Current Issues in Management - Essay Example

Current Issues in Management Table of Contents Table of Contents 2 Introduction 3 Section Ethical Business Practices and Its Influences 3 Section 2: Impact of Legislation on Business Practices and Bankruptcy 7 Conclusion 10 References 12 Bibliography 16 Introduction Ethical business practices are strict rules, policies and actions, which are enacted in an organisation based on which members and employees are required to conduct operations in accordance with moral obligation and responsibility. The ethical practices are incorporated in businesses in order to maintain and attain long term stability, goals and objectives for a bright future. A positive environment will help in creating a strong ethical code of conduct for increasing the effectiveness and efficiency of a business. The legislation framed for the maintenance of ethics and bankruptcy is taken into consideration for the sustainability of a business (Jennings, 2014; ACCA, 2012). The objective of the essay is to explore the concept of ethical business and its influence on stakeholders and a society. The need for legislation and its impact on a business is also considered, taking into view the case of “bankruptcy”. Section 1: Ethical Business Practices and Its Influences Business ethics are the strong and the rigid guidelines followed by every company for the long term sustainability of a business. Business ethics is one of the most important aspects for managing enterprises and their long term existence in the emerging global market economies. Ethical business practices are being incorporated in a business in order to encourage transparency, truthfulness and accountability. Ethical practices in any business organisation, helps in strengthening the organisations credibility and confidence in the stakeholders (OSullivan & et. al., 2012). The ethical business practices are taken into consideration for the expansion of businesses and long term profitability without any disruptions. In order words, it can be stated that ethical business practices have various facets, one being the selection of employees, their attitude towards work and fairness they posses towards their organisational culture as well as work environment. Business ethics or ethical business practices are of significance, as it is directly related with the reputation along with the goodwill of a company in the worldwide market segments (Slideshare, 2014). Business practices are crucial for organisations, as the practices help in bringing transparency for future business ventures. Furthermore, business practices help in providing necessary ‘market-oriented lawful framework’ along with trustworthy discrepancy resolution procedures, so that the fairness in delivering of quality services are maintained accordingly (Ioannou & Serafeim, 2012). Contextually, the motive of every business organisation is to enhance profit and to satisfy stakeholders by delivering quality services and valuing ethics, policies along with rules of a business. It is evident that responsible conduct in performing business operations aid in contributing and enhancing a society through fairness and good governance. In this regard, it is worth mentioning that legislation in a business and role of the government is strong in the business functionality to promote ethical business practices and approaches for long term sustainability (Ioannou & Serafeim, 2012). The performance of a business is directly related to the economy of a country. Any non-adherence of the ethical business practices adversely affects the reputation of a business and finances of a nation as well. Fairness and honesty are the basic value of a business, which helps in enhancing stakeholder’s value along with legislation obligations (Ferrell & et. al., 2014). Ethical business practices influences a business by minimising risk from various threats and accordingly, helps in reducing the operational cost of a business. Ethical practices will also assist organisations by safeguarding employees and agents. The goodwill of a business largely depends on the performance and ethics of employees along with the other related stakeholders. The overall performance of a business depends on every aspect and department including ethical financial recording and marketing process (Bruckner, 2013). However, with the increasing competition in the market segments, illegal business practices are becoming the major concerns, which leads to various outcomes that include bankruptcy among others (Institute of Business Ethics, 2012). The advantage of the ethical business practices is that abiding by the norms of business will possess a strong competitive advantage at large. Moreover, it helps in increasing the access to credits, foreign investments and enhances the reputation of a business in the international front. The purpose of business ethics are to meet the code of conduct and ethical programs responsibly to avoid fraud and non-compliance (Monahan, 2012). The responsibility of a business is to improve performance in the global market and increase profitability by meeting the changing demand of customers at large. The business faces