Is Child Labor Ever Acceptable Accounting Essay


In recent years there has been a rise in the use of child labor. This is appalling and concerning. Child labor is never acceptable. The excuse has been used that it increases the profits of a company and therefore should be acceptable. This appears to be the only logical opinion since the children will likely accept lower working conditions, lower wages, and won't receive additional benefits. Instead, a firm has other responsibilities besides solely increasing profits.

A firm's morality can be evaluated using the Social Contract Theory of the firm as a basis. This theory focuses on what the firm must accomplish to be morally legitimate. Flower states that it includes three actions: improve the welfare of customers, improve the welfare of employees, and to not harm the well-being of society (Flower). Those that only consider profits are neglecting all other aspects. Ideally profits would make customers, employees, and society better off. However, this is true if it is done through ethical actions. Using child labor does not improve the welfare of employees. Instead, it is taking advantage of children and misplacing jobs of the adult workforce. The adults that usually perform such jobs are forced find work elsewhere in the company or other companies entirely. Therefore, employees and society aren't better off.

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The Difference Principle accepts certain inequalities. It allows economic and social inequalities only if they benefit the least privileged (Flower). When using child labor, the child would be the least privileged in the situation with the firm serving as the most privileged. The firm is benefiting from the use of the child labor and could stop the occurrence at will. This is the exact opposite of the goal of the Difference Principle and therefore it isn't justified.

A firm has responsibilities that pertain to its stakeholders. Flower explains that these can be broken into general principles that include "considerations to questions of justice in its dealings with stakeholders." Stakeholders include employees along with others that are directly affected by the firm's actions (Flower). When deciding on actions or strategies, the firm should consider how it impacts employees and if it is fair to them. Child labor easily fails this test. By accepting child labor, the firm is not meeting its responsibilities.

Lastly, managers of a firm have a moral obligation to follow the applicable laws (Flower). Within the United States there is a specific dollar penalty for each child that is violating the laws established by the Department of Labor. There is no clause that allows child labor to ever be legal. Therefore, within the United States it would be unethical for a manager to decide to employee children.

In conclusion, it is never acceptable for a firm to implement child labor. By keeping one responsibility of ensuring high profits through its use, the company is neglecting all others. The firm should be protecting employees, not taking advantage of them.

Based on Flower's book, create a concept map that integrates the three functions. Using your map, explain each function's role in supporting distributive justice.

Distributive justice aims to ensure that stakeholders receive equal or justifiable portions of costs and benefits from activities, according to Flower. Distributions include cash transfers, dividends, taxes, and wages. There are three functions that contribute to equally or justly distributing these distributions. They include the reporting, distribution, and information functions.

The reporting function utilizes financial statements to present information to stakeholders. This information includes the costs and benefits from activities that will eventually be distributed or retained by the company (Flower). Financial statements are the minimal measure of information. The financial statements will include all of the distributions previously mentioned. The best measurement can be seen on the cash flow statement since cash is normally the preferred method of transfers (Flower).

Another type of statement that can be reported is value-added statements. An interesting aspect of this statement is that it considers employees to be comparable to shareholders regarding the possibility of receiving distributions (Flower). A problem is that these distributions reported on these statements don't have to be equal.

According to Flower, any distributions that aren't equally divided require justification. There are principles that can be established regarding the distribution to employees to ensure it is a just distribution. This is the Marxist Theory of Value. However, there are not any principles for other stakeholders. Instead, the reporting function provides more relevant information. The financial statements can show the distributions to the users, or stakeholders, and they can assess the justice of these distributions.

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The second function is the distribution function. In determining the distributions, it is necessary to utilize the financial statements created in the reporting function (Flower). There are two distributions addressed, those executed by the firm and state. The state requires distributions in the form of taxes. The state utilizes its authority to require adjustments to be made to the financial statements in determining distributions (Flower). Distributions the firm makes include those to shareholders, employees, and cash transfers. Most notably, the dividends to shareholders will require more judgment to ensure fair distribution.

There are two extensions of distributive justice that are possible. The first is the voluntary approach. In this approach, shareholders help determine the amount of distribution instead of allowing the firm to determine (Flower). An example of this is a Stock Corporation Act. Shareholders are able to set the amount that they would like returned and the amount reinvested in the corporation (Flower). Ideally, this would enable a fair distribution since shareholders help determine distribution amounts. The second approach is the forced adoption by state. Under this approach, the state would use the financial statements to require a certain distribution to shareholders (Flower).

