FIFTY SHADES OF BLACK AND WHITE

When we were young, we clearly knew the difference between right and wrong; between black and white.  Either this was taught to us in our schools, or we picked it from what we saw people practice around us.  Like Ernest Hemingway wrote, "I know that what is 'moral' is what you feel good after, and what is 'immoral' is what you feel bad after." It was that simple.

But as we grew older, as we did our CA, and as we began working in firms or in corporate India something happened; the voice of our hearts became feebler, and the vision about right and wrong blurred. We started to bend the law without breaking it. Somewhere along the line, we began to say, "but, hey, forget the moral position; we are legally right."  Let us be honest. The audit and accounting profession too has contributed to the mess. 

In this article, we look at ethical dilemmas faced by professionals: doctors, lawyers, accountants, and auditors. These men hold positions of trust and have encountered ‘conflict of interest’ issues.   Today, the CEO and the CFO are chummy; while in the natural scheme of things, they should act as each other's check.  We now know Enron was the rule, not the exception. Satyam, DHFL, IL&FS, etc., have slowly begun to shatter the trust people had in the CA profession. 

THE SHADES OF GRAY

Among corporates, Tata and Infosys, still considered doyens of governance, have mud slung at them, and some of it has stuck. Air Asia and Infosys’ Panaya deal come to the mind. Cognizant and Larsen & Toubro didn't cover themselves with glory in the bribery scandal that rocked them in the US. We get shattered once the truth is broken, leaving us skeptical about trusting again. 

A chief contributor to this is ‘ethical dilemmas.’ You face such a dilemma when you have to choose between two situations that are equally dicey. The process becomes complicated as it differs from person to person either due to culture or because of individual perceptions of right and wrong.

To understand the ethico-legal conundrum, let’s raise a few questions. 

Do I as the CEO recruit a close relative in a position of influence? You may say “Yes. Why deny him the opportunity if he is, otherwise, eligible.” I disagree because promotions and payments, of which I am in charge, will see a conflict of interest.  Remember, Infosys’ founders decided that none of their children will work in the company.   

Is it unethical to sell tickets in the gray market? You may say "Yes," while I might say "No" because I have spent time and resources in procuring a ticket and wish to charge a premium for my effort.  If products can be sold above cost, why not tickets? Remember a banana being sold at a 5-star hotel at Rs 375 plus tax? Who is right, and who is wrong? Aren't there shades of gray?

Next, is the question of legality. What is legal in one country is illegal in another. Both betting and abortion are wrong in India, but perfectly okay in some other countries. How do we then sit on judgment over these? Also, when laws change to allow for what was once illegal, is it right to say the code was wrong earlier.  One day when professional bodies allow advertising, would it mean the decision not to allow advertising all these years was morally wrong?

We must  understand the relationship between law and ethics to further understand the ethical dilemma. 

Law is a set of rules created by the government to govern society, and is made after considering moral values. We must obey the law; otherwise, anarchy will prevail. A breach of law invites penalty. In contrast, morality guides us about what is good or bad, and is an unwritten code of conduct adopted by people. Allowing an ambulance to jump the traffic signal is a case in point.

The situation becomes dicey since we cannot define a moral law for all cases because code is principle-based, and not rule-based. Do I give a seating space to a pregnant lady on a bus while I am feeling sick? Do I wink at a possible qualification in an accounting statement because I am promised a more remunerative audit the following year? Do I, as a partner, accept a gift or hospitality from a company I am auditing? Do I as a doctor refuse a diwali present from a medical laboratory? 

We cannot define a law for all situations and must rely on good faith.

MORE SHADES OF GRAY

A person can face an ethical dilemma in any aspect of life, including personal, social, and professional. 

I am an awardee recognized by the government to travel business business class at a concessional rate. I travel business class at the reduced fare but charge the client the full fare. Am I morally wrong? After all, the discount was for my past work. Is there a need to pass on that benefit to the client? But a reimbursement is getting back of actual money spent. Ha, there is a dilema there!

Staying with travel, if I am eligible for air travel, do I travel by train and pocket the difference saying that any way the company was willing to spend the higher amount? To whom does the frequent flyer points accumulated on use for company travel belong? You or to the company? Take another example. Suppose an airline allowed you a free trip for every nine trips you made. If you traveled nine times on company’s expense, to whom does the 10th travel, which is free, belong: to you who traveled, or the company which had paid nine airfares? Meaning, can you use the free ticket for personal travel, or must you use it for business travel? 

Auditors, either because of their proximity to the board or because of sheer competition, take decisions that are legally right but morally wrong.  Like, how much fraud should the company's shareholders know when you realize that the company is turning around? Can I push an April sale to March knowing the product was produced in March, moved out in March, delivered in April, money collected in May, and financials are to be signed in June? Is euthanasia morally wrong? What about a lawyer who takes up the cause of an assassin? Does the legal nonsense that every man is entitled to defense not run counter to morality?

