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Importance Of Ethics In Corporate Governance

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According to king III reports, ethics (integrity and responsibility) is the foundation of and reason for corporate governance. The ethics of govern once requires the board to ensure that the company is run ethically. As this achieved the company earns the necessary approval _ its license to operate from those affected and affecting its operations. (LoDSA, 2009: p21). Unethical behaviour inside the company is frequently caused by unethical individuals. Managers tend to be unethical doing things to their own self-interest instead of providing the best interest of shareholders. For the business to be less likely to fail the corporate governance must be effective in the business and thus protect the interest of shareholders of the business.
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A company can have sound corporate governance and a good standard of code of ethics but lack people with strong moral principles and high quality of being honest e.g. senior managers and directors. The board of directors must have a crystal, clear ethical leadership before on their power of firing unethical directors and mangers. The specific ethical values that justify all features of corporate governance are responsibility, accountability, fairness and transparency. Therefore the board is required to act ethical towards shareholders and stakeholders for the sake of the …show more content…

They not only lead to decrease of the organizations stock value but also to the decrease in profit since investors would no longer interested in investing their money into a corrupted company; as well as in creating damage to its reputation. Further, they have learned lessons on the importance of hiring upstanding employees (which is an external auditor); who will contribute to the improvement of the company instead of lead it to its demise. It also goes to show how imperative it is to maintain good accounting practices and establish efficient accounting systems in the organization (infit Accounting; 2014). The reason that make users trust auditors opinion is that external audit are trusted to express an opinion on the fair presentation by using the terms of an acceptable financial reporting framework (Like IFRS or SME’s). (Louse Kretzschamar & Fransprinsloo, 2012:

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