Chapter 6: Ethics, Professionalism and Social Responsibility

The Relevance of Professional Codes

  • Professional codes regulate the behavior of people in a particular profession.

  • A profession requires specialized tertiary education.

  • Registration with a professional body requires abiding by its code.

  • Contravening the code may lead to fines, suspension, or disbarment.

  • Examples: Law, Education, Chartered Accounting, Medicine, Nursing, Engineering, Architecture, Actuary.

Good Business Practice

  • Good business practice includes standards of professionalism, accountability, ethics, and effective business practice.

  • Professional codes guide professional behavior with predetermined consequences for non-compliance.

  • Unethical behavior may not always be clear if an employee doesn't belong to a professional organization, as ethics are part of individual values.

  • Unethical actions are not necessarily illegal in a free market economy (e.g., selling poor quality goods at a high price).

  • All illegal acts are considered unethical (e.g., selling petrol below the government-determined price).

  • Different ethical theories explain justifications for actions:

    • Principle-based theory: Ethical decisions are based on a person's principles, values, and morals. For example, accepting consequences for wrongdoing, refusing to lie or pay a bribe.

    • Consequence-based theory: The outcome of an action determines its ethicality. For example, lying to avoid upsetting someone.

    • Utilitarian theory: Ethical decisions are based on what is best for the greatest number of people. For example, paying a bribe to create jobs.

Ethical Behavior in Practice

  • Conflict of interest: A person in authority makes a decision that benefits them rather than the business.

    • Example: A board member being offered a position on a supplier's board or failing to disclose a relationship with a job applicant.

  • Bribes and corruption: Offering a reward for an unfair advantage.

    • A bribe can be money (smoothing payment or facilitation payment), a gift, employment, promotion, or any other favor.

    • Corruption is the abuse of power for personal gain, including receiving bribes, kickbacks, misappropriating funds, or abusing an official position.

  • Unauthorized use of funds: Using business funds without authorization is theft.

    • Examples: A manager using an expense account for personal expenses or using a business petrol card for private use.

  • Inappropriate gifts: Employees are expected to declare gifts, and businesses may limit the acceptable value of gifts to avoid the appearance of bribery.

  • Sexual harassment: A criminal offense as per the Labour Relations Act, including:

    • Unwelcome physical contact.

    • Verbal conduct like sexual advances or sex-related jokes.

    • Non-verbal conduct like sexual gestures or indecent exposure.

    • Promises of rewards for sexual favors.

    • Businesses should have a clear policy on sexual harassment with procedures and penalties.

  • Unfair advertising: Unethical advertising practices.

  • Employment/labor issues:

    • Employees abusing sick leave.

    • Abuse of the internet or email: visiting porn sites, sharing confidential information, spreading rumors, using social media or personal emails during work hours, sending emails that bring the business into disrepute.

    • Taking business stationery for private use.

    • Verbal abuse of staff members.

  • Pricing of goods:

    • Price fixing: Competitors agreeing to charge predetermined prices, which is illegal. Competition should keep prices low and quality high.

    • Charging more in rural areas than urban areas without justification is unethical according to the Consumer Protection Act (CPA).

  • Insider trading: Trading shares based on confidential knowledge, which is a criminal offense.

  • Piracy: Illegal use or reproduction of copyrighted work.

  • Counterfeiting/bootlegging:

    • Counterfeiting: Imitating another's work and pretending it is the original (e.g., designer clothing).

    • Bootlegging: Illegal production and/or distribution of a product (e.g., selling liquor without a license or selling cigarettes on the black market to avoid taxes).

  • Taxation:

    • Tax avoidance: Legal ways to reduce tax burden (e.g., deducting legal expenses).

    • Tax evasion: Illegal and unethical act of not declaring all income or lying about expenses to pay less tax.

  • Whistle-blowing: Exposing unethical behavior, fraud, health and safety violations, or violation of a law.

    • Whistle-blowers are protected by law.

Evaluate Ethical/Unethical Behavior in Different Spheres of Society

  • Ethical behavior in the world of Business and Finance:

    • Businesses need a Code of Ethics based on core values to enhance honesty and integrity.

    • Importance of a Code of Ethics:

      • Communicates the ethical vision.

      • Creates a common framework for business decisions.

      • Sets out desired behavior and procedures.

      • Spells out consequences of unethical behavior.

      • Protects the business if an employee breaches the code.

      • Helps new employees understand acceptable behavior.

      • Helps to understand acceptable practices within the organization globally.

      • Gives the business the opportunity to create a positive image.

      • Guides the business and employees regarding Corporate Social Responsibility (CSR).

  • Ethics in Government:

    • Government implements policies to prevent corruption, such as the National Anti-Corruption Forum (NACF).

    • South Africa has a National Crime Prevention Strategy and a Code of Conduct for the Public Service.

    • Parliament has an Ethics subcommittee for Members of Parliament.

    • Despite efforts, corruption continues, affecting the reputation of government officials.

  • Ethics in the international market:

    • Ethical standards differ drastically between countries.

    • Issues like child labor and slave labor still occur.

    • Businesses should not ignore unethical practices in their supply chain.

    • Examples:

      • Foxconn (Apple supplier): Employee suicides due to inhumane treatment.

      • Nike: Negative publicity for using sweatshops.

      • De Beers: Accusations of using blood diamonds, addressed by a campaign to eliminate conflict diamonds.

      • Cocoa plantations: Child slavery in some African countries.

The Relationship Between Management Ethics and Social Responsibility

  • Corporate Social Responsibility (CSR): An on-going commitment by businesses to behave ethically, contributing to economic and social development.

    • CSR is about developing and showing people the importance of ethical behavior in business practices and how they influence the community and environment positively. It involves making decisions that are not only profitable but also beneficial to society as a whole.

    • Businesses are expected to operate transparently and ensure accountability, holding themselves responsible for the impacts of their actions on stakeholders. By embracing CSR, companies can build trust and foster long-term relationships with consumers, employees, and the wider community.

Corporate Social Responsibility (CSR) involves businesses committing to ethical behavior and contributing positively to society and the environment. It requires transparency and accountability, fostering trust with stakeholders and ensuring long-term relationships.