Question

Examine ethical behavior within firms in relation to financial management. Provide two (2) examples of companies that have been guilty of ethics-based action related to financial management and how the companies were effected.

Answer 1

Ethical behavior in firms in relation to financial management

Financial management holds an important role in corporate governance.

Ethical behavior in financial management refers to adhering to the rules and regulations and complying with the laws so that there won't be any negative impact on the company. Many companies failed to have ethical behavior which resulted in their downfall from being in the top to bankrupt.

Examples :

The downfall of Enron, imprisonment of its leader group was one of the widely known and shocking violations of all time. It not only bankrupted the company but also destroyed one of the largest audit firms, Arthur Andersen.They Knowingly manipulated the accounting rules and masked enormous losses and liabilities of the company.

Worldcom,

Which at that time was the second-largest longest telecommunications company which entered into merger discussions with Sprint. The merger was dashed by the Department of Justice over concerns about it creating it a virtual monopoly that resulted in companies stock fall. BAnks demanded repayment and the board was convinced to lend more money so as not to sell the stake in the company. The resulting investigation of SEC resulted in companies' bankruptcy.