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 Business Studies Grade 12.  Topic 3: Ethics and Professionalism.

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Presentation on theme: " Business Studies Grade 12.  Topic 3: Ethics and Professionalism."— Presentation transcript:

1  Business Studies Grade 12

2  Topic 3: Ethics and Professionalism

3  INTRODUCTION: o Ethics refers to conduct we perceive as right and wrong. o Business ethics refers to accepted principles of right and wrong that direct the behaviour of business people, employers and employees. o Business ethics involve: Corporate social responsibility. Issues regarding the rights and duties of a company and its shareholders. Issues concerning relations between different companies, e.g. takeovers and industrial espionage. Leadership issues, e.g. corporate governance. Political contributions made by business enterprises. The misuse of corporate ethics policies as marketing instruments.

4  ETHICAL BEHAVIOUR AND ETHICAL BUSINESS PRACTICE: o Ethical behaviour goes beyond obeying laws, rules and regulations and involves doing the right thing. o In simple terms, ethics means the moral principles that serve as a guide between right and wrong. o Ethical business practices refer to honest when doing business, safety in the workplace and social and environmental issues, for example. o It should also be borne in mind that what is ethically for one culture / population group it is unethical for another group. o Ethical codes have been developed for industries, companies, managers and employees because the cost of white collar crime is high – both for businesses and society.

5  ETHICAL BEHAVIOUR AND ETHICAL BUSINESS PRACTICE: o A code of ethics is a document which explains a business’ values and principles. o Businesses should have a strict code of ethics for their employees and this code must be strictly enforced. o White collar crime refers to crimes such as fraud and money laundering. o The nature of ethical decisions and actions can be measured against the following questions: Do the decision / action comply with the company’s code of ethics? Are the decision / action within the framework of the law? Are the decision / action fair to the company’s stakeholders? Do I feel positive about my decision / action?

6  ETHICAL BEHAVIOUR AND ETHICAL BUSINESS PRACTICE:  The King Code (King III) o Business entities should act as responsible corporate citizens. o But issues like ethics and corruption challenge responsible citizenship. o The King Code of corporate governance provides a framework for dealing with issues such as corporate governance, ethics and corruption. o Corporate governance refers to the way in which a company is governed and it explains the relationship between the company and its stakeholders (e.g. shareholders, customers, directors, managers) o The Code was developed by Judge Mervyn King and the third version of the King Code (King III) was released early in o Retired Judge Mervyn King was chairman of the first committee on Corporate Governance in July 1993.

7  ETHICAL BEHAVIOUR AND ETHICAL BUSINESS PRACTICE:  The King Code (King III) o The Code applies to all entities. o The reason for the development and implementation of the Code was the occurrence of corruption in businesses. o King III focuses on: Responsibility Accountability Discipline Fairness Leadership Independence Transparency Social responsibility

8  ETHICAL BEHAVIOUR AND ETHICAL BUSINESS PRACTICE:  The King Code (King III) o The Code provides detail on: The boards and directors: role, composition, appointment process, director development, remuneration of directors. Audit committees Risk management Managing stakeholder relationships. Internal audits Integrated sustainability reporting and disclosure Compliance with laws, regulations, rules and standards. Compliance and enforcement Fundamental and affected transactions

9  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  Criteria of ethical and professional behaviour o Businesses are operating in an ethical and professional manner if the following criteria are met: The business must create benefits for society. The business must be sustainable. The business must not be harmful to society. Business operations must take place within the boundaries of the law. Business operations must be carried out responsibly.

10  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  Unethical business practices o Unethical business practice does not comply with the above criteria. o Examples of unethical business practice includes:

11  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  Unethical business practices o Examples of unethical business practice includes:

12  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  Unethical business practices o Examples of unethical business practice includes:

13  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  Unethical business practices o Examples of unethical business practice includes:

14  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  More examples of ETHICAL and UNETHICAL behaviour Examples of ETHICAL behaviour: Objective and impartial action. Transparency Confidentiality of information. Caring for the environment. Avoid conflicts of interest. Stay within legal provisions. Committed and responsible. Take reasonable steps to ensure that employees behave correctly, etc.

15  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  More examples of ETHICAL and UNETHICAL behaviour Examples of UNETHICAL behaviour: Dishonesty, fraud and lack of transparency: for example: the truth about the origin of the product is fabricated, forged products are marketed under a well-known brand, not honest when information is provided. Maximum profit at the expense of customers: price of products continues to rise while the purchase price was reduced. Falsification of documents: ‘creative accounting’ to keep shareholders happy or to evade income taxes. Infringement on other people’s privacy: use of confidential information of stakeholders for personal benefits.

