Criticisms of Kantian Ethics in the Business Industry

Ethics is generally one of the most intensely debated subjects in the society as they can be found at all levels. Most commonly, people talk of ethics in a religious or personal context, topics such as euthanasia being the less evil in ill-fated circumstance or if it is acceptable to lie to protect other persons’ feelings. In an organisational context, ethics are an important part of each employee’s job, from interns to CEOs, as they determine how employees act in certain situations.

The general concept of ethics is defined as a set of moral rules that govern a person’s behaviour and judgement of right and wrong, when conducting an activity. There are various philosophical theories to cover the concept of ethics, both of consequential nature such as utilitarianism, hedonism and egoism and of non-consequential nature such as deontology and Agent’s virtue.

The term of compliance is generally defined as the ability of an individual to act according to an order, relevant laws or regulations. Correspondingly in business, regulatory compliance is the legal entity’s responsibility to be aware of and adhere to an external laws/regulations and internal rules which are imposed upon it. As an organisation, it is imperative to inform in advance and encourage all individuals associated with the legal entity to conform to the laws and internal rules and apply when necessary.

Regulatory Compliance and Ethics are interrelated concepts in some aspects, however, their foundation is quite different. In business, an organisation can have a Compliance program without an Ethics program, but not the other way. The reason behind this is that compliance is more rigid, all the employees and the organisation as a whole must adhere to laws and regulations, while ethics are more of a grey area and it refers to what an employee intends to do after going through the compliance program. Although ethics are seen to be less important than compliance, they are vital in determining how a company is perceived, with respect to its operating process, by communities and external employees or other organisations.

This piece of writing benefited of two methods of data collection, both of a qualitative nature. Qualitative data is useful in this context as it is asking an open-ended question about how ethics and compliance are important to Disney and to its employees in general. In terms of data collection, the main method used is through academic journals derived from either field studies or diverse specialised books. Additionally, a longitudinal method of diary studies where a logbook with various tasks and adhoc situations have been kept proved to be valuable when writing the personal experience at the Company.

The essay will be an analysis of theoretical concepts reviewed in the academic studies at Royal Holloway and how they fit in a real-world context, more precisely, in my work experience at The Walt Disney Company (TWDC) as an Accounting Intern. The first part of this piece of writing will be criticising how employees are guided on both morals and imposed ethical business conduct to take the right decisions and act professionally. On moral side, the focus will be on Kantian stakeholder theory and its formulations. On the ethical business conduct side, the emphasis will be on the five principles in the CIMA Code of Ethics and how professional ethics are applied by employees as well as the threats they present, drawing a parallel to TWDC ‘Standard of Business Conduct (SBC).

The second part of this piece of writing will focus on criticising how the businesses are complying with laws and regulations and employees’ motives to conform to Regulatory Compliance at the workplace. The emphasis will be on analysing methods of compliance in accounting such as SOX control and International Financial Reporting Standards. Furthermore, the essay will evaluating how The Walt Disney Company adheres to external and internal compliance in its accounting practices, as well as describing experiences where I, as an employee, have adhered to business’ compliance. Lastly, the essay will be analysing the similarities and differences between ethics and compliance in the society and in the working environment through the Fraud Triangle, Forced Compliance Theory and Cognitive Dissonance.

Deontology is an ethical theory that uses categorical imperatives to distinguish right from wrong and it is often associated with philosopher Immanuel Kant. The theory is arguing that the actions rather than the consequences matter in moral decision making (Bowie, 2017) and regardless of the outcome and personal desires, we are categorically moral responsible for our actions. According to his literature in Groundwork for the Metaphysics of Morality, Kant believes that the only thing in the world that is ethical without qualification, and that should govern a person’s actions is the good will, where moral obligations are derived from pure reason. Morality should provide people with a framework of rational rules that guide and prevent certain actions.

Transposing ethics in a business context, literature suggests that ethical decisions are influenced by organisational culture (Ponemon,1992), hence why legal entities agree to the development of professional codes of ethics. The management of a company should focus on providing meaningful work for employees and make sure that employees are satisfied with how they are treated in the work environment. According to Bowie in Paradox of Profit, content employees might lead to increased profits and prosperity for a company (Bowie,1998).

Deontological ethics take in consideration the personal side of an employee in a business context, as individual character formation in the workplace is vital in the creation of an organisational culture. Categorical imperative morals encourage the employee to act ethically, taking in consideration human traits such as humanity. According to Kantian stakeholder theory, actions should only be considered ethical if they benefitted all stockholders, without placing an individual’s interests above those of other stakeholders. Additionally, management employees should be aware that taking correct decisions will potentially determine how successful a business is. Nevertheless, in some situations, due to the ambiguity of deontological ethics, the employee might choose to breach the concept of ethics.

