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MMH733 Ethics and Corporate Sustainability Management

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You need to choose a business sector to focus on, and address how business ethics is managed within that sector (e.g. Financial; Mining; Agriculture; Retail; Service; Education; Tourism etc.).

The list of sections below provides the issues that you need to consider:

(1) Discuss major challenges, relating to business ethics, facing the sector. You are expected to focus briefly on the following issues:

  1. ethical issues facing the sector

  2. sustainability focus of the sector
  3. major stakeholders in the sector

(2) Explain what factors are driving the sector to manage the business ethics more effectively.

(3) Elaborate how managing business ethics has helped the sector.

Answer:

Introduction

Ethics can be defined as a philosophical concept which helps to develop the moral power of deciding what is right and wrong. Like other business sectors, financial business is suffering from ethical failure as well. Ethics is finance sector is associated with the transparency in handing the material and information. To run a successful financial company, the work culture must possess a strong personal and professional ethical code. The financial managers are the responsible people who run the financial companies effectively. They are the key people who maintain the organizational culture, the employee efficiency and the customer satisfaction. If the managers are engaged in the wrong ethical behavior not only the company, the whole business suffers the consequences as well.  

Ethical commitment for mangers in the financial business world 

The ethical environment is builds upon the employee and authorities’ ethical behavior.  A company’s ethical climate establishes the company professionals’ commitment to the company. The financial managers play significant role in building an effective ethical climate in the company. Financial managers should take the most influential role in keeping the law, maintaining the industry standards and engage in ethical practices (Gitman, Juchau and Flanagan 2015). In financial sector, ethics is primarily focused towards the customers, investors, stakeholders and corporations. The managers must control the activities of financial companies, while keeping the ethical value by implementing right ethical values. In a survey among thousands of employee, a significant segment of employees believe that the organizations engage in ethical misconducts for profit (McManus and Subramaniam 2013). Another study by the same researchers showed that in creating the ethical misconducts the managers’ behavior and management’s encouragement to practice wrong ethics have always played important role. The case studies help to understand the contemporary practices and trends in the accounting and financial business and sheds lights on the darker corners of the business.

Leadership Ethical Value in Financing  

The finance managers manage the profiling, managing project risks and the whole of the management of the company. The first part of this century suffered from a number of businessl failure because of ethical misconducts. The WorldCom and Enron scandals are examples of ethical failure in the finance and accounting business (Bazerman and Sezer 2016). The companies should encourage the financial managers to be more honest. The managers must make the company feel the need to implement ethical practices in as many circumstances as possible. The managers on the other hand, should initiate ethical practices among the service workers. The development of a program is not enough; the managers must implement the program effectively among the employees. There should be a process evaluation by the managers at a regular interval. There are situations when the employees do not get clear knowledge regarding the ethical practice. There face the moral dilemma due to their lack of knowledge, in such situations, it the managers who help them with the experience and guidance. The difference between the effective leadership and ethical leadership in finance must be diminished (Eisenbeiss, van Knippenberg and Fahrbach 2015).

(Source: Made by Author)

The new of confused employees look up to the leadership. The managers’ serious engagement in effective ethical practice influences the employees to follow those. The failure in practicing ethics has caused long lasting harm in customer confidence in the finance sector (Kidwell et al. 2016).

Stakeholders, ethics and managers

The relationship between the financial professionals and the stakeholders is integral part of finance business sector. The leaders must realize that the stakeholders’ satisfaction is the key to the bottom line and financial success of the company (Weiss 2014). During the monetary transaction process or currency exchange, the financial managers must be fair and transparent to the business partners (Carlon and Downs 2014). The financial managers’ position highlights the importance ethics in the finance world. The main ethical managerial principles follow integrity , confidentiality, objectivity and professional behavior. Financial managers deals the financial transactions with their valued customers which are important in the decision making (Brigham and Ehrhardt 2013).

The managers can maintain the ethical continuum in the following steps.

