Generic - Business Environment and Ethics

BUSINESS ENVIRONMENT
AND ETHICS
Module Guide
Copyright © 2022
MANCOSA
All rights reserved; no part of this module guide may be reproduced in any form or by any means, including photocopying
machines, without the written permission of the publisher. Please report all errors and omissions to the following email address:
modulefeedback@mancosa.co.za
This Module Guide,
Business Environment and Ethics (NQF level 7),
will be used across the following programmes:
 Bachelor of Commerce in Marketing Management

 Bachelor of Commerce in Corporate Communication
 Bachelor of Business Administration
BUSINESS ENVIRONMENT AND ETHICS
List of Contents .................................................................................................................................................. 1
Preface............................................................................................................................................................... 2
Unit 1: Definitions and distinctions ..................................................................................................................... 8
Unit 2: The ethics of business .......................................................................................................................... 20
Unit 3: Theories on ethics and business .......................................................................................................... 33
Unit 4: Business ethics matters ........................................................................................................................ 49
Unit 5: Ethical decision-making in business ..................................................................................................... 64
Unit 6: Governing Ethical Performance ............................................................................................................ 74
Unit 7 : Ethics Case Studies........................................................................................................................... 113
Answers to Revision Questions...................................................................................................................... 116
References..................................................................................................................................................... 124
Bibliography ................................................................................................................................................... 125
i
Business Environment and Ethics
List of Contents
List of Figures and Illustrations
Figure 1.1 : Illustration on accumulation of covered topics Source: own analysis ..................................................... 10
Figure 2.1:Illustration on accumulation of covered topics........................................................................................... 22
Figure 2.2: Dimensions of corporate responsibility Source: Own analysis ................................................................. 27
Figure 3.1: Illustration on accumulation of covered topics.......................................................................................... 35
Figure 6.2: Ethics reporting structure ....................................................................................................................... 102
Figure 6.3: Ethics reporting structure Source: Own analysis.................................................................................... 103
Figure 6.4: Unethical culture behaviour demonstration ............................................................................................ 105
Figure 6.5: Ethical behaviour demonstration ............................................................................................................ 106
Figure 7.1: Illustration on accumulation of covered topics Source: Own analysis ................................................... 115
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Preface
A. Welcome
Dear Student
It is a great pleasure to welcome you to Business Environment and Ethics (BET7). To make sure that you share our
passion about this area of study, we encourage you to read this overview thoroughly. Refer to it as often as you need to,
since it will certainly make studying this module a lot easier. The intention of this module is to develop both your confidence
and proficiency in this module.
The field of Business Environment and Ethics is extremely dynamic and challenging. The learning content, activities
and self- study questions contained in this guide will therefore provide you with opportunities to explore the latest
developments in this field and help you to discover the field of Business Environment and Ethics as it is practiced today.
This is a distance-learning module. Since you do not have a tutor standing next to you while you study, you need to apply
self-discipline. You will have the opportunity to collaborate with each other via social media tools. Your study skills will
include self-direction and responsibility. However, you will gain a lot from the experience! These study skills will contribute
to your life skills, which will help you to succeed in all areas of life.
We hope you enjoy the module.
MANCOSA does not own or purport to own, unless explicitly stated otherwise, any intellectual property rights in or to
multimedia used or provided in this module guide. Such multimedia is copyrighted by the respective creators thereto and
used by MANCOSA for educational purposes only. Should you wish to use copyrighted material from this guide for purposes
of your own that extend beyond fair dealing/use, you must obtain permission from the copyright owner.
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B. Module Overview
The purpose of this module is to introduce the business ethics concepts and distinctions that are useful in understanding
both the fields of business ethics and also providing practical guidance on governing and managing ethics in organisations
thereof. The student will learn King IV principles relating to ethical leadership and governance of ethics in organisations.
The student will also learn on the reflection of the fairly recent developments that have an impact on how ethics should be
governed and managed in organisations (Companies Act of South Africa 2008, which came into effect in 2012. The guide
will provide the students with an overview of different ethical theories at the beginning to provide basic knowledge which
will further assist in understanding other topics in this module. Various examples to relatively portray real life business
environment have been used to build on the basic knowledge acquired in the first topics. The guide is drafted to also allow
the student to apply their minds and opinions from learned theories and analysis. The module is a 360 credit module at
NQF level 7. For each unit in this guide, it is suggested that a student should first study the theoretical content in the
prescribed textbook and the module guide, then attempt activity questions and revision questions provided in the guide to
test your knowledge.
The Module is a 15 credit at NQF 7
C. Learning Outcomes and Associated Assessment Criteria of the Module
Learning Outcomes of the Module Associated Assessment Criteria of the Module
 Define and understand concepts of ethics  Concepts of ethics are explained to understand business
and business ethics ethics and its importance in the organisation
 Relationship between ethics and law are discussed to make
distinctions between legal, ethical, illegal and/or unethical
 Increase awareness and understanding of  Distinctions between what is perceived ethically right and
moral issues in the business environment wrong are explored in order to make decisions on moral
and recognise and think through ethical dilemmas and competing ethical or unethical options in
issues related to business business
 Assessment of dilemmas are explored to understand that
guidance must be provided in business on how dilemmas
should be approached
 Concepts of values and ethics are evaluated and explored to
understand their influence within the business organisations
and its objectives
 Examine and evaluate business situations  Practical examples are provided and analysed to understand
and decisions from an ethical perspective ethical decisions and how they are dependent from various
business situation
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 Code of conduct is analysed to understand that it may

propose a decision making procedure that can be followed in
cases were the code does not provide sufficient guidance on
what needs to be done on specific business situations
 Understanding of business situations are explored to identify
and implement standards of conduct in business that will
ensure that the interests of stakeholders are respected and
maintained
 Knowledge on organisational operations are defined and
explored in order to apply appropriate actions
 Understand better the mechanisms in  King IV principles on ethics are analysed to understand the
developing a more ethical corporate culture need and responsibility of the organisation in the development
of a proper ethical organisational culture
 Distinction between values and ethical values are made to
assist in developing an appropriate corporate ethical culture
 Ethical values, principles and standards are analysed to
realise the importance of ethics as the backbone of any
organisation
 Ethics Committee roles are investigated to understand the link
they have to developing ethics in an organisation
 The relationship between ethics policies and code of conduct

are analysed to provide guidance in developing an
appropriate ethical behaviour in the organisation
D. Learning Outcomes of the Units

You will find the Unit Learning Outcomes on the introductory pages of each Unit in the Module Guide. The Unit Learning
Outcomes lists an overview of the areas you must demonstrate knowledge in and the practical skills you must be able to
achieve at the end of each Unit lesson in the Module Guide
E. Acronyms
RIMS Rational Interaction for Moral Sensitivity
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F. How to Use this Module

This Module Guide was compiled to help you work through your units and textbook for this module, by breaking your
studies into manageable parts. The Module Guide gives you extra theory and explanations where necessary, and so
enables you to get the most from your module.
The purpose of the Module Guide is to allow you the opportunity to integrate the theoretical concepts from the prescribed
textbook and recommended readings. We suggest that you briefly skim read through the entire guide to get an overview
of its contents. At the beginning of each Unit, you will find a list of Learning Outcomes and Associated Assessment Criteria.
This outlines the main points that you should understand when you have completed the Unit/s. Do not attempt to read and
study everything at once. Each study session should be 90 minutes without a break.
This module should be studied using the prescribed and recommended textbooks/readings and the relevant sections of
this Module Guide. You must read about the topic that you intend to study in the appropriate section before you start
reading the textbook in detail. Ensure that you make your own notes as you work through both the textbook and this
module. In the event that you do not have the prescribed and recommended textbooks/readings, you must make use of
any other source that deals with the sections in this module. If you want to do further reading, and want to obtain
publications that were used as source documents when we wrote this guide, you should look at the reference list and the
bibliography at the end of the Module Guide.
G. Study Material
The study material for this module includes tutorial letters, programme handbook, this Module Guide, a list of prescribed
and recommended textbooks/readings which may be supplemented by additional readings.
H. Prescribed and Recommended Textbook/Readings

There is at least one prescribed and recommended textbooks/readings allocated for the module.
The prescribed and recommended readings/textbooks contain a tremendous amount of material in a simple, easy-to-learn
format. You should read ahead during your course. Make a point of it to re-read the learning content in your module
textbook. This will increase your retention of important concepts and skills. You may wish to read more widely than just
the Module Guide and the prescribed and recommended textbooks/readings, the Bibliography and Reference list provides
you with additional reading. Note that this module guide is NOT a substitute for the prescribed textbook.
The prescribed and recommended textbooks/readings for this module is:
Prescribed Reading/Textbook
 Deon, R., and Leon, VV. (2017) Business Ethics. 6th Edition. Cape Town: Oxford University Press. (ISBN:
9780190721466)
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Recommended Readings
 Boatright (2014) Ethics and the Conduct of Business. Sixth Edition. Prentice Hall.
 Louise, K., Frans, P, Martin, P., Deon, R., Korien, S., Jacques, S., and Minka, W. (2012) Ethics for Accountants and
Auditors. 3rd Edition. Cape Town: Oxford University Press. (ISBN: 9780199042456)
I. Special Features
In the Module Guide, you will find the following icons together with a description. These are designed to help you study. It
is imperative that you work through them as they also provide guidelines for examination purposes.
Special Feature Icon Explanation
LEARNING The Learning Outcomes indicate aspects of the particular Unit you have
OUTCOMES to master.
The Associated Assessment Criteria is the evaluation of the students’

ASSOCIATED
understanding which are aligned to the outcomes. The Associated
ASSESSMENT
Assessment Criteria sets the standard for the successful demonstration
CRITERIA
of the understanding of a concept or skill.
A Think Point asks you to stop and think about an issue. Sometimes you
THINK POINT are asked to apply a concept to your own experience or to think of an
example.
You may come across Activities that ask you to carry out specific tasks.
In most cases, there are no right or wrong answers to these activities.
ACTIVITY
The purpose of the activities is to give you an opportunity to apply what
you have learned.
At this point, you should read the references supplied. If you are unable
READINGS to acquire the suggested readings, then you are welcome to consult any
current source that deals with the subject.
PRACTICAL
Practical Application or Examples will be discussed to enhance
APPLICATION OR
understanding of this module.
EXAMPLES
You may come across Knowledge Check Questions at the end of each
KNOWLEDGE
Unit in the form of Knowledge Check Questions (KCQ’s) that will test
CHECK
your knowledge. You should refer to the Module Guide or your
QUESTIONS
textbook(s) for the answers.
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You may come across Revision Questions that test your understanding
REVISION
of what you have learned so far. These may be attempted with the aid of
QUESTIONS
your textbooks, journal articles and Module Guide.
Case Studies are included in different sections in this Module Guide. This
CASE STUDY
activity provides students with the opportunity to apply theory to practice.
You may come across links to Videos Activities as well as instructions on

VIDEO ACTIVITY
activities to attend to after watching the video.
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Unit
1: Definitions and Distinctions
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Unit Learning Outcomes
CONTENT LIST LEARNING OUTCOMES
1.1 Introduction  Introduce content area in the units
1.2 Definition of Business  Define Business
1.3 Definition of Ethics  Define the Concept of Ethics
1.4 Definition of Business Ethics  Define Business Ethics
1.5 Right, Wrong and Dilemmas  Demonstrate understanding of how ethics is used within a business
1.6 Ethics and the law  Evaluate and analyse the perceptions of ethics
1.7 Ethics and Values  Evaluate and analyse the perceptions of ethics
1.8 Integrity  Evaluate and analyse the perceptions of ethics
1.9 Personal and organisational ethics  Distinguish between personal and organisational ethics
1.10 Summary  Summarise content areas covered in the units
Prescribed / Recommended Reading

 Deon, R., and Leon, VV. (2017) Business Ethics. 6th Edition. Cape Town: Oxford
University Press. (ISBN: 9780190721466)
You need to study Chapter 1
Recommended Reading
 Louise, K., Frans, P, Martin, P., Deon, R., Korien, S., Jacques, S., and Minka, W. (2012)
Ethics for Accountants and Auditors. 3rd Edition. Cape Town: Oxford University Press.
(ISBN: 9780199042456)
You need to refer to Chapter 1 of this book
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Business Ethics
UNIT 1
Definitions and Distinctions
- Business UNIT 2
- Ethics
- Business ethics The ethics of business
- Right, wrong and dilemmas
- Ethics and law
- Ethics and values
- Integrity
- Personal and organisational ethics
UNIT 3 UNIT 4 UNIT 5

Theories one ethics Business ethics Ethical decision-
and business matters making in business
UNIT 6
UNIT 7
Governing ethical
Case Studies
performance
Figure 1.1 : Illustration on accumulation of covered topics

Source: own analysis
1.1 Introduction
As a prospective Marketing Manager of the corporate world, private or public industry you will be required to practically
understand ethics in business and how this plays an important role in the success and sustainability of business. This unit
is developed to introduce the concepts of ethics in the field of business as well as to make distinctions of these terms. It
will provide clarity on the meaning of these concepts to assist you to avoid misunderstanding and confusion that may arise
in the field of business ethics. The unit will further outline the practical aspects of governing and managing ethics in an
organisation.
1.2 Definition of Business

Before we define ethics and business ethics, it is important to understand what ‘business’ actually means. This would also
help us understand the relation of business with ethics later on. It is also imperative to know that ethics can be irrelevant
where there is no business, thus the business term is introduced to this module and unit first.
As outline in Chapter 1 of your prescribed textbook, under the heading ‘business’, business can either refer to a specific
type of organisation or to a specific type of activity. Organisation can be referred to an enterprise that provides goods or
services in exchange for some payment. The providers of such goods or services can be public or private enterprises, or
individuals.
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A broader understanding of business ethics is therefore used in this module, which includes both the public (state owned)
and private enterprises. On the other hand, business refers to a specific type of activity, which is referred to businesses,
or individuals who voluntarily enter into transactions of economic exchange for good and services.
Since we now understand what the term business means, let us now explore the on three dimensions of business namely,
economic ethics, corporate responsibility and organisational ethics as well as classifying them as either an organisation or
as an activity (Enderle, 2003; Goodpaster, 1992; Rossouw and Stuekelberger, 2012 cited in Rossouw and Van Vuuren,
2017).
This will merely assist you in obtaining clarity of the kind of environment which businesses operate in.
a) Economic ethics – This is factored in both an organisation and an activity as this occurs within an economic
system as well as socio-political frameworks. Businesses operating in these spaces are governed by national
laws and regulations (economic) and by the social norms of where they are located as well as rules that internally
govern the business. Chapter 2 of unit 2 will expand understanding of economic systems by discussing the
macroeconomic framework.
b) Corporate responsibility – Business as an organisation, mostly find themselves in a network of relationships

where the business is located. The relationships can be with one or more suppliers, customers, society,
employees, the state, competitors and employees. As a result, the business therefore has to form certain business
interactions and relationship in sustaining the business’s operations.
c) Organisational ethics – This is self-explanatory in terms of where this falls under, “an organisation”.
Organisations often have their own structures, standards and rules to govern to direct and control its day to day
operations. Obviously these structures and standards will merely be developed in a way that they consider the
relative stakeholders that the organisation is parametric with. The challenge comes in where these standards
contradict other stakeholder’s interests. Sometimes a stakeholder can belong in two groups of stakeholders and
therefore develops different needs that they expect to be fulfilled by an organisation, refer to Chapter 1 of your
prescribed, under the heading ‘business’ for detail. How does an organisation solve this conflict? These
organisational dimensions will further be explored in Unit 2, Chapter 4 of your prescribed textbook.
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From the above, it should now be apparent that the above organisations and activities (also known as business) will only
develop certain standards to operate their business once they get to know their stakeholders and needs thereof. Please
see below the common stakeholders and their needs that businesses interact with:
Table 1.1: Stakeholders and their needs
Stakeholder Needs
Employees Security over job
Suppliers Credit paid back in time
Customers Deliver quality products/services at affordable price
Government Compliant to set laws and regulations, honour tax

payments
Investors Get profit share and dividends
Society Socially responsible
Media Do not offend their personal interest

Source: own analysis
1.3 Definition of Ethics
Now that you know what is referred to in the concept business, which is used a lot in this module, you can now take note
of what ethics means and then we can define business ethics combined the two terms, namely, business and ethics.
One of the most topical concepts in the business world nowadays is found to be ethics. It is as a result of the positive and
negative impact this can contribute to the business achieving its mission and objectives. For example, employees that
work in a well cultured and appropriate ethical environment which they understand, will in most cases deliver as expected
as they can sense their value thereof. On the other hand, employees working in an environment that harms a lot of their
interests, will most probably not deliver as expected and therefore retaliate with the assumption that their managers want
to get rid of them. As a result, they may commit fraud, waste productivity time and etc.
Ethics is about what is good and bad, right and wrong, in human interactions or with various parties involved and affected
by the interactions. It revolves around three central concepts, which are ‘self’, ‘good’, and ‘other’. In simple terms this
means for one to be ethical, an action taken must good for oneself and be also good to others. If it happens that the
interests of others are excluded or not considered at all, then one may, and not necessarily all the time, be regarded as
selfish. Therefore, the quality of interaction remains crucial through consideration of the above three central concepts
mentioned. It can be tricky as to when something is good to oneself but harms interests of others. Is it always practical for
one to be ethical without hurting feelings and surroundings of the other?
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Let us take a look at the example below:

Example 1
Mr A, owner of company XYZ Limited, which recently got listed at the JSE has decided to
develop an Ethics Policy for the first time for the company to be compliant to King IV. A
few months ago, it was unanimously reported that there are some and very few employees
who seem to be paid for the hours not actually worked. They would submit a timesheet for
overtime that was not worked. This is concerning other employees as they make sure that
they record the accurate time whereas others do not.
One of the actions noted in the policy is the following: ‘All employees should ensure that a
timesheet is completed and signed daily by the Line Manager so that accurate time may
be paid. Disciplinary action would be taken against employees who fail to do so.’
Required:
a) Evaluate if the above policy action is ethical.
b) Advise what behaviour is followed by the employees not disclosing the true worked
time.
1.4 Definition of Business Ethics

Now that you know what Business and Ethics means, it should be easier for you to understand the combined term Business
Ethics. From the above we have also noted that it will not be possible to implement any ethics principles or actions where
there is no business. Ethics is therefore applied to business considering the impact the business organisations and activity
have on the interest of all who are affected by it. According to Rossouw and Van Vuuren (2017), Business Ethics is about
identifying and implementing values and standards of conduct for business that will ensure that the interests of its
stakeholders are respected.
In summary, business is a term and ethics is about the principles or standards that are developed in the business for its
daily operations. These standards are developed for execution by stakeholders and it monitoring is required to see if these
are well practiced. Example 1 given above covers this understanding.
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Example 1.1
a) From Example 1 above, can you identify the impact employee’s conduct
resulted in the business?
b) Do you also now understand what mitigation controls business can undertake
to reduce any negative impact on the day to day operations.
1.5 Right, Wrong and Dilemmas

Society sometimes is mistaken on when an action is perceived right and wrong. This now takes us to evaluating the
difference between these so that we may get clarity around the two with ethics. Can a standard be ethically right at times
and so be ethically wrong at times too? What is the perception from society?
For example, there is a consensus that the protection of innocent lives and telling the truth is “ethically right”. On the other
hand, there is a similar consensus that the killing of innocent people and dishonesty is “ethically wrong”.
In business, the same perceptions as mentioned above also apply. “There are certain behaviours that are considered
ethically right, such as respect for the dignity of employees and for company property. On the other hand, discriminating
employees and theft over company property is considered ethically wrong”. In some cases, there may be difficult situations
when one has to choose if a standard is ethically right and wrong. This choice situation is effectively referred to “moral
dilemmas”. Moral dilemmas might force one to choose between two competing good values, such as honesty and loyalty.
By making a choice, this results in one value being compromised (Allan, 2012 cited in Rossouw and Van Vuuren, 2017)).
See below an example to help you understand the dilemma concept:
Example 2
According to Rossouw and Van Vuuren (2017), privacy in email use is a typical moral
dilemma in business. Why do they say this? Employees’ whose email privacy is monitored
would regard this value as unethical, whereas managers would justify it as a legitimate
managerial prerogative. This means, the other value will need to be compromised when a
decision or choice is made on what value to actually perform.
It is imperative to note that a dilemma can only exist where there two competing values such
as two ethical values or two unethical values.
As this may be a hard choice to make, businesses should make it clear as to what is
regarded ethically right or acceptable behaviour and so also make it clear on what they
consider ethically wrong or unacceptable behaviour. As dilemmas occur from time to time,
business should acknowledge this and provide guidance on how these dilemmas should be
approached.
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Example 3:
Company ABC Limited who is in oil manufacturing has decided to open a branch in one of
the Limpopo villages very close to the river, for which they have obtained a license to source
some of the water from. The water will be used for cleaning the machinery and also to clean
the floor space after oil manufacturing. All licenses related to opening this kind of business
were duly obtained. “In a business case that was performed, it was noted that the dirty water
will run back to the river, and good enough, the river is always flowing in a sense that oil
will not knot together”, the Chief Executive Officer said. There isn’t any residence in the
area where Company ABC wants to operate but are a few neighbouring villages about 10
kilometres away from the location. The society has received the news that Company ABC
will be opening in the neighbourhood soon and is worried that the water from the river they
use for doing their washing, and sometimes drinking in days where municipal water is off,
will be contaminated. This would not be safe for the society to use anymore and they are
furious about this matter. The CEO of Company ABC nonetheless says that the government
has allowed the company to operate in the location, clearly there is not significant damage
that would be done.
Self-Test questions
a) Can you identify the dilemma in the above scenario? Hint: your response should show
whether both parties are ethical or both are unethical for there to be a dilemma.
b) Which option would you consider for your concerns if you were the CEO of Company
ABC and why?
1.6 Ethics and the law

Some people confuse the concept ethics and the law. It is common for one to assume that whatever which is ethical would
be lawful and vice versa. Of course there are similarities to the two but there are also significant differences. Commonly,
both law and ethics strive towards determining what is acceptable, and responsible in human interaction and society. The
law achieves this through the public and political process. On the other hand, ethics stems from personal or society values
and is based on internal convictions rather than external coercion as in the case of the law. A tabulated example is provided
in Unit 1, Chapter 1, Page 7 for your illustration and understanding. At this stage, you should be able to distinguish between
law and ethics. It is also crucial to take note that one should not hide behind the law justifying being ethical. In extreme
cases where one finds themselves breaking the law while trying to be ethical, but to conquer this, one should go an extra
mile by challenging the existing laws on when they are perceived to be unfair to then justify actions taken.
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1.7 Ethics and Values

There is a definite link between ethics and values, however the two concepts are not identical. Values can be linked to
what is desirable. It is good to also note that values are not only related to individuals but also organisations. There are
normally three different kinds of values that can be distinguished within business organisations which are strategic, work
and ethical values.
In simple terms, Strategic values indicate the direction in which the organisation wishes to move and this means all
members of the organisation will need to work in a specified manner. Work values can be related to those that employees
will need to adhere to in their jobs, e.g. punctuality, innovation and excellence. Lastly, ethical values will include respect,
honesty, and fairness. This is to ensure that internal stakeholders and external stakeholders get along well with one
another.
1.8 Integrity
Integrity is closely aligned to ethics. This is sometimes used as a substitute for ethics. But individually, integrity refers to
adherence to a set of ethical standards and not merely the law. Integrity is also associated with being fair, uprightness,
and wholeness (Rossouw and Van Vuuren, 2017).
1.9 Personal and organisational ethics

