Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This presentation has been uploaded by Public Relations Cell, IIM Rohtak to help the B-school aspirants crack their interview by gaining basic knowledge on Finance.
Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
This presentation has been uploaded by Public Relations Cell, IIM Rohtak to help the B-school aspirants crack their interview by gaining basic knowledge on Finance.
From power points and "financial management: principles and application book"
Pointers to review:
1. Introduction to Financial Management
2. Stocks
3. Financial Ratios (Analysis, etc)
4. Quick Ratio
5. Cash outflows
6. Financial Statements
7. Dividends
8. ROA, ROE
9. Time Value of Money
10. EAR
11. Future value of ordinary annuity
12. Annuity vs Perpetuity
13. Present value of cash flows
14. Bonds
15. Bond's yield to maturity
16. Book value per share
17. Preferred vs Common stock
18. Annual Rate of return
19. Risk & Return
20. Payback period
21. Capital Budgeting
22. NPV
23. Cost of Capital
24. Dividend policy (Ex dividend date)
25. Retained Earnings
A beginners’ Guide for Financial Statements.
What are the financial statements?
Why financial statements are important?
Types of financial statements? And what is the basic purpose of each financial statement?
Financial Statements are the financial documents providing significant information about the financial activities of the business entity.
The existing business environment is very turbulent so corporate houses find it very difficult in managing their financial statement. In such scenario, financial management plays significant role for the companies for managing and organizing their financial data and
statements. In the following study different financial tools and techniques will be applied on the London Woods company to analyze its financial performance which will help it in decision making.
From power points and "financial management: principles and application book"
Pointers to review:
1. Introduction to Financial Management
2. Stocks
3. Financial Ratios (Analysis, etc)
4. Quick Ratio
5. Cash outflows
6. Financial Statements
7. Dividends
8. ROA, ROE
9. Time Value of Money
10. EAR
11. Future value of ordinary annuity
12. Annuity vs Perpetuity
13. Present value of cash flows
14. Bonds
15. Bond's yield to maturity
16. Book value per share
17. Preferred vs Common stock
18. Annual Rate of return
19. Risk & Return
20. Payback period
21. Capital Budgeting
22. NPV
23. Cost of Capital
24. Dividend policy (Ex dividend date)
25. Retained Earnings
A beginners’ Guide for Financial Statements.
What are the financial statements?
Why financial statements are important?
Types of financial statements? And what is the basic purpose of each financial statement?
Financial Statements are the financial documents providing significant information about the financial activities of the business entity.
The existing business environment is very turbulent so corporate houses find it very difficult in managing their financial statement. In such scenario, financial management plays significant role for the companies for managing and organizing their financial data and
statements. In the following study different financial tools and techniques will be applied on the London Woods company to analyze its financial performance which will help it in decision making.
Discuss in detail the stakeholder approach with 300-350 wordswitbuffydtesurina
Discuss in detail the stakeholder approach with 300-350 words
with min 2 APA format citations
and 2 responses to the classmates post around 150-200 words each
Classmate Dharmagiri Post -1
Stakeholder Approach
It used to be believed that the organization's essential objective is or should boost the interests of the investors. In any case, more issues are progressively raised concerning stakeholder control. Accordingly, the Stakeholder approach these days is by all accounts an elective method for corporate government these days. This implies chiefs of the organization ought to consider more on different Stakeholder bunches rather than simply focused on financiers interests. It would encourage chiefs to take progressively significant consultation on their choices as the investor is never again the main factor they have to offer the idea to, and this can stay away from transient benefit boost conduct to a huge degree.
The Interest of the Company
As a matter of first importance, it is basic to think about whether the enthusiasm of the organization is that of the stakeholders. Despite discussion has proceeded on the enthusiasm of the organization, because of the partition of corporate character, it is clear that these two ideas would not be vague.
Stakeholder Theory
Stakeholder hypothesis was first raised by R. Edward Freeman as an absolute opposite to the hypothesis that chiefs of the organization is just responsible to the investors. Stakeholders incorporate representatives, suppliers of acknowledge, (for example, banks and money related foundations), providers, clients, nearby set-ups, natural gatherings and the government and their interests out to be assessed by the executives of the organization. As indicated by Freeman, every Stakeholder has an option to be treated as finishes to only a method or an instrument. At the end of the day, every one of the Stakeholders interests ought to be considered by executives of organization, regardless of whether in certain conditions where it may conflict with the transient ideal estimation of the investors.
The Superiority of Stakeholder Approach
Besides, it would accommodate the connection between the non-investor gatherings and the organization. Take the general population representatives for instance, seeing them as an organization instead of a methods would eventually make a progressively agreeable and beneficial connection between the workers and the organization, it is fundamental for organizations to have qualified and well-persuaded workers to endure and to succeed particularly in the escalated focused world these days.
Thirdly, the advancement of an organization must incorporate the nearby networks and condition. Accepting them as Stakeholders would maintain a strategic distance from acquiring a transient benefit to their detriment, which thusly will be hindering to the long haul enthusiasm of the organization. In addition, outside guidelines like natural insurance principles mirro ...
Running Head ECONOMICS AND ADMINISTRATION1ECONOMICS AND ADMI.docxtodd271
Running Head: ECONOMICS AND ADMINISTRATION 1
ECONOMICS AND ADMINISTRATION 5
ECONOMICS AND ADMINISTRATION
Khalia Hart
Dr. Touhey
MGMT 640 – Financial Decision Making for Managers
March 31, 2019
EXECUTIVE SUMMARY
For the success of every business, there needs to be a strong supporting factor that enforces success. The success of a business indicates that the structure of decision making is tough, strict but at the same time lenient to staff and more importantly customers. Financial management is a very vital factor to consider while engaging in any business activity. Not only is it concerned about customers and staff, but also affects every aspect of the business from managing cash flow and maintaining performance index to developing plans to ensure maximum use of opportunities by business owners. Stakeholders and business owners need to realize the importance of financial management as a tool in business administration since it is the force that ensures continuous development of financial capabilities needed for a business to achieve its full potential.
The macro-economic environment addresses issues concerning behavior. Here are where aAdministrative issues lie. Administration can be categorized into two main categories, administration as a practice and as a science. Administration as a practice mainly addresses the normal routine of business owners and managers and their normal administrative roles in any business entity. Administration as a scientific field is bound to face challenges which are broken down into four main classes. They are discussed fully in this document.
