AOS Key Terms T7

Free market

A belief that businesses in an economy should make their own decisions about prices or investments, for the purpose of maximising profit; that the economy should not be under government control through subsidies, state ownership or regulations.

Codes of Conduct

A set of rules outlining the responsibilities of or proper practices for an individual, party or organization; minimum standards set for professionals by their profession (e.g., accountants, lawyers, doctors).

Prudence

Acting with care; trying to avoid doing harm; using skill and good judgment in the use of business resources, for example.

Business Sustainability

Business sustainability is often defined as managing the triple bottom line - a process by which companies manage their financial, social and environmental risks, obligations and opportunities in such a way as to not harm future generations. These three impacts are sometimes referred to as profits, people and planet.

Care and Diligence

Due care is the degree of care which is expected from a reasonable person under the circumstances. Diligence is the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis. Such concepts apply to a business as a corporate citize

Deception and Fraud

In criminal law, fraud is intentional deception made for personal gain or to damage another individual; the related adjective is 'fraudulent', and verb is 'defraud.' Fraud is a crime and a civil law violatio An example of this would be where a manager intentionally hides unethical practices or steals money through false accounting and false reporting.

Ethics

Morals or guiding principles that show the right thing to do based on duty, responsibilities, and justice.

GRI Reporting Framework

The Global Reporting Initiative offers a widely used framework (guidelines) on how a business can describe what it is doing to meet the requirements of good practice with regards sustainability.

Utilitarianism

The belief that "it is the greatest happiness of the greatest number that is the measure of right and wrong"; where a company is judged as to its "utility" - defined as maximizing happiness and reducing suffering.

Stakeholder Theory

The view that every business has a responsibility not just to its shareholders but also to its employees, customers and communities, all of which can be seriously affected by the actions or omissions of the business.

Performance Indicators

These refer to the means by which an objective can be judged to have been achieved or not achieved; they are therefore tied to goals and objectives and serve simply as 'yardsticks' by which to measure the degree of success in goal achievement. With regards a company's efforts to be sustainable, it will report on its level of success and failure shown by achieving the main environmental, social and economic standards.

Corporate Social Responsibility

This is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

Good Faith

This is a sincere, honest intention to do what is right, regardless of the outcome. Directors of a company, for example, must act in the best interests of the business.

Corporate Governance

This phrase refers to the system by which corporations are directed and controlled. The structure specifies the rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs.

Shareholder Value

This phrase refers to the view that the purpose of a public business is to maximise shareholder wealth. It affects the responsibilities of the board of directors, and especially in the way they direct management in the running of the business

Agency Theory

This theory describes the relationship of one party (the principal) employing another (the agent) to perform some activity. For example, it applies to the relationship of a company's managers who act as agents of its owners (shareholders).

Stewarship Theory

This theory of business practice has it that managers will act as responsible guardians (stewards) of the assets they control, focusing on the best interests of the business rather than their own personal interests.

Discretion, Discretionary

Where a manager can use their own judgment on a business matter affecting others; something done voluntarily, and not because of a law or regulatio