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The Ethical Issues in Financial Management Report (Assessment)

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Updated: Aug 20th, 2019

Financial managers play a dynamic role in an organization. As a matter of fact, the main duties of financial managers are to make decisions regarding investments and manage the financial portfolio. The decisions are not about which securities to hold but what business opportunities to pursue and finance (Van Horne & Wachowicz 2).

The ethical issues in financial management fall into two main categories, which include ethical obligation or duties of financial managers of a corporation and ethical justification for organizing a corporation with shareholder’s control (Weaver & Weston 13). The former category is based on the decisions made by financial managers in fulfilling the financial function of a corporation.

It involves the fiduciary duties of the financial managers to a corporation and its shareholders (Weaver & Weston 13). The financial manager’s ethics is based on widely accepted codes of conduct (Weaver & Weston 13).

A financial manager must be trusted by the company’s stakeholders; he/she must conduct his/her duties with integrity and exercise fairness to all the stakeholders (Weaver & Weston 13). A reputation of integrity enables a financial manager to attract other employees to believe in the company’s vision and work towards implementing the company’s objectives (Weaver & Weston 13).

Self interest by financial mangers usually leads to greed and selfishness. If this greed is left to dominate an individual’s thinking, it usually causes a disorder known as ‘accumulation-fever’. It, therefore, makes a financial manger start indulging in illegal deals at his/her work place so as to accumulate his/her own wealth.

The focus of such a type of a financial manager shifts from the long-term company objectives to the short-term individual objectives (Lynch 148). Financial managers are always supposed to be trusted by the company’s shareholders and their colleagues.

Self interest that is a form of unethical behavior can create a great loss to a company (Lynch 148). Financial managers are always entitled to a salary package for the services they offer to a company, but the company does not allow them to use the company finances for their own selfish reasons (Lynch 148).

This form of behavior will cause a company to make huge loses or even collapse. It can also lead to loss of confidence in the company’s management by the junior employees (Lynch 148).

Olympus, a world renowned Electronics Company, was reported to have engaged in a big financial statement fraud (Tabuchi 1). This report was published by New York Times newspaper on November 7, 2011 on page B1. The paper indicated that the economic fraud committed by Olympus could be one of the biggest financial frauds of the past decade (Tabuchi 1).

On November 8, 2011, Olympus management reported that more than one billion dollars payouts were utilized to finance mergers with other companies. The paper also reported that the company issued a statement which said that the money which had been alleged to have been paid for the mergers had in fact been utilized to mask heavy losses made since 1990 (Tabuchi 1).

The investigative panel revealed that Olympus had made 687 million dollars in fees to pay an obscure financial adviser over its acquisition of ‘Gyrus’ in the year 2008 (Tabuchi 1). In fact, that amount of money was roughly a third of the two billion dollars acquisition price (Tabuchi 1).

Works Cited

Lynch, James. Banking and finance: managing the moral dimension, Cambridge: Gresham Books, 2004. Print.

Tabuchi, Hiroko. “Olympus Hid Investing Losses in Big Merger Payouts,” New York Times 7 Nov. 2011: 1. nytimes.com. Web.

Van Horne, James C. and John Martin Wachowicz. Fundamentals of financial management. 13 ed. Essex: Pearson Education Limited, 2008. Print.

Weaver, Samuel and Fred Weston. Strategic financial management: applications of corporate finance, Ohio: Mason Publishers, 2008. Print.

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