Code of Ethics and Basic Principles (Grade 10 NSC Matric Accounting): Revision Notes
Code of Ethics and Basic Principles
Introduction
Understanding ethics is essential in any business environment. Ethics form the foundation of how businesses operate and how people within those businesses conduct themselves. This note will help you understand what a code of ethics is and explore the fundamental principles that guide ethical behaviour in the workplace.
Ethics isn't just about following rules—it's about creating a culture of trust, respect, and integrity that benefits everyone in the organisation and beyond.
What is a code of ethics?
A code of ethics is a written statement that outlines the norms and beliefs of a business. It describes what is considered acceptable behaviour in the workplace. Think of it as a guidebook that helps everyone in the organisation understand what is right and wrong in different situations.
The code of ethics serves several important purposes:
Key Functions of a Code of Ethics:
- It creates clarity for all stakeholders by defining acceptable standards of behaviour
- It helps everyone understand what is considered right or wrong in specific workplace situations
- It typically emphasises core values such as honesty, integrity and diversity
- It provides a framework for decision-making when faced with ethical dilemmas
Basic principles of ethics
Ethics in business is guided by several fundamental principles. Understanding these principles will help you recognise ethical behaviour and make sound decisions in the workplace.
Ethical conduct
Ethics refers to the moral principles of a profession that guide how a person should behave. Ethical conduct means acting in accordance with these moral principles in all professional situations.
Both employees and employers share responsibility for ethical behaviour. They must act morally and ethically towards themselves, their colleagues, clients and the profession as a whole. This shared responsibility creates a culture of trust and respect in the workplace.
To ensure ethical conduct, every profession needs clear rules that define what is acceptable. These rules should be:
- Written down so everyone knows what is expected
- Created in consultation with both employees and employers
- Applied fairly to all levels of the organisation
- Written in such a way that employees at all levels feel the rules apply to everyone, not just to them
Exam tip: When answering ethics questions, imagine yourself working in the business and apply these principles to real workplace situations.
Leadership
Leadership means being in control of a group of people or an organisation. A leader must take charge while others follow their direction.
Effective leadership is demonstrated when followers obey the leader because they genuinely respect what the leader says and does, not simply because they fear consequences. Good leaders earn respect through their actions, decisions and integrity.
Discipline
Discipline involves working and behaving in a controlled manner by following specific rules. The code of ethics outlines both acceptable workplace behaviour and the consequences for incorrect behaviour.
When employees fail to follow the code of ethics, they will face disciplinary action. This system of accountability ensures that standards are maintained and that everyone understands there are consequences for unethical behaviour.
Transparency
Transparency means conducting yourself in such a way that it is clear you have nothing to hide. Transparent behaviour builds trust within the organisation and with external stakeholders.
Being transparent means:
- Operating openly and honestly
- Making information available to those who need it
- Being straightforward in communications
- Avoiding secretive or deceptive practices
Accountability
Accountability means taking responsibility for what you say and do, and being able to justify your actions. When you are accountable, you acknowledge your decisions and their outcomes, whether positive or negative.
Accountable individuals:
- Own their mistakes and learn from them
- Can explain the reasoning behind their decisions
- Take credit for successes and responsibility for failures
- Don't blame others or make excuses
Fairness
Fairness is the quality of being reasonable and just. It requires judging situations objectively, without bias or preconceived ideas.
Fair treatment means:
- Treating all customers or clients equally
- Making decisions based on merit, not favouritism
- Ensuring people feel they are being treated justly
- Applying rules and standards consistently to everyone
When customers and colleagues feel they are treated fairly, it builds loyalty and creates a positive working environment.
Sustainability
Sustainability means acting in ways that show respect for the environment and the responsible use of resources. Sustainable business practices make a difference in the long term by ensuring resources remain available for future generations.
Sustainable businesses:
- Avoid wasting resources
- Minimise damage to the environment
- Consider the long-term impact of their decisions
- Balance current needs with future consequences
Responsible management
Responsible management considers three crucial elements, often called the 3 Ps: People, Planet and Profit.
The 3 Ps Framework:
People: A responsible manager considers all stakeholders in the business—employees, suppliers and customers—and deals with them ethically. This means treating people with respect, fairness and honesty.