Factors that affect administrative decisions include globalization, cost of control, the relationship between stakeholders and demand on ethical behavior and corporate responsibility. Administrations in different organizations should always be keen to ensure that the named issues are always put under the eye . These factors can greatly affect the performance of a business entity as shall be discussed in this document. Comment by debra touhey: Good start, Khalia. The Executive Summary should explain the problems at hand with potential solutions to those problems. Here is a good reference on writing Executive Summaries:
https://www.inc.com/guides/2010/09/how-to-write-an-executive-summary.html
INTRODUCTION
Since time immemorial, business has always been a very important factor in society. To date, business transactions take place daily through the various business entities that have been established. In the modern world, however, various guidelines, strategies, and tools have been established to ensure that business practices go on smoothly (Robert et al., 2004). Comment by debra touhey: A little too informal for graduate writing
One of the practices that have been developed to ensure maximum productivity in the various entities that have been established, is financial management. The financial management function allows for the planning, organizing, monitori.
Respond to...Explain the various aspects of finance that man.docxcwilliam4
Respond to...
Explain the various aspects of finance that management must understand.
“Financial management involves planning, forecasting, analysis andevaluation, as well as understanding legal and regulatory issues.” (Byrd, J., Hickman, K., & McPherson, M. 2013) This is important for investors and stockholders to manage. The idea behind financial management is to maximize the returns on an investors investment. Managers must create a balance sheet and decide where in an organization that monies need to be invested. To do this a balance sheet is created and decisions need to be made based off the balance sheet, then finances can be moved around the organization to maximize profits for investors.
Describe why a manager needs to understand the characteristics and importance of financial markets including their liquidity, competitiveness, and efficiency.
A financial manager needs to understand financial markets. An understanding of liquidity, competitiveness and efficiency would be incredibly important for a financial manger to know. Understanding these aspects of finance allows a financial manager to ensure that financial aspects of loans, investments, financial data are in tact and kept track of in an appropriate fashion. Knowing these aspects also helps the manager to know where funds in an organization are, and helps them decide on investments and loans.
Interpret the function of the Financial Balance Sheet in assisting in management’s decision making process.
“A financial balance sheet is a snapshot of a company’s financial position at a moment in time. The left handed side list assets and the right-handed side list liabilities and owners’ equity” (Byrd, J., Hickman, K., & McPherson, M. 2013) The function of a balance sheet to a manager and their decision making process is important because it allows the manager to anticipate where the finances in the organization are headed. The balance sheet can answer difficult questions for the manager. Overall the balance sheet is something that you can show others why funds are moving around the organization, and why those decisions were made.
Discuss what could happen if management does not fulfill responsibilities related to finance. Share a real world example from your own professional experience or from an external source.
If a manager fails to fulfill their responsibilities financially there are several things that could go wrong. Debt could be raised, or advertising money could fall flat, also budgets could be exhausted before the end of a quarter or a year which could impact overall sales. What comes to mind in my professional life is working for a specialty pharmacy. We were given a specific sales budget not to exceed per quarter. The financial manager under estimated our budget and we were then told that we were not allowed to continue doing lunches. This caused the business to take a hit because the sales force needed to cancel already scheduled lunches that were designed .
A quick review of those issues that confront both public & private companies, C & S Corps, LLC's, Trusts & Partnerships in today's transparency driven business environment.
Creative Accounting and Impact on Management Decision MakingWaqas Tariq
The study was conducted to appraise the impact of creative accounting on management decisions of selected companies listed in the Nigerian Stock Exchange. With the background, the main objective of the study includes the examination of the extent to which macro-manipulation of financial statement affects management decisions; to examine the extent to which macro-manipulation of financial statement affects share price performance; and to determine the impact of misreported assets and liabilities as well as making recommendations to help remedy some of the problems. The research method used was descriptive and the primary data collected were summarized and tabulated. These were picked in line with the hypothesis variables of the study so as to determine their validity. It was observed that the application of creativity in financial statement reporting significantly affects the decision of management to recapitalize the firm upward or dispose of it reserves. The study concluded that creative accounting through macro-manipulation of financial statements affects a firm’s price and capital market performance. In view of the study, the researcher recommended that the application of creative accounting on management decision should be to avoid misreporting of assets and liabilities in their financial report, and that management decision towards creative accounting should be geared towards the relative advantage principle and good corporate governance which encourage challenges to current ways of thinking and not manipulating for self interest.
The Case This case was developed by the MIT Sloan School o.docxmehek4
The Case
This case was developed by the MIT Sloan School of Management. It is part of their
“Learning Edge,” a free learning resource. This case was prepared by John Minahan
and Cate Reavis. This case is based on actual events. Actual names are changed; some
of the narrative is fictional.
In early 2012, as he prepared to enter a meeting with the board of trustees of a
state pension fund, Harry Markham, CFA, couldn't help but feel professionally
conflicted.
Since earning his Master of Finance in 2004 at one of the top business schools in
the United States, Markham had worked for Investment Consulting Associates
(ICA), a firm that gave investment advice to pension funds.
Since joining the firm, Markham had grown increasingly concerned over how
public sector pension fund liabilities were being valued. If he valued the liabilities
using the valuation and financial analysis principles he learned in his Master of
Finance and CFA programs, he would get numbers almost twice as high as those
reported by the funds.
This would not be such a problem if he were allowed to make adjustments to the
official numbers, but neither his clients nor his firm was interested in questioning
them. The board did not want to hear that the fund's liabilities were much larger
than the number being captured by the Government Accounting Standards Board
(GASB) rules and his firm wanted to keep the board of trustees happy.
How, Markham wondered, was he supposed to give sound investment advice to
state treasurers and boards of trustees working from financials that he knew were
grossly misleading?
Markham's dilemma came down to conflicting loyalties: loyalty to his firm,
loyalty to the boards of trustees and others who made investment decisions for
public pensions and who, in turn, hired his firm to provide investment expertise,
and loyalty to the pensioners themselves, as Markham believed was called for by
the CFA Code of Ethics and Standards of Professional Conduct.
In his role as investment advisor, the differing views on how to value pension
liabilities challenged Markham on both a practical and an ethical level. "My role
is not to decide the value of liabilities," he explained.
That is the actuary's job. My role is to give investment advice. However, as an
investment advisor, the first thing you want to understand is the client's
circumstances. That is a basic ethical precept. The CFA professional standards
say you should never give advice without knowing what your client's
circumstances are. And so what happens is that we have these funds that are
grossly short of money, but the accounting does not show them as being grossly
short of money. I make the case within my firm that we need to know where we
are starting before we give advice. And perhaps our advice would be different if
the client knew they were starting from a multi-billion-dollar hole that they're
seemingly not aware of.
In addition to the fact ...
