FREE ESSAY ON ACCOUNTING ETHICS

ACCOUNTING ETHICS

Contents 1. Introduction 2. What is Business Ethics? 3. The 10 Benefits of Business Ethics
4. Case Study on Nestle 4.1. The Impact of Business Ethics on Nestle 4.2. Nestle's view
on Business Ethics 4.3. The Implications of Business Ethics on Stakeholders 5. Conclusion
Introduction Businesses have power through their ability to spend vast amounts of money.
They have the ability to enhance or change situations that the common individual does
not. As organisations affect many people, they have obligations to their employees,
consumers, community and the world. They have a responsibility to conduct business in a
way that is not harmful and which positively benefits as many people as possible and
themselves. Although this sounds simple, it is easier said than done! as there will
always be a conflict of interest between various groups of people. Any decisions made by
businesses need to be made with an informed awareness of the specific situation and then
act according to some sort of system of principals which is Business Ethics. What is
Business Ethics? Business ethics is exactly the same as normal ethics, and that is
knowing what is right or wrong, and learning what is right and what is wrong in a
business environment. Then doing the right thing, but the right thing is not as
straightforward as explained in many business ethics books. Most ethical dilemmas in the
workplace are not simply a matter of Should she steal from him? or Should he lie to his
boss? Businesses cannot function without ethics, why? Society dictates a set of rules and
conformities and seeing as all businesses strive after common goals it means that these
goals can only be achieved on the basis of standards, values and morals in society. It
can be assumed that business life has to be called 'moral' as well. As in society,
standards and values are spontaneously formed once people come together and start
'behaving', likewise, business life becomes exactly the same and that's when morals come
into effect, and when businesses decide on implicit or explicit ways to achieve certain
goals and then are agreed on. Businesses in general are working on the basis of an ethics
that settles different interests. The standards and values within companies can be
characterised as mutual respect. In this respect it is in everyone's interest, and is
considering people as an end in themselves, not as a means, reciprocity and fairness.
This ethics is passed down and filtered to a group of stakeholders who have an interest
in the company. These parties usually are: personnel, customers, suppliers,
subcontractors, shareholders, society and those who speak on behalf of the environment
and future generations Many ethicists say there's always a right thing to do based on
moral principle, and others believe the right thing to do depends on the situation,
ultimately it's up to the individual on what they do and on what they believe to be the
right thing is. Sometimes the right thing is not necessarily the best thing to do. Many
philosophers consider ethics to be the science of conduct. Twin Cities consultants Doug
Wallace and John Pekel (of the Twin Cities-based Fulcrum Group) explain that ethics
includes the fundamental ground rules by which we live our lives. Many professionals in
ethics say that new ethical beliefs are state of the art legal matters, and that what
becomes an ethical issue of today is then later made into a law. Values that say how we
should behave are said to be moral values, values such as respect, honesty, fairness,
responsibility, etc. Statements about how these values should be implemented are
sometimes called moral or ethical principles. The concept of business ethics has been
seen to mean various things to different people, but usually it's knowing what is right
or wrong in the workplace and doing what's right in regard to effects of products,
services and relationships with stakeholders. Wallace and Pekel say that attention to
business ethics is critical during times of fundamental change, times much like those
faced now by businesses, both non-profit and for-profit. In times of fundamental change,
values that were previously taken for granted are now strongly questioned. Many of these
values are no longer followed. Therefore, there are no clear morals to guide today's
leaders through difficult problems about what is right or wrong, just vague perceptions
of what should and has already been done. A focal point on ethics in the workplace shows
and alerts leaders and staff on how they should act. An attention to ethics in the
workplaces helps ensure that when leaders and managers are struggling in times of crises
and confusion, they retain a strong moral focus. However, attention to business ethics
provides numerous other benefits, as well. Note that many people believe that business
ethics, with its continuing focus on doing the right thing, only asserts the obvious be
good, don't lie,, and so these people don't take business ethics seriously. For many
people, these principles can go right out the door during times of stress. Business
ethics can be a strong preventative medicine. 10 Benefits of Business Ethics These
benefits were attained from http//: www.businessethics.com/index/benefits.htm Many people
are used to reading or hearing of the moral benefits of attention to business ethics.
