ACC5216 Accounting Theory | Financial Dispute of Barclays

Introduction 

This study mainly focuses on a case study, wherein an organization named Barclays faced the issue of whistleblowing within the company. The issue was mostly related to financial constraints. It was observed that the CEO of the company tried to expose the whistleblower, as the company disclosed some important information its financial transactions (Parker, Guthrie & Linacre, 2011). Generally, the whistleblower is a referred to as a person, who is responsible for disclosing organizational information about a company in an unlawful manner. In the context of the case related to Barclays, a person namely Mr. Staley has conducted this kind of activity. Thus, the company was penalized by the Financial Conduct Authority (FCA) in the UK. The objective of this study is to highlight the major factors regarding whistleblower and its effect on the company. At the same time, certain theory related to the finance and its implication on different organizations has also highlighted the study. In addition, the study also focuses on how theories have implemented by the CEO of Barclays.

Facts of the Case 

On the basis of the case scenario, it has been identified that the Financial Executive Director of Barclays informed to the CEO that whistleblower plays a vital role within an organization. It helps in determining the major faults in the financial aspects of the company. Thus, due to this reason, the CEO of the Barclays Company has conducted the process of whistle blowing, whereas the FCA in the UK was observed unlawful activities within the organization. Thus, it was observed that the CEO of the company was fined £642,430 for trying to uncover the name of the whistleblower. However, the auditors of the FCA found that the company maintains a completely different financial statement in respect of their published financial statement (Morris & Glover, 2018). In this context, it was observed that the company was caught for their improper financial management. However, Mr. Staley stated that he was not involved in the incident regarding the financial mismanagement in the company. After Stanley’s statement of involvement, the auditors of FCA and Prudential Regulation Authority (PRA) conducted a process of scrutiny, wherein both the authorities observed that the fines were appropriate. In addition, it was also found that the CEO, CFO, and other higher associates were responsible for the incident. Hence, inappropriate financial management can be considered as the main reason behind the incident that took place in the Barclays (Morris & Glover, 2018).

Whistleblower 

A whistleblower can be defined as a person, who is often responsible for disclosing certain information within the organization, which is illegal or unethical in nature. Through the process of whistleblowing, an organization can easily find out the internal faults regarding the business operations (Booth, 2018). Hence, it can be claimed that the higher authorities of an organization are able to take a reasonable decision through the process of whistleblowing. Thus, on the basis of the provided case scenario, it has been identified that Mark Steward, who is the director of the organizational marketing and enforcement division of Barclays stated that the CEO of the company conducted whistleblowing process. This was with the purpose of determining organizational faults relating to its finance. Hence, the CEO of the Barclays Company tried to uncover the internal whistleblower in this case scenario. However, the CEO of the company was fined for his actions with respect to the whistleblowing issue (Nandwa, n.d.).

Reasons behind the Exposing Whistleblower

Based on the overall reviewing the case study, it has been observed that recognizing financial disputes within the organization is the key reason behind the conduction of whistleblowing procedure. However, finance plays a major role in any organization, as without it, a company cannot measure its cash flow, profit, loss, income, expenditure, assets, and liabilities among others. Hence, it is mandatory that an organization must focus on the finance along with its proper management (Jansen, 2018). In this case, the CEO of Barclays wanted to measure and find out the major financial disputes within the organization so that the overall organizational performance can be enhanced. Thus, owing to this particular reason, the company took help from FCA and PRA. Based on the above observation, the financial background enhancement can be considered as the main intention for why the CEO of Barclays Company tried to unmask the internal whistleblower of the organization (Fagbemi, 2017).

Accounting Theory Related to the CEO’s Behavior

The CEO is considered as a vital aspect of any organization and can be described as a significant character. This is due to the fact that he/she is responsible for the purpose of running all the activities within the company. Within the case, the CEO of Barclays took decision for revealing the whistleblower of the company, which led towards his penalization. Hence, ‘Decision-Usefulness’ Theory has been taken into consideration for the purpose of analyzing the behavior of the CEO in the process of unveiling the whistleblower (Vollmer, 2018). On the basis of this theory, the CEO of Barclays Company focused on communicating with his subordinates, especially the security team of the bank to find the whistleblower in the company (Fieger, & Rice, 2018; Ruddick & Kollewe, 2017). In the case of accounts, the CEO implemented certain decisions regarding the accountability so that the internal accounting system can be operated effectively. This kind of behavior of a CEO can develop organizational performance in an efficient manner. However, this theory has worked properly in the case but the outcome was reflected to be negative for the organization (Fieger, & Rice, 2018).

Whistleblower behavior of a CEO can be considered as a part of planned behavior. Hence, the theory of planned behavior is can help in identifying the adequacy of CEO’s decision regarding Barclays. Through the process of planned behavior, an organization can prepare an operational map, which assists it to develop organizational performance within the market (Jansen, 2018). In this context, the theory has reflected that the higher authorities of the organization must focus on a single attitude, subject, and behavior. Based on these factors, an intention has been developed, which led the organization towards the right behavior. In this case, the CEO of Barclays Company has been emphasizing the organizational finance. Hence, they have centralized their focus on the disputes regarding the financial faults within the organization. It leads the company to make maintain the confidentiality of the whistleblower. In addition, it can also help the company to identify the malpractices or unethical activities (Fagbemi, 2017).

