Key Ethical Issues Raised in the Article
Discuss about the Business Corporations Ethics and Social Responsibility.
The title of the article is “An Ethical Framework for Tax Decision Making by Corporations in Australia”. According to Appendix A, Catriona Lavermicocca and Michael Quilter published the article on 12th of April 2018. The article talks about ethical decision making in the management of large corporations in Australia whereby companies evade taxes due to the current culture and structure of tax collection. The article articulates how this kind of practices shows the lack of ethical decision making in the leadership of these companies (Appendix A). It as well outlines why manager’s moral standards are also of significance in the management of corporates as well as the companies themselves embracing the need to have core values incorporated in the company’s code of conduct. The article finally illustrates how a company with good values cannot benefit from a manager who does not have high standards of ethics and professionalism.
From the article, several issues are raised. First, how companies that have a substantial presence in Australia should be ethical when it comes to tax payment and compliance. The companies either pay little tax or evade tax altogether. Therefore, this means that the government has to come up with complex tax structures and systems to keep up with the tax evaders, which comes at a cost regarding acquiring and administration (Appendix A). Therefore, the whole issue of tax evasion and non-compliance places an ethical obligation on the corporate’s leadership and decision makers. The article goes on to suggest that nowadays most companies operate with the conservative approach to corporate ethics whereby the companies are based on profit and revenue generation, and no much concern is placed on their social responsibility and obligations in which the society demands them to be held accountable. This tax avoidance when viewed in a social responsibility perspective, transfers the tax burden to other people in the community. Therefore, the article suggests that there should be an ethical framework for tax risk management that guides the decision making in the corporate world which can be embedded in the company’s code of ethics (Appendix A). This framework will help the companies eliminate the uncertainties and complexities that arise in law application, therefore, dictating where the company sits regarding the acceptable level of tax risks.
Registered companies in Australia are supposed to act responsibly and ethically according to the principles as well as recommendations of the corporate governance council. For instance, the third principle outlines that just being ethical and responsible in meeting tax obligations is not enough; it also includes being an exemplary corporate citizen (Szerletics, 2015). It again adds that registered company’s core values must be included in the code of conduct utilised in company’s decision making. Therefore, the company’s decision makers require proper governing principles and values that instils principled reasoning in that legal and ethical principles are established at the board level and demonstrated through the organisational structure (SHAH, 2014).
Consider your character and integrity
On the other hand, it is quite a difficult task doing away with the current ethical culture and introducing a new one more particularly in connection with tax non-compliance and decision-making. In most large Australian companies, tax managers and chief financial officers are the ones responsible with decision making on matters concerning task risk therefore apart from the company’s ethics, principles and code of conduct, individual ethics are also of utmost importance (In Nucci, In Narva?ez, & In Krettenauer, 2014). Generally, most if not all chief financial officers have membership in professional accounting entities which obligates them to operate with high ethical standards in their line of duty. From a survey, chief financial officers’ perspective on the ethics likely affects their decision-making and most probably, those who have a negative attitude towards ethics or assume the importance of ethical and responsible conduct, often get involved in corporate tax evasion and non-compliance schemes. Therefore, personal attitudes of managers towards ethical behaviour will most likely affect the process of decision making in a company presenting a risk to the company regarding the corporate position on ethics (Newton, 2013). The company has to, therefore, work to reduce effects of personal ethical preferences from their managers if their objectives encompass ethical conduct regarding tax compliance.
Just like the Australian government is trying to come up with aggressive structures and systems to deal with tax evasion, in another similar comparison is the ethical decision of the Malaysian government sidelining officials accused of ignoring corruption (Appendix B).
Ethical judgements are not only concerned about what happened but also if what happened is right or wrong. Thus, personal moral judgements are about the effects of the actions or decisions people make whether they should have been done. Individual ethical judgements can be made through the following five steps;
When creating a moral judgement, you must first gather all the facts about the subject you want to judge. During this process, an individual should neutral as possible, avoid distorting the facts for your benefits and do not overlook other facts. All facts must be brought on the table of judgement. If the facts are tempered with in the first place, then the decision will not be considered as ethical (Dobrin, 2012). But at the same time, it is challenging to know all the facts about a subject you want to judge. Therefore, at this stage, you have to rely on reasonable assumptions to help in the judgement. After that, you have to interpret the facts and the logical assumptions about your values and what they mean to other parties involved.
