Ethics in Business http:www'hhmcpas'comresourcesEIB_May_2009'PPT

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Ethics in Business http//www.hhmcpas.com/resourc
es/EIB_May_2009.PPT

• Presented to
• Joint Meeting - Power Accountants Association
• May 21, 2009
• Chattanooga, TN

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• Presented by
• Randall B. Hebert, MBA, CPA, CVA
• Henderson Hutcherson McCullough, PLLC
• 1200 Market Street
• Chattanooga, TN 37402
• 423-702-8145
• 423-756-7771

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Ethics Defined

• The philosophical study of moral values and
  rules
• A branch of philosophy encompassing right conduct
  and good life
• The study of principles relating to right and
  wrong conduct Morality the standards that
  govern the conduct of a person, especially a
  member of a profession

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Can Ethics be taught?
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Aristotle's Ethics

• We study ethics in order to improve our lives,
  and therefore its principal concern is the nature
  of human well-being. Aristotle regards the
  ethical virtues (justice, courage, temperance and
  so on) as complex rational, emotional and social
  skills. What we need, in order to live well, is a
  proper appreciation of the way in which such
  goods as friendship, pleasure, virtue, honor and
  wealth fit together as a whole. Therefore,
  practical wisdom cannot be acquired solely by
  learning general rules. We also must also
  acquire, through practice, those deliberative,
  emotional, and social skills that enable us to
  put our general understanding of well-being into
  practice in ways that are suitable to each
  occasion.

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Decision Tree

• Although there is no possibility of writing a
  book of rules, however long, that will serve as a
  complete guide to wise decision-making, it would
  be a mistake to attribute to Aristotle the
  opposite position, namely that every purported
  rule admits of exceptions, so that even a small
  rule-book that applies to a limited number of
  situations is an impossibility. He makes it clear
  that certain emotions (spite, shamelessness,
  envy) and actions (adultery, theft, murder) are
  always wrong, regardless of the circumstances.

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Where does Ethics Begin?

• Virtue makes the goal right, practical wisdom the
  things leading to it.
• - Aristotle
• Ethical values are the foundation on which
  civilized society exists

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Self-analysis questions

• Each of us must ask ourselves, What is my
  highest aspiration?
• Wealth
• Fame (Pleasure)
• Esteem (Honor)
• Popularity (Friendship)
• Integrity (Virtue)

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Self-analysis answers

• If integrity is secondary to any of the
  alternatives, it will be sacrificed in situations
  where a choice must be made.

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Style of Ethics

• Ethic of Justice
• Responsibility to General Principle(s)
• Ethic of Care
• Responsibility to reduce Harm or Suffering

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Ethic of Justice

• Based on abstract, impersonal principles
• Logical and impartial
• Objective and fair
• Inflexible and uncaring
• Legalistic and authoritarian
• More common of men than women

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Ethic of Care

• Responsibility to reduce actual harm or suffering
• Solutions tailored to circumstances
• Notion of equity or appropriateness
• Flexible and sensitive
• Subjective and arbitrary
• More common of women than men

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Detecting Your Style of Ethics

• Which is worse?
• A. Hurting someones feelings by telling the
  truth
• B. Telling a lie and protecting feelings
• Which is the worse mistake?
• A. To make exceptions to freely
• B. To apply rules too rigidly

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Detecting Your Style of Ethics

• Which is worse to be?
• A. Unmerciful
• B. Unfair
• Which is worse?
• Stealing something valuable from someone for no
  good reason
• Breaking a promise to a friend for no good reason

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Detecting Your Style of Ethics

• Which is better to be?
• A. Just and fair
• B. Sympathetic and feeling
• Which is worse?
• A. Not helping someone in trouble
• B. Being unfair to someone by playing favorites

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Detecting Your Style of Ethics

• In making a decision you rely more on
• A. Hard facts
• B. Personal feelings and intuition
• Which is more important in determining whether an
  action is right or wrong?
• A. Whether anyone actually gets hurt
• B. Whether a rule, law, commandment or moral
  principle is broken

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Detecting Your Style of Ethics

• Your boss orders you to do something that will
  hurt someone. If you carry out the order, have
  you actually done anything wrong?
• A. Yes
• B. No

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Does it make a difference?

• Never underestimate the power of one person
• England
• English in the U.S.
• Texas
• Selective Service

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First Thought this Morning?

• No one says, Today, I am going to commit fraud
  and mislead people both inside and outside my
  company by publishing financial information that
  is misleading and does not materially represent
  factually the current financial position of my
  company nor the operating results.

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Ten Universal Values

• Caring
• Respect for others
• Fairness
• Pursuit of Excellence
• Accountability

• Honesty
• Integrity
• Promise-keeping
• Fidelity
• Responsible Citizenship

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The Value of a Professional Code of Conduct

• How does a professional code of conduct protect
  the public?
• To whom are we responsible?
• Ethics and the thought process.

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Ethics in the Workplace

• Business ethics.
• Ethical behavior..
• Business vs. personal ethics

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Ethics in the WorkplaceDecision-making Framework

• Check the facts
• Define the problem
• Identify the morally relevant factors
• Develop potential solutions
• Test the alternative potential solutions against
  benchmarks of relevant professional and moral
  standards of conduct
• Choose the best potential solution

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Ethics in the WorkplaceTesting the Potential
Solutions

• Rules test
• Publicity test
• Harm test
• Defensibility test
• Reversibility test

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• Do the right thing!

