the public interest".
- 17Kohlberg levels Post-Conventional Stage/Plane 6 : Universal ethical principle orientationRight" is defined by conscience according to self-chosen ethical principles appealing to logical comprehensiveness, universality and consistency.
- 18(AAA) MODEL• Establish the facts
• Identify the ethical issues
• Identify the norms
• Identify alternative courses of action
• What is the best course of action
• Consider consequences
• The decision is taken - 19(AAA) MODEL (Detail points)• Establish the facts of the case. To ensure there is no ambiguity about what is under consideration.
• Identify the ethical issues in the case, by asking what ethical issues are at stake.
• Identify the norms by placing the decision in its social, ethical, and professional behaviour context.
Professional codes of ethics are taken to be the norms, principles, and values.
• Identify alternative courses of action by stating each one, without consideration of the norms, in order to ensure that each outcome is considered, however inappropriate it might be.
• What is the best course of action that is consistent with the norms.
Then it should be possible to see which options accord with the norms and which do not.
• Consider consequences of the outcomes.
The purpose of the model is to make the implications of each outcome unambiguous so that the final decision is made in full knowledge and recognition of each one.
• The decision is taken
The American Accounting Association model invites the decision maker to explicitly outline their norms, principles, and values, while Tucker’s model (next - 20Tucker’s 5-question model Is the decisionprofitable?
legal?
fair?
right?
sustainable or environmentally sound? - 21GRAY, OWEN AND ADAMS Pristine CapitalistsThe value underpinning this position is shareholder wealth maximisation, and implicit within it is the view that anything that reduces potential shareholder wealth is effectively theft from shareholders
- 22GRAY, OWEN AND ADAMS Expedients• Also believe in maximising shareholder wealth, but recognise that some social responsibility may be necessary
• So, a company might adopt an environmental policy or give money to charity if it believes that by so doing, it will create a favourable image that will help in its overall strategic positioning - 23GRAY, OWEN AND ADAMS Proponents of social contract• Businesses enjoy a licence to operate and that this licence is granted by society as long as the business acts deserving of that licence.
• So, businesses need to be aware of the norms in society so that they can adapt to them.
• If an organisation acts in a way that society finds unacceptable, the licence can be withdrawn by society, as was the case with Arthur Andersen after the collapse of Enron. - 24GRAY, OWEN AND ADAMS Social ecologists• Recognise that business has a social and environmental footprint and therefore bears some responsibility in minimising the footprint it creates.
• An organisation might adopt socially responsible policies because it feels it has a responsibility to do so. - 25GRAY, OWEN AND ADAMS Socialists• Those that see the actions of business as manipulating, and even oppressing other classes of people.
• Business is a concentrator of wealth in society and so the task of business, social, and environmental responsibility is very large – much more so than merely adopting token policies
• Business should recognise and redresses the imbalances in society and provides benefits to stakeholders well beyond the owners of capital. - 26GRAY, OWEN AND ADAMS Radical feminists• Also seek a significant re‑adjustment in the ownership and structure of society.
• They argue that society and business are based on values that are usually considered masculine in nature such as aggression, power, assertiveness, hierarchy, domination, and competitiveness.
• It would be better if society and business were based instead on connectedness, equality, dialogue, compassion, fairness, and mercy (traditionally seen as feminine characteristics). - 27GRAY, OWEN AND ADAMS Deep ecologists• The most extreme position, strongly believing that humans have no more intrinsic right to exist than any other species
• The world’s ecosystems of flora and fauna are so valuable and fragile that it is immoral for these to be damaged simply for the purpose of human economic growth. - 28Corporate and Personal ethical stances Short-term shareholder interests (annual ROI)• Applies to entities which:
- aim just to maximise short-term shareholder profits; and
- only meet the minimum obligation required by law.
• Interest is in short-term dividends rather than long-term capital growth.
• There will be conflicts between short-term and long-term strategies and decisions. - 29Corporate and Personal ethical stances Long-term shareholder interests (Capital growth)Applies to entities which:
• aim to maximise long-term shareholder profits (capital growth)
• are interested in the Long-term strategies and decisions.
• meet the obligations required by law. - 30Corporate and Personal ethical stances Stakeholder obligations (Understand all their needs)• Without appropriate relationships with groups such as suppliers, employers and customers, the organisation would not be able to function.
• Therefore, we now move from not just looking at shareholders interests but further afield to others who are affected by the company - 31Corporate and Personal ethical stances Shaping Society (Apply own ethics into society)• The role of shaper of society is demanding and largely the concern of public sector organisations and charities, though some well-funded private organisations or very powerful and wealthy individuals might act in this way.
• The legitimacy of this approach for organisations depends on the framework of corporate governance and accountability.
• So here it goes beyond even those affected by the company - to looking at society and the world as a whole. - 32'CSR strategy' and 'strategic CSR• Strategic CSR looks at those good corporate social responsibility activities that are the KEY focus of a business and hence its strategy
• If you buy clothes at Loft by design in France - they come with ethical concepts even printed on their clothes such as “build community” or “keep money in the local community”
• Not only is this an outward expression but also all purchases result in books being made available in parts of the world without such resources.
