Week One Flashcards

Question

DESCRIBE BUSNINESS SUSTAINABILITY, OUTLINE ITS KEY DRIVERS AND PRINCIPLES AND COMPARE KEY THEORIES IN THE AREA

Answer 1

Business sustainability considers the use of the world’s resources in a way that does not compromise the ability of future generations to meet their needs. Key drivers include the competition for resources, climate change, economic globalisation and connectivity and communication. Principles include ethics, governance, transparency, business relationships, financial return, community involvement/economic development, value of products and services, employment practices and protection of the environment. By necessity, decision making in business incorporates a certain level of ethical contemplation. This includes a consideration of corporate social responsibilities, such as a consideration of employees, the lifecycle of a product or service, the impact of the entity generally on society and the environment, and the need to report such effects, both positive and negative. Shareholder value is concerned with the increase in the shareholders’ wealth (owners of the corporation). Stakeholder theory suggests that many groups other than shareholders have a stake in the activities and performance of an entity and that corporate governance needs to reflect the wider duty of care that society is placing on the decision makers of entities. Stewardship theory suggests that directors are a steward of some cause or group.

Answer 2

theory which describes the relationship where one part (the principal) employs another (the agent) to perform some activity on their behalf

Answer 3

- competition for resources - climate change - economic globalisation: integration of national economies into the global economy brings opportunities for business, but often with significant risks. - connectivity and communication

Answer 4

theory that entities must conduct operations in accordance with societal expectations

Answer 5

1. ethics: the company establishes, promotes, monitors and maintains ethical standards and practices in dealings with all company stakeholders 2. governance: company manages al of its resources conscientiously and effectively, recognising the fiduciary duty of corporate boards and managers to focus on the interest of all company stakeholders 3. transparency: the company provides timely disclosure of info about its products and services, activities and this permitting stakeholders to make informed decisions 4. business relationships: the company engages in fair trading practices with suppliers distributors, and partners 5. financial return: the company compensates providers of capital with a competitive return on investment and the protection of company assets 6. community involvement/economic development: company fosters a mutually beneficial relationship between the corporation and the community in which it is sensitive to the culture, context and needs of the community 7. value of products and services: company respects the needs, desires and rights of its customers and strives to provide the highest levels of product and service values 8. employment practices: the company engages in human resource management practices that promote personal and professional employee development, diversity and empowerment 9. protection of the environment: company strives to protect and promote sustainable development with products, processes, services and activities.

Answer 6

Throughout this corporate governance discussion, the idea is that entities must be responsible. The question is ‘to whom should the entity be responsible?’ Should the entity be responsible to only one of its stakeholders/shareholders or should it consider all stakeholders equally. Is the entity acting responsibility by following the minimum guidelines simply to keep the government off its back or does it really have the employees’ interests at heart. The triple bottom line approach and the GRI reporting framework are two common methods used for reporting CSR. The three dimensions of the triple bottom line approach espouse the need to report on economic, social and environmental dimensions. The GRI reporting framework supports this view and outlines principles and standard disclosures required, technical protocols and information relevant to different sectors. The standard sustainability report should contain the strategy and profile of the entity, the management approach and the entity’s economic, social and environmental performance indicators. Accountants can help organisations in applying the reporting framework by using their expertise in gathering, collating and reporting information, including sustainable-relevant information in their analysis for business decisions and through the provision of audit and assurance services.

Answer 7

a sustainability framework that provides uidance on how organisations can disclose their sustainability performance

Answer 8

- reporting principles and standard disclosures ( reporting principles relate to both content and quality. the standard disclosures are separated into general and specific disclosures)

Answer 9

- strategy and analysis - organisational profile - identified material aspects and boundaries - stakeholder engagement - report profile - government - ethics and integrity

Answer 10

- management approach | - indicators - economic, environmental and social

Answer 11

considers the economic, social and environmental performance of an entity environmental: entities activities relating to natural capital and whether its activities are environmentally sustainable. social performance: both human capital and societys wealth creation potention, the abilty of people to work together for common purposes in groups or in organisations

Answer 12

accountants are well versed in the applications of standards for reporting, their skills in this area can be applied to the reporting of an entity sustainability performance.

