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The commitment CFP® professionals make to upholding CFP Board's Standards of Professional Conduct, along with CFP Board's enforcement of those Standards, provide you an understanding of the high level of ethical and competent service to expect when working with a CFP® professional. Knowing what to expect from a financial planning relationship.
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- 3 Conduct an Ethical Audit
- 4 How Business Ethics Affect Stockholder Equity
What is right and what is wrong behavior in the business world takes on different meanings in different cultures, making it challenging to truly define business ethics in international markets. However, there are a number of actions that are almost universally considered unethical, and which criminal laws seek to prevent. Reviewing a few examples of ethics violations in the business world can help you to understand the kinds of things that are unacceptable in almost every culture.
Ethical Considerations for Human Resources
Interactions between managers, business owners and employees create numerous opportunities for breaches of ethics. Discrimination based on ethnicity, gender, age or other factors is an issue in the United States, for example, and legislated against. Managers who discriminate against minority groups in hiring practices, compensation decisions and the terms of employment can face legal and social consequences. Dishonesty and manipulation are also examples unethical workplace behavior, whether on the part of supervisors or subordinates.
Integrity of Accounting
Financial accounting is a major ethical battleground in business, and a plethora of industry and government regulation seeks to prevent dishonest business people from reporting financial information in unethical ways. Certain unethical accounting practices are illegal, such as flat-out misrepresenting income or expense figures on financial statements. There are a number of legal accounting practices that are considered unethical, as well, such as padding the goodwill figure on a balance sheet or unjustifiably shifting expenses to inappropriate periods to influence current financial results.
Sustainability, Business and the Environment
Businesses often affect a variety of external stakeholders that have nothing to do with a company aside from the issues brought about by the company's actions. Large amounts of pollution in the air or water can introduce disease and cancer epidemics in local communities, for example. Simple nuisances like noise pollution or a significant increase in truck traffic can damage the quality of life in surrounding communities, as well.
Completely ignoring these external impacts is universally regarded as unethical. Highly ethical companies do not accept any negative impact on those in surrounding communities, taking whatever steps are necessary to ensure that their actions and business practices enhance their communities, not harm them.
Theft and Fraud
Business owners or employees can commit breaches of ethics on an individual basis, rather than on behalf of a company. The early 21st century saw a string of long-running ponzi schemes, for example, in which individuals duped entire companies and extensive client lists into believing gross exaggerations of their financial positions. Executives and employees can embezzle money from their companies for years, taking thousands or millions of dollars for personal use before getting caught. Even front-line store associates can steal money or inventory directly from their employers, proving that breaches of ethics can occur at any level of a business.
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About the Author
David Ingram has written for multiple publications since 2009, including 'The Houston Chronicle' and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.
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Ingram, David. 'Examples of Ethics Violations in Business.' Small Business - Chron.com, http://smallbusiness.chron.com/examples-ethics-violations-business-25673.html. 08 March 2019.
Ingram, David. (2019, March 08). Examples of Ethics Violations in Business. Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/examples-ethics-violations-business-25673.html
Ingram, David. 'Examples of Ethics Violations in Business' last modified March 08, 2019. http://smallbusiness.chron.com/examples-ethics-violations-business-25673.html
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The financial industry is a major backbone in society with consequences that can drastically change the economy and influence the personal finances of every American. Major events like the housing market crash in 2007 were perpetuated by poor ethics and ultimately led to a great recession that effected most Americans and the larger global economy. Ethics in the financial industry are crucial as the system is largely built on regulatory guidelines and variances of trust.
Ethics in the Client-Adviser Relationship
The relationship between an individual and their personal financial adviser or broker is built on trust and ethics. The adviser should always work in the best interest of the client, making financial decisions and suggestions that will benefit them in the long run. Ethics play a major role in this relationship and some financial products offer brokers bonuses and kickbacks for driving sales. In some cases, investing in these products is a good decision but making an investment solely based on the return offered to the adviser does not prioritize the client.
Ethics in the Political Spectrum
Politics plays a major role in the financial industry. Laws and bills are passed to manage regulations and compliance laws designed to protect the consumer from predatory investments and unethical behavior. Ethical elected officials will create and modify laws in the best interest of society as a whole. When elected officials are too closely tied to the financial industry or heavily influenced by the financial industry lobby, potential breakdowns in regulatory systems are possible. In extreme cases, poor ethical practices at the highest levels of politics can have drastic economic consequences.
Consequences of Ethical Violations
Ethical violations have consequences for individual investors, and also for the brokers and companies holding the capital investments. A broker who makes poor ethical decisions that negatively impact the client may be liable for financial losses and damages in court. If the broker is not held liable, the individual will absorb the losses. Losses from unethical broker decisions can significantly impact an individual, with the potential to lose his entire savings. Investments in publicly traded companies will impact the company directly. False markets will artificially inflate value and when the value is lost, the company may lay off employees and scale down significantly.
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About the Author
Zach Lazzari is a freelance writer and manages marketing initiatives for multiple small businesses. His business experience ranges from startups to corporate with a focus on digital advertising, content marketing, sales lead generation and audience acquisitions. He built a custom email lead gen campaign that catapulted a startup to 7-figure sales within one year. Zach studied anthropology at Western State College of Colorado and is always learning and studying new ways to drive business.