FOUNDATIONS OF ETHICS

Ethics
This is the study of rules and principles relating to right or wrong behaviour
Ethic norms are standards of conduct for behaving well and staying away bad behaviour
Morality is a system of behaviour with regards to standard of rightness and wrongness. They are
principles concerning what is right and wrong or good and bad behaviour

Prominent Ethical Theories

Let us look at four ethical theories in relation to the above questions. The theories are; rights theory,
justice theory, utilitarianism, and profit maximization. The rights theory is also referred to as
deontological ethical theory since it focused on the actions and process and not just consequences.
The other three which focus on the consequences of an action are teleological ethical theories.

Rights theory
This is based on the view that certain human rights are fundamental and should be observed. This
therefore means that its primary focus is on individuals in society. There are two primary category of
rights theory 1) Kantianism 2) The modern rights theory

Kantianism
Immanuel Kant was a strict deontologist. He viewed humans as moral actors free to make choices.
According to this philosopher morality of a given action was determined by applying categorical
imperative, that is, judge an action by applying it universally. For instance if you are to steal then
the question is, are you will let everyone steal freely? Since this threatens your future security then
you may conclude that stealing is wrong.

Modern right theories

One major problem with Kantianism is that it imposes duties to be absolute. This implies that lying or
killing for instance would be perceived to be unethical. Modern theorist believes that there may be
circumstances when action like lying and killing could be morally acceptable for instance self-
defense. One popular theory believes that you should abide by a moral rule unless a more important
rule conflicts with it, that is, our moral compulsion is not to compromise a person’s right unless a
greater right takes priority over it.

Due to this moral relativism, modern rights theorists have choices to make. They must determine
what the fundamental rights are and how they are ranked in importance. Most courts tend to use
this approach.

Justice theory
This is derived from John Rawls’s book A Theory of Justice, which argued for just distribution of
society’s resources. This can be referred to as a fair allocation of society’s benefits and burdens
among all members of society.

Rawls argues that self-interested rational persons behind the veil of ignorance would choose two
general principles of justice to structure society in the real world:

1. Principle of equal liability- each person has equal right to basic rights and liberties.
2. Difference principle- social inequities are only acceptable if they cannot be eliminated
without making the worst-off class even worse off.

Under the justice theory, the decision makers’ choices are to be guided by fairness and impartiality,
however, the focus in on the outcome of the decision.
Consider a company that has two choices in terms of production, that is, produces locally or
outsource, based on this theory the company can choose to outsource assuming the workers in the
other country are badly off than the local workers.

Utilitarianism
This derived from the workings of Jeremy Bentham and John Stuart Mill. Under utilitarianism, an
ethical decision is one that maximizes utility for society as a whole. Thus, in our individual decision
we should always calculate their costs and benefits for every member of society. An action is ethical
only if the benefits to society outweigh their costs. This means that at times decision makers have to
sacrifice their own interest in doing so gives greater benefit to society.

Profit maximization
This is a teleological theory that is based on the laissez faire theory of capitalism championed by
Adam Smith.

It proposes that managers should managers should maximize a business’s long run profits within
the limits of law. Unlike utilitarianism, in profit maximization the managers focus solely on those
decisions result into more profits for the organization.

Critics view this to be entirely untrue since in the quest for more profit other issues such as
employees’ welfare could be ignored.

Universal moral principles

Do good avoid evil
Do unto others what you would want them to do unto you
The end does not justify the means
Follow what nature intends

Business Ethics and Corporate Social Responsibility

In the recent years, nation have been surprised by a number of major corporate scandals triggering
widespread public skepticism, shock among other behaviors towards the executives who run them.
Such tend to range from inflating profits, obstruction of justice, manipulating the market, etc.

In most business set ups, it would appear, when a behavior has a direct identifiable price, it is much
easier to motivate corporate behavior. However;

1. Should corporate managers consider moral choices or should their focus be based on profit
and loss
2. In a world of ever-increasing complexity and interdependency, how does one go about
determining what conduct is or is not ethical

Professional Ethics and the Law

Principles that have to be followed by a professional accountant include:

a) Integrity
It refers to the character of the accountant. The accountant should be one who is of unquestionable
morals, honest, trustworthy, and forthright.

b) Professional Independence
This refers to the ability of the accountant to do his work without following any instructions from the
client or any other person for any reason.
The independence ensures that the accountant will be truthful and will carry out his duties in
accordance with the dictates of the profession as opposed to personal whims.

c) Confidentiality
This is the duty of secrecy. It is the duty not to divulge to third parties any information that has been
received by the accountant in his capacity as such or to use such information in any way for any other
purpose without the consent of the client or express authority of the law.

d) Professional Competence
Means that for a person to render professional services as an accountant he must have attained the
professional ability to do so i.e. he must inter alia have the necessary qualifications after having gone
through a prescribed course of study.