A final important distinction in business ethics that we need to make is between personal and organisational ethics. This
distinction is illustrated with a metaphor of apples and barrels, wherein apples represent individuals and barrels represent
an organisation, refer to details in Chapter 1 of your prescribed textbook). In other words, a barrel will contain the apples.
So whenever an apple gets bad, it should be removed from the barrel and therefore replaced with a good apple. Translating
it back to individual and an organisation, this means that where an individual behaves unethically, they should be removed
from an organisation and replaced with ethical employees. No organisation wishes to have unethical employees, as they
are perceived to be the ones resulting in failure on certain tasks in the organisation. On the other hand, this simply means
that an ethics of the apples can influence the ethics of the barrel and the opposite can also apply.
And in business organisation (barrels) that individuals (apples) work in may have a constructive or corruptive influence on
the moral of character of the people (apples) that work in the organisations. People with goo d moral character can be
influenced to behave unethically when they find themselves in organisations where unethical conduct is the norm. So this
means that bad barrels (organisations) may corrupt good employees (individuals) and the opposite is true. Why are we
making this distinction? It is to show you that ethics must not only be addressed to individuals but also on the level of
organisational culture and practices. Furthermore, students should take note of the society norms within which they operate
which may also be constructive or corruptive therefore influencing certain behaviour by the organisation. On the other
hand, business organisation may also influence how society reacts based on the business values that have.
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REVISION QUESTIONS
Self-Assessment and Case study questions
Analysing Business and its responsibilities – further understanding will be obtained in Unit 2.
Case 1
A new public Hospital based in Gauteng in one of the townships was opened 2 months ago and
it is currently serving about 500 people daily. There is an expectation of an increase in the
number of patients as the nearby townships are starting to come as well. This hospital is defined
as the cleanest and with quick service compared to the other hospitals nearby.
Required:
a) With reference to a public hospital, what economic activity is this?
b) Can you identify the related stakeholder network that the hospital interacts with? Identify
them.
c) Please evaluate the needs of these stakeholders.
Case 2
Required:
Provide an example where an individual situation may be deemed illegal but ethical at the same
time:
Case 3
RRR Pty (Ltd) is a logistics company and has a fleet of 90 vehicles of which most of them are
trucks. The company always employs respecting candidates who follows management
instructions at all times. Some of these trucks are not licensed as required by law and this has
been leading to a few fines pile in the Income Statement of the company. The Fleet Manager
says it is difficult to license these trucks as they were purchased 2 nd hand and a lot of
documentation is required to fix this issue, yet business needs to run daily. “There is just no time
to fix this”, he says. As a result, he has told his drivers to negotiate not to get a fine as much as
they can and with whatever it takes on the road. He gives extra money to each driver for security
in this regard.
Required:
a) What metaphor is referred to in this case?
b) Analyse the scenario in terms of the identified metaphor.
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1.10 Summary
The concepts and distinctions introduced in this unit will be an important part of the vocabulary that you will need to
understand the rest of the study guide as well as important in making you fluent in ethics discourse.
These concepts will be used frequently so it is wise to get familiar with to understand the forthcoming build-up.
Now you can pre-read Unit 2 starting from Chapter 2 until Chapter 4 wherein we will further explore on what the three
levels of economic activity entails, responsibilities of business organisation and roles ethics play in building trust.
Suggested Solutions to questions provided in unit 1.
Example 1
a) Self – This act is good for Mr A as this action may note the transgressors and therefore improves the profitability
of his company.
Good for oneself - this is definitely good.
Good for other – For employees that were paid for hours not worked without reporting the matter to management
and Human Resources, this action is naturally wrong. As we have identified their wrong action, the policy action
to be implemented will not be harming any of their interest. This will nonetheless, promote the good behaviour
other employees have been conducting all along. Therefore, the above action in the policy will is considered
ethical.
Note: Do take cognisance in your response that you address the three central concepts of Good, Self and Other
in your response. Can you also see that Mr A served his interests while simultaneously caring about how the
interests of others will be affected! Please also note in this instance, not everyone’s interests were fulfilled but
the good character employee’s interests were highly considered and fulfilled.
b) Some employees in the scenario above are submitting false worked hours. This behaviour is considered as
unethical. Generally done, it is unethical to use company’s resources for personal use. And this is also stealing
company’s money indirectly.
Example 1.1
a) This resulted in loss of profit as some employees where paid for hours not worked and sometimes overtime.
Furthermore, this has also resulted in stricter actions to be undertaken should any events for defrauding the
company be noted. Employees might not be at ease on the implemented working conditions as a mistake of
forgetting to clock in and out may trigger a disciplinary action against the employee no matter how loyal they
have been before the new policy.
b) Yes, sometimes by implementing policies governing specific units of the business may improve profitability
and also provide fair and equal working environment.
MANCOSA 18
Example 3
a) Society is concerned that the water they use will be spoiled from the oil from company ABC. On the other
hand, CEO of ABC has done everything in their power to duly register and obtain certificates for the company
to function.
The society is ethical from their concern as the intention is good, for themselves and other communities who
are still to come live around the area.
From Company ABC’s view, the intention to open a company in the villages is good as this will create an
employment for the community as well, this will be profitable for the company and also to others in terms of
growth in the Limpopo villages as well as recognition of the area. This might in the long run attract more
investors into the area and as a result create further employment from the society nearby as they stand a
higher chance of employment.
All parties as shown above are ethical as the intentions are good for self and others.
b) From responses in A above, as well as taking into consideration the fact that the community nearby does not
solely depend on the river water, the CEO should perhaps address a resolution that may be suitable for both
parties with the communities nearby. Assurance should also be provided that employment will be created for
suitable candidates in the area as well as assistance of clean water provision by Company ABC in cases on
emergency.
19 MANCOSA
Unit
2: The Ethics of Business
MANCOSA 20
2.2 Macro-ethics – Chapter 2  Differentiate between macroeconomic, organisational and intra-

organisational economic activity
2.3 The Social responsibility of business –  Compare capitalism to statism and theories of justice in macro-
Chapter 3 economic level
 Analyse the ethical justification of economic systems and macro-

economic policies to investigate ethical dimensions that may arise
2.4 Ethics in organisation-Chapter 4  Evaluate appropriate ethical rules in a business environment.
 Investigate different types of roles and responsibilities that

business are expected to fulfil in relation to the economic,
workplace, social and natural environments
Prescribed Reading
You need to study Chapters 2 to 4
Recommended Reading
 Louise, K., Frans, P, Martin, P., Deon, R., Korien, S., Jacques, S., and Minka, W.
(2012) Ethics for Accountants and Auditors. 3rd Edition. Cape Town: Oxford
You need to refer to Chapter 7 of this text book
21 MANCOSA
BUSINESS ETHICS
UNIT 2 UNIT 3
UNIT 1
The ethics of business Theories one ethics
Definitions and
Macro ethics and business
Distinctions - Rise of capitalism and statism
- Theories of justice
Social responsibilities of the business

- The economy
- The workplace
- Social environment
Ethics in organisation

UNIT 7
Business ethics Ethical decision- Governing ethical
Case Studies
matters making in business performance
Figure 2.1:Illustration on accumulation of covered topics
2.1 Introduction
In the Unit 1, a distinction was made between three different levels of economic activity, namely, the macroeconomic, the
organisational and the intra-organisational levels. Each of these three levels economic activity has its own ethical
dimension. In this Unit, we will explore what ethics entails and implies on each of these three levels of economic activity.
In Chapter 2, an investigation of the ethical dimension of macroeconomic level by analysing the justification of economic
systems and macroeconomic policies is done. We focus on the ethics of capitalism and statism as the two major competing
economic systems of recent times. The ethical gains and deficits of the two economic systems are also discussed.
In Chapter 3, the focus shifts to the organisational level where we attend to the ethical responsibilities of business or
organisations towards the broader environment within which they operate. We investigate the different types of roles and
responsibilities that businesses are expected to fulfil in relation to their economic, social and natural environments.
And lastly in Chapter 4, we move to the intra-organisational level side of things. Examination of crucial role of ethics in
intra-organisational relations and the role that it plays in building trust in organisations is assessed. We also explore on
the role that ethics play on in the performance of organisations and to also determine were the business stands ethically.
2.2 Macro-ethics – Chapter 2

As analysed in Unit 1, the study of ethics is concerned with evaluating the moral desirability of individuals and group
actions. These actions can only be propoerly understood within the context in which the individuals and groups operate.
MANCOSA 22
This is because these particular contexts determine the rules of the game and, therefore the types of actions that are
deemed appropriate or not within a given setting. However, it is imperative to remember that these rules change over time
and therefore are shubject to ethical scruitiny. This now brings us to understanding that the evaluation of ethics falls under
the domain of macro-ethics (as opposed to meso – or micro-ethics defined in Chapter 1).
Now, what is macro ethics? is this related to busines ethics? As defined in Unit 1, business ethics is about identifying and
implementing values and standards of conduct for business that will ensure that the interests of its stakeholders are
respected. On the other hand, according to Woermannn (date unknown) cited in Rossouw and Van Vuuren (2017), as
reflected in your prescribed textbook, in Chapter 2, macro-ethics is the study and evaluation of the social, economic,
political, environment and cultural contexts (and the interrelations between these contexts) that shape our practices. Can
you now see that ‘business ethics’ is internal whereas macro is about external factors that business do not have control
over? Therefore, ethics in business and at a macro scale will differ depending on the context of discussion.
Chapter 2 restricts itself to exploring the capitalistic system in which business operates, and to different conceptions of
distributive justice in which business operates, and to different conceptions of distributive justice that either support this
system, or can be employed to critically evaluate capitalism.
Now let us understand what capitalism is. Capitalism is an economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by the state (Dictionary, 1989). Capitalism is an empirical
fact of today’s world. Capitalism has led to many advances in society and most importantly of which includes incentivising
development and innovation in science, technology, transportation and medicine, allowing customers greater choice of
products and services, and facilitating the development of a global trade and finance. Furthermore, according to
Woermannn (date unknown) cited in Rossouw and Van Vuuren (2017),), capitalism has also increased the general wealth
of society and also has increased the global GDP (study Chapter 2, page 13 -14). The author further understands that
capitalism is premised on the homo economicus view of humans, which is based on the assumption that we are rational
beings who seek to maximise both monetary and non-monetary utility. One of the golden rules of capitalism is that one
need to invest money in order to make money. But where does this leave the poor who do not have money to invest? This
brings us to the weakness that the capitalistic system has. Because the poor would not be able to make money as they
would not have money to invest. Though in the above, we have addressed the strength of the system but we must not
ignore the weaknesses of the system either. This means distributing justice to the society may be a concern in terms of
that it may not achieve equality. A group of society may not be afforded resources simply because they have not had an
opportunity to undertake extensive training or study due to poverty. On the other hand, a group of society who can afford
to invest money in training or study may be give good resources to further their knowledge and improve their way of living
with the poor still left behind.
This brings us to the difficult question to answer, of what would then constitute a fair allocation and division of benefits and
burdens, (Manuel, 2010:22 cited in Rossouw and Van Vuuren, 2017).
23 MANCOSA
2.2.1 The rise of capitalism – capitalism vs statism

Capitalism operates on a market system where production and distribution of resources are privatised. Refer to Chapter 2
of your prescribed textbook, where in this market system is viewed differently different economists. In summary, according
to Smith (date unknown) cited in Rossouw and Van Vuuren (2017 perception of the market is that it’s efficiency is promoted
when we allow the market to function with minimal interference from the state. He further supports this by making an
example in production space, where in a team in which different people take charge of specific functions in the production
process will work a lot more effectively than one person who attempts to make a product from scratch. Per the author’s
understanding, that means each division will be fully responsible and strive to produce the best as there would not be
interference from anyone outside that specific division.
Example 1
If Mr A invents cell phones, initially he would make a lot of money. Due to high demand for
cell phones, he may even charge high prices on his products. Soon however, other people
would realise that they can manufacture cell phones as it is profitable and then enter the
market as a result.
a. Are you able to identify capitalism in this example?

b. Can you identify what capitalism has resulted into?
Then there is statism, the opposite of what capitalism is, developed by Karl Marx at the Communist Manifesto (Marx, 1848
cited in Rossouw and Van Vuuren, 2017). Statism is defined as a political system in which the state has substantial
centralised control over social and economic affairs. Statism has found its most of significant expression in market of
socialism. Socialism is a political and economic theory of social organisation which advocates that the means of production,
distribution, and exchange should be owned or regulated by the community as a whole. This is factored by the public
ownership of property and state owned controlled economy. In this doctrine as developed by Karl Marx, he argued that
capitalism creates hierarchies which also allows exploitation of workers. Workers are then forced to work for a capitalist
class for very small amount. And an as result, this creates an imbalance and inequality of distribution of resources through
capitalism. In summary, this means that capitalism has not been considering society’s needs. Nonetheless, Marx and
Engels (refer to your prescribed textbook, under the heading - the rise of capitalism), have implemented measures to
minimise the inequality created by capitalism thereof, such as minimum wage and occupational health and safety laws to
protect workers.
MANCOSA 24
2.2.2 Theories of justice

In capitalism above, it was mentioned that this system has a weakness of not equally distributing justice.
Now let us elaborate more on what we mean by justice. The word justice is used in an economic system where there are
limited resources to be utilised by various number of people. As a result, certain people end up having more opportunities
in life to advance more resources at their disposal for realising their dreams and goals. The issue of distributive justice can
therefore employ to assess the strengths and weaknesses of capitalism.
In defining justice, according to Plato, the four virtues on which our moral life is based are prudence, temperance, courage
and justice. However, Comte-Sponville (1996) cited in Rossouw and Van Vuuren (2017) argues that of these four values,
only justice is good in itself, whereas the other virtues only lead to good consequences if the will of the doer is good.
Comte-Sponville further argues that there are two ways that justice is perceived as, being justice as respect for the state
legality (where in ever all cases are treated alike) and justice as respect for equality among individuals. The author also
believes that in many cases justice, also referred to as law has not been equal and therefore prone to failure as the law is
a human system.
As can be noted above, there is not a distinctive way of defining justice. Further to this, see below for more views on justice
definition which are fully explained in Chapter 2, under the heading – theories of justice:
1. John Stuart Mill, a British social and political philosopher – according to Mill (1965) cited in Rossouw and Van
Vuuren (2017), he believes that justice should be based on the principle of social utility, meaning an action should
be deemed just if it promotes the overall social welfare. He believes that this will resolve the problem of competing
criteria. On the distribution of benefits and burdens, it should be considered through who is to maximise the social
utility. This means, it an assessment (which is not easy to do) should be made based on who will maximise the
distributed resources in social, political and economic phase. This theory is referred to as the Utilitarian theory.
2. John Rawls, an American philosopher, offers an alternative utilitarianism in his influential book A Theory of Justice,
Rawls (1971) cited in Rossouw and Van Vuuren (2017). He argues that justice should be understood in terms of
fairness, and the only way in which fairness can be ensured is to hypothesise an original position of equality. As
we are born in different circumstances, this also influences the opportunities people tend to face as a result.
Furthermore, society will choose the governing principles of society which will be necessarily just to the exposed
way of living. This further will result in some of the beneficial principles not be campaigned for as the society will be
unware/ignorant of these. This theory is referred to as the Egalitarian theory of justice. Rawls also has 2 principles
which he believes will attain fairness in terms of distributing and allocating resources. Principle one, is the principle
which guarantees the moral equality of people. This principle states that all people should have rights to the most
comprehensive set of freedoms that are compatible with a reciprocal system of freedom to all. Principle two – also
known as the difference principle, states that social and economic inequalities will only be justified if they benefit
the worst off in society and if they are attached to positions and offices open to all. Meaning the society will
understand a situation where resources have been allocated unequally if the allocation does benefit those in worst
case scenario in the respective society.
25 MANCOSA
Example 2:
A township in Gauteng has the most of unsafe living areas where there is now a drastically
increasing number of informal settlement camps. The township has other households who can
afford their living expenses but majority cannot. The Government has seen a need to find an area
to build RDP houses for the people who live in an informal settlement camps. This will even make
the township loo attractive and clean as a result.
Required:
a. Can you identify inequality of resource allocation in this example?
b. According to the Egalitarian theory of justice by John Rawl, can you justify the action of
building RDP house by the government?
3. Robert Nozick– An American philosopher agrees with Rawl on that the Utilitarian theory of justice is indefensible
on the grounds that it denies our basic rights. He is also critical of Raw’s principles, the difference principle (principle
two), that it may infringe others rights. Nozick believes that everyone should be given the freedom to live as they
wish, without any interference (Nozick, date unknown cited in Rossouw and Van Vuuren, 2017). In other words,
there should be personal freedom in which an individual can exercise their own choices on the condition that they
do not interfere with other people’s freedom. This theory is referred to as Libertarian theory of justice. In this theory,
one is entitled to their own belongings as long as they did not acquire them without violating anyone’s moral rights.
Therefore, one can be able to do whatever they like with their belongings. As an example, a property that is acquired
through theft or force or fraud will be deemed an invalid transfer.
Revision question
Case 1
From recent news of South African, were in previously disadvantaged black population is fighting
to get their land back from the colonial system. The government has started and is in process to
draft the claim policies with this regard.
Required:
a. Support this action using the Utilitarian theory of justice by John Stuart Mill.
b. What would be Comte-Sponville view of justice in the above policy?
MANCOSA 26
As can be noted above, Chapter 2 is about the theory of distribution of justice equally. This was for you to understand that
the Macroeconomic dimensional level concerns inequality, and in the aftermath of the global economic crisis, it is crucial
to address issues pertaining to the allocation and distribution of society’s benefits and burdens to ensure the sustainability
of the political, social and economic orders.
2.3 The social responsibility of business – Chapter 3

Corporations are part of society and inevitably find themselves in relationships of responsibility with the societies in which
they operate. Companies play a big role in the society but providing employment, creating value for stakeholders and
developing opportunities for the societies in which they operate. But it should also not be ignored that companies can also
negatively impact the societies in which they operate by, for example, exploiting employees, corrupting officials, doing
harm to the natural environment. As a result, the relationship between business and society therefore always has ethical
dimension. There is a growing consensus that companies have responsibilities in four broad areas, namely: economy, the
workplace, then social environment and then natural environment. See below diagram 3.1, dimensions of corporate
responsibility:
A. Economy B. Workplace
Corporate Responsibility
C. Social environment
D. Natural environment
Figure 2.2: Dimensions of corporate responsibility

3
Source: Own analysis
A. The economy
The first area of responsibility a company should consider is its impact on the economy or marketplace. The company
should therefore consider how its operations and financial performance affect the economy.
If a company sustains good financial performance, as a result, it adds value to the society and stakeholders at large.
Income will be provided to those that are employed by it and return on investment will also be created. The society then
benefits from the levies, taxes and other contributions that the company pays to the local government which can be in turn
invested in the development of local and national infrastructure. In other words, a company that can sustain its profits
contributes to the economy at large and vice versa. Any action that may result in the company failing to operate not only
harms the company itself but also the society.
27 MANCOSA
B. The workplace
The second area of responsibility is the workplace. The company should consider how it affects the health, safety and
development of its employees. Does it maintain respectful and sound work relationships with its employees? There are
certain standards and law regulating the corporate responsibility towards employees such as Labour laws and Health and
Safety related laws. This is a mere corporate responsibility than a socially responsibility action. An action is deemed
corporate socially responsible where there is absence of laws or regulations. This is referred to an explicit corporate social
responsibility (Matten and Moon, 2008 cited in Rossouw and Van Vuuren, 2017), and a socially responsibility action which
is done to adhere to mandatory standards is an implicit corporate social responsibility.
C. Social Environment
The third area of responsibility is the impact that companies have on the social environment or communities in which they
operate. They need to consider their operations, products or services on the community. It should also be considered if
any risk is posed to the health and safety to society. What about the benefits or negative impacts is the community exposed
to from the company’s operations?
It is crucial to understand that the society has expectations for companies to respect. Some expectations can be as a
result of voluntary imposed actions which end up be understood to be a liability to be fulfilled by the company. Some
expectations are as a result of how other companies do it. Companies mostly or at all times responds positively to these
expectations for several reasons but not limited to: gain legitimacy, enhance their strategic interests and to honour their
ethical duties to society. These 3 responses are briefly discussed below. Refer to Chapter 3, under the heading – societal
expectations.
Legitimacy interest
This is done in order to be accepted by society as business depends on it to be perceived as acting in society’s interest.
This now brings us to the fact that business only motive is not to make profit but also be legitimate, by respecting the
interest of the society.
Strategic interest considerations

As a company does not fully function with only finance, assets, laws protecting it, suppliers, etc., it also needs the society
for human resources in order to staff their operations. In other words, businesses require different support from their
stakeholders and by so doing, strategic interest in is enhanced. Should a company be perceived disregarding any of the
stakeholder’s need or expectations, it runs a risk of losing their trust and collaboration.
Ethical considerations
In light of being considerate and respecting the interest of society or stakeholders at large, there are also ethical duties
that companies needs to fulfil to the society. Meeting society and stakeholder’s needs is instrumental for the success of
the business.
MANCOSA 28
What are these ethical considerations that we are referring to? Companies have basic ethical obligations which are to
consider how its interests affect the interests of others. All members of society need to be treated with respect and decency,
irrespective of their status or the social power that they may exert over to business. Some of these considerations are not
written but simply presupposed by society.
2.3.1 Discretionary contribution

Discretional responsibilities refer to those that the company chooses to fulfil, such as donations etc. Companies fulfil these
responsibilities for various reasons such as, giving back to society from which the company benefits from, out of sympathy
from either poverty or any natural disaster, to gain good reputation etc. At times, a company may perhaps provide a
sponsorship programme to the society or bursaries from which it also expects to benefit from in the long run, this
responsibility is referred to corporate social investment.
2.3.2 Corporate citizenship

When is a company deemed to be a corporate citizen? Is it from being responsible to the society? A company is seen as
a corporate citizen when it complies to all economic and political laws and regulations. These may also include being
responsible towards the natural environment as well as social environment. This then makes it difficult for the company to
operate as they wish since there are a lot of expectations from different stakeholders, economy and the natural
environment that needs to be considered and fulfilled.
REVISION QUESTIONS
Case 2:
Company ABC Limited who is in oil manufacturing has decided to open a branch in one of
the Limpopo villages very close to the river for which they have obtained a license to source
some of the water from. The water will be used for cleaning the machinery and also to clean
the floor space after oil manufacturing. All licenses related to opening this kind of business
were duly obtained. In a business case that was performed, it was noted that the cleaning
water will run back to the river but good enough, the river water is always flowing in a sense
that the oil will move with the water and not knot together, the Chief Executive Officer said.
There isn’t any residence in the area where Company ABC wants to operate but are a few
neighbouring villages about 10 kilometres away from the location. The society has received
the news that Company ABC will be placed in the neighbourhood soon and is worried that
the water from the river they use for doing their washing, and sometimes drinking in days
where municipal water is off will be spoiled. This would not be safe for the society to use
anymore and they are furious about this matter. The CEO of ABC nonetheless says if the
government has allowed us to operate in the location, clearly there is not significant damage
that would be done. Company ABC is also known to be a responsible citizen.
29 MANCOSA
Required:
a) Identify a conflict arising from the case study above by analysing the expectation
from the stakeholders or environments impacted by the opening of Company ABC.
b) Evaluate possible appropriate ethical rules or responsibilities that company ABC
may at an obligation or discretionary implement to remain a socially responsible
corporate citizen.
2.4 Ethics in organisation – Chapter 4
Chapter 4 is merely building on Chapter 3, - ethics in business while being responsible. It is often what happens within
corporations that determines their ethical impact on the physical, economic and social environment. As addressed in
Chapter 3, ethical responsibility may be as a result of an obligation (where a responsibility is regulated) which they entity
would be forced to comply, and be may be as a result of discretion. Nonetheless, Chapter 4 further addresses the issue
of ethics in an intra-organisational level, which shows that ethics cannot be divorced from business activity.
If we say ethics cannot be divorced from business activities, what might happen if a business is run without ethics?
Remember, ethics is a moral value. Generally, a business with no rules or not guided morally is a failing business. Again,
the bottom line of every business is to maximise shareholder’s wealth.
Take for example; a company operating with no ethical consideration will view some stakeholders such as suppliers as
dispensable entities who should be grateful for being given business. Same with employees, they will be viewed as though
a company is doing a favour for them. So by being ethical, we get to respect and
need each other and that way all business decisions are then guided by good morals. This also should bring us to the fact
that groups cannot function without norms and those norms are ethical principles which will determine the extent of
conformity and cohesion in a groups, refer to Chapter 4 of your prescribed textbook.
Example 3
Company XXX is struggling financially due to the fact for the past 5 years, no profit has been
realised and overdrafts are increasing. The company is also failing to honour supplier
payment terms resulting to some suppliers denying them business. The Chief Financial
Officer (CFO) has developed a strategy where in 3000 employees will need to be retrenched
while 500 employees will be converted to wage employees and working on shifts. The first
cut of expenses is on employees as it is deemed to be one a biggest cost in the company.
MANCOSA 30
Retrenchments package is being calculated to be finalised in a month or so as well as

endorsement letters. This change will be implemented in 4 months from now.
Required:
a) From the scenario above, do you think Company XXX is ethical considerate and
why its employees?
b) What are the benefits of being ethically considerate to both the employees and
Company XXX?
As summary, ethics is crucial to the job performance of individuals, as individuals will act to meet the stipulations as
outlined in the employment contract such as, loyalty, dedication, and creativity while performing their tasks. People who
feel that they are respected, who receive recognition for good work, and who fee l sense that their creative contributions
are appreciated, tend to work with more likely to utilise their potential for the benefits of the business. And the opposite will
apply to people are humiliated on their work, and these types of people will only do what is expected of them without taking
an extra mile to be creative. Refer to Chapter 4.
2.5 Summary
Unit 2 further outlined the three dimensions which are macro level (Chapter 2), micro- level (Chapter 3) and intra-
organisation level (Chapter 4) dimension. It is important to understand that business operates in a capitalism system where
distribution of resources is not equal in the economy (justice). How then do we survive and be just while being ethical? It
was then introduced the responsibilities that business has towards different stakeholders and lastly how then one needs
to take note that ethics is inherent to the business and not an add-on function to the business.
31 MANCOSA
Solutions to questions in this Unit
Example 1:
a. Yes, in this example we can see that capitalism works because everyone is free to pursue their own interest,
as everyone is motivated with the same interest, profit.
b. Capitalism has thus resulted in Mr A having to compete with other manufactures of cell phones, and therefore
sharing the profits even though they would not be shared equally as this depends on the customer loyalty
and sales achieved. And a result, society may benefit altogether as certain self-interest behaviour has been
met. Furthermore, it must not be ignored that a capitalistic system fails to distribute or allocate resources
equally amongst society as the golden rule of “one needs to invest money in order to make money”. This will
also mean that the manufacturer who can afford to invest more in this kind of business will be able to make
more profit.
Example 2:
a. Yes, I can identify a distribution inequality as not every household in the area will be built an RDP house but
only the households who live in informal settlement camps.
b. The society in this township will be able to deem this action just as this benefits the population who are in the
worst case scenario (principle two of John Rawl).
Example 3
a) Company XXX is ethical considerate as they understand the inconvenience they would cause is significant.
As a result, the company would be offering retrenchment packages as well as endorsement letters for use
by the employees when they apply for new employment. The retrenchment package is also a sign of sincere
together with the 4 months’ notification period in order for employees in question to start marketing for other
jobs.
b) Because Company XXX is ethical considerate towards its employees. They are mostly like be loyal to their
products or services in future. In future, should XXX request for some employees return to work, they are
most like to agree a they know that it is a responsible entity.
MANCOSA 32
Unit
3: Theories on Ethics and
Business
33 MANCOSA
3.2 The modes of ethics management-  Understand the difference between descriptive and normative
Chapter 5 business theories
 Explain the nature, purpose and inner logic of the six categories
classified under ethical management approaches
3.3 Classical ethical theories- Chapter 6  Discuss and apply the three ethical classical theories of ethics by
the virtue theory of Aristotle, the deontological theory of Immanuel
Kant and the Utilitarian theory of J.S Mill
3.4 Theories of the modern  Evaluate when corporations should be considered as moral agents
corporation/business- Chapter 7 or amoral institutions
 Assess social responsibilities a business needs to take care of and
apparent benefits
Prescribed Reading
You need to study Chapter 5 to 7
Recommended Reading
(2012) Ethics for Accountants and Auditors. 3rd Edition. Cape Town: Oxford
You need to refer to Chapter 3 and 8 of this book
MANCOSA 34
BUSINESS ETHICS
UNIT 1 UNIT 2
UNIT 3
Definitions and The ethics of
Theories one ethics and business
Distinctions business
Modes of ethics management
- The amoral mode
- The survival mode
- The reactive mode
- Compliance mode
- The integrity mode
- The totally aligned compliant organisation
Classical ethical theories

