Nature of ethics and its relevance to business and the accountancy profession

Nature of ethics and its relevance to business and the accountancy profession

In business, ethics is defined as the application of ethical values to business behavior. Ethical values are words such as integrity, honesty, responsibility, transparency and fairness amongst others. It is how the business or entity brings these values ‘alive’ or applies them within their organization as it transacts its business that is key. How it conducts its relationships with its employees, its shareholders, its customers, its suppliers and with those in the community in which and wherever it operates. It is therefore about how the entity does its business not what it does, so it is not about the product or service the company provides.

 

Ethical values play out through behaviors. They are highly relevant to business and those operating in it, especially professional people. There is the expectation in the public mind that professionals within organizations will play a leadership role in ensuring that those entities will act ethically in transacting their business.

That expectation is rooted in ‘trust’ that businesses know what they are doing and are doing it in society’s interest, as part of wealth creation for all. This is the ‘trust me’ model. This model has been eroded as society recognized as it could not trust business to ‘do the right thing’ particularly in the arena of non-financial focused activity. So after the 1960s/1980s when major companies became manager run and led rather than family owned and led, the model evolved to ‘involve me’. This model has continued to evolve through the stages of ‘show me’, asking companies to demonstrate how they do their business; to ‘prove to me; where society expects companies to provide independent verification and assurance of how they do their business. The ultimate model, if companies do not behave, is to impose law on them to do so: ‘obey me’. The law is a blunt instrument in curing behaviour because it cannot define or cover all instances of poor behaviour, and leads to a compliance or tick the box culture rather than one based on ‘doing the right thing’ naturally.