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Tackle ethical issues in a strategic way

Lee Rowlandson addresses the ethics topic (question 2.3) that appeared in the December 2016 exam


March 2017

There aren’t many certainties in life, especially when you are preparing for exams. With a vast array of topics for examiners to choose from it is always comforting to find one that is guaranteed to be tested every sitting. And for students preparing for the ICAEW Business Strategy paper that topic would be ethics.
The paper assesses a candidate’s ability to identify, explain and advise on ethical concerns stemming from commercial (or perhaps uncommercial) decisions that have been made within an organisation.
In the December 2016 exam, question 2 focused on an organisation called ZDC. Students were asked to explain the ethical issues for both the chief executive and marketing director arising from a conversation about the recent takeover of a company called Trann. The examiner also asked candidates to set out the actions that each director should take as a result of this conversation.
Identifying the ethical issues
Note that the question asked for an explanation of ethical issues (plural). Therefore students needed to diligently digest all of the information provided to identify a range of problems.
The BS examiners often comment that weaker answers focus narrowly on a small number of issues and fail to appreciate the multiple layers of predicaments that are often presented.
In this scenario there were two main issues, each of which gave rise to numerous concerns.
Firstly, the chief executive’s niece worked as a manager at takeover target Trann. He had not disclosed this information at the time of the acquisition and may have even voted in favour of helping his niece’s career rather than the best interest of ZDC. She had since been promoted twice.
Secondly, the CEO may have been guilty of putting pressure on the marketing director initially to vote in favour of the acquisition. He may have exerted more pressure to ensure that the takeover was a success, and again to not disclose his family connections.
How many issues did you count? There are as many as seven.
Explaining the ethical issues
When explaining the problems it is crucial to be able to explain why something is an ethical issue and then what the impact of this issue might be.
Students often miss the first stage of this explanation, skipping straight to the implications. In this question the implications may be that ZDC may have made an unsuitable acquisition. However, this is the commercial consequences of these ethical issues rather than the ethical issues themselves.
To describe the ethicality of the predicaments it helps to use ‘ethical language’, such as the popular transparency, effect and fairness framework. For example, the CEO not disclosing the employment status of his niece would be a lack of transparency.
However, do not limit yourself to these three terms. The question of whether the chief executive acted in the best interest of the company could be depicted by using terms such as ‘lack of objectivity’ or ‘self-interest’. Furthermore, the threats that he makes with regards to the marketing director’s dismissal could be discussed in terms of their legality.
It is also important to establish the facts to present a balanced evaluation. Did the chief executive actually put pressure on the marketing director’s vote? Or, to be sceptical, is this director now looking for an excuse to disassociate himself with this questionable decision?
Advising on the ethical issues
Always remember to provide advice in questions like this. After all, the requirement does specifically ask for the actions that they should each now take.
Most questions will contain similar wording to this, as the examiners want to assess a student’s ability to offer practical advice. So they will be looking for more than just “call the ICAEW helpline”.
Again, the markers will look favourably on an answer that offers a range of recommendations – especially as this requirement asked for actions that they should both take.
Ideally, the advice should also aim to address different problems. Should the CEO disclose his niece’s position? What should the marketing director do if he feels he has been pressurised?
Tragically, the main risk with this section of the question is that students often forget to offer any advice at all. Remember that the number-one thing the reader will be looking for is always guidance. With that in mind, it is important to remember what can be learned from this question:
• Identify a range of ethical issues from the scenario.
• Explain them by using ethical language.
• Advise with a selection of practical solutions.

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