ETHICAL DILEMMAS IN BUSINESS

Acting ethically means determining what is "right" and which is "wrong." While some unethical business practices are evident; in other instances, they are not. This is why organizations frame their codes of conduct, violation of which may lead to sanctions.

For example: should the purchase officer visiting the vendor company be put up by the supplier in a 5-star hotel and all his needs met? Should doctors accept sponsorship for international conferences by pharmaceutical companies. Maybe the doctor is not influenced in his decisions, but Caesar’s wife should be above suspicion.  Should auditors accept the hospitality of their clients or should their fee be all-inclusive?  Can the chief of selectors of the Board of Control for Cricket in India also be the brand ambassador of a franchisee in IPL?

In technical terms, these practices are legal, but it is a gray matter. The purchasing officer is likely to favor the vendor with a price discount. The doctor may prescribe the sponsoring company's expensive medicine. The auditor may want to look the other way when there is an accounting transgression. The selector may be influenced by the fact that he receives top dollars for his work as an ambassador. 

There is unethical behavior among individuals, businesses, and professionals. Being inaccurate on the resume is an example that come to the mind in the case of individuals. Dumping pollutants into the water supply, and wrongly classifying employees as contractors to avoid ESI are examples of businesses resorting to unethical practice. 

ETHICAL LEADERSHIP

Managers face day-to-day ethical dilemmas as conflicts of interest, unauthorized payments, cherry picking between suppliers, unfair pricing, and discrimination in hiring throng.  But one thing is clear. Without an ethical leadership, we cannot see long-term growth. A Deloitte survey identifies five key factors in promoting an ethical workplace: behavior of management (42%), practice of the direct supervisor (35%), positive reinforcement for ethical conduct (30%), compensation including salary and bonus (29%), and the act of peers (23%). As the old English adage goes, “actions speak louder than words.”

Management must create an environment that is conducive to ethical behavior by acting as role models. A code cannot anticipate every possible ethical dilemma. You can have unanticipated situations with no guidance available about how to behave in that circumstance. In these situations, it is best to 'disclose and discuss,' say, by either talking to the boss or a colleague. 

When faced with ethical dilemma we must act on it; otherwise, it may result in severe consequences for organizations. To solve moral problems, companies and organizations work on developing strict ethical standards for their employees. 

RESOLVING THE CONFLICT

Good ethics is equal to good business. According to greatplacetowork.com, companies that travel from good to great are those who had their moorings soundly based on values and ethics. There are two tests or guidelines.

1.Potter Boxprovides a guidelinefor ethical decision making by focusing on facts, values, principles, and loyalties.

STEP ONE: FACE FACTS:  

List the facts withoutmaking judgments. Example: Do I as a video journalist shoot a riot even as it is happening?

STEP TWO: EXAMINE VALUES: 

What do you value most? This helps the analyst to identify differences in perspectives. We may judge according to aesthetics (pleasing), professionalism values (prompt), logic (competent), sociocultural (hard work), and moral (honesty). Example:  Will the shock value of the video discourage riots? Or will it stir up disturbing memories?

STEP THREE – EXAMINE PRINCIPLES: 

Principles are reasoning applicable to a situation. You must decide which one of these principles you wish to apply. 

?     Take the middle path. Emphasize moderation.  (Aristotle's Golden Mean) 

?     Compromise, as moral values lie between two extremes. (Confucius' Golden Mean.)  

?     Do to others what you would want them to do to you. (Kant's Imperative.)

?     Seek the greatest happiness for the highest number of people. (Mill's Principle of Utility.)

Staying with the riot example, we would perhaps go with either Aristotle’s Golden Mean or Mill’s Principle of Utility. 

STEP FOUR – DETERMINE LOYALTIES: 

Where does your loyalty lie in the given situation? Answering this will clarify your thinking. Example:In the video shoot of the riot, does your loyalty lie with the media company or with the general public?

The Potter Box is not a magic wand. Two people analyzing the same issue with the Box could arrive at two very different conclusions. 

2.   Mamma’s Test wonders whether you would be proud to tell your mother about what you did. If you would, and she would be equally proud of you, it has passed the test of ethical dilemma, and you can go ahead. If it has not, it has failed the test. You might say this is juvenile; trust me it works. 

A FINAL NOTE

When addressing ethical dilemma, make sure you're aware of all sides of the story, and talk to the right people for advice. "Good people do not need laws to tell them to act responsibly, while bad people will find a way around the rules," wrote Plato.

Let's be good, responsible citizens; and good, responsible, businesses.

FIRST PUBLISHED IN KSCAA JAN 2020 ISSUE