Issues in Ethical Behaviour and Corporate Governance 07

Good Morning!!
“The self is not

something that one
finds. It is something
that one creates”.
Issues of Corporate
Governance
Session 6
Learning Objectives
1. Identify the stakeholders who
have an interest in organisation
activity
2. Understand the general
regulatory and commercial
environment
3. Appreciate the role of ethics
in business
Learning Objectives (cont.)
4. Be aware of the use of codes of
ethical conduct
5. Explain recent business ethical
issues
6. Apply the concept of
corporate governance
Learning Objectives (cont.)
7. Describe the current debate

surrounding corporate governance
8. Outline current guidelines and
practices of corporate
governance
Topic Overview
This topic investigates the commercial

environment in which entities operate;
corporate governance and the
responsibilities of decision makers.
Overview cont
The business environment consists
of a range of government agencies,
professional bodies and business
associations
Stakeholders who have an
interest in business activity
 Inside users (i.e. owners) are a group of

users who have an interest in the
performance of an entity
 There are also outside users – collectively
known as stakeholders
(cont.)
Stakeholders include:
 Investors
 Creditors
 Employees (and Trade Unions)
 Customers
(cont.)
 Government – e.g. FIRCA
 Special Interest Groups e.g. environment
groups
 Community – is the entity contributing to our
welfare and economic prosperity
The general regulatory and
commercial environment
Government agencies that influence the
business environment include:
1. The Reserve Bank
2. Public Enterprise Ministry
3. Accounting Standard
Board (FIA)
(cont.)
4. Fiji Competition and Consumer
Commission
5. Fiji Taxation Office (FIRCA)
6. The Fiji Stock Exchange (FSX)
3. Accounting Standards Board
(ASB)
• The ASB (the members of
whom are appointed by the professional
bodies) issue the accounting standards.
4. Fiji Competition and
Consumer Commission
(FCCC)
• The FCCC administers the Trade Practices Act
and the Prices Surveillance regulations. These
Acts cover anti-competitive trading; unfair
market practices; mergers and acquisitions;
product safety and liability
5. Inland Revenue (FIRCA)
• The Inland Revenue collects taxes; VAT;
supervises self-managed
superannuation funds, etc.
7. The Fiji Stock Exchange
(FSX)
• The FSX supervises the public listings
of companies.
N.B. the FSX is itself a publicly listed
company.
(cont.)
As well as government agencies, the
highly organised and regulated accounting
profession itself impacts heavily on
business decision making.
Appreciate the role of ethics in
business
Ethics is fundamental to the study of
business: We must consider the ethics
underpinning business such as:
 Virtues
 Duties
 Morals and
 Justice
Codes of Ethical Conduct
The accounting professional body in Fiji, FIA
have a Code of Professional
Conduct
(cont.)
The eight fundamental principles espoused in
the code cover:
1. The Public Interest
2. Integrity
3. Objectivity
4. Independence
(cont.)
5. Confidentiality
6. Technical and professional

standards
7. Competence and due care
8. Ethical behaviour
Recent ethical issues
in business
Key ethical issues facing entities today
include:
1. Whistleblowing
2. Insider trading
3. Bribery
4. Ethical investments
5. Triple bottom line
Recent ethical issues in
business (cont)
Socially responsible business

behavior has enjoyed heightened
interest over the last decade –
business (cont.)
1. Whistle blowing – the act of an employee
exposing an organisation’s unethical
practices
2. Insider trading – i.e. ‘inside’ knowledge
business (cont.)
3. Ethical investments – investors only buying

into companies that have value systems in
place
4. Bribery – payment for a ‘favour’
business (cont.)
5. Triple bottom line accounting –

economic, social and environmental
performance of an entity should be
reported
Concept of corporate
governance
Corporate governance refers to the

direction, control and management of an
organisation.
Concept of corporate
governance (cont.)
Directors owe the following legal duties to
their company:
 to act in good faith, in the best interests of
the company
 to act with care and diligence and
 to avoid conflicts between their role as a
director and personal interests
Current debate surrounding
corporate governance
 A central part of corporate governance is to
ensure the maximisation of shareholder value.
 So company directors need to:
 Assess their obligations carefully and
 Follow corporate governance guidelines

Current guidelines and practices
of corporate governance (cont.)
 Guidelines cover items such as:
 Functions and structure of the board
of directors
 Conduct of directors
 Role of shareholders
Current guidelines and
governance (cont.)
 Compensation of senior officers and directors
 Role of company accountants and auditors
 Audit committees
 Customer and supplier relations, etc.
governance (cont.)
A summary of the ASX corporate
governance guidelines for example
includes:
 Lay solid foundations for respective
roles and responsibilities of board and
management
governance (cont.)
 Structure the board to add value
 Actively promote ethical and responsible decision
making
 Safeguard integrity in financial reporting
governance (cont.)
 Promote timely and balanced disclosure of all
company material matters
 Respect the rights of shareholders
 Recognise and manage risk
governance (cont.)
 Encourage enhanced performance of
board and management
 Remunerate fairly and responsibly
 Recognise the legitimate interests of
stakeholders
The Corporate Responsibility Index
 strategic management tool
 enhance the capacity of businesses to
develop, measure and communicate best
practice in the field of corporate social
responsibility.
 through benchmarking corporate social
responsibility strategy, and
 implementation process
 four key impact areas of community, workplace,
marketplace and environment.
The role of the Accountant
 Providers of information to capital market
participants.
 Accuracy/ reliability
 Concern – Firm acts as both
 Independent auditor
 Management consultant
 Loss of independence
Loss of independence
 Recommend:
 Audit committee
 Mandatory audit partner rotation
 Disclosure of both audit and non-audit fees
 Statement
Tutorial question
 Question 1 & 2 of Solomon ch 3

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Good Morning!!

“The self is not

7. Describe the current debate

This topic investigates the commercial

 Inside users (i.e. owners) are a group of

6. Technical and professional

7. Competence and due care

Socially responsible business

3. Ethical investments – investors only buying

5. Triple bottom line accounting –

Corporate governance refers to the

 Follow corporate governance guidelines

 Disclosure of both audit and non-audit fees

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