Ethical Issues
Ethics refers to moral principles and it’s all about how the challenge of doing right is met, even when doing so will cost more than what a business is willing to pay. The pressure to achieve short-term financial goals may make managers to engage in unethical practices or behaviour in to appease the shareholders on the financial status of a public firm. The law requires that public companies must disclose material information to the shareholders. The law also makes it unlawful for these firms to omit disclosing material fact in a manner that will mislead the investors and to make statements of facts that are untrue. Apart from these rules being based on law, they basically spell out some of the ethical standards that the managers of the companies should subscribe to so as to avoid the manipulation, deception or defraud to the investors. However, this law cannot be equal to the law of God which requires obedience that is in good faith but not for fear of punishment (Cafferky, 2015).
The book of Leviticus 19:11 stipulates that one should not one should not steal, deal falsely or lie to others. This commandment prohibits not just falsehoods, lies and mistakes but it prohibits any pointless and distracting communication that may negatively affect others (Fredrick, 2007). The pressure that is normally placed on companies to improve their financial status normally arises from the boundaries placed on stock exchange market and the quotation systems that are automated by national or small capital markets and the NASDAQ. These measures require firms to comply with stringent regulatory and commerce guidelines which are difficult to attain at the beginning of the year. Moreover, the investors are usually assessed on the overall yield of their portfolios and a comparison is made with the competitors’ results. What is of more important is the firm’s performance in a particular short run, and the managers of the firms are then assessed in accordance with this short-term performance (Salter, 2012). The managers may be fired or graded according to firms outcomes in the short-run even if they believe that there is a promise for the long-term improvement in the financial performance. This short-term perspective may make the managers to engage in unethical practices like packaging various assets with a lot of debt in order to provide the investors with a leveraged exposure to the market. The firms’ mangers engage in negligent behaviour that are completely unethical and fraudulent such that any disclosure hides the truth, violates the rules of fairness and this cause considerable losses to unsuspecting and poorly informed investors. This can also be termed as negligence. Like normal human beings, the mangers are susceptible to estimating their capability of doing right and at times like these, they find themselves engaging in unethical behaviour even where they did not mean to. They do this as a result of the kind pressure they face in order to ensure that the firms reach the desired short-term financial achievements. The investors put a lot of pressure on the executives and corporate boards so that they can achieve short-term profits in stock price while disregarding a balance between long-term investment, integrity and risk management since their major aim is to beat peer investors and combined short-term indexes (Salter, 2012). This can be regarded as a way of inviting the vice of corruption.
The point in the Leviticus 19: 11 is about the relational aspect of disclosing the truth or giving false information. To a Christian, any lie is not only a misrepresentation of cold fact but also a betrayal of trust that people have on another person. The need to control output of managers of public firms may cause them to neglect the ethical standards that they are expected to observe so that they forget need for not conveying false information to other people. The bible verse instructs someone to distance themselves from falsehood which includes misleading information on press releases, deceptive labels, packaging or advertisements. When the firm management is under scrutiny to provide best performance, they may turn to may result to keeping the debts of the books, by creating paper companies that can hold the debts, and provide financial statements to shareholders and government that are entirely an entirely different set. Such practices in accounting make the firms look very profitable and the stakeholders and more so the public have a false image. Such unethical behaviour make many innocent investors to lose their money and trust in the said firms. This also applies to public companies that are owned by the government, which may come up with policies that can have negative impacts on the entire market. The firms may be under the pressure from the authorities to increase public expenditures before the elections so as to win over more votes. While such directions may achieve the short-term financial goal of improved expenditures, they may be unethical since they are not done in good faith, and may have social and macro-economic consequences (Fredrick, 2007). Any practices that lead to falsehood or insincere management practices go against the Christian ethical standard.
References
Salter, M. (2012).How Short-Termism Invites Corruption ...And What to Do about It.5-37. Retrieved from: http://www.hbs.edu/faculty/Publication%20Files/12-094_8260785f-0417-45d1-8abc-0afe86f87eaa.pdf
Cafferky, M. E. (2015). Business ethics in biblical perspective: A comprehensive introduction.
Fredrick, R. (2007). A Companion to Business Ethics. Chichester: John Wiley & Sons. 291
NKJ Bible: Leviticus 19:11
