The concept of Business Ethics in Corporate Governance

Introduction

Business ethics primarily means the acceptable norms that are practiced in the realm of moral duties and challenges that are associated with a typical business sphere. The report is premised on the need to have ethics in the realm of accounting which thereby connects to the desired corporate governance that has been agitated for by the stakeholders. At the tail end, the report evaluates highlighted themes of business ethics , offering the best insights for those who are seeking business dissertation help.

The concept of business ethics as applied in accounting theory

Notably, the sources of business ethics may be unwritten or written codes that highlight the values, principles and the culture of the organization; wherefrom decision-making may arise. Primarily, the ethics in a business environment do apply in the many range of aspects of the organization and its conduct, which may be carried out by the whole entity or the individual personnel. The whole gist of business ethics implies that the organizational entity must ensure that any action undertaken in its name is carried out with regard to the good of the it by eliminating any element of wrongfulness; hence the personnel must be well acquainted with the technical knowhow of discerning what is wrong an right (Goel and Ramanathan, 2014).

Business ethics manifests itself in three portions, which include the professional, personal and corporate level. The personal level is also referred to as the micro scale while professional one is also known as the micro scale. According to Mele et al. (2014), it is noteworthy that the trio is related in one way or the other thus one cannot effectively operate without the input of others. The organizational structure of an entity requires that accountability is enhanced thus eliminating any kind of ill motive that may negate the progress of the business. For instance, the legal and regulatory mechanisms have been put in place to guide juristic bodies on how to carry out their operations. Specifically, the laws and regulations of the land have put emphases that uphold the integrity of such commercial entities (Goldberg et al., 2016). In verity, the law on company has outlined the manner in which the companies and other commercial bodies should prepare their books of account at the end of the financial year. Indeed, the directors of the company are required by the law to prepare and deposit the financial records of the company as they fall due.

The records should be materially true to the best knowledge of the person preparing them.

As will be seen later, it is a mandatory requirement for some specified commercial entities such as companies to have the company secretaries, as they act as the custodians advisors of the entities on compliance (Mele et al, 2014). Additionally, there are circumstances in which mandatorily require that the company must have an internal auditor who looks into the books and records of the financial accounts to either give it a green light thus clean bill of health or flag them down so as to provide the correct financial statements.

Ethics in the business environment is indeed a very fundamental factor for in the long-term objectives of the entity. The successes and the failures of the business arguably lies on how the organization deals with ethical issues in its financial accounting and other (Goel and Ramanathan, 2014). In essence, the manner in which those who have been entrusted with carrying out the objectives of the firm implement the said policies in their daily tasks adds utmost value to the business thus meeting its set visions and goals. Business ethics greatly manifests itself in accounting through various ways. Needless to say, accounting can be categorized into financial and managerial accounting. The former is concerned with the manner in which data that is necessary for preparing the information of financial statements. On the other hand, managerial accounting is an internal affair in which the organization processes the financial records so as to use the information for its transactions in the business. Financial accounting is primarily concerned with informing the outside world such as the potential investors, the government and the creditors of the financial position and the viability of the said entity (Mele et al, 2014). The information derived from the financial accounting may also show the ability of the probability of the existence of the business thus its financial health, so to speak.

The persons preparing the financial statements must take into cognizance the integrity required of her in carrying out the said crucial task. The information relied on should be factual without known or hidden error. It should be so because financial accounting relies heavily on the past information in historical sequence of the entity’s calendar, which runs from specified time to time. This sensitive information is what informs the decision of the company on how to strategize its operations. The regulatory mechanisms that have been put in place are primarily supposed to promote the cardinal rule of accuracy. There are various professional standards in which various financial statements should be prepared and reported such as the balance sheet, which shows the financial position of the company by highlighting its assets, liabilities and capital. The income statements also come in handy to provide a summarized overview of how the business has managed to perform in terms of trading profit, loss matters. It may also provide the information about cash flow, showing how money has been used in the operations of the company (Hamilton, 2016).

