ACCG8313 ETHICS AND GOVERNANCE

INTRODUCTION TO CLASSES
MODULE 1 : ACCOUNTING AND SOCIETY
Introduction to classes in ACCG 8313
E&G
Introduction to classes in ACCG8313 E&G

Preparing you thoroughly for success in both the Macquarie University

assessment and the CPA Australia exams by:

 Emphasising the importance of YOU reading carefully and

understanding every page of the CPA Study Guide and ALSO being
fully aware of the CPA Australia content that occurs throughout the
semester in the ‘CPA Australia My Online Learning’ website.

 Explaining throughout the semester the dangers of open book

exams and relevant examination concepts including approaches to
multiple choice exams and short answer questions
UNIT OVERVIEW
Assessment
Click task
icon to add picture Weight Due
Class Test 1 20% Week 4. # Wednesday 19 August
Modules 1-2 (NOT open book test
– details to be advised)

Class Test 2 35% Week 10. # Week commencing 28

September. Modules 1-5. ( Open
book exam – details to be advised)
Ongoing – active participation in
Participation 15% classes and discussion forums,
including completion of all CPA
online quizzes.
CPA Examination Period. Wed
Final Exam ( CPA) 30% 14th October – 2nd November
2020
Total 100%
See Unit Guide and iLearn for details. ( # Dates and times to be confirmed via
iLearn)
UNIT OVERVIEW
Final exam (CPA) Total
Examination held by CPA Marks

63 MCQ questions ( 1 63 Information obtained from CPA

mark each) plus Online Materials “Exam
Information and Mark
extended response 12 Allocations**”
question(s)

Total 75
** subject to change
“a snapshot of all resources available that complement your study guide. You may use these
resources at any time to enhance your whole of subject knowledge” 

CPA ONLINE RESOURCES

7
RESOURCES

As stated in the Unit Guide … including

• November 2019 3RD Edition CPA Australia Study Guide for CPA Ethics and
Governance
• iLearn and iLearn PowerPoint screens for each Module ( including iLearn
discussion forums in each MQ module)
• CPA My Online Learning…
• Available ONLY to enrolled CPA Australia Program candidates (NOT always
to your lecturer) INCLUDING:
• Primary Resources
• Ebook Study Guide
• Guided Learning ( including short Videos, tasks, readings, module quizzes and
practice exams)
• Learning Tasks
• Business Simulations and Case Studies
• Discussion forum which allows candidates to ask questions that are
answered by a person engaged by CPA Australia – this is potentially VERY
important for your study and exam purposes.

8
Open Book Exams … understanding the threat!

Open book exam? An invitation to run out of time?

 You must read and prepare CAREFULLY ( similar to a CLOSED
BOOK exam????)
 But it is NOT closed book – you will have your books with
you… SO – what to do?
 Read every page of every Module carefully before the exams!
 Prepare good study notes that relate to the modules with page
numbers for each topic!
 Prepare a summary of the module … think about the way to
make ‘Open Book’ work!
 CONSIDER placing the summary onto an Excel spreadsheet with a
column showing page numbers ( 2 examples provided on iLearn)
 THEN sort the spreadsheet alphabetically and/or by Module – so
that a topic can be found easily along with the page on which it is
located – PRINT THIS FOR THE EXAM!

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Open Book Exams … understanding the threat!

All this preparation will build your knowledge so that you will not need to
open books to answer a question AND FURTHER

If you DO OPEN YOUR BOOKS – your printed index will take you
IMMEDIATELY to the page you need

RESULT? You waste almost no time looking for open book

content – so you are much more likely to pass.

PLANNING for exams is vital - This is a crucial first step! YOU

CANNOT LEARN IN THE EXAM!!
MODULE 1 : ACCOUNTING AND SOCIETY

OBJECTIVES

Describe the nature and attributes of a

profession

Explain the co-regulatory processes of the

accounting profession

Differentiate the roles, relationships and

activities of accountants

Evaluate the challenges faced by the

profession in the global context

Explain the importance of soft and

technical skills required of accountants
Accounting and Society
 What is an accounting profession? Privileges, benefits of membership?
 What are the roles and expectations of a professional accountant?
 Actions of professional accountants can affect organisations, people and their lives and
society as a whole. Implied social contract
 Maintain trust and confidence of society as a whole.
 Ethical actions at all times (including moral agency principles …)
 The ‘service ideal’ …. a fundamental duty to society at large no matter what the nature of
employment or engagement.
 Challenge : obligation to put the good of society ahead of personal interest.

