A significant part of business is ethical, its code values and the trust. Anything illegal is not necessarily ethical, but by law, the expectation of the business is to be fair and ethical, and not abusive and predatory. Any unethical abusive practices may not be illegal, but the harm leaves the consumer stripped of self-respect, wealth, and ruins their life. In some instances, a very narrow line divides the action becoming unethical and fraud instead of ethical and legal. Companies must act responsibly when they enter global business and behave ethically which lays the legal foundation.
Organizational Ethics Issue Resolution Organizational Ethic Issue Resolution An organization that lacks a true culture of ethical compliance can create problems with integrity issues with stakeholders and customers. When a major company such as Enron, was structured their approach to ethics on the surface appeared to oppose progressive innovation. The policies and ethics programs were set up to protect the company and its shareholders. According to author Berenbeim, The Enron company had a detailed code of ethics it was not enough the organization needed to incorporate ethics and integrity throughout their corporate culture. Enron had to focus on business ethics issues raised by the conduct of the company’s directors, officers, accounts and lawyers (Berenbeim, 2002).
Ethics can be described as: "the activity of examining one's moral standards or the moral standards of a society, and asking how these standards apply to our lives" (11). The application of ethics in business is generally perceived as the evaluation of individual and collective moral standards, a reflection of societal morality, and then the determination of business decisions that are not only based on the efficacy of business operations, but also on these moral standards. The problem that many corporations perceive when pursuing the application of ethics in business is that ethical choices are not always the most sound business decisions. For example, when the pharmaceutical corporatio... ... middle of paper ... ...issue as a whole. Individuals have a moral responsibility to take ethical action, and there is no way of denying that corporations are made up of individuals attempting to make both business and ethical determinations.
Numerous numbers of frauds have materialized in different countries namely, The WorldCom Scandal, Lehman Brothers, Tyco scandal, HBSC scandal, HIH Insurance Company scam, the Libor Scam etc. All these involved manipulation of financial accounts for personal benefit. Some common techniques used were over-optimistic valuations of assets and extensive under-reporting of liability, under pricing and reserve problems, insider trading and non adherence of laws about payment of taxes. All the companies involved in accounting frauds went bankrupt and had a huge impact on the economies of their respective countries and eventually lead to arrests of executives involved.
Reason / Background The major downfall and/or reorganization of companies have cost: lost securities, downsized or vacancies in employment, lost or minimized retirements, and assisted in the economic recession. The following companies have been involved in varying experiences that led to financial improprieties and unethical decisions. Enron “Boosted profits and hid debts totaling over $1 billion by improperly using off-the-books partnerships; manipulated the Texas power market; bribed foreign governments to win contracts abroad; manipulated California energy market” (Brag, 2002, para. 9). The behavior exhibited by Enron’s former CEO Kenneth Lay showed that large and successful appearing companies are not exempt from human error.
It conventionally isn't illicit to lie to customers, but it isn't good business. In conclusion, an ethical demeanor is merely making good business decisions predicated on an established business having code of ethics. Once this is accomplished and practiced on a regular basis, most organization would not see examples like Eron and WorldCom.
Financial statement fraud is one of the biggest types of fraud in today’s business world. The complexity and mechanism of financial statement fraud brought the attention of auditors and regulators. Financial scandals of Enron, WorldCom, Xerox, Tyco, Parmalat, Qwest, and Satam Computers increased the auditors’ responsibility in detecting and preventing fraudulent transactions. Corporate financial fraud had negative consequences for the market capitalization due to gigantic losses of investors. In addition, accounting scandals of early 2000th ruined auditors’ reputation and the public trust.
There are several detriments to each method used today, one severe downside the Comply-or-Explain approach is that disciplinary action is not taken when a firm does not comply and fails because of that non-compliance. This was witnessed in the economic downturn in 2002, firms that were not in compliance experienced harsh economic conditions than those that did not. The composition of the Board of Directors is a vital component of every corporate governance system, but yet it is only recommended in the principles method that the majo... ... middle of paper ... ...es. With the principles- approach there is a need for a more watchdog like governmental body, one that can impose penalties if a corporation does not comply or explain. While only a little over half of Germany based firms follow this approach where in the United Kingdom there is even less, it is important that these firms that do not follow explain why, they might even have a better approach to the principles they are not following.
Ethical issues related to ownership include conflicts between manager’s duties to the owners and their own interests, also separation of ownership and control of business. Financial issue includes, for example, the accuracy of reported financial documents. Ethical issues can acquire between manages and employees, then employees are asked to carry out assignments they consider unethical. Consumers and marketing issues are related to providing safe desired products for a fear price and not harming people and an environment. Accountants also face ethical dilemma, they have to deal with competition advertising commission.
It may be noted that all legal actions need not be ethical. Hence, educating managers in understanding the difference between ethical standards and laws is essential in any business organizations. The good (or bad) outcomes of managerial decisions are not just reflected back to the individual who makes it, but is felt on the organization as a