Kant had a lot to offer in his writings about the categorical imperatives which can be understood by different formulations, depending on the context. The ‘Universalizability’ formulation is arguing that one should act based on the general principle that stands behind a particular action which is considered by an individual. For example, theft by employees, managers, and customers is a major problem in business. If a maxim that permitted stealing was universalized, there could be no private property or nothing could be owned. Therefore, if the employee steals from the boss, the theft is morally wrong.

The ‘Humanity’ or ‘Ends in themselves’ formulation focuses on how people should treat one another. The principle is based on the fact that humans use mere means to benefit or interest them as individuals. Kant argues that a mere mean should only be used on an object, never on a person, hence avoiding diminishing or inhibiting uniquely human capacities. This formulation can also be applied to business where people in a business relationship cannot be used. Moreover, corporations and business practices should be of such a nature that they contribute to the development of human rational.

CIMA Code of ethics is a well-known IFAC handbook among professional accountants and registered students (CIMA, 2020). The code frames the five principles that every accounting employee must be aware of and apply when necessary. They are as follows: integrity, objectivity, professional competence and due care, professional behaviour and confidentiality.

Integrity is a fundamental principle which involves being straightforward and honest in all professional and business relationships according to the CIMA Code. In business, integrity is also referred as the reality principle and it is essential in many aspects. It is giving the business a competitive edge as the rivalry is more aggressive in today’s world and the companies have to be cautious of the image they portray to the market they act in, to its competitors and to the community in general. 

Moreover, it makes taking decision significantly easier. For example, employees in management roles in the company, such as shareholders and CEOs, need to be courageous to take upright decisions as they can influence the reputation or financial position of a company. In the event of failing to be honest in taking decisions, it is important to question actions, admit errors and avoid deluding other parties. According to TWDC’ Standard of Business Conduct its employees have to be aware that acting with honesty is the only approach which will keep intact Company’s reputation as being number one in the entertainment business. Guidelines to ethical behaviour for high level employees include following laws and regulations, as well as keeping an ‘open door’ policy for any concerns or questions coming from lower levels personnel.

At an accounting level, it is fundamentally important to present fairly the financial position, financial performance and cash flows of an entity, more precisely to not knowingly be associated with reports which are not understandable, relevant, reliable or comparable. Furthermore, there might be situations where the numbers on the reports have meanwhile changed or there has been unintentionally omitted information, the accountant does not breach the concept of integrity only if he/she reports the updates and does not manipulate data. A factor that might influence an accountant or even an auditor to manipulate or oversee data is the intimidation threat. This can be detrimental to integrity principle when the threat is made by a higher ranked employee with a dominating personality who exerts pressure, either actual or feared.

During my internship, I have always used integrity in my practice as I have prepared monthly Deferred Income and Revenue Reconciliation reports. The numbers reported have always been honest, their format was easy to follow and comparable. Other situations where I presented an honest attitude was when I owned up for mistakes such as inputting wrong data or sending an unclear e-mail.

Objectivity is a principle that requires an employee to avoid compromising professional judgment in conditions of bias or conflict of interest, as indicated by CIMA Code. This principle arguably presents the most threats, most common being the familiarity between employees and managers or third parties with an interest in the company. Decisions based on objectivity mean disregarding personal ties and not taking in consideration the emotional aspects. Additionally, decision making must ignore discriminatory factors such as skin colour or sexual orientation when dealing with the personnel. 

Though complete objectivity may be difficult for large enterprises, management should strive to make decisions based on undisputable information. For example, directors and managers must use objectivity to assess performance and give equal chances to all employees. Furthermore, neglecting objectivity in the workplace can have consequences ranging from discontented employees to possible civil suits. Disney’s Code of Conduct reiterates that the business is built on public trust and it is important to keep personal relations outside of the workplace in order to avoid potential conflict of interest, however if there are any familiarities between employees, they must be reported to Management Audit department.

At an accounting level, accountants must not manipulate data for personal gains and report all financial statements based on solid evidence. Other circumstances where an objective opinion might be hard to maintain is when a previous employee is working as an auditor. Depending on the former relationship with employer, his/her position might be compromised by the advocacy threat and the behaviour might be influenced negatively or positively.

Through my work experience at the corporation, I had learnt to be objective when constructing financial reports by using more than one system to check if the data is complete and correct. Also, selected reports have been investigated by external auditors every quarter through SOX controls to ensure if the numbers reflect how well the business in doing in its Licensing department.