Ethical business practices are standards of conduct that are relevant to the moral judgment of those who apply to business-related positions [Gitman, 2012]. Shareholders and stakeholders are two different groups of investors who have a vested interest in the company's success. Shareholders are investors who are not employed by the company but have purchased stocks [stocks] in the company and want their investment to grow. Stakeholders are customers, employees, owners, creditors, suppliers, actually working in the company, or have a direct economic impact on the company's success [Gitman, 2012].
Morality plays an important role in the success or failure of the company. For example, if a company deliberately records a profit or loss in its financial statements in order to present a more favorable image to shareholders rather than actual financial data, shareholders will lose confidence in the company and sell its shares. In addition, if stakeholders are unfavoured or not paid on time, the turnover and ability to obtain credit will also affect the company's bottom line. Some arguments argue that executives only have the obligation to facilitate shareholders because the group provides most of the cash needed for operations [Gitman, 2012]. However, if the holder is dissatisfied with the operation, an important gear in the wheel will be lost, which will eventually lead to the company closing down.
An example of a false statement to investors is the bank failure in 2008 and the collapse of the real estate market. Mortgage securities are actual mortgages sold by mortgage brokers, packaged as securities, and invested by financial institutions [Brigham & Ehrhardt, 2011]. The risk of mortgage securities is lower than the actual mortgage risk of securities, which leads to the global economic crisis. [Brigham & Ehrhardt, 2011]. Investors buy these securities in order to get a healthy return on investment, but instead buy a mortgage with default risk. These mortgages are risky because mortgage lenders cannot afford loans because of interest rates, or fraudulent lending practices in mortgage banks distorted information to customers. In addition, when housing demand began to decline due to a large number of mortgage defaults and unemployment, housing prices plummeted, and the number of short sales and foreclosures caused several banks to close down. Loans have slowed dramatically, affecting US businesses, individuals and the rest of the world.
Executives have primary responsibility for their owners and stakeholders to ensure maximum profit and growth within the company. It is the responsibility of the company's executives, managers and officers to maintain a high standard of ethics so that both parties and holders are confident in the company and want to retain investors and commit to achieving their goals. Both groups have a significant impact on the company's stock earnings per share, both of which are important to the company's growth and maximum profit.
Reference
Brigham, E., Ehrhardt, M. [2011]. Financial Management: Theory and Practice
from
[13th Edition] Ohio: Cengage Learning. ISBN-13: 978-1-133-66500-7
Gitman, Lawrence J. & Zutter, Chad J. [2012]. Manage financial principles. 13th
from
Version. Prentice Hall.
Orignal From: Business ethics is a moral responsibility
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