Financial management

    (1) Discuss the key ethical issues that need to be considered in the financial management of your chosen organization. In you discussion you are required to explain the ‘agency problem’ and how it might apply to your chosen organization. Paragraph 1 – Bribes (175 words, 4 citations) • Define brides, nepotism, and cronyism – dishonestly persuade by gifts, preference to family and friend etc. • Negatives consequences of these – reputational damage, litigation, boycotts, falling share prices, fines from government, execs could face jail time etc… which have far reaching and negative financial consequences • Provide an example from your company illustrating the negative consequence • Benefits of avoidance of these issues (establish links ie discuss means to establish links) - Link with stakeholder engagement eg. Improved supplier confidence, attraction of new business partners, improved perception from government - Link with financial benefits eg. Shareholder confidence, higher share prices and market valuation, tax breaks from government - Link with CSR – improved reputational advantage from community and society. Provide a company example illustrating these benefits. Economists argue there is no such link between CSR and improved financial performance • Possible strategies to mitigate eg. Establishment of a code of conduct, code of ethics, better corporate governance, laws, regulations from stock markets eg. ASX. • Codes (discretionary) are more common in the UK than US – Practices differ according to jurisdiction • Does your company have a code? How effective is it is mitigated bribes? • In the US, laws (mandatory) are established to deter brides etc.. (Sarbanes Oxley Act 2010 ie law/mandatory not optional). Explain what these entail • Limitations with codes of conduct eg. Not enforceable by law, depends on moral suasion • But laws are not necessarily more effective than codes. Still many infractions of laws in the US eg Enron scandal etc… • Comparison with a rival