Unethical Business Practices Essay

693 Words Nov 1st, 2012 3 Pages
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
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Company profit is another pressure that encourages unethical behavior and is closely tied to personal gain. Because “managerial compensation, particularly at the top, is usually tied to financial performance in general and often to share value in particular” (Ross, Westerfield, Jaffe, & Jordan, 2011, p.14) many officers are motivated to make the company appear more profitable in order to gain short-term investor confidence. As companies gain more investment activity officers gain more compensation. If this behavior is discovered the officers could face sever penalties (including jail time) and the company could face financial ruin as investors lose confidence. A recent example of this type of behavior can also be seen through the multiple failures seen in the face of the financial crisis such as Bear Stearns, Lehman Brothers, and Countrywide to name a few. Most recently, this might be seen with the recent $2 billion trading loss at JP Morgan Chase where large investments were made in hedge funds that were sold at a loss. Although company officers insist that this is was not the intent of the activity, there is speculation and an ongoing investigation.
The most obvious way to control these types of behaviors would be increased regulation in the financial industry. In 2010, Congress passed the Financial Overhaul Bill to do just this. This bill puts more focus on regulatory bodies within the
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