many issues regarding conduct, quality, transparency, health of an organisation along with compliance with law and other standards. From the evaluation of the past history regarding business ethics, it is evidential that due to the lack of business ethics, proper code of conduct, transparency and employee ethical responsibility led to various negative issues such as bankruptcy and cooperate fraud and dissolution of an organisation. The companies facing these issues led to loss of reputation, integrity and affected the economy of a country at large. This is when the need for legal framework and compliance of ethical structures and policies came into effect to a considerable extent. For instance, the event of Enron was one of the remarkable incidents, wherein, a business was declared bankrupt, which is owing to the largest unethical business practices in the history of America (Ferrell & et. al., 2014; Crown, 2012). The case of Enron can be reflected as one of the best examples of the lack of business ethics and ineffective incorporation of the legislation for a company. The failure of business ethics in case of Enron was due to the loopholes in policies and management structure. Enron did not follow proper accounting guidelines and auditing principles owing to which the company has been performing business operations unethically, which adversely affected stakeholders’ right and economic environment. The need for transparency, integrity and ethical management support lead to the failure and bankruptcy of the company. The case of Enron cites the need for a proper legal framework, as the scandal was faced due to the lack of proper monitoring and ethical business operations. Another example in this regard, is the fall of Lehman Brothers, which was also due to the lack of ethical business practices. Lehman Brothers also collapsed owing to inappropriate combination related to complex derivatives, rating agencies’ complacency and intricate accounting principles. These events of Enron and Lehman Brothers gave rise to the need of legislative framework for conducting business operations ethically (Bennett & et. al., 2013; Azadinamin, 2013; Monahan, 2012; Bris, 2010). The legislation framework will help businesses to meet the terms of ethical obligation, so that customers do not have to suffer the consequences of unfair business practices. Moreover, the strong legislation and legal actions or policies will restrict a business and employees engaged to reduce the illegal activities, causing negative effects on the public. The government policies and legal rules are required to be implemented, as rules as well as regulations offer supervisory role in maintaining business ethical practices (Zimmerman, 2014). The framework of legislation will monitor the work procedures and behaviours of a business entity and incorporate the ‘antitrust law’, which will ascertain that businesses are coordinating activities both internally and externally in an ethical manner. The implementation of legislation will help a business to reduce the number of scandals, financial penalties and bankruptcy. In this context, it can be stated that government legislative framework are required to reduce scandals and to maintain transparency (McPherson, 2014). However, the ethical business practices within an organisation will lead to the adherence of business activities with transparency and profitability for an economy at large (Salehi & et. al., 2012). Another major example, with regard to unethical business practices was the fall of WorldCom wherein the finances and accounting transactions were maintained in an illegal manner. The company had to face bankruptcy affecting the related stakeholders. This event was due to the lack of ethical business practices and weak legislative policies within the organisation (Slideshare, 2013). Section 2: Impact of Legislation on Business Practices and Bankruptcy As per the case “The Year in Bankruptcy: Part I”, it is observed that the issue that several businesses are facing due to the non-adherence of the ethical practices is bankruptcy, which is not only affecting a business at large but are also affecting the global economy. As per the case, it is stated that during ‘Great Recession’, several companies suffered losses and huge economic turmoil due to the fall in the mortgage-foreclosure rates. The decrease in the business performance during the recession gave rise to high unemployment rate. It was during this period that several companies are involved in unethical practices due to non-transparency in the ethical practices. It was during this tenure when the risk for companies increased for increased conduct of unethical business practices. Moreover, the filing of bankruptcy increased to a considerable extent due to the lack of unethical practices. Due to the increase in the economic turmoil and rise in the level of bankruptcy, the legislative framework was incorporated in a stringent manner in an organisation (Oellermann & Douglas, 2013). It is evident, that a strong legislation framework relating to ethical practices have great impact on an economy and business environment at large. Legislation framework is