Purpose of Ethics in a Business Environment

Posted on 27. Feb, 2008 by in Legal ethics

Laura Erickson asked:

Ethics can be defined as a set of moral values or principles that consist of a moral duty and obligation. In the business setting they are the rules or standards which govern the conduct of employees. This code of conduct encourages public confidence in the products and services of the company. A profession is formed on the basis of a generally accepted body of knowledge, a standard of achievement and code of ethics that is strictly enforced. A code of ethics is said to be a crucial element in the foundation of a profession. The three major accounting professional organizations follow an ethics code.

Ethics are especially important in the work of a management accountant so they have the right elements and are able to serve their management efficiently. The behavior of a management accountant is governed by the Institute of Management Accountants (IMA) Code of Ethics. When this code of ethics is followed a trusting relationship develops so the work of the accountants is able to be relied upon and it also enhances their professionalism. The four main standards that appear on the code of ethics are competence, credibility, confidentiality and integrity. The standard of competence requires that every member must maintain a high level of professionalism by continuing to develop their skills and knowledge, be able to perform their duties by still abiding by relevant laws and regulations. Also to provide supportive decisions and other information that is accurate and timely and lastly to be able to recognize any limitations or constraints that relate to the success o an activity. Credibility refers to each member being able to communicate information objectively and make sure that they disclose all relevant information and delays of deficiencies that have an effect on the organization or its operations. The concept of confidentiality refers to each member of the organization keeping all personal information discrete and secret unless it is necessary that the information is disclosed. All parties involved must be aware and comply to the confidential policy. It is also assumed that under this standard each member will refrain from using information that is considered confidential to have an illegal advantage or promote unethical activities. The last standard in the code of ethics is integrity. Integrity refers to the ability to adhere to moral and ethical principles and have regular communication to avoid conflicts of interest. Also acting with integrity includes refraining and abstaining from engagement in any activity that with discredit the company or be deemed as unethical. 

The Institute of Management Accountants (IMA) insures that all members of their organization should always behave ethically. Each member is obligated to commit to practices that are both ethical and professional. Their ethical principles include: Honesty, Fairness, Objectivity and Responsibility. Everyone has their own knowledge of honesty and what it means to be honest. Being truthful and sincere is said to be acting honestly and it will help in an organization if everyone possesses those qualities. Fairness in accounting is defined as a company’s financial statements being presents in an understandable, and comprehensive way to not favor one party over another. Objectivity refers to not acting based on personal feelings or prejudice and being unbiased. Responsibility is an obligation or duty to do things that you feel is right. In a business environment these are all key principles that each person must follow and uphold in order to maintain some sort of ethical standard to work and live by. Every member should not only abide by them but also encourage others in their organization to do the same; failure to comply can result in strong discipline.

Organizations can have as many rules and regulations they want when it comes down to acting ethical and how to punish those who don’t but sometimes conflicts do arise that can’t be handled just by your organization’s policies. In situations like these other courses of action must be applied and taken into consideration. To resolve ethical conflicts you should first talk to your supervisor and discuss the situation with them. If this doesn’t help to resolve the conflict it would be a good idea to keep moving up the chain of management until an immediate answer is found that would help to resolve the problem. Another option would be to discuss your possible outcomes to the situation with an IMA counselor to get a better idea of what your options are. To take it one step further you could also contact your attorney to legal obligations and rights that may be involved in the conflict of ethics.

There are always going to be ethical issues that arise but having a good ethics code within your organization there is a high chance that conflicts can be resolved. It is necessary that the ethics code be enforced and if someone is acting unethically or not abiding by the code that they person should face serious consequences. Ethics provide the foundation for which a civilized society can exist and therefore they are a key element in the success of all business and accounting professions.

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