Answer 13

comparison of two competing investment projects would require an analysis of economic profits in order to make decisions relating to social and environmental initiative.

Answer 14

integrity of info is collected and can help to provide audit and assurance on the corporate social responsibility reports that are issued by entities.

Answer 15

The term ‘corporate governance’ is generally used in relation to large business entities. However, the majority of issues surrounding the discussion of corporate governance equally apply to small and medium-sized businesses. The management of all entities needs to be aware of its responsibilities with respect to the law and to society generally. Large entities tend to have additional issues to consider due to the separation of ownership and control. That is, the people who own the business are not always the ones making the decisions. For example, the shareholders of a large entity such as Nokia Corporation cannot all decide on the direction the company should take. Generally, a management structure is put in place to deal with operational decisions, and the board of directors (elected by the shareholders) deals with strategic issues. A number of elements must be considered in business decision making. Although it can be fun and rewarding to be in charge, making decisions is a difficult task regardless of whether the entity is small or large. The quality of those decisions determines the success or otherwise of an entity in meeting its objectives and can influence the lives of many. People who make such decisions have power, but they also have responsibilities and are accountable for their actions. This unit is about using accounting information as an input to the decision-making process. It is useful therefore to understand the responsibilities of the people who govern business entities. Corporate governance deals with the rights and responsibilities of a company’s management, its board, shareholders and various stakeholders. How well companies are run affects market confidence as well as company performance. Good corporate governance is therefore essential for companies that want access to capital and for countries that want to stimulate private sector investment. If companies are well run, they will prosper. This in turn will enable them to attract investors whose support can help to finance faster growth. Poor corporate governance on the other hand weakens a company’s potential and at worst can pave the way for financial difficulties and even fraud. Corporate governance refers to the direction, control and management of an entity. The board of directors is given the authority through a company constitution and the Corporations Act 2001 to act on behalf of shareholders. Recent corporate collapses have focused a spotlight on the governance of business entities. Society is looking for transparency and accountability of management, in particular directors

Answer 16

The current climate has triggered an increase in the discussion of and debate on corporate governance principles. Guidelines cover such items as the functions and structure of the board of directors, the role of shareholders, the compensation of senior officers and directors, the role of the company accountants and auditors, audit committees and customer and supplier relations. Corporate governance guidelines help to foster improved corporate governance practices. An example is that put forward by the ASX Corporate Governance Council. The guidelines foster awareness of a director’s responsibilities, and help communicate society’s expectations to the wider business community.

Answer 17

Because our world is becoming a global village, and people are becoming better educated, business ethics is receiving increasing attention. Humankind has considered the philosophy of ethics for centuries. Business decision makers influence the use of the world’s resources and can affect the lives of many people. Ethics is central to the study of humankind, and so should be explored in a business context. Two key approaches are teleological and deontological theories. The teleological approach is concerned with the consequences of decisions, while the deontological approach is concerned with the action or decision itself.

Answer 18

theories concerned with the consequences of decisions

Answer 19

theories concerned with duty

Answer 20

all individuals maximising their utility will lead to society's utility being maximised also

Answer 21

Codes of ethical conduct prescribe minimum ethical standards and are widely used in business to communicate a respect for the public good. The fundamental principles are integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The methods proposed by Langenderfer and Rockness and the St James Ethics Centre were presented. The application of ethical decision-making methods helps to identify the issues and clarify thought when making a business decision.

Answer 22

1. integrity: being straightforward, honest and sincere in your approach to professional work 2. objectivity: do not compromise your professional or business judgement because of bias, conflict of interest or the undue influence of others 3. professional competence and due care: perform professional services with due care, competence and diligence. carry out your professional work in accordance with the technical and professional standards relevant to that work 4. confidentiality: respect the confidentiality of info acquired in the course of tour work and do not disclose any such info to a third part without specific authority or unless there is a legal or professional duty to disclose it. refrain from using confidential info acquired as a result of the professional engagement to your advantage of third parties 5. professional behaviour: conduct yourself in a manner consistent with the good reputation of the profession and refrain from any conduct that might bring discredit to the profession.

Answer 23

theories -> personal -> corporate consequentialism (teleology) -> agency theory -> shareholder value ethical idealism (deontology) -> stewardship theory -> stakeholder theory