However, there are other types of benefits, as well. The following list describes various
types of benefits from managing ethics in the workplace. 1. Attention to business ethics
has substantially improved society. A matter of decades ago, children in our country
worked 16-hour days. Workers' limbs were torn off and disabled workers were condemned to
poverty and often to starvation. Trusts controlled some markets to the extent that prices
were fixed and small businesses choked out. Price fixing crippled normal market forces.
Employees were terminated based on personalities. Influence was applied through
intimidation and harassment. Then society reacted and demanded that businesses place high
value on fairness and equal rights. Anti-trust laws were instituted. Government agencies
were established. Unions were organised. Laws and regulations were established. 2. Ethics
programs help maintain a moral course in turbulent times. As noted earlier in this
document, Wallace and Pekel explain that attention to business ethics is critical during
times of fundamental change -- times much like those faced now by businesses, both
non-profit and for-profit. During times of change, there is often no clear moral compass
to guide leaders through complex conflicts about what is right or wrong. Continuing
attention to ethics in the workplace sensitises leaders and staff to how they want to
act. 3. Ethics programs cultivate strong teamwork and productivity. Ethics programs align
employee behaviours with those top priority ethical values preferred by leaders of the
organisation. Usually, an organisation finds surprising disparity between its preferred
values and the values actually reflected by behaviours in the workplace. Ongoing
attention and dialogue regarding values in the workplace builds openness, integrity and
community -- critical ingredients of strong teams in the workplace. Employees feel strong
alignment between their values and those of the organisation. They react with strong
motivation and performance. 4. Ethics programs support employee growth and meaning.
Attention to ethics in the workplace helps employees face reality, both good and bad, in
the organisation and themselves. Employees feel full confidence they can admit and deal
with whatever comes their way. Bennett, in his article Unethical Behaviour, Stress Appear
Linked (Wall Street Journal, April 11, 1991, p. B1), explained that a consulting company
tested a range of executives and managers. Their most striking finding: the more
emotionally healthy executives, as measured on a battery of tests, the more likely they
were to score high on ethics tests. 5. Ethics programs are an insurance policy -- they
help ensure that policies are legal. There are an increasing number of lawsuits in regard
to personnel matters and to effects of an organisation's services or products on
stakeholders. As mentioned earlier in this document, ethical principles are often
state-of-the-art legal matters. These principles are often applied to current, major
ethical issues to become legislation. Attention to ethics ensures highly ethical policies
and procedures in the workplace. It's far better to incur the cost of mechanisms to
ensure ethical practices now than to incur costs of litigation later. A major intent of
well-designed personnel policies is to ensure ethical treatment of employees, e.g., in
matters of hiring, evaluating, disciplining, firing, etc. Drake and Drake (California
Management Review, V16, pp. 107-123) note that an employer can be subject to suit for
breach of contract for failure to comply with any promise it made, so the gap between
stated corporate culture and actual practice has significant legal, as well as ethical
implications. 6. Ethics programs help avoid criminal acts of omission and can lower
fines. Ethics programs tend to detect ethical issues and violations early on so they can
be reported or addressed. In some cases, when an organisation is aware of an actual or
potential violation and does not report it to the appropriate authorities, this can be
considered a criminal act, e.g., in business dealings with certain government agencies,
such as the defence Department. The recent Federal Sentencing Guidelines specify major
penalties for various types of major ethics violations. However, the guidelines
potentially lower fines if an organisation has clearly made an effort to operate
ethically. 7. Ethics programs help manage values associated with quality management,
strategic planning and diversity management -- this benefit needs far more attention.