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
NO1 Uk Black Magic Specialist Expert In Sahiwal, Okara, Hafizabad, Mandi Bah...Amil Baba Dawood bangali
Contact with Dawood Bhai Just call on +92322-6382012 and we'll help you. We'll solve all your problems within 12 to 24 hours and with 101% guarantee and with astrology systematic. If you want to take any personal or professional advice then also you can call us on +92322-6382012 , ONLINE LOVE PROBLEM & Other all types of Daily Life Problem's.Then CALL or WHATSAPP us on +92322-6382012 and Get all these problems solutions here by Amil Baba DAWOOD BANGALI
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US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
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#vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore#blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #blackmagicforlove #blackmagicformarriage #aamilbaba #kalajadu #kalailam #taweez #wazifaexpert #jadumantar #vashikaranspecialist #astrologer #palmistry #amliyaat #taweez #manpasandshadi #horoscope #spiritual #lovelife #lovespell #marriagespell#aamilbabainpakistan #amilbabainkarachi #powerfullblackmagicspell #kalajadumantarspecialist #realamilbaba #AmilbabainPakistan #astrologerincanada #astrologerindubai #lovespellsmaster #kalajaduspecialist #lovespellsthatwork #aamilbabainlahore #Amilbabainuk #amilbabainspain #amilbabaindubai #Amilbabainnorway #amilbabainkrachi #amilbabainlahore #amilbabaingujranwalan #amilbabainislamabad
1. 28
2
Stakeholders, Governance, and Corporate Culture
Stakeholder theory is managerial… [S]takeholder theory asks, what responsibility does management have to
stakeholders?… Many proponents of a shareholder, single-objective view of the firm distinguish the economic
from the ethical consequences and values.
(Freeman, 2004, p. 364)
Stakeholders
In the conduct of business, with investment and consumer interests, the concept of a stakeholder may
include shareholders, creditors, employees, financiers, customers, regulators, financial analysts, and
local, national, or international communities. Stakeholders may comprise anyone who has a direct or
indirect interest in a business and its activities. Traditionally shareholders are considered primary
stakeholders as they have a direct interest in the business. The notion of a primary stakeholder,
1
however, suggests that other stakeholders are secondary and that implies they are of less importance.
The demarcation denotes a preferential sequence where the interests of one group take priority over
the other.
In this book, with its emphasis on fraud business, stakeholders are viewed as a collective, one
group. Adverse economic and social consequences of financial statement fraud (FSF) are widely
dispersed as evidenced by international case examples. Albeit that the degree of suffering
2
experienced by individuals or stakeholder groups will differ, both entities arguably are of equal import
and ought not to be differentiated. For management, delineating stakeholders as either primary or
secondary may be somewhat tricky as they try to balance the wants of both.
Advocates of the “separatist” stakeholder concept suggest: ‘One of the challenges of managing an
organization is to balance the needs of both primary and secondary stakeholders.’ Yet this is
3
problematic. To identify both primary and secondary stakeholders and to establish their actual needs is
impracticable. Arguably it is not possible to identify all stakeholders in any particular business, at any
particular time.
On the other hand, the concept of direct and indirect stakeholders in business is reasonable.
Evidently some stakeholders hold a direct stake in the business (e.g. owners, employees, creditors)
whilst others still with interest are more external to the business and its operations (e.g. regulators,
potential investors, financial analysts). It is the tenor of primary and secondary stakeholders that is of
concern. If the wants of one stakeholder group are given precedence over another, the result is likely
to end in dispute. Such conflict, in turn, increases pressure on directors and managers to achieve
business outcomes that satisfy a seemingly disconnected bunch. Therein corporate officers may be
more inclined to take opportunities to appease the more vocal or powerful group. Mounting pressure to
achieve a particular periodic financial outcome where opportunities to diminish that pressure prevail
can result in fraudulent behaviour.
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2. 29
Hence, it seems advantageous for directors and managers to work in concert to achieve the
organization’s goals with focus on one stakeholder group. The purpose of the business may be
multifaceted. Its objectives and goals should be focused to maximize financial returns for shareholders
and sustain business continuity, but not to the detriment of others (communities or the environment).
In this context, the conduct of business would take account of economic, social, and ethical issues. The
business and its activities then would more likely be sustainable in both financial and non-financial
concerns.
The contrasting views on stakeholder theory and the shareholder versus stakeholder approach to
business and its purpose are of concern. Confusing to some is that maximizing shareholder wealth is
arguably an ethical consideration. In many situations it embodies good management. On the other
4
hand it likely encourages a short-term focus on maintaining or increasing profits—regardless of whom
or what may be disadvantaged. This in turn can intensify the pressure on managers to be able to report
financial results and non-financial outcomes that some expect, but that may not be reasonable
(acceptable or ethical) in a particular environment.
When pressure and opportunity to mitigate the pressure converge, the circumstances for fraud are
set. It does not mean that fraud will occur but it signals a warning. The potential fraudster needs to
rationalize the act. Under varying situations of intense pressure, given the opportunity, many otherwise
honest people will rationalize a fraudulent act. Debatably there is no generally agreed profile of a
fraudster. It may be anyone who under a different set of circumstances would not consider or
participate in fraud. See .
5 Diagram 2.1
Kranacher et al. (2011, p. 12) explained ‘whether fraud perpetrators are male or female, they look
like average people… fraudsters typically do not have a criminal background… [and] it is not
uncommon for a fraud perpetrator to be a well-respected member of the community’. On the other
hand some advocate there are certain characteristics that may be attributed to the most likely fraudster.
On that point the debate continues.
6
Diagram 2.1 The Fraud Triangle Factors and Elements
Source: The diagram has been devised and constructed by the authors.
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3. 30
Stakeholder Outcomes: Short-Term vs. Longer View
To effectively sustain business practice obliges managers and directors to attend to both financial and
non-financial outcomes of business activities. Such attention should not be short term. If a short-term
view is taken and rising pressure from shareholders and other stakeholders to perform well and report
on short-term achievements is evident; the risk of management fraud escalates.
Issues of corporate social responsibility (CSR) are increasingly of concern to business and to
sustainable business practices. Assuredly most managers want to maximize shareholder wealth and
sustain business activities, and debatably the two need not be in conflict. Unfortunately, sometimes
they are. Moser and Martin (2012, p. 797) explained that ‘accounting researchers (e.g., Friedman,
1970; Shank et al., 2005; Dhaliwal et al., 2011), as well as some writers in the financial press
(Karnani, 2010), have typically taken the perspective that companies will, , only engage in
or should
socially responsible activities when doing so maximizes shareholder value’ [emphasis added]. Others
disagree and remind us that actively pursuing socially responsible operations is more likely to increase
business profitability, hence the wealth of all. Importantly, the costs associated with socially
7
responsible business operations and reporting need not be at the expense of shareholder returns (Moser
and Martin, 2012).
