Ethical Conflicts that can arise within Companies

2291 Words5 Pages
bulb-icon

Recommended: Importance of values in business

The problem to be investigated is the conflict that can arise within companies between doing what is right (or moral) and doing what is often viewed as more important the attainment of corporate goals. This conflict is highlighted in the case study involving Fannie Mae (FM). (Jennings, 2009) In this case, corporate executives choose to focus on corporate goals and meeting the market expectations, ignoring any moral issued witch conflicted with the attainment of their goal. (Jennings, 2009) To understand the reasons for the executives actions and learn from their mistakes and misjudgments the following topics are reviewed: 1) ethics and social responsibility, 2) the importance of devolution, 3) the power and value of incentive plans, 4) the rational for legitimate income smoothing, and 5) the impact of pep talks.

FM is a federally chartered shareholder-owned corporation. The organization is charged with the goal of increasing affordable housing availability and to attract investment in the housing market. Coupling the federal charter and the goals of shareholders FM needs to walk a fine line between ethics and business practices. FM was named the most ethical company in the United States by Business Ethics magazine in 2004. (Jennings, 2009) Unfortunately, there was a darker side to the FM story. Corporate executives choose to focus on corporate goals and meeting the market expectations, ignoring any moral issued witch conflicted with the attainment of their goal. (Jennings, 2009) To understand the reasons the reader needs to be aware of several pieces to the FM situation including: 1) ethics and social responsibility, 2) the importance of devolution, 3) the power and value of incentive plans, 4) the rational for...

... middle of paper ...

...be it Enron or Nazi Germany, can be a result of individuals that do not question authority.

Conclusion

It is clear in reviewing the FM case that the corporate executive’s personal morals were overrun by their desire to attain personal incentives and bonuses. Lack of internal controls allowed the executives to control what was reported to ensure the goal was attained. (Jennings, 2009) Retaining control and limiting devolution kept those below the executive ranks largely in the dark. The executive team used the corporate goals to manage behaviors from the top down, ignoring and or eliminating those who questioned their processes. (Marken, 2004) Reviewing the impact of how goals and incentives are communicated and calculated is a valuable lesson in understanding the balance between personal morals and attaining corporate goals. (Schultz & Wehmeier, 2010)

Show More
Related

  • Memo to Martha Stewart, CEO of Martha Stewart Omnimedia

    1577 Words  | 4 Pages

    William Evan and Edward Freeman, in their essay “A Stakeholder Theory of the Modern Corporation,” argue that the objective of a company and its managers is not only to maximize profit for its owners and stockholders, but also to balance the benefits received or losses incurred by other stakeholders—employees, suppliers, customers, and the local community, all of whom may be influenced by company decisions. As the owner of MSO, your aim is ostensibly to maximize profits for yourself, but unlike most other indicted CEOs, you have not tried to obtain personal gains at the expense of the stakeholders of your enterprise. Rather, the charges that have been brought against you are for your dealings with another company; in this day and age where investors bemoan the lack of ethics of CEOs who use the power of their position in the boardroom to achieve selfish gains at the expense of their own company and its stakeholders, the charges of insider t...

    Read More

  • Reactionary Essay To If Aristotle Ran General Motors, By Tom Morris

    1257 Words  | 3 Pages

    It's difficult not to be cynical about how “big business” treats the subject of ethics in today's world. In many corporations, where the only important value is the bottom line, most executives merely give lip service to living and operating their corporations ethically.

    Read More

  • Enron Corporation: The Downfall Of Ethical Behavior In Business

    784 Words  | 2 Pages

    Ethics policies are implemented in almost all businesses. Companies search for candidates that will be moral in their actions so they can ensure long-term financial success. Throughout history we have seen businesses fall due to unethical behavior. In recent years the business Enron Corporation is best known for the scandal that led to the bankruptcy of a company with more than 60 billion dollars in assets. We will examine the circumstances that led to the downfall of Enron, how the scandal was realized, as well as the outcome of one of the largest bankruptcies in American history; a case that exemplifies unethical professional behavior.

    Read More

  • Analysis Of The NASW Code Of Ethics

    700 Words  | 2 Pages

    Many organizations have been destroyed or heavily damaged financially and took a hit in terms of reputation, for example, Enron. The word Ethics is derived from a Greek word called Ethos, meaning “The character or values particular to a specific person, people, culture or movement” (The American Heritage Dictionary, 2007, p. 295). Ethics has always played and will continue to play a huge role within the corporate world. Ethics is one of the important topics that are debated at lengths without reaching a conclusion, since there isn’t a right or wrong answer. It’s basically depends on how each individual perceives a particular situation. Over the past few years we have seen very poor unethical business practices by companies like Enron, which has affected many stakeholders. Poor unethical practices affect the society in many ways; employees lose their job, investors lose their money, and the country’s economy gets affected. This leads to people start losing confidence in the economy and the organizations that are being run by the so-called “educated” top executives that had one goal in their minds, personal gain. When Enron entered the scene in the mid-1980s, it was little more than a stodgy energy distribution system. Ten years later, it was a multi-billion dollar corporation, considered the poster child of the “new economy” for its willingness to use technology and the Internet in managing energy. Fifteen years later, the company is filing for bankruptcy on the heels of a massive financial collapse, likely the largest in corporate America’s history. As this paper is being written, the scope of Enron collapse is still being researched, poked and prodded. It will take years to determine what, exactly; the impact of the demise of this energy giant will be both on the industry and the

    Read More

  • Business Ethics Case Study

    820 Words  | 2 Pages

    Do you agree with Schmeltekopf that business schools are not preparing students well for the for the ethical challenges they will face in the workplace? Why or why not?

