session 5: iaad code of ethics:ethical dilemmas

Session 5: IAAD Code of Ethics:Ethical dilemmas

Workshop on Ethics and Values in Governance

Session Overview

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Ethical dilemma

Ethical dilemma in the IAAD

Scenarios of Ethical dilemma

Learning Objective

• By the end of the Session participants will beable to understand ethical dilemma and howto manage ethical dilemmas.

Workshop on Ethics and Values in governance 3

Activity 5

• Discuss in your group for five minutes on the following:

– What you understand by ethical dilemma

– Ethical dilemma and ethical violation

– Significance of managing ethical dilemma in workplace

– Factors affecting ethical behaviour

• Share in the plenary


What is an ethical dilemma?

• Ethical dilemmas,

– are situations in which there is a choice to bemade between two options

– neither of which resolves the situation in anethically acceptable fashion.

• In such cases, societal and personal ethicalguidelines can provide no satisfactoryoutcome for the chooser.

Workshop on Ethics and Values in governance

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• Ethical dilemmas don't just centre upon rightversus wrong;

• Can involve right versus right'.

• Ethical dilemmas can arise from equally attractiveoptions that could be justified as being `right' inparticular situations.

• It is not about the legality of the act.

• Within complex contexts and circumstances itmay not be so easy to discern what the ‘right'option might be and what the ‘wrong' optionmight be or whether the action is legal or illegal.


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Ethical dilemmas MAY include:• Discrimination• Sexual harassment• Conflicts of interest• Service receiver/Customer confidence• Organizational resources


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Ethical dilemmas:1. You are hiring an employee

whose duties areimportant to thecompany's success. Thebest qualified applicant is afemale who appears to bepregnant. Would you hirethis best qualified or passto the next person whoisn't pregnant? (Though, itis illegal to not hirebecause of pregnancy, but,there is no way to provethat's why you hired theother person.)

2. You are a real estate agent. A lady from out of town calls you to list her deceased parent’s home for sale. She is not sure what it is worth, but says she will be happy to get Rupees 50 lakh for the home. You look at the home and feel it is worth at least Rs.75 lakh and realise it would be perfect for your brother. What do you do?


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Ethical Violations Vs Ethical dilemmas

• Ethical dilemmas are the situations faced by the employee.

• Ethical dilemmas may or may not lead up to an ethical violation.

• Ethical violation is usually a clear violation of the existing code of ethics/rules/principles in place. It may often pave way for legal action, if proven.


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Ethical dilemmas in work place

• Ethical dilemmas are faced in many situations,in many areas. Our concern is managingethical dilemmas in work place.

• Why do you think managing ethical dilemmasin work place is essential?


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Significance of managing ethical dilemmas

• Ethical dilemmas complicate the work place inthe following manner.

• Ethical behavior can be rationalized by convincingoneself that:

– Behavior is not really illegal.

– Behavior is really in everyone’s best interests.

– Nobody will ever find out.

• This might lead to distorted decision making.


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Significance of managing ethical dilemmas

• Ethical decision making in tune with theorganisational policies is important becausethey tend to establish the ethical tone of theorganisation, ultimately impactingorganisational goals and objectives.

• Hence the need of streamlining the ethicaldecision making in work places.

• There are factors influencing ethical behaviourof a person in the workplace.


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Factors influencing ethical behaviour of an Employee

• The person– Family influences, religious values, personal standards,

and personal needs

• The organization– Supervisory behavior, policy statements and written

rules, and peer group norms and behavior

• The environment– Government laws and regulations, societal norms and

values, and competition climate in an industry


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ETHICAL DILEMMAS IN IAAD


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Framework of ethical decision making



IAAD code of ethics-Core Values

Integrity

Independence, Objectivity and Impartiality

Professional Secrecy

Competence

Activity 5B

• Refer to Handout 5 and answer the questions against each scenario.

• Link the scenarios to the relevant core values of the IAAD and deliberate on how the challenges in the situations can be managed and overcome.


Summary

• Ethical dilemmas

• Ethical dilemma in the IAAD

• Scenarios of ethical dilemma


Thank you


The development of audit regulation in Sweden and the strengthening of the position of the profession

Paper to be presented at the sixth Accounting History International Conference, 18–20 August 2010, in Wellington, New Zealand

Peter Öhman* and Eva Wallerstedt**

* Assistant Professor (Business Administration) Mid Sweden University

Department of Social Sciences 851 70, Sundsvall, Sweden

Email: [email protected]

Phone: 0046 73 036 79 48 (Corresponding author)

** Professor (Business Administration) Mid Sweden University

Department of Social Sciences 851 70, Sundsvall, Sweden

Email: [email protected]

Phone: 0046 70 233 43 95

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Abstract The Swedish audit regulation history reveals that laws both codified the development of

auditing practice and established a basis for professional auditor associations as rule-making

bodies. In Sweden, the regulatory process started in 1895, when the law confirmed a long-

established practice and stipulated that limited companies should assign auditors. The

following decades were characterized by the establishment of an auditing field. In 1932, a

corporate financial scandal prompted major criticism, while simultaneously initiating changes

in audit regulations of benefit for the auditing profession. The profession’s position was

further strengthened in the 1970s when the state suggested additional assignments for

auditors. Swedish accession to the European Union in 1995 was another critical event, since

national regulations had to be adjusted to European statutory requirements, and the Swedish

auditing profession was incorporated in an international auditing field.

Keywords: Audit regulation; Auditing profession; Rule-making bodies; Critical events;

Sweden; European Union

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1 Introduction The emergence and early development of the auditing profession have been closely connected

with industrialization. As long as enterprises were financed internally from cash flow, their

founders rarely had to raise capital by issuing stock. Increasingly, however, companies

became dependent on outside capital. Investors, in turn, required assurance that their invested

capital was being properly managed. The resulting corporate entities, in which ownership and

management were separated, stimulated the emergence of financial auditing, and the auditing

profession gradually achieved a significant position in the industrialized world (Sampson,

1962; Power, 1997; Matthews et al., 1998).

The first association of accountants, Collegio dei Raxonati, was founded in Italy

in 1581. However, nowadays Scotland and England are considered the leading countries in

the early development of the auditing profession (Jensen, 2000, pp. 8–9). In Scotland, the

Society of Accountants in Edinburgh received a Royal Charter in 1854. In England, the first

professional organization, the Incorporated Society of Liverpool Accountants, was formed in

1870. Ten years later the organisation received a Royal Charter under the name the Institute

of Chartered Accountants in England and Wales (ICAEW).

The relevance of research into the auditing profession is illustrated by a

quotation from a classic work by Carr-Saunders and Wilson (1933). In it, the authors examine

and evaluate the characteristics of various professions, among them auditing:

The position of the company auditor is one of peculiar delicacy, for though he is appointed as the ‘watchdog’ of the shareholders, he must yet work in close and constant cooperation with the board … he should feel himself able to resist pressure that may be brought to bear upon him, in regard either to the form of his certificate or to the manner in which the accounts are presented. (Carr-Saunders and Wilson, 1933, p. 221)

The delicate and vulnerable position of auditors has been highlighted over the years,

especially in discussions in the wake of corporate financial scandals, such as the Hatry (1929)

and Royal Mail (1931) cases in England (Jones, 1995). These events indicated that the lack of

clear accounting and auditing rules had created unacceptable risk for potential investors. This

situation has gradually changed over the years, and today there are many accounting and

auditing regulations. However, recent financial scandals, such as the Enron (2001) and

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WorldCom (2002) cases in the USA, indicate that the problem of inadequate rules for

accounting and auditing remains (Rezaee, 2005).

This paper focuses on the audit regulation process in Sweden. During the

twentieth century, an auditing profession slowly emerged in Sweden and the other Nordic

countries. From the start, the Nordic countries had initiated cooperation in professional

matters, which led to similar development trajectories (Wallerstedt, 2009). The case of

Sweden is also interesting, as Sweden has been a member of the European Union (EU) since

1995 and is affected by the same regulatory requirements as the other 27 member states. The

Swedish auditing profession is nowadays part of an international auditing field consisting of

regulators, professional associations, accounting firms, and other interested parties. DiMaggio

and Powell (1982, p. 148) state that an organizational field includes “those organizations that,

in aggregate, constitute a recognized area of institutional life”. Organizations in an actual field

display diversity in approach and form in the initial stages of their life cycle, but over time

powerful forces emerge and they become more similar to one another.

When studying the process of audit regulation in Sweden, the hierarchy of rules

suggested by Flower (1999, pp. 5–9) is a helpful tool. This hierarchy in Table 1 covers a wide

spectrum of matters ranging from laws to interpretations of individuals, where the former are

considered the basis of all regulatory systems and the latter only have persuasive influence.

Table 1: A hierarchy of rules

Rule Rule-making bodies Laws Legislature Delegated legislation Decrees Government Tax regulations Tax authorities Judgment Courts of law Standards Standard-setting bodies Rules of other bodies Professional recommendations Professional associations Guidelines Industrial associations Listing rules Stock exchange Interpretations Individuals: academics, lawyers, etc.

Source: Flower (1999).

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The rationale underlying the choice of material is that critical events have

promoted the process of audit regulation in Sweden and strengthened the position of the

auditing profession. A critical event is an incident that in some way has a significant impact

on a certain issue (cf. Flanagan, 1954). Critical events can only be recognised retrospectively,

and when selecting these events we concentrated on rules and rule-making bodies as

suggested by Flower (1999). The empirical data were gathered mainly from archival

materials, but also from interviews with prominent Swedish auditors.

The remainder of this paper is structured according to three periods in the

development of Swedish audit regulation: the set-up period, the domestic development period,

and the internationally oriented period. In the concluding section, we discuss the findings. The

set-up period began at the turn of the last century when the first signs of an emerging auditing

profession appeared in Sweden. During this period, an institutional framework connected to

the new profession evolved. The domestic development period started in the early 1930s,

when the international financial market collapsed. In the USA, the stock market crashed, and

in Europe there were several corporate financial scandals, including the Kreuger crash in

Sweden. This period deals with the aftermath/consequences of the Kreuger crash. In the early

1970s, international cooperation began to intensify. Swedish auditors turned to their

colleagues in England to get more closely acquainted with new auditing methods. From a

Swedish viewpoint, EU membership in 1995 was the most important event during the

internationally oriented period.

2 The set-up period

2.1 The first auditor association The set-up of the auditing profession in Sweden started around 1900, promoted by interaction

between market conditions, various actors (i.e., organizations), and critical events. Around the

turn of the century, 400–500 new limited companies were founded per year. Companies such

as AGA, ASEA, LM Ericsson, Separator, and SKF grew greatly in importance overseas

(Schön, 2000, pp. 220–223). However, there were no formalized instructions or requirements

for how auditing work should be performed or what qualifications were needed to audit a

company. Laypeople interpreted the assignments according to their own traditions or cultural

beliefs: the knowledge of those bankers, directors, managers, traders, and account clerks

performing audits must have been very diverse. At that time, the audit rules seemed to emerge

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through “spontaneous solidarity of the community”, which together with “market” and “state”

is one of the three ideal cases of regulation (Puxty et al., 1987).

The first observable sign of a profession (cf. Wilensky, 1964, p. 143–145)

emerged when the Swedish Association of Auditors (Svenska Revisorsamfundet; henceforth,

SRS) was founded in 1899. Its founder, Edvard Wavrinsky, was a member of the Riksdag and

for many years was the foremost proponent of SRS, acting from various positions inside and

outside the association. Wavrinsky was inspired by the successful development of the

auditing profession in England, and the Institute of Chartered Accountants in London served

as his model. SRS’s first protocols refer to this institute, which had achieved a “great

reputation” and whose members “were scattered all over the British Empire”. Although the

call for members to join SRS went out to “professional auditors and accountants”, SRS

members included few full-time auditors, consisting mainly of people who carried out

auditing as a sideline to other activities and who lacked professional education in auditing.

(SRSa, Protocol 9/10 1900, 3 §; “En återblick på de 25 gångna åren” [A look back on the past

25 years], 1925, pp. 164–165)

2.2 Company law codifies and stimulates auditing practice In 1895, Sweden’s Companies Act for the first time stipulated that limited companies should

appoint at least one auditor for a period no longer than two years, and that an audit report

should be delivered each year. The auditor was expected to have permanent access to

company records and other documents. If the auditors provided misrepresentative

information, displayed gross negligence, or intentionally failed to make an observation, they

were responsible for the damages incurred by the audited company. However, the Act set

forth no stipulations concerning auditor independence or special auditing training.

There is evidence of the regular auditing of Swedish companies on a voluntary

basis from around 1650 (OSa, Sillén), so the Companies Act of 1895 confirmed long-

established practice. This observation is in line with that of Watts and Zimmerman (1978),

who found that company practice had preceded the debates noted in the accounting literature

as well as the regulations introduced by legislative authorities. Jönsson (1985, p. 85) followed

in the same vein when he observed that the passing of a law often was preceded by good and

accepted practice.

Notably, mandatory stipulations about appointed auditors appeared five years

earlier in Sweden than in England (Jensen, 2000, p. 10). Sweden also became the first country

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in the world in which the auditor, in addition to the strictly financial investigation, also

examined the management’s administration of the company. The legal provisions concerning

the management audit were based on a venerable tradition extending back at least to the

1840s (OSa, Sillén). In this case as well, legislated requirements were preceded by practice.

The Companies Act of 1910 enlarged on the stipulations concerning auditing

and auditors to secure the position of the shareholders relative to the board. Now, anyone

employed by the company or by a board member could not be appointed auditor, and the legal

rights and obligations of auditors were better expressed than in the Act of 1895. Besides

access to all documents, the auditor should be allowed to inventory company cash and other

assets. This clarification was needed, because it had occasionally happened that the annual

general meeting deprived the auditor of specific duties generally associated with the

assignment, for example, examining whether stock reported in the books really existed. A rule

was added about minority auditors, but there were still no formal stipulations about auditor

qualifications.

To overcome the inadequacies of accepted auditing principles and to prepare

auditors for the new regulations contained in the Act of 1910, the Federation of Swedish

Industries appointed an auditing committee in 1912. Oskar Sillén, a committee member and

one of the first authorized auditors in Sweden, prepared guidelines for how the auditing

process was to be executed. These guidelines are found in the documents of the Central Board

of Auditing formed in 1919, so they had obviously been distributed to practicing auditors.

When preparing these guidelines, Sillén was probably inspired by Lawrence Dicksee’s

Auditing: A Practical Manual for Auditors, first published in 1892. The need for additional

auditing guidelines was highlighted in the 1920s, when authorized auditors pointed out that

the auditing process, which according to the 1910 Companies Act was to be conducted in

companies, was not working as intended. (Wallerstedt, 2009, p. 72)

2.3 Auditor authorization by a private organisation In 1912, SRS faced competition when the Stockholm Chamber of Commerce decided to

authorize auditors. The timing of this decision was connected with the 1909 establishment of

the Stockholm School of Economics (SSE), the first graduates of which were examined in

1911. Notably, Sweden’s neighbouring countries began to authorize auditors at about the

same time: Denmark in 1909, Norway in 1910, and Finland in 1912. The idea of having

chambers of commerce authorize auditors probably came from Germany, where there had

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been “beeidigten Bücher-Revisoren” in Hamburg, Lübeck, and Berlin since the end of the

1800s, authorized by their chambers of commerce. (“Auktorisationen av revisorer 50 år”

[Authorization of auditors 50 years], 1963; Jensen, 2000, p. 30)

According to Stacey (1954, p. 21), several European nations embarked on

academic accountancy education for auditors long before England. While the precondition for

acceptance into ICAEW was five years under articles, the precondition for authorization by

the Stockholm Chamber of Commerce was a degree from the SSE and three years of practical

experience in a chartered accountant firm.

When the first authorized auditors appeared, they differed from the SRS

members in that they had a university education and were not allowed to support themselves

in any other way than by auditing. Two of the signs of a profession suggested by Wilensky

(1964, pp. 142–144), adequate training (including university education) and full-time

employment, were thereby initiated. However, the high entrance barriers to becoming an

authorized public accountant in Sweden led to the slow growth of the profession, and

authorized auditors had a hard time supporting themselves by their work. The companies’

habit of appointing lay auditors seemed to be persistent, possibly because auditors belonging

to SRS were often at least as “professional” as were authorized auditors in carrying out audit

assignments. There is a difference between being a professional and acting professionally

(Torstendahl, 1990).

2.4 The battle between two auditor associations Over the years since 1912, SRS members had consistently tried various tactics either to erase

the barriers to becoming authorized auditors or to overcome them themselves. In 1921, the

SRS auditors sent a letter to the government expressing their intention to authorize auditors of

their own (SRSa, “To the King”). The interaction between the different groups of auditors

very clearly exposed opposing interests. Their actions seem to have been in line with the

interactionist approach discussed by Willmott (1986, pp. 557–558), in which competing

interests in a profession are exposed, one group seeking to convince others of its legitimate

claim to professional recognition. When authorized auditors in Norway announced a Nordic

auditing conference in Kristiania (nowadays Olso), the time seemed to be right for authorized

auditors in Sweden to form their own association. Accordingly, in 1923 the Swedish Institute

of Authorised Public Accountants (Föreningen Auktoriserade Revisorer; henceforth, FAR)

was formed. The official explanation for the establishment of the Institute was the conference

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in Kristiania, though the intention of SRS to authorize auditors of their own may have

triggered the establishment.

After the founding of the new association, the auditing field in Sweden

comprised two associations – SRS auditors (72 members) and FAR auditors (20 members) –

each pursuing its own interests. SRS consisted of part-time auditors while FAR included only

academically trained professionals working fulltime. The climate of cooperation between the

two was strained from time to time: FAR claimed a monopoly over the designation

“authorized public accountant”, while SRS claimed the right to authorize auditors themselves.

Similar turf wars had occurred in the 1890s between UK auditing bodies about using the

designation “chartered accountant” and about the “registration and control of persons acting

as public accountants”. In 1891, for example, ICAEW introduced a bill (which was denied

passage) in the House of Commons seeking legislation to prohibit members of other bodies

from using the designation “chartered accountant” (FARa and CBAa, Protocols 1923–1924;

Stacey, 1954, pp. 34–36).

In 1931, SRS and FAR reached a settlement and a new auditor designation was

instituted: that of registered accountant. Authorized and registered accountants differed in that

the theoretical and practical requirements for the registered accountants were less stringent,

and they were allowed to conduct audits as a sideline to another occupation.

As recently as 1930, just below 8 percent of auditors in the largest limited

companies in Sweden were authorized auditors. This meant that a great majority of these

companies were audited by laypeople. One may conclude that the audits performed differed

from person to person and that professional knowledge was probably transferred from one

generation to another. It was somewhat more common for authorized auditors to be appointed

by listed companies. There were around one hundred companies listed on the stock market at

this time (1931), and 32 of them had assigned one or two authorized public accountants.

Given this situation, FAR asked the stock exchange to declare in the listing rules that all listed

companies should appoint authorized auditors by referring to the neighbouring country of

Denmark, which had decided to do so the same year. However, FAR had to wait for a

decision on this matter (CBAa, Protocol 1932).

2.5 The creation of an auditing field The set-up period was characterized by the establishment of an auditing institutional

framework. Organizations with direct or indirect connection to the young profession were

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established in the wake of the Companies Act of 1895, which stipulated the obligation of

limited companies in Sweden to assign an auditor. The foundation of SRS was partly a

consequence of this law, but the concurrent development of the auditing profession in the UK

was also of importance. The private initiative to establish SEE in 1909 and the graduation of

its first students two years later must be considered key events; they provided the basis for the

decision of the Stockholm Chamber of Commerce to authorize their first six auditors in 1912,

and the foundation of FAR in 1923.

There are close connections between the events presented in Table 2, and in

most cases previous events are prerequisites for following ones. For example, the decision to

institute a new kind of auditor in 1931 was a consequence of all the preceding events.

Table 2: Critical events in the Swedish auditing field in the set-up period 1895 The Companies Act requires the assignment of auditors

1899 The Swedish Association of Auditors (SRS) is founded

1909 The Stockholm School of Economics (SEE) is opened

1910 The Companies Act extends audit regulation

1912 The Stockholm Chamber of Commerce begins to authorize auditors, and the

Federation of Swedish Industries appoints an auditing committee

1923 The Swedish Institute of Authorized Public Accountants (FAR) is founded

1931 A new kind of auditor – the registered accountant – is instituted

Analyzing these events in light of the hierarchy of rules suggested by Flower (1999) in Table

1, it is obvious that the stipulation in the 1895 Act set forth in the 1910 Act, preceded the

decision of the Federation of Swedish Industries to appoint an auditing committee to produce

auditing guidelines. Apart from the Companies Acts, the guidelines and the listing rules

published by private organizations, there was a lack of formalized auditing rules in the set-up

period. It should be noted that the activities of individuals, such as the authorized public

accountant Oskar Sillén and SRS’s founder Edvard Wavrinsky, were important in these early

years. Sillén, for example, produced auditing guidelines, and in this way became an

interpreter of the law. These two individuals likely became so influential because of the lack

of other rule-making bodies besides the legislature (cf. Flower, 1999, p. 9).

