Finance and Investment Questions

Office Hours: M,W 10:00 – 11:30 AM; T,Th 10:00 – 11:15 AM; 1:30 – 2:45 PM

It is easy to understand Solomon’s argument that unethical practices destroy the business and its key people. This has been proven by so many companies, such as Enron case, whose scandals have been unveiled to the public and the people who used to amass great wealth out of unethical practices are now behind bars. Even if they get out of prison, it will be difficult to imagine how they can recover from the negative image that the public already has on them.

In today’s 21st century, it takes good ethics for every company to strive competitively to maintain as the best top competitor in their industries; and has its provocations of smart goal as to how successfully they anticipate their business to function, when it comes to finances, attracting and recruiting employees, begin an admirable corporation to citizens, and while showing customers and employees love, courteous, and appreciation. Companies forestall unethical behavior of bad reputation to uphold the organization values. These atrocious speculations can permanently cause decreased revenues and will degrade the company name, sometimes irreparably damaged.

More than a decade ago, one of the most commanding corporations in modern American history filed for bankruptcy. Enron, a seemingly invulnerable company would eventually provoke sweeping changes in regulation that controls the management and accounting of public companies even to this day. The Enron scandal has come to be known as one of the prime audit failures of all time and serves as a classic example of corporate greed and corruption. However, for the generation that watched in horror as corporations such as Enron fell along with the stock market, this scandal is slowly becoming just that: history. And for the newer generation of college students like me, it is almost ancient history. Despite the time that separates us from this scandal, it has never been more important to remember the lessons learned and best understand how the adoption of The Clarkson Principles can guide our careers in the business sector.

1. Openness and Transparency. In the textbook, transparency represents providing clear and equal access of material company information on a regular basis to all investors to allow for informed investment decisions and the ongoing monitoring of the company’s activities. The Satyam scandal erupted when its founder and chairman admitted falsifying accounts of over $1 billion. As the details of what happened unfold, the need for openness and transparency comes into sharp focus.

Lack of integrity, incomplete discloser, and unwilling to speak the truth are all scopes of dishonesty (Ferrell, Fraedrich, & Ferrell, 2013). Some businesses prompt and participate in dishonorable activities through unethical behavior. This is the very reason why today’s economy faces financial disaster. The Sarbanes-Oxley Act appears to have a strong grasp on controlling the financial environment in organizations; however, other financial disasters will more than likely hit home. Because these transgressions will emanate additional legislation might greatly prevent future misconducts. For this reason, legislations continue to recover with up-to-date implementations.

Before 2002, shocking scandals in the stock markets generated substantial losses to investors and, for a time, the United States economy was in near chaos. Enough evidence of impropriety, financial statements, market analysts, politicians and company executives, emerged to increase investor skepticism for a long time (Larson, Thompson and Walters, 2004). The primary focus of this problem was the concerns regarding the ethical behavior of business enterprises and the effectiveness of accounting and auditing norms (Larson et al. 2004). The Sarbanes-Oxley Act of 2002 was signed into law by President George W. Bush to enhance the public's confidence in the accounting profession (Larson et al., 2004). This Act, considered one of the most noteworthy

Treasury bonds are issued by the government, have almost no default risk and the bond price goes down when interest rates rise. Corporate bonds are issued by corporations and carry default risk if the issuing corporation is not able to pay interest and principal payments. Corporate bonds make up a large portion of the overall bond market. Corporate bonds are characterized by higher yields than government securities cause there is a higher risk of a company defaulting than a government. The upside to this is that they can also be the most rewarding fixed-income investments because of the risk the investor must take on, where higher credit companies that are more likely to pay back their obligations will carry a relatively lower interest rate than riskier borrowers. Companies can issue bonds with fixed or variable interest rates and of varying maturity. Municipal bonds carry risk similar to corporate bonds, they are often issued by state and local governments. The major advantage of municipal bonds is for investors since the returns are free from federal tax, and furthermore, state and local governments will often consider their debt non-taxable for residents, making some municipal bonds completely tax free, sometimes called triple-tax free. The yield on a municipal bond is usually lower than that of an equivalent taxable bond. Foreign bonds are issued by foreign governments carry default and extra risk if the bond