Ethics programs identify preferred values and ensuring organisational behaviours are
aligned with those values. This effort includes recording the values, developing policies
and procedures to align behaviours with preferred values, and then training all personnel
about the policies and procedures. This overall effort is very useful for several other
programs in the workplace that require behaviours to be aligned with values, including
quality management, strategic planning and diversity management. Total Quality Management
includes high priority on certain operating values, e.g., trust among stakeholders,
performance, reliability, measurement, and feedback. Eastman and Polaroid use ethics
tools in their quality programs to ensure integrity in their relationships with
stakeholders. Ethics management techniques are highly useful for managing strategic
values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their
ethics programs into their strategic planning process. Ethics management programs are
also useful in managing diversity. Diversity is much more than the colour of people's
skin -- it's acknowledging different values and perspectives. Diversity programs require
recognising and applying diverse values and perspectives -- these activities are the
basis of a sound ethics management program. 8. Ethics programs promote a strong public
image. Attention to ethics is also strong public relations -- admittedly, managing ethics
should not be done primarily for reasons of public relations. But, frankly, the fact that
an organisation regularly gives attention to its ethics can portray a strong positive to
the public. People see those organisations as valuing people more than profit, as
striving to operate with the utmost of integrity and honour. Aligning behaviour with
values is critical to effective marketing and public relations programs. Consider how
Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in
Alaska. Bob Dunn, President and CEO of San Francisco-based Business for Social
Responsibility puts it best: Ethical values, consistently applied, are the cornerstones
in building a commercially successful and socially responsible business. 9. Overall
benefits of ethics programs: Donaldson and Davis, in Business Ethics? Yes, But what can
it Do for the Bottom Line? (Management Decision, V28, N6, 1990) explain that managing
ethical values in the workplace legitimises managerial actions, strengthens the coherence
and balance of the organisation's culture, improves trust in relationships between
individuals and groups, supports greater consistency in standards and qualities of
products, and cultivates greater sensitivity to the impact of the enterprise's values and
messages. 10. Last and most formal attention to ethics in the workplace is the right
thing to do. Case Study on Nestle All information for this was ascertained at the nestle
web site http//www.nestle.com. Nestle's view on Business Ethics Nestle's view on business
ethics is one of great importance. As you can see from their web site www.nestle.com this
is one of their major focal points. Nestle, like many other businesses have created what
they believe to be a comprehensive ethical policy or codes of ethics, in plain they are
lists of what they believe is ethical behaviour and how they should behave. However, the
existence of a code of ethics may not guarantee that the company will conduct itself
ethically. Ethics codes are often drawn up in response to scandals and to protect the
name of the company, and then this only state its legal responsibilities and the conduct
it expects from its employees, rather than listing any ethical principals and aspirations
that it holds. The emphasis has often been on the company setting standards for the
employees to meet, so it will not be caught breaking the law, rather than realising that
the company itself needs to be guided in its business conduct. Nestle have got an ethics
policy from legislation to child labour, they have covered every single topic they
believe comes under the word of ethics. Nestle believe that every single area of their
business needs to have an ethics policy in which they should be able to follow, as they
are a global company and their arms stretch to many different area's. Nestles Global
Commitment and Responsibilities Since Henri Nestle developed the first milk food for
infants in 1867, the Nestle company has gained vast experience through its scientific
research into the nutritional needs and food preferences of consumers of all ages. No
other food company invests so much in fundamental and applied research. The company has
been a leading food manufacturer and major purchaser of agricultural raw materials for
over 130 years. Food and agriculture are an integral part of the social, cultural,
economic and political context of every community. Since Nestle activities in
Switzerland, its country of origin, account for less than 2% of its global turnover,
Nestle learned very early to respect the social, political and cultural traditions of all
countries in which the products are produced and sold. They also learned to be a highly
decentralised people and products oriented company rather than a systems centred
organisation. Today, Nestle is the world's largest and most diversified food company,
with nearly 500 factories around the globe, producing healthy, enjoyable food products
for every stage of life. Quality is the cornerstone of the success of the Nestle Company.
Everyday, millions of people all over the world show their trust in the company by
choosing Nestle products. This trust comes from a quality image that has been built up
for over a century. Nestle carries out its global social responsibility, firstly, by
taking a long term approach to strategic decision making which recognises the interests
of our consumers, shareholders, business partners, and the world-wide economies in which
we operate. Secondly, our responsibilities and values are reflected by the commitment of
management and employees at all levels, to our Corporate Business Principles, which
define standards of behaviour for all companies in the Nestle Group, and are intended to
complement applicable legislation and international recommendations. P. Brabeck-Letmathe
Chief Executive Officer Nestle S.A. Nestle Corporate Business Principles From
www.nestle.com Nestle is committed to the following business principles in all countries.