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3 The domestic development period

3.1 The Kreuger crash This period was ushered in by a corporate financial scandal that had significant international

repercussions. According to Flesher and Flesher (1986), the establishment of the Securities

and Exchange Commission (SEC) in the USA in 1934 was a consequence not only of the

1929 stock market crash in New York, but also of the Kreuger crash.

The Kreuger affair became an international cause célèbre. The frauds had survived undetected for so long because of the lax state of company law which allowed Kreuger to maintain a high level of secrecy around the group’s affairs. In January 1933, G. O. May testified to the United States Banking and Currency Sub-Committee, observing that ‘the Kreuger & Toll frauds could not have been concealed if either the audits of the companies had been co-ordinated under a single control, or the audits, though not so co-ordinated, had been carried out in all cases with a proper honesty, efficiency and independence’. (Jones, 1995, pp. 180–181)

It took a long time for the auditor associations to recover from the Kreuger affair, though the

activities followed from it also strengthened the position of the profession. In fact, the

Kreuger crash can be seen as the most significant event in the development of the Swedish

auditing profession. This observation is in accordance with Power (1997, p. 26), who claims

that each significant crisis leads to a further round of institutional change that benefits the

profession involved.

The story began when Ivar Kreuger and Paul Toll formed the joint-stock

company Kreuger & Toll, which in a few years grew into one of Sweden’s leading building

firms. By the mid 1920s, Kreuger had become a prominent international businessman,

generally known as the “Match King”. By the end of 1920, the Kreuger Group had acquired

fifteen national match monopolies and owned majority shares in several other match

monopolies. Stocks and bonds of Kreuger & Toll were the most widely held securities in

America in the 1920s. One explanation for the success on the American market was that

annual returns on these stocks and bonds were over 20 percent. Unfortunately, these

dividends were paid mostly out of capital, not profits. Kreuger was essentially operating a

giant pyramid scheme, which was hidden from the investing public by Kreuger’s insistence

that the company’s financial statements not be audited. He preached a philosophy that secrecy

was paramount to corporate success (Flesher and Flesher, 1986, p. 447). The group’s structure

was very complex, and in fact Ivar Kreuger was the only one who had full insight into the

transactions and transfers occurring between the subsidiaries (Thunholm, 1995).

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Because of the stock market crash in 1929, some banks went into bankruptcy,

making it impossible to raise capital through the American market. Loans to various states

had become Kreuger’s most important assets but, because of the breakdown of international

payment systems, the risk of loss intensified (Schön, 2000, p. 343). Rumours were circulating

about the financial problems of the Kreuger Group, and it became impossible for Kreuger to

raise more money on the market, something that was essential for company survival

(Thunholm, 1995, p. 251). To calm down the lenders, a meeting was arranged in Paris at the

beginning of March 1932 with some of Kreuger’s American bank connections and Swedish

bankers. At that meeting, Kreuger became aware of what was about to be exposed and on 12

March he committed suicide. This led to the collapse of the Kreuger consortium and to

financial disaster for those who had invested much of their money in the group’s companies.

(Gäfvert, 1979, pp. 207–241)

3.2 A need for a stronger auditing profession The year before the Kreuger crash, a board meeting at the stock exchange in Stockholm

postponed FAR’s proposition that all listed companies ought to appoint an authorized auditor

(FARa, Protocol 22/1 1931). However, right after the crash, the stock exchange urged

parliament to propose in law that each listed company must have at least one authorized

auditor (NAa, Swedish Ministry of Justice Memorandum Report 1932, p. 6).

In discussions following the Kreuger crash, there was severe criticism of the

institution of auditing in Sweden. Inside the auditing profession, in particular in FAR, it was

felt that the profession had to act to defend and protect the prestige of auditors. The most

important issue was preventing an authorized public accountant from being involved in

anything like the Kreuger affair. It had been proved that Anton Wendler, the auditor of the

Kreuger Group, had been on the Kreuger payroll and it was quite obvious that he had failed to

uphold FAR stipulations. In fact, he had signed the audit reports without even performing an

audit. The significance of Wendler’s contraventions was indicated by the fact that he was

jailed by a court of law. (“Revisor Anton Wendler häktad på måndagen” [Auditor Anton

Wendler remanded into custody Monday], 1932)

The Kreuger crash highlighted the deficiencies of regulations concerning auditor

independence and the auditor’s obligation to impose standards in excess of minimum legal

requirements. Furthermore, the need for ethics rules had become glaringly obvious. The first

rules in this field were formulated by FAR members in 1933 and were secret; these were

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amended and supplemented several times in the following years. By 1942, the ethics rules

contained fifteen principles dealing with professional conduct involving colleagues as well as

the auditing profession, auditor independence, price competition, etc. (Wallerstedt, 2009, pp.

159–160). The ethics rules compiled after the Kreuger crash marked an important step in

strengthening the auditing profession in Sweden. According to Wilensky (1964, pp. 145–

146), the emergence of a code of ethics indicates that a profession has become securely

entrenched.

3.3 Legal protection and new audit tasks After the Kreuger crash, auditors became aware of the importance of recognizing the

consolidated financial position of a group. Auditors also took measures to improve their

auditing procedures when consolidated balance sheets were introduced. However, very few

Swedish companies listed on the stock exchange presented consolidated accounts; the extent

just rose from just 4 percent in 1932 to 16 percent in 1941 (Wallerstedt, 1999). A few years

later, the situation was different. The Companies Act of 1944 contained stipulations

concerning consolidated accounts. The comments attached to the Act included detailed

discussion of the growing importance of company groups and the importance of properly

auditing them. Consolidated accounts should summarize the balances of the parent company

and the subsidiaries, in accordance with accepted accounting and business practices (SOU,

1941:9, p. 446). In this respect Sweden acted before England, where legislation about

consolidated accounts appeared in 1948. However, European countries were far behind the

USA, which had begun requiring consolidated accounts already in 1910 (Jones, 1995, pp.

235–236).

The importance of the requirement to present consolidated accounts cannot be

overestimated. What is reported by companies is generally perceived as important by

stakeholders (Gambling, 1977); if requirements call for something to be accounted for, this

will draw public attention and in turn increase the need for auditing.

FAR considered the Companies Act of 1944, which replaced the Act of 1910, as

“the most important manifestation ever of their importance in Sweden” (Sillén, 1949, p. 77).

The main reason for this satisfaction was probably that the monopoly of the chambers of

commerce to authorize auditors was now legally protected; henceforth, no other authority

could authorize public accountants. The last of Wilensky’s (1964) characteristic signs of a

profession was thereby achieved by the auditing profession in Sweden.

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Another reason for the satisfaction among the professionals was that use of

authorized public accountants finally became compulsory in listed companies. Furthermore,

the importance of auditor independence was stressed, and the content of the audit report was

more elaborate than before. The auditor was required to sign the balance sheet and the profit

and loss statements, verifying that they were in accordance with the company’s books.

However, the only qualification required of auditors in limited companies according to the

Act of 1944 was that they should have relevant accounting experience and some acquaintance

with the financial circumstances of the companies under audit.

3.4 An initial focus on numerical investigations “Några ord om siffergranskning” [A few words about numerical investigation], published by

FAR at the time of the Kreuger crash in March 1932, claimed that the auditor’s role was

generally understood to entail “detecting and preventing misappropriations”. When

performing the annual audit, the auditor had the duty to review the financial statements and

examine the balance sheet “in as much detail as possible”. The company’s internal routines

and processes should be organized such that irregularities would mainly be discovered by the

companies themselves.

The control function, which was supposed to preclude misappropriations in

daily management, was to be exercised by checking clerks. As a rule, these numerical

auditors would be engaged by, and report to, the incumbent auditors. By this arrangement,

checking clerks would obtain a much more “independent position towards the company than

if they were directly recruited by the company itself”. Their main task was to facilitate the

discovery of any misappropriations and to determine when “such business transactions”

called for the incumbent auditors’ attention. Regarding the education of checking clerks, they

were supposed to be “extremely skilled accountants” as well as “used to auditing”. The

incumbent auditors were to prepare detailed work instructions, but even if the checking clerks

had these instructions, the work also required that they be able to assess, “reasonably

independently”, how the work was to be performed.

There are numerous testimonies describing how the subsequently authorized

public accountants handled numerical auditing early in their careers. One of them remembers:

The job had a lot to do with numerical auditing, verification, and cash inventories. There were virtually no manuals, covering the subject auditing in its entirety. Very few descriptions of the auditing technology were to be found. (Ulf Gometz, interview)

14

Audit work followed in this vein for the first years after the adoption of the new Act in 1944.

However, the professional development of auditing methods and procedures began in the late

1950s, when the focus gradually shifted from numerical examination to internal control. The

initial step in this transformation occurred when the big accounting firms started to use

statistical sampling.

The question was not to examine every tenth entry, but to set up audit plans according to a certain level of significance. (Björn Markland, preceding Secretary General of FAR, interview)

FAR’s internal activity accelerated in the early 1960s, and several task forces were

established. There also seemed to be a need for professional meetings, and members

assembled in Stockholm, Gothenburg, and Malmö, where they participated in discussions.

The number of members gradually increased, and at the end of the domestic development

period FAR consisted of 387 members (Wallerstedt, 2009, p. 263).

3.5 Towards the first auditing recommendation The years that followed the new Companies Act were devoted to interpreting the law. At this

time, the regulation process was to largely left to the “market”, and the private auditor

associations, in particular FAR, strengthened their positions as rule-making bodies.

In 1946, FAR published “Nya aktiebolagens bestämmelser om revisorer” [The

provisions of the new Companies Act regarding auditors]. Some of the issues addressed in

this work were: who could be appointed auditor; when an approved auditor should be

appointed; audits of consolidated accounts; the audit report as a pubic document; and the

auditing of limited companies going into liquidation. In 1949, FAR published what came to

be regarded as the first recommendation concerning accounting issues, “Några synpunkter på

årsredovisningen enligt nya aktiebolagslagen” [Some comments on the financial statements,

based on the new Companies Act]. This text was revised and republished in 1955, 1961, and

1965.

In 1964, the FAR board decided that accounting and auditing recommendations

should be worked out in two parallel committees. The first auditing recommendation, which

dealt with the fundamental principles for conducting an audit, was preceded by discussions in

the FAR board of whether it was “wise” to publish auditing principles. Several members felt

that such a publication could be inappropriate as, in their minds, the proposal contained

15

several controversial points. They argued that, if an auditor failed to apply these principles,

this could lead to problems if he or she had applied more conventional methods (FARa,

Administration Report 1964–1965).

The auditing committee’s draft “Grundläggande principer för utförande av

revision i svenska aktiebolag” [Basic principles for conducting audits in Swedish companies],

was published in the 1967 member list. The proposal contained the following sections:

“Introduction”, “Auditor”, “Auditor review”, “Examination of the company’s internal

control”, “Materiality and relative risk”, Documentation”, “Demarcation of responsibilities

between the auditor and management”, “Additional missions”, “Agencies”, “Organization of

work and the working paper”, and “Filing”. In the introductory section, the committee

stressed, in accordance with what had been determined by the board, that the proposal should

not be regarded as definitive: the principles made no claim to be “established auditing

standards”. The committee noted that the focus of auditors’ work had changed since the

advent of the 1944 Companies Act. Accounting firms had become more complicated and

advanced, and auditors had an increasing number of tools at their disposal. Companies were

also aware that they had to be organised so as to facilitate effective internal control. Against

this background, the committee considered it necessary to

through the elaboration of rules and recommendations for members’ work, seek to achieve uniform standards, which can be gradually applied in the future, and in accordance with business needs.

In 1971, finally, the first recommendation, “Om revision av räkenskaperna i svenska

aktiebolag: granskningens inriktning och omfattning” [About auditing the accounts of

Swedish limited companies: focus and scope of the review process], was published. It was a

revised version of the 1967 draft. “Sweden thereby became the third country in the world to

issue auditing recommendations, preceded only by the USA and England” (Bertil Edlund,

former president of IFAC, interview).

3.6 A financial scandal promotes the development of the profession The first critical event in this period (see Table 3) was the most important one. On one hand,

the Kreuger crash prompted major criticism of the institution of auditing. The auditor’s

obligations were tested in the court of law, and the Kreuger Group auditor was jailed. This

highlighted the judgment level in the hierarchy of rules presented in Table 1.

16

Table 3: Critical events in the Swedish auditing field in the domestic development period 1932 The Kreuger crash

1933 Ethics rules are formulated for FAR members

1944 The Companies Act grants chambers of commerce the monopoly to authorize public

accountants and registered accountants and to make decisions concerning consolidated accounts

1964 An auditing committee is established by FAR

1971 The first auditing recommendation is published by FAR

On the other hand, the audit failure caused further audit regulation to the benefit of the

auditing profession. As a result of the Kreuger crash the stock exchange urged that all listed

companies should be obliged to appoint at least one authorized auditor, and this was finally

included in law in the Companies Act of 1944. The Act also stipulated that the title

“authorized public accountant” was legally reserved for auditors who received their titles

from chambers of commerce. The compilation of ethics rules by FAR members at the

beginning of this period is another critical event that positively affected the profession.

The additional rule-making was of particular concern to FAR in this period. The

years that followed the new Act were devoted to interpreting the law. An auditing committee

was established in 1964 and the first recommendation was published in 1971. From then on,

FAR was considered a prominent rule-making body in the Swedish auditing field.

4 The internationally oriented period

4.1 Modern auditing practice In 1970, some FAR members were assigned to create a “model company” to be used as a case

when discussing upcoming auditing recommendations. This case, Modular Machinery, later

became known as Sweden’s first step towards modern auditing practices with a clear focus on

internal control. Considerable work supported this case, which was inspired by foreign

models. In the early 1970s, FAR members had visited colleagues in ICAEW in London to

obtain inspiration for the future development of auditing practice in Sweden. The Swedish

auditors were interested in the organization of ICAEW, education and recruitment matters,

professional merger activities, work on accounting and audit recommendations, and the

impact of these recommendations on practice (FARa, Protocol 23/2 1970).

After the collaboration with their foreign colleagues, the old model of item-by-

item checking was abandoned in Sweden. Instead, auditing work focused on areas of

responsibility and delineation of authority, established rules and procedures, and the existence

17

of a systematically arranged accounting system. These were essentially the same principles

that Skinner and Andersen (1966) had recommended in Analytical Auditing (FAR 75 år – en

rapsodisk skildring av utvecklingen 1923-98 [The Swedish Institute of Authorised Public

Accountants 75 years – a rhapsodic story of the development 1923-98], 1998, s. 16).

4.2 The private authorization system comes to an end In the early 1970s, the system of private authorization through chambers of commerce was

questioned by various stakeholders, among them members of the Riksdag. This issue found a

solution in 1973, when the National Board of Trade became the authority responsible for

authorizing and approving auditors (the term “approved auditors” replaced “registered

accountants” in 1975). Sixty years of private authorization had come to an end.

The National Board of Trade from then on issued authorizations and approvals,

published instructions for auditors, and dealt with complaints from the public concerning

professional acts of omission on the part of authorized public accountants or approved

accountants. The theoretical academic qualifications were, as before, normally a degree in

business administration with an approved curriculum. After five years’ documented service

under an authorized public accountant, candidates could apply for authorization to the

National Board of Trade and afterwards apply for membership in FAR. The Board had a

supervisory role but played no part in setting standards. The National Board of Trade was

assisted by an advisory board in important or complex issues. The advisory board comprised

representatives of the auditor associations, i.e., FAR and SRS, and representatives of various

organizations and governmental agencies. (Wallerstedt, 2009, p. 220)

4.3 New statutory audit assignments Allen and McDermott (1993, p. 4) claim that, in England, auditing is likely the profession that

has been most dependent on legislation to consolidate its position. Regarding the stipulations

about auditors in the Companies Acts, this is arguably valid also in Sweden. The workload of

professional auditors increased when a new Companies Act was passed in 1975. Substantially

more data had to be scrutinized in virtually every audit.

The most important feature of the new Act was that specific stipulations of the

Companies Act of 1944 regarding the auditing process were replaced by the requirement that

company annual reports were to be examined according to Generally Accepted Auditing

Standards (GAAS). These standards were to be interpreted according to the recommendations

18

of the auditing profession and to statements issued by the National Board of Trade. Once

again, legislated requirements were preceded by practice and professional efforts.

When the National Board of Trade became responsible for authorizing and

approving auditors in 1973, a shift from “market oriented regulation” to “state oriented

regulation” (cf. Puxty et al., 1987) occurred. The state soon moved to act on its new power

position. In the Riksdag, the question of how to handle economic crimes came to the fore. A

report from the Crime Prevention Council, for example, suggested that auditors should be

used in fighting economic crimes.

This was the first time auditors had experienced a government assault on their traditional role. (Björn Markland, preceding Secretary General of FAR, interview)

This debate in Sweden can be compared with the situation from the mid 1850s to at least until

the early 1900s in England, when the primary objective of auditing was fraud detection

(Power 1997, p. 21; Matthews et al., 1998, pp. 94–99).

In 1978, the Crime Prevention Council issued a memorandum suggesting that

the position of auditors ought to be strengthened, since it was observed that economic crime

was most common in small limited companies. As it was expected that the supply of

authorized and approved auditors would be sufficient by 1983, it was possible to prescribe in

the Companies Act that at least one auditor in a limited company should be authorized or

approved (Revisors verksamhet [The Work of Auditors], 1978; SFS, 1982:739). To meet the

enhanced demand to which accounting firms had to respond, the number of authorized public

accountants increased by 120 percent, from 854 in 1982 to 1877 in 1992 (Wallerstedt, 2009,

p. 263).

Starting in 1985, auditors were required to monitor whether companies had

fulfilled their obligations according to stipulations concerning taxes and other charges. If the

company had not done so, the auditors had to deliver a qualified opinion. The auditors were

also obliged, on request, to provide information about the company to the person in charge of

preliminary investigations of economic crimes (Widhagen and Damberg, 1985). Additional

responsibility was placed on auditors with another supplement to the Companies Act

specifying that auditors had to report suspicions of particular economic crimes committed by

a board member or the CEO (SFS, 1998:760).

The Companies Act of 1975 was replaced in 2005 by a new Act, which

contained few substantial changes. Instead, separate laws for auditors and auditing were

introduced as a consequence of Sweden’s membership in the EU (see below).

19

4.4 Sweden enters the European market Today’s Europe has its roots in the aftermath of the Second World War and the quest to build

a new and peaceful Europe (EU contract, 1994). The Coal and Steel Community was formed

by France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg in 1951, a year

considered a milestone in the history of the EU. The next milestone came in 1957, when these

countries decided to deepen and broaden cooperation in all spheres of economic life. The

Treaty of Rome entered into force in 1958; the “four freedoms” it enshrined – free movement

of goods, services, capital, and people across borders – would lead to economic and social

development throughout Western Europe.

When Sweden signed the European Economic Area (EEA) agreement in 1992, it

also committed to adapting its rules to EC company law. Sweden became, along with Finland

and Austria, a member of the EU in 1995. The previous national regulations of the member

states now had to be adjusted to European statutory requirements. EU directives are the

instruments used to achieve harmonization concerning various issues. Each member state

must incorporate these directives into its laws and regulations. The EU’s 8th Company Law

Directive regulates the auditing field, focusing especially on auditor qualifications and ethics

rules (SOU, 1993:69).

Swedish membership in the EU must be regarded as a critical event for the

auditing profession. The harmonization of Swedish accounting and auditing regulations with

EU directives provided the impetus for new laws (cf. Flower, 1999, pp. 14–18). An Annual

Accounts Act was introduced, incorporating the terms of the 4th EU Directive, and separate

laws for auditors and auditing were introduced in 1995 and 1999, respectively.

The Swedish Auditors Act of 1995 stipulated that auditing matters should be

handled by an independent authority, which would assume the duties of the National Board of

Trade. From this point on, the Supervisory Board of Public Accountants issued authorizations

and approvals, published instructions for auditors, and dealt with complaints from the public.

Union Européenne des Experts Comptables Economiques et Financiers (UEC),

the European accountancy organization of which FAR was a member, along with several

other countries’ auditors’ associations had appointed a committee to draw up codes of

conduct. The FAR ethics committee had reviewed these rules and the FAR board found that

they were also suitable for Swedish conditions. These rules were translated into Swedish and

adopted in Swedish law and in the FAR constitution. The UEC rules were mostly consistent

20

with the main rules applying to members of the American Institute of Certified Public

Accountants (AICPA) since 1973. The proposal concerning ethics rules was approved by

FAR’s 1977 annual general meeting, and, in a slightly amended version in 1996.

In the 1990s, the EU prepared a recommendation calling on member states to

ensure that those carrying out statutory audits were “independent”: an auditor should not be

allowed to undertake any activities inconsistent with the statutory audit. The Fédération des

Experts Comptable Européens’ (FEE) ethics committee, which was working on a “conceptual

approach to independence”, tried to convince the European Commission to implement the

ideas contained in this EU recommendation concerning auditor independence. The

Commission accepted these ideas, but their implementation was postponed because of the

Enron affair, making Sweden the first country in Europe to include an “auditor independence

tool” (“The Analysis Model”) in the Swedish Auditors Act of 2001. “The law provided the

auditors with a ‘tool’ for attaining and reinforcing their independence, but its implementation

was left to the profession” (Björn Markland, preceding Secretary General of FAR, interview).

