The Impact of Budgets, Balance Sheets and Management Accounts on the Organization - Literature review Example

FINANCIAL ETHICS Name: Institution affiliated: Date of submission: Tutor: Introduction While the study will be conducted to focus on the responsibilities of different parties in an organization to ensure that financial conflicts arises, other social issues will also be considered in the study. There is no doubt that in most organization’s the conflict of interest is becoming a major problem as the organizations continue to enjoy financial developments. The conflict of interests may at times be lead to unethical social issues being experienced in the organizations resulting in negative problems such as demoralization of the different individuals and corruption. As such, it is important that the different organizations consider the development of ethical practices and standards which promote the growth and development of the different parts of the organization as well as ensure that there are limited conflicts that are experienced in the organization regarding the financial wellbeing of the organization. Most organizations are created to provide for investments opportunities so that they can maximize their profits. As a result, it is important to ensure that in as much as profits are maximized within the organization; the management of these funds should be done according to the ethical standards that have been set to ensure that no financial conflicts arise from the operations. The project will therefore try to investigate ways through which the organization can avoid different conflicts of interests in the financial operations of the organization and in the various investments that they make in their routine activities. Focussing on the perspective of the investors, there are a number of factors that need to be considered to ensure that the organization properly manages the conflicts of interests that may arise in the organization. These factors include the ethical considerations, the environmental factors and responsibilities in which the organization undertakes to ensure that the investments are properly managed. The business sustainability processes are also considered in this case to ensure that the maximization of profits is done in a proper and sustainable manner. Finally, the social responsibilities are also factors that determine the conflict of interest that may arise in the organization according to their routine functioning. Literature review Ethical foundations that govern the proper functioning of the organization and reduce instances of conflicts of interests arising within the organization are based on a number of issues. These issues include such factors as the codes, regulations and principles that guide the activities of the organization. Other ethical obligations that should be considered also include the reservoir of trust and the fiduciary obligations. The fiduciary obligations in organizations that usually personal based obligations which require that the individuals put aside their personal and self interest and focus to provide the those who have entrusted them with the duties that they are required to undertake. The fiduciary theory is based on the fact of duty that that a person holding the character of the trustee, to act for the benefits of the others to whom their matters are connected according to a predefined understanding. In this case, the system in based on trust and the individual wins the trust of the other by ensuring that the individual acts only in the interest of the other party and with all ethical considerations being factored [Lin081]. The trust and trustworthiness are other factors that are provided by the reservoir of trust that provides the need for investigators to provide the organization with information about the organization about tasks and operations that have been conducted without considering the normal activities of the organization. In this case, the investigation of the conflicts in finance in the organization is done according to a predetermined conflict gauge which provides for a number of issues. These include the initial considerations, research design, prospective review, in process considerations and the reporting factors. The in process factors that need to be considered in this case are factors such as recruitment, informed consent and integrity of the data. The employees in the organization should be recruited according to merit. In this way, it will be easy to ensure that they develop and implement programs that are consistent with the objectives and goals of the organization. Such implementation will ensure that there are minimal errors occurring in the processes and activities of the organization. As such, it will be possible to make improve decisions on financial issues which will allow the organization to reduce any instance of conflict of interest being experienced [Ali02]. The issue of organizational sustainability is provided by the ability of the organization to survive and it usually depends on the organizational activities towards the environment in which they operate in. According to McHugh and Cao, (2005, p. 223) an organization’s environment could be defined as the different elements that exist both within and outside the business boundaries which have the possibility to influence the all or part of the activities of the organization. This has forced the organizations to incorporate change in their systems so that the activities of the organization can be sustainable [McH05]. The organizational environment considers the internal and external environment of the organization. For profitability and performance to be achieved, then it becomes necessary for the organization to consider the strengths and weaknesses of their activities so that they can work towards improving the business performance [Bes09]. According to Phillip, (2010) factors like pricing product quality and reputation and experience in the market are the internal factors. The pricing of Company’s products should be lower than those of the competitor companies. while companies invest to maximize their profits, the issue of the customers forces them to reduce their profits significantly since the customers may end up being discouraged by the high prices and choose to purchase the same products from the competitors of the business. Social responsibilities are important considerations that should be made in the organizations to ensure that they objectives control any form of conflict of interest that may arise from the social responsibilities f the organization. The different organizations usually have a duty to provide the stakeholders with their different needs to ensure that they all benefit from the activities of the organization. This ensures that the organization does not pursue the profit maximization goal at the expense of the interest of the other stakeholders [Dez01]. Corporate social responsibilities of an organization refer to the initiatives that are undertaken by organizations in order to assess the responsibilities of the organization towards the social wellbeing, financial wellbeing and environmental wellbeing within the organization. The main reason why the social responsibilities remain important issues is the positive impact that is usually embraced towards