Acting Unethically: Understanding Consequences of Economic Scandals


by Jennifer Burns - Date: 2007-01-29 - Word Count: 528 Share This!

In order to understand the value of ethical business practices to community in general, it is essential to discuss the subject matter from the perspective on the economic downturn brought in recent years by ethical malpractices. The era of the late 1990s, the time of skyrocketing stock markets as a result of wide spread Internet technologies, emergence of new business models, aging workplace and war for talent - all factors combined led to lowering degree of trust in transparent business operations by the general community. While expanding economy resulted in higher level of employment, the war for skilled employees was started. This led to formation of the image that some employees and managers were above the rules. Consequently, this resulted in unethical behavior, as some stock option rich executives inflated the market in order to cash their options. Investors continued on financing businesses that were engaged in doubtful practices and profitability and risk of which could be put to doubt; whereas this, in turn, contributed to higher pressure among corporate executives.

Consequently, in 1990s the new accounting tools were innovated to boost profitability, as perceived, whereas in reality, an organization could not cover the amount of assets reported on the balance sheet. The brightest example of this is Enron - company used sophisticated accounting practices to conceal the debt, whereas investors realized very little about the situation of the company. Consequently, the arising conflicts of interests could be balanced in traditional ways. The advent of Internet followed by overall aging of the population also contributed to doubtful ethical practices. As the level of crime is dependent on the age constitutes of society, a higher level of education among the youth made it easier for people to engage in fraudulent activity. These factors led to formation of the new business environment that now has to make up for mistakes in the past. A series of high-profile scandals placed doubt in the hearts of investors and the general community and put overall market profitability to question. As people are now afraid of investing in doubtful businesses, ethical organizations are now suffering significant losses having to make up for the investor mistrusts and rising levels of risks. This places additional pressure of profession of a Human Resource manager, as the one bearing direct responsibility for ethical malpractices, whereas failure of the past, most likely will take long to be corrected.

What are the outcomes of the scandals? From the economic standpoint, businesses now will be enjoying a lower investor activity that is followed by higher interest rates for raising money. As the role and effectiveness of accounting profession is put doubt after the scandal with Enron, there is a higher level of risks associated with investment. As ethical scandals undermine public trust, market is realizing higher interest rates, lower investment returns, and consequently, overall economic performance is not realized to the full. it is obvious that the role of ethical practices is huger and is directly related to overall company profitability and economic well-being of society.

Jennifer Burns is a custom essay writer at Custom-Writing.org, academic assistance. Being actively engaged in report writing herself, Jennifer now assists student with writing a critique paper.


Related Tags: business ethics, business malpractices, essays on business ethics

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