Day 154 Standard of business ethic

Standard of business ethic

Many organizations had established their own standard of ethical conduct, in order to ensure the members’ behavior would comply with their objective. It is rather a complicated method to develop this framework of ethics, but there are three fundamental factors comprise it.

These three tenets are: responsibility, accountability and liability. Where responsibility requires people to understand, and willing to take the obligations or expected consequences derived from their actions. For example, a distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest (Accounting Professional and Ethical Standards Board [APESB] 2010). The accountant may lose their professional certificate if they failed to act in accordance to this code of ethics.

In addition, the accountability is related to identity the individual or group that should take the responsibility. In the previous example, the professional accountant would be bound by their actions, hence they would be accounted for any consequences. 

Moreover, the liability is the right of affected parties to request compensation from the source of damage. For instance, it is both an ethical requirement and statutory provision, which the director needs to act in good faith in the best interests of the corporation. (Corporations Act 2001 (Cth) S 181) Consequently, the company may demand the cost of damage derived from director’s negligence in the performing that duty.

However, the ethical standard of conduct is normally a guideline of behaviours expected by the society. Therefore, contradiction of the ethical decision may not impose statutory obligations. To illustrate, the pension trustees need to ‘act with prudence, reasonable care and best interest of the scheme participants and beneficiaries.’ (Centre of Financial Markets Integrity [CFA], 2008) In fact, a lot of superannuation funds in Australia were under performing. Obviously, there are no legal requirements for fund managers to maximize the return on investment, but it led to ethical issue because they were not putting effort corresponding to beneficiaries’ interest.