Ethics and compliance in the modern business environment have become an integral part of a firm that needs to be integrated in the daily running of activities. Ethics or ethical behavior by definition refers to that conduct which is considered as morally good and/or right from the societal context. The imperatives of successful performance in today’s business environment demands that ethical practices be engraved in organizational decision making (Keown, A. J. et al, 2005). A firm should look beyond what it considers best in the organizations interests to also that is in the best interest of the society. Compliance on the other hand refers to more than just merely implementing the legal requirements in financial reporting. It goes a step further to incorporate a managerial function that inculcates the values of diligence and show of skill in the way the business carries away with its daily activities. Compliance therefore addresses such issues as to whether there re any policies and effective communications thereof within the organization that enhances an ethical culture within the organization. Ethics and compliance are somehow interdependent in that, it is almost impossible to have one of those working effectively without the other one.
The role of ethics and compliance in Wal-Mart’s financial environment
The financial environment of any firm is comprised of three elements. These are; finance, investors and markets. The finance element revolves around how the firm goes about managing its finances to drive in profits and maximize shareholder value. The finance element therefore is primarily concerned with financial decision making in a manner that enhances the firm value. The second element of the financial environment is investors. Investors are those individuals and institutions that invest in the firm thereby providing it with funds to run its day-to-day activities. The third and final element in the firm financial environment is markets. Markets offer a platform where both investors and financial managers can interact via the firm. Markets facilitate the flow of funds between investors, the firm and the finance mangers and vice versa. Since all these three elements are interdependent, the role of ethics and compliance is to foster the relations between the three.
In the case of a business such as now the Wal-Mart, ethics and compliance are of great importance as without them it is very difficult to establish trust and credibility that usually holds together the three elements (Keown, A. J. et al, 2005). The financial managers at Wal-Mart for instance will find it very difficult to convince investors to commit their funds in the firm if the investors have got no trust and credibility in them. Since Wal-Mart is a publicly traded firm, as a result of lack of trust by investors the market will also feel the pinch as potential investors withdraw their interest in the firm’s shares causing the firm to tumble. The role of ethics and compliance therefore is to restore and sustain the trust and credibility required in the financial environment to be effective. To ensure this is done, Wal-Mart has not only in their financial reporting engaged an independent opinion of the authors to affirm the firms commitment in following the legal and regulatory requirements of financial reporting but it has also gone a step further to disclose other information that it deems necessary to establish credibility. In addition, the firm has also a wide array of experienced members of the board from diverse backgrounds. Through establishing such measures of high ethical conduct and compliance, Wal-Mart has been able to establish a very strong brand perception and image the world over.
Conclusion
Looking at how successful Wal-Mart is as well as other reputable organizations that have been able to maintain high standards of ethical conduct and compliance, it is no doubt that it actually pays to d the right thing. It is therefore crucial that in an environment that has become truly global, trust and credibility will be the key values that will separate successful and unsuccessful organization and there’s no better way than to ensure ethical compliance.
Reference
Keown, A. J. et al (2005). Financial Management: Principles and Applications, Tenth Edition. New York: Pearson Prentice Hall.