The third function is the information function. This function impacts both prior functions in that it identifies principles that should be used in developing financial statements (Flower). These financial statements are then the basis of the distribution function.

In decision making, the veil of ignorance should be used. By utilizing this method, all stakeholders will agree on the truthfulness, objectivity, equality, just exchanges, and prevention of harm (Flower). These will be depicted within the financial statements. The ultimate goal would be that in agreement the stakeholders will have equal bargaining power and thus distributive justice will be achieved (Flower).

Another benefit of the information function is greater transparency (Flower). There could be a possible misconception in that this requires all information to be presented. However, greater transparency requires relevant information to be presented (Flower). It is also necessary to weigh the costs versus the benefits of the information.

Overall, all three functions are necessary to achieve distributive justice. The reporting function is enhanced through the use of the information function and also depicts the results of the distribution function. However, this isn't the only relationship. The three functions are correlated and continue to impact each other throughout the distribution cycle. However, all are necessary to ensure that stakeholders receive a justifiable distribution.

According to Harvey Kapnick, the chairman of Arthur Andersen from 1970 to 1979, stated that:

If the accounting profession is to fulfill its public interest responsibilities, its own credibility must be restored. This is essential not only for the survival of the profession, but also for our free enterprise system itself.

Based on McPhail and Walters is accounting a profession? Does it matter whether it is or not? Defend your answer.

Harvey Kapnick was entirely correct in stating that the accounting profession must restore its credibility following the scandals of the early 2000s. This will impact public interest, the profession, and the free enterprise system. But before that can be done, it should be considered whether accounting can be classified as a profession. While a profession is a group of people with a common career, it means much more.

McPhail and Walters define professionals as people within a group with similar values that work to promote those values. Accountants fit this role because they are a group that is working towards the fair presentation and evaluation of financial information. It takes more than simple training to do so (McPhail and Walters). Instead, accountants require a specific education along with certifications, including Certified Public Accountant, for many roles. This is one of the most recognized requirements of being a profession. In addition, the accounting profession promotes specific values.

Groups of professionals set the values that they believe are the most important and then work to promote those values within their work (McPhail and Walters). Within accounting specifically, there is the need to be impartial (McPhail and Walters). This perspective was severely damaged by the high profile accounting scandals. One of the goals of impartial financial reporting was to look beyond self-interest and more towards public interest. The financial statements are prepared and presented as the primary means of communication of financial information. It is vital that this trust returns for the sake of the profession. Without this, anyone could prepare financial statements and the public would likely trust them. This is not beneficial for the users of financial statements either since the financial information will be of lower quality. In promoting impartiality and public interest, accounting again can be classified as a profession.

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An important aspect of a profession is self-regulation (McPhail and Walters). There are various codes that can be used such as the American Institute of Certified Public Accountants (AICPA) Code of Ethics or even U.S. Generally Accepted Accounting Principles (GAAP). These sets of rules are set by separate entities and considered self-regulation. If the accounting were to no longer be a profession, these rules would likely be set by a regulatory agency. Along with self-regulation there are also implicit rules. Instead of accountants creating their own rules, these are the rules that society imposes on accountants due to expectations (McPhail and Walters). This builds off of Kapnick's belief. Society did have expectations for the accounting profession but these have been tarnished.

In considering multiple aspects, accounting is a profession. This is important because it will have implications on the regulations and roles that society for accountants. As Kapnick indicated, the effects of accountants' work stretches beyond other accountants. It has impacts on the public and therefore markets.

On September 5, 2007, Steve Jobs, the CEO of Apple, Inc., announced that the spectacularly successful iPhone would be reduced in price by $200 from $599, its introductory price of roughly two months earlier. Needless to say, he received hundreds of emails from irate customers. Two days later he offered early customers who paid the full price a $100 credit good at Apple's retail and online stores. Was this decision to mitigate the $200 price decrease, and the manner of doing so, appropriate from an ethical perspective? Defend your answer.

In 2007, Steve Jobs reduced the price for the iPhone by a significant amount, or $200, after two months. To ease tensions that were created with prior customers, Jobs offered a $100 credit to those customers. When considering this from a free-market economic perspective, this was unethical and therefore inappropriate.