Kim et al. (2012) suggested that socially responsible activities engaged by business that diminished
shareholder returns were unethical as earnings management is deemed unethical. Others, with focus on
the shareholder approach, advocate maximizing shareholder returns is socially responsible. Some
8
consider it manifestly so. Yet a singular and short-term attention to rates of return on investments
9
augments corporate pressure and as such increases the likelihood of management fraud. Investors, like
financial analysts, might expect to take some responsibility for being aware of circumstances that are
apt to result in fraudulent behaviour. The seemingly endless pursuit of “who is to blame?” in an
corporate collapse, or fraud, warrants continued attention. It may be that it is
unexpected unexpected
not necessarily is to blame for the circumstance but provides the opportunity for the
who 10 what 11
circumstances that prevail.
Directors and managers need to know the financial state of their business and its capacity to
continue to trade. That is in many jurisdictions a financial and a non-financial necessity to enable
business continuity and to avoid insolvent trading. Albeit that is, that most non-financial
12
circumstances in business eventually trade into a financial result. Perceptibly then shareholders,
employees, customers, creditors, financiers, and many others are interested in the business continuing
its operations. Additionally they are interested in the outcome of those operations (financial and
non-financial), as those business activities will potentially benefit or adversely affect many. In that
vein stakeholders generally are liable to want a considered and well-reasoned approach to the
management of business. Hence a longer-term approach to profitable outcomes of maximizing
financial returns with business continuity and sustainable operations is probable.
Stakeholders and the Concept of Maximizing Returns
Recall that shareholders as primary stakeholders signal a single-minded approach to the conduct of
business. That focus enables the underlying theory of corporations to emphasize maximizing financial
returns for the owners. So the idea facilitates action to glean a “best” rate of return on the amount of
money shareholders invest in the business. Globally, case examples illustrate this is not always in
13
the best interests of other stakeholders, for instance employees. Interestingly, some suggest
14
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4. 31
employees along with customers are also primary stakeholders. In addition, local communities are
15
of prime importance for business especially when determining business interests and possible
outcomes of their actions. 16
When businesses engage in activities that maximize economic returns for shareholders the results
may, but not always, connect with socially responsible outcomes for others. In this context the
17
concept of primary stake-holders versus secondary stakeholders again is tricky. Archival excerpts on
the Ok Tedi mine in PNG, for instance, reveal that BHP’s connection to operating the massive gold
18
and copper mine was problematic to the extent that the conglomerate moved to extricate itself from
operations largely due to the scale of the resulting ecological spoil. The apparent increased pressure
19
to extricate economic satisfaction for shareholders and others adversely affected governance and
socially responsible choices.
Environmental and social damage in the case of Ok Tedi was huge. Partly it resulted from economic
influences that were, at that time, subject to public and private decisions. Those decisions seemingly
were in conflict with the safety and well-being of the people. In this case public officials and
20
corporate officers could be seen to be primary stakeholders in that particular “reform” process. The
episode illustrates how the notion of primary and secondary stakeholders, in all processes, can become
tricky. That a business exists solely to maximize financial returns for its shareholders is a narrow
concept. Freeman et al. (2004, p. 364) explained:
Many proponents of a shareholder, distinguish the economic from the ethical
single-objective view of the firm
consequences and values. The resulting theory is a narrow view that cannot possibly do justice to the panoply
[full array] of human activity that is value creation and trade, i.e., business. (emphasis added)
Some advocates of the shareholder approach separate actions necessary to achieve economic goals
from the principles of conducting business in an ethical manner (fair, decent, and just). The broader
stakeholder approach and that includes shareholders, with its communal focus does not separate the
two. Theoretically then under the broader approach it is more likely that financial, social and
environmental awareness will converge for the betterment of communities and thus enable a dynamic
and more just business community. In that environment, pressure that may be attributed to a probable
increase in FSF may actually dissipate. In turn it is more likely that business continuity will sustain.
As on-going business activities require both an economic certainty (sound financial position) and a
culture that does not violate the rights of any (social responsibility), the fundamental theory of a firm
in the conduct of its business could well be revisited.
Business Outcomes: Economic and Ethical
Previous studies have determined that business managers comprehend the necessity to consider and
embrace a broad approach to the purpose of business. In so doing their business activities have
21
achieved improved outcomes both in terms of profitability and business relationships. In this context, a
crucial driver of business continuity is to focus on both the economic and ethical (moral) suppositions
of conducting business.
On the other hand, a business organization might secure continuity of its operations, attend to its
economic needs, and do so to the detriment of others. Evidently this is unethical. Recall that after the
invasion of Kuwait (1990), the UN placed heavy sanctions on Iraq. In its disadvantaged state Iraq was
unable to provide enough food for its people. In response, by 1995 the UN Oil-for-Food programme
was established. Subsequently by 1996 Iraq was able to sell its oil to purchase food and other
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5. 32
humanitarian goods for its people—all under UN contracts, supervision, and agreements. One of its
purchases was for wheat and the major supplier was the Australian Wheat Board (AWB). 22
The case of the AWB and its involvement in the UN’s oil-for-food programme is an exemplar of
economic versus ethical dilemma. The AWB chose the economic route, and by 1999 around 10 per
cent of the Australian wheat exports per annum went to Iraq. It wasn’t the sale of wheat per se that
was the problem, but the varying shades of the process that caused grave concern. Ultimately the
AWB—at that time—was found lacking in moral and corporate responsibilities in the conduct of its
business. The organization’s unethical behaviour ended in a Royal Commission that scathingly
rebuked the AWB, its executives, and others. Since that time the AWB has implemented many
changes to reconstruct its organization and to promote itself as an ethical and socially responsible
business; different from the one that operated during the Oil-for-Food programme, 1999–2004. 23
The following example reminds of the unethical and fraudulent under-tones that pervaded
circumstances of and for many business constructs during the time of the UN humanitarian
programme.
The AWB and the Royal Commission Inquiry into the Oil-for-Food Programme
The question of corporate ethics and culture was extensively examined during the Royal Commission
into ‘certain Australian companies in relation to the UN Oil-for-Food Programme.’ The Honourable
24
Terrence Cole (2006) AO RFD QC questioned the activities of Australian companies, specifically with
regard to allegations of bribery of foreign officials connected to the Iraqi government. 25
The Royal Commission examined in detail the activities of the AWB and its payment schemes. One
of which was a ‘discharge and land transport fee of US$12.00 per metric tonne to an Iraqi entity, the
Land Transport Co.’ In fact this fee was, and arguably the AWB then knew it was, a means of
26
making US dollar payments to the Iraq government in contravention of UN Sanctions. The Royal
Commission found that the somewhat inappropriate ‘conduct of the AWB and its officers was due to a
failure in [the organization’s] corporate culture.’ It was found that the AWB operated, at that time, in
an ethos of self focus in order to achieve its economic goals. That is, it spent time and money with
intent to find ways in which to arrange its business activities in Iraq to avoid breaching the law; rather
than working diligently in conjunction with the UN’s oil-for-food programme. The latter is
27
important because the programme was intended to help sustain the innocent people of the land by
providing them with much needed food, medical supplies, and other essentials.