    Read More

  • Ethical Business Case Study

    1111 Words  | 3 Pages

    The term “ethical business” is seen, by many people, as an oxymoron. This is because a business’s main objective is to make as much money as possible. Making the most money possible, however, can often lead to unethical actions. Companies like Enron, WorldCom, and Satyam have been the posterchildren for how corporations’ greed lead to unethical practices. In recent times however, companies have been accused of being unethical based on, not how they manage their finances, but on how they treat the society that they operate in. People have started to realize that the damage companies have been doing to the world around them is more impactful and far worse than any financial fraud that these companies might be engaging in. Events like the BP oil

    Read More

  • Ethical Ethics Case Study

    1665 Words  | 4 Pages

    I discovered how sticking to one’s morals should be the topmost priority for everyone involved in business, whether personal or professional. Regardless of what the consequences may be, the intensity of the problem, and the complexities it may bring, sacrificing one’s integrity should never be an option, as integrity goes hand-in-hand with the morals of an individual (Duggan & Woodhouse, 2011). They further go on to say that having individuals take part in building a code of ethics that supports employee integrity, they will act ethically. Also, I believe that companies should place more emphasis on the moral behavior of their employees, and clear-cut policies should be set regarding such ethical situations. Furthermore, I realized how serving justice while making decisions really helps in the long run, and that opting to go for the ideal rather than they deserved is not always the best option, and could hurt a company in more than one

    Read More

  • Ethical Dilemmas in the Workplace

    558 Words  | 2 Pages

    In Module 1, Kindred Todd faced quite a few ethical dilemmas that included her values and technical ineptness. The first predicament was tested her personal morals and ethics. According to, Cumming and Worley, OD practitioners are dealing more and more with value conflicts with powerful outside groups (Cummings & Worley, 2008). Kindred was immediately faced with the issue of knowing what was ethically correct but being told the unethical approach was the best in order to benefit the client and her job security. Although compromising is one of the many skills of organization developers there are still morals that should be followed on each assignment. Kindred, know that deceiving the clients was unethical, took the first step to working on behalf of the client and immediately involved her superior, Larry, to resolve a potential conflict In the project. While her actions went in vain when she told her boss to remove her from the project and provide the client with a more qualified resource, Kindred did what she thought to be the best approach.

    Read More

  • The Ford Pinto Case

    756 Words  | 2 Pages

    From reading this case, we realize the company did not apply the managing ethics competency in building its goals and structure. Managing ethics competency involves the o...

    Read More

  • Unethical Business Practices in Glengarry Glen Ross

    775 Words  | 2 Pages

    The movie “Glengarry Glen Ross” presented a series of ethical dilemmas that surround a group of salesmen working for a real estate company. The value of business ethics was clearly undermined and ignored in the movie as the salesmen find alternatives to keep their jobs. The movie is very effective in illustrating how unethical business practices can easily exist in the business world. Most of the time, unethical business practices remain strong in the business world because of the culture that exists within companies. In this film, the sudden demands from management forced employees to become irrational and commit unethical business practices. In fear of losing their jobs, employees were pressured to increase sales despite possible ethical ramifications. From the film, it is right to conclude that a business transaction should only be executed after all legal and ethical ramifications have been considered; and also if it will be determined legal and ethical to society.

    Read More

  • Ethical Climate Essay

    1173 Words  | 3 Pages

    Trimming fat and reducing management layers is inevitable. However, boosting shareholder wealth by stepping on the stakeholders is immoral and unethical. While it is hard to say definitively what the right answer here was, we can examine some of Kidder’s principles of resolving ethical dilemmas to evaluate the decisions made. For example, ends-based thinking, which refers to doing what is best for the masses, was clearly not accounted for in this decision making process. Shareholders and senior management seemed to be the benefactors in CSC’s example. Furthermore, the care-based thinking principle also seems to have been neglected in this decision making process. I would find it difficult to imagine that senior leaders contemplated their proposed behaviors as if they were the object rather than the agent, and consulted their feelings before determining that 40% of the workforce must fall into the category of not meeting expectations (Hughes et al., 2014). Overall, CSC’s decisions were clearly not entirely moral or

    Read More

  • Fall Of Enron Essay

    1519 Words  | 4 Pages

    In Enron, it was dictatorial and revenue-based to new ideas. Leaders not only fostered a wrong sense of security for employees, paying high wages to keep workers dependent on the system via golden handcuffs, but also may allows employees did unethical behaviors. This repressive and illegal corporate would eventually make company lost creditability, or else, make company

    Read More

  • The Role of Ethics in Corporate Governance

    1629 Words  | 4 Pages

    This paper discusses the role of ethics in corporate governance. I seek to show the application of moral and ethical principles in corporate governance. Ethics is a topic that has generated a lot of interest in the last decade especially after high profile scandals. The failures of prominent companies such as WorldCom, Enron, Merrill lynch and Martha Stewart portrays the lack of corporate ethics. The failure of such business has seen an increased pressure to incorporate ethics in corporate governance. The result of corporate scandals has been eroding investor and public confidence. The entire economic system has experienced some form of stress from loss of capital, a falling stock market and business failures.

    Read More

  • Corporate Governance: The Role of Boards in Company Operations

    1412 Words  | 3 Pages

    According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.

    Read More

  • Business Ethics Case Study

    1348 Words  | 3 Pages

    The Facts: Kermit Vandivier works for B.F. Goodrich. His job assignment was to write the qualifying report on the four disk brakes for LTV Aerospace Corporation. LTV purchased aircraft brakes from B.F. Goodrich for the Air Force. Goodrich desperately wanted the contract because it guaranteed a commitment from the Air Force on future brake purchases for the A7D from them, even if they lost money on the initial contract.

    Read More

More about Ethical Conflicts that can arise within Companies

Open Document