ACCOUNTING ETHICS

Accounting Ethics on BP Oil Spill

Accounting Ethics on BP Oil Spill

Introduction

There are two basic directions in ethics, ethics of the mind that justifies an action by reference to intention and ethics of the consequence that justifies an action by reference to results. These are also known as deontological and teleological ethical theories, respectively. For example, telling the truth is considered by many to be 'the right thing to do' regardless of consequences and is an example of deontological ethics. Kant's categorical imperative represents a moral obligation stemming from the duty to 'do well' and, as such, is also an expression of deontological ethics. Kant noted that people may perform good deeds for bad reasons (e.g., egotism, attaining social prominence, etc.), and, under deontological ethics, the deeds would have no moral worth. On the other hand, teleological ethics is expressed as utilitarianism that supports material benefit (e.g. money, pleasure, food, survival) as an appropriate end. In Leviathan, Thomas Hobbes opines that utilitarianism requires that man accede to a sovereign authority. Individual utilitarianism gives every man or woman the license to possess everything in the world, thus leading to conflict and lives that are 'solitary, poor, nasty, brutish and short. In Hobbes' view of this social contract, man gives up individual utilitarianism for that of the society. In this topic, the issues related to ethics, which had value during the incident of Gulf BP Oil spill will be discussed in detail.

Research of Gulf BP Oil spill problem

In the light of the growing magnitude of ecological problems, the natural environment has become an important avenue for firms to gain competitive advantage. This phenomenon is well illustrated by the loss of around $30 billion of BP's market value in the first month following the Gulf of Mexico oil spill in April 2010, causing BP to trade at a 20% discount to its rival, Royal Dutch Shell. This event is a reminder of the extreme costs that can be imposed on firms that cause environmental degradation, and recent evidence suggests that the management of U.S. firms is becoming increasingly cognizant of the strategic importance of the natural environment. This trend has gained increased ascendancy over the past decade for three main reasons. First, as illustrated in the case of BP, research findings support the view that firms with better environmental performance are more likely to experience superior economic performance This should compel firms to take a more proactive approach to managing the environment.

Summary of the problem

The introduction of ISO 14001 by the International Organization for Standardization in 1996 has created an international benchmark for environmental management systems. ISO 14001 requires independent auditors to certify that firms have effective internal policies, assessment plans, and implementation to manage their potential impacts on the natural environment. While it is not mandatory for U.S. firms to adopt ISO 14001, they have strong incentives to do so, as the adoption of ISO 14001 can result in an enhanced environmental image and external legitimacy, as well ...