16  ETHICAL AND UNETHICAL BUSINESS PRACTICE:  More examples of ETHICAL and UNETHICAL behaviour Examples of UNETHICAL behaviour: Sexual discrimination: favouring certain genders in the appointment of employees to fill vacant positions. Business espionage: illegally obtain information about the business of a competitor or new products developed by competitors. Emotional manipulation of people: encourage people to buy products now because a scarcity in the future will be encountered or that prices will be increased. Tax evasion: do not declare all income that the business has earned, etc. Bribery: e.g. pay someone or give the person an asset such as a vehicle to receive certain favours in return.

17  THE DIFFERENCE BETWEEN ETHICS AND PROFESSIONALISM:

18  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o A professional person is someone who is paid to perform specialised tasks, e.g. doctors, pharmacists. o Nowadays, the term is applicable to a broader career span to include highly qualified professions and skills e.g. professional artists, football and rugby players, etc. o Professional business practice describes appropriate behaviour for an occupation. o Doctors, accountants and teachers, for example, all have their own rules of professional conduct. o Professional behaviour involves doing what you are supposed to do while you are at work.

19  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o Criteria for professionals: Exceptional and specialised knowledge in the professional field Excellent skills in the profession Good quality performance High standards of professional ethics, behaviour and work activities Good motivation and work moral Master in his / her area o Any person can be professional in his / her work. It is no longer just about qualifications and university degrees, but also about hard work, honesty, attitude and values and social responsibility. o Work should be dealt with, with pride and dedication to maintain high standards of performance.

20  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o Examples of professional and unprofessional behaviour:

21  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o Examples of professional and unprofessional behaviour:

22  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o Examples of professional and unprofessional behaviour:

23  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o More examples of unprofessional behaviour: Professional misconduct on social media / websites / blogs, etc. Discuss work problems with other people in person or through on-line talks. Hate speech. Use of foul language. Rudeness. Poor telephone etiquette

24  PROFESSIONAL AND UNPROFESSIONAL BUSINESS PRACTICES: o Principles for professional behaviour:

25  THE RELATIONSHIP BETWEEN ETHICAL AND PROFESSIONAL BEHAVIOUR : o Personal ethics refers to an individual’s conscience, while professional ethics refers to the adherence to a professional code. o The two roles can sometimes be in conflict with each other: o The difference between ethical and professional behaviour is based on cultural, religious and community norms. An auditor audited his friend’s books. It is found that the accounting was irregular and there was tax evasion over a period of time. His personal ethics will be loyalty to his friend but professional ethics require him to report the irregularity.

26  THE RELATIONSHIP BETWEEN ETHICAL AND PROFESSIONAL BEHAVIOUR :

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28 o The link between ethical behaviour and professionalism is clear. o Unethical behaviour almost certainly also constitutes unprofessional behaviour. o However, being unprofessional doesn’t always involve unethical behaviour, for example:

29  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?: o Although the main purpose of business is to make profits for the owner(s) / shareholders, there is increasing pressure on businesses to provide professional, ethical and responsible business practices. o It requires that businesses always have to find ways to strike a balance between profit and the application of ethical and professional business practices. o The provisions of the King Code should be applied.

30  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Not starting a venture at the expense of someone else o An enterprise should not exist at the detriment of employees, the community or the environment. o The enterprise should make a positive contribution towards alleviating poverty, creating employment and uplifting society. o The management team may not take unnecessary risks with investors’ money. E.g. directors of companies should use the capital invested by shareholders in the company, wisely and transparently. o Examples of this unprofessional business practice were Master Bond in the nineties and Fidentia in the 2000s.

31  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Not starting a venture at the expense of someone else o Master Bond, as a business, stole over R600 million of pensioners’ savings and retirement money invested in the business. This business pretended that they were a registered bank, whose deposits from pensioners are protected by the SA Reserve Bank. They received deposits as investment, especially from pensioners and these deposits would be used to buy real estate on which dwellings and shops would be built. Most of these developments had never existed and some of the land Master Bond indicated they have bought was in the sea and not on land. Documents were falsified to indicate that it seems that the deposits (investments) were used to develop property. While the investors lost their money, the owners and managers of Master Bond lived in luxury

32  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Not starting a venture at the expense of someone else o In the Fidentia scandal, the owner and executive management of Fidentia took R694 million form the pension fund of the “Living Hands – trust” for widows and orphans to reinvest it. While the vulnerable persons (widows and orphans) were waiting for monthly payments (interest) on the investment, the executive management of Fidentia never reinvested the money, but it was used to pay themselves huge salaries.