A person who has fulfilled the requirements of the Accountants Act in relation to qualifications is
deemed to be professionally competent.

Law and Morality

Morality is the sense of judgment between right and wrong by reference to certain standards
developed by society over time.

It defines standards of behavior widely accepted by a society and is binding on the conscience of
the members of that society. An action that is considered to be opposed to morality will generally
be frowned upon by that society. However, morality is not enforceable by courts of law.

This is compared to rules of law, which are binding, enforceable and have sanctions in all cases.
Wrongs in society are contraventions of law or morality or both. However, the law incorporates a
significant proportion of morality. In such instances, where law and morality overlap, morality is
enforced as a rule of law. Such morality becomes part of the law. E.g. Killing a person is immoral as
well as a crime. So is theft.

However, certain wrongs in society contravene morality but not the law e.g. disrespects failure to
provide for parents, failure to rescue a drowning person etc.

What then is the relation of morality to law?

1. The existence of unjust laws (such as those enforcing slavery) proves that morality and
law are not identical and do not coincide.
2. The existence of laws that serve to defend basic values such as laws against murder, rape,
malicious defamation of character, fraud, bribery, etc. proves that the two can work
together.
3. Laws govern conduct at least partly through fear of punishment. When morality, is
internalized when it has become habit-like or second nature, governs conduct without
compulsion. The virtuous person does the appropriate thing because it is the fine or noble
thing to do, not because not doing it will result in punishment.
4. As such, when enough people think that something is immoral they will work to have a law
that will forbid it and punish those that do it. However if there is a law that says doing X is
wrong and illegal and enough people no longer agree with that then those people will work
to change that law.

Distinction between morality and ethics

1. Moral refers to beliefs of the individuals or group as to what is right or wrong while ethics are
guiding principles which help individuals or group decide what is good or bad
2. Morals are general principles set by the group while ethics are a person’s response to a particular
issue
3. Morals are not appliable in business however ethics are applicable
4. Morals deal with the principles of right or wrong while ethics deal with right or wrong conduct
5. Morals are governed by social and cultural norms while ethics are governed by individual or legal
and professional norms

Integrity
It is the quality of having honesty and truthfulness.

Traits
 Honesty
 Dependable
 Truthfulness
 Trustworthy
 Good character
 Upholding moral value

Code of ethics
Is usually a written statement of ethical guidelines used to regulate behavior of people. It consists of:
 Objectives
 Personal conducts
 Corporate behavior
 Specific obligation by the company to the stakeholder
 People or individuals unto which the code of ethics apply

Objectives of code of ethics

 Help an organization to promote positive organization culture hence a healthier working
environment
 Setting boundaries
 Lowers the rate of unethical behavior in an organization
 Leading by example
 Avoiding legal troubles
 Enhance public relations

Conflict of Interest and Related Party Transactions

Is a situation where an individual is in a position to exploit professional or official capacity for
personal benefit.

Situation of conflict of interest

1. Direct holding directorships in other companies
2. A company where a director is the owner and is connected in commercial activities
3. Receiving gifts form friends or companies that you do business with
4. Outside employment having that affects the company
5. Self-dealings- entering into a transaction that benefits him

Ways to deal with conflict of interest:

1. Avoiding situations that would lead to conflict of interest
2. Transfer staff either temporarily or permanent to a different section
3. Reassignment of duties to another person
4. Resignation from the position of interest
5. Withdrawal from voting or discussing that particular business item
6. Disclosure of interests to the company
7. Have a code of ethics that clarify how to deal with areas of conflict of interest

Whistle blowing and relevant protection mechanisms

1. Definition:

Refers to the activity of an individual who is a member or a non-member of the organization to

disclose unethical and illegal activities of a company to the authority who can take corrective
actions.

A whistleblower is an employee or a non-employee who voluntarily communicates unethical or illegal

activities of a firm to the authority.
Whistleblowing refers to the act of reporting or disclosing information about illegal, unethical, or
improper activities within an organization

2. Importance:
- Promotes transparency and accountability.
- Helps uncover corruption, fraud, and other malpractices.

Relevant Legislation:

1. Public Interest Disclosure Act (2010):

- Key Provisions:
- Provides protection to whistleblowers in both public and private sectors.
- Defines the procedure for reporting and the obligations of employers.

2. Public Officers Ethics Act (No. 4 of 2003):

- Protection Mechanisms:
- Protects public officers who report corruption and other unethical behavior.
- Safeguards against victimization or retaliation.

Protection Mechanisms for Whistleblowers:

1. Confidentiality:
- Whistleblowers' identities are kept confidential during and after the investigation.

2. Immunity from Retaliation:

- Whistleblowers are protected from adverse employment actions, harassment, or discrimination.