- The virtue theory
- The deontological theory
- The utilitarian theory
Theories of modern corporation

- Corporate social responsibility
- Stakeholder theory

UNIT 7
Case Studies
Figure 3.1: Illustration on accumulation of covered topics

4
3.1 Introduction
In this unit, you will learn about theories which are meant to give you a grasp of other people’s views and judgement. There
are there to make sense and not merely to a put a comprehensive judgement on how things should be done. Theories
also enable one to understand, evaluate, assess and even predict matters in the field of study. Without theories, any field
of study is difficult to understand. For this reason, an introduction of a number of theories that are important for making
sense and gaining deeper understanding of the field of business ethics are discussed.
Chapter 5 of this unit introduces us to Descriptive theories, which in business ethics are describe and explain states of
ethical affairs. They enable scholars and practitioners to gain deeper insight into specific states of ethical affairs in business
ethics. Under the descriptive, six categories which classifies ethics management approaches will be discussed. This is to
explain the nature, purpose and inner logic of these approaches.
In Chapter 6 of this unit, normative theories in the theory of business ethics, which is in contrast of the Descriptive theory
as referred to in Chapter 5, will be explained. This theory goes beyond mere descriptions of ethical states of affairs, and
35 MANCOSA
venture into the domain of how specific ethical states of affairs should be. They thus set make value judgement that set a
specific standard of how things should be ethically speaking. In this chapter, three classical theories of ethics, namely, the
virtue theory of Aristotle, the deontological theory of Immanel Kant, and the utilitarian theory of J.S Mill. These theories are
to assist us in judging whether an action or state of affairs could be considered ethical or not.
In Chapter 7, again, normative theories that are specifically applied in the field of business ethics are provided. These
ethics identify moral status and obligations of corporations. This is to identify if corporations should be considered as moral
agents or as amoral institutions, what social responsibilities corporations should take care of, and for whose benefit
corporations should be run.
3.2 The modes of ethics management – Chapter 5

Before we describe what descriptive theories in business ethics is, it is imperative to understand that as in all other business
functions, ethics too needs to be managed. There are different modes or ways of managing ethics in corporations which
the descriptive theory classifies under six categories as follows, refer to Chapter 5.
3.2.1 The amoral mode

The nature of the amoral mode is characterised believing that an organisation does not need ethics in business. This mode
assumes that business is ethics free and ethics does not belong in the business. The purpose of this mode is to free
business from any concerns about ethics in business decisions and actions. This is believed as a strive to free the business
from unnecessary constraints.
The management of ethics under the amoral mode is to consistently dismiss any reference to ethics in the business
environment. In simple terms an organisation run within an amoral mode believes that laws and regulations are enough to
ensure that no harm is done to the society and thus anything that is not illegal is therefore permissible in business. For
example, if the entity is permitted to conduct business by law even though the society’s oxygen in one way or another
would be deteriorated, this would be deemed fine by this entity as they are simply permitted by law.
From what we have learnt so far, this theory seems to be a somehow confusing on the relationship between business and
ethics. These theories are meant to allow you room to judge and consider certain thoughts regarding ethics and the
business ultimately.
Nonetheless, various challenges or risks have been identified from adopting the amoral mode which are but not limited to:
- These companies are prone to corporate scandals as the employees within the company are not ethical;
- Key business stakeholders if not treated with respect and humanity can lead to potential disruptions and cause
great harm as a pay back;
- Stakeholders of such entities are most like not have loyalty for the entity nor commitment.
Just by looking at the mentioned three challenges and risks of applying this mode, can you see that this disregards the
fact that business is business by people? As little care is considered on anyone’s value. Businesses applying this mode
should reconsider looking at their perspective with regards to ethics and business.
MANCOSA 36
3.2.2 The survival mode

Organisations in this mode usually believe that good business is from unethical conduct, and will therefore not survive if
they are ethical, (nature). There are myths that relate to these kinds of business leaders which will be further discussed in
Unit 4, Chapter 8.
The purpose of this mode is to maximise profit at all cost, regardless if the company was conducting any unethical conduct.
All that matters are the bottom line (making profit) and with a winning mind at all cost. As businesses on this mode strive
to survive at all costs, unethical behaviour is most likely to occur in the name of maximising the business profits and
surviving.
Management of the survivors does consider concerns to ethics. The corporate culture makes very little provision for an
ethical way of thinking. There is absence of ethics management in these organisations and neither ethics intervention exist
nor the code of ethics. In summary, management strategies of these businesses condone unethical practices.
Like the organisation applying the amoral mode, the survival mode also has challenges or risks as a result which are
named below:
- Financial penalties of unethical behaviour,
- Stakeholders are alienated
- Dissonance of lack of agreement between personal and organisational values.
3.2.3 The reactive mode

Organisations on this mode (nature) are those that react from the challenges that are posed by the organisations in the
survival mode. They are prompted by awareness, either through advice or from identified risks that something needs to
be done to avoid certain risks and consequences of unethical behaviour. They can be ethical but not actively managing
their ethical standards. This means that even if an unethical action is discovered or detected, the culprits will still go
unpunished, there is no management of ethics in this matter.
The purpose of organisation in this mode is to protect themselves against the dangers of unethical behaviour from sensing
a risk from unethical behaviour. The risk could be investigation against the company. They fear their stakeholders and to
protect the loss or disinterest by stakeholders. So in this mode, ethics does exist, it is just a lack of application that persists
as they prefer to respond from the given unethical circumstance than proactively managing ethics.
Management - Organisation applying this mode manages ethics by incorporating a corporate code of ethics which may be
delegated to one member of the organisation or to internal audit, risk management, etc. Some organisations may even
consult or outsource an external party to draft the code for them. It even goes further for these organisations to obtain an
existing code of another company and adopt it to them.
37 MANCOSA
The ethical standards or code of ethics that may eventually be developed may remain on the shelf without being made a
live document and often employees in the organisation does not know much on how to respond and act towards ethical
issues.
Challenges that may be experienced with organisations of reactive mode are:
- Susceptible to ethical standards
- Frustrated stakeholders
- Corporate ethical reputation is below par.
3.2.4 Compliance Mode

Organisations on this mode promotes ethical behaviour by monitoring and managing their ethics performance and ensuring
that all members of the organisation abide by the ethical standards of the organisation. The organisation takes corrective
action by disciplining or penalising those acting unethically. This mode results in the company being on a rule based
approach to manage its ethics (nature).
The purpose of this mode is to prevent any unethical behaviour by the business (barrel) and employees (apples) in the
business. This could be to avoid the cost that may arise as a result of being unethical or the benefits that may flow to the
business from being ethical.
The compliance mode penalises any detected unethical behaviour. Management ensures that the ethics policy is always
updated and where there is insufficient clarity, this is revised to provide clarity on ethical behaviour and standards. The
businesses in this mode also have an active ethics management team who is responsible to handle all the ethical issues
and also ensures that all employees and suppliers are familiar and adhere to the code. Awareness to ethics is done through
communication and trainings. A system is also created to monitor such events as well as one to report any unethical
behaviour.
Like in the above mentioned modes, the compliance mode also has its own challenges or risks.
- As it is strict in terms of policies, monitoring and management, there is a mentality build that what is not forbidden
is allowed. All the loopholes in the policy are used to justify unethical behaviour;
- Personal and moral responsibility is underlined as everything is drafted;
- Makes it impossible to apply to all rules.
3.2.5 The integrity mode

The integrity approach comprises a value based approach to managing ethics, and thus a desire to promote ethical
behaviour. Unlike the compliance mode that sets all rules to be followed, this approach seeks to obtain commitment of
individual members to a set of shared corporate values (nature).
Purpose of the integrity approach is to raise the level of ethical responsibility in the company, by getting members of the
organisation to commit to being ethical.
MANCOSA 38
Organisations manage this approach by rewarding those that are ethical. Training and communication to employees is
done to create ongoing awareness of ethics.
Challenges or risk that arise by practising this approach include:

- Discretion is mostly abused;
- Powerful leaders undermine ethics drive
3.2.6 The Totally Compliant Organisation (TAO)

The TOA mode is characterised by an integration of ethics into the identity, purpose, and goals of the organisation. This
means that in the business strategies, ethics also forms part of that (nature)
A purpose of this approach is to reinforce ethics as part of the organisation’s identity and purpose.
Management of ethics is geared towards promoting and improving the strategic importance of ethical behaviour for the
sustainable business and success. Management of ethics is not limited to a specific ethics function such as Risk, Human
Resource and etc., but widely to all employees of the business.
Challenges or risks from practising this approach include:

- Members could have ethical arrogance;
- Induction on ethics may be neglected on induction;
- Lack of coordination in managing ethics.
Activity 3.1
Cakeza Pty (Ltd) is a manufacturing company of cement, sand and bricks. These are
used by construction companies which are 100% of Cakeza clients. Cakeza does not
sell to individual households. Lots of air pollution has been done since incorporation 3
years ago. The community that stays 2kms away from the firm complains a lot and
mostly during spring time where there is lots of wind. Like any other businesses,
management wants to maximise shareholders value. The complaints received so far
have not been formally nor informally dealt with. But Management is starting to get
worried that the community might boycott if no action is taken. Management is now
deeply looking into getting a solution to avoid this issue taken to another level and
therefore resulting in loss of profits made as a result. “After solving this, we can now
move on to real business”, the Chief Executive said.
39 MANCOSA
Activity 3.2
Company Dee based in Mauritius, is a company ran by 90% of the same race with 10% arising
from other group of races. The 10% group feels that they are not respected for some time now
and they are hardly recognised on their work performance ratings by management. Most of
the Managers in Dee are also from the majority race of 90% and it has not been easy for them
to understand the concerns brought through by this minority group, they are minority after all.
The Head of HR says. Privately, there have been meeting gong on by the minority group where
they want to look for other jobs and hurt management back by destroying what they value the
most as they believe that they are not an asset to this company.
Activity 3.3
The CEO of XXY is currently being investigated for not being integral when applying for a
tender. It is said that the information used are inaccurate and this may have been done
purposefully and out of negligence. This is currently a speculation as this is a big tender which
may have triggered the other companies to raise these sort of concerns. The Head of HR does
not seem to have a problem in this regard as they believe that he was acting in the best interest
of the company. This tender has been boosting the company’s books since it was obtained so
I don’t see why we should suspend him until this investigation can is finalised.
Activity 3.4
ABC Limited has high regard of its stakeholders in a sense they ensure that all their stakeholders
are happy at all times. Where there is no common goal, a presentation is prepared and sent to
the respective stakeholder for them understand why the company cannot do things the way they
perceive. Employees are highly recognised by management and ensure that they are well
motivated on their work by giving incentives.
Unethical behaviour is condemned. Recently there was a Marketing employee who gold holds
of the competitor’s marketing information. Not knowing, ABC manufactured and launched
exactly the same product which the competitor launched in the same week. It was then
investigated as to who perhaps leaked the company’s information or who may have stolen the
competitor’s information. It was tracked to the Marketing employee who was then immediately
dismissed. The dismissal letter stipulated that the employee was dismissed for acting against
the Ethics policy. Management is busy with investigations and is worried that they may need to
pay lots amounts of penalties from this action.
Identify which mode these organisation applies in the activities above. Justify your answer.
MANCOSA 40
Activity 3.5
An insurance company, MMM has shared values which are agreed upon with employees as a
timeous basis.
One of the values are to speak with the customers with respect and be sensitive. Xolani was
awarded the best ethical employee of the month as he committed to excellent values during the
month.
Activity 3.6
Tally Tiles opened a branch in a new township as the social media loves the company and this
has been shown with increased followers too. All new employees are let known on the interview
on how Tally Tiles makes it a norm to be ethical in its mission and objectives. Luckily most of the
times, the employees are aware on how Tally Tiles is also ethically responsible to the society
and are willing to contribute differently to improve the being of this company. Of course it is
embedded in the organisation’s being that it is always ethical.
3.3 Classical ethical theories – Chapter 6

According to Rossouw and Van Vuuren (2017) for one to be able to make a judgment of what is ethical or unethical, there
should be a standard or criterion against which specific actions can be judged. There are however, ethical theories which
provide standards for deciding whether a specific action is ethical or not. They are meant to assist one in making analyse
actions and in providing reasons for why we consider an action to be either ethical or not. In Chapter 6, the three influential
theories are discussed which are still relevant today:
- The virtue theory of Aristole;
- The utilitarian theory of Mill;
- The deontological theory of Kant.
3.3.1 The Virtue theory – Aristotle

Aristotle believes that everything in life has a specific goal. He uses the greek term Telos when referring to Goal of
something. For example, the goal or telos of a knife is to cut. The goal or telos of a pencil is to write. This examples are
given in order to bring to you an understanding that all people have a goal, and there is a common goal that people share.
This goal or telos referred is to live a well life, of happiness, lived to its full potential in greek word this is referred to as
eudaimonia to reach eudaimonia, one needs to start with self-love. He believes that if one has self-love, they can invest in
their development to then reach their goal (Aristotle, date unknown cited in Rossouw and Van Vuuren, 2017).
41 MANCOSA
Virtues
What is a virtue, this is defined as a character build over time that enables you to reach your telos or goal? If the telos of
a knife is to cut, the virtue will be anything that enables it to cut. What could this be, this could be the sharpness of the
blade, the strength of the metal and the firmness of grip that the handle of the knife provides.
What do you think will enable a human being reach their telos or goal of Eudaimonia? One needs an internal dimension
built on morals. Morality requires people of good character. Only people with good character are able to do good. It is
imperative to know that these characters are built over time. This eventually bring us to virtue, good virtue. What are
referring to by this? Virtue is developed by taking rational control of one’s dispositions (habits). As this is practiced over
and over again, it then becomes a character. It is then also easier for one to do the right thing when faced with difficult
ethical situations. In summary, the virtue ethics claims that morality depends on the moral virtues of one’s character.
3.3.2 The deontological ethics – Immanuel Kant

With the virtue ethics claiming that morality depends on the moral virtues of a person, on the other hand, the deontological
ethics insists to believe that moral action requires conformity to rationally founded moral principles that are there. According
to Kant (1785) cited in Rossouw and Van Vuuren (2017), he believes that one experience cannot be used as guidance on
what he ought to do. Kant also believes that the only reliable source of moral guidance resides in our own independent
thinking. Natural needs, past and our present experiences cannot be used to determine the standard for good behaviour.
He also refers to good will, which he believes that with good will, one can have good morals and not human will, which
may be corrupted. Deontological theory is therefore an ethic of duty; the duty always abides by those objective standards
of ethical behaviour that we have distinguish through our rational thinking. For Kant, obeying objective standards of
behaviour from a sense of duty is the hallmark of moral behaviour.
3.3.3 The Utilitarian theory – John Stuart Mill

Mill (date unknown) cited in Rossouw and Van Vuuren (2017) was convinced that actions are good when they positively
contribute towards fulfilling the goal of human beings, which is referred to happiness. He simply believes that for an action
is right or wrong, consequences of that action should be looked at. If the consequence was good and makes majority of
people affected by that specific action happy, then it should be deemed right and ethical thereof. If the opposite applies,
then the action would be deemed wrong and unethical. For your information, happiness includes pleasure, absence of
pain, and the opposite will be pain or privation of pleasure. Mill’s theory has been criticised by other theorist, refer to
Chapter 6 of your prescribed textbook, under the heading utilitarian ethics. Mill also outlined to defend his theory of
happiness and how it should be for the majority of society than the individual (Mill, date unknown cited in Rossouw and
Van Vuuren, 2017).
MANCOSA 42
REVISION QUESTIONS
Case 1
Mr Coolso is a partner in a big audit firm for 7 years now. He is naturally a rational and a man
of virtue. He has created a good client relationship with his client for 4 years now. The client
contributes a significant amount of money into the audit firm. This year, the client books are
not looking too good and the client is awaiting an approval from a bank for a big capital for a
potential investment to a profitable project. This approval is dependent on certain numbers
from the audited Financial Statement. The client has asked the Mr Coolso, the partner, about
the big capital he is looking up to and has asked the partner to be as polite as he can to agree
with everything he sees as well as to issue an unqualified report. He further says, this project
will also create even more jobs on top on the 9000 employees the company has.
Required:
a) Applying the virtue theory, what do you think Mr Coolso would consider when
responding to this request?
b) Applying the deontological theory, how would your response change.
c) How would your response change if Mr Coolso applies the Utilitarian theory?
3.4 Theories of the modern corporation/business – Chapter 7

The significant increase in size and influence of modern business over the last century has given too much thinking
about the moral status and moral obligations of the modern business. Below are the common questions that have been
asked by corporations (as outlined in Chapter 7 of your prescribed textbook):
– Do corporations have moral responsibilities?
– Can corporations be regarded as moral agents?
– Whose interest should the corporations service?
From the questions above, a number of theories emerged to address these types of issues. In Chapter 7, only three
theories, namely, the corporate social responsibility, corporate moral agency and stakeholder theory are discussed.
3.4.1 Corporate social responsibility
People tend to further want to know if businesses/corporates have moral responsibilities towards their owners or
shareholders, or do they have responsibilities towards the societies within which they operate?
43 MANCOSA
See below Milton Friedman and Christopher Stone different views to answer the question if corporates/businesses are
socially responsible or not.
 Milton Friedman
- Friedman denies that corporations do have a social responsibilities other than increasing profit of the
business and its shareholders.
- Every talk about businesses having to be socially responsible was regarded as foolish and short sighted by
Friedman.
- His understanding was based on the fact that we live in a free and democratic society, political and
economic society, where in parties are free to engage in whatever contracts and transactions they deem fit
economically and who need to conform politically.
- Society cast their votes to a preferred party which as a result the party needs to conform to the society’s
interests thereof.
- He believes that a business should be business and politics should be politics and never mix the two or
confuse the two.
- Business executives are employees of the owners of business and have been appointed to make as much
money as possible while adhering to the rules of society.
- Business has therefore no right nor responsibility to be socially responsible.
- Though employees of the business do have moral responsibilities which some may extend to the society.
This can be done in an individual’s capacity and not that of the business.
- He believes that if a business uses the company’s resources to act socially responsible, they are actually
stealing company resources to spend on illegitimate objectives.
- Friedman also understand that since the business money ultimately goes to employees, and stakeholders
is taxed politically, by being socially responsible, this means another indirect tax is being imposed on these
stakeholders who may have benefited from the money spent by being socially responsibility.
- Furthermore, Friedman grants that there are certain conditions in which corporate social spending can be
justified. The first he refers to is when the corporate is a sole proprietary entity where in every spend is
automatically done by the individual. The second condition he refers to is when a company incurs some
spending socially but with expectations to benefit from the spend (Friedman,1992:162 cited in Rossouw
and Van Vuuren, 2017).
Example 1
In your own words, on what grounds does Milton reject corporate social responsibility?
MANCOSA 44
 Christopher Stone
Stone disagrees with Friedman’s theory under the three headings as shown below:
1. Managers do not only have an obligation to shareholder’s profit making.
- Stones refuses the fact that the managers obligations are to maximise shareholders wealth.
- He understands that at the usual, managers do not even know nor meet with shareholders.
- Therefore, the main goal could not be to maximise their wealth or profits. It is the manager’s obligations to look
after the interest of their principals – shareholders (Stone, date unknown cited in Rossouw and Van Vuuren, 2017).
2. Market forces are not sufficient

- He is against the fact that market forces are efficient in ensuring that the activities of corporations will serve the
social needs of the societies, the market mechanism is geared towards economic efficiency and not towards the
satisfaction of social needs. Therefore, social needs are different to economic needs.
3. The law is inadequate

- He further believes that the political system or law is inadequate to ensure that societies needs are fulfilled. He
believes that corporations should act as moral agents who care about their impact on the social and natural
environment. The law alone has time pressure to look at all the societies problem and solve them and hence,
corporations should act as moral agents to fill the gaps that the law cannot fulfil.
i. Corporate moral agency
The question is if business need to be classified as moral agents or not.