Globally, the AWB was not the only organization so involved. With regard to the AWB however
the cost was high. The Royal Commission reported, that among other things the ‘AWB lost its
reputation,’ ‘shareholders lost half the value of their investment,’ ‘trade with Iraq worth more than
A$500 million per annum was forfeited,’ and ‘many senior executives resigned’. Further there were
threats of litigation both nationally and internationally as well as ‘potential further restrictions on
AWB’s trade overseas’. 28
Of course that was then and for the AWB the tide may well have turned and the organization reborn
as a productive entity. One of the primary warnings from such activities however, that continue to
29
evolve is the affect of related outcomes on all stakeholders. Thus we return to earlier consideration of
different stakeholder groups.
In essence it may be said that elevating the rights of one stakeholder group is ostensibly detrimental
to other stakeholder groups. Freeman et al. (2004, p. 365) suggested: ‘Shareholder rights are far from
absolute, regardless of how much economists talk about the corporation as being the private property
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6. 33
of the shareholders. The rights of shareholders are prima facie at best, and cannot be used to justify
limiting the freedom [choices] of others without their consent.’ Seemingly it is evident, given case
circumstances of business operations and outcomes of same that stakeholders will either benefit or
suffer from the economic and social outcomes attributed to those activities.
In this context a stakeholder approach to business is twofold. It pays attention to both the purpose of
the organization in achieving its business goals (economic) and the necessity to attend to the
relationships that foster good business (social awareness and ethics). The stakeholder approach
considers principles broadly, in that ethics and economics are not separated in the conduct of business.
We acknowledge many may argue the shareholder approach to conducting business does not discount
ethics in business deliberations. We suggest, however, this argument is tenuous without including in
its purpose, awareness of, and actions that support, social responsibility. The latter is of particular
importance herein as we deliberate circumstances of fraud in published statements of financial
account.
Although maximizing shareholder returns is a legitimate aim in progressing business economically,
it is also in some circumstances likely to be a constricted view in sustaining business environmentally.
The broader stakeholder approach advances the shareholder approach to achieve improved results
generally. In this way it enables sustainable business activities that result in more positive outcomes
for business organizations; and that betters the situation for all. Moreover this approach is likely to
help management on a practical level, as ‘[s]takeholder theory… reflects [on] and directs how
managers operate rather than primarily addressing management theorists and economists [focus on
“financial” rates of return]’ (Freeman et al., 2004, p. 364).
Diagram 2.2 Stakeholder Theory (Shareholder vs. Stakeholder Approach: Primary and Secondary Stakeholders)
Source: The diagram has been devised and constructed by the authors.
Understandably, different business organizations nurture different business goals. In that context the
purpose of specific businesses and the outcomes of their activities need to be articulated clearly to
stakeholders. This is of particular import in matters of governance.
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7. 34
Governance
Recently the focus on , internationally, has become entrenched with regard to
corporate governance
securities markets and that concept tends to emphasize the importance of following a set of rules or
principles. Corporate entities might be seen to satisfy governance mandates by instigating a ‘tick the
box’ approach to compliance and accountability. Being seen to conform to expectations of regulators
and securities markets arguably does little to address actual governance concerns. In other words a
business organization may be seen to be doing what is required by the authorities, rather than
identifying and instigating action for the betterment of the organization, its business initiatives and
outcomes, and for its stakeholders. That is the form of corporate governance. Emphasis on governance
is different to giving weight to and necessitates action to focus on substance
corporate governance
over form. 30
Some may argue that corporate entities do continually enhance and change their governance
practices to achieve the best outcomes possible and do so in ever-changing and challenging economic
environments. In particular, regulators and other authoritative organizations support proactive
corporate behaviour. In the USA, for instance, “Business Roundtable” as an authority on corporate
governance is of this view. It also strongly suggests that ‘best practices by public companies [are
31
achieved] within a framework of laws and regulations that establish minimum requirements while
affording companies the ability to develop individualized practices that are appropriate for them’
(Business Roundtable, 2012, p. 1). This is debatably a widely held and important view, certainly as
32
business organizations are commonly accepted to be different one from the other, and so require the
flexibility to act in the organizations’ and its stakeholders’ interests.
In recent years the USA corporate entities have increasingly been encouraged to:
Adopt best practices within the framework of strengthened securities market listing standards and legal
requirements that developed beginning with the passage of the Sarbanes-Oxley Act of 2002 and have
continued with the financial crisis and the passage of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. 33
Such action and expectations to so act have been initiated by many countries globally. This has
34
particularly occurred since the earlier years of this millennium and following the Global Financial
Crisis (GFC). 35
Although businesses, companies, multi-national corporations may be seen to initiate good
governance practices, the concept of “good governance” in itself is problematic. Clarke and Dean
(2007, p. 33) with regard to two relatively recent unexpected corporate collapses in the USA and
Australia explained:
Responses to the Enron and HIH collapses provide a sorry tale. Overdosing on governance rules, and the
public’s seduction by flimsy evidence in support of them, characterised those responses. Common sense has
been outplayed by the false appeal of swift regulatory action. Appearances of good governance have
. (emphasis added)
outvalued the reality of achieving it 36
Economic circumstances are at times difficult and whilst we engage in a money economy this will in
all likelihood continue. Importantly, what is considered arduous in the context of trade by one business
may not be so for another. The individual business challenges for each organization will define, to
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8. 35
some extent, the willingness of its managers (and stakeholders) to participate in what they deem to be
good governance practices. Moreover, what authorities may deem to be “best practices” may not apply
across all organizations. Hence, individual business entities given flexibility will likely seek to
practice good governance in the spirit in which it was intended; because those actions will be good for
business outcomes and business continuity.
Governance Broadly
Governance in its broader context suggests directors, executives, and managers centre their attention
on leading and managing the organization and its resources, with focus on its people and
organizational goals. They do this to achieve the best results for the business and its outcomes with
due attention to what securities markets may require. In this mode it is probable that stake-holders will
be privy to voluntary publications of governance matters. Such publications are apt to supplement
reported details that comply with the wants of securities markets. So good governance will incorporate
both, that which may be considered a mandate and further details given voluntarily to better inform
stakeholders. Notably the concept of governance per se is not a recent development. Yet many seem
37
to think, or act as though, it is.
