3

Chapter 3

Chapter 3
Ethics and professionalism

INTRODUCTION
The challenges that exist within the business environments often test the ethical
values and principles of organisations and business people. How to be professional,
responsible and ethically effective in business practice should constantly be evaluated.
Businesses can apply King Code principles for good corporate governance to improve ethical
and professional business practices.
3
Chapter 3

Overview
 Define ethical behaviour
Ethics and  Description/Definition of ethical
 Give practical examples of ethical and
professiona behaviour and business practice.
unethical business practice, e.g. using
lism  Examples of ethical and unethical fair vs. unfair advertising techniques,
business practice, e.g. using fair etc.
vs. unfair advertising techniques,  Give practical examples of professional
etc. and unprofessional business practices,
 Examples of professional and e.g. good use of work time and abuse of
unprofessional business practices, work time, etc.
e.g. good use of work time and  Explain how businesses can apply King
abuse of work time, etc. Code principles of transparency,
accountability and responsibility for
 Application of the following King
good corporate governance to improve
Code principles: ethical and professional business
o Transparency practices.
o Accountability  Suggest/Recommend ways in which
o Responsibility professional, responsible, ethical and
 Ways in which professional, effective business practice should be
responsible, ethical and effective conducted, e.g. payment of fair wages,
business practice should be providing quality goods and services,
not starting a business venture at
conducted.
someone else's expense, etc.
 Situations/issues that pose  Identify types of
challenges in the business unethical/unprofessional behaviour from
environments given scenarios/statements.
 Recommendations improvements  Discuss/Explain the following
for Situations/issues that pose unprofessional and unethical
challenges in the business businesses practice`
environments  Sexual harassment
 Unauthorised use of workplace
funds and resources
 Unfair advertising – definition and
examples
 Pricing of goods in rural areas
3
Chapter 3

Come up with your

own method to help
learn the meaning of these concepts

3.1 Key concepts

These definitions will help you understand the meaning of key
Business Studies concepts that are used in this chapter.
Understand these concepts well.

Term Definition
Business ethics Ideas about what is morally correct or not applied in a business
situation.
Ethical behaviour Acting in ways consistent with what society and individuals think are
good values.
Business practice A procedure/rule employed or followed by a business in the pursuit of
its objectives.
Professionalism Describes the internationally accepted standards/expectations that
society has of people’s conduct and levels of competence in the
workplace.
Tax evasion When a business does not declare all their income to SARS with the
aim of paying less tax.
Corporate The exercise of ethical and effective leadership by the board of
governance governors of a business towards achieving good performance/
effective control/sustainability and profitability.
Accountability Holding directors and officials responsible to stakeholders for their
decisions and action.
Transparency Directors and managers are expected to operate in a manner that is
easy for stakeholders to understand what actions are performed.
Responsibility The legal and moral obligation of the business in relation to the
economic, social and natural environment within which it operates.
3
Chapter 3

3.2 Ethics and professionalism

Ensure that you understand the meaning of
professionalism and ethics so that you are able to
explain the differences between these concepts.

Differences between professionalism and ethics

PROFESSIONALISM ETHICS
 Refers to what is right/wrong/acceptable  Refers to the principles of right and
in a business. wrong/acceptable in society.
 Set of standards of expected behaviour.  Conforms to a set of values that are
morally acceptable.
 Applying a code of conduct in a  Forms part of a code of conduct to guide
profession or business. employees to act ethically.
 Focuses on developing a moral compass  Focuses on upholding the reputation of a
for decision-making. business/profession.
 Includes guidelines on employees'  Involves following the principles of right
appearance/communication/attitude/ or wrong in business
responsibility, etc. activities/practices/dealings.

3.3 King code principles

Responsibility  The business/ board should develop and implement programmes
that should be aimed at protecting the communities in which they
operate.
 The business/ board should develop remedial programmes to
protect the environment for example, reduce air and water pollution.
Accountability  There must be sound relationships between the business and all
stakeholders.
 The business is answerable to stakeholders for their actions and the
performance of the business.
 A board of directors must be appointed and accountability rest with
the members thereof.
Transparency  Business must have audit committees and must conduct internal
audits.
 There must be disclosure of accounting transactions and
transparency.
 The findings of the audits must be made available to stakeholders
and strategies must be put in place to deal with shortcomings.