Milton Friedman denied that corporations could be regarded as moral agents and agreed that only at an individual level
one can be a moral agent who therefore may be able perform moral responsibilities, refer to Chapter 7 of your prescribed
textbook, under the heading ‘corporate moral agency’ for detail.
On the other hand, Peter French disagrees with Friedman’s view of seeing corporations as non-biological persons or moral
agents. Peter believes that a responsible moral agent is not defined merely at the human level but it is imperative to look
if the corporate is responsible and accountable for its actions. Refer to Chapter 7 of your prescribed textbook, under the
heading ‘corporate moral agency’ for detail.
Example 2
Can corporations be regarded as moral agents as outlined by Peter French?
45 MANCOSA
ii. Stakeholder theory

Further from Unit 2, where a definition of stakeholder was given, stakeholder can also refer to those that can benefit or be
harmed by corporation’s actions. Refer back to Unit 2 for types of stakeholders and their needs in order to understand the
background of the stakeholder theory.
The stakeholder theory gives another challenge to the belief that corporations should be run and managed for the mainly
benefit of shareholders. As detailed in your prescribed textbook, Edward Freeman’s view’s challenges Milton Friedman’s
view of shareholder’s theory which dictates that corporations should be managed mainly for the creation of shareholder’s
wealth. Refer to Chapter 7 of your prescribed textbook, under the heading ‘corporate moral agency’ for detail. It is argued
that the interest of the shareholder should be balanced with that of the employees of the corporations as they also matter
and are an asset to the company, other than not have one goal which is to maximise the shareholder’s wealth. From the
known assumption above, the law also seeks to legally protect the rights of employees that have to be respected by
management.
Based on the legal argument, Evan and Freeman concluded that different stakeholders of corporations have rights that
need to be respected by the management of the modern corporations, refer to Chapter 7 of your prescribed textbook,
under the heading ‘stakeholder theory’ for detail.
3.5 Summary
Chapter 5 of this unit, was about ethics management where in it was made clear of the types of ethics management entities
follows or react towards unethical conducts. Read and understand this and be able to identify to which approach each
ethics management falls under.
Chapter 6 discussed the theories around ethics to understand when is an action deemed ethical and not. It is imperative
to understand the thought process of the theorists before deciding if an event/action is ethical or not.
Chapter 7 was a merely a discussion of theories of whether corporations/business be recognised as corporate socially
responsible towards the society. Various theories in support of and against this were discussed.
MANCOSA 46
Activity 3.1
Cakeza Pty (Ltd) has been receiving complaints for the past 3 years from the community nearby about the air pollution
they are getting from the cement and sand and other products the firm manufactures. It seems that there is no
stakeholder policy or some sort dealing with concerns raised from stakeholder or the society as shown in this example.
If there was a policy on how to address these concerns and promptly so, it would not have taken 3 years for
management to discover how serious the society’s concern is as it deteriorates their health and ways of living from
the dust and smell the firm is producing. Luckily, now Management is getting to the bottom of the situation and realising
that it needs to be ethical as the action taken is not good to others. This then bring us to a conclusion that Cakeza
applies a Reactive mode to avoid certain risks from negatively impacting its operations (refer to your prescribed
textbook, Chapter 5, under the heading ‘reactive mode’).
Activity 3.2
It is apparent that Dee applies an Amoral Mode as they ignore ethical conduct and they do not care about the values
of the minority group. As a result, dissonance between employee’s value and that of the organisation arose. Private
meetings are being held which may result in scandals happening, fraud and etc. which the company will have no
management control over as it is also operating to unethical behaviours (refer to your prescribed textbook, Chapter 5,
under the heading ‘amoral mode’).
Activity 3.3
The CEO of XXY is currently being investigated for an unethical conduct of submitting inaccurate information for a
tender application which was ultimately received. The Head of Human Resource Department sees no problem with
this as this may be the culture that is implied in this organisations. They are concerned with getting more business
and ultimately more profit no matter how much it costs. This business is built on the culture of winning and this is
possibly why inaccurate information was submitted in the name of winning. Therefore, the company is applying a
Survival Mode to survive and to stay in business.
Activity 3.4
ABC Limited is on a compliance mode for the following reasons:
- The company ensures that its stakeholders are happy with the operations decisions. The company even
have a stakeholder policy as well as the ethics policy.
- It is also mentioned that unethical behaviour is condemned at ABC.
- We can also see that the Marketing Manager was dismissed (penalised) for an unethical action taken. This
is to show that that ABC strives to be complaint and be in line with their ethics policy. This is to also eradicate
unethical behaviour in the organisation.
47 MANCOSA
Activity 3.5
The approach that is MMM shows is an Integrity approach as an employee was awarded. This shows that MMM
strives to promote ethical values through incentivising them.
Activity 3.6
It is seeming that Tally Tile is an organisation that has been run with good social responsibility as well as built ethics
across with expected contribution from the employees as well. This practice is supported by the Totally Aligned
Organisations.
Example 1
Milton rejects a corporate to be socially responsible on the following ground:
- Corporation or management goal is to maximise shareholder’s wealth;
- The business mandate cannot engage socially with stakeholders as this then result in theft of shareholder’s
money which they would have benefitted from
- The law or market already caters for social responsibility it’s in mandate so by taxing the business to fulfil those
needs.
Business can thus be socially responsible only when there are certain expectations that the company may benefit
from in future.
Example 2
Corporations may be regarded as moral agents for the following reasons:
He believes that corporates may be moral agents with moral responsibilities from in their own right.
This decision cannot be only regarded to be at an individual or human level but also from the business levels as long
as they have intentions to conduct an action for which they will ultimately be responsible for.
MANCOSA 48
Unit
4: Business Ethics Matters
49 MANCOSA
4.2 Dispelling the Myths-Chapter 8  Criticise the different myths of business ethics
4.3 Ethics and Corporate Reputation-  Evaluate how ethics can affect the organisations’ reputation with
Chapter 9 relative stakeholders
4.4 Ethics and Human Capital- Chapter  Evaluate how organisational ethical mind-set can facilitate human
10 wellness, meaning and self-actualisation
4.5 Ethics and Trust in Organisations-  Understand what trust in business refers to
Chapter 11
 Evaluate how ethics can facilitate trust in organisations
 Evaluate the role of ethics in building trusts
4.6 Using Ethics to Prevent Fraud-  Define fraud

Chapter 12
 Evaluate fraud risk management
4.7 Summary  Summarise topic areas covered in unit
Prescribed Reading
You need to study Chapter 8 to 11
MANCOSA 50
BUSINESS ETHICS

Definitions and The ethics of Theories one ethics
Distinctions business and business
UNIT 4
Business ethics matters
Ethics in business: Dispelling ethics
- Dog eat dog
- Survival of the fittest
- Nice guys comes second
- Unethical conduct is not serious
- When in Rome, do as the Romans do
- All that matters is the bottom line
Ethics and corporate reputation

Ethics and human capital
Ethics and trust in an organisation
The role of ethics in building trust
Using ethics to prevent fraud
UNIT 5 UNIT 6
UNIT 7
Ethical decision- Governing ethical
Case Studies
making in business performance

5
51 MANCOSA
4.1 Introduction
The purpose of Unit 4 is to demonstrate that business ethics matters in business, and that organisations and their leaders
ignore the ethical dimension of business. The extent to which ethics is seen within a business affects both the perceptions
of its stakeholders and the performance of the business. Ethics influences various factors from various stakeholders such
as:
- The confidence of investors in organisations;
- The loyalty of customers to companies;
- The willingness of talented individuals to offer their skills to the organisation.
This brings us to understanding that recognising and integrating ethics within a business is a crucial factor that determines
its success and sustainability.
Chapter 8 of this unit will lay the foundation for the fact that ethics matters in business by advancing logical arguments on
how ethics dispel popular myths. The beliefs raised in these myths can advocate a strict division between business and
ethics if not addressed.
Chapter 9 illustrates the symbiotic nature between ethics and corporate reputation and the organisation’s primary
stakeholders (investors, consumers and employees), as well as its financial performance
Chapter 10 shows how ethics is proposed as the key to unlock human potential in organisation. This chapter demonstrate
how organisational ethical mind-set can facilitate wellness, meaning and self-actualisation. A number of ethics related
factors are then suggested as prerequisites to unlocking human potential in organisations.
In Chapter 11, the nature of trust is presented as well as cost of distrust. This chapter also explains how ethics can facilitate
trust in organisations.
And lastly Chapter 12 ends by exploring the role that ethics can pay in preventing in organisations.
4.2 Dispelling the myths – Chapter 8

There has been different perceptions and scepticism about ethics and the business. Some people believe capitalism
excludes ethics whereas others believe the opposite. It is also questionable to others if it is possible run a successful
business whilst adhering to ethical standards. All these perceptions function as myths that legitimise and/or sustain
unethical business practice, for further explanation, refer to your prescribed book, chapter 8.:
1. Dog eat dog

This myth in business believes that business environment is lonely and a hostile environment. Either you trample on or
you are trampled upon. This mean the interest of others are not considered at all as this may create a loophole and leave
a business vulnerable to be attacked by others. Therefore, being ethical in business is to the detriment of your own interest
and may lead to harm in the business, confirmed by Smith Adam, when he wrote in the Wealth of Nations in 1776, (Smith,
1776 cited in Rossouw and Van Vuuren, 2017).
MANCOSA 52
Example 1
Do you think businesses following this myth will survive long in business?
2. Survival of the fittest

According to this myth, business is a competitive struggle in which only the bravest and toughest will survive. This means
one never should consider the interest of the competitor as this may jeopardise one’s chances of survival. This means one
should do whatever it takes to beat rivals. Again as in myth 1 above, ethics may be a detriment or dangerous as it might
undermine your competition.
Example 2
The survival of the fittest myth challenges business to act in all power to
survive rivals. Elaborate on how compliance to rules and ethics would
make the game a competitive one.
3. Nice guys/girls come second

This myth has a view that one cannot be ethical and also be successful at the same time. It is deemed impossible to be
both ethical and successful in this myth. In this myth, it is believed that ethics comes at a price. For example, certain
business opportunities such as big money tenders may be lost from acting ethically. Therefore, by being ethical, ones
cannot be successful (refer to detail in Chapter 8 of your prescribed textbook).
Example 3
Company AAT (Pty) Ltd is in a manufacturing industry with growing entry levels
into the industry. AAT supplies good quality building materials to household
builders, construction companies who mostly have to bid up for before supply
can be made.
The tenders open 2 months before the actual supply required date. Quotes
and tender forms are completed and submitted for the tender in question. The
most suitable supplier in terms of price and quality is approved and order is
placed together with expected delivery dates and location. These tenders
usually range from R500 000 to R1 500 000 sales in one delivery.
The owner of AAT (Pty) Ltd really wants to out beat everyone for the next
coming tender bid by Chima Constructions as AAT has not been getting the
previous bids. This time, he says he will do everything it takes to win the bid
as he has been too compliant while others may not have been.
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He is considering to make his prices very low for quotation and will increase
them back to normal price when invoicing to Chima Constructions. He says he
will invoice them as overruns from the normal ordered stock as they may hardly
keep record of how many items they ordered and used.
Required:
In attempt to be successful while being unethical, assess the impact that the
unethical action/s by AAT could result into, if these are indeed executed as
planned.
4. Unethical conduct is not serious

In this myth, it is believed that unethical conduct may not really or severely hurt the society at large and may only hurt a
few people. It is also perceived that an unethical conduct might also benefit the society and the economy, for details, refer
to Chapter 8 of your prescribed textbook.
Example 4
Using the facts from example 3 above, where AAT will produce uncompetitive prices?
Required
Identify the damage this action may cause to society.
5. ‘When in Rome, do as Romans do”
This myth justifies unethical behaviour in business environment. It believes that if you found yourself to be located in an
industry or country where unethical conduct is a norm, then you must also be unethical. If you decide to be ethical in an
unethical environment, the chances of the industry changing to join you are very low to zero. Therefore, you must just join
them. If you can see, this myth works on majority rule basis. The majority wins and their way will prevail. The danger with
this myth is that it condones laxness and devalues ethical leadership. This myth also makes one to fail making their own
judgements about what is acceptable and not. For further details, refer to Chapter 8 of your prescribed textbook.
For example, there are certain countries where child labour is practised (worldatlas.com). Companies who employ under
age believe that the ‘child’ wants the job (due to poverty) and also come at a cheaper price. Can you see that this is
justifiable? But what does the law say? The law protects children from exploitative labour practices, from work that is
inappropriate for a child's age, and work that puts the child's education and physical, mental, spiritual, moral and social
development at risk (RSA Constitution, 1996).
MANCOSA 54
6. “All that matters are the bottom line”

Similarly, to Miltons Friedman’s theory in Unit 3, the bottom of this myth is for a business to make profit as it also determines
if the business is successful or not. Anything that impacts the possibility on the bottom line should be pursued and anything
that’ disrupts should be discarded. This ends up a business not being ethical at all as ethics has nothing to do with profit
(refer to Chapter 8 of your prescribed textbook, under heading “All that matters are the bottom line”).
For example, as this myth eliminates all events that impact profit, if it happens that an employee is not performing as
expected, he/she may be dismissed he/she is not productive. Can you see that this myth may also attract other ethical
aspects of compliance that need to be adhered to before someone may be dismissed from work?
4.3 Ethics and corporate reputation – Chapter 9

In Unit 1 Chapter 1, we defined the terms ethics and business. A new term we have been seeing a lot in Unit 2 and 3 is
‘Reputation’. Let us now elaborate this term so that we can understand how corporate/business’s reputation may be
implicated by ethics. We need to also understand why reputation is important in business. If you can also recall, in Unit 3
we also made referenced to the fact that there is a high risk of reputational damage by being unethical.
Reputation
Organisational reputation, as the attributed character of an organisation determines the extent to which stakeholders would
be comfortable to form relationships, business or otherwise, with the organisation. Reputation is built or developed from a
history of interactions. Good interaction will build good reputation and the opposite applies (refer to Chapter 9 of your
textbook, under the heading ‘reputation’).
According to Dallas (2004) cited in Rossouw and Van Vuuren (2017), at a country level, if its reputation is seen dubious,
this will result in less capital flow to the country, weaker currency level and ultimately less business opportunities with
countries abroad.
On the other hand, at corporate level, doubtful reputation will affect the ability to sell goods and services, to attract investors
and to hire talented staff (refer to detail in Chapter 9 of your prescribed textbook, under the heading ‘reputation at country
level’).
It is important to note that reputation is built over years but can be destroyed overnight. Ethics play an important role when
it comes to determining whether a country or corporate has a good reputation. By way of doing business ethically, this
may result in good financial performance ultimately, therefore benefits of being ethical, thereby supporting the theories
that we learnt in the previous chapter. As there are known financial benefits to being ethical, it is therefore important that
ethics is well managed in an organisation to avoid ruining these benefits (refer to detail in Chapter 9 of your prescribed
textbook, under the heading ‘reputation at country level’).
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Example 5
Let’s take, a business owner (Mr X) of a well-known company who was travelling to Dubai for a
vacation and business. The vacation was with his friends who are also business owners, but Mr X
has a potential investor whom he will also meet in Dubai business whilst he is there. They needed
this time off as they had a hectic year and they want some fresh air out of work. Unfortunately, one
of them was caught with an illegal substance and the whole group of friends were asked not to
proceed with the trip but go to the police station. Investigations are still underway.
Required:
Assuming that Mr X had just issued shares to the public, and considering that he will be meeting
with a potential investor, what is your take from the shareholder’s and investors point of view.
4.4 Ethics and human capital Chapter 10

We should understand that technology does a lot in industry. But also, it is also imperative to know that in the world were
technology can do the most, that same technology was created by human potential, therefore creating financial capital. It
is therefore increasingly recognised that it is people or human resources of the organisation that are most likely to supply
the core or important competencies for business sustainability and successful long term financial performance. Surely you
have head people saying employees are the biggest asset of the company.
Have you asked yourself on how these assets can remain appreciative? This is where now we refer to training and skills
development. If employees are not continuously trained to respond to the economic and industry needs, they will stop
adding value and thereafter be seen as expenses to the business. But the responsibility to developing human capital lies
with the employer. Furthermore, employees need to be treated with respect, fairness, honesty, empathy, justice and be
recognised (also referred to as core principles). Therefore, ethics should not be neglect the above five mentioned core
principles.
Ethics was discovered that it actually unlocks the human potential (refer to Chapter 10 of your prescribed textbook for
more detail, under the heading ‘ethics as the key to unlock human potential’). When employees are trusted with what they
do, they can easily apply their minds and therefore enhance from the known. Human capital requires the following three
paradigms in order to function fully, refer to Chapter 10 of your prescribed textbook for more detail under the heading
‘ethics as the key to unlock human potential’.:
- Wellness (mentally positive),
- finding meaning (knowing what to do and when to do it) and
- self-actualisation (the desire to want to become more of what one is)
MANCOSA 56
This chapter also tells you that the psychological contract which is referred to the expectations the business and employees
have on each other is important, in as much as an organisation has certain expectation from employees, employees also
do expect a fair return on the delivered expectations. This may be fulfilled by looking at and aligning personal and ethical
values which can be well executed by the HR management.
Suppose a new employee joins a company where he is not offered training but big bunches of reports to read. Do you
think this employee will quickly become an asset to the company the soonest? Will he/she even add any value to the
duties that he will perform? Does he even know what to do?
The answer to all these questions will be: No. The employee will not be adding value nor be seen as an asset as he will
not be delivering anything as expected for that matter. So the line manager together with HR need to arrange some
training for him on his duties and how they should be carried. Remember organisations differ to organisation as they
are operated differently too.
4.5 Ethics and trust in organisations – Chapter 11

Trust can be defined as an optimistic disposition displayed by a person pursing a goal in taking the risk of relying on
another person for attaining that goal. Therefore, trust is a risk to the trustor (refer to Chapter 11 of your prescribed textbook
for more detail).
Trust has been a topical term in organisations leaders. Low levels of trust in an organisation is of serious concern.
Rebuilding trust can also be challenging to leaders of corporations. Trust is a precondition for the functioning of any social
system. Why are we discussing trust in business ethics?
The purpose of this chapter is to explore the role of ethics in building trust in business (refer to Chapter 11 of your
prescribed textbook for more detail).
The following identified factors have resulted in business leaders losing trust in stakeholders and vice versa which are as
follows (refer to Chapter 11 of your prescribed textbook under the heading, ‘the loss of trust in organisation’:
- Globalisation – markets expanding internationally, dealing with different culture not familiar with. In
globalisation, business dealings are carried with stakeholders not ever seen nor known which poses further
challenges in trusting these stakeholders from interactions engaged.
- Less job security – Over the years, there has been a decline in job security as a result of several factors
such as industrial revolution, globalisation, takeovers, mergers and etc. This has resulted in employees
losing trust in the employer and therefore not delivering to their best capabilities.
- Flatter company structures – volatile nature of working conditions due to changing economical reactions.
Working with different teams on different projects can jeopardise the trust that was previously offered on
the same long working conditions.
- Corporate scandals - scandals in business loses a lot of trust by all stakeholders.
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All of the above mentioned are examples of why there is trust concerns in a business. Trust is thus essential in the business
for various reasons which are fully discussed in Chapter 11, pages 138 -140, which includes:
- Distrust is expensive and therefore one definitely needs to trust all stakeholders;
- Trust facilitates corporations, this may include working in teams;
- Trust unlocks knowledge, a culture to all employees to share useful information is promoted and
- Trust promotes loyalty, if employees trusts each other, good business relationships are created and
promoted.
4.5.1 The role of ethics in building trust

A number of ways in building trustworthiness of a person has been identified. The following factors have a significant
impact to enhance how trustworthy managers are perceived by their subordinates:
1. Openness
Trust contributes towards enhancing the interest of employees and other stakeholders who interact with the
organisation. Therefore, the sense of not sharing information is perceived as uncompetitive and undermining as this
will defeat the purpose of decision making as well. An organisation that does not share information will not be trusted
by its stakeholders. But ethics has enabled a platform to achieve sharing of information amongst employees and
managers.
2. Competence
With trust an organisation can be competent with the right knowledge and skills. Technical and people management
competence is gained as a result of having ethics in an organisation.
3. Integrity
Integrity is associated with a person who acts in an ethical manner. Decisions that are made by an integral person
are most in line with ethical standards and would not be expected to be misleading. The Human Resource department
needs to ensure that ethical candidates are recruited through identification of ethical standards and values that need
to be adhered to.
4. Benevolence
Benevolence is related in actively showing concern, care and empathy for others. When there is trust amongst
employees as well as ethics, employees can take care of each other and not use advantage of the vulnerability.
5. Reputation`
Good reputation is built over trustworthy employees and managers and those whom they interact with over time.
MANCOSA 58
Example, a company whose trust can be built through ethics is one whom conducts at the least the following:
- Very minimal unethical behaviour is reported over time;
- Managers care about their employee’s wellness and work load;
- Managers interactions with stakeholders are ethical and with integrity and respect;
- Ethical behaviour is appreciated;
- Information is transferred and shared with other employees and managers and etc.
4.6 Using ethics to prevent fraud - Chapter 12

Fraud is defined as an unlawful and intentional making of a misrepresentation which causes actual prejudice or which is
prejudicial to another (Snyman, 2002:520 cited in Rossouw and Van Vuuren, 2017). People can be unethical, and some
organisations perceive that everyone is unethical until they proof themselves not to be. Given an opportunity, people can
use it to their own personal benefit while at the expense of an organisation. Due to the latter mentioned, organisation have
developed fraud management to prevent, detect and respond to fraud should this occur. One of the tools implemented is
Ethics. Ethics can be used to prevent fraud, via ethics awareness outlining the rules, values and standards all employees
in and organisation needs to know. Disciplinary action is taken to those conducts unethical behaviour, for further detail,
refer to Chapter 12 of your prescribed textbook, under the heading ‘using ethics to prevent fraud’.
At this level, you should be familiar with the term fraud. For someone to be found guilty of fraud the following five elements
of fraud should be proven: unlawfulness, intent, misrepresentation/deception, causality and prejudice, for further detail,
refer to Chapter 12 of your prescribed textbook, under the heading ‘using ethics to prevent fraud’.
Why do people commit fraud? By substantiating the above reasons why people commit fraud, there are three dimensions
that results in one committing fraud, which are the following summarised:
1. Opportunity
When there is a loophole or opportunity in place for one to commit it, people will most likely take the chance and use the
opportunity at hand. Example could be if one has access to company funds, has a higher position of trust or has capabilities
to commit fraud (skills and knowledge).
2. Motive
People will commit fraud for various reasons which they would not care the danger of result will put them through. At the
time, the reasons seem valid enough to them than the actual penalty when caught. Some people commit fraud over greed,
personal gain and some because they merely can. Some people commit fraud to proof a point of being more
knowledgeable than others. Other people find themselves committing fraud for reasons such as those to take care of
family as they believe that, under normal circumstances, their family would not get the opportunities or reach the goals
they have (also referred to centred motives). Some people also commit fraud from forced situations, be it living conditions,
medical or debts, etc. For further detail, refer to Chapter 12 of your prescribed textbook, under the heading ‘drivers of
fraud’.
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3. Rationalisation
This dimension relates to the justification of all the misdeeds a fraudster has before he commits fraud. This justification or
rationalisation will include the following:
- I’m only borrowing the money and will pay it back;
- I deserve it or work hard to deserve it;
- Everyone else is doing it, etc. For further details, refer to Chapter 12 of your prescribed textbook, under the
heading ‘rationalisation’.
Due the above mentioned reasons on why people commit fraud. Many organisations have developed a fraud risk
management in place to detect, prevent and respond to the above.
These include:
- As prevention method, an entity may train its employees about fraud- fraud awareness programme;
- As detection, an entity can run a data analytics on certain sections such as creditors payments and
investigate on any anomalies.
- As a response, an entity can outline the disciplinary actions that need to be undertaken on each possible
level of fraud, refer to your prescribed textbook Chapter 12, for more examples.
How can now ethics be used to prevent fraud? Refer to more examples in page 156 – 162 of your prescribed textbook.
Ethical awareness initiatives training is implemented where real life or possible fraud examples are given to employees to
illustrate how fraud may exist. This way, they may be limited to think of any unethical conduct resulting in fraud as they will
think that the entity is already tracking such acts. Furthermore, this also may create an ethical environment and culture to
employees and encourage them to whistle blow any unethical notices act. For further detail, refer to Chapter 12 of your
prescribed textbook, under the heading ‘fraud risk management programmes’.
REVISION QUESTIONS
Case 1
Philipos Pty Ltd is one of the largest selling FMCG company (Fast Moving Consumer Goods), that
sells dairy products, processed meat, beverages and also distributes chilled drinks on behalf of
other manufacturers as they recently expanded their fleet.
It was recently discovered that a Creditors Clerk (Mr Funkie) working at the Creditors department
misappropriated some funds though colluding with one of the suppliers Bekani Pty Ltd in the
creditors systems wherein they split the funds after payment has been made to that supplier. Bekani
Pty Ltd is a company that supplies Philipos Pty Ltd with ingredients for use in manufacturing of
beverages.
MANCOSA 60
It was also noted that that the Creditors Clerk used open purchase orders (PO’s) in the system that
was created a few years ago to provide for the services that are still to be offered by the supplier
(Bekani Pty Ltd). In essence Bekani Pty Ltd was paid for the goods ever received but still sent
fraudulent invoices. Through thorough investigation that has been internally conducted, it was noted
that this incident has been going on for 2 years and amount of R120m has been fraudulently stolen
as a result. This amount was stolen in ranges of between R3m -R 5m monthly. The Human
Resource has suspended Mr Funkie as investigation are still going on and in the meantime, the
Financial Manager have a lot of questions on what could have gone wrong in the system and the
way they do business for so much to be lost without being noticed.
Required:
As an Investigation and Risk Management Consultant, you have been approached by Philipos Pty
Ltd to assist in recommending controls, improvements and strategies that the company can put in
place.
4.7 Summary
In this unit you learnt how to myths can change a way of viewing ethical actions. Some of the myths cannot be sustained
whereas some seem to be more practical in business. It is important to note the risks each myth has in business and
stakeholder. You should have also learnt how ethics (ethical and unethical behaviour) can impact companies’ reputation.
This practice is imperative to know as nowadays a business in is built on how business interacts with stakeholder over
years. Reputation through ethics therefore plays a big role in defining who the business is. In this unit, you also learnt how
ethics can also unlock human behaviour, which considered to as a company’s biggest asset as they are the ones who
makes business to run. Furthermore, it was also identified how ethics can assist in building trust within and organisation.
And lastly, you should have learnt that ethics can be used as a tool to prevent fraud in a business.
61 MANCOSA
Example 1
The dog eat dog myth disregards the interest of others in order to be a winner or a survivor in business. Contrary to
applying this myth is, if the interests of stakeholders are not respected nor considered, the business might not survive.
Let us take a look at the below analysis to support this fact:
Suppliers - Suppliers expect their debt obligations to be honoured in time. If this is not fulfilled, less to ultimately no
resources will be provided resulting in no business or delays in manufacturing and selling.
Employees – If employees need are not considered, this is most likely to make them feel alienated and thereafter not
perform as expected and furthermore may try to find loopholes to compensate themselves.
Customers – Customers are reasons why we run a business, they can build it or destroy it. If their concerns or needs
are not considered, the business is less likely to survive.
Therefore, we can conclude that businesses ran on Dog eat dog myth will not be winners. It should also be clear that
to survive and flourish, one has no option other than to respect the interest of those who make up the social network of
that particular business.
Example 2
Competition is a referred to a foul game. And without rules the game would not be fair. Be it in sport, certain rules are
set for the game to be fair, it simple terms, all players of any sport will need to earn the win. Similarly, in business, if no
rules (for example, ethical rules) are set, it will most possibly result in the business industry being unfair. A business is
expected to participate in competition while complying to certain rules and regulations to the game of the business
industry. Therefore, rules and ethics is important for the competition game to remain meaningful. Once again, if rules
and ethics are applied to be competitive, a good reputation is earned thereby also improving the stakeholders interest
in the business.
Example 3
AAT want to execute, namely, by submitting uncompetitive prices for the bid and eventually invoice the true price
through the use false information. Competition in South Africa is governed by certain bodies, such as the Competition
Commission. If AAT is found to be uncompetitive, its reputation will be negatively impacted resulting in loss of future
tenders or being forbidden to participate in bids at all. Furthermore, certain fines may be charged which may negatively
impact the business’s cash flow. As a result, a business opportunity will be given to rivals indirectly.
Other customers, may also lose interest in engaging with the entity with no good business reputation. As a result, the
assessment to being unethical in the context of striving to be successful is rated as high and catastrophic, and may
again result in risk going concern of AAT.
MANCOSA 62
Example 4
If AAT is to be found non-compliant to competition laws and regulation, as it was shown in suggested solution to example
3 above, reputational damage and fines will accrue to the company which may place the company’s going concern at
risk. And if the risk is catastrophic, the company may need to shut down and the employees which are employed by
AAT will be left with no jobs. Furthermore, this will be placing more burden to the society.
Example 5
Shareholder and Investor’s view
Mr X is considering several cash inflow opportunities, but these opportunities may be missed as there is now an
investigation on unethical behaviour. The society at large may now perceive this business man as one of those who
conduct business illegally by also selling illegal substances. Their reputation as a group, and not in isolation to the
person who was caught with them will be ruined as a result. All other business transactions will be questionable and so
also lose loyalty from current customers which they deal with. Those shareholders who were considering buying the
shares may completely change their mind resulting in lost cash inflow which may have been used to grow the business.
With the potential investor, he/she might even change his mind from meeting Mr X as he will not want to associate
himself with someone accused of illegal dealing. Unethical behaviour will result in lost cash inflows as a result.
63 MANCOSA
Unit
5: Ethical Decision-Making
in Business
MANCOSA 64
5.2 Making Ethical Business Decisions-  Discuss who is most suitable to make ethically sound business
Chapter 13 decisions
 Discuss four criteria’s that could be applied to business decisions

to ensure that due care is taken care of when making ethical
business decisions
5.3 Ethical Business Decisions: Executive  Evaluate the impact of simultaneous raise in executive
Pay and Downsizing-Chapter 14 remuneration and downsize of the workforce
5.4 Resolving Ethical Dilemmas in  Discuss the RIMS (Rational Interaction for Moral Sensitivity)
Business-Chapter 15 strategy for resolving moral dilemma
 Explain the three steps of a RIMS strategy
5.5 Employment Equity: Resolving Ethical  Apply the use of RIMS to generate creative proposals that can
Dilemmas- Chapter 16 resolve the deadlock caused by ethical dilemma
You need to study Chapter 13 - 16 of this textbook
(2012) Ethics for Accountants and Auditors. 3rd Edition. Cape Town: Oxford University
Press. (ISBN: 9780199042456)
You need to refer to Chapter 4 and 5 of this book
65 MANCOSA
BUSINESS ETHICS

