Ethics and Governance: The Theory of Virtue Ethics and its Application in a Case Study of Freedom Insurance

This report discusses the theory of virtue ethics and its application in a case study of Freedom Insurance. It explores the ethical issues surrounding the Royal Commission and the importance of ethical conduct in business. The report also examines the role of APES 110 in safeguarding against unethical practices.

Ethics and governance
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Ethics
Executive Summary
In this report, the Royal Commission and other unethical practices are dealt with and
discussed. The report stress upon the theory that is associated with the Royal Commission.
Virtue ethics is best suited as it sheds light on the moral character. Further, the case of
Freedom insurance is studied in the light of APES 110. An analysis is made into the case
study and the ethical issue together with the safeguard available to the CPA is adequately
discussed.
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Contents
Introduction...........................................................................................................................................3
The theory concerning Royal Commissioner.........................................................................................3
Application in a case study of Freedom Insurance................................................................................5
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9
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Introduction
It is important that the business should be conducted with a proper code of conduct. It should
be ascertained that there should be regulatory action and proper implementation so that the
collective goals can be attained and promoted. The theories are prevalent so that the business
attains an ethical code of conduct. Ethical theories are present so that publicly desired result
can be attained. If the players are left to operate on its own then it can lead to major pitfalls
however, it needs to be tamed by proper ethical standards and code of conduct. In this
scenario, the Royal Commissioner's case has been considered and the theory of virtue ethics
that suits the case has been discussed and applied
The theory concerning Royal Commissioner
Going by the case study of the Royal Commissioner's, the best applicable theory is that of
Virtue Ethics. Virtue ethics can be applied in the case because it is a representation of the
moral character that carries out an action. This theory provides a strong statement about what
is happening. Virtue Ethics is nothing but a representation of mind and character. VE
emphasizes hugely on moral character. The significance of VE is tremendous in an
individual’s life (Donius, 2010). However, VE is yet not considered within the practice of
international politics or the discipline of International Relations. International ethics is all
about either consequentialism approach (consequences of actions) or deontological approach
(development or identification of moral duties or rules). VE is a blend of “virtues” that
includes taking moral and appropriate actions and having an understanding of the same.
Virtual ethics emphasizes more on an individual’s moral character and not on ethics such as
rights, rules, and norms that are required in Industrial relations and Industrial politics (Douma
& Hein, 2013). This is why VE has not yet received an acknowledgment from IR and IP.
Nevertheless, owing to the significance of Virtual ethics in today’s world there is an ultimate
need for industrialists to restructure Industrial relations and Industrial politics altogether
again.
VE is a broad topic that has been developing over many decades now. VE can be deemed as a
conventional approach as the same was developed by many Ancient Chinese and Ancient
Greek philosophers. Even though VE is a conventional ethical approach, the same was
adopted later in Western philosophy by both consequentialism and deontological approach
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(Goergen, 2012). However, the following article is all about contemporary Virtual Ethics and
its significance to International Relations instead of the various types of Virtual Ethics.
Virtual Ethics helps an individual to distinguish between the right and wrong, wise or foolish,
just or unjust, kind or mean, loving or cruel, fair or unfair, and so on. Therefore, VE is all
about focussing on an individual’s ethical understanding amidst traditions and cultures. The
law definitely requires few revisions in the definition of ‘final product’ must eliminate the
prohibition of funeral expenses policies, and Consumer protection provisions of the ASIC
Act must be applied to funeral expenses policies without any doubt (Geoffrey et. al, 2016).
The issues that were faced are: issues pertaining to EDR (external dispute resolution); •claim
handling issues; lack of enforceability of code obligations related issues; issues associated
with the manner of selling few insurance schemes and products; issues pertaining to the use
and dependence upon certain unfair contract terms; and issues associated with the avoidance
of insurance policies due to misrepresentations or pre-contractual non-disclosure (Goergen,
2012).
At present, VE is considered as one of the three substantial approaches in normative ethics. It
is not wrong to say that VE emphasizes more on individual moral character, behavior, ethics,
and integrity. The morality of an individual is not confined to following certain norms, rules
or any guidelines as such but it, in general, it is all about believing, preaching and practicing
moral thoughts, deeds, and excellence. As per Aristotelian virtue ethics, virtue ethics is
nothing but a sensible character trait that lies between two extremes, such as courage lying
between cowardice and rashness (Bhattacharya & Sen, 2010). The individual is often
indulged in an ongoing fight between two extremes where he has to look for a balance so as
to make ethical decisions. The virtuous agent is unvaried of any norms, rules and guidelines
and all it focuses on virtues like wisdom, fairness, integrity, temperance, consistency, courage
together known as moral excellence.