The prediction made is based on the facts gathered. By doing this, chances of getting the desired outcomes are increased. Of course, it is difficult to predict the future, but it is common sense that some items are more certain than others are. For instance, when you slap someone, you are more likely to be also hit than get a smile thus an individual is supposed to select something that they think they should avoid or proceed with an action that is more likely to cause good (Dobrin, 2012).
This is called intuition or conscience. By identifying one’s beliefs, one can verify if their judgement is rational or not. Conscious and sensible feelings always highlight what has been overlooked in the process of making an ethical decision.
In this step, individuals ask themselves if they will be comfortable with the judgement and if they would be willing to let others know about that judgement. Whether they will get ashamed or feel guilty about the judgment, whether they would approve others judging the way they did and whether they will be proud of their views.
- Willingness to explain to others own reasons for the judgement and being ready to engage in honest conversations with others.
A person would be able to test his/her judgement whether it is ethical or not by submitting it to others for scrutiny.
Other important factors also considered in the making of individual ethical judgements include; identifying consequences, considering personal integrity and character, thinking creatively about possible actions and deciding on the best moral action and being prepared to deal with the scrutiny.
Ethical individual judgement can as well vary in some ways. Some judgements may be positive while others negative and others may be directly implied. From the article, personal ethical judgement depends on the person’s attitude towards a moral code of conduct. If a manager’s attitude towards ethics marries with those of the company then, they will be able to make rational judgements on matters tax risk management. But if the manager’s attitude towards ethical conduct is wrong, then their decisions will not be moral hence will most likely get involved in tax evading scandals.
Moral philosophy deals with examining the nature of morality, the concept of right and wrong and how people should morally coexist with others. The moral philosophies that exist are teleology, egoism, utilitarianism, deontology, relativist, virtue ethics and justice. Teleology specifies that morally acceptable actions base on some desired outcomes. Egoism stipulates that morally right actions are those that satisfy a particular person’s self-interest as determined by the individual. In utilitarianism, acceptable actions are those that satisfy the cumulative interests of many people as defined by those individuals. Moreover, deontology focuses on the intentions related to a specific behavior rather than the consequences. It mainly focuses on personal rights preservation. In relativist, ethicalness is subjectively evaluated according to individual and group experiences. Virtue ethics stipulates that whatever is morally acceptable in a certain situation is not only what standard morality demands but also the individual moral character of a person in that situation. Lastly, justice assesses ethicalness based on fairness.
Therefore, from the article, the moral theory that relevantly applies is virtue ethics theory that focusses on conventional morality as well as individual morality (Oxley, 2014). This means that in any given situation what is moral is not only what the conventional morality approves but also what a moral individual would view as right and acceptable. Therefore, from the case study, what the conventional morality requires is that companies should comply with tax payments, but for this to happen the individual moral standards of the managers of these companies should be high. This implies that if the chief financial officers are morally upright then they will comply with tax obligations but if their moral standards are pathetic, then it does not matter what the conventional morality requires.
In conclusion, it is prudent for companies to have core values that define them as well as their management. The company’s core values in the code of conduct must marry with the manager’s ethical standards for it to have an ethical decision-making process. Therefore, moral responsibility in the management of the corporate world begins with personal ethical standards of the managers and goes upwards to the company’s core values formulated by the board.
References
Dobrin, A. D. (2012). Steps in Ethical Decision Making. Psychology Today. doi:10.1002/9781118001875.ch11
Klikauer, T. (2012). Seven Moral Philosophies of Management. Seven Management Moralities, 44-65. doi:10.1057/9781137032218_3
Ladd, G. T. (n.d.). Universality of moral principles. Philosophy of conduct: A treatise of the facts, principles, and ideals of ethics, 389-414. doi:10.1037/13713-016
Lavermicocca, C., & Quilter, M. (2018). An ethical framework for tax decision making by corporations in Australia [Online]. Available at https://www.austaxpolicy.com/ethical-framework-tax-decision-making-corporations-australia/[accessed on 26 May 2018]
SHAH, S. H. (2014). Soulful corporations: A values-based perspective on corporate social responsibility. Heidelberg: Springer.
In Nucci, L. P., In Narva?ez, D., & In Krettenauer, T. (2014). Handbook of moral and character education.
Newton, L. H. (2013). Ethical decision-making: Introduction to cases and concepts in ethics. Cham: Springer.
Oxley, J. (2014). Moral dimensions of empathy: Limits and applications in ethical theory and practice. Place of publication not identified: Palgrave Macmillan.
Szerletics, A. (2015). Paternalism: Moral theory and legal practice. Frankfurt am Main [Germany: Peter Lang Edition.
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