Steinberg (2011, p. 2) explained that governance to him means ‘the allocation of power among the
’, although ‘the term is used also to encompass an array of
board, management and shareholders
actions taken by management in running a company, from senior levels down throughout the
management ranks’, (emphasis in the original). The notion of including shareholders in the sphere of
governance of a business and its activities is interesting. It empowers shareholders as activists in the
decision-making realm of the organization. But how this could work in a serviceable manner for all
stakeholders is problematic. The concept is awkward.
Depending on the extent of shareholder activist involvement, it could be disruptive and
counter-productive. Shareholders as the owners are directly involved in the business. On the other
hand, they are external to the organization and its business operations. They are not inherently part of
its daily operating procedures. Thus, the concept of shareholder activists, individual or groups,
involved in daily business decisions seems odd. Furthermore there are likely to be disadvantages
surfacing within the shareholder group itself. For instance, in determining the extent to which minority
shareholders and or preference shareholders may form an activist group, or be discounted. At worst:
If the shareholder power pendulum swings too far, we may be faced with frequent turnover of directors, large
numbers of dissident directors, and boards unable to come to consensus. A result may be an adversarial
board-CEO relationship, distracted senior management, and disrupted corporate performance. Directors
spending time campaigning or otherwise politicking and CEOs dealing with dysfunctional boards serve no
purpose, and will be both distracting and destructive.
(Steinberg, 2011, p. 285)
With such a scenario the pressure and possibly the opportunity to invoke fraudulent behaviour
increases. Shareholders by and large do have decision-making power, for example, by way of
discussion, argument, input at annual general meetings, special meetings, investment choices, and the
like. There is also the power of the media that shareholders and other stake-holders can call upon.
Albeit that the responsibility and accountability for decision outcomes on business operations rests
ultimately with management and directors, stakeholders in business can create waves and sometimes
be disruptive. This is hardly in the best interests of business continuity.
38
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9. 36
A continuing and financially secure corporate business operation requires a well selected group of
skilled, experienced, educated, knowledgeable directors with the fortitude to work in harmony. An
39
effective board of directors will have the tenacity to ask hard questions when necessary and demand
answers that satisfy. This is increasingly a requisite for an effective board. It is of concern on a
40
global front as the stipulations for directors’ increase and the punitive outcomes for misleading
disclosures made by, or allowed to be published by, directors and/or the board escalate. 41
Hence the culture that emanates from the top of the organization throughout the entire body of the
business is of concern. Commonly this culture is referred to as the ‘tone at the top.’ We advocate that
many, incorrectly, view the responsibility for this tenor in the business, to be solely the responsibility
of the directors, the CEO, and other executive officers. In reality the tone of the culture that permeates
throughout an organization is dependent on the attitude and actions of all the organizations’
employees. We agree, however, that the beginning of the culture (the organizational cult) rests with
the executives. If employees throughout the organization witness that slack behaviour, loose business
morals, and unethical transactions are rife in their business—employees at all levels are likely to
follow suit.
Corporate Culture
The ‘tone at the top’ is a concept that centres on an organization’s culture. It goes beyond attention to
the traditional theory of a business firm—to maximise profits and maximise shareholder returns. In
42
this context culture invokes attention to broader aspects inherent to an organization and its activities. It
includes social awareness and ethical behaviour in the conduct of business. It alerts stakeholders to the
organization’s business systems, its internal control environment, the dynamics of its leadership, and
the business’ willingness to be proactive as well as adapt to changing business circumstances. In this
mode, business and its leaders are challenged to inform and educate stakeholders and embed controls
that diminish the opportunity for fraud to occur within business’ internal control environment.
Attention to sustainable business practices is ever-increasing. In line with this is awareness of
43
business’ corporate social responsibility. More over persistent critical thought and debate on what
44
constitutes basically the theory of business continues. Importantly in the case of long-running,
profitable, and otherwise ‘successful’ businesses it is evident that the underlying theory of business
(its mission, its vision for the future) is not static. 45
Drucker (1994) provided many examples of such business achievements; for instance, in the case of
the University of Berlin (1809), radical theories defined the organization. That is, until the reign of
Hitler, the Deutsche Bank (1870) and Georg Siemens’ (its first CEO) view of the theory of business
focussed on entrepreneurial involvement and finance. Mitsubishi (1870s) developed radical thought on
business theory that within 20 years cemented its place in multi-national business, and as a leader in
Japan. Later in the USA General Motors (GM) and IBM demonstrated such dynamics throughout the
twentieth century and arguably highlighted that malaise in business theory underpins expected and
unexpected business collapse.
In the case of General Motors and other car manufacturers in Australia from around 2010 this
appears to be evident. As this book is written, a major concern for many is that by 2016 General
Motors (GM) will not be manufacturing cars in Australia. Ford Australia is already on the way out and
Toyota is suspected to follow. It may be argued that this apparent collapse of car manufacturing in
Australia is somewhat due to inattention to changing markets and international challenges. That the
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10. 37
changing focus internationally in what denotes sustainable business practice in car manufacturing and
associated industries has been unattended in Australia—and for some time.
Reiterating the theory of a business firm is not embedded necessarily in economic concepts or
historic operational achievements. Business is dynamic. A vibrant business organization is constantly
aware of its environment (economic and social) and will initiate change in its business activities in
tune with its surroundings. Such change may be proactive, reactive, or both. The alternative—a static
view—is not viable, and it is arguably more likely to result in business failure. The process of
46
conducting business globally is vigorous, and demands continual development. So too are the theories
that underpin the activities of business enterprise. Those theories are also linked to what may
constitute ethics in business practice. Seemingly ethical behaviour in business is likely to lessen
fraudulent behaviour.
Ethics and Ethical Behaviour
The notion of ethics and ethical behaviour in ordinary daily life is arguably the same as that applied in
the conduct of business. On this topic individuals may differ in their opinion. Some may choose to
behave in a completely different way in a business trading circumstance to that of their daily life. 47
Debatably there is or should be no difference between the concept of business ethics and personal
ethics. Given the apparently increasing amount of fraud and fraudulent behaviour in business the idea
warrants discussion and continued debate. Numerous case examples show that a lack of ethical
behaviour in business can, and often does, lead to fraud.
In the case of professional ethics as opposed to business ethics, individuals may disagree
(personally) with a course of action but still be required within their professional discipline to abide by
a certain code or legal requirement. This can lead to conflict and trauma for some. Two online
examples from New Zealand elaborate: 48
A police officer [for instance] may personally believe that a law that they are required to
enforce is wrong. However, under the Code of Conduct for the New Zealand Police, they are
required to obey all lawful and reasonable instructions unless there is good and sufficient
cause to do otherwise.
