Question

Critically evaluate the role and influence of ethics in corporate finance decisions within your organisation. Use examples to support your answer.

(700 words)

Answer 1

Ethics is the set of moral priciples of a particular person.We can also call it rules of conduct.Ethics are there to help us and provide guidance for our behaviour that affets others.If people stop following their own morals,they will act unethical,which can leaad to job loss,jail,huge fines or reputational damage.When we talk about comapnay,ethical decision making attempts to promote the company as a whole,rather than letting one individiual profit from business decisions.An example of unethical behaviour in comapany would be insider trading or fraud.In past,manager of my company has change the way the depreciation is charge to show the greater profit for upcoming sale of shares.To prevent this companies have to make sure that their employees work honestly,fair and with respect.Even though governments and regulators combat misconduct through regulatory reform,it is still not enough to be sure a company is fully ethical,that is why firms have to develop a culture of integrity and an ethical framework.The firm will need a well developed set of priciples that will analyze decisions and potential conduct in an ethical perspective.Managers have a big influnce in promoting ethical behaviour,they are able to demonstrate how it should be done.This can inspire employee to behave ethically.

Financial Crisis 2008 hurt many people financially.As a result,many invetsor are paying more attention to the companies which they have invested in.They went to make sure that their invested capital is secured and that the company is ethical.To be sure that the companies and professional investors have the right intentions,new regulations have been implemented.Companies nowdays have to be go through a yearly due diligence control and need to record all the transactions they have made.Looking at the professional investors side,most investing companies obligate their employee to attend an ethical class,to teach them how to invest in an ethical way and show them the consequences of unethical behaviour.Also,investors cannot just invest in everything they want anymore.Before the financial crisis exploded the investors could invest in the stock withut having the money to cover the investment.When the crisis exploded the investors could not pay their debts anymore,which resulted in immense loss for banks and clients.For this reason,investments need to have security.If ethical behaviour is not given in a company this can have further consequences as mentioned above.Investors might not want to invest or will demand a higher risk premium,because the risk of the investment is much higher.