• Consequently all materials and work is done locally and sustainably regardless of the effect on cost. This is quite a big thing when your competition is say Primark who will use the cheapest source of clothing.
• However this good CSR becomes a strategy. It gives a purpose to everything the company does and therefore then gains a niche in the market where like minded customers will be
• The idea of strategic CSR is very specific and goes beyond “we are green etc” it permeates all KPIs and objectives - 33IR ObjectObjective is a report which shows how organisations create value
- 34The 'integrated reporting' concept & Integrated ThinkingThe 'integrated reporting' concept
Integrated reporting (stylised as '') is the basis for a fundamental change in how to manage and report to stakeholders.
Integrated Thinking
is the active consideration of the relationships between how an organisation operates and the capitals it uses - 35Integrated Reporting The Capitals• These are the resources and the relationships used by the organisation
• They are financial, intellectual,social and relationship,human, manufactured and natural capital.
• However, an integrated report may not cover all capitals – the focus is on capitals that are relevant to the entity - 36Integrated Reporting Value creationAn organisation’s activities influences its ability to continue to draw on capitals continuously
- 37Integrated Reporting The value creation process• At the heart of the value creation process is an entity’s business model
• This creates outputs (products, services, by-products, waste) and outcomes (internal and external consequences for the capitals). - 38Objectives and fundamental concepts of integrated reporting• To improve the quality of information available to providers of financial capital
• To communicate everything affecting how an organisation creates value
• Look after the broad base of capitals and show how they depend on each other
• Make decisions that focus on creating value in the short, medium and long term - 39Purpose of integrated reportingTo explain to providers of financial capital how an organisation creates value over time
- 40Guiding principlesThese underpin the integrated report
They guide the content of the report and how it is presented - 41Content elementsThese are the key categories of information
They are a series of questions rather than a prescriptive list - 42Guiding Principles• Are you showing an insight into the future strategy..?
• Are you showing a holistic picture of the the organisation's ability to create value over time?
Look at the combination, inter-relatedness and dependencies between the factors that affect this
• Are you showing the quality of your stakeholder relationships?
• Are you disclosing information about matters that materially affect your ability to create value over the short, medium and long term?
• Are you being concise?
Not being burdened by less relevant information
• Are you showing Reliability, completeness, consistency and comparability when showing your own ability to create value. - 43Content Elements• Organisational overview and external environment
• Governance
• Business model
• Risks and opportunities
• Strategy and resource allocation
• Performance
• Outlook - 44Content Elements (Detailed)ORGANISATIONAL OVERVIEW AND EXTERNAL ENVIRONMENT
What does the organisation do and what are the circumstances under which it operates?
GOVERNANCE
How does an organisation’s governance structure support its ability to create value in the short, medium and long term?
BUSINESS MODEL
What is the organisation’s business model?
RISKS AND OPPORTUNITIES
What are the specific risk and opportunities that affect the organisation’s ability to create value over the short, medium and long term, and how is the organisation dealing with them?
STRATEGY AND RESOURCE ALLOCATION
Where does the organisation want to go and how does it intend to get there?
PERFORMANCE
To what extent has the organisation achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?
OUTLOOK
What challenges and uncertainties is the organisation likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance? - 45Environmental Footprint• Measures a company’s resource consumption of inputs such as energy, feedstock, water, land use, etc.
• Measures any harm to the environment brought about by pollution emissions.
• Measures resource consumption and pollution emissions in either qualitative, quantitative or replacement terms.
• Together, these comprise the organisation’s environmental footprint.
• A target may be set to reduce the footprint and a variance shown.
• Not all do this and so this makes voluntary adoption controversial - 46Sustainable development• The development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
• Energy, land use, natural resources and waste emissions etc should be consumed at the same rate they can be renewed
• Sustainability affects every level of organisation, from the local neighborhood to the entire planet.
• It is the long term maintenance of systems according to environmental, economic and social considerations. - 47Full cost accountingThis means calculating the total cost of company activities, including environmental, economic and social costs
- 48TBL (Triple bottom line) accounting• TBL accounting means expanding the normal financial reporting framework of a company to include environmental and social performance.
• The concept is also explained using the triple ‘P’ headings of ‘People, Planet and Profit’
• The principle of TBL reporting is that true performance should be measured in terms of a balance between economic (profits), environmental (planet) and social (people) factors; with no one factor growing at the expense of the others.
• The contention is that a corporation that accommodates the pressures of all the three factors in its strategic investment decisions will enhance shareholder value, as long as the benefits that accrue from producing such a report exceeds the costs of producing it. - 49Advantages and Purposes of Environmental Reporting• A way to show their accountability to society and to future generations
• To strengthen a company’s accountability to its shareholders
• To demonstrate their responsiveness to certain issues that may threaten the perception of their ethics
• To gain, maintain or restore the perception of legitimacy after a company commits an environmental error
• A convenient place to inform all about (and re-assure investors) environmental risks and the ways that they are being managed or mitigated.
• The systems and the knowledge they generate could have the potential to save costs and increase operational efficiency