Ethics in Finance Finance is one of the most technical aspects of business administration, both in theory andpractice. Without proper financial management, no organization can survive and succeed. Hence, this is the area requiring most of the concentration of business experts. In the same way, ethical standards are considered very important in the corporate world. The increasing competition in the corporate world is leading to many unethical practices leading to short term gains for corporate entities. These ethical issues are not confined to employees’ behavior at work place but it is spread to the areas of marketing and finance as well (Aragon 1).
This paper casts light upon the ethical consideration required in the field of financial management. Companies have various rules regarding processing payments of their suppliers and distributors. It is commonly observed in business practices that the suppliers, who are in good books of finance personnel, get their payments processed quickly. On the other hand, the suppliers who do not have favorable relations get paid in the end. It also happens in corporate world that finance personnel tend to ignore the discrepancies in the record of suppliers’ whom they like.
It is interesting to mention how suppliers become favorite ones to finance personnel. Most of the times, they share a percentage of their payment with finance people so that they process their payments quickly without highlighting any issue in it. There is high possibility of processing fake bills as well against a promised share of an amount for the processing authority. It is also observed that finance department is the one which is always against the practices of incurring expenses.
This is the reason; it holds most of the activities which require budget allocation. It has much pressure from the upper management to control the expenses and the most effective way to do is not processing the letters requiring budget allocation. People need to follow up their orders frequently to get them done. If somebody does not follow up, there is remote possibility that his activity will be cleared. It is an unethical practice and finance department should perform their functions without requiring follow up from the people behind these activities. Unethical practices are commonly seen in procurement related activities.
The internal people have deals with the vendor to get their products sold against the agreed share of profit. When the need of particular good arises, the procurement people try their best to get it purchased from their favorite vendors. At times, the internal staff gets into conflict upon their favorite vendors. The ultimate result is the loss of company which actually needs the products and can’t get it because of dishonesty of procurement people. It is also seen that these people set the high quote prices for particular good so that they can also enjoy their share of commission out of them. The employees belonging to other departments feel insecure if they are not in the good books of finance people.
Everybody assumes that sooner or later they will have some task to be done by finance people and if they go against these people, it is high probability that finance people will not get his work done. Conclusion Finance department is the backbone of the company (Daft 508) and the main player in setting the organizational repute in internal as well as external stakeholders.
There is strong need of adherence to ethical values in Finance so that company can perform to the maximum. If there are leakages and transactions are carried out on favoritism only, the organization is bound to suffer because of its low credibility and poor financial health. Recommendation The organization should make finance people understand that the organization trusts in them that is why they are allocated in the most sensitive department. They should prove that they are trustworthy and ensure compliance with organizational policies and standard operating procedures (Boatright 16).
The organization should develop such a system in which transparency (McEwen 6) and fairness (Duska, Duska and Ragatz 14) is embedded to the core. The system should teach the ethical values to the employees. It must be strong enough not to let anybody go against the standard operating procedure despite one’s wishes. As the world is going through digitization and use of information system is has become part and parcel of organizations, it is important to make sure that the information systems are strong enough to cope with vulnerable activities and are protected from all kinds of threat (Champlain 10).
These measures though appear effective, need strong connection with the determination of organization to develop an ethical culture among its employees. Works Cited Aragon, George. Financial Ethics: A Positivist Analysis. Oxford: Oxford University Press, 2011. Print. Boatright, John. Finance Ethics: Critical Issues in Theory and Practice. New Jersey: John Wiley & Sons, 2010. Print. Champlain, Jack. Auditing Information Systems. New Jersey: John Wiley & Sons, 2003.
Print. Daft, Ricard. Organization Theory and Practice. USA: Cengage Learning, 2008. Print. Duska, Ronald, Duska, Brenda and Ragatz, Julie. Accounting Ethics. UK: John Wiley & Sons, 2011. Print. McEwen, Ruth. Transparency in Financial Reporting: A Comparison Between IFRS and US GAAP. Great Britian: Harriman House Ltd, 2009. Print.