Entrepreneurial Crime and the Sarbanes-Oxley legislation - Essay Example

Entrepreneurial Crime and the Sarbanes-Oxley legislation It is important for corporations to employ individuals with good ethical record and proper educational qualifications. It is also useful that in the course of the development of such employees, companies should strive to inculcate attitudes of ethical practice, intensify corporate values and principles. Government and regulatory institutions should equally engage the business and private sector more closely so that there is greater synergy in the business environment from multiple stakeholders (Acs & Szerb, 2007). White-collar crime is a corporate concern globally because of greed and the fact that business regulation can often not attain perfect surveillance and oversight. National organizations have loopholes are due to geographical and spatial complexities and the fact that different cultures and legal systems are brought together (Acs & Szerb, 2007). Question 1 Trade involving international players should be ethical and regulated by law. In the spirit of the Sarbanes-Oxley legislation, auditing accuracy, financial accuracy and operations between such entities and individuals must be undertaken in a clear and plausible manner to avoid fraudulent engagement (Acs & Szerb, 2007). On the contrary, the Fumitake Nishi, a former employee of the Tile Shop Holdings, Inc., and brother-in-law of the Company CEO colluded with another Chinese company where he was a majority shareholder to indulge in multiple practices that were unethical and fraudulent (Anderson, 2014). Even though, the audit did not reveal any substantial embezzlement of company funds, the vendor relationships and sourcing practices were unethical and tantamount to a contravention of law. Incentive compensation practices that the Beijing Pingxiu (BP) indulged in were detestable because they meddled in the company’s vendor practices by yielding operations that unorthodox and fraudulent (Anderson, 2014). Many funds were paid into the victim’s private bank account by the company to secure the vendor deals. The process was prohibited because it denied conventional operators business opportunity over the course of time they operated the business (Acs & Szerb, 2007). Sarbanes-Oxley clauses state succinctly that such operations that are deemed fraudulent and draw employees into questionable conduct must be effectively reported investigated and punished. Whereas according to the audit report, there were no overpayments or underpayments to vendors through the hybrid BP operations, the system of its business was not disclosed to the Tile Shop Holdings (Anderson, 2014). Consequently, the process was unethical and a violation of ethical procedures. Question 2 Multiple unethical violations concern the contemporary American business and international operations. Apart from the fact that the law prohibit such activities, they can have adverse effects on the morale of the employees, stakeholder, investors and the company reputation in the long term (Hwang & Staley, 2005). The fact that Fumitake Nishi was related to the CEO and ability to indulge in extensive international transactions with another company was motivated by his close access and relationship with the CEO. The existing relationship and access to the operational mechanism of the company motivated the ethical violations because the victim in this case must have gained privacy to the intellectual knowledge of the company’s top management (Hwang & Staley, 2005). The company board failed to keep a clear-cut record and transactional details of their operations. Laxity allowed another company to come into the business process and benefit. The fact that the individual highlighted in the ethical violation was related to the company CEO was another issue because people in the company could have naturally assumed he is acting on the prerogatives of the CEO due to the close relationships they had as brothers-in-law. Question 3 Free markets operate and thrive on the fact that corporate and individual managers use the rule of law and business information efficiently. Sarbanes-Oxley came into force when many corporate bodies had indulged in activities that eroded investor confidence and enhanced the cost of operations. Sarbanes-Oxley therefore came into force to improve corporate reporting, improve ethical practices and guard against fraud and financial embezzlement among top CEO and dishonest business personalities. The act aims at protecting varied parties who are not directly associated with the operational processes within the organization. The economic concept of ‘free markets’ work better when the business environment is subject to effective regulation. Governments undertake effective surveillance on business operations. In addition, business leaders should be honest. Nonetheless, when the oversight mechanisms are relaxed and business leaders are dishonest, the free market ideals might suffer because trust formation, fraud, monopolistic tendencies tend to prevail and enhance cost. Sarbanes-Oxley legislation is a useful mechanism for the management of the business climate for optimal outcomes. Furthermore, in a more interlinked global business environment, regulations and business operation oversight must be heightened to ensure the business operations and interactions are sustainable and productive. Question 4 According to Anderson (2014), the Fumitake Nishi case might evoke reactions of different sorts going by the standpoint of evaluators. This was indeed a criminal action viewed from the perspective of the management board of Tile Shop Holdings because their employee indulged in direct contraventions of their corporate ethical standards. Fumitake Nishi was able to make such moves because he had access to the corporate intelligence and insider business model understanding that is an intellectual property of the corporation. The case could also be regarded as a direct exploitation of the relationship Fumitake Nishi had with the CEO of the company, Robert Rucker. Rucker in this regard could look at the case from a purely civil perspective because his own brother-in-law acted in manners that sabotage his very leadership and corporate credibility as a business leader. Independent analysts could link the Fumitake Nishi’s behaviour to confidential information of the company leaked by the Robert Rucker perhaps in private indulgences between brothers-in-law. Consequently, many unacceptable corporate practices could be unearthed. Since the case involves legal contraventions of established corporate legal policies and practice, the acts are tantamount to criminal activity and not only punishable as ethical violations of business standards. In the post Sarbanes-Oxley legislation era, the corporate and their leaders must bear responsibility for their acts. Fumitake Nishi is a direct victim of such violations as established in the investigation report. Question 5 Agencies that are charged with the responsibility to investigate and report the nature corporate practices must themselves observe the laws and high standards of ethics otherwise they would be serving no functions. The organizations have their reputations on the line whenever called upon to investigate companies because the unethical practices would come to the surface on their own accord (Acs & Stough, 2008). The statutory powers have been abused in the past. However, it is useful to recognize that wrong corporate practices eventually hurt. Fumitake Nishi should be punished in my view for the fraudulent actions he operated through BP. It should also be noted that the company would eventually lose vendor deals from some of their established collaborators. The situation could have adverse long-term effects. All corporate that indulges in unethical practice bear responsibility at some stage due to their involvement though in a passive manner. The corporations and regulatory agencies must collaborate to avoid any punitive measures because corporate organizations handle trust and agency interactions on behalf of numerous stakeholders and investors. Adversarial approaches are better suited to yielding the sanctions that must exist for business leaders to observe legal and ethical standards. In this regard, any ethical violation must attract considerable sanctions targeting individuals involved (Anand, Ashforth & Joshi, 2004). In the event that sanctions are not exercised, the essence of the entire legislation and government regulation of business would not yield meaningful results. However, non-adversarial approaches have their limitations, if they are proactive and progressive. References Anderson, J. (2014). Tile Shop Fires Employee in Wake of Ethics Violations. Retrieved from http://tcbmag.com/News/Recent-News/2014/January/Tile-Shop-Fires-Employee-In-Wake-Of-Ethics-Violati Acs, Z. J., & Stough, R. R. (2008). Public policy in an entrepreneurial economy: creating the conditions for business growth (Vol. 17).New York, NY: Springer. Acs, Z. J., & Szerb, L. (2007). Entrepreneurship, economic growth and public policy. Small Business Economics, 28(2-3), 109-122. Anand, V., Ashforth, B. E., & Joshi, M. (2004). Business as usual: The acceptance And perpetuation of corruption in organizations. The Academy of Management Executive, 18(2), 39-53. Hwang, D. B., & Staley, A. B. (2005). An analysis of recent accounting and auditing failures in the United States on US accounting and auditing in China. Managerial Auditing Journal, 20(3), 227-234. Read More