Ethics which is also termed as the moral philosophy is involves defending, systematizing and recommending concepts of right and wrong in conduct, and application of these ethics in business is called Business ethics (Pearson, 2017). The growing needs for ethics in business has increased over the last decade, earlier the opinion used to be that businesses can’t be ethical. However, the trend has shifted and now there is greater need for development of ethics in business, primarily because life, welfare and money of lot of people are at stake (Schwartz, 2017). Businesses have come to realize that they operate in a social ecosystem, and they are responsible for welfare of the people and development of the society and community. Thus, business executives have to think of a larger picture while taking decisions in business environment (Bowie, 2017).
The case study presented here is of WorldCom, which is the perfect example of unethical conduct in business. The case study in itself underlines the importance of consideration of ethics in decision making. The case demonstrates that how it was unable to prevent itself from becoming bankrupt, due to unethical decision making. Due to which, the company earned a bad reputation and ruined the trust of its shareholders. The assignment here is divided into three sections. The first section will implement two ethical behaviour theories to understand the action and conduct of David and Buddy. The second part is based on application of seven steps of AAA Ethical decision-making model to decide on the decision Buddy should have taken in the given situation. The last part is the Application of APES 110 in the given scenario to recommend and advice David on the ethical perspective of decision making.
This section here will discuss two ethical behavioural theories in the light of the actions of David and Buddy.
It is an ethical theory which helps to determine and identify right from wrong by focussing on the consequences and outcomes, in other words utilitarianism can be seen as theory of consequentialism (Baron, 2017). Thus, this theory revolves around the consequences of the decision while judging its morality. This theory is based on the concept of “Doing Greater Good for the greatest number of People”, it provides that any decision a person makes, he should first think about the consequences of his decision on other people (Shestack, 2017). It is only after understanding the possible ramification of the decision making, decision should be made. Unlike the case of David, who completely ignored the sentiments of people employed in the company, and took decision which had an impact on their lives.
The theory of Utilitarianism is a right fit to analyse the case of David, because he completely ignored the greatest good and focussed on his own good. This can be said with most certainty, as it was David who acted unethically on the instructions of Scott, is an implication of their selfish motives. David wanted to impress his boss and wanted to be in his good books, this motivated him to take decisions which were unethical for the business organization. David did not think twice about the implication of his decision on the rest of the employees working, his action had the potential of dissolution of the company. Hence, the decision and action of David were not good even for the organization as well other employees, they were totally guided by selfish motives. Thus, the explanation of David’s action can be analysed in the light of Utilitarianism theory which urges to think about the greatest good of people for greatest number of People.
In accordance to moral philosophy, deontological ethics can be seen as a normative ethical theory which states that the morality of an action should be based on whether the action in itself is right or wrong under the purview of a series of rules, instead of considering the consequences of the action (Hutchings, 2017). Thus, the theory judges a situation which is based exactly on understanding the morality of the actions (Fraser, 2017). Buddy who was working in the capacity of Accounting director of company himself did wrong to the company, contrary to his job roles which asks him to keep the books of account clean. Acting on the decision of David, is the biggest gap in the expected job duties and the job role of Buddy. He breached his Job duties to accommodate the request of David on Behalf of Scott. Thus, due to the breach of duties done by Buddy, his case falls under the purview of Deontology Theory.
This section will provide for the decision Buddy should have taken ideally after the insistence from David by utilizing the AAA Seven steps ethical decision making model.
The seven step decision making model of the AAA ethical decision making theory as people know of was first introduced in a report handed over to the American Accounting Association in the year 1990 (Curtis et. al., 2017). AAA model uses seven key steps which a person or an organization should use while making or trying to take an ethical decision. The highly renowned model uses the seven steps in context of consequence evaluation, checking the facts and other while making an ethical decision (Kelly, 2017).
The case of WorldCom has three major players, Scott, David and Buddy. Scott wanted to interfere and manipulate the books of account, in his opinion this would have changed the fate of company, and showed it in good light in front of the stakeholders. Scott insisted on David to help him in this process by speaking to Buddy, who was the director of accounts. Thus, these are the three major players who were the primarily responsible for the fraudulent activities in the books of account.
The unethicality in the case is quite clear; Scott and David wanted to change the books of account by removing the already booked and incurred expenses with the aim of increasing the profits and keep a healthy pricing for the company’s share. Their combined act required Buddy to participate in the fraudulent activity, as he was the director of accounting, and also a person who can meddle with the books and give the desired results to David and Scott (Fiolleau & Kaplan, 2017).
Speaking in social and moral context, it is wrong from the point of view of Buddy to meddle with the books of account and inflate the profit of the company. One of the biggest moral implications here is that there are plethora’s of people who make their investing decision on the basis of the financial books of account facilitated by the business organization. The decision of Buddy by all means is unethical as well, as it does not make any sense neither for the business, employees and other stakeholders to keep them in hiding and reduce the losses to inflate the profits. Additionally, looking at the professional behaviour of David, Scott and Buddy, it is a clear breach of their assigned job roles and the pledge they took before joining the organization. Thus, in the light of ethical, moral, social context the decision of Buddy was absolutely unethical and carried negative consequences for the organization.
Buddy had three alternative options in the given situation. The first option was to blatantly rubbish the request of David and Scott, and take it to a next step by informing the senior management about the wrong doing of David and Scott. The second alternate is to move to the government authority or regulatory organization on the possibility of fraudulent activities at WorldCom. The last option or the alternate strategy for Buddy is to acknowledge the demand of David and Scott and in order to save his job, follow their orders. Hence, it is really advised to evaluate the option or strategies before taking the decision in the light of utilitarianism theory (Pergola & Walters, 2017).
