Chapter six : Ethics, professionalism and social responsibility
Why ethics matters :
Something can be legal but still unethical – and all illegal acts are unethical. Eg. selling poor quality goods at a high price is not
illegal (free market) but it is unethical. Selling petrol below the government price is illegal and therefore unethical.
KEY TERMS :
1. Professional code: regulates the behaviour of people in a profession that needs specialised training (law, medicine,
nursing, engineering, chartered accounting). Breaking it can mean a fine, suspension or being disbarred.
2. Good business practice: professionalism, accountability, ethics and effective business practice.
3. Corporate Social Responsibility (CSR): an ongoing commitment by businesses to behave ethically and contribute to the
economic and social development of employees and the community.
4. Whistle-blower: someone who exposes unethical behaviour, fraud, health and safety violations or corruption.
A) Ethical theories
These explain why people justify certain actions as ethical or unethical:
1) Principle-based theory
a. A person’s ingrained set of values, morals and rules decides what is right or wrong
b. Accept the consequences – never lie, never pay a bribe, even if the deal is lost
2) Consequence-based theory
a. The outcome decides whether an action is ethical
b. Eg. it is OK to lie if the truth will upset someone
3) Utilitarian theory
a. What is best for the greatest number of people
b. Eg. paying a bribe is OK if the deal creates jobs for many people
B) Ethical behaviour in practice
1) Conflict of interest
, a. Someone in a position of authority makes a decision that benefits himself rather than the business
b. Eg. a director approached by a supplier he is linked to, or a recruitment panel member who doesn’t disclose that
an applicant is a friend
2) Bribes and corruption
a. Bribe: a reward to give someone an unfair advantage (money, gift, job offer, promotion) – “smoothing” or
“facilitation” payment
b. Corruption: abusing a position of power for personal gain – kickbacks, misappropriating funds
3) Unauthorised use of funds
a. The same as theft – “white collar crime”
b. Eg. a manager claims lunch with his wife as a business expense, or uses a petrol card for private trips
4) Inappropriate gifts
a. Employees must declare gifts – may be limited to a certain value
b. A gift may be seen as a form of bribery
5) Sexual harassment
a. Code of Good Practice (22 April 2014). A criminal offence
b. Unwelcome physical contact, verbal (jokes, remarks), non-verbal (gestures, explicit pictures)
c. Senior employee promising a reward for sexual favours
d. Businesses need a clear policy and procedure, and must state the penalties
6) Unfair advertising
a. Regulated by the Advertising Regulatory Board (ARB)
7) Employment / labour issues
a. Abusing sick leave
b. Abusing the internet – porn sites, social media during work, personal emails
c. Sharing confidential information
d. Spreading rumours about the business or colleagues
e. Taking stationery home, verbal abuse
8) Pricing of goods
a. Price fixing: competitors agree on a price – illegal (Competition Commission can fine directors)
b. CPA: illegal to charge more in rural areas without good reason
c. Charging a high price just because there are no competitors is unethical
9) Insider trading
a. Trading JSE shares using confidential information only an insider would know. A criminal offence
Why ethics matters :
Something can be legal but still unethical – and all illegal acts are unethical. Eg. selling poor quality goods at a high price is not
illegal (free market) but it is unethical. Selling petrol below the government price is illegal and therefore unethical.
KEY TERMS :
1. Professional code: regulates the behaviour of people in a profession that needs specialised training (law, medicine,
nursing, engineering, chartered accounting). Breaking it can mean a fine, suspension or being disbarred.
2. Good business practice: professionalism, accountability, ethics and effective business practice.
3. Corporate Social Responsibility (CSR): an ongoing commitment by businesses to behave ethically and contribute to the
economic and social development of employees and the community.
4. Whistle-blower: someone who exposes unethical behaviour, fraud, health and safety violations or corruption.
A) Ethical theories
These explain why people justify certain actions as ethical or unethical:
1) Principle-based theory
a. A person’s ingrained set of values, morals and rules decides what is right or wrong
b. Accept the consequences – never lie, never pay a bribe, even if the deal is lost
2) Consequence-based theory
a. The outcome decides whether an action is ethical
b. Eg. it is OK to lie if the truth will upset someone
3) Utilitarian theory
a. What is best for the greatest number of people
b. Eg. paying a bribe is OK if the deal creates jobs for many people
B) Ethical behaviour in practice
1) Conflict of interest
, a. Someone in a position of authority makes a decision that benefits himself rather than the business
b. Eg. a director approached by a supplier he is linked to, or a recruitment panel member who doesn’t disclose that
an applicant is a friend
2) Bribes and corruption
a. Bribe: a reward to give someone an unfair advantage (money, gift, job offer, promotion) – “smoothing” or
“facilitation” payment
b. Corruption: abusing a position of power for personal gain – kickbacks, misappropriating funds
3) Unauthorised use of funds
a. The same as theft – “white collar crime”
b. Eg. a manager claims lunch with his wife as a business expense, or uses a petrol card for private trips
4) Inappropriate gifts
a. Employees must declare gifts – may be limited to a certain value
b. A gift may be seen as a form of bribery
5) Sexual harassment
a. Code of Good Practice (22 April 2014). A criminal offence
b. Unwelcome physical contact, verbal (jokes, remarks), non-verbal (gestures, explicit pictures)
c. Senior employee promising a reward for sexual favours
d. Businesses need a clear policy and procedure, and must state the penalties
6) Unfair advertising
a. Regulated by the Advertising Regulatory Board (ARB)
7) Employment / labour issues
a. Abusing sick leave
b. Abusing the internet – porn sites, social media during work, personal emails
c. Sharing confidential information
d. Spreading rumours about the business or colleagues
e. Taking stationery home, verbal abuse
8) Pricing of goods
a. Price fixing: competitors agree on a price – illegal (Competition Commission can fine directors)
b. CPA: illegal to charge more in rural areas without good reason
c. Charging a high price just because there are no competitors is unethical
9) Insider trading
a. Trading JSE shares using confidential information only an insider would know. A criminal offence
