Question

Examine ethical behavior within firms in relation to financial management. Provide two examples of companies that have been guilty of ethics-based action related to financial management.

Answer 1

Ethics can be defined as a set of moral principles based on which the rules that guide the organization's and employee's conduct have been formulated.With regard to financial management ethics aims to protect and and maintain the interest of the stakeholders of the business.The stakeholders of the business are employees management ,creditors , owners etc.In financial management companies the following standards are often mentioned:Act with honesty and integrity ,this refers to avoiding conflicts of interest(actual and apparent),providing individuals with accurate understandable information complete with relevant disclosure of information.Compliance with rules and regulation,exercise good faith and independent information(this translates to not putting your own interest ahead of the client"s),abstaining from disclosing confidential information and ensuring the maintenance of a system of internal control to enure ethical behaviour.

Two Examples of companies being guilty of ethics based action that I'm citing here are Enron Scandal in 2001 and the TYCO Scandal in 2002.In 2001 Enron(an energy and service corporation) was found guilty of keeping huge amounts of debts of their balance sheets.Approximately $74 billion dollars was the loss the shareholders incurred and resulted in job loss for some of it's employees.In 2002 the CEO and CFO of TYCO(blue chip Swiss security systems based in new jersey) was found guilty of embezzling $150 million of company funds disguising the funds as executive bonuses.