This arrangement was similar to other attempts to create a balance between regulation and

“self-regulation” in the auditing field in Sweden (Öhman et al., 2006).

Although Sweden is an EU member, its auditing regulations possess some

special domestic features. The most prominent of these is that Swedish auditors still have to

examine the management’s administration of the company. In fact, Sweden and Finland are

the only countries in the world where there are legal provisions concerning management

auditing.

It must also be noted that the present Swedish auditor association Far (see

below) is a member of the International Federation of Accountants (IFAC) and is thus

committed to implementing IFAC’s ethics recommendations as far as Swedish law allows.

Over the last years, Swedish authorized public accountants have occupied prominent positions

in various auditor associations. Bertil Edlund was Deputy President of IFAC (1987–1990) and

President (1990–1992). Göran Tidström has been Deputy President of IFAC since 2008; he

was a former President of FEE (2000–2002). Björn Markland has several international

assignments, among them technical advisor to the IFAC Board. From their positions, these

Swedish auditors have had the opportunity to interact with colleagues from other countries.

21

4.5 The state and the EU interferes in the Swedish auditing field The structure of the auditing field changed in 1973 when the National Board of Trade became

the authority responsible for authorizing and approving auditors (see Table 4). When the state

interfered in the auditing field, the position of the auditing profession was further

strengthened. In 1975, Sweden’s Companies Act for the first time stipulated that auditing

work should be carried out in accordance with Generally Accepted Auditing Standards. In

1983, a supplement of the Companies Act stipulated that at least one auditor in every limited

company had to be authorized or approved.

A particularly critical event was when Sweden joined the EU in 1995. Sweden’s

national regulations now had to be adjusted to European statutory requirements and to EU

directives. The Swedish Auditors Act of 1995 brought Swedish auditing rules into line with

EU legislation. This law stipulated that auditing matters should be handled by an independent

governmental agency – the Supervisory Board of Public Accountants – now responsible for

the former duties of the National Board of Trade. The decision to create a separate authority

responsible for auditing matters highlighted the importance of the auditing profession.

Although there had been proposals for cooperation between SRS and FAR

auditors since the 1920s, it was not until the 1970s that these discussions became more

substantial and the two bodies actually began to cooperate. Finally, in 2006 the associations

merged. The new association (Far) is now the only national professional organisation for

authorized public accountants, approved public accountants, and other highly qualified

accounting specialists. Far includes approximately 6000 members. (Far.se)

Table 4: Critical events in the Swedish auditing field in the internationally oriented period 1973 The National Board of Trade becomes a governmental agency in the auditing field

1975 The Companies Act stipulates the application of Generally Accepted Auditing Standards

1983 A supplement to the Companies Act stipulates that limited companies must appoint

authorized or approved auditors (thereby preparing for additional auditor assignments)

1995 Sweden signs the European Economic Area (EEA) agreement, the Swedish Auditors Act is

enacted, and the Supervisory Board of Public Accountants is appointed through legislation

2001 New legislation concerning the auditing profession is enacted as a tool to bolster auditor

independence (The Analysis Model”) in the Swedish Auditors Act

2006 The two professional auditor associations, FAR and SRS, merge

The formulation in the Companies Act of 1975 emphasized standards in the hierarchy of rules

in Table 1, while bolstering FAR as a standard-setting body. The adoption of “self-regulation”

22

was emphasized not only when it was left to the profession to interpret the law and express in

standards what would be considered generally accepted auditing work, but also when Sweden

included a specific model to bolster auditor independence in the 2001 Swedish Auditors Act.

This “tool” for resolving the eternally difficult question of auditor independence was handed

over to the professionals to interpret and act upon accordingly.

When the National Board of Trade became a governmental agency in the

auditing field, delegated legislation was for the first time highlighted in audit regulation in

Sweden. Later on the tax authorities become a new rule-making body to consider at the

delegated legislation level, and after that another governmental agency, the Economic Crimes

Bureau, entered the field.

5 Discussion and conclusions Over the last century, an auditing field gradually emerged in Sweden. At the beginning of the

1900s, SRS auditors and FAR auditors entered the scene. They occasionally cooperated, but

usually their actions benefited solely their own interests. FAR members struggled to protect

their status as authorized public accountants. This illustrates a strategy to achieve control, in

line with the critical perspective according to which “the emergence of professional bodies is

seen as a means of achieving collective social mobility by securing control over a niche

within the market for skilled labour” (Willmott, 1986, p. 558). Wilensky (1964, pp. 142–146)

suggests that the core of a profession consists of signs of professionalism that symbolize its

domain. In the 1940s, all these signs – adequate training, full-time employment, professional

associations, legislated protection for the professionals, and ethics codes – were achieved by

the Swedish auditing profession.

The Kreuger crash obviously promoted the profession in several ways, even

though it was embarrassing that the appointed FAR-auditor of the Kreuger Group was jailed

by a court of law. New and extended rules in the auditing field emerged in the wake of the

financial scandal (cf. Power, 1997), and important actors expressed a need for a stronger

profession. When FAR developed accounting and auditing recommendations some decades

later, the association established itself as the prominent rule-making body in the Swedish

corporate market.

In the 1970s, the state took action to use the competence of the auditing

profession in fighting economic crime, in what was considered a “government assault” on the

auditors’ traditional role. The prescription in the 1983 supplement to the Companies Act that

23

at least one auditor in each limited company should be authorized or approved was also

motivated by the fact that most economic crimes were believed to occur in small companies.

This decision promoted the position of the profession, and the number of authorized public

accountants grew by 120 percent within a period of ten years.

The most critical event in recent years was undoubtedly the 1995 governmental

decision to enter the EU, and Swedish regulations had to be adjusted to the European statutory

requirements. The EU became the most important rule-making body, and a new level was

included in the hierarchy of rules.

Table 5 illustrates how the hierarchy of auditing rules in Sweden was gradually

modified in response to the critical events described in this paper.

Table 5: The Swedish hierarchy of auditing rules

Rule a Rule-making body a First appearance in period b Directive European Union III The 8th directive (the audit directive) Laws Legislature I The Companies Act 2005 (1975, 1944, 1910, 1895) The Swedish Auditors Act 2001 (1995) Delegated legislation III Auditor and auditing regulation The Supervisory Board of Public Accountants (The National Board of Trade) Tax regulation Tax authorities Economic crime regulation Economic Crimes Bureau Judgement Courts of law II The Kreuger crash Standards Far (FAR) III Generally Accepted Auditing Standards Rules of other bodies I Professional recommendations Far (FAR, SRS) Guidelines The Federation of Swedish Industries Listing rules Stock exchange Interpretations Individuals: Auditors, members of parliament I a Rules and rule-making bodies that were replaced are indicated within parentheses. b The Roman numerals indicate the period in which a certain rule first appeared.

It can be concluded that the number of rule-making bodies involved in the audit regulation

process has increased over time (see Table 5). In addition to the importance of legislation,

influential individuals, as well as various organizations have had an impact on the

development. In chronological order, the organizations involved are: the Federation of

24

Swedish Industries, which was involved when the first guidelines were produced; the stock

exchange, which was involved in discussions with auditing professionals about future listing

rules; the courts of law, which were involved in sorting out the frauds committed by people

involved in the Kreuger Group; and FAR, which produced auditing recommendations and

formulated Generally Accepted Auditing Standards. In the 1970s, audit legislation was

delegated for the first time. Besides the National Trade of Board (and the subsequent the

Supervisory Board of Public Accountants), other governmental agencies – the tax authorities

and the Economic Crimes Bureau – became rule-making bodies within the auditing field.

When Sweden entered the EU, the 8th directive (the audit directive) was introduced at the top

level in the Swedish hierarchy of auditing rules.

It can also be concluded that laws both codified the development of auditing

practice and promoted future regulation in Sweden. On the one hand, the Companies Acts

were partly preceded by auditing practice, and professional efforts in the decades following

1900 paved the way for new laws. On the other hand, every time legislative authorities

investigated the auditing field and enacted new laws, rules connected to these laws followed.

Allen and McDermott (1993) claim that the auditing profession in England has been strongly

dependent on legislation to consolidate its position, and this conclusion also holds for the

auditing profession in Sweden. The laws became a foundation for both additional rules and

the professional associations as rule-making bodies in all three investigated periods.

It must be stressed that audit regulations in EU member states are harmonized

by international auditing organizations, and that the auditing field is recognised on an

international level (cf. DiMaggio and Powell, 1982). Although the Swedish governmental

decision to enter the EU was the decisive step towards this harmonization, the international

exchange of ideas has been considerable. In the set-up period, Swedish auditors were inspired

by the development of the auditing profession in England, and they cooperated with their

Nordic colleagues. The development in Sweden was similar to what happened in the Nordic

countries and in the UK. The international orientation clearly increased in the 1970s, when

Sweden followed the UK and adopted modern auditing practice with a clear focus on internal

control. As a member of the International Federation of Accountants (IFAC), FAR

implemented international ethics recommendations, and Swedish authorized public

accountants with prominent positions in various international auditor associations interacted

with colleagues from other countries. However, the differences between authorized public

accountants like Göran Tidström and their former colleague Oskar Sillén’s abilities to

influence the Swedish rule-making process are significant. The present situation is

25

characterized by rule-making bodies at various levels, including an additional EU level (see

Table 5), while the early years were characterized by a lack of rule-making bodies at several

levels in the Swedish hierarchy of auditing rules.

Our historical review of audit regulation in Sweden also demonstrates that the

rules first emerged through the “spontaneous solidarity” of the community. At the end of the

1800s, laypeople carried out audits as a sideline to other activities, and regulation was limited

to the Companies Act of 1895. Successively, private interests became more active in the

regulation process. The professional auditor associations, in particular FAR, promoted a

market orientation. A shift from “market” to “state” occurred when the National Board of

Trade became responsible for authorizing and approving auditors. Subsequent EU

membership further increased the state orientation. However, although regulation had become

more extensive, it was still partly left to the auditing profession to monitor the auditors. This

was an attempt to establish a balance between “state-oriented regulation” and “market-

oriented self-regulation” in the auditing field in Sweden (cf. Öhman et al., 2006).

Since critical events can only be recognised retrospectively, it is possible that a

historical review of audit regulation in Sweden would render somewhat different results in the

future. Sweden’s membership in EU will likely continue to affect the auditing field. For

example, the upcoming decision to join the other member states and abolish the statutory

audit for the smallest private limited companies may severely affect the auditing profession in

Sweden. In the UK, the statutory audit was abolished for the smallest limited companies in

1994, and more than half of UK companies have made use of the exemption from the audit

requirement (Collis et al., 2004). To deal with this new situation, auditing professionals have

restructured their supply of services to cope with a shrinking auditing market. From originally

being two associations exclusively for auditors, the merged association Far is now an

organization including other highly qualified accounting specialists.

26

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Matthews, D., Anderson, M. and Edwards, J. R. (1998), The Priesthood of Industry. The Rise

of the Professional Accountant in British Management, Oxford: Oxford University Press.

“Nya aktiebolagens bestämmelser om revisorer”, (1946), List of Members, Föreningen Auktoriserade Revisorer (FAR). “Några ord om siffergranskning”, (1932), List of Members, Föreningen Auktoriserade Revisorer (FAR). ”Några synpunkter på årsredovisningen enligt nya aktiebolagslagen”, 1949, List of Members, Föreningen Auktoriserade Revisorer (FAR). “Om revision av räkenskaperna i svenska aktiebolag – granskningens inriktning och omfattning”, (1971), List of Members, Föreningen Auktoriserade Revisorer (FAR). Power, M. (1997), The Audit Society. Rituals of Verification, Oxford: Oxford University Press. Puxty, A. G., Willnett, H. C., Cooper, D. J. and Lowe, A. C. (1987), “Modes of Regulation in Advanced Capitalism: Locating Accountancy in Four Countries”, Accounting, Organization and Society, Vol. 12, No. 3, pp. 273–291. “Revisor Anton Wendler häktad på måndagen”, (1932), Svenska Dagbladet 3/5. ”Revisors verksamhet”, (1978), Brottsförebyggande rådet, PM 1978:2, Stockholm Rezaee, Z. (2005), “Causes, Consequences, and Deterence of Financial Statement Fraud”, Critical Perspectives on Accounting, Vol. 16, No. 3, pp. 277–298. Sampson, A. (1962), Anatomy of Britain, London: Hoddar and Stoughton. Schön, L. (2000), En modern svensk ekonomisk historia: tillväxt och omvandling under två

sekel, Stockholm: SNS Förlag. SFS 1982:739, Lag om ändring i aktiebolagslagen, Stockholm. SFS 1998:760, Lag om ändring i aktiebolagslagen, Stockholm. Sillén, O., 1949, “Auktorisationer förr, nu och framledes”, Affärsekonomi, No. 6.

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Skinner, R. Mc. G. and Andersen, R. J. (1966), Analytical Auditing: An Outline of the Flow Chart Approach to Audits, Toronto: Sir Isaac Pitman. SOU 1941:9, Lagberedningens förslag till Lag om aktiebolag m. m., Motiv, Stockholm. SOU 1993:69, Revisorerna och EG, Stockholm. Stacey, N. A. (1954), English Accountancy: A Study in Social and Economic History

1800–1954, London: Gee & Co. Thunholm, L–E. (1995), Ivar Kreuger, Stockholm: Fischer & Co. Torstendahl, R. (1990), “Essential Properties, Strategic aims and Historical Development: Three Approaches to Theories of Professionalism”, in Burrage, M. and Torstendahl R. (eds.), Professions in theory and history, London: Sage Publications, pp. 44-63.

Wallerstedt, E. (1999), “Ivar Kreuger”, The third Accounting History International Conference, Osaka, Japan. Wallerstedt, E. ( 2009), Revisorsbranschen i Sverige under hundra år [The Swedish Auditing Industry over 100 years], Stockholm: SNS Förlag. Watts, R. J. and Zimmerman J. L. (1978), “Towards a Positive Theory of the Determination of Accounting Standards”, The Accounting Review, Vol. 53, No. 1, January, pp. 112–133. Widhagen, G. and Damberg, M., 1985, “Så blev resultatet av förslagen om effektivare företagsrevision”, Balans, Vol. 11, No. 1, pp. 10–13. Wilensky, H. (1964), “The Professionalization of Everyone?”, The American Journal of

Sociology, Vol. LXX, No 2, pp. 137–158. Willmott, H. (1986), “Organising the Profession: A Theoretical and Historical Examination of the Development of the Major Accountancy Bodies in the U. K.”, Accounting, Organizations and Society, Vol. 11, No. 6, pp. 555–580. Öhman, P., Häckner, E., Jansson, A-M. and Tschudi, F. (2006), “Swedish Auditors’ View of Auditing: Doing Things Right versus Doing the Right Things”, European Accounting Review, Vol. 15, No. 1, pp. 89–114.

Archives CBAa, Central Board of Auditing CBA, Stockholm. FARa, Swedish Institute of Authorized Public Accountants FAR, Stockholm. OSa, Oskar Silléns archive, Uppsala.

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NAa, Swedish National archive, Stockholm. SRSa, Swedish Association of Auditors SRS, Stockholm.

Interviews Bertil Edlund, former president of IFAC (2003). Ulf Gometz, Authorized public accountant (2004). Björn Markland, preceding Secretary General of FAR (2009).

Session 5: IAAD Code of ethics and ethical dilemma Session at a Glance 5

Workshop on Ethics and Values in governance Page Glance 5

Session Objective Materials Required Session Structure Teaching Methods Used

Time Required

By the end of the Session participants will be able to understand ethical dilemma and how to manage ethical dilemmas in IAAD.

Projector, slides, flipcharts, markers, etc.

Session Overview Basic concept Ethical dilemma

Slide/lecturette

3 Mins 10 mins

Key Teaching Points (KTPs)

Managing ethical dilemmas

Case studies, group discussions

65 mins

Evaluation

Embedded in the KTPs

Summary

2 mins

Total time 75 mins

Notes: Before the workshop, participants should be asked to bring cases of ethical dilemmas faced in their offices for experience sharing.

Session 5: Ethics in IA&AD- Ethical dilemmas, challenges, Risks & Management Guide 5

Workshop on Ethics and Values in governance Page Guide 5

Facilitator’s Guide Reference Participant Response 1 Session Overview

Tell that this session deals with • Ethical dilemma-general • Ethical violations vs ethical dilemmas • Ethical dilemma in the workplace • Managing ethical dilemma in the work place

Slide No.

2 Learning Objective Tell: By the end of the Session participants will be able to understand ethical dilemma

and how to manage ethical dilemmas.

3 Key Teaching Points (KTPs) KTP1 Understanding Ethical Dilemmas Tell that this session will deal be an interesting one with more group activities. Divide the participants into of four/five equal groups. Show slide 4. Ask the participants to define ‘ethical dilemma’. Ask the participants to discuss amongst the group for five minutes and present the definition arrived at by the group. Tell that they may also give examples to support their definition.

Slide 4



Listen to the responses. Note them down on the board. If the definitions and examples given by the participants are not appropriate, tell that it is not so and that after seeing the definition in the following slides, it will be explained. Show slide5,6

Tell that

Ethical dilemmas,

– are situations – in which there is a choice to be made between two options – Neither of which resolves the situation in an ethically acceptable

fashion. • In most of such cases, societal and personal ethical guidelines can provide no

satisfactory outcome for the chooser. • Ethical dilemmas don't just centre upon right versus wrong but can involve right

versus right', which makes it complex. • Ethical dilemmas can arise from equally attractive options that could be

justified as being `right' in particular situations. • It should be remembered that, it is not about the legality of the act. • Within complex contexts and circumstances it may not be so easy to discern

what the ‘right' option might be and what the ‘wrong' option might be (whether the action is legal or illegal)

Show slide 7.

Tell that Ethical dilemmas include:

• Discrimination

Slide 5,6 Slide 7



• Sexual harassment • Conflicts of interest • Service receiver/Customer confidence • Organizational resources

Show slide 8. (Example 1) You are hiring an employee whose duties are important to the company's success. The best qualified applicant is a female who appears to be pregnant. Would you hire this best qualified or pass to the next person who isn't pregnant? (Though, it is illegal to not hire because of pregnancy, but, there is no way to prove that's why you hired the other person.) Tell that in this example 1,

We see a complex situation.

There are two options available, 1. To go ahead and employ the best qualified lady. However there is a threat

of poor performance of the applicant in job due to her health constraints; there is even a risk of the position temporarily falling vacant.

2. To pass on to the next qualified applicant. However there is a possibility that the pregnant lady is the best suitable for the job and she may still perform better. The lady appears to be pregnant and we are not sure about it.

Here there is no question about the legality of the act. As mentioned, though, it is illegal to not hire because of pregnancy, but, there is no way to prove that's why you hired the other person.

Tell that this is a typical ethical dilemma faced in a work place and how to manage these dilemmas is what we will be seeing in the course of the session.

Show slide 9. (Example 2). Ask the participants randomly to tell how this situation fits into the definition.

Slide 8 Slide 9



Note the responses on board. Add on to participants’ answers if necessary, of the following. In this example,

The real estate agent faces a situation of dilemma.

There are two options available to him. 1. He may tell the lady the fact of the property’s true worth and try selling it

to a suitable party. 2. He may sell it to his brother for the lesser price. This way, the client is also

satisfied as the expected value was lesser only.

Legally there is nothing preventing the real estate agent from choosing either of the options.

Clarify their doubts if any, in the course of the discussion. Difference between ethical violations and ethical dilemmas Show slide 11. Ask the participants what is the difference between Ethical Violations and Ethical

dilemmas?

Listen to their responses.

Show slide ___.

Tell that

Ethical dilemmas are the situations faced by the employee.

• Ethical dilemmas may or may not lead up to an ethical violation.

Slide 11



• Ethical violation is usually a clear violation of the existing code of

ethics/rules/principles in place. It may often pave way for legal action, if

proven.

Tell that Ethical dilemmas are faced in many situations, in many areas, be it personal or

professional. With this understanding of ethical dilemmas, we will concentrate on

ethical dilemmas in work place.

Significance of managing ethical dilemmas in work place

Ask the participants, now that we understand the meaning, context of ethical

dilemmas, why is managing ethical dilemmas in workplace essential.

Listen to their responses and note them down on the board.

Tell that Ethical behavior is usually rationalized by convincing oneself that:

– Behavior is not really illegal. As already discussed, legality will never be

the question.

– Behavior is really in everyone’s best interests. One tends to convince

himself that a decision is made considering the best interests.

– Nobody will ever find out. There are high chances of the ethical

violation going unnoticed

• This might lead to distorted decision making in the organization.

Tell that

Ethical dilemmas complicate the work place and ethical decision making in tune with

the organisational policies is important because they tend to establish the ethical tone

of the organisation, ultimately impacting organisational goals and objectives. Hence the



need of streamlining the ethical decision making in work places.