The integrity of an individual’s moral character is considered utmost in virtue ethics. This
means that it inspires an individual to practice goodness and become a good person. It is not
wrong to say that the character of a person is developed and shaped from a relevant moral
community and this is why it is always significant to identify and target an individual’s
community or communities (Bertilsson, 2017). A corporate environment that has set high
standards of ethical conduct for its employees is undoubtedly the most preferred one.
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Going by the Royal Commissioner case, it is reflected that the VE has time and again
cultivated the meaning of identifying and doing ‘right and wrong’ to ‘knowing oneself and
analyzing whether the actions are relatable with who he is or not’. VE allows an individual to
know oneself more and then analyze whether the actions come in the way of who he is and
who he is not rather than just labeling deeds as black and white.
It is strongly reflected from the case that a person who is virtuous is habituated to it and not
just inconsistent with it. Doing good deeds once in a while will not make an individual a
virtuous person but being consistent in choosing and performing right deeds with right
intentions will always make him a virtuous person. What an individual constantly does,
makes up his character. An individual who is constant at deceiving will ultimately develop
that character trait in oneself and likewise, an individual who is constantly kind will
definitely possess kindness in his character (Kruger, 2015). Intellectual virtues and moral
virtues are two types of virtues. Intellectual virtues are the intellect of the mind. Intellectual
virtues are not just learned by an individual but it is taught to him/her in the first place. For
example, being able to judge, understand and reason appropriately. Moral virtues are
developed by repeating things, deeds or actions. For example, by practicing kindness one
becomes kind. Moral virtues are developed as a result of forming appropriate habits. Moral
virtues are not taught but developed as a result of practice, knowledge, and consistency.
Without active support and participation of an individual at the receiving end neither moral
nor intellectual virtues are developed. Before performing an activity one must have that
potential. Virtues are developed as a result of regular practice just in the way an individual
learns any co-curricular activities.
Application in a case study of Freedom Insurance
APES 110 is a standard of ethics that encompass all members of the professional bodies that
adopted APES 110. Through this principle, the members can identify threats, evaluate the
importance of the threats and apply safeguard to it. In this scenario, Freedom insurance is
expecting the agent to utilize policies or tactics of sales that is aggressive and inappropriate.
Hence, in this scenario, the insurance is asking the agents to use aggressive or inappropriate
tools to enhance the sales that are unethical in nature. In this scenario, the member is trying to
have self-interest ahead of the public interest. Further, this behavior of insurance is
influenced by the idea of self-interest over the public interest.
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The act of bluffing has various meanings. It can sometimes be in the form of just
exaggerating things and sometimes deceiving. Therefore, the ethical status of self-interest
over public interest also depends on its meaning. The theory particularly emphasizes on the
role and duties of an insurance agent pertaining to information disclosures concerned with an
insurance policy. This will further help in concluding whether bluffing is ethical or unethical.
A lie is nothing but deliberately making a wrong statement and confirming it as truth for
one’s own benefit. While lying, an individual makes others trust in his statement and
ultimately deceiving the latter. It can be by means of offering wrong information,
manipulating the statements, exaggerating things, etc so as to convince the other person.
Misleading or misguiding others is nothing but deception. Lying is a kind of or rather a type
of deception (Rebel, 2016). An individual can deceive by means of disguise, gestures,
maintaining silence on a matter, etc. Hiding certain matters and information that might alter
the entire scenario is nothing but deception. A lie to is a deceptive message conveyed to
others.
The investors are now skeptical about the integrity, accountability, and transparency of
organizations and capital markets due to various accounting scandals. It is seen that not just
accountants but many auditors too have been involved in such accounting scandals recently
detected in Australia (Royal Commission, 2018). It is seen that many auditors have allowed
and appreciated such malpractices to take place which has indeed hampered the financial
accounting process as a whole. Though there are multiple reasons behind an untimely demise
of an organization yet the contribution of auditors in letting malpractices to take place shall
always be the most significant one.
The actions of the sales agent should be ethical but there are other things too that determine
their ethics. In this regard, it can be said that sometimes the expectations of the clients also
decide the ethical behavior of the agent. Client expectations must always be reasonable and
practical (Rebel, 2016). The client has following three basic reasonable expectations: •
Asking the sales agent to suggest or refer a product that suits their budget, needs, and
preferences; • the continuity of appropriate coverage as per their preferences; and •
transparency in information provided and absence of any form of deception. It will always be
considered as an unethical practice on the part of a sales professional where he/she
deliberately wishes to skip complete and significant information or just simply offer wrong
information in general.
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Having knowledge is an important factor but one’s behavior definitely goes a long way.
Therefore in this context, it can be said that to become a professional accountant, having
required knowledge is mandatory but to sustain the job he/she must have to behave and act
accordingly as well. An accountant must hold due respect for customs, laws, and practices.
