Ethics considerations in financial management assignment

These companies eventually suffered public humiliation, huge financial losses, and in some cases, bankruptcy or dissolution. The ethical and legal problems resulted in some corporate officials going to prison, many employees losing their jobs, and thousands of stockholders losing some or all of their savings invested in the firms stock. When speaking about ethics issues of this type, the role of ethical principles is essentially to supplement and reinforce legal strictures.

In these highly competitive days, when corporations are under enormous pressure from shareholders to produce financial results, financial executives face substantial temptations to take measures which, for example, might make their corporation or division appear more profitable than it is. Most executives are strong enough to resist these temptations (Luft, 1997). Sadly though some are not and that is how ENRON and WorldCom happened. Ethical behavior in business is critical.

Time will tell is this solution will keep corporations on the straight and narrow. To exist in business your customers must trust that you have their best interests at heart and your main goal is for them to be happy with the corporation’s performance. Once that trust is broken lives are affected a thousand times over. The people who run these corporations must remember that they are dealing with peoples lives and well being and the government is hoping that with the SOX act they will not forget that and will treat their customers the way the themselves want to be treated.

References Gitman, Lawrence J. (2006). The Role and Environment of Managerial Finance. Principles of Managerial Finance, Brief Fourth Edition. Boston, MA: Pearson/Addison Wesley. Joan L Luft (1997). Fairness, Ethics and the Effect of Management Accounting on Transaction Costs. Journal of Management Accounting Research, 9, 199-216. Retrieved June 30, 2008, from Accounting & Tax with Standards database. (Document ID: 905990581).