Accounting Business Reporting for Decision Making

CHAPTER 2 Accounting in society 67

sense of duty. How do you determine if an act is done in good will? Through what Kant proposes as the

‘categorical imperative’ (Kant 1964). This categorical imperative, according to Kant, provides a general

rule that can be used in any given ethical situation. Two definitions of the categorical imperative that

have been espoused are as follows.

1. I ought never to act except in such a way that I can also will that my maxim should become a uni-

versal law.

2. Act in such a way that you always treat humanity... never simply as a means, but always at the same

time as an end.

The first of these maxims is similar to the ‘do unto others as you would have them do unto you’

philosophy. If you took out credit knowing that you couldn’t pay it back, would you like a universal

law that dictates that this is acceptable practice? If so, logic would suggest that eventually no-one would

extend credit, thus grinding to a halt the cycle of the credit markets. In fact, the global financial crisis

during 2008 was firstly a credit crisis that overflowed into the general business arena and significantly

impacted on people’s savings, investments and house prices.

The second maxim is that the end does not justify the means or, to put it another way, you should not

take advantage of people to achieve a certain end. Kant’s philosophy is grounded in the notion of respect

for the individual. Hence the requirement that people should be treated as ends and not as a means to

others’ ends. People themselves are not machinery, capital or commodities at the disposal of others for

their self-interest. Some good examples to emphasise this human dignity aspect of Kant’s philosophy are

as follows.

• The auction on eBay of a human kidney was reported as attracting bids of up to $5.7 million before

eBay terminated the auction. The selling of kidneys, no matter how utilitarian for the seller or society,

would be seen to be morally wrong.

• Many businesses have relationships among their various stakeholders at the core of their mission

statements or codes of conduct. Such companies include Nokia Corporation, Johnson & Johnson and

Motorola.

• The Southwest Airlines action of not terminating the employment of staff after the September 11

terrorist attack led to a level of employee loyalty that resulted in staff working overtime free until the

public started flying again. Through this action the organisation emphasised the importance of staff

and the substance of the company’s values, according to which individual relationships with all stake-

holders are treasured and stakeholders are not treated simply as a means to economic profitability. In

fact, Southwest Airlines’ financial success, in contrast to most other airlines which have been doing it

tough in recent years, has been argued as being a consequence of its good relationship with its staff.

In summary, Kant’s philosophy is embedded in duty or obligation and encompasses a dignity or res-

pect for the individual. So, a business motivated by profits, despite doing respectful things, is acting

in a prudential way and not a moral way. However, critics point out that Kant’s universal obligations

do not take into account particular situations. This is particularly relevant in business situations where

impartiality is assumed. Businesses undertake transactions at ‘arm’s length’, give all employees an equal

opportunity and treat customers similarly. However, it is sometimes argued that there is a need to recog-

nise special relationships and therefore to act with partiality. For example, in business, the concept of

supply chain management may warrant the building of special relationships between suppliers and cus-

tomers. If supply is restricted, it is natural for suppliers to favour customers who receive a regular ship-

ment and always pay on time. In fact, in some countries, such as Japan, loyal, trusting relationships are

treasured. The universal obligation to treat all customers equally would be seen to exploit that relation-

ship. However, when does partiality become immoral? Most people can accept a business doing favour-

able deals with their loyal customers, suppliers or employees. Discounts or favourable terms would be

seen as a part of treating employees with respect and rewarding them for their hard work. However, large

loans to employees, particularly top management, were the subject of bank scandals in the early 1990s.

As a result, regulation and codes explicitly stating the need for ‘arm’s length transactions’ or trans-

actions on the same terms as those with outsiders were introduced for such situations.