C3 Financial responsibilities
Responsibility to Pay Taxes Promptly/Tax Avoidance
Responsibility to pay taxes promptly/tax avoidance. Paying tax supports governments in their objectives to improve the economy and standards of living for their citizens. Tax revenue allows governments to pay for education, healthcare, welfare benefits and improve infrastructure. Organisations pay tax on their profits and employees pay tax on their income.
Tax avoidance refers to methods used by businesses to legally reduce the amount of tax they pay. An example of this is to set up offshore companies in ‘tax haven’ countries to avoid paying tax in the country they operate in. Tax avoidance is not illegal but is seen as unethical as it does not benefit the community.
Corrupt Practices
Corrupt Practices. Corruption in the workplace refers to any type of behaviour where individuals act in their own personal best interests at the expense of the interests of the firm and its customers. Corruption can have many negative consequences such as lower profits and a negative image. Often by the time corrupt practices are uncovered, it is too late. Examples of corruption include bribery, fraud, embezzlement and kickbacks.
Prevention of corruption. The route with the least negative consequences is to prevent corruption in the first place. Methods businesses can use include contractual agreements that specifically state unacceptable behaviour, e.g. accepting expensive gifts, regular training that includes expectations related to corrupt practices, and establishing a positive corporate culture.
Read Patagonia’s code of conduct for their workers.
Investigating corruption. Firms that have a regular and systematic approach to investigating fraudulent practices can identify and respond to corrupt practices before they get out of hand. Internal investigations such as auditing documents to check figures add up can identify any discrepancies. When there is a person within an organisation that has raised suspicions of corruption, external agencies can be hired that specialise in uncovering hidden practices.
Excessive Remuneration, Severance Packages and Corporate Bonus Systems
Excessive remuneration, severance packages and corporate bonus systems. The top tier of management in any organisation receive the highest level of pay. As pay is often linked to the performance of the organisation, it is an incentive to perform well. Executive pay outnumbered worker pay by 347:1 in 2016 (Gomez-Bezares et al., 2019). Strong executive packages support recruitment and retention strategies but they contribute to the inequity of wealth both in an organisation and in the overall economy.
Read more about pay gaps here.