Accounting Theory Related to the CEO’s Accountability

In order to conduct an appropriate financial activity, the higher associates must implement Accounting Structure theory within the organization. The theory reflects the traditional way of practicing accounting. In this, the golden rule of accounting is to be followed properly. Each of the transactions must be recorded in the journal. After the recording, each data is to be transferred into the ledger in order to conduct trail balance (Nandwa, n.d). After this, the profit and loss account needs to be prepared for the purpose of developing a balance sheet of an organization. Apart from this, there exists numerous process of accounting, which is to be followed by the CEO of an organization, while developing a financial statement with the help of experts. Thus, in the context of Barclays Company, the CEO of the organization is unable to conduct proper accountability within the organization, which initiates the issue of uncovering whistleblower (Slacka & Tsalavoutasb, 2018).

Compare, Contrast, and Evaluation of three theories

After analyzing the three theories, it has been identified that CEO’s behavior can be considered to be important for an organization. This is due to the fact that it leads the organization to behave in an adequate manner. On the other hand, the process of whistleblowing is not a lawful activity for an organization. Hence, the intention of whistleblowing can affect the business operations both positively as well negatively. Thus, with respect to CEO’s accountability, it can be stated that it entirely depends on the organizational financial experts. This is mostly because the CEO of an organization is aware regarding the basic accounting terms but the complex accounting terms may not be examinable by the CEO (Matthew, Paul, & Donna, 2018). Hence, chance avoidance is higher in this kind of situation. Hence, the CEO of an organization must develop skills regarding accountability so that the organization can perform appropriately. Based on the above observations, it can be stated that a CEO of the organization such as Barclays must focus on the behavior of finance. At the same time, he must aware regarding the consequences of disclosing the whistleblower. Simultaneously, he must also be aware of the financial terminologies so that the organization can operate properly. Any wrong decision regarding any of the abovementioned theory can lead an organization to incur a loss in the respective market (Malik & Nawaz, 2018).

Conclusion 

Based on the overall study findings, it has been identified that the finance plays a major role with respect to organizational development. Hence, any right and wrong decision relating to finance can affect the organizational operation within its market. The taken decision can have both negative as well as positive impact. Hence, the CEO of an organization must ensure that no unethical activities are conducted on the organizational premises. It can further be concluded that the CEO of Barclays ignored the theory of ‘Decision-Usefulness’, ‘Planned Behavior’, and ‘Accounting Structure’, which resulted in the overall incident in the organization. At the same time, the decision regarding whistleblowing can also be considered to be wrong, as they did not examine the internal financial defaults by own, which resulted in the penalization of the CEO.

References 

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Fagbemi, T. O., 2017, ‘Whistleblowing intention: Evidence From future accountants in universities located in Kwara State, Nigeria’. Osogbo Journal of Management (OJM), Vol 2, pp. 47–56.

Fieger, P., & Rice, B. S., 2018, ‘Whistle-blowing in the Australian public service: The role of employee ethnicity and occupational affiliation’, Personnel Review, Vol. 47 Iss. 3, pp. 613-629.

Jansen, E. P., 2018, ‘Bridging the gap between theory and practice in management accounting: Reviewing the literature to shape interventions’, Accounting, Auditing & Accountability Journal, Vol. 31 Issue. 5, pp.1486-1509.

Malik, M. S. & Nawaz, M. K., 2018, ‘The role of ethical leadership in whistleblowing intention among bank employees: Mediating role of psychological safety’, Review of Integrative Business and Economics Research, vol. 7, iss. 4 pp.238-252

Morris, S. & Glover, J., 2018. 'Got away lightly': Barclays CEO fined $1.1m after trying to expose whistleblower, Whistleblower, viewed 20 September 2018, <https://www.smh.com.au/business/banking-and-finance/got-away-lightly-barclays-ceo-fined-1-1m-after-trying-to-expose-whistleblower-20180512-p4zew0.html>.

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Ruddick, G. & Kollewe, J., 2017. Barclays boss used bank's security team to hunt for whistleblower. Barclays, viewed 20^th September 2018, <https://www.theguardian.com/business/2017/apr/10/barclays-boss-jes-staley-may-lose-bonus-over-bid-to-expose-whistleblower>.

Slacka, R. & Tsalavoutasb, I., 2018, ‘Integrated reporting decision usefulness: Mainstream equity market views’, Accounting Forum., Vol. 42, Iss. 2, pp. 184-198.

Vollmer, H., 2018, ‘Accounting for tacit coordination: The passing of accounts and the broader case for accounting theory’, Accounting, Organizations and Society, Vol. 68–69 pp. 1-142