It is surely required of the persons in charge of the financial records of the business to avail them when required for audit purposes. The personnel must take a lot of care to give proper figures as opposed to cooked and guessed work simply to satisfy their short-term gain. These information, as said earlier, is very important to those who may want to invests into the business by injecting more capital through subscription of the shares. Failure to adhere o to the established standards may lead to duping of the potential investors thus exploiting their hard-earned cash.

Additionally, reports derived from the financial statements are always concise and aggregated. Also, there must be an element of generality and specificity as need may be. However, when it comes to financial management, the accounting reports must be very detailed to provide variety of information as the case may be. To add on, the rule of specificity must be adhered to .Due to the fact that managerial accounting deals with the internal issues of the company’s financial records, ethical concerns are given prominence by the senior management of the entity (Akkeren and Buckby, 2017). Various bodies of accountants have hitherto given prominence of financial managerial accounting thus coming up with guidelines of upholding the standards that they have set up. Chief of them is that one cannot practice as an accountant without having the practicing certificate that shows that they have been approved to prepare the said documents. They also advocate for objectivity, honesty, and fairness in their work. Various accounting bodies, the world over also sensitizes the members to promote the virtue of responsibility whenever they are handling the financial records of various companies that they have been instructed to prepare. Competence stands high in business ethics regarding accounting process. One cannot be expected to maintain and prepare documents that she does not have expertise on. She must have the requisite knowledge to undertake the task that she has been assigned to perform. Skills and knowledge must be combined together while handling the financial records.

Confidentiality is a vital key in business ethics as far as accounting is concerned. It is noteworthy that not every person should get access to the financial records of the firm. Disclosure is only limited to the persons who should have the information on the financial records. It is only upon given the green light to disclose the information by the supervisor that the accountant can proceed to do so. In any way, the permission to disclose is discretionary on the top management.

It is ethically expected of a professional dealing with the financial records to ensure that credibility is upheld at all material times. The accountant should observe fairness while dealing with the figures to make her opinions. He has the duty to ensure that the stakeholders in the business are well informed about any information that may materially affect the business and the information should be given timely without unnecessary delays. In so doing, objectivity is very crucial (Akkeren and Buckby, 2017).

The assessment of the current trends and theories concerning corporate Governance

Corporate governance has definitely experienced exponential growth and change within the recent years albeit that the traditional doctrines that have long been established still act as the golden rules in the sector. Legal and regulatory measures have been put in place to ensure that the dynamics experienced in the market are well taken care of. Integrity definitely forms a central theme in business ethics as far as the profession of financial accounting is concerned. Given the sensitivity of documents and matters that they handle, the professionals are expected by dint of their expertise to practice moral judgment that is sound in fact and deed. This should be a true reflection of the records that they interact with in the course of their work (Mele et al., 2014). This is so because the documents that they prepare are relied on by the public in general and the company’s management to assess its financial status and health. The fundamental business ethic of integrity is very crucial for any business as it comprises of elements such as being candid, forthright and honesty in all undertakings with the business financial documents and information. Professional accountants should not take advantage of any personal advantage of gain in the guise of confidential documents that may be in their custody. The must at all material times guard their reputation, to avoid situations that may portray them into a conflict of interest with the organization or even the client.

Objectivity and independence are also very crucial ethical aspects that an accountant must uphold in her daily tasks. A limit should be had on the services that a firm offering accounting services can do and the conditions in which they must offer given services. Though a lot has changed in the legal and regulatory measures that have been adopted in the spheres of corporate governance, there are still some elements of long standing principles that have hitherto guided the operations of the corporate bodies. The various sources of corporate governance in the U.K spring from various acts of parliament, rules, and regulations adopted by various professional bodies among others (Walker, 2009).

The companies Act 2006 is the main legislation that dwells on corporate issues in various companies and commercial organizations in the United Kingdom. The corporate code also plays a vital role in streamlining the ethical requirements that the corporate leaders must adhere to. Generally, the jurisdiction of the UK corporate governance comprises of mechanisms that are key in strengthening aboard system, unitary in nature thus enhancing the collective responsibility of the directors of the board to comply with the legal and regulatory requirements (Mangena and Pike 2005).