Taking into account local legislation, cultural and religious practice: Nestle's business
objective and that of management and employees at all levels, is to manufacture and
market the company's products in such a way as to create value that can be sustained over
the long term for consumers, shareholders, employees, business partners and the large
number of national economies in which Nestle operates. Nestle does not favour short-term
profit and at the expense of successful long term business development, but recognises
the need to generate profit each year in order to maintain the support of the financial
markets, and to finance investments. Nestle believes that, as a general rule, legislation
is the most effective safeguard of ethical conduct, although in certain areas, additional
guidance to management and employees in the form of voluntary business principles is
beneficial in order to ensure that the highest standards are met throughout the
organisation. Nestle is conscious of the fact that the success of a corporation is a
reflection of the professionalism, conduct and ethical values of its management and
employees, therefore recruitment of the right people, and ongoing training and
development are crucial. Nestle recognises that consumers have a legitimate interest in
the company behind the Nestle brands, and the way in which the Nestle Company operates.
The Impact of Business Ethics on Nestle As you can see nestles whole foundation is based
around ethics. As Nestle is a global company they have to take in many factors when
considering their ethical policy, and the fact that they are a global organisation, makes
that process one step harder. Being a global company Nestle is affected by different laws
around the globe. Nestles reputation is paramount to them so by having a strict code of
ethics is to their advantage as consumer awareness is growing with each and every day.
More and more people are becoming concerned and disturbed by moral issues surrounding
companies, if a company does a certain action that consumers dislike, it can have drastic
effects to revenues. Nestle have had first hand experience of the power of consumers, as
not so long ago was involved in allegations that it was supplying unsafe addictive baby
milk supplements to mothers in the 3rd world. This brought on an outrageous response from
consumers all around the world, as this was seen to be immoral and totally unacceptable
by such a large well-known and respected organisation as Nestle. As these allegations
spread, it was devastating to Nestle as many retail outlets began to boycott Nestle by
removing all Nestle products from the shelves. This boycott was done for several reasons
by different outlets, the reason for this was because of consumers. If other companies
were seen to be siding with Nestle, then that could conflict with their own ethical
policies and consumers could be deterred by that fact. With the introduction and
implementation of a strict and concise ethical policy, Nestle has seemed to redeem
themselves by ensuring a good upstream communication. Nestle have also reached back into
the good books by promoting their codes of ethics by various media's and making them
readily available to the public. A list of Nestle ethics can be found on their web site,
this list has covered everything from environmental issues to child labour, by doing this
they have appealed to the moral issues facing everyday people and the emotions of its
consumers. As Nestles ethics are so detailed and cover almost every aspect of moral
dilemmas in various societies, Nestle now have the responsibility to live up to their
word, and make sure that this policy does exactly what it says. The impact that this will
have on them will be great, as it will be a fairly costly process to monitor all of these
conditions globally. This would also have a positive effect in the respects of its
consumers, as in this age the consumer market is more competitive than it ever was, and
Nestle need to be seen as a consumer friendly organisation, sympathetic, moral and
ethical. Consumers would see this as Nestle doing something beneficial and good for
people. Implications of Business Ethics on Stakeholders The implications on stakeholders
of Nestle is plain and simple, whatever Nestle do, so do they. What is meant by this is
as follows; any actions that are taken upon Nestle than the stakeholders are doing these
actions also, it can also be called, guilt by association. Any stakeholders also must
abide by the ethics policies set out by Nestle, as guilt by association also functions
the opposite way. Any actions deemed unethical or any unethical behaviour by either party
can result in harm for the other, a classic lose-lose situation, therefore upstream
communication is essential for these ethics policies to be adhered to. The impact on all
stakeholders can be a great strain, as Nestle have a very thourough and comprehensive
ethics policy, to conform to this could take a great deal of time, Conclusion What is
Business Ethics? Plain and simple, ethics is the choice between right and wrong. 
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