The CFO for a corporation deliberately misstates expenses on the income statement purely out of a sense of loyalty to his CEO and the company. The CFO will receive no financial incentive for this misstatement. In fact, he risks losing his job by doing this. Is this an ethical violation for the CFO? Why or why not?
These same individuals trusted and respected Bernard Madoff and yet he showed less than the mutual respect a professional investor should show toward his clients. Family members were not immune to his scheme. In fact, other family members were encouraged to invest and also bring in new investors into the fold of his deliberate hoax of profiting off of the rich and unassuming. Madoff showed that he lacked care and empathy for his clients, clearly a pure dereliction of duty, to provide the best information and protect investor’s financial investments. There were also unethical issues involving the entity that was supposed to secure and watch over those that are investing our money.
How individuals were rewarded for their work, apparently encouraged risky behavior. “Traders were rewarded for making risky investments with the bank’s money” and “Risk taking was apparently ‘embraced’.” (Brickley, Smith, & Zimmerman, p. 13) 3. Even though Kerviel appears to have been working alone, his supervisors should have been more proactive in their investigations of his activities once questionable transactions appeared. The control mechanisms in place at Société Générale should have been sufficient to prevent a single trader from being able to make these huge transactions without additional approval from upper-level management. Works Cited Brickley, J.
Citigroup Merger Scheme The film The Inside Job provides a in depth look at the various ethically ambiguous business practices that take place in The U.S. and around the globe which helped spark the financial crisis of 2008. One such practice, the merger of Citicorp with Travelers, used morally questionable business practices in order to become the largest financial services company in the world. In 1998 these two companies merged to become Citigroup. The problem with this merger was that it was illegal, and a clear violation of The Glass-Steagall Act, which was enacted on the heels of The Great Depression in 1933. This Act prevented banks with consumer deposits from engaging in risky investment banking activities.
According to Robert Solomon, “Good Ethics is Good Business” and “unethical conduct hurts business as a whole”. I agree with his point of view because in the business world, we have witnessed big companies fail and fall down due to their unethical practice. I also agree that being aware of the 3C’s, which are Compliance, Contributions, and Consequences, is the best tool to define Good Ethics in Business. Solomon used Break Breaker Inc. case to prove that unethical business strategy will lead to the quick failure of business. Break Breaker Inc. to some extent obey with some legal rules, but failed to comply with principles of morality and community, contribute to the society by producing honest high quality services, and account the consequence of damaging their reputation.
Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it turned out that these companies were mostly founded by inflated revenues and negative financial conditions. Short after, companies reputations and financial credibility began break like bubbles, in the wake of the ensuing investigations. The result of these action caused investors once again lost their trust and confidence in America’s publicly traded companies, which eventually led to more bankruptcies. As a result, multitudes became jobless, and the trend went from bad to worse throughout the decade.
* What are the legal requirements? * Didn’t break any laws, related to him applying company funds towards personal use even though his act was solely beneficial to himself alone. What are the ethical duties? * Maintain price-competitive markets will ensure that scares resources are used to optimally satisfy consumer needs. * Pareto Optimality wasn’t obtained because maximum benefits of most wanted goods and services produced at minimum cost of least wanted resources.
The ultimate goal is to protect investors. Reason Many acts of corporate corruption in the 1990s and early 2000s brought on this regulation. There were many loopholes that allowed for accounting errors without any legal incentive to correct the problem. Due to the accounting practices at companies such as Enron, Tyco, and WorldCom investors lost billions. The accounting practices created a scandal in which the companies were able to hide information from investors.
The question as to whether Bernard Ebbers, former Chief Executive Officer (CEO) and founder of WorldCom, should have gone to jail is one that many, during 2002, could easily answer with a resounding yes. However, the case goes much deeper than the visceral reaction by the public to punish those who are considered extremely wealthy. True, the violations committed by WorldCom, Ebbers, and others within the hierarchy of the company were grave and had an obvious negative impact on the public’s financial futures and standing, but we must also remember the impact this case had on the conduct of corporate business. Separating normal business practices from those practices that occur on the fringe of legality, one can make easy comparisons as to how the WorldCom fiasco helped to spotlight the practices that likely occurred throughout corporate America. Ethics is not something that can be written into law; one can be ethical and break the law just as easily as an unethical practitioner can remain within the bounds of legality.
Many companies argue that the SOX Act is too costly and ineffective and that the Oversight Board has not been able to prove the SOX Act’s value; however the Oversight Board would argue that since its inception, there has not been another massive scandal like Enron Corp or WorldCom, Inc. Whether a company has chosen to comply because it values the ethics supported by the Sarbanes-Oxley Act or simple fear of repercussions from being caught, no one can argue the decrease in corporate scandal is a good thing for America’s business