Definitions and The ethics of Theories one ethics
Distinctions business and business
UNIT 5
UNIT 4
Ethical decision-making in business
Business ethics
Making ethical business decisions
matters
Ethical business decision: Executive pay and
downsizing
Resolving ethical dilemmas
The steps in the RIMS strategy
UNIT 6
Governing ethical UNIT 7
performance Case Studies

6
5.1 Introduction
In the previous units, we identified the ethical dimension of business and also demonstrated that it is important to attend
to this ethical dimension. Driving factors to attending to the ethics of an organisation is to ensure that ethically sound
decisions are made by those who act on behalf of the organisation as this is not well executed, may be at a detriment of
the organisation.
This unit highlights for you the two types of ethical decisions that need to be made in business. Firstly, being to making
ethically sound decisions in business (refer to Chapter 13 of your prescribed textbook) and secondly being ethical decisions
that which focuses specifically on ethical issues that arise in business in the form of ethical dilemmas and how such ethical
dilemma can be resolved (referred to in Chapter 14).
In Chapter 15 of your prescribed textbook, the focus then shifts to how does one resolve ethical dilemmas in business.
The steps in resolving ethical business dilemmas are introduced through the RIMS (Rational Interaction for Moral
Sensitivity) and three basic steps that it consists of are explained.
MANCOSA 66
In Chapter 16 of your prescribed textbook, The RIMS strategy is applied through a case study that deals with employment
equity ethical dilemma emerged in a company. This Chapter shows how the RIMS strategy can be applied to generate
creative proposal to resolve the deadlock caused.
5.2 Making ethical business decisions – Chapter 13

From the previous units, it was made apparent to you that an unethical business is exposed to certain risks that may result
in financial losses, reputational damage, relationship trust damage with stakeholders and so on. In some cases, a business
may fall into a trap of not being ethical from a normal business decision. Therefore, every single business dealing should
be assessed if it is ethical or not as if it is found not to be ethical, it may seem that management deliberately entered into
an unethical business. As a response to this types of blinds spots that may exist, it is good practice for business to develop
an approach to decision making in business that will ensure that business decisions are ethically sound. One way of
achieving this is to develop a decision making procedure that attends to the ethical side of business decisions. Four criteria
can be developed that could be applied to business decisions to ensure that due care is taken of the ethical implications
thereof. The following procedure can be applied to assess if a business decision is ethical:
1. Is it legal?
A decision taken should be legal. When is a business decision deemed legal?
By law, all decisions should be acceptable when they are safe to the society. Some laws are common knowledge and it is
therefore easy to identify if certain behaviours are ethical or not. In cases when the law is not common knowledge or
unclear, it is advisable to get an external legal advice or opinion before a behaviour can be implemented. Remember, the
legality testing alone cannot support that a decision or behaviour is ethical or not as legality does not always equal morality.
This is why we need to look at other three below criterions to make an ethically sound business decision. For further detail,
refer to Chapter 13 of your prescribed textbook, under the heading ‘is it legal’.
2. Does it meet company standards?

Business decisions need to be tested against the ethical standards of the business (so not to deviate away from them),
which are commonly set as company values, in a code of ethics or ethics policy. These documents are documented in
business to prevent irresponsible behaviour. Therefore, any business decisions that is taken should be assesses against
these standards internally. i.e. are we procuring as we are supposed to, are the expense accounts correctly classified?
The trick lies in how detail these documents contain. If less is covered by these documents, it may leave certain decisions
not easy to assess as nothing or little clarity may have been made. So ideally, the policy or code of ethics, should be as
detailed as possible to clearly and precisely be detailed. This is also why the ethics policy or code of ethics should be
made live documents that are updated and amended when necessary.
3. Is it fair to all stakeholders?

As business decisions affects stakeholders, it is also important that when certain behaviours are finalised, be analysed to
see if the interest of affected stakeholders will be happy about them or not. This is to also show some sincere and respect
and fairness to their interests as a business. This test is done through assessing how they may be affected by the decision
67 MANCOSA
through imagination and business putting themselves in their (those affected/stakeholders) shoes. Another way to find out
if the decision will be ideal and ethical to implement will be through stakeholder engagement where in the business interacts
with those that will be affected by the decision in order to foresee how they will be impacted.
4. Can it be disclosed?
This criterion assesses whether you would be comfortable in disclosing, defend or justify to public platforms, the decision
taken. One needs to also assess if privately or alone, by asking oneself if they would feel comfortable in disclosing the
decision to the most significant person in their life. This area also tests how one would feel about the decision.
Example 1
Assume there is a law which says all companies should reduce the sugar content on all sugary
beverages (hereafter referred to as sugar tax), i.e. fizzy drinks, juice, shakes and etc. by 4% sugar
content. Furthermore, assume that this law stipulates that no product should contain more than 10
grams of sugar in a 1 litre bottle and sugar tax imposed on sugar content above 10grams per 1 litre
is R0.30. Also assume that the purpose of this tax is to reduce obesity in South Africa and promote
healthy eating to everyone.
Company ABC sells beverages ranging from fizzy drinks, 100% fruit juice, other mixed juices, and
ice cream. Company ABC had reduced the sugar content on fizzy drinks, but realised that
consumers do not like the product with reduced sugar content as it does not taste the way it was
originally designed. This was confirmed from the 5 months’ sales volume report. The marketing
department also taken initiative to interact with consumers to find out if they want the original sugar
content or happy with the current content. From the stats received, together with that from social
media platforms, it was noted that consumers do not like the current products (with reduced sugar
content). Some consumers said they rather drink water and stop buying any sweetened drink as the
whole purpose has been removed (with reduced sugar content). They also believe that they have a
right to choose and therefore they chose to consume drinks with more sugar content. Management
is now confused on what action to take as the law is against this whereas the society (which the law
is fighting for) wants the original drinks with lots of sugar content. Company ABC strives to adhere
to all laws and regulations governing their business to also avoid incurring penalties. Furthermore,
ABC has a Stakeholder policy which is a live document which is also monitored timely.
Required:
a) Who in this organisation has a final say to determine if the fizzy drinks should be taken to
its original state or not?
b) What process should the person identified in a) look at before a final and Ethical business
decision can be made?
MANCOSA 68
5.3 Ethical business decision: Executive pay and downsizing – Chapter 14

Chapter 14 of your prescribed textbook purely gives a practical example through a Case Study of how to apply the four
criteria that have been learnt in Chapter 13. Remember this criterion is used to assess if a business decision is ethical or
not. Refer to Chapter 14 of your prescribed book.
5.4 Resolving ethical dilemmas in business - Chapter 15

In Chapter 1 of your prescribed textbook, we explored a little bit on ethical dilemmas, which exist when there are two
conflicting moral actions. A dilemma exists where there is a good act done but indirectly harming the interest of the other,
therefore two competing good values. i.e. honesty and loyalty. Refer to Unit 1, Chapter 1 of your prescribed textbook for
revision. A dilemma can only exist where there is contradicting moral choices. Furthermore, in Unit 1 Chapter 1 your
prescribed textbook, we did mention that a strategy should be implemented by an organisation to guide through decision
making for such moral dilemmas. A RIMS (Rational Interaction for Moral Sensitivity) strategy is introduced in order to
resolve such mentioned dilemmas. This strategy can be used for both social and personal ethical dilemmas in the
workplace.
Social dilemmas arise when different people make conflicting judgments on what is considered to be morally right with
regard to a specific situation. Personal dilemmas occur when a person has a conflicting view about what the most
appropriate moral decisions should be in specific situation. The purpose of RIMS strategy is to structure a process of
rational interactions between the rival points of view in a moral dispute that will result in morally sensitive criterions, refer
to Chapter 15 of your prescribed textbook for detailed explanation.
5.4.1 The steps in the RIMS strategy – as outlined in your prescribed textbook, Chapter 15:
1. Generate and evaluate all points of view
The below three criterions should be satisfied considering all points of view in the decision making, it should be:
o a moral argument and not selfish
o clear and intelligible to all
o factually correct
2. Identify implications
o Identify both the positive and negative implications of the different points of view rather than focusing on the motives
of the different points of view.
3. Find solutions
o A solution should be an option which result in negative implications kept to a minimum. This requires participants
to co-operating together in finding solutions.
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REVISION QUESTIONS
Case 1
Henry Peterson started a small Accounting firm in Pretoria 20 years ago. His strong insistence on
professional service to clients and respect for staff served the firm well. After the first few lean and
difficult years of building a steady client base, the first grew steadily to the point where Peterson and
Associates now employs 250 staff members in total.
Although the client base of Peterson and Associate is quite diverse, a substantial member of their
clients is linked to agricultural sector. That is the reason that, a part of their headquarters in Pretoria
and their city offices in Cape Town, Durban and Johannesburg, Peterson and Associates also had
offices in Bothaville, Lephalale and Bela Bela.
With the recent recession in the agricultural sector, their offices in Bothaville, Lephalale and Bela
Bela has started running into financial difficulties. At the last meeting of the partners of Peterson and
Associates, they came to the conclusion that they had no option than to close their offices in
Bothaville, Lephalale and Bela Bela. At the same meeting, they also decided to explore the viability
of opening new offices in Windhoek (Namibia) and Gaborone (Botswana) instead.
Jane Peterson, a senior partner in the firm that her father started, was put in charge of the process
of closing down the three offices. Jane was somewhat overwhelmed by her assignment. She could
still remember all the excitement that had gone with opening the offices in Bothaville, Lephalale and
Bela Bela.
12 years ago, when she was an accounting student, she had never have dreamed that closing down
offices and laying off people would one day be part of her job as a Chartered Accountant. But now
it is, she has to deal with it.
Required:
Apply the four criterion to assist Jane in deciding if the behaviour to be implemented is ethical or
not?
Source: Rossouw, D., Prozesky, M., du Plessis, C. and Prinsloo, F., 2012. Ethics for accountants
& auditors. OUP Catalogue. 3rd Edition. Cape Town: Oxford University Press. (ISBN:
9780199042456). Chapter 4.
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5.5 Employment Equity: resolving ethical dilemmas – Chapter 16

A case study has been provided in your prescribed textbook – Chapter 16 page 190 – 206, on how to apply a RIMS
Strategy to solve an employment equity dilemma.
5.6 Summary
In Chapter 13 of this unit, you should have learnt the four criteria of assessing if a business decision is ethical or not to
avoid risks arising from being unethical impacting the organisation. And in Chapter 14, we explored via a case study,
application of the four criteria leant in Chapter 13. An example of executive pay and downsizing is discussed in this chapter.
In Chapter 15, you learnt further about resolving an ethical dilemma. This are the difficult instances in a business as one
moral decision should be made from the other. A RIMS strategy was introduced to resolve an ethical dilemma. And last in
Chapter 16, another case study example is provided to apply the RIMS strategy on an employment equity scenario.
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Example 1
a) The decision on whether or not the company needs to go back to its final state is collective decision by those
involved in developing the product who are, Marketing Manager, Quality Manager, Financial Manager, Chief
Executive Officer and the Board of Directors.
b) To make an ethical business decision. There are four criteria that need to be followed to avoid a decision being
unethical thereby also posing certain risks to the company. The decision is question is if they can manufacture
and sell the fizzy drinks at their original state, knowingly harming consumer’s health.
Company ABC management need to look at the following:
- Is the decision legal?

The law says all manufacturers of beverages should reduce their sugar content by 4% to avoid the society suffering
from obesity. The law’s decision is such that to protect society. In this case, the society wants to the fizzy drinks to be
reinstated to its original sugar content as they buy them for hat. They believe that no one should decide on their health
on what to eat and not so they have a right to choose on what they want. Consumers are aware of the danger of
consuming too much sugar and are happy with it. It can be argued that the consumers who want less sugar content
will definitely buy drinks with such and those that want more sugar content will buy that as well. There is a variety of
products from which consumers can choose from including different sugar levels.
It should be noted that alone, this criterion cannot be a decider but the above is worth noting for decision purposes. If
ABC decided to reinstate the products, then penalties (sugar tax) will be incurred.
- Does it meet the company standards?

Company ABC main goal like any other company is to grow in business from making profit. Assuming that Company
ABC has a code of ethics and ethics policy, this would one way or another address that laws and regulation should
be adhered to. This decision will therefore be against the law. On the other hand, the company has a stakeholder
policy which is most likely to address that all stakeholders need to bed considered and fulfilled. In this case, the
consumers are asking for the fizzy drink to go back to its normal state as their need. Looking at the stakeholder policy,
the company will be in line with its policy should they decide to reinstate the product to its original state.
- Is it fair to all stakeholders?

The affected stakeholders in this scenario is the consumers and the law. Consumers want something different to that
of the law. This decision will be fair to consumers as it is what they need but the law is against the idea as it is worried
about people’s health.
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- Can it be disclosed?
Publicly, the decision is triggered from the consumer’s side and therefore it will be easy to disclose it should be it be
decided that the company will manufacture the fizzy drinks to its original state. The only penalty that may arise is
penalties through sugar tax. Privately, if each individual is to evaluate themselves in terms of the morality of this
decision, they will most likely feel comfortable about it as the dangers of consuming the product is well known to the
society and increased prices will be incurred by consumers as well to cater for sugar tax.
Conclusion
From the above, the harm that the fizzy drinks can result into are well known by the consumers even though the law
is protecting them against that by imposing a sugar tax. The legality criteria can therefore be bypassed as the other
three criteria are met and the decision can be disclosed. Therefore one can conclude that the business decision is
ethical.
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Unit
6: Governing Ethical Performance
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6.2 Ethics and Corporate Governance-  Distinguish between ethics of governance and governance of
Chapter 17 ethics (in terms of the Fourth King Report on Corporate
Governance for South Africa 2016, also referred to as King IV)
6.3 Leadership Commitment- Chapter 18  Discuss the role that leaders have to play in building an ethical
organisational culture
6.4 Governance Structures- Chapter 19  Discuss the roles and responsibilities of governance structures
and management structures in organisational ethics
6.5 Ethics Management Structures-  Analyse ethics management structures

Chapter 20
6.6 Ethics Risk a Strategy- Chapter 21  Describe ethics risk and opportunities
6.7 Code of Ethics- Chapter 22  Understand the concept code of conduct and discuss its
purpose in an organisation
 Discuss the nature and dimensions of codes of ethics
6.8 Institutionalising Ethics- Chapter 23  Discuss appropriate ethics management systems
6.9 Reporting and Assessing Ethics  Discus the appropriate reporting and assessment tools on
Performance- Chapter 24 business ethics
6.10 Organisational Ethical Culture- Chapter  Evaluate how organisational culture effects thought and
25 behaviour
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You need to study Chapter 17 – 25
(2012) Ethics for Accountants and Auditors. 3rd Edition. Cape Town: Oxford University
Press. (ISBN: 9780199042456)
You need to refer to Chapter 9 of this book
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BUSINESS ETHICS

Definitions and The ethics of Theories one ethics and
Distinctions business UNIT 4
business
Business ethics
matters
UNIT 5 UNIT 6
Ethical decision- Governing ethical performance
making in business Ethics of corporate governance
- Corporate governance: Perceptions and approaches
- The prominence of corporate governance
- Framework for the governance of ethics
Leadership commitment
- The nature of leadership
- Roles of the CEO
- Leadership commitment
Governance structure
- Roles and Responsibilities of the governing body
- Roles and responsibility of the ethics subcommittee
Ethics management structures

- Ethics management structure and roles
Ethics risk an strategy

- Risk management
Code of ethics
- The format of the code
- The content of the code
Institutionalising ethics
- Proactive ethics management system
- Reactive ethics management system
Reporting and assessing ethics performance

- Reporting by the ethics office to the ethics committee
- Independence assessment over ethics performance
- Reporting to external stakeholders
Organisational ethical culture

- What is a corporate/organisational culture
- Characteristic of an ethical organisation
- Leadership and ethical culture
- Assessment of ethical organisation culture
UNIT 7
Case Studies

7
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6.1 Introduction
The focus of this unit is on the process of governing and managing the ethics or a company at the business level. Refer
to your prescribed textbook.
In Chapter 17- Ethics of governance and governance of ethics is introduced as well as governance of ethics from a
Corporate Governance for South Africa’s perspective (IoDSA, 2016). Corporate Governance is also referred to as King IV.
The term King IV may be predominately used throughout this unit.
Ethics of governance – this refers to the ethical obligation of companies to be responsible members of the societies where
they operate.
Governance of ethics – refers to the process of directing, implementing and overseeing the ethics of a business.
Chapter 18 will discuss the role of leaders in business have to play in building an ethical organisational/business culture,
with Chapter 19 and 20 exploring the roles and responsibilities of governance structures and management structures in
organisational ethics respectively.
Chapter 21 then focuses on the analysis of ethics risks and opportunities which further assists in developing an ethics
management strategy.
From the ethics analysis learnt in Chapter 22, we will discuss the nature and dimensions of code of ethics, as the
interference between organisational ethical values and ethical behaviour. It reflects on how the code of ethics alone cannot
be deemed sufficient but codified ethical standards needs to be institutionalised. Chapter 23 discusses the management
systems on ethics institutionalisation.
Further from institutionalisation of ethics, that will be learned in chapters 22 and 23, Chapter 24 introduces King IV
requirements on integrated sustainability reporting requirements, as well as the process of internal and external reporting
that needs to be done on ethics performance of the organisation.
And lastly Chapter 25 of this unit will introduce less visible but crucial aspect of an ethical business culture in the
governance of ethics.
6.2 Ethics of corporate governance – Chapter 17

King IV states that “The governing body should lead ethically and effectively”. In this chapter you will learn the relationship
between ethics and corporate governance. Firstly, we will introduce the approaches to corporate governance and their
ethical dimensions. Also you will learn about the ethics dimension of King IV and discuss the requirement for social and
ethics committee. In this chapter an introduction of a comprehensive framework for the governance and management of
ethics is made.
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6.2.1 Corporate governance: Perceptions and approaches

There are significant differences in how countries perceive corporate governance and how to approach corporate
governance. In order for you to understand the different perceptions and approaches, see below distinction made that
apply in the field corporate governance:
1. Internal and external corporate governance
The distinction between internal and external corporate governance revolves around where the control over
corporations is situated. When the control, responsibility and direction of corporate resides with the board of directors
and executive, then this is referred to as internal corporate governance. In this internal corporate governance system,
management is responsible for determining the strategic direction and the ultimate performance of the company. The
board needs to ensure that the management of the company pursues and implements the strategic direction
effectively. Furthermore, the board needs to ensure that the company is governed in a fair and responsible manner
in accordance with legal, professional, societal and organisational standards that a company is expected to adhere
to. With King IV, the process for internal corporate governance is described under four responsibilities to achieve four
outcomes shown below. All these responsibilities lie with the governing body (also referred to the board):
 Strategy – the governing body is responsible for setting a strategy for the organisation
 Policy – they need to ensure that there are policies in place to guide the organisation in the execution of its
strategy
 Oversight – They need to ensure oversight over performance of the organisation to determine if it is in line with
its strategy and policy
 Disclosure – they need to report and disclose to the stakeholder’s the organisation’s performance
All the above mentioned responsibilities are to fulfil the mentioned below outcomes
 To promote an appropriate ethical culture
 To sustain good performance which creates value for stakeholders
 To ensure an effective control environment which also ensures that risks are identified and dealt with
 To ensure that the legitimacy of the organisation depicts good reputation and trust by its stakeholders
And when corporate control resides or locates with the external regulatory bodies and government, this is therefore
referred to external corporate governance. In this system, the corporate control is exercised by regulatory institutions,
societal norms or eth market itself. The above mentioned then determines the playing field on which an organisation
pursue the corporate objectives. External corporate governance is often mandatory and corporations that do not abide
by the set of rules and standards run the risk of being penalised. When the corporate is run by societal norms,
corporation also need to heed to the values set by society. However, this may not be mandatory to comply than when
the regulatory sphere governs the organisation. It is important to thus note that disrespecting the societal norms may
disadvantage or detriment the company’s performance and survival. Another external control arises through mergers
and acquisition by the market. The low performing companies run a risk of being merged with or acquired.
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2. Shareholder and stakeholder approaches to corporate governance

The difference between the two approaches to corporate governance depends on the question for whose benefit
should business be governed.
When corporate governance is focused shareholder’s interest only, the internal or external corporate governance can
be characterised as shareholder oriented. This focus on interest of the shareholders has thus been referred to as an
exclusive approach to corporate governance. This latter holds that managers are the agents of shareholders and are
obliged to act in the best interest of the shareholders.
Approaches that focus not only on shareholders’ interests but also those of stakeholders are referred to as stakeholder
oriented or inclusive models of corporate governance. In this approach, the interests of all various stakeholders to the
business are protected. Stakeholders as explored in the previous units, include customers, consumers, suppliers,
shareholders, government, employees, communities and etc. In this approach, corporate governance is defined as a
system that ensures that the board and management of corporations strike a balance between the interest of their
various stakeholders and the interest of the company.
3. Mandatory and voluntary corporate governance

Some corporations may be compelled to abide to the standards of corporate governance and some chose to voluntary
apply the corporate governance standards. When companies are compelled to abide to corporate governance, this
dispensation is mandatory. Failure to adhere to such standards may result in sanctions like fines for corporations,
imprisonment of executive managers or director, and prevention from listing or trading on stock exchanges. For any
mandatory corporate governance to be effective, corporate laws and regulations need to be made clear and
enforceable.
A voluntary approach is practical where preconditions lack in developing and emerging economies. In this approach,
only best practice principles and recommendations are advised to be followed. Companies will therefore choose
whether and how they wish to apply the recommended principles at their own discretion.
4. The accuracy of governance and the governance of ethics

Ethics are associated with corporate governance in two ways. The first being the ethical values and principles that
underpin a specific corporate governance regime. This dimension is hereafter referred to as the ethics of governance.
The second is the way in which corporations are expected to manage their ethics. This is hereafter referred to as
governance of ethics.
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6.2.2 The prominence of corporate governance

The leading factors to corporate governance was driven by the success and failures of modern corporations. Corporations
are not victims of external conditions that have imposed corporate governance standards upon them, they have also
created the conditions for the generation of these standards. The following sections outline a number of important factors
that have contributed to the current prominence of corporate governance.
1. Trust in corporations
2. Investor demand
3. Stakeholder activism
4. Social influences of corporations
5. Risk management
6. Sustainability
6.2.3 Corporate governance in South Africa

The history of corporate governance in South Africa is closely linked with the King Report on corporate governance of
South Africa. The first King Report was published in 1994, the second King Report was published in 2002, third King
Report in 2009 and fourth King Report was released in 2016. Furthermore, Companies Act of 2008 came into effect in
2011. The Companies Act and its regulation introduced a new and important development in corporate governance.
Certain companies are now required by law to have social and ethics committee as a statutory subcommittee of the board.
This committee is responsible for governance of ethics.
The following sections provide a broad outline of ethics and governance according to the King IV Report and the
Companies Act.
1. Corporate governance in King IV