Tell that

There are factors influencing ethical behaviour of an Employee, in a work place. They

are:

The person (himself) that is, his Family influences, religious values, personal

standards, and personal needs

• The organization: Supervisory behavior, policy statements and written rules,

and peer group norms and behavior. Refer to example 3 above and tell that the

employee’s ethical decision making will be influenced by the store’s peer group

norms and behavior.

• The environment: Government laws and regulations, societal norms and values,

and competition climate in an industry

Show slide ___. (Examples 4) for typical ethical dilemmas arising in a workplace. KTP2 Ethical dilemmas in IAAD Tell that with sufficient understanding of ethical dilemmas in workplace we shall now move on to applying this knowledge to IAAD audit office scenarios. Tell that we shall now do a group activity. Distribute exercise sheet 10 A. Ask the participants to work in the same groups as before.



In this exercise the groups are to develop a sample scenario of ethical dilemma in an IAAD audit office. They may develop a sample scenario, the complexities, challenges and risks involved in it, and the ethical violation which it may lead to. Administrative scenarios may be avoided as audit is our service delivery and hence we may concentrate only on them. (Also, issues involving corruption/bribery may also be avoided as they are clear legal violations and not mere ethical dilemmas) The same may be presented before the class. Allow ten minutes for the group activity. Let the groups make the presentation one by one. Ask the other groups to give their opinions. Lead on the discussion as it arises. Allot a total time of 20 minutes for presentation and plenary discussion. KTP3 Managing an Ethical Dilemma Case study Your audit of a new sensitive government scheme that was a signature piece of legislation reveals serious mismanagement and potential corruption, at various levels. However you are individually aware that even after such serious mis-management, as a trickle-down effect, the scheme has resulted in lots of development. Also, It is an election year and release of the audit report at that point of time could be politically embarrassing to elected officials in the state. Your reviews of other schemes have given you an opinion that the schemes are well run. As an individual you are also aware that the Government has overall been a progressive one with a significant development happening in the State. However, this one scheme review’s release at this point of time could go completely against the incumbent government leading to a change in government and also even discontinuation of the scheme. What would you do? Complexity of the situation



1. Our audit should not depend on external situations. We should never compromise with our independence.

2. Yet, the scheme is a necessary one for further development of the state. 3. IAAD has a very sensitive media policy. The department’s image could be

tarnished by political elements as biased and in favour of / against certain political elements.

4. The party which worked on the review could face individual risks of threats from political elements.

5. Review presented later may also raise eyebrows of various counters like opposition parties, press and may again give a picture of bias/favouritism.

Options available to us 1. Going ahead with the release of the report. 2. Deferring the report and presenting it after the elections.

Challenges associated with and Risks involved in it

A. Going ahead with release of report 1. You may have to face serious political comments/allegations of bias and

favour for the timeliness of the report. 2. Your own superior officers may not support this decision of releasing the

audit report at this time. B. Deferring the report

1. Without valid reason, deferring the report could lead to criticisms even within the office.

2. The report might lose significance at a later point of time leading to waste of resources.

3. Feeling guilty. Ethical violation it may lead up to How to manage the issue

4 Evaluation

6 Summary Sum up session, thank all and wind up session

Handout 5

Workshop on Ethics and Values in governance Handout 5

Pag

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Scenarios of Ethical dilemma

1. Mr X is a supervisory officer in an office. He has worked in this office for several months

when Mr Y, the Cashier, who has become a good friend tells Mr X that his daughter is

extremely ill and that he urgently need Rs 50000 for some medical tests. He also tells Mr X

that he does not have the cash and is trying to arrange for it so that the medical tests can be

carried out without delay. Sometime later Mr X asks Mr Y about his daughter and he tells

her that the tests have been done and there is nothing to worry about now. Mr Y then

confides to Mr X that he took Rs. 50,000/- from the office imprest to pay for the medical

tests. Mr X assures Mr Y that he has already started putting back the money and the entire

Rs 50,000 will be returned fully by next month.

Comment on the situation in terms of issues of ethics and dilemmas faced by both Mr X and

Mr Y.

What is the ethical dilemma that Mr X is confronted with? How should Mr X deal with the

dilemma?

2. You are the in charge of Record section and handles purchases for the office. Over the

years, different firms have offered, and your predecessors have accepted lunch, gift packets

etc from the firms from which office purchases have been made. One day, on coming back

from office after opening the tenders for bulk purchase of office stationery for the financial

year, you find a new TV and DVD player on your doorstep with a note that says: “A personal

gift for our long standing friendship. Enjoy it with your family in good health. Signed : One of

the firms which had submitted their bid.

What do you do?

3. Your audit of a new high profile government program that was a signature piece of

legislation reveals serious mismanagement and potential corruption. It is an election year

and release of your audit could be politically embarrassing to elected officials in your

community.

What do you do?

4. You belong to a particular state. You work in the audit office of that state. You audit a

Centrally Sponsored Scheme. The second year’s flow of funds depends on the certification

of AG (Audit). It was found out that there are huge unspent funds. The Finance Secretary of

Handout 5


Pag

e2

the State is a close relative, and he has been requesting you for getting the certification

done so that there is no difficulty in release of the second year’s funds.

What would you do?

5. You are doing an EAP audit. You are one of the few specialised people in the field. You are

a regular auditor of the unit and have been involved in this audit for the last 10 years. What

are the ethical issues in this case?

6. You were involved in the audit report preparation of a very sensitive audit, the findings of

which are likely to unravel a scam in one of the flagship programmes of the Government.

The audit report is due to be made public next week. Before the report becomes public, you

show a draft copy of the report to a friend who works for a national newspaper who reports

the matter without delay thereby causing a furore in the Parliament and thereby creating an

uncomfortable situation for the SAI. What are the ethical issues involved here?

7. You have been made the Audit Manager for audit of the office where your spouse is the

Finance Advisor. You do not disclose this information to the management. During the course

of audit, the team discovers certain irregularities in the financial dealings of the auditee

office. In order to save your spouse, you discuss the matter at home and work out ways to

cover up the matter.

Giving an Account: Ethics and Auditing

Agenda • Ethics Requirements for CPAs in NC

• Giving An Account: Ethics and Auditing

• Wrap-up

08G .0410 Professional ethics and conduct CPE As part of the annual CPE requirement, all active CPAs shall complete CPE on professional ethics and conduct as set out in 21 NCAC 08N. They shall complete either two hours in a group study format or four hours in a self-study format.

CERTIFIED FRAUD EXAMINER CFE's will earn 20 hours of CPE per twelve month period. At least 10 of these must relate directly to the detection and deterrence of fraud and 2 hours must relate to directly to ethics.

CERTIFIED INTERNAL AUDITOR

CERTIFIED INFORMATION SYSTEMS AUDITOR

Principles CPA

CIA CISA

CFE Integrity Objectivity

Confidentiality Competency

Responsibilities The Public Interest

Independence Due Care

Scope and Nature of Services

Ethics for CPAs North Carolina Accountancy Rules

SUBCHAPTER 08N - PROFESSIONAL ETHICS AND CONDUCT

SECTION .0100 - SCOPE AND APPLICABILITY

(Handouts)

CPAs in the News Penalties of $20,000 for accountant The Malborough Express (NZ)/Sep 22, 2011

Blenheim accountant Susheel Dutt has been censured and ordered to pay $20,000 in fines and costs by the New Zealand Institute of Chartered Accountants for breaching its code of ethics and for unbecoming conduct. He was charged with conduct unbecoming of an accountant and breaching the code of ethics for representing a client during district court proceedings in August last year without being competent to do so.

CPAs in the News Burbank accountant held in fraud case September 05, 2011|By Abby Sewell, Los Angeles Times

A Burbank accountant who has served as treasurer on hundreds of political campaigns has been jailed on a federal fraud charge that centers on her work for a state Assembly member, authorities say. Kinde Durkee was arrested Friday afternoon at the Burbank office of her firm, Durkee & Associates, and is charged with one count of mail fraud. Interviews with some of her clients suggest that the case may expand to include charges of embezzlement involving multiple victims.

CPAs in the News Sentencing delayed in Madoff case /lohud.com Sep 10, 2011

Sentencing has been delayed until March for the New City auditor who helped Bernard Madoff hide a $65 billion Ponzi scheme for nearly two decades. David Friehling's sentencing has been rescheduled to March 23, from Sept. 16. This marks the fourth postponement since Friehling pleaded guilty to nine federal crimes on Nov. 3, 2009, including securities fraud, investment adviser fraud and obstructing tax law administration.

Giving An Account: Ethics and Auditing

Rosemarie Tong Distinguished Professor of Health Care Ethics Department of Philosophy Director Center for Professional and Applied Ethics UNC Charlotte

Gordon Hull PhD, Assistant Professor Department of Philosophy UNC Charlotte

Agenda • Ethics versus Compliance • Mid-level Concepts versus Higher-order Concepts • Profession versus Occupations • Rules versus Standards • Basic Ethical Frameworks Utilitarian Approach Deontological Approach Virtue Approach

• Four Case Studies for Auditors • Wrap-up

Structure

Three (relevant!) tangents

Thick concepts

Theory

Tangent 1: Ethics and Compliance

• Ethics: doing what’s right

• Compliance: following rules/laws/codes

• Issue:

– Rules are related to ethics (we hope!)

– But ethics doesn’t reduce to rules…

Ethics doesn’t reduce to rules

1. Even clear rules aren’t always clear:

“No vehicles in the park”

Are these “vehicles?”

Example 1…

…Example 2

Do rules need exceptions?

Ethics doesn’t reduce to rules

1. Even clear rules aren’t always clear: still need interpretation, judgment, etc.

2. Rules may not cover everything

(What does the Bible say about recombinant DNA?)

3. Rules can conflict

(privacy and security, for example)

Ethics and compliance

Upshot: ethics can help you sort these situations out – give you the “why” of the rules

Tangent 2: Professions and Occupations

Executive Summary:

Professionals often have extra ethical concerns

Real world impact:

You have ethics codes and licensing requirements

Professions and Occupations: Long version

• Bagging groceries = occupation.

• Being a doctor or a lawyer = profession.

• Professionals usually in positions of social power or responsibility

• Often therefore have licensing, ethics codes, and so on.

Power and trust: Doctors

• Why would you give someone the exclusive right to prescribe medicine…

• Without some ways to assure that they’re qualified, not corrupted by Pharma reps, and keeping up in their fields, etc.

Power and Trust: Occupations

• Courtesy clerks? Not so far up the food chain…

Tangent 3: Rules and Standards

Restraints, from most to least:

Rules

Standards

Principles

Example: “To be president, someone must…”

• “… be at least 35 years of age.” (hard rule)

• “… be an adult” (soft rule)

• “… be sufficiently mature” (standard)

• Principle: “The president should be qualified.”

• As you get less restraining, you need more interpretation, but you cover more cases

Thick concepts

• We do our ethical thinking in terms like

Privacy

Safety

Transparency

• These can guide interpretation of rules

“No vehicles in the park”

What value does this rule try to express?

“Safety”

(OK)

(Not OK)

Ex: most of the list of principles earlier:

• Integrity • Objectivity

• Confidentiality • Competency

• Responsibilities • The Public Interest

• Independence • Due Care

• Scope and Nature of Services

Theory

• Why are values worth having?

• Three basic strategies:

1. Consequences

2. Principles

3. Virtues

Consequences

• Actions are judged by their results

• “Utilitarianism” says:

– In terms of happiness/pleasure (it’s the only thing we all value!)

– When compared to other actions

• Close to cost-benefit analysis

Consequences example:

• Why value safety?

…Because secure people are happier, better able to pursue other pleasures, etc.

Principles (Deontology)

• Focus on intention, not result

• Actions can be seen as following rules

• Some rules are situational, others universal

• Moral rules have to be universal – so if you can’t universally follow it, it’s not moral

Example:

• Proposed action: “I want to kill myself”

• Rule: “If you’re in a boring seminar, kill yourself”

• Test: Could you rationally want everyone everywhere to follow that rule?

• Answer: no. • Outcome: it’s immoral to

commit suicide due to boredom.

Utility v. Deontology: the honest shopkeeper

Utility:

• Customers happy. Good.

Deontology:

• Obeying law. Good.

• Why is he honest?

• To get repeat business? Not moral.

• Because it’s the right thing to do? Good.

Virtue: Four minimal characteristics

1. Focus on person not action

2. “Character” important

3. Not immutable

4. Virtue taken as a dispositional property

Small Group Case Studies

Summary and

Questions

CAPAM Featured Report:

Ethical Dilemmas in the Public Service

June 2010Commonwealth Association for Public Administration & Management (CAPAM)

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C A P A M F E A T U R E D R E P O R T : E T h i C A l D i l E M M A s i n T h E P U b l i C s E R v i C E

Commonwealth Association for Public Administration and Management (CAPAM)

l’Esplanade laurier300 laurier Avenue WestWest Tower, Room A-1245Ottawa, On Canada K1n 6Z2

Phone: 613-996-5026Fax: 613-947-9223Email: [email protected]

For more information, please visit: www.capam.org

Copyright © Commonwealth Association for Public Administration and Management, 2010. All rights reserved.

The views and opinions expressed in each document reflect those of the author and do not necessarily reflect those of CAPAM. The material in this publication is based on sources that we believe to be reliable. While every care has been taken in the preparation of this publication, CAPAM gives no warranty that the sources are correct.

3C O M M O n W E A l T h A s s O C i A T i O n F O R P U b l i C A D M i n i s T R A T i O n A n D M A n A g E M E n T

IntroductionAs a non-profit association, CAPAM represents an international network of 1100 senior public servants, heads of government, leading academics and researchers located in over 50 different countries across the Commonwealth. The association is guided by international leaders that believe in the value of networking and knowledge exchange and the promotion of good governance for the betterment of citizens lives across the Commonwealth.

CAPAM’s mission is to promote the practical requirements of good governance, just and honest government across the Commonwealth countries and beyond. CAPAM provides a forum for the active exchange of innovations, knowledge and practice in citizen-centered service delivery, leadership development and growth, and public service management and renewal. We serve our members as a centre of excellence in good governance and endeavor to build a more responsive and dynamic public service.

The purpose of CAPAM Featured Reports is to present and capture strategies, approaches and implementation challenges in three main areas; human resource management & governance, leadership in the public service, and innovations in citizen centered service delivery. This publication will serve as a knowledge transfer tool that complements and extends the sharing and learning process of CAPAM conference programmes and activities.

Each series offers a continued learning and analysis tool for practitioners, academics and experts. The cases and papers bring together various country approaches for comparative and sharing purposes.

Ethical Dilemmas in the Public Service

Papers and cases included in this publication draw from presentations or paper submissions for the CAPAM Good Governance , Accountability and Trust Conference held May 18 - 20, 2010 in Abuja, nigeria, in partnership with the government of nigeria through the head of Federation of service. The purpose of this report is to present and capture some ethical dilemmas public servants face in their everyday activities.

Acknowledgements

CAPAM would like to thank and acknowledge the leadership and management of the government of nigeria, through the head of service of the Federation and their tremendous efforts as partners in the organization of the conference. in particular, we would like to extend our appreciation to Mr. Stephen Oronsaye, Head of Service of the Federation, Ms. Amal Pepple, CAPAM Board Member, Nigeria and the Local Organizing Committee.

CAPAM extends great appreciation and thanks to the contributing authors in this publication. The authors offered not only their expertise and knowledge, but the lessons and good practices of their respective organisations. Their efforts have contributed to the fostering of exchange and dialogue between Commonwealth countries.

4 C A P A M F E A T U R E D R E P O R T : E T h i C A l D i l E M M A s i n T h E P U b l i C s E R v i C E

Table of ContentsEthics, Ethical Dilemmas and the Public serviceDr. David Menyah, Manager, Programme Development, CAPAM

issues of Ethics and Professional valuesDr. Roger Koranteng, Adviser, (Governance) Governance and Institutional Development Division (GIDD), Commonwealth Secretariat, UK

Reflections on Public Service Dilemmas: Nigeria’s ExperiencesDr. Gabriel Gundu, Consultant, Public Administration, Uganda Management Institute

Clash between Religious values and Regulations governing the Conduct of Public OrganizationsBashi Mothusi, Centre of Specialization in Public Administration & Management (CESPAM), University Of Botswana

Reflections on Ethical Dilemmas in the Implementation of a New Performance Appraisal system (Pas) in the Public service, the Kenyan CaseDr. Margaret Kobia, Director, Kenya Institute of Administration (KIA)

Reflections on Ethical Dilemmas: A South African PerspectiveProfessor Solly Mollo, Director General, PALAMA, South Africa

Reflections on Ethical DilemmasDr. Goke Adegoroye, Permanent Secretary, Federal Capital Territory, Abuja, Nigeria

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Ethics, Ethical Dilemmas and the Public ServiceDr. David Menyah, Manager, Programme Development, CAPAM

Introduction

The reputation and success of governance depends upon the conduct of public functionaries and what the public believe about their conduct. it is therefore of fundamental importance that public functionaries act justly and fairly to all, not only paying lip service to ethical conduct but also ensuring that these are manifestly and undoubtedly seen to be done. it is imperative that all public functionaries upon accepting government employment recognize that they have a special duty to be open, fair and impartial in their dealings with society. Personal self-interest should be subordinate to the public good in all circumstances, especially if circumstances arise where the possibility of a conflict of interest may become an ethical dilemma.

Ethics and Ethical Dilemma Defined

The meaning of ethics is contested. While some authors define it in terms of what it is not, referring to matters such as misconduct, corruption, fraud and other types of illegal behavior, others refer to notions of integrity, honesty, personal values and professional codes. The first of these two ways of defining ethics is the anti-corruption approach and the second is the integrity approach (Uhr, 2002). The anti-corruption approach frames discussion about ethics in negative terms. The integrity approach frames ethics in positive terms. Yet there appears to be general agreement that ethics is about relationships. several writers argue that ethics can be divorced from religion and/or from morality but most refer to its religious and philosophical bases. Ethics ‘is about what we ought to do’ (Freakley & burgh, 2007). it requires a judgment be made about a given problem or situation. Further, the term, ethics, ‘is sometimes used to refer to the set of rules, principles or ways or thinking that guide, or claim authority to guide, the actions of a particular group’ (singer 1994). For instance, Codes of Conduct identify standards of official conduct that employees are expected to perform.

Ethics, then, could be considered to be ‘about how we ought to live. What makes an action the right rather than the wrong, thing to do? What should our goals be?’ ‘Ethics is about positive not negative values’. it ‘is about asking hard questions about values, giving honest and public answers, and living by them’. by extension, ‘public sector

ethics [is] about how we live our lives together in public sector institutions’ (Preston & samford, 2002).

viewing ethics in this light indicates that people are faced with choices requiring them to make decisions enabling them to lead an ethical life within the context of their relationships with others. This suggests that people can be placed in ethical dilemmas. An ethical dilemma arises from a situation that necessitates a choice between competing sets of principles. Thus an ethical dilemma can be described as a circumstance that requires a choice between competing sets of principles in a given, usually undesirable or perplexing, situation. Conflicts of interest are possibly the most obvious example that could place public sector leaders in an ethical dilemma. Other types of ethical dilemmas in which public servants may find themselves include conflict between: the values of public administration; justifications for the institutions; aspects of the code of conduct; personal values and supervisor or governmental directive; professional ethics and supervisor or governmental directive; personal values and professional ethics versus governmental directive; blurred or competing accountabilities; and the dimensions of ethical conduct (Cranston, Ehrich & Kimber 2002, Edwards 2001, Preston & samford 2002).

Ethical Dilemmas Faced by Public Servants

some of the most common ethical dilemmas with which public servants are confronted, revolve around aspects such as:

administrative discretion• corruption• nepotism• administrative secrecy• information leaks• public accountability• policy dilemmas•

Administrative Discretion

Public officials are not merely executors of public policy. They make decisions pertaining to the lives of people, for example, about taxes, survival and the dismissal of people. in doing so they exercise discretion. The question is then how decisions are to be made to avoid ethical dilemmas.


in other words, the promotion of general welfare depends to a large extent on the use or abuse of administrative discretion.

it is true that within the rules and regulations laid down by legislation and within the prescribed procedures, there is ample opportunity for the public official to use his discretion. When faced with alternatives the choice of the public official poses an ethical problem: the choice may be acceptable to only a small section of society. The problem is that the selection of one path of action from among several alternatives is often made on the basis of personal preference, political or other affiliations, or even personal aggrandizement, thereby disregarding known facts and thus the possibility of rational decision making. it could well be that all the prescribed rules, regulations and procedures are adhered to but that the discretionary choice may be viewed as unethical or even corrupt.

Corruption

The majority of officials uphold the high standards required by public office and are devoted to promoting the general welfare. The ethical standards of public officials are, however, directly related to society as a whole. if the public accepts that in order to secure an expeditious response from a public official some pecuniary or other incentive is necessary, and the official accepts the incentive, then the standards of ethical conduct of officials and the public are in fact in harmony from the point of view of the public.

The corruption of public officials by private interests is usually very subtle, for example, favors by the public to the official under obligation and he gradually substitutes his public loyalties to those doing him favors. The ethical dilemma that faces the public servant with regard to corrupt practices as result of private interests primarily concerns his reaction to the situation. if a corrupt practice or an attempt to corruption is discovered, it is quite possible that the official’s personal loyalties or party political affiliations may be in conflict with his official duties. Should he sacrifice the public interest or try to end the corrupt practice by direct personal confrontation, or should he blow the whistle on the practitioner of corrupt practice?

