Question

Do ethics play a critical role in the financial manager’s goal of shareholder wealth maximization? How are the two related? Is the establishment of corporate ethics policies and guidelines, requiring employee compliance, enough to ensure ethical behavior by employees?

Answer 1

Ethics play a very important role in the financial manager's goal of shareholder wealth maximization.

Ethics have become an organizational priority. In the 21st century, ethics is neither a luxury nor an option. There is a growing impatience within society with selfish and irresponsible actions that impoverish some, while enriching the crafty.

A positive and healthy corporate culture improves the morale among workers in the organization, which may increase productivity and employee retention; this, in turn, has financial benefits for the organization. Higher levels of productivity improve the efficiency in the company, while increasing employee retention reduces the cost of replacing employees.

Ethical behavior among workers in an organization ensures that employees complete work with honesty and integrity. Employees who use ethics to guide their behavior adhere to employee policies and rules while striving to meet the goals of the organization. Ethical employees also meet standards for quality in their work, which can enhance the company’s reputation for quality products and service.

Leaders and employees adhering to a code of ethics create an ethical organizational culture. The leaders of a business may create an ethical culture by exhibiting the type of behavior they'd like to see in employees. The organization can reinforce ethical behavior by rewarding employees who exhibit the values and integrity that coincides with the company code of ethics and disciplining those who make the wrong choices.

Mere the estabishment of corporate ethics policies and guidelines, requiring employee compliance is not enough to ensure ethical behaviour by employees. It is very important to motivate and make the employees understand need and importance of ethics in their working. Only then employees will follow and honor these ethics and adopt them in their working. In this way they will serve for the best interest of the organisation that will help the organization in acieving its mission and vission in a better way.