Public
Self
Interest
Interest
PART A Accountants as Members of a Profession

1.1 Public Interest or Self-interest

 Accounting information vital for decisions in efficient markets

 Accounting therefore serves public interest
 Accounting profession must provide accurate information…financial and non-
financial information which is objective, free from bias and based on expertise
 Linked to ALTRUISM – acting for good of others and no benefit for self
( even own expense)

 Application of the ‘service ideal’ rather than simple self-interest

 Including the duty to add value for society and within society
 Decisions involving judgment in complex environments
 Obligations to inform and educate society and stakeholders appropriately
 Some ‘monopolistic’ professionals do not act for altruism but for wealth and
influence – see Larson (1977) and West (2003). The idea of self interest or
enlightened self interest ( seen later in this module)

13
PART A Accountants as Members of a Profession
Responsible decision-making

 See Figure 1.1 – Model of responsible decision making – core components:

 Governance
 Accountability
 Ethics

 What exactly do we mean by ‘governance’?

https://www.youtube.com/watch?v=QNYMsCpX7Rw

 Question 1.1 – complete in groups

 Example 1.1 ( pg 6) – costly error – accountant sued for $5.5m for concealing
error

 Enlightened self-interest? Discuss in class – must understand this and the

relationship with public interest … this issue arises again in later Modules

 Possible to achieve public interest and a degree of self interest.

1.3 Entrepreneurialism and Professionalism p6

 Ideals of accounting - “Entrepreneurialism” and “deProfessionalisation”

 Some people – eg Johnson & Abbott – state that they think professions
never have had a service ideal.
 Too much emphasis on ‘Entrepreneurialism’ (profits before ethics and
profits before service ideal) has a major negative impact on the credibility
of professional endeavour!
 Accountants can be in a position that emphasises the complex interplay of
“Ethics versus Profits” … ie conflicts of interest.

 https://www.youtube.com/watch?v=G8RqguCAoG4 ( Arthur Andersen)

 Examples of conflicting interests – ASIC takes action

 Example 1.2 – excessive fees charged by liquidator to be paid back
 Example 1.3 – financial service suspension – not prioritising client
interests when giving advice and creating extra revenue
1.4 What is a profession?
 An occupational area or vocation that ‘involves prolonged training and a
formal qualification’

 Can you name some professions other that the accounting profession?

 8 key attributes which confirm existence of a profession:

 Systematic body of theory and knowledge
 An extensive education process for its members
 Ideal of service to the community
 High degree of autonomy and independence
 Code of ethics for its members
 Distinctive ethos and culture
 Application of professional judgment
 Existence of a governing body that represents the members of the
profession

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1.4 What is a profession?
 Benefits when professions use expert knowledge and skills in the public interest or
for social good – refer Figure 1.2
 Self regulation
 Autonomy
 Market Control
 Economic rewards

 From Self Regulation to Co-Regulatory Process

 Self regulation allows members of a profession to be judged by their more
experienced peers rather than by regulators
 Internal penalties, sanctions, disciplinary process. Extra-legal regulation ( eg
ethical breaches not breaches of law)
 Good question on page 10 – Why do you think it may be appropriate for a
profession to publish the name of an accountant who has breached the rules
of a professional organization such as CPA Australia?
 Lack of self regulation – less value and trust in profession – authority to self
regulate removed from profession – regulations from external sources created
 Examples of co-regulation ( FRC oversight of accounting and audit standard
setters; Corporations Act giving force of law to audit and accounting
standards)
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1.6 Professions - the ‘market control’ view

Does everybody think that professions are good or valuable?

 Do professions seek and achieve monopoly power in their field of
activity?
 Do accountants as professionals possess the necessary
competencies in relation to the authority positions they hold?
 We need to understand and learn from this type of literature as
many accountants have in fact demonstrated excessive self-
interest at the expense of many stakeholders and society
generally – assisting the (arguably biased) arguments of the
power literature.
 Example 1.4 Independence of Andersen as auditor of HIH
( Australia’s largest insurance company) questioned. Negative impact
on reputation of accounting profession worldwide.
1.7 Trust and Professions

 Societies arguably need identified and trusted professions which

 Are reliable
 Have members with the requisite expert capabilities
 Accept and perform complex work and make complex professional judgment based decisions
in relation to that work
 And more!
 In order to foster these professions
 Society accepts that professions will have some degree of self-control
 Professions are permitted to have special organisational structures