An accountant should deal respectfully with his colleagues and clients. The working should
be done in a way that is not detrimental to the profession and earn a bad reputation rather
integrity should be maintained.
Self-interest threat is where an individual performs in his own interest while harming others.
In such a scenario, an individual under influence puts his own self-interest above the public
interest. Like in the case of an accountant who chooses to re-evaluate an asset so as to either
represent a true and fair view of the balance sheet or just show false high profits in order to
meet investor expectations in exchange of some monetary favors (Hong & Kacperczyk,
2009). The scope of accounting standards includes a re-evaluation of assets but doing it
unnecessarily with wrong intentions definitely puts the integrity of an accountant and overall
accounting profession into question. It is always advisable for an accountant to act with
integrity and to not take up such rewards that are based on manipulating financial accounts.
There always lies a threat where a member has to advocate the client’s business to third
parties knowing that the accounts of the same are not as healthy as the same are portrayed out
to be. The member should not compromise on his professional objectivity and integrity by
becoming a salesperson for such an employer who has projected false information in his
accounts (Hong & Kacperczyk, 2009). A member should not choose to promote a client’s
business to potential investors being aware of the fabrication in its financial reports. A
member is definitely not required to disclose any information concerned with a client’s
business to others but at the same time, he should also choose not to promote the same.
There must always be safety concerned with not just a personal level but the corporate
environment level as well. There always exists the need to have a strong understanding and
judgment skills to identify what is ethical at the personal level and the existence of
appropriate norms, rules, and policies at the corporate environment level (Hoffelder, 2012).
Practices are labeled moral or immoral based on the fact that whether a consumer is deceived
or not and also on the fact, that whether the consumer was aware of the same and deliberately
chose to opt for it (Julia & Elizabeth, 2010). If the consumer was well aware of the mishaps
and infringement practices on account of the salesperson and still opts to go for it then the
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bluffing is not completely unethical. Financial rewards should abstain that will help to avoid
the false practices that are being practiced.
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Conclusion
From the overall discussion, it can be commented that the business can run effectively when
there is a presence of a proper code of conduct and ethical standards. Each business operates
as per its pros and cons. Hence, the business should adhere to the proper ethical standards so
that there is not a major flout. Also, it is observed that the presence of APES 110 ensures that
the business does not perform in a manner that will help the form of self-interest over the
public interest. Going by the APES 110 it should be ensured that the professional should deal
in a professional code of conduct adhering to five essential principles that will help to
safeguard the practice and be away from any risks.
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References
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brand-ethic-and-profit
Bhattacharya, Du S & Sen S, CB. (2010). Maximizing business returns to corporate social
responsibility (CSR): The role of CSR communication. Management Review, 12(8),
19-26. Retrieved from:
https://www.academia.edu/31227763/Maximizing_Business_Returns_to_Corporate_S
ocial_Responsibility_CSR_The_Role_of_CSR_Communication
Donius, B. (2010) Profit Maximization - Ethics = The ‘Goldman Standard, Retrieved
from http://www.huffingtonpost.com/bill-donius/profit-maximization---
eth_b_553605.html
Douma, S and Hein, S. (2013). Economic Approaches to Organizations. London
Geoffrey D. B., Joleen K., K. K.S., and David A. W. (2016). Attracting Applicants for In-
House and Outsourced Internal Audit Positions: Views from External Auditors.
Accounting Horizons, 30(1), 143-156. Retrieved from: https://doi.org/10.2308/acch-
51309
Goergen , M. (2012). International Corporate Governance. Prentice Hall.
Hoffelder, K. (2012). New Audit Standard Encourages More Talking. Harvard Press.
Hong, H & Kacperczyk, M. (2009). The price of sin: the effects of social norms on markets’,
Journal of Financial Economics, 93,35-66. Retrieved from
http://pages.stern.nyu.edu/~sternfin/mkacperc/public_html/sin.pdf
Julia, S.K & Elizabeth C. R. (2010) Conflict Between Doing Well And Doing Good? Capital
Budgeting Case Study – Coors. Journal of Business Case Studies, 6(6), 123-130.
Retrieved from https://clutejournals.com/index.php/JBCS/article/view/267
Kruger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial
economics, 15(2), 304-329. Retrieved from
http://www.sciencedirect.com/science/article/pii/S0304405X14001925
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Rebel. (2016). Responsible Business and Profit Maximisation. Retrieved from:
http://www.responsiblebusiness.eu/display/rebwp2/Responsible+Business+and+Profit
+Maximisation
Royal Commission. (2018). Royal Commission final report. Retrieved from:
https://www.royalcommission.gov.au/sites/default/files/2019-02/fsrc-volume-1-final-
report.pdf
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