CODE OF ETHICS

Table of Contents

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 ACKNOWLEDGEMENT.................................................................................................................2

 DEFINITIONS................................................................................................................................3

 OBJECTIVES OF CODE OF ETHICS..................................................................................................4

 FACTORS THAT AFFECT THE CODE OF ETHICS..............................................................................4

 DEVELOPING THE CODE OF ETHICS..............................................................................................5

 IMPORTANCE OF CODE OF ETHICS...............................................................................................6

 CLUSTERS FOUND IN 83 CORPORATE CODES OF BUSINESS ETHICS..............................................7

 EXAMPLE – ICAP CODE OF ETHICS...............................................................................................8

 ACKNOWLEDGEMENT

A project of this nature and magnitude was a very good learning experience. I owe a debt of gratitude

to those people who aided me in the compilation of this report.

Firstly I thank to Almighty ALLAH for giving me the strength to compile this report. I take this

opportunity to thank our valued instructor “SYED TARIQ HUSSAIN” for giving me the opportunity to

prepare a report for the course of “PRINCIPLE OF MANAGEMENT”.

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 DEFINITIONS

ETHICHS

“Principles, values and belief that define what is right and wrong behavior”

Ethics is derived from the Greek term ethos which means customs, habitual usage, conduct, and
character. The study of ethics is actually a branch of philosophy. The study of ethics has led to the
identification of basic concepts, i.e.

 Rights

 Autonomy,

 Beneficence and Non maleficence,

 Justice

 Fidelity.

Rights - "Something to which one has a just claim or the power or privilege to which one is justly
entitled.

Autonomy - comes from the latin auto meaning "self" and nomy which means "control."

Beneficence and nonmaleficence - Beneficence means to do good, not harm, to other people.
Nonmaleficence is the concept of preventing intentional harm.

Justice - The word justice is closely tied with the legal system.

Fidelity - Fidelity refers to the concept of keeping a commitment

In the broadest sense, ethics are the principles that guide an individual, group, or profession in
conduct.

CODE OF ETHICS

“A code generally describes the highest values to which the company aspires to operate.”

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 OBJECTIVES OF CODE OF ETHICS

A code of ethics aims at the following:

 Guidance

It provides direction to the most important element of an organization namely the “People”, so
that they know how to conduct themselves in terms of ethical behavior and give them a sense of
common identity.

 Confidence

It inspires public confidence besides enhancing the reputation of the organization.

 Initiative

It provides initiative and stimulation to the suppliers and customers for proper conduct by
creating a sense of moral obligation

 Ethical culture

It promotes a culture of excellence by not just formally teaching ethics, but by demonstrating
through leaders the commitment of the organization to ethical behavior.

FACTORS THAT AFFECT THE CODE OF ETHICS

Whether a person acts ethically or unethically when faced with an ethical dilemma is the result of
complex interactions between the stage of moral development and several moderating variables
including individual characteristics, the organization’s structural design, the organization’s culture,
and the intensity of the ethical issue. People who lack a strong moral sense are much less likely to do
the wrong things if they are constrained by rules, policies, job descriptions or strong cultural norms
that disapprove of such behaviors. Conversely, intensely moral individuals can be corrupted by an
organization structure and culture the permits or encourages unethical practices.

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DEVELOPING THE CODE OF ETHICS

Top Manager develops the code of ethics because doing business ethically requires commitments from
top manager who uphold the shares values and set the culture tone. They are role models in terms of both
words and actions, through what they do is far more important than what they say. If top managers, for
example, take company resources for their personal use, inflate their expense accounts, or give favored
treatments to friends, they imply that such behavior is acceptable for all employees.

Top managers also set the cultural tone by their reward and punishment practices. The choices of whom
and what are rewarded with pay increases and promotions send a strong signals to employees. Those
who has done work unethically must be punish the offender and publicize the fact by making the
outcomes visible to everyone in the organization

In the case of a large organization e.g., includes several large programs or departments, we have to
develop an overall corporate code of ethics and then a separate code to guide each of departments.

Codes should not be developed out of the Human Resource or Legal departments alone, as it is
sometimes done in organizations. Codes are insufficient if intended only to ensure that policies are
legal. All staff must see the ethics program being driven by top management.

Following guidelines may be useful while developing codes of ethics:

1. Review any values need to adhere to relevant laws and regulations; this ensures organization is not
violating any of them.( Various laws given by both Provincial and Federal Governments have to be
followed such as Factories Act, Workmen Compensation Act etc).

