Transcript Acca ethics seminar university of ghana business school
ACCA ETHICS SEMINAR UNIVERSITY OF GHANA BUSINESS SCHOOL
TOPIC: “ IMPORTANCE OF WORK ETHICS IN THE FINANCE PROFESSION – ACCA EXAMPLE” PRESENTER: KWAME BOSIAKO OMANE-ANTWI. PhD., FCCA SEPTEMBER 28 TH, 2011.
PRESENTATION OUTLINE
What Ethics are?
Importance of professional Ethics to the Finance profession Promoting ethical behavior – Role of Professional Accountants Examples of Financial Code of Ethics ACCA RuleBook Section 3 TAKEAWAYS Conclusion
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ETHICS IN FINANCE
QUOTABLE QUOTES
“ The first thing is the character before money or anything else” (J.P. Morgan in testimony before the US. Congress) “The professional concerns himself with doing the right things rather than making money, knowing that the profit takes care of itself if the other things are attended to” (Edwin LeFeure, Reminiscences of a stock operator.) “ Commerce is as a heaven, whose sun is trustworthiness and whose moon is truthfulness” (Baha ‘u’ llah , 1817 – 1892)
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ETHICS IN FINANCE QUOTABLE QUOTES CONT
.
“ Try not to become a man of success but rather try to become a man of value” (Albert Einstein, 1879 1955) “ A people that values its privileges above its principles soon loses both” Dwight David Eisenhower, 1890-1969;34 th President of USA.
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ETHICS IN FINANCE – THE DEBATE GOES ON
Integrity is paramount for a successful career in finance and business One learns, rather than inherits, integrity To some people, the world of finance is purely mechanical, devoid of ethical considerations The reality is that ethical issues are pervasive in finance.
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ETHICS IN FINANCE – THE DEBATE GOES ON CONT’D
Ethics and interwoven.
economics were once tightly The patriarch of economics, Adam Smith, was actually a scholar of moral philosophy.
Morality concerns norms and teachings.
Ethics concerns the process of making morally good decisions Ethics has to do with pursuing and achieving laudable ends Ethics is defined as the “science of morals” (the Oxford English Dictionary)
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ETHICAL IMPLICATIONS IN DECISION-MAKING
To see how the decision-making process in finance have ethical implications, consider the following prominent business-scandals revealed between 1998 and 2002: In Ghana: Cooperative Bank Bank for Housing and Construction Meridian BIAO. ( FALSE FINANCIAL REPORTING) The ‘A’ life case conundrum
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ETHICAL IMPLICATIONS IN DECISION-MAKING CONT’D
Enron (inflation of earnings and use of off balance sheet entities) Worldcom (revenue and expense recognition) Xerox (revenue and earnings inflation) Adelphia (loans and looting) Bristol-Myers (improper inflation of revenues through use of sales incentives)
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ETHICAL RELATED CORPORATE SCANDALS AND RELATED PECU SETTLEMENTS Client
Sunbeam Waste Management Baptist Foundation Cendant Enron Lincoln Saving Rite Aid Barings Bank Superior Bank First National Bank of Keystone
Auditor
Anderson Anderson Anderson Ernest & Young Anderson Arthur Young KPMG Coopers & Lybrand Ernest & Young Grant Thornton
Settlement
$ 251 million $ 220 million $ 215 million $ 335 million $ 375 million $ 400 million $ 125 million $ 1.4 billion $ 2.2 billion $ 169 million
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ETHICAL PRINCIPLE:
THE CORNERSTONE
“ When one acts on principle, one acts in accordance with a set of beliefs that can help determine the best course of actions in even the most difficult and challenging circumstance.
Auditing (Finance) Services are often required under situations and circumstances courage of David and the patience of Job.” that seemingly require the wisdom of Solomon, the (Crumbley; D. L.; Rezale; Z; Ziegenfuss; D.E
(2004) Master Auditing Guide 3 rd Edition; CCH Incorporated)
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GENERAL ETHICAL CONSIDERATIONS
i.
Exercising Responsibility
ii.
Acting in the Public Interest
iii.
Acting with Integrity
iv.
Acting Objectivity and Independently
v.
Acting with Due Care
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WHY ONE SHOULD CARE ABOUT ETHICS IN FINANCE
Managing in ethical ways is not merely about avoiding bad outcomes. There are at least five (5) positive arguments for bringing ethics to bear on financial decision-making:
Sustainability
Unethical practices are not a foundation for enduring, sustainable enterprise To incorporate ethics into our finance mind-set is to think about the kind of world that we would like to live in and that our children will inherit.
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WHY ONE SHOULD CARE ABOUT ETHICS IN FINANCE CONT’D
Ethical behavior builds trust. Trust rewards
The branding of products seek to create a bond between producer and consumer: a signal of purity, performance or other attributes of quality This bond is built by trust worthy behaviour.
