ethical business conduct standards are related to moral judgments apply to people engaged in commerce related sites (Gitman, 2012). Shareholders and interested parties are two different groups of investors who have a vested interest in the success of the company. Shareholders are investors who are not employed by the company, have bought shares (stock) in company with the hope of increasing their investment. Stakeholders include customers, employees, owners, creditors, vendors, who actually do the job of the company, or have a direct economic impact on the company’s success (Gitman, 2012).
Ethics plays a big role in the success or failure of the company. For example, if a company files will profit or loss in the financial statements to show a more favorable picture to its shareholders rather than actual financial data, shareholders lose confidence in the company and sell their shares. Also, if stakeholders are treated unfavorably or not paid on time, the turnover and the inability to secure credit will also affect the company’s bottom line. Some argue that managers have required only to please their owners, because the group provides much of the money needed for the activity (Gitman, 2012). However, if stakeholders are unhappy with the operation of an important cog in the wheel is missing and will eventually cause the company to fail.
Examples of misrepresentation to investors, banking failures and the housing market crash of 2008. Mortgage securities are real mortgages that are sold by mortgage brokers, packaged as securities, offered by financial institutions for investment (Brigham & Ehrhardt, 2011). Mortgage securities contributed to the global economic crisis by being presented as a lower risk than the mortgage is security really were. (Brigham & Ehrhardt, 2011). Buy this letter expect a healthy return on their investment, but instead was to buy mortgages that were at risk of default. These mortgages were risky because mortgagees not be able to provide loans for floating rate, or fraudulent lending practices engaged in by the mortgage banks misrepresented information to clients. Also, when the demand for housing began to fall due to the number of defaults on mortgage loans and unemployment, home prices fell and the number of short sales and foreclosures forced the closure of several banks. Lending slowed dramatically and this could affect US companies, individuals and other countries around the world.
management has primary responsibility for both its shareholders and stakeholders in order to ensure maximum profit and growth within the company. It is the duty of managers, directors and officers of the company to maintain a high standard of ethics so that both shareholders and stakeholders have confidence in the company and want to remain investors and committed to their goals. Both of these groups have a huge impact on earnings per share of stock of the company, and both are important in the growth and maximum profitability.
Brigham, E., Ehrhardt, M. (2011). Financial Management: Theory and Practice
(13 ed.) Ohio: Cengage Learning. ISBN-13: 978-1-133-66500-7
Gitman, Lawrence J. & Zutter, Chad J. (2012). Principles of Managerial Finance. 13.