King IV focuses on the internal level of corporate governance. You may recall that in the previous units, we discussed how
management can best manage ethics in a company to remain sustainable or profitable. Furthermore, you should be able
to remember that despite the theories that were raised on when an organisation needs to be ethical, being ethical by doing
what is good to self and other was the viable option. This option considers the society in which the organisation is operating
in as well as looking at the interests of all internal and external stakeholders.
With King IV, the governing body (directors), have a discretion to choose which principles and recommendations to follow
to direct and control the business. Therefore, corporate governance under King IV is voluntary to those companies that
are not compelled to adhere to it. In the voluntary application, King IV requires that a principle applied should also be
explained to the stakeholders on how King IV principles were applied, opposed to previous King Reports where in a
company applied or explained why certain principles were not applied.
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In the King IV Report there is a very clear link between corporate governance and ethics. The first outcome that King IV
Report is “Ethical culture”, followed by good performance, effective control and legitimacy. These four outcomes help in
the creation of a sustainable business. Therefore, ethics takes priority in fulfilling the latter. This also means that the
governing body, audit committee, risk management and internal audit should all contribute to the development of an ethical
culture in an organisation. Good corporate governance can never be divorced from ethics. The governing body should
ensure that ethics of the organisation is actively governed. This can be done through setting an ethics tone and ethics
examples by the governing body. Furthermore, for an ethical culture to be maintained, a process of manging ethics is also
needed. This will be the ethics management process which consists of the following:
 Ethics strategy
 Ethics risk assessment
 Code of conduct and ethics policies
 Familiarising stakeholders with ethics standards of the organisation
 Monitoring adherence to ethics standards
 Providing a safe-reporting mechanism to report unethical conduct
 Assessment, monitoring and reporting ethics.
Also Refer to Chapter 17, page 222 – 223 for characteristics that the members of the governing body should exhibit,
which are the following:
 Integrity
 Competence
 Responsibility
 Accountability
 Transparency
2. Companies Act
The Companies Act compels all listed companies, state owned enterprises and all other companies with significant public
interest to have a social and ethics committee as a standing statutory subcommittee of the board of directors.
The purpose of the committee is to monitor the company’s impact on its immediate environment, and to report that impact
to the board and to shareholders at an annual general meeting. There are four groups that need to be monitored and
reported which are the following:
 Company’s impact on economy – economic development, Black economic empowerment and prevention of
corruption
 Company’s impact on employee – health, safety and development, promotion of employment equity and decent
work
 Company’s impact on society in which it operates – impact on public health, safety, consumer relations and
community development
 Company’s impact on natural environment
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Refer to the Chapter 12, page 225 on the mandate of social and ethics committee per the Companies Act of
2008.
6.2.4 Framework for the governance of ethics

The governance of ethics in any organisation requires a comprehensive governance framework and management process
to ensure that ethics are embedded in the corporate culture of the organisation. The framework of governance of ethics
will consist of the following elements:
1. Leadership commitment – Management and board to set an ethical tone
2. Governance structures – the board and the social and ethics committee should take responsibility for directing
and overseeing the ethics of the organisation. A clear mandate should be available.
3. Ethics management process – to ensure that ethics is properly managed. The process consists of the following
five aspects:
 Ethics risks assessment – ethics risk and opportunity assessment to understand ethics profile.
 Strategy – a strategy and plan must be formulated, informed by the ethics risk profile of the organisation
 Code of policies – develop a code of ethics to ensure that identified risks are addressed
 Institutionalisation – the ethics management strategy must be implemented to ensure that all contracted
stakeholders are familiar with ethical standards
 Monitoring and reporting – the implementation of ethics should be monitored regularly and reported to
management and governance structures
4. Independent assessment and external reporting – there should be an independent review by an external party
such as Internal auditing. The ethics performance should also be reported in a sustainability and integrated
report and disclosed to stakeholders.
6.3 Leadership commitment – Chapter 18

Building an ethical culture in any organisation starts with the leadership of the organisation. For successful ethical culture
to be created, an organisation needs a clear and strong leadership commitment. It is highly unlikely that that organisation
will acquire ethics mind-set or ethical cultures if their leaders display lack of commitment or fail to demonstrate the required
ethical beliefs, practices and conduct. Chapter 18 explores on the type of leadership that is required to promote and ethical
culture.
6.3.1 The nature of leadership

Who are leaders in the organisation? Organisational leaders are those employees who have power to influence others in
the organisation. As Leaders, they will require a level of decision making that may significantly influence organisational
strategic, objectives and outcomes. You should understand that not all managers have an influence on decision making
and not all managers are therefore leaders. Leadership roles can be performed by those in management position but also
by those who are not in managerial positions. See below a leadership definition by (Ciulla, 2004:16 cited in Rossouw and
Van Vuuren, 2017)
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“Leadership in not a person or a position. It is a complex moral relationship between people, based on trust, obligations,
commitment, emotion and a shared vision of the good. Ethics lies at the heart of all relationships and therefore at the heart
of relationships between leaders and followers”. Therefore, leaders who have good relationships and is trusted by
employees will highly influence employees to follow anything they believe in.
In their relationship with internal and external stakeholders, leaders are regularly confronted with challenges which require
ethical action.
6.3.2 Roles of the CEO

The CEO a part of the governing body per King IV, is also required to have leadership responsibility as defined above and
therefore act ethically. The CEO responsibility is to guide the organisation and should have the following King IV
characteristics to guide the organisation ethically:
 Integrity – working will honesty
 Competence – must be qualified and competent to deliver as a CEO, have the right skills.
 Responsibility – must be responsible and take ownership
 Accountable - must be accountable for all outcomes and any falls in achieving these
 Fairness – He should not be biased but act with equity and fairness with his subordinates
 . Transparency – Should disclose all business matters to respective stakeholders
The role of the CEO is to an ethical leader of the organisation, a symbol of ethic not only to the external but also internal
stakeholders. The CEO is the one who directly portrays the ethical character, reputation and credibility of the organisation
to the most of its stakeholders. It is the responsibility of the CEO to influence ethical behaviour. He/she cannot do this in
isolation but with the assistance of the social and ethics committee. A CEO can thus be an ethics champion to ensure that
an ethical culture is created and promoted.
6.3.3 Leadership commitment

As learnt above, the CEO must work with other executives in order to promote an ethical culture. In order to fulfil executing
an ethics management, all employees, regardless if they are in management position, they have a role to fulfil in creating
good apples in the barrel. The following nine dimensions (the 9 C’s) of obligations are explained to demonstrate leadership
commitment:
1. Care
- Reflecting to Chapter 1, you learnt on the dimension of self, good and other. This also demonstrates care. A
balance should always be maintained by also taking note of the other stakeholders interests and only those of
the organisation. By so doing, one will be portraying leadership commitment. Caring makes it easy to identify
potential negative ethical consequences. It is known then when an action could lead to harm. Under this
dimension, empathy is also exercised.
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2. Consciousness
- To establish and contribute to an ethical organisation, leaders therefore require to be willing and also firm
consciousness. The only way to commit to ethics would be to understand and believe in the fact that business
ethics matters. All the benefits to having ethics as learned in previous chapters, motivates a company to being
ethical. Examples of these benefits are such as, unlocking human potential, how it builds corporate reputation,
how ethics can build an organisation’s trust with stakeholders and etc. Consciousness also requires sensitivity,
knowing and communicating the values, and ethics related matters.
3. Competence
- Not all leaders are competed to lead a business. You should recall that earlier in this chapter, we addressed the
characteristics of a good leader (CEO), and one of them is competence. Similar to that, every leader should be
ethically competent and be able to distinguish between what is right and wrong. They must have a skill to make
and ethical decision. To achieve leadership commitment competency, a leader must also acquire intellectual
knowledge and skills so that they may be able to make proper ethical analyses and judgements when necessary.
They also need to acquire a way of thinking about ethics in business so that they may be ethically competent,
refer to table 18.1 of your prescribed textbook, for dimension of an ethics competence, for further explanation on
a competent ethical leader.
4. Conversation
- Leaders gain more support for ethics related initiatives if they also talk about ethics and encourage others to talk
about it. Ethics talk refers to conversation about ethics, and not talks about confronting others about what they
do wrong. It is with ethical talks that can solve ethical dilemmas. Ethics training for creating awareness assist in
sufficient creation of ethics management as a result. The main objective of a leader to create a platform of
conversation is for employees to be safe and make employees comfortable to ask ethics related questions. The
latter can go a long way in building an ethically sustainable environment.
5. Courage
- Leaders and employees must stand for what they believe in at all times. Certain situations may be difficult for one
to demonstrate courage. It can sometimes be in cases when they are not certain if the decision is ethical or not.
Nonetheless, an important consideration is for leaders of the business to set a tone for displaying courage when
required.
6. Choice
- Besides the fact that leaders and employees come from different backgrounds, unique cultures and different
exposures of education, when they are employed in an organisation, they have however an obligation to meet
organisational ethical standards. Good leader skills will be knowing which the choice is right even in an ethical
dilemma.
7. Creativity
- Creativity in solving ethics challenges or making ethical decision is required by business leaders. Ethical
leadership requires ethical imagination to enable the leader then to determine various different options of
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response to ethics challenges faced. Creativity also lies in evaluating the feasibility of various options and chose
the most viable and suitable option for the given incident.
8. Consistency
- A leader should always act in the same predictable and ethical manner over time. This means that the policies in
place should also be applied consistently and not be biased. Therefore, same violations to ethical standards
should experience same punishment to ensure consistency. As a result, strong ethical leadership is required to
ensure consistent ethical standards applications at all levels and across all units in the business.
9. Congruence
- A strong ethical leader should also ensure that ethical decisions achieve set and developed business goals and
strategies.
Example 1
Treat the below scenarios in isolation
a) KBBC has recently introduced a whistle blowing platform. This system is always
presented the new employees by the ethics committee, together with ethics documents
for reflection. This system is used to report any unethical behaviour that is noted in the
company. This platform is also open to the external people who may note anything that
the KBBC’s employees are doing outside the company in the name of KBBC. The ethics
officer gets notifications of everything that has been reported in the system and action
such as investigation conducted as a result. From the action taken, the response is then
sent back to the reporter on what has been done. To also ensure that they can trust the
system. All reports from unethical conducts received are presented to employees
monthly as a form of further educating then on what is deemed ethical and not.
b) 1 year ago an employee Mr A at head office conducted theft on stationery. From

investigations conducted, it seems that this employee could have been stealing the
stationery for a long time. The stationery includes calculators, pens and books which the
company for employees to use in their daily operations. Disciplinary action was taken
against the employee and payment of the known value of stationery stolen was deducted
from Mr’s A salary and a final warning was issued. Recently, there was an employee Mr
B from the manufacturing site who was found in possession of expired stock in his bag.
The employee was dismissed with immediate effect from the assumptions that the
employee has a potential to take even more high valued stock.
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c) The ethics committee of CCC limited consists of a Chartered Accountant, a Registered

Auditor, Internal Auditor by profession.
Required:
From the scenarios above, identify which of the 9 C’s (dimensional obligation) to ethical
leadership is or not portrayed.
6.4 Governance structure – Chapter 19

In Chapter 18, you learnt that building an ethical organisation requires a leadership commitment. Alone leadership
commitment cannot sufficiently ensure that ethical culture is established or maintained in an organisation. This chapter
explores the roles and responsibilities of the governance structures in building and maintaining an ethical culture in an
organisation. We will specifically look at the roles and responsibilities of the governing body and the subcommittees
responsible for governance of ethics.
6.4.1 Roles and Responsibilities of the governing body

1. Setting an ethical tone
- In line with King IV, building an ethical culture requires that the governing body individually and collectively exhibit certain
key characteristics to their mandate of leading ethically and effectively. The characteristics referred to are the same as
mentioned above which are; Integrity, Competence, Responsibility, Accountability, Fairness and Transparency. The
governing body is responsible to ensure that members are aware of their individual ethical responsibilities towards the
organisation through i.e. induction programme, verbal or formal reminder and etc. Where there is conflict of interest, the
member should be reminded or as pledged in the code of ethics, that the member will always act in the best interest of the
entity.
2. Governing ethics performance

- In line with King IV, besides setting an ethical tone as mentioned above, the governing body also have the responsibility
of governing the ethics of the organisations. Governance of ethics can be done through steering up the organisation to a
transformational change that will embed ethics not only in the identity of the organisation but also on the objectives and
daily operations. The governing body also needs to oversee ethics management to ensure that it is correctly executed
thereof.
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6.4.2 Roles and responsibility of the ethics subcommittee

The role of the subcommittee is to advise on the four governance of ethics responsibilities which are as follows:
 steering and setting the strategic direction for ethics
 approving ethics policies and planning
 overseeing and monitoring ethical performance
 ensuring accountability for an ethical culture in the organisation.
1. Mandate of the sub committee

- The subcommittee needs to be formally mandated by the board to oversee the governance of ethics. This is done in a
subcommittee charter or terms of reference.
2. Composition of the subcommittee

- Companies Act prescribes that the Social and Ethics committee have a minimum of three members with at least one
member being a non-executive and the other two being executive. But King IV recommends that the social and ethics
committee be comprised of a majority of non-executive director to avoid members of the organisation reviewing
themselves.
3. Reporting to and by the ethics subcommittee

- The social and ethics committee should drive the reporting process of all ethical matters identified in the period. This
must be reported to the board of directors and other subcommittees. For an effective reporting, the social and ethics
committee should distribute the same format to note all ethics related matters.
6.5 Ethics management structures – Chapter 20

An organisation implements an ethics committee of ethics structures such as social and ethics to ensure that oversight of
ethics management.
So far, you have learned that an ethical culture is created from leadership commitment, which then is established and
maintained by the governing body. In this Chapter, you will learn about ethics management, how is ethics managed to
ensure that an ethics culture is well maintained in an organisation?
It is important to note that an individual’s integrity, cannot really be managed. But ethics management is designed and
implemented by a variety organisational role players that formally and informally influence ethical; behaviour.
6.5.1 Ethics management structure and roles

Who are the role players of ethics management? Ethics management influencers role players can be formal structure (by
appointment) and informal structure.
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The ethics champion and the operational ethics committee

An ethics champion who oversees and ensures sufficient ethical culture builds a well-managed organisation. They ensure
that ethics momentum in the organisation is well initiative is maintained thereof. Usually the ethics champion is a member
of the executive team and ideally the champion is the CEO.
You should also recall that it was addressed in Chapter 19 that a company should establish a social and ethics committee.
Further to this, there needs to be an operational ethics committee who then is responsible to design and implement the
approved organisation’s ethics strategy (also known as the Ethics Management Plan – EMP). This committee is further
responsible to report on the progress of the implemented EMP. The operational ethics committee should meet each
quarter, therefore, four times a year to report on all ethics related matters. Agenda points to discuss included, ethics risks
exposed to, how certain ethical issues were managed, ethics control, investigation report etc.
The Ethics office and capacity needs of the ethics office

You should remember that a role of a CEO and ethics champion (if different to the CEO) is to create an ethical organisation
over time. This means they should also provide necessary resource to creating such an environment. It is therefore
advisable for an organisation to have an ethics office, which is full time, who will deal with day to day ethics issues. This
office is also responsible to deal and address exclusively ethics queries and any ethical matters arising. The ethics office
is staffed with various members including the ethics manager or ethics officers. In most companies, the office which is
supposed to work with only ethics related matters are also responsible for other offices such as human resource, risk
management and etc. This then limits the ethics office to be fully functional and therefore fulfil at full capacity, ethics
management. Though with some organisations, an ethics office is slowly growing recognition and employees utilise this
office for its purpose.
Responsibilities of an ethics manager

As outlined above, an ethics office requires there to be an ethics manager (also known as an ethics officer). The main
responsibility of the ethics manager is to be the head and manager of the ethics activities from a formalised role
perspective. For noting purposes, in other organisations, and ethics manager is referred to as ethics officer, ethics and
compliance officer or integrity manager or officer. The ethics manager therefore, plans, coordinate, implement and control
strategies, structure and systems required to monitor and report on ethics performance. What is it to report about in order
to assess if the ethics performance is planned? The ethics manager should compile a report showing ethics risks and
opportunities so that an assessment of the ethics performance is evaluated. The ethics manager should also draft an
ethics strategy and ethics management plan for review and approval by the board ethics committee. By so doing, this
indicates whether or not the ethics objectives that have been set by the organisation have been met or not. Once approved,
the ethics office can work accordingly. From a review that will be conducted by the ethics committee, there may arise a
need to update the ethics management plan, ethics policy and standards and code of ethics, which the ethics manager
will be responsible to coordinate.
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See below some of the responsibilities an ethics manager (as outlined in Page 255 of your prescribed textbook) has which
will also be addressed in Chapter 23:
 To design and implement a communication strategy for ethics
 Introducing criteria for the assessment of counterproductive behaviour in the organisation’s recruitment and
selection process
 Ethics training for new and existing employees, integrating ethical behaviour and decision making into
organisational performance
 Providing advice and guidance on ethics relate matters to the board, management and employees
 Ensuring the organisational integrity of policies, procedures and administering the implementation of ethics
related policies and enforcing the code of ethics by means of a disciplinary when required
 To market the ethics functions and its project to the rest of the organisation
As mentioned above, the ethics officer or manager needs to be a full timer to manage day to day ethics functions. The
ethics manager will require certain skills and knowledge also referred to as to capabilities: The following capabilities are
therefore required, refer to detail on you prescribed textbook, page 256:
 Management capacity
 Policy development capacity
 Training capacity
 Communication capacity
 Administrative capacity
 Advisory role capacity
 Data management capacity
 Investigative capacity
Other role players to support an ethical culture

An ethics manager on its own cannot fully fulfil all the ethics mandate for in the business. This office will require an active
support of other specialist staff and/or line managers in the organisation. The following are the support activities that an
organisation should most likely have and their main functions which integrates to ethics management, refer to Pages 257
– 261 of your prescribed textbook for detailed responsibilities they perform and contribute to a good ethical culture and
ethical management.
 Company secretary – Ensures that all principles as outlined in King IV are on a board agenda
 Risk Management – collaborate ethics risks and opportunities into the risk report
 Internal audit – perform a review or conduct on oversight of ethics process in place and advise on any
recommendations per King IV and Companies Act
 Forensic – Compiles a fraud risk register
 Legal – Ensures that ethics strategy and plan align to relevant laws, such as the Bill of rights, United Nations and
Sustainable Development Goals, etc
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 Compliance – advise the ethics office about certain standards that the company need to adhere to
 Corporate communication – Through campaigns, this activity will provide access to all relevant parties about
ethics
 Corporate reputation – assess the impact that an organisation is making from decisions taken, and evaluate and
advise of any damage done to the external stakeholders from the decision taken
 Human resource management – Ensures that they employ ethical candidates, provide training an awareness
about ethics, etc
 Employment relations – ensures that employment conditions are per the labour laws and codes and therefore
ethics not oppressing these laws
 Organisation development – promotes alignment of ethical culture to the business culture
 Employee wellness – Provides support to employee wellness (health, finances, interpersonal skills, etc.) to also
encourage productive behaviour
 Procurement – Manages the declaration of employees’ conflict of interest, develop code of ethics for suppliers,
provide training to procurement staff and etc
Line management
From the support activities mentioned above, these all needs line management to implement as per the ethics governance
framework, ethics policy and code of ethics. The line manager therefore acts as a custodian or assistant to the ethics office
or ethics manager in terms if implementation.
Example 2
Treat the following scenarios in isolation
a) An employee under the buying department did not obtain three quotations as required by
the company. As a result, the company was not buying from the most competitive supplier
and therefore resulted in more cash flow outflow as well as compromise in quality.
Who is the most suitable support activity to address this issue and how?
b) SBC dairy manufacturing company has been on the news for an infection outbreak on the
cheese they sell. The cheese has been identified to have infected about 200 consumers
across South Africa so far. The company is still finding a way to resolve this matter as they
do know that it is not ethically right as the interests of others have been negatively
impacted.
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6.6 Ethics risk a strategy – Chapter 21

Ethics is for the organisation and for the people within and outside of the organisations. But one should understand that
ethics within an organisation can be better managed than ethics outside the organisation. On another note, employee’s
personal beliefs and behaviours cannot be changed as the company will have less or no power to do that. You should
remember that ethics is about barrels and apples and therefore ethics management will be about managing the barrel and
apples as a result. Chapter 21 of your prescribed textbook focuses on determining ethics risks/assessment. This is the
first step to ethics management process. This chapter also explores on mitigating to the identified risks.
6.6.1 Risk management

Risk refers to any event that may negatively (also referred to as a downside risk) or positively (also referred to as upside
risk) impact the company. In the previous chapter on your prescribed textbook, we also highlighted that risk management
is a supporting activity to ethics management.
Ethics risk
What is ethics risks, this is defined in the following two ways (refer to Chapter 21 your prescribed textbook for further
details):
 Those that undermine the good in the ethics definition triangle (of good, self and other)
 And those that disturb the balance between the interest of the business and of the other.
An organisation’s ethics risks should be assesses both internally as well as externally. These risks are to be properly
accounted for as well as be reported on to the board/governing body as shown in the previous chapter. These risks will be
further reported to the other stakeholders on what they perceive to be the most significant risks in all their specific business
operations. Not only risks should be reported but also the strategies and control measures taken to mitigate the ethics
risks identified.
An organisation needs to report on the ethics performance of the company as outlined in the earlier chapters of the
prescribed book. The ethics performance can be reported by demonstrating through the internal and external reporting
that it has assessed its related ethics risks. As learnt in previous chapters, business ethics should not harm or avoid to
harm the interest of others. This was addressed through the three central concepts of ethics of good, self and other. This
brings us to the fact that even when a business is reporting to internal and external reporting, the report must be balanced
in terms of, it must not harm the interest of any stakeholders affected. When accounting these ethics risks, this should be
a reflection on how the business has prevented the ethics risks as well as how it balanced those ethics risks to show that
stakeholder’s interest was taken into account. The reporting should only benefit the business but also the interest of those
affected in the business operations. Therefore, when accounting for ethics risks, an organisation should also estimate the
implications the identified and action plans will have to the affected stakeholders.
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The value of assessing ethics risks and nature of ethics assessment

It is important that ethics risks are assessed often as this gives direction or indication of how the business ethics culture
is and how ethics management should be approached in future. Depending on the overall assessed impact, this gives
guidance to the following:
 Action plan implementation to respond to the reputational damage done from the ethics risks
 Formulation of ethics strategies
 Creation of ethics management structures
 Development of ethics standards
 Designing ethics management systems
 Design suitable response mode for the business (as addressed in Chapter 5 of your prescribed textbook, which
are, survival mode, amoral mode, reactive mode, compliance mode and totally aligned mode)
 A business can develop response measures to dealing with unethical behaviour in the business
 Develop measures to improve ethical culture in the business
 Determine if there is a need to appoint and ethics manager/officer, ethics committee if not available
 Can trigger the need to update, amend the code of ethics to include identified high impact ethical risks
 Develop/update the ethics policy
 Determine the need to provide ethics awareness training
Example 3
Case 1
A company Booly, is a big manufacturing company which manufactures processed meats.
Booly has risk management teams who foresees all the risks of the company. Booly has a
well-established code of ethics but it was last updated 7 years ago when the company started
getting big and expanding to other African countries. The company has 15 new employees
across all sites which were all given a 40 pages’ document by Human Resources together with
other policies relevant to their posts. No induction has been done as the employees are placed
in different sites and it has been difficult to get time to when they are all free so that they can
gather in one training. Another contributing factor to this is that it has been busy season since
these employees have been employed and again they are all experienced workers and know
how to operate on the ground.
Eight months later (after the 15 new personnel employed), from a quarterly risk management
meeting with each group line manager, it was identified that there has been two of the new
employees taking almost expired stock home if not taken by anyone by anyone, this will be
sent to some pig farmers. At times, this employee sells the products to the closer community
where he stays. Lately there has been an incident where 4 kids were diagnosed to have been
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infected by a bacterium from the processed meats they ate. All investigation was pointing back
to this employee.
When the employee was questioned, he did not deny it he does not see is wrong to take the
almost expired staff as this is to given to pigs than humans anyway. Hi lune manager advised
that it is in the ethics and also employment policies that no employees should take any stock
for any reason without the knowledge of the line manager. The employee declared with honesty
that he has never read the documents as it has been busy at work and have not gotten time to
read all the documents handed to him.
Required:
What are the possible action plan would you suggest for Booly regarding the risk identified?
How does one assess ethics risks? This is done through analysis of the identified ethics risks and where possible, quantify
the risks from the estimated probability of occurrence and possible financial impact the identified ethics risk may result.
This may be rated from different measures such as certain percentage of annual Revenue or Net Profit.
For example, an ethics risk could be, risk of misuse of company telephone lines for personal use in a call centre. If the
company assess their ethics risks impact from 10% of Revenue (with revenue being R50 000, therefore, materiality used
will be R50 000*10% = R5 000).
A company can further assume the following scale for risk weighting:
Probability of occurring Impact Weight
Very likely Highly 10%
Likely Medium 7%
Moderate Medium 5%
Unlikely Low 3%
Rare Low 1%
Application:
The above mentioned ethics risk can be referred to as having a high probability of occurrence. The impact will also be
classified as high as the risks may occur frequently resulting in more costs spent on personal use.
The quantified impact can therefore be calculated as follows:
- 5 000* 10% = R500
Therefore, the risk is assessed high impact to the company. The company should then find proper response to address
this unethical conduct from happening in future of mitigate it to its minimal level. Actions to be taken may be underlying in
the Response mode, as the company is merely responding to the ethical risk which may not have been addressed
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anywhere before. Furthermore, a company should implement action plans in place to address in response to such unethical
conduct.
Now let us explore on how can one obtain the ethics risks apparent to the business. As learnt in Chapter 8 of your
prescribed textbook, you should remember that an ethics officer/manager is responsible for the all related matters.
Therefore, an ethics manager or through the support activities should run interviews with managers of each department,
do benchmarking, from document analysis or conduct surveys and questionnaire. The most effective way identified to
obtain ethics information is through interviews as from these, one can even run a follow up on certain discussed matters.
From these, one can also obtain quantitative data as well.
Refer to Chapter 21 of your prescribed textbook for full analysis of the different methodologies that can be used to obtain
ethics assessment information.
From the above assessment, the company’s governing body should then determine the ethics management strategy which
also aligns the vision and mission of the company.
6.7 Code of ethics – Chapter 22