2. Review which values produce the top three or four traits of a highly ethical and successful product
or service in a particular functional area, for example;

For accountants: objectivity, confidentiality, accuracy, etc. Identify the values produce behaviors
that exhibit these traits.

3. Identify values needed to address current issues in workplace. Appoint one or two persons to evaluate
and give suggestion

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 IMPORTANCE OF CODE OF ETHICS

Codes of ethics consist of 8 essential roles. It state the moral responsibilities of professional as seen
by the profession because they express the profession’s collective commitment to ethics

1. Serving/Protecting the public.

This code functions as commitment by the profession as a whole that profession will serve the
public health, safety and welfare.

2. Guidance.
Every codes should have guidance so that anyone not lost. More specific direction may be
given in supplementary statements or guidelines, which tell how to apply the codes.

3. Inspiration.
They provide a positive motivation for ethical conduct. They voice what it means to be a
member of a profession committed to responsible conduct in promoting the safety, health and
welfare of the public.

4. Shared standards.
The diversity of moral viewpoints among profession show it needed to achieve the fair
standards

5. Support for responsible professionals.

Codes can potentially serve as legal support for profession criticized for living up to work-
related professional obligations.

6. Education and mutual understanding.

Codes can be discussed and used by professional societies in the classroom regarding on the
moral issues. It encourages sharing and understanding between professionals, public and
government organizations about the responsibilities of profession.

7. Deterrence and discipline.

Codes can also serve as the formal basis for investigating unethical conduct. An investigation
generally requires paralegal proceedings to get the truth about a given charge without
violating the personal rights of those being investigated.

8. Contributing to the profession’s image.

Image is essential in sustaining the trust of the public. It can help professionals more effectively
serve to the public

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 CLUSTERS FOUND IN 83 CORPORATE CODES OF BUSINESS ETHICS

Following are the clusters of variables found in 83 corporate codes of business ethics

Cluster 1. Be a Dependable Organizational Citizen

1. Comply with safety, health, and security regulations.

2. Demonstrate courtesy, respect, honesty, and fairness.
3. Illegal drugs and alcohol at work are prohibited.
4. Manage personal finances well.
5. Exhibit god attendance and punctuality.
6. Follow directives of supervisors.
7. Do not use abusive language.
8. Dress in businesslike attire.
9. Firearms at work are prohibited.

Cluster 2. Do Not Do Anything Unlawful or Improper that Will Harm the Organization

1. Conduct business in compliance with all laws.

2. Payments for unlawful purposes are prohibited.
3. Bribes are prohibited.
4. Avoid outside activities that impair duties.
5. Maintain confidentiality of records.
6. Comply with all antitrust and trade regulations.
7. Comply with accounting rules and controls.
8. Do not use company property for personal benefit.
9. Employees are personally accountable for company funds.
10. Do not propagate false or misleading information.
11. Make decisions without regard for personal gain.

Cluster 3. Be Good to Customers

1. Convey true claims in product advertisements.

2. Perform assigned duties to the best of your ability.
3. Provide products and services of the highest quality.

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 EXAMPLE – ICAP CODE OF ETHICS

Code of Ethics
For
Chartered Accountants
(Revised - May 2008)

Issued by Institute of Chartered Accountant of Pakistan (ICAP)

A chartered accountant is required to comply with the following fundamental principles:

Integrity:

A chartered accountant should be straightforward and honest in all professional and business relationships.

Objectivity:

A chartered accountant should not allow bias, conflict of interest or undue influence of others to override
professional or business judgments.

Professional Competence and Due Care:

A chartered accountant has a continuing duty to maintain professional knowledge and skill at the level
required to ensure that a client or employer receives competent professional service based on current
developments in practice, legislation and techniques. A chartered accountant should act diligently and in
accordance with applicable technical and professional standards when providing professional services*.

Confidentiality:

A chartered accountant should respect the confidentiality of information acquired as a result of professional
and business relationships and should not disclose any such information to third parties without proper and
specific authority unless there is a legal or professional right or duty to disclose. Confidential information
acquired as a result of professional and business relationships should not be used for the personal advantage
of the chartered accountant or third parties.

Professional Behavior:

A chartered accountant should comply with relevant laws and regulations and should avoid any action that
discredits the profession.

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