 If society loses trust the social and professional consequences are great

 CREDIBILITY CRISIS re accounting standards and the reliability of professional work of

accountants
 Early 2000s collapses of Enron, WorldCom, HIH Insurance
 Demise of global accounting firm Arthur Andersen
 International bank failures during the GFC
 Hayne Royal Commission ( selling of financial
 products for commission without benefit to clients)
 Refer Reading 1.1
1.8 Attributes of the accounting profession
 …. Each of the previously mentioned 8 key attributes is important in relation to
professions…

 A systematic body of theory and knowledge

 Professions have superior capabilities and are supported by a well-founded body of

knowledge.
 Thus, theory construction, by means of systematic research, is an essential feature
of a profession
 Education process for accountants is one of lifelong learning
 International Education Standards issued by IFAC ( The International Federation of
Accountants) https://www.ifac.org/
 Cover technical knowledge, soft skills and professional competence
 Must be followed by all member bodies ( including CPA Australia)
 Core competencies required for recognition as member of the profession and of
a professional body
 Ensures an equivalent level of competence and knowledge for all members of
the accounting profession
 Question 1.3 – IAESB is the relevant standard setting body within IFAC which
specifies the body of knowledge required by professional accountants

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1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…

 An extensive education process

 Entrants to that profession will have acquired understanding of both the theory and
practice of the profession.
 Knowledge and skills possessed include matters not normally obtained or
understood by the general public.
 Knowledge and skills are further developed through mentoring, professional
development and continuing education programs.
 Throughout entire careers, all professionals must maintain their knowledge and
skills.
 All CPA Australia members must undertake ongoing professional development
 Professionals must be clearly aware that it is a gross misrepresentation to accept work
if the requisite knowledge and skills are lacking
 The risk of litigation is a particular concern for professionals in public practice,
normally professional indemnity insurance premiums are related to this risk and the
underlying capabilities of the professional.
1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…

 An ideal of service (to the community)

 The monopolistic powers of professions can be abused...
 It is therefore important for professions to have an ambition to provide more than
basic service – it must consider the well-being of society – the pursuit of
excellence AND community service (in various ways…)
 The service ideal encompasses concepts such as excellent service,
reasonable pricing (rather than monopoly pricing) and pro bono work (i.e. for
the public good—at no fee). Refer Question 1.4
 It is not good enough to provide just good service to a client or employer but
professional activities should be for social good consistent with the service ideal -
recognising the role of the professional as moral agent.
 Buckley (1978): society grants professions monopoly power … as long as the
power is used in the public interest.
 Wilensky (1964: ‘any profession that abandons the service ideal will very quickly
lose the moral claim to professional status’.
1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…

 A high degree of autonomy and independence

 Traditionally professions have had very high levels of independence.
 In recent decades it has been common for governments to impose higher
levels of external (e.g. through government regulatory agencies etc) control
 Thus independence has diminished – eg self-regulation under the AASB
and AuASB has been replaced by a system where these bodies now report
to and though the governmental Financial Reporting Council
 EVEN SO – the professions still have extensive self-control and/or CO-
REGULATORY inputs
 eg the development of accounting standards includes many prominent
accounting practitioners and academics
 Practitioners in practice have extensive freedom to make ‘professional
judgment’ based decisions.
 Co-regulation and professional discipline … and see Example 1.5
Co-regulatory approach to accounting standards
1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…
 A code of ethics for members
 APES110 Code of Ethics for Professional Accountants ( APESB 2018) - we see
this illustrated fully in Module 2
 The APES Code, APES statements and the CPA Australia Constitution provide
guidance and disciplinary framework for CPA Australia members
 Behaviour that contravenes the APES Code is both unprofessional and
unacceptable
 A distinctive ethos or culture
 The jargon … the history … the certification and titles (CPA, FCPA) … the
assemblies and the rituals
 These things are part of the profession and while they may seem unimportant,
without their existence the profession has lower visibility and is not the same
important entity…
 Ethos for CPA Australia members has the word ‘INTEGRITY’ as its foundation (
see CPA logo)
 ‘Consider This’ Page 16 – class activity
1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…

 Application of professional judgment is often hard …:

