Importance of Financial Decision-Making in the Business World
In the business world, financial decision-making is important.Some organizations have trouble with accounting and the financial decision-making process in today’s diverse organizational ethics.In this world’s current economy, the expectation for organizations is to behave in an ethical manner.
The business world consists of people with different ethical belief systems, which makes it difficult to define ethics (The Journal of Accountancy, 2007). Organizations that do enforce a code of ethics can create unwanted behaviors within the organizations. These unethical behaviors can affect every individual associated with the organization.
When an organization instills good ethical behaviors, its rate of success and longevity is more likely to be high. Organizational ethics are a significant part in financial decision-making and accounting. Ethical principles set the foundation on which a cultured society exists. An exceptional illustration of ethics in accounting and finances is the Sarbanes-Oxley Act of 2002. After several financial frauds reported in 2001 and 2002, the president signed the Sarbanes-Oxley Act in July 2002. This act established major modifications to the financial practices and corporate governance regulations. According to n. d. 2006), “The given name is after Senator Paul Sarbanes and Representative Michael Oxley, who were its main architects, and it also set a number of non-negotiable deadlines for all organizations to comply” (para. 1). The Sarbanes-Oxley Act, known as the corporate responsibility act, act gives considerable supervision responsibilities and control to the Securities and Exchange Commission (SEC) above organizations external auditors and distribution of financial statements. The SEC must employ a public company accounting oversight board (PCAOB) with the authority to control the public accounting (Albrecht, Stice, Stice, & Swain, 2005, p. 01). This law was put in place because of the involvement of Enron and Tyco International in several accounting scandals. For most organizations, making money is important; money is what makes the business successful. However, a business that becomes greedy and decides to make money illegally will eventually fail. In the article “Beyond Sarbanes-Oxley”, Neil S. Lebovits, advises businesses to ensure their ethical health by doing several things. Lebovits suggests that organizations must employ the following three ethical best practices to be successful: “cultivate ethical role models, demonstrate ethical ecision-making, and encourage pushback” (Lebovits, 2006, para. 5). The Directorate of Planning, Training, Mobilization, and Security (DPTMS) organization that I work for employs these three ethical best practices daily. The management always ensures that workers behave professionally while serving soldiers and making the right decisions that could affect the soldiers training during this time of war. The DPTMS leaders provide explanations on how to make decisions and why the selection of the judgment. The organizational managers have an open-door policy to listen to the workers concerns.
Additionally, managers walk throughout the day asking employees if he or she has any issues that the managers could assist on. These types of actions create a sense of trust in the leadership that everyone worker wants to emulate. Lebovits also proposes that organizations can do more to ensure the organization workers behave ethically at all levels. Lebovits suggests that, first, organizations cultivate ethical role models. These role models structures’ must include natural influencers who exhibit strong ethical behavior in their day-to-day work in the financial departments of the organization.
Organizations must give influencers proper recognition on every occasion possible. By involving influencers in assignments, the individuals can have an encouraging impact in the organization. When an organization rewards its influencers efforts’, the organization can cultivate ethical conduct (2006). Organizational ethical behavior starts at the top of the organization. The leadership must motivate individuals to follow its behavior. Employees watch and listen to their management carefully for signs of how to act. Leaders should behave accordingly and set the example for the workers to follow.
When suitable, leaders must tell workers examples of their business decisions involving their ethics and how they used good judgment. This type of honest conversation provides employees with a quick look on how leaders act and think while representing the organization (2006). Moreover, Lebovits proposes that organizations should also encourage pushback. In other words, companies should encourage their employees to speak up if they question financial actions and decisions that affect them. Ethics hotlines, anonymous e-mails and “approachable” managers are ways for companies to obtain this type of feedback.
Organizations and their key personnel should always conduct themselves ethically and legally. They should promote an environment in which employees can articulate work-related concerns without negative effects and free exchange of information (2006). The organizations that decide to implement and follow good ethical behavior will achieve success and an excellent status as ethical and fair instiution to the clients, employees, and the shareholders. These benefits will assist the organization in the financial phase, and when organizations fail to execute will result in poor financial performance.
References Albrecht, Stice, Stice, & Swain, (2005). Accounting: Concepts and Applications (9th Ed. ). Quebecor World, Versailles, KY: South-Western, Thomson. Lebovits, N. (2006, August, 2006). Beyond Sarbanes-Oxley: Three best practices to adopt in your organization. Retrieved March, 2011, from http://www. aicpa. org/pubs/jofa/aug2006/lebovits. htm N. D. (2006). The Sarbanes-Oxley Act. Retrieved from http://www. soxlae. com The Journal of Accountancy (2007). Retrieved March, 2011, from http://www. aicpa. org/pubs/jofa/joahome. htm