identified to have significant impacts on business practices. In this regard, one of the impacts of the legislation can be viewed in terms of fair and ethical conduct of businesses. It also helps in defining the rights and duties of stakeholders in order to increase the effectiveness of a business. Additionally, the legislative framework will also help in ensuring and protecting investors, creditors and customers by implementing standard norms and policies. The key considerations of the legislative framework are employees, consumers, environment and competition. Moreover, the legislation will help in mitigating the discrimination faced by employees with regard to the illegal elements (Jones, 2013). In this regard, Enron faced bankruptcy as Arthur Andersen misguidedly interpreted the auditing reports of Enron for improper adherence of accounting guidelines along with principles of auditing (Monahan, 2012). Legislation on business practices is recognised to play a crucial role for the success of a business. It is observed from the case that due to the implementation of the effective legislative frameworks on business practices, there has been a reduction in the number of bankruptcy filed in the years 2012 from the previous year 2011. The strict laws will help in keeping a strong eye on the performance of an organisation and on the financial records through regular ethical audits. The framework will ensure that employees are performing within the given guidelines and policies by following ethical practices. In this case, it is stated that businesses’ bankruptcy filings reduced with the initiation of the legislative framework, as employees were working under the strict guidelines based on which the performance of employees are monitored on a regular interval. The framework helped in creating a strong ethical environment, which helps in maintaining transparency, integrity and ethics in a business while serving the employees and the public at large. From the case, it is evidential that due to the lack of ethical practices, the bankruptcy law was amended to reduce the number of bankruptcy filing. From the perspective of a business, it can be stated that bankruptcy affects the credit standings and restricts a business from continuing its regular activities (Koller & et. al., 2014). In this regard, the example of Lehman Brothers can be stated for being the biggest bankruptcy in the year 2008 after Enron and WorldCom. The collapse of the company was due to the unethical accounting practices followed in maintaining financial transactions. The incident demonstrated that due to the filing of bankruptcy the credit standing gets affected to a large extent and accordingly, gave rise to legislative framework for proper maintenance of financial transactions (Bennett & et. al., 2013). Notably, the amendments made during the period of recession, were regarding the ‘Legislative/Regulatory Developments’ for the improvement of business activities and ethical practices. The development mainly focused on providing employee benefits, eliminating unsecured trade credit and effective ethical valuations of data, so that the ethical needs of a business are met accordingly. Another vital changes, which was considered in Chapter 11 was regarding ‘Bankruptcy Abuse Prevention’ for the maintenance of ethics (Oellermann & Douglas, 2013). The implementation of the legislative framework would lead to strict regulations and increased transparency and integrity towards the work environment. The incorporation of the legislative framework regarding bankruptcy will be effective as the management will follow the strict guidelines and comply with the same to reduce frauds and financial fraudulency in business operations and recording financial data (Hasnas, 2013). The recent management issue of bankruptcy evaluates about the discrepancies that an organisation faces due to the lack of proper ethical business practices. To overcome these issues, few of the bankruptcy rules were amended to eliminate inconsistencies and fraudulent acts. The legislative framework will help organisations in maintaining an ethical balance and coordination within business operations and stakeholders. Moreover, the impact of legislation will be such that it will in protecting financial grants and restructure the proceedings to increase the level of security (Cross & Miller, 2013). Furthermore, the legislation will ensure practices that are more ethical and will help to avoid violation of the statutory guidelines by following the ethical business practices (Clarkson & et. al., 2014). The legislation framework and ethical business practices developed after the scandals of Enron and many more assisted in ensuring that financial and auditing operations are conducted with appropriate ethical values for minimising accounting fraud. Due to the amendment of ‘Bankruptcy Law of Chapter 11’, the government started taking severe actions for companies to follow strict legality as well as high standards. The legislation raised the level of security, code of ethics and investor confidence on a business and assisted in providing transparent, true and fair picture of financial statements. As a