Feb 9, 2016
Business Ethics and Corporate Fraud
“There's no such thing as business ethics; there's just ethics. And ethics makes no concessions for the real or imagined necessities of making a profit” (“Inspirational quote”, 2nd item). According to Michael S. Joseph, who is the founder of Edna Josephson Institute of Ethics, there is nothing higher than ethics, and there is no excuse to violate ethics.
Given the importance of business ethics in the field of business and in the whole economy, I have decided to build my research on this substantial topic that concerns many corporations all over in the world more than before, for its ...view middle of the document...
The causes of corporate fraud can be split into two main categories.
Frauds that are committed by the board of directors of corporations are the ones that mostly hurt corporations because of their power and authority within the organization, so they can use the given privileges and authority to reach their goals easily.
The many incentives that are given to the executive boards of corporations are one of the main reasons for committing frauds. According to Sandra Maria Parrado, Forensic Services Advisory practice director at PwC LLP in New York “The increased incentives for senior executives and middle management to commit accounting and financial frauds that have resulted from the financial crisis are the most likely underlying causes of the greater risk of fraud in the current economic environment.” (As cited in Chi. T., 2010, pp.91-92).
The absolute knowledge of the corporation’s financial statements is another reason of business fraud. The board of directors and the top-level management are the ones who are in the corporate dashboard. Hence, top level management can decide about any strategy that may promote the company expansion or match their personal goals. Thus, the top level management can get anything from the corporate that they work for and even disguise the corporate’s audits.
The absolute authority that is given to the executive board in corporations is also another reason to commit a business fraud. The executives are the ones who give instructions and guidance to the organization, so they take advantage of their positions to gain their purposes in a calm way.
Frauds that are committed by subordinates of corporations are always less impact than other frauds but they are the most frequent and usually are related to inventory.
The low motivation of subordinates within the workplace is the first cause of fraud in this category. When employees experience high debts or financial losses automatically they will think of how to get out from the harsh situation. Therefore, the only way to solve their financial problem is the organization to which they work especially if they are not motivated and they do not have professional long terms ambitions.
Lack of communication between subordinates and superiors and employees dissatisfaction is another reason that pulls subordinates to commit frauds. Hence, the subordinates may think of illegal ways to get what they want, or just to revenge their sufferance. According to a report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE), “Employee dissatisfaction can point to deeper problems within an organization. At the aforementioned retailer, complaints about understaffing that overstretched employees — and made it hard for them to perform the accurate inventory counts that likely would have revealed the fraudulent reporting much earlier — should have been a warning signal to company leadership” (Raftery, H., & Holder, F. L., 2016,...