Ethical Challenges and Agency Issues

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Ethical Challenges and Agency Issue Cheryl Monson, Davied Mull, Gloria Akemu, Kristin Reffalt, Lisa Cook ACC/557 April 30, 2012 Rashida Heard, CPA Ethical Challenges and Agency Issue The failures of corporate America over the past century have led to government intervention in the form of the Securities Acts of 1933 and 1934, and in 1991 the U.S. Sentencing Commission’s Guidelines for Organizational Defendants (FSGO) was published. The FSGO stated that an organization was responsible for any illegal acts committed by its employees, if the employees were acting within their official capacity. These guidelines are credited for an increase in corporate ethics programs that could result in lighter sentences and a lower risk of probation (Johnson, 2004). Despite these guidelines, the corporate world was rocked by the Enron and WorldCom scandals leading to more government intervention in the form of the Sarbanes Oxley Act of 2002 (SOX). In this paper ethical challenges and agency issues facing today’s businesses will be discussed and analyzed. Also discussed will be the Securities Acts of 1933, 1934, and SOX and how these legislative acts were reactions to similar challenges that still face today’s businesses. Ethical Challenges Notwithstanding the legislation, the greatest challenge is how to design an ethics program that prevents unethical behavior—an ethics program that works. Trevino, Weaver, Gibson, and Toffler (1999) in their investigation of ethical programs found two primary ways to answering this challenge. These approaches, the compliance/ethics and value-based/ethics, differ not only in method but also in their ultimate goal. The compliance/ethics approach in response to the FSGO focuses on the prevention and detection of illegal acts and the punishment of these acts. Trevino, et. al., found that employees

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