Unethical Business Practices
Unfortunately, in recent times, we have seen a number of examples of unethical behavior in organizations, often tied to the organization's handling of finances. In this question, discuss ethical issues facing the top leadership or financial managers in today's corporate environment regarding their approach to the financial matters of the firm. What pressures exist that might encourage unethical behavior, particularly as it pertains to the firm's financial reporting or situation? How might these be mitigated? (You might want to conduct a search to identify examples or to examine actions suggested or taken to help mitigate these instances.)
The financial officers of a firm are the stewards of the investors’ finances. They hold a fiduciary responsibility to ensure that the money invested in the company is being managed in the most appropriate way possible to maximize the return on their investment. These individuals need to be knowledgeable of industry standards and above all else, trustworthy. Even a perceived lack of ethical behavior by financial managers can ruin a firm’s reputation and cause shareholders to lose money. With this being said, there are many recent examples of financial leaders acting unethically. The two main reasons for this are personal gain and company profit.
Personal gain seems to be the most common culprit for this unethical behavior in the most recent news. This can be seen most clearly in the financial crisis where the loss of a system of checks and balances combined with the greed of many financial institutions caused the number of sub-prime mortgages to sky-rocket. Instead of focusing on the quality of home mortgages, lenders became more concerned with quantity, which was directly tied to their compensation. These mortgages were approved by banks that in turn pooled the mortgages together and sold them to investors (Curtis, 2008). The result was the banks and mortgage officers got rich off of loans that many borrowers had no way to
The financial officers of a firm are the stewards of the investors’ finances. They hold a fiduciary responsibility to ensure that the money invested in the company is being managed in the most appropriate way possible to maximize the return on their investment. These individuals need to be knowledgeable of industry standards and above all else, trustworthy. Even a perceived lack of ethical behavior by financial managers can ruin a firm’s reputation and cause shareholders to lose money. With this being said, there are many recent examples of financial leaders acting unethically. The two main reasons for this are personal gain and company profit.
Personal gain seems to be the most common culprit for this unethical behavior in the most recent news. This can be seen most clearly in the financial crisis where the loss of a system of checks and balances combined with the greed of many financial institutions caused the number of sub-prime mortgages to sky-rocket. Instead of focusing on the quality of home mortgages, lenders became more concerned with quantity, which was directly tied to their compensation. These mortgages were approved by banks that in turn pooled the mortgages together and sold them to investors (Curtis, 2008). The result was the banks and mortgage officers got rich off of loans that many borrowers had no way to