ETHICAL DILEMMAS

What would you do?

2: ANSWER SHEET
If you have concerns at work you most probably have a dilemma! The longer you leave
resolving it, the more chance there is for there to be repercussions for the organisation,
yourself and the standing of the profession.

Practice resolving the dilemmas in the five case studies with help from your professional
code and the checklist below. Decide which principles of the code are affected and what
steps you should take to resolve the dilemma. Then look at the answer sheet to see if
your answers reflect CIMAs guidance.

CIMA does not supply legal, investment, professional, or career advice. If you consult the Professional
Standards & Conduct Department, whether by email or telephone or in writing, the information and comments if
any made by our staff are given in good faith and for the purpose of general guidance only.
2 ETHICAL DILEMMAS: ANSWER SHEET

CASE STUDY ONE: TAKEOVER INFORMATION

You are financial director of a large multinational organisation and have been privy to
information about a takeover bid to acquire a rival firm. A family friend is considering selling
shares in this rival organisation and has asked you, as an expert in the industry, for advice on
this matter.

This situation has a clear impact on your integrity fair dealing

INTEGRITY and truthfulness. Your obligations in this instance are to
confidentiality.

Your objectivity would be at risk if you allow a personal

OBJECTIVITY relationship to influence the ethical and legal responsibilities you
have to your employer.

PROFESSIONAL You have a duty to maintain professional knowledge, to act

COMPETENCE diligently in accordance with professional standards and to
AND DUE CARE uphold legal and regulatory requirements.

You have an obligation to refrain from disclosure of information

CONFIDENTIALITY outside the firm or employing organisation.

PROFESSIONAL You cannot compromise your professional judgment as a result

BEHAVIOUR of a personal relationship.

Personal relationships can sometimes compromise your objectivity it is important that you
know what your obligations are and that you act with integrity.

In this case, you have obligations of confidentiality both in relation to your organisation and
in financial regulation. In advising your family friend, you would not only risk losing your job,
but are also compromising your professional judgement, integrity and future career. You
should decline to discuss the issue

See sections in the CIMA Code of Ethics: 120, 140, 150, 340
 www.cimaglobal.com/ethicsresources 3

CASE STUDY TWO: WITHOLDING INFORMATION

You are a CIMA member who is a non-executive director of a large services company. The
board of directors meets on a monthly basis to discuss the quarterly forecast and other
business issues.

It is the responsibility of the finance director to distribute papers at least two weeks prior to the
date of the meeting. These papers should first be signed off by the CEO. Recently documents
have only been received a day before the meeting.

You have raised this with the finance director who has stated the delay is due to the sign-off
by the CEO. You do not feel that you are given sufficient time to review the papers and also
believe the information that is available is not complete and therefore difficult to fully appraise.
The CEO is a dominant character and many members of the board are nervous about
broaching the matter.

You need to uphold your integrity by addressing the matter there

INTEGRITY is a need to be straightforward and honest.

Your objectivity is being compromised not only on the basis of

OBJECTIVITY lack of full and timely information, but also the perceived threats of
the CEOs behaviour.

PROFESSIONAL
You need to have full and correct information in a timely manner
COMPETENCE in order to carry out your role.
AND DUE CARE

You would be expected to resolve the issues internally where

CONFIDENTIALITY possible without disclosing confidential information.

Your professional behaviour is being compromised without

PROFESSIONAL
addressing the issue and you would not be discharging your
BEHAVIOUR duties (and nor would your colleagues).

Without sufficient information in good time for the meeting, you will not be able to act with
sufficient expertise. In this situation, acting with integrity means that you have to address the
matter in a straightforward manner.

As suggested by the principles affected above, this is an internal matter that you should at
first hand try resolve within the organisation. Revisit the issue with the finance director and
CEO in writing and be sure if the issue continues to have it on the agenda of the next board
meeting. This issue has to be resolved satisfactorily in order for you and your colleagues -
to be able to carry out your role in a professional manner.

See sections in the CIMA Code of Ethics: 110, 120, 330

4 ETHICAL DILEMMAS: ANSWER SHEET

CASE STUDY THREE: POSSIBLE INSOLVENCY

As financial controller at a manufacturing company you have been advised by a colleague

that the sales director is unlawfully declaring fuel benefits as the tax value is high. This has
been creating higher profit margins and if declared those margins will go down. There is
potential that this could push the company into insolvency, which would result in job losses for
300 employees.

You have made the other directors aware of the situation but they have expressed a wish not
to disclose the misleading tax bill. You are aware that by declaring this information to the tax
authorities, as required by law, that the organisation may have to declare insolvency and the
300 employees could lose their jobs.