Administrative Secrecy

An area which lends itself to the creation of situations and actions which could prove to become major ethical dilemmas is the secret conduct of public business. This is especially so because secrecy can provide an opportunity to cover up unethical conduct. secrecy is an ally of corruption and corruption is always practiced in secrecy. it is generally

accepted that in a democracy the people have a right to know what the government intends to do and it would be in the interest of the public for the administration of public affairs to be conducted openly.

Nepotism

The practice of nepotism (the appointment of relations and/or friends to public positions, thereby ignoring the merit principle), may lead to the downgrading of the quality of the public service. This disrupts the esprit de corps and trust and resulting in corrupt administration, owing to the ability of a select few to impair control measures on account of their personal relationship with the policy-maker, and by reason of their not being easily dismissed or replaced by others. in other words, those who are appointed with the view that they will conform to the standards and views of their appointing authority could prove to be problematic. The preferential treatment of one individual over another, without taking into account the relative merit of the respective individuals, represents nothing but victimization of an individual or individuals.

Information leaks

Official information is often of such a sensitive nature (for example, pending tax increases, rezoning land, retrenchment of staff) that disclosure of the information can lead to chaos, corrupt practices or, for some individuals, improper monetary gains. Leaking official information at a date prior to the public announcement thereof is a violation of procedural prescriptions and can be an ethical dilemma.

Public Accountability

Since public officials are the implementers of public policies, they ought to be accountable for their official actions to their superiors, the courts and the public. it is nevertheless, possible for them to hide behind prescribed procedures, the cloak of professionalism and even political office-bearers.

Policy dilemmas

Policy makers are often confronted by conflicting responsibilities. They have specific loyalties to their superiors, but also to society. They have freedom to act on behalf and in the interest of others, but they must also answer to others - their superiors and society – for their actions. The official’s obligation to respect the political process may conflict with his view on how the objects of policy making are treated. in other words, the dilemma of the public official is the clash between his view of the public


interest and the requirements of law.

Other Problem Areas

Apart from the areas of possible conflict referred to above, other problem areas from which ethical dilemmas may arise can be identified, inter alia:

the political activity of public servants resulting in divided • loyalty on the part of those officials who sympathize with the views of a specific political party;Other more subtle ethical problems, such as the abuse • of sick leave privileges, extended tea breaks and the violation of office rules in general.

Dilemma of the public servant

The potential areas for conflict are not necessary ethical dilemmas in themselves. it is what the public servant does when he is confronted by activities pertaining to these phenomena that could prove to be the ethical dilemma:

Would he keep silent when he finds that administrative 1. discretion is abused, or that corruption or nepotism are practiced?Or should he blow the whistle?2. should he actively engage in pressure group activities 3. because he sympathizes with their views?should he actively participate in party politics?4. Or should he endeavor only to promote the public good 5. and uphold the high standards of public office?

Ethical Dilemma Case Study Types

An ethical dilemma case study is a portrayal of an actual or fictitious scenario, usually multifaceted and illustrate instances dilemma. Under the more generalized category of case study exists several subdivisions, each of which is custom selected for use depending upon the goals and/or objectives. These types of case study include the following:

Illustrative Case StudiesThese are primarily descriptive studies. They typically utilize one or two instances of an event to show what a situation is like. illustrative case studies serve primarily to make the unfamiliar familiar and to give readers a common language about the topic in question.

Exploratory (or pilot) Case StudiesThese are condensed case studies performed before implementing a large scale investigation. Their basic function is to help identify questions and select types of measurement prior to the main investigation. The primary pitfall of this type of study is that initial findings may

seem convincing enough to be released prematurely as conclusions.

Cumulative Case StudiesThese serve to aggregate information from several sites collected at different times. The idea behind these studies is the collection of past studies will allow for greater generalization without additional cost or time being expended on new, possibly repetitive studies.

Critical Instance Case StudiesThese examine one or more sites for either the purpose of examining a situation of unique interest with little to no interest in generalizability, or to call into question or challenge a highly generalized or universal assertion. This method is useful for answering cause and effect questions

Sample Ethical Dilemma Case

nwankwo is a senior public servant who has worked in two state public service departments over a twenty-year period. Prior to this he was employed as a chartered accountant. in the course of performing his duties, involving primarily monetary and budgeting issues, nwankwo becomes aware that public revenue is being used inappropriately. While he is not directly responsible for this aspect of the budget, he raised his concerns about the channeling of funds from one part of the budget to another to Uche, the head of Division. nwankwo learns that not only is Uche aware of this practice, but also that he condones it. not long after, nwankwo is summoned to talk to Uche and to the Director-general about the issue. in preparation for this meeting nwankwo prepares a short paper that identifies his understanding of the key issues and presents this to Uche and the Director-general. Due to the politically sensitive nature of the issue, nwankwo is told that the matter is not within his jurisdiction and therefore he should ‘keep his nose out of it’. This advice is based on the fact that the incumbent government will not tolerate questions about how it puts its budget together but that it also faces electoral defeat if the matter were to be made ‘public’. nwankwo and his two supervisors are acutely aware of the tensions between the department, the minister and the government. This unease manifests itself around the advice the department provides the minister with, and the advice that the minister and the government want to hear in particular: After much soul searching, nwankwo decides to obey his supervisors by leaving the matter alone.

Commentary and Discussion

The critical incident in this situation can be summarized as the misuse of public money with senior officials trying to


hide the fact. There seem to be several dominant forces at play in nwankwo’s ethical dilemma. it is apparent that nwankwo draws upon his beliefs about ethical conduct from his training as an accountant, thus professional ethics is one of the key forces bearing upon his decision. his professional ethics derive from his beliefs about the appropriate role of public employees in serving the public interest. There is the expectation that public servants will use public funds in defensible and ethically accountable ways. The society force refers to key players, such as taxpayers, public servants, government members and groups served by a particular department, who stand to lose in some way by the misuse of public funds. The political framework also appears to be a pervading force in the case study, since there is the politicization of advice evident in the tension between the department, on the one hand, and the minister, on the other hand.

legal, institutional and organizational factors may have influenced Nwankwo’s thinking regarding the dilemma also. The legal factor not only relates to public sector legislation (e.g. Whistleblower Protection, Freedom of information, and other important guidelines), but what is perceived as legal and illegal behavior for government officials as well. As for the legal factor, the institutional factor concerns codes of conduct and pertinent policies and guidelines that outline correct procedures for reporting incidents like the unethical behavior of colleagues.

Finally, whether the organizational culture in which nwankwo works is reliant upon relationships of trust (or lack thereof) among organizational members and whether the actions (and past actions) of leaders support or discourage people from reporting unethical behavior are questions of some significance, as an organizational culture that fosters trust and enables leaders to model ethical behavior is one in which organizational members will be encouraged to make ethical decisions.

The political factor seems to be the most potent in directing nwankwo towards a resolution to the dilemma since he chooses to accept the advice of his supervisors and not to pursue the matter further. by taking this action, nwankwo risks his commitment to an independent public service and to the professional code of conduct governing accountants. The implication of nwanko’s decision on the department and government is minimal since the practice of misrepresenting funds remains hidden and no blame is apportioned to them. This situation is not the case for the community as the inappropriate use of public funds could have dire implications for community members who may be disadvantaged in some way or another. While nwankwo does not lose his job, does not defy his supervisors, and

does not leak this matter to the press, he personally experiences a lingering sense of doubt and guilt that he did not make the best decision at the time. it is evident that nwankwo’s personal and professional values were significantly tested by this dilemma.

It could be argued that the situation Nwankwo finds himself in might be described as one of multiple and conflicting values or accountabilities. There appears to be tensions among sets of competing values. Possible conflicts include:

Obeying supervisors’ directives versus following his 1. own personal values Choosing to serve the best interests of the community 2. versus the need to be responsive to the government of the day; andFollowing his professional ethics versus his desire to 3. maintain his career.

in this illustration, there is little doubt that nwankwo was caught in a highly complex dynamic milieu of factors. The case reinforces the point that public servants do not work within a political vacuum; the context is highly politicized. Public officials also control, in various ways, the use of financial and other valuable resources provided by the community. The use, and misuse of those resources raise important questions of professional ethics for administrators. It is similarly expected that those public officials who control the financial and other resources provided by the community have an ethical obligation to ensure that those resources are used efficiently and appropriately. In the case provided, it is anticipated that nwankwo would have been aware of the issues identified above when he weighed up the options and reached his decision. in making his final decision Nwankwo seemed to be guided by the principle of what would create the least cost to the majority of the people. in choosing not to act, he considered very carefully the implications and future repercussions of the decision on himself personally, the government and his immediate supervisors. if he had ignored the advice from his supervisors and taken the issue to the minister, nwankwo may have risked not only his current position but his career as a public servant as well. This consequence could have weighed heavily upon him. Concern over losing one’s position and jeopardizing one’s future career prospects through making mistakes or failing to take the advice of supervisors was a theme that emerged from a qualitative study of thirty new managers’ experiences of ethical dilemmas within organizations (badaracco & Webb 1995). An important conclusion reached by badaracco and Webb (1995) was that because people are so concerned about their careers, this can have the effect of ‘creat[ing]


strong pressures to choose the easier wrong rather than the tougher right in a difficult situation’ (pp. 23-24).

Similarly, in a public sector characterized by intensified politicization and pressure, it appears that there is a greater chance of public servants choosing to give advice to ministers that they know will please them out of fear (smith & Corbett 1999). by extension, a public servant could refuse to give certain advice to ministers because that advice may displease them. This latter situation seems to be applicable in nwankwo’s situation. his case suggests that the politicization of advice - which might be considered to be the most insidious form of politicization can be related to the appropriate and ethical conduct of public servants and ministers. in an impartial public service nwankwo would not have feared addressing the issue of misappropriated funds openly with the minister. Providing such advice was the ‘right’ action to take. it seems that the rhetoric of a politically neutral and impartial public service is at odds with the reality. it appears that the possible dire set of consequences of the dilemma prevented him from being able to take the ‘right’ action. in fact, it would be a brave individual who would speak out against unethical practices operating within an organizational culture such as the one in which nwankwo worked. not only was the organizational culture not conducive to ethical behavior and practices, but also nwankwo’s supervisors lacked the type of leadership essential for promoting, supporting and building an ethical public service.

References

badaracco, J & Webb, A 1995, ‘business ethics: A view from the trenches’, California Management Review’, vol. 37, pp. 8-30.Cranston, n, Ehrich, l & Kimber, M 2002, ‘Ethics, ethical dilemmas and good government’, The Public interest, December, pp. 22-25.Edwards. g 2001, ‘Ethics in practice’, Canberra bulletin of Public Administration, vol. 102, December, pp. 11-17.Freakley, M & burgh, g 2000, Engaging with ethics: Ethical inquiry for teachers, social science Press, Australia.Preston, n & samford. C with C. Connors 2002, Encouraging ethics and challenging corruption, The Federation Press, sydney.singer, P 1993. `About ethics’, in his Practical ethics; 2nd Edition. Cambridge University Press, Cambridge.smith, R F i & Corbett. D 1999. `Responsiveness without politicisation: Finding a balance’, in D Clark & D Corbett (eds), Reforming the public sector: Problems and solutions, Allen & Unwin, st leonard’s.

Uhr, J. (2002). “Competing Models of integrity.” Res Publica 11(2): 13-16.


Issues of Ethics and Professional ValuesDr. Roger Koranteng Adviser, (Governance) Governance and Institutional Development Division (GIDD) Commonwealth Secretariat, UK

Reaction to Scandals

scandals have caused a rapid decline in investor confidence, caused governments to “over-legislate, over–regulate, and over-prosecute,” and inspired “state officials to enter the fray for political advantage. Blame for the scandals is laid on a widespread abandonment of adherence to ethical obligations” among corporate leaders. Following the widely known frauds of Enron and WorldCom came scandalous discoveries in the mutual and hedge fund industries, sham bidding schemes by insurance companies, and deliberately misleading accounting statements by mortgage giants. “is it any wonder the public have doubts over corporate integrity?”

What is Ethics? in a general sense, ethics is the code of moral principles and values that governs the behaviors of a person or group with respect to what is right or wrong. Ethics sets standards as to what is good or bad in conduct and decision making.

Ethics deals with internal values that are a part of corporate culture and shapes decisions concerning social responsibility with respect to the external environment. An ethical issue is present in a situation when the actions of a person or organization may hurt or benefit others.

Three categories of Human Action

Ethics can be more clearly understood when compared with behaviors governed by laws and by free choice. Figure 1 illustrates three categories of human action.

Figure 1: Three Domains of Human Action

Codified lawWhere values and standards are written into the legal system and enforceable in the courts. in this area, lawmakers have ruled that people and corporations must behave in a certain way, such as obtaining licenses for cars or paying income/corporate taxes.

Free choice The domain of free choice is at the opposite end of the scale and pertains to behavior about which law has no say and for which an individual or organization enjoys complete freedom. An individual’s choice of religion or a corporation’s choice of the number of products/services to offer are examples of free choice.

Area of ethics between these domains lies the area of ethics. This domain has no specific laws, yet it does have standards of conduct based on shared principles and values about moral conduct that guide an individual or company.

Summary of the Domain

in the domain of free choice, obedience is strictly dictated by oneself. In the domain of codified law, obedience are laws prescribed by the legal system. Whereas in the domain of ethical behavior, obedience is unenforceable norms and standards of which the individual or company is aware. An ethically acceptable decision is both legally and morally acceptable to the larger community. Many organizations and individuals get into trouble with the simplified view that choices are governed by either law or free choice. it leads people to mistakenly assume that “if it’s not illegal, it must be free choice,” as if there were no third domain. A better option is to recognize the domain of ethics and accept moral values as a powerful force for good that can regulate behaviors both inside and outside organizations. As principles of ethics and social responsibility are more widely recognized, companies can use codes of ethics and their corporate cultures to govern behavior, thereby eliminating the need for additional laws and avoiding the problems of unfettered choice.

Ethical dilemma arises because ethical standards are not codified, and disagreements and dilemmas about proper behavior often occur. An ethical dilemma arises in a situation when each alternative choice or behavior is undesirable because of potentially harmful ethical consequences. Right or wrong is not clearly identifiable.

Moral agent The individual who must make an ethical choice in an organization is the moral agent. Consider the dilemmas facing moral agents in the following situations:

Domain of Codified Law

Domain of Ethics Domain of Free Choice

High Amount of Control Low


A top employee at your small company tells you he needs you to provide him with health insurance and some time off because he has AIDS. Granting his request will open the floodgate to many other employees with similar problems. You know the employee needs the job as well as the health insurance benefits. Providing health insurance has already stretched the company’s finances, and paying this premium will cripple the company financially. Should you accept the request? What will you do?

Guiding Ethical Decision Making Sometimes ethical decisions entail a conflict between two groups. For example, as the mayor of your city, should the potential for local health problems resulting from the effluents of a company take precedence over the jobs it creates as the city’s leading employer? TheCompany employs over 60% of the city’s residents!.

Managers faced with these kinds of tough ethical choices often benefit from a normative approach - one based on norms and values to guide their decision making. normative ethics uses several approaches to describe values for guiding ethical decision making. Five of these that are relevant to managers are the utilitarian approach, individualism approach, moral rights approach, and justice approach.

Utilitarian Approach

The utilitarian approach holds that moral behavior produces the greatest good for the greatest number. Under this approach, a decision maker is expected to consider the effect of each decision alternative on all parties and select the one that optimizes the satisfaction for the greatest number of people. The utilitarian ethic was the basis for the state of Oregon’s decision to extend Medicaid to 400,000 previously ineligible recipients by the refusing to pay for high-cost, high risk procedures such as liver transplants and bone marrow transplants. Although a few people needing these procedures have died because the state would not pay, many people have benefited from medical services they would otherwise have had to go without. Critics of the utilitarian ethic question whether the common good is squeezing the life out of the individual. Critics also claim that the Oregon decision does not fully take into account the concept of justice toward the unfortunate victims of life threatening diseases.

Individualism Approach The individualism approach contends that acts are moral when they promote the individual’s best long-

term interests. individual self direction is paramount, and external forces that restrict self direction should be severely limited. individuals calculate the best long-term advantage to themselves as a measure of a decision’s goodness. The action that is intended to produce a greater ratio of good to bad for the individual compared with other alternatives is the right one to perform. in theory, with everyone pursuing self direction, the greater good is ultimately served because people learn to accommodate each other in their own long-term interest. individualism is believed to lead to honesty and integrity because that works best in the long run. lying and cheating for immediate self-interest just causes business associates to lie and cheat in return. Thus, individualism ultimately leads to behavior toward others that fits standards of behavior people want toward themselves.

Moral-Rights Approach The moral-rights approach asserts that human beings have fundamental rights and liberties that cannot be taken away by an individual’s decision. Thus all ethically correct decision are ones that best maintain the rights of those people affected by it. Moral rights that could be considered during decision making are:

The right of free consent: individuals are to be treated only as they knowingly and freely consent to be treated.

The right to privacy: individuals can choose to do as they please away from work and have control of information about their private life.

The right to freedom of conscience: individuals may refrain from carrying out any order that violates their moral or religious.

The right to due process: individuals have a right to an impartial hearing and treatment.

The right to life and safety: individuals have a right to live without endangerment violation of their health and safety. To make ethical decisions based on the moral rights approach managers need avoid interfering with fundamental rights of others. Thus, a decision to eavesdrop on employees violates their right to privacy. sexual harassment is unethical because it violates the right to freedom of conscience.

The right to free speech would support whistleblowers who call attention to illegal or inappropriate actions within a company.


Justice Approach

The justice approach holds that moral decisions must be based on standards of equity, fairness, and impartiality. Three types of justice should be of concern to managers.

These include; • Distributive justice • Procedural justice & • Compensatory justice

Distributive justice requires that different treatment of people not be based on arbitrary characteristics. individuals who are similar in respects relevant to a decision should be treated similarly. Thus men and women should not receive different salaries if they are performing the same job. however, people who differ in a substantive way, such as job skills or job responsibility, can be treated differently in proportion to the differences in skills or responsibility among them. This difference should have a clear relationship to organizational goals and tasks. Procedural justice requires that rules be administrated fairly. Rules should be clearly stated and be consistently and impartially enforced. Compensatory justice argues that individuals should be compensated for the cost of their injuries by the party responsible. Moreover, individuals should not be held responsible for matters over which they have no control.

Factors Affecting Ethical Choices

When managers are accused of lying, cheating, or stealing, the blame is usually placed on the individual or on the company situation. Most people believe that individuals make ethical choices because of individual integrity, which is true, but it is not the whole story. Ethical or unethical business practices usually reflect the values, attitudes, beliefs, and behavior patterns of the organization culture; thus, ethics is as much an organizational as a personal issue.

Managers bring specific personality and behavioral traits to the job. Personal needs, family influence, and religious background all shape a managers value system. Specific personality characteristics, such as ego, strength, self-confidence, and a strong sense of independence, may enable managers to make ethical decisions. One important personal trait is the stages of :

Pre conventional level

At the pre conventional level individuals are concerned with external rewards and punishments, and they obey

authority to avoid detrimental personal consequences. in an organizational context, this level may be associated with managers who use an autocratic or coercive leadership style, with employees oriented toward accomplishment of specific tasks.

Conventional level

At level two, called the conventional level, people learn to conform to the expectations of good behavior as defined by colleagues, family, friends, and society. Meeting social and interpersonal obligations is important. Work group collaboration is the preferred manner for accomplishment of organizational goals, and managers use a leadership style that encourages interpersonal relationships and cooperation.

Moral development

At the high moral development or principled level, individuals are guided by an internal set of values and standards and will even disobey rules or laws that violate these principles. internal values become more important than the expectations of significant others. For example, when a navy ship sank after being torpedoed during World War il, one navy pilot disobeyed orders and risked his life to save men who were being picked off by sharks. The pilot was operating from the highest level of moral development in attempting the rescue despite a direct order from superiors. What are the implications for the pilot’s actions?

The great majority of managers operate at level one. not many advance beyond level two and only few reach the level three stage of moral development. People at level three are able to act in independent, ethical manners regardless of expectations from others inside or outside the organization. Managers at level three of moral development will make ethical decisions whatever the organizational consequences for them.

Transformative or Servant Leadership

When managers operate from this highest level of moral development, they use transformative or servant leadership, focusing on the needs of followers and encouraging others to think for themselves and to engage in higher levels of moral reasoning. Employees are empowered and given opportunities for constructive participation in governance of the organization.


Organization

The values adopted within the organization are important; especially when we understand that most people are at the level two stage of moral development, which means they believe their duty is to fulfill obligations and expectations of others. Research has shown that the values of an organization or department strongly influence employee behavior and decision making. in particular, corporate culture serves to let employees know what beliefs and behaviors the company supports and those it will not tolerate.

For example, an investigation of thefts and kickbacks in the oil business found that the cause was the historical acceptance of thefts and kickbacks. Employees were socialized into those values and adopted them as appropriate.