Breaking down an overview of Lockheed Martin’s organization leads to Terris’ elaborate plan to gain a general overview of the evolution of business ethics and revealing a balance between profits and stakeholder concerns. Responsibilities of top leadership involve several different form of involvement. These leaders have to be aware, decisive, honest, focused and inspiring. A top leader is usually referred to as a chief executive officer, CEO. CEOs have helped throughout the history of business ethics by seeking unfair advantages through immoral arrangements and creating new ways of business. With business changing occurring, welfare capitalism becomes a major aspect in the nineteenth and twentieth centuries. As a result of issues with welfare capitalism, corporate social responsibility has made its appearance in the twentieth century. Programs of corporate social responsibility now form many of corporate America’s largest advertising campaigns, especially in industries that have been vulnerable to public criticism for their social impact (Terris, 2005, p.42).

In this article, Mary Jo White, the chairwoman of the Securities and Exchange Commission, emphasized their crucial duty to protect shareholders from abusive practices they oversee. A good corporate governance and rigorous compliance are essential. However, ‘ethics and honesty’’ can become core corporate values when directors and senior executives embrace them. A recent academic study suggests that lax oversight can result when a director of a company is friendly with the chief executive overseeing it.

William and Flora Hewlett Foundation is a private foundation that give grants and gifts to different programs and addresses different social issues that include education, environment, philanthropy, global development and population, performance art programs, and other special projects. The foundation’s main objective is to help improve the lives of people for the betterment of the society. HF is a nonoperating foundation and relies on the “return on invested assets” to run the whole program (Viciera & Tung, 2006). With that being said, the foundation has to invest their resources to different assets and that it will help achieve the foundation’s goals.

This article begins by exploring the notion of society’s trust in the corporation despite the many scandals that have come to light in recent years. Examples of huge scandals of the 1990s that were sensationalised in the media include Enron’s accounting fraud, the Exxon-Valdez oil spill, and Bre-X’s falsified mining operations.

1. As a small business owner, the ratios that I will find to the best important are the ones pertaining to my needs. These include liquidity ratios and profitability ratios, both of which are common to all businesses (Loth, 2012). The business will focus on these because they relate directly to cash flow and working capital. The liquidity of the company is also going to be important to bankers who are lending the company money and also the profitability ratios are going to be important to shareholders, not to mention the production managers who need to control costs and the marketing managers who need to set prices. These ratios are common to larger corporations, but large companies will also look at other ratios that my business might not worry about so much, like the investment return ratios (ROA, ROE) and the debt ratios. The small business is more concerned with the cash flow aspects of debt than the capital structure and cost of capital. Thus as a small business there is going to be more emphasis on specific types of ratios while not worrying about other types.

As the newly appointed CEO of General Motors, it now becomes my responsibility to change the culture of the business and improve the organization’s reputation and social responsibility. To become a transparent organization, the organization must undergo a series of transformations including holding individuals accountable for unethical behavior and not reporting problems that could potentially be

The overwhelming facts point to a shady underworld of self-dealing and opportunistic exploitation of the poor and working class, which was until recently, well hidden from the commoner. The executives of WorldCom and Enron provide real world examples of unethical business practices, where the desire to make money for their shareholders transcended into an addiction to greed and self-dealing that were displayed by their, “excessive pay, perks, and golden parachutes”(Carson 392) at the expense of all stakeholders. All is not lost, there are corporations that pride themselves in their sound business model and commitment to ethical business practices. Such companies as Eaton Corporation, and Weyerhaeuser, who according to Ethisphere.com, a business ethics watchdog, are among the “2010 World`s most ethical companies.” (Ethisphere)