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Conclusion

- Company law and GAAP require proper accounting records:

- Do your records comply?

- Do you need to get closer to your records?

- Executives have to state that adequate internal controls exist -are yours adequate?

- Do you communicate adequately with your auditors?

- Is your corporate governance adequate and robust?

- Some proposed strategies or tactics might well be unethical, if not illegal - how do you check compliance?

Revision and learning pointers

You are probably well aware of the difficulty in defining what is ethical. The questions below might be useful as a 'test' of your own and your colleagues' views on what is ethical. How ethical are you?

How would you respond to the situations outlined below - using the scoring system below?

1 A utility company reviews and ups the monthly direct debit payments from customers (at a time of no significant wholesale energy price changes). When challenged by a few customers, the company spokesman replies: 'Oh, it is all right - if you have overpaid it will be refunded at the time of the annual reconciliation.'

2 A bank sales team member suggests that a customer take out

a new loan, consolidating the new loan with an existing one to give a lower total monthly payment. The customer accepts the offer. On completion of the process the bank then charges a cancellation penalty on the old loan (which is a standard term in the loan documentation) - this was not highlighted at the time of the offer.

3 A railway company has lost customers paying first-class fares due to the recession and now more so with politicians' virtuous behaviour. It has responded by changing its first-class offering to 'standard premier' (at a cost of £10 more than the previous first-class equivalent) so that those banned from travelling first class still can. The fare is marketed as a standard fare but with the benefit of travelling in first class with free meals.

4 A bank was one of the first companies to experiment with reducing interest payments for customers who had fallen behind, in order to keep them from losing their homes. Customers were encouraged to enter into a 'trial' mortgage modification programme that reduced their payments, only to find out later that they had been denied a permanent modification and owed more money than they would have done if they had not entered the programme. The loan modification application stated that borrowers were liable for past due amounts, including unpaid interest, if they were denied a permanent modification. Late fees were to be waived if permanent modifications were granted.

If we give a mark of 4 for ethical down to 1 for unethical, how did you do? I scored 4, but is this too pious a view?

These are all real cases and I have found that generally only questions 2 and 4 get a majority unethical vote. Conclusion: ethics is a difficult topic to pin down precisely.

 
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