In support to manage ethics, besides having ethics polices and standards, a company should also have a code of ethics,
which has also been found to be a prominent document for companies to develop.
This document is also believed to be influencing good corporate governance. This document is also used to stop an end
to any noted unethical behaviour.
What is a code of ethics? Also commonly known as Code of Conduct. This has been defined in Chapter 22 of your
prescribed textbook as a document or agreement that sets the standards for ethically acceptable behaviour in and by an
organisation. It is for imposing an ethical behaviour. A code of ethics should be developed to address internal and external
stakeholders. Specifically, for stakeholder’s perspective, this is to give assurance that the company interactions can be
trusted. Also for external stakeholders, the code of ethics should be developed with some minimal participation of the
stakeholders whom are most likely to be affected by the code. Refer to Chapter 22 of your prescribed textbook for further
reading.
Example
SACB – broadcasting show, broadcasted an underage movie without warning parental guidance (PG) to viewers.
Solution steps:
- Sit with viewer, analyse the impact done
- Social media post, apologise to get viewers back
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- Further, take all necessary quality checks to broadcasting. Priority number 1 for a broadcasting show
- Code be drafted to ensure such steps will be taken
6.7.1 The format of the code

The code may be developed in an Aspirational mode or Directional mode. More detail on Pages Chapter 22 of your
prescribed textbook.
1. Aspirational code – also known as code of ethics

A short document that spells out all the ethical standards, values, that a company should use a guidance when interacting
with internal and external stakeholders. With this kind of a document, all members in the organisation are expected to live
up to. This document is easy to recall as it is short and precise. It also allows for discretion as the standard included is
general, and not a distinct way of dealing with an ethical issue. Despite the above mentioned advantages, like any method
of choice, this document has disadvantages which may be vague as it provides general standards which allows discretion
by different people. Furthermore, this mode is also known to lack enforceability
2. Directional code – also known as code of conduct or code of behaviour

Other than the Aspirational code, the directional code is specific to certain actions required from the members of the
organisation. This code, will address exactly what needs to be done in what circumstances and leaves little room from
queries on misrepresentation. With tis code, it is easy to enforce and implement as it is straightforward.
6.7.2 Content of the code (code of ethics or code of conduct)

The content of the code will be directed based on the code format chosen, either the aspirational or directional. But
generally, the code will have the following content:
 Rationale of the code
- The code should address why the code has been development and for what purpose this code has been
developed. The rational should also note the benefits which the organisation and the members will earn from
adhering to the code
 Ethical values, principles or standards

- This refers to the ethical normal that will guide the organisation to an ethical behaviour. If an aspirational code
is followed, the code will most likely not be specific in terms of what ethical standards apply in the organisation.
But if a directional code is followed, the code will include specific ethical principles that need to be adhered to
as well as the implications of non-adherence
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 Guidelines of the conduct

- This refers to what actions are accepted or prohibited in an organisation. Such specification goes along with
applying the directional code
 Guideline for ethical decision making

- The code must provide a guideline of how to apply the ethical standards of the code. A decision procedure may
also be provided where the code does not address the guideline for a specific situation.
 Sanctions
- The code should specify the consequences to be faced for non-adherence to the code ethical standards. For
an aspirational code, the sanctions are likely to be general whereas in the directional code, these are specific
such as, disciplinary action to be done if employee acts in a certain way, dismissal, suspension and etc.
 Reference to resources
- This refers to the office champion or ethics officer who may be contacted in cases of when employees may
require clearance, would like to report an incident- whistle blowing, guideline is required. Reference can also
be made to other ethics documents such as the ethics policy
It is important to understand that the code’s tone may promote ethical behaviour to employees who are personally ethical
but also be prohibiting to some of the employees. Furthermore, a code should be implemented as also recommended by
King IV. This can be done from publishing the code in the company’s website o any public media platform, to allow access
to both internal and external stakeholders.
6.8 Institutionalising ethics – Chapter 23

This Chapter focuses on the ethics management system that an organisation may implement to ensure a structure ethics
environment. The management systems explored in this chapter is the proactive vs reactive management system.
Proactive management system is that which strive to promote and enhance an ethical behaviour in a positive and
supporting environment. This system aims to reflect the benefits of ethical behaviour in the business.
With the Reactive management system, the system is designed to condemn unethical or any negative behaviour.
1. Proactive ethics management system

The following dimensions are commonly addressed by an organisation that manages their ethical culture
proactively:
 Communication
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An entity often communicates the ethical expectation from internal and external stakeholders, that way
stakeholders are constantly reminded on what to do and not. With communication, the organisation also
understands what ethical behaviour employees are confronted with daily and address those at that time.
A properly designed system will have ethics awareness programmes, ethics helpline and ethics
newsletters.
 Recruitment
- An organisation that wants to build a good ethical culture or maintain and existing culture has to also
ensure that suitable employees with integrity are selected and employed. It is easier for an integral
individual to follow all other ethical standards in an organisation that those who are not. During the
selection process, an interaction should be made that conveys that the entity wishes to attract and recruit
candidates who can align to the organisational ethical needs. An organisation can confirm the suitable
candidates by reference checks the employees has previously worked. Psychology assessment to test
integrity can also be run though meta tests and other available tools.
 Orientation of new employees

- This sort of programme can improve an excellent opportunity where it can create ethics awareness to the
newly employed candidates as they are willing to be on the job. Once this is set up front, the employees
are most likely to stay in the job for long also knowing the expectations an organisation has towards them.
 Performance management and reward

- This can be done through a performance appraisal by the line manager. When an employee is recognised
for the good ethical behaviour, they are most likely to continue to behave ethically.
 Training
- Ethics training is important and it keeps the employees up to date in terms of any new ethical standards
they need to know. This can also be done through giving employees practical examples and asked them
how they would have responded to the given situations.
 Implementing and monitoring ethics policies

- The code should be consistently monitored to ensure that an ethical culture is well structured and created.
All the policies relating to the ethics should be monitored to also ensure relevancy. An incident report
should be compiled and feedback be analysed.
2. Reactive ethics management system

The system is designed to condemn unethical or any negative behaviour. The two systems are created to achieve
a reactive ethics management system:
 Confidential reporting system
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It should be understood that not ethics issues can be addressed with line mangers and ethics helpdesks.
This brings us to the creation of a confidential reporting system where the employee will remain secret
not to track who reported the incident. This type of platform is developed to create a safe space to report
an unethical behaviour. Nowadays a system is referred to as Whistle blowing line, where a wrongdoing
is reported by an employee or any stakeholder with no names of the whistle-blower revealed. The trick
also lies with the whistle-blower to ensure that full details of eth incident is provided so that the ethics
office may determine a need to investigate the incident. The whistleblowing platform also prevents fraud,
corruption amongst employees as anyone could be noting it and therefore reports the actions
unanimously.
 Disciplinary procedures
In the reactive ethics management system, a disciplinary action over non-compliant is done to
discourage unethical behaviour. The disciplinary action should be conducted fairly and consistently so
as to avoid being biased and therefore promoting equality.
6.9 Reporting and assessing ethics performance – Chapter 24

The governing body, also known as the Board, is responsible for establishment of the ethics culture and strategy. Though
some responsibilities are delegated down to the ethics champion ethics committee and ultimately the ethics offer and
support activities. The reporting purposes, the ethics officer needs to report the implementation strategy to the ethics
committee, which will report to the and update the governing body. However, the governing body remains responsible
and should be aware of all ethics strategy implemented and be ensured that an ethical culture is well established. Following
the comfort that the ethics culture has been well established, the governing body is then responsible to report this to the
internal and external stakeholders through various platforms such annual report, sustainability report or integrated report.
Refer to Chapter 24 of your prescribed textbook for a diagram showing the ethics reporting process.
6.9.1 Reporting by the ethics office to the ethics committee

We have mentioned a couple of times above that the ethics committee who is responsible to report to the governing body.
This means that the governing body delegates the ethics responsibility to the ethics committee. For reporting purposes,
the ethics committee needs to make it clear to the ethics office on what kind of information it needs to see in the reports.
At a minimum, the following needs to be reported on:

1. The progress with implementing the ethics management programme
The main points addressed this point will be the feedback on the progress and obstacles experienced during
implementation of an ethics culture. This also considers the ethics risks assessment, feedback on reviewed of
ethics related policies and code of conduct, ethics awareness programmes conducted and etc. If there are any
queries, challenges and concerns that the ethics office has, this platform of reporting is used to obtain solutions.
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2. Trend analysis
A trend analysis refers to information on ethics which could give the ethics committee and indication of the ethics
state in the business. The information referred to relates to such as reported incidents during the quarter, financial
impact if quantifiable, action taken to resolve the incident, disciplinary taken against unethical conduct. This
information may be produced and presented graphically or wit charts.
3. Critical incidents
The ethics committee should be made aware of all the critical incidents that occurred during the reportable period.
The critical incidents relate to those that may negatively harm the interest of stakeholders, may result in law
penalties, have significant cash outflow implication, those that revolve around key staff members of the governing
body or the organisation, that could pose reputational damage to the business. By so doing, identification of
urgent matters will be made and urgently attended to. But with the urgent matters, these are also addressed
before the reporting time.
4. Strategic incidents
The ethics committee should also be informed of any significant changes around ethics development such as
changes or updates in legislation, new advances in technologies and etc.
The reporting frequency is quarterly.
6.9.2 Independence assessment over ethics performance

For an organisation ethics committee to get comfort around the reported ethics implementation and performance, they
need to get this report an independent review. This is to avoid the self-review over own work done. The internal audit is
known to traditionally provide an independent review over this function as well. If there are any weaknesses identified or
improvements that can be implemented, the internal audit will duly advise. The internal audit reviews in terms of the
available ethics processes and standards if available and if not; they will review and assess the business’s ethical culture.
The internal audit, will then ultimately report to the audit committee.
There are three ways in which ethical performance may be assessed. See below:
1. Process and maturity assessment
With this type of assessment, the internal auditors will most likely do a gap analysis review to determine if there is a
need to improve the current way of doing things. This will be done through a comparison of good practice vs the
organisation’s processes. The internal audit will also review the types of measures available to enable a suitable
ethical culture, i.e. whistle -blowing measure could be in place but not being utilised by the employees. The internal
audit will then advise on the need for any training awareness programmes that are in place.
2. Culture Assessment
The internal auditors will also need to assess the ethics culture in the organisation. This type of a review is deemed
to be a subjective review as there is no prescribed way of implementing an ethical culture, which results in findings
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noted be subjective opinion. Due to the above concern noted, Internal auditors need to find ways to assess the ethics
culture in less subjective manner. The following has been identified as a solution:
- Perform surveys – ethical culture surveys with staff. This is meant to obtain clarity from the employees view on
how the organisations ethical culture is perceived. A conclusion then be drafted from the comments received
by different staff. The employees are at a minimum expected to address or comment on the training to ethics
awareness programmes in place, if there are any platforms to report unethical conduct (i.e. whistle blowing), if
there is a supported environment to ethical culture (i.e. is there leadership commitment).
The above noted surveys are commonly conducted every three years. This period also allows the company to have
implemented recommended action plans from the previous survey should have they been noted. This also helps the
organisation to improve or find new platforms of improving the ethical culture as well leadership commitment.
3. Combined Assurance
A combined approach refers to a system where a number of role players are involved in the assurance process. This
process has been suggested by King IV as the internal audit function alone cannot provide a most effective conclusion on
ethics effectiveness of the organisation. So by involving more parties to provide assurance, this also gives other
stakeholders clarity on the organisational ethics culture. Who are these other role players we are referring to? This could
be anyone who is independent from the organisation, and if its anyone from the organisation, then it has to be a specific
function such as the risk management function, Human resource function and etc. With reference to the independent role
player, this could be the provider of the ethics hotline if this function is outsourced, it could be any other ethical audits that
have been performed for the company.
A report needs to be compiled which the internal audit function will report to the audit committee of the governing body.
6.9.3 Reporting by the ethics and audit committee to the governing body
So far the following reporting structure has been noted. The following drafted structure is from the bottom delegated to the
top:
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6.Governing Body
(Board)
1.Ethics officer
5.Audit committee
Ethics
2.Ethics
Champion 4.Internal audit
3.Ethics
committee
Figure 6.2: Ethics reporting structure

8
As can be seen from the above, the ultimate responsible function on ethics is the governing body. This means they should
delegate their responsibilities down with clear mandate so that this may be well executed. An ethics report as completed
by the ethics office to the ethics champion and ethics committee needs to be submitted to the internal audit function who
will after review and assessment submit to the audit committee for final review by the governing body. The governing body
should also be provided with minutes and any matters which have been note and highlighted for decision by the governing
body. Furthermore, key incidents should also be provided as part of the ethics report. On the other hand, the audit
committee also needs to raise its findings with the governing body and ethics committee. But in essence, only key issues
should be raised with the governing body.
6.9.4 Reporting to external stakeholders

From diagram 6.3. above, number 7 in the structure would be the External Stakeholder. Please see below the in diagram
1.11 which also includes the report flow until the stakeholder:
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7.External 6.Governing Body

Stakeholders (Board)
1.Ethics officer
5.Audit committee
Ethics
2.Ethics
Champion 4.Internal audit
3.Ethics
committee
Figure 6.3: Ethics reporting structure

9
In the above diagram, the only party added is number 7- external stakeholders. So it does not end with the governing
body. The governing g body needs to ensure that stakeholders are aware of the company’s ethical culture and
performance. The reporting can be done through either the following:
1. Annual report
The report (which is also known as the financial report) is usually brief and addressing the providers of capital
such as banks and investors. To allow being short, only the code of ethics and governance structures within the
organisation is outlined. The report also covers on how the organisation intends on promoting an ethical culture
in the company.
2. Sustainability report
This report also referred to as the triple bottom line is widely directed to investors, regulators and the society. The
report covers information relating to environmental, social and economic sustainability and impacts. This report
in summary entails what actions where undertaken to ensure that the environment is kept clean regardless of the
company’s operations. With the social, the report needs to also outline how the interests of the society were
considered in the business operations. And with economic, the report needs to address the profitability or financial
impact the company is contributing to the economy and so.
3. Integrated reports
The integrated report which is recently used by most companies is merely a combined report of the sustainability
and annual report. This is a financial and non-financial view of the company’s operations throughout the year.
The intended audience for the integrated report is mostly the providers of finance and capital as outlined above
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under the annual report. This also extends to include the human, intellectual, natural and social capital. Included
in this report should be ethical values that will be taken or implemented as initiatives to contributing to a long term
value of the company.
6.10 Organisational ethical culture – Chapter 25

In this unit, we have explored on how ethical performance can be governed and/or controlled in a business. It should be
understood by now that it is easier to control the ethics environment internally or with internal stakeholders for some
reasons such as employees would like to keep the job. But it should also have remembered that the control of ethics can
only be influenced through proper leadership commitment of the governing body, ethic champion and ethics officer. If no
commitment to ethics is shown by them, it is less likely that an organisation will be ethical across all business transactions.
Furthermore, you should recall that alone the above mentioned group (governing body, ethics champion, ethics officer)
cannot fully activate ethics amongst employees but with the support of other business activities (other role players) such
as procurement, human resources, legal, secretary and etc. This brings us to the fact that, ethics is not a one-person
function but also needs certain support to ensure that it is properly implemented and executed. Again, an entity should
maintain the ethics performance in the entity by responding to unethical behaviour and finding ways to promote ethical
behaviour.
Chapter 25 explores on the organisational ethical culture. Culture relates to the way things are normally done. It therefore
gives a judgement to any behaviour against the norm. When a culture is set, everyone works around those set norms.
Culture is built over time from learning and training. The more one is exposed to a certain way of doing thing the more they
make it a tradition to doing things. Similar to the above a corporate culture will be concluded based on the way business
does its business on day to day operations. From the corporate norms/culture, a corporate may be have a prescribed
behaviour (normative dimension) as well as be described to be in a certain way (descriptive dimension). Therefore, from
setting a certain culture, employees and anyone in the organisation are driven to think and act in a certain manner. While
manner or acting and thinking is instilled in the organisation as a whole, it becomes the identity and differentiation of that
organisation.
6.10.1 What is a corporate/organisational culture
Fred Nickols demonstrated building a culture from a story “Monkey see, monkey do” (Nickols, date unknown cited in
Rossouw and Van Vuuren, 2017. In this story, a monkey in a cage that tried to reach the banana was disciplined by being
sprayed with cold water together with the other group of monkeys in the cage (for a full story, refer to Chapter 25 of your
prescribed textbook).
So one monkey prohibited behaviour caused the other monkeys to receive punishment of what they did not do. This
eventually stopped all the monkeys from reaching to the banana as it was perceived wrong. Therefore, this resulted in new
monkeys coming in the cage to wonder first why no one touched the banana, and the answer would be, if their other ones
are not reaching for it, why should I! Do you see how an ethical culture can be created? It can be created from disciplining
those who conduct unethical behaviour as the damage of that unethical conduct negatively impacts other people. This is
why an ethics definition refers to the following considerations:
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- A behaviour should be Good;

- A behaviour should be good to Self
- And lastly it should be good to Others.
If taking that banana from the story above was Good behaviour, it should be also assessed that it is good for oneself and
others as well. Will the others benefit? If they do no benefit, then the behaviour should not be done as it is unethical to do
so.
Ethical culture in a business can be described as strength should the barrel is contained with good apples (employees). It
does not end of setting ethics policies; code of conduct, management needs to also ensure that the culture they wish to
have is fully implemented and executed by acting as the policies says. At times there may be ethics policies and all related
readings, but find that no one amongst the employees is following what is documented. This means that documentations
is not sufficient but management needs to walkthrough or observe certain way of doing business within each business unit
to ensure that things are done accordingly. Some employees are not fond to reading documents and the only way to
ensure the culture would be through observation and training with real life examples.
See below a demonstration 6.10.1a on how unethical conduct can be created. If no one monitors how business is done, it
might be ignored that actual business is done unethically. As a result, this type of a culture will be created amongst
everyone to get business with the likes of being in business.
Figure 6.4: Unethical culture behaviour demonstration

10
Source Author unknown (2014)
An ethical culture is demonstrated by working together with integrity, honesty, respect. That one very action will be
monitored around the impact that it will bring unto others. A below picture is meant to demonstrate an ethical culture in an
environment from the above mentioned.
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Figure 6.5: Ethical behaviour demonstration

11
Source: Author unknown
6.10.2 Characteristic of an ethical organisation

An organisation that is ethics will have at least the following in place:
- Code of ethics
- Policies
- Clear rules
- Articulated values
- Disciplinary action
- Ethics management in place.
All the above were discussed in the earlier topics of this unit. They somewhat make it formal to have an ethical environment
by shaping the business around the above mentioned elements. The above six elements are also referred to as Deep
culture for creating an ethical working environment in an organisation. The above elements will result in an organisation
having strong ethical values. Employees working in these sort of organisation, are indirectly groomed to adhere to the
above elements as documented and advised. They see ethics as an integral part of the business and the way things
should be done around the business environment. Even if no one is looking, the employees in this type of organisational
will act ethically regardless. You might be asking yourself as to how does one conclude that an organisation has a deep
culture?
Like any other culture, it is build overtime. Over time when action towards unethical behaviour is taken and training on
ethics is given, as well as monitoring all behaviours, this is when an ethical culture will be built.
6.10.3 Leadership and ethical culture

A barrel (organisation) will be determined to be ethical if the leaders of that barrel set example to ethical behaviour. Where
leaders show strong ethical commitment, it then makes it easier to those joining the companies as a good ground has
been laid from the top. Therefore, leaders can shape the culture of the business.
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As noted earlier in this chapter, alone leaders cannot effectively ensure that a good ethical environment is set. As support,
line management should be encouraged to build and ethical business culture. Line management deals with their
employees (subordinates) on day to day basis and it is therefore easier to monitor, discipline and promote ethics through
them. By so doing and by giving the line manager the responsibility of ensuring ethics in the unit they work, this brings
along continued ethical lifestyle to the line manager as a result. To ensure that employees are ethically involved in daily
operations, line management need to ensure that they understand the ethics policies, code of ethics, values and standards
in place. They should also advise the employees on the preferred ethical behaviour so that they can work around such.
Example 4
Ms Cakeza is recently employed by TRH College, in 2019. TRH College is listed and has
been in operation for 19 years. She has about 7 months working in the college as an
Administrative clerk and mainly responsible to assist students with applications process and
queries. She is also responsible with assisting students to apply for funding at the college as
well as other student administrative duties. During recess time, her office can be quite as a
small number of students will come for her services.
When Ms Cakeza started, she was given a batch of documents to familiarise herself with
including the following:
- List of duties – updated 2019
- Code of ethics – version update date 2010
- Ethics policy – version update date 2008
- Declaration of conflict of interest – 2011
- Disciplinary procedure document – version update date 2010
- TRH College values and standards – 2010
- TRH College Mission and Vision document – 2000
- Example of administrator’s report – 2018
Since Ms Cakeza has started working. Her line Manager has not explained what to take note
for in the documents given, but she is smart and finding her feet around this. So far she has
read the Administrator’s report documents as she needs to produce that every half year end.
She has also started reading the other documents but dragging as they are long documents,
especially the ethics related documents. Her manager is hardly around at the office as well
as her colleagues. He colleagues usually leave early just after lunch and come back the next
day. She is usually left alone after lunch. Nowadays she has adopted working from home,
mostly on recess and Fridays, as these are the days that she sees very little of the students.
Students seem to now know that she is never available on Fridays and do not bother looking
for her. Only those little few do.
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Required:
a) In terms of ethics, what culture do you think is portrayed by TRH College?
b) What is your view to improving an ethical culture of TRH College for all employees
that hardly come to the office?
6.10.4 Assessment of ethical organisation culture

