Ethics in the corporate finance is becoming a widespread issue. With all of the corruption in business today and lack of ethics, people are being misled and a losing a fortune of their income to the greedy corporate giants. Far too often we hear or read about a company that is accused with corruption and the enormous amount of money that they have wrongfully taken from the public, or from people within their own corporation. There is a huge lack of and disregard for ethics in the business world. Once considered Taboo, it seems as though unethical behavior in business is now the norm. The government expects businesses to uphold ethical standards on their own without government interference. When they break the law, the government gets involved. There have been regulations put into place to curve and ultimately cease altogether the amount of corruption in the corporate world.
Legislators are cracking down on unethical and criminal behavior that occurs within businesses. Since all of the recent corruption in business in the last few years, new legislation has come about to govern how companies handle the financial reporting of a company. John R. Boatright in “Individual Responsibility in the American Corporate System: Does Sarbanes-Oxley Strike the Right Balance? argues that governing laws is a method of deterrence is correct. If companies know that they are mandated to follow certain guidelines and adhere to certain rules, than that may deter them from criminal wrong doing and committing fraud.” The Sarbanes-Oxley Act did not develop because all business were conducting business ethically and are doing the right thing. Many companies have defrauded their stakeholders, employees, and the public. They have cost Americans billions of dollars due to their unethical behavior.
There should be individual responsibility attached to the fraud that exists within these companies. With all of the financial analysis tools that are available today, accountants and top management are able to produce financial disclosures and give accurate projections of a company’s finances. These tools should make the process run more smoothly being as though they now have the capabilities to produce profit and loss statements, future projections, accrual and cash statements, and a wealth of other tools to make keeping an accurate account of their financials relatively simple. The profitability and rate of return for a company can be shown through use of the above mentioned tools. This will assist in giving a better outlook to investors, shareholders, etc. Giving the true and accurate financial outlook of a company can better help an investor or anyone who has in interest in the company to make a more informed decision as to whether or not they will go into business with the company.