Figure: Ethical Continuum

(Source: Made by author)

For the future finance managers, there will be situations which will tempt them to compromise with their ethical judgment. Then the education and the knowledge about ethics will help them to maintain his commitment. In a survey the people with hidden identities act ethically and te people who act ethically publicly are different in respect with their internal ethical knowledge (Das 2015). Amalgamation of ethical practice and theory can result in ethical practice for the company in the long run.

Solution

The finance education system must focus on the ethics curriculum. The students must be trained from the starting about the ethical practice in the profession. The teachers must engage them in the experiments. The evaluation process should be there so that they can rectify the problems and would not repeat those. Finance studies are now giving importance to the ethical studies (Swanson and Frederick 2016). The serious practice of ethical education in the finance studies will help the whole of finance business. From the core to surface, from the managers to the employees the ethical knowledge and practice of ethics will bring a practical and psychological change. The work culture will improved a lot, which will result in the company profitability. As the managers hold the authoritative positions in the financial company, they possess the power to control and manipulate. The must act very carefully while dealing with customer or stakeholders’ information, money related or other. They must never disclose the information to anyone external the concerned chain. The ethical practice can be achieved in many ways. Some are discussed along with the problems in the previous section. Financial experts are always working out other more effective solutions to deal with the ethical problems. GIPS is one of the practice the financial experts are highly suggesting for the financial managers to practice and execute to resolve the issues.

 Methods of calculation, constructing the composites, data input, real estate and private equity all come under the GIPS or The Global Investment Performance Standards (Winbladh 2013). GIPS identifies the ethical misconducts. There have been practices of not choosing representatives for account measuring, treating best accountants as an average one or manipulating the time period. This is not a law and only the managers have the power to comply this (Littlejohn et al. 2016). The managers create an environment which is systematized and formalized. The managers should accept the responsibility only if the proposed framework in integrated.  The managers can refuse supervising if a proper procedure is not being followed. The rules were previously selected and established. The managers must see that the rules were written in simple language. The managers must engage in utilizing such marketing tools like code of ethics to develop an ethical ground for the company.  

Conclusion

The ethical failures have shaken the business world. The finance market has been suffering the effects badly. The experts are suggesting the leaderships and companies to engage in ethical practice to avoid and overcome similar issues. The fresh or future managers are getting trained in ethical practices for the company’s benefit.  However practicing highest level of ethics can cause loss in profitability for the company, including bankruptcy. The discussed GIPS framework can be an effective solution and gradually become a standard one in the financial sector.

References

Bazerman, M.H. and Sezer, O., 2016. Bounded awareness: Implications for ethical decision making. Organizational Behavior and Human Decision Processes, 136, pp.95-105.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Carlon, D.M. and Downs, A., 2014. Stakeholder valuing: A process for identifying the interrelationships between firm and stakeholder attributes. Administrative Sciences, 4(2), pp.137-154.

Das, M., 2015. Need, Relevancy and Impact of Ethics Education on Accounting Profession.

Eisenbeiss, S.A., van Knippenberg, D. and Fahrbach, C.M., 2015. Doing well by doing good? Analyzing the relationship between CEO ethical leadership and firm performance. Journal of Business Ethics, 128(3), pp.635-651.

Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.

Kidwell, D.S., Blackwell, D.W., Whidbee, D.A. and Sias, R.W., 2016. Financial institutions, markets, and money. John Wiley & Sons.

Littlejohn, A., Milligan, C., Fontana, R.P. and Margaryan, A., 2016. Professional learning through everyday work: how finance professionals self-regulate their learning. Vocations and Learning, 9(2), pp.207-226.

Subramaniam, N., McManus, L. and Cameron, R., 2013. Using a web-based, longitudinal approach for teaching accounting ethics education. Journal of Business Ethics Education, 10, pp.143-167.

Swanson, D.L. and Frederick, W.C., 2016. Denial and leadership in business ethics education. Business ethics: New challenges for business schools and corporate leaders, pp.222-240.

Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.

Winbladh, J. (2013). Ethical Issues Facing the Financial Service Industry. [online] Available at: https://www.cutn.sk/Library/proceedings/mch_2013/editovane_prispevky/8.Winbladh.pdf [Accessed 25 Jul. 2017].

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