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  • Theories of Ethical

    Reasoning and Your Business


    Dana Basney


  • Dana Basney, MSBA, CPA, ABV, CIRA (retired), CVA (retired), CFF, CFE

    Dana Basney is a retired Managing Director of CBIZ MHM, LLC and a former Shareholder of Mayer Hoffman McCann P.C. He has practiced public accounting for more than 37 years. He is in charge of CBIZ MHM San Diego’s litigation support, due diligence, and valuation departments.

    Dana holds a Bachelor's Degree in Liberal Arts from Bates College in Lewiston, Maine and received a Master's Degree in Business Administration and Accounting from San Diego State University.

    Dana is a licensed CPA and a Certified Reorganization and Insolvency Accountant, as well as a Certified Valuation Analyst. He is a member of The American Institute of Certified Public Accountants, The California Society of Certified Public Accountants, The Institute of Managerial Accountants, The Association of Insolvency Accountants, The Institute of Business Appraisers, Inc., and the Bankruptcy Forum. He has served on the Family Law Bar's Business Valuation Subcommittee and has previously chaired the San Diego Chapter of the CPA Society’s Ethic2s Committee and the San Diego Litigation Support Interest Group of the CPA Society.

    Dana has extensive litigation experience and has served as an expert witness in financial and valuation matters on numerous occasions as well as a court appointed mediator and special master. Dana is also an instructor at the University of San Diego where he teaches Accounting Ethics, Fraud Examination and Forensic Accounting. He also teaches Fraud and Ethics courses for the California CPA Education Foundation.

    Dana may be reached at: [email protected] or 858.775.9071 2

  • Most People Initially Think of Ethics as Being Boring


  • What is Ethics?

    • Accepted standards of behavior

    • Practices of those in a profession

    • Laws

    • Expectations of society


  • What is Ethics?

    • Ethics, derived from the Greek word ethikos (character), deals with the concepts of right and wrong; standards of how people ought to act.

    • Morals, derived from the Latin word moralis, deals with manners, morals, character.

    • Ethics and morals are essentially the same.

    • Values are basic and fundamental beliefs that guide or motivate attitudes or actions


  • How Are Business Ethics Defined? A widely accepted definition of business ethics does not exist.


  • The best definition of ethics is also the most laconic one

    “Knowing what ought to be done and having the will to do it.”

    Source: Hall, S.S.J. (ED.) Ethics in Hospitality Management: A book of readings. East Lansing, MI: Educational Institute of the American Hotel and Motel Association; pp 12 -13.


  • 8

    Theories of Ethical Reasoning

    Deontology ( Duty Based Ethics) Teleology (Consequential Ethics) Justice Virtue Ethics

    Ethical Judgements Egoism Enlightened Egoism Utilitarianism

    Considers Rights of Stakeholders and Related Duties to Them.

    Defines "right" behavior by Consequences for the decision Maker

    Considers the well- being of others within the scope of deciding on a course of action based on self interest

    Evaluates consequences of actions (harms and Benefits) to Stakeholders

    Emhasizes rights ,fairness and Equality

    Only method where ethical reasoning methods - "Vitues" (Internal Traits of Character) - apply both to the decision maker and the decision

    Values Inputs not Results ACT: Evaluate Whether the intended action provides the greatest

    Those with equal claims to justice should be treated equally; those with unequal claims should be treated unequally

    Judgements are made not by applying rules, but by possessing those traits that enable the decision maker to act for the good of others.

    Treats People as an end and not merely as a means to an end

    Rule: Select the action that conforms to the correct moral rule that produces the greatest net benefits

    Similar to Principles of the AICPA CODE and IMA Standards

    Universality Perspective : Would I want others to act in a similar manner for similar reasons in this situation

    Associated with Immanual Kant (1724 - 1804) Thomas Hobbes(1588-1679) and John Locke (1632-1704)from the age of enlightenment

    Associated with Jeremy Bentham 1748- 1832) and John Stuart Mills (1806 - 1873)

    Associated with John Rawls (1921 - 2002)

    Traces origins back to the ancient Greeks, Plato and Aristotle

    Problems with Implementation

    Relies on moral absolutes - no exceptions; need to resolve conflicting rights

    Fails to consider interest of others affected by the decision

    Interest of others are subservient to self interest

    Can be difficult to assign values to harms and benefits

    Can be difficult to determine the criteria to distinguish equal from unequal claims

    Virtues may conflict, requiring choices to be made.

