In 1996, allegations were made against Moody’s that it was issuing ratings on bonds it had...

In 1996, allegations were made against Moody’s that it was issuing ratings on bonds it had not been hired to rate, in order to pressure issuers to pay for their service. • The government conducted an inquiry, but charges of antitrust violations were dropped. Even though no legal action was taken, does an ethical issue exist?

please explain clearly in part what ethical issue in here!

Expert Solution

Yes, the ethical issue was existing at that time as the company was not hired to rate the bonds as it does not hold any right to rate them and advertise the same in the public.

The principal of due diligence was not accurate as the company does not possess enough information and authority to rate these bonds if it is not hired for the same.

There can be several non-mitigating factors a company could face in its day to day routine. Therefore, to analyze the risk and rectifying it would save the company from a huge amount of losses.

Further, the significant risk analyzed would be ascertaining the period and its impact on the business as the ability to refinance the debt maturity can be affected by the market of finance.

The additional work would be done to maintain the accuracy and provide adequate results.

The governance in the corporate is a combination of rules framed, processes, and practices that could be controlled and directed by the firm. Further, it is an essential tool to adequate the interest of different stakeholders in the company.

jeff jeffy answered 2 years ago

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