Ethics in Financial Management

 Ethics in Financial Management

           Financial management pertains to how effectively money is managed. Organizations have financial departments that manage the financial impacts of the organization. These impacts are based on how the department has made financial decisions against the needs and goals of the organization. The behaviors of the organization’s leaders can influence the market value and the price of stocks. The market considers capital budgeting to be a major component when determining market value (Investopedia, 2017).

            When an organizational leader or manager chooses to raise the business’s debt level to finance investment needs, this is considered to be risky and unfavorable (Investopedia, 2017). The Sarbanes-Oxley Act was put into place in 2002 and is one way to control the level of risks an organization can make (Amadeo, 2016).  Organizations could no longer loan monies to executives and prevented whistleblowers from losing their job simply based on their informing of unethical actions (Amadeo, 2016).  

            Although the financial ownership of loans and expenses taken by the company is solely the company’s responsibility to repay, this Act holds the CEO personally responsible for any accounting infractions (Amadeo, 2016).  Some of the relevant activities that a corporation can do to decrease overall unethical practices is to blend several areas of business standards. Create standard policies and practices to unify the organizations expectations (Douglas, 2012).  Provide proper training and the development of the employee understanding of what is unethical and how to utilize violation reporting (Douglas, 2012).  Putting controls in place that will allow the risk management team to provide regular audits will reduce the unethical opportunities (Douglas, 2012). 

Reference

Investopedia. (2017). What are the different ways a CEO could influence stock prices? Retrieved from http://www.investopedia.com/ask/answers/010915/what-are-different-ways-ceo-could-influence-stock-prices.asp

Amadeo, K. (2016). Sarbanes-Oxley summary: how it stops fraud. Retrieved from https://www.thebalance.com/sarbanes-oxley-act-of-2002-3306254

Douglas, E. (2012). 7practices to prevent unethical behavior. Retrieved from http://blogs.edweek.org/topschooljobs/k-12_talent_manager/2012/10/7_practices_to_prevent_unethical_behavior.html