3. Legal Immunity:
- Whistleblowers are shielded from civil and criminal liability for making disclosures in good faith.

4. Whistleblower Hotlines:
- Establishing hotlines for anonymous reporting to encourage individuals to come forward.

5. Establishment of Whistleblowing Units:

- Organizations set up dedicated units to receive and investigate whistleblower reports.

Reporting Procedures:

1. Internal Reporting:
- Encourages employees to report concerns internally first.
 - Provides mechanisms within the organization to handle reports.

2. External Reporting:
- Allows whistleblowers to report to external bodies if internal mechanisms fail or are not
appropriate.

Role of Regulatory Bodies:

1. Whistleblower Protection Office:

- The office oversees the implementation and enforcement of whistleblower protection laws.

2. Ethics and Anti-Corruption Commission (EACC):

- Investigates complaints related to corruption and protects whistleblowers.

Challenges and Solutions:

1. Cultural Resistance:
- Solution: Promote a culture that values transparency and accountability.

2. Lack of Awareness:
- Solution: Conduct awareness campaigns to educate employees about whistleblower protections.

3. Inadequate Legal Framework:

- Solution: Regularly review and update legislation to address emerging challenges.

4.Whistleblower must meet all the conditions of whistleblowing before disclosing the information
5.Its risky-interested party may decide to use illegal means to cause the whistleblower not o disclose
information

Essential elements of whistleblowing:

15. Why
16. What
17. Where
18. Confidentiality
19. Non-retaliation-

Challenges in whistleblowing
Poor protection of whistleblowers

Conclusion:

Whistleblowing in Kenya is supported by legislation and protection mechanisms to encourage

individuals to report wrongdoing without fear of reprisals. Ensuring confidentiality, legal immunity,
and promoting awareness are crucial components of an effective whistleblowing framework.
Regulatory bodies play a pivotal role in investigating reports and safeguarding the rights of
whistleblowers, contributing to a more transparent and accountable society.

Linking ethics, LAWS, and regulations

Legislative Provisions on Ethical Conduct in Kenya

1. The Constitution of Kenya (2010):

 Article 10 - National Values and Principles of Governance:
 - Emphasizes principles such as patriotism, national unity, rule of law, democracy, and social
justice.
- Promotes ethical conduct and integrity in public service.

2. Public Officers Ethics Act (No. 4 of 2003):

- Objective:
- Promotes integrity and ethical behavior among public officers.

- Key Provisions:
- Defines standards of integrity for public officers.
- Establishes the Public Officers Ethics Commission (POEC) to enforce ethical standards.
- Outlines disclosure requirements for public officers.

3. Leadership and Integrity Act (No. 19 of 2012):

- Objective:
- Sets out leadership and integrity standards for state officers.
- Key Provisions:
- Defines ethical conduct for state officers, including the President, Deputy President,
Governors, and Members of Parliament.
- Establishes the Ethics and Anti-Corruption Commission (EACC) to enforce integrity
provisions.

4. Other Legislative and Regulatory Requirements:

- Kenya Anti-Corruption and Economic Crimes Act (No. 3 of 2003):
- Addresses corruption and economic crimes.
- Companies Act (No. 17 of 2015):
- Sets corporate governance standards for ethical business practices.

Role of Regulatory Bodies in Enforcing Ethical Conduct:

1. KASNEB (Kenya Accountants and Secretaries National Examination Board):

- Role:
- Regulates the accountancy profession in Kenya.
- Ensures professionals adhere to ethical standards.
- Activities:
- Conducts professional examinations with ethics components.
- Provides guidance on ethical conduct for accountants and secretaries.

2. Professional Bodies:
- Bodies such as the Law Society of Kenya, Institute of Certified Public Accountants of Kenya
(ICPAK), etc.
- Role:
- Set ethical standards for their respective professions.
- Enforce ethical guidelines through codes of conduct.

3. Ethics and Anti-Corruption Commission (EACC):

- Role:
- Enforces leadership and integrity standards.
- Investigates and prosecutes corruption cases.

- Activities:
- Conducts investigations into allegations of unethical conduct by state officers.
Penalties and Sanctions for Unethical Conduct:

- Public Officers Ethics Act:

- Penalties for non-disclosure of financial interests, bribery, and other offenses.

- Leadership and Integrity Act:

- Imposes sanctions on state officers for violations.

- Anti-Corruption and Economic Crimes Act:

- Provides penalties for corruption-related offenses.

- Professional Bodies:
- Can impose sanctions, including revoking licenses or memberships.

- Judicial System:
- Courts may impose fines, imprisonment, or both for individuals found guilty of unethical
conduct.

Conclusion:
In Kenya, a comprehensive legal framework, including the Constitution, Public Officers Ethics Act,
Leadership and Integrity Act, and other regulations, establishes ethical standards for public officers
and professionals. Regulatory bodies, such as KASNEB and professional associations, play a crucial
role in ensuring compliance, while penalties and sanctions act as deterrents against unethical conduct.