Ethical Issues in Financial Managment

Finance Management-

Financial management focuses on ratios, equity and debt. Financial managers are the people who will do research and based on the research, decide what sort of capital to obtain in order to fund the company's assets as well as maximizing the value of the firm for all the stakeholders. It also refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management.

Ethical Issues Faced by Financial Managers

Financial managers prepare reports, oversee accounting functions, plan investment strategies and direct cash management functions. They are required to uphold the highest ethical standards because internal and external stakeholders depend on transparent, timely and complete financial documents to make decisions.

Accuracy -

A company’s financial manager ensures that all financial publications accurately and fairly reflect the financial condition of the company. Accounting errors and financial fraud, such as what was in the cases of Enron and WorldCom, damage the interests of shareholders, employees and affect confidence in the financial system. Some organizations document ethics guidelines specifically for a financial manager.

Transparency -

           Financial documents reflect a company's performance relative to its peers, and it’s internal strengths and weakness. Transparency means explaining financial information clearly, especially for those who aren’t familiar with the company’s operations. Financial managers should not hide, unclear or otherwise render relevant financial information impossible for ordinary shareholders to understand.

            

Timeliness -

                Timely financial information is just as important as accurate and transparent information. Management, investors and other stakeholders require timely information to make the right decisions. Many cases exist of a publicly traded company’s stock reacting sharply and negatively to negative earnings surprises or unpleasant product-related news.

Integrity - 

              Financial managers should strive for reliable integrity. Customers, shareholders and employees should be able to trust a financial manager’s words. Managers should not allow prejudice, bias and conflicts of interest. Such as an investment position in a stock. The structure of certain stock-based incentive compensation schemes could also result in ethical issues.