Guidelines for Ethical Decision-Making When confronted with ethical dilemmas, managers use such criteria as whether they would be proud to tell their parents or grandparents about their decision or whether they could sleep well at night and face themselves in the mirror in the morning. Managers often rely on their own personal integrity in making ethical decisions. but knowing what to do is not always easy. As a future manager, you will almost surely face ethical dilemmas one day. The following guidelines will not tell you exactly what to do, within the context, will help you evaluate the situation more clearly by examining your own values and those of your organization. The answers to these questions will force you to think hard about the social and ethical consequences of your behavior.

is the problem/dilemma really what it appears to be? if 1. you are not sure, find out. is the action you are considering legal? Ethical? if you 2. are not sure, find out. if you do it, how will you feel about yourself? 3. Do you understand the position of those who oppose 4. the action you are considering? is it reasonable? Who does the action benefit? Harm? How much? How 5. long? Would you be willing to allow everyone to do what you 6. are considering doing? have you sought the opinion of others who are 7. knowledgeable on the subject and who would be objective? Would your action be embarrassing to you if it were 8. made known to your family, friends, coworkers, or superiors?

Conclusion

There are no correct answers to these questions. Yet, if you determine that an action is potentially harmful to someone or would be embarrassing to you, or if you do not know the ethical or legal consequences, these guidelines will help you clarify whether the action is socially responsible.


Reflections on Public Service Dilemmas: Nigeria’s ExperienceDr. Gabriel Gundu, Consultant, Public Administration, Uganda Management Institute

Preamble

This paper is a continuum of the growing global concern for promoting ethical fitness as an underpinning tonic for sound public service and better governance. The ongoing globalization of market economies and information technology demand for demonstrable commitment to transparent sound ethical fitness in the public service, and the strategic focus of this Conference on Public service Code of Ethics, and Reflections on (Public Service) Ethical Dilemmas, from which this paper has emerged, is an expanded expression of the same concern.

Be that as it may, this paper reflects on Nigeria’s experience in dealing with public service ethical dilemmas with the aim of highlighting some useful lessons for improved public service. in doing this, the structure of the presentation comprises: a synoptic overview of the normative nature of public service ethical dilemmas; nigeria’s experience in dealing with public service ethical dilemmas; and concluding remarks.

Normative Nature of Public Service Ethical Dilemmas

in the public service domain, normative nature of ethics tends to be in the frontline of ethical reasoning, thereby downplaying its empirical dimension. Consequently, public servants usually understand ethics to be a system of prescribed and commonly shared values and standards [e.g. trustworthiness (i.e. honesty, integrity, reliability and loyalty), responsibility (i.e. accountability, pursuit of excellence, self-restraint), fairness (i.e. open and unbiased process, impartiality, equity), respect (i.e. civility, courtesy, decency, and tolerance) and compassion], and rules of conduct (especially, those regarding financial gains, use of public resources, transparency and accountability, fair process, etc.) for guiding the obligatory, permissible, and prohibitive official conduct in the public service. Invariably, demonstrable due compliance with ethical values, standards and rules would bolster public confidence and trust in the public service, whilst ethical misconduct would erode that same confidence and trust.

Accordingly, ethical dilemmas do arise when a public-servant-decision-maker has to choose between competing considerations of ethical values and rules in order to

determine the right-thing-to-do. These dilemmas are in three broad categories:

Personal Cost Ethical Dilemmas, arising from • situations in which compliance with ethical conduct results in a significant personal cost (e.g. jeopardizing held position, missing opportunity for financial or material benefit, injuring valued relationship etc.) to the public-servant-decision-maker and/or the Agency; Right-versus-Right Ethical Dilemmas, arising from • situations of two or more conflicting sets of bona fide ethical values (e.g. public servants’ responsibility of being open and accountable to citizens versus that of adhering to the Oath of Secrecy/Confidentiality etc.); and Conjoint Ethical Dilemmas, arising from situations in • which a conscientious public-servant-decision-maker is exposed to a combination of the above-indicated ethical dilemmas in searching for the “right-thing-to-do”.

Nigeria’s Experience in Dealing with Public Service Ethical Dilemmas

Perhaps, it is worthwhile to use the above-sketched defining characteristics of normative ethics in reflecting on nigeria’s experience in dealing with public service ethical dilemmas. The reflection focuses on the:

frequently encountered ethical dilemmas; and • adopted framework of mechanisms for improving • ethical fitnessFrequently Encountered Ethical Dilemmas tend to • arise from three critical relations of:

- Civil Servants and Political Office Holders; - Civil servants and Citizens; and - intra-Civil service [i.e. Ministries, Departments

and Agencies (MDAs) that make up nigeria’s Civil service].

Civil Servants and Political Office Holders

Classical cases arise from the management of the relationship between the Minister, who is an extraction of the political office holders’ class, and the Permanent secretary, who is an extraction of the Civil servants’ class.


Conventionally, the Minister is the Political head and Chief Executive of the Ministry. before assuming duties of office, the Minister subscribes to the Ministerial Code of Conduct and Ethics and publicly expresses commitment to uphold it with a view to preserving and enhancing public confidence and trust in the public service.

On his part, the Permanent secretary is the Chief Policy Adviser to the Minister, Administrative head, and Accounting Officer of the Ministry. In the exercise of these responsibilities, he ought to strictly adhere to the prescribed and commonly shared ethical values and standards, and rules of conduct in the public service, whilst demonstrating unflinching loyalty to the Minister.

however, in practice, the management of the discharge of the foregoing responsibilities often triggers conflict between the Minister and the Permanent secretary, especially over expenditure and administrative controls. The Minister is usually under the pressure of material and pecuniary demands from his political, social and family constituencies. For political expediency, he may feel obligated to meet the demands. Consequently, he may decide to ignore the Ministerial Code of Conduct and Ethics, and transfer the demands to the Permanent secretary, with a directive to oblige. but it may be clear that meeting such demands may lead to violation of the acceptable accounting standards and practices, as well as administrative ethical principles.

in trying to arrive at the right-thing-to-do, the Permanent secretary’s conscience may raise a myriad of perplexing questions, including:

Would refusal to oblige the Minister’s directive not • displease him, thereby straining the relationship between the Minister and the Permanent secretary, and echoing the latter’s disloyalty to the former? Would a protracted conflict, arising from this incident, • not stunt the delivery on the Ministry’s mandate and adversely affect the corporate image of the Ministry with a collateral damage on the required public confidence and trust? Would succumbing to the pressures of the Minister, • with a view to pleasing him, not lead to the violation of the acceptable accounting standards and practices, as well as administrative ethical principles, thereby derailing nigeria’s crusade for sound public service ethical fitness? Would a violation of the public service ethics not • expose the Permanent secretary to the risk of misconduct sanctions (i.e. termination, dismissal, retirement in public interest etc.) as contained in the

applicable sections of the Public service Rules, and anti-corruption laws, notably, the EFCC, iCPC and Public Procurement Acts? Would such an act not be inimical to the overall • corporate image of the public service? in such a situation, would the Permanent secretary’s • reliance on the advice of participants at the Maiden Annual Forum of serving and Retired Permanent secretaries (July 2009) provide a valuable exit? it would be recalled that the participants’ advice is that Permanent secretaries should, inter alia:

o strike a healthy balance between their responsibilities as Accounting Officers and that of the honorable Ministers as Chief Executives to avoid unnecessary conflict; o uphold the rule of law, due process, firmness, fairness and tact in carrying out their responsibilities; and o uphold the highest administrative, financial, ethical and moral standards in the Civil service, irrespective of political pressure

As a footnote to the foregoing, it needs to be observed that the application of these optional principles by Permanent secretaries in practice is not always easy for resolving ethical dilemmas that confront them. For example, the application of the option of striking a balance is a form of euphemism for acquiescence while the other two options are squarely all about maintaining integrity and perhaps damming the consequence. however, very tactful Permanent secretaries do get the Ministers to commit all their demands in writing in such a way that puts potential culpability on the Ministers. in this way, Ministers with excessive tendencies for unethical actions are checked within the boundaries of the law. The nigerian experience shows that many Permanent secretaries have been able to resolve this dilemma in the performance of their duties.

Civil Servants and Citizens

Ethical dilemmas arising from the relationship between the civil servants and citizens are in the domain of service delivery. The citizens expect that their entitled service should be delivered timely, fairly, honestly, efficiently, effectively, and transparently. On their part, civil servants have subscribed to meeting the citizens’ expectations through the sERviCOM Charters, which have been developed and publicly displayed in every Ministry, Department and Agency (MDA), but in a manner that does not compromise the principle of confidentiality of official information.


however, in practical terms, the selection of a deemed best course of action, from amongst several competing options, has usually depended on the administrative discretionary choice of the civil-servant-decision-maker. And this poses an acute anxiety for appropriate answers to perplexing questions such as:

Which preferred administrative discretionary choice • would demonstrate professional discipline, equity, impartiality, fairness, honesty, integrity, reliability, pursuit of excellence, accountability, and pre-eminence of loyalty to the principle of safeguarding the best interest of the citizens, thereby enhancing public confidence and trust in the public service? Which preferred administrative discretionary option • would offend the sensibilities of the citizens with a collateral damage on public confidence and trust in the public service? Which preferred administrative discretionary choice • would please the citizens at the expense of the survival, growth and development of the public service?

Intra-Civil Service

being the Administrative head of the Ministry, the Permanent secretary is frequently confronted with situations requiring his decision on meeting staff expectations on a range of matters such as training, welfare, promotion and discipline. in search of the right-thing-to-do, he is guided by the applicable policies on staff matters, and is assisted with the opinions of the Directors of Departments and designated staff committees.

however, he is also confronted with pressures from a myriad of vested interests. in trying to strike a balance between the applicable policy guidelines and the mounting pressure from the various vested interests, the civil-servant-decision-maker faces a daunting quandary that triggers series of questions in his thinking process. such questions include:

What would be the best line of action to take towards • boosting staff morale and productivity, being a valuable tonic in discharging the Ministry’s mandate? What would be the best course of action to take • towards promoting professional merit and meeting staff expectations whilst avoiding waste of government resources? What would be the best line of action to take towards • preventing conflict between self-interest and best interest of staff?

Framework of Mechanisms for Improving Ethical Fitness

in navigating through the labyrinths of ethical dilemmas, nigeria’s public servants have had to be creative and artful whilst relying on guidance from the country’s adopted framework of mechanisms for enthroning sound ethical fitness. This framework of mechanism resonates the contemplation of Article 23 of the Charter for Public service in Africa, which enjoins public functionaries to refrain: from any activity that is inconsistent with ethics and morality, such as misappropriation of public funds, favoritism, nepotism, discrimination, influence peddling or administrative indiscretion; from soliciting, accepting, demanding or receiving, directly or indirectly, any payment, gift or other advantage in kind, in return for performing or refraining from performing their functions or obligations; from offering gifts or other advantages that might influence in their favor or in favor of family members and friends, the judgment or decision of another person; and from using public property or prevailing upon subordinates to perform activities other than those falling within the scope of their functions or mandates. but challenges do exist in the operationalization of this framework of mechanisms. The foregoing is summarized here-below.

Preventing Ethical Misconduct

The common methodology for delivering on this framework of mechanisms include:

Re-Sensitization Program on Ethical Values and Standards with a view to halting the decline of the time-honored ethical principles and rules in the public service; broadening and deepening the general public’s understanding of ethics in the public service; and promoting the culture of sound ethical fitness.

highlights of the operational activities comprise:

general public enlightenment campaign, which spans • the Ethical Revolution (1981); War Against indiscipline (1986); MAMsER (Mass Mobilization for self-Reliance, social Justice, and Economic Recovery)(1987) and its successor agency, nOA (national Orientation Agency). Others are independent Corrupt Practices and Other Related Offences Commission (iCPC), established in 2000 with a mandate to educate and enlighten the public on and against corruption and other related offences towards enlisting and fostering public support for the anti-corruption war; sERviCOM (service Compact with


all nigerians), established in 2004 and has produced Charters for its operational day-to-day implementation in all the Federal government Agencies -the Charters are the basis for Customers’ expectations of quality service delivery, demand of their rights to good service, recourse when service delivery fails, and involvement in the service Delivery Program; nigeria’s Re-branding Project(2009), and sTEPs (stewardship, Trust, Engagement, and Professionalism) (2009); peer consultative forums, notably, the Federal service Management Committee ( an assembly of all Federal Permanent secretaries under the chair of the head of the Civil service of the Federation) for peer-review and advice on performance in the MDAs, including analysis of ethical dilemmas; Retreats and Workshops where ethical issues resonate both in deliberations and conclusions, culminating in public declaration of re-commitment to upholding ethical values and standards [e.g. 2001 Kuru Declaration, Deliberations and Conclusions of the Maiden Annual Forum of serving and Retired Permanent secretaries (July 2009) etc.]; and embodiment of values re-orientation in the national development agenda, notably the APRM nigeria’s 2008 national Program of Action (nPoA), which underscores ethical re-orientation of public servants as a critical step in curbing corruption and scaling up integrity; Training in Ethical values and standards, as • contemplated in the Public service Ethics/integrity Resource Project, under the on-going public service reform program, for enhancing the capacity of public functionaries in analyzing and resolving the commonly encountered ethical dilemmas; leading by example, as subscribed to by all the • serving Ministers and special Advisers to the President in the Ministerial Code of Conduct and Ethics, and as further demonstrated in the case of the late President Yar’Adua’s declaration of his assets and liabilities to the Code of Conduct bureau and publishing same in the media. This has been adjudged by some public policy analysts as a practical demonstration of leadership commitment to promoting a culture of sound ethical fitness in the public service, which transcends mere compliance with the constitutional requirements in the Code of Conduct for Public Officers as spelt out in the 5th Schedule, Part 1, section 11 of the 1999 Constitution of the Federal Republic of nigeria. indeed, the 2008 APRM Country Review Report on nigeria (a deliverable from nigeria’s governance review by the Committee of Participating African heads of state and government in APRM) has recognized and applauded this development as one of nigeria’s best practices of commitment to

transparency in governance.

Promoting Administrative Accountability

This has been done by enshrining ethical values and standards in the:

Codes of Conduct, encouraging public servants to • adhere to the mandatory and permissible conduct in the public service. Relevant indicators include, the 1999 Constitution of the Federal Republic of nigeria, which provides for national Ethics, Code of Conduct for Public Officers, abolishment of corrupt practices and abuse of power, and Oath of Office for Principal Officers of the Executive, Legislative and Judiciary Arms of government at both the Federal and state levels (vide Chapter ii, section 23; 5th schedule, Part i; Chapter ii, section 15 (5), and 7th schedule, respectively, of the said Constitution); Civil service handbook, which spells out the Code of Ethics in government business in its Chapter 4, underscoring the value of discipline and adherence to service rules and regulations; Ministerial Code of Conduct and Ethics, to which all serving Ministers and special Advisers to the President publicly subscribe and express commitment to uphold towards preserving and enhancing public confidence and trust in the integrity, objectivity and impartiality of public functionaries; laws and rules, which prohibit misconduct and • corruption, as well as prescribe appropriate punishments for violators, e.g. regular penal codes criminalizing corruption; Corrupt Practices and Other Related Offences Act (2000); Economic and Financial Crimes Commission (Establishment) Act (2002); Public Procurement Act (2007); Fiscal Responsibility Act (2007); nigeria EiTi (Extractive industries Transparency initiative) Act 2007; 2008 Public service Rules (PsR), which prohibit misconduct, and serious misconduct, as defined in PSR 030301 and PsR 030401 respectively, but also prohibit seeking influence of prominent persons (FR 030427), receipt of presents in recognition of service rendered or anticipation of service to be rendered (FR 030433), bribery and corruption (FR 030434), and conduct prejudicial to state security (FR 030501); and 2009 Financial Regulations (FR), which provide guidance to all public officers in carrying out government financial transactions (FR 101); Public service Reforms, a series of which was • launched with the constitution of the gorsuch Committee in 1954, have been undertaken to reposition the federal public service for better


performance. in the same vein, the Federal government of nigeria launched the on-going Public service Reform Programme (PsRP) in 2003. its implementation is being guided by the national strategy for Public service Reform (nsPsR). The strategy document provides a common vision and a long term agenda (including ethical and accountable workforce with a changed work culture) to guide the rebuilding and transformation of the Federal Public service to a world-class standard for achieving nigeria’s vision 20:2020.

Establishment of Integrity and Moral Rectitude Watchdog Bodies, including:

internal bodies such as the Code of Conduct bureau, • which has been enshrined in the 1999 Constitution of the Federal Republic of nigeria by the provisions of its section 153 and the 3rd schedule, Part 1, section 1; Public Complaints Commission (PCC) (nigeria’s Ombudsman), established by Decree no. 31 of 1975 (as amended by Decree no. 21 of 1979) with the mandate to provide impartial investigation of complaints received from aggrieved citizens against government agencies (i.e. Federal, state, and local governments), corporate organizations and their officials; Bureau of Public Procurement (bPP), established by the provisions of the Public Procurement Act 2007, with the mandate to prevent fraudulent and unfair procurement, and where necessary apply administrative sanctions; Auditor-general for the Federation (AugF), mandated to undertake financial audit, appropriation audit, financial control audit, and value-for-money audit with a view to ensuring due compliance with the applicable accounting practices and standards (vide FR 108 and FR 109 of the 2009 Financial Regulations); independent external bodies, including the Media, • organized non-governmental Actors [e.g. nigerian Chapters of Transparency international, and Friedrich Ebert Foundation, integrity Club (formed in 1998) etc.], and professional bodies [e.g. institute of Chartered Accountants of nigeria (iCAn), nigerian Medical Association (nMA), nigerian bar Association (nbA) etc.] have been actively involved in the crusade for promoting compliance with ethical principles in the country.

Managing and Enforcing Ethical Principles and Laws nigeria believes that the emplacement of a framework of mechanisms for preventing misconduct in the public service is necessary but not sufficient per se. This measure needs to be supported with structured

mechanisms for managing misconduct and enforcing compliance with the acceptable ethical principles for enthroning effective and durable sound ethical fitness. such management and enforcement measures not only facilitate the disciplining of violators, but also deter would-be violators. To this end, nigeria has established a system for:

Disclosure of misconduct and corruption, which • encourages and protects whistle-blowers under the principle of confidentiality of official information, whilst providing adequate avenues and procedures for facilitating disclosure and investigation of misconduct or corruption cases. This measure, which necessitated the placement of Public suggestion boxes at the entrances and exits of government Agencies, has been reflected in several administrative instruments, with varying degrees of emphasis, notably, the 2008 Public service Rules (PsR), which provide procedures for reporting misconduct (PsR 030304), disciplinary procedure for misconduct and serious misconduct (PsR 030305), and petitions and appeals (Chapter 9); and the Code of Conduct bureau, Public Complaints Commission, sERviCOM and Economic and Financial Crimes Commission etc. have established procedures for receiving complaints and appeals without hindrance from aggrieved citizens and for protecting the petitioners. Furthermore, the Auditor-general for the Federation (AugF) is empowered by section 88 of the 1999 Constitution of the Federal Republic of nigeria to investigate and expose corruption, inefficiency or waste of public funds to the national Assembly, whilst section 128 of the same Constitution replicates same for the 36 states of the Federation; Disciplinary control is being exercised via the • occasional Ad-hoc Commissions of inquiry, and the established investigating, disciplinary, and prosecuting bodies, notably, the Disciplinary Committees provided in the 2008 Public service Rules, especially its Chapter 3 which is dedicated to discipline; independent Corrupt Practices and Other Related Offences Commission (iCPC), and Economic and Financial Crimes Commission (EFCC), are mandated to prohibit and prescribe punishment for corrupt practices and other related offences as well as economic and financial crimes, whilst the Attorney-general of the Federation and Minister of Justice is empowered to prosecute perpetrators of corruption in his capacity as the Chief Law Officer of the Federation (vide section 150 of the 1999 Constitution of the Federal Republic of nigeria). Furthermore, the iCPC has the power to investigate petitions against


public functionaries hitherto granted constitutional immunity i.e. the President, vice-President, governors and Deputy-governors. Again, the Constitutional Oversight bodies (i.e. the senate Committees on Ethics and Petitions; Public Accounts; and Finance and Appropriations, and house of Representatives’ Committees on Ethics and Privileges; Public service Matters; Public Petitions; Appropriation; Finance; and national Ethics, values and Anti-Corruption) have powers to investigate alleged cases of corruption and visit the necessary disciplinary sanctions on violators.

