American Airlines - Assignment Example

This can lead to unethical activities when the senior management and organization can gain significant rewards because of the short-term concentration on stock price (Machan, 2007). The senior management may tolerate organizational conflict of interest, abusing a number of rules of fair conduct or normal decency, gaming the rules of the society, and turning to cronyism as a means of making the most of their self-interest. Senior management troubled with the stock price of the company also concentrates on performance events that are short-term, often earnings.

As a result, the senior management holds a commonly emphasizing fascination with short-term performance of stock prices. The senior management can engage in unethical behavior because profits are presumed as the most extensively conventional metric. Senior managers who have the capacity to consistently and correctly forecast the stock prices can gain tremendous profits. This prediction may make the senior management use unfounded profit assessment. They may view the logical model of analysis as theoretically adequate but sensibly not connected from the anticipated earnings.

The senior management may refer to the activities of market players to make a case out of their short-term focus on stock price (Machan, 2007). Encouraged by the view that stakeholders look at the current stock prices to determine value, they may repurchase shares even when they may be overvalued or fairly valued. Question 2 The conduct of American Airline controlling its finances by postponing the maintenance of its aircrafts may be unethical to both the stakeholders and clients. Shareholders are perceived as a unit that endures a kind of danger as a result of investing some kind of capital, financial or human based shares in a company.

On the other hand, clients are presumed to be a group that endures some form of risk during their travels. When stakeholders and clients suppose that finances are being manipulated, a company consequently decreases worth on the stock market. The credit rating of the company will go down making the issued bonds to decrease in worth (Capozzi, 2001). Consequently, this will have a negative impact on the wealth of bondholders. American Airlines has had recurring issues with regard to maintenance of its aircrafts.

The expenditure connected with operating these aircrafts has a negative impact on both stakeholders and clients. American Airlines has an ethical obligation to both stakeholders and clients to ensure that its aircrafts are well maintained. The airline also has an obligation to give correct details on the states of their aircrafts to both stakeholders and clients. When American Airlines postpones the maintenance of its aircrafts thereby influencing earnings, it means the company is not giving the true picture about its financial situation.

In addition, the behavior is unethical towards the clients because aircrafts may pose risks that the clients are not aware of. The company also canceled a number of flights due to postponing aircraft maintenance in 2008. The company