http://www.reuters.com/article/2014/01/09/us-diamond-sec-accountingfraud-idUSBREA0813020140109
From my readings, the major point I gathered regarding ethics as a whole is honesty. In fact, what I have learned in my eighteen years is that honesty is typically ethically responsible, in both business and personal affairs.
The article I found talks of a company, Diamond Foods, being forced to pay five million dollars to settle civil charges regarding artificially inflated financial statements– misleading investors. The dishonest, and also illegal, practice made the net income for that fiscal year appear higher– exceeding the expectations of analysts which raised suspicion.
No one wins in cases of fraud. (Especially the corporations doing the deceiving in the first place so they are basically shooting themselves in the foot in regards to the long run). Corporations, when caught, lose reputation points, trust from investors and also the value of their stock (the stock of Diamond Foods fell to $17/share from a high $90/share after the unraveling of the accounting scandal and the restatement of the proper– much lower– amounts). Meanwhile, shareholders, who trust that the business is being honest about their financial statements because it’s the law and morally correct, are being fooled. Once they discover the fraud, they are quick to pull out their shares– causing the stock to plummet (which for those who’s strategy is shorting the market but that is an entirely different matter).
It’s purely a no win situation– financial dishonesty may be a short term solution to a financial crisis by hiding it behind false numbers but the truth will always be revealed– eventually.
I definitely agree with your point regarding that ethics is all about honesty. Without honesty everything in the company would breakdown. The consumers will lose interest and trust. The stockholders will lose money and belief in their shares. The employees may seek a more ethical business to work for. The list of what can happen if there is no honesty goes on. Not only do the shareholders take a hit from this but the company itself loses its label as a “trustworthy brand”, lower value of their stock and its reputation can be permanently tampered.
Precisely!! 🙂
Additionally, this idea that business ethics at the core can be traced back to honesty makes fraud seem so much more absurd as the concept of honesty is one of the first things taught in kindergarten– five year olds are capable of such while ‘respectable’ adults are not (?). Honesty is also further enforced throughout academia.
I feel that the integrity of being honest is severely more important than any possible ‘benefit’ that would result from fraud/financial dishonesty.