  • Religious and Philosophical Foundations of Ethics

    • A version of the Golden Rule appears in each of the world’s religions

    • Ethics can be traced back to ancient Greek philosophy  “What is the best sort of life for human beings to live?”

     Greeks believed the ultimate goal of happiness was to attain some objectively good status: the life of excellence


  • Deontology

    Deontology –

    A theory of reciprocal Rights and duties


  • Kant's theory is an example of a deontological or duty-based ethics : it judges morality by examining the nature of actions and the will of agents rather than goals achieved. (Roughly, a deontological theory looks at inputs rather than outcomes.) One reason for the shift away from consequences to duties is that, in spite of our best efforts, we cannot control the future. We are praised or blamed for actions within our control, and that includes our willing, not our achieving. This is not to say that Kant did not care about the outcomes of our actions–we all wish for good things. Rather Kant insisted that as far as the moral evaluation of our actions was concerned, consequences did not matter.

    As suggested by the first version of the categorical imperative above, if the maxim or rule governing our action is not capable of being universalized, then it is unacceptable. Note that universalizability is not the same as universality. Kant's point is not that we would all agree on some rule if it is moral. Instead, we must be able to will that it be made universal; the idea is very much like the golden rule –Do unto others as you would have them do unto you. If you cannot will that everyone follow the same rule, your rule is not a moral one.

    The second version of the categorical imperative given above emphasizes respect for persons . Persons, unlike things, ought never to be merely used.

    Deontological ethics is strongest in many of the areas where utilitarianism is weakest. In an ethics of duty, the ends can never justify the means. Individual human rights are acknowledged and inviolable. We need not consider the satisfaction of harmful desires in our moral deliberations. In practice, however, Kant's ethics poses two great problems : 1. Unlike the proportionality that comes out of the utility principle, the categorical imperative yields only absolutes . Actions either pass or fail with no allowance for a "gray area." Moreover, the rigid lines are often drawn in unlikely places. For example, lying is always wrong–even the "polite lie." 2. Moral dilemmas are created when duties come in conflict, and there is no mechanism for solving them. Utilitarianism permits a ready comparison of all actions, and if a set of alternatives have the same expected utility, they are equally good. Conflicting duties, however, may require that I perform logically or physically incompatible actions, and my failure to do any one is itself a moral wrong. (Extracted from the writings of Prof. Charles D. Kay of Wofford College)

    Immanuel Kant (1724-1804) and Deontological or Duty Based Ethics


  • Thomas Hobbes – An Early Advocate of Deontological Ethics

    • Thomas Hobbes 1588-1679

    • Philosopher

    • Writer

    • Thomas Hobbes was an English philosopher who wrote the 1651 book, Leviathan, a political treatise that

    described the natural life of mankind as "solitary, poor, nasty, brutish and short." Hobbes was educated at

    Oxford and worked as a tutor to the son of William Cavendish, later the Earl of Devonshire. His

    connections to the royal family gave him opportunities to travel and pursue his studies, but they also put

    him in the middle of the English Civil War. In 1640 political turmoil forced him to leave England for France,

    where he continued to associate with scholars and scientists of Europe, including Galileo and Rene

    Descartes. In his philosophical works, Hobbes wrote that matter and motion are the only valid subjects for

    philosophy. In Leviathan, he argued that man's natural state is anti-social, and that moral rules are

    created to avoid chaos. Hobbes's notion that social authority can come from the people -- and not

    necessarily a monarch -- rankled his royal associates, but helped him reconcile with Oliver Cromwell and

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