Question

Select a publicly traded firm of your choice that enjoys a large shareholder base. What challenges may this firm have encountered (or is likely to encounter) in terms of (a) incorporating ethics into financial management practices, and (b) maintaining/sustaining ethical practices in the face of internal or external (market) pressures? Frame your response relative to the financial manager's fiduciary duty to maximize shareholder's wealth.

Answer 1

My selected publicly-traded firm is Tesla and it will be having a high degree of problem associated with incorporation of ethics into the financial management practices as it can be seen that this company is highly influenced by the one person theory and this company is highly guided by the influence of Elon Musk so there will be a lot of resistance in incorporation of ethics into the financial management practices because it will be leading to expenditure related to to various social factors and it will also mean that there would be various additional environmental cost and other societal consideration when selecting of various projects so that can lead to reduction of the revenues and profits to a large extent and it will also mean that there will be cutting down on high explicit salaries of the chief executive officers so that will not be easy for incorporating into the overall financial management practices.

This company is adapting to a model which is electronic car making and this model is highly favourable for sustainable business in the long run because this is focused at production of such vehicles which will be leading into a lower damage to the environment due to being operated on the electricity and this company is also incorporating a large amount of environmental aspect into its product making which is reflecting at a high level of incorporation of the sustainable management in the business by Tesla.

There is always a duty of the financial managers to maximize the wealth of the shareholders and this can be done by maximization of the overall profits of the company which will be resulting into the increased share price and this can also be done through increased sustainability of the business in the long run which will be beneficial for the company as this will ensure the trust of societal elements as well as leading to creation of value for the shareholders in the long run.