Ethics - 4

Class COR3302

Type Seminar

Reviewed

Status Not started

Status Done

Lecture 4
Group Project:

Take on the role of a facilitator of an ethics seminar. Present it in a engaging

way

Explain issue, consider ethical issues, analysis

Presentation – 30(+5) min. 20 page report

Summary

Key ethical issues

Ethical theories to analyze case

Discussion of moral reasoning of key players

Summary of group’s opinions + proposal to deal with those ethical issues

Deadline is oct 31

Midterms:
MCQ + short answer -> read the textbook omg
Content:

1. Ethical Duties of Accountants

Even in free markets, people & companies must work within law

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 The markets rely on professionals embedded in the market as gatekeepers
of the law

Attorneys(ensure contracts and laws are followed)

auditors(verify FS)

analysts(evaluate financial prospects in credit companies for eg)

BOD(represent shareholder to monitor company to act in the interest of

shareholders

Duties of accountants

Roles based rules, which guide and control how accountants will act as
soon as you enter this role. Ensures those in the market place conform
to ideas

Eg: membership in isca, icaew, or cpa

ISCA: integrity, objectivity, professional competence and due care,

confidentiality, professional behaviour

Conflicts of Interest

A position of trust is given to a person, who has an interest in another

position which contradicts with the first position of trust.

Ensure all conflicts are declared, and one must remove themselves
from the position of the conflict

Professionals have fiduciary responsibility to place their ethical duties

over themselves

Trust is integral in accounting and finance

Trust is the financial professionals greatest asset

Even the perception of a conflict of interest must be avoided

2. Case discussion: Enron

What contributed to the scandal

The policy of firing bottom 10% + showing results -> incentive to

manipulate

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 Mark to market accounting is not supposed to be use for pnl
transactions

3. Ethics in corporate governance

Corporate governance is how an organization is run. It usually relates to

directors, who oversee what the managers do on behalf of the
shareholders

Legal duties:

Duty of care – exercise of reasonable care by BOD to ensure

executives carry out their responsibilities in the best interests of the
company

Reasonable care does not mean they need to be an expert. They

can hire experts and consultants. But they still need to their
business judgement

Duty of good faith – must act in the best interest of the organization(or
shareholders)

Loyalty – faithfulness to the organization

Fiduciary duties

Singapore code of corporate governance

SGX follows a comply or explain policy

4. Case discussion: CEO vs average worker

For ceo:

In a capitalist society I believe payments are made based on how much

value an individual can create for a shareholder/company

Ceo takes more responsibility and makes decisions that directly

improve company profitability, thus they are paid more by the
company. Average employees as individuals are not likely to contribute
as much to the shareholder wealth

Employees as a collective are necessary for a company to grow, they

implement the decisions made by the CEO. But would reducing the ceo

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 pay and transferring it to employees be enough? Especially when there
are thousand of employees?

It would be better to use profits to increase their pay or providing

additional sharebased payments.

5. Executivecompensation

Ceo pay and s&p 500 follows the same trend

Expected as pay is often performance based

But corporate profits and worker pay haven’t increased

Say on Pay: shareholders vote on executive compensation, not a

requirement rn in Singapore

can reduce excessive executive pay

Shareholders may not make decisions that are as informed as

those made by directors

Conflict of interest in compensation

The board has responsibilities in setting the pay

However, the ceo is often the chair of the board, and the board
members are also selected by the ceo. This creates a huge conflict of
interest

The higher pay is the motivator for a good ceo, because if they don’t
have the money they will look for another job

6. Whistleblowing

Internal whistleblowing is preferable

Ensure whistleblowers confidentiality

Shouldn’t immediately assume the accused is guilty, due diligence must be

taken

Must have procedures for whistleblowing – internal or external

7. Case study: snowden

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 From national security pov yes he threatened safety but from the rights of
an individual citizen , whistleblowing was the right choice

according to libertarianism the government shouldn’t be using our info

without our consent

its a concern between national security vs personal privacy

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