Do not study the following as they are no longer part of grade 12

content.
 Principles of professionalism
 The relationship between ethics and professionalism
3
Chapter 3

Activity1

1.1 Classify the following statements under unethical or unprofessional business practice.

1.1.1 Faroza Traders is advertising second hand goods as new.

1.1.2 The employees of Diana Beauty Salon are always late for work.
1.1.3 Go Tiling does not keep their promises to their customers.
1.1.4 Kola Financial Consultants falsify their clients’ financial statement in
return for a bribe. (8)

1.2 Name FOUR examples of unfair advertising practices. . (4)

1.3 Identify the King Code principle illustrated in EACH statement below.

1.3.1 The board of directors of Lake Lodge tabled its answers to stakeholders
for their actions which led to decline of profit in 2017 financial year. (2)

1.3.2 The directors of Mathoks Holding Ltd made available the findings of the
audits to stakeholders. (2)

ANSWERS TO ACTIVITY 1
1.1 Unethical/Unprofessional
1.1.1 Unethical √√
1.1.2 Unprofessional√√
1.1.3 Unprofessional√√
1.1.4 Unethical √√ (8)

1.2 Examples of unfair advertising practices

 False Labeling √
 Giving goods deceptive names. √
 Using false/deceptive advertising. √
 Selling second hand goods as new goods. √
 Criticising competitor’s goods. √
 Using small print in the advertisement to mislead the consumer. √
 Exploitation of children’s lack of understanding of product.
 Misuse of people with disabilities in advertisements. √ (4X1) (4)

1.3 King Code principles

1.3.1 Accountability √√ (2)
1.3.2 Transparency √√ (2)

Only answer the number of facts required as you will not be awarded
marks for extra answers given. This is only applicable when the
number of facts is specified e.g. name FIVE.
3
Chapter 3

3.4 Professional, responsible, ethical and effective business practices

Ways in which professional, responsible, ethical and effective business practice

should be conducted
 Businesses should treat all employees equally.
 Plan properly and put preventative measures in place.
 Pay fair wages/salaries which is in line with the minimum requirements of the BCEA/Remunerate
employees for working overtime/during public holidays.
 Engage in environmental awareness programmes/Refrain from polluting the environment, e.g. by
legally disposing of toxic waste.
 Refrain from starting a venture using other businesses' ideas that are protected by law.
 Business decisions and actions must be clear/transparent to all stakeholders.
 Businesses should be accountable /responsible for their decisions and actions/ patents rights.
 Hiring honest/trustworthy accountants/financial officers with good credentials.
 Regular/Timeous payment of taxes.
 Draw up a code of ethics/conduct.
 Ongoing development and training for all employees.
 Performance management systems/Appraisals should be in place.
 Adequate internal controls/monitoring/evaluation.

Activity2

Read the scenario below and answer the questions that follow.

ERIC WELDERS (EW)

Eric Welders specialises in the manufacturing of steel fences and gates. The business is
situated in a residential area and the neighbours are complaining of the noise caused by the
welding activities. Employees throw waste material on the ground in the local park. There is no
code of conduct for employees. Employees are not given protective clothing.

2.1 Quote from the scenario above THREE ways in which EW is not conducting business professionally,
responsibly and ethically. (3)
2.2 Advise the management of EW on how they can address the challenges identified in QUESTION 2.1.
(6)
ANSWERS TO ACTIVITY 2

2.1 Ways in which EW is not conducting business professionally, responsibly and ethically.
 The business is situation in a residential area and the neighbours are complaining of
the noise caused by the welding activities. √
 Employees throw waste material on the ground in the local park. √
 There is no code of conduct for employees. √
 Employees are not given protective clothing. √
NOTE: Quote directly from the scenario to avoid losing marks.
(3X1) (3)