The free-market economic perspective contains four basic concepts, with the first being efficiency. With this concept, inequalities are acceptable if equality is foregone for efficiency McPhail and Walters). This resonates with setting a price and not giving money back. It is possible that the price cut was caused by efficiencies in the production process and these were then passed onto the customers. The price wasn't so much of a concern. Another possibility is to look at the work that flows from offering the $100 credit. This must have required work from Apple stores and employees in gathering such information. Instead, setting the price and not offering the credit would have been ethical.

Another important quality is liberty. This concept is based within the neoliberal perspective in which a person has the freedom of choice (McPhail and Walters). Due to the fact that the customers chose to buy the iPhone at the higher price, it is acceptable to not issue a credit. In offering the credit, the decision made two months prior carries less importance. It is very common for prices to change and Apple could have created additional problems for itself in the future. The choice customers make determines the transactions they enter into and adjusting that transaction after the fact would be unethical.

Entitlement is the third concept of a free-market economic system. This concept is based on Nozick's Theory of Entitlement and states that inequalities are acceptable as long as others rights weren't infringed upon (McPhail and Walters). In this situation, the new customers didn't take anything from the old customers. Both sets of customers had the choice of purchasing a phone at the specified prices. Therefore, following this theory the prices were ethical and there was no need for the credit.

The final concept of a free-market economic system is utilitarianism. McPhail and Walters explain more specifically that this is a combination of consequentialism and a specific form of utilitarianism. Under this concept, a just system is more important than the advantage afforded to certain people compared to disadvantage to others (McPhail and Walters). However, a just system would be one that is predictable under similar situations. In the past Apple hasn't offered a credit and now that it has, in the future it will be expected to do so again. By going against the system, Apple acted in an unethical way.

In conclusion, Steve Job's decision probably appeared fair to all customers involve. However, when considering this from a free-market perspective it is fair to say that the action was unethical. It violated the four basic concepts that underlie the system.

According to Milton Friedman, so long as the company stays within the rules of law, the only social responsibility of business in a free-market economy is to increase profits. Furthermore, according to Peter Drucker, all socially responsible executives should be fired. Using moral arguments either attack or defend this position.

From a libertarian point of view, the only focus of a firm should be on increasing profits. However, in a society where some firms carry much more authority and stand to potentially affect laws, this is unjust. Instead there are other theories that oppose this position.

The Social Contract Theory of the Firm was created by Hobbes and Rousseau (Flower). Within this theory, there are three general principles that relate to improving the welfare of customers and employees and not harming society (Flower). In following this theory, Hobbes and Rousseau recognized that a firm has additional responsibilities that relate to ensuring that it is morally legitimate. A firm can exist and only focus on the profit, but that isn't sufficient to be considered moral. A socially responsible executive would be focusing on exceeding the third principle under this theory. Instead of merely not causing harm to society, the executive would be attempting to improve society's position. Therefore, according to Hobbes and Rousseau a socially responsible executive would deserve recognition rather than termination.

Cohen also supports the idea that firms possess additional responsibility in his criticism of Rawl's philosophy. The criticism focuses on distributive justice and the use of the difference principle (Flower). Distributive justice is derived from a desire for equality in transactions. The difference principle hopes to improve the position of the least advantaged. Combined, these concepts contradict a self-agenda that would be promoted by a profit-motive focus. Instead, all those involved in the transaction should be treated justly and their relative positions should be taken into consideration

The final theory that supports additional responsibilities for a firm is the Stakeholder Theory of the Firm. Within this theory, it is recognized that there are many different parties involved in a firm's interactions. More specifically these parties can be classified as primary and secondary stakeholders (Flower). The theory then goes further to say that the firm has moral obligations to both sets of stakeholders. One of the several obligations states that firms have a fiduciary relationship towards stakeholders (Flower). This one obligation clearly differentiates this theory from a profit motive. If the firm had a fiduciary responsibility towards only its investors, one could argue that a profit motive is the only necessity. However, there are other relationships recognized within the secondary stakeholder category. By having a fiduciary relationship with those stakeholders, the firm is required to act in an appropriate manner that might not maximize profits. Overall, the Stakeholder Theory of the Firm expects management to respect the relationships with others and consider their impact in addition to making a profit.

In conclusion, a firm is responsible for more than generating profits. Instead, firms have a moral responsibility to consider those they transact with. This directly contradicts the beliefs of Milton Friedman that a firm should only focus on increasing profits. Also, Peter Drucker would disagree with this belief. Instead of firing socially responsible executives as Drucker suggests, these executives are acting morally. This is something that deserves accolades.