Commonly Encountered Challenges

The commonly encountered challenges comprise the: immunity clause in section 308 of the 1999 • Constitution of the Federal Republic of nigeria which protects sitting President and vice-President at the Federal level, and governor and Deputy governor at the state level from facing civil or criminal proceedings. Undeniably, this constitutes a daunting hurdle in driving the anti-corruption crusade, in spite of the iCPC’s powers to investigate but without the powers to prosecute the beneficiaries of the immunity clause; reticence of some public servants to disclose ethical • misconduct within the Public service in spite of provisions for encouraging and protecting whistle-blowing. This is believed to arise from the prevailing ignorance on the rights and obligations of whistle-blowing, and/or the fear of risking personal cost ethical dilemma (e.g. jeopardizing held position, missing opportunity for financial or material benefits, injuring valued relationship etc.); subsisting obstacles to sound ethical fitness, notably • self-interest, self-protection, self-deception, self-righteousness, and self-indulgence in dishonesty, corruption, nepotism, indiscipline, and prejudices etc.; lack of fair remuneration that is commensurate with • the civil servants’ responsibilities and performance, and enables them to live in dignity, and insecurity of tenure of Civil servants (especially regarding the uncertainties of retirement life), do trigger and sustain ethical misconduct in the public service. This concern, which has sustained the perennial tug of war of wits between the Civil service Unions and the governments, featured prominently at the discussions of the Maiden Annual Forum of serving and Retired Federal Permanent secretaries (July 2009) leading to call on government to put in place a living wage package for Civil servants by “assessing the correlation between the existing salaries and inflationary trends and establishing a sensitive salary

regime”; conflict of interest, arising mainly from pressure to • make ends meet. For instance, as a result of poor remuneration, a sizeable number of Civil servants engage in secondary income generating activities which often times clash with their official time; and environmental challenges in the city of Abuja • (nigeria’s capital) create additional ethical dilemmas for Civil servants in such areas as housing and transportation. lateness to work has become a key feature in this regard.

Concluding Remarks

As a way of conclusion, it is worthwhile to recall and underscore that:

preventing and managing misconduct as well as • enforcing ethical values and standards are very complex issues. however, a possible exit is for the public servants to ensure that their official conduct is always guided by the emplaced mechanisms for improving ethical fitness; demonstrable political commitment at the highest • political authority level is critical for successful promotion of durable sound ethical fitness; peer consultation is very valuable in navigating • through the labyrinth of ethical dilemmas in the public service; and respect of public perception is very critical because • public functionaries are stewards of public confidence and trust, which can only be gained and maintained by consistent avoidance of not only actual ethical misconduct, but very importantly the public perception of it.

References APRM Forum, 2009, APRM Country Review Report no.8: Federal Republic of nigeria Federal government of nigeria (Fgn), 1997, Civil service handbook, Fgn Printing Press, lagos, nigeria Fgn, 1999, Constitution of the Federal Republic of nigeria 1999, Fgn Printing Press, lagos, nigeria Fgn, 2000, iCPC Act 2000, Fgn Printing Press, Abuja, nigeria 3rd biennial Pan-African Conference of Ministers of Public/Civil service, 2001, Charter for the Public service in Africa Fgn, 2002, EFCC (Establishment) Act 2002, Fgn Printing Press, Abuja, nigeria Fgn, 2004, guidelines for Appointments, Promotion and Discipline, Fgn Printing Press, Abuja, nigeria, Fgn, 2007, Fiscal Responsibility Act 2007, Fgn Printing Press, Abuja, nigeria, Fgn, 2007, Public Procurement Act 2007, Fgn Printing Press, Abuja, nigeria, Fgn, 2007, nigeria EiTi Act 2007, Fgn Printing Press, Abuja, nigeria, Fgn, 2007, sERviCOM book, Fgn Printing Press, Abuja, nigeria, Fgn, 2008, Public service Rules, Fgn Printing Press, Abuja, nigeria Fgn, 2009, Financial Regulations (Revised to January 2009), Fgn Printing Press, Abuja, nigeria, Fgn, 2009, Report of the Maiden Annual Forum of serving and Retired Permanent secretaries (pending publication), Abuja, nigeria institute for local government, 2009, Understanding the basics of Public service Ethics: Promoting Personal and Organisational Ethics, California, UsA Makrydemetres, Anthony, 2002, “Dealing with Ethical Dilemmas in Public Administration: The “AliR” imperatives of Ethical Reasoning” Menya, David, (2010) “Ethics, Ethical Dilemmas and Public service” OECD, 1998, Principles for Managing Ethics in the Public service: OECD Recommendation, PUMA Policy brief no. 4 UnDEsA/UnDP, 2001, Public service Ethics in Africa: vols. 1 & 2, Un, new York UNDESA/DPADM, 2004, Nigeria: Public Administration Country Profile, UN, New York


Clash Between Religious Values and Regulations Governing the Conduct of Public OrganizationsBashi Mothusi, Centre of Specialization in Public Administration & Management (CESPAM) University Of Botswana

Introduction

The relationship between religious values and regulations governing the conduct of business in public organizations still presents challenges to decision makers. Whilst some people believe that the rights and freedoms of the citizens as enshrined in the country’s constitution should not be violated under any circumstances, some contend that the operations of public organizations should not be affected negatively by the religious values cherished and upheld by their members. it therefore becomes imperative for one to ask the question: should the interests and operations of public organizations take precedence over their members’ constitutional right to worship god?

The case study

The University of botswana community is made up of people of different religions. some of the staff members and students are Muslims while some are Christians. The differences between the two religions are well known and have sparked tensions in certain parts of the world. it is also common knowledge that the different Christian denominations have different ways of doing things as evidenced by the fact people who belong to the seventh Day Adventist Church go to church on saturdays. According to them, the sabbath starts at 6pm on Friday and ends at 6pm on saturday. During this period, all members are not supposed to do anything that may be viewed or perceived as “work.” Members of other churches such as the Methodist church, Anglican etc. on the other hand, go to church on sundays.

As a result of these differences, the University of Botswana was at one stage faced with a difficult task of satisfying the religious interests and liberties of members of the seventh Day Adventist church without compromising the welfare and the interests of other religious groups. As a way of ensuring that students are not overburdened with work during the final examination period, a decision was taken that some of the papers should be written on weekends. Members of the seventh Day Adventist church demanded that they be excused from sitting final examinations on Friday evenings and saturdays because that is the time that they use to worship god.

They contended that the university has no right to force them to sit examinations on their day of worship because the country’s constitution gives them the right to worship god as freely as possible. instead of being forced to comply with the university regulations governing the conduct of final exams, they argued that special exams must be set for them so that they can worship without any hindrance from the university authorities.

When the issue was discussed at the departmental level, some departments felt that the exams regulations should be enforced without fail. This means that those who fail to sit for exams because of religious reasons should be awarded a zero mark as it is done with those who fail to sit exams for personal reasons. The argument advanced was that students can make a choice between their academic work and their religious beliefs more especially that the University of botswana is not a secular institution. Most importantly, some people argued that if students do not sit for the final exams because of their religion, Lecturers will be forced to prepare special exams for them thus increasing their workload particularly in a university where final exams have to be moderated and be presented to a departmental board for approval.

Other members of staff argued that by failing to accommodate the interests of the affected students, the university will be contravening the country’s constitution which gives people the right and freedom to worship as they please. They strongly contended that it will be highly embarrassing for an institution of higher learning to trample upon the fundamental human rights and freedoms of the affected students.

Conclusion

As a result of this stalemate, the university management decided that all final exams scheduled for weekends will go ahead as it has always been done. it was explained in clear terms that all students who miss exams for personal or religious reasons will be awarded a zero mark and will have to retake the course(s) that they have failed when they are offered again in the subsequent semesters. This is because students belonging to other Christian denominations wanted to be accommodated and argued that they should also be exempted from sitting for exam


on sundays. The Muslims also contended that no exams should be set for Fridays because that would deny them an opportunity to go to the mosque and pray. hence, the university management decided that religious beliefs should not be allowed to interfere with the operations of the university.


Reflections on Ethical Dilemmas in the Implementation of a New Performance Appraisal System (Pas) in the Public Service, the Kenyan Case Dr. Margaret Kobia, Director, Kenya Institute of Administration (KIA)

Case Overview

The government of Kenya launched a strategy for Performance improvement in the Public service in 2004. The strategy sought to increase productivity and improve service by optimizing the human resources employed in the public service. it outlined the actions that were necessary for a lasting and sustainable change in the way public services are offered. Consequently, the Ministries and all government departments were required to develop a performance management system that includes strategic plans, human resource planning, performance contracting, annual work plans, monitoring and evaluation and a Performance Appraisal system (PAs).

since the introduction of the performance management strategy, the public service has improved in terms of service delivery. however, the whole area of performance appraisal system is surrounded by a wide range of ethical dilemmas that senior public officers continue to wrestle with. Senior public officers experience difficulties in objectively appraising staff due to cultural bias, habits and beliefs that inhibit professionalism in the appraisal system. in most cases, staff evaluation scores are too high yet the objectives or the targets are not met.

The Kenyan case study will examine some of the ethical dilemmas experienced by the public servants in Kenya during the implementation of performance management strategy at the PAs stage.

Introduction

The subject of ethics in Public service has attracted a lot of attention in the recent past. Admittedly, public officers the world over are confronted daily by ethical dilemmas in many areas of service delivery. These ethical dilemmas become more complicated as the public officers find themselves serving in a rapidly changing work environment. According to lewis and gilman (2005) ethics are standard actions that persist over time and that identify what is right and proper. Ethics is that which conforms to professional standards of behavior. One

of the challenges faced when dealing with ethics is the fact that there is no shared understanding of what ethics mean when applied in public service. For instance, do the social values change over time, and should they, therefore, be open to questioning and debate? An ethical dilemma arises in a complex situation which creates a mental conflict between choices. Nevertheless, it is widely acknowledged that a public service committed to professionalism and ethics is more likely to achieve its goals if an ethics infrastructure has been put in place. The public service as a profession should champion values of civility, probity, decency, integrity, transparency, accountability, and fairness among others. The public expects, and even demands, that public officers demonstrate a high level of ethical behavior and professionalism.

The call for higher moral and ethical grounds among public officers has increased in the last decade. To respond to the call, the government of Kenya enacted the Public Officers Ethics Act, 2003 to guide the public officers and members of the public and help them understand and resolve ethical dilemmas in their daily work and interactions.

Kenyan Experience

The government of Kenya launched a strategy for Performance improvement in the Public service in 2004. The strategy sought to increase productivity and improve service by optimizing the human resources employed in the public service. it outlined the actions that were necessary for a lasting and sustainable change in the way public services are offered. Consequently, the Ministries and all government departments were required to develop a performance management system that includes strategic plans, human resource planning, performance contracting, annual work plans, monitoring and evaluation and a Performance Appraisal system (PAs).

The framework below shows the performance management cycle in the public service in Kenya. since the introduction of the performance management


strategy, the public service has improved in terms of service delivery. however, the whole area of performance appraisal system is surrounded by a wide range of ethical dilemmas that senior public officers continue to wrestle with. Senior public officers experience difficulties in objectively appraising staff due to cultural bias, habits and beliefs that inhibit professionalism in the appraisal system. in most cases, staff evaluation scores are too high yet in reality the objectives or the targets are not met.

Dilemmas in PAS Implementation

The Kenyan case study will examine some of the ethical dilemmas experienced by the public servants in Kenya during the implementation of performance management strategy at the PAs stage. The Kenya institute of Administration (KiA) was tasked with responsibility of training on the implementation of PAs to the senior officers in the Ministries. Though the issue of performance appraisal was not entirely new in the public service, the government has faced a myriad of challenges in implementation over the years. The handling of the appraisal process was far from being professional and most of the officers were not committed to it. Some of the ethical dilemmas included the following:

Resistance to change from the old system of appraisal 1. to the new appraisal system. There was outright contempt from supervisors who kept saying that PAs could not work but without pointing out precisely the aspects of the appraisal system that was not working. Much of the contempt was as a result of supervisors fearing their work being measured and revealing their weak performance. how do you make staff embrace the PAs tool when they are suspicious that appraisal

results may affect their prospects for promotion?supervisors failed on their roles of discussion on 2. targets, scoring and provision of timely feedback to the appraisees. some of the supervisors felt incompetent to discuss targets and advice their subordinates accordingly raising the question of how do you reduce power distance for effective negotiations between a supervisor and supervisee? How do we get public officers to accept that acknowledging lack of knowledge in a certain area is not a weakness but it is an opportunity for learning?Misrepresentation of facts. sometimes the 3. supervisors would want to please everyone (Mr. /Ms nice) and hence give good scores to all. This means that the employees would never know their performance gaps even when such existed. how can public officers candidly give objective performance feedback and maintain good working relations with staff? Knowingly setting of soft/low targets thus defeating 4. the whole objectives of performance management. For example, how do we know the exact targets we should set and be held accountable? Are public servants averse to performance measurement?lack of meritocracy. Rewards and sanctions not 5. based on PAs outcome lead to accusations of favoritism, nepotism and even tribalism and hence PAs was frowned upon by most in the public service. When one wanted to score well, all one needed was to please their supervisors, not necessarily through their job-related performance. how do we as public servants embrace the values of meritocracy without apologizing for being firm?some members of staff saw PAs as opportunity to 6.

Human Resource Planning

Vision 2030

Globally competitive with high quality of life

Strategic Plan in the Ministries

Annual work plan

Monitoring, evaluation, and reporting

Performance Contracting

Performance Appraisal System

(PAS)


(vi) implementation and use of data from a reliable and valid PAs enhances trust and accountability of individuals and teams in an organization.

compete with colleagues therefore, killing the spirit of team work. For example, how do you encourage the spirit of teamwork when members of staff view PAs as competition?

Lessons Learned

The journey to performance management is not without challenges. We continue to improve on the whole performance management system to increase the level of service provision as well as develop the careers of the public officers. Some of the lessons learned include the following:

(i) Effective management of change. People will, in most cases, resist change even when it is for the better. Timely and effective communication is vital on the reasons for the change, and the benefits accruing to individuals, teams and the organization as a whole.

(ii) need for top level support. The successes that have been registered over the past few years emanated from the support from the top in the public service (strategy launch by head of state 2004). The top level leadership involvement demonstrates government’s support to the reform initiative and hence support by all. Further, this support ensures there is consistency across the public service.

(iii) There is need for continuous improvement in the process of measuring performance. no measuring tool can be perfect. The PAs was reviewed several times and there is still room for improvement to ensure reliability and validity. sometimes, members of staff complain that most of what they do each day is not captured in their performance measurement.

(iv) There is need to increase the level of trust and accountability in the performance appraisal process. Apart from revealing performance gaps among employees, performance appraisal is used for career development and succession management. Transparency in the application of the results will ensure that the right decisions are made and ultimately ensure that the culture of meritocracy is institutionalized.

(v) Training alone in PAs does not guarantee change of attitude towards performance culture. An integrative approach to capability development that includes a supportive work environment was necessary.


Reflections on Ethical Dilemmas:A South African Perspective

Introduction

The global discourse on good governance is underpinned by a call for governments to be proactive in fighting the spread of corruption. it is in this context that state institutions in the public service are expected to be exemplary in promoting and maintaining a high standard of professional ethics1. Achieving this standard requires a strong ethics infrastructure that is supported by enabling policies and a commitment to implementing them.

in 2004 the south African government developed a range of key policy instruments and frameworks necessary to promote and support a high standard of professional ethics. The government also committed itself to a range of multi-lateral anti-corruption agreements and has acceded to various international instruments on anti-corruption2. Collectively, these developments have helped shape the ethical identity of the public service.

Background

in 1955 the south African anti-apartheid formations led by the African national Congress converged in Kliptown, soweto, where they drafted the Freedom Charter. The Charter articulated the values of our democracy when it proclaimed that “south Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people”; and that our country will never be prosperous or free until all our people enjoy equal rights and opportunities.

This essence of the Freedom Charter has informed south Africa’s Constitution which is transformative and speaks of recognising “the injustices of our past”. The Constitution emphasizes the importance of good governance and administration based on democratic principles, including the rule of law3. These basic values and principles governing public administration include that:

Public Administration must be governed by a high • standard of professional ethics. Efficient, economic and effective use of resources • must be promoted. services must be provided impartially, fairly, • equitably and without bias. Public administration must be accountable, • responsive and open.

Transparency must be fostered by providing the public • with timely, accessible and accurate information.

The government is committed to transformation and ensuring that a democratic ethos is embedded in the values of public servants. These values are enshrined in the public service principles of “batho Pele” which means putting people first by being open, transparent and honest. This is what Plato referred to when he said “do no service for a present”4.

The public interest which is central to public administration has to be an integral part of the democratic process. The standard by which we address the public good is the dual imperative of historical redress and socio-economic improvements in the well being of all our people. Judged against this dual imperative, public servants are under obliged to assess their performance and conduct as well as their discretionary powers against their effectiveness in meeting the moral imperative that is, serving the public with integrity and free of corruption5. but this also requires an examination and re-examination of performance. This kind of introspection allows one to get at the corruption of values and allow for an honest assessment of service to the people.

good governance is a prerequisite to preventing and combating corruption. Public officials operate in an environment that constantly requires them to balance between personal interests and the interest of serving the public. The promotion of good governance and ethics regulation seek to assist and guide those vested with the responsibility of administering and directing the state to act in a manner consistent with public interest and in so doing preserve public confidence. Ethical behaviour, while highly desirable, respected and valued, cannot be assumed. It is therefore important to have specific measures and institutions to safeguard integrity and to promote ethics6.

The south African approach to combat corruption is a multi-pronged strategy that entails detection, prevention, education as well as awareness campaigns. The country has also put in place measures to enhance the capacity of the law enforcement agencies and other institutions to fight corruption7. The country has also adopted a multi-sectoral approach in fighting corruption which has

Professor Solly Mollo, Director General, PALAMA, South Africa


enhanced partnerships between and among government, business and civil society sectors and contributed to anti-corruption reform in south Africa. The role of civil society is integral to a national integrity system, and contributes towards mobilising and raising awareness about the impact of corruption on democracy, ethics and development8. Civil society is in all respects part of designing the anti-corruption measures that are put in place. Equally important is the supportive role played by the private sector. This support is important because in most cases corruption occurs at the interface of the public and the private sectors. Therefore business participation is critical in the fight against corruption and it ensures the highest standards of ethical and responsible business practices.

it follows from the above analyses that south Africa understands corruption to be a societal problem, which affects all sectors of society differently. The principles of democratic administration, transparency, accountability and the rule of law form the basis of a more comprehensive understanding of corruption. We need to reflect on this as we build democracy and promote economic growth and development in order to create a better life for all our people. Corruption compromises democratic political process and generates apathy and disengagement amongst citizens. The onus is on leadership to articulate and sketch a vision based on the values of a society and to design programmes to give meaning and content to this vision. strong leadership across all sectors of society being political, economic, administrative and civil society must be based on integrity and give concrete expression to the codes of good practice available.

Parliament and the Judiciary are paramount to building our national integrity system. in addition, Chapter nine of south Africa’s Constitution makes provision for state institutions that have a critical role to play in establishing an ethics culture. These institutions include the Public Protector, the south African human Rights Commission, the Commission for gender Equality, the Auditor general and the Commission for the Promotion and Protection of the Rights of Cultural, Religious and linguistic Communities. The Public service Commission has also been very instrumental in promoting the constitutionally enshrined democratic principles and values in the public service through investigating, monitoring, evaluation and reporting on public administration. The public service is continuously under close scrutiny by the public and the media. such scrutiny is a necessary measure on how public servants are executing the government mandate. in performing their duties, public

servants are entrusted with public funds and their actions must therefore be above repute.

government’s integrated approach to the combating of corruption is reflected in its conception of a Public Service Anti-corruption strategy. national government has introduced and promoted various pieces of key legislation such as:

The Protected Disclosures Act, 2000 (Act no 26 • of 2000), The Promotion of Access to information Act, 2000 • (Act no 2 of 2000), The Financial intelligence Centre Act, 2001 (Act • no 38 of 2001), The Promotion of Administrative Justice Act, 2000 • (Act no 3 of 2000), and The Prevention and Combating of Corrupt • Activities Act, 2004 (Act no 12 of 2004)9.

The Prevention and Combating of Corrupt Activities Act makes provision for a Register of Tender Defaulters within the Office of the National Treasury, as well as the compulsory reporting of corruption and certain common law offences to the south African Police service by persons who are in a position of authority.

The establishment of strong institutional capacity at national level to complement basic police work, with institutions such as the Public Protector, the national Prosecuting Authority, the special investigating Unit, the Public service Commission, the Financial intelligence Centre and the Auditor-general. These institutions, individually and collectively, are reaching levels of maturity and efficiency, which have provided the country with a strong anti-corruption capacity. Other measures include:

The establishment of dedicated Commercial • Crime Courts that have enjoyed great success insofar as prosecution is concerned. The establishment of an Asset Register for • Accounting Officers and mandatory financial disclosure of assets and interests for all senior Managers. The enactment of the Public Finance • Management Act, (Act no 1 of 1999), including the requirement for departments to do risk assessments and develop fraud prevention plans. government also commissioned a study into all • agencies involved in anti-corruption work with a view to increasing efficiencies and impact. This study was completed in August 2001 and Cabinet approved proposals for a minimum anti-corruption capacity to


be established within all government departments. A national, Public service anti-corruption hotline • (nACh) was launched on 1 september 2004. Possibly the most visible and collaborative anti-corruption effort post 2004 was the creation of the hotline. Prior to 2004, there were different department-specific and provincial hotlines for this purpose, a practice which led to poor coordination and inefficient implementation. The nACh provides a ‘one-stop’ mechanism for members of the public to report acts of corruption and creates an opportunity for different role players to cooperate better in receiving and handling allegations of misconduct. indeed, the nACh has turned out to be a widely used mechanism to report corruption, and each year the PsC has witnessed an increase in the level of its utilisation10 . The south African Auditing and Assurance standards • board undertook to adopt international Auditing standards issued by the international Federation of Accountants verbatim with effect from January 2005. The establishment of the Anti-Corruption learning • network that provides a platform for anti-corruption practitioners in the public sector to share experiences, knowledge and other good practices. it is in forums like these where our skills and knowledge will be sharpened. The Anti-corruption learning network is the forum where vibrant ideas will be exchanged. Our public sector needs all sorts of creative and innovative ideas to implement our anti-corruption measures.

