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MARKS: 100
NORMAL EXAMINATIONS
EXAMINER: MRS. B DHLAMINI
INSTRUCTION TO STUDENTS:
UNIVERSITY OF NAMIBIA
PART A (ETHTCS)
Milton Friedman views a company's only responsibility as to generate "as much [wealth] as
possible" for its owners within the legal and ethical boundaries, i.e. to maximise shareholder
returns. This view has been dubbed/labelled a "shareholder view" of corporate social
responsibility. The main reason why Friedman holds this theory is that, in his view,
shareholders own the company. Since the company is theirs, they have the moral right to
decide what it should be used for.
Although Friedman does not support the use of company resources by managers to benefit
others at the expense of shareholders, he does note that companies ultimately provide
greater benefits for society. He argues that in attempt to maximize stockholders' wealth in a
"free-enterprise" economy, competition will force the company to use resources more
efficiently than competitors, to pay an employee a competitive wage, and to provide
customers with products that are better, cheaper, and safer than those of competitors - this
ultimately benefits the broader stakeholders.
A very different view of corporate social responsibility is what is now called "stakeholder
theory." According to Edward Freeman and David Reeds (September 73, L970), the two
scholars who pioneered this view, a stakeholder is "any identifiable group or individual who
can affect the achievement of an organisation's objectives. ln other words, a stakeholder is
anyone that the corporation can harm, benefit, or influence, as well as anyone that can harm,
benefit, or influence the corporation. A stakeholder, in short, is anyone who has a "stake" in
what the company does.
Extrocted from Business Ethics Concepts ond Coses - Manuel G. Velasquez poges 24 - 25.
L.L Provide a critical analysis of the meaning of corporate social responsibility in light of
the contrasting views contemplated in the scenario above. (5)
1.2 Compare and then contrast the two views presented by Friedman as well as Freeman
and Reed (1970). (1s)
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QUESTION 2 (ETHICSI (10 MARKS)
Moral standards include the norms we have about the kinds of actions we believe are morally
good or morally bad. Moral norms can usually be expressed as general rules about our actions,
such as "always tell the truth", "it's wrong to kill innocent people," or "actions are right to the
extent that they produce happiness." Moral values can usually be expressed with statements
about objects or features of objects that have worth, such as "honesty is good," and "injustice
is bad."
Extracted from Business Ethics Concepts and Coses Vh fdition(201.4)- Monuel G. Velosquez
poge 71.
2.1 ln your own words provide a summary of what you consider to be the appropriate
definition of moral stondords, furthermore, explain how moral standards interrelate
with ethics. (41
ldentify the threats which may arise from this situation and explain how the fundamental
principles of integrity and professional behaviour may be threatened. (S)
3.2 The Code of Professional Conduct has been developed with various objectives,
including amongst others the need to address a need for professional accountants in
business to comply with the fundamental principles of integrity and professional
behaviour.
Briefly discuss the principles of integrity and professional behaviour in as far as it concerns
the professional accountants' responses to non-compliance or suspected non-compliance
with laws and regulations by the organisation which employs them. (3)
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3.3 Beckie Nchunu is a professional accountant registered with ICAN, and is recently
employed at a senior financial position by a listed company with diverse business
activities in retail. During the course of his professional activities he became aware
that:
3.3.1 The directors had taken a decision to invest substantial amounts in crypto
currencies, a practice which was specifically prohibited in terms of an
amendment to the company's memorandum of incorporation (MOl) approved
at the AGM held three years ago.
3.?.2 The company is planning to sell certain information about its customers to 3d
parties without the express permission of the customers to sharing of
information.
3.3.3 The financial director to whom Beckie Nchunu reports to, is involved in his
personal capacity as a material shareholder in a private company which is
engaged in the alleged illegal harvesting and sale of crayfish.
Discuss for each of the above situations whether it will be necessary for Beckie Nchunu to
take any action/respond to satisfy the requirements of the Code of Professional Conduct.
(Please note: you are not required to discuss the action/response which should be taken).
(1U
3.4 Within an organisation, identify the individual or group of individuals who bear the
responsibility to identify and address any non-compliance with laws and regulations by
the organisation itself or individuals within the organisation. (2)
3.5 Although the general principle of responding to non-compliance with laws and
regulations apply to all chartered accountants, the Code does distinguish between
senior chartered accountants in business and professional accountants other than
senior chartered accountants.
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3.5 Dicky Button is a chartered accountant in business registered with ICAN and is an
executive director of Jacobsfire (Pty) Ltd, a large industrial company. At a board meeting
of a company the seven directors passed a resolution by six votes to one, to implement
a process to dispose of the company's industrial waste in a manner which is in serious
contravention of various environmental regulations, but which is very difficult for the
authorities to identify and successfully prosecute.
Dicky Button had voted against the resolution and had explained to his fellow directors
the potential serious consequences of implementing this process. However, the other
directors ignored his warnings on the grounds that it was an inexpensive process and
that the risk of the company being caught and prosecuted was very low.
Consider the following "further actions" which Dicky Button could take and state, for
each "further action", explain whether it would be appropriate or not appropriate to
take further action and justify your answer.
3.5.1 Report the matter to the auditing regulatory body as a reportable irregularity. (4)
3.6.2 Change his vote from a "no" vote to abstention to protect himself from any
negative consequences. (4)
3.5.3 Accept that the resolution was passed by all the other directors but report the
intended implementation of the process to the environmental regulators without
informing the board. (4)
The board of directors is the most important factor in corporate governance, and King lV like
its predecessors, places great importance on the role of the board and its directors.
4.L ldentify the factors which the board should consider in determining the number of
directors to be appointed to the board. (4)
4.2 Outline the considerations and procedures to be followed in appointing a director to
the board. (5)
4.3 Briefly explain whether a company secretary with the requisite knowledge of labour law
and executive remuneration can be appointed to the remuneration committee. Justify
your answer. (5)
4.4 Briefly describe the requirements that should be complied with before a director can
be classified as independent non-executive director. (5)
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PART D (TNTEGRATED FINANCTAT REPORTTNG)
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