One approach is that Buddy reports the action and the advice given by David and Scott to manipulate the books of account and demonstrate high ethical conduct in his professional behaviour and also do justice to his professional code of conduct. This approach would also have the company from getting into the trap of fraudulent activity and tarnish its image in front of the stakeholders. The flip side to it is that on the social level, Scott working in the capacity of CEO has a good influence on top management; he can easily influence them against Buddy and throw him out of the company. The argument here is that the actions of Scott were focussed on the benefit of the company. Evaluating the second option which required Buddy to inform the government and other regulatory body on the fraudulent activity in the business organization and get over with this conundrum. The decision would have been high on ethical and moral compass and would also allow him to comply with his job duties. The last option which required Buddy to meddle with the books of account was unethical in approach, but would have settled down the business for him. However, this decision would have been highly ethical and a breach of his professional conducts as well. Additionally, it would have duped hundreds and thousands of shareholders by making them look at the manipulated books of account over which the shareholders take their investing decisions.
In the first option where Buddy would have reported the proposed scheme of David and Scott to the senior management, Scott could have easily influenced the top management and it could have resulted in the loss of Job for Buddy. Plus, the senior executives would have gone with the decision of Scott to terminate Buddy, as it was in the interest of the company, however unethical it was. In the second option which required Buddy to report the misdoing and the proposed scheme of business to the government and other regulatory bodies. The decision would have been highly ethical and action would have been taken over David and Scott. At the same time, Government would have ensured that senior executive does not escape the situation, providing a relief to the stakeholders of business organization. Thus, the second option is high of ethical and moral grounds. The last option which required Buddy to be a mute spectator and act per say to David and Scott, this act would have been highly unprofessional, resulting in breach of his duty and would have resulted in loss for the stakeholders.
The right decision which would have resulted in creating a positive impact on the company as well the stakeholders would be considering the second decision. The decision which asks Buddy to report the misdoing planning to the government would have made sure that the stakeholders do not make a decision on the inflated books of account. Additionally, this decision would be highly rewarding for Buddy due to the high degree of ethics and professional conduct associated with the decision.
APES 100 have been provided by Accounting Professional and Ethics Standards Board Limited and provide the Code of Ethics according to which the Professional accounts have to comply in their professional conduct (Traer, 2018). The APES 100 Principle states clearly that the responsibility of Professional Accountant is not just limited to just the employer, but they also have to think of the interest of general public. It is the responsibility of Professional accountant to act according in the best interest of the employer and general public in the longer run (Cull & Bowyer, 2017). Thus, in the light of the Principles of APES 100, David and other Professional accountant should discharge their duties.
The professional behaviour guides the employee to work in the best interest of the organization by fairly conducting one’s duties with no misconduct or misdoing. David and other professional accountant should not engage in any such activity which could in an instance discredit their profession. David should thus act according to high professional compass and advice Scott to not meddle with the books of account in the best interest of the organization and its people (Conrad, 2018).
This principle is related to maintaining the required set of competencies and the right skill to do the job effectively. It is the responsibility and the duty of professional accountant to advice the company and gives them a clear picture of the books of account. They are also required to keep up to date with the changes and development in the professional practice, and apply due diligence in their professional conduct. In this case, David should give advice to Scott that his decision to interfere with books of account is unethical.
Integrity is one of the most anticipated qualities in professional accountant. As these people have a lot to do with financial books and audit, their integrity lies in being honest with the organization and is straightforward in their communication. David here should advice Scott that misdoing in books is a breach of Integrity, thus would not participate in this activity (Thompson, 2018).
The objectivity of Professional accountant lies in each and every activity or their job responsibility. Professional accountant should not have a conflict of interest either for the public or the company, high objectivity has to be displayed here. They should not be bias towards any department or any person in general, defined by objectivity. David defied objectivity by favouring Scott over the interest of the company. Hence, it is required that David should not take any decision which would harm the reputation of the company.
Confidentiality implies that professional accountant must and should not pass on the company’s confidential information to other third parties. Professional accountant should keep their personal and professional relationship separate and never breach this confidentiality clause. However, at any point in time, the professional accountant is liable to disclose the right financial health to the management (Touchstone, 2018).
Different Threats and Safeguards will be identified here within the purview of Case discussion and ethical behaviour and theories.
Self Interest Threat- This threat was based on the self- interest of David which was related to him being the Apple of Boss’s Eyes
Advocacy Threat-This is related to inability of David to evaluate his decision making in the lens of ethics and moral behaviour. David wanted to compromise the interest of the company to favour Scott.
Intimidation Threat-The threat here is based on lack of objectivity in the decision of David, as he is intimidated that what would be reaction of Scott against his non- cooperation with him.
Conclusion
The case study of WorldCom is sufficient to emphasize the growing importance of ethics in a business organization. It has been pointed that applying the principles of ethics in professional business organization would not only safeguard the interest of self and other people, but would also be beneficial for the entire business organization. The first part shows that provided if David would have gone ahead with the theory of Utilitarianism, the situation would have been different and the same applies with Buddy, in the context of Deontology theory. The second part is based on the seven step model of ethical decision making; this model asks to carefully evaluate the consequence of the decision before actually making the decision in a systematic manner. The last question is based on the application of APES 100, which guides David to take the right ethical decision while acting in the capacity of Professional accountant.
References
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