result, the legislation helped in increasing and portraying a strong ethical organisational culture to avoid the issue of bankruptcy (Badgerow, 2013). From the above discussion, it can be analysed that the discrepancies in organisations, financial frauds and unethical practices within an organisation not only affects the stakeholders but also leads to bankruptcy and business closure among others. The adverse effect of unethical business practices could be minimised with the adherence of strict policies within an organisation, which will also assist in creating a strong ethical environment. The legislation framework will help in reducing the rate of bankruptcy filing to a considerable extent (Badgerow, 2013; Hasnas, 2013). Conclusion From the above analysis, it can be comprehended that ethical practices in the business helps in creating a strong culture. It also helps in enhancing the reputation of a business with long term sustainability and profitability considerations. The essay states that the lack of ethics in the code of conducts leads to many scandals and bankruptcy. In this context, with an increase in unethical practices, it was observed that government were coming up with strict rules, policies and necessary amendments in corporate laws for ensuring that business operations are managed ethically. Hence, it can be concluded that with the initiation of the legislation framework and ethical business practices, the issues regarding the violation of ethical practices can be reduced. References ACCA, 2012. Code of Ethics and Conduct. ACCA. [Online] Available at: http://www.accaglobal.com/content/dam/acca/global/PDF-members/2012/2012c/CofEC.pdf [Accessed August 14, 2014]. Azadinamin, A., 2013. The Bankruptcy of Lehman Brothers: Causes of Failure & Recommendations Going Forward. Swiss Management Center, pp. 1-15. Badgerow, J. N., 2013. The Seven Deadly Ethical Sins For The Bankruptcy Lawyer. American Bankruptcy Institute, pp. 175- 223. Bennett, V. M. & et. al., 2013. Customer-Driven Misconduct: How Competition Corrupts Business Practices. Articles in Advance, pp.1-18. Bris, A., 2010. The Lehman Brothers Case. A Corporate Governance Failure, Not a Failure of Financial Markets. [Online] Available at: http://www.imd.org/research/challenges/upload/TC039-10PDF.pdf [Accessed August 14, 2014]. Bruckner, M., 2013. The Virtue in Bankruptcy. Loyola University Chicago Law Journal, Vol. 45, pp. 233-285. Clarkson, K. & et. al., 2014. Business Law: Texts and Cases. Cengage Learning. Cross, F. & Miller, R., 2011. The Legal Environment of Business: Text and Cases: Ethical, Regulatory, Global, and Corporate Issues. Cengage Learning. Crown, 2012. An Inquiry into the Culture, Practices and Ethics of the Press. The Right Honourable Lord Justice Leveson, Vol. 1, pp. 1-435. Ferrell, O. C. & et. al., 2014. Business Ethics: Ethical Decision Making & Cases. Cengage Learning. Hasnas, J., 2013. Teaching Business Ethics: The Principles Approach. Journal of Business Ethics Education, pp. 1-30. Institute of Business Ethics, 2012. Business Ethics Briefing. Business Ethics & Human Rights, pp. 1-6. Ioannou, I. & Serafeim, G., 2012. The Consequences of Mandatory Corporate Sustainability Reporting . Working Paper, pp. 1-44. Jennings, M., 2014. Business Ethics: Case Studies and Selected Readings. Cengage Learning, Jones, L., 2013. Introduction to Business Law. Oxford University Press. Koller, C. A. & et. al., 2014. When Moral Reasoning and Ethics Training Fail: Reducing White Collar Crime through the Control of Opportunities for Deviance. Notre Dame Journal of Law, Ethics & Public Policy, Vol.28, Iss. 2, pp. 549-578. McPherson, C. P., 2014. Necessary But Not Sufficient: Anti-Corruption And Transparency Legislation. The Journal of World Energy Law & Business, Vol. 7, Iss. 3, pp. 180-182. Monahan, K., 2012. A Review of the Literature Concerning Ethical Leadership in Organizations. Emerging Leadership Journeys, Vol. 5, Iss. 1, pp. 56-66. Oellermann, C. M. & Douglas, M. G., 2013. The Year in Bankruptcy: Part I. Journal of Bankruptcy Law, pp. 127-157. OSullivan, P. & et. al., 2012. Business Ethics: A Critical Approach: Integrating Ethics Across the Business World. Routledge. Salehi, M. & et. al., 2012. Business Ethics. International Journal Of Scientific And Research Publications, Vol. 2, Iss. 1, pp. 1-5. Slideshare, 2014. Business and Legislation. Legislation. [Online]. Available at: http://www.slideshare.net/tutor2u/buss4-business-legislation [Accessed August 13, 2014]. Slideshare, 2013. Accounting fraud at WorldCom. Case Study. [Online]. Available at: http://www.slideshare.net/jonah1137/accounting-fraud-at-worldcom [Accessed August 20, 2014]. Zimmerman, D., 2014. Beware Ethical Traps in Bankruptcy Practice. Bankruptcy Court, pp. 1-20. Bibliography CGA, 2013. Code of Ethical Principles and Rules of Conduct. Certified General Accountants Association Of Canada, pp. 2-25. Silverstein, K., 2013. Enron, Ethics and Todays Corporate Values. Forbes. [Online] Available at: http://www.forbes.com/sites/kensilverstein/2013/05/14/enron-ethics-and-todays-corporate-values/ [Accessed August 14, 2014]. NSW, 2012. Code of Conduct. Policy Directive, pp. 1-9. Read More