 Becker argues that professional judgment is the single
most important attribute of a professional
 The problems and tasks (decisions) confronted by professionals
frequently are not capable of being addressed with simple mechanical
solutions;
 Decisions often are required rapidly and by professionals acting alone;
 Alternative courses of action can have a variety of positive and
negative attributes
 BUT without judgment accountants merely apply rules for
compliance(West 2003)
 Question 1.5 – examples of accountants using professional judgment
 Question 1.6 – Impact of Artificial Intelligence ( AI) on accounting
profession. How will it affect professional judgement. CPA podcast –
future of accounting.
1.8 Attributes of the accounting profession
 Each attribute is important in relation to professions…

 The existence of a governing body

 A strong democratically created structure
 Which provides the basis of professional independence, credibility and
community trust including through the following:
 Is the force behind strong ethical standards as a written code applying
to members.
 Encourages the setting and monitoring of high standards of professional
conduct
 Creates and enforces rules, including member sanctions and
disciplinary proceedings
 Presents a cohesive single voice for the profession and its members
 Assists relevant regulatory development
 Provides mechanisms for the recognition of members and their activities
1.9 The profession’s regulatory process

 APESB (members including CAANZ and IPA as well as CPA Australia)

 Background CLERP 9 … audit and accounting standards as ‘law’
 Independent ethical standards board to review and set the code of ethics and
professional standards for members – more transparent process
 Formal membership – including CPA Australia – with extensive power
 Independent board with a secretariat –
 The Quality assurance process … consider Q1.8 in light of the rules
 Standard setting. FRC oversight responsibility over AASB and AUASB
 Conformity with standards – eg APES205 Conformity With Accounting Standards;
APES210 Conformity With Auditing and Assurance Standards are mandatory
statements of responsibilities for members
 To hold a Certificate of Public Practice ( CPP)
 Practice reviews on a 5 year cyclical basis
 Annual signed assurance of quality control requirements
 Firm regulation – APES 320 Quality Control for Firms – some of MANY details
listed
 Leadership and Ethical requirements are two key matters mentioned.
The profession’s regulatory process

 Professional discipline
 Generally …
 CPAs submit to the full discipline authority of CPA Australia
 CPA Australia undertakes to act in the public interest!
 Regulation of member conduct
 Specific procedure and rules - obviously examinable – as per p20
 Complaint – one of many possible – to CPA Australia
 Attempt to resolve
 Review by GM Professional Conduct
 File allocated to Professional Conduct Officer (PCO)
 PCO investigates
 PCO Reports to GM PC
 CEO determines if case to answer.
 CEO refers to Tribunal
 Case Heard and decision made then
 PENALTY APPLIED…examples on p21 eg fine, forfeiture of membership
Refer Q1.10 – is a member’s name always published on the CPA Australia
Disciplinary Hearings Outcomes Report ?
PART B Interaction with society

Professional accountants – generally

 May fulfill different roles in different work environments

 Different roles influence the way accountants create value for themselves, organisations
and society

 Core value created – support of high quality decisions through provision of relevant and
useful information to decision makers

 Can accept/undertake work only where appropriately qualified

 For example, an accountant who accepts a complex audit activity without the
necessary detailed knowledge AND appropriate experience WITH the support of
necessary specialists within the team would NOT have appropriate ‘qualifications’ to
accept that task.

 Must respond appropriately where ethical challenges are encountered.

 Must combine technical skills with ‘soft skills’ such as communication, negotiation,
persuasion and leadership skills
1.10 Accounting roles, activities & relationships

Key Relationships
 Employers
 Clients
 Regulators
 Employees ( if business owner or manager)
 Peers

Accounting Work Environments… see Table 1.2

CPAs are expected to engage in a Business leadership role based on

professional capabilities applicable to many geographic locations and
work environments….
Accounting work environments
S EE TA BL E 1 . 4 s h o w i n g a c ti v i ti e s w h i c h i n c l u d e :
A s s u ra n c e (a u d i t)
F i n a n c i a l ma n a g e me n t
T a x a ti o n s e rv i c e s
F o re n s i c a c c o u n ti n g
A d v i s i n g a n d s tr a te g y f o r c l i e n ts – i n c l u d i n g i n s o l v e n c y i n re l a ti o n to fa i l e d b u s i n e s s e s
P o s s i b l e i n te rn a l a u d i t s u p p o rt
B us i ne s s adv is i ng
G e n e ra l l y … ‘ Pu b l i c p ra c ti c e ’ i n v o l v e s a v a r i e t y o f ma tte r s d e p e n d e n t o n c l i e n ts ’ n e e d s
L a rg e fi rm s – ma y te n d to wa r d s l a rg e r c l i e n ts … s m a l l e r fi rms mo re wo rk w i th SME s

