Ethical Challenges and Agency Issues Free Essays

When an agent finds out that they are going overbudget or over the allotted time limit the most critical element is open communication. With open communication it gives management more advance warning earlier in the budget cycle to make changes that can get the project back on track. The most important element management needs is ample time to make corrections to keep the project on budget and within time constraints. We will write a custom essay sample on Ethical Challenges and Agency Issues or any similar topic only for you Order Now The more time management has the better their chances are of getting the proper resources aligned to get the budget back under control. If the budget issues are due to the client not properly keeping records, the agency could word the contract in a way that allows provisions for adjustments which would enable the agency to form a financial or time resolution with the client. A contract that allows for those types of adjustments limits agency issues and will keep a better working relationship between the two parties. The main issue is deciding what party is responsible or accountable for an overbudget project. If the agency can demonstrate why the budget is off to the client and be able to charge extra for the additional work the agency could delegate more resources to get the project completed in time as well. It is critical for the agency to have open communication between its team members, but it is just as crucial for the agency to be honest with the client as well. The ethical issue that arises with being overbudget is that individual employees don’t want to be penalized or face repercussions for their performance so they delay reporting results to management. When employees are afraid to report shortfalls earlier in the process it can lead to higher costs and major agency issues. The sooner the agent can show the client that planning or reporting issues are occurring they can make vital decisions to get the project back in line. Employees need to objectively think about others involved in their future with the company and client. As long as individuals clarify expectations and apply ethics to a situation it is possible to get a project back on budget. The agency can delegate more resources to an area that needs more manpower or money to get the project completed as promised to the client. Executive Pay Analyzing the ethical challenges as well as any agency issues in the Level of Executive Pay Case Study brings forth hidden issues in the New York Stock Exchange. To better analyze these issues one first has to ask oneself the following question, what is the true definition of ethics. Wheelwright defined ethics as â€Å"that branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which it is to be guided, and of the goods toward which it may ultimately be directed. † Did Mr.  Richard (Dick) Grasso violate any ethical standards set forth by the organization he was representing; did he really violate the systematic study of reflective choice, of the standards of right and wrong? In order to get a straight answer to this question it will dependent in which side of the fence one might find oneself in; if you are on the side of the lucky ones that happens to earn this outrageous sums of money then the answer would be no. But if you find oneself in the other side of the fence with the individuals who earn an average salary that would never get the opportunity to reach the levels of aristocracy that Mr.  Grasso reached then the answer would be yes. The ethical roles on all companies play a big role on the decision making of each enterprise. Before and after Mr. Grasso was hired it was customary to compensate top officials with these large sums of money. Top officials in the NYSE never had to disclose their earning to the public or to the SEC before so it’s hard to say any ethical standards were bent or even broken. This type of compensation to top NYSE officials was customary and there were no real intentions to misguide or mislead the public or the SEC. Just because not everyone in the NYSE had access to potentially earn this outrageous sums of money will indicate to the public that these individuals were directly involved in unethical behavior. All companies in today’s business society have a code of conduct implemented but this does not means that it is being followed. What companies are doing is creating rewards methods in order to retain the services of these top business gurus that would help their business to maximize their profits and Mr. Grasso track record spoke for itself. These incentive programs can help businesses to minimize any unethical attempts to their code of conduct. The general public and the SEC are outrage because of the outlandish compensation top NYSE officials receives but at no point during the case study it mentions that these top officials have a salary cap. One believes that since there were no salary cap on how much NYSE officials might earn there are no ethical implications that could discourage NYSE official from making these large sums of money. What one does believe is that if there are established codes of conduct and employees or management violates them, there should be strict actions taken to prevent the problem from worsening. One believes that all employees including management needs to uphold the highest level of ethical conduct if a company wants to be successful. 1933, 1934, and SOX The financial information users usually rely on opinion of independent auditors to make important economic decisions. To protect users’ interest from fraudulent financial statement, security acts of 1933, 1934, and SOX joined in to ensure adequate information disclosure. The acts provide regulation that goes beyond and requires more extensive disclosure than GAAP to govern corporate financial activities. For example, companies must fill audited annual and unaudited interim financial statements in conformity with regulation S-k. In addition, the regulation S-K governs the footnote disclosure in the financial statements. Congress enacted the acts after the stock market crash in 1929 to regulate the trading of securities to the public. For this reasons, security trading companies must register with SEC prior to issuance of security to ensure that information presented to investor for making accounting decisions is correct. In the aftermath of the famous corporate accounting scandal (Enron) that rock the world market, congress enacted the Sarbanes- Oxley Act (sox) to strengthen corporate accountability and governance of public companies. The provision increases the CEO and auditors responsibilities. CEO and other top executive must certify that company financial statement and other disclosures are fairly presented in accordance with GAAP. In other words, CEO is responsible to ensure that material misstatement does not exist in the financial statement presented to the users. SOX also authorize the Public Company accounting Oversight Board (PCAOB) to oversee the activities of the registered accounting firm. This changes the way auditors plan, implement and report the audit. The provision increases penalties that could affect an accountant who is involve in the destruction, alternation, or falsification of records in federal investigations. Any violation of such may be subject to fines and imprisonment of up to 20 years, additional training, new quality control procedure, revocation of firm’s registration, and barring from participating in audit of public companies. How to cite Ethical Challenges and Agency Issues, Essay examples