On the other hand, Jeffrey L. Seglin argues that the problems in American businesses are a combination of ethical and legal problems. The ideas of ethical problems in corporate America are illustrated differently in both Frohnen and Clarke’s essay and Seglin’s essay. In Bruce Frohnen and Leo Clarke’s essay, "Scandal in Corporate America: An Ethical, Not a Legal, Problem" they discuss their views of American businesses and the little honesty that these businesses have. They claim how important honesty is within businesses and how it will help our public’s well-being and corporate America. They view American business officials to be greedy and many of their jobs just consist of helping businesses find their way around the laws.
In recent history, there have been quite a few memorable cases of corporations manipulating financial reports in order to deceive stakeholders. Deceptive accounting practices are like a disease, and should be rooted out immediately. These practices undermine the stability of U.S. financial markets, and can make people less willing to invest in stocks. Financial reporting is the key to maintaining trust in the financial system and any manipulation should not be tolerated. The purpose of financial statements Financial statements are the primary instruments used in assessing the performance of a business and its managers (Gibson , 2013).
Starting with the corporate governance, in order to ensure the accuracy of financial disclosures and detect the internal fraud properly, the following actions required by the Sarbanes-Oxley Act: -Restrictions for CEOs and CFOs. According to the Sarbanes-Oxley Act Section 302, specific certification in financial reports is required to make personally by CEOs and CFOs. The main responsibility of CEOs and CFOs is ensuring the accuracy of the financial disclosures. Any false certification and unethical actions caused by the CEOs and CFOs may lead they face the risk of reimbursing the ill-gotten gains and criminal penalties. In the case, Scott Sullivan-the CFOs of WorldCom transferred normal operating lease expense to the balance sheet as an asset.
16). The FBI’s self-dealing category would fall under the RCMP’s category of fraud against a company. Actions taken by a person who commits fraud by way of self-dealing include: “insider trading; kickbacks; backdating of executive stock options; misuse of corporate property for personal gain; and individual tax violations related to self-dealing” (FBI, para. 16). On the other hand, accounting schemes are fraud by a company, which include false accounting entries, trades and transactions with the purpose of improving the appearance of a company’s financial performance (FBI, para.
For example, General Motors recently announced t... ... middle of paper ... ...tates today - 12.2 percent of the $25.2 trillion in total assets under management tracked by Thomson Reuters Nelson - is involved in some strategy of socially responsible and sustainable investing.” Although the transgressions of a tiny percentage of corporate managers have hurt investors and the economy, market forces have mostly been able to direct proper corporate governance. When our markets first formed, certain regulations were needed to create their basic framework of functionality – but in today’s age when government uses its own methods to control corporate governance, it is to both corporations’ and investors’ detriment. Works Cited Bruno, V., & Claessens, S. (2010). Corporate governance and regulation: Can there be too much. Journal of Financial Intermediation, 461-482.
Researchers have focused mainly on managers and major shareholders interests on firm ownership. These researchers explored the relationship of ownership structure and firm performance keeping in view the conflict of interests of managers and owners of the firm. Corporate governance deals with the way how supplier of finance the firms manger to get return on their investment (Shleifer and Vishny, 1997). Corporate governance mechanism is very important even in developed economies. According to Shleifer and Vishny (1997) in developed countries corporate governance mechanism is exit with small differences.
Firstly, it introduces the background and related literatures of corporate fraud. These literatures present how corporate fraud reduce market value and increase the cost of equity. Secondly, it provides the background of Chinese stock market and regulators which are different from developed countries. Since the firm’s financial information can not be completely reflected by stock price in inefficient stock market of China, an alterantive perspective of debt financing has been proposed by several researchers. On the other hand, increasing occurrence of corporate fraud lead regulators’ credibility to be questioned and thus it is necessary to investigate on the long-term influence of fraudulent behaviors on the firm’s activities.
In general, financial fraud is made up of four broad categories consisting of fraudulent financial reporting, misappropriation of assets, expenditures and liabilities for inappropriate intentions, and fraudulently obtained revenues and assets that include avoided costs and expenses (PricewaterhouseCoopers 2008). A company that attempts to prevent fraud avoids a catastrophic risk. A culture of honesty and ethics, antifraud processes and controls, and an appropriate oversight process are the best practices for the prevention and detection of fraud. In 2002, after a chain of highly publicized corporate scandals, Congress passed the Sarbanes-Oxley Act, intending to restore investor confidence in publicly traded securities. Traditionally, management and the board of directors were in charge of managing the company and preparing financial statements.
Often multinationals see themselves as one group and that, these companies operate in different countries but their bottom line is profit. My final diagnoses would be, if uncurbed and unchecked tax planning will have a detrimental effect on many economies globally, thus the raise of economic groupings such as the OECD which police the ethics and conduct of these corporations.
Companies whose success and continuous operation prove vital to the economy and financial systems should receive auditor scrutiny and regulation oversight. It is clear that Lehman Brothers required oversight and possible prohibition of its liabilities financing practices using repo borrowing. Likewise, AIG deserved more review of its credit swap business practices. The negligence of these institutions cost the United States and foreign economies billions of dollars. The federal government chose not to intervene on Lehman Brothers’ behalf, for reasons that some say are inconsistent with other bailout decisions (Smith, 2011).