In essence, the current trend of corporate governance in the UK revolves around the need to tighten compliance on the private and public companies due to a number of reasons. Chiefly, the need to ensure continuity of companies has propelled the vigilance of various regulatory bodies to be very firm in promoting the ideals of good practice of corporate governance. The idea of forming companies for short-term gain has been discouraged by the authorities as there may be malice in such formations (Mavrakis and Legg, 2012,). Also, the need to protect the members of public has been an important reason behind tightened grip on the corporate world. Indeed, public companies may invite the members of the public to subscribe into its shares so as to keep it as a going concern. On the other hand, Dimitriades (2002) avers that private companies, though also required to adhere to the set legal and regulatory requirements, are not so much tightened to the grip as compared to the public companies, the simple reason being that they have limited scope of operations for instance, their share capital is not that large and they are limited to the invitation of members of the public to subscribe into its shares.

The fact of the matter is that in recent times, concerns have been raised concerning the manner in which high-level scandals have been sprung from various corporate bodies in the Kingdom. The effect is that the reputation of the companies has been severely damaged to the extent that many people are on outlook to avoid being duped by the directors of the companies in the name of insider trading among others. Going by the real picture in the corporate world, there is generally a decrease in the number of public companies and a steady increase in the number of privately owned companies, since the late 1990s (Djokik and Duh, 2016).

The issue of conflict of interest has been given utmost prominence than before, in the world of corporate governance. Currently, the directors or officers of the companies are required to avoid any scenario that is likely to result into any conflict between them and the company. Consequently, should they find themselves in a situation that conflicts with the objectives and aspirations of the company, there is need to disclose the nature and extent of such interests. Previously, there had been increased cases of the directors getting involved in the affairs of the company but at the same time using their positions to benefit themselves.

The fact of the matter is that the investors are limited as to what they can see in the companies due to the company veil. Their choice is thus limited as to what they can do. Therefore, the directors are therefore keenly scrutinized I terms of the knowledge and skills that they have to run the companies ((Hamilton, 2016). The investors are thus on the outlook to avoid any possible scenarios that may land them into the hands of duping directors. The level of vigilance has increased from time to time to minimize loss of capital investments that potential shareholders may want to pump into the companies.

Gender focus and diversity has increased in the corporate world over the time. Previously, most of the companies were run exclusively by the males while the females were just at the periphery. The implication is that many fora have been organized across the United Kingdom and beyond for the purpose of enhancing the need for enhancing quality and professional care of the companies. The trainings have been ranging from the role of directors in promoting equity and fairness in dealings, integrity and diligence in driving the affairs of the companies. Expertise on how to lead the boards of directors has also been given prominence over the time.

Focus has also lately been had on how to oversight the corporate culture. It is noteworthy that there are vital assets in the name of human resources that a company needs at all cost. This is coupled with the fact that the reputation and the organizational culture have been areas of consideration by the companies in recent times. As a result, companies have been striving at great lengths to have the best and refined talents at their disposal to run their affairs of implementation of policies. Culture risks have made it possible for companies to realign their values and the behaviors that they strive to promote in the mission statements(Council , 2006 p.26).

Evaluation of the concept of having universal corporate governance code that would incorporate business ethics

From the foregoing themes discussed below, it logically follows that a universal code would bring into effect the desired results that have been desired in the corporate world. For instance, cases of fraud have been eliminated due to the vigorous regulatory measures that have been put in place. The series of scandals that were the order of the day have drastically reduced due to the tightened grip on the corporate bodies in the jurisdiction (Duh, 2017).

Conclusion

This report stresses that the discipline that the actors and stakeholders have strived to maintain hitherto is fundamental it cannot be over-emphasized as it is quite evident. Essentially, law suits have decreased due to the discipline that has been promoted in the companies as a result of the universal corporate governance code. The trend in which the companies have been employing qualified and fit professionals may have minimized the negligence there previously the norm in most companies. The idea of checks and balances has made a great stride as the shareholders hold the board of directors accountable thus tyrannical decisions limited at all costs. There is still a lot that needs to be done in promoting business ethics in financial reporting and management so that the companies may be a spring of genuine investment.

Reference

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