“Public Practice” – professional accountants offering May be large firms “Big 4” or “2nd Tier” which may have
accounting services to businesses and public, as employees stronger protocols and training etc …. or small practice
or principals within accounting firms – large and small –
Accounting work environments – Public Practice

Accountants as External Advisers to SMEs ( Small and Medium Sized

Enterprises)#

 Very small SMEs

 have no accountants employed internally
 total reliance on external public accounting practices for all accounting functions
 research shows ‘fortress enterprise’ or ‘go it alone’ mentality by some owner
managers in the past .
 Refer Question 1.11. External public accountants need to show themselves
as team players who can offer business services to create value for very
small SMEs
 Business services such as acquisition, succession, financial
management, business strategy, tax planning, quality control, advice re
occupational health and safety(OH&S) and many more…

# p28 IFAC definition of SME. Varies from country to country( By reference to

quantitative ( assets/turnover/employees) and qualitative characteristics ( concentration
of ownership on a small number of individuals)
Accounting work environments – Private or Business Sector

Professional Accountants in Business (PAIB) – employed in private sector businesses

 PAIB employed in Large Business eg Qantas, Telstra

 Specialised roles ( Table 1.5) eg Board member, finance director, financial accountant,
strategic management accountant, company secretary

 PAIB employed in SME’s eg local hardware chain

 Accounting functions same as large business environment
 More detailed work and wider number of areas to be covered as less support staff

 PAIB general roles -

Implementing and maintaining operational and fiduciary controls

Providing analytical support for strategic planning and decision-making
Ensuring that effective risk management processes are in place
Assisting management in setting the tone for the continued adoption of ethical
practices
DISCUSS
Table 1.6 – PAIB activities
Question 1.12 – adding value to Andre Rieu’s business
Accounting work environments- other

Public Sector
 Includes government (federal, state, local) and regulatory bodies
 More corporate approach in recent times ‘value for money’
 Commercial know how, analytical thinking and leadership valued

Financial Advice Environment

 Accountants are called upon for investment or other financial advice beyond normal accounting duties
 More risk and responsibility as dealing with complex decision making ( rather than compliance type work)
 Additional regulatory and educational obligations – education standards created by FASEA ( Financial
Adviser Standards and Ethics Authority) including Code of Ethics for financial advisors ( FAs). From Jan 1
2019 new requirements replace ASIC’s RG 146 for licencing as a financial advisor
 Scandals internationally. Individual FAs and advisors working for insurance companies in UK and banks in
Australia– widespread selling of inappropriate investments, unacceptable high fees, corrupt practices

Not For Profits (NFPs)

 Growing complexity
 Increasing role for professional accountants – eg enhancement of efficiency and effectiveness
 Difficulty of goal-setting and strategy where PROFIT is NOT the goal!
1.11 Social impact of accounting

Social impact of accounting

 Forceful and pervasive impact on society
 Deliberate (and other) social consequences
 Examples:
 Reports on organisational outcomes affect the decisions of investors and other
external stakeholders – eg annual and half yearly reporting
 Management decisions driven by accounting
 Depreciation
 Example: Low depreciation decisions compared with high depreciation have
significant impact on various groups. Choice of depreciation method and
estimates of useful lives and residual values affect reported profits, asset
balances, remuneration and bonus plans linked to profits
 Accountants need to understand the social impact that can result … in a variety of
ways … otherwise they can all too easily not act appropriately as professionals
 Example 1.6 – ASIC instigated $515M write down of Myer LTD’s non financial
assets after questioning impairment testing assumptions
 Example 1.7 – Audit deficiencies – ASIC audit inspection program 2017/2018
1.12 Credibility of the profession

 Accounting credibility under challenge when

 Failure to perform work to an adequate standard ( accountants and auditors)
 Organisations experience distress and failure
 Many corporate failures in the past 20 years and GFC in 2008/09
 The community saw these as a ‘failed’ accounting profession
 Many inquiries and regulatory changes have occurred to rebuild
confidence

 Key Issues Causing Reduced Credibility …. According to IFAC

 Creative accounting
 Poor audit quality
 Lack of auditor independence
 Financial accounting distortions
 Question 1.13 useful strategies for eliminating / reducing the above
issues
 Example 1.8 CFO convicted of causing false records and providing false
information to company auditor
1.12 Credibility of the profession

 Restoring Credibility to Accounting

 Pressure from governments, investors, professional accounting bodies for
measures to reduce likelihood of corporate failures:
 Establishment of FRC
 Accounting Standards backed by law
 Auditors must apply the Code of Ethics
 FRC responsible for auditor independence
 Enhanced regulation globally ( US Sarbanes-Oxley Act 2007, CLERP 9
Australia)
 Adoption of International Standards since 2004 for accounting, auditing and
ethics
 Reduction of the profession’s autonomy ( setting own rules and guidelines)
eg externally enforced legislation.