A doctor may not personally believe that the course of medical treatment chosen by a patient
is the right choice. However, under the Code of Ethics for the New Zealand Medical
Profession, they must respect the rights, autonomy and freedom of choice of the patient.
Circumstances of this type are similar in many countries. The culture that emanates from a
professional body is expressed to some extent by the behaviour of its individual members. That
behaviour may be attributed to the professions’ code of conduct. Of which the substance of the code
would take precedence over its form. Notably there are different attributes between a business
undertaking and that of a profession. Tawney (1920, p. 94) for instance explained: ‘The essence of…
[industry] is that its only criterion is the financial return which it offers to its shareholders. The essence
of the… [profession] is that, though men [and women] enter it for the sake of their livelihood, the
measure of their success is the service which they perform, not the gains which they amass.’ The
primary difference is altruism as it is attributed to professional rite.
Even so the substance of a set of instructions (code) may be misinterpreted by individuals in the
profession because of the form in which they are written. Accounting standards that underpin
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11. 38
generally accepted financial accounting practice are an example. The content of many such standards
are arguably convoluted and confusing. Some advocate that accounting standards are problematic in
assisting business stakeholders in economic decisions. Clarke and Dean (2007, p. 211) asserted,
‘financial disclosure in accord with conventional accounting [practice] generally fails to disclose the
wealth and progress of companies, and the recently promoted IFRSs [International Financial
Reporting Standards] will do little to remedy that.’
Foremost and relevant to note is that the apparent current fixation on ethics and ethical behaviour is
not new.
Debated for at least 2500 years, and commonly understood to be the product of personal choice, ethics can be
equated to the depths of the ocean. While there are some things that we know (e.g., the ocean floor contains
water and ethics are the ground rules by which we live our lives), other elements are mysteries (what
organisms live on the ocean floor and what does it mean to be ethical). Generally, people are continuously
exploring the depths of both. Because ethics are defined individually, there are presumably six billion [or
more] viewpoints about ethics on this planet. 49
Central to considerations of fraud and fraudulent behaviour in an organization are the norms
established by the entity with regard to its people and expectations of their behaviour. This translates
into a required standard of organizational behaviour that may be written into a code of conduct or
similarly, a code of ethics. As such, the organization’s outlook considers the effect of its actions (type
of business operations and outcomes of same) on the broader community as well as its stakeholders.
This may sound ideological to some, but people can desensitize themselves to harmful behaviour and
its outcomes. So, if that thought is applied to business ethics, then an organization without ethical
standards may find its employees submit to opportunities that result in outcomes that would otherwise
be considered harmful and unethical. 50
With regard to FSF there is a direct link between the tenor of the organization and opportunities
within the organization for fraud to occur. As business circumstances, people, and the natural world
are ever-changing, a constant review of a business organization’s internal control environment and its
linkage to mitigate opportunities for fraud is warranted.
Business Dynamic and Fraud
FSF has regard to the quality of the content of statements made (verbal or written) about the financial
state of the organization. As such those involved in constructing or delivering those statements are
accountable for the content of the statements. So once again we are confronted with determining what
denotes quality in a statement about an organization’s financials. Although much has been written and
debated on this point across time, it remains of concern. Herein we take the view that quality of
published financials with regard to business transactions and the outcomes of same are depicted by the
serviceability of the financial numbers reported, hence the information content therein. Notably this is
a difficult area and one of contention for many.
Consider for instance: How is it that we may best determine the substance of the information? On
the one hand, for financial details to be serviceable they need to be of use. In a financial context that
means surely that the content needs to be both suitable and relevant to the task at hand. Thus the
content of published financial statements would directly relate to the subject of the report—that is,
depicted by the title of the financial report.
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12. 39
Chapter three explores this notion of quality with regard to the content of a suite of conventional
financial statements. It elaborates management’s role in providing financial information to
stakeholders within and external to the organization. The link to fraud and fraudulent behaviour is
made with specific regard to bribery and corruption because this is an area of growing concern
internationally. Drawing on case examples, the role of directors and other corporate officers are
examined with due regard for corporate legislation. Underpinning this story is attention to the
necessity for effective communication throughout an organization as well as with external parties.
Thus the duties and accountability of directors and other corporate officers are shown to be entwined
with the details of published financial and non-financial disclosures.
Notes
1 Consider this: ‘While shareholders are stakeholders in the organization, not all stakeholders are shareholders.
Additionally, shareholders are primary stake-holders, but they are not the only primary stakeholders in the
organization. Other primary stakeholders include, but are not limited to, customers and employees.’ Available
at , accessed November 2013.
www.ehow.com/info_7998291_primary-stakeholder.html#ixzz2l2wWxW7u
2 Consider, for example, the stories behind the fraud and failures of Satyam (India); Enron, Adelphia, Tyco
(USA); HIH (Australia); Parmalat (Italy); and many others.
3 See , accessed November 2013.
www.ehow.com/info_7998291_primary-stakeholder.html#ixzz2l2wWxW7u
4 Refer to, for instance, ‘Maximising shareholder value: An ethical responsibility?’ Available at http:/
, accessed November
/knowledge.insead.edu.csr/ethics/maximising-shareholder-value-an-ethical-responsibility
2013.
5 Nonetheless there are certain characteristics that may be attributed to the most likely fraudster. See, for
instance, Greenlee et al. (2007); Kranacher et al. (2011, p. 12); and Albrecht et al. (2012, p. 33).
6 See, for instance, Greenlee et al. (2007); Kranacher et al. (2011, p. 12); and Albrecht et al. (2012, p. 33).
7 See, for instance, , accessed November
http://news.vanderbilt.edu/2013/09/surprising-link-disclosure-profits/
2013.
8 See, for instance, ‘Social responsibility has a dollar value’ at www.theage.com.au/news/business/social
, accessed November 2013. The article
-responsibility-has-a-dollar-value/2006/07/26/1153816252246.html
asserts a valid point on linkage between CSR and shareholder returns.
9 Ibid.
10 ‘There is a widespread phobia that commercial order is threatened by the incapacity of directors and auditors
to form honest judgments, independent of undue influences’ (Clarke and Dean, 2007, p. 211).
11 In non-fraud cases, for instance, ‘[d]isclosure relating to corporate groups’ financial status and performance is
[arguably] at best equivocal, generally misleading and, sometimes, completely meaningless. Protection
offered by the corporate veil to shareholders in respect of claims on their capital, and to creditors by
quarantining a company’s assets to satisfy their claims, has frequently been misappropriated to their collective
detriment but to the betterment of others’ (Clarke and Dean, 2007, p. 128).