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Myths about Business Ethics

• More about religion than management
• Our employees are ethical
• Best left to philosophers, academics and
  theologians
• Is superfluous
• Good guys preaching to bad guys

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Myths about Business Ethics(continued)

• New policeman on the block
• Ethics cannot be managed
• Business ethics social responsibilities
• No laws broken no problem
• Ethics management has little relevance

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Benefits of Managing Ethics

• Substantially improve society
• Maintain moral course in turbulent times
• Cultivate teamwork and productivity
• Support employee growth and meaning
• Insurance policy of sorts

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Benefits of Managing Ethics

• Avoid criminal acts of omission
• Promotes values of quality, planning and
  diversity management
• Promote strong public image
• Bottom-line impact
• Its the Right Thing to Do

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What causes people to compromise their ethical
standards?

• Unrealistic expectations
• Desire to further ones career
• Desire to protect ones livelihood
• Diminished morale working environment
• Ignorance of what is unethical

Source Business Ethics Survey 2005
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Setting the Tone at the Top

• Management can significantly influence behavior
• Strong advocacy for ethical behavior
• Formal and evident ethics program
• Establish a Code of Conduct enforce it

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The Code of Professional Conduct

• AICPA Code of Professional Conduct
• Rules vs. Principles
• How to respond to ethical dilemmas

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AICPA Code of Professional Conduct
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Fundamental Theme

• Be committed to honorable behavior, even at the
  sacrifice of personal advantage

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Six Principles

• Responsibilities
• Public trust/Public Interest
• Integrity
• Objectivity Independence
• Due Care
• Scope and Nature of Services

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Understanding Professional Conduct

• How does the Code of Professional Responsibility
  apply to industry professionals?

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Ethics for Industry CPAs

• AICPA guidance for Management Accountants
• IMA guidance
• IIA guidance in draft to revise

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AICPA Code of Professional Conduct

• Rule 101 Independence
• Rule 102 Integrity and Objectivity
• Rule 201 General Standards
• Rule 202 Compliance with Standards
• Rule 203 Accounting Principles
• Rule 301 Confidential Client Info
• Rule 302 Contingent Fees
• Rule 501 Acts Discreditable
• Rule 502 Advertising and Solicitation
• Rule 503 Commissions and Referral Fees
• Rule 505 Form of Organization and Name

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AICPA Code of Professional EthicsGeneral
Standards

• Professional Competence
• Due Professional Care
• Planning and Supervision
• Sufficient Relevant Data

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Industry Accountants (CPAs) andRule 102

• Interpretation 102-2 Conflicts of Interest
• Interpretation 102-3 Obligations of a Member to
  Employers External CPA
• Interpretation 102-3 Use of CPA designation
  in Industry
• Interpretation 102-4 Subordination of Judgment
  by a Member

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IMA Standards of Conduct

• Competence
• Confidentiality
• Integrity
• Objectivity

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What to do when policies do not resolve the
dilemma

• Discuss with superior
• Clarify relevant issues with advisor
• Consult legal counsel
• RESIGN

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Ethical Rulings Pronouncements

• Pronouncements
• Issued as general guidelines
• Naturally broad
• Meant to convey intent
• Rulings
• Help Implement Pronouncements
• Deal with specific circumstances

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Sources of Assistance

• AICPA
• IMA
• 1-800-638-4427 Ext. 1662
• ethics_at_imanet.org
• Tennessee Society of CPAs
• Other state societies
• Other ethical websites

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Case Studies
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Reporting Inflated NumbersBy Jessica Silliman

• Discussion Questions
• How would you describe the fundamental ethical
  dilemma that Barbara faces?
• Who benefits by Barbara passing on the incorrect
  information? Who is harmed by her doing so?
• Do you think Barbara handled this situation
  correctly? Would you handle it differently? If
  so, how?

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Should Mary Buy Her own Bonus?By Shel Horowitz

• Discussion Questions
• How would you describe the fundamental ethical
  dilemma that Mary faces?
• Who benefits by Mary making the donation? Who is
  harmed by her doing so?
• Do you think Mary handled this situation
  correctly? Would you handle it differently? If
  so, how?

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Inside Informationby David J. Fritzsche

• Discussion Questions
• What are the fundamental ethical issues that Tom
  faces?
• What are the possible alternatives available to
  Tom?
• What are the ethics of the possible alternatives
  available to Tom?
• What should Tom do? Why?

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Dont Play Games!By G. Stevenson Smith Curtis
J. Bonk

• Discussion Questions
• What are the fundamental ethical issues facing
  Rick in this scenario?
• What are the possible alternatives available to
  Rick?
• What are the ethics of the possible alternatives
  available to Rick?
• How do you feel about Ricks actions thus far?
  What would you do differently? Why?

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Filling the Poolby David J. Harr

• Discussion Questions
• What are the fundamental ethical issues that Bob
  faces?
• What are the possible alternatives available to
  Bob?
• What are the ethics of the possible alternatives
  available to Bob?
• What should Bob do? Why?

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Questions

• ?

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Thank You!For questions or for more information

• Randall Hebert
• Henderson Hutcherson McCullough, PLLC
• 1200 Market Street
• Chattanooga, TN 37402
• 423-756-7771 or 423-702-8145
• rhebert_at_hhmcpas.com