South Africa has also ratified numerous international conventions. This is in line with our determination to promote our national anti-corruption values and interests throughout the world. As a member of the international community, we have domesticated the international agreements of the sADC, the African Union (AU), the United nations (Un) as well as the Organisation for Economic Co-operation and Development (OECD) Convention on the Bribery of Foreign Officials in international business Transaction11. All these instruments recognise the inter-relatedness of sectors in the prevention and eradication of corruption. The ratification of these legal instruments signals our commitment and dedication to fighting corruption.

Civil society and business will play a prominent role in assisting government to implement and monitor application of these instruments. government has ensured that access to information and levels of transparency required for the credibility of the monitoring process are in place.

however, and this is largely attributed to the measures

of transparency that we have put in place that open up any acts of unethical behavior, our people still feel that we are not doing enough to fight corruption12 . On occasion they find themselves in situations where they have to pay for government services they are entitled to. As a consequence, we have put in place additional measures such as Know Your services Rights Campaign launched by our government in 2008. This campaign has been instrumental in educating and creating awareness about the rights of our people to services provided by government. The national Anti-Corruption Forum (nACF) also launched an awareness and communications campaign in 2007 and 2008. The aim of both these campaigns is to create awareness around our anti-corruption legal framework.

The country is well on course to implement recommendations of the African Peer Review Mechanism to improve our good governance structures. south Africa has opened its doors to public scrutiny through various peer review mechanisms. south Africa has received our phase one examination report from the OECD Working group on bribery which found the country to be ethical and competitive.

south Africa has also shown commitment to work with its African counterparts in fighting corruption. It is against this backdrop, that we have signed and are implementing a Memorandum of Understanding with the Democratic Republic of Congo (DRC) which makes provision for co-operation on areas of anti-corruption.

Anti-Corruption Training

Training is one of the key components in the fight against corruption in south Africa. There are training programmes on anti-corruption that are conducted throughout various government departments.

in 2006, the Department for Cooperative governance and Traditional Affairs developed the local government Anti-Corruption strategy. The roll out of the strategy was supported by the implementation of the ethics training programme developed by Public Administration leadership and Management Academy (PAlAMA), which is a training department of government. To date PAlAMA rolled out 39 training sessions to 680 Municipal employees including Municipal Managers.

in collaboration with the Department of Public service and Administration (DPsA), PAlAMA has also developed a programme to create ethical organisational ethos in Departments as well as the implementation of the Public


service national Anti-Corruption strategy approved by Cabinet in January 2002. The strategy prescribes that a Minimum Anti-Corruption Capacity (MACC) be established in all national and provincial departments. A comprehensive pilot training programme was developed to assist departments to build the capacity of employees performing these minimum and related functions. To date PAlAMA has conducted 20 training sessions to a total of 383 anti-corruption officials from across national and provincial departments. Furthermore, two pilot sessions for local government took place wherein 12 municipalities and a total of 27 delegates participated. Overall, the data gathered from all three spheres of government training sessions of the Minimum Anti-Corruption Capacity Training Pilot Programme yielded positive results both on the course material and the overall training programme itself. Ethical dilemmas in the Public Sector13

Endless media accounts of conflicts of interest situations among public officials reveal the following key issues for south Africa’s integrity management system. First, the unregulated grey zones are attractive for unethical conduct. second, where regulations do exist they can sometimes be ineffective.

The first instance relates to where public officials are recruited by the private sector to take up lucrative jobs in companies that have business interests in government. This might result in these officials using their government connections to benefit themselves or their business interests. laws to prevent these abuses from taking place are still under debate. As a result, there are no restrictions on high-ranking officials leaving the Government to accept positions in the private sector.

in the second instance, even where regulations exist, they are often ineffective, partly due to inadequate monitoring and oversight. For an example, in south Africa the Code of Conduct for Assembly and Permanent Council Members and the Public service Regulations, requires Members of Parliament and senior managers in government to declare ownership shares in private companies, directorships, and other forms of private interest that could represent a conflict of interest.

According to a 2006 report by the Auditor general more than 1,600 Members of the Executive Councils in Provinces and senior managers in government were identified as directors or members in companies and close corporations. The Auditor general reported that the majority of them did not disclose all their interests. The

report also stipulated that over 50,000 employees below the senior management level were directors or members of private businesses. The Public service Commission reported 48% compliance in terms of financial disclosure requirements among senior managers in the Public service in 2008 and recommended charging the non-complying members with misconduct.

Finally, where regulations exist there are occasional loopholes such as the dual employment of public servants. however, the Executive is revising existing ethics regulations to close such gaps by, for an example, the adoption of a comprehensive policy framework on the management of conflicts of interest. Clear timelines will also be set for this process and communicated to Parliament to facilitate political oversight.

Concluding/anecdotal remarks

To conclude, it is worth noting that ethical behaviour, where it is promoted and corruption combated, benefits the economic wellbeing of the country. in south Africa, the Special Investigations Unit (SIU) has made a significant impact in addressing weak processes, recovering past losses and preventing future losses through forensic interventions14. More specifically:

More than R8 billion cumulative savings have been • achieved through recoveries and prevention of future losses (social grants) Over 10 000 criminal offenders prosecuted through • siU facilitation Audited more than 1.1 million drivers licenses and • found 8% invalid The Department of Correctional service’s anti-• corruption strategy has netted recoveries of over R47 million from 46 medical practitioners who fraudulently and excessively claimed against the medical aid fund. Medical aid claims were reduced by about R500 • million per year since the institution of investigations commissioned by Correctional services. The claims were earlier hovering above R1 billion and have since gone down to about R500 million15 .

These are just some of a series of success stories arising from the initiative to promote ethical behaviour in south Africa. The country aims to build a public service which upholds the highest moral values, integrity and ethics. To create a civil service that strives to promote and live out the values of professionalism, transparency, efficiency, accountability and responsiveness, we must be hard on corruption. Democracy and good governance are built on the foundation of a competent civil service. A Public


service comprises of people who always strive to deliver speedy, courteous and empowering services to all, regardless of race, colour or creed.

End notes

1 state of Public service Report 2008, Public service Commission 2 south African Yearbook 2008/9 3 The Constitution, section 195 (1) (a) 4 Plato, The laws 349 (A.E. Taylor trans., Aldine Press 1960). 5 DPsA Country Corruption Assessment Report, 2003 6 Public service Anti-Corruption strategy, 2002 7 ibid.8 Eweje, g.: 2001, ‘Corporate social responsibility and Multinational Enterprises in Developing Countries: natural Resource Exploitation in nigeria, south Africa, and Zambia’. 9 state of Public service Report 2008, Public service Commission 10 ibid. 11 DPsA Country Corruption Assessment Report, 2003 12 ibid. 13 (Adapted from article in business Day 24 August 2009 by schulz-herzenberg is a senior researcher in the Conflicts of Interest Project in Cape Town). 14 state of Public service Report 2008, Public service Commission 15 DPsA Presentation to Anti-Corruption learning network 30 July, 2009


Reflections on Ethical DilemmasDr. Goke Adegoroye, Permanent Secretary, Federal Capital Territory, Abuja, Nigeria

Background

The global economic meltdown of the last 2 years occurred with harsh consequences which manifested variously on the corporate, personal, and national levels. On the surface, the failure of regulatory institutions and market determinism were suggested as causative factors of the meltdown, but deep down lies the reality of severe moral failure on the part of those entrusted by society, in the financial and business sectors, to advance its interest and promote the common good. in our current seamless world of globalization, the effects of unethical conduct are no longer confined to national boundaries, as they reverberate across nations and continents, causing a domino effect to produce a global disequilibrium, and the threatening of our collective prosperity.

Let me reflect on my own experience in Nigeria. As a young man, i lived in a nation where everything showed a progressive sign of working well and this positive progression was confirmed by the Human Development indices. Without any controversy, the nigerian Civil service from the 50s up until the early 70s was once regarded as one of the best in the Commonwealth. it was conscious of its role in national development and did so conscientiously. in that golden dispensation, the civil service spoke truth to power; was almost rigid in the observance of its rules, regulations and procedures, while its officers earned their positions by merit, hard work, and performance.

Regrettably, the public service in nigeria in recent years was no longer regarded as a virile national institution for advancing the welfare and well-being of the people. it became the whipping dog of the populace and incompetent political office holders of successive Administrations. Accordingly, the public service was being derided as inefficient, incompetent and corrupt; and having little or no regard for the needs and preferences of the citizens in the delivery of services. While some of these descriptions might have been too generalized and exaggerated, there was sufficient evidence to show that the nigerian public service needed massive moral and ethical regeneration in order to win back the public trust and confidence.

Our first concern is an understanding of the role of the public service in the polity, particularly in the context of

a developing country. My submission is that the Public service exists to foster the developmental objectives of the nation state] by energizing and working with all relevant stakeholders and partners to advance the welfare and well-being of the citizenry. Accordingly, the paramount role of the public service is to facilitate national transformation by placing its knowledge and expertise at the disposal of the society, to be harnessed for the common good. It is in the fulfillment of this larger role that the Public Service can be sufficiently motivated to serve with integrity, which to me, connotes currency and purity of character, in upholding the public trust, through selfless service.

Having defined the purpose of the Service, the next concern is to address how best to foster integrity as an enduring culture in the Public service. There are sectoral obligations that each of us must fulfill in order to preserve our national integrity:

sector ObligationsExecutive should ensure that

all areas of conflicting interests in the society are taken into consideration.

legislature Must work with the Electoral Commissions to ensure free and fair elections; it must assist in promptly enacting into law executive bills

Judiciary should be independent of the legislature and the Executive as well as all other influence groups in the society but must dispense justice, fair and clean

Public service should serve the public interest, and uphold the public trust


Regulatory & Enforcement Agencies

Must recognize and uphold integrity to achieve credibility and sustainability

The Press should rise above partisan, primordial and/or publisher’s interests and focus on national interest

Civil society should serve as conscience of the oppressed

government, as an employer, must recognize the imperative of paying public servants remunerations that enable them to live with human dignity.

The codes of ethics are clear and unambiguous and are interred in various regulations, guidelines and laws. For us in nigeria, we have the Public service Rules, Financial Regulations, Code of Conduct Act, Economic and Financial Crimes Commission (EFCC) Act; the iCPC Act; the bureau of Public Procurement Act etc. Yet as Public servants we face and witness on a daily basis several ethical and moral dilemmas. There is therefore an urgent need to develop a new values code for the public service, for a complete reorientation of the public service.

It is in recognition of the need to find a new way of inculcating a culture of integrity in the public service that the nigerian Public service integrity Project was conceived in 2006, by the bureau of Public service Reforms, in collaboration with TiRi, and with funding support from the Department for international Development (DFiD). The project departs from the traditional approach of moralizing integrity concerns, by recognizing the need for enhancing competencies in resolving integrity dilemmas. Through the use of a tool box comprising the revised Public service Rules and Regulations, relevant national legislation, and other complementary international codes, to assist officers to gain sufficient knowledge about the range of options before them to enable them to make the right decisions, which are consistent with promoting public accountability and selflessness in the public service. The more an officer is trained the more he/she is expected to get deeper in the application of the public service rules and financial regulations, as well as other relevant codes, to resolve the dilemmas confronting him/her in real life situations. integrity concerns cannot, and should not be equated entirely with anti-corruption crusade. integrity is the totality

of the system processes and procedures for eliciting the right motivation in the public service and challenging its officers not only to rise above pedestrian levels in the performance of their duties, but to all times avoid unethical conduct and sacrificing all for the public good. As i said in 2004 in the bPsR Publication, nigeria Public service Reform, Organizational integrity and strategic Corruption Control “Official positions very often constitute pressure points for the integrity of public officers, but this is a challenge that can be managed. When, however, public officers themselves constitute pressure points for the integrity of their officers, as it is increasingly the case in recent past, then the nation is in crisis” .

As a government Engineer in the Ministry of Works, housing and Urban Development, you certify a bridge or building as having been properly or building collapses killing many people, how do you feel? As a government Pharmacist working in the national Food and Drug Agency, and deployed to the ports, you certify the clearance of an expired consignment of vaccines, only to find out later that many children given the vaccines were dying. how do you feel? You are working in the Abuja geographical information system (Agis) or Development Control Department and you insist that unless an allottee of a plot gives you the job of serving as his architect you would frustrate the processing of any drawing submitted to your office; where is your sense of official integrity? if as a Director, Permanent secretary or Minister in the Ministry of Education, you already cornered some overseas scholarships slots for your wards who had lower quality degrees in the less technical disciplines as business Administration, how do you feel when you meet a young graduate 1st of Chemical Engineering with Class honours degree but who has been sidelined because of your influence?

it has become the vogue to lobby to be posted to “juicy” (i.e. big budget) Ministries, Departments and Agencies (iviDAs), without taking into account the dangers that the challenges of those positions carry, only to run back and start begging to be saved when caught in messy acts. As i once said in one public lecture, “when as Public servants we lobby to be deployed to juicy posts, we must not complain if we get “squashed” on those posts because squashing and maceration are age-long accepted processes of getting out the juice”. Adegoroye, 2009. On the whole, it is important to bear in mind the injunction that a good name is much better than gold and silver. indeed, the list of those who had shaped the history of mankind is made, not of those with stinking wealth and properties, but those who served and laid down their lives for humanity. in this connection, the Public service


cannot hide under the convenient excuse that it cannot be an island in a society where moral values are under the onslaught of being compromised. it has no choice but to respond to its calling and sacred duty as the guardian of the public trust.

As i said earlier, the nigeria Public sector integrity at Work CD/DvD was developed to facilitate our Ethics/integrity Training Program. The project aims at developing the practical knowledge and skills of civil servants to enable them to recognize and deal with ethics and integrity issues in the workplace, using the CD/DvD search engine that links users to the appropriate Public service Rules/ Regulation and Codes. The iT based drama sketches methodology being adopted for the project has proven to be effective in conducting training on public sector ethics in Australia and new Zealand.

The Nigerian Project is the first to be introduced in Africa, featuring locally-developed case-scenarios which reflect everyday dilemmas faced by Nigerian Public Officials. Australia adopted the Kangaroo while we adopted the African grey Parrot. The Parrot as you all know tells the truth and so symbolizes integrity.

There are 8 Case study videos: “Physician heal Thyself” -dramatizes systemic corruption in the health sector

it’s About Time” -focuses on leadership and systems breakdown in the Public service and the Challenges of reforms.

“Just Do Your Job” -shows the dimensions of the international crime of toxic waste dumping and lack of due diligence of the bureaucracy.

“Making Ends Meet” -shows the school enrolment and Teacher to student ratio data inflation dimension of the bedrock of corruption in the education sector.

“not business as Usual” -dramatizes a success story amidst the challenges of reforms.

“Kangaroo Court” -focuses on the abuse of disciplinary procedure in the public service.

“Playing by the Rules” -dramatizes the pressures encountered by officers implementing Due Process in public procurement.

“An Offer They Can’t Refuse” -plays out one example of the international connection of grand corruption of the political elite.

Each of these videos runs for 15 -20 minutes and presents 2 choices in terms of the decision available to us as public officers. There are several Ethics/Integrity issues begging for resolution across our Public service today. but, let me end this oral part of my presentation with a moral burden of the Academic in nigeria. Moral/Ethical burden of Academic staff Union of Universities (AsUU) in nigeria. because of incessant strikes by lecturers, students of Federal Universities now spend 6 -7 years to complete a 4 year Program. in the process several of these students veer off track, prematurely raising families and/or losing focus. Their transcripts become suspect as foreign scholarship committees question the quality of such students who earn 4 year degree in 7 years. While the academic records of those students remain stigmatized for life, the lecturers on the other hand lose nothing as they earn their full pay and even plough the free time imposed by the strike in carrying out their private businesses, consultancy and research for accelerated promotion and financial gains.

Commonwealth Association for Public Administration & Management (CAPAM)

www.capam.org

Session 5: Case studies on IAAD Core values

Workshop on Ethics and Values in Governance

Session Overview

2

Case studies

Identifying ethical issues

Managing the ethical issues

Learning Objective

• By the end of the Session participants will solve case studies on the core values of ethics and will be able to identify the ethical issues and how to manage them through the case studies.


3

Activity

• Handout 5- Case Studies on ethical dilemma in IAAD.

• Discuss in group the following questions:

– What is the ethical dilemma in each of the cases given in Handout 5?

– How can those dilemmas be managed so that the core values and principles of the IAAD code of ethics are not violated?

(Time: 30 mins)


4

Thank you


5

Session 7: Context setting for trainers Session at a Glance 7

Workshop on Ethics and Values in governance Page Glance 7

Session Objective Materials Required Session Structure Teaching Methods Used

Time Required

By the end of the Session participants will solve case studies on the core values of ethics and will be able to identify the ethical issues and how to manage them through the case studies.

Projector, slides, flipcharts, markers, etc.

Session Overview Slide/lecturette

3 Mins

Key Teaching Points (KTPs)

Identify ethical issues in the given case scenarios and how to manage them.

Handout 7-Case studies, Presentation, discussion etc.

70 mins

Evaluation

Not required

Summary

2 mins

Total time 75 mins

Notes:....

Session 7: Case studies on ethical dilemmas in IAAD Guide 7

Workshop on Ethics and Values in governance Guide 7

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Facilitator’s Guide Reference 1 Session Overview

Show slide 1, Greet participants and welcome them to the workshop. Tell them that in this session we shall study a few case studies on ethical dilemmas in IAAD and we shall identify the ethical issues in those cases and how to manage them.

Slide 1 Slide 2

2 Learning Objective Tell: By the end of the Session participants will solve case studies on the core values of ethics and will be able to identify the ethical issues and how to manage them through the case studies.

Slide 3

4 Key Teaching Points (KTPs) Tell that we will do all learning in this session through hands on exercise. Show slide 4 on Activity. Distribute Handout 7. Read out instructions and Tell: Handout 7- is a Case Studies on ethical dilemma in IAAD. Tell: After going through the case studies given in Handout 7, discuss in group the following questions:

– What is the ethical dilemma in each of the cases given in Handout 7? – How can those dilemmas be managed so that the core values and principles of the IAAD code

of ethics are not violated? Tell: You have 30 minutes t do the above. Give 15 more minutes for plenary discussion on the group ideas.

Slide 4 Handout 7

6 Summary: Tell we will have more experience sharing on ethical dilemma in IAAD in the practicum session. Give instructions for practicum Sum up session and Thank all.

Handout 5


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Cases of Ethical dilemma

1. Mr X is a supervisory officer in an office. He has worked in this office for several months

when Mr Y, the Cashier, who has become a good friend tells Mr X that his daughter is

extremely ill and that he urgently need Rs 50000 for some medical tests. He also tells Mr X

that he does not have the cash and is trying to arrange for it so that the medical tests can be

carried out without delay. Sometime later Mr X asks Mr Y about his daughter and he tells

her that the tests have been done and there is nothing to worry about now. Mr Y then

confides to Mr X that he took Rs. 50,000/- from the office imprest to pay for the medical

tests. Mr X assures Mr Y that he has already started putting back the money and the entire

Rs 50,000 will be returned fully by next month.

Comment on the situation in terms of issues of ethics and dilemmas faced by both Mr X and

Mr Y.

What is the ethical dilemma that Mr X is confronted with? How should Mr X deal with the

dilemma?

2. You are the in charge of Record section and handles purchases for the office. Over the

years, different firms have offered, and your predecessors have accepted lunch, gift packets

etc from the firms from which office purchases have been made. One day, on coming back

from office after opening the tenders for bulk purchase of office stationery for the financial

year, you find a new TV and DVD player on your doorstep with a note that says: “A personal

gift for our long standing friendship. Enjoy it with your family in good health. Signed : One of

the firms which had submitted their bid.

What do you do?

3. Your audit of a new high profile government program that was a signature piece of

legislation reveals serious mismanagement and potential corruption. It is an election year

and release of your audit could be politically embarrassing to elected officials in your

community.

What do you do?

Handout 5


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4. You belong to a particular state. You work in the audit office of that state. You audit a

Centrally Sponsored Scheme. The second year’s flow of funds depends on the certification

of AG (Audit). It was found out that there are huge unspent funds. The Finance Secretary of

the State is a close relative, and he has been requesting you for getting the certification

done so that there is no difficulty in release of the second year’s funds.

What would you do?

5. You are doing an EAP audit. You are one of the few specialised people in the field. You are

a regular auditor of the unit and have been involved in this audit for the last 10 years. What

are the ethical issues in this case?

session 5: iaad code of ethics:ethical dilemmas

Documents