By not declaring the unlawful tax benefits your integrity is clearly

INTEGRITY compromised.

Firstly, you need to ascertain the facts. Your objectivity is

threatened by the perceived threat of job losses. The short-term
OBJECTIVITY and unlawful actions to increase margins will not help the
business model in the long-term.

PROFESSIONAL By not declaring you are undermining both your professional

COMPETENCE competence as well as not acting with due care and diligence as a
AND DUE CARE professional accountant.

In this case there may a legal and professional right and duty to
CONFIDENTIALITY disclose. The issue will not go away and you will be seen as
complicit when the issue unfolds.

There is a need to comply with the relevant law and regulations on

PROFESSIONAL
this matter. By failing to declare your actions both discredits the
BEHAVIOUR profession and put you in disrepute.

Firstly you must be clear that there is an issue and find out the facts. Should you find that fuel
benefits are being unlawfully declared you should take action. In this situation, you have to
think about the long-term effects of your actions. By not declaring the misleading tax bill the
organisation might keep afloat for the moment but it will not make the issue go away, and it
will not necessarily save the jobs at risk in the long run. Doing this would severely damage
your integrity and professional competence, and risk your reputation and future career.

You are legally required to disclose all information. This is clearly a tough decision to make,
as jobs are at risk, but by refraining from reporting you will only worsen the situation and by
self declaring there may be ways to negotiate a resolution with the authorities. The issue
needs to be raised urgently with the line management and, if necessary escalate with options
available to them.

See sections in the CIMA Code of Ethics: 110, 120, 310, 320
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CASE STUDY FOUR: FAMILY ISSUES

You are a CIMA student employed as a company secretary for a small family owned limited
company. The board is made up of family members, with only one family member holding an
executive position as managing director.

There are some disagreements within the family regarding the will of the recently deceased
chair of the board, the mother of the family. The board have twice voted to pay pension
contributions to one of the members of the family on the board as non-executive director, a
brother of the managing director, and this has been approved by majority in meeting.
However, you have since been advised by the managing director not to make the payment.

You need to remain straightforward and honest both with the

INTEGRITY managing director and the board.

You cannot allow the undue influence of family issues to override

OBJECTIVITY your professional judgment.

PROFESSIONAL
There is a need to act diligently in accordance with professional
COMPETENCE standards, the decision has been approved by the board.
AND DUE CARE

You will not compromise confidentiality by further raising the issue

CONFIDENTIALITY with the board.

Failure to carry out the boards actions may mean failure to

PROFESSIONAL
comply with relevant company regulation, against your
BEHAVIOUR professional duty.

As the issue have already been approved by the board, this situation risks putting you in a
position where you fail to comply with company regulation and your professional standards.
To resolve this issue you need to be honest and straightforward towards all parties involved.
Make sure to act professionally, and not to let family issues influence your judgment.

See sections in the CIMA Code of Ethics: 110, 120, 300.11-300.14

6 ETHICAL DILEMMAS: ANSWER SHEET

CASE STUDY FIVE: EMPLOYEE ISSUES

You are a CIMA member who has recently joined a limited company that processes food. The
company is effectively run by one director. The other directors are non-executive and all have
close personal relationships.

As a key member of the finance team you have discovered that some employees are being
paid cash in hand and not via the formal payroll. You also have suspicions that some of these
people are being employed illegally and you have no records of their formal employment
documents or contracts.

The situation demands that you are honest and straightforward

INTEGRITY with your concerns with the management.

Your objectivity could be compromised if you are unable to obtain

OBJECTIVITY the full facts.

PROFESSIONAL
You will be required to act competently and diligently in relation to
COMPETENCE relevant legislation and professional standards.
AND DUE CARE

If you are unable to resolve the issue internally you may need to
CONFIDENTIALITY consult externally, particularly if legal requirements are being
breached.

You will need to bring the attention of the management to the risks
PROFESSIONAL
and also to the need to act within the law and fairly with
BEHAVIOUR employees.

It is crucial that you act with integrity in this dilemma. Before you do anything else, make sure
that you get all the facts. Once you know what is going on if employees are working illegally
you should raise your concerns with management. Inform them that this is a legal matter
that cannot be ignored, and what the risks are if they do not take action, as well as advising
on what steps can be taken to resolve the issue.

In the event they should not respond to your concern you may be obliged to consult someone
externally. You have a responsibility to act professionally and competently and to not
compromise your own integrity.

See sections in the CIMA Code of Ethics: 120, 150, 310, 320