BUSINESS ETHICS

 Understand and explain what is meant by business ethics.  Understand the role or regulators and regulation. OBJECTIVES

 Ethics – set of moral principles or values that govern behaviour.  Code of Ethics – document that outlines the principles of conduct to be used in making decisions within a business. BUSINESS ETHICS

 Can deal with:  Adherence to the law  Product safety and quality  Health and safety in the workplace  Conflicts of interest  Staffing and marketing practices  Financial reporting  Pricing, billing, and contracting  Protection of the environment CODE OF ETHICS

 The obligation that businesses and their activities should benefit society as a whole not just shareholders – Stakeholder Theory.  Can be demonstrated through:  Philanthropy and volunteerism  Environmental awareness  Sensitivity to diversity and quality of work life SOCIAL RESPONSIBILITY

 Exist to clarify and enforce obligations between companies and stakeholders.  Three kinds:  Hard regulation – legally binding obligations (eg. Corporations Act 2001).  Soft regulation – non-binding, involuntary codes of conduct, society expectations etc.  Hybrid regulation – not strictly binding but entail some penalty if not followed (eg. Fine or penalty by professional body). REGULATION

 Enforce rules enacted and implemented.  Regulators measures can vary from self- regulation to enforcement of mandatory penalties with no discretion. REGULATORS

 By law, companies must disclose financial information to the public. Enron, an energy distributing company was in a partnership with Arthur Anderson, an accounting firm. Arthur Anderson was responsible for auditing the financial books of Enron. Executives from both businesses secretly knew that Enron was in financial disaster and changed the numbers around in the financial books to show that the company was doing quite well. They shredded documents to hide the fact that Enron was in financial trouble. Enron executives later told their employees through s that the company is growing and in good financial status. Enron employees were encouraged to invest in the company through their retirement account. Several months later, Enron filed for bankruptcy and their stock price fell from $65 a share to $0.60 a share. Is this action illegal? Explain your reasoning. Does the action violate company or professional standards? Who is affected, and how, by the action? (Positive & Negative Affects) FINANCIAL DISCLOSURE CASE STUDY