Examine ethical behavior within firms in relation to financial management. Provide two examples of companies that have been guilty of ethics-based action related to financial management. Explain how the incidents affected the company, the economy, and society.
This incident can affect the company, economy, and societyEthical behavior depresses the overall morale. This can lead to a general lack of faith in the integrity of senior managers, erosion in the confidence in the free market system, including its political institutions, processes, and leaders, and general growth of cynicism in society. The failure of Financial management firms to detect managerial fraud has also led to less faith in audited financial statements. Many believe that the financial management firms have compromised their integrity because of the lure of lucrative consulting contracts from firms they were auditing.Business ethics are very important when it comes to financial management. Lack of it could result in not only losses to the company but also put the company into very damaging lawsuits.
One company that was found guilty of ethics-based malfeasance related to financial management is the Enron Corporation. Enron was a big company enjoying good profits and reputation before the scandal. Enron had been named the most innovative company by Fortune Magazine for six consecutive years. By keeping huge amounts of debts off books the company through Jeff Skilling and Ken Lay was able to defraud investors of billions of shillings. What is more, a huge number of employees lost their retirement benefits while others lost jobs.