As markets reveal, successfully branded products command a premium price.
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WHY ONE SHOULD CARE ABOUT ETHICS IN FINANCE CONT’D
This implicit bond, trust, or reputation can translate into more effective and economically attractive financial transactions and policies.
Ethics sets a higher standard than laws and reputations
To a large extent, the law is a crude instrument.
It tends to trail rather than anticipate behaviour To use only the law as thinking is denominator of social norms a basis for ethical to settle for the lowest common
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WHY ONE SHOULD CARE ABOUT ETHICS IN FINANCE CONT’D
Reputation and Conscience
By some estimates, the average annual income for a life time (even counting years spent in prison) is large- it seems that crime does pay If income is all that mattered, most of us would switch to this lucrative field Today people value their reputation, not for some nebulous financial gain but because people take pride in their good names.
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FOR WHOSE INTEREST ARE YOU GOING TO WORK OR WORKING?
Generally, the finance professional is one agent acting on behalf of others. For whom are you the agent? Two classic schools of thought emerge: •
Stockholders
Melton Friedman (1962) perhaps the most prominent exponent of the stockholder school of thought, has argued that the objective of business is to return value to its owners, and that to divert the objective to other ends is to expropriate shareholder value and thereafter the survival of the enterprise.
•
Stakeholders
Edward Freeman (1984) argued that the firm should be managed in the interest of the broader spectrum of constituents.
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W
HAT CAN YOU DO TO PROMOTE ETHICAL FINANCE BEHAVIOUR IN YOUR ORGANIZATION
(
OUR ROLE
)
o o o o An important contributor to unethical business practices is the existence of a work environment that promotes such behaviour. Leaders in corporate work places need to be proactive in shaping a higher-performance culture that sets higher ethical expectations: Adopt a code of ethics.
Talk about ethics within your team and or organization.
Reflect on your dilemmas Act on your ethics
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EXAMPLE OF FINANCIAL CODE OF ETHICS (COMPANY A)
Employees involved (TARGET GROUP): The Chief Executive Officer The Chief Finance Officer Head of Corporate Control , Corporate Treasury, Corporate Fiscal and Corporate Internal Audit Employees performing an accounting or financial function and all designated as belonging to the Target Group.
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EXAMPLE OF FINANCIAL CODE OF ETHICS (COMPANY A) CONT’D
Act honestly and ethically Act in good faith, responsible, with due care and integrity, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated Avoid conflicts of interest A “conflict of interest” occurs where an individual’s direct or indirect interest interferes of or appears to interfere with the interest of his/her organization
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EXAMPLE OF FINANCIAL CODE OF ETHICS (COMPANY A) CONT’D
Comply with applicable laws, rules and regulations.
Protect organization’s assets and resources.
Provide reliable financial reporting and disclosures.
Ensure reliable internal control.
Maintain a proper professional competence level.
Be accountable for adherence to the Financial Code.
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GRAPPLING WITH AN ETHICAL DILEMMA THE 12 POINT TEST (LAURA NASH, 1981)
1.
2.
3.
4.
5.
6.
Have I defined the problem correctly and accurately?
If I stood on the other side of the problem, how would I define it?
What are the origins of this dilemma?
To whom and to what am I loyal, as a person and as a member of a firm?
What is my intention in making this decision?
How do the likely results compare with my intention?
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GRAPPLING WITH AN ETHICAL DILEMMA THE 12 POINT TEST (LAURA NASH, 1981) CONT’D
7.
8.
9.
10.
11.
12.
Can my decision injure anyone? How?
Can I engage the affected parties in my decision before I decide or take action.
Am I confident that my decision will be as valid over a long period as it may seem at this moment?
If my boss, the CEO, the directors, my family, or the community learned about this decision, would I have misgivings about my actions?
What signals (or symbols) might my decisions convey, if my decision were understood correctly? If misunderstood Are there exceptions to my position perhaps special circumstances under which I might make a different decision?
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CODE OF ETHICS AND CONDUCT. ACCA RULEBOOK ISSUED JANUARY 2011
The Fundamental Principles set out the obligations placed on all members, whether or not they are in practice
Integrity
Members shall be “straightforward and honest in all professional and business relationships”
Objectivity
Members shall “not allow bias, conflict of interest or the undue influence of others to compromise their professional or business judgment.”
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CODE OF ETHICS AND CONDUCT. ACCA RULE BOOK ISSUED JANUARY 2011 CONT’D Professional Competence and due care
Members have a continuing duty to “ maintain professional knowledge and skill at a level required to ensure that clients or employees receive competent professional service”
Confidentiality
members shall respect the confidentiality of information “acquired as a result of professional and business relationships”
Professional Behaviour
Members shall comply with relevant laws and regulations and shall avoid any action that may discredit the profession. Members shall “ behave with courtesy and consideration” towards all with whom they come into contact in a professional capacity.