 Accounting is not (and never will be) ‘perfect’ - but excellent professional
accountants will improve weaknesses as they arise and ensure that the social
impact of the profession remains vastly positive
1.13 Capability considerations

 Business Leadership Capabilities

 CPAs must recognise their role and status as business leaders

 Require a wide range of capabilities – sometimes also called

‘competencies’ – the ambition must be to be fully professionally
capable not merely ‘competent’.

 Two sets of capabilities are required – comprising a combination of skills

and knowledge and experience in respect
 of more objectively visible TECHNICAL (TSKE) capabilities and
 less objectively apparent SOFT SKILL (SSKE) capabilities
1.13 Capability considerations
 TSKE include …
• Technical skills, knowledge & experience relating to general accounting
activities such as:
― Financial reporting,
― Finance and financial analysis, management accounting, computers and
comms,
― Company structures and design, regulations, laws – eg taxation, corporate
competition and consumer employment OH&S … etc
 SSKE include …
• Soft skills, knowledge & experience - a wide range of vital social capabilities
such as:
― Listening and understanding
― Communicating – verbally and in writing
― Discussion involving dissent and persuasion – without hostility or
dysfunction
― Time management and capability development
― Reading 1.3 ‘How soft skills can boost your career’
1.13 Capability considerations

 The ‘professional capabilities’ relying on TSKE and SSKE do NOT happen

quickly.
 They require
 Formal and informal study (including once professional status is
attained – eg CPAs and CPD obligations)
 Experience including mentoring and learning from those at a more
advanced professional level
 Learning ‘on the job’ by carefully assessing personal successes and
also failures in the workplace.
 The true professional will never stop building their TSKE and SSKE
capabilities and will be aware of their limitations at any time.
 Given that many professional accountants become leaders in the
profession good management skills above and beyond highly skilled
professional capabilities often are also important
 Many CPAs also become business leaders and/or business
managers – capability development in respect of these roles is also
vital – along with the continued recognition of the service ideal and all
professional requirements.
In class discussion questions … and ‘solution thoughts’

Question 1: Could an accountant cause a ‘social impact’ by manipulating profits

in order to change executive remuneration (for example by creating ‘bonus
rewards’ for managers who have become friends?

‘Solution thoughts’…. Can YOU make more and/or better professional

observations?

The social impact of this approach is very large indeed. Matters we need to discuss in
class include (and hopefully you will think of many other aspects):
Will such an approach add value as required by good corporate governance principles?
Is such manipulation legal? Is the accountant breaking the law? Are others acting
illegally?
Is this approach encouraging good managers or is it encouraging bad behaviour?
Will those who are outside the arrangement become less productive or leave?
Accounting and accountants build systems that cause people to behave well or badly.
Bad remuneration schemes can be a major problem – and poor remuneration design
(and greedy recipients) were a key feature in the recent GFC!
In class discussion questions … ‘solution thoughts’

Question 2: Is it possible that an organisation which ignores fundamental

environmental pollution issues (such as chemical contamination of waterways or
sulphur dioxide exhaust emissions) may damage people planning to retire on
superannuation savings?

‘Solution thoughts’… There is a real ‘social impact’ … & YOUR professional

observations?

As we will see in Module 5 the value assessment and the reporting of environmental
impact is far from precise. Accordingly, many organisations do not report on
environmental problems and very few actually try to assess the (current or future) costs
associated.
The social consequences of not doing so can be looked at in many ways – for example
the ‘present value’ of large costs in the distant future are small – so the impact is not
currently significant. However, if those future costs come as a ‘surprise’ to the market in
the future then expected future profits and/or share values may be far lower than
expected. This means that if a superannuation fund relies on those lower values in order
to pay superannuation to beneficiaries then payments to the beneficiaries will be small.
The potential social impact of the failure to account for pollution is obvious…
NEXT WEEK – WEEK 2

ON TO MODULE 2 MAKE SURE YOU READ FOR

EVERY CLASS IN EVERY UNIT

THIS IS YOUR ONLY

GUARANTEE OF SUCCESS!