Financial Reporting and Ethics - The Institute of Chartered ...

FINANCIAL REPORTING AND ETHICSphysically challenged people. Another insists that the only obligations of acommercial company are to obey the laws of the land and earn profits for itsinvestors. Yet others are of the opinion that companies need to concernthemselves with charitable courses only.According to Elegido (1996), maximizing profits does not strictly imply workingtowards the generation of greater profits. What it means is making efforts tomake large profits and subordinating literally such considerations as socialwelfare and the environment. While it may be desirable to render communityservices, it is not mandatory and neither is it a priority. Friedman (1970), thefamous monetary economist, believes that a company’s one and onlyresponsibility is to maximise profits for its investors as long as it acts withinthe law. He is of the opinion that going beyond this objective is synonymouswith having “socially responsible executives” who have to act as “redistributorswho take other people’s money, that is, the shareholders, and spend it on whatthese executives themselves defined as general social interest, as if theywere some sort of self – appointed tax collectors.” Friedman contends that it isbetter for the executives of a business to stick to maximising profits, as theywill more appropriately and effectively be “led by an invisible hand” toenhance the comfort of the common man. Friedman supports charity andassisting the needy. He, however, does not support making available to theneedy what belongs to other people. What, in effect, Friedman is saying is thata company’s shareholders should be left to show generosity in the areas oftheir choice, at their own pace and measure.The idea of Friedman that nobody is tied to moral responsibilities which exceedthe law does not appear to be sound.Firstly, legal prescriptions, because of the difficulties with their enforcement,tend not to create room for implementation. For example, a father has thelegal duty to cater for his children. But he has moral obligations such as theprovision of affection and protection from all forms of cruelty, as well. Themoral duties are not matters of law, yet they have to be respected and honoured.Secondly, the peculiarity of the law is its slowness, especially in Nigeria, infinding a solution to an identified problem. There is some time lag before asuitable law is in place. Moreover in certain societies, the cost of justice isprohibitive.Thirdly, in some places, there are laws which are morally objectionable. Anexample is a law which is in existence and which has to do with religiousdiscrimination, in some parts of the world.In view of the reasons outlined above, it does not appear sound that all a personneeds to do is to keep to the tenets of the law and nothing more. There is theduty of care to one’s neighbour. The code of moral rules or responsibilitiesapplies to both natural persons or individuals as well as body corporates.218