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THREATS CHALLENGING THE FUNDAMENTAL PRINCIPLES
Self-interest
Self-review
Advocacy
Familiarity
Intimidation
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LIABILITY TO DISCIPLINARY ACTION
Being guilty of misconduct in the course of carrying out professional duties or otherwise Performing work erroneously, inadequately, inefficiently or incompetently to such an extent, or on such a number of occasions, as to amount to misconduct.
Breaching any ACCA Bye-law or regulation.
Being disciplined by another professional body.
Becoming insolvent or entering into a voluntary arrangement or seminar.
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LIABILITY TO DISCIPLINARY ACTION CONT’D
Failing to satisfy a judgment debt without reasonable excuse for two (2) months.
N/B Misconduct includes (but is not limited to) any act likely to bring discredit upon the member, ACCA, or the accountancy profession.
Sanctions includes severe reprimand or admonished, fines etc. A member can also be excluded from membership
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TAKE AWAYS
WHAT DO YOU DO WHEN CONFRONTED WITH ETHICS PROBLEM
“
This may be the toughest step of all. The field of ethics can lend structure to one’s thinking, but has less to say about the action to be taken. When confronting a problem of ethics within an organization, one can consider a hierarchy of responses, from questioning and watching to whistle-blowing (either to an internal ombudsperson or , if necessary, to an outside entity) and, possibly, leaving the organization” (Ethics in Finance by Jacques Lemay, 2011)
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TAKE AWAYS
WHAT DO YOU DO WHEN CONFRONTED WITH ETHICS PROBLEM CONT’D
Ethics is one of the pillars on which stands success in finance It builds sustainable enterprise, trust, organizational and personal satisfaction The financial decision-maker must learn to identify, analyse, and act on the ethical issues that may arise.
Consequences, duties, and virtues stand out as three important benchmarks for ethical analysis.
Real business leaders will take the time to sort through the ambiguities of ethical dilemmas and do the “right things”
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TAKE AWAYS
ETHICS AND CORPORATE GOVERNANCE EDUCATION
1.
2.
3.
4.
The ethics Task Force of AACSB International Report 2004: ethics Education in Business School should cover the following four (4) core areas: Responsibility of Business in society Shareholders value creation culminating in wealth creation to provide opportunity to affect society and the environment Ethical Decision-Making Adjust ethical decision-making variety Consequentialist Deontology Virtue Ethical Leadership (Moral Managers) Corporate Governance Education
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LESSON
2011 SEPTEMBER LESSON UBS BANK OF SWISS ROGUE TRADER GHANAIAN KWAKU ADOBOLI (ESTIMATED LOSSES £ 1.5 BILLION) CHARGE SHEET: “while occupying a position, namely being a senior trader with Global Synthetic Equities, in which you were expected to safeguard, or not to act against, the financial interest of UBS Bank, you dishonestly abused that position intending thereby to make a gain for yourself, causing losses to UBS or expose UBS to risk of losses”
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SPIRIT OF THE 4- WAY
Is it the Truth?
Is it fair to all concerned?
Will it build Goodwill and Better Friendship?
Will it be beneficial to all concerned?
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THANK YOU
Prof. Kwame Bosiako Omane-Antwi,PhD, MBA, MA, AMP (Oxon); FCCA; FRSA, CFE.
Vice Rector, Pentecost University College E-mail : [email protected]
Tel : 0244320448 / 0202011775 Website: www.bomaneantwi.com
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REFERENCES:
ACCA Rule Book; the code of Ethics and Conduct : Achaempong, F., and W. Zemedkum, “An empirical and Ethical Analysis of Factors Motivating Managers’ Merger Accisi” Journal of Business Ethics 14 (1995); 855-865 Blide, A., and H.H. Stevenson, “ Why be Honest if Honesty Doesn’t Pay” Harvard Business Review (September-October 1990): 121-129 Bloomenthol Harold S. Sarbanes-Oxley Act in Perspective (St. Paul, MN: West-Group), 2002 Boahight, J.R. Ethics in Finance (Oxford; Blackwell Publishers), 1999
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REFERENCES: C
ONT
’
D
Kidder, R. “Ehics and the Bottom Line: Ten Reasons for Business to do Right”, Insights in Global Ethics (Spring 1997) 7-9.
Nash,L.L. “Ethics sithout the sermon” Harvard Business Review (November-December1981): 79 90.
Wicks, A “ A note on Ethical Decision-Making” Charlottesville,VA: E- 0242), 2003.
University of Verginia Darden School of Business case collection (UVA-
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