2.2 Recommendations on how EW can address their challenges

 Refrain from starting a venture at the expense of others.√√
 Draw up a code of ethics/conduct for employees. √√
 Plan properly and put preventative measures in place√√ Max
(6)
3
Chapter 3
3.5 Unethical/unprofessional business practices
Unethical Reasons for being Recommendations
/unprofessional unethical/unprofessional
Sexual harassment  Involves unwanted and  Every business should have a clear
unwelcome attention of a sexual policy regarding sexual harassment.
nature from someone at work.  Employees must know there rights
 The attention causes and the rights of fellow employees.
discomfort, is humiliating and  Business must create an environment
interferes with the job. where all employees are treated with
dignity and respect.
 Internal investigation should be made
in order to determine the seriousness
of the harassment.
 Serious cases/matters on sexual
harassment should be reported to the
appropriate institutions such as the
SA Police Services (SAPS).
Unauthorised use of  Using the business’s money  Identify potential areas where
workplace funds and without permission is called unauthorised use of funds occurs.
resources unauthorised use of funds  Limit the number of employees who
 Using the organisations funds have access to funds.
for own use is illegal.  Implement a fraud prevention
 Example buying air time from strategy.
petty cash  Complete internal audits on a regular
basis.
Unfair advertising  The use of false or misleading  Consumers must report unfair
statements in advertising advertisements to the Advertising
leading to misrepresentation of Standards Authority.
the concerned product, which  Business should be encouraged to
may negatively affect keep their advertising fair and in line
consumers. with the constitution.
Pricing of goods in rural  People in rural areas are often  Consumers should report cases of
areas not able to compare prices of unfair pricing.
different retailers./They are  New entrepreneurs should be
forced to buy from one local encouraged so that there is
store. competition.
 They are at the mercy of greedy  Shopkeepers and service providers
shopkeepers who inflate prices. should keep profits at reasonable
levels.
Taxation  Corporate tax and personal  Businesses should pay the correct
income tax are the main source amount of tax to SARS.
of income for the government.  Keep financial records honestly and
 Many businesses and accurately.
individuals do not declare all  Make sure that all financial records are
their income to SARS. checked and audited.
 This is called tax evasion and it  Submit all tax returns on time.
is illegal and unethical.
Abuse of work time  Activities that are not focused  Monitoring of employee achievements
on the job that you are meant to  Including an explanation of which
do during working hours actions constitute wasting time in the
 Making personal calls during company code of conduct.
work hours.  Creating a culture of responsibility
 Taking extended lunch breaks towards the company.
 Using the printer and copier for  Pointing out the problem to those who
personal use appear to be wasting time.
 Doing personal business during  Creating a feeling of teamwork so that
work hours all employees feel responsible for what
has to be achieved.
3
Chapter 3

Activity3

3.1 Identify the type of unethical/unprofessional business practice that is conducted by Mics Guest
House in the Sotho village below.

3.1.1 The financial manager does not record the cash receipts transactions in order to avoid
paying VAT.

3.1.2 The supervisor promised John, one of her employee’s a salary increase if he agrees
to have an intimate relationship with her.

3.1.3 The receptionist uses her cell phone during working hours.

3.1.4 The business charges guests more for breakfast than in the city.

3.1.5 The manager uses the business credit card to pay for the holiday expenses of his
family.
(10)

3.2 Suggest practical ways that Mics Guest House can deal with each type of unethical/unprofessional
business practice identified in QUESTION 3.1.
Use the table below as a guide to present your answer.
TYPES RECOMMENDATIONS
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
(10)
3
Chapter 3

ANSWERS TO ACTIVITY 3
TYPES RECOMMENDATIONS
3.1.1 Tax evasion √√  Businesses should pay the correct amount of tax to
SARS.√√
 Keep financial records honestly and accurately.√√
 Make sure that all financial records are checked and
audited.√√
Sub max 2
3.1.2. Sexual harassment √√  Every business should have a clear policy regarding
sexual harassment.√√
 Employees must know there rights and the rights of
fellow employees.√√
 Business must create an environment where all
employees are treated with dignity and respect..√√
Sub max 2
3.1.3 Abuse of work time √√  Monitoring of employee achievements.√√
 Including an explanation of which actions constitute
wasting time in the company code of conduct.√√
 Creating a culture of responsibility towards the
company.√√
Sub max 2
3.1.4 Pricing of goods in rural areas  Consumers should report cases of unfair pricing.√√
√√  New entrepreneurs should be encouraged so that
there is competition.√√
 Shopkeepers and service providers should keep
profits at reasonable levels.√√
Sub max 2
3.1.5 Unauthorised use of workplace  Identify potential areas where unauthorised use of
funds and resources √√ funds occur.√√
 Limit the number of employees who have access to
funds.√√
 Implement a fraud prevention strategy.√√
Sub max 2
Max (10) Max (10)
 Chapter 3
3