12 In Australia under the ACA, s95A defines solvency/insolvency and s588G stipulates the directors’ duty to
prevent insolvent trading. Under s295(4)(c) a directors’ declaration is required on whether the business entity
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13. 40
is able to pay its debts when due and payable. Similar requirements are evident in the legislation of other
countries for instance the UK, Canada, USA and New Zealand. Refer, for example, to Margret (2012, pp.
41–68).
13 See Sundaram and Inkpen (2004); also Freeman et al. (2004) for a response in ‘Stakeholder Theory and “The
Corporate Objective Revisited”’.
14 Pressure on management to portray a failing business as profitable with a sound financial position might result
in a massive cost cutting exercise. Given wages and salaries are major costs to most businesses, the likely
outcome is that employees en masse lose their jobs. In many cases of unexpected corporate collapse,
employees have suffered along with creditors, customers, communities, shareholders, and others; see, for
instance, Clarke et al. (2003) and (Clarke and Dean (2007).
15 See note 1 and reference therein.
16 Consider the OK Tedi mining dilemma for BHP in Papua New Guinea (from 1975 to, arguably, current times)
where the company’s mining interests conflicted with reportedly their own environmental concerns.
17 In addition their activities caused untold damage to the local river systems and social, economic, and political
environment. Details available at www.theaustralian.com.au/business/mining-energy/png-ups-the-ante-in-with
and
-bhp-over-ok-tedi-mine-row/story-e6frg9df-1226567072656# www.actnowpng.org/project/Ok%20Tedi
, accessed November 2013.
%20mine
18 Archival excerpt from Four Corners, available at www.abc.net.au/news/2013–01–07/an-radio-doco3a-ok-tedi
, accessed November 2013.
/4455092
19 From excerpt available at , accessed November 2013.
www.abc.net.au/pm/content/2012/s3656207.htm
20 By way of example: ‘During construction Ok Tedi’s tailings dam failed. The company made the fateful
decision to put all its waste directly into the creeks that run into the Ok Tedi and Fly Rivers. By the 1990s
hundreds of millions of tonnes of waste clogged those waterways, destroying thousands of hectares of forest
and inundating villages and vegetable patches.’ Available at ,
www.abc.net.au/pm/content/2012/s3656207.htm
accessed November 2013.
21 See Collins (2001) and Collins and Porras (1994). They are also mentioned in Freeman et al. (2004).
22 Refer to the Report of the Inquiry into Certain Australian companies in relation to the UN Oil-for-Food
Programme, Volume 1, Summary, Recommendations and Background, under Prologue and Summary,
available at , accessed June 2014.
www.oilforfoodinquiry.gov.au/
23 Further details at ‘AWB response to Oil-for-Food Inquiry Report’ (2006), available at www.awb.com.au
/investors/companyannouncements/mediareleases/2006
mediareleases/AWBresponsetoilforfoodinquiryreport.htm, accessed June 2014.
24 , Vol.
Report of the Inquiry into certain Australian companies in relation to the UN Oil-for-Food Programme
4, Findings, available at www.oilforfoodinquiry.gov.au/agd/WWW/rwpattach.nsf/VAP
/(22D92C3251275720C801B3314F7A9BA2)_Volume%2BIV%2B(21Nov06)-CD.pdf/$file/Volume%2BIV
, accessed June 2014.
%2B(21Nov06)-CD.pdf
25 Refer to the Report of the Inquiry into Certain Australian companies in relation to the UN Oil-for-Food
Programme, Volume 1, Summary, recommendations, and background, available at www.oilforfoodinquiry
, accessed June 2014.
.gov.au/
26 Ibid., p. xiv.
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14. 41
27 Ibid., under summary.
28 Ibid., p. xi.
29 Recall the details of the AWB’s reform agenda in the ‘AWB response to Oil-for-Food Inquiry Report’ (2006).
30 The Royal Commission into the HIH case provides examples. A summary of relevant points are available in
the article by Mills and Marjoribanks ‘The HIH legacy: Corporate governance and shareholder value,’
available at ,
www.findlaw.com.au/articles/1431/the-hih-legacy-corporate-governance-andshareholde.aspx
accessed December 2013.
31 See Business Roundtable (2012, p. 1).
32 ‘Business Roundtable is an association of chief executive officers of leading U.S. companies with more than
$6 trillion in annual revenues and more than 12 million employees. Member companies comprise nearly a
third of the total value of the U.S. stock markets and represent nearly a third of all corporate income taxes paid
to the federal government’ (Business Roundtable, 2012, p. 1).
33 Ibid.
34 Countries’ corporate governance principles are available at www.ecgi.org/codes/documents/brt_cgov
, accessed November 2013.
_principles_27mar2012_en.pdf
35 Margret (2012, p. 68) provides an historical chronology of governance issues.
36 The HIH saga in Australia was of international significance. Details of the Royal Commission are published in
the report of Justice Neville Owen (2003).
37 ‘Curiously, despite the hullabaloo surrounding the governance movement, nothing in the regimes introduces
principles by way of controlling devices that have not been in the corporate legislation for over 160 years’
(Clarke and Dean, 2007, p. 51).
38 See, for instance, Steinberg (2011, p. 261).
39 Steinberg (2011, p. 286) explained: ‘Boards should be allowed to operate in an environment where
institutional and other shareholders are permitted to appropriately exercise reasonable rights, but where boards
are positioned to retain continuity, ensure the right mix of knowledge and skills in the boardroom, and operate
so that the tough issues are debated in a collegial manner.’
40 Steinberg (2011, pp. 286–287).
41 Refer to, for example, Margret (2012, pp. 41–68) on solvency and directors’ duties; Clarke and Dean (2007,
pp. 128–159) on corporate legal entities, moral and legal issues.
42 Briefly: ‘A microeconomic concept founded in neoclassical economics that states that firms (corporations)
exist and make decisions in order to maximize profits,’ available, with further explanation, at www
.
.investopedia.com/terms/t/theory-firm.asp
43 Refer, for instance, to Gray et al. (2014); Adams (2011); Adams and McNicholas (2007).
44 See Adams (2008) with regard to CSR, risk, and risk management.
45 A key article with regard to changing theories of business is: Drucker (1994) ‘The Theory of the Business’,
, September. The date of the article does not detract from the relevance of its content
Harvard Business Review
to current times and business situations.
46 Ibid.
47 Adams and Frost (2006) provided a meaningful discourse in: ‘Accounting for ethical, social, environmental
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15. 42
and economical issues: Towards an integrated approach.’
48 Available at , accessed December
www.iaa.govt.nz/policy-manual/part-c/difference-personal-professional.asp
2013.
49 Further details available at , accessed December 2013.
www.ivysea.com/pages/ldrex_0601_01.html
50 Ibid.
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