How does one know if suitable ethical culture is created in an environment? This needs to be assessed as highlighted in
Chapter 21. This also serves as ethics risk and strategy. The assessment can be conducted internally by the ethics
committee or by an external party who is an expert in ethics to provide recommendations where necessary. Assessment
can be done in one of the following ways:
1. Quantitative surveys – Manual questions can be distributed to employees to respond either anonymously as
some people feel comfortable to not be known when it comes to such questionnaires. The covered topics in the
survey should at least ask or request comment of the communication effectiveness on ethics, leadership
commitment reflected in the organisation, awareness of ethical values depiction, and if employees are satisfied
with the way ethical culture is set up. As the survey is quantitative, employees will need to indicate from a given
scale, on where they think the rate should be. At the end of the rating scale, employees can also be request to
comment on any matter or applaud they would like to give to promote a good working environment.
2. Qualitative surveys – These types of surveys may be done through interviews of one on one sessions where a
number of concerns and comments can be gathered and noted. If it allows, one can also distribute such surveys
to be filled out on the above mentioned topics of coverage. The disadvantage on this will be that employees will
write too little or may not be interested as it can be time consuming.
3. System prompt ethical assessment – An organisation can also create a compulsory survey to be done on this
system annually. This will also assist in terms of determining if there has been any improvement or not to the
noted recommendations.
There are more ways of assessing an organisation’s ethical culture. But the onus lies in leaders of the business to ensure
that an ethical culture is created and maintained. By assessing an ethical culture, this also helps an organisation to see
where they are ethically and plan on a future strategy to ensuring that an ethical culture is created and well executed.
Again, it can be noted through such assessment if the ethics policy, code of ethics and any documents to ethics are useful
or not. If not useful, an entity can find ways to shorten the documents, provide training and awareness programmes and
educate employees on what is in the documents. Ethics management can be improved as a result.
6.11 Summary
This unit has explored on various elements if an ethics management programme in Chapter 17 - 24. You also learnt that
ethics should be seen a forced behaviour to employees but certain perception should be created to instil ethical behaviour
in employees.
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You also learnt that for an effective ethical environment to be created, leaders of the business need to show commitment
to it together with the support of line managed and other activities in the business. Furthermore, business leaders should
act and behave along integrity, respect, transparency, empathy, care, compassion, fairness and responsibility. To also
properly manage ethics, an ethics report should be created and presented by the ethics officer up to the board of directors.
This way, it shows as commitment by the governing bodies.
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Example 1
a) The dimension of leadership commitment achieved in this scenario is Conversation. During induction, new
employees are communicated with through a presentation by the ethics committee and surely in the
presentation one can assume that they have questions and answer session to address more on ethics.
Furthermore, a whistle blowing system is introduced which is also presented through a report to all employees.
b) It seems to this scenario that Consistency is not applied as the two similar examples were not consistently
acted upon. The incident from a year ago related to theft and so is the recently incident. But the treatment to
the two incidents was applied in different ways. Therefore, the leaders of this organisation is not reflecting any
consistency.
c) CCC’s ethics committee seems to be Competent and knowledgeable as well as necessary skills to implement
and lead the business ethically.
Example 2
a) In this scenario, the most suitable support activity to deal with this issue will be the Procurement activity. This
activity is the one to directly ensure that its staff buys in the right order as required. As this is most likely
acceptable, the Procurement department will need to train its staff and also ensure that the staff adhere to
ethics policies.
b) The corporate, legal and forensic department of SBC is most suitable to deal with this impact in the following
manner. The Corporate department should quickly get the message across the country to ensure that no
further harm is done from consuming the product as well as withdrawing the product from the market. All social
media posts should be tracked and responded to accordingly to show care to the market as this has negatively
impacted the market. On the other hand, the Legal department should work around compensating the infected
consumers and also take responsibility of the company’s mistakes. Lastly, the forensic unit should look into
investigating the source of the bacteria infection on the product. This can be done through getting the cheese
tested in labs for quality. They can also evaluate the manufacturing process of cheese with an expert and
identify possible processes that might have caused the infection.
Example 4
a) Ms Cakeza’s line manager is hardly at work for reasons not known but may be assumed that she is working
from home like other employees. Her colleagues avail themselves for a half day and sometimes do not come.
As a result, Ms Cakeza has also joined the rest of the team by not going to work on Fridays and during recess.
The culture created by this team seems to have been stemming from the manager who is hardly at the office.
As a mnager, he/she could have always advised her staff that he/she is not around due to certain work related
reasons, such as attending workshops and conferences. But because these reasons are not known, it
MANCOSA 110
somewhat seems that he is not working but using company time for personal use. Ms Cakeza’s colleagues
also do half days without any problem as they know that their leader also engages in the same behaviour (of
not being in the office). Therefore, an unethical culture is created based on the above. The apples in the
organisation are all getting spoilt from the example they see from their leader. Changing such a culture would
not be easy as the leader who is supposed to set an example is hardly around.
Some of the employees may even be using company resources for personal use as it does not seem like there
is anyone monitoring them. They could be using telephone and internet for significantly non-work related
issues. Furthermore, the quality of Ms Cakeza’s work and that of the team may not be on par as the manager
is most likely to approve reports under pressure of getting things done.
The type of culture that is created by the leader (Manager) may also result in giving the employees an
opportunity to commit fraud as he may just approve funds transfer for non-related work.
Lastly, we can say that, indeed there are ethics documents in place. But they have been updated more than 5
years ago which is questionable if the whole College is taking ethics seriously as the documents have not been
attended to for these many years. It seems that the documents are available but not been monitored to update
for relevancy. It could also be that there is not ethics committee, ethics champion who show commitment to
ethics in the company.
b) Commitment by Ethics policies developers (HR)

It seems that the Human Resources is the owner of the ethics documents but do not take further initiative to
ensure that execution of the documents is taking place. Therefore, the Human Resource needs to show
commitment by i.e. ensuring all employees get training on ethics, create more ethics awareness programmes
to activate ethics at a College.
Leadership Commitment
- For an ethical culture to be implemented, leaders (in this case referred to a Manager), needs to show
commitment to ethics. Ms Cakeza’s Manager is hardly at work and this has resulted in other subordinates
adopting the same behaviour of not coming to work and ultimately leaving work early. This has further
resulted in the newest employee (Ms Cakeza) also adopting to manager herself and not respect work time.
Appoint Ethics committee and Ethics officer

- Alone the ethics policies are not sufficient to ensure execution of an ethical culture. It can be noted from
the above that ethics documents have not been respected or the employees may not have been aware
that the documents are important to be adhered to. Therefore, TRH College’s board should appoint an
ethics committee and ethics officer who will facilitate the ethics awareness programmes.
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Reporting ethics
To ensure consistent commitment on ethics, if no ethics manager is in place, Line Managers should be tasked to
produce ethics report on their staff.
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Unit
7: Ethics Case Studies
113 MANCOSA
7.2 Topics covered in business ethics  Test your understanding by analysing, assessing and applying
business ethics knowledge in emerging ethical issues that may
arise in business
Prescribed and Recommended Textbooks/Readings

 Deon, R., and Leon, VV. (2017) Business Ethics. 6th Edition. Cape Town:
Oxford University Press. (ISBN: 9780190721466)
You need to study Chapter 26
MANCOSA 114
7.1 Introduction
Unit 7 – Chapter 16 (the last chapter in your prescribed textbook) provides 19 case studies to apply your knowledge and
skills around what you have learned in the book Business Ethics. The case studies are meant to test your understanding
of what you have learned as well as application to real life examples on ethics in business. Before you can answer the
questions in this chapter, you must make reference to the chapter in question so that you can properly apply it to your
solution.
7.2 Topics covered in Business Ethics

See below graphic reflection on the topics you learnt on Business Environment and Ethics.
See below Illustration table reflecting on learned topics in units of Business Ethics
BUSINESS ETHICS
UNIT 1 UNIT 2
UNIT 3
Definitions and The ethics of
Theories one ethics
Distinctions business
and business

UNIT 7
Case Studies

12
7.3 Summary
Note that the examples given do not portray any real company but are merely to serve as what commonly happens in a
business environment.
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Answers to Revision Questions

UNIT 1
Case 1:
a) Macroeconomic activity.
b) A hospital’s biggest stakeholder is the patients, followed by suppliers, then society in which the hospital operates
in, employees and government (health department)
c) Patients
Patients expect that they receive the quickest and quality service all the time. They also expect to be treated in a
respectful way and also being provided with all basic health needs such as beds, quality medication and
appropriate temperature for the illness in question.
Suppliers
Suppliers of medication and other hospital equipment expect that the department of health pays on behalf of the
hospital in time so that there may further be allowed to source the medication from them.
Society
It is important that the hospital always treat all patients with respect for society to appreciate the service. If it
comes to play that any unethical act is practiced by the hospital negatively impacting the patients, the society
might strike and destroy the premises.
Employees
Employees expect that they work in a cleaner and safety environment. They also expect to receive adequate
work resources to stay safe from any illness from the patients. For hours that employees work, they need to be
adequately remunerated, which is at market value.
Government
The relative department, which is the health department will need by all means that all policies and regulations
governing the hospitals are properly adhered to.
Case 2:
For example, a victim of hijack may use a bottle to kill a hijacker in protecting himself whereas it is illegal to kill
someone by law. The society will deem this action ethical as it is naturally wrong for anyone to steal other
people’s property. But at the same time, it will be painful to the perpetrator’s family knowing that their loved one
has been killed. The motion behind this is that he/she was killed doing a wrongful act and therefore society will
find it acceptable for him/she to have been killed. Lawfully, it can be argued that, what if the perpetrator was
not going to kill the victim? Therefore, it is illegal to have done so and certain charges may be pressed as a
result.
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Case 3:
a) The metaphor referred to is Apples and Barrels
b) The above case seems to have good apples (employees) who always listen and follows what management
says) and also a bad barrel (RRR Pty (Ltd). The apples are forced to act unethically as per instruction that
they are given by their manager to do everything they not to get the fine. In this case, the apples would not
even have a say to pressure their managers to license the trucks as required. This then gives them little room
to act ethically in any way as they are given money to even bribe the police on the road. The money that
would not be paid over to the cops is mostly likely to be used by the drivers as there would not be proof if
they have not paid it over, thereby being unethical. We can learn from this that the bad barrel has negatively
impacted the morals of the good apples.
UNIT 2
Case 1
a. Mill understands and believes that an action is just if it promotes the welfare of the society as a whole. In support
of the above policy in progress, and not because any property rights were violated, the land redistribution will
increase the long term growth of the previously disadvantage population through agricultural usage. On another
hand, before this policy can be finalised, it should be considered on who will maximise the social utility through
the usage of the land. In this theory, if it is found that the current users of the land can use it to generate more
growth for the society than when distributed further, this means the land will not be redistributed as a result.
b. Comte-Sponville’s view is that justice is superior to and more valuable than the wellbeing or efficiency, it cannot
be sacrificed to them – not even for the happiness of the greatest number (1996:62).
In other words, he would look at what law describes the case as, and if it is not lawfully right, then consequences
will need to be faced no matter how many people would be negatively impacted. i.e. is the above is deemed to
be violation of property rights, then consequences relating to violation of property rights will be applied.
Case 2:
a) A conflict arises in an instance where the interest of one party is affected from an action by another. In this case
study, we can see that Company ABC wants to open a branch and from its operations, water pollution would be
done which ultimately affect the interests of others, such as the society and the natural environment as the water
would be spoilt. Please see below an analysis of their expectations:
1. Society – they expect that the river water is always clean. They are concerned that the company’s operations
would not fulfil that as the oil will also run with the water. This will then negatively impact their health as this
water is sometimes used to do laundry and drinking.
2. Natural environment - Water itself is a natural resource and this is consumed by human beings. The water
would not be serving its full purpose as after oil flows into it, these will never be consumed by humans.
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Everyone including corporations is responsible to ensure that the natural environment is kept clean and safe
for human consumption at all times.
b) Company ABC should consider doing the following to avoid the conflict as mentioned above negatively impacting
its operations. To continue being a good socially corporate citizen, ABC should at a minimum:
- Implement a policy outlining all the responsibility to be undertaken to reduce the pollution of water. This can
involve doing a research of river water cleaning products for the water to be safe for human consumption.
- Assurance must be given to the society that if the water is not clean enough for use, ABC would provide
water tankers, only in cases of interruption of water supply from the municipality.
- Also provide assurance that employment opportunities would be created for the qualified and suitable
candidates. This way they can be in support of the branch opening.
UNIT 3
Case 1
a) Your response may cover the following:
- Virtue – good character build over years;
- Good client relationship, it may be tempting to agree and act as requested;
- Significant profit is made from this client, which makes it difficult to decline such a favour
- But as Mr Coolso is a rationally virtue individual, it will not be possible for Mr Coolso to allow such an
unethical conduct as this is not in line to his values;
- Therefore, besides the regulation bounding him, his inclinations would not allow him to act unethically
and therefore decline this request. He will therefore work as normal and issue an opinion based on the
executed work.
b) Under the deontological theory, obeying objective standards of behaviour from a sense of duty is the hallmark
of moral behaviour.
By applying the deontological theory, Mr Coolso would not face any difficulties responding to this as he merely
needs to respect the standards, and the law binding his work and issue a rightful opinion from the results
evidence from work performed.
c) If the Utilitarian theory is applied, the following would need to be considered by Mr Coolso before he can
respond nor take action as requested.
- This theory considers the happiness of the majority affected by the specific action;
- The action referred to is for issuing an unqualified report by Mr Coolso;
- Will majority be happy if Mr Coolso does as requested, Yes, more jobs will be created and the company
will further grow in business,
- Is the action good, the action will not be good for Mr Coolso’s morals (virtue), and also against the law.
On the other hand, the action will help by creating further jobs from a current economic unemployment
rate.
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- This action will therefore create happiness to the majority of the Client’s company.
- On the other hand, if Mr Coolso accepts the request and issues an unqualified opinion which the client
does not deserve, if investigated, the company may incur significant litigation costs and fines, and
ultimately lose clients going forward. Furthermore, the Client’s company may be fined for operating
against the law which may have defrauded a Bank and etc.
- Looking into the above, the majority will be left unhappy in future if it is eventually found out that certain
irregularities have been applied. These irregularities may result in future shut down of the client’s
company.
- Therefore, the action is not ethical and Mr Coolso would decline the request applying the Utilitarian
theory as well.
UNIT 4
Case 1
- There are 3 prerequisites/ elements for fraud to occur, which are, Opportunity by the perpetrator, Motive, and
Rationalisation.
- Even though the above contribute to fraud occurring in an organisation, fraud can thus be prevented, detected
and responded to. This may be done through a risk management strategy for fraud implemented by the
organisation.
- Further, an organisation may consider to completely prevent fraud through promoting the following as a
minimum:
 Anti-fraud culture,
 Risk awareness,
 Whistleblowing,
- I have however outlined the below recommendations and improvements that we/I propose Philipos Pty Ltd
may put in place to avoid this fraud incident occurring in future together with the reasons why and objectives
to the implementation thereof.
- Philipos keeps approved purchase orders for long and therefore the Creditors Clerk found an opportunity to
use these for his personal benefit together with the mentioned supplier. I therefore propose that the purchase
order policy or standards be changed to only open unused purchase orders for a short time, i.e. 3 months to
avoid a loophole to use these otherwise. The purchased can thereafter be deleted after 3 months’ lifespan
to avoid re-use and a new one be created for the next use within 3 months.
- As the entity still has open PO’s in the system, in the meantime, all the open PO’s must be thoroughly
reviewed against the Invoice received, Goods Received Note/Delivery Note and for a date when
goods/services were received, PO number referred to in the invoice and amount charged for the specific
service. The Creditors Manager can even go an extra mile to phone the department that is referred to have
119 MANCOSA
received the goods/service and inspect that they have indeed been received. This is to ensure that all
payments received against old invoices are for goods/services that have been received.
- Approval of payments – Phillipos Pty Ltd should have a set payments policy/rules with payment approval
thresholds to allow segregation of duties and scrutiny of exceptional amounts.
- The system may also be configured to disallow certain payments to be done without certain approval
signatories i.e. that of the Group Financial Managers.
- Supplier Payments must be supported with an approved payment and all exceptions followed up.
- Creditors Manager should consider doing Creditors Reconciliation for all suppliers. This way, a payment trend
may be noted and any exception may be followed up.
- The Creditors Manager may consider pulling out a payment report weekly/monthly depending on the when
the payments are made, to analyse the payment trend of each supplier compared to previous years and
document reasons to any exceptional increases and anomalies.
- Install a comprehensive system of control to reduce the opportunity for fraud and increase the likelihood of
detection. This may be done through consultation with an IT expect on systems and configuration.
UNIT 5
Case 1
1. Is it legal?
When the 3 options that Jane is considering are subjected to the legal test, it is clear that legal consideration
have already played a significant role in determining their options. From the way in which she formulated her
options, it is evident that she wanted to avoid breaking any laws because she made it clear that her actions
should be according to accepted fair labour practices. We can safely assume that was determined not to
contravene any laws in closing down the 3 offices. All her options therefore passed the legal test.
2. Does it meet company standards?

Peterson and Associates being an accounting firm, the relevant values and standards that would apply to the
firm are the professional codes and standards of the accounting profession and ethical values and standard
values of the firm itself. Since the professional codes and standards of the accounting profession do not deal
explicitly with staff layoffs, Jane will have to look at the ethical standards of the firm for guidance. Although
Peterson and Associates do not have a formal code of ethics, it is clear from the case study that the firm
places a high value on professional service to clients and respect for staff. These two core values of the firm
have not been translated into a set of guidelines for conduct that would tell Jane how to deal with the situation
that she now faces. Nevertheless, the value of respect for staff does place moral obligation on her to respect
the interests of all staff members who are affected by the closing of the 3 offices. Following fair and due
labour process in laying off the affected staff members (her option one would certainly be part of respecting
their interest, but strong emphasis on “respect for staff” that characterises Peterson and Associates most
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probably will compel her to move beyond the mere adherence to fair labour process and to give greater
weight to option two and three, which are aimed at softening the negative impact of the office closures on the
affected employees).
3. Is it fair to all stakeholders?

The fairness test requires Jane to determine the potential impact of each of the three options that she is
considering on those who stands to be affected by them. We will consider the options individually and
consider their potential impact on affected stakeholders.
Option 1 – Terminate employee contracts

Should the employment contracts of all employees be terminated, according to accepted fair labour practice,
they will each receive a severance financial package that will leave them better off in the short run, but without
a steady income in the long run. They might therefore, have sufficient financial means to cope for the first
weeks or months after they have been dismissed, but thereafter, they will be worse off than before, unless
they have already accumulated sufficient wealth to cope without the steady income that they will no longer
be receiving from and Peterson and Associates.
The firm itself might be worst off in the short run because of the severance packages they have to pay to
their staff in the three offices that will be closed. In the long run, however the firm will be better off financially:
it will no longer suffer the financial losses that where incurred but the three offices that were in financial
difficulties.
A third group that might potentially be affected by this option are the employees of Peterson and Associates
who work in the remaining offices of the firm. They might suffer from the survival syndrome. This is the guilt
in security and lack of confidence that often prevails amongst the staff who remain after an organisation has
gone through a down season. Although they might at first not seem to be directly affected by the closure of
the three offices, the potential physiological harm to them also needs to be taken into consideration.
Option 2 – terminate contracts and assist in finding new employment

If this course of action is followed, the employees who are being retrenched will suffer the same fate as
indicated in option 1 above. However, because of the assistance being offered to them in finding new jobs,
they might soon find themselves in new jobs where they will once more enjoy a steady income. If this option
can be implemented successfully, the detrimental impact of the employees would be substantially softened.
This option might costs the company even more financially than the first option because a part of paying
severance packages, the firm will have to fund the cost of assisting employees to find alternative employment.
121 MANCOSA
Both these expenses are, however, temporary, and in the long run, the company most probably will still be
in better financial shape.
The remaining employees of Peterson and Associates might benefit from exercising the option, because their
experience of survival syndrome is likely to be less acute. They will experience the firm as caring for the
plight of those who have been retrenched. It will provide them with the security of knowing that if they find
themselves in similar situation in future they can expect the firm to do the same for them.
Option 3 – Redeploy employees to new offices

For many employees facing the financial hardship that might result from the pending termination of their
employment contract, this option is likely to hold the most promise. Although they will have to cope with the
inconvenience associated with relocating to another town and country, they will at least have a secure income
again in a firm with which they are well acquitted. One might assume that they could be some employees
who might prefer to not to make use all these options, but they are likely to be the ones who have alternative
employment options or they ones who have accumulates wealth to be no longer dependant on the income
that they receive from the firm. For the company, this third option will obviously have an immediate financially
implication in the sense that they will have to keep their offices in Bothaville, Lephalale and Bela Bela running
at a loss of 2,3 or even more months longer than they initially intended. However, if the firm is able to
accommodate most of the employees affected by the closure of the three offices in the new offices in
Windhoek and Gaborone, it will save on the cost of paying financially severance packages to these
redeployed employees. At the same time, the will also save on recruitment costs for a new staff on new office.
On top of that, the other employees of the firm will be spared from experiencing survival syndrome, as no
substantial retrenchments will occur. The application of the fairness test will most probably convince Jane
further that option two and three are the most financially sound solution as they will soften the negative impact
on those who are worst affected by the decision to close the three offices.
4. Can it be disclosed?
In applying the public version of disclosure test, Jan will have to imagine her, for example, reading in big
black bold letters on the front page of local newspaper the headlines of a report on the decision by Peterson
and Associate to close their local office. The report will not only carry the story of the decision to close the
offices, but will also detail the firms ethics and values, its justification of the decision, the impact of the affected
staff and the measures that the firm has taken to assist the staff members who have been worst affected by
the decision. Jane will then have to ask herself which of the three options that she is currently considering
she would be most comfortable reading about in the newspaper.
MANCOSA 122
In applying the public, and especially the private version of the disclosure test, Jane will be bringing her own
person values into play. As an individual, she will have to live with the decision she made. For this reason,
she needs to personally convinced that what she is about to do is right and good and therefore the best
ethical alternative in her situation. The relevant question that she needs to pose to herself is: “which of the
options that she is considering will contribute the most to her sense of what is fair and good? “If she is not
able to align her decision with her own values, she is likely to suffer feelings of guilt and may end up
experiencing alienation towards her firm and her profession.
UNIT 6
Case 1
Prioritise ethics awareness training
Booly ethics officer should set up time the soonest with all new employees together with all line managers on ethics
awareness. If it comes to a pus, the officer and team can get time to travel around all sites with new employees and
conduct the training as this may interrupt less working time compared to when all new employees coming to meet in
head office. This is most likely to reduce the risk exposure as employees will be aware of what the company deems
ethical and not.
Improve ethics communication

Booly may implement introducing posters around all offices and manufacturing sites of what to and not. Especially at
bathrooms and kitchens, as these areas employee mostly go to for rest.
Revisit the ethics policy write up

The ethics officer may consider updating the ethics documents to shorten them up, and make them user friendly.
123 MANCOSA
References
 Constitution of the Republic of South Africa (1996), Pretoria

 Dictionary, O.E., 1989. Oxford English dictionary. Simpson, JA & Weiner, ESC
 Rossouw, D. and Van Vuuren, L., 2017 . Business ethics. Oxford University Press
 Rossouw, D., Prozesky, M., du Plessis, C. and Prinsloo, F., 2012. Ethics for accountants & auditors. OUP Catalogue
MANCOSA 124
Bibliography
 Constitution of the Republic of South Africa (1996), Pretoria

 Dictionary, O.E., 1989. Oxford English dictionary. Simpson, JA & Weiner, ESC
 Rossouw, D. and Van Vuuren, L., 2017 . Business ethics. Oxford University Press
 Rossouw, D., Prozesky, M., du Plessis, C. and Prinsloo, F., 2012. Ethics for accountants & auditors. OUP Catalogue
125 MANCOSA
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BUSINESS ENVIRONMENT

 Bachelor of Commerce in Marketing Management

List of Contents .................................................................................................................................................. 1

Unit 1: Definitions and distinctions ..................................................................................................................... 8

Unit 2: The ethics of business .......................................................................................................................... 20

Unit 3: Theories on ethics and business .......................................................................................................... 33

Unit 4: Business ethics matters ........................................................................................................................ 49

Unit 5: Ethical decision-making in business ..................................................................................................... 64

Unit 6: Governing Ethical Performance ............................................................................................................ 74

Unit 7 : Ethics Case Studies........................................................................................................................... 113

Answers to Revision Questions...................................................................................................................... 116

Bibliography ................................................................................................................................................... 125

List of Figures and Illustrations

Figure 2.1:Illustration on accumulation of covered topics........................................................................................... 22

Figure 2.2: Dimensions of corporate responsibility Source: Own analysis ................................................................. 27

Figure 3.1: Illustration on accumulation of covered topics.......................................................................................... 35

Figure 4.1: Illustration on accumulation of covered topics.......................................................................................... 51

Figure 5.1: Illustration on accumulation of covered topics.......................................................................................... 66

Figure 6.1: Illustration on accumulation of covered topics.......................................................................................... 77

Figure 6.2: Ethics reporting structure ....................................................................................................................... 102

Figure 6.3: Ethics reporting structure Source: Own analysis.................................................................................... 103

Figure 6.4: Unethical culture behaviour demonstration ............................................................................................ 105

Figure 6.5: Ethical behaviour demonstration ............................................................................................................ 106

We hope you enjoy the module.

C. Learning Outcomes and Associated Assessment Criteria of the Module

Learning Outcomes of the Module Associated Assessment Criteria of the Module

 Code of conduct is analysed to understand that it may

 The relationship between ethics policies and code of conduct

D. Learning Outcomes of the Units

F. How to Use this Module

H. Prescribed and Recommended Textbook/Readings

Special Feature Icon Explanation

The Associated Assessment Criteria is the evaluation of the students’

You may come across links to Videos Activities as well as instructions on

Unit Learning Outcomes

CONTENT LIST LEARNING OUTCOMES

1.1 Introduction  Introduce content area in the units

1.2 Definition of Business  Define Business

1.3 Definition of Ethics  Define the Concept of Ethics

1.4 Definition of Business Ethics  Define Business Ethics

1.8 Integrity  Evaluate and analyse the perceptions of ethics

1.10 Summary  Summarise content areas covered in the units

Prescribed / Recommended Reading

UNIT 3 UNIT 4 UNIT 5

Figure 1.1 : Illustration on accumulation of covered topics

1.2 Definition of Business

b) Corporate responsibility – Business as an organisation, mostly find themselves in a network of relationships

Table 1.1: Stakeholders and their needs

Employees Security over job

Suppliers Credit paid back in time

Customers Deliver quality products/services at affordable price

Government Compliant to set laws and regulations, honour tax

Investors Get profit share and dividends

Society Socially responsible

Media Do not offend their personal interest

1.3 Definition of Ethics

Let us take a look at the example below:

1.4 Definition of Business Ethics

1.5 Right, Wrong and Dilemmas

1.6 Ethics and the law

1.7 Ethics and Values

1.9 Personal and organisational ethics

Suggested Solutions to questions provided in unit 1.

Unit Learning Outcomes