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The importance of ethics in financial management

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The ethics are principles based on doing the right thing. They are the moral values by which an individual or business operates. The business should act ethically until attaining the ultimate success. The history of doing right things helps to heighten selling point and reputation of organization in the community.

The ethics are morally valued but they are backed by legal consequence for failure to act within certain guidelines. Most of the people are not much considered the effect of ethics on business until fall of Enron in 2001 and 2002, but every finance manager must be aware about ethics regularly. The ethics of a finance manager should be above approach. This includes more than just acting in an honest, above-board manner. It means establishing boundaries that prevent professional and personal interests from appearing to conflict with the interest of the employer. The finance manager must provide competent, accurate and timely information to the company fairly presents it at any time potential disclosure issues, such as legal ramifications. The manager is ethically responsible for protecting the confidence of employer and staying within the boundaries of law.

Legal issues

Some laws are specifically designed to address unethical actions of finance managers. For example, if a finance manager is aware of business activity that will affect a stock price and uses that information to buy or sell stocks for financial again, he has broken a trust with his employer and broken laws established by the Securities and Exchange Commission (SEC). A finance manager who is aware that his company may be breaking the law may be held legally responsible for a crime.

Balancing act

The dilemma faced by many finance managers comes in balancing the need to act ethically while fulfilling the needs of the employer. The employer’s ultimate goal is to maximize earnings, and the drive to make money may cause an employee to act unethically. If a manager believes his company may have crossed an ethical line, his first step should be to take it up with his employer. If he feels the actions warrant legal intervention, he should do so without fear of repercussion.


If a discussion with an employer does not resolve the ethical issues facing a finance manager, he can report the activity to the appropriate government agency for investigation. This is known as whistle blowing. Under current laws, an employee has the right to report suspicious activity without fearing for his job. While the activity may put a strain on his working relationship, he is protected by law.

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