the different stakeholders of the organization. The business social responsibilities help them develop ethical issues that govern the organization as well as ensuring that proper corporation means are developed in the organization to improve the corporation of all the stakeholders within the organization [Ann12]. According to Justine and John, (2013), the corporate social responsibilities encompass the ethical issues that govern the business premises. Under the social responsibilities, there are regulations that have been developed to ensure that there is no instance of exploitation in the organization as the business seeks to develop andincrease their returns. Further, they argue that the business premises is usually divided into the political, social, economic, technological, legal and environmental environments. In this case, the prime goal of the businesses is to maximize their profits and this is done to ensure that the shareholders welfare in optimized. As such, the economic enviroment of the business takes the highest consideration as the other factors in the enviroment are in most cases ignored or overlooked. The firms will in this case take up new projects that the directors percieve to be profitable to the economic structure of the organization. therefore, they end up forgeting the welfare of the other stakeholders such as the customers, employees and the community living around the business premises. The ethical issues in thiscase provides for reguations to ensure that the welfare of the stakeholders is considered and as a result, tr to avoid any conflict of interest that may arise within the organization. the customers in this case are interested in he organization providing them with high quality products at very low prices. This brings in a financial conflict of interest between the shareholders in the organization and the customers. The shareholders are interetsed in the profits therefore, will require the prices to be high while the customers are interetsed in both quality products with low prices [Dim06]. The environmental factors usually consider the need for the organization to maintain the strycture and shape of the environment in which they operate. Some of the business premises are licensed to operate in activities that degrade the environment. This conflicts with the interest of those that live around the business environment. As a result, there is a financial conflict of interest that is created between the shareholders and the community. While the shareholders push to increase their returns on investment, they still bear the social responsibility that is required for them to ensure that they try to reclaim the land that they have destroyed in their quest to maximize revenues from investments. As such, the community demands that the business premises to try and reclaims the part tht have been destroyed by their activities as a result, the profit maximization factor is undermined [Jus13]. Finally, the business also bears the need for social responsibilities to the maagers and the employees of the organization. this also creates a conflict of interest as the shareholders wealth is reduced from the payment of salaries, wages and the cost of training that the employees and managers undergo in the course of their operations within the organization. the wages, salaries and cost of training the employees and manager reduces the profits that are collected in the organization significantly. Nelson, (2001) argues that the labor expenses are the highest costs that the organizations have to deal with. They take upto 70% of the total costs that the organizations have to incur in their investments activities. As such this highly redues the investment profits that the organization makes. Furthermore, there is another coflict of financial interest that arises when the organization managers choose to give themselves extra bonuses when the organization make profits. This bonuses are usually extra expenses that the organization shareholders have to deal with and as suc, they reduce the profits that are made by the organization [Nel01]. Analysis As provided by the different literature identified and discussed above, the financial conflict in an organization are become a major problem. Some of the traditional regulations that had already been developed by the different organizations to manage the welfare of all the stakeholders are increasingly becoming obsolete since they were focused on profit maximization and failed to provide the organization stakeholders with their necessary needs. The main financial conflict that has been identified by the different literature is those between the shareholders and all the other stakeholders. As such, the organization shareholders want to maximize their profits whereas the activities and demands of the other stakeholders are aimed at reducing the profits that are made by the organization. in this way, the organization shareholder have been forced to develop social corporate responsibilities to ensure that in as much as their investments are aimed at maximizing their profits, the welfare of the other stakeholders is considered. As such, the managers and employees should be paid their salaries and wages in time. Similarly, the value of the wages and salaries should be according to the labor output that is provided by the employees and managers of the organization. similarly, the reporting of profits should be done timely and in a free and fair way according to the standards that are provided by the accounting standards board. In this way, the government taxes will be paid accordingly. Sometimes, the organizational shareholders may choose to report losses, even when they are making profits. In this way, they do not pay any taxes to the government. This is unethical behaviour that should be avoided [Phi10]. On the issue of the customers, the organization should provide quality products and ensure that the prices that are set for the goods and services provided by the organization are kept low so that the customers can afford them. Sometimes, due to the conflict of financial interest that may exist between the employees and the customers, the organization may choose to sell substandard goods at the same price of the other goods. In this way, the cost of production is reduced and the organization starts to make more profits. This is another unethical behaviour that may be developed as a result of the conflict of interest that may exist between the shareholders and the customers. Finally, the society may also create a conflict of interest especially for those organizations whose investing activities usually degrade the quality of the environment in which they operate. In this case, the society ends up suffering from the hazards that they face from the investing activities of the organization. in this case, the organization is forced to use part of their profits to try and reclaim the part of the environment that they have destroyed in their investing activities. REEFRENCES Lin081: , (Lindsey, et al., 2008), Ali02: , (Ali, 2002), McH05: , (McHugh & Cao, 2005, p. 223), Bes09: , (Bessant & Tidd, 2009), Dez01: , (Dezoort & Steven, 2001), Ann12: , (Ann Brockett, 2012), Dim06: , (Dimitris, 2006), Jus13: , (Justine & John, 2013), Nel01: , (Nelson, 2001), Phi10: , (Phillip, 2010), Read More