Management Principles Paññasastra University of Cambodia

Paññasastra University of Cambodia

Management Principles Paññasastra University of Cambodia

Ethical decision making models are used in ethics education to
provide a framework for ethical decision making.
• The main reference in this section is to the International Accounting
Education Standards Board (IAESB) where a framework for ethical
decision making is developed (known as the Ethics Education
Framework (EEF)) and then applied using two models in the study
guide.
The IAESB Ethics Education Framework (EEF) shown above is
designed to provide a structure for the development of ethical education.
It recognises that ethics education is actually a lifelong process and will
continue through the career of an accountant or any other professional.
The framework establishes a four-stage learning continuum which
professionals will generally move through during their careers.
This framework can then be applied to ethical decision making using the
two models mentioned in the study guide.
Ethical decision making
IAESB ethics framework
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Stage Explanation
1 Ethical
knowledge
Education focuses on communicating fundamental
ethical knowledge about professional values, ethics and
attitudes. The aim is to develop ethical intelligence by
obtaining knowledge of the different ethical concepts
and theories relating to the accountant’s work. The stage
explains the fundamental theories and principles of
ethics. Having obtained knowledge of these theories, the
accountant will understand the ethical framework within
which they operate.
2 Ethical
sensitivity
This stage applies the basic ethical principles from
stage 1 to the actual work of the accountant in the
functional areas being worked on, e.g. auditing, taxation,
consultancy, etc. The aim of the stage is to ensure that
accountants can recognise ethical threats.
The stage is developed by providing case studies and
other learning aids to show how and where ethical
threats can arise. In other words the accountant is
sensitised to ethical issues, i.e. the areas where ethical
threats appear can be identified.
3 Ethical
judgement
This stage teaches the accountant how to integrate and
apply ethical knowledge and sensitivity from stages 1
and 2 to form reasoned and hopefully well-informed
decisions.
The stage therefore aims at assisting accountants in
deciding ethical priorities and being able to apply a wellfounded
process for making ethical decisions. It is taught
by applying ethical decision- making models to ethical
dilemmas, showing how ethical judgement is being
applied.
4 Ethical
behaviour
This stage is primarily concerned with explaining how an
accountant should act ethically in all situations (i.e. not
just the workplace but other situations where the
profession of accountancy must be upheld).
The stage therefore explains that ethical behaviour is
more that believing in ethical principles; it also involves
acting on those principles. In terms of lifelong education,
the accountant must therefore continue to be aware of
ethical theory, ethical threats and continually seek to
judge actions in the light of expected ethical behaviour.
Teaching is primarily through case studies.
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• The American Accounting Association model provides a series of
questions regarding the application of ethics.
• The Tucker model provides a brief framework for considering whether
or not a decision is ethical.
Refer to the Examiner’s article published in Student Accountant in March
2008 “Ethical decision making”
American Accounting Association (AAA) model
The American Accounting Association model provides a framework within
which an ethical decision can be made.
The seven question in the model are:
(1) What are the facts of the case?
(2) What are the ethical issues in the case?
(3) What are the norms, principles and values related to the case?
(4) What are the alternative courses of action?
(5) What is the best course of action that is consistent with the norms,
principles and values identified in step 3?
(6) What are the consequences of each possible course of action?
(7) What is the decision?
Ethical decision making
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(1) Establishing the facts of the case. This step means that when the
decision-making process starts, there is no ambiguity about what is
under consideration.
(2) Identify the ethical issues in the case. This involves examining the
facts of the case and asking what ethical issues are at stake.
(3) An identification of the norms, principles, and values related to the
case. This involves placing the decision in its social, ethical, and, in
some cases, professional behaviour context. In this last context,
professional codes of ethics or the social expectations of the
profession are taken to be the norms, principles, and values. For
example, if stock market rules are involved in the decision, then
these will be a relevant factor to consider in this step.
(4) Each alternative course of action is identified. This involves stating
each one, without consideration of the norms, principles, and values
identified in Step 3, in order to ensure that each outcome is
considered, however appropriate or inappropriate that outcome
might be.
(5) The norms, principles, and values identified in Step 3 are overlaid
on to the options identified in Step 4. When this is done, it should be
possible to see which options accord with the norms and which do
not.
(6) The consequences of the outcomes are considered. Again, the
purpose of the model is to make the implications of each outcome
unambiguous so that the final decision is made in full knowledge and
recognition of each one.
(7) The decision is taken.
Tucker’s 5-question model
Tucker provides a 5-question model against which ethical decisions can be
tested. It is therefore used after the AAA model shown above to ensure that
the decision reached is ‘correct’. Is the decision:
• Profitable?
• Legal?
• Fair?
• Right?
• Sustainable or environmentally sound?
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AAA model
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(Scenario expanded from TYU in chapter 12)
A global environmental group has entered into an alliance with a
refrigerator manufacturer. Its actions have led to a bitter internal battle,
with many founding members suggesting the organisation had ‘sold out’
to the business world. Others argued that their actions might help save
the planet from climate change.
The company in question is FN, a German domestic and industrial
refrigerator manufacture that was in receivership, its predicament arising
from a lack of investment and chronic inefficiency as an ex-eastern
German communist organisation. The environmental group intended to
use this company to launch its Chlorofluorocarbon (CFC) -free fast-freeze
unit. This revolutionary technology eliminates the emissions associated
with refrigeration units that have been blamed for destroying the ozone
layer and raising world climate.
The environmental group actively promoted the idea amongst its
worldwide membership and, at a press conference three years ago,
stated that it had a large number of advance orders from customers
willing to sign up to buy the fridges once they were in production. The
receiver subsequently conceded and allowed the company to begin
trading again, although confidentially he believed the idea was just an
attempt by the company to save themselves from receivership, rather than
indicating genuine environmental beliefs.
The receiver was not the only one with reservations. Chemical companies
that currently supply the CFC chemicals to the industry said the new
technology was untried and would not work. Competitor refrigeration
manufacturers (some of the largest companies in the world) went a step
further and said the proposed fridges amounted to “a potential danger to
consumers” and would not consider using the new technology.
Last year the German government signed off the prototype fridges as
meeting all product safety requirements. Production began shortly
afterwards, and within a year sales exceeded a quarter of a million units.
Yesterday, the world’s largest refrigerator manufacture announced it
would be switching to the new technology within two years.
Required:
Describe the ethical decision making process of FN using Tucker’s
model.

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