33  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Payment of fair wages o Employees must be compensated for their contribution towards the enterprise. o The efforts of employees contribute to the enterprise’s profit and employees should be compensated accordingly. o The salaries of executives and employees should be in proportion to the position the employee held. o In some businesses (such as Master Bond and Fidentia) the executives received exorbitant salaries while employees received meagre salaries. o Employees may not be exploited by giving them minimum salaries just because jobs are scarce and that they feel that they need to work for a wage / salary that the employer offer. o Compensation and working conditions may not be weaker than the BCEA specified for the specific industry. o Provision must be made for fair performance appraisal and promotion possibilities. This appraisal should be agreed between the employer and employee. The evaluation of ethical behaviour should be part of the performance appraisal system. o Nepotism should be avoided.

34  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Regular payment of tax o Legislation compels businesses and individuals that generate income, to pay tax. o “Creative accounting” where some income is not recorded, may not e applied as business practice “. o If people or businesses evade tax, it is unfair to all people and business enterprises that regularly pay tax. o Tax returns should be submitted in time (before the annual deadline) at the South African Revenue Service (SARS). o These returns must have a fair statement of revenue and expenditure. o Information technology may not be used to manipulate income or to make transactions’ data to occur complex in order to make inspection difficult.

35  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Regular payment of tax o Tax officers should under no circumstances be bribed to accept incorrect information. o In cases where the tax officer suggests that a bribe will be accepted for incorrect tax information, that officer must be reported to SARS. o Tax money is used to the advantage of everybody. o Tax money is applied for the benefit of all and to keep society functioning, e.g. Funding the police service Building and maintaining prisons Building public hospitals Maintaining and building new roads Education

36  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Use reliable / honest accountants / auditors with good reputation o No business can afford to make use of accountants / auditors who are known for their unethical and unprofessional practices. o The bookkeepers of Master Bond and Fidentia has been guilty of “creative accounting” by covering large personal loans to executives because it is actually a way of stealing the money.

37  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Openness and transparency o All transactions and negotiations of the business must be open and transparent. This means no information may be withheld and there may not be hidden agendas. o The business must make the employees aware of the different policies in the business, as well as legislation applicable to specific employees and ensure that employees adhere to these policies and laws.

38  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Social responsibility o The community should be involved in the decision making and implementation of plans and programs relating to social responsibility. o These programs should work towards the lifting of the community in which the business operates and must be sustainable.

39  WAYS IN WHICH RESPONSIBLE, ETHICAL AND EFFECTIVE BUSINESS PRACTICES SHOULD BE CONDUCTED?:  Adequate internal control o Control over the business’ ethical code and codes of conduct should be applied consistently. o Corrective measures must be implemented when employees deviate, before it is too late and the company’s image is harmed. o Recognition for compliance with these codes should also be given.

40  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Taxation

41  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Sexual harassment

42  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Sexual harassment

43  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Pricing of goods in rural areas

44  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Price-fixing

45  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Unfair advertising

46  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Unfair advertising

47  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Unfair advertising  Examples: o Prices are manipulated by “free gifts” that accompanies the product when the consumers purchase it. o Businesses advertise a particular item at a very low price to attract consumers, but when consumers visit the store, the item is not available at the advertised price. o Buy one and get one free, but there are hidden costs included that the consumers had to pay. o Advertise e.g. a living room set with accessories such as reading lamps, etc. as shown in the illustration, without specifying that the reading lamp are not included in the advertised price.

48  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Unfair advertising  Examples: o Advertising of refurbished second hand goods as new goods is misleading and unfair. o The use of a competitor’s name or trademark of a competitor in an advertisement when different products are compared. o The allocation of misleading characteristics to a product, e.g. a vacuum cleaner is advertised an described as if it has excellent suction action, but the product does not have that feature. o Presentation and/or wording in the advertisement amount to concealment where certain information is purposely omitted, e.g. advertising a used car, without stating the year of manufacturing or mileage. o Ambiguity and exaggeration in an advertising may mislead the consumer.

49  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Unauthorised use of funds

50  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Abusing work time

51  ISSUES THAT COULD CHALLENGE RESPONSIBLE, ETHICAL AND PROFESSIONAL BEHAVIOUR:  Abusing work time


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