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Ethics and Corporate Governance Kassim Hussein, PhD Contact 255 754360174

Ethics and Corporate Governance Kassim Hussein, PhD Contact 255 754360174 kassimhussein2002@yahoo.com. Outline Conceptualization (Ethics, Morals, Values, CG) Ethics in Business Business Codes CG Framework and Decision Process Pertinent issues in ethics and CG.

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Ethics and Corporate Governance Kassim Hussein, PhD Contact 255 754360174

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  1. Ethics and Corporate Governance KassimHussein, PhD Contact 255 754360174 kassimhussein2002@yahoo.com

  2. Outline Conceptualization (Ethics, Morals, Values, CG) Ethics in Business Business Codes CG Framework and Decision Process Pertinent issues in ethics and CG

  3. Conceptualization: Ethics • Ethicsinvolves judgments as to good and bad, right and wrong and what ought to be (what is good, bad or who decides)

  4. The golden rule “do unto others as you would have them do unto you”.

  5. Morals Are rules or duties that govern our conduct / behavior, e.g. “do not tell a lie”

  6. Values • Values are beliefs that a given behavior or outcome is desirable or good. • Values serve as standards of conduct that guide our behavior • Example: how we value the environment, self-respect, keeping our family safe, good health….

  7. Ethics in Business • BE - comprises principles, values, and standards that guide behavior in the practice of business • As business transactions take effect, decisions are made which pass though ethical assessment and they occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment.

  8. Values and judgments are critical in ethical decisions

  9. Types of Business Codes

  10. Codes of conduct - prohibit behaviour and inform expectations. Often outline penalties for breaches of the code. Codes of practice - illustrate the values and principles of the business and how things are done in the business. These codes attempt to empower the employee by making the employee an ethical decision maker. Codes of ethics - set up values and principles as well a define the responsibilities, duties, and obligations organizational members have adhere to

  11. Fundamental Principles - 1 • Integrity • To be straight forward and honest in all professional and business relationships • Objectivity • To not allow bias, conflict of interest or undue influence of others to override professional or business judgments

  12. Fundamental Principles - 2 Professional Competence and Due Care • To maintain professional knowledge and skill at the level required to ensure competent professional delivery of work, engagement or services based on current developments in practice, legislation and techniques • To act diligently in accordance with applicable technical and professional standards

  13. Fundamental Principles • Confidentiality • To refrain from disclosing confidential information acquired as a result of professional and business relationships without proper and specific authority to disclose unless there is a legal or professional right or duty to disclose • To refrain from using confidential information acquired as a result of professional and business relationships for personal advantage or the advantage of third parties

  14. Fundamental Principles focus on • Professional behavior • Obligation to comply with relevant laws and regulations and avoid any action that discredits the profession/ role as a director

  15. The journey to middle income country: The causality between growth and governance Growth causes governance to improve ... … and better governance causes growth • Using measures of rule of law, bureaucratic quality and corruption, Chong and Calderon (2000) found significant causality from good governance to growth and vice versa – i.e. “good governance” both contributes to and results from strong economic performance • Other studies have dealt with the potential for reverse causation by using exogenous instruments for the governance indicators and concluded that good governance has a significant and strong causal impact on economic performance … • Burkhart and Lewis-Beck (1994) found that while higher per capita incomes foster democracy, democracy in turn does not foster higher incomes • B. Friedman (2005) argues that higher living standards encourage more open, tolerant and democratic societies … but the debate on causality continues …

  16. What is CG? KinglV defines • CG is the exercise of ethical and effective leadership by the governing body (Board of Directors) towards achievement of governance outcomes : • Ethical Culture • Good performance • effective control • legitimacy

  17. Shareholders • Board of Directors • Achievement of strategic objectives and value creation • Fulfil responsibilities and duties in law and prescribed functions Chairman Strategy BoardMeetings Information and Communication Key Areas of Responsibility Corporate Policies & Procedures Board Operations Corporate Secretary Board Governance Instruments Reporting&Disclosure Monitoring and Evaluation GovernanceSystem and Controls Board Committees CEO & Management Audit & Risk Committee Executive Committee OHS Committee Other Committee Internal Controls & Assurance Combined Assurance Model Internal Audit External Audit Other Assurance Providers Management Board Governance Framework Regulators (BOT; BRELA; CMSA/DSE; NBAA/IFRS) Best Practices:

  18. Decision processes • CG is important because it looks at how these decision makers act, how they can or should be monitored, and how they can be held accountable for their decisions and actions.

  19. Pertinent CG issues relating to ethics • Fit for Purpose (competency including independence, related party transactions, accountability and disclosure) • Fiduciary Responsibility ( Duty of loyalty, duty of care, Business Judgment rule). • Board’s Self Assessment • Ethical Dilemma • UTU/UMUNTU aspects in CG and Ethics

  20. Thorny Ethical issues in Tanzania • Construction costs – • Use of substandard or inferior materials • Delays in completion dates • Delays in paying contractors • Corruption in tendering processes, • Public Procurement Act, 2011 section 83 (1) stipulates among other things that; the procuring entities and tenderers under public financed contracts shall proceed in a transparent and accountable manner during the procurement and execution of such contracts.

  21. Summary • Ethics deals with things to be sought and things to be avoided in an area/space – CG provides mechanisms for providing direction, control and leadership to achieve objectives sought effectively ethically, efficiently, legally and ethically. • Business Ethics" should be driven or governed by "Personal Ethics” • Personal Ethics should incorporate UTU/UMUNTU • Combatting corruption in construction/procurement and upholding CG

  22. Discussions, Q & A

  23. Thank you Kassim Hussein, PhD kassimhussein2002@yahoo.com +255 754 360 174

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