Planet: A responsible manager takes the environment into account and does everything possible to ensure it is protected and not destroyed. This includes making environmentally conscious decisions about operations, materials and waste.
Profit: A responsible manager ensures the business makes maximum profit, but only by using ethical practices. Profit should never come at the expense of people or the planet, or through unethical means.
The 3 Ps work together to create a balanced approach to business management that considers all important factors, not just financial gain.
Integrity
Integrity can be defined as honesty, efficiency, sincerity, honesty towards oneself, and the upholding of values and norms. It means being true to your principles even when no one is watching.
Success in business can only be achieved when employees and clients respect the integrity of the business, which must be reflected in the management and leaders.
Why is integrity important for managers?
It builds confidence: When people know that managers don't use their position to enrich themselves through the business, confidence, loyalty and support grow naturally. Employees and stakeholders trust leaders who demonstrate integrity.
It influences others: A manager's conduct influences everyone around them, including employees and employers. The character of the manager determines the character of the business. Leaders set the tone for the entire organisation.
It creates high standards: The manager's integrity sets a positive example for employees to follow. Remember the saying: people do what people see. If leaders demonstrate high ethical standards, employees are more likely to follow suit.
Confidentiality
Confidentiality means keeping business information private and secure. Most information in a business should remain confidential, shared only with those who have a legitimate need to know.
Employees must not leak information intended only for internal use to people outside the business. Breaching confidentiality can harm the business significantly.
Worked Example: Understanding Confidentiality Breaches
Imagine a manager is making decisions about a large contract the business might obtain. If this information is disclosed to outsiders, a rival business might use this knowledge to compete for and potentially win the contract. This would cause the business to lose a valuable opportunity.
Employees who are disloyal may share confidential information with people who should not have access to it, damaging the business's competitive position and potentially causing financial loss.
Objectivity
Objectivity is the ability to act in an unbiased way. This means not being influenced by personal feelings and preferences when making decisions.
An objective person:
- Makes decisions based on true facts, not personal feelings
- Acts fairly and without bias when carrying out duties
- Is not swayed by pressure from others
- Considers all relevant information before deciding
- Separates emotions from professional judgement
Objectivity is especially important in roles that require impartiality, such as accounting, auditing and management.
Professional ability and proper care
When offering professional services, you offer your knowledge, skills, experience, care and diligence. Professional ability means having the competence to do your job properly.
Key principles include:
- Professionals should not provide services for which they are not qualified unless they can obtain proper advice and assistance
- Professionals must maintain a high standard of knowledge and skills
- Clients and employers should receive qualified professional services that reflect the most recent practical, legal and technical developments
- Continuous learning and development are essential to maintain professional competence
This principle ensures that clients receive quality service from competent professionals who stay current in their field.
Professional conduct
Professional conduct concerns how all people connected to an enterprise behave in the workplace. At all times, individuals should conduct themselves in ways that don't negatively influence the enterprise.
Professional conduct requires:
- Being polite and considerate towards all parties you interact with
- Showing respect to colleagues, clients, suppliers and other stakeholders
- Maintaining appropriate workplace behaviour at all times
- Representing the business positively through your actions
- Understanding that your behaviour reflects on the entire organisation
Your professional conduct affects not only your own reputation but also that of your employer and colleagues.
Technical standards
Technical standards refer to the relevant technical and professional skills required for a specific position. Every employee should possess the skills their role demands.
Requirements for meeting technical standards:
- Employees must have all relevant technical and professional skills for their position
- All tasks assigned by employers should be carried out with integrity
- Work must conform to all technical and professional standards laid down by the enterprise
- Work must comply with standards set by relevant authorities and applicable legislation
- Employees must maintain their skills and stay current with industry requirements
Meeting technical standards ensures quality work that complies with legal and professional requirements.
Remember!
Key Points to Remember:
- A code of ethics describes acceptable workplace behaviour and helps everyone understand what is right and wrong in specific situations
- The basic principles of ethics include ethical conduct, leadership, discipline, transparency, accountability, fairness, sustainability, responsible management, integrity, confidentiality, objectivity, professional ability, professional conduct and technical standards
- Responsible management balances the 3 Ps: People, Planet and Profit
- Integrity is crucial for managers because it builds confidence, influences others and creates high standards
- When answering ethics questions in exams, apply these principles to workplace situations as if you were working in the business